* * * * * FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 GENERAL MEETING OF 18 APRIL 2018

Transcription

1 NPL SECURITISATION EUROPE SPV S.r.l. single-member limited liability company Registered Office: Milan, Via A. Pestalozza, no. 12/14 Capital: Euro 10,000 fully paid up Milan Company Register Number Tax Code and VAT Number REA Number * * * * * FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 GENERAL MEETING OF 18 APRIL

2 Table of contents ADMINISTRATIVE BODY... 3 DIRECTORS' REPORT... 4 Financial Statements as at 31 December STATEMENT OF COMPREHENSIVE INCOME STATEMENT OF CHANGES IN EQUITY STATEMENT OF CASH FLOW AS AT 31 DECEMBER NOTES TO THE FINANCIAL STATEMENTS Part A Accounting policies Part B Information on the Statement of Financial Position Part C Information on the Income Statement Part D Other information - Securitisation transaction Section 1 Specific disclosures on the operations carried out LOT 1 NPL SECURITISATION EUROPE SPV S.r.l Section 2 Specific disclosures on the operations carried out LOT 2 NPL SECURITISATION EUROPE SPV S.r.l Section 3 Information on risks and risk management policies Section 4 Disclosures on equity Section 5 Statement of Comprehensive Income Section 6 Related party transactions Section 7 Other disclosures

3 ADMINISTRATIVE BODY BOARD OF DIRECTORS: CHAIR OF THE BOARD OF DIRECTORS: DIRECTOR DIRECTOR GIULIA REALI DANIELA ROGNONE ALVISE DI STEFANO Independent auditors: PRICEWATERHOUSECOOPERS S.p.A. 3

4 DIRECTORS' REPORT Dear Member, we submit the financial statements for the period ended 31 December 2017 for your approval. The financial statements consist of the Statement of Financial Position, the Income Statement, the Statement of Comprehensive Income, the Statement of Changes in Equity, the Statement of Cash Flows, and the Notes to the Financial Statements. In addition, they are accompanied by this Report on operations. The financial statements as at 31 december 2017 are the first financial statements closed by the company since it was established. Pursuant to the provisions of Article 2 of Italian Legislative Decree 38/2005, the Company, as an issuer of financial instruments admitted to trading on EU regulated markets, has prepared the financial statements in accordance with the accounting standards issued by the International Accounting Standards Board (IASB) and the relevant interpretations by the International Financial Reporting Interpretations Committee (IFRIC), as endorsed by the European Commission and introduced into Italian law by said Legislative Decree 38/2005. The Financial Statements were prepared using the format set out by the Bank of Italy in the provision Financial Statements of non-bank IFRS intermediaries dated 9 December All references to securitisation vehicle corporations have been removed from the regulatory scope of the latter, since they no longer qualify as non-bank financial brokers pursuant to Legislative Decree 141/2010 and related remedial decrees. Considering this, for the purpose of preparing the Notes to the Financial Statements, the Company used the Instructions for the preparation of financial statements and reports for Financial Intermediaries, Payment Institutions, Electronic Money Institutions, Asset Management and Brokerage Firms which was released by the Bank of Italy on 15 December 2015, also in view of the fact that IAS 1 does not require a rigid structure of layouts and pending the enactment of a new legislation, replacing the previous one, governing the preparation of securitisation vehicle corporations' financial statements. This has been deemed the most suitable approach for providing information on the financial position, income statement and cash flows of the Company, as well as on the performance of the securitisation transactions, that is useful for financial statement users in making economic decisions and is relevant, reliable and intelligible both in terms of Company operations and in terms of separate assets. The IAS/IFRS standards and the relevant interpretations (SIC/IFRIC) used are those endorsed by the European Union and in force at the reporting date. Company business The Company was incorporated on 08 November 2016 through public deed drafted by Ms. Giovannella Condò, Notary Public in Milan (Index no /File no. 8207). Since 25 January 2017 the Company is registered in the Bank of Italy's List of Financial Vehicle Corporations, based on the Provision dated October 1, 2014 regarding Measures concerning information and statistical requirements of vehicle corporations involved in securitisation transactions. In accordance with the Articles of Association and the provisions of law, the Company has the sole purpose of carrying out one or more securitisation transactions pursuant to Italian Law 130/99 and subsequent implementing measures, by purchasing receivables, both existing and future, and identifiable in block if multiple, and financing such purchase by issuing notes as per Article 1, paragraph 1, letter b) of Italian Law 130/1999, in such a manner as not to assume any credit risk. Under the Articles of Association and in accordance with the aforementioned Law and related implementing measures, the receivables purchased by the Company in relation to each transaction represent assets that are for all intents and purposes separate from those of the Company as well as 4

5 those relating to any other transactions. Creditors other than the holders of the notes issued to fund the acquisition shall have no claim to such assets. Within the scope of such purpose, the Company initiated two securitisation transactions. Securitisation transactions Separate assets no. 1 On 17 January 2017, the Company entered into a securitisation transaction pursuant to Italian Law 130/1999, purchasing a portfolio of non-performing receivables due from companies involved in bankruptcy procedures (still in progress at the time of the purchase or previously in bankruptcy procedures and at the time of purchase, no longer involved in such) and/or from natural persons and/or bonds issued by companies involved in bankruptcy procedures (still in progress at the time of the purchase or previously in bankruptcy procedures and at the time of purchase, no longer involved in such). The initial nominal value of the portfolio was Euro 1,369,923, while the price of sale was Euro 68,422. The securitisation transaction was completed on 3 February 2017 with the issue of two classes of notes. a. Class A Notes: issued on a Partly Paid Asset Backed Fixed Rate Senior Notes basis, up to a maximum of Euro 20,000,000, maturing in December 2036, of which Euro 61,579 paid at issue. ISIN code IT b. Class B Notes: issued on a Partly Paid Asset Backed Variable Return basis, up to a maximum of Euro 2,222,222, maturing in December 2036, of which Euro 6,842 paid at issue. ISIN code IT In FY 2017, the company stipulated additional contracts for the transfer of receivables. At the same time, with each purchase of securitised loans, subsequent payments were made against the notes. At 31 December 2017, the situation of the notes was as follows: a. Class A Notes: Partial payments made for a total of Euro 19,998,509 b. Class B Notes: Partial payments made for a total of Euro 2,222,222 The Class A Notes are listed on the Malta Stock Exchange and are not rated. For a qualitative and quantitative description of the transaction undertaken, along with the agreements entered into, please refer to Part D - Other Information in the Notes to the Financial Statements. Separate assets no. 2 On 28 December 2017, the Company entered into a second securitisation transaction pursuant to Italian Law 130/1999, purchasing a portfolio of impaired loans, mainly unsecured, originated by Banco BPM S.p.A. and Banca Popolare di Milano S.p.A., mainly due from debtors involved in bankruptcy or liquidation procedures or in any case in a state of insolvency, belonging to a portfolio with a GBV in excess of Euro 900 million, called the Large Portfolio, in the context of a competitive process, upon completion of which the Transferor was named as the awardee of said portfolio. The initial nominal value of the portfolio was Euro 904,638,501, while the price of sale was Euro 18,000,000. The securitisation transaction was completed in January 2018 with the issue of three classes of notes. For a qualitative and quantitative description of the transaction undertaken, along with the agreements entered into, please refer to Part D - Other Information in the Notes to the Financial Statements. 5

6 Company's operations The day-to-day management of the Company shows no significant events worthy of note. The Company's assets amounted to Euro 32,262 and consisted of Euro 10,006 in receivables due from banks, Euro 20,100 in receivables due from the initial securitised assets, and Euro 2,156 in receivables due from tax authorities for advances on withholdings. Liabilities amounted to Euro 22,262 and consisted of payables due to suppliers for invoices not yet received. Equity totalled Euro 10,000 and consisted entirely of the nominal capital for the same amount paid up upon the establishment of the Company. Expenses, amounting to Euro 25,760, mainly consisted of audit fees (Euro 17,467), notary costs for the establishment of the company (Euro 5,665), and the other administrative expenses incurred as part of the Company's operations (Euro 2.498). Bank charges amounted to Euro 130. Income, amounting to Euro 25,760, consisted of the Issuer Retention Amount necessary to keep the Company in good standing. There was nothing to report in the Statement of Comprehensive Income. There are no significant comments to be made on the Statement of Cash Flows. Information on risks and risk management policies As regards the presentation of the main risks and uncertainties to which the Company is exposed, due to the particular nature of the provisions in the law governing financial vehicle corporations engaged in securitisation transactions, there is no relevant information to disclose concerning the Company s equity. Specifically, the Company was formed to carry out one or more securitisation transactions, and this purpose was fulfilled with the completion of the securitisation transactions described in this report. Please refer to Part D, Section 1 of the Notes to the Financial Statements for information on said securitisation transactions, whose assets are separate from those of the Company. Pursuant to Article 2428, paragraph 6-bis of the Italian Civil Code, the Company specifies that, in accordance with Italian Law no. 130 of 30 April 1999, given the original structure of the transaction and based on the performance of the portfolio concerned, as commented in the Notes to the Financial Statements, the credit, liquidity and cash flow risks have been transferred to the holders of the notes issued. Composition of the Company capital The Share Capital is fully subscribed and paid up for a quota equal to Euro 10,000 which is held by the single member Special Purpose Entity Management S.r.l. based in Milan, Italy. Results for the year For the year ended 31 December 2017, the Company reached break-even point. Treasury shares and shares in parent companies The Company does not hold, and has not held during the period, any treasury shares or shares in parent companies, either directly or through trust companies or nominees. Relations with subsidiaries, associates, and parent companies The Company has no relations with the single member with regard to its ordinary operations. Management and coordination The Company is not subject to any management and coordination by the single member. 6

7 Related-party transactions There is no information to disclose in this regard. Research and development The Company conducted no research and development during the period. Report on corporate governance and ownership structure In accordance with Article 3 of Italian Law 130, the Company's sole purpose is to carry out one or more securitisation transactions by purchasing receivables in such a manner as not to assume any credit risk. In compliance with the provisions of the aforementioned law, the receivables the Company acquires as part of the securitisation transaction represent assets that are for all intents and purposes separate from those of the Company as well as those relating to other transactions, and creditors other than the holders of the notes issued to fund the acquisitions shall have no claim to such assets. Within the limits permitted by Italian Law 130/1999, the Company may conduct additional financial transactions as required to ensure the successful completion of the securitisation transactions it carries out, or that are instrumental to achieving the Company s purpose, as well as re-invest in other financial assets the proceeds from the servicing of the receivables acquired that are not used to settle the claims arising from the above securities. As part of its operations, the Company initiated two securitisation transactions by purchasing a portfolio of receivables without recourse pursuant to Italian Law 130/99 and issuing notes listed on regulated markets. Therefore, in accordance with Article 123 bis of Italian Legislative Decree no. 58 of 24 February 1998, the report on operations of issuers of securities admitted to trading on regulated markets must contain a specific section entitled Report on governance and ownership structure, which, under paragraph 2 (b) of said Article, shall provide information on the main characteristics of existing risk management and internal audit systems used in relation to the financial reporting process, including consolidated reports, where applicable. The Company is incorporated in Italy and issued Class A debt instruments traded on the Malta Stock Exchange. The Company has no employees. The Company uses service providers in order to pursue its business purpose, and consequently also for the activities associated with the existing risk management and internal audit systems concerning the financial reporting process. The securitisation transaction documents govern the appointment of each service provider and specify what is required of it. This information is also provided in Part D, Section F.3 of the Notes to the Financial Statements. These service providers are selected from among the entities that perform the type of work the Company delegates to them on a professional basis. They must perform their duties in accordance with applicable laws and so as to enable the Company to meet its obligations under the transaction documents and the law. Such service providers mainly act as: (i) the Servicer, which is responsible, among other things, for managing the receivables acquired; (ii) the Corporate Servicer, which is responsible for the Company s administrative and accounting activities; and (iii) the Cash Manager, the Calculation Agent, and the Paying Agent, which provide cash management, calculation and payment services. In particular, the Servicer is the entity responsible for collecting the receivables sold and providing cash management and payment services according to the provisions of Article 2, paragraph 3 (c) of Italian Law 130/1999. Under Article 2, paragraph 6, of said Law, banks or intermediaries registered in the specific list under Italian Legislative Decree no. 385 of 1 September 1993 can act as Servicers, ensuring that transactions conform to the law and the prospectus. Also pursuant to the Bank of Italy's Provision of 23 August 2000, the Servicer shall have operational duties as well as guarantee that securitisation transactions are conducted properly in the interest of the noteholders and, more generally, the market. Finally, the Corporate Servicer shall prepare the financial reports mainly by using the data provided by 7

8 the entity responsible for servicing the receivables acquired. Information on environment and human resources Due to the particular nature of the Company's business, and since there are no employees, there is no information to disclose regarding the environment or human resources. The Company solely operates at its registered office. Events after the reporting period and outlook There are no significant events to report with regard to the Company s operations after the year end. The second securitisation transaction was completed in January 2018 with the issue of three classes of notes. The Company will continue the current securitisation transactions. ***** Proposal to approve the financial statements Dear Member, please refer to the Notes to the Financial Statements for a description of the basis of measurement and preparation of the annual Financial Statements, which we are confident you will approve of, and we invite you to approve the Financial Statements for the year ended 31 December 2017, in which the Company broke even. Milan, 19 March 2018 Giulia Reali (Chair of the Board of Directors) 8

9 Financial Statements as at 31 December 2017 STATEMENT OF FINANCIAL POSITION (in Euro) Assets 60 Receivables 10, Other assets 22,256 Total assets 32,262 Liabilities and equity 90 Other liabilities 22, Capital 10, Profit (loss) for the year 0 Total liabilities and equity 32,262 9

10 INCOME STATEMENT Income - Expenses 10 Interest receivable and similar income 1 Net interest income 1 40 Fee expense (130) Net fee income (expense) (130) Net trading income (loss) (129) 110 Administrative expenses (25,630) (b) other administrative expenses (25,630) 160 Other operating income (expenses) 25,759 Operating profit (loss) 0 Pre-tax profit (loss) from continuing operations 0 After-tax profit (loss) from continuing operations 0 Profit (loss) for the year 0 10

11 STATEMENT OF COMPREHENSIVE INCOME Items 10 Profit (loss) for the year - Other comprehensive income, net of tax, not to be reclassified to profit or loss 20 Property, plant and equipment 30 Intangible assets 40 Defined benefit plans 50 Non-current assets being disposed of 60 Share of reserves from equity accounted investments Other comprehensive income, net of tax, to be reclassified to profit or loss 70 Foreign investment hedges 80 Exchange differences 90 Cash flow hedges 100 Available-for-sale financial assets 110 Non-current assets being disposed of 120 Share of reserves from equity accounted investments 130 Total other comprehensive income, net of tax 140 Total comprehensive income (items ) - 11

12 STATEMENT OF CHANGES IN EQUITY (in units of Euro) Balance at 31 Dec 2016 Change in opening balance Balance at 01 January 2017 Allocation of prior year profit Reserves Dividends and other allocations Changes occurred during the year Change in reserves Issue of new shares Equity transactions Share buybacks Special dividend Change in equity instruments Other changes Total comprehensive income for the year ended Equity at Capital: 10,000 10,000 Share premiums Reserves: a) retained earnings b) other Valuation reserves: Equity instruments Treasury shares Profit (loss) for the year Equity 10,000 10,000 No prior period information has been provided, as the Financial Statements for the year ended 31 December 2017 are the first prepared for the Company. 12

13 STATEMENT OF CASH FLOW AS AT 31 DECEMBER 2017 OPERATING ACTIVITIES (A) 1. OPERATIONS 0 - interest income 1 - interest expense - dividends or similar income - net fee income (expense) (130) - personnel expenses - other expenses (25,630) - other income 25,759 - tax expense - income/expenses associated with disposal groups, net of tax effect 2. NET CASH FROM/USED FOR FINANCIAL ASSETS (22,256) - financial assets held for trading - financial assets at fair value - available-for-sale financial assets - due from banks - due from financial institutions - due from customers - other assets (22,256) 3. NET CASH FROM/USED FOR FINANCIAL LIABILITIES 22,262 - due to banks - due to financial institutions - due to customers - outstanding securities - financial liabilities held for trading - financial liabilities at fair value - other liabilities 22,262 NET CASH FROM/USED IN OPERATING ACTIVITIES (A) 6 INVESTING ACTIVITIES (B) 1. NET CASH FROM 0 - sales of equity investments - dividends from equity investments - sales/redemptions of held-to-maturity financial assets - sales of property, plant and equipment - sales of intangible assets - sales of business units 2. NET CASH USED IN 0 - purchases of equity investments - purchases of held-to-maturity financial assets - purchases of property, plant and equipment - purchases of intangible assets - purchases of business units NET CASH FROM/USED IN INVESTING ACTIVITIES (B) 0 FINANCING ACTIVITIES (C) - payment of corporate capital 10,000 - issue/repurchase of treasury shares 0 - issue/purchase of equity instruments 0 - dividend distribution and other allocations NET CASH FROM/USED IN FINANCING ACTIVITIES (C) 10,000 NET CASH GENERATED/USED DURING THE YEAR (D=A+B+C) 6 Items Amount (in units of Euro) 31Dec2017 Opening cash and cash equivalents 0 Total net cash generated/used during the year 10,006 Closing cash and cash equivalents 10,006 13

14 NOTES TO THE FINANCIAL STATEMENTS Company business The Company, incorporated on 08 November 2016 through public deed drafted by Ms. Giovannella Condò, Notary Public in Milan, has the sole purpose of carrying out one or more securitisation transactions in accordance with Italian Law no. 130 of 30 April The Company is registered in the Bank of Italy's List of Financial Vehicle Corporations. The Company completed the following transactions: Portfolio 1: On 17 January 2017, the Company entered into a securitisation transaction pursuant to Italian Law 130/1999, purchasing a portfolio of non-performing receivables due from companies involved in bankruptcy procedures (still in progress at the time of the purchase or previously in bankruptcy procedures and at the time of purchase, no longer involved in such) and/or from natural persons and/or bonds issued by companies involved in bankruptcy procedures (still in progress at the time of the purchase or previously in bankruptcy procedures and at the time of purchase, no longer involved in such). The securitisation transaction was completed on 3 February 2017 with the issue of two classes of notes. Portfolio 2: On 28 December 2017, the Company entered into a second securitisation transaction pursuant to Italian Law 130/1999, purchasing a portfolio of impaired loans, mainly unsecured, originated by Banco BPM S.p.A. and Banca Popolare di Milano S.p.A., mainly due from debtors involved in bankruptcy or liquidation procedures or in any case in a state of insolvency, belonging to a portfolio with a GBV in excess of Euro 900 million, called the Large Portfolio, in the context of a competitive process, upon completion of which the Transferor was named as the awardee of said portfolio. The securitisation transaction was completed in January 2018 with the issue of three classes of notes. Introduction Pursuant to the provisions of Article 2 of Italian Legislative Decree 38/2005, the Company, as an issuer of financial instruments admitted to trading on EU regulated markets, has prepared the financial statements in accordance with the accounting standards issued by the International Accounting Standards Board (IASB) and the relevant interpretations by the International Financial Reporting Interpretations Committee (IFRIC), as endorsed by the European Commission and introduced into Italian law by said Legislative Decree 38/2005. The Financial Statements were prepared using the format set out by the Bank of Italy in the provision Financial Statements of non-bank IFRS intermediaries dated 9 December All references to securitisation vehicle corporations have been removed from the regulatory scope of the latter, since they no longer qualify as non-bank financial brokers pursuant to Legislative Decree 141/2010 and related remedial decrees. Considering this, for the purpose of preparing the Notes to the Financial Statements, the Company used the Instructions for the preparation of financial statements and reports for Financial Intermediaries, Payment Institutions, Electronic Money Institutions, Asset Management and Brokerage Firms which was released by the Bank of Italy on 15 December This has been deemed the most suitable approach for providing information on the financial position, income statement and cash flows of the Company, as well as on the performance of the securitisation transactions, that is useful for financial statement users in making economic decisions and is relevant, reliable and intelligible both in terms of Company operations and in terms of separate assets. The IAS/IFRS standards and the relevant interpretations (SIC/IFRIC) used are those endorsed by the European Union and in force at the reporting date. 14

15 Securitisation transactions The Company exclusively carries out receivables securitisation transactions pursuant to Italian Law 130/99 and it has recognised the financial assets purchased, the notes issued, and the other transactions carried out as part of the securitisation transactions in the Notes to the Financial Statements, and not in the Statement of Financial Position, consistently with the provisions of Italian Law no. 130/99, which sets out that the receivables relating to each transaction represent assets that are for all intents and purposes separate from those of the Company as well as those relating to any other transactions. Financial asset and liabilities are recognised in the Notes to the Financial Statements in accordance with the administrative provisions issued by the Bank of Italy under Article 9 of Legislative Decree 38/2005 and in accordance with international accounting standards. For the purposes of completeness, it should be noted that the IFRS accounting treatment of financial assets and/or groups of financial assets as well as financial liabilities arising from securitisation transactions is still discussed by the bodies dealing with the interpretation of IFRSs. The Bank of Italy's Provision dated 15 December 2015 expressly established that Part D of the Notes to the Financial Statements shall include a specific section presenting in summary form at least the following information for each individual securitisation transaction carried out: - amount of the receivables purchased (par value and purchase price); - amount of the notes issued, broken down by class and seniority; as well as all additional information deemed necessary to give a true and fair view of the transaction, it being understood that the reporting entity should prevent an excess of information from making the document less clear and easy to understand. The same provision also requires to disclose the following information for each securitisation transaction: a) summary statement of the securitised assets and notes issued; b) qualitative information; c) quantitative information. Form and content of the Financial Statements The Financial Statements were prepared in accordance with Italian Legislative Decree no. 38 of 28 February 2005 and the instructions issued by the Bank of Italy in its provision of 15 December 2015, and consist of: Statement of Financial Position and Income Statement Statement of Comprehensive Income Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements Part A Accounting policies A.1 Overview A.2 Main items in the financial statements A.3 Disclosure of transfers between portfolios of financial assets A.4 Fair value disclosure A.5 Day one profit/loss disclosure Part B Information on the Statement of Financial Position Part C Information on the Income Statement Part D Other information These financial statements are accompanied by the Report on operations. Since the Company is a Public Interest Entity as defined in Article 16 of Italian Legislative Decree 39 of 27 January 2010, in accordance with said Legislative Decree, it appointed the Audit Firm PricewaterhouseCoopers S.p.A. to conduct statutory audits of the Company for the nine-year period from 2017 to

16 Part A Accounting policies A.1 Overview Section 1 - Statement of compliance with international accounting standards Pursuant to the provisions of Article 2 of Italian Legislative Decree 38/2005, the Company, as an issuer of financial instruments admitted to trading on EU regulated markets, has prepared the financial statements in accordance with the accounting standards issued by the International Accounting Standards Board (IASB) and the relevant interpretations by the International Financial Reporting Interpretations Committee (IFRIC), as endorsed by the European Commission and introduced into Italian law by said Legislative Decree 38/2005. The Company therefore applied the IASs/IFRSs in force at 31 December 2017 (including the SIC and IFRIC interpretations) as endorsed by the European Commission. Section 2 - Basis of preparation The Financial Statements were drawn up in line with the prescriptions laid down in the Bank of Italy Instruction dated 15 December 2015 (supervisory instructions for the preparation of financial statements and annual reports by financial intermediaries, payment institutions, Electronic, Money Institutions, SGRs, and SIMs) outlining the framework and regulations for the Annual Report of financial brokers. The financial statements were prepared to present fairly the Company s financial position, financial performance and cash flows for the year. The Company prepared the Financial Statements on a going concern basis (IAS 1 par. 25), using the accrual basis of accounting (IAS 1 par. 27 and 28), and ensuring the consistency of presentation and classification of items in the financial statements (IAS 1 par. 45). Assets and liabilities, and income and expenses were not offset unless required or permitted by a standard or an interpretation (IAS 1 par. 32). The financial statements consist of the statements required by IAS 1 and by the Bank of Italy s Provision, i.e. the Statement of Financial Position, the Income Statement, the Statement of Comprehensive Income, the Statement of Changes in Equity, the Statement of Cash Flows, and the Notes to the Financial Statements. The financial statements as at 31 December 2017 are the first financial statements closed since the Company was established and, therefore, for each item of the Balance Sheet and Income Statement, no indication is given of a comparative amount for the previous year. The Company exclusively carries out receivables securitisation transactions pursuant to Italian Law no. 130 of 30 April 1999 and it has recognised the financial assets purchased, the notes issued, and the other transactions carried out as part of securitisation transactions in the Notes to the Financial Statements, consistently with the provisions of Italian Law 130/99, according to which the receivables relating to each transaction represent assets that are for all intents and purposes separate from those of the Company as well as those relating to any other transactions. The financial statements were prepared using the Euro as reporting currency; unless otherwise noted, all amounts reported in these Financial Statements are in thousands of Euro. Here below are the accounting standards, amendments and IFRS interpretations which will be effective after 2017: On 18 May 2017, the IASB issued IFRS 17 Insurance Contracts, replacing IFRS 4 Insurance Contracts. 16

17 IFRS 17 is effective for annual reporting periods beginning on or after 1 January Earlier application is permitted if both IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments have also been applied. On 7 June 2017, the IASB issued IFRIC 23 Uncertainty over Income Tax Treatments. The interpretation clarifies the accounting for uncertainties in income taxes. IFRIC 23 is effective for annual reporting periods beginning on or after 1 January Earlier application is permitted. On 12 October 2017, the IASB issued Prepayment Features with Negative Compensation (Amendments to IFRS 9). The amendment is effective for annual reporting periods beginning on or after 1 January Earlier application is permitted. On 12 October 2017, the IASB issued Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28). The amendment is effective for annual reporting periods beginning on or after 1 January Earlier application is permitted. On 12 October 2017, the IASB issued Annual Improvements to IFRS Standards Cycle, which collects the amendments made to some IFRSs as result of the annual improvements process. The main changes regard: IFRS 3 Business Combinations and IFRS 11 Joint Arrangements: the amendments clarify that when an entity obtains control of a business that is a joint operation, it remeasures previously held interests in that business. When an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business. IAS 12 Income Taxes: the amendment clarifies that all the tax effects linked to dividends (including payments on financial instruments classified in equity) must be booked consistently with the transaction that generated said profits (income statement, OCI or equity). IAS 23 Borrowing costs: the amendments clarify that if any specific borrowing remains outstanding after the related qualifying asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general borrowings. Here below are the accounting standards effective for periods beginning on or after 1 January 2018 and already endorsed by the European Commission: IFRS 15 Revenue from Contracts with Customers, which will replace standards IAS 18 Revenue and IAS 11 Construction Contracts, as well as interpretations IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers and SIC 31 Revenues-Barter Transactions Involving Advertising Services. This standard sets out a new model for recognising revenue, to be applied to all contracts with customers, except for those falling within the scope of other IAS/IFRS standards such as leases, insurance contracts and financial instruments. IFRS 9 - Financial Instruments, which introduced new requirements for classifying and measuring financial assets and financial liabilities. More specifically, for financial assets, the new standard takes a single approach based on the method of managing the financial instruments and the characteristics of the contractual cash flows of the financial assets themselves, so as to determine the measurement criterion, replacing the 17

18 different rules envisaged by IAS 39. For financial liabilities, on the other hand, the main change regards the way in which changes to fair value of a financial liability designated as a financial liability measured at fair value are booked to the income statement, if these changes are due to a change in the credit rating of the liability issuer. According to the new standard, these changes must be noted under Other comprehensive income and no longer on the income statement. The impairment requirements in the new standard are based on an expected credit loss model and replace the IAS 39 incurred loss model; entities are required to consider supportable information that is available without undue cost or effort about past events, current conditions and forecasts of future economic conditions. IFRS 9 requires that the same impairment model apply to all financial instruments, i.e. financial assets measured at amortised cost, financial assets mandatorily measured at FVTOCI, lease receivables, and trade receivables. IFRS 9 includes a new hedge accounting model to better align hedge accounting with the risk management activities of an entity, by removing or amending some of the key prohibitions and rules within IAS 39. The entry into force of the above standards and/or amendments did not have an impact on the Company's financial statements. Section 3 Events after the reporting period No events occurred after the reporting period that had a material impact on the financial position, financial performance and cash flows as presented in the financial statements. Section 4 Other aspects There is nothing else to disclose in these notes. A.2 Main items in the financial statements The following is a description of the main accounting standards used in the preparation of the financial statements at 31 December 2017 with reference to only the items in the statement of financial position and income statement. The Company has described the criteria for the recognition, classification, measurement and derecognition of each item. RECEIVABLES Recognition Receivables are recognised at the date they are granted, or when the Company becomes a party to the relevant contractual provisions and, as a result, has a legal right to receive cash flows. At initial recognition, the Company measures the receivable at fair value, which normally corresponds to the amount granted or the price paid. Classification This item includes receivables due from banks arising from the Company s cash at bank, receivables due from financial institutions, as well as the receivables classified under Other assets, such as the receivables due from third parties. Measurement After initial recognition, receivables due from banks are measured at amortised cost. 18

19 Other short-term receivables are measured at their original value, equal to the estimated realisable value. As for other receivables, at each reporting date the Company tests them for impairment. Derecognition Receivables are derecognised when the asset in question is sold, transferring substantially all the risks and rewards, when the contractual rights expire, or when the receivable is considered to be uncollectible. PAYABLES Recognition Payables are recognised on the date of receipt of the relevant amounts, or when the Company becomes a party to the contractual provisions and, as a result, has a legal obligation to pay cash flows. At initial recognition, the Company recognises payables at fair value, which normally corresponds to the amount paid. Classification This item includes payables due to banks, financial institutions, as well as the payables recognised under Other liabilities, such as the payables due to suppliers and tax authorities for VAT and withholding taxes. Measurement Payables are measured at amortised cost. Short-term liabilities with a negligible time factor are measured at their original value. Derecognition Payables are derecognised when the liabilities have expired or are settled. INCOME AND EXPENSES Expenses are recognised in the income statement when a decrease in future economic benefits related to a decrease in an asset or an increase of a liability has arisen that can be measured reliably. Expenses are recognised in the income statement on the basis of the matching of revenues and expenses. All costs relating to securitisation procedures are charged back directly to the securitisation transaction. Revenue is recognised in the income statement when an increase in future economic benefits related to an increase in an asset or a decrease of a liability has arisen that can be measured reliably. This means that revenue is recognised at the same time as the recognition of an increase in an asset or a decrease of a liability. The main revenue item in the Company's financial statements derives from the charging back of costs related to the aforementioned securitisation procedure. A.3 Disclosure of transfers between portfolios of financial assets As for the disclosures required under IFRS 7, there were no reclassifications of financial assets between different portfolios. 19

20 A.4 Fair value disclosure QUALITATIVE INFORMATION In light of the Company's operations, there is no significant information to disclose. QUANTITATIVE INFORMATION A Assets and liabilities not measured at fair value or measured at fair value on a nonrecurring basis: breakdown by fair value level Assets/liabilities not measured at fair value or measured at fair value on a non-recurring basis CA L1 L2 L3 1. Held-to-maturity financial assets 2. Receivables Property, plant and equipment held for investment purposes 4. Non-current assets and disposal groups Total Payables 2. Outstanding securities 3. Liabilities associated with assets being disposed of Total IFRS 13 establishes a fair value hierarchy based on the extent to which inputs to valuation techniques used to measure the underlying assets/liabilities are observable. The fair value measurement for an asset or liability is categorised in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. Generally speaking, an input is not considered to be significant to the fair value measurement of an instrument if the remaining inputs account for most of the change in fair value over a period of three months. Specifically, the hierarchy consists of three levels: - level 1: the fair value of the instruments categorised in this level is measured based on quoted prices in active markets; - level 2: the fair value of the instruments categorised in this level is measured based on valuation models using inputs observable in active markets; - level 3: the fair value of the instruments categorised in this level is measured based on valuation models using mainly inputs that are unobservable in active markets. The fair value of receivables due from banks is deemed to be equal to the carrying amount, as these are exclusively receivables on demand relating to correspondent bank accounts. A.5 Day one profit/loss disclosure Since in 2017 the Company did not use any financial instruments as part of its operations, there is no day one profit/loss disclosure to be made. Here below is the information described in Parts B, C and D of the Notes to the financial statements. It should be noted that the Company did not provide neither information on cases that are not relevant 20

21 to these financial statements, nor the amounts concerning items that are not present or lower than Euro 1,000, which is the measuring unit in which the Notes are expressed. Part B Information on the Statement of Financial Position Assets Section 6 Receivables Item Receivables due from banks Breakdown Fair value CA L1 L2 L3 1. Deposits and current accounts Loans 2.1 Repurchase agreements 2.2 Finance leases 2.3 Factoring - with recourse - without recourse 2.4 Other loans 3. Debt securities - structured securities - other debt securities 4. Other assets Total Legend: L1=Level 1 L2=Level 2 L3=Level 3 This item consisted of the balance on the Company s bank account, totalling Euro 10 thousand, and is to be considered as receivable on demand. Section 14 Other assets Item Breakdown of item 140 Other assets Breakdown Receivables due from assets 20 Receivables due from tax authorities 2 Total carrying amount 22 The item has a balance of Euro 22 thousand and consists of Euro 20 thousand receivable due for the Issuer Retention Amount against the first separate equity for the maintenance of the Company s good 21

22 standing and Euro 2 thousand in receivables due from the tax authority for excess withholding payments. Liabilities Section 9 Other liabilities Item Breakdown of item 90 Other liabilities Breakdown Payables due to suppliers 10 Payables for invoices not yet received 12 Total carrying amount 22 Section 12 Equity Items 120, 130, 140 and Breakdown of item 120 Capital Type Amount 1.Capital 1.1 Ordinary shares /quotas 10 The Capital, consisting of membership interests, subscribed and paid up for a total of Euro 10,000, is held by the single member Special Purpose Entity Management S.r.l Other information The Company does not hold, and has not held during the period, any treasury shares or shares in parent companies, either directly or through trust companies or nominees. There is no information to disclose concerning the requirements in IAS 1 par. 79, lett. a), (iii), (v), (vi), (vii), par. 136A, par. 137, and par. 80A. Pursuant to Article 2427, no. 7-bis of the Italian Civil Code, here below is the breakdown of Equity by possible use and distributability, as well as the description of the uses made during the previous three years. Nature/description Amount Capital 10 Retained earnings Profit carried forward Total 10 Non-distributable portion Distributable residual portion A: for capital increase B: to cover losses C: for distribution to members Possible use Amount available Summary of uses made during the previous three years To cover For other losses reasons Guarantees, Commitments and Off-Balance-Sheet Transactions Guarantees in favour of third parties At 31 December 2017, the Company has not issued any guarantees in favour of third parties. 22

23 Commitments At 31 December 2017, the Company had no commitments. Off-balance-sheet transactions At 31 December 2017, there were no off-balance-sheet transactions outstanding. Foreign currency assets and liabilities At 31 December 2017, the Company had no foreign currency assets or liabilities. Part C Information on the Income Statement Section 9 Administrative expenses Item Breakdown of item 110.b Other administrative expenses The item, amounting to Euro 26 thousand, consisted of administrative services and other operating expenses. 31 Dec 2017 Audit certificate 17 Notary fees for incorporation 6 Other administrative and sundry expenses 3 Total administrative expenses 26 Section 14 Other operating income (expenses) Item Breakdown of item 160 Other operating income (expenses) The item, amounting to Euro 26 thousand, consisted of the Issuer Retention Amount required to maintain the Company in good standing. Recovery of maintenance costs 26 Total other operating income 26 23

24 Part D Other information - Securitisation transaction Section 1 - Specific disclosures on the operations carried out LOT 1 NPL SECURITISATION EUROPE SPV S.r.l. F1 Summary of securitised assets and notes issued A. SECURITISED ASSETS A1) Receivables 16,587,255 A2) Notes 19,718 TOTAL A) 16,606,973 B. USE OF FUNDS FROM LOAN SERVICING B3) Other 5,005,392 TOTAL B) 5,005,392 C. NOTES ISSUED Class A Notes 20,673,202 Class B Notes 2,222,222 TOTAL C) 22,895,424 D. FINANCING 500 E. OTHER LIABILITIES 211,876 DIFFERENCE A + B - C - D - E (1,495,435) F. INTEREST EXPENSE ON NOTES ISSUED 724,428 G. COMMISSIONS AND FEES CHARGED TO THE TRANSACTION G1) for servicing 17,138 G2) for other services 782,366 TOTAL G) 799,504 H. OTHER EXPENSES 13,576 I. INTEREST INCOME FROM SECURITISED ASSETS 0 L. OTHER INCOME 42,073 DIFFERENCE I + L - F - G - H (1,495,435) A+B-C-D-E is the cumulative result of the transaction, while I+L-F-G-H is the result for the period. No prior period information has been provided, as the securitisation transaction was completed in

25 Measurement criteria adopted in preparing the Summary Statement of the securitised assets and notes issued In reporting on the transaction, consideration has been given to the Bank of Italy's Provision of 15 December Instructions for the preparation of financial statements and reports for Financial Intermediaries, Payment Institutions, Electronic Money Institutions, Asset Management and Brokerage Firms - in accordance with the principle of substance over legal form. Specifically, said Bank of Italy's Provision sets out the disclosure requirements concerning the transactions carried out for the notes to the financial statements of Financial Vehicle Corporations engaged in securitisation transactions. Considering the nature of the transaction entered into and the Company's limited operational capacity, the accounting information and the measurements of the Securitised Assets have been acquired from the Servicer. Specifically, the following measurement criteria were applied for the most significant items. Securitised assets Receivables Receivables are recognised at their purchase price, which is calculated by deducting the price differential from the par value of the receivables. Use of funds - Receivables due from banks The assets that comprise this item are recognised at nominal value and according to their estimated realisable value, including any interest accruing. Notes issued The notes are recognised at par value plus interest accruing. Borrowings Payables are recognised at par value. Other liabilities The liabilities that comprise this item are recognised at nominal value. Accrued expenses were calculated on an accrual basis, in accordance with the matching of revenues and expenses in the period. Income and expenses Income and expenses are recognised on an accrual basis, including by recognising accruals and deferrals. Where technically appropriate, accruals and deferrals are added directly to or deducted directly from the relevant assets or liabilities. Breakdown of items included in the summary of the transaction Below is the breakdown of the main items. 25

26 Securitised assets Receivables The item is broken down as follows: Situation at Receivables purchased (par value) 525,164 Notes purchased (par value) 971 Differential between the par value and the price - Receivables (508,577) Differential between the par value and the price - Notes (951) Total 16,607 Details on the composition of the receivables, information on the performance for the year and the status of the receivables, and related breakdowns, are reported in the section Quantitative information. Use of funds from loan servicing The item is broken down as follows: Situation at Cash available on current accounts 5,002 Notes differential deferred charges 3 Total 5,005 Notes issued The item is broken down as follows: Situation at Class A Notes 19,999 Class B Notes 2,222 Accrued expenses on Class A Notes 675 Accrued expenses on Class B Notes 0 Total 22,896 Loans The item is broken down as follows: Situation at J-Invest loan 1 Total 1 Other liabilities The item is broken down as follows: Situation at Payables due to suppliers for invoices not yet received 85 Payables due to Company's operations 20 Payables due to suppliers 107 Total