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Dilosk RMBS No.1 Designated Activity Company

Directors' report and audited financial statements

For the financial year ended 31 December 2019

Registered number 557456

Dilosk RMBS No.1 Designated Activity Company

Contents Page(s)

Directors and other information 1

Directors' report 2-6

Statement of directors' responsibilities 7

Independent auditor's report 8-12

Statement of comprehensive income 13

Statement of financial position 14

Statement of changes in equity 15

Statement of cash flows 16

Notes to the financial statements 17-46

Dilosk RMBS No.1 Designated Activity CompanyPage 1

Directors and other information

Directors Philip CraigBronagh Hardiman (appointed on 6 February 2019)Ross Burns (resigned on 6 February 2019)Adrienne Lonergan (appointed on 12 March 2020 and resigned on 13 March 2020)

Registered Office First Floor, Block AGeorge's Quay PlazaGeorge's QuayDublin 2Ireland

Administrator & Vistra Alternative Investments (Ireland) LimitedCompany Secretary First Floor, Block A

George's Quay PlazaGeorge's QuayDublin 2Ireland

Independent Auditor KPMGChartered Accountants and Statutory Audit Firm1 Harbourmaster PlaceIFSCDublin 1Ireland

Deutsche Bank AG LondonWinchester House1 Great Winchester StreetLondon EC2N 2DBUnited Kingdom

Trustee Deutsche Trustee Company LimitedWinchester House1 Great Winchester StreetLondon EC2N 2DBUnited Kingdom

Bankers BNP Paribas S.A., Dublin Branch Allied Irish Bank Plc5 George's Dock Business Banking AIBIFSC 7/12 Dame StreetDublin 1 Dublin 2Ireland Ireland

Master Servicer16 Hume StreetDublin 2Ireland

Sub-Servicer Link ASI LimitedBlock C, Maynooth Business CampusMaynooth, Co. Kildare, W23 F854Ireland

Solicitor A&L GoodbodyNorth Wall QuayIFSCDublin 1Ireland

Dilosk Designated Activity Company

Cash Manager & Principal Paying Agent


Directors' report

Principal activities

There has been no significant changes in those activities outlined above during the financial year.

Business reviewDuring the financial year:● the Company made a profit after tax and after other comprehensive income of €2,002,955 (2018: loss of €44,306);●

●

● the Company's finance expense on the debt securities issued for an amount of €5,782,573 (2018: €3,877,017);● the Company provided further advances to existing customers amounting to €803,206 (2018: €398,000);●

● the Class A Notes principal was partially repaid for an amount of €17,371,944 (2018: €19,721,542).

As at 31 December 2019:● the Company's total assets was €113,870,487 (2018: €127,269,550);● the carrying value of the debt securities amounted to €110,207,304 (2018: €125,473,558);● the financial assets at fair value through other comprehensive income amounted to €107,957,503 (2018: €121,718,011);● the Company's net assets were €3,487,322 (2018: €1,484,367); and● the Company had the following notes in issue:

- Class A Residential Mortgage Backed Floating Rate Notes due February 2051 - Class B Residential Mortgage Backed Floating Rate Notes due February 2051- Class C Residential Mortgage Backed Floating Rate Notes due February 2051- Class D Residential Mortgage Backed Floating Rate Notes due February 2051- Class Z Residential Mortgage Backed Floating Rate Notes due February 2051

Future developments

the Company received interest income from financial assets at fair value through other comprehensive income for an amount of€4,424,225 (2018: €5,312,662);

the Company received principal on the financial assets at fair value through other comprehensive income amounting to €18,675,905(2018: €19,975,605); and

€10,300,000

The board of directors (hereinafter referred to as the "Board" or the "directors") will continue to ensure proper management of the currentMortgage Portfolio and Notes of the Company.

The directors present their annual report and audited financial statements of Dilosk RMBS No.1 Designated Activity Company (the"Company") for the financial year ended 31 December 2019.

The Company, a special purpose vehicle, was incorporated in Ireland as a limited company on 13 February 2015 with registration number557456. In accordance with the changes introduced into Irish law by the Companies Act 2014 (the "Act"), Dilosk RMBS No.1 Limitedconverted to a designated activity company and changed its name to Dilosk RMBS No.1 Designated Activity Company, effective as of 17September 2016.

On 26 May 2015, the Company acquired from Dilosk Funding No.1 Designated Activity Company (the "Seller") the beneficial interest in aportfolio of mortgage loans (the "Loans") and related rights (the "Related Security") originated by ICS Building Society ("ICS") andsecured over residential properties located in Ireland (the Loans and Related Security, together, the "Mortgage Portfolio").

The Company funded the purchase of the beneficial interest in the Mortgage Portfolio by issuing €160,500,000 Class A ResidentialMortgage Backed Floating Rate Notes due February 2051 (the "Class A Notes"), €24,700,000 Class B Residential Mortgage BackedFloating Rate Notes due February 2051 (the "Class B Notes"), €6,200,000 Class C Residential Mortgage Backed Floating Rate Notes dueFebruary 2051 (the "Class C Notes"), €4,100,000 Class D Residential Mortgage Backed Floating Rate Notes due February 2051 (the''Class D Notes'') and €10,300,000 Class Z Residential Mortgage Backed Floating Rate Notes due February 2051 (the ''Class Z Notes'')(together the "Notes").

€63,217,722

the movement through other comprehensive income of financial assets through other comprehensive income being the mortgage loanassets amounted to €4,290,009 (2018: loss €703,744);

€24,700,000€6,200,000€4,100,000

All the Notes issued by the Company are listed on the Main Securities Market of the Irish Stock Exchange plc, trading as Euronext Dublin(the "Euronext Dublin").

We note that the Master Servicer is assessing potential scenarios to re-finance the notes and or sell the portfolio during 2020. The directorsdo not expect to sell the portfolio during 2020, however no formal decision have been made as at the date of approval of the financialstatements.


Directors' report (continued)

Results and dividends for the financial year

Changes in directors, secretary and registered office

There have been no other changes in directors, secretary and registered office during the financial year and/or since the financial year end.

Business risks and uncertainties

Operational risk

Going concern

Directors, secretary and their interests

Shares and shareholders

Corporate Governance StatementIntroduction

Financial Reporting Process

Management has assessed the Company’s ability to continue as a going concern and anticipate that the portfolio of underlying mortgageswill continue to generate enough cash flows on an ongoing basis to meet the Company's liabilities as they fall due.

The Company's financial statements for the financial year ended 31 December 2019 have been prepared on a going concern basis. Thedirectors anticipate that the Mortgage Portfolio will continue to generate sufficient cash flow on an ongoing basis to meet the Companyliabilities as they fall due.

None of the directors, who held office as at 31 December 2019, held any shares in the Company. The directors, Bronagh Hardiman andPhilip Craig, at the date of approval of this report, are listed on page 1. There were no contracts of any significance in relation to thebusiness of the Company in which the directors had any interest, as defined in the Act, at any time during the financial year to 31December 2019. Director fees are disclosed in note 6.

The authorised share capital of the Company is €1,000, which have been fully called for. The only shareholder in the Company is VistraCapital Markets (Ireland) Limited as from 10 July 2019 (previously, Sanne Nominees Ireland Limited) (the "Share Trustee"), holding the1,000 shares. All shares are held under the terms of declaration of trust dated 26 February 2015, under which the relevant share trusteeholds the issued shares of the Company on trust for charity. The Share Trustee has no beneficial interest in and derives no benefit from itsholding of the shares. There are no other rights that pertain to the shares and the shareholders. The shareholder has no voting rights.

On 6 February 2019, Ross Burns resigned as director of the Company and was replaced by Bronagh Hardiman on the same date. On 12March 2020, Adrienne Lonergan was appointed as director of the Company and resigned on 13 March 2020.

We note that the Master Servicer is assessing potential scenarios to re-finance the notes and or sell the portfolio during 2020. The directorsdo not expect to sell the portfolio during 2020, however no formal decision have been made as at the date of approval of the financialstatements.

All the Notes issued by the Company are listed on the main securities market of Euronext Dublin. The Company is subject to andcomplies with Irish Statute comprising the Act and the Listing rules of the Euronext Dublin. The Company has complied with all legal andlisting requirements that it is required to comply with and does not apply additional requirements in addition to those. Each of the serviceproviders engaged by the Company is subject to their own corporate governance requirements.

The Board is responsible for establishing and maintaining adequate internal control and risk management systems of the Company inrelation to the financial reporting process. Such systems are designed to manage rather than eliminate the risk of failure to achieve theCompany’s financial reporting objectives and can only provide reasonable and not absolute assurance against material misstatement orloss.

The results for the financial year are set out on page 13. The Board does not recommend the payment of a dividend for the financial yearunder review (2018: € Nil).

The Company is subject to various risks including operational risk which are summarised below. The other key risks facing the Companysuch as credit risk, price risk, liquidity risk are set out in note 17 to the financial statements.

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Company’s processes,personnel and infrastructure, and from external factors other than credit, markets and liquidity issues such as those arising from legal andregulatory requirements and generally accepted standards to corporate behaviour. Operational risks arise from all the Company’soperations. Certain administration functions are outsourced to Vistra Alternative Investments (Ireland) Limited ("VAIIL") and DiloskDesignated Activity Company (the "Servicer").



Corporate Governance Statement (continued)Financial Reporting Process (continued)

Risk Assessment

More specifically:-- Regular training on accounting rules and recommendations are provided to the accountants employed by the Administrator.

Control Activities

Monitoring

Capital Structure

There are no restrictions on voting rights.

Appointment and replacement of directors and amendment to the Constitution

Powers of directors

Given the contractual obligations on the Administrator, the Board has concluded that there is currently no need for the Company to have aseparate internal audit function in order for the Board to perform effective monitoring and oversight of the internal control and riskmanagement systems of the Company in relation to the financial reporting process.

The Company is not subject to the European Communities (Takeover Bids (Directive 2004/25/EC)) Regulations 2006 and therefore notrequired to include information relating to voting rights and other matters required by those Regulations and specified by the Act.

With regard to the appointment and replacement of directors, the Company is governed by its Constitution, Irish Statute comprising theAct and the Listing rules of Euronext Dublin (formerly, Irish Stock Exchange). The Constitution may be amended by special resolution ofthe shareholders.

The Board is responsible for managing the business affairs of the Company in accordance with the Constitution. The directors maydelegate certain functions to the Administrator and other parties, subject to the supervision and direction by the directors. The directorshave delegated the day-to-day administration of the Company to the Administrator.

The Administrator is contractually obliged to design and maintain control structures to manage the risks which the Board judges to besignificant for internal control over financial reporting. These control structures include appropriate division of responsibilities and specificcontrol activities aimed at detecting or preventing the risk of significant deficiencies in financial reporting for every significant account inthe financial statements and the related Notes in the Company’s annual report.

The Board has an annual process to ensure that appropriate measures are taken to consider and address the shortcomings identified andmeasures recommended by the independent auditors.

The Board is responsible for assessing the risk of irregularities whether caused by fraud or error in financial reporting and ensuring theprocesses are in place for the timely identification of internal and external matters with a potential effect on financial reporting. The Boardhas also put in place processes to identify changes in accounting rules and recommendations and to ensure that these changes areaccurately reflected in the Company’s financial statements.

The Administrator has a review procedure in place to ensure errors and omissions in the financial statements are identified and

The Board has established processes regarding internal control and risk management systems to ensure its effective oversight of thefinancial reporting process. These include appointing the Administrator, VAIIL, to maintain the accounting records of the Companyindependently of Deutsche Trustee Company Limited (the "Trustee"), Deutsche Bank AG London (the "Cash Manager") and Servicer. TheAdministrator is contractually obliged to maintain adequate accounting records as required by the Corporate Administration Agreement. Tothat end the Administrator performs reconciliations of its records to those of the Trustee, Cash Manager and Servicer. The Administrator isalso contractually obliged to prepare for review and approval by the Board the annual report including financial statements intended to givea true and fair view.

The Board evaluates and discusses significant accounting and reporting issues as the need arises. From time to time the Board alsoexamines and evaluates the Administrator’s financial accounting and reporting routines and monitors and evaluates the external auditors’performance, qualifications and independence. The Administrator has operating responsibility for internal control in relation to thefinancial reporting process and the Administrator’s report to the Board.

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



Audit committee

Political donations

Accounting records

Subsequent events

The measures that the directors have taken to secure compliance with the requirements of Section 281 to 285 of the Act with regards to thekeeping of adequate accounting records are to outsource this function to a specialised provider of such services. The books of account ofthe Company are maintained by VAIIL at First Floor, Block A, George's Quay Plaza, George's Quay, Dublin 2, Ireland.

The Electoral Act, 1997 (as amended by the Electoral Amendment Political Funding Act, 2012) requires companies to disclose all politicaldonations over €200 in aggregate made during a financial year. The directors, on enquiry, have satisfied themselves that no such donationsin excess of this amount have been made by the Company during the financial year to 31 December 2019.

On March 11, 2020, the World Health Organization officially declared COVID-19, the disease caused by the novel coronavirus, apandemic. The directors are closely monitoring the evolution of this pandemic, including how it may affect the economy and the generalpopulation. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of the novelcoronavirus on the Company or the overall economy.

Analysts estimate that new house prices could decline in the 10% to 20% range whereas Davys suggests 5% to 20% drop in new houseprices. House builders are also set to see fewer visitors on sites due to social isolation with both builders and estate agents moving toappointment-only viewings or virtual viewings.

Two of the largest house builders in Ireland have at least 50% of its 2020 target forward sold for the year. The ERSI are also predicting a20% drop for investment in dwellings and improvements. The last financial crisis in 2008 seen a minimum of 10% drop in property pricesin the first 12 months.

Under Section 1551(1) of the Act, all public-interest entities are required to establish an audit committee, subject to certain exemptions.Section 167 of the Act also requires the directors of a large company (as such term is defined in the Act) to establish an audit committee orto state the reasons for not establishing such a committee.

As set out in Section 1551(11)(c) of the Act, a Company issuing asset backed securities may avail itself of an exemption from therequirements to establish an audit committee. The sole business of the Company relates to the issuing of asset-backed securities. Given thecontractual obligations of the Administrator and the limited recourse nature of the securities issued by the Company and considering thatthe Company is operating within the turnover threshold limits as set out under Section 167(1) of the Act, the Board has concluded thatthere is currently no need for the Company to have a separate audit committee in order for the Board to perform effective monitoring andoversight of the internal control and risk management systems of the Company in relation to the financial reporting process and themonitoring of the statutory audit and the independence of the statutory auditors. Accordingly, the Company has availed itself of theexemption under Section 1551(11)(c) of the Act not to establish an audit committee.

The Company will need to provide COVID-19 Payment Breaks to all borrowers (i.e. owner-occupiers and buy-to-let) in line with DiloskDAC (the "Master Servicer") requirements which is to offer a 3-month payment holiday to borrowers affected by COVID-19. Dilosk DACis a Central Bank of Ireland ("CBI") regulated entity.

If a high number of borrowers avail of the COVID-19 Payment Break and for a longer duration which results in a material impact on cashflows, there is an increased likelihood that this may be challenged by Noteholders. However, this risk is low given percentages currentlyavailing of option and current reserve fund balances.

Any borrower who avails of a COVID-19 Payment Break will be maintained in their pre-payment break state (i.e. performing). This wouldbe consistent with Dilosk DAC's and CBI’s guidance that any COVID-19 related payment break should not affect borrowers' credit scores(as confirmed by the CCR). Consequently, COVID-19 Payment Breaks will not be reported as arrears, or for the purpose of arrears-basedtransaction triggers.

The Company considered the impact of the pandemic on the carrying values of assets and liabilities on the Company’s Statements ofFinancial Position. The overall financial impact of COVID-19 cannot be reliably estimated at this time, however the Company assessedthat its key sensitivity was in relation to ECLs on the underlying mortgages assets.

Dilosk RMBS No.l Desipeted Acttvity ConpenyPage 6

Dirtctors' rcport (cotrtinmd)

Subsequelt events (continucd)At the end of the COMD-19 Payment Break it is expecad that ioterest will be capitalised over the rcmaining life of the moftgag€.

However, if there is CBI Advice which requires Dilosk DAC to provide ao e:.tension to &e remaining term (i.e. 3 months) in order tore.duce the increase in monthly morgage r€paymeffi post the COVIDI9 Payment Brea( the Company should also be able toaccommodate this. This becomes much mce involved in tenrs of its obligations under insurance policies, e.g. imurorce policies wouldalso need to be extended by 3 months, stc.

lnvestorreprts and Reguldoryr€potrB re rurrentlybeing revicwed but the Compuy mticipae reporting COVIDI9 Pryment Breaks ooloan-by-loan basis, which would allorr for their id€iltificalion in the respective mortgag€ pools. However, currentty there is limitedguidancc from regularors and rating agencies m horr thcse will be reportcd in future r4orting periods.

As of the most recert irvestor report arrers rmountd to 2.2a/o of the Po,rtfolio whilst ?7o of the of bmrowers bad availed of COYIF I 9

paymentbffiks.

Post yea erd ail nm+irding indicative offrr bo been received to acqufue the beneficial interest of lhe mutgage pudolio at tle firstoptional redernfion date in August 2020.

Post year erd the mortgage arrees have not increased materially atrd the moratoriums granttd to bonnwers as a result of COVID.19 are

curently und€r review but &Ey do not represent bonowers ia arrears d the datr of 4proval of the financial stateinents. The impact ofborrowers unablc to rentm to repaym€[ts post mtraforiumt after 3 mofhs, camot fully be ass€ssed at &is time. The portfolio of mortgqge

loans has a lorr LTV ratio, circa 4lV" at the y€ar er4 is represemtdive of the borrower quality and the ability to recov€r outstarding

reseivables wt€re e adve$€ case post mordorium were to aise. The Notcs issued have reconrse oaly to the collections fim &e mmtgageportfolio and the secured creditqs rank in advqrce of ihese collectiqt for dris reason therc is limited liquidity risk fm frc Copary.

There has been no odrer subcequent significant evsrts that r€quire adjustned and/or disclosure in ttresc financial staternents up to the date

of siping this reporc

Strtcnent on relcvent audit iaforuadolEtrh directtr d the dde of 4proval of this report confirms lhar:

r so far as thcy awae, there is no r€levmt audit irformalion of which the Company's arditors ae rmaware; andr the directors havc taken all stepa that drey ought to have trke,o as directorr in order to make thetselves aware of any relevant audit

information and to establish that thc Company's auditors are aware of this information.

Dircctor's complirncc statcmciltAt dris present time thc Compmy is operating wilhin the 6reshold limits as s€t out urder Section 225 (7) of the Act, uhich enables the

Company to avail of m exemptim to rhe Cmplimce Policy Staement obligcions. Accordinglythe dhectos are not required to include a

Compliace Statemcot in freir stahrtory directors' reput for the current fiaancial yer ending 3 I Dccsmber 20 I 9.

ludcpendmt AoditorIn accordaacr with Section 383(2) of the Act KPMG, Chfitered Accountmts, Staffiory Audit Fitm have orpressed their willingrtess toeontiaue in office.

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IXIosk RMBS Nol lhsigneted Adivity ComprnyPage 7

Statemcut of directors' rcrponslbilitics

The directors are responsible for preparing the dicctors' report and fiMncial stntem€nts, ir accordance with aplicable law ad rcgulations.

Compauy law requircs the directors to prepfle firaflcial statements for each financial year. Under that law they have electedto prepare the

financial staftm€nts in apcordance with International Fiuncial Reporting Standards QFRS) a.s adopte.d by the European Union (ELD.

Under company law the directors must trot qprove the financial statcmen8 unless drey ae satisfied that 6ey givc a unc ad fair viEw ofthe assets, liabilities and finmcial positim of the Cmpany and of its profit or loss for thatyear.

In preparing these financial stat€ments, the directors are required to:

r select suitable accormting policies andthen apply them consistently;

r make judge,ments ald estimdcs thd are reasonable and pruden!

. state whether applicable accomting stadards have been followe4 subject to any material depa*res disclmcd and *plained in thefinancial g{ements;

r assess the Compmy's ability to continue as a goirg concem, disclosing, as applicable, maters related to going concem; and

o use the going csrcem hsis of acc<xnting wle*r they cither intord to liquidate the Compey cE to c€as€ qcrtims, o have no rsalisticalternative but to do so.

The dfuectors are rrsporsible for keeping adequate records which disclooe wirt reasmable accuracy at any time the ass6ts,

liabilities" finecial position md profit m loss of the Cmpany and oable them to msur tlrat the finmcial stalments comply with the Act.They are respmsible for such iaterral controls as liey detrmine is rccessary to enable the preprdim of financial staternerts that are free

frorr mdedal misststflient, whethcr &e to fraud m eror, and have general rcspmsibility for taking zuch sftps as are reasonably open to

them to safegurd the assets of the Cmpmy md to prevent md rletect fraud od othet irregularities. Thc directors are also responsible forpreparing a directon' report that complies with the requirements of the Act.

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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF DILOSK RMBS NO.1 DESIGNATED ACTIVITY COMPANY

Report on the audit of the financial statements

Opinion

We have audited the financial statements of Dilosk RMBS No.1 Designated Activity Company (‘the Company’) for the year ended 31 December 2019 set out on pages 13 to 46, which comprise the Statement of comprehensive income, Statement of financial position, Statement of changes in equity, Statement of cash flows and related notes, including the summary of significant accounting policies set out in note 3. The financial reporting framework that has been applied in their preparation is Irish Law and International Financial Reporting Standards (IFRS) as adopted by the European Union.

In our opinion, the accompanying financial statements:

- give a true and fair view of the assets, liabilities and financial position of the Companyas at 31 December 2019 and of its loss for the year then ended;

- have been properly prepared in accordance with IFRS as adopted by the EuropeanUnion; and

- have been properly prepared in accordance with the requirements of the CompaniesAct 2014.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (Ireland) (ISAs (Ireland)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s Responsibilities section of our report. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion is consistent with our report to the audit committee.

We were appointed as auditor by the directors in August 2016 for the period ended 31 December 2015. The period of total uninterrupted engagement is the 5 years ended 31 December 2019. We have fulfilled our ethical responsibilities under, and we remained independent of the Company in accordance with, ethical requirements applicable in Ireland, including the Ethical Standard issued by the Irish Auditing and Accounting Supervisory Authority (IAASA) as applied to listed public interest entities. No non-audit services prohibited by that standard were provided.

Key audit matters: our assessment of risks of material misstatement

Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Page 8

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF DILOSK RMBS NO.1 DESIGNATED ACTIVITY COMPANY (continued)

In arriving at our audit opinion above, the key audit matters, in decreasing order of audit significance, were as follows:

Valuation of financial assets at fair value through other comprehensive income €107,057,503 (2018: €121,718,011) Refer to pages 19-26 (accounting policy) and pages 28-29 & 32-45 (financial disclosures)

The key audit matter How the matter was addressed in our audit

Financial assets at fair value through other comprehensive income represent 95% of the value of the Company’s total assets. The financial assets consist of a residential mortgage loan portfolio. The mortgage loans are considered level 3 assets per the fair value hierarchy.

The valuation of financial assets at fair value through other comprehensive income involves subjective judgments and unobservable inputs in determining the fair value and expected credit loss. There is a risk that the valuation and provision in respect of these mortgage loans held by the Company may not be reflective of fair value and/or appropriate expected credit loss provision.

Our audit procedures included but were not limited to the following: - Obtaining and documenting an understanding of the

valuation methodologies, valuation processes and arrearsmanagement processes and testing the design andimplementation of the relevant controls therein;

- With the assistance of our valuation specialists, we testedthe fair value model and the expected credit loss (ECL)model, the methodology and respective estimates andjudgements applied based on the mortgage loan portfolio,with reference to relevant industry and marketconsiderations. We derived a fair value range using ourassumptions and other qualitative factors based on ourknowledge of the industry. We compared these ranges toManagement’s (the Master Servicer) fair value andexpected credit loss provision and held discussion withManagement (the Master Servicer) to challenge their inputsand underlying assumptions, such as the discount factor,forward looking information and staging criteria.

- Comparing the actual 2019 cashflows to the expected 2019cashflows from the mortgage portfolio, to assess thereasonableness in determining the projected 2020cashflows applied to the fair value model;

- Testing the full population of the mortgage loans greaterthan 30 days past due as at 31 December 2019 andinspecting their cashflows post year end to determine ifthere were any late payments year to date.

- We also considered the adequacy of the Company’sdisclosures (see note 2D) in relation to: the use ofjudgements and estimates in determining the fair value andECL of investments: the Company’s valuation policiesadopted; and fair value disclosures in note 4 and note 10 tothe financial statements for compliance with the relevantaccounting standard.

Based on evidence obtained, we concluded that the judgements and estimates relating to the valuation of the financial assets at fair value through other comprehensive income is reasonable.

Page 9


Our application of materiality and an overview of the scope of our audit

Materiality for the Company’s financial statements was set as €1,117,376 (2018: €1,280,294), it is determined with reference to a benchmark of total assets of which it represents 1% (2018: 1%).

We reported to the Board of Directors any corrected or uncorrected identified misstatements exceeding €55,869 (2018: €64,015), in addition to other identified misstatements that warranted reporting on qualitative grounds.

Our audit of the Company was undertaken to the materiality level specified above and was performed by a single engagement team in Dublin, Ireland.

We have nothing to report on going concern

We are required to report to you if we have concluded that the use of the going concern basis of accounting is inappropriate or there is an undisclosed material uncertainty that may cast significant doubt over the use of that basis for a period of at least twelve months from the date of approval of the financial statements. We have nothing to report in these respects.

Other information

The directors are responsible for the other information presented in the Annual Report together with the financial statements. The other information comprises the information included in the Directors’ report. The financial statements and our auditor’s report thereon do not comprise part of the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information.

Based solely on our work on the other information, we report that:

• we have not identified material misstatements in the directors’ report;• in our opinion, the information given in the directors’ report is consistent with the

financial statements;• in our opinion, the directors’ report has been prepared in accordance with the

Companies Act 2014.

Corporate governance disclosures

As required by the Companies Act 2014, we report, in relation to information given in the Corporate Governance Statement on pages 3 to 4, that:

• based on the work undertaken for our audit, in our opinion, the description of themain features of internal control and risk management systems in relation to thefinancial reporting process is consistent with the financial statements and has beenprepared in accordance with the Act; and;

• based on our knowledge and understanding of the Company and its environmentobtained in the course of our audit, we have not identified any material misstatementsin that information.

We also report that, based on work undertaken for our audit, the information required by the Act is contained in the Corporate Governance Statement.

Page 10


Our opinions on other matters prescribed the Companies Act 2014 are unmodified

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

In our opinion, the accounting records of the Company were sufficient to permit the financial statements to be readily and properly audited and the Company’s financial statements are in agreement with the accounting records.

We have nothing to report on other matters on which we are required to report by exception

The Companies Act 2014 requires us to report to you if, in our opinion, the disclosures of directors’ remuneration and transactions required by Sections 305 to 312 of the Act are not made.

Respective responsibilities and restrictions on use

Directors’ responsibilities

As explained more fully in their statement set out on page 7, the directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (Ireland) will always detect a material misstatement when it exists. Misstatements can arise from fraud, other irregularities or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. The risk of not detecting a material misstatement resulting from fraud or other irregularities is higher than for one resulting from error, as they may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control and may involve any area of law and regulation and not just those directly affecting the financial statements.

A fuller description of our responsibilities is provided on IAASA’s website at https://www.iaasa.ie/getmedia/b2389013-1cf6-458b-9b8f-a98202dc9c3a/Description_of_auditors_responsiblities_for_audit.pdf.

Page 11

https://www.iaasa.ie/getmedia/b2389013-1cf6-458b-9b8f-a98202dc9c3a/Description_of_auditors_responsiblities_for_audit.pdf

https://www.iaasa.ie/getmedia/b2389013-1cf6-458b-9b8f-a98202dc9c3a/Description_of_auditors_responsiblities_for_audit.pdf


The purpose of our audit work and to whom we owe our responsibilities

Our report is made solely to the Company’s members, as a body, in accordance with Section 391 of the Companies Act 2014. Our audit work has been undertaken so that we might state to the Company’s members 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 than the Company and the Company’s members, as a body, for our audit work, for our report, or for the opinions we have formed.

Vincent Reilly 26 June 2020 for and on behalf of KPMG Chartered Accountants, Statutory Audit Firm 1 Harbourmaster Place, IFSC, Dublin 1

Page 12


Statement of comprehensive incomeFor the financial year ended 31 December 2019

Year ended Year ended31-Dec-19 31-Dec-18

Note € €4 4,424,225 5,312,662

Finance expense 5 (5,782,573) (3,877,017)10 (177,818) 101,241

(1,536,166) 1,536,886

Operating expenses 6 (750,638) (877,198)

(Loss)/profit before taxation (2,286,804) 659,688

Tax expense 7 (250) (250)

(Loss)/profit for the financial year (2,287,054) 659,438

Other comprehensive income

Items that are or may be reclassified subsequently to profit or lossMovement in fair value reserve 4,290,009 (703,744)

Total comprehensive income/(loss) for the financial year 2,002,955 (44,306)

ECL impairment on financial assets at fair value through other comprehensiveincome

The accompanying notes on pages 17 to 46 form an integral part of these financial statements

Interest income from financial assets at fair value through other comprehensiveincome

IXlosk RMBS No.l Deripeted Activity Comptny

Strtement of fnancisl DooltionAs at 3l December 2019

Axsets

Cash and cash equivalena

Other receivables

Financial assets ar fair value thmugh other comprehensivc income

Total essets

Ltabifitics rnd Equity

LirbilitierOther payables

Debt securities issued

Corporation ta,r payable

Total ltrbilides

EqulfCalled up share capital presetrted as equity

Fair value reserve

Retained earnings

Tot*l equity

Totel liabilitics and cqdty

tln hehalf of the floard

Page 14

Note

I9

l0

31-Dec-i 9 3 l -Llec-l ti

ee5911,984 5,549,728

1,000 1,811

r07,9s7,503 r21,718,011

113,870,487 127269,550

11

t2175,611 311,375

11a,207JM t?3,473,5582s0 250

110,383,165 125,785,183

1,000

3,465,907

20,415

1,000

(824,r02)

2,307,469

3,487,322 1,484,367

113,870,487 127269,550

,4,*'ql.i{fl}4;Bronagh HartlirnanDi.".tl. I

R-,^" G-Il"o*o.of \l

i)are:2ol&1101,

The accompanying u$tes on pages I 7 to 46 form an integral part of these hnancial statements

i3


Statement of changes in equityFor the financial year ended 31 December 2019

Share Fair Value Retainedcapital Reserve earnings Total

€ € € €

Balance at 1 January 2018 1,000 (120,358) 1,648,031 1,528,673

Profit for the financial year - - 659,438 659,438

Other comprehensive lossMovement in fair value reserve - (703,744) - (703,744)

Total comprehensive loss - (703,744) 659,438 (44,306)

Balance as at 31 December 2018 1,000 (824,102) 2,307,469 1,484,367

Balance as at 1 January 2019 1,000 (824,102) 2,307,469 1,484,367

Loss for the financial year - - (2,287,054) (2,287,054)

Other comprehensive incomeMovement in fair value reserve - 4,290,009 - 4,290,009

Total comprehensive income - 4,290,009 (2,287,054) 2,002,955

Balance as at 31 December 2019 1,000 3,465,907 20,415 3,487,322



Statement of cash flowsFor the financial year ended 31 December 2019

Year ended Year endedNote 31-Dec-19 31-Dec-18

€ €Cash flows from operating activities(Loss)/profit for the financial year before tax (2,286,804) 659,688

Adjustments for:Interest expense 5 5,782,573 3,877,017Interest income 4 (4,424,225) (5,312,662)

10 177,818 (101,241)

Cash used in operating activities (750,638) (877,198)Interest income received 4,433,579 5,968,061Interest paid (3,686,237) (4,578,751)Operating cash inflow before movements in working capital (3,296) 512,112Decrease in other receivables 811 -(Decrease)/increase in other payables (135,764) 7,004Tax paid (250) (250)Net cash (used in)/generated from operating activities (138,499) 518,866

Cash flows from investing activities10 18,675,905 19,975,605

Issuance of financial assets at fair value through other comprehensive income (803,206) (398,000)Net cash generated from investing activities 17,872,699 19,577,605

Cash flows used in financing activitiesRepayment of debt securities issued 12 (17,371,944) (19,721,542)Net cash used in financing activities (17,371,944) (19,721,542)

Net increase in cash and cash equivalents 362,256 374,929

Cash and cash equivalents at beginning of the financial year 5,549,728 5,174,799Increase in cash and cash equivalents 362,256 374,929Cash and cash equivalents at end of the financial year 5,911,984 5,549,728

Analysed as follows:Cash at bank 5,912,015 5,549,728Bank overdraft (31) -

5,911,984 5,549,728

ECL impairment on financial assets at fair value through other comprehensive income

Collections on financial assets at fair value through other comprehensive income



Notes to the financial statementsFor the financial year ended 31 December 2019

1. General information

There has been no significant changes in those activities outlined above during the financial year.

The Company has no employees.

2. Basis of preparation(a) Statement of compliance

These financial statements have been prepared on a going concern basis as defined in the directors' report.

(b) Basis of measurementThe financial statements have been prepared on the historical cost basis except for the following:•

• Debt securities issued measured at amortised cost.

The methods used to measure the fair values are discussed in note 18.

(c) Functional and presentation currency

We note that the Master Servicer is assessing potential scenarios to re-finance the notes and or sell the portfolio during 2020. Thedirectors do not expect to sell the portfolio during 2020, however no formal decision have been made as at the date of approval of thefinancial statements.

Financial assets at fair value through other comprehensive income, being the mortgage loan assets are measured at fair valuethrough other comprehensive income: This is based on the Company’s intention to refinance the portfolio of residentialmortgages in August 2020, by way of a mortgage sale agreement, thus meeting the hold to collect and sell business model andSPPI criteria.

These financial statements are presented in Euro (€) which is the Company’s functional currency. Functional currency is the currencyof the primary economic environment in which the entity operates. Financial assets at fair value through other comprehensive incomeand debt securities issued of the Company are denominated in Euro. The directors of the Company believe that Euro most faithfullyrepresents the economic effects of the underlying transactions, events and conditions. All figures presented in Euros have beenrounded off to the nearest Euro unless specified otherwise.

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") issued byInternational Accounting Standard Board (IASB) and its interpretations as adopted by the EU and as applied in accordance with theAct.

On 26 May 2015, the Company acquired from Dilosk Funding No.1 Designated Activity Company (the "Seller") the beneficial interestin a portfolio of mortgage loans (the "Loans") and related rights (the "Related Security") originated by ICS Building Society ("ICS")and secured over residential properties located in Ireland (the Loans and Related Security, together, the "Mortgage Portfolio").

The Company funded the purchase of the beneficial interest in the Mortgage Portfolio by issuing €160,500,000 Class A ResidentialMortgage Backed Floating Rate Notes due February 2051 (the "Class A Notes"), €24,700,000 Class B Residential Mortgage BackedFloating Rate Notes due February 2051 (the "Class B Notes"), €6,200,000 Class C Residential Mortgage Backed Floating Rate Notesdue February 2051 (the "Class C Notes"), €4,100,000 Class D Residential Mortgage Backed Floating Rate Notes due February 2051(the ''Class D Notes'') and €10,300,000 Class Z Residential Mortgage Backed Floating Rate Notes due February 2051 (the ''Class ZNotes'') (together the "Notes").

The accounting policies set out below have been applied in preparing the financial statements for the financial year ended 31December 2019 and the comparative information presented in these financial statements for the financial year ended 31 December2018.

The Company, a special purpose vehicle, was incorporated in Ireland as a limited company on 13 February 2015 with registrationnumber 557456. In accordance with the changes introduced into Irish law by the Companies Act 2014 (the "Act"), Dilosk RMBSNo.1 Limited converted to a designated activity company and changed its name to Dilosk RMBS No.1 Designated Activity Company,effective as of 17 September 2016.

All the Notes issued by the Company are listed on the Main Securities Market of the Irish Stock Exchange plc, trading as EuronextDublin (the "Euronext Dublin").


Notes to the financial statements (continued)For the financial year ended 31 December 2019

2. Basis of preparation (continued)(d) Use of estimates and judgements

(i) Judgements

(ii) Assumptions and estimation uncertainties

Note 3(c) : determination of the fair value of financial instruments with significant unobservable inputs.

(e) New standards, amendments or interpretations

Description Effective date1 January 20191 January 20191 January 20191 January 2019

Annual Improvements 2015 -2017: IFRS 3, IFRS 11, IAS 12, IAS 23 1 January 20191 January 2019

Description Effective date*1 January 20201 January 2020

1 January 20201 January 20201 January 2021

*Where new requirements are endorsed, the EU effective date is disclosed. For un-endorsed standards and interpretations, the IASB’seffective date is noted. Where any of the upcoming requirements are applicable to the Company, it will apply them from their EUeffective date.

The directors have considered the new standards, amendments and interpretations as detailed in the above table and do not plan earlyadoption of these standards. The application of all of these standards, amendments or interpretations will be considered in detail inadvance of a confirmed effective date by the Company.

Note 3(c): establishing the criteria for determining whether credit risk on the financial asset has increased significantly since initialrecognition, determining methodology for incorporating forward-looking information into measurement of Expected Credit Loss("ECL") and selection and approval of models used to measure ECL.

None of the above standards, amendments and interpretations had a significant impact on the Company’s financial statements.

In preparing these financial statements, management has made judgements, estimates and assumptions that affect the application of theCompany's accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ fromthese estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.

Amendments to IAS 28: Investments in associates - Long term interests in associates and joint ventures

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the yearended 31 December 2019 is included in the following notes.

Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognisedin the financial statements is included in the following notes.

(i) Effective for annual periods beginning on 1 January 2019

Amendments to IFRS 9: Financial Instruments - Prepayment features with negative compensation

IFRS 3: Business Combinations

IAS 8: Accounting Policies, Changes in Accounting Estimates and ErrorsAmendments to the Conceptual Framework

(ii) Standards not yet effective, but available for early adoption

IFRIC Interpretation 23: Uncertainty over income tax

Note 3(c) : impairment of financial instruments: determining inputs into the ECL measurement model, including incorporation offorward-looking information.

IFRS 16: Leases

Amendments to IAS 1: Presentation of Financial Statements: Classification of Liabilities as Current or Non-current

IFRS 17: Insurance contracts

Amendments to IAS 19: Employee Benefits - Plan amendment, curtailment or settlement

The directors have set out below both the upcoming EU endorsed and un-endorsed accounting standards, amendments orinterpretations.



3(a)

(b) Cash and cash equivalents

(c) Financial instrumentsFinancial Assets(i) Recognition, classification and measurement

• financial assets at amortised cost;• financial assets at FVOCI; or• financial assets at FVTPL.

Financial assets at amortised costDebt instruments

•

•

The Company determines the appropriate classification based on the contractual cash flow characteristics of the financial asset and theobjective of the business model within which the financial asset is held.

the financial asset is held within a business model whose objective is achieved by holding financial assets to collect contractualcash flows.

Income from financial assets at fair value through other comprehensive income and finance expense on debt securitiesissued

Income from financial assets at fair value through other comprehensive income includes interest earned on financial assets at fair valuethrough other comprehensive income and finance expense relates to interest arising on debt securities issued which are all recognisedusing effective interest rate method.

Significant accounting policies

Cash and cash equivalents include cash in hand, deposits held on call with banks and other short-term highly liquid investments withoriginal maturities of less than three months, which are subject to insignificant risk of changes in their fair value, and are used by theCompany for the purpose of investing in short term commitments rather than for investment or other purposes. Cash and cashequivalents are carried at amortised cost in the statement of financial position.

The Company applies the following accounting policies to the classification, recognition and measurement policies to financial assets.A financial asset is recognised in the statement of financial position when, and only when, the Company becomes a party to itscontractual provisions. At initial recognition, a financial asset is measured at fair value (plus, in the case of a financial asset not atFVTPL, directly attributable transaction costs) and is assigned one of the following classifications for the purposes of subsequentmeasurement:

A debt instrument is measured, subsequent to initial recognition, at amortised cost where it meets both of the following conditions andhas not been designated as measured at FVTPL:

the financial asset has contractual terms that give rise on specified dates to cash flows that are solely payments of principal andinterest on the principal amount outstanding; and

In determining the business model for a group of financial assets, the Company considers factors such as how performance isevaluated and reported to key management personnel; the risks that affect performance and how they are managed; how managers arecompensated; and the expected frequency, value and timing of sales of financial assets.

The effective interest rate method is a method of calculating the amortised cost of a financial asset or a financial liability and ofallocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discountsestimated future cash payments and receipts through the expected life of the financial instrument or, when appropriate, a shorter periodto the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the companyestimates cash flows considering all contractual terms of the financial instrument (for example, prepayment options) but does notconsider future credit losses. The calculation includes all fees paid or received between parties to the contract that are an integral partof the effective interest rate, transaction costs and all other premiums or discounts.

In considering the contractual cash flow characteristics of a financial asset, the Company determines whether the contractual termsgive rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. In thiscontext, ‘principal’ is the fair value of the financial asset on initial recognition and ‘interest’ is consideration for the time value ofmoney and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basiclending risks and costs (e.g. liquidity risk and administrative costs), as well as profit margin. In making the determination, theCompany assesses whether the financial asset contains a contractual term that could change the timing or amount of contractual cashflows such that it would not meet this condition. In making this assessment, the Company considers contingent events, leveragefeatures, prepayment and term extensions, terms which limit the Company’s recourse to specific assets and features that modifyconsideration of the time value of money.



3. Significant accounting policies (continued)(c) Financial instruments (continued)Financial Assets (continued)(i) Recognition, classification and measurement (continued)

Financial assets at amortised cost (continued)Debt instruments (continued)

Financial assets at fair value through other comprehensive income ("FVOCI")Debt instruments

•

•

Financial assets at fair value through profit or loss ("FVTPL")

Financial assets mandatorily measured at fair value through profit or loss

•

•

Financial assets designated as measured at fair value through profit or loss

Purchases and sales of debt securities at amortised cost are recognised on trade date: the date on which the Company commits topurchase or sell the asset. Loans measured at amortised cost are recognised when cash is advanced to the borrowers.

Interest revenue using the effective interest method is recognised in the statement of comprehensive income. An impairment lossallowance is recognised for ECL with corresponding impairment gains or losses recognised in the statement of comprehensive income.

Purchases and sales of debt instruments at fair value through OCI are recognised on trade date. Gains and losses arising from changesin fair value are included in OCI. Interest revenue using the effective interest method and FX gains and losses on the amortised cost ofthe financial asset are recognised in the statement of comprehensive income. The impairment loss allowance for ECL does not reducethe carrying amount but an amount equal to the allowance is recognised in OCI as an accumulated impairment amount, withcorresponding impairment gains or losses recognised in the statement of comprehensive income. On derecognition, the cumulativegain or loss previously recognised in OCI is reclassified to the statement of comprehensive income.

the financial asset has contractual terms that give rise on specified dates to cash flows that are solely payments of principal andinterest on the principal amount outstanding; and

financial assets held within a business model whose objective is achieved neither by collecting contractual cash flows nor bothcollecting contractual cash flows and selling financial assets. This includes financial assets held within a portfolio that is managedand whose performance is evaluated on a fair value basis, such as investments held by the Company’s life assurance business. Itfurther includes portfolios of financial assets which are ‘held for trading’, which includes financial assets acquired principally forthe purpose of selling in the near term and financial assets that on initial recognition are part of an identified portfolio where thereis evidence of a recent pattern of short-term profit-taking.

A financial asset may be designated at FVTPL only if doing so eliminates or significantly reduces measurement or recognitioninconsistencies (an ‘accounting mismatch’) that would otherwise arise from measuring financial assets or liabilities or recognisinggains and losses on them on different bases.

Regular way purchases and sales of financial assets at fair value through profit or loss are recognised on trade date. They are carried onthe balance sheet at fair value, with all changes in fair value included in the statement of comprehensive income.

Financial assets meeting either of the conditions below are mandatorily measured at FVTPL (other than in respect of an equityinvestment designated as at FVOCI):

A debt instrument is measured, subsequent to initial recognition, at FVOCI where it meets both of the following conditions and has nobeen designated as measured at FVTPL:

financial assets with contractual terms that do not give rise on specified dates to cash flows that are solely payments of principaland interest on the principal amount outstanding; and

the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows andselling financial assets.

All other financial assets are measured, subsequent to initial recognition, at FVTPL.



3. Significant accounting policies (continued)(c) Financial instruments (continued)(i) Recognition, classification and measurement (continued)

Business model assessment

–

– how the performance of the portfolio is evaluated and reported to the Company’s management;–

–

–

–

–

– contingent events that would change the amount or timing of cash flows;– prepayment and extension features;– terms that limit the Company’s claim to cash flows from specified assets (e.g. non-recourse features); and– features that modify consideration of the time value of money (e.g. periodical reset of interest rates).

Held-to-collect and sell business model: this includes financial assets at fair value through other comprehensive income. Thesefinancial assets are held both to collect contractual cash flow and also to sell. This is based on the Company’s intention to holdthe portfolio mortgages until the first optional redemption date to generate cashflows from the underlying mortgages and then torefinance the portfolio through a mortgage sale agreement at the first optional redemption date on the interest payment datefalling in August 2020.

The Company holds a portfolio of long-term variable rate loans for which the Company has the option to propose to revise the interestrate at periodic reset rates. These resets rights are limited to the market rate at the time of revision, ultimately interest rates are tied tothe cost of funding which is market dependent. The borrowers have an option to either accept the revised rate or redeem the loan at parwithout penalty. The Company has determined that the contractual cash flows of these loans are SPPI because the option varies theinterest rate in a way that is consideration for the time value of money, credit risk, other basic lending risks and costs associated withthe principal amount outstanding.

In assessing whether the contractual cash flows are SPPI, the Company considers the contractual terms of the instrument. Thisincludes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cashflows such that it would not meet this condition. In making this assessment, the Company considers:

Held-to-collect business model: this includes cash and cash equivalents and other assets held to collect. These financial assets areheld to collect contractual cash flow.

A prepayment feature is consistent with the solely payments of principal and interest criterion if the prepayment amount substantiallyrepresents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable additionalcompensation for early termination of the contract. Additionally, for a financial asset acquired at a discount or premium to itscontractual par amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual paramount plus accrued (but unpaid) contractual interest (which may also include reasonable additional compensation for earlytermination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition.

the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations aboutfuture sales activity; and

financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured atFVTPL.

Assessment whether contractual cash flows are Solely Payments of Principal and Interest ("SPPI")

For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ isdefined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during aparticular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profitmargin.

In making an assessment of the objective of the business model in which a financial asset is held, the Company considers all of therelevant information about how the business is managed, including:

the risks that affect the performance of the business model (and the financial assets held within that business model) and howthose risks are managed;

the documented investment strategy and the execution of this strategy in practice. This includes whether the investment strategyfocuses on earning contractual interest income, matching the duration of the financial assets to the duration of any relatedliabilities or expected cash outflows or realising cash flows through the sale of the assets;

The Company has determined it has the following business models:



3. Significant accounting policies (continued)(c) Financial instruments (continued)(i) Recognition, classification and measurement (continued)

Amortised Cost FVOCI FVTPL Total€ € € €

Fair value through other comprehensive income:- 107,957,503 - 107,957,503

Amortised cost:5,911,984 - - 5,911,984

1,000 - - 1,000

5,912,984 107,957,503 - 113,870,487


Amortised cost:110,207,304 - - 110,207,304

175,611 - - 175,611

110,382,915 - - 110,382,915


Fair value through other comprehensive income:- 121,718,011 - 121,718,011

Amortised cost:5,549,728 - - 5,549,728

1,811 - - 1,811

5,551,539 121,718,011 - 127,269,550


Amortised cost:125,473,558 - - 125,473,558

311,375 - - 311,375

125,784,933 - - 125,784,933

(ii) Reclassification

(iii) Derecognition

Financial Liabilities

Debt securities issuedOther payables

Cash and cash equivalentsOther receivables

Other receivables

Financial Liabilities

Debt securities issuedOther payables

31-Dec-18Financial Assets

A financial asset is derecognised when the contractual rights to the cash flows from the financial asset expire or the Company hastransferred substantially all the risks and rewards of ownership. Where a modification results in a substantial change to the contractualcash flows of a financial asset, it may be considered to represent expiry of the contractual cash flows, resulting in derecognition of theoriginal financial asset and recognition of a new financial asset at fair value. The Company reduces the gross carrying amount of afinancial asset and the associated impairment loss allowance when it has no reasonable expectations of recovering a financial asset inits entirety or a portion thereof.

Refer to below table for a reconciliation of line items in the statement of financial position to the categories of financial instruments, asdefined by IFRS 9:

31-Dec-19Financial Assets

Cash and cash equivalents

When, and only when, the Company changes its business model for managing financial assets, it reclassifies all affected financialassets. Reclassification is applied prospectively from the reclassification date, which is the first day of the first reporting period,interim or annual, following the change in business model that results in the reclassification. Any previously recognised gains, lossesor interest are not restated.

Financial assets at fair value through othercomprehensive income




3. Significant accounting policies (continued)(c) Financial instruments (continued)(iv) Impairment of financial instrumentsScope

Basis for measuring impairment

Stage 1: 12-month ECL (not credit-impaired)

Stage 2: Lifetime ECL (not credit-impaired)

Stage 3: Lifetime ECL (credit-impaired)

Stage allocation

Significant increase in credit risk

Credit-impaired

a) significant financial difficulty of the issuer or the borrower;b) c)

d)

The Company renegotiates loans to customers in financial difficulties (referred to as ‘forbearance activities’a) to maximise collectionopportunities and minimise the risk of default. Loan forbearance is granted on a selective basis if the debtor is currently in default onits debt or if there is a high risk of default, there is evidence that the debtor made all reasonable efforts to pay under the originalcontractual terms and the debtor is expected to be able to meet the revised terms. The revised terms usually include extending thematurity, changing the timing of interest payments and amending the terms of loan covenants.

Generally, forbearance is a qualitative indicator of a significant increase in credit risk and an expectation of forbearance may constituteevidence that an exposure is credit-impaired. A customer needs to demonstrate consistently good payment behaviour over a period oftime before the exposure is no longer considered to be credit-impaired/in default.

These are financial instruments which are credit-impaired at the reporting date but were not credit-impaired at initial recognition. Animpairment loss allowance equal to lifetime ECL is recognised.

A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows haveoccurred. Evidence that a financial asset is credit-impaired includes observable data about the following events:

the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted tothe borrower a concession(s) that the lender(s) would not otherwise consider;

a breach of contract, such as a default or past due event;

it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation;

These are financial instruments where there has not been a significant increase in credit risk since initial recognition. An impairmentloss allowance equal to 12-month ECL is recognised. This is the portion of lifetime ECL resulting from default events that are possiblewithin the next 12 months.

These are financial instruments where there has been a significant increase in credit risk since initial recognition but which are notcredit-impaired. An impairment loss allowance equal to lifetime ECL is recognised. Lifetime ECL are the ECL resulting from allpossible default events over the expected life of the financial instrument.

The Company allocates financial instruments into the following categories at each reporting date to determine the appropriateaccounting treatment.

The Company considers all financial instruments to be fully performing if they are current or with less than 30 days arrears, theseinstruments are therefore assigned to Stage 1. If a financial instrument is not current i.e. is in arrears between 30 – 90 days then this isdeemed to have a significant increase in credit risk, and is therefore assigned to Stage 2. Financial instruments with greater than 90days arrears or have had a measure of forbearance are deemed credit impaired, and therefore assigned to Stage 3.

In determining if a financial instrument has experienced a significant increase in credit risk since initial recognition, the Companyassesses whether the risk of default over the remaining expected life of the financial instrument is significantly higher than had beenanticipated at initial recognition, taking into account changes in prepayment expectations where relevant. The Company usesreasonable and supportable information available without undue cost or effort at the reporting date, including forward lookinginformation. A combination of quantitative, qualitative and backstop indicators are generally applied in making the determination. Forcertain portfolios, the Company assumes that no significant increase in credit risk has occurred if credit risk is ‘low’ at the reportingdate.

The Company recognises impairment loss allowances for ECL on the following categories of financial instruments: financial assets atfair value through other comprehensive income, cash and cash equivalents and other receivables.



3. Significant accounting policies (continued)(c) Financial instruments (continued)(iv) Impairment of financial instruments (continued)

Credit-impaired (continued)e)f)

Measurement of ECL and presentation of impairment loss allowancesECL are measured in a way that reflects:a) an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;b) the time value of money; andc)

ECL are measured as follows:•

•

•

Impairment loss allowances for ECL are presented in the financial statements as follows:• Financial assets at FVOCI: as a deduction from the gross carrying amount in the balance sheet.• Debt instruments at FVOCI: an amount equal to the allowance is recognised in OCI as an accumulated impairment amount.

Utilisation of impairment loss allowances

Write-off

For financial assets, the discount rate used in measuring ECL is the effective interest rate (or ‘credit-adjusted effective interest rate’ fora Purchased or Originated Credit Impaired (POCI) financial asset) or an approximation thereof. For undrawn loan commitments, it isthe effective interest rate, or an approximation thereof, that will be applied when recognising the financial asset resulting from the loancommitment.

Financial assets that are written off could still be subject to enforcement activities in order to comply with the Company’s proceduresfor recovery of amounts due.

Financial assets that are credit-impaired at the reporting date: the difference between the gross carrying amount and the presentvalue of estimated future cash flows.

Undrawn loan commitments: the present value difference between the contractual cash flows that are due to the Company if thecommitment is drawn and the cash flows that the Company expects to receive.

the purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses.

Loans and debt securities are written off (either partially or in full) when there is no reasonable expectation of recovering a financialasset in its entirety or a portion thereof. This is generally the case when the Company determines that the borrower does not have assetsor sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. This assessment is carriedout at the individual asset level.

the disappearance of an active market for that financial asset because of financial difficulties; or

Financial assets that are not credit-impaired at the reporting date: the present value of the difference between all contractual cashflows due to the Company in accordance with the contract and all the cash flows the Company expects to receive.

It may not be possible to identify a single discrete event - instead, the combined effect of several events may have caused financialassets to become credit-impaired.

reasonable and supportable information that is available without undue cost or effort at the reporting date about past events,current conditions and forecasts of future economic conditions.

The Company reduces the gross carrying amount of a financial asset and the associated impairment loss allowance when it has noreasonable expectations of recovering a financial asset in its entirety or a portion thereof. Indicators that there is no reasonableexpectation of recovery include the collection process having been exhausted or it becoming clear during the collection process thatrecovery will fall short of the amount due to the Company. The Company considers, on a case-by-case basis, whether enforcementaction in respect of an amount that has been written off from an accounting perspective is or remains appropriate. Any subsequentrecoveries are included in the statement of comprehensive income as an impairment gain.



3. Significant accounting policies (continued)(c) Financial instruments (continued)

Financial liabilities

Financial liabilities are derecognised when they are extinguished, that is when the obligation is discharged, cancelled or expires.

Offsetting

(d) Tax expense

(e) Provisions

(f) Share capitalShare capital is issued in Euro. Dividends are recognised as a liability in the financial year in which they are approved.

(g) Other income and expensesAll other income and expenses are accounted for on an accruals basis.

Financial assets and liabilities are set off and the net amount presented in the statement of financial position when, and only when, theCompany has a legal right to set off the amounts and intends either to settle on a net basis or to realise the asset and settle the liabilitysimultaneously. Income and expenses are presented on a net basis only when permitted by the accounting standards, or for gains andlosses arising from a group of similar transactions.

The Company classifies its financial liabilities as being measured at amortised cost unless it has designated liabilities at FVTPL or isrequired to measure liabilities mandatorily at FVTPL such as derivative liabilities. Financial liabilities are initially recognised at fairvalue, (normally the issue proceeds i.e. the fair value of consideration received) less, in the case of financial liabilities subsequentlycarried at amortised cost, transaction costs. For financial liabilities carried at amortised cost, any difference between the proceeds, netof transaction costs, and the redemption value is recognised in the statement of comprehensive income using the effective interestmethod.

When a financial liability that is measured at amortised cost is modified without resulting in de-recognition, a gain or loss isrecognised in profit or loss. The gain or loss is calculated as the difference between the original contractual cash flows and themodified contractual cash flows discounted at the original effective interest rate.

The Company recognises a provision for a present obligation resulting from a past event when it is more likely than not that it will berequired to transfer economic benefits to settle the obligation and the amount of the obligation can be estimated reliably.

Contingent liabilities are possible obligations arising from past events whose existence will be confirmed only by uncertain futureevents, or present obligations arising from past events that are not recognised because either an outflow of economic benefits is notprobable or the amount of the obligation cannot be reliably measured. Contingent liabilities are not recognised but information aboutthem is disclosed unless the possibility of any outflow of economic benefits in settlement is remote.

Current tax is the expected tax payable or receivable on the taxable income or loss for the financial year, using tax rates applicable tothe Company’s activities enacted or substantively enacted at the reporting date, and adjustment to tax payable in respect of previousfinancial years.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which theasset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probablethat related tax benefit will be realised.

Tax expense comprises current and deferred tax. Tax expense is recognised in the statement of comprehensive income except to theextent that it relates to items recognised directly in equity, in which case it is recognised in equity.



3. Significant accounting policies (continued)(h) Operating segment

4. Income from financial assets at fair value through other comprehensive income Year ended Year ended31-Dec-19 31-Dec-18

€ €Interest income on mortgage portfolio 4,424,225 5,312,662

5. Finance expense Year ended Year ended31-Dec-19 31-Dec-18

€ €Interest expense on debt securities issued (776,299) (879,605) Interest expense on Class Z Notes (5,006,274) (2,997,412)

(5,782,573) (3,877,017)

6. Operating expenses Year ended Year ended31-Dec-19 31-Dec-18

€ €Servicer fees (548,777) (678,767) Professional fees (120,592) (124,679) Audit fees (49,200) (37,822) VAT expenses (5,349) (9,363) Tax advisory fees (4,920) (4,920) Rating agency fees (12,500) (12,500) Director fees (7,000) (7,000) Other expenses (2,300) (2,147)

(750,638) (877,198)

The Company is administered by VAIIL and has no employees.

During the financial year, the Company paid the Servicer, Dilosk DAC, Servicer fees amounting to €548,777 (2018: €678,767). Thisincludes the senior servicing fee and the subordinated servicing fee. The Senior servicing fee is calculated at 0.25% per annum on theoutstanding portfolio balance at the end of each month and the subordinated servicing fee is calculated at 0.20% per annum on theoutstanding portfolio balance at the end of each month.

The Company is engaged as one segment which involves the purchase of certain Irish residential loans from Dilosk Funding No.1

Designated Activity Company financed through the issue of debt securities. The standard on segmental reporting puts emphasis on the

management approach to reporting on operating segments. An operating segment is a component of the Company that engages in

business activities from which it may earn revenue and incur expenses. The directors perform regular reviews of the operating results

of the Company and make decisions using financial information at the Company level considering it as one entity. Accordingly, the

directors believe that the Company has only one reportable operating segment. The directors are responsible for ensuring that the

Company carries out business activities in line with transaction documents. They may delegate some of the day to day management of

the business to other parties both internal and external to the Company. The decisions of such parties are reviewed on a regular basis to

ensure compliance with the policies and legal responsibilities of the directors. Refer to note 17(i) for details of geographical location.

Section 305A(1)(a) of the Act, requires disclosure that VAIIL received €1,000 (2018: €1,000) per director included in theadministration fee as consideration for the making available of an individual to act as a director of the Company.

The terms of the Corporate Administration Agreement between the Company and VAIIL provide for a single fee for the provision ofcorporate administration services (including the making available of an individual to act as a director of the Company). As a result, theallocation of fees between the different services provided is a subjective and approximate calculation. Bronagh Hardiman does not(and will not), in her personal capacity or any other capacity, receive any fee for acting or having acted as a director of the Company.For the avoidance of doubt, notwithstanding that Bronagh Hardiman is an employee of VAIIL, she does not receive any remunerationfor acting as a director of the Company.

Interest income is calculated on an effective interest rate basis to ensure that any gain on the financial assets is allocated to theappropriate accounting period.



6. Operating expenses (continued)


Auditor's remuneration (VAT exclusive) € €Statutory audit 40,000 30,750Other assurance services - -Tax advisory services 4,000 4,000Other non-audit services - -

44,000 34,750

7. Tax expense(a) Factors affecting current tax charge for the financial year


€ €(Loss)/profit before tax (2,286,804) 659,688

Current tax at 25% (571,701) 164,922Adjustment for Irish GAAP accounting 31 December 2004 571,451 (165,172)Total tax charge for the financial year (250) (250)

(b) Deferred taxThe reconciliation of deferred tax assets and liabilities for the financial year is as follows:


€ €Opening deferred tax (asset)/liability - -Tax charge for the financial year - -Tax adjustment for the prior financial year - -Closing deferred tax (asset)/liability - -

8. Cash and cash equivalents 31-Dec-19 31-Dec-18€ €

Cash 5,911,984 5,549,728

Refer to note 17 for credit risk and interest rate disclosures relating to cash and cash equivalents.

Fees amounting to €7,000 (2018: €7,000) were paid to one of the directors. Other than this, there were no further required disclosuresarising under Sections 305 and 306 of the Act. The Company has no employees and services required are contracted from third parties.

The Company qualifies as a special purpose vehicle under Section 110, TCA 1997, (as amended). As such the profits chargeable tocorporation tax are computed in accordance with the provisions applicable to Schedule D Case I which are taxed at the passive rate of25%.

All of the Company’s cash balances are held with BNP Paribas S.A. Dublin Branch amounting to €5,912,015 (2018: €5,549,716) andAllied Irish Bank Plc, amounting to an overdraft of €31 (2018: bank balance €12).

The reconciliation of tax on profit at the standard rate of Irish corporation tax to the Company’s actual tax charge is analysed asfollows:

Any temporary difference arising on the assets is expected to reverse entirely as cash flows unwind over future accounting periods.Therefore, the Company does not expect to have any exposure to deferred tax and for this reason does not record a deferred taxliability.



9. Other receivables 31-Dec-19 31-Dec-18€ €

Prepayments - 811Other receivables 1,000 1,000

1,000 1,811

The other receivables are current and due within one year.

Refer to note 17 for credit risk disclosures relating to other receivables.

10. Financial assets at fair value through other comprehensive income 31-Dec-19 31-Dec-18€ €

Financial assets at fair value through other comprehensive income 107,957,503 121,718,011

Movement during the financial yearAt beginning of the financial year 121,718,011 141,898,119Cash transactionsAdditions during the financial year 803,206 398,000Principal repayments during the financial year (18,675,905) (19,975,605)Non cash transactionFair value movement 4,290,009 (703,744)ECL provision (177,818) 101,241At end of the financial year 107,957,503 121,718,011

31-Dec-19 31-Dec-18Maturity analysis of financial assets at fair value through other comprehensive income € €< 1 year 17,206,904 20,341,9921-2 years 17,206,904 20,341,9922-5 years 51,620,712 61,025,977> 5 years 21,922,983 20,008,050

107,957,503 121,718,011

See note 12, debt securities issued, which provides details on the priorities of payments and the credit risk note 17.

The maturity analysis presented below is based on the undiscounted actual cashflows contracted (excluding ad-hoc repayments) forprincipal receipts based on 2019 results.

On 29 May 2015, pursuant to a Mortgage Sale Agreement, the Company acquired the beneficial interest, including all the risks andrewards, of the Mortgage Portfolio.

As at 31 December 2019, the Company had financial assets exposed to credit risk with a total carrying amount of €107,957,503(2018: €121,718,011). The credit risk relates to financial assets at fair value through other comprehensive income of €107,957,503(2018: €121,718,011) and the Company has appointed Dilosk Designated Activity Company as servicer to manage this risk on behalfof the Company. Ultimately this risk is borne by Dilosk Funding No.1 Designated Activity Company as any reduction in the value ofthe financial assets at fair value through other comprehensive income will be matched by a reduction in the Class Z Notes in line withthe priorities of payments as determined in the Prospectus of the Company. As the loans were sold on arms length basis, where the fairvalue was determined to be equal to the principal value outstanding on the loans, the risk is limited to the carrying value of the Notes.The Company now assesses fair value based on a discounted cashflow model in line with IFRS 13. For more detailed information onthe fair value calculation please see note 18 Financial Instruments.



10. Financial assets at fair value through other comprehensive income (continued)

Loan impairment provisions Loan exposure and impairment metrics

31 December 31 December2019 2018

Financial assets at fair value through other comprehensive income € €Stage 1 105,160,203 119,672,074Stage 2 2,066,070 1,353,903Stage 3 731,230 692,034

107,957,503 121,718,011


ECL provisions € €Stage 1 620,945 458,736Stage 2 176,284 149,141Stage 3 78,389 89,923

875,618 697,800


ECL provisions coverageStage 1 % 0.59 0.38Stage 2 % 8.53 11.02Stage 3 % 10.72 12.99

0.81 0.57

Critical accounting estimates

IFRS 9 ECL model design principles

• Unbiased - conservatism has been removed to produce unbiased model estimates;• Point-in-time - recognise current economic conditions;• Forward-looking - incorporated into PD estimates and, where appropriate, EAD and LGD estimates; and• For the life of the loan - all models produce a term structure to allow a lifetime calculation for assets in Stage 2 and Stage 3.

IFRS 9 requires that at each reporting date, an entity shall assess whether the credit risk on an account has increased significantly sinceinitial recognition. Part of this assessment requires a comparison to be made between the current lifetime PD (i.e. the currentprobability of default over the remaining lifetime) with the equivalent lifetime PD as determined at the date of initial recognition.

A loan is impaired when there is objective evidence that the cash flows will not occur in the manner expected when the loan wasadvanced. Such evidence includes changes in the credit rating of a borrower, the failure to make payments in accordance with the loanagreement; significant reduction in the value of any security; breach of limits or covenants; and observable data about relevantmacroeconomic measures.

The impairment loss is the difference between the carrying value of the loan and the present value of estimated future cash flows at theloan's original effective interest rate.

To meet IFRS 9 requirements for ECL estimation, probability of default (PD), loss given default (LGD) and exposure at default (EADused in the calculations must be:

In 2019 and 2018 the loan impairment provisions have been established in accordance with IFRS 9. Accounting policy (3(c)) sets outhow the expected loss approach is applied. At 31 December 2019, customer loan impairment provisions amounted to €875,618 (2018:€697,800).



11. Other payables 31-Dec-19 31-Dec-18€ €

Accrued expenses (61,783) (195,450)Interest payable on debt securities issued (83,485) (92,839)Deferred income* (30,343) (23,086)

(175,611) (311,375)

* Deferred income relates to excess interest income received through the bank.

All other payables are current and due and payable within one year.

Refer to note 17 for liquidity risk disclosures relating to other payables.

12. Debt securities issued 31-Dec-19 31-Dec-18€ €

Notes issued (110,207,304) (125,473,558)

Notes issued Initial nominal amount 31-Dec-19 31-Dec-18Class A (160,500,000) (63,217,722) (80,589,666)Class B (24,700,000) (24,700,000) (24,700,000)Class C (6,200,000) (6,200,000) (6,200,000)Class D (4,100,000) (4,100,000) (4,100,000)Class Z (10,300,000) (11,989,582) (9,883,892)

(205,800,000) (110,207,304) (125,473,558)

31-Dec-19 31-Dec-18Movement in debt securities issued € €At beginning of the financial year (125,473,558) (145,886,259)Principal repayments of Class A Note 17,371,944 19,721,542Interest repayment of Class Z Note 2,900,584 3,688,571Interest expense on Class Z Note (5,006,274) (2,997,412)At end of the financial year (110,207,304) (125,473,558)

Maturity analysis of the debt securities issued (nominal value) 31-Dec-19 31-Dec-18€ €

< 1 year (17,206,904) (20,341,992)1-2 years (17,206,904) (20,341,992)2-5 years (51,620,712) (61,025,977)> 5 years (24,172,784) (23,763,597)

(110,207,304) (125,473,558)

Carrying amount

The Company has issued five classes of floating rate notes being the Class A Notes, Class B Notes, Class C Notes, Class D Notes andClass Z Notes. The most senior class of notes are the Class A Notes whilst they remain outstanding and thereafter the Class B Noteswhilst they remain outstanding and thereafter the Class C Notes whilst they remain outstanding and thereafter the Class D Notes whilstthey remain outstanding and thereafter the Class Z Notes whilst they remain outstanding.

The principal collections received by the Company on loan assets are first used to redeem the Class A Notes until the Class A Noteshave been redeemed in full, then to redeem the Class B Notes until the Class B Notes have been redeemed in full, then to redeem theClass C Notes until the Class C Notes have been redeemed in full, then to redeem the Class D Notes until the Class D Notes have beenredeemed in full and lastly to redeem the Class Z Notes until the Class Z Notes have been redeemed in full.

The maturity analysis presented below is based on the undiscounted actual cashflows contracted (excluding ad-hoc repayments) forprincipal receipts based on 2019 and 2018 results.



12. Debt securities issued (continued)

Notes issued Applicable margin Step-up margin Maturity dateClass A 0.800% 1.200% 28-Feb-51Class B 1.400% 2.100% 28-Feb-51Class C 1.850% 2.775% 28-Feb-51Class D 2.200% 3.300% 28-Feb-51Class Z 0.000%* n/a 28-Feb-51

13. Called up share capital presented as equity 31-Dec-19 31-Dec-18€ €

Authorised:1,000 Ordinary shares of €1 each 1,000 1,000

Issued, called up and unpaid: € €1,000 Ordinary shares of €1 each 1,000 1,000

14. Ownership of the Company

15.

The following charges have been registered over the Company:• charge on uncalled share capital;• charge on book debts; • floating charge on undertakings or property; and• charge for the purpose of securing any issue of debentures.

16. Related parties transactionsTransactions with VAIILDuring the financial year, the Company incurred a fee of €23,467 (2018: €22,000) relating to administration services provided byVAIIL. As at 31 December 2019, €nil were due and payable to VAIIL (2018: €nil). Director fees amounted to €7,000 (2018: €7,000)and are disclosed in note 6 to the financial statements.

The interest collections received by the Company on loan assets are first used towards payment of expenses of the Company theninterest amounts due and payable on the Class A Notes, then towards payment, pro rata and pari passu, of amounts of interest due andpayable on the Class B Notes, Class C Notes, Class D Notes and Class Z Notes. The Notes mature in February 2051. Interest on theabove mentioned Notes is payable quarterly in arrears equal to the sum of quarterly Euribor and an applicable margin (as definedbelow) on the basis of a 360 day year over the actual number days elapsed. The margin per annum is as follows:

*The Class Z noteholders receive all the residual income generated by the Company after all expenses and commitments have beensettled. Inline with the waterfall of revenue receipts per the cash management agreement.

The step-up margin applies as from the Interest Payment Date falling in August 2020. The EIR calculation has been calculated basedon the assumption the Issuer exercises its ability to redeem the Notes on the earliest of the Step-Up Date, August 2020.

The Noteholders are fully exposed to the market risk of the underlying financial assets at fair value through other comprehensiveincome. The Noteholders' recourse is limited to the assets of the Company. In the event that accumulated losses prove not to berecoverable during the life of the Company, then this will reduce the obligation to the Noteholders by an equivalent amount. Thecarrying amount of financial assets represents the maximum credit risk exposure at the reporting date.

The Board consists of two directors (one independent director). The Board has considered the issue as to who is the ultimatecontrolling party over the Company. It has been determined that the control of the relevant day to day activities of the Company restswith the Board and in line with IFRS 10, Trinity Investments DAC is the immediate controlling party and Attestor Capital is theultimate controlling party.

The Company entered a deed of charge pursuant to which it granted fixed and floating security in favour of the Security Trustee overall its assets as security for the Secured Obligations.

Charges

The sole shareholder in the Company is Vistra Capital Markets (Ireland) Limited, holding 1,000 shares, which have been transferredfrom Sanne Nominees Ireland Limited (previously known as Castlewood CS Holdings Limited) on 10 July 2019. The shareholder actssolely as share trustee and has no beneficial ownership in the Company. The sole shareholder holds the shares in the Company forcharitable purposes, under the terms of a declaration of trust.



16. Related parties transactions (continued)Transactions with Dilosk Funding No.1 Designated Activity Company

17. Financial risk managementRisk management framework

The Company has exposure to the following risks from its use of financial instruments:(i) Credit risk;(ii) Market risk; and(iii) Liquidity risk.

(i) Credit risk

Credit Quality analysis

2018Stage 1 Stage 2 Stage 3 Total Total

105,781,148 2,242,354 809,619 108,833,121 122,415,811

Loss allowance (620,945) (176,284) (78,389) (875,618) (697,800)Carrying amount 105,160,203 2,066,070 731,230 107,957,503 121,718,011

The Company’s maximum exposure to credit risk in the event that counterparties fail to perform their obligations as at 31 December2019 in relation to each class of recognised financial assets, is the carrying amount of those assets as indicated in the statement offinancial position.

Financial assets at fair value through other comprehensive income

This note presents information about the Company's exposure to each of the above risks, the Company’s objectives, policies andprocesses for measuring and managing risk, and the Company’s management of capital and further quantitative disclosures areincluded throughout these financial statements.

Credit risk is the risk of financial loss to the Company if a counterparty to a financial instrument fails to meet its contractualobligations, and arises principally from the Company’s credit linked assets. The Company’s principal financial assets are cash andcash equivalents, other receivables and financial assets at fair value through other comprehensive income, which represent theCompany’s maximum exposure to credit risk in relation to financial assets.

The Company’s credit risk is principally based on the collections under its financial assets at fair value through other comprehensiveincome. The effective monitoring and controlling of customer credit risk is a competency of the Servicer who has been appointed bythe Company. Pursuant to the Servicing Agreement, the Servicer has delegated certain administration and management services inrespect of the Mortgage Portfolio to Link ASI Limited (formerly Capita Asset Services (Ireland) Limited), the Delegated Servicer. Onbehalf of ICS Building Society (the "Originator") and the Company, the Delegated Servicer manages the Company’s portfolio offinancial assets at fair value through other comprehensive income in line with the Delegated Servicing Agreement entered into on 29May 2015. The Delegated Servicing Agreement is consistent with industry norms and in accordance with common standards used inthe business of being Servicer of financial assets at fair value through other comprehensive income.

Dilosk Funding No.1 Designated Activity Company is the holder of 100% of the Class Z Notes, for a nominal amount of €10,300,000,issued by the Company. During the financial year, an amount of €1,689,582 (2018: interest due and payable of €416,108) relating tointerest was receivable from Dilosk Funding No.1 Designated Activity Company. The interest distributions are calculated using theeffective interest rate method. At the financial year end, the nominal amount of the Class Z Notes issued amounted to €11,989,582(2018: €9,883,892), using the effective interest rate method.

The following table sets out information about the credit quality of financial assets measured at fair value through other comprehensiveincome. The amounts in the table represent gross carrying amounts.

The Company has acquired the beneficial interest from financial assets at fair value through other comprehensive income in theMortgage Portfolio from Dilosk Funding No.1 Designated Activity Company. The geographical concentration of the financial assets atfair value through other comprehensive income is 100% in Ireland, split by regions detailed in the below notes. The financial assets atfair value through other comprehensive income are not rated.

In respect of each Loan, the Delegated Servicer maintains all records of the loan accounts and notifies borrowers of any rate changesand processes principal and interest payments. The Delegated Servicer also monitors arrears levels and reports this weekly to theServicer who assists with the decision on how the arrears are to be dealt with.

The Board has overall responsibility for the establishment and oversight of the Company’s risk management framework.

2019

Dilosk RMBS No.1 Designated Activity Company Page 33


17. Financial risk management (continued)(i) Credit risk (continued)

Basis for measuring impairment

Definition of write-off

Definition of default

Inputs, assumptions and techniques used for estimating impairment

Forward looking information (FLI)

Expected life

Stage Allocation

IFRS 9 does not define default, but contains a rebuttable presumption that default has occurred when an exposure is greater than 90days past due. The Company has generally made this presumption in its loan portfolios.

The Company has adopted an ECL framework that takes cognisance of industry best practice, and reflects a component approachusing PD, EAD and LGD components calibrated for IFRS 9 purposes. Because all financial assets within the scope of the IFRS 9impairment model will be assessed for at least 12-months of expected credit losses, and that underperforming assets will attract fulllifetime expected credit losses, loss allowances are generally expected to be higher under IFRS 9 relative to IAS 39.

Measurement of ECLs at the reporting date includes reasonable and supportable information.

Delinquency – greater than 30 days past due;

Write off occurs when the Company determines that the borrower does not have assets or sources of income that could generatesufficient cash flows to repay the amount owing. This information generally comes in the form of qualitative information, the write offamount is either partial or the full amount outstanding and will be assessed by the credit committee of the Servicer.

The Company compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a defaultoccurring on the financial instrument as at the date of initial recognition. At each reporting date, to identify a significant increase incredit risk (SICR) in relation to an exposure since origination, and classification as Stage 2 within the IFRS 9 ECL framework, theCompany has relied on the following measures:

All contractual terms have been considered when determining the expected life, including prepayment options, extension and rolloveroptions. For most instruments, the expected life is limited to the remaining contractual life, adjusted as applicable for expectedprepayments. For instruments in Stage 2 or Stage 3, loss allowances cover expected credit losses over the expected remaining life ofthe instrument.

In arriving at the Company’s impairment allowance an unbiased and probability weighted estimate of credit losses is arrived at byevaluating a range of possible outcomes that incorporates forecasts of future economic conditions. Macro-economic factors and FLIhave been incorporated into the measurement of ECL as well as the determination of whether there has been a significant increase incredit risk since origination.

The Company considers all financial instruments to be fully performing if they are current or with less than 30 days arrears, theseinstruments are therefore assigned to Stage 1. If a financial instrument is not current i.e. is in arrears between 30 – 90 days then this isdeemed to have a significant increase in credit risk, and is therefore assigned to Stage 2. Financial instruments with greater than 90days arrears or have had a measure of forbearance are deemed credit impaired, and therefore assigned to Stage 3.

Forbearance – reported as currently forborne or restructured;

In incorporating multiple economic scenarios into the ECL models which considers, amongst other things, the Company’s budgets,and the views of policy makers on longer term economic prospects and key risks. The Company has referenced publicly availableinformation for key economic indicators including unemployment, interest rates and publicly available external macro-economicforecasts including from the Central Bank of Ireland (CBI) and other reputable institutions. This external data has been combined withinternal forecasts to develop a combined forecast. Scenario projections are further discussed on page 38.

Risk Grade – accounts that migrate to a risk grade which the Company has specified as being outside its risk appetite for origination; Change in remaining lifetime PD – accounts that have a remaining lifetime PD that is in excess of the risk at which the Companyseeks to originate risk. For the purposes of this assessment, credit risk is based on an instrument’s lifetime PD, not the losses expectedto be incurred.

The assessment is performed on a relative basis and is symmetrical in nature, allowing credit risk of financial assets to move back toStage 1 if the increase in credit risk since origination has reduced and is no longer deemed to be significant.




Stage Allocation (continued)Stage 1: 12-month ECL (not credit-impaired)

Stage 2: Lifetime ECL (not credit-impaired)

Stage 3: Lifetime ECL (credit-impaired)

Significant increase in credit risk

-----

In determining if a financial instrument has experienced a significant increase in credit risk since initial recognition, the Companyassesses whether the risk of default over the remaining expected life of the financial instrument is significantly higher than had beenanticipated at initial recognition, taking into account changes in prepayment expectations where relevant. The Company usesreasonable and supportable information available without undue cost or effort at the reporting date, including forward lookinginformation. A combination of quantitative, qualitative and backstop indicators are generally applied in making the determination. Forcertain portfolios, the Company assumes that no significant increase in credit risk has occurred if credit risk is ‘low’ at the reportingdate.

The below criteria are automatically applied as part of the monthly execution of the Company's impairment models:a contractual payment is greater than 30 days past duea forbearance measure has been used for arrears or pre-arrears casesshown a deterioration of loan level PD

The Company classifies all financial instruments with greater than 90 days arrears to be in default i.e. credit impaired and financialinstruments are allocated to Stage 3. The Company also has override ability, this can be used to adjust staging for qualitative reasons,such as willingness to pay.

These are financial instruments which are credit-impaired at the reporting date but were not credit-impaired at initial recognition. Animpairment loss allowance equal to lifetime ECL is recognised.

These are financial instruments where there has not been a significant increase in credit risk since initial recognition. An impairmentloss allowance equal to 12-month ECL is recognised. This is the portion of lifetime ECL resulting from default events that are possiblewithin the next 12 months.

If the Company determines that the credit risk of a financial asset increased to the point that it is considered credit-impaired, interestrevenue is calculated based on the amortised cost (i.e. the gross carrying amount less the loss allowance). Lifetime expected creditlosses are recognised on these financial assets.

changes in financial & economic conditionscredit scores/affordability

If the credit risk increased significantly and is not deemed low by the Company, full lifetime expected credit losses are recognised inprofit or loss. The calculation of interest revenue is the same as for Stage 1.

Once a financial instrument is originated or purchased, 12-month expected credit losses are recognised in profit or loss and a lossallowance is established. For financial assets, interest revenue is calculated on the gross carrying amount (i.e. without deduction forexpected credit losses).

These are financial instruments where there has been a significant increase in credit risk since initial recognition but which are notcredit-impaired. An impairment loss allowance equal to lifetime ECL is recognised. Lifetime ECL are the ECL resulting from allpossible default events over the expected life of the financial instrument.

The Company classifies all financial instruments with more than 30 days arrears but less than 90 days arrears, have had forbearancemeasures applied or have shown a deterioration of loan level PD to have significant increase in credit risk and are therefore allocatedto Stage 2.

The Company classifies all current loans performing and are therefore allocated to Stage 1 with 12-month ECL recorded.




Credit-impaired

• significant financial difficulty of the issuer or the borrower;• a breach of contract, such as a default or past due event;•

• it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation;• the disappearance of an active market for that financial asset because of financial difficulties; or• the purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses.


Current 105,160,203 - - 105,160,203 119,672,074 Overdue < 30 days - 2,066,070 - 2,066,070 1,353,903 Overdue >30 days - - 731,230 731,230 692,034 Carrying amount 105,160,203 2,066,070 731,230 107,957,503 121,718,011

31-Dec-19 31-Dec-18Number of loans outstanding (Inclusive of number of loans in arrears) 1,269 1,422 Number of loans in arrears * 27 32

Loss allowance


Balance at 1 January 458,736 149,141 89,923 697,800 799,041162,209 27,143 (11,534) 177,818 (101,241)

Balance at 31 December 620,945 176,284 78,389 875,618 697,800

IFRS 9 - ModelCredit risk grades

Weighted As at 31 December Average PD Stage 1 0.27%Stage 2 2.20%Stage 3 2.85%Combined 0.34%

A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows haveoccurred. Evidence that a financial asset is credit-impaired includes observable data about the following events:

Net remeasurement of loss allowance

The following table shows reconciliation from the opening to the closing balance of the loss allowance.

2019

The following table sets out information about the overdue status of financial assets in Stages 1, 2 and 3. The amounts in the tablerepresent the carrying amounts net of loss allowances.

It may not be possible to identify a single discrete event and instead, the combined effect of several events may have caused financialassets to become credit-impaired.

As at 31 December 2019, the principal balance of the loans in arrears amounted to €2,797,300 (2018: €2,045,937).

The table below provides an indicative mapping of how the Company's internal credit grades relate to probability of default (PD). Theweighted-average PD is calculated based on the carrying amounts of the assets in each range.

the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted tothe borrower a concession(s) that the lender(s) would not otherwise consider;

2019




Probability of Default (PD)

(1)

(2)

(3)(4)

One year account level probability of default

This one year PD can then be transformed into a lifetime PD.

Exposure at Default (EAD) and Loss Given Default (LGD)

Each of the components of the cash flow calculation are described in detail in what follows:

Prepayment (CPR - Constant prepayment rate)CPR rate is an annual estimate of the percentage of balance that is overpaid.

Default Balance

Principal and Interest

Default to Possession Timeline

The default amount for the given period is calculated depending on the scenario and the underlying loan characteristics. The Companyhas allowed a maximum of 12 months interest to be accrued for mortgages in default.

Due to the fact that the model is utilising a probabilistic approach, it is a portion of the balance that defaults rather than an actualaccount.

Merge the SOE and Company's ROI PD model to derive a lifetime PD model specific to the Company’s portfolios that issensitive to the economic scenarios required by IFRS 9.

The IFRS 9 standards do not directly define what is meant by a default event, but there is a requirement that financial institutions alignwith internal credit risk management. As such the Company has adopted the 90 days past due (DPD) default definition in thedevelopment of the default model.

Calibrate the ROI PD model to the Company's data via a logistic transform in order to produce a Company specific ROI PDmodel that reproduces default rates consistent with the Company’s internal mortgage portfolios.

Build an ROI state of the economy (SOE) model which predicts a retail credit index for ROI based on macroeconomic variables.

Derive account level ROI specific PD model based on residential mortgages in ROI from European Data Warehouse (EDW)data. The ROI PD model estimates the default probability over a one year time horizon.

The Company incorporates a probabilistic cash flow approach to produce time based loan level future cash flows and losses fromfinancial assets at fair value through other comprehensive income. Within this framework it is assumed that the future cash flows arerealised as per the contractual obligations of the underlying mortgages, specified by various model parameters, with exception ofwhere parameters denote event probabilities. Where this is the case, for example with default, it is assumed that x% of the loan balancedefaults and (1-x)% of the balance does not.

The model progresses through each month of the projection sequentially and calculates balances at the beginning of the period,defaulted balance, prepaid amount, principal and interest paid, balance cured from default, liquidated balance, recovered balance fromliquidation and loss amount. Once these elements have been calculated the balance at the end of the period is calculated which ispassed to the next period as the balance at the beginning of that period.

Principal and interest amounts are both calculated from the end of period performing balance, which is the balance after defaults andpossessions have been removed. The interest rate that is sourced from the relevant interest rate scenario. The principal is calculated sothat the loan amortizes and the balance is zero at maturity, or if it is an interest only loan then it is zero.

The number of months a mortgage is in default is determined by the months in foreclosure timeline parameter which has been set to 40months which was derived at through interrogation of the ROI EDW data. The default to possession timeline takes account of the timevalue of money in order to replicate what happens in reality when an account goes into default.

In order to derive account level lifetime PD measures that are influenced by idiosyncratic and systematic factors, the Companyperforms the following steps:




Possession and Cure Amounts

Possession to Liquidation Timeline & Liquidation Balance

Recovery & Net Loss

Final Loss Calculation

Upside Scenario 10%Central Scenario 40%Downside Scenario 50%

Scenario Projections - Forward looking informationThe Company has three defined scenarios:(1)

(2)

(3) Downside Scenario derived to simulate a worst case scenario which should therefore result in much higher PDs than the norm.

The below shows the macroeconomic assumptions made of each scenario:

Upside ScenarioYear GDP Delta Unemployment House Price

Index Delta 1 10.98% 4.79% 15.39% 0%2 10.98% 4.79% 15.39% 0%3 10.98% 4.79% 15.39% 0%

Central ScenarioYear GDP Delta Unemployment House Price

Index Delta 1 3.75% 9.45% 6.18% 25%2 3.75% 9.45% 6.18% 25%3 3.75% 9.45% 6.18% 25%

Downside ScenarioYear GDP Delta Unemployment House Price

Index Delta 1 15.45% -18.28% 125%2 14.98% -16.19% 100%3 14.47% -14.32% 75%

ECB Rate Change

-0.08%

-3.18%-1.46%

The final calculation of loss for each loss measure is calculated over each scenario and then weighted by the probabilities that are assigned to each scenario in order to arrive at a final loss number for the Company.

ECB Rate Change

Upside Scenario which is designed to be a best case scenario in terms of macroeconomic indicators, which should result in lowerthan average PD values.

The possession to liquidation timeline represents the number of months between a typical repossession and property sale. TheCompany has set the initial value for the possession to liquidation timeline to 15 months.

The recovery and net loss is calculated based on the assumed liquidated balance, this is then overlaid with fixed and variable sale costsThe Company has assumed €5,000 fixed and 2% variable sales costs.

The cure amount is the percentage of balance that cures back to performing at the end of the default. This is designed to replicate whathappens in reality when an account cures from default due to a restructure or for any other reason. The Company has assigned a curerate of 5%.

Central Scenario which is designed to replicate long run average values of macroeconomic variables and is therefore in somesense an expectation of future outcomes. This should therefore result in average PD values.

ECB Rate Change




State of the Economy (SOE) Model

Sensitivity of ECL to future economic conditions

Upside Central Downside Upside Central Downside

EUR EUR EUR EUR EUR EURFinancial assets 107,957,504 107,957,504 107,957,504 121,718,011 121,718,011 121,718,011ECL provisions 122,514 722,010 1,010,874 417,558 781,570 864,697

The maximum credit exposure at the reporting date in relation to the Company's financial assets was:31-Dec-19 31-Dec-18

€ €Cash and cash equivalents 5,911,984 5,549,728 Other receivables 1,000 1,811 Financial assets at fair value through other comprehensive income 107,957,503 121,718,011

113,870,487 127,269,550

Collateral held and other credit enhancementsThe Company holds collateral against its credit exposures.

Residential mortgages

The LTV of loan portfolio on 31 December 2019 is 41.41% (2018: 44.75%).

Unemployment: The inability to earn due to unemployment translates into the inability to services ones debts. The Company thereforeassume that the correlation between unemployment and defaults is positive.

Interest Rates: An increase in central bank interest rates results in an increase in the size of payments due on mortgages. TheCompany therefore only consider interest rate variables, transformed or otherwise, that are positively correlated with default.

The above scenarios are driven by the Company's State of the Economy Model. The SOE model has been constructed inline with IFRS9 framework and is used to understand and predict potential macroeconomic effects on credit defaults within the Republic of Ireland.

Gross Domestic Product (GDP): Whilst having no actual direct link to mortgage defaults, GDP is a good barometer of the state ofthe economy and is therefore assumed by the Company to be negatively correlated to defaults.

The SOE model predicts house prices, unemployment rate, interest rate, and gross domestic product. All of which are used in thescenario calculations. The variables are discussed in greater detail below:

House Prices: There is clearly greater incentive to service debt on an asset that has equity value for the owner over one that does not.The Company therefore assumes that house prices are negatively correlated with default.

As at 31 December

The following table below shows the loss allowance on loans and receiveables advanced to BTL and PDH borrowers assuming eachforward-looking scenario (e.g. central, upside and downside) were weighted 100% instead of applying scenario probability weightsacross the three scenarios.

2019 2018

The following tables stratify credit exposures of loans by ranges of loan-to-value (LTV) ratio. LTV is calculated as the ratio of thegross amount of the loan outstanding - to the most recent value of the underlying collateral.




LTV assessment of loan portfolio

Current LTV Number of loans Percentage of total principal

outstanding

Number of loans Percentage of total principal

outstanding

*<=0% 65 5.10% 65 4.50%>0% to <50% 972 76.60% 1,084 76.20%>=50% to <60% 86 6.80% 92 6.50%>=60% to <70% 67 5.30% 78 5.50%>=70% to <80% 62 4.90% 61 4.30%>=80% to <90% 17 1.30% 42 3.00%

1,269 100.00% 1,422 100.00%

Purpose of loansNumber of loans Percentage of

total principal outstanding

Number of loans Percentage of total principal

outstanding

Purchase 695 54.76% 762 53.60%Remortgage 354 27.90% 415 29.20%Buy to let 169 13.32% 199 14.00%Further advance 51 4.02% 46 3.20%

1,269 100.00% 1,422 100.00%

31-Dec-19 31-Dec-18% %

Residential property 100 100

Interest Rate AnalysisRepayment Basis 31-Dec-19

€Capital & Interest 0.00% to 3.00% 73,443 Capital & Interest 3.01% to 3.51% 124,272 Capital & Interest 3.51% to 4.00% 9,788,284 Capital & Interest 4.01% to 4.50% 78,180,887 Capital & Interest 4.51% to 5.00% 13,171,306 Capital & Interest 5.01% to 5.50% 1,505,447 Capital & Interest 5.51% to 6.00% 1,666,882 Capital & Interest 6.01% to 6.50% 596,270 Interest Only 4.01% to 4.50% 49,757 Interest Only 4.51% to 5.00% 210,665 ECL provision (875,618)Fair value reserve 3,465,907

107,957,503

Geographical riskThe geographical concentration of the financial assets at fair value through other comprehensive income is as follows:

Interest Rate

31-Dec-19 31-Dec-18

The Company's financial assets exposed to credit risk are concentrated in the following industries:

31-Dec-19 31-Dec-18

The Servicer is responsible for the collection, managing and monitoring of the loan portfolio along with the Master Servicer andmajority Junior lender as parties to the operating committee.




Geographical risk (continued)

Country 31-Dec-19 31-Dec-18€ Total

Dublin 517 53,897,968 580 62,855,345 Cork 175 13,479,473 187 15,634,889 Galway 72 5,466,245 82 6,589,034 Wicklow 51 4,732,686 59 5,644,222 Kildare 59 5,077,420 69 6,311,219 Meath 54 4,449,143 61 5,556,099 Others 341 18,264,278 384 20,649,105 ECL provision - (875,618) - (697,800)Fair value reserve - 3,465,907 - (824,102)

1,269 107,957,503 1,422 121,718,011

(ii) Market risk

Market risk embodies the potential for both gains and losses and includes interest rate risk, currency risk and price risk.

(a) Interest rate risk

At the reporting date, the interest rate profile of the Company's financial instruments was as follows:

Interest rate risk tableNon interest

Fixed Floating bearing Total€ € € €

73,443 107,884,060 - 107,957,503

Cash and cash equivalents - 5,911,984 - 5,911,984 Other receivables - - 1,000 1,000

73,443 113,796,044 1,000 113,870,487

Debt securities issued - (110,207,304) - (110,207,304)Other payables - - (175,611) (175,611)Corporation tax payable - - (250) (250)

- (110,207,304) (175,861) (110,383,165)

Net exposure 73,443 3,588,740 (174,861) 3,487,322


Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interestrates. There may be a timing mismatch between payments of interest on the Notes and payments of interest on the financial assets and,in the case of floating rate financial assets, the rates at which they bear interest may adjust more or less frequently, and on differentdates and based on different indices than the interest rate of the debt securities.

In addition, the mortgage market in Ireland is becoming increasingly competitive in the switcher market. A number of institutions areoffering a no-cost switching service and in some cases are offering a cash back offer to encourage customers to switch their mortgage.The interest rates on offer to low and moderate loan-to-value mortgages are very competitive and while the level of switching inIreland is very low, this could increase over time leading to reduced interest rates on the mortgages in order to retain the customers.

The objective of market risk management is to manage and control market risk exposures within acceptable parameters whileoptimising the return on the market.

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect theCompany’s income or its value of its holdings of financial instruments. The Noteholders are exposed to the market risk of the assetsportfolio.

Number of loans Number of loans

31-Dec-19



17. Financial risk management (continued)(ii) Market risk (continued)(a) Interest rate risk (continued)

Interest rate risk table (continued)Non interest

Fixed Floating bearing Total€ € € €

771,906 120,946,105 - 121,718,011

Cash and cash equivalents - 5,549,728 - 5,549,728 Other receivables - - 1,811 1,811

771,906 126,495,833 1,811 127,269,550

Debt securities issued - (125,473,558) - (125,473,558)Other payables - - (311,375) (311,375)Corporation tax payable - - (250) (250)

- (125,473,558) (311,625) (125,785,183)

Net exposure 771,906 1,022,275 (309,814) 1,484,367

Sensitivity analysis

A 100 basis point increase or decrease represents management's assessment of a reasonably possible change in interest rates.

(b) Currency risk

(c) Price risk

(iii) Liquidity risk


31-Dec-18

The sensitivity analysis below has been determined based on the Company's exposure to interest rates for interest bearing assets andliabilities (included in the interest rate exposure tables above) at the reporting date and the stipulated change taking place at thebeginning of the financial year and held constant throughout the financial reporting year in the case of instruments that have floatingrates.

If interest rates had been 100 basis points higher and all other variables were held constant, the interest income on the financial assetswould have increased by €1,136,037 (2018: €1,316,331) and the interest expense for Class A to Class D Notes would have increasedby €1,231,266 (2018: €1,443,639). Interest expense for the Class Z Note is based on a variable rate which is determined on anavailable funds basis.

Currency risk is the risk that the value of future cash flows of a financial instrument will fluctuate because of changes in foreignexchange rates.

The debt securities issued, financial assets at fair value through other comprehensive income and share capital of the Company aredenominated in Euro, its functional currency and as such no sensitivity analysis has been presented.

Price risk is the risk that the value or future cash flows of a financial instrument will fluctuate because of changes in market prices(other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individualfinancial instrument or its issuer or factors affecting all similar financial instruments traded in the market.

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s obligationunder the Notes are limited to the receipts of accrued interest and proceeds from the collection of financial assets at fair value throughother comprehensive income.

Repayment of the Notes and accrued interest thereon is dependent upon funds being available to meet such liabilities as they fall due.However, if the Company has insufficient funds available for the purpose of redeeming the principal outstanding on any class of Notesin full, or interest thereon, such amounts shall not be payable to the Noteholders, due to their limited recourse nature.



17. Financial risk management (continued)(iii) Liquidity risk (continued)

The table below shows the contractual, undiscounted cash flows of the Company's financial liabilities.

Carrying amount

Gross contractual cash flows

Less than one year One to two years Two to five years

More than five years

€ € € € € €Liabilities

Other payables (175,611) (175,611) (175,611) - - - (110,382,915) (133,567,588) (18,115,820) (17,940,209) (53,652,355) (43,859,204)

Carrying amount

Gross contractual cash flows

Less than one year One to two years Two to five years

More than five years

€ € € € € €Liabilities

Other payables (311,375) (311,375) (311,375) - - - (125,784,933) (152,382,992) (21,468,495) (21,157,120) (63,254,220) (46,503,157)

18. Financial Instruments(a) Valuation models

Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical instruments.

* The contractual cashflows presented are undiscounted.

Debt securities issued *

(17,940,209) (43,859,204)Debt securities issued *

(17,940,209) (53,652,355) (110,207,304) (133,391,977)

(125,473,558) (152,071,617) (21,157,120) (21,157,120) (63,254,220) (46,503,157)

The fair values of financial assets and financial liabilities that are traded in active markets are based on prices obtained directly froman exchange on which the instruments are traded or obtained from a broker that provides an unadjusted quoted price from an activemarket for identical instruments. For all other financial instruments, the Company determines fair values using other valuationtechniques.

For financial instruments that trade infrequently and have little price transparency, fair value is less objective and requires varyingdegrees of judgement depending on liquidity, uncertainty of market factors, pricing assumptions and other risks affecting the specificinstrument.

The Company measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in makingthe measurements.

The principal collections received by the Company are first used to redeem the Class A Notes until the Class A Notes have beenredeemed in full, then to redeem the Class B Notes until the Class B Notes have been redeemed in full, then to redeem the Class CNotes until the Class C Notes have been redeemed in full, then to redeem the Class D Notes until the Class D Notes have beenredeemed in full and lastly to redeem the Class Z Notes until the Class Z Notes have been redeemed in full.

The interest collections received by the Company are first used to pay expenses of the Company, pay interest expenses of the Class ANotes, then to pay interest expense on the Class B Notes, then to pay interest expense on the Class C Notes, then to pay interestexpense on the Class D Notes and lastly to pay any income remaining to the Class Z Notes.

The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet itsliabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to theCompany’s reputation.

31-Dec-19

31-Dec-18

The Company's obligations under the Notes are matched with the receipts of accrued interest less any deductions for general operatingcosts and proceeds from the Company's financial assets at fair value through other comprehensive income.



18. Financial Instruments (continued)(a) Valuation models (continued)

Financial instruments not measured at fair value

Fair value Carrying value Fair value Carrying value€ € € €

Financial assetsCash and cash equivalents 5,911,984 5,911,984 5,549,728 5,549,728

1,000 1,000 1,811 1,811 5,912,984 5,912,984 5,551,539 5,551,539

Financial liabilities Other payables (175,611) (175,611) (311,375) (311,375)Debts securities issued (113,694,626) (110,207,304) (126,957,925) (125,473,558)Corporation tax payable (250) (250) (250) (250)

(113,870,487) (110,383,165) (127,269,550) (125,785,183)

(b) Financial instruments measured at fair value – Fair value hierarchy

Since the loan payables are limited recourse, amounts received from the disposal of the financial assets at fair value through othercomprehensive income would be used to repay the Senior funding and Class B Notes and Class C Notes. Hence, as there are noimpairment on the financial assets at fair value through other comprehensive income, in the opinion of the directors, the fair value ofloan payables approximate their carrying amounts as they carry floating rates of interest.

The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell theasset or paid to transfer the liability in an orderly transaction between market participants at the measurement date.

In the opinion of the directors, the carrying value of financial assets approximates their fair value since the loans are fully cash flowperforming, significantly over-collaterised and carry an interest margin which, in the opinion of the directors, remain within marketlevels. The Company also expects to enter into a mortgage sale agreement to dispose of the financial assets at par, this further satisfiesthe directors that carrying value approximates fair value.

The following table analyses financial instruments measured at fair value at the reporting date, by the level in the fair value hierarchyinto which the fair value measurement is categorised. The amounts are based on the values recognised in the statement of financialposition. The fair values include any deferred differences between the transaction price and the fair value on initial recognition whenthe fair value is based on a valuation technique that uses unobservable inputs.

In the opinion of the directors, the carrying value of other financial assets and financial liabilities, principally cash and cashequivalents, other receivables and other payables, approximate fair value, given the short duration of these items.

2019 2018

Level 2: Inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly (i.e.derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments;quoted prices for identical or similar instruments in markets that are not considered active; or other valuation techniques in which allsignificant inputs are directly or indirectly observable from market data.

Level 3: Inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputs notbased on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category includesinstruments that are valued based on quoted prices for similar instruments but for which significant unobservable adjustments orassumptions are required to reflect differences between the instruments.

Valuation techniques include net present value and discounted cash flow models, comparison with similar instruments for whichobservable market prices exist and other valuation models. Assumptions and inputs used in valuation techniques include historicaleffective interest rates, risk-free and benchmark interest rates, credit spreads and other premiums used in estimating discount rates,bond and equity prices, foreign currency exchange rates, equity indices, EBITDA multiples and revenue multiples and expected pricevolatilities and correlations.

Other receivables



18. Financial Instruments (continued)(b) Financial instruments measured at fair value – Fair value hierarchy (continued)

Level 1 Level 2 Level 3 Total fair value€ € € €

- - 107,957,503 107,957,503

- - 107,957,503 107,957,503

- - 121,718,011 121,718,011

- - 121,718,011 121,718,011

(i) Reconciliation

2019 2018€ €

Balance at 1 January 121,718,011 141,898,119 Total gain or losses:in P&L (177,818) 101,241in OCI 4,290,009 (703,744)Purchases 803,206 398,000 Settlements (18,675,905) (19,975,605)Balance at 31 December 107,957,503 121,718,011

(ii) Unobservable inputs used in measuring fair value

Type of financial instrument Fair values at 31 December

2019

Valuation Technique

Significant unobservable

input

107,957,503 Discounted Cashflow

Probabilities of default

Fair value measurement sensitivity to unobservable inputsSignificant increases in any of these inputs in isolation would result in lower fair values.

Significant unobservable inputs are developed as follows:- Expected cash flows are derived from the entity’s business plan and from historical comparison between plans and actual results.-

- The discount rate used is a risk adjusted weighted average cost of capital.

Favourable UnfavourableFinancial assets at fair value through other comprehensive income 476,364 (476,364)



Financial assets at fair value throughother comprehensive income

Range of estimates (weighted-average) for

unobservable input

0.01% to 11.26%

The following table shows a reconciliation from the beginning balances to the ending balances for fair value measurements in Level 3of the fair value hierarchy.

Financial assets at fair value through other comprehensive

income

31-Dec-18

The probabilities of default and loss from the mortgage portfolio held by the Company have been incorporated into the cashflows, this is to reflect expected future losses in the fair value calculation. The probabilities of default and loss have been flexedto show how sensitive the fair value calculation is to deviations in the probabilities of default.

Although the Company believes that its estimates of fair value are appropriate, the use of different methodologies or assumptionscould lead to different measurements of fair value. For fair value measurements in Level 3, changing one or more of the assumptionsused to reasonably possible alternative assumptions would have the following effects.

Effect on OCI

31-Dec-19



18. Financial Instruments (continued)(b) Financial instruments measured at fair value – Fair value hierarchy (continued)(ii) Unobservable inputs used in measuring fair value (continued)Fair value measurement sensitivity to unobservable inputs (continued)

19. Capital risk management

The Company is not subject to any other externally imposed capital requirements.

20. Commitments and contingent liabilitiesAs at 31 December 2019, the Company did not have any commitments or contingent liabilities.

21. Subsequent events

Analysts estimate that new house prices could decline in the 10% to 20% range whereas Davys suggests 5% to 20% drop in new houseprices. House builders are also set to see fewer visitors on sites due to social isolation with both builders and estate agents moving toappointment-only viewings or virtual viewings.

Two of the largest house builders in Ireland have at least 50% of its 2020 target forward sold for the year. The ERSI are also predictinga 20% drop for investment in dwellings and improvements. The last financial crisis in 2008 seen a minimum of 10% drop in propertyprices in the first 12 months.

On March 11, 2020, the World Health Organization officially declared COVID-19, the disease caused by the novel coronavirus, apandemic. The directors are closely monitoring the evolution of this pandemic, including how it may affect the economy and thegeneral population. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact ofthe novel coronavirus on the Company or the overall economy.

The favorable and unfavorable effects of using reasonably possible alternative assumptions for the valuation of financial assets at fairvalue through other comprehensive income have been calculated by recalibrating the model values using an unobservable input basedon management’s best estimate of possible up / downside deviations. The most significant unobservable input is the probability ofdefault, this is derived from the portfolio of mortgages held by the Company.

Share capital of €1,000 was issued in line with Irish Company Law and is not used for financing the investment activities of theCompany.

The Company will need to provide COVID-19 Payment Breaks to all borrowers (i.e. owner-occupiers and buy-to-let) in line withDilosk DAC (the "Master Servicer") requirements which is to offer a 3-month payment holiday to borrowers affected by COVID-19.Dilosk DAC is a Central Bank of Ireland ("CBI") regulated entity.

If a high number of borrowers avail of the COVID-19 Payment Break and for a longer duration which results in a material impact oncash flows, there is an increased likelihood that this may be challenged by Noteholders. However, this risk is low given percentagescurrently availing of option and current reserve fund balances.

Any borrower who avails of a COVID-19 Payment Break will be maintained in their pre-payment break state (i.e. performing). Thiswould be consistent with Dilosk DAC's and CBI’s guidance that any COVID-19 related payment break should not affect borrowers'credit scores (as confirmed by the CCR). Consequently, COVID-19 Payment Breaks will not be reported as arrears, or for the purposeof arrears-based transaction triggers.

At the end of the COVID-19 Payment Break it is expected that interest will be capitalised over the remaining life of the mortgage.However, if there is CBI Advice which requires Dilosk DAC to provide an extension to the remaining term (i.e. 3 months) in order toreduce the increase in monthly mortgage repayments post the COVID-19 Payment Break, the Company should also be able toaccommodate this. This becomes much more involved in terms of its obligations under insurance policies, e.g. insurance policieswould also need to be extended by 3 months, etc.

The Company considered the impact of the pandemic on the carrying values of assets and liabilities on the Company’s Statements ofFinancial Position. The overall financial impact of COVID-19 cannot be reliably estimated at this time, however the Companyassessed that its key sensitivity was in relation to ECLs on the underlying mortgages assets.



21. Subsequent events (continued)

22. Approval of the financial statementsThe Board of directors approved these financial statements on 26 June 2020.

There has been no other subsequent significant events that require adjustment and/or disclosure in these financial statements up to thedate of signing this report.

As of the most recent investor report arrears amounted to 2.2% of the Portfolio whilst 7% of the of borrowers had availed of COVID-19 payment breaks.

Post year end an non-binding indicative offer has been received to acquire the beneficial interest of the mortgage portfolio at the firstoptional redemption date in August 2020.

Post year end the mortgage arrears have not increased materially and the moratoriums granted to borrowers as a result of COVID-19are currently under review but they do not represent borrowers in arrears at the date of approval of the financial statements. The impactof borrowers unable to return to repayments post moratoriums after 3 months, cannot fully be assessed at this time. The portfolio ofmortgage loans has a low LTV ratio, circa 41% at the year end, is representative of the borrower quality and the ability to recoveroutstanding receivables where an adverse case post moratorium were to arise. The Notes issued have recourse only to the collectionsfrom the mortgage portfolio and the secured creditors rank in advance of these collection, for this reason there is limited liquidity riskfor the Company.

Investor reports and Regulatory reports are currently being reviewed but the Company anticipate reporting COVID-19 Payment Breakson loan-by-loan basis, which would allow for their identification in the respective mortgage pools. However, currently there is limitedguidance from regulators and rating agencies on how these will be reported in future reporting periods.

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