Annual Report & Accounts / 2007

Anglo Irish Bank

Annual Report & Accounts / 2007

There is a Difference

www.angloirishbank.com
Business Lending / Treasury / Wealth Management
Front cover
Main photo: The Ritz-Carlton Powerscourt, Ireland.
Top photos [L to R]: The Apthorp, New York;
RTÉ National Symphony Orchestra;
Irish International Women’s Rugby team.
Back cover
Photos [L to R]: 45 Milk Street, Boston;
Thistle Hotel Haydock, Merseyside;

Anglo Irish Bank locations

Junior Achievement Ireland students.

Dublin Cork London Glasgow Geneva

Head Office Anglo Irish Bank House 10 Old Jewry 180 St. Vincent Street 7 Rue des Alpes
Stephen Court 11 Anglesea Street London EC2R 8DN Glasgow G2 5SG P.O. Box 1380
18/21 St. Stephen’s Green Cork Tel: +44 207 710 7000 Tel: +44 141 204 7270 1211 Geneva 1
Dublin 2 Tel: +353 21 453 7300 Fax: +44 207 710 7050 Fax: +44 141 204 7299 Tel: +41 22 716 3636
Tel: +353 1 616 2000 Fax: +353 21 453 7399 Fax: +41 22 716 3619
Fax: +353 1 616 2411 Private Banking Leeds
www.angloirishbank.com Galway 6 Stratton Street 1 Whitehall Riverside Lisbon
Anglo Irish Bank House London W1J 8LD Whitehall Road Avenida da Liberdade
Registrar Correspondence Forster Street Tel: +44 207 016 1500 Leeds LS1 4BN 190- 5° A
Computershare Investor Galway Fax: +44 207 016 1555 Tel: +44 113 205 3100 1250-147 Lisbon
Services (Ireland) Limited Tel: +353 91 536 900 Fax: +44 113 205 3111 Tel: +351 210 438 300
Heron House Fax: +353 91 536 931 Banbury Fax: +351 210 438 333
Corrig Road Manchester
Town Centre House
Sandyford Industrial Estate Vienna
Limerick Southam Road 1 Marsden Street
Dublin 18
Banbury Manchester M2 1HW Rathausstrasse 20
Tel: +353 1 216 3100 Anglo Irish Bank House
Oxon OX16 2EN Tel: +44 161 214 3020 P.O. Box 306
Freephone: 1800 225 125 98 Henry Street
Tel: +44 1295 755 500 Fax: +44 161 214 3030 A-1011 Vienna
(Shareholder enquiries) Limerick
Fax: +44 1295 755 510 Tel: +43 1 406 6161
www.computershare.com Tel: +353 61 461 800
Isle of Man Fax: +43 1 405 8142
E1,243m Private Banking
Fax: +353 61 461 899
Belfast
Jubilee Buildings
14/18 Great Victoria Street Boston
record profit before Connaught House
1 Burlington Road
Sligo
Connacht House
Belfast BT2 7BA
Tel: +44 2890 333 100
Victoria Street
Douglas (Representative Office)
Dublin 4 Isle of Man IM1 2SH 265 Franklin Street
tax up 46% Tel: +353 1 631 0000
Fax: +353 1 631 0098
Markievicz Road
Sligo
Fax: +44 2890 269 090 Tel: +44 1624 698 000
Fax: +44 1624 698 001
Boston MA 02110
Tel: +1 617 720 2577
Tel: +353 71 911 9400
Birmingham Fax: +1 617 720 6099
Fax: +353 71 911 9499
1 Colmore Square Jersey
Waterford Birmingham B4 6AJ 31 The Parade Chicago
Tel: +44 121 232 0800 St Helier (Representative Office)
Anglo Irish Bank House
Fax: +44 121 232 0808 Jersey JE2 3QQ 71 South Wacker Drive
Maritana Gate
Canada Street Tel: +44 1534 611 500 Chicago IL 60606
Waterford Fax: +44 1534 605 055 Tel: +1 312 924 2200
Tel: +353 51 849 300 Fax: +1 312 924 2222
Improved Fax: +353 51 849 399
New York

cost to income (Representative Office)

222 East 41st Street

ratio 22% New York NY 10017

Tel: +1 212 503 3000
Fax: +1 212 503 3033

Forward looking statements

This report contains certain forward looking statements with respect to the financial condition, results of operations
and businesses of Anglo Irish Bank. These statements involve risk and uncertainty because they relate to events
and depend upon circumstances that will occur in the future. There are a number of factors which could cause
actual results or developments to differ materially from those expressed or implied by these forward looking
statements. The statements are based on current expected market and economic conditions, the existing regulatory
www.designbankltd.com

environment and interpretations of IFRS applicable to past, current and future periods. Nothing in this report should
be construed as a profit forecast.

This report is printed on Revive Silk Paper which

Anglo Irish Bank Corporation plc is regulated has a fibre source of 50% de-inked post-consumer
by the Financial Regulator in Ireland. For further information, please email: [email protected] waste, 25% pre-consumer waste.
 Anglo Irish Bank
Annual Report & Accounts 2007
// Another year of strong growth
and investment across the Bank //

Customer
deposit growth
of E16.7bn1
up 46%

Contents
30% return 02
04
Financial highlights
Group profile

on equity 07
13
Chairman’s statement
Group Chief Executive’s review
20 Board of Directors
24 Corporate Responsibility
31 Report of the Directors
32 Statement of Directors’ responsibilities
33 Corporate governance statement

High quality 38
40
Independent Auditors’ report
Consolidated income statement

growth in customer
41 Consolidated balance sheet
42 Bank balance sheet
43 Statement of recognised income
lending of E18bn1
44
and expense
Cash flow statement

up 37% 46 Notes to the financial statements

134 Consolidated income statement
(USD, GBP, CHF)
135 Consolidated balance sheet
(USD, GBP, CHF)
136 Shareholder information

1
On a constant currency basis
1 01
 Financial highlights

2007 2006
Profit before taxation (€m) 1,243 850
Earnings per share (cent) 134.7 93.7
Dividends per share (cent)
1
19.49 16.24
Cost to income ratio 22.3% 26.5%

Customer lending 2 (€m) 67,076 50,227

Total assets (€m) 96,652 73,290
Total funding (€m) 83,875 62,193
Shareholders’ funds (€m) 4,052 2,689

02
 Anglo Irish Bank
Annual Report & Accounts 2007
// Delivering excellent performance across
all divisions with growth in earnings per
share of 44% //
1,243 1243.0 134.7 134.699997 19.49

16.24
994.4 107.759998

850 93.7 13.54

745.8 80.819998
11.28
71.0
615 9.40
57.3
504 497.2 53.879999

6.27
347 39.0

261 29.1
248.6 26.939999
2002

2003

2004

2005

2006

2007

2002

2003

2004

2005

2006

2007

2002

2003

2004

2005

2006

2007
0.0 0.000000

Profit before taxation (Em) Earnings per share (cent) Dividends per share1 (cent)

96.7 96.699997
83.9 83.900002
67.1

77.359998 67.120001
73.3 62.2 50.2
1
Includes proposed final
dividend
58.019998 50.340001
2
Includes funding provided
to customers of Anglo Irish 49.6 34.6
42.1
Assurance Company under
investment contracts and also
38.679999 33.560001
securitised loans 34.3 24.4
29.1

The basis of numbers in the 25.5 22.4 18.1

financial highlights are as 19.4 16.9 14.3
19.339999 16.780000
follows:
2006 to 2007 - IFRS
2005 - Pro-forma IFRS
2002

2003

2004

2005

2006

2007

2002

2003

2004

2005

2006

2007

2002

2003

2004

2005

2006

2007

2002 to 2004 - Irish GAAP

0.000000 0.000000

Total assets (Ebn) Total funding (Ebn) Customer lending2 (Ebn)

03
3
 Group profile

Anglo Irish Bank is a relationship based business bank operating in three

core areas – Business Lending, Treasury and Wealth Management. Not
a universal bank, we focus on providing bespoke differentiated products
where we can deliver superior service to our customers.

The Bank operates a centralised business model which facilitates quick

decision making, consistent risk management and effective delivery for
our customers. This model, together with our focused strategy over the
last two decades, has enabled the Bank to achieve consistent above
market returns, with compound annual growth rates in excess of 35%
on both pre-tax profits and total assets over the past twenty years.

This organically driven growth has seen the Bank’s 2007 pre-tax profits
exceed E1.2 billion and total assets reach almost E100 billion.

A key element in the Bank’s development to date is the skill,

professionalism and commitment of our people. Now numbering almost
1,900 they remain central to the Bank’s continued success.

USA Ireland Isle of Man UK Jersey Portugal Switzerland Austria

Boston Dublin Douglas London St Helier Lisbon Geneva Vienna

Chicago Cork Banbury
New York Galway Belfast
Limerick Birmingham
Sligo Glasgow
Waterford Leeds
Manchester

04
 Anglo Irish Bank
Annual Report & Accounts 2007
Business Treasury Wealth
Lending Management
Secured term lending is the Bank’s core The primary role of our Treasury Division is The Bank’s Wealth Management Division
offering and the main driver of revenues and to ensure that the Bank manages its funding operates as a niche provider of private
profitability. and liquidity requirements effectively. banking services to high net worth clients.
It is also responsible for managing the Many of these clients are also customers of
Business Lending operates through a
Bank’s interest rate and foreign exchange our Business Lending divisions.
network of 16 offices in three main markets –
exposures, as well as generating additional
Ireland, the United Kingdom and the United In addition to traditional private banking
income through corporate treasury activities.
States. We apply the same relationship services the Division specialises in the
Funding, liquidity and all aspects of risk
based model to our business lending development of unique tailored investment
management for the Group are managed
activities in all geographic locations. solutions for clients, with an emphasis on
centrally.
creating and preserving wealth.
This model focuses on lending to
Historically, customer funding has been
experienced business professionals on The private bank in Ireland is a long
the primary source of funding for the Bank.
transactions that are supported by secure established successful franchise and, in
Customer deposits are raised through well
cash flows and strong collateral. Lending 2006, we launched our UK private banking
established franchises in Ireland, the UK,
transactions are approved at the Group’s business. Now operating from new offices in
the Isle of Man, Austria and more recently in
centralised credit committees in accordance Mayfair, we offer a similar suite of bespoke
Jersey. The Bank provides an award winning
with the Bank’s prudent credit policy. services to our UK Business Lending
range of savings and deposit products which
The regular participation of all lenders at customers.
pay consistent competitive interest rates
credit committees uniquely empowers
to almost 200,000 customers. Customer Private banking services are also provided
them in their dealings with customers,
retention rates in excess of 98% reflect from offices in Austria, Switzerland and
whilst ensuring consistent, high quality
the exceptional service provided to our Portugal. Anglo Irish Assurance Company,
underwriting.
deposit customers. a subsidiary of the Bank, provides a range
Through this disciplined approach the Bank of tax efficient investment and retirement
The Bank has developed a strong franchise
has established strong indigenous franchises solutions as part of an integrated service for
and expertise in international capital
across each of its core geographies. The size our Wealth Management clients.
markets. The duration, mix and geographic
of each market continues to offer the Bank a
distribution of our funding and capital base
significant opportunity to build and expand
is enhanced by using a broad range of
on these existing positions.
market funding initiatives. The Bank now has
established relationships with more than 350
banks worldwide.

Our Treasury Division also acts as a specialist

provider of innovative foreign exchange and
interest rate risk management solutions for
corporate customers. These services are
provided by teams based in Ireland, the UK,
Austria and through our representative office
in Boston.

05
5
 // In 2007 Anglo Irish Bank delivered its
22nd consecutive year of uninterrupted
earnings growth, with underlying profits
increasing by 44% to E1,221 million //
Sean FitzPatrick Chairman

06
 Anglo Irish Bank
Annual Report & Accounts 2007
Chairman’s statement
In 2007 Anglo Irish Bank delivered its 22nd consecutive David Drumm will provide further details of the
year of uninterrupted earnings growth, with underlying performance and key drivers in his Group Chief
profits increasing by 44% to E1,221 million. Executive’s review.

This excellent performance is grounded in the Group’s I pay tribute to all our people whose talent and
disciplined and focused business model, prudent risk commitment are central to the quality of the Bank’s
appetite and very limited exposure to areas affected success and ongoing development.
by current credit market issues. These results reflect
controlled organic growth with all divisions contributing Dividend growth
strongly. Key highlights of the Bank’s performance
include: Your Board proposes a final ordinary dividend for 2007 of
13.01 cent per share, bringing the total dividends for the
year to 19.49 cent, an increase of 20%. Dividend cover
Positive earnings momentum remains exceptionally strong at 6.8 times.
• R
 ecord underlying profit before tax of E1,221 million,
Total shareholders’ equity has grown to in excess of E4
a rise of 44%
billion from just E1 billion in 2003. The annuity and low
• 4 6% increase in profit before tax to E1,243 million, volatility nature of the Group’s income stream and its
including a E22 million profit on the disposal of our highly efficient operating structure will sustain significant
Isle of Man trust activities incremental capital generation year on year. Accordingly,
the Bank is well placed to maintain its progressive
• 4 1% increase in underlying earnings per share
dividend policy in 2008 and future years.
to 131.7 cent
We propose to pay the final dividend on 14 February
• C
 ost to income ratio of 22.3%, an improvement
2008 to all ordinary shareholders on the Bank’s register
of 4.2 percentage points
as at the close of business on 7 December 2007.
• S
 pecific impairment charge unchanged on 2006 Withholding tax may apply on the dividend depending
at 9 basis points on the tax status of the individual shareholder. As in
• Continued strong return on equity of 30% previous years, shareholders will be offered the option of
receiving dividends in the form of either cash or shares.
• Total dividend of 19.49 cent, an increase of 20%

Board of Directors
Significant balance sheet strength
Further to our recent announcement, Tom Browne will
• Growth in lending of E18.0 billion1 , an increase of 37% shortly retire from the Board. Tom joined the Bank in
• C
 ontinued robust asset quality with impaired loans 1990 and held various senior roles, most recently as
representing only 0.50% of closing loan balances Managing Director of Lending Ireland. I thank Tom for his
immense contribution to the Bank and wish him every
• R
 ecord growth in funding of E25.5 billion1 with
success for the future.
customer deposits alone up by E16.7 billion1 or 46%
In the first half of 2007 Paddy Wright retired from the
• S
 trongest capital position in the Bank’s history – core
Board and Noël Harwerth joined us as a Non-executive
equity grew by E1.4 billion to in excess of E4 billion.
Director. I reiterate my thanks to Paddy and again
Tier 1 and Total Capital ratios now stand at 8.6% and
welcome Noël.
12.0% respectively

1
On a constant currency basis

07
 Chairman’s statement continued
Corporate Responsibility Our adherence to a strategy of controlled organic growth
will enable the Bank to take good advantage of potential
We consistently pursue the highest standards of
opportunities to increase market share, particularly in the
conduct in managing the business in the interests of
UK and the US, and to meet successfully any challenges
all stakeholders as we believe that this is critical to
arising in the future. We are confident that our stringent
our continuing success. Details of our activities and
risk management standards will maintain the high
achievements in this regard are featured later in the
quality of our asset base. Our proven lending model, a
Annual Report.
diverse funding franchise, excellent liquidity and a robust
capital base combined with a uniquely efficient operating
Outlook – maintaining earnings guidance structure will underpin continuing strong earnings
performance.
We expect growth in the economies in which we
operate to moderate during 2008, reflecting recent Your Board anticipates underlying earnings per share
uncertainty in the wider capital markets. This is likely to growth in excess of 15% in 2008 and looks forward with
be counterbalanced in part by a more benign outlook confidence to the sustained delivery of above market
for base interest rates. Overall fundamentals support returns in subsequent years.
continued economic growth in Ireland and the UK.
We are strongly positioned across all markets with
experienced, well capitalised borrowers with robust cash
flows – factors which are particularly relevant in our
North American business given a slower US economy.
Whilst it is difficult to assess when the dislocation
in capital markets will settle, we expect that the
forthcoming releases of full year audited bank results Sean FitzPatrick
will be an important step in this direction. Chairman
27 November 2007

08
 Anglo Irish Bank
Annual Report & Accounts 2007
// Your Board anticipates underlying earnings per
share growth in excess of 15% in 2008 and looks
forward with confidence to the sustained delivery
of above market returns in subsequent years //

09
 Thistle Hotels 

01 Working closely with one of

our experienced customers, the
Bank arranged and structured
the debt facility for the purchase
and refurbishment of 28 hotels
operated by Thistle Hotels. As
part of the facility, our Treasury
Division provided an interest
rate risk management solution
for the long-term element of the
debt. The hotels are located in
major cities throughout the UK.

01

10
 Anglo Irish Bank
Annual Report & Accounts 2007
// We continue to invest in the development
of our franchise in both London and the
UK regional markets //

02

Royal Opera House

Retail Portfolio Next Generation Clubs

02 In 2004 the Bank’s Wealth Management

Division acquired a 50% share of the
retail development around The Royal
03 The Bank provided a debt facility
for a key UK client to refinance the
purchase of Next Generation Clubs. In 03
Opera House, London, on behalf of addition, the Bank provided funding
clients of our Private Bank. Situated to assist in the acquisition of three
in the heart of Covent Garden, the further clubs, and our Treasury
acquisition of this high profile retail Division provided an interest rate
investment allowed clients to take risk management solution on all
advantage of the redevelopment of the transactions. Next Generation Clubs
centre. The Bank completed the sale is a leading operator of premium
of its share in the portfolio in 2007, family friendly racquet, health and
generating a return in excess of 200% fitness clubs in the United Kingdom.
for our clients over a three year period.

11
 // The Bank continues to effectively execute
its traditional client centric and asset quality
focused strategy //
David Drumm Group Chief Executive

12
 Anglo Irish Bank
Annual Report & Accounts 2007
Group Chief Executive’s review
2007 has been another year of outstanding achievement The Bank operates a strict underwriting model. We lend to
for Anglo Irish Bank with record earnings, strong lending experienced business people and professional investors,
growth, excellent asset quality and continued development providing senior term debt on a secured basis. Cash
of our franchises in Ireland, the UK and North America. flows from proposed transactions or a client’s existing
asset portfolio must provide sufficient debt service
The enduring strength of the Bank’s business model is coverage, typically a minimum of 1.25 times – the Bank
evidenced by a 44% increase in underlying profits to does not engage in speculative development lending. The
E1,221 million, marking 22 years of uninterrupted profit cornerstone of our consistent record on asset quality is
growth. The Bank continues to effectively execute its strong underlying client cash flows, normally based on
traditional client centric and asset quality focused strategy. long-term contractual rental incomes derived from diverse
sectors of the service economy. These sectors continue to
The Bank has a resilient funding platform, excellent liquidity perform strongly.
and a strong capital base. Customer deposits consistently
represent some two thirds of total funding. Prudent liquidity The Bank’s low loss outcome in the event of a default is further
management and our approach of raising market funding underpinned by personal guarantees and by the fact that close
ahead of requirements has served the Bank very well during to 100% of the loan book is secured by a first legal charge on
the recent dislocation in capital markets. tangible assets, typically on a cross-collateralised basis.

Loans must be individually approved at central credit

Business Lending – well managed high
committee in Dublin, chaired independently by Group
quality growth
Risk Management. This approach ensures adherence
The Bank has again delivered strong growth in business to our stringent underwriting criteria and consistent
lending across its three chosen markets - Ireland, the UK decision making and client service. In addition, Group Risk
and North America. Net loan growth of E18.0 billion , an
1
Management undertakes a complete on-site review of
increase of 37%, brings total customer lending balances all loans at least twice a year, stress testing the impact of
to E67.1 billion (including lending associated with our increased interest rates and reduced cash flows. The most
assurance company). recent review, completed in mid-November, confirmed the
excellent condition of the Bank’s loan book and showed that
Total average lending margin increased by 6 basis points we are not experiencing increased stress in any area.
to 2.42% during 2007, in part reflecting upward movement
following the market-wide repricing of credit risk. This We are confident that our focused underwriting model
is continuing into the current year with margins on new will sustain the ongoing high quality of our asset base.
business trending upwards. Nevertheless, we remain as vigilant as ever.

Asset quality – underpinning the Bank’s success Lending - Ireland

Asset quality remains excellent. The Bank’s specific At the end of September 2007 loans to Irish customers stood
impairment charge, at 9 basis points of average customer at E37.8 billion, up E9.3 billion1 in the year. This performance,
advances, remains unchanged on 2006. The quality of the at the upper end of expectations, was achieved through
book is further evidenced by the low level of impaired loans selective asset growth in our traditional areas.
of E335 million, representing an improvement on 2006 at
just 0.50% of closing loan balances and significantly below We saw some indications of a moderation in lending activity
that of peers. Total lending balance sheet provisions at year in the second half of the year and expect this to continue into
end amounted to E295 million, covering almost 90% of 2008, broadly reflecting a return to more sustainable long-term
impaired loans before taking the Bank’s collateral security growth rates in the Irish economy. Economic fundamentals
into account. remain firm - demographics, job creation, income growth and
the government’s fiscal position all remain positive while the
interest rate outlook is now more supportive.

1
On a constant currency basis

13
 Group Chief Executive’s review continued
These fundamentals support ongoing demand for housing, Lending – North America
although below the exceptional levels seen in recent years.
2007 has been another outstanding year for our North
Buyer and seller expectations are realigning and prices are
American lending division with net loan growth of
likely to settle with a measured reduction in supply. This will
€3.7 billion1. The Bank is established in three key prime
support a more stable house price environment, important
markets – Boston, New York and, most recently, Chicago.
to the long-term growth and competitiveness of the Irish
The performance of this business demonstrates the Bank’s
economy.
ability to transport its model and generate shareholder
The commercial sector remains sound, supported by strong value. We have taken our team in North America to over
occupier demand and restricted supply. Notwithstanding 100 people during 2007, continuing our investment in
this, we expect to see a reduction from the very strong the franchise.
levels of recent activity.
Recent events in capital markets have undoubtedly
We believe that the Irish market continues to offer us resulted in increased uncertainty across the broader US
significant medium to longer term opportunity to build on economy. The impact of this has been less pronounced in
our established positions, deepening and broadening the the commercial property sectors of the stronger regional
Bank’s franchise. economies in which the Bank operates. These three markets
are particularly resilient and robust, with rentals trending
upwards and occupational demand remaining strong.
Lending – UK
The Bank’s UK lending business enjoyed another strong year With experienced, well capitalised borrowers, the Bank has
in 2007, increasing loan balances by 30%1 to €21.7 billion. a strong base from which to exploit potential opportunities
This performance reflects high quality asset growth in both including, as in the UK, the return of some borrowers to
London and regional markets, where we continue to invest more traditional relationship based banking. Looking to the
in developing the business. medium to longer term, we see significant opportunity to
increase our share of this very large market.
After a sustained period of compression, commercial
property yields have widened recently. Investment property
Treasury – delivering on key objectives
fundamentals however remain sound, with low vacancy
rates, a restricted supply pipeline and a potentially more The performance of our Treasury Division in 2007 has been
benign interest rate environment. Larger loan transactions most impressive, with success in each of its key business
have slowed, reflecting the impact of the capital markets objectives - providing a robust and diversified funding and
dislocation, in particular on conduit based lenders. We capital platform for the Bank, maintaining prudent balance
envisage some of the larger borrowers returning to more sheet liquidity and managing the Bank’s interest rate and
traditional relationship based banking as market foreign currency risks together with supporting delivery to
conditions settle. our Treasury client base.

While the UK economy is expected to slow, it will remain in Funding and liquidity – a platform of
our view one of the better performing large economies in financial strength
Europe and a key market for the Bank. We see considerable
opportunity in the UK given the Bank’s modest market share The Bank’s total funding and capital stood at €93.2 billion at
and its proven ability over two decades to build enduring year end, reflecting record growth of €25.5 billion1.
customer relationships.
Customer deposits
Our customer deposit business delivered an outstanding
performance, growing by 46% or €16.7 billion1. This brings

14
 Anglo Irish Bank
Annual Report & Accounts 2007
total balances to €52.7 billion. Customer balances today corporations. This represents a key strategic step in providing
account for 63% of the Bank’s senior funding, consistent a new, long-term funding growth platform to the Group with
with the levels of the past five years. This strong growth in very significant potential now and in future years.
customer deposits alone almost fully funded the increase in
customer lending during the year. Market funding
The Bank’s customer deposit franchise dates back over 2007 has also been a very successful year on the debt
three decades in Ireland and two decades in the UK, with a securities side of our funding strategy, with issuance increasing
successful expansion into the retail savings market in the by 60%1 to €23.6 billion. This significant activity, aligned with
1990’s and across mainland Europe in more recent years. the Bank’s consistent strategy of raising market funding well in
Deposit growth during 2007 was well spread throughout advance of requirements, has aided the Bank to insulate itself
all target markets. The continuing success of the Bank’s from the effects of the current turbulence in credit markets.
customer funding activities, both retail and non-retail, is
premised on outstanding customer service and consistent Close to 60% of debt market funding has a maturity profile
pricing. The single goal of our customer deposit business of greater than one year. Early in 2007, the Bank expanded
is to enhance and diversify the Bank’s funding base – not its sources of long-term funding through the establishment
seeking to generate profit. This is a critical advantage as of an innovative commercial mortgage covered bond
others in the marketplace are typically unable to provide programme, raising €1.3 billion by year end.
such a consistently competitive offering. Our efficient and
Throughout our considerable growth over the past three
unique cost to income structure underpins the long-term
decades, we have always been keenly aware of the
sustainability of this strategy.
importance of maintaining a robust liquidity profile. The Bank
Retail customer balances now stand at €19.4 billion, adding maintains a strong customer deposit to loan ratio at 79%.
over 7,000 new customers per month through the Bank’s Customer deposits plus term debt securities equate to 104%
phone and postal platform. Market-leading customer of total lending – including capital, this ratio increases to
retention ratios, at close to 98%, reflect the strength of 118%. The Bank has maintained its excellent liquidity position
our franchise. The quality and consistency of our product since the turbulence in credit markets began in July. Access
offering was recognised by Moneyfacts, the UK consumer to funding has remained strong in the intervening period,
finance advocate. In 2006, and again in 2007, we were with significant volumes raised through customer and market
awarded ‘Best Product’ in our key categories. This business, funding sources. Our liquidity position was further enhanced
which continues to grow apace, will form a key pillar of the by the creation of €2 billion of covered bonds in November.
Bank’s diverse funding over the coming years. The nature of the Bank’s assets and the low usage of covered
bond funding to date provide significant incremental secured
In 2007 the Bank’s non-retail customer deposit business funding and liquidity capacity for the future. The Bank
grew strongly to €33.3 billion, an increase of 29% . This
1 maintains a very active debt investor relations programme,
strong, relationship focused business provides a deep vein enabling regular contact and ensuring that investors have a
of core funding across a diverse customer base, comprising thorough understanding of the Bank’s model.
small and medium sized corporates, charities, investment
managers, local authorities, credit unions and other long-term From a regulatory liquidity perspective, the Group operates
holders of cash in Ireland, the UK, the Isle of Man, Jersey within the revised and strengthened liquidity regime
and across Europe. We continued to develop this business in introduced by the Irish Financial Regulator this year.
2007, adding significant numbers of new clients in all markets Considered one of the most stringent regimes in Europe, it
and ending the year with in excess of 10,000 customers. This requires liquidity to cover commitments allowing for no new
deposit base is highly granular with an average balance of funding from any source out to thirty days. The assumptions
under €4.0 million. The Bank has recently expanded this applied within the regime are prudent. The Bank always
business into the United States with deposit products to US maintains a significant buffer over these requirements and
continues to do so during the current market volatility.

1
On a constant currency basis

15
 Group Chief Executive’s review continued
Our pool of high grade liquid assets, combined with The Bank is a buy-to-hold investor of treasury assets and
short-term bank placings of less than two weeks duration, does not engage in the trading of such securities. This is
currently stands at a similar level to year end. The Bank has reflected in our minimal trading Value at Risk which, at a
been, and continues to be, a significant net lender to the 99% confidence level, averages €0.3 million, stemming
inter-bank market. solely from the management of customer related positions.

The success of the Bank’s funding and liquidity management

Capital – a solid foundation for future growth
strategy means it has a balance sheet with the underlying
strength and flexibility to take advantage of opportunities During the year we raised an additional €1.8 billion of
and to successfully meet the challenges of changing market capital in significantly oversubscribed offerings, providing
conditions. This strength was recognised in March when a robust platform to support the medium to longer term
Standard & Poor’s initiated coverage of the Bank with an opportunities that we see in all of our core markets.
‘A’ long-term / ‘A-1’ short-term rating. This strong rating is
in addition to those of Moody’s, Fitch and Dominion Bond Over the past two years the Board has adopted a strategy
Rating Service, our other rating agencies. to significantly enhance the Bank’s equity ratio. This was
achieved through strong retentions and two equity placings,
the most recent in February 2007 raising €542 million. In
Other treasury assets
2007 alone, the Bank’s equity increased by 51%, bringing
The Bank has very limited exposure to assets impacted total shareholders’ funds to €4.1 billion. Accordingly, the
by the current capital markets uncertainty. These include Bank’s core equity ratio has increased from 4.2% to 5.2%,
investments of €134 million (0.14% of total assets) in major based on risk weighted assets at 30 September of
bank sponsored Structured Investment Vehicles (‘SIVs’). €78.67 billion.
Although we are a buy-to-hold investor and none of these
assets are in default, we have charged a prudent collective The capital base was further added to in June when the
impairment provision of €67 million (50% of our holding) Bank raised €510 million of Tier 1 and €750 million of Tier 2
in arriving at the €1.243 billion in pre-tax profits for the capital. Tier 1 and Total Capital ratios are strong at 8.6% and
year. This serves to protect the Bank from further possible 12.0% respectively, well in excess of minimum regulatory
deterioration in this asset class given market uncertainty. requirements. The Bank, given its current excellent position
The Bank has no exposure to SIV-lites and does not sponsor and ongoing strong retentions, has sufficient equity for
any SIVs or conduit vehicles. future growth. In addition, the Bank will not need to raise
Tier 1 or Tier 2 debt capital before the first half of 2009.
The Bank holds €80m (0.08% of total assets) of asset-backed
securities with a synthetic exposure to underlying subprime The Capital Requirements Directive (‘CRD’), which
assets. We have taken a mark-to-market adjustment of €21 implements the provisions of the Basel II Capital Accord in
million against these assets resulting in a carrying value of the EU, will come into effect on 1 January 2008. We have
€59 million at year end. In addition, the Bank has €199 invested significantly to ensure the implementation during
million (0.21% of total assets) of other highly rated 2008 of enhancements to our Group-wide credit grading
asset-backed securities with some indirect subprime models to meet the required standards of the Internal
component. The fair value of these assets, all of which Ratings Based approach. In the interim period, we will
continue to perform, is €175 million. All of the above calculate our capital requirements under the Standardised
securities have been independently valued. Pricing provided approach. We expect some regulatory capital benefit over
by independent external experts is in line with FASB 157 time following implementation of the CRD.
Level 2 standards. These bonds are generally well seasoned,
originated between 2003 and early 2006. We are a Delivering for clients
buy-to-hold investor of these assets, 90% of which are
In addition to its key objectives outlined earlier, Treasury
AAA / AA rated. The Bank does not have any direct exposure
provides a valuable source of revenue diversification,
to subprime sectors.
particularly in our Corporate Treasury Sales business. Our
teams work closely with customers to develop innovative

16
 Anglo Irish Bank
Annual Report & Accounts 2007
risk management solutions, individually tailored to manage Outlook – confidence for the future
their specific interest rate and foreign currency exposures.
We expect Ireland to remain one of the strongest European
Importantly, this business is a natural complement to our
economies in 2008, despite a gradual moderation in growth
lending business and gives the Bank enhanced visibility and
rates. Our positioning in the UK and US, notwithstanding
certainty over client cash flows.
the uncertainty in capital markets, provides opportunities to
expand our franchise and increase market share.
Wealth Management – another
excellent year The relevance of our relationship driven lending model is
underscored in today’s market conditions. Our liquidity,
Our Wealth Management Division had another excellent
funding and capital strength position us well to take
year, contributing €97 million to Group profit before tax, an
advantage of the significant potential in each of our core
increase of 84%. The Division continues its targeted strategy
markets. As always, the Bank’s risk appetite remains
as a niche provider of financial products and solutions to
conservative - we will never sacrifice asset quality for
high net worth clientele.
growth.

We launched our UK Private Banking business in 2006 and it

The Bank’s €9.8 billion of lending work in progress at year
has made considerable progress to date. We see significant
end is well spread and of high quality, although it is natural
opportunity in a business that complements our existing
to expect a slower conversion rate than previously. We
lending activities and core client base. Over time, we expect
anticipate that lending growth during 2008 will calibrate to
the business to replicate the success of our Irish Private Bank.
the levels seen in 2005 – 2006 with net interest margins and
cost to income levels broadly stable. We will always adopt
Our People a prudent approach to provisioning and expect specific
Our continuing success is testament to the commitment and charges for lending impairment to increase, although
performance of our people, and I take this opportunity to remaining low. Reflecting these factors, we expect continued
thank all my colleagues for their outstanding contribution significant equity capital generation.
this year. Our people are committed to our client-centric
We anticipate underlying earnings per share growth in
culture of delivery and this gives me confidence for the
excess of 15% in 2008 and are confident that our proven
Group’s performance in the years ahead.
organic strategy will continue to deliver in the years beyond.
We continue to invest for the future and remain dedicated
to finding and recruiting the best available talent in each of
our markets. We added 320 people during 2007, bringing
headcount to 1,873, an increase of 21% allowing for the
disposal of our Isle of Man trust activities. This investment
has been achieved while improving our cost to income David Drumm
ratio from 26.5% to 22.3%. Looking forward, I see further Group Chief Executive
opportunities to make strategic hires in an environment 27 November 2007
where people will place increasing value on a long-term,
relationship based business.

I join our Chairman in recognising the immense contribution

made by Tom Browne. Tom has been a key member of our
senior management team for many years and played a large
part in the success of the Bank over this time. I thank Tom
again for his dedication and commitment to the Bank and
wish him every success for the future.

17
 01

02

18
 Anglo Irish Bank
Annual Report & Accounts 2007
// We continue to grow our market share in Ireland
reflecting our superior customer focused proposition //

The Ritz-Carlton Fraser Hart

Powerscourt Jewellers

01 The Bank arranged and structured

project finance and long-term
facilities for one of Ireland’s leading
02 In 2007, we provided financing to
enable a client complete the purchase
of 31 Fraser Hart jewellery stores
property companies to develop the across the UK. Our client is one of
Ritz-Carlton in County Wicklow. the largest and most successful
In addition, our Treasury Division indigenous jewellery chains in the
provided an interest rate risk Irish market. The Bank arranged
management solution. Set amidst the suitable short and long-term facilities,
Powerscourt Estate, one of the most signalling our commitment to support
scenic and historic estates in Ireland, both the client’s acquisition and
the Ritz-Carlton is a two hundred room future business plans. Our Treasury
resort showcasing Palladian style Division also assisted the client in
architecture and offering guests every mitigating interest rate risk on the
amenity and luxury. loan. The acquisition offers our client
a significant presence in the mid to
upper tier of the UK jewellery market.

19
 Sean FitzPatrick  David Drumm

Lar Bradshaw Tom Browne Fintan Drury

Noël Harwerth Anne Heraty  Michael Jacob

William McAteer Gary McGann Declan Quilligan

Ned Sullivan Pat Whelan

20
 Anglo Irish Bank
Annual Report & Accounts 2007
Executive Director
An independent Non-executive Director
A member of the Audit Committee
A member of the Nomination and Succession Committee

Board of Directors
A member of the Remuneration Committee
A member of the Risk and Compliance Committee

Sean FitzPatrick (59) was appointed Chairman in David Drumm (41), a Chartered Accountant,
January 2005. A Chartered Accountant, he also joined the Bank in 1993 after a number of years
serves as Chairman of Smurfit Kappa Group plc in corporate finance. He was appointed Group
and is a Non-executive Director of Aer Lingus Chief Executive in January 2005 having been
plc, Greencore Group plc, Gartmore Irish Growth Head of Lending Ireland and prior to that CEO of
Fund plc and Experian Group Limited. the North America Division.

Lar Bradshaw (47), who joined the Board in Tom Browne (45) joined the Board in January Fintan Drury (49), who joined the Board in May
October 2004, is a former Director of McKinsey 2004. He holds MBS and BBS degrees and is a 2002, is Chairman of Paddy Power plc and
Inc. and former Managing Director of McKinsey member of both the Institute of Bankers and the Platinum One Limited, a pan European sports
Ireland. He was also Chairman of Dublin Marketing Institute of Ireland. management and events company. He is a
Docklands Development Authority from 1997 former news journalist with RTÉ and in 1988
until 2007 and he is currently Chairman of founded Drury Communications, a corporate
Aras Slainte Healthcare Group. He holds an communications consultancy which he sold
MBA degree from the International Institute for in 1999.
Management Development in Switzerland.

Noël Harwerth (59), who joined the Board in Anne Heraty (47), who joined the Board in April Michael Jacob (62) has been a Director since
February 2007, is Deputy Chairman of Sumitomo 2006, is Chief Executive of CPL Resources plc, 1988 and is a Fellow of the Chartered Institute
Mitsui Banking Corporation Europe Limited, and a a recruitment and outsourcing agency which of Management Accountants. He is Chairman
Director of Royal & Sun Alliance Insurance plc, The she established in 1989. She is also a Director of Slaney Foods Limited and the Lett Group
Corporate Services Group plc, LogicaCMG plc and of Bord Na Móna plc, Forfás and the Irish Stock of Companies, Deputy Chairman of SIAC
The Tote. She is a Partnership Director of Tube Lines Exchange. She holds a Bachelor of Arts degree Construction Limited, a Director of REOX
Limited, Metronet Rail BCV Limited and Metronet in Mathematics and Economics. Holdings plc, Dolmen Securities and other
SSL Limited. She was previously the Chief companies.
Operating Officer of Citibank International Europe.

William McAteer (57), a Chartered Accountant, Gary McGann (57), who joined the Board in Declan Quilligan (44) joined the Board in January
is Chief Risk Officer and Finance Director of the January 2004, is Group CEO of the Smurfit 2006. He is Chief Executive of the Group’s
Group. He was previously Managing Director of Kappa Group plc. He is Chairman of the Dublin operations in the United Kingdom. He joined
Yeoman International Leasing Limited, prior to Airport Authority. He is also a Director of Aon the Bank in 1990 and holds a Masters degree in
which he was a Partner with Price Waterhouse. McDonagh Boland Group and United Drug plc. Management from Trinity College Dublin.
He holds a BA degree from University College
Dublin, a Masters degree in Management
Science and is a Fellow of the Association of
Chartered Certified Accountants.

Ned Sullivan (59), who joined the Board in Pat Whelan (45) joined the Board in July 2006.
November 2001, is Chairman of Greencore He was appointed Managing Director for Ireland
Group plc and of McInerney Holdings plc. He is in September 2007, having previously been
the former Chairman of The President’s Award- Director of Group Risk and Operations. He joined
Gaisce, former Group Managing Director of the Bank in 1989 and is a member of the Institute
Glanbia plc and previously held a number of Bankers.
of senior management positions in Grand
Metropolitan plc. He holds B.Comm and
MBS degrees.

21
 45 Milk Street
Boston

01 45 Milk Street is a landmark office

building located in the heart of
Boston’s vibrant Financial District.
The architecturally significant Beaux
Arts style property is fully occupied by
an excellent, diverse tenant base and
is situated just steps from Boston’s
epicentre, Post Office Square. The
Bank sourced, acquired and financed
the property on behalf of one of its
international private clients, providing
a financing structure that will give
the client the opportunity to realise
long-term capital appreciation on this
02 investment. In addition, our Treasury
Division provided a comprehensive
interest rate risk management solution
on the transaction.

The Apthorp
New York

02 The Apthorp is an internationally renowned

residential building located in Manhattan’s
distinguished Upper West Side. The Bank
provided acquisition and redevelopment facilities
to one of its existing clients to carry out building
upgrades and renovations to this famous
landmark property. The financing provided our
client with the flexibility needed to support their
long-term strategy for this property. Additionally,
the Bank’s Treasury Division provided a tailored
interest rate hedging solution.

Palmer House Hilton Hotel 03

Chicago

03 The historic Palmer House Hilton Hotel is located in the thriving

downtown Chicago Loop. Built in 1925, this prime hotel is minutes
away from Millennium Park, Navy Pier and one block from the
premium retail thoroughfare, ‘The Magnificent Mile’ on Michigan
Avenue. The Bank structured a facility to provide an existing client with
the flexibility needed to execute a reposition strategy on this landmark
Chicago asset. Currently under renovation, this hotel will benefit from
the client’s significant capital investment programme.

22
 01

Anglo Irish Bank

Annual Report & Accounts 2007

23
 Corporate Responsibility
Corporate Responsibility (‘CR’) plays an integral role in our ambitions. This year a new innovative Learning and
approach to business at Anglo Irish Bank. We recognise our Development programme was launched to further facilitate
obligations and responsibilities, and from the highest levels the progress of our staff. This initiative will ensure that our
of our organisation we are committed to fulfilling them. employees receive the appropriate training to help them
We understand the importance of building and maintaining reach their full potential within the Bank. We have a work
sustainable relationships with all our stakeholders – environment of equal opportunity with wide scope for
shareholders, customers, staff, suppliers, government, career progression and a meritocracy where outstanding
regulatory bodies and the community and how these performance is acknowledged and well rewarded.
relationships are key to our continued success.

At Anglo Irish Bank it has been our policy to reward the

The way we conduct our business is guided and dedication and achievement of our people with tangible
underpinned by a set of core values and principles which ownership of the business. Testament to this commitment is
ensure the Bank operates in the best interests of all the success of our Save As You Earn (‘SAYE’) scheme, which
stakeholders. has been in operation since 2000. The scheme allows staff to
acquire shares in the Bank at a discounted rate. The initiative
has been extended successfully across all of the Bank’s
We operate to the highest ethical and governance standards geographical locations, with a very positive response from
as we aspire to be a model corporate citizen. For this reason staff, with over 90% now being shareholders.
we invest heavily in the development and training of our
staff, as well as maintaining the highest levels of integrity in
our relationships with our stakeholders. At Anglo Irish Bank, In April 2007 we launched an Employee Well-Being scheme.
we take a responsible approach to environmental issues and The scheme is operated in conjunction with an independent
are proactive in seeking innovative ways in which to become consultancy firm and offers a completely confidential
more efficient. In addition, a fundamental aspect of our CR support service to staff on any issues facing them in
strategy is our commitment to supporting the development their personal lives. This scheme is characteristic of our
of the wider community, which includes sponsorship commitment to the health and well-being of our people.
programmes for the arts and sporting events.

As well as supporting our staff during their careers at

Our people Anglo Irish Bank, we are committed to safeguarding their
future later in life. It is for this reason that we continue to
The success of Anglo Irish Bank is directly attributable to the
support an incentive based pension scheme, whereby staff
dedication and commitment of almost 1,900 people working
are encouraged to make additional voluntary contributions
for the Bank. Employee well-being is therefore of paramount
(AVCs) to their pension. Under the scheme, the Bank will
importance.
match, on a one-for-one basis, AVCs made by staff up to
a pre-defined level. This initiative continues to receive
We aim to foster an environment where staff can develop very positive feedback, with the numbers making AVCs
both personally and professionally, and where resources increasing significantly since the launch of the programme
are put in place so that they can realise their goals and last year.employee relations. A survey which was conducted

24
 Anglo Irish Bank
AnnualReport
Annual Accounts 2007
Report && Accounts
As an employer we invest significantly in employee As well as maintaining a strong relationship with our
relations. A survey which was conducted with our customers, the Bank is also committed to our relationships
staff in May 2007 revealed that our employees had an with our suppliers. We continuously seek to improve the
overwhelmingly positive attitude to their role and to the way in which they are managed. An important element
Bank. Overall, the findings are very encouraging. We intend of this is ensuring that we pay our creditors promptly and
to make this survey an annual event. This will provide us efficiently. In this regard, electronic funds transfer is our
with invaluable feedback allowing us to continually improve primary method of payment.
employee relations going forward.

Our community
Our marketplace Our approach to CR in the community is firmly rooted in the
Anglo Irish Bank’s sustained market leading performance generosity and commitment of our staff, who give their time
has been built on a relationship based business model that and effort to support a wide range of worthwhile causes.
has professionalism and consistent delivery to customers at In fact, employees are often directly involved in the selection
its core. and funding of many of the initiatives supported by the Bank.

We understand that customers are unique and all have Anglo Irish Bank is a founding member of Business in the
different needs. Acknowledging this, we provide a bespoke Community (‘BITC’). Since 2000, BITC has worked with Irish
service, tailored to individual requirements. companies who are seeking to make a positive impact on
society. This is done through numerous initiatives which
focus on community involvement. One such initiative in
To ensure that we meet the highest standards of service, which the Bank has actively participated is the ‘Ready to
our customer support staff are organised into specialist Work’ scheme which offers people who have been affected
teams to maximise the efficiency with which they deal with by homelessness the opportunity to re-enter the workforce.
customer queries. Each team acts as a point of contact ‘Ready to Work’ offers training and support as well as
for a specified customer group to ensure that we respond placements in participating companies to those who seek
effectively to their individual requirements. Furthermore, help. In addition, the Bank has teamed up with BITC in
the Bank has a complaints process in place, whereby staff Ireland and the UK to develop various educational initiatives
members formally log customer complaints which are in our community.
then appropriately addressed. This is characteristic of our
commitment to superior customer service and ensures
that any complaints received are dealt with promptly and
professionally.

25
 01
RTÉ National Junior Achievement
Ireland v England Symphony Orchestra Ireland Land Aid - UK
01  TWomen’s
he Irish International
Rugby team
02  TSymphony
he RTÉ National
Orchestra
03  Jstudents
unior Achievement Ireland
from 4 Class
th
04  TBank
he 2007 Anglo Irish
Regatta was held in
playing against England performance of Mahler’s Scoil Chaitríona, Renmore, support of Land Aid, a UK
in the Six Nations in ‘Symphony of a Thousand’ Galway, following their charity which helps fund
February 2007. at the National Basketball ‘School to Work Day’ in the activities of specialist
Arena in May 2007, Anglo Irish Bank, Galway. agencies working with the
sponsored by Anglo Irish homeless.
Bank.

02

26
 Anglo Irish Bank
Annual Report & Accounts 2007
05

03 06
St. Paul’s Community
Abbey Theatre Cheltenham College The Rotunda Hospital

05  (left to right) David

Drumm, Group Chief
06  ‘Anglo
Ebaziyan’, winner of the
Irish Bank Supreme
07  Aandnglostudents
Irish Bank volunteers
from St.
08 
2007 marks the Rotunda Hospital’s
250th anniversary of providing
Executive, Fiach Novices Hurdle at the Paul’s Community College, continuous care on the Parnell
MacConghail, Director at Cheltenham Festival on Waterford. Square site in Dublin. To celebrate
the Abbey and Stuart 13 March 2007. this important ‘birthday’ of the
Carolan, winner of the oldest working maternity hospital
2007 Anglo Irish Bank in the world, Anglo Irish Bank was
‘Writer in Association’ delighted to support the Hospital’s
bursary at the Abbey Garden Party in September and
Theatre, Dublin. Gala Dinner in December.

07

04 08
27
 Corporate Responsibility continued
At Anglo Irish Bank we continue to support and develop our We continue to make substantial donations each year
mentoring programmes for the secondary level students of to charities nominated by staff in all of our locations. In
Warrenmount School in the Liberties district of Dublin. We addition to our continued support of the Irish Cancer
started this programme in 2000 and since then it has Society, a significant number of our Irish employees partake
received widespread commitment from staff who, with the in a ‘Give As You Earn’ scheme in support of Children Direct,
Bank’s support, offer their time to help students realise their a partnership of five Irish children’s charities: Temple Street
full potential. To date, over 100 members of staff have been Children’s Hospital, the ISPCC, Enable Ireland, Focus Ireland
involved with the Warrenmount initiative. The mentoring and ACTIONAID Ireland. Under this initiative, which has
scheme enables the pupils to develop important personal been in place since 2004, monthly donations are made by
and professional skills which will undoubtedly benefit their staff and the Bank then matches these payments.
future lives and careers. We have also established school
programmes with St. Vincent’s in Cork and St. Paul’s
Community College, in Waterford. In London, members of The arts play a pivotal role in our communities and our
our staff are involved in a mentoring process at schools in support of the arts is a very important aspect of our
the borough of Tower Hamlets. CR agenda. In the past year the Bank has continued its
sponsorship of the Abbey Theatre’s ‘Writer in Association’
programme. Furthermore, the Bank has maintained its
Our Irish regional offices have taken a proactive role long-standing relationship with the RTÉ National Symphony
in supporting education in their local area. Our staff in Orchestra and the National Concert Hall.
Cork, Galway and Waterford have teamed up with Junior
Achievement Ireland to educate students about the various
career opportunities available to them in the Irish jobs At Anglo Irish Bank, our support of sporting endeavours
market. This initiative reinforces to students the link between is both enduring and wide ranging. Our more high-profile
education and attaining a foothold in the labour market. This sporting sponsorships continue to be the Cheltenham
year employees from these branches volunteered at thirteen National Hunt Racing Festival and the Irish Women’s
national schools across the country. Rugby team. However, the Bank also remains a very active
contributor to sport at a more local, grass roots level where
we provide support to numerous local sports clubs.
Anglo Irish Bank is involved with Young Social Innovators
(‘YSI’) – an initiative which aims to develop social awareness
and activism amongst young people. The programme runs The Bank commenced a sports scholarship scheme with
in schools throughout Ireland and empowers students to the National College of Ireland in 2006. This scheme
identify social issues which they could help to change. The targets talented young athletes and helps them maximise
Bank’s relationship with YSI involves monetary support and their potential. Under the scheme, the Bank provides the
facilitating staff in providing their business expertise. necessary financial support to ensure that these athletes are
given every chance to realise their goals. The results from
the scholarship scheme to date are very encouraging with
recipients of this financial support reaching some of the
highest levels in their respective fields.

28
 Anglo Irish Bank
Annual Report & Accounts 2007
Our environment
As a corporate citizen the Bank recognises its responsibility
to the environment and aims to operate in a way which
minimises its “carbon footprint” as much as possible.
It is our policy to recycle all paper, glass and computer
consumables where possible. The use of technology, such
as email and electronic payments, across the Group has
significantly reduced paper usage. Specifically, the Bank
now provides the facility to receive this Annual Report
electronically. Furthermore, the Bank disposes of all electrical
and electronic equipment in a safe and environmentally
responsible way as stipulated in the recent EU Waste
Electrical and Electronic Equipment Directive.

Anglo Irish Bank is committed to taking significant steps

towards becoming more energy efficient and making
greater use of cleaner sources of energy where possible.
As an example, we purchase all our electricity in Ireland
from Airtricity, an innovative company who are committed
to supplying renewable energy.

Our future
The many CR initiatives which Anglo Irish Bank continues
to undertake enable the Bank to promote a positive ethos,
not just among our staff but also among our many and
varied stakeholders. We remain fully committed to our
CR programme and are confident that it will continue to
develop and produce further benefits for the Bank and
our stakeholders in the years ahead.

// We operate to the highest ethical and governance

standards as we aspire to be a model corporate citizen.
For this reason we invest heavily in the development and
training of our staff, as well as maintaining the highest levels
of integrity in our relationships with our stakeholders //

29
30
 Anglo Irish Bank
Annual Report & Accounts 2007

Report of the Directors

The Directors present their report and the audited Bernard Daly retired as Secretary on 2 February
financial statements for the year ended 2007 and was replaced by Natasha Mercer. The
30 September 2007. interests of the Directors and Secretary who held
office at 30 September 2007 in the share capital of
Results the Bank are shown in the Remuneration
The Group profit attributable to equity holders of Committee's report on behalf of the Board, set out
the parent amounted to €998 million as set out in in note 53 to the financial statements.
the consolidated income statement on page 40.
Substantial shareholdings
Review of activities Details of interests in excess of 3% of the ordinary
The principal activity of the Group is the provision share capital which have been notified to the Bank
of banking services. The Chairman's statement and are shown on page 136.
the Group Chief Executive's review on pages
7 to 17 report on developments during the year, on Group undertakings and foreign branches
events since 30 September 2007 and on likely Particulars of the principal subsidiary undertakings
future developments. The financial statements for within the Group required to be declared under
the year ended 30 September 2007 are set out in Section 16 of the Companies (Amendment) Act,
detail on pages 40 to 133. 1986 are shown in note 28. The Bank has
established branches, within the meaning of EU
Dividends Council Directive 89/666/EEC, in Austria, Jersey,
An interim dividend of 6.48 cent per ordinary share Portugal and the United Kingdom.
was paid on 17 July 2007. Subject to shareholders'
approval, it is proposed to pay a final dividend on Corporate governance
14 February 2008 of 13.01 cent per ordinary share The Directors' Corporate governance statement
to all registered shareholders at the close of appears on pages 33 to 37.
business on 7 December 2007. Dividend
withholding tax ('DWT') may apply on the Principal risks and uncertainties
proposed final dividend depending on the tax status Information concerning the principal risks and
of each shareholder. uncertainties facing the Bank and the Group is set
out in note 47.
Shareholders will be offered the choice of taking
new ordinary shares in lieu of the proposed final Books and accounting records
dividend, after deduction of DWT where applicable. The Directors are responsible for ensuring that
proper books and accounting records, as outlined
Capital resources in Section 202 of the Companies Act, 1990, are
Details of changes in capital resources and treasury kept by the Bank. To ensure compliance with these
shares during the year are included in notes 40 to requirements the Directors have appointed
44 of the financial statements. professionally qualified accounting personnel with
appropriate expertise and have provided adequate
Accounting policies resources to the Finance function. The books and
The principal accounting policies, together with the accounting records of the Bank are maintained at
basis of preparation of the financial statements, are the Bank's registered office at Stephen Court,
set out in note 1. 18/21 St. Stephen's Green, Dublin 2.

Directors and Secretary Auditors

The names of the current Directors appear on The Auditors, Ernst & Young, have expressed their
pages 20 and 21, together with a short biographical willingness to continue in office.
note on each Director.
Directors:
Patrick Wright retired from the Board on David Drumm (Group Chief Executive),
2 February 2007. Noël Harwerth was co-opted to William McAteer (Executive Director),
the Board on the same date and, being eligible, Pat Whelan (Executive Director).
offers herself for re-election. Tom Browne will
shortly retire from the Board. William McAteer, Secretary:
Lar Bradshaw, Ned Sullivan and Michael Jacob will Natasha Mercer.
retire by rotation as Directors in accordance with
the Articles of Association and, being eligible, offer 27 November 2007
themselves for re-election.

31
 Statement of Directors' responsibilities
The following statement, which should be read in financial statements are prepared in accordance
conjunction with the Auditors’ report on pages with International Financial Reporting Standards, as
38 and 39, is made with a view to distinguishing for adopted by the European Union, and comply with
shareholders the respective responsibilities of the the Companies Acts, 1963 to 2006 and Article 4 of
Directors and of the Auditors in relation to the the IAS Regulation. They also have general
financial statements. responsibility for taking such steps as are
reasonably open to them to safeguard the assets of
Irish company law requires the Directors to the Bank and of the Group and to prevent and
prepare financial statements for each financial year detect fraud and other irregularities.
which give a true and fair view of the state of affairs
of the Bank and of the Group as at the end of the The Directors are responsible for the maintenance
financial year and of the profit or loss of the Group and integrity of the corporate and financial
for that year. With regard to the financial information included on the Bank's website.
statements on pages 40 to 133, the Directors have Legislation in the Republic of Ireland governing the
determined that it is appropriate that they continue preparation and dissemination of financial
to be prepared on a going concern basis and statements may differ from legislation in other
consider that in their preparation: jurisdictions.

ƒ suitable accounting policies have been selected

and applied consistently; Directors:
ƒ judgements and estimates that are reasonable David Drumm (Group Chief Executive),
and prudent have been made; and William McAteer (Executive Director),
ƒ the financial statements comply with applicable Pat Whelan (Executive Director).
International Financial Reporting Standards.
Secretary:
The Directors are responsible for keeping proper Natasha Mercer.
books of account which disclose with reasonable
accuracy at any time the financial position of the
Bank and which enable them to ensure that the

32
 Anglo Irish Bank
Annual Report & Accounts 2007

Corporate governance statement

The Directors of the Bank are committed to Roles of Chairman and Group Chief
maintaining the highest standards of corporate Executive
governance and, in particular, have regard to the The distinct and separate roles of the Chairman and
principles set out in ‘The Combined Code on Group Chief Executive are set out in writing and
Corporate Governance’ published in July 2003 and have been approved by the Board. There is a clear
revised in June 2006. division of responsibilities.

This Corporate Governance statement describes The Chairman promotes continuing high standards
how the Bank applies the principles of the of corporate governance and ensures there is
Combined Code and comments on its compliance effective communication with shareholders. He is
with the Code’s provisions. Except where stated, responsible for the leadership and effectiveness of
the Directors believe that the Group has complied the Board and the Non-executive Directors in
fully with the provisions of the Combined Code particular.
throughout the financial year ended 30 September
2007. The Group Chief Executive provides leadership
through his management of the day-to-day
Board of Directors operations of the Bank and his advice to the Board.
The Board of Directors is responsible for the He has the central role in maintaining and enhancing
leadership, direction and control of the Bank and a culture of high performance and motivation in the
the Group and is accountable to the shareholders Bank. Together with the Group Finance Director,
for financial performance. It delegates the the Group Chief Executive has responsibility for
management and day-to-day running of the Bank to ongoing relationships with shareholders.
the Group Chief Executive and senior management.
As at 30 September 2007, the Board consisted of Independence of the Board
thirteen members, eight of whom are Non- The Board is satisfied that each of the Non-
executive Directors. There were eight scheduled executive Directors is independent. In reaching that
meetings of the Board during the financial year. conclusion, the Board took into account a number
Details of attendance by Directors at scheduled of factors that might appear to affect the
meetings of the Board and its Committees during independence of some of the Directors, including
the year ended 30 September 2007 are set out on length of service on the Board and cross-
page 37. The Board is provided with relevant directorships. In each case, the Board is completely
papers in advance of meetings to enable it to carry satisfied that the independence of the relevant
out its duties. It receives regular management Directors is not compromised.
reports and information on corporate and business
issues to enable reviews of performance against Appointments to the Board
business targets and objectives. Directors are appointed initially for three years and
there is an expectation of a further such term
The Board keeps a formal schedule of matters assuming satisfactory performance. In individual
specifically reserved for its decision. These include cases, the appointment may be further extended
agreement of strategic objectives, annual plans and subject to a rigorous review of performance. A
performance targets, monitoring and control of robust and transparent procedure is in place for the
operations, review of the performance of Board appointment of new Directors.
Committees and approval of specific senior
appointments. Appointments to the Board are made based on
merit and using objective criteria. The terms and
Ned Sullivan is the Senior Independent Non- conditions of appointment of Non-executive
executive Director. The Non-executive Directors Directors are available for inspection at the
are independent of management and have varied registered office during normal business hours, and
backgrounds, skills and experience. All Directors at the Annual General Meeting.
bring independent judgement to bear on issues of
strategy, performance, resources, key appointments All Directors are provided with induction on
and standards of conduct. appointment and update and refresh their skills and
knowledge on an ongoing basis. This includes a
The Bank has insurance for Directors and Officers particular focus on ensuring the Non-executive
which covers legal actions brought against them in Directors are fully informed on issues of relevance
the course of their duties. to the Bank and its operations. The induction
process includes an opportunity for new Non-
A short biographical note on each Director is set executive Directors to meet major shareholders.
out on page 21.

33
 Corporate governance statement continued
Furthermore, the Bank will facilitate major other details in order to allow shareholders to
shareholders who wish to meet any new Non- make an informed decision.
executive Director.
Board Committees
The Directors can avail of the advice and services There are four Board Committees and each has
of the Group Company Secretary who ensures that specific terms of reference, which are reviewed
Board procedures are followed and that there is annually. The Committees’ terms of reference,
compliance with applicable rules and regulations. setting out roles and responsibilities, are available
The Directors and Committees of the Board can on request through the Group Company Secretary
seek independent professional advice, if required, at and on the Bank’s website.
the Bank's expense.
Remuneration Committee
Performance evaluation Members: Ned Sullivan (Chairman), Sean
The Chairman conducts evaluations of the FitzPatrick, Anne Heraty and Gary McGann.
performance of the Board, individual Directors and
Board Committees annually. In addition, the Board The Committee is responsible for the formulation
and its Committees undertake an annual evaluation of the Group’s policy on remuneration in relation
of their performance and report their findings and to all Executive Directors and other senior
any resulting recommendations to the Board. In executives. The Committee’s report on behalf of
order to enhance the evaluation process, the Board the Board on Directors’ remuneration and interests
and its Committees have occasionally used external is set out in note 53 to the financial statements. All
consultants. members of the Remuneration Committee are
Non-executive Directors. The Chairman of the
An evaluation of the performance of the Chairman Bank is a member of the Remuneration Committee
is conducted by the Senior Independent Non- as permitted by the revised Combined Code on
executive Director, taking into account the views of Corporate Governance, published in June 2006.
the other Directors.
Audit Committee
At least once a year, the Chairman meets with the Members: Gary McGann (Chairman), Michael Jacob
Non-executive Directors without the Executive and Noël Harwerth.
Directors and also has a private discussion with
every Director on a wide range of issues affecting The Audit Committee receives reports on various
the Group, including any matters which the aspects of control. It reviews the Group’s financial
Directors, individually, wish to raise. Each Director statements, the scope of the audits and the plans,
discusses his or her own performance with the findings and recommendations of the Group
Chairman. internal and external Auditors.

The Board discusses the results of its evaluations The Audit Committee has unrestricted access to
and uses the process to constructively improve the both the Group internal and external Auditors and
effectiveness of the Board. meets privately with the external Auditors at least
once each year. The independence and objectivity
Re-election of the external Auditors is safeguarded by the Audit
One third of the Directors are required to retire at Committee’s pre-approval of all non-audit services.
every Annual General Meeting. Consequently,
every Director must submit themselves for re- Risk and Compliance Committee
election at least once every three years. New Members: Fintan Drury (Chairman), Lar Bradshaw
Directors are proposed for re-election at the and Ned Sullivan.
Annual General Meeting following their
appointment. The Risk and Compliance Committee’s role is to
oversee risk management and compliance. It
Whilst not strictly in line with the Combined Code, reviews, on behalf of the Board, the key risks and
Michael Jacob, who has served more than nine compliance issues inherent in the business and the
years as a Non-executive Director, was not system of internal control necessary to manage
proposed for re-election by the Board in 2007 as them, and presents its findings to the Board.
he had been put forward for re-election in both
2005 and 2006. Nomination and Succession Committee
Members: Anne Heraty (Chairman), Lar Bradshaw,
The names of Directors submitted for election or David Drumm, Fintan Drury and Sean FitzPatrick.
re-election are accompanied by biographical and

34
 Anglo Irish Bank
Annual Report & Accounts 2007

This Committee is responsible for recommending security, business continuity planning, asset and
candidates to the Board for appointment as liability management (including interest,
Directors and ensuring a suitable induction currency and liquidity risk), operational risk
programme is in place for all new Directors. It management, credit risk management and
regularly reviews the Board's structure, size, compliance.
composition, balance and succession plans and
encourages the establishment of formal The Group Internal Audit function reports to the
management development programmes. External Group Chief Executive and the Audit Committee. It
search consultants were used in the process leading helps the Group accomplish its objectives by
to the appointment of Noël Harwerth as a Non- bringing a systematic and disciplined approach to
executive Director. evaluating and improving the effectiveness of the
risk management, control and governance
Internal control processes.
The Directors acknowledge their overall
responsibility for the Group’s system of internal The system of internal control, which is embedded
control and for reviewing its effectiveness. The within the operations of the Group, is reviewed by
system is designed to manage rather than eliminate Group Internal Audit. Emphasis is focused on areas
the risk of failure to achieve the Group’s business of greatest risk as identified by risk analysis. In
objectives and provides reasonable but not absolute addition, the internal control systems are subject to
assurance against material financial misstatement or regulatory supervision by the Financial Regulator
loss. Such losses could arise because of the nature and other overseas regulators.
of the Group’s business in undertaking a wide range
of financial services that inherently involve varying The Audit Committee and the Risk and Compliance
degrees of risk. Committee review the effectiveness of the Group’s
internal controls annually. This involves reviewing
The Board confirms that, during the year under the work and the reports of the Group Internal
review and up to the date of approval of the annual Audit, Risk Management and Compliance functions
report and financial statements, there was in place and establishing that appropriate action is being
an ongoing process for identifying, evaluating and taken by management to address issues highlighted.
managing the significant risks faced by the Group The Audit Committee also meets with and receives
and that this process is regularly reviewed by the reports from the external Auditors.
Board and accords with the Financial Reporting
Council’s revised guidance on Internal Control. The Following each meeting of the Audit Committee
Group’s system of internal control includes: and the Risk and Compliance Committee, the
Committee Chairmen report to the Board and
ƒ An organisation structure with clearly defined minutes of such meetings are circulated to all
authority limits and reporting mechanisms to members of the Board.
higher levels of management and to the Board,
which supports the maintenance of a strong The Directors confirm that, with the assistance of
control environment; reports from the Audit Committee and the Risk
and Compliance Committee, they have reviewed, in
ƒ A Group Risk Management function and a accordance with the Combined Code, the
Group Compliance function with responsibility effectiveness of the systems of internal control in
for ensuring that risks are identified, assessed existence in the Group for the year ended
and managed throughout the Group. The 30 September 2007 and for the period up to and
Group Credit Committee together with the including the date of approval of the financial
Group Asset and Liability Committee provide statements. The review undertaken covers all
support to the Audit Committee and the Risk aspects of control including financial, operational
and Compliance Committee in ensuring that and compliance controls and risk management.
efficient procedures are in place to manage
risk; Going concern
The Directors confirm that they are satisfied that
ƒ An annual budgeting and monthly financial the Bank and the Group have adequate resources
reporting system for all Group business units to continue to operate for the foreseeable future
which enables progress against plans to be and are financially sound. For this reason, they
monitored, trends to be evaluated and continue to adopt the going concern basis in
variances to be acted upon; and preparing the financial statements.

ƒ A comprehensive set of policies and guidelines

relating to capital expenditure, computer

35
 Corporate governance statement continued
Relations with shareholders for, against and abstaining from that resolution. The
The Group gives relations with shareholders a high Chairmen of the Remuneration Committee, Audit
priority. The Directors are kept informed on Committee, Risk and Compliance Committee and
shareholder relations through regular reports to Nomination and Succession Committee are
the Board by the Group Chief Executive and Group available to answer relevant questions at the Annual
Finance Director and through feedback from General Meeting.
shareholders, brokers and investment bankers.
There is regular dialogue with individual institutional The Group uses its internet site
shareholders, financial analysts and brokers and (www.angloirishbank.com) to provide investors
presentations are given at the time of major with the full text of each annual and interim report
announcements, which provide opportunities for for the previous five years, and copies of
Directors to hear the views of shareholders presentations to analysts and investors.
directly. Annual and interim results presentations are
broadcast live via the internet to facilitate as many
All shareholders are invited to attend the Annual shareholders as possible receiving the information
General Meeting and to participate in proceedings. at the same time. In addition, shareholders can
Notice is sent to shareholders at least twenty choose to receive reports and Annual General
working days in advance of the meeting. At the Meeting documents electronically rather than by
Annual General Meeting, separate resolutions are post.
proposed on each substantially separate issue.
When an issue has been determined at the meeting The website also provides detailed financial data,
on a show of hands, the Chairman indicates to the Bank information, information on credit ratings and
meeting the number and proportion of proxy votes all Stock Exchange and other press releases.

36
 Anglo Irish Bank
Annual Report & Accounts 2007

Attendance at scheduled meetings during the year ended 30 September 2007

Risk and Nomination and

Name Board Audit Remuneration Compliance Succession
A* B* A* B* A* B* A* B* A* B*
Sean FitzPatrick,
8 8 - - 2 2 - - 3 3
Chairman
David Drumm,
8 8 - - - - - - 3 3
Group Chief Executive
Lar Bradshaw 8 6 - - - - 7 6 3 3
Tom Browne (1) 8 7 - - - - 2 2 - -
Fintan Drury 8 8 - - - - 7 7 3 3
Noël Harwerth (2)
6 6 2 2 - - - - - -
(Appointed 2 February 2007)
Anne Heraty (3) 8 8 4 3 2 2 - - 3 3
Michael Jacob (4) 8 8 2 2 1 1 3 3 - -
William McAteer 8 8 - - - - - - - -
Gary McGann (5) 8 8 6 5 1 1 - - - -
Declan Quilligan (6) 8 8 - - - - 2 1 - -
Ned Sullivan (7) 8 8 4 4 2 2 3 3 - -
Pat Whelan (8) 8 8 - - - - 2 2 - -
Patrick Wright (9)
3 3 2 2 - - - - - -
(Retired 2 February 2007)

* Column A indicates the number of scheduled meetings held during the period the Director was a member of the Board or
Committee and was eligible to attend and Column B indicates the number of scheduled meetings attended.

(1) Tom Browne retired from the Risk and Compliance Committee on 31 January 2007.

(2) Noël Harwerth was appointed to the Audit Committee on 28 June 2007.

(3) Anne Heraty retired from the Audit Committee on 25 April 2007.

(4) Michael Jacob retired from the Risk and Compliance Committee on 24 April 2007 and from the Remuneration
Committee on 29 June 2007. He was appointed to the Audit Committee on 28 June 2007.

(5) Gary McGann was appointed to the Remuneration Committee on 29 June 2007.

(6) Declan Quilligan retired from the Risk and Compliance Committee on 31 January 2007.

(7) Ned Sullivan retired from the Audit Committee on 25 April 2007. He was appointed to the Risk and Compliance
Committee on 24 May 2007.

(8) Pat Whelan retired from the Risk and Compliance Committee on 31 January 2007.

(9) Patrick Wright retired from the Audit Committee on 2 February 2007.

37
 Independent Auditors’ report to the members of
Anglo Irish Bank Corporation plc
We have audited the Group and parent Bank explanations necessary for the purposes of our
financial statements ('the financial statements') of audit and whether the parent Bank balance sheet is
Anglo Irish Bank Corporation plc for the year in agreement with the books of account and
ended 30 September 2007 which comprise the returns.
Consolidated income statement, the Consolidated
and the Bank balance sheets, the Consolidated and We also report to you if, in our opinion, any
the Bank statements of recognised income and information specified by law or the Listing Rules of
expense, the Consolidated and the Bank cash flow the Irish Stock Exchange regarding Directors'
statements, and the related notes 1 to 58. These remuneration and other transactions is not
financial statements have been prepared under the disclosed and, where practicable, include such
accounting policies set out therein. information in our report.

This report is made solely to the parent Bank's We review whether the Corporate governance
members, as a body, in accordance with Section statement reflects the parent Bank's compliance
193 of the Companies Act, 1990. Our audit work with the nine provisions of the 2003 Financial
has been undertaken so that we might state to the Reporting Council's Combined Code specified for
parent Bank's members those matters we are our review by the Listing Rules of the Irish Stock
required to state to them in an Auditors’ report Exchange and we report if it does not. We are not
and for no other purpose. To the fullest extent required to consider whether the Board's
permitted by law, we do not accept or assume statements on internal control cover all risks and
responsibility to anyone other than the Bank and controls or form an opinion on the effectiveness of
the parent Bank's members as a body, for our audit the Group's corporate governance procedures or
work, for this report, or for the opinions we have its risk and control procedures.
formed.
We read other information contained in the Annual
Respective responsibilities of Directors and Report and consider whether it is consistent with
Auditors the audited financial statements. The other
The Directors are responsible for the preparation information comprises only the Chairman's
of the financial statements in accordance with statement, the Group Chief Executive's review, the
applicable Irish law and International Financial Report of the Directors and the Corporate
Reporting Standards (IFRSs) as adopted by the governance statement. We consider the
European Union as set out in the Statement of implications for our report if we become aware of
Directors' responsibilities. any apparent misstatements or material
inconsistencies with the financial statements. Our
Our responsibility is to audit the financial responsibilities do not extend to any other
statements in accordance with relevant legal and information.
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 and
have been properly prepared in accordance with
the Companies Acts, 1963 to 2006 and Article 4 of
the IAS Regulation. We also report to you our
opinion as to: whether proper books of account
have been kept by the parent Bank; whether proper
returns adequate for our audit have been received
from branches of the parent Bank not visited by us;
whether, at the balance sheet date, there exists a
financial situation which may require the convening
of an Extraordinary General Meeting of the parent
Bank; and whether the information given in the
Report of the Directors is consistent with the
financial statements. In addition, we state whether
we have obtained all the information and

38
Basis of audit opinion We have obtained all the information and
We conducted our audit in accordance with explanations we consider necessary for the
International Standards on Auditing (UK and purposes of our audit. In our opinion proper books
Ireland) issued by the Auditing Practices Board. An of account have been kept by the parent Bank and
audit includes examination, on a test basis, of proper returns adequate for the purposes of our
evidence relevant to the amounts and disclosures in audit have been received from branches of the
the financial statements. It also includes an parent Bank not visited by us. The parent Bank
assessment of the significant estimates and balance sheet is in agreement with the books of
judgments made by the Directors in the account and returns.
preparation of the financial statements, and of
whether the accounting policies are appropriate to In our opinion the information given in the Report
the Group's and Bank's circumstances, consistently of the Directors is consistent with the financial
applied and adequately disclosed. statements.

We planned and performed our audit so as to In our opinion, the parent Bank balance sheet does
obtain all the information and explanations which not disclose a financial situation, which under
we considered necessary in order to provide us Section 40(1) of the Companies (Amendment) Act,
with sufficient evidence to give reasonable 1983, would require the convening of an
assurance that the financial statements are free Extraordinary General Meeting of the Bank.
from material misstatement, whether caused by
fraud or other irregularity or error. In forming our
opinion we also evaluated the overall adequacy of Ernst & Young
the presentation of information in the financial Registered Auditors
statements. Dublin

Opinion 27 November 2007

In our opinion:

ƒ the Group 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 Group as at 30 September 2007 and of its
profit for the year then ended;

ƒ the parent Bank's financial statements give a

true and fair view, in accordance with IFRSs as
adopted by the European Union as applied in
accordance with the Companies Acts, 1963 to
2006, of the state of affairs of the parent Bank
as at 30 September 2007; and

ƒ the financial statements have been properly

prepared in accordance with the Companies
Acts, 1963 to 2006 and Article 4 of the IAS
Regulation.

______________________________________________________________________________________________________
The following two notes have been added to the Auditors’ report in compliance with the guidance issued by the Auditing
Practices Board in bulletin 2001/1 ‘The electronic publication of auditors’ reports’.
Notes:
1. The maintenance and integrity of the Anglo Irish Bank website is the responsibility of the Directors; the work carried out
by the Auditors does not involve consideration of these matters and, accordingly, the Auditors accept no responsibility for
any changes that may have occurred to the financial statements since they were initially presented on the website.
2. Legislation in the Republic of Ireland governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.

39
 Consolidated income statement
For the year ended 30 September 2007
2007 2006
Note €m €m

Interest and similar income 3 5,371 3,169

Interest expense and similar charges 4 (3,805) (2,100)
Net interest income 1,566 1,069

Fee and commission income 177 147

Fee and commission expense (16) (14)
Dealing profits 5 13 27
Other operating income 6 21 11
Other income 195 171
Total operating income 1,761 1,240

Administrative expenses 7 (368) (311)

Depreciation (11) (7)
Amortisation of intangible assets - software 29 (14) (10)
Total operating expenses (393) (328)

Operating profit before provisions for impairment 1,368 912

Provisions for impairment:
Loans and advances - specific (51) (36)
Loans and advances - collective (31) (30)
Other - collective (67) -
11 (149) (66)

Operating profit 1,219 846

Share of results of joint ventures 27 2 4
Profit on disposal of Isle of Man trust business 12 22 -

Profit before taxation 1,243 850

Taxation 13 (235) (192)

Profit for the year 1,008 658

Attributable to:
Equity holders of the parent 14 998 657
Minority interest 15 10 1
Profit for the year 1,008 658

Basic earnings per €0.16 ordinary share 17 134.7c 93.7c

Diluted earnings per €0.16 ordinary share 17 133.2c 92.3c

Directors: David Drumm (Group Chief Executive), William McAteer (Executive Director), Pat Whelan (Executive Director).
Secretary: Natasha Mercer.

40
 Anglo Irish Bank
Annual Report & Accounts 2007

Consolidated balance sheet

As at 30 September 2007 2007 2006
Note €m €m
Assets
Cash and balances with central banks 18 848 440
Financial assets at fair value through profit or loss
- held on own account 19 430 456
- held in respect of liabilities to customers under investment contracts 19 644 309
Derivative financial instruments 20 1,355 2,459
Loans and advances to banks 21 12,051 12,424
Assets classified as held for sale 22 288 -
Available-for-sale financial assets 23 12,530 5,155
Loans and advances to customers 24 65,949 49,142
Interests in joint ventures 27 88 68
Intangible assets - software 29 17 24
Intangible assets - goodwill 29 46 66
Investment property
- held on own account 30 25 36
- held in respect of liabilities to customers under investment contracts 31 2,090 1,956
Property, plant and equipment 32 37 37
Retirement benefit assets 9 29 16
Deferred taxation 33 47 34
Other assets 34 143 625
Prepayments and accrued income 35 43
Total assets 96,652 73,290
Liabilities
Deposits from banks 35 7,601 10,275
Customer accounts 36 52,686 36,858
Debt securities in issue 37 23,588 15,060
Derivative financial instruments 20 1,175 2,490
Liabilities to customers under investment contracts 38 1,779 1,394
Current taxation 63 51
Other liabilities 39 175 32
Accruals and deferred income 190 183
Retirement benefit liabilities 9 7 7
Deferred taxation 33 49 43
Subordinated liabilities and other capital instruments 40 5,274 4,205
Total liabilities 92,587 70,598

Share capital 41 122 115

Share premium 43 1,139 594
Other reserves 43 (92) 9
Retained profits 43 2,883 1,971
Shareholders' funds 4,052 2,689
Minority interest 42 13 3
Total equity 43 4,065 2,692

Total equity and liabilities 96,652 73,290

Contingent liabilities
Guarantees 45 1,524 2,175
Commitments
Commitments to lend 45 9,775 8,734

Directors: David Drumm (Group Chief Executive), William McAteer (Executive Director), Pat Whelan (Executive Director).
Secretary: Natasha Mercer.

41
 Bank balance sheet
As at 30 September 2007
2007 2006
Note €m €m
Assets
Cash and balances with central banks 18 830 430
Financial assets at fair value through profit or loss
- held on own account 19 386 436
Derivative financial instruments 20 1,414 2,491
Loans and advances to banks 21 9,949 10,350
Assets classified as held for sale 22 145 -
Available-for-sale financial assets 23 12,502 5,141
Loans and advances to customers 24 64,793 48,718
Investments in Group undertakings 28 950 789
Intangible assets - software 29 16 22
Property, plant and equipment 32 21 21
Retirement benefit assets 9 26 13
Deferred taxation 33 46 34
Other assets 34 1 8
Prepayments and accrued income 18 15
Total assets 91,097 68,468

Liabilities
Deposits from banks 35 12,728 13,336
Customer accounts 36 46,700 32,758
Debt securities in issue 37 23,588 15,060
Derivative financial instruments 20 1,241 2,508
Current taxation 13 14
Other liabilities 39 55 32
Accruals and deferred income 171 134
Deferred taxation 33 2 -
Subordinated liabilities and other capital instruments 40 2,976 2,297
Total liabilities 87,474 66,139

Share capital 41 122 115

Share premium 43 1,139 594
Other reserves 43 (90) 8
Retained profits 43 2,452 1,612
Total equity 43 3,623 2,329
Total equity and liabilities 91,097 68,468

Contingent liabilities
Guarantees 45 1,372 2,109
Commitments
Commitments to lend 45 7,323 6,936

Directors: David Drumm (Group Chief Executive), William McAteer (Executive Director), Pat Whelan (Executive Director).
Secretary: Natasha Mercer.

42
 Anglo Irish Bank
Annual Report & Accounts 2007

Statement of recognised income and expense

For the year ended 30 September 2007
The Group The Bank
2007 2006 2007 2006
€m €m €m €m

Profit for the year 1,008 658 909 602

Net actuarial gains in retirement benefit schemes, after tax 12 6 12 6

Net change in cash flow hedging reserve, after tax 5 (58) 5 (58)
Net change in available-for-sale reserve, after tax (107) (4) (107) (4)
Foreign exchange translation (8) 2 (5) 1
Income and expense recognised directly in equity (98) (54) (95) (55)
Total recognised income and expense for the year 910 604 814 547

Attributable to:
Equity holders of the parent 900 603 814 547
Minority interest 10 1 - -
Total 910 604 814 547

43
 Cash flow statement
For the year ended 30 September 2007
The Group The Bank
2007 2006 2007 2006
Note €m €m €m €m
Cash flows from operating activities
Profit before taxation 1,243 850 1,098 731
Interest earned on available-for-sale financial assets (465) (154) (425) (154)
Financing costs of subordinated liabilities and other
capital instruments 261 174 132 93
Other non-cash items 46 138 142 113 105
1,177 1,012 918 775

Changes in operating assets and liabilities

Net increase in deposits 21,682 20,052 21,862 19,453
Net increase in loans and advances to customers (16,846) (15,422) (16,050) (14,923)
Net (increase)/decrease in loans and advances to banks (3) 17 (177) 220
Net increase in assets held in respect of liabilities to
customers under investment contracts (469) (772) - -
Net increase in investment contract liabilities 385 479 - -
Net decrease/(increase) in financial assets at fair value
through profit or loss held on own account 26 (439) 50 (432)
Net movement in derivative financial instruments (278) (22) (215) 2
Net decrease/(increase) in other assets 482 (255) 7 (4)
Net increase in other liabilities 143 8 23 9
Exchange movements 383 72 395 52
Net cash flows from operating activities before taxation 6,682 4,730 6,813 5,152

Tax paid (217) (163) (188) (145)

Net cash flows from operating activities 6,465 4,567 6,625 5,007

Cash flows from investing activities (note a) (7,562) (111) (7,652) (244)

Cash flows from financing activities (note b) 1,399 1,459 1,086 968

Net increase in cash and cash equivalents 302 5,915 59 5,731

Opening cash and cash equivalents 10,800 4,926 9,069 3,356

Effect of exchange rate changes on cash and cash equivalents (270) (41) (235) (18)
Closing cash and cash equivalents 46 10,832 10,800 8,893 9,069

44
 Anglo Irish Bank
Annual Report & Accounts 2007

The Group The Bank

2007 2006 2007 2006
€m €m €m €m
(a) Cash flows from investing activities
Purchases of available-for-sale financial assets (14,743) (2,538) (14,728) (2,522)
Sales and redemptions of available-for-sale financial assets 7,120 2,340 7,120 2,325
Interest received on available-for-sale financial assets net of
associated hedges 332 146 292 146
Purchases of assets classified as held for sale (288) - (145) -
Proceeds on disposal of Isle of Man trust business 44 - - -
Purchases of property, plant and equipment (12) (8) (10) (7)
Proceeds on disposals of property, plant and equipment 1 1 1 -
Additions to intangible assets - software (7) (12) (6) (12)
Investments in joint venture interests (42) (51) - -
Proceeds on disposals of joint venture interests 13 - - -
Distributions received from joint venture interests 10 11 - -
Purchases of investment property held on own account (1) - - -
Proceeds on disposals of investment property held on own
account 11 - - -
Investments in Group undertakings - - (176) (174)
Net cash used in investing activities (7,562) (111) (7,652) (244)

(b) Cash flows from financing activities

Proceeds of equity share issues 552 431 552 431
Proceeds from issues of subordinated liabilities and other
capital instruments 1,259 1,552 748 946
Redemptions of subordinated liabilities and other
capital instruments (104) (260) (8) (260)
Coupons paid on subordinated liabilities and other capital
instruments (205) (155) (120) (75)
Equity dividends paid (86) (74) (86) (74)
Purchases of own shares (17) (35) - -
Net cash flows from financing activities 1,399 1,459 1,086 968

45
 Notes to the financial statements
1. Accounting policies
The principal accounting policies that the Group applied in preparing its financial statements for the year ended
30 September 2007 are set out below.

1.1 Basis of preparation

Both the consolidated and parent Bank's financial statements comply with International Financial Reporting
Standards (‘IFRS’) as adopted by the European Union (‘EU’) and applicable at 30 September 2007. The financial
statements also comply with the requirements of relevant Irish legislation including the Companies Acts, 1963 to
2006 and the European Communities (Credit Institutions: Accounts) Regulations, 1992 as amended by the
European Communities (International Financial Reporting Standards and Miscellaneous Amendments)
Regulations, 2005.

In 2006 the Group early adopted the fair value option under IAS 39 and the Amendment to IAS 19 - 'Employee
Benefits - Actuarial Gains and Losses, Group Plans and Disclosures', both of which have been adopted by the EU.

The financial statements have been prepared under the historical cost convention, as modified by the revaluation
of certain assets and liabilities to the extent required or permitted under accounting standards as set out in the
relevant accounting policies. They are presented in euro, rounded to the nearest million.

1.2 Basis of consolidation

The consolidated financial statements include the financial statements of Anglo Irish Bank Corporation plc
('the Bank') and all of its subsidiary undertakings (including special purpose entities) prepared to the end of the
financial year. An entity is a subsidiary where the Group has the power, directly or indirectly, to control the
financial and operating policies of the entity so as to obtain benefits from its activities. The existence and effect
of potential voting rights that are currently exercisable or convertible are considered in assessing whether the
Group controls the entity.

Subsidiaries are consolidated from the date on which control is transferred to the Group until the date that
control ceases. The purchase method of accounting is used by the Group to account for the acquisition of
subsidiary undertakings. Intercompany balances and any unrealised gains and losses, or income and expenses,
arising on transactions between Group entities are eliminated on consolidation.

The accounting policies have been consistently applied by Group entities.

1.3 Interest income and expense recognition

Interest income and expense is recognised in the income statement for all interest-bearing financial instruments
held on own account using the effective interest rate method.

The effective interest rate method is a method of calculating the amortised cost of a financial asset or liability
and of allocating the interest income or interest expense over the relevant period. The effective interest rate is
the rate that exactly discounts the expected future cash payments and receipts throughout the expected life of
the financial instrument, or when appropriate a shorter period, to the net carrying amount of the financial asset
or financial liability.

The calculation includes all fees, transaction costs and other premiums and discounts that are an integral part of
the effective interest rate on the transaction.

Once an impairment loss has been made on an individual asset interest income is recognised on the unimpaired
portion of that asset using the rate of interest at which its estimated future cash flows were discounted in
measuring impairment.

Borrowing costs are not capitalised.

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 Anglo Irish Bank
Annual Report & Accounts 2007

1.4 Fee and commission income

Fees and commissions which are not an integral part of the effective interest rate are generally recognised on an
accruals basis over the period in which the service has been provided.

Asset management, advisory and service fees are recognised based on the applicable service contracts, usually on
a time-apportioned basis. The same principle is applied to the recognition of income from wealth management,
financial planning, trustee and custody services that are continuously provided over an extended period of time.

Loan commitment fees for loans that are likely to be drawn down are deferred (together with related direct
costs) and recognised as an adjustment to the effective interest rate on the loan once drawn. Commitment fees
in relation to facilities where drawdown is not probable are recognised over the term of the commitment.

Fees arising from negotiating, or participating in the negotiation of, a transaction for a third party, such as the
acquisition of property assets, are recognised upon completion of the underlying transaction. Loan syndication
fees are recognised as revenue when the syndication has been completed and the Group has retained either no
part of the loan for itself or retained a part of the loan at the same effective interest rate as the other
participants.

1.5 Financial assets

Financial assets are classified into the following categories: financial assets at fair value through profit or loss;
loans and receivables; held-to-maturity investments; and available-for-sale financial assets. Management
determines the classification of financial assets at initial recognition.

Financial assets at fair value through profit or loss

This category has two sub-categories: financial assets held for trading, and those designated at fair value through
profit or loss at inception. A financial asset is classified in this category if acquired principally for the purpose of
selling in the short term or if so designated by management.

A financial asset may be designated at fair value through profit or loss in the following circumstances:

a) it eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise

arise from measuring assets or liabilities or recognising gains and losses arising on them on different
bases; or
b) a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a
fair value basis, in accordance with a documented risk management or investment strategy; or
c) a financial instrument contains one or more embedded derivatives that significantly modify the cash
flows arising from the instrument and would otherwise need to be accounted for separately.

Derivatives are classified as held for trading unless they are designated as hedges. Interest on financial assets at
fair value through profit or loss held on own account is included in net interest income. Other gains and losses
arising from changes in fair value are included directly in the income statement within dealing profits.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market and which are not classified as available-for-sale. They arise when the Group provides
money to a customer with no intention of trading the receivable.

Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed
maturities that the Group's management has the positive intention and ability to hold to maturity. Were the
Group to sell other than an insignificant amount of held-to-maturity assets, the entire category would be tainted
and reclassified as available-for-sale financial assets.

47
 Notes to the financial statements continued

1. Accounting policies continued

1.5 Financial assets continued

Available-for-sale financial assets
Available-for-sale financial assets are those intended to be held for an indefinite period of time, which may be
sold in response to needs for liquidity or changes in interest rates, exchange rates, asset prices or other factors.

Purchases and sales of financial assets at fair value through profit or loss, held-to-maturity investments and
available-for-sale financial assets are recognised on a trade date basis, being the date on which the Group
commits to purchase or sell the asset. Loans and receivables are recognised when funds are advanced to the
borrowers. Financial assets are initially recognised at fair value plus transaction costs, with the exception of
financial assets carried at fair value through profit or loss whose transaction costs are taken directly to the
income statement. Financial assets are derecognised when the rights to receive cash flows from the financial
assets have expired or where the Group has transferred substantially all the risks and rewards of ownership.

Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried
at fair value. Loans and receivables and held-to-maturity investments are subsequently carried at amortised cost
using the effective interest rate method.

Gains and losses arising from changes in the fair value of financial assets at fair value through profit or loss held
on own account are included within dealing profits in the income statement in the period in which they arise.
Interest on assets within this category is reported in interest income. Gains and losses arising from changes in
the fair value of available-for-sale financial assets are recognised as a separate component of shareholders' equity
until the financial assets are derecognised or impaired, at which time the cumulative gain or loss previously
recognised in equity is transferred to the income statement.

Interest is calculated using the effective interest rate method and is recognised in the income statement.
Dividends on available-for-sale equity instruments are recognised in the income statement when the Group's
right to receive payment is established.

The fair values of financial assets quoted in active markets are based on current bid prices. For unquoted
financial assets or where the market for a financial asset is not active, the Group establishes fair value by using
valuation techniques. These include the use of recent arm's length transactions, reference to other similar
instruments, discounted cash flow analysis, option pricing models and other valuation techniques commonly used
by market participants. Private equity investments that do not have a quoted market price in an active market
and whose fair value cannot be reliably measured using valuation techniques are measured at cost.

The Bank accounts for investments in subsidiary undertakings at cost less provisions for impairment.

1.6 Financial liabilities

Financial liabilities other than those at fair value through profit or loss are initially recognised at fair value, being
their issue proceeds net of transaction costs incurred. Transaction costs on liabilities at fair value are expensed
to the income statement. All liabilities, other than those designated at fair value through profit or loss, are
subsequently carried at amortised cost. For financial liabilities measured at amortised cost any difference
between initial fair value and redemption value is recognised in the income statement using the effective interest
rate method.

A liability upon initial recognition may be designated at fair value through profit or loss when:

a) it eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise

arise from measuring assets or liabilities or recognising the gains and losses on them on different bases;
or
b) a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a
fair value basis, in accordance with a documented risk management or investment strategy; or
c) a financial instrument contains one or more embedded derivatives that significantly modify the cash
flows arising from the instrument and would otherwise need to be accounted for separately.

The classification of instruments as a financial liability or an equity instrument is dependent upon the substance of
the contractual arrangement. Instruments which carry a contractual obligation to deliver cash or another
financial asset to another entity are classified as financial liabilities.

48
 Anglo Irish Bank
Annual Report & Accounts 2007

Preference shares and other subordinated capital instruments issued are classified as financial liabilities if coupon
payments are not discretionary. Distributions on these instruments are recognised in the income statement as
interest expense using the effective interest rate method.

1.7 Financial guarantees

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the
holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the
original or modified terms of a debt instrument.

Financial guarantees are given to banks, financial institutions and other bodies on behalf of customers to secure
loans, overdrafts and other banking facilities and to other parties in connection with the performance of
customers under obligations related to contracts, advance payments made by other parties, tenders, retentions
and the payment of import duties and taxes.

Financial guarantees are initially recognised in the financial statements at fair value on the date that the guarantee
was given. Subsequent to initial recognition, the Group's liabilities under such guarantees are measured at the
higher of the initial measurement, less amortisation calculated to recognise in the income statement the fee
income earned over the period, and the best estimate of the expenditure required to settle any financial
obligation arising as a result of the guarantees at the balance sheet date.

Where the parent Bank enters into financial guarantee contracts to guarantee the indebtedness of other Group
companies, the parent Bank considers these contracts to be insurance arrangements and accounts for them as
such. The parent Bank treats these guarantee contracts as contingent liabilities until such time as it becomes
probable that it will be required to make a payment under these guarantees.

1.8 Impairment of financial assets

It is Group policy to make provisions for impairment of financial assets to reflect the losses inherent in those
assets at the balance sheet date.

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a
portfolio of financial assets is impaired. A financial asset or a portfolio of financial assets is impaired and
impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or
more loss events that occurred after the initial recognition of the asset and that loss event (or events) has had
an impact such that the estimated present value of future cash flows is less than the current carrying value of the
financial asset, or portfolio of financial assets, and can be reliably measured.

Objective evidence that a financial asset, or a portfolio of financial assets, is potentially impaired includes
observable data that comes to the attention of the Group about the following loss events:

a) significant financial difficulty of the issuer or obligor;

b) a breach of contract, such as a default or delinquency in interest or principal payments;
c) the granting to the borrower of a concession, for economic or legal reasons relating to the borrower's
financial difficulty, that the Group would not otherwise consider;
d) it becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
e) the disappearance of an active market for that financial asset because of financial difficulties; or
f) observable data indicating that there is a measurable decrease in the estimated future cash flows from a
portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet
be identified within the individual financial assets in the portfolio, including:
- adverse changes in the payment status of borrowers in the portfolio; or
- national or local economic conditions that correlate with defaults on the assets in the portfolio.

The Group first assesses whether objective evidence of impairment exists individually for financial assets that are
individually significant, and individually or collectively for financial assets that are not individually significant. If the
Group determines that no objective evidence of impairment exists for an individually assessed financial asset,
whether significant or not, it includes that asset in a group of financial assets with similar credit risk
characteristics and includes these performing assets under the collective incurred but not reported ('IBNR')
assessment. An IBNR impairment provision represents an interim step pending the identification of impairment
losses on an individual asset in a group of financial assets. As soon as information is available that specifically
identifies losses on individually impaired assets in a group, those assets are removed from the group. Assets that
are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are
not included under the collective assessment of impairment.

49
 Notes to the financial statements continued

1. Accounting policies continued

1.8 Impairment of financial assets continued
For loans and receivables and held-to-maturity investments, the amount of impairment loss is measured as the
difference between the asset's carrying amount and the present value of estimated future cash flows discounted
at the asset's original effective interest rate. If a loan or held-to-maturity investment has a variable interest rate,
the discount rate for measuring any impairment loss is the current effective interest rate determined under the
contract. The amount of the loss is recognised using an allowance account and is included in the income
statement.

The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects
the cash flows that may result from foreclosure, less costs for obtaining and selling the collateral, whether or not
foreclosure is probable.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment was recognised, the previously recognised impairment
loss is reversed by adjusting the allowance account. The amount of the reversal is recognised in the income
statement.

When a loan is deemed to be uncollectible, it is written off against the related provision for loan impairment.
Such loans are written off after all the necessary procedures have been completed and the amount of the loss
has been determined. Subsequent recoveries of amounts previously written off decrease the amount of the
provision for loan impairment in the income statement.

In the case of equity instruments classified as available-for-sale financial assets, a significant or prolonged decline
in the fair value of the instrument below its cost is considered in determining whether impairment exists. Where
such evidence exists, the cumulative net loss that has been previously recognised directly in equity is removed
from equity and recognised in the income statement. Impairment losses recognised in the income statement on
equity shares are not reversed through the income statement. All increases in the fair value of equity shares
after impairment are recognised directly in equity.

In the case of debt instruments classified as available-for-sale financial assets, impairment is assessed based on the
same criteria as all other financial assets. Reversals of impairment of debt securities are recognised in the income
statement if the increase in fair value can be objectively related to an event occurring after the impairment loss
was recognised.

1.9 Derivative financial instruments and hedge accounting

Derivatives
Derivative instruments, including swaps, futures, forward foreign exchange contracts, forward rate agreements
and options, are used for trading and for hedging purposes.

Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are
subsequently remeasured at their fair value. Fair values are obtained from quoted market prices in active
markets and where these are not available from valuation techniques including discounted cash flow and option
pricing models. Fair values are adjusted for counterparty credit risk. All derivatives are carried as assets when
their fair value is positive and as liabilities when their fair value is negative unless there is a legal ability and
intention to settle net. Derivatives are treated as held for trading unless they are designated as hedges.

Hedge accounting
The method of recognising the resulting fair value gain or loss depends on whether the derivative is designated
as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives
as either fair value hedges (where the Group hedges changes in the fair value of recognised assets or liabilities or
firm commitments), cash flow hedges (where the Group hedges the exposure to variability of cash flows
attributable to recognised assets or liabilities or highly probable forecasted transactions) or hedges of a net
investment in a foreign currency operation.

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 Anglo Irish Bank
Annual Report & Accounts 2007

The Group documents, at the inception of each hedging transaction, the relationship between hedging
instruments and hedged items, as well as its risk management objective and strategy for undertaking various
hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis,
of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair
values or cash flows of hedged items.

Fair value hedge accounting

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the
income statement, together with any changes in the fair value of the hedged asset or liability that are attributable
to the hedged risk.

If the hedge no longer meets the criteria for hedge accounting, the fair value hedging adjustment cumulatively
made to the carrying amount of the hedged item is, for items carried at amortised cost, amortised to profit or
loss over the period to maturity of the previously designated hedge relationship using the effective interest rate
method. For available-for-sale financial assets the fair value hedging adjustment remains in equity until the hedged
item affects profit or loss. If the hedged item is sold or repaid, the unamortised fair value adjustment is
recognised immediately in the income statement.

Cash flow hedge accounting

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges are initially recognised directly in equity. The gain or loss relating to the ineffective portion is recognised
immediately in the income statement. Amounts accumulated in equity are recycled to the income statement in
the same periods as the hedged items affect profit or loss.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge
accounting, hedge accounting is discontinued. Any cumulative gain or loss existing in equity at that time remains
in equity and is recognised in the income statement when the forecast transaction arises. When a forecast
transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is
immediately transferred to the income statement.

Hedges of net investments

Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss
on the hedging instrument relating to the effective portion of the hedge is recognised directly in equity; the gain
or loss relating to the ineffective portion is recognised immediately in the income statement. Gains and losses
accumulated in equity are included in the income statement on the disposal or partial disposal of the foreign
operation. Hedges of net investments may include non-derivative liabilities.

Derivatives that do not qualify for hedge accounting

Certain derivative instruments entered into as economic hedges may not qualify for hedge accounting. Changes
in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised
immediately in the income statement.

Embedded derivatives
Certain financial instruments contain both a derivative and a non-derivative component. In such cases, the
derivative component is termed an embedded derivative. When the economic characteristics and risks of
embedded derivatives are not closely related to those of the host contract and the host contract is not carried
at fair value through profit or loss, the embedded derivative is treated as a separate derivative. These embedded
derivatives are measured at fair value with changes in fair value recognised in the income statement.

1.10 Offsetting
Financial assets and liabilities are offset and the net amount reported in the balance sheet if, and only if, there is a
currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net
basis, or to realise the asset and settle the liability simultaneously.

1.11 Investment contracts

Contracts issued by the life assurance business are unit-linked and do not contain any significant insurance risk.
These contracts are all classified as investment contracts.

Financial assets and investment property held in respect of linked liabilities to customers and related liabilities to
customers under investments contracts are stated at fair value and are separately disclosed in the Group balance
sheet or in the notes thereto.

51
 Notes to the financial statements continued

1. Accounting policies continued

1.11 Investment contracts continued
Premiums received and claims paid are accounted for directly in the balance sheet as adjustments to the
investment contract liability. Investment income and changes in fair value arising from the investment contract
assets and the corresponding movement in investment contract liabilities are included on a net basis in other
operating income. Revenue on investment management services provided to holders of investment contracts is
recognised as the services are performed.

1.12 Derecognition
A financial asset is derecognised when it has been transferred and the transfer qualifies for derecognition. A
transfer requires that the Group either transfers the contractual rights to receive the asset's cash flows or
retains the right to the asset's cash flows but assumes a contractual obligation to pay those cash flows to a third
party.

After a transfer, the Group assesses the extent to which it has retained the risks and rewards of ownership of
the transferred asset. If substantially all the risks and rewards have been retained, the asset remains on the
balance sheet. If substantially all the risks and rewards have been transferred, the asset is derecognised.

If substantially all the risks and rewards have been neither retained nor transferred, the Group assesses whether
or not it has retained control of the asset. If it has not retained control, the asset is derecognised. Where the
Group has retained control of the asset, it continues to recognise the asset to the extent of its continuing
involvement.

A financial liability is removed from the balance sheet when the obligation is discharged, cancelled or expires.

1.13 Property, plant and equipment

Property, plant and equipment is held for use in the business and is stated at cost less accumulated depreciation
and provisions for impairment, if any. Additions and subsequent expenditure are capitalised only to the extent
that they enhance the future economic benefits expected to be derived from the asset. Property, plant and
equipment are depreciated on a straight-line basis to their residual values over their estimated useful economic
lives as follows:

Freehold buildings 2% per annum

Fixtures and fittings 12.5% to 25% per annum
Motor vehicles 20% per annum
Computer equipment 25% per annum

Leasehold improvements are depreciated on a straight-line basis over the shorter of twenty years or the period
of the lease or the period to the first break clause date in the lease. Freehold land is not depreciated.

The useful lives and residual values of property, plant and equipment are reviewed and adjusted, if appropriate,
at each balance sheet date. Property, plant and equipment are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable. If impaired, an asset's
carrying amount is written down immediately to its estimated recoverable amount which is the higher of its fair
value less costs to sell or its value in use. Gains and losses arising on the disposal of property, plant and
equipment are included in the income statement.

1.14 Trading properties

Trading properties are held for resale and are stated at the lower of cost and net realisable value.

1.15 Intangible assets

Goodwill
The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and
liabilities incurred or assumed at the date of the transaction, plus costs directly attributable to the acquisition.
Identifiable assets acquired are fair valued at the acquisition date. The excess of the Group's cost of acquisition
over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill.

52
 Anglo Irish Bank
Annual Report & Accounts 2007

Goodwill is tested annually for impairment or more frequently when there are indications that impairment may
have occurred. Goodwill is allocated to cash-generating units for the purposes of impairment testing. When the
recoverable amount of a cash-generating unit is less than its carrying amount, an impairment loss is required.
The recoverable amount of a cash-generating unit is the higher of its fair value less costs to sell and its value in
use. Goodwill is carried at cost less accumulated impairment losses.

In accordance with IFRS 1, goodwill written off directly to reserves or amortised to the income statement prior
to 1 October 2004 under Irish Generally Accepted Accounting Principles has not been reinstated.

Computer software
Computer software is stated at cost less accumulated amortisation and provisions for impairment, if any. The
identifiable and directly associated external and internal costs of acquiring and developing software are
capitalised where the software is controlled by the Group and where it is probable that future economic
benefits that exceed its cost will flow from its use over more than one year. Costs associated with maintaining
software are recognised as an expense when incurred. Capitalised computer software is amortised on a straight-
line basis over its expected useful life which is normally four years.

1.16 Investment property

Investment property comprises freehold and leasehold properties that are held to earn rentals or for capital
appreciation or both.

Investment property - held on own account

Investment property held on own account is included in the balance sheet at cost less accumulated depreciation
and provisions for impairment losses, if any. Freehold investment properties are depreciated on a straight-line
basis over fifty years. Leasehold investment properties are depreciated on a straight-line basis over the remaining
term of the lease up to a maximum of fifty years.

Investment property - held in respect of liabilities to customers under investment contracts

Investment property held in respect of liabilities to customers under investment contracts is included in the
balance sheet at fair value. Fair value is based on valuations by independent registered valuers which are
determined based on current prices in an active market for similar properties in the same location and
condition.

1.17 Employee benefits

Pension obligations
The Group operates various pension schemes including both defined benefit and defined contribution plans. A
defined benefit plan is a pension plan that defines an amount of pension benefit to be provided, usually as a
function of one or more factors such as age, years of service and basic pay. A defined contribution plan is a
pension plan under which the Group pays fixed contributions into a fund and has no legal or constructive
obligations to pay any further contributions.

The asset or liability recognised in the balance sheet in respect of each defined benefit pension plan is the fair
value of plan assets less the present value of the defined benefit obligation at the balance sheet date. Current bid
prices are used to measure the fair value of plan assets. The defined benefit obligation is calculated annually by
independent actuaries using the projected unit method. The present value of the defined benefit obligation is
determined by discounting the estimated future cash outflows using interest rates of high quality corporate
bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity
approximating the terms of the related pension liability. Plans in surplus are shown as assets and plans in deficit,
together with unfunded plans, are shown as liabilities. The recognised asset, where applicable, is limited to the
present value of any future refunds due from or reductions in future contributions payable to plans that are in
surplus.

The cost of providing defined benefit plans to employees comprising the current service cost, past service cost,
the expected return on plan assets and the change in the present value of plan liabilities arising from the passage
of time is charged to the income statement within employee expenses. Actuarial gains and losses arising from
experience adjustments and changes in actuarial assumptions are charged or credited directly to reserves
through the statement of recognised income and expense.

For defined contribution plans, once the contributions have been paid the Group has no further obligation. The
contributions are recognised as an employee benefit expense when they are due.

53
 Notes to the financial statements continued

1. Accounting policies continued

1.17 Employee benefits continued
Share-based payments to employees
The Group uses a number of share-based payment schemes to incentivise its employees. The fair value of shares
or share options granted in exchange for employee services received is recognised as an expense over the
period that the employees become unconditionally entitled ('the vesting period') to the shares or share options.
The total amount expensed over the vesting period is determined by reference to the fair value of the shares or
share options on the date of grant. The fair value of share options granted is calculated using a binomial lattice
model which takes into account any market conditions upon which vesting is conditional, the exercise price of
the option, the share price at the date of grant of the option, the risk-free interest rate, the expected dividend
yield, the expected volatility of the share price over the expected life of the option and other relevant factors.

Non-market vesting conditions are taken into account by adjusting the number of shares or share options
included in the measurement of the cost of employee services so that ultimately the amount recognised in the
income statement reflects the number of vested shares or share options. Where vesting conditions are related
to market conditions, the charge for the services received is recognised regardless of whether or not the
market-related vesting conditions are met, provided that the non-market vesting conditions are met.

The expense related to equity-settled share-based payments is credited to the share-based payment reserve in
equity. Where a share-based payment arrangement gives rise to the issue of new shares, the proceeds of issue
are credited to the share capital (with par value) and share premium accounts and there is also a transfer
between the share-based payment reserve and revenue reserves reflecting the accumulated cost of the share-
based payment recognised in the income statement.

Where shares are purchased by employee share trusts to satisfy share-based payment awards they are treated
as treasury shares and the cost of these shares is deducted directly from revenue reserves. Any cash
consideration received on the subsequent vesting of these shares is credited directly to revenue reserves and
there is also a transfer between the share-based payment reserve and revenue reserves reflecting the
accumulated cost of the share-based payment recognised in the income statement.

The fair value of share options granted on or before 7 November 2002 has not been expensed to the income
statement.

1.18 Assets classified as held for sale

An asset is classified as held for sale if it is primarily acquired for the purpose of selling it in the near term and
where a sale is highly probable and is expected to occur within one year. Assets classified as held for sale are
stated at the lower of their carrying amount and fair value less costs to sell. Gains and losses arising from
changes in fair value are recognised in the income statement.

1.19 Foreign currency translation

Functional and presentation currency
The consolidated financial statements are presented in euro, which is the Bank's functional and presentation
currency. Each entity in the Group determines its own functional currency which is the currency of the primary
economic environment in which the entity operates. Items included in the financial statements of each entity are
measured using that functional currency.

Transactions and balances

Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional
currency rate of exchange ruling at the balance sheet date. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the retranslation at period end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in the income statement except when deferred in
equity as qualifying cash flow hedges or qualifying net investment hedges.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the date when the fair value was determined.

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 Anglo Irish Bank
Annual Report & Accounts 2007

Foreign operations
The results and financial position of all Group entities that have a non-euro functional currency are translated
into euro as follows:

a) assets and liabilities and goodwill arising on acquisition of foreign operations are translated at the closing
rate at the balance sheet date;
b) income and expenses are translated into euro at the average rates of exchange during the period where
these are a reasonable approximation of the exchange rates at the dates of these transactions; and
c) all resulting exchange differences are included as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities and
of funding designated as hedges of such investments are included as a separate component of equity. When a
foreign entity is sold, the cumulative exchange differences deferred as a separate component of equity are
recognised in the income statement as part of the gain or loss on disposal.

1.20 Provisions
Provisions are recognised in respect of present legal or constructive obligations arising from past events where it
is probable that outflows of resources will be required to settle the obligations and they can be reliably
estimated.

Contingent liabilities are possible obligations whose existence depends on the outcome of uncertain future
events or those present obligations where the outflows of resources are uncertain or cannot be measured
reliably. Contingent liabilities are not recognised in the financial statements but are disclosed unless they are
remote.

1.21 Tax (current and deferred)

Current tax payable is the expected tax payable on the taxable income for the year adjusted for changes to
previous years and is calculated based on the applicable tax law in each jurisdiction in which the Group operates.
Deferred tax is provided using the balance sheet liability method on temporary differences arising between the
tax bases of assets and liabilities for taxation purposes and their carrying amounts in the financial statements.
Current and deferred taxes are determined using tax rates based on legislation enacted or substantively enacted
at the balance sheet date and expected to apply when the related tax asset is realised or the related tax liability
is settled.

Deferred tax assets are recognised where it is probable that future taxable profits will be available against which
temporary differences will be utilised. Deferred tax is provided on temporary differences arising from
investments in subsidiaries and joint ventures, except where the timing of the reversal of the temporary
difference is controlled by the Group and it is probable that the difference will not reverse in the foreseeable
future. Deferred tax is not provided on goodwill.

Current and deferred taxes are recognised in the income statement in the period in which the profits or losses
arise except to the extent that they relate to items recognised directly in equity, in which case the taxes are also
recognised in equity.

Deferred and current tax assets and liabilities are only offset when they arise in the same reporting group for tax
purposes and where there is both the legal right and intention to settle on a net basis or to realise the asset and
settle the liability simultaneously.

55
 Notes to the financial statements continued

1. Accounting policies continued

1.22 Leases
Group as lessor
Leasing and instalment credit agreements with customers are classified as finance leases if the agreements
transfer substantially all the risks and rewards of ownership of an asset, with or without ultimate legal title. An
asset classified as a finance lease is recorded within loans and advances to customers as a receivable based on
the present value of the lease payments, discounted at the rate of interest implicit in the lease, less any
provisions for bad and doubtful rentals. The difference between the total payments receivable under the lease
and the present value of the receivable is recognised as unearned finance income, which is allocated to
accounting periods under the pre-tax net investment method to reflect a constant periodic rate of return.

Assets leased to customers are classified as operating leases if the lease agreements do not transfer substantially
all the risks and rewards of ownership. Where leased assets are included within investment property held on
own account on the Group's balance sheet, depreciation is provided on the depreciable amount of these assets
on a systematic basis over their estimated useful lives. Rental income from investment property held on own
account and related lease incentives granted are recognised on a straight-line basis over the non-cancellable term
of the lease. Investment contract accounting applies where leased assets are included within investment property
held in respect of linked liabilities to customers.

Group as lessee
Operating lease rentals payable and related lease incentives receivable are recognised in the income statement
on a straight-line basis over the non-cancellable term of the lease.

1.23 Interests in joint ventures

Joint ventures are contractual arrangements whereby two or more parties undertake an economic activity that
is subject to joint control. The Group's interests in joint ventures are recognised using the equity method of
accounting and are initially recognised at cost, with the exception of interests in joint ventures held under
investment contracts which are designated at fair value through profit or loss. Under the equity method, the
Group's share of the post-acquisition profits or losses after taxation of joint ventures is recognised in the
income statement and its share of post-acquisition movements in reserves is recognised in reserves. The
cumulative post-acquisition movements are adjusted against the carrying amount of the investment.

The calculation of the share of the results of joint ventures is adjusted where necessary to ensure consistency
with the Group's accounting policies.

1.24 Venture capital and other investments

Equity shares and similar instruments held on own account as part of a venture capital portfolio are carried at
fair value with gains and losses taken to dealing profits as they arise.

All other equity shares and similar instruments held on own account are classified as available-for-sale. They are
held on the balance sheet at fair value with unrealised gains or losses being recognised directly through reserves
except for impairment losses, which are recognised immediately through the income statement. Income on
these equity instruments is credited to other operating income.

1.25 Sale and repurchase agreements

Debt securities sold subject to a commitment to repurchase them are retained on the balance sheet when
substantially all the risks and rewards of ownership remain with the Group. The liability to the counterparty is
included separately on the balance sheet in deposits from banks or customer accounts as appropriate.

When securities are purchased subject to a commitment to resell, but the Group does not acquire the risks and
rewards of ownership, the transaction is treated as a collateralised loan and recorded within loans and advances
to banks or customers as appropriate. The securities are not included in the balance sheet.

The difference between the sale and repurchase price is treated as interest and is accrued over the life of the
agreement using the effective interest rate method.

56
 Anglo Irish Bank
Annual Report & Accounts 2007

Securities lent to counterparties are retained in the financial statements. Securities borrowed are not recognised
in the financial statements, unless these are sold to third parties in which case the purchase and sale are
recorded with the gain or loss included in dealing profits. The obligation to return them is recorded at fair value
as a trading liability.

1.26 Share capital

Share issue costs
Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the
proceeds.

Dividends on ordinary shares

Dividends on ordinary shares are recognised in equity in the period in which they are paid or are approved by
the ordinary shareholders for payment. Dividends proposed after the balance sheet date are not recognised as a
liability until they have been approved by ordinary shareholders. They are disclosed in the events after the
balance sheet date note.

When scrip shares are issued in lieu of dividends the cash equivalent, net of withholding tax when applicable, is
written back to retained profits. Shares issued in lieu of dividends are set off against the share premium account.

Treasury shares
Where any Group company purchases the Bank's ordinary shares they are classified as treasury shares and the
consideration paid is shown as a deduction from shareholders' equity. No gain or loss is recognised on the sale,
issue or cancellation of treasury shares. The consideration received on the subsequent sale or issue of treasury
shares is credited to shareholders' equity. Treasury shares are excluded when calculating earnings per share.

As permitted under Irish legislation, a Group subsidiary holds ordinary shares in the Bank on behalf of life
assurance policyholders under contracts classified as investment contracts. All liabilities under investment
contracts are carried at fair value through profit or loss. As the Group is not allowed to treat treasury shares as
an asset, an increase in the ordinary share price results in a loss being reflected in the income statement.
Conversely, a fall in the ordinary share price results in a gain being reflected in the income statement.

1.27 Segmental reporting

Business segments are distinguishable parts of the Group that provide products or services that are subject to
risks and rewards that are different to those of other business segments. Geographical segments are
distinguishable parts of the Group that provide products or services within a particular economic environment
that is subject to risks and rewards that are different to those operating in other economic environments. The
Group has determined that business segments are the primary reporting segments.

1.28 Cash and cash equivalents

For the purposes of the cash flow statement, cash comprises cash on hand and demand deposits. Cash
equivalents are highly liquid investments convertible into cash with an insignificant risk of changes in value and
with maturities of less than three months.

1.29 Fiduciary and trust activities

The Group acts as trustee and in other fiduciary capacities that result in the holding or placing of assets on
behalf of individuals, unit trusts, investment trusts and pension schemes. These assets are not consolidated in the
accounts as the Group does not have beneficial ownership. Fees and commissions earned in respect of these
activities are included in the income statement.

1.30 Accounting estimates and judgements

The reported results of the Group are sensitive to the accounting policies, assumptions and estimates that
underlie the preparation of its financial statements. Irish company law and IFRS require the Directors, in
preparing the Group's financial statements, to select suitable accounting policies, apply them consistently and
make judgements and estimates that are reasonable and prudent.

The judgements and estimates involved in the Group's accounting policies that are considered by the Board to
be the most important to the portrayal of the Group's financial condition and that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are
discussed below. The use of estimates, assumptions or models that differ from those adopted by the Group
could affect its reported results.

57
 Notes to the financial statements continued

1. Accounting policies continued

1.30 Accounting estimates and judgements continued
Loan impairment
The estimation of potential loan losses is inherently uncertain and depends upon many factors. At least every six
months the Group reviews its loan portfolios to assess whether there is objective evidence of impairment. If
there is objective evidence that a loan is impaired, a provision is recognised equating to the amount by which the
book value of the loan exceeds the present value of its expected future cash flows. Provisions are calculated on
an individual basis with reference to expected future cash flows including those arising from the realisation of
collateral. The determination of these provisions often requires the exercise of considerable judgement by
management involving matters such as future economic conditions and the resulting trading performance of the
customer and the value of collateral, for which there may not be a readily accessible market. As a result these
provisions can be subject to significant variation as time progresses and the circumstances become clearer. The
methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed
regularly to reduce any differences between loss estimates and actual loss experience.

An additional incurred but not reported ('IBNR') collective provision is required for potential impairment in
currently performing loans. This provision takes account of observable data indicating that there is a measurable
decrease in the estimated future cash flows from a group of loans with similar credit risk characteristics,
although the decrease cannot yet be identified within the individual loans in the group.

This provision is calculated by applying an appropriate loss factor to each individual group of loans sharing
common risk characteristics. This incurred loss factor is determined primarily by actual experience and is
supplemented with other available evidence and management's market knowledge.

The future credit quality of loan portfolios against which an IBNR collective provision is applied is subject to
uncertainties that could cause actual credit losses to differ materially from reported loan impairment provisions.
These uncertainties include factors such as local and international economic conditions, borrower specific
factors, industry trends, interest rates, unemployment levels and other external factors.

Impairment of available-for-sale financial assets

In the case of debt instruments classified as available-for-sale financial assets, impairment is assessed based on the
same criteria as all other financial assets. A collective provision is made to cover expected losses inherent in
portfolios of currently performing debt instruments where there is objective evidence to suggest that they
contain impaired assets but the individual impaired assets cannot yet be identified. The portfolio of structured
investment vehicle assets meets this criterion.

The collective provision on this portfolio is determined primarily by reference to the most up to date net asset
values underpinning the portfolio and is supplemented with other available evidence and management's market
knowledge.

This portfolio is subject to uncertainties that could cause actual credit losses to differ materially from the
reported collective impairment provision. Uncertainties include factors such as international wholesale funding
conditions, changes in underlying asset valuations, entity specific factors, interest rates and other external
factors.

Fair value
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable and
willing parties in an arm's length transaction. Fair values are determined by reference to observable market
prices where these are available and are reliable. Where representative market prices are not available or are
unreliable, fair values are determined by using valuation techniques which refer to observable market data. These
include comparisons with similar financial instruments for which market observable prices exist, discounted cash
flow analyses, option pricing models and other valuation techniques commonly used by market participants. The
accuracy of fair value calculations could be affected by unexpected market movements when compared to actual
outcomes.

58
 Anglo Irish Bank
Annual Report & Accounts 2007

Expected life of lending

IAS 39 requires interest and arrangement fees which form an integral part of the return earned from lending to
be measured using the effective interest rate method. The effective interest rate is the rate that exactly
discounts estimated future cash receipts and payments through the expected life of the loan or, when
appropriate, a shorter period to the net carrying amount of the loan.

Management uses judgement to estimate the expected life of each loan and hence the expected cash flows
relating to it. The accuracy of the effective interest rate would therefore be affected by unexpected market
movements resulting in altered customer behaviour and differences in the models used when compared to actual
outcomes.

Taxation
The taxation charge accounts for amounts due to fiscal authorities in the various jurisdictions in which the
Group operates and includes estimates based on a judgement of the application of law and practice in certain
cases in order to determine the quantification of any liabilities arising. In arriving at such estimates, management
assesses the relative merits and risks of tax treatments assumed, taking into account statutory, judicial and
regulatory guidance and, where appropriate, external advice. Where the final tax outcome is different from the
amounts that are currently recorded, such differences will impact upon the current and deferred tax amounts in
the period in which such determination is made.

Retirement benefits
The Group operates defined benefit pension schemes. In determining the actual pension cost, the values of the
assets and liabilities of the schemes are calculated. The assets of the schemes are valued at fair value. The
liabilities of the schemes are measured on an actuarial basis, using the projected unit method and discounted at
the current rate of return on a high quality corporate bond of equivalent term and currency to the liabilities.
This involves modelling the future growth of scheme liabilities and requires management to make assumptions as
to price inflation, dividend growth, salary and pensions increases, return on investments and employee mortality.
There are acceptable ranges in which these estimates can reasonably fall. The impact on the consolidated income
statement and the consolidated balance sheet could be materially different if an alternative set of assumptions
was used.

1.31 Prospective accounting changes

The Group has not applied the following new standards, amendments to standards and interpretations that have
been adopted by the International Accounting Standards Board and which would be applicable to the Group
with an effective date after the date of these financial statements:

IFRS 7 - Financial Instruments: Disclosures;

IFRS 8 - Operating Segments;
Amendment to IAS 1 - Capital Disclosures;
Amendment to IAS 1 - Presentation of Financial Statements;
Amendment to IAS 23 - Borrowing Costs;
IFRIC Interpretation 10 - Interim Financial Reporting and Impairment;
IFRIC Interpretation 11 - IFRS 2 - Group and Treasury Share Transactions;
IFRIC Interpretation 12 - Service Concession Arrangements;
IFRIC Interpretation 13 - Customer Loyalty Programmes; and
IFRIC Interpretation 14 - IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction.

These will be adopted in future years and are not expected to have a material impact on the Group's results.
IFRS 7 and the Amendments to IAS 1 will result in additional disclosures relating to capital and risk management
policies and processes and the inclusion of a statement of comprehensive income.

The EU Transparency Directive (‘the Directive’) was signed into Irish law on 13 June 2007. It sets out deadlines
and content requirements in relation to annual and half-year reports. In addition the Group will be required to
publish management statements during the financial year. The Directive is not expected to have a significant
effect on the Group’s financial reporting.

59
 Notes to the financial statements continued

2. Segmental reporting

Business segments 2007

Inter-
Business Wealth Group segment
Lending Treasury Management items eliminations Group
€m €m €m €m €m €m

Revenue from external customers 4,039 1,166 377 - - 5,582

Inter-segment revenue - 2,833 - - (2,833) -
Total revenue 4,039 3,999 377 - (2,833) 5,582

Operating profit 1,181 (4) 97 (55) - 1,219

Share of results of joint ventures - - 2 - - 2
Profit on disposal of Isle of Man
trust business - - 22 - - 22
Profit before taxation 1,181 (4) 121 (55) - 1,243

External assets 62,600 27,152 6,756 144 - 96,652

Inter-segment assets - 55,025 - 9,569 (64,594) -
Total assets 62,600 82,177 6,756 9,713 (64,594) 96,652

External liabilities - 82,177 4,762 5,648 - 92,587

Equity - - - 4,065 - 4,065
Inter-segment liabilities 62,600 - 1,994 - (64,594) -
Total equity and liabilities 62,600 82,177 6,756 9,713 (64,594) 96,652

Additional information:
Capital expenditure 6 3 5 6 - 20
Depreciation and amortisation 2 1 4 18 - 25
Provisions for impairment 82 67 - - - 149
Other non-cash expenses 7 3 2 4 - 16
Interests in joint ventures - - 88 - - 88

Geographical segments 2007

Republic UK Rest of the
of Ireland & IOM USA World Group
€m €m €m €m €m

Revenue from external customers 3,260 1,781 491 50 5,582

Total external assets 64,142 24,514 7,616 380 96,652

Capital expenditure 9 8 1 2 20

60
 Anglo Irish Bank
Annual Report & Accounts 2007

Business segments 2006

Inter-
Business Wealth Group segment
Lending Treasury Management items eliminations Group
€m €m €m €m €m €m

Revenue from external customers 2,439 689 226 - - 3,354

Inter-segment revenue - 1,590 - - (1,590) -
Total revenue 2,439 2,279 226 - (1,590) 3,354

Operating profit 781 83 53 (71) - 846

Share of results of joint ventures - - 4 - - 4
Profit before taxation 781 83 57 (71) - 850

External assets 47,387 21,082 4,686 135 - 73,290

Inter-segment assets - 41,529 - 7,064 (48,593) -
Total assets 47,387 62,611 4,686 7,199 (48,593) 73,290

External liabilities - 62,611 3,480 4,507 - 70,598

Equity - - - 2,692 - 2,692
Inter-segment liabilities 47,387 - 1,206 - (48,593) -
Total equity and liabilities 47,387 62,611 4,686 7,199 (48,593) 73,290

Additional information:
Capital expenditure 6 4 6 4 - 20
Depreciation and amortisation 2 1 6 8 - 17
Provisions for impairment 65 - 1 - - 66
Other non-cash expenses 7 3 2 3 - 15
Interests in joint ventures - - 68 - - 68

Geographical segments 2006

Republic UK Rest of the
of Ireland & IOM USA World Group
€m €m €m €m €m

Revenue from external customers 1,867 1,192 254 41 3,354

Total external assets 48,203 20,478 4,365 244 73,290

Capital expenditure 12 7 - 1 20

Revenue includes interest and similar income, fee and commission income, dealing profits and other
operating income. Inter-segment transactions are conducted on an arm's length basis. Group items include
the return earned on the Group's equity capital, the margin cost of subordinated debt and other capital
instruments and central overheads. The geographical segments are based primarily on the location of the
office sourcing the transaction.

On 1 October 2006 the Isle of Man banking operations were transferred from Wealth Management to
Treasury and the interests in joint ventures were transferred from Business Lending to Wealth
Management. Prior year comparatives have been adjusted to reflect these changes.

61
 Notes to the financial statements continued

3. Interest and similar income 2007 2006

€m €m
Interest on loans and advances to banks 604 337
Interest on loans and advances to customers 4,268 2,626
Interest on available-for-sale financial assets 465 154
Interest on financial assets at fair value through profit or loss held on own
account 19 23
Finance leasing and hire purchase income 15 29
5,371 3,169

4. Interest expense and similar charges 2007 2006

€m €m
Interest on deposits from banks 360 307
Interest on customer accounts 2,175 1,190
Interest on debt securities in issue 1,009 429
Interest on subordinated liabilities and other capital instruments 261 174
3,805 2,100

5. Dealing profits 2007 2006

€m €m
Interest rate contracts 13 14
Foreign exchange contracts 7 4
Credit contracts (1) 1
Net (losses)/gains from financial assets designated at fair value held on own
account (6) 8
Hedge ineffectiveness - -
13 27

62
 Anglo Irish Bank
Annual Report & Accounts 2007

6. Other operating income 2007 2006

€m €m
Increase in fair value of assets designated at fair value held in respect of
liabilities to customers under investment contracts 224 236
Increase in liabilities designated at fair value held in respect of liabilities to
customers under investment contracts (217) (237)
Rental income 9 9
Net gains on disposal of available-for-sale financial assets 1 1
Profit on disposal of investment properties held on own account 1 -
Other 3 2
21 11

In the current year €7m of the increase in fair value of assets held under investment contracts is
attributable to minority interest (note 38).

7. Administrative expenses 2007 2006

€m €m
Staff costs:
Wages and salaries 169 148
Share-based payment schemes (note 8) 24 22
Retirement benefits cost - defined contribution plans 12 12
Retirement benefits cost - defined benefit plans (note 9) 3 7
Social welfare costs 21 17
Other staff costs 6 4
235 210
Other administrative costs 133 101
368 311

The average number of persons employed by the Group during the year, analysed by location, was as
follows:
2007 2006

Republic of Ireland 943 830

United Kingdom and Isle of Man 507 470
United States of America 90 63
Rest of the World 174 163
1,714 1,526

63
 Notes to the financial statements continued

8. Share-based payment schemes

The Group operates a number of share-based incentive plans which feature ordinary shares of the parent
Bank. The purpose of these plans is to motivate employees to contribute towards the creation of long-term
shareholder value. Further details are given below:

Employee Share Option Scheme

On 15 January 1999 the shareholders approved the establishment of the Employee Share Option Scheme
('ESOS') which replaced the scheme originally approved by shareholders in 1988.

Under its terms all qualifying employees may be invited to participate in the scheme at the discretion of the
Directors. Options are granted at the middle market price on the day on which the shares were dealt in
immediately preceding the date of the invitation. During the continuance of the scheme each participant is
limited to a maximum entitlement of scheme shares equivalent to an aggregate value of four times that
employee's annual emoluments. Basic tier options may not be transferred or assigned and may be exercised
only between the third and tenth anniversaries of their grant, or at such earlier time as approved by the
Directors. Second tier options may not be transferred or assigned and may be exercised only between the
fifth and tenth anniversaries of their grant, or at such earlier time as approved by the Directors.

In the ten year period from 15 January 1999 the maximum number of basic and second tier options granted
under the scheme may not exceed 10% of the issued ordinary share capital of the Bank from time to time.
Both the basic and second tier options which may be granted are each restricted to 5% of the issued
ordinary share capital of the Bank from time to time.

The exercise of basic tier options granted since 15 January 1999 is conditional upon earnings per share
growth of at least 5% compound per annum more than the increase in the Irish consumer price index. The
exercise of second tier options granted since 15 January 1999 is conditional upon earnings per share growth
of at least 10% compound per annum more than the increase in the Irish consumer price index and the
Bank's shares must also rank in the top quartile of companies as regards growth in earnings per share on the
Irish Stock Exchange.

Employee Share Ownership Plan

On 14 January 2000 the shareholders approved the establishment of the Anglo Irish Bank Employee Share
Ownership Plan ('ESOP'). The plan's trustee may purchase ordinary shares of the Bank in the open market.
Eligible employees may be granted options to acquire shares held by the trustee on similar terms and
exercise conditions as those applicable to basic tier options under the ESOS above.

The total number of ordinary shares which may be the subject of ESOP options may not, when aggregated
with the ordinary shares the subject of options granted under the Save As You Earn ('SAYE') scheme,
exceed 5% of the issued ordinary share capital of the Bank from time to time.

Save As You Earn Scheme

On 14 January 2000 the shareholders also approved the establishment of the Anglo Irish Bank SAYE scheme.
This scheme has Irish, UK, Austrian, US and Swiss versions in order to conform with local legislation in
these jurisdictions.

The Irish version permits eligible employees to enter into a savings contract with the Bank for a three or
five year period saving a maximum of €320 per month for the appropriate contract period and to use the
proceeds of the savings contract to fund the exercise of three, five or seven year options granted under the
scheme. Options are granted at a 25% discount to the market price on the date that employees were invited
to enter into these contracts. These options become exercisable when the participants' savings contracts
are completed.

64
 Anglo Irish Bank
Annual Report & Accounts 2007

A variation of the Anglo Irish Bank SAYE scheme was introduced for all UK staff of the Group in 2001. This
scheme permits eligible employees to enter into a savings contract with an outside financial institution for a
three or five year contract period, saving a maximum of Stg£250 per month for the appropriate contract
period, and to use the proceeds of the savings contract to fund the exercise of three, five or seven year
options granted under the scheme. Options are granted at a 20% discount to the average market price over
the week preceding the date that employees were invited to enter into these contracts.

During 2005 an Austrian version of the Anglo Irish Bank SAYE scheme was introduced for all Austrian staff.
This scheme permits eligible employees to save up to a maximum of €320 per month for five years and to
use the proceeds of the savings contract to fund the exercise of options granted under the scheme. Options
are granted at a 25% discount to the market price on the date that employees were invited to enter into
these contracts.

A US sub-plan complying with US legislation was put in place during 2006. This scheme permits eligible
employees to enter into a three or five year savings contract for three, five or seven year options.
Employees are permitted to save a maximum of US$400 per month. The option price is set on the date of
invitation and is at a 25% discount to the market share price on that date.

A further version was introduced during 2006 for all Swiss employees. This scheme permits eligible
employees to save up to a maximum of CHF500 per month for three or five years and to use the proceeds
of the savings contract to fund the exercise of options granted under the scheme. Options are granted at a
25% discount to the market price on the date that employees were invited to enter into these contracts.

Approved Profit Sharing Scheme ('APSS')

The Group operates a share acquisition scheme on terms approved by the Irish Revenue. There are no
vesting conditions and the scheme is open to all eligible employees in the Republic of Ireland. An APSS is a
scheme whereby a company may allocate shares to qualifying employees and the employee is, subject to
certain conditions, exempt from income taxes. Annually at their discretion the Directors set aside a sum of
profits out of which a bonus is paid to employees. Eligible employees may elect to receive their profit share
allocations either in the form of shares or in cash. Such shares are purchased in the open market and held by
trustees for a minimum period of two years. The shares are required to be held by trustees for a total
period of three years for the employees to obtain the maximum income tax benefit. Such employees may
also elect to forego an amount of salary, subject to certain limitations, and use the amount of salary
foregone to fund the acquisition of additional shares. The maximum market value of shares that may be
appropriated by any employee in a year may not exceed €12,700. Included in the share-based payment cost
for 2007 is €8m (2006: €7m) in relation to the profit sharing scheme, €7m (2006: €6m) of which was paid in
shares, resulting in the trustees acquiring 467,178 (2006: 542,321) shares at a purchase price of €14.85
(2006: €11.43).

Deferred Share Scheme ('DSS')

At 30 September 2007 the trustee of the DSS held 1,104,416 (2006: 1,107,743) shares to honour conditional
share awards granted between December 2004 and July 2007 to eligible Group employees as part of their
remuneration package. These shares were purchased in the open market and are funded by interest free
borrowings from a Group subsidiary undertaking. These share awards are conditional on the relevant
employees remaining in the Group's employment for three years from their grant date. The cost of the DSS
is expensed evenly to the income statement over the three year vesting period and amounted to €4m in
2007 (2006: €3m). When the awards vest the trustee's borrowings are fully reimbursed by the sponsoring
Group employer. During the year 346,516 (2006: 502,959) share awards were granted to employees at a
weighted average cost of €14.79 (2006: €11.54).

65
 Notes to the financial statements continued

8. Share-based payment schemes continued

The share-based payment expense is analysed as follows:

2007 2006
€m €m
Share option schemes 12 12
Approved Profit Sharing Scheme 8 7
Deferred Share Scheme 4 3
Total share-based payment schemes (note 7) 24 22

The requirements of IFRS 2 'Share-based Payment' have been applied to all equity share-based payments
granted after 7 November 2002.

Movements in options
Movements in options granted under Group share incentive plans are as follows:

ESOS 2007 2006

Weighted Weighted
Number average Number average
of options exercise price of options exercise price
'000 € '000 €
Outstanding at beginning of year 15,905 7.00 18,516 4.90
Granted 3,299 14.87 3,613 11.40
Exercised (2,654) 4.53 (5,884) 3.10
Forfeited (331) 11.38 (340) 7.00
Outstanding at end of year 16,219 8.91 15,905 7.00
Exercisable at end of year 2,103 3.50 3,052 3.70

ESOP 2007 2006

Weighted Weighted
Number average Number average
of options exercise price of options exercise price
'000 € '000 €
Outstanding at beginning of year 1,969 9.07 1,487 7.48
Granted 1,381 14.89 718 11.28
Exercised (80) 8.05 (176) 5.05
Forfeited (70) 12.01 (60) 7.97
Outstanding at end of year 3,200 11.54 1,969 9.07
Exercisable at end of year 131 4.59 51 1.20

SAYE 2007 2006

Weighted Weighted
Number average Number average
of options exercise price of options exercise price
'000 € '000 €
Outstanding at beginning of year 2,911 5.77 3,690 3.36
Granted 753 11.56 914 8.92
Exercised (824) 4.20 (1,502) 1.79
Forfeited (266) 7.78 (191) 5.60
Outstanding at end of year 2,574 7.76 2,911 5.77
Exercisable at end of year 39 1.29 11 3.34

66
 Anglo Irish Bank
Annual Report & Accounts 2007

The ranges of exercise prices, weighted average exercise prices, weighted average remaining contractual
life and the number of options outstanding for the option schemes were as follows:

30 September 2007
Weighted Weighted
average average Number of
Range of exercise remaining outstanding
exercise price contractual options
prices € life in years '000
ESOS Up to €4 2.12 4 1,100
€4 to €7 5.00 6 4,103
€7 to €10 8.01 7 4,445
€10 to €13 11.38 8 3,362
€13 to €17 14.91 9 3,209

ESOP Up to €4 1.20 3 51
€4 to €7 6.76 7 80
€7 to €10 8.02 7 965
€10 to €13 11.20 8 753
€13 to €17 14.92 9 1,351

SAYE Up to €4 1.44 1 467

€4 to €7 4.66 2 133
€7 to €10 8.25 3 1,248
€10 to €14 11.55 4 726

30 September 2006
Weighted Weighted
average average Number of
Range of exercise remaining outstanding
exercise price contractual options
prices € life in years '000
ESOS Up to €4 2.04 5 1,787
€4 to €7 5.06 7 5,975
€7 to €10 8.00 8 4,525
€10 to €13 11.38 9 3,618

ESOP Up to €4 1.20 4 51
€4 to €7 6.76 8 120
€7 to €10 8.02 8 985
€10 to €13 11.18 9 813

SAYE Up to €4 1.77 2 748

€4 to €7 4.62 1 679
€7 to €10 8.30 3 1,484

67
 Notes to the financial statements continued

8. Share-based payment schemes continued

Option pricing model

A binomial lattice option pricing model has been used to determine the value of options granted. The
following tables detail the assumptions used and the resulting weighted average fair values provided by the
option pricing model.

2007
ESOS
ESOS Second SAYE SAYE SAYE
Basic Tier ESOP Three Five Seven

Number of options ('000) 1,370 1,929 1,381 453 263 37

Exercise price (€) 14.96 14.81 14.89 11.52 11.62 11.55
Share price at grant date (€) 14.96 14.81 14.89 15.12 14.98 15.61
Vesting period (years) 3 5 3 3 5 7
Expected volatility 24% 28% 24% 23% 26% 28%
Option life (years) 10 10 10 3.5 5.5 7.5
Risk-free rate 3.9% 4.0% 3.9% 4.2% 4.3% 4.3%
Dividend yield 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%
Fair value per option (€) 3.09 4.05 3.08 4.71 5.28 6.35

2006
ESOS
ESOS Second SAYE SAYE SAYE
Basic Tier ESOP Three Five Seven

Number of options ('000) 1,354 2,259 718 438 372 104

Exercise price (€) 11.46 11.36 11.28 8.92 8.93 8.90
Share price at grant date (€) 11.46 11.36 11.28 12.66 12.33 13.10
Vesting period (years) 3 5 3 3 5 7
Expected volatility 27% 30% 27% 25% 29% 29%
Option life (years) 10 10 10 3.5 5.5 7.5
Risk-free rate 3.0% 3.2% 3.1% 3.1% 3.2% 3.3%
Dividend yield 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%
Fair value per option (€) 2.52 3.35 2.53 4.79 5.35 5.73

The volatility assumption is set by taking historical volatility appropriate to the expected lives of the
options. The risk-free rate is the yield on iBoxx Eurozone Sovereign bonds appropriate to the expected
lives of the options. The expected lives of options are based on historical data.

There have been no modifications to the Group's share-based payment schemes during the course of
2007 or 2006. The weighted average share price at the dates of option exercise during the year was
€15.69 (2006: €12.60).

68
 Anglo Irish Bank
Annual Report & Accounts 2007

9. Retirement benefits

The parent Bank operates two defined benefit non-contributory pension schemes in Ireland. The assets of
these schemes are held in separate trustee-administered funds. These schemes have been closed to new
members since January 1994. New Irish employees after that date join a funded scheme on a defined
contribution basis. There are also funded defined contribution pension plans covering eligible Group
employees in other locations as well as unfunded defined benefit pension plans relating to certain Austrian
employees. In the case of a number of Austrian employees whose employment contracts commenced
prior to 1 January 2003, Austrian law requires employers to pay lump sums upon retirement or
termination of employment if the employee has been with a company for at least three years. The amount
payable is calculated based on length of service and salary.

Details of defined benefit schemes

Retirement benefits under the Bank’s Irish defined benefit plans are calculated by reference to
pensionable service and pensionable salary at normal retirement date. The pension charge in the income
statement relating to all defined benefit pension schemes is based on the advice of an independent
actuary. An actuarial valuation for the purposes of IAS 19 has been prepared as at 30 September 2007 by
an independent actuary using the projected unit method. Using this method the current service cost will
increase as the members of closed schemes approach retirement.

The principal assumptions used, which are based on the advice of an independent actuary, are set out in
the table below:

Financial assumptions 2007 2006

% p.a. % p.a.

Discount rate for liabilities of the schemes 5.50 4.60

Rate of increase in salaries 4.00 4.00
Rate of increase in pensions 2.25 to 3.00 2.25 to 3.00
Inflation rate 2.25 2.25

Mortality assumptions
The key mortality assumptions used in estimating the actuarial value of the schemes' liabilities are:

2007 2006
Longevity at age 60 for current pensioners (years)
Males 23.6 23.6
Females 26.6 26.6

Longevity at age 60 for future pensioners (years)

Males 24.9 24.9
Females 27.9 27.9

69
 Notes to the financial statements continued

9. Retirement benefits continued

Sensitivity analysis
Sensitivity analysis for each of the principal assumptions used to measure the schemes' liabilities at
30 September 2007 is as follows:

Impact on scheme liabilities

Change in increase by increase by
assumption % €m

Discount rate Decrease 0.5% 10.3% 10

Rate of increase in salaries Increase 0.5% 2.1% 2
Inflation rate Increase 0.5% 3.1% 3
Life expectancy Increase by 1 year 2.1% 2

Assets
The expected long-term rate of return on assets of 6.2% (2006: 5.4%) at the year end is estimated based
on the current level of expected returns on risk free investments (primarily government bonds), the
historical level of the risk premium associated with the other asset classes in which the portfolio is
invested and the expectations for future returns of each asset class. The expected return for each asset
class is then weighted based on the actual allocation to develop the long-term rate of return on assets
assumption for the portfolio.

The market value of assets in the schemes and the expected long-term rates of return were:

% of Market % of Market
Expected scheme value Expected scheme value
return assets of assets return assets of assets
2007 2007 2007 2006 2006 2006
% % €m % % €m

Equities 7.6 49 60 7.4 54 63

Bonds 4.6 38 47 3.8 5 6
Property 6.6 3 4 6.4 3 4
Hedge funds 6.6 7 8 6.4 6 7
Cash 2.0 3 4 2.0 32 38
Total market value of schemes' assets 123 118
Actuarial value of liabilities of funded schemes (97) (105)
Surplus in the funded schemes - parent Bank 26 13
Pension reimbursement right in subsidiary 3 3
Retirement benefit assets 29 16

At 30 September 2007, the assets of the pension schemes included ordinary shares in the parent Bank
amounting to €1m (2006: €1m).

Retirement benefit liabilities 2007 2006

€m €m
Present value of unfunded obligations in subsidiary (7) (7)

The €7m (2006: €7m) present value of unfunded obligations relates to the Group's Austrian subsidiary.
Of this amount, €3m (2006: €3m) is reimbursed by the former shareholders of that subsidiary.

70
 Anglo Irish Bank
Annual Report & Accounts 2007

The following table sets out the components of the defined benefit cost:

Components of pension expense 2007 2006

€m €m
Included in administrative expenses:
Current service cost 3 3
Past service cost 1 5
Expected return on assets of pension schemes (6) (5)
Interest on liabilities of pension schemes 5 4
Cost of providing defined retirement benefits (note 7) 3 7

The actual return on assets during the year ended 30 September 2007 was €5m (2006: €8m).

Amount recognised in statement of recognised income and

expense ('SORIE')
2007 2006
€m €m

Change in assumptions underlying the present value of schemes' liabilities 19 4

Experience losses on liabilities of the pension schemes (4) (1)
Actual return less expected return on assets of the pension schemes (1) 3
Actuarial gains recognised under IAS 19 14 6
Deferred tax on actuarial gains (2) -
Actuarial gains after tax (note 43) 12 6

Cumulative amount of after tax actuarial gains/(losses) recognised

since 1 October 2004 in the SORIE to end of year * 5 (7)

* all recognised in the parent Bank

Reconciliation of defined benefit obligations during the year

2007 2006
€m €m

Defined benefit obligation at beginning of year 105 98

Current service cost 3 3
Past service cost 1 5
Interest cost 5 4
Benefit payments (2) (2)
Actuarial gain during year (15) (3)
Defined benefit obligation at end of year 97 105

71
 Notes to the financial statements continued

9. Retirement benefits continued

Reconciliation of the fair value of schemes' assets during the year

2007 2006
€m €m

Fair value of schemes' assets at beginning of year 118 107

Expected return 6 5
Contributions paid by employer 2 5
Benefit payments (2) (2)
Actuarial (loss)/gain during year (1) 3
Fair value of schemes' assets at end of year 123 118

History of experience gains and losses

2007 2006 2005
€m €m €m

Difference between actual and expected return on assets:

Amount (1) 3 6
Percentage of schemes' assets at year end 1% 3% 6%

Experience losses on liabilities:

Amount (4) (1) (4)
Percentage of schemes' liabilities at year end 4% 1% 4%

Total gross amount recognised in SORIE:

Amount 14 6 (15)
Percentage of schemes' liabilities at year end 14% 6% 15%

Defined benefit pension plans

2007 2006 2005
€m €m €m

Plan assets 123 118 107

Funded defined benefit obligation (97) (105) (98)
Surplus within funded plans 26 13 9

Additional information

The expected employer contributions for defined benefit schemes for the year ending
30 September 2008 are €2m.

72
 Anglo Irish Bank
Annual Report & Accounts 2007

10. Auditors' remuneration (including irrecoverable VAT) 2007 2006

€m €m

Statutory audit 1.1 0.9

Audit related services 0.3 0.3
Other services 0.4 0.1
1.8 1.3

The Audit Committee has reviewed the level of fees and is satisfied that it has not affected the
independence of the auditors. Audit related and other services fees are primarily in respect of tax
compliance and advice, letters of comfort and transition to IFRS. Auditors' remuneration is included
within administrative expenses.

11. Provisions for impairment 2007 2006

€m €m
Loans and advances to customers (note 25)
Specific 51 36
Collective 31 30
82 66
Available-for-sale financial assets (note 23)
Collective - structured investment vehicles ('SIVs') 67 -
149 66

The Group's exposure to SIVs consists of capital notes in bank-sponsored vehicles costing €134m
(2006: €69m) before collective impairment provisions. The Group does not sponsor any SIVs nor has it
provided any term funding or liquidity facilities to SIVs. It has no exposure to SIV-lites.

12. Profit on disposal of Isle of Man trust business

On 21 December 2006 the Group disposed of its Isle of Man trust business for a consideration of €44m,
which gave rise to a profit on disposal of €22m.

2007
€m

Cash consideration received 44

Carrying value of net assets on date of disposal excluding goodwill (4)
40

Goodwill recovered (note 29) (18)

Profit on disposal 22

73
 Notes to the financial statements continued

13. Taxation 2007 2006

€m €m
Current taxation
Irish Corporation Tax - current year 146 100
- prior years (2) (1)
Double taxation relief (36) (26)
Irish Bank Levy - 1
Foreign tax - current year 121 86
- prior years - (3)
229 157
Deferred taxation
Current year (note 33) 6 35
235 192
Effective tax rate 18.9% 22.6%

The reconciliation of taxation on profits at the standard Irish Corporation Tax rate to the Group's actual
tax charge is analysed as follows:
2007 2006
€m €m

Profit before taxation at 12.5% 155 106

Effects of:
Foreign earnings subject to different tax rates 80 91
Irish Bank Levy - 1
Overprovision in prior years (2) (4)
Other 2 (2)
Taxation charge for year 235 192

74
 Anglo Irish Bank
Annual Report & Accounts 2007

14. Profit attributable to equity holders of the parent

€909m (2006: €602m) of the Group profit for the year attributable to equity holders is dealt with in the
financial statements of the parent Bank. As permitted by Irish legislation, a separate income statement for
the parent Bank has not been presented.

15. Minority interest

The profit attributable to minority interest is analysed as follows:

2007 2006
€m €m

Increase in fair value of net assets held under investment

contracts attributable to minority interest (note 6) 7 -
Other minority interest 3 1
10 1

16. Distributions on equity shares 2007 2006

€m €m
Ordinary shares of €0.16 each
2006 final dividend of 10.84c per share (2005: 9.03c) 78 61
2007 interim dividend of 6.48c per share (2006: 5.40c) 49 39
127 100
Final dividend scrip (33) (22)
Interim dividend scrip (8) (4)
Equity dividends paid 86 74

Dividends on ordinary shares are recognised in equity in the period in which they are approved.
Dividends declared after the balance sheet date are disclosed in note 55.

75
 Notes to the financial statements continued

17. Earnings per €0.16 ordinary share 2007 2006

Basic
Profit attributable to ordinary shareholders €998m €657m

Weighted average number of shares in issue during the year 741m 701m

Basic earnings per €0.16 ordinary share 134.7c 93.7c

Diluted
Profit attributable to ordinary shareholders €998m €657m

Weighted average number of shares in issue during the year 741m 701m
Dilutive effect of options outstanding 8m 11m
Diluted weighted average number of shares 749m 712m

Diluted earnings per €0.16 ordinary share 133.2c 92.3c

Adjusted basic
Profit attributable to ordinary shareholders €998m €657m
Less: profit after tax on disposal of Isle of Man trust business (€22m) -
Adjusted profit €976m €657m

Weighted average number of shares in issue during the year 741m 701m

Adjusted basic earnings per €0.16 ordinary share 131.7c 93.7c

Adjusted diluted
Profit attributable to ordinary shareholders €998m €657m
Less: profit after tax on disposal of Isle of Man trust business (€22m) -
Adjusted profit €976m €657m

Weighted average number of shares in issue during the year 741m 701m
Dilutive effect of outstanding options 8m 11m
Diluted weighted average number of shares 749m 712m

Adjusted diluted earnings per €0.16 ordinary share 130.3c 92.3c

The calculation of basic earnings per ordinary share is based on the profit attributable to ordinary
shareholders divided by the weighted average number of ordinary shares in issue excluding own shares
held to satisfy share options granted or to be granted under the Anglo Irish Bank Employee Share
Ownership Plan, shares held in respect of the Deferred Share Scheme and shares purchased by Anglo
Irish Assurance Company Limited for the benefit of policyholders.

Adjusted basic and adjusted diluted earnings per share have been presented to exclude the impact of the
profit arising on the disposal of the Isle of Man trust business on the underlying results for the period.

76
 Anglo Irish Bank
Annual Report & Accounts 2007

18. Cash and balances with central banks

These amounts include only those balances with central banks which may be withdrawn without notice.

19. Financial assets at fair value through The Group The Bank
profit or loss 2007 2006 2007 2006
€m €m €m €m

Held on own account

Debt securities 364 433 364 433
Equity shares 66 23 22 3
430 456 386 436

Of which listed 365 9 364 -

Of which unlisted 65 447 22 436
430 456 386 436

All of the above financial assets are designated at fair value through profit or loss with the exception of
the €433m of debt securities at 30 September 2006 which consisted of certificates of deposit held for
trading.

The Group
2007 2006
€m €m
Held in respect of liabilities to customers
under investment contracts (note 38)
Equity shares 394 268
Investments in property structures 217 -
Debt securities 33 41
644 309

Of which listed 370 301

Of which unlisted 274 8
644 309

All financial assets at fair value through profit or loss held in respect of liabilities to customers under
investment contracts are designated at fair value through profit or loss.

20. Derivative financial instruments

Details of the objectives, policies and strategies arising from the Group's use of financial instruments,
including derivative financial instruments, are presented in note 47 on risk management and control.

The following tables present the notional and fair value amounts of derivative financial instruments,
analysed by product and purpose.

77
 Notes to the financial statements continued

20. Derivative financial instruments continued

The Group 2007

Contract
notional Fair values
Derivatives held for trading amount Assets Liabilities
€m €m €m
Interest rate contracts
Interest rate swaps 88,601 617 (645)
Interest rate caps, floors and options - held and written 11,710 28 (31)
Forward rate agreements 13,421 2 (2)
Interest rate futures - bought and sold 10,770 - -
Exchange traded options - bought and sold 1,846 - -
Interest rate contracts total 126,348 647 (678)

Foreign exchange contracts

Forward foreign exchange 14,364 165 (164)
Foreign exchange options - held and written 4,710 17 (18)
Currency swaps 1,640 125 (16)
Foreign exchange contracts total 20,714 307 (198)

Other
Equity index options - held and written 808 89 (89)
Credit derivatives 606 1 (1)
1,414 90 (90)

Total trading derivative financial instruments 148,476 1,044 (966)

Derivatives held for hedging

Derivatives designated as fair value hedges

Interest rate and cross-currency interest rate swaps 11,232 168 (142)

Derivatives designated as cash flow hedges

Interest rate swaps 10,719 95 (61)
Forward rate agreements 2,011 - -
Forward foreign exchange 1,048 28 -
13,778 123 (61)

Total hedging derivative financial instruments 25,010 291 (203)

Derivatives held in respect of liabilities to customers under

investment contracts (note 38) 981 20 (6)
Total derivative financial instruments 174,467 1,355 (1,175)

At 30 September 2007 the weighted average remaining term of the Group's cash flow hedges is 1.1 years.
The maximum remaining term of any individual cash flow hedge at that date is 9 years.

78
 Anglo Irish Bank
Annual Report & Accounts 2007

The Bank 2007

Contract
notional Fair values
Derivatives held for trading amount Assets Liabilities
€m €m €m
Interest rate contracts
Interest rate swaps - external 90,827 638 (711)
- Group 5,009 80 (19)
Interest rate caps, floors and options - held and written 11,710 28 (31)
Forward rate agreements 13,421 2 (2)
Interest rate futures - bought and sold 10,770 - -
Exchange traded options - bought and sold 1,846 - -
Interest rate contracts total 133,583 748 (763)

Foreign exchange contracts

Forward foreign exchange - external 14,061 164 (156)
- Group 308 1 (9)
Foreign exchange options - held and written 4,710 17 (18)
Currency swaps - external 2,937 168 (16)
- Group 1,297 - (52)
Foreign exchange contracts total 23,313 350 (251)

Other
Equity index options - held and written 808 89 (89)
Credit derivatives 606 1 (1)
1,414 90 (90)

Total trading derivative financial instruments 158,310 1,188 (1,104)

Derivatives held for hedging

Derivatives designated as fair value hedges

Interest rate and cross-currency interest rate swaps 7,709 103 (76)

Derivatives designated as cash flow hedges

Interest rate swaps 10,719 95 (61)
Forward rate agreements 2,011 - -
Forward foreign exchange 1,048 28 -
13,778 123 (61)

Total hedging derivative financial instruments 21,487 226 (137)

Total derivative financial instruments 179,797 1,414 (1,241)

79
 Notes to the financial statements continued

20. Derivative financial instruments continued

The Group 2006

Contract
notional Fair values
Derivatives held for trading amount Assets Liabilities
€m €m €m
Interest rate contracts
Interest rate swaps 48,312 335 (306)
Interest rate caps, floors and options - held and written 10,246 19 (20)
Forward rate agreements 529 - -
Interest rate futures - bought and sold 6,457 - -
Exchange traded options - bought and sold 3,330 - -
Interest rate contracts total 68,874 354 (326)

Foreign exchange contracts

Forward foreign exchange 12,607 72 (68)
Foreign exchange options - held and written 5,675 8 (9)
Currency swaps 1,053 1,021 (1,060)
Foreign exchange contracts total 19,335 1,101 (1,137)

Other
Equity index options - held and written 464 60 (60)
Credit derivatives 233 1 -
697 61 (60)

Total trading derivative financial instruments 88,906 1,516 (1,523)

Derivatives held for hedging

Derivatives designated as fair value hedges

Interest rate and cross-currency interest rate swaps 6,362 892 (913)

Derivatives designated as cash flow hedges

Interest rate swaps 5,323 41 (31)
Forward foreign exchange 586 3 (8)
5,909 44 (39)

Total hedging derivative financial instruments 12,271 936 (952)

Derivatives held in respect of liabilities to customers under

investment contracts (note 38) 1,084 7 (15)
Total derivative financial instruments 102,261 2,459 (2,490)

At 30 September 2006 the weighted average remaining term of the Group's cash flow hedges was
1.7 years. The maximum remaining term of any individual cash flow hedge at that date was 10 years.

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 Anglo Irish Bank
Annual Report & Accounts 2007

The Bank 2006

Contract
notional Fair values
Derivatives held for trading amount Assets Liabilities
€m €m €m
Interest rate contracts
Interest rate swaps - external 49,991 364 (345)
- Group 1,864 39 (33)
Interest rate caps, floors and options - held and written 10,246 19 (20)
Forward rate agreements 529 - -
Interest rate futures - bought and sold 6,457 - -
Exchange traded options - bought and sold 3,330 - -
Interest rate contracts total 72,417 422 (398)

Foreign exchange contracts

Forward foreign exchange - external 12,319 69 (68)
- Group 288 3 -
Foreign exchange options - held and written 5,675 8 (9)
Currency swaps 1,053 1,021 (1,060)
Foreign exchange contracts total 19,335 1,101 (1,137)

Other
Equity index options - held and written 464 60 (60)
Credit derivatives 233 1 -
697 61 (60)

Total trading derivative financial instruments 92,449 1,584 (1,595)

Derivatives held for hedging

Derivatives designated as fair value hedges

Interest rate and cross-currency interest rate swaps 4,683 863 (874)

Derivatives designated as cash flow hedges

Interest rate swaps 5,323 41 (31)
Forward foreign exchange 586 3 (8)
5,909 44 (39)

Total hedging derivative financial instruments 10,592 907 (913)

Total derivative financial instruments 103,041 2,491 (2,508)

81
 Notes to the financial statements continued

21. Loans and advances to banks The Group The Bank

2007 2006 2007 2006
€m €m €m €m

Placements with banks 9,712 9,728 7,610 7,654

Securities purchased with agreements to resell 2,339 2,696 2,339 2,696
12,051 12,424 9,949 10,350

Amounts include:
Due from Group undertakings 74 15

The Group's loans and advances to banks include €255m (2006: €179m) held in respect of liabilities to
customers under investment contracts (note 38).

Loans and advances to banks also include balances of €48m (2006: €37m) held with central banks which
cannot be withdrawn on demand.

22. Assets classified as held for sale The Group The Bank
2007 2006 2007 2006
€m €m €m €m

Assets classified as held for sale 288 - 145 -

Assets classified as held for sale comprise assets that have been acquired by the Group’s wealth
management division with a view to allocation to policyholders under investment contracts or sale to
private clients in the coming year.

All held for sale assets were purchased with a view to resale and therefore were classified as such on
initial acquisition.

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 Anglo Irish Bank
Annual Report & Accounts 2007

23. Available-for-sale financial assets

The Group The Bank

2007 2006 2007 2006
€m €m €m €m
Listed
Government bonds 2,229 698 2,211 685
Other debt securities 6,211 4,161 6,211 4,161
Equity shares 6 8 6 8
8,446 4,867 8,428 4,854
Unlisted
Certificates of deposit 3,844 280 3,844 280
Other debt securities 239 - 230 -
Equity shares 1 8 - 7
4,084 288 4,074 287

Total 12,530 5,155 12,502 5,141

The movement on available-for-sale financial assets

is summarised below:

At beginning of year 5,155 5,005 5,141 4,992

Additions 14,743 2,538 14,728 2,522
Disposals (sales and redemptions) (7,120) (2,340) (7,120) (2,325)
Fair value movements (189) (20) (189) (20)
Increase in interest accruals 130 6 130 6
Exchange and other movements (189) (34) (188) (34)
At end of year 12,530 5,155 12,502 5,141

In the current year €67m of the fair value movements included above have been recognised as a collective
impairment charge (note 11) in the income statement.

At 30 September 2007 available-for-sale financial assets of €1,000m (2006: €1,650m) were pledged to
third parties in sale and repurchase agreements for periods not exceeding six months for both the Group
and the Bank.

The amount removed from equity and recognised as income in the income statement in respect of
available-for-sale financial assets amounted to €1m (2006: €1m) during the year for both the Group and
the Bank.

83
 Notes to the financial statements continued

24. Loans and advances to customers The Group The Bank

2007 2006 2007 2006
€m €m €m €m

Amounts receivable under finance leases (note 26) 85 127 66 104

Amounts receivable under hire purchase contracts
(note 26) 85 186 31 61
Other loans and advances to customers 66,074 49,099 64,905 48,796
66,244 49,412 65,002 48,961
Provisions for impairment (note 25) (295) (270) (209) (243)
65,949 49,142 64,793 48,718
Amounts include:
Due from Group undertakings 5,560 4,199

The Bank's loans and advances to customers include €1,127m (2006: €1,085m) lent to fund assets held in
respect of liabilities to customers under investment contracts (note 38).

The Group's loans and advances to customers include loans to equity-accounted joint venture interests of
€470m (2006: €212m) and loans of €101m (2006: €nil) to joint venture interests held in respect of
liabilities to customers under investment contracts. Also included are loans of €148m (2006: €nil) to
entities which are classified as held for sale.

The Group's loans and advances to customers consist primarily of secured term lending to the business
sector. An analysis of risk concentrations based on the geographic location of the secured real estate is as
follows:

The Group
Risk concentrations 2007 % of total 2006 % of total
€m loans €m loans

Republic of Ireland 23,914 36% 17,475 36%

United Kingdom 25,729 39% 21,925 45%
Mainland Europe 3,918 6% 2,551 5%
United States of America 7,909 12% 4,659 9%
Loans secured on real estate 61,470 93% 46,610 95%
Other secured 4,479 7% 2,532 5%
Total loans and advances to customers 65,949 100% 49,142 100%

Covered bonds
Loans and advances to customers include loans of €2,333m (2006: €nil) for both the Group and the Bank
which have been transferred to Anglo Irish Covered Bonds LLP, a Limited Liability Partnership which is
consolidated by the Group. The transferred loans secure bonds issued under the Bank's €2,000m
covered bond programme. At 30 September 2007 €1,347m (2006: €nil) of these covered bonds had been
issued by the Bank and are included as liabilities within debt securities in issue (note 37). The loans
remain on the Bank's balance sheet as it retains substantially all of the risks and rewards relating to them.

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Annual Report & Accounts 2007

25. Provisions for impairment on loans The Group The Bank

and advances to customers 2007 2006 2007 2006
€m €m €m €m

At beginning of year 270 339 243 314

Implementation of IAS 39 on 1 October 2005 - (117) - (104)
Charge against profits - specific (note 11) 51 36 (10) 23
- collective (note 11) 31 30 24 26
Write-offs (44) (13) (40) (12)
Recoveries of previous write-offs 1 1 1 1
Unwind of discount (7) (6) (4) (6)
Exchange movements (7) - (5) -
Transfer to subsidiary - - - 1
At end of year 295 270 209 243

Specific 141 143 71 125

Collective 154 127 138 118
Total 295 270 209 243

Impaired loans 335 263 167 196

The unwind of discount represents interest income earned on the performing element of impaired loans
and advances.

26. Leasing

Loans and advances to customers include amounts receivable under finance leases and hire purchase
contracts analysed by remaining maturity as follows:

The Group The Bank

2007 2006 2007 2006
€m €m €m €m
Gross receivables:
Three months or less 31 70 16 47
One year or less but over three months 55 93 32 43
Five years or less but over one year 92 166 54 84
Over five years 4 6 4 4
182 335 106 178
Unearned future income (12) (22) (9) (13)
Net receivables (note 24) 170 313 97 165

The cost of assets acquired by the Group during the year for letting under finance leases and hire
purchase contracts amounted to €39m (2006: €68m).

85
 Notes to the financial statements continued

27. Interests in joint ventures The Group

2007 2006
€m €m
Unlisted
At beginning of year 68 23
Investment in joint ventures 42 51
Disposals (13) -
Share of results 2 4
Distributions (10) (11)
Exchange movements (1) 1
At end of year 88 68

Group's share of:

Current assets 66 57
Non-current assets 411 244
Current liabilities (17) (11)
Non-current liabilities (372) (222)
Interests in joint ventures 88 68

Income 32 19
Expenses (29) (14)
Taxation (1) (1)
Share of results of joint ventures 2 4

Issued
Group's capital
interest in and loan
equity and stock
Joint venture entity and registered office Principal activity loan capital €m

Taurus Euro Retail Holdings Sarl Property investment 20% 88

10 rue Henri Schnadt, L-2530 Luxembourg

The Anglo Irish UK Property Fund SLP Property investment 27% 2

180 St. Vincent Street, Glasgow G2 5SG, Scotland

The Second Anglo Irish UK Property Fund SLP Property investment 19% 21
50 Lothian Road, Festival Square, Edinburgh EH3 9WJ, Scotland

Moorevale Investments Limited Property investment 50% -

53-54 Brook's Mews, London W1K 4EF, England

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 Anglo Irish Bank
Annual Report & Accounts 2007

Issued
Group's capital
interest in and loan
equity and stock
Joint venture entity and registered office Principal activity loan capital €m

Aggmore Europe I S.A. Property investment 49% 19

14 rue du Marché aux Herbes, L-1728 Luxembourg

Halladale Anglo Ventures Limited Property investment 50% 8

93 West George Street, Glasgow G2 1PB, Scotland

Carisbrooke Anglo Ventures Limited * Property investment 67% 20

10 Old Jewry, London EC2R 8DN, England

Alchemist Anglo Property Ventures Limited Property investment 50% -

Suite 2/3, 135 Buchanan Street, Glasgow G1 2JA, Scotland

* The Group's interest in the issued share capital of this entity is greater than 50%. However, the
substance and legal form of this venture is such that it is a jointly controlled entity as the approval of both
joint venture parties is required for all strategic financial and operating decisions.

At 30 September 2007 the Group had neither capital commitments nor contingent liabilities, whether
incurred jointly or otherwise, in relation to its joint venture interests.

87
 Notes to the financial statements continued

28. Investments in Group undertakings The Bank

2007 2006
€m €m
Investments in subsidiary undertakings at cost less provisions for impairment 950 789

Principal subsidiary undertakings and registered offices Principal activity

Anglo Irish Asset Finance plc Finance
10 Old Jewry, London EC2R 8DN, England

Anglo Irish Asset Management Limited Fund management

Stephen Court, 18/21 St. Stephen's Green, Dublin 2, Ireland

Anglo Irish Assurance Company Limited Life assurance and pensions

Heritage House, 23 St. Stephen's Green, Dublin 2, Ireland

Anglo Irish Bank (Austria) A.G. Banking

Rathausstrasse 20, P.O. Box 306, A-1011 Vienna, Austria

Anglo Irish Bank Corporation (I.O.M.) P.L.C. Banking

Jubilee Buildings, Victoria Street, Douglas, Isle of Man 1M1 2SH

Anglo Irish Bank (Suisse) S.A. Banking

7 Rue des Alpes, P.O. Box 1380, 1211 Geneva 1, Switzerland

Anglo Irish Capital Funding Limited Finance

Walker House, Mary Street, George Town, Grand Cayman, Cayman Islands

Anglo Irish Capital UK LP Finance

10 Old Jewry, London EC2R 8DN, England

Anglo Irish Capital UK (2) LP Finance

10 Old Jewry, London EC2R 8DN, England

Anglo Irish Capital UK (3) LP Finance

10 Old Jewry, London EC2R 8DN, England

Anglo Irish Covered Bonds LLP Guarantor of covered bonds

10 Old Jewry, London EC2R 8DN, England

Anglo Irish International Financial Services Limited Finance

Stephen Court, 18/21 St. Stephen's Green, Dublin 2, Ireland

Anglo Irish Property Lending Limited Finance

10 Old Jewry, London EC2R 8DN, England

88
 Anglo Irish Bank
Annual Report & Accounts 2007

Principal subsidiary undertakings and registered offices Principal activity

Buyway Group Limited Investment holding
Stephen Court, 18/21 St. Stephen's Green, Dublin 2, Ireland

CDB (U.K.) Limited Investment holding

10 Old Jewry, London EC2R 8DN, England

Sparta Financial Services Finance

Stephen Court, 18/21 St. Stephen's Green, Dublin 2, Ireland

Steenwal B.V. Investment holding

Drentestraat 24 BG, 1083 HK Amsterdam, The Netherlands

The Anglo Aggmore Limited Partnership Property

10 Old Jewry, London EC2R 8DN, England

The Group owns all of the issued ordinary share capital of all subsidiary undertakings listed unless
otherwise stated. All of the Group undertakings are included in the consolidated financial statements. The
Group holds 75% of the capital contributed to The Anglo Aggmore Limited Partnership. The capital
contributors earn a return of 10% per annum on their capital and thereafter the Group is entitled to 50%
of the remaining profits of this partnership. The Group is the general partner of Anglo Irish Capital UK
LP, Anglo Irish Capital UK (2) LP, Anglo Irish Capital UK (3) LP and The Anglo Aggmore Limited
Partnership.

The Group's interest in Anglo Irish Covered Bonds LLP is, in substance, no different than if it were a
wholly owned subsidiary undertaking. Consequently it is consolidated in the Group accounts.

Each subsidiary undertaking operates principally in the country in which it is registered. A complete listing
of Group undertakings will be annexed to the annual return of the Bank in accordance with the
requirements of the Companies Acts. Investments in certain subsidiary undertakings operating as credit
institutions are not directly held by the parent undertaking.

89
 Notes to the financial statements continued

29. Intangible assets The Group The Bank

Computer Computer
software Goodwill software
€m €m €m
Cost
At 1 October 2005 40 67 24
Additions 12 - 12
Exchange movement - (1) -
At 30 September 2006 52 66 36

Additions 7 - 6
Disposals (note 12) - (18) -
Exchange movement - (2) -
At 30 September 2007 59 46 42

Accumulated amortisation and impairment losses

At 1 October 2005 18 - 8
Charge for the year 10 - 6
At 30 September 2006 28 - 14

Charge for the year 14 - 12

At 30 September 2007 42 - 26

Net book value

At 30 September 2007 17 46 16
At 30 September 2006 24 66 22

Following the sale of the Isle of Man trust business during the year the remaining goodwill of €46m now
relates entirely to the acquisition of Anglo Irish Bank (Suisse) S.A.

There was no impairment of goodwill in either 2007 or 2006. Impairment testing is performed, at least
annually, by comparing the carrying value of goodwill to the recoverable amount, which is based on a
value in use calculation. This calculation uses cash flow projections based on management's five year
business plan with cash flows thereafter being extrapolated using growth rates reflecting the trend in
growth rate for the local economy. These cash flows are then discounted at the weighted average cost of
capital for the Group. The weighted average cost of capital is based on the weighted average cost of debt
combined with the cost of equity capital as determined by a capital asset pricing model. When the
present value exceeds the carrying amount no impairment arises.

90
 Anglo Irish Bank
Annual Report & Accounts 2007

30. Investment property - held on own account

The Group
2007 2006
€m €m
Cost
At beginning of year 37 37
Additions 1 -
Disposals (11) -
Exchange movement (1) -
At end of year 26 37

Accumulated depreciation
At beginning of year 1 -
Charge for the year 1 1
Disposals (1) -
At end of year 1 1

Net book value

At end of year 25 36
At beginning of year 36 37

The fair value of investment property held on own account at 30 September 2007 is €29m
(2006: €44m).

31. Investment property - held in respect of liabilities to

customers under investment contracts
The Group
2007 2006
€m €m
Fair value
At beginning of year 1,956 1,219
Additions 653 635
Disposals (698) (99)
Fair value movements 179 201
At end of year (note 38) 2,090 1,956

91
 Notes to the financial statements continued

32. Property, plant and equipment

Computer
Freehold Leasehold and other
The Group properties improvements equipment Total
€m €m €m €m
Cost
At 1 October 2005 5 26 46 77
Additions - 5 3 8
Disposals - - (2) (2)
At 30 September 2006 5 31 47 83

Disposal of Group undertaking - - (2) (2)

Additions - 2 10 12
Disposals - (2) (3) (5)
At 30 September 2007 5 31 52 88

Accumulated depreciation
At 1 October 2005 1 8 32 41
Charge for the year - 3 3 6
Disposals - - (1) (1)
At 30 September 2006 1 11 34 46

Disposal of Group undertaking - - (1) (1)

Charge for the year - 2 8 10
Disposals - (1) (3) (4)
At 30 September 2007 1 12 38 51

Net book value

At 30 September 2007 4 19 14 37
At 30 September 2006 4 20 13 37

The Group occupies properties with a net book value of €21m at 30 September 2007 (2006: €22m) in
the course of carrying out its own activities.

92
 Anglo Irish Bank
Annual Report & Accounts 2007

Computer
Leasehold and other
The Bank improvements equipment Total
€m €m €m
Cost
At 1 October 2005 13 37 50
Additions 4 3 7
Disposals - (1) (1)
At 30 September 2006 17 39 56

Additions 1 9 10
Disposals (2) (2) (4)
At 30 September 2007 16 46 62

Accumulated depreciation
At 1 October 2005 5 26 31
Charge for the year 2 3 5
Disposals - (1) (1)
At 30 September 2006 7 28 35

Charge for the year 2 7 9

Disposals (1) (2) (3)
At 30 September 2007 8 33 41

Net book value

At 30 September 2007 8 13 21
At 30 September 2006 10 11 21

93
 Notes to the financial statements continued

32. Property, plant and equipment continued

The Group has minimum future rental payments under non-cancellable operating leases as follows:

2007 2006
Property Equipment Property Equipment
€m €m €m €m

Within one year 12 2 15 3

One to five years 35 1 48 4
Over five years 135 - 84 -
182 3 147 7

The total of future minimum sublease payments expected to be received under non-cancellable subleases
at 30 September 2007 was €2m (2006: €3m).

The Group profit before taxation is arrived at after charging operating lease rentals of €15m (2006:
€13m). Sublease income recognised for the year was €1m (2006: €nil).

As at 30 September 2007 the Group and the Bank had contractual commitments of €4m (2006: €2m) for
the acquisition of property, plant and equipment.

94
 Anglo Irish Bank
Annual Report & Accounts 2007

33. Deferred taxation The Group The Bank

2007 2006 2007 2006
€m €m €m €m
Analysis of movement in deferred taxation:
Opening net (liability)/asset (9) 43 34 40
IAS 32 and IAS 39 transition adjustments - (25) - (12)
Income statement charge for year (6) (35) (2) (2)
Movements through equity 13 8 13 8
Group transfer - - (1) -
Closing net (liability)/asset (2) (9) 44 34

Analysis of deferred taxation asset:

Available-for-sale financial assets 14 - 14 -
Arrangement fees 14 17 14 17
Derivatives and cash flow hedges 6 8 6 8
Employee benefits and share-based payment schemes 5 8 5 8
Impairment provisions 5 8 5 6
Other temporary differences 3 1 2 -
47 42 46 39

Analysis of deferred taxation liability:

Unremitted profits of subsidiaries (37) (33) - -
Arrangement fees (7) (8) - -
Other temporary differences (5) (10) (2) (5)
(49) (51) (2) (5)

Represented on the balance sheet as follows:

Deferred taxation asset 47 34 46 34
Deferred taxation liability (49) (43) (2) -
(2) (9) 44 34

34. Other assets The Group The Bank

2007 2006 2007 2006
€m €m €m €m

Trading properties 137 611 - -

Sundry debtors 6 14 1 8
143 625 1 8

Trading properties primarily consist of properties acquired for onward allocation to clients as investment
property held in respect of liabilities to customers under investment contracts.

95
 Notes to the financial statements continued

35. Deposits from banks The Group The Bank

2007 2006 2007 2006
€m €m €m €m

Repayable on demand 414 43 6,041 3,584

Securities sold under agreements to
repurchase 1,886 3,852 1,886 3,852
Other deposits by banks with agreed
maturity dates 5,301 6,380 4,801 5,900
7,601 10,275 12,728 13,336
Amounts include:
Due to Group undertakings 5,676 3,770

36. Customer accounts The Group The Bank

2007 2006 2007 2006
€m €m €m €m

Repayable on demand 3,800 2,032 3,134 2,146

Other deposits by customers with agreed
maturity dates 48,886 34,826 43,566 30,612
52,686 36,858 46,700 32,758
Amounts include:
Due to Group undertakings 933 489

The Bank's customer accounts include €363m (2006: €156m) of deposits held in respect of liabilities to
customers under investment contracts (note 38). These deposits eliminate on consolidation in the Group
customer accounts balances.

The Group's customer accounts include deposits of €45m (2006: €56m) received from equity-accounted
joint venture interests.

37. Debt securities in issue The Group The Bank

2007 2006 2007 2006
€m €m €m €m

Medium term note programme 14,084 9,833 14,084 9,833

Other debt securities in issue:
Commercial paper 5,421 3,888 5,421 3,888
Certificates of deposit 1,680 1,339 1,680 1,339
Covered bonds 1,347 - 1,347 -
Extendible notes 1,056 - 1,056 -
23,588 15,060 23,588 15,060

Covered bonds for the Group and the Bank are secured on certain loans and advances to customers
(note 24).

96
 Anglo Irish Bank
Annual Report & Accounts 2007

38. Liabilities to customers under investment contracts The Group

2007 2006
€m €m
Assets held in respect of liabilities to customers under investment contracts:
Investment property 2,090 1,956
Financial assets at fair value through profit or loss 644 309
Derivative financial instruments 14 (8)
Loans and advances to banks 255 179
Ordinary shares in parent Bank 14 15
Subordinated liabilities and other capital instruments - Group 24 34
Total 3,041 2,485
Less:
Funding provided by parent Bank (1,127) (1,085)
Funding provided by external banks (381) (162)
Net asset value attributable to external unitholders (110) -
Net asset value attributable to minority interest (7) -
Add:
Funds on deposit with parent Bank 363 156
Liabilities to customers under investment contracts at fair value 1,779 1,394

Under the terms of the investment contracts issued by the Group's assurance business legal title to the
underlying investments is held by the Group, but the inherent risks and rewards in the investments are
borne by customers through unit-linked life assurance policies. In the normal course of business, the
Group's financial interest in such investments is restricted to fees earned for contract set up and
investment management.

Underlying investments related to certain investment contracts are held through unit trusts or other legal
entities which are not wholly-owned subsidiaries of the Group. The inherent risks and rewards borne by
external third parties are treated as either amounts attributable to external unitholders or minority
interest as appropriate.

In accordance with IFRS, obligations under investment contracts are carried at fair value on the balance
sheet and are classified as liabilities to customers under investment contracts. The above table sets out
where the relevant assets and liabilities in respect of the life assurance business investment contracts are
included on the Group balance sheet. On consolidation, Group loans and advances to customers are
shown net of funding of €1,127m (2006: €1,085m) provided by the parent Bank to fund assets held by the
life assurance business in respect of liabilities to customers under investment contracts.

39. Other liabilities The Group The Bank

2007 2006 2007 2006
€m €m €m €m

Amounts attributable to external unitholders

linked to investment contracts (note 38) 110 - - -
Sundry liabilities 65 32 55 32
175 32 55 32

97
 Notes to the financial statements continued

40. Subordinated liabilities and other capital instruments

The Group The Bank

2007 2006 2007 2006
€m €m €m €m
Dated Loan Capital
€750m Floating Rate Subordinated Notes 2014 (a) 749 748 749 748
US$165m Subordinated Notes Series A 2015 (b) 115 127 115 127
US$35m Subordinated Notes Series B 2017 (c) 24 27 24 27
€500m Callable Floating Rate Subordinated Notes 2016 (d) 499 498 499 498
€750m Callable Floating Rate Subordinated Notes 2017 (e) 749 - 749 -

Undated Loan Capital

Stg£200m Step-up Callable Perpetual Capital Securities (f) 294 309 - -
Stg£250m Tier One Non-Innovative Capital Securities (g) 368 390 - -
€600m Perpetual Preferred Securities (h) 521 511 - -
US$125m Series A Preference Shares (i) - 99 - -
Stg£300m Non-Cumulative Preference Shares (j) 407 431 407 431
Stg£300m Step-up Perpetual Subordinated Notes (k) 424 449 424 449
€600m Fixed/Floating Perpetual Preferred Securities (l) 599 599 - -
Stg£350m Fixed/Floating Perpetual Preferred Securities (m) 516 - - -
Other subordinated liabilities 9 17 9 17
5,274 4,205 2,976 2,297

All subordinated liabilities and other capital instruments issued by the parent Bank are unsecured and
subordinated in the right of repayment to the ordinary creditors, including depositors of the Bank. The
prior approval of the Financial Regulator in Ireland is required to redeem these issues prior to their final
maturity date.

(a) The €750m Floating Rate Subordinated Notes 2014 bear interest at three month EURIBOR plus
0.45% per annum to 25 June 2009 and thereafter at three month EURIBOR plus 0.95% per annum.

(b) The US$165m Subordinated Notes Series A 2015 bear interest at 4.71% per annum to
28 September 2010 and thereafter reset at three month LIBOR plus 0.92% per annum.

(c) The US$35m Subordinated Notes Series B 2017 bear interest at 4.80% per annum to
28 September 2012 and thereafter reset at three month LIBOR plus 0.93% per annum.

(d) The €500m Callable Floating Rate Subordinated Notes 2016 were issued on 21 June 2006, and bear
interest at three month EURIBOR plus 0.30% to 21 June 2011 and thereafter at three month
EURIBOR plus 0.80% per annum. They are callable in whole or in part at the option of the Bank,
subject to the prior approval of the Financial Regulator in Ireland, at their principal amount together
with any outstanding payments on 21 June 2011 or on any coupon date thereafter.

98
 Anglo Irish Bank
Annual Report & Accounts 2007

(e) The €750m Callable Floating Rate Subordinated Notes 2017 were issued on 19 June 2007, and bear
interest at three month EURIBOR plus 0.25% to 19 June 2012 and thereafter at three month
EURIBOR plus 0.75% per annum. They are callable in whole or in part at the option of the Bank,
subject to the prior approval of the Financial Regulator in Ireland, at their principal amount together
with any outstanding payments on 19 June 2012 or on any coupon date thereafter.

(f) On 28 June 2001 Anglo Irish Asset Finance plc ('issuer') issued Stg£200m 8.5325% Step-up Callable
Perpetual Capital Securities ('securities') at par value which have the benefit of a subordinated
guarantee by Anglo Irish Bank Corporation plc ('guarantor').

The securities are perpetual securities and have no maturity date. However, they are redeemable in
whole or in part at the option of the issuer, subject to the prior approval of the Financial Regulator in
Ireland and of the guarantor, at their principal amount together with any outstanding payments on
28 June 2011 or on any coupon payment date thereafter.

The securities bear interest at a rate of 8.5325% per annum to 28 June 2011 and thereafter at a rate
of 4.55% per annum above the gross redemption yield on a specified United Kingdom government
security, reset every five years. The interest is payable semi-annually in arrears on 28 June and
28 December.

(g) On 23 July 2002 Anglo Irish Asset Finance plc ('issuer') issued Stg£160m 7.625% Tier One Non-
Innovative Capital Securities ('TONICS') at an issue price of 99.362%. A further tranche of Stg£90m
TONICS was issued on 21 March 2003 at an issue price of 106.378% plus accrued interest. These
issues also have the benefit of a subordinated guarantee by Anglo Irish Bank Corporation plc
('guarantor').

The TONICS are perpetual and have no maturity date. However, they are redeemable in whole but
not in part at the option of the issuer, subject to the prior approval of the Financial Regulator in
Ireland and of the guarantor, at their principal amount together with any outstanding payments on
23 July 2027 or on any coupon payment date thereafter.

Interest is payable annually in arrears on 23 July on the TONICS at a rate of 7.625% per annum until
23 July 2027. Thereafter, the TONICS will bear interest at a rate of 2.4% per annum above six month
LIBOR, payable semi-annually in arrears on 23 January and 23 July.

The rights and claims of the holders of the securities at (f) above and the TONICS are subordinated
to the claims of the senior creditors of the issuer or of the guarantor (as the case may be) in that no
payment in respect of the securities or the TONICS or the guarantees in respect of them shall be
due and payable except to the extent that the issuer or the guarantor (as applicable) is solvent and
could make such a payment and still be solvent immediately thereafter and the guarantor is in
compliance with applicable regulatory capital adequacy requirements. Upon any winding up of the
issuer or the guarantor, the holders of the securities and the TONICS will rank pari passu with the
holders of preferred securities and preference shares issued by or guaranteed by the issuer or the
guarantor and in priority to all other shareholders of the issuer and of the guarantor.

99
 Notes to the financial statements continued

40. Subordinated liabilities and other capital instruments continued

(h) On 30 September 2004 the limited partners of the Anglo Irish Capital UK LP ('issuer') contributed
capital in the form of 600,000 Non-Voting Non-Cumulative Perpetual Preferred Securities ('preferred
securities') of €1,000 each issued at par. The preferred securities have the benefit of a subordinated
guarantee by Anglo Irish Bank Corporation plc ('guarantor'). The issuer is a limited partnership
organised under the laws of England and Wales and its general partner is Anglo Irish Capital GP
Limited, a wholly owned subsidiary of the guarantor.

The preferred securities are perpetual and have no repayment date. However, they are redeemable
in whole, but not in part, at the option of Anglo Irish Capital GP Limited and subject to the prior
approval of the Financial Regulator in Ireland, at their issue price together with any outstanding
payments on 30 March 2010 or on any distribution date thereafter.

Cash distributions to the limited partners are payable semi-annually in arrears on 30 March and
30 September. The distribution rate on the preferred securities was fixed at 6% per annum to
30 September 2005 and thereafter resets every six months at a rate linked to the euro ten year
constant maturity swap, subject to a cap of 9% per annum.

Anglo Irish Bank Corporation plc has guaranteed the holders of the preferred securities with respect
to their rights to distributions and on liquidation. The guarantee gives, as nearly as possible, the
holders of the preferred securities rights equivalent to those which the holders would be entitled to
if they held preferred securities in Anglo Irish Bank Corporation plc itself. No distributions can be
paid in respect of the preferred securities by the issuer or the guarantor if the guarantor is not in
compliance with applicable regulatory capital adequacy requirements.

(i) Anglo Irish Capital Funding Limited ('issuer') issued 5,000,000 Series A Floating Rate Non-Cumulative
Guaranteed Non-Voting Preference Shares of US$25 each on 4 June 1997. These shares had the
benefit of a subordinated guarantee by Anglo Irish Bank Corporation plc ('guarantor'). The holders
were entitled to receive a non-cumulative preferential dividend in four quarterly instalments in
arrears on 4 March, 4 June, 4 September and 4 December in each year. The coupon rate was three
month US Dollar LIBOR plus 2.5% per annum.

Anglo Irish Bank Corporation plc had guaranteed the holders of the preference shares with respect
to their rights to distributions and on liquidation. The guarantee gave, as nearly as possible, the
holders of the preference shares rights equivalent to those which the holders would be entitled to if
they held preference shares in Anglo Irish Bank Corporation plc itself.

These preference shares were redeemable at par at the option of the issuer, subject to the prior
consent of the guarantor and the Financial Regulator in Ireland, in whole or in part, on any dividend
date from 4 June 2002.

These preference shares were redeemed at par on 4 December 2006.

100
 Anglo Irish Bank
Annual Report & Accounts 2007

(j) On 15 June 2005 300,000 non-cumulative preference shares of Stg£1 each were issued at a price of
Stg£997.99 per share. The holders of these preference shares are entitled to a non-cumulative
preference dividend of 6.25% per annum based on a principal amount of Stg£1,000 per share payable
annually in arrears on 15 June in each year to 15 June 2015. Thereafter dividends are due to be paid
quarterly in arrears on 15 March, 15 June, 15 September and 15 December in each year based on a
principal amount of Stg£1,000 per share and on the three month LIBOR rate plus 1.66% per annum.
No preference dividends can be paid if the issuer is not in compliance with applicable regulatory
capital requirements.

These preference shares are redeemable at Stg£1,000 per share in whole, but not in part, at the
option of the issuer, subject to the prior consent of the Financial Regulator in Ireland, on
15 June 2015 and on any dividend date thereafter.

Upon any winding up of the issuer these preference shares rank in priority to the ordinary shares in
the Bank and equally among themselves and any other present and future Tier 1 capital issues of the
Group. Holders of these preference shares are not entitled to vote at any general meetings of the
Bank, except in certain restricted circumstances.

(k) The Stg£300m Step-up Perpetual Subordinated Notes were issued on 5 October 2005 and bear
interest at 5.25% per annum fixed to 5 October 2015 and thereafter reset at three month LIBOR
plus 1.68% per annum. These notes are redeemable at par in whole, but not in part, at the option of
the Bank, subject to the prior approval of the Financial Regulator in Ireland, on 5 October 2015 and
on any coupon date thereafter.

(l) On 29 September 2006 the limited partners of the Anglo Irish Capital UK (2) LP ('issuer')
contributed capital in the form of €600m Fixed Rate/Floating Rate Guaranteed Non-Voting Non-
Cumulative Perpetual Preferred Securities ('preferred securities') issued at par in the denomination
per preferred security of €50,000 and integral multiples of €1,000 thereabove (subject to investors
holding a minimum interest of €50,000). The preferred securities have the benefit of a subordinated
guarantee by Anglo Irish Bank Corporation plc ('guarantor'). The issuer is a limited partnership
organised under the laws of England and Wales and its general partner is Anglo Irish Capital GP
Limited, a wholly owned subsidiary of the guarantor.

The preferred securities are perpetual and have no repayment date. However, they are redeemable
in whole, but not in part, at the option of Anglo Irish Capital GP Limited and subject to the prior
approval of the Financial Regulator in Ireland, at their issue price together with any outstanding
payments on 29 September 2016.

Cash distributions to the limited partners are payable annually on 29 September. The distribution
rate on the preferred securities was fixed at 5.219% per annum to 29 September 2016 and thereafter
resets at three month EURIBOR plus 2.20% per annum.

Anglo Irish Bank Corporation plc has guaranteed the holders of the preferred securities with respect
to their rights to distributions and on liquidation. The guarantee gives, as nearly as possible, the
holders of the preferred securities rights equivalent to those which the holders would be entitled to
if they held preferred securities in Anglo Irish Bank Corporation plc itself. No distributions can be
paid in respect of the preferred securities by the issuer or the guarantor if the guarantor is not in
compliance with applicable regulatory capital adequacy requirements.

101
 Notes to the financial statements continued

40. Subordinated liabilities and other capital instruments continued

(m) On 1 June 2007 the limited partners of the Anglo Irish Capital UK (3) LP ('issuer') contributed capital
in the form of Stg£350m Fixed Rate/Floating Rate Guaranteed Non-Voting Non-Cumulative
Perpetual Preferred Securities ('preferred securities') issued at par in the denomination per preferred
security of Stg£50,000 and integral multiples of Stg£1,000 thereabove (subject to investors holding a
minimum interest of Stg£50,000). The preferred securities have the benefit of a subordinated
guarantee by Anglo Irish Bank Corporation plc ('guarantor'). The issuer is a limited partnership
organised under the laws of England and Wales and its general partner is Anglo Irish Capital GP
Limited, a wholly owned subsidiary of the guarantor.

The preferred securities are perpetual and have no repayment date. However, they are redeemable
in whole, but not in part, at the option of Anglo Irish Capital GP Limited and subject to the prior
approval of the Financial Regulator in Ireland, at their issue price together with any outstanding
payments on 1 June 2017, or on any distribution payment date thereafter.

Cash distributions to the limited partners are payable semi-annually in arrears on 1 June and
1 December each year up to and including 1 June 2017, and thereafter quarterly in arrears on
1 March, 1 June, 1 September and 1 December. The distribution rate on the preferred securities was
fixed at 6.949% per annum to 1 June 2017 and thereafter resets at three month LIBOR plus 1.39%
per annum.

Anglo Irish Bank Corporation plc has guaranteed the holders of the preferred securities with respect
to their rights to distributions and on liquidation. The guarantee gives, as nearly as possible, the
holders of the preferred securities rights equivalent to those which the holders would be entitled to
if they held preferred securities in Anglo Irish Bank Corporation plc itself. No distributions can be
paid in respect of the preferred securities by the issuer or the guarantor if the guarantor is not in
compliance with applicable regulatory capital adequacy requirements.

102
 Anglo Irish Bank
Annual Report & Accounts 2007

41. Share capital Group and Bank

2007 2006
€m €m
Ordinary share capital

Authorised
1,200,000,000 ordinary shares of €0.16 each (2006: 760,000,000) 192 122

Allotted, called up and fully paid

763,113,647 ordinary shares of €0.16 each (2006: 721,299,187) 122 115

Movements in allotted, called up and fully paid share capital 2007 2006
Number of ordinary shares:
At beginning of year 721,299,187 678,130,548
Share placement 35,709,707 33,566,275
Scrip dividends 2,626,115 2,216,559
Options exercised
- Employee Share Option Scheme 2,654,400 5,883,800
- Save As You Earn scheme 824,238 1,502,005
At end of year 763,113,647 721,299,187

On 2 February 2007 the Bank's authorised ordinary share capital was increased from 760,000,000 to
1,200,000,000 shares.

During the year ended 30 September 2007 the allotted, called up and fully paid ordinary share capital was
increased from 721,299,187 to 763,113,647 shares as follows:

In February 2007 the Bank issued 35,709,707 ordinary shares at a market price of €15.20. This 5%
ordinary share placement strengthens the Group's capital ratios.

In February 2007 2,147,859 ordinary shares were issued to those holders of ordinary shares who elected,
under the terms of the scrip dividend election offer, to receive additional ordinary shares at a price of
€15.46 in lieu of all or part of the cash element of their final dividend entitlement in respect of the year
ended 30 September 2006.

In July 2007 478,256 ordinary shares were issued to those holders of ordinary shares who elected, under
the terms of the scrip dividend election offer, to receive additional ordinary shares at a price of €16.33 in
lieu of all or part of the cash element of their interim dividend entitlement in respect of the year ended
30 September 2007.

During the year 2,654,400 ordinary shares were issued to option holders on the exercise of options under
the terms of the Employee Share Option Scheme at prices ranging from €1.17 to €11.82, and 824,238
ordinary shares were issued to option holders on the exercise of options under the terms of the Save As
You Earn scheme at prices ranging from €0.90 to €11.51.

The Group operates a number of share-based incentive plans, details of which are provided in note 8.

Under resolutions approved by the shareholders, the Bank has the authority to make market purchases of
any class of its own shares to the extent of 10% of its then issued share capital and to hold these shares as
treasury shares. This authority has not been exercised.

103
 Notes to the financial statements continued

41. Share capital continued

Preference share capital

The Bank has authorisation from shareholders to issue preference share capital as follows:
Group and Bank
2007 2006
€m €m

50,000,000 Non-cumulative preference shares of €1 each 50 50

50,000,000 Non-cumulative preference shares of Stg£1 each 72 74
50,000,000 Non-cumulative preference shares of US$1 each 35 39

On 15 June 2005 300,000 non-cumulative preference shares of Stg£1 each were issued at a price of
Stg£997.99 per share. Under IAS 32, these are classified as subordinated liabilities and other capital
instruments (note 40).

42. Minority interest The Group

2007 2006
€m €m

Net asset value held under investment contracts attributable to

minority interest (note 38) 7 -
Other minority interest 6 3
13 3

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 Anglo Irish Bank
Annual Report & Accounts 2007

43. Total equity

The following tables provide a reconciliation of the movements in total equity. A description of the
components of other reserves is provided below:

Capital reserve
The capital reserve is a non-distributable capital reserve.

Exchange translation reserve

The exchange translation reserve has two components. It includes the cumulative foreign exchange
differences arising from translating the income statements of foreign operations at average exchange rates
and the translation of the balance sheets of foreign operations using exchange rates ruling at the year end.
It also includes the cumulative foreign exchange differences arising from the translation of the Group's
investment in foreign operations, net of exchange differences arising on funding designated as hedges of
these investments.

Cash flow hedging reserve

The cash flow hedging reserve represents the effective portion of the cumulative net change in the fair
value of derivatives designated as cash flow hedges. It is stated net of deferred taxation.

Available-for-sale reserve
The available-for-sale reserve represents the unrealised net gains and losses in the fair value of available-
for-sale financial assets as adjusted for any impairment losses recognised in the income statement.
Changes in fair value are presented net of transfers to the income statement in respect of fair value
hedges. It is stated net of deferred taxation.

Share-based payments reserve

The share-based payments reserve represents the cumulative income statement expense for unexercised
share options and deferred share awards granted on or after 7 November 2002.

105
106
43. Total equity continued
Consolidated reconciliation of movements in total equity
Other reserves
Share Share Exchange Cash flow Available- Share-based Retained Minority
capital premium Capital translation hedging for-sale payments profits interest Total
€m €m €m €m €m €m €m €m €m €m
2006
Balance at 1 October 2005 109 169 1 - 34 11 14 1,411 2 1,751
Profit for the year - - - - - - - 657 1 658
Equity dividends - - - - - - - (100) - (100)
Share placing 5 405 - - - - - - - 410
Options exercised and scrip dividends 1 20 - - - - (6) 32 - 47
Net movement in own shares - - - - - - - (35) - (35)
Actuarial gains after tax in retirement benefit schemes - - - - - - - 6 - 6
Share-based payments - - - - - - 15 - - 15
Net changes in fair value - - - - - (3) - - - (3)
Transfers to income statement - - - - - (1) - - - (1)
Notes to the financial statements continued

Other movements - - - 2 (58) - - - - (56)

Balance at 30 September 2006 115 594 1 2 (24) 7 23 1,971 3 2,692

2007
Balance at 30 September 2006 115 594 1 2 (24) 7 23 1,971 3 2,692
Profit for the year - - - - - - - 998 10 1,008
Equity dividends - - - - - - - (127) - (127)
Share placing 6 531 - - - - - - - 537
Options exercised and scrip dividends 1 14 - - - - (5) 46 - 56
Net movement in own shares - - - - - - - (17) - (17)
Actuarial gains after tax in retirement benefit schemes - - - - - - - 12 - 12
Share-based payments - - - - - - 16 - - 16
Net changes in fair value - - - - - (165) - - - (165)
Collective impairment recognised in income statement - - - - - 59 - - - 59
Transfers to income statement - - - - - (1) - - - (1)
Other movements - - - (8) 5 - (2) - - (5)
Balance at 30 September 2007 122 1,139 1 (6) (19) (100) 32 2,883 13 4,065

Retained profits are stated net of treasury shares of €74m (2006: €57m) (note 44).
 Reconciliation of movements in total equity - The Bank

Other reserves
Share Share Exchange Cash flow Available- Share-based Retained
capital premium Capital translation hedging for-sale payments profits Total
€m €m €m €m €m €m €m €m €m

2006
Balance at 1 October 2005 109 169 1 - 34 11 14 1,072 1,410
Profit for the year - - - - - - - 602 602
Equity dividends - - - - - - - (100) (100)
Share placing 5 405 - - - - - - 410
Options exercised and scrip dividends 1 20 - - - - (6) 32 47
Actuarial gains after tax in retirement benefit schemes - - - - - - - 6 6
Share-based payments - - - - - - 15 - 15
Net changes in fair value - - - - - (3) - - (3)
Transfers to income statement - - - - - (1) - - (1)
Other movements - - - 1 (58) - - - (57)
Balance at 30 September 2006 115 594 1 1 (24) 7 23 1,612 2,329

2007
Balance at 30 September 2006 115 594 1 1 (24) 7 23 1,612 2,329
Profit for the year - - - - - - - 909 909
Equity dividends - - - - - - - (127) (127)
Share placing 6 531 - - - - - - 537
Options exercised and scrip dividends 1 14 - - - - (5) 46 56
Actuarial gains after tax in retirement benefit schemes - - - - - - - 12 12
Share-based payments - - - - - - 16 - 16
Net changes in fair value - - - - - (165) - - (165)
Collective impairment recognised in income statement - - - - - 59 - - 59
Transfers to income statement - - - - - (1) - - (1)
Other movements - - - (5) 5 - (2) - (2)
Balance at 30 September 2007 122 1,139 1 (4) (19) (100) 32 2,452 3,623
Annual Report & Accounts 2007

107
Anglo Irish Bank
 Notes to the financial statements continued

44. Treasury shares The Group

2007 2006
€m €m
Ordinary shares in Anglo Irish Bank Corporation plc ('own shares') at cost 60 42
Treasury shares held for the benefit of policyholders 14 15
74 57

Own shares are held to satisfy share options granted or to be granted to employees under the Anglo
Irish Bank Employee Share Ownership Plan ('ESOP') and also to honour conditional share awards made
to employees under the Deferred Share Scheme ('DSS') (note 8).

The trustee of the ESOP borrowed funds from a Group subsidiary undertaking, interest free, to enable
the trustee to purchase own shares in the open market. At 30 September 2007 options were outstanding
over 3,199,700 (2006: 1,968,700) own shares at exercise prices ranging from €1.20 to €16.28. These
options may be exercised at various dates up to August 2017. The proceeds of option exercises are used
to repay the loan.

At 30 September 2007 the trustee of the DSS held 1,104,416 (2006: 1,107,743) own shares to honour
conditional share awards granted between December 2004 and July 2007 to eligible Group employees as
part of their remuneration package. These shares were purchased in the open market and are also
funded by interest free borrowings from a Group subsidiary undertaking. These share awards are
conditional on the relevant employees remaining in the Group's employment for three years from their
grant date. The cost of providing these awards is expensed in the income statement over the vesting
period of the awards. When the awards vest the trustee's borrowings are fully reimbursed by the
sponsoring Group employer.

Including the above, at 30 September 2007 the trustees held 6,665,825 (2006: 5,649,594) own shares
with a market value of €88m (2006: €73m). The dividend income received during the year on own shares
of €1m (2006: €1m) is excluded in arriving at the Group profit before taxation.

Anglo Irish Assurance Company Limited holds ordinary shares for the benefit of policyholders which are
categorised as treasury shares (note 38). At 30 September 2007 it held 1,025,090 (2006: 1,127,881)
shares. These shares have a market value of €14m (2006: €15m).

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 Anglo Irish Bank
Annual Report & Accounts 2007

45. Contingent liabilities, commitments and The Group The Bank

contingencies 2007 2006 2007 2006
€m €m €m €m
Contingent liabilities
Guarantees and irrevocable letters of credit 1,411 2,076 1,283 2,025
Performance bonds, VAT guarantees and
other transaction related contingencies 113 99 89 84
1,524 2,175 1,372 2,109
Commitments
Credit lines and other commitments to lend 9,775 8,734 7,323 6,936

Other contingencies
In addition to the above, the Bank has given guarantees in respect of certain subsidiaries.

46. Cash flow statement

The Group The Bank

Other non-cash items 2007 2006 2007 2006
€m €m €m €m

Provisions for impairment 149 66 81 49

Loans and advances written-off net of recoveries (43) (12) (39) (11)
Net increase in accruals and deferred income 15 41 37 20
Net decrease/(increase) in prepayments and
accrued income 3 24 (3) 24
Depreciation and amortisation 25 17 21 11
Share of results of joint ventures (2) (4) - -
Profit on disposal of Isle of Man trust business (22) - - -
Net gains on disposal of available-for-sale financial
assets (1) (1) (1) (1)
Profit on disposal of investment properties held on
own account (1) - - -
Share-based payment expense 16 15 16 15
Other (1) (4) 1 (2)
138 142 113 105

Cash and cash equivalents

Cash and balances with central banks 848 440 830 430
Loans and advances to banks (with a
maturity of less than three months) 9,984 10,360 8,063 8,639
At 30 September 10,832 10,800 8,893 9,069

109
 Notes to the financial statements continued

47. Risk management and control

Introduction
One of the most fundamental aspects of banking is the management of risk, hence the identification,
measurement and management of risk is a strategic priority for the Group. Consequently, the Board of
Directors ('the Board') has established a comprehensive framework covering accountability, oversight,
measurement and reporting to maintain high standards of risk management throughout the Group. The
principal risks faced by the Group are credit risk, market risk, liquidity or funding risk, operational risk
and regulatory change.

Other key risks and uncertainties facing the Group relate to the general macroeconomic outlook for
Ireland, the UK and the USA. The Group's activities in these key markets are sensitive to increased
competition, higher interest rates, regulatory change, a decline in general economic conditions and
deterioration in underlying asset quality.

Governance framework
The Board approves the overall Group strategy and is responsible for approving the Group's risk appetite.
Primary responsibility for managing risk and for ensuring adequate controls are in place lies with
management. The Group Risk Management function sets limits consistent with the Group's risk appetite,
monitors and reports on compliance with those limits and oversees the management of risk. The function
is headed by the Chief Risk Officer ('CRO'). The CRO is an Executive Director who reports directly to
the Group Chief Executive.

The following Board and executive Committees support the Group's risk management objectives:

ƒ Risk and Compliance Committee;

ƒ Main Credit Committee; and
ƒ Group Asset and Liability Committee ('ALCO').

The Risk and Compliance Committee's main role is to oversee risk management and compliance. This
covers credit, market, liquidity and operational risk. The Committee reviews, on behalf of the Board, the
key risks and compliance issues inherent in the business and the system of control necessary to manage
them. The Committee comprises three Non-executive Directors and approves Group policy on both
banking and treasury credit risk.

The Board delegates its monitoring and control responsibilities to the Main Credit Committee for credit
matters and to ALCO for market risk and liquidity matters. Both Committees comprise senior
management from throughout the Group.

Group Risk Management, Group Finance, Group Compliance and Group Internal Audit are central
control functions, independent of line management, whose roles include monitoring the Group's activities
to ensure compliance with financial and operating controls. The general scheme of risk management,
financial control and operational control is designed to safeguard the Group's assets while allowing
sufficient operational freedom for business units to earn a satisfactory return for shareholders.

Risk management approach

The Group's approach to risk management is based on line management having primary responsibility for
management of risk in individual businesses. As part of the Group's governance framework, risk is subject
to independent oversight and analysis by Group Risk Management, which comprises five core functions:

ƒ Banking credit risk;

ƒ Treasury credit risk;
ƒ Market risk;
ƒ Liquidity risk;
ƒ Operational risk.

These key risk management functions support the CRO in the formulation and monitoring of risk policies
and strategies.

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 Anglo Irish Bank
Annual Report & Accounts 2007

Banking and treasury credit risk

Credit risk is the risk that the Group will suffer a financial loss from a counterparty's failure to pay
interest, repay capital or meet a commitment that they have entered into where the collateral pledged as
security is insufficient to cover the payments due. The Group's credit risk arises primarily from its lending
activities to customers but also from investment in securities and its use of derivatives.

The Group's policy on banking and treasury credit risk is set out in a detailed credit policy manual which
has been approved by the Risk and Compliance Committee. The policy manual, which is regularly
updated, is provided to all relevant staff and forms the core of the Group’s credit risk ethos. Strict
parameters for all types of credit exposure are set down and all applications for credit are assessed within
these parameters.

The Group operates a tiered system of discretions which ensures that all credit exposures are authorised
at an appropriately senior level. The Main Credit Committee, which is the most senior forum for
approving credit exposures, includes Executive Directors and senior management. All credit committees
must reach a consensus before authorising a credit exposure and each individual credit must be signed by
a valid quorum. Additionally, a Non-executive Director must countersign all exposures over a certain
threshold.

All lending exposures are monitored on an ongoing basis with the senior executives responsible for
banking credit risk regularly meeting each individual lender and examining their loan portfolio in detail.
This ensures that potential problems are identified promptly and appropriate remedial action taken.

Credit risk on all treasury clients and interbank facilities is regularly assessed. All such treasury lines must
be formally reviewed by Group Risk Management at least once a year.

Group Risk Management monitors credit risk on a portfolio basis and, in particular, looks at the entire
Group's exposure to geographic and industry sectors. Sectoral guidelines are in place and restrictions on
exposures are imposed when considered prudent. The Group's credit policy ensures that no single
counterparty or group of closely-related counterparties give rise to a significant concentration of credit
risk. Information on the Group's principal risk concentrations is disclosed in note 24.

For financial assets recognised on balance sheet the Group's maximum exposure to credit risk is the
carrying amount of these assets. In most cases the actual exposure to credit risk is less than the carrying
amount. For example, for loans and advances to customers the Group requires various forms of credit
protection, including covenants, and obtains security such as mortgages or charges. Personal guarantees
from borrowers are also often required. To reduce the credit exposure on derivative financial
instruments the Group utilises master netting agreements and obtains cash collateral against net
exposures under collateral support agreements. For financial guarantees granted the maximum exposure
to credit risk is the maximum amount that the Group would have to pay if the guarantees are called upon.
For loan commitments and other credit related commitments that are irrevocable over the life of the
respective facilities the maximum exposure to credit risk is the full amount of committed facilities.

Market risk
Market risk is the risk of a potential adverse change in the Group’s income or financial position arising
from movements in interest rates, exchange rates or other market prices. Market risk arises from the
structure of the balance sheet, the execution of customer and interbank business and trading. The Group
recognises that the effective management of market risk is essential to the maintenance of stable earnings,
the preservation of shareholder value and the achievement of the Group's corporate objectives.

The Group's exposure to market risk is governed by policies prepared by Group Risk Management in
conjunction with Group Treasury and approved by ALCO. These policies set out the nature of risk which
may be taken, the types of financial instruments which may be used to increase or reduce risk and the way
in which risk is controlled. In line with these policies ALCO approves all risk limits, which are also notified
to the Risk and Compliance Committee.

Exposure to market risk is permitted only in specifically designated business units and is centrally managed
by Group Treasury in Dublin. In other units, market risk is eliminated by way of appropriate hedging
arrangements with Group Treasury. Market risk throughout the Group is measured and monitored by
Group Risk Management, operating independently of the risk-taking units.

111
 Notes to the financial statements continued

47. Risk management and control continued

Market risk continued
Use of financial instruments
The Group uses financial instruments in the normal course of its business. To fund asset growth the
Group accepts deposits from customers and interbank counterparties and raises funds via the capital
markets by issuing debt securities. Interest rates on financial instruments can be either fixed or variable,
with varying contractual terms from short to long-term.

Where appropriate the Group uses derivatives to manage interest rate and foreign exchange exposures
arising from the use of financial instruments.

Interest income is principally derived from the Group's lending activities. In addition, the Group earns
interest income on its stock of liquid financial assets which are held for liquidity purposes.

The Group also trades in financial instruments by taking positions in exchange traded and over-the-
counter instruments in order to take advantage of short-term market movements. ALCO places limits on
trading exposures which are independently reported and monitored by Group Risk Management.

Derivatives
A derivative is a financial instrument which defines certain financial rights and obligations which are
contractually linked to interest rates, exchange rates or other market prices. Derivatives are an efficient
and cost effective means of managing market risk and limiting counterparty exposures. As such, they are
an indispensable element of treasury management. Further details of derivative balances are disclosed in
note 20. The accounting policy on derivatives is set out in note 1.

It is recognised that certain forms of derivatives can introduce risks which are difficult to measure and
control. For this reason it is Group policy to place clear boundaries on the nature and extent of its
participation in derivative markets and to apply industry best practice to all aspects of such activity.

The Group's derivative activities are governed by policies approved by ALCO. These policies relate to the
management of the various types of risk associated with derivatives, including market risk, liquidity risk
and credit risk.

The Group assumes market risk only in clearly defined categories of derivatives, which are traded in well
established, liquid markets, supported by industry standard conventions and documentation and valued in
accordance with generally accepted methods. Positions can only be taken in instruments which the Group
can settle, administer and value, and where the risks can be accurately measured and monitored against
exposure limits.

Group Treasury is permitted to take discretionary risk in non-option derivatives, such as interest rate
futures, bond futures, forward rate agreements, interest rate swaps, forward foreign exchange and
currency swaps. In addition, it is permitted to take exposure in the most widely traded option markets,
principally through caps, floors, swap options (swaptions), futures options and conventional currency
options.

Transactions in other more complex derivatives are typically entered into on a matched, back-to-back
basis. This category consists predominantly of equity index derivatives used for the purposes of
constructing retail savings products whose performance are linked to equity markets.

Collateral agreements
The Group has executed Collateral Support Agreements ('CSA's) with its principal interbank derivatives
counterparties. The purpose of a CSA is to limit the potential cost of replacing derivative contracts at
market prices in the event of default by the original counterparty. Under the terms of a CSA, if the
aggregate market value of a set of derivative contracts between the two parties exceeds an agreed
threshold figure, the party which would be exposed to loss in the event of default receives a deposit of
cash or eligible securities equal to the excess aggregate value over the threshold.

112
 Anglo Irish Bank
Annual Report & Accounts 2007

Trading book – interest rate risk

Group Treasury's interest rate trading book consists of interest rate swaps, currency swaps, interest rate
futures, forward rate agreements and options and is marked to market daily. Sensitivity calculations for all
market risk factors are used to measure and limit the Group's exposures.

Trading book position and stop-loss limits are formally approved by ALCO, notified to the Risk and
Compliance Committee and independently monitored daily by Group Risk Management.

Trading book – foreign exchange risk

Trading foreign exchange risk is confined to Group Treasury's trading book and arises from corporate
and interbank foreign exchange business and from trading. Position limits are used to measure and limit
foreign exchange risk. Measurement is carried out independently by Group Risk Management and stop-
loss limits are applied on a daily, monthly and annual basis. Where the Group's trading book contains non-
linear foreign exchange risk, additional sensitivity measures are used to monitor and limit the Group's
exposure to the various market risk factors.

Structural foreign exchange risk

Structural foreign exchange risk represents the currency risk arising from the translation of the Group's
net investments in operations whose functional currency is not in euro. It is Group policy to eliminate this
risk by matching all material foreign currency investments in such operations with liabilities in the same
currency.

Non-trading book
The Group's non-trading book consists of personal and corporate deposits, issued debt securities and the
lending portfolio, as well as Group Treasury's interbank cash book and investment portfolio. In non-
trading business units interest rate risk arises primarily from the Group's core banking business. This
exposure is centrally managed by Group Treasury in Dublin using interest rate swaps and other
conventional hedging instruments.

The Group's non-trading book exposure is analysed by its maturity profile in each currency. Limits by
currency and maturity are formally approved by ALCO and notified to the Risk and Compliance
Committee. These limits are then subject to independent monitoring by Group Risk Management.

Hedging
With the exception of designated hedging instruments, derivatives are treated as held for trading.

The Group designates certain derivatives as either fair value hedges (where the Group hedges changes in
the fair value of recognised assets or liabilities or firm commitments), cash flow hedges (where the Group
hedges the exposure to variability of cash flows attributable to recognised assets or liabilities or highly
probable forecast transactions) or hedges of a net investment in a foreign currency operation.

Fair value hedges

The Group hedges the interest rate risk resulting from any potential change in the fair value of certain
fixed rate assets and liabilities using interest rate swaps and forward rate agreements. The Group also
uses cross-currency interest rate swaps to hedge foreign currency and interest rate exposures on certain
assets and liabilities denominated in foreign currencies.

Cash flow hedges

The Group hedges a portion of floating rate cash flow exposures using interest rate swaps. The Group
also hedges certain forecast foreign currency cash flows using forward foreign exchange contracts
(note 49).

Hedges of net investments

The Group hedges the currency translation risk of net investments in foreign operations with matching
foreign currency funding.

See note 20 for more details on derivatives used for hedging.

113
 Notes to the financial statements continued

47. Risk management and control continued

Liquidity risk
Liquidity risk is the risk that the Group does not have sufficient funds available at all times to meet its
contractual and contingent cash flow obligations. The Group manages liquidity risk through holding a
stock of highly liquid assets which can be readily realised for cash and by focusing on the liquidity profile of
its assets and liabilities.

Liquidity risk is measured using the cash flow mismatch approach where cash inflows and outflows are
analysed to produce a net cash flow position over set time periods. Consistent with the Group's
conservative approach to liquidity risk, cash outflows are assumed to be paid at the earliest potential time
period and cash inflows to be received at the latest potential time period.

Liquidity risk is monitored centrally by ALCO. Its responsibilities include:

ƒ approving and maintaining Group funding and liquidity policy;

ƒ setting liquidity risk strategy for the Group; and
ƒ maintaining internal and external liquidity risk limits.

ALCO's Liquidity Sub-committee specifically deals with all matters relating to Group liquidity.
Group Treasury is responsible for the operational execution of liquidity strategy and management of
Group cash flows on a daily and intra-day basis.

A fundamental component of the Group liquidity policy is the Group funding policy which seeks to build
and maintain a funding profile which is well diversified in terms of retail, corporate and capital markets on
a customer, segmental, geographical and duration basis.

ALCO is responsible for ensuring asset growth is funded in an appropriate manner in accordance with
Group funding policy.

The Group maintains a contingency funding plan to deal with periods of market liquidity stress. The plan is
comprehensive and includes detailed actions which may be required depending on the nature and severity
of the potential liquidity stress. Early warning indicators are an important facet of the contingency funding
plan.

The Group has a comprehensive stress testing framework which is consistent with market best practice
for liquidity risk stress and scenario testing. The suite of stress tests incorporates both market and bank
specific stresses including moderate and severe events. These stress tests are also modelled for short,
medium, and long-term time periods.

The stress testing results enable the Group to analyse the potential effects of low probability yet high
impact events and review the probability of such an event occurring. The Group has limits in place which
set the maximum tolerance for the results of the various stress test scenarios. The Group has also pre-
defined courses of action to reduce the exposure to a particular stress if deemed appropriate.

The Financial Regulator in Ireland introduced new regulatory liquidity requirements in 2007 replacing the
liquid stock approach with a more advanced cash flow mismatch approach. Minimum regulatory ratios are
in place for specified timebands, specifically sight to 8 days and over 8 days to 30 days, with conservative
assumptions set for certain cash flow types.

Cash outflows must be met with cash inflows or highly liquid assets and the Group must maintain a
minimum of 100% coverage in the sight to 8 day timeband and 90% coverage in the over 8 days to 30 days
timeband. In addition, the Financial Regulator in Ireland requires banks to comply with qualitative
requirements regarded as best practice for liquidity risk management.

The Group operates internal limits over and above the minimum regulatory requirements.

114
 Anglo Irish Bank
Annual Report & Accounts 2007

Operational risk
Operational risk is the risk of loss arising from fraud, unauthorised activities, error, omission, inefficiency,
systems failure or exposure to external events. The risk is associated with human error, systems failure,
and inadequate controls and procedures.

The Group's management of its exposure to operational risk is governed by a policy document prepared
by Group Risk Management and approved by the Risk and Compliance Committee. The policy document
specifies that the Group will operate such measures of risk identification, assessment, monitoring and
management as are necessary to ensure that operational risk management is consistent with the
approach, aims and strategic goals of the Group and is designed to safeguard the Group's assets while
allowing sufficient operational freedom to earn a satisfactory return for shareholders. The policy
document also sets out the responsibilities of senior management, the requirement for reporting of
operational risk incidents and the role of Group Internal Audit in providing independent assurance.

The operational risk management process consists of the setting of strategic objectives, the identification
of risks and the implementation of action plans to mitigate the risks identified. Recognising that
operational risk cannot be entirely eliminated, the Group implements risk mitigation controls including
fraud prevention, contingency planning and incident management. Where appropriate this strategy is
further supported by risk transfer mechanisms such as insurance.

The business units and support functions formally reassess their operational risk profile and provide
certified reports to Group Risk Management. These reports are consolidated and presented to the Risk
and Compliance Committee.

Compliance risk
Management and the Group Compliance function are responsible for ensuring that the Group is
compliant with all relevant laws and good practice guidelines in each of the jurisdictions in which the
Group operates. This includes ensuring that all of the Group's personnel are aware of and take steps to
comply with Group policies and procedures. Non-compliance can give rise to reputational loss, legal or
regulatory sanctions or material financial loss.

Group Compliance is charged with defining and identifying regulatory and compliance risks and developing
a compliance programme for the Group that includes the implementation and review of specific policies
and procedures, compliance monitoring and education of Group staff on regulatory and compliance
matters. This programme is risk-based and the Head of Group Compliance is responsible for ensuring
appropriate coverage and co-ordination with other Group functions.

The Risk and Compliance Committee have oversight on all compliance issues.

115
 Notes to the financial statements continued

47. Risk management and control continued

Capital management
The types and levels of capital maintained by the Group are determined in line with its capital
management objectives which ensure that the levels of capital:
ƒ comply with minimum regulatory requirements;
ƒ are appropriate to the Group's underlying risk profile;
ƒ meet the expectations of investors and other stakeholders; and
ƒ support the Group's dividend.

The Group’s regulatory capital base consists of both Tier 1 and Tier 2 capital. Tier 1 capital includes
equity (comprising ordinary share capital, qualifying preference shares, share premium and eligible
reserves), hybrid capital instruments, deductions for intangible assets and prudential adjustments. Tier 2
capital includes subordinated debt and collective impairment provisions. The composition of both Tier 1
and Tier 2 capital is subject to prudential limits. Total capital is further reduced by supervisory deductions
representing the Group's investment in subsidiaries that are not consolidated for the purposes of
regulatory supervision.

It is Group policy to pre-fund capital requirements ensuring a strong capital base to support underlying
growth. At 30 September 2007 the Group's Tier 1 capital and Total capital ratios are strong at 8.6% and
12.0% respectively, well in excess of minimum regulatory requirements. In February the Group issued
35,709,707 ordinary shares at a market price of €15.20 in a 5% share placement. A further Stg£350
million was raised in June 2007 by issuing a new Tier 1 hybrid capital instrument. These initiatives,
together with strong retentions of €912 million contributed to a 41% increase in Tier 1 capital during the
year of €1,985 million. In addition, the Group also issued €750 million of Tier 2 capital in June 2007. Risk
weighted assets have grown by 37%, which is primarily due to the increase in lending across the Group
during the year ended 30 September 2007.

Regulatory capital The Group

2007 2006
€m €m

Tier 1 capital * 6,777 4,792

Tier 2 capital 2,715 2,134
Supervisory deductions (12) (10)
Total capital 9,480 6,916

Total risk weighted assets 78,677 57,358

Tier 1 capital ratio 8.6% 8.4%

Total capital ratio 12.0% 12.1%

* Tier 1 capital is adjusted for proposed final dividends.

Basel II
The Group will apply the Standardised Approach for credit and operational risk from 1 January 2008. The
Group is currently preparing an application for qualification under the Foundation Internal Ratings Based
Approach for submission to the Financial Regulator in Ireland in 2008. The Group expects some
regulatory capital benefit over time following implementation of the Capital Requirements Directive.

116
 Anglo Irish Bank
Annual Report & Accounts 2007

48. Average effective interest rates

The table below shows the average yields on interest bearing assets and liabilities:
The Group
2007 2006
Yield % Yield %
Assets
Loans and advances to banks 4.66 3.38
Loans and advances to customers 7.18 6.35
Other financial assets held on own account 4.67 3.52

Liabilities
Deposits from banks 4.16 3.41
Customer accounts 4.79 3.95
Debt securities in issue 4.76 3.54
Subordinated liabilities and other capital instruments 5.78 5.06

The above yields are calculated using monthly average balances.

Interest income and expense on interest-bearing financial instruments are recognised using the effective
interest rate method.

49. Currency information

At 30 September 2007 the Group's main currency exposures, which arose primarily from the hedging of
forecast non-euro income, were a Stg£ short position of €745m (2006: €366m) and a US$ short position
of €303m (2006: €220m).

The income statement includes net exchange gains of €7m (2006: losses €1m).

It is Group policy to eliminate structural foreign exchange risk by matching all material foreign currency
investments in operations whose functional currency is not in euro with funding in the same currency.

50. Interest rate repricing

The Group manages interest rate risk on a consolidated basis. The following tables analyse the Group's
assets and liabilities into relevant repricing groupings. The interest rate repricing table of the Bank does
not provide meaningful information and therefore has not been presented.

Non-interest bearing balances include interest accruals, impairment provisions, fair value movements and
fair value hedge accounting adjustments.

Assets and related liabilities held in respect of liabilities to customers under investment contracts are
separately disclosed as the underlying interest rate risk is borne by the policyholders and has no direct
impact on the results of the Group.

117
118
50. Interest rate repricing continued
30 September 2007

The Group Over three Over six Over one

months but months but year but
Not more not more not more not more Over Non- Policy-
than three than six than one than five five interest Trading holders'
months months year years years bearing book funds Total
€m €m €m €m €m €m €m €m €m
Assets
Cash and balances with central banks 848 - - - - - - - 848
Financial assets at fair value through profit or loss 398 4 - - - 28 - 644 1,074
Derivative financial instruments - - - - - 291 1,044 20 1,355
Loans and advances to banks 10,377 769 387 84 3 176 - 255 12,051
Available-for-sale financial assets 8,129 1,030 1,287 1,605 589 (110) - - 12,530
Loans and advances to customers 65,280 232 521 589 245 209 - (1,127) 65,949
Other assets - - - - - 755 - 2,090 2,845
Total assets 85,032 2,035 2,195 2,278 837 1,349 1,044 1,882 96,652
Notes to the financial statements continued

Liabilities
Deposits from banks 6,013 797 341 24 - 45 - 381 7,601
Customer accounts 46,034 2,167 3,494 716 74 564 - (363) 52,686
Debt securities in issue 17,952 1,911 1,249 2,187 120 169 - - 23,588
Derivative financial instruments - - - - - 203 966 6 1,175
Liabilities to customers under investment contracts - - - - - - - 1,779 1,779
Other liabilities - - - - - 374 - 110 484
Subordinated liabilities and other capital instruments 2,000 603 5 429 2,322 (61) - (24) 5,274
Total equity - - - - - 4,072 - (7) 4,065
Total equity and liabilities 71,999 5,478 5,089 3,356 2,516 5,366 966 1,882 96,652

Hedging derivatives - nominal amounts (10,776) 2,408 2,526 3,174 2,668 - - - -

Interest rate repricing gap 2,257 (1,035) (368) 2,096 989 (4,017) 78 - -

Cumulative interest rate repricing gap 2,257 1,222 854 2,950 3,939 (78) - - -

Euro Cumulative interest rate repricing gap 625 732 1,049 2,806 3,996 (167) - - -

Stg£ Cumulative interest rate repricing gap 1,377 544 (203) 117 (91) 60 - - -

US$ Cumulative interest rate repricing gap 546 50 51 75 82 62 - - -

 30 September 2006

The Group Over three Over six Over one

months but months but year but
Not more not more not more not more Over Non- Policy-
than three than six than one than five five interest Trading holders'
months months year years years bearing book funds Total
€m €m €m €m €m €m €m €m €m
Assets
Cash and balances with central banks 440 - - - - - - - 440
Financial assets at fair value through profit or loss - 421 - - - 35 - 309 765
Derivative financial instruments 912 161 220 482 - 172 505 7 2,459
Loans and advances to banks 10,703 950 333 212 5 42 - 179 12,424
Available-for-sale financial assets 3,978 81 31 853 156 56 - - 5,155
Loans and advances to customers 47,620 392 582 1,191 400 42 - (1,085) 49,142
Other assets - - - - - 949 - 1,956 2,905
Total assets 63,653 2,005 1,166 2,738 561 1,296 505 1,366 73,290

Liabilities
Deposits from banks 9,209 160 660 - - 84 - 162 10,275
Customer accounts 32,650 1,481 1,846 644 110 283 - (156) 36,858
Debt securities in issue 11,936 788 565 1,645 41 85 - - 15,060
Derivative financial instruments 1,534 273 - 9 - 183 476 15 2,490
Liabilities to customers under investment contracts - - - - - - - 1,394 1,394
Other liabilities - - - - - 316 - - 316
Subordinated liabilities and other capital instruments 1,351 601 4 435 1,882 (34) - (34) 4,205
Total equity - - - - - 2,707 - (15) 2,692
Total equity and liabilities 56,680 3,303 3,075 2,733 2,033 3,624 476 1,366 73,290

Hedging derivatives - nominal amounts (6,689) 862 1,243 2,196 2,388 - - - -

Interest rate repricing gap 284 (436) (666) 2,201 916 (2,328) 29 - -

Cumulative interest rate repricing gap 284 (152) (818) 1,383 2,299 (29) - - -

Euro Cumulative interest rate repricing gap 784 414 324 1,869 2,853 (25) - - -

Stg£ Cumulative interest rate repricing gap 217 (21) (757) (362) (473) (18) - - -

US$ Cumulative interest rate repricing gap (495) (404) (278) (46) (2) 13 - - -
Annual Report & Accounts 2007

119
Anglo Irish Bank
 Notes to the financial statements continued

51. Fair value of financial assets and financial liabilities

The following table represents the carrying amount and the fair value of the Group's financial assets and
financial liabilities at the year end.

The concept of fair value assumes realisation of financial instruments by way of a sale. However, in many
cases, particularly in respect of loans and advances to customers, the Group intends to realise assets
through collection over time. As such, the fair value calculated does not represent the value of the Group
as a going concern at the year end. As a result, readers of these financial statements are advised to use
caution when using this data to evaluate the Group's financial position.

The Group 2007 2006

Carrying Fair Carrying Fair
amount value amount value
€m €m €m €m
Financial assets
Cash and balances with central banks 848 848 440 440
Financial assets at fair value through profit or loss
- held on own account 430 430 456 456
- held in respect of liabilities to customers under
investment contracts 644 644 309 309
Derivative financial instruments 1,355 1,355 2,459 2,459
Loans and advances to banks 12,051 12,048 12,424 12,420
Available-for-sale financial assets 12,530 12,530 5,155 5,155
Loans and advances to customers 65,949 66,055 49,142 49,207

Financial liabilities
Deposits from banks 7,601 7,582 10,275 10,272
Customer accounts 52,686 52,678 36,858 36,852
Debt securities in issue 23,588 23,524 15,060 15,070
Derivative financial instruments 1,175 1,175 2,490 2,490
Subordinated liabilities and other capital instruments 5,274 4,993 4,205 4,243

Fair value is the amount for which an asset could be exchanged, or a liability settled, between
knowledgeable and willing parties in an arm's length transaction. The Group has estimated fair value
wherever possible using quoted prices from active markets. The fair value of financial assets has been
determined using bid prices, while offer prices have been used to determine the fair value of financial
liabilities. In certain cases however, including loans and advances to customers, there are no active
markets. Accordingly, fair value has been calculated using appropriate valuation techniques. The methods
used to determine the fair value of items not carried at fair value are set as follows:

120
 Anglo Irish Bank
Annual Report & Accounts 2007

Cash and balances with central banks

The fair value of cash and balances with central banks is their carrying amount as these balances may be
withdrawn without notice.

Loans and advances to banks

The fair value of overnight placements is their carrying amount. The fair value of other loans and advances
to banks is calculated by discounting expected cash flows using market rates.

Loans and advances to customers

The carrying value of variable rate loans and advances to customers is considered to approximate fair
value as there has been no significant change in the credit risk of the borrowers. The fair value of fixed
rate loans is calculated by discounting expected cash flows using market rates or interest rates currently
offered by the Group.

Deposits from banks and customer accounts

The fair value of deposit liabilities repayable on demand is their carrying amount. The fair value of other
deposits is calculated by discounting expected cash flows using market rates or interest rates currently
offered by the Group.

Debt securities in issue, subordinated liabilities and other capital instruments

The fair value of debt securities in issue, subordinated liabilities and other capital instruments is their
quoted market value at year end.

52. Maturity profile

The Group manages liquidity risk on a consolidated basis. The following tables analyse the Group's
financial assets, financial liabilities and derivative financial instruments into relevant maturity groupings
based on the remaining period to the contractual maturity date as at the balance sheet date. The maturity
profile of the Bank does not provide meaningful information and therefore has not been presented.

As the information presented in the following tables is prepared on the basis of contractual maturity it
should not be taken as an indication of the Group's liquidity risk.

Assets and related liabilities held in respect of liabilities to customers under investment contracts are
separately disclosed as the underlying liquidity risk is borne by the policyholders and has no direct impact
on the results of the Group.

121
122
52. Maturity profile continued

30 September 2007

The Group Over three Over one

months but year but
Not more not more not more Over Policy-
than three than one than five five Equity holders'
Demand months year years years shares funds Total
€m €m €m €m €m €m €m €m
Financial assets
Cash and balances with central banks 848 - - - - - - 848
Financial assets at fair value through profit or loss
- held on own account - 3 48 93 220 66 - 430
- held in respect of liabilities to customers under investment
contracts - - - - - - 644 644
Derivative financial instruments - 228 201 615 291 - 20 1,355
Notes to the financial statements continued

Loans and advances to banks 377 9,607 1,217 543 52 - 255 12,051
Available-for-sale financial assets - 2,540 2,907 4,645 2,431 7 - 12,530
Loans and advances to customers 2,255 12,314 14,458 25,935 12,114 - (1,127) 65,949
Total financial assets 3,480 24,692 18,831 31,831 15,108 73 (208) 93,807

Financial liabilities
Deposits from banks 414 4,621 1,150 1,035 - - 381 7,601
Customer accounts 3,800 42,673 5,757 724 95 - (363) 52,686
Debt securities in issue - 6,509 4,990 11,602 487 - - 23,588
Derivative financial instruments - 156 124 496 393 - 6 1,175
Liabilities to customers under investment contracts - - - - - - 1,779 1,779
Subordinated liabilities and other capital instruments* - 50 13 1 5,234 - (24) 5,274
Total financial liabilities 4,214 54,009 12,034 13,858 6,209 - 1,779 92,103

* Undated subordinated liabilities and other capital instruments have been included in amounts maturing over five years.
 30 September 2006

The Group Over three Over one

months but year but
Not more not more not more Over Policy-
than three than one than five five Equity holders'
Demand months year years years shares funds Total
€m €m €m €m €m €m €m €m
Financial assets
Cash and balances with central banks 440 - - - - - - 440
Financial assets at fair value through profit or loss
- held on own account - - 433 - - 23 - 456
- held in respect of liabilities to customers under investment
contracts - - - - - - 309 309
Derivative financial instruments - 199 567 1,469 217 - 7 2,459
Loans and advances to banks 45 10,315 1,372 459 54 - 179 12,424
Available-for-sale financial assets - 481 1,216 2,874 568 16 - 5,155
Loans and advances to customers 4,493 6,074 10,147 19,793 9,720 - (1,085) 49,142
Total financial assets 4,978 17,069 13,735 24,595 10,559 39 (590) 70,385

Financial liabilities
Deposits from banks 43 8,866 827 377 - - 162 10,275
Customer accounts 2,036 30,838 3,382 649 109 - (156) 36,858
Debt securities in issue - 4,993 2,375 7,617 75 - - 15,060
Derivative financial instruments - 195 599 1,450 231 - 15 2,490
Liabilities to customers under investment contracts - - - - - - 1,394 1,394
Subordinated liabilities and other capital instruments* - 126 13 9 4,091 - (34) 4,205
Total financial liabilities 2,079 45,018 7,196 10,102 4,506 - 1,381 70,282

* Undated subordinated liabilities and other capital instruments have been included in amounts maturing over five years.
Annual Report & Accounts 2007

123
Anglo Irish Bank
 Notes to the financial statements continued

53. Report on Directors' remuneration and interests

This report on Directors' remuneration and interests has been prepared by the Remuneration
Committee on behalf of the Board of Directors in accordance with the requirements of the Irish Stock
Exchange's Combined Code on Corporate Governance.

Remuneration Committee
All members of the Remuneration Committee are Non-executive Directors. Its current members are
Ned Sullivan (Chairman), Sean FitzPatrick, Anne Heraty and Gary McGann. This Committee is responsible
for the formulation of the Group's policy on remuneration in relation to all Executive Directors and
other senior executives. The remuneration of the Executive Directors is determined by the Board of
Directors on the recommendations of the Remuneration Committee. The recommendations of the
Remuneration Committee are considered and approved by the Board of Directors.

Remuneration policy
The remuneration policy adopted by the Group is to reward its Executive Directors competitively having
regard to comparable companies and the need to ensure that they are properly rewarded and motivated
to perform in the best interests of shareholders. The policy is based heavily on rewarding performance.
The Group Chief Executive is fully consulted about remuneration proposals in relation to other
Directors. From time to time the Remuneration Committee takes advice from external pay consultants.
Included in the remuneration package for Executive Directors are basic salary, a performance related
bonus and the opportunity to participate in employee share incentive plans. They also participate in either
a personal Revenue approved defined contribution pension plan or a Group defined benefit pension
scheme.

Remuneration for Non-executive Directors is a matter for the Chairman in consultation with the Group
Chief Executive and the Group Company Secretary. Neither the Chairman nor any Director are involved
in decisions relating to their own remuneration.

Performance bonuses
Performance bonuses are determined for each individual Executive Director. Bonuses earned in any one
year depend on the Remuneration Committee's assessment of each Director's performance against
predetermined individual, divisional and Group objectives.

The annual performance bonus is based on a multiple of base salary and is paid annually in cash once the
Group's financial results have been independently audited. The annual performance bonus motivates and
rewards Directors for achieving strategic financial and non-financial objectives.

The Group also operates a deferred bonus scheme for Executive Directors. Prior to 2007 the Group
deferred bonus scheme was cash-based. However from 2007 onwards, subject to ordinary shareholder
approval at the forthcoming Annual General Meeting, the Remuneration Committee intends replacing this
scheme with a new share-based long term incentive plan ('share-based LTIP'). The benefits under the
proposed share-based LTIP scheme will be deferred to the earlier of three years or the individual's
retirement date and will be conditional on the Group achieving set key performance targets. This
proposed policy change is designed to further enhance the alignment between Directors' and
shareholders' interests.

124
 Anglo Irish Bank
Annual Report & Accounts 2007

Share incentive plans

It is the Group's policy to motivate its Executive Directors by granting them share options. These options
have been granted under the terms of the employee share incentive plans approved by shareholders.
Further details in relation to these plans are provided in notes 8 and 44 of the financial statements. Non-
executive Directors are not eligible to participate in the employee share incentive plans.

Loans to Directors
Loans to Directors are made in the ordinary course of business on commercial terms in accordance with
established policy. Details of loans to Directors are included in note 54.

Contracts
Other than in the normal course of business, there have not been any contracts or arrangements with
the Bank or any subsidiary undertaking during the year in which a Director of the Bank was materially
interested and which were significant in relation to the Group's business. There are no service contracts
in existence for any Director with the Bank or any of its subsidiary undertakings.

Pensions
Executive Directors participate in either a defined contribution scheme or a Group defined benefit
scheme. All pension benefits are determined solely in relation to basic salary. Fees paid to Non-executive
Directors are not pensionable.

125
 Notes to the financial statements continued

53. Report on Directors' remuneration and interests continued

Directors' remuneration - 2007

Annual *Deferred
perfor- perfor- **Pension
mance mance contri- Former
Salary Fees bonus bonus Benefits bution Director Total
€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000

Executive Directors
David Drumm 956 - 2,000 - 44 274 - 3,274
Tom Browne 455 - 600 - 48 123 - 1,226
William McAteer 485 - 800 - 48 94 - 1,427
Declan Quilligan (1) 484 - 735 - 8 139 - 1,366
Pat Whelan 413 - 640 - 41 118 - 1,212

Non-executive Directors
Sean FitzPatrick - 431 - - - - - 431
Lar Bradshaw - 80 - - - - - 80
Fintan Drury - 85 - - - - - 85
Noël Harwerth (2) - 53 - - - - - 53
Anne Heraty - 83 - - - - - 83
Michael Jacob - 90 - - - - - 90
Gary McGann - 85 - - - - - 85
Ned Sullivan - 108 - - - - - 108
Patrick Wright (3) - 27 - - - - - 27

Former Director
Peter Murray (4) - - - - - - 85 85

Total 2,793 1,042 4,775 - 189 748 85 9,632

(1) In addition, relocation costs of €160,000 were incurred by the Group in respect of Declan Quilligan's
transfer to the UK.
(2) Co-opted on 2 February 2007.
(3) Retired on 2 February 2007.
(4) Fees paid to Peter Murray in his capacity as a member of the Supervisory Board of Anglo Irish Bank
(Austria) A.G. and as a Non-executive Director of Anglo Irish Assurance Company Limited.

* The cash-based deferred bonus scheme ceased during the year. Pending ordinary shareholder approval,
this will be replaced by a share-based long term incentive plan.
** Includes amounts due in lieu of pension benefits foregone.

126
 Anglo Irish Bank
Annual Report & Accounts 2007

Directors' remuneration - 2006

Annual Deferred
perfor- perfor- *Pension
mance mance contri- Former
Salary Fees bonus bonus Benefits bution Director Total
€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000

Executive Directors
David Drumm 818 - 1,300 600 39 258 - 3,015
Tom Browne 435 - 750 350 45 112 - 1,692
William McAteer 435 - 800 400 54 87 - 1,776
Declan Quilligan (1) 301 - 300 200 - 88 - 889
John Rowan (2) 110 - - - 27 42 - 179
Pat Whelan (3) 85 - 100 50 11 25 - 271

Non-executive Directors

Sean FitzPatrick - 363 - - - - - 363

Lar Bradshaw - 72 - - - - - 72
Fintan Drury - 77 - - - - - 77
Anne Heraty (4) - 34 - - - - - 34
Michael Jacob - 96 - - - - - 96
Patricia Jamal (5) - 32 - - - - - 32
Gary McGann - 72 - - - - - 72
Ned Sullivan - 93 - - - - - 93
Patrick Wright - 72 - - - - - 72

Former Director
Peter Murray (6) - - - - - - 84 84

Total 2,184 911 3,250 1,600 176 612 84 8,817

(1) Co-opted on 26 January 2006. In addition, relocation costs of €175,000 were incurred by the Group
in respect of Declan Quilligan's transfer to the UK.
(2) Retired on 31 December 2005. In recognition of his substantial contribution to the Group, John
Rowan received an additional €1,108,000 on his retirement.
(3) Co-opted on 6 July 2006.
(4) Co-opted on 27 April 2006.
(5) Retired on 21 March 2006.
(6) Fees paid to Peter Murray in his capacity as a member of the Supervisory Board of Anglo Irish Bank
(Austria) A.G. and as a Non-executive Director of Anglo Irish Assurance Company Limited.

* Includes amounts due in lieu of pension benefits foregone.

127
 Notes to the financial statements continued

53. Report on Directors' remuneration and interests continued

Directors' and Company Secretary's interests

The beneficial interests of the current Directors and Secretary and of their spouses and minor children
in the shares of the Bank are included in the following table:

Interests in ordinary shares 30 September 2007 30 September 2006

Ordinary Share Ordinary Share
shares options shares options
Directors
Sean FitzPatrick 4,512,712 - 4,473,869 -
David Drumm 510,899 1,201,834 305,520 1,402,696
Lar Bradshaw 141,195 - 120,139 -
Tom Browne 893,936 1,601,791 884,733 1,608,330
Fintan Drury 53,796 - 53,327 -
Noël Harwerth - - - * - *
Anne Heraty 25,000 - 25,000 -
Michael Jacob 746,921 - 746,766 -
William McAteer 3,367,452 501,056 2,863,376 1,002,696
Gary McGann 140,028 - 139,247 -
Declan Quilligan 183,419 900,000 179,148 902,696
Ned Sullivan 427,584 - 425,200 -
Pat Whelan 346,192 701,366 145,248 701,366

Secretary
Natasha Mercer 16,737 26,834 16,664 * 26,834 *

* or date of appointment if later

There have been no changes in the Directors' and Secretary's shareholdings between
30 September 2007 and 27 November 2007. The Directors and Secretary and their spouses and minor
children have no other interests in the shares of the Bank or its Group undertakings as at
30 September 2007.

Details of options outstanding at 30 September 2007 are shown in the Register of Directors' and
Secretary's Interests, which may be inspected at the Bank's registered office. The closing market price
of the Bank's ordinary shares at 30 September 2007 was €13.26 (2006: €12.95) and the range during
the year to 30 September 2007 was from €11.63 to €17.53.

128
 Anglo Irish Bank
Annual Report & Accounts 2007

Share options granted to Directors

Options to subscribe for ordinary shares in the Bank granted to and exercised by Directors during the year
to 30 September 2007 are included in the following table:

Options Options Market

granted exercised price at Options outstanding at 30 Sept 2007 Weighted
Options at since since exercise Date from average
1 Oct 2006 1 Oct 2006 1 Oct 2006 date which Expiry Exercise exercise
Number Number Number Price € Number exercisable date price € price €

David Drumm 200,000 - 200,000 16.25 - ● Sept 06 Sept 13 4.68

200,000 - - 200,000 # Sept 08 Sept 13 4.68
500,000 - - 500,000 ● Nov 07 Nov 14 7.97
500,000 - - 500,000 # Nov 09 Nov 14 7.97
2,696 - 2,696 15.70 - * Feb 07 Aug 07 4.51
- 1,834 - 1,834 * Jan 12 July 12 11.51
1,402,696 1,834 202,696 1,201,834 7.43

Tom Browne 300,000 - - 300,000 ● Feb 05 Feb 12 2.25

300,000 - - 300,000 # Feb 07 Feb 12 2.25
500,000 - - 500,000 ● Sept 06 Sept 13 4.68
500,000 - - 500,000 # Sept 08 Sept 13 4.68
8,330 - 8,330 15.93 - * June 07 Dec 07 2.54
- 1,791 - 1,791 * July 12 Jan 13 11.79
1,608,330 1,791 8,330 1,601,791 3.78

William McAteer 500,000 - 500,000 16.25 - ● Dec 06 Dec 13 6.30

500,000 - - 500,000 # Dec 08 Dec 13 6.30
2,696 - 2,696 15.70 - * Feb 07 Aug 07 4.51
- 1,056 - 1,056 * Jan 10 July 10 11.51
1,002,696 1,056 502,696 501,056 6.31

Declan Quilligan 100,000 - - 100,000 ● Sept 06 Sept 13 4.68

100,000 - - 100,000 # Sept 08 Sept 13 4.68
100,000 - - 100,000 ● Nov 07 Nov 14 7.97
200,000 - - 200,000 # Nov 09 Nov 14 7.97
100,000 - - 100,000 + Nov 07 Nov 14 7.97
150,000 - - 150,000 ● Dec 08 Dec 15 11.82
150,000 - - 150,000 # Dec 10 Dec 15 11.82
2,696 - 2,696 14.82 - * Feb 07 Aug 07 4.51
902,696 - 2,696 900,000 8.52

Pat Whelan 200,000 - 200,000 16.25 - ● Sept 06 Sept 13 4.68

200,000 - - 200,000 # Sept 08 Sept 13 4.68
50,000 - - 50,000 ● Nov 07 Nov 14 7.97
100,000 - - 100,000 # Nov 09 Nov 14 7.97
50,000 - - 50,000 + Nov 07 Nov 14 7.97
50,000 - - 50,000 ● Dec 08 Dec 15 11.82
50,000 - - 50,000 # Dec 10 Dec 15 11.82
1,366 - - 1,366 * Jan 09 July 09 8.90
- 70,000 - 70,000 ● Feb 10 Feb 17 16.11
- 80,000 - 80,000 # Feb 12 Feb 17 16.11
- 50,000 - 50,000 + Feb 10 Feb 17 16.11
701,366 200,000 200,000 701,366 9.90

● Basic tier options - ESOS

# Second tier options - ESOS
* SAYE scheme options
+ ESOP options

129
 Notes to the financial statements continued

53. Report on Directors' remuneration and interests continued

Directors' pension benefits

The Group makes payments to defined contribution pension plans for Tom Browne and William
McAteer. All of the other Executive Directors are members of a Group defined benefit scheme. Details
are as follows:

Defined
Defined benefit contribution
Increase in
accrued annual Total accrued Total increase in
pension benefit pension benefit transfer value of Group
during year at year end accrued benefit contribution
€'000 €'000 €'000 €'000

David Drumm (1) - 258 - -

Tom Browne - - - 123
William McAteer - - - 94
Declan Quilligan 21 147 179 -
Pat Whelan 38 117 718 -
59 522 897 217

(1) David Drumm's pension fund has been capped in line with the provisions of the Finance Act, 2006
and as a result there is no increase in the accrued annual pension benefit during the year ended
30 September 2007. He is entitled to a supplementary taxable cash allowance of €274,000 in lieu of
pension benefits foregone.

The increase in accrued annual pension benefit during the year excludes any increase for inflation. The
total accrued pension benefit at the year end is that which would be paid annually on normal retirement
date, based on service to the year end. The increase in transfer value of accrued benefit has been
calculated by an independent actuary.

Fees paid to Non-executive Directors are not pensionable.

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 Anglo Irish Bank
Annual Report & Accounts 2007

54. Related party transactions

Subsidiary undertakings
Banking transactions are entered into by the Bank with its subsidiaries in the normal course of business.
Balances between the Bank and its subsidiaries are detailed in notes 20, 21, 24, 35, 36, 38 and 44. Details
of the principal subsidiary undertakings are shown in note 28.

Joint ventures
The Group provides certain banking and financial services for its joint ventures. Details of loans to and
deposits from joint ventures are shown in notes 24 and 36 respectively.

Pension funds
The Group provides normal investment fund management and banking services to pension funds operated
by the Group for the benefit of its employees. These services are provided on similar terms to third party
transactions and are not material to the Group.

Remuneration of key management personnel

The following disclosures are made in accordance with the provisions of IAS 24 'Related Party
Disclosures' in respect of the remuneration of key management personnel. For the purposes of this
standard, key management personnel comprise the Board of Directors (Executive and Non-executive)
and members of the Senior Executive Board.

The amounts presented below include the figures separately reported in the Report on Directors'
remuneration and interests in note 53.

2007 2006
€m €m

Salaries and short-term employee benefits 12 9

Directors' fees 1 1
Post employment benefits 1 9
Other long-term benefits 1 3
Equity compensation benefits 3 5
18 27

131
 Notes to the financial statements continued

54. Related party transactions continued

Transactions with key management personnel

Loans to key management personnel are made in the ordinary course of business on normal commercial
terms. In addition, key management personnel may hold deposits with the Group.

The aggregate amounts outstanding at year end of loans to and deposits by persons who, at any time
during the year, were key management personnel were:

2007 2006
Aggregate Number of Aggregate Number of
balance persons balance persons
€m €m
Directors
Loans 41 13 31 12
Deposits 8 13 5 11

Members of the Senior Executive Board *

Loans 6 5 6 4
Deposits 1 6 3 7

Total loans 47 18 37 16

Total deposits 9 19 8 18

* Excluding Executive Directors

Other related party transactions

Anne Heraty, a Non-executive Director, is also a Director of CPL Resources plc. During the year ended
30 September 2007, CPL Resources Group received €263,000 (2006: €156,000) in fees, incurred in the
normal course of business, from the Group.

Fintan Drury, a Non-Executive Director, is also a Director of Platinum One Ltd. During the year ended
30 September 2007, Platinum One Ltd received €nil (2006: €26,000) in fees, incurred in the normal
course of business, from the Group.

132
 Anglo Irish Bank
Annual Report & Accounts 2007

55. Events after the balance sheet date

In accordance with IAS 10 'Events after the Balance Sheet Date', the proposed final dividend of
13.01 cent per ordinary share, amounting to €99m, is not recognised as a liability until it is ratified at the
Annual General Meeting.

56. Trust activities

The Group provides custody, trustee, investment management and advisory services to third parties
which involve the Group making allocation, purchase and sale decisions in relation to a wide range of
assets. Those assets that are held in a fiduciary capacity are not included in these financial statements. At
the balance sheet date the Group had the following assets under management:

2007 2006
€m €m

Equities and investment properties 2,232 4,830

Managed cash and other assets 638 1,638
2,870 6,468

On 21 December 2006 the Group disposed of its Isle of Man trust business (note 12).

57. General

Anglo Irish Bank Corporation plc is domiciled and incorporated in the Republic of Ireland as a public
limited company. Its principal place of business and registered office is situated at Stephen Court,
18/21 St. Stephen's Green, Dublin 2. It is principally engaged in banking activities.

58. Approval of financial statements

The Group financial statements were authorised for issue by the Board of Directors on
27 November 2007.

133
 Consolidated income statement
For the year ended 30 September 2007
USDm GBPm CHFm

Interest and similar income 7,615 3,742 8,916

Interest expense and similar charges (5,395) (2,651) (6,317)
Net interest income 2,220 1,091 2,599

Fee and commission income 251 123 294

Fee and commission expense (23) (11) (27)
Dealing profits 18 9 22
Other operating income 30 15 35
Other income 276 136 324
Total operating income 2,496 1,227 2,923

Administrative expenses (522) (256) (611)

Depreciation (15) (8) (18)
Amortisation of intangible assets - software (20) (10) (23)
Total operating expenses (557) (274) (652)

Operating profit before provisions for impairment 1,939 953 2,271

Provisions for impairment:
Loans and advances - specific (72) (35) (85)
Loans and advances - collective (44) (22) (51)
Other - collective (95) (47) (111)
(211) (104) (247)

Operating profit 1,728 849 2,024

Share of results of joint ventures 3 2 3
Profit on disposal of Isle of Man trust business 31 15 36

Profit before taxation 1,762 866 2,063

Taxation (333) (164) (390)

Profit for the year 1,429 702 1,673

Attributable to:
Equity holders of the parent 1,415 695 1,657
Minority interest 14 7 16
Profit for the year 1,429 702 1,673

Basic earnings per €0.16 ordinary share $1.91 93.9p Chf 2.24

Diluted earnings per €0.16 ordinary share $1.89 92.8p Chf 2.21

Exchange rates used at 30 September 2007

One Euro = USD 1.4179 / GBP 0.6968 / CHF 1.6601

134
 Anglo Irish Bank
Annual Report & Accounts 2007

Consolidated balance sheet

As at 30 September 2007
USDm GBPm CHFm
Assets
Cash and balances with central banks 1,202 591 1,408
Financial assets at fair value through profit or loss
- held on own account 610 300 714
- held in respect of liabilities to customers under investment contracts 913 449 1,069
Derivative financial instruments 1,921 944 2,249
Loans and advances to banks 17,087 8,397 20,006
Assets classified as held for sale 408 201 478
Available-for-sale financial assets 17,766 8,731 20,801
Loans and advances to customers 93,509 45,953 109,482
Interests in joint ventures 125 61 146
Intangible assets - software 24 12 28
Intangible assets - goodwill 65 32 76
Investment property
- held on own account 36 17 42
- held in respect of liabilities to customers under investment contracts 2,963 1,456 3,470
Property, plant and equipment 53 26 62
Retirement benefit assets 41 20 48
Deferred taxation 67 33 78
Other assets 203 100 237
Prepayments and accrued income 50 24 58
Total assets 137,043 67,347 160,452
Liabilities
Deposits from banks 10,778 5,296 12,619
Customer accounts 74,704 36,712 87,464
Debt securities in issue 33,445 16,436 39,158
Derivative financial instruments 1,666 819 1,951
Liabilities to customers under investment contracts 2,522 1,240 2,953
Current taxation 89 44 105
Other liabilities 248 122 291
Accruals and deferred income 269 132 315
Retirement benefit liabilities 10 5 12
Deferred taxation 70 34 81
Subordinated liabilities and other capital instruments 7,478 3,675 8,755
Total liabilities 131,279 64,515 153,704

Share capital 173 85 202

Share premium 1,615 793 1,891
Other reserves (130) (64) (153)
Retained profits 4,088 2,009 4,786
Shareholders' funds 5,746 2,823 6,726
Minority interest 18 9 22
Total equity 5,764 2,832 6,748

Total equity and liabilities 137,043 67,347 160,452

Contingent liabilities
Guarantees 2,161 1,062 2,530
Commitments
Commitments to lend 13,860 6,811 16,227

Exchange rates used at 30 September 2007

One Euro = USD 1.4179 / GBP 0.6968 / CHF 1.6601

135
 Shareholder information

Substantial shareholdings
As at 27 November 2007 the following interests in the ordinary share capital had been notified to the Bank.

Number % of issued ordinary

of shares share capital
Credit Suisse Securities (Europe) Limited & Credit Suisse
International 52,329,327 6.9
Invesco plc 38,078,107 5.0
Lehman Brothers International (Europe) 36,536,195 4.8
Bank of Ireland Nominees Limited 24,539,364 3.2

The above represent all shareholdings in excess of 3% of the issued ordinary share capital which have been notified to
the Bank.

Size analysis of shareholdings at 30 September 2007

Shareholdings Shares
Number % Number %

1 - 5,000 15,407 79.6 18,966,094 2.5

5,001 - 10,000 1,653 8.6 11,720,615 1.5
10,001 - 25,000 1,273 6.6 20,182,648 2.6
25,001 - 50,000 425 2.2 14,934,487 2.0
50,001 - 100,000 237 1.2 16,587,827 2.2
100,001 - 500,000 220 1.1 46,100,149 6.0
Over 500,000 137 0.7 634,621,827 83.2
19,352 100.0 763,113,647 100.0

Financial calendar
Publication of results Half year to 31 March 2007 10 May 2007

Dividend (ordinary shares) Interim dividend paid 17 July 2007

Publication of results Year to 30 September 2007 28 November 2007

Share transfer books closed 7 December 2007

Accounts posted to shareholders 3 January 2008

Annual General Meeting 1 February 2008

Dividend (ordinary shares) Proposed final dividend payment 14 February 2008

136
Front cover
Main photo: The Ritz-Carlton Powerscourt, Ireland.
Top photos [L to R]: The Apthorp, New York;
RTÉ National Symphony Orchestra;
Irish International Women’s Rugby team.
Back cover
Photos [L to R]: 45 Milk Street, Boston;
Thistle Hotel Haydock, Merseyside;

Anglo Irish Bank locations

Junior Achievement Ireland students.

Dublin Cork London Glasgow Geneva

Head Office Anglo Irish Bank House 10 Old Jewry 180 St. Vincent Street 7 Rue des Alpes
Stephen Court 11 Anglesea Street London EC2R 8DN Glasgow G2 5SG P.O. Box 1380
18/21 St. Stephen’s Green Cork Tel: +44 207 710 7000 Tel: +44 141 204 7270 1211 Geneva 1
Dublin 2 Tel: +353 21 453 7300 Fax: +44 207 710 7050 Fax: +44 141 204 7299 Tel: +41 22 716 3636
Tel: +353 1 616 2000 Fax: +353 21 453 7399 Fax: +41 22 716 3619
Fax: +353 1 616 2411 Private Banking Leeds
www.angloirishbank.com Galway 6 Stratton Street 1 Whitehall Riverside Lisbon
Anglo Irish Bank House London W1J 8LD Whitehall Road Avenida da Liberdade
Registrar Correspondence Forster Street Tel: +44 207 016 1500 Leeds LS1 4BN 190- 5° A
Computershare Investor Galway Fax: +44 207 016 1555 Tel: +44 113 205 3100 1250-147 Lisbon
Services (Ireland) Limited Tel: +353 91 536 900 Fax: +44 113 205 3111 Tel: +351 210 438 300
Heron House Fax: +353 91 536 931 Banbury Fax: +351 210 438 333
Corrig Road Manchester
Town Centre House
Sandyford Industrial Estate Vienna
Limerick Southam Road 1 Marsden Street
Dublin 18
Banbury Manchester M2 1HW Rathausstrasse 20
Tel: +353 1 216 3100 Anglo Irish Bank House
Oxon OX16 2EN Tel: +44 161 214 3020 P.O. Box 306
Freephone: 1800 225 125 98 Henry Street
Tel: +44 1295 755 500 Fax: +44 161 214 3030 A-1011 Vienna
(Shareholder enquiries) Limerick
Fax: +44 1295 755 510 Tel: +43 1 406 6161
www.computershare.com Tel: +353 61 461 800
Isle of Man Fax: +43 1 405 8142
E1,243m Private Banking
Fax: +353 61 461 899
Belfast
Jubilee Buildings
14/18 Great Victoria Street Boston
record profit before Connaught House
1 Burlington Road
Sligo
Connacht House
Belfast BT2 7BA
Tel: +44 2890 333 100
Victoria Street
Douglas (Representative Office)
Dublin 4 Isle of Man IM1 2SH 265 Franklin Street
tax up 46% Tel: +353 1 631 0000
Fax: +353 1 631 0098
Markievicz Road
Sligo
Fax: +44 2890 269 090 Tel: +44 1624 698 000
Fax: +44 1624 698 001
Boston MA 02110
Tel: +1 617 720 2577
Tel: +353 71 911 9400
Birmingham Fax: +1 617 720 6099
Fax: +353 71 911 9499
1 Colmore Square Jersey
Waterford Birmingham B4 6AJ 31 The Parade Chicago
Tel: +44 121 232 0800 St Helier (Representative Office)
Anglo Irish Bank House
Fax: +44 121 232 0808 Jersey JE2 3QQ 71 South Wacker Drive
Maritana Gate
Canada Street Tel: +44 1534 611 500 Chicago IL 60606
Waterford Fax: +44 1534 605 055 Tel: +1 312 924 2200
Tel: +353 51 849 300 Fax: +1 312 924 2222
Improved Fax: +353 51 849 399
New York

cost to income (Representative Office)

222 East 41st Street

ratio 22% New York NY 10017

Tel: +1 212 503 3000
Fax: +1 212 503 3033

Forward looking statements

This report contains certain forward looking statements with respect to the financial condition, results of operations
and businesses of Anglo Irish Bank. These statements involve risk and uncertainty because they relate to events
and depend upon circumstances that will occur in the future. There are a number of factors which could cause
actual results or developments to differ materially from those expressed or implied by these forward looking
statements. The statements are based on current expected market and economic conditions, the existing regulatory
www.designbankltd.com

environment and interpretations of IFRS applicable to past, current and future periods. Nothing in this report should
be construed as a profit forecast.

This report is printed on Revive Silk Paper which

Anglo Irish Bank Corporation plc is regulated has a fibre source of 50% de-inked post-consumer
by the Financial Regulator in Ireland. For further information, please email: [email protected] waste, 25% pre-consumer waste.
 Annual Report & Accounts / 2007

Anglo Irish Bank

Annual Report & Accounts / 2007

There is a Difference

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