IntesaBci Sec. 2 S.r.l. (incorporated with limited liability under the laws of the Republic of Italy)

Transcription

1 Offering Circular Pursuant to Article 2, paragraph 3 of Italian Law No. 130 of 30 April 1999 IntesaBci Sec. 2 S.r.l. (incorporated with limited liability under the laws of the Republic of Italy) Euro 2,026,500,000 Residential Mortgage Backed Floating Rate Notes due 2023 consisting of: Euro 405,500,000 Class A1 Residential Mortgage Backed Floating Rate Notes due 28 August 2023 Issue Price: 100% Euro 1,519,600,000 Class A2 Residential Mortgage Backed Floating Rate Notes due 28 August 2023 Issue Price: 100% Euro 40,600,000 Class B Residential Mortgage Backed Floating Rate Notes due 28 August 2023 Issue Price: 100% Euro 60,800,000 Class C Residential Mortgage Backed Floating Rate Notes due 28 August 2023 Issue Price: 100% Application has been made to the Luxembourg Stock Exchange (the ``Stock Exchange'') to list the Euro 405,500,000 Class A1 Residential Mortgage Backed Floating Rate Notes due 28 August 2023 (the ``Class A1 Notes''), the Euro 1,519,600,000 Class A2 Residential Mortgage Backed Floating Rate Notes due 28 August 2023 (the ``Class A2 Notes'' and together with the Class A1 Notes, the ``Class A Notes''), the Euro 40,600,000 Class B Residential Mortgage Backed Floating Rate Notes due 28 August 2023 (the ``Class B Notes''), and the Euro 60,800,000 Class C Residential Mortgage Backed Floating Rate Notes due 28 August 2023 (the ``Class C Notes'' and, together with the Class A Notes and the Class B Notes, the ``Notes'') of IntesaBci Sec. 2 S.r.l., a limited liability company organised under the laws of the Republic of Italy (the ``Issuer''). Calculations as to the expected maturity and average life of the Notes can be made based on certain assumptions as set out in the section ``Expected Maturity and Average Life of the Notes and Assumptions'' below. The principal source of payment of interest and of repayment of principal on the Notes will be from proceeds received from time to time in respect of a portfolio of performing residential mortgage loan receivables (the ``Portfolio'') and connected rights purchased by the Issuer from Banca Intesa S.p.A. (``Intesa'' or the ``Originator'') pursuant to the terms of a transfer agreement dated 19 December 2002 (the ``Transfer Agreement''). Interest on the Notes will accrue on a daily basis and be payable in arrear in Euro on 28 May 2003 (referred to as the ``First Payment Date'') and thereafter quarterly in arrear on the 28th day of February, May, August and November of each calendar year (each a ``Payment Date''), or, if any such day is not a day (other than a Saturday or a Sunday) on which banks are generally open for business in Milan and Luxembourg and on which the Trans-European Automated Real Time Gross Transfer System (or any successor thereto) is open (a ``Business Day''), on the next succeeding Business Day provided that, following the delivery of a Trigger Notice upon the occurrence of a Trigger Event, the Payment Date may be any Business Day speci ed in the Trigger Notice. The rate of interest applicable to the Notes for each Interest Period (as de ned in the ``Glossary of Terms'') shall be Euribor for three month deposits determined in accordance with Condition 5 (Interest) of the Notes plus the following respective margins in respect of the following classes of Notes: (1) Class A1 Notes: a margin of 0.17% per annum; (2) Class A2 Notes: a margin of 0.28% per annum; (3) Class B Notes: a margin of 0.51% per annum; and (4) Class C Notes: a margin of 1.45% per annum The Class A1 Notes are expected, on issue, to be rated Aaa by Moody's Investors Service Limited (``Moody's''), AAA by Standard and Poor's Ratings Services, a division of the McGraw-Hill Companies, Inc. (``S&P'') and AAA by Fitch Ratings Limited (``Fitch'' and, together with Moody's and S&P, the ``Rating Agencies''). The Class A2 Notes are expected, on issue, to be rated Aaa by Moody's, AAA by S&P and AAA by Fitch. The Class B Notes are expected, on issue, to be rated Aa2 by Moody's, AA by S&P and AA by Fitch. The Class C Notes are expected, on issue, to be rated Baa2 by Moody's, BBB by S&P and BBB by Fitch. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal by the assigning rating organisation. Payments under the Notes may or may not be subject to withholding for or on account of tax, in accordance with Italian Law No. 239 of 1 April Upon the occurrence of any withholding for or on account of tax from any payments under the Notes, neither the Issuer nor any other person shall have any obligation to pay any additional amount(s) to any holder of the Notes of any class. The Notes will be secured limited recourse obligations solely of the Issuer. In particular, the Notes will not be obligations or responsibilities of, or guaranteed by, any of the Representative of the Noteholders, the Originator, the Administrative Services Provider, the Account Bank, the Amortisation Account Bank, the Paying Agent, the Servicer, the Special Servicer, the Luxembourg Paying Agent, the Cash Manager, the Calculation Agent, the Swap Counterparty, the Subordinated Loan Provider, the Funding Provider or the Guarantee Provider (each as de ned below in ``The Principal Parties''), the Arranger, the Lead Managers or the quotaholders of the Issuer. Furthermore, none of such persons accepts any liability whatsoever in respect of any failure by the Issuer to make payment of any amount due on the Notes. The Notes will be in bearer form and will be held in dematerialised form on behalf of the ultimate owners as from 27 February 2003 (the ``Issue Date'') until redemption or cancellation thereof, by Monte Titoli S.p.A. (``Monte Titoli'') for the account of the relevant Monte Titoli Account Holders (as de ned below). The expression ``Monte Titoli Account Holders'' means any authorised nancial intermediary institution entitled to hold accounts on behalf of their customers with Monte Titoli and includes any depository banks appointed by Clearstream Banking S.A. (``Clearstream'') and Euroclear Bank S.A./N.V as operator of the Euroclear System (``Euroclear''). Monte Titoli shall act as depository for Clearstream and Euroclear. Title to the Notes will at all times be evidenced by book-entries in accordance with the provisions of Article 28 of Italian Legislative Decree No. 213 of 24 June 1998 and with Resolution No of 23 December 1998 of the Commissione Nazionale per le SocietaÁ e la Borsa (``CONSOB'') as amended by CONSOB Resolution No of 20 April 2000, CONSOB Resolution No of 18 April 2001 and CONSOB Resolution No of 10 July 2002 and CONSOB Resolution No of 4 December No physical document of title will be issued in respect of the Notes. The Notes will start to amortise on or after 28 August 2004 (the ``Initial Amortisation Date'') in accordance with the Order of Priority as set out in Condition 4.1 unless certain events set out in Condition 10 (Trigger Events) (each a ``Trigger Event'') occur, in which case the Notes will be redeemed in the manner speci ed in Condition 4.2. The Notes of each class will be redeemed pro rata in the manner speci ed in Condition 6 (Redemption, Purchase and Cancellation). Before the Final Maturity Date (as de ned in the ``Glossary of Terms'') the Notes will be subject to optional redemption in whole or in part in certain circumstances, as set out in Condition 6 (Redemption, Purchase and Cancellation). 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 ``Special Considerations''. Sole Arranger Banca Intesa S.p.A. Lead Managers and Bookrunners Caboto IntesaBci Cre dit Agricole Indosuez Morgan Stanley Co-Managers ABN Amro Bank N.V. Banc of America Securities Limited Banco Commercial PortugueÆs de Investimento S.A. The date of this Offering Circular is 27 February 2003 HSBC Bank plc

2 None of the Issuer, the Arranger, the Lead Managers, the Co-Managers or any other party to the Transaction Documents (as de ned in the ``Glossary of Terms'' below) other than Intesa has undertaken or will undertake any investigation, searches or other actions to verify the details of the Portfolio sold by Banca Intesa S.p.A. (``Intesa'') to the Issuer, nor has the Issuer, or any other party to the Transaction Documents undertaken, nor will they undertake, any investigations, searches, or other actions to establish the creditworthiness of any Debtor. The Issuer accepts responsibility for the information contained in this document, other than that information for which Intesa accepts responsibility as described in the following paragraph. To the best of the knowledge and belief of the Issuer (having taken all reasonable care to ensure that such is the case), such information is true and does not omit anything likely to affect the import of such information. Intesa accepts responsibility for the information included in this document in the sections headed ``The Portfolio'', ``Loan Servicing and Collection Procedures'', and ``The Originator'' and any other information contained in this document relating to itself and the Intesa Group, the collection procedures relating to the Portfolio, the Claims, the Mortgage Loans and the Mortgages (each as de ned in ``Glossary of Terms'' below). To the best of the knowledge and belief of Intesa (which has taken all reasonable care to ensure that such is the case), such information is true and does not omit anything likely to affect the import of such information. No person has been authorised to give any information or to make any representation not contained in this document and, if given or made, such information or representation must not be relied upon as having been authorised by or on behalf of the Lead Managers, the Representative of the Noteholders, the Issuer, the quotaholders of the Issuer, Intesa (in any capacity) or any other party to the Transaction Documents. Neither the delivery of this document nor any sale or allotment made in connection with the offering of any of the Notes shall, under any circumstances, constitute a representation or imply that there has been no change in the affairs of the Issuer, Intesa, or the Intesa Group or the information contained herein since the date hereof or that the information contained herein is correct as at any time subsequent to the date hereof. The Notes constitute direct secured limited recourse obligations of the Issuer. By operation of Italian law, the Issuer's right, title and interest in and to the Portfolio will be segregated from all other assets of the Issuer. By operation of Italian Law and of the Transaction Documents, amounts deriving from the Portfolio will only be available, both prior to and following a winding up of the Issuer, to satisfy the obligations of the Issuer to the holders of the Class A1 Notes (the ``Class A1 Noteholders''), the holders of the Class A2 Notes (the ``Class A2 Noteholders'' and together with the Class A1 Noteholders, the ``Class A Noteholders''), the holders of the Class B Notes (the ``Class B Noteholders''), the holders of the Class C Notes (the ``Class C Noteholders'' and together with the Class A Noteholders and the Class B Noteholders, the ``Noteholders'') and to pay any costs, fees and expenses and any other amount payable to the Representative of the Noteholders, the Originator, the Administrative Services Provider, the Account Bank, the Amortisation Account Bank, the Paying Agent, the Servicer, the Special Servicer, the Luxembourg Paying Agent, the Cash Manager, the Calculation Agent, the Subordinated Loan Provider, the Swap Counterparty, the Guarantee Provider and the Funding Provider, (each as de ned below under ``The Principal Parties'') (together the ``Other Issuer Creditors'') and to any third party creditor in respect of any costs, fees or expenses incurred by the Issuer to such third party creditors in relation to the securitisation of the Portfolio (the ``Securitisation''). Amounts derived from the Portfolio will not be available to any other creditors of the Issuer. The Noteholders agree that the Issuer Available Funds will be applied by the Issuer in accordance with the Order of Priority (as de ned in the ``Glossary of Terms'') The Notes will also be secured, in each case, over certain assets of the Issuer. See ``Description of the Transaction Documents ± Description of the Intercreditor Agreement'', ``Description of the Deed of Pledge'' and ``Description of the Deed of Charge''. The distribution of this document and the offer, sale and delivery of Notes in certain jurisdictions may be restricted by law. Persons into whose possession this document comes are required by the Issuer and the Lead Managers to inform themselves about, and to observe, any such restrictions. Neither this document nor any part of it constitutes an offer, and may not be used for the purpose of an offer to sell any of the Notes, or a solicitation of any offer to buy any of the Notes, by anyone in any jurisdiction or in any circumstances in which such offer or solicitation is not authorised or is unlawful. The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the ``Securities Act'') or any other state securities laws and are subject to U.S. tax law requirements. Subject to certain exceptions the Notes may not be offered or sold within the United States or for the bene t of U.S. persons (as de ned in Regulation S under the Securities Act). The Notes may not be offered or sold directly or indirectly, and neither this document nor any other offering circular or any prospectus, form of application, advertisement, other offering material or other 2

3 information relating to the Issuer or the Notes may be issued, distributed or published in any country or jurisdiction (including the Republic of Italy, the United Kingdom and the United States), except under circumstances that will result in compliance with all applicable laws, orders, rules and regulations. For a further description of certain restrictions on offers and sales of the Notes and the distribution of this document see ``Subscription and Sale'' below. In connection with the distribution of the Notes,CreÂdit Agricole Indosuez S.A. may over-allot or effect transactions which stabilise or maintain the market price of the Notes at a level which might not otherwise prevail. Such stabilising, if commenced, may be discontinued at any time. Words and expressions in this document shall, except so far as the context otherwise requires, have the same meanings as those set out in the ``Glossary of Terms'' below. These and other terms used in this document are subject to the de nitions of such terms set out in the Transaction Documents, as they may be amended from time to time. In this Offering Circular, references to ``Euro'', ``EUR0'', ``A'' and ``cents'' are to the single currency introduced in the member states of the European Community which adopted the single currency in accordance with the Treaty of Rome of 25 March 1957, as amended by, inter alia, the Single European Act 1986 and the Treaty of European Union of 7 February 1992 establishing the European Union and references to ``ITL'', ``Lit'', ``Lire'' and ``Italian Lire'' are to the lawful currency of the Republic of Italy prior to its adoption of the Euro. 3

4 INDEX TRANSACTION SUMMARY INFORMATION... 5 SPECIAL CONSIDERATIONS THE PORTFOLIO SELECTED ASPECTS OF ITALIAN LAW RELEVANT TO THE PORTFOLIO AND THE TRANSFER OF THE PORTFOLIO LOAN SERVICING AND COLLECTION PROCEDURES THE ORIGINATOR THE ISSUER THE SWAP COUNTERPARTY AND GUARANTEE PROVIDER USE OF PROCEEDS DESCRIPTION OF THE TRANSACTION DOCUMENTS ISSUER ACCOUNTS EXPECTED MATURITY AND AVERAGE LIFE OF THE NOTES AND ASSUMPTIONS TERMS AND CONDITIONS OF THE NOTES TAXATION SUBSCRIPTION AND SALE GLOSSARY OF TERMS GENERAL INFORMATION

5 TRANSACTION SUMMARY INFORMATION The following information is a summary of the transactions and assets underlying the Notes and is quali ed in its entirety by reference to the detailed information presented elsewhere in this document and in the Transaction Documents 1. The Principal Parties Issuer Originator Servicer Special Servicer Administrative Services Provider Representative of the Noteholders Cash Manager Account Bank Amortisation Account Bank Calculation Agent IntesaBci Sec. 2 S.r.l., a limited liability company incorporated in the Republic of Italy under Article 3 of law No.130 of 30 April 1999 (legge sulla cartolarizzazione dei crediti) (the ``Securitisation Law'') and registered under No with the Register of Enterprises of Milan. The Issuer is registered under No in the general register held by Uf cio Italiano Cambi pursuant to Article 106 of Italian Legislative Decree n. 385 of 1 September 1993 (as amended and implemented from time to time, the ``Consolidated Banking Act'') and in the special register held by the Bank of Italy pursuant to Article 107 of the Consolidated Banking Act. Banca Intesa S.p.A. (``Intesa''), a bank organised as a joint stock company under the laws of the Republic of Italy and registered with the Bank of Italy pursuant to Article 13 of the Consolidated Banking Act under number 5361 and is the parent company of the Intesa Group. Intesa IntesaBci Gestione Crediti S.p.A. (``IGC'') Intesa KPMG Fides Fiduciaria S.p.A. Intesa Intesa CreÂdit Agricole Indosuez S.A., Milan Branch Giustidata S.r.l., a company which is part of the KPMG Group and which is specialised in corporate, accounting, nancial reporting and consulting services. Paying Agent Intesa Subordinated Loan Provider Intesa Luxembourg Paying Agent SocieÂte EuropeÂenne de Banque S.A. (``SEB'' ) Swap Counterparty CreÂdit Agricole Indosuez S.A. Guarantee Provider CreÂdit Agricole Indosuez S.A., Milan Branch Funding Provider Intesa 2. The Notes The Notes On or about 27 February 2003 (the ``Issue Date''), the Issuer will issue Euro 405,500,000 Class A1 Residential Mortgage Backed Floating Rate Notes due 28 August 2023 (the ``Class A1 Notes''), Euro 1,519,600,000 Class A2 Residential Mortgage Backed Floating Rate Notes due 28 August 2023 (the ``Class A2 Notes'' and together with the Class A1 Notes, the ``Class A Notes''), Euro 40,600,000 Class B Residential Mortgage Backed Floating Rate Notes due 28 August 2023 (the ``Class B Notes'') and Euro 60,800,000 Class C Residential Mortgage Backed Floating Rate Notes due 28 August 2023 (the ``Class C Notes'' and, together with the Class A Notes and the Class B Notes, the ``Notes''). 5

6 Issue Price Form and Denomination of the Notes Interest Expected Maturity of the Notes The Notes will constitute secured, direct and limited recourse obligations of the Issuer. The Notes will be issued at the following percentages of their principal amount: Class A1 Notes 100% Class A2 Notes 100% Class B Notes 100% Class C Notes 100% The Notes will be in bearer form and will be held in dematerialised form on behalf of the ultimate owners until redemption or cancellation thereof by Monte Titoli for the account of the relevant Monte Titoli Account Holder (as de ned in the ``Glossary of Terms''). Monte Titoli shall act as depository for Clearstream and Euroclear. Title to the Notes will be evidenced by book entries in accordance with the provisions of Article 28 Italian Legislative Decree No. 213 of 24 June 1998 and CONSOB Resolution No of 23 December 1998 as amended by CONSOB Resolution No of 20 April 2000, CONSOB Resolution No of 18 April 2001, CONSOB Resolution No of 10 July 2002 and CONSOB Resolution No of 4 December No physical document of title will be issued in respect of the Notes. The Notes will be issued in denominations of Euro 10,000 or integral multiples thereof. The Notes will bear interest on their Principal Outstanding Amount (as de ned in the ``Glossary of Terms'') from and including the Issue Date and for each Interest Period (as de ned in the ``Glossary of Terms'') at the following margins above Euribor for three month Euro deposits, determined in accordance with Condition 5 (``3 Month Euribor''): Class A1 Notes 0.17% per annum, Class A2 Notes 0.28% per annum, Class B Notes 0.51% per annum and Class C Notes 1.45% per annum. Interest on the Notes will be payable quarterly in arrears starting on 28 May 2003 (the ``First Payment Date'') and thereafter on the 28th day of February, May, August and November of each year or, if such day is not a day (other than a Saturday or a Sunday) on which banks are generally open for business in Milan and Luxembourg and on which the Trans- European Automated Real Time Gross Transfer System (or any successor thereto) is open (a ``Business Day''), on the immediately following Business Day (each a ``Payment Date'') as provided in the Conditions, provided that, following the delivery of a Trigger Notice upon the occurrence of a Trigger Event, the Payment Date may be any Business Day speci ed in the Trigger Notice. Payment of interest on the Class B Notes and the Class C Notes may be deferred in accordance with Condition 5.1 (Payment Dates, Interest Periods and Deferral of Interest). Calculations as to the expected maturity and average life of the Notes can be made based on certain assumptions, as set out in the section ``Expected Maturity and Average Life of the Notes and Assumptions'' below. The expected maturity date of the Class A1 Notes is 28 August The expected maturity date of the Class A2 Notes is 28 August

7 The expected maturity date of the Class B Notes is 28 August The expected maturity date of the Class C Notes is 28 August Final Maturity Date Save as described below, unless previously redeemed in full, the Notes are due to be repaid in full at their respective Principal Outstanding Amount on the Payment Date falling on 28 August 2023 (the ``Final Maturity Date''). The Notes, to the extent not redeemed in full by their respective Final Maturity Dates, shall be cancelled. Mandatory Redemption The Notes of each Class will be subject to mandatory redemption in full or in part: Optional Redemption Redemption for Tax Reasons (A) (B) (C) on 28 August 2004 (the ``Initial Amortisation Date'') and on each Payment Date falling thereafter, in an amount equal to the Class A1 Principal Payment Amount, the Class A2 Principal Payment Amount, the Class B Principal Payment Amount and the Class C Principal Payment Amount respectively; on the Initial Amortisation Date and on each Payment Date falling thereafter (i) following the delivery of a Trigger Notice pursuant to Condition 10, or (ii) in case of Optional Redemption pursuant to Condition 6.3, at their Principal Outstanding Amount; and on each Payment Date in the case of a Redemption for Tax Reasons pursuant to Condition 6.4, at their Principal Outstanding Amount. The Issuer may on any Payment Date falling on or after the Initial Amortisation Date redeem all (but not only some) of the Notes at their Principal Outstanding Amount, together with all accrued but unpaid interest thereon up to and including the relevant Payment Date, if, on any Collection Date, the Outstanding Principal Portfolio is equal to or less than 10% of the lesser of (i) the Initial Principal Portfolio and (ii) the Initial Purchase Price (as de ned below). Any such redemption shall be effected by the Issuer giving not more than 60 nor less than 30 days' prior notice in writing to the Representative of the Noteholders and to the Noteholders in accordance with Condition 14, and provided that the Issuer, prior to giving such notice to the Representative of the Noteholders, has produced to the Representative of the Noteholders a certi cate signed by the chairman of the board of directors of the Issuer evidencing that it will have the necessary funds, not subject to interests of any other person, to discharge all its outstanding liabilities in respect of the Notes and any amounts required under the Conditions to be paid in priority to, or pari passu with, the Notes of each class. ``Outstanding Principal Portfolio'' means, as of each Collection Date, the principal outstanding amount of the Portfolio at such date. ``Initial Principal Portfolio'' means the principal outstanding amount of the Portfolio as at 31 October If the Issuer con rms to the Representative of the Noteholders that (i) on the next Payment Date the Issuer would be required to deduct or withhold, from any payment of principal or interest on the Notes, any amount for or on account of any present or future taxes, duties, assessments or governmental 7

8 charges by the Republic of Italy or any political sub-division thereof or any authority thereof or therein (other than in respect of a Decree 239 Deduction (as de ned below)) or (ii) as a result of any amendment to, or change in, the laws or regulations of the Republic of Italy (or any political subdivision thereof) or in the interpretation of such laws or regulations which occurs after the Issue Date, the Issuer is likely to be found liable to pay the ordinary Italian corporation tax (IRPEG) or any other income tax in relation to the proceeds of the Portfolio, and the Issuer produces to the Representative of the Noteholders a certi cate signed by the chairman of the board of directors evidencing that it will have the necessary funds not subject to the interest of any other person to discharge all its outstanding liabilities in respect of the Notes and any amounts required under the Conditions to be paid in priority to, or pari passu with, the Notes, then, following receipt of a written notice from the Representative of the Noteholders authorising the redemption, the Issuer will redeem, on the next succeeding Payment Date, all (but not only some) of the Notes at their Principal Outstanding Amount together with accrued but unpaid interest up to and including the relevant Payment Date, having given not more than 60 nor less than 30 days' notice in writing to the Representative of the Noteholders and to the Noteholders in accordance with Condition 14. Taxation Pre-Enforcement Priority in relation to Interest and Principal of the Notes Payments under the Notes may or may not be subject to withholding or deduction for or on account of ``imposta sostitutiva'', in accordance with Italian Law No. 239 of 1 April 1996, as amended by Italian Law No. 409 of 23 November 2001 and as subsequently amended and supplemented (any such withholding or deduction, a ``Decree 239 Deduction''). See ``Taxation''. Upon the occurrence of any withholding or deduction for or on account of tax from any payments under the Notes, neither the Issuer nor any other person shall have any obligation to pay any additional amount(s) to any holder of Notes of any class. In respect of the obligation of the Issuer to pay interest and principal on the Notes in accordance with the Pre-Enforcement Order of Priority (as de ned below), Condition 4.1 provides that the Class A1 Noteholders and the Class A2 Noteholders will be entitled to receive payment of interest in priority to payment of interest to the Class B Noteholders and the Class C Noteholders. The Class A1 Noteholders will be entitled to receive payment of principal in priority to payment of principal to the Class A2 Noteholders, the Class B Noteholders and the Class C Noteholders and the Class A2 Noteholders will not be entitled to receive any payment of principal unless and until the Class A1 Notes have been redeemed in full, but in priority to the payment of principal to the Class B Noteholders and the Class C Noteholders. The Class B Noteholders will not be entitled to receive any payment of interest unless and until all interest amounts then due to the Class A Noteholders have been paid in full, but in priority to the payment of interest to the Class C Noteholders. The Class B Noteholders will not be entitled to receive any payment of principal unless and until the Class A Notes have been redeemed in full, but in priority to the payment of principal to the Class C Noteholders. To the extent that the Class B Interest Subordination Event (as de ned in the 8

9 ``Glossary of Terms'') has occurred, the payment of interest to the Class B Noteholders will be subordinated to the repayment of principal to the Class A Noteholders. The Class C Noteholders will not be entitled to receive any payment of interest unless and until all interest amounts then due to the Class A Noteholders and the Class B Noteholders have been paid in full. The Class C Noteholders will not be entitled to receive any payment of principal unless and until the Class A Notes and the Class B Notes have been redeemed in full. To the extent that the Class C Interest Subordination Event (as de ned in the ``Glossary of Terms'') has occurred, the payment of interest to the Class C Noteholders will be subordinated to the repayment of principal to the Class A Noteholders and the Class B Noteholders. Post-Enforcement Priority in relation to Interest and Principal of the Notes Ratings Purchase of the Notes In respect of the obligation of the Issuer to pay interest and principal on the Notes in accordance with the Post-Enforcement Order of Priority, Condition 4.2 provides that the Class A Noteholders will be entitled to receive payment of interest and principal in priority to the payment of interest and principal to the Class B Noteholders and the Class C Noteholders; the Class B Noteholders will not be entitled to receive any payment of interest and principal unless and until all interest and principal amounts due to the Class A Noteholders have been paid in full, but in priority to the payment of interest and principal to the Class C Noteholders; and the Class C Noteholders will not be entitled to receive any payment of interest and principal unless and until all interest and principal amounts due to the Class A Noteholders and the Class B Noteholders have been paid in full. The Class A1 Notes are expected, on issue, to be rated Aaa by Moody's, AAA by S&P and AAA by Fitch (each as de ned in the ``Glossary of Terms''). The Class A2 Notes are expected, on issue, to be rated Aaa by Moody's, AAA by S&P and AAA by Fitch. The Class B Notes are expected, on issue, to be rated Aa2 by Moody's, AA by S&P and AA by Fitch. The Class C Notes are expected, on issue, to be rated Baa2 by Moody's, BBB by S&P and BBB by Fitch. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal by the assigning rating organisation. The Issuer may not purchase any Notes at any time. 3. Description of Cash Flows and Issuer Accounts Accounts held with the Account Bank Pursuant to the terms of the Cash Allocation, Management and Payments Agreement, the Issuer will establish the following accounts with the Account Bank: (A) The ``Issuer Collection Account'': to which all the amounts collected from time to time by the Issuer in respect of the Claims (as de ned in the ``Glossary of Terms'') as principal, interest and/or expenses, including Prepayments (as de ned in the ``Glossary of Terms'') and any payment of damages, as a result of the activity of the Servicer and Special Servicer pursuant to the Servicing Agreement (the ``Collections''), will be credited. Any amounts standing to the credit of such account will be transferred on a daily basis to the Issuer Investment Account. (See the sections entitled ``Issuer Accounts'', ``Servicing and Collection 9

10 (B) Procedures'' and ``Description of the Transaction Documents ± Description of the Servicing Agreement''). The ``Issuer Cash Reserve Account'': to which on each Payment Date prior to the delivery of a Trigger Notice (as de ned below), the Issuer will credit the Cash Reserve Required Amount (as de ned in the ``Glossary of Terms'') out of which any amount credited to the Issuer Cash Reserve Account on each Payment Date in accordance with the Pre-Enforcement Order of Priority will be transferred to the Issuer Investment Account on such date. (See the sections entitled ``Issuer Accounts'' and ``Description of the Transaction Documents ± Description of the Subordinated Loan''). (C) The ``Issuer Investment Account'': to which: (a) all amounts standing to the credit of the Issuer Collection Account will be transferred on a daily basis; (b) all sums (other than the Collections) collected or received by the Issuer under any Transaction Document to which the Issuer is party, will be credited from time to time; (c) any amount credited to the Issuer Cash Reserve Account on each Payment Date in accordance with the Pre-Enforcement Order of Priority will be transferred on such date; (d) the proceeds from the issuance of the Notes (net of the commissions payable to the Lead Managers and the Co-Managers) will be credited on the Issue Date; (e) any amounts standing to the credit of the Issuer Payment Account on the Business Day immediately following each Payment Date will be credited on such date; and (f) the proceeds of the Subordinated Loan (as de ned below), which include the Initial Cash Reserve Amount (as de ned in the ``Glossary of Terms''), will be credited on the Issue Date. Pursuant to the terms of the Cash Allocation, Management and Payments Agreement, during each Collection Period (as de ned in the ``Glossary of Terms'') the Cash Manager shall invest funds standing to the credit of the Issuer Investment Account in Eligible Investments (as de ned below) which have the requisite maturity date, and any proceeds upon maturity or any sums deriving from the disposal of such Eligible Investments, including pro t generated thereby or interest matured thereon, will also be transferred to the Issuer Investment Account on or prior to the relevant Collection Date. From such account: (a) all sums standing to the credit thereof on each Collection Date (as de ned in the ``Glossary of Terms'') will be transferred to the Issuer Payment Account on such Collection Date; (b) the Initial Purchase Price of the Portfolio (as de ned below), plus interest accrued thereon pursuant to the Transfer Agreement, will be paid to the Originator on the Issue Date and (c) certain initial costs of the Securitisation will be paid on the Issue Date out of the proceeds of the Subordinated Loan. (See the sections entitled ``Issuer Accounts'' and ``Description of the Transaction Documents ± Description of the Cash Allocation, Management and Payments Agreement''). (D) The ``Issuer Securities Account'': into which all the securities constituting Eligible Investments will be deposited from time to time and pledged in accordance 10

11 with the provisions of the Intercreditor Agreement and the Deed of Pledge. Any proceeds upon maturity or any sums arising from the disposal of such Eligible Investments, including pro t generated thereby or interest accrued thereon, will be credited to the Issuer Investment Account on or prior to each Collection Date. (See the sections entitled ``Issuer Accounts'' and ``Description of the Transaction Documents ± Description of the Cash Allocation, Management and Payments Agreement, Description of the Intercreditor Agreement and Description of the Deed of Pledge''). (E) The ``Issuer Payment Account'': to which (a) all the amounts standing to the credit of the Issuer Investment Account will be transferred on each Collection Date, (b) all interest accrued as of each Collection Date on the amounts standing to the credit of the Issuer Initial Amortisation Account will be transferred on each relevant Payment Date, (c) all sums paid into the Issuer Initial Amortisation Account under item (viii) of the Pre- Enforcement Order of Priority or, as applicable, under items (v), (vi) and (vii) of the Post-Enforcement Order of Priority will be transferred on the Initial Amortisation Date, and (d) all sums paid into the Issuer Initial Amortisation Account under the Bank Guarantee (as de ned below) during each Collection Period will be transferred on each relevant Payment Date, provided however that, where the Bank Guarantee has been enforced, if the Account Bank is not replaced by an Eligible Institution (as de ned below) at least one Business Day before the Initial Amortisation Date or any relevant Payment Date (as applicable), the sums standing to the credit of the Issuer Initial Amortisation Account on such day shall not be transferred to the Issuer Payment Account, on the Initial Amortisation Date or the relevant Payment Date, as applicable, and (e) any amount due by the Swap Counterparty under the Swap Agreements will be paid on each Swap Payment Date (as de ned in the ``Glossary of Terms''). All the amounts standing to the credit of the Issuer Payment Account on each Payment Date shall form part of the Issuer Available Funds for distribution on each Payment Date in accordance with the applicable Order of Priority (as de ned below). Any amount standing to the credit of the Issuer Payment Account will be transferred back to the Issuer Investment Account one Business Day after each Payment Date. (See the sections entitled ``Issuer Accounts'' and ``Description of the Transaction Documents ± Description of the Intercreditor Agreement''). (F) The ``Issuer Corporate Account'': to which the Issuer Retention Amount (as de ned below) will be credited on the Payment Date falling in May of each year in accordance with the applicable Order of Priority. Amounts standing to the credit of the Issuer Corporate Account shall be used to cover the administrative and other corporate expenses of the Issuer, in order for the Issuer to maintain its corporate existence. (See the section entitled ``Issuer Accounts''). 11

12 (G) The ``Issuer Expenses Account'': to which the Issuer Disbursement Amount (as de ned below) will be credited on the Payment Date falling in May of each year in accordance with the applicable Order of Priority. Any amounts standing to the credit of the Issuer Expenses Account shall be used to cover the out of pocket expenses of the Issuer, other than corporate costs and expenses. (See the section entitled ``Issuer Accounts''). (H) The ``Issuer Quota Capital Account'': to which all the sums contributed by the quotaholders of the Issuer as quota capital have been credited. The Issuer Quota Capital Account together with the Issuer Collection Account, the Issuer Investment Account, the Issuer Securities Account, the Issuer Cash Reserve Account, the Issuer Payment Account, the Issuer Corporate Account and the Issuer Expenses Account are referred to as the ``Accounts'' Account held with the Amortisation Account Bank Pursuant to the terms of the Cash Allocation, Management and Payments Agreement, the Issuer will establish with the Amortisation Account Bank the ``Issuer Initial Amortisation Account'', to which (a) on each Payment Date preceding the Initial Amortisation Date, provided that the Issuer has not received a Trigger Notice, the amount under item (viii) of the Pre-Enforcement Order of Priority will be credited, (b) upon delivery of a Trigger Notice, on each Payment Date preceding the Initial Amortisation Date, the amounts under items (v), (vi) and (vii) of the Post-Enforcement Order of Priority will be credited, and (c) any amount paid by the Guarantee Provider (or any replacement guarantee provider) under the Bank Guarantee will be credited, and out of which (d) on each Payment Date which falls prior to the Initial Amortisation Date, any interest accrued as of the preceding Collection Date on the amounts standing to the credit of the Issuer Initial Amortisation Account will be transferred to the Issuer Payment Account, (e) on the Initial Amortisation Date, all amounts credited to the Issuer Initial Amortisation Account pursuant to sub-paragraphs (a) and (b) above (together with interest accrued thereon) will be transferred to the Issuer Payment Account and (f) on each Payment Date any amount paid under the Bank Guarantee will be transferred to the Issuer Payment Account, provided however that, where the Bank Guarantee has been enforced, if the Account Bank is not replaced by an Eligible Institution at least one Business Day before the Initial Amortisation Date or any relevant Payment Date (as applicable), the sums standing to the credit of the Issuer Initial Amortisation Account on such day shall not be transferred to the Issuer Payment Account on the Initial Amortisation Date or the relevant Payment Date, as applicable, and shall form part of the Issuer Available Funds for distribution on either the Initial Amortisation Date or any relevant Payment Date (as applicable), in accordance with the applicable Order of Priority. (See the sections entitled ``Issuer Accounts'' and ``Description of the Transaction Documents ± Description of the Bank Guarantee''). The Issuer Initial Amortisation Account, together with the Accounts are referred to as the ``Issuer Accounts''. 12

13 Account Bank and Amortisation Account Bank Account Bank Quarterly Report As at the Issue Date the unsecured, unguaranteed and unsubordinated short-term debt obligations of the Account Bank are rated P-1 by Moody's, A-2 by S&P and F-1 by Fitch. Pursuant to the terms of the Bank Guarantee (as de ned below), the Guarantee Provider will irrevocably guarantee to the Issuer the due and prompt payment of the amounts due from the Account Bank under the Cash Allocation, Management and Payments Agreement. As at the Issue Date the unsecured, unguaranteed and unsubordinated short-term debt obligations of the Guarantee Provider are rated P-1 by Moody's, A-1+ by S&P, and F1+ by Fitch. If the Guarantee Provider is downgraded and, as a result of such downgrading, it falls below the Minimum Rating (as de ned in below), it shall immediately notify the Issuer and the Bank Guarantee shall terminate on the date falling 50 days after such downgrading. The Issuer shall within 20 days after the downgrading of the Guarantee Provider, either, (a) appoint another bank acting as guarantee provider which shall have at least the Minimum Rating, or (b) enter into a suitable collateral arrangement on terms acceptable to the Rating Agencies. Failing such appointment or such collateral arrangement being put in place, the Issuer shall appoint another bank within 20 days, acting as account bank which quali es as an Eligible Institution and the Account Bank shall immediately transfer all sums deposited with it to such new account bank. The Bank Guarantee shall terminate if at any time the Account Bank is upgraded so as to qualify as an Eligible Institution. As at the Issue Date the unsecured, unguaranteed and unsubordinated short-term debt obligations of the Amortisation Account Bank are rated P-1 by Moody's, A-1+ by S&P, and F1+ by Fitch. If the Amortisation Account Bank is downgraded and, as a result of such downgrading, the Amortisation Account Bank fails to qualify as an Eligible Institution, it shall immediately notify the Issuer and the Issuer shall terminate the appointment of the Amortisation Account Bank and appoint another bank acting as amortisation account bank which quali es as an Eligible Institution within 30 days thereafter. Following such appointment the Amortisation Account Bank shall immediately transfer all sums deposited with it to such new amortisation account bank. ``Eligible Institution'' means a depository institution organised under the laws of any state which is a member of the European Union or of the United States, the short-term unsecured and unsubordinated debt obligations of which are rated at least P-1 by Moody's, F-1 by Fitch and A-1+ by S&P. ``Minimum Rating'' means a rating assigned to the short term unguaranteed, unsubordinated and unsecured short-term debt obligations at least equal to P-1 by Moody's, F-1+ by Fitch and A-1+ by S&P. On or prior to each Quarterly Report Date (as de ned in the ``Glossary of Terms'') the Account Bank shall deliver a quarterly report to the Issuer, the Representative of Noteholders, the Paying Agent, the Cash Manager, the Servicer, the Administrative Services Provider, the Originator, the Rating Agencies and the Calculation Agent (the ``Account Bank Quarterly Report''), which shall include details of the balance, interest and movement in the Accounts as of the preceding Collection Date. 13

14 Amortisation Account Bank Quarterly Report Eligible Investments On or prior to each Quarterly Report Date, the Amortisation Account Bank shall deliver a copy of a quarterly report to the Issuer, the Representative of Noteholders, the Paying Agent, the Cash Manager, the Servicer, the Administrative Services Provider, the Originator, the Rating Agencies and the Calculation Agent (the ``Amortisation Account Bank Quarterly Report'') which shall provide details on the balance, interest and movements in the Issuer Initial Amortisation Account as of the preceding Collection Date. The Cash Manager shall invest funds standing to the credit of the Issuer Investment Account in investments which may include any senior, unsubordinated debt security, investment, commercial paper, deposit or other debt instrument issued by, or fully and unconditionally guaranteed by, an institution having at least the rating given by Moody's, Fitch and S&P for the maturity (or the residual maturity, as applicable) of such investment as set out below (or otherwise acceptable to the Rating Agencies), Maturity Rating S&P Moody's Fitch Between 1 and 3 months A-1+ A1 and P-1 F-1+ Less than 1 month A-1 A2 or P-1 F-1 provided always that any such investment, paper, deposit or instrument (a) has a maturity date falling on or before the Business Day preceding the immediately following Collection Date, and (b) is not subject to any Decree 239 Deduction or any withholding pursuant to article 26.3 bis of Presidential Decree No. 600/1973, as subsequently amended or supplemented; and further provided that (c) any Eligible Investments which are rated A-1 by S&P shall not at any time exceed 20% of the then Principal Outstanding Amount of the Notes. 4. Issuer Available Funds and Priority of Payments Issuer Available Funds On each Payment Date, the Issuer Available Funds shall comprise: (a) (b) (c) (d) all the Collections received or recovered by the Issuer, through the Servicer and the Special Servicer and all interest accrued and paid on such sums during the preceding Collection Period; on the Initial Amortisation Date, any amount credited to the Issuer Initial Amortisation Account during the preceding Collection Periods in respect of item (viii) of the Pre-Enforcement Order of Priority or items (v), (vi) and (vii) of the Post-Enforcement Order of Priority, as applicable; all amounts due and payable to the Issuer by the Swap Counterparty pursuant to the terms of the Swap Agreements in relation to such Payment Date; all amounts received from the Originator pursuant to the Transfer Agreement and the Warranty and Indemnity Agreement during the preceding Collection Period; 14

15 (e) all amounts received by the Issuer under the other Transaction Documents during the preceding Collection Period; (f) (g) (h) all amounts received by the Issuer under the terms of the Quotaholders' Agreement and the Letter of Undertaking; any other amounts, not included in the foregoing items (a), (b), (c), (d) (e) and (f) standing to the credit of the the Issuer Investment Account, the Issuer Initial Amortisation Account (excluding any amount credited to such account, prior to the Initial Amortisation Date, in respect of item (viii) of the Pre-Enforcement Order of Priority or items (v), (vi) and (vii) of the Post-Enforcement Order of Priority, as applicable, and any amount credited to such account under the Bank Guarantee), the Issuer Cash Reserve Account and the Issuer Payment Account on the Collection Date immediately preceding the relevant Payment Date; all amounts received from the sale of the Portfolio should such sale occur; and (i) following the delivery of a Trigger Notice, any proceeds from the enforcement of the Deed of Pledge and of the Deed of Charge. provided that if prior to each Payment Date the Bank Guarantee is enforced in respect of any amounts included in the foregoing items, the amounts paid by the Guarantee Provider shall replace pro-tanto the relevant amounts included in the foregoing items and shall form part of the Issuer Available Funds on such Payment Date. Allocation of Principal On each Payment Date falling on or after the Initial Amortisation Date, the principal payment due and payable on the Class A Notes in accordance with the Pre-Enforcement Order of Priority (the ``Class A Principal Payment Amount'') will be equal to the sum of the Class A1 Principal Payment Amount and the Class A2 Principal Payment Amount, where (i) the ``Class A1 Principal Payment Amount'' means, with respect to each Calculation Date (as de ned in the ``Glossary of Terms''), the lesser of: (a) the Target Amortisation Amount (or, if lower, the amount available after the application of the Issuer Available Funds, on the immediately following Payment Date, to all items of higher priority to the payment of principal on the Class A Notes) and (b) the Principal Outstanding Amount of the Class A1 Notes on such Calculation Date, and (ii) the ``Class A2 Principal Payment Amount'' means, with respect to each Calculation Date, the lesser of (a) the Target Amortisation Amount (or, if lower, the amount available after the application of the Issuer Available Funds, on the immediately following Payment Date, to all items of higher priority to the payment of principal on the Class A Notes) less the Class A1 Principal Payment Amount and (b) the Principal Outstanding Amount of the Class A2 Notes on such Calculation Date. On each Payment Date falling on or after the Initial Amortisation Date, the principal payment due and payable on the Class B Notes in accordance with the Pre-Enforcement Order of Priority (the ``Class B Principal Payment Amount'') will be, with respect to the relevant Calculation Date, the lesser of (a) the Target Amortisation Amount less the Class A Principal Payment Amount (or, if lower, the amount available 15