UUBBII FFIINNAANNCCEE CCBB 22 SS..RR..LL..
COMPANY SUBJECT TO MANAGEMENT AND COORDINATION ACTIVITY BY UBI BANCA S.P.A. Foro Buonaparte 70 – 20121 Milano Quota capital Euro 10,000.00.= fully paid up Listed on the Companies Register of Milan Reg. no. and tax code 07639080964
FFIINNAANNCCIIAALL SSTTAATTEEMMEENNTTSS AATT 3311 DDEECCEEMMBBEERR 22001155
This is a translation of the Italian original "Bilancio d’esercizio al 31 dicembre 2015" and has been prepared solely for the convenience of international readers. In the event of any ambiguity the Italian text will prevail. The Italian original is available upon written request to UBI Finance CB 2 S.r.l., Foro Buonaparte 70 – 20121 Milan (Italy) UBI FINANCE CB 2 S.R.L.
IINDEX
CORPORATE BODY ...... 3 DIRECTORS’ REPORT ON OPERATIONS ...... 4 1 - GENERAL INFORMATION 4 1.1 - Management of the Company ...... 5 1.2 - Company organization...... 6 1.3 - Research and development activities ...... 7 1.4 - Own shares and the holding company's shares...... 7 1.5 - Management and coordination activities...... 7 1.6 – Related party transactions...... 7 1.7 -. Going concern ...... 7 2 - SUBSEQUENT EVENTS 7 3 - OUTLOOK 7 4 - PROFIT FOR THE YEAR 8 5 - OTHER INFORMATION 8 BALANCE SHEET...... 9 INCOME STATEMENT...... 10 STATEMENT OF COMPREHENSIVE INCOME...... 11 STATEMENT OF CHANGES IN EQUITY ...... 12 CASH FLOW STATEMENT ...... 13 EXPLANATORY NOTES...... 15 1. INTRODUCTION 15 2. PART A - ACCOUNTING POLICIES 15 A.1 General part ...... 15 A.2 The main aggregates of the financial statements ...... 17 A.3 Information on the transfer of financial assets between portfolios...... 19 A.4 Information on fair value...... 19 A.5 Information on the so-called “Day one profit/loss” ...... 20 3. PART B - COMMENTS ON THE BALANCE SHEET 21 4. PART C – COMMENTS ON THE INCOME STATEMENT 26 5. PART D – OTHER INFORMATION 30 Section 1 – Specific notes on the operations carried out ...... 30 Section 3 – – Information on risks and related risk management policies ...... 57 Section 4 – Comments on Equity ...... 59 Section 5 – Statement of Comprehensive Income...... 59 Section 6 – Transactions with related parties...... 59 Section 7 – Other information ...... 62
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CCORPORATE BODY
BOARD OF DIRECTORS
CHAIRMAN OF THE BOARD : DOTT. RENZO PARISOTTO
DIRECTOR : DOTT. GIUSEPPE SCIARROTTA
DIRECTOR : DOTT. ANDREA DI COLA
INDEPENDENT AUDITORS : DELOITTE & TOUCHE S.P.A.
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DDIRECTORS’ RREPORT ON OPERATIONS
1 - GENERAL INFORMATION UBI FINANCE CB 2 S.R.L. (hereinafter the “Company”) is a vehicle securitisation company under Italian law incorporated on 20 December 2011. Pursuant to art. 2 of the Articles of Association, the Company's sole purpose, within the scope of one or more transactions (meaning both single transactions and issue programs) for the issue of covered bonds pursuant to art. 7-bis of Law 130 of 30th April 1999 (“Law 130/99”) and any subsequent modifications and additions and related implementation provisions, is to purchase from banks, in exchange for payment, residential and commercial mortgages, loans due from the Public Administration or guaranteed by them, also identifiable as a block, as well as securities issued within the scope of securitisation transactions concerning loans of the same nature, in accordance with the said legislation, by taking on loans granted or guaranteed also by the selling bank, as well as the issue of guarantees for the bonds issued by those or other banks. Law 130/99 was amended in 2005 in order to allow the issue of covered bonds. At the date of this annual report, however, no regulatory interpretation related to the application of such Law has been issued by the Regulatory or Government body, except: (i) Decree no. 310 of the Ministry of Economy and Finance of 14 December 2006 (the 'MEF Decree'), that defined the technical requirements of the guarantee that can be given for covered bonds, (ii) Decree no. 29 of the Ministry of Economy and Finance of 17 February 2009 that redefined the conditions under which financial intermediaries have be to registered in the Special List, with effect from the date of publication in the 'Gazzetta Ufficiale' of 20 October 2009; (iii) the Ruling of the Bank of Italy dated 16 April 2010, related to the supervisory provisions on covered bonds; and (iv) the Legislative Decree dated 13 August 2010 n. 141 and its subsequent amendments and additions, which has entirely amended the regulation relating to financial intermediaries and other financial industry players, effective from 19 September 2010. Therefore, such authorities or other authorities might issue other regulations on Law 130/99 and its application, whose impact cannot be foreseen by the Company at the date of this report. As a consequence, the accounting treatment of the program for the issue of covered bonds carried out by the Company complies with the "Instructions for the preparation of financial statements and reporting of financial intermediaries, of Institutes of Payment, of IMELs, fund management companies and asset management companies" issued by the Bank of Italy with the Ruling dated 15 December 2015, which replaced the instructions attached to the Regulations of 14 February 2006. The legislation mentioned in the Instructions is in line with the contents of the preceding Ruling of 29 March 2000 and with the provisions of Law 130/99, under which "loans relating to each transaction are segregated assets, by all means, from those of the company and those of other transactions". Information concerning the program for the issue of covered bonds is available in the relevant section of the Explanatory Notes called 'Part D - Other information'; it does not constitute part of the Company’s financial statements. In order to reach the business purpose, the Company was initially registered in the appropriate section of the General List, as per art. 106 of the Legislative Decree n. 385 of 1st September
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1993 ('TUB') under no 42013 and with ABI Intermediary code n. 337048. The reform of Title V TUB, started with Legislative Decree no.141 of 13 August 2010 and completed with the issue of the MEF Decree no.53/2015 and with the publication on 12 May 2015 of the Bank of Italy's new Supervisory Provisions for Financial Intermediaries (Circular no.288 of 3 April 2015) coming into force on 11 July 2015, in particular, (i) redefined a new operating perimeter for financial intermediaries which does not include vehicle companies for the guarantee of Covered Bonds if belonging to a banking group as defined by art.60 TUB and (ii) established a single Register of financial intermediaries thereby overcoming the pre-existing division between intermediaries registered in the Special list ex art.107 and those registered in the General list ex art.106. This said, following the loss of the requisites for remaining in the new "Single Register ex art. 106", on 27 July 2015, the Company requested cancellation as a Financial Intermediary from the General List ex art. 106 TUB and the Bank of Italy confirmed that such cancellation had taken place on 3 August 2015. The Company's registered office is in Foro Buonaparte no. 70 Milan, whilst the duration is established until 31 December 2050. At incorporation, the quota capital of Euro 10,000, fully paid up, was 90% held by Stichting Viola, a Dutch Foundation with registered office in Amsterdam (the Netherlands), in Luna Arena, Herikerbergweg 238, and the remaining 10% by Unione di Banche Italiane S.p.A., a joint stock company incorporated under Italian law, with registered office in Bergamo (Italy), piazza Vittorio Veneto n 8, Parent of the banking group of the same name. Subsequently, on 20 March 2012, with a deed of transfer of quotas pursuant to art. 2479 of the civil code, Stichting Viola transferred an investment of a nominal Euro 5,000, equal to 50% of the quota capital, to Unione di Banche Italiane S.p.A. Following this act, the registered capital of € 10,000 is now held for a quota of 60% by UNIONE DI BANCHE ITALIANE S.P.A (Hereinafter "UBI Banca") and the remaining 40% by the Dutch foundation STICHTING VIOLA.
1.1 - MANAGEMENT OF THE COMPANY During 2012, the Company, with the assistance of Barclays Bank PLC as Arranger and of the law firms Clifford Chance and Chiomenti, put in place with UBI Banca (or the 'Issuer') some negotiations aimed at implementing the program ('Program') by UBI Banca for the issue of covered bonds pursuant to Law 130/1999 . In particular, the Program provides for the fractional issuance of bonds by UBI Banca for an amount up to Euro 5,000,000,000, and in this context, the Company is committed to ensuring these issuances. As a matter of fact, the ‘Covered Bond Guarantee" agreement’, underwritten on 02 April 2012, states that the Company issues an irrevocable guarantee, on a first demand, unconditional and independent in favour of the covered bond holders in respect of portfolios of loans from time to time sold by the Seller Banks, under which the Company will guarantee the repayment of all sums due in respect of capital and interest in relation to the covered bonds by the Issuer (the ‘Guarantee’). The Company is therefore committed, from time to time, to increase, where necessary, the Guarantee granted, based on the amount of single issue. In compliance with the structure of the Program: (i) from March and April 2012, the following UBI Group banks adhered to the Program: 1. Banco di Brescia S.p.A. (“BBS”), 2. Banca Regionale Europea S.p.A. (“BRE”), 3. Banca Popolare di Bergamo S.p.A. (“BPB”), 4. Banca Popolare di Ancona S.p.A. (“BPA”), 5. Banco di San Giorgio S.p.A. (“BSG”) now BRE by virtue of the merger by
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acquisition that took place by deed dated 15 October 2012, 6. Banca Popolare Commercio e Industria S.p.A. (“BKI”), 7. Banca Carime S.p.A. (“BRM”), and 8. Banca di Valle Camonica S.p.A. (“BVC”) To this end, they sold portfolios of suitable assets to the Company at a purchase price of the previous portfolios equal to the book value stated on the latest financial statements approved by the Originating Bank, net of the principal amount collected in the period between the latest financial statements approved and the date of sale of the portfolio, and including the accrued interest at the date of the sale thereof; (ii) at the eighth transfer on 30 November 2015 the following banks of the UBI Group also joined the Program: 9. IW Bank S.p.A. (“IWB”), which on 25 May 2015 incorporated UBI Banca Private Investment S.p.A., and 10. the Parent company of UBI Banca ( all together jointly defined as the "Seller Banks") (iii) simultaneously to each transfer, the Seller Banks granted a loan to the Company of the same amount, so that the Company could have the financing in order to purchase such portfolios, loan subordinated to the reimbursement of the covered bonds issued by UBI Banca; (iv) each transfer was publicised by a dedicated publication in the 'Gazzetta Ufficiale’; (v) up until today UBI Banca has issued the following series of covered bonds and the Company has then increased the maximum granted amount pursuant to the Guarantee in order to including the issuance of each series: The First Series. On 28 May 2012, UBI Banca has issued the first series of covered bonds (for an amount equal to Euro 1,800 million, the “First Series”); at the same time, the Company has released the Guarantee for a total maximum granted amount equal to Euro 2,100 million; The Second Series. On 29 October 2012, UBI Banca issued the second series of covered bonds (for an amount equal to Euro 500 million, the “Second Series”); at the same time, the Company released the Guarantee for a total maximum granted amount equal to Euro 2,620 million; The Third Series. On 05 March 2014, UBI Banca issued the third series of covered bonds maturing on 05 March 2019 (for an amount equal to Euro 200 million, the “Third Series”); at the same time, the Company released the Guarantee for a total maximum granted amount equal to Euro 2,580,000,000. The Fourth Series. On 14 July 2015, UBI Banca issued the fourth series of covered bonds maturing on 14 July 2021 (for an amount equal to Euro 650 million, the “Fourth Series”); at the same time, the Company released the Guarantee for a total maximum granted amount equal to Euro 2,610,000,000. For a qualitative and quantitative description of the securitisation program carried out as well as the contracts signed see 'Part D - Other information' of the Explanatory Notes.
1.2 - COMPANY ORGANIZATION The Company has no employees, secondary offices, branch offices or local units. Given the special features of the transaction it is going to put in place, the Company outsourced all functions typical of an organisational structure, as well as internal control systems, to third parties.
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In particular, within the scope of the program, the servicing activity is carried out by UBI Banca, as master servicer, charged with the collection of the loans subject to securitisation and the collection and payment services pursuant to Law 130/1999 and, as such, it will take on the commitments pursuant to Art. 2, par. 6 of Law 130/1999 (hereinafter “Master Servicer”). The Master Servicer then delegated the collection and management of loans to the Sellers. The Company has also directly charged the Sellers, each in the quality of sub-servicer for the Credit portfolio sold by the same, to perform certain monitoring and reporting activities.
1.3 - RESEARCH AND DEVELOPMENT ACTIVITIES The Company has incurred no expenditure for research and development.
1.4 - OWN SHARES AND THE HOLDING COMPANY'S SHARES Pursuant to art. 2428 of the Italian Civil Code we inform you that during the period none of the Company's own shares or shares of the holding company were bought, sold or held in the portfolio, – either directly or through trustees or nominees.
1.5 - MANAGEMENT AND COORDINATION ACTIVITIES Pursuant to Art. 2497 of the Italian Civil Code, we note that the Company is subject to management and coordination activity by UBI Banca that holds 60% of the Company's quota capital.
1.6 – RELATED PARTY TRANSACTIONS Concerning relationships with UBI Group companies and subsidiaries, please refer to section 4 of part D of the Explanatory Notes.
1.7 -. GOING CONCERN During the preparation of Financial Statements it has been assessed the existence of conditions relating to the Company's ability to act as an operating entity with a time horizon of at least twelve months after the date of these Financial Statements. To make this assessment the following were taken into consideration: all available information and the specific activities performed by the Company whose sole corporate goal, in compliance with Law 130/99, is the realization of one or more covered bond transactions. Consequently, these Financial Statements were prepared on a going concern basis, as there were no events or conditions that may lead to the emergence of doubts about the Company's ability to keep on acting as an operating entity.
2 - SUBSEQUENT EVENTS For significant events occurring after 31 December 2015, please see section 3 of part A1 of the Explanatory Notes.
3 - OUTLOOK Company management will aim at continuing the Program for the issue of covered bonds by UBI Banca.
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4 - PROFIT FOR THE YEAR The Company recorded a profit for the year ended 31 December 2015 of Euro 3.01 which, pursuant to art. 16, paragraph 8, letter A, of Leg Dec. 213/98, is shown in the financial statements as Euro 3, rounded to the nearest Euro. The Quotaholders are invited to allocate the profit of Euro 3.01 in full to the legal reserve.
5 - OTHER INFORMATION There is nothing to report.
* * * * *
Dear Quotaholders, We believe we have fully illustrated the Company's financial statements as at and for the year ended 31 December 2015, its fourth year of activity, comprising the obligatory schedules required by IAS 1 that is the Balance Sheet, Income Statement, Statement of Comprehensive Income, Statement of Changes in Equity, Cash Flow Statement, Explanatory Notes to the financial statements and this Directors’ Report on operations. We therefore invite you to approve the Financial Statement at 31 December 2015, which records a profit of Euro 3.01, booked at Euro 3, and the proposal for the allocation of the said profit. Milan, 23 February 2016
UBI FINANCE CB 2 S.R.L. For the Board of Directors The Chairman Dott. Renzo Parisotto
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BBALANCE SSHEET
ASSETS
(values in Euro) Assets 2015 2014
60. Loans and receivables 10,040 10,043
120. Tax assets 406 422 a) current 406 422 b) advanced - - pursuant to Law 214/2011 - -
140. Other assets 163,948 120,869
TOTAL ASSETS 174,394 131,334
LIABILITIES
(values in Euro) Liabilities and Equity 2015 2014
70. Tax liabilities 406 365 a) current 406 365 b) deferred - -
90. Other liabilities 163,970 120,954
120. Quota Capital 10,000 10,000
160. Reserves 15 10
180. Profit (Loss) for the year 3 5
TOTAL LIABILITIES AND EQUITY 174,394 131,334
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IINCOME SSTATEMENT
(values in Euro)
01/01/2015 - 01/01/2014 - Items 31/12/2015 31/12/2014
10. Interest income and similar income 3 5
NET INTEREST INCOME 3 5
110. Administrative expenses: (42,597) (40,549) a) staff expenses (12,065) (11,667) b) other administrative expenses (30,532) (28,882)
160. Other operating income/expenses 43,003 40,914 OPERATING PROFIT 406 365
PROFIT (LOSS) BEFORE TAX FROM 409 370 CONTINUING OPERATIONS 190. Income taxes for the year from continuing operations (406) (365)
PROFIT (LOSS) AFTER TAX FROM 3 5 CONTINUING OPERATIONS
PROFIT (LOSS) FOR THE PERIOD 3 5
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SSTATEMENT OF CCOMPREHENSIVE IINCOME
(values in Euro)
Items 31/12/2015 31/12/2014
10. Profit (loss) for the financial year 3 5 Other income, net of taxes without transfer to income statement - - 20. Property, equipment and investment property - - 30. Intangible assets - - 40. Defined benefit plans - - 50. Non-current assets held for sale - - 60. Portion of reserves relating to equity-accounted investments - - Other income, net of taxes with transfer to income statement - - 70. Hedges of investments in foreign operations - - 80. Exchange rate differences - - 90. Cash flow hedges - - 100. Financial assets available for sale - - 110. Non-current assets held for sale - - 120. Portion of reserves relating to equity-accounted investments - - 130. Total other comprehensive income after tax - - 140. Comprehensive income (Items 10+130) 3 5
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SSTATEMENT OF CCHANGES IN EEQUITY MOVEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014
(values in Euro) Previous year net income's Changes during the year allocation previous year Equity transactions 2014 31.12.2014 Reserves allocations Balance at 01.01.2014 at Balance distribution instruments Other changes Other Quotaholders' Equity at Equity Quotaholders' Change inequity Change Opening balance adjustments Openingbalance inreserves Change Opening Balance at 01.01.2014 at OpeningBalance Issue of newquotas ofIssue Dividendsand other Purchase of ownof shares Purchase Extraordinary dividends Extraordinary year the for income Comprehensive
Quota Capital 10,000 - 10,000 - 10,000 Quota premium - - - - - Reserves: a) income-related 5 5 5 - 10 b) other - - - - - Valuation reserves - - - - - Equity instruments - - - - - Treasury quotas - - - - - Profit (Loss) for the year 5 - 5 (5) - 5 5 Quotaholders' Equity 10,010 - 10,010 ------5 10,015
MOVEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015
(values in Euro) Previous year net income's Changes during the year allocation previous year Equity transactions 2015 31.12.2015 Reserves allocations Balance at 01.01.2015 at Balance distribution instruments Other changes Other Quotaholders' Equity at Equity Quotaholders' Change inequity Change Change inreserves Change Opening balance adjustments Openingbalance Opening Balance at 01.01.2015 at OpeningBalance Issue of newquotas ofIssue Dividendsand other Purchase of ownof shares Purchase Extraordinary dividends Extraordinary year the for income Comprehensive
Quota Capital 10,000 - 10,000 - 10,000 Quota premium - - - - - Reserves: a) income-related 10 10 5 - 15 b) other - - - - - Valuation reserves - - - - - Equity instruments - - - - - Treasury quotas - - - - - Profit (Loss) for the year 5 - 5 (5) - 3 3 Quotaholders' Equity 10,015 - 10,015 ------3 10,018
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CCASH FLOW STATEMENT DIRECT METHOD
(values in Euro) Amount Amount A. OPERATING ACTIVITIES 2015 2014 1. Management (3) 43 - interest income collected (+) 3 5 - interest expense paid (-) - - - dividends and similar revenues (+) - - - net fee and commission (+/-) - - - staff costs (-) - - - other costs (-) (6) - - other revenues (+) - 38 - taxes and duties (-) - - - income/expenses of groups of assets held for disposal, net of the tax effect (+/-) - - 2. Net cash flows from/used in financial assets - - - financial assets held for trading - - - financial assets measured at fair value - - - financial assets available for sale - - - due from banks - - - due from financial entities - - - loans and advances to customers - - - other assets - - 3. Net cash flows from/used in financial liabilities - - - payables to banks - - - payables to financial entities - - - payables to customers - - - debt and securities issued - - - financial liabilities held for trading - - - financial liabilities designated at fair value - - - other liabilities - - Net cash flows from/used in operating activities A (3) 43
B. INVESTING ACTIVITIES
1. Cash generated by - sales of equity investments - - - dividends collected on equity investments - - sales/redemptions of financial assets held to maturity - - - sales of property, plant and equipment - - - sales of intangible assets - - - sales of business units - - 2. Cash used for - - - purchases of equity investments - - - purchases of financial assets held to maturity - - - purchases of property, plant and equipment - - - purchases of intangible assets - - - purchases of business units - - Net cash flow from/used in investing activities B - -
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(values in Euro) Amount Amount C. FUNDING ACTIVITIES 2015 2014 - issues/purchases of own shares - - - issues/purchases of equity instruments - - - distribution of dividends and other purposes - - Net cash flow from/used in funding activities C - -
NET CASH GENERATED/USED DURING THE YEAR D=A+B+C (3) 43
RECONCILIATION
Amount Amount 2015 2014 Cash and cash equivalents at beginning of year* 10,043 10,000 Total net cash generated/used during the year (3) 43 Cash and cash equivalents at end of year* 10,040 10,043
* This item of the Cash Flow Statement normally includes receivables from banks available on demand
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EEXPLANATORY NNOTES
1.. INTRODUCTION These EXPLANATORY NOTES are divided into the following parts: PART A - ACCOUNTING POLICIES PART B – COMMENTS ON THE BALANCE SHEET PART C – COMMENTS ON THE INCOME STATEMENT PART D – OTHER INFORMATION
2.. PART A - ACCOUNTING POLICIES
A.1 GENERAL PART SECTION 1 - STATEMENT OF COMPLIANCE WITH IFRS In compliance with the provisions of Italian Legislative Decree 38 of 28 February 2005 ("Italian Legislative Decree 38/2005”), the Company falls within the sphere of application of the international accounting principles inasmuch as part of a Group drawing up a consolidated financial statement according to IAS/IFRS accounting principles. As a result, the annual financial statements at 31 December 2015 have been drawn up in compliance with the IAS/IFRS, therefore applying all the international accounting principles as approved by the European Commission at the date of preparing said Financial Statements. The said standards have been issued by the International Accounting Standards Board (IASB) and allow for comparison between company financial statements in a context of greater competition and globalisation. The application of IAS/IFRS was defined at European level by the EU Regulation no. 1606 of 19 July 2002 for the consolidated financial statements of listed Companies, and it was finalised with the approval of the standards by the European Commission. At national level, the application of IFRS standards was extended by Leg. Decree 38/2005, pursuant to the options defined by the EU Regulation, to the separate financial statements of listed companies, banks and supervised financial institutions, optionally for 2005 and compulsorily from 2006.
SECTION 2 – BASIS OF PREPARATION The financial statement has been drawn up in application of the international accounting standards issued by the IASB (the International Accounting Standards Board) and relative interpretations issued by the IFRIC (the International Financial Reporting Interpretations Committee) and approved by the European Union, and the instructions issued by the Bank of Italy’s Provision of 15 December 2015 (which has completely replaced the Regulation of 14th February 2006 and its amendments) on the schedules and rules for compiling the financial statements of financial intermediaries. Financial assets and liabilities have been reported in the explanatory notes as required by the Bank of Italy's instructions issued in relation to article 9 of Italian Legislative Decree 38/2005,
15 UBI FINANCE CB 2 S.R.L. in accordance with International Financial Reporting Standards. This approach also complies with Italian Law 130/99, whereby receivables relating to each transaction are accounted for separately for all intents and purposes from those of the company and from those of other transactions. For the sake of completeness, please note that the accounting treatment under International Financial Reporting Standards of financial assets and/or groups of financial assets and financial liabilities as guarantee of transactions for the issue of covered bonds has not yet been officially interpreted by the bodies responsible for International Financial Reporting Standards interpretation. The financial statements have been drafted in order to present a true and fair view of the financial positions, results of operations and cash flows for the year. This financial statement applies the following preparation criteria: . GOING CONCERN (IAS 1 PAR. 25 AND 26) Assets and liabilities are measured based on their function, since they are destined to last in time. . ACCRUALS PRINCIPLE (IAS 1 PAR. 27 AND 28) Costs and revenues are recognised, irrespective of the moment in which the amount is paid/received, under the accruals principle and matching criteria. . COHERENCE OF PRESENTATION (IAS 1 PAR. 29) Presentation and classification of items are maintained consistent over time in order to ensure the comparison of information, unless their modification is required by an International Financial Reporting Standard or by an interpretation or renders more appropriate in terms of significance and reliability, the representation of values. If a presentation or classification criterion is changed, the new criterion is also applied – when possible –to the previous financial statement; in such a case, the items concerned and the nature of and reason for the change are indicated. The items are presented and classified according to the new financial statement schedules which the Bank of Italy has prepared pursuant to the Governor’s provision of 15 December 2015. . AGGREGATION AND RELEVANCE (IAS 1 PAR. 29) All groupings of significant items of a similar nature and function are shown separately. Elements of a different nature or function, if material, are shown separately. . PROHIBITION OF OFFSETTING (IAS 1 PAR. 32) Assets and liabilities, costs and revenues are not offset against each other, unless this is required by an International Financial Reporting Standard or by an interpretation or by the schedules and instructions of the Bank of Italy. . COMPARATIVE INFORMATION The comparative information of the previous year is shown for all data in the accounts, unless an International Financial Reporting Standard or an interpretation do not prescribe or allow otherwise. Disclosures are also included when useful for comprehension of data. The financial statements are composed of the mandatory schedules required by IAS 1, that is the Statement of financial position, the Income Statement, the Statement of Changes in Equity, the Statement of cash flows and these Explanatory Notes. The Financial Statement has been drafted using the Euro as the accounting currency; therefore, unless specified otherwise, the figures on this Statement are in Euro. The financial statements are also accompanied by the Management Report. These financial statements were audited pursuant to Legislative Decree 27 January 2010, n 39 by Deloitte & Touche S.p.A., which was appointed by the quotaholders for the three-year period 2015-2017 on 10 March 2015.
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INTERNATIONAL ACCOUNTING PRINCIPLES IN FORCE SINCE 2015 Below we list the accounting standards, amendments and IFRS interpretations that came into force in 2015: . On 20 May 2013 the interpretation of IFRIC 21 – Levies was published, providing clarifications on the time of recognising a tax levy (other than income tax) imposed by a government body. The principle tackles both liabilities for taxes falling within the sphere of application of the IAS 37 – Provisions, Contingent Liabilities and Contingent Assets, and those for taxes the timing and amount of which is uncertain. The interpretation applies retrospectively to annual periods beginning at the latest from 17 June 2014 or later. . On 12 December 2013 the IASB published the document “Annual Improvements to IFRSs: 2011-2013 Cycle” implementing the amendments to some principles within the sphere of the annual improvement process of the same (among which: IFRS 3 Business Combinations – Scope exception for joint ventures, IFRS 13 Fair Value Measurement – Scope of portfolio exception, IAS 40 Investment Properties – Interrelationship between IFRS 3 and IAS 40). The amendments apply starting from the annual periods starting on 1 January 2015 or later. The entry into force of these principles and/or amendments had no effect on the financial statements of the Company.
SECTION 3 – SUBSEQUENT EVENTS Following the end of FY 2015, the management of the Program of covered bank bonds structured by UBI Banca, in which the company is involved, took place as forecast. At the date of preparation of these financial statements, there are no known events, subsequent to the reporting date, which could negatively influence the financial position and results of operations of the Company. Notice is hereby given that, pursuant to IAS 10, the date on which these financial statements were authorized for publication by the Board of Directors of the Company is 23 February 2016.
SECTION 4 – OTHER ASPECTS There is nothing to report.
A.2 THE MAIN AGGREGATES OF THE FINANCIAL STATEMENTS The accounting policies adopted for the items shown in these financial statements at 31 December 2015 are described below. For each item, the recognition, classification, measurement and recognition of costs and revenue as well as derecognition criteria are given. RECEIVABLES AND OTHER ASSETS RECOGNITION CRITERIA Loans and receivables are recognised on the date of disbursement, i.e. when the Company becomes a party to the contractual clauses and, consequently, has a legal right to receive cash flows. Initial recognition is at fair value which usually corresponds to the amount disbursed or the price paid. CLASSIFICATION CRITERIA This item includes amounts due from banks which represent the Company's liquidity deposited with banks and the loans and receivables classified under 'Other assets' such as tax assets or assets arising from the recharging of operating expenses to the Covered Bank Bond Program.
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CRITERIA FOR VALUATION AND RECOGNITION OF THE INCOME COMPONENTS After initial entry, receivables from banks are valued at their original value, equal to the presumed sale value; since they regard short term loans, the discounting factor has been considered negligible. Other receivables are examined at every accounting closure date, to verify whether there is any objective evidence of impairment. DERECOGNITION CRITERIA Receivables are derecognised when the relative assets are sold with the substantial transfer of all connected risks and rewards, or when the relative contractual rights expire, or when the assets is considered as definitively uncollectable.
PAYABLES AND OTHER LIABILITIES RECOGNITION CRITERIA Payables are recognised on the date of disbursement, i.e. when the Company becomes a party to the contractual clauses and has a consequent legal obligation to pay the relative amounts. Initial recognition of payables is at fair value which usually corresponds to the amount to be paid. CLASSIFICATION CRITERIA Included in this item includes Tax liabilities and trade payables. CRITERIA FOR VALUATION AND RECOGNITION OF THE INCOME COMPONENTS Since these are short-term liabilities, for which the time value of money effect is negligible, they are measured at their original amount, equal to their extinguishment amount. DERECOGNITION CRITERIA They are derecognised when the liabilities expire or are extinguished.
CURRENT AND DEFERRED TAX ASSETS AND LIABILITIES RECOGNITION CRITERIA Taxes are recognised when the various types of withholdings and taxes are identified. CLASSIFICATION CRITERIA This item includes current and deferred tax assets and liabilities. CRITERIA FOR VALUATION AND RECOGNITION OF THE INCOME COMPONENTS Current and deferred tax assets and liabilities are entered without any offsetting. Current tax assets are entered at the nominal value of the receivables relative to taxes paid in advance. Current tax liabilities relative to withholding taxes are also entered at nominal value, while the income taxes for the period are calculated on a realistic forecast of the tax burdens to be absolved in compliance with the tax laws in force. Deferred tax liabilities are calculated independently of the tax situation relative to present or future losses; the entry of deferred tax assets depends on the reasonable forecast of their recovery. DERECOGNITION CRITERIA Current tax (assets and liabilities) are derecognised when, at the legal expiry date, the various taxes collected as a withholding agent are paid. Deferred taxes are cancelled according to forecasts of their recoverability.
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COSTS AND REVENUE Costs are recognised in the income statement at the moment of a decrease in the future economic benefits which leads to a decrease in assets or an increase in liabilities with a value which can be reliably determined. Costs are recognised in the income statement according to the criterion of direct association between the costs incurred and the earning of specific income items (costs-revenue matching). All costs relating to the securitisation processes are charged back directly to the covered bank bond program structured by UBI Banca in which the Company participates. Revenue is recognised in the income statement at the moment of an increase in the future economic benefits which leads to an increase in assets or a decrease in liabilities with a value which can be reliably determined. This means that the revenue is recognised at the same time as the increase in the assets or the decrease in the liabilities. The main revenue item on the Company’s financial statement is the re-debit of the costs relative to the aforesaid securitisation process.
A.3 INFORMATION ON THE TRANSFER OF FINANCIAL ASSETS BETWEEN PORTFOLIOS There is nothing to report.
A.4 INFORMATION ON FAIR VALUE QUALITATIVE INFORMATION Given the company operations, there are no significant elements to report.
QUANTITIVE INFORMATION A.4.5.4. Assets and liabilities not measured at fair value or measured at fair value on a non-recurrent basis: division according to levels of fair value
Assets and liabilities not measured at fair value or 31/12/2015 31/12/2014 measured at fair value on a non-recurrent basis BV L1 L2 L3 BV L1 L2 L3 1. Financial assets held to maturity ------2. Loans and receivables 10,040 - - 10,040 10,043 - - 10,043 3. Tangible assets held for investment purposes ------4. Non-current assets and disposal groups classified as held for sale ------Total 10,040 - - 10,040 10,043 - - 10,043 1. Payables ------2. Outstanding securities ------3. Liabilities associated with assets held for sale ------Total ------
KEY: L1 = level 1 / L2 = level 2 / L3 = level 3
19 UBI FINANCE CB 2 S.R.L.
The fair value of receivables from banks may coincide with the financial statement value inasmuch as such receivables consist solely of short-term elements, relative to current accounts. The IFRS 13 principle establishes a fair-value hierarchy depending on the degree of observability of the inputs involved in value-measurement techniques. The fair-value hierarchy level associated with the assets and liabilities is defined as the minimum level of all the significant inputs used. Generally speaking, a valuation input is not considered significant for the fair value of an instrument if the remaining inputs explain most of the variance of said fair value over a period of time of three months. Specifically, three levels are envisaged: - level 1: the fair value of the instruments classified at this level is determined based on quoted prices in active markets; - level 2: the fair value of the instruments classified at this level is determined based on evaluation models using observable inputs in active markets; - level 3: the fair value of the instruments classified at this level is determined based on evaluation models using mainly significant inputs which are not observable in active markets.
A.5 INFORMATION ON THE SO-CALLED “DAY ONE PROFIT/LOSS” There is nothing to report.
20 UBI FINANCE CB 2 S.R.L.
3.. PART B - COMMENTS ON THE BALANCE SHEET
ASSETS
SECTION 6 – LOANS & RECEIVABLES – ITEM 60 6.1 DUE FROM BANKS
Composition Total 31/12/2015 Total 31/12/2014 Fair value Fair value Book Value Book Value L1 L2 L3 L1 L2 L3
1. Deposits and current accounts 10,040 - - 10,040 10,043 - - 10,043 2. Loans ------2.1 Repurchase agreements ------2.2 Lease agreements ------2.3 Factoring ------with Recourse ------without Recourse ------2.4 Other loans ------3. Debt securities ------structured securities ------other debt securities ------4. Other assets ------Total carrying amount 10,040 - - 10,040 10,043 - - 10,043
KEY: L1 = level 1 L2 = level 2 L3 = level 3
The item “Deposits and current accounts” refers to receivables available on demand deposited on the ordinary current account n. 89447 at UBI Banca S.p.A., the fair value of which, being short-term credit, coincides at 31 December 2015 with the book value.
21 UBI FINANCE CB 2 S.R.L.
SECTION 12 – – TAX ASSETS AND TAX LIABILITIES –– ITEM 120 AND ITEM 70 12.1 BREAKDOWN OF ITEM 120 ''TAX ASSETS: CURRENT AND ADVANCED''
Total 2015 Total 2014 a) current: 406 422 - tax assets (advances, withholdings, etc.) 1 1 - IRES advance payment - 17 - IRAP advance payment 370 305 - offset IRES receivables 18 99 - Reg. Business Tax credit subject to offsetting 17 - b) assets for advanced payment: - - - IRES advanced payment - - - IRAP advanced payment - - Total 406 422
12.2 BREAKDOWN OF ITEM 70 ''TAX LIABILITIES: CURRENT AND DEFERRED''
Total 2015 Total 2014 a) current: - due to the Tax Authorities for withholding taxes to be paid - - - due to the Tax Authorities for stamp duty - - - current IRES and IRAP 406 365 b) liabilities for deferred taxes - IRES - - - IRAP - - Total 406 365
The item consists of IRAP payables for € 399 and IRES payables for € 7.
12.3 CHANGES IN DEFERRED TAX ASSETS (RECOGNISED IN THE INCOME STATEMENT) There is nothing to report.
SECTION 14 – OTHER ASSETS – ITEM 140 14.1 BREAKDOWN OF ITEM 140 ''OTHER ASSETS'' Other assets are composed of the items detailed in the following table:
Description Total 2015 Total 2014 - Receivables from segregated assets 163,343 120,305 - Prepayments 605 564 Total 163,948 120,869
22 UBI FINANCE CB 2 S.R.L.
The item "Receivables from segregated assets" represents the receivable (cumulative since the beginning of the securitisation Operation) for the recharge of the separate assets of the costs necessary to preserve the existence of the Company. Prepayments represent the items necessary to match costs and revenue on an accruals basis. They refer to the amount pertaining to 2016 of an insurance contract for the professional liability of directors.
23 UBI FINANCE CB 2 S.R.L.
LIABILITIES
SECTION 7 – – TAX LIABILITIES –– ITEM 70 See Section 12 of the Assets.
SECTION 9 – OTHER LIABILITIES – ITEM 90 9.1 BREAKDOWN OF ITEM 90 ''OTHER LIABILITIES''
Total 2015 Total 2014 - Payables to the segregated assets 139,992 95,980 - Tax payables on withholdings applied - 2,612 - Payables to the Board of Directors 261 261 - Payables to Deloitte & Touche S.p.A. Invoices received 22,663 7,802 - Payables to Deloitte & Touche S.p.A. Invoices to be received 1,054 14,299 Total 163,970 120,954
The item "Payables to the segregated assets" represents the payable (cumulative since the beginning of the securitisation Operation) for the costs of the existence of the Company paid from the segregated assets.
SECTION 12 – EQUITY – ITEMS 120, 130, 140 AND 150 12.1 BREAKDOWN OF ITEM 120 ''QUOTA CAPITAL'' The quota capital amount is of Euro € 10,000.00 and is divided into quotas pursuant to art. 2468 of the Italian Civil Code. At the reporting date, it was fully subscribed and paid up.
Categories Amount 1. Quota Capital 10,000 1.1 Ordinary shares - 1.2 Other shares/Stakes 10,000
At 31st December 2015 the quota capital is held as follows: . € 4,000, or 40% of the quota capital, by the Dutch foundation STICHTING VIOLA, a Dutch foundation, based in Amsterdam (Netherlands), in Luna Arena, Herikerbergweg 238; . Euro 6,000, equal to 60% of the quota capital, by UBI BANCA S.PA. with head office in Bergamo, Via V. Veneto n. 8, tax code and Bergamo Businesses Registration number 03053920165.
12.2 BREAKDOWN OF ITEM 130 ''TREASURY SHARES'' No shares have been issued or repurchased.
24 UBI FINANCE CB 2 S.R.L.
12.3 BREAKDOWN OF ITEM 140 ''EQUITY INSTRUMENTS'' No equity instruments have been issued.
12.4 BREAKDOWN OF ITEM 150 ''SHARE PREMIUM'' There is nothing to report.
12.5 OTHER INFORMATION The following table illustrates the composition of the equity reserves and the relative occurrences during the financial year:
Retained Legal Other earnings Total A. OPENING BALANCE 10 - - 10 B. INCREASES 5 - - 5 B.1 Allocation of profits 5 5 B.2 Other changes - - C. DECREASES - - - - C.1 Utilisation - coverage of losses - distribution - transfer to quota capital C.2 Other changes D. CLOSING BALANCE 15 - - 15
With regard to the information referred to in art. 2427, paragraph 7-bis of the Italian Civil Code, one should refer to the details in the following table:
EQUITY USABILITY AND DISTRIBUTION POSSIBILITIES
Use in the Amount at Possibility of Available Description three previous 31/12/2015 use quota periods QUOTA CAPITAL 10,000 - - - INCOME-RELATED RESERVES: - LEGAL RESERVE 15 B 15 - - RETAINED EARNINGS - - - - - OTHER - - - -
PROFIT (LOSS) FOR THE YEAR 3 B, C 3 -
KEY: “A” to increase capital “B” to cover losses “C” for distribution to quotaholders
25 UBI FINANCE CB 2 S.R.L.
4.. PART C – COMMENTS ON THE INCOME STATEMENT
SECTION 1 – INTEREST - ITEMS 10 AND 20 1.1 BREAKDOWN OF ITEM 10 ''INTEREST INCOME AND SIMILAR INCOME''
Debt Other Total Items / Technical forms Loans Total securities operations 2015 2014 1. Financial assets held for trading - - 2. Financial assets at fair value - - 3. Financial assets available for sale - - 4. Financial assets held to maturity - - 5. Loans and receivables 5.1 Due from banks 3 3 5 5.2 Due from financial institutions - - 5.3 Receivables from customers - - 6. Other assets - - 7. Hedging derivatives - - Total - - 3 3 5
The item includes only the interest accrued on the ordinary current bank account held with Banco di Brescia S.p.A. prior to the transfer of the aforesaid account to UBI Banca S.p.A, inasmuch as such current account is non interest-bearing.
SECTION 9 - ADMINISTRATIVE EXPENSES – ITEM 110 9.1 BREAKDOWN OF ITEM 110.A ''STAFF EXPENSES'' These expenses represent only the fees to the Directors for the financial year increased by the relative expenses for third party liability insurances. The Company does not have any employees.
Description Total 2015 Total 2014 - Directors’ fees 9,538 9,538 - Third party liability insurance 2,527 2,129 Total 12,065 11,667
26 UBI FINANCE CB 2 S.R.L.
Items/Segments Total 2015 Total 2014 1. Employed staff - - a) wages and salaries - - b) social security expenses - - c) post-employment indemnity - - d) welfare expenses e) provisions to staff post-employment benefits - - f) provisions to pension funds and similar commitments - - - defined contribution - defined benefits g) payments to external supplementary welfare provisions - defined contribution - defined benefits h) other expenses 2. Other active staff 3. Directors and Auditors 12,065 11,667 4. Staff placed on rest 5. Recoveries of expenses for employees seconded to other companies 6. Reimbursement of expenses for employees seconded to the company 12,065 11,667
9.3 BREAKDOWN OF ITEM 110.B “OTHER ADMINISTRATIVE EXPENSES” "Administrative expenses: b) Other administrative expenses" consists of the following:
Total 2015 Total 2014 - Audit fees 30,016 28,362 - Bank costs 6 10 - Tax for Government concessions 310 310 - Chamber of Commerce fees 200 200 Total 30,532 28,882
Pursuant to art. 2427, paragraph 1, no. 16-bis of the Italian Civil Code, below is a table giving information on the fees paid to the independent auditing firm Deloitte & Touche S.p.A. and to the companies belonging to its network. This payment, relative to the financial year 2015, is that pursuant to contract, inclusive of any indexation but not inclusive of out-of-pocket expenses
27 UBI FINANCE CB 2 S.R.L. and VAT.
Type of services Service provider Service beneficiary Fees (€) Auditing of the accounts Deloitte & Touche S.p.A. UBI Finance CB 2 S.r.l. 19,200 Other services Deloitte & Touche S.p.A. UBI Finance CB 2 S.r.l. 3,000 Total 22,200
SECTION 14 - OTHER OPERATING INCOME AND EXPENSES – ITEM 160 14.1 BREAKDOWN OF ITEM 160 ''OTHER OPERATING INCOME/EXPENSES''
Description Total 2015 Total 2014 - Revenues from the recharge to the segregated assets 43,038 40,934 - Extraordinary Expenses (35) (20) Total 43,003 40,914
"Revenues from the recharge to the segregated assets" represents the proceeds arising from the recharge to segregated assets of the costs of existence of the Company for the period.
SECTION 17 - INCOME TAXES FOR THE YEAR FROM CONTINUING OPERATIONS – ITEM 190 17.1 BREAKDOWN OF ITEM 190 ''INCOME TAXES FOR THE YEAR FROM CONTINUING OPERATIONS''
Total 2015 Total 2014 1. Current taxes (406) (365) 2. Changes to previous year current taxes - - 3. Reduction in current taxes - - 3.1 Reduction in current taxes for tax credits, under Law 214/2011 - - 4. Change in advanced tax - - 5. Change in deferred tax - - Taxes for the year (406) (365)
The amount recorded in the financial statements is the debt for current IRES of € 7 and for current IRAP of € 399.
28 UBI FINANCE CB 2 S.R.L.
17.2 RECONCILIATION BETWEEN THEORETICAL AND EFFECTIVE TAX BURDEN
(values in Euro) 2015 2014 Items/Technical forms IRES IRAP IRES IRAP Profit before taxes 409 15,156 370 14,560 Difference between value and cost of production from F/S - - - - Applicable ordinary rate 27.50% 5.57% 27.50% 5.57% Theoretical tax 112 844 102 811 Tax effect of temporary/permanent differences: Non-deductible costs - - - - Other differences (384) - (407) - IRAP deduction - (8,000) - (8,000) Adjusted taxable income 25 7,156 (37) 6,560 Change in deferred tax - - - - Current effective tax 7 399 - 365 Current effective rate 1.68% 2.63% 0.00% 2.51%
29 UBI FINANCE CB 2 S.R.L.
5.. PART D – OTHER INFORMATION
SECTION 1 – SPECIFIC NOTES ON THE OPERATIONS CARRIED OUT
L. COVERED BONDS
L.1 - SUMMARY TABLE OF ASSETS UNDERLYING COVERED BANK BONDS AND LOANS RECEIVED
(values in Euro)
2015 2014 A. Securitised assets 3,151,992,881 3,126,060,741 A1) Loans and receivables 3,151,992,881 3,126,060,741 B. Use of funds from the management of loans 73,757,358 87,194,166 B3) Other 73,757,358 87,194,166 C. Issued notes - D. Loans received 3,246,525,743 3,215,016,486 E. Other Liabilities 31,718,886 31,918,176 Difference (A+B)-(C+D+E)* (52,494,390) (33,679,755)
F. Interest expense on notes issued - - G. Fees and commissions on the transaction 2,207,550 1,836,877 G1) For servicing 1,946,711 1,653,035 G2) For other services 260,839 183,842 H. Other expenses 77,497,430 80,029,781 I. Interest income on securitised assets 60,890,298 68,066,718 L. Other revenues 47 1,179,129 Difference (F+G+H)-(I+L)** 18,814,635 12,620,811
* Such difference represents the cumulative balance of the Transaction ** Such difference represents the balance of the Transaction for the year
30 UBI FINANCE CB 2 S.R.L.
MEASUREMENT CRITERIA USED FOR DRAWING UP THE SUMMARY TABLE This schedule was prepared in line with the guidelines set out by the Bank of Italy relating to the companies transferring the assets underlying the covered bank bonds (Ruling of 15 December 2015, which fully replaced the instructions attached to the Regulations of 14 February 2006 and its subsequent amendments); all the items indicated correspond to the figures taken from the company's accounting records and information system of the Servicer, UBI Banca. The following measurement criteria were used for the most significant entries.
LOANS AND RECEIVABLES - Receivables from financial institutions are measured at nominal amount which presumably corresponds to their realisation value. - The assets underlying the covered bank bonds have been recognised at transfer value and are measured according to the expected realisation value bearing in mind the solvency of the debtor. Such value is in fact determined by subtracting the principal and interest loss estimates from the overall amount disbursed. - The loans of the amount available are expressed at nominal value, equal to collection value. - Accrued income and deferred expenses have been calculated on an accruals basis, applying the principle of correlating costs and revenues according to the financial year.
OTHER ASSETS Other assets are recognised at nominal amount corresponding to the presumable realisation value.
PAYABLES Payables are shown at nominal amount.
OTHER LIABILITIES Other liabilities are recognised at nominal amount.
COSTS AND REVENUE Costs and revenue are recognised according to the accruals principle. All costs relative to securitisation processes are charged back directly to the Covered bank bond program.
31 UBI FINANCE CB 2 S.R.L.
BREAKDOWN OF THE ITEMS IN THE SUMMARY TABLE
A. ASSETS UNDERLYING THE COVERED BANK BONDS 3,151,992,881
These are composed of the realisation value of the existing loans at 31/12/2015:
2015 2014 - BRE loan portfolio 558,285,591 586,504,432 - Accrued interest on BRE loan portfolio 2,874,321 2,893,286 - Allowance for impairment on BRE loan portfolio (9,333,230) (5,190,474) - BBS loan portfolio 666,660,706 612,849,088 - Accrued interest on BBS loan portfolio 3,241,109 2,251,415 - Allowance for impairment on BBS loan portfolio (6,807,039) (5,156,981) - BPB loan portfolio 671,494,630 700,924,692 - Accrued interest on BPB loan portfolio 2,548,485 2,192,242 - Allowance for impairment on BPB loan portfolio (5,807,172) (4,641,377) - BPA loan portfolio 521,925,692 518,805,561 - Accrued interest on BPA loan portfolio 5,350,809 5,132,427 - Allowance for impairment on BPA loan portfolio (9,237,731) (5,917,985) - IWB loan portfolio 25,446,904 - - Accrued interest on IWB loan portfolio 8,796 - - Allowance for impairment on IWB loan portfolio (26,310) - - UBI loan portfolio 13,192,252 - - Accrued interest on UBI loan portfolio 9,305 - - Allowance for impairment on UBI loan portfolio (14,950) - - BKI loan portfolio 302,283,562 306,838,808 - Accrued interest on BKI loan portfolio 1,377,092 1,142,396 - Allowance for impairment on BKI loan portfolio (3,020,895) (2,220,660) - BRM loan portfolio 296,418,226 306,777,559 - Accrued interest on BRM loan portfolio 1,585,131 2,032,468 - Allowance for impairment on BRM loan portfolio (7,654,662) (4,996,812) - BVC loan portfolio 123,426,768 107,025,431 - Accrued interest on BVC loan portfolio 823,393 678,394 - Allowance for impairment on BVC loan portfolio (3,057,902) (1,863,169) 3,151,992,881 3,126,060,741
32 UBI FINANCE CB 2 S.R.L.
B. USE OF FUNDS FROM THE MANAGEMENT OF LOANS 73,757,358
The item includes:
2015 2014 - Due from banks 73,609,141 86,983,383 - Due from ordinary management 139,992 95,980 - Prepaid expenses 5,925 4,780 - Collections to be credited 2,300 110,023 73,757,358 87,194,166
C. ISSUED NOTES -
The Company did not and will not issue notes, as it is the guarantor - with the loan portfolios purchased by the Sellers from time to time - of the OBG2 program by UBI Banca
D. LOANS RECEIVED 3,246,525,743
The item includes:
2015 2014 - BRE Subordinated loan 568,078,450 599,761,726 - BBS Subordinated loan 683,557,663 629,781,679 - BPB Subordinated loan 685,433,170 716,851,113 - BPA Subordinated loan 534,175,856 530,235,996 - IWB Subordinated loan 25,732,448 - - UBI Subordinated loan 13,398,597 - - BKI Subordinated loan 307,941,158 314,055,358 - BRM Subordinated loan 301,613,296 314,346,353 - BVC Subordinated loan 126,595,105 109,984,261 3,246,525,743 3,215,016,486
33 UBI FINANCE CB 2 S.R.L.
E. OTHER LIABILITIES 31,718,886 These are composed of:
2015 2014 - Payables to Ordinary Management 163,343 120,305 - Payables to suppliers for invoices still to be received 1,055,786 844,149 - Payables to suppliers for received invoices 15,288 14,473 - Incorrect collections to be returned 28,109 - - Accrued Additional Premium BRE 5,258,909 5,822,917 - Accrued Additional Premium BBS 6,358,202 4,937,519 - Accrued Additional Premium BPB 4,875,922 5,084,936 - Accrued Additional Premium BPA 7,493,338 7,667,272 - Accrued Additional Premium IWB 39,279 - - Accrued Additional Premium UBI 24,361 - - Accrued Additional Premium BKI 2,416,270 2,446,208 - Accrued Additional Premium BRM 2,768,555 3,756,030 - Accrued Additional Premium BVC 1,221,524 1,224,367 31,718,886 31,918,176
It is specified that the payables for "Additional premiums" will only be repaid upon conclusion of the Program and if there is enough money available in the funds in place at that time. The loss accumulated at 31/12/2015 (€ 52 million) would not enable the repayment of such debts and the partial repayment of further portions of subordinate loans.
G. FEES AND COMMISSIONS ON THE TRANSACTION 2,207,550 The item includes:
2015 2014 - Servicer 1,946,711 1,653,035 Total "G1) Servicing fees" 1,946,711 1,653,035
- Lux Account Bank Commissions 160,500 126,000 - London Account Bank Commissions 15,517 - - Trustee 35,711 11,172 - Process Agent fee 1,730 - - Corporate Servicer 47,381 46,670 Total "G2) For other services" 260,839 183,842
34 UBI FINANCE CB 2 S.R.L.
H. OTHER EXPENSES 77,497,430 These include:
2015 2014 - Interest expense on BRE Loan & Additional Premium 10,943,515 12,780,474 - Interest expense on BBS Loan & Additional Premium 12,258,648 11,435,886 - Interest expense on BPB Loan & Additional Premium 11,289,086 12,698,994 - Interest expense on BPA Loan & Additional Premium 10,498,406 12,245,544 - Interest expense on BKI Loan & Additional Premium 4,700,039 5,438,523 - Interest expense on BRM Loan & Additional Premium 6,999,541 9,441,575 - Interest expense on BVC Loan & Additional Premium 1,803,235 2,222,941 - Interest expense on IWB Loan & Additional Premium 39,279 - - Interest expense on UBI Loan & Additional Premium 24,361 - - Impairment losses on BRE loans 4,142,756 2,573,498 - Impairment losses on BBS loans 1,650,057 1,893,854 - Impairment losses on BPB loans 1,165,795 820,817 - Impairment losses on BPA loans 3,319,745 1,522,968 - Impairment losses on BKI loans 800,235 799,973 - Impairment losses on BRM loans 2,657,850 2,909,019 - Impairment losses on BVC loans 1,194,734 343,184 - Impairment losses on IWB loans 26,310 - - Impairment losses on UBI loans 14,950 - - Rounding 2 1 - Losses on BPB loans 601,740 381,109 - Losses on BVC loans 121,755 23,921 - Losses on BPA loans 2,765,938 1,997,169 - Losses on BBS loans 119,930 153,151 - Losses on BRE loans 152,631 161,009 - Losses on BRM loans 28,573 102,276 - Losses on BKI loans 33,142 501 - Interest expense 86,970 20,782 - Administrative expenses recharged by Ordinary Management 43,038 40,934 - Administrative expenses 2,807 2,870 - Costs not Accrued 322 - - Notary expenses 11,923 18,706 - Bank charges 117 102 77,497,430 80,029,781
35 UBI FINANCE CB 2 S.R.L.
I. INTEREST GENERATED BY ASSETS UNDERLYING THE COVERED 60,890,298 BANK BONDS The item includes:
2015 2014 - Interest income on BBS loans 11,641,039 11,214,508 - Interest income on BRE loans 11,220,712 12,271,323 - Interest income on BPB loans 11,283,852 12,177,987 - Interest income on BPA loans 10,507,783 11,095,305 - Interest income on IWB loans 31,859 - - Interest income on UBI loans 15,744 - - Interest income on BKI loans 4,643,393 5,388,821 - Interest income on BRM loans 7,754,033 8,842,680 - Interest income on BVC loans 1,724,830 1,992,597 - Interest income accrued and not collected on BBS loans 989,694 576,990 - Interest income accrued and not collected on BRE loans (18,965) 930,276 - Interest income accrued and not collected on BPB loans 356,242 712,475 - Interest income accrued and not collected on BPA loans 218,383 1,338,401 - Interest income accrued and not collected on IWB loans 8,796 - - Interest income accrued and not collected on UBI loans 9,305 - - Interest income accrued and not collected on BKI loans 234,696 164,959 - Interest income accrued and not collected on BRM loans (447,337) 667,532 - Interest income accrued and not collected on BVC loans 144,999 289,104 - Penalties from BBS loans 60,998 8,600 - Penalties from BRE loans 57,725 36,874 - Penalties from BPB loans 28,701 47,952 - Penalties from BPA loans 27,742 18,457 - Penalties from BKI loans 24,531 13,069 - Penalties from BRM loans 17,893 34,666 - Penalties from BVC loans 1,875 3,774 - Default interest on BBS loans 38,587 45,289 - Default interest on BRE loans 65,271 31,171 - Default interest on BPB loans 79,931 56,521 - Default interest on BPA loans 66,859 36,593 - Default interest on IWB loans 2 - - Default interest on UBI loans - - - Default interest on BKI loans 30,756 19,082 - Default interest on BRM loans 51,587 40,488 - Default interest on BVC loans 18,782 11,224 60,890,298 68,066,718
36 UBI FINANCE CB 2 S.R.L.
L. OTHER REVENUES 47 The item includes:
2015 2014 - Bank interest income on BRE Bank accounts - 80,514 - Bank interest income on BBS Bank accounts - 81,281 - Bank interest income on BPB Bank accounts - 83,704 - Bank interest income on BPA Bank accounts - 74,564 - Bank interest income on BKI Bank accounts - 45,360 - Bank interest income on BRM Bank accounts - 41,303 - Bank interest income on BVC Bank accounts - 11,142 - Interest income on Reserve Account - 14,310 - Positive currency exchange differences 47 - - Revenues not Accrued - 746,943 - Rounding - 8 47 1,179,129
37 UBI FINANCE CB 2 S.R.L.
QUALITATIVE INFORMATION L.2 - DESCRIPTION AND TREND OF THE OPERATION
THE CB2 PROGRAM During 2012, the Company, with the assistance of Barclays Bank PLC as Arranger and of the law firms Clifford Chance and Chiomenti, put in place with UBI Banca (or the 'Issuer') some negotiations aimed at implementing a program ("the CB2 program") by UBI Banca for the issue of covered bonds (the ‘Covered Bonds’ or ‘OBG’) pursuant to Law 130/1999. More specifically, the Program establishes on the one hand, transfers without recourse of pecuniary receivables deriving from residential loans, as better identified below, to the Company by some banks of the UBI Banca Group, specifically: 1. Banco di Brescia S.p.A. (“BBS”), 2. Banca Regionale Europea S.p.A. (“BRE”), 3. Banca Popolare di Bergamo S.p.A. (“BPB”), 4. Banca Popolare di Ancona S.p.A. (“BPA”), 5. Banco di San Giorgio S.p.A. (“BSG”) now BRE by virtue of the merger by acquisition that took place by deed dated 15 October 2012, 6. Banca Popolare Commercio e Industria S.p.A. (“BKI”), 7. Banca Carime S.p.A. (“BRM”), 8. Banca di Valle Camonica S.p.A. (“BVC”), 9. IW Bank S.p.A. (“IWB”), which on 25 May 2015 incorporated UBI Banca Private Investment S.p.A., and 10. the Parent company of UBI Banca (jointly the "Originating Banks"). and on the other, the split issue of covered bank bonds by UBI Banca for up to € 5,000,000,000. In this context, the Company has undertaken to cover said emissions. As a matter of fact, the ‘Covered Bond Guarantee Agreement’, underwritten on 02 April 2012, states that the Company issues an irrevocable guarantee, on a first demand, unconditional and independent in favour of the covered bond holders in respect of portfolios of loans from time to time sold by the Seller Banks, under which the Company will guarantee the repayment of all sums due in respect of capital and interest in relation to the covered bonds by the Issuer (the ‘Guarantee’). The Company is therefore committed, from time to time, to increase, where necessary, the Guarantee granted, based on the amount of single issue. In compliance with this CB2 Program structure, the Company has acted as follows. THE INITIAL On 29 February 2012, the Company stipulated a transfer contract with TRANSFER all the Originating Banks for the pecuniary loans identified en bloc, in accordance with and pursuant to the combined provisions of Articles 7- bis and 4 of Italian Law no. 130/99 and Article 58 of the Consolidated Law on Banking, by virtue of which the Company undertakes to regularly acquire on a without recourse basis, according to a transfer programme, portfolios of loans deriving from performing mortgage
38 UBI FINANCE CB 2 S.R.L.
loans disbursed by the Transferring Banks during its core business (the "Initial Loans"). Therefore, in March and April 2012, all Originating Banks subscribed to the CB2 Program, selling portfolios of suitable assets to the Company at a purchase price of the previous portfolios equal to the book value stated on the latest financial statements approved by the Originating Bank, net of the principal amount collected in the period between the latest financial statements approved and the date of sale of the portfolio, and including the accrued interest at the date of the sale thereof. Specifically: A. on 01 March 2012 the Company purchased the following new non- recourse loan portfolios: - Euro 356,526,938 from BRE; - Euro 331,748,471 from BKI; - Euro 511,170,873 from BPA and - Euro 100,616,524 from BVC; B. on 01 April 2012 the Company purchased the following new non- recourse loan portfolios: - Euro 561,183,597 from BPB; - Euro 628,274,868 from BBS as amended by letter dated 29 May 2012; - Euro 309,027,265 from BRM and - Euro 208,552,704 from BSG. INITIAL LOANS SUBJECT At such date, such loans were identifiable as a 'block' according to and TO TRANSFER by effect of the combination of articles 7-bis and 4 of the Law 130/99 and of article 58 of TUB, since they met the following common criteria: (1) which may be: (A) land property mortgage loans (i) with risk weighting factor of no more than 35% and where the ratio between outstanding principal added to the outstanding principal of any preceding mortgage loans on the same property is not higher than 80% of the property value, pursuant to the Decree no. 310, or (ii) where there are properties concerned by the related mortgage guarantee of which at least one is a residential property, with a risk weighting factor of more than 35% and in relation to which the ratio between outstanding principal added to the outstanding principal of any preceding mortgage loans on the same property is not higher than 80% of the property value; or (B) commercial mortgage loans (i) with risk weighting factor of no more than 50% and where the ratio between outstanding principal added to the outstanding principal of any preceding mortgage loans on the same property is not higher than 60% of the property value, pursuant to the Decree no. 310, or (ii) where there are several properties concerned by the related mortgage guarantee of which at least one is a commercial property, which have a risk weighting factor of above 50% and in relation to which the ratio between outstanding principal added to the outstanding principal of any preceding mortgage loans on the same property is not higher than 60% of the property value;
39 UBI FINANCE CB 2 S.R.L.
(2) in respect to which the period of consolidation applicable to the relative mortgages has ended and the mortgage is not subject to dispute pursuant to Art. 67 of the Royal Decree no. 267 of 16th March 1942 and, where applicable, of Art. 39, paragraph four, of Legislative Decree no. 385 of 1 September 1993; (3) that have been disbursed or acquired from Banca Carime S.p.A.; (4) that are regulated by the Italian law; (5) that are performing and been paid for more than 30 day since the expected payment date; (6) that do not include clauses that limit the possibility for Banca Carime S.p.A. to transfer loans coming from the corresponding agreement or that decide that the permission of the debtor is required for such transfer and Banca Carime S.p.A. has obtained such permission; (7) in relation to which at least one subscription was paid by the debtor; (8) according to which all payments receivable from the debtor are made in Euro; (9) that were fully issued; (10) that have been granted to a natural person (including natural persons who are, or were, on the related disbursement date, employees of the company belonging to the Unione di Banche Italiane S.p.A. banking group), to a legal entity (with the exclusion of public sector entities, territorial entities and central administrations and central banks) or several natural persons or legal entities holding them jointly; (11) that provide for the payment by the debtor of a variable interest rate (determined each time by Banca Carime S.p.A. or fixed; (12) backed by first degree mortgages.
SUBORDINATE LOANS At the same time as the Initial Transfer, each Originating Bank granted FROM THE ORIGINATING the Company a loan for the same amount, so that the latter could have BANKS the funds necessary for the purchase of the above-mentioned loan portfolio - redemption subordinated to the repayment of the covered bonds issued by UBI Banca.
SUBSEQUENT Under the scope of the CB2 programme, once the Initial Transfer had TRANSFERS been made, each Originating Bank has the right to transfer new portfolios to the Company in order to: (a) integrate the portfolio held by the Company in exchange for the issue, by UBI Banca, of further Series of Guaranteed Bank Bonds in the context of the CB2 Programme; (b) guarantee the conformity of the portfolio of tests envisaged by the legislation and contracts or rather with the 15 percent threshold in relation to the Supplementary Suitable Assets established by the provisions of the MEF Decree and Instructions; or (c) invest available funds in excess with respect to that needed, in order that the tests are respected, in further suitable assets or supplementary suitable assets.
40 UBI FINANCE CB 2 S.R.L.
Therefore, until the date of the financial statements the following Subsequent Transfers were made: TRANSFER 3 On 28 March 2013 the Company purchased the following new non- recourse loan portfolios: . Euro 103,821,224 from BBS; . Euro 97,264,697 from BPA; . Euro 68,619,076 from BKI, and . Euro 51,636,781 from BRM. TRANSFER 4 On 28 November 2013 the Company purchased the following new non- recourse loan portfolios: . Euro 152,607,619 from BRE; . Euro 248,308,229 from BPB, and . Euro 45,537,727 from BVC. In 2014, the following Subsequent Transfers were made: TRANSFER 5 On 30 April 2014 the Company purchased the following new non- recourse loan portfolios: . Euro 47,835,632 from BRE; . Euro 60,470,554 from BPA; . Euro 28,590,624 from BKI, and . Euro 38,687,351 from BRM. TRANSFER 6 On 28 November 2014 the Company purchased the following new non- recourse loan portfolios: . Euro 84,632,519 from BPB, and . Euro 90,813,907 from BBS; TRANSFER 7 On 29 May 2015 the Company purchased the following new non- recourse loan portfolios: . Euro 156,608,215 from BBS; . Euro 65,108,817 from BPA; . Euro 42,023,000 from BKI, and . Euro 50,286,921 from BRE. TRANSFER 8 On 30 November 2015 the Company purchased the following new non- recourse loan portfolios: . Euro 59,380,464 from BPB; . Euro 31,608,618 from BVC; . Euro 25,732,448 from IWB; . Euro 27,535,286 from Carime, and . Euro 13,405,564 from UBI.
ISSUE OF THE FIRST On 28 May 2012, UBI Banca issued the first series of OBG for a total SERIES OF COVERED value of Euro 1,800 million. BONDS These OBGs are "retained", meaning that they are maintained by UBI Banca to be used for allocation in the European Central Bank and/or the Bank of Italy, thereby going towards increasing the liquid reserves of
41 UBI FINANCE CB 2 S.R.L.
the UBI Group. Moreover, they have been admitted for listing on the London Stock Exchange. The schedule regulating covered bonds constitutes the 'base prospectus' pursuant to Directive 2003/71/EC. WARRANTY TO THE Pursuant to Article 4 of the MEF Decree, and applicable to all loan ISSUER portfolios that will be transferred to the Company, the Company on 28 May 2012 issued an irrevocable guarantee, at first demand, unconditional and independent, in favour of the covered bonds holders, based on which the Company guarantees the repayment of all amounts due for principal or interest, related to the covered bonds by the Issuer, for a amount of Euro 2,100 million.
ISSUE OF THE Afterwards, UBI Banca has issued the following series of covered bonds SUBSEQUENT SERIES and therefore the Company has increased the maximum granted amount OF OBG pursuant to the Guarantee, in order to including the issuance of each series: The Second Series. On 29 October 2012, UBI Banca issued the second series of covered bonds (for an amount equal to Euro 500 million, the “Second Series”); at the same time, the Company released the Guarantee for a total maximum granted amount equal to Euro 2,620 million; The Third Series. On 05 March 2014, UBI Banca issued the third series of covered bonds maturing on 05 March 2019 (for an amount equal to Euro 200 million, the “Third Series”); at the same time, the Company released the Guarantee for a total maximum granted amount equal to Euro 2,580,000,000. The Fourth Series. On 14 July 2015, UBI Banca issued the fourth series of covered bonds maturing on 14 July 2021 (for an amount equal to Euro 650 million, the “Fourth Series”); at the same time, the Company released the Guarantee for a total maximum granted amount equal to Euro 2,610,000,000.
AMENDMENTS ON Since the beginning of the program CB2, the Company has put in place THE PROGRAM the following measures to amend the structure and contractual STRUCTURE documentation of the program itself.
FITCH RATING On 12 December 2013 Program CB2 contracts were modified so that the same, initially structured as a program of the so-called retained type, assumed the characteristics of a program of the so-called public type and that, consequently, the covered bonds were assigned a rating and the same could be placed on the market, in addition, then, to the provision in liquidity operations within the Eurosystem. After this, UBI Banca succeeded in getting an "A+" rating for the covered bank bonds from the rating agency Fitch Ratings Ltd. TRANSFER STOCK During the year 2014, on the advice of UBI Banca, for efficiency EXCHANGE LISTING reasons, it became necessary to change the listing stock market of the OBG covered bank bonds, initially listed on the London Stock Exchange to the Irish Stock Exchange, both with regard to future emissions and emissions already existing within the program. In view of this, the company partnered with UBI Banca, as issuer, in
42 UBI FINANCE CB 2 S.R.L.
order to: (i) perfect the passporting procedure of the base prospectus relating to the CB2 Program (the "Prospectus"), (ii) carry out the necessary requirements in order to request and obtain the listing of the Covered Bank Bonds on the Irish Stock Market, (iii) carry out the delisting of the series of covered bank bonds listed on the London Stock Exchange, (iv) participate in the preparation and negotiation of the new Prospectus to be approved by the Irish authorities, and (v) make all necessary and appropriate communications to dealers of the Programme and the holders of the covered bank bonds in order to give information to them regarding implementation of the above activities. On 23 May 2014, the passporting procedure was completed and the bonds are now listed on the Irish Stock Exchange. REPLACEMENT During 2015, at the instructions of UBI Banca, the need arose to change ACCOUNT BANK some definitions contained in the CB2 Program agreements, among which those of “Eligible Institution”, “Eligible Investment” and “Top Up Assets” among other things so as to align the contractual documentation with changes to the EU Regulation no. 575/2013 (“CRR”) (and to the relative implementing regulations) and that of “Eligible Assets” so as to exclude the ABS securities from the portfolio of assets suitable for selling to the Company. In addition to the above, it was held appropriate to replace UBI Banca International SA (“UBI Lux”) as Account Bank of the CB2 Program with BNP Paribas Securities Services, London branch. As a result on 16 July 2015 the following changes were made to the structure of the CB2 Program: (i) the Company terminated its agreement with UBI Lux as “Luxembourg Account Bank; (ii) appointed BNP Paribas Securities Services, London branch “English Account Bank” (“BNPP”); (iii) opened new current accounts at BNPP; (iv) transferred to the new English current accounts the balance of funds and securities deposited with UBI Lux, inclusive of the interest accrued up to the effective refund date, and (v) lastly closed the existing accounts at UBI Lux. REPLACEMENT OF Following the withdrawal of its rating on the first program of covered FITCH WITH DBRS bank bonds set up by UBI Banca for business reasons, the rating agency Fitch Ratings Limited decided in October 2015 not to renew the three year agreement for the assessment of the CB2 Program for which the company is guarantor. As a result, on 15 October 2015 the contractual structure of the CB2 program required changing so as to replace Fitch Ratings Limited with DBRS Ratings Limited as the rating agency of the CB2 Program.
PROGRESS OF THE Started in 2012, the OBG Program has generated payments in line with TRANSACTION the plan for the period.
43 UBI FINANCE CB 2 S.R.L.
The following figure summarises the structure of the transaction:
Asset Swap Providers Bank of Italy (if applicable)
Cover Euribor Pool + Transfers of Revenue Margin Supervision Assets UBI Finance CB 2 s SRL Sellers Guarantor Purchase price Liability Subordinated Repayment of Swap loan Subordinated loan Covered Bond Swap Provider Sellers (if applicable)
Liability Intercompany Repayment of Swap loan Intercompany loan Guarantee
Issuer Asset Monitor
Proceeds OBG
Investors
44 UBI FINANCE CB 2 S.R.L.
L3 - ENTITIES INVOLVED In addition to UBI FINANCE CB 2 S.R.L. (the "Guarantor"), the main subjects involved in the new Covered Bank Bonds Program are:
ISSUER, UNIONE DI BANCHE ITALIANE SOCIETÀ PER AZIONI MASTER SERVICER, (“UBI Banca”) CALCULATION AGENT & Piazza Vittorio Veneto n. 8 - 24122 Bergamo ITALIAN ACCOUNT BANK
REPRESENTATIVE OF THE BNY MELLON CORPORATE TRUSTEE SERVICES LTD. COVERED BONDHOLDERS One Canada Square E14 5AL London- UNITED KINGDOM
ORIGINATING BANKS, . Banca Regionale Europea S.p.A. (“BRE”), SUB-SERVICER & . Banco di Brescia S.p.A. (“BBS”), SUBORDINATED LOAN . Banca Popolare di Bergamo S.p.A. (“BPB”), PROVIDER . Banca Popolare di Ancona S.p.A. (“BPA”), . Banco di San Giorgio S.p.A. (“BSG”) (1), . Banca Popolare Commercio e Industria S.p.A. (“BKI”), . Banca Carime S.p.A. (“BRM”), . Banca di Valle Camonica S.p.A. (“BVC”) . IW Bank S.p.A. (“IWB”) , and . UBI Banca. ASSET MONITOR BDO ITALIA S.P.A. (ex- Mazars & Guérard) Viale Abruzzi 94 – 20131 Milano
PRINCIPAL PAYING THE BANK OF NEW YORK MELLON (LUXEMBOURG) AGENT S.A. ITALIAN BRANCH
Via Carducci, 31 - 20123 Milan
ENGLISH ACCOUNT BANK BNP PARIBAS SECURITIES SERVICES 3, Rue d'Antin, 75002, Paris – FRANCE operating through the London office 55, Moorgate - EC2R 6PA London - UNITED KINGDOM
OLD LUXEMBOURG UBI BANCA INTERNATIONAL S.A. ACCOUNT BANK 37/A Avenue J. F. Kennedy 1855 Luxembourg - LUXEMBOURG
GUARANTOR CORPORATE TMF MANAGEMENT ITALY S.R.L. SERVICER Foro Buonaparte, 70 - 20121 Milan
COVERED BOND SWAP Appointment not yet assigned PROVIDER
45 UBI FINANCE CB 2 S.R.L.
(1) On 15 October 2012, Banco di San Giorgio S.p.A. stipulated the deed of merger by acquisition by Banca Regionale Europea S.p.A., a deed that took effect as from 22 October 2012. Banco di San Giorgio S.p.A. was the transaction sub-servicer and Subordinated Loan Provider, in relation to its transferred loans until the merger date.
L.4 - FEATURES OF THE ISSUES As anticipated in the 'Description of the transaction' section, the Company, as guarantor - with the loans portfolios purchased by the Sellers from time to time - of the program for the issue of covered bonds guaranteed by UBI Banca pursuant to art. 7-bis of Law 130/99, did not and will not issue securities.
L.5 - CONNECTED FINANCIAL TRANSACTIONS
WARRANTY AND INDEMNIFICATION OF THE SELLER At the date of transfer, the Company agreed with each Seller a Warranty and Indemnification Contract according to which the Seller itself has made certain representations and guarantees in favour of the Company concerning the Loan Portfolio sold and has accepted to hold the same harmless from certain costs, expenses and liabilities incurred in relation to the purchase and ownership of the securitised portfolio.
SUBORDINATED LOAN When the Company bought the credit portfolios, it stipulated a subordinated loan contract with each Seller (the so-called “Subordinated Loan Agreement), for the same amount, in order to have the funds necessary for the purchase of the credit. The loan is subordinated to the repayment of the covered bonds that will be subsequently issued by UBI Banca. To remunerate such loan, at each payment date the Company pays each Seller a base annual interest equal to 0.001% plus a 'Premium' resulting from the difference between the interest collected from the loan portfolio and most operating costs concerning the existence of the Company and the Program.
INTERCREDITOR AGREEMENT The Company, in return for the transfer of any and all right, ownership and interest on each asset concerning the Program, obtains from the Representative of the Noteholders, the guarantee of coverage of any and all right, ownership and interest on the amounts deposited, from time to time, on the current accounts of the transaction, in favour of the same Noteholders and all creditors of the Program.
L.6 - OPERATING FACULTIES OF THE TRANSFEREE COMPANY The Company has no operating faculties concerning the prepayment of covered bonds.
46 UBI FINANCE CB 2 S.R.L.
QUANTITATIVE INFORMATION
L.7 - CASH FLOW DATA RELATIVE TO LOANS In the year, acquired loans have had the following movements:
(values in Euro)
From 01/01/2015 to From 01/03/2012* to 31/12/2015 31/12/2014 Opening Balance 3,126,060,741 - of which: Loan portfolios purchased 3,139,725,571 - Accrued interest on loans 16,322,628 - Allowance for impairment (29,987,458) - Increases: 532,579,631 4,318,628,501 Loan portfolios purchased 471,689,333 4,125,927,179 Accrued interest on loans 60,890,298 192,701,322 Decreases: (506,647,491) (1,192,567,760) Principal collected (432,280,573) (986,201,608) Interest collected (59,394,485) (176,378,694) Impairment losses on loans (14,972,433) (29,987,458) Closing Balance: 3,151,992,881 3,126,060,741 of which: Loan portfolios 3,179,134,331 3,139,725,571 Accrued interest on loans 17,818,441 16,322,628 Allowance for impairment (44,959,891) (29,987,458)
* Date of Initial Transfer
At each reporting date, it is assessed whether there is any objective evidence that a financial asset or group of financial assets is impaired. This occurs when it is foreseen that the company will not be able to collect the amount due, according to the contractual terms, e.g. in the following cases: a) significant financial difficulty of the issuer or obligor; b) a breach of contract, such as default or delinquency in interests or principal payment; c) the lender, for economic or legal reasons relating to the borrower’s financial difficulty, granting a concession to the borrower which the lender would not otherwise consider; d) it becoming probable that the borrower will enter financial reorganisation; e) the disappearance of an active market for that financial asset because of financial difficulties; f) observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of similar financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group. The valuation of non-performing loans (loans that, based on the definitions given by the Bank of Italy, are non-performing, doubtful, restructured or past-due loans) is performed based on
47 UBI FINANCE CB 2 S.R.L. analytical methods. The valuation of the remaining loans is made based on collective methods, with grouping in similar risk classes. The criteria for determining the doubtful accounts to be registered for non-performing loans are based on the discounting of the expected financial flows, for capital and interests, taking into account any collateral covering the positions and any advance payments received. In determining the present value of future cash flows, the basic requirement is the identification of estimated collections, the timing of payments and the rate used. The amount of the loss is measured as the difference between the asset's carrying amount and the present value of the estimated future cash flows discounted using the original effective interest rate. The valuation of performing loans regards the portfolios of assets for which no objective element of impairment has been found, and which are therefore assessed collectively. To the estimated cash flows of the assets, grouped in homogeneous classes with similar characteristics in terms of credit risk, the percentage loss that can be deduced from the historical statistics is applied. If a loan subjected to analytical assessment does not show significant value reductions, it is included in a group of financial assets with similar credit risk characteristics and assessed collectively.
48 UBI FINANCE CB 2 S.R.L.
L.8 - TREND OF PAST-DUE LOANS At 31 December 2015, the position of the loans due but not yet collected is the following:
(values in Euro)
BRE Loans BBS Loans BPB Loans BPA Loans BKI Loans 2015 2015 2015 2015 2015 30 –60 days 2,687,233 2,253,492 2,761,603 1,208,185 1,709,359 61 - 90 days 1,229,070 985,254 2,245,903 2,476,812 464,550 91 - 120 days 1,170,299 811,055 734,183 2,595,186 362,846 More than 120 days 5,638,709 3,063,235 3,604,296 5,853,507 1,638,090 More than 210 days 34,544,090 43,712,952 21,962,294 49,395,242 17,625,183 Total 45,269,401 50,825,988 31,308,279 61,528,932 21,800,028
(values in Euro)
BRM Loans BVC Loans IWB Loans UBI Loans 2015 2015 2015 2015 30 –60 days 3,626,853 469,190 12,680 109,245 61 - 90 days 1,199,312 17,955 402,122 91 - 120 days 1,295,043 23,126 - More than 120 days 1,301,441 1,548,481 - More than 210 days 29,220,044 9,886,341 - Total 36,642,693 11,945,093 414,802 109,245
Below, is shown for comparison the classification of loans to 31/12/2014 (values in Euro)
BRE Loans BBS Loans BPB Loans BPA Loans 2014 2014 2014 2014 30 –60 days 4,299,860 2,574,812 4,567,811 2,113,951 61 - 90 days 9,249,022 2,191,509 1,336,075 4,347,819 91 - 120 days 2,517,271 2,359,431 1,810,769 3,503,985 More than 120 days 8,130,798 9,427,443 1,709,558 7,840,488 More than 210 days 15,029,810 28,504,625 22,396,451 31,264,691 Total 39,226,761 45,057,820 31,820,664 49,070,934
(values in Euro)
BKI Loans BRM Loans BVC Loans 2014 2014 2014 30 –60 days 523,456 2,055,454 882,036 61 - 90 days 524,862 3,982,195 1,132,297 91 - 120 days 338,196 409,942 257,902 More than 120 days 2,298,033 1,615,759 336,820 More than 210 days 15,360,557 27,562,545 4,622,175 Total 19,045,104 35,625,895 7,231,230
49 UBI FINANCE CB 2 S.R.L.
The loans are therefore classified as follows:
(values in Euro)
BRE Loans BBS Loans BPB Loans
Provision for Provision for Provision for 2015 % Coverage 2015 % Coverage 2015 % Coverage impairment impairment impairment
Unimpaired loans 516,462,075 2,379,971 0.46% 616,823,641 2,504,490 0.41% 640,023,389 2,406,014 0.38% Past due impaired loans 2,011,487 102,708 5.11% 2,801,512 144,024 5.14% 466,835 24,539 5.26% Possible default 25,020,506 2,119,850 8.47% 30,230,401 2,289,204 7.57% 16,436,662 1,278,482 7.78% Non-performing loans 14,791,523 4,730,701 31.98% 16,805,152 1,869,321 11.12% 14,567,744 2,098,137 14.40% Total 558,285,591 9,333,230 1.67% 666,660,706 6,807,039 1.02% 671,496,645 5,807,172 0.86%
(values in Euro) BPA Loans BKI Loans BRM Loans
Provision for Provision for Provision for 2015 % Coverage 2015 % Coverage 2015 % Coverage impairment impairment impairment
Unimpaired loans 462,405,570 2,720,522 0.59% 280,417,174 1,100,274 0.39% 258,765,466 904,041 0.35% Past due impaired loans 1,797,975 98,144 5.46% 572,619 29,929 5.23% 1,126,696 62,678 5.56% Possible default 34,711,279 3,044,319 8.77% 15,743,648 1,209,368 7.68% 21,716,211 2,241,877 10.32% Non-performing loans 23,010,868 3,374,746 14.67% 5,550,121 681,324 12.28% 14,809,853 4,446,066 30.02% Total 521,925,692 9,237,731 1.77% 302,283,562 3,020,895 1.00% 296,418,226 7,654,662 2.58%
(values in Euro) BVC Loans IWB Loans UBI Loans
Provision for Provision for Provision for 2015 % Coverage 2015 % Coverage 2015 % Coverage impairment impairment impairment
Unimpaired loans 110,542,709 422,083 0.38% 25,446,904 26,310 0.10% 13,192,252 14,950 0.11% Past due impaired loans 41,080 2,086 5.08% ------Possible default 8,834,193 1,076,185 12.18% ------Non-performing loans 4,008,786 1,557,548 38.85% ------Total 123,426,768 3,057,902 2.48% 25,446,904 26,310 0.10% 13,192,252 14,950 0.11%
Below, is shown for comparison the classification of loans to 31/12/2014:
(values in Euro)
BRE Loans BBS Loans BPB Loans
Provision for Provision for Provision for 2014 % Coverage 2014 % Coverage 2014 % Coverage impairment impairment impairment
Unimpaired loans 565,323,961 2,801,702 0.50% 572,737,358 2,147,044 0.37% 678,115,125 2,286,328 0.34% Past due impaired loans 5,798,153 246,305 4.25% 6,366,677 260,185 4.09% 2,216,887 155,200 7.00% Possible default 7,476,291 428,248 5.73% 20,728,743 1,248,853 6.02% 9,456,259 827,813 8.75% Non-performing loans 7,906,027 1,714,219 21.68% 13,016,310 1,500,899 11.53% 11,136,421 1,372,036 12.32% Total 586,504,432 5,190,474 0.88% 612,849,088 5,156,981 0.84% 700,924,692 4,641,377 0.66%
(values in Euro) BPA Loans BKI Loans BRM Loans
Provision for Provision for Provision for 2014 % Coverage 2014 % Coverage 2014 % Coverage impairment impairment impairment
Unimpaired loans 477,204,504 2,579,867 0.54% 288,594,410 1,002,222 0.35% 274,993,483 1,103,266 0.40% Past due impaired loans 6,266,579 335,170 5.35% 2,596,605 135,629 5.22% 1,242,629 65,621 5.28% Possible default 25,912,929 1,522,569 5.88% 11,026,993 474,019 4.30% 23,779,137 2,435,301 10.24% Non-performing loans 9,421,549 1,480,379 15.71% 4,620,800 608,790 13.17% 6,762,310 1,392,624 20.59% Total 518,805,561 5,917,985 1.14% 306,838,808 2,220,660 0.72% 306,777,559 4,996,812 1.63%
50 UBI FINANCE CB 2 S.R.L.
(values in Euro) BVC Loans
Provision for 2014 % Coverage impairment
Unimpaired loans 101,341,966 620,452 0.61% Past due impaired loans 112,609 5,801 5.15% Possible default 1,554,883 123,329 7.93% Non-performing loans 4,015,973 1,113,587 27.73% Total 107,025,431 1,863,169 1.74%
Reported here below is the organizational structure and policies adopted by the Servicer, UBI Banca, and Sub-Servicer, the Seller Banks, for the management of impaired loans. The classification of a critical portfolio complies with the law and it can be summarized as follows: . continuous overdue for more than 90 days, . restructured positions, . operative watch list, . non-performing loans. As for the ‘doubtful loans’, in order to optimise their control and exclusively for management purposes, it is made a division of the positions where it is assumed that the temporary critical situation can be solved quickly (within 9 months), defining them as ‘operating doubtful loans’. In fact, after the ninetieth day that a ‘performing’ position continues to highlight spill or delayed payments, according to the thresholds for detection of ‘Past Due’ provided by the Bank of Italy, is automatically classified ‘Past Due’ (past due or ongoing spill) and its management, aimed at regularizing the position, remains in the charge of the manager in coordination with the Seller Bank of Doubtful Claims structure. After sixty days in that status a proposal for the classification to ‘Operating Doubtful Loan’ is generated for the position, which will last additional sixty days maximum. After this period the position that remains in the ‘Past Due’ state will be automatically classified to ‘Operating Doubtful Loan’ for a maximum of two hundred seventy days and, eventually, at the expiration of that period will be automatically classified, if conditions are met, to ‘Recovery Doubtful Loan’. After three hundred sixty-five days from being classified ‘Recovery Doubtful Loan’, for these positions it will be generated a proposal for the classification to ‘Non-performing Loans’. The management of critical loans is controlled according to the risk level: with regard to 'continuous overdue for more than 90 days', 'operating doubtful loans', doubtful loans and 'restructured loans', it is assigned to the organisational structures in charge of the management of impaired loans at the Sub-servicers; with regard to 'non-performing' loans, these are managed by the Credit Collection Department of the Servicer, the Parent Company UBI Banca S.p.A. The adequacy of impairment losses is assessed analytically, position by position, ensuring high levels of hedging of the expected losses. The exposure due to impaired positions is constantly analysed by the individual operating units of the Sub-Servicers who are responsible for risk control, and by the parent company.
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L.9 - CASH FLOWS The cash flows that occurred during the year ended 31 December 2015 are summarized in the following table:
(values in Euro)
2015 2014 Description Partial Total Partial Total
Collections of the period 488,247,081 437,619,307 - from loans 488,247,081 437,201,431 - from notes issued - - - from guarantee lines - - - from liquidity lines - - - from derivative contracts - - - other collections - 417,876
Payments of the period (501,621,323) (734,321,266) - to noteholders - - - to Originator 500,765,218 733,724,165 - on guarantee lines - - - on liquidity lines - - - on derivative contracts - - - other payments 856,105 597,101
Net income/(outgoing) (13,374,242) (296,701,959)
Cash and cash equivalents at the start of 86,983,383 383,685,342 the year Cash and cash equivalents at the 73,609,141 86,983,383 end of the year
Net cash flows (13,374,242) (296,701,959)
The cash flows produced during the year were in line with expectations. Forecast flows for FY 2016 come to approximately Euro 427.5 million, divided up into Euro 345.8 million for capital and Euro 81.7 million for interest.
L.10 - SITUATION OF GUARANTEES AND CREDIT LINES No credit lines were given or received from third parties nor was any temporary financing used.
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L.11 - BREAKDOWN BY RESIDUAL LIFE ASSETS: All the monetary loans, arising from performing loans in portfolio, follow a scheduled repayment plan with the following residual life, calculated by taking the maturity date of the loan itself as a reference:
(values in Euro) BRE Loans BBS Loans BPB Loans BPA Loans BKI Loans 2015 2015 2015 2015 2015 Up to three months 2,272,219 1,818,464 975,756 903,525 200,170 From three months to one year 1,999,769 2,998,482 1,794,619 1,973,419 5,178,114 From one to five years 73,506,268 139,519,946 52,849,669 68,093,220 36,672,353 Beyond five years 480,507,335 522,323,814 615,874,586 450,955,528 260,332,925 Total 558,285,591 666,660,706 671,494,630 521,925,692 302,383,562
(values in Euro) BRM Loans BVC Loans IWB Loans UBI Loans 2015 2015 2015 2015 Up to three months 2,152,208 98,448 - 324 From three months to one year 1,588,647 1,209,512 55,877 727 From one to five years 40,105,287 13,838,021 1,379,384 261,518 Beyond five years 252,572,084 108,280,787 24,011,643 12,929,683 Total 296,418,226 123,426,768 25,446,904 13,192,252
(values in Euro) BRE Loans BBS Loans BPB Loans BPA Loans 2014 2014 2014 2014 Up to three months 619,587 976,016 224,008 565,405 From three months to one year 2,013,586 4,398,879 1,840,110 2,449,013 From one to five years 72,919,890 87,361,731 55,552,036 58,791,881 Beyond five years 510,951,369 520,112,462 643,308,538 456,999,262 Total 586,504,432 612,849,088 700,924,692 518,805,561
(values in Euro) BKI Loans BRM Loans BVC Loans 2014 2014 2014 Up to three months 212,247 365,354 121,887 From three months to one year 1,902,956 3,476,211 811,145 From one to five years 39,820,729 34,562,060 13,937,868 Beyond five years 264,902,876 268,373,934 92,154,531 Total 306,838,808 306,777,559 107,025,431
The 'Other assets' are due within max. 18 months.
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LIABILITIES: The 'Other liabilities' are due in the short term. L.12 - BREAKDOWN BY GEOGRAPHIC SEGMENT
Country of residence of debtors:
(values in Euro) BRE Loans BBS Loans BPB Loans BPA Loans BKI Loans 2015 2015 2015 2015 2015
Italy 558,285,591 666,660,706 671,494,270 521,925,692 302,283,562 Abroad - - - - -
Total 558,285,591 666,660,706 671,494,270 521,925,692 302,283,562
(values in Euro) BRM Loans BVC Loans IWB Loans UBI Loans 2015 2015 2015 2015
Italy 296,418,226 123,426,768 25,446,904 13,192,252 Abroad - - - -
Total 296,418,226 123,426,768 25,446,904 13,192,252
(values in Euro) BRE Loans BBS Loans BPB Loans BPA Loans 2014 2014 2014 2014
Italy 586,504,432 612,849,088 700,924,692 518,805,561 Abroad - - - -
Total 586,504,432 612,849,088 700,924,692 518,805,561
(values in Euro) BKI Loans BRM Loans BVC Loans 2014 2014 2014
Italy 306,838,808 306,777,559 107,025,431 Abroad - - -
Total 306,838,808 306,777,559 107,025,431
Currency of the credit positions: EURO.
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L.13 - CONCENTRATION OF RISK
The following tables summarize the number and total value of loans by amount for each Seller Bank.
(values in Euro) Amounts at 31/12/2015
Amount range BRE Loans BBS Loans BPB Loans (Euro) Contract no. Amount % incidence Contract no. Amount % incidence Contract no. Amount % incidence >0 < 25,000 945 11,936,867 2.14 1,028 12,746,486 1.91 1,327 16,195,460 2.41 >25,000 < 75,000 1,701 81,356,807 14.57 1,617 79,085,400 11.86 2,177 107,926,103 16.07 >75,000 < 250,000 1,604 205,843,104 36.87 1,669 208,840,091 31.33 2,588 310,436,676 46.23 >250,000 358 259,148,813 46.42 409 365,988,729 54.90 357 236,936,391 35.28 Total 4,608 558,285,591 100 4,723 666,660,706 100 6,449 671,494,630 100
(values in Euro) Amounts at 31/12/2015
Amount range BPA Loans BKI Loans BRM Loans (Euro) Contract no. Amount % incidence Contract no. Amount % incidence Contract no. Amount % incidence >0 < 25,000 781 10,526,336 2.02 600 7,142,472 2.36 834 10,567,493 3.57 >25,000 < 75,000 1,671 81,250,808 15.57 1,013 49,563,329 16.40 1,461 68,898,779 23.24 >75,000 < 250,000 1,437 182,146,511 34.90 1,072 140,916,557 46.62 985 116,644,306 39.35 >250,000 353 248,002,037 47.52 132 104,661,204 34.62 129 100,307,648 33.84 Total 4,242 521,925,692 100 2,817 302,283,562 100 3,409 296,418,226 100
(values in Euro) Amounts at 31/12/2015
Amount range BVC Loans IWB Loans UBI Loans (Euro) Contract no. Amount % incidence Contract no. Amount % incidence Contract no. Amount % incidence >0 < 25,000 143 1,632,537 1.32 20 284,166 1.12 14 193,095 1.46 >25,000 < 75,000 241 11,425,446 9.26 57 2,849,738 11.20 77 3,904,782 29.60 >75,000 < 250,000 262 34,218,235 27.72 73 9,212,688 36.20 71 8,418,987 63.82 >250,000 95 76,150,550 61.70 15 13,100,312 51.48 2 675,388 5.12 Total 741 123,426,768 100 165 25,446,904 100 164 13,192,252 100
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(values in Euro) Amounts at 31/12/2014
Amount range BRE Loans BBS Loans BPB Loans (Euro) Contract no. Amount % incidence Contract no. Amount % incidence Contract no. Amount % incidence >0 < 25,000 873 11,041,338 1.88 865 10,332,934 1.69 1,373 17,223,618 2.46 >25,000 < 75,000 1,675 81,436,641 13.89 1,326 65,402,652 10.67 2,117 104,623,655 14.93 >75,000 < 250,000 1,638 212,404,798 36.22 1,392 175,343,921 28.61 2,610 316,096,894 45.10 >250,000 391 281,621,655 48.02 381 361,769,581 59.03 384 262,980,525 37.52 Total 4,577 586,504,432 100 3,964 612,849,088 100 6,484 700,924,692 100
(values in Euro) Amounts at 31/12/2014
Amount range BPA Loans BKI Loans BRM Loans (Euro) Contract no. Amount % incidence Contract no. Amount % incidence Contract no. Amount % incidence >0 < 25,000 736 9,472,911 1.83 627 7,251,292 2.36 792 10,164,952 3.31 >25,000 < 75,000 1,656 80,981,039 15.61 991 48,322,797 15.75 1,421 67,342,398 21.95 >75,000 < 250,000 1,486 189,107,142 36.45 1,045 135,589,487 44.19 1,013 120,886,306 39.41 >250,000 353 239,244,469 46.11 147 115,675,232 37.70 136 108,383,903 35.33 Total 4,231 518,805,561 100 2,810 306,838,808 100 3,362 306,777,559 100
Amount range BVC Loans (Euro) Contract no. Amount % incidence >0 < 25,000 140 1,674,477 1.56 >25,000 < 75,000 217 10,182,470 9.51 >75,000 < 250,000 241 32,296,060 30.18 >250,000 78 62,872,424 58.75 Total 676 107,025,431 100
It is also reported that there are no individual loans greater than 2% of the total loans in the portfolio.
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SECTION 3 – – INFORMATION ON RISKS AND RELATED RISK MANAGEMENT POLICIES
3.1 CREDIT RISK QUALITATIVE INFORMATION 1. GENERAL ASPECTS (i) ORDINARY MANAGEMENT - The Company is not subject to credit risk since it has deposits in its bank accounts of Euro 10,040. (ii) SEGREGATED ASSETS - The Company is subject to risks deriving from: - missing collection of amounts due from the transferred debtors; - default of the Servicer in collecting sufficient funds to meet the payment obligations deriving from the CB2 Program. These risks are mitigated by the following techniques: (i) the issue on the part of UBI Banca of a total amount of covered bank bonds with a value lower than that of the Credit Portfolios sold (so-called “over- collateralisation”);
3.2 MARKET RISK 3.2.1 INTEREST RATE RISK QUALITATIVE INFORMATION 1. GENERAL ASPECTS (i) ORDINARY MANAGEMENT - The Company is not subject to credit risk, since it only has “credit with banks” represented by current account deposits amounting to Euro 10,040. (ii) SEGREGATED ASSETS - For the Company interest rate risk exists only when the Issuer is no longer able to sustain the commitments deriving from the issue of the covered bonds ( 'Issuer Default Notice'), and it is mainly due to the potential loss arising from changes in interest rates of the securitised assets and the issued bonds. The latter, in fact, follow the trend of the variable rate Euribor market, whilst the performing loans, which constitute the securitisation assets, are not necessarily linked to the Euribor. As result of this misalignment between positive and negative interest, if the Euribor should exceed a certain level, the Company might not have sufficient funds to execute the payment of all the obligations arising from the Program of covered bonds. The main element for the mitigation of this risk is the overcollateralisation.
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3.3 OPERATIONAL RISK QUALITATIVE INFORMATION 1. GENERAL ASPECTS, PROCESSES AND METHODS FOR ESTIMATING AND MANAGING THE OPERATING RISK This is the risk of suffering losses generated by inefficiencies of Company processes, malfunctioning of technological systems, external events which cause or might cause objective and measurable losses for the Company. The Basel Committee associates unexpected losses to four factors: human errors, system failures, inadequate procedures and controls, external events. Operational risk is a pure risk, that is only negative outcomes are associated. The ability of the Company to fulfil its obligations pursuant to the Covered bank bond program structured by UBI Banca, in which the company participates, depend exclusively on third-party subjects to which all the functions typical of an organised structure, as well as the internal auditing systems, are delegated; the Company, in fact, by its nature, has no employees. In particular, the positive outcome of the Securitisation Program depends on the ability of the Servicer to manage the loans portfolio according to the terms of the Servicing Agreement. Therefore, in order to mitigate the risk deriving from the servicing activity and to ensure that the credit is managed in a coherent and uniform manner, the Servicer: - has acknowledged that its obligations pursuant to the Serving contract are those that it must honour in the normal practice of its professional activity; - has undertaken to manage the servicing activity with maximum professional diligence, it remaining understood that if, in the execution of the mandate, a conflict should arise between its own interests and that of the bank which issues other services relative to the transferred borrowers and the Company's interests, the Service shall report the fact to the Company and to the Noteholders' Representative, and shall, in any case, follow the directives issued by this latter; - is held to perform the servicing activity through its own operating structure, and to guarantee that this is provided with all the infrastructures, and technical and organisational and information technology resources necessary for the efficient execution of the aforesaid activities.
3.4 LIQUIDITY RISK QUALITATIVE INFORMATION 1. GENERAL ASPECTS, PROCESSES AND METHODS FOR ESTIMATING AND MANAGING THE LIQUIDITY RISK a) ORDINARY MANAGEMENT - The Company is not subject to liquidity risk since it has 'Receivables from banks' for on demand deposits in bank accounts of Euro 10,040. b) SEGREGATED ASSETS - The liquidity risk is connected with the possibility of incurring losses, in terms of the price for disposing of assets/liabilities as resulting from the need to liquidate the positions promptly due to unforeseen financial needs in the event of default by the Issuing Bank. In this case, in fact, the Company would be forced to sell the cover pool on the market, as the funds collected may not suffice to make timely
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payment of the interest and capital on the Covered Bank Bonds issued. The main elements for mitigating this risk are: - the high level of overcollateralisation; - the quality of the loans portfolio sold; - the dynamic management of the cover pool itself, considering that the funds obtained from the instalments collected by way of capital on the loans of the cover pool are in fact re-invested in new loans with similar characteristics. As far as quantitative information, please refer to paragraph “F. Securitisation of receivables” in the Notes.
SECTION 4 – COMMENTS ON EQUITY The characteristic of the Company's business, specifically dictated by Italian Law 130/99 is the separate equity of the company's assets and liabilities with respect to those of the covered bank bond program structured by UBI Banca, in which the Company is involved. Given this separation, the corporate costs incurred to maintain the Company in good standing are limited and in any case recovered by means of specific contractual clauses that establish the charging back of the Program. This means that the company selling the assets underlying the covered bank bonds UBI Finance CB 2 S.r.l. retains suitable equity levels during implementation of the covered bond program. For quantitative information, please refer to the section on Liabilities, relative to the composition of items 120 and 160.
SECTION 5 – STATEMENT OF COMPREHENSIVE INCOME As during financial year 2015 no changes in value were observed for the assets offset against the valuation reserves, the Company's Profit/Loss coincides with its comprehensive income.
SECTION 6 – TRANSACTIONS WITH RELATED PARTIES 6.1 DETAILS OF REMUNERATION PAID TO KEY MANAGEMENT PERSONNEL Directors 9,538 Statutory Audit - Total 9,538 The fees for the Board of Directors are shown in the table. The Company does not have a Board of Statutory Auditors.
6.2 LOANS AND GUARANTEES ISSUED IN FAVOUR OF DIRECTORS AND STATUTORY AUDITORS No loans or guarantees have been granted to directors.
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6.3 INFORMATION ON TRANSACTIONS WITH RELATED PARTIES The Company, whose capital is subscribed by 60% by Unione Banche Italiane S.p.A. and for the remaining 40% by the Dutch foundation Stichting Viola, is subject to Management and Coordination activity by Unione Banche Italiane S.p.a. itself. Concerning relationships with UBI Banca Group companies, the Company has atUBI Banca S.p.A., a current bank account regulated by market conditions, number 89447, for an amount of Euro 10,040 at 31 December 2015.
INFORMATION ON THE PARENT COMPANY UBI Finance CB 2 S.r.l. is part of the UBI Banca Banking Group registered in the Register of Banking Groups; the parent company is the Unione di Banche Italiane S.p.A., with head office in Bergamo, piazza Vittorio Veneto 8. Pursuant to art. 2497 bis of the Italian civil code, the essential data of the last approved financial statement of UBI Banca, the parent company responsible for the direction and coordination of the Company, is indicated below. For a full understanding of UBI Banca's financial situation at 31 December 2015, and of the economic result achieved by the bank in the annual period ending at such date, please read the financial statements which, accompanied by the auditors' report is available from the company's head office or on the website www.ubibanca.it
FINANCIAL STATEMENTS OF THE COMPANY CARRYING OUT THE MANAGEMENT AND COORDINATION ACTIVITY - KEY FIGURES (ART. 2497 BIS OF THE ITALIAN CIVIL CODE) - 2014 FINANCIAL STATEMENTS - UBI BANCA S.C.P.A.
BALANCE SHEET (in thousands of Euros)
31.12.2014 Amounts in thousands of Euros
Assets 10. Cash and cash equivalents 160,330 20. Financial assets held for trading 1,544,835 30. Financial assets at fair value 193,167 40. Financial assets available for sale 18,066,883 50. Financial assets held to maturity 3,576,951 60. Loans and advances to banks 14,055,649 70. Loans and advances to customers 23,330,321 80. Hedging derivatives 647,972 90. Value adjustment of generically-hedged financial assets (+/-) 5,583 100. Equity investments 9,624,011 110. Property, equipment and investment property 634,178 120. Intangible assets 410 130. Tax assets 1,688,730 a) current 331,162 b) deferred 1,357,568 pursuant to Law 214/2011 1,234,949 140. Non-current assets and disposal groups classified as held for sale 507 150. Other assets 642,338 TOTAL ASSETS 74,171,865
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31.12.2014 Amounts in thousands of Euros BALANCE SHEET – LIABILITIES AND EQUITY 10. Loans and advances from banks 19,140,417 20. Payables to customers 7,065,270 30. Outstanding securities 36,545,668 40. Financial liabilities held for trading 722,181 60. Hedging derivatives 937,018 80. Tax liabilities 352,883 a) current 169,396 b) deferred 183,487 100. Other liabilities 751,071 110. Post-employment benefits 45,443 120. Provisions for risks and charges: 45,218 a) pensions and similar commitments 1,144 b) other provisions 44,074 130. Valuation reserves 164,951 160. Reserves 2,354,285 170. Share premiums 4,716,866 180. Quota Capital 2,254,371 190. Treasury quotas (-) -5,340 200. Profit (Loss) for the year (+/-) -918,437 TOTAL LIABILITIES AND EQUITY 74,171,865
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INCOME STATEMENT (in thousands of Euros)
31.12.2014 Amounts in thousands of Euros
10. Interest income and similar income 1,122,471 20. Interest expense and similar expenses (1,026,027) 30. Net interest expense 96,444 40. Fee and commission income 83,474 50. Fee and commission expense (59,219) 60. Net fee and commission income 24,255 70. Dividends and similar income 276,489 80. Net result of trading 33,670 90. Net result of hedges (8,069) 100. Profit (Loss) on disposal or repurchase of: 149,479 a) loans (9,324) b) financial assets available for sale 166,743 d) financial liabilities (7,940) 110. Net result of financial assets/liabilities carried at fair value 3,073 120. Net trading income 575,341 130. Net impairment losses on: (121,551) a) loans (116,738) b) financial assets available for sale (2,995) d) other financial transactions (1,818) 140. Net result of financial operations 453,790 150. Administrative expenses: (341,440) a) staff expenses (169,970) b) other administrative expenses (171,470) 160. Provisions for risks and charges (311) 170. Net impairment losses on property, equipment and investment property (21,503) 190. Other operating expense/income 120,159 200. Operating costs (243,095) 210. Profit (Loss) on associates (1,122,126) 240. Profit (Loss) on disposal of investments 61 250. Profit (Loss) on continuing operations before tax (911,370) 260. Income taxes for the year on continuing operations (7,067) 270. Profit (Loss) from continuing operations after tax (918,437) 290. Profit (Loss) for the year (918,437)
SECTION 7 – OTHER INFORMATION 7.1 AVERAGE NUMBER OF EMPLOYEES BY CATEGORY The Company does not have employees.
* * * * *
Milan, 23 February 2016 UBI FINANCE CB 2 S.R.L. For the Board of Directors The Chairman Dott. Renzo Parisotto
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