THE PRINCESS AND THE PEA

Restriction on Assignment

If FCE has agreed or agrees with any borrower on restrictions on the assignment of the receivables, such receivables may not be validly assigned to the issuer under the receivables sale agreement. Any assignment of a receivable which contravenes such restriction on assignment will be invalid. The terms of FCE's standard loan agreements, however, do not prohibit FCE from assigning claims arising from such standard loan agreements.

Termination of Loan Agreements

In general, the loan agreements may be terminated by either party during the agreed term of the loan for good cause (wichtiger Grund). Termination of contracts with continuing obligations such as loan agreements for good cause is permitted under the German civil code if the non defaulting party cannot be expected to continue the contract.

FCE Germany is explicitly allowed to terminate the loan agreement for any of the following good causes:

 a loan instalment is 30 days in arrear, unless the loan agreement is with a consumer or founder of a new business (which is likely to be the case for a large portion of the portfolio), in which case termination is allowed after the requirements of paragraph 498 of the German civil code are fulfilled (loan instalments are two or more months in arrear and 10% of the original sum of all gross loan instalments are in arrear or, if the term of the loan agreement is longer than 36 months, 5% of the original sum of all gross loan instalments are in arrear) and the statutory final reminder announcing the forthcoming termination of the loan has been sent to the borrower,

 there is or threatens to be a substantial deterioration in the financial condition of the borrower or in the value of a security given for the loan (e.g. the vehicle) as a result of which the repayment of the loan is jeopardised even upon realisation of the security.

FCE Germany's right to terminate the loan agreement is limited in case of insolvency.

For more detailed information, you should read "Seller and Servicer – Servicing and Collections—

Bankrupt and Insolvent Accounts".

According to the loan terms and conditions, if the borrower is a consumer or founder of a new business such borrower is permitted to terminate the loan agreement at the end of six months after complete disbursement of the loan, observing a notice period of three months, or, in the case of loans originated after 10 June 2010, to prepay the loan in whole or in part at any time. In the case of such early termination or prepayment, the borrower is not required to reimburse FCE for any break cost incurred.

Recharacterisation of Fixed Security Interest

There is a possibility that an English court finds that the fixed security interests expressed to be created by the issuer under the deed of charge could take effect as floating charges as the description

security interests are recharacterised as floating security interests, the claims of certain statutorily defined preferential creditors of the relevant chargor may have priority over the rights of the relevant chargee, as the case may be, to the proceeds of enforcement of such security. A receiver appointed by the security trustee under the deed of charge would be obliged to pay preferential creditors out of floating charge realisations in priority to payments to the secured parties (including the noteholders). However, the only categories of preferential debts are certain amounts payable with respect to occupational pension schemes, employee remuneration and levies on coal and steel production. The issuer undertakes not to have any employees.

With respect to the security granted by FCE over the vehicles, that security is, from the point of view of English law, a floating charge and, accordingly, the disadvantages of such a security described above apply to it. However, the opening of winding up or reorganisation proceedings does not affect the rights in rem of creditors or third parties with respect to assets belonging to FCE situated in an EEA Member State and therefore the disadvantages discussed in this paragraph should not apply in practice.

Risk of Claw Back

As FCE is a credit institution incorporated under the laws of England and Wales, the assignment of the receivables may, in principle, be avoided or set aside upon an insolvency of FCE under English insolvency rules if such assignment was at undervalue or creates a preference in favour of certain creditors of FCE. However, this risk is mitigated since the purchase price paid for the receivables is equal to the net present value of the receivables.

Validity of Contractual Priorities of Payments

The validity of contractual priorities of payments such as those contemplated in this transaction has been challenged recently in the English and U.S. courts. These proceedings have taken place due to the insolvency of a secured creditor (namely, the swap counterparty). These proceedings

considered whether such payment priorities breach the anti-deprivation principle under English and U.S insolvency law. These rules prevent a party from enforcing a provision that deprives its

counterparty's creditors of an asset solely as a result of the counterparty's insolvency.

In England, the rule established by the House of Lords in British Eagle International Airlines Ltd v

Compagnie Nationale Air France [1975] 1 WLR 758 HL was that on bankruptcy or liquidation, the

assets of an insolvent debtor are not to be removed from the insolvent estate but are to be available for distribution amongst the general body of the debtor's creditors.

In Perpetual Trustee Co Ltd v BNY Corporate Trustee Services Ltd (2009) EWCA Civ 1160, it was argued that, following the rule in British Eagle, the provisions pursuant to which a secured creditor had subordinated itself to noteholders on the insolvency of that secured creditor should be void because the secured creditor would as a consequence have deprived its own creditors of the secured asset. The Court of Appeal dismissed this argument and upheld the validity of the priority of payments provisions, stating that the anti-deprivation principle was not breached by such provisions on the facts of the case.

The Supreme Court has since upheld the findings of the Court of Appeal. In Belmont Park

Investments Pty Limited & Others v BNY Corporate Trustee Services Limited and Lehman Brothers Special Financing Inc. [2011] UKSC 38 the court considered payment priorities which "flipped" the

priority position of the swap counterparty upon that counterparty defaulting under the swap agreement, The Supreme Court held that the provisions of the swap agreement were enforceable. The Supreme

the U.S. Bankruptcy Code in a U.S. insolvency. The U.S. courts' ruling on this principle is thus, as it acknowledged, "directly at odds with the judgment of the English Courts".

The consequent uncertainty and possible differences between English and U.S. law with respect to the scope and operation of the anti-deprivation principle means that this issue is likely to be an area of continued judicial scrutiny and debate, especially in the case of cross jurisdictional insolvencies.

If a creditor of the issuer (such as the swap counterparty) or a related entity becomes subject to insolvency proceedings in any jurisdiction outside England and Wales, and it is owed a payment by the issuer (such as a termination payment due under the swap agreement which purports to have been subordinated as a result of the swap counterparty's insolvency), it is uncertain whether the insolvent creditor or any insolvency official appointed with respect to that creditor could successfully challenge either the validity or enforceability of subordination provisions included in the English law governed transaction documents. An example would be a provision relating to the ranking in the priorities of payment of the swap counterparty's payment rights under the swap agreement).

Additionally, there can be no assurance that such subordination provisions would be upheld under the insolvency laws of any relevant jurisdiction outside England and Wales. If the courts of a

jurisdiction outside England and Wales do not uphold such provisions, it is unclear whether and to what extent the relevant proceedings and corresponding findings would be recognised by the English courts. While the English courts have to date been generally supportive of subordination

arrangements, there can be no assurance that such support would be maintained in a case where the English court is co-operating with the courts in another jurisdiction in a cross-border insolvency case."

For more information, you should read "Risk Factors — Validity of contractual priorities of payments".

Basel Capital Accord and Regulatory Capital Requirements

The original Basel Accord was agreed in 1988 by the Basel Committee on Banking Supervision, or the "Committee". The 1988 Accord, now referred to as Basel I, was intended to strengthen the

soundness and stability of the international banking system as a result of the higher capital ratios that it required. The Committee published the text of the new capital accord under the title: "Basel II; International Convergence on Capital Measurement and Capital Standards: a revised framework", or "Basel II" in June 2004, which was then updated and published in its final comprehensive form in July 2006.

In the European Union the Basel II framework has been implemented via a number of directives collectively referred to as the EU Capital Requirements Directive 2006/48/EC, as amended, or "CRD". It is expected, however, that the implementation of Basel II and Basel III has and will continue to result in substantial changes to capital requirements, prudential oversight and risk management systems. The Basel frameworks have not been fully implemented in all participating countries.Investors should note thatimplementation of the Basel frameworks requires national legislation.

In July 2009, the Committee published various reforms concerning the trading book, re-

securitisations, disclosure of securitisation risk, and additional Pillar 2 supervisory guidance. This was followed by further reforms being approved by the Committee in December 2010 and January 2011 (those rules being finalised in June 2011) which, among other matters, amend the Basel II rules on capital and liquidity requirements for credit institutions (including amendments to the definition of capital and counterparty risk and the introduction of leverage ratio and liquidity requirements such as a liquidity coverage ratio and a net stable funding ratio), these reforms are collectively known as

"Basel III". The Committee published the full text of the revised liquidity coverage ratio following endorsement on 6 January 2013 by its governing body. The Committee is also considering other

(Regulation (EU)) no. 575/2013 on prudential requirements for credit institutions and investment firms. In the case of CRD4, these provisions will need to be adopted by the EU member states during the course of 2013. The provisions of CRR and CRD4 will come into effect (subject to transition provisions) beginning in 2014 with full implementation by 2019.

The provisions of Article 122a of the CRD came into force on 31 December 2010 and apply to EEA regulated credit institutions and their consolidated group affiliates.

Article 122a of the CRD requires an affected investor to be able to demonstrate that it has undertaken certain due diligence in respect of, amongst other things, the securitisation position it has acquired and the underlying exposures, and that procedures have been established for monitoring the performance of the underlying exposures on an ongoing basis. Failure to comply with one or more of the requirements set out in the retention rules may result in the imposition of a material capital charge with respect to the investment made in the securitisation by the relevant affected investor.

The seller has made certain representations and undertakings in relation to the retention of a material net economic interest and provision of information in compliance with the retention rules. In particular, for so long as listed notes are outstanding, FCE will retain the Class C notes which constitute, as at the closing date, a material net economic interest of not less than 5% of the nominal amount of the securitised exposures in this securitisation transaction in accordance with Article 122a, paragraph (1) sub (d) of the CRD.

Article 122a of the CRD will be recast by the provisions of CRD4, together the"retention rules" and the current guidelines on Article 122a of the CRD will be replaced by new and potentially different regulatory technical standards. In May 2013, the European Banking Authority issued a consultation paper on draft regulatory and implementing technical standards on the new securitisation retention rules under CRD4. The draft regulatory technical standards differ in several respects to the guidelines published in relation to Article 122a of the CRD and given the standards are the subject of current consultation, the form of the final standards may well differ from the current proposals. In addition, it is currently uncertain when they will be finalised and take effect and how changes will impact

transactions entered into before the standards come into effect.

Investors should also be aware of Section 5 of Chapter III of the Capital Requirements Regulation (Regulation (EU)) no. 575/2013 implementing the EU Alternative Investment Fund Managers Directive or "Section 5", the provisions of which section introduced risk retention and due diligence requirements (which took effect from 22 July 2013 in general) in respect of alternative investment fund managers that are required to become authorised under the EU Alternative Investment Fund Managers Directive and which assume exposure to the credit risk of a securitisation on behalf of one or more alternative investment funds. While the requirements under Section 5 are similar to those which apply under Article 122a of the CRD (including in relation to the requirement to disclose to alternative investment fund managers that the originator, sponsor or original lender will retain, on an ongoing basis, a net economic interest of not less than 5% in respect of certain specified credit risk tranches or asset exposures), they are not identical and, in particular, additional due diligence obligations apply to relevant alternative investment fund managers. Each of Article 122a of the CRD and Section 5 apply in respect of the notes.

To date there is limited guidance, and no regulatory or judicial determination, on the interpretation and application of the retention rules. Until additional guidance is available and such determinations are made, there will be considerable uncertainty about the interpretation and application of the retention rules and Section 5. It should be noted that Member States of the European Economic Area may implement and/or apply the retention rules or Section 5 and related provisions differently which

application of the Basel II and Basel III frameworks, the retention rules, Section 5, Solvency II and related implementing measures, standards and guidance or of further amendment to them or other similar laws and regulations.

For more information, you should read "Risk Factors —Basel Capital Accord and regulatory capital requirements".

Rating Agencies

In general, European regulated investors are restricted from using a rating for regulatory purposes if such rating is not issued by a credit rating agency established in the European Union and registered under Regulation (EC) N01060/2009 "CRA Regulation". The credit ratings included or referred to in this prospectus have been issued by the rating agencies, each of which has been registered or certified in accordance with the CRA Regulation.

The list of registered and certified rating agencies published by the European Securities and Markets Authority "ESMA" on its website in accordance with the Regulation (EC) N01060/2009 of the European Parliament and the Council of 16 September 2009 is not conclusive evidence of the status of the relevant rating agency included in such list, as there may be delays between certain supervisory measures being taken against a relevant rating agency and the publication of the updated ESMA list. Certain information with respect to the credit rating agencies and ratings is set out in the "Transaction

Overview" section of this prospectus.

Banking Act 2009

The 2009 Act came into effect on 21 February 2009. It confers on the UK Treasury and the Bank of England powers to act, pursuant to a special resolution regime, to address situations where all or part of the business of a UK Deposit-Taker such as FCE has encountered, or is likely to encounter, financial difficulties.

The UK Treasury and the Bank of England have been given certain wide powers to support the implementation of the stabilisation measures contemplated by the 2009 Act. The UK Treasury may, in certain circumstances, take a UK Deposit-Taker into temporary public ownership by means of a share transfer order. The Bank of England may also transfer all or part of a UK Deposit-Taker's business to a private sector purchaser or a bridge bank wholly owned by the Bank of England. A transfer to a private sector purchaser may be a transfer of securities issued by a UK Deposit-Taker or a transfer of all or part of its property, rights and liabilities. A transfer to a bridge bank may be achieved only by a

property transfer. A share transfer may comprise all or some of the securities issued by a UK Deposit- Taker. A share transfer order can extend to a wide range of securities, including shares and bonds issued by a UK Deposit-Taker or its holding company and warrants for such shares and bonds.

Before the Bank of England or the UK Treasury are able to exercise these powers, the UK Prudential Regulator Authority must be satisfied that the UK Deposit-Taker is failing, or is likely to fail, to meet certain regulatory conditions. The purpose of the powers is to maintain confidence in the banking and financial systems of the United Kingdom and they can only be exercised in circumstances that are consistent with the achievement of this objective.

The powers under the 2009 Act are wide ranging and may entail divesting the authorised UK Deposit-Taker of its assets or transferring ownership of any securities issued by it. Accordingly the enforceability of the rights and obligations of FCE could be affected if the Bank of England or the UK Treasury exercised such powers with respect to FCE.

Where property is held on trust, a property transfer instrument may provide for the terms on which the property is to be held after the instrument takes effect (including the removal or variation of the terms of the trust), and may also provide for how powers and liabilities with respect to the property will be exercisable or have effect after the transfer.

The Bank of England may also cancel or vary a contract or other arrangement between the transferor and a group company (or a company which, immediately before the transfer, was a group company), or to confer rights and impose obligations on such a company and the transferor or transferee, where the Bank of England considers this step to be necessary to ensure the provision of services and facilities required to enable the transferee to operate the transferred business effectively.

There is also power for the UK Treasury to amend the law (save for a provision made by or under the 2009 Act) by order for the purpose of enabling the special resolution regime powers to be used effectively, potentially with retrospective effect.

Safeguards restrict the making of partial property transfers with respect to protected arrangements, such as capital market arrangements, security interests, set-off and netting