DELAMARE CARDS MTN ISSUER PLC
AUDITED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
Company Registration: 6652499
DELAMARE CARDS MTN ISSUER PLC
CONTENTS
DIRECTORS AND ADVISERS
3
REPORT OF THE DIRECTORS
4
INDEPENDENT AUDITORS’ REPORT
9
STATEMENT OF COMPREHENSIVE INCOME
11
STATEMENT OF FINANCIAL POSITION
12
STATEMENT OF CHANGES IN EQUITY
13
STATEMENT OF CASHFLOWS
14
NOTES TO THE FINANCIAL STATEMENTS
15
DELAMARE CARDS MTN ISSUER PLC
DIRECTORS AND ADVISERS
Directors:
N. D. Scott
(appointed 30 March 2012)
V. M. Rapley (resigned 30 March 2012)
J. C. Bingham
Secretary:
State Street Secretaries (UK) Limited
1st Floor
Phoenix House
18 King William Street
London
EC4N 7BP
Registered Office:
1st Floor
Phoenix House
18 King William Street
London
EC4N 7BP
Auditors:
PricewaterhouseCoopers LLP
Erskine House
68-73 Queen Street
Edinburgh
EH2 4NH
Bankers:
The Royal Bank of Scotland
36 St Andrews Square
Edinburgh
EH2 2YB
Delegate Cash Manager:
The Royal Bank of Scotland
250 Bishopsgate
London
EC2M 4AA
Delegate Servicer:
The Royal Bank of Scotland
250 Bishopsgate
London
EC2M 4AA
3
DELAMARE CARDS MTN ISSUER PLC
REPORT OF THE DIRECTORS
The Directors present their report and the audited financial statements for Delamare Cards
MTN Issuer plc (the “Company”) for the year ended 31 December 2011.
Principal activities
The principal activity of the Company is to issue publicly listed floating rate asset backed
medium term notes, in the international capital markets, which are denominated in Sterling
(the “loan notes in issue”) and to invest the proceeds of the issue of these asset backed
medium term notes in a global loan note with Delamare Cards Funding 1 Limited, a fellow
group undertaking. The Company commenced trading on 31 October 2008 when it issued
£1.165 billion of medium term notes and purchased a global loan note from Delamare Cards
Funding 1 Limited for the same amount, in order to allow Delamare Cards Funding 1 Limited
to purchase an interest in the assets of the ‘Trust’ administered by Delamare Cards
Receivables Trustee Limited, a fellow group undertaking. The assets of the Trust comprise
credit card receivables originating from Tesco Personal Finance plc (“TPF plc”). The
securitisation structure has been originated as a means of raising finance for TPF plc. The
Company is domiciled in the United Kingdom (the “UK”) where all its business activities take
place. The activities of the Company are managed in accordance with the securitisation
transaction documents.
The Company is registered in England & Wales with an authorised share capital of £50,000
comprising 50,000 ordinary shares of £1 each of which 2 are fully paid up.
Business review
During the year, Delamare Cards Funding 1 Limited made payments totalling £3,220,510 in
relation to interest on the global loan note (2010: £7,917,677) to the Company. These
payments of interest were used to meet the Company’s obligations on the loan notes in issue,
payable to the loan note holders. All payments made in 2011 and 2010 were made in
accordance with the securitisation transaction documents.
On 19 May 2011, TPF Plc purchased Delamare Cards Funding 1 Limited investor interest in
the Delamare Cards Receivables Trust established as part of the Delamare securitisation
structure. The result of this decision was that the Global loan notes and the loan notes in
issue were settled and as the value of the deemed loan is based on the outstanding loan
notes, the deemed loan between the Delamare Cards Funding 1 Limited and Delamare Cards
Receivables Trustee Limited has a £nil value.
Upon settlement of the Global Loan Notes, an intercompany expenses loan was established
between Tesco Personal Finance plc and Delamare Cards MTN Issuer plc to ensure any
payments falling due from the Securitisation structure would be settled by Tesco Personal
Finance plc.
The Directors are committed to obtaining legal counsel prior to any future resumption of
activity to ensure that the Company remains legally compliant with the Securitisation
Transaction Documents.
Results and dividends
Profits for the Company are pre-defined under the securitisation transaction documents.
Under the terms of these documents the Company retained the rights to £1,000 per month up
to 30 April 2011, the last cut-off date before settlement of the loan notes (2010: £1,000 for 12
months). This is reflected within the statement of comprehensive income on page 11.
During the year, no interim dividend has been paid (2010: £14,743). The Directors do not
recommend a final dividend for the year (2010: £nil). The Directors consider the results to be
satisfactory.
4
DELAMARE CARDS MTN ISSUER PLC
Business environment
There are no global loan notes in issue at 31 December 2011. The Directors do not
anticipate any external changes in the business environment which would adversely impact
the Company. The performance of any global loan note which may be issued in the future
would depend on there being no material change in performance of the credit card
receivables.
If any expenses become payable, these will be settled by Tesco Personal Finance plc and
added to the intercompany expenses loan as noted above.
Future outlook
The Company does not hold any global loan notes at 31 December 2011.
The Directors expect that the Company will continue to meet the required payments as they
fall due during 2012.
The principal activity of the Company remains the investment of proceeds from the issue of
asset backed medium term notes. The Directors expect to issue further asset backed
medium term notes in the future, and do not believe that any solvency issues will arise due to
a gap in the Company carrying out its principal activities. The Directors will have the benefit
of legal counsel in this regard prior to agreeing the repayment of its existing asset backed
medium term notes.
Principal risks and uncertainties
In order to manage risks the Company has implemented a set of policies and procedures.
The principal risks the Company is exposed to are detailed below:
Credit risk: Credit risk is the risk that counterparties will cause a financial loss to the
Company by failing to discharge an obligation when due. Prior to 19 May 2011, the Company
was exposed to credit risk via Delamare Cards Funding 1 Limited, and whether this company
would not be able to repay its obligations under the global loan note. This was dependant on
the ability of borrowers (under the credit card loans in which the global loan note counterparty
Delamare Cards Funding 1 Limited, has a beneficial interest) to be able to meet their
obligations as they fell due.
From 19 May 2011, the Directors do not believe the Company is exposed to credit risk, as
there are no gobal loan notes in issue.
Liquidity risk: Liquidity risk is the risk that the Company is not able to meet its financial
obligations as they fall due or can do so only at an excessive cost. Liquidity risk arises from
the mismatch in the cash flows generated from assets and liabilities. The Directors do not
consider the exposure to liquidity risk to be material to the Company as the loan notes, when
they are in issue are designed to match the maturity and repayment profile of the global loan
note backed by the underlying portfolio of credit card receivables.
Interest risk: Interest risk is the possibility that changes in interest rates will result in higher
financing costs and/or reduced income from the Company’s interest bearing financial assets
and liabilities. The Directors do not consider the exposure to interest risk to be material as
the Company has no fixed rate assets or liabilities and the interest rates on the global loan
note and notes when they were in issue are identical.
Operational risk: Operational risk is the risk that the Company will incur losses due to
inadequate or failed internal processes, people and systems or from external events.
Delamare Cards Receivables Trustee Limited and the beneficial owners of the trust property
have retained TPF plc under the terms of the administration agreement as the servicer of the
credit card receivables. TPF plc (in its capacity as Servicer and Cash Manager) has
appointed The Royal Bank of Scotland plc ("RBS") as the Delegate Servicer and Delegate
5
DELAMARE CARDS MTN ISSUER PLC
Cash Manager. Failure of either Servicer and/or either Cash Manager to carry out its services,
could lead to a loss on the notes and/or early redemption of the notes.
The ability of Delamare Cards Funding 1 Limited to make the payments due in respect of the
global loan note to the Company is in part dependent upon the servicer administering the
credit card receivables (which form the Trust’s property) and transactions affecting the credit
card receivables in a prompt and accurate manner.
The Servicer services and administers the credit card receivables and collects payments due
in respect of the credit card receivables in accordance with its customary and usual servicing
procedures for servicing credit card receivables comparable to the credit card receivables and
in accordance with the Credit Card Guidelines.
These procedures include monitoring compliance with and administering the credit card
receivables features and facilities applicable to the credit card receivables, responding to
customer inquiries and management of credit card receivables in arrears. The appointment,
including all rights and obligations, of the Servicer may be settled by issuing written notice to
the Servicer upon the occurrence of certain events (each a “servicer Default” event) including
the occurrence of an insolvency event in relation to the Servicer. Upon settlement of the
Servicer, Delamare Cards Receivables Trustee has agreed to use reasonable endeavours to
appoint a substitute servicer. No such event has occurred.
From 19 May 2011, the Directors believe the operational risk for the Company has diminished
to an immaterial level as there are no gobal loan notes in issue.
Key performance indicators (“KPIs”)
The main KPI used by the Directors in assessing the performance of the Company is the
monitoring of expected cash flows against actual cash flows. The Company’s performance is
addressed in the monthly management accounts provided to the Directors and in the Investor
Reports, which are made publicly available.
Each series of loan notes, when in issue, is assigned a credit rating at time of issue which
reflects the likelihood of full and timely payments to the note holders of the amount due as set
out in the ‘transaction documents’. A rating may be revised, suspended or withdrawn by the
rating agencies if circumstances change.
A monthly checklist is completed and reviewed detailing all of the key requirements that must
be met under the various legal agreements which underpin the Delamare Cards securitisation
structure. The items covered are predominantly consideration of whether there have been
breaches of the securitisation transaction documents. However, there are certain specific
tangible measures which are verified and which are relevant to the Company including
assessing whether:
•
•
the excess spread is £0.01 after all fees have been paid;
the proportion of the securitised pool represented by the notes, if in issue, has not
been more than 92% plus any excess beyond 2% of credit balances held by
customers included within the securitised pool.
During the year these KPIs have been met, and are reported as part of the monthly investor
reporting process.
th
After the redemption on 19 May, there are no relevant KPIs.
Directors and Secretary
The directors of the Company who were in office during the year and up to the date of signing
the financial statements were:
•
•
N. D. Scott
V. M. Rapley
(appointed 30 March 2012)
(resigned 30 March 2012)
6
DELAMARE CARDS MTN ISSUER PLC
•
J. C. Bingham
No Director had an interest in the share capital of the Company.
Employees
The Company does not have any employees (2010: nil).
Financial instruments
In order to conduct its business activities the Company holds financial instruments as detailed
below:
Financial assets – the principal financial assets held by the Company comprised a global loan
note issued by Delamare Cards Funding 1 Limited. The main purpose of holding these
financial assets, as agreed by the Directors, was to ensure appropriate liquidity, ensuring the
Company’s liabilities were met as they fell due and to meet regulatory requirements in respect
of liquidity management.
At 31 December 2011, the Company did not hold the global loan note.
financial asset is Cash and Cash Equivalents.
The remaining
Financial liabilities – the principal financial liabilities of the Company were loan notes in issue.
The purpose of these financial liabilities, as agreed by the Directors, was to ensure the
Company has sufficient funding to enable the servicing of the global loan note.
At 31 December 2011, the Company did not hold any loan notes in issue, and have no other
financial liabilities.
Policy and practice on payment of creditors
The Company’s policy is to pay suppliers within 30 days of receipt of a correctly prepared
invoice submitted in accordance with the terms of the contract or such other payment period
as agreed.
Going concern
Having reviewed the factors, and taking into account current market conditions, the Directors
are satisfied that the Company has adequate resources to continue in business for the
foreseeable future. Furthermore the Directors are committed to obtaining legal counsel and
professional advice to ensure any future developments undertaken by the Company in the
coming 12 months do not jeopardise the Company’s future solvency.
The Company has access to the Loan Expenses Facility between Delamare Cards Funding 1
Limited and Tesco Personal Finance plc as described above, to ensure any expenses
incurred are met.
If any loan notes are issued in the future, it will remain the case that these noteholders will
only be paid interest and principal to the extent that funds are received on the Trusts’ credit
card portfolio and remitted to the Company in accordance with the inter company
agreements. Consequently the going concern basis continues to be appropriate in preparing
the financial statements.
Auditors
The auditors, PricewaterhouseCoopers LLP, have indicated their willingness to continue in
office and a resolution that they be re-appointed will be proposed at the annual general
meeting.
Statement of disclosure of information to auditors
7
DELAMARE CARDS MTN ISSUER PLC
Each of the Directors at the date of approval of this report confirms that:
•
•
so far as each Director is aware there is no relevant audit information
information needed by the auditors in connection with preparing their report)
the Company’s auditors are unaware; and
that each Director has taken all the steps that he/she ought to have taken
himself/herself aware of any relevant audit information and to establish
Company’s auditors are aware of that information.
(that is,
of which
to make
that the
Statement of directors’ responsibilities
The Directors are responsible for preparing the Directors’ report and financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year.
Under that law the Directors have elected to prepare the Company financial statements in
accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the
European Union (EU). Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view of the state of affairs of
the Company and of the profit or loss of the Company for the year.
In preparing the financial statements, the Directors are required to:
•
•
•
•
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether applicable IFRSs as adopted by the EU have been followed, subject to
any material departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate
to presume the Company will continue in business.
The Directors confirm that they have complied with the above requirements in preparing these
financial statements.
The Directors are responsible for keeping adequate accounting records that are sufficient to
show and explain the Company’s transactions and disclose with reasonable accuracy at any
time the financial position of the Company and enable them to ensure that the Report of the
Directors and financial statements comply with the Companies Act 2006. 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.
Each of the Directors as listed on page 3 confirm that, to the best of each person’s knowledge
and belief:
•
•
the financial statements, prepared in accordance with IFRSs as adopted by the EU,
give a true and fair view of the assets, liabilities, financial position and profit for the
Company; and
the Report of the Directors 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 that they face.
BY ORDER OF THE BOARD
Jason C. Bingham
Director
__ June 2012
8
DELAMARE CARDS MTN ISSUER PLC
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF DELAMARE CARDS MTN
ISSUER PLC
We have audited the financial statements of Delamare Cards MTN Issuer plc for the year
ended 31 December 2011 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. The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting Standards (IFRSs) as
adopted by the European Union.
Respective responsibilities of directors and auditors
As explained more fully in the Directors’ Responsibilities Statement set out on page 8, the
directors are responsible for the preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices
Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the company’s
members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and
for no other purpose. We do not, in giving these opinions, accept or assume responsibility for
any other purpose or to any other person to whom this report is shown or into whose hands it
may come save where expressly agreed by our prior consent in writing.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This includes an assessment of:
whether the accounting policies are appropriate to the company’s circumstances and have
been consistently applied and adequately disclosed; the reasonableness of significant
accounting estimates made by the directors; and the overall presentation of the financial
statements. In addition, we read all the financial and non-financial information in the audited
financial statements to identify material inconsistencies with the audited financial statements.
If we become aware of any apparent material misstatements or inconsistencies we consider
the implications for our report.
Opinion on financial statements
In our opinion the financial statements:
•
•
•
give a true and fair view of the state of the company’s affairs as at 31 December 2011
and of its profit and cash flows for the year then ended;
have been properly prepared in accordance with IFRSs as adopted by the European
Union; and
have been prepared in accordance with the requirements of the Companies Act
2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements.
9
DELAMARE CARDS MTN ISSUER PLC
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
•
adequate accounting records have not been kept, or returns adequate for our audit
have not been received from branches not visited by us; or
•
the financial statements are not in agreement with the accounting records and
returns; or
•
certain disclosures of directors’ remuneration specified by law are not made; or
•
we have not received all the information and explanations we require for our audit.
Catrin Thomas (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Edinburgh
__ June 2012
10
DELAMARE CARDS MTN ISSUER PLC
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2011
Note
31 December
2011
£’000
31 December
2010
£’000
Finance income
Finance cost
Net interest income
3
3
3,221
(3,221)
-
7,918
(7,918)
-
Other income
Total income
4
21
21
40
40
Administrative expenses
PROFIT BEFORE TAX
5
(17)
4
(28)
12
Income tax expense
6
(1)
(3)
3
9
TOTAL COMPREHENSIVE INCOME FOR
THE YEAR
All items dealt with in arriving at the profit for the year ended 31 December 2011 related to
continuing operations.
Other than the profit for the year, shown above there was no other comprehensive income for
the year ended 31 December 2011 (2010: £nil)
The notes on pages 15 to 27 form part of these financial statements.
11
DELAMARE CARDS MTN ISSUER PLC (Company number: 6652499)
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2011
31 December
2011
£’000
31 December
2010
£’000
36
38
-
32
308
1,165,600
74
1,165,940
10
-
279
1,165,600
10
1,165,879
50
14
50
11
Total equity
64
61
TOTAL LIABILITIES AND EQUITY
74
1,165,940
Note
ASSETS
Cash and cash equivalents
Other receivables
Global loan note
7
8
9
TOTAL ASSETS
LIABILITIES
Other payables
Loan notes in issue
10
11
Total liabilities
EQUITY
Share capital
Retained earnings
12
The financial statements were approved and authorised for issue by the Board of Directors on
the __ June 2012 and were signed on its behalf by:
Jason C Bingham
Director
The notes on pages 15 to 27 form part of these financial statements.
12
DELAMARE CARDS MTN ISSUER PLC
STATEMENT OF CHANGES IN EQUITY
AS AT 31 DECEMBER 2011
Share capital
Balance at 1 January 2011
Comprehensive income
Profit for the year and total
comprehensive income
Balance at 31 December 2011
£’000
Retained
earnings
£’000
Total
£’000
50
11
61
-
3
3
50
14
64
Share capital
Total
£’000
Retained
earnings
£’000
£’000
50
17
67
-
9
9
-
(15)
(15)
50
11
61
AS AT 31 DECEMBER 2010
Note
Balance at 1 January 2010
Comprehensive income
Profit for the year and total
comprehensive income
Transactions with owners
Dividend to equity holders
13
Balance at 31 December 2010
The notes on pages 15 to 27 form part of these financial statements.
13
DELAMARE CARDS MTN ISSUER PLC
STATEMENT OF CASHFLOWS
FOR THE YEAR ENDED 31 DECEMBER 2011
12 months to
31 December
2011
£’000
12 months to
31 December
2010
£’000
4
270
(270)
12
(47)
47
Net cash flows from operating activities
4
12
Cash flows from financing activities
Interest received on global loan note
Interest paid on loan notes in issue
Dividend paid
3,221
(3,221)
-
7,648
(7,648)
(15)
Net cash flows from financing activities
-
(15)
Net increase/(decrease) in cash and cash
equivalents
4
(3)
Cash and cash equivalents at beginning of the
year
32
35
36
32
Note
Cash flows from operating activities
Profit before Tax
Decrease / (Increase) in operating assets
(Decrease) / Increase in operating liabilities
13
Cash and cash equivalents at the end of the
year
7
Operating activities are the cash flows necessary to allow the Company to continue
discharging its responsibilities in line with the securitisation transactions documents.
Investing activities are the cash flows required in establishing the principal activities of the
Company.
Financing activities are the principal revenue generating activities of the Company.
The notes on pages 15 to 27 form part of these financial statements.
14
DELAMARE CARDS MTN ISSUER PLC
NOTES TO THE FINANCIAL STATEMENTS 2011
1. BASIS OF PREPARATION
The financial statements of the Company have been prepared in accordance with
International Financial Reporting Standards as adopted by the European Union (IFRSs as
adopted by the EU), IFRIC interpretations and the Companies Act 2006 applicable to
companies reporting under IFRS.
The preparation of financial statements in conformity with IFRS requires the use of certain
estimates that affect the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expense during the reporting period.
The financial statements are presented in Sterling, which is the functional currency of the
Company. The figures shown in the financial statements are rounded to the nearest thousand
unless otherwise stated.
2. ACCOUNTING POLICIES
(a) Accounting convention
The financial statements have been prepared on the historical cost and a going concern basis. A
summary of the Company’s accounting policies is set out below. These policies have been
consistently applied to all of the years presented, unless otherwise stated.
(b) Standards, Amendments and Interpretations, which became effective in 2011 and
are relevant to the Company
The following standards, amendments and interpretations, which became effective in 2011,
are relevant to the Company:
• Amendment to IAS 24, ‘Related Party Transactions’. The amendment changes the
definition of a related party and modifies certain related-party disclosure requirements for
government-related entities. This has no impact on the Company.
• Improvements to IFRSs (2010) – These improvements contain numerous amendments to
IFRS that the IASB consider non-urgent but necessary. This has no material impact on
the Company’s accounting policies.
(c) Early adoption standards
The Company has not early adopted any standards or implementations during the year 1
January 2011 to 31 December 2011.
(d) Standards, interpretations and amendments to published standards that are not yet
effective
The following standards and interpretations have been issued and are mandatory for the
Company’s accounting periods beginning on or after 1 January 2012 or later periods and are
expected to be relevant to the Company. The impact of these new standards and
interpretations is still being assessed:
•
•
•
•
•
•
•
IAS 1, ‘Financial statement presentation’ regarding other comprehensive income
(effective annual periods beginning on or after 1 July 2012)
IAS 12, ‘Income taxes’ on deferred tax (effective annual periods beginning on or after 1
January 2012)
IAS 19, ‘ Employee benefits’ (effective annual periods beginning on or after 1 January
2013)
IFRS 7, ‘Financial instruments: Disclosures’ on derecognition (effective annual periods
beginning on or after 1 July 2011)
IFRS 9, ‘Financial instruments’ (effective annual periods beginning on or after 1 January
2015)
IFRS 10, ‘Consolidated financial statements’ (effective annual periods beginning on or
after 1 January 2013)
IFRS 11, ‘Joint arrangements’ (effective annual periods beginning on or after 1 January
2013)
15
DELAMARE CARDS MTN ISSUER PLC
NOTES TO THE FINANCIAL STATEMENTS 2011
•
•
•
•
IFRS 12, ‘Disclosures of interests in other entities’ (effective annual periods beginning on
or after 1 January 2013)
IFRS 13, ‘Fair value measurement’ (effective annual periods beginning on or after 1
January 2013)
IAS 27 (revised 2011), ‘Separate financial statements’ (effective annual periods beginning
on or after 1 January 2013)
IAS 28 (revised 2011), ‘Associates and joint ventures’ (effective annual periods beginning
on or after 1 January 2013)
(e) Segmental reporting
The Company’s activities, as considered by the Directors, constitute one segment due to the
similarity of risks faced in relation to the investment of the proceeds of the issue of asset backed
medium term notes. Consequently all activities are presented as such and therefore the
Company is not required to produce additional segmental information.
(f) Finance income and cost
For all financial instruments measured at amortised cost, interest income or expense is recorded
at the effective interest rate (“EIR”), which is the rate that exactly discounts estimated future cash
payments or receipts through the expected life of the financial instrument or a shorter period,
where appropriate, to the net carrying amount of the financial asset or liability. The EIR
calculation takes into account all contractual terms of the financial instrument including any fees
or incremental costs that are directly attributable to the instrument.
The calculation includes all amounts received or paid by the Company that are an integral part of
the overall return, direct incremental transaction costs related to the acquisition or issue of a
financial instrument and all other premiums or discounts. Once the recorded value of a financial
asset has been reduced due to an impairment loss, interest income continues to be recognised
using the original effective interest rate applied to the new carrying amount.
(g) Other income
In order to allow the Company to meet expenses it incurs, and to allow it to create the profit
entitled to it under the Securitisation Transaction Documents, additional income is received by
the Company. This is accounted for on an accruals basis when the obligation to meet the
expenses and the consequent right to the revenue occurs.
(h) Administrative expenses
Administrative expenses are recognised on an accruals basis in the period in which they are
incurred. All administrative expenses are in accordance with agreed contractual arrangements.
(i) Taxation
The current tax expense is based on the taxable results for the year, using tax rates enacted
or substantively enacted at 31 December 2011, including any adjustments in respect of prior
years.
(j) Dividends
Dividends on ordinary shares are recognised in equity in the period in which they are
approved by the Company’s Directors.
(k) Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents include cash in hand,
deposits held on call with banks, any highly liquid investments which have a maturity within
three months of the date of acquisition that are repayable on demand and form an integral
part of the Company’s cash management.
16
DELAMARE CARDS MTN ISSUER PLC
NOTES TO THE FINANCIAL STATEMENTS 2011
(l) Financial Instruments
The Directors determine the classification of financial assets and financial liabilities at initial
recognition. The Company has classified its financial assets as loans and receivables. The
Company measures all of its financial liabilities at amortised cost.
Loans and receivables are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. Loans to group undertakings and other financial asset
balances (such as other receivables) are classified as loans and receivables. Loan notes in issue
and other liabilities are classified as financial liabilities. Both loans and receivables and financial
liabilities are measured on origination at fair value plus or minus directly attributable transaction
costs. Subsequent measurement is at amortised cost, using the EIR method for both loans and
receivables and financial liabilities. In addition, loans and receivables are adjusted for any
impairment losses identified.
(m) Fair value estimates
The fair value estimates on the loan notes in issue are calculated using a discounted cash
flow estimate appropriately adjusted to reflect credit risk. Taking account of the identical
nature of the global loan note, the fair values for the global loan note are considered to be the
same as the loan notes in issue.
(n) Impairment of financial assets
The Company assesses at each reporting date whether there is any objective evidence that a
financial asset or group of financial assets classified as loans and receivables is impaired. A
financial asset or portfolio of financial assets is impaired and an impairment loss incurred if,
and only if, there is objective evidence of impairment as a result of one or more events that
occurred after the initial recognition of the asset (an incurred ‘loss event’) and the loss event
(or events) has an impact on the estimated future cash flows of the financial asset or group of
financial assets that can be reliably estimated.
For assets carried at amortised cost, the Company first assesses whether objective evidence
of impairment exists individually for financial assets that are individually significant, or
collectively for financial assets that are not individually significant. If there is objective
evidence that an impairment loss has incurred an impairment allowance is calculated based
on the difference between the Directors’ best estimate of the present value of future cash
flows of the loan or group of loans (discounted at original EIR) and the loan or group of loans
current carrying value. Impairment allowances are recorded within the statement of
comprehensive income.
Losses suffered by Delamare Cards Funding 1 Limited in respect of the Deemed loan (see
below) to TPF plc will not cause impairment to the Company’s loan with Delamare Cards
Funding 1 Limited until all credit enhancement is used up. Credit enhancement is represented
by excess spread and reserve funds held by Delamare Cards Funding 1 Limited.
(o) Deemed Loan – Global loan note
The Company had a loan with Delamare Cards Funding 1 Limited. Delamare Cards Funding
1 Limited originally used the proceeds of this loan to purchase an interest in a portfolio of
credit card receivables originated by TPF Plc and held in Trust by Delamare Cards
Receivables Trustee Limited. Under IAS39 it is the case that, although these credit cards
have been legally sold by TPF Plc, this has not resulted in TPF Plc passing on substantially
all the risks and rewards associated with the credit card portfolio. Accordingly, these credit
card assets remain on TPF Plc’s statement of financial position and Delamare Cards Funding
1 Limited has a deemed loan with TPF Plc. The Directors have considered the quality of
these assets originated by TPF Plc as represented by the deemed loan and have concluded
that it is appropriate to prepare the accounts on a going concern basis. The Company is only
obliged to make repayments to the extent permitted by receipts from Delamare Cards
Funding 1 Limited in respect of the global loan. Such receipts are determined by Delamare
Cards Funding 1 Limited’s receipts from TPF Plc in respect of the deemed loan, which are in
turn determined by the performance of the underlying credit card portfolio.
17
DELAMARE CARDS MTN ISSUER PLC
NOTES TO THE FINANCIAL STATEMENTS 2011
3. NET INTEREST INCOME
31 December
2011
£’000
31 December
2010
£’000
Class A (2008-1A)
Class B (2008-1B)
Class C (2008-1C)
2,807
125
289
6,885
309
724
Total
3,221
7,918
2,807
6,885
125
309
289
724
3,221
7,918
-
-
Finance income
Finance Cost
Class A (2008-1A) Asset Backed Floating Rate Notes
due 2011
Class B (2008-1B) Asset Backed Floating Rate Notes
due 2011
Class C (2008-1C) Asset Backed Floating Rate Notes
due 2011
Total
Net Interest Income
Interest income received is in respect of the global loan note. Interest rates on the global loan
note are detailed in note 9. Interest rates on the asset back floating rate notes are detailed in
11.
4. OTHER INCOME
Income from Delamare Cards Funding 1 Limited
Loan note holder profit amount
31 December
2011
£’000
31 December
2010
£’000
17
4
28
12
21
40
Income from Delamare Cards Funding 1 Limited is received in amounts equal to any
administration expenses recognised at the Company’s level to enable it to meet its
obligations.
18
DELAMARE CARDS MTN ISSUER PLC
NOTES TO THE FINANCIAL STATEMENTS 2011
5. ADMINSTRATIVE EXPENSES
31 December
2011
£’000
31 December
2010
£’000
17
28
17
28
Professional fees
No emoluments were due to the Directors for their services to the Company during the year
ended 31 December 2011 (2010: £nil).
Audit fees of £13,125 were borne by TPF plc (2010: £12,500).
6. INCOME TAX EXPENSE
31 December
2011
£’000
31 December
2010
£’000
Profit on ordinary activities before tax
4
12
Profit on ordinary activities before tax multiplied by the
rate of corporation tax of 26.50% (2010: 28.00%)
1
3
Income tax expense
1
3
Analysis of charge in the year
The standard rate of Corporation Tax in the UK was changed from 28% to 26% with effect
from 1 April 2011. This gives an overall blended Corporation Tax rate for the Company for the
full year of 26.50% (2010: 28.00%) for UK tax purposes.
7. CASH AND CASH EQUIVALENTS
31 December
2011
£’000
31 December
2010
£’000
36
32
36
32
Cash at bank
Cash and cash equivalents are classified as current (2010: current).
19
DELAMARE CARDS MTN ISSUER PLC
NOTES TO THE FINANCIAL STATEMENTS 2011
8. OTHER RECEIVABLES
Accrued interest on global loan note
Amounts due from parent undertaking
31 December
2011
£’000
31 December
2010
£’000
38
270
38
38
308
Interest rates on the global loan note are detailed in note 9 and the accrued interest on the
global loan note is £Nil at 31 December 2011 as a result of the global loan notes being settled
on 19 May 2011. Other receivables are classified as current (2010: current).
9. GLOBAL LOAN NOTE
Global loan note no. 1
Class A (2008-1A)
Class B (2008-1B)
Class C (2008-1C)
31 December
2011
£’000
31 December
2010
£’000
-
1,049,050
40,800
75,750
-
1,165,600
The 2008 series global loan note was settled in May 2011.
This settlement was planned and as such the maturity of the global loan note asset was
considered as current for 2010.
On 31 October 2008 the Company purchased three classes of a global loan note no.1 (the
“global loan note”) issued by Delmare cards Funding 1 Limited. The global loan note is
constituted under the terms and conditions of the Security Trust Deed and Cash Management
Agreement dated 31 October 2008 made between the Company and, inter alios, Delamare
Cards Receivables Trustee Limited, a fellow group undertaking and TPF plc. The global loan
note was privately owned and not listed on capital markets.
th
The global loan note bears interest monthly in arrears, payable on the 19 of each month at
the 1 month LIBOR rate plus a margin of: Class A 0.10%, Class B 0.20%, and Class C
0.40%.
The Directors’ recalled and settled the existing asset backed medium term notes on 19 May
2011, consequently the Directors’ settled the global loan note on the same day.
20
DELAMARE CARDS MTN ISSUER PLC
NOTES TO THE FINANCIAL STATEMENTS 2011
10. OTHER PAYABLES
Loan note interest payable
Amounts due to group undertaking
Current tax liability
31 December
2011
£’000
31 December
2010
£’000
9
1
270
6
3
10
279
Loan note interest payable is detailed in note 3, and the Loan note interest payable is £Nil at
31 December 2011 as a result of the Loan notes being settled on 19 May 2011.
Other payables are classified as current (2010: current).
11. LOAN NOTES IN ISSUE
Class A Series 2008-1A Asset Back Floating Rate Notes
due 2011 (ISIN: XS0396463159)
Class B Series 2008-1A Asset Back Floating Rate Notes
due 2011 (ISIN: XS0396462938)
Class C Series 2008-1A Asset Back Floating Rate Notes
due 2011 (ISIN: XS0396463076)
31 December
2011
£’000
31 December
2010
£’000
-
1,049,050
-
40,800
-
75,750
-
1,165,600
The 2008 series Loan Notes were settled on 19 May 2011. Consequently the maturity of the
loan note liabilities were considered as current in 2010.
The Company issued three classes of loan notes, with a total nominal value of
£1,165,600,000. The net proceeds from the issue of the notes were used to purchase the
global loan note no. 1 series. The notes were rated by Moody’s Investors Service Limited and
by Standard & Poor’s Ratings Group. These loan notes were settled on 19 May 2011.
The loan notes, when in issue, beared interest monthly in arrears, payable on the 19th of each
month at the 1 month LIBOR rate plus a margin of: Class A 0.10%, Class B 0.20%, and Class
C 0.40%.
21
DELAMARE CARDS MTN ISSUER PLC
NOTES TO THE FINANCIAL STATEMENTS 2011
12. SHARE CAPITAL
31 December
2011
£’000
31 December
2010
£’000
50
50
-
-
50
50
Authorised
50,000 Ordinary shares of £1 each
Issued and fully paid
2 Ordinary shares of £1 each
Issued and part paid
49,998 Ordinary shares of £1 each
99% of the shares are beneficially owned by the parent undertaking, Delamare Cards Holdco
Limited, and are partly paid as at 31 December 2011 (2010: 25%). One fully paid share is
owned by Stanhope Gate Trustees Limited and one fully paid share owned by Delamare
Cards Holdco Limited.
13. DIVIDEND TO EQUITY HOLDERS
31 December
2011
£’000
31 December
2010
£’000
-
15
-
15
Interim dividend to equity holders
During the establishment of the Delamare group in which the Company is a member, a loan
was issued to the Company’s parent, MTN Holdco Limited, to enable the purchase of the
share capital of the Company. In 2010, this loan fell due for repayment, and was repaid
through the declaration of an interim dividend in 2010.
No interim or final dividends were paid or recommended by the Directors for 2011 (2010: final:
£nil).
14. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
The table below sets out the book and fair values for the Company’s financial instruments:
31 December
2011
Fair value
£’000
31 December
2011
Book value
£’000
36
38
36
38
74
74
FINANCIAL ASSETS
Cash and cash equivalents
Other receivables
22
DELAMARE CARDS MTN ISSUER PLC
NOTES TO THE FINANCIAL STATEMENTS 2011
31 December
2011
Fair value
£’000
31 December
2011
Book value
£’000
10
10
10
10
31 December
2010
Fair value
£’000
31 December
2010
Book value
£’000
32
308
1,153,844
32
308
1,165,600
1,154,184
1,165,940
31 December
2010
Fair value
£’000
31 December
2010
Book value
£’000
276
1,153,844
276
1,165,600
1,154,120
The fair value of the individual loan notes in issue included above are:
1,165,876
31 December
2010
Fair value
£’000
31 December
2010
Book value
£’000
1,040,124
40,072
73,648
1,049,050
40,800
75,750
1,153,844
1,165,600
FINANCIAL LIABILITIES
Other payables
The loan notes were redeemed during the year.
FINANCIAL ASSETS
Cash and cash equivalents
Other receivables
Global loan note
FINANCIAL LIABILITIES
Other Payables
Loan notes in issue
Class A Series 2008
Class B Series 2008
Class C Series 2008
It is the Directors’ opinion that the global loan note and loan notes in issue are identical,
therefore the fair values calculated above are equal and opposite.
The book value of all other financial assets and liabilities approximates their fair value.
Due to the short repricing period of cash and cash equivalents, other receivables and interest
payable, the Directors do not consider that there is any significant difference between the fair
value and book value.
The Directors have calculated the fair value of the global loan note and loan notes in issue
based on discounted cash flows. No indicators of impairment have been noted. The global
loan note and the notes in issue were settled on 19 May 2011.
23
DELAMARE CARDS MTN ISSUER PLC
NOTES TO THE FINANCIAL STATEMENTS 2011
15. FINANCIAL RISK MANAGEMENT
The Board of Directors has overall responsibility for the establishment and oversight of the
Company’s risk management framework. The Company’s risk management policies are
established to identify and analyse the risks faced by the Company, to set appropriate risk
limits and controls and to monitor risks and adherence to limits. Risk management policies
are reviewed regularly to reflect changes in market conditions and the Company’s activities.
The activities of the Company expose it to financial risk which it manages in order to achieve
its financial and corporate objectives.
Strategy in using financial instruments
Financial instruments comprise the majority of the Company’s assets and liabilities and these
instruments expose the Company to financial risk. The Company does not trade in financial
instruments.
Credit Risk
The Company was exposed to credit risk which is the risk that counterparties would cause a
financial loss to the Company by failing to discharge an obligation.
The principal risk to the Company is the Delamare Cards Funding 1 Limited will not be able to
repay its obligations under the global loan note. The maximum exposure to this credit risk is
represented by the statement of financial position carrying value of the loan and repayment is
dependant on the borrowers’ (the credit card receivables) ability to meet obligations as they
fall due.
From 19 May 2011, the Directors do not believe the Company is exposed to credit risk, as
there are no gobal loan notes in issue.
The table below presents the arrears performance of the credit cards receivables portfolio
through which Delamare Cards Funding 1 Limited has a beneficial interest along with TPF
plc. Through the global loan note the Company is exposed to a share of the credit risks in
these loans.
As at
31 December 2011
Non delinquent
1 month past due
2 months past due
3 months past due
Greater than 3
months past due
Accounts
No.’000
Value
£’000
% of Total
1,062
6
2
2
1,297,791
13,885
6,133
5,853
95
1
1
-
11
39,844
3
1,083
1,363,506
100
24
DELAMARE CARDS MTN ISSUER PLC
NOTES TO THE FINANCIAL STATEMENTS 2011
As at
31 December 2010
Non delinquent
1 month past due
2 months past due
3 months past due
Greater than 3
months past due
Accounts
No.’000
Value
£’000
% of Total
1,114
8
2
2
1,379,468
18,071
7,440
6,742
95
1
1
-
14
46,065
3
1,140
1,457,786
100
Liquidity Risk
Liquidity risk is the risk that the Company is not able to meet its financial obligations as they
fall due or can do so only at an excessive cost. Liquidity risk arises from the mismatch in the
cash flows generated from assets and liabilities.
The Directors do not consider the exposure to liquidity risk to be material to the Company as
the loan notes in issue are designed to match the maturity and repayment profile of the global
loan note.
The table below presents the cash flows payable by the Company under non-derivative
financial liabilities by remaining contractual maturities at the statement of financial position
date. The amounts disclosed in the table are the earliest contractual undiscounted cash flows:
As at
31 December 2011
Interest payable
Loan notes in issue
As at
31 December 2010
Interest payable
Loan notes in issue
< 1 Year
£’000
1 – 2 Years
£’000
Total
£’000
-
-
-
-
-
-
< 1 Year
£’000
1 – 2 Years
£’000
Total
£’000
270
1,165,600
-
270
1,165,600
1,165,870
-
1,165,870
Assets available to meet all of the liabilities as they fall due are cash and cash equivalents
and loan from group undertaking.
Interest Rate Risk
Interest risk is the possibility that changes in interest rates will result in higher financing costs
and / or reduced income from the Company’s interest bearing financial assets and liabilities.
25
DELAMARE CARDS MTN ISSUER PLC
NOTES TO THE FINANCIAL STATEMENTS 2011
The Company finances its obligations through the issue of medium term notes. The loan
notes incur floating rates of interest. This floating rate of interest on borrowings is matched by
the floating rate of interest earned on the global loan (note 9). If 1 month LIBOR moved the
change in interest payable would be matched by the change in interest receivable.
The Directors do not consider the exposure to interest risk to be material as the Company has
no fixed rate assets or liabilities and the interest rates on the global loan note and notes when
they were in issue are identical
As at 31 December 2011 there were no loan notes or global loan note in issue as a result of
the settlement in May 2011. The interest rate profile of financial assets and liabilities is as
follows:
As at 31 December 2011
Interest charging
basis
Effective interest
rate
Assets
Other receivables
Cash and cash receivables
Non-interest bearing
Non-interest bearing
n/a
n/a
Liabilities
Other payables
Non-interest bearing
n/a
The interest rate profile of financial assets and liabilities at 31 December 2010 is as follows:
As at 31 December 2010
Interest charging
basis
Effective interest
rate
Assets
Interest receivables on:
Class A (2008 -1A)
Class B (2008 -1B)
Class C (2008 -1C)
Other receivables
Cash and cash receivables
Floating
Floating
Floating
Non-interest bearing
Non-interest bearing
1 M LIBOR + 0.10%
1 M LIBOR + 0.20%
1 M LIBOR + 0.40%
n/a
n/a
Liabilities
Interest payable on:
Class A Series 2008
Class B Series 2008
Class A Series 2008
Other payables
Floating
Floating
Floating
Non-interest bearing
1 M LIBOR + 0.10%
1 M LIBOR + 0.20%
1 M LIBOR + 0.40%
n/a
16. CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
There were no outstanding capital commitments or contingent liabilities at the year end.
17. CONTROLLING PARTY
The Company’s immediate parent is Delamare Cards Holdco Limited, which prepares
consolidated financial statements. The Company’s ultimate parent is State Street Secretaries
(UK) Limited. The Directors’ decisions and control of the entity are carried out in accordance
with the securitisation transactions documents, set up for the benefit of TPF plc. As such the
Company considers Tesco plc to be the ultimate controlling party.
26
DELAMARE CARDS MTN ISSUER PLC
NOTES TO THE FINANCIAL STATEMENTS 2011
The Company’s results are included within the consolidated financial statements of Tesco plc.
These financial statements can be obtained from its registered office Tesco House, Delamare
Road, Cheshunt, Hertfordshire, EN8 9SL.
18. RELATED PARTY DISCLOSURE
Parties are considered to be related if one party has the ability to control the other party or
exercise significant influence over the party in making financial or operational decisions, or
one other party controls both.
On 1 April 2010, Mourant Limited sold its interest in certain affiliates to State Street
Corporation ("SSC"). Each of N.D. Scott and J.C. Bingham is an employee of a subsidiary of
SSC, affiliates of which provide ongoing administrative services to the Company at
commercial rates. V.M. Rapley was an employee of SSC.
The terms and conditions of any transactions with key management personnel and their
related parties are no more favourable than those available, or which might reasonably be
expected to be available, on similar transactions to non-key management personnel related
entities on an arm’s length basis.
During the year, State Street Secretaries (UK) Limited was paid £nil (2010: £6,500) in respect
of administrative fees. These expenses were in accordance with the revised terms of contract.
At the year end, there were no balances (2010: £nil) outstanding with State Street Secretaries
(UK) Limited.
During the year, the Company was paid £3,241,092 (2010: £7,957,953) by Delamare Cards
Funding 1, representing the interest due on the global loan note, administrative expenses due
to be met by the Company, and the loan note holder profit amount. At the year end, the
Company was due £nil (2010: £270,116) from Delamare Cards Funding 1 in respect of
accrued interest on the global loan note. At the year end, Delamare Cards Funding 1 was due
£9,730 (2010: £6,370) from the Company in respect of corporation tax paid on the Company’s
behalf.
In order to fund payments on the loan notes in issue, the Company entered into a global loan
note with Delamare Cards Funding 1 Limited. This was settled during the year. As at 31
December 2011, the outstanding balance on this global loan note was £nil (2010:
£1,165,600,000).
The Company was established by TPF plc, the ultimate parent Company of which is Tesco
plc, to facilitate the securitisation of credit card receivables originated by TPF plc. As at 31
December 2011, the outstanding balance on the loan notes in issue held by TPF plc was £nil
(2010: £1,165,600,000).
During the year the Company has paid £3,220,510 (2010: £7,917,677) to TPF plc
representing interest on these loan notes. At the year end, £nil (2010: £270,116) was due to
TPF plc in respect of accrued interest.
19. EVENTS OCCURING AFTER THE STATEMENT OF FINANCIAL POSITION
DATE
Following the migration of the Tesco Personal Finance credit card portfolio from the Royal
Bank of Scotland plc to Tesco Personal Finance plc from 21 May 2011, Tesco Personal
Finance plc have taken over the responsibilities of Cash Manager for the Delamare
Securitisation Structure.
On 21 June 2012 Moody’s rating agency downgraded the long term rating of RBS by one
notch to Baa1 with a negative outlook. RBS is the Delegate Servicer and Delegate Cash
Manager. TPF plc are comfortable that this has no impact on the Company.
27