Company name Waterford Cp Inv PLC
Headline Annual Report 30.04.2012


RNS Number : 2808L
Waterford Capital Investments Plc
31 August 2012
 

 

 

 

WATERFORD CAPITAL INVESTMENTS PLC

 

 

FOR THE YEAR ENDED 30 APRIL 2012

 

 

 

 

 

COMPANY NUMBER: 426004

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 


TABLE OF CONTENTS                                                                                                                                                         PAGE

 

COMPANY INFORMATION                                                                                                                                                          1

 

DIRECTORS' REPORT                                                                                                                                                                   2-5

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES                                                                                                                 6

 

INDEPENDENT AUDITORS' REPORT                                                                                                                                      7-8

 

STATEMENT OF COMPREHENSIVE INCOME                                                                                                                          9

 

STATEMENT OF FINANCIAL POSITION                                                                                                                                 10

 

STATEMENT OF CHANGES IN EQUITY                                                                                                                                   11

 

STATEMENT OF CASH FLOWS                                                                                                                                                 12

 

NOTES TO THE FINANCIAL STATEMENTS                                                                                                                     13-35

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMPANY INFORMATION

 

DIRECTORS                                                                                 John Fitzpatrick (Irish)

                                                                                                        Michael Boyce (Irish) 

Klaus Vandewalle (Belgian - resigned 1 October 2011)

                                                                                                        Johan Dewolfs (Belgian - resigned 31 August 2011)

                                                                                                        Johan Tyteca (Belgian - resigned 1 June 2012)

Christiaan Sterckx (Belgian - appointed 15 September 2011)

                                                                                                        Luc Vanbriel (Belgian - appointed 21 December 2011)                         

SECRETARY                                                                                The Bank of New York Mellon (Ireland) Limited

                                                                                                        4th Floor, Hanover Building

                                                                                                        Windmill Lane

                                                                                                        Dublin 2

 

REGISTERED OFFICE                                                                 4th Floor, Hanover Building

                                                                                                        Windmill Lane

                                                                                                        Dublin 2

 

SOLICITORS                                                                                McCann Fitzgerald

                                                                                                        Riverside One

                                                                                                        Sir John Rogerson's Quay

                                                                                                        Dublin 2

 

PRINCIPAL PAYING AGENT, REGISTRAR,                          The Bank of New York Mellon

TRANSFER AGENT AND CALCULATION                           One Canada Square    

AGENT                                                                                          London E14 5AL

                                                                                                        England

 

NOTE TRUSTEE                                                                          BNY Corporate Trustee Services Limited

                                                                                                        One Canada Square

                                                                                                        London E14 5AL

                                                                                                        England

 

BANK AND CUSTODIAN                                                        KBC Bank NV

                                                                                                        Havenlaan 2

                                                                                                        B-1080 Brussels

                                                                                                        Belgium

 

INDEPENDENT AUDITORS                                        Deloitte & Touche

                                                                                                        Deloitte & Touche House

                                                                                                        Earlsfort Terrace

                                                                                                        Dublin 2

 

PORTFOLIO MANAGER                                                           KBC Asset Management NV                                                     

                                                                                                        Havenlaan 6

                                                                                                        B-1080 Brussels

                                                                                                        Belgium       

 

PORTFOLIO ADMINISTRATOR                                             KBC Asset Management NV

                                                                                                        Havenlaan 6

                                                                                                        B-1080 Brussels

                                                                                                        Belgium

 

CORPORATE ACCOUNTING                                                   KBC Bank Ireland Plc

ADMINISTRATOR                                                                     Sandwith Street

                                                                              Dublin 2                                                                                         

 

                                                                                                       

 

 

 

DIRECTORS' REPORT

for the year ended 30 April 2012

 

The directors present their report and the audited financial statements for the year.

 

PRINCIPAL ACTIVITY

Waterford Capital Investments plc (the "Company"), an Irish registered Company, was incorporated on 5 September 2006. 

 

The principal activity of the Company is the investment in bonds, commercial papers and time deposits.

 

The Company has established a €40,000,000,000 Programme to issue Notes. Notes issued under this Programme will be issued in Series and the terms and conditions of the Notes of each Series will be set out in a Term Sheet for such Series. All of the notes issued by the Company are held by KBC Life Assurance companies, Capital Protected Funds and Arcade Finance Plc, which have KBC Asset Management NV acting as portfolio manager. The noteholders have the right to early redeem notes until the final maturity date by providing an exercise notice to the paying agent.

 

BUSINESS REVIEW AND KEY PERFORMANCE INDICATORS

The directors consider the following to be the main financial key performance indicators of the Company:

·      the Company made a profit of €719 (2011: profit of  €562)

·      there were no credit events that affected the Company during the current and prior years.

·      the net gain (realised and movement in unrealised) from financial assets designated at fair value through profit or loss amounted to €5,469,637 (2011: net loss of  €3,598,915)

·      the net gain (realised and movement in unrealised) from financial liabilities designated at fair value through profit or loss amounted to €1,044,441(2011: net gain of €1,186,161)

·      Interest income from investments amounted to €10,966,300 (2011: €10,596,316)

·      Interest expense from notes issued amounted to €8,511,516 (2011: €7,230,637)

·      the Company's total indebtedness was €375,859,844 (2011: €516,723,026)

·      Net investment sales amounted to €141,620,876 (2011: €55,283,001)

·      Net note redemptions amounted to €148,938,174 (2011: €53,710,993)

 

Due to the nature of the Company, the directors consider there to be no main non-financial key performance indicators.

 

The Company had the following series in issue at year end

EUR 117,886,000           Series No. 2006-1      Floating Rate Secured Senior Notes due 2014

EUR 64,904,000             Series No. 2006-3      Floating Rate Secured Senior Notes due 2014

EUR 70,848,000             Series No. 2006-4      Floating Rate Secured Senior Notes due 2014

EUR 55,310,000             Series No. 2006-5      Floating Rate Secured Senior Notes due 2014

EUR 71,738,000             Series No. 2007-6      Floating Rate Secured Senior Notes due 2015

EUR 18,220,000             Series No. 2008-20    Floating Rate Secured Senior Notes due 2015

CZK 657,650,000           Series No. 2007-8      Floating Rate Secured Senior Notes due 2015

CZK 88,150,000             Series No. 2007-14    Floating Rate Secured Senior Notes due 2015

CZK 867,550,000           Series No. 2007-15    Floating Rate Secured Senior Notes due 2015

US$ 67,030,000              Series No. 2007-7      Floating Rate Secured Senior Notes due 2015

US$ 36,758,000              Series No. 2007-19    Floating Rate Secured Senior Notes due 2015

HUF 80,500,000             Series No. 2007-17    Floating Rate Secured Senior Notes due 2015

PLN 29,750,000              Series No. 2007-10    Floating Rate Secured Senior Notes due 2015

PLN 101,970,000            Series No. 2007-16    Floating Rate Secured Senior Notes due 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

DIRECTORS' REPORT (continued)

for the year ended 30 April 2012

 

BUSINESS REVIEW AND KEY PERFORMANCE INDICATORS (continued)

The directors believe the Company is a going concern for the following reasons

·      The portfolio is actively managed by KBC Asset Management NV and the directors intend that the present level of activity will be sustained for the foreseeable future

·      The Company is a limited recourse vehicle and therefore all risks and rewards of ownership are borne by the noteholders

                                       

FUTURE DEVELOPMENTS

At the start of June 2012 the Company's portfolio was split between a short duration portfolio and a long duration portfolio. On 1 June 2012, the Company issued three new series of notes to fund the investments on the long duration portfolio. The existing series of notes fund the investments on the short duration portfolio.  The maturity on the investments on the short duration portfolio is on average between 1 and 2 years.  The maturity on the investments on the long duration portfolio is on average between 4 and 5 years.  

 

RESULTS AND DIVIDENDS

The results for the year are shown on page 9.  The Company paid a dividend of €500 during the year.  The directors have proposed a dividend distribution of €1,000.  €219 of the profit after tax has been transferred to reserves (2011: €562).

 

CHANGES IN DIRECTORS, SECRETARY AND REGISTERED OFFICE

Klaus Vandewalle resigned as a director on the 1 October 2011. John Dewolfs resigned as a director on 31 August 2011. Christian Sterckx was appointed as a director on 15 September 2011.  Luc Vanbriel was appointed as a director on 21 December 2011.  Johan Tyteca resigned as director on 1 June 2012.

 

DIRECTORS' AND SECRETARY'S INTERESTS IN SHARES

The directors or the Company secretary had no beneficial interest in the share capital of the Company at the date of appointment, at the beginning of the year or at the end of the year.

 

RISK FACTORS

The principal risks and uncertainties facing the Company are set out in Note 17 to the financial statements.

 

BOOKS OF ACCOUNT

The directors are responsible for ensuring that proper books and accounting records, as outlined in Section 202 of the Companies Act 1990, are kept by the Company.  The directors have ensured that this has been complied with by outsourcing this function to a specialised provider of such services.

 

The books and accounting records are maintained at KBC Bank Ireland Plc, Sandwith Street, Dublin 2.

 

SUBSEQUENT EVENTS

The structure of the Company changed at the start of June.  This change is set out in the Future Developments paragraph above.  The Company issued the following series of notes on 1 June 2012:

 

EUR 40,000,000                 Series No. 2012-21      Floating Rate Secured Senior Notes due 2017

EUR 55,000,000                 Series No. 2012-22      Floating Rate Secured Senior Notes due 2017

EUR 45,000,000                 Series No. 2012-23      Floating Rate Secured Senior Notes due 2016

 

Johan Tyteca resigned as a director on 1 June 2012.  The directors proposed a dividend of €1,000 on 30 August 2012.

 

 

 

 

 

 

 

 

 

 

 

DIRECTORS' REPORT (continued)

for the year ended 30 April 2012

 

ANNUAL CORPORATE GOVERNANCE STATEMENT

The Company is subject to and complies with Irish Statute comprising the Companies Acts 1963 to 2012 and the Listing rules of the Irish Stock Exchange.  The Company does not apply additional requirements in addition to those required by the above. Each of the service providers engaged by the Company is subject to their own corporate governance requirements.

 

Financial Reporting Process

The Board of Directors ("the Board") is responsible for establishing and maintaining adequate internal control and risk management systems of the Company in relation to the financial reporting process. The Board is also responsible for the review of half yearly and annual financial statements. Such systems are designed to manage rather than eliminate the risk of failure to achieve the Company's financial reporting objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.

 

The Board has established processes regarding internal control and risk management systems to ensure its effective oversight of the financial reporting process. These include appointing KBC Asset Management NV as Portfolio Administrator and Manager and KBC Bank Ireland Plc as Corporate Accounting Administrator. The Corporate Accounting Administrator is contractually obliged to maintain proper books and records. To that end the Corporate Accounting Administrator performs reconciliations of its records to those of the Trustee, Custodian and the Portfolio Administrator. The Corporate Accounting Administrator is also contractually obliged to prepare for review and approval by the Board the annual report including financial statements intended to give a true and fair view.

 

The Board evaluates and discusses significant accounting and reporting issues as the need arises. From time to time the Board also examines and evaluates the Corporate Accounting Administrator's financial reporting routines and monitors and evaluates the external auditors' performance, qualifications and independence. The Corporate Accounting Administrator has operating responsibility for internal control in relation to the financial reporting process and reports to the Board.

 

Risk Assessment

The Board is responsible for assessing the risk of irregularities whether caused by fraud or error in financial reporting and ensuring the processes are in place for timely identification of internal and external matters with a potential effect on financial reporting. The Board has also put in place processes to identify changes in accounting rules and recommendations and to ensure that these changes are accurately reflected in the Company's financial statements. In respect of the financial reporting process, KBC Bank Ireland plc has in place appropriate practices to ensure that:

-       its financial reporting is accurate and complies with the financial reporting frameworks; and

-       systems are in place to achieve high standards of compliance with regulatory requirements.

 

Control Activity

The Portfolio and Corporate Accounting Administrator are obliged to design and maintain control structures to manage the risks which the Board judges to be significant for internal control over financial reporting. These control structures include appropriate division of responsibilities and specific control activities aimed at detecting or preventing the risk of significant deficiencies in financial reporting for every significant account in the financial statements and the related notes in the Company's annual report.

 

Monitoring

The Board ensures that appropriate measures are taken to consider and address the shortcomings identified and measures recommended by the independent auditors.

 

Given the contractual obligations on the Portfolio and Corporate Accounting Administrator, the Board has concluded that there is currently no need for the Company to have a separate internal audit function. 

 

Capital Structure

No person has a significant direct or indirect holding of securities in the Company. No person has any special rights of control over the Company's share capital. BNY Corporate Trustee Services Limited holds 39,994 shares in the Company but has no direct or indirect control of the Company.

 

There are no restrictions on voting rights.

 

DIRECTORS' REPORT (continued)

for the year ended 30 April 2012

 

Appointment and replacement of directors and amendments in the Articles of Association

With regard to the appointment and replacement of Directors, the Company is governed by its Articles of Association and Irish Statute comprising the Companies Acts, 1963 to 2012. The Articles of Association themselves may be amended by special resolution of the shareholders.

 

Powers of Directors

The Board is responsible for managing the business affairs of the Company in accordance with the Articles of Association. The Directors may delegate certain functions to other parties, subject to supervision and direction by the Board. The Board has delegated the day to day administration of the Company to the Portfolio Administrator.

 

Audit committee

Statutory audits in Ireland are regulated by the European Communities (Statutory audits) (Directive 2006/43/EC) Regulations 2010. According to the regulations, if the sole business of the Irish company relates to the issuing of asset-backed securities, the company is exempt from the requirement to establish an audit committee (under Regulation 91 (9) (d) of the Regulations). The Company is a debt issuing vehicle incorporated in Ireland and in this respect is not required to establish an audit committee.

 

INDEPENDENT AUDITOR

Deloitte & Touche, Chartered Accountants have signified their willingness to continue in office in accordance with Section 160(2) of the Companies Act 1963.

 

 

 

John Fitzpatrick                                                Michael Boyce

Director                                                                    Director                                                               

 

Date: 30 August 2012                                           

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

 

Directors' responsibilities for the preparation of the annual report and financial statements

The directors are responsible for preparing the annual report and the financial statements.  The directors have elected to prepare financial statements for the Company in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union. The financial statements are prepared in accordance with the Companies Acts, 1963 to 2012.

 

International Accounting Standard 1 requires that financial statements present fairly for each financial year the Company's financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board's ("IASB") 'Framework for the Preparation and Presentation of Financial Statements'. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRSs. 

 

Directors are also required to:

·      properly select and apply accounting policies; 

·      present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

·      provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance;

·      state that the financial statements have been prepared in accordance with IFRS as issued by the IASB and as adopted by the European Union; and

·      prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business.

The directors are responsible for keeping proper books of account which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Acts, 1963 to 2012.  They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.  The directors are also responsible for the preparation of a directors' report which complies with the requirements of the Companies Acts, 1963 to 2012 and for complying with the Rules issued by the Irish Stock Exchanges.

The directors are responsible for the maintenance and integrity of the annual report and financial statements published.  Legislation in Ireland governing the preparation and dissemination of financial statements differs from legislation in other jurisdictions.

Responsibility statement

 

We confirm to the best of our knowledge:

·      the financial statements, prepared in accordance with International Financial Reporting Standards as issued by the IASB and as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

·      the management report which is incorporated into the directors' report, includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties they face.

 

On behalf of the board

 

 

John Fitzpatrick                                                        Michael Boyce

Director                                                                      Director             

 

Date: 30 August 2012

 


INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF WATERFORD CAPITAL INVESTMENTS PLC

 

We have audited the financial statements of Waterford Capital Investments Plc for the year ended 30 April 2012 which comprise the statement of comprehensive income, the statement of financial position, the statement of changes in equity, the statement of cash flows and the related notes 1 to 23.  These financial statements have been prepared under the accounting policies set out therein.

 

This report is made solely to the Company's members, as a body, in accordance with Section 193 of the Companies Act, 1990.  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 auditors' 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 this report, or for the opinions we have formed.

 

Respective responsibilities of directors and auditors

The directors are responsible for preparing the financial statements, as set out in the Statement of Directors' Responsibilities in accordance with applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

 

Our responsibility, as independent auditors, is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

 

We report to you our opinion as to whether the financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, and are properly prepared in accordance with Irish statute comprising the Companies Acts, 1963 to 2012.  We also report to you whether in our opinion: proper books of account have been kept by the Company; whether, at the statement of financial position date, there exists a financial situation requiring the convening of an extraordinary general meeting of the Company; and whether the information given in the directors' report is consistent with the financial statements.  In addition, we state whether we have obtained all the information and explanations necessary for the purposes of our audit and whether the Company's statement of financial position and statement of comprehensive income are in agreement with the books of account.

 

We also report to you if, in our opinion, any information specified by law regarding directors' remuneration and directors' transactions is not disclosed and, where practicable, include such information in our report.

 

We read the Directors' Report and consider the implications for our report if we become aware of any apparent misstatement or material inconsistencies with the financial statements.  Our responsibilities do not extend to any other information.

 

Basis of audit opinion

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board.  An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements.  It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements and of whether the accounting policies are appropriate to the Company's circumstances, consistently applied and adequately disclosed.

 

We planned and performed our audit so as to obtain all the information and explanations which we consider necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error.  In forming our opinion we evaluated the overall adequacy of the presentation of information in the financial statements.

  

  

INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF WATERFORD CAPITAL INVESTMENTS PLC

 

 

Opinion

In our opinion the financial statements:

 

·                 give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of affairs of the Company as at 30 April 2012 and of its profit for the year then ended; and

 

·                 have been properly prepared in accordance with the Companies Acts, 1963 to 2012.

 

We have obtained all the information and explanations we consider necessary for the purposes of our audit.  In our opinion proper books of account have been kept by the Company.  The Company's financial statements are in agreement with the books of account.

 

In our opinion the information given in the Directors' Report is consistent with the financial statements.

 

The net assets of the Company, as stated in the statement of financial position are more than half the amount of its called-up share capital and, in our opinion, on that basis there did not exist at 30 April 2012 a financial situation which, under Section 40(1) of the Companies (Amendment) Act, 1983, would require the convening of an extraordinary general meeting of the Company.

 

 

Brian O'Callaghan

 

For and on behalf of Deloitte and Touche

Chartered Accountants and Registered Auditors
Dublin
   

 

 

Date: 30 August 2012

 

 

 

 


STATEMENT OF COMPREHENSIVE INCOME

for the year ended 30 April 2012

 

 

Notes

Year ended 30/04/2012

 

Year ended 30/04/2011

(as restated)

 

 

 

 

 

Interest income on financial assets designated at fair value through profit or loss

 

5

10,966,300

 

10,596,316

Interest expense on financial liabilities designated at fair value through profit or loss

 

6

(8,511,516)

 

(7,230,637)

Realised gain/(loss) on financial assets designated at fair value through profit or loss

 

627,579

 

(2,324,220)

Realised gain/(loss) on financial liabilities designated at fair value through profit or loss

 

1,498,271

 

(1,654,227)

Movement in unrealised loss/gain on financial assets designated at fair value through profit or loss

 

4,842,058

 

(1,274,695)

Movement in unrealised loss on financial liabilities designated at fair value through profit or loss

 

(453,830)

 

2,840,388

Net expense from derivatives held for trading

7

(8,951,851)

 

(709,983)

Net foreign exchange gain

 

591,161

 

229,759

 

 

 

 

 

Net investment income

 

608,172

 

472,701

 

 

 

 

 

Other income

8

19,880

 

8,094

Other expenses

9

(627,052)

 

(479,795)

 

 

 

 

 

Profit from ordinary activities before taxation

 

1,000

 

1,000

 

 

 

 

 

Taxation

10

(281)

 

(438)

 

 

 

 

 

Profit and total comprehensive income for the year

 

719

 

562

 

 

 

 

 

 

 

The accompanying notes to the financial statements from page 13 to 35 form an integral part of the financial statements.

 

 

On behalf of the board

 

 

John Fitzpatrick                                                        Michael Boyce

Director                                                                      Director             

 

Date: 30 August 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STATEMENT OF FINANCIAL POSITION

as at 30 April 2012

 

 

 

Notes


As at

30/04/2012

               


As at

30/04/2011

               


As at

01/05/2010

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

Financial assets designated at fair value through profit or loss

 

11

 

259,535,597

 

240,574,591

 

418,747,462

Derivatives held for trading 

12

 

1,473,763

 

3,845,579

 

11,557,102

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

13

 

446,256

 

191,697

 

587,379

Amounts receivable from custodian

 

 

135

 

-

 

-

Interest receivable on investments

 

 

3,329,439

 

2,540,675

 

2,640,588

Financial assets designated at fair value through profit or loss

 

11

 

108,488,817

 

263,601,062

 

144,310,107

Derivatives held for trading 

12

 

2,627,618

 

6,010,984

 

790,190

 

 

 

 

 

 

 

 

Total assets

 

 

375,901,625

 

516,764,588

 

578,632,828

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 






Amounts payable to custodian

 

 

-


45,535


-

Interest payable on notes issued

 

 

1,418,359


1,572,473


1,421,695

Expense accruals

 

 

13,838


18,747


78,785

Derivatives held for trading 

12

 

737,385


738,339


773,151

 

 

 






Non-current liabilities

 

 

 

 

 

 

 

Financial liabilities designated at fair value through profit or loss

 

14

 

360,918,689

 

510,901,304

 

565,798,458

Derivatives held for trading 

12

 

12,771,573

 

3,446,628

 

10,519,739

 

 

 

 

 

 

 

 

Total liabilities

 

 

375,859,844

 

516,723,026

 

578,591,828

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

Called up share capital

15

 

40,000

 

40,000

 

40,000

Profit and loss account

 

 

1,781

 

1,562

 

1,000

Total equity

 

 

41,781

 

41,562

 

41,000

 

 

 

 

 

 

 

 

Total liabilities and equity

 

 

375,901,625

 

516,764,588

 

578,632,828

 

The accompanying notes to the financial statements from page 13 to 35 form an integral part of the financial statements.

 

 

On behalf of the board

 

 

John Fitzpatrick                                                    Michael Boyce

Director                                                                  Director 

 

Date: 30 August 2012

 

 

 

 

 

 

STATEMENT OF CHANGES IN EQUITY

for the year ended 30 April 2012

 

 


Share

capital

Profit and

loss account

Total

equity

 

 

 

 

 

Balance as at 30 April 2010

 

40,000

1,000

41,000

 

 

 

 

 

Total comprehensive income for the year

 

 

 

 

Result for the year

 

-

562

562

Other comprehensive income

 

-

-

-

 

 

-

562

562

 

 

 

 

 

Balance as at 30 April 2011

 

40,000

1,562

41,562

 

 

 

 

 

Total comprehensive income for the year

 

 

 

 

Result for the year

 

-

719

719

Other comprehensive income

 

-

-

-

 

 

-

719

719

 

 

 

 

 

Dividend paid during the year

 

-

(500)

(500)

 

 

 

 

 

Balance as at 30 April 2012

 

40,000

1,781

41,781

 

 

 

 

 

 

The accompanying notes to the financial statements from page 13 to 35 form an integral part of the financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

STATEMENT OF CASH FLOWS

for the year ended 30 April 2012

 

 

Notes

Year ended

30/04/2012

Year ended

30/04/2011

(as restated)

Cash flows from operating activities

 

 

 

Interest received on investments

 

10,177,401

10,696,229

Interest paid on notes issued

 

(8,665,630)

(7,079,859)

Derivative receipts

 

16,852,428

10,047,775

Derivative payments

 

(10,725,106)

(15,374,952)

Other income

 

19,880

8,094

Other expenses

 

(677,496)

(494,298)

Cash generated from/used in operating activities

 

6,981,477

(2,197,011)

 

 

 

 

Taxes paid

 

(281)

(438)

Net cash generated from/used in operating activities

 

6,981,196

(2,197,449)

 

 

 

 

Cash flows from investing activities

 

 

 

Investment purchases

 

(596,439,380)

(555,151,886)

Investment paydowns and disposals

 

738,060,256

610,434,887

Net cash from investing activities

 

141,620,876

55,283,001

 

 

 

 

Cash flows from financing activities

 

 

 

Proceeds from note issuance

 

116,385,330

236,391,872

Redemption and repurchase of notes

 

(265,323,504)

(290,102,865)

Dividend paid

 

(500)

-

Net cash used in financing activities

 

(148,938,674)

(53,710,993)

 

 

 

 

Net decrease in cash and cash equivalents

 

(336,602)

(625,441)

 

 

 

 

Cash and cash equivalents at beginning of the year

 

191,697

587,379

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

591,161

229,759

 

 

 

 

Cash and cash equivalents at end of the year

13

446,256

191,697

 

The accompanying notes to the financial statements from page 13 to 35 form an integral part of the financial statements.

  

 

 

 

 

 

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

 

1.     General Information

Waterford Capital Investments Plc (the "Company"), an Irish registered Company was incorporated on 5 September 2006 to issue Notes. The cash proceeds are used to invest in commercial papers, bonds and time deposits.

 

2.     Basis of Preparation

 

(a)    Statement of compliance

         The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union and the Companies Acts 1963 to 2012 and the Listing Rules issued by the Irish Stock Exchange.

 

(b)    New standards and interpretations adopted

The accounting policies adopted are consistent with those of the previous financial year.

 

The following amended IFRS and IFRIC interpretations were adopted by the Company during the accounting period beginning 1 May 2011. The amendments did not have any impact on the accounting policies, financial position or performance of the Company:

·      IAS 24 Related Party Disclosures (amendment) effective 1 January 2011

·      IAS 32 Financial Instruments: Presentation (amendment) effective 1 February 2010

·      IFRIC14 Prepayments of a Minimum Funding Requirement (amendment) effective 1 January 2011

·      Improvements to IFRS (2010)

§ IFRS 3 Business Combinations

§ IFRS 7 Financial Instruments

§ IAS 1 Presentation of Financial Statements

§ IFRS 3 Business Combinations (Contingent consideration arising from business combination prior to adoption of IFRS 3 (as revised in 2008))

§ IFRS 3 Business Combinations (Un-replaced and voluntarily replaced share-based payment awards)

§ IAS 27 Consolidated and Separate Financial Statements

§ IAS 34 Interim Financial Statements

§ IFRIC 13 Customer Loyalty Programmes (determining the fair value of award credits)

 

(c)    New standards and interpretations not yet adopted

The IFRSs applied by the Company in the preparation of these financial statements are those effective for accounting periods beginning on or before 1 May 2011. A number of new standards, amendments to standards and interpretations in issue are not yet effective for accounting periods beginning on or before 1 May 2011, and the Company has not early adopted them. None of these will have an effect on the financial statements of the Company with the possible exceptions of IFRS 9 "Financial Instruments" and IFRS 13 "Fair Value Measurement". 

 

IFRS 9 deals with classification and measurement of financial assets and liabilities and its requirements represent a significant change from the existing requirements in IAS 39 in respect of financial assets. The standard contains two primary measurement categories for financial assets: amortised cost and fair value. A financial asset would be measured at amortised cost if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows, and the asset's contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding. All other financial assets would be measured at fair value. The standard eliminates the existing IAS 39 categories of held to maturity, available-for-sale and loans and receivables. For an investment in an equity instrument which is not held for trading, the standard permits an irrevocable election, on initial recognition, on an individual share-by-share basis, to present all fair value changes from the investment in other comprehensive income. No amount recognised in other comprehensive income would ever be reclassified to profit or loss. However, dividends on such investments are recognised in profit or loss, rather than other comprehensive income unless they clearly represent a partial recovery of the cost of the investment. Investments in equity instruments in respect of which an entity does not elect to present fair value changes in other comprehensive income would be measured at fair value with changes in fair value recognised in profit or loss.

 

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

2.     Basis of Preparation (continued)

 

(c)    New standards and interpretations not yet adopted (continued)

The standard requires that derivatives embedded in contracts with a host that is a financial asset within the scope of the standard are not separated; instead the hybrid financial instrument is assessed in its entirety as to whether it should be measured at amortised cost or fair value.

 

IFRS 9 is effective for annual periods beginning on or after 1 January 2015.  Earlier application is permitted once the standard is endorsed by the European Union.  The Company does not plan to adopt this standard early.

 

In May 2011, the IASB issued IFRS 13, Fair Value Measurement.  The standard defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price). IFRS 13 is effective for annual periods beginning on or after 1 January 2013.  Earlier application is permitted once the standard is endorsed by the European Union.  The Company does not plan to adopt this standard early.

 

The Company is currently assessing the impact of adopting IFRS 9 and IFRS 13; however, the impact of adoption depends on the assets held by the Company at the date of adoption, so therefore it is not practical to quantify the effect.

 

(d)    Basis of measurement

         The financial statements have been prepared on the historical cost basis except for certain financial assets and financial liabilities designated at fair value through profit or loss and derivatives held for trading which are also measured at fair value.

 

(e)    Functional and presentation currency

         These financial statements are presented in Euro which is the Company's functional currency. The functional currency is the currency of the primary economic environment in which the entity operates. The Company has issued notes primarily in Euro and the directors of the Company believe that Euro most faithfully represents the economic effects of the underlying transactions, events and conditions. Transactions in foreign currencies are translated at the foreign currency exchange rate ruling at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the foreign currency closing exchange rate ruling at the statement of financial position date. Foreign currency exchange differences arising on translation and realised gains and losses on disposals or settlements of monetary assets and liabilities are recognised in the statement of comprehensive income.  Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated to the functional currency at the foreign currency exchange rates ruling at the dates that the values were determined.

 

(f)     Use of estimates and judgements

The preparation of the financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that may affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are reviewed on an ongoing basis.  Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects current and future periods.

 

A key area of estimation for this Company would be in the determination of fair values for financial assets and liabilities for which there is no observable market price.  The valuation techniques used and the accounting judgements applied when determining the fair value of financial assets and liabilities for which there is no observable market price is described in the significant accounting policy Note 3(e) "Financial instruments: Fair Value Measurement Principles".

 

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

2.     Basis of Preparation (continued)

 

(f)     Use of estimates and judgements (continued)

IFRS 7 "Financial Instruments: Disclosures" establishes a fair value hierarchy that prioritises the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).  The three levels of the fair value hierarchy are as follows:

·      Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities

·      Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices), including inputs from markets that are not considered to be active

·      Level 3 - Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs)

 

Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk.  Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics and other factors.  A financial instruments level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.  However, the determination of what constitutes "observable" requires significant judgement by the Company.  The Company considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, provided by independent sources that are actively involved in the relevant market.  The categorisation of a financial instrument within the hierarchy is based upon the pricing transparency of the financial instrument and does not necessarily correspond to the Company's perceived risk inherent in such financial instruments.  The fair value hierarchy is set out in Note 17(h).

 

3.     Significant accounting policies

 

(a)    Interest income and expense

Interest income is accounted for on an effective interest rate basis. Due to the limited recourse nature of the notes issued, the Company is only required to pay the interest if it has collected sufficient funds to cover the amount due after having retained a reserved profit of €1,000 per annum for the Company.

 

(b)    Taxation

The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the period as calculated in accordance with Irish Tax Laws. Taxable profit differs from profit before tax as reported in the statement of comprehensive income because it excludes items of income or expense that are not taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the statement of financial position date.

 

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profits, and is accounted for using the statement of financial position method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary difference can be utilised.

 

(c)    Net expense from derivatives

The net expense from derivatives includes the fair value movements, settlement receipts and settlement payments for derivatives.

 

(d)    Cash and cash equivalents

Cash and cash equivalents includes cash held with banks which are subject to insignificant risk of changes in their values and are used by the Company in the management of its short term commitments.

 

(e)    Financial instruments          

         Classification

A financial asset or financial liability at fair value through profit or loss is a financial asset or liability that is classified as held-for-trading or designated as at fair value through profit or loss.

 

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

3.     Significant accounting policies (continued)

 

(e)    Financial instruments (continued)

 

Classification (continued)

The Company has designated its investments held and notes issued at fair value through profit or loss on the basis that they form part of a group of financial assets and financial liabilities which is managed, and the performance of which is evaluated, on a fair value basis in accordance with a documented investment strategy and information about these financial assets and financial liabilities is provided internally on a fair value basis to the entity's key management personnel.

 

The Company has classified the cross currency swaps and interest rate swaps which it has entered into as derivatives held for trading.  These derivatives have not been formally designated into a hedging relationship and as such changes in their fair value are recognised in the statement of comprehensive income.

        

         Measurement

Financial instruments are recognised initially at fair value.  Transaction costs on financial assets and financial liabilities at fair value through profit or loss are expensed immediately.

Subsequent to initial recognition, all instruments classified at fair value through profit or loss, are measured at fair value with changes in their fair value recognised in the statement of comprehensive income.

 

         Fair Value Measurement Principles

         The determination of fair values of financial assets, financial liabilities and derivatives are based on a combination of quoted prices and valuation models, which are developed from recognised valuation models.  Some or all of the inputs into these models may not be market observable, and are derived from market prices or rates or are estimated based on assumptions. Due to the limited recourse nature of the notes issued, the determination of fair values of financial liabilities is based on a valuation model which will include the fair value of financial assets and derivatives held for trading and the carrying value of cash and cash equivalents, interest receivable, interest payable, other assets and other liabilities. The fair value of the notes issued falls within Level 3 of the fair value hierarchy.

 

         The fair value for commercial papers and time deposits are based on a discounted cash flow model which uses market interest rates as an input.  The fair value for commercial papers and time deposits falls within Level 2 of the fair value hierarchy. The fair value for bonds is based on quoted bid market prices. The fair value of bonds based on quoted bid prices fall within Level 1 on the fair value hierarchy.  If quoted prices are not available for bonds the fair value is based on a model which uses credit default spreads or analogue bond spreads as an input.  The fair value of bonds based on a model which used credit default spreads or analogue bond spreads as an input fall within Level 2 on the fair value hierarchy.

 

The fair values of cross currency swaps and interest rate swaps are based on net present values of future cash flows within the swap contracts. Valuation models are used to value swaps which use market interest and foreign exchange rates to obtain a fair value for cross currency swaps and market interest rates for interest rate swaps.  The fair value of cross currency swaps and interest rate swaps fall within Level 2 on the fair value hierarchy.

 

         Recognition

The Company initially recognises all financial assets and liabilities on the trade date at which the Company becomes a party to the contractual provisions of the instruments. From trade date, any gains and losses arising from changes in fair value of the financial assets or financial liabilities are recorded in the statement of comprehensive income.

 

Derecognition

The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Company is recognised as a separate asset or liability. The Company derecognises a financial liability when its contractual obligations are discharged or cancelled or expired.

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

3.     Significant accounting policies (continued)

 

(e)     Financial instruments (continued)

 

Offsetting

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

 

(f)     Segment Reporting

         An operating segment is a component of the Company:

·      that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity),

·      whose operating results are regularly reviewed by the Company's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and

·      for which discrete financial information is available.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.  The chief operating decision maker is the person or group that allocates resources to and assesses the performance of the operating segments of a company.

 

4.      Financial assets and liabilities

The following table details the categories of financial assets and liabilities held by the Company at the reporting date

 

Fair value

As at 30/04/12

Carrying value As at 30/04/12

Fair value

As at 30/04/11

Carrying value

As at 30/04/11

 

Assets

 

 

 

 

Financial assets designated at fair value through profit or loss

 

 

 

 

Investments at fair value

368,024,414

368,024,414

504,175,653

504,175,653

 

 

 

 

 

Derivatives held for trading 

4,101,381

4,101,381

9,856,563

9,856,563

 

 

 

 

 

Other assets

3,775,830

3,775,830

2,732,372

2,732,372

 

 

 

 

 

Total assets

375,901,625

375,901,625

516,764,588

516,764,588

 

 

 

 

 

Liabilities

 

 

 

 

Financial liabilities designated at fair value through profit or loss

 

 

 

 

Notes issued at fair value

(360,918,689)

(360,918,689)

(510,901,304)

(510,901,304)

 

 

 

 

 

Derivatives held for trading 

(13,508,958)

(13,508,958)

(4,184,967)

(4,184,967)

 

 

 

 

 

Other liabilities

(1,432,197)

(1,432,197)

(1,636,755)

(1,636,755)

 

 

 

 

 

Total liabilities

(375,859,844)

(375,859,844)

(516,723,026)

(516,723,026)

 

Other assets as presented above represent cash and cash equivalents, interest receivable on investments and amounts receivable on custodian as detailed in the statement of financial position.

 

Other liabilities as presented above represent expense accruals, interest payable on notes and amounts payable to custodian as detailed in the statement of financial position.

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

5.     Interest income on financial assets designated at fair value through profit or loss

 

Year ended

30/04/2012

 

Year ended

30/04/2011

 

Interest income on investments

10,966,300

 

10,595,316

 

 

 

 

 

 

6.     Interest expense on financial liabilities designated at fair value through profit or loss

 

Year ended

30/04/2012

 

Year ended

30/04/2011

 

Interest expense on notes issued

8,511,516

 

7,230,637

 

7.     Net expense from derivatives held for trading  

 

Year ended

30/04/2012

 

Year ended

30/04/2011

(as restated)

 

Derivative receipts

16,852,428

 

10,047,775

 

Derivative payments

(10,725,106)

 

(15,374,952)

 

Fair value movement on derivatives held for trading 

(15,079,173)

 

4,617,194

 

 

(8,951,851)

 

(709,983)

 

8.     Other income

 

Year ended

30/04/2012

 

Year ended

30/04/2011

 

Interest income from cash and cash equivalents

17,660

 

8,094

 

Compensation income

2,220

 

-

 

 

19,880

 

8,094

 

9.     Other expenses

 

Year ended

30/04/2012

 

Year ended

30/04/2011

 

Portfolio management fees

470,155

 

322,608

 

Legal fees

4,057

 

3,932

 

Auditors fees

11,475

 

11,495

 

Directors' fees (for services as role of director)

3,000

 

2,500

 

Tax compliance fees

2,875

 

2,874

 

Custody fees

42,989

 

54,282

 

Other expenses

92,501

 

82,104

 

 

627,052

 

479,795

 

Fees charged by the Company's auditors in respect of the financial year, (excluding VAT) were as follows

 

 

Year ended

30/04/2012

 

Year ended

30/04/2011

 

Audit of financial statements

9,500

 

9,500

 

Other assurance services

-

 

-

 

Tax advisory services

2,375

 

2,375

 

Non-audit services

-

 

-

 

 

11,875

 

11,875

 

 

 

 

 

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

10.   Taxation

The Company is subject to Irish Corporation tax at the Irish Corporation tax rate that applies to income other than trading income. The effective tax rate is 25% in accordance with Section 110 of the Taxes Consolidation Act, 1997.

 

Year ended

30/04/2012

 

Year ended

30/04/2011

 

 

 

 

Corporation tax charge

281

 

438

 

 

 

 

 

 

Factor affecting tax charge for the year has been calculated as follows

 

 

 

 

 

 

 

 

 

Profit on ordinary activities before tax

1,000

 

1,000

 

 

 

 

 

 

Current tax at 25%

250

 

250

 

Effects of

 

 

 

 

Under provision

31

 

219

 

Utilised losses brought forward

-

 

(31)

 

Taxation charge for the year

281

 

438

 

The Company will continue to be taxed in accordance with Section 110 of the Taxes Consolidation Act 1997.

 

11.   Financial assets designated at fair value through profit or loss

As at

30/04/2012

 

As at

30/04/2011

 

 

 

 

Financial assets with a maturity greater than 1 year


 

 

 

Investments in EUR Bonds

221,090,503

 

211,478,252

 

Investments in USD Bonds

36,562,772

 

19,634,229

 

Investments in GBP Bonds

-

 

7,551,394

 

Investments in CZK Bonds

1,882,322

 

1,910,716

 

 

259,535,597

 

240,574,591

 

 

 

 

 

 

Financial assets with a maturity within 1 year

 

 

 

 

Investments in EUR Bonds

46,849,339

 

163,200,296

 

Investments in GBP Bonds

8,281,358

 

6,467,804

 

Investments in USD Bonds

-

 

2,354,526

 

Investments in EUR Commercial Papers

35,231,739

 

71,505,994

 

Investments in USD Commercial Papers

6,014,874

 

3,496,102

 

Investments in CZK Time Deposits

5,857,025

 

6,199,989

 

Investments in PLN Time Deposits

6,195,050

 

10,251,100

 

Investments in HUF Time Deposits

59,432

 

125,251

 

 

108,488,817

 

263,601,062

 

 

 

 

 

 

Total financial assets designated at fair value through profit or loss

368,024,414

 

504,175,653

 

The Company invests into a large diverse portfolio of investments with a mixture of floating and fixed rate bonds, fixed rate commercial papers and fixed rate term deposits.  The breakdown of the interest risk profile is provided in Note 17(d) (ii) "Financial instruments, principal risks and uncertainties: Market risk: Interest rate risk".  The credit quality of the investments held is set out in Note 17(a) "Financial instruments, principal risks and uncertainties: Credit risk".  The geographical concentrations and industrial sector concentrations of the investments held is set out in Note 17(b) "Financial instruments, principal risks and uncertainties: Concentration risk".

 

 

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

11.  Financial assets designated at fair value through profit or loss (continued)

 

 

As at

30/04/2012

 

As at

30/04/2011

 

 

 

 

Opening balance

504,175,653

 

563,057,569

 

Purchases of investments

596,439,380

 

555,151,886

 

Sales of investments

(738,060,256)

 

(610,434,887)

 

Realised gain/(loss) on investments

627,579

 

(2,324,220)

 

Movement in unrealised loss/gain on investments

4,842,058

 

(1,274,695)

 

Closing balance

368,024,414

 

504,175,653

 

12.   Derivatives held for trading  

As at

30/04/2012

 

As at

30/04/2011

 

 

 

 

Derivatives with a maturity greater than 1 year

 

 

 

 

Derivative assets

 

 

 

 

Cross currency swaps

1,203,542

 

3,146,800

 

Derivative liabilities

 

 

 

 

Cross currency swaps

(5,129,707)

 

(2,391,041)

 

Interest rate swaps

(7,641,866)

 

(1,055,587)

 

 

(12,771,573)

 

(3,446,628)

 

Derivatives with a maturity within 1 year

 

 

 

 

Derivative assets

 

 

 

 

Cross currency swaps

2,451,255

 

5,483,918

 

Interest rate swaps

176,363

 

527,066

 

 

2,627,618

 

6,010,984

 

 

 

 

 

 

Derivative liabilities

 

 

 

 

Cross currency swaps

(529,077)

 

(20,797)

 

Interest rate swaps

(208,308)

 

(717,542)

 

 

(737,385)

 

(738,339)

 

 

As at

30/04/2012

 

As at

30/04/2011

 

 

 

 

Currency analysis

 

 

 

 

Cross currency swaps

 

 

 

 

EUR

(1,103,176)

 

1,667,104

 

USD

(2,605,735)

 

(43,519)

 

GBP

1,704,924

 

4,595,295

 

 

 

 

 

 

Interest rate swaps

 

 

 

 

USD

(346,646)

 

-

 

EUR

(6,959,536)

 

(468,154)

 

CZK

(97,408)

 

(79,130)

 

13.   Cash and cash equivalents

As at

30/04/2012

 

As at

30/04/2011

 

 

 

 

Cash held with KBC Bank NV

446,256

 

191,697

 

 

 

 

 

Cash is held in KBC Bank NV current accounts which have no special terms and conditions.  Cash is available on demand.

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

13.   Cash and cash equivalents (continued)

 

As at

30/04/2012

 

As at

30/04/2011

 

Currency analysis

 

 

EUR

233,693

 

169,017

 

USD

196,617

 

10,885

 

GBP

74

 

23

 

CZK

7,219

 

7,663

 

HUF

123

 

399

 

PLN

8,530

 

3,710

 

14.   Financial liabilities designated at fair value through profit or loss

As at

30/04/2012

 

As at

30/04/2011

 

 

 

 

CLASS                                  COUPON

 

 

 

 

EUR Notes issued                6 month EURIBOR less 0.07%

235,636,273

 

368,533,390

 

CZK Notes issued               6 month PRIBOR less 0.10%

49,155,868

 

59,728,472

 

USD Notes issued               6 month USD LIBOR less 0.07%

51,690,484

 

54,250,489

 

 

360,918,689

 

510,901,304

 

In addition to the floating rate coupon, the notes issued also carry a return in the form of a profit participating "excess spread". Due to this profit participating excess spread, the notes effectively receive all realised income and gains in excess of a reserved profit amount net of other expenses.  The Company is entitled to retain a reserved profit of €1,000 per annum.  All of the notes issued by the Company are held by KBC Life Assurance companies, Capital Protected Funds and Arcade Finance Plc, which have KBC Asset Management NV acting as portfolio manager. All notes issued are listed on the Irish Stock Exchange and are limited recourse. The noteholders have the right to early redeem notes until the final maturity date by providing an exercise notice to the paying agent.

 

The maturity profile of the Notes issued is as follows:

As at

30/04/2012

 

As at

30/04/2011

 

 

EUR Notes issued

 

 

 

Maturing on 23/09/2014

58,020,408

 

112,600,249

Maturing on 23/10/2014

41,901,979

 

71,151,195

Maturing on 10/11/2014

40,528,986

 

65,048,279

Maturing on 23/12/2014

35,540,540

 

47,977,204

Maturing on 10/01/2015

45,862,127

 

56,190,349

Maturing on 10/02/2015

13,782,233

 

15,566,114

 

235,636,273

 

368,533,390

CZK Notes issued

 

 

 

Maturing on 23/03/2015

20,468,690

 

24,801,537

Maturing on 23/04/2015

-

 

-

Maturing on 10/05/2015

2,816,452

 

2,562,802

Maturing on 10/07/2015

25,870,726

 

32,364,133

 

49,155,868

 

59,728,472

USD Notes issued

 

 

 

Maturing on 10/01/2015

33,472,773

 

32,503,125

Maturing on 23/09/2015

18,217,711

 

21,747,364

 

51,690,484

 

54,250,489

HUF Notes issued

Maturing on 10/07/2015

53,402

 

119,939

 

PLN Notes issued

Maturing on 23/03/2015

5,712,114

 

6,192,015

Maturing on 10/07/2015

18,670,548

 

22,076,999

 

24,382,662

 

28,269,014

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

14.   Financial liabilities designated at fair value through profit or loss (continued)

 

 

A summary maturity analysis of the Notes issued is as follows:

As at

30/04/2012

 

As at

30/04/2011

Amounts falling due

 

< 1 year

-

 

-

1 - 2 years

-

 

-

2 - 5 years

360,918,689

 

510,901,304

> 5 years

-

 

-

 

360,918,689

 

510,901,304

 

The notes issued are designated as financial liabilities at fair value through profit or loss.  The fair value movement on financial liabilities is due to a combination of market and credit risk factors but information regarding the split is not available.

 

15.   Share Capital                                                                                             

 

 

As at

30/04/2012

 

As at

30/04/2011

 

 

 

Authorised

 

 

 

 

40,000 ordinary shares at €1 each

 

40,000

 

40,000

 

 

 

 

 

Issued and fully paid up

 

 

 

 

40,000 ordinary shares at €1 each

 

40,000

 

40,000

 

The holders of shares have the right to receive notice of, attend and vote at general meetings of the Company.  The holder of each share has the right to one vote.  Upon winding up, if net assets are insufficient to repay the whole paid up share capital, then the net assets will be distributed in proportion to the shares held by a shareholder.  Upon winding up, if net assets are in excess of the whole paid up share capital, then the excess will also be distributed in proportion to the shares held by a shareholder.

 

The holders of shares are entitled to receive dividends when they are declared according to the proportion of shares held.

 

16.   Segment analysis

The Company has one reportable segment. The reportable segment involves the repacking of investments on behalf of investors, which are bought from the market and subsequently securitised to avail of potential market opportunities and risk-return asymmetries.  KBC Asset Management NV has been appointed as portfolio manager to the Company. At the start date of the Company KBC Asset Management NV entered into a portfolio management agreement with the Company. Under this portfolio management agreement KBC Asset Management NV decides on how the resources of the Company are allocated in line with the strict terms and eligibility criteria as set out in the Company's Prospectus and assesses the performance of the investments held by the Company. The Prospectus was agreed upon by the directors at the start date of the Company and the directors have approved all subsequent updates to the Prospectus. The directors review the performance of the Company and KBC Asset Management NV report to the directors on a quarterly basis. 

KBC Asset Management NV is deemed to be the chief operating decision maker as it decides on how the resources of the Company are allocated as well as assessing the performance of the investments held. 

 

The following is the information reviewed by KBC Asset Management NV in deciding how resources are allocated and assessing the performance of the investments held:

 

KBC Asset Management NV is deemed to be the chief operating decision maker as it decides on how the resources of the Company are allocated as well as assessing the performance of the investments held. 

 

The following is the information reviewed by KBC Asset Management NV in deciding how resources are allocated and assessing the performance of the investments held:

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

16.   Segment analysis (continued)

·      Credit quality of investments held - the credit quality of investments held are reviewed on a monthly basis by KBC Asset Management NV.  The breakdown of the credit ratings of the investments held by the Company is set out in Note 17(a) "Credit risk". The KBC Asset Management NV Risk department also rate the notes issued by the Company.  This rating is based on the weighted average credit rating of the investments held by the Company.  At 30 April 2012 the credit rating assigned to the notes issued by the Company by the KBC Asset Management Risk department was AA-.

 

·      Liquidity and Asset Liability Management ("ALM") ratios - the liquidity and ALM ratios of the Company are reviewed on a monthly basis.  The ALM ratio is reviewed to see if the Company is underinvested and whether the maturity/liquidity breakdown of the investments held is sufficient to meet the obligations to repay the notes. The liquidity breakdown is set out in Note 17(c) "Liquidity risk".  At 30 April 2012 the Company is deemed to be overinvested by 1.50% (2011: overinvested by 0.23%).  The levels of note redemptions/subscriptions are also reviewed as this is a key driver in whether the Company has to sell investments or whether it can buy investments as note redemptions will primarily have to be funded through investment disposals.  The net note redemptions for the year ended 30 April 2012 are set out in the cash flow from financing activities in the Statement of Cash Flows.

 

·      Country and industry exposure - the exposure the Company has to countries and industries is reviewed by KBC Asset Management NV on a monthly basis.  The level of exposure to countries and industries is decided upon by the KBC Asset Management NV Allocation Committee.  The country and industrial exposure limits set by the KBC Asset Management NV Allocations Committee is a driver in what investments are purchased and sold. The industrial sector and country breakdown of investments held at 30 April 2012 is set out in Note 17(b) "Concentration risk".

 

·      Market prices and market price fluctuations - daily market price fluctuations on all investments held are reviewed by relevant KBC Asset Management NV front office staff. The market value of investments is also a key driver in what investments are purchased and sold and the movement in market value is a key performance indicator reviewed by the KBC Asset Management NV front office staff assigned to the Company. The market value as at 30 April 2012 for investments held is set out in Note 11 "Financial assets designated at fair value through profit or loss". The movement in market value for the year ended 30 April 2012 ("movement in unrealised gain/loss on investments") is also set out in Note 11 "Financial assets designated at fair value through profit or loss".

 

The Company earns interest income from its portfolio of investments which includes bonds, commercial papers and time deposits.  The breakdown of interest income for the year is as follows:

 

Year ended

 30/04/2012

 

Year ended

 30/04/2011

Interest income from bonds

6,353,434

 

9,350,771

Interest income from commercial papers

1,035,372

 

964,092

Interest income from time deposits

3,577,494

 

281,453

 

10,966,300

 

10,596,316

 

The country breakdown of interest income for the year is as follows:

 

Year ended

 30/04/2012

 

Year ended

 30/04/2011

Ireland

283,745

 

1,078,395

Belgium

1,596,255

 

1,411,296

United States of America

2,203,483

 

1,816,510

The Netherlands

992,233

 

512,969

United Kingdom

1,197,413

 

658,122

Germany

544,072

 

571,001

France

1,842,083

 

666,091

Italy

495,873

 

766,168

Rest of Europe

1,279,904

 

2,274,602

Rest of World

531,239

 

841,162

 

10,966,300

 

10,596,316

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

16.   Segment analysis (continued)

        

         The country breakdown of non-current investments and derivatives held at year end is as follows:

 

As at

 30/04/2012

 

As at

 30/04/2011

Non-current investments

 

 

 

Ireland

13,486,356

 

19,621,272

Belgium

17,509,772

 

25,882,029

The Netherlands

28,154,241

 

33,422,432

Spain

-

 

2,576,988

France

57,410,941

 

17,848,750

Italy

5,830,638

 

26,403,618

Austria

-

 

195,288

Czech Republic

1,882,322

 

1,910,716

Germany

9,754,092

 

6,618,532

Australia

-

 

6,004,959

United Kingdom

18,448,015

 

23,433,207

United States of America

60,136,676

 

66,428,828

Rest of Europe

29,321,634

 

10,227,972

Rest of World

17,600,910

 

-

 

259,535,597

 

240,574,591

 

 

 

 

Non-current derivatives

 

 

 

Belgium

(11,297,810)

 

398,951

 

(11,297,810)

 

398,951

 

Due to the diversity of the portfolio of investments held no interest income earned from an individual investment exceeds 10% of total interest income for the year ended 30 April 2012.

 

17.   Financial instruments, principal risks and uncertainties

The principal risks and uncertainties of the business relate to credit risk, concentration risk, liquidity risk, market risk and operational risk.

 

(a)    Credit risk

Credit risk is the risk of financial loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's portfolio of investments and derivatives. The maximum gross exposure to credit risk at the statement of financial position date was:

 

 

 

As at

30/04/2012

 

As at

30/04/2011

 

 

 

Financial assets designated at fair value through profit or loss

 

368,024,414

 

504,175,653

Derivatives held for trading 

 

4,101,381

 

9,856,563

Cash and cash equivalents

 

446,256

 

191,697

Interest receivable on investments

 

3,329,439

 

2,540,675

Amounts receivable from custodian

 

135

 

-

 

 

375,901,625

 

516,764,588

 

No financial asset is past due. 

 

The Company's net exposure to credit risk is minimal as the notes issued by it are limited recourse.  Consequently, any loss suffered on the assets held will reduce the amount which the Company is required to pay to the note holders and therefore does not result in a loss to the Company.  Management have outsourced the responsibility of monitoring credit risk to KBC Asset Management NV.

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

17.   Financial instruments, principal risks and uncertainties

 

(a)   Credit risk (continued)

KBC Asset Management NV's Risk department monitors the credit risk for the Company by monitoring external credit ratings for the investments held by the Company on a monthly basis. The following are the minimum credit ratings for investments held by the Company, which the KBC Asset Management NV's Risk department monitors during its review:

·      The minimum short term credit rating is at least A-1 from Standard & Poor's or an equivalent short term credit rating from Moody's or Fitch.  If a short term security is not rated by any of these credit rating agencies, it must have a short term credit risk profile equivalent to, or better than, in the opinion of the KBC Asset Management NV's Risk department, a short term credit rating of A-1 from Standard & Poor's.

·      The minimum longer term credit rating is at least A- from Standard & Poor's or an equivalent long term credit rating from Moody's or Fitch.  If a long term security is not rated by any of these credit rating agencies, it must have a long term credit risk profile equivalent to, or better than, in the opinion of the KBC Asset Management NV's Risk department, a long term credit rating of A- from Standard & Poor's.

·      There are certain specified securities in the Company's prospectus that may be invested into even if they fall outside the above credit ratings.  There is a maximum notional amount that can be invested into these specified securities.

 

The following is the breakdown of the credit ratings for the financial assets designated at fair value through profit or loss held by the Company:

 


 

 

As at

30/04/2012

As at

30/04/2011

Rating

Rating agency

 

%

%

Long term

 

 

 

 

AAA

Standard & Poor's

 

9.45

13.72

AA+

Standard & Poor's

 

2.19

6.75

AA

Standard & Poor's

 

6.38

10.55

AA-

Standard & Poor's

 

11.69

4.37

A+

Standard & Poor's

 

14.81

20.00

A

Standard & Poor's

 

11.97

13.26

A-

Standard & Poor's

 

9.49

1.23

BBB+

Standard & Poor's

 

-

1.37

B-

Standard & Poor's

 

0.96

-

Aaa

Moody's

 

5.48

0.27

Aa2

Moody's

 

-

5.04

Aa3

Moody's

 

5.01

-

A1

Moody's

 

2.83

-

A2

Moody's

 

1.58

-

Baa3

Moody's

 

3.66

2.75

A

Fitch

 

-

2.48

BB+

Fitch

 

-

0.05

 

 

 

85.50

81.84

 

Short term

 

 

 

 

A-1+

Standard & Poor's

 

2.72

3.09

A-1

Standard & Poor's

 

5.85

15.07

P-1

Moody's

 

5.42

-

F1+

Fitch

 

0.51

-

 

 

 

14.50

18.16

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

17.   Financial instruments, principal risks and uncertainties (continued)

 

(a)   Credit risk (continued)

Two Bank bonds had a Moody's rating of Baa3 and  Standard & Poor's rating of B-.  At the date these bonds were purchased they did meet the minimum credit rating.  The holding of these investments was approved by the KBC Asset Management NV Allocation Committee.  The bond with a Baa3 Moody's rating is included in the specified securities listing in the Company's prospectus.  Therefore it is allowable for the Company to hold these investments.

 

       KBC Bank NV is the swap counterparty for all derivatives held for trading as at 30 April 2012.  All cash balances are also held with KBC Bank NV. KBC Bank NV had an "A-2" (30 April 2011: "A-1") short term rating and an "A-" (30 April 2011: "A") long term credit rating from Standard & Poor's as at 30 April 2012.

 

(b)     Concentration risk

The Company's financial assets designated at fair value through profit or loss were concentrated in the following industrial sector types and geographical locations:

 

 

As at

30/04/2012

 

As at

30/04/2011

 

 

%

 

%

Industrial sector

 

 

 

 

Banking and financial services

 

90.97

 

89.13

Government

 

6.67

 

10.04

Commercial Services & Supplies

 

-

 

0.83

Automobiles

 

2.36

 

-

 

 

100.00

 

100.00

 

 

 

As at

30/04/2012

 

As at

30/04/2011

 

 

%

 

%

Country

 

 

 

 

United States of America

 

20.70

 

20.40

Belgium

 

9.67

 

12.34

Ireland

 

3.66

 

5.26

The Netherlands

 

9.22

 

8.69

United Kingdom

 

7.29

 

9.87

Italy

 

3.34

 

7.25

Spain

 

0.72

 

2.69

Australia

 

4.78

 

6.53

France

 

20.20

 

14.75

Germany

 

3.67

 

3.22

Austria

 

1.10

 

2.52

Norway

 

-

 

2.98

Luxembourg

 

2.72

 

-

Sweden

 

8.18

 

-

Denmark

 

3.10

 

2.97

Other

 

1.65

 

0.53

 

 

100.00

 

100.00

 

(c)    Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due.  The Company hedges liquidity risk through the issuance of notes with similar maturity dates as the investments to be acquired with the issuance proceeds and with corresponding payment dates on the notes issued and investments held. It also hedges liquidity risk by investing a significant percentage of the issuance proceeds into short term liquid investments.  Management have outsourced the responsibility of monitoring liquidity risk to KBC Asset Management NV.

 

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

   

17.   Financial instruments, principal risks and uncertainties (continued)

 

(c)    Liquidity risk (continued)

 

As at 30 April 2012

 

Carrying amount

 

Gross contractual cash flows

Less than one year

 

Greater than one year

 

Financial assets designated at fair value through profit or loss

368,024,414

366,483,813

108,685,727

257,798,086

Derivatives held for trading 

4,101,381

4,101,381

2,627,618

1,473,763

Cash and cash equivalents

446,256

446,256

446,256

-

Interest receivable on investments

3,329,439

26,082,813

12,524,334

13,558,479

Amounts receivable from custodian

135

135

135

-

 

375,901,625

397,114,398

124,284,070

272,830,328

 





Financial liabilities designated at fair value through profit or loss

(360,918,689)

(359,378,087)

-

(359,378,087)

Derivatives held for trading 

(13,508,958)

(13,508,958)

(737,385)

(12,771,573)

Interest payable on notes issued

(1,418,359)

(24,171,734)

(10,613,254)

(13,558,480)

Expense accruals

(13,838)

(13,838)

(13,838)

-

 

(375,859,844)

(397,072,617)

(11,364,477)

(385,708,140)

 

 

 

 

 

 

41,781

41,781

112,919,593

(112,877,813)

 

         As at 30 April 2011

 

Carrying amount

 

Gross contractual cash flows

Less than one year

 

Greater than one year

 

Financial assets designated at fair value through profit or loss

504,175,653

507,690,716

264,562,618

243,128,098

Derivatives held for trading 

9,856,563

9,856,563

6,010,984

3,845,579

Cash and cash equivalents

191,697

191,697

191,697

-

Interest receivable on investments

2,540,675

45,281,527

12,556,216

32,725,311

 

516,764,588

563,020,503

283,321,515

279,698,988

 

 

 

 

 

Financial liabilities designated at fair value through profit or loss

(510,901,304)

(531,610,985)

-

(531,610,985)

Derivatives held for trading 

(4,184,967)

(4,184,966)

(738,339)

(3,446,627)

Amounts payable to custodian

(45,535)

(45,535)

(45,535)

-

Interest payable on notes issued

(1,572,473)

(27,118,708)

(8,422,213)

(18,696,495)

Expense accruals

(18,747)

(18,747)

(18,747)

 

 

(516,723,026)

(562,978,941)

(9,224,834)

(553,754,107)

 

 

 

 

 

 

41,562

41,562

274,096,681

(274,055,119)

 

 (d)  Market risk

Market risk represents the potential for both loss and gains and includes currency risk, interest rate risk and other price risk. Management have outsourced the responsibility of monitoring market risk to KBC Asset Management NV.

 

 

 

 

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

   

17.   Financial instruments, principal risks and uncertainties (continued)

 

(d)    Market risk (continued)

 

(i)    Currency risk

The Company is exposed to exchange rate movements between EUR, its functional currency, and certain foreign currencies, namely Czech Koruna (CZK), US Dollar (USD), British Pound (GBP), Hungarian Forint (HUF) and Polish Zloty (PLN).  The Company's financial statements are denominated in EUR while the investments purchased by the Company can be denominated in other currencies.

 

Changes in rates of exchange may have an effect on the value of or the income from these investments. The Company manage currency risk by issuing notes in currencies other than EUR and through entering into cross currency swaps.

 

The Company used the following exchange rates to retranslate balances denominated in foreign currencies at the statement of financial position date:

 

 

As at

30/04/2012

 

As at

30/04/2011

 

 

 

USD

 

1.3236

 

1.4836

GBP

 

0.8151

 

0.8895

CZK

 

24.9390

 

24.2010

HUF

 

286.1500

 

264.5800

PLN

 

4.1740

 

3.9330

 

Details of the foreign currency investments held by and notes issued by the Company are shown below along with the foreign currency swaps entered into to mitigate currency risk on investments acquired in different currencies to the notes issued.

     

    As at 30 April 2012

 

 

CZK

USD

GBP

HUF

PLN

Total

Investments held (at nominal amounts)

7,656,682

40,797,824

8,281,192

59,409

6,190,704

62,985,811

 

 

Cash and cash equivalents

7,219

196,617

74

123

8,530

212,563

 

Notes issued (at nominal amounts)

(49,882,714)

(52,445,225)

-

(54,167)

(24,754,432)

(127,136,538)

 

 

(42,218,813)

(11,450,784)

8,281,266

5,365

(18,555,198)

(63,938,164)

 

As at 30 April 2011

 

 

CZK

USD

GBP

HUF

PLN

Total

Investments held (at nominal amounts)

8,053,386

24,063,090

14,064,872

125,482

10,261,887

56,568,717

 

 

Cash and cash equivalents

7,663

10,885

23

399

3,710

22,680

 

Notes issued (at nominal amounts)

(60,160,737)

(54,659,612)

-

(120,946)

(28,498,602)

(143,439,897)

 

 

(52,099,688)

(30,585,637)

14,064,895

4,935

(18,233,005)

(86,848,500)

 

 

 

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

   

17.   Financial instruments, principal risks and uncertainties (continued)

 

(d)    Market risk (continued)

 

(i)    Currency risk (continued)

 

The cross currency swaps entered into to mitigate currency risk on investments acquired in different currencies to the notes issued are as follows:

 

As at 30 April 2012

 

 

CZK

USD

GBP

PLN

Total

 

Swaps (at nominal amounts)

(40,633,617)

3,637,156

8,281,192

(20,018,000)

(48,733,269)

 

 

 

As at 30 April 2011

 

 

CZK

USD

GBP

PLN

Total

 

Swaps (at nominal amounts)

(47,018,837)

(31,173,970)

14,064,872

(18,668,000)

(82,795,935)

 

 

 

 (ii)         Interest rate risk

The Company is exposed to changes in its cost of financing arising from movements in the EURIBOR, GBP and USD LIBOR, PRIBOR, BUBOR and WIBOR rates which respectively form the basis of the interest payments on the EUR, USD, CZK, HUF and PLN senior notes issued by it.  Increases in these rates increase the cost of funding.  Due to the limited recourse nature of the notes issued, the Company is only required to pay the interest if it has collected sufficient funds to cover the amount due after having retained a reserved profit of €1,000 per annum for the Company.  As such the Company has no net exposure to interest rate risk.

 

The interest rate risk profile of the Company's financial assets and liabilities designated at fair value was as follows:

 

As at 30/04/2012

 

As at 30/04/2011

 

Maturity less than 1 year

Maturity greater than 1 year

 

Maturity less than 1 year

Maturity greater than 1 year

 

 

Financial assets designated at fair value through profit or loss

 

 

 

 

 

Floating rate

49,962,847

70,747,197

 

137,051,374

157,634,289

Fixed rate

58,525,970

188,788,400

 

126,549,688

82,940,301

 

108,488,817

259,535,597

 

263,601,062

240,574,591

 

 

 

 

 

 

Financial liabilities designated at fair value through profit or loss

 

 

 

 

 

Floating rate

-

(360,918,689)

 

-

510,901,304

 

-

(360,918,689)

 

-

510,901,304

 

(iii) Other price risk

Price risk is the risk that the value of financial instruments will fluctuate as a result of changes in the market prices, whether caused by factors specific to an individual investment, its issuer or all factors affecting all instruments traded in the market. The financial assets designated at fair value through profit or loss held by the Company, as disclosed in Note 11, are exposed to price risk but the Company has no net exposure to price risk due to the fact that the notes issued by it are limited recourse to the investments acquired with the issuance proceeds. Consequently, any price gains or losses on the investments held are exactly offset by corresponding gains or losses on the notes issued with no loss to the Company. There are no differences in the exposure to price risk between individual series of notes issued by the Company.

 

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

   

17.   Financial instruments, principal risks and uncertainties (continued)

 

(d)    Market risk (continued)

 

(iii) Other price risk (continued)

Each series of note is exposed to a pro-rata share of the gains or losses on the investments held. KBC Asset Management NV, the Company's portfolio manager monitors market price fluctuations on the investments held by the Company on a daily basis. Market price fluctuations are one of the key drivers in the investment allocations made by the portfolio manager. Market prices are obtained from independent price sources. KBC Asset Management NV also monitors the Company's exposures to countries and industries. The limiting of exposures to various countries and industries is a key method of managing price risk. The Company's exposure to countries and industries is set out in Note 17(b) "Concentration risk". Another key method is that the Company can only hold investments with a minimum credit rating.  The credit rating breakdown of investments held is set out in Note 17(a) "Credit risk". The Company also manages price risk by investing in a diverse portfolio of investments. The Company may not hold 10% of investments in the same issuer and is limited to an aggregate investment of 40% in individual issuers of greater than 5% of investments held.

 

(e)   Sensitivity analysis

 

(i)    Currency risk

The Company purchases investments in multiple currencies. These investment purchases are funded through the issuance of notes in either the same currency as the investment purchased or in a different currency to the investments acquired with currency risk being hedged through the use of swap agreements. Any gains or losses in terms of currency movements on the investments are offset by corresponding movements on the related notes issued or swap agreements entered into.

 

The Company's sensitivity to a movement in each applicable currency exchange rate is set out below (prior to the impact of derivative movements).  The rates used in the sensitivity analysis per currency are as follows:

 

 

2012

2011

USD

9%

10%

CZK

7%

7%

HUF

9%

10%

PLN

9%

11%

GBP

9%

10%

 

    As at 30 April 2012

 

CZK

USD

GBP

HUF

PLN

 

 

 

 

 

 

 

 

Investments held (at nominal amounts)

500,904

3,368,628

683,768

4,905

511,159

 

Cash and cash equivalents

505

17,695

7

11

768

 

Notes issued (at nominal amounts)

3,263,355

4,330,340

-

4,473

2,043,944

 

 

    As at 30 April 2011

 

CZK

USD

GBP

HUF

PLN

 

 

 

 

 

 

 

 

Investments held (at nominal amounts)

526,857

2,187,554

1,278,625

11,407

1,016,944

 

Cash and cash equivalents

501

990

2

36

368

 

Notes issued (at nominal amounts)

3,935,749

4,969,056

-

10,995

2,824,186

 

 

 (ii)  Interest rate risk

Due to the limited recourse nature of the notes issued the Company is only required to pay the interest if it has collected sufficient funds to cover the amount due after having retained a reserved profit of €1,000 per annum for the Company.  As such the Company has no net exposure to interest rate risk.

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

17.   Financial instruments, principal risks and uncertainties (continued)

 

(e)    Sensitivity analysis (continued)

 

(ii)   Interest rate risk (continued)

The Company's sensitivity to an increase and decrease in interest rates is set out below.  The rates used in the sensitivity analysis are as follows:

 

 

2012

2011

EUR

4%

4%

USD

3%

3%

CZK

2%

2%

PLN

3%

6%

 

The Company does not monitor HUF due to the low level of notes issued in this currency.

 

 

 

As at

 30/04/2012

 

As at

 30/04/2011

EUR interest payable on notes issued

 

+/- 34,010

 

+/- 40,784

USD interest payable on notes issued

 

+/- 2,723

 

+/- 1,433

CZK interest payable on notes issued

 

+/- 3,219

 

 +/- 4,016

PLN interest payable on notes issued

 

+/- 9,387

 

+/- 18,128

 

(iii) Other price risk

The financial assets of the Company are subject to market fluctuations and the risks inherent in all investments.  Any change in the fair value of the investments will be offset by a corresponding change in the fair value of the notes.  The Company's sensitivity to a 5% increase and decrease in market prices is as follows:

 

 

 

As at

 30/04/2012

 

As at

 30/04/2011

Movement in fair value of bonds held for 5% change in market prices

 

+/- 15,733,315

 

+/- 20,629,861

Movement in fair value of commercial papers held for 5% change in market prices

 

+/- 2,062,331

 

+/- 3,750,105

Movement in fair value of time deposits held for 5% change in market prices

 

+/- 605,575

 

+/- 828,817

 

(f)     Operational risk exposure

The Company has appointed KBC Asset Management NV as portfolio manager and administrator, KBC Bank NV as custodian and KBC Bank Ireland plc as corporate accounting administrator. The successful operation of this Company is therefore reliant on KBC Group NV companies.

 

(g)    Collateral

The total financial assets of the Company with a carrying value of €368,024,414 (2011: €504,175,653) and the total cash and cash equivalents of the Company with a carrying value of €446,256 (2011: €191,697) are charged to BNY Corporate Trustee Services Limited (the "Trustee") by way of first fixed security.

 

The Trustee is required once the first fixed security becomes enforceable and the net proceeds are realised to apply the proceeds to clear the following ranked obligations on a pro rata basis:

·      receivership costs

·      general administrative costs

·      interest to noteholders

·      repayment of principal to noteholders

·      any amounts payable to a swap counterparty

·      the balance of proceeds (if any) to the Company

 

 

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

   

17.   Financial instruments, principal risks and uncertainties (continued)

 

(g)    Collateral (continued)

The first fixed security is only enforceable on the occurrence of a continuing general event of default as described in the Company's Master Trust Deed.  On such event the Trustee may at its discretion, or shall, if so requested in writing by the noteholders of at least one-fifth of the notes then outstanding or, if so directed by an Extraordinary Resolution of such noteholders, enforce the first fixed security.  The following events are deemed to be general events of default:

·      The Company defaults in the payment of any redemption amount or defaults for a period of 14 days or more in the payment of any sum other than redemption amounts due to noteholders

·      The Company fails to perform or observe any of its obligations under the note term sheets or Trust Deed and such failure continues for a period of 30 days

·      The Company is deemed to be unable to pay its debts as and when they fall due

·      The Company is subject to any order made by any competent court or any resolution passed for the winding-up or dissolution of the company or subject to any insolvency, bankruptcy, compulsory liquidation, examination, controlled management procedures or suspension of payments

The terms and conditions for the first fixed security are set out in the in the Company's €40,000,000,000 Base Prospectus and Master Trust Deed and are usual and customary for note issuers.

 

(h)    Fair values

The accounting policies regarding the fair value hierarchy are set out in Note 2(f) "Use of estimates and judgements" and Note 3(e) "Financial instruments: Fair Value Measurement Principles". The following table analyses within the fair value hierarchy the Company's financial assets and liabilities measured at fair value:

 

As at 30 April 2012

 

Level 1

 

Level 2

 

Level 3

 

Total balance

 

 

 

 

 

Financial assets designated at fair value through profit or loss

 

 

 

 

Bonds

292,459,830

22,206,464

-

314,666,294

Commercial Papers

-

41,246,613

-

41,246,613

Time Deposits

-

12,111,507

-

12,111,507

 

292,459,830

75,564,584

-

368,024,414

 

 

 

 

 

Derivatives held for trading

 

 

 

 

Cross currency swaps

-

(2,003,987)

-

(2,003,987)

Interest rate swaps

-

(7,403,590)

-

(7,403,590)

 

-

(9,407,577)

-

(9,407,577)

 

 

 

 

 

Financial liabilities designated at fair value through profit or loss

 

 

 

 

Notes issued

-

-

(360,918,689)

(360,918,689)

 

-

-

(360,918,689)

(360,918,689)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

   

17.   Financial instruments, principal risks and uncertainties (continued)

 

(h)   Fair values (continued)

 

As at 30 April 2011

 

Level 1

 

Level 2

 

Level 3

 

Total balance

 

 

 

 

 

Financial assets designated at fair value through profit or loss

 

 

 

 

Bonds

398,712,917

13,884,300

-

412,597,217

Commercial Papers

-

75,002,096

-

75,002,096

Time Deposits

-

16,576,340

-

16,576,340

 

398,712,917

105,462,736

-

504,175,653

 

 

 

 

 

Derivatives held for trading 

 

 

 

 

Cross currency swaps

-

6,218,880

-

6,218,880

Interest rate swaps

-

(547,284)

-

(547,284)

 

-

5,671,596

-

5,671,596

 

 

 

 

 

Financial liabilities designated at fair value through profit or loss

 

 

 

 

Notes issued

-

-

(510,901,304)

(510,901,304)

 

-

-

(510,901,304)

(510,901,304)

 

There were no transfers between levels during the year.                 

 

A reconciliation of all movements in the fair value of financial liabilities categorised within Level 3 is presented below:

 

 

 

Level 3

Notes issued

30/04/2012

 

Level 3

Notes issued

30/04/2011

 

 

 

Opening balance

 

510,901,304

 

565,798,458

Redemption of notes issued

 

(265,323,504)

 

(290,102,865)

Issuance of notes issued

 

116,385,330

 

236,391,872

Gain on notes issued

 

(1,044,441)

 

(1,186,161)

Closing balance

 

360,918,689

 

510,901,304

 

The inputs into the model used to determine the fair value of the notes issued which fall under Level 3 of the fair value hierarchy are set out in Note 3(e) "Financial Instruments: Fair Value Measurement Principles".

 

No sensitivity analysis for the impact of changes in these inputs is disclosed as

·      It is not practical to do so due to the diverse portfolio of the underlying investments and derivatives held by the Company

·      The Company has no net exposure to changes in fair valuation movements due to the limited recourse nature of the notes issued by the Company.

 

18.   Related party transactions

All of the notes issued by the Company for the current and prior year are held by KBC Life Assurance companies, Capital Protected Funds and Arcade Finance Plc which have KBC Asset Management NV acting as portfolio manager.  All interest expense for the current and prior year was paid to these companies.  The directors of the Company are also directors of Arcade Finance Plc.

 

 

 

 

 

The Bank of New York Mellon (Ireland) Limited, the Company secretary, earned fees of €1,813 for the year, €453 of which was payable as at 30 April 2012.

 

 

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

18.   Related party transactions (continued)

Klaus Vandewalle was and Luc Vanbriel is a director of KBC Fund Management Limited (formerly Eperon Asset Management Limited), a 100% subsidiary of the Company's portfolio manager and administrator.  Johan Dewolfs was and Christiaan Sterckx is a director of KBC Asset Management NV. KBC Asset Management NV earned fees of €470,155 (2011: €322,608) and €13,500 (2011: €13,500) respectively for its role as portfolio manager and administrator.  Portfolio management fees and administrator fees payable as at 30 April 2012 was €Nil (2011: €Nil) and €Nil (2011: €Nil) respectively.

 

Johan Tyteca is a director of KBC Bank NV, the Company's custodian.  KBC Bank NV earned fees of €42,989 (2010: €54,282) for its role as custodian, €Nil of which was payable as at 30 April 2012 (2011: €Nil).

 

KBC Bank Ireland plc is a 100% subsidiary of KBC Bank NV.  KBC Bank Ireland plc earned fees of €17,234 (2011: €16,902) for its role as corporate accounting administrator, €Nil (2011: €4,332) of which was payable as at 30 April 2012.

 

Klaus Vandewalle, Johan Dewolfs, Johan Tyteca, Christiaan Sterckx and Luc Vanbriel did not earn fees for their roles as directors. John Fitzpatrick and Michael Boyce each receive €1,500 per year for their roles as independent directors.  Directors' fees prepaid as at 30 April 2012 were €Nil (2011:€ 1,042).

 

19.   Ownership of the Company

39,994 of the issued shares are held in trust by BNY Corporate Trustee Services Limited. In addition, as of 30 April 2012 Mr. Patrick Joseph Duffy, Ms. Arlene Allen, Mr. Paul Murphy, Ms. Siobhan Burke, Mr. Anthony Grace and Mr. Michael Devane hold one share each as the "Share Trustees" under the terms of declarations of trust for BNY Corporate Trustee Services Limited. The Board of Directors have considered the issue as to who is the controlling party of the Company.  It has determined that the control of the activities of the Company rests with the Board.

 

20.   Dividends

A dividend of €500 (€0.0125 per ordinary share) was paid during the year (2011: €Nil).  On 30 August 2012 the directors proposed a dividend of €1,000 (€0.025 per ordinary share).

 

21.   Comparatives

The prior year figures have been reclassified for the following reasons:

 

Some realised foreign exchange gains and losses due to cross currency swaps were included in the prior year in the effect of exchange rate changes on cash and cash equivalents in the statement of cash flows and in net foreign exchange gain in the statement of comprehensive income. The gains have been reclassified to derivative receipts and the losses have been reclassified to derivative payments in the statement of cash flows.  They have been reclassified from net foreign exchange gain to net income from derivatives in the statement of comprehensive income.

 

Due to the restatements a third statement of financial position has been presented as at 1 May 2010 in line with the requirements of IAS 1 "Presentation of Financial Statements". Note disclosures as at 1 May 2010 were not presented as no amounts in the statement of financial position have been restated.

 

 

Year ended 30/04/2011 per signed financial statements

Prior year reclassification

 

 

Year ended

30/04/2011

(as restated)

 

 

  Net expense from derivatives

(1,787,824)

1,077,841

(709,983)

  Net foreign exchange gain

1,307,600

(1,077,841)

229,759

  Derivative receipts

8,471,720

1,576,055

10,047,775

  Derivative payments

(14,876,738)

(498,214)

(15,374,952)

  Effect of exchange rate changes on

  cash and cash equivalent

1,307,600

(1,077,841)

229,759

 

 

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

22.   Subsequent events

The structure of the Company changed at the start of June. The Company's portfolio was split between a short duration portfolio and a long duration portfolio. On 1 June 2012, the Company issued three new series of notes to fund the investments on the long duration portfolio. The existing series of notes fund the investments on the short duration portfolio.  The maturity on the investments on the short duration portfolio is on average between 1 and 2 years.  The maturity on the investments on the long duration portfolio is on average between 4 and 5 years.   The Company issued the following series of notes on 1 June 2012:

 

EUR 40,000,000        Series No. 2012-21      Floating Rate Secured Senior Notes due 2017

EUR 55,000,000        Series No. 2012-22      Floating Rate Secured Senior Notes due 2017

EUR 45,000,000        Series No. 2012-23      Floating Rate Secured Senior Notes due 2016

 

Johan Tyteca resigned as a director on 1 June 2012.  The directors proposed a dividend of €1,000 on 30 August 2012.

 

23.   Approval of financial statements

The financial statements were approved by the board of directors on 30 August 2012.

 

 

This announcement has been issued through the Companies Announcement Service of

The Irish Stock Exchange.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
ISELLFIRTDILVIF