AA BOND CO LIMITED

ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 JANUARY 2023

Registered FC number: FC031455

Registered Company number 112992

AA BOND CO LIMITED

1

DIRECTORS’ REPORT

FOR THE YEAR ENDED 31 JANUARY 2023

The directors present their annual report and audited financial statements of AA Bond Co Limited

(“the Company”) for the year ended 31 January 2023.

PRINCIPAL ACTIVITIES AND REVIEW OF THE BUSINESS

The Company is a wholly owned subsidiary of AA Intermediate Co Limited.

The principal activity of the Company is that of a financing company. The Class A and B Notes

in issue are listed on the Irish Stock Exchange plc, trading as Euronext Dublin. Despite a

challenging macroeconomic environment, the Company remains in a resilient position to continue

to perform its primary activity and management have assessed that this will continue to be the

case.

During the current year, the Company issued £250m of Class A10 Notes and repaid £250m of

Class A6 Notes. The issue of the Class A10 Notes was not a modification of any existing debt

and the associated issue fees were capitalised. Included in finance costs is a £1m write-off of

unamortised issue fees associated with the Class A6 Notes.

On 6 February 2023 the Company issued £400m of Class A11 Notes at an interest rate of 8.45%.

The proceeds of the issuance of the Class A11 Notes were used to redeem £308m of Class A7

Notes for a cash payment of £302m on 7 February 2023 tendered by existing note holders as

part of a liability management exercise. A further £10m of Class A7 Notes were purchased from

existing bond holders on 3 March 2023 and redeemed. A further £103m of Class A7 Notes were

voluntarily repaid on 16 May 2023 and redeemed.

The Company incurred interest on borrowings of £115m (2022: £116m) in the year to 31 January

2023, amortisation of issue fees of £5m (2022: £9m), early repayment penalties of £1m (2022:

£nil) and a write-off of unamortised issue fees associated with the Class A6 Notes of £1m (2022:

£4m). This was offset by interest receivable from a fellow subsidiary undertaking of £122m (2022:

£129m). Management deems these figures to be the key performance indicators of the Company.

There are currently no plans to alter the principal activity of the Company going forward and the

Company expects to continue to be a financing company.

The directors have had regard to the matters set out in Article 74 (1) when performing their duty

under section 74 of the Companies (Jersey) Law 1991. The Company is part of the AA Limited

group (the Group), the ultimate parent of which is Basing ConsortiumCo Limited during the year

ended 31 January 2023. Decisions, policies and procedures that may affect stakeholders were

implemented at an AA Limited group level during the year and the Directors oversee the

application of these to the Company. For details of how this is accomplished within the AA Limited

group, refer to page 40-41 of AA Limited’s Annual Report 2023 and to whose governance the

Company is subject.

RISK MANAGEMENT FRAMEWORK

The Board of AA Limited is responsible for determining the level of risk that the AA is prepared

to take, or that it is willing to accept, in order to achieve its strategic objectives. The levels of risk

are articulated through a series of risk appetite statements and we monitor ourselves closely

against the statements through our risk governance and our risk management framework. Further

information about the corporate governance arrangements for the AA is set out in the Directors’

Report on pages 46-51 of the AA Limited Annual Report and Accounts 2023.

AA BOND CO LIMITED

DIRECTORS’ REPORT (continued)

FOR THE YEAR ENDED 31 JANUARY 2023

2

The AA operates a three lines of defence model to ensure that its risks and opportunities are

identified, assessed, monitored and managed in line with its stated risk appetite.

The three lines of defence model can be summarised as follows:

•

First line of defence: the business units that run the business, they are accountable for

the day-to-day management of the AA, which includes identifying and managing their

risks.

•

Second line of defence: the AA’s Group Risk and Compliance function, they are

accountable for providing oversight, challenge and advice to the first line.

•

Third line of defence: the AA’s Internal Audit function, they are accountable for providing

assurance to the business by performing independent reviews of the first and second

lines of defence.

The AA’s risk management framework aims to ensure that:

•

risks are made visible

•

risks are discussed and understood

•

risks are owned and managed

•

appropriate action is taken

•

risks are used for opportunities

•

we learn from our risk-taking

The risk management framework is comprised of the five pillars set out below.

Risk culture and

governance

The processes and structures to demonstrate to the AA

Limited Board that effective risk management, oversight and

assurance is being undertaken for all key risks faced by the

AA.

Strategy and objectives

The process to ensure that risk is considered as part of

strategy and objectives, including the direction it sets for

taking, avoiding and considering opportunity from risk.

Risk identification and

prioritisation

A set of key risk categories to identify where the AA has, or is

likely to have, material risk exposures and the activities we

perform to prioritise our actions.

Risk management and

controls

A set of processes to review and assess the risk and control

environment. Risks are assessed on an inherent (no controls),

residual (with controls) and target basis to help senior

management understand and manage their risk exposures.

Risk reporting and

communication

The information and reporting in place to support senior

management in discharging their risk management

accountabilities effectively and to help them make informed,

risk-based decisions.

AA BOND CO LIMITED

DIRECTORS’ REPORT (continued)

FOR THE YEAR ENDED 31 JANUARY 2023

3

RISK MANAGEMENT FRAMEWORK (continued)

The principal risks and uncertainties facing the Company are considered to be:

Financial Risk

The risk that the AA Limited Group has insufficient liquid funds required for the business to

operate, is unable to refinance its maturing debt, or unable to do this at affordable cost.

The ability to finance is critical to the ongoing existence and operation of the Group. Credit rating,

stakeholder management, financial market conditions and interest rates are all important factors.

In particular, financing costs have increased as a result of rising interest rates as the economy

sees higher levels of inflation.

Despite a challenging macroeconomic environment, the Group has completed a successful

refinancing of its A6 Notes, issuing £250m of A10 Notes in FY23, as well as a partial refinancing

of its £550m A7 Notes in FY24 (see the Going Concern section of this report on page 4 for more

information) and continues to seek to refinance bonds well ahead of their maturity dates. The

Group is highly cash generative and has good levels of available cash as well as a Working

Capital Facility of £56m, of which £46m is available for cash drawings allowing it to withstand

such macroeconomic challenges.

Credit Risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument

or customer contract, leading to a financial loss. The Company is exposed to credit risk in relation

to the intercompany balance due from a fellow subsidiary undertaking. The AA Limited group

monitors the recoverability of intercompany balances to ensure that there are sufficient resources

to meet each counterparty’s obligation.

DIRECTORS

The directors who held office during the year and up to the date of signing the financial statements

were as follows:

M Neville

H Whitaker

T O Mackay

COMPANY SECRETARY

Ogier Global Company Secretary (Jersey) Limited

DIVIDENDS

The Company has not paid a dividend in the year (2022: £nil) and the directors do not propose

the payment of a final dividend (2022: £nil).

INDEPENDENT AUDITORS

Pursuant to Article 113 (5) of the Companies (Jersey) Law 1991, the auditors will be deemed to

be reappointed and PricewaterhouseCoopers LLP will therefore continue in office.

AA BOND CO LIMITED

DIRECTORS’ REPORT (continued)

FOR THE YEAR ENDED 31 JANUARY 2023

4

GOING CONCERN

The Company’s business activities, future developments and its exposure to financial risks are

described in the “Principal activity and review of the business” and “Risk management

framework” sections on pages 1 to 3.

The Company has adequate financial resources due to the Company's own net current asset

position. AA Bond Co Limited is a wholly owned subsidiary of the AA Limited group (“Group”),

hence the going concern status of the Company is linked to the wider Group, which provides

the cash required to meet the scheduled debt interest payments and principal repayments. The

Company directors have reviewed projected cash flows of the Group for a period of at least one

year from the date of signing of these financial statements and have concluded, with the AA

Limited directors, that the Company has sufficient funds to continue trading during this period

and the foreseeable future.

The Company continues to seek to refinance its debt within good time of its scheduled maturity,

including the refinancing of £129m of A7 Notes which have a maturity date of 31 July 2024. As

at the date of approval of these financial statements, £421m of the original £550m A7 Notes

has already been refinanced.

The Company directors have confirmed these points with the AA Limited group directors and

have reviewed the projected cash flows of the AA Limited group for a period of at least one

year from the date of approval of these financial statements. The Company directors have

concluded, with the AA Limited directors, that they have confidence that the Company and the

AA Limited group will have sufficient funds to continue trading during this period and the

foreseeable future and will be able to secure financing so as to be able to continue to meet its

liabilities as they fall due. For more detail see page 50-51 of the AA Limited group’s Annual

Report. For the AA Limited group’s longer-term viability, it remains a key assumption of its

directors that the AA Limited group continues to have ready access to public debt markets to

enable its borrowings to be refinanced in due course. However, as noted above, the refinancing

of the Class A7 notes, due on 31 July 2024, is currently in progress at the date of issue of these

financial statements (see Note 15). In the event the refinancing is not successful, the Company

may not be able to continue as a going concern as the Company may not be able to meet the

debt repayment. These circumstances indicate that a material uncertainty exists that may cast

significant doubt on the Company’s ability to continue as a going concern for a period in excess

of a year from the date of issue of these financial statements.

However, after making appropriate enquiries and considering the uncertainty described above,

the Company’s directors have, at the time of approving these financial statements, a

reasonable expectation that the AA Limited group and the Company have adequate resources

to continue in operational existence for the foreseeable future and, as a consequence, consider

that it is appropriate to adopt the going concern basis in preparing these financial statements.

The financial statements do not include the adjustments that would result if the Company was

unable to continue as a going concern.

AA BOND CO LIMITED

DIRECTORS’ REPORT (continued)

FOR THE YEAR ENDED 31 JANUARY 2023

5

STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE FINANCIAL

STATEMENTS

The directors are responsible for preparing financial statements for each financial year which give

a true and fair view, in accordance with applicable Jersey law and United Kingdom Accounting

Standards, of the state of affairs of the Company and of the profit or loss of the Company for that

period. In preparing those financial statements, the directors are required to:

•

select suitable accounting policies and then apply them consistently;

•

make judgements and estimates that are reasonable and prudent;

•

state whether applicable accounting standards have been followed, subject to any

material departures disclosed and explained in the financial statements; and

•

prepare the financial statements on the going concern basis unless it is inappropriate to

presume that the Company will continue in business.

The directors confirm that they have complied with the above requirements in preparing the

financial statements.

The directors are responsible for keeping proper accounting records that disclose with

reasonable accuracy at any time the financial position of the Company and enable them to ensure

that the financial statements comply with The Companies (Jersey) Law, 1991. 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.

So far as the directors are aware, there is no relevant audit information of which the Company’s

auditors are unaware, and each director has taken all the steps that he or she ought to have

taken as a director in order to make himself or herself aware of any relevant audit information

and to establish that the Company’s auditors are aware of that information.

DIRECTORS’ INDEMNITY

The Company maintains directors’ and officers’ liability insurance, which gives appropriate cover

for any legal action brought against its directors and officers. The Company has also granted

indemnities to its directors and officers against all losses and liabilities incurred in the discharge

of their duties, to the extent permitted by law. This is a qualifying third-party indemnity provision

and was in force throughout the financial year and at the date of approval of the financial

statements.

ON BEHALF OF THE BOARD

M NEVILLE

DIRECTOR

26 MAY 2023

Registered Office: 3

rd

Floor, 44 Esplanade, St Helier, Jersey, JE4 9WG

6

AA BOND CO LIMITED

Independent auditors’ report to the

members of AA Bond Co Limited

Report on the audit of the financial statements

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of AA Bond Co Limited

(the “Company”) as at 31 January 2023, and of its financial performance for the year

then

ended in accordance

with United Kingdom Accounting Standards, comprising FRS 101: “Reduced Disclosure Framework” (“FRS

101”)

and have been properly prepared in accordance with the requirements of the Companies (Jersey) Law 1991.

What we have audited

The Company’s financial statements comprise:

•

the Statement of Financial Position as at 31 January 2023;

•

the Income Statement for the year then ended;

•

the Statement of Changes

Ln

Equity for the year then ended; and

•

the notes to the financial statements, which include significant accounting policies and other

explanatory

information.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under

those standards are further described in the Auditors’ responsibilities for the audit of the financial statements section of

our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

We remained independent of the Company in accordance with the International Code of Ethics for Professional

Accountants (including International Independence Standards) issued by the International Ethics Standards Board for

Accountants (IESBA Code). We have fulfilled our other ethical responsibilities in accordance with the IESBA Code.

Material uncertainty related to going concern

In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the

disclosure made in note 1 to the financial statements concerning the Company’s ability to continue as a going concern.

The Company has borrowings and forms part of the corresponding debt security group for which the refinancing of the

Class A7 Notes, due on 31 July 2024, is not committed at the date of issue of these financial statements. These conditions,

along with the other matters explained in note 1 to the financial statements, indicate the existence of a material uncertainty

which may cast significant doubt about the Company's ability to continue as a going concern. The financial statements do

not include the adjustments that would result if the Company were unable to continue as a going concern.

In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting

in the preparation of the financial statements is appropriate.

AA BOND CO LIMITED

7

Our evaluation of the directors’ assessment of the Company’s ability to continue to adopt the going concern basis of

accounting included:

•

We have obtained management's going concern assessment for the Company.

•

We checked the consistency of the

%

oard-approved cash flows for the next 12 months used in the going concern

assessment with trading performance of the wider Group over the last financial year and in the period since. We have

performed arithmetic testing over the cash flow model to ensure that this is appropriate and have completed a lookback

test to consider the previous forecasting inaccuracies for the Group. We obtained and tested the directors’ sensitivity

calculations based on these cash flows. We challenged the cash flows these sensitivity calculations were based

on

and agreed with the directors’ conclusion. We found the key cash flow assumptions to be consistent with recent

trading

experience.

•

We have undertaken procedures to ensure the Company is part of the AA Intermediate Co Limited debt

security

group.

•

We vouched the cash on hand and available facilities in the directors' going concern assessment to our year end audit

work and gave due consideration to the Company's loan note maturity dates.

•

We read the Going concern disclosure in note 1 and validated they accurately describe the directors' considerations

in this area.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant

sections of this report.

Our audit approach

Context

AA Bond Co Limited is a financing

F

ompany which holds loan notes which are listed on the Irish Stock Exchange

plc, trading as 'Euronext Dublin'.

Overview

Audit scope

•

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the

financial statements. In particular, we looked at where the directors made subjective judgements, for example in

respect of significant accounting estimates that involved making assumptions and considering future events that are

inherently uncertain.

Key audit matters

•

Material uncertainty related to going concern

•

Recoverability of amounts owed by group undertakings (£3,319m, 2022: £3,195m) (Note 9 and Note 2.2)

•

Recognition, measurement and disclosure of financial liabilities (£2,160m, 2022: £2,156m) (Note 11 and Note 2.3)

Materiality

•

Overall materiality: £33.19m (2022: £31.96m) based on 1% of total assets.

•

Performance materiality: £24.89m (2022: £23.90m).

The scope of our audit

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial

statements. In particular, we considered where the directors made subjective judgements; for example, in respect of

significant accounting estimates that involved making assumptions and considering future events that are inherently

uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among

other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to

fraud.

AA BOND CO LIMITED

8

Key audit matters

Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit

of the financial statements of the current period and include the most significant assessed risks of material misstatement

(whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit

strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and

any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the

financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these

matters.

In addition to going concern, described in the Material uncertainty related to going concern section above, we determined

the matters described below to be the key audit matters to be communicated in our report. This is not a complete list of

all risks identified by our audit.

The key audit matters below are consistent with last year.

Key audit matter

How our audit addressed the key audit matter

Recoverability of amounts owed by group undertakings

(£3,319m, 2022: £3,195m) (Note 9 and Note 2.2)

We have agreed the carrying amount to the audited AA

Limited group intercompany reconciliation and have

confirmed that the balance has been recorded as a liability

in the trial balance of the counterparty. We tested the

recoverability of this balance by confirming the net current

asset position of the counterparty to evaluate the likelihood

of default. The counterparty’s ability to settle the balance is

itself dependent on amounts owed to the counterparty by

other AA group companies and we have therefore

performed a similar assessment of recoverability on those

balances. We challenged management’s assessment that

the Expected Credit Loss on receivables, which are not

immediately recoverable is immaterial. We checked the

consistency of the cash flows for the wider Group over the

last financial year. Based on the work performed above, we

are satisfied with the recoverability of the carrying value of

amounts owed by group undertakings.

This represents a key audit matter due to the size of the

intercompany receivables balance and the complexity of

the intercompany arrangements within the AA Limited

group. There is a risk that the counterparty is unable to

repay sufficient amounts to service the debt and

eventually repay the overall balance over the long term or

for the underlying businesses to underperform resulting in

an inability to refinance the current debt facilities in

advance of required repayment dates.

Recognition, measurement and disclosure of financial

liabilities (£2,160m, 2022: £2,156m) (Note 11 and Note

2.3)

We focused our testing on the completeness and valuation

of the liability at year end. We have recalculated the

valuation at amortised cost. We obtained third party

confirmation of the total outstanding loan principal as at 31

January 2023, and

Ze DVVeVVeG the

fair value

RI the ORDn

EDODnFeV

at that date. We considered the accounting

applied for the issuance of the Class A10 Notes and

redemption of the Class A6 Notes in July 2022. We

considered the refinancing transaction of the A6 Notes to

meet the definition of an "extinguishment" under IFRS 9

and, as such, the remaining unamortised debt issue costs

for these Notes were expensed immediately. Costs

directly associated with the issuance of the A10 Notes

were capitalised and are being amortised over the life of

the loan note. In addition to assessing the Company’s

compliance with IFRS 9, we reviewed the financial

statement disclosures and were satisfied with the nature

and extent of the disclosures provided. We found no

material misstatements from our testing.

This represents a key audit matter because the balance is

significant within the AA Bond Co Limited financial

statements, and the purpose of the Company is to hold

and issue the listed debt. Furthermore, in July 2022, the

entity refinanced the A6 Notes held. The accounting

related to extinguishment or modification involves a level

of judgement.

AA BOND CO LIMITED

9

How we tailored the audit scope

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial

statements as a whole, taking into account the structure of the Company, the accounting processes and controls, and the

industry in which it operates.

We scope the audit, based on materiality, by financial statement line item. As there are no branches or other locations no

scoping by location is required.

The impact of climate risk on our audit

As part of our audit we made enquiries of management to understand the extent of the potential impact of climate risk

on the Company’s financial statements, and we remained alert when performing our audit procedures for any indicators

of the impact of climate risk. Our procedures did not identify any material impact as a result of climate risk on the

Company’s financial statements.

Materiality

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for

materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature,

timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating

the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Overall Company

materiality

£33.19m (2022: £31.96m).

How we

determined it

1% of total assets

Rationale for

benchmark applied

The Company is a financing Company and issues loan notes on behalf of the AA Limited group.

All interest costs are recharged to another group Company, therefore we believe that total assets

is the most appropriate benchmark.

We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected

and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining

the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and

disclosures, for example in determining sample sizes. Our performance materiality was 75% (2022: approximately 75%)

of overall materiality, amounting to £24.89m (2022: £23.90m) for the Company financial statements.

In determining the performance materiality, we considered a number of factors - the history of misstatements, risk

assessment and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of

our normal range was appropriate.

We agreed with those charged with governance that we would report to them misstatements identified during our audit

above £1.66m (2022: £1.60m) as well as misstatements below that amount that, in our view, warranted reporting for

qualitative reasons.

10

AA BOND CO LIMITED

5eSRUtiQJ RQ RtheU iQIRUPatiRQ

The other information comprises all of the information in the Annual Report and Audited Financial Statements (the

“Annual Report”) but does not include the financial statements and our auditors’ report thereon. The directors are

responsible for the other information.

Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an

audit opinion or any form of assurance thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,

consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained

in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that

there is a material misstatement of this other information, we are required to report that fact. We have nothing to report

based on these responsibilities.

Responsibilities for the financial statements and the audit

Responsibilities of the directors for the financial statements

As explained more fully in the Statement of directors' responsibilities in respect of the financial statements, the directors

are responsible for the preparation of the financial statements in accordance with United Kingdom Accounting

Standards, comprising FRS 101, the requirements of Jersey law and for such internal control as the directors determine

is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to

fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Company’s ability to continue as a

going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting

unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to

do so.

Auditors’ responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from

material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with

ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are

considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic

decisions of users taken on the basis of these financial statements.

Our audit testing might include testing complete populations of certain transactions and balances, possibly using data

auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing

complete populations. We will often seek to target particular items for testing based on their size or risk characteristics.

In other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the

sample is selected.

AA BOND CO LIMITED

11

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism

throughout the audit. We also:

•

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error,

design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and

appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud

is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,

misrepresentations, or the override of internal control.

•

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the

Company’s internal control.

•

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and

related disclosures made by

the GLUeFtRUV

.

•

Conclude on the appropriateness of

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use of the going concern basis of accounting and, based on the

audit

evidence obtained, whether a material uncertainty exists related to events or conditions that may cast

significant

doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty

exists, we

are required to draw attention in our auditor’s report to the related disclosures in the financial statements

or, if

such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence

obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to

cease to continue as a going concern.

•

Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and

whether the financial statements represent the underlying transactions and events in a manner that achieves fair

presentation.

•

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities

within the Company to express an opinion on the financial statements. We are responsible for the direction,

supervision and performance of the Company audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of

the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our

audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical

requirements regarding independence, and to communicate with them all relationships and other matters that may

reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or

safeguards applied.

From the matters communicated with those charged with governance, we determine those matters that were of most

significance in the audit of the financial statements of the current period and are therefore the key audit matters. We

describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or

when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because

the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such

communication.

Use of this report

This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance

with Article 113A of the Companies (Jersey) Law 1991 and for no other purpose. We do not, in giving these opinions,

accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose

hands it may come save where expressly agreed by our prior consent in writing.

AA BOND CO LIMITED

12

Report on other legal and regulatory requirements

Compan

\

Law exception reporting

Under the Companies (Jersey) Law 1991 we are required to report to you if, in our opinion:

•

we have not

UeFeLYeG

all the information and explanations we require for our audit; or

•

proper accounting records have not been kept; or

•

the financial statements are not in agreement with the accounting records.

We have no exceptions to report arising from this responsibility.

Nicholas Smith

for and on behalf of PricewaterhouseCoopers LLP

Chartered Accountants

Southampton

26 May 2023

AA BOND CO LIMITED

13

INCOME STATEMENT

FOR THE YEAR ENDED 31 JANUARY

Note

2023

2022

£m

£m

OPERATING (COSTS)/INCOME

Administrative expenses

4

-

(38)

Other income

5

-

38

Release from intercompany loan

-

29

Forgiveness of intercompany loan

-

(29)

Finance income

6

122

129

Finance costs

7

(122)

(129)

OPERATING PROFIT AND PROFIT BEFORE

TAX

-

-

Income tax expense

8

-

-

PROFIT FOR THE FINANCIAL YEAR

-

-

Profit before tax for the financial year ended 31 January 2023 is £5k (2022: £5k). Profit for the

financial year ended 31 January 2023 is £4k (2022: £4k).

There is no income and expenditure other than that passing through the income statement, therefore

no separate statement of comprehensive income is presented.

The accompanying notes are an integral part of this income statement.

AA BOND CO LIMITED

14

STATEMENT OF FINANCIAL POSITION

AS AT 31 JANUARY

Note

2023

2022

£m

£m

NON-CURRENT ASSETS

Trade and other receivables

9

2,160

2,156

CURRENT ASSETS

Trade and other receivables

9

1,159

1,039

1,159

1,039

TOTAL ASSETS

3,319

3,195

CURRENT LIABILITIES

Trade and other payables

10

(1,159)

(1,039)

(1,159)

(1,039)

NON-CURRENT LIABILITIES

Borrowings

11

(2,160)

(2,156)

TOTAL LIABILITIES

(3,319)

(3,195)

NET ASSETS

-

-

EQUITY

Called up share capital

13

-

-

Retained earnings

-

-

TOTAL EQUITY

-

-

These financial statements from pages 13–24 were approved by the board of directors on 26 May 2023

and signed on its behalf by:

M NEVILLE

DIRECTOR

26 M

AY

2023

AA Bond Co Limited

Registered number:112992

The accompanying notes are an integral part of this statement of financial position.

AA BOND CO LIMITED

15

STATEMENT OF CHANGES IN EQUITY

Share capital

Retained

earnings

Total

equity

£m

£m

£m

At 1 February 2021

-

-

-

Profit for the financial year

-

-

-

At 31 January 2022

-

-

Profit for the financial year

-

-

-

At 31 January 2023

-

-

-

The accompanying notes are an integral part of this statement of changes in equity.

AA BOND CO LIMITED

16

NOTES TO THE FINANCIAL STATEMENTS

1

PRESENTATION OF FINANCIAL STATEMENTS

AA Bond Co Limited is a public company, limited by shares, and is incorporated and domiciled in Jersey.

The financial statements are prepared in Sterling and are rounded to the nearest £m.

Going concern

The Company’s business activities, future developments and its exposure to financial risks are

described in the “Principal activity and review of the business” and “Risk management framework”

sections on pages 1 to 3.

The Company has adequate financial resources due to the Company's own net current asset position.

AA Bond Co Limited is a wholly owned subsidiary of the AA Limited group (“Group”), hence the going

concern status of the Company is linked to the wider Group, which provides the cash required to meet

the scheduled debt interest payments and principal repayments. The Company directors have

reviewed projected cash flows of the Group for a period of at least one year from the date of signing

of these financial statements and have concluded, with the AA Limited directors, that the Company

has sufficient funds to continue trading during this period and the foreseeable future.

The Company continues to seek to refinance its debt within good time of its scheduled maturity,

including the refinancing of £129m of A7 Notes which have a maturity date of 31 July 2024. As at the

date of approval of these financial statements, £421m of the original £550m A7 Notes has already

been refinanced.

The Company directors have confirmed these points with the AA Limited group directors and have

reviewed the projected cash flows of the AA Limited group for a period of at least one year from the

date of approval of these financial statements. The Company directors have concluded, with the AA

Limited directors, that they have confidence that the Company and the AA Limited group will have

sufficient funds to continue trading during this period and the foreseeable future and will be able to

secure financing so as to be able to continue to meet its liabilities as they fall due. For more detail see

page 50-51 of the AA Limited group’s Annual Report. For the AA Limited group’s longer-term viability,

it remains a key assumption of its directors that the AA Limited group continues to have ready access

to public debt markets to enable its borrowings to be refinanced in due course. However, as noted

above, the refinancing of the Class A7 notes, due on 31 July 2024, is currently in progress at the date

of issue of these financial statements (see Note 15). In the event the refinancing is not successful, the

Company may not be able to continue as a going concern as the Company may not be able to meet

the debt repayment. These circumstances indicate that a material uncertainty exists that may cast

significant doubt on the Company’s ability to continue as a going concern for a period in excess of a

year from the date of issue of these financial statements.

However, after making appropriate enquiries and considering the uncertainty described above, the

Company’s directors have, at the time of approving these financial statements, a reasonable

expectation that the AA Limited group and the Company have adequate resources to continue in

operational existence for the foreseeable future and, as a consequence, consider that it is appropriate

to adopt the going concern basis in preparing these financial statements.

The financial statements do not include the adjustments that would result if the Company was unable

to continue as a going concern.

AA BOND CO LIMITED

NOTES TO THE FINANCIAL STATEMENTS (continued)

17

2

ACCOUNTING POLICIES

2.1

Basis of preparation

These financial statements were prepared in accordance with Financial Reporting Standard 101

Reduced Disclosure Framework (“FRS 101”) and Companies (Jersey) Law 1991. The financial

statements are prepared under the historical cost convention.

The principal accounting policies applied in the preparation of these financial statements are set out

below. These policies have been consistently applied to all the years presented, unless otherwise

stated.

The Company has taken advantage of the following disclosure exemptions under FRS 101:

-

IAS 1 paragraphs 10(d) and 10(f),

-

IAS 1 paragraph 16 (statement of compliance with all IFRS),

-

IAS 1 paragraph 38A (requirement for minimum of two primary statements, including cash flow

statements),

-

IAS 1 paragraph 111 (cash flow statement information),

-

IAS 1 paragraphs 134-136 (capital management disclosures),

-

IAS 7 ‘Statement of cash flows’,

-

IAS 8 paragraphs 30 and 31 (new accounting standards that have been issued but are not yet

effective),

-

The requirements in IAS 24, ‘Related party disclosures’ to disclose all related party transactions

entered into between two or more members of a group,

-

IAS 24 ‘Related party disclosures’ (key management compensation),

New standards, amendments and IFRIS IC interpretations

The Company did not identify any new accounting standards coming into effect in the current year with

a material impact on the financial statements. A number of new accounting standards, amendments

and interpretations have been issued and will be effective for years beginning after 1 February 2023,

however the Company has not identified any with an expected material effect on the financial

statements.

2.2

Critical accounting estimates and judgements

Management have exercised judgement in applying the Company’s accounting policies. The principal

judgements involving a higher degree of judgement and complexity, where the assumptions are

significant to the financial statements, relate to how refinancing transactions are accounted for under

IFRS 9 (see notes 7 and 11). There were no critical accounting estimates in preparing these financial

statements.

The assessment of credit loss allowances for intercompany receivables requires judgement to assess

the collectability of intercompany balances.

2.3

Significant accounting policies

a)

Taxation

Tax on the profit or loss for the year comprises current tax. Current tax is the expected tax payable or

receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted

at the statement of financial position date, and any adjustment to tax payable in respect of prior years.

b)

Financial assets and financial liabilities

Financial assets and financial liabilities are recognised in the Company’s statement of financial position

when the Company becomes a party to the contractual provisions of the instrument. They are classified

according to the substance of the contractual arrangements entered into. The Company recognises

loss allowances for expected credit losses (ECLs) on relevant financial assets.

AA BOND CO LIMITED

NOTES TO THE FINANCIAL STATEMENTS (continued)

18

2

ACCOUNTING POLICIES (continued)

2.3

Significant accounting policies (continued)

b)

Financial assets and financial liabilities (continued)

Trade and other receivables and trade and other payables

Trade and other receivables due within one year or after more than one year which are subject to an

Issuer/Borrower Loan Agreement (IBLA) are therefore subject to the same terms as the Company’s

Borrowings. Trade and other receivables due within one year which are not subject to an IBLA are not

interest bearing and are recognised initially at fair value and are subsequently held at amortised cost.

Trade and other payables due within one year are not interest bearing and are recognised initially at

fair value and are subsequently held at amortised cost.

Borrowings

Debt is initially recognised in the statement of financial position at fair value less transaction costs

incurred directly in connection with the issue of the instrument. Debt issue fees in respect of the

instrument, including premiums and discounts on issue, are capitalised at inception and charged to

the income statement over the term of the instrument using the effective interest method. Remaining

issue costs on debt are written off to the income statement when the debt is extinguished.

An exchange with an existing lender of debt instruments with substantially different terms, or a

substantial modification of the terms of an existing financial liability or a part of it, is accounted for as an

extinguishment of the original financial liability and the recognition of a new financial liability. If an

exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs

or fees incurred are recognised as part of the gain or loss on the extinguishment. If the exchange or

modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying

amount of the liability and are amortised over the remaining term of the modified liability.

c)

Finance income

Interest receivable relates to interest received from a fellow subsidiary undertaking under the IBLA

which permits the Company to recharge its expenses.

d)

Finance costs

Finance costs comprise interest payable and amortisation of debt issue fees.

3

AUDITORS’ REMUNERATION

Auditors’ remuneration in respect of the audit of the Company’s financial statements for the year ended

31 January 2023 amounted to £32k (2022: £32k). In addition, fees for non-audit services provided by

the Company’s auditors were £215k (2022: £130k), relating to audit-related assurance services.

4

ADMINISTRATIVE EXPENSES

2023

2022

£m

£m

Transaction fees related to debt financing

arrangements

-

38

-

38

AA BOND CO LIMITED

NOTES TO THE FINANCIAL STATEMENTS (continued)

19

5

OTHER INCOME

2023

2022

£m

£m

Administrative expenses recharged to AA Senior

Co Limited

-

38

-

38

6

FINANCE INCOME

2023

2022

£m

£m

Interest receivable from fellow subsidiary

undertakings

122

129

122



7

FINANCE COSTS

2023

2022

£m

£m

Interest on external borrowings

115

116

Amortisation of debt issue fees

5

9

Early repayment penalties

1

-

Unamortised debt issue fees written off following

repayment of borrowings

1

4

Total finance costs

122

During the year, the Company issued £250m of Class A10 Notes and repaid £250m of Class A6 Notes.

The issue of the Class A10 Notes was not a modification of any existing debt and the associated issue

fees were capitalised (Note 11).

The Company incurred finance costs of £1m associated with early repayment penalty following the

repayment of the Class A6 Notes.

Included in finance costs is a £1m write-off of unamortised issue fees associated with the Class A6

Notes.



AA BOND CO LIMITED

NOTES TO THE FINANCIAL STATEMENTS (continued)

20

8

INCOME TAX EXPENSE

The major components of the income tax expense are:

2023

2022

£m

£m

Current tax:

- Current income tax charge

-

Total income tax expense

-

Reconciliation of income tax expense to profit before tax multiplied by UK’s corporation tax rate:

2023

2022

£m

£m

Profit before tax

-

Profit before tax at rate of 19.0% (2022: 19.0%)

-

Income tax expense reported in the income statement

-

The Company is incorporated in Jersey but not resident in Jersey as its business is centrally managed

and controlled in the UK. It is therefore tax resident in the UK. The March 2021 budget announced that

the main corporation tax rate will increase from 19.0% to 25.0% in April 2023.

9

TRADE AND OTHER RECEIVABLES

2023

2022

£m

£m

Amounts receivable after one year

Amounts owed by group undertakings

2,160

2,156

2,160

2,156

The Company has entered into a number of Issuer/Borrower Loan Agreements (IBLAs) with AA Senior

Co Limited. As a result of these agreements, the proceeds from the loan notes issued by the Company

were loaned to AA Senior Co Limited. The terms of these intercompany loans reflect the terms and

costs of the loan notes held by the Company. The element of the amounts owed by group undertakings

which relate to the IBLAs are per the borrowings note, see note 11.

2023

2022

£m

£m

Amounts receivable within one year

Amounts owed by group undertakings

1,159

1,039

1,159

1,039

Amounts owed by group undertakings within one year are unsecured, have no repayment terms and

bear no interest.

-

-

-

-

-

AA BOND CO LIMITED

NOTES TO THE FINANCIAL STATEMENTS (continued)

21

10

TRADE AND OTHER PAYABLES

2023

2022

£m

£m

Amounts owed to group undertakings

1,159

1,039

1,159

1,039

Amounts owed to group undertakings are unsecured, have no repayment terms and bear no interest.

11

BORROWINGS

Expected

maturity date

Interest

rate

Principal

Issue

costs

Amortised

issue

costs

Total at 31

January

2023

Total at 31

January

2022

£m

£m

£m

£m

£m

Class A2

Notes

31 July 2025

6.27%

500

(1)

1

500

500

Class A6

Notes

31 July 2023

2.75%

-

-

-

-

249

Class A7

Notes

31 July 2024

4.88%

550

(8)

6

548

546

Class A8

Notes

31 July 2027

5.50%

325

(3)

1

323

323

Class A9

Notes

31 July 2028

3.25%

270

(4)

1

267

266

Class A10 Notes

31 July 2029

7.38%

250

(2)

-

248

-

Class B3

Notes

31 January

2026

6.50%

280

(10)

4

274

272

5.59%

2,175

(28)

13

2,160

2,156

The Company’s borrowings are presented in current and non-current liabilities as below:

2023

£m

2022

£m

Current

Borrowings

-

-

Non-current

Borrowings

2,160

2,156

2,160

2,156

At 31 January 2023 there are no current borrowings.

At 31 January 2023, all borrowings have fixed interest rates. The weighted average interest rate for all

borrowings of 5.59% has been calculated using the interest rate and principal values on 31 January

2023.

On 13 July 2022 AA Bond Co Limited issued £250m of Class A10 Notes at an interest rate of 7.38%.

£2m of issuance fees associated with the issue of the Class A10 Notes were capitalised and will be

amortised over the term of the debt up to the date of maturity. The proceeds of the issuance of the

Class A10 Notes were used to redeem the Class A6 Notes. The A6 redemption was done at a make-

whole premium of £1m and was completed on 14 July 2022.

AA BOND CO LIMITED

NOTES TO THE FINANCIAL STATEMENTS (continued)

22

11

BORROWINGS (continued)

In order to show the Group net borrowings, the Notes and the issue costs have been offset. Issue costs

are shown net of any premium on the issue of borrowings. Interest rate swaps are recognised in the

statement of financial position at fair value at the period end.

All of the Class A Notes are secured by first ranking security in respect of the undertakings and assets

of AA Intermediate Co Limited and its subsidiaries. The Class A facility security over the AA

Intermediate Co Limited group’s assets ranks ahead of the Class B3 Notes. The Class B3 Notes have

first ranking security over the assets of the immediate parent undertaking of the AA Intermediate Co

Limited group, AA Mid Co Limited. AA Mid Co Limited can only pay a dividend when certain Net Debt

to debt covenant EBITDA and cash flow criteria are met.

Any voluntary early repayments of the Class A Notes would incur a make-whole payment of all interest

due to the expected maturity date, although most classes of Notes can be settled without penalty within

a period before the expected maturity date. For the Class A7 Notes this period is three months, for the

Class A8 Notes, Class A9 Notes and Class A10 Notes this period is six months. Any voluntary

repayment on the Class B3 Notes would be made at a fixed premium until 31 January 2025 after which

there would be no premium to pay on redemption. No redemption of the Class B3 Notes occurred during

the period.

All of the Group loan Notes are listed on the Irish Stock Exchange plc, trading as Euronext Dublin.

In order to comply with the requirements of the Class A Notes, the Group is required to maintain the

Class A free cash flow to debt service ratio in excess of 1.35x. The actual Class A free cash flow to

debt service ratio as at 31 January 2023 was 2.9x (2022: 3.1x).

The Class A Notes only permit the release of cash from the AA Intermediate Co Limited group of

companies providing the Senior Leverage ratio, after payment, is less than 5.5x and providing there is

sufficient excess cash flow to cover the payment. The actual Senior Leverage ratio as at 31 January

2023 was 5.8x (2022: 6.2x). The Class B3 Notes restrictions only permit the release of cash providing

a number of criteria are met including that the Fixed Charge Coverage ratio after payment is more than

2:1 and providing that the aggregate payments do not exceed 50% of the accumulated consolidated

net income. The actual Fixed Charge Coverage ratio at 31 January 2023 was 2.6x (2022: 2.7x).

The Class A and Class B3 Notes therefore place restrictions on the Group’s ability to upstream cash

from the key trading companies to pay external dividends and finance activities unconstrained by the

restrictions embedded in the debts.

On 13 July 2022, S&P Global Ratings reaffirmed the credit rating of the Group’s Class A Notes at BBB-

and the Class B3 Notes at B+. In February 2023, further changes were made to the Group’s financing

profile. See note 37 for further details.

Fair value

The Company’s borrowings are financial liabilities with carrying values and the difference between the

carrying values and fair values is shown below. The fair value is measured using quoted market prices

in an actively traded market for identical assets or liabilities (falling under the ‘Level 1’ fair value

category).

2023

£m

2022

£m

Loan notes

Carrying value

2,160

2,156

Fair value measurement using quoted market prices

2,022

2,274

AA BOND CO LIMITED

NOTES TO THE FINANCIAL STATEMENTS (continued)

23

12

FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Company’s principal financial liabilities comprise borrowings as well as trade and other payables.

The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s

principal financial are other receivables.

The Company is exposed to market risk, credit risk, and liquidity risk. The Company’s senior

management oversees the management of these risks, supported by the Group Treasury function. The

Group Treasury function ensures that the Company’s financial risks are governed by appropriate

policies and procedures and that financial risks are identified, measured and managed in accordance

with the Company’s policies and risk objectives. All derivative activities are for risk management

purposes and are carried out by the Group Treasury function. It is the Company’s policy not to trade in

derivatives for speculative purposes.

The Directors review and agrees policies for managing each of these risks, which are summarised

below.

Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate

because of changes in prices set by the market. The key market risk that the Company is exposed to

is future interest rate rises with respect to borrowings. The Company has policies and limits approved

by the Board for managing the interest rate risk exposure. The Company’s policy is to fully hedge all of

its exposure to variable interest rates.

Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or

customer contract, leading to a financial loss. The Company is exposed to credit risk in relation to its

financial assets and other receivables.

The Company’s maximum exposure to credit risk for the components of the statement of financial

position at each reporting date is the carrying amount.

Liquidity risk

Liquidity risk is the risk that the Company either does not have available sufficient financial resources

to enable it to meet its obligations as they fall due, or can secure them only at excessive cost. The

Company’s liquidity is managed through the IBLA agreement with AA Senior Co Limited.

13

CALLED UP SHARE CAPITAL

2023

2022

Allotted, called up and fully paid

£

£

2 (2022: 2) ordinary shares of £1

2

2

The Company did not pay any dividends in the year (2022: £nil). The Company did not propose a final

dividend (2022: £nil).