Joan Burton (Dublin West, Labour)
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Question 157: To ask the Minister for Finance the value of the State holding, through the National Pension Reserve Fund, in a bank (details supplied); the net expenditure by the NPRF to acquire this holding; the nominal change in value of this holding since the conversion of 1.036 billion preference shares into ordinary shares at a price of €1.80 per ordinary share; the treatment in the public finances, and calculation of general Government deficit and debt, of any such nominal change in the value of the NPRF investment; and if he will make a statement on the matter. [22951/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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On 25 April 2010, having consulted the Governor of the Central Bank and the Regulatory Authority and having decided that it is required in the public interest to prevent potential serious damage to the financial system in the State and to ensure the continued stability of that system. I issued directions to the National Pensions Reserve Fund Commission to convert part of its €3.5 billion holding of Bank of Ireland preference stock into ordinary stock as part of the capital raising exercise announced by the bank on 26 April. The details of the transaction are as follows:

Placing/Conversion (Step 1) The National Pensions Reserve Fund (NPRF) has subscribed for 576 million units of ordinary stock. In exchange for this stock the NPRF converted 1,036 million units of preference stock at their issue price of €1.00 into ordinary stock. Warrant cancellation The NPRF has received €491 million in cash in return for the cancellation of the warrants issued in conjunction with the preference stock.

Rights Issue (Step 2) The NPRF will participate in the Bank of Ireland rights issue taking up the full allocation to which it is entitled at a price of €0.55 per unit of ordinary stock. In order to exercise the rights, the NPRF will convert a further 627 million units of its preference stock into ordinary stock.

Fees The NPRF will receive €51 million in fees for its participation in the transaction.

Change in dividend rate on preference stock The dividend rate on the remaining preference stock increases from 8.00% to 10.25%.

The transaction involves no new investment by the NPRF in Bank of Ireland and is being funded entirely via conversion of preference stock. Including the cancellation of the warrants issued in conjunction with the preference stock and fees, the NPRF will receive total cash income of €542m from Bank of Ireland for participation in the transaction.

On completion of the transaction, the NPRF's directed investment in Bank of Ireland will consist of: 1,900 million units of ordinary stock valued at their current market price (36% of the bank's ordinary stock in issue including the bonus stock issued to the NPRF in lieu of a cash dividend on the preference stock in February 2010); and 1,837 million units of preference stock held at their issue price of €1.00 paying an annual dividend of 10.25%.

The return on the investment comprises dividends received on the ordinary and preference stock, changes in the market value of the ordinary stock and receipts in respect of the cancellation of the warrants and transaction fees. Bank of Ireland's share price has been volatile since the announcement of the transaction. It is not uncommon for the volatility of a stock to increase during a rights issue period. Additionally, market volatility globally has increased in recent weeks.

The NPRF Commission will continue to publish information on the overall return to and value of the investments it holds at my direction in credit institutions in its quarterly Performance and Portfolio Updates.

As regards the treatment of changes in the value of the NPRF, the contribution of the NPRF to the General Government Balance is made up of the interest and dividends which it earns on its investments, less any costs associated with the administration of the fund. Any changes in the nominal values of investments held by the NPRF are not considered to be income or expenditure, as they affect the value of the stock of NPRF assets and do not have an impact on the General Government Balance. The payment to Government of ordinary shares in lieu of a dividend is considered as income in national accounting terms and, therefore, improves the General Government Balance by the same amount as if the Fund had received the dividend payment.

Joan Burton (Dublin West, Labour)
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Question 158: To ask the Minister for Finance the value of the National Pension Reserve Fund; the total cash it has in hand; and its total holdings of near cash financial instruments. [22952/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The National Pensions Reserve Fund was established on 2 April 2001 under the National Pensions Reserve Fund Act 2000 with the objective of meeting as much as possible of the cost to the Exchequer of social welfare pensions and public service pensions to be paid from the year 2025 until at least 2055.

The National Pensions Reserve Fund Commission – who control and manage the Fund – publish a report on the performance of the NPRF at the end of each quarter on the Commission's website www.nprf.ie/home.html. The most recent such report, as of 31 March 2010, valued the Fund at €24.5 billion. A breakdown of the Fund by asset class as detailed in the report is set out as follows.

The Discretionary Portfolio comprises investments made by the Commission under the Fund's investment policy as set out in the National Pensions Reserve Fund Act 2000.

The transfer of assets from university pension funds took place on 31 March 2010 under the Financial Measures (Miscellaneous Provisions) Act 2009, which provides for the meeting of future pension liabilities on a pay-as-you-go basis by the relevant bodies.

The Directed Investments comprise preference share investments in Bank of Ireland and Allied Irish Banks plc and warrants which give an option to purchase up to 25% of the enlarged ordinary share capital of each bank following exercise of the warrants. Dividends on preference shares received in the form of ordinary shares are also included. The investments were made by the Commission for the purposes of bank recapitalisation at the direction of the Minister for Finance under the Investment of the National Pensions Reserve Fund and Miscellaneous Provisions Act 2009. The preference share investments are held at cost. While the preference shares pay a non-cumulative fixed dividend of 8%, income on the preference shares is not recognised until declaration of the dividend by the bank concerned. The Minister for Finance directed the NPRF Commission on 25 April 2010 to convert part of its preference shareholding in Bank of Ireland into ordinary stock as part of the bank's capital-raising exercise but this is not reflected in the figures above which relate to the position of the NPRF at 31 March 2010.