MERCURIO MORTGAGE FINANCE S.R.L.

Transcription

1 Prospectus dated 27 January 2012 MERCURIO MORTGAGE FINANCE S.R.L. (incorporated with limited liability under the laws of the Republic of Italy) 7,005,000,000 Class A Residential Mortgage Backed Floating Rate Notes Series due 27 January 2061 Issue Price: 100 per cent This document constitutes a Prospetto Informativo for the purposes of article 2, sub-section 3 of Italian Law number 130 of 30 April 1999 and a "Prospectus" prepared in accordance with the Directive 2003/71/EC (the "Prospectus Directive") for the purpose of article 5 of the Prospectus Directive in connection with the application for the Rated Notes to be admitted to the official list of the Irish Stock Exchange (the "Prospectus"). The Prospectus has been approved by the Central Bank of Ireland, as competent authority under Directive 2003/71/EC. The Central Bank of Ireland only approves this Prospectus as meeting the requirements imposed under the Irish and EU law pursuant to the Directive 2003/71/EC. Such approval relates only to 7,005,000,000 Class A Residential Mortgage Backed Floating Rate Notes Series due 27 January 2061 (the "Rated Notes") which are to be admitted to trading on a regulated market for the purposes of Directive2004/39/EC and/or which are to be offered to the public in any Member State of the European Economic Area. Application has been made to the Irish Stock Exchange for the Rated Notes of Mercurio Mortgage Finance S.r.l., a società a responsabilità limitata organised under the laws of the Republic of Italy, (the "Issuer") to be admitted to the Official List and trading on its regulated market. No application has been made to list the 844,952,000 Class J Residential Mortgage Backed Variable Rate Notes Series due 27 January 2061 (the "Junior Notes" and, together with the Rated Notes, the "Notes") on any stock exchange. The Junior Notes are not being offered pursuant to this Prospectus, nor will this Prospectus be approved by the Central Bank of Ireland in relation to the Junior Notes. The Notes will be issued on the Issue Date. The principal source of payment of interest on the Notes, of repayment of principal on the Notes and of payment of Premium in respect of the Junior Notes will be the collections and recoveries made in respect of monetary claims and connected rights arising out of residential mortgage loan agreements entered into by Barclays Bank PLC, Italian branch in the course of its business, and purchased by the Issuer from the Originator pursuant to the Receivables Purchase Agreement. The Issuer has purchased the Portfolio on 16 January By virtue of the operation of article 3 of the Securitisation Law and the Transaction Documents, the Issuer's right, title and interest in and to the Portfolio and to any sums collected therefrom will be segregated from all other assets of the Issuer (including any other portfolios of receivables purchased by the Issuer pursuant to the Securitisation Law) and any cash-flow deriving therefrom (to the extent identifiable) will be available, both prior to and following a winding up of the Issuer, to satisfy the obligations of the Issuer to the Noteholders and to the Other Issuer Creditors or to any other creditors of the Issuer in respect of any costs, fees and expenses in relation to the Securitisation, in priority to the Issuer's obligations to any other creditors. Interest on the Notes will be payable by reference to successive Interest Periods. Interest on the Notes will accrue on a daily basis and, prior to the delivery of a Trigger Notice to the Issuer, will be payable in arrears in euro on January, April, July and October in each year (or, if any such day is not a Business Day, on the immediately following Business Day). The rate of interest applicable to the Rated Notes for each Interest Period shall be the rate offered in the Euro-Zone inter-bank market for three month deposits in Euro (so long as no Trigger Notice has been served and except in respect of the Initial Interest Period where an interpolated interest rate based on 3 and 4 months deposits in Euro will be substituted to three months Euribor) (as determined in accordance with Rated Notes Condition 7 (Interest)), plus a margin of 0.30% per annum. The Notes are expected, on issue, to be rated "Aaa (sf)" by Moody's and "AAA(sf)" by Fitch. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, revision or withdrawal at any time by any one or all of the Rating Agencies. The credit rating applied for in relation to the Rated Notes will be issued by the Rating Agencies each of which is established in the European Union and is registered under Regulation (EU) No 1060/2009 (the "CRA Regulation"), as resulting from the list of registered credit rating agencies (reference number 2011/247) published on 31 October 2011 by the European Securities and Markets Authority (ESMA).

2 As at the date of this Prospectus, payments of interest and other proceeds in respect of the Notes may be subject to withholding or deduction for or on account of Italian substitute tax, in accordance with Italian Legislative Decree number 239 of 1 April 1996, as amended and supplemented from time to time, and any related regulations. Upon the occurrence of any withholding or deduction for or on account of tax from any payments under the Notes, neither the Issuer nor any other person shall have any obligation to pay any additional amount(s) to any holder of Notes. For further details see the section entitled "Taxation". The Notes will be limited recourse obligations solely of the Issuer. In particular, the Notes will not be obligations or responsibilities of, or guaranteed by, any of the Originator, the Servicer, the Representative of the Noteholders, the Calculation Agent, the Account Bank, the Collection Account Bank, the GIC Account Bank, the Expenses Loan Provider, the Subordinated Loan Provider, the Principal Paying Agent, the Swap Counterparty, the Issuer Corporate Services Provider, the Listing Agent, the Sole Arranger, the Sole Lead Manager, or the Quotaholders. Furthermore, none of such persons accepts any liability whatsoever in respect of any failure by the Issuer to make payment of any amount due on the Notes. As of the Issue Date, the Notes will be held in dematerialised form on behalf of the ultimate owners by Monte Titoli for the account of the relevant Monte Titoli Account Holders. Monte Titoli shall act as depository for Euroclear and Clearstream. The Notes will at all times be evidenced by book-entries in accordance with the provisions of the Italian Legislative Decree number 58 of 24 February 1998 and the Joint Regulation, as amended and supplemented. No physical document of title will be issued in respect of the Notes. Before the relevant maturity date, the Notes will be subject to mandatory and/or optional redemption in whole or in part in certain circumstances (as set out in Condition 8 (Redemption, Purchase and Cancellation)). Unless previously redeemed in full in accordance with the Conditions, the Notes will be redeemed on the Final Maturity Date. Save as provided in the Conditions, the Notes will start to amortise on the First Payment Date falling on 28 April 2012, subject to there being sufficient Principal Available Funds and in accordance with the Priority of Payments for application of the Principal Available Funds. Capitalised words and expressions in this Prospectus shall, except so far as the context otherwise requires, have the meanings set out in the section entitled "Glossary". For a discussion of certain risks and other factors that should be considered in connection with an investment in the Notes, see the section entitled "Risk Factors and Special Considerations". Sole Arranger and Sole Lead Manager BARCLAYS

3 None of the Issuer, the Sole Arranger, the Sole Lead Manager or any other party to the Transaction Documents other than the Originator has undertaken or will undertake any investigation, searches or other actions to verify the details of the Receivables sold by the Originator to the Issuer, nor has any of the Issuer, the Sole Lead Manager or any other party to the Transaction Documents undertaken, nor will they undertake, any investigations, searches, or other actions to establish the creditworthiness of any Debtor. In the Warranty and Indemnity Agreement the Originator has given certain representations and warranties to the Issuer in relation to, inter alia, the Receivables, the Mortgage Loan Agreements and the Debtors. The Issuer accepts responsibility for the information contained in this Prospectus. To the best of the knowledge and belief of the Issuer (which has taken all reasonable care to ensure that such is the case), the information for which it takes responsibility is in accordance with the facts and does not contain any omission likely to affect the import of such information. Barclays Bank PLC accepts responsibility for the information included in this Prospectus in the sections entitled "The Portfolio", "The Originator, the Servicer, the Calculation Agent, the Swap Counterparty, the GIC Account Bank, the Collection Account Bank, the Subordinated Loan Provider and the Expenses Loan Provider", "Credit and Collection Policy" and "Description of the Transaction Documents - The Servicing Agreement" and any other information contained in this Prospectus relating to itself, the Receivables and the Mortgage Loan Agreements. To the best of the knowledge and belief of Barclays Bank PLC (which has taken all reasonable care to ensure that such is the case), such information is in accordance with the facts and does not contain any omission likely to affect the import of such information. The Bank of New York Mellon (Luxembourg) S.A., Italian branch accepts responsibility for the information included in this Prospectus in the section entitled "The Account Bank and the Principal Paying Agent". To the best of the knowledge and belief of The Bank of New York Mellon (Luxembourg) S.A., Italian branch (which has taken all reasonable care to ensure that such is the case), such information is in accordance with the facts and does not contain any omission likely to affect the import of such information. No person has been authorised to give any information or to make any representation not contained in this Prospectus and, if given or made, such information or representation must not be relied upon as having been authorised by, or on behalf of, the Sole Arranger, the Sole Lead Manager, the Representative of the Noteholders, the Issuer, the Quotaholders, Barclays Bank PLC (in any capacity) or any other party to the Transaction Documents. Neither the delivery of this Prospectus nor any sale or allotment made in connection with the offering of any of the Notes shall, under any circumstances, constitute a representation or imply that there has not been any change or any event reasonably likely to involve any change, in the condition (financial or otherwise) of the Issuer or Barclays Bank PLC or the information contained herein since the date hereof, or that the information contained herein is correct as at any time subsequent to the date of this Prospectus. The Notes constitute direct limited recourse obligations of the Issuer. By operation of Italian law, the Issuer's right, title and interest in and to the Portfolio will be segregated from all other assets of the Issuer and amounts deriving therefrom will only be available, both prior to and following a winding up of the Issuer, to satisfy the obligations of the Issuer to the holders of the Notes and to pay any costs, fees and expenses payable to the Originator, the Servicer, the Representative of the Noteholders, the Calculation Agent, the Issuer Corporate -i-

4 Services Provider, the Subordinated Loan Provider, the Expenses Loan Provider, the Principal Paying Agent, the Collection Account Bank, the GIC Account Bank, the Account Bank and the Swap Counterparty and to any third party creditor in respect of any costs, fees or expenses incurred by the Issuer to such third party creditors in relation to the Securitisation. Amounts derived from the Receivables will not be available to any other creditor of the Issuer. The Noteholders agree that the Issuer Available Funds will be applied by the Issuer in accordance with the relevant priority of payments as outlined in Condition 6 (Priority of Payments). The distribution of this Prospectus and the offer, sale and delivery of the Notes in certain jurisdictions may be restricted by law. Persons into whose possession this Prospectus (or any part of it) comes are required by the Issuer and the Sole Lead Manager to inform themselves about, and to observe, any such restrictions. Neither this Prospectus nor any part of it constitutes an offer, or may be used for the purpose of an offer to sell any of the Notes, or a solicitation of an offer to buy any of the Notes, by anyone in any jurisdiction or in any circumstances in which such offer or solicitation is not authorised or is unlawful. The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended, or any other state securities laws and are subject to U.S. tax law requirements. Subject to certain exceptions, the Notes may not be offered or sold within the United States or for the benefit of U.S. persons (as defined in Regulation S under the Securities Act). The Notes may not be offered or sold directly or indirectly, and neither this Prospectus nor any other offering circular or any prospectus, form of application, advertisement, other offering material or other information relating to the Issuer or the Notes may be issued, distributed or published in any country or jurisdiction (including the Republic of Italy, the Republic of Ireland, the United Kingdom and the United States), except under circumstances that will result in compliance with all applicable laws, orders, rules and regulations. For a further description of certain restrictions on offers and sales of the Notes and the distribution of this Prospectus see the section entitled "Subscription, Sale and Selling Restrictions" below. Certain monetary amounts and currency conversions included in this Prospectus have been subject to rounding adjustments; accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which preceded them. All references in this Prospectus to "euro", "cents" and " " are to the single currency introduced in the member states of the European Community which adopted the single currency in accordance with the Treaty of Rome of 25 March 1957, as amended by, inter alia, the Single European Act 1986, the Treaty of European Union of 7 February 1992, establishing the European Union and the European Council of Madrid of 16 December 1995; references to "Italy" are to the Republic of Italy; references to laws and regulations are to the laws and regulations of Italy; and references to "billions" are to thousands of millions. The language of this Prospectus is English. Any foreign language text that is included with or within this document has been included for convenience purposes only and does not form part of the Prospectus. -ii-

5 Index Section Page TRANSACTION DIAGRAM... 1 TRANSACTION SUMMARY INFORMATION... 3 RISK FACTORS AND SPECIAL CONSIDERATIONS THE PORTFOLIO THE ORIGINATOR, THE SERVICER, THE CALCULATION AGENT, THE SWAP COUNTERPARTY, THE GIC ACCOUNT BANK, THE COLLECTION ACCOUNT BANK, THE SUBORDINATED LOAN PROVIDER AND THE EXPENSES LOAN PROVIDER CREDIT AND COLLECTION POLICY THE ISSUER THE ACCOUNT BANK AND THE PRINCIPAL PAYING AGENT USE OF PROCEEDS DESCRIPTION OF THE TRANSACTION DOCUMENTS THE ACCOUNTS EXPECTED AVERAGE DURATION OF THE NOTES TERMS AND CONDITIONS OF THE RATED NOTES SELECTED ASPECTS OF ITALIAN LAW TAXATION SUBSCRIPTION, SALE AND SELLING RESTRICTIONS GENERAL INFORMATION GLOSSARY iii-

6 TRANSACTION DIAGRAM The following is a diagram showing the structure of the Securitisation as at the Issue Date. It is intended to illustrate to prospective noteholders a scheme of the principal transactions contemplated in the context of the Securitisation on the Issue Date. It is not intended to be exhaustive and prospective noteholders should also read the detailed information set out elsewhere in this document. -1-

7 DOCUMENTS INCORPORATED BY REFERENCE The following documents shall be deemed to be incorporated by reference in, and form part of, this Prospectus: (i) the audited financial statements of the Issuer as at 31 December 2010; (ii) Auditor's report on the 2010 financial statements; (iii) the audited financial statements of the Issuer as at 31 December 2009; (iv) Auditor's report on the 2009 financial statements, and shall be made available by the Issuer as further set out in paragraph (8) in "General Information" below. Any information not listed in the cross reference table below but included in the documents incorporated by reference is given for information purposes only. This Prospectus will be available on the Irish Stock Exchange's web site. Document Information contained Page Financial statement 2010 Balance sheet as at 31 December 2010 Income statement as at 31 December 2010 Accounting policies and explanatory notes Auditor's report 2010 Auditor's report on the 2007 financial statement Financial statement 2009 Balance sheet as at 31 December 2009 Income statement as at 31 December 2009 Accounting policies and explanatory notes Auditor's report 2009 Auditor's report on the 2009 financial statement -2-

8 TRANSACTION SUMMARY INFORMATION The following information is a summary of the transactions and assets underlying the Notes and is qualified in its entirety by reference to the more detailed information presented elsewhere in this Prospectus and in the Transaction Documents. 1. THE PRINCIPAL PARTIES Issuer Originator Servicer Representative of the Noteholders Cash Manager Calculation Agent Mercurio Mortgage Finance S.r.l., a società a responsabilità limitata incorporated under the laws of the Republic of Italy, having its registered office at Foro Buonaparte, 70, Milan, Italy, fiscal code and enrolment with the companies register of Milan number , enrolled under number in the register of special purpose vehicles (elenco delle società veicolo) held by the Bank of Italy pursuant to article 4 of the Bank of Italy's regulation dated 29 April 2011, having as its sole corporate object the performance of securitisation transactions under the Securitisation Law. Barclays Bank PLC, a bank incorporated under the laws of England and Wales, having its registered office at 1 Churchill Place, London E14 5HP, United Kingdom, acting through its Italian branch, with offices at Via della Moscova, 18, Milan, Italy, fiscal code and enrolment with the companies register of Milan number , enrolled under number 4862 with the register of banks held by the Bank of Italy pursuant to article 13 of the Consolidated Banking Act. Barclays Bank PLC, Italian branch. The Servicer will act as such pursuant to the Servicing Agreement. BNY Mellon Corporate Trustee Services Limited, a company whose principal place of business is at One Canada Square, Canary Wharf, London E14 5AL, United Kingdom. The Representative of the Noteholders will act as such pursuant to the Subscription Agreement, the Intercreditor Agreement and the Deed of Charge. The Bank of New York Mellon, acting through its London branch, whose principal place of business is at One Canada Square, Canary Wharf, London E14 5AL, United Kingdom. The Cash Manager will act as such pursuant to the GIC Agreement. Barclays Bank PLC, Italian branch. The Calculation Agent will act as such pursuant to the Cash -3-

9 Allocation, Management and Payments Agreement. Collection Account Bank Account Bank GIC Account Bank Barclays Bank PLC, Italian branch. The Collection Account Bank will act as such pursuant to the Servicing Agreement and the Cash Allocation, Management and Payments Agreement. The Bank of New York Mellon, (Luxembourg) S.A., Italian branch, a bank incorporated under the laws of Grand Duchy of Luxembourg, having its registered office at 2-4 rue Eugène Ruppert, L-2453, Luxembourg, Grand Duchy of Luxembourg, acting through its Italian branch with offices at Via Carducci, 31, Milan, Italy. The Account Bank will act as such pursuant to the Cash Allocation, Management and Payments Agreement. Barclays Bank PLC. The GIC Account Bank will act as such pursuant to the GIC Agreement. Principal Paying Agent The Bank of New York Mellon, (Luxembourg) S.A., Italian branch. The Principal Paying Agent will act as such pursuant to the Cash Allocation, Management and Payments Agreement. Subordinated Loan Provider Barclays Bank PLC, Italian branch. The Subordinated Loan Provider will act as such pursuant to the Subordinated Loan Agreement. Expenses Loan Provider Swap Counterparty Issuer Corporate Services Provider Quotaholders Barclays Bank PLC, Italian branch. The Expenses Loan Provider will act as such pursuant to the Expenses Loan Agreement. Barclays Bank PLC, Italian branch. The Swap Counterparty will act as such pursuant to the Swap Agreement. TMF Management Italy S.r.l., a società a responsabilità limitata incorporated under the laws of the Republic of Italy, having its registered office at Foro Buonaparte, 74, Milan, Italy, fiscal code and enrolment with the companies register of Milan number The Issuer Corporate Services Provider will act as such pursuant to the Issuer Corporate Services Agreement. Stichting Tevere, a Dutch foundation (stichting) incorporated under the laws of The Netherlands, having its registered office at Parnassustoren, Locatellikade 1, 1076 AZ, Amsterdam, The -4-

10 Netherlands, enrolled with the chamber of commerce of Amsterdam under number Stichting Tirreno, a Dutch foundation (stichting) incorporated under the laws of The Netherlands, having its registered office at Parnassustoren, Locatellikade 1, 1076 AZ, Amsterdam, The Netherlands, enrolled with the chamber of commerce of Amsterdam under number Sole Arranger Listing Agent Sole Lead Manager Barclays Bank PLC, Italian branch. The Bank of New York Mellon (Ireland) Limited with offices at Hanover House, Windmill Lane, Dublin 2, Ireland. Barclays Bank PLC, Italian branch. 2. THE PRINCIPAL FEATURES OF THE NOTES The Rated Notes The Junior Notes Issue price The 7,005,000,000 Class A Residential Mortgage Backed Floating Rate Notes Series due 27 January 2061 will be issued by the Issuer on the Issue Date. The 844,952,000 Class J Residential Mortgage Backed Variable Rate Notes Series due 27 January 2061 will be issued by the Issuer on the Issue Date. The Notes will be issued at the issue price of 100 per cent of their principal amount upon issue. Interest on the Notes The Rated Notes will bear interest on their Principal Amount Outstanding from and including the Issue Date at 0.30% per annum above Euribor for 3 months deposits in Euro (except in respect of the Initial Interest Period where an interpolated interest rate based on interest rates for 3 and 4 months deposits in Euro will be substituted to Euribor for three months deposits in Euro). The Junior Notes will bear interest on their Principal Amount Outstanding from and including the Issue Date at a rate equal to Euribor for 3 months deposits in Euro (except in respect of the Initial Interest Period where an interpolated interest rate based on interest rates for 3 and 4 months deposits in Euro will be substituted to Euribor for three months deposits in Euro). -5-

11 Interest in respect of the Notes will accrue on a daily basis and is payable in arrears in euro on each Payment Date in accordance with the Priority of Payments. The first payment of interest in respect of the Notes will be due on the Payment Date falling in April 2012 in respect of the period from (and including) the Issue Date to (but excluding) such date. Premium A Premium may be payable on the Junior Notes on each Payment Date in accordance with the Junior Notes Conditions. The Premium payable on the Junior Notes on each Payment Date will be determined by reference to the residual Interest Available Funds after satisfaction of the items ranking in priority to the Premium on the Junior Notes in accordance with the applicable Priority of Payments. Junior Notes Conditions Except for Junior Notes Conditions 3.1 (Denomination), 7 (Interest and Premium) and 8.12 (Early redemption through the disposal of the Portfolio following full redemption of the Rated Notes) the Junior Notes Conditions are the same, mutatis mutandis, as the Rated Notes Conditions. Form and denomination Status and subordination The denomination of the Rated Notes and the Junior Notes will be, respectively, 100,000 and 1,000. The Notes will be held in dematerialised form on behalf of the beneficial owners, until redemption or cancellation thereof, by Monte Titoli for the account of the relevant Monte Titoli Account Holders. The Notes have been accepted for clearance by Monte Titoli with effect from the Issue Date. The Notes will at all times be in book entry form and title to the Notes will be evidenced by book entries in accordance with the provision of article 28 of Decree 213 and the Joint Regulation, as subsequently amended and supplemented from time to time. No physical document of title will be issued in respect of the Notes. Both prior to and following the delivery of a Trigger Notice, payments of interest on the Rated Notes will at all times rank in priority to payments of interest and Premium on the Junior Notes Both prior to and following the delivery of a Trigger Notice, payments of principal on the Rated Notes will at all times rank in priority to payments of -6-

12 principal on the Junior Notes Withholding on the Notes Mandatory Redemption Optional redemption As at the date of this Prospectus, payments of interest and other proceeds under the Notes may be subject to withholding or deduction for or on account of Italian substitute tax (imposta sostitutiva), in accordance with Decree 239. Upon the occurrence of any withholding or deduction for or on account of tax from any payments under the Notes, neither the Issuer nor any other person shall have any obligation to pay any additional amount(s) to any holder of the Notes. The Notes will be subject to mandatory redemption in full (or in part pro rata) on each Payment Date in accordance with the Conditions, in each case if on such dates there are sufficient Principal Available Funds which may be applied for this purpose in accordance with the Priority of Payments. Provided that no Trigger Notice has been served on the Issuer, on any Payment Date falling on or after the Clean Up Option Date, the Issuer may redeem the Notes (in whole but not in part) at their Principal Amount Outstanding (plus any accrued but unpaid interest thereon), in accordance with the Principal Priority of Payments, subject to the Issuer: (i) (ii) giving not more than 60 days and not less than 30 days' notice to the Representative of the Noteholders and to the Noteholders of its intention to redeem the Notes; and delivering, prior to the notice referred to in paragraph (i) above being given, to the Representative of the Noteholders a certificate duly signed by the Issuer to the effect that it will have the necessary funds (free and clear of any Security Interest of any third party) on such Payment Date to discharge all of its outstanding liabilities in respect of the Notes and any other payment ranking in priority to or pari passu with the Notes in accordance with the Priority of Payments. Redemption for tax reasons Upon the imposition, at any time, (i) of any withholding or deduction for or on account of tax (other than a Decree 239 Deduction) from any payments to be made to the Noteholders or pursuant to the Swap Agreement, or (ii) of any taxes, duties, -7-

13 assessments or governmental charges of whatever nature on the Portfolio (including on amounts payable to the Issuer in respect of the Receivables) by the Republic of Italy or any political sub-division thereof or any authority thereof or therein, and provided that the Issuer has certified and produced evidence acceptable to the Representative of the Noteholders that it will have the necessary funds (not subject to the interests of any person) to discharge all of its outstanding liabilities in respect of the Notes and any amount required to be paid under the Conditions and the Intercreditor Agreement in priority to or pari passu with the Notes, the Issuer may, subject to as provided in the Conditions, redeem, on the next succeeding Payment Date, in whole (but not in part) the Notes at their Principal Amount Outstanding together with accrued but unpaid interest up to and including the relevant Payment Date. Final Maturity Date Segregation of Issuer's Rights Unless previously redeemed in full, the Notes are due to be repaid in full at their Principal Amount Outstanding on the Final Maturity Date. The Notes, to the extent not redeemed in full on their Final Maturity Date, shall be cancelled. The Notes have the benefit of the provisions of article 3 of the Securitisation Law, pursuant to which the Portfolio is segregated by operation of law from the Issuer's other assets. Both before and after a winding up of the Issuer, amounts deriving from the Portfolio will be exclusively available for the purpose of satisfying the obligations of the Issuer to the Noteholders and to the Other Issuer Creditors or to any other creditors of the Issuer in respect of any costs, fees and expenses in relation to the Securitisation. See for further details "Selected Aspects of Italian Law - Ring-fencing of the assets". The Portfolio may not be seized or attached in any form by creditors of the Issuer other than the Noteholders, until full discharge by the Issuer of its payment obligations under the Notes or cancellation thereof. Pursuant to the terms of the Intercreditor Agreement and the Mandate Agreement, the Issuer has empowered the Representative of the Noteholders, following the delivery of a Trigger Notice or upon failure by the Issuer to exercise its rights under the Transaction Documents within 10 days from notification of such failure, to exercise all -8-

14 the Issuer's rights, powers and discretion under the Transaction Documents taking such action in the name and on behalf of the Issuer as the Representative of the Noteholders may deem necessary to protect the interests of the Issuer, the Noteholders and the Other Issuer Creditors in respect of the Portfolio and the Issuer's Rights. Italian law governs the delegation of such power. In addition, security over certain rights of the Issuer arising out of certain Transaction Documents will be granted by the Issuer in favour of the Representative of the Noteholders pursuant to the Deed of Pledge and the Deed of Charge, for the benefit of itself, the Noteholders and the Other Issuer Creditors. Trigger Events If any of the following events occurs: (i) Non-payment: The Issuer fails to pay any amount of principal in respect of the Rated Notes within five days of the due date for payment of such principal or fails to pay any amount of interest in respect of the Rated Notes within three days of the due date for payment of such interest; (ii) Breach of other obligations: The Issuer defaults in the performance or observance of any of its obligations under or in respect of the Notes or any of the Transaction Documents to which it is a party (other than any obligation to pay principal or interest in respect of the Notes) and such default (a) is in the opinion of the Representative of the Noteholders, incapable of remedy or (b) being a default which is, in the opinion of the Representative of the Noteholders, capable of remedy remains unremedied for 30 days after the Representative of the Noteholders has given written notice of such default to the Issuer requiring the same to be remedied; (iii) Insolvency of the Issuer: an Insolvency Event occurs with respect to the Issuer; or -9-

15 (iv) Unlawfulness: it is or will become unlawful for the Issuer to perform or comply with any of its obligations under or in respect of the Notes or any of the Transaction Documents to which it is a party, then the Representative of the Noteholders, (1) in the case of a Trigger Event under item (i) above, shall; and (2) in the case of a Trigger Event under items (ii), (iii) or (iv) above, if so directed by an Extraordinary Resolution of the Noteholders, shall, in each case subject to being indemnified and/or secured to its satisfaction, serve a Trigger Notice on the Issuer declaring the Notes to be due and repayable, whereupon they shall become so due and repayable, following which all payments of principal, interest and other amounts due in respect of the Notes shall be made according to the order of priority set out in the Conditions and described in "Priority of Payments following the delivery of a Trigger Notice" below and on such dates as the Representative of the Noteholders may determine. Non petition Only the Representative of the Noteholders may pursue the remedies available under the general law or under the Transaction Documents to obtain payment of the Obligations or enforce the Security and no Noteholder shall be entitled to proceed directly against the Issuer to obtain payment of the Obligations or to enforce the Security. In particular: (i) (ii) no Noteholder is entitled, otherwise than as permitted by the Transaction Documents, to direct the Representative of the Noteholders to enforce the Security and no Noteholder (nor any person on its behalf, other than the Representative of the Noteholders, where appropriate) is entitled to take any proceedings against the Issuer to enforce the Security; no Noteholder (nor any person on its behalf, other than the Representative of the Noteholders) shall, save as expressly -10-

16 permitted by the Transaction Documents, have the right to take or join any person in taking any steps against the Issuer for the purpose of obtaining payment of any amount due from the Issuer; (iii) (iv) until the date falling one year and one day after the date on which the Notes and any other notes issued in the context of the Previous Securitisations and any further securitisations undertaken by the Issuer have been redeemed in full or cancelled in accordance with their terms and conditions, no Noteholder (nor any person on its behalf, other than the Representative of the Noteholders when so directed by an Extraordinary Resolution of all the Noteholders and then only if the representative of the noteholders of the Previous Securitisations and any further securitisations undertaken by the Issuer, if any, have been so directed by extraordinary resolutions of their respective noteholders in accordance with the relevant transaction documents) shall initiate or join any person in initiating an Insolvency Event in relation to the Issuer; and no Noteholder shall be entitled to take or join in the taking of any corporate action, legal proceedings or other procedure or step which would result in the Priority of Payments not being complied with. Limited recourse obligations of Issuer Notwithstanding any other provision of the Transaction Documents, all obligations of the Issuer to the Noteholders are limited in recourse as set out below: (i) (ii) each Noteholder will have a claim only in respect of the Issuer Available Funds and at all times only in accordance with the Priority of Payments and will not have any claim, by operation of law or otherwise, against, or recourse to, the Issuer's other assets or its contributed capital; sums payable to each Noteholder in respect of the Issuer's obligations to such Noteholder shall be limited to the lesser of (a) the aggregate amount of all sums due and -11-

17 payable to such Noteholder; and (b) the Issuer Available Funds, net of any sums which are payable by the Issuer in accordance with the Priority of Payments in priority to or pari passu with sums payable to such Noteholder; and (iii) if the Servicer has certified to the Representative of the Noteholders that there is no reasonable likelihood of there being any further realisations in respect of the Portfolio or the Security (whether arising from judicial enforcement proceedings, enforcement of the Security or otherwise) which would be available to pay unpaid amounts outstanding under the Transaction Documents and the Representative of the Noteholders has given notice on the basis of such certificate in accordance with Condition 16 (Notices) that there is no reasonable likelihood of there being any further realisations in respect of the Portfolio or the Security (whether arising from judicial enforcement proceedings, enforcement of the Security or otherwise) which would be available to pay amounts outstanding under the Transaction Documents, the Noteholders shall have no further claim against the Issuer in respect of any such unpaid amounts and such unpaid amounts shall be cancelled and deemed to be discharged in full. The Organisation of the Noteholders and the Representative of the Noteholders The Organisation of the Noteholders shall be established upon and by virtue of the issuance of the Notes and shall remain in force and in effect until repayment in full or cancellation of the Notes. Pursuant to the Rules of the Organisation of the Noteholders (attached to the Conditions as an Exhibit), for as long as any Note is outstanding, there shall at all times be a Representative of the Noteholders. The appointment of the Representative of the Noteholders, as legal representative of the Organisation of the Noteholders, is made by the Noteholders subject to and in accordance with the Rules of the Organisation of the Noteholders, except for the initial Representative of the Noteholders appointed at the time of issue of the Notes, which is appointed by the Sole Lead Manager in the Subscription Agreement. Each Noteholder is -12-

18 deemed to accept such appointment. Expected weighted average duration of the Notes The following table shows the weighted average duration and the expected maturity of the Notes and has been prepared based on the characteristics of the Receivables included in the Portfolio, on historical performance and on the following additional assumptions: (i) (ii) (iii) (iv) (v) no Trigger Event occurs in respect of the Notes; repayment of principal under the Notes occurs from the Payment Date falling in April 2012; the right of optional redemption under Condition 8.3 (Redemption, Purchase and Cancellation - Optional redemption) is exercised on any Payment Date falling on or after the Clean Up Option Date; no event under Condition 8.4 (Redemption, Purchase and Cancellation - Optional redemption for taxation reasons) occurs; the Receivables are prepaid at a constant prepayment rate of 7%. Expected weighted average duration (years) Expected Life (years) Expected maturity date 8, January 2030 See for further details "Risk factors and special considerations Expected maturity dates of the Notes" and "Expected average duration of the Notes". Rating The Rated Notes are expected to be rated "Aaa(sf)" by Moody's and "AAA(sf)" by Fitch on the Issue Date. A rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the assigning rating agency. The credit rating applied for in relation to the Rated Notes will be issued by the Rating Agencies each of which is established in the European Union and is -13-

19 registered under Regulation (EU) No 1060/2009 CRA Regulation, as resulting from the list of registered credit rating agencies (reference number 2011/247) published on 31 October 2011 by the European Securities and Markets Authority (ESMA). Listing Governing Law Regulatory Disclosure Application has been made to the Irish Stock Exchange for the Rated Notes to be admitted to the Official List and to trading on its regulated market. The Prospectus has been approved by the Central Bank of Ireland, as competent authority under the Prospectus Directive. The Central Bank of Ireland only approves this Prospectus as meeting the requirements imposed under Irish and EU law pursuant to the Prospectus Directive. The Notes will be governed by Italian Law. Capital Requirements Directive On 16 September 2009 the European Parliament and the European Council adopted the Directive 2009/111/EC (the "CRD II") amending the capital requirements directive, which comprises Directive 2006/48/CE and Directive 2006/49/CE (the "CRD"), relating to, inter alia, exposures to transferred credit risk in the context of securitisation transactions. Pursuant to the new article 122(a) of the CRD, as implemented into Italian law by the Bank of Italy Circular No. 263 of 27 December 2006 ("Nuove disposizioni di vigilanza prudenziale per le banche" as amended by the 7th revision of 28 January 2011) (the "Article 122(a) of the CRD"), the Originator shall be required to retain at least 5 per cent of the net economic interest in the Securitisation. Article 122(a) of the CRD became effective from 1 January In the Intercreditor Agreement and in the Subscription Agreement, Barclays Bank PLC, Italian branch in its capacity as Originator, has undertaken to the Issuer and the Representative of the Noteholders that it will retain at the Issue Date and maintain on an ongoing basis at least 5 per cent of the net economic interest in accordance with option (d) of paragraph 1 of Article 122(a) of the CRD or any permitted alternative method thereafter and provide adequate disclosure to the Noteholders in accordance with such Article 122(a) of the CRD. -14-

20 To this purpose, the Originator has undertaken to retain the Junior Notes which represent 10.76% of the Portfolio at the Issue Date and therefore is more than 5% of the net economic interest in the Securitisation. Any change to the manner in which this interest is held will be notified to Noteholders. Furthermore, in the Intercreditor Agreement and the Subscription Agreement, the Originator has undertaken that prospective investors have readily available access to all information as it would be necessary to conduct comprehensive and well informed stress tests, in accordance with Article 122 (a) of the CRD, as implemented from time to time. In accordance with the Intercreditor Agreement, the Originator undertakes that any of such information: (a) on the Issue Date will: (i) be disclosed in the section "Portfolio" of the Prospectus; and (ii) with reference to any further information, required by Article 122(a) of the CRD, as amended from time to time, and not covered under points (i) above, appear on the Originator's web site at: rizzazione_mercurio_sette.aspx, (b) following the Issue Date, on a quarterly basis, will: (i) on each Calculation Date, be disclosed in the Payments Report issued by the Calculation Agent, which will be generally available to the Noteholders and prospective investors at the offices of the Principal Paying Agent and on the Calculation Agent s web site at rizzazione_mercurio_sette.aspx. It is understood that the Payments Report shall be deemed to have been produced on behalf of the Originator, under the Originator s full responsibility, with reference only to the information that the Originator -15-

21 has the obligation to make available to investors under Article 122(a) of the CRD; and (ii) with reference to any further information, required by Article 122(a) of the CRD, as amended from time to time, and not covered under points (i) and (ii) above, appear on the Originator's web site at: rizzazione_mercurio_sette.aspx. Under the Intercreditor Agreement and the Subscription Agreement, the Originator has undertaken that the retention requirement is not to be subject to any credit risk mitigation, any short position or any other hedge, within the limits of Article 122(a) of the CRD. 3. ISSUER AVAILABLE FUNDS AND PRIORITIES OF PAYMENTS Issuer Available Funds Interest Available Funds The Issuer Available Funds, in respect of any Payment Date, are constituted by the aggregate of the Interest Available Funds and the Principal Available Funds. The Interest Available Funds are, in respect of any Payment Date, constituted of the aggregate of: (i) (ii) (iii) (iv) all amounts collected by the Servicer in respect of the Receivables on account of interest, fees and pre-payment penalties during the immediately preceding Collection Period and credited to the GIC Account; all Recoveries collected by the Servicer during the immediately preceding Collection Period and credited to the GIC Account; all amounts of interest accrued (net of any withholding or expenses, if due) and paid on the Accounts during the immediately preceding Collection Period; all other items and payments received by the Issuer which do not qualify as Principal Available Funds and which have been credited to the GIC Account during the immediately preceding Collection Period; -16-

22 (v) (vi) (vii) any payment to be received from the Swap Counterparty on or immediately prior to such Payment Date, pursuant to the Swap Agreement (excluding any collateral which the Swap Counterparty may be required to post pursuant the Swap Agreement); and any amount allocated on such Payment Date under items First and Eighth of the Principal Priority of Payments; the Cash Reserve Available Amount (if any), on such Payment Date (other than the Payment Date on which the Notes are redeemed in full); (viii) the Liquidity Reserve Available Amount (if any), on such Payment Date (other than the Payment Date on which the Notes are redeemed in full). Principal Available Funds The Principal Available Funds are, in respect of any Payment Date, constituted of the aggregate of: (i) (ii) (iii) (iv) (v) all amounts collected by the Servicer in respect of the Receivables on account of principal during the immediately preceding Collection Period and credited to the GIC Account; all amounts received by the Issuer from the Originator pursuant to the Receivables Purchase Agreement and credited to the GIC Account during the immediately preceding Collection Period; the Interest Available Funds, if any, to be credited to the Principal Deficiency Ledger on such Payment Date under item Eighth of the Interest Priority of Payments; all the proceeds deriving from the sale, if any, of the Portfolio or of single Receivables; any amounts (other than the amounts already allocated under other items of the Principal Available Funds and the Interest Available Funds) received by the Issuer from any party to the Transaction Documents during the immediately preceding Collection Period -17-

23 (excluding any amount received from the sale, if any, of the Portfolio and excluding any amount, if any, received as collateral under the Swap Agreement, but including any proceeds deriving from the enforcement of the Issuer's Rights); (vi) (vii) any amounts (if any) paid by the Originator to the Issuer pursuant to the Warranty and Indemnity Agreement including any amount advances as limited recourse loan pursuant to Clause 6.1 of the Warranty and Indemnity Agreement; on the earlier of (i) the Payment Date on which the Notes are redeemed in full and (ii) the Final Maturity Date, any amount standing to the credit of the Expenses Account, the Cash Reserve Ledger and the Liquidity Reserve Ledger; (viii) any amount allocated on such Payment Date under item Tenth of the Interest Priority of Payments; and (ix) upon occurrence of an Insolvency Event in respect of the Servicer, any amount posted under Clause 3.6.4(b) of the Servicing Agreement. Interest Priority of Payments prior to the delivery of a Trigger Notice Prior to the delivery of a Trigger Notice or upon full redemption of all the Notes pursuant to any provision of Condition 8 (Redemption, Purchase and Cancellation), the Interest Available Funds shall be applied on each Payment Date in making the following payments in the following order of priority (in each case only if and to the extent that payments of a higher priority have been made in full): First, to pay, pari passu and pro rata according to the respective amounts thereof, any Expenses (to the extent that amounts standing to the credit of the Expenses Account have been insufficient to pay such costs during the immediately preceding Interest Period); Second, to pay the remuneration due to the Representative of the Noteholders and to pay any indemnity amounts properly due and any proper costs and expenses incurred by the Representative of -18-

24 the Noteholders under the provisions of, or in connection with, any of the Transaction Documents; Third, to credit into the Expenses Account such an amount as will bring the balance of such account up to (but not in excess of) the Retention Amount; Fourth, to pay, pari passu and pro rata according to the respective amounts thereof, any amount due and payable on account of remuneration, indemnities or proper costs and expenses incurred by the relevant agent on such Payment Date to the Account Bank, the Collection Account Bank, the Cash Manager, the GIC Account Bank, the Calculation Agent, the Principal Paying Agent, the Issuer Corporate Services Provider, the Back-up Servicer (if any), the Receiver and the Servicer; Fifth, to pay to the Swap Counterparty any amount due and payable under the Swap Agreement, including any hedging termination payments upon early termination of the Swap Agreement, except where the Swap Counterparty is the Defaulting Party or the Sole Affected Party; Sixth, to pay, pari passu and pro rata, all amounts of interest due and payable on the Rated Notes on such Payment Date; Seventh, in or towards making good any shortfall reflected in the Liquidity Reserve Ledger until the credit balance of the Liquidity Reserve Ledger is brought up to the Required Liquidity Reserve Amount; Eighth, in or towards making good any shortfall reflected in the Principal Deficiency Ledger until the debit balance, if any, of the Principal Deficiency Ledger is reduced to zero by allocating the relevant amounts to the Principal Available Funds; Ninth, in or towards making good any shortfall reflected in (i) the Cash Reserve Ledger until the credit balance of the Cash Reserve Ledger is brought up to the Required Cash Reserve Amount and (ii) in other reserve account(s) (or ledger(s), as the case may be), opened (or established, as the case may be) from time to time in name of the Issuer; Tenth, to transfer to the Principal Available Funds an amount equal to the amounts, if any, allocated on -19-

25 the immediately preceding Payment Date under item First of the Principal Priority of Payments and on any preceding Payment Date and not already paid; Eleventh, to pay the Deferred Instalment; Twelfth, to pay any and all amounts due and payable to the Sole Lead Manager as indemnity pursuant to the Transaction Documents; Thirteenth, to pay any hedging termination payment due and payable to the Swap Counterparty under the Swap Agreement, other than any amount paid under item Fifth above; Fourteenth, to pay to the Expenses Loan Provider interest due and payable on the Expenses Loan; Fifteenth, to pay, pari passu and pro rata, to the Subordinated Loan Provider interest due and payable on the Cash Reserve Loan and the Liquidity Reserve Loan; Sixteenth, to pay, pari passu and pro rata, all amounts of interest due and payable on the Junior Notes; Seventeenth, to pay, pari passu and pro rata, the Premium on the Junior Notes. Principal Priority of Payments prior to the delivery of a Trigger Notice Prior to the delivery of a Trigger Notice or upon full redemption of all the Notes pursuant to any provision of Condition 8 (Redemption, Purchase and Cancellation), the Principal Available Funds shall be applied on each Payment Date in making the following payments in the following order of priority (in each case only if and to the extent that payments of a higher priority have been made in full): First, to pay any amount payable under items First to Sixth (inclusive) under the Interest Priority of Payments, to the extent that the Interest Available Funds are not sufficient on such Payment Date to make such payments in full; Second, to pay pari passu and pro rata, any principal amounts due and payable on the Rated Notes; Third, to pay, pari passu and pro rata, any principal -20-

26 amounts due and payable on the Junior Notes; Fourth, to pay to the Originator any Adjusted Purchase Price pursuant to clause of the Receivables Purchase Agreement; Fifth, to pay any amount due and payable under the Transaction Document, to the extent not already paid or payable under other items of this Priority of Payments; Sixth, to repay to the Expenses Loan Provider any amount payable in respect of principal on the on the Expenses Loan; Seventh, to repay, pari passu and pro rata, to the Subordinated Loan Provider any amount payable in respect of principal on the Cash Reserve Loan and the Liquidity Reserve Loan; Eighth, to transfer to the Interest Available Funds any remaining amount after all the other payments under this Principal Priority of Payments have been made in full. Priority of Payments following the delivery of a Trigger Notice On each Payment Date following the delivery of a Trigger Notice, the Issuer Available Funds shall be applied in making the following payments in the following order of priority (in each case only if and to the extent that payments of a higher priority have been made in full): First, to pay, pari passu and pro rata according to the respective amounts thereof, any Expenses (to the extent that amounts standing to the credit of the Expenses Account have been insufficient to pay such costs during the immediately preceding Interest Period); Second, to pay, pari passu and pro rata, according to the respective amounts thereof, (a) the remuneration due to the Representative of the Noteholders and to pay any indemnity amounts properly due under and any proper costs and expenses incurred by the Representative of the Noteholders under the provisions of, or in connection with, any of the Transaction Documents, and (b) the remuneration due to any Receiver and any proper costs and expenses incurred by it; -21-

27 Third, to credit into the Expenses Account such an amount to bring the balance of such account up to (but not in excess of) the Retention Amount; Fourth, to pay, pari passu and pro rata according to the respective amounts thereof, any amount due and payable on account of remuneration, indemnities or proper costs and expenses incurred by the relevant agent on such Payment Date to the Account Bank, the Collection Account Bank, the Cash Manager, the GIC Account Bank, the Calculation Agent, the Principal Paying Agent, the Issuer Corporate Services Provider, the Back-up Servicer (if any), the Receiver and the Servicer; Fifth, to pay to the Swap Counterparty any amount due and payable under the Swap Agreement, including any hedging termination payments upon early termination of the Swap Agreement, except where the Swap Counterparty is the Defaulting Party or the Sole Affected Party; Sixth, to pay, pari passu and pro rata, all amounts of interest due and payable on the Rated Notes on such Payment Date; Seventh, to pay, pari passu and pro rata, all amounts outstanding in respect of principal on the Rated Notes; Eighth, to pay any and all amounts due and payable to the Sole Lead Manager as indemnity pursuant to the Transaction Documents; Ninth, to pay any hedging termination payments due and payable to the Swap Counterparty under the Swap Agreement other than any amount paid under item Fifth above; Tenth, to pay to the Originator any Adjusted Purchase Price pursuant to clause of the Receivables Purchase Agreement; Eleventh, to pay to the Expenses Loan Provider interest due and payable on the Expenses Loan; Twelfth, to repay to the Expenses Loan Provider any amount payable in respect of principal on the Expenses Loan; Thirteenth, to pay any amount due and payable -22-

28 4. TRANSFER OF THE PORTFOLIO under the Transaction Documents, to the extent not already paid or payable under other items of this Priority of Payments; Fourteenth, to pay, pari passu and pro rata, to the Subordinated Loan Provider interest due and payable on the Cash Reserve Loan and the Liquidity Reserve Loan; Fifteenth, to repay, pari passu and pro rata, to the Subordinated Loan Provider any amount payable in respect of principal on the Cash Reserve Loan and the Liquidity Reserve Loan. Sixteenth, to pay, pari passu and pro rata, all amounts of interest due and payable on the Junior Notes on such Payment Date. Seventeenth, to pay, pari passu and pro rata, all amounts of principal due and payable on the Junior Notes on such Payment Date. Eighteenth, to pay the Premium on the Junior Notes. The Portfolio The principal source of payment of interest and of repayment of principal on the Notes will be collections and recoveries made in respect of the Portfolio purchased on 16 January 2012 by the Issuer pursuant to the terms of the Receivables Purchase Agreement. The Portfolio has been assigned and transferred to the Issuer without recourse (pro soluto) against the Originator in the case of a failure by any of the Debtors to pay amounts due under the Mortgage Loan Agreements, in accordance with the Securitisation Law and subject to the terms and conditions of the Receivables Purchase Agreement. As consideration for the purchase of the Receivables, the Issuer shall pay to Barclays the Purchase Price and the Deferred Instalment. The Purchase Price (being equal to the aggregate of the Individual Purchase Price of each Receivables as at the Valuation Date), will be paid through the net proceeds of the issuance of the Notes while the Deferred Instalment (being equal to the aggregate of the Accrued Interest plus any interest and charges accrued, due and unpaid on the Receivables as at the Valuation Date) will be paid in -23-

29 accordance with the Priority of Payments. See for further details "The Portfolio" and "Description of the Transaction Documents - The Receivables Purchase Agreement". Servicing of the Portfolio On 16 January 2012, the Servicer and the Issuer entered into the Servicing Agreement, pursuant to which the Servicer has agreed to collect the Receivables and to administer and service the Portfolio on behalf of the Issuer in compliance with the Securitisation Law. Warranties indemnities and The Servicer has undertaken to prepare and submit to the Issuer, on a periodic basis, a Quarterly Servicer's Report and a Monthly Servicer's Report providing key information relating to the amortisation of the Portfolio and the Servicer's activity during the relevant Collection Period, including, without limitation, a description of the Portfolio, information relating to any Defaulted Receivables and the Collections during the preceding Collection Period and a performance analysis. See for further details "Description of the Transaction Documents - The Servicing Agreement". In the Warranty and Indemnity Agreement, the Originator has made certain representations and warranties to the Issuer in relation to, inter alia, the Receivables and has agreed to indemnify the Issuer in respect of certain liabilities incurred by the Issuer as a result of the breach of such representations and warranties. See for further details "Description of the Transaction Documents - The Warranty and Indemnity Agreement". 5. CREDIT STRUCTURE Intercreditor Agreement Under the terms of the Intercreditor Agreement, the Representative of the Noteholders shall be entitled, inter alia, following the service of a Trigger Notice and until the Notes have been repaid in full or cancelled in accordance with the Conditions, to pay or cause to be paid on behalf of the Issuer and using the Issuer Available Funds all sums due and payable by the Issuer to the Noteholders, the Other Issuer Creditors and third party creditors in respect of costs and expenses incurred in the context of the Securitisation, in accordance with the terms of the -24-

30 Priority of Payments. See for further details "Description of the Transaction Documents - The Intercreditor Agreement". Cash Allocation, Management and Payments Agreement Under the terms of the Cash Allocation, Management and Payments Agreement, the Account Bank, the Collection Account Bank, the Calculation Agent, the Issuer Corporate Services Provider and the Principal Paying Agent have agreed to provide the Issuer with certain calculation, notification, cash management and reporting services together with account handling services in relation to moneys from time to time standing to the credit of the Payments Account and the Expenses Account and with certain agency services. The Calculation Agent has agreed to prepare, on or prior to each Calculation Date, the Payments Report containing details of amounts to be paid by the Issuer on the Payment Date following such Calculation Date in accordance with the Priority of Payments. On each Payment Date, the Principal Paying Agent shall apply amounts transferred to it out of the Payments Account in making payments to the Noteholders in accordance with the Priority of Payments, as set out in the Payments Report. See for further details "Description of the Transaction Documents - The Cash Allocation, Management and Payments Agreement". GIC Agreement Under the terms of the GIC Agreement, the GIC Account Bank has agreed to pay a guaranteed rate of interest equal to the ECB MRO Rate on any amount standing from time to time to the credit of the GIC Account. See for further details "Description of the Transaction Documents - The GIC Agreement". Mandate Agreement Under the terms of the Mandate Agreement, the Representative of the Noteholders will be authorised, subject to a Trigger Notice being served upon the Issuer following the occurrence of a Trigger Event or upon failure by the Issuer to exercise its rights under the Transaction Documents within 10 day from the notification of such failure, and fulfilment of certain other conditions, to exercise, in the name and on behalf of the Issuer, all the Issuer's non-monetary rights arising out of certain Transaction Documents to which -25-

31 the Issuer is a party. See for further details "Description of the Transaction Documents - The Mandate Agreement". Swap Agreement The Issuer has entered into the Swap Agreement with the Swap Counterparty. See for further details "Description of the Transaction Documents - The Swap Agreement". Issuer Corporate Services Agreement Under the terms of the Issuer Corporate Services Agreement between the Issuer and the Issuer Corporate Services Provider, the Issuer Corporate Services Provider has agreed to provide certain corporate administrative services to the Issuer. See for further details "Description of the Transaction Documents - The Issuer Corporate Services Agreement". Deed of Pledge Under the terms of the Deed of Pledge, the Issuer has granted to the Representative of the Noteholders (acting for itself and for the benefit of the Noteholders and the Other Issuer Creditors) a pledge over certain monetary rights to which the Issuer is entitled from time to time pursuant to certain Transaction Documents to which the Issuer is a party. See for further details "Description of the Transaction Documents - The Deed of Pledge". Deed of Charge Under the terms of the Deed of Charge, the Issuer has assigned by way of security in favour of the Representative of the Noteholders (as trustee for the Noteholders and the Other Issuer Creditors) all the Issuer's right, title, benefit and interest under the Swap Agreement and the GIC Agreement and charged in favour of the Representative of the Noteholders (as trustee for the Noteholders and the Other Issuer Creditors) all the Issuer's right, title, benefit and interest in respect of the GIC Account. Subordinated Agreement Loan See for further details "Description of the Transaction Documents - The Deed of Charge". Pursuant to the Subordinated Loan Agreement, the Subordinated Loan Provider has disbursed to the Issuer the Cash Reserve Loan to establish, on the Issue Date, the Cash Reserve and the Liquidity Reserve Loan to establish, on the Issue Date, Liquidity Reserve. -26-

32 See for further details "The Transaction Documents the Subordinated Loan Agreement". Cash Reserve The proceeds of the Cash Reserve Loan under the terms of the Subordinated Loan Agreement shall be deposited by the Issuer on the Issue Date in the GIC Account and recorded in the Cash Reserve Ledger, maintained by or on behalf of the Issuer, as Cash Reserve. Amounts available on the Cash Reserve Ledger will be paid from the GIC Account on each Payment Date and applied in or towards making good any shortfall reflected in the Principal Deficiency Ledger until the debit balance, if any, of the Principal Deficiency Ledger is reduced to zero, to the extent that the Interest Available Funds are not sufficient for such purpose on such Payment Date in accordance with the Interest Priority of Payments. Amounts available on the Cash Reserve Ledger will, on the earlier of (i) the Payment Date on which the Notes are redeemed in full and (ii) the Final Maturity Date, form part of the Principal Available Funds on such Payment Date and will be applied in accordance with the Principal Priority of Payments. To the extent that on any Payment Date the balance of the Cash Reserve on the Cash Reserve Ledger is lower than the Required Cash Reserve Amount, the Issuer will apply Interest Available Funds in accordance with the Interest Priority of Payments to bring the balance of the Cash Reserve up to the Required Cash Reserve Amount. Liquidity Reserve The proceeds of the Liquidity Reserve Loan under the terms of the Subordinated Loan Agreement shall be deposited by the Issuer on the Issue Date in the GIC Account and recorded in the Liquidity Reserve Ledger, maintained by or on behalf of the Issuer, as Liquidity Reserve. Amounts available on the Liquidity Reserve Ledger will be paid from the GIC Account on each Payment Date and applied for making the payments under items from First to Sixth of the Interest Priority of Payments, to the extent that Interest Available Funds are not sufficient for such purpose on such Payment Date in accordance with the Interest Priority of Payments. Amounts available on the Liquidity Reserve Ledger -27-

33 will, on the earlier of (i) Payment Date on which the Notes are redeemed in full and (ii) the Final Maturity Date, form part of the Principal Available Funds on such Payment Date and will be applied in accordance with the Principal Priority of Payments. To the extent that on any Payment Date the balance of the Liquidity Reserve on the Liquidity Reserve Ledger is lower than the Required Liquidity Reserve Amount, the Issuer will apply Interest Available Funds in accordance with the Interest Priority of Payments to bring the balance of the Liquidity Reserve up to the Required Liquidity Reserve Amount. Expenses Loan Agreement Pursuant to the Expenses Loan Agreement, the Expenses Loan Provider has disbursed to the Issuer the Expenses Loan to pay the Initial Expenses and to fund the Retention Amount on the Issue Date. Principal Ledger Deficiency See for further details "The Transaction Documents - the Expenses Loan Agreement". The Principal Deficiency Ledger is a ledger established by the Issuer in order to record any principal deficiency on the Portfolio in respect of the Principal Amount Outstanding of the Notes. On each Calculation Date, the Calculation Agent will, subject to receipt of the relevant information due from the Servicer, record as a debit entry in the Principal Deficiency Ledger an amount equal to the difference, if any, between item (i) of the Principal Available Funds and the Target Principal Payment Amount. On each Payment Date, upon occurrence of any shortfall reflected in the Principal Deficiency Ledger, the Issuer will apply, in accordance with the Priority of Payments, (i) any Interest Available Funds allocated to the Principal Available Funds under item Eighth of the Interest Priority of Payments or (ii) the Cash Reserve Available Amount, to the extent that the Interest Available Funds allocated under item Eighth of the Interest Priority of Payments are not sufficient, to make good any such shortfall until the debit balance of the Principal Deficiency Ledger is reduced to zero. 6. THE ACCOUNTS Issuer Collection Account Pursuant to the Servicing Agreement, the Servicer shall credit to the Issuer Collection Account, established in the name of the Issuer with Barclays Bank PLC, Italian branch all the amounts received or recovered during each Collection Period. Pursuant to -28-

34 the GIC Agreement, one Business Day after the Servicer has credited the amounts received or recovered to the Issuer Collection Account, such amounts shall be transferred to the GIC Account. Payments Account All amounts payable on each Payment Date will, one Business Day prior to such Payment Date, be paid into the Payments Account established in the name of the Issuer with the Account Bank. The Payments Account will be maintained with the Account Bank for as long as the Account Bank is an Eligible Institution. GIC Account The Issuer has established with the GIC Account Bank the GIC Account into which will be paid (i) on the Issue Date, the proceed of the Cash Reserve Loan and the Liquidity Reserve Loan and (i) from time to time, the amounts transferred from the Issuer Collection Account. In the GIC Agreement, the GIC Account Bank has agreed to pay the Issuer on the amounts from time to time standing to the credit of the GIC Account interest at the ECB MRO Rate. The GIC Account will be maintained with the GIC Account Bank for as long as the GIC Account Bank is an Eligible Institution or until the GIC Agreement is terminated. Expenses Account The Issuer has established the Expenses Account with Barclays Bank PLC, Italian branch, into which (i) on the Issue Date, the Expenses Loan will be credited to pay the Initial Expenses and to fund the Retention Amount and thereafter, (ii) on each Payment Date, Interest Available Funds will be credited in accordance with the Interest Priority of Payments to bring the balance of such Expenses Account up to (but not in excess of) the Retention Amount. -29-

35 RISK FACTORS AND SPECIAL CONSIDERATIONS The following is a summary of certain aspects of the issue of the Notes of which prospective noteholders should be aware. It is not intended to be exhaustive and prospective noteholders should also read the detailed information set out elsewhere in this Prospectus and reach their own views prior to making an investment decision. RISK FACTORS AND SPECIAL CONSIDERATIONS IN RELATION TO THE ISSUER Securitisation Law The Securitisation Law was enacted in Italy in April As at the date of this Prospectus, no interpretation of the application of the Securitisation Law has been issued by any Italian court or governmental or regulatory authority, except for regulations issued by the Bank of Italy concerning, inter alia, the accounting treatment of securitisation transactions by special purpose companies incorporated under the Securitisation Law, such as the Issuer, and the duties of the companies which carry out collection and recovery activities in the context of a securitisation transaction. Consequently, it is possible that such or different authorities may issue further regulations relating to the Securitisation Law or the interpretation thereof, the impact of which cannot be predicted by the Issuer as at the date of this Prospectus. Issuer's ability to meet its obligations under the Notes The ability of the Issuer to meet its obligations in respect of the Notes will be dependent on (i) the receipt by the Issuer of collections and recoveries made on its behalf by the Servicer from the Portfolio, (ii) any payments made by the Swap Counterparty under the Swap Agreement, (iii) the amounts standing to the credit of the Cash Reserve Ledger; (iv) the amounts standing to the credit of the Liquidity Reserve Ledger; and (v) any other amounts received by the Issuer pursuant to the provisions of the other Transaction Documents to which it is a party. No independent investigation in relation to the Receivables None of the Issuer, the Sole Arranger or the Sole Lead Manager nor any other party to the Transaction Documents (other than the Originator) has undertaken or will undertake any investigation, searches or other actions to verify the details of the Receivables sold by the Originator to the Issuer, nor has any of such persons undertaken, nor will any of them undertake, any investigations, searches or other actions to establish the creditworthiness of any Debtors. The Issuer will rely instead on the representations and warranties given by the Originator in the Warranty and Indemnity Agreement. The only remedies of the Issuer in respect of the occurrence of a breach of a representation and warranty which materially and adversely affects the value of a Receivable will be the requirement that the Originator indemnifies the Issuer for the damages deriving therefrom pursuant to the Warranty and Indemnity Agreement (see "Description of the Transaction Documents - The Warranty and Indemnity Agreement", below). There can be no assurance that the Originator will have the financial resources to honour such obligations. -30-

36 Liquidity and credit risk The Issuer is subject to a liquidity risk in case of delay between the Scheduled Instalment Dates and the actual receipt of payments from the Debtors. This risk is addressed in respect of the Notes through the support provided to the Issuer in respect of payments on the Notes by: (i) the Cash Reserve, (ii) the Liquidity Reserve and (iii) the Swap Counterparty under the Swap Agreement. The Issuer is also subject to the risk of default in payment by the Debtors and of the failure to realise or to recover sufficient funds in respect of the relevant Mortgage Loans in order to discharge all amounts due from such Debtors under the Mortgage Loan Agreements. This risk is mitigated by the availability of the Cash Reserve. Although the Issuer believes that the Portfolio has characteristics that demonstrate capacity to produce funds to service any payments due and payable on the Notes, there can, however, be no assurance that the level of collections and recoveries received from the Portfolio will be adequate to ensure timely and full receipt of amounts due under the Notes. Credit risk on Barclays Bank PLC, Italian branch and the other parties to the Transaction Documents The ability of the Issuer to make payments in respect of the Notes will depend to a significant extent upon the due performance by Barclays Bank PLC, Italian branch (in any capacity) and the other parties to the Transaction Documents of their respective various obligations under the Transaction Documents to which they are parties. In particular, without limiting the generality of the foregoing, the timely payment of amounts due on the Notes will depend on the ability of the Servicer to service the Portfolio and to recover the amounts relating to Defaulted Receivables (if any) and the continued availability of hedging under the Swap Agreement. Prospective Noteholders should note that the Swap Counterparty has the right to terminate the Swap Agreement if a Trigger Notice is delivered. The performance of such parties of their respective obligations under the relevant Transaction Documents is dependent on the solvency of each relevant party. It is not certain that a suitable alternative Servicer could be found to service the Portfolio if Barclays Bank PLC, Italian branch becomes insolvent or its appointment under the Servicing Agreement is otherwise terminated. If such an alternative Servicer were to be found it is not certain whether it would service the Portfolio on the same terms as those provided for in the Servicing Agreement. In addition, the Issuer is subject to the risk that, in the event of insolvency of Barclays Bank PLC, Italian branch, the Collections then held by the Servicer are lost. For the purpose of reducing such risk, the Issuer has taken certain actions, such as the obligation of Barclays Bank PLC, Italian branch in the Servicing Agreement to credit any Collections and Recoveries to the Issuer Collection Account (which shall be maintained with an Eligible Institution or, upon loss of such status, the Issuer shall alternatively, (i) replace the Issuer Collection Account with a new account opened with an Eligible Institution and direct Debtors to pay on such new account, or (ii) to deposit the Servicer's Downgrading Amount, or (iii) to provide a first demand guarantee issued by an Eligible Institution) on the same Business Day of receipt. -31-

37 Interest rate risk The Issuer expects to meet its floating rate payment obligations under the Notes primarily from payments received from collections and recoveries made in respect of the Receivables. In order to avoid the occurrence of a mismatch between the payments received from collections and recoveries made in respect of the Receivables and the floating rate payment obligations of the Issuer under the Notes, the Issuer entered into the Swap Agreement in relation to the Portfolio with the Swap Counterparty. Pursuant to such confirmation on each Payment Date the Issuer shall pay to the Swap Counterparty an amount equal to the product of the Notional Amount multiplied by BMR (where "BMR" is the aggregate of interest and other amounts other than principal received by the Issuer during a Collection Period in relation to the Portfolio minus senior expenses (expressed as a percentage of the Notional Amount) and the "Notional Amount" is the aggregate Outstanding Principal in respect of the Portfolio minus the Outstanding Principal Due in respect of Defaulted Receivables). The Swap Counterparty shall pay to the Issuer an amount equal to the product of the Notional Amount and a floating rate of 3 months Euribor plus the relevant margin. The Swap Agreement contains specific downgrade provisions aimed at maintained the credit ratings of the Notes, pursuant to which the Swap Counterparty will be required within a specified timeframe, in the event that it is downgraded, to post collateral, provide a suitable guarantor or transfer its rights and obligations under the Swap Agreement to another suitably rated entity. In the event of early termination of the Swap Agreement, the Issuer may be obliged to pay termination payments to the Swap Counterparty. The amount of the termination payment will be based, inter alia, on the cost of entering into a replacement swap agreement. The issuer cannot give any assurance that it will have sufficient funds available to make any termination payments under the Swap Agreement or to make subsequent payments to Noteholders in respect of the Notes. Nor can the Issuer give any assurance that the issuer will be able to enter into a replacement swap agreement, or if one is entered into, that the then credit rating of the replacement swap provider will be sufficiently high to prevent a downgrading of the then current ratings of the Notes by the Rating Agencies. Except where the Swap Counterparty has caused the Swap Agreement to terminate by its own default, any termination payment due from the Issuer will rank prior to payments due on the relevant Rated Notes. Therefore, if the Issuer is obliged to make a termination payment to the Swap Counterparty or to pay any other additional amount as a result of the termination of the Swap Agreement, this may affect the funds which the Issuer has available to make payments on the notes. Claims of unsecured creditors of the Issuer By operation of Italian law, the rights, title and interests of the Issuer in and to the Portfolio will be segregated from all other assets of the Issuer (including, for the avoidance of doubt, any other portfolio purchased by the Issuer pursuant to the Securitisation Law) and any amounts deriving therefrom will be available both prior to and on a winding up of the Issuer only in or towards satisfaction, in accordance with the applicable Priority of Payments, of the payment obligations of the Issuer to the Noteholders, to the Other Issuer Creditors and in relation to any other unsecured costs of the securitisation of the Portfolio incurred by the -32-

38 Issuer. Amounts deriving from the Portfolio will not be available to any other creditor of the Issuer whose costs were not incurred in connection with the Securitisation. Under Italian law and the Transaction Documents, any creditor of the Issuer who has a valid and unsatisfied claim may file a petition for the bankruptcy of the Issuer, although no creditors other than the Representative of the Noteholders (on behalf of the Noteholders) and any third party creditors having the right to claim for amounts due in connection with the securitisation of the Portfolio would have the right to claim in respect of the Portfolio, even in a bankruptcy of the Issuer. Prior to the commencement of winding up proceedings in respect of the Issuer, the Issuer will only be entitled to pay any amounts due and payable to any third parties who are not Other Issuer Creditors in accordance with the Priority of Payments. Following commencement of winding up proceedings in respect of the Issuer, a liquidator would control the assets of the Issuer including the Portfolio, which would likely result in delays in any payments due to the Noteholders and no assurance can be given as to the length or costs of any such winding up proceedings. Each Other Issuer Creditor has undertaken in the Intercreditor Agreement not to petition or commence proceedings for a declaration of insolvency (nor join any such petition or proceedings) against the Issuer until the date falling one year and one day after the date on which the Notes and any other notes issued in the context of any further securitisations undertaken by the Issuer have been redeemed in full or cancelled in accordance with their terms and conditions. Previous Securitisations and further securitisations In January 2003, in June 2003, in July 2008, in January 2009, in July 2009 and in November 2009 the Issuer carried out, respectively, the First Securitisation, the Second Securitisation, the Third Securitisation, the Fourth Securitisation, the Fifth Securitisation and the Sixth Securitisation through the issuance of the Series 1 Notes, the Series 2 Notes, the Series 3 Notes, the Series 4 Notes, the Series 5 Notes and the Series 6 Notes collateralised by, respectively, the First Portfolio, the Second Portfolio, the Third Portfolio, the Fourth Portfolio, the Fifth Portfolio and the Sixth Portfolio. The Issuer may purchase and securities further portfolios of monetary claims in addition to the Previous Portfolios and the Portfolio. It is a condition precedent to any such further securitisation that the then current rating of the Notes, the Series 1 Notes, the Series 2 Notes, the Series 3 Notes, the Series 4 Notes, the Series 5 Notes and the Series 6 Notes will not be adversely affected by such further securitisation (provided that the Rating Agencies, in accordance with their criteria, will not release any confirmation letter in respect of the Notes). Under the terms of article 3 of the Securitisation Law, the assets relating to each securitisation transaction will, by operation of law, be segregated for all purposes from all other assets of the company that purchases such assets. On a winding up of such a company such assets will only be available to holders of the notes issued to finance the acquisition of the relevant assets and to certain creditors claiming payment of debts incurred by the company in connection with the securitisation of the relevant assets. In addition, the assets relating to a particular securitisation transaction will not be available to the holders of notes issued to finance any other securitisation transaction or to general creditors of the issuer company. -33-

39 Tax treatment of the Issuer Taxable income of the Issuer is determined without any special rights in accordance with Italian Presidential Decree number 917 of 22 December Pursuant to the regulations issued by the Bank of Italy on 29 March 2000 (schemi di bilancio delle società per la cartolarizzazione dei crediti), and on 14 February 2006 (istruzioni per la redazione dei bilanci degli intermediari finanziari iscritti nell'"elenco speciale", degli IMEL delle SGR e delle SIM) the assets and liabilities and the costs and revenues of the Issuer in relation to the securitisation of the Receivables will be treated as off-balance sheet assets and liabilities, costs and revenues (except for overhead and general expenses and any amount that the Issuer may apply out of the Issuer Available Funds for the payment of such overhead and general expenses). Based on the general rules applicable to the calculation of the net taxable income of a company, such taxable income should be calculated on the basis of accounting, i.e. onbalance sheet earnings, subject to such adjustments as are specifically provided for by applicable income tax rules and regulations. On this basis, no taxable income should accrue to the Issuer in the context of the Securitisation. On 24 October 2002, the Revenue Agency Regional Direction of Lombardy, released a private ruling with reference to some aspects of the Italian taxation of a securitisation vehicle. According to the private ruling, the Agency claimed that the net result of a securitisation transaction is taxable as Issuer's taxable income "to the extent that the relevant securitisation transaction is structured in such a way that a net income is available to the vehicle after having discharged all its obligations". Moreover, the Agenzia delle Entrate (the "Agency"), with Circular number 8/E of 6 February 2003, has taken the position that only amounts, if any, available to securitisation vehicles after fully discharging their obligations towards the noteholders and any other creditors of the securitisation vehicles in respect of any costs, fees and expenses in relation to securitisation transactions should be imputed for tax purposes to the securitisation vehicles. Consequently, according to the quoted position of the Agency, the Issuer should not have any taxable income if no amounts are available to the Issuer after discharging all its obligations deriving from and connected to the Securitisation. It is however possible that the Italian Tax Authorities or another competent authority may issue regulations, circular letters or generally binding rules relating to the Securitisation Law which might alter or affect, or that any competent authority or court may take a different view with respect to, the tax position of the Issuer, as described above. Interest accrued on the accounts opened by the Issuer in the Republic of Italy with any Italian resident bank or any Italian branch of a non-italian bank (including the Issuer Collection Account, the Payments Account and the Expenses Account) will be subject to withholding tax on account of Italian tax which, as at the date of this Prospectus, is levied at the rate of 20 per cent. RISK FACTORS AND SPECIAL CONSIDERATIONS IN RELATION TO THE NOTES Integral multiples of less than 100,000 Although notes which are admitted to trading on a regulated market in the European Economic Area or offered to the public in a member state of the European Economic Area in circumstances which require the publication of a prospectus under the Prospectus Directive are required to have a minimum denomination of 100,000 (or, where the specified currency -34-

40 is not euro, its equivalent in the specified currency), it is possible that the notes may be traded in the clearing systems in amounts in excess of 100,000 (or its equivalent in alternate currencies) that are not integral multiples of 100,000 (or its equivalent in alternate currencies). In relation to any issue of notes which have a denomination consisting of the minimum specified denomination plus a higher integral multiple of another smaller amount, it is possible that the notes may be traded in amounts in excess of 100,000 (or its equivalent) that are not integral multiples of 100,000 (or its equivalent). Noteholders should be aware that Notes which have a denomination that is not integral multiple of the minimum specified denomination may be illiquid and difficult to trade Each Class of Notes are the obligations of the Issuer only The Issuer is the only entity responsible for making any payments on each Class of Notes. Each Class of Notes will not represent an obligation of, or the responsibility of, the Representative of the Noteholders, the Principal Paying Agent or any other paying agent, the Calculation Agent, the Swap Counterparty, the Account Bank, the Collection Account Bank, the GIC Account Bank, the Sole Arranger or any other party to the Transaction Documents (other than the Issuer) (or any company in the same group of companies as, or affiliated to, Barclays or any other party to the Transaction Documents), or any other party to the Securitisation (other than the Issuer). Furthermore, no person other than the Issuer will accept any liability whatsoever to a Noteholder in respect of any failure by the Issuer to pay any amount due to the Noteholders under the Notes. Suitability Structured securities, such as the Notes, are sophisticated financial instruments, which can involve a significant degree of risk. Prospective investors in the Notes should ensure that they understand the nature of such Notes and the extent of their exposure to the relevant risks. Such prospective investors should also ensure that they have sufficient knowledge, experience and access to professional advice to make their own legal, tax, accounting and financial evaluation of the merits and risks of an investment in any Note and that they consider the suitability of such Notes as an investment in light of their own circumstances and financial condition. Source of payments to the Noteholders The Notes will be limited recourse obligations solely of the Issuer. In particular, the Notes will not be obligations or responsibilities of or guaranteed by any of the Originator, the Servicer, the Representative of the Noteholders, the Calculation Agent, the Account Bank, the Collection Account Bank, the GIC Account Bank, the Principal Paying Agent, the Subordinated Loan Provider, the Swap Counterparty, the Issuer Corporate Services Provider, the Listing Agent, the Sole Arranger, the Sole Lead Manager or the Quotaholders. None of any such persons, other than the Issuer, will accept any liability whatsoever in respect of any failure by the Issuer to make any payment of any amount due under the Notes. Save for the assets held by the Issuer in connection with the Previous Securitisations, which would be unavailable to the Other Issuer Creditors, the Issuer will not as at the Issue Date have any significant assets to be used for making payments under the Notes other than the Portfolio and its rights under the Transaction Documents to which it is a party. Consequently, -35-

41 following the service of a Trigger Notice or at the Final Maturity Date, the funds available to the Issuer may be insufficient to pay interest on the Notes or to repay the Notes in full. Limited recourse nature of the Notes There is no assurance that, over the life of the Notes or at the redemption date of the Notes (whether on the Final Maturity Date, upon redemption by acceleration of maturity following the service of a Trigger Notice, or otherwise), there will be sufficient funds to enable the Issuer to pay interest on the Notes or to repay the Notes in full. The Notes will be limited recourse obligations of the Issuer. If there are not sufficient funds available to the Issuer to pay in full all principal, interest and other amounts due in respect of the Notes, then the Noteholders will have no further claims against the Issuer in respect of any such unpaid amounts. Following the service of a Trigger Notice, the only remedy available to the Noteholders and the Other Issuer Creditors is the exercise by the Representative of Noteholders of the Issuer's Rights. Yield and payment considerations The amount and timing of the receipt of Collections on the Receivables and the courses of action to be taken by the Servicer with respect to the servicing, administration, collection, operation and restructuring of and other recoveries on the Receivables, as well as other events outside the control of the Servicer and the Issuer, will affect the performance of the Portfolio and the expected life of the Rated Notes. The expected life of the Rated Notes will be affected by the timing and amount of receipts in respect of the Receivables, which will be influenced by the courses of action to be followed by the Servicer with respect to the Receivables and decisions to alter such courses of action from time to time, as well as by economic, geographic, social and other factors including, inter alia, the availability of alternative financing and local, regional and national economic conditions. Settlement or sales of Receivables earlier or later or for different amounts than anticipated may significantly affect the expected life of the Rated Notes. The stream of principal payments received by a Noteholder may not be uniform or consistent. No assurance can be given as to the yield to maturity which will be experienced by a purchaser of any Rated Notes. The yield to maturity may be adversely affected by higher or lower rates of delinquency and default on the Receivables. Certain recent legislation enacted in Italy has given new rights to mortgage debtors and/or reinforced existing rights including, inter alia: (i) the right of prepayment of the principal amount of the mortgage loan, without incurring a penalty; or, in respect of mortgage loan agreements entered into before 2 February 2007, at a reduced penalty rate (Law Decree of 31 January 2007, the "Bersani Decree"); (ii) right to the substitution (portabilità) of a mortgage loan with another mortgage loan and/or the subrogation of a new bank into the rights of their creditors in accordance with article 1202 (surrogazione per volontà del debitore) of the Civil Code, by eliminating the limits and costs previously borne by the Debtors for the exercise of such right and the right of first home-owners to suspend instalment payments under mortgage loans up to a maximum of two times and for a maximum aggregate period of 18 months (Italian Law No. 244 of 24 December 2007, the "2008 Budget Law; (iii) the right to suspend the payment of instalments relating to mortgage loans for a 12 month period, where requested by the relevant Debtor during the period from 1 February 2010 to 31 January 2012 (Convention between ABI and the consumers' associations stipulated on 18 December 2009 and extended on, respectively, 26 January 2011 and 25 July 2011, the "Piano Famiglie"), (iv) -36-

42 the right to renegotiate, subject to certain conditions and up to 31 December 2012, the floating rate or the final maturity of the Mortgage Loans executed prior to (and excluding) 14 May 2011 for the purpose of purchase, building or maintenance of the debtors' principal residence (law decree number 70 of 13 May 2011, as converted into Law no. 106 of 12 July 2011, the "Decreto Sviluppo") and (v) the right to suspend the payments of instalments due under the relevant loans in favour of certain debtors resident in the municipalities of the Veneto Region affected by the flood events occurred in such places in the period from 31 October to 2 November 2010 (order no issued by the Prime Minister (Il Presidente del Consiglio dei Ministri) on 13 November 2010, as amended on 7 May 2011, the "Ordinanza"). A substantial recourse by the Debtor on the rights provided by these legislations may have an adverse effect on the Portfolio and, in particular, on any cash flow projections concerning the Portfolio and as a consequence on the repayment of the Notes. For further details please see section "Selected Aspects of Italian Law". See for further details "Expected Weighted Average Duration of the Notes" below. Subordination The Rated Notes will at all times rank without preference or priority pari passu and pro rata among themselves for all purposes. Both prior to and following the delivery of a Trigger Notice, payments of interest and principal due on the Rated Notes will rank in priority to payments of interest, principal and Premium due on the Junior Notes. Noteholders should have particular regard to the factors identified in the sections headed "Credit Structure" and "Priority of Payments" above in determining the likelihood or extent of any shortfall of funds available to the Issuer to meet payments of interest and Premium and/or repayment of principal due under the Notes. Ratings of the Rated Notes The ratings assigned by Moody's to the Rated Notes address the expected loss posed to the Noteholders following a default. The ratings assigned by Fitch to the Rated Notes incorporate an indication of the probability of default of such debt instrument. The ratings do not address, inter alia, the following: the possibility of the imposition of Italian or European withholding tax; the marketability of the Rated Notes, or any market price for the Rated Notes; or whether an investment in the Rated Notes is a suitable investment for the relevant Noteholder. A rating is not a recommendation to purchase, hold or sell the Rated Notes. Any Rating Agency may lower its rating or withdraw its rating if, inter alia, in the sole judgment of that Rating Agency, the credit quality of the Rated Notes has declined or is under evaluation. If any rating assigned to the Rated Notes is lowered or withdrawn, the -37-

43 market value of the Rated Notes may be reduced. A security credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time. In addition, any Rating Agency might include non-credit analysis on factors not directly associated with the transaction when assessing the Rated Notes. Fitch Ratings group of companies established in the EU was registered on October 31, 2011 in accordance with Regulation (EC) No. 1060/2009 of the European Parliament and of the Council of September 16, 2009 on credit rating agencies, as amended by Regulation (EU) No. 513/2011 of the European Parliament and of the Council of May 11, 2011 (the "EU Regulation"). Moody's is established in the European Union and has been registered under the EU Regulation, as resulting from the list of registered credited rating agencies (reference number 2011/247) published on 31 October 2011 by the European Securities and Markets Authority (ESMA). Conflicts of interest Various potential and actual conflicts may arise as between Noteholders themselves and as between Noteholders and Other Issuer Creditors: Ranking and conflict between Other Issuer Creditors and Noteholders Pursuant to the Intercreditor Agreement the Representative of the Noteholders shall, as regards the exercise and performance of all powers, authorities, duties and discretion vested in it under the Transaction Documents (except where expressly provided otherwise), have regard to the interests of both the Noteholders and the Other Issuer Creditors but if, in the opinion of the Representative of the Noteholders, there is a conflict between their interests, the Representative of the Noteholders will have regard solely to the interests of the Noteholders. Where the Representative of the Noteholders is required to consider the interests of the Noteholders and, in its opinion, there is a conflict between the interests of the holders of different classes of Notes, the Representative of the Noteholders will consider only the interests of the holders of the Most Senior Class of Notes. If at any time there is, in the opinion of the Representative of the Noteholders, a conflict between the interests of the Other Issuer Creditors then, subject to the above provisions, the Representative of the Noteholders shall have regard to the interests of whichever of the Other Issuer Creditors ranks higher in the Priority of Payments for the payment of the amounts therein specified. For the avoidance of any doubt, the Representative of the Noteholders shall not be obliged to act upon or comply with any direction or request of any of the Other Issuer Creditors except with regard to the instructions relating to the bank account for payments to that Other Issuer Creditor given in accordance with the provisions of the Intercreditor Agreement. Modification to the transaction documents and waivers of breach of terms Pursuant to the Conditions and the Rules of the Organisation of the Noteholders the Representative of the Noteholders is permitted to agree to certain matters, including modifications to any of the Transaction Documents and waivers in respect of any breach -38-

44 thereof provided that in its opinion, any such matter would not be materially prejudicial to the interests of the Noteholders and subject only to the prior notice to the Rating Agencies (and with respect to modification of the Condtions, subject to prior consultation with the Swap Provider). Limited rights The protection and exercise of the Noteholders' rights against the Issuer and the preservation and enforcement of the security under the Notes is one of the duties of the Representative of the Noteholders. The Conditions and the Rules of the Organisation of the Noteholders limit the ability of each individual Noteholder to commence proceedings against the Issuer by conferring on the holders of the Notes the power to determine whether any Noteholder may commence any such individual actions. The Conditions and the Intercreditor Agreement contain provisions requiring the Representative of the Noteholders to have regard to the interests of the Noteholders as regards all powers, authorities, duties and discretion of the Representative of the Noteholders. In some circumstances, the Notes may become subject to early redemption. Early redemption of the Notes in some cases may be dependent upon receipt by the Representative of the Noteholders of a direction from, or resolution of, a specified proportion of the Noteholders. If the economic interest of a Noteholder represents a relatively small proportion of the majority and its individual vote is contrary to the majority vote, its direction or vote may be of no practical effect and, if a determination is made by the requisite majority of the Noteholders to redeem the Notes, the minority Noteholders may face early redemption of the Notes against their will. The right of the Noteholders to approve a resolution on certain matters (as specified in the Rules for the Organisation of the Noteholders) is exercisable through an Extraordinary Resolution of the Noteholders, in respect of which the quorum will be two or more persons holding or representing at least 75 per cent of the Principal Amount Outstanding of the Notes then outstanding, or at an adjourned meeting, two or more persons being or representing Noteholders whatever the Principal Amount Outstanding of the Notes so held or represented. Expected maturity dates of the Notes In accordance with the mandatory redemption provisions applicable to the Notes, if there are sufficient Issuer Available Funds, full redemption of the Notes is expected to be achieved on the Payment Date falling in 27 January There can be no assurance, however, that redemption in full, or at all, will be achieved on such Payment Dates. See for further details "Expected Average Duration of the Notes". In particular, the redemption in full of the Notes may be achieved prior to such dates as a result of the occurrence of circumstances in which the Mortgage Loan Agreements may be terminated (by prepayment, early termination or otherwise) prior to their scheduled redemption dates. Although there may be certain payment obligations on the Originator in these events, there can be no assurance, however, that the monies received therefrom in all of these circumstances would be sufficient to ensure that the Issuer has the necessary funds to meet its payment obligations in respect of the Notes in whole or in part. -39-

45 Market for the Rated Notes Although application has been made for the Rated Notes to be listed on the Irish Stock Exchange, there is currently no market for the Rated Notes. The Rated Notes have not been registered under the Securities Act and will be subject to significant restrictions on resale in the United States. There can be no assurance that a secondary market for any of the Rated Notes will develop or, if a secondary market does develop, that it will provide the holders of the Rated Notes with liquidity of investments or that any such liquidity will continue for the life of such Rated Notes. Consequently, any purchaser of Rated Notes must be prepared to hold such Rated Notes until the Final Maturity Date. In particular, as at the date of this Prospectus, the secondary market for asset backed securities is experiencing disruptions resulting from reduced investor demand for such securities. This has had a material adverse impact on the market value of asset backed securities and resulted in the secondary market for asset backed securities experiencing very limited liquidity. Limited liquidity in the secondary market may continue to have an adverse effect on the market value of asset backed securities, especially those securities that are more sensitive to prepayment, credit or interest rate risk and those securities that have been structured to meet the requirements of limited categories of investors. Consequently, whilst these market conditions persist, an investor in the Rated Notes may not be able to sell or acquire credit protection on its Rated Notes readily and market values of the Rated Notes are likely to fluctuate. Any of these fluctuations may be significant and could result in significant losses to an investor. The Issuer's reliance on third parties The Issuer is a party to contracts with a number of other third parties that have agreed to perform certain services in relation to the Notes. For example, the Swap Counterparty has agreed to provide certain hedging services, the Issuer Corporate Services Provider has agreed to provide corporate services to the Issuer and the Principal Paying Agent and the Calculation Agent have agreed to provide payment and calculation services in connection with the Notes. In the event that any relevant third party fails to perform its obligations under the respective agreements to which it is a party, one or more Classes of Notes may be adversely affected. Disruptions and volatility in the global financial markets During the course of 2011, the debt crisis in the Euro-zone has intensified and three countries (Greece, Ireland and Portugal) have requested the financial aid of the European Union and the International Monetary Fund. Credit quality has generally declined, as reflected by the repeated sovereign rating downgrades suffered by several countries in the Euro-zone periphery since the beginning of the sovereign debt crisis in May The large sovereign debts and fiscal deficits in European countries have raised concerns regarding the financial condition of Eurozone financial institutions and their exposure to such countries. These concerns may have an impact on Euro-zone banks funding. Withholding tax under the Notes Payments of interest under the Notes may or may not be subject to withholding or deduction for or on account of Italian tax. For example, as at the date of this Prospectus, according to -40-

46 Law Decree number 239 of 1 April 1996, any non-italian resident beneficial owner of a payment of interest or other proceeds relating to the Notes who (i) is either not resident, for tax purposes, in a country which recognises the Italian fiscal authorities' right to an adequate exchange of information, or (ii) even if resident in a country which recognises the Italian fiscal authorities' right to an adequate exchange of information, does not timely comply with the requirements set forth in Decree 239 and the relevant application rules in order to benefit from the exemption from substitute tax, will receive amounts payable on the Notes net of Italian substitute tax (see for further details also the section entitled "Taxation" below). At the date of this Prospectus such substitute tax is levied at the rate of 20 per cent (the Notes having a maturity of not less than 18 months), or such lower rate as may be applicable under the relevant double taxation treaty. If substitute tax is imposed in respect of payments to Noteholders of amounts due pursuant to the Notes, neither the Issuer nor any other person will be obliged to gross-up or otherwise compensate the Noteholders for the lesser amounts the Noteholders will receive as a result of the imposition of substitute tax. European Withholding Tax Directive On 3 June 2003, the EU Council of Economic and Finance Ministers ("ECOFIN") adopted a new directive regarding the taxation of savings income. The directive has been in force since 1 July Under the directive each Member State is required to provide to the tax authorities of each other Member State details of payments of interest or other similar income paid by a person within its jurisdiction to an individual resident in that other Member State; however, Austria and Luxembourg may instead apply a withholding system for a transitional period in relation to such payments deducting tax at a rate of 35 per cent. The transitional period is to commence on the date from which the directive is to be applied by Member States and to terminate at the end of the first fiscal year following agreement by certain non- EU countries to the exchange of information relating to such payments. Italy has implemented the directive through Legislative Decree number 84 of 18 April 2005 ("Decree 84/2005"). Under Decree 84/2005, subject to a number of conditions being met, in the case of interest (including interest accrued on the Notes at the time of their disposal) paid since 1 July 2005 to individuals that qualify as beneficial owners of the interest and are resident for tax purposes in another Member State, the paying agent shall report to the Italian tax authorities details of the relevant payments and personal information on the individual beneficial owners. Such information is transmitted by the Italian tax authorities to the competent foreign tax authorities of the State of residence of the beneficial owner. In certain circumstances the same reporting requirements must be complied with also in respect of interest paid to an entity established in another Member State, other than legal persons (with the exception of certain Finnish and Swedish entities), entities whose profits are included in business income taxable under general arrangements for business taxation and, in certain circumstance, UCITS recognised in accordance with Directive 2009/65/EC. Priority of Payments The validity of contractual priorities of payments such as those contemplated in this transaction has been challenged in the English and U.S. courts. The hearings have arisen due to the insolvency of a secured creditor (in that case a swap counterparty) and have considered whether such payment priorities breach the "anti-deprivation" principle under English and -41-

47 U.S. insolvency law. This principle prevents a party from agreeing to a provision that deprives its creditors of an asset upon its insolvency. It was argued that where a secured creditor subordinates itself to Noteholders in the event of its insolvency, that secured creditor effectively deprives its own creditors. The Supreme Court of the United Kingdom in Belmont Park Investments PTY Limited (Respondent) v BNY Mellon Corporate Trustee Services Limited and Lehman Brothers Special Financing Inc. [2011] UK SC 38 unanimously upheld the decision of the Court of Appeal in dismissing this argument and upholding the validity of similar priorities of payment, stating that, provided that such provisions form part of a commercial transaction entered into in good faith which does not have as its predominant purpose, or one of its main purposes the deprivation of the property of one of the parties on bankruptcy, the anti-deprivation principle was not breached by such provisions. In parallel proceedings in New York, Judge Peck of the U.S. Bankruptcy Court for the Southern District of New York granted Lehman Brothers Special Finance Inc.'s ("LBSF") motion for summary judgement on the basis that the effect was that the provisions infringed the anti-deprivation principle in a U.S. insolvency. Judge Peck acknowledged that this resulted in the U.S. courts coming to a decision "directly at odds with the judgement of the English Courts". In New York, whilst leave to appeal was granted, the case was settled before an appeal was heard. Therefore concerns still remain that the English and U.S. courts will diverge in their approach which, in the case of an unfavourable decision in New York, may adversely affect the Issuer's ability to make payments on the Notes. There remains the issue whether in respect of the foreign insolvency proceedings relating to a creditor located in a foreign jurisdiction, an English court will exercise its discretion to recognise the effects of the foreign insolvency proceedings, whether under the Cross Border Insolvency Regulations 2006 or any similar common law principles. Given the current state of U.S. law, this is likely to be an area of continued judicial focus particularly in respect of multi-jurisdictional insolvencies. GENERAL RISK FACTORS AND SPECIAL CONSIDERATIONS Claw back of the sales of the Receivables Assignments executed under the Securitisation Law are subject to revocation on bankruptcy under article 67 of the Bankruptcy Law but only in the event that the adjudication of bankruptcy of the Originator is made within three months of the completion of the securitisation transaction (or, if earlier, of the purchase of the Portfolio) or, in cases where paragraph 1 of article 67 applies (e.g. if the payments made or the obligations assumed by the bankrupt party exceed by more than one-fourth the consideration received or promised), within six months of the securitisation transaction (or of the purchase of the Portfolio). Prepayments under Mortgage Loan Agreements Pursuant to article 65 of the Bankruptcy Law ("Article 65"), payments made by a debtor with respect to debts that fall due on or after the date on which the relevant debtor is declared bankrupt are ineffective against the creditors of the relevant debtor, if such payments are made within the two years prior to the declaration of bankruptcy. Any such ineffective payment may therefore be clawed-back by the bankruptcy receiver of the payor regardless of whether the debtor was insolvent at the time when the payment was made. According to the decisions number 4824 of 5 April 2002 and number of 29 July, 2009, the Italian Supreme Court held that the provisions of Article 65 apply to payments of debts -42-

48 made on or before the date on which the relevant debts fall due, irrespective of whether the loan agreement entitled the debtor to prepay the amounts due, on the grounds that any such prepayment constitutes a payment of a debt not yet due. However, in the decision number of 18 July 2008 (the "2008 Decision"), the Italian Supreme Court specified that the above principle does not apply to the prepayments made by a debtor under a mortgage loan agreement qualifying as mutuo fondiario since the debtor's right to prepay a mutuo fondiario is explicitly provided for by law and, upon exercise of the right of prepayment, the debt becomes due so that the relevant payment may not be deemed ineffective under Article 65. While article 4 of Securitisation Law provides that special purpose vehicles (which would include the Issuer) are specifically exempt from the claw-back provisions under article 67 of the Bankruptcy Law in respect of payments made to them by the underlying debtors, nothing is said as to an exemption from Article 65 (providing that a payment of a debt not yet due and payable, which falls due on or after the bankruptcy of the relevant payor, is ineffective towards the creditors of the bankruptcy estate if such payment is made in the two years preceding the bankruptcy). However, on the basis of the above-mentioned case law of the Supreme Court held in the 2008 Decision, we believe that payments received by the Issuer under loans which classify as Fondiari Loans ((mutui fondiari)), in accordance with the provisions of the Consolidated Banking Act, should not be liable to be deemed ineffective under Article 65. However, it should be noted that Italian court decisions are not binding on other courts. Mortgage Loans' Performance The Portfolio is exclusively comprised of residential mortgage backed loans which were performing as at the Valuation Date (see "The Portfolio"). There can be no guarantee that the Debtors will not default under such Mortgage Loans and that they will therefore continue to perform. The recovery of amounts due in relation to Defaulted Receivables will be subject to the effectiveness of enforcement proceedings in respect of the Portfolio which in Italy can take a considerable time depending on the type of action required and where such action is taken and on several other factors, including the following: proceedings in certain courts involved in the enforcement of the Mortgage Loans and Mortgages may take longer than the national average; obtaining title deeds from land registries which are in process of computerising their records can take up to two or three years; further time is required if it is necessary to obtain an injunction decree (decreto ingiuntivo) and if the relevant Debtor raises a defence to or counterclaim in the proceedings; and it takes an average of six to eight years from the time lawyers commence enforcement proceedings until the time an auction date is set for the forced sale of any Real Estate Asset. Law number 302 of 3 August 1998 allowed notaries to conduct certain stages of the enforcement procedures in place of the courts and was enacted in order to reduce the length of enforcement proceedings by between two and three years. Law Decree no. 212 of 22 December 2011 Law Decree no. 212 of 22 December 2011 (the "Decree 212") has introduced a new procedure by which debtors who are in a state of over indebtedness (sovraindebitamento), and to whom no bankruptcy or other insolvency proceedings under the Italian Bankruptcy -43-

49 Law or any other similar law applies, may request to enter into a debt restructuring agreement (accordo di ristrutturazione) with their relevant creditors. The debt restructuring agreement, subject to the relevant court approval, provides, inter alia, for (i) the renegotiation of the payments' terms with the relevant creditors; (ii) the full payment of the secured creditors; (iii) the full payment of any other creditors which are not part of the debt restructuring agreement (provided that the payments due to any creditors which have not approved the debt restructuring agreement, including any secured creditors, may be suspended for up to one year); and (iv) the possibility to appoint a trustee for the administration and liquidation of the debtor's assets and the distribution to the creditors of the proceeds of the liquidation. Should the debtors under the Portfolio enter into such debt restructuring agreement (be it with the Issuer or with any other of its creditors), the Issuer could be subject to the risk of having the payments due by the relevant debtor suspended for up one year. Decree 212 came into force on 23 December 2011, but it still need to be converted into law by the Italian Parliament within sixty days. In this respect, it should be noted that Decree 212 may not be approved or converted into law or, in case of conversion, that its provisions may partly differ from those stated under Decree 212. Insurance coverage All Mortgage Loan Agreements provide that the relevant Real Estate Assets must be covered by an Insurance Policy issued by leading insurance companies approved by the Originator. There can be no assurance that all risks that could affect the value of the Real Estate Assets are or will be covered by the relevant Insurance Policy or that, if such risks are covered, that the insured losses will be covered in full. Any loss incurred in relation to the Real Estate Assets which is not covered (or which is not covered in full) by the relevant Insurance Policy could adversely affect the value of the Real Estate Assets and the ability of the relevant Debtor to repay the relevant Mortgage Loan. Rights of set-off and other rights of the Debtors Under general principles of Italian law, the Debtors are entitled to exercise rights of set-off in respect of amounts due under any Mortgage Loan Agreement against any amounts payable by the Originator to the relevant Debtor. The assignment of receivables under the Securitisation Law is governed by article 58, paragraphs 2, 3 and 4, of the Consolidated Banking Act. According to the prevailing interpretation of such provision, such assignment becomes enforceable against the relevant debtors as of the later of (i) the date of the publication of the notice of assignment in the Official Gazette of the Republic of Italy (Gazzetta Ufficiale della Repubblica Italiana), and (ii) the date of registration of the notice of assignment in the competent companies' register. Consequently, Debtors may exercise a right of set-off against the Issuer on claims against the Originator and/or the Issuer which have arisen before both the publication of the notice in the Official Gazette and the registration in the competent companies' register have been completed. The exercise of such right of set-off by the Borrowers may adversely affect any sale proceeds of the Portfolio and, ultimately, the ability of the Issuer to make payments under the Notes. -44-

50 Usury Law Italian Law number 108 of 7 March 1996, as amended by the Decreto Sviluppo (the "Usury Law") introduced legislation preventing lenders from applying interest rates equal to or higher than rates (the "Usury Rates") set every three months on the basis of a Decree issued by the Italian Treasury (the last such Decree having been issued on 20 December 2011). In addition, even where the applicable Usury Rates are not exceeded, interest and other advantages and/or remuneration may be held to be usurious if: (i) they are disproportionate to the amount lent (taking into account the specific circumstances of the transaction and the average rate usually applied for similar transactions) and (ii) the person who paid or agreed to pay was in financial and economic difficulties. The provision of usurious interest, advantages or remuneration has the same consequences as non-compliance with the Usury Rates. In certain judgements issued during 2000, the Italian Supreme Court (Corte di Cassazione) ruled that the Usury Law applied both to loans advanced prior to and after the entry into force of the Usury Law. Moreover, according to a certain interpretation of the Usury Law (which was generally considered, in the Italian legal community, to have been accepted in the above mentioned rulings of the Corte di Cassazione), if at any point in time the rate of interest payable on a loan (including a loan entered into before the entry into force of the Usury Law or a loan which, when entered into, was in compliance with the Usury Law) exceeded the then applicable Usury Rate, the contractual provision providing for the borrower's obligation to pay interest on the relevant loan would become null and void in its entirety. The Italian Government intervened in this situation with Law Decree number 394 of 29 December 2000 (the "Usury Law Decree"), converted into Law number 24 by the Italian Parliament on 28 February 2001, which provides, inter alia, that interest is to be deemed usurious only if the interest rate agreed by the parties exceeds the Usury Rate applicable at the time the relevant agreement is reached. The Usury Law Decree also provides that, as an extraordinary measure due to the exceptional fall in interest rates in the years 1998 and 1999, interest rates due on instalments payable after 2 January 2001 on loans already entered into on the date on which the Usury Law Decree came into force (such date being 31 December 2000) are to be replaced by a lower interest rate fixed in accordance with parameters fixed by the Usury Law Decree. The validity of the Usury Law Decree has been challenged before the Italian Constitutional Court by certain consumers' associations claiming that the Usury Law Decree does not comply with the principles set out in the Italian Constitution. By decision number 29 of 14 February 2002, the Italian Constitutional Court stated, inter alia, that the Usury Law Decree complies with the principles set out in the Italian Constitution except for those provisions of the Usury Law Decree which provide that the interest rates due on instalments payable after 2 January 2001 on loans are to be replaced by lower interest rates fixed in accordance with the Usury Law Decree. By such decision the Italian Constitutional Court has established that the lower interest rates fixed in accordance with the Usury Law Decree are to be substituted on instalments payable from the date on which such Decree came into force (31 December 2000) and not on instalments payable after 2 January If the Usury Law were to be applied to the Notes, the amount payable by the Issuer to the Noteholders may be subject to reduction, renegotiation or repayment. -45-

51 The Originator has represented and warranted to the Issuer in the Warranty and Indemnity Agreement that the provisions of the Mortgage Loans Agreements comply with the Italian usury provisions. Compounding of Interest (Anatocismo) Pursuant to article 1283 of the Italian civil code, in respect of a monetary claim or receivable, accrued interest may be capitalised after a period of not less than six months only (i) under an agreement subsequent to such accrual or (ii) from the date when any legal proceedings are commenced in respect of that monetary claim or receivable. Article 1283 of the Italian civil code allows derogation from this provision in the event that there are recognised customary practices ("usi") to the contrary. Banks and other financial institutions in the Republic of Italy have traditionally capitalised accrued interest on a three monthly basis on the grounds that such practice could be characterised as a customary practice ("uso normativo"). However, a number of recent judgements from Italian courts (including the judgements from the Italian Supreme Court (Corte di Cassazione) number 2374/99 and number 2593/2003) have held that such practices may not be defined as customary practices ("uso normativo"). Consequently if Debtors were to challenge this practice, it is possible that such interpretation of the Italian civil code would be upheld before other courts in the Republic of Italy and that the returns generated from the relevant Mortgage Loan Agreements may be prejudiced. The Originator has consequently undertaken in the Warranty and Indemnity Agreement to indemnify the Issuer in respect of any losses, costs and expenses that may be incurred by the Issuer in connection with any challenge in respect of the interest on interest. Fixed charges may take effect under English law as floating charges Pursuant to the terms of the Deed of Charge, the Issuer has purported to grant first fixed charges over the GIC Account and the amounts deposited thereon. The law in England and Wales relating to the characterisation of fixed charges is unsettled. It is difficult to predict how the principles laid down by the English courts in relation to characterisation of fixed and floating charges in case law (including National Westminster Bank plc -v- Spectrum Plus Limited ([2005] UK HL 41)) would be applied to transactions in the nature of the issue of the Notes. The principal risk is that of fixed charges purported to be created by the Deed of Charge being recharacterised as floating charges if it is proven, for example, that the Representative of the Noteholders does not exert sufficient control over the charged assets for the charges to constitute fixed charges. The assessment of the degree of control for such purposes is essentially a question of fact. Political and economic developments in the Republic of Italy and in the European Union The financial condition, results of operations and prospects of the Republic of Italy and companies incorporated in the Republic of Italy may be adversely affected by events outside their control, namely European law generally, any conflicts in the region or taxation and other political, economic or social developments in or affecting the Republic of Italy generally. -46-

52 Change of law The structure of the transaction and, inter alia, the issue of the Notes and the ratings assigned to the Notes are based on Italian law, tax and administrative practice in effect at the date hereof, having due regard to the expected tax treatment of all relevant entities under such law and practice. No assurance can be given that Italian law, tax or administrative practice will not change after the Issue Date or that such change will not adversely impact the structure of the transaction and the treatment of the Notes. Projections, forecast and estimates Estimates of the expected maturity and expected average lives of the Notes included herein, together with any projections, forecasts and estimates set out in this Prospectus, are forward looking statements. Projections are necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the projections will not materialise or will vary significantly from actual results. Accordingly, the projections are only estimates. Actual results may vary from projections and the variation may be material. Forward-looking statements Words such as "intend(s)", "aim(s)", "expect(s)", "will", "may", "believe(s)", "should", "anticipate(s)" or similar expressions are intended to identify forward-looking statements and subjective assessments. Such statements are subject to risks and uncertainties that could cause the actual results to differ materially from those expressed or implied by such forwardlooking statements. The reader is cautioned not to place undue reliance on these forwardlooking statements, which speak only as of the date of this Prospectus and are based on assumptions that may prove to be inaccurate. No-one undertakes any obligation to update or revise any forward-looking statements contained herein to reflect events or circumstances occurring after the date of this Prospectus. Regulatory initiatives may result in increased regulatory capital requirements and/or decreased liquidity in respect of the Notes In Europe, the U.S. and elsewhere there is increased political and regulatory scrutiny of the asset-backed securities industry. This has resulted in a raft of measures for increased regulation which are currently at various stages of implementation and which may have an adverse impact on the regulatory capital charge to certain investors in securitisation exposures and may thereby affect the price and liquidity of asset-backed securities in the secondary market. In particular, investors should be aware of article 122(a) of the Capital Requirements Directive ("CRD"), which comprises Directive 2006/48/EC and Directive 2006/49/CE, as amended by Directive 2009/111/EC, which will apply to newly issued asset-backed securities after 31 December 2010, and to asset-backed securities issued on or before that date from the beginning of 2015 to the extent that new underlying exposures are added or substituted after 31 December Article 122(a) of the CRD, implemented into Italian law by the Bank of Italy Circular No. 263 of 27 December 2006 ("Nuove disposizioni di vigilanza prudenziale per le banche" as amended by the 10th revision of 21 December 2011) requires, amongst other things, an EU regulated credit institution to only invest in asset-backed securities in respect of which the -47-

53 originator, sponsor or original lender of the securitisation has explicitly disclosed to the credit institution that it will retain, on an ongoing basis, a net economic interest of not less than 5 per cent in respect of certain specified credit risk tranches or asset exposures. Article 122(a) of the CRD also requires that, before investing, and as appropriate thereafter, credit institutions, shall be able to demonstrate to the competent authorities for each of their individual securitisation positions, that they have a comprehensive and thorough understanding of and have implemented formal policies and procedures for analysing, understanding and stress testing their securitisation exposures and, where applicable, the underlying exposures. Furthermore credit institutions shall regularly perform their own stress tests appropriate to their securitisation positions on an on-going basis. Investors in the Notes are responsible for analysing their own regulatory position and are required to independently assess and determine the sufficiency of the information provided by the Originator for the purposes of complying with Article 122(a) of the CRD, as implemented. Consequently, none of the Issuer, the Sole Lead Manager, the Sole Arranger or Barclays makes any representation to any prospective investor or purchaser of the Notes (i) regarding the regulatory capital treatment of their investment on the Issue Date or at any time in the future (in addition to any other regulatory requirements applicable to them with respect to their investment in the Notes) and (ii) that such information is sufficient in all circumstances for the purposes of complying with Article 122(a) of the CRD, and the relevant implementation. Failure to comply with one or more of the requirements set out in Article 122(a) of the CRD and in the relevant implementation will result in the imposition of a penal capital charge on the notes acquired by the relevant investor. In particular, where the relevant requirements of Article 122(a) of the CRD, as implemented are not complied with in any material respect and there is negligence or omission in the fulfilment of the due diligence obligations on the part of a credit institution that is investing in the Notes, a proportionate additional risk weight of no less than 250 per cent of the risk weight (with the total risk weight capped at 1250 per cent) which would otherwise apply to the relevant securitisation position shall be imposed on such credit institution. Consequently, the Noteholders should make themselves aware of the provisions of the Article 122(a) of the CRD and make their own investigation and analysis as to the impact of the CRD on any holding of Notes. To date there is limited guidance, and no regulatory or judicial determination, on the interpretation and application of Article 122(a) of the CRD. Until additional guidance is available and such determinations are made, there remains considerable uncertainty with respect to the interpretation and application of the provisions of Article 122(a) of the CRD and, in particular, what will be required to demonstrate compliance with Article 122(a) of the CRD to national regulators. Investors should take their own advice on compliance with, and the application of, the provisions of Article 122(a) of the CRD. In addition, investors should be aware that the regulatory framework published by the Basel Committee on Banking Supervision (the "Basel Committee") in 2006 ("Basel II framework") has not been fully implemented in all participating countries. The implementation of the framework in relevant jurisdictions may affect the risk-weighting of the Notes for investors who are or may become subject to capital adequacy requirements that follow the framework. -48-

54 On 16th December, 2010 and 13th January, 2011, the Basel Committee issued its final guidance on the proposed changes to capital adequacy and liquidity requirements ("Basel III"), which envisages a substantial strengthening of existing capital rules, including through the following proposals: (a) (b) (c) (d) (e) raising the quality of the Core Tier 1 capital base in a harmonized manner (including through changes to the items which give rise to adjustments to that capital base and a reform of the capital structure); introducing a requirement for non-core Tier I and Tier II capital instruments to have a mechanism that requires them to be written off on the occurrence of a bailout of the institution; strengthening the risk coverage of the capital framework; promoting the build up of capital buffers; and introducing a new leverage ratio as well as short-term and long-term standards for funding liquidity (referred to as the Liquidity Coverage Ratio and the Net Stable Funding Ratio). The implementation of the Basel III reforms will begin on 1st January, 2013; however, the requirements are subject to a series of transitional arrangements and will be phased in over a period of time. Member countries will be required to implement the new capital standards from January 2013, the new Liquidity Funding Ratio from January 2015 and the Net Stable Funding Ratio from January In the European Union, the Basel III proposals are expected to be implemented by way of further changes to the CRD, which will be transposed into national law by EU Member States. As at the date of this Prospectus, the European Commission has published a public consultation document on proposed amendments to CRD (the "CRD IV"), which reflects the consultation documents issued by the Basel Committee in December 2009 (the "Basel III Proposal"), later finalized in the form of Basel III; since few changes were made between the Basel III Proposal and Basel III, the CRD IV largely reflects Basel III. Once CRD IV is adopted, Italy will be required to enact implementing laws and regulations. Significant uncertainty remains around the final requirements and implementation of these proposed initiatives. There can be no guarantee that the regulatory capital treatment of the Notes for investors will not be affected by any future implementation of and changes to the CRD, Directive 2009/138/EC, the Basel II framework (including the Basel III changes described above) or other regulatory or accounting changes. The Issuer believes that the risks described above are the principal risks inherent in the transaction for holders of the Notes but the inability of the Issuer to pay interest or repay principal on the Notes may occur for other reasons and the Issuer does not represent that the above statements of the risks of holding the Notes are exhaustive. While the various structural elements described in this Prospectus are intended to lessen some of these risks for holders of the Notes, there can be no assurance that these measures will be sufficient or effective to ensure payment to the holders of the Notes of interest or principal on such Notes on a timely basis or at all. -49-

55 THE PORTFOLIO Pursuant to the Receivables Purchase Agreement, the Issuer has purchased the Portfolio from the Originator together with any other rights of the Originator to guarantees or security interests and any related rights that have been granted to the Originator to secure or ensure payments under any of the Receivables. The Receivables comprised in the Portfolio arise out of residential mortgage loans (mutui ipotecari residenziali) governed by Italian Law and entered into by the Originator in the course of its business. The Receivables are classified as at the Valuation Date as performing by the Originator. All Receivables comprised in the Portfolio, purchased by the Issuer from the Originator, have been selected on the basis of the Criteria listed in the Annex 1 of the Receivables Purchase Agreement and repeated in this Prospectus (see "The Criteria", below). As at the Valuation Date, the aggregate of the Outstanding Principal of all Receivables comprised in the Portfolio amounted to ,00. The information relating to the Portfolio contained in this Prospectus is, unless otherwise specified, a description of the Portfolio as at the Valuation Date. The Criteria The Receivables arise out of Mortgage Loans which, as at the Valuation Date, met the following criteria: (i) (ii) (iii) (iv) (v) (vi) (vii) mortgage loans which are classified as Fondiari Loans (mutui fondiari); mortgage loans denominated in euro; mortgage loans entered into exclusively with Banca Woolich S.p.A Barclays Bank PLC; mortgage loans completely advanced, under which there are no undrawn amounts and no further advances are allowed; mortgage loans granted to natural persons (whether individually or jointly with other persons), included in the category SAE 600 ("Famiglie Consumatrici") pursuant to the Supervisory Regulations; mortgage loans in respect of which the relevant debtors are resident and domiciled in the Republic of Italy; mortgage loan having a fixed rate of interest, or a variable floating rate of interest indexed to Euribor for 1, 3 or 6 month deposits or indexed to ECB MRO Rate, as the case may be, with the exclusion of mortgage loans with a variable floating rate of interest indexed to the Swiss franc; (viii) mortgage loan secured by an "economically" first ranking mortgage (ipoteca di primo grado economico), i.e. (i) a first ranking priority mortgage (ipoteca di primo grado), in respect of which there are not further mortgages granted on the relevant real estate -50-

56 asset in favour of third parties ranking equal or in priority with respect to the rank of such mortgage or, if such mortgages exist, (ii) a subsequent ranking priority mortgage (ipoteca di grado successivo) with respect to which the obligations secured by the mortgage(s) ranking prior to such subsequent mortgage have been fully satisfied (as documented in the relevant mortgage loan agreement) or a consent to the cancellation of the previous mortgage has been obtained (as documented in the relevant mortgage loan agreement) or (iii) a mortgage of a subsequent ranking with respect to the first ranking priority mortgage if the claims secured by a mortgage of a prior ranking and in respect of which the debtor is the same person, are transferred to the Company; (ix) (x) (xi) mortgage loan secured by "ipoteca" on residential properties with cadastral codes of A1, A2, A3, A4, A5, A6, A7, A8, A9, A11; mortgage loans in respect of which there are no amounts due and owing but not paid by the relevant debtor outstanding for more than 30 days; in relation to which the ratio between the disbursed amount and the relevant real estate value, at the date of the disbursement, was not greater than 80%, or, where exceeding the 80% ratio, in respect of which the relevant debtor has entered into a fidejussory policy with an insurance company; (xii) mortgage loans originated between 1 January 1998 (inclusive) and 31 October 2011 (inclusive); (xiii) mortgage loans in respect of which the relevant debtor, at the date of the disbursement, was not an employee, officer or director of Banca Woolich S.p.A. Barclays Bank PLC or any other company of the group; (xiv) (xv) (xvi) mortgage loans with an amortisation repayment profile characterised by (i) instalments composed of an interest and a principal component; or (ii) instalments composed of an interest component to be paid on a monthly basis and a principal component to be paid on a stepped basis; mortgage loans secured by mortgages on real estate assets located in Italy; mortgage loans not benefitting from any subsidy from a third party (such as a State entity); (xvii) mortgage loans not fractionated (mutui non frazionati); (xviii) mortgage loans in respect of which the outstanding principal is higher than euro 1,000 and lower than euro 10,000,000; (xix) (xx) (xxi) mortgage loans in respect of which the number of instalments not yet due is higher than 12; mortgage loans which have not been subject to renegotiations in accordance with Law Decree n 93 of 27 May 2008 (Tremonti Law); mortgage loans which are not subject to suspension of payments pursuant to Law Decree n 39 of 28 April 2009; -51-

57 (xxii) mortgage loans in respect of which at least one instalment has been paid. Characteristics of the Portfolio The Mortgage Loan Agreements included in the Portfolio are governed by Italian law and have the characteristics illustrated in the following tables. The following tables set out information with respect to the Portfolio derived from the information supplied by the Originator in connection with the acquisition of the Receivables by the Issuer. The information in the following tables reflects the position of the Portfolio as at the Valuation Date. Barclays Bank Residential Mortgage Portfolio at 13/1/2012 Pool Summary Total Value ,51 Number of Loans Average Minimum Maximum Initial LTV 66,20% 1,79% 80,01% Current LTV 63,91% 1,72% 80,00% Margin of Variable Rate (%) 1,76 0,00 3,00 Current Loan Amount , ,00 Original Loan Advance , ,00 Original Term (Mths) 319, Remaining Term (Mths) Seasoning (Mths) Table 1. Distribution of Loans by Original Loan To Value Ratio % of Current Originator Number of Loans % of Pool Aggregate Current Balance Balances Barclays Bank Plc ,00% ,51 100,00% Total ,00% ,51 100,00% Table 2. Distribution of Loans by Original Loan To Value Ratio Original LTV Ratio % Number of Loans % of Pool Aggregate Current Balance % of Current Balances =< ,26% ,11% ,18% ,12% ,76% ,93% ,48% ,72% ,07% ,00% ,87% ,78% ,82% ,49% ,55% ,85% >80-0,00% 0 0,00% Total ,00% ,51 100,00% -52-

58 Table 3. Distribution of Loans by Current Loan To Value Ratio Current LTV Ratio % Number of Loans % of Pool Aggregate Current Balance % of Current Balances =< ,41% ,16% ,71% ,38% ,45% ,41% ,91% ,23% ,44% ,55% ,50% ,57% ,00% ,85% ,59% ,85% >80-0,00% 0 0,00% Total ,00% ,51 100,00% Table 4. Distribution of Loans by Current Balance Current Balance Number of Loans % of Pool Aggregate Current Balance % of Current Balances <= ,03% ,00% 15000, ,56% ,11% 30000, ,44% ,72% 45000, ,26% ,14% 60000, ,02% ,66% 75000, ,06% ,74% 90000, ,11% ,09% , ,43% ,73% , ,24% ,95% , ,45% ,40% , ,79% ,37% , ,73% ,55% > ,87% ,53% Totals ,00% ,51 100,00% Table 5. Distribution of Loans by Months to Maturity Months Remaining Number of Loans % of Pool Aggregate Current Balance % of Current Balances <= ,01% ,00% ,03% ,00% ,03% ,01% ,40% ,68% ,52% ,35% ,25% ,71% ,03% ,87% ,98% ,44% ,69% ,76% ,00% ,66% ,17% ,44% ,73% ,66% ,17% ,42% Totals ,00% ,51 100,00% -53-

59 Table 6. Distribution of Loans by Amortisation Method (100% repayment mortgages) Repayment Method Number of Loans % of Pool Aggregate Current Balance % of Current Balances French Method ,05% ,22% Capital and Interest 560 0,93% ,77% Increasing Payment 9 0,01% ,01% Totals ,00% ,51 100,00% Table 7. Distribution of Loans by Seasoning Seasoning (Mths) Number of Loans % of Pool Aggregate Current Balance % of Current Balances ,21% ,73% 20, ,25% ,81% 25, ,45% ,57% 30, ,33% ,30% 35, ,23% ,22% 40, ,14% ,12% 45, ,05% ,05% 50, ,05% ,05% 55, ,05% ,05% 60, ,02% ,02% 65, ,03% ,02% 70, ,03% ,01% 75, ,03% ,01% > ,12% ,05% Totals ,00% ,51 100,00% Table 8. Distribution of Loans by Loan Purpose Loan Purpose Number of Loans % of Pool Aggregate Current Balance % of Current Balances Purchase ,95% ,76% Purchase & Restructuring - 0,00% 0 0,00% Remortgage ,40% ,84% Completeion of Works 486 0,81% ,66% Liquidity ,41% ,26% Restructuring ,13% ,20% Remortgage 783 1,30% ,29% Totals ,00% ,51 100,00% Table 9. Distribution of Loans by Margin Margin over interest rate basis Number of Loans % of Pool Aggregate Current Balance % of Current Balances Empty (Fixed Rate Pure) ,80% ,39% <= 0, ,11% ,16% 0, ,49% ,15% 1,01-1, ,89% ,53% 1,26-1, ,53% ,69% 1,51-1, ,67% ,51% 1, ,84% ,94% 2,01-2, ,64% ,61% 2,26-2,5 16 0,03% ,02% 2,51-2,75 1 0,00% ,00% 2, ,00% ,00% Totals ,00% ,51 100,00% -54-

60 Table 10. Distribution of Loans by Region Loan Region Number of Loans % of Pool Aggregate Current Balance % of Current Balances Abruzzo % 61,213, % Basilicata % 13,778, % Calabria % 75,098, % Campania 5, % 697,890, % Emilia Romagna 2, % 360,112, % Friuli Venezia Giulia % 39,538, % Lazio 11, % 1,765,265, % Liguria 1, % 228,272, % Lombardia 14, % 1,939,536, % Marche % 75,802, % Molise % 17,616, % Piemonte 7, % 899,207, % Puglia 2, % 310,737, % Sardegna 1, % 201,338, % Sicilia 2, % 335,918, % Toscana 2, % 362,580, % Trentino Alto Adige % 6,235, % Umbria % 62,987, % Val D'Aosta % 11,401, % Veneto 2, % 385,306, % Totals 60, % 7,849,838, % Table 11. Distribution of Loans by Legal Lien Position Lien Number of Loans % of Pool Aggregate Current Balance % of Current Balances First 59, % 7,806,712, % Second or Higher % 43,125, % Totals 60, % 7,849,838, % Table 12. Distribution of Loans Type Loan Type Number of Loans % of Pool Aggregate Current Balance % of Current Balances Variable Rate ,20% ,77% Fixed Rate ,68% ,37% Variable Rate Fixed Installment Variable Duration ,44% ,15% Variable with Option to Fix ,00% ,95% Interest Only + Capital Repayments 515 0,86% ,67% Rising Installments 9 0,01% ,01% Capped Mortgages ,86% ,36% Fixed Rate + Option to fix ,80% ,59% State Sale 91 0,15% ,13% STEP UP 2 0,00% ,00% Totals ,00% ,51 100,00% -55-

61 THE ORIGINATOR, THE SERVICER, THE CALCULATION AGENT, THE SWAP COUNTERPARTY, THE GIC ACCOUNT BANK, THE COLLECTION ACCOUNT BANK, THE SUBORDINATED LOAN Barclays Bank PLC PROVIDER AND THE EXPENSES LOAN PROVIDER Barclays Bank PLC is a public limited company registered in England and Wales under number The liability of the members of Barclays Bank PLC is limited. It has its registered head office at 1 Churchill Place, London, E14 5HP. Barclays Bank PLC was incorporated on 7 August 1925 under the Colonial Bank Act 1925 and on 4 October 1971 was registered as a company limited by shares under the Companies Act 1948 to Pursuant to The Barclays Bank Act 1984, on 1 January 1985, Barclays Bank was reregistered as a public limited company and its name was changed from "Barclays Bank International Limited" to "Barclays Bank PLC". Barclays Bank PLC and its subsidiary undertakings (taken together, the "Group") is a major global financial services provider engaged in retail and commercial banking, credit cards, investment banking, wealth management and investment management services. The whole of the issued ordinary share capital of Barclays Bank PLC is beneficially owned by Barclays PLC, which is the ultimate holding company of the Group. The short term unsecured obligations of Barclays Bank PLC are rated P-1 by Moody s and F1 by Fitch Ratings Limited and the long-term obligations of Barclays Bank PLC are rated Aa3 by Moody s and A by Fitch Ratings Limited. Based Based on the Group's audited financial information for the year ended 31 December 2010, the Group had total assets of 1,490,038 million (2009: 1,379,148 million), total net loans and advances 1 of 465,741 million (2009: 461,359 million), total deposits 2 of 423,777 million (2009: 398,901 million), and total shareholders' equity of 62,641 million (2009: 58,699 million) (including non-controlling interests of 3,467 million (2009: 2,774 million)). The profit before tax from continuing operations of the Group for the year ended 31 December 2010 was 6,079 million (2009: 4,559 million) after impairment charges and other credit provisions of 5,672 million (2009: 8,071 million). The financial information in this paragraph is extracted from the audited consolidated financial statements of Barclays Bank PLC for the year ended 31 December Based on the Group's unaudited financial information for the six months ended 30 June 2011, the Group had total assets of 1,493,464 million, total net loans and advances 1 of 500,734 million, total deposits 2 of 457,572 million, and total shareholders equity of 62,521 million (including non-controlling interests of 3,354 million). The profit before tax from continuing operations of the Group for the six months ended 30 June 2011 was 2,653 million after impairment charges and other credit provisions of 1,828 million. The financial information in this paragraph is extracted from Barclays Bank PLC's unaudited Interim Results Announcement for the six months ended 30 June None of the Rated Notes and the Junior Notes will be obligations of Barclays or any of its affiliates. 1 Total net loans and advances include balances relating to both bank and customer accounts. 2 Total deposits include deposits from bank and customer accounts. -56-

62 CREDIT AND COLLECTION POLICY Distribution List Name Federico Provinciali Clara Di Luca Tommaso Giordani Collection & Recoveries Policy Manual Retail Credit Barclays Bank Italy Title, Department Risk Director Head of Collection and Litigation Operations, Risk Dept Head of Credit Policies and Infrastructure, Risk Dept Document Control Page Version Date Status Owner Reason for Change Number Issued /10/09 Final Head of Policies /03/2011 Final Head of Credit Policies Group policy compliance; and Infrastructure new portfolios under management /08/2011 Final Head of Credit Policies Forbearance and Loss and Infrastructure Recognition Policy compliance Approval Version Number Date Approved Name Title 1.0 Federico Provinciali Tommaso Giordani Adriano Bottazzi Marianna Carboni /05/2011 Federico Provinciali Tommaso Giordani Clara Di Luca /08/2011 Federico Provinciali Tommaso Giordani Clara Di Luca Signature: Risk Director Head of Policies, Risk Dept Collection Manager, Risk Dept Litigation Manager, Risk Dept Risk Director Head of Credit Policies and Infrastructure Head of Collection and Litigation Operations Risk Director Head of Credit Policies and Infrastructure Head of Collection and Litigation Operations -57-

63 1. Overview Following Group and RRB Policies, the Collection & Recoveries Policy Manual Retail Credit defines the local rules and guidelines for Collection and Recoveries activities with respect to Mortgage Loans, Credit Cards, Personal Loans, Salary Secured Loans (SSL), Overdrafts and Small and Medium Enterprise loans. The policies set the general rules for collection and recovery processes encompassing strategies and operational structures; internal and external agents; accounts re-age, repayment plans, charge-off, write-off and debt sale. The policy framework set by Group is described in the following documents: Retail Credit Risk Control Framework, Group Forbearance and Loss Recognition Policy, RRB Europe Debt Sale Policy, Group Retail Credit Risk MI Definition. Whenever local regulations and supervisory rules require deviations from Group policies, appropriate out of policy management tool will be submitted (breaches, dispensations, waivers). Operational and any further details are described in the Local Operational Manuals, split by product/process whenever appropriate. 1.1 Policy approval The Collection and Recoveries Policy must be approved by the CRMC Italy, after sign off by the following functions: Risk Director, Head of Credit Policies and Infrastructure, Head of Collections Operations. 1.2 Policy owner The Policy Owner is the Italy Head of Credit Policies and Infrastructure, who is responsible for compliance with Group and Group/RRB Policies. Any material change in a policy (including its termination) must receive the same approval that was required for its adoption. Any material change in a policy must be distributed in the same manner as the original policy was distributed. -58-

64 1.2.1 Policy review A review of the Policy will be made once a year or with a greater frequency if necessary. Any changes and/or amendments will be approved as per the normal process and communicated to relevant sections accordingly Audit Trail The Italian Head of Credit Policies and Infrastructure will keep a record of any amendments, changes and revisions made to the Policies, by whom and when. 1.3 Incident Management Incidents are currently raised via the Magic process, managed through the Intranet. Furthermore, a summary of the incident is communicated by to the competent department (Operations Direction) for review and action. In case of major malfunctioning or structural inadequacies, Business Partners from COO must be involved and the problem must be escalated to the appropriate decision level. 1.4 Delegation of limits of authority Delegated authority for authorizing forgiven amount in settlement: Refer to: Allegato n. 1 al Regolamento Interno - Disciplina Uniforme dei Poteri Delegati. Delegated authority for authorizing write-off of immaterial accounts outstanding: Head of Collection and Litigation Operations (HCLO). Delegated authority for authorizing interest rate reduction, not commercially available remedial products, fees and penalties waiver: Head of Collection and Litigation Operations. Delegated authority for overrides, referrals and decision with respect to stated policy rules: Risk Director (RD). Following a matrix related to some critical processes and delegated authority with guidelines on override authorization: Process\Authority HCLO RD CRMC write-off 3 : N\A N\A any value debt sales up to 50k (net up to250k (net N\A settlement credit per account) credit) N\A small up to 10% of any value balances overdue for fixed 3 For Overdrafts and SME HCLO authority is limited to the post Charge Off phase being the pre charge Off phase under responsibility of Branch Business Support team. -59-

65 terms product and up to 5% of credit line for revolving facilities both within a maximum of 100k (net credit per month) legal ( Sofferenza ): suspensions up to 200k over 200k N\A Within the delegated authority the manager can further sub-delegate it with respect to the structure of own office. The sub-delegation process will be detailed on operational manuals. 2. Organization The Collection Operations department is part of the Risk Direction. It is responsible for bringing delinquent accounts to a current status in accordance with the terms and conditions of the credit agreement. Its organisation needs to be able to carry out all aspects of the credit and collection policy. Impairment and Collection Strategies is also part of the Risk Direction, it is responsible (but not limited to) for definition, supervision and monitoring of collection strategies and their impact on portfolio risk performance and impairment calculation. The Head of Impairment and Collection Strategies is responsible for: strategy design and approval of strategies when proposed by Collection Operations, collection target definition embedded in impairment RAF figures, approval of economic rationales embedded in commission plans, debt sales eligible portfolio selection and related price, monitoring compliance with the policy devised in this document, collection MI development and update, capacity plan framework and related portfolio data, regular review to determine any modification when needed, reporting any breaches of the policy to the Head of Credit Policy, Approval of Collection Agencies selection and load mix 2.1 Strategies and strategy design Collection strategies are sets of actions, time of execution and commission plans and incentives (when external agents are used) aiming at maximizing the collection and recovery results in each stage of past due management and minimizing costs taking in account the general business target (see following point). They are designed and deployed using appropriate tools for simulation and evaluation before application and for monitoring after deployment. When such tools are not available, they are based upon structured performance analysis and expert evaluation, related also to market environment if known. Collection strategies are approved by CRMC and circulated to Collection Operations teams for implementation activities. -60-

66 2.2 Collection target definition Collection target should be set, using the result coming from roll rates as forecasted in the latest available RAF, in term of expected asset distribution by bucket to achieve a defined impairment figure. In the same way recovery target should be set based upon recovery vintage evidence and recoveries embedded in LGD2 RAF figures. The target should be notified to Collection Operation after each RAF refresh (usually performed on a quarterly base) and monitored on an ongoing basis. 2.3 Approval of commission plans Commission plans and incentives for current strategies and special campaigns must be approved by Collection Strategies, evaluating the economic rationales linking costs to recoveries and impairment parameters. 2.4 Debt sales management Collection strategies is responsible for selecting and evaluating sale of debt after charge-off, which must be evaluated in term of economic differential between expected recoveries (net of costs) and sale price offered by qualified third parties. 2.5 Policy compliance Any breach to the mandatory requirements of this policy must be notified to the policy owner as soon as identified. In case of events that may lead to a breach of any of the mandatory Group Policies a detailed analysis must be notified to appropriate Governance function for exception management activities and reporting to business units. 2.6 Collection MI Collection strategy team must develop and maintain a set of report to address collections and recovery performance from an aggregate perspective (at portfolio/product level), to monitor collection performance with specific focus on impairment impacts. Collection Operations must maintain a set of operational reports to control and manage the day by day activities, with focus on resource allocation, cost effectiveness and target achievement Monthly Collection Pack As a minimum requirement the following data should be captured, analysed and tracked: Volume and value of assets by stage of delinquency (e.g. count of days delinquent or cycle/bucket of delinquency, this should be split by status (e.g. General delinquent, insolvency, deceased, repayment etc.) The flow of accounts from one cycle/bucket of delinquency to another, what remains in the same cycle/bucket, what flows down a worse stage of delinquency and what flows back (either full or partial cure) Performances by Collection Agency -61-

67 2.6.2 Daily Collection Report Daily reports should look to capture delinquency and operational Collections activity. The content should allow a comparison of operational efficiency, cash collected, and volumes of delinquent accounts cured. Examples of data elements captured, tracked and analysed daily are: Volume and value of active accounts in delinquency by cycle/bucket Volume and value of payments and bounces by billing cycle In addition to these reports it is expected that Operational Managers would have further metrics at cycle and collector/agency level Recoveries MI On a monthly basis, dedicated reports highlight the accounts having overtaken charge-off and write-off terms. The MI must cover the amounts recovered at the account level based on Vintage of charge off. 2.7 Capacity plan framework and data Collection strategies should define a common framework with respect to FTE estimation on phone collection activities, where performed internally or by external centres, whenever the costs are calculated on resources allocation. Data on forecasted volumes of accounts should be updated in line with RAF submission to be reflected in capacity plans. 2.8 Policy review 4 A full review of this policy must be performed and documented at least annually. However a gap analysis must be performed against any new/amended relevant Group Policy. This document should be reviewed and updated in case of any relevant change in operational and strategic workflow. 3. Process 3.1 Collections (pre charge-off activities) The aims of collection activities are to return the account to current status through timely actions performed toward past due accounts/customers, evaluating conditions and opportunity for remedial plans whenever customer are in temporary or permanent reduced capacity to pay. 4 An action plan will be presented for approval to Credit Risk Management Committee in order to address timing and action to be pursued to deliver on operational manuals, system functionalities GAPS, any dispensation / waiver to group policy needed to fully comply with this document -62-

68 3.1.1 Triggers into Collections Where an account breaches its agreed obligations or an insufficient payment is made before the due date and it is considered that the risk of non payment is high then Collections activity should take place. A payment is deemed insufficient where the amount is less than 100% of the due amount in principal and contractual interest (percentage may vary based on specific strategic analysis. Penalty interests ( interessi di mora ) and fees are treated separately and should not contribute to the aging of the account (when information systems allow the management of this functionality). For cards minimum due must be paid to prevent ageing of the account. Accounts should also be triggered into Collections if there is information available that the customer is in financial difficulty (for example from public registries and credit bureaux), deceased or has completed the loan schedule but still has a debit balance on the account. A loan should also be triggered into Collections if a payment has been received but has subsequently been reversed or the direct debit payment has been removed and no payment method is recorded on the system. SSL are managed according to dedicated policy related to unpaid installment by the third party administration or company, insurance claim management and collections actions toward the customer whenever appropriate Early stage (1-60 dpd) The goal at this stage is to maximize the return of customers to current status. Collection queues should be normally aligned to delinquency buckets, with special statuses assigned to specific queues (deceased, suspected fraud, etc). Action used are mainly dunning letters and phone collection calls. Internal and/or external phone collection and door-to-door agencies can be used, maintaining a random assignment to different agencies where applicable and always guaranteeing the statistical significance of the control groups in champion challenger deployment. Appropriate compensation scheme and incentive goals must be defined for each agency. If a DSS is in place, more sophisticated segmentation strategy can be implemented. Special treatment for First Instalment Defaulters, untraceable and deceased customers should be defined Intermediate stage ( dpd) The intermediate stage of delinquent accounts management spans the 61 to 120 dpd time period. The goal at this stage is still to maximize the return of customers to current status, using some sort of remedial tools if applicable. Collection queues should be aligned to delinquency buckets or multiple thereof. At this stage impairment concerns start to rise and appropriate targets must be set along the expected values. -63-

69 Action used are mainly specialized phone collection calls and door-to-door agencies contacts for cash collection at customers residence. Internal and/or external phone collection and door-to-door agencies can be used, maintaining a random assignment to different agencies where applicable and always guaranteeing the statistical significance of the control groups in champion challenger deployment. Appropriate compensation scheme and incentive goals must be defined for each agency Late stage ( dpd) The late stage of delinquent accounts management spans the 121 to 180 dpd time period (121 to 360 dpd for Mortgages). The goal at this stage is to understand why the previous actions have been ineffective and more effective treatments can be set up to prevent the account to be charged-off. Collection queues should be aligned to delinquency buckets or multiple thereof. Impairment concerns are high, appropriate targets must be set in accordance with expected values. Action used are mainly specialized door-to-door agencies contacts for remediation and, if feasible, cash collection at customers residence. Internal and/or external phone collection and door-todoor agencies can be used, maintaining a random assignment to different agencies where applicable and always guaranteeing the statistical significance of the control groups in champion challenger deployment. Appropriate compensation scheme and incentive goals must be defined for each agency Forbearance and Loss Mitigation Tools This Policy is aimed to ensure the use of specific mitigation tools is both appropriate for customers in financial difficulties at that time and sets minimum standards for qualification criteria, frequency, monitoring, reporting and control of such tools. Policies that fall under the umbrella of the Italy Retail forbearance and loss mitigation policy are as follows: Re-Age Policy: Re-age refers to returning a delinquent account to current status without collecting the total amount of arrears (principal, interest and fees) outstanding. Forbearance Policy (Repayment Plan/Restructure etc): Forbearance is defined as an agreement between the Bank and the customer to accept less than contractual amounts due, where financial difficulties would otherwise prevent satisfactory repayment within the original terms and conditions of the contract. Special Relief Programs: special relief programs are referred here as Italy specific programs sponsored by Government, Bank Associations, Credit Organizations and aimed to address customers difficulties in the event of calamities (earthquakes, floods) or general Financial Crisis. For these special cases the Bank is required to fulfill the programs therefore acting on a reactive basis rather than proactive; -64-

70 Settlement Policy: Settlement is defined as the acceptance by the Bank of an offer from the customer for a sum less than the value of the financial asset, in full and final settlement of the debt. It includes a forgiven amount (the amount to be waived) and a settlement amount (the amount to be paid). As far as detailed tracking of all remedial Tools by product that are currently in use in the Italy Retail business please refer to products specific sections of this document Re-Age (Amortising & Open End/Revolving Products) A Re-age action is applied when the level of recorded arrears on the account is reduced in the bank records without the customer having repaid the arrears. It is applied when a customer: has fallen behind on his/her contractual payments; is able to meet future contractual payments, but is unable to payback the arrears (e.g. the missed payments are due to a temporary change in the customers financial circumstances which has now been corrected, but the customers finances will not permit payment of the arrears). An account must be considered as having been re-aged (either to the good book, or to a less severe cycle delinquent state), where its level of recorded delinquency is reduced in the bank s books without the requisite level of arrears having been paid. A re-aged account will follow the standard Charge Off process when back to delinquency. For amortising products the re-age is operationally carried out by either: Extension of term with no associated change in contractual payment; Incorporation of the arrears into a revised contractual monthly payment over the original term. Accounts must not be re-aged unless all of the following apply: The borrowing must have been on book at least nine months before consideration for a re-age can be made (i.e. 9 months pre the 3 month qualification period). Borrower should show a renewed willingness & ability to repay loan. This will be achieved by the borrower making at least three consecutive (or the equivalent of) contractual monthly payments. For the avoidance of doubt, this will be the contractual minimum due for a card portfolio. Funds may not be advanced for this purpose nor match pay contributions made by the Bank utilized towards qualification. The account must not currently be part of a repayment plan program (agreement to accept reduced payments) No terminated accounts (only Bucket 4+ accounts eligible) No previously charged off or written off accounts. -65-

71 No advance should be Re-aged more than once within any twelve month period or more than twice in 5 years period. This policy is not intended to cover arrears caused by operational / bank errors. Specific and tighter eligibility criteria with respect to what detailed above can be applied depending on performance analysis of the re-aged portfolios to properly target customer to be addressed with remedial offer and allow any optimization in Impairment saving. Accounts subject to re-age should not be recorded as assets under forbearance Forbearance Programmes Retail Revolving products Three types of forbearance programs are available in the case of revolving products: Short Term Plan: An agreement to accept less than contractual minimum due as a % of balance outstanding for a maximum of 12 months. For acceptance, the Business must ensure that the monthly payment is no less than 50bps of original balance. Any offers below this threshold may be accepted but must be charged-off in line with the standard policy periods (outlined in s 3.6.4) and collected in a recoveries environment. Longer Term Plan: An agreement to accept less than the contractual minimum due as a % of the balance outstanding for a maximum period of 60 months. For acceptance, the Business must ensure that the monthly payment is no less than 100bps of original balance. Rewrite: Full amortization of the outstanding balance over the agreed period up to the maximum term of 60 months, followed by account closure. Accounts must not be placed onto repayment plan unless all of the following apply: There must be evidence that the customer is in financial difficulty. The customer should be in a delinquent state unless there is strong evidence that a customer who is currently up to date will default imminently, evidencing financial difficulty. The borrowing must have been on book at least nine months before a repayment plan can be offered. Once offered, the borrower should show a renewed willingness & ability to meet the agreed reduced payments. This will be achieved by the borrower making at least 1 payment at the new amount to qualify for the plan. This payment must be received prior to the customer being set up on the restructured offering. Funds may not be advanced for this purpose. Business must ensure they apply a minimum payment threshold for acceptance of plans. The average level of the outstanding debt and the -66-

72 contractual minimums should be taken into consideration when agreeing this threshold. Late and over limit fees may be waived during this period and a concessionary APR negotiated, down to 0% where necessary as a means to reduce the size of the payment required or as an incentive to pay. No previously charged off or written off accounts. In terms of program restrictions, the following must be applied: A maximum of 1, 12 month short term plan in 5 years may be agreed with the customer. A maximum of 1 longer term plan in 12 months and 2 longer term plans in 5 years can be agreed with the customer. Plans may not be agreed concurrently that in aggregate exceed the 5 year term. Only 1 rewrite may be agreed with a customer in the lifetime of the product in addition to the frequency restrictions outlined in 3.4.2(g, h). A customer may switch from a short term/longer term plan to a rewrite at any point. Interest rates must be reduced whilst an account is subject to forbearance. A plan may be re-aged a total of once in a lifetime of a plan. This is in addition to regular 1 in 12, 2 in 5 re-age rules. Note, the placing of the account into an up to date status on plan at the commencement of the agreement does not count as a re age. Any switch from revolving line onto a loan product, should follow the reducing term product eligibility criteria. Any restructure of this kind must involve the simultaneous cancellation and closure of the card account. Impairment treatment will adhere to section of GRIP methodology, until customer is fully rehabilitated (so that account is re-aged and re-start being impaired with standard methodology or is closed). Review of the approved short term plans should be undertaken when coming close to the end (max 30 days from last scheduled payment). This review should consider the use of all available tools, including, but not limited to, bureau records/scores, indebtedness indices, confirmation of recent employment. For plans agreed via a Collection Agency the Business must request the CA to establish the customer s financial situation in line with the above set of objectives. The following options are available: Full rehabilitation. Customer rehabilitation is the aim of a short term payment plan and this solution is therefore expected to be the norm. The customer is now in a position to make full original contractual minimum due at the original interest rate prior to the plan and would qualify for open to buy. These customers should be placed into the up to date book upon receipt of three full original contractual minimum due payments; the DDR/PDQ option is not appropriate in this instance. Failure to meet any of the qualifying payments renders the customer ineligible for this option. Rewrite. A customer may be offered the opportunity of switching to a fully amortising rewrite, subject to qualifying criteria detailed in this policy. -67-

73 Longer term Payment Plan. If all above options are not suitable, a longer term plan may be agreed with the following caveats: Plans paying between 50bps and 100bps must increment to a payment 100bps of the original balance. Failure to this must result in charge-off within the standard policy periods; Assuming the minimum incremental payment criteria are met; the maximum period a customer may concurrently reside on a longer term payment plan is 60 months; Longer term payment plans must be reviewed annually. The review should seek to re-establish the customer s circumstances to ascertain if the plan is still required or if the customer can now fully rehabilitate. In the event that no contact is made and/or there is no evidence to suggest the customer can afford full rehabilitation, it is acceptable to allow continuation of the plan, providing it does not extend beyond the maximum period of 60 months. Charge-off. If unable to meet the above requirements, the account should be chargedoff within the standard policy periods Retail Unsecured Loans & Mortgages (Loan re-write, re-negotiation) Forbearance programs differ depending on whether temporary or longer term financial difficulties exist as follows: Restructure: For longer term difficulties or those of an undeterminable length, this would result in one or more changes to the contractual monthly payment, by altering either term and/or interest rate, thus varying the original loan agreement. Restructure eligibility criteria: There must be evidence that the customer is in financial difficulty. The customer should be in a delinquent state unless there is strong evidence that a customer who is currently up to date will default imminently, evidencing financial difficulty. Examples of financial difficulty include, but are not limited to (1) advise of an income shock, e.g. loss of job, (2) contact from a debt management company/debt counsellor following an interview with the customer (3) proactive contact by the Bank to a customer whom we have identified as highly indebted through the use of bureau scores/indebtedness indices and the like, either on an individual basis or collectively as part of a targeted forbearance program. The borrowing must have been on book at least nine months before a plan can be offered. For any facilities where a payment holiday is a feature of the product, the time on book is calculated from the commencement of the paying period. Once offered the borrower should show a renewed willingness & ability to meet the agreed reduced payments. This will be achieved by the borrower making 2 payments at the new amount to qualify and 3 payments for any -68-

74 secured assets. Funds may not be advanced for this purpose. Note this is not required for Short term relief plans. The customer must sign a new facility letter to acknowledge the new agreement and make the appropriate payments in full before plan may be set up. The revised contractual monthly payment amount on the restructured asset must be equal to at least 25% of the original contractual monthly payment for mortgage accounts and 20% for all other products, including second charge lendings. Negative amortization must not occur at any point. Account must not have been previously charged off or have been written off. Account must not be bankrupt, subject to an IVA, fraud or deceased. Customers may only participate in any of the forbearance options (or any combination thereof) once in a 12 month period, or 2 times in 5 years. Short Term Relief Programs: the agreement to accept lower than contractual monthly payment for a defined period. Short term plans eligibility criteria: There must be evidence that the customer is in financial difficulty. The customer should be in a delinquent state unless there is strong evidence that a customer who is currently up to date will default imminently, evidencing financial difficulty. Examples of financial difficulty include, but are not limited to (1) advise of an income shock, e.g. loss of job, (2) contact from a debt management company/debt counsellor following an interview with the customer (3) proactive contact by the Bank to a customer whom we have identified as highly indebted through the use of bureau scores/indebtedness indices and the like, either on an individual basis or collectively as part of a targeted forbearance program. The borrowing must have been on book at least nine months before a plan can be offered. For any facilities where a payment holiday is a feature of the product, the time on book is calculated from the commencement of the paying period. There are no requirements for qualifying payments, or to collect new forms of agreement, although the business must send the terms of agreement to the customer in writing. The revised contractual monthly payment amount on the restructured asset must be equal to at least 25% of the original contractual monthly payment for mortgage accounts and 20% for all other products, including second charge lendings. Negative amortization must not occur at any point. This product may only be offered once in the lifetime of the loan, twice in the case of a mortgage where longer tenors are a feature. Maximum term may not exceed 12 months. Account must not have been previously charged off or have been written off. Account must not be bankrupt, subject to a fraud or deceased. -69-

75 During a short term relief program, arrears will continue to accrue against the original contract. Once a program has successfully completed, these arrears need to be dealt with appropriately. The following options are available: Rehabilitation: this option would require 3 qualifying payments at the original contractual monthly payment. Any term extension must be within business policy and product parameters. Should any of these qualifying payments be missed, the account must be charged-off within standard policy periods Restructure: subject to qualification criteria described in this Policy. Additional Short Term Relief Program or switch to interest only: this is only available to mortgage products and a maximum of 1 in 12 months or 2 in 24 months can be offered. Unsecured products must be handled through the options as described above. Interest Only Switchers: this involves the switch from interest and capital repayments to interest only payments and is only available for mortgages secured against property. Interest Only Switchers eligibility criteria: There must be evidence that the customer is in financial difficulty. The customer should be in a delinquent state unless there is strong evidence that a customer who is currently up to date will default imminently, evidencing financial difficulty. Examples of financial difficulty include, but are not limited to (1) advise of an income shock, e.g. loss of job, (2) contact from a debt management company/debt counsellor following an interview with the customer (3) proactive contact by the Bank to a customer whom we have identified as highly indebted through the use of bureau scores/indebtedness indices and the like, either on an individual basis or collectively as part of a targeted forbearance program. The borrowing must have been on book at least nine months before a plan can be offered. For any facilities where a payment holiday is a feature of the product, the time on book is calculated from the commencement of the paying period. There are no requirements for qualifying payments, or to collect new forms of agreement, although the business must send the terms of agreement to the customer in writing. The revised contractual monthly payment amount on the restructured asset must be equal to at least 25% of the original contractual monthly payment for mortgage accounts and 20% for all other products, including second charge lendings. Negative amortization must not occur at any point. A maximum period of 12 months may be offered for interest only switchers. This can be offered providing a thorough assessment of the customer s circumstances indicate that the customer has a realistic opportunity of resuming the contractual monthly payment, or more, after the period of interest only has finished. -70-

76 During an interest only program, arrears will continue to accrue against the original contract. Once a program has successfully completed, these arrears need to be dealt with appropriately. The following options are available: Rehabilitation: this option would require 3 qualifying payments at the original contractual monthly payment. Any term extension must be within business policy and product parameters. Should any of these qualifying payments be missed, the account must be charged-off within standard policy periods Restructure: subject to qualification criteria described in this Policy. A further 12 month period of interest only or transfer to Short Term Relief Program. However, only 1 in 12 months or 2 in 24 months can be offered and in agreeing this option, the Business must reasonably believe that the financial difficulty is still expected to be temporary and the customer s probability of rehabilitation remains strong. The Business should seek to use this additional period to increase payments up to full contractual payment by expiry, thus avoiding any income shocks to the customer at the end of the extended period of forbearance Special Relief Programmes These country specific treatments are launched by Barclays Italy through submission to credit group of policy dispensation requests. Eligibility criteria, operational management processes details, impairment treatments should be documented in these requests for approval by group. In most of the cases these programs consist in fact of suspensions in the payment of instalments (and loan term extensions) granted to customers for a specific period of time. Each of these programs will be classified either as re-age or forbearance depending on its features. Six months after exiting the program (when applicable, i.e. in case of suspensions) each account should be fully rehabilitated to standard books, when regularly paying back instalments due. Specific eligibility criteria are set by the sponsoring organism to be fulfilled by any citizen willing to enrol to each of the programs. The Impairment treatment for each of the special relief programs is detailed in each related dispensation request, and will be following GRIP when program is classified as forbearance or other logics that may depend on the nature of the programs Settlements Settlement is defined as the acceptance by the Bank of an offer from the customer for a sum less than the value of the financial asset, in full and final settlement of the debt. It includes a forgiven amount (the amount to be waived) and a settlement amount (the amount to be paid). Such Settlements may be agreed in written form by the customer at any stage within the Collections process. -71-

77 Settlements agreed in a pre-charge off status agreed should be placed into the charge-off portfolio with the forgiven amount impaired at 100% and the shortfall amount impaired at LGD1. Settlement offers should be supported by either an assessment of risk and likely recovery without a settlement; or the customer s income and expenditure, outstanding debts and pro rata disposable income available to settle Barclays debts. Specific Settlement campaigns can be arranged with the definition of the overall forgiveness threshold to be granted at targeted customer segment level. Payment may be made in one payment in the first month following agreement or staggered over up to a maximum of 6 months. Once received, any residual balance will be written off and the account(s) on which the offer was made will be closed. The account should be marked as satisfied or partially satisfied where data is shared with credit reference agencies on receipt of payment. Settlements grid will be available to Collection to allow authorized management of settlement offers by collectors. These grid should be properly built and reviewed considering impairment coverage related to the product in the related stage of delinquency, historical performance trends and targets set. (refer to specific products section in this document). Partial Settlement criteria must be included in the Operational Manual of each product. Criteria must include: Also: Criteria for selection Conditions under which settlements are allowed e.g. Loss of income, Life event etc. Approval authority on both value and percentage of balance forgiven Documents required, e.g. Settlement Agreement, income statement, cause of financial distress MI requirements to track and monitor use and volume of settlements Settlement payment should apply to principle balance first and then to interest and fees. The difference between the account balance and the agreed settlement amount must be impaired immediately The amount forgiven on settlement must be taken to loss as a write off to the P&L and not as a charge off Where applicable, settlements must be reported to the bureau with a settlement code If the account settled is in charge off, the bureau reporting must stay as a charge off Write Off of settled balance must be performed within 60 days upon receipt of last payment (closure of the agreement) In the case of customer having more than one account (also on different products); settlement procedure may consider the consolidated outstanding debt and therefore imply the closure of all the customer s accounts. -72-

78 3.1.6 Tracking of performance for Forbearance and Loss Mitigation Tools All rimediated portfolio will be tracked separately for 24 months (accounts enrolled in forbearance programs should be kept segregated upon completion or no payment). All reports related to remediated accounts will comprise only accounts booked in the last 24 months on the relevant program (for suspension the tracking will happen in two ways depending on phase of the programme, enrolment in suspension period & expiring of suspension period; please refer to relevant paragraph of this document) Re-Age Where an account has been re-aged it should be tracked separately, for both operational purposes (i.e. a collector must be able to identify a re-aged account which subsequently re-enters collections), and for MI purposes. As a minimum the business should be able to provide data on the volume and value of re-aged accounts each month, and their subsequent vintage performance after 3, 6, 9 and 12 months. Performance should show the distribution of those assets across delinquency buckets and charge off. Below details of what reporting will be needed: 30+ dpd at 3, 6, 12 and 18 months by vintage, both by volume and value. Charge-off, by value at 12, 24 and 36 months by vintage. Separate tracking of first versus subsequent re-ages Forbearance Programmes As a minimum requirement, the Business must be able to track the following: Early time on book performance and portfolio performance of the program. Specifically this must include 30+ dpd at 3, 6, 12 and 18 months by vintage together with 30+ dpd and 90+ dpd portfolio-level delinquencies, both by volume and value. Charge-off, by value at 12, 24 and 36 months by vintages For all programs, the Business must track performance and breakage rates by payment rate bands/type of program. Monthly reporting to Group as defined in sections 5 (stock and flow), 6 (vintage) and 10 (PCRL Coverage) of the Group MI Definitions Policy. These metrics will be reported monthly in Risk Management Committee (or equivalent) packs. In addition, the Business must be able to produce performance of plans by payment bands. This must include tracking of incremental payments achieved for any plans subject to an annual review process and subsequent performance (when available in the information systems). -73-

79 Special Relief Programmes Depending on program typology these programs may fall into re-age or forbearance category; when suspensions in the payment of instalments is applied following reporting will be needed: Booking report: # accounts entering program in each month and related balance, scheduling of # accounts expected to exit suspension (when applicable) with related balance by month Portfolio Overview: % portfolio treated monthly, # accounts, Balance of accounts, performance of treated portfolio (30+, 90+, CO Stock). Vintage Analysis (based on month of enrolment to the program or month of exiting from suspension when applicable) For those specific programs where suspensions in the payment is contemplated the performance monitoring period should start at the suspension expiration date (i.e. when account is supposed to re-start paying) Settlements Following reporting will be needed for Settlements: Monthly performance monitoring: % portfolio treated, # accounts that have been settled and related balance at time of WO, total amount written Off, amount impaired at time of WO 3.2 Recoveries (post charge-off activities) The aim of Recoveries is to optimize the return of Impaired Assets after charge/off through internal and external activities Termination When an account has defaulted on its agreed terms and conditions, in case of revolving account or overdraft facility the credit facility will be terminated. The customer must be notified. An appropriate status must be added to the account to prevent further use. Even where the account is subsequently paid to current, the facility will remain cancelled. Accounts will only be considered for re-instatement following completion of a further full underwriting process Charge-Off definition Charge-off is defined as a fundamental change in the relationship between the bank and its customer, where the focus switches from the collection of overdue amortised payments or unauthorised credit line borrowing to the recovery of the entire asset. -74-

80 Charge-off should be accelerated in the following events: the debtor cannot be traced as formally stated by a public register ( Certificato di irreperibilità ); Bankruptcy (when applicable) the debtor is deceased and there are not coapplicant(s) and heirs; evidences of irreversible insolvency other than delinquency and\or, for secured, when collateral is being pursued by other parties( Avviso d'asta or Sequestro ) Charge-off must be considered as an irreversible state. In certain cases, it may be acceptable for secured accounts to move back from charge-off to performing or delinquent states. This is only considered acceptable where local legislation requirements are in place (i.e. passaggio a sofferenza in Bank of Italy regulation), or where the customer has clearly demonstrated a renewed willingness to pay and there is a strong chance that they will be able to meet their contractual obligations in the foreseeable future through a program of rehabilitation. For mortgages, the value of collateral must be re-assessed within 30 days upon charge off; also, this initial valuation must be physical and provide both an open market value (assuming willing buyer and willing seller) and a forced sale valuation of the property. This should, wherever possible, include an internal inspection. Should a desktop/hpi methodology be proposed rather than a physical valuation this should be handled as a policy variation through the GRCR process. Further updated individual valuations must be undertaken at least every 12 months whilst in charge-off, thus ensuring any valuation included within loss given default models is appropriate. In the case of assets secured against property this ongoing valuation need not be physical but can be undertaken with a desktop/hpi methodology; this should be notified to Group Retail Credit Risk in advance of it being implemented. Therefore, at account closure, the last assessment must be not older than 12 months Sofferenza (Formal insolvency status notification as per Bank of Italy definition) Local supervisory rules require to set the status Sofferenza for the whole customer credit exposition when there is a permanent proven inability to repay (either stated in Court or not). The status and related outstanding information must be reported to the public credit bureau ( Centrale dei Rischi ). Collection operations is responsible for classifying or suspend this process based on the appropriate conditions as stated in operational manuals, differently agreed with relevant functions or stated in delegated authority matrix. For further details on suspensions see local policy and operational manuals Recoveries Policy Once a customer has defaulted on their credit agreement and been charged off, the account should be passed on for recoveries action. -75-

81 The strategy for Recoveries action may differ by product (in particular on the secured vs. unsecured status) and must be documented in the Collection Operations Manual. It must be designed to maximise the discounted cash flow of the charged off accounts. Legal action against the debtor should be considered on a case by case basis, balancing expected costs and benefits and execution duration. The recovery payments must first be applied to principal; it may be applied to interest and fees only after all principal has been recovered Rehabilitation Policy Charge-off must be considered as an irreversible state. When compliant with regulations and when the customer has clearly demonstrated a renewed willingness to pay and there is a strong chance that they will able to meet their contractual obligations, a rehabilitation action can be applied. Any rehabilitation action agreed within the recovery must adhere to the following criteria: no new monies are to be advanced nor other debts consolidated into the balance; the facility must have been open for at least 9 months; the Business must satisfy itself that the customer has a strong chance of full rehabilitation informed by review of the customer s current financial circumstances including, but not limited to, confirmation of regular income, affordability checks and use of current bureau scores; the customer s renewed willingness and ability to repay must be demonstrated through 6 consecutive payments of the original CMP; lump sum, sporadic payments and interest concessions are not acceptable; for a further 6 month period, a customer reaching cycle 2 must be transferred directly back to the charge-off book and the legal process recommence as if the rehabilitation had not occurred; the business must evidence the revised agreement to the customer in writing in line with legal and regulatory requirements; businesses must accurately record such rehabilitation programs to credit bureaus, ensuring compliance with local regulation; the frequency of rehabilitation programs must not exceed 1 in 5 years; the Business must ensure such accounts are separately tracked and monitored, with vintage performance presented as part of the CRMC meetings Settlements Settlements have the aim to accept a partial payment and write off the remaining amount to maximize the value recovered, if an account is in collections and the customer is unable to pay the full balance. -76-

82 Settlements may be agreed in written form by the customer at any stage within the Collections process. Settlement offers should be supported by either an assessment of risk and likely recovery without a settlement; or the customer s income and expenditure, outstanding debts and pro rata disposable income available to settle Barclays debts. Specific Settlement campaigns can be arranged with the definition of the overall forgiveness threshold to be granted at targeted customer segment level. Payment may be made in one payment in the first month following agreement or staggered over up to a maximum of 6 months. Once received the final payment as per agreement, any residual balance will be written off and the account(s) on which the offer was made will be closed. The account should be marked as satisfied or partially satisfied where data is shared with credit reference agencies on receipt of payment. Settlements grid will be available to Collection to allow authorized management of settlement offers by collectors. These grid should be properly built and reviewed considering impairment coverage related to the product in the related stage of delinquency, historical performance trends and targets set. (refer to specific product sections) Settlement criteria must be included in the Operational Manual of each product. Criteria must include: Also: criteria for selection, conditions under which settlements are allowed e.g. Loss of income, Life event etc., approval authority on both value and percentage of balance forgiven, documents required, e.g. Settlement Agreement, income statement, cause of financial distress, MI requirements to track and monitor use and volume of settlements Settlement payment should apply to principle balance first and then to interest and fees. The difference between the account balance and the agreed settlement amount must be impaired immediately The amount forgiven on settlement must be taken to loss as a write off to the P&L and not as a charge off Where applicable, settlements must be reported to the bureau with a settlement code If the account settled is in charge off, the bureau reporting must stay as a charge off. Write Off of settled balance must be performed within 60 days upon receipt of last payment (closure of the agreement) In the case of customer having more than one account (also on different products); settlement procedure may consider the consolidated outstanding debt and therefore imply the closure of all the customer s accounts. -77-

83 3.2.7 Write-Off Policy 4. Debt Sale Write-off is defined as the movement of a financial asset off the balance sheet. Write-off typically occurs when: All viable recovery action has been attempted and recovery of the debt has failed Customer deceased where there is no estate, no heirs or heirs do not accept the heritage Failed internal and external Trace and Collect activity. Account has been identified as fraudulent and recovery of the debt is not possible When the account has been n months x n months with no payments since charge off (see product section for specific parameters). Upon debt sale Write Off of residual balance when a partial settlement agreement is closed (upon receipt of last payment) In addition, for unsecured lending only, accounts should be written off for the following reasons: Bankruptcy cases, when applicable Small balance write-offs/ Uneconomical to Pursue Exceptional circumstances (e.g. long term unemployment, long term or terminal illness) Debt sale should be segmented in order to maximise the cash flow to Barclays. Where significant by the scale of the business this should generally be on a forward flow agreement to ensure stability in income. Sales should be made promptly following write-off and income should be received shortly following agreement to sell (e.g. within one month) 5. As a general principle, the point of debt sale should be post sale activities and infrastructure are in place The following valuation process shall be adhered to: valuations of the proposed debt sale must be undertaken prior to the agreement of a sale valuations of portfolio shall include: forecast liquidation over an agreed period, discounted recovery, costs of recovery; any assumptions used for future LGD forecasting shall demonstrate sustainability of price throughout the given period; 5 Refer to GRB WE Debt Sale Policy (WESDP) for details. -78-

84 re-assessment of stock LGDs shall be undertaken in line with LGD restatement outlined in Group Model Risk Policy. Once an account has been sold the account must be written off within 30 working days of contracted sale date. 5. Product summary cards For each product are defined summary cards with main policy rules and limitations. Following there are those related to the existing products. 5.1 Mortgages Topic Definitions Notes trigger entry in collection Dpd (days past due) instalment(s) due delinquency classification by bucket, conventionally defined in 30 days chunks or by calendar month with respect to due dates or based on monthly due dates from bk 1 to bk 12 MI Group Retail Credit Risk: MI Definition Policy, 7.1 actions available dunning letters sms telegrams phone collection door-to-door visits skip tracing remedial tools eligibility and limits Re-Age (Term Extension) minimum 24 mob; bucket 1-3 only; 3 months qualification period (3 consecutive contractual monthly payments or equivalent cumulative amount); no repayment plan in place; no previous charge-off or write-off; no fraud or deceased with no heirs: max 1 in 12 months and 2 in 5 years Forbearance (Restructure): remedial tools must be managed by a specialized internal team adequate support from operational structures (IT and transactional applications) must be available for remedial management and tracking minimum 24 mob; evidence of customer financial distress (reduced income and/or credit bureau debt position); minimum revised payment 25% of the original contractual monthly payment 3 qualifying payments prior to set up customer must subscribe in written form the new agreed conditions, the process must be compliant with Italian regulations; the collateral must be fully available to the new agreement ( iscrizione di ipoteca must be fully binding) restructure must be defined as specific -79-

85 no previous charge-off or write-off; no fraud or deceased with no heirs: impairment charge in line with GRIP policy max once in a 12 month period, or 2 times in 5 years Forbearance (Short Term Plan): minimum 24 mob; evidence of customer financial distress (reduced income and/or credit bureau debt position); minimum revised payment 25% of the original contractual monthly payment customer must subscribe in written form the new agreed conditions, the process must be compliant with Italian regulations; the collateral must be fully available to the new agreement ( iscrizione di ipoteca must be fully binding); max 2 in a lifetime; max term 12 months; no previous charge-off or write-off; no fraud or deceased with no heirs; product code and product programme, commercially available or more favourable conditions should be fully identified (as per group policy) for impairment purposes Forbearance (Interest Only Switchers): authority and limits for late payment fees and penalty interests waiver minimum 24 mob; evidence of customer financial distress (reduced income and/or credit bureau debt position); customer must subscribe in written form the new agreed conditions, the process must be compliant with Italian regulations; the collateral must be fully available to the new agreement ( iscrizione di ipoteca must be fully binding); max term 12 months; no previous charge-off or write-off; no fraud or deceased with no heirs; max once in a 12 month period, or 2 times in 5 years collection operating procedure define delegation authority for waiver on other fees (excluding principal and contractual interest), as a tool for improving the collection results on delinquent customers eligibility criteria for external agencies strategy definition stated in written form formally signed off licence from Police Department (Ministry of Interiors) adopting a code of conduct (TCF-like) structured and well organized disclosure on collectors names knowledge of Barclays products and rules -80-

86 segmentation prioritization test and compare agencies performance performance metrics contact (RPC) rates (phones) target values cure rates cash collected promise kept (phones) costs per collected charge-off triggers at 360 dpd / 12 instalment past due charge off principal and reverse interest and fees earned but not collected early entry (within 60 days from event): deceased with no heirs bankruptcy Legal executions initiated by other creditors if impacting foreclosure Secured facilities in charge off are impaired on a case by case basis. The estimated future cash flows should take into account the net realizable value Net realizable value of collateral on chargedoff accounts must be updated within 30 days from charge off; drive-by re-evaluation must be in place not older than 12 months until account closure. rehabilitation action minimum 24 mob minimum 6 consecutive payments of the original CMP max 1 in 5 years in case rolling to b2 immediate charge off is applied settlement policy - account must be charged off authority and limits expected actual value (discounted at contractual rate) of collateral sale and legal expenses (based on historical evidence) must be lower or equal than the cash recovered amount the payment of the settled amount must be received in 30 days from agreement the payment can be split by a maximum of 6 monthly instalment property foreclosure property foreclosure is the action of last resort to recover a mortgage credit after failure of all other collections and recovery actions Barclays appoints the lawyer (belonging to Bank legal panel list) to initiate legal proceeding that will end with the sale at auction of the real estate through a court s managed process as per Italian code of civil execution post asset realisation a period is to be allowed for a payment plan to be agreed and set up with the customer for repayment of the shortfall. If a plan is not agreed within a 3 month period or the payment agreed is below the minimum payment thresholds, the asset must be (as per Group credit risk waiver Italy/38/360dpd) Italian Law establishes that, after the registration of the Attachment in the Land Registry, the Creditor sues for sale the property in front of the Court of Justice. -81-

87 written-off within 60 days. write-off policy Write-off of the outstanding debt will occur when: collateral is sold at lower than Forced Sale Value and no other recovery options are available after 16 months without payments post realisation of security after 16 months without payments where realisation of security is not sought or legally possible qualifying payment definition is 1 monthly instalment as per charged off plan. Where realisation of security is underway, there is no write off point specified Early write off occur within 6 months where: the asset is deemed irrecoverable; the asset is deemed immaterial; a full and final settlement has been reached. the asset is to be debt sold to a third party. 5.2 Credit cards Topic Definitions Notes trigger entry in collection Dpd (days past due) Insufficient minimum payment Overlimit (discretional, based on strategy defined) delinquency classification by bucket, conventionally defined in 30 days chunks from bk 1 to bk 6 actions available statement message dunning letters telegrams & sms phone collection door-to-door visits and pre-legal activities remedial tools eligibility and limits skip/trace Re-age of account: minimum 9 mob buckets months qualification period (3 consecutive contractual monthly payments or equivalent) no previous charge-off or write-off no fraud or deceased max 1 in 12 months and 2 in 5 years Re-age of account on RP: only once in lifetime Forbearance (Short term Plan): -82-

88 evidence of financial difficulties (current delinquency) minimum 9 mob minimum 1 payment at the new amount to qualify for the plan define minimum payment for plans (minimum payment 1% of outstanding balance) max 12 months term fees can be waived lower APR (down to 0%) can be negotiated no previous charge-off or write-off no fraud or deceased max 1 in 5 years Forbearance (Long Term Plan): evidence of financial difficulties (current delinquency) minimum 9 mob minimum 1 payment at the new amount to qualify for the plan define minimum payment for plans (minimum payment 1% of outstanding balance) max 60 months term fees can be waived lower APR (down to 0%) can be negotiated no previous charge-off or write-off no fraud or deceased max 1 in 1 year and 2 in 5 years. Plans may not be agreed concurrently that in aggregate exceed the 5 year term. minimum annual review Forbearance (Rewrite): evidence of financial difficulties (current delinquency) minimum 9 mob minimum 1 payment at the new amount to qualify for the plan define minimum payment for plans (minimum payment 1% of outstanding balance) max 60 months term with fixed amortization plan fees can be waived lower APR (down to 0%) can be negotiated no previous charge-off or write-off no fraud or deceased max 1 in 1 year and 2 in 5 years. Plans may not be agreed concurrently that in aggregate exceed the 5 year term. minimum annual review -83-

89 partial settlements MOB>=9 Settlement % depends on delinquency bucket and customer s risk profile: authority and limits for late payment fees and penalty interests waiver eligibility criteria for external agencies Bucket Risk Min% (Balance) 3 L 60 3 M 55 3 H 50 4 L 55 4 M 50 4 H 45 5 L 50 5 M 45 5 H 40 6 L 45 6 M 40 6 H 35 collection operating procedure defines delegation of authority for waiver on other fees (excluding principal and contractual interest), as a tool for improving the collection results on delinquent customers licence from Police Department (Ministry of Interiors) adopting a code of conduct (TCFlike) structured and well organized disclosure on collectors names knowledge of Barclays products and rules strategy definition whenever possible, use cycle by cycle working queues; segmentation of account (whenever possible by risk of nonpayment/probability of recovery); prioritization of actions test and compare agencies performance performance metrics phone contacts rates (RPC) target values cure rates cash collected promise received promise kept costs per collected charge-off triggers at 180 dpd early entry (within 60 days from event): trace failed, deceased, early settlement, proved fraud post charge-off qualifying payment definition >= 100 Only payment above threshold would qualify account for the re-start of the WO 18 x1 8 period -84-

90 settlement policy authority and limits Settlements (post charge-off): maximum forgiven amount 50% of the total past due (net of expenses and penalty interests) maximum 6 instalments payment in case settlement campaigns are specifically defined departing from the policy, they must be approved by CRMC write-off triggers 18 x 18 (18 months with no payment or 18 months since last payment) Minimum qualified payment: see above early write-off (within 6 months from event): proven fraud (within 90 days from event) deceased without estate and heirs did not accept heritage full and final settlement the asset is deemed immaterial; debt sale (instead of write-off accounts will be impaired at 100% rate and put in a specific queue waiting for debt sale, according to the Group retail write-off policy dispensation Italy/30, expiring 30th of September, 2011) 5.3 Personal Unsecured Loans Topic Definitions Notes trigger entry in collection Dpd (days past due) instalment(s) due delinquency classification by bucket, conventionally defined in 30 days chunks from bk 1 to bk 6 actions available dunning letters telegrams & sms phone collection door-to-door visits and pre-legal activities remedial tools eligibility and limits skip/trace Re-Age (Term Extension) minimum 9 mob; bucket 1-3 only; 3 months qualification period (3 consecutive contractual monthly payments or equivalent cumulative amount); no repayment plan in place; no previous charge-off or write-off; no fraud or deceased with no heirs: max 1 in 12 months and 2 in 5 years Forbearance (Restructure): minimum 9 mob; evidence of customer financial distress (reduced income and/or credit bureau debt position); minimum revised payment 20% of the original contractual monthly restructure must be defined as specific product code and product programme, commercially available or more favourable conditions should be fully identified (as per group policy) for impairment purposes -85-

91 payment 2 qualifying payments prior to set up customer must subscribe in written form the new agreed conditions, the process must be compliant with Italian regulations; the collateral must be fully available to the new agreement ( iscrizione di ipoteca must be fully binding) no previous charge-off or write-off; no fraud or deceased with no heirs: impairment charge in line with GRIP policy max once in a 12 month period, or 2 times in 5 years Forbearance (Short Term Plan): minimum 9 mob; evidence of customer financial distress (reduced income and/or credit bureau debt position); minimum revised payment 20% of the original contractual monthly payment; customer must subscribe in written form the new agreed conditions, the process must be compliant with Italian regulations; the collateral must be fully available to the new agreement ( iscrizione di ipoteca must be fully binding); max 2 in a lifetime; max term 12 months; no previous charge-off or write-off; no fraud or deceased with no heirs. authority and limits for late payment fees and penalty interests waiver Forbearance (Interest Only Switchers): minimum 9 mob; evidence of customer financial distress (reduced income and/or credit bureau debt position); customer must subscribe in written form the new agreed conditions, the process must be compliant with Italian regulations; the collateral must be fully available to the new agreement ( iscrizione di ipoteca must be fully binding); max term 12 months; no previous charge-off or write-off; no fraud or deceased with no heirs; max once in a 12 month period, or 2 times in 5 years. collection operating procedure define delegation authority for waiver on other fees (excluding principal and contractual interest), as a tool for improving the collection results on delinquent customers -86-

92 eligibility criteria for licence from Police Department external agencies (Ministry of Interiors) adopting a code of conduct (TCFlike) structured and well organized disclosure on collectors names knowledge of Barclays products and rules strategy definition stated in written form formally signed off segmentation of accounts prioritization of actions test and compare agencies performance performance metrics contact (RPC) rates target values cure rates cash collected promise kept costs per collected charge-off triggers 180 dpd early entry (within 60 days from event): trace failed, deceased, early settlement, proved fraud. settlement policy - Pre charge-off: n. a. authority and limits Post charge-off: maximum forgiven amount 50% of the total past due (net of expenses and penalty interests) maximum 6 instalments payment in case settlement campaigns are specifically defined departing from the policy, they must be approved by CRMC write-off triggers 16 x 16 (16 months with no payment or 16 months since last payment) Minimum qualified payment: early write-off (within 6 months from event): proven fraud (within 90 days from event) deceased without estate and heirs did not accept heritage full and final settlement the asset is deemed immaterial; debt sale (instead of write-off accounts will be impaired at 100% rate and put in a specific queue waiting for debt sale, according to the Group retail write-off policy dispensation Italy/30, expiring 30 th of September, 2011) 5.4 Salary Secured Loans Topic Definitions Notes trigger entry in collection Dpd (days past due) instalment(s) due -87-

93 claims delinquency classification by bucket, conventionally defined in 30 days chunks from bk 1 to Insurance refusal to disbursement actions available dunning letters telegrams phone collection door-to-door visits skip/trace legal actions insurance claim liquidation remedial tools eligibility Re Age (Term Extension): and limits Minimum 9 mob 3 months qualification period (3 consecutive contractual monthly payments or equivalent cumulative amount) no repayment plan in place no previous charge-off or writeoff no fraud or deceased max 1 in 12 months and 2 in 5 years Term Extension for Temporary Claims: temporary claims are related to temporary situation of delinquency. Cases of temporary claims are for example the temporary redundancy, etc. The Insurance Company: will be advised of the claim; has to approve the re-age of instalments if not explicit in the insurance company policy. Collection actions are started not before delinquency reaching 45 dpd through phone contact with ATC Credit Policy drives the application of special forbearance tools (term extensions), to account for technical delays in the payment of the first instalment remedial tools can be managed by an outsourcing provider, but must be monitored by a specialized internal team adequate support from operational structures (IT and transactional applications) must be available for remedial management and tracking Temporary claims are impaired as charge off, when the payments restart the claims will be closed on the system and the asset charge back to its real delinquency cycles. authority and limits for collection operating procedure late payment fees and define delegation authority for penalty interests waiver waiver on other fees (excluding principal and contractual interest), as a tool for improving the collection results on delinquent customers eligibility criteria for licence from Police Department external agencies (Ministry of Interiors) adopting a code of conduct (TCFlike) structured and well organized disclosure on collectors names knowledge of Barclays products and rules approved as compliant by Barclays Sourcing strategy definition stated in written form The strategy segmentation -88-

94 formally signed off segmentation of accounts prioritization of actions test and compare agencies performance (when applicable) performance metrics contact (RPC) rates target values cure rates cash collected average time to collect from insurance (for claims) charge-off triggers insurance Claims (Temporary and Definitive) insurance Refusal ( KO assicurativi ) at 180 dpd (for impairment charge purposes only) settlement policy - n.a authority and limits write-off policy Write-off of the outstanding debt will occur when: All viable recovery action has been attempted and recovery of the debt has failed Failed internal and external Trace and Collect activity. Where there also exists no debt sale opportunity. Account has been 18 months since charge off with no payments and/or 24 months since last payment early write-off (within 6 months from event): proven fraud (within 90 days from event) deceased without estate and heirs did not accept heritage full and final settlement debt sale write off of partial unpaid instalment: All viable recovery action has been attempted and recovery of the debt has failed Actions to be performed are not economically sustainable with respect to debt to collect has to consider both customer and employer in relation to unpaid instalments n.a. In case of instalments partially paid, and if all viable recovery action has been attempted and recovery of the debt has failed, the instalments can be written off even if the accounts is not yet in charge off. -89-

95 5.5 Overdraft Facilities and Temporary Overdrafts (retail customers) 6 Topic Definitions Notes trigger entry in collection Over credit limit for 21+ days Credit downgrade and/or evidence of financial difficulties (insolvency, charged off credit lines by other institutions, ) coming from credit bureaux delinquency classification EWL Days past due (up to 180) actions available dunning letters phone collection call by branch and Business Support remedial tools eligibility and limits authority and limits for late payment fees and penalty interests waiver legal actions Forbearance (Long Term Plan): minimum 9 mob no previous charge-off or writeoff no fraud or deceased limits: maximum length: 36 months minimum payment: 3% of restructured credit line maximum 2 consecutive plans maximum 1 plan in 1 year and 2 in 5 years collection operating procedure define delegation authority for waiver on other fees (excluding principal and contractual interest), as a tool for improving the collection results on delinquent customers n. a. in case of more then 3 rp requests, Business Support must evaluate the opportunity/feasibility to terminate the account eligibility criteria for external agencies strategy definition n. a. small portfolio performance metrics cure rates target values cash collected charge-off triggers at 180 dpd evidence of insolvency (charged off credit lines by other institutions, ) coming from credit bureau Customer death settlement policy - Pre charge-off: at least 80% of authority and limits outstanding credit line, in a single payment before or at end month. Post charge-off: Up to 30% of forgiven amount to be authorized by Litigation Manager Up to 50% of forgiven amount to be authorized by Collection Head According to: Allegato n. 1 al Regolamento Interno - Disciplina Uniforme dei Poteri Delegati 6 Overdraft Portfolio collection activities are currently under Branch Business Support team s responsibility in pre Charge Off and HCLO s responsibility in post Charge Off. -90-

96 Over 50% to be authorized by Risk Director write-off policy Write-off of the outstanding debt will occur when: all available recovery action has been attempted and recovery of the debt has failed 16 x 16 (16 months with no payment or 16 months since last payment) Outstanding amount is less than 250 early write-off (within 6 months from event): proven fraud (within 90 days from event) deceased without estate and heirs did not accept heritage full and final settlement debt sale 5.6 Small and Medium Enterprise loans (secured and unsecured) 7 Topic Definitions Notes trigger entry in collection Dpd (days past due) Customer type: small Over credit limit for 21+ days medium enterprise, sole Credit downgrade and/or evidence owner enterprise, of financial difficulties (insolvency, individual self employed charged off credit lines by other Product type: secured institutions, ) coming from credit (mortgages, other bureaux security), unsecured (loans with amortization plan, overdraft, short term financing) delinquency classification EWL Days past due (up to 180 days) actions available dunning letters phone collection call by branch and Business Support legal actions after NPL classification remedial tools eligibility Forbearance (Restructure): and limits Minimum 9 mob no previous charge-off or writeoff no fraud or deceased limits: maximum length: 36 months minimum payment: 3% of restructured credit line, 25% of original CMP for secured and 20% for unsecured maximum 2 consecutive plans max once in a 12 month period, or 2 times in 5 years 7 SME Portfolio collection activities are currently under Branch Business Support team s responsibility in pre Charge Off and HCLO s responsibility in post Charge Off. -91-

97 authority and limits for late payment fees and penalty interests waiver minimum review every 12 months collection operating procedure define delegation authority for waiver on other fees (excluding principal and contractual interest), as a tool for improving the collection results on delinquent customers eligibility criteria for n.a. external agencies strategy definition n.a. performance metrics contact (RPC) rates target values cure rates cash collected charge-off triggers 180 dpd for unsecured loans 360 dpd for secured loans Evidence of insolvency (charged off credit lines by other institutions, ) coming from credit bureaux Bankruptcy The accounts move to Collection and Litigation Dept just when all recoveries strategies have been adopted and it is no possible to recover the debt. Facilities not collected move to Collection Dept for being charged off if the total exposure is greater than 250. In case of total exposure up to 250 the facility moves to Litigation Dept for an immediate write-off. rehabilitation action (only secured) settlement policy - authority and limits minimum 24 mob minimum 6 consecutive payments of the original CMP max 1 in 5 years in case rolling to b2 immediate charge off is applied Unsecured loans: Pre charge-off: at least 80% of outstanding credit line, in a single payment before or at end month Post charge-off: Up to 30% of forgiven amount to be signed by Litigation Manager Up to 50% of forgiven amount to be signed by Collection Head Over 50% to be signed by Risk Director Secured loans: Pre charge-off: at least the value of credit line net of impairment, in a single payment before or at end month. Post charge-off: at least the value of credit line net of impairment, maximum 6 instalments -92-

98 write-off policy Write-off of the outstanding debt will occur when: - unsecured loans: all viable recovery action has been attempted and recovery of the debt has failed 16 x 16 (16 months with no payment or 16 months since last payment) Outstanding amount is less than 250 early write-off (within 6 months from event): proven fraud (within 90 days from event) deceased without estate and heirs did not accept heritage full and final settlement the asset is deemed immaterial; debt sale - secured loans: when security is sold at lower than Forced Sale Value after 16 months without payments post realisation of security after 16 months without payments where realisation of security is not sought or legally possible Where realisation of security is underway, there is no write off point specified Note: (Strategy and development of Business bank products are currently under review by Barclays Italy Senior Management and that will very likely imply changes to the policy detailed above.) -93-

99 Appendix Glossary and Definitions Item CMP CRMC DSS EWL ATC Definition Contractual Monthly Payment ( rata minima or rata di piano di ammortamento ) Credit Risk Management Committee Decision Support System Decision Engine Early Warning List Customer s employee (Azienda Terza Ceduta) -94-

100 THE ISSUER Introduction The Issuer was incorporated in the Republic of Italy pursuant to the Securitisation Law on 11 July 2002 as a società a responsabilità limitata under the name "Carangide S.r.l." and changed its name in "Mercurio Mortgage Finance S.r.l." by an extraordinary resolution of the meeting of the Quotaholders held on 29 November The Issuer's by-laws provides for termination of the same on 31 December The registered office of the Issuer is in Foro Buonaparte, 70, Milan Italy, fiscal code and enrolment with the companies register of Milan number , enrolled under number in the register of special purpose vehicles (elenco delle società veicolo) held by the Bank of Italy pursuant to article 4 of the Italy's regulation dated 29 April The Issuer has no employees and no subsidiaries. The Issuer's telephone's number is The authorised and issued quota capital of the Issuer is 10,000, fully paid up and divided into two quotas of 5,000 each. The current quotaholders of the Issuer are as follows: Quotaholder Stichting Tevere Stichting Tirreno Quota 5,000 (50% of the quota capital) 5,000 (50% of the quota capital) The Issuer has not declared or paid any dividends or, save as otherwise described in this Prospectus, incurred any indebtedness. Issuer's Principal Activities The sole corporate object of the Issuer as set out in article 3 of its by-laws (statuto) and in compliance with the Securitisation Law is to perform securitisation transactions (operazioni di cartolarizzazione). The Issuer was established as a multi-purpose vehicle and accordingly it may carry out further securitisation transactions in addition to the Previous Securitisations and the Securitisation, subject to the provisions set forth in Condition 5 (Issuer's Covenants). Condition 5 (Issuer's Covenants) provides that, so long as any of the Notes remain outstanding, the Issuer shall not, without the prior consent of the Representative of the Noteholders and as provided in the Quotaholders' Agreement and the Conditions, incur any other indebtedness for borrowed moneys (except in relation to the Previous Securitisations and any other securitisation carried out in accordance with the Transaction Documents) engage in any activities (other than acquiring and holding the assets on which the Previous Notes and the Notes are secured, issuing the Previous Notes and the Notes and entering into the documents executed in the context of the Previous Securitisations and the Transaction Documents to which it is a party), pay any dividends, repay or otherwise return any quota capital, have any subsidiaries, employees or premises, consolidate or merge with any other person or convey or transfer its property or assets to any person (otherwise than as contemplated in the Conditions or in the Intercreditor Agreement) or increase its capital. -95-

101 The Issuer will covenant in the Intercreditor Agreement to observe, inter alia, the restrictions detailed in Condition 5 (Issuer's Covenants). Directors The directors of the Issuer are: Chairman of the Mr. Andrea Di Cola, a chartered accountant. The domicile of Mr. Di Board of Directors Cola, in his capacity of Chairman of the Board of Directors of the Issuer, is at Foro Buonaparte, 70, Milan, Italy. Director Director Ms. Sonia Francesca Piazzoni, a manager. The domicile of Ms. Piazzoni, in his capacity of Director of the Issuer, is at Foro Buonaparte, 70, Milan, Italy. Alessandro Mauri, a manager. The domicile of Mr. Mauri, in his capacity of Director of the Issuer, is at Foro Buonaparte, 70, Milan, Italy. The Quotaholders' Agreement Pursuant to the term of a quotaholders' agreement entered into on 23 January 2003 (as extended on or about the Issue Date) between the Issuer, the Representative of the Noteholders and the Quotaholders, the Quotaholders have agreed, inter alia, not to amend the by-laws (statuto) of the Issuer and not to pledge, charge or dispose of the quota (save as set out below) of the Issuer without the prior written consent of the Representative of the Noteholders. The Quotaholders' Agreement is governed by, and will be construed in accordance with, Italian law. Accounts of the Issuer and accounting treatment of the Portfolio Pursuant to Bank of Italy regulations, the accounting information relating to the securitisation of the Receivables will be contained in the explanatory notes to the Issuer's accounts (Nota Integrativa). The explanatory notes, together with the balance sheet and the profit and loss statements, form part of the financial statements of Italian limited liabilities companies (società a responsabilità limitata). The fiscal year of the Issuer begins on 1 January of each calendar year and ends on 31 December of the same calendar year with the exception of the first fiscal year which started on 11 July 2002 and ended on 31 December Capitalisation and indebtedness statement The capitalisation of the Issuer as at the date of this Prospectus, adjusted for the issue of the Notes, is as follows: Quota capital Euro Issued, authorised and fully paid up capital 10,000 Loan Capital Euro -96-

102 First Securitisation 594,000,000 Class A Mortgage Backed Floating Rate Notes Series due ,700,000 Class M1 Mortgage Backed Floating Rate Notes Series due ,700,000 Class M2 Mortgage Backed Floating Rate Notes Series due ,800,000 Class B Mortgage Backed Floating Rate Notes Series due ,899, ,012, ,600, ,767, Letter of Credit Nominal 12,624,000 Liquidity Facility Nominal 23,985,600 Second Securitisation 1,018,400,000 Class A Mortgage Backed Floating Rate Notes Series due ,900,000 Class B Mortgage Backed Floating Rate Notes Series due ,500,000 Class C Mortgage Backed Floating Rate Notes Series due ,200,000 Class D Mortgage Backed Floating Rate Notes Series due ,844, ,759, ,592, ,768, Letter of Credit Nominal 19,710,000 Liquidity Facility Nominal 36,135,000 Third Securitisation 4,002,350,000 Class A Residential Mortgage Backed Floating Rate Notes Series due ,522,862, Subordinated Loan 360,211,500 Expenses Loan 0 Fourth Securitisation 1,806,850,000 Class A Residential Mortgage Backed Floating Rate Notes Series due ,147,489, Subordinated Loan 189,719,

103 Expenses Loan 0 Fifth Securitisation 2,578,300,000 Class A Residential Mortgage Backed Floating Rate Notes Series due August ,015,242, Subordinated Loan 270,721,500 Expenses Loan 0 Sixth Securitisation 2,261,550, Class A Residential Mortgage Backed Fixed Rate Notes Series due November ,875,667, Subordinated Loan 203,539,500 Expenses Loan 0 Seventh Securitisation 7,005,000,000 Class A Residential Mortgage Backed Floating Rate Notes Series due 27 January ,952,000 Class J Residential Mortgage Backed Variable Rate Notes Series due 27 January ,005,000, ,952,000 Cash Reserve Loan 470,997,120 Liquidity Reserve Loan 180,000,000 Expenses Loan 900,000 Total loan capital (euro) 117,658,004, Total capitalisation and indebtedness (euro) 117,658,014, Subject to the above, as at the date of this Prospectus, the Issuer has no borrowings or indebtedness in respect of borrowings (including loan capital issued or created but unissued), term loans, liabilities under acceptances or acceptance credits, mortgages, charges or guarantees or other contingent liabilities. Financial statements and auditors The financial statements of the Issuer as at 31 December 2009 and 31 December 2010 have been duly audited by Pricewaterhousecoopers S.p.A., an auditing company enrolled with the Albo Speciale delle società di revisione held by CONSOB pursuant to article 161 of the Financial Laws Consolidation Act, with offices at Via Monte Rosa 91, Milan, Italy. Copy of the financial statements of the Issuer for each financial year since the Issuer's incorporation may be inspected and obtained free of charge during usual business hours at the specified office of the Representative of the Noteholders. -98-

104 THE ACCOUNT BANK AND THE PRINCIPAL PAYING AGENT The Bank of New York Mellon (Luxembourg) S.A. was incorporated in the Grand Duchy of Luxembourg as a société anonyme on 15 December 1998 under the Luxembourg Law of 10th August 1915 on commercial companies, as amended, and has its registered office at 2-4 rue Eugène Ruppert, L-2453 Luxembourg, Grand Duchy of Luxembourg. It is an indirect wholly-owned subsidiary of The Bank of New York Mellon Corporation. On 20 January 1999 the The Bank of New York Mellon (Luxembourg) S.A. received its banking licence in accordance with the Luxembourg Law of 5 April 1993 on the financial sector, as amended, and has engaged in banking activities since then. On 19 October 2006 the The Bank of New York Mellon (Luxembourg) S.A. has enhanced its banking licence to cover as well the activities of administrative agent of the financial sector. The Bank of New York Mellon (Luxembourg) S.A. is supervised by the Luxembourg financial regulator, the Commission de Surveillance du Secteur Financier. -99-

105 USE OF PROCEEDS The proceeds from the issue of the Notes, being 7,849,952,000, will be applied by the Issuer to pay to the Originator the Purchase Price for the Portfolio in accordance with the Receivables Purchase Agreement

106 DESCRIPTION OF THE TRANSACTION DOCUMENTS The description of the Transaction Documents set out below is a summary of certain features of those agreements and is qualified by reference to the detailed provisions of the Transaction Documents. Prospective Noteholders may inspect copies of the Transaction Documents upon request at the specified office of the Representative of the Noteholders. 1. THE RECEIVABLES PURCHASE AGREEMENT On 16 January 2012, the Originator and the Issuer entered into the Receivables Purchase Agreement, pursuant to which the Originator has assigned and transferred to the Issuer, without recourse (pro soluto), all of its rights, title and interest in and to the Portfolio. The consideration to be paid by the Issuer to the Originator in respect of the Portfolio pursuant to the Receivables Purchase Agreement is equal to the Purchase Price (being the aggregate sum of the Individual Purchase Prices of the Receivables comprised in the Portfolio) and the Deferred Instalment (being equal to the Accrued Interest plus any interest and changes accrued, due and unpaid on the Receivables as at the Valuation Date (excluded)). The Individual Purchase Price for each Receivable is equal to the relevant Outstanding Principal. Under the Receivables Purchase Agreement, the Purchase Price for the Receivables is payable by the Issuer to the Originator on the Issue Date, provided that the formalities set out in Clause 8.1 of the Receivables Purchase Agreement have been completed, while the Deferred Instalment is paid in accordance with the Interest Priority of Payments. The Originator has sold to the Issuer, and the Issuer has purchased from the Originator, the Receivables comprised in the Portfolio, which meet the Criteria, described in detail in the section headed "The Portfolio". The sale of the Portfolio was made in accordance with article 58, subsections 2, 3 and 4 of the Consolidated Banking Act (as provided by article 4 of the Securitisation Law). Notice of the transfer was published in the Gazzetta Ufficiale della Repubblica Italiana, Parte Seconda, number 8 of 19 January 2012 and was published in the companies register of Milan on 19 January The Receivables Purchase Agreement contains a number of undertakings by the Originator in respect of its activities relating to the Receivables. The Originator has undertaken, inter alia, to refrain from carrying out activities with respect to the Receivables which may prejudice the validity or recoverability of any Receivable or adversely affect the benefit which the Issuer may derive from the Receivables and in particular not to assign or transfer the Receivables to any third party or to create any security interest, charge, lien or encumbrance or other right in favour of any third party in respect of the Receivables. The Originator has also undertaken not to modify or cancel any term or condition of the Mortgage Loan Agreements or any document to which it is a party relating to the Receivables which may prejudice the Issuer's rights to the Receivables, save in the event such modifications or cancellations are provided for by the Transaction Documents or required by law. Under the terms of the Receivables Purchase Agreement the Issuer has granted to the Originator (i) a right to repurchase (in whole but not in part) the then outstanding portfolio on any Payment Date on or after the Clean Up Option Date and (ii) an option -101-

107 right to repurchase individual Receivables within certain limits and to the extent that the total amount of Receivables so repurchased during each calendar year does not exceed the lower of (1) the difference between (a) 10% of the Outstanding Principal of all the Receivables included in the Portfolio as at the Valuation Date and (b) the Outstanding Principal of the Receivables which have been subject to renegotiation under the terms of the Servicing Agreement until the relevant repurchase date, and (2) 10% of the Outstanding Principal of all the Receivables included in the Portfolio as at the beginning of the relevant calendar year. The Receivables Purchase Agreement and any non contractual obligations arising out of or in connection with it are governed by and shall be construed in accordance with Italian law. 2. THE SERVICING AGREEMENT On 16 January 2012, the Originator and the Issuer entered into the Servicing Agreement, pursuant to which the Issuer has appointed Barclays PLC, Italian branch as Servicer of the Receivables. The receipt of the Collections is the responsibility of the Servicer acting as agent (mandatario) of the Issuer. Under the Servicing Agreement, the Servicer shall credit on a daily basis any amounts collected from the Receivables to the Issuer Collection Account. The Servicer will also act as the soggetto incaricato della riscossione dei crediti ceduti e dei servizi di cassa e di pagamento pursuant to the Securitisation Law. In such capacity, the Servicer shall also be responsible for ensuring that such operations comply with the provisions of articles 2.3, letter (c), and 2.6 of the Securitisation Law. The Servicer will also be responsible for carrying out, on behalf of the Issuer, in accordance with the Servicing Agreement and the Credit and Collection Policy, any activities related to the management, enforcement and recovery of the Defaulted Receivables. The activities to be carried out by the Servicer include also the processing of administrative and accounting data in relation to the Receivables and the management of such data. The Servicer has represented to the Issuer that it has all skills, software, hardware, information technology and human resources necessary to comply with the efficiency standards required by the Servicing Agreement. The Servicer has undertaken to use all due diligence to maintain all accounting records relating to the Receivables and the Defaulted Receivables and to supply all relevant information to the Issuer to enable it to prepare its financial statements. In return for the services provided by the Servicer, the Issuer will pay to the Servicer on each Payment Date, in accordance with the applicable Priority of Payments: (a) with respect to the management and collection of the performing Receivables (in bonis) a commission equal to 0.15% of the Outstanding Principal Balance of the Receivables at the beginning of the relevant Collection Period to be calculated pursuant to the following formula: -102-

108 A x 0.15% x B 365 where: "A" represents the Outstanding Principal Balance of the Receivables at the beginning of the relevant Collection Period, and "B" represents the number of days elapsed in the relevant Collection Period; (b) with respect to the administration, collection and recovery of any Non- Performing Receivable: (i) (ii) a commission equal to 3% of the amount recovered in respect of each Non-Performing Receivable; the expenses (including, but not limited to, any fees and expenses of external lawyers) reasonably incurred by the Servicer in connection with the recovery of any Non-Performing Receivables relating to the preceding Collection Period, up to a maximum amount of Euro 100,000 (including VAT) per Collection Period, and (c) for the monitoring and reporting activity carried out by the Servicer an annual fee of Euro 5,000 (including VAT). Under the Servicing Agreement the relevant parties have agreed that given the interest of the Originator to amend terms and conditions of the Mortgage Loan Agreements in order to maintain good relationships with its customers and to avoid possible discrimination between the Debtors and its other customers, the Issuer has granted to the Servicer the possibility for it, in the name and on behalf of the Issuer, to enter into renegotiation agreements both of Defaulted Receivables and of performing Receivables within the limits and subject to the conditions set out therein. The Servicer has undertaken to prepare and submit to the Issuer quarterly and monthly reports containing, a summary of the performance of the Portfolio, a detailed summary of the status of the Receivables and a report on the level of collections in respect of principal and interest on the Portfolio, for delivery to, inter alios, the Issuer, the Calculation Agent and the Representative of the Noteholders. The Issuer has undertaken to appoint a back-up servicer if the long-term rating of the Servicer's unsecured, unguaranteed and unsubordinated debt obligations by Moody's falls below "Baa2" and "BBB" by Fitch (provided that if such entity is on rating watch negative, it shall be treated as one notch below its then current Fitch rating) within 30 calendar days from such downgrading. The Servicer may not terminate its appointment before the earlier of the date on which the Notes have been repaid in full and the Final Maturity Date. The Issuer may terminate the Servicer's appointment and appoint a successor servicer if certain events occur (each a "Servicer Termination Event"). The Servicer Termination Events include the following events: -103-

109 (i) (ii) (iii) (iv) (v) (vi) failure on the part of the Servicer to deposit or pay any amount required to be paid or deposited, which failure continues unremedied for 7 (seven) Business Days after the due date thereof and cannot be attributed to force majeure; failure on the part of the Servicer to observe or perform any other term, condition, covenant or agreement provided for under the Servicing Agreement and the other Transaction Documents to which it is a party, and the continuation of such failure for a period of 7 (seven) Business Days following receipt by the Servicer of written notice from the Issuer requiring remedy of such failure; any of the representations and warranties given by the Servicer, pursuant to the Servicing Agreement, has been proved to be untrue, false or deceptive in any material respect; an Insolvency Event occurs with respect to the Servicer; it becomes unlawful for the Servicer to perform or comply with any of its obligations under the Servicing Agreement or the other Transaction Documents to which it is a party; the Servicer is or will be unable to meet the current or future legal requirements and the Bank of Italy's regulations for entities acting as servicers in the context of a securitisation transaction. The Servicing Agreement and any non contractual obligations arising out of or in connection with it are governed by and shall be construed in accordance with Italian law. 3. THE WARRANTY AND INDEMNITY AGREEMENT On 16 January 2012, the Issuer and the Originator entered into the Warranty and Indemnity Agreement, pursuant to which the Originator has given certain representations and warranties in favour of the Issuer in relation to the Receivables comprised in the Portfolio and certain other matters and has agreed to indemnify the Issuer in respect of certain liabilities of the Issuer that may be incurred in connection with the purchase and ownership of the Receivables. The Warranty and Indemnity Agreement contains representations and warranties given by the Originator as to matters of law and fact affecting the Originator including, without limitation, that the Originator validly exists as a juridical person, has the corporate authority and power to enter into the Transaction Documents to which it is party and assume the obligations contemplated therein and has all the necessary authorisations therefore. The Warranty and Indemnity Agreement sets out standard representations and warranties in respect of the Receivables including, inter alia, that, as of the date of execution of the Warranty and Indemnity Agreement, the Receivables comprised in the Portfolio (i) are valid, in existence and in compliance with the Criteria, and (ii) relate to Mortgage Loan Agreements which have been entered into, executed and -104-

110 performed by the Originator in compliance with all applicable laws, rules and regulations (including the Usury Law). Pursuant to the Warranty and Indemnity Agreement, the Originator has agreed to indemnify and hold harmless the Issuer, its officers or agents or any of its permitted assigns from and against any and all damages, losses, claims, costs and expenses awarded against, or incurred by such parties which arise out of or result from, inter alia, (a) any representations and/or warranties made by the Originator under the Warranty and Indemnity Agreement, being false, incomplete or incorrect; (b) the failure by the Originator to comply with any of its obligations under the Transaction Documents; (c) any amount of any Receivable not being collected as a result of the proper and legal exercise of any right of set-off against the Originator by the relevant Debtor and/or any insolvency receiver of the relevant Debtor; (d) the failure of the terms and conditions of any Mortgage Loan Agreement on the Valuation Date to comply with the provision of article 1283 of the Italian civil code; or (e) the failure to comply with the provisions of the Usury Law in respect of any interest accrued under the Mortgage Loan Agreement up to the Valuation Date. The Warranty and Indemnity Agreement and any non contractual obligations arising out of or in connection with it are governed by and shall be construed in accordance with Italian law. 4. THE CASH ALLOCATION, MANAGEMENT AND PAYMENTS AGREEMENT On or about the Issue Date, the Issuer, the Originator, the Servicer, the Cash Manager, the Representative of the Noteholders, the Calculation Agent, the Issuer Corporate Services Provider, the Account Bank, the Collection Account Bank, the Principal Paying Agent and the GIC Account Bank entered into the Cash Allocation, Management and Payment Agreement. Under the terms of the Cash Allocation, Management and Payment Agreement: (i) (ii) (iii) (iv) the Account Bank has agreed to establish and maintain, in the name and on behalf of the Issuer, the Payments Account and to provide the Issuer with certain reporting services together with account handling services in relation to monies from time to time standing to the credit of the Payments Account; the Issuer Corporate Services Provider has agreed to operate the Expenses Account held with Barclays Bank PLC, Italian branch, in accordance with the instructions of the Issuer; the Calculation Agent has agreed to provide the Issuer with the Payments Report; the Principal Paying Agent has agreed to provide the Issuer with certain payment services together with certain calculation services in relation to the Notes. The parties have agreed that in case the Servicer fails to deliver the Quarterly Servicer's Report then the Calculation Agent shall prepare a Payments Report based -105-

111 on the most-recently available Monthly Servicer's Report, provided that in such Payments Report the Calculation Agent shall provide for the application of the Issuer Available Funds for the payment of items from First to Sixth (other than the servicing fees) of the Interest Priority of Payments and from First to Second of the Principal Priority of Payments and the payment of the amounts due under the other items of the Interest Priority of Payments will be payable on the next succeeding Payment Date, provided that the Servicer will prepare, on the immediately following Quarterly Servicer's Report Date, a consolidated Quarterly Servicer's Report with respect to the two preceding Collection Periods. The Payments Account held with the Account Bank shall be opened in the name of the Issuer and shall be operated by the Account Bank and the amounts standing to the credit thereof shall be debited and credited in accordance with the provisions of the Cash Allocation, Management and Payment Agreement. The Issuer may (with the prior approval of the Representative of the Noteholders) revoke its appointment of any of the Calculation Agent, Principal Paying Agent and Account Bank (each an "Agent") by giving not less than three months' written notice. The appointment of each Agent shall terminate forthwith in accordance with article 1456 of the Italian civil code if: (i) an Insolvency Event occurs in relation to it; or (ii) it is rendered unable to perform its obligations for a period of 60 days by circumstances beyond its control. Each Agent may resign from its appointment, upon giving not less than three months' (or such shorter period as the Representative of the Noteholders may agree) prior written notice of resignation to the Issuer and the Representative of the Noteholders. Such resignation will be subject to and conditional upon: the Representative of the Noteholders consenting in writing to the resignation; and a substitute Agent being appointed by the Issuer, with the prior written approval of the Representative of the Noteholders, on substantially the same terms as those set out in the Cash Allocation, Management and Payments Agreement. The Cash Allocation, Management and Payments Agreement and any non contractual obligations arising out of or in connection with it are governed by and shall be construed in accordance with Italian law. 5. THE INTERCREDITOR AGREEMENT On or about the Issue Date, the Issuer and the Other Issuer Creditors entered into the Intercreditor Agreement. Under the Intercreditor Agreement provision is made as to the application of the proceeds from collections in respect of the Portfolio and as to the circumstances in which the Representative of the Noteholders will be entitled to exercise certain rights in relation to the Portfolio. In the Intercreditor Agreement the Other Issuer Creditors have agreed, inter alia, to the order of priority of payments to be made out of the Issuer Available Funds and that the obligations owed by the Issuer to the Noteholders and, in general, to the Other Issuer Creditors are limited recourse obligations of the Issuer. The Noteholders and the Other Issuer Creditors have a claim against the Issuer only to the extent of the Issuer Available Funds in each case subject to and as provided in the Intercreditor Agreement and the other Transaction Documents

112 Under the terms of the Intercreditor Agreement, the Issuer has undertaken, following the service of a Trigger Notice, to comply with all directions of the Representative of the Noteholders, acting pursuant to the Conditions, in relation to the management and administration of the Portfolio. The Intercreditor Agreement and any non contractual obligations arising out of or in connection with it are governed by and shall be construed in accordance with Italian law. 6. THE GIC AGREEMENT On or about the Issue Date, the Issuer, the GIC Account Bank, the Representative of the Noteholders and the Cash Manager entered into the GIC Agreement. Pursuant to the terms of the GIC Agreement, the GIC Account Bank has agreed to establish and maintain, in the name and on behalf of the Issuer, the GIC Account, and to provide the Issuer with certain reporting services together with account handling services in relation to monies from time to time standing to the credit of the GIC Account. Under the terms of the GIC Agreement, the GIC Account Bank has agreed to pay a guaranteed rate of interest on any amount standing from time to time to the credit of the GIC Account equal to the ECB MRO Rate. The GIC Agreement and any non contractual obligations arising out of or in connection with it are governed by and shall be construed in accordance with English law. 7. THE MANDATE AGREEMENT On or about the Issue Date, the Issuer and the Representative of the Noteholders entered into the Mandate Agreement under which, subject to a Trigger Notice being served upon the Issuer or upon failure by the Issuer to exercise its rights under the Transaction Documents within 10 day from the notification of such failure, the Representative of the Noteholders, acting in such capacity, shall be authorised to exercise, in the name and on behalf of the Issuer, all the Issuer's non-monetary rights arising out of the Transaction Documents to which the Issuer is a party. The Mandate Agreement and any non contractual obligations arising out of or in connection with it are governed by and shall be construed in accordance with Italian law. 8. THE DEED OF PLEDGE On or about the Issue Date, the Issuer and the Representative of the Noteholders entered into the Deed of Pledge under which, without prejudice and in addition to any security, guarantee and other right provided by the Securitisation Law and the Deed of Charge securing the discharge of the Issuer's obligations to the Noteholders, the Issuer has pledged in favour of the Noteholders and the Other Issuer Creditors all monetary claims and rights and all the amount (including payment for claims, indemnities, damages, penalties, credits and guarantees) to which the Issuer is entitled to from time to time pursuant to certain Transaction Documents, with the exclusion of the Receivables and the Collections. The security created pursuant to the Deed of Pledge will become enforceable upon the service of a Trigger Notice

113 The Deed of Pledge and any non contractual obligations arising out of or in connection with it are governed by and shall be construed in accordance with Italian law. 9. THE DEED OF CHARGE On the Issue Date, the Issuer and the Representative of the Noteholders will enter into the Deed of Charge under which, without prejudice and in addition to any security, guarantees and other rights provided by the Securitisation Law and the Deed of Pledge securing the discharge of the Issuer's obligation to the Noteholders and the Other Issuer Creditors, the Issuer will assign in favour of the Representative of the Noteholders (as trustee for the Noteholders and the Other Issuer Creditors) all the Issuer's right, title, benefit and interest arising under the Swap Agreement and the GIC Agreement and charge in favour of the Representative of the Noteholders (as trustee for the Noteholders and the Other Issuer Creditors) all the Issuer's right, title, benefit and interest in the GIC Account. The security created by the Deed of Charge will become enforceable upon service of a Trigger Notice. The Deed of Charge and any non contractual obligations arising out of or in connection with it are governed by and shall be construed in accordance with English law. 10. THE SWAP AGREEMENT On or about the Issue Date, the Issuer and the Swap Counterparty entered into the Swap Agreement, pursuant to which the Issuer shall mitigate certain risks it bears in respect of its obligations under the Notes. The Swap Agreement consists of an ISDA 1992 Master Agreement (Multicurrency Cross Border) dated on or about the Issue Date, together with the schedule and credit support annex thereto and the related confirmation. Pursuant to such confirmation on each Payment Date the Issuer shall pay to the Swap Counterparty an amount equal to the product of the Notional Amount multiplied by the BMR (where "BMR" is the aggregate of interest and other amounts other than principal received by the Issuer during a Collection Period in relation to the Portfolio minus senior expenses (expressed as a percentage of the Notional Amount) and the "Notional Amount" is the aggregate Outstanding Principal in respect of the Portfolio minus the Outstanding Principal Due in respect of Defaulted Receivables). The Swap Counterparty shall pay to the Issuer an amount equal to the product of the Notional Amount and the floating rate of 3 months Euribor plus the relevant margin. If the Swap Counterparty is downgraded by the Rating Agencies below any of the required credit ratings set out in the Swap Agreement, it will be required to carry out, within the time frame specified in the Swap Agreement one or more remedying measures at its own cost which include the following: (a) (b) transfer all of its rights and obligations under the Swap Agreement to an appropriately rated entity; arrange for an appropriately rated entity to become co-obligor or guarantor in respect of its obligations under the Swap Agreement; or -108-

114 (c) post collateral to support its obligations under the Swap Agreement. The Swap Agreement will terminate on the earlier of the Final Maturity Date and the date on which the Notes have been redeemed in full including following a redemption of the Notes pursuant to Condition 8.3 (Redemption, Purchase and Cancellation - Optional redemption) and Condition 8.4 (Redemption, Purchase and Cancellation - Optional redemption for taxation reasons) but other than following delivery of a Trigger Notice pursuant to Condition 12 (Trigger Events). The occurrence of certain other termination events contained in the Swap Agreement may cause the earlier termination of the Swap Agreement. The Swap Agreement and any non contractual obligations arising out of or in connection with it are governed by and shall be construed in accordance with English law. 11. THE SUBORDINATED LOAN AGREEMENT On or about the Issue Date, the Issuer and the Subordinated Loan Provider entered into the Subordinated Loan Agreement, pursuant to which the Subordinated Loan Provider has provided to the Issuer a subordinated loan made available in two drawings as follows: (i) the Cash Reserve Loan, the proceeds of which shall be deposited by the Issuer on the Issue Date in the GIC Account and recorded in the Cash Reserve Ledger and (ii) the Liquidity Reserve Loan, the proceeds of which shall be deposited by the Issuer on the Issue Date in the GIC Account and recorded in the Liquidity Reserve Ledger. The Cash Reserve Loan and the Liquidity Reserve Loan will be repaid by the Issuer in accordance with the provisions of the Subordinated Loan Agreement and in accordance with the Priority of Payments. The Subordinated Loan Agreement and any non contractual obligations arising out of or in connection with it are governed by and shall be construed in accordance with Italian law. 12. THE EXPENSES LOAN AGREEMENT On or about the Issue Date, the Issuer and the Expenses Loan Provider entered into the Expenses Loan Agreement, pursuant to which the Expenses Loan Provider has provided to the Issuer the Expenses Loan, the proceeds of which shall be deposited by the Issuer on the Issue Date in the Payments Account and used to pay the Initial Expenses and to fund the Retention Amount. The Expenses Loan will be repaid by the Issuer in accordance with the provisions of the Expenses Loan Agreement and in accordance with the Priority of Payments. The Expenses Loan Agreement and any non contractual obligations arising out of or in connection with it are governed by and shall be construed in accordance with Italian law. 13. THE CORPORATE SERVICES AGREEMENT Under the Corporate Services Agreement entered into on 22 January 2003 (as extended on or about the Issue Date), between the Issuer, the Issuer Corporate Servicer Provider and the Representative of the Noteholders, the Issuer Corporate -109-

115 Servicer Provider has agreed to provide certain corporate administration and management services to the Issuer in relation to the Securitisation. The Corporate Services Agreement and any non contractual obligations arising out of or in connection with it are governed by and shall be construed in accordance with Italian law

116 THE ACCOUNTS The Issuer has opened and, subject to the terms of the Transaction Documents, shall at all times maintain the following accounts. (1) Issuer Collection Account Into the Issuer Collection Account: any Collections received and recovered by the Servicer daily upon receipt thereof, in accordance with the Servicing Agreement Out of the Issuer Collection Account: any amounts standing to the credit of the Issuer Collection Account to the GIC Account, on the Business Day immediately following the day on which such amounts have been credited thereto. (2) Payments Account Into the Payments Account: (a) (b) (c) (d) on the Issue Date, the proceeds of the issue of the Notes (net of any amounts that are being set-off under the terms of clause 13.4 (Set-off) of the Subscription Agreement as payment of the Purchase Price); any amount received under the Transaction Documents that are not expressed to be paid to a different Account; two Business Days prior to each Payment Date (or one Business Day, for as long as the Principal Paying Agent and the Account Bank are the same entity), the amounts transferred from the GIC Account (including any Cash Reserve Available Amount) pursuant to the GIC Agreement; Two (2) Business Days (or one Business Day for as long as the Principal Paying Agent and the Account Bank are the same entity) prior to the Payment Date on which the Notes are redeemed in full, from the GIC Account, any amount recorded as a credit balance in the Cash Reserve Ledger. Out of the Payments Account: (a) (b) on the Issue Date, firstly, the fees, costs and expenses due on that date by the Issuer as confirmed by the Issuer, secondly to pay the Purchase Price to the Originator (net of any amounts that are being set-off under the terms of Clause 13.2 (Payments of Subscription Monies), each as set out in the relevant Transaction Documents; one Business Day prior to each Payment Date, to make payments to the account specified for such purpose by the Principal Paying Agent, for onward payment to the Noteholders through the Monte Titoli system in accordance with the applicable Priority of Payments and the relevant Payments Report; -111-

117 (c) (d) on each Payment Date, to make payments to the Other Issuer Creditors other than the Noteholders in accordance with the applicable Priority of Payments and the relevant Payments Report o Trigger Event Report, as the case may be; and on each Payment Date, in accordance with the Priority of Payments, to transfer the amounts necessary to replenish the Expense Account up to the Retention Amount, to replenish the Cash Reserve Account up to the Required Cash Reserve Amount and to make good any shortfall reflected in the Principal Deficiency Ledger until the debit balance, if any, of the Principal Deficiency Ledger is reduced to zero; (3) GIC Account The Issuer has established with the GIC Account Bank the GIC Account into which amounts from the Issuer Collection Account will be transferred. In the GIC Agreement, the GIC Account Bank has agreed to pay the Issuer on the amounts from time to time standing to the credit of the GIC Account interest at the ECB MRO Rate. The GIC Account will be maintained with the GIC Account Bank for as long as the GIC Account Bank is an Eligible Institution or the GIC Agreement is terminated. Into the GIC Account: The Issuer hereby undertakes to the GIC Account Bank and the other parties to pay to or deposit in, or cause to be paid to or deposited in, as the case may be, the GIC Account: (a) (b) (c) (d) (e) on the Issue Date, the proceeds of the Cash Reserve Loan to form the Cash Reserve, to be recorded in the Cash Reserve Ledger; on the Issue Date, the proceeds of the Liquidity Reserve Loan to form the Liquidity Reserve, to be recorded in the Liquidity Reserve Ledger; on the Issue Date, any Collections received and recovered by the Servicer from the Effective Date (included) to the Issue Date (excluded), in accordance with the Servicing Agreement; from the Issue Date, any amounts from time to time standing to the credit of the Issuer Collection Account on the Business Day immediately following the day on which such amounts have been credited thereto; on any Payment Date on which the balance of the Cash Reserve is lower than the Required Cash Reserve Amount, Interest Available Funds in order to increase the balance of the Cash Reserve to the Required Cash Reserve Amount, in accordance with the item eighth of the Interest Priority of Payments. Out of the GIC Account: (a) Two (2) Business Days (or one Business Day for as long as the Principal Paying Agent and the Account Bank are the same entity) prior to each -112-

118 Payment Date and on the instruction of the Cash Manager, the GIC Account Bank (acting through its Italian branch) shall transfer: (1) the GIC Balance (other than (i) the Cash Reserve to the extent that no Cash Reserve Available Amount is required to be used in accordance with the relevant Payments Report (ii) the Liquidity Reserve to the extent that no Liquidity Reserve Available Amount is required to be used in accordance with the relevant Payments Report and (ii) the amounts corresponding to the Collections transferred to the GIC Account following the Collection Date immediately preceding the relevant Payment Date) to the Payments Account; and (2) the Cash Reserve Available Amount and the Liquidity Reserve Available Amount, if any, specified in the relevant Payments Report, to the Payments Account. (b) Two (2) Business Days (or one Business Day for as long as the Principal Paying Agent and the Account Bank are the same entity) prior to the Payment Date on which the Notes are redeemed in full, the GIC Account Bank (acting through its Italian branch) shall transfer an amount equal to any amount recorded as a credit balance in the Cash Reserve Ledger and the Liquidity Reserve Ledger to the Payments Account. (4) Expenses Account Into the Expenses Account: (a) (b) on the Issue Date, the Retention Amount; and on each Payment Date, an amount to bring the balance of the Expenses Account up to (but not in excess of) the Retention Amount in accordance with the Priority of Payments; Out of the Expenses Account: any amounts standing to the credit of the Expenses Account will be used for paying the Expenses during an Interest Period. Each of the Account Bank and the GIC Account Bank will be required at all times to be an Eligible Institution. Should either the Account Bank or the GIC Account Bank cease to be an Eligible Institution, the Accounts held with it will be transferred to another Eligible Institution within 30 calendar days from the date on which the Account Bank or, as the case may be, the GIC Account Bank ceased to be an Eligible Institution

119 EXPECTED AVERAGE DURATION OF THE NOTES Weighted average duration refers to the average amount of time that will elapse from the date of issuance of a security to the date of distribution to the investor of amounts distributed in net reduction of principal of such security. The weighted average duration of the Notes will be influenced by, inter alia, the actual rate of collection of the Receivables. Calculations as to the weighted average duration and the expected maturity of the Notes can be made on the basis of certain assumptions, including the rate at which the Receivables are prepaid, the amount of the Defaulted Receivables and whether the Issuer exercises its option for an early redemption of the Notes. The following table shows the weighted average duration and the expected maturity of the Notes and has been prepared based on the characteristics of the Receivables included in the Portfolio, on historical performance and on the following additional assumptions: (i) no Trigger Event occurs in respect to the Notes; (ii) repayment of principal under the Notes occurs from the Payment Date falling in 28 April 2012; (iii) (iv) the right of optional redemption under Condition 8.3 (Redemption, Purchase and Cancellation - Optional redemption) is exercised on any Payment Date falling on or after the Clean Up Option Date; no event under Condition 8.4 (Redemption, Purchase and Cancellation - Optional redemption for taxation reasons) occurs. The actual characteristics and performance of the Receivables are likely to differ from the assumptions used in constructing the table set forth below, which is hypothetical in nature and is provided only to give a general sense of how the principal cash-flows might behave. Any difference between such assumptions and the actual characteristics and performance of the Receivables will cause the weighted average duration and the expected maturity of the Notes to differ (which difference could be material) from the corresponding information in the following table. Constant prepayment Weighted Average Expected Life Expected Maturity rate Duration (years) (years) 7% 18, January

120 TERMS AND CONDITIONS OF THE RATED NOTES The following is the text of the terms and conditions of the Notes. In these Conditions, references to the "holder" of a Note and to the "Noteholders" are to the ultimate owners of the Notes, dematerialised and evidenced by book entries with Monte Titoli in accordance with the provisions of (i) article 83-bis of the Financial Laws Consolidation Act and (ii) the Joint Regulation, as subsequently amended and supplemented from time to time. The Noteholders are deemed to have notice of and are bound by, and shall have the benefit of, inter alia, the terms of the Rules, attached as an Exhibit to, and forming part of, these Conditions. The 7,005,000,000 Class A Residential Mortgage Backed Floating Rate Notes Series due 27 January 2061 and the 844,952,000 Class J Residential Mortgage Backed Variable Rate Notes Series due 27 January 2061 have been issued by the Issuer on the Issue Date pursuant to the Securitisation Law to finance the purchase of the Receivables from the Originator pursuant to the Receivables Purchase Agreement. The principal source of payment of interest and repayment of principal due and payable in respect of the Notes will be collections and recoveries made in respect of the Receivables. Any reference below to a "Class" of Notes or a "Class" of Noteholders shall be a reference to the Rated Notes or to the respective ultimate owners thereof. 1. INTRODUCTION 1.1 Rated Noteholders deemed to have notice of Transaction Documents The Rated Noteholders are entitled to the benefit of, are bound by and are deemed to have notice of all the provisions of the Transaction Documents (described below). 1.2 Provisions of Conditions subject to Transaction Documents Certain provisions of these Rated Notes Conditions include summaries of, and are subject to, the detailed provisions of the Transaction Documents. 1.3 Copies of Transaction Documents available for inspection Copies of the Transaction Documents (other than the Subscription Agreements) are available for inspection by the Rated Noteholders during normal business hours at the registered office of the Issuer, being as at the Issue Date, Foro Buonaparte, 70, Milan, Italy, at the registered office of the Representative of the Noteholders, being, as at the Issue Date, One Canada Square, Canary Wharf, London E14 5AL, United Kingdom, and at the specified office of the Principal Paying Agent, being, as at the Issue Date, Via Carducci, 31, Milan, Italy. 1.4 Description of Transaction Documents Pursuant to the Subscription Agreement, the Sole Lead Manager has agreed to subscribe for the Notes and appointed the Representative of the Noteholders to perform the activities described in the Subscription Agreement, these Conditions, the Rules and the other Transaction Documents

121 1.4.2 Pursuant to the Warranty and Indemnity Agreement, the Originator has given certain representations and warranties in favour of the Issuer in relation to the Portfolio and certain other matters and has agreed to indemnify the Issuer in respect of certain liabilities of the Issuer incurred in connection with the purchase and ownership of the Portfolio Pursuant to the Servicing Agreement, the Servicer has agreed to administer, service and collect amounts in respect of the Portfolio on behalf of the Issuer. The Servicer will be the soggetto incaricato della riscossione dei crediti ceduti e dei servizi di cassa e di pagamento pursuant to the Securitisation Law and will be responsible for ensuring that such transactions comply with the provisions of article 2.3(c) and article 2.6 of the Securitisation Law Pursuant to the Issuer Corporate Services Agreement, the Issuer Corporate Services Provider has agreed to provide to the Issuer certain services in relation to the management of the Issuer Pursuant to the Cash Allocation, Management and Payments Agreement, the Calculation Agent, the Principal Paying Agent, the Account Bank, the Collection Account Bank, the GIC Account Bank, the Servicer and the Issuer Corporate Services Provider have agreed to provide the Issuer with certain calculation, notification, reporting and agency services together with account handling, cash management and payment services in relation to moneys from time to time standing to the credit of the Accounts. The Cash Allocation, Management and Payments Agreement also contains provisions relating to, inter alia, the payment of principal, interest and Premium in respect of the Notes Pursuant to the Monte Titoli Mandate Agreement, Monte Titoli has agreed to provide the Issuer with certain depository and administration services in relation to the Notes Pursuant to the Intercreditor Agreement, provision is made as to the order of application of Issuer Available Funds and the circumstances under which the Representative of the Noteholders will be entitled to exercise certain of the Issuer's rights in respect of the Portfolio and the Transaction Documents Pursuant to the Swap Agreement, the Swap Counterparty has agreed to hedge the potential interest rate exposure of the Issuer in relation to its floating rate interest obligations under the Notes Pursuant to the GIC Agreement, the GIC Account Bank has agreed to pay interest on any amount standing from time to time to the credit of the GIC Account at the ECB MRO Rate Pursuant to the Deed of Pledge, the Issuer has pledged, in favour of the Noteholders and the Other Issuer Creditors, all monetary claims and rights and all the amounts payable from time to time (including payment for claims, indemnities, damages, penalties, credits and guaranties) to which it is entitled pursuant or in relation to certain Transaction Documents to which the Issuer is a party

122 Pursuant to the Deed of Charge, the Issuer has assigned by way of security in favour of the Representative of the Noteholders (as trustee for the Noteholders and the Other Issuer Creditors) all of the Issuer's right, title, benefit and interest, present and future, pursuant to or in relation to the Swap Agreement and the GIC Agreement and charged in favour of the Representative of the Noteholders (as trustee for the Noteholders and the Other Issuer Creditors) all the Issuer's right, title, benefit and interest, present and future, in respect of the GIC Account Pursuant to the Subordinated Loan Agreement, the Subordinated Loan Provider has disbursed to the Issuer a subordinated loan to establish the Cash Reserve and the Liquidity Reserve on the Issue Date Pursuant to the Expenses Loan Agreement, the Expenses Loan Provider has disbursed to the Issuer the Expenses Loan to pay the Initial Expenses and to fund the Retention Amount on the Issue Date Pursuant to the Mandate Agreement, the Representative of the Noteholders, subject to a Trigger Notice being served upon the Issuer following the occurrence of a Trigger Event and, subject to the fulfilment of certain conditions, upon failure by the Issuer to exercise its rights under the Transaction Documents is authorised to exercise, in the name and on behalf of the Issuer, all the Issuer's non-monetary rights arising out of certain Transaction Documents to which the Issuer is a party Pursuant to the Quotaholders' Agreement, certain rules have been set forth in relation to the corporate management of the Issuer Pursuant to the Master Definitions Agreement, the definitions and interpretations of certain terms and expressions used in the Transaction Documents have been agreed by the parties to the Transaction Documents. 1.5 Acknowledgement Each Noteholder, by reason of holding Notes, acknowledges and agrees that the Sole Lead Manager shall not be liable in respect of any loss, liability, claim, expenses or damages suffered or incurred by any of the Noteholders as a result of the performance by BNY Mellon Corporate Trustee Services Limited or any successor thereof of its duties as Representative of the Noteholders as provided for in the Transaction Documents. 2. DEFINITIONS AND INTERPRETATION 2.1 Definitions "Account Bank" means The Bank of New York Mellon (Luxembourg) S.A., Italian branch or any other person for the time being acting as Account Bank pursuant to the Cash Allocation, Management and Payments Agreement. "Accounts" means, collectively, the Payments Account, the Issuer Collection Account and the GIC Account and "Account" means any of them

123 "Accrued Interest" means, on any date, the interest accrued and unpaid on the Outstanding Principal of each Mortgage Loan. "Adjusted Purchase Price" means, in relation to any Receivables erroneously excluded from the Portfolio pursuant to clause of the Receivables Purchase Agreement, an amount calculated in accordance with clause of the Receivables Purchase Agreement. "Aggregate Notional Outstanding Amount" means the sum of the Notional Outstanding Amount of each Receivable as at the Collection Date falling at the end of each Collection Period calculated by the Servicer on the relevant Quarterly Servicer's Report Date. "Bankruptcy Law" means Italian Royal Decree number 267 of 16 March 1942, as amended and supplemented from time to time. "Barclays Bank PLC, Italian branch" means Barclays Bank PLC, Italian branch, a bank incorporated under the laws of England and Wales, having its registered office at 1 Churchill Place, London E14 5HP, United Kingdom, acting through its Italian branch, with offices at Via della Moscova, 18, Milan, Italy, fiscal code and enrolment with the companies register of Milan number , enrolled under number 4862 with the register of banks held by the Bank of Italy pursuant to article 13 of the Consolidated Banking Act. "Business Day" means any day on which banks are generally open for business in Milan, London and Dublin and on which TARGET2, the Trans-European Automated Real Time Gross Transfer System, which uses a single shared platform and was launched on 19 November 2007 (or any successor thereto) is open. "Calculation Agent" means Barclays Bank PLC, Italian branch, or any other person for the time being acting as Calculation Agent pursuant to the Cash Allocation, Management and Payments Agreement. "Calculation Date" means the date falling three Business Days after each Quarterly Servicer's Report Date. "Cash Allocation, Management and Payments Agreement" means the cash allocation, management and payment agreement entered into on or about the Issue Date between the Issuer, the Servicer, the Originator, the Representative of the Noteholders, the Account Bank, the Collection Account Bank, the GIC Account Bank, the Cash Manager, the Issuer Corporate Services Provider, the Calculation Agent and the Principal Paying Agent, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Cash Manager" means The Bank of New York Mellon, London branch or any other person for the time being acting as Cash Manager pursuant to the GIC Agreement. "Cash Reserve" means a reserve created with the proceeds of the Cash Reserve Loan to be applied in accordance with the provisions of the GIC Agreement

124 "Cash Reserve Available Amount" means, in respect of any Payment Date, the amount to be drawn from the Cash Reserve Ledger required to be applied in or towards making good any shortfall reflected in the Principal Deficiency Ledger until the debit balance, if any, of the Principal Deficiency Ledger is reduced to zero, to the extent that the Interest Available Funds (net of any Cash Reserve Available Amount) have not been sufficient for such purpose on such Payment Date in accordance with the Interest Priority of Payments. "Cash Reserve Ledger" means the ledger maintained by the Cash Manager to record the Cash Reserve from time to time in accordance with the provisions of the GIC Agreement and the Conditions. "Cash Reserve Loan" means the loan granted to the Issuer under the Subordinated Loan Agreement for an amount equal to Euro 470,997,120. "Class" shall be a reference to a class of Notes being the Class A Notes or the Class J Notes and "Classes" shall be construed accordingly. "Class A" means the Rated Notes. "Class J" means the Junior Notes. "Clean Up Option Date" means any Payment Date on which the aggregate Outstanding Principal of the Portfolio is equal to or less than 10 per cent of the aggregate Outstanding Principal of the Portfolio as at the Valuation Date. "Clearstream" means Clearstream Banking, Luxembourg with offices at 42 avenue JF Kennedy, L-1855 Luxembourg. "Collections" means all amounts received by the Servicer or any other person in respect of the Instalments due under the Receivables and any other amounts whatsoever received by the Servicer or any other person in respect of the Receivables. "Collection Account Bank" means Barclays Bank PLC, Italian branch, or any other person for the time being acting as Collection Account Bank pursuant to the Cash Allocation, Management and Payments Agreement and the Servicing Agreement. "Collection Date" means the tenth day of April, July, October, and January of each year. "Collection Period" means: (a) (b) (c) prior to the service of a Trigger Notice, each period commencing on (and excluding) a Collection Date and ending on (but including) the immediately following Collection Date; following the service of a Trigger Notice, each period commencing on, and ending on, the dates determined by the Representative of the Noteholders; and in the case of the first Collection Period, the period commencing on (and excluding) the Valuation Date and ending on (and including) the Collection Date falling in April

125 "Credit and Collection Policy" means the procedures for the collection and recovery of Receivables attached as Annex 1 to the Servicing Agreement. "Conditions" means, as applicable, the Rated Notes Conditions or the Junior Notes Conditions. "CONSOB" means Commissione Nazionale per le Società e la Borsa. "Consolidated Banking Act" means Italian Legislative Decree number 385 of 1 September 1993, as amended and supplemented from time to time. "Criteria" means the criteria set out in the Receivables Purchase Agreement on the basis of which the Receivables and the Mortgage Loan Agreements from which they arise, are identified as a "block" (in blocco), pursuant to the articles 1 and 4 of the Securitisation Law. "Debtor" means any individual person who entered into a Mortgage Loan Agreement as principal debtor or guarantor or who is liable for the payment or repayment of amounts due in respect of a Mortgage Loan or who has assumed the Debtor's obligation under an accollo, or otherwise. "Decree 213" means Legislative Decree number 213 of 24 June 1998, as amended and supplemented from time to time. "Decree 239" means Legislative Decree number 239 of 1 April 1996, as amended and supplemented from time to time. "Decree 239 Deduction" means any withholding or deduction for or on account of "imposta sostitutiva" under Decree 239. "Deed of Charge" means the English law deed of charge entered into on or about the Issue Date between the Issuer and the Representative of the Noteholders (acting as trustee for the Noteholders and for the Other Issuer Creditors), as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Deed of Pledge" means the Italian law deed of pledge entered into on or about the Issue Date between the Issuer and the Representative of the Noteholders (acting on behalf of the Noteholders and of the Other Issuer Creditors), as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Defaulted Receivables" means any Mortgage Loan which: (a) (b) has Instalments not paid for more than 360 calendar days from the relevant due date; or has been classified as a "defaulted loan" (credito in sofferenza) pursuant to the Bank of Italy's supervisory regulations (Istruzioni di Vigilanza della Banca d'italia). "Defaulting Party" has the meaning ascribed to that term in the Swap Agreement

126 "Deferred Instalment" means Euro 11,134,476.57, being the residual consideration due for the Portfolio under the provisions of the Receivables Purchase Agreement and payable in accordance with the Interest Priority of Payments. "Delinquent Receivables" means, on each Collection Date, any Receivables having Instalments not paid for more than 180 calendar days from the relevant due date and which have been not classified as Defaulted Receivables. "Determination Date" means: (a) (b) with respect to the Initial Interest Period, the day falling two Business Days prior to the Issue Date; and with respect to each subsequent Interest Period, the date falling two Business Days prior to the Payment Date at the beginning of such Interest Period. "ECB MRO Rate" means the rate set by European Central Bank from time to time as the minimum bid rate in respect of variable rate tenders for its main refinancing operations (MRO). "Eligible Institution" (A) in case of Moody's rating, any credit institution organised under the laws of any State which is a member of the European Union or of the United States, whose unsecured and unsubordinated debt obligations have a shortterm rating at least equal to "P-1" by Moody's (or another rating that does not affect the Notes' rating) or are guaranteed by an entity whose unsecured and unsubordinated debt obligations have a rating from Moody's at least equal to "P-1" and the guarantee provided by this entity meets the criteria set out by Moody's, or (in the event of absence of a short-term rating) a long-term rating of its unsecured debt and subordinated at least "A2" by Moody's (or other rating that does not affect the rating of the Notes) or is guaranteed by an entity with a long-term rating of its unsecured debt and subordinated at least "A2" by Moody's, or if a guarantee is provided by this entity, such guarantee meets the criteria required by Moody's; and (B) in case of Fitch rating, whose the short term unsecured, unsubordinated and unguaranteed debt obligations of which are rated at least "F1" by Fitch (provided that, if any of the above credit institutions is on rating watch negative, it shall be treated as one notch below its then current Fitch rating); and the long term unsecured, unsubordinated and unguaranteed debt obligations of which are rated at least "A" by Fitch (provided that, if any of the above credit institutions is on rating watch negative, it shall be treated as one notch below its then current Fitch rating). "Euroclear" means Euroclear Bank S.A./N.V., as operator of the Euroclear System. "Euribor" means: (a) prior to the delivery of a Trigger Notice, the Euro-Zone Inter-bank offered rate for 3 month Euro deposits which appears on the display page designated Euribor 01 on Reuters (except in respect of the Initial Interest Period, where an interpolated interest rate based on interest rates for 3 and 4 month deposits in Euro which appears on the display page designated Euribor 01 on Reuters will be substituted); or -121-

127 (b) (c) (d) following the delivery of a Trigger Notice, the Euro-Zone Inter-bank offered rate for Euro deposits applicable to any period in respect of which interest on the Notes is required to be determined which appears on a Reuters display page nominated and notified by the Representative of the Noteholders for such purpose or, if necessary, the relevant linear interpolation, as indicated by the Representative of the Noteholders in accordance with the Intercreditor Agreement; or in the case of (a) and (b), Euribor shall be determined by reference to such other page as may replace the relevant Reuters page on that service for the purpose of displaying such information; or in the case of (a) and (b), Euribor shall be determined, if the Reuters service ceases to display such information, by reference to such page as displays such information on such other service as may be nominated information vendor for the purpose of displaying comparable rates and approved by the Representative of the Noteholders, (the rate determined in accordance with paragraphs (a) to (d) above being the "Screen Rate" or, in the case of the Initial Interest Period, the "Additional Screen Rate") at or about 11:00 a.m. (Brussels time) on the Determination Date; and (e) if the Screen Rate (or, in the case of the Initial Interest Period, the Additional Screen Rate) is unavailable at such time for Euro deposits for the relevant period, then the rate for any relevant period shall be: (i) (ii) (iii) the arithmetic mean (rounded to four decimal places with the mid-point rounded up) of the rates notified to the Calculation Agent at its request by each of the Reference Banks as the rate at which deposits in Euro for the relevant period in a representative amount are offered by that Reference Bank to leading banks in the Euro-Zone Inter-bank market at or about a.m. (Brussels time) on the Determination Date; or if only two of the Reference Banks provide such offered quotations to the Calculation Agent, the relevant rate shall be determined, as aforesaid, on the basis of the offered quotations of those Reference Bank providing such quotations; or if only one or none of the Reference Banks provides the Calculation Agent with such an offered quotation, the relevant rate shall be the rate in effect for the immediately preceding period to which one of subparagraphs (a) or (b) above shall have applied. "Euro-Zone" means the region comprised of Member States of the European Union that adopted the single currency in accordance with the Treaty establishing the European Community (signed in Rome on 25 March 1957) as amended by the Treaty on European Union (signed in Maastricht on 7 February 1992). "Expenses" means any and all documented fees, costs, expenses and taxes required to be paid to any third party creditors (other than the Noteholders and the Other Issuer Creditors) arising in connection with the Securitisation and/or required to be paid (as -122-

128 determined in accordance with the Issuer Corporate Services Agreement, by reference to the number of the then outstanding securitisation transaction carried out by the Issuer) in order to preserve the existence of the Issuer, to maintain it in good standing or to comply with applicable laws. "Expenses Account" means the euro denominated account established in the name of the Issuer (IBAN: IT52L ), or such other substitute account opened in accordance with the Cash Allocation, Management and Payments Agreement. "Expenses Loan" means the loan granted to the Issuer under the Expenses Loan Agreement for an amount equal to Euro 830,000. "Expenses Loan Agreement" means the loan agreement entered into on or about the Issue Date between the Issuer and the Expenses Loan Provider, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Expenses Loan Provider" means Barclays Bank PLC, Italian branch, or any other person for the time being acting as Expenses Loan Provider pursuant to the Expenses Loan Agreement. "Extraordinary Resolution" shall have the meaning ascribed to it in the Rules of the Organisation of the Noteholders. "Fifth Securitisation" means the securitisation transaction carried out by the Issuer on 2 July 2009 through the issuance of the Series 5 Notes. "Fifth Portfolio" means the portfolio of receivables purchased by the Issuer in the context of the Fifth Securitisation. "Final Maturity Date" means the Payment Date falling in 27 January "Financial Laws Consolidation Act" means Italian Legislative Decree number 58 of 24 February 1998, as amended and supplemented from time to time. "First Payment Date" means the Payment Date falling on 28 April "First Portfolio" means the portfolio of receivables purchased by the Issuer in the context of the First Securitisation. "First Securitisation" means the securitisation transaction carried out by the Issuer on 23 January 2003 through the issuance of the Series 1 Notes. "Fitch" means Fitch Ratings Limited. "Fondiari Loans" (mutui fondiari) means the mortgage loans granted pursuant to the provisions of articles 38 and ss. of the Consolidated Banking Act; "Fourth Portfolio" means the portfolio of receivables purchased by the Issuer in the context of the Fourth Securitisation

129 "Fourth Securitisation" means the securitisation transaction carried out by the Issuer on 20 January 2009 through the issuance of the Series 4 Notes. "FSMA" means the Financial Services and Markets Act "GIC Account" means the euro denominated account established in the name of the Issuer with the GIC Account Bank (IBAN: GB43 BARC ), as the same may be renumbered or redesignated from time to time, or such other substitute account as may be opened in accordance with the GIC Agreement. "GIC Account Bank" means Barclays Bank PLC, or any other person for the time being acting as GIC Account Bank pursuant to the GIC Agreement. "GIC Agreement" means the GIC agreement entered into on or about the Issue Date between the Issuer, the Servicer, the Originator, the Representative of the Noteholders and the GIC Account Bank, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Holder" of a Note means the ultimate owner of a Note. "Individual Purchase Price" means, in respect of each Receivable and as at the Valuation Date, an amount equal to the aggregate of any Principal Instalments not yet due in respect of such Receivable. "Initial Expenses" means the amount of expenses and costs connected with the establishment of the Securitisation. "Initial Interest Period" means the first Interest Period, which shall begin on (and include) the Issue Date and end on (but exclude) the First Payment Date. "Insolvency Event" means in respect of any company or corporation that: (i) (ii) such company or corporation has become subject to any applicable bankruptcy, liquidation, administration, insolvency, composition or reorganisation (including, without limitation, "fallimento", "liquidazione coatta amministrativa", "concordato preventivo" and "amministrazione straordinaria", each such expression bearing the meaning ascribed to it by the laws of the Republic of Italy, including the seeking of liquidation, winding-up, reorganisation, dissolution, administration) or similar proceedings or the whole or any substantial part of the undertaking or assets of such company or corporation are subject to a pignoramento or similar procedure having a similar effect (other than, in the case of the Issuer, any portfolio of assets purchased by the Issuer for the purposes of further securitisation transactions), unless, in the opinion of the Representative of the Noteholders (who may in this respect rely on the advice of a lawyer selected by it), such proceedings are not being disputed in good faith with a reasonable prospect of success; or an application for the commencement of any of the proceedings under (a) above is made in respect of or by such company or corporation or such proceedings are otherwise initiated against such company or corporation and, in the opinion of the Representative of the Noteholders (who may in this -124-

130 respect rely on the advice of a lawyer selected by it), the commencement of such proceedings are not being disputed in good faith with a reasonable prospect of success; or (iii) (iv) (v) such company or corporation takes any action for a re-adjustment of deferment of any of its obligations or makes a general assignment or an arrangement or composition with or for the benefit of its creditors (other than, in the case of the Issuer, the Other Issuer Creditors) or is granted by a competent court a moratorium in respect of any of its indebtedness or any guarantee of any indebtedness given by it or applies for suspension of payments; or an order is made or an effective resolution is passed for the winding-up, liquidation or dissolution in any form of such company or corporation or any of the events under article 2484 of the Italian civil code occurs with respect to such company or corporation(except a winding-up for the purposes of, or pursuant to, a solvent amalgamation or reconstruction, the terms of which have been previously approved in writing by the Representative of the Noteholders); or such company or corporation becomes subject to any proceedings equivalent or analogous to those above under the law of any jurisdiction in which such company or corporation is deemed to carry on business. "Instalment" means, with respect to each Mortgage Loan Agreement, each instalment due from the relevant Debtor thereunder and which consists of an Interest Instalment and a Principal Instalment. "Insurance Policy" means each of the insurance policies taken out in relation to each Real Estate Asset and each Mortgage Loan. "Intercreditor Agreement" means the intercreditor agreement entered into on or about the Issue Date between the Issuer and the Other Issuer Creditors, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Interest Available Funds" means the aggregate of: (i) (ii) all amounts collected by the Servicer in respect of the Receivables on account of interest, fees and pre-payment penalties during the immediately preceding Collection Period and credited to the GIC Account; all Recoveries collected by the Servicer during the immediately preceding Collection Period and credited to the GIC Account; (iii) all amounts of interest accrued (net of any withholding or expenses, if due) and paid on the Accounts during the immediately preceding Collection Period; (iv) all other items and payments received by the Issuer which do not qualify as Principal Available Funds and which have been credited to the GIC Account during the immediately preceding Collection Period; -125-

131 (v) any payment to be received from the Swap Counterparty on or immediately prior to such Payment Date, pursuant to the Swap Agreement (excluding any collateral which the Swap Counterparty may be required to post pursuant the Swap Agreement); and (vi) any amount allocated on such Payment Date under items First and Eighth of the Principal Priority of Payments; (vii) the Cash Reserve Available Amount (if any), on such Payment Date (other than the Payment Date on which the Notes are redeemed in full); (viii) the Liquidity Reserve Available Amount (if any), on such Payment Date (other than the Payment Date on which the Notes are redeemed in full). "Interest Instalment" means the interest component of each Instalment. "Interest Payment Amount" shall have the meaning ascribed to such term in Condition "Interest Period" means each period from (and including) a Payment Date to (but excluding) the next following Payment Date. "Interest Priority of Payments" means the Priority of Payments under Condition (Priority of Payments - Pre-Trigger Notice Priority of Payments - Interest Priority of Payments). "Interest Rate" shall have the meaning ascribed to such term in Condition "Issue Date" means 27 January 2012, or such other date on which the Notes are issued. "Issue Price" means 100% of the Principal Amount Outstanding of the Notes upon issue. "Issuer" means Mercurio Mortgage Finance S.r.l., a società a responsabilità limitata incorporated under the laws of the Republic of Italy, having its registered office at Foro Buonaparte, 70, Milan, Italy, fiscal code and enrolment with the companies register of Milan number , enrolled under number in the register of special purpose vehicles (elenco delle società veicolo) held by the Bank of Italy pursuant to article 4 of the Italy's regulation dated 29 April 2011, having as its sole corporate object the performance of securitisation transactions under the Securitisation Law. "Issuer Available Funds" means, in respect of any Payment Date, the aggregate of the Interest Available Funds and the Principal Available Funds. "Issuer Collection Account" means the euro denominated account established in the name of the Issuer with the Servicer (IBAN: IT75K ), as the same may be renumbered or redesignated from time to time, or such other substitute account as may be opened in accordance with the Cash Allocation, Management and Payments Agreement

132 "Issuer Corporate Services Agreement" means the corporate services agreement executed on 23 January 2003 between the Issuer and the Issuer Corporate Services Provider, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Issuer Corporate Services Provider" means TMF Management Italy S.r.l., or any other person for the time being acting as Issuer Corporate Services Provider pursuant to the Issuer Corporate Services Agreement. "Issuer's Rights" means the Issuer rights under the Transaction Documents. "Joint Regulation" means the regulation issued jointly by the Bank of Italy and CONSOB on 22 February 2008 and published on the Official Gazzette number 54 of 4 March 2008, as amended from time to time. "Junior Notes" means the 844,952,000 Class J Residential Mortgage Backed Variable Rate Notes Series due 27 January 2061 issued by the Issuer on the Issue Date. "Junior Noteholders" means the holders of the Junior Notes. "Junior Notes Conditions" means the terms and conditions of the Junior Notes as from time to time modified in accordance with the provisions herein contained and including any other document expressed to be supplemental thereto and any reference to a particular numbered Junior Notes Condition shall be construed accordingly. "Liabilities" means in respect of any person, any losses, damages, costs, charges, awards, claims, demands, expenses, judgements, actions, proceedings or other liabilities whatsoever including legal fees and any taxes and penalties incurred by that person, together with any value added or similar tax charged or chargeable in respect of any sum referred to in this definition. "Liquidity Reserve" means a reserve created with the proceeds of the Liquidity Reserve Loan to be applied in accordance with the provisions of the GIC Agreement and the Conditions. "Liquidity Reserve Available Amount" means, in respect of any Payment Date, the amount to be drawn from the Liquidity Reserve Ledger required to be applied for making payments under items from First to Sixth of the Interest Priority of Payments, to the extent that the Interest Available Funds (net of any Liquidity Reserve Available Amount) have not been sufficient for such purpose on such Payment Date in accordance with the Interest Priority of Payments. "Liquidity Reserve Ledger" means the ledger maintained by the Cash Manager to record the Liquidity Reserve from time to time in accordance with the provisions of the GIC Agreement. "Liquidity Reserve Loan" means the loan granted to the Issuer under the Subordinated Loan Agreement for an amount equal to Euro 180,000,

133 "Listing Agent" means The Bank of New York Mellon (Ireland) Limited with offices at Hanover House, Windmill Lane, Dublin 2, Ireland. "Mandate Agreement" means the mandate agreement entered into on or about the Issue Date between the Issuer and the Representative of the Noteholders, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Master Definitions Agreement" means the master definitions agreement entered into on or about the Issue Date between all the parties to each of the Transaction Documents, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Monte Titoli" means Monte Titoli S.p.A., a società per azioni having its registered office at Via Mantegna, 6, Milan, Italy. "Monte Titoli Account Holders" means any authorised financial intermediary institution entitled to hold accounts on behalf of its customers with Monte Titoli (as intermediari aderenti) in accordance with article 30 of Decree 213 and includes any depository banks approved by Euroclear and Clearstream. "Monte Titoli Mandate Agreement" means the agreement entered into between the Issuer and Monte Titoli as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Monthly Servicer's Report" means the monthly report to be delivered by the Servicer to the Issuer, the Issuer Corporate Servicer Provider and the Rating Agencies on each Monthly Servicer's Report Date in accordance with article of the Servicing Agreement. "Monthly Servicer's Report Date" means prior to the delivery of a Trigger Notice, the date falling 5 Business Days following the 10th day of the month. "Moody's" means Moody's Investors Service, Inc. "Mortgage" means each mortgage created on the relevant Real Estate Asset, pursuant to the Italian law, in order to secure the Receivables. "Mortgage Loan" means each mortgage loan granted to a Debtor, on the basis of a Mortgage Loan Agreement pursuant to which the Issuer has title to enforce a Receivable (or portion thereof) against the relevant Debtor. "Mortgage Loan Agreement" means each mortgage loan agreement entered into between the Originator and a Debtor. "Noteholders" means the Rated Noteholders and the Junior Noteholders. "Non-Performing Receivables" means, together, the Delinquent Receivables and the Defaulted Receivables

134 "Noteholders" means the Rated Noteholders and the Junior Noteholders. "Notes" means, together, the Rated Notes and the Junior Notes. "Notional Outstanding Amount" means, in relation to a Receivable, on the Collection Date falling at the end of each Collection Period, an amount equal to the product of: (i) (ii) the Outstanding Principal Due of such Receivable; and the Performance Factor applicable to such Receivable. "Obligations" means all the obligations of the Issuer created by or arising under the Notes and the Transaction Documents. "Official Gazette" means the Gazzetta Ufficiale della Repubblica Italiana. "Organisation of the Noteholders" means the association of the Noteholders, organised pursuant to the Rules of the Organisation of the Noteholders. "Originator" means Barclays Bank PLC, Italian branch. "Other Issuer Creditors" means the Originator, the Servicer, the Back-up Servicer (if any) the Representative of the Noteholders, the Calculation Agent, the Issuer Corporate Services Provider, the Subordinated Loan Provider, the Expenses Loan Provider, the Principal Paying Agent, the Account Bank, the Cash Manager, the Collection Account Bank, the GIC Account Bank, the Sole Lead Manager and the Swap Counterparty. "Outstanding Principal" means, on any relevant date, in relation to any Receivable, the aggregate of the Principal Instalments not yet due. "Outstanding Principal Due" means, on any relevant date, in relation to any Receivable, the aggregate of (i) all Principal Instalments due but not paid on such relevant date, and (ii) the Principal Instalments not due yet. "Payment Date" means (a) prior to the delivery of a Trigger Notice, the 28th day of January, April, July and October of each year or, if such day is not a Business Day, the immediately following Business Day, and (b) following the delivery of a Trigger Notice, any day on which any payment is required to be made by the Representative of the Noteholders in accordance with the Trigger Event Priority of Payment, the Conditions and the Intercreditor Agreement, provided that the First Payment Date will fall in 28 April "Payments Account" means the euro denominated account established in the name of the Issuer with the Account Bank (IBAN: IT68S ) or such other substitute account as may be opened in accordance with the Cash Allocation, Management and Payments Agreement. "Payments Report" means the report setting out all the payments to be made on the following Payment Date under the applicable Priority of Payments, which shall be prepared and delivered by the Calculation Agent in accordance with the Cash -129-

135 Allocation, Management and Payments Agreement before the delivery of a Trigger Notice. "Performance Factor" means in relation to a Receivable, as at the Collection Date falling at the end of each Collection Period, the following percentage depending on the current status of the Receivable (as classified in accordance with the Credit and Collection Policy): (i) (ii) (iii) if the Receivable is not classified as Defaulted Receivable, nor as Delinquent Receivable, 100%; if the Receivable is classified as Delinquent Receivable, 75%; and if the Receivable is classified as Defaulted Receivable, or if in respect to a Receivable a limited recourse loan pursuant to Clause 6.1 of the Warranty and Indemnity Agreement has been granted, 0%. "Portfolio" means the portfolio of Receivables purchased on 16 January 2012 by the Issuer pursuant to the terms and conditions of the Receivables Purchase Agreement. "Premium" means the amount, which may be payable on the Junior Notes on each Payment Date subject to the Junior Notes Conditions, determined by reference to the residual Issuer Available Funds, if any, after satisfaction of the items ranking in priority pursuant to the applicable Priority of Payment on such Payment Date. "Previous Notes" means, together, the Series 1 Notes, the Series 2 Notes, the Series 3 Notes, the Series 4 Notes, the Series 5 Notes and the Series 6 Notes. "Previous Securitisations" means, together, the First Securitisation, the Second Securitisation, the Third Securitisation, the Fourth Securitisation, the Fifth Securitisation and the Sixth Securitisation. "Principal Amount Outstanding" means, on any date, (i) the principal amount of a Note upon issue, minus (ii) the aggregate amount of all principal payments which have been paid prior to such date, in respect of such Note. "Principal Available Funds" means the aggregate of: (i) (ii) (iii) (iv) all amounts collected by the Servicer in respect of the Receivables on account of principal during the immediately preceding Collection Period and credited to the GIC Account; all amounts received by the Issuer from the Originator pursuant to the Receivables Purchase Agreement and credited to the GIC Account during the immediately preceding Collection Period; the Interest Available Funds, if any, to be credited to the Principal Deficiency Ledger on such Payment Date under item Eighth of the Interest Priority of Payments; all the proceeds deriving from the sale, if any, of the Portfolio or of single Receivables; -130-

136 (v) (vi) (vii) any amounts (other than the amounts already allocated under other items of the Principal Available Funds and the Interest Available Funds) received by the Issuer from any party to the Transaction Documents during the immediately preceding Collection Period (excluding any amount received from the sale, if any, of the Portfolio and excluding any amount, if any, received as collateral under the Swap Agreement, but including any proceeds deriving from the enforcement of the Issuer's Rights); any amounts (if any) paid by the Originator to the Issuer pursuant to the Warranty and Indemnity Agreement including any amount advances as limited recourse loan pursuant to Clause 6.1 of the Warranty and Indemnity Agreement; on the earlier of (i) the Payment Date on which the Notes are redeemed in full and (ii) the Final Maturity Date, any amount standing to the credit of the Expenses Account, the Cash Reserve Ledger and the Liquidity Reserve Ledger; (viii) any amount allocated on such Payment Date under item Tenth of the Interest Priority of Payments; (ix) upon occurrence of an Insolvency Event in respect of the Servicer, any amount posted under Clause 3.6.4(b) of the Servicing Agreement. "Principal Deficiency" means the negative difference, calculated on each Calculation Date, between item (i) of the Principal Available Funds and the Target Principal Payment Amount on the immediately following Payment Date. "Principal Deficiency Ledger" means the ledger maintained by the Calculation Agent, on which any Principal Deficiency shall be recorded on each Payment Date. "Principal Instalment" means the principal component of each Instalment. "Principal Paying Agent" means The Bank of New York Mellon (Luxembourg) S.A., Italian branch, or any other person for the time being acting as Principal Paying Agent pursuant to the Cash Allocation, Management and Payments Agreement. "Principal Priority of Payments" means the Priority of Payments under Condition (Priority of Payments - Pre-Trigger Notice Priority of Payments - Principal Priority of Payments). "Priority of Payments" means the order of priority pursuant to which the Issuer Available Funds shall be applied on each Payment Date prior to and/or following the service of a Trigger Notice in accordance with the Conditions and the Intercreditor Agreement. "Prospectus" means the prospectus prepared in connection with the Securitisation. "Purchase Price" means Euro 7,861,086, being the initial consideration payable by the Issuer to the Originator under the provisions of the Receivables Purchase Agreement

137 "Quarterly Servicer's Report" means the quarterly report to be delivered by the Servicer to the GIC Account Bank, the Account Bank, the Swap Counterparty, the Issuer, the Calculation Agent, the Representative of the Noteholders, the Principal Paying Agent, the Issuer Corporate Services Provider and the Rating Agencies on each Quarterly Servicer's Report Date and containing details of the performance of the Receivables during a specified Collection Period prepared in accordance with article of the Servicing Agreement. "Quarterly Servicer's Report Date" means (a) prior to the delivery of a Trigger Notice, the date falling 5 Business Days following the end of the immediately preceding Collection Period and (b) following the delivery of a Trigger Notice, the seventh day before any Payment Date. "Quotaholders" means Stichting Tevere and Stichting Tirreno. "Quotaholders' Agreement" means the agreement executed on 23 January 2003 between the Issuer, the Originator, the Quotaholders and the Representative of the Noteholders, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Rated Notes" means 7,005,000,000 Class A Residential Mortgage Backed Floating Rate Notes Series due 27 January 2061 issued by the Issuer on the Issue Date. "Rated Noteholders" means the holders of the Rated Notes. "Rated Notes Conditions" means the terms and conditions of the Rated Notes, as from time to time modified in accordance with the provisions herein contained and including any agreement or other document expressed to be supplemental thereto and any reference to a particular numbered Rated Notes Condition shall be construed in relation to the Rated Notes accordingly. "Rating Agencies" means, collectively, Moody's and Fitch. "Real Estate Assets" means the real estate properties which have been mortgaged in order to secure payment of the Receivables pursuant to the Mortgage Loan Agreements. "Receivables" means all rights and claims of the Issuer arising out from any Mortgage Loan Agreement existing or arising from (and excluding) the Valuation Date, including without limitation: (a) (b) (c) all rights and claims in respect of the repayment of the outstanding principal; all rights and claims in respect of the payment of interest (including the default interest) accruing on the Mortgage Loans from (and including) the Valuation Date; all rights and claims in respect of payments of any amount deriving from damages suffered, costs, expenses, taxes and ancillary amounts incurred; -132-

138 (d) (e) (f) all rights and claims in respect of each Mortgage and any other guarantee and security relating to the relevant Mortgage Loan Agreement; all rights and claims under and in respect of the Insurance Policies; and the privileges and priority rights (diritti di prelazione) transferable pursuant to the Securitisation Law supporting the aforesaid rights and claims, as well as any other right, claim and action (including any legal proceeding for the recovery of suffered damages), substantial and procedural action and defence inherent or otherwise ancillary to the aforesaid rights and claims, including, without limitation, the remedy of termination (risoluzione contrattuale per inadempimento) and the declaration of acceleration of the Debtors (decadenza dal beneficio del termine). "Receivables Purchase Agreement" means the receivables purchase agreement entered into on 16 January 2012 between the Issuer and the Originator, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Receiver" means any receiver, manager or administrative receiver appointed in accordance with clause 10 (Appointment of Receiver) of the Deed of Charge. "Recoveries" means any amounts received or recovered by the Servicer in relation to any Defaulted Receivables and any amounts received or recovered by the Servicer in relation to any Delinquent Receivable. "Reference Bank" means the principal London office of three major banks in the London interbank market, in each case, selected by the Principal Paying Agent at the relevant time. "Representative of the Noteholders" means BNY Mellon Corporate Trustee Services Limited, or any other person for the time being acting as representative of the Noteholders. "Required Cash Reserve Amount" means Euro 470,997,120. "Required Liquidity Reserve Amount" means Euro 180,000,000. "Retention Amount" means an amount equal to Euro 60,000. "Rules of the Organisation of the Noteholders" means the rules of the organisation of the Noteholders attached as Exhibit to the Conditions, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereof. "Scheduled Instalment Date" means any date on which an Instalment is due pursuant to each Mortgage Loan Agreement. "Second Portfolio" means the portfolio of receivables purchased by the Issuer in the context of the Second Securitisation

139 "Second Securitisation" means the securitisation transaction carried out by the Issuer on 26 June 2003 through the issuance of the Series 2 Notes. "Securities Act" means the U.S. Securities Act of 1933, as amended. "Securitisation" means the securitisation of the Receivables made by the Issuer through the issuance of the Notes, pursuant to articles 1 and 5 of the Securitisation Law. "Securitisation Law" means Italian Law number 130 of 30 April 1999, as amended and supplemented from time to time. "Security" means the security created pursuant to the Deed of Pledge and the Deed of Charge. "Security Interest" means: (a) (b) (c) any mortgage, charge, pledge, lien, privilege (privilegio speciale) or other security interest securing any obligation of any person; any arrangement under which money or claims to money, or the benefit of, a bank or other account may be applied, set-off or made subject to a combination of accounts so as to effect discharge of any sum owed or payable to any person; or any other type of preferential arrangement having a similar effect. "Series 1 Notes" means, together, the 594,000,000 Class A Mortgage Backed Floating Rate Notes Series due 2037; the 10,700,000 Class M1 Mortgage Backed Floating Rate Notes Series due 2037; the 17,700,000 Class M2 Mortgage Backed Floating Rate Notes Series due 2037 and the 8,800,000 Class B Mortgage Backed Floating Rate Notes Series due 2037, issued by the Issuer in the context of the First Securitisation. "Series 2 Notes" means, together, the 1,018,400,000 Class A Mortgage Backed Floating Rate Notes Series due 2036; the 21,900,000 Class B Mortgage Backed Floating Rate Notes Series due 2036; the 17,500,000 Class C Mortgage Backed Floating Rate Notes Series due 2036 and the 37,200,000 Class D Mortgage Backed Floating Rate Notes Series due 2036, issued by the Issuer in the context of the Second Securitisation. "Series 3 Notes" means the 4,002,350,000 Class A Residential Mortgage Backed Floating Rate Notes, Series due 2077 issued by the Issuer in the context of the Third Securitisation. "Series 4 Notes" means the 1,806,850,000 Class A Residential Mortgage Backed Floating Rate Notes Series due January 2078, issued by the Issuer in the context of the Fourth Securitisation. "Series 5 Notes" means the 2,578,300,000 Class A Residential Mortgage Backed Floating Rate Notes Series due August 2083, issued by the Issuer in the context of the Fifth Securitisation

140 "Series 6 Notes" means 2,261,550,000 Class A Residential Mortgage Backed Fixed Rate Notes Series due November 2059, issued by the Issuer in the context of the Sixth Securitisation. "Servicer" means Barclays Bank PLC, Italian branch, or any other person for the time being acting as Servicer pursuant to the Servicing Agreement. "Servicer's Downgrading Amount" means 90,000,000. "Servicing Agreement" means the agreement entered into on 16 January 2012 between the Issuer and the Servicer, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Sixth Portfolio" means the portfolio of receivables purchased by the Issuer in the context of the Sixth Securitisation. "Sixth Supplement to the Issuer Corporate Services Agreement" means the agreement for the amendment and the extension of the Issuer Corporate Services Agreement entered into on or about the Issue Date between the Issuer and the Issuer Corporate Services Provider. "Sixth Supplement to the Quotaholders' Agreement" means the agreement for the amendment and the extension of the Quotaholders' Agreement entered into on or about the Issue Date between the Issuer, Barclays PLC, Italian branch, the Representative of the Noteholders and the Quotaholders. "Sole Affected Party" means an Affected Party as defined in the Swap Agreement which at the relevant time is the only Affected Party under the Swap Agreement. "Sole Arranger" means Barclays Bank PLC, Italian branch. "Sole Lead Manager" means Barclays Bank PLC, Italian branch. "Subordinated Loan Agreement" means the loan agreement entered into on or about the Issue Date between the Issuer and the Subordinated Loan Provider, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Subordinated Loan Provider" means Barclays Bank PLC, Italian branch, or any other person for the time being acting as Subordinated Loan Provider pursuant to the Subordinated Loan Agreement. "Subscription Agreement" means the subscription agreement in relation to the Notes entered into on or about the Issue Date between the Issuer, the Representative of the Noteholders, the Originator and the Sole Lead Manager, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Swap Agreement" means the swap agreement entered into on or about the Issue Date between the Issuer and the Swap Counterparty in the form of an International Swaps and Derivatives Association, Inc. ("ISDA") 1992 Master Agreement -135-

141 (Multicurrency Cross Border) dated on or about the Issue Date, together with the schedule and credit support annex thereto and the related confirmations, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Swap Counterparty" means Barclays Bank PLC, Italian branch, or any other person for the time being acting as Swap Counterparty. "Target Principal Payment Amount" means, on each Calculation Date, the difference between the Principal Amount Outstanding of the Notes on the immediately preceding Payment Date and the Aggregate Notional Outstanding Amount. "Tax" means any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by the Republic of Italy or any political sub-division thereof or any authority thereof or therein. "Tax Deduction" means any present or future tax, levy, impost, duty charge, fee, deduction or withholding of any nature whatsoever (including any penalty or interest payable in connection with any failure to pay or any delay in paying of any of the same, but excluding taxes or net income) imposed or lieved by or on behalf of any tax authority in Italy. "Third Portfolio" means the portfolio of receivables purchased by the Issuer in the context of the Third Securitisation. "Third Securitisation" means the securitsation transaction carried out on 2 July 2008 through the issuance of the Series 3 Notes. "Transaction Documents" means, together, the Receivables Purchase Agreement, the Servicing Agreement, the Warranty and Indemnity Agreement, the Subscription Agreement, the Monte Titoli Mandate Agreement, the Intercreditor Agreement, the Expenses Loan Agreement, the GIC Agreement, the Subordinated Loan Agreement, the Cash Allocation, Management and Payments Agreement, the Swap Agreement, the Deed of Pledge, the Deed of Charge, the Mandate Agreement, the Sixth Supplement to the Issuer Corporate Services Agreement, the Sixth Supplement to the Quotaholders' Agreement, the Master Definitions Agreement, the Conditions, this Prospectus and any other document which may be deemed to be necessary in relation to the Securitisation. "Transfer Date" means 16 January "Trigger Event" means any of the events described in Condition 12 (Trigger Events). "Trigger Event Priority of Payments" means the Priority of Payments under Condition 6.2 (Post Trigger Notice Priority of Payments). "Trigger Event Report" means the report setting out all the payments to be made on the following Payment Date under the Trigger Event Priority of Payments which, following the occurrence of a Trigger Event and the delivery of a Trigger Notice, shall be prepared and delivered by the Calculation Agent in accordance with the Cash Allocation, Management and Payments Agreement

142 "Trigger Notice" means the notice served by the Representative of the Noteholders on the Issuer declaring the Notes to be due and payable in full following the occurrence of a Trigger Event as described in Condition 12 (Trigger Events). "Usury Law" means Law number 108 of 7 March 1996, as subsequently amended and supplemented, and Law number 24 of 28 February 2001, which converted into law the Law Decree number 394 of 29 December "Valuation Date" means 13 January "VAT" means Imposta sul Valore Aggiunto (IVA) as defined in Italian D.P.R. number 633 of 26 October 1972, as amended and implemented from time to time. "Warranty and Indemnity Agreement" means the agreement entered into on 16 January 2012 between the Issuer and the Originator, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. 2.2 Interpretation References in Condition Any reference in these Rated Notes Conditions to: (a) (b) (c) (d) "holder" and "Holder" mean the ultimate holder of a Note and the words "holder", "Noteholder" and related expressions shall be construed accordingly; a "law" shall be construed as a reference to any law, statute, constitution, decree, judgment, treaty, regulation, directive, by-law, order or any other legislative measure of any government, supranational, local government, statutory or regulatory body and a reference to any provision of any law, statute, constitution, decree, judgment, treaty, regulation, directive, by-law, order or any such legislative measure is to that provision as amended or re-enacted; "person" shall be construed as a reference to any person, firm, company, corporation, government, state or agency of a state and any association or partnership (whether or not having legal personality) of two or more of the foregoing; a "successor" of any party shall be construed so as to include an assignee or successor in title of such party and any person who under the laws of the jurisdiction of incorporation or domicile of such party has assumed the rights and obligations of such party under any Transaction Document or to which, under such laws, such rights and obligations have been transferred Transaction Documents and other agreements Any reference to the Master Definitions Agreement, any other document defined as a "Transaction Document" or any other agreement, deed or -137-

143 document shall be construed as a reference to the Master Definitions Agreement, such other Transaction Document or, as the case may be, such other agreement or document as the same may have been, or may from time to time be amended, varied, novated, supplemented or replaced Transaction parties A reference to any person defined as a "Transaction Party" in these Rated Notes Conditions or in any Transaction Document shall be construed so as to include its and any subsequent successors and permitted assignees and transferees in accordance with their respective interests Master Definitions Agreement Words and expressions used herein and not otherwise defined shall have the meanings and constructions ascribed to them in the Master Definitions Agreement. 3. FORM, TITLE AND DENOMINATION 3.1 Denomination 3.2 Form The Rated Notes are issued in minimum denominations of 100,000 and in integral multiples of 1,000 in excess thereof. The Rated Notes are issued in dematerialised form and will be evidenced by, and title thereto will be transferable by means of, one or more book-entries in accordance with the provisions of (i) article 83-bis of the Financial Laws Consolidation Act and (ii) the Joint Regulation, as amended and supplemented from time to time. 3.3 Title and Monte Titoli The Rated Notes will be held by Monte Titoli on behalf of the Rated Noteholders until redemption or cancellation thereof for the account of the relevant Monte Titoli Account Holders. No physical documents of title will be issued in respect of the Rated Notes. 3.4 The Rules The rights and powers of the Rated Noteholders may only be exercised in accordance with the Rules attached to these Rated Notes Conditions as an Exhibit which shall constitute an integral and essential part of these Rated Notes Conditions. 3.5 Rights under the Deed of Pledge The rights arising from the Deed of Pledge are included in each Rated Note

144 4. STATUS, PRIORITY AND SEGREGATION 4.1 Status The Rated Notes constitute limited recourse obligations of the Issuer and, accordingly, the obligation of the Issuer to make payments under the Rated Notes is limited to the amounts received or recovered by the Issuer in respect of the Portfolio and pursuant to the exercise of the Issuer's Rights, as further specified in Condition 9.2 (Limited Recourse Obligations of the Issuer). The Rated Noteholders acknowledge that the limited recourse nature of the Rated Notes produces the effects of a "contratto aleatorio" (aleatory agreement) under Italian law and are deemed to accept the consequences thereof, including, but not limited to, the provisions of article 1469 of the Italian civil code. 4.2 Segregation by law and security By virtue of the Securitisation Law, the Issuer's right, title and interest in and to the Portfolio is segregated from all other assets of the Issuer and from any other securitisation transaction carried out by the Issuer and any amount deriving therefrom will only be available both before and after a winding-up of the Issuer to satisfy the obligations of the Issuer to the Noteholders, to the Other Issuer Creditors and to any third party creditors of the Issuer in respect of costs, fees and expenses incurred by the Issuer in relation to the Securitisation. The Rated Notes have the benefit of the Security over certain assets of the Issuer pursuant to the Deed of Pledge and the Deed of Charge. 4.3 Ranking Both prior to and following the delivery of a Trigger Notice, payments of interest on the Rated Notes will at all time rank in priority to payments of interest and Premium on the Junior Notes Both prior to and following the delivery of a Trigger Notice, payments of principal on the Rated Notes will at all times rank in priority to payments of principal on the Junior Notes Obligations of Issuer only The Rated Notes are obligations solely of the Issuer and are not obligations of, or guaranteed by, any other entity or person. 5. ISSUER COVENANTS For so long as any amount remains outstanding in respect of the Notes of any Class, the Issuer shall not, save with the prior written consent of the Representative of the Noteholders, or as expressly provided in any of the Transaction Documents: 5.1 Negative pledge create or permit to subsist any Security Interest whatsoever over the Portfolio or any part thereof or over any of its other assets or sell, lend, part with or otherwise dispose of all or any part of the Portfolio or any of its assets, except in connection with the Previous Securitisations or with further securitisations permitted pursuant this Condition 5; or -139-

145 5.2 Restrictions on activities engage in any activity whatsoever which is not incidental to or necessary in connection with the Previous Securitisations, the Securitisation, any further securitisation complying with this Condition 5 or with any of the activities in which the Transaction Documents provide or envisage that the Issuer will engage; or have any subsidiary (società controllata as defined in article 2359 of the Italian civil code) or any employees or premises; or at any time approve or agree or consent to any act or thing whatsoever which may be materially prejudicial to the interests of the Noteholders under the Transaction Documents and shall not do, or permit to be done, any act or thing in relation thereto which may be materially prejudicial to the interests of the Noteholders under the Transaction Documents; or become the owner of any real estate asset, including in the context of enforcement proceedings relating to a Real Estate Asset; or 5.3 Dividends or distributions pay any dividend or make any other distribution or return or repay any quota capital to its Quotaholders, or increase its capital, save as required by applicable law; or 5.4 De-registrations ask for de-registration from the register of special purpose vehicles (elenco delle società veicolo) held by Bank of Italy under article 4 of the Bank of Italy's regulation dated 29 April 2011, for as long as the Securitisation Law, the Consolidated Banking Act or any other applicable law or regulation requires issuers of notes issued under the Securitisation Law or companies incorporated pursuant to the Securitisation Law to be registered thereon; or 5.5 Borrowings incur any indebtedness in respect of borrowed money whatsoever (save for the indebtedness incurred in respect of the Previous Securitisations or of further securitsations permitted pursuant to this Condition 5), or give any guarantee, indemnity or security in respect of any indebtedness or other obligation of any person or entity or become liable for the debts of any other person or entity or hold out its credit as being available to satisfy the obligations of others; or 5.6 Merger consolidate or merge with any other person or entity or convey or transfer its properties or assets substantially as an entirety to any other person or entity; or 5.7 No variation or waiver permit any of the Transaction Documents to which it is party to be amended, terminated or discharged, or exercise any powers of consent or waiver pursuant to the -140-

146 terms of any of the Transaction Documents to which it is a party, or permit any party to any of the Transaction Documents to which it is a party to be released from such obligations; or 5.8 Bank accounts have an interest in any bank account other than the Accounts, the Expenses Account, the account on which its quota capital is credited, any bank account opened pursuant to the Swap Agreement for the deposit of collateral or any bank account opened in relation to the Previous Securitisations or any other securitisation permitted pursuant to this Condition 5 below; or 5.9 Statutory documents amend, supplement or otherwise modify its by-laws (statuto) or atto costitutivo except where such amendment, supplement or modification is required by a compulsory provision of Italian law or by the competent regulatory authorities; or 5.10 Corporate records, financial statements and books of account cease to maintain corporate records, financial statements and books of account separate from those of the Originator and any other person or entity, provided that nothing in this Condition 5 shall prevent or restrict the Issuer from acquiring further portfolios of mortgage loans or other debt receivables ("Further Portfolios") and entering into agreements and transactions relating thereto ("Further Securitisation") financed or to be financed by the issue of further debt securities ("Further Notes") and granting security over such Further Portfolios and any right, benefit, agreement, instrument, document or other asset of the Issuer relating thereto or to such Further Securitisations to secure such Further Notes and/or the rights of any person in connection with such Further Securitisations ("Further Security"), provided that: (i) (ii) (iii) the same person as is Representative of the Noteholders for the Notes is representative of the noteholders in respect of such Further Notes under the terms of agreements substantially in the form of the Subscription Agreement, the Intercreditor Agreement and the Deed of Charge; the Issuer confirms in writing to the Representative of the Noteholders that such Further Security is constituted separately from the Security and does not include or comprise any asset over or in respect of which security is constituted by the Security; the Issuer provides the Representative of the Noteholders with legal opinions (issued by law firms acceptable to the Representative of the Noteholders) confirming that, by operation of Italian law, the Issuer's right, title and interest in and to the Further Portfolios is segregated from the Portfolio and any other Further Portfolios acquired by the Issuer and all other assets of the Issuer and all amounts deriving therefrom will only be available to satisfy the obligations of the Issuer to the holders of the related Further Notes and/or the rights of any other person in connection with such Further Securitisation; -141-

147 (iv) (v) (vi) the Issuer confirms in writing to the Representative of the Noteholders that the terms and conditions of such Further Notes contain provisions to the effect that the obligations of the Issuer whether in respect of interest, principal, premium or other amounts in respect of such Further Notes, are limited recourse obligations of the Issuer, limited to the amounts deriving from the respective Further Portfolios and some or all of the assets of the Issuer over which such Further Security has been granted; the Issuer confirms in writing to the Representative of the Noteholders that each person party to each such Further Securitisation agrees and acknowledges that the obligations of the Issuer to such person in connection with such Further Securitisation are limited recourse obligations of the Issuer, limited to the amounts deriving from the respective Further Portfolios and some or all of the assets of the Issuer over which the related Further Security has been granted and that each secured party in respect of such Further Securitisation or the Representative of the Noteholders in respect of the holders of such Further Notes has agreed to limitations on its ability to take action against the Issuer, including in respect of insolvency proceedings relating to the Issuer, in terms in all significant respects, equivalent to those contained in Clause 12 (Enforcement of Security, Non Petition and Limited Recourse) of the Intercreditor Agreement; the Issuer confirms in writing to the Representative of the Noteholders that the terms and conditions of such Further Notes and of the Intercreditor Agreement or other document or documents constituting the Further Security therefor shall include: (a) (b) terms and conditions in all significant respects equivalent to those provided in Conditions 5.1 to 5.10 above; and provisions which are the same as or, in the sole discretion of the Representative of the Noteholders, equivalent to this provision; and (vii) the Representative of the Noteholders is satisfied that provisions (i) to (vi) of this Condition 5 have been satisfied. In giving any consent to the foregoing, the Representative of the Noteholders may require (not being obliged) the Issuer to make such modifications or additions to the provisions of any of the Transaction Documents (and may itself consent thereto on behalf of Noteholders) or may impose such other conditions or requirements as the Representative of the Noteholders may deem expedient (in its absolute discretion) in the interests of the Noteholders and may rely on any written confirmation from the Issuer as to the matters contained therein

148 6. PRIORITY OF PAYMENTS 6.1 Pre-Trigger Notice Priority of Payments Interest Priority of Payments Prior to the delivery of a Trigger Notice or upon full redemption of all the Notes pursuant to any provision of Condition 8 (Redemption, Purchase and Cancellation), the Interest Available Funds shall be applied on each Payment Date in making the following payments in the following order of priority (in each case only if and to the extent that payments of a higher priority have been made in full): First, to pay, pari passu and pro rata according to the respective amounts thereof, any Expenses (to the extent that amounts standing to the credit of the Expenses Account have been insufficient to pay such costs during the immediately preceding Interest Period); Second, to pay the remuneration due to the Representative of the Noteholders and to pay any indemnity amounts properly due and any proper costs and expenses incurred by the Representative of the Noteholders under the provisions of, or in connection with, any of the Transaction Documents; Third, to credit into the Expenses Account such an amount as will bring the balance of such account up to (but not in excess of) the Retention Amount; Fourth, to pay, pari passu and pro rata according to the respective amounts thereof, any amount due and payable on account of remuneration, indemnities or proper costs and expenses incurred by the relevant agent on such Payment Date to the Account Bank, the Collection Account Bank, the Cash Manager, the GIC Account Bank, the Calculation Agent, the Principal Paying Agent, the Issuer Corporate Services Provider, the Back-up Servicer (if any), the Receiver and the Servicer; Fifth, to pay to the Swap Counterparty any amount due and payable under the Swap Agreement, including any hedging termination payments upon early termination of the Swap Agreement, except where the Swap Counterparty is the Defaulting Party or the Sole Affected Party; Sixth, to pay, pari passu and pro rata, all amounts of interest due and payable on the Rated Notes on such Payment Date; Seventh, in or towards making good any shortfall reflected in the Liquidity Reserve Ledger until the credit balance of the Liquidity Reserve Ledger is brought up to the Required Liquidity Reserve Amount; Eighth, in or towards making good any shortfall reflected in the Principal Deficiency Ledger until the debit balance, if any, of the Principal Deficiency Ledger is reduced to zero by allocating the relevant amounts to the Principal Available Funds; -143-

149 Ninth, in or towards making good any shortfall reflected in (i) the Cash Reserve Ledger until the credit balance of the Cash Reserve Ledger is brought up to the Required Cash Reserve Amount and (ii) in other reserve account(s) (or ledger(s), as the case may be), opened (or established, as the case may be) from time to time in name of the Issuer; Tenth, to transfer to the Principal Available Funds an amount equal to the amounts, if any, allocated on the immediately preceding Payment Date under item First of the Principal Priority of Payments and on any preceding Payment Date and not already paid; Eleventh, to pay the Deferred Instalment; Twelfth, to pay any and all amounts due and payable to the Sole Lead Manager as indemnity pursuant to the Transaction Documents; Thirteenth, to pay any hedging termination payment due and payable to the Swap Counterparty under the Swap Agreement, other than any amount paid under item Fifth above; Fourteenth, to pay to the Expenses Loan Provider interest due and payable on the Expenses Loan; Fifteenth, to pay, pari passu and pro rata, to the Subordinated Loan Provider interest due and payable on the Cash Reserve Loan and the Liquidity Reserve Loan; Sixteenth, to pay, pari passu and pro rata, all amounts of interest due and payable on the Junior Notes; Seventeenth, to pay, pari passu and pro rata, the Premium on the Junior Notes Principal Priority of Payments Prior to the delivery of a Trigger Notice or upon full redemption of all the Notes pursuant to any provision of Condition 8 (Redemption, Purchase and Cancellation), the Principal Available Funds shall be applied on each Payment Date in making the following payments in the following order of priority (in each case only if and to the extent that payments of a higher priority have been made in full): First, to pay any amount payable under items First to Sixth (inclusive) under the Interest Priority of Payments, to the extent that the Interest Available Funds are not sufficient on such Payment Date to make such payments in full; Second, to pay pari passu and pro rata, any principal amounts due and payable on the Rated Notes; Third, to pay, pari passu and pro rata, any principal amounts due and payable on the Junior Notes; -144-

150 Fourth, to pay to the Originator any Adjusted Purchase Price pursuant to clause of the Receivables Purchase Agreement; Fifth, to pay any amount due and payable under the Transaction Document, to the extent not already paid or payable under other items of this Priority of Payments; Sixth, to repay to the Expenses Loan Provider any amount payable in respect of principal on the on the Expenses Loan; Seventh, to repay, pari passu and pro rata, to the Subordinated Loan Provider any amount payable in respect of principal on the Cash Reserve Loan and the Liquidity Reserve Loan; Eighth, to transfer to the Interest Available Funds any remaining amount after all the other payments under this Principal Priority of Payments have been made in full. 6.2 Post Trigger Notice Priority of Payments On each Payment Date following the delivery of a Trigger Notice, the Issuer Available Funds shall be applied in making the following payments in the following order of priority (in each case only if and to the extent that payments of a higher priority have been made in full): First, to pay, pari passu and pro rata according to the respective amounts thereof, any Expenses (to the extent that amounts standing to the credit of the Expenses Account have been insufficient to pay such costs during the immediately preceding Interest Period); Second, to pay, pari passu and pro rata, according to the respective amounts thereof, (a) the remuneration due to the Representative of the Noteholders and to pay any indemnity amounts properly due under and any proper costs and expenses incurred by the Representative of the Noteholders under the provisions of, or in connection with, any of the Transaction Documents, and (b) the remuneration due to any Receiver and any proper costs and expenses incurred by it; Third, to credit into the Expenses Account such an amount to bring the balance of such account up to (but not in excess of) the Retention Amount; Fourth, to pay, pari passu and pro rata according to the respective amounts thereof, any amount due and payable on account of remuneration, indemnities or proper costs and expenses incurred by the relevant agent on such Payment Date to the Account Bank, the Collection Account Bank, the Cash Manager, the GIC Account Bank, the Calculation Agent, the Principal Paying Agent, the Issuer Corporate Services Provider, the Back-up Servicer (if any), the Receiver and the Servicer; Fifth, to pay to the Swap Counterparty any amount due and payable under the Swap Agreement, including any hedging termination payments upon early termination of the Swap Agreement, except where the Swap Counterparty is the Defaulting Party or the Sole Affected Party; -145-

151 Sixth, to pay, pari passu and pro rata, all amounts of interest due and payable on the Rated Notes on such Payment Date; Seventh, to pay, pari passu and pro rata, all amounts outstanding in respect of principal on the Rated Notes; Eighth, to pay any and all amounts due and payable to the Sole Lead Manager as indemnity pursuant to the Transaction Documents; Ninth, to pay any hedging termination payments due and payable to the Swap Counterparty under the Swap Agreement other than any amount paid under item Fifth above; Tenth, to pay to the Originator any Adjusted Purchase Price pursuant to clause of the Receivables Purchase Agreement; Eleventh, to pay to the Expenses Loan Provider interest due and payable on the Expenses Loan; Twelfth, to repay to the Expenses Loan Provider any amount payable in respect of principal on the Expenses Loan; Thirteenth, to pay any amount due and payable under the Transaction Documents, to the extent not already paid or payable under other items of this Priority of Payments; Fourteenth, to pay, pari passu and pro rata, to the Subordinated Loan Provider interest due and payable on the Cash Reserve Loan and the Liquidity Reserve Loan; Fifteenth, to repay, pari passu and pro rata, to the Subordinated Loan Provider any amount payable in respect of principal on the Cash Reserve Loan and the Liquidity Reserve Loan. Sixteenth, to pay, pari passu and pro rata, all amounts of interest due and payable on the Junior Notes on such Payment Date. Seventeenth, to pay, pari passu and pro rata, all amounts of principal due and payable on the Junior Notes on such Payment Date. Eighteenth, to pay the Premium on the Junior Notes. 7. INTEREST 7.1 Accrual of interest Each Rated Note bears interest on its Principal Amount Outstanding from (and including) the Issue Date. 7.2 Payment dates and Interest Periods Interest in respect of the Rated Notes will accrue on a daily basis and will be payable in Euro in arrears on each Payment Date in respect of the Interest Period ending on -146-

152 such Payment Date. The First Payment Date is the Payment Date falling in 28 April 2012 in respect of the Initial Interest Period. 7.3 Cessation of interest accrual Each Rated Note (or the portion of the Principal Amount Outstanding due for redemption) shall cease to bear interest from (and including) the Final Maturity Date or from (and including) any earlier date fixed for redemption unless payment of the principal due and payable but unpaid is improperly withheld or refused, in which case, each Rated Note (or the relevant portion thereof) will continue to bear interest in accordance with this Rated Condition (both before and after judgment) at the rate from time to time applicable to such Rated Note until the day on which either all sums due in respect of such Rated Note up to that day are received by the relevant Rated Noteholder or the Representative of the Noteholders or the Principal Paying Agent receives all amounts due on behalf of all such Rated Noteholders. 7.4 Calculation of interest Interest in respect of any Interest Period or any other period shall be calculated on the basis of the actual number of days elapsed and a 360 day year. 7.5 Rates of interest The rate of interest applicable to the Rated Notes (the "Interest Rate") for each Interest Period, including the Initial Interest Period, shall be the aggregate of three months Euribor (so long as no Trigger Notice has been served and except in respect of the Initial Interest Period where an interpolated interest rate based on 3 and 4 months deposits in Euro will be substituted to three months Euribor), plus a margin of 0.30% per annum There shall be no maximum or minimum Interest Rate. 7.6 Calculation of Interest Payment Amounts The Issuer shall on each Determination Date determine or cause the Principal Paying Agent to determine: the Interest Rate applicable to the Rated Notes for the next Interest Period beginning after such Determination Date (or, in case of the Initial Interest Period, beginning on and including the Issue Date); the Euro amount (the "Interest Payment Amount") payable as interest on a Rated Note in respect of such Interest Period calculated by applying the relevant Interest Rate to the Principal Amount Outstanding of a Rated Note on the Payment Date at the commencement of such Interest Period (or, in the case of the Initial Interest Period, the Issue Date) (after deducting therefrom any payment of principal due and paid on that Payment Date), multiplying the product of such calculation by the actual number of days in the Interest Period and dividing by 360, and rounding the resultant figure to the nearest cent (half a cent being rounded up)

153 7.7 Notification of Interest Payment Amount and Payment Date As soon as practicable (and in any event not later than the close of business on the relevant Determination Date), the Issuer (or the Principal Paying Agent on its behalf) will cause: the Interest Rate for the Rated Notes for the related Interest Period; the Interest Payment Amount for each Rated Note for the related Interest Period; and the Payment Date in respect of each such Interest Payment Amount, to be notified to the Servicer, the Representative of the Noteholders, the Calculation Agent, the Issuer Corporate Services Provider, the Swap Counterparty, Monte Titoli and the Irish Stock Exchange and will cause the same to be published in accordance with Rated Notes Condition 16 (Notices) on or as soon as possible after the relevant Determination Date. 7.8 Amendments to publications The Interest Rate and the Interest Payment Amount for the Rated Notes and the Payment Date so published may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) without notice in the event of any extension or shortening of the relevant Interest Period. 7.9 Determination by the Representative of the Noteholders If the Issuer does not at any time for any reason calculate (or cause to be calculated) the Interest Rate and the Interest Payment Amount in accordance with this Rated Notes Condition 7, the Representative of the Noteholders as legal representative of the Organisation of the Noteholders shall (i) determine (or cause to be determined) the Interest Rate for the Rated Notes at such rate as (having regard to the procedure described above) it shall consider fair and reasonable in all the circumstances; and (ii) determine (or cause to be determined) the Interest Payment Amount for the Rated Notes in the manner specified in Rated Notes Condition 7.6 (Calculation of Interest Payment Amounts) and such determination shall be deemed to have been made by the Issuer The Representative of the Noteholders shall have no liability to any person (other than the Issuer) in connection with any determination or calculation made by it or its agent pursuant to this Condition 7.9 or any failure to make such determination or calculation or any failure to appoint such an agent willing or able to make such determination or calculation, and the Representative of the Noteholders shall not be in any way responsible for any liabilities incurred by reason of misconduct or default on the part of any such agent or be bound to supervise the proceedings or acts of any such agent, provided that such agent has been selected by the Representative of the Noteholders among financial institutions having certified experience in -148-

154 making the above determination and calculation and already acting as calculation agent in other securitisation transactions Notifications to be final Each notification, calculation and quotation given, expressed, made or obtained for the purposes of this Rated Notes Condition 7 (Interest), whether by the Reference Banks (or any of them), the Principal Paying Agent, the Issuer or the Representative of the Noteholders shall (in the absence of wilful default, bad faith or manifest error) be binding on all persons Reference Banks The Issuer shall ensure that, so long as any of the Rated Notes remain outstanding, there shall at all times be three Reference Banks Unpaid interest with respect to the Rated Notes Unpaid interest on the Rated Notes shall accrue no interest. 8. REDEMPTION, PURCHASE AND CANCELLATION 8.1 Final redemption Unless previously redeemed in full or cancelled as provided in this Rated Notes Condition, the Issuer shall redeem the Rated Notes at their Principal Amount Outstanding, plus any accrued but unpaid interest, on the Final Maturity Date The Issuer may not redeem the Rated Notes in whole or in part prior to that date except as provided below in Rated Notes Conditions 8.2 (Mandatory redemption), 8.3 (Optional redemption) and 8.4 (Optional redemption for taxation reasons), but without prejudice to Rated Notes Condition 12 (Trigger Events) and Rated Notes Condition 13 (Enforcement) If the Issuer has insufficient Issuer Available Funds to repay the Rated Notes in full on the Final Maturity Date, then the Rated Notes shall be deemed to be discharged in full and any amount in respect of principal, interest or other amounts due and payable in respect of the Rated Notes shall (unless payment of such amounts is being improperly withheld or refused) be finally and definitively cancelled. 8.2 Mandatory redemption On each Payment Date on which there are Issuer Available Funds available for payments of principal in respect of the Rated Notes in accordance with the Priority of Payments set out in Rated Notes Condition 6 (Priority of Payments), the Issuer will cause each Note to be redeemed on such Payment Date in an amount equal to the Principal Payment Amount determined on the related Calculation Date

155 8.3 Optional redemption Provided that no Trigger Notice has been served on the Issuer, the Issuer may redeem all (but not some only) of the Notes at their Principal Amount Outstanding, together with interest accrued thereon, on any Payment Date falling on or after the Clean Up Option Date subject to the following: that the Issuer has given not more than 60 days and not less than 30 days' notice to the Representative of the Noteholders and the Noteholders in accordance with Rated Notes Condition 16 (Notices) of its intention to redeem all (but not some only) of the Notes; and that prior to giving such notice, the Issuer has provided to the Representative of the Noteholders a certificate signed by the Issuer confirming that the Issuer will on the relevant Payment Date have the funds, not subject to the interests of any person, required to redeem the Notes in accordance with this Condition and any amount required to be paid under the Pre-Trigger Notice Priority of Payments in priority to or pari passu with the Notes. 8.4 Optional redemption for taxation reasons Provided that no Trigger Notice has been served on the Issuer, the Issuer may redeem all (but not some only) of the Notes at their Principal Amount Outstanding on any Payment Date: after the date on which the Issuer is required to make any payment in respect of the Notes or the Swap Agreement and the Issuer would be required to make a Tax Deduction in respect of such payment (other than in respect of a Decree 239 Deduction); after the date of a change in the Tax law of Italy (or the application or official interpretation of such law) which would cause the total amount payable in respect of the Portfolio to cease to be receivable by the Issuer, including as a result of any of the Debtors being obliged to make a Tax Deduction in respect of any payment in relation to any Receivables, subject to the following: that the Issuer has given not more than 60 days' and not less than 30 days' notice to the Representative of the Noteholders and the Noteholders in accordance with Condition 16 (Notices) of its intention to redeem all (but not some only) of the Notes; and that prior to giving such notice, the Issuer has provided to the Representative of the Noteholders: (a) a certificate signed by a director of the Issuer to the effect that the obligation to make a Tax Deduction or the imposition resulting in the total amount payable in respect of the Portfolio ceasing to be receivable by the Issuer cannot be avoided by taking measures reasonably available to the Issuer and not prejudicial to its interest as a whole; and -150-

156 (b) a certificate signed by a director of the Issuer confirming that the Issuer will, on the relevant Payment Date, have the funds not subject to the interests of any other person required to redeem the Notes pursuant to this Condition and any amount required to be paid under the Priority of Payments in priority to or pari passu with the Notes. 8.5 Conclusiveness of certificates Any certificate given by or on behalf of the Issuer pursuant to Rated Notes Condition 8.3 (Optional redemption) or Rated Notes Condition 8.4 (Optional redemption for taxation reasons) may be relied on by the Representative of the Noteholders without further investigation and shall be binding on the Noteholders and the Other Issuer Creditors. 8.6 Calculation of Principal Payment Amount and Principal Amount Outstanding On each Calculation Date, the Issuer shall calculate or cause the Calculation Agent to calculate: (a) (b) (c) the amount of the Issuer Available Funds; the aggregate principal payment (if any) due on the Rated Notes on the next following Payment Date and the Principal Payment Amount (if any) due on each Rated Note of that Class; and the Principal Amount Outstanding of each Rated Note on the next following Payment Date (after deducting any principal payment due to be made on that Payment Date in relation to each Rated Note) The principal amount redeemable in respect of each Rated Note (the "Principal Payment Amount") on any Payment Date shall be a pro rata share of the principal payment due in respect of the Rated Notes, in accordance with the relevant Priority of Payments, on such date. The Principal Payment Amount is calculated by multiplying the Issuer Available Funds available to make the principal payment in respect of the Rated Notes, in accordance with the relevant Priority of Payments, on such date by a fraction, the numerator of which is the then Principal Amount Outstanding of each Rated Note and the denominator of which is the then Principal Amount Outstanding of all the Rated Notes, and rounding down the resultant figures to the nearest cent, provided always that no such Principal Payment Amount may exceed the Principal Amount Outstanding of the relevant Rated Note. 8.7 Calculation by the Representative of the Noteholders in case of Issuer default If the Issuer does not at any time for any reason calculate (or cause the Calculation Agent to calculate) the Issuer Available Funds, the amount thereof available for principal payments in respect of the Rated Notes, the Principal Payment Amount in respect of each Rated Note or the Principal Amount Outstanding in relation to each Rated Note in accordance with this Rated Notes Condition, such amounts shall be calculated by (or on behalf of) the Representative of the Noteholders in accordance with this Rated Notes -151-

157 Condition (based on information supplied to it by the Issuer or the Calculation Agent) and each such calculation shall be deemed to have been made by the Issuer The Representative of the Noteholders shall have no liability to any person (other than the Issuer) in connection with any determination or calculation made by it or its agent pursuant to this Rated Notes Condition 8.7 or any failure to make such determination or calculation or any failure to appoint such an agent willing or able to make such determination or calculation, and the Representative of the Noteholders shall not be in any way responsible for any liabilities incurred by reason of misconduct or default on the part of any such agent or be bound to supervise the proceedings or acts of any such agent, provided that such agent has been selected by the Representative of the Noteholders among financial institutions having certified experience in making the above determination and calculation and already acting as calculation agent in other securitisation transactions. 8.8 Notice of calculation of Principal Payment Amount and Principal Amount Outstanding The Issuer will cause each calculation of the Principal Payment Amount and Principal Amount Outstanding in relation to the Rated Notes to be notified immediately after calculation (through the Payments Report or the Trigger Event Report) to the Representative of the Noteholders, the Principal Paying Agent and, for so long as the Rated Notes are listed on the Irish Stock Exchange, the Irish Stock Exchange and will cause notice of each calculation of a Principal Payment Amount and Principal Amount Outstanding in relation to the Rated Notes to be given in accordance with Rated Notes Condition 16 (Notices) not later than two Business Days prior to each Payment Date. 8.9 Notice Irrevocable Any such notice as is referred to in Rated Notes Conditions 8.3 (Optional redemption), 8.4 (Optional redemption for taxation reasons) and 8.8 (Notice of calculation of Principal Payment Amount and Principal Amount Outstanding) shall be irrevocable and, upon the expiration of notice pursuant to Rated Notes Conditions 8.3 (Optional redemption) or 8.4 (Optional redemption for taxation reasons), the Issuer shall be bound to redeem the Rated Notes at their Principal Amount Outstanding No purchase by Issuer The Issuer is not permitted to purchase any of the Rated Notes at any time Cancellation All Rated Notes redeemed in full will be cancelled forthwith by the Issuer and may not be resold or reissued

158 8.12 Early Redemption through the disposal of the Portfolio The Issuer shall redeem the Notes in whole (but not in part) on any Payment Date falling on or after the Clean Up Option Date through the transfer of the Portfolio to the Noteholder, along with any Issuer Available Funds (but net of any amounts to be paid by the Issuer in priority to any payment due to the Noteholders in accordance with the relevant Priority of Payments), in full satisfaction of its payment obligations under the Notes, provided that the transferee is the sole Junior Noteholder, holding 100% of the Notes and that it has provided the Issuer with a solvency certificate. The transfer of the Portfolio and any Issuer Available Funds, as described above, shall cause the full and irrevocable satisfaction of any and all Issuer's obligations under the Notes, regardless of the status and value of the Portfolio at the time of the transfer and irrespective of the actual receipt by the transferee of any proceeds or collection under the Portfolio. Notice to the Noteholders of redemption of the Notes hereunder shall be given by the Issuer in accordance with Condition 16 (Notices). 9. LIMITED RECOURSE AND NON PETITION 9.1 Noteholders not entitled to proceed directly against Issuer Only the Representative of the Noteholders may pursue the remedies available under the general law or under the Transaction Documents to obtain payment of the Obligations or enforce the Security and no Noteholder shall be entitled to proceed directly against the Issuer to obtain payment of the Obligations or to enforce the Security. In particular, no Noteholder is entitled, otherwise than as permitted by the Transaction Documents, to direct the Representative of the Noteholders to enforce the Security and no Noteholder (nor any person on its behalf, other than the Representative of the Noteholders, where appropriate) is entitled to take any proceedings against the Issuer to enforce the Security; no Noteholder (nor any person on its behalf, other than the Representative of the Noteholders) shall, save as expressly permitted by the Transaction Documents, have the right to take or join any person in taking any steps against the Issuer for the purpose of obtaining payment of any amount due from the Issuer; until the date falling one year and one day after the date on which the Notes and any other notes issued in the context of the Previous Securitisations and any further securitisations undertaken by the Issuer have been redeemed in full or cancelled in accordance with their terms and conditions, no Noteholder (nor any person on its behalf, other than the Representative of the Noteholders when so directed by an Extraordinary Resolution of all the Noteholders and then only if the representative of the noteholders of the Previous Securitisations and any further securitisations undertaken by the Issuer, if any, have been so directed by extraordinary resolutions of their respective noteholders in accordance with the relevant transaction documents) shall initiate or join any person in initiating an Insolvency Event in relation to the Issuer; and -153-

159 9.1.4 no Noteholder shall be entitled to take or join in the taking of any corporate action, legal proceedings or other procedure or step which would result in the Priority of Payments not being complied with. 9.2 Limited Recourse Obligations of Issuer Notwithstanding any other provision of the Transaction Documents, all obligations of the Issuer to the Noteholders are limited in recourse as set out below: each Noteholder will have a claim only in respect of the Issuer Available Funds and at all times only in accordance with the applicable Priority of Payments and will not have any claim, by operation of law or otherwise, against, or recourse to, the Issuer's other assets or its contributed capital; sums payable to each Noteholder in respect of the Issuer's obligations to such Noteholder shall be limited to the lesser of (a) the aggregate amount of all sums due and payable to such Noteholder and (b) the Issuer Available Funds, net of any sums which are payable by the Issuer in accordance with the Priority of Payments in priority to or pari passu with sums payable to such Noteholder; and if the Servicer has certified to the Representative of the Noteholders, that there is no reasonable likelihood of there being any further realisations in respect of the Portfolio or the Security (whether arising from judicial enforcement proceedings, enforcement of the Security or otherwise) which would be available to pay unpaid amounts outstanding under the Transaction Documents or the Notes and the Representative of the Noteholders has given notice on the basis of such certificate in accordance with Rated Notes Condition 16 (Notices) that there is no reasonable likelihood of there being any further realisations in respect of the Portfolio or the Security (whether arising from judicial enforcement proceedings, enforcement of the Security or otherwise) which would be available to pay amounts outstanding under the Transaction Documents or the Notes, the Noteholders shall have no further claim against the Issuer in respect of any such unpaid amounts and such unpaid amounts shall be cancelled and discharged in full. 10. PAYMENTS 10.1 Payments through Monte Titoli Payment of principal and interest and premium (if applicable) in respect of the Notes will be credited, according to the instructions of Monte Titoli, by the Principal Paying Agent on behalf of the Issuer to the accounts of the Monte Titoli Account Holder in whose accounts with Monte Titoli the Notes are held and thereafter credited by such Monte Titoli Account Holders from such aforementioned accounts to the accounts of the beneficial owners of those Notes or through Euroclear and Clearstream to the accounts with Euroclear and Clearstream of the beneficial owners of those Notes, all in accordance with the rules and procedures of Monte Titoli, Euroclear or Clearstream, as the case may be

160 10.2 Payments subject to fiscal laws All payments in respect of the Notes are subject in each case to any applicable fiscal or other laws and regulations. No commissions or expenses shall be charged to the Noteholders in respect of such payments Payments on Business Days Noteholders will not be entitled to any interest or other payment in consequence of any delay after the due date in receiving any amount due as a result of the due date not being a business day in the place of payment to such Noteholder Change of Principal Paying Agent and appointment of additional paying agents The Issuer reserves the right, subject to the prior written approval of the Representative of the Noteholders, at any time to vary or terminate the appointment of the Principal Paying Agent and to appoint additional or other paying agents (provided that any additional or substitute paying agent, as the case may be, shall be an Eligible Institution). The Issuer will cause at least 30 days' prior notice of any change in or addition to the Principal Paying Agent or its Specified Office to be given in accordance with Rated Notes Condition 16 (Notices). 11. TAXATION 11.1 Payments free from Tax All payments in respect of the Notes will be made free and clear of and without withholding or deduction (other than a Decree 239 Deduction, where applicable) for any Taxes imposed, levied, collected, withheld or assessed by applicable law unless the Issuer, the Representative of the Noteholders or the Principal Paying Agent or any paying agent appointed under Condition 10.4 (Change of Principal Paying Agent and appointment of additional paying agent) (as the case may be) is required by law to make any Tax Deduction. In that event the Issuer, the Representative of the Noteholders or such Principal Paying Agent (as the case may be) shall make such payments after such Tax Deduction and shall account to the relevant authorities for the amount so withheld or deducted No payment of additional amounts None of the Issuer, the Representative of the Noteholders, the Principal Paying Agent or any paying agent appointed under Condition 10.4 (Change of Principal Paying Agent and appointment of additional paying agent) will be obliged to pay any additional amounts to the Noteholders as a result of any such Tax Deduction Tax Deduction not Trigger Event Notwithstanding that the Representative of the Noteholders, the Issuer or the Principal Paying Agent or any paying agent appointed under Condition 10.4 (Change of Principal Paying Agent and appointment of additional paying agent) are required to make a Tax Deduction this shall not constitute a Trigger Event

161 12. TRIGGER EVENTS 12.1 Trigger Events Each of the following events is a "Trigger Event": Non-payment: The Issuer fails to pay any amount of principal in respect of the Rated Notes within five days of the due date for payment of such principal or fails to pay any amount of interest in respect of the Rated Notes within three days of the due date for payment of such interest; or Breach of other obligations: the Issuer defaults in the performance or observance of any of its obligations under or in respect of the Notes or any of the Transaction Documents to which it is a party (other than any obligation to pay principal or interest in respect of the Notes) and such default (a) is in the opinion of the Representative of the Noteholders, incapable of remedy or (b) being a default which is, in the opinion of the Representative of the Noteholders, capable of remedy remains unremedied for 30 days after the Representative of the Noteholders has given written notice of such default to the Issuer requiring the same to be remedied; Insolvency of the Issuer: an Insolvency Event occurs with respect to the Issuer; or Unlawfulness: it is or will become unlawful for the Issuer to perform or comply with any of its obligations under or in respect of the Notes or any of the Transaction Documents to which it is a party Delivery of Trigger Notice If a Trigger Event occurs and is continuing, subject to Condition 12.3 (Conditions to delivery of Trigger Notice) the Representative of the Noteholders: in the case of a Trigger Event under Condition shall; and in the case of a Trigger Event under Condition , or shall, if so directed by an Extraordinary Resolution of the Noteholders; serve a written notice (a "Trigger Notice") on the Issuer Conditions to delivery of Trigger Notice Notwithstanding Condition 12.2 (Delivery of a Trigger Notice) the Representative of the Noteholders shall not be obliged to deliver a Trigger Notice unless: -156-

162 in the case of the occurrence of any of the events mentioned in Condition (Breach of other obligations), the Representative of the Noteholders shall have certified in writing that the occurrence of such event is in its sole opinion materially prejudicial to the interests of the Noteholders; and it shall have been indemnified and/or secured to its satisfaction against all Liabilities to which it may thereby become liable or which it may incur by so doing Consequences of delivery of Trigger Notice Upon the service of a Trigger Notice, all payments of principal, interest and other amounts in respect of the Notes shall become immediately due and payable without further action or formality at their Principal Amount Outstanding, together with any accrued interest and shall be payable in accordance with the order of priority set out in Condition 6.2 (Post Trigger Notice Priority of Payments) and on such dates as the Representative of the Noteholders shall determine as being Payments Dates. 13. ENFORCEMENT 13.1 Proceedings At any time after a Trigger Notice has been served on the Issuer, the Representative of the Noteholders may, at its discretion and without further notice take such steps and/or institute such proceedings as it thinks fit to enforce repayment of the Notes and payment of accrued interest thereon but it shall not be bound to do so unless directed by an Extraordinary Resolution of the Noteholders and subject to Article of the Rules of the Organisation of the Noteholders Directions to the Representative of the Noteholders The Representative of the Noteholders may take such action without having regard to the effect of such action on any individual Noteholder or on any Other Issuer Creditor Sale of Portfolio Following the delivery of a Trigger Notice the Representative of the Noteholder shall direct the Issuer to sell the Portfolio or a substantial part thereof only if so requested by an Extraordinary Resolution of the Noteholders then outstanding and strictly in accordance with the instructions approved thereby subject to Article of the Rules of the Organisation of the Noteholders (and for the avoidance of doubt subject to its indemnification to satisfaction) Upon occurrence of the circumstance under Condition above, the assignee of the Portfolio (or part of it) shall provide the Issuer with (i) a solvency certificate and (ii) a good standing certificate (certificate di vigenza) issued by the relevant Chamber of Commerce confirming that no insolvency proceedings have been filed or are pending against it

163 14. THE REPRESENTATIVE OF THE NOTEHOLDERS AND OTHER AGENTS 14.1 The Organisation of the Noteholders The Organisation of the Noteholders shall be established upon and by virtue of the issue of the Notes and shall remain in force and in effect until repayment in full or cancellation of the Notes. The provisions relating to the Organisation of the Noteholders and the Representative of the Noteholders are contained in the Rules of the Organisation of the Noteholders Appointment of the Representative of the Noteholders Pursuant to the Rules of the Organisation of the Noteholders there shall at all times be a Representative of the Noteholders. 15. PRESCRIPTION Claims against the Issuer for payments in respect of the Notes shall be prescribed and shall become void unless made within ten years (in the case of principal) or five years (in the case of interest) from the date on which a payment in respect thereof first becomes due and payable. 16. NOTICES 16.1 Notices Given Through Monte Titoli Any notice regarding the Notes, as long as the Notes are held through Monte Titoli, shall be deemed to have been duly given if given through the systems of Monte Titoli Notices in Ireland As long as the Rated Notes are listed on the Irish Stock Exchange and the rules of such exchange so require, any notice to Rated Noteholders shall also be published on the website of the Irish Stock Exchange. Any such notice shall be deemed to have been given on the date of such publication or, if published more than once or on different dates, on the first date on which publication is made in the manner referred to above Other Method of Giving Notice The Representative of the Noteholders shall be at liberty to sanction some other method of giving notice to Noteholders (including, without limitation, any relevant screen) if, in its sole opinion, such other method is reasonable having regard to market practice then prevailing and to the rules of the stock exchange on which the Rated Notes are then listed and provided that notice of such other method is given to the Rated Noteholders in such manner as the Representative of the Noteholders shall require. 17. NOTIFICATIONS TO BE FINAL All notifications, opinions, determinations, certificates, calculations, quotations and decisions given, expressed, made or obtained for the purposes of these Conditions, -158-

164 whether by the Principal Paying Agent or any paying agent appointed under Rated Notes Condition 10.4 (Change of Principal Paying Agent and appointment of additional paying agent), the Calculation Agent, the Issuer or the Representative of the Noteholders shall (in the absence of wilful default (dolo), gross negligence (colpa grave), fraud (frode) or manifest error) be binding on the Principal Paying Agent or any paying agent appointed under Rated Notes Condition 10.4 (Change of Principal Paying Agent and appointment of additional paying agent), the Calculation Agent, the Issuer, the Representative of the Noteholders and all Noteholders and (in such absence as aforesaid) no liability to the Noteholders shall attach to the Principal Paying Agent, the Calculation Agent, the Issuer or the Representative of the Noteholders in connection with the exercise or non-exercise by them or any of them of their powers, duties and discretion hereunder. 18. GOVERNING LAW AND JURISDICTION 18.1 Governing Law of Notes The Rated Notes and any non-contractual obligations arising out of them are governed by Italian law Governing Law of Transaction Documents All the Transaction Documents and any non-contractual obligations arising out of them, except for the Swap Agreement, the GIC Agreement and the Deed of Charge, are governed by Italian law. The Swap Agreement, the GIC Agreement and the Deed of Charge and any non-contractual obligations arising out of them are governed by English law Jurisdiction of Courts The Courts of Milan are to have exclusive jurisdiction to settle any disputes which may arise out of or in connection with the Rated Notes and any disputes related to any non-contractual obligations arising out of or in connection with the Rated Notes

165 1. GENERAL EXHIBIT TO THE TERMS AND CONDITIONS OF THE NOTES RULES OF THE ORGANISATION OF THE NOTEHOLDERS TITLE I GENERAL PROVISIONS 1.1 The Organisation of the Noteholders is created concurrently with the issue of and subscription for the 7,005,000,000 Class A Residential Mortgage Backed Floating Rate Notes Series due 27 January 2061 (the "Rated Notes") and 844,952,000 Class J Residential Mortgage Backed Variable Rate Notes Series due 27 January 2061 (the "Junior Notes" and, collectively with the Rated Notes, the "Notes") issued by Mercurio Mortgage Finance S.r.l., and is governed by the Rules of the Organisation of the Noteholders set out herein (the "Rules"). 1.2 The Rules shall remain in force and effect until full repayment or cancellation of all the Notes. 1.3 The contents of the Rules are deemed to be an integral part of each Note issued by the Issuer. 2. DEFINITIONS AND INTERPRETATION 2.1 Definitions In these Rules the terms set out below have the following meanings: "Basic Terms Modification" means any proposal: (a) (b) (c) (d) (e) (f) (g) to change any date fixed for the payment of principal, interest or Premium in respect of the Notes of any Class; to reduce or cancel the amount of principal, interest or Premium due on any date in respect of the Notes of any Class or to alter the method of calculating the amount of any payment in respect of the Notes of any Class on redemption or maturity; to change the quorum required at any Meeting or the majority required to pass any Ordinary Resolution or Extraordinary Resolution; to change the currency in which payments due in respect of any Class of Notes are payable; to alter the priority of payments of interest, principal or Premium in respect of any of the Notes; to effect the exchange, conversion or substitution of the Notes of any Class for, or the conversion of such Notes into, shares, bonds or other obligations or securities of the Issuer or any other person or body corporate, formed or to be formed; to resolve on the matter set out in Rated Notes Condition (Noteholders not entitled to proceed directly against the Issuer) and Junior Notes Condition (Noteholders not entitled to proceed directly against the Issuer) or -160-

166 (h) to change this definition; "Blocked Notes" means Notes which have been blocked in an account with a clearing system or otherwise are held to the order of or under the control of the Principal Paying Agent for the purpose of obtaining from the Principal Paying Agent a Block Voting Instruction or a Voting Certificate on terms that they will not be released until after the conclusion of the Meeting in respect of which the Block Voting Instruction or Voting Certificate is required; "Block Voting Instruction" means, in relation to a Meeting, a document obtained by the Principal Paying Agent: (a) certifying that certain specified Notes have been blocked in an account with a clearing system, the Monte Titoli Account Holder or the relevant custodian and will not be released until the earlier of: (i) (ii) a specified date which falls after the conclusion of the Meeting; and the surrender to the Principal Paying Agent not less than 48 Hours before the time fixed for the Meeting (or, if the Meeting has been adjourned, the time fixed for its resumption) of the confirmation that the Notes are Blocked Notes and notification of the release thereof by the Principal Paying Agent to the Issuer and Representative of the Noteholders; (b) (c) (d) certifying that the Holder of the relevant Blocked Notes or a duly authorised person on its behalf has notified the Principal Paying Agent that the votes attributable to such Notes are to be cast in a particular way on each resolution to be put to the Meeting and that during the period of 48 hours before the time fixed for the Meeting such instructions may not be amended or revoked; listing the total number of such specified Blocked Notes, distinguishing between those in respect of which instructions have been given to vote for, and against, each resolution; and authorising a named individual to vote in accordance with such instructions; "Chairman" means, in relation to a Meeting, the individual who takes the chair in accordance with Article 8 (Chairman of the Meeting) of the Rules; "Conditions" means, as applicable, a condition of the Rated Notes Conditions or of the Junior Notes Conditions. "Extraordinary Resolution" means a resolution passed at a Meeting, duly convened and held in accordance with the provisions contained in the Rules by a majority of not less than three quarters of the votes cast; "Holder" in respect of a Note means the ultimate owner of such Note; "Junior Notes Conditions" means the terms and conditions of the Junior Notes as from time to time modified in accordance with the provisions herein contained and including any other document expressed to be supplemental thereto and any reference to a particular numbered Junior Notes Condition shall be construed accordingly

167 "Meeting" means a meeting of Noteholders of any Class or Classes, whether originally convened or resumed following an adjournment; "Monte Titoli" means Monte Titoli S.p.A., a società per azioni having its registered office at Via Mantegna, 6, Milan, Italy. "Monte Titoli Account Holders" means any authorised financial intermediary institution entitled to hold accounts on behalf of its customers with Monte Titoli (as intermediari aderenti) in accordance with article 30 of Decree 213 and includes any depository banks approved by Euroclear and Clearstream. "Monte Titoli Mandate Agreement" means the agreement entered into between the Issuer and Monte Titoli as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Most Senior Class of Notes" means (i) the Rated Notes and (ii) upon full repayment of the Rated Notes, the Junior Notes. "Ordinary Resolution" means any resolution passed at a Meeting duly convened and held in accordance with the provisions contained in the Rules by a majority of the vote cast; "Proxy" means a person appointed to vote under a Voting Certificate as a proxy or the person appointed to vote under a Block Voting Instruction, in each case, other than: (a) (b) any person whose appointment has been revoked and in relation to whom the Principal Paying Agent, has been notified in writing of such revocation by the time which is 48 hours before the time fixed for the relevant Meeting; and any person appointed to vote at a Meeting which has been adjourned for want of a quorum and who has not been reappointed to vote at the Meeting when it is resumed; "Rated Notes Conditions" means the terms and conditions of the Rated Notes, as from time to time modified in accordance with the provisions herein contained and including any agreement or other document expressed to be supplemental thereto and any reference to a particular numbered Rated Notes Condition shall be construed in relation to the Rated Notes accordingly. "Resolutions" means Ordinary Resolutions and Extraordinary Resolutions collectively; "Specified Office" means, with respect to the Principal Paying Agent, its Italian branch branch at Via Carducci, 3, Milan, Italy, or, with respect to any additional or other Paying Agent appointed pursuant to Condition 10.4 (Change of Principal Paying Agent and appointment of additional paying agents) and the provisions of the Cash Allocation, Management and Payments Agreement, the specified office notified to the Noteholders upon notification of the appointment of each such Paying Agent in accordance with Condition 10.4 (Change of Principal Paying Agent and appointment of additional paying agents) and in each such case, such other address as it may specify in accordance with the provisions of the Cash Allocation, Management and Payment Agreement

168 "Transaction Party" means any person who is a party to a Transaction Document; "Trigger Event" means any of the events described in Condition 12 (Trigger Events) of the Condition. "Trigger Notice" means a notice described as such in Condition 12.2 (Trigger Notice) of the Condition. "Voter" means, in relation to any Meeting, the Holder or a Proxy named in a Voting Certificate, the bearer of a Voting Certificate issued by the Principal Paying Agent or a Proxy named in a Block Voting Instruction; "Voting Certificate" means, in relation to any Meeting: (a) (b) a certificate issued by a Monte Titoli Account Holder in accordance with the regulation issued jointly by the Bank of Italy and CONSOB on 22 February 2008, as amended from time to time; or a certificate issued by the Principal Paying Agent stating: (i) that Blocked Notes will not be released until the earlier of: (1) a specified date which falls after the conclusion of the Meeting; and (2) the surrender of such certificate to the Principal Paying Agent. (ii) the bearer of the certificate is entitled to attend and vote at such Meeting in respect of such Blocked Notes; "Written Resolution" means a resolution in writing signed by or on behalf of all Noteholders of any Class of Classes who at any relevant time are entitled to participate in a Meeting in accordance with the provisions of these Rules, whether contained in one document or several documents in the same form, each signed by or on behalf of one or more of such Noteholders; "24 hours" means a period of 24 hours including all or part of a day on which banks are open for business both in the place where any relevant Meeting is to be held and in the place where the Principal Paying Agent has its Specified Office; "48 hours" means 2 consecutive periods of 24 hours Unless otherwise provided in these Rules, or the context requires otherwise, words and expressions used in the Rules shall have the meanings and the constructions ascribed to them in the Rated Notes Conditions. 2.2 Interpretation Any reference herein to an "Article" shall, except where expressly provided to the contrary, be a reference to an article of these Rules A "successor" of any party shall be construed so as to include an assignee or successor in title of such party and any person who under the laws of the jurisdiction of incorporation or domicile of such party has assumed the rights and obligations of -163-

169 such party under any Transaction Document or to which, under such laws, such rights and obligations have been transferred Any reference to any person defined as a "Transaction Party" in these Rules or in any Transaction Document or the Conditions shall be construed so as to include its and any subsequent successors and transferees in accordance with their respective interests. 3. PURPOSE OF THE ORGANISATION 3.1 Each Noteholder is a member of the Organisation of the Noteholders. 3.2 The purpose of the Organisation of the Noteholders is to co-ordinate the exercise of the rights of the Noteholders and, more generally, to take any action necessary or desirable to protect the interest of the Noteholders. TITLE II MEETINGS OF THE NOTEHOLDERS 4. VOTING CERTIFICATES AND BLOCK VOTING INSTRUCTIONS 4.1 Issue A Noteholder may obtain a Voting Certificate in respect of a Meeting by requesting its Monte Titoli Account Holder to issue a certificate in accordance with the regulation issued jointly by the Bank of Italy and CONSOB on 22 February 2008, as amended from time to time A Noteholder may also obtain a Voting Certificate from the Principal Paying Agent or require the Principal Paying Agent to issue a Block Voting Instruction by arranging for Notes to be (to the satisfaction of the Principal Paying Agent) held to its order or under its control or blocked in an account in a clearing system (other than Monte Titoli) not later than 48 hours before the time fixed for the relevant Meeting. 4.2 Expiry of validity A Voting Certificate or Block Voting Instruction shall be valid until the release of the Blocked Notes to which it relates. 4.3 Deemed Holder So long as a Voting Certificate or Block Voting Instruction is valid, the party named therein as Holder or Proxy, in the case of a Voting Certificate issued by a Monte Titoli Account Holder, the bearer thereof, in the case of a Voting Certificate issued by a Principal Paying Agent, and any Proxy named therein in the case of a Block Voting Instruction issued by the Principal Paying Agent shall be deemed to be the Holder of the Notes to which it refers for all purposes in connection with the Meeting to which such Voting Certificate or Block Voting Instruction relates. 4.4 Mutually exclusive A Voting Certificate and a Block Voting Instruction cannot be outstanding simultaneously in respect of the same Note

170 4.5 References to blocking and release References to the blocking or release of Notes shall be construed in accordance with the usual practices (including blocking the relevant account) of any relevant clearing system. 5. VALIDITY OF BLOCK VOTING INSTRUCTIONS AND VOTING CERTIFICATES A Block Voting Instruction or a Voting Certificate issued by a Monte Titoli Account Holder shall be valid only if it is deposited at the Specified Office of the Principal Paying Agent, or at any other place approved by the Representative of the Noteholders, at least 24 hours before the time of the relevant Meeting. If such a Block Voting Instruction or Voting Certificate is not deposited before such deadline, it shall not be valid unless the Chairman decides otherwise before the Meeting proceeds to business. If the Representative of the Noteholders so requires, satisfactory evidence of the identity of each Proxy named in a Block Voting Instruction or of each Holders or Proxy named in a Voting Certificate issued by a Monte Titoli Account Holder shall be produced at the Meeting but the Representative of the Noteholders shall not be obliged to investigate the validity of a Block Voting Instruction or Voting Certificate or the identity of any Proxy named in a Voting Certificate or Block Voting Instruction or the identity of any Holder named in a Voting Certificate issued by a Monte Titoli Account Holder. 6. CONVENING A MEETING 6.1 Convening a Meeting The Representative of the Noteholders or the Issuer may convene separate or combined Meetings of the Noteholders of any Class or Classes at any time and the Representative of the Noteholders shall be obliged to do so upon the request in writing by Noteholders representing at least one-tenth of the aggregate Principal Amount Outstanding of the outstanding Notes of the relevant Class or Classes. 6.2 Meetings convened by Issuer Whenever the Issuer is about to convene a Meeting, it shall immediately give notice in writing to the Representative of the Noteholders specifying the proposed day, time and place of the Meeting, and the items to be included in the agenda. 6.3 Time and place of Meetings Every Meeting will be held on a date and at a time and place selected or approved by the Representative of the Noteholders. 7. NOTICE 7.1 Notice of meeting At least 21 days' notice (exclusive of the day notice is delivered and of the day on which the relevant Meeting is to be held), specifying the day, time and place of the Meeting, must be given to the relevant Noteholders and the Principal Paying Agent and any other agent appointed under Condition 10.4 (Change of Principal Paying Agent and appointment of additional paying agents), with a copy to the Issuer, where the Meeting is convened by the Representative of the Noteholders, or with a copy to the Representative of the Noteholders, where the Meeting is convened by the Issuer

171 7.2 Content of notice The notice shall set out the full text of any resolution to be proposed at the Meeting unless the Representative of the Noteholders agrees that the notice shall instead specify the nature of the resolution without including the full text and shall state that Voting Certificate for the purpose of such Meeting may be obtained from a Monte Titoli Account Holder in accordance with the provisions of the regulation issued jointly by the Bank of Italy and CONSOB on 22 February 2008, as amended from time to time, and that for the purpose of obtaining Voting Certificates from the Principal Paying Agent or appointing Proxies under a Block Voting Instruction, Notes must (to the satisfaction of the Principal Paying Agent) be held to the order of or placed under the control of the Principal Paying Agent or blocked in an account with a clearing system not later than 48 hours before the relevant Meeting. 7.3 Validity notwithstanding lack of notice A Meeting is valid notwithstanding that the formalities required by this Article 7 are not complied with if the Holders of the Notes constituting the Principal Amount Outstanding of all outstanding Notes, the Holders of which are entitled to attend and vote, are represented at such Meeting, and the Issuer and the Representative of the Noteholders are present at the Meeting. 8. CHAIRMAN OF THE MEETING 8.1 Appointment of Chairman An individual (who may, but need not be, a Noteholder), nominated by the Representative of the Noteholders may take the chair at any Meeting, but if: the Representative of the Noteholders fails to make a nomination; or the individual nominated declines to act or is not present within 15 minutes after the time fixed for the Meeting, the Meeting shall be chaired by the person elected by the majority of the Voters present, failing which, the Issuer shall appoint a Chairman. The Chairman of an adjourned Meeting need not be the same person as was Chairman at the original Meeting. 8.2 Duties of Chairman The Chairman ascertains that the Meeting has been duly convened and validly constituted, manages the business of the Meeting, monitors the fairness of proceedings, leads and moderates the debate, and defines the terms for voting. 8.3 Assistance to Chairman The Chairman may be assisted by outside experts or technical consultants, specifically invited to assist in any given matter, and may appoint one or more vote-counters, who are not required to be Noteholders. 9. QUORUM 9.1 The quorum at any Meeting convened to vote on: an Ordinary Resolution relating to a Meeting of a particular Class or Classes will be two or more persons holding or representing at least 50 per cent of the Principal -166-

172 Amount Outstanding of the Notes then outstanding in that Class or these Classes or, at any adjourned Meeting two or more persons being or representing Noteholders of that Class or these Classes whatever the Principal Amount Outstanding of the Notes then outstanding so held or represented in such Class or Classes an Extraordinary Resolution, other than in respect of a Basic Terms Modification, relating to a Meeting of a particular Class or Classes of Notes, will be two or more persons holding or representing at least 50% of the Principal Amount Outstanding of the Notes then outstanding in that Class or those Classes, or at an adjourned Meeting, two or more persons being or representing Noteholders of that Class or those Classes whatever the Principal Amount Outstanding of the Notes then outstanding so held or represented in such Class or Classes; an Extraordinary Resolution, in respect of a Basic Terms Modification, (which must be proposed separately to each Class of Noteholders), will be two or more persons holding or representing at least 75% of the Principal Amount Outstanding of the Notes then outstanding in the relevant Class, or at an adjourned Meeting, two or more persons being or representing Noteholders of that Class whatever the Principal Amount Outstanding of the Notes so held or represented in such Class, provided that, if in respect of any Class of Notes the Principal Paying Agent has received evidence that all the Notes of that Class are held by a single Holder and the Voting Certificates and/or Block Voting Instructions so confirm, then a single Voter appointed in relation thereto or being the Holder of the Notes thereby represented shall be deemed to be two Voters for the purpose of forming a quorum. 10. ADJOURNMENT FOR WANT OF QUORUM If a quorum is not present within 15 minutes after the time fixed for any Meeting: 10.1 if such Meeting was requested by Noteholders, the Meeting shall be dissolved; and 10.2 in any other case, the Meeting (unless the Issuer and the Representative of the Noteholders otherwise agree) shall, subject to paragraphs and below, be adjourned to a new date no earlier than 14 days and no later than 42 days after the original date of such Meeting, and to such place as the Chairman determines with the approval of the Representative of the Noteholders provided that: no Meeting may be adjourned more than once for want of a quorum; and the Meeting shall be dissolved if the Issuer and the Representative of the Noteholders together so decide. 11. ADJOURNED MEETING Except as provided in Article 10 (Adjournment for want of a quorum), the Chairman may, with the prior consent of any Meeting, and shall if so directed by any Meeting, adjourn such Meeting to another time and place. No business shall be transacted at any adjourned Meeting except business which might have been transacted at the Meeting from which the adjournment took place

173 12. NOTICE FOLLOWING ADJOURNMENT 12.1 Notice required Article 7 (Notice) shall apply to any Meeting which is to be resumed after adjournment for lack of a quorum except that: days' notice (exclusive of the day on which the notice is delivered and of the day on which the Meeting is to be resumed) shall be sufficient; and the notice shall specifically set out the quorum requirements which will apply when the Meeting resumes Notice not required It shall not be necessary to give notice of resumption of any Meeting adjourned for reasons other than those described in Article 10 (Adjournment for want of a quorum). 13. PARTICIPATION 13.1 Voters; The following categories of persons may attend and speak at a Meeting: 13.2 the directors and the auditors of the Issuer; 13.3 representatives of the Issuer and the Representative of the Noteholders; 13.4 financial advisers to the Issuer and the Representative of the Noteholders; 13.5 legal advisers to the Issuer and the Representative of the Noteholders; 13.6 any other person authorised by virtue of a resolution of such Meeting or by the Representative of the Noteholders. 14. VOTING BY SHOW OF HANDS 14.1 Every question submitted to a Meeting shall be decided in the first instance by a vote by a show of hands Unless a poll is validly demanded before or at the time that the result is declared, the Chairman's declaration that on a show of hands a resolution has been passed or passed by a particular majority or rejected, or rejected by a particular majority, shall be conclusive without proof of the number of votes cast for, or against, the resolution. 15. VOTING BY POLL 15.1 Demand for a poll A demand for a poll shall be valid if it is made by the Chairman, the Issuer, the Representative of the Noteholders or one or more Voters representing or holding not less than one-fiftieth of the Principal Amount Outstanding of the outstanding Notes conferring the right to vote at the Meeting. A poll may be taken immediately or after such adjournment as is decided by the Chairman but any poll demanded on the election of a Chairman or on any -168-

174 question of adjournment shall be taken immediately. A valid demand for a poll shall not prevent the continuation of the relevant Meeting for any other business The Chairman and a poll The Chairman sets the conditions for the voting, including for counting and calculating the votes, and may set a time limit by which all votes must be cast. Any vote which is not cast in compliance with the terms specified by the Chairman shall be null. After voting ends, the votes shall be counted and after the counting the Chairman shall announce to the Meeting the outcome of the vote. 16. VOTES 16.1 Voting Each Voter shall have: on a show of hands, one vote; and on a poll, one vote for each 1,000 in aggregate face amount of outstanding Notes represented or held by the Voter Block Voting Instruction Unless the terms of any Block Voting Instruction or Voting Certificate appointing a Proxy state otherwise, a Voter shall not be obliged to exercise all the votes to which such Voter is entitled or to cast all the votes he exercises the same way Voting tie In the case of a voting tie, the relevant resolution shall be deemed to have been rejected. 17. VOTING BY PROXY 17.1 Validity Any vote by a Proxy in accordance with the relevant Block Voting Instruction or Voting Certificate appointing a Proxy shall be valid even if such Block Voting Instruction or any instruction pursuant to which it has been given had been amended or revoked provided that none of the Issuer, the Representative of the Noteholders or the Chairman, has been notified in writing of such amendment or revocation at least 24 hours prior to the time set for the relevant Meeting Adjournment Unless revoked, the appointment of a Proxy under a Block Voting Instruction or Voting Certificate in relation to a Meeting shall remain in force in relation to any resumption of such Meeting following an adjournment save that no such appointment of a Proxy in relation to a Meeting originally convened which has been adjourned for want of a quorum shall remain in force in relation to such Meeting when it is resumed. Any person appointed to vote at such Meeting must be re-appointed under a Block Voting Instruction or Voting Certificate to vote at the Meeting when it is resumed

175 18. ORDINARY RESOLUTIONS 18.1 Powers exercisable by Ordinary Resolution Subject to Article 19 (Extraordinary Resolutions), a Meeting shall have power exercisable by Ordinary Resolution, to: grant any authority, order or sanction which, under the provisions of the Rules or the Conditions, is required to be the subject of an Ordinary Resolution or required to be the subject of a resolution or determined by a Meeting and not required to be the subject of an Extraordinary Resolution; and authorise the Representative of the Noteholders or any other person to execute all documents and do all things necessary to give effect to any Ordinary Resolution Ordinary Resolution of a Single Class No Ordinary Resolution of any Class of Noteholders shall be effective unless it is sanctioned by an Ordinary Resolution of the Holders of each of the other Classes of Notes ranking senior to such Class (to the extent that there are Notes outstanding ranking senior to such Class), unless the Representative of the Noteholders considers that none of the Holders of each of the other Classes of Notes ranking senior to such Class would be materially prejudiced by the absence of such sanction. 19. EXTRAORDINARY RESOLUTIONS 19.1 A Meeting, in addition to any powers assigned to it in the Conditions, shall have power exercisable by Extraordinary Resolution to: approve any Basic Terms Modification; approve any modification, abrogation, variation or compromise of the provisions of these Rules, the Conditions or of any Transaction Document or any arrangement in respect of the obligations of the Issuer under or in respect of the Notes which, in any such case, is not a Basic Terms Modification and which shall be proposed by the Issuer, the Representative of the Noteholders and/or any other party thereto; in accordance with Article 28 (Appointment, Removal and Renumeration), appoint and remove the Representative of the Noteholders; authorise the Representative of the Noteholders to issue a Trigger Notice as a result of a Trigger Event pursuant to Condition 12; discharge or exonerate, including retrospectively, the Representative of the Noteholders from any liability in relation to any act or omission for which the Representative of the Noteholders has or may become liable pursuant or in relation to these Rules, the Conditions or any other Transaction Document; grant any authorisation or approval, which, under the provisions of these Rules or of the Conditions, must be granted by an Extraordinary Resolution; authorise and ratify the actions of the Representative of the Noteholders in compliance with these Rules, the Intercreditor Agreement and any other Transaction Document; -170-

176 waive any breach or authorise any proposed breach by the Issuer or (if relevant) any other Transaction Party of its obligations under or in respect of these Rules, the Notes or any other Transaction Document or any act or omission which might otherwise constitute a Trigger Event under the Notes appoint any persons as a committee to represent the interests of the Noteholders and to confer on any such committee any powers which the Noteholders could themselves exercise by Extraordinary Resolution authorise the Representative of the Noteholders (subject to its being indemnified and/or secured to its satisfaction) and/or any other person to execute all documents and do all things necessary to give effect to any Extraordinary Resolution Basic Terms Modification No Extraordinary Resolution involving a Basic Terms Modification that is passed by the Holders of one Class of Notes shall be effective unless it is sanctioned by an Extraordinary Resolution of the Holders of each of the other Classes of Notes then outstanding Extraordinary Resolution of a Single Class No Extraordinary Resolution to approve any matter other than a Basic Terms Modification of any Class of Noteholders shall be effective unless it is sanctioned by an Extraordinary Resolution of the Holders of each of the other Classes of Notes ranking senior to such Class (to the extent that there are Notes outstanding ranking senior to such Class), unless the Representative of the Noteholders considers that none of the Holders of each of the other Classes of Notes ranking senior to such Class would be materially prejudiced by the absence of such sanction and, for the purposes of this Article 19.3 (Extraordinary Resolution of a Single Class), Rated Notes rank senior to Junior Notes. 20. EFFECT OF RESOLUTIONS 20.1 Binding Nature Subject to Article 18.2 (Ordinary resolution of a single Class), Article 19.2 (Basic Terms Modification) and Article 19.3 (Extraordinary Resolution of a Single Class) which take priority over the following, any resolution passed at a Meeting of the Noteholders of one or more Classes of Notes duly convened and held in accordance with the Rules shall be binding upon all Noteholders of such Class or Classes, whether or not present at such Meeting and whether or not voting and any resolution passed at a Meeting of the Rated Noteholders duly convened and held as aforesaid shall also be binding upon all the Junior Noteholders, and in each case, all of the relevant Classes of Noteholders shall be bound to give effect to any such resolutions accordingly and the passing of any such resolution shall be conclusive evidence that the circumstances justify the passing thereof Notice of Voting Results Notice of the results of every vote on a Resolution duly considered by Noteholders shall be published (at the cost of the Issuer) in accordance with the Conditions and given to the Principal Paying Agent (with a copy to the Issuer and the Representative of the Noteholders within 14 days of the conclusion of each Meeting)

177 21. CHALLENGE TO RESOLUTIONS Any absent or dissenting Noteholder has the right to challenge Resolutions which are not passed in compliance with the provisions of the Rules. 22. MINUTES Minutes shall be made of all resolutions and proceedings of each Meeting. The Minutes shall be signed by the Chairman and shall be prima facie evidence of the proceedings therein recorded. Unless and until the contrary is proved, every Meeting in respect of which minutes have been signed by the Chairman shall be regarded as having been duly convened and held and all resolutions passed or proceedings transacted at such meeting shall be regarded as having been duly passed and transacted. The Minutes shall be recorded in the minute book of Meetings of Noteholders maintained by the Issuer (or the Corporate Service on behalf of the Issuer). 23. WRITTEN RESOLUTION A Written Resolution shall take effect as if it were an Extraordinary Resolution or, in respect of matters required to be determined by Ordinary Resolution, as if it were an Ordinary Resolution. 24. JOINT MEETINGS Subject to the provisions of the Rules, the Conditions, joint Meetings of the Rated Noteholders, the Class B Noteholders and the Class C Noteholders may be held to consider the same Ordinary Resolution or Extraordinary Resolution and the provisions of the Rules shall apply mutatis mutandis thereto. 25. SEPARATE AND COMBINED MEETINGS OF NOTEHOLDERS The following provisions shall apply in respect of Meetings where outstanding Notes belong to more than one Class: business which, in the opinion of the Representative of the Noteholders, affects only one Class of Notes shall be transacted at a separate Meeting of the Noteholders of such Class; business which, in the opinion of the Representative of the Noteholders, affects more than one Class of Notes but does not give rise to an actual or potential conflict of interest between the Noteholders of one Class of Notes and the Noteholders of any other Class of Notes shall be transacted either at separate Meetings of the Noteholders of each such Class of Notes or at a single Meeting of the Noteholders of all such Classes of Notes as the Representative of the Noteholders shall determine in its absolute discretion; and business which, in the opinion of the Representative of the Noteholders, affects the Noteholders of more than one Class of Notes and gives rise to an actual or potential conflict of interest between the Noteholders of one such Class of Notes and the Noteholders of any other Class of Notes shall be transacted at separate Meetings of the Noteholders of each such Class

178 26. INDIVIDUAL ACTIONS AND REMEDIES 26.1 Each Noteholder has accepted and is bound by the provisions of Condition 9 (Limited Recourse and Non Petition) and, accordingly, if any Noteholder is considering bringing individual actions or using other individual remedies to enforce his/her rights under the Notes, any such action or remedy shall be subject to a Meeting not passing an Ordinary Resolution objecting to such individual action or other remedy on the grounds that it is not consistent with such Condition. In this respect, the following provisions shall apply: the Noteholder intending to enforce his/her rights under the Notes will notify the Representative of the Noteholders of his/her intention; the Representative of the Noteholders will, without delay, call a Meeting in accordance with the Rules; if the Meeting passes an Ordinary Resolution objecting to the enforcement of the individual action or remedy, the Noteholder will be prevented from taking such action or remedy (without prejudice to the fact that after a reasonable period of time, the same matter may be resubmitted for review of another Meeting); and if the Meeting of Noteholders does not object to an individual action or remedy, the Noteholder may take such individual action or remedy No Noteholder will be allowed to take any individual action or remedy to enforce his/her rights under the Notes unless a Meeting of holders of the Most Senior Class of Notes has been held to resolve on such action or remedy in accordance with the provisions of this Article. 27. FURTHER REGULATIONS Subject to all other provisions contained in the Rules, the Representative of the Noteholders may, without the consent of the Issuer, prescribe such further regulations regarding the holding of Meetings and attendance and voting at them and/or the provisions of a Written Resolution as the Representative of the Noteholders in its sole discretion may decide. TITLE III THE REPRESENTATIVE OF THE NOTEHOLDERS 28. APPOINTMENT, REMOVAL AND REMUNERATION 28.1 Appointment The appointment of the Representative of the Noteholders takes place by Extraordinary Resolution of the holders of the Most Senior Class of Notes in accordance with the provisions of this Article 28, except for the appointment of the first Representative of the Noteholders which will be BNY Mellon Corporate Trustee Services Limited Identity of Representative of the Noteholders The Representative of the Noteholders shall be: a bank incorporated in any jurisdiction of the European Union, or a bank incorporated in any other jurisdiction acting through an Italian branch; or a company or financial institution enrolled with the register held by the Bank of Italy pursuant to article 107 of the Consolidated Banking Act; or -173-

179 any other entity which is not prohibited from acting in the capacity of Representative of the Noteholders pursuant to the law. The directors and auditors of the Issuer and those who fall within the conditions set out in article 2399 of the Italian civil code cannot be appointed as Representative of the Noteholders and, if appointed as such, they shall be automatically removed Duration of appointment Unless the Representative of the Noteholders is removed by Extraordinary Resolution of the of the holders of the Most Senior Class of Notes pursuant to Article 19 (Extraordinary Resolutions) or resigns pursuant to Article 29 (Resignation of the Representative of the Noteholders), it shall remain in office until full repayment or cancellation of all the Notes After termination In the event of a termination of the appointment of the Representative of the Noteholders for any reason whatsoever, such representative shall remain in office until the substitute Representative of the Noteholders, which shall be an entity specified in Article 28.2 (Identity of Representative of the Noteholders), accepts its appointment, and the powers and authority of the Representative of the Noteholders the appointment of which has been terminated shall, pending the acceptance of its appointment by the substitute, be limited to those necessary to perform the essential functions required in connection with the Notes Remuneration The Issuer shall pay to the Representative of the Noteholders an annual fee for its services as Representative of the Noteholders from the Issue Date, as agreed either in the initial agreement(s) for the issue of and subscription for the Notes or in a separate fee letter. Such fees shall accrue from day to day and shall be payable in accordance with the Priority of Payments up to (and including) the date when the Notes shall have been repaid in full or cancelled in accordance with the Conditions. 29. RESIGNATION OF THE REPRESENTATIVE OF THE NOTEHOLDERS The Representative of the Noteholders may resign at any time by giving at least three calendar months' written notice to the Issuer, without needing to provide any specific reason for the resignation and without being responsible for any costs incurred as a result of such resignation. The resignation of the Representative of the Noteholders shall not become effective until a new Representative of the Noteholders has been appointed in accordance with Article 28.1 (Appointment) and such new Representative of the Noteholders has accepted its appointment provided that if Noteholders fail to select a new Representative of the Noteholders within three months of written notice of resignation delivered by the Representative of the Noteholders, the Representative of the Noteholders may appoint a successor which is a qualifying entity pursuant to Article 28 (Appointment, Removal and Remuneration). 30. DUTIES AND POWERS OF THE REPRESENTATIVE OF THE NOTEHOLDERS 30.1 Representative of the Noteholders is legal representative The Representative of the Noteholders is the legal representative of the Organisation of the Noteholders and has the power to exercise the rights conferred on it by the Transaction Documents in order to protect the interests of the Noteholders

180 30.2 Meetings and Resolutions Unless any Resolution provides to the contrary, the Representative of the Noteholders is responsible for implementing all Resolutions of the Noteholders. The Representative of the Noteholders has the right to convene and attend Meetings to propose any course of action which it considers from time to time necessary or desirable Delegation The Representative of the Noteholders may in the exercise of the powers, discretions and authorities vested in it by these Rules and the Transaction Documents: act by responsible officers or a responsible officer for the time being of the Representative of the Noteholders; whenever it considers it expedient and in the interest of the Noteholders, whether by power of attorney or otherwise, delegate to any person or persons or fluctuating body of persons some, but not all, of the powers, discretions or authorities vested in it as aforesaid. Any delegation pursuant to Article may be made upon such conditions and subject to such regulations (including power to sub-delegate) as the Representative of the Noteholders may think fit in the interest of the Noteholders. The Representative of the Noteholders shall not, other than in the normal course of its business, be bound to supervise the acts or proceedings of such delegate or sub-delegate and shall not in any way or to any extent be responsible for any loss incurred by reason of any misconduct, omission or default on the part of such delegate or sub-delegate, provided that the Representative of the Noteholders shall use all reasonable care in the appointment of any such delegate and shall be responsible for the instructions given by it to such delegate. The Representative of the Noteholders shall, as soon as reasonably practicable, give notice to the Issuer of the appointment of any delegate and any renewal, extension and termination of such appointment, and shall procure that any delegate shall give notice to the Issuer of the appointment of any sub-delegate as soon as reasonably practicable Judicial Proceedings The Representative of the Noteholders is authorised to initiate and to represent the Organisation of the Noteholders in any judicial proceedings, including Insolvency Proceedings Consents given by Representative of Noteholders Any consent or approval given by the Representative of the Noteholders under these Rules and any other Transaction Document may be given on such terms and subject to such conditions (if any) as the Representative of the Noteholders deems appropriate. and notwithstanding anything to the contrary contained in these Rules or in the Transaction Documents such consent or approval may be given retrospectively Discretions Save as expressly otherwise provided herein, the Representative of the Noteholders shall have absolute discretion as to the exercise or non-exercise of any right, power and discretion vested in the Representative of the Noteholders by these Rules or by operation of law

181 30.7 Obtaining instructions In connection with matters in respect of which the Representative of the Noteholders is entitled to exercise its discretion hereunder, the Representative of the Noteholders has the right (but not the obligation) to convene a Meeting or Meetings in order to obtain the Noteholders' instructions as to how it should act. Prior to undertaking any action, the Representative of the Noteholders shall be entitled to request that the Noteholders indemnify it and/or provide it with security as specified in Article 31.2 (Specific Limitations) Trigger Events The Representative of the Noteholders may certify whether or not a Trigger Event is in its opinion materially prejudicial to the interests of the Noteholders and any such certificate shall be conclusive and binding upon the Issuer, the Noteholders, the Other Issuer Creditors and any other party to the Transaction Documents Remedy The Representative of the Noteholders may determine whether or not a default in the performance by the Issuer of any obligation under the provisions of the Rules, the Notes or any other Transaction Documents may be remedied, and if the Representative of the Noteholders certifies that any such default is, in its opinion, not capable of being remedied, such certificate shall be conclusive and binding upon the Issuer, the Noteholders, the Other Issuer Creditors and any other party to the Securitisation. 31. EXONERATION OF THE REPRESENTATIVE OF THE NOTEHOLDERS 31.1 Limited obligations The Representative of the Noteholders shall not assume any obligations or responsibilities in addition to those expressly provided herein and in the Transaction Documents Specific limitations Without limiting the generality of Article 31.1, the Representative of the Noteholders: shall not be under any obligation to take any steps to ascertain whether a Trigger Event or any other event, condition or act, the occurrence of which would cause a right or remedy to become exercisable by the Representative of the Noteholders hereunder or under any other Transaction Document, has occurred and until the Representative of the Noteholders has actual knowledge or express notice to the contrary, it shall be entitled to assume that no Trigger Event, or such other event, condition or act has occurred; shall not be under any obligation to monitor or supervise the observance and performance by the Issuer or any other parties of their obligations contained in these Rules, the Transaction Documents or the Conditions and, until it shall have actual knowledge or express notice to the contrary, the Representative of the Noteholders shall be entitled to assume that the Issuer and each other party to the Transaction Documents are duly observing and performing all their respective obligations; except as expressly required in the Rules or any Transaction Document, shall not be under any obligation to give notice to any person of its activities in performance of the provisions of these Rules or any other Transaction Document; -176-

182 shall not be responsible for investigating the legality, validity, effectiveness, adequacy, suitability or genuineness of these Rules or of any Transaction Document, or of any other document or any obligation or right created or purported to be created hereby or thereby or pursuant hereto or thereto, and (without prejudice to the generality of the foregoing) it shall not have any responsibility for or have any duty to make any investigation in respect of or in any way be liable whatsoever for: (i) (ii) (iii) (iv) (v) the nature, status, creditworthiness or solvency of the Issuer; the existence, accuracy or sufficiency of any legal or other opinion, search, report, certificate, valuation or investigation delivered or obtained or required to be delivered or obtained at any time in connection with the Notes or the Portfolio; the suitability, adequacy or sufficiency of any collection procedure operated by the Servicer or compliance therewith; the failure by the Issuer to obtain or comply with any licence, consent or other authority in connection with the purchase or administration of the Portfolio; and any accounts, books, records or files maintained by the Issuer, the Servicer and the Principal Paying Agent or any other person in respect of the Portfolio; shall not be responsible for the receipt or application by the Issuer of the proceeds of the issue of the Notes or the distribution of any of such proceeds to the persons entitled thereto; shall have no responsibility for procuring or maintaining any rating of the Notes by any credit or rating agency or any other person; shall not be responsible for or for investigating any matter which is the subject of any recital, statement, warranty, representation or covenant by any party other than the Representative of the Noteholders contained herein or in any Transaction Document or any certificate, document or agreement relating thereto or for the execution, legality, validity, effectiveness, enforceability or admissibility in evidence thereof; shall not be liable for any failure, omission or defect in registering or filing or procuring registration or filing of or otherwise protecting or perfecting the Rules or any Transaction Document; shall not be bound or concerned to examine or enquire into or be liable for any defect or failure in the right or title of the Issuer in relation to the Portfolio or any part thereof, whether such defect or failure was known to the Representative of the Noteholders or might have been discovered upon examination or enquiry or whether capable of being remedied or not; shall not be under any obligation to guarantee or procure the repayment of the Portfolio or any part thereof; shall not be responsible for reviewing or investigating any report relating to the Portfolio provided by any person; shall not be responsible for or have any liability with respect to any loss or damage arising from the realisation of the Portfolio or any part thereof; -177-

183 shall not be responsible (except as expressly provided in the Conditions) for making or verifying any determination or calculation in respect of the Notes, the Portfolio or any Transaction Document; shall not be under any obligation to insure the Portfolio or any part thereof; shall not have any liability for any loss, liability, damages claim or expense directly or indirectly suffered or incurred by the Issuer, any Noteholder, any Other Issuer Creditor or any other person as a result of the delivery by the Representative of the Noteholders of a certificate of material prejudice pursuant to Condition 12 on the basis of an opinion formed by it in good faith Specific Permissions When in the Rules or any Transaction Document the Representative of the Noteholders is required in connection with the exercise of its powers, trusts, authorities, duties or discretions to have regard to the interests of the Noteholders, the Representative of the Noteholders shall have regard to the interests of the Noteholders as a class and shall not be obliged to have regarded to the consequences of such exercise for any individual Noteholder resulting from his or its being for any purpose domiciled, resident in or otherwise connected with or subject to the jurisdiction of any particular territory or taxing authority The Representative of the Noteholders shall, as regards the exercise and performance of the powers, trusts, authorities, duties and discretions vested in it by the Transaction Documents, except where expressly provided therein, have regard to the interests of both the Noteholders and the Other Issuer Creditors but if, in the opinion of the Representative of the Noteholders, there is a conflict between their interests the Representative of the Noteholders will have regard solely to the interest of the Noteholders Where the Representative of the Noteholders is required to consider the interests of the Noteholders and, in its sole opinion, there is a conflict between the interests of the holders of different Classes of Notes, the Representative of the Noteholders will consider only the interests of the holders of the Most Senior Class of Notes The Representative of the Noteholders may refrain from taking any action or exercising any right, power, authority or discretion vested in it under these Rules or any Transaction Document or any other agreement relating to the transactions herein or therein contemplated until it has been indemnified and/or secured to its satisfaction against any and all actions, proceedings, claims and demands which might be brought or made against it and against all costs, charges, damages, expenses and liabilities which may be suffered, incurred or sustained by it as a result. Nothing contained in the Rules or any of the other Transaction Documents shall require the Representative of the Noteholders to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties or the exercise of any right, power, authority or discretion hereunder if it has grounds for believing the repayment of such funds or adequate indemnity against, or security for, such risk or liability is not reasonably assured to it Notes held by Issuer The Representative of the Noteholders may assume without enquiry that no Notes are, at any given time, held by or for the benefit of the Issuer; -178-

184 31.5 Illegality No provision of the Rules shall require the Representative of the Noteholders to do anything which may be illegal or contrary to applicable law or regulations or to expend moneys or otherwise take risks in the performance of any of its duties, or in the exercise of any of its powers or discretion. The Representative of the Noteholders may refrain from taking any action which would or might, in its opinion, be contrary to any law of any jurisdiction or any regulation or directive of any agency of any state, or if it has reasonable grounds to believe that it will not be reimbursed for any funds it expends, or that it will not be indemnified against any loss or liability which it may incur as a consequence of such action. The Representative of the Noteholders may do anything which, in its opinion, is necessary to comply with any such law, regulation or directive as aforesaid. 32. RELIANCE ON INFORMATION 32.1 Advice The Representative of the Noteholders may act on the advice of, a certificate or opinion of or any written information obtained from any lawyer, accountant, banker, broker, credit or rating agency or other expert, whether obtained by the Issuer, the Representative of the Noteholders or otherwise, and shall not be liable for any loss occasioned by so acting and notwithstanding any limitation of liability in respect thereof and in circumstances where, in the opinion of the Representative of the Noteholders, it is not practicable for the Representative of the Noteholders to obtain advice on any other basis, notwithstanding any limitation of or cap on liability in respect thereof Transmission of Advice Any opinion, advice, certificate or information referred to in Clause 32.1 (Advice) may be sent or obtained by letter, telegram, or fax transmission and the Representative of the Noteholders shall not be liable for acting on any opinion, advice, certificate or information purporting to be so conveyed although the same contains some error or is not authentic Certificates of Issuer The Representative of the Noteholders may call for, and shall be at liberty to accept as sufficient evidence: as to any fact or matter prima facie within the Issuer's knowledge, a certificate duly signed by a director of the Issuer; that such is the case, a certificate of a director of the Issuer to the effect that any particular dealing, transaction, step or thing is expedient; and as sufficient evidence that such is the case, a certificate signed by a director of the Issuer to the effect that the Issuer has sufficient funds to make an optional redemption under the Conditions. and the Representative of the Noteholders shall not be bound in any such case to call for further evidence or be responsible for any loss that may be incurred as a result of acting on such certificate unless any of its officers responsible for the administration of the Securitisation shall have actual knowledge or express notice of the untruthfulness of the matters contained in the certificate

185 32.4 Resolution or direction of Noteholders The Representative of the Noteholders shall not be responsible for acting upon any resolution purporting to be a Written Resolution or to have been passed at any Meeting in respect whereof minutes have been made and signed or a direction of the requisite percentage of Noteholders, even though it may subsequently be found that there was some defect in the constitution of the Meeting or the passing of the Written Resolution or the giving of such directions or that for any reason the resolution purporting to be a Written Resolution or to have been passed at any Meeting or the giving of the direction was not valid or binding upon the Noteholders Certificates of Monte Titoli Account Holders The Representative of the Noteholders, in order to ascertain ownership of the Notes, may fully rely on the certificates issued by any Monte Titoli Account Holder in accordance with the regulation issued jointly by the Bank of Italy and CONSOB on 22 February 2008, as amended from time to time, which certificates are to be conclusive proof of the matters certified therein Clearing Systems The Representative of the Noteholders shall be at liberty to call for and to rely on as sufficient evidence of the facts stated therein, a certificate, letter or confirmation certified as true and accurate and signed on behalf of such clearing system as the Representative of the Noteholders considers appropriate, or any form of record made by any clearing system, to the effect that at any particular time or throughout any particular period any particular person is, or was, or will be, shown its records as entitled to a particular number of Notes Rating Agencies The Representative of the Noteholders shall be entitled to assume, for the purposes of exercising any power, authority, duty or discretion under or in relation to these Rules that such exercise will not be materially prejudicial to the interests of the Noteholders provided that such action does not have an adverse impact on the rating of the then current rating of the Notes. Notwithstanding the foregoing, it is agreed and acknowledged by the Representative of the Noteholders and notified to the Noteholders that a credit rating is an assessment of credit and does not address other matters that may be of relevance to the Noteholders, and it is expressly agreed and acknowledged that the attribution of such rating does not impose on or extend to any Rating Agency any actual or contingent liability to the Representative of the Noteholders, the Noteholders or any other third party or create legal relations between any of the Rating Agencies and the Representative of the Noteholders, the Noteholders or any other third party by way of contract or otherwise. If the Representative of the Noteholders, in order properly to exercise its rights or fulfil its obligations, deems it necessary to obtain the view of the Rating Agencies as to how a specific act would affect the outstanding rating of the Notes, the Representative of the Noteholders may inform the Issuer, which will then obtain such views at its expense on behalf of the Representative of the Noteholders or the Representative of the Noteholders may seek and obtain such views itself at the cost of the Issuer Certificates of Parties to Transaction Document The Representative of the Noteholders shall have the right to call for or require the Issuer to call for and to rely on written certificates issued by any party (other than the Issuer) to the Intercreditor Agreement or any other Transaction Document, -180-

186 in respect of every matter and circumstance for which a certificate is expressly provided for under the Conditions or any Transaction Document; as any matter or fact prima facie within the knowledge of such party; or as to such party's opinion with respect to any issue, and the Representative of the Noteholders shall not be required to seek additional evidence in respect of the relevant fact, matter or circumstances and shall not be held responsible for any loss, liability, cost, damage, expense, or charge incurred as a result of having failed to do so unless any of its officers responsible for the administration of the Securitisation shall have actual knowledge or express notice of the untruthfulness of the matter contained in the certificate Auditors The Representative of the Noteholders shall not be responsible for reviewing or investigating any auditors' report or certificate and may rely on the contents of any such report or certificate. 33. MODIFICATIONS 33.1 Modification The Representative of the Noteholders may from time to time and without the consent or sanction of the Noteholders concur with the Issuer and any other relevant parties in making: any modification to these Rules, the Notes or to any of the Transaction Documents in relation to which its consent is required if, in the opinion of the Representative of the Noteholders, such modification is of a formal, minor or technical nature, is made to comply with mandatory provisions of law or is made to correct a manifest error; any modification to these Rules or any of the Transaction Documents (other than in respect of a Basic Terms Modification or any provision of these Rules or any of the Transaction Documents referred to in the definition of Basic Terms Modification) in relation to which its consent is required which, in the opinion the Representative of the Noteholders, is not materially prejudicial to the interests of the holders of the Most Senior Class of Notes; and any modification to these Rules or the Transaction Documents (other than in respect of a Basic Terms Modification or any provision of the Rules or any of the Transaction Documents referred to in the definition of a Basic Terms Modification) which the Issuer has requested the Representative of the Noteholders to approve in the context of any further securitisation referred to in Condition 5 and which, in the opinion of the Representative of the Noteholders, will not be materially prejudicial to the interests of the holders of the Most Senior Class of Notes and the fact that the execution of the relevant amendment or modification would not adversely affect the current ratings of the Notes shall be conclusive evidence that the requested amendment is not materially prejudicial to the interests of the of the holders of the Most Senior Class of Notes Modifications requested by the Noteholders The Representative of the Noteholders shall be bound to concur with the Issuer and any other party in making any modifications if it directed to do so by an Extraordinary -181-

187 Resolution of the holders of the Most Senior Class of Notes or, in the case of any modification which constitutes Basic Terms Modification, of the holders of each Class of the Notes but only if it is indemnified and/or secured to its satisfaction against all Liabilities to which it may thereby render itself liable or which it may incur by so doing Binding Notice Any such modification referred to in Article 33.1 shall be binding on the Noteholders and, unless the Representative of the Noteholders otherwise agrees, the Issuer shall procure that such modification be notified to the Noteholders and the Other Issuer Creditors as soon as practicable thereafter in accordance with provisions of the Conditions relating to notices of Noteholders and the relevant Transaction Documents. 34. WAIVER 34.1 Waiver of Breach The Representative of the Noteholders may at any time and from time to time in its sole direction, without prejudice to its rights in respect of any subsequent breach, condition, event or act, from time to time and at any time, but only if and in so far as in its opinion the interests of the holders of the Most Senior Class of Notes shall not be materially prejudiced thereby: authorise or waive, on such terms and subject to such conditions (if any) as it may decide, any proposed breach or breach of any of the covenants or provisions contained in the Notes or any of the Transaction Documents; or determine that any Trigger Event shall not be treated as such for the purposes of the Transaction Documents, without any consent or sanction of the Noteholders Binding Nature Any authorisation, waiver or determination referred in Article 34.1 (Waiver of Breach) shall be binding on the Noteholders Restriction on powers The Representative of the Noteholders shall not exercise any powers conferred upon it by this Article 34 (Waiver) in contravention of any express direction by an Extraordinary Resolution of the holders of the Most Senior Class of Notes or of a request or direction in writing made by the holders of not less than 25 per cent in aggregate Principal Amount Outstanding of the Most Senior Class of Notes then outstanding but so that no such direction or request: shall affect any authorisation, waiver or determination previously given or made; or shall authorise or waive any such proposed breach or breach relating to a Basic Terms Modification unless the holders of the Most Senior Class of Notes have, by Extraordinary Resolution, so authorised its exercise Notice of waiver Unless the Representative of the Noteholders agrees otherwise, the Issuer shall cause any such authorisation, waiver or determination to be notified to the Noteholders and the Other -182-

188 Issuer Creditors, as soon as practicable after it has been given or made in accordance with the provisions of the conditions relating to Notices and the relevant Transaction Documents Professional advice In the exercise of its powers, the Representative of the Noteholders shall be entitled to seek any professional advice it might deem appropriate, at costs and expenses of the Issuer. 35. SECURITY DOCUMENTS 35.1 The Deed of Pledge The Representative of the Noteholders shall have the right to exercise all the rights granted by the Issuer to the Noteholders pursuant to the Deed of Pledge. The beneficiaries of the Deed of Pledge are referred to in this Article 35 as the "Secured Noteholders" Rights of Representative of the Noteholders The Representative of the Noteholders, acting on behalf of the Secured Noteholders, shall be entitled to: appoint and entrust the Issuer to collect, in the Secured Noteholders' interest and on their behalf, any amounts deriving from the pledged claims and rights, and shall be entitled to give instructions, jointly with the Issuer, to the respective debtors of the pledged claims to make the payments related to such claims to the Payments Account or to any other account opened in the name of the Issuer (the Payments Account and any such other account in this Article, the "Accounts"); attest that the account(s) to which payments are made in respect of the pledged claims are deposit accounts for the purpose of article 2803 of the Italian civil code, and procure that such account(s) is(are) operated in compliance with the provisions of the Cash Allocation, Management and Payments Agreement and the Intercreditor Agreement and for such purpose and until a Trigger Notice is served, the Representative of the Noteholders, acting in the name and on behalf of the Secured Noteholders, shall appoint the Issuer to manage the Accounts in compliance with the Cash Allocation, Management and Payments Agreement; procure that all funds credited to the Accounts from time to time are applied in accordance with the Cash Allocation, Management and Payments Agreement and the Intercreditor Agreement; and procure that the funds from time to time deriving from the pledged claims and the amounts credited to the Accounts are applied towards satisfaction not only of the amounts due to the Secured Noteholders, but also of amounts due and payable to any other parties that rank prior to the Secured Noteholders according to the applicable Priority of Payments set forth in the Conditions, and to the extent that all amounts due and payable to the Secured Noteholders have been paid in full, that any remaining amount be used towards satisfaction of any amounts due to any other parties that rank below the Secured Noteholders pursuant to the Priority of Payments. The Secured Noteholders irrevocably waive any right they may have in relation to any amount deriving from time to time from the pledged claims or credited to the Accounts, or to any other account opened in the name of the Issuer and appropriate of such purpose, which is not in accordance with the provisions of this Article 35. The Representative of the Noteholders shall not be entitled to collect, withdraw or apply, or issue instructions for the -183-

189 collection, withdrawal or application of, cash deriving from time to time from the pledged claims under the Deed of Pledge except in accordance with the provisions of this Article 35 and the Intercreditor Agreement. 36. INDEMNITY Pursuant to the Subscription Agreement, the Issuer has covenanted and undertaken to reimburse, pay or discharge (on a full indemnity basis) upon demand, to the extent not already reimbursed, paid or discharged by the Noteholders and without any obligation to first make demand upon the Noteholders, all costs, liabilities, losses, charges, expenses, damages, actions, proceedings, claims and demands properly incurred by or made against the Representative of the Noteholders, or any entity to which the Representative of the Noteholders has delegated any power, authority or discretion, in relation to the exercise or purported exercise of its powers, authorities and discretions and the performance of its duties under and otherwise in relation to the Rules and the Transaction Documents, including but not limited to, legal and travelling expenses, and any stamp, issue, registration, documentary and other taxes or duties paid by the Representative of the Noteholders in connection with any action and/or legal proceedings brought or contemplated by the Representative of the Noteholders pursuant to the Transaction Documents against the Issuer, or any other person to enforce any obligation under the Rules, the Notes or the Transaction Documents. 37. LIABILITY Notwithstanding any other provision of these Rules, the Representative of the Noteholders shall not be liable for any act, matter or thing done or omitted (including, for the avoidance of doubt, special, indirect, punitive or consequential loss or damage of any kind whatsoever (including but not limited to lost profits) whether or not foreseeable) in any way in connection with the Transaction Documents, the Notes or these Rules without prejudice to any mandatory provisions of law. TITLE IV THE ORGANISATION OF THE NOTEHOLDERS AFTER SERVICE OF AN ENFORCEMENT NOTICE 38. POWERS It is hereby acknowledged that, upon service of a Trigger Notice or, prior to service of a Trigger Notice, following the failure of the Issuer to exercise any right to which it is entitled, pursuant to the Mandate Agreement the Representative of the Noteholders, in its capacity as legal representative of the Organisation of the Noteholders, shall be entitled (also in the interests of the Other Issuer Creditors) pursuant to articles 1411 and 1723 of the Italian civil code, to exercise certain rights in relation to the Portfolio. Therefore, the Representative of the Noteholders, in its capacity as legal representative of the Organisation of the Noteholders, will be authorised, pursuant to the terms of the Mandate Agreement, to exercise, in the name and on behalf of the Issuer and as mandatario in rem propriam of the Issuer, any and all of the Issuer's Rights under certain Transaction Documents, including the right to give directions and instructions to the relevant parties to the relevant Transaction Documents

190 39. GOVERNING LAW TITLE V GOVERNING LAW AND JURISDICTION The Rules and any other non-contractual obligation arising out of them are governed by, and will be construed in accordance with, the laws of the Republic of Italy. 40. JURISDICTION The Courts of Milan will have jurisdiction to hear and determine any suit, action or proceedings and to settle any disputes which may arise out of or in connection with the Rules

191 SELECTED ASPECTS OF ITALIAN LAW The Securitisation Law The Securitisation Law was enacted on 30 April 1999 and was conceived to simplify the securitisation process and to facilitate the increased use of securitisation as a financing technique in Italy. It applies to securitisation transactions involving a "true" sale (by way of non-gratuitous assignment) of receivables, where the sale is to a company created in accordance with article 3 of the Securitisation Law and all amounts paid by the debtors in respect of the receivables are to be used by the relevant company exclusively to meet its obligations under notes issued to fund the purchase of such claims and all costs and expenses associated with the securitisation transaction. Ring-fencing of the assets Under the terms of article 3 of the Securitisation Law, the assets relating to each securitisation transaction will, by operation of law, be segregated for all purposes from all other assets of the company which purchases the receivables (including any other receivables purchased by the Issuer pursuant to the Securitisation Law). Prior to and on a winding up of such a company such receivables will only be available to holders of the notes issued to finance the acquisition of the relevant receivables and to certain creditors claiming payment of debts incurred by the company in connection with the securitisation of the relevant receivables. In addition, the receivables relating to a particular transaction will not be available to the holders of notes issued to finance any other securitisation transaction or to general creditors of the issuer company. Under Italian law, however, any creditor of the Issuer would be able to commence insolvency or winding-up proceedings against the Issuer in respect of any unpaid debt. The assignment The assignment of the receivables under the Securitisation Law will be governed by article 58 paragraphs 2, 3 and 4 of the Consolidated Banking Act. The prevailing interpretation of this provision, which view has been strengthened by article 4 of the Securitisation Law, is that the assignment can be perfected against the Originator, the debtors in respect of the assigned debts, and third party creditors by way of publication of the relevant notice in the Official Gazette and, in the case of the debtors, registration in the companies register, so avoiding the need for notification to be served on each debtor. As of the date of the publication of the notice in the Official Gazette, the assignment becomes enforceable against: (a) (b) (c) any creditors of the Originator who have not prior to the date of publication of the notice commenced enforcement proceedings in respect of the relevant debts; the liquidator or other bankruptcy official of the Originator; and other permitted assignees of the Originator who have not perfected their assignment prior to the date of publication

192 As of the later of (i) the date of the publication of the notice in the Official Gazette or (ii) the date of registration of the notice in the companies register, the assignment becomes enforceable against: (i) (ii) the debtors; and the liquidator or other bankruptcy official of such debtors (so that any payments made by a debtor whose debt has been assigned to the purchasing company may not be subject to any claw-back action pursuant to article 67 of the Bankruptcy Law). The benefit of any privilege, guarantee or security interest guaranteeing or securing repayment of the assigned debts will automatically be transferred to and perfected with the same priority in favour of the Issuer, without the need for any formality or annotation. As from the date of publication of the notice of the assignment in the Official Gazette, no legal action may be brought in respect of the debt assigned or the sums derived therefrom other than for the purposes of enforcing the rights of the noteholders in relation to the notes issued for the purpose of financing the acquisition of the relevant debts and to meet the costs of the transaction. Notice of the assignment of the Receivables comprised in the Portfolio pursuant to the Receivables Purchase Agreement was published in the Gazzetta Ufficiale della Repubblica Italiana, Parte Seconda, number 8 of 19 January 2012 and was registered with the companies register of Milan on 19 January Assignments executed under the Securitisation Law are subject to revocation on bankruptcy under article 67 of the Bankruptcy Law but only in the event that the adjudication of bankruptcy of the relevant party is made within three months of the securitisation transaction or, in cases where paragraph 1 of article 67 applies, within six months of the securitisation transaction. The Issuer The Issuer must be registered on the register of special purpose vehicles (elenco delle società veicolo) held by the Bank of Italy pursuant to article 4 of the Bank of Italy's regulation dated 29 April Enforcement proceedings The Italian civil code provides that Mortgages may be "voluntary" (ipoteche volontarie), where granted by a borrower or a third party guarantor by way of a deed, or "judicial" (ipoteche giudiziarie), where registered in the appropriate land registry (Conservatoria dei Registri Immobiliari) following a court order or injunction to pay amounts in respect of any outstanding debt or unperformed obligation. In accordance with the Italian code of civil procedure, as amended and supplemented by Legislative Decree number 35 of 14 March 2005, converted into Law number 80 of 14 May 2005, a mortgage lender (whose debt is secured by a mortgage whether "voluntary" or "judicial") may commence enforcement proceedings by seeking a court order or injunction for payment in the form of a titolo esecutivo from the court in whose jurisdiction the mortgaged property is located. This court order or injunction must be served on the debtor

193 If the mortgage loan was executed in the form of a public deed (atto pubblico) or a notarised private deed (scrittura privata autenticata), a mortgage lender can serve a copy of the mortgage loan agreement, stamped by a notary public with an order for the execution thereof (formula esecutiva) directly on the debtor without the need to obtain a titolo esecutivo from the court. An atto di precetto is notified to the debtor together with either the titolo esecutivo or the loan agreement, as the case may be. The property will be attached by a court order to be filed with the appropriate land registry (Conservatoria dei Registri Immobiliari). The enforcement proceeding shall begin not earlier than 10 days, but not later than 90 days, from the date on which notice of the atto di precetto is served. The mortgage lender who intends to request the attachment of the mortgaged property shall (i) search the land registry to ascertain the identity of the current owner of the property and then serve notice of the request for attachment on the current owner, even if no transfer of the property from the original borrower or mortgagor to a third party purchaser has been previously notified to the mortgage lender, and (ii) deposit at the competent court, within 120 days of filing, any relevant documentation, as required by law. The court may, at the request of the mortgage lender and after hearing the debtor, appoint a custodian to manage the mortgaged property in the interests of the mortgage lender. If the debtor does not occupy the mortgaged property, the court shall appoint a third party as custodian. Technical delays may be caused by the need to append to the mortgage lender's request for attachment copies of the relevant mortgage and cadastral certificates, which usually take some time to obtain. According to law number 302 of 3 August 1998 a mortgage lender can substitute such cadastral certificates with certificates obtained from public notaries; the latter are allowed to conduct various activities which were before exclusively within the powers of the courts. Within 30 days of deposit of the required documentation, the court shall set a hearing in order to examine any challenge filed by the debtor and to plan the sale of the mortgaged property. The Italian code of civil procedure, as recently amended, provides that the court shall make every effort to sell the mortgaged property by acquiring sealed bids (vendita senza incanto) rather than proceeding by an auction (vendita con incanto). Should the bidding procedure not be successful, the mortgaged property shall be sold with an auction. If the court proceeds with the auction (vendita con incanto) of the mortgaged property, it will usually appoint an expert to value the property and, on the basis of the expert's valuation, the court shall determine the minimum bid price for the property at the auction. If an auction fails to result in the sale of the property, the court will arrange a new auction with a lower minimum bid price. The courts have discretion to decide whether, and to what extent, the bid price should be reduced (the maximum permitted reduction being one-fifth of the minimum bid price of the previous auction). In practice, the courts tend to apply the one-fifth reduction. The sale proceeds, after the deduction of the expenses of the enforcement proceedings and any expenses for the cancellation of the mortgages, will be applied in satisfaction of the claims of the mortgage lender in priority to the claims of any other creditor of the debtor (except for the claims for taxes due in relation to the mortgaged property and for which the collector of taxes participates in the enforcement proceedings). Pursuant to article 2855 of the Italian civil code the claims of a mortgage lender in respect of interest may be satisfied in priority to the claims of all other unsecured creditors in an amount equal to the aggregate of (i) the interest accrued at the contractual rate in the calendar year in -188-

194 which the initial stage of the enforcement proceedings are taken and in the two preceding calendar years and (ii) the interest accrued at the legal rate until the date on which the mortgaged property is sold. Any amount recovered in excess of this will be applied to satisfy the claims of any other creditor participating in the enforcement proceedings. The mortgage lender will be entitled to participate in the distribution of any such excess as an unsecured creditor. The balance, if any, will then be paid to the debtor. Upon payment in full of the purchase price by the purchaser within the specified time period, title to the property will be transferred after the court issues an official decree ordering the transfer. In the event that proceedings have been commenced by creditors other than the mortgage lender, the mortgage lender will have priority over such other creditors in having recourse to the assets of the borrower during such proceedings, such recourse being limited to the value of the mortgaged property. The average length of enforcement proceedings, from the court order or injunction of payment to the final sharing out, is between six and seven years. In the medium-sized central and northern Italian cities it can be significantly less whereas in major cities or in Southern Italy the duration of the procedure can significantly exceed the average. In such a sense, Law number 302 of 3 August 1998 was issued for the purpose of shortening the duration of enforcement proceedings by an average of two or three years, by allowing notaries to conduct certain stages of the enforcement procedures in place of the courts. Fondiari Loans ((mutui fondiari)) enforcement proceedings All the Mortgage Loans are Fondiari Loans ((mutui fondiari)). Enforcement proceedings in respect of Fondiari Loans ((mutui fondiari)) commenced after 1 January 1994 are currently regulated by article 38 (and following) of the Consolidated Banking Act in which several exceptions to the rules applying to enforcement proceedings in general are provided for. In particular, there is no requirement to serve a copy of the loan agreement directly on the borrower and the mortgage lender of Fondiari Loans ((mutui fondiari)) is entitled to commence or continue enforcement proceedings after the debtor is declared insolvent or insolvency proceedings have been commenced. Moreover, the custodian appointed to manage the mortgaged property in the interest of the lender pays directly to the lender the revenues recovered on the mortgaged property (net of administration expenses and taxes). After the sale of the mortgaged property, the court orders the purchaser (or the assignee in the case of an assignment) to pay that part of the price corresponding to the Fondiari Loans ((mutui fondiari)) lender's debt directly to the lender. Pursuant to article 58 of the Consolidated Banking Act, as amended by article 12 of Legislative Decree number 342 of 4 August 1999, the Issuer will be entitled to benefit from such procedural advantages which apply in favour of a lender of a Fondiari Loans ((mutui fondiari)) loan. Attachment of Debtor's Credits Attachment proceedings may be commenced also on due and payable credits of a borrower (such as bank accounts, salary, etc.) or on borrower's movable property which is located on third party premises. Aspects of Italian Law with respect to the Mortgage Loans -189-

195 The Bersani Decree aims at, inter alia, increasing competitiveness in a number of sectors, including the banking sector. In particular, in the banking sector, the Bersani Decree aims at reducing the costs associated with prepayment of mortgage loans with a view allowing borrowers to refinance their mortgage loans more easily. The Bersani Decree also provides that any provision imposing a prepayment penalty in case of early redemption of mortgage loans is void with respect to mortgage loan agreements entered into, with an individual as borrower, on or after 2 February 2007 (being the date on which the Bersani Decree entered into force) for the purpose of purchasing or refurbishing real estate properties destined to residential purposes or to carry out the borrower's own professional and economic activity. With respect to loan agreements entered into prior to the enactment of the Bersani Decree (i.e., prior to 2 February 2007), article 7, paragraph 5 of the Bersani Decree provided that the Italian banking association (Associazione bancaria italiana) ("ABI") and the main national consumer associations were entitled to reach, within three months from 2 February 2007, an agreement regarding the equitable renegotiation of prepayment penalties within certain maximum limits calculated on the residual amount of the loans (in each instance, the "Substitutive Prepayment Penalty"). Had ABI and the relevant consumer associations failed to reach an agreement, the Bank of Italy would have determined the Substitutive Prepayment Penalty by 2 June The agreement reached on 2 May 2007 between ABI and national consumer associations (the "Prepayment Penalty Agreement") contains the following main provisions (as described in an ABI press release dated May 2007): (i) (ii) (iii) with respect to variable rate loan agreements - the Substitutive Prepayment Penalty should not exceed 0.50 per cent, and should be further reduced to: (a) 0.20 per cent, in case of early redemption of the loan carried out within the third year from the final maturity date; and (b) zero, in case of early redemption of the loan carried out within two years from the final maturity date; with respect to fixed rate loan agreements entered into before 1 January the Substitutive Prepayment Penalty should not exceed 0.50 per cent, and should be further reduced to: (a) 0.20 per cent, in case of early redemption of the loan carried out within the third year from the final maturity date; and (b) zero, in case of early redemption of the loan carried out within two years from the final maturity date; with respect to fixed rate loan agreements entered into after 31 December the Substitutive Prepayment Penalty should be equal to: (a) 1.90 per cent if the relevant early redemption is carried out in the first half of loan's agreed duration; (b) 1.50 per cent if the relevant early redemption is carried out following the first half of loan's agreed duration, provided however that the Substitutive Prepayment Penalty should be further reduced to: (x) 0.20 per cent, in case of early redemption of the loan carried out within three years from the final maturity date; and (y) zero, in case of early redemption of the loan carried out within two years from the final maturity date. The Prepayment Penalty Agreement introduces a further protection for borrowers under a "safeguard" equitable clause (the "Clausola di Salvaguardia") in relation to those loan agreements which already provide for a prepayment penalty in an amount which is compliant with the thresholds described above. In respect of such loans, the Clausola di Salvaguardia provides that: -190-

196 (a) if the relevant loan is either: (x) a variable rate loan agreement; or (y) a fixed rate loan agreement entered into before 1 January 2001; the amount of the relevant prepayment penalty shall be reduced by 0.20 per cent; (b) if the relevant loan is a fixed rate loan agreement entered into after 31 December 2000, the amount of the relevant prepayment penalty shall be reduced by (x) 0.25 per cent if the agreed amount of the prepayment penalty was equal or higher than 1.25 per cent; or (y) 0.15 per cent, if the agreed amount of the prepayment penalty was lower than 1.25 per cent. Finally the Prepayment Penalty Agreement sets out specific solutions with respect to hybrid rate loans which are meant to apply to the hybrid rates the provisions, as more appropriate, relating respectively to fixed rate and variable rate loans. The Bersani Decree moreover includes other miscellaneous provisions (now incorporated in article 40-bis of the Consolidated Banking Act) relating to mortgage loans which include, inter alia, simplified procedures meant to allow a more prompt cancellation of mortgages securing loans granted by banks or financial intermediaries in the event of a documented repayment in full by the debtors of the amounts due under the loans. While such provisions do not impact on the monetary rights of the lenders under the loans (lenders retain the right to oppose the cancellation of a mortgage), the impact on the servicing procedures in relation to the applicable loan agreements cannot be entirely assessed at this time. The 2008 Budget Law provides for certain new measures for the protection of consumers' rights and the promotion of the competition in, inter alia, the Italian mortgage loan market. The new provisions of law facilitate the exercise by the Debtors of their right to the substitution (portabilità) of a mortgage loan with another mortgage loan and/or the subrogation of a new bank into the rights of their creditors in accordance with article 1202 (surrogazione per volontà del debitore) of the Civil Code, by eliminating the limits and costs previously borne by the Debtors for the exercise of such right. The recent Law Decree number 78 of 1 July 2009 (as converted into law by the Italian Law number 102 of 3 August 2009) provides, inter alia, that if the subrogation has not been executed within 30 days from the date of the assignee bank's request of the interbank collaboration procedures, the original bank shall indemnify the mortgage debtor an amount equal to 1 per cent. of the mortgage value for each month or part of a month of delay. In the event the delay is due to circumstances ascribed to the assignee bank, the original bank shall be entitled to recover from the assignee bank an amount equal to the indemnity paid to the mortgage debtor. In addition, the 2008 Budget Law provided for the right of borrowers, under mortgage loans related to the purchase of the first house ("prima casa") and unable to pay the relevant instalments, to request the suspension of payments of instalments due under the relevant mortgage loans for a maximum of two times and for a maximum aggregate period of 18 months. The 2008 Budget Law also provided for the establishment of a fund (so called "Fondo di solidarietà", the "Fund") created for the purpose of bearing certain costs deriving from the suspension of payments and refers to implementing regulation to be issued for the determination of: (i) the requirements that the borrowers must comply with in order to have the right to the aforementioned suspension and the subsequent aid of the Fund; and (ii) the formalities and operating procedures of the Fund. The Decreto Sviluppo provides that, until 31 December 2012, any Borrower providing a certificate of the I.S.E.E.- (Indicatore della situazione economica equivalente) no higher than -191-

197 Euro 35,000, who entered into before (and excluding) 14 May 2011 Mortgage Loan granted in order to fund the purchase or restructuring of a real estate property to be used as residential property, and in respect of which (i) the capital amount granted is not higher than Euro 200,000; (ii) the interest rate is floating for the entire duration of the Mortgage Loan; and (iii) there are no due and unpaid instalments, is entitled to require the renegotiation of certain terms and conditions of the Mortgage Loans. In accordance with article 8 of the Decreto Sviluppo, the relevant Borrower may obtain a change of the applicable floating interest rate of the relevant Mortgage Loan into a fixed interest rate and/or the change of the final maturity date of the relevant Mortgage Loan by extending such maturity date for a period no longer than 5 years (provided that the new amortisation period will be no longer than 25 years). The combined provisions of Piano Famiglie stipulated on 18 December 2009 and the conventions entered into between ABI and consumers' associations on, respectively, 26 January 2011 and 25 July 2011, provide for a 12 month period suspension of payment of instalments relating to mortgage loans, where requested by the relevant Debtor during the period from 1 February 2010 to 31 January The suspension is allowed only where the following events have occurred: (i) termination of employment relationship; (ii) termination of employment relationships regulated under article 409 n. 3 of the Italian Civil Procedure Code; (iii) death or the occurrence of conditions pertaining to non-self sufficiency; and/or (iv) suspension from work or reduced working hours for a period of at least 30 days. The relevant events satisfying the subjective requirements must have occurred in respect of the relevant Debtor during the period from 1 January 2009 to 31 December The suspension can be requested on one occasion only and applies to the following categories of mortgage loans: (i) which are granted in an amounts not exceeding 150,000 Euro, (ii) which are granted for the purpose of purchasing, constructing or renovating of a primary residence (mutui prima casa); (iii) which have been assigned under securitisation or covered bond transactions pursuant to Law 130, or (iv) which have been renegotiated pursuant to the Convention or whose lender was subrogated pursuant to the Bersani Decree. Finally, in order to obtain such suspension of payments, the Debtor shall have an income not exceeding 40,000 Euro per year. The document clarifies that in the context of a securitisation or covered bond transaction, the special purpose vehicle, or the Bank acting on its behalf, can adhere to the Piano Famiglie. The suspension can be limited to principal instalments only or can encompass both principal and interest instalments. Particularly, the Measures for Families provides for the right of the families residing in the municipalities affected by the earthquake to suspend, for further 6 months, the payment of instalments of the mortgage loans related to the primary residence ("prima casa"), The suspension will apply to mortgage loans not exceeding Euro , the relevant debtor has a taxable income of less than per year and is compliant with one of the conditions of the Piano Famiglia (loss of job, death or onset of term care, suspension from work). On 13 November 2010 the Prime Minister (Il Presidente del Consiglio dei Ministri) has issued the order number 3906, as amended on 7 May 2011 by the order number 3938 issued by the Prime Minister (Il Presidente del Consiglio dei Ministri) (the "Ordinanza") granting in favour of certain debtors (resident in the Municipalities of the Veneto Region affected by the flooding that occurred in such places in the period from 31 October 2010 to 2 November 2010) the option to request the relevant banking and credit institutions to suspend, for a period of 8 months, the instalments of the relevant loans (whether for principal or both interest and principal)

198 Accounting treatment of the Receivables Pursuant to Bank of Italy's regulations of 29 March 2000 ("Schemi di bilancio delle società di cartolarizzazione dei crediti"), and on 14 February 2006 (istruzioni per la redazione dei bilanci degli intermediari finanziari iscritti nell'"elenco speciale", degli IMEL delle SGR e delle SIM) the accounting information relating to the securitisation of the Receivables will be contained in the Issuer's nota integrativa, which, together with the balance sheet and the profit and loss statements form part of the financial statements of Italian companies. Other recent legislative provisions relating to Mortgage Loans Recently various law decrees (subsequently converted into law) containing provision applicable to Mortgage Loans have been issued. In this respect please refer to section "Risk Factors and Special Considerations - Yield and payment considerations". Proposal for a Directive of the European Parliament and of the Council on credit agreements relating to residential property On 31 March 2011, the European Commission published a proposal for a directive on credit agreements relating to residential immovable property for consumers. The proposed directive applies to (a) credit agreements secured by a mortgage or comparable security commonly used in a Member State on residential immovable property, or secured by a right relating to residential immovable property, (b) credit agreements the purpose of which is to purchase or retain rights in land or in a existing or proposed residential building; and (c) credit agreements the purpose of which is to renovate residential immovable property and which are outside Directive 2008/84/EC (Consumer Credit Directive). The proposed directive does not apply to credit agreements to be repaid from the sale proceeds on an immovable property or to certain credit granted by an employer to its employee. The proposed directive requires (among other things): standard information advertising; standard pre-contractual information; adequate explanations to the borrower on the proposed credit agreement and any ancillary service; calculation on the annual percentage rate of charge in accordance with a prescribed formula; assessment of creditworthiness of the borrower; and a right of the borrower to make early repayment of the credit agreement. The proposed directive also imposes prudential and supervisory requirements for credit intermediaries and non-bank lenders

199 TAXATION The statements herein regarding taxation are based on the laws in force as at the date of this Base Prospectus and are subject to any changes in law occurring after such date, which changes could be made on a retroactive basis. The following summary does not purport to be a comprehensive description of all the tax considerations which may be relevant to a decision to subscribe for, purchase, own or dispose of the Notes and does not purport to deal with the tax consequences applicable to all categories of investors, some of which (such as dealers in securities or commodities) may be subject to special rules. Prospective purchasers of the Notes are advised to consult their own tax advisers concerning the overall tax consequences of their ownership of the Notes. Republic of Italy Tax treatment of Notes issued by the Issuer having a maturity of no less than 18 months Italian Legislative Decree No. 239 of 1 April 1996 ("Decree 239") sets out the applicable regime regarding the tax treatment of interest, premium and other income (including the difference between the redemption amount and the issue price) (hereinafter collectively referred to as "Interest") deriving from Notes falling within the category of bonds (obbligazioni) and similar securities issued, inter alia, by Italian limited liability company incorporated under article 3 of Law No 130 of 30 April The provisions of Decree 239 only apply to Notes issued by the Issuer that qualify as obbligazioni (bonds) or as titoli similari alle obbligazioni (securities similar to bonds) pursuant to Article 44 of Presidential Decree No. 917 of 22 December 1986, as amended and supplemented ("Decree No. 917"). Italian resident Noteholders Where an Italian resident Noteholder is: (a) (b) (c) (d) an individual not engaged in an entrepreneurial activity to which the Notes are connected (unless he has opted for the application of the risparmio gestito regime see under "Capital gains tax" below); a non-commercial partnership; a non-commercial private or public institution; or an investor exempt from Italian corporate income taxation, interest, premium and other income relating to the Notes, accrued during the relevant holding period, are subject to a withholding tax, referred to as "imposta sostitutiva", levied at the rate of 20 per cent. In the event that the Noteholders described under (a) and (c) above are engaged in an entrepreneurial activity to which the Notes are connected, the imposta sostitutiva applies as a provisional tax. Where an Italian resident Noteholder is a company or similar commercial entity, or a permanent establishment in Italy of a foreign company to which the Notes are effectively connected, and the Notes are deposited with an authorised intermediary, Interest from the Notes will not be subject to imposta sostitutiva. They must, however, be included in the relevant Noteholder s income tax return and are therefore subject to general Italian corporate -194-

200 taxation and, in certain circumstances, depending on the "status" of the Noteholder, also to IRAP (the regional tax on productive activities). Italian real estate funds created under Article 37 of Italian Legislative Decree No. 58 of 24 February 1998 and Article 14 bis of Italian Law No. 86 of 25 January 1994, are not subject to any substitute tax at the fund level nor to any other income tax in the hands of the fund. If the investor is resident in Italy and is an open-ended or closed-ended investment fund (the "Fund") or a SICAV, and the Notes are held by an authorised intermediary, Interest accrued during the holding period on the Notes will not be subject to imposta sostitutiva. The Fund or SICAV will not be subject to taxation on such result, but a withholding tax of 20 per cent. will apply, in certain circumstances, to distributions made in favour of unitholders or shareholders. Where an Italian resident Noteholder is a pension fund (subject to the regime provided for by article 17 of the Italian Legislative Decree No. 252 of 5 December 2005) and the Notes are deposited with an authorised intermediary, Interest relating to the Notes and accrued during the holding period will not be subject to imposta sostitutiva, but must be included in the result of the relevant portfolio accrued at the end of the tax period, to be subject to an 11 per cent. substitute tax. Pursuant to Decree 239, imposta sostitutiva is applied by banks, SIMs, fiduciary companies, SGRs, stockbrokers and other entities identified by a decree of the Ministry of Finance (each an "Intermediary"). An Intermediary must (a) be resident in Italy or be a permanent establishment in Italy of a non-italian resident financial intermediary, and (b) intervene, in any way, in the collection of interest or in the transfer of the Notes. For the purpose of the application of the imposta sostitutiva, a transfer of Notes includes any assignment or other act, either with or without consideration, which results in a change of the ownership of the relevant Notes or in a change of the Intermediary with which the Notes are deposited. Where the Notes are not deposited with an Intermediary, the imposta sostitutiva is applied and withheld by any Italian financial intermediary paying interest to a Noteholder or, absent that, by the issuer. Non-Italian resident Noteholders Where the Noteholder is a non-italian resident, an exemption from the imposta sostitutiva applies provided that the non-italian resident beneficial owner is: (a) resident, for tax purposes, in a country which allows for a satisfactory exchange of information with Italy (the "White List States") as listed (i) in the Italian Ministerial Decree dated 4 September 1996, as amended from time to time, or (ii) as from the fiscal year in which the decree pursuant to article 168-bis of Italian Presidential Decree of 22 December 1996, No 917 is effective, in the list of States allowing an adequate exchange of information with the Italian tax authorities as per the decree issued to implement Article 168-bis, paragraph 1 of Italian Presidential Decree of 22 December 1986, No. 917 (for the 5 years starting on the date of publication of the Decree in the Official Gazette, States and territories that are not included in the current black-lists set forth by Italian Ministerial Decrees of 4 May 1999,

201 November 2001 and 23 January 2002 nor in the current white list set forth by Italian Ministerial Decree of 4 September 1996 are deemed to be included in the new whitelist); or (b) (c) (d) an international body or entity set up in accordance with international agreements which have entered into force in Italy; or a Central Bank or an entity which manages, inter alia, the official reserves of a foreign State; or an "institutional investor", whether or not subject to tax, which is established in a country which allows for a satisfactory exchange of information with Italy. In order to ensure gross payment, non-italian resident Noteholders must be the beneficial owners of the payments of Interest and must: (a) (b) deposit, directly or indirectly, the Notes with a resident bank or SIM or a permanent establishment in Italy of a non-italian resident bank or SIM or with a non-italian resident entity or company participating in a centralised securities management system which is in contact, via computer, with the Ministry of Economy and Finance; and file with the relevant depository, prior to or concurrently with the deposit of the Notes, a statement of the relevant Noteholder, which remains valid until withdrawn or revoked, in which the Noteholder declares to be eligible to benefit from the applicable exemption from imposta sostitutiva. This statement, which is not requested for international bodies or entities set up in accordance with international agreements which have entered into force in Italy nor in the case of foreign Central Banks or entities which manage, inter alia, the official reserves of a foreign State, must comply with the requirements set forth by Ministerial Decree of 12 December The imposta sostitutiva will be applicable at the rate of 20 per cent. to Interest paid to Noteholders who do not qualify for the exemption. Noteholders who are subject to the substitute tax might, nevertheless, be eligible for a total or partial relief under an applicable tax treaty. Capital gains tax Any gain obtained from the sale or redemption of the Notes would be treated as part of the taxable income (and, in certain circumstances, depending on the "status" of the Noteholder, also as part of the net value of the production for IRAP purposes) if realised by an Italian company, a similar commercial entity (including the Italian permanent establishment of foreign entities to which the Notes are connected) or Italian resident individuals engaged in an entrepreneurial activity to which the Notes are connected. Where an Italian resident Noteholder is an individual not engaged in an entrepreneurial activity to which the Notes are connected, any capital gain realised by such Noteholder from the sale or redemption of the Notes would be subject to an imposta sostitutiva, levied at the rate of 20 per cent. Noteholders may set off any losses with their gains

202 In respect of the application of imposta sostitutiva, taxpayers may opt for one of the three regimes described below: (a) (b) Under the tax declaration regime (regime della dichiarazione), which is the default regime for Italian resident individuals not engaged in an entrepreneurial activity to which the Notes are connected, the imposta sostitutiva on capital gains will be chargeable, on a cumulative basis, on all capital gains (net of any incurred capital loss) realised by the Italian resident individual Noteholder holding the Notes. In this instance, "capital gains" means any capital gain not connected with an entrepreneurial activity pursuant to all sales or redemptions of the Notes carried out during any given tax year. Italian resident individuals holding the Notes not in connection with an entrepreneurial activity must indicate the overall capital gains realised in any tax year, net of any relevant incurred capital loss, in the annual tax return and pay the imposta sostitutiva on such gains together with any balance income tax due for such year. Capital losses in excess of capital gains may be carried forward against capital gains realised in any of the four succeeding tax years. Capital losses realised before 1st January 2012 may be carried forward to be offset against subsequent capital gains of the same nature realized from 1st January 2012 for a portion equal to 62.5 per cent. of the relevant capital loss. As an alternative to the tax declaration regime, Italian resident individual Noteholders holding the Notes not in connection with an entrepreneurial activity may elect to pay the imposta sostitutiva separately on capital gains realised on each sale or redemption of the Notes (the risparmio amministrato regime). Such separate taxation of capital gains is allowed subject to: (i) (ii) the Notes being deposited with Italian banks, SIMs or certain authorised financial intermediaries; and an express election for the risparmio amministrato regime being timely made in writing by the relevant Noteholder. The depository must account for the imposta sostitutiva in respect of capital gains realised on each sale or redemption of the Notes (as well as in respect of capital gains realised upon the revocation of its mandate), net of any incurred capital loss. The depository must also pay the relevant amount to the Italian tax authorities on behalf of the taxpayer, deducting a corresponding amount from the proceeds to be credited to the Noteholder or using funds provided by the Noteholder for this purpose. Under the risparmio amministrato regime, where a sale or redemption of the Notes results in a capital loss, which may be deducted from capital gains subsequently realised, within the same securities management, in the same tax year or in the following tax years up to the fourth. Under the risparmio amministrato regime, the Noteholder is not required to declare the capital gains in the annual tax return. (c) In the "risparmio gestito" regime, any capital gains realised by Italian resident individuals holding the Notes not in connection with an entrepreneurial activity who have entrusted the management of their financial assets (including the Notes) to an authorised intermediary, will be included in the computation of the annual increase in value of the managed assets accrued, even if not realised, at year end, subject to a 20 per cent. substitute tax, to be paid by the managing authorised intermediary. Any depreciation of the managed assets accrued at the year end may be carried forward -197-

203 against increase in value of the managed assets accrued in any of the four succeeding tax years. The Noteholder is not required to declare the capital gains realised in the annual tax return. Any capital gains realised by a Noteholder who is an Italian open ended or a closed-ended investment fund or a SICAV will be included in the result of the relevant portfolio accrued at the end of the tax period. A 20 per cent. withholding tax will apply in certain circumstances, to distributions by the Fund or SICAV to unitholders or shareholders. Any capital gains realised by a Noteholder who is an Italian pension fund (subject to the regime provided for by article 17 of the Italian Legislative Decree No. 252 of 5 December 2005) will be included in the result of the relevant portfolio accrued at the end of the tax period, to be subject to an 11 per cent. substitute tax. Capital gains realised by non-italian resident Noteholders from the sale or redemption of Notes issued by an Italian resident issuer and traded on regulated markets are not subject to the imposta sostitutiva. Capital gains realised by non-italian resident Noteholders from the sale or redemption of Notes issued by an Italian resident issuer not traded on regulated markets are not subject to the imposta sostitutiva, provided that the effective beneficiary is: (a) (b) (c) (d) resident in a country which allows for a satisfactory exchange of information with Italy; an international entity or body set up in accordance with international agreements which have entered into force in Italy; a Central Bank or an entity which manages, inter alia, the official reserves of a foreign State; or an "institutional investor", whether or not subject to tax, which is established in a country which allows for a satisfactory exchange of information with Italy. If none of the conditions above is met, capital gains realised by non-italian resident Noteholders from the sale or redemption of Notes issued by an Italian resident issuer and not traded on regulated markets may be subject to the imposta sostitutiva at the current rate of 20 per cent. However, Noteholders may benefit from an applicable tax treaty with Italy providing that capital gains realised upon the sale or redemption of the Notes are to be taxed only in the resident tax country of the recipient. Inheritance and gift taxes Transfers of any valuable asset (including shares, Notes or other securities) as a result of death or donation are taxed as follows: (a) (b) transfers in favour of spouses and direct descendants or direct ancestors are subject to an inheritance and gift tax applied at a rate of 4 per cent. on the value of the inheritance or gift exceeding 1,000,000; transfers in favour of relatives to the fourth degree or relatives-in-law to the third degree are subject to an inheritance and gift tax at a rate of 6 per cent. on the entire -198-

204 value of the inheritance or the gift. Transfers in favour of brothers/sisters are subject to the 6 per cent. inheritance and gift tax on the value of the inheritance or gift exceeding 100,000; and (c) any other transfer is subject to an inheritance and gift tax applied at a rate of 8 per cent. on the entire value of the inheritance or gift. Transfer tax Contracts relating to the transfer of securities are subject to a Euro 168 registration tax as follows: (i) public deeds and notarised deeds are subject to mandatory registration; (ii) private deeds are subject to registration only in the case of voluntary registration. EU Savings Directive Under EC Council Directive 2003/48/EC (the "EU Savings Directive") on the taxation of savings income, each Member State is required, from 1 July 2005, to provide to the tax authorities of another Member State details of payments of interest or other similar income (within the meaning of the EU Savings Directive) paid by a person within its jurisdiction to, or collected by such a person for an individual resident or certain limited types of entity established in that other Member State; however, for a transitional period, Austria and Luxembourg are permitted to apply an optional information reporting system, whereby if a beneficial owner (within the meaning of the EU Savings Directive) does not comply with one of two procedures for information reporting, the relevant Member State will levy a withholding tax on payments to such beneficial owner. The withholding tax system applies for a transitional period during which the withholding tax rate is 35 per cent. The transitional period is to terminate at the end of the first full fiscal year following agreement by certain non-eu countries to the exchange of information relating to such payments. Also with effect from 1 July 2005, a number of non-eu countries, including Switzerland and certain dependent or associated territories of certain Member States, have agreed to adopt similar measures (either provision of information or transitional withholding) in relation to payments made by a person within its jurisdiction to, or collected by such a person for an individual resident or certain limited types of entity established in a Member State. In addition, the Member States have entered into provision of information or transitional withholding arrangements with certain of those dependent or associated territories in relation to payments made by a person in a Member State to, or collected by such a person for an individual resident or certain limited types of entity established in one of those territories. On 13 November 2008, the European Commission published a proposal for amendments to the EU Savings Directive, which included a number of suggested changes. The European Parliament approved an amended version of the proposal on 24 April If any of these proposed changes are made in relation to the EU Savings Directive, they may amend or broaden the scope of the requirements described above. Investors who are in any doubt as to their position should consult their professional advisers. Implementation in Italy of the Savings Directive Italy has implemented the Savings Directive through Legislative Decree No. 84 of 18th April, 2005 (Decree No. 84). Under Decree No. 84, subject to a number of important conditions being met, for interest paid from 1 July 2005 to individuals which qualify as beneficial -199-

205 owners of the interest payment and are resident for tax purposes in another Member State, Italian qualified paying agents shall not apply the withholding tax. Instead, they shall report to the Italian Tax Authorities details of the relevant payments and personal information on the individual beneficial owner. Such information is transmitted by the Italian Tax Authorities to the competent foreign tax authorities of the State of residence of the beneficial owner

206 The Subscription Agreement SUBSCRIPTION, SALE AND SELLING RESTRICTIONS Barclays Bank PLC, Italian branch (the "Sole Lead Manager") has, pursuant to the Subscription Agreement dated on or about the Issue Date between the Issuer, the Originator, the Representative of the Noteholders and the Sole Lead Manager, agreed to subscribe and pay the Issuer for the Notes at their Issue Price of 100 per cent of their principal amount. The Subscription Agreement is subject to a number of conditions and may be terminated by the Sole Lead Manager in certain circumstances prior to payment for the Notes to the Issuer. The Issuer and the Originator have agreed to indemnify the Sole Lead Manager against certain liabilities in connection with the issue of the Notes. Selling Restrictions Each of the Issuer and the Sole Lead Manager has, pursuant to the Subscription Agreement, undertaken to the others that it will comply with all applicable laws and regulations in each country or jurisdiction in which it purchases, offers, sells or delivers the Notes or has in its possession or distributes this Prospectus or any related offering material, in all cases at its own expense. Each of the Issuer and the Sole Lead Manager has, pursuant to the Subscription Agreement, represented and warranted that it has not made or provided and undertaken not to make or provide any representation or information regarding the Issuer, the Originator or the Notes save as contained in this Prospectus or as approved for such purpose by the Issuer or the Originator or which is a matter of public knowledge. General Persons into whose hands this Prospectus comes are required by the Issuer and the Sole Lead Manager to comply with all applicable laws and regulations in each country or jurisdiction in which they purchase, offer, sell or deliver the Notes or have in their possession, distribute or publish this Prospectus or any other offering material relating to the Notes, in all cases at their own expense. United States The Notes have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions exempt from the registration requirements of the Securities Act. Terms used in this paragraph have the meanings given to them by Regulation S. The Notes are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to, or for the account or benefit of, a United States person, except in certain transactions permitted by U.S. tax regulations. Terms used in this paragraph have the meanings given to them by the United States Internal Revenue Code of 1986 and regulations thereunder. The Sole Lead Manager has agreed that, except as permitted by the Subscription Agreement, it will not offer, sell or deliver the Rated Notes, (a) as part of its distribution at any time or (b) otherwise, until 40 days after the later of the commencement of the offering and the issue -201-

207 date of the Rated Notes, within the United States or to, or for the account or benefit of, U.S. persons, and that it will have sent to each dealer to which it sells Rated Notes during the distribution compliance period a confirmation or other notice setting forth the restrictions on offers and sales of the Rated Notes within the United States or to, or for the account or benefit of, U.S. persons. Terms used in this paragraph have the meaning given to them in Regulation S under the Securitisation Act. In addition, until 40 days after commencement of the offering, an offer or sale of Rated Notes within the United States by a dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act, if such offer or sale is made otherwise than in accordance with available exemption from registration under the Securities Act. United Kingdom The Sole Lead Manager has, pursuant to the Subscription Agreement, represented, warranted and undertaken each other and to the Issuer that: (i) No deposit-taking: in relation to any Notes having a maturity of less than one year: (a) (b) it is a person whose ordinary activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of its business; and it has not offered or sold and will not offer or sell any Notes other than to persons: (A) (B) (C) whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses; or who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their businesses; where the issue of the Notes would otherwise constitute a contravention of Section 19 of the Financial Services and Markets Act 2000 (the "FSMA") by the Issuer; (ii) (iii) Financial promotion: it has only communicated or caused to be communicated, and will only communicate or cause to be communicated, any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) received by it in connection with the issue or sale of any Notes in circumstances in which section 21(1) of the FSMA does not apply to the Issuer; and General compliance: it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom

208 Italy The offering of the Notes has not been registered pursuant to Italian securities legislation and, accordingly, the Sole Lead Manager has represented and agreed that it has not offered or sold, and will not offer or sell, any Notes in the Republic of Italy in an offer to the public, and that sales of the Notes in the Republic of Italy shall be effected in accordance with all Italian securities, tax and exchange control and other applicable laws and regulations. Any such offer, sale or delivery of the Notes or distribution of copies of this Prospectus or any other document relating to the Notes in Italy must be: (i) (ii) made by investment firms, banks or financial intermediaries permitted to conduct such activities in Italy in accordance with Legislative Decree No. 385 of 1 September 1993, as amended, Financial Laws Consolidation Act, CONSOB Regulation No of 29 October 2007, and any other applicable laws and regulations; and in compliance with any other applicable notification requirement or limitation which may be imposed by CONSOB or the Bank of Italy

209 GENERAL INFORMATION (1) The Issuer has obtained all necessary consents, approvals and authorisations in Italy in connection with the issue and performance of the Notes. The issue of the Notes was authorised by a resolution of the Quotaholders of the Issuer passed on 13 January (2) Application has been made to the Irish Stock Exchange for the Rated Notes to be admitted to the Official List and to trading on its regulated market. The Prospectus has been approved by the Central Bank of Ireland, as competent authority under the Prospectus Directive. The Central Bank of Ireland only approves this Prospectus as meeting the requirements imposed under Irish and EU law pursuant to the Prospectus Directive. (3) The Issuer is not (and was not in the 12 months preceding the date of this Prospectus) involved in any litigation, arbitration, governmental or administrative proceedings relating to claims or amounts which are material and which may have, or have had, during such 12 months' period, a significant effect on its financial position nor is the Issuer, to the best of its knowledge, aware that any such proceedings are pending or threatened. (4) Save as disclosed in this Prospectus, there has been no material adverse change in the financial position or prospects of the Issuer since 31 December 2010 (being the date of the most recent audited financial statements of the Issuer). (5) Save as disclosed in this Prospectus, the Issuer has no outstanding loan capital, borrowings, indebtedness or contingent liabilities, nor has the Issuer created any mortgages or charges or given any guarantees. (6) The Issuer will produce proper accounts (ordinaria contabilità interna) and audited financial statements in respect of each financial year and will not produce interim financial statements. Copies of these documents will be promptly deposited after their approval at the registered office of the Issuer and the Representative of the Noteholders and at the specified office of the Principal Paying Agent, where such documents will be physically available for inspection and where copies of such documents may be obtained free of charge upon request during usual business hours. (7) The Notes have been accepted for clearance through Monte Titoli, Euroclear and Clearstream as follows: ISIN code Common code Rated Notes IT Junior Notes IT (8) As long as the Rated Notes are listed on the Irish Stock Exchange, copies of the following documents are physically available, may be inspected and obtained free of charge during usual business hours at the specified offices of the Principal Paying Agent and of the Representative of the Noteholders at any time after the date of this Prospectus: -204-

210 (i) (ii) the statuto and atto costitutivo of the Issuer; the following agreements: Receivables Purchase Agreement; Servicing Agreement; Warranty and Indemnity Agreement; Intercreditor Agreement; Cash Allocation, Management and Payments Agreement; GIC Agreement; Deed of Pledge; Deed of Charge; Expenses Loan Agreement; Subordinated Loan Agreement; Mandate Agreement; Sixth Supplement Quotaholders' Agreement; Sixth Supplement Issuer Corporate Services Agreement; Swap Agreement; Monte Titoli Mandate Agreement; Master Definitions Agreement; and (iii) the audited financial statements of the Issuer as at 31 December 2009 and 31 December 2010 or, as the case may be, the most recent audited financial statements of the Issuer. (9) So long as any of the Notes remains outstanding, copies of the Payments Reports shall be made available for collection at the registered offices of the Issuer, the Representative of the Noteholders and the Principal Paying Agent, respectively, on each Calculation Date and on each date on which it is produced. The first Payments Report will be available at the registered office of the Issuer, the Representative of the Noteholders and the Principal Paying Agent on or about the Payment Date falling in 28 April The Payments Reports will be produced quarterly and will contain details of amounts payable on the Payment Date to which it refers in accordance with the Priority of Payments, including the amount payable as principal and interest in respect of each Note

211 (10) The estimated annual fees and expenses payable by the Issuer in connection with the Securitisation amount to approximately 70,000 (excluding servicing fees and any VAT, if applicable). (11) The estimated total expenses payable by the Issuer in connection with the admission of the Rated Notes to trading on the regulated market of the Irish Stock Exchange amount to approximately 3041,20 (excluding application of VAT, if any)

212 GLOSSARY These and other terms used in this Prospectus are subject to, and in some cases are summaries of, the definitions of such terms set out in the Transaction Documents, as they may be amended from time to time. "Account Bank" means The Bank of New York Mellon (Luxembourg) S.A., Italian branch or any other person for the time being acting as Account Bank pursuant to the Cash Allocation, Management and Payments Agreement. "Accounts" means, collectively, the Payments Account, the Issuer Collection Account and the GIC Account and "Account" means any of them. "Accrued Interest" means, on any date, the interest accrued and unpaid on the Outstanding Principal of each Mortgage Loan. "Adjusted Purchase Price" means, in relation to any Receivables erroneously excluded from the Portfolio pursuant to clause of the Receivables Purchase Agreement, an amount calculated in accordance with clause of the Receivables Purchase Agreement. "Aggregate Notional Outstanding Amount" means the sum of the Notional Outstanding Amount of each Receivable as at the Collection Date falling at the end of each Collection Period calculated by the Servicer on the relevant Quarterly Servicer's Report Date. "Bankruptcy Law" means Italian Royal Decree number 267 of 16 March 1942, as amended and supplemented from time to time. "Barclays Bank PLC, Italian branch" means Barclays Bank PLC, Italian branch, a bank incorporated under the laws of England and Wales, having its registered office at 1 Churchill Place, London E14 5HP, United Kingdom, acting through its Italian branch, with offices at Via della Moscova, 18, Milan, Italy, fiscal code and enrolment with the companies register of Milan number , enrolled under number 4862 with the register of banks held by the Bank of Italy pursuant to article 13 of the Consolidated Banking Act. "Business Day" means any day on which banks are generally open for business in Milan, London and Dublin and on which TARGET2, the Trans-European Automated Real Time Gross Transfer System, which uses a single shared platform and was launched on 19 November 2007 (or any successor thereto) is open. "Calculation Agent" means Barclays Bank PLC, Italian branch, or any other person for the time being acting as Calculation Agent pursuant to the Cash Allocation, Management and Payments Agreement. "Calculation Date" means the date falling three Business Days after each Quarterly Servicer's Report Date. "Cash Allocation, Management and Payments Agreement" means the cash allocation, management and payment agreement entered into on or about the Issue Date between the Issuer, the Servicer, the Originator, the Representative of the Noteholders, the Account Bank, the Collection Account Bank, the GIC Account Bank, the Cash Manager, the Issuer Corporate Services Provider, the Calculation Agent and the Principal Paying Agent, as from -207-

213 time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Cash Manager" means The Bank of New York Mellon, London branch or any other person for the time being acting as Cash Manager pursuant to the GIC Agreement. "Cash Reserve" means a reserve created with the proceeds of the Cash Reserve Loan to be applied in accordance with the provisions of the GIC Agreement. "Cash Reserve Available Amount" means, in respect of any Payment Date, the amount to be drawn from the Cash Reserve Ledger required to be applied in or towards making good any shortfall reflected in the Principal Deficiency Ledger until the debit balance, if any, of the Principal Deficiency Ledger is reduced to zero, to the extent that the Interest Available Funds (net of any Cash Reserve Available Amount) have not been sufficient for such purpose on such Payment Date in accordance with the Interest Priority of Payments. "Cash Reserve Ledger" means the ledger maintained by the Cash Manager to record the Cash Reserve from time to time in accordance with the provisions of the GIC Agreement and the Conditions. "Cash Reserve Loan" means the loan granted to the Issuer under the Subordinated Loan Agreement for an amount equal to Euro 470,997,120. "Class" shall be a reference to a class of Notes being the Class A Notes or the Class J Notes and "Classes" shall be construed accordingly. "Class A" means the Rated Notes. "Class J" means the Junior Notes. "Clean Up Option Date" means any Payment Date on which the aggregate Outstanding Principal of the Portfolio is equal to or less than 10 per cent of the aggregate Outstanding Principal of the Portfolio as at the Valuation Date. "Clearstream" means Clearstream Banking, Luxembourg with offices at 42 avenue JF Kennedy, L-1855 Luxembourg. "Collections" means all amounts received by the Servicer or any other person in respect of the Instalments due under the Receivables and any other amounts whatsoever received by the Servicer or any other person in respect of the Receivables. "Collection Account Bank" means Barclays Bank PLC, Italian branch, or any other person for the time being acting as Collection Account Bank pursuant to the Cash Allocation, Management and Payments Agreement and the Servicing Agreement. "Collection Date" means the tenth day of April, July, October, and January of each year. "Collection Period" means: (a) prior to the service of a Trigger Notice, each period commencing on (and excluding) a Collection Date and ending on (but including) the immediately following Collection Date; -208-

214 (b) (c) following the service of a Trigger Notice, each period commencing on, and ending on, the dates determined by the Representative of the Noteholders; and in the case of the first Collection Period, the period commencing on (and excluding) the Valuation Date and ending on (and including) the Collection Date falling in April "Conditions" means, as applicable, the Rated Notes Conditions or the Junior Notes Conditions. "CONSOB" means Commissione Nazionale per le Società e la Borsa. "Credit and Collection Policy" means the procedures for the collection and recovery of Receivables attached as Annex 1 to the Servicing Agreement. "Consolidated Banking Act" means Italian Legislative Decree number 385 of 1 September 1993, as amended and supplemented from time to time. "Criteria" means the criteria set out in the Receivables Purchase Agreement on the basis of which the Receivables and the Mortgage Loan Agreements from which they arise, are identified as a "block" (in blocco), pursuant to the articles 1 and 4 of the Securitisation Law. "Debtor" means any individual person who entered into a Mortgage Loan Agreement as principal debtor or guarantor or who is liable for the payment or repayment of amounts due in respect of a Mortgage Loan or who has assumed the Debtor's obligation under an accollo, or otherwise. "Decree 213" means Legislative Decree number 213 of 24 June 1998, as amended and supplemented from time to time. "Decree 239" means Legislative Decree number 239 of 1 April 1996, as amended and supplemented from time to time. "Decree 239 Deduction" means any withholding or deduction for or on account of "imposta sostitutiva" under Decree 239. "Deed of Charge" means the English law deed of charge entered into on or about the Issue Date between the Issuer and the Representative of the Noteholders (acting as trustee for the Noteholders and for the Other Issuer Creditors), as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Deed of Pledge" means the Italian law deed of pledge entered into on or about the Issue Date between the Issuer and the Representative of the Noteholders (acting on behalf of the Noteholders and of the Other Issuer Creditors), as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Defaulted Receivables" means any Mortgage Loan which: (a) has Instalments not paid for more than 360 calendar days from the relevant due date; or -209-

215 (b) has been classified as a "defaulted loan" (credito in sofferenza) pursuant to the Bank of Italy's supervisory regulations (Istruzioni di Vigilanza della Banca d'italia). "Defaulting Party" has the meaning ascribed to that term in the Swap Agreement. "Deferred Instalment" means Euro 11,134,476.57, being the residual consideration due for the Portfolio under the provisions of the Receivables Purchase Agreement and payable in accordance with the Interest Priority of Payments. "Delinquent Receivables" means, on each Collection Date, any Receivables having Instalments not paid for more than 180 calendar days from the relevant due date and which have been not classified as Defaulted Receivables. "Determination Date" means: (a) (b) with respect to the Initial Interest Period, the day falling two Business Days prior to the Issue Date; and with respect to each subsequent Interest Period, the date falling two Business Days prior to the Payment Date at the beginning of such Interest Period. "ECB MRO Rate" means the rate set by European Central Bank from time to time as the minimum bid rate in respect of variable rate tenders for its main refinancing operations (MRO). "Eligible Institution" (A) in case of Moody's rating, any credit institution organised under the laws of any State which is a member of the European Union or of the United States, whose unsecured and unsubordinated debt obligations have a short-term rating at least equal to "P-1" by Moody's (or another rating that does not affect the Notes' rating) or are guaranteed by an entity whose unsecured and unsubordinated debt obligations have a rating from Moody's at least equal to "P-1" and the guarantee provided by this entity meets the criteria set out by Moody's, or (in the event of absence of a short-term rating) a long-term rating of its unsecured debt and subordinated at least "A2" by Moody's (or other rating that does not affect the rating of the Notes) or is guaranteed by an entity with a long-term rating of its unsecured debt and subordinated at least "A2" by Moody's, or if a guarantee is provided by this entity, such guarantee meets the criteria required by Moody's; and (B) in case of Fitch rating, whose the short term unsecured, unsubordinated and unguaranteed debt obligations of which are rated at least "F1" by Fitch (provided that, if any of the above credit institutions is on rating watch negative, it shall be treated as one notch below its then current Fitch rating); and the long term unsecured, unsubordinated and unguaranteed debt obligations of which are rated at least "A" by Fitch (provided that, if any of the above credit institutions is on rating watch negative, it shall be treated as one notch below its then current Fitch rating). "Euroclear" means Euroclear Bank S.A./N.V., as operator of the Euroclear System. "Euribor" means: (a) prior to the delivery of a Trigger Notice, the Euro-Zone Inter-bank offered rate for 3 month Euro deposits which appears on the display page designated Euribor 01 on Reuters (except in respect of the Initial Interest Period, where an interpolated interest rate based on interest rates for 3 and 4 month deposits in Euro which appears on the display page designated Euribor 01 on Reuters will be substituted); or -210-

216 (b) (c) (d) following the delivery of a Trigger Notice, the Euro-Zone Inter-bank offered rate for Euro deposits applicable to any period in respect of which interest on the Notes is required to be determined which appears on a Reuters display page nominated and notified by the Representative of the Noteholders for such purpose or, if necessary, the relevant linear interpolation, as indicated by the Representative of the Noteholders in accordance with the Intercreditor Agreement; or in the case of (a) and (b), Euribor shall be determined by reference to such other page as may replace the relevant Reuters page on that service for the purpose of displaying such information; or in the case of (a) and (b), Euribor shall be determined, if the Reuters service ceases to display such information, by reference to such page as displays such information on such other service as may be nominated information vendor for the purpose of displaying comparable rates and approved by the Representative of the Noteholders, (the rate determined in accordance with paragraphs (a) to (d) above being the "Screen Rate" or, in the case of the Initial Interest Period, the "Additional Screen Rate") at or about 11:00 a.m. (Brussels time) on the Determination Date; and (e) if the Screen Rate (or, in the case of the Initial Interest Period, the Additional Screen Rate) is unavailable at such time for Euro deposits for the relevant period, then the rate for any relevant period shall be: (i) (ii) (iii) the arithmetic mean (rounded to four decimal places with the mid-point rounded up) of the rates notified to the Calculation Agent at its request by each of the Reference Banks as the rate at which deposits in Euro for the relevant period in a representative amount are offered by that Reference Bank to leading banks in the Euro-Zone Inter-bank market at or about a.m. (Brussels time) on the Determination Date; or if only two of the Reference Banks provide such offered quotations to the Calculation Agent, the relevant rate shall be determined, as aforesaid, on the basis of the offered quotations of those Reference Bank providing such quotations; or if only one or none of the Reference Banks provides the Calculation Agent with such an offered quotation, the relevant rate shall be the rate in effect for the immediately preceding period to which one of subparagraphs (a) or (b) above shall have applied. "Euro-Zone" means the region comprised of Member States of the European Union that adopted the single currency in accordance with the Treaty establishing the European Community (signed in Rome on 25 March 1957) as amended by the Treaty on European Union (signed in Maastricht on 7 February 1992). "Expenses" means any and all documented fees, costs, expenses and taxes required to be paid to any third party creditors (other than the Noteholders and the Other Issuer Creditors) arising in connection with the Securitisation and/or required to be paid (as determined in accordance with the Issuer Corporate Services Agreement, by reference to the number of the then -211-

217 outstanding securitisation transaction carried out by the Issuer) in order to preserve the existence of the Issuer, to maintain it in good standing or to comply with applicable laws. "Expenses Account" means the euro denominated account established in the name of the Issuer (IBAN: IT52L ), or such other substitute account opened in accordance with the Cash Allocation, Management and Payments Agreement. "Expenses Loan" means the loan granted to the Issuer under the Expenses Loan Agreement for an amount equal to Euro 830,000. "Expenses Loan Agreement" means the loan agreement entered into on or about the Issue Date between the Issuer and the Expenses Loan Provider, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Expenses Loan Provider" means Barclays Bank PLC, Italian branch, or any other person for the time being acting as Expenses Loan Provider pursuant to the Expenses Loan Agreement. "Extraordinary Resolution" shall have the meaning ascribed to it in the Rules of the Organisation of the Noteholders. "Fifth Securitisation" means the securitisation transaction carried out by the Issuer on 2 July 2009 through the issuance of the Series 5 Notes. "Fifth Portfolio" means the portfolio of receivables purchased by the Issuer in the context of the Fifth Securitisation. "Final Maturity Date" means the Payment Date falling in 27 January "Financial Laws Consolidation Act" means Italian Legislative Decree number 58 of 24 February 1998, as amended and supplemented from time to time. "First Payment Date" means the Payment Date falling on 28 April "First Portfolio" means the portfolio of receivables purchased by the Issuer in the context of the First Securitisation. "First Securitisation" means the securitisation transaction carried out by the Issuer on 23 January 2003 through the issuance of the Series 1 Notes. "Fitch" means Fitch Ratings Limited. "Fondiari Loans" (mutui fondiari) means the mortgage loans granted pursuant to the provisions of articles 38 and ss. of the Consolidated Banking Act; "Fourth Portfolio" means the portfolio of receivables purchased by the Issuer in the context of the Fourth Securitisation. "Fourth Securitisation" means the securitisation transaction carried out by the Issuer on 20 January 2009 through the issuance of the Series 4 Notes

218 "FSMA" means the Financial Services and Markets Act "GIC Account" means the euro denominated account established in the name of the Issuer with the GIC Account Bank (IBAN: GB43 BARC ), as the same may be renumbered or redesignated from time to time, or such other substitute account as may be opened in accordance with the GIC Agreement. "GIC Account Bank" means Barclays Bank PLC, or any other person for the time being acting as GIC Account Bank pursuant to the GIC Agreement. "GIC Agreement" means the GIC agreement entered into on or about the Issue Date between the Issuer, the Servicer, the Originator, the Representative of the Noteholders and the GIC Account Bank, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Holder" of a Note means the ultimate owner of a Note. "Individual Purchase Price" means, in respect of each Receivable and as at the Valuation Date, an amount equal to the aggregate of any Principal Instalments not yet due in respect of such Receivable. "Initial Expenses" means the amount of expenses and costs connected with the establishment of the Securitisation. "Initial Interest Period" means the first Interest Period, which shall begin on (and include) the Issue Date and end on (but exclude) the First Payment Date. "Insolvency Event" means in respect of any company or corporation that: (i) (ii) such company or corporation has become subject to any applicable bankruptcy, liquidation, administration, insolvency, composition or reorganisation (including, without limitation, "fallimento", "liquidazione coatta amministrativa", "concordato preventivo" and "amministrazione straordinaria", each such expression bearing the meaning ascribed to it by the laws of the Republic of Italy, including the seeking of liquidation, winding-up, reorganisation, dissolution, administration) or similar proceedings or the whole or any substantial part of the undertaking or assets of such company or corporation are subject to a pignoramento or similar procedure having a similar effect (other than, in the case of the Issuer, any portfolio of assets purchased by the Issuer for the purposes of further securitisation transactions), unless, in the opinion of the Representative of the Noteholders (who may in this respect rely on the advice of a lawyer selected by it), such proceedings are not being disputed in good faith with a reasonable prospect of success; or an application for the commencement of any of the proceedings under (a) above is made in respect of or by such company or corporation or such proceedings are otherwise initiated against such company or corporation and, in the opinion of the Representative of the Noteholders (who may in this respect rely on the advice of a lawyer selected by it), the commencement of such proceedings are not being disputed in good faith with a reasonable prospect of success; or -213-

219 (iii) (iv) (v) such company or corporation takes any action for a re-adjustment of deferment of any of its obligations or makes a general assignment or an arrangement or composition with or for the benefit of its creditors (other than, in the case of the Issuer, the Other Issuer Creditors) or is granted by a competent court a moratorium in respect of any of its indebtedness or any guarantee of any indebtedness given by it or applies for suspension of payments; or an order is made or an effective resolution is passed for the winding-up, liquidation or dissolution in any form of such company or corporation or any of the events under article 2484 of the Italian civil code occurs with respect to such company or corporation(except a winding-up for the purposes of, or pursuant to, a solvent amalgamation or reconstruction, the terms of which have been previously approved in writing by the Representative of the Noteholders); or such company or corporation becomes subject to any proceedings equivalent or analogous to those above under the law of any jurisdiction in which such company or corporation is deemed to carry on business. "Instalment" means, with respect to each Mortgage Loan Agreement, each instalment due from the relevant Debtor thereunder and which consists of an Interest Instalment and a Principal Instalment. "Insurance Policy" means each of the insurance policies taken out in relation to each Real Estate Asset and each Mortgage Loan. "Intercreditor Agreement" means the intercreditor agreement entered into on or about the Issue Date between the Issuer and the Other Issuer Creditors, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Interest Available Funds" means the aggregate of: (i) (ii) (iii) (iv) (v) (vi) all amounts collected by the Servicer in respect of the Receivables on account of interest, fees and pre-payment penalties during the immediately preceding Collection Period and credited to the GIC Account; all Recoveries collected by the Servicer during the immediately preceding Collection Period and credited to the GIC Account; all amounts of interest accrued (net of any withholding or expenses, if due) and paid on the Accounts during the immediately preceding Collection Period; all other items and payments received by the Issuer which do not qualify as Principal Available Funds and which have been credited to the GIC Account during the immediately preceding Collection Period; any payment to be received from the Swap Counterparty on or immediately prior to such Payment Date, pursuant to the Swap Agreement (excluding any collateral which the Swap Counterparty may be required to post pursuant the Swap Agreement); and any amount allocated on such Payment Date under items First and Eighth of the Principal Priority of Payments; -214-

220 (vii) the Cash Reserve Available Amount (if any), on such Payment Date (other than the Payment Date on which the Notes are redeemed in full); (viii) the Liquidity Reserve Available Amount (if any), on such Payment Date (other than the Payment Date on which the Notes are redeemed in full). "Interest Instalment" means the interest component of each Instalment. "Interest Payment Amount" shall have the meaning ascribed to such term in Condition "Interest Period" means each period from (and including) a Payment Date to (but excluding) the next following Payment Date. "Interest Priority of Payments" means the Priority of Payments under Condition (Priority of Payments - Pre-Trigger Notice Priority of Payments - Interest Priority of Payments). "Interest Rate" shall have the meaning ascribed to such term in Condition "Issue Date" means 27 January 2012, or such other date on which the Notes are issued. "Issue Price" means 100% of the Principal Amount Outstanding of the Notes upon issue. "Issuer" means Mercurio Mortgage Finance S.r.l., a società a responsabilità limitata incorporated under the laws of the Republic of Italy, having its registered office at Foro Buonaparte, 70, Milan, Italy, fiscal code and enrolment with the companies register of Milan number , enrolled under number in the register of special purpose vehicles (elenco delle società veicolo) held by the Bank of Italy pursuant to article 4 of the Italy's regulation dated 29 April 2011, having as its sole corporate object the performance of securitisation transactions under the Securitisation Law. "Issuer Available Funds" means, in respect of any Payment Date, the aggregate of the Interest Available Funds and the Principal Available Funds. "Issuer Collection Account" means the euro denominated account established in the name of the Issuer with the Servicer (IBAN: IT75K ), as the same may be renumbered or redesignated from time to time, or such other substitute account as may be opened in accordance with the Cash Allocation, Management and Payments Agreement. "Issuer Corporate Services Agreement" means the corporate services agreement executed on 23 January 2003 between the Issuer and the Issuer Corporate Services Provider, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Issuer Corporate Services Provider" means TMF Management Italy S.r.l., or any other person for the time being acting as Issuer Corporate Services Provider pursuant to the Issuer Corporate Services Agreement. "Issuer's Rights" means the Issuer rights under the Transaction Documents

221 "Joint Regulation" means the regulation issued jointly by the Bank of Italy and CONSOB on 22 February 2008 and published on the Official Gazzette number 54 of 4 March 2008, as amended from time to time. "Junior Notes" means the 844, Class J Residential Mortgage Backed Variable Rate Notes Series due 27 January 2061 issued by the Issuer on the Issue Date. "Junior Noteholders" means the holders of the Junior Notes. "Junior Notes Conditions" means the terms and conditions of the Junior Notes as from time to time modified in accordance with the provisions herein contained and including any other document expressed to be supplemental thereto and any reference to a particular numbered Junior Notes Condition shall be construed accordingly. "Liabilities" means in respect of any person, any losses, damages, costs, charges, awards, claims, demands, expenses, judgements, actions, proceedings or other liabilities whatsoever including legal fees and any taxes and penalties incurred by that person, together with any value added or similar tax charged or chargeable in respect of any sum referred to in this definition. "Liquidity Reserve" means a reserve created with the proceeds of the Liquidity Reserve Loan to be applied in accordance with the provisions of the GIC Agreement and the Conditions. "Liquidity Reserve Available Amount" means, in respect of any Payment Date, the amount to be drawn from the Liquidity Reserve Ledger required to be applied for making payments under items from First to Sixth of the Interest Priority of Payments, to the extent that the Interest Available Funds (net of any Liquidity Reserve Available Amount) have not been sufficient for such purpose on such Payment Date in accordance with the Interest Priority of Payments. "Liquidity Reserve Ledger" means the ledger maintained by the Cash Manager to record the Liquidity Reserve from time to time in accordance with the provisions of the GIC Agreement. "Liquidity Reserve Loan" means the loan granted to the Issuer under the Subordinated Loan Agreement for an amount equal to Euro 180,000,000. "Listing Agent" means The Bank of New York Mellon (Ireland) Limited with offices at Hanover House, Windmill Lane, Dublin 2, Ireland. "Mandate Agreement" means the mandate agreement entered into on or about the Issue Date between the Issuer and the Representative of the Noteholders, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Master Definitions Agreement" means the master definitions agreement entered into on or about the Issue Date between all the parties to each of the Transaction Documents, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto

222 "Monte Titoli" means Monte Titoli S.p.A., a società per azioni having its registered office at Via Mantegna, 6, Milan, Italy. "Monte Titoli Account Holders" means any authorised financial intermediary institution entitled to hold accounts on behalf of its customers with Monte Titoli (as intermediari aderenti) in accordance with article 30 of Decree 213 and includes any depository banks approved by Euroclear and Clearstream. "Monte Titoli Mandate Agreement" means the agreement entered into between the Issuer and Monte Titoli as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Monthly Servicer's Report" means the monthly report to be delivered by the Servicer to the Issuer, the Issuer Corporate Servicer Provider and the Rating Agencies on each Monthly Servicer's Report Date in accordance with article of the Servicing Agreement. "Monthly Servicer's Report Date" means prior to the delivery of a Trigger Notice, the date falling 5 Business Days following the 10th day of the month. "Moody's" means Moody's Investors Service, Inc. "Mortgage" means each mortgage created on the relevant Real Estate Asset, pursuant to the Italian law, in order to secure the Receivables. "Mortgage Loan" means each mortgage loan granted to a Debtor, on the basis of a Mortgage Loan Agreement pursuant to which the Issuer has title to enforce a Receivable (or portion thereof) against the relevant Debtor. "Mortgage Loan Agreement" means each mortgage loan agreement entered into between the Originator and a Debtor. "Noteholders" means the Rated Noteholders and the Junior Noteholders. "Non-Performing Receivables" means, together, the Delinquent Receivables and the Defaulted Receivables. "Noteholders" means the Rated Noteholders and the Junior Noteholders. "Notes" means, together, the Rated Notes and the Junior Notes. "Notional Outstanding Amount" means, in relation to a Receivable, on the Collection Date falling at the end of each Collection Period, an amount equal to the product of: (i) (ii) the Outstanding Principal Due of such Receivable; and the Performance Factor applicable to such Receivable. "Obligations" means all the obligations of the Issuer created by or arising under the Notes and the Transaction Documents. "Official Gazette" means the Gazzetta Ufficiale della Repubblica Italiana

223 "Organisation of the Noteholders" means the association of the Noteholders, organised pursuant to the Rules of the Organisation of the Noteholders. "Originator" means Barclays Bank PLC, Italian branch. "Other Issuer Creditors" means the Originator, the Servicer, the Back-up Servicer (if any) the Representative of the Noteholders, the Calculation Agent, the Issuer Corporate Services Provider, the Subordinated Loan Provider, the Expenses Loan Provider, the Principal Paying Agent, the Account Bank, the Cash Manager, the Collection Account Bank, the GIC Account Bank, the Sole Lead Manager and the Swap Counterparty. "Outstanding Principal" means, on any relevant date, in relation to any Receivable, the aggregate of the Principal Instalments not yet due. "Outstanding Principal Due" means, on any relevant date, in relation to any Receivable, the aggregate of (i) all Principal Instalments due but not paid on such relevant date, and (ii) the Principal Instalments not due yet. "Payment Date" means (a) prior to the delivery of a Trigger Notice, the 28th day of January, April, July and October of each year or, if such day is not a Business Day, the immediately following Business Day, and (b) following the delivery of a Trigger Notice, any day on which any payment is required to be made by the Representative of the Noteholders in accordance with the Trigger Event Priority of Payment, the Conditions and the Intercreditor Agreement, provided that the First Payment Date will fall in 28 April "Payments Account" means the euro denominated account established in the name of the Issuer with the Account Bank (IBAN: IT68S ) or such other substitute account as may be opened in accordance with the Cash Allocation, Management and Payments Agreement. "Payments Report" means the report setting out all the payments to be made on the following Payment Date under the applicable Priority of Payments, which shall be prepared and delivered by the Calculation Agent in accordance with the Cash Allocation, Management and Payments Agreement before the delivery of a Trigger Notice. "Performance Factor" means in relation to a Receivable, as at the Collection Date falling at the end of each Collection Period, the following percentage depending on the current status of the Receivable (as classified in accordance with the Credit and Collection Policy): (i) (ii) (iii) if the Receivable is not classified as Defaulted Receivable, nor as Delinquent Receivable, 100%; if the Receivable is classified as Delinquent Receivable, 75%; and if the Receivable is classified as Defaulted Receivable, or if in respect to a Receivable a limited recourse loan pursuant to Clause 6.1 of the Warranty and Indemnity Agreement has been granted, 0%. "Portfolio" means the portfolio of Receivables purchased on 16 January 2012 by the Issuer pursuant to the terms and conditions of the Receivables Purchase Agreement

224 "Premium" means the amount, which may be payable on the Junior Notes on each Payment Date subject to the Junior Notes Conditions, determined by reference to the residual Issuer Available Funds, if any, after satisfaction of the items ranking in priority pursuant to the applicable Priority of Payment on such Payment Date. "Previous Notes" means, together, the Series 1 Notes, the Series 2 Notes, the Series 3 Notes, the Series 4 Notes, the Series 5 Notes and the Series 6 Notes. "Previous Securitisations" means, together, the First Securitisation, the Second Securitisation, the Third Securitisation, the Fourth Securitisation, the Fifth Securitisation and the Sixth Securitisation. "Principal Amount Outstanding" means, on any date, (i) the principal amount of a Note upon issue, minus (ii) the aggregate amount of all principal payments which have been paid prior to such date, in respect of such Note. "Principal Available Funds" means the aggregate of: (i) (ii) (iii) (iv) (v) (vi) (vii) all amounts collected by the Servicer in respect of the Receivables on account of principal during the immediately preceding Collection Period and credited to the GIC Account; all amounts received by the Issuer from the Originator pursuant to the Receivables Purchase Agreement and credited to the GIC Account during the immediately preceding Collection Period; the Interest Available Funds, if any, to be credited to the Principal Deficiency Ledger on such Payment Date under item Eighth of the Interest Priority of Payments; all the proceeds deriving from the sale, if any, of the Portfolio or of single Receivables; any amounts (other than the amounts already allocated under other items of the Principal Available Funds and the Interest Available Funds) received by the Issuer from any party to the Transaction Documents during the immediately preceding Collection Period (excluding any amount received from the sale, if any, of the Portfolio and excluding any amount, if any, received as collateral under the Swap Agreement, but including any proceeds deriving from the enforcement of the Issuer's Rights); any amounts (if any) paid by the Originator to the Issuer pursuant to the Warranty and Indemnity Agreement including any amount advances as limited recourse loan pursuant to Clause 6.1 of the Warranty and Indemnity Agreement; on the earlier of (i) the Payment Date on which the Notes are redeemed in full and (ii) the Final Maturity Date, any amount standing to the credit of the Expenses Account, the Cash Reserve Ledger and the Liquidity Reserve Ledger; (viii) any amount allocated on such Payment Date under item Tenth of the Interest Priority of Payments; and -219-

225 (ix) upon occurrence of an Insolvency Event in respect of the Servicer, any amount posted under Clause 3.6.4(b) of the Servicing Agreement. "Principal Deficiency" means the negative difference, calculated on each Calculation Date, between item (i) of the Principal Available Funds and the Target Principal Payment Amount on the immediately following Payment Date. "Principal Deficiency Ledger" means the ledger maintained by the Calculation Agent, on which any Principal Deficiency shall be recorded on each Payment Date. "Principal Instalment" means the principal component of each Instalment. "Principal Paying Agent" means The Bank of New York Mellon (Luxembourg) S.A., Italian branch, or any other person for the time being acting as Principal Paying Agent pursuant to the Cash Allocation, Management and Payments Agreement. "Principal Priority of Payments" means the Priority of Payments under Condition (Priority of Payments - Pre-Trigger Notice Priority of Payments - Principal Priority of Payments). "Priority of Payments" means the order of priority pursuant to which the Issuer Available Funds shall be applied on each Payment Date prior to and/or following the service of a Trigger Notice in accordance with the Conditions and the Intercreditor Agreement. "Prospectus" means this Prospectus. "Purchase Price" means Euro 7,861,086, being the initial consideration payable by the Issuer to the Originator under the provisions of the Receivables Purchase Agreement. "Quarterly Servicer's Report" means the quarterly report to be delivered by the Servicer to the GIC Account Bank, the Account Bank, the Swap Counterparty, the Issuer, the Calculation Agent, the Representative of the Noteholders, the Principal Paying Agent, the Issuer Corporate Services Provider and the Rating Agencies on each Quarterly Servicer's Report Date and containing details of the performance of the Receivables during a specified Collection Period prepared in accordance with article of the Servicing Agreement. "Quarterly Servicer's Report Date" means (a) prior to the delivery of a Trigger Notice, the date falling 5 Business Days following the end of the immediately preceding Collection Period and (b) following the delivery of a Trigger Notice, the seventh day before any Payment Date. "Quotaholders" means Stichting Tevere and Stichting Tirreno. "Quotaholders' Agreement" means the agreement executed on 23 January 2003 between the Issuer, the Originator, the Quotaholders and the Representative of the Noteholders, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Rated Notes" means 7,005,000,000 Class A Residential Mortgage Backed Floating Rate Notes Series due 27 January 2061 issued by the Issuer on the Issue Date. "Rated Noteholders" means the holders of the Rated Notes

226 "Rated Notes Conditions" means the terms and conditions of the Rated Notes, as from time to time modified in accordance with the provisions herein contained and including any agreement or other document expressed to be supplemental thereto and any reference to a particular numbered Rated Notes Condition shall be construed in relation to the Rated Notes accordingly. "Rating Agencies" means, collectively, Moody's and Fitch. "Real Estate Assets" means the real estate properties which have been mortgaged in order to secure payment of the Receivables pursuant to the Mortgage Loan Agreements. "Receivables" means all rights and claims of the Issuer arising out from any Mortgage Loan Agreement existing or arising from (and excluding) the Valuation Date, including without limitation: (a) (b) (c) (d) (e) (f) all rights and claims in respect of the repayment of the outstanding principal; all rights and claims in respect of the payment of interest (including the default interest) accruing on the Mortgage Loans from (and including) the Valuation Date; all rights and claims in respect of payments of any amount deriving from damages suffered, costs, expenses, taxes and ancillary amounts incurred; all rights and claims in respect of each Mortgage and any other guarantee and security relating to the relevant Mortgage Loan Agreement; all rights and claims under and in respect of the Insurance Policies; and the privileges and priority rights (diritti di prelazione) transferable pursuant to the Securitisation Law supporting the aforesaid rights and claims, as well as any other right, claim and action (including any legal proceeding for the recovery of suffered damages), substantial and procedural action and defence inherent or otherwise ancillary to the aforesaid rights and claims, including, without limitation, the remedy of termination (risoluzione contrattuale per inadempimento) and the declaration of acceleration of the Debtors (decadenza dal beneficio del termine). "Receivables Purchase Agreement" means the receivables purchase agreement entered into on 16 January 2012 between the Issuer and the Originator, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Receiver" means any receiver, manager or administrative receiver appointed in accordance with clause 10 (Appointment of Receiver) of the Deed of Charge. "Recoveries" means any amounts received or recovered by the Servicer in relation to any Defaulted Receivables and any amounts received or recovered by the Servicer in relation to any Delinquent Receivable. "Reference Bank" means the principal London office of three major banks in the London interbank market, in each case, selected by the Principal Paying Agent at the relevant time

227 "Representative of the Noteholders" means BNY Mellon Corporate Trustee Services Limited, or any other person for the time being acting as representative of the Noteholders. "Required Cash Reserve Amount" means Euro 470,997,120. "Required Liquidity Reserve Amount" means Euro 180,000,000. "Retention Amount" means an amount equal to Euro 60,000. "Rules of the Organisation of the Noteholders" means the rules of the organisation of the Noteholders attached as Exhibit to the Conditions, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereof. "Scheduled Instalment Date" means any date on which an Instalment is due pursuant to each Mortgage Loan Agreement. "Second Portfolio" means the portfolio of receivables purchased by the Issuer in the context of the Second Securitisation. "Second Securitisation" means the securitisation transaction carried out by the Issuer on 26 June 2003 through the issuance of the Series 2 Notes. "Securities Act" means the U.S. Securities Act of 1933, as amended. "Securitisation" means the securitisation of the Receivables made by the Issuer through the issuance of the Notes, pursuant to articles 1 and 5 of the Securitisation Law. "Securitisation Law" means Italian Law number 130 of 30 April 1999, as amended and supplemented from time to time. "Security" means the security created pursuant to the Deed of Pledge and the Deed of Charge. "Security Interest" means: (a) (b) (c) any mortgage, charge, pledge, lien, privilege (privilegio speciale) or other security interest securing any obligation of any person; any arrangement under which money or claims to money, or the benefit of, a bank or other account may be applied, set-off or made subject to a combination of accounts so as to effect discharge of any sum owed or payable to any person; or any other type of preferential arrangement having a similar effect. "Series 1 Notes" means, together, the 594,000,000 Class A Mortgage Backed Floating Rate Notes Series due 2037; the 10,700,000 Class M1 Mortgage Backed Floating Rate Notes Series due 2037; the 17,700,000 Class M2 Mortgage Backed Floating Rate Notes Series due 2037 and the 8,800,000 Class B Mortgage Backed Floating Rate Notes Series due 2037, issued by the Issuer in the context of the First Securitisation

228 "Series 2 Notes" means, together, the 1,018,400,000 Class A Mortgage Backed Floating Rate Notes Series due 2036; the 21,900,000 Class B Mortgage Backed Floating Rate Notes Series due 2036; the 17,500,000 Class C Mortgage Backed Floating Rate Notes Series due 2036 and the 37,200,000 Class D Mortgage Backed Floating Rate Notes Series due 2036, issued by the Issuer in the context of the Second Securitisation. "Series 3 Notes" means the 4,002,350,000 Class A Residential Mortgage Backed Floating Rate Notes, Series due 2077 issued by the Issuer in the context of the Third Securitisation. "Series 4 Notes" means the 1,806,850,000 Class A Residential Mortgage Backed Floating Rate Notes Series due January 2078, issued by the Issuer in the context of the Fourth Securitisation. "Series 5 Notes" means the 2,578,300,000 Class A Residential Mortgage Backed Floating Rate Notes Series due August 2083, issued by the Issuer in the context of the Fifth Securitisation. "Series 6 Notes" means 2,261,550,000 Class A Residential Mortgage Backed Fixed Rate Notes Series due November 2059, issued by the Issuer in the context of the Sixth Securitisation. "Servicer" means Barclays Bank PLC, Italian branch, or any other person for the time being acting as Servicer pursuant to the Servicing Agreement. "Servicer's Downgrading Amount" means 90,000,000. "Servicing Agreement" means the agreement entered into on 16 January 2012 between the Issuer and the Servicer, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Sixth Portfolio" means the portfolio of receivables purchased by the Issuer in the context of the Sixth Securitisation. "Sixth Supplement to the Issuer Corporate Services Agreement" means the agreement for the amendment and the extension of the Issuer Corporate Services Agreement entered into on or about the Issue Date between the Issuer and the Issuer Corporate Services Provider. "Sixth Supplement to the Quotaholders' Agreement" means the agreement for the amendment and the extension of the Quotaholders' Agreement entered into on or about the Issue Date between the Issuer, Barclays PLC, Italian branch, the Representative of the Noteholders and the Quotaholders. "Sole Affected Party" means an Affected Party as defined in the Swap Agreement which at the relevant time is the only Affected Party under the Swap Agreement. "Sole Arranger" means Barclays Bank PLC, Italian branch. "Sole Lead Manager" means Barclays Bank PLC, Italian branch

229 "Stock Exchange" means the Irish Stock Exchange. "Subordinated Loan Agreement" means the loan agreement entered into on or about the Issue Date between the Issuer and the Subordinated Loan Provider, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Subordinated Loan Provider" means Barclays Bank PLC, Italian branch, or any other person for the time being acting as Subordinated Loan Provider pursuant to the Subordinated Loan Agreement. "Subscription Agreement" means the subscription agreement in relation to the Notes entered into on or about the Issue Date between the Issuer, the Representative of the Noteholders, the Originator and the Sole Lead Manager, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Swap Agreement" means the swap agreement entered into on or about the Issue Date between the Issuer and the Swap Counterparty in the form of an International Swaps and Derivatives Association, Inc. ("ISDA") 1992 Master Agreement (Multicurrency Cross Border) dated on or about the Issue Date, together with the schedule and credit support annex thereto and the related confirmations, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto. "Swap Counterparty" means Barclays Bank PLC, Italian branch, or any other person for the time being acting as Swap Counterparty. "Target Principal Payment Amount" means, on each Calculation Date, the difference between the Principal Amount Outstanding of the Notes on the immediately preceding Payment Date and the Aggregate Notional Outstanding Amount. "Tax" means any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by the Republic of Italy or any political sub-division thereof or any authority thereof or therein. "Tax Deduction" means any present or future tax, levy, impost, duty charge, fee, deduction or withholding of any nature whatsoever (including any penalty or interest payable in connection with any failure to pay or any delay in paying of any of the same, but excluding taxes or net income) imposed or lieved by or on behalf of any tax authority in Italy. "Third Portfolio" means the portfolio of receivables purchased by the Issuer in the context of the Third Securitisation. "Third Securitisation" means the securitsation transaction carried out on 2 July 2008 through the issuance of the Series 3 Notes. "Transaction Documents" means, together, the Receivables Purchase Agreement, the Servicing Agreement, the Warranty and Indemnity Agreement, the Subscription Agreement, the Monte Titoli Mandate Agreement, the Intercreditor Agreement, the Expenses Loan Agreement, the GIC Agreement, the Subordinated Loan Agreement, the Cash Allocation, Management and Payments Agreement, the Swap Agreement, the Deed of Pledge, the Deed -224-

230 of Charge, the Mandate Agreement, the Sixth Supplement to the Issuer Corporate Services Agreement, the Sixth Supplement to the Quotaholders' Agreement, the Master Definitions Agreement, the Conditions, this Prospectus and any other document which may be deemed to be necessary in relation to the Securitisation. "Transfer Date" means 16 January "Trigger Event" means any of the events described in Condition 12 (Trigger Events). "Trigger Event Priority of Payments" means the Priority of Payments under Condition 6.2 (Post Trigger Notice Priority of Payments). "Trigger Event Report" means the report setting out all the payments to be made on the following Payment Date under the Trigger Event Priority of Payments which, following the occurrence of a Trigger Event and the delivery of a Trigger Notice, shall be prepared and delivered by the Calculation Agent in accordance with the Cash Allocation, Management and Payments Agreement. "Trigger Notice" means the notice served by the Representative of the Noteholders on the Issuer declaring the Notes to be due and payable in full following the occurrence of a Trigger Event as described in Condition 12 (Trigger Events). "Usury Law" means Law number 108 of 7 March 1996, as subsequently amended and supplemented, and Law number 24 of 28 February 2001, which converted into law the Law Decree number 394 of 29 December "Valuation Date" means 13 January "VAT" means Imposta sul Valore Aggiunto (IVA) as defined in Italian D.P.R. number 633 of 26 October 1972, as amended and implemented from time to time. "Warranty and Indemnity Agreement" means the agreement entered into on 16 January 2012 between the Issuer and the Originator, as from time to time modified in accordance with the provisions therein contained and including any agreement or other document expressed to be supplemental thereto

231 ISSUER Mercurio Mortgage Finance S.r.l. Foro Buonaparte, Milan Italy ORIGINATOR, SERVICER, SWAP COUNTERPARTY, COLLECTION ACCOUNT BANK, SUBORDINATED LOAN PROVIDER, CALCULATION AGENT, EXPENSES LOAN PROVIDER Barclays Bank PLC, Italian branch Via della Moscova, Milan Italy PRINCIPAL PAYING AGENT AND ACCOUNT BANK The Bank of New York Mellon (Luxembourg) S.A., Italian branch Via Carducci, Milan Italy REPRESENTATIVE OF THE NOTEHOLDERS BNY Mellon Corporate Trustee Services Limited One Canada Square London E14 5AL United Kingdom GIC ACCOUNT BANK Barclays Bank PLC 1 Churchill Place London E14 5HP United Kingdom CASH MANAGER The Bank of New York Mellon, London branch One Canada Square Canary Wharf London E14 5AL United Kingdom LISTING AGENT The Bank of New York Mellon (Ireland) Limited Hanover House Windmill Lane Dublin 2 Ireland ISSUER CORPORATE SERVICES PROVIDER TMF Management Italy S.r.l. Foro Buonaparte, Milan Italy LEGAL ADVISERS To the Sole Arranger and the Sole Lead Manager as to Italian and English law and Italian taxation law Studio Legale Associato in associazione con Clifford Chance Piazzetta M. Bossi, Milan Italy -226-