Issue Price: 100 per cent.

Transcription

1 LUSSO S.R.L. (incorporated with limited liability under the laws of the Republic of Italy, with a sole quotaholder) 65,000,000 Class A Commercial Mortgage Backed Notes due 30 March ,000,000 Class B Commercial Mortgage Backed Notes due 30 March ,000 Class X1 Commercial Mortgage Backed Notes due 30 March ,000 Class X2 Commercial Mortgage Backed Notes due 30 March 2027 Issue Price: 100 per cent. This document constitutes a Prospetto Informativo for the purposes of article 2, sub-section 3 of Italian Law 30 April 1999 No. 130 as amended (the Securitisation Law) and a Prospectus prepared in accordance with the Directive 2003/71/EC (as amended, including by Directive 2010/73/EU, the Prospectus Directive) for the purpose of article 5.3 of the Prospectus Directive in connection with the application for the Notes (other than the Class X 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 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. Such approval relates only to the 65,000,000 Class A Commercial Mortgage Backed Notes due 30 March 2027 (the Class A Notes), 20,000,000 Class B Commercial Mortgage Backed Notes due 30 March 2027 (the Class B Notes), which are to be admitted to trading on the regulated market of the Irish Stock Exchange or other regulated markets for the purposes of Directive 2004/39/EC 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 Class A Notes and the Class B Notes of Lusso S.r.l., a società a responsabilità limitata incorporated under the Securitisation Law, with a sole quotaholder, (the Issuer) to be admitted to the official list of the Irish Stock Exchange (the Official List) and to trading on its regulated market (the Main Securities Market). No application has been made to list the 100,000 Class X1 Commercial Mortgage Backed Notes due 30 March 2027 (the Class X1 Notes) and the 100,000 Class X2 Commercial Mortgage Backed Notes due 30 March 2027 (the Class X2 Notes and together with the Class X1 Notes, the Class X Notes) on any stock exchange nor will this Prospectus be approved by the Central Bank of Ireland in relation to the Class X Notes. The Class A Notes, the Class B Notes together with the Class X Notes are collectively referred as to the Notes. The Notes will be issued on the Issue Date (such date falling on or about 24 July 2015). The principal source of payment of interest, and of repayment of principal on the Notes will be the collections and recoveries made in respect of monetary claims and connected rights arising out of the 85,000,000 loan agreement entered into by BNP Paribas, Italian Branch (BNPP or the Originator) and Sicily Outlet Village S.p.A. (the Borrower) on 30 March 2015, as amended and supplemented on 19 May 2015, along with any other related documents and relevant security. The Issuer purchased the Loan Asset Portfolio on 12 June By virtue of article 3 of the Securitisation Law and the Note Transaction Documents, the Issuer's right, title and interest in and to the Loan Asset Portfolio and to any sums collected therefrom will be segregated from all other assets of the Issuer and any cash-flow deriving therefrom 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 Secured 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 in respect of the Notes (other than the Class X Notes) will accrue on a daily basis and will be payable in Euro in arrears on the 25 th day of February, May, August and November in each year (or, if such day is not a Business Day, the following Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not). The rate of interest applicable to the Notes (other than the Class X Notes) will be aggregate of Euribor plus the relevant margin specified in Condition 7 (Interest) (the Margin), except in respect of the first Note Interest Period, where the rate of interest will be the aggregate of the applicable Margin and the higher of: (i) an interpolated interest rate based on one and two months deposits in Euro (determined as of 22 July, 2015) and (ii) zero. Interest in respect of the Class X Notes will accrue in accordance with Condition 7.4 (Interest amounts payable on the Class X Notes) and will be payable in Euro in arrears on each Note Payment Date. The Notes and interest accrued on the Notes will not be obligations or responsibilities of any person other than the Issuer. 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 Noteholders Representative or the Paying Agent or any paying agent (as the case may be) is required by law to make any Tax Deduction. In that event the Issuer, the Noteholders Representative or such Paying Agent (as the case may be) will make such payments after such Tax Deduction and will account to the relevant authorities for the amount so withheld or deducted. For further details see the section entitled Taxation.The Notes will be limited recourse obligations solely of the Issuer. The Notes are issued in dematerialised form (forma dematerializzata) and will be held in such form on behalf of the Noteholders, until redemption or cancellation thereof, by Monte Titoli for the account of the relevant Monte Titoli Account Holders in accordance with article 83-bis and ff. of the Legislative Decree 24 February 1998, No. 58, and the joint resolutions of the Bank of Italy and Consob dated 22 February Title to the Notes will at all times be evidenced by book-entries in accordance with the applicable law. No certificate or 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 Terms and Conditions of the Notes (the Conditions), the Notes shall be redeemed on the Final Maturity Date. Capitalised words and expressions in this Prospectus shall, except so far as the context otherwise requires, have the meanings as defined in the Conditions. BNP Paribas S.A. will retain, on an ongoing basis, a material net economic interest of not less than 5 per cent. in the Securitisation in accordance with each of Article 405(1) of Regulation (EU) No. 575/2013 (the CRR) and Article 51 of Commission Delegated Regulation (EU) No. 231/2013 of 19 December 2012 (the AIFM Regulation). As at the Issue Date, such interest will comprise the retention of no less than 5 per cent. of the nominal value of each of the Class A Notes and the Class B Notes. The manner in which

2 the net economic interest is retained may be changed (but without obligation to do so), also in connection with any amendment to, or change in the interpretation of the CRR and/or the AIFM Regulation. 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 included in this Prospectus. Prospective Noteholders should be aware of the aspects of the issuance of the Notes that are described in that section. Arranger BNP PARIBAS S.A. Lead Manager BNP PARIBAS London Branch 24 July 2015

3 IMPORTANT NOTICES The distribution of this Prospectus and the offering of the Notes in certain jurisdictions may be restricted by law. No representation is made by the Issuer, the Originator, the Noteholders Representative, the Arranger, the Lead Manager or any other person to whom this Prospectus may be lawfully distributed, or that the Notes may be lawfully offered in compliance with any applicable registration or other requirements, in any such jurisdiction, or pursuant to an exemption available thereunder, and none of them assumes any responsibility for facilitating any such distribution or offering. No action has been or will be taken to permit a public offering of the Notes or the distribution of this Prospectus in any jurisdiction where action for that purpose is required. Accordingly, the Notes may not be offered or sold, directly or indirectly, and neither this Prospectus nor any advertisement or other offering material may be distributed or published, in any jurisdiction, except under circumstances that will result in compliance in any applicable laws and regulations. The Lead Manager has represented and undertook in the Subscription Agreement that all offers and sales by it will be made on such terms. Persons into whose possession this Prospectus, any advertisement or other offering material come are required by the Issuer, the Arranger and the Lead Manager to inform themselves about and to observe any such restrictions. Neither this Prospectus nor any part hereof constitutes an offer of, or an invitation by or on behalf of the Issuer, the Originator, the Noteholders Representative, the Arranger or the Lead Manager to subscribe for or purchase any of the Notes and neither this Prospectus, nor any part hereof, may be used for or in connection with an offer to, or solicitation by, any person in any jurisdiction or in any circumstances in which such offer or solicitation is not authorised or to any person to whom it is unlawful to make such offer or solicitation. For a further description of certain restrictions on offers and sales of the Notes and distribution of this Prospectus (or any part hereof) see the section entitled Subscription, Sale and Selling Restrictions. The Issuer accepts responsibility for the information contained in this Prospectus. To the best of the knowledge and belief of the Issuer (having taken all reasonable care to ensure that such is the case), the information contained in this Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information. Where information has been indicated to have been sourced from a third party, the Issuer confirms that this information has been accurately reproduced and that as far as the Issuer is aware and is able to ascertain from information published by or documentation deriving from such third party, no facts have been omitted which would render the reproduced information inaccurate or misleading. Other than the Issuer, none of the Arranger, the Lead Manager, the Originator, the Borrower or any person other than the Issuer have separately verified the information contained in this Prospectus. Accordingly, no representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by the Arranger, the Lead Manager, the other Issuer Secured Creditors, the Originator, the Borrower (the latter in particular not having taken part nor having been involved in any manner and in any respect in the securitisation) or any other person as to the accuracy or completeness of the information contained in this Prospectus or any other information supplied in connection with the Notes. Each person receiving this Prospectus acknowledges that such person has not relied on the Arranger, the Lead Manager, the other Issuer Secured Creditors, the Originator, the Borrower or any other person to this Prospectus or on any person affiliated with any of them in connection with its investigation of the accuracy of such information or its investment decision. No person is or has been authorised in connection with the issue and sale of the Notes 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 Issuer or by the Arranger, the Lead Manager, the other Issuer Secured Creditors or any of their respective affiliates, associated bodies or shareholders or the shareholders of the Issuer. Neither the delivery of this Prospectus nor any sale or allotment made in connection with the offering of any of the Notes will, under any circumstances, constitute a representation or create any implication that there has been any change in the information contained herein since the date hereof or that the information contained herein is correct as of any time subsequent to its date. THE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE SEC), ANY STATE SECURITIES COMMISSION OR ANY OTHER i

4 U.S. OR STATE REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOINGAUTHORITIES PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE. PURSUANT TO AN EXEMPTION FROM THE U.S. COMMODITY FUTURES TRADING COMMISSION (THE CFTC) IN CONNECTION WITH POOLS WHOSE PARTICIPANTS ARE LIMITED TO NON-U.S. PERSONS (AS DEFINED IN RULE 4.7 UNDER THE COMMODITY EXCHANGE ACT OF 1936, AS AMENDED (THE CEA)), AN OFFERING MEMORANDUM FOR THIS POOL IS NOT REQUIRED TO BE, AND HAS NOT BEEN, FILED WITH THE CFTC. THE CTFC DOES NOT PASS JUDGEMENT UPON THE MERITS OF PARTICIPATING IN A POOL OR UPON THE ADEQUACY OR ACCURACY OF AN PROSPECTUS. CONSEQUENTLY, THE CTFC HAS NOT REVIEWED OR APPROVED THIS OFFERING OR ANY PROSPECTUS FOR THIS POOL. The Notes and interest thereon will not be obligations or responsibilities of any person other than the Issuer, which obligations will be limited recourse obligations in accordance with the terms thereof and the Securitisation Law. The Issuer is not, and will not be, regulated by the Central Bank of Ireland by virtue of the issuance of the Notes. Any investment in the Notes does not have the status of a bank deposit and is not subject to the deposit protection scheme operated by the Central Bank of Ireland. ii

5 OFFEREE ACKNOWLEDGEMENTS Each person receiving this Prospectus, by acceptance hereof, hereby acknowledges that this Prospectus has been prepared by the Issuer solely for the purpose of article 5.3 of the Prospectus Directive in connection with the application for the Notes (other than the Class X Notes) to be admitted to the official list of the Irish Stock Exchange and article 2, sub-section 3 of Securitisation Law. This Prospectus does not constitute, and will not be construed as, any representation or warranty by the Arranger or the Lead Manager to the adequacy or accuracy of the information set forth herein. Delivery of this Prospectus to any person other than the prospective investor and those persons, if any, retained to advise such prospective investor with respect to the possible offer and sale of the Notes is unauthorised, and any disclosure of any of its contents for any purpose other than considering an investment in the Notes is strictly prohibited. A prospective investor will not be entitled to, and must not rely on this Prospectus unless it was furnished to such prospective investor directly by the Issuer, the Arranger or the Lead Manager. The obligations of the parties to the transactions contemplated herein are set forth in and will be governed by certain documents described in this Prospectus, and all of the statements and information contained in this Prospectus are qualified in their entirety by reference to such documents. This Prospectus contains summaries of certain of these documents, which the Issuer believes to be accurate to the extent that the relevant statements constitute a summary of such documents, but for a complete description of the rights and obligations summarised herein, reference is hereby made to the actual documents, copies of which are available for inspection by physical or electronic means free of charge during usual business hours (on giving reasonable notice) at the specified office of the Paying Agent and the Master Servicer and at the registered office of the Issuer (see General Information Documents available for inspection, below). EACH PERSON RECEIVING THIS PROSPECTUS ACKNOWLEDGES THAT: (A) SUCH PERSON HAS BEEN AFFORDED AN OPPORTUNITY TO REQUEST AND TO REVIEW, AND HAS RECEIVED, ALL ADDITIONAL INFORMATION CONSIDERED BY IT TO BE NECESSARY TO VERIFY THE ACCURACY OF OR TO SUPPLEMENT THE INFORMATION HEREIN, (B) SUCH PERSON HAS NOT RELIED ON THE ARRANGER OR THE LEAD MANAGER OR ANY PERSON AFFILIATED WITH THE ARRANGER OR THE LEAD MANAGER IN CONNECTION WITH ITS INVESTIGATION OF THE ACCURACY OF SUCH INFORMATION OR ITS INVESTMENT DECISION, (C) NO PERSON HAS BEEN AUTHORISED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION REGARDING THE NOTES OTHER THAN AS CONTAINED HEREIN, AND IF GIVEN OR MADE, ANY SUCH OTHER INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORISED, AND (D) NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER WILL CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS AT ANY TIME SINCE THE DATE HEREOF. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN BUSINESS, LEGAL AND TAX ADVISERS FOR INVESTMENT, LEGAL AND TAX ADVICE AND AS TO THE DESIRABILITY AND CONSEQUENCES OF AN INVESTMENT IN THE NOTES. iii

6 FORWARD-LOOKING STATEMENTS Certain matters contained in this Prospectus and any document incorporated by reference herein are forwardlooking statements. Such statements appear in a number of places in this Prospectus, including with respect to assumptions on repayment, prepayment and certain other characteristics of the Property and the Loan Asset Portfolio and reflect significant assumptions and subjective judgments that may or may not prove to be correct. Such statements may be identified by reference to a future period or periods and the use of forwardlooking terminology such as may, will, could, believes, expects, projects, anticipates, continues, intends, plans or similar terms. Consequently, future results may differ from the expectations of the Issuer generally due to a variety of factors, including (but not limited to) the economic environment and changes in laws and regulations, fiscal policy, planning or tax laws in Italy. Other factors not presently known to the Issuer generally or that the Issuer presently believe are not material could also cause results to differ materially from those expressed in the forward-looking statements included in this Prospectus. Moreover, past financial performance should not be considered a reliable indicator of future performance and prospective purchasers of the Notes are cautioned that any such statements are not guarantees of performance and involve risks and uncertainties, many of which are beyond the control of the Issuer. None of the Issuer, the Originator, the Arranger, the Lead Manager or any other person has attempted to verify any such statements, nor does it make any representation, express or implied, with respect thereto. Prospective investors should not therefore, place undue reliance on any of these forward-looking statements. None of the Issuer, the Originator, the Arranger, the Lead Manager or any other person assumes any obligation to update these forward-looking statements or to update the reasons for which actual results could differ materially from those anticipated in the forward-looking statements. iv

7 REFERENCES TO CURRENCIES All references in this Prospectus to euro, EUR or are to the currency introduced at the commencement of the third stage of European economic and monetary union pursuant to the Treaty establishing the European Community, as amended by the Treaty on European Union, as amended by the Treaty of Amsterdam. v

8 SOURCES OF MARKET DATA, FINANCIAL DATA AND OTHER REFERENCES The Prospectus contains or refers to figures (all subject to commercial rounding), market data, analyst reports, and other publicly available information about the market which are based on published market data or figures from publicly available sources. To the extent that information contained in this Prospectus was derived from third-party sources, the Issuer confirms that such information is accurately reproduced and that as far as the Issuer is aware and is able to ascertain from information published by that third party, no facts have been omitted that would render the information reproduced in this Prospectus inaccurate or misleading. The Issuer has not verified the figures, market data, and other information contained in the publicly available sources and do not assume any responsibility for the accuracy of the figures, market data, or other information from the publicly available sources. Where market data and commentary is sourced from CBRE market research, it should be noted that while CBRE has obtained the information from sources believed to be reliable and do not doubt its accuracy, CBRE has not verified such information and makes no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the market. vi

9 REGULATORY DISCLOSURE RETENTION The BNP Paribas S.A. has undertaken in the Intercreditor Agreement that, from the Issue Date, it will: (i) (ii) (iii) (iv) retain, on an ongoing basis, a material net economic interest of not less than 5 per cent. in the Securitisation in accordance with each of Article 405(1) of the CRR and Article 51 of the AIFM Regulation; comply with the relevant disclosure obligations imposed under the CRR and the AIFM Regulation, including without limitation the manner in which retained interest is held, the level of such retained interest, and any matters that could undermine the maintenance of the minimum required net economic interest as referred to above; provide confirmation on a quarterly basis to the Master Servicer and the Calculation Agent that it continues to retain a material net economic interest of not less than 5 per cent. in the Securitisation, for inclusion of such information in the Investor Report; notify to the Master Servicer and the Calculation Agent any change to the level or manner in which such retained interest is held, for inclusion of such information in the Investor Report; provided that BNP Paribas S.A. is only required to do so to the extent that the retention and disclosure requirements under the CRR and the AIFM Regulation remain in effect, and provided further that BNP Paribas S.A. will not be in breach of any such undertakings if it fails to comply due to events, actions or circumstances beyond its control. As of the Issue Date, such interest will comprise the retention of no less than 5 per cent. of the nominal value of each of the Class A Notes and Class B Notes. The manner in which the net economic interest is retained may be changed (but without obligation to do so), also in connection with any amendment to, or change in the interpretation of the CRR and/or the AIFM Regulation. Investors to assess compliance Each prospective investor is required to independently assess and determine the sufficiency of the information described above and in this Prospectus generally for the purposes of complying with each of Part Five of the CRR (including Article 405 of the CRR) and Section Five of Chapter III of the AIFM Regulation (including Article 51 and following of the AIFM Regulation) and any corresponding national measures which may be relevant. In particular, each prospective investor, in the process of making its investment decisions or decision s regarding its own compliance with applicable regulations, is required not to rely upon the representations given by the Issuer, the Originator, the Arranger, the Lead Manager or any other Secured Creditors in this Prospectus. Moreover, none of the Issuer, the Originator, the Arranger, the Lead Manager or any Other Issuer Secured Creditor makes any representation that the information described above or in this Prospectus is sufficient in all circumstances for such purposes. vii

10 VALUATION DISCLAIMER Please see The Valuation for the Valuation produced by CBRE Valuation S.p.A. (CBRE), a global corporate member of the Royal Institution of Chartered Surveyors (RICS), as at 15 March 2015 in relation to the Property, in accordance with the RICS Valuation Professional Standards (January 2014) (the Red Book ), as amended, which has been compiled for the purposes of ascertaining the Property Market Value. The Valuation has been used for the purposes of this transaction and throughout this Prospectus. The Valuation was produced by CBRE, acting through their office at Via Del Lauro, 5/7, Milan, Italy. CBRE has given and has not withdrawn its written consent both to the inclusion in this Prospectus of the Valuation, and to references to the Valuation in the form and context in which it appears. CBRE accepts responsibility for the Valuation. To the best of the knowledge and belief of CBRE (having taken all reasonable care to ensure that such is the case), the information contained in the Valuation is, as at the date stated therein, in accordance with the facts and does not omit anything likely to affect the its import. Except for any responsibility arising under the Prospectus (Directive 2003/71/EC) Regulations 2005 and the Prospectus rules issued by the Central Bank of Ireland (the Irish Regulations and Rules ) to any person as and to the extent there provided, to the fullest extent permitted by law CBRE do not assume any responsibility and will not accept any liability to any person for any loss suffered by any such person as a result of, arising out of, or in accordance with the Valuation or CBRE s responsibility statement, required by and given solely for the purposes of complying with the above Irish Regulations and Rules and the Prospectus Directive, consenting to its inclusion in the Prospectus. Prospective investors should be aware that (i) the Valuation was prepared prior to the date of this Prospectus and therefore refer to the position of the Property at the relevant dated stated therein and (ii) CBRE has not been requested to update or revise any of the information contained therein, nor will it be asked to do so prior to the issue of the Notes. Accordingly, prospective investors should be aware that the information included in the Valuation may not reflect the current physical, economic, competitive, market or other conditions with respect to the Property. In undertaking the Valuation, CBRE has based their work on certain information from third-party sources, in particular as detailed in the Sources of Information section of the Valuation report, which they have assumed to be correct and comprehensive but have not verified. The information contained in the Valuation must be considered together with all of the information contained elsewhere in this Prospectus including, without limitation, the statements made in the section entitled Risk Factors Risk factors and special considerations related to the Property. All of the information contained in the Valuation is subject to the same limitations, qualifications and restrictions contained in the other sections of this Prospectus. Prospective investors are strongly urged to read this Prospectus in its entirety prior to accessing the Valuation. With the exception of the Valuation which it prepared and subject to the terms of its appointment by the Originator on 12 March 2015, CBRE does not accept any liability in relation to the information contained in this Prospectus or any other information provided by the Issuer or the Originator or any other party to this transaction. To the extent that the Issuer has summarised or included any part of the Valuation in the Prospectus, such summaries or extracts should be considered in conjunction with the entire Valuation. CBRE does not accept any responsibility for any summary or extract of the Valuation by the Issuer. No reliance may be placed upon the contents of the Valuation by any party for any purpose other than in connection with the purpose of the Valuation. viii

11 CONTENTS Page TRANSACTION DIAGRAMS... 1 TRANSACTION OVERVIEW... 5 RISK FACTORS DOCUMENTS INCORPORATED BY REFERENCE THE PROPERTY PORTFOLIO FOC SECTOR OVERVIEW THE SPONSOR THE MANAGER COMMERCIAL AGREEMENTS RELATED TO PROPERTY THE LOAN ASSET PORTFOLIO DESCRIPTION OF THE BORROWER HEDGING AGREEMENTS THE BORROWER THE VALUATION THE ISSUER THE ORIGINATOR DESCRIPTION OF THE PRIMARY SERVICER AND THE SPECIAL SERVICER USE OF PROCEEDS DESCRIPTION OF THE NOTE TRANSACTION DOCUMENTS THE ISSUER ACCOUNTS STRUCTURE WEIGHTED AVERAGE LIFE OF THE NOTES TERMS AND CONDITIONS OF THE NOTES SELECTED ASPECTS OF ITALIAN LAW TAXATION IN THE REPUBLIC OF ITALY SUBSCRIPTION, SALE AND SELLING RESTRICTIONS GENERAL INFORMATION ix

12 TRANSACTION DIAGRAMS The following diagrams show the structure of the Securitisation as at the Issue Date. They are intended to illustrate to prospective noteholders a scheme of the principal transactions contemplated in the context of the Securitisation on the Issue Date. The diagrams are not intended to be exhaustive and prospective noteholders should also read the detailed information set out elsewhere in this Prospectus. Overview of the Transaction 1

13 Structure of the Borrower 2

14 Ownership Structure of the Issuer 3

15 Cash Flow 4

16 TRANSACTION OVERVIEW 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 Note Transaction Documents. A. TRANSACTION PARTIES ON THE ISSUE DATE Party Name Address Document under which appointed / Further information Issuer Lusso S.r.l. Via Alessandro Pestalozza, 12/ Milan, Italy Originator BNP Paribas, Italian Branch Piazza San Fedele, 1/ Milan, Italy Arranger BNP Paribas S.A. Piazza San Fedele, 1/ Milan, Italy Lead Manager BNP Paribas, London Branch Primary Servicer / Special Servicer Mount Street Mortgage Servicing Limited 10 Harewood Avenue, London NW1 6AA 10 Harewood Avenue, London NW1 6AA 3rd Floor New City Court20 st Thomas Street London, SE1 9RS Master Servicer Zenith Service S.p.A. Via Alessandro Pestalozza, 12/ Milan, Italy N/A. See The Issuer for further information. N/A. See The Originator for further information. N/A N/A The Primary Servicer / Special Servicer will perform certain obligations with respect to the Loan Asset Portfolio pursuant to a servicing agreement entered into on or about the Issue Date between the Issuer, the Master Servicer, the Primary Servivcer / Special Servicer the Noteholders Representative and the Loan Agent (the Servicing Agreement). See Description of the Note Transaction Documents Key Terms of the Servicing Agreement for further information. The Master Servicer will perform certain obligation with respect to the Loan Asset Portfolio pursuant to a servicing agreement entered into on or about the Issue Date between the Issuer, the Master Servicer, the Primary Servicer / Special Servicer the Noteholders Representative and the Loan Agent (the Servicing Agreement). 5

17 Issuer Account Bank BNP Paribas Securities Services Noteholders Representative BNP Paribas Securities Services Paying Agent BNP Paribas Securities Services Quotaholder Structured Finance Management Italy S.r.l. Via Ansperto, Milan, Italy Via Ansperto, Milan, Italy Via Ansperto, Milan, Italy Via Alessandro Pestalozza, 12/ Milan, Italy See Description of the Note Transaction Documents Key Terms of the Servicing Agreement for further information. The Issuer Account Bank will be appointed pursuant to an agency agreement dated on or about the Issue Date entered into between the Issuer, the Master Servicer, the Corporate Servicer, the Noteholders Representative, the Calculation Agent, the Issuer Account Bank, and the Paying Agent (the Agency Agreement). See Description of the Note Transaction Documents Agency Agreement for further information. The Noteholders Representative will act as such pursuant to the Subscription Agreement and the agreement entered into between the Issuer, the Originator, the Agents, the Corporate Services Provider, the Servicers, the Initial Subscribers and the Noteholders Representative (the Intercreditor Agreement) The Paying Agent will act as paying agent in respect of the Notes pursuant to the Agency Agreement. See Description of the Note Transaction Documents The Agency Agreement for further information. The Quotaholder will assume certain undertakings in relation to the management of the Issuer pursuant to the Intercreditor Agreement. See Description of the Note Transaction Documents The 6

18 Intercreditor Agreement Corporate Servicer Zenith Service S.p.A. Via Alessandro Pestalozza, 12/ Milan, Italy Calculation Agent Zenith Service S.p.A. Via Alessandro Pestalozza, 12/ Milan, Italy The Corporate Servicer will act as corporate services provider to the Issuer pursuant to the Corporate Services Agreement entered into on or about the Issue Date between, inter alios, the Corporate Servicer and the Issuer (the Corporate Services Agreement). See Description of the Note Transaction Documents The Corporate Services Agreement for further information. The Calculation Agent will act as such pursuant to the Agency Agreement. See Description of the Note Transaction Documents The Agency Agreement for further information. Other parties relevant for the Notes: Party Name Address Listing Agent McCann FitzGerald Listing Services Limited Riverside One, Sir John Rogerson s Quay, Dublin 2, Ireland Irish Stock Exchange The Irish Stock Exchange Plc 28 Anglesea Street Dublin 2, Ireland Clearing System Monte Titoli S.p.A. (the Clearing System) Piazza degli Affari Milan, Italy B. THE LOAN ASSET PORTFOLIO Please refer to the sections entitled The Loan Asset Portfolio for further detail in respect of the main features of the Loan. The following is only a summary of certain terms of the Loan. Investors should refer to, and carefully consider, further details which are set out in The Loan Asset Portfolio in relation to the Loan. Initial Principal Amount 85,000, Principal Amount of Loan at Issue Date Borrower Loan purpose 85,000, Sicily Outlet Village S.p.A. Corso Giacomo Matteotti n. 10, Milan, Italy The Borrower has applied all amounts borrowed by it thereunder towards general corporate purposes of the same 7

19 Utilisation Date 30 March 2015 Loan Interest Period Loan Payment Date Loan Final Maturity Date 30 March 2022 Interest Borrower s Jurisdiction A three month calendar period with the first Interest Period being from 30 March 2015 to 25 May Each subsequent Interest Period starts on the day following the expiry of the previous Interest Period and ends on the 25 th day of the third calendar month immediately following the expiration of the previous Interest Period, which for the avoidance of doubt, shall fall on 25 February, 25 May, 25 August and 25 November of each year, provided that there shall be a short final Interest Period ending on 30 March February, 20 May, 20 August and 20 November of each year The applicable Euribor plus a margin of 400 basis points per annum Italy Loan Security Documents (i) Deed of mortgage over the property; Key Financial Covenants Loan to Value Covenant Actual Interest Cover Ratio Covenant Cash Trap Event Borrower Level Hedging Governing Law of the Loan (ii) (iii) (iv) (v) (vi) (vii) Deed of pledge over pledged accounts; Deed of pledge over shares; Deed of assignment of contract receivables; Deed of assignment of hedging receivables; any loss payee clause; and any other document designated in writing as such by the Borrower and the Loan Agent or that is provided pursuant to the above mentioned documents for the perfection of any security interest or any privilege provided therein. Loan to Value (LTV) and Interest Cover Ratio (ICR) An Event of Default occurs if the LTV ratio is, on each Test Date, equal or higher than 80 per cent. An Event of Default occurs if the ICR ratio is, on each Test Date, equal to or lower than 140% The ICR is calculated as the ratio between the Net Operating Income and the Net Interest. The circumstance when on any Test Date (i) the LTV ratio is equal to or higher than 70% but lower than 75%; and/or (ii) the ICR ratio is equal to or lower than 180% but higher than 160%. An interest rate swap has been entered into by the Borrower with Banca Nazionale del Lavoro S.p.A. on 30 April The Loan is governed and shall be interpreted in accordance with the laws of Italy. C. LOAN ASSET PORTFOLIO SALE AGREEMENT Please refer to the sections entitled Description of the Note Transaction Documents The Loan Asset Portfolio Sale Agreement for further detail in respect of the terms of the sale arrangements of the Loan. Loan Asset Portfolio Sale Agreement Loan Asset Portfolio Sale Pursuant to the terms of a Loan Asset Portfolio Sale Agreement dated 12 June 2015 (as amended by the amendment agreement dated 29 June 2015) (the Loan 8

20 Agreement Representation and Warranties Consideration Remedy for Breach of Warranty Asset Portfolio Sale Agreement) between the Issuer and the Originator, the Originator has assigned to the Issuer the Loan Asset Portfolio. The Loan Asset Portfolio is transferred as a pool (in blocco) and without recourse (pro soluto). The Loan Asset Portfolio Sale Agreement is governed in accordance with the laws of the Republic of Italy. Pursuant to the terms of the Loan Asset Portfolio Sale Agreement, the Originator has given certain representations and warranties and indemnities in favour of the Issuer in relation to, inter alia, the Loan Asset Portfolio. See for further details Description of the Note Transaction Documents The Loan Asset Portfolio Sale Agreement. As consideration for the purchase of the Loan Asset Portfolio, the Issuer will pay to the Originator the Purchase Price. The Issuer will pay the Purchase Price in immediately available funds on the Transfer Date, in accordance with the settlement instructions to be agreed between the Parties on or prior to such date. Purchase Price means Euro 85,000,000. See for further details Description of the Note Transaction Documents The Loan Asset Portfolio Sale Agreement. Without prejudice to any other right of the Issuer pursuant to Italian laws or to the Note Transaction Documents, the Originator undertakes to indemnify and hold harmless the Issuer from and against any and all damages, losses, claims, costs, expenses and/or Tax (including, without limitation, the legal fees) that the Issuer might incur or suffer as an immediate and direct result of (i) the untruthfulness and the non-correctness of any of the representations and warranties given pursuant to the Loan Asset Portfolio Sale Agreement which is not remedied within 30 Business Days; or (ii) a default by the Originator in the performance of any of its material obligations under the Loan Asset Portfolio Sale Agreement which has not been remedied within 30 Business Days; or (iii) any amount offset by the Debtor pursuant to the Loan Finance Documents against the Issuer as owner of the Receivables, in respect of any amounts owed to the Debtor by the Originator, to the extent such off-setting refers to facts and circumstances occurred on or prior to the Transfer Date. See for further details Description of the Note Transaction Documents The Loan Asset Portfolio Sale Agreement. D. SUMMARY OF THE TERMS AND CONDITIONS OF THE NOTES Please refer to section entitled Terms and Conditions of the Notes for further detail in respect of the terms of the Notes Full Capital Structure of the Notes Class A Class B Class X1 Class X2 Currency Initial Principal Amount 65,000,000 20,000, , ,000 Issue Price 100% 100% 100% 100% Reference Rate Euribor Euribor N/A N/A Relevant Margin 3.2% per annum 6.0% per annum N/A N/A Interest Accrual Method Actual/360 Actual/360 N/A N/A Interest Determination Date The date falling two TARGET Days prior to The date falling two TARGET Days prior to N/A N/A 9

21 the first day of each Loan Interest Period (i.e. two TARGET Days prior to each Notes Payment Date) and, in respect of the first Notes Interest Period, the date falling two TARGET Days prior to the Issue Date. Note Payment Date 25 February, 25 May, 25 August and 25 November of each year + Expected / Final Maturity Date the first day of each Loan Interest Period (i.e. two TARGET Days prior to each Notes Payment Date) and, in respect of the first Notes Interest Period, the date falling two TARGET Days prior to the Issue Date. 25 February, 25 May, 25 August and 25 November of each year + Expected / Final Maturity Date 25 February, 25 May, 25 August and 25 November of each year + Expected / Final Maturity Date 25 February, 25 May, 25 August and 25 November of each year + Expected / Final Maturity Date Business Day Convention Modified Following Modified Following Modified Following Modified Following First Note Payment Date 25 August August August August 2015 First Note Interest Period Issue Date to first Note Payment Date Issue Date to first Note Payment Date Issue Date to first Note Payment Date Issue Date to first Note Payment Date Expected Maturity Date 30 March March March March 2022 Final Maturity Date 30 March March March March 2027 Form of the Notes Dematerialised form (forma dematerializzata) Dematerialised form (forma dematerializzata) Dematerialised form (forma dematerializzata) Dematerialised form (forma dematerializzata) Application for Listing Irish Stock Exchange Irish Stock Exchange N/A N/A ISIN Code IT IT IT IT Common Code N/A N/A Clearance/Settlement Monte Titoli Monte Titoli Monte Titoli Monte Titoli Minimum Denomination 100,000 or integral multiples of Euro 1,000 in excess thereof 100,000 or integral multiples of Euro 1,000 in excess thereof 100, ,000 Retained Amount 5% 5% N/A N/A Principal features of the Notes Notes Issue Price Note Date Payment Interest on the Class A and Class B Notes The 65,000,000 Class A Commercial Mortgage Backed Notes due 30 March 2027 will be issued by the Issuer on the Issue Date. The 20,000,000 Class B Commercial Mortgage Backed Notes due 30 March 2027 will be issued by the Issuer on the Issue Date. The 100,000 Class X1 Commercial Mortgage Backed Notes due 30 March 2027 will be issued by the Issuer on the Issue Date. The 100,000 Class X2 Commercial Mortgage Backed Notes due 30 March 2027 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. The 25th day of February, May, August and November in each year or, if such day is not a Business Day, the following Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not). The first Note Payment Date is 25 August The final Note Payment Date is 30 March The Expected Maturity Date and the Final Maturity Date will also be Note Payment Dates. Interest on the Notes will accrue on a daily basis and will be payable in arrear in Euro on each Note Payment Date. The period from each Note Payment Date (including) to (but excluding) the following Note Payment Date being the Note Interest Period. The rate of interest payable from time to time in respect of the principal amount outstanding of each Class A Notes and Class B Notes for each Note Interest Period will be the aggregate of Euribor plus the applicable Margin, except for the first Note Interest Period where the rate of 10

22 Interest on the Class X Notes Margin Euribor Deferral interest of Form, denomination and title interest will be the aggregate of the applicable Margin and the higher of: (i) an interpolated rate interest based on one and two months deposits in Euro (determined as of 22 July 2015); and (ii) zero; (each of such rates of interest in respect of the first and any subsequent Note Interest Period, a Note Interest Rate). Euribor means, for each Notes Interest Period other than the first one, the same reference rate as determined and calculated in respect of the corresponding Loan Interest Period in accordance with the Loan Transaction Documents. The amounts due on the Class X Notes in respect to any Note Payment Date (the Class X Available Amount) will be: (i) (ii) the Interest Available Funds collected in respect of the corresponding Loan Interest Period; minus amounts payable under items from (i) to (viii) of the Priority of Payments set out in Condition 6.2 (Pre-enforcement interest Priority of Payments), or items from (i) to (vi) of the Priority of Payments set out in Condition 6.6 (Post-enforcement Priority of Payments (Interest and Principal)), as the case may be, in respect of the relevant Loan Interest Period. On each Note Payment Date, the Class X Available Amount will be distributed among the Class X1 Notes and the Class X2 Notes as follows: (a) (b) Euro 12,500 to the Class X2 Noteholder; and any amounts remaining to the Class X1 Noteholder (the Class X Notes Payments); provided that, should the Class X Available Amount be insufficient to pay the amount due to the Class X2 Noteholders under paragraph (a) above, the Issuer will create a provision on its accounts for the unpaid portion, which will be deferred and paid on the earlier of : (a) any succeeding Note Payment Date when there is sufficient Class X Available Amount; or (b) the date on which the Issuer redeems in full the Class X2 Notes. For the avoidance of doubt, no further interest will accrue on any amount so deferred. Class A Notes, 3.2 per cent. per annum; Class B Notes, 6.0 per cent. per annum. Euribor means, for each Note Interest Period, the same interest rate as determined and calculated in respect of the corresponding Loan Interest Period in accordance with the Loan Transaction Documents. Without prejudice to Condition 12 (Event of Default), to the extent that on any Note Payment Date funds available to the Issuer to pay interest on the Class A Notes or the Class B Notes are insufficient, then the amount of the shortfall (the Deferred Interest) will not be paid on that Note Payment Date. The Issuer will create a provision in its accounts for such Deferred Interest, which will be paid on the earlier of: (a) any succeeding Note Payment Date when there is sufficient Interest Available Funds in accordance with the relevant Priority of Payments; or (b) the date on which the Issuer redeems in full the relevant Notes. No further interest will accrue on any Deferred Interest or, more generally, interest amounts under the Notes. The Notes will be issued in dematerialised form (forma dematerializzata) on the terms of and subject to the Conditions and will be held in such form on behalf of the Noteholders, until redemption or cancellation thereof, by Monte Titoli for the account of the relevant Monte Titoli Account Holders in accordance with article 83-bis and ff. of the Legislative Decree 24 February 1998, No. 58, and the joint resolutions of the Bank of Italy and Consob dated 22 February The denomination of the Notes (other than the Class X Notes) will be 100,000 or integral multiples of Euro 1,000 in excess thereof. 11

23 Payment of Interest on the Notes Repayment of principal on the Notes Ranking Withholding Notes on Final Redemption Note Plan Mandatory Redemption Maturity Loan Prepayment Fees Optional Redemption for taxation reasons Title to the Notes will at all times be evidenced by book-entries in accordance with the applicable law. No certificate or physical document of title will be issued in respect of the Notes. Payment of interest on the Notes will occur in accordance with the then applicable Priority of Payments. Repayment of principal on the Notes will occur in accordance with the then applicable Priority of Payments. The Notes will rank among themselves in accordance with the Priority of Payments set out in Condition 6 (Priority of Payments). 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 Noteholders Representative or the Paying Agent or any paying agent (as the case may be) is required by law to make any Tax Deduction. In that event the Issuer, the Noteholders Representative or such Paying Agent (as the case may be) will make such payments after such Tax Deduction and will account to the relevant authorities for the amount so withheld or deducted. The Issuer will redeem the Notes at their principal amount outstanding, together with accrued and unpaid interest, on the Expected Maturity Date or, in case of any default or delay by the Debtors under the Finance Documents, by the Final Maturity Date. The Issuer may not redeem the Notes prior to that date, in full or in part, unless in accordance with this Condition 8, but without prejudice to Condition 12 (Notes Events of Default). If the Issuer has insufficient funds to repay the Notes in full on the Final Maturity Date, then the Notes will be deemed to be discharged in full and any amount payable in respect of the Notes will be finally and definitely cancelled, unless payment of such amounts is being improperly withheld or refused. If the Loan remains outstanding on the date falling 24 months prior to the Final Maturity Date and, in the opinion of the Special Servicer, all recoveries then anticipated are unlikely to be realised in full prior to the Final Maturity Date, then the Special Servicer will prepare and deliver a Note Maturity Plan in accordance with the Servicing Agreement. The Notes (other than the Class X Notes) will be redeemed on each Note Payment Date on which there are Principal Available Funds, in accordance with the applicable Priority of Payments. The Class X1 Notes and the Class X2 Notes will be subject to partial mandatory redemption on the first Notes Payment Date, irrespective of the Priority of Payments, from amounts standing to the credit of the Class X Account, up to 95,000 for each Class. The Issuer may apply amounts standing to the credit of the Class X Account also for the purpose of funding any non-recurring Issuer Expenses incurred upon issue of the Notes or in any case prior to the first Notes Payment Date, to the extent not already envisaged under the Notes Transaction Documents or paid otherwise. The Class X1 Notes and the Class X2 Notes will be subject to full mandatory redemption, irrespective of the Priority of Payments, from amounts standing to the credit of the Class X Account on the Notes Payment Date on which all the other Notes are redeemed in full. On each Note Payment Date, prior to the delivery of a Note Enforcement Notice, any Loan Prepayment Fees received by the Issuer will be allocated and paid pro rata to the Class A Notes and the Class B Notes in accordance with their respective amount outstanding. Loan Prepayment Fees means the prepayment fees due by the Borrower upon voluntary prepayment of the Loan in accordance with Clause 23.3 (Prepayment Fees) of the Loan Agreement. Provided that no Note Enforcement Notice has been served, if at any time, following the occurrence of legislative or regulatory changes, or official interpretations or administration or application thereof by competent authorities: 12

24 and illegality (i) on the next Note Payment Date: (x) the Issuer would be required to make a Tax Deduction (other than a Decree 239 Deduction) in respect of any payment of principal, premium or interest on the Notes; or (y) amounts payable to the Issuer in respect of the Receivables would be subject to a Tax Deduction; or Expected Maturity Date and Final Maturity Date Segregation Issuer s Rights of Notes Event of Default (ii) (iii) the segregated assets (patrimonio separato) of the Issuer in respect of the Securitisation becomes subject to Tax prior to the Final Maturity Date; or without prejudice to Condition 12.1(v), is or will become unlawful for the Issuer (by reason of a change in law or the interpretation or administration thereof since the Issue Date) to perform or comply with any of its material obligations under or in respect of the Notes or any of the Transaction Documents to which it is a party; then the Issuer may redeem all (but not some only) of the Notes at their principal amount outstanding, together with accrued but unpaid interest and premia, on any Note Payment Date, subject to: (i) (ii) the Issuer having given not more than 60 days and not less than 30 days notice to the Noteholders Representative and the Noteholders in accordance with Condition 15 (Notices); and the Issuer having provided to the Noteholders Representative, prior to the delivery of the above notice (A) a legal opinion (in form and substance satisfactory to the Representative of the Noteholders) from a primary law firm (approved in writing by the Representative of the Noteholders) opining on the relevant change in law or interpretation or administration or application thereof, and (B) a directors certificate confirming that the above circumstances cannot be avoided by taking measures reasonably available to the Issuer. The above directors certificate will be binding on the Noteholders and the other Issuer Secured Creditors, and the Noteholders Representative may rely on it without further investigation. Unless previously redeemed in full the Notes are expected to mature on the Note Payment Date falling on 30 March 2022 (the Expected Maturity Date) and the Notes of each Class will in any event be due to be repaid in full at their Principal Amount Outstanding not later than 30 March 2027 (the Final Maturity Date). The Notes have the benefit of the provisions of article 3 of the Securitisation Law (as amended by the Law Decree Competitività), pursuant to which the Receivables are 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 Loan will be exclusively available for the purpose of satisfying the obligations of the Issuer to the Noteholders and to the other Issuer Secured Creditors or to any other creditors of the Issuer in respect of any costs, fees and expenses in relation to the Securitisation, subject to the applicable Priority of Payments. See for further details Selected Aspects of Italian Law Ring fencing of the assets. If any of the following events occurs: (i) (ii) (iii) (Non-payment): Non-payment of any amount of interest on the Class A Notes and/or Class B Notes within 5 Business Days of the due date of payment; or non-payment of any amount in respect of any Class of Notes following an optional redemption notice; or non-payment of any amount of principal on any Notes on the Final Maturity Date; (Breach of other obligations): the Issuer defaults in the performance of any of its obligations under the Conditions or any of the Transaction Documents in any material respect, and such default is (a) incapable of remedy or (b) if capable of remedy, remains unremedied for 30 days after the Noteholders Representative has given written notice to the Issuer requiring the same to be remedied; (Misrepresentation): any representation made or deemed to be made by the Issuer pursuant of the Transaction Documents proves to have been incorrect or misleading in any material respect when made or deemed to be made, and such misrepresentation is (a) incapable of remedy or (b) if capable of remedy, remains for 30 days after the 13

25 Non petition Limited Recourse The organisation of the holders of the Notes Noteholders Representative Enforcement (iv) (v) Noteholders Representative has given written notice to the Issuer requiring the same to be remedied; (Unlawfulness): it is or becomes unlawful for the Issuer to perform any of its obligations under the Conditions or any material obligations under the Transaction Documents; (Insolvency): an order is made or a resolution is passed for the winding-up of the Issuer; the Issuer stops payment of its debts, or becomes unable to pay its debts as they fall due, or otherwise becomes insolvent within the meaning of the applicable insolvency law; Insolvency Proceedings are initiated by or against the Issuer, or an application for the commencement of any such proceedings is made, save where such proceedings or application are frivolous or vexatious and are being contested in good faith by the Issuer with a reasonable prospect of success. Save as expressly permitted by the Transaction Documents, only the Noteholders Representative may pursue the remedies available to the Noteholders in respect of the Conditions and the Transaction Documents, either by law or by contract. The Noteholders are entitled to direct the Noteholders Representative to pursue any remedy or action, or to refrain from doing so, only in accordance with the Conditions and in particular with Condition 14 (Meetings of the Noteholders). If the Noteholders Representative improperly fails to act and such failure is continuing within a reasonable period following receipt of a written notice, then Noteholders holding the required majority of Notes may act directly. All obligations of the Issuer to the Noteholders are limited in recourse and subject to certain restrictions as set out below: (i) (ii) (iii) (iv) the Noteholders will have a claim only in respect of the Available Funds and only in accordance with the applicable Priority of Payments (and in respect of Class X Notes and Loan Prepayment Fees, in accordance with respectively Conditions 8.2 (Mandatory Redemption) and 8.3 (Loan Prepayment Fees)); the Noteholders will not have recourse against the other assets of the Issuer or its contributed capital, or against any of the directors, quotaholders, officers or agents of the Issuer; sums payable by the Issuer to the Noteholders will be limited, at any given time, to the lesser of (a) the nominal amounts which would be due and payable at such time in accordance with the applicable Priority of Payments and (b) the Available Funds, net of any sums which are payable in priority to or pari passu with sums payable to the Noteholders; until the date falling one year and one day after the Final Maturity Date, or two years and one day after the full redemption of the Notes in accordance with the Conditions, the Noteholders may not initiate, or join other parties in, enforcement, insolvency or liquidation proceedings against the Issuer; the Noteholders will not take or join any action which would result in the applicable Priority of Payments not being complied with. The organisation of the Noteholders will be established upon and by virtue of the issue of the Notes and will remain effective until repayment in full or cancellation of the Notes. The organisation acts through the Noteholders Representative, the meeting of the Noteholders, and any written resolution of the Noteholders, in each case subject to the Condition 13 (Organisation of the Noteholders Noteholders Representative). The purpose of the organisation 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. The Noteholders may at any time, at their own costs and expenses, appoint an ad hoc committee in respect of one or more specified matters. Pursuant to Condition 13.2 (Appointment, duration and removal) for so long as the Notes are outstanding, there will be at all times a Noteholders Representative, to be appointed by a written resolution of the Noteholders. At any time after a Note Enforcement Notice has been served on the Issuer, the Noteholders Representative may, at its discretion and always in the interest of the Noteholders, without 14

26 Listing Governing Law Regulatory Disclosure Preliminary Collection Report Preliminary Payments Report Loan Report Investor Investor Report further notice, take such steps and institute such proceedings as it thinks fit to enforce repayment of the Notes and payment of other amounts due to the Noteholders. Application has been made to the Irish Stock Exchange for the Notes (other than the Class X Notes) to be admitted to the Official List and to trading on the Main Securities 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 and will be subject to the jurisdiction of the Italian courts. In the Intercreditor Agreement, BNP Paribas S.A. undertakes to the Issuer and to the Noteholders Representative that, from the Issue Date as originator, it will: (i) retain, on an ongoing basis, a material net economic interest of not less than 5 per cent. in the Securitisation in accordance with each of Article 405(1) of the CRR and Article 51 of AIFM Regulation; (ii) comply with the relevant disclosure obligations imposed under the CRR and the AIFM Regulation, including without limitation the manner in which retained interest is held, the level of such retained interest, and any matters that could undermine the maintenance of the minimum required net economic interest as referred to above; (iii) provide confirmation on a quarterly basis to the Master Servicer and the Calculation Agent that it continues to retain a material net economic interest of not less than 5 per cent. in the securitisation, for inclusion of such information in the Investor Report; (iv) notify to the Master Servicer and the Calculation Agent any change to the level or manner in which such retained interest is held, for inclusion of such information in the Investor Report; provided that BNP Paribas S.A. is only required to do so to the extent that the retention and disclosure requirements under the CRR and the AIFM Regulation remain in effect, and provided further that BNP will not be in breach of any such undertakings if it fails to comply due to events, actions or circumstances beyond its control. As of the Issue Date, such interest will comprise the retention of no less than 5 per cent. of the nominal value of each of the Class A Notes and Class B Notes. The manner in which the net economic interest is retained may be changed (but without obligation to do so) in connection with any amendment to, or change in the interpretation of the CRR and/or the AIFM Regulation. By no later than 10 Business Days prior to each Loan Payment Date, the Primary Servicer will deliver to the Issuer, the other Servicers, the Agents and the Noteholders Representative a report containing the information specified in the Servicing Agreement. See Description of the Note Transaction Documents Key Terms of the Servicing Agreement for further information. Within 2 Business Days following receipt of the Preliminary Collection Report, the Calculation Agent will deliver the Preliminary Payments Report to the Issuer and the Issuer s counterparties under the Note Transaction Documents. Such report is prepared on the basis of the information included in the Preliminary Collection Report and it contains the information specified in the Agency Agreement. See Description of the Note Transaction Documents Agency Agreement for further information. The Primary Servicer will prepare and deliver the Loan Investor Report to the Calculation Agent within 15 Business Days after each Note Payment Date in accordance with the Servicing Agreement. See Description of the Note Transaction Documents Key Terms of the Servicing Agreement for further information. The Calculation Agent will prepare and deliver the Investor Report to the Issuer, the Servicers, the Agents and the Noteholders Representative within 20 Business Days after each Note 15

27 Collection Report Payments Report Payment Date in accordance with the Agency Agreement. See Description of the Note Transaction Documents Agency Agreement for further information. By no later than 1 Business Day following each Loan Payment Date, the Issuer Account Bank will deliver to the Calculation Agent and the Servicers a report detailing the amounts actually collected by the Issuer. See Description of the Note Transaction Documents Agency Agreement for further information. The Calculation Agent will deliver the Payments Report to the Issuer and the Issuer s counterparties under the Note Transaction Documents by no later than 10:00 a.m. (CET) of the Business Day immediately preceding each Note Payment Date. The Calculation Agent will cause the Payments Report to be published on its website on or as soon as possible after such Note Payment Date. Such report contains the information specified in the Agency Agreement. See Description of the Note Transaction Documents Agency Agreement for further information. E. RIGHTS OF NOTEHOLDERS AND RELATIONSHIP WITH THE OTHER ISSUER SECURED CREDITORS Please refer to sections entitled Terms and Conditions of the Notes for further detail in respect of Noteholders, conditions for exercising their rights and relationship with the other Issuer Secured Creditors. Noteholder Decision Making Meeting of the Noteholders Provisions Noteholders holding not less than 10 per cent. of the principal amount outstanding of the Notes of the relevant Class, the Issuer and the Noteholders Representative are entitled to convene separate or combined meetings of the Noteholders of any Class or Classes, at any time. For the avoidance of doubt, the Noteholders Representative has the right, but not the obligation, to convene a meeting or meeting in order to obtain the Noteholders instructions in connection with matters in respect of which the Noteholders Representative is entitled to exercise discretions hereunder. The Noteholders Representative will be obliged to convene a meeting upon written request by the Primary Servicer for obtaining Noteholders consent for any purpose. First call Second call Notice period: 14 days 14 days (provided hovewer that the second call meeting may be convened on the same day of the first call meeting) Quorum: presence of as many Noteholders representing at least 50.1 per cent. of the principal amount outstanding of the Notes of each of the relevant Class(es). Required majority: Resolution (other than the Basic Term Modification): absolute majority of the principal amount outstanding represented at the meeting. Resolution enabling a Basic Term Modification: favourable vote of Noteholders representing at least 75 per cent. of the principal amount outstanding of the Notes of each relevant presence of as many Noteholders representing more than 33.3 per cent. of the principal amount outstanding of the Notes of each of the relevant Class(es). Resolution (other than the Basic Term Modification): absolute majority of the principal amount outstanding represented at the meeting. Resolution enabling a Basic Term Modification: favourable vote of Noteholders representing more than 66 per cent. of the principal amount outstanding of the Notes of each relevant 16

28 Negative Consent (silenzio assenso) Communication with Noteholders Originator Noteholder as Written resolution: Class(es). Class(es). A resolution passed in writing by Noteholders holding at least 50.1 per cent. of the principal amount outstanding of the Notes of the relevant Class(es) will have the same effect as a resolution passed at a duly convened meeting. The Issuer, the Noteholders Representative or any Servicer acting in accordance with the Servicing Agreement may propose any matter for consideration and approval by the Noteholders by way of negative consent. This provision does not apply to a resolution relating to (a) a Basic Term Modification, (b) the waiver of any Notes Event of Default, (c) the service of a Note Enforcement Notice, (d) sale of the Loan Asset Portfolio under Condition 12.3 (Sale of Loan Asset Portfolio) or (e) postponement of the Loan Maturity Date (save as provided in the Servicing Agreement). A resolution will be deemed approved by negative consent where: (i) (ii) notice of such proposed resolution is given to the Noteholders in accordance with Condition 15 (Notices) and such notice contains a statement informing the Noteholders that the negative consent procedure applies; holders representing 25 per cent. or more of the principal amount outstanding of the Notes of the relevant Class(es) have not informed in writing the Noteholders Representative of their objection to such resolution within 30 days of the date of the notice. As long as the Notes are held through Monte Titoli, any notice regarding the Notes will be deemed to have been duly given if given through the systems of Monte Titoli. As long as the Notes are listed on the Irish Stock Exchange and the listing rules so require, any notice will also be published on the website of the Irish Stock Exchange or in such other or additional manner as required by such rules. The Noteholders Representative may sanction some other or additional method of notice (including without limitation any relevant screen) if, in its sole opinion, such other or additional method is reasonable having regard to market practice then prevailing. Any notice to be given by a Servicer to the Noteholders will be published on Bloomberg or, if Bloomberg is not available, the most widely read online information source accessed by CMBS investors generally which is available for publication of notices of the type contemplated by the Servicing Agreement, as determined by the relevant Servicer upon consultation with the Noteholders Representative. There are no restrictions on the rights of the Originator in respect of voting or counting in the quorum in respect of any portion of the Notes held by it. F. ADDITIONAL RELEVANT DATES AND PERIODS Issue Date The Issuer will issue the Notes on 24 July Collection Period Interest Determination Date Calculation Date The period commencing one day after a Loan Payment Date and ending on the next Loan Payment Date (inclusive), except in respect of the first Collection Period, which commences on the Issue Date (inclusive). The date falling two TARGET Days prior to the first day of each Loan Interest Period (i.e., two TARGET Days prior to each Notes Payment Date) and, in respect of the first Notes Interest Period, the date falling two TARGET Days prior to the Issue Date. TARGET Day means any day on which the system for the payments in Euro named Trans- European Automated Real Time Gross Settlement Express Transfer payment, which is effective from 19 November, 2007, is open and effective for the settlement of the payments in Euro. The date falling one Business Day prior to each Note Payment Date. 17

29 Note Interest Period Loan Investor Report Date Investor Report Date In respect of the first Note Interest Period, the period commencing on (and including) the Issue Date and ending on (but excluding) the Note Payment Date falling on 25 August 2015 and, in respect of any successive Note Interest Period, the period from (and including) a Note Payment Date to (but excluding) the following Note Payment Date. The date falling 15 Business Days after each Note Payment Date (each, a Loan Investor Report Date) on which the Primary Servicer is required to deliver the Loan Investor Report. The date falling 20 Business Days after each Note Payment Date (each, an Investor Report Date), on which the Calculation Agent is required to deliver the Investor Report. G. CREDIT STRUCTURE AND CASHFLOW Please refer to sections entitled Description of the Note Transaction Documents for further detail in respect of the credit structure and cash flow of the transaction. Available Funds Interest Available Funds Principal Available Funds Common terms Pre-enforcement interest Priority of Payments The aggregate of the Interest Available Funds, the Principal Available Funds, the Loan Prepayment Fees and the proceeds deriving from the sale of the Loan Asset Portfolio (if any) or any indemnity paid by the Originator to the Issuer pursuant to the Loan Asset Portfolio Sale Agreement. Without double counting, the aggregate of: (a) (b) (c) (d) any amount collected or recovered by the Issuer in relation to the Loan Asset Portfolio and the Note Transaction Documents other than the Principal Available Funds and the Loan Prepayment Fees (including for the avoidance of doubt any break costs); any interest accrued from time to time on the Accounts other than the Class X Account and the Class X Reserve Account; any amounts credited from time to time to the Expenses Account; and any amounts credited from time to time on the Class X Reserve Account, as from the earlier of (i) the first Note Payment Date following the Loan Maturity Date or (ii) the first Note Payment Date following the delivery of a Note Enforcement Notice or (iii) the Note Payment Date on which the Notes are redeemed in full or (iv) the first Note Payment Date following the date on which all outstanding Servicing Transfer Event(s) have been cured. The aggregate of: (a) (b) (c) any Scheduled Loan Amortisation Amount; any other amount collected or recovered by the Issuer in relation to the Loan Asset Portfolio on account of principal, including following a prepayment of the Loan either on a mandatory or voluntary basis (but excluding any Loan Prepayment Fees); and any insurance proceeds received by the Issuer other than those relating to loss of rent. On each Note Payment Date, the Available Funds will be applied by or on behalf of the Issuer in making the payments in the order of priority set out in Condition 6 (Priority of Payments). Payments of the same priority will be made pro rata and pari passu according to their respective amount. Payments of a lower priority will be made only if payments of a higher priority have been made in full. On each Note Payment Date prior to (a) the delivery of a Note Enforcement Notice or (b) the occurrence of a Servicing Transfer Event, the Interest Available Funds will be applied by or on behalf of the Issuer in making the payments in the following order of priority: 18

30 Pre-enforcement principal Priority of Payments Interest Priority of Payments following a Servicing Transfer Event Principal Priority of Payments following a Servicing Transfer Event Post-enforcement Priority of Payments (Interest and Principal) (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) First, to pay or allocate for payment during the following Note Interest Period, pari passu and pro rata according to their respective amount, any Issuer Expenses, to the extent the funds standing on the Expenses Account are insufficient; Second, to replenish the Expenses Account up to the Retention Amount; Third, to pay any amounts due to the Noteholders Representative pursuant to the Note Transaction Documents; Fourth, to pay any amounts due to the Paying Agent, the Issuer Account Bank, the Calculation Agent, the Corporate Services Provider, the Primary Servicer, the Special Servicer and the Master Servicer pursuant to the Note Transaction Documents, pari passu and pro rata according to their respective amount; Fifth, to pay interest due on the Class A Notes; Sixth, to pay interest due on the Class B Notes; Seventh, to pay any indemnity amounts due by the Issuer in case of misrepresentation under the Subscription Agreement; Eight, to distribute and pay any Class X Available Amount due to on the Class X Notes, in accordance with Condition 7.4 (Interest amounts payable on the Class X Notes). On each Note Payment Date prior to (a) the delivery of a Note Enforcement Notice or (b) the occurrence of a Servicing Transfer Event, the Principal Available Funds will be applied by or on behalf of the Issuer to repay principal due on the Class A Notes and the Class B Notes, pro rata and pari passu according to their respective amount. On each Note Payment Date following the occurrence of a Servicing Transfer Event but prior to the delivery of a Note Enforcement Notice, the Interest Available Funds will be applied by or on behalf of the Issuer in making the payments in the following order of priority: (i) (ii) items (i) to (vii) as set forth in Condition 6.2 (Pre-enforcement interest Priority of Payments); and all remaining amount, to credit any excess to the Class X Reserve Account. On each Note Payment Date following the occurrence of a Servicing Transfer Event but prior to the delivery of a Note Enforcement Notice, the Principal Available Funds will be applied by or on behalf of the Issuer: (i) (ii) First, to repay principal due on the Class A Notes; Second, to repay principal due on the Class B Notes. Following the delivery of a Note Enforcement Notice, the Available Funds (including for the avoidance of doubt the proceeds deriving from any sale of the Loan Asset Portfolio) will be applied by or on behalf of the Issuer in making the payments in the following order of priority, on each Note Payment Date or on such earlier date on which the Available Funds exceed Euro 10,000,000: (i) (ii) (iii) (iv) First, to pay any amounts due to the Noteholders Representative pursuant to the Note Transaction Documents; Second, to pay any amounts due to the Paying Agent, the Issuer Account Bank, the Calculation Agent, the Corporate Services Provider, the Primary Servicer, the Special Servicer and the Master Servicer pursuant to the Note Transaction Documents, pro rata and pari passu according to their respective amount; Third, to pay interest, principal and the pro rata portion of the Loan Prepayment Fees due on the Class A Notes; Fourth, to pay interest, principal and the pro rata portion of the Loan 19

31 General Credit Structure (v) (vi) (vii) Prepayment Fees due on the Class B Notes Fifth, to pay interest and principal on the Class B Notes; Sixth, to pay any indemnity amounts due by the Issuer in case of misrepresentation under the Subscription Agreement; Seventh, to distribute and pay any Class X Available Amount due on the Class X Notes in accordance with Condition 7.4 (Interest amounts payable on the Class X Notes). The general credit structure of the transaction includes, broadly speaking, the following elements: (a) Intercreditor Agreement Under the terms of the Intercreditor Agreement, the Noteholders Representative shall be entitled, inter alia, following the service of a Note Enforcement 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 Available Funds all sums due and payable by the Issuer to the Noteholders, the other Issuer Secured 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 Priority of Payments. See for further details Description of the Note Transaction Documents The Intercreditor Agreement. (b) Agency Agreement Under the terms of the Agency Agreement, the Issuer Account Bank, the Calculation Agent, the Master Servicer, and the 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 Issuer Accounts and with certain agency services. The Paying Agent will perform and deliver the following calculations on behalf of the Issuer: (a) on each Interest Determination Date, in respect of each Notes Interest Period, the applicable Euribor and Notes Interest Rate; (b) on each Interest Determination Date and in respect of the following Note Payment Date, all calculations in respect of interest, pursuant to Condition 7.6 (Calculations of interest and other amounts due in respect of the Notes), save for the Class X that will be made by the Calculation Agent. The Calculation Agent has agreed to prepare (i) the Preliminary Payments Report containing an estimate of the amounts to be paid by the Issuer on the Note Payment Date following each Calculation Date in accordance with the Priority of Payments; (ii) the Payments Reports including the confirmation/amendment of the amounts specified in the Preliminary Payments Report and (iii) the Investor Report containing the information already provided in the Loan Investor Report by the Primary Servicer and the rate of interest and the cash flows, including in respect of principal, interest and any other amounts received under the Notes for the most recent Notes Interest Period. On each Note Payment Date, the Paying Agent shall apply amounts transferred to it out of the Payments Account in making payments to the Noteholders in accordance with the relevant Priority of Payments, as set out in the Payments Report. The Issuer Account Bank has agreed to prepare the Collection Report detailing the amounts actually collected by the Issuer. See for further details Description of the Note Transaction Documents The Agency Agreement. (c) Deed of Pledge Under the terms of the Deed of Pledge, the Issuer has granted to the Noteholders Representative (acting for itself and for the benefit of the Noteholders and the other 20

32 Issuer Accounts Issuer Secured Creditors) a pledge over certain monetary rights to which the Issuer is entitled from time to time pursuant to certain Note Transaction Documents to which the Issuer is a party. See for further details Description of the Note Transaction Documents The Deed of Pledge. Collection Account, IBAN IT 69 G , into which the Primary Servicer or the Special Servicer (as the case may be) will credit or cause to be credited any payments received or recovered under or in relation to the Loan Asset Portfolio; the Issuer Account Bank will transfer funds standing to the credit of the Collection Account to the Payments Account on the Business Day preceding each Note Payment Date; on the first Note Payment Date following the Issue Date, the Paying Agent will transfer to the Originator the pro rata portion of the interest amounts paid from the Borrower in respect of the first interest period, in accordance with the Loan Asset Portfolio Sale Agreement Payments Account, IBAN IT 46 H , into which: - the Initial Subscriber will credit (or cause to be credited) the net proceeds of the issue of the Notes, other than the Class X Notes; - the Issuer Account Bank will transfer the funds standing to the credit of the Collection Account, the Expenses Account, and the Class X Reserve Account on the Business Day preceding each Note Payment Date; - any party will pay or transfer any amount due or received under the Note Transaction Documents that is not expressed to be paid to a different Account; and out of which: - the Paying Agent will make upfront payments, if any, due on or about the Issue Date as set out in the Note Transaction Documents (including for the avoidance of doubt payment of the purchase price of the Loan Asset Portfolio in accordance with the Loan Asset Portfolio Sale Agreement); - on each Note Payment Date, the Paying Agent will make payments due and transfers required in accordance with the applicable Priority of Payments and relevant Payments Report; Expenses Account, IBAN IT 74 K , into which: - the Paying Agent will replenish the Expenses Account up to the Retention Amount on each Note Payment Date, in accordance with the applicable Priority of Payments and relevant Payments Report; and out of which: - the Issuer (or the Corporate Servicer on behalf of the Issuer) will pay any Issuer Expenses due on a date which is not a Note Payment Date; - the Issuer Account Bank will transfer the funds standing to the credit of the Expenses Account to the Payments Account on the Business Day preceding each Note Payment Date. Retention Amount means Euro 30,000. Class X Reserve Account, IBAN IT 97 J , into which the Paying Agent will credit any amounts due to the Issuer pursuant to Condition 6.4 following a Servicing Transfer Event, and out of which the Issuer Account Bank will transfer funds to the Payments Account on the Business Day preceding each Note Payment Date in accordance with the Conditions. Class X Account, IBAN IT 23 I , into which the Initial Subscriber will credit the net proceeds of the issue of the Class X Notes, and out of which the Paying Agent will repay principal amounts under the Class X Notes in 21

33 accordance with the Condition 8.2 (Mandatory Redemption), irrespective of any Priority of Payments. H. ADMINISTRATIVE FEE The following table set out the fees to be paid by the Issuer to the other Issuer Secured Creditors (as appropriate). Type of Fee Amount of Fee Priority in Cashflow Frequency Master Servicing Fees Euro 11,000 per annum In priority to all outstanding Notes Primary Servicing Fees Special Servicing Fees Liquidation Fee Workout Fee (Special Servicer) per cent. (net of VAT) per annum of the outstanding principal amount of the Loan 0.12 per cent. (net of VAT) per annum of the outstanding principal amount of the Loan once Loan is transferred to special servicing 0.60 per cent. (net of VAT) of any Liquidation Proceeds received by the Issuer 0.60 per cent. (net of VAT) of each collection of interest and principal received on the Loan Other Fees Estimated at Euro 100,000 per annum In priority to all outstanding Notes In priority to all outstanding Notes In priority to all outstanding Notes In priority to all outstanding Notes In priority to all outstanding Notes Payable pro rata temporis on each Note Payment Date Payable pro rata temporis on each Note Payment Date Payable pro rata temporis on each Note Payment Date Payable where the Loan was a Specially Serviced Loan for a period of 30 days or less Payable where the Loan was a Specially Serviced Loan and subsequently becomes a Corrected Loan, provided that no fee will be payable where the Loan was a Specially Serviced Loan for a period of 30 days or less Various For further information see Description of the Note Transaction Documents Key terms of the Servicing Agreement Servicing Fee. 22

34 RISK FACTORS Any investment in the Notes is subject to a number of risks. Prior to investing in the Notes of any Class, prospective investors should carefully consider the risk factors described, and the special considerations summarised, below together with the other information contained in this Prospectus and any document incorporated by reference herein. The Issuer believes that the following factors may affect its ability to fulfil its obligations under Notes. Most of these factors are contingencies which may or may not occur and the Issuer is not in a position to express a view on the likelihood of any such contingency occurring. In addition, factors that are material for the purpose of assessing the market risks associated with Notes are also described below. This summary is not intended to be exhaustive. The Issuer believes that the factors described below represent the principal risks inherent in investing in Notes, but the inability of the Issuer to pay interest, repay principal or pay other amounts on or in connection with any Notes may occur for other reasons which may not be considered significant risks by the Issuer based on information currently available to it or which it may not currently be able to anticipate. Should any of such predictable or unpredictable events occur, the value of the Notes may decline, the Issuer may not be able to pay all or part of the interest or principal on the Notes and investors may lose all or part of their investment. Prospective investors should also read the detailed information set out elsewhere in this Prospectus, including any document incorporated by reference herein, and reach their own views, based upon their own judgement and upon advice from such financial, legal and tax advisers as they have deemed necessary, prior to making any investment decision. In addition, whilst the various structural elements described in this Prospectus are intended to lessen some of the risks discussed below for the Noteholders, there can be no assurance that these measures will be sufficient to ensure that the Noteholders of any Class receive payment of interest or repayment of principal from the Issuer on a timely basis or at all. Words and expressions defined in the Terms and Conditions of the Notes in the Note Transaction Documents or elsewhere in this Prospectus have the same meaning when used in this section. FACTORS THAT MAY AFFECT THE ISSUER'S ABILITY TO FULFIL ITS OBLIGATIONS UNDER THE NOTES Risk factors and special considerations related to the Issuer and the Note Transaction Documents Limited liability under the Notes The Notes constitute direct, secured and limited recourse obligations solely of the Issuer. The Issuer will be the only entity which has obligations to pay any amount due in respect of the Notes. The Notes will not be obligations or responsibilities of, or guaranteed by, any other entity. Accordingly, nobody other than the Issuer has or accepts any liability whatsoever to the Noteholders related to any failure by the Issuer to pay any amount due and payable under the Notes. If not repaid in full on the Final Maturity Date, amounts outstanding under the Notes will be written off. Limited resources of funds to make payments under the Notes The Issuer is a special purpose entity with no business operations other than the issue of the Notes, the entering into of the Note Transaction Documents and the transactions ancillary thereto. The assets of the Issuer will themselves be limited. The Issuer has no operating history. The Issuer will not have any significant assets to be used for making payments under the Notes other than the Loan Asset Portfolio and its rights under the Note Transaction Documents to which it is a party. 23

35 Other than the foregoing, the Issuer is not expected to have any other funds available to it to meet its obligations under the Notes and/or any other payment obligation ranking in priority to, or pari passu with, the Notes. Consequently, 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 Note Enforcement 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. Limited recourse obligations of the Issuer The Notes will be limited recourse obligations of the Issuer. On enforcement of the Notes, in the event that the proceeds of such enforcement are insufficient (after payment of all other claims ranking higher in priority to or pari passu with amounts due under the Notes), then the Noteholders will have no further claim against the Issuer in respect of such unpaid amounts. Enforcement action under the Notes and the Loan Asset Portfolio is the only substantive remedy available for the purposes of recovering amounts owed in respect of the Notes through the exercise by the Noteholders Representative of the Issuer s rights. The Issuer will not have any recourse to the assets of the Borrower unless the Borrower has also defaulted on its obligations under the Loan Finance Documents. The security created by the Loan Security Documents entered into by the Borrower will not automatically be enforceable as a result of enforcement action under the Notes. Subordination Payments of interest and principal will be made to Noteholders in the priorities set forth in the relevant Priority of Payments. In particular, following delivery of a Note Enforcement Notice or upon the Notes otherwise becoming due and payable in full, payments of principal, interest and other amounts in respect of the Class B Notes will be subordinated to payments of principal, interest and other amounts in respect of the Class A Notes. Payments in respect of the Class X Notes will be subordinated to payments in respect of the Class A Notes and Class B Notes. For further detail regarding the Priority of Payments, see Condition 6 (Priority of Payments). There is no assurance that the subordination arrangements will protect the holders of Class A Notes or the holders of the most senior Class of Notes from all risk of loss. As a result of this subordination structure and other risks, under certain circumstances investors in one or more Classes of Notes may not recover their initial investment. Certain amounts payable by the Issuer to third parties such as the Primary Servicer, the Special Servicer, the Master Servicer, the Paying Agent, the Issuer Account Bank and the Noteholders Representative rank in priority to payments of principal and interest on the Notes, both before and after the occurrence of an Event of Default with respect to the Notes. Claims of unsecured creditors of the Issuer By virtue of article 3 of the Securitisation Law and the Note Transaction Documents, the rights, title and interests of the Issuer in and to the Loan Asset Portfolio and amounts received by the Issuer in respect thereof will be segregated from all other assets of the Issuer 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 relevant Priority of Payments, of the payment obligations of the Issuer to the Noteholders, to the other Issuer Secured Creditors and in relation to any other unsecured costs of the securitisation of the Loan Asset Portfolio incurred by the Issuer and 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 Note Transaction Documents, any third party 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 Noteholders Representative (on behalf of the Noteholders) and any third party creditors having the right to claim for amounts due in connection with the Securitisation would have the right to claim in respect of the Loan Asset Portfolio, even in a bankruptcy of the Issuer. 24

36 Following commencement of winding up proceedings in respect of the Issuer, a liquidator would control the assets of the Issuer including the Loan Asset 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. The Issuer s ability to meet its payment obligations under the Notes will primarily depend upon the Borrower s ability to meet its payment obligations under the Loan Agreement Payments in respect of the Notes are dependent on, and limited to, the receipt of funds from the Receivables. In turn, recourse to the Receivables is generally limited to the Borrower and its assets, which consist of the Property, security over which has been created to the secure the Loan, and whose business activities are limited to owning, developing, managing, financing and otherwise dealing with such assets. The ability of the Borrower to make payments on the Loan prior to the Loan Maturity Date and, therefore, the ability of the Issuer to make payments on the Notes prior to the Final Maturity Date is dependent primarily on the sufficiency of the net operating income of the Property. For further information see Risk factors and special considerations related to the Borrower, the Loan Agreement and the Loan Security Documents Borrower business Ability of Borrower to meet its payment obligations below. The ability of the Issuer to redeem the Notes in full on or prior to the Final Maturity Date is dependent on receipt by the Issuer of all principal amounts outstanding under the Loan either by way of prepayment or repayment of the Loan by the Borrower or the realisation of sufficient proceeds upon enforcement of the security for the Loan following an event of Default with respect to the Loan. The ability of the Borrower to repay the Loan in full on the Loan Maturity Date (to the extent it is not prepaid) will depend primarily upon the full and timely payment of the rents by the Tenants and, inter alia, upon the Borrower s ability to either refinance or sell or re-let the Property upon maturity of the Loan Agreement. Any re-letting, refinancing or sale of the Property (in whole or in part), as well as the cash flows deriving from any enforcement of the mortgage over the Property pursuant to the Loan Agreement, will be dependent upon the market value of the Property at the relevant time. There can be no assurance that the proceeds of the enforcement of the security or of the refinancing, re-letting or sale of the Property will be sufficient to enable the Issuer to meet its payment obligations under the Notes. Reliance on agents Certain of the business activities of the Issuer are to be carried out on behalf of the Issuer by agents appointed by the Issuer for such purpose. Neither the Issuer nor the Corporate Servicer will have any role in determining or verifying the data received from the Primary Servicer, the Special Servicer, the Master Servicer, the Issuer Account Bank, the Paying Agent, the Calculation Agent, the Noteholders Representative and any calculations derived therefrom. The Issuer may amend the economic terms and conditions of the Notes without the prior consent of all holders of such Notes The Conditions contain provisions for calling meetings of Noteholders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Noteholders, including Noteholders who did not attend and vote at the relevant meeting, and Noteholders who voted in a manner contrary to the majority (for further information see, inter alia, Conditions 14.5 (Constituting the meeting and validity of the resolutions Basic Term Modifications)). In addition, the Note Transaction Documents provide for resolutions affected selected matters to be deemed to be passed by negative consent, i.e. where defined majorities do not timely object to the proposed resolution(s) (for further information see, inter alia, Conditions 14.8 (Negative Consent)). Some amendment to the Notes (to the extent that affect selected matters not to be deemed to passed by negative consent ), may include, without limitation, changing any 25

37 date fixed for payment of principal, interest and premia in respect of the Notes of any Class; reducing or cancelling any monetary claim of the Noteholders against the Issuer or any other amounts payable by the Issuer to the Noteholders; any change to the method of calculating the amount of any payment in respect of the Notes, or to the currency in which such payments are due; altering the Priority of Payments in respect of the Notes; altering the quorum or majority required to pass any resolution or approve a written resolution; releasing the Loan Security other than in accordance with the Servicing Agreement; releasing the Deed of Pledge; authorising the Servicer to approve any amendments to the Loan Transaction Documents which constitute a Reserved Matter under the Servicing Agreement; authorizing the Issuer to carry out further securitisations, issue new notes or otherwise increase the amount of the Notes, reducing the amount of principal and interest payable on the Notes, changing the time and manner of payment, changing provisions relating to redemption, limiting remedies on the Notes and changing the amendment provisions. These and other changes may adversely impact Noteholders rights and may adversely impact the market value of the Notes. (For further information see Risks relating to negative consent of the Noteholders below.) Risks relating to the rights of Noteholders, resolutions and Noteholder Meetings 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 Noteholders Representative. The Conditions limits 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. Noteholders should be aware that, subject only to the delivery of notices in accordance with Condition 15 (Notices) unless they have made arrangements to promptly receive notices sent to Noteholders from any custodians or other intermediaries through which they hold their Notes and give the same their prompt attention, meetings may be convened and resolutions, may be considered and resolved or deemed to be passed without their involvement. Rights available to holders of Notes of different Classes In performing its duties and exercising its powers as representative of the Noteholders, the Noteholders Representative will have regard to the interests of all of the Noteholders as a Class. Where there is a conflict between the interests of the holders of one Class of Notes and the holders of another Class of Notes, the Noteholders Representative will only have regard to the interests of the holders of the most Senior Class of Notes in respect of which the conflict arises, subject as provided in the Intercreditor Agreement and the Conditions. For these purposes, the interests of individual Noteholders will be disregarded and the Noteholders Representative will determine interests viewing the holders of any particular Class of Notes as a whole. Prospective investors in more junior Classes of Notes should, therefore, be aware that conflicts with more senior Classes of Notes will be resolved in favour of the latter Classes. Risks relating to negative consent of Noteholders A resolution (other than a resolution relating to a Basic Term Modification, the waiver of any Note Event of Default, the service of a Note Enforcement Notice, the sale of the Loan Asset Portfolio under Condition 12.3 or the postponement of the Loan Maturity Date (save as provided in the Servicing Agreement)) may be passed by the negative consent of the relevant Noteholders i.e. without any Noteholders having voted in favour of such resolution as long as holders in respect of a sufficient principal amount of Notes have not voted against such resolution. A resolution will be deemed approved by negative consent where: (i) notice of such proposed resolution is given to the Noteholders in accordance with Condition 15 and such notice contains a statement informing the Noteholders that the negative consent procedure applies; 26

38 (ii) holders representing 25 per cent. or more of the principal amount outstanding of the Notes of the relevant Class(es) have not informed in writing the Noteholders Representative of their objection to such resolution within 30 days of the date of the notice. Therefore, it is possible that a resolution could be deemed to be passed without the vote of any Noteholders or even if holders of up to per cent. in aggregate of the principal amount outstanding of the Notes Class(es) objected to it. Risks relating to the deferral of interest on certain Classes of Notes If, on any Note Payment Date, there are insufficient funds available to the Issuer to pay interest on any Class of the Notes (other than the most senior Class of Notes ) then the amount of the shortfall will not be paid on that Note Payment Date. Such failure to pay interest will not constitute a Event of Default and the Issuer's liability to pay such accrued interest will be deferred until the earlier of (a) any succeding Note Payment Date when there are sufficient Interest Available Funds in accordance with the relevant Priority of Payments and (b) the date on which the Issuer redeems in full the relevant Notes. There is a risk that any deferred interest may not be paid to the relevant Noteholders on maturity of the Notes (please see Limited resources of funds to make payments under the Notes and The Issuer s ability to meet its payment obligations under the Notes will primarily depend upon the Borrower s ability to meet its payment obligations under the Loan Agreement ). Appointment of substitute Servicer The termination of the appointment of one of the Servicers under the Servicing Agreement will only be effective once a substitute Servicer, as the case may be, has effectively been appointed (see Description of the Note Transaction Documents - Key Terms of the Servicing Agreement below). There can be no assurance that a suitable substitute Servicer could be found who would be willing to service the Loan and the relevant security at a commercially reasonable fee, or at all, on the terms of the Servicing Agreement (even though such agreement provides for the fees payable to a substitute Servicer to be consistent with those payable generally at that time for the provision of the relevant commercial mortgage administration services). In any event, the ability of such substitute Servicer to perform such services fully would depend on the information and records then available to it. The fees and expenses of a substitute Servicer performing services in this way would be payable in priority to payment of interest under the Notes. Primary and special servicing roles Pursuant to the Servicing Agreement, the Issuer appointed Mount Street Mortgage Servicing Limited as Primary Servicer and Special Servicer (the Primary Servicer or the Special Servicer and together with the Master Servicer, the Servicers). Pursuant to the Securitisation Law, the Master Servicer is required to monitor the Securitisation. The Master Servicer may prevent the Primary Servicer or Special Servicer from taking certain actions to the extent that the Master Servicer considers such acts would infringe the Securitisation Law. See further "Description of the Issuer Transaction Documents Key Terms of the Servicing Arrangements" Conflicts between servicing entities and the Issuer The Issuer has been advised by the Servicers that they intends to continue to service existing and new loans for third parties and their own portfolio, including loans similar to the Loan, in the ordinary course of their business. These loans may be in the same markets or have common owners, obligors and/or property managers as the Loan and the Property. Certain personnel of the Servicers, as applicable, may, on behalf of the Servicers, as applicable, perform services with respect to the Loan at the same time as they are performing services, on behalf of other persons or itself, with respect to other loans in the same markets as the Property securing the Loan. In such a case, the interests of the Servicer, as applicable, and its affiliates 27

39 and their other clients may differ from and compete with the interests of the Issuer and such activities may adversely affect the amount and timing of collections on the Loan. Although the potential for a conflict of interest exists in these circumstances, pursuant to the terms of the Servicing Agreement the Servicers have agreed to act in accordance with the Servicing Standard which would require them to service such loans without regard to such affiliation. Conflicts between affiliates of the Arranger, the Lead Manager and the Issuer Conflicts of interest between affiliates of the Arranger and Lead Manager that engage in the acquisition, development, operation, financing and disposition of commercial property, on one hand, and the Issuer, on the other hand, may arise because such affiliates will not be prohibited in any way from engaging in business activities similar to or competitive with those of a Borrower. affiliates of the Arranger and Lead Manager intend to continue to actively acquire, develop, operate, finance and dispose of property-related assets in the ordinary course of their businesses. During the course of their business activities, affiliates of the Arranger and Lead Manager may provide liquidity facility and swap counterparty services or acquire, own or sell properties or finance loans secured by properties which are in the same markets as the Property Portfolio. In such a case, the interests of such may differ from and compete with the interests of the Issuer, and decisions made with respect to such assets may adversely affect the amount and timing of distributions with respect to the Notes. In addition, the Arranger and Lead Manager and their respective affiliates may have business, lending or other relationships with, or equity investments in, obligors under loans or tenants and conflicts of interest could arise between the interests of the Issuer and the interests of the Arranger and Lead Manager and such affiliates arising from such business relationships. Related Parties may purchase Notes Related parties, including the Servicers, or affiliates of a Borrower may purchase all or part of one or more Classes of Notes. A purchase by the Servicers, could cause a conflict between such entity s duties pursuant to the Servicing Agreement and its interest as a holder of a Note, especially to the extent that certain actions or events have a disproportionate effect on one or more Classes of Notes. The Servicing Agreement provides that the Loan is required to be administered in accordance with the Servicing Standard without regard to ownership of any Note by the Master Servicer or the Primary Servicer or any Special Servicer, or any affiliate thereof. Change of counterparties The parties to the Note Transaction Documents who receive and hold monies or provide support to the transaction pursuant to the terms of such documents (such as the Issuer Account Bank) are required to satisfy certain criteria in order to remain a counterparty to the Issuer. These criteria may include requirements in relation to the short-term and long-term unguaranteed and unsecured ratings ascribed to such party by the rating agencies. If the party concerned ceases to satisfy the applicable criteria, including the ratings criteria detailed above, then the rights and obligations of that party (including the right or obligation to receive monies on behalf of the Issuer) may be required to be transferred to another entity which does satisfy the applicable criteria. In these circumstances, the terms agreed with the replacement entity may not be as favourable as those agreed with the original party pursuant to the relevant Note Transaction Document and the cost to the Issuer may therefore increase. This may reduce amounts available to the Issuer to make payments of interest on the Notes. Furthermore, it may not be possible to identify an entity with the requisite rating which will agree to act as a replacement entity at all. Risk factors and special considerations related to the Borrower, the Loan Agreement and the Loan Security Documents Borrower business Ability of Borrower to meet its payment obligations 28

40 The Borrower's only material assets are the Property and the Leases and it will therefore have access to no funds other than those generated through its ownership and letting of the Property. Apart from this, the amount standing to the credit of the Borrower s bank accounts and any interest earned by the Borrower in respect of its bank accounts, the payments made by the Borrower Hedging Counterparty pursuant to the Borrower Hedging Agreement, the Borrower is not expected to have any other funds available to it to meet its obligations under the Loan Agreement. In other words, the Borrower s ability to discharge its obligations under the Loan Agreement depends primarily on the timely and full receipt of the rents, on the compliance by the tenants with all the terms and conditions of the lease agreements entered into, and, at maturity of the Loan, on the Borrower s ability to sell or refinance the Property (in whole or in part). In particular, a default of the tenants on their obligation to pay the rents would significantly impact on the Borrower s ability to meet its payment obligations under the Loan Agreement. The Borrower s ability to discharge its obligations will also depend on the level of its operating expenses, its tax liabilities and any other liability that may arise in relation to any applicable laws and regulations with respect to the ownership of the Property (see also Risk factors and special considerations related to the Property below). The inadequacy of the cash flows and revenues received by the Borrower with respect to the liabilities and obligations of the Tenants may cause a default of the Borrower under the terms of the Loan Agreement which, in turn, may cause a default of the Issuer under the Notes. Claw-back risks Italian law includes avoidance provisions requiring the so-called claw-back that may give rise to the revocation of grants of security interests and payments made by the debtor prior to the declaration of bankruptcy, as summarised in Selected Aspects of Italian law Insolvency Proceedings Bankruptcy (fallimento). In bankruptcy proceedings (fallimento), Italian bankruptcy law, as currently in force, provides for a claw-back period ranging from six months to two years, depending, inter alia, on the date on which the security is taken. Late payment or non-payment of rent Rental payments due under a Lease on or before the relevant Loan Payment Date may not be paid by the tenant on the due date or at all. If any payment of rent is not received from any tenant on or prior to the immediately following Loan Payment Date and any resultant shortfall is not otherwise compensated for from other resources, there may be insufficient cash available to the Borrower to make payments to the Issuer under the Loan Agreement. The inadequacy of the cash flows and revenues received by the Borrower with respect to the liabilities and obligations of the tenants may cause a default of the Borrower under the terms of the Loan Agreement which, in turn, may cause a default of the Issuer under the Notes. Prepayment of the Loan The Borrower is obliged, in certain circumstances, to prepay the Loan in whole or in part prior to the Loan Final Maturity Date. These circumstances include, inter alia, (i) the sale of the Property or any transfer of the Property; (ii) the loss or destruction in full of the Property; (iii) certain changes in the composition of the shareholders; (iv) certain events of change of control (as further described under section entitled The Loan Asset Portfolio Mandatory prepayment in full Change of Control ) (v) where the Property has been damaged and, as a consequence of such damages, the Property Open Market Value decreases by more than 40% of the Property Open Market Value resulting from the most recent Property Appraisal; (vi) where the Property or a portion of the same has been subject to an expropriation or appropriation or seizure or any analogous proceedings. Certain of these events are beyond the control of the Borrower and the Issuer (such as the destruction or damage of any Property or its compulsory acquisition). In addition, the Borrower is permitted under the Loan Agreement (at its option but subject to certain conditions) to prepay all or a minimum amount of Euro 5,000, of the Loan on any date. Any such prepayment may result in the Notes being prepaid earlier than anticipated. 29

41 The Borrower is also permitted, subject to the terms of the Loan Agreement, to prepay the Loan on the occurrence of certain tax or regulatory events in relation to a lender (including the Issuer). Any such prepayment in respect of the Loan may result in the Notes being redeemed earlier than anticipated. Considerations relating to prepayments The yield to maturity on the Notes will depend, to a large extent, upon the rate and timing of principal payments on the Loan. For this purpose, principal prepayments include both voluntary prepayments, if permitted, and involuntary prepayments, such as prepayments resulting from defaults and liquidations. If any Class of Notes is purchased at a premium, and if payments and other collections of principal on the Loan occur at a rate faster than anticipated at the time of the purchase and/or break or prepayment fees are received by the Issuer and paid as principal on the Notes, then the weighted average period during which interest earned on the Noteholders' investments may shorten and the actual yield to maturity on that Class of Notes may be lower than assumed at the time of the purchase. If any Class of Notes is purchased at a discount, and if payments and other collections of principal on the Loans occur at a rate slower than anticipated at the time of the purchase, then the actual yield to maturity on that Class of Notes may be lower than assumed at the time of the purchase. The investment performance of any Note may vary materially and adversely from expectations due to the rate of payments and other collections of principal on the Loan being faster or slower than anticipated. Accordingly, the actual yield may not be equal to the yield anticipated at the time the Note was purchased, and the expected total return on investment may not be realised. A high prepayment rate in respect of the Loan, and/or the prepayment of one Loan may result in a reduction in interest receipts in respect of the Loan and, more particularly, could reduce the weighted average coupon earned on the Loan Asset Portfolio which may result in a shortfall in the monies available to be applied by the Issuer in making payments of interest on the Notes, and will result in a shortfall in certain prepayment scenarios. The prepayment risk will, in particular, be borne by the holders of the most junior Classes of Notes then outstanding. Withholding tax in respect of the Loan Under current law, all payments made to the Issuer on the Loan by the Borrower can be made without withholding or deduction for or on account of the Republic of Italy. In the event that any withholding or deduction for or on account of such tax is required to be made following any change in law, the amount of the payment will be increased to the extent necessary to ensure that, after that withholding or deduction has been made, the Issuer receives a cash amount equal to that which it would have received had no such withholding or deduction been required to be made. However, there is no corresponding obligation on the tenant to increase rental payments under the Lease Agreements in these circumstances, and consequently the Borrower may not have sufficient funds with which to make such additional payments to the Issuer. If the Borrower is obliged to make such an increased payment to the Issuer, the Borrower has the option (but not the obligation) to repay the outstanding Loan in full. If the Borrower does have sufficient funds and chooses to repay the Loan, the Issuer will then be obliged to redeem the Notes in accordance with Condition 8.2 (Mandatory redemption) under the Terms and Conditions of the Notes. If the Borrower does not have sufficient funds to enable it to make such increased payments to the Issuer, the Issuer may not have sufficient funds to enable it to meet its payment obligations under the Notes and/or any other payment obligations ranking in priority to, or pari passu with, the Notes. Enforcement by Primary Servicer and Special Servicer If the Borrower defaults in its obligations in relation to the Loan or the Loan Security, the Primary Servicer, or, if at the relevant time the Loan is a Specially Serviced Loan, the Special Servicer will be required to determine the best strategy for exercising the rights of the Issuer, in accordance with the Servicing Standard. These determinations may, in certain circumstances, involve the Servicer or the Special Servicer declining or deferring the commencement of formal enforcement proceedings. Instead, the Servicer or the Special Servicer will be entitled to agree to waive or modify certain provisions of the Loan Finance Documents, 30

42 provided that (inter alia) to do so would be in accordance with the Servicing Standards and subject to Condition 14.5 (Constituting the meeting and validity of the resolutions Basic Term Modifications)). See the section entitled Key terms of the Servicing Agreement Modifications, waivers, amendments and consents for further details as to the rights and obligations of the Servicer and the Special Servicer in relation to the enforcement of the Loan Security and the modification and waiver of the provisions of the Loan Finance Documents. There will be no restrictions on either the Primary Servicer or the Special Servicer preventing them from acquiring Notes or servicing loans for third parties, including loans similar to the Loan. The properties securing any such loans may be in the same market as the Property. Consequently, personnel of the Primary Servicer or the Special Servicer, as the case may be, may perform services on behalf of the Issuer with respect to the Loan at the same time as they are performing services on behalf of other persons with respect to similar loans. Despite the requirement on each of the Primary Servicer and the Special Servicer to perform their respective servicing obligations in accordance with the terms of the Servicing Agreement, such other servicing obligations may pose inherent conflicts for the Primary Servicer or the Special Servicer. Italian Usury Law The interest payments and other remuneration paid by the Borrower under the Loan are subject to Italian law No. 108 of 7 March, 1996 (the Usury Law), which 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 Ministry of Economy and Finance (the last of such decrees having been issued on 26 March 2015). 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 situations of the transaction and the average rate usually applied for similar transactions); and (ii) the person who paid or agreed to pay them 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. If the Loan is found to contravene the Usury Regulations, the Borrower might be able to claim relief on any interest previously paid and oblige the Issuer to accept a reduced rate of interest, or potentially no interest on the Loan. In such cases, the ability of the Issuer to maintain scheduled payments of interest and principal on the Notes may be adversely affected. Refinancing risk Unless previously repaid, the Borrower will be required to repay the Loan on the Loan Final Maturity Date. The ability of the Borrower to repay the outstanding amount of the Loan on the Loan Final Maturity Date will depend, among other things, upon its ability to find a lender willing to lend to the Borrower (secured against some or all of the Property) sufficient funds to enable repayment of the Loan. If the Borrower cannot find such a lender, then the Borrower may be forced in circumstances which may not be advantageous into selling some or all of the Property in order to repay the Loan. Failure by the Borrower to refinance the Loan or to sell the Property on or prior to the Loan Maturity Date may result in the Borrower failing to repay the Loan in full on the Loan Final Maturity Date. In the event of such a default, the Noteholders, or the holders of certain Classes of Notes, may receive by way of principal repayment an amount less than the then Principal Amount Outstanding on their Notes and the Issuer may be unable to pay in full interest and other amounts due on the Notes. Risks relating to Representation and Warranties of the Borrower under the Loan Agreement Representation and warranties given by the Borrower under the Loan Agreement are to some extent qualified by the actual knowledge of the Borrower. While protection provided by representation and warranties is limited to the extent that the Borrower if factually able to indemnify the recipient of such representations and warranties, representations and warranties which are qualified by actual knowledge of the risk represented 31

43 which might be difficult if not impossible to demonstrate successfully in practice. See further The Loan Asset Portfolio The Loan Agreement B.2 Main Terms of the Loan Agreement Representation and Warranties Property Representations. Borrower taxation The Borrower is a joint stock company limited by shares (società per azioni) operating in Italy and, as such, is subject to: (i) Italian corporate income tax (IRES), currently applied at the rate of 27.5 per cent; and (ii) Regional tax on productive activities (IRAP), currently applied at the rate of 3.9 per cent (such IRAP rate may be increased on a regional basis). Under current Italian tax law, rental income receivable by the Borrower constitutes taxable income for Italian corporation tax purposes, but that repayments of principal amounts advanced to the Borrower under the Loan are not deductible for those purposes. It is envisaged that the Borrower's rental income will fund the repayment of part of the principal under the Loan, and so effectively part of the repayment of principal will be funded out of post-tax income of the Borrower. Part of the rental income received by the Borrower may (depending on the availability to it of any tax reliefs in respect of that income) therefore be required to be applied to discharge its corporation tax liability, and thus not be available to it to make payments under the Loan. The immovable properties of the Borrower are subject to the municipal property tax (IMU) ranging from 0,76 per cent to 1,06 per cent (depending on the type of asset and on the municipality in which it is located) of the adjusted cadastral value of the properties. An increase in the IRES, IRAP or IMU tax rates would adversely affect the Borrower s ability to repay principal according to the expected amortisation plans. There can be no assurance that tax law and practice will not change in a manner (including, for example, a rise in the rate of IRES, IRAP and or IMU taxes, as indicated above) which would adversely affect the amount of post-tax income of the Borrower and therefore affect the Borrower's ability to make repayments under the Loan. If the Issuer does not receive all amounts due from the Borrower under the Loan, the Issuer may not ultimately have sufficient funds to enable it to meet its payment obligations under the Notes and/or any other payment obligations ranking in priority to, or pari passu with, the Notes. Limitation of recoverability of legal fees in enforcement There can be no assurance that the Issuer will be able to recover legal fees incurred or advanced by it or by the Servicer on its behalf, in connection with the enforcement of a Loan or the relevant Loan Security from the Borrower, in particular, to the extent that such legal fees exceed the statutory limits provided by law. There can be no assurance that the legal fees relating to an enforcement of a Loan or the relevant Loan Security will fall within the limitation of what can be charged to a debtor under applicable law. Any amounts of legal fees in excess of such limitation could result in a shortfall in amounts that would otherwise be available to pay interest in respect of, and redeem principal on, the Notes. Other indebtedness of the Borrower The Borrower may incur additional indebtedness in connection with owning the Property after the Closing Date, the existence of which may adversely affect the financial viability of the Borrower. Additional debt increases the possibility that the Borrower would lack the resources to repay the Loan and its other debt and, in addition, the Borrower may have actual or contingent liabilities linked to its activities which may result in the insolvency or administration of the Borrower. In order to address these risks, the Loan Agreement restricts the right of the Borrower to incur additional indebtedness except in certain circumstances (including, inter alia, shareholder loan subject to certain conditions, financial indebtedness in relation to the ordinary course of business up to a maximum amount in aggregate (either committed and/or outstanding) equal to (x) Euro 2,000,000 or (y) exclusively in case of implementation of Phase 3 pursuant to the provisions of the Loan Agreement and Euro 3,000,000, in both cases for the entire duration of the Loan Agreement). There can be no assurance, however, that no such 32

44 actual or contingent liabilities will exist in the future or that the activities of the Borrower outside of the transaction will not lead to its being the subject of an insolvency or administration order. Risk factors and special considerations related to the Property General real estate risks In the event of a default by the Tenants under the Lease Agreements, the full recovery of amounts due pursuant to the Loan Agreement will largely depend upon the value of the Property at the relevant time. The value of the Property depends on several factors, including, without limitation, its use and the manner in which the Property is maintained. The value of the Property may be affected by changes in general and local economic conditions such as an oversupply of space, a reduction in demand for commercial real estate in the relevant area, competition from other available space or increased operating costs. The value of the Property may also be affected by such factors as political developments, government regulations and changes in planning, zoning or tax laws, interest rate levels, inflation, the availability of financing and yields of alternative investments. Risks relating to commercial properties Generally Lending on, and taking security over, commercial properties is generally viewed as exposing a lender to greater risk than lending on residential properties since the repayment of loans secured by income-producing properties is typically dependent upon the successful operation of the related property. The only funds which will be available to make payments under the Loan will be amounts received under the Leases, amounts standing to the credit of the Borrower s accounts and interests accrued thereon from time to time, certain insurance proceeds, funds generated by disposals of the Property, the payments made by the Borrower Hedging Counterparty pursuant to the Borrower Hedging Agreement and any amounts generated by enforcement of the security granted by the Borrower. Real property investments are subject to varying degrees of risk. The value of, and/or income receivable from, the Property may also be adversely affected by other factors including, but not limited to: (i) local conditions such as an oversupply of space, a reduction in demand for retail real estate in the area where the Property is located; (ii) competition from other available space and increased operating costs; (iii) political developments, changes in government regulations, planning or tax laws or policies, interest rate levels, inflation, the availability of financing and yields of alternative investments; (iv) national, regional and local economic conditions (which may be adversely affected by business closures or slowdowns and other factors); (v) perceptions by prospective tenants, retailers and shoppers of the safety, convenience, condition, services and attractiveness of the Property; (vi) the proximity, attractiveness and availability of competing alternatives to the Property (if competing properties of a similar type in the areas where the Property is located are built or refurbished); (vii) the willingness and ability of the owners of the Property to provide capable management and adequate maintenance and any increase in the capital expenditure needed to maintain the Property or make improvements to it; (viii) demographic factors, location, consumer confidence, unemployment rates, consumer tastes and preferences; (ix) retroactive changes to building or similar regulations and increases in operating expenses (such as energy costs); (x) potential environmental legislation or liabilities or other legal liabilities; (xi) the availability of refinancing, and change in interest rate levels or yields required by investors in income-producing commercial properties; (xii) the age, construction quality and design of the Property (the adverse effects of poor construction quality will increase over time in the form of increased maintenance and capital improvements needed to maintain the Property - even good construction will deteriorate over time if adequate maintenance is not scheduled and undertaken in a timely fashion); and (xiii) the quality of the tenants. In addition, the Property cannot realistically be convertible to alternative uses if the present use were to become unprofitable for any of the above, or other reasons. The conversion of commercial properties to alternate uses also generally requires substantial capital expenditure so, if the Borrower becomes unable to meet its obligations on the Loan, the sale value of any 33

45 such Property may be substantially less, relative to the amount owing on the Loan, than would be the case if such Property were readily adaptable to other uses. Risks relating to commercial properties Retail properties Properties used and/or let for retail purposes are further subject to the following which could also affect a Property's value and/or the rental income receivable from it: (i) competition from other retail spaces or the construction of other retail space; (ii) competition from other forms of retailing outside a given property market (such as mail order and catalogue selling, discount shopping centers and selling through the Internet), which may reduce retailers' need for space at a given location (the continued growth of these alternative forms of retailing could adversely affect the demand for space and, therefore, the rents collectable from retail properties); and (iii) the quality of management and attractiveness of the Property and the surrounding neighbourhood to tenants and their customers, the public perception of the level of safety in the area, access to public transportation and major roads and the need to make major repairs or improvements to satisfy major tenants. Such factors can sometimes result in rapid, substantial increases and decreases in rental and valuation levels. Restrictions on use of the Property The Property is subject to restrictions resulting from conditions imposed by planning permissions or statutory agreements entered into with the relevant local authority to secure the grant of a planning permission. Many of these restrict the use of the Property to the retail activity. A number of planning permissions have associated agreements which impose additional obligations on the owners and occupiers. Any breach of the planning obligations could result in the obligations being enforced by an injunction or by the local authority entering upon the land to carry out the works and recovering the costs from the owner or occupier. Such restriction could adversely affect the Borrower's ability to repay the Loan or to pay interest and other amounts thereon and in turn the Issuer's ability to pay principal, interest and other amounts due on the Notes. Environmental matters In accordance with Italian law, the Borrower may be responsible for environmental liabilities in relation to the Property in certain circumstances, because Italian environmental legislation imposes liability for clean-up costs on the owner or occupier of land where the person who caused or knowingly permitted the pollution cannot be found. Even if more than one person may have been responsible for the contamination, each person covered by the relevant environmental law may be held responsible for all the clean-up costs incurred. Therefore, liability may ultimately rest with the Borrower for the environmental matters discovered at the Property. In addition, third parties may sue the Borrower for damages and costs resulting from substances emanating from that site, and the presence of substances in the Property that could result in personal injury or similar claims by private claimants. The costs associated with any clean-up or remediation to be performed in connection to environmental liabilities affecting the Property could affect the cash flows available to the Borrower to repay the Loan, which may affect the payment of interest or principal to Noteholders. In the context of the due diligence no environmental analysis has been carried out with respect to the Property. See further The Loan Asset Portfolio The Loan Agreement B.2 Main Terms of the Loan Agreement Representation and Warranties Property Representations. Risks relating to permits and licenses The retail premises within the Property are required to have valid and legitimate commercial licenses that authorise the operation of the full sales surface area in which retail activities are conducted, the lack of which may give rise to fines or sanctions (including the closure of the activity). Furthermore, the Property is required to have a number of authorisations and permits such as certificates of fitness for use, building permits, occupancy certificates and fire prevention certificates, which are generally issued from local authorities on the basis of national, regional and local laws are required with respect of the Property and have 34

46 to be used in compliance with the allowed uses and, in certain cases, have to comply with certain restrictions. In the context of the due diligence, the advisers have not been provided with all the documentation required in order to properly assess the existence/legitimacy of the building permits and/or of the commercial authorisations and other permits indicated above. The lack of any of the required authorizations, licenses or permits, as well as the illegitimacy of said permits and the use of the building for uses that are not allowed, may give rise to fines, sanctions or even an order to stop / suspend operations or a demolition order, and works carried out in the lack of appropriate building titles may also impact, in most serious cases, on the possibility to transfer the ownership of the property or of part of the same which may adversely affect the ability of the relevant Borrower to meet its obligations under the Loan Agreement. Moreover, the illegitimacy / lack of the building permits may negatively impact on the legitimacy of the commercial authorisations and of the other permits related to the building / to the activities carried out in the buildings in general. The presence of restrictions can, inter alia, limit the use / transfer of the property, as well as impose obtainment of additional authorisation in case of works to be carried out on the building. Moreover, there can be no guarantee that all licenses and permits will be renewed upon expiry; if any of the licenses required to operate the Property are not renewed, or are revoked by the administrative entity, the lack of any of the required licenses or permits may give rise to fines, sanctions or even an order to stop operations, which may adversely affect the ability of the relevant Borrower to meet its obligations under the Loan Agreement. See further The Loan Asset Portfolio The Loan Agreement B.2 Main Terms of the Loan Agreement Representation and Warranties Property Representations. Obligations arising from Municipal agreements The Property was developed pursuant to agreements with the relevant municipality in which it is located, and these agreements impose certain obligations on the Borrower (e.g., to complete certain zoning works and parking lots, to pay certain amounts or to grant to the municipality the use of certain land for the benefit of the local community). In the context of the due diligence, the advisers have not been provided with all the documentation required in order to properly assess the fulfillment by the Borrower of all its obligations arising from the agreement with the relevant Municipality. See further The Loan Asset Portfolio The Loan Agreement B.2 Main Terms of the Loan Agreement Representation and Warranties Property Representations. Other encumbrances The Property is subject to encumbrances such as several easement rights, buffer strips (in particular, SNAM buffer strip), unilateral deed of undertaking and other similar third parties in rem rights. In the context of the due diligence report, the advisers have not been provided with all the documentation required in order to properly assess the confirmation that all such encumbrances have been complied with. The liability for any breach of such obligations will rest with the Borrower. See further The Loan Asset Portfolio The Loan Agreement B.2 Main Terms of the Loan Agreement Representation and Warranties Property Representations. Statutory Rights of Tenants Italian law number. 392 of 27 July 1978 (the Law 392), grants certain rights to tenants under commercial lease agreements (locazioni commerciali). Such rights include the following: (a) the tenant s right to compensation upon termination of a lease agreement related to a space used for an activity implying direct contacts with customers, for reasons other than the tenant: (i) having withdrawn; (ii) having served a termination notice effective as of the expiry date of the agreement; (iii) being in breach of contract; and (iv) being subject to any bankruptcy proceedings, such amount being equal to, in case of activities other than hotel activities, 18 monthly instalments of the last paid rent (or 36 monthly instalments of the last paid rent in the event that within one year since 35

47 (b) (c) termination of such tenant s lease, new activities identical or similar to those carried out by the tenant in the leased premises are performed therein); and the tenant s right to terminate a lease agreement at any time upon 6 months prior written notice for serious reasons (gravi motivi), including force majeure and objectively and unpredictably worsened economic and market conditions which make the lease too onerous for the tenant. This could result in a decrease of rental income to a Borrower, unless a new lease at substantially the same rent can be entered into. If a Borrower is unable to secure a new tenant at substantially the same rent, a decrease in rental income may have an adverse effect on such Borrowers ability to meet its debt service on its Loan and subsequently the Noteholders may not receive the timely repayment of interest and principal on the Notes; and a pre-emption purchase right in favour of tenants carrying out activities implying direct contacts with customers to; prior waiver by a tenant of such pre-emption right is null and void and in case of breach of such pre-emption right, the tenant would have a right (diritto di riscatto) to obtain ownership of the sold premises from the purchaser or any assignee thereof. According to Italian case law, should the landlord sell the relevant premises as part of a sale as a pool (vendita in blocco, i.e., the sale as a whole, and not partitioned, of a compound made up of the different leased units), the tenant would not be entitled to exercise such pre-emption right. Risks relating to leases of business units Nearly all of the occupational leases in respect of some of the Property are structured as leases of business units (affitti di ramo d azienda) as opposed to commercial leases (locazioni commerciali). Leases of business units allow greater flexibility to the landlord and tenant to agree the terms and conditions of the lease agreement compared to the statutory provisions of law applicable to commercial leases. Certain Italian Supreme Court decisions and the legal practice are inclined to uphold leases of commercial units within shopping centres as validly entered into as leases of business units. Consequently, the statutory provisions on commercial leases do not apply. However, tenants may claim that the lease of a business unit should instead qualify as a commercial lease and therefore that the tenant should be entitled to exercise the statutory rights which apply to commercial leases. Any liability arising from such claims, where successful, and the consequent exercise of certain statutory rights by the tenants would remain with any Borrower. In addition, compared to regular leases, a business lease gives rise to two potential risks for the lessor. A lessor under a business lease (such as a Borrower) may incur liabilities in connection with any employee hired by the lessee to work for the leased business where: (a) (b) the employment contract for the employee is not terminated by the lessee before the expiry of the business lease, or the employment contract for the employee is terminated by the lessee before the expiry of the business lease, but raises a claim for wrongful termination. In both circumstances, once the business has been transferred back to the lessor any current or former employee of the business may potentially seek to be retained, or hired back in case of wrongful termination, by the leased business now returned to the lessor, thus generating liability for the lessor. Although the majority of the business leases for the commercial units within the Property require the lessee to indemnify the lessor if the business is returned with any employees, the indemnity received by the lessor, if any, may not fully cover the lessor's liability arising from a claim. Recovery of leased premises within the Property following default by a Tenant under a Lease Legal proceedings to evict defaulting tenants may be started if the relevant breach is not remedied. The procedure for a landlord to enforce its remedies may take time, especially if the tenant opposes or challenges the order of the judge to vacate a property or if it raises objections to the amount awarded to the lessor. In 36

48 such cases, an ordinary legal action (rather than a summary judgment) ensues. The eviction is likely to take approximately 4 years. Limited due diligence The due diligence exercises carried out with respect to the Property were limited to the information made available by the Borrower and the Notary appointed by the Borrower in connection with the acquisition of the Property. The due diligence reports also refers to documents which were not available, incomplete or not recent; such circumstances have not been considered material in the context of the origination process. Notwithstanding the due diligence report which has been prepared as described above, such due diligence report is not comprehensive and there is no guarantee that it disclosed all relevant and/or material issues. In the Loan Agreement, the Borrower has provided representations and warranties as to certain matters which have been described, verified and/or disclosed in such due diligence or reports but also in relation to matters which were not described, verified and/or disclosed therein. As such, it is possible that matters which could not be verified by reference to the due diligence and/or reports were represented to by the Borrower subject to its best knowledge of the related circumstances. If such matters were subsequently shown to have been incorrect, inaccurate or untrue, but were not known by the Borrower at the relevant time to the best of its knowledge, it is possible that the Lender s remedies under the Loan Agreement, including the ability to declare a Loan Event of Default on this basis, would be limited or non-existent. See further The Loan Asset Portfolio The Loan Agreement B.2 Main Terms of the Loan Agreement Representation and Warranties Property Representations. Risks relating to the rental income The Borrowers ability to make their payments under the Loan Agreement will also be dependent on payments being made by the tenants of the Property. Although in certain cases the amount of the unpaid rent does not appear to be material, such outstanding claims might be symptomatic of difficulties of the landlord to ensure the timely and full payment of the rent. Additionally, no assurance can be given that tenants in the Property will continue making payments under their leases or that any such tenants will not become insolvent or subject to insolvency proceedings in the future or, if any such tenants become subject to insolvency proceedings, that they will continue to make rental payments in a timely manner. In addition, a tenant may, from time to time, experience a downturn in its business, which may weaken its financial condition and result in a failure to make rental payments when due. If a tenant, particularly a major tenant, defaults its obligations under its occupational lease, a Borrower may experience delays in enforcing its rights as lessor and may incur substantial costs and experience significant delays associated with protecting its investment, including costs incurred in renovating and re-letting the Property. In any of the above circumstances, the funds payable to a Borrower under a guarantee (if any) provided by the tenants may not be sufficient to off-set fully the diminished flow of revenues and the decrease in rental income may have an adverse effect on the Borrower ability to meet their debt service on the Loan and subsequently the Noteholders may not receive the timely repayment of interest and principal on the Notes. Risk relating to the cash flow calculation Cash flow figures in relation to the Property contained in this Prospectus are based on historical information and should not be taken as an indication of any future cash flows with respect to the Property. Each investor should make its own determination of the appropriate assumption to be used in determining the cash flows to be generated in relation to the Property. Property having been transferred by donation (donazione) Certain portions of the Property were transferred to some of the previous owners pursuant to donations. According to Italian Law, donations cannot restrict the portion of the estate which is mandatorily reserved to the close relatives if the donor (e.g. husband/wife and sons) (the so called porzione di legittima ) including 37

49 sons which the donor ignored to have at the moment of the donation. This means that a portion of the estate of the deceased (eredità) is reserved by mandatory provision of Italian law to his/her heirs at law (eredi legittimari), thus it is not freely assignable by the deceased, by will or by way of donation. Any heirs at law (eredi legittimari) (and their own heirs or transferees) who have been prejudiced by a donation (or disposition by will) of their porzione di legittima, are entitled to obtain a corresponding reduction of the quota granted (by way of donation or will) to a third party, which impinged in their reserved portion, by way of an azione di riduzione. A successful azione di riduzione may result (subject to certain circumstances, such as the absence of other freely available assets) in an asset previously donated to a third party having to be transferred back to the relevant heir at law (or having to be sold to fund payments due thereto), free of any mortgage, to the extent that the relevant azione di riduzione is registered with the competent Land Registry within 20 years from the date of registration of the donation. A registration of the azione di riduzione with the competent Land Registry after 10 years from the day on which the succession took place (i.e., the death of the relevant deceased) would not be of prejudice of a mortgagee under a mortgage registered prior to the registration of such azione di riduzione. The donations of the portions of the Property in this case were executed in 2000 and 2006 respectively. With regards to the donation executed in 2000, the donor died in 2003 thereofre the deadline for any reduction claims has already expired, while with regards to the donation executed in 2006 a reduction claim would still be possible. Based on the information made available to the Borrower during the due diligence, such risk has not been considered material for the purpose of the origination process, given the relatively low amount of any such reduction claim. Insurance The Loan Agreement requires the Borrower to ensure that there is effected and maintained at all times, insurance in respect of the Property against usual risks. There can be no assurance that any loss incurred will be of a type covered by such insurance and will not exceed the limits of such insurance. The risks that the Loan Agreement require to be covered include, but are not limited to, loss or damage caused by certain specified events (including, inter alia, third party liability and act of terrorism risk) and such other risks as a prudent property company carrying on the same or substantially similar business as the Borrower would effect. There is a possibility of losses with respect to the Property for which insurance proceeds may not be adequate or which may result from risks which are not covered by insurance, the effect of which were not taken into account in preparing the cash flow analysis in respect of the Notes. As with all real estate, if reconstruction (due to earthquake, fire or other casualty) or any major repair or improvements is required to the Property, changes in law and governmental regulations may be applicable and may materially affect the cost to effect such reconstruction, major repair or improvement. As a result of the occurrence of any of these events, the amounts realised with respect to the Property, and consequently the amounts available to make payments on the Notes, could be substantially less than as set forth in the cash flow analysis. Specifically, in the case that the Property is subject to earthquake, earthquake insurance would cover losses to the Property up to the lower of 50% of the insured value and ,00. Reliance on Valuation Report The Valuation was obtained around the time of the origination of the relevant Loan and there can be no assurance that the market value of the Property will continue to equal or exceed the valuation. Valuations represent the analysis and opinion of qualified valuers and are not guarantees of present or future values (one valuer may reach a different conclusion from a different valuer appraising the same property). Furthermore, valuations seek to establish the amount which a third party buyer (excluding a purchaser with a special interest) would pay for the asset and, in certain cases, may have taken into consideration the purchase price paid by the Borrower. There can be no assurance that the market value of the Property will continue to equal or exceed such valuations nor, as the market value of the Property fluctuates, any assurance that this will remain equal to or greater than the unpaid principal, accrued interest and other amounts due under the Loan 38

50 Agreement nor, if the Property is sold following an event of default under the Loan Agreement, any assurance that the net proceeds of such sale will be sufficient to pay in full all amounts due under the Loan Agreement (and therefore the amounts due under the Notes). Property management The Property is currently managed and will be managed by a property and asset manager as described in The Property Portfolio Acquisition, Ownership, Leases And Asset Management. The successful operation of a property depends upon the property and asset manager's performance and the technical and economic viability of the manager's capital preservation and improvement projects and leasing initiatives. The property manager is generally responsible for responding to changes in the local market; planning and implementing the rental structure; operating the property and providing building services; managing operating expenses; and assuring that maintenance and capital improvements are carried out in a timely fashion. The asset manager is responsible, in respect of the Property, for financial planning, preparing the budget, business plan, capital expenditure plan and financial and fiscal compliance generally. Given the number of leases, the Property requires intensive management, active marketing and leasing, and a good relationship with tenants in order to maintain and enhance income, minimise vacancy rates and also to ensure the Property is kept in good order. The net cashflow realised from and/or the residual value of the Propertymay be affected by the performance of the property and asset manager. A specialized trading asset such as a factory outlet centre is particularly dependent on the quality of management. 39

51 Compulsory purchase Any property in Italy may be subject to a compulsory purchase order in connection with general utility purposes at any time. If a compulsory purchase order is made regarding all or part of any of the Property, compensation would be payable to the Borrower (as owner of the Property) on the basis of specific criteria set out in applicable legislation. There can be no assurance that the amount of such compensation would at least be equal to the value of the compulsory purchased Property. In addition, there is often a delay between the completion of a compulsory purchase of a property and the date of payment of the statutory compensation. Any such delay, or a payment of statutory compensation to the Borrower that is lower than the value of the Property, could have an adverse impact on the ability of the Borrower to meet its obligations under the Loan Agreement and, accordingly, the ability of the Issuer to meet its payment obligations under the Notes. Considerations relating to the Borrower Hedging Agreements In certain circumstances the Borrower Hedging Agreement may be terminated and the Borrower may be unable to find a suitable replacement hedging counterparty. Should the Borrower Hedging Agreement be terminated or should the Borrower Hedging Counterparty otherwise fail to provide the Borrower with all amount owing to it on any payment date under the Borrower Hedging Agremeent, including in the event of the insolvency of the Borrower Hedging Counterparty, then that Borrower may have insufficient funds available to it to make payments of interest due under the Loan Agreement. The Borrower Hedging Agreement will terminate on the Loan Maturity Date. If the Loan is not repaid in full on the Loan Maturity Date, Euribor rate fluctuation risk will be un-hedged in respect of the Notes in a principal amount equal to the outstanding principal amount of the Loan. FACTORS WHICH ARE MATERIAL FOR THE PURPOSE OF ASSESSING THE MARKET RISKS ASSOCIATED WITH NOTES ISSUED IN THE CONTEXT OF THE SECURITISATION Risks relating to the Notes The Notes may not be suitable investment for all investors Each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should: (i) (ii) (iii) (iv) (v) have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained or incorporated by reference in this Prospectus; have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio; have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including Notes with principal or interest payable in one or more currencies, or where the currency for principal or interest payments is different from the potential investor s currency; understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant indices and financial markets; consider all of the risks of an investment in the Notes, including Notes with principal or interest payable in one or more currencies, or where the currency for principal or interest payments is different from the potential investor s currency; and 40

52 (vi) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks. Some Notes are complex financial instruments. Sophisticated institutional investors generally do not purchase complex financial instruments as stand-alone investments. They purchase complex financial instruments as a way to reduce risk or enhance yield with an understood, measured, appropriate addition of risk to their overall portfolios. A potential investor should not invest in Notes which are complex financial instruments unless it has the expertise (either alone or with a financial adviser) to evaluate how the Notes will perform under changing conditions, the resulting effects on the value of the Notes and the impact this investment will have on the potential investor s overall investment portfolio. The volatile economy and credit crisis may increase loan defaults and affect the value and liquidity of the Notes The global economy recently experienced a significant recession and many economies continue to experience on-going volatility. Severe on-going disruption in the credit markets, including the general absence of investor demand for and purchases of CMBS and other asset-backed securities and structured financial products is still continuing. Conditions are volatile and economic growth may not be sustainable for any specific period of time. A material worsening in economic conditions in the locations in which Property is situated could increase tenant defaults at the Property within the Property Portfolio thereby adversely affecting the amounts received by the Issuer under a Loan and consequently the amounts paid to Noteholders. The lack of credit liquidity, decreases in both the sale and rental value of commercial properties, lower occupancy rates and, in some instances, correspondingly higher lending rates have prevented many commercial mortgage borrowers from refinancing their loans. These circumstances have increased delinquency and default rates of securitised commercial mortgage loans, and may lead to widespread commercial mortgage defaults. In addition, the declines in real estate values have resulted in reduced borrower equity, hindering the ability of borrowers to refinance in an environment of increasingly restrictive lending standards and giving them less incentive to cure delinquencies and avoid enforcement. Higher loan-to-value ratios are likely to result in lower recoveries on foreclosure, and an increase in loss severities above those that would have been realised had property values remained the same or continued to increase. Defaults, delinquencies and losses have further decreased property values, thereby resulting in additional defaults by commercial mortgage borrowers, further credit constraints, further declines in property values and further adverse effects on the perception of the value of CMBS. Many commercial mortgage lenders have tightened their loan underwriting standards which has reduced the availability of mortgage credit to prospective borrowers. These developments have contributed and may continue to contribute, to a weakening in the commercial real estate market as these adjustments have, among other things, inhibited refinancing and reduced the number of potential buyers of commercial real estate. The continued use or further adjustment of these loan underwriting standards may contribute to further increases in delinquencies and losses on commercial mortgage loans generally. The global markets have seen an increase in volatility due to uncertainty surrounding the level and sustainability of sovereign debt of certain countries in the Euro- Zone. There can be no assurance that this uncertainty will not lead to further disruption of the credit markets in Europe. In addition, recently-enacted (and future) financial reform legislation in Europe could adversely affect the availability of credit for commercial real estate. The credit crisis and downturn in the real estate market have adversely affected the value of CMBS The Property consists of a factory outlet centre. Accordingly, the Notes will be affected by market trends which affect commercial mortgage-backed securities (CMBS) in general. Recent events in the real estate and securitisation markets, and in the debt markets and the economy generally, have caused significant dislocations, illiquidity and volatility in the markets for CMBS and securities backed by mortgages on commercial properties as well as in the wider global financial markets. 41

53 In addition to credit factors directly affecting CMBS, the continuing fallout from a downturn in the commercial mortgage-backed securities market and markets for other asset backed and structured products has also affected the CMBS market by contributing to a decline in the market value and liquidity of securitised investments such as CMBS. The deterioration of other structured products markets may continue to adversely affect the value of CMBS. Even if CMBS are performing as anticipated, the value of such CMBS in the secondary market may nevertheless decline as a result of deterioration in general market conditions or in the market for other asset backed or structured products. Risks related to the Notes generally Set out below is a brief description of certain risks relating to the Notes generally: EU Savings Directive Under Council Directive 2003/48/EC on the taxation of savings income (the EUSD), Member States are required to provide to the tax authorities of other Member States details of certain payments of interest or similar income paid or secured by a person established in a Member State to or for the benefit of an individual resident in another Member State or certain limited types of entities established in another Member State. A number of non-eu countries, and certain dependent and associated territories of certain Member States, have adopted 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 in a Member State 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 and 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 24 March 2014, the Council of the European Union adopted a Council Directive amending and broadening the scope of the requirements described above. Member States are required to apply these new requirements from 1 January The changes will expand the range of payments covered by the EUSD, in particular to include additional types of income payable on securities. The EUSD will also be expanded to cover the circumstances in which payments that indirectly benefit an individual resident in a Member State must be reported. This approach will apply to payments made to, or secured for, persons, entities or legal arrangements (including trusts) where certain conditions are satisfied, and may in some cases apply where the person, entity or arrangement is established or effectively managed outside of the European Union. For a transitional period Austria isrequired (unless during that period they elect otherwise) to operate a withholding system in relation to such payments. The changes referred to above will broaden the types of payments subject to withholding in those Member States which still operate a withholding system when they are implemented. FATCA All payments in respect of the Notes are subject in all cases to (i) any applicable fiscal or other laws, regulations and directives to which the Issuer, the Representative Noteholders or the Paying Agent or any paying agent (as the case may be) may be subject, but without prejudice to the provisions of Condition 10.2 and (ii) any withholding or deduction required pursuant to an agreement described in Section 1471(b) of the U.S. Internal Revenue Code of 1986 or otherwise imposed pursuant to Sections 1471 through 1474 of that Code, any regulations or agreements thereunder, official interpretations thereof, or any law implementing an intergovernmental approach thereto (FATCA). Notwithstanding anything in Condition 10.2 to the contrary, neither the Issuer nor any such Noteholders Representative or Paying Agent or any paying agent (as the case 42

54 may be) will be liable for any taxes or duties of whatever nature imposed or levied by FATCA or any directives or agreements implementing FATCA. Risks related to alternative characterisation of the Notes as an equity interest in the Issuer for US federal income tax purposes The characterisation of the Notes as debt or equity for United States federal income tax purposes depends on many factors, including the form of such Note, the terms of such Notes and the debt-to-equity ratio of the Issuer. Because the Issuer may not have substantial equity, there is a risk that the U.S. Internal Revenue Service could assert that the Notes or any Class of Notes should be treated as an equity interest in the Issuer (and, potentially as an interest in a passive foreign investment company (PFIC) or controlled foreign corporation (CFC)) rather than as debt for United States federal income tax purposes. A Note that is treated as an equity interest in a PFIC or CFC rather than a debt instrument for United States federal income tax purposes would have certain timing and character consequences to a United States holder that would be materially different from the consequences to such holder if the Note is treated as a debt instrument, and could require certain elections and disclosures that would need to be made shortly after acquisition to mitigate potentially adverse United States tax consequences. The Issuer and the Arranger have not analysed the potential U.S. tax treatment of the Notes or the potential U.S. tax consequences to noteholders of an investment in the Notes. Potential noteholders subject to United States taxation should inform themselves (and consult their tax advisors) as to the potential U.S. tax consequences of investing in the Notes. The proposed financial transaction tax (FTT) The European Commission has published a proposal for a Directive for a common FTT in Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia (the participating Member States). The proposed FTT has very broad scope and could, if introduced in its current form, apply to certain dealings in the Notes (including secondary market transactions) in certain circumstances. Under current proposal the FTT could apply in certain circumstances to persons both within and outside of the participating Member States. Generally, it would apply to certain dealings in the Notes where at least one party is a financial institution, and at least one party is established in a participating Member State. A financial institution may be, or be deemed to be, established in a participating Member State in a broad range of circumstances, including (i) by transacting with a person established in a participating Member State or (ii) where the financial instrument which is subject to the dealings is issued in a participating Member State. The FTT proposal remains subject to negotiation between the participating Member States. It may therefore be altered prior to any implementation, the timing of which remains unclear. Additional EU Member States may decide to participate. Prospective holders of the Notes are advised to seek their own professional advice in relation to the FTT. Regulation affecting investors in securitisations 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 number 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/or the incentives for certain investors to hold asset-backed securities, and may thereby affect the liquidity of such securities. Investors in the Notes are responsible for analysing their own regulatory position and none of the Issuer, the Corporate Servicer, the Noteholders Representative, the Issuer Account Bank, the Arranger, the Lead Manager, the Servicer makes any representation to any prospective investor or purchaser of the Notes regarding the regulatory capital treatment of their investment on the Issue Date or at any time in the future. 43

55 Investors should be aware of Articles of the CRR and any implementing rules in relation to a relevant jurisdiction, which applies in general to newly-issued securitisations after 31 December Article 405(1) of the CRR restricts EU regulated credit institutions from investing in asset-backed securities unless the originator, sponsor or original lender in respect of the relevant securitisation has explicitly disclosed to the EU regulated credit institution that it will retain, on an on-going basis, a net economic interest of not less than five per cent. in respect of certain specified credit risk tranches or asset exposures as contemplated by Article 405(1). Article 406 also requires an EU regulated credit institution to be able to demonstrate that it has undertaken certain due diligence in respect of, amongst other things, the securitisation notes it has acquired and the underlying exposures and that procedures are established for such due diligence activities to be conducted on an on-going basis. Similar requirements to those set out in Articles of the CRR have been implementedfor other EU regulated investors (such as, insurance and reinsurance undertakings pursuant to the Commission Delegated Regulation (EU) 2015/35 ( Regulation 2015/35 ) containing implementing rules for Solvency II Directive (2009/138/EC) and certain alternative investment fund managers (pursuant to the Alternative Investment Fund Managers Regulation (EU No 231/2013)). Failure to comply with one or more of the requirements set out in Articles will result in the imposition of a penal capital charge with respect to the investment made in the securitisation by the relevant investor. Articles of the CRR apply in respect of the Notes. Investors which are EU regulated credit institutions should therefore make themselves aware of the requirements of Articles in addition to any other regulatory requirements applicable to them with respect to their investment in the Notes. With respect to the commitment of the BNP Paribas S.A. to retain a five per cent. material net economic interest in the securitisation and with respect to the information to be made available by the Issuer or another relevant party, relevant investors are required independently to assess and determine the sufficiency of the information described in this Prospectus, in any investor report and otherwise for the purposes of complying with Articles and none of the Issuer, the Borrower, the Corporate Servicer, the Originator, the Noteholders Representative, the Issuer Account Bank, the Arranger, the Lead Manager, the Servicers makes any representation that the information described above is sufficient in all circumstances for such purposes. Considerable uncertainty remains with respect to Articles and it is not clear what will be required to demonstrate compliance to national regulators. Certain details on specific aspects of the requirements and what is or will be required for the relevant investors to demonstrate compliance to national regulators are however included in the Commission Delegated Regulation (EU) No. 625/2014 of 13 March 2014, supplementing CRR by way of regulatory technical standards specifying the requirements for investor, sponsor, original lenders and originator institutions relating to exposures to transferred credit risk. Relevant investors who are uncertain as to the requirements that will need to be complied with in order to avoid the additional regulatory capital charges for non-compliance with Articles should seek guidance from their regulator. The Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers (AIFMD) has been implemented in Italy through the Legislative Decree no. of 4 March 2014, n. 44 which has amended the Legislative Decree no. 58 of 24 February The implementation has been completed by the adoption of the following delegated acts by the Italian competent authorities: - Bank of Italy Regulation on collective asset management (Regolamento sulla gestione collettiva del risparmio) of 19 January 2015, adopted by the Bank of Italy and entered into force on 3 April 2015; - Bank of Italy - CONSOB Act of 19 January 2015 amending the CONSOB Regulation No of 29 October 2007 (Regolamento Congiunto) - CONSOB Resolution No of 8 January 2015 amending the CONSOB Regulation No of 14 May 1999 (Regolamento Emittenti) 44

56 - Ministry of Economy and Finance Decree n. 30 of 5 March 2015, entered into force on 3 April In addition, implementation of and/or changes to the Basel II framework (Basel II) may affect the capital requirements for and/or the liquidity of the Notes. The Basel II framework is an international accord which while it is not itself binding on participating states or institutions sets out benchmark regulatory capital rules for banks. The 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. It should also be noted that the Basel Committee has approved significant changes to the Basel II framework (such changes being commonly referred to as Basel III), including new capital and a minimum leverage ratio for credit institutions. In particular, the changes include among other things, new requirements for the capital base held by credit institutions, measures to strengthen the capital requirements for counterparty credit exposures arising from certain transactions and the introduction of a leverage ratio as well as short-term and longer-term standards for funding liquidity (referred to as the Liquidity Coverage Ratio and the Net Stable Funding Ratio). Member countries have been required to implement the new capital standards from January 2013, the new Liquidity Coverage Ratio from January 2015 and the Net Stable Funding Ratio from January The European authorities have indicated that they support the work of the Basel Committee on the approved changes in general, and the European Commission's corresponding proposals to implement the changes (through amendments to the Capital Requirements Directive) were published in July 2011 and came into force on 1 January The Basel III framework has been substantially reflected in the EU legislation by means of the recently agreed package consisting of the new Capital Requirements Directive (Directive 2013/36/EU; CRD IV) and CRR. The adoption of these measures will allow the set-up of a Single Rule book which is the key tool in the EU to allow a level playing field, to contrast regulatory arbitrage and foster the convergence of supervisory practices. CRD IV and the CRR were formally adopted by the European Council on 20 June 2013 and published in the Official Journal on 27 June The CRR entered into application on 1 January CRD IV has been implemented in Italy through the Bank of Italy Circular No. 285 issued on 17 December 2013, and Legislative Decree No. 72 of 12 May 2015, entered into force on 27 June The provisions required by CRR and CRD IV are expected to be fully implemented by 1 January The changes approved by the Basel Committee may have an impact on the capital requirements in respect of the Notes and/or on incentives to hold the Notes for investors that are subject to requirements that follow the revised framework and, as a result, they may affect the liquidity and/or value of the Notes. Investors should consult their own advisers as to the regulatory requirements in respect of the Notes and as to the consequences to and effect on them of any changes to the Basel II framework (including the Basel III changes described above) and the relevant implementing measures. No predictions can be made as to the precise effects of such matters on any investor or otherwise. Change of Law The structure of the transaction and, inter alia, the issue of 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 as to any possible change to Italian law, Tax or administrative practice after the Issue Date. Delisting of the Notes Application has been made to the Central Bank of Ireland, as competent authority under the Prospectus Directive as implemented in Ireland, for the Prospectus to be approved. Application has been made to the Irish Stock Exchange for the Notes (other than the Class X Notes) to be admitted to the Official List and to trading on the Main Securities Market. The Notes (other than the Class X Notes) may subsequently be 45

57 delisted despite the best efforts of the Issuer to maintain such listing and, although no assurance is made as to the liquidity of the Notes as a result of listing, any delisting of the Notes may have a material effect on a Noteholder s ability to resell the Notes on the secondary market. Risks related to the market generally Set out below is a brief description of the principal market risks. Absence of secondary market; Limited liquidity Application has been made to the Central Bank of Ireland, as competent authority under the Prospectus Directive as implemented in Ireland, for the Prospectus to be approved. Application has been made to the Irish Stock Exchange for the Notes (other than the Class X Notes) to be admitted to the Official List and to trading on the Main Securities Market. However, if granted, there can be no assurance that a secondary market in the Notes will develop or, if it does develop, that it will provide Noteholders with liquidity of investment, or that it will continue for the life of the Notes. Consequently, any purchaser of the Notes must be prepared to hold such Notes for an indefinite period of time or until final redemption or maturity of such Notes. Lack of liquidity could result in a significant reduction in the market value of the Notes. In addition, the market value of the Notes may fluctuate with changes in prevailing rates of interest and the performance of the Loans. Consequently, any sale of Notes by Noteholders in any secondary market which may develop may be at a discount to the original purchase price of those Notes. Exchange rate risks and exchange controls The Issuer will pay principal and interest on the Notes in Euro. This presents certain risks relating to currency conversions if an investor s financial activities are denominated principally in a currency or currency unit (the Investor s Currency) other than Euro. These include the risk that exchange rates may significantly change (including changes due to devaluation of Euro or revaluation of the Investor s Currency) and the risk that authorities with jurisdiction over the Investor s Currency may impose or modify exchange controls. An appreciation in the value of the Investor s Currency relative to Euro would decrease (i) the Investor s Currency-equivalent yield on the Notes, (ii) the Investor s Currency equivalent value of the principal payable on the Notes and (iii) the Investor s Currency equivalent market value of the Notes. Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal. 46

58 DOCUMENTS INCORPORATED BY REFERENCE This Prospectus should be read and construed in conjunction with the documents incorporated by reference set out in the table below. The following documents which have previously been published and have been filed with the Irish Stock Exchange and the Central Bank of Ireland, shall be deemed to be incorporated by reference via the website Data/Dept-Security-Documents/?progID=-1&uID=7079&FIELDSORT=docId in, and to form part of, this Prospectus: (a) (b) (c) (d) the auditors' report and audited consolidated annual financial statements of the Borrower for the financial year ended 31 December 2014 (entire document); the auditors' report and audited consolidated annual financial statements of the Borrower for the financial year ended 31 December 2013 (entire document); the Valuation (entire document) referred to in The Valuation ; the Investor Presentation (entire document). WEBSITES Other than the information in the websites listed above under Documents incorporated by Reference, websites referred to in this Prospectus do not form part of this Prospectus. 47

59 THE PROPERTY PORTFOLIO THE PROPERTY The Sicilia Outlet Village is a retail outlet centre located in the Municipality of Agira, Contrada Mandrebianche Snc (Enna), Sicily, Italy. It is situated on the A19 Catania - Palermo highway with a signposted exit, 45 minutes from Catania and 90 minutes from Palermo. The SOV Outlet was developed in two phases and was completed in July Overall, it has a GLA of approximately 29,600 sqm and 142 retail units with 2,200 external car spaces located to the western and eastern side of the Property. The SOV Outlet was designed to resemble typical architectural features of the Sicily Region. Buildings are constructed in precast concrete structure and most of them two-storey (even if the second storey is not used as retail area) in order to evoke a familiar urban, village environment. The SOV Outlet has a high percentage of designer and luxury brands as tenants and is considered a luxury scheme together with other outlet villages in Italy, such as Serravalle Scrivia, La Reggia, and the Mall. It is the only factory outlet centre in Sicily. The population in the 90-minute catchment area is estimated to be between 2.4 million 3.6 million. Opening dates: Phase I in November 2010, Phase II in July 2014 GLA approximately 29,600 sqm; Shops: 142 Market value: Euro 139,700,000 (see the Valuation by CBRE as at 15 March 2015 incorporated by reference in this Prospectus), generating, based on the information made available by the Borrower to the Originator during the due diligence, approximately Euro 10 million in gross rent in 2014, and assumed to grow to 11 million in 2015 with further growth assumed in future years Retail categories: Luxury, Designer, Contemporary Fashion, Casual & Sportswear, Home Décor & Accessories Occupancy: 92% (as at April 2015), with anticipated 100% occupancy by end of 2015 as asset reaches full stabilisation Sicily has 5m inhabitants and 5m tourists per annum Sicily o 48

60 Floorplan as at April 2015: Growth Figures 1 : 1 Source: Stilo 49

61 Tenant Mix 2 : 2 Source: Stilo 50

62 ACQUISITION AND OWNERSHIP OF THE PROPERTY SOV owns the Property by virtue of a share purchase agreement, executed on 30 September 2008 between Mi.No.Ter S.p.A., Brianza Fiduciaria S.r.l., Pollopilli S.s., Svim Sicilia S.r.l., Evirfin S.p.A., Sicilcom S.r.l. (as sellers) and SOV (as purchaser), notarised by Public Notary A.M Siciliano (repertorio N raccolta N ) (the Share Purchase Agreement). By means of the Share Purchase Agreement, SOV purchased 100% of the capital share of Dittaino Development S.r.l. (Dittaino), which previously owned the area interested by the Property and the relevant zoning works, including public and pertaining parking lots and held the relevant commercial authorizations and building titles for the construction and management of the Property. On 14 November 2008 Dittaino has been incorporated in SOV. EASEMENTS AND ENCUMBRANCES The Property is affected by the following easements and encumbrances: (i) (ii) (iii) right of way on Sheet n. 95, parcels n. 372 and 378, granted in favour of Mr. Annibale Colombrita by means of Act n of 21 January 2010, Public Notary Filomena Greco; easement right for underground interconnection infrastructures on sheet n. 95, parcel n. 402, subparcels n. 210, 19 and 20, granted in favour of Enel Distribuzione S.p.A. by means of Act n of 24 January 2012, Public Notary Grazia Fiorenza; easement right for underground interconnection infrastructures on sheet n. 95, parcel n. 402, subparcels n. 23, granted in favour of Enel Distribuzione S.p.A., by means of Act n of 20 December, 2013 Public Notary Grazia Fiorenza; The Property is also affected by the other restrictions such as: (i) buffer strip from the SNAM pipeline; and (ii) unilateral deed of undertaking for destining, as a permanent encumbrance, a portion of the Area (51,166 sqm) to car parking. ZONING The Municipality of Agira allowed the construction of the Property by means of a variation of the PRG, pursuant to Resolution n. 29 of 13 September The deadline for the conclusions of the Property and of the relevant zoning were extended (i.e. within 30 May 2015), in compliance with the applicable regional law. BUILDING TITLES The Property and relevant zoning works were built pursuant to a planning permit issued on 27 May 2008; and several variations to the original project were authorised from 2009 until OCCUPANCY CERTIFICATES AND FIRE PREVENTION CERTIFICATES Occupancy Certificate So far as the Issuer is aware, based on the information available to it, the occupancy certificates relating to the Property are still valid with reference to the present occupancy characteristics of the Property. Fire prevention certificate So far as the Issuer is aware, based on the information available to it the Property complies with the applicable fire prevention provisions due to the fire prevention certificate CPI prot. n issued by the fire brigade of Enna on 23 November, 2010 and renewed on 6 November 2014, related to the following activities listed under the Attachment I of the Presidential Decree n. 151/2011: (i) 49.A Groups for the production of subsidiary electrical energy and cogeneration plants of total power not exceeding 350 kw; 51

63 (ii) 74.C Installations for the production of heat fuelled by solid combustible, liquid or gas of power more than 700 kw. LEASES OF THE PROPERTY The lease structure of the Property is essentialy based on lease of business units which account for the majority of contractual relationships within the Property. SOV entered into over 150 such agreements in connection with the Property. LITIGATION The Issuer is not aware of any litigation pending or threatened in respect of the Property or any of the leases. 52

64 FOC SECTOR OVERVIEW The term Factory Outlet Centre (FOCs) identifies a retail centre, normally located in a town periphery, equipped to accommodate a specific business category. FOCs are the next stage in the development of classic factory outlet stores into a modern retail concept. They typically have over 10,000 sqm. of GLA, are developed in phases (to allow consolidation and increase attractiveness over the time), are located in peripheral areas (although not too far from major urban areas) and are well-connected with major transport networks in order to capture as wide a population catchment as possible. As is the case for traditional shopping centres, FOCs also include food services, entertainment activities and other services, such as the possibility of free parking and the promotion of tourist activities. FOCs enable manufacturers and vertically-integrated retailers to sell past season items, factory seconds, surplus stock, etc. directly to the consumer, without using retail businesses as distribution channels. In the recent past many retailers have also started to create dedicated collections specific to FOC formats as a result of the emergence of this type of scheme. Coordination, organisation and marketing are carried out by the centre management. Generally, an FOC is characterised by high architectural quality, with an innovative lay-out and provides an extensive sales experience, to create a centre that is typically integrated with the lifestyle and the local landscape and where manufacturers of famous brands can offer their products directly to consumers at reduced prices (allowing up to a 70% saving relative to normal high street prices). An FOC usually occupies an open-air retail space, which imitates the appearance of a traditional village (or marketplace) where the store units are grouped around smaller, interconnected sections or imitations of village streets. The SOV typifies these characteristics. Product range running and Pricing in FOCs In general, there is a trend towards an expansion of the product range in FOCs. The main focus is still on clothing but other product ranges for example food are also being increasingly integrated. The goods on sale in an FOC are primarily, among others: Products from the year before or the previous season ( past season ) Products with minor faults ( irregular products or factory seconds ) Products for market testing purposes ( sample ) Not all the product ranges and not even the main product ranges of the manufacturers are for sale in a FOC. The composition of the product range is random and is determined, among other things, by the sizes available or the range of colours. All products are offered with price reductions of at least 25-30% off the high-street prices up to 70%; this price reduction is fixed in the tenancy agreement and must be adhered to by the tenant. At the same time, all goods are labelled with the (recommended) high street prices and the "outlet prices", in order to make the price gap clear to the customer. Another fundamental aspect of FOCs is the oversight by the managing company (see description of Arcus Real Estate, the manager of the Property, in the paragraph The Manager below). With regard to price levels and market positioning, brands can be sorted into A, B, C or even D quality retailers, or into luxury, high, medium and low level brands. In general, until recently, very few operators such as Arcus Real Estate have succeeded in leasing an FOC almost exclusively to brands from the premium sector. The SOV has predominantly A&B quality brands/retailers and is run by an experienced and highly respected manager. 53

65 Overall, there is a direct correlation between brand quality and brand image and an FOC s attractiveness to customers: the higher the number of A-brands presented in an FOC, the greater its long-range commercial outreach and therefore the greater its subsequent economic success. An FOC s attractiveness to customers decreases in proportion to the quality of the specific type of FOC, whereby upper level schemes enjoy the greatest geographic outreach, while the lower schemes are only able to penetrate a very limited catchment area and as such more or less correspond to that of a bargain shop. The SOV Outlet is a good example of an FOC where a high number of A-brands are present and is able to have the long-range commercial outreach. ITALIAN FOCs The first Italian purpose-built factory outlet centre, the Designer Outlet Serravalle Scrivia, was completed in 2000 by McArthur Glen. Since then, this industry has evolved constantly, and today factory outlet centres represent a well-known and established retail concept in the Italian market. Many major Italian luxury & mid-upper market retailers have been operating through factory outlet stores for many years. The products sold in these stores, include mainly surplus stock, seconds and ends of lines at reduced prices. Many of these factory outlet stores, such as Prada and Gucci, are incredibly successful. Italian Factory Outlet Stock With regard to the geographical distribution of outlets, the development of FOCs is relatively balanced between the north and south of Italy. In terms of FOCs number, 10 schemes are located in the northern part of the country, whilst 7 schemes are in the Centre and 6 in the South and the Islands. The following table provides a comparison between the more significant outlet centres in Italy 3. Comparison Table 1: Outlet centres in Italy, in reverse chronological order # Asset Type Opening Gross Lettable Area (sqm) Location Region Major Cities 1 Cilento Outlet Village Medium k Eboli Campania Naples 2 Sicilia Outlet Village Luxury k Agira Sicily Catania, Palermo 3 La Reggia Designer Outlet Luxury k Marcianise Campania Naples 4 Citta' Sant'Angelo Outlet Village Low k Citta' Sant' Angelo Abruzzi Pescara 5 Soratte Outlet Shopping Low k Sant'Oreste Lazio Rome 6 Mondovicino Factory Outlet Medium-Low k Mondovi Piemonte Torino 7 Noventa di Piave Designer Outlet Luxury k Noventa di Piave Veneto Venice 8 Palmanova Outlet Village Medium-Low k Palmanova Friuli Venice 9 Outlet Centre Brennero Medium-Low k Brennero Trentino Alto-Adige Bolzano Bozen, Innsbruck 10 Sardinia Outlet Village Medium-Low k Sestu Sardinia Cagliari 11 Valdichiana Medium k Valdichiana Tuscany Florence 12 Factory Outlet Centre Barberino Luxury k Barberino di Mugello Tuscany Florence 13 Molfetta Medium k Molfetta Puglia Bari 14 Vicolungo Outlet Medium-High k Vicolungo Piemonte Milan 15 Castel Guelfo Outlet Medium-Low k Castel Guelfo di Bologna Emilia Romagna Bologna 16 Franciacorta Medium-High k Rodengo Lombardy Brescia, Verona 17 Mantova Medium-High k Mantova Lombardy Brescia, Verona 3 Source: BNP Paribas 54

66 18 Fashion District Valmontone Medium k Valmontone Lazio Rome 19 Castelromano Designer Outlet Luxury k Rome Lazio Rome 20 Fidenza Village High k Fidenza Parma Parma 21 The Mall Gucci Luxury k Firenze Tuscany Florence 22 Serravalle Luxury k Allessandria Piemonte Milan, Torino Despite its recent evolution, the Italian FOC sector is considered mature in a European context, with only the UK having more schemes. Developers It is important to note that the FOC sector has a strong presence of specialised companies. This reflects the fact that this asset type requires significant management expertise and therefore the managing entity has a vital role to play, particularly in order to properly supervise the pricing policy of each tenant and in the marketing and asset management to maximise income for the centre as a whole. The leading specialised companies active in Italy, that developed and currently own and manage the most successful FOCs, are: Mc Arthur Glen: the UK-based FOC-developer and operator is the market leader in FOCs. It entered the Italian market in 2000 with the opening of the Designer Outlet Serravalle Scrivia. Today schemes run by this operator represent almost 30% of FOC GLA in the Italian market, owning 4 further schemes beside Serravalle: Castel Romano Outlet (RM), FOC Barberino (Arezzo), La Reggia Designer Outlet (Caserta), Veneto Designer Outlet (Noventa di Piave). Percassi Group: an Italian leading developer, mainly focused on the retail sector. In partnership with Craig Realty Group (a U.S.-based leader in the sector) this company has developed two major Italian FOCs: Franciacorta Outlet Village & Valdichiana. In 2010 it developed through its new company, Premium Retail (currently Arcus Real Estate S.r.l.), the first FOC in Sicily - Sicilia Outlet Village (subject property). The Franciacorta and Valdichiana are currently owned by Blackstone. 55