UUBBII FFIINNAANNCCEE SS..RR..LL..
Corso Vercelli 40 – 20145 Milan, Italy Quota capital € 10,000.00 = fully paid up Listed on the Milan Business Register no. 06132280964 | REA 1871670 Tax ID no. 07639080964 Part of the UBI VAT Group, VAT no. 04334690163
COMPANY UNDER THE MANAGEMENT AND COORDINATION OF UNIONE DI BANCHE ITALIANE S.P.A., BERGAMO (BG)
FFIINNAANNCCIIAALL SSTTAATTEEMMEENNTTSS AATT 3311 DDECEMBER 22001199
This is a translation of the Italian original "Bilancio d’esercizio al 31 dicembre 2019" and has been prepared solely for the convenience of international readers. In the event of any ambiguity the Italian text will prevail. The Italian original is available upon written request to UBI Finance S.r.l., Corso Vercelli 40 – 20145 Milano (Italy)
FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
CCONTENTS
ADMINISTRATIVE BODY ...... 3
REPORT ON OPERATIONS ...... 4
1 - GENERAL INFORMATION 4 1.1 - Management of the Company 6 1.2 - Company organisation 10 1.3 - Research and development 10 1.4 – Treasury and parent company quotas 10 1.5 - Management and coordination activities 10 1.6 – Transactions with associated parties and infra-group transactions 10 1.7 -. Going concern. 10 2 - IMPORTANT EVENTS AFTER CLOSURE OF THE FINANCIAL YEAR 11 3 – BUSINESS OUTLOOK 11 4 - PROFIT FOR THE YEAR 11 5 - OTHER INFORMATION 11
BALANCE SHEET ...... 13
INCOME STATEMENT ...... 14
STATEMENT OF COMPREHENSIVE INCOME ...... 15
STATEMENT OF CHANGES IN EQUITY ...... 16
CASH FLOWS STATEMENT ...... 17
EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS ...... 19
1. INTRODUCTION 19 2. PART A – ACCOUNTING POLICIES 19 A.1 General part 19 A.2 Part relative to the principal financial statement aggregates 23 A.3 Information on the transfer of financial assets between portfolios 25 A.4 Information on fair value 25 A.5 “Day one profit/loss” Disclosure 26 3. PART B - COMMENTS ON THE BALANCE SHEET 27 4. PART C - INFORMATION ON THE INCOME STATEMENT 32 5. PART D – ADDITIONAL INFORMATION 35 Section 1 - Specific notes on the operations carried out 35 Section 3 – Information on risks and related hedging policies 63 Section 4 – Information on assets 65 Section 5 – Comprehensive Income Statement 65 Section 6 – Related party transactions 66 Section 7 – Other information 69 INDEPENDENT AUDITOR 'S REPORT ...... 70
2 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
AADMINISTRATIVE BBODY
BOARD OF DIRECTORS
CHAIRMAN OF THE BOARD : RENZO PARISOTTO
DIRECTORS : GIUSEPPE GILARDI
ANDREA DI COLA
INDEPENDENT AUDITOR : DELOITTE & TOUCHE S. P.A.
3 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
RREPORT ON OPERATIONS
1 - GENERAL INFORMATION UBI FINANCE S. R.L. (hereinafter the “ Company ”) is a vehicle securitisation company under Italian law incorporated on 18 March 2008. Pursuant to art. 2 of the Articles of Association, the Company’s sole purpose, within the scope of one or more transactions (meaning both single transactions and issue programmes) for the issue of covered bonds pursuant to art. 7-bis of Law. 130 of 30 April 1999 (“ Law 130/99 ”) and any subsequent modifications and additions and related implementation provisions, is to purchase from banks, in exchange for payment, land- property and mortgage loans due from the Public Administration or guaranteed by them, also identifiable as a block, as well as notes issued within the scope of securitisation transactions concerning loans of the same nature, in accordance with the said legislation, by taking on loans granted or guaranteed also by the selling bank, as well as the issue of guarantees for the bonds issued by those or other banks. Italian Law 130/99 was amended in 2005 to allow the issue of covered bonds. At the date of this annual report, however, no regulatory interpretation related to the application of such Law has been issued by the Regulatory or Government body, except: (i) Decree no. 310 of the Italian Ministry of Economy and Finance of 14 December 2006 (the “ MEF Decree ”), that defined the technical requirements of the guarantee that can be given for covered bonds, (ii) Decree no. 29 of the Italian Ministry of Economy and Finance of 17 February 2009 that redefined the conditions under which financial intermediaries have to be registered in the Special List, with effect from the date of publication in the Gazzetta Ufficiale [Official Journal] of 20 October 2009; (iii) the Ruling of the Bank of Italy dated 16 April 2010, related to the supervisory provisions on covered bonds; (iv) Italian Legislative Decree no. 141 dated 13 August 2010 and its subsequent amendments and additions, which has entirely amended the regulation relating to financial intermediaries and other financial industry players, effective from 19 September 2010; and (v) the “New Supervisory Provisions” issued by the Bank of Italy on 24 June 2014 to bring national regulations on covered bonds into line with the new elements introduced by the European Regulation no. 575/2013 on covered bank bonds (the “CRR”). Therefore, such authorities or other authorities might issue other regulations on Law 130/99 and its application, whose impact cannot be foreseen by the Company at the date of this report. In accordance with the aforesaid legal provisions, the credits purchased by the Company and the amounts paid by the relevant debtors will go to satisfy the rights, also in accordance with Art. 1180 of the Italian Civil Code, of the covered bond holders, as per subsection 1 of Art. 7-bis of Italian Law no. 130/99, to whose benefit the Company has provided guarantee, of the counterparties of derivative contracts with the aim of hedging risks on credits and securities purchased and of other accessory contracts, as well as to the payment of other transaction costs, as a priority against the repayment of loans as per subsection 1 of Art. 7-bis of Italian Law no. 130/99. The loans purchased by the Company relating to an issue programme are accounted for separately for all intents and purposes from those of the Company and from those relating to other issue programmes, on which no actions by creditors other than covered bond holders and other creditors, as per the previous subsection, are permitted. Unlike traditional securitisation
4 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L. transactions these programmes have a dynamic structure which consists of providing for subsequent scenarios of buying and selling assets to maintain a high-quality guarantee and comply with the maximum ratio to the covered bonds issued. The accounting treatment of the programme for the issue of covered bonds carried out by the Company complies with the provisions of Bank of Italy’s Instructions of 30 November 2018 (for financial statements for years ending on 31 December 2019) on the matter of financial statements of IFRS intermediaries other than bank intermediaries. This in turn is in line with the contents of the preceding Ruling of 29 March 2000 and with the provisions of Italian Law 130/99, under which “loans relating to each transaction are segregated assets, to all effects, from those of the company and those of other transactions”. At the date of this Report, no specific alternative instructions had been received from the Entities or authorities with competence regarding the accounting treatment of securitisation transactions put in place in terms of the aforementioned Italian Law 130/1999. Consequently, these continue to be represented as they were in the 2018 Financial Statements in the relative section of the Explanatory Notes to the financial statements, entitled “Part D – Other Information”, and are not included in the Financial Statement schedules. In order to achieve the business purpose, the Company was initially registered in the appropriate section of the General List, as per Art. 106 of Italian Legislative Decree no. 385 of 1 September 1993 (“ TUB ” - Consolidated Law on Banking) as no. 40685 and with ABI Intermediary code no. 335315. The reform of Title V TUB, started with Italian Legislative Decree no.141 of 13 August 2010 and completed with the issue of the MEF Decree no.53/2015 and with the publication on 12 May 2015 of the Bank of Italy’s new Supervisory Provisions for Financial Intermediaries (Circular no.288 of 3 April 2015) coming into force on 11 July 2015, in particular, (i) redefined a new operating perimeter for financial intermediaries, which does not include vehicle companies for the guarantee of covered bonds if belonging to a banking group as defined by Art.60 TUB, and (ii) established a single Register of financial intermediaries, thereby overcoming the pre-existing division between intermediaries registered in the Special list pursuant to Art.107 and those registered in the General list pursuant to Art.106. This said, following the loss of the requisites for remaining in the new “Single Register pursuant to Art. 106”, on 22 July 2015, the Company requested cancellation as a Financial Intermediary from the General List pursuant to Art. 106 TUB and the Bank of Italy confirmed that such cancellation had taken place on 31 July 2015. The Company has its registered offices in Milan, which were transferred during the year from Foro Buonaparte no. 70 to Corso Vercelli no. 40 with a duration established through 31 December 2050. At incorporation, the quota capital of € 10,000, fully paid up, was 90% held by Stichting Mara, a Dutch Foundation with registered office in Amsterdam (the Netherlands), in Luna Arena, Herikerbergweg 238, and the remaining 10% by Unione di Banche Italiane S.p.A., a joint stock company incorporated under Italian law, with registered office in Bergamo (Italy), piazza Vittorio Veneto no. 8, Parent of the banking group of the same name. Subsequently, on 26 June 2008, with a deed of transfer of quotas pursuant to art. 2479 of the civil code, Stichting Mara transferred an investment of a nominal Euro 5,000, equal to 50% of the quota capital, to Unione di Banche Italiane S.p.A. Following this act, the registered capital of € 10,000 is now held for a quota of 60% by UNIONE DI BANCHE ITALIANE S. P.A. (Hereinafter “ UBI Banca ”) and the remaining 40% by the Dutch foundation STICHTING MARA .
5 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
1..1 - MANAGEMENT OF THE COMPANY 1.1.1 DESCRIPTION OF THE CB1 PROGRAMME During 2008, in keeping with its business purpose, the Company, with the assistance of Barclays Bank PLC as Arranger and of the law firms Clifford Chance and Chiomenti, put into place with UBI Banca (the “Issuer” ) a series of negotiations aimed at implementing the issue programme (the “CB1 Programme” ) by UBI Banca for the issue of covered bonds pursuant to Law 130/1999. In particular, the CB1 Programme provides for the fractional issuance of covered guaranteed bonds by UBI Banca (hereafter, “CBs” ) for an amount up to € 10,000,000,000, and in this context, the Company is committed to ensuring these issuances. As a matter of fact, the “Covered Bond Guarantee” agreement, signed on 30 July 2008, states that the Company issues an irrevocable guarantee, on a first demand, unconditional and independent in favour of the covered bond holders in respect of portfolios of loans from time to time sold by the Seller Banks, under which the Company will guarantee the repayment of all sums due in respect of capital and interest in relation to the covered bonds by the Issuer (the “ Guarantee ”). The Company is therefore committed, from time to time, to increase, where necessary, the Guarantee granted, based on the amount of single issue.
1.1.2 PROGRAMME PERFORMANCE In compliance with this Programme structure, the Company has acted as follows: (i) from June 2008 to September 2010, the following UBI Group banks adhered to the Programme: 1. Banco di Brescia S.p.A. (“ BBS ”), now UBI Banca by virtue of the merger by acquisition that took place by deed dated 20 February 2017; 2. Banca Regionale Europea S.p.A. (“ BRE ”), now UBI Banca by virtue of the merger by acquisition that took place by deed dated 15 November 2016, 3. Banca Popolare di Bergamo S.p.A. (“ BPB ”), now UBI Banca by virtue of the merger by acquisition that took place by deed dated 20 February 2017 4. Banca Popolare di Ancona S.p.A. (“ BPA ”), now UBI Banca by virtue of the merger by acquisition that took place by deed dated 20 February 2017 5. Banco di San Giorgio S.p.A. (“ BSG ”), initially merged in BRE, now UBI Banca by virtue of the merger by acquisition with BRE by deed dated 15 November 2016, 6. Banca Popolare Commercio e Industria S.p.A. (“ BKI ”), now UBI Banca by virtue of the merger by acquisition that took place by deed dated 15 November 2016, 7. Banca Carime S.p.A. (“ BRM ”), now UBI Banca by virtue of the merger by acquisition that took place by deed dated 20 February 2017 8. UBI Banca Private Investment S.p.A. (“ BPI ”) now IW Bank S.p.A. by virtue of the merger by acquisition that took place by deed dated 25 May 2015; 9. Banca di Valle Camonica S.p.A. (“ BVC ”), now UBI Banca by virtue of the merger by acquisition that took place by deed dated 20 February 2017 and 10. Unione di Banche Italiane S.p.A. (“ UBI ”), which since 23 July 2012 (with effect from 1 January 2012 for accounting and tax purposes) merged with Banca 24-7 by acquisition of the latter. To this end, they sold portfolios of suitable assets to the Company at a purchase price of the previous portfolios equal to the book value stated on the latest financial statements approved by the Originating Bank, net of the principal amount collected in the period between the latest financial statements approved and the date of sale of the portfolio, and including the accrued interest at the date of the sale thereof;
6 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
1. at the fourteenth transfer on 1 November 2015 IW Bank S.p.A. (“ IWB ” all together jointly defined as the “ Seller Banks ”) joined the Programme; 2. the Originating Banks also sold new portfolios to the Company with a view to integrating the portfolio held by the Company against the issue, by UBI Banca of further series of CBs; 3. simultaneously to each transfer, the Seller Banks granted a loan to the Company of the same amount, so that the Company could have the financing in order to purchase such portfolios, loan subordinated to the reimbursement of the covered bonds issued by UBI Banca; 4. by virtue of the Master Purchase Agreement stipulated with the Company on 11 April 2013, UBI Banca subscribed to the Programme as the new seller bank, thus falling within the portfolio of Seller Banks as defined above; in that since 23 July 2012, (with effect from 1 January 2012 for accounting and tax purposes), UBI Bank merged with Banca 24-7 by acquisition of the latter, taking over the residual stock of non-captive loans; 5. each transfer was publicised by a dedicated publication in the Gazzetta Ufficiale ; 6. the table below summarises the salient features of the CBs issued by UBI Banca from the start of the CB1 Programme up until 31 December 2013:
ISSUES (max. Programme €10 bln) GUARANTEE Series date Maturity Initial issue maximum 1 23 September 2009 € 1,000,000,000 € 1,882,502,000 2 16 December 2009 16 December 2019€ 1,000,000,000 € 2,752,502,000 3 30 April 2010 30 April 2023€ 250,000,000 € 3,063,400,000 4 15 September 2010 15 September 2017€ 1,000,000,000 € 4,334,400,000 5 18 October 2010 18 October 2015€ 500,000,000 € 4,912,000,000 6 28 January 2011 28 January 2021€ 1,000,000,000 € 6,471,000,000 7 22 February 2011 22 February 2017€ 750,000,000 € 7,497,000,000 8 18 November 2011 18 November 2022€ 250,000,000 € 7,600,000,000 9 22 February 2012 17 February 2014€ 250,000,000 10 22 February 2012 18 February 2014€ 250,000,000 € 8,300,000,000 11 22 February 2012 19 February 2014€ 250,000,000 12 Tranche 1 14 October 2013 14 October 2020€ 1,250,000,000 € 9,380,000,000 12 Tranche 2 19 December 2013 14 October 2020€ 250,000,000 € 9,580,000,000 13 23 December 2013 23 December 2018€ 1,000,000,000 € 10,720,000,000
7. During 2014, UBI Banca deemed it appropriate to change the CB listing, initially listed on the London Stock Exchange, to the Irish Stock Exchange, both as regards future and existing issues under the Programme; 8. at the same time, UBI Banca increased the maximum amount of the Programme from the initial amount of € 10 billion to a new amount (€ 15 billion), more in keeping with the previous issues and those planned for the future; 9. the table below summarises the salient features of the CBs issued by UBI Banca after this increase until the reporting date of these financial statements:
7 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
ISSUES (max. Programme €15 bln) GUARANTEE Series date Maturity Initial issue maximum 14 05 February 2014 05 February 2024€ 1,000,000,000 € 12,020,000,000 15 05 March 2014 05 March 2019€ 700,000,000 € 11,960,000,000 16 13 October 2014 13 October 2017€ 700,000,000 € 12,400,000,000 17 07 November 2014 07 November 2025€ 1,000,000,000 € 13,470,000,000 18 Tranche 1 27 October 2015 27 January 2023€ 750,000,000 € 11,630,000,000 19 14 December 2015 14 December 2022€ 500,000,000 € 12,120,000,000 20 31 March 2016 31 March 2022€ 1,000,000,000 € 12,200,000,000 18 Tranche 2 20 June 2016 27 January 2023€ 250,000,000 € 12,380,000,000 21 23 June 2016 23 June 2018€ 750,000,000 € 13,120,000,000 22 14 September 2016 14 September 2026€ 1,000,000,000 € 14,110,000,000 18 Tranche 3 21 October 2016 27 January 2023€ 250,000,000 € 13,320,000,000 23 04 October 2017 04 October 2027€ 1,250,000,000 € 12,700,000,000 24 € 500,000,000 15 January 2018 15 July 2024 € 12,560,000,000 25 € 500,000,000 26 23 February 2018 23 February 2033€ 90,000,000 € 12,590,000,000 27 26 February 2018 25 February 2033€ 160,000,000 € 12,800,000,000 24 Tranche 2 15 October 2018 15 July 2024€ 250,000,000 € 13,030,000,000 28 16 October 2018 16 October 2028€ 700,000,000 € 13,900,000,000 29 10 December 2018 12 December 2022€ 800,000,000 € 15,030,000,000 30 10 December 2018 11 December 2023€ 500,000,000 € 15,030,000,000 31 25 febbraio 2019 25 settembre 2025€ 500,000,000 € 14,640,000,000 32 05 dicembre 2019 05 dicembre 2029€ 1,000,000,000 € 15,520,000,000
1.1.3 PARTICIPATION IN THE UBI VAT GROUP As noted in the 2018 financial statements, on 9 October 2018, the UBI Banca Board of Directors resolved to include the parent company in the VAT Group Regime, effective as of 1 January 2019, as envisaged under Articles 70-bis through 70-duodecies of Italian Presidential Decree 633/1972, and formulated the instruction, in the context of the management and coordination activities applying to UBI Banca, that each company in the UBI Group involved in the project also join. Very briefly, the essential points relative to the above Decree are: - the option to adhere to the VAT Group Regime lasts for three years and cannot be revoked prior to natural expiry; - if opting for the VAT Group Regime, a new and independent entity with regards to the Value Added Tax is created, known as "VAT Group"; - if opting for the VAT Group Regime, this necessarily and automatically applies to all companies meeting the requirements established in the Decree, as any discretionary powers relative to the composition of those participating in the VAT Group are precluded (known as the “all in, all out principle”); - the VAT Group becomes the sole holder of all rights, obligations and responsibilities envisaged in Italian Presidential Decree 633/1972 and associated regulations: at the same
8 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
time that all entities participating in the VAT Group maintain their own legal autonomy/separation, solely for VAT purposes they "merge" into a single entity, known as the VAT Group, which is identified by a new VAT number; - as an effect of the VAT Group Regime, infragroup transactions are irrelevant for VAT purposes (both sales of goods and provisions of services) which occur between participants in the VAT Group, given that these are operations internal to the newly established taxpaying entity (the exception to this principal is transactions which occur between different segments of the VAT Group, known as “separate activities”); - transactions carried out relative to third parties by any participant of the group are considered to be carried out by the VAT Group for the purposes of VAT, and not by individual participants; - transactions carried out by third parties relative to any participant of the group are considered to be carried out relative to the VAT Group for the purposes of VAT and relative to the individual participants; - foreign permanent establishments (i.e. branches) are excluded from the VAT Group Regime pursuant to the law. This means services between the Italian parent company and a foreign branch, and vice versa, follow the ordinary rules relative to VAT (including those which determine the territorial location of the tax); - all rights and obligations deriving from the application of rules regarding VAT apply directly and only to the VAT Group and their fulfilment and execution is assigned solely to the representative of the group, which takes on all associated responsibilities; - the other participants are jointly responsible for greater taxes, interest and fines due following tax inspection, liquidation and auditing activities. Given the “all in, all out principle”, companies in the UBI Banca Group involved in the VAT Group Regime total 17, including the Company, which adhered on 14 November 2018. Relative to the stated joint responsibility, the parent company, as the representative of the UBI VAT Group, has relieved the Company of any charges, indemnity requirements and liabilities deriving from inclusion in the VAT Group Regime in order to guarantee the Company that participation in the UBI VAT Group will not prejudice its position relative to the financial administration, as well as to protect the integrity of its separate equity, destined solely for subscribers of the CB issued by UBI Banca.
1.1.4 OTHER SIGNIFICANT EVENTS DURING THE YEAR We note the following significant events: SALES : during the course of 2019, the Company acquired a loan portfolio without recourse from UBI Banca on 30 April for € 2,420,021,494 (“ Sale 19 ”). NPL REPURCHASE : on 30 August, UBI Banca repurchased these assets from the Company, which at 11 August respected all of the following criteria: - denominated in euro; - the relative repayment was originally guaranteed by mortgages on real estate assets; - the relative debtors were classified and identified as “non-performing” in the Bank of Italy Risk Clearinghouse by UBI or another bank in the UBI Group; - they were disbursed or acquired by Unione di Banche Italiane S.p.A. or Unione di Banche Italiane S.p.A. had become the owner of them following the merger by acquisition of other banks which were the originators of the loans and then transferred to UBI Finance S.r.l.; and
9 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
- UBI had sent the relative debtors, by 31 July 2019, a specific communication containing file no. 05072019_1 via registered letter with return receipt. The fee paid to repurchase these receivables was € 250,795,409. A more detailed qualitative and quantitative description of the operation carried out is provided in “Part D – Other Information” of the Explanatory Notes to the financial statements.
1..2 - COMPANY ORGANISATION The Company has no employees, secondary offices, branch offices or local units. In view of the particular nature of the operation that the Company intends to carry out, it has outsourced all the typical functions of an organisational structure and the internal control systems to specially appointed third parties. In particular, within the scope of the programme, the servicing activity is carried out by UBI Banca, as master servicer, charged with the collection of the loans subject to securitisation and the collection and payment services pursuant to Law 130/1999 and, as such, it will take on the commitments pursuant to Art. 2, par. 6 of Italian Law 130/1999 (hereinafter “ Master Servicer ”). The Master Servicer then delegated the collection and management of the Loans to the Sellers. The Company has also directly charged the Seller Banks, each in the quality of sub-servicer for the Credit portfolio sold by the same, to perform certain monitoring and reporting activities. As from 20 February 2017, following the “Single Bank” Project, IW Bank S.p.A. is the only remaining CB1 Programme special servicer. Relative to Company governance, Director Marco Trabattoni resigned for personal reasons effective 1 October 2019. Therefore, at its meeting on 25 October, the Board of Directors appointed Giuseppe Gilardi, a manager at UBI Banca, as the new member of the Board, through cooptation.
1..3 - RESEARCH AND DEVELOPMENT The Company has incurred no expenditure for research and development.
1..4 – TREASURY AND PARENT COMPANY QUOTAS Pursuant to Art. 2428 of the Italian Civil Code, we inform you that during the period none of the Company’s own shares or shares of the holding company were bought, sold or held in the portfolio, either directly or through trustees or nominees.
1..5 - MANAGEMENT AND COORDINATION ACTIVITIES Pursuant to Art. 2497 of the Italian Civil Code, we note that the Company is under the management and coordination of UBI Banca, which holds 60% of the Company’s quota capital.
1..6 – TRANSACTIONS WITH ASSOCIATED PARTIES AND INFRA-GROUP TRANSACTIONS Concerning relationships with UBI Group companies and subsidiaries, please refer to section 4 of part D of the Explanatory Notes.
1..7 -.. GOING CONCERN.. In preparing the financial statements, we assessed whether the basis existed to consider that the Company was able to operate as a going concern for at least twelve months following the financial statements reference date. To make this assessment, the following were taken into consideration: all available information and the specific activities performed by the Company
10 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L. whose sole corporate goal, in compliance with Italian Law 130/99, is the execution of one or more covered bond transactions. Consequently, these financial statements have been prepared with a view to the company as a going concern, as there are no events or situations that may give rise to any doubt as to its capacity to continue to operate in this fashion.
2 - IMPORTANT EVENTS AFTER CLOSURE OF THE FINANCIAL YEAR For significant events occurring after 31 December 2019, please see section 3 of part A1 of the Explanatory Notes.
3 – BUSINESS OUTLOOK Company management will aim at continuing the CB1 Programme by UBI Banca for the previously mentioned CB.
4 - PROFIT FOR THE YEAR The period closes with a break-even result, since management costs were debited to the separate capital as contractually agreed.
5 - OTHER INFORMATION There is nothing to report.
* * * * *
11 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
PROPOSAL FOR THE ALLOCATION OF PROFIT (LOSS) FOR THE YEAR
Dear Quotaholders,
We believe we have fully illustrated the Company's financial statements as at and for the year ended 31 December 2019, its twelfth year of activity, comprising the obligatory schedules required by IAS 1 that is the Balance Sheet, Income Statement, Statement of Comprehensive Income, Statement of Changes in Equity, Cash Flow Statement, Explanatory Notes and this Directors’ Report on operations. We therefore ask you to approve the financial statement at 31 December 2019, which closes at break-even point. Milan, 25 February 2020
UBI FINANCE S.R.L. For the Board of Directors The Chairman Renzo Parisotto
12 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
BBALANCE SSHEET
ASSETS
(amounts in euro) Asset Items 2019 2018
40. Financial assets measured at amortised cost 10,006 10,006 a) due from banks 10,006 10,006 b) due form financial companies - - c) due from customers - -
100. Tax assets 1,045 2,569 a) current 1,045 2,569 b) prepaid - -
120. Other assets 593,793 547,890
TOTAL ASSETS 604,844 560,465 LIABILITIES
(amounts in euro) Liabilities and Equity 2019 2018
60. Tax liabilities 434 1.478 a) current 434 1.478 b) deferred - -
80. Other liabilities 594.375 548.952
110. Quota Capital 10.000 10.000
150. Reserves 35 35
170. Profit (Loss) for the year - -
TOTAL LIABILITIES AND EQUITY 604.844 560.465
13 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
IINCOME SSTATEMENT
(amounts in euro)
Items 31/12/2019 31/12/2018
160. Administrative costs: (44,974) (56,575) a) staff costs (9,538) (17,602) b) other administrative expenses (35,436) (38,973)
200. Other operating income and expenses 45,408 57,975
210. OPERATING COSTS 434 1,400
PROFIT/(LOSS) BEFORE TAX FROM 260. 434 1,400 CONTINUING OPERATIONS 270. Income taxes for the year from continuing operations (434) (1,400) PROFIT/(LOSS) AFTER TAX FROM 280. - - CONTINUING OPERATIONS
300. PROFIT/(LOSS) FOR THE PERIOD - -
14 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
SSTATEMENT OF CCOMPREHENSIVE IINCOME
(amounts in euro)
Items 31/12/2019 31/12/2018
10. Profit/(Loss) for the year - - Other income, net of taxes without transfer to income statement - - 20. Equity securities measured at fair value through other comprehensive income - - 30. Financial liabilities measured at fair value through profit and loss (changes in own credit standing) - - 40. Hedging of equity securities measured at fair value through other comprehensive income - - 50. Property, plant and equipment - - 60. Intangible assets - - 70. Defined benefit plans - - 80. Non-current assets and asset groups held for sale - - 90. Portion of reserves relating to equity-accounted investments - - Other income, net of taxes with transfer to income statement - - 100. Hedges of investments in foreign operations - - 110. Exchange rate differences - - 120. Cash flow hedges - - 130. Hedging instruments (macro) - - 140. Financial assets (other than equity securities) measured at fair value through other comprehensive income - - 150. Non-current assets and asset groups held for sale - - 160. Portion of reserves relating to equity-accounted investments - - 170. Total other comprehensive income after tax - - 180. Comprehensive income (Items 10+170) - -
15 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
SSTATEMENT OF CCHANGES IN EEQUITY
CHANGES AT 31 DECEMBER 2019
(amounts in euro) Allocation of result Changes in the year previous year Transactions on shareholders’ equity 31/12/2019 Reserves dividends allocations instruments Other changes Other Balances at 31/12/2018 at Balances Shareholders' equity at at equity Shareholders' Changes in equity Balances at 01/01/2019 at Balances Issue ofquotas new Issue Changesinreserves Dividendsand other Changesto opening balances ComprehensiveincomeFY 2019 Distributionextraordinary Treasury quotas purchased quotas Treasury
Quota Capital 10,000 - 10,000 10,000 Quota premium on issue - - Reserves: 35 35 35 a) profits 35 - 35 35 b) others - - - - Valuation reserves - - - - Equity instruments - - - - Treasury quotas - - - - Profit/(Loss) for the year - - - - - Shareholders' equity 10,035 - 10,035 ------10,035
CHANGES AT 31 DECEMBER 2018
(amounts in euro) Allocation of result Changes in the year previous year Transactions on shareholders’ equity 31/12/2018 Reserves dividends allocations instruments Other changes Other Balances at31/12/2017 Balances Shareholders' equity at at equity Shareholders' Changes in equity Balances at 01/01/2018 at Balances Changesin reserves ofquotas new Issue Dividendsand other Changesto opening balances ComprehensiveincomeFY 2018 Distributionextraordinary Treasury quotas purchased quotas Treasury
Quota Capital 10,000 - 10,000 10,000 Quota premium on issue - - Reserves: 35 35 35 a) profits 35 - 35 35 b) others - - - - Valuation reserves - - - - Equity instruments - - - - Treasury quotas - - - - Profit/(Loss) for the year - - - - - Shareholders' equity 10,035 - 10,035 ------10,035
16 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
CCASH FFLOWS SSTATEMENT DIRECT METHOD
(amounts in euro) Amount A. OPERATING ASSETS 2019 2018 1. Operation - - - interest income collected (+) - - - interest expense paid (-) - - - dividends and similar revenues (+) - - - net fees and commissions (+/-) - - - staff costs (-) (9,538) (17,602) - other costs (-) (35,436) (38,973) - other revenues (+) 45,408 57,975 - taxes and duties (-) - - - income/expenses for groups of assets held for disposal, net of the tax effect (+/-) (434) (1,400) 2. Cash generated/absorbed by the financial assets (44,379) (60,359) - financial assets held for trading - - - financial assets measured at fair value - - - other assets obligatorily measured at fair value - - - financial assets measured at fair value through other comprehensive income - - - financial assets measured at amortised cost - - - other assets (44,379) (60,359) 3. Cash generated/absorbed by the financial liabilities 44,379 60,359 - financial liabilities measured at amortised cost - - - financial liabilities held for trading - - - financial liabilities measured at fair value - - - other liabilities 44,379 60,359 Net cash generated/absorbed by operating activities A - -
-INVESTMENT ACTIVITIES
1. Cash generated by - sales of equity investments - - - dividends collected on equity investments - - - sales of property, plant and equipment - - - sales of intangible assets - - - sales of business units - - 2. Cash absorbed by - - - purchases of equity investments - - - purchases of property, plant and equipment - - - purchases of intangible assets - - - purchases of business units - - Net cash generated/used by investments B - -
B. FUNDING ACTIVITIES
- issues/purchases of own shares - - - issues/purchases of equity instruments - - - distribution of dividends and other purposes - - Net cash generated/absorbed by funding activities C - -
NET CASH GENERATED/ABSORBED IN THE PERIOD D= A+ B+ C - -
KEY
(+) generated (-) absorbed
17 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
RECONCILIATION (amounts in euro) Amount Amount 2019 2018 Cash and cash equivalents at beginning of year 10,006 10,006 Total net cash generated/used during the year - -
Cash and cash equivalents at end of year 10,006 10,006
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UBI FINANCE S. R.L.
EEXPLANATORY NNOTES TO THE FFINANCIAL SSTATEMENTS
1.. INTRODUCTION These NOTES TO THE FINANCIAL STATEMENTS are subdivided into the following sections: PART A – ACCOUNTING POLICIES PART B - INFORMATION ON THE STATEMENT OF FINANCIAL POSITION PART C - INFORMATION ON THE INCOME STATEMENT PART D – ADDITIONAL INFORMATION
2.. PART A – ACCOUNTING POLICIES
A..1 GENERAL PART SECTION 1 - STATEMENT OF COMPLIANCE WITH INTERNATIONAL ACCOUNTING STANDARDS The Company is part of the UBI Banca Group, which prepares a consolidated financial statement pursuant to the provisions contained in Art. 3 of Italian Legislative Decree 38/2005 and therefore pursuant to the possibility granted by Art. 4, subsection 4 of Italian Legislative Decree no. 38 of 28 February 2005 (“ Italian Legislative Decree no. 38/2005 ”) and, as in previous years, has prepared the Financial Statement according to the accounting standards in force at 31 December 2019 issued by the International Accounting Standards Board (IASB) and the relative interpretations of the International Financial Reporting Interpretations Committee (IFRIC) approved by the European Commission and introduced into Italian legislation by the aforementioned Legislative Decree 38/2005. The said standards have been issued by the International Accounting Standards Board (IASB) and allow for comparison between company financial statements in a context of greater competition and globalisation. The application of IAS/IFRS was defined at European level by the EU Regulation no. 1606 of 19 July 2002 for the consolidated financial statements of listed Companies, and it was finalised with the approval of the standards by the European Commission. At national level, the application of IAS/IFRS was extended by Legislative Decree no. 38/2005, in the exercise of the options provided by the European Regulation, to the individual financial statements of listed companies, banks and regulated financial institutions, as an option for 2005 and mandatory from 2006.
SECTION 2 – GENERAL ACCOUNTING STANDARDS These Financial statements have been drawn up in application of the international accounting standards issued by the IASB and relative interpretations issued by the IFRIC approved by the European Union and bearing in mind the provisions of the Bank of Italy Provision of 30
19 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
November 2018 entirely replacing the Regulation of 14 February 2006 and subsequent amendments on the schedules and rules for compiling the financial statements of financial intermediaries other than bank intermediaries. The Company’s sole activity is the purchase of receivables by taking on loans under Italian Law no. 130 of 30 April 1999 as a part of transactions for the issue of Bank Covered Bonds. The financial assets purchased and other transactions carried out as part of the aforementioned transactions are reported in the explanatory notes in compliance with Italian Law no. 130 of 30 April 1999, whereby receivables relating to each transaction are accounted for separately for all intents and purposes from those of the company and from those relating to other transactions. For the sake of completeness, the accounting treatment according to International Financial Reporting Standards of financial assets and/or groups of financial assets and financial liabilities to guarantee transactions for the issue of CB has not yet been officially interpreted by the bodies responsible for International Financial Reporting Standards interpretation. The Financial Statements have been drafted in order to present a true and correct picture of the equity situation, the financial position, the economic results and the financial flows of the year. These Financial Statements are based on the application of the following general principles: . GOING CONCERN (IAS 1 PAR . 25 AND 26) Assets and liabilities are measured based on their function, since they are destined to last over time. . ACCRUALS PRINCIPLE (IAS 1 PAR . 27 AND 28) Costs and revenues are recognised, regardless of when the payments are actually made or received, according to the period in which they accrue and according to the criterion of correlation. . COHERENCE OF PRESENTATION (IAS 1 PAR . 29) The presentation and classification of items are kept constant over time to guarantee comparability of the information, unless a change is required by an International Accounting Standard or by an Interpretation or renders the presentation of amounts more appropriate in terms of significance and reliability. If a presentation or classification criterion is changed, the new criterion is also applied – where possible – to the previous financial statement; in such a case, the items concerned and the nature of and reason for the change are indicated. The financial statement schedule provided for by the Bank of Italy Provision of 30 November 2018 has been adopted in the presentation and classification of the items. . AGGREGATION AND RELEVANCE (IAS 1 PAR . 29) All significant aggregations of items with a similar nature or function are reported separately. The elements of a different nature or function, if material, are presented in a distinct manner. . PROHIBITION OF OFFSETTING (IAS 1 PAR . 32) The assets and liabilities, costs and revenues are not offset against each other unless required or permitted by an International Accounting Standard or Interpretation or by the formats and instructions laid down by the Bank of Italy. . COMPARATIVE INFORMATION The comparative information of the preceding period is given for all the data contained on the accounting schedules, unless an International Accounting Standard or an Interpretation prescribe or allow otherwise. Descriptive information is also given when useful for understanding the data. The financial statements are composed of the mandatory schedules required by IAS 1, that is the Balance Sheet, the Income Statement, the Statement of Changes in Equity, the Cash Flows Statement and these Explanatory Notes.
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UBI FINANCE S. R.L.
The Financial Statement has been drafted using the Euro as the accounting currency; therefore, unless specified otherwise, the figures on this Statement are in Euro. The Financial Statements are accompanied by the Report on operations. These financial statements were audited pursuant to Italian Legislative Decree 27 January 2010, no. 39 by Deloitte & Touche S.p.A., which was appointed by the quotaholders for the three-year period 2017-2019 on 06 March 2017.
REGULATORY DEVELOPMENTS Below we note, with reference to the areas of greatest significance, changes made to international accounting standards and information regarding the date of efficacy. IFRS ACCOUNTING STANDARDS, AMENDMENTS AND INTERPRETATIONS APPLIED AS OF 1 JANUARY 2019 On 13 January 2016, the IASB published standard IFRS 16 – Leases which replaces standard IAS 17 – Leases, as well as the interpretations IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases—Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The new standard provides a new definition of lease and introduced a criteria based on the notion of control (right of use) over an asset to distinguish lease contracts from contracts for the provision of services, identifying the following as discriminating factors: identification of the asset, right to replace the same, right to obtain substantially all economic benefits deriving from use of the asset and, finally, the right to direct use of the asset underlying the contract. The standard establishes a single model for recognising and measuring lease contracts for the lessee, which involves recognition of the asset subject to leasing, even if operating, in the assets, with a contra entry under financial liabilities. The standard does not introduce any significant changes for lessors. This standard, which applies as of 1 January 2019, had no effects on the Company's financial statements. On 12 December 2017, the IASB published the document “ Annual Improvements to IFRS 2015-2017 Cycle ” implementing the amendments to some principles as part of the annual improvement process. The main amendments refer to: o IFRS 3 Business Combinations and IFRS 11 Joint Arrangements: the amendment clarifies that when an entity obtains control of a business that is a joint operation, it must remeasure the interest previously held in that business. This process is not applicable, however, in the case of joint control. o IAS 12 Income Taxes: the amendment clarifies that all tax effects related to dividends (including payments on financial instruments classified under net equity) must be recognised consistently with the transaction generating said profits (income statement, OCI or net equity). o IAS 23 Borrowing costs: the amendment clarifies that in the case of funding that remains in place even after the qualifying asset is ready for use or sale, this becomes part of the financing expenses used to calculate the funding costs. The adoption of this amendment had no effect on the Company's financial statements. On 7 February 2018, the IASB published the document “ Plan Amendment, Curtailment or Settlement (Amendments to IAS 19) ”. The document clarifies that an entity must recognise a change (i.e. a curtailment or a settlement) in a defined benefit plan. The changes establish that an entity must update its assumptions and remeasure net liabilities or assets
21 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
deriving from the plan. The amendments clarify that, after the occurrence of the event, an entity must use updated assumptions to measure the current service cost and interest for the rest of the reference period subsequent to the event. The adoption of this amendment had no effect on the Company's financial statements. On 12 October 2017, the IASB published the document “ Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28) ”. This document clarifies the need to apply IFRS 9, including the requirements linked to impairment, to long-term interests in associate companies and joint ventures to which the equity method is not applied. The adoption of this amendment had no effect on the Company's financial statements. On 7 June 2017, the IASB published the interpretation “ Uncertainty over Income Tax Treatments (IFRIC Interpretation 23) ”. The interpretation deals with the issue of uncertainty over tax treatment in respect of income tax. In particular, the interpretation requires an entity to analyse uncertain tax treatments (individually or as a group, based on their features), always assuming that the tax authorities will review the tax position in question with full knowledge of all relevant information. If the entity finds it unlikely that the tax authorities will accept the tax treatment used, the entity must reflect the effects of this uncertainty when measuring current and deferred income taxes. Furthermore, the document contains no new disclosure obligations, but highlights that the entity must establish whether it is necessary to provide information on the considerations made by management and relating to the uncertainties inherent to the recognition of taxes, in accordance with IAS 1. The new interpretation applies as of 1 January 2019. The adoption of this amendment had no effect on the Company's financial statements. On 12 October 2017, the IASB published an amendment to “IFRS 9 Prepayment Features with Negative Compensation ”. This document specifies that instruments which permit early redemption could pass the Solely Payments of Principal and Interest (SPPI) test even if the "reasonable additional compensation" to be paid in the case of early redemption is "negative compensation" for the financing entity. The adoption of this amendment had no effect on the Company's financial statements. IFRS AND IFRIC ACCOUNTING STANDARDS, AMENDMENTS AND INTERPRETATIONS APPROVED BY THE EUROPEAN UNION , NOT YET REQUIRED AND NOT ADOPTED IN ADVANCE AS OF 31 DECEMBER 2019 On 31 October 2018, the IASB published the document “ Definition of Material (Amendments to IAS 1 and IAS 8 )”. The document introduced a change in defining the word “significance” as contained in the standards IAS 1 – Presentation of Financial Statements and IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors . This amendment aims to make the definition of “significant” more specific and introduces the concept of “obscured information”, accompanying the concepts of omitted or erroneous information, already present in the two standards subject to the change. The amendment clarifies that information is “obscured” if it is described so as to produce a similar effect in the primary readers of the financial statements as if the information were omitted or erroneous. The amendments introduced were approved on 29 November 2019 and apply to all transactions occurring after 1 January 2020. The Directors do not expect any effects from the adoption of this amendment. On 29 March 2018, the IASB publish an amendment to “ References to the Conceptual Framework in IFRS Standards ”. The amendment is effective for periods starting on or after 1 January 2020, but early application is allowed.
22 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
The Conceptual Framework defines the fundamental concepts for financial disclosures and guides the Council in developing IFRS standards. The document helps to guarantee that Standards are conceptually consistent and that similar transactions are treated in the same way, so as to provide useful information to investors, lenders and other creditors. The Conceptual Framework helps companies in developing accounting standards when no IFRS standard applies to a given transaction and, more generally, helps interested parties to understand and interpret the Standards. The Directors do not expect any effects from the adoption of this amendment. On 26 September 2019, the IASB published an amendment titled “ Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform ”. This amends IFRS 9 - Financial Instruments and IAS 39 - Financial Instruments: Recognition and Measurement, as well as IFRS 7 - Financial Instruments: Disclosures. In particular, the amendment changes some of the requirements established for application of hedge accounting, offering temporary derogations in order to mitigate the impact deriving from uncertainties relative to the IBOR reform currently under way for future cash flows in the period prior to completion. The amendment also requires entities to provide additional information about their hedge relationships directly affected by uncertainties generated by the reform and to which the stated derogations apply. The amendments take effect on 1 January 2020, but companies may opt for early application. The Directors do not expect any effects from the adoption of this amendment.
SECTION 3 – EVENTS AFTER CLOSURE OF THE FINANCIAL PERIOD Following the end of financial year 2019, the Programme in which the company is involved as a guarantor was managed on the basis of forecasts. At the date of preparation of these financial statements, there are no known events, subsequent to the reporting date, which could negatively influence the financial position and results of operations of the Company. Pursuant to IAS 10, the date on which these financial statements were authorised for publication by the Company's Board of Directors is 25 February 2020.
SECTION 4 – OTHER ASPECTS There is nothing to report.
A..2 PART RELATIVE TO THE PRINCIPAL FINANCIAL STATEMENT AGGREGATES The accounting policies adopted for the items shown in these financial statements at 31 December 2019 are described below. For each item, the recognition, classification, measurement and recognition of costs and revenues as well as derecognition criteria are given. These criteria have not changed from the previous fiscal year. RECEIVABLES AND OTHER ASSETS RECOGNITION CRITERIA Receivables are entered as of the date they are disbursed, i.e., when the company becomes a party in the contractual clauses and, as a consequence, has a legal right to receive financial flows. Initial entry is at fair value, which usually corresponds to the amount disbursed or the price paid. CLASSIFICATION CRITERIA
23 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
This item includes amounts due from banks which represent the Company’s liquid assets deposited with banks and the loans and receivables classified under “Other assets” such as tax assets or assets arising from the recharging of operating expenses to the CB1 Programme. CRITERIA FOR MEASUREMENT AND RECOGNITION OF INCOME COMPONENTS After initial recognition, amounts due from banks are recognised at the amortised cost, equal to the initial recognition value minus capital repayments, decreased/increased by writedowns/writebacks and decreased by amortisation of the difference between the amount disbursed and that repayable at maturity. As these are short-term receivables, the discounting factor was judged irrelevant and hence the assessment is done at the historical cost. Other receivables are examined at every accounting closure date, to verify whether there is any objective evidence of impairment. DERECOGNITION CRITERIA Receivables are derecognised when the relative assets are sold with the substantial transfer of all connected risks and rewards, or when the relative contractual rights expire, or when the assets are considered as definitively uncollectable.
PAYABLES AND OTHER LIABILITIES RECOGNITION CRITERIA Payables are recognised on the date of disbursement, i.e. when the Company becomes a party to the contractual clauses and has a consequent legal obligation to pay the relative amounts. Initial recognition of payables is at fair value which usually corresponds to the amount to be paid. CLASSIFICATION CRITERIA This item includes payables to the tax authorities or suppliers. CRITERIA FOR MEASUREMENT AND RECOGNITION OF INCOME COMPONENTS Since these are short-term liabilities, for which the temporal effect is negligible, they are entered at their original value, which is also the same as their extinction value. DERECOGNITION CRITERIA Payables are derecognised when they have expired or are paid.
CURRENT AND DEFERRED TAXES RECOGNITION CRITERIA Taxes are recognised when the various types of withholdings and taxes are identified. CLASSIFICATION CRITERIA Current and deferred tax assets and liabilities are included in this item. CRITERIA FOR MEASUREMENT AND RECOGNITION OF INCOME COMPONENTS Current and deferred tax assets and liabilities are entered without any offsetting. Current tax assets are entered at the nominal value of the receivables relative to the prepaid taxes. Current tax liabilities are also entered at the nominal value of the withholding taken, while fiscal year taxes are determined on the basis of a realistic forecast of the taxes to be paid in application of current tax law. Deferred tax liabilities are calculated independently of the tax situation relative to present or future losses; the entry of deferred tax assets depends on the reasonable expectation of their recovery. DERECOGNITION CRITERIA Current tax (assets and liabilities) are derecognised when, at the legal expiry date, the various
24 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L. taxes collected as a withholding agent are paid. Deferred taxes are cancelled according to forecasts of their recoverability.
COSTS AND REVENUES Costs are recognised in the income statement at the moment of a decrease in the future economic benefits which leads to a decrease in assets or an increase in liabilities with a value which can be reliably determined. Costs are recognised in the income statement according to the criterion of direct association between the costs incurred and the earning of specific income items (costs-revenue matching). All costs relating to the securitisation processes are charged back directly to the CB programme structured by UBI Banca in which the Company participates. Revenue is recognised in the income statement at the moment of an increase in the future economic benefits which leads to an increase in assets or a decrease in liabilities with a value which can be reliably determined. This means that the revenue is recognised at the same time as the increase in assets or the decrease in liabilities. The main revenue item on the Company’s financial statement is the re-debiting of the costs relative to the aforesaid securitisation process.
A..3 INFORMATION ON THE TRANSFER OF FINANCIAL ASSETS BETWEEN PORTFOLIOS There is nothing to report.
A..4 INFORMATION ON FAIR VALUE QUALITATIVE INFORMATION Given the company operations, there are no significant elements to report. QUANTITATIVE INFORMATION A.4.5.4. Assets and liabilities not measured at fair value or measured at fair value on a non-recurrent basis: division according to levels of fair value
Assets and liabilities not measured at fair value or 31/12/2019 31/12/2018 measured at fair value on a non-recurrent basis BV L1 L2 L3 BV L1 L2 L3 1. Financial assets measured at amortised cost 10,006 - - 10,006 10,006 - - 10,040 2. Tangible assets held for investment purposes ------3. Non -current assets and asset groups held for sale ------Total 10,006 - - 10,006 10,006 - - 10,040 1. Financial liabilities measured at amortised cost ------2. Liabilities associated with assets held for sale ------Total ------
KEY : BV = book value/L1 = level 1 / L2 = level 2 / L3 = level 3
The fair value of amounts due from banks may coincide with the financial statement value inasmuch as such receivables consist solely of short-term elements, relative to current accounts.
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UBI FINANCE S. R.L.
A..5 “DAY ONE PROFIT/LOSS” DISCLOSURE There is nothing to report.
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UBI FINANCE S. R.L.
3.. PART B - COMMENTS ON THE BALANCE SHEET
ASSETS
SECTION 4 - FINANCIAL ASSETS MEASURED AT AMORTISED COST - ITEM 40
4.1 FINANCIAL ASSETS MEASURED AT AMORTISED COST : SECTOR BREAKDOWN OF AMOUNTS DUE FROM BANKS
Composition Total 2019 Total 2018
Book Value Fair value Book Value Fair value of which: of which: Stage one and Stage Stage one and Stage acquired or L1 L2 L3 acquired or L1 L2 L3 stage two three originated stage two three originated impaired impaired
1. Deposits and 10,006 - - - - 10,006 10,006 - - - - 10,006 current accounts 2. Financing ------2.1 Repurchase agreements 2.2 Lease agreements 2.3 Factoring - with Recourse - without Recourse 2.4 Other loans
3. Debt securities ------3.1 structured securities 3.2 other debt securities
4. Other assets ------Total 10,006 - - - - 10,006 10,006 - - - - 10,006
KEY : L1 = level 1 L2 = level 2 L3 = level 3
The item shows the balance of current account 89283 open with UBI Banca S.p.A. which contains sums deposited by quotaholders for quota capital. Fair value at 31 December 2019 coincides with the book value, since these are receivables available on demand.
27 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
SECTION 10 – TAX ASSETS AND LIABILITIES – ITEM 100 UNDER ASSETS AND ITEM 60 UNDER LIABILITIES
10.1 “T AX ASSETS : CURRENT AND PREPAID ”: BREAKDOWN
Total 2019 Total 2018 a) current: 1,045 2,569 - tax receivables (advances, withholdings, etc.) - - - IRES advance payment 48 1,279 - IRAP advance payment 312 1,212 - offset IRES receivables 331 - - Reg. Business Tax credit subject to offsetting 354 78 b) prepaid tax assets: - - - prepaid IRES - - - prepaid IRAP - - Total 1,045 2,569
The item comprises the IRES and IRAP advances paid in 2019 and the IRAP receivables that can be offset.
10.2 “T AX LIABILITIES : CURRENT AND DEFERRED”: BREAKDOWN
Total 2019 Total 2018 a) current: 434 1,478 - tax payables for taxes withheld at source, not yet paid in - - - due to the Tax Authorities for stamp duty - - - current IRES and IRAP 434 1,478 b) liabilities for deferred taxes: - IRES - - - IRAP - - Total 434 1,478
The item consists of IRAP payables for € 332 and IRES payables for € 102.
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UBI FINANCE S. R.L.
SECTION 12 – OTHER ASSETS – ITEM 120 12.1 OTHER ASSETS : BREAKDOWN The Other Assets consist of the items detailed in the table below:
Description Total 2019 Total 2018 - Receivables from segregated assets 593,793 547,890 Total 593,793 547,890
The item “Receivables from segregated assets” represents the receivable (cumulative since the beginning of the securitisation Operation) for the recharge of the separate assets of the costs necessary to preserve the existence of the Company.
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UBI FINANCE S. R.L.
LIABILITIES
SECTION 6 – TAX LIABILITIES – ITEM 60 See Section 10 of the Assets.
SECTION 8 – OTHER LIABILITIES – ITEM 80 8.1 OTHER LIABILITIES : BREAKDOWN
Total 2019 Total 2018 - Payables to segregated assets 565,618 519,576 - Payables to the Board of Directors 9,538 9,538 - Payables to Deloitte & Touche S.p.A. 19,219 19,838 Total 594,375 548,952
The item “Payables to the segregated assets” represents the payable (cumulative since the beginning of the securitisation Operation) for the costs of the existence of the Company paid from the segregated assets.
SECTION 11 – EQUITY – ITEMS 110, 120, 130, 140, 150, 160 AND 170 11.1 EQUITY : BREAKDOWN The quota capital is € 10,000.00 and it is subdivided into quotas pursuant to Art. 2468 of the Italian Civil Code. At the reporting date, it was fully subscribed and paid up.
Types Amount 1. Quota Capital 10,000 1.1 Ordinary shares - 1.2 Other shares/Stakes 10,000
At 31 December 2019, the quota capital is held as follows: . € 4,000, or 40% of the quota capital, by the Dutch foundation STICHTING MARA , a Dutch foundation, based in Amsterdam (Netherlands), in Luna Arena, Herikerbergweg 238; . € 6,000, equal to 60% of the quota capital, by UBI BANCA S. P.A. with head office in Bergamo, Via V. Veneto n. 8, tax code and Bergamo Businesses Registration number 03053920165.
11.2 TREASURY SHARES : BREAKDOWN No shares have been issued or repurchased.
11.3 EQUITY INSTRUMENTS : BREAKDOWN No equity instruments have been issued.
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UBI FINANCE S. R.L.
11.4 QUOTA PREMIUMS : BREAKDOWN There is nothing to report.
11.5 OTHER INFORMATION The table below illustrates the composition of the quotaholders’ equity reserves and relative use of the same during the period:
Retained Legal reserve Others Total earnings A. OPENING BALANCE 2 33 - 35 B. INCREASES - - - - B.1 Profits allocated B.2 Other changes C. DECREASES - - - - C.1 Uses - to cover losses - distribution - transfer to capital C.2 Other changes D. CLOSING BALANCE 2 33 - 35
With regard to the information referred to in art. 2427, paragraph 7-bis of the Italian Civil Code, reference is made to the details in the following table:
EQUITY USABILITY AND DISTRIBUTION POSSIBILITIES
Use in the Amount at Possibility of Available Description three previous 31/12/2019 use quota periods
QUOTA CAPITAL 10,000 - - -
INCOME-RELATED RESERVES:
- LEGAL RESERVE 2 B 2 -
- RETAINED EARNINGS 33 A, B, C 33 -
- OTHERS - - - -
PROFIT (LOSS) FOR THE YEAR - - - -
KEY : “A” to increase capital “B” to cover losses “C” for distribution to shareholders
31 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
4.. PART C - INFORMATION ON THE INCOME STATEMENT
SECTION 10 - ADMINISTRATIVE COSTS – ITEM 160 10.1 STAFF COSTS : BREAKDOWN These expenses refer solely to fees paid to directors during the year. The Company does not have any employees.
Description Total 2019 Total 2018 - Directors’ fees 9,538 10,338 - Third party liability insurance - 7,264 Total 9,538 17,602
Items / Sectors Total 2019 Total 2018 1. Employed staff - - a) wages and salaries - - b) social security expenses - - c) post-employment indemnity - - d) welfare expenses e) provisions to staff post-employment benefits - - f) provisions to pension funds and similar commitments - - - defined contribution - defined benefit g) payments to external supplementary welfare provisions: - defined contribution - defined benefit h) other employee benefits 2. Other active staff 3. Directors and Auditors 9,538 17,602 4. Staff on leave 5. Recovery of expenses for employees seconded to other companies 6. Reimbursement of expenses for employees seconded to the company 9,538 17,602
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10.3 OTHER ADMINISTRATIVE EXPENSES : BREAKDOWN The item can be broken down as follows:
Total 2019 Total 2018 - Audit fees 35,006 38,543 - Tax for Government concessions 310 310 - Chamber of Commerce fees 120 120 Total 35,436 38,973
SECTION 14 - OTHER OPERATING INCOME AND EXPENSES – ITEM 200 14.1 OTHER OPERATING EXPENSES : BREAKDOWN
Description Total 2019 Total 2018 - Extraordinary Expenses 495 492 Total 495 492
14.2 OTHER OPERATING INCOME: BREAKDOWN
Description Total 2019 Total 2018 - Revenues from the recharge to the segregated assets 45,903 58,280 - Extraordinary Revenues - 187 Total 45,903 58,467
“Revenues from the recharge to the segregated assets” represents the proceeds arising from the recharge to segregated assets of the costs of existence of the Company for the period.
SECTION 19 - INCOME TAXES FOR THE YEAR FROM CONTINUING OPERATIONS – ITEM 270 19.1 INCOME TAXES FOR THE YEAR FROM CONTINUING OPERATIONS: BREAKDOWN
Total 2019 Total 2018 1. Current taxes (434) (1,400) 2. Changes to previous year current taxes - - 3. Reduction in current taxes - - 3.1 Reduction in current taxes for tax credits, under Law 214/2011 - - 4. Change in prepaid tax - - 5. Change in deferred tax - - Taxes for the year (434) (1,400)
The amount recorded in the financial statement is the debt for current taxes amounting to € 102 for IRES and to € 299 for IRAP.
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UBI FINANCE S. R.L.
19.2 RECONCILIATION BETWEEN THEORETICAL AND EFFECTIVE TAX BURDEN
(amounts in euro) 2019 2018 Type of operation/Amounts IRES IRAP IRES IRAP Profit before taxes 434 13,963 1,400 21,992 Difference between production value and cost - - - - Ordinary rate applicable 27.50% 5.57% 27.50% 5.57% Theoretical taxation 119 778 385 1,225 Tax effect of permanent differences: Non-deductible costs (63) - 1,142 - Other differences - - - - Regional business tax deduction - (8,000) - (8,000) Adjusted taxable income 371 5,963 2,542 13,992 Changes in deferred tax liabilities Effective taxation 102 332 699 779 Effective rate 23.51% 2.38% 49.93% 3.54%
34 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
5.. PART D – ADDITIONAL INFORMATION
SECTION 1 - SPECIFIC NOTES ON THE OPERATIONS CARRIED OUT
H. COVERED BONDS
H.1 - SUMMARY TABLE OF ASSETS UNDERLYING COVERED BANK BONDS AND LOANS RECEIVED
(amounts in euro units)
FY 2019 FY 2018 A. Securitised Assets 15,638,092,033 15,430,351,854 A1) Loans and receivables 15,638,092,033 15,430,351,854 B. Use of funds from the management of loans 925,920,544 618,675,024 B3) Others 925,920,544 618,675,024 C. Securities issued - - D. Financing received 16,522,141,326 16,083,383,060 E. Other Liabilities 240,162,408 237,414,189 Difference (A+B)-(C+D+E)* (198,291,157) (271,770,371)
F. Interest expense on securities issued - - G. Fees and commissions on the transaction 8,059,054 7,648,682 G1) For servicing 7,955,160 7,549,356 G2) For other services 103,894 99,326 H. Other charges 308,807,637 345,592,180 I. Interest income on securitised assets 299,825,749 269,571,359 L. Other income 90,520,156 - Difference (F+G+H)-(I+L)** (73,479,214) 83,669,503
* This difference represents the cumulative imbalance of the Transaction ** This difference represents the imbalance for the period for the Transaction
35 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
CRITERIA USED FOR DRAWING UP THE SUMMARY TABLE This schedule was prepared in line with the guidelines set out by the Bank of Italy relating to the companies transferring the assets underlying the covered bank bonds (Ruling of 30 November 2018); all the items indicated correspond to the figures taken from the company’s accounting records and information system of the Servicer, UBI Banca. In particular, the measurement criteria adopted for the most significant entries are provided below.
LOANS AND RECEIVABLES - Receivables from financial institutions are recognised at their nominal value, which corresponds to their presumable realisation value. - The assets underlying the covered bank bonds have been recognised at transfer value and are measured according to the expected realisation value bearing in mind the solvency of the debtor. Such value is in fact determined by subtracting the principal and interest loss estimates from the overall amount disbursed. - The loans of the amount available are expressed at nominal value, equal to collection value. - Accrued income and deferred expenses have been calculated on an accruals basis, applying the principle of correlating costs and revenues according to the financial year.
OTHER ASSETS Other assets are shown at their nominal value, corresponding to the presumed realisable value.
PAYABLES Payables are recognised at their nominal value.
OTHER LIABILITIES Other Liabilities are recognised at their nominal value.
COSTS AND REVENUES Costs and revenues are recognised according to the accruals principle. All costs relative to securitisation processes are charged back directly to the Covered bank bond programme.
DERIVATIVE CONTRACTS The differentials on the Liability Swap contracts are entered under the charges/revenues according to the accruals principle.
36 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
BREAKDOWN OF THE ITEMS ON THE SUMMARY TABLE
A. ASSETS UNDERLYING THE COVERED BANK BONDS 15,638,092,033
These are composed of the realisation value of the existing loans at 31/12/2019:
2019 2018 - IWB loan portfolio 134,049,204 153,763,913 - Accrued interest on IWB loan portfolio 467,965 536,502 - Allowance for impairment on IWB loan portfolio (4,342,422) (4,430,750) - UBI loan portfolio 15,607,992,155 15,469,024,863 - Accrued interest on UBI loan portfolio 53,746,410 55,701,314 - Allowance for impairment on UBI loan portfolio (153,821,279) (244,243,988) 15,638,092,033 15,430,351,854
B. USE OF FUNDS FROM THE MANAGEMENT OF LOANS 925,920,544
The item includes:
2019 2018 - Due from banks 925,316,234 618,023,398 - Due from ordinary management 565,618 519,576 - VAT advance 286 - -Accrued income for interest earned 6,623 - - Deferred income 26,083 28,524 - Collections to be credited 5,700 103,526 925,920,544 618,675,024
The cash flows collected in 2019 were used to refund the subordinate loans existing with the individual seller banks, as envisaged by art. 6.2 of the Subordinate Loan agreement.
C. SECURITIES ISSUED -
The Company did not and will not issue notes, as it is the guarantor - with the loan portfolios purchased by the Sellers from time to time - of the programme for the issue of CBs guaranteed by UBI Banca.
37 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
D. FINANCING RECEIVED 16,522,141,326
The item includes:
2019 2018 - IWB subordinated loan 143,567,841 165,138,824 - UBI subordinated loan 16,378,573,485 15,918,244,236 16,522,141,326 16,083,383,060
E. OTHER LIABILITIES 240,162,408 These consist of:
2019 2018 - Payables for ordinary management 593,792 547,890 - Payables to service providers for invoices to be received 3,846,578 3,656,439 - Payables to service providers for invoices received 7,548 23,244 - Accrued interest expense, current account 3,000,726 - - Accrued Additional Premium IWB 2,043,918 2,523,288 - Accrued Additional Premium UBI 230,669,846 230,663,328 240,162,408 237,414,189
It is specified that the payables for “Additional premiums” will only be repaid upon conclusion of the Programme and if there is enough money available in the funds in place at that time. The loss accumulated at 31/12/2019 of € 198 million (€ 272 million in 2018) does not allow the repayment of a portion of subordinate loans.
G. FEES AND COMMISSIONS ON THE TRANSACTION 8,059,054 These consist of:
2019 2018 - Servicer 7,955,160 7,549,356 Total "G1) For servicing services" 7,955,160 7,549,356
- Trustee 67,891 61,162 - Process Agent fee 519 1,037 - Corporate Servicer 35,484 37,128 Total "G2) For other services" 103,894 99,326
38 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
H. OTHER CHARGES 308,807,637 These include:
2019 2018 - Interest expense on IWB Loan & Additional Premium 2,092,944 2,563,507 - Interest expense on UBI Loan & Additional Premium 286,644,755 257,233,515 - Impairment losses on IWB loans - 529,434 - Impairment losses on UBI loans - 73,080,365 - Losses on UBI loans 15,664,652 10,751,758 - Losses on IWB loans 216,720 503,360 - Interest expense on current account 4,135,731 859,814 - Costs not relative to the period - 2,334 - Administrative expenses recharged by Ordinary Management 45,902 58,280 - Administrative expenses 2,095 4,601 - Notary expenses 2,867 4,431 - Negative currency exchange differences 4 43 - Bank charges 1,967 738 308,807,637 345,592,180
The item “Interest expense, current account” is generated by recharging the interest applied by the Central European Bank to “overnight” investments (negative during the period) made by UIB Banca with the liquid assets present in the Company’s current accounts.
I. INTEREST GENERATED BY ASSETS UNDERLYING THE COVERED 299,825,749 BANK BONDS These consist of:
2019 2018 - Interest income on IWB loans 2,263,960 2,755,980 - Interest income on UBI loans 298,274,412 269,897,467 - Interest income accrued and not collected on IWB loans (68,537) (84,463) - Interest income accrued and not collected on UBI loans (1,954,904) (4,281,597) - Penalties from IWB loans 3,201 1,544 - Penalties from UBI loans 264,410 275,502 - Default interest on IWB loans 9,942 8,724 - Default interest on UBI loans 1,033,265 998,202 299,825,749 269,571,359
39 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
L. OTHER INCOME 90,520,156 These consist of:
2019 2018 - Income not accrued 2,496 - - Write-ups on IWB loans 88,328 - - Write-ups on UBI loans 90,422,709 - - Interest income current account 6,623 - 90,520,156 -
Following the repurchase of non-performing loans by the Originator for € 250,795,409, as detailed in section 1.1.4 of the Report on Operations, the provision for impairment decreased, generating a writeback on receivables which, for the UBI portfolio, amounted to around 90 million.
40 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
QUALITATIVE INFORMATION H.2 - DESCRIPTION AND TREND OF THE OPERATION
THE CB1 PROGRAMME During 2008, the Company, with the assistance of Barclays Bank PLC as Arranger and of the law firms Clifford Chance and Chiomenti, has put in place with UBI Banca (or the “ Issuer ”) some negotiations aimed at implementing a programme (the “ CB1 Programme ”) by UBI Banca for the issue of covered bonds (the “ Covered Bank Bonds ” or “ CBs ” - Covered Bonds) pursuant to Italian Law 130/1999.
More specifically, the CB1 Programme establishes, on the one hand, transfers without recourse of pecuniary receivables deriving from residential loans, as better identified below, to the Company by some banks of the UBI Banca Group, specifically:
1. Banco di Brescia S.p.A. (“ BBS ”), now UBI Banca by virtue of the merger by acquisition that took place by deed dated 20 February 2017, 2. Banca Regionale Europea S.p.A. (“ BRE ”), now UBI Banca by virtue of the merger by acquisition that took place by deed dated 15 November 2016, 3. Banca Popolare di Bergamo S.p.A. (“ BPB ”), now UBI Banca by virtue of the merger by acquisition that took place by deed dated 20 February 2017, 4. Banca Popolare di Ancona S.p.A. (“ BPA ”), now UBI Banca by virtue of the merger by acquisition that took place by deed dated 20 February 2017, 5. Banco di San Giorgio S.p.A. (“ BSG ”), initially merged in BRE, now UBI Banca by virtue of the merger by deed dated 20 February 2017, 6. Banca Popolare Commercio e Industria S.p.A. (“ BKI ”), now UBI Banca by virtue of the merger by acquisition that took place by deed dated 15 November 2016, 7. Banca Carime S.p.A. (“ BRM ”), now UBI Banca by virtue of the merger by acquisition that took place by deed dated 20 February 2017, 8. UBI Banca Private Investment S.p.A. (“ BPI ”) now IW Bank S.p.A. by virtue of the merger by acquisition that took place by deed dated 25 May 2015; 9. IW Bank S.p.A. (“ IWB ”), 10. Banca di Valle Camonica S.p.A. (“ BVC ”), now UBI Banca by virtue of the merger by acquisition that took place by deed dated 20 February 2017 and 11. Unione di Banche Italiane S.p.A. (“ UBI ”), which since 23 July 2012 (with effect from 1 January 2012 for accounting and tax purposes) merged with Banca 24-7 by acquisition of the latter; (jointly the “ Originating Banks ”),
and on the other, the split issue of covered bank bonds by UBI Banca for up to € 10,000,000,000.
41 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
In this context, the Company has undertaken to cover said emissions. As a matter of fact, the “Covered Bond Guarantee” agreement, signed on 30 July 2008, states that the Company issues an irrevocable guarantee, on a first demand, unconditional and independent in favour of the covered bond holders in respect of portfolios of loans from time to time sold by the Seller Banks, under which the Company will guarantee the repayment of all sums due in respect of capital and interest in relation to the covered bonds by the Issuer (the “ Guarantee ”). The Company is therefore committed, from time to time, to increase, where necessary, the Guarantee granted, based on the amount of single issue. In compliance with this Programme structure, the Company has acted as follows.
THE INITIAL TRANSFER On 30 June 2008, the Company signed with BRE and BBS (jointly the “Initial Sellers” ) two transfer agreements of monetary receivables identifiable as a single "block" according to and by effect of the combination of articles 7-bis and 4 of the Law 130/99 and of article 58 of TUB, purchasing without recourse with effective date 1 July 2008 the following portfolios of performing receivables deriving from residential loans granted by economical first grade mortgage pertaining to the relevant Seller (the “Initial Loans” ): - € 595,473,865 from BRE and - € 1,391,201,377 from BBS.
INITIAL LOANS SUBJECT TO At such date, such loans were identifiable as a “block” according to and TRANSFER by effect of the combination of articles 7-bis and 4 of the Law 130/99 and of article 58 of TUB, since they met the following common criteria: (1) these are land property mortgage loans where the ratio between outstanding principal added to the outstanding principal of any preceding mortgage loans on the same property isn’t higher than 80% of the property value, pursuant to the Decree no. 310 of the Ministry of Economy and Finance of 14 December 2006; (2) with respect to which the consolidation term of the mortgages is concluded and they are not subject to challenge pursuant to Art. 67 of Italian Royal Decree No. 267 of 16 March 1942 and, when applicable, Art. 39, paragraph four of Italian Legislative Decree No. 385 of 1 September 1993; (3) that were issued by the Seller; (4) that are regulated by the Italian law; (5) that are performing and been paid for more than 1 day since the expected payment date; (6) that do not include clauses that limit the possibility for the Seller to transfer loans coming from the corresponding agreement or that decide that the permission of the debtor is required for such transfer and the Seller has obtained such permission; (7) in relation to which at least one subscription was paid by the debtor before 1 July 2008; (8) that expect the debtor to pay for monthly, quarterly or six-monthly subscriptions;
42 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
(9) according to which all payments receivable from the debtor are made in Euro; (10) that were fully issued; (11) that were not issued in favour of natural persons that are, or were, at the date of issue, employed with any company belonging to Unione di Banche Italiane S.c.p.A.; (12) that were granted to one or several natural persons that hold a joined account; (13) that are soft loans that offered a facilitation or other benefits in principal or in interest (soft loans); (14) assisted with first-level mortgages, that is (i) a first-level mortgage or (ii) (A) a second-level or subsequent-level mortgage in relation to which the creditor secured by the first-level mortgage is the Seller and in respect to which the obligations secured by such first- level mortgage were fully complied with, or (B) a second-level or subsequent-level mortgage in respect to which the creditor secured by higher level mortgages is the Seller (although obligations secured by higher level mortgages are not fully complied with) and the loans secured by such higher level mortgages come from loans that meet these criteria. LOANS SUBORDINATED BY Simultaneously, each Initial Seller granted the Company a loan for the INITIAL SELLERS same amount, so that the latter could have the funds necessary for the purchase of the above-mentioned loan portfolio - redemption subordinated to the repayment of the covered bonds issued by UBI Banca. REPURCHASE On 1 March 2010, the Company has sold back to the Initial Sellers INITIAL LOANS pursuant to article 11.3 of the Master Purchase Agreement the following Initial Loans, which for various reasons no longer fall within the selection criteria for the portfolios of the CB1 Program, and more precisely: . € 2,398,570 in default and € 87,561,597 not eligible to BRE, and . € 4,729,024 in default and € 243,098,071 not eligible to BBS.
SUBSEQUENT TRANSFERS Following the Initial Transfer, the Company acquired various loan portfolios without recourse from the Sellers (“ Subsequent Transfers ”), summarised below. TRANSFER 2 On 30 November 2009, the Company finalised the following new acquisitions: . € 210,984,151 from BRE; . € 453,032,832 from BBS and . € 1,347,612,455 from BPB, which adhered to the Program as additional seller. TRANSFER 3 On 01 May 2010, the Company finalised the following new acquisitions: . a new loan portfolio from BBS for € 672,896,469; . a new loan portfolio from BRE for € 245,457,659; . a new loan portfolio from BPB for € 758,754,383;
43 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
. the initial portfolio of performing receivables deriving from residential loans granted by first grade mortgage pertaining to BPA for € 672,137,149; . the initial portfolio of performing receivables deriving from residential loans granted by first grade mortgage pertaining to BSG for € 336,304,315. Thus, with this sale BPA and BSG joined the Programme as subsequent seller. TRANSFER 4 On 1 October 2010, the Company purchased the following new non- recourse loan portfolios: . € 1,381,598,480 from BKI; . € 696,269,788 from BRM; . € 223,133,986 from BVC and . € 140,498,355 from BPI. Thus, with this sale BKI, BRM, BVC, and BPI joined the Programme as subsequent sellers. TRANSFER 5 On 1 May 2011, the Company finalised the following new acquisitions: . a new loan portfolio from BBS for € 564,335,773; and . a new loan portfolio from BPB for € 809,449,670. TRANSFER 6 On 31 October 2011, the Company purchased the following new non- recourse loan portfolios: . € 395,798,879 from BRE; . € 466,384,081 from BPA; . € 203,958,421 from BSG and . € 520,886,653 from BKI.
TRANSFER 7 On 31 January 2012, the Company finalised the following new acquisitions: . € 346,098,197 from BBS; . € 451,159,851 from BPB; . € 278,557,527 from BRM and . € 91,832,409 from BPI.
TRANSFER 8 On 28 September 2012, the Company purchased the following new non- recourse loan portfolios: . € 223,786,985 from BRE; . € 347,111,898 from BPA; . € 605,687,070 from BPCI; . € 141,235,188 from BSG and . € 94,047,055 from BVC.
TRANSFER 9 On 31 May 2013, the Company purchased the following new non- recourse loan portfolios: . € 628,145,188 from BBS; . € 137,912,876 from BPA;
44 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
. € 167,481,923 from BPCI, and . € 310,275,741 from BRM. TRANSFER 10 On 31 October 2013, the Company purchased the following new non- recourse loan portfolios: . € 1,119,040,043 from BPB; . € 25,303,963 from BVC; . € 60,626,004 from BPI, and . € 2,096,634,974 from UBI Banca. Thus, with this sale UBI Banca joined the Programme as subsequent seller. TRANSFER 11 On 30 May 2014, the Company purchased the following new non- recourse loan portfolios: . € 254,881,540 from BRE; . € 141,768,365 from BPA; . € 127,927,796 from BKI, and . € 100,912,280 from BRM. TRANSFER 12 On 31 October 2014, the Company purchased the following new non- recourse loan portfolios: . € 242,990,513 from BBS;
. € 244,542,693 from BPB; . € 22,534,632 from BVC; . € 20,575,993 from BPI, and . € 57,466,582 from UBI Banca. TRANSFER 13 On 15 May 2015, the Company purchased the following new non- recourse loan portfolios: . € 254,557,943 from BBS; . € 250,138,690 from BKI; . € 146,941,417 from BRE and . € 104,735,863 from BRM. TRANSFER 14 On 30 October 2015, the Company purchased the following new non- recourse loan portfolios: . € 181,027,136 from BPA; . € 475,470,927 from BPB; . € 25,133,892 from BVC; . € 18,324,256 from IWB and . € 39,462,602 from UBI. TRANSFER 15 On 29 April 2016, the Company purchased the following new non- recourse loan portfolios: . € 149,380,663 from BPA; . € 329,285,627 from BBS; . € 369,758,806 from BPB; . € 337,658,528 from BKI, and . € 172,705,787 from BRE.
45 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
TRANSFER 16 On 28 April 2017, the Company acquired a loan portfolio without recourse for € 1,684,900,633 from UBI Banca. TRANSFER 17 On 30 April 2018, the Company acquired a loan portfolio without recourse for € 2,233,739,364 from UBI Banca. TRANSFER 18 On 30 November 2018, the Company acquired a loan portfolio without recourse for € 1,290,979,287 from UBI Banca. TRANSFER 19 On 30 April 2019, the Company acquired a loan portfolio without recourse for € 2,420,021,494 from UBI Banca.
ISSUE OF THE FIRST Due to the negative trend in international financial markets, UBI Banca SERIES OF COVERED felt it appropriate to issue the first series of covered bonds for an BONDS amount of € 1 billion on 23 September 2009. These CBs were placed on the Italian market and on foreign markets at Italian and foreign institutional investors, and admitted to listing on the London Stock Exchange. The schedule regulating covered bonds constitutes the “base prospectus” pursuant to Directive 2003/71/EC. WARRANTY TO THE ISSUER Pursuant to Article 4 of the MEF Decree, and applicable to all loan portfolios that will be transferred to the Company, the Company on 21 September 2009 issued an irrevocable guarantee, at first demand, unconditional and independent, in favour of the covered bonds holders, based on which the Company guarantees the repayment of all amounts due for principal or interest, related to the covered bonds by the Issuer, for € 1,882,502,000.
ISSUE OF THE Afterwards, UBI Banca issued the following series of covered bonds; at SUBSEQUENT SERIES OF the same time, the Company adjusted the maximum covered amount CB S pursuant to the Guarantee, to the total of the series of CBs issued:
2009-13 MAXIMUM AMOUNT OF ISSUES (max. Programme €10 bln) GUARANTEE PROGRAMME : € 10 BLN Series date Maturity Initial issue maximum 1 23 September 2009 € 1,000,000,000 € 1,882,502,000 2 16 December 2009 16 December 2019€ 1,000,000,000 € 2,752,502,000 3 30 April 2010 30 April 2023€ 250,000,000 € 3,063,400,000 4 15 September 2010 15 September 2017€ 1,000,000,000 € 4,334,400,000 5 18 October 2010 18 October 2015€ 500,000,000 € 4,912,000,000 6 28 January 2011 28 January 2021€ 1,000,000,000 € 6,471,000,000 7 22 February 2011 22 February 2017€ 750,000,000 € 7,497,000,000 8 18 November 2011 18 November 2022€ 250,000,000 € 7,600,000,000 9 22 February 2012 17 February 2014€ 250,000,000 10 22 February 2012 18 February 2014€ 250,000,000 € 8,300,000,000 11 22 February 2012 19 February 2014€ 250,000,000 12 Tranche 1 14 October 2013 14 October 2020€ 1,250,000,000 € 9,380,000,000 12 Tranche 2 19 December 2013 14 October 2020€ 250,000,000 € 9,580,000,000 13 23 December 2013 23 December 2018€ 1,000,000,000 € 10,720,000,000
46 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
2014-PRESENT MAXIMUM AMOUNT OF PROGRAMME : € 15 BLN ISSUES (max. Programme €15 bln) GUARANTEE Series date Maturity Initial issue maximum 14 05 February 2014 05 February 2024€ 1,000,000,000 € 12,020,000,000 15 05 March 2014 05 March 2019€ 700,000,000 € 11,960,000,000 16 13 October 2014 13 October 2017€ 700,000,000 € 12,400,000,000 17 07 November 2014 07 November 2025€ 1,000,000,000 € 13,470,000,000 18 Tranche 1 27 October 2015 27 January 2023€ 750,000,000 € 11,630,000,000 19 14 December 2015 14 December 2022€ 500,000,000 € 12,120,000,000 20 31 March 2016 31 March 2022€ 1,000,000,000 € 12,200,000,000 18 Tranche 2 20 June 2016 27 January 2023€ 250,000,000 € 12,380,000,000 21 23 June 2016 23 June 2018€ 750,000,000 € 13,120,000,000 22 14 September 2016 14 September 2026€ 1,000,000,000 € 14,110,000,000 18 Tranche 3 21 October 2016 27 January 2023€ 250,000,000 € 13,320,000,000 23 04 October 2017 04 October 2027€ 1,250,000,000 € 12,700,000,000 24 € 500,000,000 15 January 2018 15 July 2024 € 12,560,000,000 25 € 500,000,000 26 23 February 2018 23 February 2033€ 90,000,000 € 12,590,000,000 27 26 February 2018 25 February 2033€ 160,000,000 € 12,800,000,000 24 Tranche 2 15 October 2018 15 July 2024€ 250,000,000 € 13,030,000,000 28 16 October 2018 16 October 2028€ 700,000,000 € 13,900,000,000 29 10 December 2018 12 December 2022€ 800,000,000 € 15,030,000,000 30 10 December 2018 11 December 2023€ 500,000,000 € 15,030,000,000 31 25 febbraio 2019 25 settembre 2025€ 500,000,000 € 14,640,000,000 32 05 dicembre 2019 05 dicembre 2029€ 1,000,000,000 € 15,520,000,000
AMENDMENTS ON THE Since the start of the Programme, the Company has implemented the PROGRAMME STRUCTURE following changes to the structure and to the contractual documentation of the Programme. DOWNGRADING OF Since it was set up the Programme has provided that: UBI BANCA - UBI Banca and other subsidiaries of the UBI Group have the role of custodian banks of the proceeds arising from acquired portfolios; - UBI Banca should enter with the Company into derivative contracts to hedge interest rate. The retention of such roles was related to maintaining a certain level of ratings assigned by rating agencies involved in the programme itself. It was also provided that, following a downgrading of UBI Banca below certain thresholds: (i) the deposits on bank accounts held with UBI Banca and its subsidiaries should be transferred promptly, at the expense of the custodian, at another entity with the necessary requirements (including the rating), appointed by the Company; (ii) the contractual relationships with custodian banks had to be solved; (iii) UBI Banca was required to collateralise its obligations arising from derivative contracts. On 5 October 2011, the rating agency Moody’s lowered the rating of Italian Government Bonds by 3 notches (from Aa2 to A2), and the next day it followed the list of downgrades on Italian banks, in particular, UBI Banca suffered the lowering of the long-term rating from A2 to A3 and of the short-term rating from P-1 to P-2. As a result of this downgrading the minimum level of rating above
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UBI FINANCE S. R.L.
mentioned was exceeded and therefore on 8 November 2011 it was necessary to make the following amendments to the Programme structure: a) the Company has terminated the contract with UBI Banca International S.A. as Deposit Bank; b) UBI Banca had to marginalize swaps with the Company; c) the Company opened new bank accounts with The Bank of New York Mellon, London Branch, eligible counterparty, so that in these accounts it were transferred the collections arising from the amortization of the portfolios purchased, and paid the guarantee related to derivative contracts between the Company and UBI Banca, under the Programme.
AMENDMENTS TO THE Following the operating procedures in force at the time of SWAP AGREEMENTS incorporation, UBI Banca agreed on the use of derivative contracts with the rating agencies and with Arranger of the Programme in order to normalise cash flows between the Seller Banks and the Company (“asset swap”) and to cover the Company against interest rate risk in the case of a step-in on behalf of UBI Banca in payment of CB coupons (so-called “liability swap”). Complete hedging through derivative contracts was a necessary condition to obtain an “AAA” rating for the Programme. On the other hand, at the time, the rating levels of UBI Banca were such as to allow them to take on the role of direct counterparty in these swap transactions with the Company (directly for liability swaps, indirectly for asset swaps, providing a guarantee to the Seller Banks). However, after the aforementioned downgrade, UBI Banca and the Seller Banks found themselves contractually obliged to transfer the derivative contracts, stipulated within the scope of the Programme, to third-party counterparties (asset swaps and liability swaps). In the light of market conditions and particularities of the derivative contracts, UBI Banca was unable to identify counterparties willing to step in to such contracts with the current conditions, and therefore evaluated the prospect of a complete restructuring of existing swap transactions, aimed at: (i) reducing the total notional amount of the swaps and (ii) aligning the structural provisions to those of the market in order to allow transfer to third parties. To this end, UBI Banca agreed with the rating agencies to abandon the contractual provision of complete hedging of the interest-rate risk by the Company in the case of its step-in for the payment of CB coupons, in favour of a system which recognises the fact that variable-rate loans (which make up the majority of the Company’s active coupons) would make it unnecessary to transform all of the interest on loans received by the Company to fixed rate. At the same time, the fixed-rate loans supply a natural partial hedge regarding the issue of fixed-rate Covered Bonds. In the light of this, on 11 April 2013, the following changes were made to the structure of the Programme: a) early closure of all Asset Swaps (through the signing of special
48 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
termination agreements between the Company and each Asset-Swap Provider ); and b) modification of the Liability Swaps to reduce the notional amount to that strictly necessary, agreed with the ratings agencies. Upon modification of the liability swaps, UBI Banca began looking for a market counterparty to whom it may assign derivative contracts. This process is still in progress.
TRANSFER STOCK During the year 2014, on the advice of UBI Banca, for efficiency EXCHANGE LISTING CB S reasons, it became necessary to change the listing stock market of the covered bank bonds, initially listed on the London Stock Exchange to the Irish Stock Exchange, both with regard to future emissions and emissions already existing within the program. In view of this, the company partnered with UBI Banca, as issuer, in order to: (i) perfect the passporting procedure for the base prospectus relating to the CB2 Programme (the “Prospectus”), (ii) carry out the necessary requirements in order to request and obtain the listing of the Covered Bank Bonds on the Irish Stock Market, (iii) carry out the delisting of the series of covered bank bonds listed on the London Stock Exchange, (iv) participate in the preparation and negotiation of the new Prospectus to be approved by the Irish authorities, and (v) make all necessary and appropriate communications to dealers of the Programme and the holders of the covered bank bonds in order to give information to them regarding implementation of the above activities. On 23 May 2014, the passporting procedure was completed and the bonds are now listed on the Irish Stock Exchange.
INCREASE TO THE At the same time as transferring the Stock Exchange listing, UBI Banca MAXIMUM PROGRAMME increased the maximum amount of the Programme from the initial AMOUNT amount of € 10 billion to a new amount of € 15 billion, more in keeping with the issues already made and those planned for the future.
TRANSFER SWAP In 2014, the need also emerged, according to UBI Banca to transfer the COLLATERAL ACCOUNT Swap Collateral Accounts relative to UBI Banca as Liability Swap Provider, opened at the Bank of New York Mellon, London Branch, which in the framework of the Programme has the role of English Account Bank, to another bank. As a result, on 10 December 2014 BNP Paribas Securities Services was appointed “Swap Collateral Account Bank” for the Programme. To such purpose, among others, the following documents were signed: (i) “Appointment Agreement”, to appoint the new depositary bank; (ii) Amendment Agreements of the “Intercreditor Agreement”, “Cash Allocation, Management and Payments Agreement”, “English Account Bank Agreement” and “Master Definitions Agreement”, to acknowledge the participation of the new depositary bank in
49 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
such contracts; (iii) “Supplemental Deed of Charge”, to grant a pledge on the new swap collateral accounts opened at the new depositary bank.
AMENDMENT OF During 2015, at the instructions of UBI Banca, the need arose to change SERVICING FRAMEWORK some definitions contained in the Programme agreements, among which AGREEMENT those of “Eligible Institution”, “Eligible Investment” and “Top Up Assets” among other things so as to align the contractual documentation with changes to the EU Regulation no. 575/2013 (“CRR”) (and to the relative implementing regulations). In addition to the above, it became desirable on 30 July 2015, both for reasons of efficiency and expediency, to change the Servicing Framework Agreement and the annexed cashing in procedures to provide, among other things, for the possibility of UBI Banca as Master Server, within the sphere of managing the non-performing loans on behalf of the Company, to sell said loans directly to third parties in the interests of the said Company.
REPLACEMENT OF FITCH On 24 August 2015 the rating agency Fitch Ratings Limited published a WITH DBRS press release in which it announced its intention, for business reasons, to withdraw its rating of the Programme of covered bank bonds for which the Company is guarantor. As a result, on 23 September 2015 the contractual structure of the CB2 programme required changing so as to replace Fitch Ratings Limited with DBRS Ratings Limited as the rating agency of the Programme.
SINGLE BANK PROJECT On 27 June 2016 the Parent company UBI Banca approved the “Group Industrial Plan”, which provides– inter alia - for the adoption of an operating structure as a simpler and more efficient “single bank” with the merger by acquisition of BPB, BdB, BPCI, BRE, BPA, CARIME and BVC in UBI Banca by the first half of 2017. This merger project, approved by the Bank of Italy on 30 August 2016, consists of three phases: (i) a first merger by acquisition agreement of Banca Regionale Europea S.p.A. and Banca Popolare Commercio e Industria S.c.p.A. in UBI Banca; (ii) a second merger agreement relative to the acquisition of Banca Popolare di Bergamo S.p.A., Banca di Valle Camonica S.p.A. and Banco di Brescia S.p.A., and lastly (iii) a third merger agreement relative to the acquisition of Banca Carime S.p.A. and Banca Popolare di Ancona S.p.A. FIRST PHASE On 15 November 2016 UBI Banca stipulated the two merger deeds pursuant to art. 2504 of the Civil Code respectively relating to the merger by acquisition of BPCI and BRE of the Parent Company. The contracts of the Programme were simultaneously amended to have UBI Banca step in as Originator and Sub-Servicer of the Programme, in the rights and obligations of the two banks acquired. SECOND AND THIRD Contrary to the previsions in the “Plan”, on 20 February 2017, UBI PHASE Banca incorporated the remaining banks in the UBI Group, completing
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UBI FINANCE S. R.L.
all the phases of the “Single Bank” in advance. This in turn made it necessary to make the following changes to the Programme on 23 May 2017: a) the cancellation of the sub-servicing contracts subscribed to by UBI Banca as Master Servicer and the Incorporated Banks as Sub- Servicers, with the Master Servicer delegating certain activities regarding collections and the management of loans to the Incorporated Banks that had been ceded by the latter, because these activities are carried by UBI Banca after the Merger; b) the closure of the “ Italian Collection Accounts ” and “ English Collection Accounts ” that had been opened by the Company to deposit the collections deriving from Portfolios sold by the Incorporated Banks (the “Relevant Accounts”), because subsequent to the Merger, these collections were transferred to the corresponding accounts opened by the Company with l’ Account Bank with reference to the UBI Portfolio (the “UBI Accounts”), whereas collections received subsequent to the Merger were credited directly to UBI accounts, and c) the extinction of the lien established by the Company in favour of Noteholders and other covered creditors, on the Relevant Accounts referred to in point (b) above that were closed.
MINOR CONTRACT On 12 December 2017, certain Programme contracts were amended so AMENDMENTS as to: (i) change the nominal value test; (ii) cancel the UBI liability swap (no longer deemed necessary given that the Programme’s current rating level did not provide any significant benefits to the Programme itself) and (iii) allow for the transfer of public entity bonds.
PERFORMANCE OF THE Started in late 2008, the Programme has generated payments in line with TRANSACTION the plan for the period.
The following figure summarises the structure of the transaction:
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UBI FINANCE S. R.L.
H.3 - ENTITIES INVOLVED In addition to UBI FINANCE S. R.L. (the “ Guarantor ”), the main subjects involved in the Covered Bank Bonds Programme are:
ORIGINATING BANKS , . Banco di San Giorgio S.p.A. (“BSG”) (1) , SUB -SERVICER & . Banca Regionale Europea S.p.A. (“BRE”) (2) , SUBORDINATED LOAN . Banca Popolare Commercio e Industria S.p.A. (“BKI”) PROVIDER (2) , . Banco di Brescia S.p.A. (“BBS”) (3) , . Banca Popolare di Bergamo S.p.A. (“BPB”) (3) , . Banca Popolare di Ancona S.p.A. (“BPA”) (3) , . Banca Carime S.p.A. (“BRM”) (3) , . UBI Banca Private Investment S.p.A. (“BPI”) now IW Bank S.p.A. by virtue of the merger by acquisition that took place by deed dated 25 May 2015, . Banca di Valle Camonica S.p.A. (“BVC”) (3) , . IW Bank S.p.A. (“IWB”), and . Unione di Banche Italiane S.p.A. (“UBI”).
ISSUER , UNIONE DI BANCHE ITALIANE SOCIETÀ PER AZIONI MASTER SERVICER , Piazza Vittorio Veneto no. 8 - 24122 Bergamo CALCULATION AGENT &
52 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
ITALIAN ACCOUNT BANK REPRESENTATIVE OF THE BNY MELLON CORPORATE TRUSTEE SERVICES LTD . COVERED BONDHOLDERS One Canada Square E14 5AL London - UNITED KINGDOM ASSET MONITOR BDO ITALIA S. P.A. (formerly Mazars & Guérard) Viale Abruzzi 94 – 20131 Milan
PRINCIPAL PAYING THE BANK OF NEW YORK MELLON (L UXEMBOURG ) AGENT S.A., ITALIAN BRANCH Via Mike Bongiorno 13 - 20100 Milan
ENGLISH ACCOUNT BANK THE BANK OF NEW YORK MELLON , LONDON BRANCH One Canada Square E14 5AL LONDON - UNITED KINGDOM
SWAP COLLATERAL BNP PARIBAS SECURITIES SERVICES ACCOUNT BANK 3, Rue d’Antin, 75002, Paris– FRANCE operating through the London office 55, Moorgate - EC2R 6PA London - UNITED KINGDOM
GUARANTOR CORPORATE TMF MANAGEMENT ITALY S. R.L. SERVICER Corso Vercelli 40 – 20145 Milan, Italy
(1) On 15 October 2012, Banco di San Giorgio S.p.A. stipulated the deed of merger by acquisition by Banca Regionale Europea S.p.A., a deed that took effect as from 22 October 2012. BANCO DI SAN GIORGIO S. P.A. WAS THE TRANSACTION SUB -SERVICER AND Subordinated Loan Provider, in relation to its transferred loans until the merger date. (2) On 15 November 2016, Banca Regionale Europea S.p.A. and Banca Popolare Commercio e Industria S.c.p.A stipulated the deed of merger by acquisition by UBI Banca, a deed that took effect as from 21 November 2016. BRE AND BKI WERE ORIGINATORS , SUB -SERVICERS OF THE OPERATION AND Subordinated Loan Providers, in relation to its transferred loans until the merger date. (3) On 20 February 2017 Banco di Brescia S.p.A., Banca Popolare di Bergamo S.p.A., Banca Carime S.p.A. and Banca Popolare di Ancona S.p.A. stipulated the deed of merger by acquisition in UBI Banca. BBS, BPB, BRM and BPA were originators, sub-servicers of the operation and Subordinated Loan Providers, in relation to its transferred loans until the merger date.
H.4 - FEATURES OF THE ISSUES As anticipated in the “Description of the transaction” section, the Company, as guarantor - with the loans portfolios purchased by the Sellers from time to time - of the programme for the issue of covered bonds guaranteed by UBI Banca pursuant to art. 7-bis of Law 130/99, did not and will not issue securities.
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UBI FINANCE S. R.L.
H.5 - CONNECTED FINANCIAL TRANSACTIONS
SELLER ’S GUARANTEES AND INDEMNITY At the date of transfer, the Company agreed with each Seller a Warranty and Indemnification Contract according to which the Seller itself has made certain representations and guarantees in favour of the Company concerning the Loan Portfolio sold and has accepted to hold the same harmless from certain costs, expenses and liabilities incurred in relation to the purchase and ownership of the securitised portfolio.
SUBORDINATED LOAN When the Company bought the credit portfolios, it stipulated a subordinated loan contract with each Seller (“Subordinated Loan Agreement”), for the same amount, in order to have the funds necessary for the purchase of the credit. The loan is subordinated to the repayment of the covered bonds that will be subsequently issued by UBI Banca. To remunerate such loan, at each payment date the Company pays each Seller a base annual interest equal to 0.001% plus a “Premium” resulting from the difference between the interest collected from the loan portfolio and most operating costs concerning the existence of the Company and the Programme.
INTERCREDITOR AGREEMENT The Company, in return for the transfer of any and all right, ownership and interest on each asset concerning the Programme, obtains from the Representative of the Noteholders, the guarantee of coverage of any and all right, ownership and interest on the amounts deposited, from time to time, on the current accounts of the transaction, in favour of the same Noteholders and all creditors of the Programme.
H.6 - OPERATING FACULTIES OF THE TRANSFEREE COMPANY The Company has no operating faculties concerning the prepayment of covered bonds.
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UBI FINANCE S. R.L.
QUANTITATIVE INFORMATION H.7 – CASH FLOW DATA FOR RECEIVABLES In the year, acquired loans have had the following movements:
(amounts in euro units) From 01/07/2008 FY 2019 to 31/12/2018 Opening balance 15,430,351,854 - of which: Loan portfolios purchased 15,622,788,776 - Accrued interest on loans 56,237,816 - Allowance for impairment (248,674,738) - Increases: 2,810,358,280 30,855,885,066 Loan portfolio purchase 2,420,021,494 28,150,251,810 Accrued interest on loans 299,825,749 2,700,440,803 Allowance for impairment 90,511,037 5,192,453 Decreases: (2,602,618,101) (15,425,533,212) Collections of principal (2,300,768,911) (12,527,463,034) Collections of interest (301,849,190) (2,644,202,987) Writedowns of receivables - (253,867,191) Closing balance: 15,638,092,033 15,430,351,854 of which: Receivables portfolio 15,742,041,359 15,622,788,776 Accrued interest on loans 54,214,375 56,237,816 Allowance for impairment (158,163,701) (248,674,738)
At each reporting date, it is assessed whether there is any objective evidence that a financial asset or group of financial assets is impaired. This occurs when it is foreseen that the company will not be able to collect the amount due, according to the contractual terms, e.g. in the following cases: a) significant financial difficulty of the issuer or obligor; b) a breach of contract, such as default or delinquency in interests or principal payment; c) the lender, for economic or legal reasons relating to the borrower’s financial difficulty, granting a concession to the borrower which the lender would not otherwise consider; d) it becoming probable that the borrower will enter financial reorganisation; e) the disappearance of an active market for that financial asset because of financial difficulties; f) observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of similar financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group. The valuation of non-performing loans (loans that, based on the definitions given by the Bank of Italy, are non-performing, doubtful, restructured or past-due) is performed based on analytical methods. The valuation of the remaining loans is made based on collective methods, with grouping in similar risk classes.
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UBI FINANCE S. R.L.
The criteria for determining the doubtful accounts to be registered for non-performing loans are based on the discounting of the expected financial flows, for capital and interests, taking into account any collateral covering the positions and any advance payments received. In determining the present value of future cash flows, the basic requirement is the identification of estimated collections, the timing of payments and the rate used. The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted using the original effective interest rate. The valuation of performing loans regards the portfolios of assets for which no objective element of impairment has been found, and which are therefore assessed collectively. To the estimated cash flows of the assets, grouped in homogeneous classes with similar characteristics in terms of credit risk, the percentage loss that can be deduced from the historical statistics is applied. If a loan subjected to analytical assessment does not show significant value reductions, it is included in a group of financial assets with similar credit risk characteristics and assessed collectively.
H.8 - TREND OF PAST -DUE LOANS At 31 December 2019, the position of the loans due but not yet collected for the Seller Bank is as follows:
(amounts in euro units)
UBI Loans IWB Loans
2019 2018 2019 2018 30 –60 days 46,765,228 67,768,014 1,302,353 3,422,049 61 – 90 days 28,953,305 34,770,360 1,215,880 1,435,298 91 – 120 days 23,396,137 24,005,014 50,731 471,804 More than 120 days 39,725,432 50,574,202 1,135,724 559,526 More than 210 days 263,807,061 452,119,052 7,167,836 7,498,118 Total 402,647,163 629,236,642 10,872,524 13,386,795
The loans are therefore classified as follows:
(amounts in euro units) UBI Loans IWB Loans Provision for % Provision for % 2019 2019 impairment Coverage impairment Coverage Unimpaired loans 15,215,293,419 67,406,287 0.44% 124,467,127 675,120 0.54% Past due impaired loans 27,720,399 2,169,034 7.82% 460,899 33,659 7.30% Probable default 277,474,182 45,607,901 16.44% 4,293,608 535,182 12.46% Non-performing loans 87,504,155 38,638,057 44.16% 4,827,570 3,098,461 64.18% Total 15,607,992,155 153,821,279 0.99% 134,049,204 4,342,422 3.24%
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UBI FINANCE S. R.L.
(amounts in euro units) UBI Loans IWB Loans Provision for % Provision for % 2018 2018 impairment Coverage impairment Coverage Unimpaired loans 14,880,679,642 74,598,252 0.50% 144,432,123 829,270 0.57% Past due impaired loans 8,083,822 486,451 6.02% 190,889 10,144 5.31% Probable default 303,280,596 42,087,622 13.88% 3,872,351 381,451 9.85% Non-performing loans 276,980,803 127,071,663 45.88% 5,268,550 3,209,885 60.93% Total 15,469,024,863 244,243,988 1.58% 153,763,913 4,430,750 2.88%
In 2019, the portion of non-performing loans and the relative provision for impairment decreased following repurchase of these loans by the Originator in the amount of € 250,795,409, as detailed in section 1.1.4 of the Report on Operations.
The organizational structure and policies adopted by the UBI Banca Group in the management of impaired loans is reported below and divides into: a) Impaired expired and/or excess loans ("Past Due"), b) Probable default (also defined “Unlikely to pay”), c) Non-performing (also defined “Bad Loans”). a) EXPIRED AND /OR EXCESS LOANS (P AST -DUE ) This class includes “customer loans” for expired or excess amounts meeting all the following conditions: - of a continuous nature; - lasting more than 90 days; - for an amount equal to or greater than the threshold for detection (otherwise known as “materiality threshold”) identified each time by the Bank of Italy. Inclusion of the previously solvent debtor among these loans is automatic upon occurrence of the aforesaid regulatory requisites. The automatic classification of the debtor in: - “Performing loans” in the event of paying off the expired and/or excess loan; - in the category “Probable Operating Default” after 180 days of remaining continuously in the “Past-Due” state is also provided for. In this regard, for the customer classified as Past Due (status acquired 90 days after the anomaly occurring) who continues to have excesses and payments in arrears, a classification proposal of “Probable Operating Default” will be generated after 60 days, a status which will have a maximum duration of a further 120 days. Counterparties (individual subjects or economic groups) with exposure of above € 1 billion at Group level may remain in the Past Due state for over 120 days after obtaining a preventive opinion from the Parent company. In any case, 180 days after acquiring Past-Due status, positions which continue to remain in such status, consequently continuing to present excesses or arrears will be automatically classified as “Probable Operating Default”. The faculty to manually classify the loan in “Past-Due” within a different default status is however acknowledged, after resolution by the competent body. Management of the counterparties classified as Past Due is the responsibility of the Bank Networks of the Group.
57 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L. b) PROBABLE DEFAULT This is how the loans which the Bank deems improbable that the debtor will repay in full (in terms of principal and/or interest) without the Bank putting into place actions aimed at safeguarding its claims, are classified. For the purposes of internal management only, the UBI Group distinguishes between: - “Probable Restructured Default”: the set of loans for which the debtor, on account of deterioration of his/her economic-financial position, obtains formalized restructuring agreements; - “Probable Operating Default”: the set of positions classified as “Probable Default” for which there is an intention to regularize the position within a time frame of not more than 12 months; - “Probable Recovery Default”: the set of positions classified as “Probable Default” for which there is an intention to proceed with total decommitment of the loan with the customer. Counterparties “undergoing restructuring”, i.e. positions which, regardless of the administrative classification status, have the following characteristics: - counterparties for whom objective elements regarding the customer’s wish to proceed with a loan restructuring plan (objective restructuring) have been observed. - counterparties for whom, in the face of significant financial tension, the Bank deems it opportune to activate a support plan by opening a negotiation (“potential restructuring”) also fall within “Probable Restructured Default”. The Banks in the Group have the ability to independently classify and impair to such administrative state, in line with the degree of deterioration of the risk profile of the counterparty. They are also required, after making such classification, to ask the Parent Company for a preventive opinion on consistency with the Group’s guidelines on credit in relation to the management proposal concerning such counterparties (including therein the extent of analytical impairments). Counterparties “undergoing restructuring” (as defined previously) are an exception to the above rule for whom the relative classification in the state of “Probable Restructured Default” is made by the Bank after obtaining an opinion from the Parent Company UBI Banca. The management of counterparties “undergoing restructuring” and of those classified in “Probable restructured default” falls under the responsibility of the Impaired Loans and Credit Collection Area, where the customers of the Banks in the Group have granted a specific mandate to the Parent Company by means of a framework agreement. In other cases, the management of counterparties classified as “probable restructured default”/“undergoing restructuring” remains with the individual Banks. As regards Probable Operating and Recovery Default, Banks have the ability to independently classify and impair them. They are also required, after making such classification, to ask the Parent Company for a preventive opinion on consistency with the Group’s guidelines. Counterparties “undergoing restructuring” classified as “Probable restructured default” subject to centralised management are an exception for whom the relative classification of the positions of such subsidiaries is the responsibility of the Banks which granted a management mandate to the Parent Company, after making an application to the Parent Company.
58 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L. c) NON -PERFORMING LOANS This item includes cash receivables due from parties in a state of insolvency, even if not yet legally ascertained, or in equivalent situations, regardless of any loss forecasts formulated by the Bank. To enable prompt attribution of the Non-performing status to the counterparties concerned, the Bank has the ability to independently classify and impair in such administrative state, in line with the degree of deterioration of the risk profile of the counterparty, The Banks are required, immediately after making such classification, to inform the Parent Company and request a preventive opinion on its consistency with the Group’s guidelines. The management of Non-performing customer loans of the Banks which have granted a specific mandate to the Parent Company by means of a framework agreement falls under the responsibility of the Impaired Loans and Credit Collection Area of the Parent Company and, in particular, of the competent Credit Recovery Service. In the absence of a mandate granted to the Parent Company the management of Non-performing counter parties remains with the individual Banks. UBI’s Impaired Loans and Credit Collection Area may avail of the contribution of External Debt Collection companies or the professional assistance of external law firms in its activities. Upon conclusion of the credit recovery, whether in or out of court, if the credit is partially recovered by the Bank or is not recovered, the part of the credit not recovered will be accounted for in the losses, following resolution by the Body chosen according to the company regulations currently in force. Such resolution will not in any case entail the waiving of any residual credits due.
H.9 - CASH FLOWS The cash flows that occurred during the year ended 31 December 2019 are summarized in the table.
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UBI FINANCE S. R.L.
(amounts in euro units) FY 2019 FY 2018 Description Partial Total Partial Total
Collections in the year 2,589,072,952 2,191,498,688 - from receivables 2,589,071,332 2,191,498,688 - from notes issued - - - from guarantee lines - - - from liquidity lines - - - from derivative contracts - - - other collections 1,620 -
Payments in the year (2,281,780,116) (1,890,837,821) - to noteholders - - - to Originator 2,279,741,522 1,888,880,141 - on guarantee lines - - - on liquidity lines - - - on derivative contracts - - - other payments 2,038,594 1,957,680
Net income/(outgoing) 307,292,836 300,660,867
Cash and cash equivalents 618,023,398 317,362,531 at the start of the year Cash and cash equivalents 925,316,234 618,023,398 at the end of the year
Net change in cash 307,292,836 300,660,867
The cash flows of the period are in line with the forecasts.
H.10 - SITUATION OF GUARANTEES AND CREDIT LINES There are no credit lines granted or received from third parties, and no resort was made to any temporary funding source.
H.11 – BREAKDOWN ACCORDING TO RESIDUAL LIFE
ASSETS : All the monetary loans, arising from performing loans in portfolio, follow a scheduled repayment plan with the following residual life, calculated by taking the maturity date of the loan itself as a reference:
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UBI FINANCE S. R.L.
(amounts in euro units) UBI Loans IWB Loans 2019 2018 2019 2018 Up to three months 4,065,780 441,922 100,695 54,231 From three months to one year 27,501,926 26,913,341 360,944 418,801 From one to five years 692,842,369 683,531,786 8,944,145 8,577,070 More than five years 14,883,582,080 14,754,162,814 124,643,420 144,713,811
Total 15,607,992,155 15,465,049,863 134,049,204 153,763,913
The “Other assets” fall due within a maximum period of 18 months.
LIABILITIES : The “Other liabilities” are due in the short term.
H.12 - BREAKDOWN BY GEOGRAPHIC SEGMENT
Borrowers' country of residence: ITALY Currency of the credit positions: EURO .
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H.13 - CONCENTRATION OF RISK
The following tables summarize the number and total value of loans by amount for each Seller Bank. It is also reported that there are no individual loans greater than 2% of the total loans in the portfolio.
(amounts in euro units) Amounts at 31/12/2019
Amount bracket UBI Loans IWB Loans
(euro) Amount occurrence % Amount occurrence % >0 < 25,000 442,074,549 2,83 4,695,705 3,50 >25,000 < 75,000 4,018,797,041 25,75 32,257,474 24,06 >75,000 < 250,000 10,058,374,240 64,44 84,200,966 62,81 > 250,000 1,088,746,325 6,98 12,895,059 9,62 Total 15,607,992,155 100 134,049,204 100
(amounts in euro units) Amounts at 31/12/2018
Amount bracket UBI Loans IWB Loans
(euro) Amount occurrence % Amount occurrence % >0 < 25,000 455,812,032 2,95 4,670,840 3,04 >25,000 < 75,000 3,826,416,462 24,74 35,874,088 23,33 >75,000 < 250,000 10,065,400,205 65,07 96,964,885 63,06 > 250,000 1,121,396,164 7,25 16,254,100 10,57 Total 15,469,024,863 100 153,763,913 100
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UBI FINANCE S. R.L.
SECTION 3 – INFORMATION ON RISKS AND RELATED HEDGING POLICIES
3.1 CREDIT RISK QUALITATIVE INFORMATION 1. GENERAL (i) ORDINARY MANAGEMENT - The Company is not subject to credit risk, since it only has “credit with banks” represented by current account deposits amounting to € 10,006. (ii) SEGREGATED ASSETS - The Company is subject to risks deriving from: - failure to collect sums due from transferred debtors; - default of the Servicer in collecting sufficient funds to meet the payment obligations deriving from the Programme. Such risks are mitigated by the following techniques: (i) the issue by UBI Banca of a total amount of covered bank bonds with a value lower than that of the credit portfolios sold (“over-collateralisation”).
3.2 MARKET RISK 3.2.1 INTEREST RATE RISK QUALITATIVE INFORMATION 1. GENERAL (i) ORDINARY MANAGEMENT - The Company is not subject to credit risk, since it only has “credit with banks” represented by current account deposits amounting to € 10,006. (ii) SEGREGATED ASSETS - For the Company, interest rate risk exists only when the Issuer is no longer able to sustain the commitments deriving from the issue of the covered bonds (“Issuer Default Notice”) and it is mainly due to the potential loss arising from changes in interest rates of the securitised assets and the issued bonds. The latter, in fact, follow the trend of the variable rate Euribor market, whilst the performing loans, which constitute the securitisation assets, are not necessarily linked to the Euribor. As result of this misalignment between positive and negative interest, if the Euribor should exceed a certain level, the Company might not have sufficient funds to execute the payment of all the obligations arising from the Programme of covered bonds. Therefore, to hedge against interest rate fluctuations on the covered bonds issued, the Company underwrites with each Seller Bank an Interest Rate Swap Agreement every time UBI Banca issues a new series of covered bonds.
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3.3 OPERATIONAL RISKS QUALITATIVE INFORMATION 1. GENERAL ASPECTS , MANAGEMENT PROCESS AND MEASUREMENT METHODS FOR OPERATIONAL RISK This refers to the risk of sustaining losses generated by inefficient company processes, the malfunctioning of technological systems, or external events which cause, or could cause, objective and measurable losses for the Company. The Basel Committee ascribes unexpected losses to the occurrence of four factors: human error, system failures, inadequate procedures and controls and external events. Operational risk is a pure risk; i.e. it is connected only to the negative effects of an event. The ability of the Company to fulfil its obligations pursuant to the Covered bank bond programme structured by UBI Banca, in which the company participates, depend exclusively on third-party subjects to which all the functions typical of an organised structure, as well as the internal auditing systems, are delegated; the Company, in fact, by its nature, has no employees. In particular, the positive outcome of the Programme depends on the ability of the Servicer to manage the loans portfolio according to the terms of the Servicing Agreement. Therefore, in order to mitigate the risk deriving from the servicing activity and to ensure that the credit is managed in a coherent and uniform manner, the Servicer: - has acknowledged that its obligations pursuant to the Serving contract are those that it must honour in the normal performance of its professional activity; - has undertaken to manage the servicing activity with maximum professional diligence, it remaining understood that if, in the execution of the mandate, a conflict should arise between its own interests and that of the bank which issues other services relative to the transferred borrowers and the Company’s interests, the Service shall report the fact to the Company and to the Noteholders’ Representative, and shall, in any case, follow the directives issued by this latter; - is held to perform the servicing activity through its own operating structure, and to guarantee that this is provided with all the infrastructures, and technical and organisational and information technology resources necessary for the efficient execution of the aforesaid activities.
3.4 LIQUIDITY RISK QUALITATIVE INFORMATION 1. GENERAL ASPECTS , PROCESSES AND METHODS FOR ESTIMATING AND MANAGING THE LIQUIDITY RISK a) ORDINARY MANAGEMENT - The Company is not subject to liquidity risk since it has “Receivables from banks” for on demand deposits in bank accounts of € 10,006. b) SEGREGATED ASSETS - The liquidity risk is connected with the possibility of incurring losses, in terms of the price for disposing of assets/liabilities as resulting from the need to liquidate the positions promptly due to unforeseen financial needs in the event of default by the Issuing Bank. In this case, in fact, the Company would be forced to sell the
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UBI FINANCE S. R.L.
cover pool on the market, as the funds collected may not suffice to make timely payment of the interest and capital on the Covered Bank Bonds issued. The main elements for mitigating this risk are: - the high level of over-collateralisation; - the Interest Rate Swap Agreement, which protects against the interest rate risk; - the dynamic management of the cover pool itself, considering that the funds obtained from the instalments collected by way of capital on the loans of the cover pool are in fact re-invested in new loans with similar characteristics. As far as quantitative information is concerned, please refer to paragraph “H. Covered bank bonds” in the Notes.
SECTION 4 – INFORMATION ON ASSETS The characteristic of the Company’s business, specifically dictated by Italian Law no. 130/99 is the separate equity of the company’s assets and liabilities with respect to those of the covered bank bond programme structured by UBI Banca, in which the Company is involved. Given this separation, the corporate costs incurred to maintain the Company in good standing are limited and in any case recovered by means of specific contractual clauses that establish the charging back of the Programme. This means that the company selling the assets underlying the covered bank bonds UBI Finance S.r.l. retains suitable equity levels during implementation of the covered bond programme. For quantitative information, please refer to the section on Liabilities, relative to the composition of items 110 to 170.
SECTION 5 – COMPREHENSIVE INCOME STATEMENT As during financial year 2019 no changes in value were observed for the assets offset against the valuation reserves, the Company’s Profit/Loss coincides with its comprehensive income.
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UBI FINANCE S. R.L.
SECTION 6 – RELATED PARTY TRANSACTIONS
6.1 DETAILS OF REMUNERATION PAID TO KEY MANAGEMENT PERSONNEL Directors 9,538 Statutory auditors - Total 9,538
The fees for the Board of Directors are shown in the table. The Company does not have a Board of Auditors.
6.2 LOANS AND GUARANTEES ISSUED IN FAVOUR OF DIRECTORS AND STATUTORY AUDITORS No loans or guarantees have been granted to directors.
6.3 INFORMATION ON RELATED PARTY TRANSACTIONS The Company, whose capital is subscribed by 60% by Unione Banche Italiane S.p.A. and for the remaining 40% by the Dutch foundation Stichting Mara, is subject to Management and Coordination by Unione Banche Italiane S.p.A. itself. Concerning relationships with UBI Banca Group companies, the Company has at UBI Banca S.p.A., a current bank account regulated by market conditions, number 89283, for an amount of € 10,006 at 31 December 2018.
INFORMATION ON THE PARENT COMPANY UBI Finance S.r.l. is part of the UBI Banca Banking Group registered in the Register of Banking Groups; the parent company is the Unione di Banche Italiane S.p.A., with head office in Bergamo, piazza Vittorio Veneto 8. Pursuant to art. 2497 bis of the Italian civil code, the essential data of the last approved financial statement of UBI Banca, the parent company responsible for the direction and coordination of the Company, is indicated below. For a full understanding of UBI Banca’s financial situation at 31 December 2018 and of the economic result achieved by the bank in the annual period ending on this date, please read the financial statements which, accompanied by the auditors’ report, are available from the company’s head office or at www.ubibanca.it .
66 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
FINANCIAL STATEMENTS OF THE COMPANY CARRYING OUT THE MANAGEMENT AND COORDINATION ACTIVITY - KEY FIGURES (ART . 2497 BIS OF THE ITALIAN CIVIL CODE ) - 2018 FINANCIAL STATEMENTS - UBI BANCA S. P.A. STATEMENT OF FINANCIAL POSITION (in thousands of euro)
amounts in thousands of euro
ASSETS 31/12/2018
10. Cash and cash equivalents 732,742 20. Financial assets measured at fair value through profit and loss: 1,203,500 a) financial assets held for trading 407,000 c) other financial assets obligatorily measured at fair value 796,500 30. Financial assets measured at fair value through other comprehensive income 8,889,656 40. Financial assets measured at amortised cost: 102,020,450 a) due from banks 9,953,490 b) loans and advances to customers 92,066,960 50. Hedging derivatives 44,084 60. Value adjustment of generically-hedged financial assets (+/-) 97,429 70. Equity investments 1,467,282 80. Property, plant and equipment 1,747,497 90. Intangible assets 1,278,491 of which Goodwill 1,195,839 100. Tax assets: 3,880,942 a) current 1,295,811 b) deferred 2,585,131 pursuant to Law 214/2011 1,667,308 110. Non-current assets and asset groups held for sale 2,525 120. Other assets 1,240,334
Total assets 122,604,932
amounts in thousands of euro
LIABILITIES AND SHAREHOLDERS’ EQUITY 31/12/2018
10. Financial liabilities measured at amortised cost: 109,359,943 a) payables to banks 16,946,039 b) payables to customers 66,446,170 c) outstanding securities 25,967,734 20. Financial liabilities held for trading 412,610 40. Hedging derivatives 109,169 50. Value adjustment of generically-hedged financial liabilities (+/-) 74,297 60. Tax liabilities: 141,145 a) current 17,712 b) deferred 123,433 80. Other liabilities 2,950,457 90. Post-employment benefits 286,105 100. Provisions for risks and charges: 413,089 a) commitments and guarantees given 63,289 b) pensions and similar commitments 91,932 c) other provisions for risks and charges 257,868 110. Valuation reserves (319,731) 140. Reserves 2,597,635 150. Quota premiums 3,294,604 160. Quota Capital 2,843,177 170. Treasury shares (-) (25,074) 180. Profit (Loss) for the year (+/-) 467,506
Total liabilities and shareholders’ equity 122,604,932
67 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
INCOME STATEMENT (in thousands of Euro)
68 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
SECTION 7 – OTHER INFORMATION 7.1 AVERAGE NUMBER OF EMPLOYEES BY CATEGORY The Company has no employees.
7.2 FEES FOR THE INDEPENDENT AUDITING FIRM Pursuant to Art. 2427, paragraph 1, no. 16-bis of the Italian Civil Code, below is a table giving information on the fees paid to the independent auditing firm Deloitte & Touche S.p.A. and to the companies belonging to its network. Those fees, pertaining to the fiscal year 2019, are the ones stated by the contract including ISTAT remeasurement, and does not include expenses, the supervisory contribution or VAT:
Type of service Service provider Service receiver Fees (€) Independent auditing Deloitte & Touche S.p.A. UBI Finance S.r.l. 21,867 Other services Deloitte & Touche S.p.A. UBI Finance S.r.l. 3,000 Total 24,867
The independent auditor did not provide any additional services in the 2019 financial year.
* * * * *
Milan, 25 February 2020
UBI FINANCE S.R.L. For the Board of Directors The Chairman Renzo Parisotto
69 FINANCIAL STATEMENTS AT 31 DECEMBER 2019
UBI FINANCE S. R.L.
IINDEPENDENT AAUDITOR''S RREPORT
70 Deloitte & Touche S.p.A. Via Tortona, 25 20144 Milano Italia
Tel: +39 02 83322111 Fax: +39 02 83322112 www.deloitte.it
INDEPENDENT AUDITOR’S REPORT PURSUANT TO ARTICLE 14 OF LEGISLATIVE DECREE No. 39 OF JANUARY 27, 2010
To the Quotaholders of UBI Finance S.r.l.
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Opinion
We have audited the financial statements of UBI Finance S.r.l. (the Company), which comprise the balance sheet as at December 31, 2019, and the income statement, statement of comprehensive income, statement of changes in equity and cash flow statement for the year then ended, and explanatory notes to the financial statements.
In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Company as at December 31, 2019 and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements applicable under Italian law to the audit of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Emphasis of matter
We draw attention to the Section 2, Part A.1 of explanatory notes to the financial statements where Directors indicate that the Company's sole activity is the purchase of receivables by taking on loans under Italian Law No. 130 of April 30, 1999, as a part of transactions for the issue of bank covered bonds. As explained by the Directors, the Company has reported the financial assets purchased and the other transactions carried out as part of the aforementioned transactions in the explanatory notes in compliance with Italian Law No. 130 of April 30, 1999, whereby receivables relating to each transaction are accounted for separately for all intents and purposes from those of the company and from those of other transactions. Our opinion is not qualified in relation to this matter.
Responsibilities of the Directors for the Financial Statements
The Directors are responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union and, within the terms established by law, for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
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Sede Legale: Via Tortona, 25 – 20144 Milano │ Capitale Sociale Euro 10.328.220,00 i.v. Codice Fiscale/Registro delle Imprese Milano n. 03049560166 – REA Milano n. 1720239 │ Partita IVA IT 03049560166
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In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they have identified the existence of the conditions for the liquidation of the Company or for the termination of the operations or have no realistic alternative to such choices.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing (ISA Italia) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with International Standards on Auditing (ISA Italia), we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance, identified at an appropriate level as required by ISA Italia, regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
Opinion pursuant to art. 14, paragraph 2 (e), of Legislative Decree 39/10
The Directors of UBI Finance S.r.l. are responsible for the preparation of the report on operations of UBI Finance S.r.l. as at December 31, 2019, including its consistency with the related financial statements and its compliance with the law.
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We have carried out the procedures set forth in the Auditing Standard (SA Italia) n. 720B in order to express an opinion on the consistency of the report on operations with the financial statements of UBI Finance S.r.l. as at December 31, 2019 and on its compliance with the law, as well as to make a statement about any material misstatement.
In our opinion, the above-mentioned report on operations is consistent with the financial statements of UBI Finance S.r.l. as at December 31, 2019 and is prepared in accordance with the law.
With reference to the statement referred to in art. 14, paragraph 2 (e), of Legislative Decree 39/10, made on the basis of the knowledge and understanding of the entity and of the related context acquired during the audit, we have nothing to report.
DELOITTE & TOUCHE S.p.A.
Signed by
Marco De Ponti Partner
Milan, Italy March 4, 2020
This report has been translated into the English language solely for the convenience of international readers.