NOT FOR DISTRIBUTION IN THE UNITED STATES

MM S.p.A.

(incorporated as a società per azioni under the laws of the Republic of Italy) €100,000,000 3.15 per cent. Senior Secured Amortizing Fixed Rate Notes due 23 December 2035

The issue price of the €100,000,000 3.15 per cent. Senior Secured Amortizing Fixed Rate Notes due 23 December 2035 (the “Notes”) of MM S.p.A. (the “Issuer” or the “Company” or “MM”) is 100 per cent. of their principal amount. The Notes constitute obbligazioni pursuant to Articles 2410 et seq. of the Italian Civil Code and Article 185 of the Legislative Decree n. 50/2016 (the “Public Contracts Code”). The Notes will bear interest from and including the Issue Date (as defined below) at the rate of 3.15 per cent. per annum, payable in arrear on 23 December in each year, commencing on 23 December 2017, all as more fully described in “Terms and Conditions of the Notes—Interest”. Interest payments to certain Noteholders may be subject to Italian substitute tax (imposta sostitutiva) as more fully described in “Terms and Conditions of the Notes—Taxation” and “Taxation—Italian Taxation”. To the extent not previously redeemed or purchased and cancelled, the Notes will be redeemed in instalments on each Amortisation Date in the relevant Amortisation Amount (each term as defined in the Terms and Conditions of the Notes (the “Conditions”)) with the final Amortisation Date on 23 December 2035 (the “Maturity Date”). The Notes may be redeemed, in whole but not in part, at 100 per cent. of their principal amount outstanding plus interest, if any, to the date fixed for redemption at the option of the Issuer in the event of certain changes affecting taxation in the Republic of Italy. See Condition 10 (Redemption and Purchase). Noteholders will be entitled, following the occurrence of a Change of Control (as defined in the Conditions) to request the Issuer to redeem such Notes at 100 per cent. of their principal amount outstanding together with any accrued and unpaid interest (if any), all as more fully described in Condition 10.3 (Redemption and Purchase— Redemption at the Option of the Noteholders following a Change of Control). The Notes will be secured on a senior secured basis by Security Interest (as defined in the Conditions) created pursuant to the following Security Documents (as defined in the Conditions): (i) any deed or document governing the “privilegio generale” over movable present and future assets of the Issuer pursuant to Article 186 of Public Contracts Code; (ii) any Additional Security Agreement (as defined in the Conditions); and (iii) any deed or document from time to time amending and/or supplementing and/or extending any of the above; (collectively, the “Transaction Security”). This prospectus (the “Prospectus”) constitutes a prospectus for the purpose of Directive 2003/71/EC, as amended (including by Directive 2010/73/EU, to the extent that such amendments have been implemented in a relevant member state of the European Economic Area) (the “Prospectus Directive”). The Prospectus has been approved by the Central Bank of Ireland (the “Central Bank”), as competent authority under the Prospectus Directive. The Central Bank only approves this Prospectus as meeting the requirements imposed under Irish and EU law pursuant to the Prospectus Directive. Such approval relates only to the Notes which are to be admitted to trading on the regulated market of the Irish Stock Exchange or other regulated markets for the purposes of Directive 2004/39/EC or which are to be offered to the public in any member state of the European Economic Area. Application has been made to the Irish Stock Exchange plc (the “Irish Stock Exchange”) for the Notes to be admitted to its official list (the “Official List”) and trading on its regulated market. This Prospectus is available for viewing on the website of the Irish Stock Exchange. Investing in the Notes involves risks. For a discussion of these risks, see “Risk Factors” beginning on page 12.

The Notes have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws and are subject to United States tax law requirements. The Notes are being offered only outside the United States by the Lead Manager (as defined herein) in accordance with Regulation S under the Securities Act (“Regulation S”), and may not be offered, sold or delivered within the United States or to, or for the account or benefit of, “U.S. persons”, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. For a description of further restrictions on offers and sales of the Securities, see “Subscription and Sale”. The Notes are expected to be rated BBB- by Standard & Poor’s Credit Market Services Italy S.r.l. (“S&P”), and Baa2 by Moody's Investor Service Emea Limited ("Moody's") on or about the Issue Date. Each of S&P and Moody’s is established in the European Union and registered under Regulation (EC) No.1060/2009 (as amended) (the “CRA Regulation”) and as such is included in the list of credit rating agencies published by the European Securities and Markets Authority on its website (at http://www.esma.europa.eu/page/List- registered-and-certified-CRAs) in accordance with the CRA Regulation. A rating is not a recommendation to buy, sell or hold securities and may be subject to revision, supervision or withdrawal at any time by the assigning rating organization. The Notes will be held in dematerialised form on behalf of their beneficial owners, until redemption in full or cancellation by Monte Titoli S.p.A. (“Monte Titoli”), for the account of any authorised financial intermediary institution entitled to hold accounts on behalf of their customers with Monte Titoli including Euroclear Bank S.A./N.V. (“Euroclear”) and Clearstream Banking, société anonyme (“Clearstream, Luxembourg”). The Notes have been accepted for clearance by Monte Titoli. The Notes will at all times be held in book entry form and title to the Notes will be evidenced by book entries, as described in further detail in Condition 1 (Form, Denomination and Title).

Investment in project bonds involves a high degree of risk. For a description of the specific risks involved in an investment in the Notes, prospective investors should have regard, among other things, to the factors described in the section "Risk Factors" on page 12 to 34 below.

Lead Manager Banca IMI The date of this Prospectus is 21 December 2016

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NOTICE TO INVESTORS

The Issuer has confirmed that this Prospectus contains all information regarding the Issuer and its subsidiaries (together with the Issuer, the “Group”) and the Notes which is material; such information is true and accurate in all material respects and is not misleading in any material respect; any opinions, predictions or intentions expressed in this Prospectus on the part of the Issuer are honestly held or made and are not misleading in any material respect; this Prospectus does not omit to state any material fact necessary to make such information, opinions, predictions or intentions (in such context) not misleading in any material respect. The Issuer accepts responsibility for the information contained in this Prospectus and declares that, having taken all reasonable care to ensure that such is the case, the information contained in this Prospectus to the best of its knowledge is in accordance with the facts and contains no omission likely to affect its import. The Issuer has not authorised the making or provision of any representation or information regarding the Issuer or the Notes other than as contained in this Prospectus or as approved for such purpose by the Issuer. Any such representation or information should not be relied upon as having been authorised by the Issuer or Banca IMI S.p.A. (the “Lead Manager”), or BNP Paribas Securities Services, Milan Branch acting as security agent (the "Security Agent"), principal paying agent (the "Principal Paying Agent") and noteholders' representative (the "Noteholders' Representative"). None of the Issuer, the Lead Manager, the Security Agent, the Principal Paying Agent or the Noteholders' Representative have authorised, nor do they authorise, the making of any offer of the Notes through any financial intermediary, other than offers made by the Lead Manager which constitute the final placement of the Notes contemplated in this Prospectus. This Prospectus has not been submitted to the clearance procedure of CONSOB and may not be used in connection with the offering of the Notes in the Republic of Italy, its territories and possessions and any areas subject to its jurisdictions other than in accordance with applicable Italian securities laws and regulations, as more fully set out under “Subscription and Sale”. The distribution of this Prospectus and the offering, sale and delivery of the Notes in certain jurisdictions may be restricted by law. Persons into whose possession this Prospectus comes are required by the Issuer and the Lead Manager to inform themselves about and to observe any such restrictions. This Prospectus may only be used for the purposes for which it has been published. For a description of certain restrictions on offers, sales and deliveries of the Notes and on distribution of this Prospectus and other offering material relating to the Notes, see “Subscription and Sale”. In particular, the Notes have not been and will not be registered under the Securities Act and are subject to United States tax law requirements. Subject to certain exceptions, the Notes may not be offered, sold or delivered in the United States or to U.S. persons. The Notes are subject to restrictions on transferability and resale and may not be transferred or resold in the United States or to U.S. persons except as permitted under applicable U.S. federal and state securities laws pursuant to a registration statement or an exemption from registration. Neither the delivery of this Prospectus nor the offering, sale or delivery of any Note shall in any circumstances create any implication that there has been no adverse change, or any event reasonably likely to involve any adverse change, in the condition (financial or otherwise) of the Issuer or the Group since the date of this Prospectus. This Prospectus is to be read and construed in conjunction with all documents which are deemed to be incorporated herein by reference. This Prospectus shall, save as specified herein, be read and construed on the basis that such documents are so incorporated and form part of this Prospectus. See “Information Incorporated by Reference”. None of the Lead Manager, the Security Agent, the Principal Paying Agent or the Noteholders' Representative makes any representation or warranty, expressed or implied, or accepts any responsibility, with respect to the accuracy or completeness of any of the information in this Prospectus. This Prospectus is not intended to provide the basis of any credit or other evaluation and should not be considered as a recommendation by the Issuer or the Lead Manager or the Security Agent, or the Principal Paying Agent or the Noteholders' Representative that any recipient of this Prospectus should purchase the Notes. In making an investment

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decision, prospective investors must rely on their own examination of the Issuer’s business and the terms of the offering. Prospective investors should not consider any information contained in this Prospectus to be investment, legal, business or tax advice. Each prospective investor should consult its own counsel, business adviser, accountant, tax adviser and other advisers for legal, financial, business, tax and related advice regarding an investment in the Notes. Prospective investors should understand that they may have to bear the financial risks of their investment for an indefinite period of time. The information set out in the sections of this Prospectus describing clearing arrangements is subject to any change or reinterpretation of the rules, regulations and procedures of Monte Titoli, in each case as currently in effect. If prospective investors wish to use the facilities of Monte Titoli, they should confirm the continued applicability of the rules, regulations and procedures of Monte Titoli. The Issuer will not be responsible or liable for any aspect of the records relating to, or payments made on account of, book-entry interests held through the facilities of Monte Titoli or for maintaining, supervising or reviewing any records relating to such book-entry interests. The language of this Prospectus is English. Certain legislative references and technical terms have been cited in their original language in order that the correct technical meaning may be ascribed to them under applicable law. Certain figures included in this Prospectus have been subject to rounding adjustments; accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them.

STABILISATION

In connection with the issue of the Notes, Banca IMI S.p.A. (the “Stabilising Manager”) (or any person acting for the Stabilising Manager) may over-allot Notes or effect transactions with a view to support the market price of the Notes at a level higher than that which might otherwise prevail in the open market. However, there can be no assurance that the Stabilising Manager (or any person acting on its behalf) will undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the Notes is made and, if begun, may be discontinued at any time, but must end no later than the earlier of thirty (30) days after the issue of the Notes or sixty (60) days after the date of allotment of the Notes. Such stabilising shall be in compliance with all applicable laws, regulations and rules.

MARKET SHARE INFORMATION AND STATISTICS

This Prospectus contains statements regarding the Issuer's industry and its relative competitive position in the industry that are not based on published statistical data or information obtained from independent third parties, but are based on the Issuer's experience and its own investigation of market conditions, including its own elaborations of such published statistical or third-party data. Although the Issuer's estimates are based on information obtained from its customers, sales force, trade and business organizations, market survey agencies and consultants, government authorities and associations in its industry which it believes to be reliable, there is no assurance that any of these assumptions are accurate or correctly reflect the Issuer's position in the industry. None of the Issuer's internal surveys or information have been verified by independent sources. While the Issuer has compiled, extracted and, to the best of its knowledge, correctly reproduced market or other industry data from external sources, including third parties or industry or general publications, the Issuer has not independently verified such data. The Issuer cannot assure investors of the accuracy and completeness of, and takes no responsibility for, such data other than the responsibility for the correct and accurate reproduction thereof. The Issuer confirms that this information has been accurately reproduced, and so far as the Issuer is aware and is able to ascertain from information available from such external sources, no facts have been omitted which would render the reproduced information inaccurate or misleading.

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PRESENTATION OF FINANCIAL INFORMATION

Financial information included in the Prospectus This Prospectus includes the audited consolidated financial statements of the Issuer as of 31 December 2015 and 2014, and for the years then ended. The financial statements of the Issuer as of and for the year ended 31 December 2014 have been prepared by management in accordance with Italian GAAP and have been audited by Eleuteria Audit S.p.A. (previously Mazars S.p.A.) The financial statements of the Issuer as of and for the year ended 31 December 2015 have been prepared by management in accordance with Italian GAAP and have been audited by BDO Italia S.p.A. The consolidated financial statements of the Issuer as at and for the year ended 31 December 2015 have been prepared in conformity with IFRS solely for the purpose of its inclusion in the Prospectus (the "Special Purpose Audited IFRS Consolidated Financial Statements"). The Special Purpose Audited IFRS Consolidated Financial Statements have been audited by BDO Italia S.p.A. The Special Purpose Audited IFRS Consolidated Financial Statements and the relevant independent auditor's report are attached as Appendix 1 to this Prospectus.

Certain audited financial information of the Issuer for the year ended on 31 December 2015 extracted from Special Purpose Audited IFRS Consolidated Financial Statements has been included in this Prospectus, together with a table to show differences between financial information prepared in accordance with Italian GAAP and IFRS and a discussion of such differences (see “Selected Financial Information - Summary of certain differences between Italian GAAP and IFRS”). Such paragraph does not include a full qualitative or detailed quantitative disclosure of the differences between Italian GAAP and IFRS applicable to the Issuer; accordingly, undue reliance should not be placed on the completeness of such disclosure. Each prospective investor should consult its own professional advisors for an understanding of the differences between Italian GAAP and IFRS and how those differences might affect the financial information included in this Prospectus. . Except where otherwise indicated, financial information relating to the Issuer included in this Prospectus has been prepared in accordance with Italian GAAP. Non-GAAP financial measures This Prospectus contains certain non-GAAP financial measures, including, EBITDA and EBIT. “EBITDA” is defined as profit or loss for the period adjusted for (i) Current and deferred income taxes, (ii) Total extraordinary items, (iii) Total financial income and costs (iv) Amortization, depreciations and write- downs, (v) Provision for risks and (vi) Other provisions.

“EBIT” is defined as profit or loss for the period adjusted for (i) Current and deferred income taxes, (ii) Total extraordinary items and (iii) Total financial income and costs. The Issuer believes these non-GAAP measures are useful and a commonly used measures of financial performance in addition to profit for the period and other profitability measures, cash flow provided by operating activities and other cash flow measures under applicable GAAP because they facilitate operating performance and cash flow comparisons from period to period, time to time and company to company. By eliminating potential differences between periods or companies caused by factors such as depreciation and amortization methods, financing and capital structures, taxation positions or regimes, the Issuer believes these non-GAAP measures can provide a useful additional basis for comparing the current performance of the underlying operations being evaluated. For these reasons, the Issuer believes these non-GAAP measures and similar measures are regularly used by the investment community as a means of comparison of companies in its industry. It should be noted that these non-GAAP financial measures are not recognised as a measure of performance under GAAP and should not be recognised as an alternative to operating income or net income or any other performance measures recognised as being in accordance with GAAP or any other generally accepted accounting principles. These non-GAAP financial measures are used by management to monitor the

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underlying performance of the business and operations. These measures are not indicative of the historical operating results of the Issuer, nor are they meant to be predictive of future results. Since all companies do not calculate these measures in an identical manner, the Issuer’s presentation may not be consistent with similar measures used by other companies. Therefore, undue reliance should not be placed on such data. Segment Information The Issuer’s business operations are divided in the following four business segments: (i) IWS, (ii), Engineering Business (iii) Public Housing Business and (iv) Assets and Property management. The information by business segments provided in this Prospectus is based on the financial information which management uses in monitoring the performance of the business and has not been prepared in accordance with Italian GAAP or any other accounting principles. In the future the Issuer will present its consolidated financial statements in accordance with IFRS, pursuant to which the Issuer will be required to present segment information. The segment information that the Issuer will be required to present in accordance with IFRS may differ from the information by business segment provided herein. Management believes that the information by business segment presented herein is useful in understanding the underlying trends of the different business segments.

FORWARD LOOKING STATEMENTS This Prospectus may contain certain statements that are, or may be deemed to be, forward-looking, including statements with respect to the Issuer’s and the Group’s business strategies, expansion of operations, trends in their business and their competitive advantage, information on technological and regulatory changes and information on exchange rate risk and generally includes all statements preceded by, followed by or that include the words “believe”, “expect”, “project”, “anticipate”, “seek”, “estimate”, “aim”, “intend”, “plan”, “continue” or similar expressions. By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those in the forward-looking statements as a result of various factors. Potential investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. Any forward-looking statements are only made as of the date of this Prospectus, and the Issuer does not intend, and does not assume any obligation, to update forward-looking statements set forth in this Prospectus. Many factors may cause the Issuer’s or the Group’s results of operations, financial condition, liquidity and the development of the industries in which they compete to differ materially from those expressed or implied by the forward-looking statements contained in this Prospectus. The risks described under “Risk Factors” in this Prospectus are not exhaustive. Other sections of this Prospectus describe additional factors that could adversely affect the Issuer’s and the Group’s results of operations, financial condition, liquidity and the development of the industries in which they operate. New risks can emerge from time to time, and it is not possible for the Issuer to predict all such risks, nor can the Issuer assess the impact of all such risks on its business or the extent to which any risks, or combination of risks and other factors, may cause actual results to differ materially from those contained in any forward- looking statements. Given these risks and uncertainties, investors should not rely on forward-looking statements as a prediction of actual results.

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CERTAIN DEFINED TERMS References to the “Issuer” or “MM” are to MM S.p.A.; references to the “Group” or the “MM Group” are to the Issuer and its consolidated subsidiaries. References to “ME” means Metro Engineering S.r.l., a consolidated subsidiary of MM S.p.A. References to “NME” means Napoli Metro Engineering S.r.l., a consolidated subsidiary of MM S.p.A. References to the “Lead Manager” are to Banca IMI S.p.A. References to the “IMI” are to Banca IMI S.p.A. References to “€” or “Euro” are to the single currency introduced at the start of the third stage of the European Economic and Monetary Union pursuant to the Treaty on the functioning of the European Union, as amended. References to "billions" are to thousands of millions. References to the "Conditions" are to the terms and conditions relating to the Notes set out in this Prospectus in the section “Terms and Conditions of the Notes” and any reference to a numbered "Condition" is to the correspondingly numbered provision of the Conditions. References to “IFRS” in this Prospectus are to International Financial Reporting Standards as adopted by the European Commission, which are those required to be used by companies listed on regulated markets in the European Union. References to “Italian GAAP” in this Prospectus are to the Italian laws and regulations governing the preparation of financial statements, as interpreted and integrated by the accounting principles established by the Organismo Italiano di Contabilità.

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TABLE OF CONTENTS

FORWARD LOOKING STATEMENTS ...... 6 CERTAIN DEFINED TERMS ...... 7 OVERVIEW ...... 9 RISK FACTORS ...... 12 INFORMATION INCORPORATED BY REFERENCE ...... 35 USE OF PROCEEDS ...... 37 SELECTED FINANCIAL INFORMATION ...... 38 DESCRIPTION OF THE ISSUER ...... 50 KEY CONTRACTS AND CONCESSION ...... 79 INTERCREDITOR ARRANGEMENTS...... 88 REGULATION ...... 89 TERMS AND CONDITIONS OF THE NOTES ...... 101 TAXATION ...... 125 SUBSCRIPTION AND SALE ...... 131 GENERAL INFORMATION ...... 134

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OVERVIEW

The summary below describes the principal terms of the Notes. Certain of the terms and conditions described below are subject to important limitations and exceptions. The “Terms and Conditions of the Notes” section of this Prospectus contains a more detailed description of the terms and conditions of the Notes, including the definitions of certain terms used in this summary. Issuer ...... MM S.p.A., a joint stock company (società per azioni) organised under the laws of the Republic of Italy (the “Issuer”). Notes Offered ...... €100,000,000 aggregate principal amount of 3.15 per cent. senior secured amortizing fixed rate Notes due 23 December 2035. Final Maturity Date ...... The Notes will mature on 23 December 2035 (the “Maturity Date”). Unless previously redeemed or purchased and cancelled, the Issuer will redeem the Notes on each amortisation date indicated in Condition 10.1 (each an “Amortisation Date” with the final Amortisation Date being the Maturity Date) in an aggregate amount equal to the principal payment set out in Condition 10.1 (each, an “Amortisation Amount”). The principal aggregate amount outstanding of the Notes shall be reduced, pro rata with respect to each outstanding Note, by the Amortisation Amount for all purposes with effect from the relevant Amortisation Date such that the aggregate principal amount outstanding of the Notes following such reduction shall be the amount set out in Condition 10.1, unless the payment of the relevant Amortisation Amount is improperly withheld or refused. Interest ...... The Notes will bear interest at a rate of 3.15 per cent. per annum. Issue Price ...... 100 per cent. of the principal amount of the Notes Interest Payment Date ...... Interest on the Notes will be payable annually in arrear on 23 December in each year, beginning on 23 December 2017 (each a “Coupon”). Ranking ...... The Notes and the Coupons are direct, unconditional and unsubordinated obligations of the Issuer which are secured in the manner provided in Condition 5 (Transaction Security) and rank and will rank pari passu, without any preference among themselves. The Notes will rank pari passu, and will share the Transaction Security with any Permanent Financing (as defined in the Conditions) subject, and upon, the terms and conditions of the Security Documents (as defined in the Conditions) and the Intercreditor Agreement (as defined in the Conditions). See “Terms and Conditions of the Notes”. Tax Redemption ...... The Issuer may redeem the Notes, in whole but not in part, at a redemption price of 100% of the principal amount outstanding, plus accrued and unpaid interest to but excluding the relevant date of redemption, if the Issuer would become obligated to pay certain additional amounts as a result of certain changes in specified tax laws or certain other circumstances. See “Terms and Conditions of the Notes—Redemption and Purchase—Redemption for Taxation Reasons”.

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Change of Control ...... Upon the occurrence of a Change of Control (as defined in the Conditions) at any time, the Issuer will have to offer to Noteholders to redeem all the Notes at a price equal to 100% of the principal amount outstanding thereof plus accrued and unpaid interest, to but excluding the relevant date of redemption. See “Terms and Conditions of the Notes— Redemption and Purchase—Redemption at the Option of the Noteholders following a Change of Control”. Redemption upon Termination The Issuer will redeem all, but not part only, of the Notes at their Value Payment ...... principal amount outstanding together with any accrued and unpaid interest until the date of the redemption no later than 10 Business Days after receipt by the Issuer (or by any person on its behalf) of any Termination Value Payment (all terms as defined in the Conditions). See “Terms and Conditions of the Notes—Redemption and Purchase —Redemption upon Termination Value Payment”. Covenants ...... The Terms and Conditions provide for certain covenants for the Issuer concerning:  Information to be provided;  Listing;  Treatment of the Termination Value Payment;  Compliance with specified (i) Net Financial Debt--EBITDA Ratio, (ii) Net Financial Debt- Consolidated Fixed Assets Ratio and (iii) Consolidated Coverage Ratio;  Delivery by the Issuer of evidence of registration/receipt of the deposit of the privilegio generale at the competent Court promptly and in any case within 10 Business Days of the Issue Date (all as defined in the Conditions);  Maintenance of Rating;  Pari passu payments. See “Terms and Conditions of the Notes—Covenants.” Use of Proceeds ...... The Issuer will use the proceeds from the sale of the Notes to fund the investments under the Investment Plan (Programma degli Interventi) in accordance with the terms of the Milan IWS Concession. Furthermore, as allowed under Articles 185 of the Public Contracts Code, the proceeds will be used to repay the Issuer’s existing IMI Agreement as it also directly relates to the management and operation of the IWS and to the investments under the Investment Plan. Forms and Denomination ...... The Notes will be in bearer form and in denominations of €100,000 and integral multiples of €100,000 in excess thereof and will be held in dematerialised form on behalf of the beneficial owners, until redemption in full or cancellation thereof, by Monte Titoli S.p.A., for the account of the relevant Monte Titoli S.p.A. account holders.

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Transfer Restrictions; Absence of a Public Market for the Notes ...... The Notes have not been registered under the U.S. Securities Act and thus are subject to restrictions on transferability and resale. The Issuer cannot assure investors that a market for the Notes will develop or that, if a market develops, the market will be a liquid market. The Lead Manager has advised the Issuer that it currently intends to make a market in the Notes. However, the Lead Manager is not obligated to do so and any market making with respect to the Notes may be discontinued without notice. See “Subscription and Sale”. Listing ...... Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and trading on its regulated market. Security Agent ...... BNP Paribas Securities Services, Milan Branch Principal Paying Agent ...... BNP Paribas Securities Services, Milan Branch Listing Agent ...... Walkers Listing Services Limited Governing Law of the Notes ...... Italian law Governing Law of the Security Documents ...... Italian law

Risk Factors

Investing in the Notes involves substantial risks. Please see the “Risk Factors” section for a description of certain of the risks you should carefully consider before investing in the Notes. Additional Information

The Issuer’s registered offices are located at Via del Vecchio Politecnico, 8, Milan, Italy. Its telephone number is +39 02 77471.

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RISK FACTORS The Issuer believes that the following factors may affect its ability to fulfil its obligations under the Notes. Most of these factors are contingencies which may or may not occur and the Issuer is not in a position to express a view on the likelihood of the occurrence of any such contingency. In addition, factors which are material for the purpose of assessing the market risks associated with the Notes are also described below. The Issuer believes that the factors described below represent the principal risks inherent in investing in the Notes, but the inability of the Issuer to pay interest, principal or other amounts on or in connection with the Notes may occur for other reasons which may not be considered significant risks by the Issuer based on information currently available to it or which it may not currently be able to anticipate. In addition, the order in which the risk factors are presented below is not intended to be indicative either of the relative likelihood that each risk will materialise or of the magnitude of their potential impact on the business, financial condition and results of operations of the Issuer. Prospective investors should also read the detailed information set out elsewhere in this Prospectus and consider carefully whether an investment in the Notes is suitable for them in light of the information contained in this Prospectus and their personal circumstances, based upon their own judgment and upon the advice from such financial, legal and tax advisers as they may deem necessary. Words and expressions defined in "Terms and Conditions of the Notes" or elsewhere in this Prospectus have the same meaning in this section. Prospective investors should read the whole of this Prospectus, including the information incorporated by reference. Factors affecting the Issuer's ability to fulfil its obligations under the Notes Risk factors relating to Integrated Water Service The water business of the Issuer depends on the concession agreement with the ATO Office of Milan The Issuer’s primary business relates to the management of integrated water services (“IWS”) (see “Description of the Issuer—IWS”), to be exercised in compliance with the provisions of the concession agreement (the “Milan IWS Concession”), entered into between the Issuer and the Azienda speciale of the Municipality of Milan, in its quality of competent office (ente di governo dell’ambito – EGA) for the "Optimal Territorial Area" (Ambito Territoriale Ottimale – “ATO”) of the Milan territory. Please note that, pursuant to Art. 1, paragraph 16 of Law No. 56/2014, the Municipality of Milan, as of January 1st 2015, has been declared Città Metropolitana, replacing the Province of Milan (Provincia di Milano) in all its tasks and competences. As a result of the above, pursuant to Art. 6 of Regional Law No. 32/2015, also the Azienda speciale was wound up and replaced, as of June 15 2016, by a new governmental body for the ATO of Milan called “Ufficio d’Ambito della Città Metropolitana di Milano” (hereinafter the “ATO Office of Milan”). Please further note that the Second Amendment to the Milan IWS Concession, already approved by the ATO Office of Milan, is still subject to the approval by the Autorità per l'Energia Elettrica, il Gas e il Sistema Idrico (i.e. the National Authority for Electrical Energy, Gas and Water Supply, the "AEEGSI") (see “Key Contracts and Concession—IWS—Relevant resolutions and agreements for the IWS”). There are a number of events which may lead to early termination of the Milan IWS Concession, including: (i) termination of the Milan IWS Concession if the Issuer fails to perform its obligations thereunder; and (ii) withdrawal by the ATO Office of Milan due to, inter alia, change in law not compatible with the terms of the Milan IWS Concession or with any modification to the Milan IWS Concession or overriding public interest reasons (see “Key Contracts and Concession—IWS—Milan IWS Concession”). If the Milan IWS Concession is terminated for any of the above reasons, the Issuer is entitled to receive the applicable termination value from the new operator and to continue to manage the ordinary activities of the IWS, through an extension of the term of the Milan IWS Concession, until such payment is actually made by the incoming concessionaire (see “Key Contracts and Concession—IWS—Milan IWS Concession”). Furthermore, cumulatively with any penalties and sanctions set out by national and regional laws, the Issuer shall also be subject to monetary penalties in case of failure to meet certain obligations under the Milan IWS Concession, unless such failure is due to force majeure events. The application of the above penalties and sanctions do not prejudice the right of the ATO Office of Milan to ask for further damages, if any, arising from the termination of the Milan IWS Concession for Issuer’s default (please see “Key Contracts and Concession—IWS—Milan IWS Concession”).

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Termination of the Milan IWS Concession, as well as the application of penalties, sanctions or damages thereunder, could have a material adverse effect on the Issuer’s business, financial condition and results of operations as well as the Issuer’s ability to meet its payment obligations under the Notes. Risks relating to the investments to be carried out by the Issuer under the Investment Plan In order to fulfil its obligations under the Milan IWS Concession, the Issuer is required, inter alia, to carry out the investment programme set out in the Investment Plan (Programma degli Interventi) attached to the Milan IWS Concession and forming an integral part thereof (see “Regulation—Water Business—The Issuer’s Investment Plan”). Failure to meet this investment program may lead to termination of the Milan IWS Concession (see “Key Contracts and Concession—IWS—Milan IWS Concession”). As required by the Investment Plan and the applicable regulatory framework, the Issuer has invested and will continue to invest in the development of water provision, sewage and purification plants and networks which it owns or operates under the Milan IWS Concession. There is no assurance that the investment strategies implemented by the Issuer will be successful, as they may be interrupted or delayed due to unforeseen difficulties related to the obtaining of environmental and/or administrative authorisations or the opposition of political groups or other organisations. In addition, the Issuer’s investment strategies under the Investment Plan may be influenced by changes in the price of equipment, materials and labour, as well as changes to the political or regulatory framework or the Issuer’s inability to raise funds at acceptable interest rates. Such delays could affect the ability of the Issuer to meet regulatory and other environmental performance standards as well as the obligations under the Milan IWS Concession and could have a material adverse effect on the Issuer’s business, financial condition and results of operations as well as the Issuer’s ability to meet its payment obligations under the Notes. The continued management of the IWS by the Issuer depends on its status as an in-house company of the Municipality of Milan The ATO Office of Milan has directly entrusted the Issuer with the management of the IWS, without the need for a public tender process, due to the Issuer’s status as an in-house company of the Municipality of Milan, pursuant to art. 149-bis of Legislative Decree No. 152/2006 (the “Environmental Code”) and art. 5 of the Public Contracts Code (please see “Regulation—Water Business—In house providing mechanism and requirements”). As a result of being an in-house company, the Municipality of Milan may exercise control over the Issuer similar to that exercised over its own departments, pursuant to which both strategic objectives and significant decisions of the Issuer are subject to the decisive influence of the Municipality. The loss of the in-house requirements or a change in law, as well as a negative decision of the ATO Office of Milan in relation to the management model for the IWS, may lead to an early termination of the Milan IWS Concession. In such a case, the Issuer shall be entitled to receive the applicable termination value from the new operator and to continue to manage the ordinary activities of the IWS, through an extension of the term of the Milan IWS Concession, until such payment is actually made by the incoming concessionaire (see “Key Contracts and Concession—IWS—Milan IWS Concession”). Nonetheless, in such a case, the early termination of the Milan IWS Concession could have a material adverse effect on the Issuer’s business, financial condition and results of operations as well as the Issuer’s ability to meet its payment obligations under the Notes. Force majeure as well as other unforeseeable events may affect the economic and financial balance of the Issuer The Milan IWS Concession has a thirty year duration, starting from January 1st 2008. If during the concession lifespan extraordinary and unforeseeable circumstances occur which determine an alteration of the economic and financial balance of the Milan IWS Concession, the Issuer may ask for a rebalancing of the original economic and financial conditions, identifying expressly the measures required to ensure the restoration of the balance and describing the circumstances that have led out the imbalance. Such measures must then be approved by the ATO Office of Milan and by the AEEGSI to be validly implemented (please see “Key Contracts and Concession—IWS—Milan IWS Concession”). Delay in the rebalancing process as well as disagreement between the parties on (i) circumstances determining the imbalance of the original economic and financial conditions and (ii) relevant measures to be put in place to

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restore such balance, could have a material adverse effect on the Issuer’s business, financial condition and results of operations as well as the Issuer’s ability to meet its payment obligations under the Notes. Changes in IWS regulation could affect the Issuer’s revenues and results of operation The IWS is a public service of primary importance, heavily regulated both at European, national and regional level. For all the aspects of the IWS management (e.g. assignment of the IWS, conditions for the operation, quality standards as well as tariff calculation and revision), the Issuer must comply with the applicable regulations (including those set out by the AEEGSI) as well as with the provisions contained in the Milan IWS Concession. Furthermore, as an in-house company of the Municipality of Milan, the Issuer must act in compliance with the directives and guidelines set out by the Municipality of Milan (see “Regulation—Water Business—The national and regional framework applicable to the IWS”). Although the entire regulatory framework is designed to give stability to the IWS sector, it cannot be excluded that – given also the long-lasting duration of the Milan IWS Concession – changes in applicable laws and regulations, whether at a regional, national or European level, and the manner in which they are interpreted, could positively or negatively affect the Issuer's earnings and current operations. Such changes could include changes in tax rates, legislation and policies as well as changes in environmental, safety or other workplace laws. Public policies related to water, energy, energy efficiency and/or air emissions may also have an impact on the IWS sector. Furthermore, the Issuer operates the IWS Business in a certain political, legal, and social context and, therefore, even different decisions of the Municipality of Milan (and, consequently, of the ATO Office of Milan) may prejudice the Issuer’s revenues and results of operations. Regulation of the IWS as well as political decisions determine the manner in which the Issuer conducts the IWS Business and the tariff it charges on the end-users. Any new or substantially altered rules and standards may adversely affect the Issuer’s business, financial condition and results of operations. In such a case, the Issuer may ask for a rebalance of the original economic and financial conditions (see “Key Contracts and Concession—IWS—Milan IWS Concession”). However, delay in the rebalancing process as well as disagreement between the parties on (i) circumstances determining the imbalance the original economic and financial conditions and (ii) relevant measures to be put in place to restore such balance, could have a material adverse effect on the Issuer’s business, financial condition and results of operations as well as the Issuer’s ability to meet its payment obligations under the Notes. Risks specifically related to environmental and health and safety liabilities Risks of environmental and health and safety accidents and liabilities are inherent to the operation of the IWS. Notwithstanding the Issuer's belief that the operational policies and standards adopted and implemented to ensure the safety of its operations are adequate, it is always possible that incidents such as blowouts, spill- overs, pollution and similar events will occur, resulting in damage to the environment, the Issuer’s employees and/or local communities. The Issuer has accrued risk provisions for environmental expenses and liabilities. Notwithstanding such provisions, the Issuer may in the future incur significant environmental expenses and liabilities in addition to the amounts already accrued owing to (i) unknown contamination, (ii) the results of on-going surveys or future surveys on the environmental status of certain of the Issuer's industrial sites as required by applicable regulations on contaminated sites and (iii) the possibility that proceedings will be brought against the Issuer in relation to such matters. Any such liabilities/increase in costs could have a material adverse effect on Issuer’s business, financial condition and results of operations as well as Issuer’s ability to meet its payment obligations under the Notes. Should such events be due to force majeure or other unforeseeable events not attributable to Issuer’s default under the Milan IWS Concession, the Issuer could ask for a rebalancing of the original economic and financial conditions (see “Key Contracts and Concession—IWS—Milan IWS Concession”). However, delay in the rebalancing process as well as disagreement between the parties on (i) the circumstances determining the imbalance in the original economic and financial conditions and (ii) relevant measures to be put in place to restore such balance, could have a material adverse effect on Issuer’s business, financial condition and results of operations as well as Issuer’s ability to meet its payment obligations under the Notes. The Issuer may be unable to maintain or obtain the required licences, permits, approvals or consents

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The Issuer’s activities entail exposure to regulatory, technical, commercial, economic and financial risks related to the obtaining of relevant permits and approvals from regulatory, legal, administrative, tax and other authorities and agencies. The processes for obtaining these permits and approvals are often lengthy, complex, unpredictable and costly. If the Issuer is unable to maintain or obtain the relevant permits and approvals, its ability to achieve its strategic objectives could be impaired, which could have a material adverse effect on the Issuer’s business, financial condition and results of operations as well as the Issuer’s ability to meet its payment obligations under the Notes. Risks related to the determination and revision of the IWS tariff The Issuer’s revenue received for the management of the IWS - as well as for the realisation of the investments envisaged under the Investment Plan - is solely represented by the tariff, which is quantified by the ATO Office of Milan and approved by the AEEGSI, in accordance with the provisions of the Milan IWS Concession, the AEEGSI regulations as well as Art. 154 of the Environmental Code (see “Key Contracts and Concession—IWS—Milan IWS Concession” and “Regulation—Water Business—IWS tariff”). The overall IWS tariff calculation method, as well as its revision at the end of each four-year regulatory period, is laid down in accordance with the “full cost recovery” principle under Art. 9 of Directive 2000/60/EC (establishing a framework for Community action in the field of water policy), as better detailed in the Communication from the Commission to the Council, the European Parliament and the Economic and Social Committee (Pricing policies for enhancing the sustainability of water resources - COM/2000/0477). Nonetheless, given also the long duration of the Milan IWS Concession, there may occur extra-costs/lower incomes due to extraordinary and unforeseeable circumstances, not covered by the tariff, which determine the alteration of the economic and financial balance of the Milan IWS Concession. In such a case, the Issuer may ask for a rebalancing of the original economic and financial conditions (see “Key Contracts and Concession— IWS—Milan IWS Concession”). However, delay in the rebalancing process as well as disagreement between the parties on (i) circumstances determining the imbalance in the original economic and financial conditions and (ii) relevant measures to be put in place to restore such balance, could have a material adverse effect on the Issuer’s business, financial condition and results of operations as well as the Issuer’s ability to meet its payment obligations under the Notes. Risks relating to quality standards The Issuer is required to comply with certain contractual and contractual quality standards for the provision of the IWS to end-users, as set out under AEEGSI Resolution No. 655/2015/R/idr and the Milan IWS Concession (see “Regulation—Other relevant AEEGSI Resolutions”). Failure to comply with these standards may result in the application to the Issuer of penalties and/or sanctions as well as in the obligation to indemnify the end-users. Although the Issuer believes that it currently complies with the applicable quality standards, any future breach of these standards could have a material adverse effect on the Issuer’s business, financial condition and results of operations as well as the Issuer’s ability to meet its payment obligations under the Notes. Risks relating to the interruption of the IWS The Issuer is continuously exposed to the risk of interruption of IWS activities due to the malfunctioning of its infrastructure resulting from events beyond the Issuer’s control, such as extreme weather phenomena, natural disasters, fire, malicious damage, accidents, labour disputes and mechanical breakdown as well as any unavailability of equipment of critical importance for the provision of the IWS caused by material damage to the equipment or its components, which may result in increased costs. The Issuer's management believes that its systems of prevention and protection operate according to the frequency and gravity of the particular events. Moreover, its ongoing maintenance plans, the availability of strategic spare parts and insurance coverage for the infrastructures necessary for the IWS, enable the Issuer to mitigate the economic consequences of potentially adverse events that might be suffered by any of its plants or networks. However, there can be no assurance that maintenance costs will not increase compared to those originally planned, that insurance products will continue to be available on reasonable terms or that each event or series of events affecting one or more plants or networks could compromise production capacity and result in loss of income and/or cost increases and, therefore, could have a material adverse effect on the Issuer’s business, financial condition and results of operations as well as the Issuer’s ability to meet its payment obligations under the Notes. Should such events be due to force majeure or other unforeseeable events not attributable to the Issuer’s 15

default under the Milan IWS Concession, the Issuer could ask for a rebalancing of the original economic and financial conditions (please see “Key Contracts and Concession—IWS—Milan IWS Concession”). However, delay in the rebalancing process as well as disagreement between the parties on (i) circumstances determining an imbalance in the original economic and financial conditions and (ii) relevant measures to be put in place to restore such balance, could have a material adverse effect on Issuer’s business, financial condition and results of operations as well as Issuer’s ability to meet its payment obligations under the Notes. Risks related to competition As at the date of this Prospectus, the Issuer does not face any significant competition in the areas of business in which it operates, primarily due to its status as an in-house providing company of the Municipality of Milan. However, there is no guarantee that, in the future, changes in the applicable legal and regulatory framework (including that governing the granting of concessions) and how they are interpreted by the courts or by regulators, whether at a national or European level, could lead to a significant increase in competition. The Issuer’s failure or inability to respond effectively to an increased level of competition could have an adverse impact on the Issuer’s growth prospects, results of operations and cash flows and its ability to fulfil its obligations under the Notes. Risks specifically referred to single segments of the IWS Sewer flooding The Issuer's combined sewerage systems can, during prolonged heavy rainfall, reach their hydraulic capacity, which would result in flooding. As it is not possible to forecast accurately the occurrence and effects of sewer flooding, forward planning and setting adequate provisions to face or alleviate the risk of sewer flooding is difficult. The financial costs of measures necessary to address sewer flooding, or to alleviate the risk of sewer flooding to properties at risk may be higher than anticipated, which could have a material adverse effect on the Issuer’s business, financial condition and results of operations as well as the Issuer’s ability to meet its payment obligations under the Notes. Should such events be due to force majeure or other unforeseeable events not attributable to the Issuer’s default under the Milan IWS Concession, the Issuer could ask for a rebalance of the original economic and financial conditions (please see “Key Contracts and Concession—IWS—Milan IWS Concession”). However, delay in the rebalancing process as well as disagreement between the parties on (i) circumstances determining the imbalance in the original economic and financial conditions and (ii) relevant measures to be put in place to restore such balance, could have a material adverse effect on the Issuer’s business, financial condition and results of operations as well as the Issuer’s ability to meet its payment obligations under the Notes. Water shortages Water shortages may be caused by natural disasters, floods and prolonged droughts, below average rainfall or increases in demand or by environmental factors such as climate change, which may exacerbate seasonal fluctuations in the availability and supply of water. However, the Issuer believes that the occurrence of these events in the Milan city area could be considered very remote, due to the climate, the geographical features of its territory and the historical abundance of water resources. In the event of water shortages, additional costs may be incurred by the Issuer in order to provide emergency reinforcement to supplies in areas of shortage which may adversely affect its business, results of operations, profitability or financial condition. In addition, restrictions or interruptions on the use or supply of water may adversely affect the Issuer's turnover and potentially result in significant payments to affected customers as compensation, all of which could have a material adverse effect on Issuer’s business, financial condition and results of operations as well as Issuer’s ability to meet its payment obligations under the Notes. Should such events be due to force majeure or other unforeseeable events not attributable to the Issuer’s default under the Milan IWS Concession, the Issuer could ask for a rebalance of the original economic and financial conditions (see “Key Contracts and Concession—IWS—Milan IWS Concession”). However, delay in the rebalancing process as well as disagreement between the parties on (i) circumstances determining the imbalance in the original economic and financial conditions and (ii) relevant measures to be put in place to restore such balance, could have a material adverse effect on the Issuer’s business, financial condition and results of operations as well as the Issuer’s ability to meet its payment obligations under the Notes. Service interruptions due to key infrastructures disruption

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Unexpected failure or disruption (including criminal acts or major health and safety incidents) at a key infrastructure (including treatment facilities) could cause a significant interruption to the supply of services (in terms of duration or number of customers affected), materially affecting the way in which the Issuer operates, prejudicing its reputation and resulting in additional costs such as liability to customers or loss of revenue, each of which could have a material adverse effect on the Issuer’s business, financial condition and results of operations as well as the Issuer’s ability to meet its payment obligations under the Notes. Should such events be due to force majeure or other unforeseeable events not attributable to the Issuer’s default under the Milan IWS Concession, the Issuer could ask for a rebalance of the original economic and financial conditions (see “Key Contracts and Concession—IWS—Milan IWS Concession”). However, delay in the rebalancing process as well as disagreement between the parties on (i) circumstances determining the imbalance in the original economic and financial conditions and (ii) relevant measures to be put in place to restore such balance, could have a material adverse effect on the Issuer’s business, financial condition and results of operations as well as the Issuer’s ability to meet its payment obligations under the Notes. Pipeline collapse The management of an extensive water provision and sewage network could require ordinary and extraordinary interventions that may impact on pipeline stability. These conditions may cause: pipe ruptures with consequent possible damage and flooding of roads, public and private surfaces and properties; sewage pipeline collapse, with consequent possible occurrence of chasms that may cause damage to road surfaces These events could cause a significant interruption to the supply of the IWS (in terms of duration or number of customers affected) materially affecting the way that the Issuer operates, and could cause damage to third parties, prejudicing the reputation of the Issuer and resulting in additional costs including liability to customers or loss of revenue, each of which could have a material adverse effect on the Issuer’s business, financial condition and results of operations as well as the Issuer’s ability to meet its payment obligations under the Notes. It is worth noting that, should such events be due to force majeure or other unforeseeable events not attributable to the Issuer’s default under the Milan IWS Concession, the Issuer could ask for a rebalance of the original economic and financial conditions (see “Key Contracts and Concession—IWS—Milan IWS Concession”). However, delay in the rebalancing process as well as disagreement between the parties on (i) circumstances determining the imbalance in the original economic and financial conditions and (ii) relevant measures to be put in place to restore such balance, could have a material adverse effect on the Issuer’s business, financial condition and results of operations as well as the Issuer’s ability to meet its payment obligations under the Notes. Contamination of water supplies Water supplies may be subject to contamination, including contamination from the presence of naturally occurring compounds and pollution from man-made substances or criminal acts. In the event that the Issuer's water supply is contaminated and it is unable to substitute water supply from an uncontaminated water source, or to adequately treat the contaminated water source in a cost-effective manner, this may have an adverse effect on its business, financial condition or results of operations because of the resulting prejudice to reputation and required capital and operational expenditure. The Issuer could also be fined for breaches of requirements or regulations, or held liable for human exposure to hazardous substances in its water supplies or other environmental damage, which could have a material adverse effect on the Issuer’s business, financial condition and results of operations as well as the Issuer’s ability to meet its payment obligations under the Notes. In addition, contamination of supplies could exacerbate water shortages, giving rise to the issues described above. Risks also arise from adverse publicity that these events may generate and the consequent damage to the Issuer’s reputation. Any such negative publicity as a result of contamination could be far reaching due to the high levels of attractiveness of the area in which the Issuer operates and could have a material adverse effect on the Issuer’s business, financial condition and results of operations as well as the Issuer’s ability to meet its payment obligations under the Notes. Should such events be due to force majeure or other unforeseeable events not attributable to the Issuer’s default under the Milan IWS Concession, the Issuer could ask for a rebalance of the original economic and financial conditions (see “Key Contracts and Concession—IWS—Milan IWS Concession”). However, delay in the rebalancing process as well as disagreement between the parties on (i) circumstances determining the 17

unbalancing the original economic and financial conditions and (ii) relevant measures to be put in place to restore such balance, could have a material adverse effect on the Issuer’s business, financial condition and results of operations as well as the Issuer’s ability to meet its payment obligations under the Notes. Weather and catastrophe risks There is a risk that extreme weather conditions could cause flooding, prolonged periods of drought and/or operational difficulties, which could adversely affect the Issuer's service performance and give rise to potential penalties as well as the need to pay compensation to customers the application of other measures under the regulatory framework. Moreover, catastrophic events such as dam bursts, fires, earthquakes, floods, droughts, terrorist attacks, diseases, plant failure or other similar events could result in personal injury, loss of life, pollution or environmental damage, severe damage to or destruction of the Issuer's operational assets. Any costs resulting from the suspension of operations of the Issuer as a result of such catastrophic events could have a material adverse effect on Issuer’s business, financial condition and results of operations as well as Issuer’s ability to meet its payment obligations under the Notes. It is worth noting that, should such events be due to force majeure or other unforeseeable events not attributable to the Issuer’s default under the Milan IWS Concession, the Issuer could ask for a rebalance of the original economic and financial conditions (see “Key Contracts and Concession—IWS—Milan IWS Concession”). However, delay in the rebalancing process as well as disagreement between the parties on (i) circumstances determining the imbalance in the original economic and financial conditions and (ii) relevant measures to be put in place to restore such balance, could have a material adverse effect on the Issuer’s business, financial condition and results of operations as well as the Issuer’s ability to meet its payment obligations under the Notes. Risk factors relating to other Issuer’s businesses Apart from the IWS Business, which represents its main business, the Issuer operates also the Engineering Business, the Public Housing Business and the Asset Management Business, together, the “Other Businesses”. Whilst the IWS Business and the Public Housing Business are directly performed by the Issuer, the Engineering Business is managed by the Issuer also through its subsidiaries (Metro Engineering S.r.l., Napoli Metro Engineering S.r.l. and MMB Project Rus). Even though the proceeds arising from the sale of the Notes shall not be used by Issuer to fund the Other Businesses, negative results relating to the Other Businesses may nonetheless impair the overall capacity of the Issuer to generate revenues (also as a result of higher costs incurred by the Issuer) and, therefore, could have a material adverse effect on Issuer’s business, financial condition and results of operations as well as Issuer’s ability to meet its payment obligations under the Notes. Risks relating to the Other Businesses The Engineering Business, the Public Housing Business and the Asset Management Business are regulated by service contracts directly granted by the Municipality of Milan, without the need of any public competitive selection, due to the Issuer’s status as an in-house company (see “Description of the Issuer—Issuer’s Businesses”). Each service contract requires the Issuer to comply with certain obligations specified therein (including regular maintenance activities). Under the service contracts, the Issuer is subject to penalties or sanctions for non-performance or default. Such default or failure to perform, if left un-remedied, could result in the early termination of the relevant service contract by the Municipality of Milan. Furthermore, in accordance with general principles of Italian law, a contract can be terminated early for public interest reasons. In either cases, the Issuer might be required to transfer all of the assets relating to the execution of the relevant service contract to the Municipality of Milan or to the replacing contractor. No management assurance can be given that the Issuer will be successful in renewing its existing service contracts for the execution of the Other Businesses or in obtaining their renewal once they expire, or that any new service contract or renewal of existing service contracts will be on terms similar to those currently in force. Any failure by the Issuer to obtain new service contracts or renewal of the existing ones, in each case on similar or other favourable terms, may impair the overall capacity of the Issuer to generate revenues (also as a result of higher costs incurred by the Issuer) and, therefore, could have a material adverse effect on Issuer’s

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business, financial condition and results of operations as well as Issuer’s ability to meet its payment obligations under the Notes. The Issuer’s activities/services related to the Engineering Business are compensated on a full recovery cost basis (please see “Description of the Issuer—Engineering Business”), subject to possible adjustments that might be requested by the Municipality of Milan on a case by case basis depending on specific circumstances, which might partly affect the operative results of the Engineering Business. It must be considered that the current remuneration scheme for the Public Housing Business is based on the number and on the status (rented, vacant, occupied) of real estate property units (please see “Description of the Issuer—Public Housing Business”). There is a risk that the number of units rented or available for rent could be reduced for various reasons such as the reduction of extraordinary maintenance financing by the Municipality of Milan, the non compliance of property units with applicable housing standards or an increase in the number of illegal occupations. Although the Issuer has implemented a set of management instruments in order to control these risks, it is not possible to forecast accurately the occurrence and effects of the aforementioned events. These events could have a negative impact on the Issuer’s revenues and costs of measures required to deal with this events may be higher than predicted, each of which could have a material adverse effect on Issuer’s business, financial condition and results of operations as well as Issuer’s ability to meet its payment obligations under the Notes. Please further note that the operating performance of the Public Housing Business (which is carried out also through third party contractors), directly impacts the operating activities of the Issuer and could also affect the Issuer’s ability to attain the key performance indicators defined for the Issuer by the Municipality of Milan. Interruption of the Public Housing Business (also as a result of unexpected failure by third party contractors) could cause a significant interruption to the supply of the relevant services to the end-users (occupant/resident/tenant, as the case may be), materially affecting the way in which the Issuer operates as well as its reputation and may result in additional costs or loss of potential revenues, each of which could have a material adverse effect on the Issuer’s business, financial condition and results of operations as well as the Issuer’s ability to meet its payment obligations under the Notes. In addition, the management of the Public Housing Business by the Issuer could cause losses or damages to third parties. The Issuer and the Municipality of Milan have set in place specific insurance policies with a coverage that they believe is appropriate (please see “Description of the Issuer— Public Housing Business”). Operational risks specifically referred to the Engineering Business As examined in the section below (please see “Description of the Issuer—Engineering Business”), the Engineering Business comprises several activities, each of them may give raise to specific risks, as detailed in the following paragraphs. Risks related to design activities and direction of the works When performing design services, the Issuer operates in accordance with quality management system certified ISO 9001 as well as the best practice for risk and project management. In addition, the preliminary inspection on the design activities (verifica preliminare della progettazione) is carried out in compliance with ISO/IEC 17020:2012 requirements, pursuant to which the Issuer’s internal bodies entrusted with the execution (having the “B” type features), hold the necessary competence to guarantee the impartiality and consistency of their inspection activities. In addition to the above quality management systems, the Issuer holds adequate insurance coverage for the professional liability relating to the design, preliminary inspection and direction of the works activities. It is worth noting that the Issuer does not perform construction activity and, therefore, does not bear any construction risks, which are entirely borne by the construction company entrusted with the execution of the relevant works (in relation to which the Issuer may be entrusted with the design, preliminary inspection and/or direction of the works activities, as the case may be). Notwithstanding the above, the design, preliminary inspection and direction of the works activities may be subject to the following risks:

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 design flaws or errors in the performance of preliminary design inspection which may prejudice, in whole or in part, the realisation of the works or their appropriate use;  ruin or major defects, in total or in part, of the executed works;  damage caused to third parties as a consequence of the execution of the works;  risks not covered, in full or in part, by the available insurance coverage. Should any of the above risks occur, the Issuer may be liable toward the client/third parties for higher costs/damages, which could have a material adverse effect on the Issuer’s business, financial condition and results of operations as well as the Issuer’s ability to meet its payment obligations under the Notes. Risks related to health and safety coordination The Engineering Business performed by the Issuer comprises the execution health and safety coordination activities both during the design and the construction phase and, therefore, the Issuer may be entrusted with the role of coordinator for the design activities (Coordinatore in Fase di Progettazione, CSP) and/or coordinator for the execution activities (Coordinatore in Fase di Esecuzione, CSE). In particular, the CSP is the person who is appointed by the client (or by the subject responsible for the works (responsabile dei lavori) appointed by him), during the design stage, to perform the health and safety tasks set out in Art. 91 of Legislative Decree No. 81/2008 (i.e. Consolidated Act on Health and Safety Rules - LD 81/2008); whilst the CSE is the person who is appointed by the client (or by the subject responsible for the works (responsabile dei lavori) appointed by him), during the execution phase, to perform the health and safety tasks set out in Art. 92 of LD 81/2008. The Issuer, when performing the above activities, operates according to the best practice of the market and holds adequate insurance coverage. In addition, it is worth noting that any liability which may arise from the performance of such activities is primarily on the individuals entrusted with the relevant task of CSP/CSE. Notwithstanding the above, there is still some risk that the Issuer may face liability toward the client/third parties for higher costs/damages, as well as reputational risk, which could have a material adverse effect on the Issuer’s business, financial condition and results of operations as well as the Issuer’s ability to meet its payment obligations under the Notes. Risks related to the procurement/construction management The Engineering Business performed by the Issuer may include procurement/construction management on behalf of the client in relation to the selection of the construction company entrusted with the execution of the works as well as the integrated management of the construction contracts in relation to which the Issuer may have performed the design activities. Even though, in such cases, the construction risk is entirely borne by the construction company, the Issuer may be liable toward the client/third parties for higher costs/damages should its obligation to select and control the construction company not carried out in a diligent manner (culpa in eligendo/culpa in vigilando) and, therefore, the Issuer is held in breach of its contractual obligations, which could have a material adverse effect on the Issuer’s business, financial condition and results of operations as well as the Issuer’s ability to meet its payment obligations under the Notes. Risks related to the expropriation activities In the context of the Engineering Business the Issuer may be entrusted with the execution of expropriation activities on behalf of the client. Even though such activities have a purely technical nature and are carried out by the Issuer in compliance with the best practice, nonetheless the Issuer could held liable toward the client/third parties for higher costs/damages, which could have a material adverse effect on the Issuer’s business, financial condition and results of operations as well as the Issuer’s ability to meet its payment obligations under the Notes. Risks relating to the implementation of the Issuer’s strategic objectives The Issuer intends to pursue a strategy of development in its IWS Business as well as in the Other Businesses, in accordance with its in-house company status. The Issuer’s strategy (whose primary objectives are described in the following section “Description of the Issuer – Strategy”) contains, and is prepared on the basis of, a number of critical assumptions and estimates relating to future trends and events that may affect the business sectors in which the Issuer operates, such as estimates of activity volumes and changes to the applicable 20

regulatory framework. There can be no assurance that the Issuer will achieve its strategic objectives. For example, if any of the events and circumstances taken into account when the strategic objectives were set out do not occur, the future business, financial condition, cash flow and/or results of operations of the Issuer could be different from those envisaged and the Issuer may not achieve its strategic objectives, or do so within the expected timeframe, which could have a material adverse effect on Issuer’s business, financial condition and results of operations as well as Issuer’s ability to meet its payment obligations under the Notes. Risks related to competition As at the date of this Prospectus, the Issuer does not face any significant competition in the areas of business in which it operates, primarily due to its status as an in-house company of the Municipality of Milan (see “Description of the Issuer—In-house company nature of the Issuer”). However, there is no guarantee that, in the future, changes in the applicable legal and regulatory framework (including that governing the in-house providing mechanism) and how they are interpreted by the courts or by regulators, whether at a national or European level, would not lead to a significant increase in competition. The Issuer’s failure or inability to respond effectively to an increased level of competition could have an adverse impact on the Issuer’s growth prospects, results of operations and cash flows and its ability to fulfil its obligations under the Notes. Risks related to information technology The Issuer's operations are supported by complex information systems, particularly with respect to its technical, commercial and administrative divisions. Information technology risk arises in particular from issues concerning the adequacy of these systems and the integrity and confidentiality of data and information. The major operating risks connected with the IT system involve the availability of "core" systems. The continuous development of IT solutions to support business activities, the adoption of strict security standards and of authentication and profiling systems help to mitigate these risks. In addition, to limit the risk of activity interruption caused by a system fault, the Issuer has adopted hardware and software configurations for those applications that support critical activities, which are subjected to efficiency testing. Specifically, the services provided by the Issuer's outsourcer include a disaster recovery service that is intended to guarantee system recovery within timeframes that are consistent with the critical relevance of the affected applications. Nevertheless, there can be no assurance that serious system failures, network disruptions or breaches in security will not occur and any such failure, disruption or breach may have a material adverse effect on Issuer’s business, financial condition and results of operations as well as Issuer’s ability to meet its payment obligations under the Notes. Risks relating to legal proceedings or investigations by the authorities The Issuer is a defendant in a number of legal proceedings, which are incidental to its business activities. MM made provision in its consolidated financial statements for legal proceedings which amounted to € 4,159,000 as at 31 December 2015 (See "Description of the Issuer - Legal Proceedings", below). The Issuer may, from time to time, be subject to further litigation and to investigations by taxation and other authorities. The Issuer is not able to predict the ultimate outcome of any of the claims currently pending against it or future claims or investigations that may be brought against it, which may be in excess of its existing provision. In addition, it cannot be ruled out that the MM will in future years incur significant losses in addition to amounts already provided for in connection with pending legal claims and proceedings or future claims or investigations which may be brought owing to: (i) uncertainty regarding the final outcome of such proceedings, claims or investigations; (ii) the occurrence of new developments that management could not take into consideration when evaluating the likely outcome of such proceedings, claims or investigations; (iii) the emergence of new evidence and information; and (iv) the underestimation of likely future losses. Adverse outcomes in existing or future proceedings, claims or investigations could have an adverse effect on the business, financial condition, results and continuation of operations of MM. In addition to the above, the Issuer is currently subject and it may be subject to enforcement proceedings, which may negatively affect the Issuer’s financial positions and day-by-day operation (e.g. by suspending the bank accounts’ operation). Moreover, the Issuer is also party to a number of proceedings in which, although any relevant loss and/or liability will be borne by the Municipality of Milan, the Issuer - in case of negative decision by the court - might (or could be obliged to) pay in advance the relevant counterparty and then recover the relevant amounts from the Municipality of Milan. Such scenario could cause temporary cash flow shortfall to the Issuer and, consequently, it could have an adverse effect on the financial situation and operations of MM.

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Risks relating to joint ventures and partnerships In 2015, the Issuer has established in partnership with RZD Group (Russian National Railways) a joint venture called MMB Project Rus, incorporated under Russian law, to develop potential engineering business in Russia. At the date of this Prospectus, the joint venture company does not have any assets or liabilities. Moreover, in recent years, the Issuer has participated in international engineering public tendering processes in partnership with other players of the industry. The Issuer may also enter into further partnerships for public tenders in the future with the same or other parties. According to the in-house providing principle, the expected level of business deriving from this kind of activities is limited with respect to the total value of production (please see “Description of the Issuer— Issuer’s Businesses—Results by business segments”). The possible benefits or expected returns from such joint ventures and partnerships may be difficult to achieve or may prove to be less valuable than the Issuer currently estimates. This could have a material adverse effect on Issuer’s business, financial condition and results of operations as well as Issuer’s ability to meet its payment obligations under the Notes. Risks related to insurance coverage The Issuer maintains insurance coverage in an amount that it believes to be appropriate to protect itself against a variety of risks, such as property damage and liability claims. However, there can be no assurance that: (i) the Issuer will be able to maintain the same insurance coverage in the future (on terms considered acceptable by MM (considering the degree of risk undertaken by MM in relation to the insurance coverage conditions and in accordance with the insurance obligations of the Issuer under the Milan IWS Concession) or at all); (ii) claims will not either exceed the amount of coverage or fall outside the scope of the risks insured under the relevant policy; (iii) insurers will at all times be able to meet their obligations; or (iv) the Issuer’s provisions for uninsured or uncovered losses will be sufficient to cover the full amount of liabilities eventually incurred. Any of these scenarios could have a material adverse effect on Issuer’s business, financial condition and results of operations as well as Issuer’s ability to meet its payment obligations under the Notes. The Issuer’s historical financial and operating results may not be indicative of future performance The Issuer’s historical financial and operating results may not be indicative of its future performance. There can be no assurance of the Issuer’s continued profitability in future periods. Risks relating to skills and expertise of the Issuer’s employees The Issuer’s ability to operate its business effectively depends on the skills and expertise of its employees. If the Issuer loses any of its key personnel or is unable to recruit, retain and/or replace sufficiently qualified and skilled personnel, it may be unable to implement its business strategy. This could have a material adverse effect on Issuer’s business, financial condition and results of operations as well as Issuer’s ability to meet its payment obligations under the Notes. Risks relating to potential disputes with employees Disputes with the Issuer’s employees may arise both in the ordinary course of the Issuer’s business or from one-off events, such as mergers and acquisitions or as a result of employees moving to an incoming concession holder upon the expiry or termination of a concession held by the Issuer. Any material dispute could give rise to difficulties in supplying customers and maintaining its IWS networks, which could in turn lead to a loss of revenues and prevent the Issuer from implementing its business strategy. This could have a material adverse effect on Issuer’s business, financial condition and results of operations as well as Issuer’s ability to meet its payment obligations under the Notes. Risks relating to potential breaches of laws and regulations by employees There is a risk that the Issuer’s employees may breach anti-bribery legislation, the Issuer’s internal policies or governance regulations. This could have a material adverse effect on Issuer’s business, financial condition and results of operations as well as Issuer’s ability to meet its payment obligations under the Notes Risk relating to any breaches of the organisation and management model

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Legislative Decree No. 231/2001 (“Decree 231/2001”) imposes direct liability on a company for certain unlawful actions taken by its executives, directors, agents and/or employees. The list of offences under Decree 231/2001 currently covers, among other things, bribery, theft of public funds, unlawful influence of public officials, corporate crimes (such as false accounting), fraudulent acts and market abuse, as well as health, safety and environmental hazards. In order to reduce the risk of liability arising under Decree 231/2001, MM and its consolidated subsidiaries ME and NME have each adopted its own organisation, management and supervision model (the “Model”) to ensure the fairness and transparency of their business operations and corporate activities and provide guidelines to their management and employees to prevent them from committing any of the aforementioned offences. Each of these companies has also appointed its own supervisory body (the “Organismo di Vigilanza”) to oversee the functioning and updating of, and compliance with, the Model. Notwithstanding the adoption of these measures, the Issuer or one of its consolidated subsidiaries could still be found liable for the unlawful actions of their officers or employees if, in the relevant authority’s opinion, Decree 231/2001 has not been complied with. This could lead to a suspension or limitation of the Issuer’s or consolidated subsidiaries operating activities and/or an imposition of fines and other penalties, all of which could have a material adverse effect on Issuer’s business, financial condition and results of operations as well as Issuer’s ability to meet its payment obligations under the Notes. Risk relating to any breaches of the Plan for the prevention of corruption and for the transparency The combined provision of Italian Law No. 190/2012 and of Italian Legislative Decree No. 33/2013 has required that the Board of Directors of the Issuer adopted a Plan for the prevention of corruption and for the transparency (the “Plan”). The Plan is adopted on a three-year basis, with the current Plan running from 2016 to 2018, and has to be revised and approved by January 31st of each year. The Issuer’s Board of Directors has appointed a Head of the Prevention of corruption and Transparency. Each of ME and NME has also appointed its own Head of the Prevention of corruption and Transparency. The Anti Corruption Law 190/2012 brings a comprehensive set of measures aimed to prevent and eliminate corruption and illegality in the Public Administration to which MM is subject. The Plan identifies and addresses the activity areas with potential corruption risk. Among the compulsory activity areas, defined at national level by ANAC (Italian anti-corruption authority) the Plan covers: staff recruitment and progression; works, services and supply procurement; granting and provision of subsidies and contributions as well as economic advantages allocation of any kind to individuals and public or private entities. Among specific risk areas, MM has included in the Plan: public housing management; San Rocco purification plant management. For these areas the Plan includes specific operating models to prevent unlawful actions related to corruption. The Plan includes also obligations, controls and monitoring actions to enforce the transparency requirements defined in the Legislative Decree No. 33/2013. Notwithstanding the adoption of these measures, each of the Issuer, ME or NME could still be found liable for the unlawful actions of their officers or employees if, in the relevant authority’s opinion, Law No. 190/2012 and Legislative Decree No. 33/2013 have not been complied with. This could have a material adverse effect on Issuer’s business, financial condition and results of operations as well as Issuer’s ability to meet its payment obligations under the Notes. Risk relating to management control systems The Issuer’s structures produce periodic reporting documents that the management team requires to carry out its activities and take strategic and operational decisions. The Issuer believes that these reports enable its management team to make informed assessments of the Issuer’s financial position and prospects. Nonetheless, the Issuer intends to continue improving the reporting system in order to achieve better integration and automation of the reports produced by it, reduce the risk of error and increase the speed of the flow of information. Should the Issuer fail to implement the reporting system successfully, it may face the risk of data entry errors, which could mean that its management team is not properly informed of any issues which require prompt intervention, adversely affecting the business, financial condition and results of operations as well as Issuer’s ability to meet its payment obligations under the Notes. Risks relating to the difficult conditions in the global financial markets and in the economy in general

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Although a global economic recovery has been recorded in recent years, and although there have been relevant expansive monetary interventions performed by supranational financial institutions as the European Central Bank, various concerns remain regarding the ability of certain EU member states and other countries like the United States to service their sovereign debt obligations. The significant economic stagnation in certain countries in the Eurozone, especially Greece, Italy, Portugal, Spain, Slovenia and Cyprus in part due to the effects of the sovereign debt crisis and corresponding austerity measures in these markets, has added to these concerns. The measures so far implemented to reduce public debt and fiscal deficits have already resulted in lower or negative GDP growth and high unemployment rates in these countries. If the fiscal obligations of these or other countries continue to exceed their fiscal revenue, taking into account the reactions of the credit and swap markets, or if their banking systems further destabilise, the ability of such countries to service their debt in a cost efficient manner could be impaired. The continued uncertainty over the outcome of various international financial support programmes, the possibility that other countries might experience similar financial pressures, investor concerns about inadequate liquidity or unfavourable volatility in the capital markets, lower consumer spending, higher inflation or political instability could further disrupt the global financial markets and might adversely affect the economy in general. In addition, the risk remains that a default of one or more countries in the Eurozone, the extent and precise nature of which are impossible to predict, could lead to the expulsion or voluntary withdrawal of one or more countries from the Eurozone or a disorderly break-up of the Eurozone, either of which could significantly disrupt financial markets and possibly trigger another global recession. All of these risks could materially and adversely affect the business, results of operations and financial condition of the Issuer, and, as a result, the Issuer’s ability to meet its obligations under the Notes. On 23 June 2016, the UK held a referendum to decide on the UK's membership of the European Union. The UK vote was to leave the European Union. There are a number of uncertainties in connection with the future of the UK and its relationship with the European Union. The negotiation of the UK’s exit terms is likely to take a number of years. Until the terms and timing of the UK’s exit from the European Union are clearer, it is not possible to determine the impact that the referendum, the UK’s departure from the European Union and/or any related matters may have on the business of the Issuer. As such, no assurance can be given that such matters would not adversely affect the business, financial condition and results of operations as well as Issuer’s ability to meet its payment obligations under the Notes. Credit risk Credit risk represents the Issuer’s exposure to potential losses that may be incurred if a commercial or financial counterparty fails to meet its obligations. With reference to Engineering Business and Public Housing Business segments, the totality of credits is almost due by the Municipality of Milan or other public entities, thus reducing the potential for credit risk. The main credit risks for the Issuer arise from trade receivables from the provision of the IWS. The Issuer seeks to address this risk with policies and procedures regulating the monitoring of expected collection flows, the issue of reminders, the granting of extended credit terms if necessary and the implementation of suitable recovery measures. This risk has intensified in recent years due to the ongoing economic recession and the Issuer has reacted by implementing a series of preventive measures, which include an increase in internal and external credit management controls. Notwithstanding the foregoing, a general increase in default rates could have a material adverse effect on the Issuer’s business, financial condition and results of operations as well as Issuer’s ability to meet its payment obligations under the Notes. Interest rate risk The Issuer is exposed to fluctuations in rates of interest, in particular from financial indebtedness. The Issuer's objective is to limit its exposure to interest rate increases while maintaining acceptable borrowing costs. The risks associated with increases in interest rates are monitored non-speculatively and, if necessary, reduced or eliminated by entering swap contracts with financial counterparties for the sole purpose of cash flow hedging. As at 31 December 2015, the Group’s contracts to limit exposure to interest rate risk shows a negative fair value of Euro 10.4 million. As at 31 December 2015, the Group's consolidated hedging contracts, together with fixed-rate loans, hedge approximately 100 per cent of long term loans, in line with the Group’s target of maintaining a balance between floating rate loans and fixed rate loans or in any case hedged against significant increases in interest rates. There can be no assurance that the hedging policy adopted by the Issuer, which is designed to minimise any losses connected to fluctuations in interest rates in the case of floating rate indebtedness by transforming them

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into fixed rate indebtedness, will actually have the effect of reducing any such losses. To the extent it does not, this may have an adverse effect on the Issuer's business, financial condition and results of operations. Funding and liquidity risk The Issuer's ability to borrow from banks or in the capital markets to meet its financial requirements is dependent on favourable market conditions. Borrowing requirements of MM are coordinated by the Issuer's central finance department in order to achieve consistency between financial resources and management plans, to manage net trade positions and maintain the level of risk exposure within the Issuer's prescribed limits. The MM's approach toward funding risk is aimed at securing competitive financing and ensuring a balance between average maturity of funding, flexibility and diversification of sources. However, these measures may not be sufficient to protect MM fully from such risk and, in addition to the impact of market conditions, the ability of the Issuer to obtain new sources of funding may be affected by contractual provisions of existing financings (such as change of control clauses, requiring the Issuer to remain under the control of local authorities, as well as clauses such as negative pledges that restrict the security that can be given to other lenders). If insufficient sources of financing are available in the future for any reason, the Issuer may be unable to meet its funding requirements, which could materially and adversely affect its business, financial condition and results of operations as well as Issuer’s ability to meet its payment obligations under the Notes. Risks relating to fluctuations in the prices of energy commodities The Issuer is exposed to the risk of fluctuations in the prices of the energy commodities it acquires in connection with the IWS segment, in particular electric energy, which cost amounted to about 17 per cent of the total value of production of the IWS segment for the year ended 31 December 2015. These fluctuations directly and indirectly affect the Issuer’s results through the cost recovery mechanisms contained in water tariff method, which contains a two-year lag for a full cost recovery, which is also linked to average national energy procurement price cap for the sector. In order to contain the fluctuation risk and to ensure the convenience of the energy commodities pricing, the Issuer participate to an electric energy buying group for a joint yearly public tendering for potential suppliers. The buying group for the tender related to 2016 energy consumption included, besides MM, several public companies operating in the IWS and in the local public transport sector. The Issuer’s energy consumption volumes included in the tender represented about the 21 per cent of total volumes included in the tender. The Issuer gives no assurance that the measures adopted by it to manage the price fluctuation of the commodities it handles are adequate, or that in the future it will be able to continue to rely on the described procurement strategy. This could adversely affect the Issuer’s business, financial condition and results of operations as well as Issuer’s ability to meet its payment obligations under the Notes. Risk Factors Relating to the Notes The Notes are fixed-rate securities and are vulnerable to fluctuations in market interest rates The Notes will bear interest at a fixed rate. A holder of a security with a fixed interest rate is exposed to the risk that the price of such security falls as a result of changes in the current interest rate on the capital markets (“Market Interest Rate”). While the nominal interest rate of a security with a fixed interest rate is fixed during the life of such security or during a certain period of time, the Market Interest Rate typically changes on a daily basis. As the Market Interest Rate changes, the price of such security changes in the opposite direction. If the Market Interest Rate increases, the price of such security typically falls, until the yield of such security is approximately equal to the Market Interest Rate. Conversely, if the Market Interest Rate falls, the price of a security with a fixed interest rate typically increases, until the yield of such security is approximately equal to the Market Interest Rate. Investors should be aware that movements of the Market Interest Rate could adversely affect the market price of the Notes. The Notes may not be a suitable investment for all investors Each potential investor in the Notes should determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should: (i) have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained or incorporated by reference in this Prospectus or applicable supplement;

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(ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact such investment will have on its overall investment portfolio; (iii) have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes; (iv) understand thoroughly the terms of the Notes; and (v) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks. A potential investor should not invest in the Notes, unless the potential investor has the expertise (either alone or with a financial adviser) to evaluate how the Notes will perform under changing conditions, the resulting effects on the value of the Notes and the impact this investment will have on the potential investor’s overall investment portfolio. Certain Italian law provisions affecting the Notes and the rights of the Noteholders are untested The Notes are subject to certain provisions of the Italian legislation and, in particular, the Public Contracts Code and, with reference to tax provisions, Law Decree No. 83/2012. In particular, Article 185 of the Public Contracts Code and Article 1 of Law Decree No. 83/2012, which sets forth specific legal and tax provisions applicable to notes and other debt instruments issued by the Issuer, including the Notes, has been recently amended and are therefore untested under Italian law, may be challenged and, if challenged, may not be upheld by an Italian court and/or any relevant Italian authorities. Any such circumstance may have an adverse impact on Noteholders’ rights and on the market value of the Notes. See also “Regime applicable to noteholders meetings. Holders of the Notes may not control certain decisions regarding their rights, including the acceleration of the Notes and the enforcement of Transaction Security”, “The Notes must be purchased by, and held at all times by, Qualified Holders” below. In particular, the holders of the Notes would be eligible to benefit from, amongst other things, the General Privilege (as defined in the Conditions) under the Public Contracts Code. The enforcement of the General Privilege may also be subject to the occurrence of certain conditions under applicable legislation which may not subsist. In addition, the application and interpretation of the recent amendments to the Italian law provisions governing the General Privilege is as yet untested by the courts and by the relevant authorities. As a result, there can be no assurance that any of the General Privilege will be enforceable on the terms, and within the time-frames, envisaged by the Public Contracts Code, or at all. The Termination Value may be significantly reduced and the Issuer may not be able to redeem the Notes If the Issuer fails to comply with the terms of the Concession Agreement and as a result the Concession Agreement (as defined in the Conditions) is terminated by the Grantor (as defined in the Conditions), the Issuer has the right to receive an amount equal to the Termination Value (as defined in the Conditions). The proceeds of the Termination Value must be used by the Issuer to redeem the Notes under Condition 10.4 (Redemption and Purchase-Redemption upon Termination Value Payment). However, the Termination Value due to the Issuer may be set off against, amongst other things (a) any amounts owed by the Issuer to the Grantor at the time the Termination Value is paid and (b) the amount of any sanctions or penalties applied against the Issuer in connection with its failure to comply with the terms of the Concession Agreement. As a result, in these circumstances, the amount available to the Issuer as Termination Value could be materially reduced. Following the Issuance of the Notes, the Issuer may incur significantly more debt The Issuer may be able to incur significant additional indebtedness in the future, including any Required Capex Indebtedness (as such term is defined in Condition 4 (Definitions)) to finance the IWS. If the Issuer incurs additional indebtedness, until the investments carried out under the IWS are recovered through the tariff mechanism or any other projects financed through such additional indebtedness become capable of generating additional cash flow, the risks related to the business of the Issuer associated with its increased level of debt could intensify.

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The Issuer is subject to restrictive covenants under the existing indebtedness and it may be subject to restrictive covenants under any Additional Indebtedness which could impair its ability to run its business Any Required Capex Indebtedness (as such term is defined in the Conditions), as well as any other indebtedness which is permitted to be incurred under the Conditions (together any “Additional Indebtedness”), may contain negative covenants (subject to exceptions to be agreed between the Issuer and the providers of such Additional Indebtedness), restricting, among other things, the Issuer’s ability to:

 make certain capital expenditures;

 make certain investments;

 incur additional indebtedness or issue guarantees, including for the purpose of refinancing of existing indebtedness;

 create or incur security;

 sell, lease, transfer or dispose of assets;

 merge or consolidate with other companies;

 make a substantial change to the general nature of the Issuer’s business;

 pay dividends and make other distributions or restricted payments; and

 enter into transactions with affiliates. The documentation for such Additional Indebtedness may also provide for certain restrictive financial covenants, the breach of which would lead to an event of default thereunder, as well as other terms (including representations, covenants, mandatory prepayments, trigger events and events of default) which are more restrictive than the Conditions. Such other Additional Indebtedness may also benefit from the same Transaction Security as the Notes. See “—The Transaction Security will be shared with other creditors.” The restrictions and limitations contained in the documentation for such Additional Indebtedness, as well as the restrictions contained in the Conditions, could affect the Issuer’s ability to operate its business. For example, such restrictions could adversely affect the Issuer’s ability to finance its operations, fund capital expenditure required for the timely compliance with the Concession Agreement and the implementation of its investment plans or finance its capital needs. Additionally, its ability to comply with these covenants and restrictions may be affected by events beyond its control, including, among other things, prevailing economic, financial and industry conditions. If the Issuer breaches any of these covenants or restrictions, it could result in a default under the relevant documentation for such Additional Indebtedness. If there was an event of default under any relevant documentation for such Additional Indebtedness that is not cured or waived, the holders of the defaulted debt could (subject to the terms of the Intercreditor Agreement) terminate their commitments thereunder and cause all amounts outstanding with respect to such indebtedness to be due and payable immediately, which in turn could result in cross defaults under other indebtedness, including the Notes. Any such actions could force the Issuer into bankruptcy or liquidation, and it may not be able to repay its obligations under the Notes in such an event. Same considerations apply also with reference to the existing indebtedness of the Issuer, whose documentation contains, among other things, customary covenants and events of default and which, except for the BEI Financing, are not party to the Intercreditor Agreement. Also in this case, if the Issuer breaches any of these covenants or cause otherwise an event of default under the relevant documentation, unless such default is cured or waived, the holder of the defaulted debt could terminate its commitments thereunder (without being subject to any contractual limitations or conditions towards the Noteholders) and cause all amounts outstanding with respect to such indebtedness to be due and payable immediately, which in turn could result in cross defaults under other indebtedness, including the Notes. Any such actions could force the Issuer into bankruptcy or liquidation, and it may not be able to repay its obligations under the Notes in such an event.

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The Notes will be secured only to the extent of the value of the Transaction Security that has been granted as security for the Notes The Transaction Security securing the Notes will initially comprise a “privilegio generale” over movable present and future assets of the Issuer pursuant to Article 186 of Public Contract Code. If an event of default occurs and the Notes are accelerated, the Notes will rank equally with the holders of other unsubordinated and unsecured indebtedness with respect to any assets excluded from the Transaction Security. To the extent the claims of the holders of the Notes exceed the value of the assets securing the Notes and other liabilities, claims related to any excluded assets will rank equally with the claims of the holders of any other unsecured indebtedness. As a result, if the value of the assets pledged as security for the Notes is less than the value of the claims of the holders of the Notes together with the claims of other secured creditors and any claims of the holders of any pari passu additional indebtedness, those claims may not be satisfied in full before the claims of unsecured creditors of the Issuer are paid. The Issuer has created security interests and certain creditor protection mechanisms in favour of third parties which are not party to the Intercreditor Agreement The Issuer has created security in favour of certain existing lenders (see “Description of the Issuer- Financing”). Consequently, such other secured creditors will have priority over the proceeds arising from the enforcement of the respective security interests and claims of the Noteholders related to assets secured in favour of such other secured creditors will be subordinated to the full satisfaction of these secured creditors and of the other creditors preferred by mandatory provisions of law. In addition, since such other secured creditors are not party to the Intercreditor Agreement, they may autonomously start a claim or enforcement proceeding against the Issuer without any obligation to inform or request the consent of the Noteholders and the proceeds of such enforcement will not be shared with the Noteholders. In addition, Noteholders should note that the Issuer has put in place certain creditor protection mechanisms in favour of certain existing lenders under existing facility agreements (see “Description of the Issuer- Financing”) which, even if are not legally considered security (“garanzie reali”) under Italian law, in practice channel and segregate part of the Issuer’s available cash and may create practical problems to the Security Agent in connection with the realisation of security interests. In this respect, the Noteholders should consider that, due to such mechanisms, it cannot be excluded that the rights of the abovementioned lenders (including Intesa Sanpaolo S.p.A. which is the sole shareholder of the Lead Manager) may affect the Noteholders’ rights deriving from the Notes. It may be difficult to realise the value of the Transaction Security The Transaction Security may be subject to exceptions, defects, encumbrances, liens and other imperfections, whether on or after the date the Notes are first issued. The existence of such exceptions, defects, encumbrances, liens and other imperfections could adversely affect the value of the Transaction Security, as well as the ability of the Security Agent to realise or foreclose on such Transaction Security. Furthermore, the first-priority ranking of security interests can be affected by a variety of factors, including the timely satisfaction of perfection requirements, statutory liens or re-characterisation under local laws. The Transaction Security may be subject to practical problems generally associated with the realisation of security interests in Transaction Security. The Security Agent may also need to obtain the consent of a third party to enforce a security interest. The Security Agent may not be able to obtain any such consent. In addition, the consent of any third parties may not be given when required to facilitate a foreclosure on such assets. Accordingly, the Security Agent may not have the ability to foreclose upon those assets, and the value of the Transaction Security may significantly decrease. As a result, in these circumstances, the amount recoverable by the Noteholders could be materially reduced or eliminated. The Transaction Security will be shared with other creditors The Notes will rank pari passu, and will share the Transaction Security with: (i) the Euro 70,000,000 long term facility provided to Company (as borrower) by the European Investment Bank (Banca europea per gli investimenti) as lender under an agreement dated 18 November 2016 as the same may be amended and/or supplemented and/or restated and/or replaced from time to time (the “BEI Financing”); and/or

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(ii) any other bank facilities provided to the Issuer to finance (in whole or in part) the new investments and works required under the Investment Plan (Programma degli Interventi) attached to, and forming an integral part of, the Concession Agreement reaching an aggregate amount (including amounts under paragraph (i) above, and this paragraph (ii)) not exceeding Euro 70,000,000, subject, and upon, the terms and conditions of the Security Documents and the Intercreditor Agreement. As a result, the value of the assets pledged as security for the Notes may not be sufficient to satisfy the claims of the holders of the Notes together with the claims of such other secured creditors. Regime applicable to noteholders meetings. Noteholders may not control certain decisions regarding their rights, including the acceleration of the Notes and the enforcement of Transaction Security, which may also be subject to the terms of the Intercreditor Agreement Article 185 of the Public Contracts Code exempts the Notes from the application of mandatory Italian law governing noteholders meetings and noteholders representative. In case of amendments to Italian law providing for a specific regime governing the above meetings of Noteholders, the meetings of Noteholders will be governed by the Conditions to the extent Italian law does not provide otherwise. In addition, the applicability of Italian law to the provisions governing the meetings of Noteholders could result in the appointment of a Noteholders representative (rappresentante comune) pursuant to Article 2417 of the Italian Civil Code. In addition, the Conditions contain provisions for calling meetings of Noteholders to consider matters affecting their interests generally including, inter alia, any proposal to modify the maturity of the Notes or the dates on which interest is payable on them, to reduce or cancel the principal amount of, or interest on, the Notes, or to change the currency of payment of the Notes. These provisions permit defined majorities to bind all Noteholders, including Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a manner contrary to the majority. It is possible that the interests of certain other parties to the Intercreditor Agreement will not be aligned with the interests of Noteholders and there can be no assurance that any modification, consent or waiver to the Intercreditor Agreement or any Security Document or any enforcement action taken with reference to the Notes and/or any Transaction Security will be favourable to the Noteholders. In the case of modifications, consents or waivers made without the consent of the Noteholders, or any enforcement action, such matters may be detrimental to the interests of some or all Noteholders. Modifications, consents or waivers or any enforcement action (or failure to take any enforcement action) may also be detrimental to the interests of some or all Noteholders, but nonetheless permissible without any such consent, despite the fact that the ratings of the Notes or of the Issuer may be affirmed. The votes of the Noteholders may not constitute the required majority in respect of any such matter, owing to the relative amount of indebtedness (compared to the Issuer’s overall indebtedness) constituted by the Notes which is capable of being voted by the Noteholders’ Representative under the Intercreditor Agreement compared with the Permanent Financing and any other Additional Indebtedness. Therefore, according to the Intercreditor Agreement, Noteholders alone may not be able to control the outcome of any particular modification, consent or waiver or enforcement process and it is possible that the Security Agent may be given instructions which are not in the interests of Noteholders. The ability of the Security Agent to enforce certain of the Transaction Security may be restricted by Italian law The Intercreditor Agreement will provide that to the extent permitted by applicable law, only the Security Agent has the right to enforce the Security Documents on behalf of the holders of the Notes. As a consequence of such contractual provisions, holders of the Notes will not be entitled to take enforcement action in respect of the Transaction Security securing the Notes, except through the Noteholders’ Representative, who will provide instructions to the Security Agent in respect of the Transaction Security. See “Terms and Conditions of the Notes—Transaction Security”.

The security interest under the Security Documents in favour of the Notes will be created in favour of the Security Agent which will act as representative of the Noteholders pursuant to and for the purposes of Article 185 of the Public Contracts Code and Article 2414-bis, paragraph 3, of the Italian Civil Code and will thus be entitled to exercise, in the name and on behalf of the Noteholders (including their assignees), all the substantial and procedural rights relating to such security interests and in favour of the Noteholders. However, the enforceability of Italian law security granted in favour of a representative (rappresentante) of noteholders

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pursuant to Article 185 of the Public Contracts Code and Article 2414-bis, paragraph 3, of the Italian Civil Code has not been tested in the Italian courts due to the recent introduction of the relevant legislative provision and, therefore, the risk of unenforceability by the Noteholders of the security documents posed by Italian law cannot be eliminated or mitigated, and neither can such risk be eliminated or mitigated by securing a parallel debt as the enforcement of a security granted in favour of the creditor of a parallel debt has not been tested in Italian courts.

The security under the Security Documents may be subject to exceptions, defects, encumbrances, liens and other imperfections permitted under the Security Documents or the Conditions, whether on or after the date the Notes are issued. The existence of such exceptions, defects, encumbrances, liens and other imperfections could adversely affect the value of such security, as well as the ability of the Security Agent to realise or foreclose on such security. Furthermore, the first-priority ranking of security interest can be affected by a variety of factors, including the timely satisfaction of the perfection requirements, statutory liens or re- characterisation under local laws.

The security under the Security Documents may be subject to practical problems generally associated with the realisation of security interest. The Security Agent may also need to obtain the cooperation of a third party to enforce a security interest. The Security Agent may not be able to obtain any such cooperation.

The validity and enforceability of the Security Documents and other Noteholders' rights is subject to legal qualifications and assumptions typical for similar transactions and the enforcement of rights is subject to procedural rules which may have an impact on the timing and manner of enforcement. Such procedures in Italy may take several years before a final order is obtained.

Moreover, under Italian law, claims of certain categories of creditors (creditori privilegiati) are given statutory priority in relation to the proceeds of a debtor’s property in respect of the claims of other creditors.

Rights of Noteholders in the Transaction Security securing the Notes may be adversely affected by the failure to perfect security interests in the Transaction Security Under Italian law, a security interest in certain tangible and intangible assets can only be properly perfected, and thus retain its priority, if certain actions are undertaken by the secured party and/or the grantor of the security interest. The security interests in the Transaction Security may not be perfected with respect to the claims of the Notes if the Issuer fails or is unable to take the actions required to perfect the security interest. Such failure may result in the invalidity of the relevant security interest in the Transaction Security or adversely affect the priority of such security interest in favour of third parties, including a trustee in bankruptcy and other creditors who claim a security interest in the same Transaction Security. The Notes must be purchased by, and held at all times by, Qualified Holders The Notes are subject to certain provisions of the Italian legislation and, in particular, the Code of Public Contracts and, with reference to tax provisions, Law Decree No. 83/2012. Pursuant to such provisions, the Notes may only be subscribed for, held by and circulate among certain investors (the “Qualified Holders”). As of the date of this Prospectus, article 185 of the Public Contracts Code provides that only qualified investors (investitori qualificati) (as defined in article 100 of the Legislative Decree No. 58 of 24 February 1998, as amended) and entities controlled by such qualified investors pursuant to article 2359 of the Italian Civil Code may subscribe for, purchase or hold the Notes. Potential investors should be aware that, by purchasing the Notes they will be deemed to have represented and warranted that they are Qualified Holders and acknowledged that the Issuer is not and will not be at any time in a position to monitor the identity and qualification of any purchaser of, or holder of, the Notes as well as the compliance with Italian laws and regulations applicable to the entities that may purchase or hold the Notes. Although the Public Contracts Code and Law Decree No. 83/2012 do not set out the consequences of a non-compliance with such limitations, it cannot be ruled out that any such Notes not held by a Qualified Holder would not be enforceable or any purchase of, or subscription for, the Notes by a person who is not a Qualified Holder should not be valid or would be subject to a different tax regime. Each potential investors should consult its legal and tax advisers to determine if it qualifies as a Qualified Holder and to evaluate the legal and tax consequences of the purchase of the Notes.

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The granting of the security interests in the Transaction Security may create “clawback” periods for such security interests in accordance with Italian law The granting of new security interests in connection with the issuance of the Notes, (including under the General Privilege), may be voidable by the grantor of such security interest or by an insolvency trustee, liquidator, receiver or administrator or by other creditors, or may be otherwise set aside by a court, or be unenforceable if certain events or circumstances exist or occur, including, among other things, if: (a) the grantor of such security interest is deemed to be insolvent at the time of the grant, (b) the grant permits the secured parties to receive a greater recovery than if the grant had not been given and (c) an insolvency proceeding in respect of the grantor of such security interest is commenced within a legally specified “clawback” period following the granting or recreation of such security interest. To the extent that the granting or recreation of any security interest in the Transaction Security is voided, holders of the Notes would lose the benefit of the relevant security interest. Redemption prior to maturity for tax reasons In the event that the Issuer would be obliged to increase the amounts payable in respect of the Notes due to any change in or amendment to the laws or regulations of the Republic of Italy or any political subdivision thereof or of any authority therein or thereof having the power to tax or in the interpretation or administration thereof, the Issuer may redeem all outstanding Notes in accordance with the Conditions of the Notes. If this occurs, there can be no assurance that it will be possible to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Notes. The Issuer may not have sufficient funds at the time of occurrence of a change of control event to redeem outstanding Notes Upon the occurrence of certain events relating to the Issuer as set out in “Terms and Conditions of the Notes— Redemption and Purchase— Redemption at the Option of the Noteholders following a Change of Control”, the Noteholders will have the right to require the Issuer to redeem their outstanding Notes at their principal amount outstanding plus accrued and unpaid interest, if any, to the date of redemption. However, it is possible that the Issuer will not have sufficient funds at the time of occurrence of such events to make the required redemption of Notes. In addition, except as specifically set out in “Terms and Conditions of the Notes— Redemption and Purchase—Redemption at the Option of the Noteholders following a Change of Control”, the Notes do not contain provisions that provide a right to Noteholders to require the Issuer to purchase or redeem the Notes in any other circumstances.

Decisions at Noteholders’ meetings bind all Noteholders

Provisions for calling meetings of Noteholders are contained in the Agency Agreement and summarised in Condition 15 (Meetings of Noteholders, Modification and votes relating to the Intercreditor Agreement). Noteholders’ meetings may be called to consider matters affecting Noteholders’ interests generally, including modifications to the terms and conditions relating to the Notes. These provisions permit defined majorities to bind all Noteholders, including those who did not attend and vote at the relevant meeting or who voted against the majority. Any such modifications to the Notes (which may include, without limitation, lowering the ranking of the Notes, reducing the amount of principal and interest payable on the Notes, changing the time and manner of payment, changing provisions relating to redemption, limiting remedies on the Notes and changing the amendment provisions) may have an adverse impact on Noteholders' rights and the market value of the Notes.

Noteholders’ meeting provisions may change by operation of law or because of changes in the Issuer’s circumstances

As currently drafted, the rules concerning Noteholders’ meetings are intended to follow mandatory provisions of Italian law that apply to Noteholders’ meetings where the issuer is an Italian unlisted company. As at the date of this Prospectus, the Issuer is an unlisted company but, if its shares are listed on a securities market while the Notes are still outstanding, then the mandatory provisions of Italian law that apply to Noteholders’ meetings will be different (particularly in relation to the rules relating to the calling of meetings, participation by Noteholders at meetings, quorums and voting majorities). In addition, certain Noteholders’ meeting provisions could change as a result of amendments to the Issuer’s By-Laws. Accordingly, Noteholders should not assume that the provisions relating to Noteholders’ meetings contained in the Agency Agreement and

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summarised in the Conditions will correctly reflect mandatory provisions of Italian law applicable to Noteholders’ meetings at any future date during the life of the Notes.

Payments in respect of the Notes may in certain circumstances be made subject to withholding or deduction of tax

All payments in respect of the Notes will be made free and clear of withholding or deduction of Italian taxation, unless the withholding or deduction is required by law. In that event, the Issuer will pay such additional amounts as will result in the Noteholders receiving such amounts as they would have received in respect of such Notes had no such withholding or deduction been required. The Issuer’s obligation to gross up is, however, subject to a number of exceptions, including withholding or deduction of:

(a) Italian substitute tax (imposta sostitutiva), pursuant to Italian Legislative Decree No. 239 of 1 April 1996 (“Decree No. 239/1996”); and (b) withholding tax operated in certain member states of the European Union (each a “Member State”) pursuant to EC Council Directive 2003/48/EC and similar measures agreed with the European Union by certain non-EU countries and territories. See “Terms and Conditions of the Notes—Taxation”. Prospective purchasers of Notes should consult their tax advisers as to the overall tax consequences of acquiring, holding and disposing of Notes and receiving payments of interest, principal and/or other amounts under the Notes, including, in particular, the effect of any state, regional or local tax laws of any country or territory. See also “Taxation”. The tax regime applicable to the Notes The Issuer qualifies as a company eligible to issue project bonds (obbligazioni di progetto) under Article 185 of the Public Contracts Code. Therefore, the Notes are subject to the legal and tax regime set out by Article 185 of the Public Contracts Code, which has replaced Article 157 of legislative Decree No. 163 of 12 April 2006, and by Article 1 of Law Decree No. 83 of 22 June 2012, as amended. In particular, according to Article 1 of Law Decree No. 83 of 22 June 2012, interest on notes that fall within the category of project bonds (obbligazioni di progetto), which are issued by Italian resident companies referred to by Article 185 of the Public Contracts Code, and are subject to the conditions set forth by this latter provision (among other requirements, that the Notes must be purchased by, held at all times by and circulate only among Qualified Holders), is subject to the same tax regime applicable to interest on bonds issued by the Italian Republic (titoli del debito pubblico). However, as clarified by the Italian tax authorities in Circular No. 4/E of 2013, the application of the tax regime provided for bonds issued by the Italian Republic (titoli del debito pubblico) is limited only to interest on such notes and does not cover other capital income (redditi di capitale) deriving from the notes, such as income deriving from repurchase agreements (riporti or pronti contro termine) or any capital gains deriving from the sale or redemption of the notes. See "Taxation-Italian Taxation". In addition, a favorable tax regime is provided for any kind of security issued by any type of guarantor at any time in relation to project bonds, as well as the relevant subrogations (surroghe) and substitutions (sostituzioni), postponements (postergazioni), subdivisions (frazionamenti), and cancellations or partial cancellations (cancellazioni, anche parziali), including the sale of receivables relating to the same issuance of bonds and the transfers of the security package, even if consequential to the transfer of the relevant project bond. Any change of the above law provisions or regulations or a less favorable interpretation of the same laws and regulations which may determine the application of withholding or substitute taxes (or the increase of the applicable withholding rate) with respect to payments on the Notes and the eventual resulting obligation to pay additional amounts to Noteholders and/or the applicable tax regime of the security package of the project bonds (as well as of the relevant subrogations (surroghe) and substitutions (sostituzioni), postponements (postergazioni), subdivisions (frazionamenti), and cancellations or partial cancellations (cancellazioni, anche parziali), including the sale of receivables relating to the same issuance of bonds and the transfers of the security package, even if consequential to the transfer of the relevant project bond) could have a material adverse effect on the Issuer’s financial condition and results of operations. 32

No physical document of title issued in respect of the Notes The Notes will be in dematerialised form and evidenced at any time through book entries pursuant to the relevant provisions of the Italian Legislative Decree dated 24 February 1998, No. 58, as subsequently amended and supplemented ("Legislative Decree No. 58") and in accordance with CONSOB and Bank of Italy Joined Regulation dated 22 February 2008, as subsequently amended and supplemented ("CONSOB and Bank of Italy Regulation"). In no circumstance would physical documents of title be issued in respect of the Notes. While the Notes are represented by book entries, investors will be able to trade their beneficial interests only through Monte Titoli and the authorised financial intermediaries holding accounts on behalf of their customers with Monte Titoli. As the Notes are held in dematerialised form with Monte Titoli, investors will have to rely on the procedures of Monte Titoli and the financial intermediaries authorised to hold accounts therewith, for transfer, payment and communication with the Issuer. Risks Relating to Change of Law No assurance can be given as to the impact of any possible judicial decision or change to Italian law or any administrative practice thereof after the date of this Prospectus. Insolvency laws applicable to the Issuer may not be as favourable to the Noteholders as bankruptcy laws in other jurisdictions The Issuer is incorporated in the Republic of Italy. The Issuer and its Italian subsidiaries (as well as any of its subsidiaries whose centre of interests is deemed to be the Republic of Italy) will be subject to Italian insolvency laws. The Italian insolvency laws may not be as favourable to Noteholders’ interests as creditors as the laws of other jurisdictions with which the Noteholders may be familiar. For instance, if the Issuer becomes subject to certain bankruptcy proceedings, payments made by the Issuer in favour of the Noteholders prior to the commencement of the relevant proceeding may be liable to claw-back by the relevant trustee. In particular, in a bankruptcy proceeding (fallimento), Italian law provides for a standard claw-back period of up to one year (six (6) months in some circumstances), although in certain circumstances such term can be up to two (2) years. In this regard, Article 65 of the Italian Royal Decree No. 267 of 16 March 1942, as subsequently amended, may be interpreted as to provide for a claw back period for two years applicable to any payment by the Issuer pursuant to an early redemption at the option of the Issuer if the stated maturity of the Notes falls on or after the date of declaration of bankruptcy of the Issuer. Furthermore, under Italian law, holders of the Notes do not have any right to vote at any shareholders’ meetings of the Issuer. Consequently, Noteholders cannot influence any decisions by the Board of Directors of the Issuer or any decisions by shareholders concerning the Issuer’s capital structure, including the declaration of dividends in respect of the Issuer’s ordinary shares. Risk Factors Relating to Markets Generally Set out below is a brief description of the principal market risks that may be relevant in connection with an investment in the Notes. There is no active trading market for the Notes and one cannot be assured Application has been made for the Notes to be listed on the Official List of the Irish Stock Exchange and admitted to trading on the regulated market of the Irish Stock Exchange. However, there can be no assurance that the Notes will be accepted for listing or, if listed, will remain listed. The Notes are new securities for which there is currently no market. There can be no assurance as to the liquidity of any market that may develop for the Notes, the ability of Noteholders to sell such Notes or the price at which the Notes may be sold. The liquidity of any market for the Notes will depend on the number of holders of the Notes, prevailing interest rates, the market for similar securities and other factors, including general economic conditions, and the Issuer’s financial condition, performance and prospects. In an illiquid market, the Noteholders might not be able to sell their Notes at any time at fair market prices. There can be no assurance that an active trading market for the Notes will develop or, if one does develop, that it will be maintained. If an active trading market does not develop or cannot be maintained, this could have a material adverse effect on the liquidity and trading prices for the Notes.

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Transfers of the Notes may be restricted, which may adversely affect the secondary market liquidity and/or trading prices of the Notes Subject to applicable Italian laws and regulations, the ability to transfer the Notes may also be restricted by securities laws or regulations of certain countries or regulatory bodies. See “Subscription and Sale”. The Notes have not been, and will not be, registered under the Securities Act or any state securities laws or the securities laws of any other jurisdiction. Noteholders may not offer the Notes in the United States or for the account or benefit of a U.S. person, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. It is the obligation of each Noteholder to ensure that offers and sales of Notes comply with all applicable securities laws. In addition, transfers to certain persons in certain other jurisdictions may be limited by law, or may result in the imposition of penalties or liability. For a description of restrictions which may be applicable to transfers of the Notes, see “Subscription and Sale”. Credit ratings may not reflect all risks Credit ratings assigned to the Notes at any time will only reflect the views of the relevant rating agency and may not reflect the potential impact of all risks related to structure, market, additional factors discussed above, and other factors that may affect the value of the Notes. A credit rating or the absence of a rating is not a recommendation to buy, sell or hold Notes and may be revised or withdrawn by the rating agency at any time. In addition, and notwithstanding the above, an adverse change in a credit rating could affect the trading price for the Notes. Legal investment considerations may restrict certain investments The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (i) Notes are legal investments for it, (ii) Notes can be used as collateral for various types of borrowing, and (iii) other restrictions apply to the purchase or pledge of any Notes. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of Notes under any applicable risk-based capital or similar rules. Exchange rate risks and exchange controls The Issuer will pay principal and interest on the Notes in Euro. This presents certain risks relating to currency conversions if an investor’s financial activities are denominated principally in a currency or currency unit (“Investor’s Currency”) other than euro. These include the risk that exchange rates may change significantly (including changes due to devaluation of the euro or revaluation of the Investor’s Currency) and the risk that authorities with jurisdiction over the Investor’s Currency may impose or modify exchange controls. An appreciation in the value of the Investor’s Currency relative to the euro would decrease (i) the Investor’s Currency equivalent yield on the Notes, (ii) the Investor’s Currency-equivalent value of the principal payable on the Notes, and (iii) the Investor’s Currency-equivalent market value of the Notes. In addition, government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal.

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INFORMATION INCORPORATED BY REFERENCE The following information is incorporated in, and forms part of, this Prospectus: i. the audited consolidated annual financial statements of the Issuer as at and for the year ended 31 December 2015 prepared in accordance with Italian GAAP; and ii. the audited consolidated annual financial statements of the Issuer as at and for the year ended 31 December 2014 prepared in accordance with Italian GAAP; in each case together with the accompanying notes and, where applicable, external auditors’ report. Access to documents Each of the above documents have been previously filed with the Central Bank of Ireland and can be accessed on the following addresses on the Issuer’s website:

 Annual Report as at 31 December 2015: http://www.metropolitanamilanese.it/resources/mm/trasparenza_2016/Consolidated_5_9_16/MM%20Consoli dated%20as%20at%2031.12.2015.pdf Or by clicking on “Consolidated Financial Account 2015” at the following address: http://www.metropolitanamilanese.it/pub/page/en/MM/bilanci

 Annual Report as at 31 December 2014: http://www.metropolitanamilanese.it/resources/mm/trasparenza_2016/Consolidated_5_9_16/MM%20Consoli dated%20as%20at%2031.12.2014.pdf Or by clicking on “Consolidated Financial Account 2014” at the following address: http://www.metropolitanamilanese.it/pub/page/en/MM/bilanci In addition, the Issuer will provide, without charge to each person to whom a copy of this Prospectus has been delivered, upon the request of such person, a copy of any or all the documents containing information incorporated by reference herein. Requests for such documents should be directed to the Issuer at its offices set out at the end of this Prospectus. Such documents will also be available, without charge, at the specified office of each Paying Agent. Cross-reference list The following table shows where the information incorporated by reference in this Prospectus can be found in the above-mentioned documents. Information contained in those documents other than the information listed below does not form part of this Prospectus and is either not relevant or covered elsewhere in this Prospectus.

Document Page number(s) Consolidated annual financial statements 2015

 Balance Sheet - Assets 2  Balance Sheet – Liabilities 4  Memorandum Accounts 6  Income Statement 7-9  Notes to the consolidated financial statements 10-60

 Independent auditors’ report of the consolidated financial statements as at 31 December 2015 101-107

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Document Page number(s) Consolidated annual financial statements 2014

 Balance Sheet - Assets 2  Balance Sheet – Liabilities 3  Memorandum Accounts 4  Income Statement 5-6  Notes to the consolidated financial statements 7-36

 Independent auditors’ report of the consolidated financial statements as at 31 December 2014 73-77 The documents set out above are translated into English from the original Italian. The Issuer has accepted responsibility for the accuracy of such translations. The audited financial statements of the Issuer as at and for the year ending 31 December 2016 and as at and for each 31 December thereafter will be prepared in accordance with IFRS. The consolidated financial statements of the Issuer as at and for the year ended 31 December 2015 have been prepared in conformity with IFRS solely for the purpose of its inclusion in the Prospectus (the "Special Purpose Audited IFRS Consolidated Financial Statements"). The Special Purpose Audited IFRS Consolidated Financial Statements and the relevant independent auditor's report are attached as Appendix 1 to this Prospectus.

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USE OF PROCEEDS The Issuer will use the proceeds from the sale of the Notes to fund the investments under the Investment Plan (Programma degli Interventi) in accordance with the terms of the Milan IWS Concession. Furthermore, as allowed under Articles 185 of the Public Contracts Code, the proceeds will be used to repay the Issuer’s existing IMI Agreement as it also directly relates to the management and operation of the IWS and to the investments under the Investment Plan. Envisaged capital structure The Issuer intends to finance its Investments Plan with the issuance of the Notes for an amount equal to Euro 100 million and a new bank facility up to a maximum of approximately Euro 90 million maturing in 2035 and ranking pari passu with the Notes.

Sources & Uses

Eur Uses Eur mln Sources mln

Integrated Water Service investments 100,0 Notes Issue 100,0

Total 100,0 Total 100,0

Pro-Forma Debt Capitalization Following The Notes Issue

Eur mln x 2015A EBITDA

Notes 100,0 2,1x

Payables to banks within 12 months 1 51,7 1,1x

Payables to banks beyond 12 months 2 75,4 1,6x

Gross Debt 227,1 4,8x

Total cash and cash equivalents (Pro-Forma Post Issue) 3 142,0 3,0x

1 Refer to the audited financial statements of the Issuer as of and for the year ended 31 December 2015. 2 Refer to the audited financial statements of the Issuer as of and for the year ended 31 December 2015 3 Refer to the audited financial statements of the Issuer as of and for the year ended 31 December 2015 with reference to “Total cash and cash equivalents” which has been increased by the principal amount of Notes to be issued (Eur 100milion) 37

SELECTED FINANCIAL INFORMATION

The following tables contain consolidated balance sheet and income statement information of the Issuer as at and for the years ended 31 December 2015 and 2014, derived from the Issuer’s audited consolidated annual financial statements as at and for the year ended 31 December 2015 prepared by management in accordance with Italian GAAP, as well as some selected line items from the Issuer’s results of operations on a non- consolidated and consolidated basis. This information should be read in conjunction with, and is qualified in its entirety by reference to the Issuer’s audited consolidated annual financial statements as at and for the years ended 31 December 2015 and 2014, together with the accompanying notes and auditors’ reports, all of which are incorporated by reference in this Prospectus. See “Information Incorporated by Reference”. Copies of the above-mentioned annual financial statements of the Issuer are available for inspection by Noteholders, as described in “Information Incorporated by Reference – Access to documents”. Certain financial information of the Issuer for the year ended on 31 December 2015 prepared by the Issuer on a voluntary basis under IFRS has been included in the tables below, together with a table to show differences between financial information prepared in accordance with Italian GAAP and IFRS and a discussion of such differences. Such consolidated financial information constitutes a summary of the consolidated financial information contained in the special purpose audited consolidated financial statements of MM S.p.A. as at and for the year ended 31 December 2015, prepared on a voluntary basis by the Issuer in accordance with IFRS, exclusively for the purpose of the inclusion in this Prospectus and audited by BDO Italia S.p.A. (the "Special Purpose Audited IFRS Consolidated Financial Statements"). See “Consolidated financial information prepared in accordance with IFRS”.

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MM S.p.A.

AUDITED CONSOLIDATED ANNUAL BALANCE SHEETS

Assets

As at 31 December Assets 2015 2014 (audited) (audited) Italian GAAP Italian GAAP (thousands of Euro) Fixed assets Intangible 7,924 9,012 Tangible 242,158 224,916 Long-term investments 230 206 Total fixed assets 250,312 234,134

Current assets Inventories 51,689 49,196 Receivables - Trade receivables 99,797 79,350 - From parent companies 2,213,600 2,131,293 - For tax receivables 22,005 11,884 - For deferred tax assets 9,112 9,010 - From others 13,706 8,622 Financial assets other than fixed assets 0 0 Liquid assets (cash and cash equivalents) 41,968 16,157 Total current assets 2,451,877 2,305,512

Accruals and deferrals Accrued income and prepaid expenses 872 880 Total Accruals and deferrals 872 880

TOTAL ASSETS 2,703,061 2,540,526

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MM S.p.A. AUDITED CONSOLIDATED ANNUAL BALANCE SHEETS (Cont’d)

Liabilities and shareholders’ equity

As at 31 December Liabilities and shareholders’ equity 2015 2014 (audited) (audited) Italian GAAP Italian GAAP (thousands of Euro) Shareholders’ equity Share capital 15,600 15,600 Legal reserve 3,172 3,172 Other reserves: extraordinary or optional reserve 36,428 28,428 Other reserves: merger surplus reserve 46,387 0 Other reserves: consolidation reserve 1,233 1,251 Retained earnings (losses) 844 0 Profit (loss) for the year 16,704 8,826 Total consolidated shareholders’ equity 120,368 57,277

Provisions for risks and charges Provisions for risks and charges 4,370 3,660 Total provisions for risks and charges 4,370 3,660

Employees severance indemnity Employees severance indemnity 7,170 6,897 Total employees severance indemnity 7,170 6,897

Pavables Payables to banks within 12 months 51,718 50,773 Payables to banks beyond 12 months 75,363 64,980 Advances 5,452 4,443 Trade payables 124,470 121,269 Due to parent companies 2,241,476 2,124,070 Tax payables 4,714 13,715 Payables to social security institutions 4,611 4,279 Other payables 29,730 59,837 Total payables 2,537,534 2,443,366

Accruals and deferrals Accrued expenses and deferred income 33,619 29,326 Total accrual and deferrals 33,619 29,326

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 2,703,061 2,540,526

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MM S.p.A. AUDITED CONSOLIDATED ANNUAL INCOME STATEMENTS As at 31 December Income Statements 2015 2014 (audited) (audited) Italian GAAP Italian GAAP (thousands of Euro) Value of production Revenues from sales and services 258,714 255,094 Changes in construction contracts 2,321 2,331 Own work capitalised 2,662 2,504 Other revenues and income 10,996 7,530 Total value of production 274,693 267,459

Costs of production For raw materials, consumables and goods for resale 2,597 1,550 For services 161,497 175,895 For use of third party assets 4,553 3,737 For personnel 56,408 44,833 Amortisation, depreciations and write-downs 20,244 18,265 Changes in inventories of raw materials, consumables and -172 -87 goods for resale Provision for risks 700 240 Other provisions 60 159 Sundry operating costs 2,457 1,665 Total costs of production 248,344 246,257

Difference between value and costs of production 26,349 21,202

Financial income and costs Other finance income 919 1,470 Interest and other finance costs 4,294 5,480 Foreign exchange gains and losses -2 -1 Total financial income and costs -3,377 -4,011

Extraordinary income and costs Extraordinary income 6,158 486 Extraordinary costs 1,091 1,030 Total extraordinary items 5,067 -544

Profit (loss) before tax 28,039 16,647 Current and deferred income taxes for the year 11,335 7,821 Profit (loss) for the year 16,704 8,826

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Consolidated EBITDA is calculated as profit or loss for the year adjusted for the following line items: (i) Current and deferred income taxes, (ii) Total extraordinary items, (iii) Total financial income and costs (iv) Amortization, depreciations and write-downs, (v) Provision for risks and (vi) Other provisions, as derived from the Issuer’s Audited Consolidated Financial Statements as of and for the years ended December 31, 2015 and 2014, prepared pursuant to Italian GAAP.

Consolidated EBIT is calculated as profit or loss for the year adjusted for (i) Current and deferred income taxes, (ii) Total extraordinary items and (iii) Total financial income and costs, as derived from the Issuer’s Audited Consolidated Financial Statements as of and for the years ended December 31, 2015 and 2014, prepared pursuant to Italian GAAP.

The following table sets forth a calculation of our consolidated EBIT and consolidated EBITDA for the years ended December 31, 2015 and 2014:

Italian GAAP For the year ended December 31, 2015 2014 (€ in thousands) Profit for the year 16,704 8,826 Current and deferred income taxes for the year 11,335 7,821 Total extraordinary items (5,067) 544 Total financial income and costs 3,377 4,011 Operating profit - EBIT 26,349 21,202 Amortisation, depreciations and write-downs 20,244 18,265 Provision for risks 700 240 Other provisions 60 159 Gross operating profit - EBITDA 47,353 39,866

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EBITDA on a non-consolidated basis is calculated as Profit or loss for the year adjusted for the following line items: (i) Current and deferred income taxes, (ii) Total extraordinary items, (iii) Total financial income and costs (iv) Amortization, depreciations and write-downs, (v) Provision for risks and (vi) Other provisions, as derived from the Issuer’s audited separate financial statements as of and for the years ended December 31, 2015 and 2014, prepared pursuant to Italian GAAP.

EBIT on a non-consolidated basis is calculated as Profit or loss for the year adjusted for (i) Current and deferred income taxes, (ii) Total extraordinary items and (iii) Total financial income and costs, as derived from the Issuer’s audited separate financial statements as of and for the years ended December 31, 2015 and 2014, prepared pursuant to Italian GAAP.

The following table sets forth a calculation of our EBIT and EBITDA on a non-consolidated basis for the years ended December 31, 2015 and 2014:

Italian GAAP For the year ended December 31, (€ in thousands) 2015 2014 Profit for the year 17,376 8,844 Current and deferred income taxes for the year 11,257 7,412 Total extraordinary items ( 5,038) 714 Total financial income and costs 2,644 3,280 Operating profit - EBIT 26,239 20,250 Amortisation, depreciations and write-downs 20,240 18,262 Provision for risks 700 240 Other provisions 60 159 Gross operating profit - EBITDA 47,239 38,911

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Consolidated financial information prepared in accordance with IFRS

The consolidated financial information included in the tables below constitutes a summary of the consolidated financial information contained in the Special Purpose Audited IFRS Consolidated Financial Statements. The Special Purpose Audited IFRS Consolidated Financial Statements will be included as comparative data in the consolidated financial statements of MM S.p.A. as at and for the year ending 31 December 2016, which will be the first consolidated financial statements of the Issuer prepared in accordance with IFRS. The Issuer will prepare its consolidated financial statements as at and for the year ending 31 December 2016 and thereafter in accordance with IFRS. The tables below should be read in conjunction with the Special Purpose Audited IFRS Consolidated Financial Statements attached as Appendix 1 to this Prospectus. Assets

As at 31 December Assets 2015 IFRS 2015 Italian GAAP adjustments IFRS with IFRS (audited) (audited) form (audited)

(thousands of Euro) Non_current assets Rights on assets under concession 198,696 198,696 Other intangible assets 7,924 (7,752) 172 Property, plant and equipment 242,158 (197,076) 45,082 Deferred tax assets 9,112 (2,847) 6,265 Other non-current assets 1,102 0 1,102 Total non-current assets 260,296 (8,979) 251,317

Current assets Trade receivables 2,313,397 (2,105,551) 207,846 Inventories 1,833 0 1,833 Construction contracts 49,856 (49,856) 0 Cash and cash equivalents 41,968 0 41,968 Other current assets 35,711 (306) 35,405 Total current assets 2,442,765 (2,155,713) 287,052

TOTAL ASSETS 2,703,061 (2,164,692) 538,369

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Liabilities and shareholders’ equity

As at 31 December Liabilities and shareholders’ equity 2015 IFRS 2015 Italian GAAP adjustments IFRS with IFRS (audited) (audited) form (audited)

(thousands of Euro)

Total equity 120,368 6,152 126,520

Liabilities Non-current liabilities Provisions for risks and charges 4,159 995 5,154 Provision for employee severance indemnities 7,170 344 7,514 Deferred tax liabilities 211 (211) 0 Non-current financial liabilities 75,363 10,269 85,632 Other non-current liabilities 45,539 (26,411) 19,128 Total non-current liabilities 132,442 (15,014) 117,428

Current liabilities Trade payables 2,365,947 (2,155,407) 210,540 Current financial liabilities 51,718 (117) 51,601 Current tax payable 0 1,026 1,026 Other current liabilities 32,586 (1,332) 31,254 Total current liabilities 2,450,251 (2,155,830) 294,421

TOTAL LIABILITIES AND SHAREHOLDERS’ 2,703,061 (2,164,692) 538,369 EQUITY

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Income Statements

As at 31 December Income Statements 2015 IFRS 2015 Italian GAAP adjustments IFRS with IFRS (audited) (audited) form (audited)

(thousands of Euro)

Revenues 261,035 (70,480) 190,555 Revenues for works on assets under concession 0 24,697 24,697 Other revenues and income 19,816 (10,097) 9,719 Total revenues and income 280,851 (55,880) 224,971

Costs of raw materials, consumables and goods (2,425) 0 (2,425) Costs for services (166,050) 72,825 (93,225) Costs for works on assets under concession 0 (23,670) (23,670) Personnel costs (56,409) 6,106 (50,303) Amortization, depreciation, write-downs and accruals (21,004) 7,712 (13,292) Other operating costs (3,546) 249 (3,297) Total operating costs (249,434) 63,222 (186,212)

Operating profit 31,417 7,342 38,759

Financial income and costs Financial income 942 0 942 Financial expanses (4,319) (408) (4,727) Total financial income and costs (3,377) (408) (3,785)

Profit (loss) before tax 28,040 6,934 34,974 Income taxes (11,336) (681) (12,017) Profit (loss) for the year 16,704 6,253 22,957

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Summary of certain differences between Italian GAAP and IFRS This Prospectus contains (i) historical financial information derived from the Issuer’s consolidated audited financial statements as of and for the years ended December 31, 2015 and 2014, prepared in accordance to Italian GAAP, and (ii) certain consolidated financial information of the Issuer for the year ended December 31, 2015 extracted from the Special Purpose Audited IFRS Consolidated Financial Statements attached to the Prospectus. The following is a discussion of certain significant differences between Italian GAAP and IFRS applicable to the Issuer. This paragraph does not include a full qualitative or detailed quantitative disclosure of the differences between Italian GAAP and IFRS applicable to the Issuer; accordingly, undue reliance should not be placed on the completeness of such disclosure. Each prospective investor should consult its own professional advisors for an understanding of the differences between Italian GAAP and IFRS and how those differences might affect the financial information included in this Prospectus.

The differences highlighted below reflect only those main differences in accounting policies in force at the time of the preparation of the Italian GAAP consolidated financial statements for the year ended December 31 2015. No attempt has been made to identify future differences between Italian GAAP and IFRS deriving from changes in accounting standards, transactions or events that may occur in the future. Regulatory bodies that promulgate Italian GAAP and IFRS have significant ongoing projects that could affect future comparisons. Future developments or changes in Italian GAAP and IFRS may give rise to additional differences between Italian GAAP and IFRS, which could have a significant impact on the Issuer. Service concession arrangements (IFRIC12)

 Adjustment to equity at December 31, 2015: Euro 4,847 thousand;

 Adjustment to profit for the year ended December 31, 2015: Euro 4,847 thousand. Under Italian GAAP, assets related to service concession arrangements are recognized as property, plant and equipment and amortized on their estimated useful lives. Under IFRS, assets related to service concession arrangement are recognized as rights on assets under concession and amortized over the duration of the concession according to the provisions set forth by IFRIC 12. IFRIC 12 applies to service concession arrangements between a public sector body (grantor) and a private sector body (operator) when the following conditions are met:

 the grantor controls or regulates what services the operator must provide with the asset, to whom it must provide them, and at what price; and

 the grantor controls – through ownership or otherwise – any significant residual interest in the asset at the end of the term of the arrangement. The operator does not recognize the asset under concession as property, plant and equipment as it does not control it, but only has the right to use it to provide the public service in accordance with the terms specified in the arrangement with the grantor. The rights on assets under concession represent the right of the Issuer to utilize the assets under concession of the Integrated Water Services (so-called intangible asset method) in consideration of the costs incurred for the design and construction of the asset with the obligation to return the asset at the end of the concession. The construction work in progress at the reporting date is measured based on the state of advancement of the work in accordance with IAS 11 and this amount is reported in the income statement in “Revenues for works on assets under concession”. Assets under concession are amortized over the duration of the concession, as it is expected that the future economic benefits of the asset will be utilized by the operator. The depreciable amount is the difference between the asset’s cost and their residual value, determined in accordance with the applicable regulations currently in force. The items principally affected by the application of IFRIC 12 are as follows:

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 Recognition of the concession rights from construction and/or upgrade services for an amount of Euro 198,696 thousand as of December 31, 2015;

 De-recognition of those items of property, plant and equipment recognized as proprietary assets under Italian GAAP that are closely connected with the water service infrastructure and therefore, under IFRIC 12, are assets under the control of the grantor for an amount of Euro 200,853 thousand as of December 31, 2015;

 Recognition of the amortization of the concession rights over the life of the concession for an amount of Euro 7,550 thousand for the year ended December 31, 2015 and release of the depreciation of property, plant and equipment under the scope of IFRIC 12 for an amount of Euro 13,627 thousand for the year ended December 31, 2015; and

 Recognition of revenues and costs for the year ended December 31, 2015 relating to construction services on the basis of the percentage of completion of the relevant contracts for an amount of Euro 24,697 thousand and Euro 23,670 thousand, respectively. Revenue from construction and/or upgrade services is measured at fair value, calculated on the basis of total construction costs incurred by the Integrated Water Services, plus a 4.3% mark-up reflecting the remuneration of the internal costs of engineering and construction management performed by personnel of the Group. Other revenues and income (revenues from connections of users to the Integrated Water Service)

 Adjustment to equity at December 31, 2015: Euro 9,647 thousand;

 Adjustment to profit for the year ended December 31, 2015: Euro 1,146 thousand; Under Italian GAAP, revenues from connections of users to the Integrated Water Service are deferred over the useful life of the related tangible asset. Under IFRS (IAS 18), they are entirely recognized as revenues when the service is completed. The application of IAS 18 resulted in the elimination of deferred income for an amount of Euro 12,776 thousand as of December 31, 2015, and an increase in net result for the year 2015 of Euro 1,146 thousand. Provision for employee severance indemnities

 Adjustment to equity at December 31, 2015: Euro (247) thousand;

 Adjustment to profit for the year ended December 31, 2015: Euro 192 thousand;

 Adjustment to comprehensive income (loss) for the year ended December 31, 2015: Euro (158) thousand. Under Italian GAAP, post-employment benefits are recognized on an accrual basis during the period of employment, in accordance with applicable legislation and employment contracts. IAS 19 separates post-employment benefits into “defined benefit” and “defined contribution” plans. In defined contribution plans, contributory costs are charged to the income statement as they occur, based on the relative nominal value. The provision of post-employment benefits (TFR) is considered a defined benefit program until December 31, 2006, to be measured in accordance with actuarial valuation methods using statistical and demographic assumptions. Following a change in Italian legislation, the TFR provision accrued after January 1, 2007 has been considered a defined-contribution program, where the requirements provided for in the amendments had been satisfied. In defined benefit plans, the amount of the benefit to be paid is quantifiable only after termination of employment, and associated with one or more factors such as age, the years of service and compensation. Therefore, the relative cost is charged to the statement of comprehensive income based on actuarial computations. The liability for the plans corresponds to the present value of the obligation at the date of the financial statements. The changes in actuarial gains and losses are recognized in other consolidated comprehensive income, the service cost is recognized within “Personnel costs” and the interest cost is recognized within “Financial expenses”.

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The following table sets forth the financial and demographic assumptions used in the actuarial calculations as of and for the year ended December 31, 2015:

Discount rate 1.60%

Inflation rate 1.75%

Mortality statistics of the Mortality Estimated mortality rate Information System

INPS (National Social Security Estimated disability rate Institution) statistics by age and sex

Probability of resignation/retirement (annual) 3.10%

IRS derivatives

 Adjustment to equity at December 31, 2015: Euro (7,965) thousand;

 Adjustment to comprehensive income (loss) for the year ended December 31, 2015: Euro 930 thousand. In accordance with Italian GAAP, the fair value of IRS derivatives is not recognized in the statement of financial position, but it is only disclosed in the notes to the financial statements. Under IFRS, specifically IAS 39, if IRS derivatives qualify for hedge accounting, the following accounting treatments are applied:

 if the derivatives hedge the risk of fluctuations in the fair value of the hedged assets or liabilities (fair value hedge) they are measured at fair value through profit or loss; accordingly, the hedged assets and liabilities are adjusted to reflect changes in fair value associated with the hedge risk;

 if the derivatives hedge the risk of fluctuations in the cash flows of the hedged assets or liabilities (cash flow hedge), changes in the fair value of derivatives are initially recognized in equity and subsequently transferred to the income statement consistent with the economic effects of the hedged transactions. If hedge accounting cannot be applied, the gains or losses resulting from the measurement at fair value of the derivatives are immediately recognized in profit or loss. In accordance with IAS 39, IRS derivative agreements have been recognized at fair value in the statement of financial position. Subsequent to initial recognition, IRS derivative instruments are accounted for according to hedge accounting method (cash flow hedge) considering that the conditions set forth in IAS 39 have been satisfied. Reclassifications to the statement of financial position and to the statement of comprehensive income (Construction of assets) In application of the provisions included in IAS 18, considering that the Issuer, for the engineering service, is acting as an agent between the Municipality of Milan and the third party suppliers, revenues and receivables related to the construction of assets are settled against the related costs and payables. Accordingly, the Group i) has settled the receivables and payables for an amount of Euro 2,119 million as well as the revenues and related costs towards the Municipality of Milan as of and for the year ended December 31, 2015 and ii) construction contracts for an amount of Euro 49,856 thousand as of December 31, 2015, representing the design and the construction supervision activities carried out by the Issuer on constructions contracts authorized by the Municipality of Milan, have been classified in the item “Trade receivables” under IFRS.

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DESCRIPTION OF THE ISSUER Overview MM S.p.A. (the “Issuer” or “MM”) is a company limited by shares (società per azioni) incorporated in Italy according to the provisions of the Italian Civil Code. Its registered office and principal place of business is at Via del Vecchio Politecnico 8, Milan, Italy. It is registered with the Companies’ Register of Milan with Fiscal Code and VAT number 01742310152 (previously the registered number was 94604). The Issuer is one of the main players in the integrated water service (“IWS”) industry in the north of Italy, with a particular focus on providing services in Milan. For more details about the IWS, see “—IWS” below. MM is a multi-service organization. Besides the IWS, which in terms of EBITDA represents the core business of the Issuer, its ancillary businesses include engineering services and public housing management as well as public asset management (see “—Engineering Business”, “—Public Housing Business”, “— Asset Management Business”). The Issuer may be contacted by telephone at +39 02 77471 and by email at the following certified email address: [email protected]. History and development Established on 6 October 1955 as an engineering company, the Issuer was originally named Metropolitana Milanese S.p.A. Its primary scope of business was the design and construction of the Milan Metro system. In the following decades, the company has widened its engineering business portfolio to include mobility and infrastructure engineering. These services were mainly provided to the Municipality of Milan, but the Issuer also undertook projects on a national and international basis. In June 2003, the Municipality of Milan decided to assign to the Issuer the IWS of Milan. In December 2014, the Municipality of Milan assigned to the Issuer the management of municipal housing property. At the end of 2014, Metropolitana Milanese S.p.A. changed its name to MM S.p.A. The current organizational structure of the Issuer was established on 30 December 2015 as a consequence of the merger of Milano Immobili e Reti S.r.l. (“MIR”) into MM S.p.A. MIR was a company wholly owned by the Municipality of Milan, operating in the public asset management sector. The accounting and fiscal aspects of the merger took effect from 1 January 2015. In-house company nature of the Issuer The Issuer is an in-house company of the Municipality of Milan and is entitled to manage the IWS - as well as the other ancillary businesses granted by the Municipality of Milan (see “—Issuer’s Businesses”) - according to the in-house providing mechanism (see “Regulation—Water Business—In house providing mechanism and requirements”) , as it meets the following requirements and conditions: (i) the Municipality of Milan owns the entire shareholding of the Issuer; (ii) more than 80% of the activities of the Issuer relates to the performance of tasks entrusted to it by the Municipality of Milan; and (iii) the Municipality of Milan exercises over the Issuer a control similar to that exercised over its own departments, pursuant to which both strategic objectives and significant decisions of the Issuer are subject to the decisive influence of the Municipality. In order to ensure that the Municipality of Milan may exercise over the Issuer a control similar to that exercised over its own departments, as required by point (iii) above, the by-laws of the Issuer provide for the following controlling mechanisms:

 as the sole shareholder of the Issuer, the Municipality of Milan, through shareholder meetings, appoints all the members of the board of directors, which can be composed of three or five members, including the chairman;

 when directors are appointed, the Municipality of Milan can indicate the management and/or operational objectives that the board of directors will be in charge of pursuing. Failure to fulfil said objectives constitutes grounds for terminating the office of the directors in question;

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 the board of directors ensures the approval and implementation of the directives, guidelines and scheduling documents issued by the Municipality of Milan; it also ensures the pursuit of the management and operational objectives assigned to the board members upon their appointment;

 the board of directors, on the basis of such directives, guidelines and scheduling documents, develops or updates the documents indicated by the Municipality of Milan including the following: business plan; document reporting the general guidelines of the corporate management policy and the document defining company policies designed to minimise the environmental impact of the activities carried out. By the term established by the Municipality of Milan, the board of directors must submit the above-mentioned documents for the approval of the shareholders’ meeting, pursuant to Article 2364, paragraph 1, no. 5 of the Italian Civil Code, with a view to implementing all the measures required for executing the documents in question once approval has been obtained;

 the board of directors also drafts the annual budget, divided up by business segments, in line with the indications provided by the Municipality of Milan, and updates the three-year economic programme and the three-year investment plan. By January of each year, these documents are submitted for the approval of the shareholders’ meeting, pursuant to Article 2364, paragraph 1, No. 5 of the Italian Civil Code, with a view to implementing all the measures required for executing the documents in question once approval has been obtained;

 failure to execute the activities which the shareholders’ meeting has approved in advance, or failure to execute them in compliance with the approvals granted and, more generally, failure to implement the guidelines assigned by the Municipality of Milan, can constitute just grounds for terminating the appointment of the directors; and

 the shareholder(s) must receive after each quarter a regular report on the general operating performance of the Issuer and its outlook. Should said reports fail to comply with the guidelines provided by the Municipality of Milan, the latter can request that a shareholders’ meeting be convened immediately, pursuant to Article 2367 of the Italian Civil Code, so that the most appropriate measures can be implemented. Issuer’s Businesses The Issuer’s activities are divided into the following four business segments:

 IWS. Includes IWS mainly for the Milan area and its population (“IWS Business”) (see “—IWS”);

 Engineering services. Includes the provision of engineering services for transport and mobility systems and in infrastructure, acting also on behalf of the Municipality of Milan (“Engineering Business”) (see “—Engineering Business”);

 Public Housing. Includes property management and facility management activities performed in the name of and on behalf of the Municipality of Milan, with reference to its municipal housing properties (“Public Housing Business”) (see “—Public Housing Business); and

 Assets and Property management. Includes the assets and the activities relating to public asset management formerly performed by MIR before the merger with MM (“Asset Management Business”). The IWS Business, the Public Housing Business and the Asset Management Business are managed directly by the Issuer whilst the Engineering Business is managed by MM together with its subsidiaries Metro Engineering S.r.l., Napoli Metro Engineering S.r.l. and MMB Project Rus. Results by business segments The following tables show a breakdown by business segment of selected line items from the Issuer’s results of operations on a non-consolidated basis for the years ended 31 December 2015 and 2014. The data in the tables below are based on the audited non-consolidated annual financial statements of the Issuer as at and for the year ended 31 December 2015 prepared in accordance with Italian GAAP and with the report on the operation for the year ended 31 December 2015.

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Results of operations by business segments (For the year ended 31 December 2015; thousands of Euro)

Asset Public Total (1) Engineering Management Italian GAAP figures ...... IWS Housing (MM Business Business Business Business S.p.A.) Total revenue and income ...... 143,709 110,751 13,618 2,840 270,918 Total operating expense ...... (106,745) (104,410) (12,192) (332) (223,679) Gross operating profit – EBITDA ...... 36,964 6,341 1,426 2,508 47,239 Amortisation/depreciation, provisions(2) ...... (15,943) (2,644) (104) (2,309) (21,000) Operating profit – EBIT ...... 21,021 3,697 1,322 199 26,239 (1) Figures on a standalone basis. (2) Since 2015 “Piano Stralcio” integrated water sector contributions (Euro 2.1 million in 2015), previously classified as an income component, have been classified as a direct netting of depreciations.

Results of operations by business segment (For the year ended 31 December 2014; thousands of Euro)

Asset Public Total (1) Italian GAAP figures ...... Engineering Management Housing (MM IWS Business Business Business S.p.A.) Total revenue and income ...... 137,777 123,730 1,183 0 262,690 Total operating expense ...... (104,216) (118,613) (950) 0 (223,779) Gross operating profit – EBITDA ...... 33,561 5,117 233 0 38,911 Amortisation/depreciation, provisions(2) ...... (16,414) (2,191) (56) 0 (18,661) Operating profit – EBIT ...... 17,147 2,926 177 0 20,250 (1) Figures on a standalone basis. (2) Until 2014 “Piano Stralcio” integrated water sector contributions (Euro 2.6 million in 2014), are classified as income components, while since 2015 they have been classified as a direct netting of depreciations. The most important businesses for the Issuer in terms of revenues are the IWS Business (accounting for Euro 143.7 million in revenues in 2015 and Euro 137.8 million in 2014) and the Engineering Business (accounting for Euro 110.8 million in revenues in 2015 and Euro 123.7 million in 2014). The Public Housing Business and Asset Management Business are significantly smaller, as the Public Housing Business had revenues of Euro 13.6 million in 2015 and Euro 1.2 million in 2014 and the Asset Management Business had revenues of Euro 2.8 million in 2015. The revenues from the Engineering Business include revenues connected with the works contracted on behalf of the Municipality of Milan according to the Engineering Service Contract (see “Key Contracts and Concession—Engineering Business—The Engineering Service Contract”). The total amount of the Engineering Business revenue and income is composed of two components: the revenues related to the services performed by MM and the revenues which represents pass-through costs related to the works on behalf of the Municipality of Milan. The two components were respectively 36% and 64% of the total for the year ended 31 December 2015 and 29% and 71% of the total for the year ended 31 December 2014, as the pass-through component was equal to Euro 70.4 million for the year ended 31 December 2015 and Euro 88.3 million for the year ended 31 December 2014. The remaining Engineering Business revenues include the engineering services provided by the Issuer’s subsidiaries (Metro Engineering S.r.l. (“ME”) and Napoli Metro Engineering (“NME”) S.r.l.). The following table shows the Issuer’s total revenues and income broken down according to each business segment for the years ended 31 December 2015 and 2014 on a consolidated basis with reference to the MM Group and on a non-consolidated basis with reference to the Issuer.

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MM Group – Revenue and income by business segment Italian GAAP For the year ended For the year ended 31 December 2015 31 December 2014 Thousands Thousands of Euro % of total of Euro % of total IWS ...... 143,709 52% 137,777 52% Engineering Business ...... 114,526 42% 128,500 48% Public Housing Business ...... 13,618 5% 1,183 0% Asset Management Business ...... 2,840 1% 0 0% Total (Group) ...... 274,693 100% 267,460 100%

MM S.p.A. – Revenue and income by business segment Italian GAAP For the year ended For the year ended 31 December 2015 31 December 2014 Thousands Thousands of Euro % of total of Euro % of total IWS ...... 143,709 53% 137,777 53% Engineering Business ...... 110,751 41% 123,730 47% Public Housing Business ...... 13,618 5% 1,183 0% Asset Management Business ...... 2,840 1% 0 0% Total (MM S.p.A.) ...... 270,918 100% 262,690 100%

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IWS The IWS business segment represented 78.2 per cent of the Issuer’s EBITDA for the year ended 31 December 2015. It represented 86.3 per cent of the Issuer’s EBITDA for the year ended 31 December 2014. The Issuer’s activities in this division can be summarised as follows:

 Aqueduct. Includes management of water supply, water treatment, water distribution to clients, wells (for irrigation of public green areas) management; and

 Sewage. Includes sewage network management, the collection of industrial and household wastewater and the collection and management of urban tunnelled rivers and channels; and

 Purification. Includes direct purification plant management, monitoring of purification activities performed by third parties, sludge drying and final special waste disposal. The Issuer also performs the following activities in the context of IWS:

 Customer Management activities, mainly consisting of: (i) billing and commercial activities, (ii) customer connection and metering and (iii) customer relationship management;

 Laboratory testing and controls, related to water quality control and laboratory chemical analyses, as well as waste water and purification plant controls. The geographical area in which the Issuer operates the IWS is substantially that of the City of Milan. According to Lombardy Regional Law No. 32/2015, in 2016, the local authority supervising the water sector for the territory of Milan will be merged with the authority of the Milan metropolitan area, without affecting the Milan IWS Concession (as defined below). The IWS is performed by the Issuer in accordance with high quality standards: to this end, MM has obtained UNI EN ISO 9001 quality certification, UNI EN ISO 14001 environmental certification and UNI EN CEI ISO 50001 energy management certification. The Issuer carries out IWS activities in Milan pursuant to the Milan IWS Concession. (see “Key Contracts and Concession—IWS—Milan IWS Concession”). Aqueduct Water supply and distribution MM manages the IWS for Milan, for a total of about 50,000 customer points, serving a resident population of about 1.4 million inhabitants and a non-resident population (including residents, commuters and visitors) of about 0.6-0.7 million inhabitants equivalent to a total population of about 2.0 million people (Sources: Statistical office of the Municipality of Milan 2015; Impresa & Stato 82/08, Chamber of Commerce of Milan). Water supply is guaranteed by a system of 450 wells pumping groundwater to tanks. The extraction of water from wells reached approximately 220 million cubic metres in 2014 and 230 million cubic metres in 2015. Raw water is then treated in order to be safe for drinking and then 29 pumping stations feed the system for a total final supply to users of around 180/190 million cubic metres per year. The total length of the distribution network is approximately 2,226 kilometres, which was originally completely interconnected. Water pipes are mainly made of steel, cast iron and ductile iron, with diameters ranging between 50 mm and 1200 mm. The average supply pressure is between 2.5 bar in the northern part of the system and six bar in the southern one, due to a difference in elevation between the north and south areas of Milan. Water treatment Before being distributed to customers and final users, water is subjected to specific treatment in order to reduce or eliminate compounds and substances exceeding the limits permitted under applicable law. At each of the pumping stations raw water from wells is treated in function of the specific-site characteristics and disinfected in order to eliminate viruses and bacteria. In order to ensure drinking water quality, MM performs a high number of laboratory controls in its laboratories and onsite, both at plants and stations and along the distribution network. In 2014, MM’s 54

laboratories analyzed 17,572 samples, for a total of 229,860 parameters, including chemical, physical and micro-biological indicators. Monitoring distribution network MM regularly monitors its distribution network by utilizing the SCADA system and through periodic inspections and preventative tests by the MM operators and the MM leakage control team. Leakage detection and performance tests on operating pressure and flow capacity are regularly implemented. In 2015, according to the calculation method of the national authority for electricity, gas and water services (Autorità per l’energia elettrica il gas ed il sistema idrico - “AEEGSI”) on real leakages, the Issuer's network technical losses, on average, were approximately 12 per cent of the water introduced into the system for that year, as compared to a national average for network losses of 32 per cent. (Source: Censis, 2014, “Diario della transizione No. 4”). MM is focused also on developing strategies for asset management and water supply system planning in order to increase its performance in terms of both energy efficiency and cost effectiveness. Sewage services Sewage network management MM is the sole operator in the sector of urban waste water in Milan. It currently performs waste water services also for the Municipality of Settimo Milanese. The MM sewage network covers 100% of the area of Milan, serving a resident population of about 1.4 million inhabitants and an equivalent population (including estimated city users) of about 2.0 million users (Source: Statistical office of the Municipality of Milan 2015; Impresa & Stato 82/08, Chamber of Commerce of Milan). The waste water collected by MM’s sewage network service can be classified as follows:

 domestic or non-industrial waste water produced by households and small offices and containing both organic substances and substances derived from products used for domestic cleaning and personal hygiene (sometimes referred to as black waste water);

 industrial waste water, released during production processes and typically containing a high concentration of pollutants; and

 environmental waste water produced by climatic conditions (i.e. rainwater, floods etc.) collected from road drains and gutters (sometimes referred to as white waste water). MM does not manage special or dangerous waste water deriving from industrial activities. Included in the plant structure utilised for its integrated water service is a sewage network that extends over approximately 1,548 kilometres for mixed sewage (a combination of black and white waste water), conveying in 2015 approximately 280 million cubic metres to 3 purification plants, 2 of which are located in Milan. Due to the low level of industrial activities performed in Milan with respect to the total city economy, the volume of industrial waste water is low, with a total output of 5.84 million cubic metres in 2015, equal to 2.5% of total sewage volumes. Maintenance of sewage network Sewage systems require regular ordinary maintenance operations, such as monitoring the efficiency of the elevation plants, removing sediment and obstacles that may obstruct water flows and maintaining public manholes. Extraordinary maintenance operations include renovation, restructuring or repairs to improve operating conditions, hydraulic efficiency and the safety of the network. MM employs specialised internal maintenance technicians for the supervision of scheduled and emergency operations and outsources to selected firms a relevant part of the maintenance works. All such operations are controlled by a single remote control centre managed by MM. MM defines a specific periodic program for sewage network inspection and cleaning, performed both by internal and outsourced teams. Purification services Purification service management

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The Issuer's integrated water cycle is completed by water purification service operations. The purification service includes the construction, management and maintenance operations related to urban waste water (domestic and industrial) treatment plants connected to sewage networks, in order to restore treated water quality to the appropriate level for the final user; the purification activity includes sludge treatment. Milan’s integrated water system network is currently served by the following three waste water purification plants:

 San Rocco Plant, located in the southern part of Milan, which has been directly managed by MM since December 2014, serving the western part of Milan, covering a city area of 101.3 km2; in 2015 it treated a total amount of 95 million cubic metres of waste water;

 Nosedo Plant, located in the southern part of Milan, which is managed by Milano Depur, a wholesale operator, serving the central part of Milan, covering a city area of 69 km2; in 2015 it treated a total amount of 158 million cubic metres of waste water;

 Peschiera Borromeo Plant, located in the Municipality of Peschiera Borromeo and partially dedicated to the Milan network, which is managed by Amiacque, serving the eastern part of the city, covering a city area of 22.3 km2; in 2015 it treated 25 million cubic metres of waste water in the plant line serving the Milan sewage network. MM has the overall responsibility of ensuring the purification service for Milan. Thus it supervises purification activities for all the three plants with specific quality control programs. Each of the purification plants located in Milan (San Rocco and Nosedo) have a treatment capacity higher than 1 million equivalent inhabitants (Source: Issuer’s website). The Peschiera Borromeo plant serves about 250,000 equivalent inhabitants (Source: Issuer’s website). The dimensions and the technological complexity of San Rocco and Nosedo are high when compared to the national average. Both these plants adopt technologies among the best available in the industry (i.e.: Moving bed biofilm reactor; ultraviolet rays or peracetic acid disinfection, sludge drying). The purification plants are structured according to a three-phase process: preliminary mechanic treatment; biological treatment; tertiary treatment. MM’s purification service is subject to stringent final drainage quality levels, as the treated water resulting from the purification plants is used for irrigation purposes. In 2015, water used for irrigation purposes amounted to a total of 95 million cubic metres for the San Rocco and Nosedo plants. The disposal of the residual sludge produced by the two plants, which in 2015 amounted to a total of 22,000 tons for San Rocco and 44,000 tons for Nosedo, is managed by MM and it is usually targeted at agricultural or energy recovery uses. Maintenance of waste water purification plants The Issuer is responsible for the ordinary and extraordinary maintenance of the waste water treatment plant of San Rocco. The Issuer monitors its plant 24 hours a day with assistance during business hours by a more specialised staff. The other plants are monitored through regular visits, third party services for maintenance and inspections and a remote control system, which is used to monitor the operational efficiency and status of all its plants. The Issuer conducts quality, environment and product quality control on fresh water, treated water and residual waste water. The Issuer monitors and tests the chemical, physical and microbiological characteristics of its fresh water to ensure compliance with current environmental standards. Engineering Business The Engineering Business segment represented 42 per cent of total consolidated revenues and income for the year ended 31 December 2015 and 48 per cent for the year ended 31 December 2014 (including the ME and NME subsidiaries). For MM on a non consolidated basis, the Engineering Business segment represented 13.4 per cent of EBITDA for the year ended 31 December 2015 and 13.2 per cent for the year ended 31 December 2014. The Issuer’s activities in this segment can be summarised as follows:

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 Implementation of development plans and feasibility studies;

 Project design;

 Construction management;

 Supervision;

 Safety coordination during the design and construction phases;

 Support to public bodies and general activities, including: project management; providing support to the officer in charge of the project (responsabile del procedimento); technical and financial assessments; administrative and legal management of tenders and contracts; expropriations; topographic and geognostic surveys; works and systems acceptance testing; and

 Inspection activities as a certification agency. These activities are performed in a wide range of business fields, due to the relevant know-how acquired by MM during its historical development. In fact, the company was originally established in order to build the underground rail network of Milan. During the following decades, MM has widened its scope in engineering services, expanding first into transport and mobility and later into infrastructure engineering. The Issuer carries out Engineering Services in Milan pursuant to the Engineering Services Contract (see “Key Contracts and Concession—Engineering Business—The Engineering Service Contract”). MM’s projects and activities are mainly related to the following business areas:

 Transport and Mobility: transport and mobility plans; underground and urban rail transit systems, railway lines and stations; innovative transport systems; transport infrastructure renovation and improvements to comply with regulations;

 Road and Parking Infrastructures: urban and non-urban road infrastructure; urban and non-urban road system upgrades; surface and underground marking interchanges at underground and railway terminuses;

 Other Infrastructures and Urban Renovation: airport buildings and infrastructure; redevelopment of major urban areas to improve and enhance the environment; hydraulic infrastructure; buildings intended for public use and public housing; air, noise and subsoil reclamation in urban environments; environmental reclamation; infrastructure and urban implementation for large events (most significantly: Expo 2015). The main current projects being developed by the Engineering Business segment are:

 Milan Underground Line M4 (15.2 km railway, 21 stations): MM’s role includes support to public bodies, construction management and safety coordination of the new urban railway. The line will cross the entire city on an east-west axis, reaching Linate airport and passing through the city centre, and is expected to come into operation in 2022;

 Naples Light Underground Rail System: MM is developing Lines 1 and 6 of the system, with executive design and construction management activities; this activity is performed through MM’s subsidiary Napoli Metro Engineering S.r.l.;

 Extraordinary maintenance of Milan’s public housing assets;

 Post-Expo dismantling and rebuilding activities;

 Milano Parco Nord: design of Retention Basin;

 Design and support for network infrastructure and installations included in MM IWS Investment Plan. According to the Engineering Service Contract, MM can also award engineering works through tender procedures on behalf of the Municipality of Milan. These works are financed by the Municipality of Milan according to its official works plan and to the works’ progress.

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The Engineering Business also includes some activities undertaken for third parties other than the Municipality of Milan and its subsidiaries, of which Naples Underground rail is the most significant in terms of revenue. Some recent international activities have been undertaken for infrastructure projects in Ethiopia, Switzerland, Peru, Romania, Greece and Saudi Arabia. The revenues from international engineering activities for the year ended 31 December 2015 were approximately 0.5 million Euro. With reference to the 2016 fiscal year the Issuer expects that 93% of its revenues relating to Engineering Business services will be received from the Municipality of Milan and its subsidiaries. For more details on the Engineering Business conducted by the Issuer’s subsidiaries, see below “—MM Subsidiaries description”. Public Housing Business The Public Housing Business segment was established on 1 December 2014. From that date, the Municipality of Milan assigned to MM the management of its municipal housing assets that currently include about 38,700 units, of which about 28,700 are homes; 8,800 are garages/parking spaces and 1,200 are properties for different uses, i.e. shops, laboratories and other uses. These units were previously managed by Aler Milano, a regional public entity. The Public Housing Business segment represented 3.0 per cent of the Issuer’s EBITDA for the year ended 31 December 2015 and 0.6 per cent for the year ended 31 December 2014, which was the start-up year, with only one month of housing management activity. The Issuer’s activities in this segment can be summarised as follows:

 Property management activities;

 Facilities management activities; and

 Other additional activities. MM performs all the Public Housing Business activities for the Municipality of Milan, dealing with third parties in its name and on its behalf. The Public Housing Business is carried out by the Issuer according to the terms and conditions set out under a service contract entered into by the Municipality of Milan and the Issuer on 30 June 2015 which shall expire in 2045 (the “Public Housing Service Contract”) (see “Key Contracts and Concession—Public Housing— The Public Housing Service Contract”). The Public Housing Service Contract is a long term contract and can therefore ensure the possibility of developing operational synergies with other MM businesses as, for example, in engineering activities for housing maintenance and in energy management optimization. MM Public Housing Business activities are mainly performed within Milan. In addition, approximately 1,500 units are located in neighbouring municipalities. Even if located outside Milan, as of the date of this Prospectus, all the units are owned by the Municipality of Milan. The principal source of revenues for MM for these activities is the periodic management fee paid by the Municipality of Milan, which is proportional to the number of units managed and their status (rented vs. free units). The fee has been defined in order to ensure full cost recovery for MM’s public housing activities. The payments to facility and property management suppliers, which are based on contracts signed in the name of and on behalf of the Municipality of Milan, are not included in the income statements of the MM Group as they are managed through an advanced cash payment system by the Municipality of Milan, recorded in MM’s financial statements. The Public Housing Service Contract includes also a possible specific incremental variable fee for MM, based on the achievement of KPIs defined on a yearly basis by the Municipality of Milan. Property management MM Housing property management activities are mainly composed of:

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 Administrative management, including: billing and contract management; real estate property units protection in terms of prevention from squatting and other illegal uses; condominium management; real estate property insurance;

 Accounting management, including: financial and economic reporting and forecasting;

 Resident mobility, including: tenants mobility plan implementation (change of dwelling), relocation management for tenants; emergency relocation management, including temporary storage of goods;

 Customer relationship management and communication, including: 24 hour toll free number, local offices for face-to-face relation management, active participation management. Facilities management MM Housing facilities management activities are mainly composed of:

 Operations management, including: gatekeeping service, cleaning and environmental services, heating, energy efficiency management, energy performance certification;

 Technical and maintenance management, including: management of green areas; building maintenance; water, sanitary, electrical, gas, heating and other technical system management;

 Emergency management (performed 24 hours a day, seven days a week) in case of major technical faults or other security issues. Other additional activities According to the Public Housing Service Contract, the Municipality of Milan can entrust special projects to MM, which are not directly mentioned in the Public Housing Service Contract. These projects are mainly focused on increasing the quality of service or on developing new services to tenants. These projects are financed with a specific extra fee paid by the Municipality of Milan. Asset Management Business In addition to the above activities that constitute the three main businesses of the MM Group, the Issuer provides public asset management services, principally with reference to its shareholder, as a consequence of the merger process with MIR S.r.l., through the Asset Management Business segment. The business segment manages real estate and other assets which are involved in Milan municipal solid waste management. These assets have to be made available to the pro tempore waste management concessionaire for Milan (currently Amsa - Azienda Milanese Servizi Ambientali S.p.A. (“Amsa”)), a company of the group headed by A2A S.p.A.) through a rent contract upon payment of an annual fee (see “Key Contracts and Concession—Asset Management—The Amsa Contract”). The Asset Management business division represented 5.3 per cent of the Issuer’s EBITDA for the year ended 31 December 2015, which has been the first year with accounting effect on MM S.p.A., as a consequence of the completion of the merger process.

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Strategy MM’s mission is to ensure the best quality and efficiency standards in its business areas, operating with a high level of expertise and competitiveness, fulfilling its shareholder’s guidelines and fulfilling its mandate as a public service company devoted to its citizen community. The primary business goals of MM include:

 Ensuring service quality and environmental quality in its activities;

 Increasing operating efficiency and multiservice synergies, improving operating margins and controlling costs;

 Developing and renewing integrated water service networks and plants;

 Supporting the Municipality of Milan in urban and infrastructure development policies; and

 Enhancing the quality and the efficiency of public housing management, with particular care for resident services. MM intends to achieve these long-term goals by adhering to the principles and actions outlined below: IWS

 Focusing on full ATO Plan investments implementation for the integrated water service, setting an overall long term financial strategy for their financing;

 Developing operating efficiencies in all of the value chain phases of IWS, ensuring a strong performance in water provisions, sewage and purification;

 Introducing the best available technologies for IWS management, increasing water and service quality; and

 Increasing the competence of personnel through information and training activities and fulfilling the contractual quality standards set by AEEGSI. Engineering Business

 Widening the engineering portfolio in terms of performed services;

 Increasing the services performed for the IWS unit in accordance with the investment plan, and for public housing infrastructure projects;

 Pursuing full cost recovery for engineering services, according to a prevalent in-house providing focus of the activities; and

 Introducing new engineering competences and technologies, thus stimulating innovation processes for continuous development of products and services provided. Public Housing Business

 Completing the organizational model of the Public Housing Business segment;

 Focusing on operational efficiencies in facility and property management activities, generating value for the shareholder and for residents;

 Focusing on continuous improvement in performance levels, according to the objectives defined by the Municipality of Milan; and

 Sustaining innovation and quality of services for the end user. Asset Management Business

 Development of potential synergies with other Issuer’s business divisions (e.g. Engineering Business);

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 Progressive reduction of external operating costs currently generated by the Asset Management Business;

 Continuation and updating of current renting contract schemes. Moreover, at corporate level, MM intends to implement specific actions for:

 Achieving efficient and focused turnover management, accompanied by competence enhancement policies, developing technical and professional skills for MM in order to achieve high quality standards of service;

 Continuing the improvement of the working environment and reducing the risks to operators;

 Optimising financial management, through the definition of an overall financial strategy in coherence with IWS investment plan and tariff evolution;

 Designing an integrated IT strategy, in order to sustain the quality improvement process and to pursue increasing efficiencies in corporate and operating activities. Financing Loan facilities As of 31 December 2015, the main loan facilities of the Issuer were as follows: Long-term facility agreement with Banca Popolare di Bergamo

On July 21, 2011 MM entered into a facility agreement (the “BPB Agreement”) for a maximum total amount equal to €25 million (€19,839,136 outstanding as of 31 December 2015) entered into, by and between, MM, as borrower, and Banca Popolare di Bergamo (“BPB”), as lender.

Maturity and repayment requirements

The loan is repayable in 2 pre-amortized instalments and 58 instalments payable every three months, with the last instalment due on 25 July 2026.

Voluntary prepayment

Prepayments are permitted and are subject to certain limitations and a prepayment fee.

Interest rate

The interest rate is equal to 3mEuribor + 2.50% per annum and MM pays accrued interest on the loan on the last day of each interest period, which occurs every three months. In order to hedge against the interest rate risk, the Issuer entered into an interest rate swap to convert, on the last day of each interest period, the variable rate indicated above into a fixed interest rate equal to 5.74% per annum.

Security or other creditor’s protection mechanisms

No security is provided under the BPB Agreement.

Covenants

The BPB Agreement contains certain customary affirmative and negative covenants. Such covenants include, inter alia that the Issuer must: (i) provide annual financial statements; (ii) remain the concessionaire under the Milan IWS Concession; (iii) provide BPB with an amount equal to at least Euro 3,000,000 per annum deriving from the revenues under the Milan IWS Concession by means of Sepa direct debit; (iv) provide BPB with certificates confirming compliance with covenants and (v) notify BPB of any failure to comply with the covenants and of any event potentially prejudicial for BPB.

Withdrawal rights and termination events

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General references to the relevant provisions of the Italian Civil Code and the right of termination by the BPB upon MM’s failure to comply with the covenants provided in the BPB Agreement.

Long-term facility agreement with Banca Nazionale del Lavoro S.p.A.

On 6 November 2007 MM entered into a facility agreement (the “BNL Agreement”) for a maximum total amount equal to €20 million (€13,000,000 outstanding as of 31 December 2015) entered into by and between MM, as borrower, and Banca Nazionale del Lavoro S.p.A. (“BNL”) as lender.

Maturity and repayment requirements

The loan is repayable in 40 instalments payable every six months, with the last instalment due on 31 July 2028.

Voluntary prepayment

Prepayments are permitted and are subject to certain limitations and no prepayment fee is provided for.

Interest rate

The interest rate is equal to 6mEuribor + 0.25% per annum and MM pays accrued interest on the loan on the last day of each interest period, which occurs every six months. In order to hedge against the interest rate risk, the Issuer entered into an interest rate swap to convert, on the last day of each interest period, the variable rate indicated above into a fixed interest rate equal to 6.20% per annum.

Security or other creditor’s protection mechanisms

According to article 5 of the BNL Agreement, in order to secure MM’s payment obligation of each six- monthly instalment (and the relevant interests), MM undertakes to transfer on a six-month basis from its ordinary accounts onto a dedicated account opened with BNL (the “BNL Bank Account”) an amount equal to the six-monthly instalment (and the relevant interests).

To strengthen such obligation, MM granted irrevocable instructions and a mandate, in the interest of BNL, to Banca Intesa Infrastrutture e Sviluppo S.p.A. (now Intesa Sanpaolo S.p.A.), in its quality as bank where MM has opened the bank accounts onto which the revenues under the Milan IWS Concession are collected, to transfer on a six-month basis (i.e. usually 2 or 3 days before each relevant semi-annual repayment date) the amount corresponding to the principal and interest relating to the relevant six-month period onto the BNL Bank Account. On each relevant semi-annual repayment date BNL uses the amount deposited into the BNL Bank Account to repay the relevant six-monthly instalment (and the relevant interests).

In addition, a pledge over the balance of the BNL Bank Account is granted in favour of BNL.

Additional security is to be provided in case any issue arise in relation the security mechanism above or any increase of the instalments occur.

The existing security interests will be released upon reimbursement (in full or in part).

Covenants

The BNL Agreement contains certain customary affirmative and negative covenants. Such covenants include, inter alia: (i) providing annual financial statements; (ii) notice requirements in the event of any administrative or legal variation which could have a material adverse effect on the asset, financial or economic or legal condition of MM; (iii) a requirement to notify BNL of any new medium/long-terms financing requested from third parties. In this respect, the Issuer has already informed BNL about the issuance of the Notes.

Withdrawal rights and termination events

The BNL Agreement contains customary withdrawal rights and termination events, including, inter alia: (i) failure to pay any principal or interest when due; (ii) failure to comply with certain provisions of the BNL

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Agreement; (iii) untruthfulness or incorrectness of representations and warranties; (iv) creditor process; (v) granting of a mortgage; (vi) segregation of assets; (v) insolvency proceedings and (vi) significant increase of financial indebtedness which could have a material adverse effect on the asset, financial or economic or legal condition of MM. Long-term facility agreement with Banca Carige S.p.A.

On 7 August 2009 MM entered into a facility agreement (the “Carige Agreement”) for a maximum total amount equal to €25 million (€19,357,731 outstanding as of 31 December 2015) entered into, by and between, MM, as borrower, and Banca Carige S.p.A. (“Carige”), as lender.

Maturity and repayment requirements

The loan is repayable in 36 instalments payable every six months, with the last instalment due on 31 October 2027.

Voluntary prepayment

Prepayments are permitted and are subject to certain limitations and no prepayment fee is provided for.

Interest rate

The interest rate is fixed and equal to the annual interest rate swap rate in Euro versus 12mEuribor + 2.20% per annum and MM pays accrued interest on the loan on the last day of each interest period, which occurs every six months.

Security or other creditor’s protection mechanisms

According to article 5 of the Carige Agreement, in order to secure MM’s payment obligation of each six- monthly instalment (and the relevant interests), MM undertakes to transfer on a six-month basis from its ordinary accounts onto a dedicated account opened with Carige (the “Carige Bank Account”) an amount equal to the six-monthly instalment (and the relevant interests).

To strengthen such obligation, MM granted irrevocable instructions and a mandate in the interest of Carige to Banca Infrastrutture Innovazione e Sviluppo S.p.A. (now Intesa Sanpaolo S.p.A.), in its quality as bank where MM has opened the bank accounts onto which the revenues under the Milan IWS Concession are collected, to transfer on a six-month basis (i.e. usually 2 or 3 days before each relevant semi-annual repayment date) from such bank accounts to the Carige Bank Account, the amount corresponding to the principal and interest relating to the relevant six-month period. On each relevant semi-annual repayment date Carige uses the amount deposited into the Carige Bank Account to repay the relevant six-monthly instalment (and the relevant interests).

A pledge over balance of the Carige Bank Account is granted in favour of Carige.

Additional security is to be provided in case any issues arise in relation to the security mechanism above or any increase of the instalments occurs.

Covenants

The Carige Agreement contains certain customary affirmative and negative covenants. Such covenants include, inter alia that the Issuer must: (i) provide certain financial and other information including annual financial statements; (ii) give notice in the event of any administrative or legal variation which could have a material adverse effect on the asset, financial or economic or legal condition of MM; and (iii) notify Carige of any new medium/long-terms financing requested from third parties. In this respect, the Issuer has already informed Carige about the issuance of the Notes.

Withdrawal rights and termination events

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The Carige Agreement contains customary withdrawal rights and termination events, including, inter alia: (i) failure to pay any principal or interest when due; (ii) failure to comply with certain provisions of the Carige Agreement; (iii) untruthfulness or incorrectness of representations and warranties; (iv) creditor process; (v) granting of a mortgage; (vi) segregation of assets; (v) insolvency proceedings and (vi) a significant increase of financial indebtedness which could have a material adverse effect on the asset, financial or economic or legal condition of MM. Long-term facility agreement with Banca Intesa Infrastrutture e Sviluppo S.p.A. (now Intesa Sanpaolo S.p.A.)

On 6 October 2006 MM entered into a facility agreement (the “ISP Agreement”) for a maximum total amount equal to €20 million (€12,783,625 outstanding as of 31 December 2015) entered into by and between MM, as borrower, and Banca Intesa Infrastrutture e Sviluppo S.p.A. (now Intesa Sanpaolo S.p.A.) (“ISP”) as lender.

Maturity and repayment requirements

The loan is repayable in 40 instalments payable every six months, with the last instalment due on 31 October 2026.

Voluntary prepayment

Prepayments are permitted and are subject to certain limitations and no prepayment fee is provided for.

Interest rate

The interest rate is equal to 6mEuribor + 0.12% per annum and MM pays accrued interest on the loan on the last day of each interest period, which occurs every six months. In order to hedge against the interest rate risk, the Issuer entered into an interest rate swap to convert, on the last day of each interest period, the variable rate indicated above into a fixed interest rate equal to 4.28% per annum.

Security or other creditor’s protection mechanisms

According to article 5 of the ISP Agreement, in order to secure MM’s payment obligation of each six-monthly instalment (and the relevant interests), MM granted irrevocable instructions and mandate to ISP, in its interest and in its quality as bank where MM has opened the bank accounts onto which the revenues under the Milan IWS Concession are collected, to transfer on a six-month basis (i.e. usually 2/3 days before each relevant semi-annual repayment date) from such bank accounts to a dedicated account opened with ISP (“ISP Account”), the amount corresponding to the principal and interest relating to the relevant six-month period. On each relevant semi-annual repayment date ISP uses the amount deposited into the ISP Account to repay the relevant six-monthly instalment (and the relevant interests).

No pledge over the balance of the ISP Account is granted in favour of ISP.

Additional creditors’ protection or securities to be provided in case any issue arise in relation the mechanism above or any increase of the instalments occur.

Covenants

The ISP Agreement contains certain customary affirmative and negative covenants. Such covenants include, inter alia, that the Issuer must: (i) provide certain financial and other information including annual financial statements; (ii) give notice in the event of any administrative or legal variation which could have a material adverse effect on the asset, financial or economic or legal condition of MM; and (iii) notify ISP of any new medium/long-term financing requested from third parties. In this respect, the Issuer has already informed ISP about the issuance of the Notes.

Withdrawal rights and termination events

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The ISP Agreement contains customary withdrawal rights and termination events, including, inter alia: (i) failure to pay any principal or interest when due; (ii) failure to comply with certain provisions of the ISP Agreement; (iii) untruthfulness or incorrectness of representations and warranties; (iv) creditor process; (v) granting of a mortgage; (vi) segregation of assets; (v) insolvency proceedings and (vi) a significant increase of financial indebtedness which could have a material adverse effect on the asset, financial or economic or legal condition of MM. Long-term facility agreement with Banca IMI S.p.A.

On 23 September 2015, MM entered into a long-term facility agreement (the “IMI Agreement”) for a maximum total amount equal to €50 million (€10,000,000 outstanding as of 31 December 2015) entered into, by and between, inter alia, MM as borrower and IMI as lender.

Maturity and repayment requirements

The loan is repayable in full on 22 March 2017 with the option to postpone the repayment of the facility to 22 September 2018. The Issuer intends to use the proceeds from the sale of the Notes, inter alia, to repay the IMI Agreement. Before the issue date of the Notes IMI is expected to confirm the termination of the IMI Agreement under the condition precedent (condizione sospensiva) of the receipt by IMI of the relevant redemption amount and certain comfort documents on or before the issue date of the Notes.

Voluntary prepayment

Prepayments are permitted and are subject to certain limitations and no prepayment fee is provided for.

Interest rate

The interest rate is equal to 3mEuribor + 45bps (60bps in case of exercise of postponement option) per annum and MM pays accrued interest on the loan on the last day of each interest period, which occurs every three months.

Security or other creditor’s protection mechanisms

The IMI Agreement is secured by a “privilegio generale” over movable present and future assets of the Issuer pursuant to article 186 of the Public Contracts Code (formerly art. 160 of old Public Contracts Code). Before the issue date of the Notes IMI is expected to enter into a deed of release in notarial form relating to the privilegio generale under the IMI Agreement under the condition precedent (condizione sospensiva) of the receipt of the relevant redemption amount and certain comfort documents on or before issue date of the Notes.

Covenants

The IMI Agreement contains certain customary affirmative and negative covenants, subject to customary qualifications, exceptions and baskets. Such covenants include, inter alia: (i) the provision of certain financial and other information, including annual audited financial statements; (ii) compliance with laws and regulations; (iii) a negative pledge; (iv) no additional financial indebtedness (over a certain threshold) without IMI’s prior written consent; (v) no additional security granted over the termination amount to be received under the Milan IWS Concession; (vi) compliance with obligations under the Milan IWS Concession; (vii) no amendment to the Milan IWS Concession other that amendments requested by law or which will not have a material adverse effect on amongst others, the financial and economic condition of MM; notice requirements for any financial indebtedness and granting of security to third parties.

In relation to the above, for the purpose of the issuance of the Notes, on 20 September 2016 the Issuer sent a waiver request to IMI to obtain its consent to, among other things: i. extend the security interest established in favour of IMI under the “privilegio generale” over movable assets of the Issuer pursuant to article 186 of the Public Contracts Code (formerly art. 160 of the old Public Contracts Code) also in favour of the Noteholders and of the EIB under the Permanent Financing. IMI has provided its response to this waiver letter accepting the above described request on 4 November 2016. 65

Events of default

The IMI Agreement contains customary events of default, which are subject to customary materiality and other qualifications, exceptions and or grace periods, as appropriate, including, inter alia: (i) failure to pay any principal or interest when due; (ii) failure to comply with certain provisions of the IMI Agreement; (iii) untruthfulness or incorrectness of representations and warranties; (iv) cross default; (v) unlawfulness and invalidity; (vi) insolvency and declaration of bankruptcy and (vii) termination of the Milan IWS Concession.

Facility agreement with Banca Popolare di Sondrio S.p.A.

On 13 October 2015 MM entered into a facility agreement (the “BPS Agreement”) for a maximum total amount equal to €5 million (€5,000,000 outstanding as of 31 December 2015) entered into, by and between, MM, as borrower, and Banca Popolare di Sondrio (“BPS”), as lender.

Maturity and repayment requirements

The loan is repayable in full on 4 December 2017.

Interest rate

The interest rate is equal to 3mEuribor + 1.5% per annum and MM pays accrued interest on the loan on the last day of each interest period, which occurs every three months.

Security or other creditor’s protection mechanisms

No security is provided under the BPS Agreement.

Long-term facility agreement with European Investment Bank

MM as borrower and European Investment Bank (“EIB”) as lender on 18 November 2016 entered into a long- term facility agreement for a maximum total amount equal to €70 million (the “BEI Financing” and together with any additional bank facilities that may be entered into by the Issuer, in its capacity as borrower to finance (in whole or in part) the new investments and works required under the Investment Plan (Programma degli Interventi) attached to, and forming an integral part of, the Concession Agreement reaching an aggregate amount (including amounts under the BEI Financing, and any other additional facilities described above) not exceeding Euro 70,000,000 (the “Permanent Financing”)).

Availability period

The loan may be utilised, in no more than 5 tranches, during the 24 months following the execution of the BEI Financing.

Maturity and repayment requirements

The loan is repayable in full no later than 31 December 2034. Each tranche shall be reimbursed, on an annual, semi-annual or quarterly basis, on the dates specified under the confirmation of utilization issued by EIB and in any case within the earlier of (a) the date falling 18 years after the scheduled utilisation date and (b) 31 December 2034.

Prepayment

Voluntary prepayments are permitted and are subject to certain conditions, limitations and payment of breakage costs. Furthermore the BEI Financing includes also mandatory prepayment provisions related, among other things, to the following events: (i) MM makes certain voluntary prepayment (including cancellation), in whole or in part, of any financing other than the BEI Financing; (ii) the public shareholder(s) of MM cease to own, directly or indirectly, a participation at least equal to 51% of the share capital of MM (or in any case the

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minimum participation required for the purpose of the in house providing) (iii) an entity or a group of entities acting in concert acquire control over MM or the entity directly or indirectly controlling MM; (iii) termination of the Milan IWS Concession.

Interest rate

For each tranche of the loan MM is entitled to decide between a fixed interest rate (equal to the interest rate fixed by the competent EIB body per annum) or a floating rate (equal to Euribor + the spread fixed by the competent EIB body per annum) - both the fixed interest rates and the spread include the margin of 47bps. On an annual, semi-annual or quarterly basis, MM pays accrued interest on the loan starting from the first payment date of the drawn tranche following the relevant utilization date.

Security or other creditor’s protection mechanisms

The BEI Financing is secured by the “privilegio generale” over movable present and future assets of the Issuer pursuant to article 186 of the Public Contracts Code (formerly art. 160 of old Public Contracts Code). This security is shared with the Noteholders, on a pari passu basis and according to the provisions set forth under the Intercreditor Agreement.

Covenants

The BEI Financing contains certain customary affirmative and negative covenants, subject to customary qualifications, exceptions and thresholds. Such covenants include, inter alia: (i) the provision of certain financial and other information, including annual audited financial statements; (ii) compliance with laws and regulations; (iii) a negative pledge; (iv) no additional financial indebtedness (over a certain threshold) of MM’s subsidiaries without EIB’s prior written consent; (v) certain financial covenants; (vi) giving notice of any event which could have a material adverse effect on the execution and management of the water service.

Events of default

The BEI Financing contains customary events of default, which are subject to customary thresholds and other qualifications, exceptions and/or grace periods, as appropriate, including, inter alia: (i) failure to pay any principal or interest under the BEI Financing when due; (ii) failure to comply with certain provisions of the BEI Financing; (iii) untruthfulness or incorrectness of representations and warranties; (iv) failure to pay any amount under any other financial indebtedness (v) cross default (vi) insolvency and declaration of bankruptcy and (vii) termination of the Milan IWS Concession.

Intercreditor Agreement

It is intended that the EIB will, on or around the Issue Date, enter into the Intercreditor Agreement with, among others, the Issuer, the Security Agent and the Noteholders’ Representative in order to discipline and coordinate, among other things, the exercise of the creditors’ rights (including the right to enforce) under the abovementioned “privilegio generale”.

Other facilities and overdraft arrangements The Issuer has also revolving credit facilities and overdrafts, for a maximum total amount of about Euro 90,000,000, of which Euro 30,000,000 and Euro 17,100,505 have been already used as of 31 December 2015, respectively under the revolving credit facilities and the overdrafts. No security is provided under either agreement.

Debt securities As of the date of this Prospectus, MM has not issued any debt securities. Guarantees

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As at 31 December 2015, guarantees to third parties amounted to Euro 19,545,729. IWS Financial Strategy As recalled in the section “Description of the Issuer – Strategy”, the Issuer intends to develop an overall long- term financial strategy for the financing of the IWS Investment Plan, of which the Notes represent a strategic component. In order to proceed to the realization of the strategy, the Issuer has already carried out several activities and executed and implemented several deeds aimed at the issuance and the listing of the Notes and at the definition of the other financial instruments required by the strategy itself. Among these activities and deeds, in January 2015, the Issuer carried out a market solicitation in order to obtain the necessary resources to finance the investment plan of the IWS. In September 2015, the Issuer entered into the ‘IMI Agreement’ with Banca IMI for a bridge facility agreement and awarded to Banca IMI the advisory activities for the analysis and structuring of the Issuer’s financial strategy. In November 2015, the Chairman of MM communicated to the Board of Directors that the Issuer was considering the issuance of institutional notes for an amount of around € 100,000,000. Therefore, in that context, it was deemed appropriate to start the procedure for the assignment of a credit rating to the Issuer. In December 2015, the Issuer started a procedure for the assignment of a corporate credit rating to MM, as described in the section “Description of the Issuer – Recent developments”, which includes also the following assignment of a credit rating to the Notes for the purposes of their issuance. In April 2016, the Shareholders’ Meeting approved to continue the assessment activities, specifying that the strategic scenario to be carried out is composed by a combination of two different sources of financing, i.e. the issuance of amortizing notes and the granting of an amortizing loan. Then, in July 2016, the Board of Directors of the Issuer approved and submitted to the shareholders’ meeting a proposal for the issuance of notes. The shareholders’ meeting resolved to approve such proposal on 28 July 2016. The financial strategy adopted by the Issuer on the basis of the procedure briefly described above provides, in addition to the issuance of the Notes for an amount up to € 100,000,000 as referred to in this Prospectus, the structuring and execution by the Issuer of a term loan facility (i.e. the Permanent Financing as defined above) for an estimated overall amount of € 70,000,000. The Permanent Financing has enabled the Issuer to obtain further financial sources necessary for the investments to be carried out according to the IWS investment plan. It is intended that the EIB will, on or around the Issue Date, execute the Intercreditor Agreement (as may be amended and/or supplemented and/or restated and/or replaced from time to time in accordance with its terms) in order to ensure the pari passu principle and the sharing of the Transaction Security with the holders of the Notes (represented by the Security Agent).

Share capital and Shareholders As of 31 December 2015, the Issuer had a share capital of Euro 15,600,000 fully paid up and consisting of 15,600,000 ordinary shares with a nominal value of Euro 1.00 each. Since 31 December 2015, there have been no changes to the Issuer’s share capital. The Issuer’s sole shareholder is the Municipality of Milan. Group Structure The table below shows the subsidiaries of the Issuer in which it has a controlling interest as of 31 December 2015. As parent company, the Issuer is responsible for the establishment of strategic guidelines and management policies for its subsidiaries, allocating resources and coordinating them, in accordance with the instructions and guidelines provided by the Municipality of Milan.

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Percentage of share capital Subsidiaries held by the Issuer

Consolidated companies

Metro Engineering S.r.l. 100%

Napoli Metro Engineering S.r.l. 100%

Jointly controlled companies

MMB Project Rus (partnership with Russian Railways Group RZD 50% based on Russian law)

The following chart shows the Group structure as at 31 December 2015.

As reported in the previous chart, the Issuer’s sole shareholder is the Municipality of Milan, in line with in- house providing requirements.

MM Subsidiaries description Metro Engineering S.r.l. Metro Engineering S.r.l. (“ME”) was established in 2009. The company has the specific purpose of developing and managing contracts on a national and international basis (except those related to the Municipality of Milan). As specified in its By-laws, the scope of its business activities is currently restricted to those activities entrusted by the Issuer. The following table shows selected line items from Metro Engineering results of operations on a non- consolidated basis for the years ended 31 December 2015 and 2014. 69

Metro Engineering – Key financial figures

Italian GAAP For the year ended For the year ended 31 December 2015 31 December 2014

Thousands Thousands of Euro of Euro

Total revenue and income 713 2,307

Total operating expense 714 1,535

Gross operating profit – (1) 772 EBITDA

Amortisation/ depreciation provisions 0 0

Operating profit (1) 772 EBIT

* Based on audited non-consolidated annual financial statements of the Issuer as at and for the year ended 31 December 2015 prepared in accordance with Italian GAAP. Napoli Metro Engineering S.r.l. Napoli Metro Engineering S.r.l. (“NME”) was established in 2009. The company has the specific purpose of developing and managing Naples Metro contracts, assisting the local concessionaire, Metronapoli, in its technical and administrative dealings. As specified in its By-laws, the scope of its business activities is currently restricted to those activities entrusted by the Issuer. The following table shows selected line items from Napoli Metro Engineering results of operations on a non- consolidated basis for the years ended 31 December 2015 and 2014.

Napoli Metro Engineering – Key financial figures

Italian GAAP For the year ended For the year ended 31 December 2015 31 December 2014

Thousands Thousands of Euro of Euro

Total revenue and income 4,356 3,970

Total operating expense 4,241 3,787

Gross operating profit – 115 183 EBITDA

Amortisation/ depreciation provisions 4 3

Operating profit 111 180 EBIT

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* Based on audited non-consolidated annual financial statements of the Issuer as at and for the year ended 31 December 2015 prepared in accordance with Italian GAAP.

MMB Project Rus The company is a joint venture established with RZD Group (Russian National Railways) in order to develop in Russia the engineering services business in the transport and mobility areas. MMB Project Rus does not include relevant assets or liabilities. Management Corporate governance Corporate governance rules for Italian companies like MM S.p.A. are provided pursuant to the Italian Civil Code. MM has adopted a system of corporate governance, based on a conventional organizational model involving the Shareholders’ meetings, the Board of Directors, the Board of Statutory Auditors and the independent auditors. According to MM’s By-Laws, The Chairman of the Board of Directors is empowered to represent MM. Board of Directors The current Board of Directors has been appointed for a three-year term, which is set to expire at the shareholders’ meeting called to approve the Issuer’s 2018 year-end financial statements. The following table sets out the current members of the Board of Directors of MM and the main positions held by them outside MM Group.

Name Position Main position Held outside MM Group

Davide Amedeo Chairman No other relevant positions Corritore

Loredana Director Member of the Lombardy Regional Council for Equal Bracchitta opportunities Unique component of the Performance evaluation board of the Municipality of Opera (MI) Component of the Performance evaluation board of the Territorial Health Agency (ASST) of Pavia

Luigi Mario Director Chairman of D&G S.r.l. (Amrop) Mancioppi Chairman of Amrop S.r.l.

The business address of each member of the Board of Directors is the Issuer’s registered office.

Board of Statutory Auditors The board of statutory auditors is composed of three auditors and two alternate auditors who remain in office for three years. The current Board of Statutory Auditors of MM has been appointed for a three-year term which is set to expire at the shareholder’s meeting called to approve the Issuer’s 2016 year-end financial statements.

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The following table sets out the current members of the Board of Statutory Auditors of MM and the main positions held by them outside MM Group.

Name Position Main position Held outside MM Group

President of Board of Statutory Auditors at Cognizant Technology Solutions Italia S.p.A. Standing Auditor at: Tre P S.p.A.

Taini Substitute Auditor at: Argos S.p.A. ; Chairman Claudia Savina Investindesign S.p.A.; Milanosport S.p.A. Statutory Auditor (Revisore legale dei conti) at: Municipality of Arena Po (PV); Municipality of Pieve Porto Morone (PV); Municipality of Riva di Sotto (BG); Municipality of Gerenzago (PV); LCM Trading S.p.A.

Rizzi President of Board of Statutory Auditors at Standing Auditor Henry Richard SPV Linea M4 SpA

Accountant professional, associate at Studio Bellavite Pellegrini President of Board of Statutory Auditors at 3 Emme S.p.A. in Liquidazione

Bellavite Pellegrini Standing Auditor at: Moro Costruzioni S.p.A; Standing Auditor Stefano Teresio Biffignandi S.p.A.; Pandino Wurstel S.r.l.; Villapizzone S.r.l. Attorney at FER 1923 S.r.l. Sole Director at: La Beola S.r.l.; Sidai S.r.l.

Accountant professional in Milan since 1995

Santangelo Substitute Auditor Standing Auditor at: Kayafin S.r.l.; Gut Distribution Sebastiana S.r.l.; Compagnia Mercantile & Commerciale Export Procurement S.p.A.; Fondazione Smemoranda; Metodo Immobile S.p.A.; Accountant professional and Statutory auditor professional in collaboration with Studio Deiure in Milan Standing Auditor at: Moretti Substitute Auditor - N.E.F.F.A.S. Nastri Ferro e Acciai Speciali S.r.l.; Ilaria - S.E.A. Handling S.p.A. in Liquidazione; - Zimmer Biomet Italia S.r.l.; - Private Equity Partners SGR S.p.A..

Accountant professional in Milan since 2009 Arrigoni Standing Auditor at: Imprepar Impregilo Partecipazioni Substitute Auditor Guido S.p.A.; Passante Di Mestre S.C.p.A. Substitute Auditor at S.G.F. - INC S.p.A.

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Director at: P.G.F. S.r.l., MB Medical S.r.l. Unique liquidator at: Ri.Ma.Ti. S.c.a.r.l.

The business address of each member of the Board of Statutory Auditors is the Issuer’s registered office. Conflicts of interest As the date of this Prospectus, no member of the Board of Directors or the Board of Statutory Auditors has any private interest and/or other duty which conflicts with its obligations deriving from its office. Employees As of 31 December 2015, the Group had 1,037 employees, consisting of 34 managers, 647 office workers and 356 factory workers. As of 31 December 2014, the Group had 943 employees, consisting of 33 managers, 571 office workers and 339 factory workers. Legal proceedings MM is party to a number of civil and administrative proceedings arising from the conduct of its activities and may from time to time be subject to inspections by tax and other authorities. As of 31 December 2015, the Issuer had a provision in its consolidated financial statements for legal proceedings in the amount of € 4,159,000.00. The following table sets out the main litigation proceedings to which the Issuer is a party as at the date of this Prospectus. Administrative Proceedings

Parties Forum Description Amount claimed Status

Salini Claudio Administrative Administrative Between € Judgment of first S.p.A., now Regional Tribunal dispute - claim 1,000,000 and € instance in favour Costruzioni Lombardia brought by Salini 3,000,000 of MM. Terms to Romane against tender propose an appeal S.p.A./MM documents relating not yet expired. to the extension of M1 Monza - Bettola

Vodafone/ MM Administrative Administrative Not assessable First instance Regional Tribunal dispute - claim judgment pending Lombardia against tender documents relating to voice services for MM

Bruno SpA/MM Italian Council of Administrative Not assessable Judgement of Coese SpA State dispute - claim second instance in against tender favour of MM documents - image issued on damage November 2016. Terms to propose an appeal before the Supreme Court (Corte di Cassazione)

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pending.

Milano Technology Italian Council of Administrative Not assessable Appeal by MM’s / MM State dispute - claim counterparty against tender against a judgement documents for of the public housing Administrative cleaning services Regional Tribunal in favour of the Issuer

A member of the Administrative Administrative No request of First instance City Council of the Regional Tribunal dispute - claim compensation has judgment pending Municipality of Lombardia against the been filed by the Milan and the resolution of the claimant association Diritto Municipality of e Mercato / MM Milan which and Municipality of awards to MM Milan certain services

Carbotermo/ Administrative Administrative Not assessable First instance Cristoforetti/ Regional Tribunal dispute – claim judgement pending Cofely/MM Lombardia against tender documents issued by MM (as awarding authority) regarding office heating services

Impresa Sangalli / Administrative Administrative Not assessable First instance MM Regional Tribunal dispute – claim judgement pending Lombardia against tender documents issued by MM for water course maintenance and waste services

SINTES / MM Administrative Administrative Not assessable First instance Regional Tribunal dispute – claim judgement pending Lombardia against tender documents issued by MM for engineering services

In addition to the above, the Issuer is aware of a pending administrative proceeding filed on 6 July 2015 before the Administrative Regional Court of Lombardia - Milan by two members of the City Council of the Municipality of Milan, for the annulment of the Resolution of the City Council of the Municipality of Milan - Settore Politiche Ambientali ed Energetiche dated 19 March 2015, No. 6, by which the above public administration approved the update of the Piano d’Ambito and the extension of Milan IWS Concession from 20 years to 30 years (i.e. until 31 December 2037) (the “Resolution”). The main objection of the claimants is the alleged violation of the competence to adopt the above Resolution. No precautionary measures were requested by the Claimants to suspend the effectiveness of the Resolution. On 10 November 2015, the claimants filed an additional claim (ricorso per motivi aggiunti) to challenge - in the same pending administrative proceeding - also the Resolution No. 14/2015 of 9 September 2015 of the ATO Office of Milan, which formally approves the extension of the concession term under the Milan IWS Concession until 31 December 2037 (the “Second Resolution”). This additional claim was based on the same arguments supporting the original claim.

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The hearing to discuss the merits of the case have not been scheduled yet. Civil Proceedings Part 1

Parties Forum Description Amount claimed Status

MM/Zanuso Antonio and Supreme Court Civil dispute - € 561,980 Last instance Chambry Carlo (Corte di opposition to judgment pending Cassazione) injunction decree

MM/Europea 92 S.p.A. Milan Tribunal Civil dispute - € 750,000 First instance opposition to the judgment pending enforcement proceeding

Gemmo S.p.A./MM and Venice Tribunal Civil dispute - € 3,417,083.98 First instance others preventive judgment technical appraisal pending - MM (Accertamento has required the Tecnico insurance Preventivo) - companies to join claim for damages the proceedings

Condominio Centrale Milan Tribunal Civil dispute - € 1,005,868 First instance Termica Frolanini/MM declaration of judgment non-infringement pending concerning the invoicing of the Integrated Water Service (SII)

MM/Parrocchia Milan Tribunal Civil dispute - € 340,000 First instance - Sant’Ambrogio di claim for damages judgment has Cinisello Balsamo and been issued and others has confirmed that the insurance policies cover the damages claimed - term to appeal the first instance judgment is currently pending

Covar/MM Milan Tribunal Civil dispute - Not assessable First instance declaration of judgment has non-infringement been issued and concerning the had rejected invoicing of the Covar’s request - Integrated Water term to appeal the Service (SII) first instance judgment is currently pending

MetroWeb S.p.A./MM Milan Tribunal Civil dispute - € 1,582,566.02 First instance and others claim for damages judgment pending - MM has required the insurance companies to join

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the proceedings

MetroWeb S.p.A./MM Milan Tribunal Civil dispute - € 488,452.31 First instance and others claim for damages judgment pending - MM has required the insurance companies to join the proceedings

Prima Appalti S.p.A./MM Milan Tribunal Civil dispute - € 248,387.18 First instance request for judgment pending recognition of reserves

ATI Ronzoni S.r.l./MM Milan Tribunal Civil dispute - € 1,660,573.07 First instance request for judgment pending recognition of reserves

Part 2

Parties Forum Description Amount claimed Status

ATI Grandi Lavori Supreme Court Civil dispute - € 1,800,000 Proceeding Fincosit/MM (Corte di request for resumed before Cassazione) recognition of the Court of reserves Appeal of Milan

MM/Torno Global Milan Tribunal Civil dispute - € 600,571.68 First instance Contracting S.p.A. (now opposition to judgment pending Bankruptcy Torno Global injunctive decree Contracting S.p.A.)

MM/Torno Global Milan Tribunal Civil dispute - € 2,199,609.18 First instance Contracting S.p.A. (now opposition to judgment pending Bankruptcy Torno Global injunctive decree Contracting S.p.A.)

MM/Torno Global Milan Tribunal Civil dispute - € 4,876,016.45 First instance Contracting S.p.A. (now opposition to judgment pending Bankruptcy Torno Global injunctive decree Contracting S.p.A.)

MM/Iclet Armamento Court of Appeal Civil dispute - € 299,208.86 Second instance Ferroviario S.p.A. of Milan opposition to judgment pending injunctive decree

Impresa S.p.A./MM Court of Appeal Civil dispute - € 19,505,855.30 Second instance of Milan request for judgment pending recognition of reserves

MM/IMAF Milan Tribunal Civil dispute - € 304,884.40 First instance opposition to judgment pending injunctive decree

IMAF/MM Milan Tribunal Civil dispute - Not assessable First instance request for judgment pending recognition of

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reserves

ATI IPA Precast Milan Tribunal Civil dispute - € 16,663,083.78 First instance S.p.A./MM request for judgment pending recognition of reserves

Beta Funding S.r.l., ARA Milan Tribunal Civil dispute - € 24,751,196.61 First instance Assets Recovery and request for judgment pending Administration S.r.l./MM recognition of reserves

Acmar S.c.p.a./MM and Milan Tribunal Civil dispute - € 9,739,989.44 Ordinary others request for proceeding and recognition of Preventive reserves and claim Technical for damages Appraisal (ATP - Accertamento Tecnico Preventivo) pending.

Zoldan S.p.A./MM Milan Tribunal Civil dispute - € 550,000 First instance claim for damages judgment pending

Cavalleri Ottavio Milan Tribunal Civil dispute - € 11,831,385.01 First instance S.p.A./MM request for judgment pending recognition of reserves

Cavalleri Ottavio Milan Tribunal Civil dispute - € 776,355.22 First instance S.p.A./MM opposition to judgment pending injunctive decree - state of progress in works (SAL - Stato di Avanzamento Lavori) not paid

SALC SpA / MM Milan Tribunal Civil dispute - € 44,193,740.42 First instance request for for reserves and € judgment pending recognition of 13,740,878.22 for reserves and extra extra works works.

As a general consideration, please note that any liability (if any) arising from the proceedings indicated under Part 2 of the Civil Proceedings above in principle can be recovered by the Issuer from the Municipality of Milan, as the responsibilities and obligations under the relevant relationships are substantially pass-through for the Issuer due to existing agreements between this latter and the Municipality of Milan. In addition, please note that the above litigations are almost totally related to the engineering business. In addition to the above, as a result of a judgment relating to the payment of extra costs due under a contract for the construction of public transport infrastructure commissioned by the Issuer (acting upon request of the Municipality of Milan and other local public entities) to a contractor, on June 30, 2016 this contractor has started enforcement proceedings against the Issuer by notifying a deed of foreclosure to third parties (pignoramento presso terzi) over the Issuer’s receivables owed by several public and private entities. The Issuer has reached an agreement with the contactor to settle the dispute and revoke the foreclosure upon payment of an amount of € 14,622,311.48.

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The above agreement has been concluded on the basis of a previous resolution by the Municipal Council (Giunta Comunale) of Milan on July 11, 2016 (pending discussions with the other public authorities involved in the re-distribution of such extra costs) which has approved to allocate the necessary budgetary resources (for an amount equal to € 14,000,000) in favor of the Issuer to settle the dispute with the contractor and to obtain the cessation of the pending enforcement proceeding. Pending the collection of the above amount by the Issuer from the Municipality of Milan, the Issuer has already paid in full the contractor in order to put into effect the cessation of the pending enforcement proceeding. Consequently, the foreclosures have been already released, but the Issuer is currently waiting to receive the amount of € 14,000,000 from the Municipality of Milan. Furthermore, with reference to the above described proceedings “Cavalleri Ottavio S.p.A./MM - Civil dispute – opposition to injunctive decree for a claimed amount of € 776,355.22”, on September 8, 2016 this contractor has started an enforcement proceeding against the Issuer by notifying a deed of foreclosure to third parties (pignoramento presso terzi) over certain Issuer’s bank accounts for an overall amount of € 1,411,497.12 for each bank account. On 21 October 2016, the Issuer has filed a request of reduction of the deed of foreclosure to limit it to one bank account only. Pending the above Issuer’s request and the next hearings, as of September 30, 2016, the overall Issuer’s cash account subject to the deed of foreclosure in question is of about € 4.303.078 and the overall available Issuer’s cash account is equal to about € 24,300,000. Save as set out above, the Issuer is not involved and, in the 6 months prior to the date of this Prospectus, has not been involved in any governmental, legal or arbitration proceedings which may have or have had a material adverse effect on the Issuer’s financial position or profitability. Recent developments Approval of MM capital increase by the City Council of Milan On 26 October 2015, the City Council of Milan approved resolution No. 31 for a capital increase for MM through the transferring to MM of a set of real estate assets owned by the Municipality of Milan. The Municipality of Milan undertook this transaction in order to strengthen the capital structure of MM in view of the envisaged investment plan for Integrated Water Services and the connected financial requirements. The City Council resolution included an expected value estimate for the assets involved in the operation of about €22 million. Such value has been subject to an adequacy test by the Italian tax authority (Agenzia delle Entrate), which has expressed its opinion that confirms the value indicated above. The real estate assets that will be transferred are already functional assets with respect to MM’s activities. The company currently pays a rent to the Municipality of Milan for the assets; the rent contract will end after the completion of the transfer process. The transfer process is currently ongoing and it is expected to be completed before within the first quarter of 2017. MM S.p.A. corporate rating In order to support its financial strategy, MM has selected the credit rating agencies Moody’s and S&P in order to obtain a rating assignment at the corporate level. On 10 May 2016, Moody’s assigned a Baa2 first-time issuer rating to MM with a stable outlook; on 13 December 2016, following the outlook change to negative from stable on the Italian government’s Baa2 debt rating and the outlook change of the City of Milan rating to negative from stable, Moody’s has assigned a negative outlook to MM rating (which is now Baa2, negative). On 10 May 2016, S&P has assigned a preliminary BBB- corporate credit rating to MM, with a stable outlook. Other IWS activities evolution Outside of the service perimeter defined by the Milan IWS Concession, the Issuer is currently managing some activities related to aqueduct plants and networks located in the Municipality of Corsico. The dimension of the activity is limited compared to the overall business of the Issuer, as it regards the aqueduct phase only and in 2014 and 2015 the billed water volumes are equal to less than 2% of the total billed volumes, for an yearly amount of about euro 900,000 in 2015 (source: MM internal accounting data). The activities related to the aqueduct of Corsico could be subject to a transfer of business, if required by the ATO Office of Milan and/or by the Municipality of Milan.

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KEY CONTRACTS AND CONCESSION

IWS Relevant resolutions and agreements for the IWS The Issuer has been entrusted with the management of the IWS for Milan, on the basis of the in-house providing mechanism (please see “Regulation—Water Business—In house providing mechanism and requirements”), according to the following resolutions:  Resolution of the City Council of Milan No. 47 of 26 July 2007 approving the plan of the "Optimal Territorial Area" (Ambito Territoriale Ottimale - "ATO") (the “ATO Plan”) for the 2007-2027 period and entrusting the Issuer with the management of the IWS for Milan until 2027;  Resolution No. 10/07 of 3 August 2007 of the ATO Office of Milan approving the ATO Plan for the 2007-2027 period;  Resolution No. 13/07 of 28 November 2007 of the ATO Office of Milan, entrusting the Issuer with the management of the IWS for Milan and approving the relevant draft IWS Concession;  on 28 November 2007 the ATO Office of Milan and the Issuer entered into the IWS Concession for Milan expiring on 2027 (the “Milan IWS Concession”);  Resolutions No. 14/2010 of 8 September 2010 and No. 49/2014 of 18 December 2014 of the ATO Office of Milan, updating the ATO Plan for Milan;  Resolution of the City Council of Milan No. 6/2015 of 19 March 2015, approving the updated ATO Plan, also pursuant to art. 48.3 of RL 26/2003, including an extension of the management of the IWS by the Issuer until 31 December 2037, as a result of an increase of the investment plan setting out the required works to be carried out (Programma degli Interventi – “Investment Plan”) and the need to ensure the economic and financial balance of the economic and financial plan (piano economico- finanziario - “PEF”);  Resolution No. 6/2015 of 26 June 2015 of the ATO Office of Milan, approving the updated ATO Plan and including an extension of the management of the IWS by the Issuer until 31 December 2037;  Resolution No. 14/2015 of 9 September 2015 of the ATO Office of Milan and Issuer’s Board resolution of 24 September 2015, whereby the parties agree on the extension of the concession term under the Milan IWS Concession until 31 December 2037;  amendment to the Milan IWS Concession, signed on 28 September 2015 between the ATO Office of Milan and the Issuer, extending the duration of the Milan IWS Concession until 31 December 2037 (the “First Amendment”);  Resolution No. 11/2016 of 30 May 2016 of the ATO Office of Milan, approving an addendum to the Milan IWS Concession in order to align such agreement with the provisions of the Standard IWS Concession (please see “Regulation—Water Business—The Standard IWS Concession” ) (the “Second Amendment”). The Second Amendment to the Milan IWS Concession is subject to the approval by the AEEGSI. Please note however that, pursuant to Resolution 656/2015/R/idr, the AEEGSI approval is only aimed at verifying its compliance with the Standard IWS Concession and, therefore, no other objections can be raised by the AEEGSI.

Milan IWS Concession Main provisions of Milan IWS Concession, as resulting from the First and Second Amendment, are the following: Object (art. 1 and 2) The Issuer must provide the IWS to the ATO of Milan. The IWS is exclusively granted to the Issuer and the area to be served by the Issuer may be extended/reduced in agreement between the ATO Office of Milan and the Issuer. Subcontracting (art. 4) The Issuer may not assign or subcontract, in whole or in part, the IWS under penalty of termination of the Milan IWS Concession, with the sole exception of the water treatment services executed prior to the execution

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of the Milan IWS Concession. The Issuer may assign to third parties only minor activities ancillary to the IWS and provided that such agreements are notified to the ATO Office of Milan. Issuer’s Obligations (art. 5 and 5 bis) The Issuer must:

i. comply with all national and regional laws and regulations (including those relating to public water sources and pollution), as well as with the technical requirements set out under the Milan IWS Concession and its specifications (Disciplinare Tecnico) as well as with the ATO Plan; ii. carry out the IWS pursuant to the quality, efficiency and effectiveness criteria set out under RL 26/2003 and according to safety, equality and solidarity principles; iii. ensure the functionality of the IWS and shall indemnify and keep harmless the ATO Office of Milan and the Municipality of Milan from any liability that may arise from the operation of the IWS; iv. comply with all labour laws and regulations as well as with all applicable social security and health and safety rules; v. cooperate with the ATO Office of Milan, in its quality of the ATO Office of Milan, and also with the Municipality of Milan itself to allow the latter to carry out its control and survey activities, and shall participate to the meetings of the technical committee set up by the ATO Office of Milan; vi. maintain and operate the lab for water analysis, ensuring adequate checks to water quality and monitoring of the water treatment plants; vii. achieve the quality, efficiency and accountability standards set out by AEEGSI regulations; viii. comply with the criteria and mechanics for the quantification of the Tariff (as defined below); ix. set out the customer service charter (Carta dei Servizi) in compliance with AEEGSI regulations; x. carry out the Investment Plan; xi. set up an adequate system to verify the correct operation of the IWS; xii. notify to the ATO Office of Milan any event that may affect the operation of the IWS; xiii. return to the ATO Office of Milan at the end of the concession term all works and equipment pertaining to the IWS in a good state of maintenance; xiv. provide the mandatory guarantees/warranties; xv. draft the financial statements in compliance with applicable law; xvi. continue with the operation of the IWS until a new operator is appointed, in compliance with AEEGSI regulations and with the specific provisions of the Milan IWS Concession; xvii. provide the ATO Office of Milan with all necessary notices and information.

Achieving and maintaining the economic and financial balance – procedure for rebalancing (art. 5 ter, 5 quarter, 5 quinquies, 5 sexies)

The parties agree to pursue and maintain the economic and financial balance of the Milan IWS Concession. If during a regulatory period extraordinary and unforeseeable circumstances occur which determine the alteration of the economic and financial balance of the Milan IWS Concession, the Issuer may send a motivated request to the ATO Office of Milan asking for a rebalance and identifying expressly the measures required to ensure the restoration of the balance and describing the circumstances that have determined the unbalancing.

In order to restore the original economic and financial balance, the following measures may be applied (in this order of preference):

i. revision of the Tariff, within the limitations set out by AEEGSI; ii. modification of the Investment Plan (this is to be done in such a way to allow that the minimum service levels as well as the satisfaction of clients demands are in any case guaranteed); iii. change to the perimeter of the concession or (to the extent allowed under the IWS Concession and applicable law) extension of the term of the Milan IWS Concession; iv. access to AEEGSI’s equalisation mechanisms; v. other measures as agreed by the parties.

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Please note that two or more of the above measures may be applied jointly.

The ATO Office of Milan assesses the Issuer’s request within 60 days of its receipt and notifies to AEEGSI its decision on the proposed rebalancing measures. Final approval is to be given by AEEGSI in order for such measures to be validly implemented within the following 180 days.

Assets and equipment for the IWS (art. 8, 9. 10 and 11) All assets and equipment necessary for the IWS are given in free concession of use (concessione d’uso gratuita) to the Issuer for the entire duration of the Milan IWS Concession. Please note that as (i) the Issuer does not have full title to such assets and equipment and (ii) the latter are devoted to a local public service of general interest, the Issuer may not create mortgages and other security interests over them, with the exception of the general lien (privilegio generale) pursuant to Art. 186 of the Public Contracts Code, which may be created only on movable assets (please see “Description of the Issuer—Financing”). The Issuer has received such assets and equipment and undertakes to maintain and update them in order to comply with all applicable technical and safety regulations. All assets are to be returned to the ATO Office of Milan (or to the new operator appointed by the latter) upon expiry or early termination of the Milan IWS Concession. Step-in by a new operator into the Milan IWS Concession (art. 12 and 12 bis) The ATO Office of Milan must start the procedure for the awarding of the Milan IWS Concession at least 18 months prior to its expiry and, in case of early termination, within 3 months from such event. The awarding to a new operator is notified to AEEGSI. With reference to the termination value due to the Issuer at the end of the concession period (including the case of early termination), the ATO Office of Milan calculates the termination value in accordance with AEEGSI’s regulation applicable from time to time relating to the Tariff calculation method (i.e. taking into account the regulatory asset base value of the assets not yet amortised at the time of the termination) – as proposed by the Issuer upon consultation with its financiers - which is then to be approved by AEEGSI. The termination value is to be paid by the new operator to the Issuer.

Upon payment of the termination value, the Issuer shall transfer to the new operator the infrastructures and equipment necessary for the carrying out of the IWS as identified by the ATO Office of Milan. The new operator, alternatively to the payment of the termination value (in whole or in part), may step into the obligations of the exiting operator within the limits and the provisions of art. 1406 of the Italian Civil Code (which regulates the replacement of a party to a contract). In addition, pursuant to art. 153.2 of the Environmental Code, the incoming operator may replace the Issuer in the obligations and guaranties pertaining to the finance arrangements relating to the financing of the IWS or to pay-back the outstanding debt, in accordance with the provisions thereunder. Failure by the new operator to pay the termination value within the due date shall determine that Issuer shall continue to manage the ordinary activities of the IWS through an extension of the term of the Milan IWS Concession until the end of the relevant current four-year regulatory period and in any case subject to the limitations set forth under applicable law. In such a case the guarantees provided by the new operator shall be enforced and a sanctioning procedure is started. During such interim period, the ATO Office of Milan may request to the Issuer to carry out investments only if they cannot be postponed and provided that the above request of the ATO Office of Milan sets out also the modalities for the Issuer to recover the relevant costs.

ATO Plan and Investment Plan (art. 15, 16 and 17)

The Issuer must comply with the terms and provisions under the ATO Plan, in order to guarantee the levels of service required by it and the economic and financial balance of the Milan IWS Concession.

In accordance with the ATO Plan, the ATO Office of Milan approves the Investment Plan for the Milan IWS Concession, having a four year duration coincident with the regulatory period, which the Issuer is bound to implement, for the purpose to determine the Tariff from time to time applicable according to the AEEGSI rules. The Investment Plan is drafted alongside the PEF in order to ensure that the conditions for the economic

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and financial balance of the Milan IWS Concession are clear and associated also to the investments that the Issuer must carry out.

Each year the ATO Office of Milan approves, upon input of the Issuer, a yearly operational plan (Piano Operativo Annuale– “POA”) which has the aim of implementing the Investment Plan. The Issuer must achieve the objectives set out by the ATO Plan and carry out the investments set out by the Investment Plan in accordance with the provisions of the POA.

Any works/activities that the Issuer wants to carry out that are not contained under the Investment Plan/ATO Plan must be approved in advance by the ATO Office of Milan.

At the beginning of each regulatory period the ATO Office of Milan shall update the Investment Plan, the PEF and the Milan IWS Concession. Also the ATO Plan is updated from time to time to ensure the effectiveness and quality of the services.

Tariff and Tariff revision mechanisms (art. 19 and 20)

The Issuer shall be entitled to receive and collect the Tariff by the clients of the IWS for the provision of the IWS, to be determined in compliance with art. 154 of the Environmental Code.

The Tariff is calculated in accordance with national laws and AEEGSI regulations in order to ensure full recovery of all investment costs (please see “Regulation—Water Business—IWS tariff”).

The ATO Office of Milan may apply penalties in case of non compliance with the minimum quality standards set out by AEEGSI Resolutions, including the contractual and contractual quality standard under Resolution No. 655/2015/R/idr (please see “Regulation—Other relevant AEEGSI Resolutions”).

The Tariff is updated for each regulatory period and may be subject to extraordinary updates in case the economic and financial balance of the Milan IWS Concession is prejudiced for a cause not attributable to the Issuer’s fault.

Term of the Milan IWS Concession (art. 33)

The Milan IWS Concession has a 30 year term starting from 1 January 2008 and ending on 31 December 2037.

Termination, withdrawal and revocation of the Milan IWS Concession (art. 34)

The Milan IWS Concession shall be terminated in case one of the following occurs:

i. full interruption of the aqueduct or water disposal systems for a period exceeding 3 consecutive days due to the severe negligence or wilful misconduct of the Issuer; ii. unauthorised assignment of the Milan IWS Concession; iii. unauthorised mergers, demergers or assignment of going concern by the Issuer; iv. failure to provide/integrate the guarantees/insurances required under the Milan IWS Concession.

The ATO Office of Milan may also terminate the Milan IWS Concession in case of severe negligence in the operation of the IWS or severe violation of the terms of the Milan IWS Concession. Occurring one of the above termination event, the ATO Office of Milan shall send to the Issuer a prior written notice granting an adequate cure period pursuant to art. 1454 of the Italian Civil Code, failing which without the default being cured by the Issuer, the ATO Office of Milan may terminate the Milan IWS Concession. In case of termination due to the Issuer’s fault, the ATO Office of Milan may enforce the guarantee provided by the Issuer and also claim all relevant damages (to the extent not covered by the guarantee).

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The ATO Office of Milan may withdraw from the Milan IWS Concession, by written motivated notice to the Issuer, in case one of the following occurs: i. change in law not compatible with the terms of the Milan IWS Concession or with any modification to the Milan IWS Concession; ii. supervened public interest reasons; iii. loss/reduction of the subjective, economic or financial requirements by the Issuer; iv. bankruptcy of the Issuer or admission to other bankruptcy procedures; v. liquidation of the Issuer.

Guarantee and Insurance (art. 35 and 36) Within 30 days of the execution of the Milan IWS Concession, the Issuer shall provide the ATO Office of Milan with a bank/insurance guarantee having an amount equal to 2% of the revenues of the Issuer relating to the operation of the IWS during the previous year. Such amount is to be updated every regulatory period based on the last available balance sheets of the Issuer. The Issuer shall integrate the guarantee within 15 days in case any amount is enforced by the ATO Office of Milan in connection with the application of penalties. The Issuer shall enter into an insurance policy to cover third party civil liability and to cover the assets and equipment of the IWS (also from natural disasters). Penalties (art. 37) In addition to any penalties and sanctions set out by national and regional laws, the Issuer shall also be subject to the following penalties (not applicable in case of force majeure events): i. in case of failure to achieve the technical and operational objectives set out by the technical specifications (disciplinare tecnico) and by the ATO Plan: a penalty between 0.5% and 2% of the yearly revenues (to be quantified based on how severe is the Issuer’s default); ii. in case of failure to achieve the quality objectives set out by the technical specifications (disciplinare tecnico) and by the ATO Plan: a penalty between Euro 10,000 and Euro 100,000 (to be quantified based on how severe is the Issuer’s default); iii. in case of failure to achieve the structural objectives set out by the technical specifications (disciplinare tecnico) and by the ATO Plan: a penalty between 0.1% and 1% of the IWS yearly revenues (to be quantified based on how severe is the Issuer’s default). In all cases of non compliance with the terms of the Milan IWS Concession as well as with the technical specifications (disciplinare tecnico), the ATO Office of Milan applies a sanction between Euro 10,000 and Euro 100,000 (to be quantified based on how severe is the Issuer’s default). All sanctions and penalties applied by the ATO Office of Milan to the Issuer are also notified to AEEGSI. Provisional substitution of the Issuer (art. 38) If the Issuer is unable to comply with the law or with the obligations arising from the Milan IWS Concession, thus compromising the water resource, the environment or if the minimum levels of service are not guaranteed, the ATO Office of Milan may take those measures necessary to ensure the compliance by the Issuer. In such cases a prior notice is sent to the Issuer giving a cure period to resolve the default, failing which the ATO Office of Milan may terminate, revoke or withdraw from the Milan IWS Concession and step in to ensure that the IWS is provided. Engineering Business Relevant resolutions and agreements for the Engineering Business The Issuer is entitled to carry out Engineering Business and technical and administrative activities for the Municipality of Milan according to an in-house providing scheme established with the Municipality (please see “Regulation—Water Business— Tariff calculation mechanisms”). Such Engineering Business is carried

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out by the Issuer according to the terms and conditions set out under a service contract entered into by the Municipality of Milan and the Issuer on 30 October 2009 and which shall expire on 2019 (the “Engineering Service Contract”), in compliance with the following Municipal Resolutions:

 Resolution of the Council of the Municipality of Milan No. 43 of 13 October 2008, which defined the guidelines for the Engineering Service Contract between the Municipality of Milan and the Issuer;

 Resolution of the Board of the Municipality of Milan No. 2365/2009 of 2 October 2009, approving the draft Engineering Service Contract between the Municipality of Milan and the Issuer. The Engineering Service Contract The main provisions of the Engineering Service Contract are the following: Object (Art. 3-7) The Engineering Service Contract is a general framework agreement to be activated upon specific requests pursuant to which the Municipality of Milan may assign, inter alia, to the Issuer the following activities:

 technical and administrative activities in relation to public contracts, analysis, studies, planning, environmental impact assessment, construction, maintenance, direction of the works and testing in the following areas: (i) railway public transportation, (ii) infrastructures relating to public and private transport, (iii) public parking and intermodal facilities, (iv) hydraulic works, (v) refurbishment and updating of facilities and equipment of the abovementioned infrastructures;  technical and administrative activities in relation to preliminary, definitive and executive designs, health and safety coordination, direction of works, testing, environmental impact assessment, geological surveys and expropriation activities, high surveillance on public works, support to the responsible officers as well as control over public expenditure/accounts relating to the carrying out of works;  operation of public infrastructures and works of public interest. The Municipality of Milan shall identify on an annual basis the activities for which the Issuer’s support is required, in compliance with the available economic resources specifically set aside for this purpose. Upon specific request of the Municipality of Milan, the Issuer shall prepare an executive plan as well as a timeframe schedule relating to the activities required to be submitted to the Municipality of Milan for its approval. In such a case, the relationships between the parties shall be regulated according to specific contract rules (disciplinare di affidamento) drafted in accordance with the Municipality of Milan standard form. Consideration (Art. 8) The services/activities assigned to the Issuer shall be compensated on a full cost recovery basis, also according to a fee calculated by applying a certain percentage to the value of the works which such services/activities pertain to. The percentage, which can range from 3% to 8%, varies depending on the value of the works (i.e. the percentage decreases as the value of the works increases). The above payment shall be made according to the progression of the activities to be performed in accordance with the specifications required. Termination and withdrawal (Art. 11) The Municipality of Milan may automatically terminate the Engineering Service Contract pursuant to Art. 1456 of the Italian Civil Code should one of the following events occur:

 bankruptcy, insolvency, liquidation or winding up of the Issuer;  severe and repeated default to comply with the undertakings of the obligations under the Engineering Service Contract;  unauthorised assignment of the Engineering Service Contract;  loss of the in-house providing requirements (please see “Regulation—Water Business—In house providing mechanism and requirements”).

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The Municipality of Milan may withdraw from the Engineering Service Contract as well as from any single assignment arising therefrom upon its exclusively discretion. In such a case, the Issuer shall only be entitled to receive compensation equal to the value of the activities duly carried out as of the withdrawal date. In case of termination/ withdrawal, the Issuer shall be bound to continue with the activities entrusted until its replacement by a new operator. Public Housing Relevant resolutions and agreements for the Public Housing Business The Issuer is entitled to carry out the Public Housing Business management activities pursuant to an in-house providing mechanism (please see “Regulation—Water Business—In house providing mechanism and requirements”). The Public Housing Business is carried out by the Issuer according to the terms and conditions set out under the Public Housing Service Contract, in compliance with the following Municipal Resolutions:

 Resolution of the Municipal Board of Milan No. 1953 of 3 October 2014, bestowing on the Issuer the provisional management of municipal public housing properties;

 Resolution of the Municipal Council of Milan No. 9 of 29 April 2015, which sets out the guidelines for the carrying out by the Issuer of the Public Housing Business on a 30-year basis according to article 42 subparagraph 2 letter e) of Legislative Decree No. 267/2000. The Public Housing Service Contract The main provisions of the Public Housing Service Contract are the following: Object and term (art. 1, 2, 6, 7, 8, 10 and 11) The Municipality of Milan assigns to the Issuer the operation and maintenance of the public housing facilities in the ownership of the Municipality of Milan (the “Public Buildings”) for a period of 30 years starting from 1 July 2015 (i.e. until 30 June 2045). The Issuer shall carry out in relation to the Public Buildings:

 property management activities (the “Property Management Activities”) which include, inter alia, managing the relationship with the tenants and third parties, management of the rental agreements, definition and calculation of the rents, recovery of unpaid rents, ensuring that no unauthorised use of the Public Building is allowed, coordination of the relationships with other owners of apartments/neighbours, issuing of the bills and collection of the rents, general surveillance and monitoring;

 facility management activities (the “Facility Management Activities”) which include, inter alia, the custody and surveillance activities by means of a superintendent, collection and disposal of the waste materials and trash, management of the heating systems and of the energy efficiency of the buildings, management and maintenance of the elevators, the gardens and of any equipment (electrical, heating, water). Extraordinary maintenance activities and services shall be specifically assigned to the Issuer on the basis of specific assignment contracts (Disciplinari di Incarico) and paid in accordance with the fees applicable under the Engineering Service Contract through the funding specifically allocated by the Municipality of Milan, also in accordance with the Triannual Plan of Public Works (Piano Triennale delle Opere Pubbliche). In addition, special projects may be assigned to the Issuer by the Municipality of Milan by means of separate agreements. All Property Management Activities and Facilities Management Activities shall be carried out in compliance with the terms, conditions and specifications set out under the customer service charter (Carta dei Servizi – “Service Charter”) which is to be approved by the Municipality of Milan and the Issuer and updated on a yearly basis. Consideration (Art. 16, 17, 18 and 19) The services/activities assigned to the Issuer shall be compensated as follows: 85

 a fixed fee of Euro 27 per month per single Public Building managed (plus VAT), such amount to be updated to take into account the ISTAT fluctuation;

 a variable amount, depending on whether the Issuer has met the KPI (as defined below) up to Euro 3 per month per single Public Building managed (plus VAT), such amount is to be updated to take into account the ISTAT fluctuation. The fees recognised to the Issuer shall also take into account the actual situation of the Public Buildings, depending if they are rented or not. In particular the following formulas are to be taken into account:

Type of Public Building Status

Rented Empty (or used without a regular contract)

Homes X 0.6X

Stores, offices, labs and other X 0.7X uses

Garage and car spaces 0.6X 0.3X

Where “X” = Euro 27 per month per single Public Building managed (plus VAT) – to quantify the fix portion of the fee, and “X” = up to a maximum of Euro 3 per month per single building managed (plus VAT), when calculating the variable portion of the fee. The Municipality of Milan approves every year the Key Performance Indicators (“KPI”) that will apply to the Issuer in connection with the performance of the Property Management Activities and Facility Management Activities. The expenses sustained by the Issuer in connection with the Property Management Activities and Facility Management Activities shall be reimbursed to the Issuer up to the amounts set aside by the Municipality of Milan in its financial statements. Termination and withdrawal (art. 26 and 27) In case of severe and reiterated failure by the Issuer to comply with the terms of the Public Housing Service Contract, the Municipality of Milan may notify to the Issuer a request to immediately comply within a specific cure period. Failure by the Issuer to comply or to provide adequate justifications allows the Municipality of Milan to terminate the Public Housing Service Contract. In such a case the Issuer must hand back to the Municipality of Milan all Public Buildings within 12 months of the termination. The Municipality of Milan may withdraw from the Public Housing Service Contract in case supervened public interest reasons arise. In such event the Issuer shall be entitled to the reimbursement of the costs sustained and to the payment of the fee for all activities already carried out up to the date of withdrawal. Asset Management The Amsa Contract The business segment manages real estate and other assets (together, the “assets”) which are involved in Milan municipal solid waste management. These assets have to be made available to the pro tempore concessionaire in charge of the waste management for Milan (the “Service”) (currently Amsa, a company of the group headed by A2A S.p.A.) through a rent contract. On 30 June 2014, MIR entered into a rent contract with Amsa (the “Amsa Contract”) and the Issuer became part of the Amsa Contract as a consequence of the merger with MIR S.r.l. on 1 January 2015. The main provisions of the Amsa Contract are the following: Object (Art. 2) Amsa rents the relevant assets (listed in an attachment to the Amsa Contract).

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Intended use (art. 3) Amsa shall use the rented assets only in connection with the Service unless otherwise specifically authorized by the Issuer. Amsa should obtain the previous authorization from the Issuer in order to let any third party to use the rented assets. Length (art. 4) The Amsa Contract will end on 30 June 2017 and will be renewed upon terms to be agreed from time to time for the entire duration of the Service. The Amsa Contract will end in case Amsa is no longer in charge of the Service. In any case, Amsa has the right to withdraw from the Amsa Contract by giving a three month notice, without any compensation to the Issuer. Fees (art. 5) The rental fee amounts to Euro 2,600,000 for the period from 1 January 2016 to 31 December 2016 and Euro 1,300,000 for the period from 1 January 2017 to 30 June 2017. Maintenance (art. 8) Amsa, shall provide, under its own responsibility and at its own expenses for the ordinary and extraordinary maintenance, renovation and restorations of the assets. Such maintenance will be regulated by an annual programme to be agreed between the parties. Upon termination of the Amsa Contract, the Issuer will reimburse Amsa for unamortised expenses (based on an amortization plan agreed between the Issuer and Amsa). Sublease (art. 12) Subject to the Issuer’s consent, Amsa may sublease, in whole or in part, the rented assets or partially transfer the Amsa Contract to the parent company or any other subsidiaries of the parent company. In such a case, Amsa will be jointly and severally liable for all the obligation deriving from the Amsa Contract toward the Issuer. Indemnity (art. 13) Amsa will indemnify the Issuer from and against any loss incurred by it in connection with any wilful or negligent act of Amsa or any of its employees.

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INTERCREDITOR ARRANGEMENTS The Issuer is expected to enter into an Intercreditor Agreement with (amongst others) the Security Agent and EIB (as creditor under the BEI Financing) on or around the Issue Date (all terms as defined in the Conditions). If and to the extent such Intercreditor Agreement is entered into, it will govern, among other things: (a) the ranking and enforcement of the Transaction Security, (b) the rights and obligations of the Security Agent, the Noteholders’ Representative, any creditor under the BEI Financing and (c) the enforcement actions that can be taken by the Security Agent in respect of any Security Interest created (or expressed to be created) under or in connection with the Security Documents. Pursuant to the terms of the Intercreditor Agreement, the Security Interest created (or expressed to be created) under or in connection with the Security Documents shall secure claims of the holders of the Notes and of any creditors under the BEI Financing pari passu and without any preference between them. It is expected that the Intercreditor Agreement will be governed by, and shall be construed in accordance with, Italian law.

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REGULATION

The principal legislative and regulatory measures applicable to Issuer's regulated business are summarised below. Although this overview contains the principal information that the Issuer considers material in the context of the issue of the Notes, it is not an exhaustive account of all applicable laws and regulations. Prospective investors and/or their advisers should make their own analysis of the legislation and regulations affecting the Issuer's and of the impact it may have on an investment in the Notes and should not rely on this overview only. Water Business The national and regional framework applicable to the IWS The IWS is the comprehensive public services that relate to water collection, uptake and distribution of water for civil uses as well as the disposal and treatment of sewage water. The IWS is a public service, which is to be managed in accordance with the general principles of efficiency and cost-effectiveness as well as in compliance with national and European legislation. The first comprehensive set of legal provisions enacted to regulate the water sector was contained in Law No. 36 of 5 January 1994 (the "Galli Law") which has then been reinstated by the Environmental Code under Part III, Section III, Title II, art. 147 and following. With specific reference to the regulation of IWS at a Regional level, the Lombardy Region has issued Regional Law n. 26 of 12 December 2003 (“RL 26/2003”), which sets out under article 47 and following the rules applicable to the water sector. The main objectives of national and regional laws include: (i) the appointment of a single operator for the management of the IWS within each ATO (as defined below); (ii) the identification of a tariff that allows the operator of the IWS to cover both the costs for the provision of the service and the cost to carry out the investments necessary to ensure an adequate level of service; and (iii) the separation of the competence for planning and control of the service from the management of the IWS. Pursuant to Law Decree No. 201 of 6 December 2011 (converted into Law by Law No. 214 of 22 December 2011) the AEEGSI is the regulator in charge, inter alia, of the regulation and surveillance of the IWS and the approval of the tariffs. Pursuant to art. 147 of the Environmental Code, the IWS is organised according to ATOs, which are defined at a Regional level. The local authorities that fall within the territory of the ATO must take part in EGA, which is in charge of: (i) the management of the IWS and of the relevant infrastructures; (ii) the approval of the ATO Plan; the awarding of the concession to manage the IWS (the “IWS Concession”); and (iii) the surveillance of the supply of the IWS. The ATO Plan is the main planning tool for the IWS as it defines the quality standards to be achieved, as well as the type of infrastructural works that are necessary to ensure that such standards are met, and it comprises: (i) the overview of the existing infrastructures; (ii) the Investment Plan; (iii) the organizational model and (iv) the PEF. The ATO Plan is also the main reference tool to determine the tariff applicable to the IWS and to set out the terms of the IWS Concession, as it forms an integral part of such agreements. Law Decree n. 133 of 12 September 2014 (the so-called “Sblocca Italia Decree”) has introduced some amendments to art. 172 of the Environmental Code, which now provides that: i. within 30 November 2015, the EGA must (if it hasn’t already done so) approve an ATO Plan, start the awarding procedure for the IWS and provide that the relevant concession is to be awarded to a single operator within the ATO (the “Operator”); ii. the Operator, once awarded with the IWS Concession, must step into the operation of the IWS for the whole ATO, replacing other existing operators as their concessions expire; iii. the Region may step in and start the procedures for the award of the IWS Concession if the EGA fails to do so. If also the Region fails to start such procedures the AEEGSI may notify the Prime Minister and request the appointment of a commissioner to be put in charge of such procedure; iv. upon expiry of the IWS Concession, according to the terms and conditions therein specified, the IWS infrastructures and equipment of the exiting Operator shall be transferred into the ownership of the relevant local authorities.

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Pursuant to art. 48 of RL 26/2003, the Region has identified the Provinces and the Metropolitan City of Milan as the EGA and has bestowed upon them the functions that had previously been exercised by the ATO authority (Autorità d’Ambito), which have been unwound. The Provinces and the Metropolitan City of Milan have set up specific ATO Offices (Uffici d’Ambito) to carry out the activities necessary to award IWS Concessions, approve the ATO Plan and quantify and approve the applicable tariffs in compliance with the relevant regulation (please see paragraph below). Art. 49 of RL 26/2003 clarifies that the EGA must choose the procedure for the awarding of the IWS Concession from the three options set out under Art. 149 bis of the Environmental Code. The procedure for the awarding of the IWS Concession Art. 149-bis of the Environmental Code sets out the rules for the awarding of IWS Concessions to a sole Operator and specifies that one of the following three alternative procedures are available: i. awarding to a private Operator, though a public tender procedure, in compliance with the EU Treaty principles; ii. awarding to a public-private company (società mista) – using a PPP scheme – after having carried out a tender procedure with a double object aimed at the identification of the private shareholder and the grant of the concession to such company; iii. direct award to a public company through the “in-house providing” mechanism, if the relevant conditions are met (please see paragraph below). In house providing mechanism and requirements Pursuant to art. 149-bis of the Environmental Code and art. 5 of Legislative Decree n. 50/2016 (the “Public Contracts Code”), the direct award of a concession agreement to an “in-house” company, under the control of one or more public entities, may occur provided that the following conditions are met: a) there is no direct shareholding of private companies (or other private entities) in the in-house company; b) more than 80% of the activities of the in-house company must relate to the performance of tasks entrusted to it by the relevant public entities; c) the relevant public entities must exercise over the in-house company a control similar to that exercised over their own internal departments, pursuant to which both strategic objectives and significant decisions of the in-house company are subject to the decisive influence of the public entities. IWS tariff Pursuant to art. 154 of the Environmental Code, the consideration to be paid to the Operator for managing the IWS is a tariff, which is to be quantified by the EGA and approved by the AEEGSI, in accordance with the AEEGSI regulations described below (the “Tariff”). The Tariff is to be calculated taking into account the quality of the service provided, the amount of works necessary to provide such services, the management costs relating to the infrastructures, the operation costs as well as the costs in connection with the ATO Offices, in order to ensure the full coverage of all investment and operation costs. Tariff calculation mechanisms Up to the year 2012 the Tariff was calculated according to the provisions set out pursuant to Ministerial Decree 1 august 1996. By Resolution No. 585/2012/R/idr, AEEGSI approved a new tariff calculation method, which was intended as a temporary method to be applied only during as a “transitory period” for the years 2012 and 2013 (the so called, temporary transitional method: Metodo Tariffario Transitorio - “MTT”). The MTT was characterised by the application of the same tariff structure applied in 2012 (calculated using updated data to ensure that the revenues were recognised on the basis of the new methodology) multiplied by a “teta” factor which had been quantified through a complex mechanism by AEEGSI and EGA. According to information publicly available, the MTT has been challenged, among other things, before the Administrative Court of Lombardia (TAR Lombardia) by certain consumers’ associations for alleged violation

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of the principle of full recovery cost, which is provided - among other things - under Directive 2000/60/EC and Art. 154 of the Environmental Code. With the decisions no. 00780/2014 and no. 00779/2014 the Administrative Court of Lombardia has rejected the request of the consumers’ associations and it has established that the MTT complies with the full recovery cost criteria. The above consumers’ associations have challenged the decisions of the Administrative Court of Lombardia before the Administrative Court of Appeal (Consiglio di Stato) (registration procedure no. 05890/2014 and no. 05940/2014). The Administrative Court of Appeal has requested a technical expert opinion regarding the formulas and parameters under the MTT, in order to verify whether the tariff item which covers the financing costs is actually based on the principle of full cost recovery or not. The technical report has been provided and on December 15, 2016 a public hearing has been held before the Administrative Court of Appeal which is now expected to issue its decision. In this respect, please note that since such pending proceedings refer only to the MTT, in principle they do not directly affect the successive tariff calculation methods (i.e. MTI-1 and MTI-2).

By Resolution No. 643/2013/R/idr, AEEGSI approved the tariff calculation mechanism which applies to the years 2014 and 2015 (the water tariff method: Metodo Tariffario Idrico - “MTI-1”). Article 2 of Resolution No. 643/2013/R/idr defines the following service costs as components for determining the Tariff: • investments costs, including loans, taxes and depreciation charges; • operating costs, including costs related to the electricity, wholesale supplies, costs related to the loans and other various components; • any additional advance payment for new investments; • environmental costs and of resource; and • component relating to previous years balancing. The MTI-1 provides that the Tariff for the years 2014 and 2015 is calculated by taking the value of the Tariff relating to the year 2012, multiplied for the value “Teta (2014)” or “Teta (2015)”, which is a coefficient approved by AEEGSI. Finally, by Resolution No 664/2015/idr, AEEGSI approved the tariff calculation method for the second regulatory period going from 2016 until 2019 (Metodo Tariffario Idrico per il Secondo Periodo Regolatorio - “MTI-2”). Pursuant to art. 1 of such resolution, the Tariff for the IWS includes the fees relating to the aqueduct, sewer and waste-water purification services. According to MTI-2, the EGA must identify the new Tariff (which shall then be approved by the AEEGSI) and update, within 30 April 2016, the following documents: (i) the Investment Plan; (ii) the PEF; and (iii) the IWS Concession, in order to take into account the integrations and amendments to the regulatory framework introduced with MTI-2. The MTI-2 provides for six different regulatory schemes to be applied in order to determine the Tariff. Each EGA choses the relevant applicable scheme depending on the relevant infrastructure needs (i.e. capex) relating to that particular ATO. The regulatory schemes and the yearly price cap values are synthetically described in the following table:

Opex / Population Opex / Population Consolidation of Variables discontinuity for < 109 €/inhabitant per > 109 €/inhabitant per systemic changes year year

Scheme I Scheme II Scheme III Expected Tariff Increase Cap Tariff Increase Cap Tariff Increase Cap 2016-2019 Capex 6,0% 5,5% 6,5% < 50% RAB

Expected Scheme IV Scheme V Scheme VI 2016-2019 Capex > 50% RAB Tariff Increase Cap Tariff Increase Cap Tariff Increase Cap

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8,5% 8,0% 9,0%

Possibility to include in Possibility to include in Possibility to include in FoNI4 a portion of new FoNI a portion of new FoNI a portion of new expected investments expected investments expected investments

As far as the Issuer is concerned, by Resolutions No. 538/2014/R/idr and No. 272/2016/R/idr, AEEGSI approved the Tariff relating to the ATO of Milan, respectively, for the MTI-1 and the MTI-2 regulatory periods (i.e. 2014-2015 and 2016-2019). In particular, the Tariff for the second regulatory period 2016-2019 has been prepared by the ATO Office of Milan in accordance with the fourth regulatory scheme, which implies the existence of huge investment needs to be carried out during the years 2016-2019 under the Investment Plan, as better explained in the following paragraph. The Tariff, to be considered as the fee applicable to the end-users, is divided in the following components:

 a fixed amount (applied independently from the actual water consumption);  a variable amount, depending on the actual water consumption;  the sewage and purification fee, similarly depending on the actual water consumption; and  an amount destined to finance investments in the sewage and purification network under the ATO Plan. The Issuer’s Investment Plan The Issuer’s Investment Plan, as determined by the ATO Office of Milan and approved by the AEEGSI within the MTI-2 procedure for the approval of the Tariff relating to the ATO of Milan, evidences a significant need to carry out investments (i.e. capex), mainly related to the oldness and obsolescence of the existing IWS network, which requires the implementation of a widespread substitution and extraordinary maintenance program. In particular, the Issuer’s Investment Plan envisages investment actions and interventions to be carried out throughout the second regulatory period 2016-2019 for an overall amount of Euro 199 million (including some capex planned for the years 2014-2015 for an amount of 10.5 million, which have been delayed for the reasons mainly attributable to the organisation of the EXPO 2015 event), distributed as follows:

 Euro 101 million (equal to 52% of the total capex) relating to the aqueduct sector;  Euro 62.5 million (equal to 31% of the total capex) relating to the sewage sector;  Euro 24.5 million (equal to 12% of the total capex) relating to the purification and water treatment sector;  Euro 10.5 million (equal to 5% of the total capex) relating to interventions on other IWS related goods. Please note that, as described in paragraph above, the Tariff is determined by the AEEGSI taking into account the investments to be carried out by the Issuer under its Investment Plan, so as to ensure the economic and financial balance under the PEF and, prospectively, throughout the whole IWS Concession duration. Therefore, pursuant to Art. 11.1 of No. 272/2016/R/idr, AEEGSI is entitled to verify that the investments envisaged under the Investment Plan are actually carried out by the Issuer and, in case of failure, to take the correspondent measures on the Tariff. Whilst the Issuer’s Investment Plan has been approved by the AEEGSI with particular reference to the second regulatory period 2016-2019 in order to determine the Tariff, the global Issuer’s Investment Plan comprises the overall IWS Concession duration until 2037. With reference to this wider perspective, the Issuer’s Investment Plan, as defined in the update of ATO Plan approved in 2015, evidences investments to be carried out for the period going from 2014 to 2037 equal to Euro 890 million (which, of course, encompass those mentioned above related to the second regulatory period 2016-2019), distributed as follows:

4 The FoNi is the New Investments Fund (Fondo Nuovi Investimenti), fed through a specific component (FNI – i.e. the component applied as an anticipation for the financing of new investments) of the Tariff. 92

 Euro 400 million relating to the aqueduct sector;  Euro 350 million relating to the sewage sector;  Euro 130 million relating to the purification and water treatment sector;  Euro 13 million relating to interventions on other IWS related goods. The Issuer’s Investment Plan, defined in the update of the ATO Plan, approved in 2015, evidences investments to be carried out for the period going from 2016 to 2037 equal to Euro 800 million.

The Milan IWS Concession PEF The PEF attached to the update of the ATO Plan for the Milan IWS Concession, approved in 2015, covers the period from 2015 until 2037 (i.e. the expiry term of the Milan IWS Concession) and is based on the Investment Plan and the relevant timeframe envisaged for its implementation (i.e. capex), whilst no additional operating costs have been envisaged as a result of the realisation of new IWS related infrastructures. The PEF is based on a full recovery cost principle applied on an annual basis. The aforementioned PEF envisages (i) the FoNI as a relevant source of funding for new investments, and (ii) the residual source of financing for new investments stemming from long term financing, in line with total ATO Plan duration. The economic and financial perspectives included in the PEF attached to the ATO Plan, in line with AEEGSI principle, consider an inflation rate of 0% and a deflator of 1.0 after 2016, as the actual values will be defined from time to time within the tariff method documents and plans calculated for each regulatory period. On the basis of these assumptions, the PEF attached to the update of the ATO Plan, approved in 2015, shows that the revenue cap of the Issuer (vincolo ai ricavi del gestore – VRG) starts from Euro 141 million in the year 2015 and shall increase to about Euro 171 million in the year 2037. The higher increase is expected in the years 2015-2024, as a consequence of the bulk of the investments to be carried out during that period. The above Tariff evolution, which has to be updated periodically according to each regulatory period defined by AEEGSI, is due to the need to gather the necessary resources to carry out the investments, which have been mainly planned during the first ten years, under the Issuer’s Investment Plan. Thereafter, the PEF attached to the ATO Plan update forecasts that the amortisation of the investments shall allow a stabilisation of the Tariff. The Standard IWS Concession By Resolution 656/2015/R/idr, AEEGSI approved the general terms of the standard IWS Concession (Convenzione Tipo) which includes the minimum contents that a IWS Concession must have (the “Standard IWS Concession”). The most relevant provisions of the Standard IWS Concession pertain to the economic and financial aspects of the IWS Concession as well as to the termination value due upon expiry/termination of the concession and can be summarised as follows: i. instruments for the maintenance of the economic and financial balance of the IWS Concession: if during the relevant regulatory period extraordinary and unforeseeable circumstances occur which determine the alteration of the economic balance of the IWS Concession, the Operator may send a motivated request to the EGA in order to ask for the implementation of adequate measures to restore such balance. In particular the following measures may be applied (in this order of preference): (a) revision of the Tariff, within the limitations set out by AEEGSI; (b) modification of the Investment Plan (this is to be done in such a way that the minimum service levels are to be in any case guaranteed as well as the satisfaction of the client’s demands); (c) change to the perimeter of the concession or (to the extent allowed under the IWS Concession and applicable law) extension of the term of the IWS Concession; (d) access to AEEGSI’s equalisation mechanisms; (e) other measures as agreed by the parties. Two or more of the above may also be applied jointly. EGA assesses the Operator’s request and notifies to AEEGSI its decision and proposed rebalancing measures. Final approval is to be given by AEEGSI in order for such measures to be validly implemented; ii. step-in by a new Operator into the IWS Concession: the EGA must start the procedure for the awarding of the IWS Concession at least 18 months prior to its expiry and, in case of early termination, within 3 months from such event. The awarding to a new Operator is notified to AEEGSI; 93

iii. termination value due to the exiting Operator at the end of the concession period (including the case of early termination): the EGA calculates the termination value – as proposed by the exiting Operator upon consultation with its financiers - which is then to be approved by AEEGSI. The termination value is to be paid by the new Operator to the exiting Operator. Upon payment of the termination value, the exiting Operator shall transfer to the new Operator the infrastructures and equipment necessary for the carrying out of the IWS as identified by the EGA. The new Operator, alternatively to the payment of the termination value (in whole or in part), may step into the obligations of the exiting Operator within the limits and the provisions of art. 1406 of the Italian Civil Code (which regulates the replacement of a party to a contract). In addition, pursuant to art. 153.2 of the Environmental Code, the incoming Operator may replace to exiting Operator in the obligations and guaranties pertaining to the finance arrangements relating to the financing of the IWS or to pay-back the outstanding debt, in accordance with the provisions thereunder . Failure by the new Operator to pay the termination value within the due date shall determine that the exiting Operator shall continue to manage the ordinary activities of the IWS through an extension of the term of the IWS Concession until the relevant current end of the four-year regulatory period and in any case subject to limitations set forth under applicable law. During such interim period, the EGA may request to the existing Operator to carry out investments only if they cannot be postponed and provided that the above EGA’s request sets out also the modalities for the Operator to recover the relevant costs. In such a case the guarantees provided by the new Operator shall be enforced and a sanctioning procedure is started. Other relevant AEEGSI Resolutions Contractual quality On December 23rd 2015, the AEEGSI has approved the Resolution No. 655/2015/R/idr (“Resolution 655”), which disciplines the contractual quality regulation of IWS or of each of the single services which compose it (“RQSII”). The RQSII discipline includes:

 Indicators and procedures for the start and the termination of the contractual relationship;

 Indicators and conditions for contractual relationship management;

 Procedures for customer charging, billing, payment and instalments;

 Discipline of complaints, written information requests and billing adjustment management;

 Front office management;

 Phone services quality;

 Indicators and procedure for contractual quality requirements in case of application of Article No. 156 of the Environmental Code (i.e. presence of multiple operators);

 Specific and general levels of contractual quality of IWS;

 Automatic compensations;

 Communication and registration obligations;

 Data verification discipline. The first implementation of RQSII regulation discipline starts from July 1st 2016, with the exception of Articles 72.2 (specific increases to quality standard automatic compensations), Article 77 (Communication to AEEGSI and local territorial authority, information and data publications) and Title VII (phone services), which will apply for MM since January 1st 2017. While most of the contractual standards requirements were already included in the customer service charters of many operators, including MM’s, the RQSII sets for the first time a national minimum quality standard level and defines an integrated compensation system for the sector.

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In particular, Title IX of Annex A to Resolution 655 identifies several obligations which constitute specific and general contract quality standards for the IWS, setting out terms and conditions for the implementation of such obligations by each IWS operator. Specific percentages and timing for reaching such contract quality standards are also provided. In case of failure to comply with the specific contract quality standards for reasons attributable to the IWS operator, Title X of Annex A to Resolution 655 provides for automatic compensation due by the IWS operator to the end-user equal to Euro 30 to be deducted from the next invoice. Since January 1st 2017, such automatic compensation could increase up to three times in case final compliance by the IWS operator occurs in a timing exceeding three times the standard required under Resolution 655. Each EGA may define additional and differentiated specific or general contract quality standards, save for the application of those generally set out by AEEGSI under Resolution 655. In addition, EGAs may also provide for higher automatic compensations. Table 6 of Annex A Resolution 655, summarises the specific and general contract quality standards to be taken into account specifying, for each of them, (i) classification, (ii) standards required, (iii) timing for the implementation and (iv) amount/modalities for calculation of the automatic compensations. Both the specific and general contract quality standards must be uploaded in the IWS operator’s database and relevant data on their actual implementation must be made available and communicated to the EGA, AEEGSI and end-users, also in order to allow the carrying out of the monitoring activities by the EGA and AEEGSI. Pursuant to Title XII of Annex A to Resolution 655, the AEEGSI may carry out specific surveys on the above data, communicating to the IWS operator the year which shall be monitored, starting from the year 2017. In case violations/non-compliance are detected by the AEEGSI as a result of the monitoring activities, penalties as defined in Article 89 and 90 of Annex A may be applied for each non-compliance/major violations, as the case may be. The AEEGSI reserves the right to carry out further inspections and spot checks, additional to those defined in Title XII of Annex A to Resolution 655, to verify the veracity of all data and information reported by the operators for the purpose to comply with the provisions of RQSII. In addition to the above penalties, should the IWS operator fail to comply with the above general contract quality standards for two consecutive years, such violation may cause the start of a sanctioning process by the AEEGSI pursuant to Art. 2.20 lett. c) of Law No. 481/1995. In particular, such piece of legislation provides for monetary sanctions ranging from Euro 2,500 up to Euro 154,937,069.73 depending on the seriousness of the breach. In case of repeated violations, which may prejudice the regular provision of the IWS to the end-users, the AEEGSI may also suspend the IWS activity for a period up to six months or propose the termination of the relevant concession agreement. Accounting unbundling On March 24th 2016, the AEEGSI has approved the resolution No. 137/2016/R/com (and in particular Annex A thereto – “Testo integrato delle disposizioni dell’autorità per l’energia elettrica il gas e il Sistema idrico in merito agli obblighi di separazione contabile (unbundling contabile) per le imprese operanti nei settori dell’energia elettrica, del gas e per i gestori del servizio idrico integrato e relative obbigli di comunicazione” – “TIUC”), which disciplines the accounting unbundling discipline for the IWS, on the basis of previously developed unbundling schemes which have been implemented for the electricity and gas sectors. The TIUC, with reference to the unbundling scheme applicable to the IWS defines three main categories:

 main activities (the “Activities” or “Activity” – which are single operational phases that could be managed as a stand-alone entity);

 Operating shared functions (“OSF”, which provide technical services for at least two of the Activities);

 Common services (“CS”, logic-organisational units which provide centralised general services for the whole company or group). The Main Activities identified in connection with IWS are:

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 Aqueduct;

 Sewage;

 Purification;

 Other water activities, which include all the water activities not included in IWS;

 Other activities, which includes the residual activities of the company, The unbundling scheme provides that economic and financial accounts relating to OSF and CS are to be allocated to each Activity according to specific drivers defined by AEEGSI, with the consequent drafting of separate annual accounts. AEEGSI resolution No. 137/2016/R/com also provides for two separate regimes: an ordinary and a simplified regime, which differ in terms of the volumes and types of information that the specific IWS operator is bound to comply with. The Issuer falls under the category of entities bound to implement the ordinary regime set out under the TIUC. The ordinary regime requires that the unbundling process include a further break-up of Activities account into a more detailed level of components, defined by Article 6 of Annex A, called “Comparti”. The subdivision into Comparti is applied according to the following table:

Activities Comparti

Aqueduct Catchment (i.e. water provisioning)

Adduction

Water treatment

Distribution

Aqueduct metering

Sewage Black and mixed wastewater

White wastewater

Sewage metering

Purification Purification

Other water activities Other water activities, different from Aqueduct, Sewage and Purification included in IWS

Collection for third parties (“Riscossione”)

Other activities Other activities

The provisions under the TIUC apply starting from the first fiscal year that opens after 31 December 2015, which for the Issuer is the year 2016. Pursuant to art. 1.2 of AEEGSI resolution No. 137/2016/R/com, for IWS operators that do not operate in the electricity and gas sectors, for which the ordinary regime applies – like the Issuer – with reference to the years 2016 and 2017, they may choose to implement the simplified regime instead of the ordinary regime. Please note that, in case of non-compliance with the unbundling rules under the TIUC, AEEGSI may start the sanctioning process pursuant to Art. 2.20 lett. c) of Law No. 481/1995. In particular, such piece of legislation provides for monetary sanctions depending on the seriousness of the breach. In case of repeated violations, which may prejudice the regular provision of the IWS to the end-users, the AEEGSI may also suspend the IWS activity for a period up to six months or propose the termination of the relevant concession agreement.

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Furthermore, pursuant to Article 30.15 of TIUC the “Cassa per i servizi energetici ed ambientali” may suspend grants to beneficiaries until they provide the separate annual accounts, according to the provisions of the TIUC. The suspension does not include grants for which the beneficiary is considered as a mere intermediary of sums not intended to him. So far, the above-described unbundling rules are still to be implemented by the Issuer. Engineering Business and Public Housing Business The Engineering Business and the Public Housing Business have been awarded to the Issuer in compliance with the in-house providing mechanism described above. Environmental regulation The Issuer is subject to a broad range of environmental laws and regulations both in Italy and the European Union, including those governing the discharge of pollutants into the air or water, the uses, transport, storage, processing, discharge, management and disposal of hazardous substances and wastes and the responsibility to investigate and clean-up contaminated sites that are or were owned, leased, operated or used by the Issuer. Such laws and regulations impose increasingly stringent environmental obligations regarding, among other things, zoning, the protection of employees and health and safety. The Issuer’s objective is to comply in all material respects, and believes that its operations generally are in material compliance, with applicable environmental and health control laws and regulations, and all related permit requirements. Responsibility for contamination The main piece of EU legislation dealing with environmental liability in respect of damage to site conditions is Directive 2004/35/CE on environmental liability with regard to the prevention and remediation of environmental damage ("Environmental Liability Directive"), which establishes a framework based on the "polluter pays" principle to prevent and remedy environmental damage. The "polluter pays" principle is set out in the Article 191(2) of the Treaty on the Functioning of the European Union. As the Environmental Liability Directive deals with the "pure ecological damage", it is based on the powers and duties of public authorities ("administrative approach") as distinct from a civil liability system for "traditional damage" (damage to property, economic loss, personal injury). The Environmental Liability Directive has been implemented in Italy by the Environmental Code, pursuant to which the polluter is legally responsible to prevent and remedy any environmental damage caused by its activities. As a result, any costs for remediation of a site must be borne by the polluter, while the landowner or any other person who is not responsible for the pollution cannot be required to carry out, or bear liability, for any clean-up activity. Under the Environmental Code, for liability purposes the actual polluter is the person responsible for the activity which caused the pollution, regardless of whether he holds any interest in the land which has been polluted. Therefore, if an action by a third party caused pollution without the owner or user of the affected land being aware of that activity, or being able to prevent the activity, that owner or user cannot be held responsible (Article 245.1 of the Environmental Code). Remediation may only be carried out by the competent public authority if the person responsible for contamination cannot be identified or is unable to perform the clean-up (for example, as a result of its corporate insolvency). The competent authority may not direct the current owner or user of the affected land to carry out any remediation work, if that owner or user is not responsible for the contamination; however, in certain circumstances the authority may nevertheless expropriate the land as compensation for its remediation costs. As an alternative, to avoid such scenario, a landowner may carry out any required remediation itself and subsequently seek reimbursement from the polluter under Italian civil laws. With respect to any remediation required in the execution of public works, if the contamination has not been caused by the contractor but is pre-existing on the site, the contractor is entitled to request a variation, and, to the extent applicable, a rebalancing of the economic and financial plan underlying the relevant contract. On the other hand, to the extent that pollution has been caused by the activities of that contractor, or is attributable to its sub-contractors, the contractor must bear the costs of remediation. Health and safety In compliance with Italian, regional and EU laws and regulations, the Issuer has implemented health and safety rules that are applicable to all its operations. 97

In particular, Legislative Decree No. 81/08 (Consolidated Act on occupational health and safety protection at workplaces, implementing, inter alia, Directives 89/391/ECC, 89/654/ECC, 89/655/ECC, 89/656/ECC, 90/269/EC, 90/270/ECC, 90/394/ECC, 90/679/ECC, 93/88/ECC, 95/63/ECC, 97/42/ECC, 98/24/ECC, 99/38/ECC, 99/92/ECC, 2001/45/ECC, 2003/10/ECC, 2004/40/ECC as well as 92/57/EEC on temporary or mobile construction sites) sets out health and safety requirements at workplaces as well as at temporary or mobile construction sites ("LD 81/08"). Under Article 2 of LD 81/08, the Issuer, as employer, is the subject who retains the responsibility to organize the activities to be carried out at the workplace, having the relevant decision and spending powers. Furthermore, in case construction works are to be carried out (also as a result of the implementation of the Investment Plan), Title IV of LD 81/08 (Articles 88 – 160) sets out specific health and safety requirements to be complied with in case works are carried out at temporary or mobile construction sites. To this end, Article 89.1.a) of LD 81/08 defines as construction site any site where building works or civil engineering activities (as listed in Annex X) are carried out. In its turn, Annex X provides a very broad list of activities that are to be regarded as building works or civil engineering. Under Article 89.1.b) of LD 81/08, the subject who bears the overall liability for health and safety compliance at construction sites is the client, identified as the subject on behalf of which the works are carried out, independently from any fragmentation of their realization. In light of the above, the Issuer – in addition to its obligation as employer - is also to be deemed as client for the purpose of application of Article 89.1.b) of LD 81/08 in relation to the carrying out of the works provided under the Investment Plan. Furthermore, the Issuer may entrust with specific health and safety burdens in the context of the carrying out of the Engineering Business (see “Description of the Issuer - Engineering Business”). In order to specifically address the above risks relating to health and safety burdens connected with the different segments of its activities, the Issuer has enacted specific quality standards in compliance with those set out under the OHSAS 18001 (Occupational Health and Safety Assessment Series). In addition, periodic audits are put in place in order to monitor the effectiveness of the implemented system as well as to promptly put in practice any improvement which may be required. Furthermore, the OHSAS 18001 system implemented by the Issuer is able to constitute an adequate Model under the Decree 231/2001 for the purpose of preventing its liability as a result of the perpetration of crimes related to breach of health and safety burdens (see “Risk Factors - Risk relating to any breaches of the organisation and management model”). Public procurement and Traceability regime pursuant to Law No. 136/2010 (to the extent applicable) Given to its status as in-house company, the Issuer is to be regarded as a public authority/public entity for the purpose of application of the Public Contracts Code (see “Description of the Issuer—Issuer’s Businesses”). In light of the above, the Issuer must comply with the public procurement rules under the Public Contracts Code when contracting out to third parties works, supply and services contract. Furthermore, the Issuer is also subject to specific obligations to ensure traceability of any financial flows relating to the activities necessary for the carrying out of its activities. In particular, in order to ensure full traceability of any financial flows and to prevent criminal infiltrations, Article 3 of Law No. 136/2010 (the “Law 136/10”) provides that all contractors, sub-contractors and concessionaires in relation to public works, services or supplies must use dedicated bank accounts to receive and/or make any payments relating to the performance of the activities under the relevant public contract. Furthermore, all such sums must be moved by wire transfers (which are traced and registered on the bank account) and include the tender identification code (codice identificativo gara - CIG) identified by the relevant awarding authority. In light of the above, the traceability regime shall apply to any payment made by the Municipality to the Issuer in connection with the execution of the activity performed by the Issuer in favour/on behalf of the Municipality. Furthermore, the Issuer must also ensure that any contracts and sub-contracts in connection with the relevant works, supplies or services include a provision requiring all sub-contractors, contractors and suppliers to comply with the obligations under Law 136/10. Any contracts entered into after the date that Law 136/10 came into effect that do not include such a provision will be deemed retroactively void.

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Pursuant to Article 6.2 of Law Decree 187/2010 (as amended by Law 217/2010), contracts concluded before 7 September 2010 must be updated to include traceability obligations before 16 June 2011. However, pursuant to Article 1339 of the Italian Civil Code, any contracts that have not been updated accordingly will be deemed to automatically include such obligations. New consolidated act on companies in which public entities have a shareholding (so-called “Madia Decree”)

Legislative Decree 19 August 2016 no. 175 introduces a consolidated act regulating companies with public shareholders (Testo unico in materia di società a partecipazione pubblica - “Madia Decree”). The Madia Decree has been published on the Italian Official Gazette (Gazzetta Ufficiale) on 8 September 2016 and has entered into force from 23 September 2016.

According to article 1, paragraph 5 of the Madia Decree, the same decree does not apply to “listed companies” (as defined under article 2, letter p)), save where expressly provided. Such definition of “listed companies” includes, among other things, also companies with public shareholders that have issued financial instruments listed on regulated markets, on or before 31 December 2015.

In this respect please also note that article 26, paragraph 5 of the Madia Decree provides that in the 12 months following the entry into force of the Madia Decree (i.e. until September 2017) such decree does not apply to companies with public shareholders which, within 30 June 2016, have adopted deeds which are aimed at issuing financial instruments (other than shares) to be listed on regulated markets. The aforesaid deeds are communicated by the issuer to the Court of Auditors (Corte dei Conti) within 60 days form the entry into force of such decree. In case the listing procedure is concluded by the aforesaid term of 12 months, the Madia Decree continues not to apply to the issuer.

In light of the above, the Issuer believes that, according to article 26,paragraph 5 of the Madia Decree, it may be substantially assimilated to listed companies for the purpose of the Madia Decree and, therefore, it believes that it is excluded from the application of the provisions under the Madia Decree, having adopted deeds aimed at issuing the Notes before the abovementioned term of 30 June 2016. Thus, consistently with article 26, paragraph 5 of the Madia Decree, within the 60-day term provided therein, the Issuer has notified to the Court of Auditors (Corte dei Conti) the deeds aimed at issuing the Notes which have been adopted before the entry into force of the Madia Decree and which are described under Section “Description of the Issuer - IWS Financial Strategy” above. Without prejudice to the above, for the sake of completeness please find below a brief description of the main provisions of the Madia Decree, which apply to the companies with public shareholders outside the scope of article 26, paragraph 5 of the Madia Decree. The Madia Decree provides a consolidated regulation with reference to the incorporation of companies by public entities as well as the acquisition, the maintenance and the management of the stakes in companies which are, totally or partially, directly or indirectly, owned by public entities.

More in details, the Madia Decree provides a list of the corporate purposes for which a company with public shareholders can be incorporated and maintained (which includes, among other things, also the realization and management of public works and/or the organization and management of a general-interest services). Moreover, the Madia Decree provides, among other things, certain general principles on the organization and management of companies with public shareholders as well as specific rules, limitations and restrictions for the incorporation, acquisition, management and sale of such type of companies. The Madia Decree also contains provisions relating to corporate bodies, including on their responsibility, remunerations and control. Furthermore, specific rules are provided both for in-house companies and public-private companies (società miste).

With reference to the listing of a public-controlled company on the regulated markets, article 18 of the Madia Decree provides that companies which are controlled by public entities can list their shares or other financial instruments (e.g. notes) on regulated markets following a decision of the competent corporate body to be adopted pursuant to article 5, paragraph 1, which provides for the relevant deed to be analytically motivated and pursuant to article 7, paragraph 1, which requires the approval by a resolution of the municipal council in case the issuer is participated by a municipality. However, the same article 26, paragraph 5 of the Madia Decree expressly provides that in any case the above provisions are without prejudice to the validity and

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effectiveness of the deeds aimed at issuing financial instruments (other than shares) listed on regulated markets, which have been adopted before the date of entry into force of the Madia Decree. By decision of the Constitutional Court No. 251/2016, the Law No. 124 of 7 August 2015 (by means of which the Italian Government was delegated to issue the Madia Decree), was partly declared unconstitutional whereby it provided that Madia Decree was subject to the mere consultation with the Regions instead of their prior agreement to be reached through the Conferenza Unificata pursuant to Legislative Decree No. 281 of 28 August 1997. However, such decision should not have a direct and automatic impact on the Madia Decree as well as on the issue of the Notes. In fact the decision of the Constitutional Court expressly states that the legitimacy of any provision of the legislative decrees issued on the basis of the Law 124/2015 (including the Madia Decree) needs to be verified on a case by case basis, upon specific challenge, taking into account the remedies that the Italian Government will put in place in order to ensure the involvement of the Regions on the subject matters falling within their competence. The Madia Decree was also directly challenged by the Veneto Region before the Constitutional Court (lawsuit register No. 76/2016). However, even in case of upholding of the above lawsuit and consequent decision of the Constitutional Court against the legitimacy of the Madia Decree, this should not have any negative impact on the issue of the Notes.

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TERMS AND CONDITIONS OF THE NOTES

The following is the text of the terms and conditions of the Notes (the “Conditions” or the “Terms and Conditions”) which will apply to the Notes.

In these Conditions, references to the “holder” of a Note or to “Noteholders” are to the beneficial owners of Notes issued in dematerialised form and evidenced in book entry form with Monte Titoli pursuant to the relevant provisions referred to in Condition 1 below. No physical document of title will be issued in respect of Notes. Euroclear and Clearstream, Luxembourg are intermediaries authorised to operate through Monte Titoli.

The €100,000,000 3.15 per cent. Senior Secured Amortizing Fixed Rate Notes due 23 December 2035 (the ”Notes”, which expression shall in these Conditions, unless the context otherwise requires, include any further notes issued pursuant to Condition 18 (Further Issues) and forming a single series with the Notes) of MM S.p.A. (the “Issue”or “MM”) are issued subject to and with the benefit of an Agency Agreement dated 23 December 2016 (such agreement as amended and/or supplemented and/or restated from time to time, the “Agency Agreement”) made between the Issuer and BNP Paribas Securities Services, Milan Branch as principal paying agent (the “Principal Paying Agent” and, together with any other paying agents appointed from time to time, the “Paying Agents” and, each of them, a “Paying Agent”).

The Notes are issued by the Issuer pursuant to, and subject to the provisions of, Article 185 of the Public Contracts Code (as below defined).

Certain statements in these Conditions include summaries of, and are subject to, the detailed provisions of and definitions in the Agency Agreement and the Intercreditor Agreement. Copies of the Agency Agreement and the Intercreditor Agreement are available for inspection during normal business hours by the Noteholders at the specified office of each of the Paying Agents. The Noteholders are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Agency Agreement and the Intercreditor Agreement applicable to them. References in these Conditions to the Paying Agent shall include any successor appointed under the Agency Agreement.

1. FORM, DENOMINATION AND TITLE

The Notes will be in bearer form and will be held in dematerialised form on behalf of their beneficial owners by Monte Titoli S.p.A. (“Monte Titoli”) for the account of the relevant Monte Titoli Account Holders as of their respective date of issue. “Monte Titoli Account Holders” means any authorised financial intermediary institution entitled to hold accounts on behalf of their customers with Monte Titoli and includes Euroclear Bank S.A./N.V. (“Euroclear”) and Clearstream Banking, société anonyme (“Clearstream, Luxembourg”). The Notes will at all times be held in book entry form and title to the Notes will be evidenced by book entries pursuant to the relevant provisions of Legislative Decree No. 58 of 24 February 1998, as subsequently amended and supplemented (the “Financial Services Act”) and in accordance with CONSOB and Bank of Italy Joint Regulation dated 22 February 2008, as subsequently amended and supplemented. No physical document of title will be issued in respect of the Notes.

The Notes are issued in the denomination of €100,000 and integral multiples of €100,000 in excess thereof.

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2. STATUS

The Notes and the Coupons are direct, unconditional and unsubordinated obligations of the Issuer which are secured in the manner provided in Condition 5 (Transaction Security) and rank and will rank pari passu, without any preference among themselves.

The Notes will rank pari passu, and will share the Transaction Security with any Permanent Financing subject to, and upon, the terms and conditions of the Security Documents and the Intercreditor Agreement.

3. NEGATIVE PLEDGE

So long as any of the Notes remain outstanding, the Issuer will not create or permit to subsist any Security Interest other than a Permitted Security Interest (each as defined below) upon the whole or any part of its present or future business, undertaking, assets or revenues (including any uncalled capital) of the Issuer to secure any Indebtedness (as defined below), unless:

(i) any such Indebtedness is Relevant Indebtedness or any Permanent Financing, and

(ii) the Issuer, before or at the same time of the creation of the Security Interest and, in any other case, promptly, takes any and all action necessary to ensure that:

(a) at the same time or prior thereto all amounts payable by it under the Notes are secured by the same Security Interest equally and rateably with the Relevant Indebtedness or any Permanent Financing and the Issuer, the Security Agent and the creditors (or their representative, agent or trustee) under such Permanent Financing or Relevant Indebtedness, as the case may be, enter into or accede to the Intercreditor Agreement; or

(b) (where the Security Interest secures Relevant Indebtedness) such other Security Interest or other arrangement (whether or not it includes the giving of a Security Interest) is approved by an Extraordinary Resolution (as defined in the Agency Agreement) of the Noteholders.

4. DEFINITIONS For the purposes of these Conditions: “AEEGSI” means the National Authority for Electricity, Gas and Water System (Autorità per l'Energia Elettrica, il Gas e il Sistema Idrico) or any replacing authority. “Authorised Signatory” means any person who is the Chairman of the Board of Directors, the General Manager (Amministratore Delegato), the General Director or any attorney to whom a special power of attorney has been granted by any of the above persons. “BEI Financing” means the Euro 70,000,000 facility provided by the European Investment Bank (Banca europea per gli investimenti) as lender to the Issuer as borrower under an agreement dated 18 November 2016 as the same may be amended and/or supplemented and/or restated and/or replaced from time to time. “BNL Account Mechanism” means the mechanism provided under article 5 of the BNL Agreement, entered into to secure the Issuer’s payment obligation of each six-monthly instalment (and the relevant interest) under the BNL Agreement, pursuant to which the Issuer undertakes to transfer on a six- monthly basis from its ordinary accounts to a dedicated account opened with Banca Nazionale del Lavoro S.p.A. (the “BNL Bank Account”) an amount equal to the six-monthly instalment (and the relevant interest) due under the BNL Agreement, together with irrevocable instructions and a mandate, in the interest of Banca Nazionale del Lavoro S.p.A., to Banca Intesa Infrastrutture e Sviluppo S.p.A. (now Intesa Sanpaolo S.p.A.), as account bank where the Issuer’s revenues under the Concession are collected, to transfer on a six-month basis, some days before each relevant semi- annual repayment date, an amount corresponding to the principal and interest relating to the relevant

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six-month period to the BNL Bank Account. On each relevant semi-annual repayment date Banca Nazionale del Lavoro S.p.A. utilises the amount deposited on the BNL Bank Account to repay the relevant six-monthly instalment (and the relevant interest). “BNL Agreement” means the facility agreement for a maximum total amount equal to €20,000,000 entered into by and between the Issuer, as borrower, and Banca Nazionale del Lavoro S.p.A. on November 6, 2007. “Business Day” means any day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET2) System and Monte Titoli S.p.A. system are open. “Carige Account Mechanism” means the mechanism provided under article 5 of the Carige Agreement, entered into to secure the Issuer’s payment obligation of each six-monthly instalment (and the relevant interest) under the Carige Agreement pursuant to which the Issuer undertakes to transfer on a six-monthly basis from its ordinary accounts to a dedicated account opened with Banca Carige S.p.A. (the “Carige Bank Account”) an amount equal to the six-monthly instalment (and the relevant interest) due under the Carige Agreement, together with irrevocable instructions and a mandate, in the interest of Banca Carige S.p.A., to Banca Intesa Infrastrutture e Sviluppo S.p.A. (now Intesa Sanpaolo S.p.A.), as account bank where the Issuer’s revenues under the Concession are collected, to transfer on a six-month basis, some days before each relevant semi-annual repayment date, an amount corresponding to the principal and interest relating to the relevant six-month period to the Carige Bank Account. On each relevant semi-annual repayment date Banca Carige S.p.A. utilises the amount deposited on the Carige Bank Account to repay the relevant six-monthly instalment (and the relevant interest). “Carige Agreement” means the facility agreement for a maximum total amount equal to €25,000,000 entered into by and between the Issuer, as borrower, and Banca Carige S.p.A. on August 7, 2009. "Certification Date" means a date falling not later than 45 days after the approval by the shareholders’ meeting of the relevant consolidated financial statements and, in any event, no later than six months after the end of the Relevant Period. "Compliance Certificate" means a certificate of the Issuer duly signed by two directors or by a director and the Chief Financial Officer of the Issuer, confirming as at the Certification Date: (i) that its audited consolidated financial statements in respect of the last Relevant Period give a true and fair view of the financial condition of the Group as at the end of such Relevant Period and of the results of its operations during such period; (ii) that it is in compliance with the covenants contained in Condition 6.4 (Financial Covenants), setting out the amount of the Issuer’s Net Financial Debt-EBITDA Ratio, Net Financial Debt- Consolidated Fixed Assets Ratio and Consolidated Coverage Ratio as at the Determination Date and its EBITDA for the Relevant Period; and (iii) to the best of the Issuer’s knowledge, having made all due enquiry, that there have been no events, developments or circumstances that would materially affect its ability to certify such compliance on the basis of the Group’s financial condition as at the Certification Date and its results of operations since the Determination Date; “Concession” means the concession for the operation of the integrated water services in the Milan territory subject matter of the Concession Agreement. “Concession Agreement” means the concession agreement entered into by the Grantor and MM in relation to the provision of integrated water services, dated 28 November 2007 (the “Original Concession Agreement”) - as recently amended by Resolution No. 11/2016 of 30 May 2016 of the ATO Office (Uffici d’Ambito) of the Municipality, approving the addendum to the original concession agreement in order to align such agreement with the provisions of the standard concession agreement set out by AEEGSI Resolution 656/2015/idr - as amended and integrated from time to time.

“Concession Event” means any of the following:

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(a) the Concession Agreement is terminated, revoked, suspended, withdrawn from or any party thereto alleges its invalidity (whether by contract, decree, regulation or otherwise);

(b) the Grantor issues a conclusive notice of termination or withdrawal or revocation pursuant to the Concession Agreement following, if applicable, the expiry of any relevant cure period provided under applicable law and/or the Concession Agreement;

(c) the Issuer proposes the termination of or withdrawal from the Concession Agreement to the Grantor; or

(d) the Concession Agreement is amended, restated and/or supplemented and two Rating Agencies (or one Rating Agency if at the time of the relevant amendment, restatement and/or supplement only one Rating Agency has assigned a rating to the Notes or the Issuer) announce a Rating Downgrade (being understood that the official statement issued by any Rating Agency announcing such Rating Downgrade should refer to the relevant amendment, restatement and/or supplement of the Concession Agreement as a reason, in whole or in part, for such downgrade) during the 180-day period following such amendment, restatement and/or supplement.

“Consolidated Coverage Ratio” means, as of any Determination Date, the ratio of (i) the EBITDA for the Relevant Period ending on that Determination Date and (ii) the Consolidated Gross Interest Expenditure for that Relevant Period.

“Consolidated Fixed Assets” means the sum of the following items calculated on a consolidated basis

(i) Rights on assets under concessions

(ii) Other intangible assets

(iii) Property, plant and equipment

(iv) Financial fixed assets in each case, as shown in, or determined by reference to, the relevant entity’s latest audited consolidated annual financial statements.

‘‘Consolidated Gross Interest Expenditure’’ means, for any Relevant Period, all interest expense of the Group for such period (including capitalized interest) determined by reference to, the relevant entity’s latest audited consolidated annual financial statements.

“Consolidated Subsidiary” means, at any time, any subsidiary of the Issuer which (consolidated with its own subsidiaries, if any) accounts for at least 10% of the consolidated EBITDA, the consolidated total assets or the Group’s consolidated revenues, or any holding company of any such company, as calculated by reference to the then latest audited annual consolidated financial statements of the Issuer and the then latest audited (or, where unavailable, unaudited) financial statements of the relevant subsidiary (consolidated or non-consolidated, as the case may be). “Default” means an event or condition the occurrence of which is, or with the expiry of any grace period or the giving of notice or both would be, an Event of Default. “Determination Date” means 31 December in each year. “EBITDA” means, in respect of any Relevant Period, the profit of the Issuer (consolidated, if available) before taxation, before deducting any net interest expense and extraordinary income/loss of the Issuer and (to the extent the Issuer’s financial statements are produced on a consolidated basis) any Consolidated Subsidiary in respect of that Relevant Period and adding back depreciation, amortisation. write-downs and provisions.

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“Environmental Code” means Legislative Decree No. 152/2006 as amended or supplemented from time to time. “Event of Default” has the meaning given to that term in Condition 13 (Events of Default- Enforcement). “Fitch” means Fitch Italia S.p.A. and its successors. “General Privilege” means a “privilegio generale” over movable present and future assets of the Issuer pursuant to article 186 of the Public Contracts Code. “Grantor” means the Azienda speciale of the Municipality of Milan, in its quality of competent office (ente di governo dell’ambito – EGA) for the “Optimal Territorial Area” (Ambito Territoriale Ottimale – ATO) of the Milan territory, as replaced starting from June 15 2016, by a new governmental body for the ATO of Milan called “Ufficio d’Ambito della Città Metropolitana di Milano”, and any entity which may step in from time to time as grantor under the Concession Agreement. “Group” means the Issuer and its Consolidated Subsidiaries from time to time.

“Indebtedness” means any indebtedness for money borrowed or raised including (without limitation) any indebtedness for or in respect of:

(a) amounts raised by acceptance under any acceptance credit facility;

(b) amounts raised under any note purchase facility;

(c) the amount of any liability in respect of leases or hire purchase contracts which would, in accordance with applicable law and generally accepted accounting principles, be treated as finance or capital leases;

(d) the amount of any liability in respect of any purchase price for assets or services the payment of which is deferred for a period in excess of 60 days; and

(e) amounts raised under any other transaction (including, without limitation, any forward sale or purchase agreement) having the commercial effect of a borrowing.

“In-House Providing Mechanism Requirements” means the requirements listed below provided under Article 149-bis of the Environmental Code and Article 5 of the Public Contracts Code, as they may be from time to time amended, and which at the time of the award and throughout the duration of the Concession must be satisfied in order for the Municipality (or a different Local Authority) to award the Concession to MM without undertaking a public tender process:

(a) there is no direct shareholding of private companies (or other private entities) in the Issuer;

(b) more than 80% of the activities of the Issuer must relate to the performance of tasks entrusted to it by the Municipality (or a different Local Authority); and

(c) the Municipality (or a different Local Authority) must exercise over the Issuer a control similar to that exercised over its own departments, pursuant to which both strategic objectives and significant decisions of the Issuer are subject to the decisive influence of the Municipality (or a different Local Authority).

“Intercreditor Agreement” means the intercreditor agreement dated on or about the Issue Date between, amongst others, the Issuer, the Security Agent, the Noteholders’ Representative and the creditors (or their representatives) under the BEI Financing, as the same may be amended and/or supplemented and/or restated and/or replaced from time to time in accordance with its terms. “Investment Grade Rating” means a rating of at least BBB- by S&P, Baa3 by Moody’s or BBB- by Fitch.

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“Investment Plan” (Programma degli Interventi) means the investment plan setting out the investments and works to be carried out by MM under the Concession Agreement as updated and amended from time to time according to applicable law and the provision of the Concession Agreement. “Issue Date” means 23 December 2016. “Italian Civil Code” means the Italian civil code, enacted by Royal Decree No. 262 of 16 March 1942, as subsequently amended and supplemented. “Local Authority” means the municipality of Milan and any other municipality, union of municipalities, metropolitan area and province, including such additional entities as better defined under the Italian laws and regulations applicable from time to time which govern(s) the territorial area served from time to time by the Issuer according to the Concession Agreement. “Maturity Date” means 23 December 2035. “Moody’s” means Moody’s Investors Service Emea Ltd. and its successors. “Municipality” means the Municipality of Milan (Comune di Milano). "Net Financial Debt" means the sum of the following items, calculated on a consolidated basis: (i) total non-current financial liabilities; plus (ii) total current financial liabilities; plus (iii) total financial liabilities for leases; plus (iv) the amount (being the amount financed) under factoring or securitisation programmes over trade receivables on a pro solvendo (with recourse) basis; less (v) available cash (disponibilità finanziarie) and cash equivalents (where “cash equivalents” means cash at banks and all assets that can be liquidated within three months); less (vi) other financial assets represented by Italian government bonds and bonds with an Investment Grade Rating, in each case, as shown in, or determined by reference to, the relevant entity’s latest audited consolidated annual financial statements.

“Net Financial Debt- Consolidated Fixed Assets Ratio” means, the ratio of (i) Net Financial Debt as at the Determination Date to (ii) Consolidated Fixed Assets for the Relevant Period. "Net Financial Debt-EBITDA Ratio" means, the ratio of (i) Net Financial Debt as at the Determination Date to (ii) EBITDA for the Relevant Period. “No Default Certificate” means the certificate to be delivered on each Reporting Date and signed by a duly Authorised Signatory of the Issuer, certifying that no Event of Default has occurred during that Relevant Period and/or is continuing as at the date of the certificate. “Non-Investment Grade Rating” means a rating of BB+ by S&P, Ba1 by Moody’s or BB+ by Fitch, or lower. “PEF” means the economic and financial plan (piano economico e finanziario) of the Concession Agreement as updated and amended from time to time according to applicable law and the provision of the Concession Agreement. “Permanent Financing” means (a) the BEI Financing and (b) any additional bank facilities that may be entered into by the Issuer, in its capacity as borrower, to finance (in whole or in part) the new investments and works required under the Investment Plan (Programma degli Interventi) attached to, and forming an integral part of, the Concession Agreement in an aggregate amount (including amounts under (a) and (b) above) not exceeding Euro 70,000,000.

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“Permitted Security Interest” means:

(a) (i) any Third Party Security Interest and (ii) any Security Interest over or affecting any asset acquired by or vested in the Issuer after the Issue Date, where such Security Interest already exists at the time that asset is acquired by or vested in the Issuer, provided that (A) such Security Interest was not created in connection with or in contemplation of the acquisition or vesting of that asset and (B) the aggregate principal amount of relevant Indebtedness secured by such Security Interest is not increased at any time thereafter;

(b) any Security Interest (a “New Security Interest”) created in substitution for or in addition to any existing Security Interest permitted under paragraph (a)(ii) (excluding, for the avoidance of doubt, the Third Party Security Interest) above (an “Existing Security Interest”), provided that (A) the sum of the principal amount secured by the New Security Interest and of the principal amounts secured by the Existing Security Interests from time to time outstanding does not at any time exceed overall the principal maximum amount originally secured by the Existing Security Interests and (B) other than by reason of general market trend beyond the control of the Issuer, the overall value of the assets over which the New Security Interest and the Existing Security Interests from time to time subsists does not at any time exceed the value of the assets over which the Existing Security Interests originally subsisted;

(c) any Security Interest arising by operation of law and in the ordinary course of trading of the Issuer including any Security Interest (in the form of “polizza fideiussoria” or “fideiussione bancaria”) issued and/or to be issued in favour of the Tax authority to obtain the reimbursement of VAT credits;

(d) the Transaction Security;

(e) any Security Interest required under the Concession Agreement.

(f) any Security Interest created to secure Project Finance Indebtedness;

(g) any Security Interest not falling within paragraphs (a) to (f) above, provided that the aggregate principal amount of Indebtedness secured by such Security Interest does not exceed the sum of Euro 35,000,000 plus 10% of the EBITDA as resulting from the latest Issuer’s financial statements available from time to time.

"Person" means any individual, company, corporation, firm, partnership, joint venture, association, organisation, state or agency of a state or other entity, whether or not having separate legal personality;

"Project" means the ownership, acquisition (in each case, in whole or in part), development, restructuring, leasing, maintenance and/or operation of an asset or assets, and the equity participations in a company holding such asset or assets;

"Project Finance Indebtedness" means any present or future Indebtedness assumed by a Person (the “relevant debtor”) to finance or refinance a Project, whereby (A) the claims of the creditors under such Indebtedness (the “relevant creditors ”) against the relevant debtor are limited to (i) the amount of cash flow or net cash flow generated by and through the Project during the tenor of such Indebtedness and/or (ii) the amount of proceeds deriving from the enforcement of any Security Interest given by the relevant debtor over the Project to secure such Indebtedness and (B) the relevant creditors have no recourse whatsoever against any assets of any member of the Group other than the Project and such Security Interest;

“Public Contracts Code” means Legislative Decree n. 50/2016, as amended or supplemented from time to time.

“Qualified Holder” means any entity that, in accordance with relevant Italian laws and regulations, may subscribe for and hold the Notes. Investitori qualificati (qualified investors) as defined in article

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100 of the Legislative Decree No. 58 of 24 February 1998, as amended and entities controlled by such qualified investors pursuant to article 2359 of the Italian Civil Code are Qualified Holders pursuant to article 185 of the Public Contracts Code.

“Rating Agency” means Fitch or Moody’s or S&P or any of their respective successors or any other rating agency established in the European Union and included in the list of credit rating agencies registered in accordance with Regulation (EC) No. 1060/2009 on Credit Rating Agencies as amended by Regulation (EU) No. 513/2011. If at any time a Rating Agency is replaced as a Rating Agency then references to its rating categories shall be deemed instead to be references to the equivalent rating categories of the entity which replaces it as a Rating Agency.

“Rating Date” means the date one Business Day prior to the first public announcement of the relevant transaction.

“Rating Downgrade” means the rating of the Notes or the Issuer by any Rating Agency is downgraded at least one rating category below the rating of the Notes or, as appropriate, the Issuer by such Rating Agency on the Rating Date, and the official statement issued by such Rating Agency announcing the Rating Downgrade refers to the relevant transaction as a reason, in whole or in part, for such downgrade. a “regulation” includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency, department or of any regulatory, self-regulatory or other authority or organisation (including the AEEGSI).

“Relevant Indebtedness” means (i) any present or future Indebtedness which is in the form of, or represented by, notes or bonds (obbligazioni) which are for the time being, or are capable of being, listed, admitted to trading or ordinarily traded on any stock exchange, over-the-counter-market or other securities market, including, for avoidance of doubt any multilateral trading facility, and which does not constitute limited-recourse borrowings and (ii) any guarantee or indemnity for or in respect of any Indebtedness under paragraph (i). “Relevant Period” means a 12-month period ending on a Determination Date. “Reporting Date” means a date falling no later than sixty (60) days after the approval by the Board of Directors of the Issuer’s consolidated annual financial statements with respect to that Relevant Period. “Required Capex Indebtedness” means any Indebtedness incurred by the Group to finance any Required Capital Expenditure which, upon its incurrence, benefits from the Transaction Security. “Required Capital Expenditure” means any capital expenditure which is:

(a) strictly required by the Grantor or under the Concession Agreement; and

(b) eligible for inclusion in any Termination Value under the terms of the Concession Agreement, the PEF and any other applicable AEEGSI regulation. “S&P” means Standard & Poor’s Credit Market Services Italy S.r.l. and its successors. “Secured Creditors” means the Noteholders as a class, the Security Agent and any other persons which share the Transaction Security pursuant to the terms of the Intercreditor Agreement. “Security Agent” means BNP Paribas Securities Services, Milan Branch. “Security Documents” means:

(a) any deed or document governing the General Privilege;

(b) any Additional Security Agreement; and

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(c) any deed or document from time to time amending and/or supplementing and/or extending any of the above. “Security Interest” means any mortgage, charge, pledge, lien, other encumbrance or other form of security interest including, without limitation, anything substantially analogous to any of the foregoing under the laws of any jurisdiction. “Subsidiary” means società controllata, as defined in Article 2359, first paragraph, of the Italian Civil Code. “Substantial Part” means twenty-five (25) per cent. or more of the Total Assets or the Total Revenues, as calculated by reference to the then latest audited financial statements of the Issuer (consolidated, if available). “Termination Value” means, at any time, the estimated value of any Termination Value Payment, as determined from time to time in accordance with the PEF, Articles 12 and 12-bis of the Concession Agreement, as well as the applicable AEEGSI regulation. “Termination Value Payment” means, at any time, the value of any payment made or to be made to the Issuer (i) upon the termination, forfeiture, revocation, resolution or expiry (decadenza, risoluzione, revoca, recesso or scadenza) (both if at the stated maturity or anticipated) of the Concession Agreement under the terms of the Concession Agreement and the applicable AEEGSI regulation or as a result of the Issuer exercising its rights of withdrawal under the Concession Agreement; or (ii) in any other circumstance where the Issuer is substituted by another entity in managing the integrated water services and a payment of the Termination Value is to be made by such other entity in accordance with the Concession Agreement and the applicable AEEGSI regulation. “Third Party Security Interest” means: (i) the pledge over bank account receivables (on which amounts are credited pursuant to the BNL Account Mechanism) granted in favour of Banca Nazionale del Lavoro S.p.A. as lender in connection with the BNL Agreement; or (ii) as an alternative to the pledge under (i) above, to the extent that the BNL Agreement is amended and/or supplemented and/or restated and/or replaced, the pledge over account (on which amounts are credited pursuant to a mechanism substantially the same as the BNL Account Mechanism) granted in favour of Banca Nazionale del Lavoro S.p.A. as lender in connection with the BNL Agreement and/or of any replacing lender thereunder (as the same may be amended and/or supplemented and/or restated and/or replaced from time to time but provided that the principal amount outstanding thereunder is not increased); and (iii) the pledge over bank account receivables granted in favour of Banca Carige S.p.A. as lender in connection with the Carige Agreement; or (iv) as an alternative to the pledge under (iii) above, to the extent that the Carige Agreement is amended and/or supplemented and/or restated and/or replaced, the pledge over account (on which amounts are credited pursuant to a mechanism substantially the same as the Carige Account Mechanism) granted in favour of Banca Carige S.p.A. as lender in connection with the Carige Agreement and/or of any replacing lender thereunder (as the same may be amended and/or supplemented and/or restated and/or replaced from time to time but provided that the principal amount outstanding thereunder is not increased).

“Total Assets” means, at any time, in respect of any Relevant Period, the total assets of the Issuer and (to the extent the Issuer’s financial statements are produced on a consolidated basis) any Consolidated Subsidiary. “Total Revenues” means, at any time, in respect of any Relevant Period, the total revenues of the Issuer and (to the extent the Issuer’s financial statements are produced on a consolidated basis) any Consolidated Subsidiary.

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“Transaction Documents” means the Agency Agreement, the Security Documents and the Intercreditor Agreement. “Transaction Security” means any Security Interest created pursuant to the Security Documents.

Save as the context otherwise provides, any reference in these Conditions to a provision of law, decree or regulation is a reference to that provision as amended or re-enacted.

5. TRANSACTION SECURITY

5.1 Transaction Security

The obligations of the Issuer under the Notes and the Intercreditor Agreement are secured in favour of (A) the Security Agent for the benefit of itself and as rappresentante pursuant to Article 2414-bis, paragraph 3, of the Italian Civil Code and art. 185 paragraph 5 of the Public Contracts Code and (B) the Noteholders as a class by the Transaction Security.

5.2 Additional Transaction Security

If: (a) a Default is continuing; or (b) a Security Interest is to be established for the Issuer to comply with Condition 6.3 (Treatment of Termination Value Payment), the Security Agent (upon consultation with the Issuer for a period not exceeding ten Business Days (or, if the Security Agent and the Issuer do not agree following such consultation period then, as required by the Security Agent) and to the extent not expressly prohibited by the Concession Agreement or the Grantor or by applicable law or regulations) may request that the Issuer grant, in favour of the Secured Creditors, such other Security Interest to secure the obligations of the Issuer under the Notes and the other Transaction Documents (each, an “Additional Security Agreement”).

6. COVENANTS

6.1 Information covenants

For so long as any Notes remain outstanding, the Issuer will:

(a) inform (i) the Noteholders immediately by means of a notice given in accordance with Condition 14 (Notices) of the occurrence of any Default and (ii) the Noteholders’ Representative immediately of the occurrence of any Default;

(b) deliver the No Default Certificate to the Noteholders’ Representative on each Reporting Date;

(c) no later than the Certification Date, deliver to the Principal Paying Agent and the Noteholders’ Representative an electronic copy of the Group’s audited consolidated annual financial statements translated into English, provided that such English translation will be prepared solely for the convenience of international readers and that, in case of inconsistency, the official Italian version will prevail. The Issuer shall ensure that each set of such financial statements is,:

(i) audited by independent auditors; and

(ii) accompanied by a Compliance Certificate.

So long as any of the Notes remains outstanding, the Issuer shall make such audited financial statements and the accompanying Compliance Certificate for the relevant Relevant Period

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available for inspection free of charge by any Noteholder on its website (www.mmspa.eu ), at its own registered office and at the Specified Office of each Paying Agent.

6.2 Listing

The Issuer shall, for so long as any Notes remain outstanding, use all reasonable endeavours to maintain a listing of the Notes on the regulated market of the Irish Stock Exchange or another regulated market on a stock exchange in the European Economic Area.

6.3 Treatment of Termination Value Payment

The Issuer will, (a) immediately deposit each Termination Value Payment into a bank account subject to Transaction Security and (b) ensure that the proceeds of such Termination Value Payment are utilised, to the extent possible under applicable law and to the extent compatible with the obligation of the Issuer to prevent the interruption and/or suspension of the public services to be still carried out or handed over at that time, to redeem the Notes pursuant to Condition 10.4 (Redemption upon Termination Value Payment).

6.4 Financial Covenants

So long as any Note remains outstanding, the Issuer shall ensure that, as of each Determination Date:

(i) its Net Financial Debt--EBITDA Ratio is no more than 4.5 to 1.0;

(ii) its Net Financial Debt- Consolidated Fixed Assets Ratio is no more than 0.70 to 1; and

(iii) its Consolidated Coverage Ratio is no less than 4.5 to 1.0.

The financial ratios set out in this Condition 6.4 shall be tested as at each Determination Date following approval by the Issuer’s Board of Directors (or equivalent body) of the Group’s consolidated annual financial statements, so that the financial ratios will be tested once in each financial year based on the previous Relevant Period, as evidenced by the Compliance Certificate in relation to such Relevant Period delivered pursuant to Condition 6.1 (c) below and for the first time in respect of the 12-month period ending 31 December 2016.

6.5 Conditions Subsequent

The Issuer shall deliver evidence of registration and receipt of the deposit of the Privilegio Generale at the competent Court promptly and in any case within 10 Business Days of the Issue Date.

6.6 Maintenance of Rating

The Issuer shall, for so long as any Notes remain outstanding, use all reasonable endeavors to maintain a credit rating from at least one Rating Agency for the Notes issued by the Issuer. The Issuer shall also co-operate with each relevant Rating Agency in connection with any reasonable request for information in respect of the maintenance of a rating and with any review of its business which may be undertaken by one or more of the Rating Agencies after the Issue Date.

6.7 Pari passu payments

Following the delivery of a notice to the Issuer stating that all the Notes are, and they shall accordingly forthwith become, immediately due and repayable following the occurrence of an Event of Default pursuant to Condition 13 (Events of Default- Enforcement), and to the extent any Indebtedness of the Issuer under any Permanent Financing is declared due and payable prior to its stated maturity by reason of an event of default (howsoever described) thereunder, the Issuer, to the extent permitted under applicable law, shall ensure that any payment made by it, or on its behalf, in respect of the Notes and any Permanent Financing results in discharging pro rata all its liabilities under the Notes and any Permanent Financing.

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7. INTEREST

7.1 Interest Rate and Interest Payment Dates

The Notes bear interest on their principal amount outstanding from and including the Issue Date at the rate of 3.15 per cent. per annum, payable annually in arrears on 23 December in each year (each an “Interest Payment Date”). The first payment (representing a full year's interest) shall be made on 23 December 2017.

7.2 Interest Accrual

Each Note will cease to bear interest from and including its due date for full redemption unless, upon due presentation, payment of the principal in respect of the Note is improperly withheld or refused or unless default is otherwise made in respect of payment. In such event, default interest (determined in accordance with the relevant law) will continue to accrue until whichever is the earlier of:

(a) the date on which all amounts due in respect of such Note have been paid; and

(b) five days after the date on which the full amount of the moneys payable in respect of such Notes has been received by the Paying Agent and notice to that effect has been given to the Noteholders in accordance with Condition 14 (Notices) (except to the extent that there is any subsequent default in payment in accordance with these Conditions).

7.3 Calculation of Broken Interest

When interest is required to be calculated in respect of a period of less than a full year, it shall be calculated on the basis of (a) the actual number of days in the period from and including the date from which interest begins to accrue (the “Accrual Date”) to but excluding the date on which it falls due divided by (b) the actual number of days from and including the Accrual Date to but excluding the next following Interest Payment Date.

8. PAYMENTS

8.1 Payments in respect of Notes

Payment of principal and interest (and any other amount) in respect of the Notes will be credited, without charge to the Noteholders, according to the instructions of Monte Titoli, by the Paying Agent on behalf of the Issuer to the accounts of those banks and authorised brokers whose accounts with Monte Titoli are credited with those Notes and thereafter credited by such banks and authorised brokers from such aforementioned accounts to the accounts of the beneficial owners of those Notes or through the account held by Euroclear and Clearstream, Luxembourg with Monte Titoli and thereafter to the accounts with Euroclear and Clearstream, Luxembourg of the beneficial owners of those Notes, in accordance with the rules and procedures of Monte Titoli (and, if applicable, Euroclear or Clearstream, Luxembourg, as the case may be).

8.2 Method of Payment

Payments of amounts due on the Notes shall be made in Euro.

8.3 Payments subject to applicable laws

Payments in respect of principal and interest (and any other amount) on the Notes are subject in all cases to any fiscal or other laws and regulations applicable in the place of payment, but without prejudice to the provisions of Condition 11 (Taxation).

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8.4 Payments on a Business Day

If the due date for payment of any amount in respect of any Note is not a Business Day, the holder shall not be entitled to payment of the amount due until the next succeeding Business Day and shall not be entitled to any further interest or other payment in respect of any such delay.

9. PAYING AGENT

9.1 Appointment; Specified Offices

The initial Paying Agent and its initial specified offices are:

BNP Paribas Securities Services, Milan Branch a société en commandite par actions incorporated under the laws of France, whose registered office is at 3 Rue d’Antin, 75002, Paris, France acting for the purpose hereof through its Milan office at Piazza Lina Bo Bardi 3 20124 registered with the companies' register held in Milan at number 13449250151, fiscal code and VAT number 13449250151.

Each Paying Agent reserves the right at any time to change its specified offices. Notice of any changes in specified offices will be given to the Issuer by the relevant Paying Agent.

9.2 Variation or Termination of Appointment of the Paying Agent

The Issuer reserves the right at any time to vary or terminate the appointment of the Principal Paying Agent, replace it and/or to appoint additional or other Paying Agents provided that:

(a) there will at all times be a Principal Paying Agent;

(b) so long as the Notes are listed on any stock exchange or admitted to listing by any other relevant authority, there will at all times be at least one Paying Agent having a specified office in the place (if any) required by the rules and regulations of the relevant Stock Exchange or any other relevant authority;

(c) the Issuer undertakes that it will ensure that it maintains a Paying Agent in a Member State of the European Union who is not obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/EC or any law implementing or complying with, or introduced in order to conform to, such Directive; and

(d) there will at all times be a Paying Agent in a jurisdiction within Europe.

Notice of any variation, termination, appointment and/or of any changes in specified offices will be given to the Noteholders promptly by the Issuer in accordance with Condition 14 (Notices).

10. REDEMPTION AND PURCHASE

10.1 Redemption by Amortisation and Final Redemption

Unless previously redeemed, or purchased and cancelled as provided below, the Notes will be redeemed by the Issuer on each amortisation date specified in column A below (each an “Amortisation Date with the final Amortisation Date being the Maturity Date) in an aggregate principal amount equal to the amount specified in column B below (each an “Amortisation Amount”) payable as provided in Condition 8 (Payments).

The principal aggregate amount outstanding of the Notes shall be reduced, pro rata with respect to each outstanding Note, by the Amortisation Amount for all purposes with effect from the relevant Amortisation Date such that the aggregate principal amount outstanding of the Notes following such reduction shall be as specified in column C below, unless the payment of the relevant Amortisation Amount is improperly withheld or refused. In such a case, the relevant principal amount will remain outstanding until whichever is the earlier of (a) the day on which all sums due in respect of such Notes 113

up to that day are received by or on behalf of the relevant Noteholders and (b) five days after the date on which the full amount of the moneys payable in respect of such Notes has been received by the Paying Agent and notice to that effect has been given to the Noteholders in accordance with Condition 14 (Notices) (except to the extent that there is any subsequent default in payment in accordance with these Conditions). For the avoidance of doubt, any Amortisation Amount indicated in the table below shall be reduced pro rata by any amount of the Notes which is redeemed in accordance with Condition 10.3 (Redemption at the Option of the Noteholders following a Change of Control) below.

Aggregate Amortisation Date Amortisation Amount Principal Amount Outstanding (A) (B) (euro millions) of the

Notes thereafter

(C) (euro millions)

23 December 2025 2 98

23 December 2026 7 91

23 December 2027 8 83

23 December 2028 10 73

23 December 2029 8 65

23 December 2030 7 58

23 December 2031 6 52

23 December 2032 12 40

23 December 2033 12 28

23 December 2034 14 14

23 December 2035 14 0

In these Conditions, references to "principal" shall, unless the context requires otherwise, be deemed to include any Amortisation Amount, references to the "due date" for payment shall, unless the context requires otherwise, be deemed to include any Amortisation Date and references to the “principal amount outstanding” of a Note on any date shall be to its original principal amount (less) (i) the aggregate of all principal payments made in respect of such Note in accordance with Condition 10.1 and (ii) the aggregate amount of all redemptions made in respect of such Note pursuant to Conditions 10.2, 10.3 and 10.4.

10.2 Redemption for Taxation Reasons

If:

(a) as a result of any change in, or amendment to, the laws or regulations of a Relevant Jurisdiction (as defined in Condition 11 (Taxation)), or any change in the application or official interpretation of the laws or regulations of a Relevant Jurisdiction, which change or amendment becomes effective after 21 December 2016, on the next Interest Payment Date the Issuer would be required to pay additional amounts as provided or referred to in Condition 11 (Taxation); and

(b) the requirement cannot be avoided by the Issuer taking reasonable measures available to it (including, without limitation, appointing a Paying Agent in another jurisdiction), 114

the Issuer may at its option, having given not less than 30 nor more than 60 days' notice to the Noteholders in accordance with Condition 14 (Notices) (which notice shall be irrevocable), redeem all the Notes, but not some only, at any time at their principal amount outstanding together with interest accrued to but excluding the relevant date of redemption, provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer would be obliged to pay such additional amounts, were a payment in respect of the Notes then due. Prior to the publication of any notice of redemption pursuant to this paragraph, the Issuer shall deliver to the Paying Agent to make available at its specified offices to the Noteholders (i) a certificate signed by an Authorised Signatory of the Issuer stating the Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Issuer so to redeem have occurred and (ii) an opinion of independent legal advisers of recognised standing to the effect that the Issuer has or will become obliged to pay such additional amounts as a result of the change or amendment.

10.3 Redemption at the Option of the Noteholders following a Change of Control

If a Change of Control occurs, then the Noteholders shall have the option (a “Put Option”), within 30 days of a Change of Control Event Notice (as defined below) being given to the Noteholders in accordance with Condition 14 (Notices) (the “Exercise Period”), to give to the Issuer through a Paying Agent a Put Notice (as defined below) requiring the Issuer to redeem Notes held by such Noteholder on the Change of Control Event Redemption Date. The Issuer will, on such Change of Control Event Redemption Date, redeem at their principal amount outstanding, all, but not part only, of the Notes which are the subject of the Put Notice, together with interest accrued and unpaid to but excluding the Change of Control Event Redemption Date.

Promptly (and in any event within 20 days) upon the Issuer becoming aware that a Change of Control has occurred, the Issuer shall give notice (a “Change of Control Event Notice”) to the Noteholders in accordance with Condition 14 (Notices) specifying (i) that Noteholders are entitled to exercise the Put Option; (ii) the procedure for exercising the Put Option, including the Change of Control Event Redemption Date; and (iii) such other information relating to the Put Option as may be relevant.

To exercise the Put Option, the Noteholder must deliver at the specified office of any Paying Agent on any Business Day at the place of such specified office falling within the Exercise Period, a duly signed and completed notice of exercise in the form (for the time being current) obtainable from any specified office of any Paying Agent (a “Put Notice”) and in which the holder must specify a bank account to which payment is to be made under this paragraph. Upon delivery of a Put Notice and up to and including the Change of Control Event Redemption Date, no transfer of title to the Notes for which the Put Notice has been delivered will be allowed. At least 5 Business Days prior to the Change of Control Event Redemption Date, the Issuer and the Paying Agent shall notify Monte Titoli of the amount of Notes to be redeemed on the Change of Control Event Redemption Date and the aggregate redemption amount. A Put Notice given by a holder of any Note shall be irrevocable except where, prior to the Change of Control Event Redemption Date, an Event of Default has occurred and is continuing, in which event such holder, at its option, may elect by notice to the Issuer (copying the Principal Paying Agent and the Paying Agent who received the Put Notice, if different) to withdraw the Put Notice and instead to accelerate the Note in accordance with Condition 13 (Events of Default - Enforcement).

For the purposes of these Conditions:

“Change of Control” means the occurrence of any circumstance as a result of which the Municipality (or different Local Authorities) ceases to own either directly and/or indirectly a shareholding which entitles it to have the majority of the voting rights in the ordinary and extraordinary shareholders' meetings of the Issuer, both at the first and second summoning (convocazione).

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“Change of Control Event Redemption Date” means the date specified in the Change of Control Event Notice, being a date not less than 30 nor more than 60 days after the expiry of the Exercise Period.

10.4 Redemption upon Termination Value Payment

Unless previously redeemed or purchased and cancelled as provided above, the Issuer will redeem all, but not part only, of the Notes at their principal amount outstanding together with any accrued and unpaid interest until the date of the redemption no later than 10 Business Days after receipt by the Issuer of any Termination Value Payment, subject as provided in Condition 8 (Payments).

10.5 No other redemption

The Issuer shall not be entitled to redeem the Notes otherwise than as provided in Conditions 10.1 to 10.4 above.

10.6 Purchases

The Issuer or any of its Subsidiaries (as defined above) may at any time purchase Notes in any manner and at any price. Such Notes may be held, reissued, resold or, at the option of the Issuer, cancelled.

10.7 Cancellations

All Notes which are redeemed in full will forthwith be cancelled. All Notes so fully redeemed, and any Notes purchased and cancelled pursuant to Condition 10.6 (Purchases) may not be reissued or resold.

10.8 Notices Final

Any such notice as is referred to in Condition 10.2 (Redemption for Taxation Reasons) or 10.3 (Redemption at the Option of the Noteholders following a Change of Control) above shall be irrevocable and, upon the expiry of such notice the Issuer shall be bound to redeem the Notes to which the notice refers in accordance with the terms of such paragraph.

11. TAXATION

11.1 Payment without Withholding

All payments in respect of the Notes by or on behalf of the Issuer shall be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature (“Taxes”) imposed or levied by or on behalf of the Relevant Jurisdiction, unless the withholding or deduction of the Taxes is required by law. In that event, the Issuer will pay such additional amounts as may be necessary in order that the net amounts received by the Noteholders after the withholding or deduction shall equal the respective amounts which would have been receivable in respect of the Notes in the absence of the withholding or deduction; except that no additional amounts shall be payable in relation to any payment in respect of any Note:

(a) the holder of which is liable for Taxes in respect of such Note by reason of having some connection with the Relevant Jurisdiction other than a mere holding of the Note; or

(b) to be made in the Relevant Jurisdiction; or

(c) where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to Council Directive 2003/48/EC on the taxation of savings income or any law implementing or complying with, or introduced in order to conform to, such Directive or any similar measures agreed upon with the European Union by certain non EU countries or territories; or

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(d) held by or on behalf of a holder who would have been able to avoid such withholding or deduction by presenting the relevant Note to another Paying Agent in a Member State of the European Union; or

(e) requested more than 30 days after the Relevant Date (as defined below) except to the extent that a holder would have been entitled to additional amounts if it had requested such payment on the last day of the period of 30 days assuming that day to have been a Business Day); or

(f) held by a holder who would be entitled to avoid such withholding or deduction by making a declaration of residence or non-residence or other similar claim for exemption and fails to do so in due time; or

(g) in relation to any payment or deduction on principal, interest or other proceeds of any Note on account of imposta sostitutiva pursuant to Italian Legislative Decree No. 239 of 1 April 1996, as amended or supplemented from time to time; or

(h) in the event of payment to a non-Italian resident legal entity or to a non-Italian resident individual, to the extent that interest or other proceeds are paid to a non-Italian resident legal entity or to a non-Italian resident individual which is resident in a country which does not allow for a satisfactory exchange of information with the Republic of Italy; or

(i) attributable to a FATCA Deduction.

In these Conditions:

(a) “Relevant Date” means the date on which the payment first becomes due or, if the full amount of the money payable has not been received by the Paying Agent on or before the due date, the date on which, the full amount of the money having been so received, notice to that effect has been duly given to the Noteholders by the Issuer in accordance with Condition 14 (Notices); and

(b) “Relevant Jurisdiction” means the Republic of Italy or any political subdivision or any authority thereof or therein having power to tax or any other jurisdiction or any political subdivision or any authority thereof or therein having power to tax to which the Issuer becomes subject in respect of payments made by it of principal and interest on the Notes.

(c) “FATCA Deduction” means a deduction or withholding from a payment under a Note required by: (i) sections 1471 to 1474 of the US Internal Revenue Code of 1986, as amended, or any associated regulations; (ii) any treaty, law or regulation of any other jurisdiction, or relating to an intergovernmental agreement between the US and any other jurisdiction, which (in either case) facilitates the implementation of any law or regulation referred to in (i) above; or any agreement pursuant to the implementation of any treaty, law or regulation referred to in (i) or (ii) above with the US Internal Revenue Service, the US government or any governmental or taxation authority in any other jurisdiction.

11.2 Additional Amounts

Any reference in these Conditions to any amounts in respect of the Notes shall be deemed also to refer to any additional amounts which may be payable under this Condition.

12. PRESCRIPTION

Claims for payment under the Notes will become void unless made within 10 years (in the case of principal) or five years (in the case of interest) from the date on which the relevant payment first becomes due in respect of the Notes, subject to the provisions of Condition 8 (Payments).

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13. EVENTS OF DEFAULT - ENFORCEMENT

13.1 Events of Default

The Noteholder’s representative shall, if so requested in writing by holders of at least 25 per cent of the aggregate principal amount of the outstanding Notes or if so directed by an Extraordinary Resolution (as defined in the Agency Agreement), give written notice to the Issuer that all the Notes are, and they shall accordingly forthwith become, immediately due and repayable at their principal amount outstanding, together with interest accrued to the date of repayment, if any of the following events (“Events of Default”) shall have occurred and be continuing:

(a) Non-payment: if default is made in the payment of any principal or interest due in respect of the Notes or any of them and the default continues for a period of 3 Business Days in the case of principal or 5 Business Days in the case of interest; or

(b) Breach of other obligations: if the Issuer fails to perform or observe any of its other material obligations under these Conditions as in the Transaction Documents and (except in any case where the failure is incapable of remedy, when no continuation or notice as is hereinafter mentioned will be required) the failure continues for the period of 45 days following the service by any Noteholder on the Issuer of written notice requiring the same to be remedied; or

(c) Cross-acceleration: if (i) any Indebtedness of the Issuer is declared to be due and repayable prior to its stated maturity by reason of an event of default (however described); (ii) the Issuer fails to make any payment in respect of any Indebtedness on the due date for payment as extended by any applicable grace period; or (iii) any security given by the Issuer for any Indebtedness is enforced; or (iv) default is made by the Issuer in making any payment when due or (as the case may be) within any applicable grace period under any guarantee and/or indemnity given by it in relation to any Indebtedness of any other person, provided that no such event shall constitute an Event of Default unless: (A) the aggregate Indebtedness relating to all such events which shall have occurred and be continuing shall amount to at least €7,500,000 (or its equivalent in any other currency) or (B) the Issuer has not remedied to such default within the following 45 days; or

(d) Winding up, etc.: if an order is made by any competent court or an effective resolution is passed for the winding up or dissolution of the Issuer save for (i) the purposes of reorganisation on terms previously approved by an Extraordinary Resolution of the Noteholders, or (ii) the purposes of or pursuant to a Permitted Reorganisation; or

(e) Cessation of business or payments: if the Issuer ceases, or publicly communicate - through any of its authorised representatives or other authorised persons - its decision to cease to carry on the whole or substantially the whole of its business related to the integrated water service, save for (i) the purposes of reorganisation on terms previously approved by an Extraordinary Resolution of the Noteholders, or (ii) the purposes of a Permitted Reorganisation; or

(f) Insolvency: if the Issuer stops the payment of, or admits in writing its inability to, pay its debts as they fall due or is adjudicated or found bankrupt or insolvent; or if the Issuer becomes subject to any liquidation, insolvency, composition, reorganisation or other similar proceedings or if an administrative or other receiver, administrator, liquidator or other similar official is appointed in relation to the Issuer; or

(g) Voluntary arrangement: if the Issuer initiates or consents to judicial proceedings relating to itself under any applicable liquidation, insolvency, composition, reorganisation or other similar laws (including the obtaining of a moratorium) or, by reason of actual financial difficulties, enters into any composition or other arrangement with, its creditors generally (or any class of its creditors) having a value equal to at least €7,500,000; or

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(h) Analogous event: any event occurs which under the laws of any relevant jurisdiction has an analogous effect to any of the events referred to in paragraphs (d) to (g) above; or

(i) Unlawfulness: it is or will become unlawful for the Issuer to perform or comply with any of its obligations under or in respect of the Notes, any Transaction Document or any such obligations cease or will cease to be legal, valid, binding and enforceable and the Issuer fails to provide a remedy within the following 45 days; or

(j) In-house Providing Mechanism: any competent authority issues a conclusive decision (or a competent court issues a judgment or order which is immediately effective) stating that the In- house Providing Mechanism Requirements are not or cease to be satisfied; or

(k) Concession Event: a Concession Event has occurred; or

(l) Enforcement proceedings: a distress, attachment, execution or other legal process is levied, enforced or sued out on or against all or a Substantial Part of the property, assets or revenues of the Issuer and is not discharged or stayed within 90 days; or

(m) Security enforced: any Security Interest created or assumed by the Issuer in respect of all or a Substantial Part of the property, assets or revenues of the Issuer becomes enforceable and any step is taken to enforce it (including the taking of possession or the appointment of a receiver, manager or other similar person) and such enforcement is not discharged or stayed within 90 days; or

(n) Unsatisfied judgment: one or more judgment(s) or order(s) (in each case being a judgment or order from which no further appeal or judicial review is permissible under applicable law) for the payment of any amount in excess of €7,500,000 (or its equivalent in other currencies, as reasonably determined by the Noteholders’ Representative on the basis of the middle spot rate for the relevant currency against the euro as quoted by any leading bank on the day on which this paragraph operates), whether individually or in aggregate, is rendered against the Issuer, becomes enforceable in a jurisdiction where the Issuer is incorporated and continue(s) unsatisfied and unstayed for a period of 120 days after the date(s) thereof or, if later, the date therein specified for payment.

“Permitted Reorganisation” means, in respect of the Issuer, an amalgamation, merger, spin-off, reconstruction, reorganisation, restructuring, transfer or contribution of assets or other similar transaction (a “relevant transaction”) whilst solvent and:

(a) on terms approved by an Extraordinary Resolution (as defined in the Agency Agreement) of the Noteholders; or

(b) whereby, to the extent that the Issuer is not a surviving entity, the resulting company whilst solvent is a Successor in Business of the Issuer. “Successor in Business” means, in relation to the Issuer, any company which, as a result of relevant transaction, (i) assumes the obligations of the Issuer in respect of the Notes, and (ii) carries on, as a successor to the Issuer, the whole or substantially the whole of the business related to the integrated water service carried on by the Issuer immediately prior thereto and (iii) beneficially owns the whole or substantially the whole of the undertaking, property and assets owned by the Issuer immediately prior thereto, or (iv) where item (ii) or (iii) is not complied with, no Rating Agency has announced a Rating Downgrade in respect of the Successor in Business or the Notes during the 150-day period following the announcement of a definitive agreement in respect of the relevant transaction, in each case to the extent ratings are assigned at the relevant time; or

(c) whereby, to the extent that the Issuer whilst solvent is the surviving entity, the relevant transaction has no material adverse effect on the ability of the Issuer to perform all its liabilities (payment and otherwise) in respect of all then existing obligations of the Issuer of the Notes. For the purposes of this provision, “material adverse effect” will be deemed not to have occurred where no Rating Agency has announced a Rating Downgrade in respect of the

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Issuer or the Notes during the 150-day period following the announcement of a definitive agreement in respect of the relevant transaction, in each case to the extent ratings are assigned at the relevant time;

provided that in any case indicated above, the relevant transaction or transactions does not or do not result in the loss of the requirements and conditions for the In-house Providing Mechanism or, in any case, does not or do not result in the loss of the integrated water services under the Concession Agreement.

13.2 Enforcement of Transaction Security by the Security Agent

The Security Agent shall take any enforcement action in respect of the Transaction Security where instructed to do so in accordance with the terms of the Intercreditor Agreement, subject to the Security Agent being indemnified and/or prefunded and/or provided with security to its satisfaction, in accordance with the terms of the Intercreditor Agreement. No Noteholder shall be entitled to (i) take any steps or action against the Issuer to enforce the performance of any of the provisions of the Security Documents or (ii) take any other proceedings in respect or concerning the Issuer.

The net proceeds of enforcement with respect to the Transaction Security will be applied in the order specified in the Intercreditor Agreement. Such net proceeds may be less than the sums due to the Noteholders (after deduction of amounts ranking ahead of the Noteholders).

14. NOTICES

14.1 Notices to the Noteholders

Any notice regarding the Notes, as long as the Notes are held through Monte Titoli, shall be deemed to have been duly given through the systems of Monte Titoli, and, as long as the Notes are listed on the Irish Stock Exchange and the rules of such exchange so require, published on the Irish Stock Exchange website (www.ise.ie). The Issuer shall also ensure that notices are duly published in a manner which complies with the rules and regulations of any stock exchange or other relevant authority on which the Notes are for the time being listed. Any such notice shall be deemed to have been given on the date of such publication or, if published more than once or on different dates, on the first date on which publication is made.

14.2 Notices from the Noteholders

Notices to be given by any Noteholder shall be in writing and given by lodging the same with the Paying Agent.

15. MEETINGS OF NOTEHOLDERS, MODIFICATION AND VOTES RELATING TO THE INTERCREDITOR AGREEMENT

15.1 Meetings of Noteholders

Subject to compliance with mandatory provisions of Italian law applicable from time to time, the Agency Agreement contains provisions for convening meetings of Noteholders to consider any matters relating to the Notes, including the modification of any provision of these Conditions or the Agency Agreement. Any such modification may be made if sanctioned by an Extraordinary Resolution. Subject to mandatory provisions of Italian law and (if applicable) the Issuer’s By-laws (statuto) in force from time to time, the directors of the Issuer or the Noteholders’ Representative may convene a meeting of Noteholders at any time at their discretion and the Issuer and the Noteholders’ Representative shall be obliged to do so upon request in writing of the Noteholders holding one twentieth of the aggregate principal amount of the Notes for the time being outstanding. The quorum at any initial meeting of Noteholders will be one or more persons holding or representing more than one half of the aggregate principal amount of the Notes for the time being outstanding, or, at a new meeting of Noteholders, one or more persons being or representing Noteholders holding more than one fourth of the aggregate principal amount of the outstanding Notes. The majority required to pass

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an Extraordinary Resolution will be: (a) for voting on any matter other than a Reserved Matter (as defined below): (i) in the case of an initial meeting of Noteholders, at least two thirds of the aggregate principal amount of the outstanding Notes represented at the meeting of Noteholders, and (ii) in the case of a new meeting of Noteholders, more than one half of the aggregate principal amount of the outstanding Notes represented at the meeting of Noteholders; or (b) for voting on a Reserved Matter: (i) in the case of an initial meeting of Noteholders, one or more persons holding or representing more than one half of the aggregate principal amount of the outstanding Notes, (ii) in the case of a new meeting of Noteholders, one or more persons holding or representing more than one fourth of the aggregate principal amount of the outstanding Notes, provided that the Issuer's By-laws (statuto) may in each case (to the extent permitted under applicable Italian law) provide for higher majorities.

For the purpose of the Condition, Reserved Matter means any proposal to amend the Conditions of the Notes, including any proposal: (a) to change any date fixed for payment of principal or interest in respect of the Notes, to reduce the amount of principal or interest payable on any date in respect of the Notes, to reduce the rate or rates of interest in respect of the Notes or to alter the method of calculating the amount of any payment in respect of the Notes on redemption or maturity or the date for any such payment; (b) to effect the exchange or substitution of the Notes for, or the conversion of the Notes into, shares, bonds or other obligations or securities of the Issuer or any other person or body corporate formed or to be formed; (c) to change the currency in which amounts due in respect of the Notes are payable; (d) to change the quorum required at any meeting of Noteholders or the majority required to pass an Extraordinary Resolution; or (e) to amend the definition of Reserved Matter. Any Extraordinary Resolution duly passed at any such meeting of Noteholders shall be binding on all the Noteholders, whether present at the meeting(s) of Noteholders or not.

15.2 Written resolution

A resolution in writing will take effect as if it were an Extraordinary Resolution if it is signed (i) by or on behalf of all Noteholders who for the time being are entitled to receive notice of a meeting of Noteholders under the Agency Agreement or (ii) if such Noteholders have been given at least 15 days’ notice of such resolution, by or on behalf one or more persons holding: (A) in case of any matter other than a Reserved Matter, one half of the aggregate principal amount of the outstanding Notes, and (B) in case of a Reserved Matter, three-fifths of the aggregate principal amount of the outstanding Notes. Such a resolution in writing may be contained in one document or several documents in the same form, each signed by or on behalf of one or more Noteholders.

15.3 Plenary Meeting of Noteholders

Notwistanding any other provision concerning the convening of a meeting of Noteholders, a meeting of Noteholders shall be considered as validly held if there are one or more persons present being or representing Noteholders holding the total aggregate principal amount of the outstanding Notes

15.4 Deemed Noteholders’ representations, warranties, acceptances and agreements

By purchasing a Note, Noteholders (A) shall be deemed to have represented and warranted to the Issuer that they are Qualified Holders and acknowledged that the Issuer is not and will not be, at any time, in a position to monitor the identity and qualification of any purchaser of, or holder of, the Notes as well as the compliance with Italian laws and regulations applicable to the entities that may purchase or hold the Notes and (B) to the greatest extent permitted by applicable laws (i) shall be deemed to have agreed to, and accepted, the appointment of the Security Agent as rappresentante of the Noteholders for the purposes of art. 2414-bis, paragraph 3 of the Italian Civil Code and Article 185, paragraph 5 of the Public Contracts Code, (ii) shall be deemed to have agreed and acknowledged that the Security Agent will administer the Transaction Security in accordance with the Agency Agreement, the Security Documents and the Intercreditor Agreement and (iii) shall be deemed to have agreed to, and accepted, the appointment of BNP Paribas Securities Services, Milan Branch as noteholders’ representative representing them and having the powers and duties indicated in the Conditions, in the Agency Agreement and in the Intercreditor Agreement (the “Noteholders’ Representative”) and (iv) shall be deemed to have confirmed that, as from the relevant purchase date, it intends to be party to the Intercreditor Agreement (through the Noteholders’ Representative) as a 121

Noteholder and a Secured Creditor, undertakes to perform all the obligations expressed in the Intercreditor Agreement to be observed by a Noteholder and a Secured Creditor and agrees that it shall be bound by the provisions of the Intercreditor Agreement as if it had been an original party to it. The removal of any Noteholders’ Representative by the Noteholders shall not become effective unless and until a new Noteholders’ Representative has been appointed by means of an Extraordinary Resolution of the meeting of Noteholders (upon Issuer’s designation in compliance with applicable tender procedure under Italian law, to the extend required under the Italian laws applicable from time to time) and has accepted appointment. The resignation of any Noteholders’ Representative shall not become effective unless and until a new Noteholders’ Representative has been appointed and has accepted appointment according to this Condition 15.4. If, within 60 (sixty) days of receipt by the Issuer and the Noteholders of the notice of resignation, the meeting of the Noteholders has not appointed a new Noteholders’ Representative (upon Issuer’s designation in compliance with applicable tender procedure under Italian law, to the extend required under the Italian laws applicable from time to time), the resigning Noteholders’ Representative will be entitled to appoint its own successor (the “Initial Successor”) between internationally recognised investment banks or internationally recognized companies acting in the same field of activity of the Noteholders’ Representative and the Initial Successor shall give notice of such appointment to the Issuer and the Noteholders as soon as practicable. However, to the extent that the appointment of a successor Noteholders’ Representative gives rise to a requirement to comply with a tender procedure under applicable Italian laws, such appointments shall have effect only until such time as the meeting of the Noteholders appoints a further successor Noteholders’ Representative (upon Issuer’s designation) in accordance with such tender procedure and the Issuer gives notice to the Initial Successor of such further appointment. Such further successor may, but need not, be the same person as the Initial Successor and, if it is not, upon the giving of such notice by the Issuer, the appointment of the Initial Successor shall immediately terminate. Each Noteholder, by reason of holding the Notes, will recognise the power of the Noteholders’ Representative, hereby granted, to appoint its own successor and will recognise such successor (if and when appointed) as its representative.

15.5 Modification

The Paying Agent, the Noteholders' Representative, the Security Agent and the Issuer may agree, without the consent of the Noteholders to:

(a) any modification of, the Notes or any of the provisions of the Agency Agreement which is of a formal, minor or technical nature or is made to correct a manifest error or to comply with mandatory provisions of the law, or

(b) any modification (except a Reserved Matter) of the Notes or any of the provisions of the Agency Agreement which is not prejudicial to the interests of the Noteholders in the opinion of the Paying Agent, the Noteholders' Representative and the Security Agent.

Any modification shall be binding on the Noteholders and, unless the Paying Agent agrees otherwise, any modification shall be notified by the Issuer to the Noteholders as soon as practicable thereafter in accordance with Condition 14 (Notices).

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15.6 Votes relating to the Intercreditor Agreement

To the extent no Extraordinary Resolution concerning such matter has already been duly passed according to the provisions of meeting of Noteholders under the Agency Agreement, if a vote by the Noteholders has to be cast with reference to a matter concerning the Intercreditor Agreement, a notice informing the Noteholders in this respect shall be notified by the Issuer to the Noteholders in accordance with Condition 14 (Notices) (the “Intercreditor Notice”).

If within 30 days from the day on which the Intercreditor Notice is given, no Extraordinary Resolution concerning such matter is duly passed according to the provisions of meeting of Noteholders under the Agency Agreement, each Noteholder will express an autonomous vote on the same matter (on the basis of the outstanding amount of Notes held by such Noteholder) following the instructions which will be provided by the Noteholders’ Representative in this respect.

16. NOTEHOLDERS’ REPRESENTATIVE – SECURITY AGENT

The Subscription Agreement and the Intercreditor Agreement contain provisions for the indemnification of the Noteholders’ Representative and of the Security Agent, including provisions permitting each of them not to take any action unless indemnified and/or secured and/or prefunded to their satisfaction. Each of the Noteholders’ Representative and the Security Agent is entitled to enter into business transactions with the Issuer and any entity related to the Issuer without accounting for any profit.

17. ROUNDING

For the purposes of any calculations referred to in these Conditions (unless otherwise specified in these Conditions), all figures resulting from such calculations will be rounded, if necessary, to the nearest euro cent (with half a euro cent being rounded upwards).

18. FURTHER ISSUES

The Issuer may from time to time without the consent of the Noteholders create and issue further notes, having the same terms and conditions as those of the Notes, or the same except for the amount and date of the first payment of interest, which may be consolidated and form a single series with the outstanding Notes.

Unless otherwise approved by the Noteholders, the issue of such further Notes (the “Further Notes”) will be subject to the following conditions precedent being fulfilled:

(a) any Further Notes are assigned the same ratings as those applicable to the Notes with which they are to be consolidated and form a single series;

(b) the current ratings of the Notes then outstanding are not downgraded, withdrawn or qualified as a result of such issue of Further Notes;

(c) application will be made, in respect of the Further Notes, for such Notes to be admitted on the same exchange on which the Notes then issued are admitted to trading; and

(d) any Further Notes will share the benefit of the Transaction Security constituted by the Security Documents.

In connection with the issue of such Further Notes any of the Security Documents may be amended but subject always to the provisions of the Conditions and the Intercreditor Agreement.

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19. GOVERNING LAW AND SUBMISSION TO JURISDICTION

19.1 Governing Law

The Agency Agreement, the General Privilege, the Notes and any non-contractual obligations arising out of or in connection with the Agency Agreement, the Transaction Security or the Notes are governed by, and construed in accordance with, Italian law.

19.2 Submission to Jurisdiction

The courts of Rome have exclusive jurisdiction to settle any dispute arising out of or in connection with the Notes, including any dispute as to their existence, validity, interpretation, performance, breach or termination or the consequences of their nullity and any dispute relating to any non- contractual obligations arising out of or in connection with the Notes (a “Dispute”) and each of the Issuer and any Noteholders in relation to any Dispute submits to the exclusive jurisdiction of the courts of Rome.

19.3 Other Documents The Issuer has in the Agency Agreement submitted to the jurisdiction of the courts of Milan. The Issuer has in the General Privilege submitted to the jurisdiction of the courts of Rome.

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TAXATION Italian Taxation The statements herein regarding taxation are based on the laws in force in Italy as of the date of this Prospectus and are subject to any changes in law occurring after such date, which changes could be made on a retroactive basis. The Issuer will not update this summary to reflect changes in laws and if such a change occurs the information in this summary could become invalid. It does not purport to be a comprehensive description of all the tax considerations which may be relevant to a decision to subscribe for, purchase, own or dispose of the Notes and does not purport to deal with the tax consequences applicable to all categories of investors, some of which (such as dealers in securities or commodities) may be subject to special rules. This summary assumes that the Issuer is resident in Italy for tax purposes, is structured and conducts its business in the manner outlined in this Prospectus. Changes in the Issuer’s organizational structure, tax residence or the manner in which it conducts its business may invalidate this summary. This summary also assumes that each transaction with respect to the Notes is at arm’s length. Where in this summary English terms and expressions are used to refer to Italian concepts, the meaning to be attributed to such terms and expressions shall be the meaning to be attributed to the equivalent Italian concepts under Italian tax law. Prospective purchasers are advised to consult their own tax advisers concerning the overall tax consequences of their ownership of the Notes.

1. Tax treatment of Notes

Under Article 1 of law Decree No. 83 of 22 June 2012, interest from notes falling within the category of project bonds (obbligazioni di progetto) issued by Italian resident companies referred to and subject to the conditions set forth by Article 157 of legislative Decree No. 163 of 12 April 2006, currently replaced by Article 185 of the Public Contracts Code, is subject to the same tax regime provided for bonds issued by the Italian Republic (titoli del debito pubblico).

Accordingly, as clarified by the Italian tax authorities (Agenzia delle Entrate) with Circular No. 4/E of 6 March 2013 and No. 19/E of 27 June 2014, these notes fall within the scope of Legislative Decree No. 239 of 1 April 1996 ("Decree 239"), as subsequently amended, which provides, inter alia, for the applicable regime with respect to the tax treatment of interest, premium and other income (including the difference between the redemption amount and the issue price) (hereinafter collectively referred to as "Interest") from notes falling within the category of bonds ("obbligazioni") or debentures similar to bonds ("titoli similari alle obbligazioni") issued, amongst others, by Italian resident companies referred to by and falling within the scope of Article 157 of legislative Decree No. 163 of 12 April 2006, currently replaced by Article 185 of the Public Contracts Code.

For this purpose, bonds or debentures similar to bonds are securities that incorporate an unconditional obligation to pay, at maturity, an amount not lower than their nominal value and that do not grant any right to directly or indirectly participate in (or to control) the management of the issuer.

However, the application of the tax regime provided for bonds issued by the Italian Republic (titoli del debito pubblico) is only limited to Interest from the said notes and is not extended to other capital income (redditi di capitale) deriving from the notes, such as income deriving from repurchase agreements (riporti or pronti contro termine) or to capital gains deriving from the sale or redemption of the notes.

According to Article 185 of the Public Contracts Code only Qualified Investors (investitori qualificati) and entities controlled by such Qualified Investors pursuant to Article 2359 of the Italian Civil Code may subscribe for, purchase or hold the Notes. Therefore, the following information on the Italian tax regime applicable to the Notes describes only the Italian tax regime applicable to Qualified Holders.

1.1 Italian resident Noteholders Where an Italian resident Noteholder is (a) an individual not engaged in an entrepreneurial activity to which the Notes are connected (unless he has opted for the application of the risparmio gestito regime – see under "Capital gains tax" below), (b) a non-commercial partnership, (c) a non-commercial private or public institution, or (d) an investor exempt from Italian corporate income taxation, Interest relating to the Notes and

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accrued during the relevant holding period are subject to a withholding tax, referred to as "imposta sostitutiva", levied at the rate of 12.5 per cent. In the event that the Noteholders described under (a) and (c) above are engaged in an entrepreneurial activity to which the Notes are connected, the imposta sostitutiva applies as a provisional tax.

Where an Italian resident Noteholder is a company or similar commercial entity, or a permanent establishment in Italy of a foreign company to which the Notes are effectively connected and the Notes are deposited with an authorised intermediary, Interest from the Notes will not be subject to imposta sostitutiva, but must be included in the relevant Noteholder's annual income tax return and are therefore subject to general Italian corporate taxation (IRES, generally levied at the rate of 27.5 per cent.) and, in certain circumstances, subject to the "status" of the Noteholder, also to regional tax on productive activities (IRAP).

Under the regime provided by Law Decree No. 351 of 25 September 2001 payments of Interests in respect of the Notes made to Italian resident real estate investment funds established pursuant to article 37 of Legislative Decree No. 58 of 24 February 1998 and article 14-bis of Law No. 86 of 1 January 1994 are not subject to imposta sostitutiva.

If the Noteholder is resident in Italy and is an open-ended or closed-ended investment fund subject to the tax regime provided by Law No. 77 of 23 March 1983 ("Fund") or a SICAV and the Notes are held by an authorised intermediary, Interest accrued during the holding period on the Notes will not be subject to imposta sostitutiva but must be included in the management results of the Fund or SICAV accrued at the end of each tax period. The Fund or SICAV will not be subject to taxation on such result, but a substitutive tax, up to 26 per cent. will apply, in certain circumstances, to distributions made in favour of unitholders or shareholders. The taxable base of this substitutive tax is determined in relation of the portion of the Fund invested in treasury bonds and similar bonds, such as the Notes.

Where an Italian resident Noteholder is a pension fund (subject to the regime provided for by article 17 of the Italian Legislative Decree No. 252 of 5 December 2005) and the Notes are deposited with an authorised intermediary, Interest relating to the Notes and accrued during the holding period will not be subject to imposta sostitutiva, but 62.5 per cent. of the amount of such Interest must be included in the result of the relevant portfolio accrued at the end of the tax period and is subject to an ad hoc 20 per cent. substitute tax.

Pursuant to Decree 239, imposta sostitutiva is applied by banks, Società di intermediazione mobiliare ("SIMs"), fiduciary companies, Società di gestione del risparmio, stockbrokers and other entities identified by a decree of the Ministry of Finance (each an "Intermediary"). In order to entitled to apply the imposta sostitutiva an Intermediary must (i) (a) be resident in Italy or be a permanent establishment in Italy of a non- Italian resident financial intermediary, or (b) be an entity or a company not resident in Italy, acting through a system of centralised administration of securities and directly connected with the Department of Revenue of the Italian Ministry of Finance having appointed an Italian representative for the purposes of the Decree and (ii) intervene, in any way, in the collection of interest or in the transfer of the Notes. For the purpose of the application of the imposta sostitutiva, a transfer of Notes includes any assignment or other act, either with or without consideration, which results in a change of the ownership of the relevant Notes or in a change of the Intermediary with which the Notes are deposited.

Where the Notes are not deposited with an Intermediary, the imposta sostitutiva is applied and withheld by any Italian financial intermediary paying interest to a Noteholder or, absent that, by the issuer.

1.2 Non-Italian resident Noteholders As clarified by the Italian tax authorities with Circular letter No. 4/E of 6 March 2013, an exemption from imposta sostitutiva should apply where the Noteholder is a non-Italian resident without a permanent establishment in Italy to which the Notes are effectively connected, provided that the non-Italian resident beneficial owner is either (a) resident, for tax purposes, in a country which allows for a satisfactory exchange of information with Italy as listed in the Italian Ministerial Decree of 4 September 1996, as amended from time to time (the White List) or in any other decree or regulation that will be issued in the future to provide the list of such countries (the New White List); or (b) an institutional investor that is resident in a country included in the White List (or in the New White List, once effective), even if it does not possess the status of a taxpayer in its own country of residence; or, independently by the relevant country of tax residence; or (c) an

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international body or entity set up in accordance with international agreements which have entered into force in Italy; or (d) a Central Bank or an entity which manages, inter alia, the official reserves of a foreign State.

In order to ensure gross payment, non-Italian resident Noteholders must be the beneficial owners of the payments of Interest and (a) deposit, directly or indirectly, the Notes with a resident bank or SIM or a permanent establishment in Italy of a non-Italian resident bank or SIM or with a non resident operator of a clearing system having appointed as its agent in Italy for the purposes of Decree 239 an Italian resident bank or SIM or a permanent establishment in Italy of a non-Italian resident bank or SIM or a non-Italian resident bank or SIM which are in contact via computer with the Ministry of Economy and Finance and (b) file with the relevant depository, prior to or concurrently with the deposit of the Notes, a statement of the relevant Noteholder, which remains valid until withdrawn or revoked, in which the Noteholder declares to be eligible to benefit from the applicable exemption from imposta sostitutiva. Such statement, which is not requested for international bodies or entities set up in accordance with international agreements which have entered into force in Italy nor in the case of foreign Central Banks or entities which manage, inter alia, the official reserves of a foreign State, must comply with the requirements set forth by Ministerial Decree of 12 December 2001.

The imposta sostitutiva will be applicable to Interest paid to Noteholders who (i) are resident, for tax purposes, in countries which do not allow for a satisfactory exchange of information with Italy or (ii) otherwise do not qualify for the exemption.

Noteholders who are subject to the substitute tax might be eligible for a total or partial relief under any applicable tax treaty.

2. Capital gains tax

2.1 Italian resident Noteholders

Any gain obtained from the sale or redemption of the Notes would be treated as part of the taxable income (and, in certain circumstances, depending on the "status" of the Noteholder, also as part of the net value of the production for IRAP purposes) if realised by an Italian company or a similar commercial entity (including the Italian permanent establishment of foreign entities to which the Notes are connected) or Italian resident individuals engaged in an entrepreneurial activity to which the Notes are connected.

Where an Italian resident Noteholder is an individual not holding the Notes in connection with an entrepreneurial activity and certain other persons, any capital gain realised by such Noteholder from the sale or redemption of the Notes would be subject to an imposta sostitutiva, levied at the rate of 26 per cent. Under some conditions and limitations, Noteholders may set off losses with their gains.

In respect of the application of imposta sostitutiva, taxpayers may opt for one of the three regimes described below: a) Under the tax declaration regime ("regime della dichiarazione"), which is the default regime for taxation of capital gains realised by Italian resident individuals not engaged in an entrepreneurial activity to which the Notes are connected, the imposta sostitutiva on capital gains will be chargeable, on a yearly cumulative basis, on all capital gains, net of any incurred capital loss, realised by the Italian resident individual Noteholder holding the Notes not in connection with an entrepreneurial activity pursuant to all sales, early redemption or redemptions of the Notes carried out during any given tax year. Italian resident individuals holding the Notes not in connection with an entrepreneurial activity must indicate the overall capital gains realised in any tax year, net of any relevant incurred capital loss, in their annual tax return and pay imposta sostitutiva on such gains together with any balance income tax due for such year. Capital losses in excess of capital gains may be carried forward against capital gains realised in any of the four succeeding tax years. As such regime constitutes the ordinary regime, the Noteholder must apply it whenever he does not opt for any of the two other regimes. b) As an alternative to the tax declaration regime, Italian resident individual Noteholders holding the Notes not in connection with an entrepreneurial activity may elect to pay the imposta sostitutiva separately on capital gains realised on each sale or redemption of the Notes ("risparmio amministrato" regime). Such separate taxation of capital gains is allowed subject to: (i) the Notes being deposited with Italian banks,

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SIMs or certain authorised financial intermediaries; and (ii) an express election for the risparmio amministrato regime being timely made in writing by the relevant Noteholder. The depository is responsible for accounting for imposta sostitutiva in respect of capital gains realised on each sale, early redemption or redemptions of the Notes (as well as in respect of capital gains realised upon the revocation of its mandate), net of any incurred capital loss, and is required to pay the relevant amount to the Italian tax authorities on behalf of the taxpayer, deducting a corresponding amount from the proceeds to be credited to the Noteholder or using funds provided by the Noteholder for this purpose. Under the risparmio amministrato regime, where a sale or redemption of the Notes results in a capital loss, such loss may be deducted from capital gains subsequently realised, within the same securities management, in the same tax year or in the following tax years up to the fourth. Under the risparmio amministrato regime, the Noteholder is not required to declare the capital gains in the annual tax return. c) Any capital gains realised by Italian resident individuals holding the Notes not in connection with an entrepreneurial activity who have entrusted the management of their financial assets, including the Notes, to an authorised intermediary and have adopted for the so-called risparmio gestito regime will be included in the computation of the annual increase in value of the managed assets accrued, even if not realised, at year end, subject to a substitute tax, levied at the rate of 26 per cent, to be paid by the managing authorised intermediary. Under the risparmio gestito regime, any depreciation of the managed assets accrued at year end may be carried forward against increase in value of the managed assets accrued in any of the four succeeding tax years. Under the risparmio gestito regime, the Noteholder is not required to declare the capital gains realised in the annual tax return. Any capital gains realised by a Noteholder who is an Italian real estate fund to which the provisions of Law Decree No. 351 of 25 September 2001, as subsequently amended, apply will be subject neither to imposta sostituitva nor to any other income tax at the level of the real estate investment fund.

Any capital gains realised by a Noteholder which is a Fund or a SICAV will be included in the results of the relevant portfolio accrued at the end of the tax period. The Fund or SICAV will not be subject to taxation on such result, but a substitutive tax, up to 26 per cent, will apply, in certain circumstances, to distributions made in favour of unitholders or shareholders.

Any capital gains realised by a Noteholder who is an Italian pension fund (subject to the regime provided for by article 17 of the Italian Legislative Decree No. 252 of 5 December 2005) will be included in the result of the relevant portfolio accrued at the end of the tax period, to be subject to an 20 per cent substitute tax.

2.2 Non-Italian resident Noteholders

Capital gains realised by non-Italian-resident Noteholders, not having a permanent establishment in Italy to which the Notes are connected, from the sale, early redemption or redemption of Notes issued by an Italian resident Issuer and transferred on regulated markets are not subject to the imposta sostitutiva nor to another Italian income tax.

Capital gains realised by non-Italian resident Noteholders from the sale, early redemption or redemption of Notes not transferred on regulated markets are not subject to the imposta sostitutiva, provided that the effective beneficiary: (a) is resident in a country included in the White List (or in the New White List once effective); or (b) is an international entity or body set up in accordance with international agreements which have entered into force in Italy; or (c) is a Central Bank or an entity which manages, inter alia, the official reserves of a foreign State; or (d) is an institutional investor which is resident in a country included in the White List (or in New White List, once effective), even if it does not possess the status of a taxpayer in its own country of residence. In this case, if non Italian residents without a permanent establishment in Italy to which the Notes are effectively connected have opted for the risparmio amministrato regime or the risparmio gestito regime, exemption from Italian capital gains tax will apply upon condition that they file in due course with the authorised financial intermediary an appropriate self-declaration ("autocertificazione") stating that they meet the requirements indicated above.

If none of the conditions above is met, capital gains realised by non-Italian resident beneficial owner of the Notes from the sale or redemption of the Notes issued by an Italian resident issuer not traded on regulated markets are subject to the imposta sostitutiva at the rate of 26 per cent. 128

In any event, non Italian resident persons or entities without a permanent establishment in Italy to which the Notes are effectively connected that may benefit from a double taxation treaty with Italy, providing that capital gains realised upon the sale or redemption of the Notes are to be taxed only in the country of tax residence of the recipient, will not be subject to imposta sostitutiva in Italy on any capital gains realised upon sale for consideration or redemption of Notes. In this case, if non Italian residents without a permanent establishment in Italy to which the Notes are effectively connected have opted for the risparmio amministrato regime or the risparmio gestito regime, exemption from Italian capital gains tax will apply upon the condition that they file in due course with the authorised financial intermediary appropriate documents which include, inter alia, a statement issued by the competent tax authorities of the country of residence of the non Italian residents.

3. Inheritance and gift taxes

Pursuant to Law Decree No. 262 of 3 October 2006, converted into Law No. 286 of 24 November 2006, as subsequently amended, the transfers of any valuable asset (including shares, notes or other securities) as a result of death or donation are taxed as follows: a) tansfers in favour of spouses and direct descendants or direct ancestors are subject to an inheritance and gift tax applied at a rate of 4 per cent. on the value of the inheritance or the gift exceeding €1,000,000; b) transfers in favour of relatives to the fourth degree or relatives-in-law of a direct lineage or after relatives-in-law of a collated lineage up to the third degree are subject to an inheritance and gift tax applied at a rate of 6 per cent. on the entire value of the inheritance or the gift. Transfers in favour of brothers/sisters are subject to the 6 per cent. inheritance and gift tax on the value of the inheritance or the gift exceeding €100,000; and c) any other transfer is, in principle, subject to an inheritance and gift tax applied at a rate of 8 per cent. on the entire value of the inheritance or the gift. If the transfer is made in favour of persons with severe disabilities, the tax is levied to the rate above mentioned on the value exceeding €1,500,000.

4. Transfer tax

Contracts relating to the transfer of securities are subject to the registration tax as follows: (i) public deeds and notarised deeds are subject to fixed registration tax at the rate of €200; (ii) private deeds are subject to registration tax only in case of use, reference in a subsequent registered deed (enunciazione) or voluntary registration.

5. Stamp duty and Wealth tax on securities deposited abroad

Pursuant to Article 19, paragraph 1, of Decree 201 of 6 December 2011 (“Decree 201”), a stamp duty on the value of the financial products and/or financial instruments included in the statement sent to clients ("Statement Duty"). The Statement Duty is levied at the rate 0.20 per cent. (but in any case not exceeding €14,000. This cap is not applied to individuals). This stamp duty is determined on the basis of the market value or – if no market value figure is available – the nominal value or redemption amount of the securities held. The stamp duty applies both to Italian resident and non-Italian resident securityholders, to the extent that the Notes are held with an Italian-based financial intermediary.

Pursuant to Article 19, paragraph 18, of Decree 201, Italian resident individuals holding the securities outside the Italian territory (i.e. without depositing them with an Italian resident financial intermediary) are required to pay a wealth tax at the current rate of 0.20 per cent. for each year. This tax is calculated on the market value of the securities at the end of the relevant year or – if no market value figure is available – on the nominal value or the redemption value of such financial assets held outside the Italian territory. Taxpayers are entitled to an Italian tax credit equivalent to the amount of wealth taxes paid in the State where the financial assets are held (up to an amount equal to the Italian wealth tax due).

6. Financial transaction tax

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On 14 February 2013, the European Commission published a proposal for a Directive for a common Financial transaction tax (“FTT”) in Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia (the “participating Member States”). The proposed FTT has very broad scope. If introduced in the form proposed on 14 February 2013, it could apply to certain dealings in Notes (including secondary market transactions) in certain circumstances.

Under the 14 February 2013 proposal, FTT could apply in certain circumstances to persons both within and outside of the participating Member States. Generally, it would apply to certain dealings in the Notes where at least one party is a financial institution, and at least one party is established in a participating Member State. A financial institution may be, or be deemed to be, "established" in a participating Member State in a broad range of circumstances, including (a) by transacting with a person established in a participating Member State or (b) where the financial instrument which is subject to the dealings is issued in a participating Member State.

The FTT proposal remains subject to negotiation between the participating Member States. It may therefore be altered prior to any implementation, the timing of which remains unclear. Additional EU Member States may decide to participate. Prospective holders of the Notes are advised to seek their own professional advice in relation to the FTT.

FATCA Withholding

The United States Hiring Incentives to Restore Employment Act (generally referred to as "FATCA") and related guidance impose a 30% United States federal withholding tax on payments of (i) interest that is treated as paid from sources within the United States and (ii) gross proceeds from sales, exchanges, redemptions or other dispositions of obligations that produce United States source interest occurring after December 31, 2018, in each case, to certain "foreign financial institutions" and "nonfinancial foreign entities", as defined in the United States Internal Revenue Code of 1986, as amended, if certain disclosure or certification requirements related to United States accounts or ownership are not satisfied. In addition, an intergovernmental agreement between the United States and the jurisdictions of a foreign financial institution may modify these rules. Neither the Issuer nor any paying agent nor any other person will be obliged to pay any additional amounts to "gross up" payments to the Noteholders or beneficial owners of the Notes for or on account of any withholding or deduction imposed under FATCA. Noteholders are urged to consult their own tax advisors regarding the application of FATCA with respect to an investment in the Notes.

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SUBSCRIPTION AND SALE The Lead Manager has, in a subscription agreement dated 21 December 2016 (the “Subscription Agreement”) and made between the Issuer and the Lead Manager, upon the terms and subject to the conditions contained therein, agreed to subscribe and pay for the Notes at their issue price of 100 per cent. of their principal amount less a commission. The Issuer has also agreed to reimburse the Lead Manager for certain of its expenses incurred in connection with the management of the issue of the Notes. The Lead Manager is entitled in certain circumstances to be released and discharged from its obligations under the Subscription Agreement prior to the closing of the issue of the Notes. General No action has been or will be taken in any jurisdiction by the Issuer or the Lead Manager that would, or is intended to, permit a public offering of the Notes, or possession or distribution of this Prospectus or any other offering material, in any country or jurisdiction where action for that purpose is required. Persons into whose hands this Prospectus comes are required by the Issuer and the Lead Manager to comply with all applicable laws and regulations in each country or jurisdiction in which they purchase, offer, sell or deliver Notes or have in their possession, distribute or publish this Prospectus or any other offering material relating to the Notes, in all cases at their own expense. The Lead Manager has represented, warranted and agreed that it will, to the best of its knowledge and belief, comply with all the relevant laws and regulations in each jurisdiction in which it purchases, offers, sells or delivers Notes or has in its possession or distributes the Prospectus or any other offering material. United States of America The Notes have not been and will not be registered under the Securities Act or any state securities laws in the United States. The Notes are being offered only outside the United States by the Lead Manager to certain investors in offshore transactions in reliance on Regulation S, and may not be offered, sold or delivered within the United States or to, or for the account or benefit of, “U.S. persons”, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Terms used in this paragraph have the meaning given to them by Regulation S. The Lead Manager has represented and warranted that it has not offered and sold the Notes, and has agreed that it will not offer and sell the Notes, (a) as part of its own distribution at any time, or (b) otherwise until forty (40) days after the later of the commencement of the offering and the Issue Date, except in accordance with Rule 903 of Regulation S. Accordingly, neither the Lead Manager, any of its Affiliates (as defined in Rule 405 of the Securities Act) nor any person acting on its or their behalf has engaged or will engage in any directed selling efforts with respect to the Notes, and the Lead Manager has represented and agreed that it has complied and will comply with the offering restrictions requirement of Regulation S. The Lead Manager has agreed that, at or prior to confirmation of sale of the Notes, it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases the Notes from it during the distribution compliance period a confirmation or notice to substantially the following effect: “The securities covered hereby have not been registered under the United States Securities Act of 1933, as amended (the “Securities Act”), and may not be offered and sold within the United States or to, or for the account or benefit of, “U.S. persons” (i) as part of their distribution at any time or (ii) otherwise, until forty (40) days after the later of the commencement of the offering and the Issue Date, except pursuant to an exemption from, or in a transaction not subject to, the regulation requirements of the Securities Act. Terms used above have the meanings given to them by Regulation S.” Terms used in the above paragraph have the meanings given to them by Regulation S. The Lead Manager has represented, warranted and agreed with the Issuer that: (a) except to the extent permitted under U.S. Treasury Regulation §1.163-5(c)(2)(i)(D) (or substantially identical successor regulation) (the “D Rules”): (i) it has not offered or sold, and during the forty (40) day restricted period will not offer or sell, Notes in bearer form to a person who is within the United States or its possessions or to a United States person;

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(b) it has, and throughout the restricted period will have, in effect, procedures reasonably designed to ensure that its employees or agents who are directly engaged in selling Notes in bearer form are aware that such Notes may not be offered or sold during the restricted period to a person who is within the United States or its possessions or to a United States person, except as permitted by the D Rules; (c) if it is a United States person, (i) it is acquiring the Notes in bearer form for the purposes of resale in connection with their original issue and (ii) if it retains Notes in bearer form for its own account, it will only do so in accordance with the requirements of U.S. Treasury Regulation §1.163-5(c)(2)(i)(D)(6) (or substantially identical successor regulation); and (d) with respect to each Affiliate (as defined in Rule 405 of the Securities Act) of the Lead Manager that acquires Notes in bearer form from the Lead Manager for the purpose of offering or selling such Notes during the restricted period, the Lead Manager undertakes to the Issuer that it will either (i) repeat and confirm the representations and agreements contained in sub-paragraphs (a), (b) and (c) on its behalf, or (ii) obtain from such Affiliate for the benefit of the Issuer the representations and undertakings contained in sub-paragraphs (a), (b) and (c) above. Terms used in the above paragraph have the meaning given to them by the Code and regulations thereunder, including the D Rules. In addition, until forty (40) days after the commencement of the offering, an offer or sale of Notes within the United States by a dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act. The Republic of Italy The offering of the Notes has not been cleared by CONSOB pursuant to Italian securities legislation. Accordingly, no Notes may be offered, sold or delivered, directly or indirectly, nor may copies of the Prospectus or of any other document relating to the Notes be distributed in the Republic of Italy, except: (i) to qualified investors (investitori qualificati), as defined under Article 100 of the Legislative Decree No. 58 of 24 February 1998, as amended (the “Financial Services Act”), as implemented by Article 26, paragraph 1(d) of CONSOB Regulation No. 16190 of 29 October 2007, as amended (“CONSOB Regulation No. 16190”), pursuant to Article 34-ter, first paragraph, letter b), of CONSOB Regulation No. 11971 of 14 May 1999, as amended (“CONSOB Regulation No. 11971”); or (ii) in other circumstances which are exempted from the rules on public offerings pursuant to Article 100 of the Financial Services Act and its implementing CONSOB Regulations including CONSOB Regulation No. 11971. Any such offer, sale or delivery of the Notes or distribution of copies of the Prospectus or any other document relating to the Notes in the Republic of Italy must be in compliance with the selling restriction under (i) and (ii) above and: (a) made by investment firms, banks or financial intermediaries permitted to conduct such activities in the Republic of Italy in accordance with the relevant provisions of the Financial Services Act, CONSOB Regulation No. 16190, Legislative Decree No. 385 of 1 September 1993, as amended (the “Banking Act”) and any other applicable laws or regulation; (b) in compliance with Article 129 of the Banking Act and the implementing guidelines of the Bank of Italy, as amended, from time to time with regard, inter alia, to the reporting obligations required; and (c) in compliance with any other applicable laws and regulations or requirement imposed by CONSOB or the Bank of Italy or any other Italian authority. United Kingdom The Lead Manager has represented, warranted and agreed that: (a) it has only communicated or caused to be communicated, and will only communicate or cause to be communicated, an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000, as amended (the “FSMA”)) received by it

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in connection with the issue or sale of the Notes in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer; and (b) it has complied and will comply with all applicable provisions of the FSMA and the regulations adopted thereunder with respect to anything done by it in relation to any Notes in, from or otherwise involving the United Kingdom.

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GENERAL INFORMATION 1. Listing and Admission to Trading Application has been made for the Notes to be listed on the Official List of the Irish Stock Exchange and admitted to trading on the regulated market of the Irish Stock Exchange. Admission is expected to take effect on or about the Issue Date. 2. Authorisation The Issuer has obtained all necessary consents, approvals and authorisations in connection with the issue and performance of its obligations under the Notes. The creation and issue of the Notes has been authorised by a resolution of the Shareholders’ Meeting of the Issuer dated 28 July 2016, and pursuant to resolutions of the Board of Directors of the Issuer dated 13 July 2016 and 20 December 2016. 3. Expenses Related to Admission to Trading The total expenses related to admission to trading are estimated at €6,540 including all fees payable to maturity. 4. Legal and Arbitration Proceedings Save as disclosed in “Description of the Issuer—Legal Proceedings”, neither the Issuer nor any other member of the Group is or has been involved in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuer is aware) in the 12 months preceding the date of this document which may have or have in such period had a significant effect on the financial position or profitability of the Issuer or the Group. 5. Auditors The financial statements of the Issuer as of and for the year ended 31 December 2014 have been prepared by management in accordance with Italian GAAP and have been audited by Eleuteria Audit S.p.A. (previously Mazars S.p.A.). The financial statements of the Issuer as of and for the year ended 31 December 2015 have been prepared by management in accordance with Italian GAAP and have been audited by BDO Italia S.p.A. Eleuteria Audit S.p.A. (previously Mazars S.p.A.), with registered office at Via Bigli no. 19, 20121, Milan, is registered under No. 41306 in the Single Register of Legal Auditors at the Ministry of the Economy and Finance (Registro Unico dei Revisori Legali presso il Ministero dell’Economia e delle Finanze), State General Accounting (Ragioneria Generale dello Stato). BDO Italia S.p.A. with registered office at Viale Abruzzi n. 94, 20131, Milan, Italy, is registered under No. 167911 in the Single Register of Legal Auditors at the Ministry of the Economy and Finance (Registro Unico dei Revisori Legali presso il Ministero dell’Economia e delle Finanze), State General Accounting (Ragioneria Generale dello Stato). BDO Italia S.p.A. has issued a special purpose independent auditors’ report with respect to the consolidated financial information of the Issuer as at and for the year ended 31 December 2015 prepared in accordance with IFRS (the “2015 IFRS Report”), which is shown at the end of the Appendix 1 to this Prospectus (Special Purpose Audited IFRS Consolidated Financial Statements). The report of BDO Italia S.p.A. is included in this Prospectus, in the form and context in which it is included, at the request of the Issuer and with the consent of BDO Italia S.p.A. BDO Italia S.p.A. accepts responsibility for the 2015 IFRS Report and declares that, having taken all reasonable care to ensure that such is the case, the information contained in the 2015 IFRS Report, to the best of its knowledge, is in accordance with the facts and contains no omission likely to affect its import. PricewaterhouseCoopers S.p.A. with registered office at Via Monte Rosa, 91, 20149 Milan, Italy, has been appointed to act as Issuer’s external auditor for the period 2016-2024. PricewaterhouseCoopers S.p.A. is registered under No. 119644 in the Single Register of Legal Auditors at the Ministry of the Economy and Finance (Registro Unico dei Revisori Legali presso il Ministero dell’Economia e delle Finanze), State General Accounting (Ragioneria Generale dello Stato).

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6. Significant Material Change Since 31 December 2015 there has been no material adverse change in the prospects of the Issuer and no significant change in the financial or trading position of the Issuer. 7. Documents on Display For so long as any of the Notes are outstanding, copies of the following documents may be inspected in electronic format during normal business hours at the specified office of each Paying Agent: (a) the deed of incorporation and the by-laws of the Issuer; (b) the Agency Agreement and the Intercreditor Agreement; (c) the audited consolidated Financial Statements for the years ended 31 December 2015 and 2014; (d) the most recently published audited annual financial statements of the Issuer. A copy of this Prospectus will also be electronically available for viewing on the website of the Irish Stock Exchange (www.ise.ie). A copy of the documents incorporated by reference in this Prospectus will be electronically available for viewing on the Issuer’s website (www.mmspa.eu). 8. Legend for any U.S. Person The Notes and any Coupons appertaining thereto will bear a legend to the following effect: “Any United States person who holds this obligation will be subject to limitations under the United States income tax laws, including the limitations provided in Sections 165(j) and 1287(a) of the Internal Revenue Code”. 9. ISIN Code The Notes have been accepted for clearance through Monte Titoli S.p.A. The International Securities Identification Number for the Notes is IT0005225898. The registered office and principal place of business of Monte Titoli S.p.A. is at Piazza degli Affari 6, 20123 Milan, Italy. 10. Yield Based on the issue price of 100 per cent. of the principal amount of the Notes, the yield on the Notes is 3.15 per cent. on an annual basis. The yield is calculated at the Issue Date on the basis of the Issue Price. It is not an indication of future yield. 11. Potential Conflicts of Interest In the ordinary course of business, the Lead Manager, the Principal Paying Agent and their affiliates have engaged, and may in the future engage, in lending, in investment banking and/or commercial banking transactions with, and may perform services for, the Issuer and its affiliates and with companies involved directly or indirectly in the sectors in which the Issuer and its affiliates operate and/or competitors of the Issuer interested in carrying out transactions of a similar nature. In addition, in the ordinary course of their business activities, the Lead Manager and its affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of the Issuer or its affiliates or any entity related to the Notes. The Lead Manager or its affiliates that have a lending relationship with the Issuer routinely hedge their credit exposure to the Issuer consistently with their customary risk management policies. Typically, the Lead Manager and its affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in the Issuer’s securities, including potentially the Notes offered hereby. Any such short positions could adversely affect future trading prices of the Notes. The Lead Manager and its affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments. For the purpose of this paragraph, the word “affiliates” also includes parent companies. 135

In particular, IMI, acting as Lead Manager in the offering of the Notes, is in a situation of conflict of interest as: • One or more of the companies members of the Intesa Sanpaolo Group – the banking group of which IMI is a member - have granted significant financing and they are one of the main financial lenders to the Issuer and its parent and group companies; • The net proceeds of the issue of the Notes will be used by the Issuer to fund the investments under the Investment Plan (Programma degli Interventi) in accordance with the terms of the Milan IWS Concession. Furthermore, as allowed under Articles 185 of the Public Contracts Code, the proceeds will be used to repay the Issuer’s existing IMI Agreement as it also directly relates to the management and operation of the IWS and to the investments under the Investment Plan. • IMI will subscribe and pay for the Notes and will receive commissions for its roles in the offering (as further described in “Subscription and Sale”). 12. Post-Issuance Information The Issuer will not provide any post-issuance information, unless required to do so by any applicable laws and regulations. 13. Irish Listing Agent Walkers Listing Service Limited is acting in solely in its capacity as listing agent for MM S.p.A. in relation to the Notes and is not itself seeking admission to the Official List or trading on the regulated market of the Irish Stock Exchange for the purposes of the Prospectus Directive.

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APPENDIX 1

SPECIAL PURPOSE AUDITED IFRS CONSOLIDATED FINANCIAL STATEMENTS

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MM S.p.A. CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2015

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(In thousands of euro) Year ended December Notes 31, 2015 Revenues 6.1 190,555 Revenues for works on assets under concession 6.2 24,697 Other revenues and income 6.3 9,719 Total revenues and income 224,971 Costs of raw materials, consumables and goods 6.4 (2,425) Costs for services 6.5 (93,225) Costs for works on assets under concession 6.6 (23,670) Personnel costs 6.7 (50,303) Amortization, depreciation, write-downs and accruals 6.8 (13,292) Other operating costs 6.9 (3,297) Total operating costs (186,212) Operating profit 38,759 Financial income 6.10 942 Financial expenses 6.10 (4,727) Profit before income taxes 34,974 Income taxes 6.11 (12,017) Net profit (A) 22,957

Other comprehensive income that will not be subsequently reclassified to

the income statement Actuarial gains (losses) on employees’ defined benefit plans (215) Tax effect on actuarial gains (losses) on employees’ defined benefit plans 57

Other comprehensive income that will be subsequently reclassified to the

income statement Change in the fair value of cash flow hedge derivatives 1,788 Tax effect on change in the fair value of cash flow hedge derivatives (858)

Total other comprehensive income, net of tax effect (B) 772

Total comprehensive income for the year (A)+(B) 23,729

1

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As of December 31, (In thousands of euro) Notes As of January 1, 2015 2015

ASSETS Non-current assets Rights on assets under concession 7.1 198,696 185,435 Other intangible assets 7.2 172 234 Property, plant and equipment 7.3 45,082 4,051 Deferred tax assets 7.4 6,265 8,693 Other non-current assets 7.5 1,102 1,086 Total non-current assets 251,317 199,499 Current assets Trade receivables 7.6 207,846 212,574 Inventories 7.7 1,833 1,661 Cash and cash equivalents 7.8 41,968 16,157 Other current assets 7.9 35,405 21,875 Total current assets 287,052 252,267 TOTAL ASSSETS 538,369 451,766 EQUITY Share capital 15,600 15,600 Reserves 87,963 40,804 Net profit 22,957 - Total equity 7.10 126,520 56,404 LIABILITIES Non-current liabilities Provisions for risks and charges 7.11 5,154 4,643 Provision for employee severance indemnities 7.12 7,514 7,307 Non-current financial liabilities 7.13 85,632 77,023 Other non-current liabilities 7.14 19,128 14,186 Total non-current liabilities 117,428 103,159 Current liabilities Trade payables 7.15 210,540 199,735 Current financial liabilities 7.13 51,601 50,738 Current tax payable 7.16 1,026 8,314 Other current liabilities 7.17 31,254 33,416 Total current liabilities 294,421 292,203 TOTAL LIABILITIES AND EQUITY 538,369 451,766

2

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands of euro) Year ended December 31, Notes 2015 Operating activities: Profit before income taxes 34,974 Adjustments for: Depreciation and amortization of tangible and intangible assets 6.8 10,532 Accruals to the provision for impairment of trade receivables 6.8 2,000 Accruals to provisions for risks and charges 6.8 760 Other accruals to provisions 7.7 - 7.12 35 Net financial expenses/(income) 6.9 3,785 Other non monetary changes (1,415)

Cash flow from operating activities before changes in working capital 50,671

Cash flow generated/(absorbed) by changes in working capital: 2,958 - Trade receivables and other assets (3,813) - Inventories (207) - Trade payables and other liabilities 6,978 Income taxes paid (11,302) Net interest received/(paid) (3,377) Utilization of provisions 7.6 - 7.11 (1,730) Cash flow from operating activities (A) 37,220 Investing activities: Net investments in tangible and intangible assets 7.1 - 7.2 - 7.3 (24,697) Cash flow from investing activities (B) (24,697) Financing activities: Proceeds from new loans 15,000 Repayment of loans (4,618) Cash flow from financing activities ( C) 10,382 Net change in cash and cash equivalents (A)+(B)+( C) 22,905 Cash and cash equivalents at the beginning of year 7.8 16,157 Cash and cash equivalents of Milano Immobili e Reti S.r.l. 2,906 Cash and cash equivalents at the end of year 7.8 41,968

3

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(In thousands of euro) Share Cash flow hedge Other reserves Net profit Total equity capital reserve Balance as of January 1, 2015 15,600 (8,895) 49,699 - 56,404

Contribution of Milano Immobili e Reti S.r.l. - - 46,387 - 46,387

Change in the fair value of cash flow hedge derivatives, net of tax effect - 930 - - 930

Net profit - - - 22,957 22,957

Actuarial gains (losses) on employees’ defined benefit plans, net of tax effect - - (158) - (158)

Balance as of December 31, 2015 15,600 (7,965) 95,928 22,957 126,520

On behalf of the Board of Directors Chairman Dr. Davide Amedeo Corritore

4

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

1. General information

MM S.p.A. (hereafter also “MM”, the “Company”) is a company incorporated in Italy, with registered and administrative offices in Milan, in Via Del Vecchio Politecnico 8, organized under the laws of the Republic of Italy. The sole shareholder of the Company is the Municipality of Milan.

The Company and its subsidiaries (together the “Group”) operate principally in the integrated water service (“IWS”) industry in the north of Italy, with particular focus in providing services in Milan, by virtue of a concession signed on November 28, 2007 (subsequently amended on September 28, 2015) by the Company and the Azienda Speciale - Autorità d’Ambito Territoriale Ottimale della Città di Milano (“ATO”) expiring in 2037 (the “Concession”). Besides the IWS, which represents the core business of the Group, its ancillary businesses also include engineering services as well as property management and facility management of housing properties of the Municipality of Milan.

These consolidated financial statements were approved by the Board of Directors of the Company on October 26, 2016.

2. Summary of accounting policies

2.1 Basis of preparation

These special purposes consolidated financial statements of MM S.p.A. as of and for the year ended December 31, 2015 (the ‘‘Consolidated Financial Statements’’) have been prepared, in accordance with International Financial Reporting Standards as adopted by EU (“EU-IFRS”), exclusively for the purpose of the inclusion of some financial information derived from them in the prospectus under preparation by the Company (the “Prospectus”) in relation to the issuance of notes outside the United States to certain investors in offshore transactions, in reliance on Regulation S under the Securities Act. The Company has prepared its local financial statements in accordance with the accounting principles issued by the Organismo Italiano di Contabilità (the “Italian GAAP”) and has never prepared, until the time of preparation of the Consolidated Financial Statements, its consolidated financial statements in accordance with the EU-IFRS. Note 10 “First time adoption of IFRS” reports the main effect of the application of the EU-IFRS to the Consolidated Financial Statements.

The Consolidated Financial Statements include the consolidated statement of financial position as of December 31, 2015 and as of January 1, 2015 (the “Transition Date”), the consolidated statement of comprehensive income, the consolidated statement of cash flows and the consolidated statement of changes in shareholders equity for the year ended December 31, 2015 and the explanatory notes.

EU-IFRS include all International Financial Reporting Standards, all International Accounting Standards (“IAS”), as well as all interpretations of the IFRS Interpretations Committee, the International Financial Reporting Interpretations Committee (“IFRIC”), formerly the Standing Interpretations Committee (“SIC”) which, at the balance sheet date, have been adopted by the European Union according to the procedure established by Regulation EC 1606/2002 of the European Parliament and European Council on July 19, 2002.

5

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

These Consolidated Financial Statements are presented in thousands of Euro, which represents the currency of the economic environment in which the Group operates. All amounts presented in the notes are expressed in thousands of Euro, unless otherwise stated.

The format of the financial statements and the relative classification criteria adopted by the Group, within the framework of the options provided by IAS 1 – Presentation of financial statements are presented below:

 the consolidated statement of financial position uses a format classifying the assets and liabilities according to current and non-current;

 the consolidated statement of comprehensive income, which classifies costs according to their nature, includes, besides the profit or loss for the year, other non-owner changes in equity;

 the consolidated statement of cash flows is prepared by recognizing cash flows from operating activities according to the indirect method.

These Consolidated Financial Statements have been prepared on a going concern basis as there is the reasonable expectation that the Company will continue its operational activities in the foreseeable future, and in any event in a time horizon of at least twelve months.

2.2 Scope of consolidation and consolidation principles

These Consolidated Financial Statements include the statement of financial position as of December 31, 2015 and January 1, 2015 and the income statement for the year ended December 31, 2015 of the Company and its subsidiaries, approved by their relative boards. The list of companies consolidated by the Group line by line at December 31, 2015 is provided below:

% ownership as of Registered office Share capital December 31, 2015 Parent company: MM S.p.A. Milan € 15,600,000

Subsidiaries: Napoli Metro Engineering S.r.l. Milan € 1,000,000 100% Metro Engineering S.r.l. Milan € 500,000 100%

During 2015, as part of the restructuring of equity investments held by the local authorities, the Municipality of Milan approved the merger of its entirely controlled subsidiary Milano Immobili e Reti S.r.l. (“MIR”) into MM S.p.A. (the “Merger”).

Below is a brief description of the criteria used for the consolidation of subsidiaries.

Subsidiaries

The consolidated financial statements include the financial statements of all the subsidiaries. Control exists when the parent holds, directly or indirectly, the majority of voting rights or has rights or liability with respect to variable returns deriving from its relations with the entity concerned and, at the same time, is able to affect such returns by exercising its power over that entity. The subsidiaries are consolidated using the line-by-line method starting from 6

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015 the date that control commences until the date that control is transferred to a third party. The closing date of such financial statements coincides with that of the parent company. The principles adopted for line-by-line consolidation are as follows:

 Assets, liabilities, revenues and expenses of the subsidiaries are consolidated on a line-by-line basis, attributing to the non-controlling interests, where applicable, their share of equity and profit or loss for the year which is shown separately in equity and in the income statement;

 Business combinations in which control is acquired are recorded as set out in IFRS 3 – Business Combinations by applying the acquisition method of accounting which requires assets acquired, liabilities assumed and equity instruments issued to be measured at their fair value at the acquisition date. The identifiable assets acquired, the liabilities and contingent liabilities assumed are recognized at their fair value at the acquisition date except for deferred tax assets and liabilities, assets and liabilities for employee benefits and assets held for sale that are recognized on the basis of the relative accounting principles. The difference between the acquisition cost and the fair value of the assets and liabilities acquired, if positive, is recognized in intangible assets as goodwill, or, if negative, after reviewing the fair value measurements of the assets and liabilities acquired, is recognized directly in the income statement, as income. Transaction costs are recorded in the income statement when incurred;

 The acquisition cost also includes contingent consideration measured at fair value at the control acquisition date. Subsequent changes in fair value are recognized in the income statement or the statement of comprehensive income if the contingent consideration is a financial asset or liability. If the contingent consideration is classified as equity, the original amount is not re-measured and when extinguished is recorded directly in equity;

 Non-controlling interests in equity and in the profit (loss) are shown as separate items in the financial statements. At the acquisition date, non-controlling interests can be measured at either the acquisition date fair value or according to the proportionate share of the net identifiable assets of the acquired entity. The choice in the measurement method for non-controlling interests is decided on a transaction-by-transaction basis. If the business combination is achieved in stages, the Group re- measures any previously held interest in the acquired entity at acquisition date fair value and any resultant gain or loss is recognized in the income statement as appropriate;

 Changes in non-controlling interests in a subsidiary, which do not constitute an acquisition or a loss of control, are accounted for as equity transactions. Therefore, for purchases subsequent to the acquisition of control and the partial disposal of a subsidiary without loss of control, any positive or negative difference between the purchase cost/sales price and the corresponding share of equity is recognized directly in the equity of the Group;

 In the case of the partial disposal of a subsidiary resulting in the loss of control, the investment retained is adjusted to fair value and the revaluation forms part of the gain or loss on the transaction;

7

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

 Significant gains and losses (including the related tax effects) resulting from transactions between fully consolidated Group companies which have not yet been realized with third parties at the end of the reporting period are eliminated. Receivables and payables, costs and revenues and finance income and expenses between companies included in the consolidation are also eliminated, if significant.

2.3 Accounting policies

A brief description of the most significant accounting policies and principles used in the preparation of the Consolidated Financial Statements is provided below.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at acquisition or production costs including directly chargeable incidental expenses necessary to bring the asset to use. Cost comprises the finance expenses directly attributable to the acquisition, construction or production of the asset. Cost also includes the expected costs of dismantling and removing the asset and restoring it to its original condition if a contractual obligation exists.

The expenses incurred for ordinary and/or cyclical maintenance and repairs are charged directly to the income statement in the year incurred. The capitalization of costs inherent to the expansion, modernization or improvement of the structural elements owned or used by third parties is made solely to the extent that they meet the conditions for being classified separately as an asset or part of an asset under the component approach method.

Property, plant and equipment are depreciated systematically each year on a straight-line basis at economic and technical rates calculated according to the asset’s estimated useful lives. The depreciation rates for each category of property, plant and equipment are reported below:

Engineering/Public Housing Depreciation rate % Directly used buildings relating to the company’s business activities 3% Plants relating to buildings 15% Furniture and fixtures 12% Telephone systems 20% Computers 20% Cars 25%

Integrated Water Service Depreciation rate % Light constructions 10% Computers 20% Furniture and fixtures 12% Cars 25% Transport vehicles 20% shorter of the remaining useful life of the asset or Leasehold improvements the remaining length of the lease

Assets and Property Management Depreciation rate % Directly used buildings relating to the company’s business activities 3% Light constructions 10% Specific plants for waste treatment 10% Equipment 20%

Depreciation starts when the asset is ready for use taking into account the time at which such condition actually arises.

Leased assets

8

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

Assets held under finance leases, in which substantially all the risks and rewards of ownership are transferred to the Group, are initially recognized as assets of the Group at fair value or, if lower, at the present value of the minimum lease payments, including bargain purchase options. The corresponding liability due to the lessor is included in the statement of financial position under financial liabilities. Such assets are depreciated according to the criterion and rates indicated previously, unless the lease term is shorter than the useful life represented by those rates and there is no reasonable certainty of transfer of ownership of the leased asset on expiry of the lease, in which case the depreciation period is represented by the lease term.

Leases where the lessor substantially retains all the risks and rewards of ownership of the assets are accounted for as operating leases. Operating lease payments are recognized over the term of the lease. Benefits received or to be received, and those given or to be given, as incentives for taking out operating leases are recognized on a straight- line basis for the entire duration of the lease.

INTANGIBLE ASSETS

Intangible assets are non-monetary assets which are without physical substance, identifiable, controllable and have the capacity to produce future economic benefits. Such assets are initially recognized at purchase and/or construction cost, including directly attributable expenses to prepare the asset for use. Interest expenses, if any, during and for the development of intangible assets are considered part of the acquisition cost. In particular, the following intangible assets can be identified in the Group. a) Rights on assets under concession (IFRIC 12)

The “Rights on assets under concession” represent the right of the Group to utilise the assets under concession of the Integrated Water Services (so-called intangible asset method) in consideration of the costs incurred for the design and construction of the asset with the obligation to return the asset at the end of the concession. The value corresponds to the “fair value” of the design and construction assets increased by the financial charges capitalized as applicable, in accordance with IAS 23, during the construction phase. The fair value of the construction work of the Integrated Water Services is based on the costs actually incurred increased by a mark-up of 4.3% representing the best estimate of the remuneration of the internal costs for the management of the works and design activities undertaken by the Group, which is a mark-up that a third party general contractor would request for undertaking the same activities, in accordance with IFRIC 12. The determination of the fair value results from the fact that the operator must apply paragraph 12 of IAS 18 and therefore if the fair value of the services received (specifically the right to utilize the asset) cannot be determined reliably, the revenue is calculated based on the fair value of the construction work undertaken. The construction work in progress at the reporting date is measured based on the state of advancement of the work in accordance with IAS 11 and this amount is reported in the income statement line “Revenues for works on assets under concession”. Assets under concession are amortized over the duration of the concession, as it is expected that the future economic benefits of the asset will be utilized by the operator. The depreciable amount is the difference between the asset’s cost and their residual value, determined in accordance with the applicable regulations currently in force. Where events arise which indicate a reduction in the value of these intangible assets, the difference between the present value and the recovery value is recognized in the income statement. When the useful life of the assets under concession is lower than the length of the concession,

9

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015 the costs related to major refurbishment or renewals are not capitalised but are included in the estimate of the related provision, in accordance with IFRIC 12. b) Software and other intangible assets

Software and other intangible assets are recognized at cost, as described previously, net of accumulated amortization and impairment losses, if any. Amortization starts when the asset is available for use and it is charged systematically over the residual period of benefit, that is, over the estimated useful life. The estimated useful life for software is of 3 years.

IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS

At every closing date, the Group assesses whether there are any indications of impairment of intangible and tangible assets. Both internal and external sources of information are used for this purpose. Internal sources include obsolescence or physical damage, and significant changes in the use of the asset and the economic performance of the asset compared to estimated performance. External sources include the market value of the asset, changes in technology, markets or laws, trend in market interest rates and the cost of capital used to evaluate investments.

When indicators of impairment exist, the carrying amount of the assets is reduced to the recoverable amount and any impairment loss is recorded in the income statement. The recoverable amount of an asset is the higher of fair value less costs to sell and its value in use, the latter being the present value of future cash flows estimated for the asset in question. In calculating the value in use, the estimated future cash flows are discounted to present value using a discount rate before taxes that reflects current market assessments of the time value of money, proportionate to the investment period, and the risks specific to the asset. For assets that do not generate largely independent cash flows, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

If the carrying amount of the cash-generating unit exceeds the recoverable amount, an impairment loss is recognized in the income statement. The impairment loss is first recognized as a deduction of the carrying amount of goodwill allocated to the cash-generating unit and then only applied to the other assets of the cash-generating unit in proportion to their carrying amount, up to the recoverable amount of the assets with a finite useful life. When the conditions that gave rise to an impairment loss no longer exist, the carrying amount of the asset is re- recognized in the income statement, up to the carrying amount that would have been recorded had no impairment loss been recognized and if normal amortization/depreciation been applied.

TRADE RECEIVABLES AND OTHER CURRENT AND NON-CURRENT ASSETS

Trade receivables and other financial assets are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method. Trade receivables and other financial assets are included in current assets, except for those with a contractual due date beyond twelve months after the date of the financial statements, which are classified as non-current assets.

Impairment losses on receivables are recognized when there is objective evidence that the Group will no longer be able to recover the receivables due from the counterparty based on the contract terms.

10

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

Objective evidence includes events such as:

 significant financial difficulties of the counterparty;

 legal disputes with the counterparty over the receivables;

 probability that the counterparty will declare insolvency or other financial restructuring procedure.

The amount of an impairment loss is measured as the difference between the carrying amount of the asset and the present value of estimated future cash flows and is recognized in the income statement. If in subsequent periods the reasons for the impairment cease to exist, the asset value is reinstated up to the amount that would have been recognized had amortized cost been applied.

Financial assets, relating to non-derivative financial instruments, with fixed or determinable payments and fixed maturity dates, which the Group intends and has the ability to hold until maturity are classified as “held-to-maturity financial assets”. Such assets are measured at amortized cost using the effective interest method, adjusted by impairment losses, if any. Whenever there are impairment losses, the same principles as described above for loans and receivables are applied.

Available-for-sale financial assets, including investments in other companies representing available-for-sale assets, are measured at fair value, if determinable. Changes in fair value are recognized directly in an equity reserve in other components of comprehensive income until they are disposed or impaired, at which time they are reversed to income. Other unlisted investments classified as “available-for-sale financial assets” whose fair value cannot be measured reliably are measured at cost adjusted by any impairment losses, which are recognized in the consolidated income statement, as required by IAS 39.

INVENTORIES

Inventories are stated at the lower of purchase cost, using the weighted average cost method, and realizable value by reference to the market price.

Obsolete and slow-moving inventories are written down according to their possibility of utilization or realization by setting up a specific provision recorded directly as a decrease in the corresponding asset item.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents includes cash on hand, bank current accounts, on demand deposits and other short-time highly liquid financial investments, which are readily convertible into cash or cash equivalents within 90 days of the original date of acquisition and are subject to an insignificant risk of change in value.

FINANCIAL LIABILITIES, TRADE PAYABLES AND OTHER LIABILITIES

Financial liabilities (other than derivative financial instruments), trade payables and other payables are initially recognized at fair value, net of directly attributable transaction costs, and are subsequently measured at amortized cost applying the effective interest rate method. If there is a change in the expected cash flows, which can be reliably determined, the value of the liabilities is recalculated to reflect this change. Financial liabilities are

11

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015 classified as current liabilities, unless the Group has the unconditional right to defer payment for at least twelve months after the statement of financial position date.

Financial liabilities are derecognized at the time of their extinguishment and when the Group has transferred all the risks and charges relating to the instrument.

FINANCIAL DERIVATIVES

Financial derivatives are assets and liabilities recognized as fair value. The Group use financial derivatives to hedge interest rate risks.

Consistent with the provisions of IAS 39, financial derivatives qualify for hedge accounting only if:  at the time that the hedge is established there is a formal designation and the hedging relationship is documented;  it is presumed that the hedge is highly effective;  the effectiveness the can be reliably measured;  the hedge is highly effective during the different accounting periods for which it is designated.

When derivatives qualify for hedge accounting, the following accounting treatments are applied:  if the derivatives hedge the risk of fluctuations in the fair value of the hedged assets or liabilities (fair value hedge; e.g., hedging fluctuations in the fair value of fixed-rate assets/liabilities), they are measured at fair value through profit or loss; accordingly, the hedged assets and liabilities are adjusted to reflect changes in fair value associated with the hedge risk;  if the derivatives hedge the risk of fluctuations in the cash flows of the hedged assets or liabilities (cash flow hedge; e.g., hedging fluctuations in the cash flows of assets/liabilities caused by fluctuations in interest rates), changes in the fair value of derivatives are initially recognized in equity and subsequently transferred to the income statement consistent with the economic effects of the hedged transactions.

If hedge accounting cannot be applied, the gains or losses resulting from the measurement at fair value of the derivatives are immediately recognized in profit or loss.

FOREIGN CURRENCY TRANSLATION

Transactions in currencies other than the functional currency are translated at the foreign exchange rate prevailing at the transaction date. Foreign exchange gains and losses arising from the settlement of transactions or from year- end translation of assets and liabilities in currencies other than Euro are recognized in the income statement.

EMPLOYEE BENEFITS

Short-term benefits are represented by salaries and wages, social security, indemnities in lieu of holidays and incentives in the form of bonuses payable in the twelve months subsequent to the date of the financial statements. Such benefits are recognized as components of personnel costs in the period in which their services are rendered.

Post-employment benefits are divided into two categories: defined contribution plans and defined benefit plans. 12

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

In defined contribution plans, contributory costs are charged to the income statement as they occur, based on the relative nominal value.

In defined benefit plans, which include severance indemnity due to employees regulated by art. 2120 of the Civil Code (“TFR”), the amount of the benefit to be paid is quantifiable only after termination of employment, and associated with one or more factors such as age, the years of service and compensation. Therefore, the relative cost is charged to the statement of comprehensive income based on actuarial computations. The liability recorded in the financial statements for defined benefit plans corresponds to the present value of the obligation at the date of the financial statements. The obligations for defined benefit plans are determined annually by an independent actuary using the projected unit credit method. The present value of defined benefit plans is determined by discounting future cash flows at an interest rate equal to high-quality corporate bonds issued in Euro which take into account the period of the relative pension plan.

Starting from January 1, 2007, Finance Law 2007 and the relative implementing decrees introduced amendments concerning TFR employee severance indemnity. The amendments include the decision of employees as to the destination of their accruing indemnity. In particular, new flows of TFR can be directed by the employee either to pre-chosen pension funds or retained in the company. In the case of external pension funds the payment of the defined contribution will be made to the fund and starting from such date the new amounts accrued have the nature of defined contribution funds not subject to actuarial measurement

Changes in actuarial gains and losses are recognized in other consolidated comprehensive income.

PROVISIONS FOR RISKS AND CHARGES

Provisions for risks and charges are set up to cover losses or liabilities whose existence is certain or probable but which at the end of the reporting period are uncertain as to amount or as to the date on which they will arise. Provisions are recognized only when there is a current obligation (legal or constructive) for a future outflow of resources deriving from a past event and it is probable that the outflow will be necessary to fulfill the obligation. This amount represents the best estimate of the present value of expenditures required to settle the obligation. If the effect of the time value is material, and the payment date of the obligations can be reasonably estimated, provisions to be accrued are the present value of the expected cash flows, using a rate that reflects market conditions, the change in the time value of money and the risks specific to the obligation. The increase in the provision due to the cost of money over time is recognized as interest expenses.

GRANTS

Capital grants are recognized in the income statement over the period necessary for correlating them to the related costs; they are represented in the statement of financial position by recording the grant as deferred revenue.

RECOGNITION OF REVENUES

Revenues are recognized initially at the fair value of the consideration received net of rebates and discounts. Revenues from sales of goods are recognized when the company has substantially transferred all the risks and rewards of ownership of the goods. Revenues from services are recognized by reference to the value of the services

13

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015 rendered as at the end of the reporting period. Revenues from connections of users to the Integrated Water Service are recognized when the service is completed.

Revenues on construction work of the Integrated Water Services are recognized in relation to the state of advancement of works in accordance with the percentage of completion method and on the basis of the costs incurred for these activities, increased by a mark-up of 4.3% representing the remuneration of the internal costs of the management of the works and design activities undertaken by the Group, that is the mark-up which would be applied by a general contractor (as established by IFRIC 12).

In accordance with EU-IFRS, sums collected on behalf of third parties, such as in an agency relationship, which do not cause an increase in the company’s equity, are excluded from revenues which, instead, are represented solely by the fees and commissions accrued on the transaction.

COST OF GOODS PURCHASED AND SERVICES PERFORMED

Purchases of goods and the performance of services are recognized in the income statement on an accrual basis.

INCOME TAXES

Current taxes are calculated based on the taxable income for the year, applying the current tax rates on the date of the financial statements.

Deferred taxes are calculated for all differences emerging between the tax basis of an asset or liability and the respective carrying amount. Deferred tax assets, not offset by deferred tax liabilities, are recognized to the extent that it is likely that future taxable income will be available against which they may be recovered. Deferred taxes are determined using the tax rates that are expected to apply in the periods in which the differences will be realized or extinguished, based on the tax rates in force or substantially in force on the statement of financial position date.

Current and deferred taxes are recognized in the statement of comprehensive income, except for those related to items charged or credited directly in equity, in which case the respective tax impact is also recognized directly to equity. Taxes are offset when they are applied by the same tax authority and there is a legal right to offset.

2.4 Recently issued accounting standards

Standards and amendments issued by the IASB, not endorsed by the European Union or endorsed but not yet applicable to these Consolidated Financial Statements, are reported in the following table:

14

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

Endorsed by the Effective date EU

Amendments to IAS 27: Equity Method in Separate Yes Annual periods beginning on or after January 1, Financial Statements 2016

Yes Annual periods beginning on or after January 1, Amendments to IAS 1: Disclosure Initiative 2016

Yes Annual periods beginning on or after January 1, Annual Improvements to IFRSs 2012–2014 Cycle 2016

Amendments to IAS 16 and IAS 38: Clarification of Yes Annual periods beginning on or after January 1, Acceptable Methods of Depreciation and Amortisation 2016

Amendments to IFRS 11: Accounting for Acquisitions Yes Annual periods beginning on or after January 1, of 2016 Interests in Joint Operations

Yes Annual periods beginning on or after January 1, Amendments to IAS 16 and IAS 41: Bearer Plants 2016

No Annual periods beginning on or after January 1, IFRS 16 Leases 2019

No Annual periods beginning on or after January 1, IFRS 9 Financial Instruments 2018

IFRS 15 Revenue from Contracts with Customers No Annual periods beginning on or after January 1, including amendments to IFRS 15: Effective date of 2018 IFRS 15

Amendments to IFRS 10, IFRS 12 and IAS 28: No Annual periods beginning on or after January 1, Investment Entities – Applying the Consolidation 2016 Exception

Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its No Deferred indefinitely Associate or Joint Venture

Amendments to IAS 12: Recognition of Deferred Tax No Annual periods beginning on or after January 1, Assets for Unrealised Losses 2017

No Annual periods beginning on or after January 1, Amendments to IAS 7: Disclosure Initiative 2017

Clarifications to IFRS 15 Revenue from Contracts with No Annual periods beginning on or after January 1, Customers 2018

15

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

Amendments to IFRS 2: Classification and No Annual periods beginning on or after January 1, Measurement of Share-based Payment Transactions 2018

3. Management of financial risks

The Group’s operations are exposed to the following risks: market risk (defined as foreign exchange and interest rate risk), credit risk (relating to both regular sales transactions with customers and financing activities) and liquidity risk (relating to the availability of financial resources and access to the credit market and financial instruments in general).

The Group’s objective is to maintain control over financial exposure, ensuring that the structure of its liabilities is in line with the composition of assets and delivering the necessary operating flexibility through the combined use of liquidity generated by current operating activities and bank financing.

The ability to generate liquidity through operating activities, together with the Group’s borrowing ability, enables the Group to adequately meet its operating needs, in terms of financing its operating working capital, funding its investments and meeting its financial obligations.

The Group’s financing policy and the management of the related financial risks is monitored at the central level. Specifically, the central finance department is responsible for assessing and approving projected financing needs, monitoring developing trends and, when necessary, taking corrective action.

The section that follows provides qualitative and quantitative indications about the effects of these risks on the Group.

MARKET RISK

1) Foreign exchange rate risk

The Group is mainly active on the Italian market and is therefore exposed to exchange rate risk to a limited extent, solely in reference to i) some receivables denominated in USD and ii) bank accounts denominated in RON (Romanian Leu).

Foreign exchange rate risk sensitivity analysis

For the purposes of the sensitivity analysis relating to exchange rate risk, the items of the statement of financial position (financial assets and financial liabilities) denominated in a currency other than each Group company’s functional currency were identified.

For the purposes of the analysis, an appreciation of 10% and a depreciation of 10% in the exchange rate between the currency in which the line item is denominated and the accounting currency were considered.

The following table presents the results of the analysis conducted:

(In thousands of euro) Effect on net profit and equity, considering tax effect

16

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

USD RON Total Sensitivity analisys -10% +10% -10% +10% -10% +10%

Year ended December 31, 2015 25 (21) 76 (63) 102 (83)

Note: Positive figures reflect a gain in net profit and an increase in equity, whereas the negative figures reflect a loss in net profit and a decrease in equity.

2) Interest rate risk

The Group is exposed to risks related to fluctuations in interest rates since it uses a mix of debt instruments according to the nature of its financial needs.

In particular, the Group normally looks for short-term debt to finance its working capital requirements and for medium-and long-term financing to support investments related to its operations and extraordinary transactions. The financial liabilities which expose the Group to interest rate risk are mainly medium-and long-term indexed loans at variable rates of interest. The Euribor is the interest rate to which the Group is most exposed.

To address these risks, the Group use Interest Rate Swaps (IRSs) with the aim of mitigating, at an acceptable cost, the potential impact of interest rate fluctuations on the bottom line. The main features of these contracts are summarized below:

As of December 31, 2015 Notional amount Fair value (in Interest rate swaps (IRS) Year executed Expiration year (in thousands of thousands of euro) euro)

IRS Intesa Sanpaolo 2006 2026 12,784 (2,734) IRS BNP Paribas 2009 2028 13,000 (4,568) IRS Banca Popolare di Bergamo 2011 2026 19,839 (3,178)

Interest rate risk sensitivity analysis

Concerning interest rate risk, a sensitivity analysis was performed to determine the effects on income statement and equity of hypothetical positive and negative 50 bps variations to current effective interest rates.

The analysis performed related mainly to the following:

 cash and cash equivalents;

 short-term and medium-/and long-term debt, including the related derivative financial instruments, where existing.

Regarding cash and cash equivalents, reference was made to the average balance and the average interest rate thereon for the year, while for short-term and medium- and long-term debt the effect was calculated at the reporting date of the consolidated financial statements. This analysis did not include financial payables contracted at fixed rates.

The table below shows the results of the analysis performed: 17

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

(In thousands of euro) Effect on net profit, considering tax Effect on equity, considering tax effect effect Sensitivity analysis -50 bps +50 bps -50 bps +50 bps

Year ended December 31, 2015 119 (119) 119 (119)

Note: Positive figures reflect a gain in net profit and an increase in equity, whereas the negative figures reflect a loss in net profit and a decrease in equity.

CREDIT RISK

The credit risk represents the exposure of the Group to the risk of potential losses deriving from the failure of counterparties to fulfill the obligations they have undertaken.

With reference to the Engineering sector, almost all receivables are from the Municipality of Milan or other public entities, thus reducing the risk of losses. In the Integrated Water Service, the Group seeks to address this risk with policies and procedures regulating the monitoring of expected collection flows, the issuance of reminders, the granting of extended credit terms if necessary and the implementation of suitable recovery measures.

Trade receivables are shown in the financial statements net of a bad debt provision, determined taking into account available information about customer solvency and considering historical data. Positions for which there is an objective condition that renders them totally or partially uncollectible are written down individually, if they are material.

Trade receivables not written down as there are no indications of collectability problems amount to Euro 208 million as of December 31, 2015 (Euro 213 million as of January 1, 2015).

LIQUIDITY RISK

The liquidity risk represents the risk that, due to the inability to raise new funds or sell assets on the market, the Group is unable to meet its payment commitments, determining an impact on the operating results if it is obliged to incur additional costs to meet its commitments or a situation of insolvency. The Group's objective is to put in place a financial structure that, in line with the business objectives and with set limits, ensures an adequate level of liquidity pursued by means of the expected tariff increases, by minimizing the related opportunity cost, and keeps a balance in terms of maturity and composition of payables.

The table below provides an analysis of the cash flows expected in future years for the repayment of financial liabilities subdivided by repayment date as of December 31, 2015:

(In thousands of euro) Balance as of Financial Liabilities Disbursements Analysis More than December 31, More than To one year one year to Total 2015 five years five years Financial liabilities 137,233 55,314 57,352 48,558 161,224 Trade payables 210,540 208,343 2,197 - 210,540 Other liabilities 50,382 31,254 14,561 - 45,815

18

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

All of the flows shown are nominal, undiscounted future cash flows, determined based on the remaining contractual maturities both for principal and accrued interest. Financing facilities are shown based on the contractual maturities when repayment is due.

CATEGORIES OF FINANCIAL ASSETS AND LIABILITIES

The following table sets forth the Group’s financial assets and liabilities by category as of December 31, 2015:

(In thousands of euro) As of December 31, 2015 Financial assets and Available- Financial liabilities Loans and for-sale liabilities at Total measured at receivables financial amortized fair value assets cost through OCI ASSETS: Other non-current assets - 1,102 - - 1,102 Trade receivables - 207,846 - - 207,846 Cash and cash equivalents - 41,968 - - 41,968 Other current assets - 35,405 - - 35,405 LIABILITIES: Non-current financial liabilities 10,480 - - 75,152 85,632 Other non-current liabilities - - - 19,128 19,128 Trade payables - - - 210,540 210,540 Current financial liabilities - - - 51,601 51,601 Other current liabilities - - - 31,254 31,254

For short-term trade receivables and payables and other receivables and payables, the carrying amount is considered a reasonable approximation to fair value.

FAIR VALUE MEASUREMENT

The fair value of financial instruments listed in an active market is based on the market prices at the balance sheet date. The fair value of instruments not listed in an active market is determined using valuation techniques based on a series of methods and assumptions connected with market conditions at the balance sheet date.

The classification of financial instruments based on a hierarchy that reflects the significance of the inputs in the determination of fair value is the following:

 Level 1: Fair value based on inputs that are quoted prices (unadjusted) on active markets for identical financial instruments;

 Level 2: Fair value based on measurement methods referring to variables observable on active markets;

 Level 3: Fair value based on measurement techniques referring to unobservable market variables.

The following table sets out the assets and liabilities measured at fair value as of December 31, 2015 by the level of the fair value hierarchy reflecting the inputs used in determining their fair value:

(In thousands of euro) As of December 31, 2015 Level 1 Level 2 Level 3

Derivative financial instruments (IRS) - 10,480 -

19

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

4. Use of estimates

The preparation of these Consolidated Financial Statements requires that management apply accounting standards and methods which, under certain circumstances, are based on difficult subjective measurements and estimates based on past experience and on assumptions considered, at various times, to be reasonable and realistic in terms of the respective circumstances. The use of such estimates and assumptions affects the amounts reported in the consolidated financial statements and disclosure. Actual results for those areas requiring management judgment or estimates may differ from those recorded in the financial statements due to the occurrence of events and the uncertainties which characterize the assumptions and conditions on which the estimates are based.

Below are briefly described the areas that require greater subjectivity of management in making estimates and for which a change in the conditions of the underlying assumptions may have a significant impact on the financial statements.

Depreciation of property, plant and equipment and amortization of intangible assets

The cost of property, plant and equipment and intangible assets is depreciated/amortized on a straight-line basis over the estimated useful life of each asset. The economic useful life of these assets is determined at the time of purchase, based on historical experience for similar assets, market conditions and expected future events which may affect them, such as technological changes. The effective economic useful life may be, therefore, different from its estimated useful life. Each year the Group assesses the technological and business segment developments, any contractual and legislative changes related to utilization of the assets and their recovery values are reviewed in order to update the residual useful life. Such updating may modify the depreciation/amortization period and consequently the annual rate and charge for current and future periods.

IFRIC 12 mark-up

The fair value of the construction work of the Integrated Water Services is based on the costs actually incurred increased by a mark-up of 4.3% representing the best estimate of the remuneration of the internal costs for the management of the works and design activities undertaken by the Group in accordance with IFRIC 12. The assessment of the mark-up is based on factors and estimates that may vary over time, and which may result in changes in such value.

Residual value at the end of the Concession

MM will receive an indemnity at the end of the Concession for an amount equal to the residual value of the assets realized during the concession period. This amount, determined in accordance with the Italian Regulatory Authority for Electricity Gas and Water (AEEGSI) provisions, is based on factors and estimates that may vary over time, and which may result in changes in such value.

Impairment loss/reversal of fixed assets

20

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

Non-current assets are periodically tested for impairment and where indicators of difficulty in recovery are present an impairment loss is recorded as a deduction from the relative net carrying amount. The existence of such indicators can be verified through subjective valuations, based on information available within the Group or externally and on historical experience. Moreover, in the presence of a potential impairment, this is determined by suitable impairment tests. The correct identification of the factors, indicating a potential impairment and the estimates to determine the loss, may depend on conditions which vary over time, affecting the assessments and estimates. Similar considerations regarding the existence of indicators and the use of estimates in the application of valuation techniques can be found in the valuations to be made in the event of the reversal of impairment losses charged in previous periods.

Deferred tax assets

Deferred tax assets are recorded on the basis of expectations of future taxable income. The assessment of expected future taxable income for the purpose of recognizing deferred tax assets depends on factors which may vary over time and may have significant effects on the measurement of this item.

Provisions for risks and charges

The Group accrues in these provisions the probable liabilities relating to litigations and controversies with staff, suppliers, and third parties and in general expenses arising from any commitments. The quantification of such accruals involves assumptions and estimates based on presently available knowledge of factors which may vary over time. Thus, the final outcomes may be significantly different from those considered during the preparation of the financial statements.

Provision for impairment of receivables

This provision reflects the estimated losses on receivables. The provision covers the estimate of the risk of losses which derives from past experience with similar receivables, from the analysis of overdue receivables (current and historical), of losses and recoveries and finally from monitoring economic trends and forecasts both currently and prospectively of the Group’s business.

Measurement of derivatives

The fair value of unlisted financial assets, such as financial derivatives, is determined by means of commonly used financial valuation techniques that entail basic assumptions and estimates. These assumptions could fail to materialize over time or not materialize as expected. Consequently, estimates made for derivatives could prove to be different from the actual data.

5. Operating segments

Information about operating segments is prepared in accordance with the provision of IFRS 8 ‘‘Operating Segments,’’ which require the presentation of this information in a manner consistent with the methods adopted by management to make operational decisions. Consequently, the identification of the operating segments and the information provided are determined based on the internal reporting system used by management for the purpose of allocating resources to the different segments and analyze the respective performance. 21

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

IFRS 8 defines an operating segment as the component of an entity: i) that engages in business activities that generate revenues and expenses (including revenues and expenses from transaction with other components of the same entity); ii) whose operating results are reviewed periodically at the entity’s highest operational decision- making level for the purpose of adopting decisions concerning the resources allocated to the segment and assessment of the segment’s results; iii) for which separate financial statement data are available.

Management has determined the operating segments as follows:

 Integrated Water Services (IWS): it includes integrated water services mainly for the Milan area and its population;

 Engineering services: it includes the provision of engineering services, construction supervision and contracting firm for the works related to the transportation and mobility systems and for the infrastructure of the Municipality of Milan;

 Public Housing: it includes property management and facility management activities performed in the name of and on behalf of the Municipality of Milan, with reference to its municipal housing properties;

 Assets and Property management: it includes the assets and the activities relating to public asset management formerly performed by MIR before the merger with MM.

The operating segments are monitored based on: i) revenues; ii) EBITDA and iii) EBIT. EBITDA is defined as net profit for the year adjusted for the following items: i) income taxes; ii) financial income and expenses; iii) amortization, depreciation, write-downs and accruals. EBIT is defined as net profit for the year adjusted for the following items: i) income taxes; ii) financial income and expenses.

Management believes that EBITDA provide a good indication of performance, as it is not influenced by the tax laws and depreciation and amortization policies.

The following table presents: i) revenues; ii) EBITDA and iii) EBIT of the operating segments for the year ended December 31, 2015:

(In thousands of euro) Year ended December 31, 2015 Integrated Assets and Engineering Public Water Property Total services Housing Service Management

Revenues 138,126 39,759 9,990 2,680 190,555

EBITDA 40,780 7,394 1,478 2,399 52,051 % on revenues by business segment 29.5% 18.6% 14.8% 89.5% 27.3%

EBIT 30,958 6,337 1,374 90 38,759 % on revenues by business segment 22.4% 15.9% 13.8% 3.4% 20.3%

Financial income 942 Financial expanses (4,727)

Profit before income taxes 34,974

Income taxes (12,017)

22

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

Net profit 22,957

6. Notes to the consolidated statement of comprehensive income

6.1 Revenues

The following table sets forth a breakdown of “Revenues” for the year ended December 31, 2015:

(In thousands of euro) Year ended December 31, 2015 Revenues Integrated Water Service 138,126 Engineering services 39,759 Public Housing 9,990 Assets and Property Management 2,680 Total 190,555

The following table sets forth a breakdown of “Revenues” by geographical area for the year ended December 31, 2015:

(In thousands of euro) Year ended December 31, 2015 Revenues by geographical area Italy 189,723 Europe 693 Rest of the world 139 Total 190,555

Revenues of the Engineering services are shown net of costs for works contracted to third parties, repeated to the customers commissioning the work in accordance with the concession deed and service contracts, for an amount of Euro 70,360 thousand for the year ended December 31, 2015.

6.2. Revenues for works on assets under concession

Revenues for works on assets under concession amount to Euro 24,697 thousand for the year ended December 31, 2015. These revenues, as per IFRIC 12, refer to construction work on assets under concession of the Integrated Water Services, increased by a mark-up of 4.3% representing the best estimate of the remuneration of the internal cost for the management of the works and design activities undertaken by the Group, which corresponds to a mark- up which a general constructor would request to undertake such activities.

6.3. Other revenues and income

The following table sets forth a breakdown of “Other revenues and income” for the year ended December 31, 2015:

(In thousands of euro) Year ended December 31, 2015 Other revenues and income Recovery of INPS contributions 5,016 Sundry services carried out by the IWS 2,193 Chargeback and refund of expenses 574 23

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

Capital contributions 22 Other revenues 1,914 Total 9,719

The item “Recovery of INPS contributions” refers to the recovery of INPS contributions paid in excess in the period from 2005 to 2012 for which the request for refund submitted by the Company was upheld during the year.

The item “Sundry services carried out by the IWS” mainly include revenues from connections of Integrated Water Service users and piping displacement.

6.4. Costs of raw materials, consumables and goods

The following table sets forth a breakdown of ‘‘Costs of raw materials, consumables and goods” for the year ended December 31, 2015:

(In thousands of euro) Year ended December 31, 2015 Costs of raw materials, consumables and goods Purchases of raw materials, consumables and goods 2,597 Change in inventories (172) Total 2,425

This item mainly include the purchase of consumables and maintenance materials of the Integrated Water Service.

6.5. Costs for services

The following table sets forth a breakdown of ‘‘Costs for services” for the year ended December 31, 2015:

(In thousands of euro) Year ended December 31, 2015 Costs for services Utilities 25,020 Purification plant management fee 19,829 Technical, legal and IT consulting 15,959 Maintenance and repairs 6,731 Waste disposal 4,610 Use of third-party assets 4,553 Services supplied by the Municipality of Milan in the management of the IWS 2,897 Insurance 2,578 Telephone charges 2,003 Advertising 838 Representation and travel costs 338 Remuneration of directors 192 Remuneration of statutory auditors and external auditors 124 Other service costs 7,553 Total 93,225

The item “Purification plant management fee”, following the internalisation of the management of the purification plant of Milan San Rocco as from December 2014, only includes the Nosedo unit and the purification costs of the Municipalities outside the relevant area.

24

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

The item “Use of third-party assets” mainly include rentals of offices (including the fee for the concession of buildings owned by the Municipality of Milan and assigned to the management of the IWS), as well as car, hardware and IT tool rentals.

6.6. Costs for works on assets under concession

Costs for works on assets under concession amount to Euro 23,670 thousand for the year ended December 31, 2015. These costs refer to the costs for the works undertaken on assets under concession.

6.7. Personnel costs

The following table sets forth a breakdown of ‘‘Personnel costs” for the year ended December 31, 2015:

(In thousands of euro) Year ended December 31, 2015 Personnel costs Wages and salaries 35,581 Social security contributions 10,807 Employee severance indemnities 2,354 Other personnel costs 1,561 Total 50,303

The table below shows a breakdown by category of the number of Group employees:

Number of employees Year 2015 At year end Average Executive 33 33 Management Staff 81 98 White Collar 568 505 Blue Collar 355 361 Total 1,037 997

6.8. Amortization, depreciation, write-downs and accruals

The following table sets forth a breakdown of ‘‘Amortization, depreciation, write-downs and accruals” for the year ended December 31, 2015:

(In thousands of euro) Year ended December 31, 2015 Amortization, depreciation, write-downs and accruals Amortization of rights on assets under concession 7,550 Depreciation of property, plant and equipment 2,847 Amortization of other intagible assets 135 Write-downs of receivables 2,000 Accruals to provisions for risks and charges 760 Total 13,292

6.9. Other operating costs

The following table sets forth a breakdown of ‘‘Other operating costs” for the year ended December 31, 2015:

(In thousands of euro) Year ended December 31, 2015

25

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

Other operating costs Taxes and duties 1,640 Membership fees 209 Losses on asset disposals 93 Sundry operating costs 1,355 Total 3,297

6.10. Financial income and expenses

The following table sets forth a breakdown of ‘‘Financial income’’ and ‘‘Financial expenses’’ for the year ended December 31, 2015:

(In thousands of euro) Year ended December 31, 2015 Financial income/(expenses) Interests for delayed payments and periodic penalty payments 648 Interest income on bank accounts 54 Foreign exchange gains 23 Other financial income 217 Total financial income 942 Interest expenses on bank loans 3,928 Bank interests 497 Interest cost on the employee benefits 94 Foreign exchange losses 25 Other financial charges 183 Total financial expenses 4,727

Net financial income/(expenses) (3,785)

6.11. Income taxes

The following table sets forth a breakdown of ‘‘Income taxes” for the year ended December 31, 2015:

(In thousands of euro) Year ended December 31, 2015 Income taxes Current income taxes (IRES, IRAP) 11,425 Deferred taxes (net change) 1,689 Tax adjustments relating to prior years (1,097) Total 12,017

The reconciliation between the theoretical and effective tax rate is presented in the following table:

(In thousands of euro) Year ended December 31, 2015 %

Profit before income taxes 34,974

Theoretical taxes (IRES) 9,618 27.5% IRAP 1,866 5.3% Tax effect of permanent differences and other differences 533 1.5%

Income taxes 12,017 Actual tax rate 34.4%

7. Notes to the consolidated statement of financial position

26

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

7.1. Rights on assets under concession

The following table sets forth movements in “Rights on assets under concession” for the period from January 1, 2015 to December 31, 2015:

(In thousands of euro) Rights on assets

under concession

Balance as of January 1, 2015 185,435 Historical cost 257,996 Accumulated amortization (72,561)

Investments 20,811 Disposals - Amortization (7,550)

Balance as of December 31, 2015 198,696 Historical cost 278,807 Accumulated amortization (80,111)

In accordance with IFRIC 12, rights on assets under concession amount to Euro 198,696 thousand as of December 31, 2015 and Euro 185,435 thousand as of January 1, 2015. Rights on assets under concession are amortized on a straight-line basis over the duration of the concession, excluding a residual value equal to Euro 24.5 million, as they will be returned to the grantor at the end of the concession.

Rights on assets under concession are shown net of:

i) the payable towards A.T.O. Città di Milano amounting to Euro 30,828 thousand. Such payable represents the value of the tariff billed to the customers during the previous financial years and bound to the realization of the investments. In fact, following completion of the investments included in the Hydrogeological Monitoring Plan (the “Plan”), A.T.O. Città di Milano confirmed the full availability of those amounts for financing the Plan; and

ii) the tariff component defined “Fondo Nuovi Investimenti” (FONI), that is an advance on the financing of new operations subject to a special-purpose constraint with regard to its use, amounting to Euro 8,880 thousand and Euro 5,374 thousand as of December 31, 2015 and January 1, 2015 respectively. These amounts do not include the part of the “Fondo Nuovi Investimenti” which is bound to the financing of social tariff subsidies by virtue of the AEEGSI and A.T.O. Città di Milano resolutions.

Investments in the year 2015 amount to Euro 20,811 thousand (net of the increase in FONI occurred during 2015) and mainly relate to investments in pipelines, purification systems and lifting systems.

Impairment test of rights on assets under concession

The Group performed an impairment test in order to assess the existence of possible impairments of amounts recognized as rights on assets under concession.

The test is performed by comparing the carrying value of the asset or group of assets comprising in the cash flow generating unit (CGU) with the recoverable value of the same, determined as the higher of its fair value (net of

27

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015 any selling expenses) and the value of the net cash flows that are expected to be produced by the assets or group of assets comprising the CGU (use value). For the purpose of the impairment test, the Group used the cash flows for the concession period as extracted from the business plan prepared by the Group, as well as the residual value of the assets realized during the concession period that the Group expects to obtain at the end of the Concession.

For performing the impairment test, the Group determined one single CGU, which is the operating segment Integrated Water Services (IWS).

The discount rate used for the cash flows (WACC), which reflects market valuations of the time value of money as well as risks related to the sector of activity and the geographical area, is equal to 5.3%.

The impairment test performed did not show impairment losses for the amounts recorded under rights on assets under concession for the year 2015 and, consequently, no impairment were applied to those assets.

7.2. Other intangible assets

The following table sets forth movements in “Other intangible assets” for the period from January 1, 2015 to December 31, 2015:

(In thousands of euro) Patent rights and Other intangible Total Other intangible assets intellectual property assets

Balance as of January 1, 2015 119 115 234 Historical cost 517 130 647 Accumulated amortization (398) (15) (413)

Investments 73 - 73 Disposals - - - Amortization (104) (31) (135)

Balance as of December 31, 2015 88 84 172 Historical cost 590 130 720 Accumulated amortization (502) (46) (548)

Investments in the year 2015 amount to Euro 73 thousand and relate to the purchase of software.

7.3. Property, plant and equipment

The following table sets forth movements in “Property, plant and equipment” for the period from January 1, 2015 to December 31, 2015:

(In thousands of euro) Industrial Land Other Plant and and Constructio Leasehold and tangibl machiner commercia n in improvement Total building e fixed Property, plant and equipment y l progress s s assets equipment Balance as of January 1, 2015 1,300 - 198 629 1,151 773 4,051 Historical cost 7,030 - 664 3,326 1,344 2,244 14,608 (10,557 Accumulated depreciation (5,730) - (466) (2,697) (193) (1,471) )

Contribution of Milano Immobili e Reti

S.r.l.: - Historical cost 40,085 24,805 4,781 - - - 69,671

28

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

(29,267 - Accumulated depreciation (7,516) (19,991) (1,760) - - - )

Additions - - 63 401 2,521 582 3,567 Disposals - Historical cost (49) (14) (284) - - - (347) - Accumulated depreciation 18 14 222 - - - 254 Depreciation (960) (873) (734) (180) - (100) (2,847)

Balance as of December 31, 2015 32,878 3,941 2,486 850 3,672 1,255 45,082 Historical cost 47,066 24,791 5,224 3,727 3,865 2,826 87,499 (42,417 Accumulated amortization (14,188) (20,850) (2,738) (2,877) (193) (1,571) )

Investments in the year 2015 amount to Euro 3,567 thousand and mainly relate to i) the purchase of furniture, office machines, sundry and small equipment and telephone systems, ii) leasehold improvements for renovation works on leased offices and iii) investments in progress and not yet in operation.

7.4. Deferred tax assets

The following table sets forth movements in “Deferred tax assets” for the period from January 1, 2015 to December 31, 2015:

(In thousands of euro) Contribution Additions/ Additions/ Balance as of Balance as of January of Milano Reversals in Reversals in December 31, 1, 2015 Immobili e comprehensive profit or loss 2015 Reti S.r.l. income

Deferred tax assets Grants and contributions 3,378 - 1,080 - 4,458 Fair value of interest rate swaps (IRS) 3,373 - - (858) 2,515 Provision for risks and charges 1,117 - 93 - 1,210 Provision for default interests 326 - (80) - 246 Employee benefits 129 - (89) 57 97 Inventories 117 - (4) - 113 Other 1,289 62 (934) - 417

Total deferred tax assets 9,729 62 66 (801) 9,056

Deferred tax liabilities Connections contribution 776 - (72) - 704 Provision for default interests 260 - (61) - 199 Intangible assets - - 1,876 - 1,876 Other - - 12 - 12

Total deferred tax liabilities 1,036 - 1,755 - 2,791

Net deferred tax assets 8,693 62 (1,689) (801) 6,265

In accordance with IAS 12, deferred tax assets and deferred tax liabilities are offset only if the entity has a legally enforceable right to set off current tax assets against current tax liabilities and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority.

The Group expects to have sufficient taxable income in the future to recover deferred tax assets.

Deferred tax assets and liabilities were recalculated during 2015 in order to include the effects of the change in the IRES (corporate income tax) rate starting from 1 January 2017. 29

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

7.5. Other non-current assets

The following table sets forth a breakdown of “Other non-current assets” as of December 31, 2015 and January 1, 2015:

(In thousands of euro) As of December 31, 2015 As of January 1, 2015 Other non-current assets Accrued income and prepaid expenses 872 880 Security deposits 230 206 Total 1,102 1,086

7.6. Trade receivables

The following table sets forth a breakdown of “Trade receivables” as of December 31, 2015 and January 1, 2015:

(In thousands of euro) As of December 31, 2015 As of January 1, 2015 Trade receivables Gross trade receivables 222,380 226,589 Provision for impairment of trade receivables (14,534) (14,015) Total 207,846 212,574

Trade receivables include receivables of Engineering services towards the Municipality of Milan, amounting to Euro 2,134 million as of December 31, 2015 and Euro 2,063 million as of January 1, 2015. These receivables are shown net of the related liabilities for advances received by the Municipality of Milan, for an amount of Euro 2,119 million as of December 31, 2015 and Euro 2,045 million as of January 1, 2015.

The changes in the provision for impairment of trade receivables are as follow:

(In thousands of euro) Provision for impairment of trade receivables

Balance as of January 1, 2015 14,015 Accruals 2,000 Uses/releases (1,481) Balance as of December 31, 2015 14,534

7.7. Inventories

The following table sets forth a breakdown of “Inventories” as of December 31, 2015 and January 1, 2015:

(In thousands of euro) As of December 31, 2015 As of January 1, 2015 Inventories Raw materials, consumables and merchandise 2,243 2,036 Provision for inventory write-downs (410) (375) Total 1,833 1,661

Inventories mainly include materials used for maintenance and investments pertaining to the Integrated Water Service.

Inventories are shown net of the provision for inventory write-downs. Changes in the provision are as follows:

30

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

(In thousands of euro) Provision for inventory write-downs

Balance as of January 1, 2015 375 Accruals 35 Uses/releases - Balance as of December 31, 2015 410

7.8. Cash and cash equivalents

The following table sets forth a breakdown of “Cash and cash equivalents” as of December 31, 2015 and January 1, 2015:

(In thousands of euro) As of December 31, 2015 As of January 1, 2015 Cash and cash equivalents Bank and postal accounts 41,951 16,145 Cash on hand 17 12 Total 41,968 16,157

7.9. Other current assets

The following table sets forth a breakdown of “Other current assets” as of December 31, 2015 and January 1, 2015:

(In thousands of euro) As of December 31, 2015 As of January 1, 2015 Other current assets Receivables from tax authorities 21,699 11,857 Advance payments 6,695 6,678 Receivables from social security institutions 2,548 - Other current receivables 4,863 3,740 Provision for impairment of other current receivables (400) (400) Total 35,405 21,875

The item “Receivables from tax authorities” mainly includes value added tax receivables.

The changes in the provision for impairment of other current receivables are as follow:

(In thousands of euro) Provision for impairment of other current receivables Balance as of January 1, 2015 400 Accruals - Uses/releases - Balance as of December 31, 2015 400

7.10. Equity

Share capital

The share capital of the Company is comprised of 15,600,000 ordinary shares with a par value of EUR 1 each, entirely held by the Municipality of Milan and fully paid up.

Reserves 31

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

Movements in shareholders’ equity reserves are shown in the statement of changes in equity.

7.11. Provisions for risks and charges

The following table sets forth movements in “Provisions for risks and charges” for the period from January 1, 2015 to December 31, 2015:

(In thousands of euro) Provisions for risks and charges

Balance as of January 1, 2015 4,643 Accruals 760 Uses/releases (249) Balance as of December 31, 2015 5,154

Accruals of the period refer to disputes with employees for Euro 700 thousand and to the insurance excess fund for Euro 60 thousand.

7.12. Provision for employee severance indemnities

The following table sets forth movements in “Provision for employee severance indemnities” for the period from January 1, 2015 to December 31, 2015:

(In thousands of euro) Employee benefits

Balance as of January 1, 2015 7,307 Increase for the period 840 Interest cost 94 Actuarial (gains) losses 215 Contributions made - Benefits paid (942) Balance as of December 31, 2015 7,514

The provision includes the effects of the present value calculation required by IAS 19.

Details of the financial and demographic assumptions used in the actuarial calculations are as follows:

Discount rate 1.60% Inflation rate 1.75% Estimated mortality rate Tables SIM2014M/SIM2014F Estimated disability rate Tables INPS1998M/ INPS1998F Probability of resignation/retirement (annual) 3.10%

7.13. Current and non-current financial liabilities

The following table provides a breakdown of ‘‘Current financial liabilities’’ and ‘‘Non-current financial liabilities’’ as of December 31, 2015 and January 1, 2015:

(In thousands of euro) As of December 31, 2015 As of January 1, 2015 Non-current Non-current Current portion Current portion Short-term and long-term borrowings portion portion Loans from banks 4,617 70,364 4,459 64,980 Other borrowings 30,000 5,000 32,125 - Bank overdraft 16,086 - 13,135 - Fair value of Interest rate swaps - 10,480 - 12,268 Finance expenses payable 1,015 - 1,054 - 32

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

Transaction charges connected to loans (117) (212) (35) (225) Total 51,601 85,632 50,738 77,023

Information about loan from banks is provided below:

(In thousands of euro) As of December 31, 2015 due due Commencement Maturity due over Notional amount Interest rate Total within 1 within 2- date date 5 years year 5 years

Loans from banks Euribor 3m + Bridge Loan (Banca IMI) 10,000 2015 2017 10,000 - 10,000 - 0.45% Floating Rate Loan - Banca Euribor 3m + 25,000 2011 2026 19,839 1,510 6,676 11,653 Popolare di Bergamo 2.5% Fixed Rate Loan - Carige 25,000 2009 2027 5.91% 19,358 1,147 5,321 12,890 Euribor 6m + Floating Rate Loan -BNL 20,000 2008 2028 13,000 1,000 4,000 8,000 0.25% Floating Rate Loan - Banca Euribor 6m + 20,000 2006 2026 12,784 960 4,214 7,610 Intesa 0.12%

Total 74,981 4,617 30,211 40,153

Borrowing costs

The costs incurred by the Group to obtain bank borrowings have initially been recognized as a decrease to the financial liability and subsequently recorded in the income statement applying the amortized cost method in accordance with IAS 39.

Covenants

Loans from banks require compliance with certain covenants, which include, inter alia: (i) providing certain financial and other information including annual financial statements; (ii) notice requirements in the event of any administrative or legal variation which could have a material adverse effect on the asset, financial or economic or legal condition of the Company; and (iii) notify the bank of any new medium/long-terms financing requested to third party. As of December 31, 2015 all covenants have been observed.

7.14. Other non-current liabilities

The following table sets forth a breakdown of “Other non-current liabilities” as of December 31, 2015 and January 1, 2015:

(In thousands of euro) As of December 31, 2015 As of January 1, 2015 Other non-current liabilities Security deposits 11,583 11,078 Deferred income 4,567 3,100 Other non-current payables 2,978 8 Total 19,128 14,186

7.15. Trade payables

This item includes payables related to the normal course of business of the Group, in relation to the supplies of goods, assets and services. As of December 31, 2015 there are no trade payables with a duration of more than five years. 33

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

7.16. Current tax payables

This item represents the Group’s net balance towards tax authorities for current income taxes (IRES and IRAP).

7.17. Other current liabilities

The following table sets forth a breakdown of “Other current liabilities” as of December 31, 2015 and January 1, 2015:

(In thousands of euro) As of December 31, 2015 As of January 1, 2015 Other current liabilities Payables to employees 7,400 5,796 Payables towards Integrated Water Service users 6,742 9,849 Advance payments 5,451 4,443 Payables to social security agencies 4,611 4,279 VAT and other tax payables 3,382 5,373 Other sundry liabilities 3,668 3,676 Total 31,254 33,416

The item “Payables to employees” mainly includes payables for holidays not taken, deferred salaries, contract bonuses and early retirement incentives not paid.

The item “Payables towards Integrated Water Service users” refers to the A.T.O. tariff amount billed in the 2012/13 financial years to be returned to the users.

8. Related party transactions

The Municipality of Milan holds 100.0% of the Company’s share capital. The Group, therefore, is entirely controlled by the Municipality of Milan.

The Group used the exemption reported in paragraph 25 of IAS 24, and therefore is exempt from the disclosure requirements of paragraph 18 of IAS 24 in relation to related party transactions and outstanding balances, including commitments, with the Municipality of Milan and its subsidiaries.

An overview of the Group’s transactions with the Municipality of Milan and its subsidiaries is provided below.

In 2015, transactions with the Municipality of Milan mainly concerned:

 engineering services in relation to the technical support to the Municipality of Milan for the construction of line M4 as well as the high supervision of the second lot of line M5;  engineering services related to Expo 2015, with reference to the tasks entrusted by the Municipality of Milan for works related to the accessibility to the Expo site;  services of property management (administrative management, accounting management, mobility management, communications management and customer-relationship management) and facility management (services, supplies and maintenance and technical management) of the municipal housing property.

34

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

As of December 31, 2015 the Group’s receivables towards the Municipality of Milan amount to Euro 2.2 billion, the Group’s payables towards the Municipality of Milan amount to Euro 2.2 billion, and the Group’s revenues and costs towards the Municipality of Milan amount to Euro 116 million and Euro 5 million, respectively. It should be noted that in the financial statements, with reference to the engineering services, the Group has settled the receivables and payables as well as the revenues and related costs towards the Municipality of Milan, considering that the Group is a mere intermediary between the Municipality of Milan and third-party contractors. In application of the provisions included in IAS 18, in fact, considering that the Group for the engineering services is acting as an agent between the Municipality of Milan and the third party suppliers, revenues and receivables related to the construction of assets are settled against the related costs and payables.

In 2015, transactions with the subsidiaries of the Municipality of Milan mainly concerned:

 engineering services in favor of Expo 2015 S.p.A., SEA S.p.A., Milanosport S.p.a., Consorzio Malpensa Construction, Arexpo S.p.A.;  costs for the removal of interference of the transmission lines of the engineering and/or Integrated Water Service sectors charged by ATM S.p.A. and companies of the A2A group;  supply of water services to all the subsidiaries of the Municipality of Milan;  purchase of electricity, gas, motive power and provision of services for waste disposal by the A2A Group;  income from a lease agreement with AMSA S.p.A., related to assets made available to the pro tempore waste management concessionaire for Milan.

9. Other information

Sureties and guarantees provided for the benefit of third parties

As of December 31, 2015 sureties to third parties amount to Euro 19,546 thousand and refer to:

 the guarantee in favour of A.T.O. as provided for by the concession agreement of the Integrated Water Service for Euro 2,450 thousand;  the guarantee given to the Municipality of Milan for the smooth carrying out of the works to modernise the waterworks for Euro 100 thousand;  guarantees to customers commissioning the work for the performance of the contracts for Euro 2,940 thousand; and  the guarantee given to the Inland Revenue for the VAT credit refund for Euro 14,056 thousand.

Compensation of directors and statutory auditors

For the year ended December 31, 2015 the compensation awarded to directors and to statutory auditors amounted to Euro 192 thousand and Euro 124 thousand, respectively.

Compensation of the Independent Auditors

For the year ended December 31, 2015 the compensation awarded to the Independent Auditors amounted to Euro 33 thousand.

35

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

10. First time adoption of IFRS

The following note sets forth the information required by IFRS 1 relating to the impact of the transition to EU- IFRS on the statement of comprehensive income, on the statement of financial position and on the equity of the Group. The following financial information has been prepared:

 a reconciliation between the Group’s statement of financial position prepared under Italian GAAP and the Group’s statement of financial position prepared under EU-IFRS as of January 1, 2015 (the Transition Date) and as of December 31, 2015;  a reconciliation between the Group’s statement of comprehensive income for the year ended December 31, 2015 prepared under Italian GAAP and the Group’s statement of comprehensive income prepared under EU-IFRS;  a reconciliation between the Group’s equity prepared under Italian GAAP and the Group’s equity prepared under EU-IFRS as of January 1, 2015 and December 31, 2015; and  explanatory notes regarding the adjustments and reclassifications included in the above mentioned reconciliations.

The statement of financial position as of the Transition Date to EU-IFRS has been prepared as follows:

 all assets and liabilities which require to be recognized by EU-IFRS have been recognized;  assets and liabilities the which are not permitted to be recognized by EU-IFRS have not been recognized; and  EU-IFRS has been applied in measuring all recognized assets and liabilities.

Optional exemptions from complete retrospective adoption of EU-IFRS

The Group has applied IFRIC 12 “Service Concession Arrangements” prospectively from the Transition Date.

Mandatory exemptions from complete retrospective adoption of EU-IFRS

IFRS 1 establishes certain compulsory exceptions from retrospective application of international accounting principles in the transition to EU-IFRS.

IFRS 1 establishes that estimates used in preparing the IFRS financial statements as of the Transition Date are to be consistent with those used in preparing the Italian GAAP financial statements as of the same date (after the adjustments required to reflect any differences in accounting principles).

The other mandatory exemptions prescribed in IFRS 1 have not been applied, as they are not applicable to the Group.

Equity reconciliation and explanatory notes

The following table shows a reconciliation of the Group’s equity as of January 1, 2015 and December 31, 2015 and its net income for the year ended December 31, 2015 prepared in accordance with Italian GAAP to the Group’s equity as of January 1, 2015 and December 31, 2015 and its net income for the year ended December 31, 2015 prepared under EU-IFRS. 36

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

Contribution Equity as of Other Equity as of of Milano Net profit for the (In thousands of euro) Note January 1, comprehensive December Immobili e year 2015 2015 income 31, 2015 Reti Srl Consolidated financial statements - 57,277 46,387 16,704 - 120,368 Italian GAAP

IRS derivatives A (8,895) - - 930 (7,965) Car parks and onerous contract B (1,495) - 300 - (1,195) Revenues from connections of users C 8,501 - 1,146 - 9,647 to the Integrated Water Service 2008 IRS agreement D 1,336 - (139) - 1,197 IFRIC 12 E - - 4,847 - 4,847 Employee benefits F (281) - 192 (158) (247) Other minor G (39) - (93) - (132)

Consolidated financial statements - 56,404 46,387 22,957 772 126,520 EU IFRS

Descriptions of the adjustments to equity as of January 1, 2015 and December 31, 2015 and to net income for the year ended December 31, 2015 following the adoption of EU-IFRS have been provided below. The tax effect associated with each of the adjustments described below has also been recognized, where applicable.

A) IRS derivatives

In accordance with Italian GAAP, the fair value of the IRS derivatives is not recognized in the statement of financial position, but it is disclosed in the notes to the financial statements.

In accordance with IAS 39, IRS derivative agreements have been recognized at fair value in the statement of financial position. Subsequent to initial recognition, the derivative instruments are accounted for according to hedge accounting method considering that the conditions set forth in IAS 39 have been satisfied. Therefore, the fair value of the IRS has been classified as financial liabilities for an amount of Euro 12,268 thousand as of January 1, 2015 and Euro 10,480 thousand as of December 31, 2015, and the changes in fair value have been recognized in other comprehensive income for Euro 1,788 thousand, net of the related tax impact for Euro 858 thousand.

B) Car parks and onerous contract

Under Italian GAAP the costs related to the realization of four car parks located in Milan (the “Car parks”) have been capitalized and depreciated over the duration of the related concession (until 2019). Considering that the Group can’t exploit the economic benefits associated with the use of the Car parks, the Car parks (net of the grants received by the Municipality of Milan) have been written down at the Transition date, for a total net amount of Euro 366 thousand. In addition, a provision for the IMU expected to be paid until the end of the concession has been accounted for an amount of Euro 1,244 thousand at the Transition Date.

C) Revenues from connections of users to the Integrated Water Service

Under Italian GAAP, revenues from connections of users to the Integrated Water Service have been deferred over the useful life of the related tangible asset capitalized. In accordance with IAS 18, they are entirely recognized as revenues when the service is completed. The application of IAS 18 resulted in the elimination of deferred income

37

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015 for an amount of Euro 11,683 thousand and Euro 12,776 thousand as of January 1, 2015 and December 31, 2015, respectively and an increase in net result for the year 2015 of Euro 1,146 thousand.

D) 2008 IRS agreement

The fair value of the 2008 IRS derivative, originally deferred under Italian GAAP for an amount of Euro 1,843 thousand as of January, 1 2015 and Euro 1,586 thousand as of December 31, 2015, have been written down under IFRS at the Transition date following the expiration of this instrument in 2009.

E) IFRIC 12

At the Transition Date, the Group applied IFRIC 12 prospectively for the assets under concession of the Integrated Water Services. The items principally affected by the application of IFRIC 12 are as follows:

 Recognition of the concession rights from construction and/or upgrade services for an amount of Euro 185,435 thousand as of January, 1 2015 and Euro 198,696 thousand as of December 31, 2015;  De-recognition of those items of property, plant and equipment previously recognized as proprietary assets that are closely connected with the water service infrastructure and therefore, under IFRIC 12, are assets under the control of the grantor for an amount of Euro 221,637 thousand as of January, 1 2015 and Euro 200,853 thousand as of December 31, 2015;  Recognition of the amortisation of the concession rights over the life of the concession for an amount of Euro 7,550 thousand, and release of the depreciation of property, plant and equipment under the scope of IFRIC 12;  Recognition of revenues and costs relating to construction services on the basis of the percentage of completion of the relevant contracts for an amount of Euro 24,697 thousand and Euro 23,670 thousand, respectively. Revenue from construction and/or upgrade services is measured at fair value, calculated on the basis of total construction costs incurred by the Integrated Water Services, i.e. the cost of materials and external services, plus a 4.3% mark-up reflecting the remuneration of the internal costs of engineering and construction management performed by personnel of the Group.

F) Employee benefits

Under Italian GAAP, post-employment benefits are recognized on an accrual basis during the period of employment, in accordance with applicable legislation and employment contracts.

IAS 19 separates post-employment benefits into “defined benefit” and “defined contribution” plans.

The provision of post-employment benefits (TFR) is considered a defined benefit program until December 31, 2006, to be measured in accordance with actuarial valuation methods using statistical and demographic assumptions. Following a change in Italian legislation, the TFR provision accrued effective January 1, 2007 has been considered a defined-contribution program, where the requirements provided for in the amendments had been satisfied.

38

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

At the Transition Date, the value of the employee benefit liability was restated, along with the related cost. The actuarial gains and losses were recognized within other comprehensive income, the service cost was recognized within “Personnel costs” and the interest cost was recognized within “Financial expenses”. The effect of this adjustment is, among others, a decrease in equity for Euro 281 thousand and Euro 247 thousand respectively as of January, 1 2015 and as of December 31, 2015.

G) Other minor

This item includes the effect of the following minor IFRS adjustments:

 Application of the amortized cost method: IAS 39 requires that financial liabilities, such as bank loans, should be measured at amortized cost. Amortized cost is calculated using the effective interest rate method, which refers to the rate that reconciles the carrying amount to future payments over the life of the financial instrument. When calculating the effective interest rate, all contractual aspects of the financial instrument must be considered, including all fees, transaction costs and any premiums or discounts. On the Transition Date, bank loans outstanding as of the reporting date were measured at amortized cost. Borrowing costs, capitalized as intangible assets under Italian GAAP, were eliminated from the statement of financial position, and the associated amortization charges were eliminated from the statement of comprehensive income. Such costs were initially recognized by decreasing the value of the associated financial liabilities and then recognizing the expense according to the effective interest method as finance expenses.  Linearization of rents: the Group has in place an operating lease agreement with AMSA with decreasing rents. In accordance with IAS 17 and SIC 15, lease income from operating leases has been recognized as income on a straight-line basis over the lease term.

Reclassifications to the statement of financial position and to the statement of comprehensive income

Deferred tax assets and deferred tax liabilities

According to IAS 12 ‘‘Income Taxes’’, deferred tax assets and deferred tax liabilities are presented as a net balance, and thus offset against one another, among non-current assets and liabilities.

Leasehold improvements

Leasehold improvements have been reclassified to ‘‘Property, plant and equipment’’.

Construction contracts

Construction contracts for an amount of Euro 47,535 thousand as of January 1, 2015 and Euro 49,856 thousand as of December, 31 2015, representing the design and the construction supervision activities carried out by the Group on constructions contracts authorized by the Municipality of Milan, have been classified in the item “Trade receivables” under IFRS.

39

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

In application of the provisions included in IAS 18, considering that the Group, for the engineering service, is acting as an agent between the Municipality of Milan and the third party suppliers, revenues and receivables related to the construction of assets are settled against the related costs and payables.

Extraordinary components

Under Italian GAAP, extraordinary income and expenses are presented within a specific line item of the statement of comprehensive income. In accordance with EU-IFRS, extraordinary income and expenses has been classified to the respective cost and revenue items.

On behalf of the Board of Directors Chairman Dr. Davide Amedeo Corritore

40

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

Annex 1: reconciliation of the Group’s consolidated statement of financial position as of January 1, 2015 prepared in accordance with Italian GAAP with the Group’s consolidated statement of financial position prepared in accordance with EU-IFRS

01.01.2015 IFRS Adjustments 01.01.2015 01.01.2015

(In thousands of euro) Consolidated statement of Consolidated Revenues from Consolidated statement financial position as of statement of financial IRS Car parks and connections of users 2008 IRS Employee IFRS of financial position as January 1, 2015 according IFRIC 12 Other minor position as of January derivatives onerous contract to the Integrated agreement benefits reclassifications of January 1, 2015 to Italian GAAP, with IFRS 1, 2015 after IFRS Water Service according to IFRS form adjustments ASSETS Non-current assets Rights on assets under concession - - - - - 185,435 - - 185,435 - 185,435 Other intangible assets 9,012 - (7,692) - - - - (314) 1,006 (772) 234 Property, plant and equipment 224,916 - - - - (221,637) - - 3,279 772 4,051 Deferred tax assets 9,010 3,373 115 (2,406) (507) - 129 15 9,729 (1,036) 8,693 Other non-current assets 1,086 ------1,086 - 1,086 Total non-current assets 244,024 3,373 (7,577) (2,406) (507) (36,202) 129 (299) 200,535 (1,036) 199,499 Current assets Trade receivables 2,210,643 ------2,210,643 (1,998,069) 212,574 Inventories 1,661 ------1,661 - 1,661 Construction contracts 47,535 ------47,535 (47,535) - Cash and cash equivalents 16,157 ------16,157 - 16,157 Other current assets 20,505 - - - - 1,397 - - 21,902 (27) 21,875 Total current assets 2,296,501 - - - - 1,397 - - 2,297,898 (2,045,631) 252,267

TOTAL ASSSETS 2,540,525 3,373 (7,577) (2,406) (507) (34,805) 129 (299) 2,498,433 (2,046,667) 451,766

TOTAL EQUITY 57,277 (8,895) (1,495) 8,501 1,336 - (281) (39) 56,404 - 56,404

LIABILITIES Non-current liabilities Provisions for risks and charges 3,399 - 1,244 - - - - - 4,643 - 4,643 Provision for employee severance indemnities 6,897 - - - - - 410 - 7,307 - 7,307 Deferred tax liabilities 260 - - 776 - - - - 1,036 (1,036) - Non-current financial liabilities 64,980 12,268 - - - - - (225) 77,023 - 77,023 Other non-current liabilities 40,412 - (7,326) (11,683) (1,843) (5,374) - - 14,186 - 14,186 Total non-current liabilities 115,948 12,268 (6,082) (10,907) (1,843) (5,374) 410 (225) 104,195 (1,036) 103,159 Current liabilities Trade payables 2,245,339 ------2,245,339 (2,045,604) 199,735 Current financial liabilities 50,773 ------(35) 50,738 - 50,738 Current tax payable ------8,314 8,314 Other current liabilities 71,188 - - - - (29,431) - - 41,757 (8,341) 33,416 Total current liabilities 2,367,300 - - - - (29,431) - (35) 2,337,834 (2,045,631) 292,203

TOTAL EQUITY AND LIABILITIES 2,540,525 3,373 (7,577) (2,406) (507) (34,805) 129 (299) 2,498,433 (2,046,667) 451,766

41

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

Annex 2: reconciliation of the Group’s consolidated statement of financial position as of December 31, 2015 prepared in accordance with Italian GAAP with the Group’s consolidated statement of financial position prepared in accordance with EU-IFRS

31.12.2015 IFRS Adjustments 31.12.2015 31.12.2015

(In thousands of euro) Consolidated statement of Consolidated Revenues from Consolidated statement financial position as of statement of financial IRS Car parks and connections of users 2008 IRS Employee IFRS of financial position as December 31, 2015 IFRIC 12 Other minor position as of derivatives onerous contract to the Integrated agreement benefits reclassifications of December 31, 2015 according to Italian GAAP, December 31, 2015 Water Service according to IFRS with IFRS form after IFRS adjustments ASSETS Non-current assets Rights on assets under concession - - - - - 198,696 - - 198,696 - 198,696 Other intangible assets 7,924 - (6,101) - - - - (395) 1,428 (1,256) 172 Property, plant and equipment 242,158 - - - - (200,853) - 2,521 43,826 1,256 45,082 Deferred tax assets 9,112 2,515 91 (2,425) (389) - 97 55 9,056 (2,791) 6,265 Other non-current assets 1,102 ------1,102 - 1,102 Total non-current assets 260,296 2,515 (6,010) (2,425) (389) (2,157) 97 2,181 254,108 (2,791) 251,317 Current assets Trade receivables 2,313,397 ------2,313,397 (2,105,551) 207,846 Inventories 1,833 ------1,833 - 1,833 Construction contracts 49,856 ------49,856 (49,856) - Cash and cash equivalents 41,968 ------41,968 - 41,968 Other current assets 35,711 ------35,711 (306) 35,405 Total current assets 2,442,765 ------2,442,765 (2,155,713) 287,052

TOTAL ASSSETS 2,703,061 2,515 (6,010) (2,425) (389) (2,157) 97 2,181 2,696,873 (2,158,504) 538,369

TOTAL EQUITY 120,368 (7,965) (1,195) 9,647 1,197 4,847 (247) (132) 126,520 - 126,520

LIABILITIES Non-current liabilities Provisions for risks and charges 4,159 - 995 - - - - - 5,154 - 5,154 Provision for employee severance indemnities 7,170 - - - - - 344 - 7,514 - 7,514 Deferred tax liabilities 211 - - 704 - 1,876 - - 2,791 (2,791) - Non-current financial liabilities 75,363 10,480 - - - - - (211) 85,632 - 85,632 Other non-current liabilities 45,539 - (5,810) (12,776) (1,586) (8,880) - 2,641 19,128 - 19,128 Total non-current liabilities 132,442 10,480 (4,815) (12,072) (1,586) (7,004) 344 2,430 120,219 (2,791) 117,428 Current liabilities Trade payables 2,365,947 ------2,365,947 (2,155,407) 210,540 Current financial liabilities 51,718 ------(117) 51,601 - 51,601 Current tax payable ------1,026 1,026 Other current liabilities 32,586 ------32,586 (1,332) 31,254 Total current liabilities 2,450,251 ------(117) 2,450,134 (2,155,713) 294,421

TOTAL EQUITY AND LIABILITIES 2,703,061 2,515 (6,010) (2,425) (389) (2,157) 97 2,181 2,696,873 (2,158,504) 538,369

42

MM S.p.A. – Consolidated financial statements as of and for the year ended December 31, 2015

Annex 3: reconciliation of the Group’s consolidated statement of comprehensive income for the year ended December 31, 2015 prepared in accordance with Italian GAAP with the Group’s consolidated statement of comprehensive income prepared in accordance with EU-IFRS

31.12.2015 IFRS Adjustments 31.12.2015 31.12.2015

(In thousands of euro) Consolidated statement of Revenues from Consolidated statement Consolidated statement comprehensive income for Car parks and connections of of comprehensive of comprehensive the year ended December 2008 IRS Employee IFRS IRS derivatives onerous users to the IFRIC 12 Other minor income for the year income for the year 31, 2015 according to agreement benefits reclassifications contract Integrated ended December 31, 2015 ended December 31, Italian GAAP, with IFRS Water Service after IFRS adjustments 2015 according to IFRS form Revenues 261,035 ------(120) 260,915 (70,360) 190,555 Revenues for works on assets under concession - - - - - 24,697 - - 24,697 - 24,697 Other revenues and income 19,816 - (1,516) 1,093 - (381) - - 19,012 (9,293) 9,719 Total revenues and income 280,851 - (1,516) 1,093 - 24,316 - (120) 304,624 (79,653) 224,971 Costs of raw materials, consumables and goods (2,425) ------(2,425) - (2,425) Costs for services (166,050) ------(166,050) 72,825 (93,225) Costs for works on assets under concession - - - - - (23,670) - - (23,670) - (23,670) Personnel costs (56,409) - - - - - 375 - (56,034) 5,731 (50,303) Amortization, depreciation, write-downs and accruals (21,004) - 1,591 - - 6,077 - 44 (13,292) - (13,292) Other operating costs (3,546) - 249 - - - - - (3,297) - (3,297) Total operating costs (249,434) - 1,840 - - (17,593) 375 44 (264,768) 78,556 (186,212) Operating profit 31,417 - 324 1,093 - 6,723 375 (76) 39,856 (1,097) 38,759 Financial income 942 ------942 - 942 Financial expanses (4,319) - - - (257) - (94) (57) (4,727) - (4,727) Profit before income taxes 28,040 - 324 1,093 (257) 6,723 281 (133) 36,071 (1,097) 34,974 Income taxes (11,336) - (24) 53 118 (1,876) (89) 40 (13,114) 1,097 (12,017) Net profit (A) 16,704 - 300 1,146 (139) 4,847 192 (93) 22,957 - 22,957

Other comprehensive income that will not be subsequently reclassified to the income statement

Actuarial gains (losses) on employees’ defined benefit plans ------(215) - (215) - (215)

Tax effect on actuarial gains (losses) on employees’ defined ------57 - 57 - 57 benefit plans

Other comprehensive income that will be subsequently reclassified to the income statement Change in the fair value of cash flow hedge derivatives - 1,788 ------1,788 - 1,788 Tax effect on change in the fair value of cash flow hedge derivatives - (858) ------(858) - (858)

Total other comprehensive income, net of tax effect - 930 - - - - (158) - 772 - 772 (B)

Total comprehensive income for the year (A)+(B) 16,704 930 300 1,146 (139) 4,847 34 (93) 23,729 23,729

On behalf of the Board of Directors Chairman Dr. Davide Amedeo Corritore

43

Tel: +39 02 58.20.10 Viale Abruzzi n. 94 Fax: +39 02 58.20.14.03 20131 Milano www.bdo.it

INDEPENDENT AUDITORS’REPORT

To the Board of Directors MM S.p.A.

We have audited the accompanying consolidated financial statements of MM S.p.A. and its subsidiaries (MM Group), which comprise the statement of financial position as of December 31, 2015, the statement of comprehensive income, the statement of changes in shareholders’ equity and the statement of cash flows for the year then ended, a summary of significant accounting policies and other explanatory notes.

Directors’ responsibility for the consolidated financial statements

The directors are responsible for the preparation of consolidated financial statements that give a true and fair view in compliance with International Financial Reporting Standards as adopted by the European Union.

Independent Auditors’ responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatements.

An audit involves performing audit procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The audit procedures selected depend on the auditor’s professional judgment, including the assessment of risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of consolidated financial statements that give a true and fair view, in order to plan and perform audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Aosta, Bari, Bergamo, Bologna, Brescia, Cagliari, Firenze, Genova, Milano, Napoli, Novara, Padova, Palermo, Pescara, Potenza, Roma, Torino, Treviso, Trieste, Verona, Vicenza

BDO Italia S.p.A. – Sede Legale: Viale Abruzzi, 94 – 20131 Milano – Capitale Sociale Euro 1.000.000 i.v. Codice Fiscale, Partita IVA e Registro Imprese di Milano n. 07722780967 - R.E.A. Milano 1977842 Iscritta al Registro dei revisori Legali al n. 167911 con D.M. del 15/03/2013 G.U. n. 26 del 02/04/2013 BDO Italia S.p.A., società per azioni italiana, è membro di BDO International Limited, società di diritto inglese (company limited by guarantee), e fa parte della rete internazionale BDO, network di società indipendenti.

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the financial position of MM Group as of December 31, 2015 and of the result of its operations and cash flows for the year then ended in compliance with International Financial Reporting Standards as adopted by the European Union.

Accounting policies and restrictions on the distribution and use

Without modifying our opinion, we draw attention to Note 10 "Summary of Accounting Policies" to the consolidated financial statements illustrating the effects of the transition to International Financial Reporting Standards as adopted by the European Union. The information disclosed in the note, with regard to the changes and reclassifications performed to the consolidated financial statements prepared in accordance with Italian regulations governing their preparation, which had been previously audited by us, on which we issued an unmodified opinion on May 17 2016, has been examined by us for the purpose of expressing opinion on the consolidated financial statements prepared in accordance with IFRS as adopted by the European union (“UE IFRS”) for the year ended December 31, 2015. The consolidated financial statements has been prepared in respect of IFRS as adopted by the European Union ("EU IFRS"), for the purpose of the inclusion of some data derived from the same in the prospectus being prepared by the Company (the " Prospectus ") in connection with the issuance of bonds to institutional investors outside the United States of America. Consequently, the consolidated financial statements cannot be suitable for other purposes. Our report is issued only for these purposes and may not be used for other purposes or disclosed to third parties outside the ones involved in the process of the issuance of the bonds, without our prior written consent.

Milan, November, 18, 2016

BDO Italia S.p.A.

Signed by Claudio Tedoldi (Partner)

This report has been translated into english from the italian original solely for the convenience of international readers REGISTERED OFFICE OF THE ISSUER MM S.p.A. Via del Vecchio Politecnico, 8 Milan Italy

PRINCIPAL PAYING AGENT BNP Paribas Securities Services, Milan Branch Piazza Lina Bo Bardi 3 20124 Milan Italy LEAD MANAGER Banca IMI S.p.A. Largo Mattioli 3 20121 Milan Italy

LEGAL ADVISERS To the Issuer: To the Lead Manager:

Bonelli Erede Pappalardo Studio Legale Associato Via Salaria 259 In association with Simmons & Simmons LLP 00199 Roma via Tommaso Grossi 2 Italy 20121 Milan Italy

To the Principal Paying Agent:

Studio Legale associato ad Ashurst LLP Piazza San Fedele 2 20121 Milan Italy

AUDITORS TO THE ISSUER PricewaterhouseCoopers S.p.A. Via Monte Rosa, 91 20149 Milan Italy LISTING AGENT Walkers Listing Services Limited The Anchorage 17/19 Sir John Rogerson’s Quay Dublin 2 Ireland