RBS 2004 Annual Report Download - page 201

section
03
199
Annual Report and Accounts 2004
Notes on the accounts
Financial
statements
Consolidation
Special purpose entities (“SPEs”)
The Group is the primary beneficiary of a number of commercial
paper conduits and other asset securitisation vehicles that
meet FIN 46R’s definition of a variable interest entity. These
entities, with total assets of £8.6 billion at 31 December 2004
(2003 – £6.9 billion), acquire financial assets from third parties
or from the Group funded by the issue of commercial paper or
other debt instruments. The Group supplies certain administrative
services and provides credit enhancement, liquidity facilities
and derivative transactions to some or all of these entities on
an arm’s length basis. In the case of commercial paper conduits,
the Group provides programme-wide credit enhancement by
letters of credit or loan facilities across all tranches of assets
funded by conduits.
Trust preferred securities
The trust preferred securities referred to in Note 32 on page
167 represent undivided beneficial interests in the assets of
trusts, which consist of partnership preferred securities
representing non-cumulative perpetual preferred limited
partnership interests issued by Delaware limited partnerships.
The Group has provided subordinated guarantees for the
benefit of the holders of the trust preferred securities and the
partnership preferred securities. Under the terms of the
guarantees, the Group has fully and unconditionally guaranteed
on a subordinated basis, payments on such trust preferred
securities and partnership preferred securities, to the extent
they are due to be paid and have not been paid by, or on behalf
of the trusts and the partnerships, as the case may be.
The trust preferred securities and partnership preferred
securities issued by the Group’s subsidiaries are
deconsolidated, resulting in a US GAAP balance sheet
reclassification from minority interests to subordinated liabilities.
The effect on US GAAP net income and equity is negligible.
There have been no significant events between the year end
and the date of approval of these accounts which would
require a change to or disclosure in the accounts.
54 Post balance sheet events