SECURITIZATION BONDS INFORMATIVE PROSPECTUS MARCH, 2005 PROSPECTUS REGISTRED WITH CNMV REGISTRIES

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1 INFORMATIVE PROSPECTUS MARCH, 2005 AYT CÉDULAS CAJAS IX FONDO DE TITULIZACIÓN DE ACTIVOS SECURITIZATION BONDS 5,000,000,000 TRANCHE A: 3,500,000,000 Aaa/AAA/AAA TRANCHE B: 1,500,000,000 Aaa/AAA/AAA ORGANIZER,, ARRANGER AND ASSIGNOR PLACEMENT AND UNDERWRITING ENTITIES ISSUERS CAJA DE AHORROS DEL MEDITERRÁNEO CAJA DE AHORROS Y MONTE DE PIEDAD DE ZARAGOZA, ARAGÓN Y RIOJA (IBERCAJA) MONTE DE PIEDAD Y CAJA DE AHORROS DE HUELVA Y SEVILLA CAJA DE AHORROS DE CASTILLA LA MANCHA CAIXA D ESTALVIS LAIETANA CAIXA D ESTALVIS DE SABADELL CAJA DE AHORROS DE GALICIA CAIXA DE AFORROS DE VIGO, OURENSE E PONTEVEDRA (CAIXANOVA) CAJA DE AHORROS DE SALAMANCA Y SORIA CAJA DE AHORROS DE MURCIA CAJA DE AHORROS Y MONTE DE PIEDAD DE CÓRDOBA (CAJASUR) MONTES DE PIEDAD Y CAJA DE AHORROS DE RONDA, CÁDIZ, ALMERÍA, MÁLAGA Y ANTEQUERA (UNICAJA) CAJA GENERAL DE AHORROS DE CANARIAS CAIXA D ESTALVIS DEL PENEDÈS CAJA DE AHORROS Y MONTE DE PIEDAD DE LAS BALEARES (SA NOSTRA) CAIXA D ESTALVIS DE TERRASSA CAJA GENERAL DE AHORROS DE GRANADA CAJA DE AHORROS DE LA INMACULADA DE ARAGÓN CAIXA D ESTALVIS DE GIRONA CAJA INSULAR DE AHORROS DE CANARIAS CAIXA D ESTALVIS COMARCAL DE MANLLEU CAJA DE AHORROS Y MONTE DE PIEDAD DE NAVARRA CAJA DE AHORROS Y MONTE DE PIEDAD DE SEGOVIA CAJA DE AHORRO PROVINCIAL DE GUADALAJARA CAJA ESPAÑA DE INVERSIONES, CAJA DE AHORROS Y MONTE DE PIEDAD CAJA DE AHORROS Y MONTE DE PIEDAD DE ONTINYENT FINANCIAL AGENT FUND DESIGNED, INCORPORATED AND MANAGED BY PROSPECTUS REGISTRED WITH CNMV REGISTRIES

2 IMPORTANT NOTICE: This document is an English translation of the Spanish language Prospectus of AyT CÉDULAS CAJAS IX, FONDO DE TITULIZACIÓN DE ACTIVOS, registered with the Comisión Nacional del Mercado de Valores (CNMV). No document other than the Spanish language Prospectus may be considered as having any legal effect whatsoever in respect to the issue of the securitization bonds by AyT CÉDULAS CAJAS IX, FONDO DE TITULIZACIÓN DE ACTIVOS SUMMARY OF GENERAL CONDITIONS 1. THE FUND 1.1 Denomination and Incorporation The Fund shall be named AyT CÉDULAS CAJAS IX, FONDO DE TITULIZACIÓN DE ACTIVOS. The Fund shall be incorporated by AHORRO Y TITULIZACIÓN, SOCIEDAD GESTORA DE FONDOS DE TITULIZACIÓN, S.A. 1.2 Identification of the Fund Management Company AHORRO Y TITULIZACIÓN, SOCIEDAD GESTORA DE FONDOS DE TITULIZACIÓN, S.A., is authorized to arrange the incorporation of the Fund, as well as to carry out the management and legal representation of the Fund, pursuant to the provisions of Royal Decree 926/1998, of May 14, FUND S ASSETS 2.1 Portfolio of Securitized Assets Composition of the Asset Portfolio of the Fund: twenty six (26) individual mortgage bonds with ten (10) year maturity term (the Mortgage Bonds A ) and twenty six (26) individual mortgage bonds with fifteen (15) year maturity term (the Mortgage Bonds B, and together with the Mortgage Bonds A, the Mortgage Bonds or the Assets ) assigned by the Assignor, AHORRO CORPORACIÓN FINANCIERA, S.V., S.A. (the Assignor ), and issued by the Issuers for an aggregate face value of FIVE BILLION EUROS ( 5,000,000,000). Issuers and Distribution of the Mortgage Bonds: each of the Issuers shall issue, on the Incorporation Date, two Mortgage Bonds whose individual face value shall be as follows: CAJA DE AHORROS DEL MEDITERRÁNEO; Mortgage Bond A: 354,166,667 euros, Mortgage Bond B: 145,833,333 euros CAJA DE AHORROS Y MONTE DE PIEDAD DE ZARAGOZA, ARAGÓN Y RIOJA (IBERCAJA); Mortgage Bond A: 283,333,333 euros, Mortgage Bond B: 116,666,667 euros MONTE DE PIEDAD Y CAJA DE AHORROS DE HUELVA Y SEVILLA; Mortgage Bond A: 318,750,000 euros, Mortgage Bond B: 131,250,000 euros CAJA DE AHORROS DE CASTILLA LA MANCHA; Mortgage Bond A: 212,500,000 euros, Mortgage Bond B: 87,500,000 euros 2

3 CAIXA D ESTALVIS LAIETANA; Mortgage Bond A: 212,500,000 euros, Mortgage Bond B: 87,500,000 euros CAIXA D ESTALVIS DE SABADELL; Mortgage Bond A: 177,083,333 euros, Mortgage Bond B: 72,916,667 euros CAJA DE AHORROS DE GALICIA; Mortgage Bond A: 141,666,667 euros, Mortgage Bond B: 58,333,333 euros CAIXA DE AFORROS DE VIGO, OURENSE E PONTEVEDRA (CAIXANOVA); Mortgage Bond A: 141,666,667 euros, Mortgage Bond B: 58,333,333 euros CAJA DE AHORROS DE SALAMANCA Y SORIA; Mortgage Bond A: 141,666,667 euros, Mortgage Bond B: 58,333,333 euros CAJA DE AHORROS DE MURCIA; Mortgage Bond A: 180,625,000,00 euros, Mortgage Bond B: 74,375,000,00 euros CAJA DE AHORROS Y MONTE DE PIEDAD DE CÓRDOBA (CAJASUR) ; Mortgage Bond A: 141,666,667 euros, Mortgage Bond B: 58,333,333 euros MONTES DE PIEDAD Y CAJA DE AHORROS DE RONDA, CÁDIZ, ALMERÍA, MÁLAGA Y ANTEQUERA (UNICAJA); Mortgage Bond A: 141,666,667 euros, Mortgage Bond B: 58,333,333 euros CAJA GENERAL DE AHORROS DE CANARIAS; Mortgage Bond A: 106,250,000 euros, Mortgage Bond B: 43,750,000 euros CAIXA D ESTALVIS DEL PENEDÈS; Mortgage Bond A: 106,250,000 euros, Mortgage Bond B: 43,750,000 euros CAJA DE AHORROS Y MONTE DE PIEDAD DE LAS BALEARES (SA NOSTRA); Mortgage Bond A: 106,250,000 euros, Mortgage Bond B: 43,750,000 euros CAIXA D ESTALVIS DE TERRASSA; Mortgage Bond A: 106,250,000 euros, Mortgage Bond B: 43,750,000 euros CAJA GENERAL DE AHORROS DE GRANADA; Mortgage Bond A: 70,833,333 euros, Mortgage Bond B: 29,166,667 euros CAJA DE AHORROS DE LA INMACULADA DE ARAGÓN; Mortgage Bond A: 100,000,000 euros, Mortgage Bond B: 100,000,000 euros CAIXA D ESTALVIS DE GIRONA; Mortgage Bond A: 70,833,333 euros, Mortgage Bond B: 29,166,667 euros CAJA INSULAR DE AHORROS DE CANARIAS; Mortgage Bond A: 70,833,333 euros, Mortgage Bond B: 29,166,667 euros CAIXA D ESTALVIS COMARCAL DE MANLLEU; Mortgage Bond A: 70,833,333 euros, Mortgage Bond B: 29,166,667 euros CAJA DE AHORROS Y MONTE DE PIEDAD DE NAVARRA; Mortgage Bond A: 53,125,000 euros, Mortgage Bond B: 21,875,000 euros CAJA DE AHORROS Y MONTE DE PIEDAD DE SEGOVIA; Mortgage Bond A: 24,791,667 euros, Mortgage Bond B: 10,208,333 euros CAJA DE AHORRO PROVINCIAL DE GUADALAJARA; Mortgage Bond A: 7,083,333 euros, Mortgage Bond B: 2,916,667 euros CAJA ESPAÑA DE INVERSIONES, CAJA DE AHORROS Y MONTE DE PIEDAD; Mortgage Bond A: 141,666,667 euros, Mortgage Bond B: 58,333,333 euros CAJA DE AHORROS Y MONTE DE PIEDAD DE ONTINYENT; Mortgage Bond A: 17,708,333 euros, Mortgage Bond B: 7,291,667 euros The Mortgage Bonds shall be initially subscribed for by the Assignor, who, in the same act of incorporation of the Fund, shall assign them to the Fund (acting through the Fund Management Company) in accordance with the provisions of the Deed of Incorporation and the Asset Assignment Agreement. 2.2 Credit Enhancement 3

4 Liquidity Facility. Two Liquidity Facilities (a Liquidity Facility A and a Liquidity Facility B) shall be established for the purpose of allowing the Fund meet its payment obligations in each Tranche respectively. The maximum amount of Liquidity Facility A shall be the result of calculating two (2) years of interest of the Tranche A Bonds by approximately 23.6% of the nominal amount of the Tranche A Bonds. The maximum amount of Liquidity Facility B shall be the result of calculating two (2) years of interest of the Tranche B Bonds by approximately 24.25% of the nominal amount of the Tranche B Bonds. Collateral Deposit. In case the Collateral Ratio of any Issuer were lower than the Minimum Collateral Ratio, they undertake to deposit in favor of the Fund at an account open with the Financial Agent an amount equivalent to two (2) years of interest of the Mortgage Bonds issued by them in order to secure eventual payment defaults of said Mortgage Bonds. Collection Account and Cash Account at a Guaranteed Interest Rate. In accordance with the provisions of the Financial Services Agreement that will be entered into by the Fund and INSTITUTO DE CRÉDITO OFICIAL, the Fund will guarantee the remuneration of the Collection Account as well as that of the Cash Account at certain pre-agreed levels. Financial Margin of the Portfolio. The assets pooled in the Fund earn interest at rates higher than those applicable to the securities issued by the Fund. 3. FUND LIABILITIES 3.1 Securities Issued: Asset-Backed Securitization Bonds Amount of Issue and Number of Bonds: FIVE BILLION EUROS ( 5,000,000,000), comprised of FIFTY THOUSAND (50,000) Bonds divided in two (2) Tranches: Tranche A: integrated by THIRTY FIVE THOUSAND (35,000) Bonds of ONE HUNDRED THOUSAND EUROS ( 100,000) face value each, represented by accounting entries, with a total nominal value of THREE THOUSAND FIVE HUNDRED MILLION EUROS ( 3,500,000,000) ( Tranche A Bonds ). Tranche B: integrated by FIFTEEN THOUSAND (15,000) Bonds of ONE HUNDRED THOUSAND EUROS ( 100,000) face value each, represented by accounting entries, with a total nominal value of ONE THOUSAND FIVE HUNDRED MILLION EUROS ( 1,500,000,000) ( Tranche B Bonds ). Tranche A Bonds and Tranche B Bonds collectively the Bonds. Face Value: ONE HUNDRED THOUSAND EUROS ( 100,000) per Bond. Price of issue: Price of issue may be at face value or lower than face value, free of subscription expenses for the subscriber. Reimbursement Price: ONE HUNDRED THOUSAND EUROS ( 100,000) per Bond, except in the circumstances set out in subsections II (Early Redemption) and IV (iii) (Disencumbrance of Hidden Defects). Interest Rate: the interest rate (the Nominal Interest Rate ) will be a fixed rate, to be determined not later than on the Date of Incorporation of the Fund as agreed by the Arranger (which is also the Assignor) and the Underwriting and Placement Entities. It shall be calculated with reference to the arithmetic average of the ask and call price of a ten (10) year, for the Tranche A Bonds, and of a fifteen (15) year, for the Tranche B Bonds, Euribor IRS appearing on ICAPEURO of Reuters screen around 11:00 a.m. of the second Business Day preceding the Date of Incorporation of 4

5 the Fund, plus a spread between minus twenty five (-25) basis points (-0,25%) and plus twenty five (+25) basis points (+0,25%). Frequency of Interest Payments : yearly, on each anniversary of the Bond Disbursement Date. Repayment of Principal: full lump-sum repayment on the Final Maturity Date. Final Maturity Date: 10 th anniversary of the Tranche A Bonds Disbursement Date, 15 th anniversary of the Tranche B Bonds Disbursement Date, without prejudice to the events of Early Redemption or, should this date not be a Business Day, the next Business Day thereafter. Legal Maturity Date: 18 th anniversary of the Bond Disbursement Date or, should this date not be a Business Day, the next Business Day thereafter. On the Legal Maturity Date all payment obligations of the Fund shall be terminated. 3.2 Credit Risk Rating Tranche A Bonds: Aaa (MOODY S); AAA (FITCH); AAA (S&P). Tranche B Bonds: Aaa (MOODY S); AAA (FITCH); AAA (S&P). 3.3 Listing of the Securitization Bonds Official Secondary Markets where admission for trading of the Bonds will be applied for: AIAF Mercado de Renta Fija. 4. AVAILABLE FUNDS. SOURCE AND APPLICATION 4.1 Source and application of funds on the Disbursement Date for the Bonds Source: the Fund will have funds at its disposal from the following items: (a) Payout of the issue of Bonds of both Tranches. (b) Endowment of Incorporation, Management and Administration of the Fund made by the Assignor. Application: the Fund will in turn use the funds described above to make the following payments 1 st Payment of the Price of the Assets. The payment of the Price of Mortgage Bonds A shall be carried out with charge to the amount obtained from the disbursement of Tranche A Bonds. Likewise, the payment of the Price of Mortgage Bonds B shall be carried out with charge to the amount obtained from the disbursement of Tranche B Bonds. 2 nd Payment of Incorporation expenses, including payment of the commissions to the participating entities, out of the Endowment of Incorporation, Management and Administration of the Fund made by the Assignor. 4.2 From the date the Fund is constituted until total redemption of the Bonds 1. Source: 5

6 (i) Available Funds A (a) Amounts received with respect to both ordinary and penalty interest collected by virtue of the Mortgage Bonds A and, if appropriate, the repayment of the principal of the same, which will have been deposited in the Collection Account; (b) Any amounts received in case of execution of the Mortgage Bonds A; (c) Drawings of the Liquidity Facility A. This Funds shall only be allocated to the payment of the Bonds interest and to the extraordinary expenses of the Fund derived from the payment default of the Issuers. (d) If applicable, the amount of the Collateral Deposit or Deposits. (ii) Available Funds B (a) Amounts received with respect to both ordinary and penalty interest collected by virtue of the Mortgage Bonds B and, if appropriate, the repayment of the principal of the same, which will have been deposited in the Collection Account; (b) Any amounts received in case of execution of the Mortgage Bonds B; (c) Drawings of the Liquidity Facility B. This Funds shall only be allocated to the payment of the Bonds interest and to the extraordinary expenses of the Fund derived from the payment default of the Issuers. (d) If applicable, the amount of the Collateral Deposit or Deposits. (iii) Remaining Available Funds In addition, on each Payment Date, the Fund shall have available the proceeds of the reinvestment of the amounts deposited in the Cash Account and in the Collection Account. 2. Application: the Available Funds on each Payment Date shall be used to fulfill the Fund s payment or withholding obligations in the following order: a) Application of Available Funds A 1 st Payment of the extraordinary expenses derived from the enforcement of Mortgage Bonds A and other payment defaults of the Mortgage Bonds A Issuers and payment to the Liquidity Facility A Lending Institution of the Availability Fee. 2 nd Payment of interest accrued on the Tranche A Bonds. If the Available Funds A are insufficient to cover the whole sum, the resulting amount will be distributed on a pro-rata basis among all the Tranche A Bonds. 3 rd Payment of interest accrued on amounts drawn under Liquidity Facility A. This amounts shall be paid on the date on which the Funds receives from the Issuers the amount whose default gave place to the drawing of the Liquidity Facility A. 4 th Redemption of principal of Liquidity Facility A. This amounts shall be paid on the date on which the Funds receives from the Issuers the amount whose default gave place to the drawing of the Liquidity Facility A. 5 th Redemption of principal on the Tranche A Bonds. This shall include payment of the amounts owed to the bondholders as a consequence of the compulsory early redemption of the issue, which may only be made out of the amounts recovered of the outstanding Mortgage Bond(s) A. If the Available Funds A are insufficient to cover the whole sum, the resulting amount will be distributed on a pro-rata basis among all the Bonds. 6 th Repayment of the Collateral Deposit, as the case may be. 7 th Payment to the Assignor (on the Legal Maturity Date) of extraordinary expenses different from those appointed in item 1 st, met by it in connection with Tranche A Bonds. b) Application of Available Funds B 1 st Payment of the extraordinary expenses derived from the enforcement of Mortgage Bonds B and other payment defaults of the Mortgage Bonds B Issuers and payment to the Liquidity Facility B Lending Institution of the Availability Fee. 6

7 2 nd Payment of interest accrued on the Tranche B Bonds. If the Available Funds B are insufficient to cover the whole sum, the resulting amount will be distributed on a pro-rata basis among all the Tranche B Bonds. 3 rd Payment of interest accrued on amounts drawn under Liquidity Facility B. This amounts shall be paid on the date on which the Funds receives from the Issuers the amount whose default gave place to the drawing of the Liquidity Facility B. 4 th Redemption of principal of Liquidity Facility B. This amounts shall be paid on the date on which the Funds receives from the Issuers the amount whose default gave place to the drawing of the Liquidity Facility B. 5 th Redemption of principal on the Tranche B Bonds. This shall include payment of the amounts owed to the bondholders as a consequence of the compulsory early redemption of the issue, which may only be made out of the amounts recovered of the outstanding Mortgage Bond(s) B. If the Available Funds B are insufficient to cover the whole sum, the resulting amount will be distributed on a pro-rata basis among all the Bonds. 6 th Repayment of the Collateral Deposit, as the case may be. 7 th Payment to the Assignor (on the Legal Maturity Date) of extraordinary expenses different from those appointed in item 1 st, met by it in connection with Tranche B Bonds. 8 th Payment to the Assignor (on the Final Maturity Date) of the variable Net Financial Revenue. To make this payment, the Fund Management Company, in the name and on behalf of the Fund, may use, on the Tranche B Final Maturity Date, the surplus that, as the case may be, remains of the Available Funds A once the applications 1 st to 6 th of paragraph a) above have been made. The proceeds of the reinvestment of the amounts deposited in the Cash Account and in the Collection Accounts and the Collection Account shall be allocated to pay, on each Payment Date and up to their own amount, all payments and withholdings included under paragraphs a) and b) above, on a prorrata basis. The Payment Priority Order set out above shall be understood without prejudice to possible exceptions thereto, as envisaged in section IV (iii) (disencumbrance of hidden defects of the Assets). For each of the items in the Payment Priority Order, any amounts that accrued but were not paid on earlier Payment Dates under such heading will be paid first, and then the amounts due on that Payment Date. Throughout the life of the Fund, the remaining balances of the Collection Account shall have an accounting reflection in the debit side of the Fund s balance as variable commission long-term creditors, as indicated in section V.1.1 above. On the Final Maturity Date, the aggregate of such account (variable commission long-term creditors) shall ve equivalente with the Net Financial Revenue (8th rank of the Paymen Priority Order in application of Available Funds B) which shall be transferred to the Assignor for its distribution among the Issuers of the Mortgage Bonds. 5. NATURE OF THIS INFORMATION This information qualifies as a Prospectus for the purposes established in Royal Decree 926/1998, of May 14, 1998 and Royal Decree 291/1992, as amended, among others, by Royal Decree 2590/1998, dated December 7, on amendments to the legal regime of the securities markets, and was registered with the Official Registries of the Spanish Securities Market Commission on March 22, The Fund Management Company, AHORRO Y TITULIZACIÓN, SOCIEDAD GESTORA DE FONDOS DE TITULIZACIÓN, S.A., in charge of incorporating and managing the Fund, is responsible for the contents of the Prospectus (without prejudice to the responsibility assumed by other entities involved). 7

8 Registry of the Prospectus with the files of CNMV may in no case be construed as a recommendation to purchase the securities, nor any opinion as to the solvency of the issuing entity, or on the profitability or quality of the securities offered hereunder. 8

9 TABLE OF CONTENTS CHAPTER I Persons responsible for the contents of the Prospectus and supervisory bodies 10 CHAPTER II Information on the securities issued by the Fund 13 CHAPTER III Information of a general nature on the Fund 63 CHAPTER IV Information on the Fund s activities and assets 79 CHAPTER V Information regarding the economic and financial operations of the Fund 101 CHAPTER VI Information of a general nature on the Fund Management Company 125 CHAPTER VII Recent performance and prospects of the Fund 130 ANNEX I ANNEX II ANNEX III ANNEX IV ANNEX V ANNEX VI ANNEX VII ANNEX VIII ANNEX IX ANNEX X ANNEX XI Certificates of the resolutions passed by the Issuers governing bodies Certificate of resolutions passed by the Assignor s Board of Directors Certificate of resolutions passed by the Fund Management Company s Board of Directors Certificates of the Issuers on the Assets and reports issued by the Fund Management Company regarding the existence, ownership and attributes of the Assets Provisional rating letters from MOODY S, FITCH and STANDARD & POOR S Letter from the Arranger Statement by the Assignor Statement of the Assignor regarding the existence of audited annual accounts for the last three (3) fiscal years, with a positive opinion in the last one Statement of the person responsible for the Prospectus about the existence of any relationships between the entities intervening in the transaction Form of Mortgage Bond Statement of the Fund Management Company that it has put at the disposal of the Rating Entities the last version of the Prospectus 9

10 CHAPTER I PERSONS RESPONSIBLE FOR THE CONTENTS OF THE PROSPECTUS AND SUPERVISORY BODIES I.1 Persons responsible for the contents of the Prospectus I.1.1 First name, surname, national identification number and position or authority of the individual or individuals who, on behalf of the Fund Management Company, are responsible for the contents of this Prospectus Mr. LUIS MIRALLES GARCÍA, holder of Spanish identification card number W, on behalf of AHORRO Y TITULIZACIÓN, SOCIEDAD GESTORA DE FONDOS DE TITULIZACIÓN, S.A. (the Fund Management Company ), promoter of the asset-backed securitization fund known as AyT CÉDULAS CAJAS VII, FONDO DE TITULIZACIÓN DE ACTIVOS (the Fund ) assumes responsibility for the content of this Prospectus on behalf of the Fund Management Company. Mr. LUIS MIRALLES GARCÍA acts in his capacity as Managing Director of the Fund Management Company by virtue of a resolution passed by the company s Board of Directors on February 10, The Fund Management Company has its registered offices in Madrid, calle de Alcalá 18 2 nd floor, its tax identification code number is A and it is listed in the Special Registry of Securitization Fund Management Companies kept by the Spanish Securities Markets Commission ( CNMV ) under entry nº 5. I.1.2 Confirmation that the contents of this Prospectus are truthful, that no relevant fact has been omitted and that none it is likely to lead to an error. Mr. LUIS MIRALLES GARCÍA confirms the accuracy of the contents of the Prospectus, and that no relevant fact has been omitted, nor is it likely to lead to error. I.2 Supervisory Bodies The incorporation of the Fund and the issue of the Bonds are subject to the following requirements, according to article 5 of Royal Decree 926/1998 (May 14, 1998) (hereinafter, Royal Decree 926/1998 ), and to the applicable provisions set forth in Royal Decree 291/1992 (March 27, 1992) on the issue of securities and their public offer for sale, as amended by Royal Decree 2590/1998, of December 7, on amendments to the legal regime of the securities markets (jointly, Royal Decree 291/1992 ) and development rules: 10

11 (a) Communication to CNMV of the project to constitute the Fund. (b) Submission and prior registration by CNMV of the supporting documents needed to constitute the Fund and of the assets to be pooled therein, together with the draft Deed of Incorporation of the Fund. (c) Submission of the report prepared by the Fund Management Company, or by accountancy auditors or other suitably qualified independent experts acceptable to CNMV, on the Assets to be pooled in the Fund, unless CNMV exempts them from this requirement. A nnex IV to this Prospectus contains the certificates on the Assets prepared by the Issuers as well as the report issued by the Fund Management Company on the existence, ownership and attributes of the Assets referred to in article 8.3 of RD 926/1998. (d) Delivery to CNMV of the report prepared by the agencies responsible for assigning risk ratings to the Bonds. A nnex V to this Prospectus contains the provisional rating letters from MOODY S, FITCH and STANDARD & POOR S, companies which have been appointed to carry out the risk rating of the Bonds (hereinafter, the Rating Agencies ). (e) Registration with the official registries of CNMV of the Informative Prospectus on the incorporation of the Fund and the Bond issue. This complete Informative Prospectus on the incorporation of the Fund and the Bond issue (the Prospectus ) was registered with the Official Registries kept by CNMV on November 11, In accordance to Article of Royal Decree 926/1998, the sale of the Assets to the Fund is subject, among other requirements, to the Assignor possessing audited accounts for the last three fiscal years, containing a favorable opinion in the most recent one. A nnex VIII to this Prospectus contains a statement by the Assignor declaring the existence of audited annual financial statements for the last three (3) fiscal years, containing a favorable opinion in the most recent one. The Issuers have deposited with CNMV their individual and/or consolidated audited annual accounts for fiscal years 2001, 2002 y 2003, containing a fav orable opinion all of them, except in the case of CAIXA D ESTALVIS LAIETANA, CAJA DE AHORROS DE GALICIA, CAIXA D ESTALVIS DEL PENEDÈS, CAIXA D ESTALVIS DE TERRASSA, CAJA DE AHORROS DE LA INMACULADA DE ARAGÓN y CAJA ESPAÑA DE INVERSIONES, CAJA DE AHORROS Y MONTE DE PIEDAD, which contain exceptions in the most recent one, although none of them refers to circumstances which imply a reduction of their solvency or creditworthiness. 11

12 The registration of this Prospectus by CNMV may in no case be construed as a recommendation to purchase the securities referred to herein, nor any opinion as to the solvency of the issuer or the profitability or quality of the securities offered hereunder. I.3 Name, registered office and qualification of the auditors responsible for verifying the number, amount and attributes of the assets to be securitized through the Fund. The number, amount and characteristics or attributes of the Assets to be securitized through the Fund (i.e. the Mortgage Bonds) have not been verified by auditors. A nnex IV to this Prospectus includes the certificates prepared by the Issuers relating to the Assets, as well as the report issued by the Fund Management Company on the existence, ownership and attributes of the Assets. 12

13 CHAPTER II INFORMATION ON THE SECURITIES ISSUED BY THE FUND II.1 Prior requirements and agreements needed to constitute the Fund; information on the securities to be issued by it, and the conditions governing the acquisition of the Assets by the Fund II.1.1 Resolutions and legal requirements relating to the issue a) Resolutions Resolutions relating to the Mortgage Bonds Issue The Issuers Board of Directors (or Executiv e Commission) hav e resolv ed to issue Mortgage Bonds, in the terms set out in the certificates included in A nnex I to the Prospectus. Resolution relating to Assignment of the Assets The Assignor s Board of Directors has resolv ed to subscribe the Mortgage Bonds and assign them to the Fund, in the terms set out in the certificate included in A nnex II to the Prospectus. Resolution relating to the Incorporation of the Fund The Fund Management Company s Board of Directors, in its meeting held on February 10, 2005, resolv ed to incorporate the Fund, in accordance with the provisions set out in Royal Decree 926/1998, to acquire the Assets from the Assignor and to issue Bonds back ed by the Fund s assets. A nnex III to the Prospectus contains the certificate of the resolutions passed by the Board of Directors of the Fund Management Company. b) Granting of the Public Deed of Incorporation of the Fund Within the five (5) Business Days following the registration of the Prospectus with the official registries of CNMV, and before the beginning of the Bond Subscription Period, the Fund Management Company together with the Assignor will grant a public deed of incorporation of the Fund, assignment and acquisition of the Assets and issue of Bonds (the Deed of Incorporation ) and enter into the rest of the agreements envisaged in this Prospectus. The Fund Management Company will submit a copy of the Deed of Incorporation an the agreements executed in the name and on behalf of the fund to CNMV for its inclusion in the public records kept by the latter before the beginning of the Bond Subscription Period. The Fund Management Company in the name of the Fund guarantees 13

14 that the content of the Deed of Incorporation shall conform to the documentation registered with the CNMV. The Bonds issued by the Fund will be represented as book entries and the Deed of Incorporation shall produce the effects set out in Article 6 of the Stock Mark et Law 24/1998, dated July 28, 1998, as amended, inter alia, by Law 37/1998 dated November 16, 1998 and 44/2002 Law, November 22, on measures reforming the financial sy stem (hereinafter jointly referred to as Law 24/1998 ). Pursuant to both this and Article 6 of Royal Decree 116/1992, dated February 14, 1992, on representation of securities as book entries and the clearing and settlement of stock exchange transactions ( Royal Decree 116/1992 ), the public deed stating that the Bonds shall be represented as book entries must be the deed of issuance. II.1.2 Prior Requirements and Resolutions Relating to Admission for Trading on the Stock Exchange, or on the Official Secondary Market The Fund Management Company will seek, in the name and on behalf of the Fund, admission of the Bond issue to listing on the fixed-income AIAF market ( AIAF ), which is an official secondary securities market recognized in the Sixth Temporary Provision of Law 37/1998 (November 16, 1998), amending Law 24/1988. Definitive admission to listing is expected to be granted no later than thirty (30) days following the Disbursement Date. Should the Bonds fail to be admitted to listing on AIAF within this deadline, the Fund Management Company shall immediately explain to bondholders the reasons for said delay by publishing a notice in a nation-wide distributed newspaper, as established in section III.7.5 without prejudice to the liabilities incurred for this delay by the Fund Management Company. The Fund Management Company shall also seek, in the name and on behalf of the Fund, the inclusion of the Bond issue in SOCIEDAD DE GESTIÓN DE LOS SISTEMAS DE REGISTRO, COMPENSACIÓN Y LIQUIDACIÓN DE VALORES, S.A. ( SOCIEDA D DE SISTEMA S ) in order for the clearance and settlement of the Bonds to be carried out under the operating rules regarding book entry securities admitted to trading on AIAF currently established or that may be approved in the future by SOCIEDAD DE SISTEMAS. II.2 Administrative authorization prior to Issue The incorporation of the Fund and the Bond issue require the prior registration of the Prospectus with the Official Registries kept by CNMV, in pursuance with Article 5 of Royal Decree 926/1998, Article 26 et seq. of Law 24/1998, and Royal Decree 291/1992. This Prospectus on the incorporation of the Fund and the Bond issue (the Prospectus ) has been registered with the Official Registries k ept by CNMV as of March 22,

15 No administrative authorization prior to the Bond issue, other than the prior registration of the Prospectus with the Official Registries of CNMV, is required. II.3 Evaluation of the Risks Inherent to the Securities Issued by the Fund, Carried out by a Rating Agency recognized by CNMV The Fund Management Company has requested MOODY S INVESTORS SERVICE ESPAÑA, S.A ( MOODY S ), FITCH RATINGS ESPAÑA, S.A.U. ( FITCH ) and STANDARD & POOR S ( STANDARD & POOR S or S&P ), both of which are rating agencies recognized by CNMV for the purposes set out in Article 2º.3.b) of Royal Decree 926/1998, to carry out the risk rating of the Bonds. References to MOODY S, FITCH AND S&P shall be deemed to refer to these agencies without prejudice to any eventual alteration of their respective corporate names. Rating Awarded to the Bond issue Prior to the registration of this Prospectus, the Rating Agencies have granted the Bonds the following ratings, all of them preliminary: PRELIMINARY PRELIMINARY PRELIMINARY RATING RATING MOODY S RATING FITCH STANDARD & POOR S Tranche A Bonds Aaa AAA AAA Tranche B Bonds Aaa AAA AAA Should any of the previous preliminary ratings not be confirmed as final before the beginning of the Subscription Period, this circumstance would be immediately reported to CNMV and made public as indicated in subsection III.7.5. In the event that any of the previous preliminary ratings were not confirmed as final, before the beginning of the Subscription Period, the incorporation of the Fund, the transfer of the Mortgage Bonds and the issue of the Bonds will be resolved. A nnex V to this Prospectus includes a copy of the preliminary risk-rating letters issued by the Rating Agencies. Explanation of Ratings MOODY S MOODY S ratings for long-term debt issues are the following: 15

16 LONG TERM Aaa Aa A Baa Ba B Caa Ca C MOODY S applies the numerical modifiers 1,2,3 in each generic long-term rating classification from Aa through to Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. MOODY S ratings for short-term debt issues are the following: SHORT TERM Prime-1 Prime-2 Prime-3 Not Prime Set out below are the definitions given by MOODY'S of the long-term and short-term ratings referred to in this Prospectus: Long-term Aaa The Bonds rated Aaa are judged to be of the highest quality. They carry the lowest investment risk and generally they are called gilt edged. The payment of the interest is secured by a large or exceptionally stable margin and principal is secure. Short-term P-1 Issuers (or supporting entities) rated P-1 have a superior ability to repay on time their debt commitments issued for a term shorter than one year. The solvency of P-1 Issuers shall be often shown through several of the following features: 1) lead position in solid sectors, 2) high return rates of the allocated funds, 3) conserv ativ e capital structure, with moderate resource to the debt market and large protection of assets, 4) high margins in the fixed debt and high internal fund generation, 5) solid ability to accede financial markets and alternative guaranteed alternative liquidity sources. FITCH 16

17 FITCH ratings for long-term debt issues are the following: LONG TERM AAA AA A BBB BB B CCC, CC, C DDD, DD, D FITCH ratings for short-term debt issues are the following: SHORT TERM F1+ F1 F2 F3 B C D FITCH may append "+" or "-" to a rating to denote relative status within major rating categories. Such suffixes are not added, in the case of long-term ratings, to the AAA category or to categories below CCC, nor to short term rating other than F1. Set out below is a description of the definition given by FITCH to the long-term and shortterm ratings referred to in this Prospectus: Long-term AAA Highest Credit Quality. AAA ratings denote the lowest expectation of credit risk. They are assigned only in cases of exceptionally strong capacity for timely payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events. Short-term F1 Highest Credit Quality. Indicates the strongest capacity for timely payment of financial commitments; may add a "+" to denote any exceptionally strong credit feature. STANDARD & POOR S 17

18 STANDARD & POOR S ratings for long-term debt issues are the following: LONG TERM AAA AA A BBB BB B CCC CC C D STANDARD & POOR S ratings for short-term debt issues are the following: SHORT TERM A-1+ A-1 A-2 A-3 B C D The ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the main categories. Set out below are definitions given by STANDARD & POOR S for the long-term and shortterm ratings referred to in this Prospectus: Long Term AAA An obligor rated AAA has extremely strong capacity to meet its financial commitments. AAA is the highest Issuer Credit Rating assigned by STANDARD & POOR S. Short Term A-1 An obligor rated A-1 has strong capacity to meet its financial commitments. It is rated in the highest category by STANDARD & POOR S. Within this category, certain obligors are designated with a plus sign (+). This indicates that the obligor s capacity to meet its financial commitments is extremely strong. The ratings granted, as well as any rev ision or suspension thereof: 18

19 (i) Are made by the Rating Agencies on the basis of large amounts of information, which is not guaranteed to be exact or complete, such that the Rating Agencies can in no way be held responsible for it; and (ii) Do not constitute, nor may they in any way be interpreted as an invitation, recommendation, or suggestion to investors to undertake any transactions with respect to the Bonds in particular, to acquire, hold, encumber or sell such Bonds. FITCH s credit risk rating is an opinion on the ability of the bonds to meet, in a timely fashion, payment of interest and principal received by AyT CÉDULAS CAJAS IX, FONDO DE TITULIZACIÓN DE ACTIVOS during the life of the transaction and, in any event, before the legal maturity of the transaction. STANDARD & POOR S ratings for the asset backed bonds of reference are an opinion of the issuer s (the Fund) capacity to pay, in a timely fashion, peridodic interest on the Bonds and principal thereof during the life of the transaction and, in any event, before the legal maturity of said asset back ed bonds. MOODY S rating for this transaction measures the expected loss before the Legal Maturity Date of the Fund. The structure allows the timely payment of interest and principal during the life of the transaction and, in any event, before the legal maturity of the transaction in The ratings may be changed, suspended or withdrawn at any given time by the Rating Agencies on the basis of any information that may come to their notice. Such situations, which will not constitute triggers for the early redemption of the Fund, will be immediately reported both to CNMV and to the bondholders, in accordance with section III.7.5. In carrying out their assessment and monitoring, the Rating Agencies have relied on the accuracy and completeness of the information provided by the Assignor and, as the case may be, the Fund Management Company, the auditors, the lawyers and other experts. The Assignor will provide the Rating Agencies, on a monthly basis, the outstanding amount of the mortgage bonds issued by each of the Issuers, the outstanding amount of the mortgage loans and credits granted by each of the Issuers, and the outstanding amount of the mortgage loans and credits granted by each of the Issuers that comply with the requirements set forth in Law 2/1981 and which are adequate to support the issuance of mortgage bonds. In addition, the Assignor will provide the Rating Agencies, on a quarterly basis, with periodical information regarding the situation of the Fund and the Mortgage Bonds, with the content and in the form agreed upon by the Assignor and the Rating Agencies, in order to make the operation of the Fund more transparent. The Fund Management Company, on behalf of the Fund, undertakes to provide the Rating Agencies, within a month following each Payment Date, with periodic information regarding the situation of the Fund and the Mortgage Bonds. It will also provide such information 19

20 whenever reasonably required to do so, and, in any event, whenever a change takes place either in the conditions of the Fund, or the agreements entered into on its behalf by the Fund Management Company or the concerned parties. The Fund Management Company will expend its utmost efforts to maintain the rating of the Bonds at their initial level, and, if a downgrading takes place, to regain it. To do so, it may request from the Assignor the same information that this has submitted to the Rating Agencies. II.4 Nature and Denomination of the Securities being Issued, indicating Number of Issue or Series The total face value of the Bond issue is FIVE BILLION EUROS ( 5,000,000,000) consisting of FIFTY THOUSAND (50,000) ordinary Bonds of ONE HUNDRED THOUSAND EUROS ( 100,000) face value each, which in two tranches or series: (i) Tranche A ( Tranche A Bonds ), integrated by THIRTY FIVE THOUSAND (35,000) Bonds of ONE HUNDRED THOUSAND EUROS ( 100,000) face v alue each, represented by accounting entries, with a total nominal value of THREE THOUSAND FIVE HUNDRED MILLION EUROS ( 3,500,000,000). (ii) Tranche B ( Tranche B Bonds ), integrated by FIFTEEN THOUSAND (15,000) Bonds of ONE HUNDRED THOUSAND EUROS ( 100,000) face v alue each, represented by accounting entries, with a total nominal value of ONE THOUSAND FIVE HUNDRED MILLION EUROS ( 1,500,000,000). The subscription or possession of Bonds of one Tranche does not imply the subscription or possession of Bonds of the other Tranche. II.4.1 Legal Regime Governing the Securities, Specifying Procedures to Guarantee the Certainty and Effectiveness of the Rights of their First and Subsequent Holders. Implications for the Financial Servicing of each one of the Security Tranches Issued by the Fund arising from the Necessary Relationship between the Schedule of Principal and Interest Payments on those Securities and the Flow of Income and Collection from the Assets. The Bonds have the legal status of simple fixed-income transferable securities with an explicit yield. As simple fixed-income transferable securities, the Bonds are subject to the legal regime set out in Law 24/1988, and are represented by book entries. The bondholders will be identified as such in accordance with the accounting records kept by SOCIEDAD DE SISTEMAS, as provided for in section II.5 of this chapter. The related certificates may be issued by the corresponding participating entity at the request of the 20

21 bondholder, in accordance with the provisions set forth in section four of Chapter 1 Title I of Royal Decree 116/1992. The issuance of the related certificates shall be at the expense of the Bondholders that request them. The Bonds can be freely transferred by any means permitted by law, and in accordance with the rules of the market on which they are traded. Ownership of each Bond shall be transmitted through an accounting record transfer. Registration of transmission of ownership in favor of the purchaser in the accounting record shall have the same effect as the transfer of certificates and the transfer shall, from that time be enforceable with regard to third parties. As provided in Article 3.3 of Royal Decree 926/1998 and Article 5.7 of Law 19/1992, the Fund Management Company, on behalf of the Fund, shall sign a Financial Services Agreement with INSTITUTO DE CRÉDITO OFICIAL (hereinafter, the Financial A gent ) whereby the income received by the Fund arising from the Assets, both in concept of repayment of principal or interest or any other concept, shall be deposited in the Collection Account and in the Cash Account until the next payment date relating to every quantity that derives from the Bonds. The investment may only take place with respect to fixed-income securities denominated in euros with a maturity term shorter than the time remaining until the next Payment Date following the investment and issued by issuers with a short-term risk rating of at least P-1 (MOODY S), F1+ (FITCH) or A-1 + (S&P) (the Required Rating ). In the event that the assets in which such temporary investment is made are repos, the counterparty of the repo transaction must have at least the Required Rating for short-term risk s. II.4.2 Other considerations and risks which, given the legal and economic nature of the Fund s A ssets, could affect financial service of the securities issued by the Fund as a consequence of the Securitization process of those assets a) Risk of non-payment of the Assets As set forth in Chapter V of this Prospectus, holders of the Bonds issued by the Fund shall bear the risk of non-payment of the Assets pooled therein, always taking into account the protection offered by the credit enhancement instruments. Consequently, the Assignor assumes no liability whatsoever for any non-payment by the Issuers, of either principal or interest, or of any other amount that the latter may owe by virtue of the Assets. Neither will it assume any liability whatsoever, for ensuring, directly or indirectly, the success of the transaction, nor will it grant any backing, provide any guarantee, or enter into any repurchase agreement with respect to the Assets. b) Risk of early redemption of the Assets The risk of early redemption of the Assets shall be borne by the bondholders. 21

22 c) Risk of liquidity There is no further guarantee that they shall effectively exist a negotiation of the Bonds in the market with a certain frequency or minimum volume, than the undertakings of the Counterparties described in section II.24. d) Limited protection The investment in Bonds may be affected, among others, by deterioration of the general economic conditions that may have a negative effect on the payments of the Assets that back the Bonds of the Fund. Although there are credit enhancement mechanism, the credit enhancement is limited. e) Default interest The delay in the payment of interest or redemption of the principal amounts to the bondholders shall not accrue default interest in their favor in any case. II.5 Form of representation and name and address of the entity in charge of the accounting record of the Bonds The Bonds will be exclusively represented as book entries and will be constituted as such by virtue of their registration in the relevant accounting record. The Deed of Incorporation shall have the effects set forth in Article 6 of Law 24/1988. In compliance with the provisions of Article 6 of Royal Decree 116/1992, the name, number of units, face value and other characteristics and conditions of the issue of Bonds that are being represented as book entries shall be those set out in the Deed of Incorporation and in this Chapter II of the Prospectus. Bondholders shall be identified as such as a result of the accounting record kept by the entities participating in SOCIEDAD DE SISTEMAS, which shall be designated as the entity in charge of the accounting record of the bonds in the Public Deed of Incorporation, so that the clearing and settlement of the Bonds shall be carried out in accordance with the operating rules which have been laid down, or may be approved in the future by SOCIEDAD DE SISTEMAS. SOCIEDAD DE SISTEMAS, a public Spanish limited company, set up in accordance with article one, paragraph two of Law 44/2002 on measures reforming the financial sy stem, which modifies article 44 of the Securities Mark et Law 24/1988, of July 28, is responsible for k eeping the accounting record of the Bonds. Its registered office is in Madrid 28020, calle Pedro Teixeira, 8. 22

23 II.6 Face value of the total securities issued by the Fund, number of securities issued and their identification numbers, if applicable, divided into the different tranches of which the issue is comprised The total face value of the Bond issue is FIVE BILLION EUROS ( 5,000,000,000) consisting of FIFTY THOUSAND (50,000) ordinary Bonds of ONE HUNDRED THOUSAND EUROS ( 100,000) face value each, which in two tranches or series: (i) Tranche A ( Tranche A Bonds ), integrated by THIRTY FIVE THOUSAND (35,000) Bonds of ONE HUNDRED THOUSAND EUROS ( 100,000) face v alue each, represented by accounting entries, with a total nominal value of THREE THOUSAND FIVE HUNDRED MILLION EUROS ( 3,500,000,000). (ii) Tranche B ( Tranche B Bonds ), integrated by FIFTEEN THOUSAND (15,000) Bonds of ONE HUNDRED THOUSAND EUROS ( 100,000) face v alue each, represented by accounting entries, with a total nominal value of ONE THOUSAND FIVE HUNDRED MILLION EUROS ( 1,500,000,000). II.7 Nominal and effective values of each security, stating, if applicable, the issue premium, expressed as a proportion of the face value and in monetary units per security. Currency of the tranches of securities issued by the Fund The Bond issue is comprised of two Tranches, A and B, denominated in euros. The price of issue of the Bonds of each Tranche shall be determined before the date of incorporation, and it may be at par value or below par value, free of all taxes and subscription expenses for the subscriber in any case. In any case, the price of issue of the Bonds that shall be finally determined shall be included in the Deed of Incoporation of the Fund and shall be communicated to the CNMV as additional information to be included in the Prospectus. Likewise, it will be disclosed to the public in the manner provided for in section III.7.5. Taxes and expenses arising from the issue of both Tranche A and Tranche B Bonds of will be paid by the Fund Management Company, on behalf of the Fund, out of a incorporation, management and administration provision which shall be established by the Assignor at the time of incorporation of the Fund. ( Endowment of Incorporation, Management and Administration ) described in section II.8.1, except for the Availability Fee of each Tranche s Liquidity Facility, that shall be paid against the Available Funds of each Tranche in accordance wth the Payment Priority Order. II.8 Commissions and related expenses of any kind that the investors must meet upon subscription of the securities issued by the Fund 23

24 The price of issue established in section II.7 above, shall be free of all taxes and subscription expenses for the subscriber. II.9 Commissions charged to the holders of book entry securities issued by the Fund, in respect of registration and account maintenance. The expenses incurred in the registration of the Bond issue in SOCIEDAD DE SISTEMAS accounting record shall be borne by the Fund (which shall pay the relevant amount out of the Endowment of Incorporation, Management and Administration contributed by the Assignor at the time of incorporation of the Fund), in the terms indicated in section II.7 above, without being further charged to the bondholders. SOCIEDAD DE SISTEMAS does not receive any fee whatsoever for maintaining the balance. Under current legislation, SOCIEDAD DE SISTEMAS participating entities may freely establish the fees and expenses to charge the bondholders for management of the securities, as they may deem appropriate, provided that these have been notified to the Bank of Spain or to CNMV, as supervisory bodies. The maximum rates that each SOCIEDAD DE SISTEMAS participating entity may charge to the bondholders are those indicated in their respective tariff informative prospectuses, which are available to the public at their registered offices, agencies and branches. II.10 Interest rate clause II.10.1 Nominal Interest Rate The Bonds shall accrue interest, calculated at a fixed annual interest rate, payable on an annual basis, on the face value of the Bonds of each Tranche, which shall be determined not later than the date of incorporation of the Fund, by agreement between the Arranger (also the Assignor) and the Underwriting and Placement Entities (the Nominal Interest Rate ). Interest on the Bonds calculated at the Nominal Interest Rate referred to above will be paid annually on each Payment Date, on the face value of the Bonds, provided that the Fund has sufficient Available Funds according to the payment priority order set out in subsection V ( Payment Priority Order ). Any withholding of taxes, payments on account and other levies currently established or that may be established in the future, on the capital, interest, or yield of the Bonds, shall be the exclusive responsibility of the bondholders; and the corresponding amounts, if any, shall be deducted by the Financial Agent, upon instructions from the Fund Management Company, acting in the name and on behalf of the Fund, in the manner legally established. The lifetime of the present issue will be divided into successive Interest A ccrual Periods (each of them, an Interest Accrual Period ) comprising the days effectively elapsed between each Payment Date as indicated in subsection II.10.3 of the Prospectus, 24

25 including the initial Payment Date in each interest accrual period, but excluding the final Payment Date. Exceptionally the first Interest Accrual Period shall have a duration between the Disbursement Date (included) and the first Payment Date (excluded). The Nominal Interest Rate of the Tranche A Bonds shall be calculated with reference to the arithmetic average of the ask price and the call price of a ten (10) years Euribor IRS (Interest Swap Rate), plus a spread (that may be negativ e) between minus twenty fiv e (- 25) basis points (-0,25%) and plus twenty fiv e (+25) basis points (+0,25%), that shall be fixed between the registry of the Prospectus and the date of incorporation of the Fund, so that when such spread is applied the Nominal Interest Rate shall result in quarter point terms, with three decimals (4.000% or 4.250% or 4,500%, etc). For purposes of setting the Nominal Interest Rate, the ask and call price of a ten (10) years IRS (Swap) will be deemed to be the rate shown on the ICAPEURO of REUTERS screen (or should it not be available on the GEHAIRS of REUTERS screen) around 11:00 a.m. hours of the second (2 nd ) Business Day preceding the date of incorporation of the Fund. Should it not be possible to determinate the Nominal Interest Rate with reference to the arithmetic average of the ask price and the call price of a ten (10) years Euribor IRS (Interest Swap Rate) for not being available in the ICAPEURO of Reuters screen (or any substitute), it shall be taken the arithmetic average between the put and call rate of the ten (10) years German bond with termination date on January 4, 2015 and coupon 3.750%, published in the O#DEBMK= of Reuters screen around 11:00 a.m. hours of the third Business Day preceding the date of incorporation, augmented in a spread between minus twenty five (-25) basis points (-0,25%) and plus twenty fiv e (+25) basis points (+0,25%). The substitution rate and the spread shall be confirmed by the Assignor to the Underwriting and Placement Entities and communicated to the Fund Management Company. On March 4, 2005 such rate would have been 3.692%. As a mere example, an explanatory chart on the evolution of the arithmetic average of the ask price and the call price of the ten (10) years IRS (Interest Rate Swap) from December 30, 2001 is attached: 25

26 IRS 10 years (quarterly) 6,000% 5,500% 5,000% 4,500% 5,250% 5,195% 5,455% 4,53 6% 4,400% 4,134 % 4,398% 4,061% 4,423 % 4,000% 3,500% 4,211% 3,930% 4,108% 3,754% 3,000% dic-01 ma r-02 jun-02 sep-02 dic-02 ma r-03 jun-03 sep-03 dic-03 ma r-04 jun-04 sep-04 dic-04 In addition, the daily evolution of the arithmetic average of the ask price and the call price of the ten (10) years Euribor IRS (Interest Rate Swap) between February 7, 2005 and March 4, 2005 is provided: IRS 10 years (daily) 4,50 0% 4,25 0% 4,00 0% 3,75 0% 3,50 0% 3,25 0% 3,550% 3,521% 3,515 % 3,5 22% 3,541% 3,565% 3,598% 3,629% 3,65 4% 3,76 3% 3,782% 3,779 % 3,7 96% 3,811% 3,78 8% 3,809% 3,81 0% 3,853% 3,84 0% 3,777% 3,00 0% 7-feb-05 8-feb-05 9-feb feb feb feb feb feb feb feb feb feb feb feb feb feb feb feb feb feb feb feb-05 1-mar-05 2-mar-05 3-mar-05 4-mar-05 26

27 The Nominal Interest Rate of the Tranche B Bonds shall be calculated with reference to the arithmetic average of the ask price and the call price of a fifteen (15) years Euribor IRS (Interest Swap Rate), plus a spread (that may be negativ e) between minus twenty fiv e (- 25) basis points (-0,25%) and plus twenty fiv e (+25) basis points (+0,25%), that shall be fixed between the registry of the Prospectus and the date of incorporation of the Fund, so that when such spread is applied the Nominal Interest Rate shall result in quarter point terms, with three decimals (4.000% or 4.250% or 4,500%, etc). For purposes of setting the Nominal Interest Rate, the ask and call price of a fifteen (15) years IRS (Swap) will be deemed to be the rate shown on the ICAPEURO of REUTERS screen (or should it not be available on the GEHAIRS of REUTERS screen) around 11:00 a.m. hours of the second (2 nd ) Business Day preceding the date of incorporation of the Fund. Should it not be possible to determinate the Nominal Interest Rate with reference to the arithmetic average of the ask price and the call price of a fifteen (15) years Euribor IRS (Interest Swap Rate) for not being available in the ICAPEURO of Reuters screen (or any substitute), it shall be taken the arithmetic average between the put and call rate of the eleven (11) years German bond with termination date on September 20, 2016 and coupon 5.625% and the nineteen (19) years German bond with termination date on April 1, 2024 and coupon 6.250%, published in the O#DEBMK= of Reuters screen around 11:00 a.m. hours of the third Business Day preceding the date of incorporation, proceeding to its linear interpolation for a 15-years term, augmented in a spread between minus twenty five (-25) basis points (-0,25%) and plus twenty five (+25) basis points (+0,25%). The substitution rate and the spread shall be confirmed by the Assignor to the Underwriting and Placement Entities and communicated to the Fund Management Company. On March 4, 2005 such rate would have been %. As a mere example, an explanatory chart on the evolution of the arithmetic average of the ask price and the call price of the fifteen (15) years IRS (Interest Rate Swap) from December 30, 2001 is attached: 27

28 IRS 15 years (quarterly) 6,000% 5,500% 5,458% 5,36 3% 5,6 48% 5,000% 4,815% 4,7 23% 4,72 9% 4,693% 4,53 3% 4,46 8% 4,500% 4,000% 4,594% 4,364% 4,419% 4,05 5% 3,500% 3,000% dic-01 mar-02 jun-02 sep-02 dic-02 mar-03 jun-03 sep-03 dic-03 mar-04 jun-04 sep-04 dic-04 In addition, the daily evolution of the arithmetic average of the ask price and the call price of the fifteen (15) years Euribor IRS (Interest Rate Swap) between February 7, 2005 and March 4, 2005 is provided: 4,50 0% 4,25 0% 4,00 0% 3,75 0% 3,78 5% 3,754 % 3,748 % 3,7 60% 3,784% 3,818% 3,844% IRS 15 years (daily) 3,877% 3,901% 4,017% 4,035% 4, 031 % 4,057% 4,070% 4,049% 4,071% 4,078% 4,122% 4,11 4% 4,041% 3,50 0% 7-feb-05 8-feb-05 9-feb feb feb feb feb feb feb feb feb feb feb feb feb feb feb feb feb feb feb feb-05 1-mar-05 2-mar-05 3-mar-05 4-mar-05 28

29 The incorporation of the Fund will take place within the five (5) Business Days subsequent to the registration of the informative Prospectus of the issue with CNMV. In any case, the Nominal Interest Rate determined for both the Tranche A and Tranche B Bonds, as described above, shall be included in the Deed of Incorporation of the Fund and shall be communicated to CNMV as an additional piece of information to be included in the Prospectus. Likewise, it will be disclosed to the public in the manner provided for in section III.7.5. II.10.2 Brief mention of the position in the Payment Priority Order occupied by interest payments on the securities issued by the Fund. Specification of the section and pages of this Prospectus describing the rules of priority established for Fund payments, and particularly those affecting interest payments on the corresponding securities Payment of interest accrued on the Bonds of both Tranches will occur second in the Payment Priority Order of the Prospectus, taking into account that the payment of the interest accrued on Tranche A Bonds shall be charged to Available Funds B and the payment of the interest accrued on the Tranche B Bonds shall be charged to Available Funds B. II.10.3 Dates, place, institutions and procedures for payment of interest Interest on the Bonds of both Tranches shall be paid annually in arrears, on each anniversary of the Bond Disbursement Date, until the Bonds are fully redeemed (each of these dates, a Payment Date ) as established in section II.12 a) of this Prospectus, except in the event of Early Redemption of the Bonds, as set forth in section II of this Prospectus. In the event that any of the dates set forth in the previous paragraph was not a Business Day, payment shall be made on the next Business Day, without any interest accruing for this reason. A Business Day shall be as established by the European Central Bank for the transaction of TARGET (Trans-European Automated Real-Time Gross-Settlement Express Transfer system), except those days that, while considered business days in accordance with the TARGET calendar, are holidays in the city of Madrid. The first Payment Date of interest on the Bonds of both Tranches will be the date of the first anniversary of the Disbursement Date, with interest accruing at the Nominal Interest Rate as from the Disbursement Date (established in subsection II.18.5), inclusive, until the first anniversary thereof, exclusive. The interest payable on each Payment Date, corresponding to each Interest Accrual Period of the Bonds, shall be calculated according to the following formula: 29

30 I = P R 100 Where: I = Interest payable on a given Payment Date. P = Face value of the Bonds (Tranche A or B, as applicable) on the Calculation Date co rrespo nding to said Pay ment Date (O NE HUNDRED THO USA ND EURO S ( 100,000), unless there has been an early redemption event in the terms set out in subsections II or IV.2.2.2). For this purpose, the Calculation Date shall be defined as the second Business Day prior to each Pay ment Date. R = Nominal Interest Rate expressed as an annual per cent. In order to calculate the Nominal Interest Rate, the actual number of days in each Interest Accrual Period shall be taken into account (Actual/Actual). Interest payable to the holders of the Bonds of each of the Tranches, calculated as explained above, and any amount of interest accrued but unpaid, shall be communicated, as described in subsection III.7.5, at least one (1) calendar day before each Payment Date. Interest accrued on the Bonds of both Tranches shall be paid on each Payment Date, always provided that the Fund has enough Available Funds to do so, ranking as highest in the Payment Priority Order of each of the Tranches. In the event that, on a given Payment Date, the Fund were unable to pay in whole or in part the interest accrued on the Bonds of any of the Tranches, in accordance with the Payment Priority Order, the amounts which the bondholders have failed to receive shall be paid on the following Payment Date. Overdue interest will accrue, until the Final Maturity Date, in favor of the bondholders at a rate equal to that applied to the Bonds of the relevant Tranche during the corresponding Interest Accrual Period(s) that have elapsed up to the Payment Date on which it is paid, without implying any capitalization of the debt. The Fund, acting through the Fund Management Company, may not defer payment of interest on the Bonds of any of the Tranches beyond the Final Maturity Date of each of the relev ant Tranche, or, should said date not be a Business Day, the following Business Day, provided that any proceeds received between the Final Maturity Date and the Legal Maturity Date corresponding to the foreclosure of overdue Mortgage Bonds, once the expenses incurred in connection with said foreclosure have been paid off, shall be paid according to the Payment Priority Order, as soon as the amount corresponding to the overdue Mortgage Bond has been deposited into the Collection Account and is available to the Management Company. Therefore, in the case that in the Legal Maturity Date the Fund does not have enough Available Funds to pay interest on the Bonds according to the Payment Priority 30

31 Order, the obligation to pay pending interest of the Bonds of both Tranches shall terminate on such Legal Maturity Date. Financial servicing of the Bond issue will be carried out by the Financial Agent (which, as set out in section II.4.1, is INSTITUTO DE CRÉDITO OFICIAL), which shall sign the Financial Services Agreement with the Fund Management Company in name and on behalf of the Fund. II.11 Redemption of the Bonds II.11.1 Reimbursement price, specifying the existence of premiums, special awards, special lots or any other financial advantage The reimbursement price of the Bonds will be equal to 100% of their face value (i.e., ONE HUNDRED THOUSAND EUROS ( 100,000) per Bond, free of expenses for the bondholders and payable in a single lump sum on the Final Maturity Date (hereinafter the Bond Redemption Date ). All the Bonds shall be fully redeemed in the same amount on the Bond Redemption Date. Exceptionally, and in the event of a partial Early Redemption having occurred in the terms set forth in subsections II and IV (by reducing the nominal amount of the Bonds and paying the corresponding amount to the bondholders), the Bond reimbursement price at the Final Maturity Date will be equal to its nominal amount once the reduction of the nominal amount has been carried out as a consequence of the partial Early Redemption (and therefore may be less than the value indicated above). II.11.2 Brief mention of the position, in the Payment Priority Order, occupied by payment of principal on the securities issued by the Fund. Specification of the section and pages of this Prospectus that describe the rules of priority established for Fund payments, and particularly those affecting payments of principal on the corresponding securities Repayment of principal of the Bonds ranks second (2 nd ) in the Payment Priority Order of each Tranche, taking into account that the redemption of Tranche A Bonds shall be charged to Available Funds A and the redemption of Tranche B Bonds shall be charged to Available Funds B. II.11.3 Redemption modalities, specifying dates, place, institutions, procedure and announcement thereof II Final Redemption The Bonds of each Tranche will be redeemed in a sole payment in their respective Final Maturity Date: 31

32 (a) Tranche A Bonds will be redeemed in a sole payment in the Tranche A Bonds Final Maturity Date and Tranche A Bonds Redemption Date (tenth (10 th ) anniversary of the Bond Disbursement Date, or, should this date not fall on a Business Day, the following Business Day (without any interest accruing for this reason), without prejudice to the possibility of Early Redemption as provided for in subsections II and IV below. (b) Tranche B Bonds will be redeemed in a sole payment in the Tranche B Bonds Final Maturity Date and Tranche B Bonds Redemption Date (fifteenth (15 th ) anniversary of the Bond Disbursement Date, or, should this date not fall on a Business Day, the following Business Day (without any interest accruing for this reason), without prejudice to the possibility of Early Redemption as provided for in subsections II and IV below. The Fund, acting through the Fund Management Company, may not defer reimbursement of principal of the Bonds beyond the eighteenth (18 th ) anniversary of the Bond Disbursement Date (the Legal Maturity Date). Therefore, in the case that in the Legal Maturity Date the Fund does not have enough Available Funds to fully redeem the principal amount of the Bonds according to the Payment Priority Order, the obligation to redeem the principal amount of the Bonds of both Tranches shall terminate on such Legal Maturity Date. II Early Redemption Without prejudice to the obligation of the Fund, through the Fund Management Company, to redeem the Bonds on the Final Maturity Date, the Fund Management Company shall carry out a partial or total Early Redemption of the Bond issue, giving prior notice to CNMV, in the following circumstances (each, an event of Early Redemption ): (i) Compulsory Early Redemption In the event that any of the Issuers fails to meet its payment obligations under the individual Mortgage Bond A or B issued by it, whether for principal and/or interest, the Fund Management Company shall proceed to a partial Early Redemption of the Bond issue of the relevant Tranche by reducing the nominal amount of the Bonds of such Tranche in an amount equal to the face value of the overdue Mortgage Bond in the terms indicated below: once the Fund Management Company receives the proceeds of the overdue Mortgage Bond in accordance with section IV whether for principal and/or interest - it will, as soon as the proceeds corresponding to such overdue Mortgage Bond have been deposited in the Collection Account and the Fund Management Company can make use of them, proceed to allocate said funds in accordance with the Payment Priority Order set out in the Prospectus. 32

33 The date on which the payments herein described shall be carried out may not necessarily coincide with a Payment Date. In the event that the amounts recovered are insufficient to fully pay to the bondholders of the relevant Tranche, the overdue amounts shall be recorded in the liabilities-side of the Fund s balance sheet as a creditors account. In order to carry out the payments of the aforementioned amounts, the Fund Management Company may only use the amounts recovered as a result of the foreclosure of the overdue Mortgage Bond or of the voluntary payment of the Issuer. (ii) Legal Early Redemption (a) According to Law 2/1981, dated 25 March, regulating the mortgage market and Royal Decree 685/1982, dev eloping the foregoing Law, should any of the Issuers, at any time during the life of the Assets issued by each one of them, exceed the limits for Mortgage Bond issuance set forth in the applicable law and regulation, the relevant Issuer must restore the balance by carrying out any of the actions set out hereunder: a) Depositing cash or public funds at the Bank of Spain; b) Acquiring mortgage bonds in the market; c) Extending new mortgage loans or acquiring mortgage debentures suitable for supporting the issue of mortgage bonds; d) Redeeming mortgage bonds by the amount needed to restore the balance. In case it is necessary, lots will be drawn to proceed with the early amortization of the relevant mortgage bond(s). According to the Internal Management Agreement referred to in section V below, the Issuers will commit themselves to make their best efforts in order to restore the balance either by means of depositing cash or public funds at the Bank of Spain or by extending new mortgage loans or acquiring mortgage debentures suitable for supporting the issue of mortgage bonds. Should any of the foregoing actions be insufficient to restore the balance, the Issuers will necessarily proceed to acquire their own mortgage bonds in the market. Should the mortgage bond to be acquired be the Mortgage Bond issued thereby and which is pooled in the Fund, the relevant Issuer shall irrevocably offer to repurchase the Mortgage Bond issued by the latter which has been pooled in the Fund, in which case the procedure to carry on the acquisition thereof must abide by the following rules. The Fund Management Company shall decide, in the name and on behalf of the Fund, and within the following two (2) Business Days as from the receipt of the notice foreseen above, whether to accept the offer to repurchase made by the Issuer. Should the Fund Management Company accept the offer of the Issuer to repurchase, the notification to the Issuer shall indicate the date on which the repurchase shall be 33

34 executed, such date not falling later that the fifth (5 th ) Business Day after the notification. The price of repurchase of the Mortgage Bond, as the case may be, shall be the higher between: (i) the price of redemption of the Mortgage Bond at par value and (ii) the market price of the Mortgage Bond. For this purposes market price of a Mortgage Bond shall be the result of multiplying the face value of said Mortgage Bond by the amount resulting from dividing (a) the arithmetic mean of the quotations of the Bonds offered by the Underwriting and Placement Entities (acting as Counterparties pursuant to the Underwriting Agreement) by (b) the face value of said Bonds. For purposes of determining the arithmetic mean of the quotations, the prices of said Bonds to be used for calculation shall be the quotations, denominated in Euros, offered by each one of the Underwriting and Placement Entities at 11:00 on the Business Day previous to the date on which the Issuer communicated to the Fund Management Company its offer to repurchase the Mortgage Bond. In case any of the Underwriting and Placement Entities did not offer a price for the Bonds, only those prices offered by the remaining Underwriting and Placement Entity(ies) shall be taken into account. The above must be understood without prejudice to the interest accrued on the Mortgage Bonds until the date of their repurchase, which must be paid on the date of repurchase. Once the amounts relating to the repurchase have been received, the Fund Management Company shall, in the name and on behalf of the Fund, take the appropriate steps to carry out a partial early redemption of the Bonds of the relevant Tranche issued through reduction of their face value. Thus, upon receipt by the Fund Management Company (in the name of the Fund) of the proceeds resulting from the repurchase of the relevant Mortgage Bond, it shall proceed to allocate said funds in accordance with the Payment Priority Order of the Prospectus. The date on which the payments herein described shall be carried out may not necessarily coincide with a Payment Date. In order to pay, as the case may be, interest and to carry out the partial early redemption of the Bonds issued through reduction of their face value, the Fund Management Company may use only the amounts received as result of the repurchase of the Mortgage Bond. The amounts received, if any, by the Fund Management Company in the name of the Fund as a consequence of the repurchase of the Mortgage Bond, and which exceed the amounts which the Fund Management Company must satisfy (in the name of the Fund) by means of the partial Early Redemption of the issue according to the terms set out herein, shall be distributed among the bondholders of the relevant Tranche (that is, Tranche A in the event the repurchased Mortgage Bond is Mortgage Bond A, 34

35 and Tranche in the event the repurchased Mortgage Bond is Mortgage Bond B) on a pro rata basis of the Bonds of said Tranche, according to the number of Bonds owned by each bondholder and according to the terms set out below. The distribution shall be carried out to the debit of the remainder, once the amounts owed by the Fund Management Company have been satisfied (in the name of the Fund) by means of the partial early redemption of the issue according to the terms set out herein. The distribution of the excess, if any, provided the excess complies with the terms described above, shall constitute an exception to the Payment Priority Order set out in this Prospectus. b) Notwithstanding the above, if the Fund Management Company (acting in the name and on behalf of the Fund) resolves not to re-sell the Mortgage Bond(s) to its Issuer in the terms set out above, and therefore the Issuer is forced to redeem mortgage bonds, provided the Mortgage Bond subject to redemption was precisely the Mortgage Bond included in the Fund s collateral pool, the terms under which the redemption of the Mortgage Bond(s) shall occur must be notified reasonably in advance to the Fund Management Company, in the name and on behalf of the Fund, in order for the latter to take the appropriate steps to proceed to the partial redemption of the Bond of the relevant Tranche issue by means of a reduction of the nominal amount of the Bonds of said Tranche equivalent to the face value of the redeemed Mortgage Bond(s). In any case, the redemption of the Mortgage Bond(s) in accordance with the provisions of the precedent paragraph shall be carried out for its (their) par value, not being able to be partially redeemed. The Early Redemption of the Mortgage Bond(s) shall be notified to the Fund Management Company at least five (5) Business Days prior to the redemption date. The above-mentioned partial Early Redemption of the Bond issue will be carried out upon receipt of the amount corresponding to the redemption of the nominal of the relevant Mortgage Bond(s), plus any interest accrued on the Mortgage Bond up to the date of the redemption thereof. Therefore, upon receipt by the Fund Management Company (on behalf of the Fund) of said amounts, it shall allocate said funds in accordance with the Payment Priority Order set out in this Prospectus. The date on which the payments herein described shall be carried out, may not coincide with a Payment Date. In order to pay, as the case may be, interest and carry out the partial early redemption of the Bonds of the relevant Tranche issue through reduction of their face value, the Fund Management Company may use only the amounts collected as a consequence of the redemption of the Mortgage Bond of the same Tranche (including to this end the amounts received corresponding to the principal as well as the interest). (iii) Early Redemption in the event of liquidation of the Fund 35

36 Additionally, the Bonds of both Tranches in whole shall be subject to complete Early Redemption in the event of liquidation of the Fund, in the circumstances and in the terms described in section III.9 of this Prospectus. If an event of Early Redemption were to take place in the terms established in this section II , CNMV will be immediately notified as will the bondholders via a widely circulated newspaper in Spain, in accordance with the provisions of section III.7.5 regarding extraordinary notifications. II.12 Schedule of financial servicing of the loan, including interest payments and redemption of principal, for each bond tranche to be issued by the Fund. Financial servicing of the Bond issue will be conducted through INSTITUTO DE CRÉDITO OFICIAL, as Financial Agent. The payment of interest and repayments of principal of the Bonds will be notified to the bondholders, as set out in section III.7.5. The payment of interest and repayments of principal of the Bonds of both Tranches will be made through the Financial Agent and based on the data included in the records of SOCIEDAD DE SISTEMAS participating entities, which shall be designated to be the entity responsible for keeping the accounting records of the Bonds. The financial service of the Bonds of each Tranche shall be charged to the proceeds from the Mortgage Bonds of the relevant Tranche (that is, the financial service of Tranche A Bonds shall be charged to the proceeds of Mortgage Bonds A and the financial service of Tranche B Bonds shall be charged to the proceeds of Mortgage Bonds B). a) Schedule of financial servicing of the transaction Given that, date of this Prospectus, the Nominal Interest Rate of Tranche A and Tranche B Bonds has not been decided, calculations have been made using a nominal interest rate of Tranche A Bonds of % and of Tranche B Bonds of %, resulting from tak ing the screen reference referred to in section II 10.1 on March 4, 2005 (3,7766% and %, respectively) plus a spread of % for Tranche A Bonds and % for Tranche B Bonds, calculating it in the following manner: Tranche A: IRS 10 years % Margin % Sum % Tranche B: 36

37 IRS 15 years % Margin % Sum % Amount of the interest per Tranche A Bond: Interest term per Bond: 365 day s Face value unpaid per Bond: 100, euros Interest calculation: 100, * * 365 / 365 = 3, euros. Amount of the interest per Tranche B Bond: Interest term per Bond: 365 day s Face value unpaid: 100, euros Interest calculation: 100, * * 365 / 365 = 4, euros. 37

38 AyT Cédulas Cajas IX, Fondo de Titulización de Activos Disbursement Date Bonds 5,000,000,000 Assets Mortgage Bonds A Mortgage Bonds B Tranche A 3,500,000,000 Inicial Balance 3,500,000,000 1,500,000,000 Tranche B 1,500,000,000 Average Rate % % Average Life 120 months 180 months Period Number Payment Date Outstanding Amount Cash Flor summary per Bond (euros) Bonos Tramo A Bonos Tramo B Principal Interest Total Payments Outstanding Principal Interest Redemption Amount Redemption Total Payments , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Total 100, , , , , ,

39 b) Internal rate of return Given that, on the date of this Prospectus, the Nominal Interest Rate on the Tranche A and Tranche B Bonds has not been decided, remaining to be set at a later date as established in section II.10.1 above, it is not possible to calculate the real rate of return for investors. However, by way of example, the previous section shows a calculation using a nominal annual interest rate of % for Tranche A and of % for Tranche B, calculated in accordance with that stated under section II.10.1, and assuming the Payment Date for both Tranches will be March 31 of each year, and that the price of issue of both Tranche A Bonds and Tranche B Bonds is 100% of their face v alue. The rate of return for the subscriber, based on the above calculations would be % for Tranche A and % for Tranche B, which is equal to the Nominal Interest Rate of each Tranche. c) Average life and duration of the bonds According to the conditions of the Bond issue, and except under the circumstances envisaged in subsections II or IV.2.2.2, the average life of the Bonds of both Tranches shall be ten (10) and fifteen (15) years respectively, and their duration eight point two (8.2) and eleven point one (11.1) years respectively, assuming that the price of issue of both Tranche A Bonds and Tranche B Bonds is 100% of their face v alue. The average life of the Bonds has been calculated using the following formula: V = T ( P d ) Where: V = P = d = T = Average life of the issued Bonds in years. Principal component to be redeemed on each Payment Date. Number of days elapsed from the Disbursement date (included) to the relevant Payment Date (not included). Total face value of the issue in Euros. The duration of the Bonds has been calculated using the following formula (modified Macaulay formula): ( a VA) 1 D = PE 1+ i ( ) Where: D = Duration of the Bonds in years. 39

40 a = Time elapsed (in years) from the Bond Disbursement Date until each of the relevant Payment Dates. VA = Present value of the total amounts payable in respect of gross interest on the respective Payment Date, and of principal on the Final Maturity Date, discounted at the effective interest rate (IRR) PE = Bond price of issue. I = Effective interest rate on the Bonds, as a fraction of one. d) Practical example of application of time periods defined in section II.10 and II.11 of this Prospectus, for calculating interest and redemption payments on the Bonds. As indicated above, on the date of this Prospectus the Nominal Interest Rate on the Tranche A and B Bonds has not been decided (this is to be determined not later than the date of incorporation of the fund, as provided for in section II.10.1 herein). Section II.12.a) of the Prospectus describes, within the parameters taken as reference in the example provided therein, a hypothesis of calculation and payment of interest and principal of Tranche A and B Bonds. II.13 Effective expected yield for the holder, taking into account the characteristics of the Bond Issue, specifying the calculation method adopted and anticipated expenses peculiar to the Issue. II.13.1 Effective yield for the holder Given that on the date of this Prospectus the Nominal Interest Rate on the Tranche A and B Bond has not been decided, it is not possible to calculate the real rate of return to investors (however, see section II.12 a)). The formula to calculate the internal rate of return for the bondholder is the following: PE = N i = 1 Ai ( 1+ r) ( nd / 365) Where: PE = Bond price of issue. r = Internal Rate of Return expressed as an annual rate, as a fraction of one. Ai = Total amounts redeemed and interest that will be received by the investors annually. (A 1...A N ) nd = Number of days between Bond of each Tranche Disbursement Date and Payment Date, exclusive. 40

41 Assuming an annual Nominal Interest Rate of % for Tranche A Bonds and of % for Tranche B Bonds, as proposed in section II.12.a) above -which has been included merely as an example-, and assuming that the price of issue of both Tranche A Bonds and Tranche B Bonds is 100% of their face v alue, this rate results in an effectiv e yield of % for Tranche A and % for Tranche B as indicated in section II.12.b) above. II.14 Expected yield on the Fund at the time of Bond issue, considering all design and placement expenses incurred, and specifying calculation method Assuming an annual interest rate of % for Tranche A Bonds and of % for Tranche B Bonds, as proposed in section II.12. a) above -which has been included merely as an example- and assuming that the price of issue of both Tranche A Bonds and Tranche B Bonds is 100% of their face v alue, this rate results in an effectiv e y ield of % for Tranche A and of 4,2210 for Tranche B, once Fund expenses have been taken into account. The effective rate of interest has been calculated employing the formula used to calculate the internal rate of return perceived by the Bond subscriber and adding the initial expenses of Fund to the flow of payments made by the latter in favor of the bondholders. The estimated expenses are as follows: Euros Incorporation and Administration Expenses CNMV fees 189, Registry 39, euros - Supervision AIAF admission 150, euros AIAF fees 52, SOCIEDAD DE SISTEMAS fees 1, Financial Services fee 220, Rating agencies and legal counsel 1,165, Administration Commission, notary s expenses, audit, publications and others 575, Subtotal 2,204, Issue and Placement Expenses Underwriting Fee (*) 70,375, Subtotal 70,375, Total 72,579, (*) The Underwriting Fee shall be agreed between the Arranger (who is also the Assignor) and the Underwriting and Placement Entities not later than the date of incorporation of the Fund, as in the case of the annual Nominal Interest Rate, as explained in greater detail in subsection II.10.1 above. The Underwriting Commission received by each of the Underwriting and Placement Entities shall range from sixteen (16) basis points (0.16%) to two hundred and twenty five (225) basis points (2.25%) 41

42 on the amount of the Tranche A Bonds underwritten by each of them and from twenty two (22) basis points (0.22%) to three hundred (300) basis points (3.00%) on the amount of the Tranche B Bonds underwritten by each of them. For the purposes of the aforementioned calculation, the most probable Underwriting Commission that could be agreed upon has been taken into account (that is, 1.41% for Tranche A and 1.41% for Tranche B). In any case, the Underwriting Commission that shall be finally agreed upon in the terms described herein shall be included in the Deed of Incorporation of the Fund and communicated to CNMV as additional information to include in the Prospectus. The expenses and commissions appearing in the chart above shall be paid by the Fund Management Company, in the name and on behalf of the Fund, out of Endowment of Incorporation, Management and Administration that the Assignor shall contribute at the time of incorporation of the Fund. (These estimated expenses do not include VAT on those invoices that are subject to, and not exempt from VAT). The extraordinary expenses originated by the enforcement of the Mortgage Bonds or by any default of the payment obligations of the Issuers, as the case may be, shall be paid by the Fund Management Company, in the name and on behalf of the Fund, against the Collateral Deposit created by the Issuer on default, as the case may be, secondly against the Liquidity Facility up to the maximum appointed in section V and in case this should be insufficient, against an extraordinary provision to be contributed by the Assignor, without prejudice to the right of the Assignor to recover the amounts so contributed on the Legal Maturity Date, in accordance with the Payment Priority Order set out in this Prospectus. Apart from the above-mentioned expenses, there could exist other extraordinary expenses different from the ones originated by the enforcement of the Mortgage Bonds or by any default of the payment obligations of the Issuers, deriving, among other things, for example, from an eventual application for the Bonds to be admitted for trading on a European stock market. Extraordinary expenses of this sort shall be paid by the Fund Management Company, in the name and on behalf of the Fund, out of an extraordinary provision to be contributed by the Assignor; the foregoing shall be without prejudice to the right of the Assignor to recover the amounts so contributed on the Legal Maturity Date, in accordance with the Payment Priority Order set out in this Prospectus. II.15 Existence, or otherwise, of special guarantees Absence of Assignor guarantees The Assignor does not guarantee in any way the successful outcome of the transaction (buen fin de la operación), in accordance with Article 2.2.b) 2º of Royal Decree 926/1998, and it does not guarantee the Bond issue either. 42

43 II.16 Law governing the transfer of the securities, indicating in particular, any restrictions on their transferability or mentioning that such restrictions exist The Bonds are not subject to particular restrictions on their free transferability, which will be carried out in accordance with the applicable legal provisions thereto and the rules of the markets where the bonds are listed, as envisaged in subsection II.17 below. The ownership of each Bond shall be transferred through an accounting record transfer. The registration of the transfer to the acquirer in the accounting record shall have the same effect as the delivery of the certificates and the transfer shall, from that moment on, be opposed against third parties. II.17 Official secondary markets for which there is an undertaking to apply for the Bonds to be accepted for trading; deadline for presenting the corresponding application and other documents needed for admission The Fund Management Company shall apply, after signing the Deed of Incorporation and once the Bonds have been paid up, for the admission to trading of the Bonds on AIAF. Definitive admission for trading of the bonds is expected to be granted no later than thirty (30) days following the Disbursement Date. In the event this deadline is not met, the Fund Management Company shall disclose the reasons for such non-compliance to CNMV and to the bondholders by publishing an announcement in a newspaper with national circulation, notwithstanding any contractual liability which may arise for the Fund Management Company as a result of such nonperformance. The Fund Management Company hereby states that it knows the requirements and conditions laid down for the Bonds to be admitted, remain on and be excluded from AIAF under the legislation currently in force and the requirements of its managing bodies. The Fund, through the Fund Management Company, agrees to comply therewith. The Fund Management Company shall also, in the name and on behalf of the Fund, apply for the Bonds to be included in SOCIEDAD DE SISTEMAS, so that the Bonds shall be cleared and settled in accordance with the operating rules which are laid down or may be laid down in the future by SOCIEDAD DE SISTEMAS for securities listed in AIAF and represented as book entries. II.18 Applications for subscription or acquisition II.18.1 Potential investor groups to which the securities are being offered, indicating the reasons of such choice Due to the main characteristics of the Bond issue, such as the face value of the Bonds and the systems used for their placement, distribution and marketing, the placement of the 43

44 Bond issue is aimed at institutional investors, although the Bonds may be acquired by any other investors in the secondary market where they are listed. For these purposes, they shall be considered institutional investors those appointed in section 7.1, paragraph a) of Royal Decree 291/1992. II.18.2 Legal capacity of the Bonds All the Bonds, once the same are admitted to trading, may be eligible for: (i) the investment of insurance companies technical provisions, in accordance with the Regulation on the Organization and Supervision of Private Insurance approved by Royal Decree 2486/1998 November 20, 1998; (ii) the constitution of legal reserves in Mutual Guarantee Companies, under Royal Decree 2345/1996 November 8, 1996; (iii) the investment of Pension Funds assets in accordance with the provisions of Article 70 of Royal Decree 304/2004, dated 20 February, which approves the regulation of Pension Funds and, (iv) calculating Mutual Funds investment coefficients, as set forth in articles 23 and 30 of Law 35/2003, dated 4 November, on Undertak ings for the Collectiv e Inv estment and in Royal Decree 91/2001, dated 2 February, which partially modifies Royal Decree 1393/1990, dated 2 November, which approves the Regulation to Law 46/1984 (December 26, 1984), regulating Mutual Fund Inv estments, with the specifics limitations that for each Mutual Fund Investment exist under this regulation. II.18.3 Subscription or acquisition date or period The subscription period (the Subscription Period ) shall have a duration of one (1) hour, between 11:00 and 12:00 am on the Business Day before the Disbursement Date. The Subscription Period shall take place on the first Business Day after the Fund s incorporation date. II.18.4 Where and before whom can subscription or acquisition be carried out The applications for subscription, to be taken into account, must be carried out through any method allowed by Law, during the Subscription Period, at the offices of ABN AMRO, SUCURSAL EN ESPAÑA, BARCLAYS BANK PLC, CALYON, SUCURSAL EN ESPAÑA and CITIGROUP GLOBAL MARKETS LIMITED (each one an Underwriting and Placement Entity and, jointly, the Underwriting and Placement Entities ). II.18.5 Means and date of payment 44

45 Subscribers of the Bonds must pay the Underwriting and Placement Entity through which they have made their subscription, on the first Business Day after the end of the Subscription Period, which is the same as the second (2 nd ) Business Day after the Fund is incorporated (the Disbursement Date ), before 10:30 a.m. Madrid time, value-dated the same day, which may correspond per each Bond assigned in the subscription. The total amount underwritten by the Underwriting and Placement Entities will be paid to the Fund by 11:00 am on the Disbursement Date, value-dated the same day, through bank transfer to the Cash Account opened with the Financial Agent for the total amount of the issue underwritten. In accordance with the Underwriting Agreement which shall be entered into by the Underwriting and Placement Entities and the Fund, said assignment may be done directly by each Underwriting and Placement Entity after deducting the amount of the Underwriting Fee, or, if the Underwriting and Placement Entity so chooses, by paying the amount of their respective underwriting commitments to the Arranger (after deducting, as the case may be) the sum of their Underwriting Fees), so that the Arranger may proceed to pay the Fund with value that same day, the amounts received from the Underwriting and Placement Entities which have opted for this disbursement method, acting in name and on behalf of such Underwriting and Placement Entities. II.18.6 Form and deadline for providing subscribers with copies of their subscription certificates or provisional contract notes, specifying their trading possibilities and maximum validity periods Each Underwriting and Placement Entity shall provide the subscribers of the Bonds who have made their subscription through such entity, no later than fifteen (15) Business Days from the Disbursement Date, a document certify ing the subscription of the assigned Bonds and the amount effectiv ely disbursed for such subscription. Such document shall not be tradable and shall be valid to prove the subscription of the relevant Bonds until such time as the entry in account is made as provided for in section II.5 of this Prospectus. II.19 Placement and allocation of the Bonds The placement of the Bonds shall be carried out by the Underwriting and Placement Entities, who will freely accept or reject the applications for subscriptions they receive, ensuring in any case that there is no discrimination between applications that have similar characteristics. Nevertheless, the Underwriting and Placement Entities may give priority to the applications of those of their clients which they objectively consider to be more appropriate. In the event that during the Subscription Period, the Tranche A Bonds were not awarded in full, the Underwriting and Placement Entities undertake to subscribe in their own name, at the end of the Subscription Period, the number of Tranche A Bonds necessary to complete their underwriting commitment as set out in subsections II.19.1 and II.19.3 of this 45

46 Prospectus. Likewise, in the event that during the Subscription Period, the Tranche B Bonds were not awarded in full, the Underwriting and Placement Entities undertake to subscribe in their own name, at the end of the Subscription Period, the number of Tranche B Bonds necessary to complete their underwriting commitment as set out in subsections II.19.1 and II.19.3 of this Prospectus. II.19.1 Institutions participating in the placement or marketing thereof, listing and clearly describing their different commitments. Total amount of commissions agreed between the different placement agents and the Fund Management Company The total Bond issue shall be placed by the Underwriting and Placement Entities as follows: UNDERWRITTEN NOMINAL A MOUNT (EUROS) UNDERWRITING AND PLACEMENT ENTITY TRANCHE A TRANCHE B ABN AMRO, SUCURSAL EN ESPAÑA 875,000, ,000,000 BARCLAYS BANK PLC 875,000, ,000,000 CALYON, SUCURSAL EN ESPAÑA 875,000, ,000,000 CITIGROUP GLOBAL MARKETS LIMITED 875,000, ,000,000 Total 3,500,000,000 1,500,000,000 It is foreseen that, prior to the incorporation date of the Fund, the inclusion of new Underwriting and Placement Entities authorized to operate in Spain may be decided, in which case the amounts of the respective underwriting agreements reflected in the previous table will be modified (although the placement, underwriting and liquidity commitments of the new Underwriting and Placement Entities shall be the ones foreseen in this Prospectus for ABN AMRO, SUCURSAL EN ESPAÑA, BARCLAYS BANK PLC, CALYON, SUCURSAL EN ESPAÑA and CITIGROUP GLOBAL MARKETS LIMITED). In any event, the inclusion of new Underwriting and Placement Entities as well as the new distribution of the amounts of the respective underwriting commitments will be notified to CNMV as additional information to include in the Prospectus. The obligations undertaken by each of the Underwriting and Placement Entities shall be independent and several. Therefore, in the vent of any Underwriting and Placement Entity not complying with its underwriting commitment, the rest of the Underwriting and Placement Entities shall not be obliged to amend its default. The Underwriting and Placement Entities shall receive an Underwriting Commission on the Disbursement Date, based on the total face value of the Bonds underwritten by them, as established in the Underwriting Agreement referred to in subsection v of this Prospectus. This Underwriting Commission shall be agreed between the Arranger (also Assignor) and the Underwriting and Placement Entities not later than the date of incorporation of the Fund. In any case, the Underwriting Commission finally agreed upon 46

47 shall be included in the Deed of Incorporation of the Fund and communicated to CNMV as additional information to be included in the Prospectus. The commission to be received by each of the Underwriting and Placement Entities shall range from sixteen (16) basis points (0.16%) to two hundred and twenty five (225) basis points (2.25%) on the amount of Tranche A Bonds underwritten by each of them and from twenty two (22) basis points (0.22%) to three hundred (300) basis points (3.00%) on the amount of Tranche B Bonds underwritten by each of them. Each Underwriting and Placement Entity shall deduct its respective Underwriting Commission from the amount it underwrites, to which the Fund Management Company, on behalf of the Fund, shall consent in the Underwriting Agreement. II.19.2 Arranger of the Bond Issue AHORRO CORPORACIÓN FINANCIERA, S.V., S.A. will act as Manager of the Bond issue. A nnex VI of this Prospectus contains a photocopy of the letter from the Arranger including statements signed by duly authorized persons, as required by the stock market legislation currently in force, a transcription of which is reproduced here: Mr. Jesús María Verdasco Bravo, with identification number , in the name and on behalf of A HORRO CORPORA CIÓN FINA NCIERA S.V., S.A. (the Arranger ) with registered offices in Madrid, Paseo de la Castellana number 89, 10 th floor, Madrid, duly authorized for it, by virtue of a resolution passed by the board of directors of the entity in a meeting held on February 24, 2005, regarding the incorporation of AyT CÉDULAS CAJAS IX, FONDOS DE TITULIZACIÓN DE ACTIVOS (the Fund ) for an amount of 5,000,000,000 euros, which Prior Communication has been already deliv ered to the Spanish Securities Market Commission in order for it to be registered, pursuant to article 20 of the Royal Decree 291/1992, March 27, of issuance and public offerings, amended by Royal Decree 2590/1998, December 7, of legal regulations amendments of the Securities Markets, declare: 1º That all necessary steps have been taken to verify the accuracy and integrity of the information contained in the Prospectus; and 2º That based on such verification, no circumstances exist which contradict or alter the information included in the Prospectus, nor does the latter omit any relevant facts or data likely to lead the investor to error. The Arranger shall not receive any management commission for acting as such. II.19.3 Institutions underwriting the Bond Issue, description of the characteristics of the Underwriting relation or Agreement, guarantees required of the Issuer or offeror, types of risk assumed, type of compensation required of the 47

48 Underwriting and Placement Entity in the event of non- fulfillment, and other relevant elements The Fund Management Company, in the name and on behalf of the Fund, shall enter into a Bond Issue Underwriting Agreement with the Arranger (who is also the Assignor) and the Underwriting and Placement Entities, whereby the latter, at their discretion, shall allocate the entire Bond Issue to third parties, and shall subscribe in their own name any Bonds remaining unsubscribed at the end of the Subscription Period, by virtue of their underwriting commitment. The Underwriting and Placement Entities will assume the commitments contained in the Underwriting Agreement, which are essentially as follows: 1) to subscribe to any Bonds remaining unsubscribed at the end of the Subscription Period, up to the established amounts; 2) to pay the Fund before 11:00 a.m. on the Disbursement Date, same day value, the total amount underwritten on the issue, deducting the amount of its respective Underwriting Fees or, if the Underwriting and Placement Entities so choose, crediting the amount of their respective underwriting commitments to the Arranger (after deducting the amount of their respective Underwriting Fees), so that the Arranger may proceed to pay into the Fund, by that time, the amounts received from the Underwriting and Placement Entities which have opted for this disbursement method, acting on behalf of and in the name of such entities; 3) undertaking to pay penalty interest as established in the Underwriting Agreement in the event of delays in paying amounts due; 4) to deliver a document to subscribers accrediting their subscription; 5) liquidity commitment on respect of the Bonds of the relevant Tranche; and 6) other aspects relating to the underwriting of the issue. The obligations born to the parties in the Underwriting Agreement will be annulled in the event that any of the provisional ratings assigned to the Bonds by the Rating Agencies as referred in subsection II.3 fails to be confirmed as final before the beginning of the Subscription Period. II.19.4 Apportionment of the placement, its modality and date of realization, means of announcing results; and, where appropriate, reimbursement to applicants of amounts paid in excess of the value of the Bonds allocated to them, plus corresponding interest payments In accordance with the procedure set forth in section II.19 it is not applicable. 48

49 II.20 Deadline and form envisaged for providing subscribers with the certificates or documents accrediting the Bond subscription The Bonds will be represented as book entries and shall be constituted as such by virtue of their registration in the corresponding accounting record, in accordance with the provisions of Royal Decree 116/1992, subject to the usual procedures and deadlines of the institution in charge thereof, SOCIEDAD DE SISTEMAS. The Underwriting and Placement Entities shall provide the subscribers of the Bonds a document certifying the subscription of the assigned Bonds and the amount effectively disbursed for such subscription no later than fifteen (15) day s as from the Disbursement Date. II.21 National legislation under which the securities are created, and indication of the competent jurisdictional bodies in the event of litigation The incorporation of the Fund and the Bond Issue are subject to Spanish law as according to the following laws and regulations: Royal Decree 926/1998 and Laws 19/1992 and 24/1988; the provisions of Royal Decree 291/1992; Ministerial Order dated July 12, 1993 on Prospectuses, further developed in Royal Decree 291/1992 (March 27, 1992); and CNMV Circulars 2/1994 (March 16, 1994) and 2/1999 (April 22, 1999), which approve certain prospectus models used in security issues or public offerings. Any question, dispute, litigation or complaint arising from the incorporation, management and legal representation of the Fund by the Fund Management Company and/or from the issue of Bonds by the Fund shall be heard and ruled upon by Spanish Courts. The Deed of Incorporation and the contracts that the Fund Management Company will subscribe in name and on behalf of the Fund shall be governed and interpreted in accordance with Spanish legislation. II.22 Personal income tax arising from the securities offered, distinguishing between resident and non-resident subscribers Set out below is a brief extract of the tax rules applying to the investments deriving from this offer, for which purpose only the national legislation currently in force and the aspects of a general nature likely to affect the investors have been taken into account. Investors should take into account any special tax circumstances that may apply to them, such as rules applying on a territorial basis and the rules of the legislation currently in force at the time the corresponding income is obtained and declared. As the Bonds in the offering are represented through book entries and an application will also be made for them to be traded and listed on an official secondary Spanish securities Market, and as these matters are relevant when the time comes to determine taxation, it 49

50 has been assumed that these conditions will be met. It has also been considered that the Bonds, at the time they are issued, will be deemed to be financial claims on explicit yields whenever this classification is relevant for tax purposes. Any withholding of taxes, payments in account and other levies, established or to be established in the future, on the capital, interest, or Bond yields, shall be the exclusive responsibility of the bondholders; and the corresponding amounts, if any, shall be deducted by the Financial Agent, on the instructions of the Fund Management Company, in the legally established way. During the lifetime of the Bonds, the tax regime applicable to them will be that deriving from the legislation in force at (that) time. II.22.1 Individuals or companies resident in Spain a) Personal income tax Although this issuance is directed to institutional investors, reference to the Personal income tax is included because, once the Bonds are placed and admitted to listing, they may be freely acquired by investors. Any income received by bondholders who are subject to Personal Income Tax (IRPF), either in respect of interest on the Bonds or as a result of their transfer, repayment or redemption, shall be treated as income from capital made by transferring their own capital to third parties in the terms of Article 23.2 of Royal Legislative Decree 3/2004, dated 5 March, approving the restated text of the Law on Personal Income Tax. In the event that the Bonds are transferred, reimbursed or redeemed, the difference between their transfer, reimbursement or redemption value (less any expenses relating to the disposal) and their acquisition or subscription value (plus any expenses relating to the acquisition), will be computed as investment income. Nevertheless, any investment losses recorded on the transfer of the Bonds, whenever the taxpayer has acquired other homogeneous financial assets within two months prior to or after such transfers, will be included in the basis of assessment for the tax as and when the financial assets that remain part of the taxpayer's assets are transferred. The net investment return will be determined by deducting the management and deposit fees (except such expenses that constitute a consideration for an individual and discretionary inv estment portfolio management) for the Bonds from the gross returns. The net returns arising on the transfer, reimbursement or redemption of any Bonds that have been part of the investor's assets for more than two years will be reduced by 40%. Income received in respect of interest shall be subject to a withholding tax of 15% payable against the recipient s IRPF account, pursuant to section 103 of Royal Legislativ e Decree 3/2004, dated 5 March, approving the restated text of the Law on Personal Income Tax. On 50

51 the contrary, there is no obligation to withhold tax on incomes arising from the transfer or redemption of financial assets with an explicit rate of return provided these satisfy the following requirements (as is expected to be the case in this issue): (i) that they are represented by account entries; (ii) that they are traded on an official Spanish secondary stock mark et. Notwithstanding the above, the part of the price corresponding to the coupon that has accrued when the Bonds are transferred during the thirty (30) days immediately prior to the collection of such coupon will be subjected to a withholding tax (at 15%), whenever (i) the acquirer is a person or entity not resident in Spain or is liable to Corporation Tax, (ii) the acquirer is subject to no withholding on the explicit income deriving from the Bond transferred. b) Corporate Income Tax The income, be it interest income or capital gains made when the Bonds are transferred, redeemed or reimbursed, earned by entities that are subject to Corporation Tax will be included in the basis of assessment in the manner provided for in Title IV of the Royal Legislative Decree 4/2004, of March 5, which approves the consolidated text of the Corporation Tax Law. In accordance with the current wording of Article 59.q) of Royal Decree 1777/2004, of July 30, which enacted the Corporation Tax Regulations, income earned by taxpayers liable to Corporation Tax on financial assets is subject to no withholding requirement provided that the following requirements are met (as is provided for in this issue): (i) that they are represented through book entries; and (ii) that they are traded on an official Spanish secondary securities mark et. In this regard, in accordance with the Ministerial Order of December 22, 1999, the procedure for effectively qualifying for exemption from the withholding or payment of advance tax on the interest provided for in Article 59.q) of the Corporation Tax Regulations, for interest paid to taxpayers who are liable to Corporation Tax, will be subject to the following requirements: 1.- The Fund Management Company, acting for and on behalf of the Fund as the issuing entity, will pay the net amount resulting from applying the general withholding rate in force on that date to all the interest to the custodian entities via the Payment Agent. 2.- By day 10 of the next month after the maturity date of each coupon, the custodian entities must provide either the Fund Management Company or the Financial Agent with a detailed list of the bondholders who are liable to the Tax, giving information as to the ISIN Codes of the Bonds, their identity, the number of securities they hold on the maturity date of each coupon, the corresponding gross income and amount withheld. 51

52 3.- The bondholders must accredit this situation with the custodian entities by day 10 of the next month after the date the coupon matures so that the custodian entities can draw up the list referred to in the preceding paragraph. 4.- The Fund Management Company, as soon as it receives this list, will immediately pay, through the Financial Agent, the custodian entities the amount withheld in excess from such bondholders who are liable to Corporation Tax. 5.- The custodian entities will immediately pay the amount withheld from the taxpayers liable to Corporation Tax. II.22.2 Individuals or companies not resident in Spain Incomes obtained by bondholders classified as subject to Non-Resident Income Tax, either in respect of interest on the Bonds or as a result of their transfer, repayment or redemption, shall be considered as income obtained in Spain, with or without a permanent establishment, under article 13 of Royal Legislativ e Decree 5/2004, of March 5, which approves the consolidated text of the Tax on Income of Non-Residents Law. a) Income obtained through a permanent establishment The income earned on the Bonds by a permanent establishment in Spain will be taxed in accordance with the rules laid down in Chapter III of the aforementioned Royal Legislative Decree 5/2004, without prejudice to the provisions of the Treaties to avoid Double Taxation subscribed by Spain. Taxpayers liable to Non-Resident Personal Income Tax who receive income from financial assets through a permanent establishment in Spain will be governed by the same rules on withholdings as are laid down for taxpayers liable to Corporation Tax. There is therefore no obligation to withhold the income from financial assets that they obtain, provided that, as provided for in this issue, the financial assets are represented through book entries and are traded on an official secondary Spanish market. The procedure for applying the exemption from withholding on the yield deriving from this type of financial assets with regard to interest is set out in the Order of the Ministry of the Economy and Finance of December 22, b) Income obtained other than through a permanent establishment The yields on the Bonds obtained by non-resident persons or entities in Spain who are acting, for the purposes hereof, without a permanent establishment, will be taxed in accordance with the rules of Chapter IV of the aforementioned Royal Legislative Decree 5/2004. Set out below are the most notable of these rules, notwithstanding the terms of the Double Taxation Treaties signed by Spain, which may determine that the corresponding income is not taxed, or else is taxed at reduced tax rates: 52

53 The basis of assessment will be quantified as the entire amount of the income obtained, calculated in accordance with the terms of Royal Legislative Decree 3/2004, dated 5 March, approving the restated text of the Law on Personal Income Tax, without the reductions provided for in such Royal Legislative Decree being applicable. In the event of transfer, reimbursement or redemption, the accessory expenses of acquisition and disposal will be taken into account for the calculation, provided that they are adequately justified. The taxation will be separate for each total or partial accrual of income subject to taxation. They may not be offset against one another. The income obtained, both from the collection of the coupons or the assignment, redemption or reimbursement of the Bonds, by non-resident persons or entities in Spain who are acting, for these purpose, without a permanent establishment in Spain, will be exempt whenever the recipient is a resident of another Member State of the European Union, or by a permanent establishment of said residents located in another Member State of the European Union provided that an appropriate certificate of residence, issued by the tax authorities of the country where the inv estor resides is produced. The income deriving from the transfer of such securities in Spanish official secondary securities markets, obtained by non-resident Natural persons or entities, without going through a permanent establishment in Spanish territory, who are residents of a State that has signed a Double Taxation Treaty with Spain containing an information exchange clause will also be exempt. For such purposes, the appropriate tax residence certificate or, as the case may be, equivalent document provided for in the applicable Treaty or development regulation, issued by the tax authorities of the country where the investor is resident, must be produced. Under no circumstances will the exemptions described in the preceding paragraphs apply when the income is obtained through countries or territories classified in the regulations as tax havens. The Tax will be calculated by applying the general rate of 15% to the basis of assessment, except where a lower rate or an exemption is applicable in accordance with domestic regulations or a Double Taxation Treaty entered into by Spain. Whenever, by virtue of the investor's place of residence, there is an internal exemption or a Double Taxation Treaty signed by Spain, the exemption or any reduced rate provided for therein for this type of income will apply, provided that a tax residence certificate or, as the case may be, equivalent document provided for in the applicable Treaty or development regulation, is produced in accordance with the terms set out hereinabove. 53

54 The income obtained by non-resident bondholders may be subject to withholding on account of Non-Resident Income Tax, in accordance with the following rules: Payment of interest on the Bonds will be subject to a withholding on account of Non-Resident Income Tax except in cases where proof is provided that the Tax has been paid or the Bondholder qualifies for exemption. The amount of the withholding shall be, in general terms, equivalent to the payable tax in accordance with the aforementioned criteria, the general withholding rate being 15%. However, there is no withholding obligation on income on the transfer or reimbursement of the financial assets that are the object of this issue, as they are represented through book entries and are traded on an official secondary Spanish market, except the part of the price corresponding to the coupon that has accrued when the Bonds are transferred during the thirty (30) days immediately prior to the collection of such coupon whenever (i) the acquirer is a non-resident person or entity in Spain or is liable to Corporation Tax, (ii) the acquirer is not obliged to withhold from the income deriving therefrom. The foregoing shall be without prejudice of the joint and several liability in which the custodian entity or management company may incur and to the obligations to declare and pay the eventual tax of the actual non resident holder. In cases where financial institutions domiciled, resident or represented in Spain which are depositories or manage the collection of the income on the Bonds are involved in the procedure for paying interest, the procedure for making the withholding on the interest effective, at the rate applying in each case, or the exemption from withholding, will be as set out by the Ministry of Economy and Finance in the Order of April 13, 2000, which is described hereinbelow: 1. The F und Management C ompany, in the name and on behalf of the F und, will transfer to the custodian entities, either directly or through the Financial Agent, on every interest due date, the net amount resulting for applying the general withholding rate in force on such date to all the interest. 2. The custodian entities must submit to either the Financial Agent or the Fund Management Company, by day 10 of the next month after the month the coupon matures, a detailed list of bondholders who are not residents of Spain and have no permanent establishment in Spain, stating, inter alia, the information on the Tranche and maturity date, the identity and place of residence of the Bondholder, the number of securities held by the Bondholder on the date the coupon matures, the corresponding gross income and the withholding to be made. 54

55 3. The non-resident bondholders must in turn have provided proof to the custodian entities of their tax residence by producing a residence certificate issued by the tax authorities of their country of residence, which must expressly state, whenever the withholding is exempted or made at a reduced rate in the terms of a Treaty, that the investor is a resident in the sense defined by such Treaty, and taking into account, furthermore, that such certificate is valid for (1) year as from when it is issued. Nevertheless, when the withholding is carried out applying a taxing limitation established in a Treaty developed by an Order in which the use of a particular form is required, such form will be used instead of the certificate. 4. The Fund Management Company, in the name and on behalf of the Fund, as soon as it receives the list referred to in the previous paragraph, will immediately transfer to the custodian entities, either directly or through its Financial Agent, the amount withheld from the investors who qualify for exemption from the withholding, or the amount withheld over and above the limits of taxation set in the Treaty applying to the investors who are entitled to reductions. 5. The custodian entities will, in turn, immediately pay, to the account of the Fund Management Company, the amount withheld or the excess withheld, as applicable, from the non-resident investors. In the event that they are unable to provide proof, for these purposes, of their tax residence status, the income received on the Bonds, be it interest income or when transferring, reimbursing or redeeming the Bonds, by non-resident bondholders will be subject to taxation under the general rules described above, although they may apply for any excess withholding or taxation to be refunded by going through the formalities and form provided by Ministerial Order of December 23, II.22.3 Indirect taxation on the Bonds The issue, acquisition, subscription and transfer of the Bonds are exempt from Corporation Tax and from Value Added Tax. II.22.4 Wealth Tax Natural persons subject to taxation on all their personal income worldwide, who are obliged to file a declaration in respect of this tax and who hold Bonds on 31 December each year, must include them in their Wealth Tax Return where they will pay tax in accordance with the general rules. For these purposes, the Bonds will be computed at the average traded value for the fourth (4 th ) quarter of each year, that is yearly published by the Ministry of Finance for this purpose. 55

56 Non-resident Natural persons who hold Bonds on 31 December of each y ear shall be subject to taxation on all their income obtained in Spain and to Wealth Tax, unless otherwise provided for in the Double Taxation Treaties. This notwithstanding, residents of other member states of the European Union will be exempt with regard to Bonds with yields that are exempted from Non-Resident Income Tax, in accordance with the terms set out hereinabove. II.22.5 Inheritance and Gift Tax Mortis causa transfers of Bonds or donations to Natural persons are governed by the general rules for Inheritance and Gift Tax, without prejudice to what is provided for in Taxation Treaties signed by Spain. In cases where the beneficiary is a legal person, the revenue obtained will be taxed in accordance with the rules on Corporation Tax or Non-Resident Income Tax, depending on the case, in this latter case the provisions of the Double Taxation Treaties provide in this regard. II.23 Purpose of the transaction II.23.1 Purpose of the net value of the issue The net value of the Bond Issue shall be destined to pay the purchase price in full of the Assets sold by the Assignor, pooled into the Fund s asset. It is hereby stated that neither the Issuers nor the Assignor intend, on the date of this Prospectus, to acquire Bonds from this issue. II.24 Institutions that have undertaken to participate in secondary trading to provide liquidity by playing the role of Counterparty, indicating the scope of the intervention and the way in which this is to be carried out. For the purpose of this section, the Underwriting and Placement Entities shall be referred to as the Counterparties. The Counterparties shall intervene in secondary trading to provide liquidity by acting as counterparty in the terms established in the Underwriting Agreement. In this sense, the Counterparties shall give liquidity to the Bonds during the business days of trading in AIAF Market. Each Counterparty shall quote bid and offer prices of the Bonds that shall be valid for nominal amounting up to FIFTEEN MILLION EUROS ( 15,000,000). The prices quoted by the Counterparties shall at all times reflect the liquidity situation existing in the market. The quoting of the sale prices shall be subject to the availability of securities in the market. The Counterparties do not guarantee that they may locate the securities to respond to the 56

57 demand, be in it their own portfolio or in other entities. Nevertheless, each Counterparty undertakes to make its best efforts to act with the usual diligence in the markets for these purposes. Prices shall be understood to be binding and shall be set in accordance with market conditions, although each Counterparty may decide the bid and offer prices it quotes and may alter either as it sees fit. These prices shall represent the rates of return that each Counterparty considers prudent to establish, according to its perception of the situation in the asset-backed bond market, as well as in fixed-income markets generally and other financial markets. The difference between the sale price and the offer price quoted by each Counterparty shall not exceed ten (10) basis points (0.1%) in terms of IRR, and shall not exceed ten (10) basis points (0.1%) in terms of price. Each Counterparty also undertakes to quote and disseminate daily prices through at least the following media (and additionally, if it is deemed convenient, by telephone): - On its Reuters screen; - On its Bloomberg screen; - hrough the SECA (Sistema Estandarizado de Cotización AIAF) system. Each Counterparty also undertakes to report on volumes traded, average prices and maturities. This shall be done either through AIAF or SOCIEDAD DE SISTEMAS services, through a press announcement or through the media mentioned above in the previous paragraph, and with the frequency that trading volumes require, but at least monthly. The Counterparties shall be exonerated of the liquidity commitments before changes that significantly affect the legal circumstances followed by the Counterparties for the sale and purchase of securities or their usual practice as financial entities. This exoneration shall be temporary, finishing at the time in which such changes, events or alterations, or other subsequent ones, cease having the aforementioned effects. Likewise, there shall be a possibility of exoneration when due to changes in the statutory, legal or economic circumstances of the Fund an alteration in the solvency or payment capacity of the Fund is determinately observed. This exoneration shall be likewise temporary, finishing at the time in which said changes cease producing the aforementioned alteration. Each Counterparty may be released from its obligation of providing liquidity when the Bonds issued by the Fund that it owns individually, acquired directly from the market in compliance with its obligations as Counterparty, exceed in each moment twenty (20%) of the outstanding balance of the Bonds of the relevant Tranche. 57

58 This liquidity commitment shall be valid throughout the life of the Bonds, from the date of their being admitted for AIAF market. It may be terminated, however, with thirty (30) days notice, in which case the Fund Management Company shall seek another entity to act as Counterparty. In the event of termination by one of the Counterparties, notwithstanding the notice period mentioned above, this Counterparty shall not be relieved of the obligations assumed in the liquidity commitment until the Fund Management Company has found another suitable entity (whether a credit institution or an investment services company authorized for such purpose) to take its place. The Fund Management Company undertakes to make its best efforts to, within the aforementioned thirty (30) days period, locate an entity willing to undertake the functions that for the leaving Counterparty are set forth in this Agreement. Once the aforementioned period is elapsed before the Fund Management Company has found a substitute for the counterparty, this may present the Fund Management Company an entity to take its place in the terms of the liquidity commitment, and the Fund Management Company may not refuse it but for lack of capacity to comply with that agreed. The Fund Management Company, acting in name and on behalf of the Fund, on the basis of information received by the Arranger and acting in the best interest of the Fund and bondholders, may terminate the liquidity commitment with any Counterparty before it expires, in the event that the latter has failed to discharge the commitments assumed, or else as the Fund Management Company sees fit, always provided it gives the Counterparty a minimum of thirty (30) days notice. However, the Fund Management Company may not use this termination faculty without previously having obtained a suitable credit entity to replace the Counterparty concerned. Given that the Arranger, as a brokerage firm, is in a better position than the Fund Management Company to assess the fulfillment (or otherwise) of the obligation of Counterparties to provide liquidity to the Bonds, it shall be the Arranger which, for the lifetime of the Fund, shall inform the Fund Management Company, according to objective criteria, of the fulfillment (or otherwise) by the Counterparties of the liquidity commitments assumed by them. The Arranger shall also, where appropriate, propose to the Fund Management Company the name of an entity to replace the outgoing Counterparty. Termination of the liquidity commitment and replacement of a Counterparty shall be notified to the bondholders via a press notice in a national newspaper. Termination of the present agreement shall also be communicated to CNMV. In the event that a Counterparty is replaced in the terms set out in the foregoing paragraphs, the outgoing Counterparty shall transfer to its replacement the amount of the Underwriting Commission received by the outgoing Counterparty corresponding to the years remaining until the transaction expires. 58

59 II.25 Individuals or firms that have played a significant part in designing or advising on the Incorporation of the Fund, or in any of the substantive information contained in this Prospectus, including underwriting of the placement a) The financial design of the Fund and the Bond issue has been carried out by AHORRO CORPORACIÓN FINANCIERA, S.V., S.A. b) The legal design of the Fund and the Bond Issue has been carried out by AHORRO CORPORACIÓN FINANCIERA, S.V., S.A. and GÓMEZ-ACEBO & POMBO ABOGADOS, S.C.P, acting as independent legal advisers. c) AHORRO CORPORACIÓN FINANCIERA, S.V., S.A. is the Assignor of the Assets. It also acts as Arranger and Organizer of the transaction. It is attached as A nnex VII copy of the declaration of the Assignor signed by persons entitled to act in its name, stating that the required verifications to ensure the veracity and integrity of the information contained in the Prospectus in connection with the Assignor and the assets that it shall assign to the Fund; and that as a consequence of such verifications, no circumstances have been noticed that contradict or modify the information included in the Prospectus, and it does not omit data or facts that could be relevant for investors. d) AHORRO Y TITULIZACIÓN, S.G.F.T., S.A. acts as Promoter and Fund Management Company. e) The Issuers of the Assets that will be assigned to the Fund at the time of its incorporation are: CAJA DE AHORROS DEL MEDITERRÁNEO; Mortgage Bond A: 354,166,667 euros, Mortgage Bond B: 145,833,333 euros CAJA DE AHORROS Y MONTE DE PIEDAD DE ZARAGOZA, ARAGÓN Y RIOJA (IBERCAJA); Mortgage Bond A: 283,333,333 euros, Mortgage Bond B: 116,666,667 euros MONTE DE PIEDAD Y CAJA DE AHORROS DE HUELVA Y SEVILLA; Mortgage Bond A: 318,750,000 euros, Mortgage Bond B: 131,250,000 euros C A JA DE A HO RRO S DE C A STILLA LA MA NC HA ; Mo rtgage Bo nd A: 212,500,000 euros, Mortgage Bond B: 87,500,000 euros CAIXA D ESTALVIS LAIETANA; Mortgage Bond A: 212,500,000 euros, Mortgage Bond B: 87,500,000 euros CAIXA D ESTALVIS DE SABADELL; Mortgage Bond A: 177,083,333 euros, Mortgage Bond B: 72,916,667 euros CAJA DE AHORROS DE GALICIA; Mortgage Bond A: 141,666,667 euros, Mortgage Bond B: 58,333,333 euros CAIXA DE AFORROS DE VIGO, OURENSE E PONTEVEDRA (CAIXANOVA); Mortgage Bond A: 141,666,667 euros, Mortgage Bond B: 58,333,333 euros 59

60 C A JA DE A HO RRO S DE SA LA MA NC A Y SO RIA ; Mo rtgage Bo nd A : 141,666,667 euros, Mortgage Bond B: 58,333,333 euros CAJA DE AHORROS DE MURCIA; Mortgage Bond A: 180,625,000,00 euros, Mortgage Bond B: 74,375,000,00 euros CAJA DE AHORROS Y MONTE DE PIEDAD DE CÓRDOBA (CAJASUR) ; Mortgage Bond A: 141,666,667 euros, Mortgage Bond B: 58,333,333 euros MONTES DE PIEDAD Y CAJA DE AHORROS DE RONDA, CÁDIZ, ALMERÍA, MÁLAGA Y ANTEQUERA (UNICAJA); Mortgage Bond A: 141,666,667 euros, Mortgage Bond B: 58,333,333 euros CAJA GENERAL DE AHORROS DE CANARIAS; Mortgage Bond A: 106,250,000 euros, Mortgage Bond B: 43,750,000 euros CAIXA D ESTALVIS DEL PENEDÈS; Mortgage Bond A: 106,250,000 euros, Mortgage Bond B: 43,750,000 euros CAJA DE AHORROS Y MONTE DE PIEDAD DE LAS BALEARES (SA NOSTRA); Mortgage Bond A: 106,250,000 euros, Mortgage Bond B: 43,750,000 euros CAIXA D ESTALVIS DE TERRASSA; Mortgage Bond A: 106,250,000 euros, Mortgage Bond B: 43,750,000 euros CAJA GENERAL DE AHORROS DE GRANADA; Mortgage Bond A: 70,833,333 euros, Mortgage Bond B: 29,166,667 euros CAJA DE AHORROS DE LA INMACULADA DE ARAGÓN; Mortgage Bond A: 100,000,000 euros, Mortgage Bond B: 100,000,000 euros CAIXA D ESTALVIS DE GIRONA; Mortgage Bond A: 70,833,333 euros, Mortgage Bond B: 29,166,667 euros CAJA INSULAR DE AHORROS DE CANARIAS; Mortgage Bond A: 70,833,333 euros, Mortgage Bond B: 29,166,667 euros CAIXA D ESTALVIS COMARCAL DE MANLLEU; Mortgage Bond A: 70,833,333 euros, Mortgage Bond B: 29,166,667 euros CAJA DE AHORROS Y MONTE DE PIEDAD DE NAVARRA; Mortgage Bond A: 53,125,000 euros, Mortgage Bond B: 21,875,000 euros CAJA DE AHORROS Y MONTE DE PIEDAD DE SEGOVIA; Mortgage Bond A: 24,791,667 euros, Mortgage Bond B: 10,208,333 euros C A JA DE A HO RRO PRO VINC IA L DE GUA DA LA JA RA ; Mortgage Bond A: 7,083,333 euros, Mortgage Bond B: 2,916,667 euros CAJA ESPAÑA DE INVERSIONES, CAJA DE AHORROS Y MONTE DE PIEDAD; Mortgage Bond A: 141,666,667 euros, Mortgage Bond B: 58,333,333 euros CAJA DE AHORROS Y MONTE DE PIEDAD DE ONTINYENT; Mortgage Bond A: 17,708,333 euros, Mortgage Bond B: 7,291,667 euros f) INSTITUTO DE CREDITO OFICIAL acts as financial agent of the transaction. g) ABN AMRO, SUCURSAL EN ESPAÑA, BARCLAYS BANK PLC, CALYON, SUCURSAL EN ESPAÑA and CITIGROUP GLOBAL MARKETS LIMITED act as Underwriting and Placement Entities. 60

61 II.26 Statement of the person responsible for the Prospectus, on behalf of the Fund Management Company, as to whether he knows of any relationship or economic interests of the experts, advisors and/or other entities involved, be it with the Fund Management Company itself or with the former holders of the assets being acquired by the Fund The statement of the person responsible for the Prospectus as to the existence of any relationship between the entities taking part in the transaction is attached as A nnex IX to the Prospectus. MR. LUIS MIRALLES GARCÍA, General Manager of the company A HORRO Y TITULIZACIÓN, SOCIEDAD GESTORA DE FONDOS DE TITULIZACIÓN S.A. (the Management Company ), with residence in Madrid, Alcalá 18 2 nd Floor and tax Id number A , properly authorized by v irtue of the powers conferred to his fav or by agreement of the Boards of Directors adopted in its session of February 10, 2005 and in relation to the incorporation of AyT CÉDULAS CAJAS IX, FONDO DE TITULIZACIÓN DE ACTIVOS by a maximum v alue of emission of 5,000,000,000 euros, which Prior Communication has been already delivered to the Spanish Securities Market Commission as required for its registry. DECLARES I. That the Fund Management Company belongs to the group of companies controlled by AHORRO CORPORACIÓN, S.A., which holds 50% of such company 's share capital. II. AHORRO CORPORACIÓN, S.A., owner of 50% of the share capital of the Fund Management Company, is lik ewise owner of the 100% of the share capital of the Assignor of the Mortgage Bonds integrated in the assets of the fund (AHORRO CORPORACIÓN FINANCIERA S.V., S.A.). III. That the Issuers of the mortgage bonds integrated in the asset-side of the Fund hold the following participation in AHORRO CORPORACIÓN, S.A.: CAJA DE AHORROS DEL MEDITERRÁNEO: 3.06% CAJA DE AHORROS Y MONTE DE PIEDAD DE ZARAGOZA, ARAGÓN Y RIOJA (IBERCAJA): 1.61% MONTE DE PIEDAD Y CAJA DE AHORROS DE HUELVA Y SEVILLA: 3.06% CAJA DE AHORROS DE CASTILLA LA MANCHA: 3.03% CAIXA D ESTALVIS LAIETANA: 0.03% CAIXA D ESTALVIS DE SABADELL: 3.06% CORPORACIÓN CAIXA GALICIA, S.A. (100% owned by CAJA DE AHORROS DE GALICIA): 3.06% CAIXA DE AFORROS DE VIGO, OURENSE E PONTEVEDRA (CAIXANOVA): 3.06% CAJA DE AHORROS DE SALAMANCA Y SORIA: 2.05% 61

62 CAJA DE AHORROS DE MURCIA: 3.06% GRUPO DE EMPRESAS CAJASUR, S.L. SOCIEDAD UNIPERSONAL (100% owned by CAJA DE AHORROS Y MONTE DE PIEDAD DE CÓRDOBA (CAJASUR)): 2.93% MONTES DE PIEDAD Y CAJA DE AHORROS DE RONDA, CÁDIZ, ALMERÍA, MÁLAGA Y ANTEQUERA (UNICAJA): 3.06% CAJA GENERAL DE AHORROS DE CANARIAS: 2.35% CAIXA D ESTALVIS DEL PENEDÈS: 0.18% CAJA DE AHORROS Y MONTE DE PIEDAD DE LAS BALEARES (SA NOSTRA): 2.76% CAIXA D ESTALVIS DE TERRASSA: 0.25% CAJA GENERAL DE AHORROS DE GRANADA: 2.98% CAJA DE AHORROS DE LA INMACULADA DE ARAGÓN: 2.76% CAJA INSULAR DE AHORROS DE CANARIAS: 2.35% CAIXA D ESTALVIS COMARCAL DE MANLLEU: 0.03% GRUPO CORPORATIVO EMPRESARIAL DE CAJA DE AHORROS Y MONTE DE PIEDAD DE NAVARRA, S.A.U. (100% owned by CAJA DE AHORROS Y MONTE DE PIEDAD DE NAVARRA): 3.03% CAJA DE AHORROS Y MONTE DE PIEDAD DE SEGOVIA: 3.06% CAJA DE AHORRO PROVINCIAL DE GUADALAJARA: 0.25% CAJA ESPAÑA DE INVERSIONES, CAJA DE AHORROS Y MONTE DE PIEDAD: 2.93% CAJA DE AHORROS Y MONTE DE PIEDAD DE ONTINYENT: 0.25% IV. That he is not aware of the existence of any other kind of relationship (voting rights, labor, family relationships, etc.) or economic interest from the individual or legal persons who have significantly taken part in designing or advising on the incorporation of the Fund or any significant information set out in the Prospectus, including the underwriting of the placement, both with the Fund Management Company and the Assignor and the Issuers." 62

63 CHAPTER III INFORMATION OF GENERAL NATURE ABOUT THE FUND III.1 Name and regulatory regime The Fund shall be named AyT CÉDULAS CAJAS IX, FONDO DE TITULIZACIÓN DE ACTIVOS and shall be subject to the regime established in Royal Decree 926/1998 and other implementing regulations of the Ministry of Economy and CNMV; Law 19/1992, with respect to what is not established in Royal Decree 926/1998; Law 24/1988, with respect to its supervision, inspection and penalization of all that results from its application; and to the other legal and regulatory resolutions that at any time may prove applicable. The Fund shall be constituted under the resolutions passed by the Board of Directors of the Fund Management Company of February 10, 2005, prior registry of this Prospectus with the files of CNMV on March 22, It shall be a separate patrimony, lack ing legal personality, in accordance with Royal Decree 926/1998. According to the Fifth Additional Provision of Law 3/1994 of April 14, which adapts Spanish legislation on credit institutions to the Second Directive on Banking Co-ordination and introduces other changes relating to the financial system, in the event of the Assignor s bankruptcy or temporary receivership, the Assignment of Assets in favor of the Fund may only be contested under paragraph second of article 878 of the Commercial Code through actions brought by the bank ruptcy receivers whereby the existence of fraud is proved, the Fund enjoying an absolute right of separation in the terms of articles 908 and 909 of the Commerce Code. The Fifth Additional Provision of Law 3/1994 of 14 April is still be applicable after Law 22/2003, dated 9 July, on Insolvency, entered into force, by virtue of that stated in the Second Additional Provision thereof, which has been modified by the Third Additional Provision of Law 36/2003, dated 11 November, on economic reform measures. In addition, its shall be subject to the provisions of the Deed of Incorporation. III.2 Legal nature and composition of the Fund s assets and liabilities III.2.1 Legal nature of the Fund The Fund shall constitute a separate patrimony, lacking legal entity, which shall be of a closed nature in accordance with article 3 of Royal Decree 926/1998, and shall be constituted by public deed. 63

64 III.2.2 Assets of the Fund The Fund s assets shall comprise: (a) The Assets or individual Mortgage Bonds (including Mortgage Bonds A and Mortgage Bonds B); (b) The balance at any time of the accounts opened in the name of the Fund (Cash Account and Collection Account); (c) The accrued interest pending payment of the Mortgage Bonds that are pooled into the Fund. III.2.3 Liabilities of the Fund The Fund s liabilities shall comprise: (a) The Bonds which are issued by the Fund (including Tranche A Bonds and Tranche B Bonds) described in Chapter II of the Prospectus; (b) The amounts due under Liquidity Facility A and Liquidity Facility B; (c) Interest accrued and unpaid on the Bonds and those corresponding to the Liquidity Facility A and the Liquidity Facility B; (d) The long-term creditors for variable commission (described in the point V.1.1 below); and (e) Endowments for extraordinary expenses different from the ones originated by the enforcement of the Mortgage Bonds made by the Assignor, as the case may be. III.3 Incorporation and Verification III.3.1 Requirements for the incorporation of the Fund The incorporation of the Fund and the issue of bonds are subject to the requirements referred to in section I.2 of the Prospectus and, in particular, to the prior and registration of this Prospectus with the files kept by CNMV. III.3.2 Incorporation Within five (5) Business Days after the registration of this Prospectus with the files kept by CNMV, the Fund Management Company, as the promoter and manager of the Fund, and the Assignor, as the Assignor of the Assets, shall grant the Deed of Incorporation in the terms established by Royal Decree 926/

65 On the Business Day following the granting of the Deed of Incorporation of the Fund, the Subscription Period shall be opened, which shall last one (1) hour. On the Business Day following the Subscription period, the Bonds shall be disbursed and the Price of the Assets shall be paid to the Assignor. Once the Deed of Incorporation of the Fund has been granted, the Disbursement Date and the interest Payment Dates shall be notified to CNMV as additional information to be annexed to the Prospectus. III.4 Mercantile Registry Under article 5.4 of Royal Decree 926/1998, neither the Incorporation of the Fund nor the Bonds issued thereby shall be subject to registration with the Mercantile Registry. III.5 Deed of Incorporation and amendments thereto The Fund shall be constituted by virtue of the Deed of Incorporation. It will not be possible to amend the Deed of Incorporation save in exceptional circumstances, and provided it is legally possible, when the requisites for such amendment as may be set out in applicable regulation are met, and provided always that said amendment does not entail a downgrading of the ratings assigned to the Bonds nor impairs the interest of the bondholders. In any case, any such amendment shall require the prior comunication to the Rating Agencies and CNMV. Any amendment to the Deed of Incorporation shall require the granting of the corresponding public deed of amendment, and must be authorized, where appropriate, by CNMV. III.6 Places where the documents can be consulted This Prospectus has been registered with the Official Registries kept by CNMV on March 22, It is available to the public free of charge at the Fund Management Company s head offices and is also available at CNMV in Madrid, 15, Paseo de la Castellana and from the governing body of AIAF in Madrid, Pablo of Ruiz Picasso s/n, as well as at the domicile of the Underwriting and Placement Entities and of the Arranger. The inclusion of this Prospectus in CNMV s registry only indicates its recognition that the Prospectus contains all the information required under the regulations governing its contents and in no case entails any responsibility of CNMV for the lack of veracity of the information contained therein. Likewise, it is hereby stated that the registration of the prospectus by CNMV does not imply a recommendation to subscribe for the securities referred to herein, nor an opinion as to the solvency of the issuing entity or on the profitability or quality of the securities offered hereunder. 65

66 Once the Deed of Incorporation has been granted, and before the beginning of the Subscription Period, the Fund Management Company will deliver to CNMV an authorized copy of the Deed of Incorporation. Additionally, the Fund Management Company, SOCIEDAD DE SISTEMAS and AIAF, will have at all times a copy of the Deed of Incorporation, available for the public to consult. III.7 Management and representation of the Fund The Fund Management Company shall be responsible for the Fund s administration and representation. The Fund Management Company is authorized to constitute Securitization Funds and, therefore, to exercise the administration and representation of the same under the provisions of Royal Decree 926/1998, by virtue of the authorization of the Finance Ministry of 2 July 1999, executed in accordance with the provisions of the Single Transitory Provision of Royal Decree 926/1998. The Fund Management Company, as manager of other companies businesses, shall represent and defend the interests of the holders of the Bonds issued against the Assets of the Fund and of the Fund s other creditors in the terms established by the legislation in force. III.7.1 General obligations of the Fund Management Company The Fund Management Company shall represent and defend the interests of the holders of the Bonds and of the Fund s other creditors. To this end it shall: (i) manage the Fund in such a way that its asset value is nil; (ii) undertake the financial management of the Assets with diligence and rigor; (iii) administer the Assets of the Fund to the benefit of the bondholders; (iv) refrain from carrying out any action that may downgrade the Bonds ratings and make its best efforts to adopt reasonably available measures to ensure that the Bonds ratings are not adversely affected at any time; (v) subscribe all contracts foreseen by the Deed of Incorporation and in this Prospectus and, as the case may be, extend or modify the agreements subscribed in the name of the Fund, substitute any of the service renderers under them and, even, should it be necessary, execute additional agreements (all of which subject to the regulation in force at any time, to the previous authorization of CNMV if it should be required and to its communication to the Rating Agencies, provided that such actions do not harm the interest of the bondholders); (vi) fulfill all formal, documentary and information obligations vis-à-vis CNMV, any other supervisory body and the Rating Agencies; 66

67 (vii) appoint the auditors of the Fund; (viii) in the event that the non-subordinated unsecured short-term debt of the Financial Agent was rated below the Required Rating, as this term is defined in section II.4.1 (and which is the one presently granted) the Fund Management Company, within a maximum term of thirty (30) Business Days as from the relevant rating is granted: (a) shall obtain from a financial entity with a rating not lower than the Required Rating, a first demand bank guarantee securing the obligations of the Financial Agent under the Financial Services Agreement or (b) in the event that the preceding were not possible, shall substitute the Financial A gent for another financial entity whose nonsubordinated unsecured short-term debt has a credit rating not lower than the Required Rating, contracting the maximum possible profitability for the balances of the Cash Account and Collection Account; (ix) hire the services of such third parties as may be necessary or convenient for the Fund s proper management without incurring expenses which are unreasonable or not at arm s length. III.7.2 Level of diligence of the Fund Management Company a) Level of diligence The Fund Management Company shall carry out its duties with the diligence required in accordance with Royal Decree 926/1998, representing the Fund and defending the interests of the bondholders and other creditors of the Fund as if they were its own interests, maximizing the level of diligence, information and defense of the bondholders interests and avoiding situations which result in a conflict of interest, giving priority to the interests of the bondholders and of the Fund s other creditors over its own interests. The Fund Management Company shall be responsible to the bondholders and the Fund s other creditors for any damage caused thereto as a result of a breach of its obligations. It shall also be responsible for any applicable penalties in accordance with the provisions of Law 19/1992. b) Availability of means The Fund Management Company has the necessary means, including the appropriate IT systems, to carry out the administrative duties corresponding to the Fund under Royal Decree 926/

68 c) Code of conduct The Fund Management Company complies with the applicable code of conduct. The Managing Company has established a Code of Conduct in compliance with the terms of Chapter II of Royal Decree 629/1993, of May 3, regarding rules governing action in the securities mark ets and compulsory registers. This code of conduct has been adapted in accordance to the provisions of Law 44/2002, November 22, on measures reforming the financial system. III.7.3 Obligations with respect to the administration and representation of the Fund a) Financial administration of the Fund The Fund Management Company shall be in charge of the financial administration of the Fund. Its responsibilities in the administration and legal representation of the Fund, listed here merely for expository purposes and notwithstanding others stipulated in the Deed of Incorporation and in this Prospectus, are as follows: (i) It shall open the Cash Account with the Financial Agent in the Fund s name. (ii) It shall open the Collection Account with the Financial Agent in the Fund s name. (iii) In the event that the non-subordinated unsecured short-term debt of the Financial Agent is assigned a credit rating lower than the Required Rating at any given time, the Fund Management Company shall proceed in accordance with the provisions set out in section III.7.1 (viii). (iv) It shall adopt the opportune measures to credit the Collection Account the amounts received from the Issuers for interest and principal payments or any other payment relating to the Mortgage Bonds which, in the terms of the Mortgage Bonds issue and other commitments assumed by the Issuers in accordance with the Internal Management Agreement, shall be received at least two (2) Business Days prior to each Payment Date. (v) It shall request drawings under Liquidity Facility A or Liquidity Facility B, as the case may be, and deposit them in the Collection Account; (vi) It shall demand the creation of the relevant Collateral Deposit and, as the case may be, authorize its release; (vii) It shall ensure that the amounts deposited in the Cash and Collection Accounts produce the yield established in the Financial Services Agreement. Notwithstanding, depending on the financial markets situation and in order to improve the Fund s profitability, the Financial Agent, always notified three months prior, will be able to temporarily inv est the balance of the Cash and Collection A ccounts by acquiring fixed- 68

69 income assets denominated in euros, with a shorter maturity than the term remaining until the next Payment Date that falls after the date on which the investment is made, issued by issuers with a minimum credit rating of the Required Rating, with a weighting of up to 10% for purposes of calculating the capital base in accordance with the Circular of the Bank of Spain 5/1993, March 26, on determination and control of minimum equity. In the event that the assets in which such current-asset investment is made are repos, the counterparty of the repo transaction must have a rating of at least the Required Rating for short term risks. (viii) It shall use the Available Funds to fulfill the Fund s payment obligations in the terms set out in this Prospectus and in the Fund s Payment Priority Order. (ix) Through the Financial Agent, it shall fulfill any tax obligations that may be applicable with respect to any payment made by the Fund, and in this case must withhold and credit the corresponding amounts in accordance with applicable regulations. (x) It shall exercise the rights inherent to ownership of the Mortgage Bonds acquired by the Fund and in general shall perform all the administrative and regulatory functions necessary for the correct conduct of the administration and legal representation of the Fund. (xi) It shall ensure that the amount of the revenues effectively received by the Fund corresponds to the amounts that it should receive in accordance with the conditions of the Mortgage Bonds. b) Subcontracting The Fund Management Company shall be authorized to subcontract or delegate to third parties of recognized solvency and capacity the provision of any of the services of an administrative nature that it must provide for the administration and legal representation of the Fund as stipulated in the Deed of Incorporation and in this Prospectus, on the condition that the subcontractor or delegate relinquishes the execution of any demand for responsibility against the Fund. Said subcontracting will in no case be referred to main duties relating to the Fund s administration and legal representation. In any case, the subcontracting or delegation of any service (i) must not entail any additional cost or expense for the Fund, (ii) must be permitted by law, (iii) must not result in a downgrading of the Bonds ratings, and (iv) must be reported to CNMV and to the Rating Agencies and, if required by law, must receive its prior authorization. Notwithstanding the above, the Fund Management Company shall not be discharged through subcontracting or delegation from any of his liabilities stipulated in the Deed of Incorporation and in this Prospectus or those for which it may be legally attributable or callable. 69

70 c) Waiver of its duties The Fund Management Company shall be able to waive its administration and legal representation duties in accordance with the provisions set forth in article 18 of Royal Decree 926/1998, by giving written notice to CNMV wherein it shall propose a replacement fund management company and it shall also submit a written notice where the new Fund Management Company, duly authorized and registered in the special registry of CNMV, declares its acceptance of such duties. Authorization of the replacement by CNMV shall be conditioned upon the fulfillment of the following requirements: (a) The delivery to the new management company of the accounting and computer records kept by the replaced Management Company. Said delivery shall only be deemed to have taken place once the new management company is capable of fully assuming its activities and communicates this circumstance to CNMV. (b) The ratings granted to the Bonds may not be lowered as a consequence of the proposed replacement. In no case shall the Fund Management Company waive the exercise of its duties, having to continue carrying them out, before completing the requirements and procedures to enable the replacement to assume its duties as new Fund Management Company. The substitution, where applicable, of the Fund Management Company may not imply any additional expense for the Fund. d) Compulsory replacement of the Fund Management Company In the event that the Fund Management Company is declared in insolvency procedures, the Fund Management Company shall find a replacement Fund Management Company, in accordance with article 19 of Royal Decree 926/1998, within a maximum period of four (4) months as from the event that forced the replacement, and, after the lapse of said period, if no new fund management company is found, the Fund will be liquidated early in accordance with the provisions of the Deed of Incorporation. III.7.4 Fulfillment of reporting obligations III Annual accounts On a yearly basis, and as soon as they are ready following their approval, which must take place no later than April 30 of each year, the Fund Management Company shall submit to CNMV the Fund s annual accounts (balance, profit, loss account and memorandum), management report and audit report for the preceding period. It shall also deposit the Fund s annual report with the Mercantile Registry if it is legally required. 70

71 The Fund Management Company shall appoint the auditor to carry out the audit of the annual accounts of the Fund, and it shall notify such appointment to the CNMV. Likewise, the Management Company shall notify to the CNMV, in the form set forth in section III.7.5.3, any change that may take place in connection with the appointment of the auditor. III.7.5 Notifications To ensure the exact fulfillment of the conditions of the issue, the Fund Management Company agrees to provide the notifications listed below with the frequency required in each case. III Ordinary regular notifications The Fund Management Company shall make all the documents and necessary information as indicated in the Deed of Incorporation and in this Prospectus available to the public. 1. The Fund Management Company shall notify bondholders annually, at least one (1) calendar day before each Payment Date, of the interest generated by the Bonds as well as the amount of interest accrued and unpaid because of the lack of Available Funds, in accordance with the Payment Priority Order. This information will also be notified to SOCIEDAD DE SISTEMAS, AIAF and the Financial Agent at least one (1) calendar day prior to each Payment Date. 2. The Fund Management Company shall issue annually, within the month following each Payment Date, a report containing: a) An inventory of the portfolio of Mortgage Bonds; b) The balance of the Cash Account and Collection Account; c) The balance of the principal of the Bonds pending maturity; d) If applicable, the amounts of the accrued, interest on the Bonds which remains unpaid; e) If applicable, the unpaid amounts on the Mortgage Bonds; f) The amount of the Liquidity Facility A and Liquidity Facility B pending repayment; g) A detailed analysis of the Fund s revenues and the allocation of said revenues to the Fund s payment obligations; 71

72 h) Any other aspect that significantly affects the Bond issue In any event, this information will comply with the corresponding requirements established by CNMV. This report will be filed with CNMV. Likewise and periodically, the Rating Agencies will be provided with such information as they may require, in the manner provided for in section II On an annual basis, the Fund Management Company shall submit the Fund s annual report audited accounts as provided for in subsection III to CNMV and. All information of a public nature about the Fund can be found at the domicile of the Fund Management Company, at the head offices of AIAF and at CNMV s Registry. III Extraordinary notifications 1. Previously to the granting of the Deed of Incorporation, the Fund Management Company, in the name and on behalf of the Fund shall communicate to CNMV, as additional information to include in the Prospectus, at least the following information: the incoporation, as the case may be, of new Underwriting and Placement Entities in accordance with the provisions of section II.19.1 indicating the new distribution of the underwriting commitments and the Underwriting Commission, the Nominal Interest Rate fixed for the Bonds in the terms described in section II.10.1, the price of issue of the Bonds, the annual ordinary interest rate of the Mortgage Bonds, the acquisition price of the Mortgage Bonds, the default interest rate of the Mortgage Bonds and the amount of the Liquidity Facility A and the Liqudity Facility B. 2. Once the Deed of Incorporation has been granted, the Fund Management Company, acting in the name and on behalf of the Fund, shall notify the incorporation of the Fund and the Bond issue and also the Disbursement Date and the Payment Dates of the Bonds; such notice may be published on any calendar day, be it a Business Day or otherwise. 2. The Fund Management Company shall inform the bondholders and the Rating Agencies of any relevant fact arising with respect to the Assets, the Bonds, the Fund and the Fund Management Company that may significantly affect the trading of the Bonds and, in general, any relevant change in the Fund s assets or liabilities. The Fund Management Company shall inform the bondholders of an eventual early redemption of the Bonds, and in the event of a full early redemption of the Bonds it shall present to CNMV the Notarial Certificate of Liquidation mentioned in section III.9.2. III Procedure All notifications concerning the Fund that the Fund Management Company is required to present to bondholders shall be made as follows: 72

73 1. The ordinary regular notifications referred to in paragraph 1 of section III above, by means of their publication on the daily bulletin of AIAF, or any other bulletin that may replace it in the future or any other bulletin of similar characteristics, or by means of their publication in a widely circulated newspaper in Spain, whether of finance or general scope. 2. The extraordinary notifications referred to in paragraphs 2 and 3 of section III above by means of their publication in widely circulated newspaper in Spain, whether of finance or general scope. Alternatively, the previously mentioned notifications may be done by means of publication in other general media. In addition, the aforementioned notifications may be done by means of the web page of the Fund Management Company ( The notifications shall be considered to have been published on the date of the newspaper, and to this end any calendar day, whether or not this is a Business Day, shall be valid. III Reporting to CNMV and to the Rating Agencies The Fund Management Company shall notify CNMV and the Rating Agencies with any information, whether of an ordinary periodical nature or of an extraordinary nature, published in accordance with the above stipulations as well as any other information which, independent of these stipulations, may be required. III.8 Expenses and taxes III.8.1 Expenses The Fund Management Company, in the name and on behalf of the Fund, shall pay the ordinary expenses or taxes of the Fund out of the Endowment of Incorporation, Management and Administration to be contributed by the Assignor at the time of incorporation for a maximum amount of 1.45% of the total amount of the Fund, with charge to the retribution to be received under this transaction (in particular, a placement fee which shall be received by the Assignor from the Issuers of the Mortgage Bonds at the time of incorporation of the Fund). Without limitation, the Fund Management Company, on behalf of the Fund, shall meet, out of the Endowment of Incorporation, Management and Administration to be contributed by the Assignor, the following expenses: Expenses, charges and professional fees for the incorporation, registry of the Fund with the official records kept by CNMV, the issuance of the Bonds and their listing for trading on AIAF (or other markets), the publishing of legal announcements and information, the expenses and fees of the professional advisors participating in the design and incorporation 73

74 of the Fund, the expenses of auditing the Fund s accounts, Rating Agencies fees (both for the initial rating and its revision), the expenses of keeping the accounting record of the Bonds and of keeping their trading on organized secondary markets, the commissions and expenses derived from services contracts and financial transactions entered into, and in general, the commissions which are payable to the Fund Management Company, the Financial Agent or the Underwriting and Placement Entities of the issue. The Endowment of Incorporation, Management and Administration shall be established on the date of incorporation of the Fund and shall be contributed by the Assignor at the time of the incorporation of the Fund being deposited in the Collection Account as provided in section V hereto. The Assignor will not be entitled to be refunded by the Fund of the amount corresponding to the Endowment of Incorporation, Management and Administration contributed at the time of incorporation of the Fund. The extraordinary expenses originated by the enforcement of the Mortgage Bonds or by any default of the payment obligations of the Issuers, as the case may be, shall be paid by the Fund Management Company, in the name and on behalf of the Fund, against the Collateral Deposit created by the Issuer on default, as the case may be, secondly against the Liquidity Facility up to the maximum appointed in section V and in case this should be insufficient, against an extraordinary provision to be contributed by the Assignor, without prejudice to the right of the Assignor to recover the amounts so contributed on the Legal Maturity Date, in accordance with the Payment Priority Order set out in this Prospectus. The Fund Management Company shall notify the Assignor of the existence of extraordinary expenses different from those originated by the enforcement of the Mortgage Bonds or by any default of the payment obligations of the Issuers (which may include, among others, expenses, taxes or any other amount payable as a consequence of the request of admission to listing of the Bonds in different organized security markets), which will be paid to the Fund by the Assignor in the Collection Account. The extraordinary expenses paid out of the extraordinary contribution made by the Assignor shall only be refunded to the latter on the Legal Maturity Date, in accordance with the Payment Priority Order. III.8.2 Value Added Tax The Value Added Tax borne by the Fund in current expenses shall be a deductible expense for Corporate Tax purposes. III.9 Expiration and Liquidation of the Fund III.9.1 Expiration The expiration of the Fund will occur for the reasons set out in Royal Decree 926/1998 and Law 19/1992 and in particular: 74

75 (i) when all the Bonds have been fully repaid and there is no pending obligation on the Fund s side; (ii) when, in the opinion of the Managing Company, exceptional circumstances occur which make it impossible or, extremely difficult, to maintain the financial balance of the Fund; (iii) when there occurs a non-payment indicative of a serious and permanent imbalance in relation to the securities issued or it is foreseen that it is going to occur; (iv) when all the Mortgage Bonds comprised in the Fund are fully redeemed; and (v) in any case, on the eighteenth (18 th ) anniversary of the Disbursement Date of the Bonds or, if it is not a Business Day, the first Business Day immediately afterwards. In the event that any of the situations described in sections (i) to (v) above arise, the Fund Management Company shall notify CNMV and begin the relevant proceedings for the liquidation of the Fund. Likewise, there will be a cause of expiration of the Fund and early redemption of the Bonds in the event that the Fund Management Company is declared in insolvency procedure or if its authorization is withdrawn, and no new fund management company were designated in accordance with section III.7.3.d). III.9.2 Liquidation The Fund Management Company will initiate proceedings to liquidate the Fund upon the expiration of the Fund in accordance with the provisions of section III.9.1 above. The liquidation of the Fund should be previously communicated to CNMV, to SOCIEDAD DE SISTEMAS, to AIAF and to the Rating Agencies and must also be published in an economic and financial newspaper or a general newspaper with national circulation. The Fund shall be liquidated by applying the proceeds of the sale of the assets, together with all the other Available Funds of the Fund in the Payment Priority Order. In the event that a surplus ( Net Financial Revenue ) remains after the liquidation of the Fund by distributing the Available Funds in accordance with the Payment Priority Order, the latter will be paid to the Assignor who will proceed in accordance with the provisions of the Internal Management Agreement. The amount of the Net Financial Revenue shall be equivalent to the positive difference, if any, between the revenues and the expenses of the Fund prior to the closing of its official accounts, on its termination. Once such amount is calculated (which shall include the aggregate of balance of the variable fee long-term creditors accounts appearing on the debit side of the balance of the Fund in accordance with section V.1.1), it shall remain deposited in the Cash Account until the Tranche B Final 75

76 Maturity Date or the date of liquidation of the Fund in the event of early extinction, on which it shall be transferred to the Collection Account to be paid to the Issuer. The Fund Management Company shall not proceed to terminate the Fund or to cancel its registration in the corresponding administrative registries until the Fund s surplus assets have been settled and the Available Funds distributed, according to the Payment Priority Order, except the necessary reserve to meet the final expenses of its expiration. In a period of six (6) months after transfer and the settlement of the Fund s surplus assets and the distribution of the Available Funds, the Fund Management Company shall execute the notarial certificate, which it shall present to CNMV declaring (i) the expiration of the Fund and the reason(s) for it, (ii) the implementation of the procedure of notifying the bondholders and CNMV, and (iii) the distribution of the Available Funds following the Payment Priority Order, which it shall announce in a national newspaper, thereby fulfilling the other applicable administrative procedures. III. 9.3 Resolution of the incorporation of the Fund In the event that any of the provisional ratings assigned by the Rating Agencies to the Bonds fails to be confirmed as final before the beginning of the Subscription Period, the incorporation of the Fund and the Bond issue and the agreements signed by the Managing Company, in the name and on behalf of the Fund, will be terminated. The termination of the incorporation of the Fund for this reason shall be notified forthwith to CNMV, as soon as it has been confirmed, and shall be made public in the manner provided for in paragraph III.7.5. Within fifteen (15) days from when the event triggering the termination of the incorporation of the Fund occurs, the Managing Company shall grant a notarial deed, which it shall send to CNMV, declaring that the Fund has been extinguished. III.10 Commissions III.10.1 Commissions of the Fund Management Company The Fund Management Company, in accordance with Royal Decree 926/1998, shall constitute, represent and administer the Fund. In consideration for these duties, the Fund shall pay the Fund Management Company, out of the Endowment of Incorporation, Management and Administration to be contributed by the Assignor when the Fund is constituted, a Incorporation and Management Commission ( Management Commission ), which shall be disbursed on the Disbursement Date in a single pay ment, and which will be equivalent to the difference between the expenses indicated in section II.14, minus the amounts invoiced by external agents (auditors, notarial fees, etc) as services for he incorporation of the Fund, which is estimated to be approximately 0.01% of the total nominal value of the Bonds issued. 76

77 In the event that AHORRO Y TITULIZACIÓN, S.G.F.T., S.A. is replaced by another management company of securitization funds as the Fund Management Company, AHORRO Y TITULIZACIÓN, S.G.F.T., S.A., shall transfer to the new fund management company the proportional amount of the Management Commission that corresponds to the remaining years of the life of the transaction. In any case, the replacement of the Fund Management Company shall not incur any additional expense for the Fund. III.10.2 Commission of the Financial Agent The Financial Agent shall receive from the Fund, against the Endowment of Incorporation, Management and Administration to be established by the Assignor when the Fund is constituted, for the services rendered by virtue of the Financial Services Agreement, a commission of TWO HUNDRED TWENTY THOUSAND EUROS ( 220,000), which shall be paid on the Disbursement Date in a single payment during the life of the transaction (hereafter the Financial Services Commission ). In the event that INSTITUTO DE CREDITO OFICIAL were replaced by another financial agent as regards the Fund, the Financial Agent must transfer to the new Financial Agent the proportional amount of the Financial Services Commission corresponding to the remaining years of life of the transaction, in accordance with the terms of the Financial Services Agreement. In any case, the replacement of the Financial Agent, if it occurs, shall not incur any additional expense for the Fund. III.11 Tax regime of the Fund In accordance with Royal Decree 926/1998, Law 19/1992, Royal Legislative Decree 4/2004, of March 5, which approves the consolidated text of the Corporation Tax Law and its Regulations (Royal Decree 1777/2004 of July 30), Law 37/1992, dated 28 December, on Vale Added Tax and Royal Decree 1/1993 dated 24 September, approving the restated text of the Capital Transfer Tax and Stamp Duty Law, the particular features of the tax rules governing the Fund are as set out below: (i) The incorporation of the Fund is exempt from Capital Transfer Tax and Stamp Duty under the heading corporate transactions, in accordance with the terns of article 16 of Royal Decree-Law 3/1993, Additional Provision Five of Law 3/1994 and article 1 of Royal Decree 926/1998 in connection with article five, 10 of Law 19/1992. (ii) The Fund is subject to Corporation Tax at the general rate in force from time to time and which is currently set at 35%. Any input VAT borne by the Fund and that is not recoverable shall be deemed allowable expense for Corporation tax purposes. 77

78 (iii) The return on the Assets shall constitute revenues for the Fund, and therefore they shall not be subject to withholding or payment on account (article 59, paragraph k) of Royal Decree 1777/2004, of July 30, which enacts the Corporation Tax Regulations). (iv) Management and custody services rendered to the Fund by the Fund Management Company shall be exempt from Value Added Tax. (v) Considerations paid to the bondholders shall de deemed as return on transferable securities. (v i) The issue of Bonds is exempt of Value Added Tax (article 20.one.18º of Law 37/1992) and of Capital Transfer Tax and Stamp Duty (article 45.i.b) number 5 of the restated text of the Capital Transfer Tax and Stamp Duty Law). (vii) The transfer to the Fund of the Assets is subject but exempt from the Value Added Tax. In the event that, in the future, any direct or indirect tax, charge or withholding on the payments owed to the Fund are established, they shall be borne by the Issuers and returned to these in the event of their recovery by the Fund. 78

79 CHAPTER IV INFORMATION REGARDING THE FUND S ACTIVITIES AND ASSETS IV.1 Purposes of the incorporation of the Fund The Fund is constituted with the purpose of obtain financing for the Issuers, through the securitization of certain credit rights, through the issuance of Mortgage Bonds which are recorded in the balance sheet of the Assignor before the incorporation of the Fund, defined in this Prospectus as the Mortgage Bonds or the Assets. In accordance with the above, the Mortgage Bonds issued by the Assignor and acquired by the Fund Management Company, in the name and on behalf of the Fund, shall be incorporated into the Fund s assets by means of written declaration in the actual security and subsequent execution of an Asset Assignment Agreement (described in section IV.2.2 below). In order to finance the acquisition of the Mortgage Bonds, the Fund Management Company, in the name and on behalf of the Fund, will carry out an issue of Bonds against the assets of the Fund, in the terms set forth in Chapter II of this Prospectus. IV.2 Assets of the Fund IV.2.1 Amount of the assets of the Fund and identification of the assets included therein IV Amount of the assets of the Fund On the date of incorporation of the Fund, each one of the Issuers shall issue a single Mortgage Bond A and a single Mortgage Bond B, whose aggregate face value shall amount to FIVE BILLION EUROS ( 5,000,000,000). The individual face value of each Mortgage Bond to be issued by each of the Issuers in the date of incorporation of the Fund shall be the indicated below: CAJA DE AHORROS DEL MEDITERRÁNEO; Mortgage Bond A: 354,166,667 euros, Mortgage Bond B: 145,833,333 euros CAJA DE AHORROS Y MONTE DE PIEDAD DE ZARAGOZA, ARAGÓN Y RIOJA (IBERCAJA); Mortgage Bond A: 283,333,333 euros, Mortgage Bond B: 116,666,667 euros MONTE DE PIEDAD Y CAJA DE AHORROS DE HUELVA Y SEVILLA; Mortgage Bond A: 318,750,000 euros, Mortgage Bond B: 131,250,000 euros 79

80 CAJA DE AHORROS DE CASTILLA LA MANCHA; Mortgage Bond A: 212,500,000 euros, Mortgage Bond B: 87,500,000 euros CAIXA D ESTALVIS LAIETANA; Mortgage Bond A: 212,500,000 euros, Mortgage Bond B: 87,500,000 euros CAIXA D ESTALVIS DE SABADELL; Mortgage Bond A: 177,083,333 euros, Mortgage Bond B: 72,916,667 euros CAJA DE AHORROS DE GALICIA; Mortgage Bond A: 141,666,667 euros, Mortgage Bond B: 58,333,333 euros CAIXA DE AFORROS DE VIGO, OURENSE E PONTEVEDRA (CAIXANOVA); Mortgage Bond A: 141,666,667 euros, Mortgage Bond B: 58,333,333 euros CAJA DE AHORROS DE SALAMANCA Y SORIA; Mortgage Bond A: 141,666,667 euros, Mortgage Bond B: 58,333,333 euros CAJA DE AHORROS DE MURCIA; Mortgage Bond A: 180,625,000,00 euros, Mortgage Bond B: 74,375,000,00 euros CAJA DE AHORROS Y MONTE DE PIEDAD DE CÓRDOBA (CAJASUR) ; Mortgage Bond A: 141,666,667 euros, Mortgage Bond B: 58,333,333 euros MONTES DE PIEDAD Y CAJA DE AHORROS DE RONDA, CÁDIZ, ALMERÍA, MÁLAGA Y ANTEQUERA (UNICAJA); Mortgage Bond A: 141,666,667 euros, Mortgage Bond B: 58,333,333 euros CAJA GENERAL DE AHORROS DE CANARIAS; Mortgage Bond A: 106,250,000 euros, Mortgage Bond B: 43,750,000 euros CAIXA D ESTALVIS DEL PENEDÈS; Mortgage Bond A: 106,250,000 euros, Mortgage Bond B: 43,750,000 euros CAJA DE AHORROS Y MONTE DE PIEDAD DE LAS BALEARES (SA NOSTRA); Mortgage Bond A: 106,250,000 euros, Mortgage Bond B: 43,750,000 euros CAIXA D ESTALVIS DE TERRASSA; Mortgage Bond A: 106,250,000 euros, Mortgage Bond B: 43,750,000 euros CAJA GENERAL DE AHORROS DE GRANADA; Mortgage Bond A: 70,833,333 euros, Mortgage Bond B: 29,166,667 euros C A JA DE A HO RRO S DE LA INMA C ULA DA DE A RA GÓ N; Mo rtgage Bo nd A: 100,000,000 euros, Mortgage Bond B: 100,000,000 euros CAIXA D ESTALVIS DE GIRONA; Mortgage Bond A: 70,833,333 euros, Mortgage Bond B: 29,166,667 euros CAJA INSULAR DE AHORROS DE CANARIAS; Mortgage Bond A: 70,833,333 euros, Mortgage Bond B: 29,166,667 euros CAIXA D ESTALVIS COMARCAL DE MANLLEU; Mortgage Bond A: 70,833,333 euros, Mortgage Bond B: 29,166,667 euros CAJA DE AHORROS Y MONTE DE PIEDAD DE NAVARRA; Mortgage Bond A: 53,125,000 euros, Mortgage Bond B: 21,875,000 euros CAJA DE AHORROS Y MONTE DE PIEDAD DE SEGOVIA; Mortgage Bond A: 24,791,667 euros, Mortgage Bond B: 10,208,333 euros CAJA DE AHORRO PROVINCIAL DE GUADALAJARA; Mortgage Bond A: 7,083,333 euros, Mortgage Bond B: 2,916,667 euros CAJA ESPAÑA DE INVERSIONES, CAJA DE AHORROS Y MONTE DE PIEDAD; Mortgage Bond A: 141,666,667 euros, Mortgage Bond B: 58,333,333 euros 80

81 CAJA DE AHORROS Y MONTE DE PIEDAD DE ONTINYENT; Mortgage Bond A: 17,708,333 euros, Mortgage Bond B: 7,291,667 euros The management bodies of the Issuers have approved the issuance of the Mortgage Bonds in the terms included in the certificates enclosed as A nnex I to this Prospectus. The Assignor shall subscribe for the Mortgage Bonds in the date of incorporation and shall assign them to the Fund in the terms set out in this Prospectus, in the Deed of Incorporation and in the Asset Assignment Agreement. The management body of the Assignor has approved the assignment of the Assets to the Fund in the terms included in the certificates enclosed as A nnex II to this Prospectus. IV Types of Assets The assets of the Fund shall comprise the indiv idual Mortgage Bonds (the Mortgage Bonds or the Assets ) issued by the Issuers, backed by the mortgage loans granted by said Issuers, in accordance with the regulation of the mortgage market. IV Description of the characteristics of the various type of Assets IV Description of the Assets The asset portfolio comprises twenty six (26) registered Mortgage Bonds with a ten (10) year maturity term (Mortgage Bonds A) and twenty six (26) registered Mortgage Bonds with a fifteen (15) year maturity term (Mortgage Bonds B), corresponding to two (2) issuances carried out by the Issuers in accordance with the provisions of Law 2/1981, March 25, on Mortgage Market and its regulations (respectively, Issuance A and Issuance B The Mortgage Bonds shall be issued individually by each of the Issuers on the date of incorporation of the Fund, at face value, at a fixed ordinary interest rate which shall be agreed upon prior to the incorporation of the Fund by the Issuers and the Manager, which is also the Assignor, by the addition of a spread between 0.001% and 0.010% to the annual nominal interest rate of the Bonds of the Tranche it is backing (that is, the interest rate of Mortgage Bonds A shall be the result of adding a spread to the Nominal Interest Rate of Tranche A Bonds and the interest rate of Mortgage Bonds B shall be the result of adding a spread to the Nominal Interest Rate of Tranche B Bonds). The ordinary fixed interest rate on the Mortgage Bonds that will be finally determined shall not exceed 7%. Interest on the Mortgage Bonds, which shall accrue as from the date of issuance thereof (inclusive), calculated at the rate referred to above, shall be payable each year on the successiv e anniv ersaries of the date of issuance of the respectiv e Mortgage Bonds until maturity of these. In order to calculate the interest, the actual days in each annual interest accrual period shall be taken into account (Actual/Actual), including the first day of the period and excluding the last one. 81

82 The Mortgage Bonds, in accordance with the terms of the issuance thereof, shall bear an interest penalty charge on the amounts due and unpaid, both for principal and interest, at a floating rate equivalent to the higher of (i) the definite fixed rate of the Mortgage Bond plus 1,5 percentage points (1.5%) or (ii) a rate equivalent to Euribor one (1) month plus 1,5 percentage points (1,5%) and single redemption of 100% of their nominal v alue on the maturity date. A nnex X to this Prospectus includes a format of the physical deed to be issued, representing the Mortgage Bonds, which incorporates the early amortization events of payment default, Legal Early Redemption and existence of hidden defects. The certificates of the Issuers on the Assets, as well as the report drafted by the Fund Management Company regarding the existence, ownership and attributes of the Assets are attached hereto as A nnex IV. Redemption of Mortgage Bonds A will take place on the tenth (10 th ) anniversary of their date of issue and redemption of Mortgage Bonds B will take place on the fifteenth (15 th ) anniversary of their date of issue. In accordance with the aforementioned provisions relating to the date of payment of interest and of redemption of the Mortgage Bonds, the Issuers shall pay the amounts (of interest or principal) due under the Mortgage Bonds on the payment dates stipulated in the physical deeds of the Mortgage Bonds and in accordance with the commitments assumed by the Issuers in the Internal Management Agreement, in such a way that the Fund has at its disposal the amounts corresponding to the payment of coupons or principal on the Mortgage Bonds at least two (2) Business Days before the Payment Date for the Bonds, thereby avoiding liquidity or cash tensions in the Fund. The Nominal Value of the Mortgage Bonds issued by each of the Issuers is the one indicated in section IV above. In accordance with article 12 of Law 2/1981, collection of both the principal and interest on the Mortgage Bonds is specially guaranteed by mortgage, without the need for registry inscription, over all mortgages from time to time registered in favor of the Issuers, without prejudice to their universal asset liability. The credit rights of the Fund, as holder of the Mortgage Bonds, with respect to the Issuers, in addition to being guaranteed as described in the previous paragraph, shall also entail the right to execute foreclosure in order to claim payment from the Issuers, the Fund, as holder of the Mortgage Bonds, being a preferred creditor, with the preference established in number 3 of article 1923 of the Civ il Code, over any other creditors in relation to the totality of mortgage loans registered in fav or of the Issuers. Law 22/2003, dated 9 July, on Insolv ency, is applicable to the Mortgage Bonds. In its Nineteenth Final Provision, said Law amends article 14 of Law 2/1981, dated 25 March, which governs the Spanish mortgage market, by adding a second section thereto, in order 82

83 to lay down the legal framework and priority order applicable to this kind of mortgage bonds in the event of insolvency. According to said article, in the event of insolvency, holders of Mortgage Bonds shall benefit from the special privilege provided for in paragraph 1 of section 1 of article 90 of the Insolvency Law. In this sense, paragraph 1 of section 1 of article 90 of the Insolvency Law states that credits guaranteed with voluntary mortgage, either chattel mortgage or real estate mortgage, are specially privileged. Likewise, it is stated that during the insolvency procedure, principal and interest payments on the Mortgage Bonds issued and outstanding as of the date on which the insolvency was applied for, shall be made against the insolvency estate (créditos contra la masa) up to an amount equal to the proceeds received by the insolvent issuer from the collateral mortgage loan pool, therefore extending to mortgage bonds the rule set forth in article º of the Insolvency Law. a) Declarations regarding the Issuers, Assets and the Assignor 1. The Assignor, as owner of the Assets until these are assigned to the Fund, guarantees the Fund Management Company, in representation of the Fund: (i) that it is a brokerage firm duly established under current legislation and registered with the Mercantile Registry; (ii) that it has not found itself in a situation of insolvency, temporary receivership or bankruptcy either at the time of its incorporation or at any subsequent point; (iii) that its corporate bodies have duly passed all necessary resolutions for assigning the Assets to the Fund and for validly providing the Deed of Incorporation of the Fund, together with agreements and additional commitments assumed; (iv) that the Assets exist; (v) that it is the outright owner of the Assets; (vi) that the Assets are freely transferable under all applicable regulations; (vii) that the assignment of the Assets to the Fund does not infringe current legislation; (viii) that the Assets are all Mortgage Bonds issued by the Issuers and duly subscribed by the Assignor; 83

84 (ix) that it is unaware of any Issuer being involved in bankruptcy proceedings. 2. Each of the Issuers guarantees, as stated in Annex IV: (i) that it is a credit institution duly established under current legislation and registered with the Mercantile Registry; (ii) that it has not found itself in a situation of insolvency, temporary receivership or bankruptcy either at the time of its incorporation or at any subsequent point; (iii) that it complies with the requirements established in Law 13/1992, of June 1 st, on equity and supervision on consolidated basis of financial entities, Circular 5/1993, of March 26, 2001, on determination and control of minimum equity of credit entities and other applicable law; (iv) that its corporate bodies have duly adopted all necessary resolutions relating to the issuance of single global Mortgage Bonds in accordance with their relevant by-laws and applicable law; (v ) that the Mortgage Bonds shall be duly issued in accordance with Law 2/1981, dated 25 March, governing the Spanish mortgage market and in Royal Decree 685/1982, dated 17 March, which dev elops certain aspects thereof; (vi) that the Mortgage Bonds issued by each of these shall not be subject to any charge or encumbrance of any kind and that no impediment exists to their being assigned to the Fund; (vii) that the information relating to the Mortgage Bonds issued by each of these included in the prospectus exactly reflects its current situation and is correct and complete; (viii) that the Mortgage Bonds issued by each of these are represented by a single registered security. (ix) that the period to redemption of the Mortgage Bond A issued by each of these is ten (10) years and the period to redemption of the Mortgage Bond B issued by each of these is fifteen (15) years; (x) that no person has preferential rights over the legitimate holder of the credit rights incorporated into the Mortgage Bonds issued by each of these, in respect of collection of the amounts arising from the same; 84

85 (xi) that the Mortgage Bonds issued by each of these represent a corresponding valid and binding payment obligation, callable under its own terms (except when affected by an insolvency procedure); (xii) that the Mortgage Bonds issued by each are freely transferable under all applicable regulations; (xiii) that payments due by each of the Issuers by virtue of the Mortgage Bonds issued by each of these are not subject to any fiscal withholdings or deductions; (xiv) that it is not aware of the existence of any lawsuit of any kind or any other circumstance relating to the Mortgage Bonds issued by it which might prejudice their validity or callability and that there is no exception to which each Issuer might refer to oppose payment of the each respective Mortgage Bonds; (xv) that it is unaware of the existence of any circumstance which might prevent the execution of the Mortgage Bonds issued by it. b) Representation of the Assets The Mortgage Bonds which comprise the Assets are documented by means of individual registered certificates initially subscribed by the Assignor and which will be transferred in favor of the Fund. c) Legislation applicable to the assignment of the Assets The Mortgage Bonds shall be issued by the Issuers in accordance with Spanish legislation and more specifically Law 2/1981 of March 25, 1981, governing the Mortgage Market, and Royal Decree 685/1982, of March 17, 1982 which develops the above-mentioned Law. In accordance with applicable special Spanish legislation, the validity of the assignment of the Mortgage Bonds to the Fund by the Assignor shall only require a written declaration in the registered mortgage bond certificate or the drawing up of a formal assignment document without it being necessary to notify the borrowers (the Issuers of the Mortgage Bonds). Notwithstanding the lack of an obligation to notify the Issuers of the assignment of the Assets, the latter shall deem to have been given notice at the time of signing the Internal Management Agreement. The Mortgage Bonds shall be transferable without the need for the intervention of a public notary, in accordance with current legislation. IV Loans portfolio backing the issue of the Mortgage Bonds 85

86 Included below are several tables of joint analysis of the portfolio of mortgage loans of the Issuers which, in compliance with the provisions of the Law 12/1981, dated March 25, of the Mortgage Market (Ley del Mercado Hipotecario), specially secure the collection of the principal as well as the interest on the Mortgage Bonds. The data from December 31, 2004 was used in completing the tables. Among the Issuers portfolios of mortgage loans, only those mortgage loans which fulfill the requisites established for these purposes in Law 2/1981 will be eligible to back the Mortgage Bonds issue. The mortgage loans eligible to back the Mortgage Bonds issue only constitute a part of the total portfolio of mortgage loans which secure payment of the principal as well as the interest of the Mortgage Bonds. In particular, and on the date of selection of the data used for the preparation of the tables (December 31, 2004), 63.3% of the total mortgage loan portfolio of the Issuers (which meant a global amount of 79,179,500,336 euros) complied with the aforementioned requisites. The amounts indicated in such tables, where applicable, are expressed in euros. The average of the remaining terms, where applicable, are expressed in months. a) Distribution among the Issuers The following table shows the breakdown of the loans among the Issuers. b) Outstanding principal of the mortgage loans The following table shows the breakdown of the outstanding balance of the mortgage loans at intervals of 25,000 euros. 86

87 For the purposes of this Prospectus, LTV means loan to value, or quotient between the outstanding amount of a loan and assessment value of the assets that secure said loan. c) Fixed o floating interest rate The following table shows the breakdown of the loans based on whether the interest payable on these is at a fixed or floating rate. However, it should be noted that the interest rate of each Mortgage Bond is not determined by the profitability or interest rate of the support portfolio, since each Mortgage Bond is guaranteed by the whole portfolio, and not by specific assets. d) Benchmark indexes established for the determination of applicable interest rate The table below shows the benchmark indexes used to determine the interest rate of each loan. The loans with fixed interest are excluded from this analysis. 87

88 e) Spread on the benchmark index The following table shows the breakdown of the mortgage loans based on the spread applicable to the benchmark indexes, at intervals of 25 basis points. The loans with fixed interest are excluded from this analysis. f) Effective interest rate currently applicable The following table shows the breakdown of loans based on the real interest rate applicable on December 31, The average interest rate for the whole portfolio, weighted by the outstanding principal, is 3.45%. 88

89 g) Type of loan The following table shows the breakdown of loans based on the type of financed property, government-protected or not. h) Geographical distribution by provinces The following table shows the geographical breakdown of the mortgage loans according to the provinces where the financed real estate which guarantees the loans is located. 89

90 i) Residual life of the loans The following table shows the breakdown of the mortgage loans based on their residual life, at the following intervals expressed in months. 90

91 j) Type of property The following table shows the breakdown of mortgage loans based on the property acting as collateral. k) Percentage of the appraisal value represented by the outstanding balance The following table shows the breakdown of the mortgage loans based on the percentage of the appraisal value represented by the outstanding balance of each loan, in accordance with the following intervals. 91

92 l) Maturity Date The following table shows the breakdown of the mortgage loans, based on their year of maturity. 92

93 m) Default data The analysis is based on the actual portfolio that on December 31, 2004 amounted to 125,149,763,309 euros, as it has ev olv ed in ev ery quarter. 93

94 94

95 In any event, the aforementioned data are information related to the whole of the portfolio guaranteeing both repayment of principal and payment of interest under the Mortgage Bonds, but does not coincide with the Bonds or the Fund Asset s total. IV.2.2 Asset Assignment Agreement The Fund Management Company shall sign an asset assignment agreement with the Assignor (the Asset Assignment Agreement ) with the following characteristics: IV Object The object of the Asset Assignment Agreement is the assignment by the Assignor of ownership of the Mortgage Bonds (Mortgage Bonds which full domain belongs to the Assignor before said assignment) and all the credit rights arising therefrom to the Fund. IV Terms and conditions of the Asset assignment The assignment of the Mortgage Bonds shall be carried out, according to the Asset Assignment Agreement, under the following conditions: (i) The assignment of the Mortgage Bonds to the Fund by virtue of the Asset Assignment Agreement is full and unconditional and valid for the entire term remaining until their maturity and shall include all rights, products and actions v is-àvis the Issuers and/or third parties, both principal and accessory, and as regards security (collateral or personal security), including the rights of legal administration and defense, authorizing the assignee to reclaim principal, interest, commissions, expenses, costs, penalties or any other item. The date on which the assignment of the Mortgage Bonds to the Fund becomes effective (the Date of Assignment ) shall necessarily coincide with the date of incorporation of the Fund. In accordance with Article 348 of the Commercial Code, the Assignor shall be liable vis-à-vis the Fund for the existence and legitimacy of the Assets and for the conditions and qualities of these assumed by the Assignor as indicated in section IV a).1 of the Prospectus and the Deed of Incorporation of the Fund, but is not liable for the insolvency of the Issuers or by the representations made by them in accordance with section IV a).2 above, not being liable for any non-payment by the Issuers either of principal or of interest, or any other amount arising from the Mortgage Bonds. (ii) In the event that payment on a Mortgage Bond becomes overdue, the Fund Management Company, acting in the name and on behalf of the Fund, and in the interests of the bondholders, shall tak e all necessary steps and bring the corresponding actions on behalf of the Fund, to ensure that the Issuers discharge 95

96 their payment obligations on the Mortgage Bonds. For this purpose, and insofar as possible, it will foreclose any guarantees established to recover the amount owed thereunder. (iii) In the event that any of the Assets, at the Date of Assignment, do not meet the characteristics included in section IV above or suffer from hidden defects, the Fund Management Company shall notify the issuer of the Mortgage Bonds affected thereby, if possible, with a view to it remedying the situation, possibly by replacement of the impaired Mortgage Bond with a satisfactory alternative, within five (5) Business Days from the respective notification. Should this circumstance not be remedied within the said period of time, or prove impossible, the Issuer shall carry out the early redemption of said Mortgage Bond in the terms laid down in the Internal Management Agreement. In this respect, the Internal Management Agreement establishes that if the hidden defect is not remedied during the above-mentioned period of time or proves impossible to rectify, the Issuer shall proceed to the early redemption of said Mortgage Bond, repaying to the Fund the greater of: (i) the redemption value of the Mortgage Bond at par value, and (ii) the market price of the Mortgage Bond. For the purposes of paragraph (ii) above, the market price of a Mortgage Bond shall be understood as the result of multiplying the face value of the relevant Mortgage Bond by the quotient between (a) the arithmetic average of the quotation price for the Bonds of the relevant Tranche (that is, Tranche A Bonds in the case of Mortgage Bonds A and Tranche B Bonds in the case of Mortgage Bonds B) provided by the Underwriting and Placement Entities (in their capacity as Counterparties in the terms of the Underwriting Agreement) and (b) the face value of those Bonds. For the purpose of calculating the market price described above, the quotations of the Bonds, denominated in euros, offered by the Underwriting and Placement Entities shall be taken at 11:00 am on the preceding business day on which the Fund Management Company has communicated to the Issuer the existence of the relevant defect. In the event that any of the Underwriting and Placement Entities do not offer a quotation price for the Bonds, only the prices offered by the rest of the Underwriting and Placement Entity(ies) shall be taken into account for this purpose. The redemption shall be carried out necessarily within the fiv e (5) Business Day s following the expiration of the period of five (5) Business Days established for remedying the situation as indicated above. The above shall be understood to be without prejudice to the interest accrued on the Mortgage Bonds up to the date of redemption of the same, which shall be paid on the date of redemption. 96

97 The Fund Management Company, on behalf of the Fund, shall proceed to the partial Early Redemption of the Tranche A and/or Tranche B Bond issue, as the case may be, through the reduction of their face value equivalent to the face value of the redeemed Mortgage Bond and the relevant payment of interest. The amounts, if any, received by the Fund Management Company in the name of the Fund, as a result of the redemption of the Mortgage Bond, exceeding the amounts to be paid by the Fund Management Company (in the name of the Fund) by virtue of the partial early redemption of the issue as set out in the Prospectus, shall be distributed among the bondholders on a pro rata basis, taking into account the number of Bonds of the relevant Tranche held by each of them, and subject to the following rules. Any such distribution shall be made from the balance remaining after payment of any amounts owed by the Fund Management Company (in the name of the Fund) by virtue of the partial early redemption of the issue as set out in the Prospectus. The distribution of the excess, if any, carried out under the aforementioned terms shall constitute an exception to the Payment Priority Order established in this Prospectus. Any amounts due shall become payable to bondholders as soon as the relevant sum has been received by the Fund Management Company, in the name and on behalf of the Fund, even if this does not coincide with a Payment Date, and up to the limit available. In the event that a partial Early Redemption were going to take place in the abovementioned terms, it will be announced to CNMV and to the bondholders by publicizing it on a widely circulated newspaper in Spain in accordance with section III for notifications of extraordinary nature. (iv ) The Assignor shall assume no obligation to buy back the Assets. IV Price and Payment The Fund, acting by means of the Fund Management Company, shall pay to the Assignor, on the Disbursement Date, the acquisition price for the Assets, which shall be equivalent to the price of issue of the Bonds determined in accordance with the provisions of section II.7 (the Price ). Payment of the Price of the Mortgage Bonds shall be made on the Disbursement Date out of the net proceeds obtained from the Bonds of the relevant Tranche. (that is, the amount from Tranche A Bonds issuance shall be allocated to the payment of the Price of the Mortgage Bonds A and the amount from Tranche B Bonds issuance shall be allocated to the payment of the Price of the Mortgage Bonds B). 97

98 On receipt of written confirmation of payment of the Price, the Assignor shall issue a receipt for the funds, thereby providing the Fund with the most efficient proof of payment. The Assignor, on its side, shall pay the nominal v alue of the Mortgage Bonds to the Issuers on the Disbursement Date. IV Transfer of the ownership of the Assets The Assets shall be issued, on the date of incorporation of the Fund, in registered form in favor of the Assignor, who shall subscribe and receive from the Issuers the deeds representing said Assets, which the Issuers shall deliver to the former before the execution of the Deed of Incorporation of the Fund. The Assignor shall therefore be the full owner of the Assets before the incorporation of the Fund. In the act of incorporation of the Fund, the Assignor shall transfer all title and full ownership of the Assets to the Fund and shall deliver to the Fund Management Company, acting in the name and on behalf of the Fund, the deed representing the Assets. The Fund Management Company, in the name and on behalf of the Fund, shall deliver the deed representing the Assets to the Financial Agents simultaneously to the execution of the Financial Services Agreement (which shall take place on the same fate of incorporation of the Fund), in the terms and for the purpose described therein. IV.2.3 Actions in case of overdue payment of Assets IV Actions to be taken by the Fund The Fund, via the Fund Management Company, shall enjoy the right of executive action of a personal (not in rem) nature against those Issuers who fail to meet their payment obligations arising from the Mortgage Bonds. This action shall be exercised in accordance with the executiv e procedure stipulated by articles 517 et seq. of the Rules of Civ il Law procedure. Without prejudice of the above, the Fund, through the Fund Management Company, shall be entitled to bring declarative action against the Issuers that fail to fulfill their payment obligations derived from the Assets. Said action shall be exercised in accordance with the appropriate ordinary declarative procedure. For these purposes, it shall be deemed that an Issuer has failed to fulfill its payment obligations (in concept of principal and/or interest) derived from the Mortgage Bond issued by said Issuer when such payment has not been carried out in the date on which it should have been carried out. In the event of non-payment, as established above, the Fund Management Company shall start, in seven (7) days from the date of the non-payment, the exercise of the 98

99 corresponding legal actions to claim the payment to the Issuers that had failed to comply payment obligations under the Mortgage Bonds. Both in the event that a non-performing Issuer voluntarily pays, before the Fund Management Company, in the name and on behalf of the Fund, brings said legal actions, or in the event of enforcement of the Mortgage Bonds as a result of the exercise of such actions, it shall also be obliged to pay any accrued default interest, in accordance with the terms of issuance of the Mortgage Bond. IV Actions to be taken by the bondholders The bondholders shall not be entitled to take direct action against the Issuers who fail to meet their payment obligations. Such action to be brought by the Fund Management Company, in representation of the Fund which owns the Assets. The bondholders shall not be entitled to take direct action against the Fund Management Company other than those actions arising from the breach of its obligations. Accordingly, the bondholders shall not be empowered to take actions against the Fund Management Company as a consequence of non-payment or early redemption of the Assets. IV.3 Regime for the administration and management of the Assets and for their replacement IV.3.1 Management duties The Fund Management Company will maintain custody, administer and manage the collection of the Assets assigned to the Fund and also carry out the financial administration of the Fund ( Management Duties ). The Fund Management Company shall carry out the Management Duties of the Assets with the same diligence as if these were its own assets, acting with all due diligence and being liable vis-à-vis the Fund for any impairment in respect thereof which may arise as a result of its negligence. The Fund Management Company shall indemnify the Fund from and against any damage, loss or expense arising from any breach of its Management Duties or from fraudulent or negligent action in the performance thereof. The Fund Management Company shall not in any way assume liability for directly or indirectly guaranteeing the satisfactory outcome of the transaction. The Fund shall receive any amounts paid by the Issuers arising therefrom in respect to principal, interest, commissions or any other applicable item and shall take the appropriate measures for paying these into the Collection Account. The Fund Management Company shall also take the appropriate measures to pay into the Collection Account the amounts received, where appropriate, from the Issuers in respect to the early redemption of any of the Mortgage Bonds. 99

100 The Fund Management Company shall, in no case, make an advance payment of any amount not previously received from the Issuers in respect to principal, interest, prepayment or others, arising from the Assets. The commission received by the Fund Management Company for the Management Duties is included in the Administration Commission received in accordance with the stipulations of section III The Fund Management Company shall be entitled to delegate the performance of all or any of the Management Duties of an administrative nature (provided however, that it shall not be entitled in any case to delegate the performance of main Management Duties), provided that this delegation (i) does not result in additional costs or expenses for the Fund, (ii) is legally possible, (iii) does not result in a ratings downgrade of the Bonds, and (iv) is notified to CNMV with its prior authorization, if legally necessary. In accordance with article 262 of the Commercial Code, should the Fund Management Company delegate its Management Duties, it shall not be discharged from any of the responsibilities which it has assumed or that are legally required from it. The Fund Management Company shall carry out the Management Duties until (i) all the Mortgage Bonds have been redeemed, (ii) all the obligations assumed by the Fund Management Company in relation to the Mortgage Bonds have expired and (iii) in any case, until the liquidation of the Fund has been concluded, once this has expired. IV.3.2 Replacement of the Assets In the event of early redemption of the Mortgage Bonds, these bonds shall not be replaced in any way. Section IV (iii) foresees the possibility of replacing the Assets in the event that any of them fails to meet the features set out in section IV above or has any hidden defects. 100

101 CHAPTER V INFORMATION ON THE FINANCIAL TRANSACTION OF THE FUND V.1 Financial structure of the Fund V.1.1 Composition of Fund assets and liabilities The Fund will have the following initial balance sheet as of the Disbursement Date: BALANCE SHEET (IN EUROS) ASSET-SIDE OF THE FUND LIABILITIES OF THE FUND Assets 5,000,000, Tranche A Bonds Tranche B Bonds 3,500,000, ,500,000, Cash ( for the Endowment of Incorporation) 72,579, (*) Short-term creditors (for the Incorporation and Management expenses) 72,579, Total asset-side 5,072,579, Total liabilities-side 5,072,579, (*) The Endowment of Incorporation, Management and Administration is a contribution to the Fund by the Assignor, which shall be made at the time of the Fund s incorporation for an amount equivalent to the definite aggregate amount of the initial expenses and other estimated ordinary expenses of the Fund broken down in section II.14, out of the assignment fee which the Assignor will receive from the issuers of the individual mortgage bonds on the Fund s Incorporation Date. The Fund will not have any obligation whatsoever to reimburse the Assignor the amount that corresponds to the Endowment of Incorporation, Management and Administration. The Asset-side of the Fund, throughout its lifetime, shall comprise: (i) the Assets (described in Chapter IV of this Prospectus); (ii) the current balance of the Cash Account (including the Reserve Funds) and Collection Account described in section V.1.2 below; and (iii) interest accrued and unpaid on the Mortgage Bonds which form part of the Fund s assets. The Liabilities-side of the Fund, throughout its lifetime, shall comprise: 101

102 (i) the Bonds that will be issued with charge to the fund (as described in Chapter II of the Prospectus); (ii) the amounts due under Liquidity Facility A and Liquidity Facility B; (iii) interest accrued and unpaid on the asset-backed securitization Bonds issued hereunder as well as those corresponding to Liquidity Facility A and Liquidity Facility B; (iv) the long term creditors account in concept of floating commission of each Tranche, calculating on an annual basis the net financial margin; and (v) the endowments for extraordinary expenses made by the Assignor, as the case may be. Throughout the lifetime of the Fund, the surplus balance of the Cash Account shall be entered in the liabilities-side of the Fund s balance sheet as a long term creditors account in concept of floating commission. On the date of liquidation of the Fund, the aggregate amount of said account (long term creditors account in concept of floating commission) shall be equivalent and will coincide with the Net Financial Revenue, which shall be transferred to the Assignor for the latter to distribute it amongst the issuers of the Mortgage Bonds, without prejudice to the Payment Priority Order set out in this Prospectus. The net asset value of the Fund shall at all times be zero. Ordinary expenses relating to the management and administration of the Funds shall be paid, during the lifetime of the transaction, by the Management Company, on behalf of the Fund. The Fund shall pay for such purpose to the Management Company at charge of the Endowment of Incorporation, Management and Administration on the date of its incorporation, out of the initial provision contributed by the Assignor. The Assets shall be acquired by the Fund at an acquisition price (the Price ) equal to the price of issue of the Bonds. On the Disbursement Date, the Fund Management Company, on behalf of the Fund, shall pay the Assignor: (i) the Price of the Mortgage Bonds A assigned to the Fund out of the Available Funds raised from placement of the Tranche A Bonds, and (ii) the Price of the Mortgage Bonds B assigned to the Fund out of the Available Funds raised from placement of the Tranche B Bonds. The Assignor, in turn, will disburse the subscription price of the Mortgage Bonds to the Issuers in the Disbursement Date. V.1.2 A ccounts of the Fund The following sections provide an outline of the purpose and transaction of the bank accounts opened by the Fund Management Company in the name of the Fund. V Cash Account 102

103 The Fund Management Company shall open a Cash Account (the Cash A ccount ) w ith the Financial Agent, in the name and on behalf of the Fund. The Cash Account shall be regulated as stipulated in the Financial Services Agreement described in section V below. The following amounts received by the Fund Management Company on the Fund s behalf shall be deposited in the Cash Account: (i) the interest obtained on the Cash Account balance; (ii) the balances remaining in the Collection Account that are transferred to the Cash Account after payment of the corresponding amounts on each Payment Date; (iii) the forced drawing of the Liquidity Facilities in accordance with the provisions of section V (iii); (iv) the remaining of the Endowment of Incorporation, Management and Administration, not allocated to compromised expenses. Notwithstanding paragraph (ii) above, the amount corresponding to the interest paid on the Cash Account balance shall be transferred to the Collection Account on each Payment Date (with the same valuation date) in order to meet the payments for which the Fund is liable in accordance with the Prospectus. As stipulated in the Financial Services Agreement, the Financial Agent guarantees a minimum interest rate on the balance of the Cash Account equal to: one-year (1) EURIBOR rate minus ten (10) basis points (0.10%). For the purposes of this section, the Euribor applicable will be the one-year (1) EURIBOR published the second (2 nd ) Business Day prior to the date on which the relevant interest period begins. For the purposes of this Prospectus, Euribor for a specific term will be deemed at one (1) year at the EURIBOR rate (Euro Interbank Offered Rate) for deposits nominated in euros for the relevant term, and distributed by the financial information system BRIDGE by request of the Federation Bancaire de l Union Européenne, currently published in the EURIBOR 01 of REUTERS approximately at 11:00 am. The settlement of interest shall be carried out in any case on the Payment Date of the Bonds or, should it not be a Business Day, the immediately subsequent Business Day (ev ent in which interest shall accrue until such subsequent Business Day) and shall be calculated on a basis of (i) the number of days in each Interest Accrual Period and (ii) a year comprising three hundred and sixty days (Actual/360). 103

104 In the event of that the not subordinated not guaranteed short-term debt of the Financial Agent is assigned a credit rating below the Required Rating, the Fund Management Company shall proceed as indicated in paragraph III.7.1 (viii). Notwithstanding the above, the Fund Management Company, depending on the state of the financial markets and to improve the return on the Fund, may temporarily invest the balances of the Cash Account, provided that the Financial Agent has been given prior notice of three (3) months, in fixed-income securities denominated in euros that become mature before the next Payment Date, issued by issuers with a credit rating at least equal to the Required Rating which have up to a 10% weighting for the purpose of calculating shareholders funds, such that, in this case also, the return obtained may differ from that initially agreed in the Financial Services Agreement. In case that the assets in which said investment is materialized were repo, the counterparty to the repo transaction shall have a rating of at least the Required Rating. V Collection Account The Fund Management Company shall open an account (the Collection Account ) with the Financial Agent in the name and on the behalf of the Fund, to be regulated by the Financial Services Agreement described in section V below. The following shall be deposited in the Collection Account: (i) The interest payments on the Mortgage Bonds, which shall be received at least two (2) Business Days prior to the Payment Date of the Bonds in accordance with the terms of the Mortgage Bond issuance and the undertak ings made by the Issuers under the Internal Management Agreement; (ii) The amounts corresponding to the principal of the Mortgage Bonds, which shall be received at least two (2) Business Days prior to the Final Redemption Date for the Bonds in accordance with the terms of the Mortgage Bond issue and the undertakings made by the Issuers under the Internal Management Agreement; (iii) Interest on the Cash Account transferred to the Collection Account in accordance with the provisions of section V below; (iv) Any other amounts deposited by the Fund by virtue of the Assets; (v) Drawings under Liquidity Facility A and Liquidity Facility B; (vi) The Endowment of Incorporation, Management and Administration; and (vii) Interest on the Collection Account balance. 104

105 Upon each Payment Date for the Bonds, and having previously made the corresponding payments on this date in accordance with the Payment Priority Order, the remaining balance shall be transferred from the Collection Account to the Cash Account. Exceptionally, the amounts corresponding to withholding taxes on the payments made shall be deposited in the Collection Account (that is, shall not be transferred to the Cash Account). Such amounts shall remain in the Collection Account up to the time of their deposit with the Tax Authorities or return to the holders, as the case may be. At the time the Fund is constituted, the amounts corresponding to the Endowment of Incorporation, Management and Administration contributed by the Assignor shall likewise be deposited in the Collection Account. The outstanding amount of this Endowment of Incorporation, Management and Administration shall be deposited in the Collection Account, after carrying out the outstanding payments on the Payment Date, shall be transferred to the Cash Account, except those amounts corresponding to unpaid committed expenses that may remain deposited in the Collection Account until the date on which the relevant pay ment must be satisfied. The Financial Agent shall pay interest on the amounts deposited in the Collection Account at a guaranteed rate equal to 1 week EURIBOR determined on the date of the deposit minus 0,15%. The interest shall be accrued from the date on which each deposit is made (including) for the number of days it remains deposited in the Collection Account (excluding the last day), and they shall be liquidated and paid in the following Payment Date. Therefore, different deposits in the Collection Account shall accrue interest at a different nominal rate each (being for each amount deposited in the Collection Account 1 week EURIBOR determined on the date of the deposit minus 0.15%), although they are liquidated and paid on the following Payment Date. As an exception to the foregoing, the interest accrued on the Endowment for Incorporation, Management and Administration, which shall be deposited in the Collection Account on the date of incorporation of the Fund, shall be liquidated and paid on the Disbursement Date at a rate equal to 1 week EURIBOR calculated on the date of incorporation of the Fund minus 0.15%. In the event that there remains deposited in the Collection Account any surplus of such Endowment for amounts corresponding to undertaken but not yet paid expenses, the interest accrued by such surplus shall be liquidated and paid on the first Payment Date at 1 week EUIBOR determined on the Disbursement Date minus 0.15%. The amounts corresponding to withholdings carried out that remain deposited in the Collection Account on a Payment Date shall be remunerated from that Payment Date until it is deposited in the Public Treasury or, as the case may be, the corresponding returns are made, at a rate equal to 1 week EURIBOR calculated on the relevant Payment Date minus 0.15%, being the corresponding interest liquidated on the following Payment Date. The base for the calculation of the interest accrued on the balance of the Collection Account shall be Actual/

106 The Fund Management Company, in light of the situation of the financial markets and in order to improve the return on the Fund, may temporarily invest the balances of the Collection Account by giving notice to the Financial Agent at least three (3) months in advance in fixed-income securities denominated in euros, with a maturity term shorter than the time remaining until the next Payment Date following the investment and issued by issuers with a short term risk rating at least equal to the Required Rating that have up to a 10% weighting, in which case the return obtained may differ from that initially agreed in the Financial Services Agreement. In case the assets in which said investment is materialized were repo, the counterparty to the repo transaction shall have a rating of at least the Required Rating. V.1.3 Liquidity Facilities and Collateral Deposits V Liquidity Facilities With the aim of enabling the Fund to meet its payment obligations, two Liquidity Facilities shall be created in connection with Tranche A Bonds (the Liquidity Facility A ) and in connection with Tranche B Bonds (the Liquidity Facility B, and together with Liquidity Facility A, the Liquidity Facilities ). The main characteristics of the Liquidity Facilities shall be the following: (i) Purpose Drawings of Liquidity Facility A shall only be used to pay the interest of Tranche A Bonds, without prejudice to the provisions of this Prospectus in connection with the Collateral Deposit. Drawings of Liquidity Facility A may be also used to pay the extraordinary expenses derived of the payment default of Mortgage Bonds A or of the default of any payment obligations of the Mortgage Bonds A Issuers, up to a maximum limit of 20% of the available amount of Liquidity Facility A. Drawings of Liquidity Facility B shall only be used to pay the interest of Tranche B Bonds, without prejudice to the provisions of this Prospectus in connection with the Collateral Deposit. Drawings of Liquidity Facility B may be also used to pay the extraordinary expenses derived of the payment default of Mortgage Bonds B or of the default of any payment obligations of the Mortgage Bonds B Issuers, up to a maximum limit of 20% of the available amount of Liquidity Facility B. (ii) Amount The maximum amount of Liquidity Facility A shall be equivalent to two (2) years of interest on the Tranche A Bonds by approximately 23.6% of the face value of Tranche A Bonds. The maximum amount of Liquidity Facility B shall be equivalent to two (2) years of interest on the Tranche B Bonds by approximately 24.25% of the face value of Tranche B Bonds. The 106

107 amount of the Liquidity Facilities to be finally determined in the terms described herein shall be included in the Deed of Incorporation of the Fund and shall be communicated to the CNMV as additional information to be included in the Prospectus. Subject to the prior confirmation of the Rating Agencies that no reduction of the credit rating of the Bonds of the relevant Tranche shall take place, the available amount of each Liquidity Facility may be reduced at the request of the Arranger. In the event of Early Redemption of the Bonds of any Tranche as a consequence of the payment default of the Mortgage Bonds of the relevant Tranche, the available amount of the Liquidity Facility of the relevant Tranche shall be also proportionally reduced in the amount in which the Bonds of said Tranche are early redeemed. The Availability Fee to be paid by the Fund Management Company, in the name and on behalf of the Fund, on the dates falling on the subsequent anniversaries of the date of the Liquidity Facility Agreement shall also be reduced proportionally to the amount reduced and on the basis of the average available amount of the period. (iii) Lending Institution Each Liquidity Facility shall be granted by a credit institution (the Lending Institution ) with a minimum short-term rating of F1 (FITCH) and P-1 (MOODY S) and long-term rating of AA- (S&P). In the event the rating given by any of the Rating Agencies shall be reduced under this level, the Fund Management Company, the Assignor and the Lending Institution shall make their best efforts to find a substitute for the Lending Institute with the minimum rating in the best financial conditions possible, for a maximum term of thirty (30) days from the time in which the relevant reduction of the rating should take place. If, within the maximum term of thirty (30) days from the reduction of the rating, no suitable substitute for the Lending Institution is found, an automatic drawing of the whole available amount of each Liquidity Facility shall take place (on the date on which said term elapses, or if it is not a Working Day, on the following Working Date) which shall be deposited in the Cash Account for its allocation by the Fund Management Company, in the name and on behalf of the Fund, for the purposes set forth in paragraph (i) and that shall be remunerated in accordance with the provisions of paragraph (vi). In the event that the Lending Institution recovers the required rating the initial situation shall be reestablished. (iv) Term The maturity of the Liquidity Facility shall be coincident with the Legal Maturity Date. (v) Drawings The Fund Management Company, in the name and on behalf of the Fund, may make drawings of each Liquidity Facility by means of written communication to the Lending Institution before 14:00 hours of Madrid one (1) day in advance to the date on which the funds must be disbursed. The drawing request shall indicate the amount to be drawn, the drawing date and its purpose (which shall be one of those indicated in paragraph (i) above). 107

108 Funds drawn under Liquidity Facility shall be deposited by the Lending Institution at the Collection Account. Once the available amount of a Liquidity Facility has been reduced in accordance with the provisions of paragraph (ii) above it may not be subsequently increased up to the initial available amount. The Fund Management Company, in the name and on behalf of the fund, may draw again the amounts under the Liquidity Facility repaid to the Lending Institution, those repayments thus recovering the maximum limit of the Liquidity Facility. (vi) Remuneration The Fund Management Company, in the name and on behalf of the Fund, shall pay the Lending Institution of each Liquidity Facility an annual availability fee (the Availability Fee ), for an amount equivalent to 0.15% of the average balance of the available amount of each Liquidity Facility throughout the year, to be paid against the Available Funds of the relevant Tranche in accordance with the Payment Priority Order (being the first (1 st ) item in said Payment Priority Order together with the extraordinary expenses of the Fund) at the account appointed by the Lending Institution, on a yearly basis on each Bond Payment Date, or should it not be a Working Day, on the subsequent Working Day. In the event of reduction of the amount of the Liquidity Facility, the Availability Fee to be paid by the Fund Management Company, in the name and on behalf of the Fund, on the dates falling on the subsequent anniversaries of the date of the Liquidity Facility Agreement shall also be reduced proportionally to the amount reduced and on the basis of the average available amount of the period. The Availability Fee shall be accrued up to the Final Maturity Date. Amounts drawn under each Liquidity Facility shall accrue interest in favor of the Lending Institution, from the date of the drawing until its repayment date, at a floating rate equivalent to the higher of (i) the interest rate of the Mortgage Bonds of the relevant Tranche plus 1.5% or (ii) a rate equivalent to Euribor one (1) month plus 1.5%. Notwithstanding the above, in the event that the forced drawing of the whole amount of a Liquidity Facility has taken place as a consequence of a reduction in the rating of the Lending Institution, in accordance with paragraph (iii), interest on said drawing shall accrue at the same rate that the relevant Financial Agent remunerates at any time the Cash Account plus a spread equivalent to the Availability Fee, unless said drawing is allocated to the purposes foreseen as a consequence of the payment default of a Mortgage Bond of the relevant Tranche, in which case the amounts thus allocated shall accrue interest at an interest rate equivalent to the higher of (i) the interest rate of the relevant Mortgage Bonds plus 1.5% or (ii) a rate equivalent to Euribor one (1) month plus 1.5%. Interest on each Liquidity Facility shall be liquidated and paid on the date on which the Fund receives from the Issuers the amount whose default gave place to the drawing of the 108

109 Liquidity Facility. These amounts shall be deemed to be received on the date on which they are deposited at the Collection Account and the Fund Management Company, in the name and on behalf of the Fund, may effectively dispose of them. The date on which said payments take place does not have to coincide with a Payment Date. (vii) Repayment of drawn amounts The amounts drawn under each Liquidity Facility shall be repaid to the Lending Institution on the date on which the Fund receives from the Issuers the amount whose default gave place to the drawing of the Liquidity Facility. These amounts shall be deemed to be received on the date on which they are deposited at the Collection Account and the Fund Management Company, in the name and on behalf of the Fund, may effectively dispose of them. The date on which said payments take place does not have to coincide with a Payment Date. In the event the recovered amounts are not enough to pay the extraordinary expenses derived from the enforcement of the Mortgage Bonds or any other payment default of the Issuers, the repayment of the drawn amounts shall be made against an endowment for extraordinary expenses made by the Assignor, without prejudice to the right of the Assignor to recover said amounts on the Legal Maturity Date in accordance with the Payment Priority Order set forth in this Prospectus. For these purposes, it shall be deemed that the amounts repaid to the Lending Institution shall be attributed in the first place to repay the amounts drawn to pay the extraordinary expenses, and in the second place to the amounts drawn to pay the interest of the Bonds. (viii) Information The Assignor shall provide the Lending Institution on a quarterly basis with the information of the situation of the Fund and the Mortgage Bonds that it shall provide the Rating Agencies with, in accordance with the provisions of paragraph II.3 of this Prospectus. V Collateral Deposit In the Internal Management Agreement, each of the Issuers undertake to deposit in favor of the Fund at an account open with the Financial Agent an amount equivalent to two (2) y ears of interest of the Mortgage Bonds issued by said Issuer and incorporated in the Fund (the Collateral Deposit ), in any of the following circumstances: (1) if at any time the Collateral Ratio of said Issuer is lower than the Minimum Collateral Ratio; for these purposes it shall be understood for Collateral Ratio, the quotient between (a) the outstanding amount of the mortgage loans and credits of the Issuer and (b) the outstanding amount of all Mortgage Bonds issued by the Issuer; Minimum Collateral Ratio, one hundred and fifty per cent (150%). 109

110 (2) if, not later than the 15 th calendar day of each month, the Issuer has not provided the Fund Management Company with its Collateral Ratio and Minimum Collateral Ratio regarding the last day of the preceding calendar month, as well as the information required for its calculation. The Collateral Deposit of any Issuer shall be used, prior to the drawings of each Liquidity Facility, solely in the event that the relevant Issuer is in default of its payment obligations from the Mortgage Bonds issued by it, and shall be allocated to the payment of the extraordinary expenses derived from the enforcement of said Mortgage Bonds, to the payment of the part of the interest of the Bonds corresponding to the face value of the Mortgage Bonds issued by said Issuer and integrated in the Fund, as well as to the payment of the part of the principal redemption corresponding to the face value of the Mortgage Bonds issued by said Issuer and integrated in the Fund, but only in the Final Maturity Date of the relevant Tranche. The Collateral Deposit shall be remunerated by the Financial Agent at an interest rate equivalent to EONIA. The Collateral Deposit may be cancelled and refunded to the relevant Issuer, subject to the previous authorization of the Fund Management Company, at the request of said Issuer, provided that it certifies that its Collateral Ratio is higher than the Minimum Collateral Ratio. V.1.4 Operating procedure The operating procedure to be followed by the Fund Management Company regarding the main payment flows generated by the financial structure of the Fund is as summarized below. V Collections and payments prior to Disbursement Date On the date of granting the Fund s deed of incorporation, the Endowment of Incorporation, Management and Administration contributed by the Assignor shall be deposited in the Collection Account. V Collections and payments on Disbursement Date On the Disbursement Date all funds raised from the issue of Bonds of both Tranches shall be deposited in the Collection Account (in case of delay in payment of the latter, the Fund will be entitled to receive penalty interest set out in the Underwriting Agreement). On the Disbursement Date, the Fund Management Company shall pay the Assignor the Price of the Assets, out of the funds deposited in the Collection Account. The Assignor shall only pay the Issuers the amount issued by these corresponding to the Mortgage Bonds upon receipt of the Price of the Assets from the Fund Management Company in the aforementioned terms. 110

111 V Collections and payments subsequent to Disbursement Date On the annual coupon payment date of the Mortgage Bonds, the Fund Management Company will take the appropriate measures to ensure that all the interest and principal amounts if applicable collected on the Mortgage Bonds is deposited in the Collection Account. On each Payment Date, the Fund Management Company shall use the Available Funds in the accounts to meet the Fund s payment liabilities, in accordance with the Payment Priority Order (notwithstanding that in the case of Early Redemption section II and early redemption in the event of hidden defects section IV payment by the Fund Management Company shall not be made until receipt of the amount corresponding to the execution of the unpaid or redeemed Mortgage Bond, as the case may be, whether or not the relevant day is a Payment Date). V Non-payment by Issuers An Issuer shall be understood to be in default of payment obligations with respect to the Mortgage Bonds it has issued when the amount due, either in concept of principal amount (in case of early redemption due to any of the causes set out in applicable law, in particular, in case of insolv ency of the Issuer) or interest, has not been paid on the corresponding payment date, without prejudice to the use of the Collateral Deposit created by the Issuer, as the case may be, in accordance with the provisions of section V When such default arises, the Fund Management Company shall, within seven (7) days of the said non-payment, initiate the relevant legal action, in the name and on behalf of the Fund, to demand payment from the Issuers failing to comply with their obligations in respect of the Mortgage Bonds. Once the corresponding amount has been obtained with respect to principal or interest-, the Fund Management Company shall proceed with the partial early redemption of the issue of the Bonds of the relevant Tranche by reducing the nominal amount of the Bonds by an amount equal to the face value of the unpaid Mortgage Bond (that is, Tranche A Bonds in the event of default of a Mortgage Bond A and Tranche B Bonds in the event of default of a Mortgage Bond B), in line with the following procedure: the Fund Management Company, as soon as the proceeds obtained from the Mortgage Bond (either as a result of the execution of the Mortgage Bond or the voluntary payment of the Issuer or, in the event of insolvency of the Issuer, on the date of its declaration in the event that, under current legislation, in force in each moment, the insolvency procedure involves the expiration anticipated of the Mortgage Bond) have been deposited into the Collection Account and are available thereto, will proceed to allocate said funds in accordance with the Payment Priority Order as set out in the Prospectus. The date on which the payments herein described shall be carried out may not coincide with a Payment Date. To proceed with payment of the amounts detailed above (which shall be in accordance with the Payment Priority Order in the terms indicated 111

112 in the Prospectus), the Fund Management Company may only use amounts recovered as a result of executing the overdue Mortgage Bond or of the voluntary payment of the Issuer. In the event that the amounts available to the Fund should not be sufficient to complete the early redemption as specified in the preceding paragraph, the shortfall in payments due to bondholders shall be made up the moment the Fund recovers the overdue amounts. In the event of a partial Early Redemption of one or all Tranches of Bonds by the abovementioned terms, it will be announced to CNMV, the Rating Agencies and to the bondholders by publishing it on a widely circulated newspaper in Spain, in accordance with section III.7.5 for notifications of extraordinary nature. V.2 Financing of the Fund The Fund will be financed through (a) the Bond issue in the terms set out in Chapter II of the Prospectus and (b) the Liquidity Facilities. The composition of the Fund s liabilities will not vary throughout its lifetime. In accordance with article 1.1 of Royal Decree 926/1998, Bond financing will exceed 50% of the liabilities of the Fund. There follows a description of the financing transactions other than the Bond issue which the Fund Management Company will arrange on the Fund s behalf to consolidate its financial structure and procure the greatest possible coverage of the risks attendant on the issue. In order to ensure that the Fund transaction adheres to the terms of the Deed of Incorporation, the requirements of this Prospectus and current legislation, the Fund Management Company, on behalf of the Fund, may extend or modify the agreements signed in the Fund s name, replace any of the agencies rendering services to the Fund thereunder and, where necessary, even enter into additional agreements. Any such action will be subject to current legislation and, if necessary, prior authorization from CNMV or the competent administrative agency, having made due notification to the Rating Agencies, provided that such recourse does not impair the interests of the bondholders. V.2.1 Liquidity Facility Agreements The Fund Management Company, in the name and on behalf of the Fund, shall enter into two liquidity facility agreements with the Lending Institutions, under which they will respectively grant to the Fund the Liquidity Facility A and the Liquidity Facility B, under the terms and conditions set forth in section V of the Prospectus. V.2.2 Other agreements concluded relative to the financial transaction of the Fund V Bond Placement Underwriting Agreement 112

113 The Fund Management Company, in the name and on behalf of the Fund, will conclude a Bond Placement Underwriting Agreement with the Arranger and Underwriting and Placement Entities, whereby such Underwriting and Placement Entities will freely place the entire Bond issue and, once the Subscription Period has closed, subscribe in their own name such Bonds as may remain unsubscribed at the close of the Subscription Period, by virtue of their respective underwriting commitments. The Underwriting and Placement Entities of the Bond issue will undertake the obligations set out in the Underwriting Agreement, which are basically as follows: 1) to subscribe all Bonds unsubscribed at the close of the Subscription Period, up to the specified amounts; 2) to pay the Fund the total underwritten amount of the issue before 11:00 am on the Disbursement Date, with value on the same date of the issue underwriting, deducting the sum of the Underwriting Fee, or at the choice of Underwriting and Placement Entity, by paying the amount of their respective underwriting commitments to the Arranger (after deducting the sum of their respective Underwriting Fees), so that the Arranger may proceed to pay into the Fund with value of the same day, the amount received from the Underwriting and Placement Entities which have opted for this disbursement method, acting in name and on behalf of such Underwriting and Placement Entities; 3) undertaking to pay penalty interest as established in the Underwriting Agreement in the event of delays in paying amounts due; 4) to deliver a document to subscribers accrediting their subscription; 5) liquidity commitment on respect of the Bonds; and 6) other aspects relating to the underwriting of the issue. The obligations undertaken by each of the Underwriting and Placement Entities under the Underwriting Agreement shall be independent and several. Underwriting and Placement Entities of the Bonds issue shall receive and Underwriting Commission that shall be determined not later than the date of incorporation of the Fund by agreement between the Arranger (also the Assignor) and the Underwriting and Placement Entities. Each Underwriting and Placement Entity shall deduce the Underwriting Commission from the amount it underwrites. Commission to be received by each of the Underwriting and Placement Entities shall range from sixteen (16) basis points (0.16%) to two hundred and twenty five (225) basis points (2.25%) of the amount of Tranche A Bonds underwritten by each of them and from twenty two (22) basis points (0.22%) to three hundred (300) basis points (3.00%) of the amount 113

114 of Tranche B Bonds underwritten by each of them. In any case, the Underwriting Commission finally agreed upon in the terms described herein shall be included in the Deed of Incorporation of the Fund and communicated to CNMV as additional information to the Prospectus. V Financial Services Agreement (Bond Payments Agency) The Fund Management Company, in the name and on behalf of the Fund, and with INSTITUTO DE CRÉDITO OFICIAL (the Financial A gent ), will sign the Financial Services Agreement referred to in Section II.4.1 above, for the Financial Agent to provide the financial services required for the issue of Bonds that are issued with charge to the assets of the Fund. Moreover, by virtue of the Financial Services Agreement, the Financial Agent shall act as custodian of the physical deeds representing the Mortgage Bonds, waiving the privileges it enjoys under Spanish Law in this regard, specifically those conferred by articles 1730 and 1780 of the Spanish Civil Code (retention of items deposited as collateral) and article 276 of the Commercial Code (guarantee similar to the retention of items deposited as collateral). The Fund Management Company, on behalf of the Fund, shall be entitled to examine, and the Financial Agent shall be obliged, under the Financial Services Agreement, to deliver thereto the original physical deeds representing the Mortgage Bonds which are kept in custody by the latter, whenever the former deems necessary, and shall be entitled to request a copy thereof. By virtue of the Financial Services Agreement and in relation to the obligations assumed with respect to the Payment Agency, the Financial Agent shall make the Bond interest payments on each Payment Date, after deduction of the full withholding of capital gains tax that, where appropriate, is required under applicable tax legislation, and make payments in respect to all other amounts that are required to be paid by the Fund in accordance with the Prospectus. In the event that the short-term not subordinated not guaranteed debt of the Financial Agent were at any time during the life of the Bond issue to be assigned a credit rating below the Required Rating (which is the one presently granted), the Fund Management Company, within a period of thirty (30) Business Days from the said downgrade, will proceed as set out in section III.7.1 (viii) above. In consideration of the services rendered by the Financial Agent, the Fund will pay the Financial Agent a Financial Services Commission of TWO HUNDRED AND TWENTY THOUSAND EUROS ( 220,000) (out of the Endowment of Incorporation, Management and Administration to be contributed by the Assignor at the time the Fund is constituted), which shall be settled in full, for the entire life of the transaction, on the Disbursement Date. 114

115 In addition, in consideration for the services to be rendered by the Financial Agent as a result of the temporary reinvestment transactions of the balances of the Cash Account and the Collection Account that might carry out the Fund Management Company in accordance with sections V and V.1.2.2, the Financial Agent shall receiv e TWENTY FIVE EUROS ( 25) for each of the cash transfers for an amount inferior to SIX MILLION TEN THOUSAND EUROS ( 6,010,000) that may be caused by said reinv estment transactions. V Internal Management Agreement The Fund Management Company, in the name and on behalf of the Fund, will sign the Internal Management Agreement, jointly with the Assignor and the Issuers, making the required calculations to ensure the correct distribution of the Net Financial Revenue among the Issuers. The Net Financial Revenue shall be payable to the Assignor, who shall distribute it among the Issuers. The distribution of the Net Financial Revenue among the Issuers will take place in compliance with the Internal Management Agreement. In compliance with the provisions of the Internal Management Agreement, the Net Financial Revenue shall be distributed, where applicable, by the Assignor in proportion to (i) the face value that the Mortgage Bonds issued by each Issuer represent in respect of the whole Asset of the Fund and (ii) the period during which the Mortgage Bonds issued by each Issuer have been pooled in the Asset-side of the Fund. Payment of the Net Financial Revenue to the Assignor and its distribution among the Issuers shall take place on the Tranche B Final Maturity Date. The Internal Management Agreement also governs other matters, in particular: a) Legal and Compulsory Early Redemption of the Mortgage Bonds see section II above b) Disencumbrance of hidden defects of the Mortgage Bonds see section IV c) Mortgage Bonds Payment Dates. In this respect, it is established that, if in the terms of the Mortgage Bond issue, the payment date for the coupons, or the principal, falls on a day that is not a Business Day, the corresponding payment will be made on the immediately preceding Business Day. Moreover, if for any reason the payment of Mortgage Bond coupons, or, as the case may be, principal, falls on a Business Day (D), and there are less than two (2) Business Days from that date (D) until the Payment Date for the Bonds, payment of the corresponding amounts will be made on the appropriate preceding Business Day 115

116 such that at least two (2) Business Days elapse between the date on which the payment of Mortgage Bond coupons or principal is made, and the Payment Date for the Bonds. d) Rights of information of the mortgage bondholders In compliance with the provisions of the Internal Management Agreement, each of the Issuers undertakes to make available any information that a legal holder of a Mortgage Bond that it has issued may reasonably request regarding the Issuer itself and Mortgage Bond. V.3 Synoptic chart showing various hypotheses and the most probable estimated performance of the Fund s financial flows V.3.1 Hypotheses assumed in relation to the central or most likely indices for the following parameters: early redemption, delays in the payment of outstanding amounts and bad debts, in respect of the Assets comprising the Fund. The Bonds will accrue interest at a fixed annual nominal rate, payable annually. This rate will be established not later than the date of incorporation of the Fund by agreement between the Arranger (which is also the Assignor) and the Underwriting and Placement Entities, in accordance with the provisions of section II.10.1 above. The tables included in section V.3.3 refer to the Fund estimated revenues and payments scenario that will be applicable throughout the life of the Fund and the Bond issue, unless any of the circumstances described in sections II and IV should arise. The assumptions made in the preparation of this table are set out below and in the table itself. a) Assets assigned (i) Portfolio volume: Tranche A 3,500,000,000 euros. Tranche B 1,500,000,000 euros. (ii) Interest rate: the fixed interest rate corresponding to the Mortgage Bonds A is % and the fixed interest rate corresponding to the Mortgage Bonds B is %. (iii) Percentage of defaults: 0% per year. (iv) Bad debts: 0%. b) Bonds 116

117 (i) Volume: 5,000,000,000 euros, split in 3,500,000,000 euros of Tranche A and 1,500,000,000 euros of Tranche B. (ii) Interest rate: the fixed interest rate corresponding to the Tranche A Bonds in % and to the Tranche B Bonds in %. c) Additional agreements (i) Cash and Collection Accounts The Cash and Collection Accounts will be held with the Financial Agent in accordance with the Financial Services Agreement referred to in point (iii) below. (ii) Liquidity Facility Agreements Amount of the Liquidity Facility A: ,000 euros. Amount of the Liquidity Facility B: 29,100,000 euros. (iii) Financial Services Agreement Guaranteed interest rate: For balances held in the Cash Account, the Financial Agent guarantees an interest rate equal to: % For the purposes of this example, a remuneration of the Cash Account of % (one (1) year EURIBOR published on March 4, 2005, % minus 0.10%) has been taken into consideration. In the following table, under the entry Cash Account there appear the amounts corresponding to the return of the balance of the Cash Account, on each Payment Date. Sums deposited in the Collection Account will accrue interest at general rate of one (1) week EURIBOR minus 0.15% annual. For the purposes of this example, a remuneration of the Collection Account of % (one (1) week EURIBOR published on March 4, 2005, % minus 0.15%) has been taken into consideration. In the following table, under the entry Collection Account there appear the amounts corresponding to the return of the balance of the Collection Account, on each Payment Date. d) Commissions and Margin Net Financial Revenue: variable amount which will be settled on the Final Maturity Date, at an amount equal to any positive difference between the income and expenditure of the Fund prior to closure of its official accountancy. Once calculated on 117

118 a yearly basis, said amount shall be credited into the Cash Account until the Final Maturity Date on which it shall be transferred to the Collection account to be paid to the Assignor. V.3.2 A nalysis and comments as to the impact on the Fund s financial structure of possible variations in the assumptions described above The quality of the Assets and the mechanisms guaranteeing the Fund s financial balance are such that it is not reasonable to take into consideration percentages of early redemption, default or bad debt so extreme which could unbalance the financial structure of the Fund V.3.3 Table showing the Fund s income and expenditure flows. For purposes of clarity, the following table shows collections and payments based on the application of cash criteria although in fact the Fund will make a temporary allocation of income and expenses based on the accrual principle. 118

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