Offering Circular. - SFM

Portfolio. In each case the performance by the Issuer of its obligations under the Transaction Documents is
also dependent on the solvency of, inter alia, the Servicer.
In the event of the termination of the appointment of the Servicer under the Servicing Agreement, it would
be necessary for the Issuer to appoint a substitute servicer (acceptable to the Representative of the
Noteholders). Such substitute servicer would be required to assume responsibility for the provisions of the
services required to be performed under the Servicing Agreement. The ability of a substitute servicer to
perform fully the required services would depend, inter alia, on the information, software and records
available at the time of the relevant appointment. There can be no assurance that a substitute servicer will be
found nor that any substitute servicer will be willing to accept such appointment nor that a substitute servicer
will be able to assume and/or perform the duties of the Servicer pursuant to the Servicing Agreement. In such
circumstances, the Issuer could attempt to sell all, or part of, the Claims, but there is no assurance that the
amount received on such a sale would be sufficient to repay in full all amounts due to the Noteholders. The
Representative of the Noteholders has no obligation to assume the role or responsibilities of the Servicer or
to appoint a substitute servicer.
Proposed Changes to the Risk-Weighted Asset Framework
On 11 May, 2004, the Basel Committee on Banking Supervision announced that it had achieved consensus
on the remaining issues regarding the proposals for a new international capital adequacy framework which
places enhanced emphasis on market discipline and risk sensitivity.
The text of the new Basel II framework was published at the end of June 2004. The Committee has indicated
that the standardised and foundation approaches will be implemented from the end of 2006, but advised that
one further year of impact analysis will be needed for the advanced approaches under the framework and
these, therefore, are expected to be implemented from the end of 2007. The European Commission has yet
to endorse the framework.
In parallel with the development of the Basel II framework, the European Commission has issued proposals
for reform of the existing EU Capital Adequacy Directive which is based on the 1988 Capital Accord and
applies to banks and investment firms in the European Union. While the European Commission has indicated
that its proposals are intended to implement the new Basel II proposals, it has noted that there will be
appropriate modifications where it considers necessary. At present, the European Commission’s proposals
are under consultation and are not in final form; however, the proposals are expected to be finalised in 2004,
allowing for implementation at the end of 2006.
If implemented, the new Basel II framework and the proposals for the reform of the EU Capital Adequacy
Directive could affect the risk-weighting of the Notes in respect of certain investors if those investors are
regulated in a manner which will be affected by the new framework or the proposals. Consequently,
Noteholders should consult their own advisors as to the effect on Noteholders of the application of the new
Basel II framework and the proposals. The Issuer cannot predict the precise effects of potential changes
which might result from the implementation of the new Basel II framework or the proposals.
Securitisation Law
As at the date of this Offering Circular, no interpretation of the application of the Securitisation Law has been
issued by any Italian governmental or regulatory authority, except for (i) regulations issued by the Bank of
Italy concerning, inter alia, the accounting treatment of securitisation transactions for special purpose
companies incorporated under the Securitisation Law, such as the Issuer, and the duties of the companies
which carry out collection and recovery activities in the context of a securitisation transaction, (ii) the decree
of the Italian Ministry of Treasury dated 4 April, 2001 and (iii) the Bank of Italy’s regulation dated 16
December, 2002 on the terms for the registration of the financial intermediaries in the register held by the
Bank of Italy pursuant to article 107 of the Banking Act. Consequently, it is possible that such authorities
may issue further regulations relating to the Securitisation Law or the interpretation thereof, the impact of
which cannot be predicted by the Issuer as at the date of this Offering Circular.
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