AUDIT COMMITTEE

The Audit Committee comprises three non-executive Board members and one external member.

The Audit Committee is comprised of the following members:

• Brian McEnery (Chairperson, Board member)
• Éilish Finan (Board member)
• Steven Seelig (Board member)
• Jim Kelly (External member)

Mr. Kelly is a former senior official with the Revenue Commissioners. He has been a Board member of the Irish Auditing and Accounting Supervisory Authority (IAASA) and was Secretary to the Commission on Taxation 2008-2009.

The Board has determined that Brian McEnery and Éilish Finan are the Committee's financial experts and that Steven Seelig is the Committee's risk expert.

The Committee met on fourteen occasions in 2012.

The Audit Committee assists the Board in fulfilling its oversight responsibilities in the following functions:

• The integrity of the financial reporting process.
• The independence and integrity of the external and internal audit processes.
• The effectiveness of NAMA's internal control system.
• The processes in place for monitoring the compliance of the loan service providers with their contractual obligations to NAMA.
• Compliance with relevant legal, regulatory and taxation requirements by NAMA.
• Good faith reporting arrangements for NAMA's employees to raise concerns, in confidence, about possible wrongdoing in financial reporting or other matters and ensuring that these arrangements allow proportionate and independent investigation and follow up action.

The principal activities of the Committee in 2012 were as follows:

1. Financial reporting

The Committee reviewed the Annual Report and Financial Statements, as well as all other formal announcements relating to the financial statements, before submission to the Board. The review focused in particular on changes in accounting policy and practices, major judgement areas, and compliance with legal (including any requirements under the Act) and regulatory requirements.

2. External audit

The C&AG is the designated external auditor under the Act. No non-audit services were provided by him during 2012. The Committee reviewed the external audit plan in advance of the audit and met with the external auditor to review the findings from his audit of the financial statements.

3. Internal audit

The Committee received regular reports from the internal auditor. These included summaries of the key findings of each audit in the period and updates on the planned work programme. On an on-going basis, the Committee ensured that these activities are adequately resourced and have appropriate standing within NAMA. This included agreement of the annual internal audit plan. The Committee also ensured coordination between the internal and external auditors.

4. Internal controls

The Committee evaluated the system of internal controls, including procedures adopted by the NTMA in the performance of its compliance and control functions for NAMA. The Committee's findings were reported to the Board.

5. Monitoring of service providers

The Committee received regular updates from Management and the internal auditor on the performance of these service providers, benchmarked against agreed targets.

The Chief Financial Officer, the Head of Audit and Risk, other senior NAMA executives and representatives of the internal and external auditors were invited as appropriate to attend all or part of any meeting. The Committee also met individually with the external auditor, the internal auditor, Chief Financial Officer of NAMA, Head of Audit and Risk of NAMA, Head of Control of the NTMA and Compliance Officer of the NTMA. Each of these has direct access, without restriction, to the Chairperson of the Audit Committee.

Brian McEnery
Chairperson

CREDIT COMMITTEE

Section 32 of the Act required the Board, which has ultimate responsibility for the credit risk of NAMA, to establish a Credit Committee operating under its delegated authority. The Credit Committee operates to Board-approved Terms of Reference as required under section 32(6) of the Act.

The Credit Committee is comprised of the following members:

• Willie Soffe (Chairman, Board member)
• Brian McEnery (Board member)
• Brendan McDonagh (Chief Executive, NAMA and Board member)
• John Mulcahy (Head of Asset Management and Board member)
• Aideen O'Reilly (Head of Legal)
• Ronnie Hanna (Head of Asset Recovery)
• Michael Moriarty (Deputy Head of Asset Recovery)
• Dónal Rooney (Chief Financial Officer)

Graham Emmett resigned from NAMA during 2012 and was replaced by Michael Moriarty as a Committee member. Dónal Rooney was appointed a member as of 1 January 2013.

The Committee, which met on 40 occasions in 2012, normally meets on a weekly basis but meets more or less frequently as required. By its very nature, the Credit Committee has a critical role in advising the Board on the establishment of NAMA credit policy and in ensuring that decision making on debtor management is consistent with overall Board policy.

Commensurate with the credit policy approved by the Board, and subject to agreed portfolio limits, the Credit Committee is the decision-making authority responsible for the approval or rejection of credit applications, which are below the level required for Board approval, but exceed the credit approval authority delegated to the NAMA Chief Executive by the Board. The Committee must operate in a considered and timely manner so as to support efficient credit-related decision making with respect to the acquired debts of close to 800 debtor connections.

A credit application is broadly defined to mean any event that materially changes the underlying risk profile of an exposure or debtor. It includes debtor strategic reviews, applications for additional credit, the restructuring or compromise of loan obligations, approval for property sales, applications for vendor finance or financing for joint venture projects, decisions with respect to personal guarantees and approval of enforcement action, including receivership, repossession and other such actions.

The Committee's principal responsibilities include:

1. Assessing credit applications which fall outside the delegated authority of the Chief Executive. These can be approved/declined/amended as appropriate. Where the level of risk exceeds the authority of the Committee, a credit application is referred, with a Credit Committee recommendation, to the Board for decision.
2. Developing and assessing proposed credit and sectoral Policies for Board consideration/approval.
3. Determining key performance indicators (KPIs) and monitoring them, establishing policies and strategies upon which the performance of the overall portfolio can be assessed and re-defined as appropriate on a periodic basis, and reporting its findings to the Board.

The principal activities of the Committee in 2012 were as follows:

1. Ensuring that systems in place for processing credit applications to the Committee and the Board were effective, efficient and appropriate.
2. Review of NAMA approved debtor strategies and progress made to date; and for more recently acquired connection facilities, review of debtor Business Plans. The Committee also conducts a bi-annual review of NAMA's top debtor's strategies (top debtors can be defined as those representing 50% of total NAMA debt).
3. Assessing, recommending and approving over 300 individual credit requests ranging from asset management decisions to complex matters related to debtor strategy actions such as continued funding of development assets. 91 papers were reviewed by the Committee for recommendation to the NAMA Board. Additionally, the Committee oversaw over 650 individual decisions made within the CEO's level of delegated authority.
4. Making decisions in relation to debtor agreements and enforcements.
5. Developing and enhancing both credit policies and sectoral policies; and assimilation of associated management information.
6. Review of Asset Management strategy and regular reviews of progress on their selected projects.

It is expected that 2013 will be another challenging year for the Credit Committee as NAMA continues to operate in a difficult economic environment particularly in Ireland and an uncertain outlook in the UK. NAMA's assets are predominantly located in these two jurisdictions. Liquidity and availability of bank funding continues to be in short supply and the credit decisions posed to the Credit Committee, by their nature, are challenging. As NAMA is required to take a commercial but prudent view while maintaining the highest standards of objectivity and integrity, all proposals are rigorously assessed and the various options fully considered. The Committee recognises that its decisions may have a significant impact on the assets and the debtors concerned, but it is determined to support projects which add value with a view to stimulating activity and employment and to maximising the return for the Irish taxpayer.

Willie Soffe
Chairperson

RISK MANAGEMENT COMMITTEE

The Risk Management Committee is responsible for overseeing the assessment and management of risks that, if they were to occur, would result in financial losses and/or a failure by NAMA to achieve its objectives as set out in its Strategic Plan.

The Risk Management Committee is comprised of the following members:

• Steven Seelig (Chairman, Board member)
• Brendan McDonagh (Chief Executive, NAMA and Board member)
• John Corrigan (Chief Executive, NTMA and Board member)
• Aideen O'Reilly (Head of Legal)
• Dave McEvoy (Head of Treasury)
• David Johnson (Head of Audit and Risk)
• Dónal Rooney (Chief Financial Officer)
• John Mulcahy (Head of Asset Management and Board member)
• Ronnie Hanna (Head of Asset Recovery)
• Seán Ó Faoláin (Head of Strategy and Communications)

The Committee met on eight occasions in 2012. Dónal Rooney⁶ and David Johnson were appointed to the Committee on 10th May 2012.

1. Reviewing and overseeing the Executive Team's plans for the identification, management, reporting and mitigation of the material risks faced by NAMA.
2. Overseeing the implementation and review of an Enterprise Risk management framework and satisfying itself that appropriate actions are taken in the event that any significant concerns are identified.
3. Ensuring that NAMA's risk management governance and organisational model provide appropriate levels of independence and challenge.

Risk categories identified in the NAMA Enterprise Risk Policy include the following risks: reputational and political, operational, credit, balance sheet (including interest rates, exchange rates and other factors which combine to influence the price of assets and liabilities on the balance sheet), liquidity, financial crime and regulatory, strategic, information technology, legal, taxation, human resources, security, and macro-economic and property risk. The NAMA Risk Management Committee oversees NAMA's risk tolerance, risk assessment and management processes to ensure that all aspects of the risk management framework comply with the approved risk limits for each risk category as established by the Board of NAMA.

The principal activities of the Committee in 2012 were as follows:

1. The NAMA Risk Management Committee oversaw the risk management implications arising from changes to the organisational structure of NAMA, which resulted in the consolidation of existing frontline and control functions and the creation of new functions with new and expanded objectives and associated risks.
   In addition, the Committee undertook a detailed examination of the nature of the NAMA risk profile and challenges to the management of risks at or above the tolerance set out by the Board. As a result of its assessments, the Committee made a number of recommendations to the Board requiring changes in policy, measurement, risk limits or risk management strategy to reduce risk to a level within the Board's tolerance. The Committee was supported in this effort by NAMA Audit and Risk, which ensures that material and emerging risks and risk events are reported to, and considered by, the Committee.
2. Understanding of the composition of the final NAMA balance sheet (and by extension the nature of the risk profile) was further enhanced in 2012 by the completion of the acquisition due diligence process and on-going improvements in the quality of management information. The Committee continued its regular review of the components of the balance sheet risk, the methods by which they are measured and reported, and alternative risk mitigation strategies. The Committee recommended to the Board, for instance, the adoption of revised hedging strategies to reduce interest rate, foreign exchange and rollover risk; the redemption of NAMA bonds to mitigate liquidity risk associated with maintaining a sufficient cash buffer for on-going operations against a backdrop of significant macro-economic uncertainty in Europe; and changes in the NAMA risk profile as a result of new processes, initiatives or as a response to external events which impact on NAMA and the achievement of its objectives.
3. Operational risks are inherent to the operation of NAMA and the Risk Management Committee's work included the on-going review of the Functional Risk Registers, which were regularly updated during 2012. As part of the reorganisation of the NAMA functions, the accompanying Risk Registers were revised to identify new and emerging risks, remove duplication and ensure the realignment of risk ownership and responsibilities, principally between the new Asset Recovery, Asset Management and CFO functions. The committee also challenged Management to consider risks not already reflected on the register. The implementation of a new Risk Portal system for managing the risk registers was rolled out across the organisation.
   
   The Risk Management Committee also continued to review on a regular basis the Risk Registers of the Master Service Provider and the PIs to gain oversight of the impact and likelihood of risk events external to NAMA that could influence the achievement of NAMA's objectives. The Committee continued support a robust control environment by requiring signoff where a control is scheduled to be tested in a quarter. Risks rated as high or significant emerging risks were examined by the Committee in more detail to provide assurance that Management's response was appropriate. Control action plans were reviewed for each risk identified to ensure that the residual risks were within the approved NAMA risk tolerance. The risk working group which provides a mechanism to ensure that the principles of risk management are deployed throughout NAMA continues to provide a forum to highlight new and emerging risks and to promote awareness of risk management practices and policies across NAMA. Risk awareness training was provided to all NAMA employees.

Steven Seelig
Chairperson

⁶ Dónal Rooney replaced the NTMA FTR Director, Brendan Murphy, as a member.

FINANCE AND OPERATING COMMITTEE

The Finance and Operating Committee comprises two non-executive Board members and five senior NAMA executives (including the NAMA Chief Executive).

The Finance and Operating Committee is comprised of the following members:

• Éilish Finan (Chairperson, Board member)
• Willie Soffe (Board member)
• Brendan McDonagh (Chief Executive, NAMA and Board member)
• Dave McEvoy (Head of Treasury)
• Dónal Rooney (Chief Financial Officer)
• Michael Moriarty (Deputy Head of Asset Recovery)
• Seán Ó Faoláin (Head of Strategy and Communications)

The Committee met on twelve occasions in 2012. Dónal Rooney and Michael Moriarty were appointed to the Committee in May 2012.⁷

The principal responsibility of the Finance and Operating Committee is to monitor the financial and operational management of NAMA and its budgetary and management reporting, including:

• All financial and management reporting whether to the Minister for Finance, the Oireachtas or otherwise (except for NAMA's annual accounts which are the responsibility of the Audit Committee).
• The preparation of management accounts.
• The preparation of annual budgets and other forecasts.
• The review of performance and variance against budget and prior year performance.
• Approving major capital expenditure.
• The management of procurement.
• Oversight of service providers (other than those whose oversight is reserved specifically to other Board committees).

The Finance and Operating Committee oversees the Executive Team's responsibilities for developing, implementing and managing NAMA's financial, operational and budgetary policies and reporting in relation thereto. It makes recommendations to the Board concerning NAMA's expenditure and budgetary requirements. The Chairperson reports formally to the Board on the key aspects of the Committee's proceedings.

During 2012, NAMA made significant progress in terms of developing its underlying Finance and Operations (both Core Operations and Systems) infrastructure.

Specific activities and progress areas are as follows:

1. Finance

• Significant developments have been made to the management information provided to the NAMA Executive, Finance and Operating Committee and Board. This continues to be a key area of focus.
• The process for the preparation of debtor cash flows for the year-end impairment review was significantly enhanced to facilitate more timely year-end reporting and enhanced management information for the Executive, Board Committees and Board. Furthermore, a semi-annual impairment process was introduced in 2012.
• An enhanced budgeting and forecasting process was introduced as part of the 2013 budget preparation cycle.
• As part of an on-going integration plan, the NAMA Finance Team assumed full management of its general ledger and related processes from Capita during 2012.
• NAMA continued to develop and enhance its reporting processes and the underlying financial data provided by the Participating Institutions.

2. Operations

Core Operations

• Following the end of the debtor business plan review process, the full transition to direct NAMA management of larger debtors was achieved through the establishment of clear operational and case management protocols and re-engineering of processes with the PIs.
• A governance framework for all NAMA policies and procedures including standardised templates, a register of obligations and a register of policies and procedures with ownership and review schedule was put in place in 2012.
• A formal structure to mandate debtor rental income was established in 2012 and is well advanced in terms of implementation in conjunction with the clearing banks.
• The NAMA operational integration plan underpinning the 2011 merger of EBS and AIB was implemented in 2012.
• A detailed asset register of all NAMA individual property units in the PMS was completed in 2012.

Systems

• The PMS, which is NAMA's core property database and management tool for its Asset Recovery and Asset Management staff, was fully implemented and rolled out in 2012.
• The DMS was also fully implemented in 2012. DMS acts as a repository for all documents. Key functionality has been delivered to manage document versions, simplify sharing and provide seamless email integration.
• Significant enhancements were made, over the course of 2012, to the NLW system, which acts as a central repository for all NAMA loan data and, in turn, feeds into other core NAMA systems. Further enhancement of the NLW is planned for 2013, in particular to facilitate the strategic enhancement of the organisation's management information platform.
• The GIS, which provides a geospatial visual of a specific property or properties, has been implemented and rolled out.
• The Argus software was implemented to support asset management decision making and management of development projects.

Éilish Finan
Chairperson

⁷ Dónal Rooney replaced the NTMA FTR Director, Brendan Murphy, and Michael Moriarty replaced John Mulcahy.

NORTHERN IRELAND ADVISORY COMMITTEE

The Act provides for the establishment of advisory committees and, on the proposal of the Minister for Finance, NAMA set up a Northern Ireland Advisory Committee. Its purpose is to advise the Board in relation to strategy for Northern Ireland assets.

The Northern Ireland Advisory Committee is comprised of the following members:

• Frank Daly (Chairman)
• Brian McEnery (Board member)
• Éilish Finan (Board member)
• Willie Soffe (Board member)
• Ronnie Hanna (Head of Asset Recovery)
• Frank Cushnahan (External member)
• Brian Rowntree (External member)

Mr. Cushnahan currently holds a number of non-executive appointments within both the public and private sectors. His previous positions include Chairman of Belfast Harbour Commissioners, Chairman of the Northern Ireland Department of Finance and Personnel Delivery Unit, Chairman of the Audit Committee of the First and Deputy First Minister and non-executive Board member of the Office of the First and Deputy First Minister.

Mr. Rowntree currently holds a number of non-executive appointments in the public and not-for-profit sectors. He is Chairman of the NI Civil Service Commissioners and an Independent Member of the Northern Ireland Policing Board. He was formerly Chairman of the Northern Ireland Housing Executive (2004-2012), a member of the Advisory Board of the International Centre for Local and Regional Development, and Vice President of the European Social Housing Forum. He has held further public appointments at Chair and non-executive Director level in the Housing, Criminal Justice, Health and Education sectors and has chaired and participated in a wide variety of forums in Northern Ireland and on a cross-border basis.

The principal responsibility of the Northern Ireland Advisory Committee is to advise the NAMA Board in relation to strategy for Northern Ireland assets. The Committee met on four occasions during 2012 and also undertook a series of related engagements and stakeholder interactions. Across all its activity the Committee recognised the need to explain how Northern Ireland assets are managed – in particular to assuage any lingering concerns regarding the possible 'firesale' of assets - while also recognising the particular set of challenges facing the Northern Ireland economy.

In 2012 Committee meetings were held in Belfast and Dublin, with the Belfast meetings (and additional Belfast engagements) providing an opportunity to hear from, and discuss feedback in person with, key stakeholders. The input of External Committee Members, Frank Cushnahan and Brian Rowntree continued to provide unique local knowledge and expertise to guide NAMA's work in Northern Ireland. Reflecting the value of their contribution, both Mr. Cushnahan and Mr. Rowntree were re-appointed to the Committee by the Board following the expiry of their initial terms of office in April 2012 for a further two years.

By mid-2012 all of the loans in the NAMA portfolio, including those pertaining to the Northern Ireland portfolio, had been assessed through the Debtor Business Plan process, bringing clarity and certainty to the management of all underlying assets. Through a combination of on-going disposals, loan repayments and decisions ultimately not to acquire certain loans for commercial reasons the eventual size of the Northern Ireland portfolio was somewhat smaller than envisaged (€1.3 billion out of NAMA's total acquisition value of €31.8 billion). The Northern Ireland portfolio, by acquisition value comprises office (18%), retail (17%), residential (10%), development (5%), and hotel and leisure (3%) assets, with the balance made up of land (25%) and other investment (22%) assets. Most of NAMA's undeveloped land portfolio in Northern Ireland is situated in the east of the region. Seventy per cent of the Northern Ireland portfolio is completed property and income producing. By the end of 2012 disposals in Northern Ireland were of the order of €100m while NAMA had provided working and development capital to NI debtors of the order of €120m. In a small number of cases NAMA has had to enforce in Northern Ireland.

2012 saw a further increase in stakeholder engagement by the Committee and included participation in events organised by the Northern Ireland Chamber of Commerce, the Ulster Society of Chartered Accountants, the Northern Ireland Assembly and Business Trust, and CBI Northern Ireland. Representatives of the Northern Ireland Office and Bank of England were also engaged and NAMA contributed to a number of Northern Ireland media programmes and interviews.

At the apex of the engagement activity is a positive working relationship with the Northern Ireland Executive and Assembly. The Chairman of the NAMA Board and members of the Northern Ireland Advisory Committee met with Ministers including the Minister for Finance and Personnel and elected representatives on an on-going basis, and provided specific briefings to Northern Ireland political parties.

Recognising the wider contribution NAMA can make to working for solutions in Northern Ireland, the Committee is also leveraging partnership across the public and social sectors, such as with Invest NI, the Northern Ireland Housing Executive and the Northern Ireland Federation of Housing Associations. A further example of this is the collaboration with the University of Ulster on a valuable research initiative to support a better understanding of the supply and demand dynamics of land across the region, including housing affordability and barriers to market entry. The Committee continues to review all opportunities to bring creative and innovative solutions in respect of NAMA's portfolio in Northern Ireland.

NAMA's mandate is to recover the maximum amount from all loans irrespective of where the underlying loans happen to be located. Towards this objective, NAMA adopts a commercial approach in each of the jurisdictions in which it operates, while recognising the distinctive market characteristics of these areas. It is particularly cognisant of the challenges specific to Northern Ireland and benefits greatly from the work of the Committee and extensive stakeholder engagement, local insights and expertise.

NAMA carries out its work with reference to a set of guiding principles, including taking a longer-term approach and avoiding fire sales, and the record to date in Northern Ireland continues to demonstrate this approach.

Frank Daly
Chairman

PLANNING ADVISORY COMMITTEE

The purpose of the Planning Advisory Committee is to advise the Board on planning, land and related matters that may have an impact on the valuation and realisation of NAMA assets and thereby affect the achievement of NAMA's purpose and functions as set down in sections 10 and 11 of the Act.

The Committee may make recommendations to the Board concerning NAMA's objective with respect to approved strategies, guidelines and statutory plans, including proposed SDZs and local area plans ('LAPS') and their impact on NAMA assets.

The Planning Advisory Committee is comprised of the following members:

• Willie Soffe (Chairman, Board Member)
• Brendan McDonagh (Chief Executive, NAMA and Board member)
• John Mulcahy (Head of Asset Management and Board member)
• Michael Wall (External Member)
• Alice Charles (External Member)

Mr. Wall is an architect and barrister and a former Board member of An Bord Pleanála.

Ms. Charles has considerable planning experience and is a member of the Royal Town Planning Institute and the Irish Planning Institute.

The Committee met on five occasions during 2012.

The principal activities of the Committee in 2012 were as follows:

1. Assessing, from a planning perspective, the strategies and the management of the Agency's portfolio.
2. Engaging in discussions with Government Departments, Local Authorities and other Statutory Bodies so as to determine how best to align NAMA's role with other public policy objectives.
3. Advising and guiding NAMA's participation in a number of specialist projects including the formulation and development of contribution guidelines, and a National Transport Authority study relating to the planning and development of large scale residential developments in Dublin.
4. Participating in the development and roll-out of a National Planning Information System and guiding the development and integration of a bespoke NAMA version of the tool which will assist in the management of debtor and property strategies.

Communication has been on-going with State Bodies with a view to aligning the needs of these bodies with NAMA linked properties. The Committee advised on the identification of those assets that might satisfy their requirements. Of special importance and focus over the course of 2012 has been NAMA's work with the Housing and Sustainable Communities Agency, Local Authorities and Voluntary Housing Agencies in identifying and making available for social housing, residential properties forming security to NAMA's loans. Part of this process has included the establishment of an SPV to expedite the process and make units more readily available for this purpose.

During the year, the Agency participated in various specialist projects which, not only related to National policy formulation, but also were of specific interest to NAMA in achieving its objectives. Of note was NAMA's input into an NTA study to review Planning and Development of Large Scale Residential Development in Dublin. The study has been completed and its report is awaited. The Agency has also been engaging with Local Authorities in the Dublin area with the aim of assisting in the review of development contributions schemes in the local authority areas across the Dublin region, in the light of the changed economic climate. Committee advice has been provided as part of this process.

NAMA continues to participate in the National Coordination Committee tasked with ensuring a solution to problematic unfinished estates. The Committee oversees this participation and disseminates advice in relation to the estates which form security to the Agency loans. Much progress has been made in resolving the immediate health and safety issues in these estates, and work continues in determining how to secure the long-term viability, where sustainable, of these developments.

NAMA has continued to work closely with the Department of Environment, Community and Local Government in the on-going evolution of the National Planning Information system. In addition the Agency is providing assistance in the development of a bespoke tool which will incorporate NAMA specific data that can be layered over the National Planning Information System. This product has been launched within the Agency resulting in the provision of an improved knowledge base to assist decision making. The Committee is monitoring the product's evolution and will provide advice on future developments to be incorporated in the tool.

In carrying out its functions, the Committee works closely with NAMA's Planning and Development Advisor and other officials of the Agency with roles related to planning. The Committee's work is greatly assisted by their knowledge and support.

Willie Soffe
Chairman