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 2 UBI FINANCE CB 2 S.R.L. 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. 3 UBI FINANCE CB 2 S.R.L. 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 4 UBI FINANCE CB 2 S.R.L. 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