ARCADE FINANCE PLC DIRECTORS REPORT AND THE AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2011 COMPANY NUMBER:

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DIRECTORS’ REPORT AND THE AUDITED FINANCIAL

STATEMENTS

FOR THE YEAR ENDED 30 APRIL 2011

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ARCADE FINANCE PLC

DIRECTORS’ REPORT AND THE AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2011

TABLE OF CONTENTS PAGE

COMPANY INFORMATION 1

DIRECTORS' REPORT 2-5

STATEMENT OF DIRECTORS’ RESPONSIBILITIES 6

INDEPENDENT AUDITOR’S REPORT 7-8

STATEMENT OF COMPREHENSIVE INCOME 9

STATEMENT OF FINANCIAL POSITION 10

STATEMENT OF CHANGES IN EQUITY 11

STATEMENT OF CASH FLOWS 12

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FOR THE YEAR ENDED 30 APRIL 2011 COMPANY INFORMATION

DIRECTORS John Fitzpatrick (Irish)

Michael Boyce (Irish)

Edward A. Marah (Irish – resigned 20 December 2010) Emmanuel Stas (Belgian – resigned 7 January 2011) Klaus Vandewalle (Belgian – appointed 7 January 2011) Johan Dewolfs (Belgian)

Johan Tyteca (Belgian)

SECRETARY The Bank of New York Mellon (Ireland) Limited

4th_{Floor, Hanover Building}

Windmill Lane Dublin 2

REGISTERED OFFICE 4th_{Floor, Hanover Building}

Windmill Lane Dublin 2

SOLICITORS McCann Fitzgerald

Riverside One Dublin 2

PRINCIPAL PAYING AGENT, REGISTRAR, The Bank of New York Mellon TRANSFER AGENT AND CALCULATION One Canada Square

AGENT London E14 5AL

England

NOTE TRUSTEE BNY Corporate Trustee Services Limited

One Canada Square London E14 5AL England

BANK AND CUSTODIAN KBC Bank NV

Havenlaan 2 B-1080 Brussels Belgium

INDEPENDENT AUDITORS Deloitte & Touche

Deloitte & Touche House Earlsfort Terrace Dublin 2

PORTFOLIO MANAGER KBC Asset Management NV

Havenlaan 6 B-1080 Brussels Belgium

ADMINISTRATOR KBC Asset Management NV

Havenlaan 6 B-1080 Brussels

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ARCADE FINANCE PLC

DIRECTORS’ REPORT

for the year ended 30 April 2011

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

Arcade Finance Plc (the "Company"), an Irish registered Company, was incorporated on 22 February 2007.

The Company utilises six ring structures for investment purposes; TRS rings, Falcon rings, Hedge fund rings, Equity-linked rings, Cash Plus rings and Corporate rings. The principal activity of the TRS and Corporate rings is to enter total return swaps with institutional and corporate investors. The principal activity of the Falcon ring is the investment in shares of special investment funds (“SIFs”). The principal activity of the Hedge fund rings is the investment in alternative investments, primarily hedge funds. The principal activity of the Equity-linked rings is the investment in floating rate notes issued by a number of securitisation companies and time deposits. The principal activity of the Cash Plus rings is to invest in the Mezzanine and the Subordinated notes issued by the Falcon ring of D-Star Finance Plc.

The Company has established a €40,000,000,000 Programme to issue a series of limited recourse ring fenced notes. The terms and conditions of each series will be set out in a term sheet for each series. As at 30 April 2011, thirty series were in issue. The Company issued two new series and one series matured during the year ended 30 April 2011.

BUSINESS REVIEW AND KEY PERFORMANCE INDICATORS

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

 the Company made a profit of €342(2010: €500)

 there were no credit events that affected the Company during the current and prior year

 the net loss (realised and movement in unrealised) from financial assets designated at fair value through profit or loss amounted €112,449,642(2010: net gain of €98,453,687)

 the net gain (realised and movement in unrealised) from financial liabilities designated at fair value through profit or loss amounted to €13,539,260 (2010: net loss of €13,774,962)

 Interest income from investments amounted to €41,037,090(2010: €51,964,077)

 Interest expense from notes issued amounted to €57,557,151(2010: €75,199,086)

 the Company’s total indebtedness was €3,585,615,129 (2010: €4,314,437,051)

 Net investment sales amounted to €607,840,243(2010: net investment purchases €995,457,855)

 Net note redemptions amounted to €706,423,348(2010: €434,318,413)

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

The Company has issued the following series under each ring

Ring 1 € 2,000,000,000 Series 2007-1 Floating Rate Notes due 2014 Ring 2 € 200,000,000 Series 2007-2 Floating Rate Notes due 2014 Ring 3 € 6,260,000 Series 2007-3 Equity-linked Notes due 2015 Ring 4 € 13,700,000 Series 2007-4 Equity-linked Notes due 2015 Ring 6 € 9,370,000 Series 2007-6 Equity-linked Notes due 2015 Ring 7 € 4,100,000 Series 2007-7 Equity-linked Notes due 2015 Ring 8 € 13,200,000 Series 2007-8 Equity-linked Notes due 2016 Ring 9 € 225,000,000 Series 2008-9 Floating Rate Notes due 2013 Ring 10 € 6,900,000 Series 2008-10 Equity-linked Notes due 2011 Ring 11 € 34,300,000 Series 2008-11 Equity-linked Notes due 2011 Ring 12 € 3,600,000 Series 2008-12 Equity-linked Notes due 2011 Ring 13 € 28,000,000 Series 2008-13 Equity-linked Notes due 2011 Ring 14 € 2,200,000 Series 2008-14 Equity-linked Notes due 2012 Ring 15 € 14,200,000 Series 2008-15 Equity-linked Notes due 2011 Ring 16 € 5,337,000 Series 2008-16 Secured Senior due 2018

Ring 17 € 127,500,000 Series 2008-17 Class A Secured Senior Floating Rate Notes due 2013 Ring 17 € 127,500,000 Series 2008-17 Class B Secured Senior Floating Rate Notes due 2013 Ring 17 € 127,500,000 Series 2008-17 Class C Secured Senior Floating Rate Notes due 2013 Ring 17 € 312,500,000 Series 2008-17 Class D Secured Mezzanine Floating Rate Notes due 2013 Ring 17 € 62,500,000 Series 2008-17 Class E Subordinated Variable Coupon Notes due 2013 Ring 18 € 4,100,000 Series 2008-18 Equity-linked Notes due 2012

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FOR THE YEAR ENDED 30 APRIL 2011

DIRECTORS’ REPORT (continued)

BUSINESS REVIEW AND KEY PERFORMANCE INDICATORS (continued) Ring 19 PLN 6,395,000 Series 2008-19 Equity-linked Notes due 2013 Ring 20 € 52,000,000 Series 2008-20 Equity-linked Notes due 2011 Ring 21 € 15,070,000 Series 2008-21 Equity-linked Notes due 2012 Ring 22 € 11,400,000 Series 2008-22 Equity-linked Notes due 2011

Ring 23 € 9,200,000 Series 2008-23 Secured Senior Floating Rate Notes due 2013 Ring 25 € 2,000,000 Series 2008-25 Equity-linked Notes due 2011

Ring 26 € 11,150,000 Series 2008-26 Secured Senior Floating Rate Notes due 2013 Ring 27 € 4,900,000 Series 2008-27 Secured Senior Floating Rate Notes due 2013 Ring 28 € 26,000,000 Series 2009-28 Equity-linked Notes due 2017

Ring 29 € 14,500,000 Series 2009-29 Equity-linked Notes due 2014 Ring 30 € 40,000,000 Series 2009-30 Equity-linked Notes due 2014 Ring 31 €71,000,000 Series 2011-31 Equity-linked Notes due 2016 Ring 32 €78,000,000 Series 2011-32 Equity-linked Notes due 2016 The directors believe the Company is a going concern for the following reasons

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

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

FUTURE DEVELOPMENTS

The directors expect that the present level of activity will be sustained for the foreseeable future. RESULTS AND DIVIDENDS

The results for the year are shown on page 9. The directors have approved a dividend distribution of €500. CHANGES IN DIRECTORS, SECRETARY AND REGISTERED OFFICE

Edward A. Marah resigned as a director on the 20 December 2010. Emmanuel Stas resigned as a director on 7 January 2011. Klaus Vandewalle was appointed as a director on 7 January 2011.

DIRECTORS' AND SECRETARY’S INTERESTS IN SHARES

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

RISK FACTORS

The principal risks and uncertainties facing the Company are set out in Note 18 to the financial statements. BOOKS OF ACCOUNT

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

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

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ARCADE FINANCE PLC

DIRECTORS’ REPORT (continued)

ANNUAL CORPORATE GOVERNANCE STATEMENT (continued)

Financial Reporting Process

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

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

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

Risk Assessment

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

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

Control Activity

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

Monitoring

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

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

Capital Structure

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

There are no restrictions on voting rights.

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

With regard to the appointment and replacement of Directors, the Company is governed by its Articles of Association and Irish Statute comprising the Companies Acts, 1963 to 2009. The Articles of Association themselves may be amended by special resolution of the shareholders.

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DIRECTORS’ REPORT (continued)

ANNUAL CORPORATE GOVERNANCE STATEMENT (continued)

Powers of Directors

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

Audit committee

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

INDEPENDENT AUDITOR

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

John Fitzpatrick Michael Boyce

Director Director

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ARCADE FINANCE PLC

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

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

The directors are responsible for preparing the annual report and the financial statements. The directors have elected to prepare financial statements for the Company in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union. The financial statements are prepared in accordance with the Companies Acts, 1963 to 2009.

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

Directors are also required to:

 properly select and apply accounting policies;

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

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

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

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

The directors are responsible for keeping proper books of account which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Acts, 1963 to 2009. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are also responsible for the preparation of a directors’ report which complies with the requirements of the Companies Acts, 1963 to 2009 and for complying with the Rules issued by the Irish Stock Exchanges.

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

Responsibility statement

We confirm to the best of our knowledge:

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

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

On behalf of the board

Director Director

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comprise the statement of comprehensive income, the statement of financial position, the statement of changes in equity, the statement of cash flows and the related notes 1 to 23. These financial statements have been prepared under the accounting policies set out therein.

This report is made solely to the Company's members, as a body, in accordance with Section 193 of the Companies Act, 1990. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

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

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

We report to you our opinion as to whether the financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, and are properly prepared in accordance with Irish statute comprising the Companies Acts, 1963 to 2009. We also report to you whether in our opinion: proper books of account have been kept by the Company; whether, at the statement of financial position date, there exists a financial situation requiring the convening of an extraordinary general meeting of the Company; and whether the information given in the directors' report is consistent with the financial statements. In addition, we state whether we have obtained all the information and explanations necessary for the purposes of our audit and whether the Company's statement of financial position and statement of comprehensive income are in agreement with the books of account.

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

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

Basis of audit opinion

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

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

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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ARCADE FINANCE PLC

/Continued from previous page

Opinion

In our opinion the financial statements:

 give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of affairs of the Company as at 30 April 2011 and of its profit for the year then ended; and

 have been properly prepared in accordance with the Companies Acts, 1963 to 2009.

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

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

The net assets of the Company, as stated in the statement of financial position are more than half the amount of its called-up share capital and, in our opinion, on that basis there did not exist at 30 April 2011 a financial situation which, under Section 40(1) of the Companies (Amendment) Act, 1983, would require the convening of an extraordinary general meeting of the Company.

Deloitte and Touche

Chartered Accountants and Registered Auditors Dublin

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STATEMENT OF COMPREHENSIVE INCOME for the year ended 30 April 2011

Notes Year ended 30/04/2011 € Year ended 30/04/2010 (as restated) € Interest income on financial assets designated at fair value

through profit or loss 5 41,037,090 51,964,077

Interest expense on financial liabilities designated at fair

value through profit or loss 6 (57,557,151) (75,199,086)

Realised gains/(losses) on financial assets designated at

fair value through profit or loss 17,786,116 (57,181,535)

Realised gains on financial liabilities designated at fair

value through profit or loss 22,026,247 25,263,696

Movement in unrealised gain/loss on financial assets

designated at fair value through profit or loss (130,235,758) 155,635,222 Movement in unrealised loss/gain on financial liabilities

designated at fair value through profit or loss (8,486,987) (39,038,658) Net income from derivatives held for trading 7 144,836,147 54,794,877

Net foreign exchange loss (24,305,452) (112,763,177)

Net investment income 5,100,252 3,475,416

Other income 8 1,215,100 1,300,255

Other expenses 9 (6,314,852) (4,774,885)

Profit from ordinary activities before taxation 500 786

Taxation 10 (158) (286)

Profit and total comprehensive income for the year 342 500 All items dealt with in arriving at the results for the year ended 30 April 2011 related to continuing operations. The accompanying notes to the financial statements from page 13 to 40 form an integral part of the financial statements.

Director Director

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ARCADE FINANCE PLC

10 STATEMENT OF FINANCIAL POSITION

as at 30 April 2011 Notes 30/04/2011As at € As at 30/04/2010 € As at 01/05/2009 € Assets Non-current assets

Financial assets designated at fair value

through profit or loss 11 2,182,048,396 2,740,768,111 2,605,855,013 Derivatives held for trading 12 368,824,485 238,689,174 229,486,971 Current assets

Cash and cash equivalents 13 288,749,138 430,823,860 1,991,388,547

Amounts receivable from custodian 202,283 - 383,928

Interest receivable on investments 3,138,832 9,074,967 22,191,335

Other receivables 36,583 9,700

-Financial assets designated at fair value

through profit or loss 11 738,419,609 895,049,779

-Derivatives held for trading 12 4,236,645 -

-Total assets 3,585,655,971 4,314,415,591 4,849,305,794 Liabilities

Current liabilities

Amounts payable to custodian 5,604,055 1,909,723 64,332,593

Interest payable on notes issued 14 7,299,123 9,325,346 23,397,621

Expense accruals 349,671 1,241,287 1,538,302

Other payables 12,146 11,886

-Tax payable - 286

-Financial liabilities designated at fair

value through profit or loss 15 84,466,757 3,366,807

-Derivatives held for trading 12 51,486,506 826,390

-Non-current liabilities

Financial liabilities designated at fair

value through profit or loss 15 3,429,462,068 4,230,944,626 4,654,854,884

Derivatives held for trading 12 6,934,803 66,748,740 105,142,394

Total liabilities 3,585,615,129 4,314,375,091 4,849,265,794 Equity

Called up share capital 16 40,000 40,000 40,000

Profit and loss account 842 500

-Total equity 40,842 40,500 40,000

Total liabilities and equity 3,585,655,971 4,314,415,591 4,849,305,794 The accompanying notes to the financial statements from page 13 to 40 form an integral part of the financial statements.

Director Director

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FOR THE YEAR ENDED 30 APRIL 2011 STATEMENT OF CHANGES IN EQUITY for the year ended 30 April 2011

Share capital € Profit and loss account € Total equity € Balance as at 30 April 2009 40,000 - 40,000

Total comprehensive income for the year

Result for the year - 500 500

Other comprehensive income - -

-- 500 500

Balance as at 30 April 2010 40,000 500 40,500

Total comprehensive income for the year

Result for the year - 342 342

Other comprehensive income - -

-- 342 342

Balance as at 30 April 2011 40,000 842 40,842

The accompanying notes to the financial statements from page 13 to 40 form an integral part of the financial statements.

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ARCADE FINANCE PLC

12 STATEMENT OF CASH FLOWS

Notes Year ended 30/04/2011 € Year ended 30/04/2010 (as restated) € Cash flows from operating activities

Interest received on investments 46,973,225 65,070,745

Interest paid on notes issued (59,583,374) (89,271,361)

Derivative payments 43,633,730 (57,469,150)

Derivative receipts (44,371,046) 67,875,304

Other income 1,188,408 829,234

Other expenses (7,026,473) (5,060,014)

Cash used in operating activities (19,185,530) (18,025,242)

Tax paid (635)

-Net cash used in operating activities (19,186,165) (18,025,242) Cash flows from investing activities

Investment purchases (660,656,379) (4,435,260,330)

Investment paydowns and disposals 1,268,496,622 3,439,802,475

Net cash from/(used in) investing activities 607,840,243 (995,457,855) Cash flows from financing activities

Proceeds from note issuance 146,971,190 79,189,845

Repurchase of notes issued (853,394,538) (513,508,258)

Net cash used in financing activities (706,423,348) (434,318,413) Net decrease in cash and cash equivalents (117,769,270) (1,447,801,510) Cash and cash equivalents at beginning of the year 430,823,860 1,991,388,547 Effect of exchange rate changes on cash and cash

equivalents (24,305,452) (112,763,177)

Cash and cash equivalents at end of the year 13 288,749,138 430,823,860 The accompanying notes to the financial statements from page 13 to 40 form an integral part of the financial statements.

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FOR THE YEAR ENDED 30 APRIL 2011 NOTES TO THE FINANCIAL STATEMENTS 1. General information

Arcade Finance Plc (the "Company"), an Irish registered Company, was incorporated on 22 February 2007 to issue a series of limited recourse Ring Fenced Notes. As of 30 April 2011, thirty were in issue. The Company utilises six ring structures for investment purposes; Total Return Swap (“TRS”) rings, Corporate rings, Equity-linked rings, Cash Plus rings, Falcon rings and Hedge Fund rings.

(a) Total Return Swap and Corporate Rings

With respect to the TRS rings, the Company issues floating rate notes variously to Amber Protective Bond Portfolio Limited, Carmine Protective Bond Portfolio Limited, Coral Protective Bond Portfolio Limited, Emerald Protective Bond Portfolio Limited, Indigo Protective Bond Portfolio Limited, Ivory Protective Bond Portfolio Limited, Magenta Protective Bond Portfolio Limited, Sepia Protective Bond Portfolio Limited, Taupe Protective Bond Portfolio Limited, Vermillion Protective Bond Portfolio Limited, N-Vest Fund-1 and to institutional investors. In the prior year, notes were issued to D-Star Finance Plc, Venice Finance Plc, Infinity Finance Plc, Sierra Finance Plc, Zulma Finance Plc and N-VEST Fund-1. With respect to the Corporate ring, the Company issues floating rate notes to Coral Protective Bond Portfolio Limited, Emerald Protective Bond Portfolio Limited, Indigo Protective Bond Portfolio Limited, institutional and corporate investors. In the prior year, notes were also issued to Sierra Finance Plc, Venice Finance Plc and Zulma Finance Plc. The return on these notes is based on EURIBOR plus a margin and is as follows:

 Series 2007-1 6 month EURIBOR plus 0.15%

The Company uses the nominal amount of the notes issued to enter into total return swaps with institutional investors.

Under the terms of the TRS, the Company acquires a portfolio of reference assets. The details of the reference assets are detailed in the swap agreement. The acquisition cost of the reference assets is equal to the nominal amount of the notes issued under the ring. Any interest received on the reference assets, plus any bank interest received on the un-invested note issuance proceeds, along with any realised gains on the reference assets is payable to the swap counterparty. In return, the swap counterparty undertakes to pay to the Company amounts equal to the interest payable on the notes issued under the ring, plus a pro-rata contribution towards operating expenses, plus amounts to cover any realised losses on the reference assets. As a result of the terms of the TRS, the Company is profit neutral in respect of its investment activities under the TRS rings.

(b) Equity-linked Rings

With respect to the Equity-linked rings the Company issues Equity-linked notes to various KBC insurance companies. The return on these notes is based on the performance of the specific equity investments or portfolio of equity investments specified in the notes’ final terms. There is no interest payable on these notes. The following series are issued under the equity-linked rings: Series 2007-3, Series 2007-4, Series 2007-6, Series 2007-7, Series 2007-8, Series 10, Series 11, Series 2008-12, Series 2008-13, Series 2008-14, Series 2008-15, Series 2008-18, Series 2008-19, Series 2008-20, Series 2008-21, Series 2008-22, Series 2008-25, Series 2009-28, Series 2009-29, Series 2009-30, Series 2011-31 and Series 2011-32.

The Company applies the proceeds of the note issuance to invest variously in time deposits and floating rate notes issued by a number of securitisation companies as detailed in note 11. The redemption amount of the notes is equal to the original nominal plus or minus the equity linked return. The Company enters

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ARCADE FINANCE PLC

14 NOTES TO THE FINANCIAL STATEMENTS (continued) 1. General information (continued)

(b) Equity-linked Rings (continued)

The Company acquires this amount, which will be the difference between the original nominal and the redemption amount through the redemption of the associated investments. In return, the Company is required to pay amounts to the swap counterparty equal to the interest received on the associated investments including time deposits and any bank interest earned on un-invested issuance proceeds. As a result of the terms of the Equity-linked swaps the Company is profit neutral in respect of its investment activities under the Equity-linked rings.

(c) Cash Plus Rings

With respect to the Cash Plus rings, the Company issues floating rate notes to retail investors. The return on these notes is based on EURIBOR plus a margin and is as follows:

The Company use the proceeds of the note issuance to invest in mezzanine and subordinated notes issued by D-Star Finance Plc and time deposits.

(d) Falcon Ring

With respect to the Falcon ring, the Company issues floating rate notes to Amber Protective Bond Portfolio Limited, Carmine Protective Bond Portfolio Limited, Coral Protective Bond Portfolio Limited, Emerald Protective Bond Portfolio Limited, Indigo Protective Bond Portfolio Limited, Ivory Protective Bond Portfolio Limited, Magenta Protective Bond Portfolio Limited, Sepia Protective Bond Portfolio Limited, Taupe Protective Bond Portfolio Limited and money market funds. In the prior year notes were also issued to D-Star Finance Plc, Infinity Finance Plc, Sierra Finance Plc and Venice Finance Plc. There are three types of floating rate notes issued:- senior, mezzanine and subordinated. The interest payable on the senior and mezzanine notes is based on EURIBOR plus a margin and is as follows:

 Series 2008-17 Senior 6 month EURIBOR plus 0.135%

 Series 2008-17 Mezzanine 6 month EURIBOR plus 0.5%

The interest payable on the subordinated note is based on all income received under the ring less any costs directly attributable to the ring and a pro-rata share of the general expenses incurred by the Company subject to a reserve profit to the Company on the Ring of €500 per annum. The Company applied the proceeds of the note issuance to invest in N-Vest Fund-1 shares.

(e) Hedge Fund Ring

With respect to the Hedge Fund ring the Company issues equity-linked notes to fund of funds. The return on these notes is based on the performance of the underlying investments. The Company uses the proceeds of the note issuance to invest in alternative investments primarily in hedge funds. Series 2008-16 is issued under the Hedge Fund Ring.

2. Basis of Preparation (a) Statement of compliance

The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union and the Companies Acts 1963 to 2009 and the Listing Rules issued by the Irish Stock Exchange.

(b) New standards and interpretations adopted

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

Amendments resulting from Improvements to IFRS to the following standards did not have any impact on the accounting policies, financial position or performance of the Company:

 IFRS 2 Share-based payment: Group Cash-settled Share-based Payment Transactions effective 1 January 2010

 IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial Statements (Amended) effective 1 July 2009, including consequential amendments to IFRS 2, IFRS 5, IFRS 7, IAS 7, IAS 21, IAS 28, IAS 31 and IAS 39

(17)

NOTES TO THE FINANCIAL STATEMENTS (continued) 2. Basis of Preparation (continued)

(b) New standards and interpretations adopted (continued)

 IAS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items effective 1 July 2009

 IFRIC 17 Distributions of Non-cash Assets to Owners effective 1 July 2009 Improvements to IFRSs

Issued in May 2008

 IFRS 5 Non-current Assets Held for Sale and Discontinued Operations effective 1 January 2010 Issued in April 2009

 IFRS 2 Share-based Payment

 IAS 1 Presentation of Financial Statements

 IAS 17 Leases

 IAS 38 Intangible Assets

 IAS 39 Financial Instruments: Recognition and Measurement

 IFRIC 9 Reassessment of Embedded Derivatives (c) New standards and interpretations not yet adopted

The IFRSs applied by the Company in the preparation of these financial statements are those effective for accounting periods beginning on or before 1 April 2010. A number of new standards, amendments to standards and interpretations in issue are not yet effective for accounting periods beginning on or before 1 April 2010, and the Company has not early adopted them. None of these will have an effect on the financial statements of the Company with the possible exceptions of IFRS 9 "Financial Instruments" and IFRS 13 “Fair Value Measurement”.

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

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

(18)

ARCADE FINANCE PLC

16 NOTES TO THE FINANCIAL STATEMENTS (continued) 2. Basis of Preparation (continued)

(d) Basis of measurement

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

(e) Functional and presentation currency

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

(f) Use of estimates and judgements

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

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

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

 Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities

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

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

Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics and other factors. A financial instruments level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgement by the Company. The Company considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, provided by independent sources that are actively involved in the relevant market. The categorisation of a financial instrument within the hierarchy is based upon the pricing transparency of the financial instrument and does not necessarily correspond to the Company’s perceived risk inherent in such financial instruments. The fair value hierarchy is set out in Note 18(h).

(19)

NOTES TO THE FINANCIAL STATEMENTS (continued) 3. Significant accounting policies

(a) Interest income and expense

Interest income is accounted for on an effective interest rate basis. Interest expense is accounted for on an effective interest rate basis for the notes issued under the TRS Rings, the Corporate Ring and the Cash Plus Rings. In respect of the notes issued by the Falcon Ring, the Company is only required to pay interest if it has collected sufficient funds to cover the amount due after having retained a reserved profit of €500 per annum for the Company. There is no interest payable on the notes issued by the Equity-linked Ring and the Hedge Fund Ring.

(b) Taxation

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

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

(c) Net income/(expense) from derivatives

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

(d) Cash and cash equivalents

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

(e) Financial instruments

Classification

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

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

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

(20)

ARCADE FINANCE PLC

18 NOTES TO THE FINANCIAL STATEMENTS (continued) 3. Significant accounting policies (continued)

(e) Financial instruments (continued)

Fair Value Measurement Principles

The determination of fair values of financial assets, financial liabilities and derivatives are based on valuation models, which are developed from recognised valuation models. Some or all of the inputs into these models may not be market observable, and are derived from market prices or rates or are estimated based on assumptions.

Due to the limited recourse nature of the notes issued by the Company, the determination of fair values of financial liabilities is based on a valuation model which will include the fair value of financial assets and derivatives held by the Company and the carrying value of cash and cash equivalents, interest receivable, interest payable, other assets and other liabilities. The fair value of the notes issued fall within Level 3 of the fair value hierarchy.

The financial assets held by the Company include notes issued by securitisation companies, shares in hedge funds and time deposits. The underlying reference assets of the total returns swaps include commercial papers, shares in hedge funds and Collateralised Debt Obligations (“CDOs”). The derivatives held by the Company include equity swaps, interest rate swaps and total return swaps.

The fair value for notes issued by securitisation companies is based on the same valuation model that is used to calculate the fair value of the notes issued by the Company. The fair value for notes issued by securitisation companies fall within Level 3 of the fair value hierarchy. The fair value for shares in hedge funds is the net asset value per share obtained from the hedge fund administrator. The net asset value per share is the market price as it is the price at which transactions would occur in the shares of the hedge fund. The fair value of shares in hedge funds would fall within Level 2 of the fair value hierarchy. The fair value for commercial papers and time deposits are based on a discounted cash flow model which uses market interest rates as an input. The fair value for commercial papers and time deposits fall within Level 2 of the fair value hierarchy. The fair values for CDOs are based on a valuation model which uses credit default spreads as an input. The credit default spreads used are currently not market observable so the fair value for CDOs fall within Level 3 of the fair value hierarchy.

The fair value of equity swaps and interest rate swaps is based on net present values of future cashflows within the swap contracts. For equity swaps fair values are obtained from a number of independent external counterparties. The fair value used in the valuations is a weighted average of these values. The external counterparties use a valuation model which uses the market price of the underlying equities and market interest rates as inputs. The fair value for equity swaps falls within Level 3 of the fair value hierarchy as the market price of the underlying equities falls within Level 3 of the fair value hierarchy. The valuation model used to obtain a fair value for interest rate swaps uses market interest rates as an input. The fair value for interest rate swaps fall within Level 2 on the fair value hierarchy.

The fair value of total return swaps is based on the value of the underlying reference assets, including cash collateral, which is margined on a daily basis. The underlying reference assets include investments in CDOs, commercial papers and shares in hedge funds. As the fair value for CDOs fall within Level 3 on the fair value hierarchy, the fair value for total return swaps also fall within Level 3 on the fair value hierarchy.

Recognition

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

Derecognition

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

(21)

NOTES TO THE FINANCIAL STATEMENTS (continued) 3. Significant accounting policies (continued)

(e) Financial instruments (continued)

Offsetting

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

(f) Segment Reporting

An operating segment is a component of the Company:

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

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

 for which discrete financial information is available.

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

4. Financial assets and liabilities

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

Fair value

as at 30/04/11 Carrying value as at 30/04/11 as at 30/04/10Fair value Carrying value as at 30/04/10

€ € € €

Assets

Financial assets designated at fair value through profit or loss

Investments at fair value 2,920,468,005 2,920,468,005 3,635,817,890 3,635,817,890 Derivatives held for trading 373,061,130 373,061,130 238,689,174 238,689,174 Other assets 292,126,836 292,126,836 439,908,527 439,908,527 Total assets 3,585,655,971 3,585,655,971 4,314,415,591 4,314,415,591 Liabilities

Financial liabilities designated at fair value through profit or loss

Notes issued at fair value 3,513,928,825 3,513,928,825 4,234,311,433 4,234,311,433 Derivatives held for trading 58,421,309 58,421,309 67,575,130 67,575,130

(22)

ARCADE FINANCE PLC

20 NOTES TO THE FINANCIAL STATEMENTS (continued) 5. Interest income on financial assets designated at fair value

through profit or loss Year ended30/04/2011 €

Year ended 30/04/2010 (as restated) €

Interest income on investments 41,037,090 51,964,077

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

Year ended 30/04/2011 € Year ended 30/04/2010 €

Interest expense on notes issued 57,557,151 75,199,086

7. Net income from derivatives held for trading Year ended 30/04/2011 € Year ended 30/04/2010 (as restated) €

Settled derivative receipts 43,633,730 67,875,304

Unsettled derivative receipts 202,283

Settled derivative payments (42,461,323) (57,940,171)

Unsettled derivative payments (64,320) (1,909,723)

Fair value movement on derivatives held for trading 143,525,777 46,769,467 144,836,147 54,794,877 8. Other income Year ended30/04/2011 € Year ended 30/04/2010 (as restated) € Interest income from cash and cash equivalents 738,008 498,491

Redemption fee income 444,222 771,426

Compensation income 32,870 30,338 1,215,100 1,300,255 9. Other expenses Year ended30/04/2011 € Year ended 30/04/2010 €

Portfolio management fees 6,008,664 4,056,558

Administrative expenses 96,463 221,140

Bank interest 4,804 17,031

Legal costs 41,541 301,881

Custody fees 145,070 156,300

Tax compliance fees 4,840 8,470

Auditors fees 8,470 8,505

Directors fees (for services as role of director) 5,000 5,000

6,314,852 4,774,885 Fees charged by the Company’s auditors (excluding VAT) were as follows:

Year ended 30/04/2011 € Year ended 30/04/2010 €

Audit of financial statements 7,000 7,000

Other assurance services -

-Tax advisory services 4,000 7,000

Non-audit related services -

(23)

NOTES TO THE FINANCIAL STATEMENTS (continued) 10. Taxation

The Company is subject to Irish Corporation tax at the Irish Corporation tax rate that applies to income other than trading income. The effective tax rate is 25% in accordance with Section 110 of the Taxes Consolidation Act, 1997. Year ended 30/04/2011 € Year ended 30/04/2010 € Corporation tax 158 286

Factors affecting tax charge for the year has been calculated as follows:

Profit on ordinary activities before tax 500 786

Current tax at 25% 125 197

Effect of:

Disallowable expense - 89

Under provision 33

Current tax charge 158 286

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

11. Financial assets designated at fair value through profit or loss As at 30/04/2011 €

As at 30/04/2010 € Financial assets with a maturity greater than 1 year

Investments held under equity-linked rings:

- Senior notes issued by Amethyst Structured Finance Plc 11,702,106 8,045,838 - Senior notes issued by Beechwood Structured Finance Plc 11,620,080 8,062,071 - Senior notes issued by Brookfields Capital Plc 11,646,916 8,071,810 - Senior notes issued by Eperon Finance Plc 11,644,676 8,066,941 - Senior notes issued by Espaccio Securities Plc 5,822,075 4,028,195 - Senior notes issued by Greenstreet Structured Financial Products Plc 5,833,108 4,030,224 - Senior notes issued by Nimrod Capital Plc 5,834,624 4,034,688 - Senior notes issued by Opal Financial Products Plc 5,774,872 4,016,426 - Senior notes issued by Profile Finance Plc 5,787,322 4,011,151 - Senior notes issued by Recolte Securities Plc 5,784,084 4,018,861 - Senior notes issued by Silverstate Financial Investments Plc 5,824,998 4,041,992 - Senior notes issued by Vespucci Structured Financial Products Plc 5,808,826 4,033,064 - Senior notes issued by Vigado Capital Plc 5,819,322 4,024,137 - Senior notes issued by Voyce Investments Plc 5,851,701 4,038,746 - Senior notes issued by Waterford Capital Investments Plc 5,794,533 4,018,050 - Senior notes issued by Waves Financial Investments Plc 5,842,862 4,034,282

- Senior notes issued by Infinity Finance Plc - 15,953,006

- Senior notes issued by Sierra Finance Plc - 15,705,246

(24)

ARCADE FINANCE PLC

22 NOTES TO THE FINANCIAL STATEMENTS (continued)

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

(continued) 30/04/2011As at €

As at 30/04/2010 € Financial assets with a maturity greater than 1 year (continued)

Investments held under cash plus rings:

- Mezzanine notes issued by D-Star Finance Plc 1,497,560 2,665,561 - Subordinated notes issued by D-Star Finance Plc 934,010 1,795,773 2,431,570 4,461,334 Investments held under hedge fund rings:

- Shares in KBC Alternative Master Fund Class “C” 1,421,351 5,834,798

- Shares in KBC Harvest Capital 1,880,153 2,896,970

3,301,504 8,731,768 Investments held under falcon ring:

- Shares in N-Vest Fund-1 744,136,857 751,856,317

744,136,857 751,856,317 Total financial assets with a maturity greater than 1 year 2,182,048,396 2,740,768,111 Financial assets with a maturity less than 1 year

Investments held under equity-linked rings:

- Time deposits 69,614,365 58,851,141

69,614,365 58,851,141 Investments held under total return swap rings and corporate ring

- EUR Commercial paper TRS reference assets - 189,523,699

- EUR Collateralised debt obligation TRS reference assets 8,025,000 -- USD Collateralised debt obligation TRS reference assets 649,381,825 627,426,003 657,406,825 816,949,702 Investments held under cash plus rings:

- Time deposits 11,398,419 19,248,936

11,398,419 19,248,936 Total financial assets with a maturity less than 1 year 738,419,609 895,049,779

Currency analysis EUR investments 1,502,312,802 2,118,735,849 PLN investments 1,217,343 1,293,664 USD investments 1,416,937,860 1,515,788,377 2,920,468,005 3,635,817,890 Movements on investments Opening balance 3,635,817,890 2,605,855,013

Settled purchases of investments 660,656,379 4,370,927,737

Unsettled purchases of investments 4,940,000

-Settled sales of investments (1,268,496,622) (3,439,418,547)

Realised losses on investments 17,786,116 (57,181,535)

Movement in unrealised gains/(losses) on investments (130,235,758) 155,635,222

Closing balance 2,920,468,005 3,635,817,890

The breakdown of the interest risk profile of the investments held is provided in Note 18(d)(ii) “Financial instruments, principal risks and uncertainties: Market risk: Interest rate risk”. The credit quality of the investments held is set out in Note 18(a) “Financial instruments, principal risks and uncertainties: Credit risk”. The geographical concentrations and industrial sector concentrations of the investments held is set out in Note 18(b) “Financial instruments, principal risks and uncertainties: Concentration risk”.

(25)

NOTES TO THE FINANCIAL STATEMENTS (continued)

12. Derivatives held for trading As at 30/04/2011 €

As at 30/04/2010 € Derivatives with a maturity greater than 1 year

Derivative assets

- Total return swaps 366,749,893 234,409,567

- Equity swaps 2,074,592 4,276,025

- Interest rate swaps - 3,582

368,824,485 238,689,174

Derivative liabilities

- Equity swaps (6,494,648) (66,169,020)

- Interest rate swaps (440,155) (579,720)

(6,934,803) (66,748,740) Derivatives with a maturity within 1 year

Derivative assets - Equity swaps 4,236,645 -4,236,645 -Derivative liabilities - Equity swaps (51,486,506) (826,390) (51,486,506) (826,390) Currency analysis

Total return swaps

EUR 366,749,893 234,409,567

Equity swaps

EUR (51,527,446) (62,572,497)

PLN (142,471) (146,888)

Interest rate swaps

EUR (440,155) (576,138)

13. Cash and cash equivalents As at

30/04/2011 €

As at 30/04/2010 €

Cash held with KBC Bank NV 288,749,138 430,823,860

Cash is held in KBC Bank NV current accounts which have no special terms and conditions. Cash is available on demand. As at 30/04/2011 € As at 30/04/2010 € Currency analysis EUR cash 73,659,287 136,162,429 PLN cash 7,270 10,400 USD cash 215,082,581 294,651,031 288,749,138 430,823,860

(26)

ARCADE FINANCE PLC

24 NOTES TO THE FINANCIAL STATEMENTS (continued)

15. Financial liabilities designated at fair value through profit or loss As at 30/04/2011 €

As at 30/04/2010 €

Floating rate notes 3,229,436,782 3,995,440,850

Equity-linked notes 284,492,043 238,870,583

3,513,928,825 4,234,311,433 The floating rate notes include the notes issued by the TRS rings, the Corporate rings, the Cash Plus rings and the Falcon rings. The notes issued by the Equity-linked rings and the Hedge fund ring are equity-linked notes. Floating rate noteholders apart from subordinated note holders are entitled to receive interest payments at set interest dates which are based on EURIBOR plus a margin. Subordinated noteholders are entitled to receive interest payments based on all income received under the ring less any costs directly attributable to the ring and a pro-rata share of the general expenses incurred by the Company subject to a reserve profit to the Company on the ring of €500 per annum. The returns on the equity-linked notes are based on the performance of the underlying equities and equity swaps. All notes issued by the Company are limited recourse.

Movements on notes issued As at

30/04/2011 € As at 30/04/2010 € Opening balance 4,234,311,433 4,654,854,884 Issue of notes 146,971,190 79,189,845

Settled redemption of notes issued (853,394,538) (513,508,258)

Unsettled redemption of notes issued (420,000)

-Realised gains on notes redeemed (22,026,247) (25,263,696)

Movement in unrealised losses/(gains) on notes issued 8,486,987 39,038,658

Closing balance 3,513,928,825 4,234,311,433

Maturity analysis of notes issued As at

30/04/2011 €

As at 30/04/2010 €

Within one year 84,466,757 3,366,807

Due in 1-2 years - 100,525,890

Due in 2-5 years 3,257,845,955 4,049,233,247

Due in more than 5 years 171,616,113 81,185,489

3,513,928,825 4,234,311,433

Currency analysis

EUR notes 3,512,831,790 4,233,137,125

PLN notes 1,097,035 1,174,308

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

16. Share Capital As at 30/04/2011 € As at 30/04/2010 € Authorised

40,000 ordinary shares at €1 each 40,000 40,000

Issued and fully paid up