Barclays 2013 Annual Report Download - page 364

Note 39: Structured Entities continued
Project finance transactions
The Group has provided £2bn to entities whose operations are limited to financing or funding the acquisition of specific assets such as schools,
hospitals, roads and renewable energy projects under the Private Finance Initiative (PFI). Equity contributions are typically required from the
sponsor or parent at inception of the arrangement which are required to absorb losses before the Group. The Group may also require the sponsor
to provide liquid collateral where there is no recourse or reliance upon the parent or sponsor beyond its initial equity contribution. The Group
typically obtains fixed and floating charges over assets, charges over shares in the structured entity, assignment rights over key contracts, step-in
rights, and performance guarantees.
Capital equipment loans
The Group has provided £1bn of funding loans to bankruptcy remote structured entities to enable them to purchase capital equipment for parent
companies and are supported by government export guarantees. The loans are also fully collateralised by the underlying assets and repayments of
principal and interest are met through lease contracts with the operating company parent of the entity for its use of the purchased assets. Due to
these guarantees and the availability of collateral, the loans are considered low risk. During the period, Barclays incurred no credit losses on such
facilities.
Mortgage backed securities
This represents a portfolio of floating rate notes mainly mortgage backed security positions used as an economic hedge of interest rate risk under
the Group’s structural hedging programme. All notes are investment grade.
Investment funds and trusts
In the course of its fund management activities, the Group establishes pooled investment funds that comprise portfolio of investments of various
kinds, tailored to meet certain investors’ requirements. The Group’s interest in funds is generally restricted to a fund management fee, the value of
which is generally based on the performance of the fund.
The Group acts as trustee to a number of trusts established by or on behalf of its clients. The purpose of the trusts, which meet the definition of
structured entities, is to hold assets on behalf of beneficiaries. The Group’s interest in trusts is generally restricted to unpaid fees which, depending
on the trust, may be fixed or based on the value of the trust assets. During the year ended 31 December 2013, fees earned were £206m and
unpaid fees were £21m. Barclays has no other risk exposure to the trusts.
Other
This includes £1,457m of derivative transactions with structured entities where the market risk is materially hedged with corresponding derivative
contracts.
Financial support provided or to be provided to unconsolidated structured entities
The Group has not provided any non-contractual financial support during the period and does not anticipate providing non-contractual support to
unconsolidated structured entities in the future.
Sponsored unconsolidated structured entities
In addition to the unconsolidated structured entities in which the Group has an interest, it also sponsors structured entities in which it has no
interest. For the purposes of these disclosures, the Group sponsors an entity when:
 It is the majority user of the entity;
 Its name appears in the name of the entity or on the products issued by the entity;
 It provides implicit or explicit guarantees of the entity’s performances; or
 It led the formation of the entity.
Income from sponsored unconsolidated structured entities comprised of a £4m interest earned from bonds recognised within trading income.
Assets transferred to unconsolidated sponsored structured entities
Assets transferred by all parties, not just those transferred by the Group, to sponsored entities during the period were as follows:
Nature of activities
2013
£m
Asset securitisations 1,515
Other 5
Total 1,520
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362 Barclays PLC Annual Report 2013
Notes to the financial statements
For the year ended 31 December 2013 continued