Annual Report 2008

Annual Report December 2008

Banca IMI S.p.A.

Piazzetta Giordano Dell’Amore 3 – 20121 Milan (Italy) – Share capital 662,464,000 Euro – ABI Code 3249.0 – Member of the Interbank Deposit Protection Fund – Registered with the Milan Business Registry – Registration number and tax ID 04377700150 – e-mail: info@ bancaimi.com – www.bancaimi.com – Telephone +39 02.72611 – Company subject to management and control of the sale shareholder Intesa Sanpaolo S.p.A. – Banca IMI is a bank of Intesa Sanpaolo Group

Contents

Officers 5

Summary information 7

Executive summary 8

Report by the Board of Directors on the Company’s situation and management trends 11 Business plan and management guidelines 13 Macroeconomic outlook and financial markets 15 Results by business area 17 Results in 2008 22 Equity aggregates 32 Equity investments and holdings 39 Capital adequacy 42 Operations support and organizational change 45 Human resources 47 Management and coordination by Intesa Sanpaolo 49 Dealings with other Group companies 50 Business outlook 51 Proposals to the Shareholders’ Meeting 52

Certification by the executive in charge of accounting documents 53

Report of the Independent Auditors 55

Report of the Board of Statutory Auditors 59

Financial statements of Banca IMI 63 Balance sheet 64 Income Statement 66 Statement of changes in shareholders’ equity 67 Statement of cash flows 69

Notes 71 Part A – Accounting policies 73 Part B – Information on the balance sheet 83 Part C – Information on the Income Statement 117 Part E – Information on risks and hedging policies 133 Credit risk 134 Market risk 154 Liquidity risk 183 Operational risks 187 Part F – Information on capital 190 Part H – Transactions with related parties 193

Attachments 195 • Auditors’ fees 197 • Earnings and financial position figures of subsidiaries IMI Investments (Luxembourg) 198 IMI Finance (Luxembourg) 200 IMI Capital Markets (USA) 202 IMI Securities (USA) 203 • Details of bond issued 205

3

Officers

Board of Directors (in office for the period 2007-2009)

President Emilio OTTOLENGHI

Vice-president Giangiacomo NARDOZZI TONIELLI

Managing Director Gaetano MICCICHÈ

Board Members Giuliano ASPERTI Aureliano BENEDETTI Stefano DEL PUNTA Luca GALLI Massimo MATTERA Pietro MODIANO (*) Marcello SALA Flavio VENTURINI

Board of Statutory Auditors (appointed for the period 2007-2009)

President Gianluca PONZELLINI

Full auditors Stefania MANCINO Riccardo ROTA

Substitute auditors Paolo Andrea COLOMBO Paolo GIOLLA

General Management

General Manager Andrea MUNARI

Indipendent Auditors Reconta Ernst & Young S.p.A. (appointed for the period 2007-2011)

(*) Resigned on 16 December 2008

5

Financial highlights

(million euro) 31.12.2008 31.12.2007 changes amount % Income statement Core business results 605.6 480.6 125.0 26.0 Net non-recurring results 121.3 133.4 (12.1) -9.1 Net interest and other banking income 726.9 614.0 112.9 18.4 Operating costs (250.1) (300.1) 50.0 -16.7 of which: personnel expenses (84.4) (121.9) 37.5 -30.8 Operating Income 476.8 313.9 162.9 51.9 Allocations and adjustments (41.9) (28.4) (13.5) 47.5 Taxes on income (159.0) (88.0) (71.0) 80.7 Net income 293.4 210.7 82.7 39.3

Balance sheet Securities 9,315.0 14,744.6 (5,429.6) -36.8 Repurchase agreements and securities lending 9,767.0 16,611.8 (6,844.8) -41.2 Structured finance assets 1,306.2 2,061.8 (755.6) -36.6 AFS and equity investments 276.8 283.7 (6.9) -2.4 Total assets 81,697.4 56,234.2 25,463.2 45.3 Net interbank position 13,247.0 (3,576.0) 16,823.0 470.4 Bond and subordinate issues 21,701.3 7,592.1 14,109.2 185.8 Guaranties given 889.9 1,106.0 (216.1) -19.5 Notional amount of financial derivatives 2,911,752.6 1,814,171.8 1,097,580.8 60.5 Notional amount of credit derivatives 91,217.6 51,985.9 39,231.7 75.5 Shareholders' equity (1) 1,788.1 1,497.5 290.6 19.4

Profitability and risk ratios (%) Cost/Income ratio 41.3% 48.9% Average Var for the period 12.5 6.9 5.6 81.2 Net income/ Average shareholders’ equity (ROE) (2) 17.9% 14.1% Net income / Capital absorbed (3) 29.3% 13.0% Basic erning per share (EPS basic) - euro 0.443 0.318 EVA ® 211.1 105.70

Capital ratios (%) Tier 1 Capital Ratio 11.0% 5.3% Tier Total Capital Ratio 12.1% 7.7%

Operating structure Total dedicated resources 571 594 (23)

Long-term rating Moody's Aa3 Fitch AA- Standard & Poors AA- 1) Including net profits for the period. 2) Profits for the period in relation to the average capital, reassessment reserves and other reserves. 3) Profits, stripped of the yield of free capital, in relation to the average absorbed capital (RWA).

7 Executive summary

At 31 December 2008 Banca IMI closed its first full year of operation with a net profit of 293.4 million. This result marks a sharp increase (+39%) on 31 December 2007, determined solely in the fourth quarter by the current corporate perimeter arising from the merger of Banca d’Intermediazione Mobiliare IMI into Banca Caboto.

All operating margins – core results, non-recurring results, and operating costs – contributed to the achievement of this positive result. Core business results generated by the capital markets and investment banking segments exceeded 600 million, up by 26% on the previous year, showing a distribution by quarter only partly influenced by the overall economic and market scenario.

Net non-recurring results came to 121 million (133 million at 31 December 2007), substantially unchanged in its contribution to the bottom line. During the periods compared, this revenue, as is typical of revenue not attributable to operating desks, showed different compositions.

At 31 December 2007 the item had benefited from revenue earned on the merger between Borsa Italiana and the London Stock Exchange, whereas one year later, in the fourth quarter, it suffered the effects of the deterioration of the credit spreads of financial institutions on Banca IMI’s statement of income.

The bid prices of asset classes attributable to banks in portfolio, including the domestic mortgage-backed securities and securitizations originated by the government system and the Group, were severely affected by this phenomenon.

Similarly, the general widening of credit spreads following the bankruptcy of the investment bank Lehman Brothers was reflected in the measurement of the structured liabilities issued by Banca IMI at fair value. The creditworthiness of the issuer and the Group, which had always played an accessory role with respect to the value of the financial assets in which funding was invested, was a primary factor in the fourth quarter, when it depressed the values of these liabilities.

Net interest and other banking income, which came to 727 million, was shaped by the results of the Capital Markets business (639 million) and the Investment Banking business (88 million). The above figure does not include the revenue reported by the foreign subsidiaries based in New York (Capital Markets) and Luxembourg (Investment Banking), which came to 12 and 21 million, respectively.

The trend in operating costs, which fell by 17%, is a reflection of the focus on monitoring the aggregate and structural containment of the items directly controlled by the Company, particularly consulting, logistics and general overhead. Personnel expenses fell by 38 million, confirming the stability of ordinary wage items, essentially due to the decline in human resources employed.

The result of operational management came to 477 million (314 million at 31 December 2007), resulting in a cost/income ratio of 41.3%, compared to 48.9% in the previous year.

The monitoring of the risks implicit in assets led to adjustments of 37 million, of which 29 million was attributable to the overall net exposure on financial transactions with companies of the Lehman Brothers Group. A further 8 million in adjustments pertained to the portfolio impairment of on-balance sheet exposures lending commitments. The statement of income was also affected by 16 million in credit risk adjustments to OTC derivatives exposures. This amount was directly deducted from “Profits (losses) on trading”.

8 Provisions for risks and charges, which in 2007 referred to the resolution of the Parmalat dispute and the expenses associated with the integration progress, were less significant in 2008.

The positive balance of other income in both periods originates in the recognition of out-of-period items due to expenses previously charged in amounts exceeding the effective outlay or liability.

Income before tax came to 452 million compared to 299 million at 31 December 2007.

Income taxes, under the increased tax rate (35.1% compared to 29.5%), were affected by the larger taxable base in connection with the full taxation of dividends collected on trading securities for the purposes of IRES (corporate income tax) and 50% for the purposes of IRAP (regional production tax), in addition to the inability to deduct all interest expenses. These factors more than offset the nominal decrease in tax rates. The lesser effective tax rate in 2007 was also due to the more favourable taxation of the Borsa-LSE capital gain.

The Bank’s capital solidity was confirmed in Q4 2008, with a Tier I capital ratio of 11% and a Tier Total of 12.1%, despite the redemption of subordinated Tier III loans in the amount of 530 million and the allocation of 74% of distributable profits to dividends during the year.

The constant improvement in the liquidity situation, most notably the increase in bond funding by 14 billion over the year (over 6 billion in the fourth quarter alone), resulted in the inversion of the interbank position held by Banca IMI, typically a borrower, and now a net lender.

The creation of value for the shareholder brought EVA® to 211 million, more than double the figure reported at 31 December 2007.

9

Report by the Board of Directors on the Company’s situation and management trends

11

The business plan and management guidelines

The Bank pursued its business plan and strategic guidelines against the backdrop of unparalleled difficulties in the macroeconomic and market scenario.

This scenario was characterized by episodes and trends the extent of which was profoundly detrimental to confidence in currency and capital markets. Government intervention aimed at restoring investor confidence has yet to achieve the desired effects of stabilizing securities markets and ensuring the solvency and liquidity of the banking system.

Despite the events of the first quarter of 2009, there was no discontinuity in current trends, regardless of the interventions by monetary, financial and supervisory authorities of unprecedented scale and breadth.

The liquidity and credit crisis had an impact – overall, a positive impact – on Banca IMI’s earnings in 2009, reflecting its effects in greater opportunities for intermediation offered by the markets and renewed fund- raising ability, despite suffering adjustments to the value of assets driven by credit risk.

These earnings results were supported by guidelines for strategic action: improving the liquidity of assets; expanding the fund-raising base; strengthening regulatory capital; optimizing the tools and units devoted to monitoring and controlling financial and credit risks; consolidating of the revenues generated by both the Capital Markets and Investment Banking business units.

The liquidity and financing capacity of assets represented an undoubtedly competitive advantage for Banca IMI, pursued through the disposal of non-core investments in the London Stock Exchange and MTS, the decrease in the equity of the investees IMI Securities and IMI Investments, the securitization of a portfolio of debt securities in order to optimize its refinancing characteristics, and the growth of bond fund-raising at exponential rates.

The Bank’s capital solidity and the quality of its equity supported its capacity to expand its risk assets. Regulatory capital was recomposed to the benefit of Core Tier 1 by redeeming all Tier 3 subordinated loans (530 million) during the year. The increase in capital adequacy requirements – particularly for issuer and counterparty profiles – was accompanied by the extension to the entire company perimeter of internal market risk models for regulatory purposes, resulting in a reduction of overall gross requirements of 700 million.

In addition, the convergence of position keeping on a single platform further strengthened risk coverage by the Capital Markets business unit. In continuity with the principle of further strengthening the control system, the first few months of 2009 witnessed the inception of the gradual centralization of all risk trading desks at the Milan office, generating additional synergies due to the logistical proximity to Banca IMI’s distribution units and the Departments charged with control – risk management, auditing and compliance – of Intesa Sanpaolo.

Management continues to be streamlined following the merger of Banca d’Intermediazione Mobiliare IMI and Banca Caboto, which is foreseen to offer further margins of improvement. The above-mentioned centralization of desks should also be interpreted partially, if not exclusively, in this light.

The strengthening of the Bank’s capital and organizational structure is preliminary to the completion of the business plan, which calls for the transfer of the structured finance business unit by the Parent Bank, planned for the first half of 2009.

The unit, which is engaged primarily in lending operations, had approximately 10 billion in on-balance sheet assets at year-end, in addition to approximately 2 billion in irrevocable loan commitments.

At the date of this report, planning was being done regarding diverse corporate, organizational, IT and

13 Report by the Board of Directors - The business plan and management guidelines administrative issues associated with the transfer, which, from an equity standpoint, will lead Banca IMI to increase its capital by a further 750 million, substantially corresponding to the regulatory requirements attributable to the risk assets transferred.

In December the Bank began creating an AFS portfolio of government securities issued in the European Union and the USA with the aim of maximizing the Bank’s strong capital position.

In the third quarter, the Bank seized the opportunity afforded by the amendments to accounting standards to reclassify a portfolio of Italian RMBS, primarily highly rated senior notes, to loans and receivables with the aim of building a portfolio with interesting returns. These are free from price dislocation in the near term.

14 The macroeconomic outlook and financial markets

During 2009, the international financial crisis was gradually transformed into the most serious recession of the post-War period, resulting in particularly severe deterioration beginning in September. The deceptive calm at the beginning of the year had already been disturbed as early as March by the crisis that struck the investment bank Bear Stearns. However, following the bank’s rescue with government funds, the tension seemed to have lessened. Nonetheless, over the summer the United States government was forced to intervene in support of Fannie Mae and Freddie Mac, until it was decided to place them in receivership in September. The very serious crisis surrounding Lehman Brothers and the decision not to rescue the investment bank triggered a series of dramatic events resulting in serious repercussions for the functioning of international capital markets.

The European continent was also swept by a wave of panic, which required supporting measures for various American and European financial institutions. On 12 October European Union governments announced a coordinated plan to stabilize the financial system, which was subsequently implemented by the national administrations.

Central banks loosened monetary policies to unprecedented levels in order to support the explosion of cautionary demand for liquidity.

The real economy began to show signs of weakness as early as the summer under the pressure of sharp rises in the prices of energy commodities and the weakness of U.S. domestic demand.

An exceptionally rapid and profound decline of manufacturing and order indices across all geographical areas, including Asia, began in September.

The United States officially entered a recession in December 2007. The GDP growth rate fell to -7.8% in December 2008, whereas employment figures showed a loss of 2.6 million jobs. Depressed by the crisis that has stricken consumption and the construction industry, gross domestic product fell sharply in the fourth quarter.

In the euro zone GDP began to decline in the second quarter of the year, but, as in the United States, the decline steepened rapidly over the last few months of the year. The annual change for 2008 is estimated at +0.8%. In November industrial output was down by 6.9% compared to the same month of 2007 against the backdrop of a severe, general reduction in orders affecting both foreign and domestic demand. The European recession is also driven by local factors, such as the crisis in Spain and Ireland following on years of unsustainable growth of domestic demand, and construction and private consumption in particular.

Italy did not prove an exception: GDP began to fall in the second quarter and the annual change for 2008 is estimated at -0.6%. The decline in industrial output in November exceeded the average for the euro zone at an annualized -9.7%.

Central banks responded to the crisis by loosening monetary policy and increasing basic monetary availability. The Federal Reserve cut its official rates from 4.25% to 0-0.25%. Surprisingly, the ECB raised its primary refinancing rate from 4.0% to 4.25% in July, only to then embark on a phase of rapid rate cuts following the outbreak of the financial panic.

Official rates were cut to 2.50% from October to December, for a total decrease of 175 BPs. The ECB also temporarily reduced the spread on primary transactions and the rates on deposits and marginal refinancing from 100 to 50 BPs. In addition, in order to encourage the normalization of interbank interest rates, the ECB introduced a series of amendments to open-market transactions, which implied a significant increase in the availability of liquidity.

The trend in market interest rates was strongly influenced by the crisis, in addition to monetary policy intervention. The one-month Euribor rate, which remained stable during the first few months of 2008, reached a peak of 5.197% in October, 91 basis points above the level at the end of 2008. The increase is entirely attributable to the rise in risk premiums on the interbank market following the winding-down of Lehman Brothers in September. Rapid official rate cuts and the decrease in the Euribor-OIS spread due to stabilization measures then went on to reduce the one-month rate to 2.634%. 15 Report by the Board of Directors - The macroeconomic outlook and financial markets

Compared to one year earlier, the IRS curve showed a decline of 184 basis points in rates for two-year maturities and 98 basis points for ten-year maturities: the spread between long- and short-term rates continued to climb during the period of monetary slowdown.

The increase in aversion to risk and the deterioration of the macroeconomic scenario led to a sharp decline in the yields on German government securities: the yield on ten-year Bunds fell from 4.66% at 23 July to 2.94% at 30 December.

However, bond issues by all other euro zone governments, including those of nations with credit ratings equivalent to Germany’s, began to be penalized by investors in September. The BTP-Bund spread for ten- year maturities rose from 28 basis points at the end of 2007 to 144 at the end of 2008. The decline in BTP yields was therefore much more moderate than that shown by Bunds. Even more violent tensions surrounded the debt of other euro zone countries such as Ireland and Greece.

The trend in the euro/dollar exchange rate was characterized by a period of appreciation (February-April) that led to fluctuations stably above 1.50 dollars and a subsequent period of rapid depreciation (July- October) characterized by a decline of as many as 36 points. Broad fluctuations also characterized the last few months of 2008. At year-end the euro/dollar exchange rate was 1.40, six points below the level of one year earlier.

The pound sterling began to show pronounced weakness in November following on a period of stability against the euro: the exchange rate rose from 0.80 to a peak of 0.98.

On the whole, since early 2008 the corporate bond market has posted a highly negative performance, showing a marked weakness of the investment grade and high-yield cash segment. The general widening of asset-swap spreads over the first three months of the year was followed by a tightening of spreads in April in May under the assumption that the credit crisis might have attenuated its impact on capital markets. Subsequently, however, the risk revaluation process resumed with considerable intensity, leading to even more severe conditions beginning in September.

In 2008 international equity markets experienced a prolonged, intensive period of price corrections due to the combined effects of the financial crisis triggered by subprime mortgages in the United States, the slowdown of the economic scenario in OECD countries, and the reflections of this scenario on corporate earnings.

The subsequent coordinated intervention by Western governments contributed to limiting the systemic effects of the crisis, yet equity markets continue to experience the recessionary impact of the financial crisis on the economic scenario in OECD countries and the repercussions on corporate earnings for the current and following years. European and U.S. equity indices were severely affected by the negative market situation: in 2008 the DAX fell by 40.4% and the CAC by 42.8%, while the FTSE 100 declined by 31.3%.

The loss posted by the DJ Industrial Average was slightly less severe, closing the period down 29.8%, whereas the S&P 500 showed a drop of 38.5%.

Eastern stock exchanges were also down sharply in 2008: the Nikkei 225 posted a downtrend of 42.1%, while the Chinese stock exchange fell particularly rapidly, resulting in a drop of 65.4% in the SSE Composite index. In this highly negative context, the Italian equity market underperformed the main European indices, due in part to the significant weight of the financial industry in the index: the MIBTEL fell by 48.7% in 2008.

In detail, the S&P MIB, which includes the 40 largest stocks on the domestic market, posted a drop of 49.5% over the year. Mid-capitalization stocks were more heavily penalized than blue chips: the Midex was down by 52.4%, whereas the All STARS index declined more moderately (40.5%). In late December trading of Italian stocks decreased by approximately 35% in terms of value compared to the same period of 2007, with a daily average of 4,067.7 million.

16 Results by business area

Capital Markets During 2008, the Fixed-Income area achieved excellent results despite the rapid occurrence of a series of exceptional events such as: the default of Lehman Brothers and the Icelandic banks; the violent, repeated steepening and flattening of the extra-long section of the interest-rate curve; and the brusque widening of spreads on government security asset swaps.

All segments (bonds, derivatives, currencies and commodities) outperformed projections due to the strategy of targeted risk management and focusing on client pricing.

In addition, constant high market volatility, with bid-offer spreads constantly widening, often presented op- portunities for seeking arbitrage windows. The entire Fixed-Income segment was also favoured by the “re- turn” to more plain-villa products (such as exchange rates) typical of highly volatile, “directional” markets and the broader crisis of confidence.

In the government securities segment, the Bank expanded its role as specialist on the screen-based markets covered (MTS, HDAT, EuroMts), confirming its position of leadership in Italian government securities and obtaining contracts to act as lead arranger for issues by the Italian and Greek governments.

Turning to interest-rate derivatives, intensive activity with corporate and institutional clients favoured the development of considerable flows, including on the longer maturities, and strengthened the Bank’s leader- ship on the domestic interdealer market.

The structural credit crisis, which began in summer 2007, manifested itself in full force in 2008 in the form of a very serious crisis of liquidity and confidence, which in some circumstances required the intervention of central governments in the credit and insurance sectors.

The launch of the TARP plan in the USA and the concurrent intervention of European governments in bank capital occurred against the backdrop of the constant disposal of assets and deleveraging of balance sheets. The strong liquidity strains on the markets and the lack of buyers led to a widening of credit spreads on financial and corporate securities, resulting in all-time high bid prices (the main Itraxx index climbed above 200 and the Crossover over 1000). In a market dominated by the search for improved asset quality and the lack of demand for senior and investment grade debt, Credit Trading succeeded in strengthening its franchise with the Group’s clients by ensuring constant liquidity and a range of price offerings.

While maintaining a moderate risk profile and aiming to avoid excessive expansion of interest-bearing as- sets, the Bank succeeded in continuing to deliver that agility of operation required to face the risks implicit in transactions that are both profitable and satisfying for the Group’s clients.

In the Equity segment, lesser flows from clients and the risks in the book of exotic products conditioned the desk’s performances, which still remained positive.

The sharp focus on reducing risks allowed the Bank to limit the impairment of its positions, especially in connection with the deepening of the market crisis during the fourth quarter of the year. Strong results were also posted by Specialist and corporate broking on Borsa’s official markets, in addition to liquidity provider services on the ETF segment – on which the Bank maintained its domestic leadership and a significant presence on the German market. The Bank confirmed and consolidated its leadership on the Sedex and Idem markets and in universal stock futures on the LIFFE, where Banca IMI acts as official market maker.

Turning to Capital Management, fiscal year 2008 ended with a result that far exceeded the targets set, pri- marily due to the contributions of the Treasury and ALM desk through the strict application of its guidelines of action: active liquidity management, diversification of sources of funding and investments, diversification of funding and maintenance of equilibrium in the Bank’s liquidity position.

17 Report by the Board of Directors - Results by business area

The results of the equity portfolio were also positive, benefiting from positions purchased during volatility and the steepening of the European curve. Directional position management proved highly profitable, with the aim of employing a short-term trading approach despite the temporary erosion of value from the options portfolio.

During the year, the activities of the Parent Company’s Banca dei Territori division focused on bond placements using simple rate structures, to the disadvantage of equity and CPPI issues. In addition, the placement of Fondi a Formula, for which a second issue is scheduled for February 2009, was concluded at year-end. The IDEA channel, through which approximately 75% of transactions passed, confirmed its importance to interest-rate risk management products.

The year was a period of transition for the distribution of exchange-rate derivatives products due to the ongoing change in the service model, which now calls for the centralization of activity with the position of Specialist.

The severe tensions on the currency market in the first three quarters of 2008 provided incentives for the investment of liquidity in repurchase agreements. The trend then slowed sharply in connection with the decline in short-term rates beginning in mid-September. Consequently, auctions of government securities were always well received, shifting the focus on risk aversion towards peripheral countries, and the liquidity not renewed on the currency market was transferred to corporate bonds with maximum maturities in late 2010.

Financial issues, especially Italian entities and senior debt, met with strong demand in all of 2008. European institutions garnered less interest, and American institutions had no appeal. The subordinated debt market halted in 2008, with exceptions only late in the year, driven by high spread levels.

The private banking market showed product simplification and shortened maturities, with clients primarily oriented towards structures with guaranteed capital, as opposed to the previous demand for partial protection of capital and greater leverage in payoffs. The most dramatic turnaround of 2008 involved underlying assets, which shifted from a stronger focus on equity and commodity products to a very strong interest in interest-rate securities in the form of bank bonds and certificates. The year was also characterized by a sharp decline in securities tied to the “assets under management” industry.

At year-end, given the levels reached by the equity market, some counterparties began to show renewed interest in equity-linked certificates with guaranteed capital.

In support of distribution activity, in 2008 the Bank created the Luxembourg certificates prospectus, expanding its product line in order to satisfy demand for underlying assets and pay-offs not available in domestic prospectuses. Renewal activities for domestic prospectus continued with regulatory entities (CONSOB, Borsa Italiana).

In the Financial Institutions sector, the market continued to present interesting opportunities in the credit sector, in particular the unprecedented expansion of bid/ask spreads.

The first part of the year witnessed significant sales flows of Italian securities by foreign clients.These disposals were primarily shifted elsewhere on the Italian market due to Banca IMI’s broad presence.

In the second part of the year, and especially after the Lehman bankruptcy, volatility proved even more severe, offering the possibility of closing many high-margin transactions, often without market risks for the Bank.

The failure to exercise call options on second-tier subordinated securities by government issuers was, and remains, an issue at the focus of attention. The first issuer not to call an issue was Credito Valtellinese. More recently, Deutsche Bank made a similar decision. There were consequently significant inflows to both the secondary and primary markets for financial securities, in particular subordinated securities.

Turning to the interest-rate market, the further widening of spreads in peripheral countries led mutual funds to freeze purchases of Italian and Greek government securities. Several proprietary bank trading desks acted against this trend by resuming their accumulation of short-term CCT and BTP with the aim of investing liquidity.

18 Report by the Board of Directors - Results by business area

The Large Corporate segment achieved exceptional results in 2008. The market crisis and Lehman Brothers Chapter 11 created unique opportunities for intermediation and coverage of outstanding positions with the U.S. bank.

The Mid-Corporate segment posted positive performances on interest rates, marking an increase of 10% on 2007, primarily due to hedging of the Group’s lending, whereas the structured rate component was in gradual decline.

Forex activities, despite the effects of the process of migration to target systems during the first half of the year, generated results that greatly exceeded expectations in all components, both cash and derivatives, and across all segments: Financial Institutions, Large and Mid, despite the absence of transactions of significant size. The results of derivatives commodities were highly interesting. These securities, after a slow inception, typical of businesses in the start-up phase, reported an encouraging increase in transactions.

The trend towards the growth in the volumes traded on regulated and organized markets at the global level initially reported in the first quarter of 2008 was dramatically reversed following the emergence of the financial crisis.

The decline in commission volumes and revenue affected the Equity Cash and ETD areas for Brokerage & Execution, as these are segments in which there was a significant decrease in flows: firstly, on the part of institutional clients due to the decline in prices, which, exacerbated by redemptions, decreased assets under management, followed by the need for hedging using listed derivatives. This was followed by the Retail segment, which witnesses an acceleration of the trend towards the decrease in assets on markets, already down significantly on recent years. In 2008, on the other hand, there was considerable activity on the bond segment.

The combined effects of the crisis, with the ensuing illiquidity of wholesale markets, investors’ preference for risk-free assets and the search for best-execution solutions for retail clients lead banking networks to seek venues able to ensure a high degree of certainty concerning the price of execution. These are the reasons that led to the growth of the number of banks that use Banca IMI’s Dynamic Best Execution system and the increase in volumes for brokers with direct access to markets on retail-type venues such as MOT and TLX.

In this connection, the primary project of the Market Hub area in 2008 was the preparation of the Dynamic Best Execution platform. Officially presented in February 2009, this platform links approximately 300 institutional clients to a wide range of external trading platforms (approximately 70 for bonds, equities and derivatives) and aims to best serve investors’ interests by executing orders received where the best conditions in terms of prices, likelihood and speed of execution are satisfied at the time.

At year end the Hub was managing 65,000 daily equities trades and 15,000 daily bond trades, representing total market share of approximately 6%.

Investment Banking Despite the decline in M&A activity in Europe and Italy, which posted decreases of 20% and 45% respectively, Banca IMI reported a 65% increase in the volume of transactions closed compared to 2007. 1

In the General Industry segment, the Company advised in the acquisition of Lucida (Giochi Preziosi) by Clessidra SGR, Fingiochi and Intesa Sanpaolo; it acted as advisor to MerMec for the disposal of a majority investment in the company; and it assisted Prima Industrie in the process of acquiring the Finnish Finn- Power Oy and Nice with the acquisition of Silentron.

It also participated in delisting, acquisitions and disposals of companies such as: Guala Closures; the Vado intermodal freight hub (Vado Intermodal Operator) to GF Portem; the acquisition of 65% of Ecoware; Pirelli RE Integrated Facility Management to Manutencoop Facility Management; N&W Investor Sarl (Necta) with the disposal of N&W Global Vending to a pool of investors; and, lastly, it assisted a pool of banks, including

1 Source: Thomson One Bankers Deals, Thomson Reuters. 19 Report by the Board of Directors - Results by business area

Intesa Sanpaolo, with the disposal of Speed.

In the Energy & Utilities segment, the Bank assisted Independent Resources with the disposal of Stoccaggio Gas Rivara and is currently involved in the corporate and industrial combination of Iride, assisted by Banca IMI, and Enìa and Hera, in addition to the merger by incorporation of AGAM Monza into ACSM Como. As advisor to A2A, Banca IMI reached an agreement with E.On for the sale to the German company of the Lombardy-based multi-utility’s investment in Endesa Italia (20%). The Bank also advised Gazprom during the process that led to the signature of a joint venture agreement with A2A and Iride for the sale of Russian gas on the Italian market. In addition, the Company is advising F2i during the process of acquiring a minority interest in Alerion.

In the Financial Institutions segment, the Bank’s professional services were provided to: a group of investors (Banca Agricola Popolare di Ragusa, Cassa di Risparmio di Rimini, Banca del Fucino, Banca Popolare di Puglia e Basilicata, Cassa di Risparmio di Bolzano, Cassa di Risparmio di Bra, Cassa di Risparmio di Cento and Unibanca) concerning the acquisition of 37.74% of Eurovita; the Parent Bank regarding the process of disposing of Sì Holding by Intesa Sanpaolo, Banca MPS and Unicredito; and the disposal of a majority interest in Cassa di Risparmio di Orvieto.

The continuing weakness of international equity markets led to a decrease in the volumes of offerings of equities or similar securities on a global scale during 2008. In particular, issues in Europe amounted to 172 billion, compared to 262 billion in 2007 (-34%).

The only segment to register a positive performance was the share capital increase market, primarily issues by the banking and financial sector: 51% (88 billion) of the total issues for the year was represented by share capital increases offered on option, marking a 54% increase in volume compared to the previous year.

Similarly to the trend at the European level, Italy also showed a decrease in issues, both in terms of total volumes (from 8.4 to 7.5 billion, or -11%) and the number of transactions (22 versus 46), albeit with a sharp increase within the share capital increase aggregate (as many as 15 issues for a total value of 7.3 billion, nearly twice the level of the previous year).

In this context, Banca IMI acted as joint global coordinator for the MolMed IPO and lead or joint lead manager for share capital increases by Tiscali, Banca Popolare dell’Etruria e del Lazio, Pierrel, Prima Industrie, Stefanel and Finmeccanica. The Bank also served as sponsor for the spin-off of Kme Group and the concurrent listing of Greenergy Capital as well as for the merger of Maffei into the Minerali Group and the concurrent listing of the new company.

International operations included participation in option issues by the Royal Bank of Scotland, UBS, Crédit Agricole and Natixis. Banca IMI also acted as co-manager for the placement of new shares of General Electric.

Thanks to these transactions, the Bank was first by number of placements or share capital increases undertaken and sixth by total value (with market share of 9.5%) on the Italian market, according to the specific rankings prepared byIFR-Thomson Financial.

In 2008 the Bank also maintained its strong positioning in the public takeover bid/delisting segment, in which it oversaw bids for Jolly Hotels, Linificio, Banca CR Firenze, Polynt, Sirti, Ducati Motor Holding (including the sell-out and squeeze-out procedure) and Guala Closures.

At year-end Banca IMI was acting as specialist or corporate broker for 32 companies listed on the Italian market, confirming its leadership of this segment of the market and its focus on the mid-cap sector.

The Bank’s Debt Capital Markets operations included the organization and placement of bond issues for both institutional and retail clients.

In the Financial Institutions segment it served as joint lead manager and bookrunner for the subordinated tier 3 issue by Banca Carige and joint lead manager for the senior five-year bond issue by Société Générale. Retail Debt Capital Markets operations included the organization of bond issues (over 12 billion, including through important networks external to the Group such as Poste Italiane and UBI Banca) by Banca IMI and third-party banks (Dexia Crediop, KBC Bank and Mediobanca).

20 Report by the Board of Directors - Results by business area

The private placement channel was responsible for organizing and placing a total of over 1.6 billion in transactions. In the corporate segment, the Bank acted as joint bookrunner for bond issues by ENI, Hera, Finmeccanica and E.ON. In the Sovereign, Supranational & Agencies segment, the Company served as joint lead manager and bookrunner for two important 15-year benchmark issues by the Republic of Italy and the Republic of Greece, in addition to a private placement, also by the Republic of Greece, of eight-year floating-rate notes. Banca IMI also organized three equity-linked issues for the European Investment Bank intended for the Group’s retail investors.

On the local entities segment, Banca IMI was joint bookrunner for the issue of 350 million in 30-year bonds by the Municipality of Turin.

The Bank’s Leveraged & Acquisition Finance operations included, inter alia, the structuring and organization of the acquisition of the Nicotra group by the private-equity funds Ergon Capital and Athena, advising Prima Industrie on the acquisition of Finn Power Oy, and the public-takeover bid for the listed firm Ducati S.p.A. by a pool of investors headed by the private-equity fund Investindustrial.

Other transactions worthy of mention include the acquisition of the Giochi Preziosi group by the private- equity fund Clessidra and Enrico Preziosi, the acquisition of Mermec S.p.A. by the private-equity fund Investitori Associati, and the acquisition of the listed firmGuala Closures S.p.A. through a public-takeover bid by a pool of financial investors led by the fund DLJMB Overseas Partners IV.

Banca IMI’s Advisory operations included participation in the most important real-estate development transactions undertaken in Italy during 2008. In further detail: – The disposal of part of the Intesa Sanpaolo Group’s real-estate portfolio no longer deemed strategic to the Group (market value of assets of approximately 850 million). Banca IMI acted as financial advisor and closed the transaction in December 2008 by transferring the property in question to the Omega Fund, managed by Fimit Sgr, shares of which were placed with a pool of leading institutional investors. Intesa Sanpaolo maintained a 30% interest in the shares issued by the Fund in return for the transfer of the property. – The transfer of part of the capital property owned by Banco Popolare (market value of assets of approximately 750 million) to a real-estate fund – Eracle – managed by Generali Immobiliare Italia Sgr. Banca IMI acted as underwriter and arranger in structuring the transaction, as well as placement agent for the placement of shares of the fund with institutional investors. The transaction was closed in December 2008 with the placement of 100% of the fund’s shares. – The partial placement of shares of a real-estate fund managed by a leading real-estate management firm, Torre Sgr, operating on the Italian market. Banca IMI also acted as sole arranger and sole placement agent in the placement of part of the fund’s shares with institutional investors (the market value of the fund’s property came to approximately 500 million).

In the market for securitization by bank originators, the trend reported in all of 2008 continued, resulting in the closing of a high number of transactions aimed at providing bank originators with ABS allocable as collateral for refinancing transactions with the European Central Bank.

In the fourth quarter of 2008 Banca IMI served as: (i) sole arranger and sole lead manager for the securitization SPQR II Srl – BIIS Series, a CBO in the amount of approximately 1.3 billion organized on behalf of Banca Infrastrutture Innovazione e Sviluppo; (ii) co-arranger and joint lead manager for the transaction Viola Finanza Srl, a securitization in the amount of approximately 600 million organized on behalf of Findomestic Banca Spa; (iii) lead manager for the Adriano Finance Srl RMBS transaction, organized on behalf of Intesa Sanpaolo in the amount of approximately 5.7 billion; (iv) co-arranger and lead manager for the Adriano Finance 2 Srl transaction, organized on behalf of Intesa Sanpaolo in the amount of approximately 13 billion.

21 Results in 2008

Banca IMI’s year-end results at 31 December 2008 show a net profit of 293.4 million, up by 39% on the 211 million reported at the end of 2007.

In the interest of a more complete analysis of earnings performance, the following table shows the statement of income in reclassified form, which permits a more accurate presentation of the main items that compose core business results and results of a non-recurring nature.

Restated income statement (million euro) Captions 31.12.2008 31.12.2007 changes absolute % Net interest income 75.6 (82.1) 157.7 192.1 Net fee and commission income 125.1 108.5 16.6 15.3 Profits from financial transactions 404.9 454.2 (49.3) -10.9 Core business results 605.6 480.6 125.0 26.0 Net non-recurring results 121.3 133.4 (12.1) -9.1 Net interest and other banking income 726.9 614.0 112.9 18.4 Net administrative expenses: (248.8) (293.5) 44.7 -15.2 of which: - personnel expenses (84.4) (121.9) 37.5 -30.8 - other administrative expenses (164.4) (171.6) 7.2 -4.2 Adjustments to property, equipments and intangibles assets (1.3) (6.6) 5.3 Operating costs (250.1) (300.1) 50.0 -16.7 Income from other activities 476.8 313.9 162.9 51.9 Imparements and provisions (41.9) (28.4) (13.5) 47.5 Other operating income ( expenses ) 17.5 13.2 4.3 32.6 Income before tax from continuing operations 452.4 298.7 153.7 51.5 Taxes on income from continuing operations (159.0) (88.0) (71.0) 80.7 Net income 293.4 210.7 82.7 39.3

In further detail: – net interest has been reclassified to account for the effects of hedging of the banking book and transactions economically related to the trading book; – dividends collected on shares in the trading book and commissions on derivative products kicked back to distribution networks have been reclassified to profits from financial transactions; – revenues and costs of strategic operations that are nevertheless of a non-recurring nature are presented on a separate line within the net interest and other banking income (net non-recurring results); – personnel expenses and other administrative expenses are stated net of recoveries.

22 Report by the Board of Directors - Results in 2008

The aggregates that compose net interest income confirm the guidelines discussed above, which have steered investments towards high-return securities and leveraged liquidity and cash at hand since the beginning of the year. These guidelines are accompanied by the economic effects created by the significant growth of bond issues and the associated change in net interbank position.

Net interest income (million euro) Items/sub-items 31.12.2008 31.12.2007 changes absolute % Bond and repo 326.6 286.4 40.2 14.0 Structured finance 79.7 69.4 10.3 14.8 Funding and interbank market 209.4 (330.1) 539.5 Bond issued and subordinated liabilities (509.0) (85.8) (423.2) Other (31.1) (22.0) (9.1) 41.4 Net interest income 75.6 (82.1) 157.7

In absolute terms, the profitability of the securities portfolio was enforced by the higher average volume of investments than in the previous year, particularly those of non-governmental issuers. This profitability was further driven by more expedient forms of fund-raising. The increase in average volumes registered by the trading book is accompanied by the additional 800 million in assets in the investment portfolios (loans and receivables and AFS) introduced in the second half of the year. Against the backdrop of gradual interest-rate cuts, interest expenses on bank funding decreased in absolute terms, also due in part to the more moderate needs to fund the cyclical nature of equity investments. The concurrent rise in bond funding, which has been invested in deposits with the Parent Company, reposi- tioned funding costs towards outstanding debt securities and resulted in a positive management margin for treasury positions.

The quarterly development of the interest margin clearly shows the trend in the aggregate.

(million euro) 4QT08 3QT08 2QT08 1QT08 Bond and repo 97.6 100.7 67.2 61.1 Structured finance 21.3 18.3 19.2 20.9 Funding and interbank market 203.6 69.6 (29.4) (34.4) Bond issues and subordinated liabilities (269.3) (128.9) (65.1) (45.7) Other (7.4) (11.0) (9.9) (2.8) Net interest income 45.8 48.7 (18.0) (0.9)

Turning to capital markets, the negative returns on equities markets, the general decrease in investment flows from clients, and the shift in investors’ choices confirmed the trend towards a decline in dealing and acceptance of trading instruction revenues. The more modest performance was also shaped by the redefinition of pricing levels at the beginning of the year in accordance with the new service models implemented with Group companies.

Revenue on exchange-rate risk brokering and management enjoyed considerable development, driven by clients’ increased hedging needs and the significant rise in volume of transactions.

23 Report by the Board of Directors - Results in 2008

Net fee and commission income (million euro) Captions 31.12.2008 31.12.2007 changes absolute % Dealing and consultancy Dealing and acceptance of trading instructions 27.9 47.6 (19.7) -41.4 Currency dealing 37.9 8.6 29.3 340.6 Placements of equities and debt 45.1 37.0 8.1 21.9 Placement of FV liabilities and CW (23.7) (18.2) (5.5) 30.2 Structured finance & advisory 44.7 44.8 (0.1) -0.2 Other 11.2 4.7 6.5 143.1 124.5 18.6 14.9 Management and services Custody and administration of securities (14.4) (11.7) (2.7) 23.1 Collection and payment services (3.4) (4.3) 0.9 -20.9 (18.0) (16.0) (2.0) 12.5 Net fee and commission income 125.1 108.5 16.6 15.3

Investment banking witnessed a rise in revenues due to the decisive contribution of the origination of securities in the fourth quarter, whereas the commissions on structured finance and advisory operations were constant over the various quarters given the adoption of the transitional business model effective 1st October 2007, under which the Company acts as advisor and organizer and the Parent Company as lending bank. The avoidance of the assumption of new credit risks, a characteristic of the previous service model, consequently halted the growth of revenues on guarantees provided.

The costs of depositary bank services, almost entirely attributable to the Parent Bank, were up due to the higher volumes of proprietary securities and the increase in the number of transactions settled.

The comparison of financial profits between the periods showed an increase in profitability on the fixed- income segment, driven by the performance of proprietary trading operations, while the management of investment flows registered a more moderate contribution. Decreased opportunities were also presented by the distribution of derivatives to clients, a segment in which operations focus primarily on the restructuring of existing portfolios towards plain-vanilla type hedges.

The results of operations involving cash and derivative securities with underlying equity risk showed a sharp decrease due to the general conditions of equity markets and the shift in investor preferences towards more modest financial risk profiles and plain-vanilla instruments.

24 Report by the Board of Directors - Results in 2008

Financial profits (million euro) Items/sub-items 31.12.2008 31.12.2007 changes absolute % Rates and bond securities 154.3 105.6 48.7 46.1 Stock securities and indices 83.1 236.9 (153.8) -64.9 Credit derivatives 95.8 33.9 61.9 Currencies 68.6 25.3 43.3 Commodities 18.9 49.9 (31.0) -62.1 Transactions and adjustments (15.8) 2.6 (18.4) Total from reclassified income statement 404.9 454.2 (49.3) -10.9

The credit and currency derivatives segments presented excellent intermediation opportunities: Banca IMI was able to provide risk hedging and liquidity to its clients, thereby achieving more than satisfactory profitability levels on several targeted transactions. The credit segment also recovered well through adequate balancing transactions based on credit derivatives, the write-downs on cash instruments due to the deterioration of bid prices, and the widening of issuer credit spreads.

As anticipated in the report at 30 September 2008, due to the continuation of the financial crisis and the resulting very high bid-offer spreads, limited number of transactions, and modest market depth for certain issuers, political and regulatory entities intervened with amendments to accounting standards. In further detail, these amendments included the option of reclassifying securities, which, due to changed market conditions, were not predicted to return to ordinary trading status out of the held-for-trading portfolio.

In consideration of the above changes, the Bank’s management decided to reclassify approximately 721 million in RMBS-type debt securities from held-for-trading to loans and receivables. These securities are primarily highly rated (AA/AAA) senior class notes. The goal of this reclassification was to establish a high-yield portfolio consisting essentially of Italian securities with loan-to-value ratios below 50%. The reclassification was undertaken on the basis of the fair value at 30 June 2008 (the date of the most recently published interim report).

The disturbances generated by the market scenario and, in particular, the general increase in credit risk premiums led the Bank to recognize credit risk adjustments on OTC derivatives contracts in the amount of 16 million (included among “Other transactions and adjustments”). This adjustment was recognized despite the fact that Banca IMI’s typical counterparties are highly rated credit brokers and financial companies, and that forms of credit risk mitigation based on netting and collateral swap contracts have been adopted for most exposures.

Due to the foregoing trends, core business results came to 606 million, up sharply (+26%) on the previous year, confirming revenue stability despite the worsening of the market crisis occurred in the fourth quarter of 2008.

25 Report by the Board of Directors - Results in 2008

Net non-recurring results include revenues of a strategic nature or not directly attributable to operating desks. In further detail, the 2007 aggregate includes the unrealized capital gain of 127 million on the equity investment in Borsa Italiana following the merger with the London Stock Exchange, in addition to dividends on equity interests.

Accordingly, the 2008 aggregate includes the capital gain realized on the disposal of MTS (4 million) and the dividends (2 million) paid by the remaining market-company investees. This item of the reclassified statement of income also includes the valuation effects of financial assets and liabilities of a situational nature due to the general deterioration of credit spreads for bank issues, for which it was not possible or expedient to enter into specific hedging transactions.

Net non-recurring results (million euro) 31.12.2008 31.12.2007 changes absolute % Capital gains on investments 4.2 127.0 (122.8) -96.7 Dividends on investments 2.0 6.4 (4.4) -68.8 IMI Creditworthiness 145.9 145.9 SPQR II Creditworthiness (30.8) (30.8) Net non-recurring results 121.3 133.4 (12.1) (9.1)

In this regard, the item includes 146 million in revenues attributable to securities issued by Banca IMI, which have been measured at their fair value. During first-time adoption of international accounting standards, this choice of accounting treatment arose from the need to stabilize the fluctuations in the value of assets (primarily shares of UCITS) in which funding was invested, assets the performance of which represented the return-premium for bondholders. This choice was made due to the presence of a clause guaranteeing invested capital, in protection of which a portion of the above-mentioned funding was allocated to money- market and bond funds, whereas the “extra income” was determined by funds with higher risk profiles.

Until the determination of fair value at 31 December 2008, Banca IMI’s creditworthiness, which previously had played a secondary role and had nonetheless been included in that of the UCITS’ underlying assets, shifted to a primary role due to the widening of spreads for financial institutions and the concurrent decrease in fund shares recognized as assets.

The non-recurring nature of a part (31 million) of the valuation adjustments to the portfolio of underlying securities for the SPQR 2 self-securitization has also been considered. These assets have not been derecognized from these financial statements. The notes underwritten by Banca IMI were significantly affected by the fourth-quarter market bid prices for the asset classes that represent the bulk of said portfolio (approximately one-half of which were issued by the Group). Given the purposes of the disposal, which aimed to create new, more expedient opportunities for the financing of assets, and not to limit the impact of the impairment thereof on the statement of income, the Bank decided not to enter into costly creditworthiness hedging transactions.

Net interest and other banking income came to a total of 727 million for the year, up by 18% on 2007.

26 Report by the Board of Directors - Results in 2008

Turning to operating costs, it should be noted that, first of all, there was a 17% decrease in the item, the quarterly figures for which clearly demonstrate the structural nature of this reduction.

Operating costs (million euro) 4QT08 3QT08 2QT08 1QT08 4QT07 3QT07 2QT07 1QT07 Personnel expenses (21.5) (20.9) (20.9) (21.1) (34.5) (28.5) (28.4) (30.5) Administrative costs (40.5) (41.9) (42.1) (39.9) (41.4) (42.5) (43.7) (44.0) Depreciations (0.3) (0.3) (0.4) (0.3) (0.7) (1.7) (2.0) (2.2) Operating costs (62.3) (63.1) (63.4) (61.3) (76.6) (72.7) (74.1) (76.7)

Note: Pro-forma data for the quarters preceding 4Q2007.

“Personnel expenses” were down by 38 million on the period of comparison, essentially attributable to the decrease in human resources employed, while ordinary wage items remained stable. On a like-for-like basis in terms of scope of consolidation (i.e., excluding the staff transferred to departments of Intesa Sanpaolo, effective 1 October 2007, which provide services to Banca IMI and including the Investment Banking human resources on partial secondment), the workforce has decreased by 60 resources since the merger. This was in addition to lesser allocations to the incentive system, which were made in 2008 in reference to the effective sums disbursed on the basis of the results in 2007, as well as to the company bonus. This change led to less costs for 15 million. If the aggregate is normalized, there was still a 20% reduction in personnel expenses between the periods of comparison.

“Other administrative expenses” consisted primarily of IT, post-trading, and management services (particularly risk management, audit and compliance and payroll) provided by the Parent Bank.

27 Report by the Board of Directors - Results in 2008

Administrative expenses (million euro) Caption/subcaptions 31.12.2008 31.12.2007 changes absolute % IT and post-trading services on outsourcing (92.6) (93.5) 1.0 -1.0 Other services rendered by the Parent Company (8.7) (2.6) (5.9) Total outsourcing costs (101.3) (96.2) (5.1) 5.3 Contributions paid to Regulatory Bodies (0.8) (0.3) (0.5) Consulting services on compulsories (2.0) (3.8) 1.8 -47.1 Total compulsories costs (2.8) (4.1) 1.3 -31.3 Rents and Real Estate management (5.8) (8.8) 3.0 -34.0 General structure costs (4.1) (7.1) 3.0 -42.1 Total logistic and functioning costs (9.9) (15.9) 6.0 -37.6 Info provider and other market information costs (26.4) (29.5) 3.1 -10.6 Databases and processing (5.3) (3.6) (1.6) 43.7 Total databases and market information costs (31.6) (33.1) 1.5 -4.6 Business consulting costs (6.0) (8.2) 2.2 -27.3 Business legal expenses (3.4) (2.2) (1.2) 54.5 Total legal and consulting expenses (9.4) (10.4) 1.0 -10.0 Advertising, promotional and agency expenses (4.4) (4.2) (0.2) 4.9 Training and other personnel costs (1.9) (3.0) 1.1 -35.4 Social contributions (1.1) (0.9) (0.2) 24.0 Indirect taxes and duties (0.7) (0.3) (0.4) Other expenses (1.4) (3.8) 2.4 -64.5 Total opertating expenses (9.5) (12.0) 2.5 -20.4 Total administrative expenses (164.4) (171.6) 7.2 -4.2

The amendments, including economic changes, to the corresponding service level agreements, led to an increase in the costs of the latter services over the year, due to the wider range of services rendered.

A particular focus was dedicated to expenses directly managed by Banca IMI, resulting in savings in the areas of logistics (in particular the use of a single building effective May 2008), advisory and overhead. Contributions paid to supervisory authorities and legal expenses in support of the business increased. These latter costs are directly related to the expansion of placement and brokerage operations.

Lastly, the item “Depreciation” continued to show a structural decline due to the disposal of the “operations” unit and the centralization of investments with the Parent Company.

Due to the foregoing factors, the results of operational management came to 477 million, up by 50% on 2007. If the aggregate is normalized for the two periods, i.e. considering solely core business revenues and costs, the increase comes to more than 80% (+159 million). The cost-income ratio fell to 41.3% from the previous 48.9%.

Net profit come to 293 million after 42 million in allocations and adjustments (28 million at 31 December 2007) and net extraordinary revenue, up slightly (17 million versus 13 million), in addition to income taxes, the effective rate of which rose from 29.5% to 35.1%.

28 Report by the Board of Directors - Results in 2008

Net Income (million euro) 31.12.2008 31.12.2007 changes absolute % Income from operating activities 476.8 313.9 162.9 51.9 Provisions and impairments (5.0) (26.4) (21.4) -81.1 Provisions for risks and charges (36.9) (2.0) (34.9) Other non-operational revenues 21.3 16.3 5.0 30.7 Other non-operational charges (3.8) (3.1) (0.7) 22.6 Profits from ordinary activities 452.4 298.7 153.7 51.5 Income taxes for the period (159.0) (88.0) (71.0) 80.7 Net profit 293.4 210.7 82.7 39.3

The increase in Provisions and impairments is primarily attributable to net exposures claimed from Lehman Brothers Group companies (29 million), whereas collective portfolio adjustments (on-balance sheet exposures, lending commitments and debt securities) remained at physiological levels.

Concurrent with the inception on 15 September 2008 of the Chapter 11 bankruptcy procedures for the holding company of investment bank Lehman Brothers, its subsidiaries, Banca IMI’s effective market coun- terparties, were declared going concerns. Said event also represented the condition for unilateral termina- tion of outstanding financial transaction and the concurrent initiation of the most appropriate methods of recovering amounts claimed, including through the enforcement of mutually provided collateral.

At the date of Chapter 11, the Bank had outstanding OTC derivatives contracts with the Lehman Group in the total notional amount of 11.3 billion, which had a net negative market value for Banca IMI of ap- proximately 17 million, all of which are governed by ISDA contracts and secured by Credit Support Annexes (Banca IMI is a net creditor for collateral). The Bank had also entered into repurchase agreements on investment bonds in the amount of 64 million and funding bonds in the amount of 4.6 million and contracted net securities loans secured by cash guar- antees in the amount of 1.8 million. In addition to the foregoing exposures, the Bank claimed receivables originating from the non-settlement of positive margins on derivatives contracts in the amount of approxi- mately 24 million.

Procedures for a legal nature aiming to recover the exposure of 38 million (9 million net of the above adjust- ments) were in progress at the date of this Report. The final date of resolution is currently difficult to predict given the complexity of the issue. Likewise, the extent and time table for the recovery of said exposure remain tied to the progress of the procedure.

Provisions for risks and charges were also less significant. In 2007 the item included the resolution of the Parmalat dispute for 16 million, in addition to the expenses associated with the integration process.

Other non-operational revenues in both years under review include the release to the statement of income of provisions for personnel expensed in previous years, in the amounts of 16 and 12 million respec- tively, to an extent exceeding the effective outlay or discharge of the liabilities.

Income taxes were affected by the larger taxable base for “IAS entities” due in particular to the full taxa- tion of dividends collected on trading securities for IRES (corporate income tax) purposes and 50% taxation of said dividends for IRAP (regional production tax) purposes, in addition to the inability to fully deduct interest expenses due to tax measures implemented last summer. These factors more than offset the nominal decrease in tax rates.

The lesser effective tax rate in 2007 was also due to the more favourable taxation of the Borsa-London Stock Exchange gain.

29 Report by the Board of Directors - Results in 2008

Quarterly statement of income figures are presented in the following table in the interest of further analysis of the development of profit or loss items during the years compared.

Lastly, a statement of reconciliation between the results of the separate statement of income of the Parent Company and the corresponding aggregates of the reclassified progressive statement of income is provided.

Quarterly reclassified income statement (million euro) 4QT08 3QT08 2QT08 1QT08 4QT07 3QT07 2QT07 1QT07 Net interest income 45.8 48.7 (18.0) (0.9) (8.0) (29.1) (31.1) (13.9) Net fee and commission income 36.0 34.2 31.9 23.0 24.5 25.0 39.0 20.0 Profits from financial transactions 58.2 55.6 164.4 126.7 82.3 80.1 133.1 158.7 Core business results 140.0 138.5 178.3 148.8 98.8 76.0 141.0 164.8 Net non-recurring results 115.1 4.2 1.2 0.8 2.0 127.5 3.9 0.0 Net interest and other banking income 255.1 142.7 179.5 149.6 100.8 203.5 144.9 164.8 Net administrative expenses: (62.0) (62.8) (63.0) (61.0) (75.9) (71.0) (72.1) (74.5) of which: - personnel expenses (21.5) (20.9) (20.9) (21.1) (34.5) (28.5) (28.4) (30.5) - other administrative expenses (40.5) (41.9) (42.1) (39.9) (41.4) (42.5) (43.7) (44.0) Adjustments to property, equipment and intangibles assets (0.3) (0.3) (0.4) (0.3) (0.7) (1.7) (2.0) (2.2) Operating costs (62.3) (63.1) (63.4) (61.3) (76.6) (72.7) (74.1) (76.7) Results of the operational management 192.8 79.6 116.1 88.3 24.2 130.8 70.8 88.1 Impairments and provisions (12.4) (29.1) (0.4) 0.0 (18.3) (6.7) (1.6) (1.8) Other revenues and costs (net) 16.9 0.1 0.4 0.1 0.2 0.5 0.3 12.2 Profits (Losses) from ordinary assets 197.3 50.6 116.1 88.4 6.1 124.6 69.5 98.5 Income taxes for the period (75.0) (19.2) (37.6) (27.2) (5.2) (25.0) (20.8) (37.0) Net profit 122.3 31.4 78.5 61.2 0.9 99.6 48.7 61.5

Note: Pro forma data for quarters prior to 4th of 2007.

Reconciliation between the restated income statement as at 31 December 2008 with the elements of the civil balance sheet (million euro) RESTATED INCOME INCOME STATEMENT - CIVIL SYSTEM STATEMENT TOTAL income income charges (income) expenses impairment Interest margin Interest lodge accounting Personal expenses Dividend and similar Other administrative Taxes on income from on income from Taxes continuing operations Net fee and commission Fair value adjustment in Net Losses/recoveries on Net Losses/recoveries on property and equipemnt on property Profits (losses) on trading Profits Other operating expenses Net provision for risks and Net provision Profits (Losses) on disposal Profits (Losses) on disposal Profits Net adjustments to/recoveries Net adjustments to/recoveries Profits (Losses) at fair value Profits Net interest income 114.2 75.6 Net fee and commission income 125.1 125.1 Financial profits 60.3 (2.6) 413.3 (33.3) 1.1 (33.9) 404.9 Non-recurring results 2.0 (30.8) 4.2 145.9 121.3 Personnel expenses (84.4) (84.4) Administrative expenses (1.0) (164.0) 0.6 (164.4) Adjustments to property, equipment and intangibles (0.8) (0.5) (1.3) Impairments and provisions (36.9) (5.0) (41.9) Other revenues and costs 17.2 0.3 17.5 Income taxes (159.0) (159.0)

TOTAL 174.5 122.5 415.3 (64.1) (38.6) 5.3 112.0 (36.9) (85.4) (164.0) (0.8) (5.0) 17.3 0.3 (159.0) 293.4

30 Report by the Board of Directors - Results in 2008

The restated income statement aims to better represent the nature of events, highlighting the economic connection of income between the captions of the financial statements and the economic trends that are now conncted with the core business activities. Specifically: – net income include the effects of liabilities valued at fair value, of hedging transactions and all of financial transaction similar to them; – the dividends and manufactured dividends for trading and returns to distribution networks are reported among the Financial profits; – the results of liabilities assessed at fair value are among the Financial profits, the item that includes the revenues from related investments; – non-recurring revenues and costs are shown on a separate line; – other administrative expenses net of reimbursements and recovered total amounts.

31 Balance sheet

The following table provides a summary of equity figures at 31 December 2008 and 31 December 2007, reclassified as appropriate on the basis of the nature of the underlying relationship.

Summary of the reclassified asset and liability statement (million euro) Assets 31.12.2008 31.12.2007 changes absolute % 1. Due to banks and to customers: - Repurchase agreements 9,542.5 16,189.5 (6,647.0) -41.1 - Securities lending 224.5 422.3 (197.8) -46.8 - Fixed income securities 640.7 - 640.7 - Collateral deposited 1,769.9 744.9 1,025.0 - Structured finance assets 1,306.2 2,061.8 (755.6) -36.6 - Interbank deposits 17,536.7 2,897.2 14,639.5 - Checking accounts and other accounts 857.9 1,095.4 (237.5) -21.7 2. Financial assets held for trading - Fixed income securities 7,708.3 7,428.2 280.1 3.8 - Stocks and quotas of UCITS 966.0 7,316.4 (6,350.4) -86.8 - Valuation of off-balance sheet trading transactions 39,998.7 16,908.5 23,090.2 - Valuation of off-balance sheet hedging transactions 361.5 22.7 338.8 3. Other assets - Property, equipment and intangible assets 1.5 2.1 (0.6) -28.6 - AFS and equity investments 276.8 283.7 (6.9) -2.4 - Other asset items 506.2 861.5 (355.3) -41.2 Total Assets 81,697.4 56,234.2 25,463.2 45.3

(million euro) Liabilities 31.12.2008 31.12.2007 changes absolute % 1. Due from banks and loans to customers - Repurchase agreements 8,324.2 15,104.8 (6,780.6) -44.9 - Securities lending 259.1 534.9 (275.8) -51.6 - Collateral received 2,732.9 1,424.0 1,308.9 91.9 - Loans 1,560.6 5,079.7 (3,519.1) -69.3 - Checking accounts and other 3,504.3 3,142.5 361.8 11.5 2. Financial liabilities held for trading - Valuation of off-balance sheet trading transactions 39,439.3 18,028.9 21,410.4 - Short selling 1,754.4 3,217.2 (1,462.8) -45.5 - Valuation of off-balance sheet hedging transactions 218.7 70.5 3. Issues - subordinate 165.1 695.4 (530.3) -76.3 - other 21,536.2 6,896.7 14,639.5 4. Allowance for specific purpose 24.0 28.5 (4.5) -15.8 5. Other liabilities 390.5 513.6 (123.1) -24.0 6. Shareholders' equity - Share capital and reserves 1,494.7 1,286.8 207.9 16.2 - Net income 293.4 210.7 82.7 39.3 Total Liabilities and Shareholders’ equity 81,697.4 56,234.2 25,463.2 45.3

32 Report by the Board of Directors - Equity aggregates

(million euro) Transactions outside the Balance Sheet 31.12.2008 31.12.2007 changes absolute % Guaranties given 889.9 1,106.0 (216.1) -19.5 Financial derivatives 2,911,752.6 1,814,171.8 1,097,580.8 60.5 Credit derivatives 91,217.6 51,985.9 39,231.7 75.5

During 2008, volumes of held-for-trading securities stood at average levels that exceeded those of the previous year, involving an uptrend in the non-governmental securities segment, which is characterized by greater profitability while also offering an adequate level of credit quality. Among equities, investments in shares aimed at maximizing liquidity profiles, with a livelier dynamic in choices of portfolios and shorter holding periods than in previous years.

The entire year witnessed the continuation of the trend towards a gradual reduction of UCITS shares in portfolio. The phenomenon, attributable to the direction the markets suggested for strategies underlying CPPI issues by Banca IMI and third parties, was most acute in the fourth quarter of the year, when invest- ments were substantially divested, following the invocation of the capital protection clauses called for by the management strategies.

Securities portfolio (million euro) Sub-items 31.12.2008 30.09.2008 30.06.2008 31.03.2008 31.12.2007 changes on 12.07 absolute % - Government and public agency securities 2.543,9 2.970,4 3.345,9 3.214,6 3.281,1 (737,2) -22,5 - Bonds and other debt securities 5.164,4 4.944,3 6.327,5 5.311,2 4.147,1 1.017,3 24,5 - Capital securities 966,0 5.100,5 5.807,1 4.965,6 7.316,4 (6.350,4) -86,8 – Stocks 204,8 1.403,0 864,3 489,0 1.227,9 (1.023,1) -83,3 – Quotas of UCITS 761,2 3.697,5 4.942,8 4.476,6 6.088,5 (5.327,3) -87,5 Total 8.674,3 13.015,2 15.480,5 13.491,4 14.744,6 (6.070,3) -41,2

As previously mentioned, due to amendments to accounting standards, and in particular the changes to IAS 39 concerning the option of reclassifying securities not predicted to resume ordinary trading status in the near term due to changed market conditions out of the held-for-trading portfolio, the Bank reclassified 721 million in RMBS-type bonds to the loans and receivables portfolio. The carrying value of this portfolio came to 641 million at year-end.

The substantial absence from the balance sheet of “toxic” assets (positions in U.S. sub-prime or Alt-A mortgages) was confirmed. For further details, the reader is referred to Part E of the Notes.

In the fourth quarter of the year, the Banca IMI brand confirmed its appeal as anissuer of debt securities through both the Group’s networks and third-party distribution networks. The change in the item “Bond issues CPPI indexed” is entirely attributable to valuation. In accordance with the strategy of enhancing regulatory capital, all tier 3 subordinated loans were redeemed in their entirety to protect against market risks.

33 Report by the Board of Directors - Equity aggregates

Bond Issues (million euro) Sub-items 31.12.2008 30.09.2008 30.06.2008 31.03.2008 31.12.2007 changes on 12.07 absolute % - Bond issues rate indexed 16,168.0 9,997.3 7,608.1 4,448.5 2,420.8 13,747.2 567.9 - Bond issues equity indexed 1,490.1 1,054.2 264.6 261.9 261.9 1,228.2 469.0 - Bond issues CPPI indexed 3,878.1 3,981.9 3,991.4 4,110.1 4,214.0 (335.9) -8.0 - Subordinated bond issues 165.1 218.0 215.1 695.0 695.4 (530.3) -76.3 - Tier 2 165.1 168.0 165.1 165.0 165.1 0.0 0.0 - Tier 3 - 50.0 50.0 530.0 530.3 (530.3) -100.0 Total 21,701.3 15,251.4 12,079.2 9,515.5 7,592.1 14,109.2 185.8

The increase in funding by approximately 15 billion led to a corresponding increase in treasury investments. Net interbank position, which witnessed Banca IMI taking the role of lender, as opposed to its traditional position as borrower, as early as the first few months of the year, showed further progress at 31 December due to both the bond placements of Q4 2008 and the reduced financing needs of the equity area

Net interbank position (million euro) Items 31.12.2008 30.09.2008 30.06.2008 31.03.2008 31.12.2007 changes on 12.07 absolute % Net sight interbank position: - checking accounts for services rendered 116,3 (21,6) 118,8 117,0 145,8 (29,5) -20,2 - free deposits 0,0 0,0 0,0 7,2 5,1 (5,1) 116,3 (21,6) 118,8 124,2 150,9 (34,6) -22,9 Net term interbank position: - time deposits 16.088,5 10.807,8 7.458,9 2.787,5 1.657,0 14.431,5 - loans (2.957,8) (4.762,4) (6.592,7) (1.945,7) (5.502,7) 2.544,9 46,2 - other technical forms 0,0 (4,7) (125,0) (172,2) 118,8 (118,8) 13.130,7 6.040,7 741,2 669,6 (3.726,9) 16.857,6 Net interbank balance 13.247,0 6.019,1 860,0 793,8 (3.576,0) 16.823,0

Turing to credit derivatives transactions, there was an overall increase in the stock of outstanding contracts (financial, credit, listed and OTC derivatives) compared to the levels reported at the end of the previous year.

The increase of approximately 40 billion in the credit derivatives segment, equally distribution between protection purchases and sales, was the net result of: on the one hand, the gradual increase in arbitrage strategies for specific issuers, interrelated business segments and indices, and, on the other, targeted periodic stock cuts following early termination of contracts undertaken with the aim of optimizing administrative management and reducing operational risks. Under multilateral agreements with counterparties, coordinated with an entity specialized in this type of financial service (Trioptima), over 2,500 contracts on indices, for a total notional value of 63 billion, were terminated without significant economic consequences in June. A further 1,000 contracts, for a total notional value of 26 billion, were terminated in October.

34 Report by the Board of Directors - Equity aggregates

Credit derivatives (million euro) Sector of the reference entity 31 December 2008 30 June 2008 31 December 2007 Protection Protection Protection Protection Protection Protection purchases sales purchases sales purchases sales Governments 1,718.4 2,132.4 1,420.0 1,950.5 1,202.4 1,450.0 Banking and Financials 12,417.0 11,165.0 9,926.1 9,430.3 6,054.2 6,384.1 Insurance companies 1,268.0 1,214.5 1,040.0 1,046.5 864.0 1,333.6 Corporates 3,366.6 3,261.1 3,194.1 3,663.0 1,357.7 1,146.8 Indices 27,383.8 27,290.8 14,873.6 14,588.2 16,383.9 15,809.2 Total 46,153.8 45,063.8 30,453.8 30,678.5 25,862.2 26,123.7

The growth of financial derivatives over the period was driven by FRAs, the notional values of which rose constantly over the quarters by 500 billion. These securities are used extensively to hedge against interest- rate risk for the shortest-term intervals of the curve (average holding period between three and six months). Specific arbitrage strategies also led to an increase in the notional value of listed options rates by 300 billion. The development of trading operations in the presence of specific transactions of significant extent, but also the rationale of the service (the hedging of the Group’s financial risks), were the reasons underling the increase in swaps, particularly for the rate segment, by more than 200 billion.

As already positively experienced in the context of credit derivatives, the Bank also launched a series of initiatives in the area of financial derivatives with the aim of reducing the number of contracts, with the ensuing benefits in terms of service costs and operational risks. The first results were achieved through the services offered by the Trioptima circuit mentioned above.

More significant benefits are expected of the introduction, effectivest 1 January 2009, of new methods of execution for the hedging of financial risks to the benefit of Group companies, aimed at hedging “by portfolio” and monitoring specific indicators, as opposed to the replication of individual contracts on the market. The greater flexibility offered by the new service model will serve as the starting point for further contractual termination and risk profile optimization in the coming year, including through direct renegotiation with counterparties. The following pages show the distribution by product and market of listing for the trading book, hedging transactions, and the banking book.

The following table shows the gross positive and negative fair value of off-balance sheet transactions. Futures-style contracts, the margins of which are entered directly to the total treasury balances taken as a contrary entry to the profit or loss item, are excluded from consideration.

35 Report by the Board of Directors - Equity aggregates

Measurement of off-balance sheet transactions (million euro) Positive fair value of 31.12.2008 31.12.2007 changes absolute % Derivatives on debt securities and interest rates 33,141.8 12,820.8 20,321.0 Derivatives on equity and stock indices 1,851.9 2,490.4 (638.5) -25.6 Derivatives on currencies 2,910.9 1,196.4 1,714.5 Credit derivatives 1,938.6 252.7 1,685.9 Derivatives on commodities 137.3 102.1 35.2 34.5 Forwards and covered warrants 18.2 46.1 (27.9) -60.5 Totals 39,998.7 16,908.5 23,090.2

Negative fair value of 31.12.2008 31.12.2007 changes absolute % Derivatives on debt securities and interest rates 32,303.3 13,599.4 18,703.9 Derivatives on equity and stock indices 2,094.4 2,549.5 (455.1) -17.9 Derivatives on currencies 2,698.4 1,218.3 1,480.1 Credit derivatives 1,886.3 237.0 1,649.3 Derivatives on commodities 45.9 37.1 8.8 23.7 Forwards and covered warrants 411.0 387.6 23.4 6.0 Totals 39,439.3 18,028.9 21,410.4

The increase reported in these aggregates originates in the rise in brokered volumes, in particular currencies and credit, but also witnessed a technical “acceleration” beginning in September, given that the gradual decrease in interest rates – and the ensuing widening of the spread between the rate paid and the rate col- lected on the interest swaps brokered – led to a rapid increase in fair value.

IOSCO - Table 1 Breakdown by risk category of outstanding derivatives at the end of the period - trading book (million euro)

Items 31.12.2008 30.06.2008 31.12.2007

Contracts Interest Exchange Stocks Other Totals Interest Exchange Stocks Other Totals Totals Rates Rates and Rates Rates and indexes indexes

- Unquoted 2,354,696.8 21,535.0 34,142.4 560.0 2,410,934.2 1,887,116.5 18,877.0 40,588.4 513.5 1,947,095.4 1,645,318.0

Forwards 8,273.0 2,090.0 150.0 10,513.0 5,368.3 2,461.6 667.1 8,497.0 11,626.3

FRA 564,035.0 23.0 564,058.0 233,863.5 58.7 233,922.2 59,100.3

Swaps 1,078,690.8 11,546.0 297.0 79.0 1,090,612.8 936,383.2 7,638.0 3,695.9 67.5 947,784.6 844,511.5

Swaps - Swapclear margins 228,723.0 228,723.0 236,884.0 236,884.0 254,882.7

Options purchased 225,302.0 3,984.0 10,664.4 216.0 240,166.4 223,397.0 4,453.2 10,942.1 210.8 239,003.1 200,170.8

Options sold 249,673.0 3,892.0 23,031.0 265.0 276,861.0 251,220.5 4,265.5 25,283.3 235.2 281,004.5 275,026.4

- Quoted 471,962.0 2.0 19,260.0 200.4 491,424.4 256,478.2 1.5 12,397.9 33.7 268,911.3 167,451.9

Futures purchased 67,112.0 262.0 189.0 67,563.0 55,612.0 757.1 15.5 56,384.6 48,739.8

Futures sold 29,945.0 2.0 356.0 7.0 30,310.0 47,319.6 1.5 800.4 18.2 48,139.7 46,521.1

Options purchased 213,616.0 5,502.0 3.9 219,121.9 99,941.2 1,883.9 101,825.1 47,485.0

Options sold 161,289.0 13,140.0 0.5 174,429.5 53,605.4 8,956.5 62,561.9 24,706.0

Total 2,826,658.8 21,537.0 53,402.4 760.4 2,902,358.6 2,143,594.7 18,878.5 52,986.3 547.2 2,216,006.7 1,812,769.9

36 Report by the Board of Directors - Equity aggregates

The following table shows derivatives hedging contracts of fixed-rated securities and exchange-rate risk on the equity of the subsidiary IMI Investments.

IOSCO - Table 1 Breakdown by risk category of outstanding derivatives at the end of the period - hedging portfolio (million euro) Items 31.12.2008 31.12.2007 Contracts Interest Exchange Stocks Other Totals Interest Exchan- Stocks Other Totals Rates Rates and Rates ge Rates and indexes indexes

Unquoted 9,374.0 20.0 - - 9,394.0 1,277.3 124.6 - - 1,401.9

Forwards 20.0 20.0 -

FRA - -

Swaps 3,415.0 3,415.0 1,277.3 124.6 1,401.9

Options purchased 5,959.0 5,959.0 -

Options sold - -

Quoted ------

Futures purchased - -

Futures sold - -

Options purchased - -

Options sold - -

Total 9,374.0 20.0 - - 9,394.0 1,277.3 124.6 - - 1,401.9

Lastly, in the interest of providing an overview of the trends during the two years compared, the following tables contain a quarterly presentation of the main asset and liability aggregates.

37 Report by the Board of Directors - Equity aggregates

Quarterly restated balance sheet (million euro)

Assets 31.12.2008 30.09.2008 30.06.2008 31.03.2008 31.12.2007 30.09.2007 30.06.2007 31.03.2007

1.Due to banks and to customers:

- Repurchase agreements 9,542,5 11,462,3 12,165,2 16,568,2 16,189,5 16,170,5 18,411,8 20,191,2

- Securities lending 224,5 173,3 271,4 473,7 422,3 682,3 1,276,2 1,379,7

- Fixed income securities 640,7 721,2 ------

- Collateral deposited 1,769,9 604,0 923,0 691,6 744,9 1,193,1 1,585,9 1,543,9

- Interbank and other accounts 19,700,8 12,961,6 10,118,1 7,100,1 6,054,4 3,511,7 3,562,6 3,546,6

2. Held for trading assets

- Fixed income securities 7,708,3 7,914,7 9,673,4 8,525,8 7,428,2 9,370,9 15,267,1 14,607,6

- Stocks and quotas 966,0 5,100,5 5,807,1 4,965,6 7,316,4 7,726,7 8,809,1 8,604,6 - Positive valuation of off-balance 40,360,2 20,830,6 22,517,2 19,114,0 16,931,2 19,427,3 20,612,0 18,484,4 sheet transactions 3. Other assets - Property, equipment and intangible assets 1,5 1,6 1,8 2,0 2,1 3,3 3,7 8,1

- Assets available for sale 276,8 40,6 127,0 127,9 283,7 298,8 272,5 248,4

- Other asset items 506,2 632,9 687,8 806,4 861,5 576,3 497,7 323,4

Total Assets 81,697,4 60,443,3 62,292,0 58,375,3 56,234,2 58,960,9 70,298,6 68,937,9

(million euro)

Derivative contracts 31.12.2008 30.09.2008 30.06.2008 31.03.2008 31.12.2007 30.09.2007 30.06.2007 31.03.2007

Financial (notional amount) 2.911.752,6 2.480.815,2 2.221.763,6 1.897.946,6 1.814.171,8 1.803.440,2 1.955.709,0 1.883.150,3

Credit (notional amount) 91.217,6 90.427,8 61.132,3 84.289,9 51.985,9 31.862,4 18.219,0 15.071,6

Note: pro forma figures for the quater prior to as at 31 December 2007.

Quarterly rested balance sheet (million euro)

Liabilities 31.12.2008 30.09.2008 30.06.2008 31.03.2008 31.12.2007 30.09.2007 30.06.2007 31.03.2007

1. Loans to customers and due from banks:

- Repurchase agreements 8.324,2 11.792,7 12.581,6 14.521,6 15.104,8 14.202,7 20.357,4 23.541,1

- Securities lending 259,1 549,8 571,2 759,6 534,9 690,4 1.416,2 1.452,9

- Collateral received 2.732,9 1.820,2 1.890,6 1.537,0 1.424,0 1.799,6 2.082,3 1.677,1

- Liability loans 1.560,6 2.477,6 3.769,7 3.661,2 5.079,7 3.659,6 7.154,2 4.443,0 - Checking accounts and other accounts 3.504,3 3.083,3 4.030,5 3.275,0 3.142,5 6.045,4 4.579,8 5.500,7 2. Held for trading assets - Negative valuation of off-balance sheet transactions 39.658,0 20.746,6 22.822,9 19.426,3 18.099,4 20.346,1 21.666,9 18.670,6 - Short selling 1.754,4 2.708,3 2.619,4 3.750,8 3.217,2 4.362,8 5.546,1 5.896,8 3. Issues - subordinate 165,1 218,0 215,1 695,0 695,4 695,0 695,8 845,0 - other 21.536,2 15.033,4 11.864,1 8.820,5 6.896,7 5.213,7 4.959,6 5.033,8 4. Vehicle funds 24,0 22,5 22,2 19,8 28,5 34,2 33,1 27,5

5. Other liability items 390,5 321,5 266,7 354,3 513,6 432,4 395,0 485,9

6. Shareholders' equity

- Share capital and reserves 1.494,7 1.498,3 1.498,3 1.497,5 1.286,8 1.269,2 1.302,0 1.302,0

- Net income 293,4 171,1 139,7 56,7 210,7 209,8 110,2 61,5

Total Liabilities 81.697,4 60.443,3 62.292,0 58.375,3 56.234,2 58.960,9 70.298,6 68.937,9

Note: pro forma figures for the quater prior to as at 31 December 2007.

38 Equity investments and holdings

Banca IMI’s operating desks in Milan are accompanied by its foreign subsidiaries in London and Athens. The perimeter is completed by the companies in the Grand Duchy of Luxembourg and the United States, which are specialized in Investment Banking and Capital Markets, respectively.

IMI Investments S.A. The company, which prepares its financial statements in USD, serves as a pure financial holding company and holds investments in IMI Finance and the IMI Securities Group. During the year it turned a profit of 7 million Euro (9.8 million USD), up sharply on the previous year (0.5 million USD). This result was primarily driven by the dividends paid by subsidiaries (8.6 million USD), but also by the doubled interest margin (a net 1.8 million dollars, compared to 0.9 million USD in 2007).

In the strategic framework of a more rational distribution of capital to the various operating units, share capital was decreased from 150 to 30 million USD. Of this sum, 100 million dollars originated from the share capital decrease by IMI Securities.

IMI Finance Luxembourg In 2006 the company played a leading role in the acquisition of Wind by the Weather Capital Group. In 2008, in addition to managing the above investment, the company participated in the provision of a mezzanine facility loan to Euro Motors S.a.r.l. in the broader context of the Ducati public-takeover bid.

The company reported revenues of 20.6 million in 2008, down from 22 million at 31 December 2007. The decrease is substantially attributable to lesser commission revenues (which fell from 4.6 to 2.5 million). The general increase in the levels of credit risk on the market led to more conservative portfolio value adjustments, which rose from 1.4 to 5 million. The overall trend led to net profit of the year, after 4.6 million in taxes (-25% compared to 31 December 2007), of 11.2 million, down from 14.3 million in the previous year.

Banca IMI Securities Corp. - IMI Capital Markets USA In 2008 Banca IMI Securities Corp. reported a net profit of 3.8 million dollars (according to IFRS), down sharply on the previous year (12.6 million USD). The decrease in profitability is attributable to the decline in brokerage commissions on equity markets, but was also affected by the lesser return on free capital arising from the strategic decision to reduce share capital (100 million USD) during the year, in addition to the marked decrease in interest rates.

Securities lending operations generated 8.4 million USD in revenues, down slightly (-13%) compared to the previous year. The company is currently engaged in an initiative in this segment that aims to extend operations in the ETF product in 2009.

Revenues on brokerage on U.S. and European equities markets came to 3.6 million USD, also down on the previous year due to the significant decrease in volumes reported in 2008, whereas the revenues generated by the sale of fixed-income securities to U.S. investors were on the rise. Origination operations on the primary market with U.S. issuers also showed significant development, resulting in revenues of 2.3 million USD.

Total administrative expenses came to 9.3 million USD, down (-4%) on the previous year, primarily due to the optimization of logistics and lower lease costs.

39 Report by the Board of Directors - Equity investments and holdings

The following table shows the highlights of earnings on products in the Banca IMI perimeter at 31 December 2008.

BANCA IMI and subsidiaries (million euro) Company Currency Net Change December 2008 December 2007 result rate Net result Share Net result Share Eur % Eur % BANCA IMI Eur 293.4 1.0000 293.4 95.20 210.7 89.60 IMI Investments Usd 1.2 1.3917 0.9 0.28 0.3 0.13 IMI Finance Eur 11.2 1.0000 11.2 3.63 14.3 6.08 IMI Capital Usd 0.0 1.3917 0.0 0.00 0.0 0.00 IMI Securities Usd 3.8 1.3917 2.7 0.89 9.8 4.19 Total 308,2 235,1 Note: The results of IMI Investments have been adjusted to exclude the dividends distributed by the subsidiary IMI Finance.

Equity investments also include the 50% stake in TLX S.p.A., the company that manages the regulated market of the same name and the EuroTLX multilateral trading system. The company’s mission is to offer securities markets and services to banks in order to best satisfy the needs of non-professional investors, thereby creating new secondary-market opportunities. The company aims to build a group of primary operators around the markets it manages in order to share the benefits of the services offered while at the same time fully sharing the costs of said services. Accordingly, a non-profit form of operation was chosen, which results in TLX breaking even on its statement of income. Consequently, in this Report it was decided to adjust the carrying value of the investment to the interest in book shareholders’ equity. The investment in Consorzio Studi e Ricerche Fiscali allows Banca IMI access to qualified tax and corpo- rate advisory services. The following equities were included among available-for-sale assets at the end of 2008: (million euro) Available for Sale investments % Held Original Revaluation Book value investment LCH.Clearnet Group Ltd 1.09 2.3 6.4 8.7 SIA - SSB 1.39 1.0 5.6 6.6 Chicago Mercantile Exchange 0.01 0.0 0.6 0.6 Pro.MAC 5.20 0.3 0.0 0.3 Total 3.6 12.6 16.2

The Bank is pursuing a strategy of maximizing economic value and increasing its liquidity for these investments. In this regard, the Bank disposed of the equity investments in LSGE and MTS during the year and remains interested in disposing of SIA-SSB in the broader context of the redefinition of the latter’s ownership structure. As regards the remaining market-companies, on 22 October LCH.Clearnet Group (LCH) and Depository Trust & Clearing Corporation (DTCC) disclosed the reaching of a non-binding agreement for a merger of the two entities with the aim of creating the world’s leading player in the clearing services industry. In this context, LCH’s shareholders will be offered the possibility of delivering the shares they hold to the buyer, DTCC, in exchange for a composite package still subject to definition based on the valuation of the shares at 10 euro, which price corresponds to that registered in the recent buy-back undertaken by LCH on its own shares. The transaction, which is subject to due diligence, is scheduled to be submit before LCH’s shareholders for the appropriate resolutions in the first quarter of 2009. On the basis of the information available at the date of this Report, DTCC’s bid (the general features of which have been approved by LCH’s primary shareholder, Euroclear) will include newly issued DTCC shares, shares of the newco devoted to the project, and extraordinary dividends paid by LCH. Assessments of the bid, once determined, will be coordinated with the Parent Company with the aim of creating further value for shareholders. 40 Report by the Board of Directors - Equity investments and holdings Shareholders’ equity

Shareholders’ equity came to approximately 1.8 billion at year-end. The changes since 31 December 2006 are shown below:

Trends in Shareholders’ equity (million euro) Share Surcharge Reserves Fair Value Profits Total net capital on shares and profits Reserves worth to be allocated Shareholders’ equity as of 31 December 2006 662.4 131.3 410.6 91.9 195.8 1,492.0 Results of the previous accounting period 67.1 (195.8) (128.7) London Stock Exchange tender offer (77.3) (77.3) Fair value for AFS investments 0.8 0.8 Profit (loss) for the period 210.7 210.7 Shareholders’ equity as of 31 December 2007 662.4 131.3 477.7 15.4 210.7 1,497.5 Results of the previous accounting period 210.7 (210.7) 0.0 Fair value for AFS investments 1.1 1.1 MTS S.p.A. losses (3.9) (3.9) Profit (loss) for the period 293.4 293.4 Shareholders’ equity as of 31 December 2008 662.4 131.3 688.4 12.6 293.4 1,788.1

The item “Reserves and profits to be allocated” includes the amount of 180 million covering the trading of Intesa Sanpaolo securities. Said reserve, approved by the Shareholders’ Meeting on 9 April 2008, is valid for a period of 18 months and for a maximum number of 30,000,000 shares.

The goal of the buy-back program is to satisfy financial risk hedging needs arising from the Bank’s normal operations and to satisfy any operational needs of a technical nature that require the use of the proprietary account in the presence of limited- or zero-risk positions. In this regard, the Bank, in collaboration with Intesa Sanpaolo’s Audit and Compliance departments, has drafted a specific protocol that governs the purchases of securities and identifies the units authorized, process owners, and operational methods to be employed.

Movement of Intesa Sanpaolo shares - trading activity

Securities Initial Purchases Sales Valuation Final

Amount Value Amount Value Amount Value Amount Amount Value (n. shares) (in euro) (n. shares) (in euro) (n. shares) (in euro) (n. shares) (n. shares) (in euro)

Ordinary shares 5,838,831 31,588,076 12,395,977 44,158,002 17,550,192 66,982,913 182,965 684,616 1,737,213

Savings shares 0 0 8,000 38,950 8,000 39,438 0 0 0

The bank’s capitalization level showed a total ratio of 12.2% at 31 December 2008. This percentage was determined, both at year-end and in the previous quarters of 2008, in accordance with the contribution to the Group’s consolidated accounts, i.e. by weighting risk assets at the standard 8% coefficient and without taking account of the one-fourth reduction in prudential requirements. The figure at 31 December 2007 is therefore not homogeneous inasmuch as it was determined according to the provisions of previous legislation. In addition, we report that the new Basel 2 scenario privileges an approach to regulatory capital requirements based on compliance with overall requirements, as opposed to a coefficient-based system.

41 The decrease with respect to the corresponding percent indicator in June and September 2008 is a consequence, first and foremost, of the trend in regulatory capital, marked by the redemption of the tier 3 subordinated loan in the amount of 50 million and the proposal to allocate part of the net profit (132 million) to dividends. Partially offsetting the above, there was a more moderate incidence of items to be deducted (subordinated bank assets and equity interests in lenders other than those acquired in market-making operations), resulting in a substantial break-even on regulatory capital of the fair value option capital gains related to Banca IMI’s creditworthiness.

The expansion of the capital surplus since the end of 2007 is attributable to the extension of the internal market-risk model of the former Banca Caboto to the trading perimeter of the former Banca d’Intermediazione Mobiliare IMI. In further detail, Provision no. 743789 of the Bank of Italy of 9 July 2008 governs the generic risk on debt securities, the generic and specific risk on equities, and position risk on UCITS shares in connection with CPPI products only.

Considering the briefer period of observation available for regulatory back-testing subsequent to the merger, an additional increase was included in the determination of requirements. This increase began to fall in March 2008 (value of 1) and continued to fall through December 2008 (value of 0).

42 Report by the Board of Directors - Shareholders’ equity

Total capital and capital ratios (million euro) Total Capital and 31.12.2008 30.09.2008 30.06.2008 31.03.2008 31.12.2007 Capital Ratios Regulatory capital Tier 1 Capital 1,535.6 1,596.5 1,631.2 1,412.5 1,393.3 Tier 2 Capital 163.7 149.0 167.4 105.0 85.5 Tier 3 Capital 0.0 50.0 50.0 255.3 530.0 Total equity 1,699.3 1,795.5 1,848.6 1,772.8 2,008.8 3rd level subordinate loans - not accountable 0.0 0.0 0.0 274.7 0.0 Capital requirements Credit and counterparty risks 539.6 523.5 454.3 508.3 463.8 Market risks: specific risk debt securities 294.8 293.9 263.3 325.6 213.7 Market risks: generic debt risk securities (*) 0.0 0.0 0.0 0.0 253.4 Market risks: specific and generic risk capital securities (*) 0.0 0.0 0.0 0.0 268.4 Market risks: concentration risk 3.2 6.0 0.0 3.8 26.7 Market risks: UCITS position risk (*) 14.8 25.2 25.0 11.4 507.6 Market risks: internal model 100.9 72.4 95.3 94.2 51.0 Market risks: other 55.9 35.4 36.2 41.7 44.1 Operational risks 114.5 96.8 96.8 96.8 0.0 25% discount for internal banks (280.9) (263.3) (242.7) (270.5) Total capital requirements 842.8 789.9 728.2 811.3 1,828.7 Risk weighted assets 13,990.5 13,112.3 12,088.1 13,467.6 26,150.4 Capital ratios Tier 1/Total risk-weighted assets 10.98% 12.18% 13.49% 10.49% 5.33% Total equity/Total risk-weighted assets 12.15% 13.69% 15.29% 13.16% 7.68% Excess capital 856.5 1,005.6 1,120.4 961.5 180.1

(*) Scope extension of the internal model.

At year-end there was a further increase in prudential requirements, with a particular focus on the “credit and counterparty” component, primarily due to the expansion of risk assets in the structured finance and credit derivatives segment.

Financial market volatility resulted in an increase in the requirements for the internal model, although in the fourth quarter of 2008 this aggregate had ceased to be penalized by the increases mentioned above, and there was an increase in absorption due to position risk on goods.

The growth of the net interest and other banking income in the three-year period 2006-2008 is the cause underlying the increase in the operational risk requirement, which continued to be calculated using the standardized method in 2008.

43 Report by the Board of Directors - Shareholders’ equity Operations support and organizational change

The first half of 2008 was characterized by the second phase of the IT integration process between the former Banca Caboto and the former Banca d’Intermediazione Mobiliare IMI, which calls for convergence towards a single target platform for front-office and position-keeping systems.

The first migration lots for credit derivatives, forex, rate derivatives and bonds began to be completed in January. The migration of the operating desks in the Milan office was completed in May. In further detail, the inflation desk was equipped with an interface with the proprietary platform specifically devoted to the pricing of this type of product.

In the second half of the year, activities involved the migration of the books of Equity Structured Derivatives and CPPI managed by the London branch in the context of the disposal of the previous Kondor system, and the concurrent activation of new interface methods with the risk management systems. The entire process was completed in December.

Remaining on the topic of IT, the process of integrating the administrative, accounting and reporting systems into the Intesa Sanpaolo Group’s new target system (the Innesto DOF project) was completed in November. This project, which lasted six months, was part of a larger program to ensure IT redundancy for Group entities.

The organizational units of Banca IMI most directly affected were Administration and Loan Department, which, prior to the Parent Company migration in the finance area, witnessed the successful completion of historical data and the inception of the use of new applications for general accounting, and for regulatory reporting risk.

Over the summer, in the context of the gradual completion of the main strategic projects arising from the completed merger of Banca Intesa and Sanpaolo IMI, the Parent Company defined a series oforganizational changes aimed at strengthening the control system, rationalizing and simplifying the governance structure, and simultaneously bringing the model into line with international best practice.

In this context, the powers and responsibilities of the Finance Operations Department were separated and redistributed to other entities within Intesa Sanpaolo.

In further detail, whereas planning and control functions were kept within the Corporate and Investment Banking Division, more specifically operational entities (support, post-trading and administration) were transferred into the Operational Services Department, while more specifically IT and technical entities were transferred into the Information Systems Department.

This transition did not result in any discontinuity in the level of service provided to Banca IMI, nor did it have any impact on previously planned projects.

The IMI-Caboto integration, the changes imposed by the law, the development of business processes and the reorganization commented upon above represent a complex, constantly changing environment for Banca IMI. In this regard, the adoption of an organizational model at the service of business needs and the capacity to monitor and govern internal processes or process in service at Group entities is of strategic importance to the Company.

To this end, Banca IMI, with the support of the Corporate and Investment Banking Division and the Operational Services Department, has launched a project to revise its organizational model, scheduled for conclusion in the first half of 2009, with the aim of rationalizing front-to-bank operating process and consolidating the map of organizational processes both for Banca IMI and the Finance Operations Service and Operational Services Department.

The logistical placement of several operational desks in the Capital Markets area was analyzed and revised to accord with the Bank’s policies and strategic development with a view towards strengthening risk control and governance. In further detail, the reorganization of the Emerging Markets & New Europe and Structured

44 Equity & Financing desks at the London branch, the activities of which have already been transferred to previously existing or newly established desks at the Milan branch, was completed in February.

On 4 June 2008 Banca IMI’s Board of Directors approved the Guidelines for administrative and financial governance aimed at implementing Law No. 262/2005. In particular, the position of Manager responsable for preparing the Company’s financial reports documents was established. This figure is responsible for ensuring the truthful and accurate representation of the Bank’s financial position and earnings.

We report that, pursuant to Legislative Decree No. 196 of 30 June 2003 – the Privacy Code, the Security Plan, which contains the minimum security measures to be implemented for data processing, was updated and drafted.

Research and development of new securities is subject to the prior approval of the New Products Committee, an entity charged with supervising and managing initiatives aimed at developing new products and/or processes.

The New Products Committee monitors the progress of work, verifies divergences from plans, and is responsible for the approval and closure of projects. The execution of these projects also calls for the involvement of the Financial Engineering team. In 2008 this team underwent organizational consolidation with the aim of centralizing the development of financial forms.

The primary activities for the year involved: – the revision of valuation models for interest rates. The extraordinary market conditions, including very high volatility levels, required work to adapt and strengthen current models in order to be suited to more extreme conditions; – the development of forms for credit risk. Pressure on the credit market required an enhancement of forms for the assessment of counterparty and liquidity risk; – the consolidation of equity forms and the completion of migration to target systems for the management of the risk associated with structured products; – the optimization of calculation performances of proprietary libraries for the valuation of trading books on the basis of the most recent parallel-calculation technology.

45 Report by the Board of Directors - Operations support and organizational change Human resources

At 31 December 2008 employees on the payroll came to 538 (586 at 31 December 2007), of which 62 were executives (63), 234 middle managers (249), and 242 belonged to the remaining professional categories (274).

Employees, including staff members on full secondment, are summarized below. The comparison with the situation at 30 September 2007 aims to highlight the trend following the merger. This latter aggregate was already stated net of the personnel transferred to the previously existing Finance Operations Department at Intesa Sanpaolo effective 1 October 2007.

Number of employees 31.12.2008 31.12.2007 30.09.2007 changes 12.2007 09.2007 Registered employees 538 586 607 (48) (69) Seconded from other companies and expatriates 2 15 37 (13) (35) Seconded to other companies and expatriates (9) (63) (13) 54 4 Total dedicated resources 531 538 631 (7) (100) of which: Italian subsidiaries 482 491 580 (9) (98) of which: Branch abroad 49 47 51 2 (2)

Partial secondments to and from the Bank (103 and 23 resources, respectively) were also ordered in the framework of integration with the Investment Banking units of the Parent Company. The following table shows the resources that effectively fall within the perimeter.

Effective resources 31.12.2008 31.12.2007 30.09.2007 changes 12.2007 09.2007 Registered employees (*) 538 586 607 (48) (69) Net seconded from Investment Banking (**) 40 56 0 (16) 40 Net seconded from others (*) (7) (48) 24 41 (31) Total dedicated resources 571 594 631 (23) (60)

(*) The value as at September 30 2007 has been cleaned of all resources brought in the branch “Operations”. (**) Conventionally considered at 50%.

The following table shows statistical distributions at year-end:

Breakdown by age group of personnel booked in the payroll register

Age Total < 30 30-40 41-50 > 50 Women 18 90 59 11 178 Men 44 137 153 26 360 Total 2008 62 227 212 37 538

Incidence 11.52% 42.19% 39.41% 6.88% Total 2007 54 301 195 36 586 Incidence 9.22% 51.37% 33.28% 6.13%

46 Average age of employees

Professional area Average age 2008 Average age 2007 Capital Market 38.2 38.1 Investment Banking 38.5 39.5 Staff 42.0 40.8 Deployments out 42.1 39.4 Average Banca IMI 39.1 39.0

A variety of training initiatives were undertaken during the year. These activities, which were of a technical and regulatory nature and involved developing the potential of resources, were undertaken by agreement with the Training Service of the Corporate and Investment Banking Division. Execution involved the accompaniment of the traditional classroom session with remote training over an e-learning platform.

Activities had a positive effect on most of the population and consisted of over 1,270 man-hours of training (including remote training). The following initiatives are particularly worthy of mention: – Teambuilding, an initiative aimed at the heads of the Capital Markets and Staff units with the goal of developing team spirit within the group and fostering mutual knowledge to create a climate of trust between people. – Coaching, involving individual processes for the Bank’s managers. – Operational risk management, a training course aimed at Operational Risk Management staff in accordance with the provisions of the specific Regulations implementing the Parent Company Guidelines for the governance of operational risks. – Innesto DOF, a training project aimed at supporting users during the transition to new applications and directed towards the entire population involved in the migration to the Group’s target system; at Banca IMI, the Administration and Loan Department units were affected. – Legislative Decree No. 231/2001, Prevention of Money Laundering and Market Abuse, training projects aimed at resources in all Capital Markets and Advisory & Primary Markets areas within Investment Banking. In 22 sessions, 338 resources were updated on recent changes to the Italian legal system, with a particular focus on issues with an impact on the specific activities of the cited business areas. – Compliance: sanctions and embargos, a training program directed towards all those who act on behalf of clients in transactions with foreign parties focused on the U.S. and European legislation governing the prevention of money laundering and the financing of terrorism, with a particular emphasis on current sanctions and embargos. – Synthetic Equity Derivatives, a “customized” advanced technical course targeted at resources at the Equity area of the Risk Trading unit, held in Milan and conducted by a specialized London-based firm. – English language, evening courses for various skills levels and the positive conclusion of the no borders project. The latter, launched in 2007, was created “to order” for the Corporate & Investment Banking Division and was aimed at intermediate and advanced language skill levels.

The Bank also participated in various Group initiatives: Leadership Development, Excellence, the Assessment Center for the evaluation of managerial potential, and training programs devoted to recently hired employees under placement contracts.

47 Report by the Board of Directors - Human resources Management and coordination by Intesa Sanpaolo

The Group’s single governance system, summarized in the Regulations issued on 17 October 2007, is guaranteed by the guidance, governance and support provided by the competent departments of Intesa Sanpaolo. Said Regulations aim to govern the institutional conditions of the Group’s operations and the relationships between the Companies that comprise it, entailing powers and obligations consistent with the predetermined growth and development guidelines and objectives.

The institutional conditions of the Intesa Sanpaolo Group’s operation and intergroup dealings, in accordance with the provisions of supervisory regulations, aim to (i) ensure high levels of integration consistent with the achievement of a shared strategic plan, with a view towards maximizing value and in accordance with the legal autonomy and proper management of the individual companies and (ii) optimize the synergies arising from membership in the Group by exploiting the various entities’ characteristics.

The Intesa Sanpaolo Group, which is organized according to a division scheme, is structured as follows: – Business units, to which all of the Group’s clients have been assigned, according to a precise, explicit segmentation process; – Central Departments and Staff Units, which have specific guidance and control responsibilities, corresponding to precise missions and functional characteristics.

Unitary operational management of the Group is ensured by the Chief Executive Officer within the context of the strategic guidelines laid down by the Supervisory Board and Executive Board, under the supervision of said Boards and their Chairmen.

In accordance with applicable provisions of law, Intesa Sanpaolo, in its capacity of Parent Company of the Banking Group of the same name, issues provisions to Group members, including as regards the implementation of instructions from the Bank of Italy. Banking Group companies are required to comply with said provisions.

The Parent Company also verifies the compliance of individual members of the Banking Group with provisions issued by the Bank of Italy in order to ensure the observance of rules concerning disclosure and regulatory supervision, without prejudice to the responsibilities of the boards of the subsidiaries towards ensuring the accuracy of information flows, the adequacy of generation procedures, and the control of the data provided.

48 Relation with Group companies

For the purposes of the information provided below, Intesa Sanpaolo Group companies are defined as those belonging to the banking group as established by Legislative Decree No. 385 of 1 September 1993.

Dealings between the various companies aim solely to maximize synergies and savings and are settled at arm’s-length conditions that reflect market performance.

The asset and liability figures at year-end may be summarized as follows:

Assets and liabilities with Group Companies (million euro) Captions Parent Banca IMI Intesa Sanpaolo subsidiaries subsidiaries Due to banks and to customers 17,653.7 166.1 148.0 Due from banks and loan to customers 4,607.0 - 831.7 Financial assets - debt securities 982.7 - 226.2 Financial liabilities - securities 8,594.6 Financial derivatives (notional amount) 157,789.2 - 76,715.9 Credit derivatives (notional amount) 313.7 - 23.1

Relations with the Parent Company relate primarily to financial transactions, as detailed in the following table:

Relations with Intesa Sanpaolo as at 31 December 2008 (million euro) Assets Amount Liabilities Amount Checking accounts 9.4 Checking accounts 2,862.8 Deposits 17,358.6 Deposits 1,571.7 Repurchase agreements 247.6 Repurchase agreements 118.7 Securities lending - Securities lending - Invoices and other payables 38.1 Invoices and other payables 53.8 Fixed income securities 982.7 Subordinate liabilities and securities issued 8,594.6 Total assets 18,636.4 Total liabilities 13,201.6

Cost and income dealings during the year are summarized below:

Costs and incomes with Intesa Sanpaolo Group Companies (million euro) Captions Parent Banca IMI Intesa Sanpaolo subsidiaries subsidiaries Interest income 479,5 10,3 14,4 Fee and commission income 52,4 0,0 21,0 Interest expenses (266,9) 0,0 (4,0) Commissions expenses (173,6) (3,0) (60,8) Administrative expenses and recovered amounts (108,2) 0,0 0,2

49 Business outlook

In 2009 there will be a sharp decline in economic growth in all industrialized nations and a brusque slowdown in production in most emerging countries. World GDP growth expectations are negative for the first time in many years.

The deterioration of economic conditions will continue to be affected by the international financial system’s difficulties in adjusting following on the most acute phase of the crisis in late 2008 and early 2009 and the severe uncertainty still present in the system may lead companies to postpone investments and families to increase their propensity to save, where possible.

In a scenario of strong aversion to risk, financing for the real economy through capital markets will remain difficult and pressure on the banking system will increase as the latter is strained by a deleveraging process that may no longer be deferred and the need to increase its capital levels.

The adjustment process will not be feasible in the near term. In conclusion, 2009 is shaping up to be a year of transition towards new equilibriums which generally seem to be characterized by higher capital levels for banks and companies and lower indebtedness for businesses. More moderate levels of economic growth than prior to the outbreak of the financial crisis are expected in the medium term.

In this scenario, although Banca IMI benefits from excellent positioning for seizing opportunities created by price dislocation in terms of liquidity, capitalization and commercial penetration ability, it may not be excluded that 2009 earnings will fall short of the projections contained in the plan.

Promotion of the Banca IMI brand as an issuer of debt securities (plain-vanilla and equity-linked) continued in the first few months of 2009 through new placements of over 11 billion in January and February.

The planned transfer of the structured finance business unit represents the Bank’s primary commitment for the first half of the year. This transfer will involve all business and staff functions, along with the departments of the Parent Bank that provide operational support, at both the Milan office and the London branch.

The business unit’s expected profitability will have an impact on the statement of income in the second half of the year.

50 Proposals to the Shareholders’ Meeting

Shareholders,

We hereby submit for your approval the Annual Report for the year 1 January – 31 December 2008, which consists of the balance sheet, the statement of income, statement of changes in shareholders’ equity, the statement of cash flows, and the notes, accompanied by this Report on Operations.

In further detail, we submit for your approval the following changes to the valuation reserves for available- for-sale assets: – a decrease of 3,929,627 arising from the disposal to the Parent Company of the interest in the firm MTS; – increases of 1,616,863 and 677,391 due to the fair value measurement of the interest in the firm LCH Clearnet and the portfolio of debt securities, respectively; – a decrease of 1,109,852 due to the fair value measurement of the equity interest in the firm CME Holdings.

We propose that the net profit of the year, 293,357,981, be allocated as specified below: – the amount of 14,668,000 to the legal reserve; – a dividend of 0.20 Euro per each of the 662,464,000 shares, for a total of 132,492,800; – the amount of 98,728,553 to the unavailable reserve; – the extraordinary reserve for the residual amount, 47,468,628.

In accordance with the provisions of article 6 of Legislative Decree No. 38/05, the sum of 98,728,553, the equivalent of the capital gains recognized on the statement of income, net of the associated tax expenses, which arose from the application of fair value to financial liabilities, is not subject to distribution. In the interest of strengthening the Company’s capitalization, the proposal for distribution calls for the allocation of the additional sum of 47,468,628 to the extraordinary reserve.

If the Annual Report and the proposed allocation of net profit are approved, the Shareholder’s equity of Banca IMI S.p.A. at the date of approval of this Report would be as follows: (euro) Share capital 662,464,000 Issue surcharges 131,259,962 Legal reserve 95,410,300 Unavailable reserve under article 6 of Legislative decree 38/05 98,728,553 Emergency fund 485,302,589 Legal reserve for the purchase of shares in the Parent Company (2359-bis of the Italian Civil Code) 180,000,000 Other reserves (profits and revaluation) 2,423,800 Total 1,655,589,204

The Board of Directors

Milan, 16 March 2009

51

Certification by the Manager responsable for preparing the Company’s Financial Reports

53 CERTIFICATION OF BANCA IMI’S FINANCIAL STATEMENTS PURSUANT TO ART. 154 BIS OF LEG. DECREE 58/1998

1. The undersigned Gaetano Miccichè (as Managing Director) and Angelo Bonfatti (as Manager responsible for preparing the Company’s financial reports) of Banca IMI, taking into account the provisions of Article 154-bis, par. 3 and 4 of Legislative Decree 58 of 24 February 1998, do hereby certify to: – the adequacy in relation to the Company’s features and – the actual application of the administrative and accounting procedures employed to draw up Banca IMI’s financial statements during the year 2008.

2. Verification of the appropriateness and effective application of the administrative and accounting procedures employed to draw up Banca IMI’s financial statements as at 31 December 2008 was performed in the context of the reorganisation of corporate processes and integration of operations after the merger between former Banca Caboto and Banca d’Intermediazione Mobiliare IMI, in a wider framework of IT systems integrations of the Intesa Sanpaolo Group of Companies. The assessment was based on methods defined by the Group consistently with the COSO and – as to the IT component – COBIT models, which are internationally accepted frameworks for internal control systems1.

3. The undersigned also certify that: 3.1 Banca IMI’s financial statements as at 31 December 2008: – have been prepared in compliance with applicable International Accounting Standards recognised by the European Community pursuant to European Parliament and Council Regulation 1606/2002 of 19 July 2002; – correspond to the results of the books and accounts; – have been prepared in compliance with Legislative Decree 38/2005 and, to the extent applicable, with Legislative Decree 87/1992, as well as with the implementing rules on the preparation of accounts issued by Banca d’Italia and with the rules issued by Consob for listed issuers companies; – give a true and fair presentation of the assets, liabilities, profit or loss and financial position of the issuer.

3.2 The report on operations includes a fair review of the development and operatin margin as well as of the position of the issuer, together with a description of the main risks and uncertainties.

Milan, march 16th, 2009

Gaetano Miccichè Angelo Bonfatti Managing Director Manager responsible for preparing the Company’s financial reports

1 The COSO Framework was prepared by the Committee of Sponsoring Organizations of the Treadway Commission, the U.S. organisation dedicated to improving the quality of financial reporting through ethical standards and effective system for corporate governance and organisation. The COBIT Framework - Control Objectives for IT and related technology is a set of rules prepared by the IT Governance Institute, the U.S. organisation whose aim is to define and improve the standards of corporate IT. 54 Report of the Independent Auditor

55

Report of the Board of Statutory Auditors

59 60 61 62 Financial statements of Banca IMI

63 Financial statements of Banca IMI

Balance sheet (amounts in euro) Assets 31.12.2008 31.12.2007 Changes absolute % 10. Cash and cash equivalent 3,785 5,727 -1,942 -33.9 20. Financial assets held for trading 48,672,950,826 31,653,111,394 17,019,839,432 53.8 40. Financial assets available for sale 252,807,067 175,896,477 76,910,590 43.7 60. Due from banks 26,409,181,324 19,103,758,456 7,305,422,868 38.2 70. Loan to customers 5,469,249,542 4,307,298,660 1,161,950,882 27.0 80. Hedging derivatives 361,545,004 22,689,466 338,855,538 100. Equity investments 24,008,898 107,805,752 -83,796,854 -77.7 110. Property and equipment 1,253,996 1,523,972 -269,976 -17.7 120. Intangible assets 205,823 587,701 -381,878 -65.0 130. Tax assets 137,372,795 165,781,744 -28,408,949 -17.1 a) current 105,219,454 97,866,631 7,352,823 7.5 b) deferred 32,153,341 67,915,113 -35,761,772 -52.7 150. Other assets 368,795,257 695,739,564 -326,944,307 -47.0

Total Assets 81,697,374,317 56,234,198,913 25,463,175,404 45.3

64 Financial statements of Banca IMI

(amounts in euro) Liabilities and shareholders’ equity 31.12.2008 31.12.2007 Changes absolute % 10. Due to banks 13,204,203,182 22,122,812,421 -8,918,609,239 -40.3 20. Due to customers 3,176,903,808 3,163,121,756 13,782,052 0.4 30. Securities issued 17,823,245,069 3,378,145,208 14,445,099,861 40. Financial liabilities held for trading 41,193,685,558 21,246,087,534 19,947,598,024 93.9 50. Financial liabilities designated at fair value through profit and loss 3,878,144,017 4,213,969,631 -335,825,614 -8.0 60. Hedging derivatives 218,735,625 70,519,131 148,216,494 80. Tax liabilities 196,067,220 137,373,737 58,693,483 42.7 a) current 194,309,522 108,289,029 86,020,493 79.4 b) deferred 1,757,698 29,084,708 -27,327,010 -94.0 100. Other liabilities 194,343,882 380,274,158 -185,930,276 -48.9 110. Employee termination indemnities 7,160,393 8,545,626 -1,385,233 -16.2 120. Allowances for risks and charges 16,803,559 15,880,463 923,096 5.8 b) other allowances 16,803,559 15,880,463 923,096 5.8 130. Valuation reserves 12,612,820 15,358,045 -2,745,225 -17.9 160. Reserves 688,387,241 477,706,011 210,681,230 44.1 170. Share premium reserve 131,259,962 131,259,962 0 0.0 180. Share capital 662,464,000 662,464,000 0 0.0 200. Net income (loss) 293,357,981 210,681,230 82,676,751 39.2

Total liabilities and Shareholders’ Equity 81.697.374.317 56.234.198.913 25.463.175.404 45,3

65 Financial statements of Banca IMI

Income Statement (amounts in euro) Items 2008 2007 Changes absolute % 10. Interest and similar income 1,491,289,216 1,328,389,501 162,899,715 12.3 20. Interest and similar expense (1,316,770,566) (1,412,672,962) 95,902,396 6.8 30. Interest margin 174,518,650 (84,283,461) 258,802,111 40. Fee and commission income 400,620,009 385,887,140 14,732,869 3.8 50. Fee and commission expense (278,134,376) (310,376,226) 32,241,850 10.4 60. Net fee and commission income 122,485,633 75,510,914 46,974,719 62.2 70. Dividend and similar income 415,353,809 291,917,483 123,436,326 42.3 80. Profits (Losses) on trading (64,188,877) 225,643,809 (289,832,686) 90. Fair value adjustments in hedge accounting (38,595,366) (63,364) 38,532,002 100. Profits (Losses) on disposal or repurchase of 5,308,058 126,806,679 (121,498,621) -95.8 a) loans 0 0 0 b) financial assets available for sale 4,189,037 126,806,679 (122,617,642) -96.7 c) investments held to maturity 0 0 0 d) financial liabilities 1,119,021 0 1,119,021 110. Profits (Losses) on financial assets and liabilities designated at fair value 111,991,533 (20,241,258) (132,232,791) 120. Net interest and other banking income 726,873,440 615,290,802 111,582,638 18.1 130. Net losses / recoveries on impairment (36,922,195) (1,924,517) (34,997,678) a) loans (32,165,231) (1,924,517) (30,240,714) b) financial assets available for sale 0 0 0 c) investments held to maturity 0 0 0 d) other financial activities (4,756,964) 0 (4,756,964) 140. Net income from banking activities 689,951,245 613,366,285 76,584,960 12.5 150. Administrative expenses (249,420,754) (301,074,433) 51,653,679 17.2 a) personnel expenses (85,409,709) (123,221,692) 37,811,983 30.7 b) other administrative expenses (164,011,045) (177,852,741) 13,841,696 7.8 160. Net provisions for risks and charges (5,000,000) (26,485,481) 21,485,481 81.1 170. Net adjustments to / recoveries on property and equipment (453,516) (1,413,816) 960,300 68 180. Net adjustments to / recoveries on intangible assets (476,178) (4,463,332) 3,987,154 89.3 190. Other operating expenses (income) 17,451,602 18,751,262 (1,299,660) -6.9 200. Operating expenses (237,898,846) (314,685,800) (76,786,954) -24.4 210. Profits (Losses) on equity investments 304,682 0 304,682 240. Profits (Losses) on disposal of investments 900 745 155 20.8 250. Income (Loss) before tax from continuing operations 452,357,981 298,681,230 153,676,751 51.5 260. Taxes on income from continuing operations (159,000,000) (88,000,000) (71,000,000) -80.7 270. Income (Loss) after tax from continuing operations 293,357,981 210,681,230 82,676,751 39.2 290. Net income (loss) 293,357,981 210,681,230 82,676,751 39.2

66 Financial statements of Banca IMI

Statement of changes in shareholders’ equity

Allocation of net income Changes in the period of the previous year

Operations on shareholders’ equity Reserves Effect of the merger Effect Amounts as ot 1.1.2007 Amounts as at 31.12.2006 Changes in reserves Stock Options Issue of new shares Shareholders’equity as at 31.12.2007 Shareholders’equity Extraordinary dividends Extraordinary Net income (loss) for the period Dividends and other allocations Purchase of treasury shares of treasury Purchase Change in equity instruments equity in Change Derivatives on treasury shares Derivatives on treasury

Share capital:

a) ordinary shares 482,464,000 180,000,000 662,464,000 662,464,000

b) other 0 0 0

Share premium reserve 0 131,259,962 131,259,962 131,259,962

Reserves:

a) retained earnings 351,459,863 103,484,067 454,943,930 22,762,081 477,706,011

b) others 0 0

Valuation reserves:

a) available for sale 4,077,726 87,761,391 91,839,117 (76,485,467) 15,353,650

b) cash flow hedges 0 0

c) other:

-legally required revaluations 4,395 4,395 4,395

Equity instruments 0 0

Treasury shares (-) 0 0

Net income (loss) 90,307,041 90,307,041 (22,762,081) (67,544,960) 210,681,230 210,681,230

Shareholders’ equity 928,313,025 502,505,420 1,430,818,445 0 (67,544,960) (76,485,467) 0 0 0 0 0 0 210,681,230 1,497,469,249

The column “Effect of the merger” includes the effects from the merger by incorporation of Banca d’Intermediazione Mobiliare IMI; the amounts are net of the dividends paid for the 2006 fiscal year.

67 Financial statements of Banca IMI

Statement of changes in shareholders’ equity

Allocation of net income Changes in the period of the previous year

Operations on shareholders’ equity Reserves Effect of the merger Effect Amounts as ot 1.1.2008 Amounts as at 31.12.2007 Changes in reserves Stock Options Issue of new shares Shareholders’equity as at 31.12.2008 Shareholders’equity Extraordinary dividends Extraordinary Net income (loss) for the period Dividends and other allocations Purchase of treasury shares of treasury Purchase Change in equity instruments equity in Change Derivatives on treasury shares Derivatives on treasury

Share capital:

a) ordinary shares 662,464,000 662,464,000 662,464,000

b) other 0 0 0

Share premium reserve: 131,259,962 131,259,962 131,259,962

Reserves:

a) retained earnings 477,706,011 477,706,011 210,681,230 688,387,241

b) other 0 0 0

Valuation reserves:

a) available for sale 15,353,650 15,353,650 (2,745,225) 12,608,425

b) cash flow hedges 0 0 0

c) other:

- legally required revaluations 4,395 4,395 4,395

Equity instruments 0 0 0

Treasury shares (-) 0 0 0

Net income ( loss ) 210,681,230 210,681,230 (210,681,230) 293,357,981 293,357,981

Shareholders’ equity 1,497,469,248 0 1,497,469,248 0 0 (2,745,225) 0 0 0 0 0 0 293,357,981 1,788,082,004

68 Financial statements of Banca IMI

Cash Flows - indirect method

Amount 31.12.2008 31.12.2007 A. INVESTMENT ACTIVITIES 1. Cash flow from operations 580,828,992 408,686,875 Net income 293,357,981 210,681,230 Gains/Losses on financial assets held for trading and on assets/ liabilities designated at fair value through profit and loss 90,410,956 151,316,848 Gains/Losses on hedging activities 0 0 Net losses/recoveries on impairment 36,922,195 1,924,517 Adjustments to/net recoveries on property, equipment and intangible assets 929,694 5,877,148 Net provisions for risks and charges and other costs/revenues 5,000,000 26,485,481 Taxes and duties to be settled 159,000,000 88,000,000 Other adjustments (4,791,834) (75,598,349) 2. Cash flow from/used in financial assets (25,762,458,642) (26,922,251,091) Financial assets held for trading (17,235,323,875) (15,890,526,017) Financial assets designated at fair value through profit and loss 0 0 Financial assets available for sale (76,910,590) (95,798,128) Loans to customers (1,161,950,882) (2,075,901,156) Due from banks: repayable on demand 884,370,424 (114,987,176) Due from banks: other (8,189,793,292) (8,290,143,610) Other assets 17,149,572 (454,895,004) 3. Cash flow from/used in financial liabilities 25,095,784,245 26,683,413,509 Due to banks: repayable on demand (1,697,795,343) 1,625,061,786 Due to banks: other (7,220,813,896) 7,178,839,742 Due to customers 13,782,052 (1,035,997,150) Securities issued 14,445,099,861 3,378,145,208 Financial liabilities held for trading 19,962,191,446 10,896,041,891 Financial liabilities designated at fair value through profit and loss (475,492,523) 4,213,969,631 Other liabilities 68,812,648 427,352,401 Net cash flow from (used in) operating activities (85,845,405) 169,849,293

The statement of cash flows was prepared using the indirect method, according to which cash flows from operating activities are represented by adjusting net profit for the effects of non-cash transactions.

In the statement, cash flows generated during the year are presented without a sign, whereas cash used is shown in parentheses.

69 Financial statements of Banca IMI

Statement of cash flows - indirect method

Amount 31.12.2008 31.12.2007 A. INVESTMENT ACTIVITIES 1. Cash flow from operations 85,843,463 3,855,638 Sales of equity investments 83,796,854 0 Dividends collected on equity investments 2,046,609 2,754,956 Sales of investments held to maturity 0 0 Sales of property and equipment 0 0 Sales of intangible assets 0 0 Sales of business branches 0 1,100,682 2. Cash flow used in 0 (113,590,452) Purchases of equity investments 0 (107,805,752) Purchases of investments held to maturity 0 0 Purchases of property and equipment 0 (1,071,016) Purchases of intangibles assets 0 (4,713,684) Purchases of business branches 0 0 Net cash flow from (used in) investing activities 85,843,463 (109,734,814) C. FINANCING ACTIVITIES Issues/purchases of treasury shares 0 0 Share capital increases 0 0 Dividend distribution and other 0 (67,544,960) Net cash flow from (used in) financing activities 0 (67,544,960)

Net increase (decrease) in cash and cash equivalents (1,942) (7,430,481)

Reconciliation

Captions Amount 31.12.2008 31.12.2007 Cash and cash equivalents at beginning of period 5.727 7.436.208 Net increase (decrease) in cash and cash equivalents (1,942) (7.430.481) Cash and cash equivalents: foreign exchange effect 0 0 Cash and cash equivalents at the end of period 3.785 5.727

Sales of equity investments include the redemption of 120 million dollars in capital undertaken by IMI Investments.

70 Notes

71

Part A – Accounting policies

A.1 - GENERAL PART

SECTION 1 - DECLARATION OF COMPLIANCE WITH TO INTERNATIONAL ACCOUNTING STANDARDS Pursuant to Legislative Decree No. 38 of 28 February 2005, Banca IMI’s financial statements were prepared in accordance with the accounting standards issued by the International Accounting Standards Board (IASB), including the interpretative documents referred to as SIC and IFRIC, and approved by the European Commission.

In preparing the financial statements, the Bank has applied the IAS/IFRS in force at 31 December 2008 and the instructions for financial statements issued by the Bank of Italy in the Provision dated 22 December 2005, the concurrent Circular No. 262, as amended, and the general provisions of the Italian Civil Code and other applicable laws and regulations.

In addition, we report that, in accordance with the recent amendments to IAS 39 and IFRS 7 (approved by the IASB on 13 October 2008 and ratified by the European Commission in Regulation No. 1004/08 of 15 October 2008 in the OJEC of 16 October 2008), during the year we reclassified a portfolio of debt securities acquired for medium-term investment purposes from the held-for-trading portfolio to the loans and receivables portfolio. Please refer to section B of the Notes for the details.

The specific accounting standards adopted, which are illustrated in Part A.2 of the Notes below, have been applied in a continuous manner.

There were no exceptions to the application of international accounting standards (IAS/IFRS).

The financial statements were audited by the firm Reconta Ernst & Young S.p.A.

SECTION 2 - GENERAL BASIS OF PREPARATION The financial statements comprise the balance sheet, statement of income, statement of changes in shareholders’ equity, statement of cash flows, and these Notes, and are accompanied by the Directors’ Report on Operations.

In compliance with the requirements of article 5 of Legislative Decree No. 38/2005, the financial statements were prepared using the euro as the accounting currency. The amounts presented in the financial statements are expressed in euro, whereas the figures cited in the Notes are stated in thousands of euro. The figures in the tables included in the Directors’ Report on Operations are in millions of euro, unless otherwise indicated.

In the circumstances cited in the Circular mentioned above, or where deemed appropriate to a fuller understanding of the trends in earnings and financial position aggregates, numerical tables also contain comparative figures from the previous year or are accompanied by detailed analyses.

In accordance with the provisions of the communication issued by the Bank of Italy on 2 January 2009, which concerns the financial statements of banks and financial companies, the compensation of the Board of Auditors was included among personnel expenses and classified to the sub-item compensation paid to Directors. Consequently, in order to ensure an accurate comparison of data, the costs in question were also reclassified for the situation at 31 December 2007.

73 Notes to the Annual Report - Part A – Accounting policies

Content of the financial statements

Balance sheet and Income Statement The presentation of the balance sheet and statement of income is based on items, sub-items and further details (the “of which” under items and sub-items). With respect to the presentation established by the Bank of Italy, the Company has omitted items devoid of values during the reporting year and the previous year. On the statement of income revenues are presented without a sign, while costs are indicated in parentheses.

Changes in shareholders’ equity The statement is presented in accordance with the provisions of Bank of Italy Circular No. 262/2005 and depicts the composition of and changes in shareholders’ equity items, broken down into share capital, capital reserves, profit reserves, asset and liability valuation reserves, and net profit or loss.

Statement of cash flows The statement of cash flows was prepared using the indirect method, according to which cash flows from operating activities are represented by adjusting net profit for the effects of non-cash transactions. Cash flows are divided into those associated with operating activity, investing activity, and funding activity.

Contents of the Notes The Notes include the information required by the Bank of Italy’s instructions and the additional information required by international accounting standards and other Italian legislation.

SECTION 3 - SIGNIFICANT EVENTS SUBSEQUENT THE FINANCIAL STATEMENT DATE

Transfer of a business unit In accordance with the plan to transfer the structured finance unit from Intesa Sanpaolo, the Board of Directors approved the overall structure of the transaction during the session held on 29 January 2009. At the above meeting the Board also approved the share capital increase in service of the transfer for a maximum amount of 750 million, divided into 350 million in share capital and 400 million in issue premium.

No events occurred after the reporting date that would have resulted in effects on the Bank’s earnings or financial position to an extent worthy of mention in these Notes.

SECTION 4 - OTHER ASPECTS

Securitization In July the Bank closed a securitization transaction pursuant to Law No. 130/99 with the aim of rendering a pre-existing portfolio of debt securities eligible for refinancing through repurchase agreement transactions. The sale of the securities benefited the special-purpose vehicle SPQR II. Banca IMI then underwrote all of the new notes issued by this vehicle (696 million in senior notes and 82 million in junior notes), thereby effectively continuing to hold all of the risks and rewards associated with the debt securities sold. Said securities therefore continue to be recognized in their entirety under the appropriate balance sheet items.

National tax consolidation Banca IMI has elected to continue to participate in the Intesa Sanpaolo Group’s national tax consolidation program for the three-year period 2007-2009. Such programs are governed by articles 117-129 of the Consolidated Income Tax Act and were introduced into the tax code by Legislative Decree No. 344/2003. Said program allows the option of electing for the transfer of the total taxable profit or loss of each company participating in the tax consolidation program, along with withholding taxes paid, deductions and tax credits, to the parent company, on the basis of which a collective taxable income or tax loss carry forward is then calculated (namely as the algebraic sum of the parent company’s income/losses and those of participating subsidiaries, and, consequently, a single tax liability/tax credit).

Consolidated financial statements Banca IMI does not draft consolidated financial statements, for which the parent company, Intesa Sanpaolo, is responsible. . 74 Notes to the Annual Report - Part A – Accounting policies

A.2 - MAIN FINANCIAL STATEMENT ITEMS

This chapter sets out the Accounting Standards adopted by Banca IMI for the preparation the financial statements for the year ended on 31 December 2008. The exposition of accounting standards is divided into the stages of classification, recognition, measurement, and derecognition of the various asset and liability items.

1. Financial assets held for trading This category includes solely debt securities, equity securities, shares of UCITS, and the positive value of derivative contracts held for trading purposes. Derivatives contracts also include those embedded in complex financial instruments. Embedded derivatives are recognized separately where the following conditions have been satisfied: – their economic characteristics and risks are not closely related to the characteristics of the host contract; – the embedded instruments considered separately meet the definition of a derivative; – the hybrid instruments to which they belong are not measured at fair value with the respective changes recognized on the statement of income.

Financial assets are initially recognized on the settlement date for debt and equity securities, and on the subscription date for derivative contracts and other off-balance sheet transactions. Upon initial recognition, held-for-trading financial assets are entered at cost, taken as the fair value of the security, without considering transaction costs or revenues directly attributable to the security, which are instead immediately recognized on the statement of income.

Subsequent to initial recognition, held-for-trading financial assets are measured at fair value and any changes are recognized in the statement of income. Market prices (bid-ask prices or average prices) are used to determine the fair value of securities listed on an active market . In the absence of an active market, estimation methods and valuation models are employed, taking account of all risk factors associated with the instruments, and based on data available from the market, such as: methods based on the quoted prices of securities having similar characteristics, discounted cash flow analysis, option-pricing models and valuations of recent comparable transactions.

The valuation models used, including for reporting purposes, to determine the fair values of derivative contracts are subject to prior validation and periodic review by the risk management department, which is independent of the structures that draft such models. Said models may incorporate factors that require the use of estimates and parameters that are not directly observable on the market.

In order to monitor the risks associated with the assumptions internal to the models employed and the most innovative securities, the fair value measured through valuation techniques is prudentially decreased by applying a corrective factor, which is determined on the basis of the degree of complexity of the valuation model used and the level of liquidity of the security. Since liquidity risks tend to diminish as a security approaches maturity, the corresponding corrective factor is reviewed and reduced as necessary to account for the financial product’s residual life. A further corrective factor is also applied when determining fair value in order to account for the extent of the bid-offer spread and the credit risks inherent in certain categories of securities.

Financial assets are derecognized where the contractual rights to receive the cash flows from said assets lapse or where the financial assets have been transferred along with substantially all associated risks and rewards. However, if the majority of risks and rewards relating to the transferred financial assets are retained, these assets continue to be carried on the balance sheet, even though in legal terms the ownership of said assets has been effectively transferred.

1 A security is regarded as listed on an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry company, pricing service or authorized entity, and those prices represent effective, regularly occurring market transactions on an arm’s length basis over a normal reference period. 75 Notes to the Annual Report - Part A – Accounting policies

2. Financial assets available for sale This category includes financial assets (with the exception of derivatives contracts) not otherwise classified as “Held-for-trading assets”, “Held-to-maturity assets” or “Loans and receivables”.

Assets in this category are initially recognized on the settlement date at their fair value, which is defined as the cost of the security, including transaction costs and revenues directly attributable to said security.

Subsequent to initial recognition, available-for-sale assets are measured at their fair value, which is determined according to the criteria cited in paragraph 1 above, involving the recognition of the profit or loss under a specific shareholders’ equity reserve until such time as the financial asset is derecognized or impairment occurs. When the asset is disposed of or becomes impaired, the accumulated profit or loss is transferred, in whole or in part, to the statement of income. Equity securities included in this category, the fair value of which may not be determined reliably according to the guidelines set out in paragraph 1, are carried at cost.

Available-for-sale financial assets are periodically tested in order to determine whether there is objective evidence of impairment. If such evidence exists, the amount of the loss is measured as the difference between purchase cost (net of any prior impairment and depreciation or amortization) and the current fair value of the asset as determined by using specific measurement methods. Said loss is then recognized on the statement of income. Any subsequent recoveries of the value of debt securities classified as available-for-sale are recognized on the statement of income if and to the extent to which they are objectively correlated to events that occur subsequent to the recognition of impairment. Recoveries recognized on equity securities are entered to shareholders’ equity.

Financial assets are derecognized where the contractual rights to the cash flows deriving from the assets lapse or where substantially all associated risks and rewards are transferred along with ownership of the financial asset.

4. Loans and receivables This category includes non-derivative loans and receivables from customers and banks that call for fixed or otherwise determinable payments, are not listed on an active market, and are not classified to another category. This category includes, inter alia, repurchase agreement transactions that call for the obligation to sell the securities at maturity and securities lending transactions involving the payment of cash collateral. Both types are carried in the accounts as investment transactions (in a like manner, they are recognized as payables to banks and to clients where the transactions obligate the Bank to repurchase the securities at maturity or receive cash collateral) and do not result in changes in the inventories of proprietary securities. This category also includes operating receivables.

Loans and receivables are initially recognized on the date of disbursement in an amount corresponding to the fair value of the loan or receivable. The fair value is represented by the sum disbursed or the price of the underlying security, including directly attributable costs/revenues determinable at the inception of the transaction, even if settled at a later time. Costs that satisfy the above characteristics are excluded where they are to be reimbursed or may be considered normal internal administrative expenses.

Subsequent to initial recognition, loans and receivables are stated net of repayments and adjustments. The original value of loans and receivables is recovered to the extent to which that the reasons for adjustment cease to apply.

The amortized cost method is not applied to loans the brief duration of makes the effect of the application of the effective interest rate method virtually negligible. Costs/revenues associated with loans and receivables that refer to repurchase agreement and securities lending transactions are taken through the statement of income on a straight line basis over the contractual duration of the loan. The same method is used to measure loans with no stated maturity or that are valid until revoked.

The carrying value of loans and receivables is periodically tested for impairment, which process contemplates the specific solvency situation of debtors having difficulty servicing their debt and the potential difficulties associated with debtors’ business segments or countries of residence, while also considering any collateral provided.

76 Notes to the Annual Report - Part A – Accounting policies

Said test is applied to non-performing loans and receivables in particular (doubtful, substandard, restructured and past-due exposures) and to those for which the Bank believes it probably will not be able to recover the entire amount due on the basis of the original contractual conditions or an equivalent amount. Such loans and receivables are subject to individual impairment testing.

The remaining on-balance sheet loans and lending commitments are subject to collective testing. In further detail: – exposures subject to country risk: unsecured exposures to residents of countries that present difficulties in servicing their debt are measured by applying impairment percentages defined at the trade association level; – performing exposures: debt securities and receivables from entities that that have yet to manifest specific risks of insolvency at the reporting date. Collective adjustments to performing loans and receivables and collateral received are determined by applying a model developed on the basis of the Parent Company’s risk management methods.

Guarantees provided not representing derivatives contracts are measured by taking account of the provisions of IAS 39, which call for, on the one hand, the recognition of the commissions collected, pursuant to IAS 38, and, on the other, the measurement of the risks and expenses associated with the guarantees in application of the criteria set out in IAS 37. Said measurement, in accordance with the Bank of Italy’s instructions, is recognized as a contra entry to the item “Other liabilities”.

Loans and receivables are derecognized when repaid or when transferred along with substantially all of the risks and rewards associated with said loans and receivables.

6. Hedging transactions Hedging transactions aim to cover potential losses attributable to certain types of risks through the gains that may be realized on the hedging securities.

In accordance with its risk management policies and hedging strategies, the Bank identified fair value hedging relationships and designated: – interest-rate derivatives as hedging instruments for the fair value of its bond issues; – exchange-rate derivatives as hedges of the equity investment in the capital of the subsidiary IMI Investments.

When a security is classified as a hedge, the Bank formally documents the relationship between the hedging instrument and hedged items and includes the risk management objectives, the strategy for implementing the hedge, which must be in line with the risk management policy identified by Risk Control, and the methods that will be used to assess the effectiveness of the hedge. As a result, the Bank verifies that the hedging relationship of the derivative effectively compensates the changes in the fair value of the hedged item. This is carried out at the inception of the hedge as well as throughout its duration.

A hedge is considered effective if, both at inception and over the course of its life, changes in the fair value or cash flows of the hedged item are offset by the changes in the fair value of the hedging derivative.

The extent to which a hedge is ineffective is represented by the difference between the change in the fair value of the hedging instrument and the change in the fair value of the hedged item. Both these changes are entered to the statement of income under “Net result of hedging transactions”.

The Bank ceases to consider these transactions as hedges, and therefore to treat them as such, if: (i) the derivative is not, or has ceased to be, highly effective as a hedge, (ii) it expires, is sold, terminated or exercised, (iii) the hedged item matures or is redeemed in advance.

The accounting treatment of fair value hedges involves recognizing the effect of changes in the fair value of the hedging instrument and changes in fair value attributable to the risk associated with the hedged assets/ liabilities in the statement of income.

Where a hedge ceases to exist for reasons other than the realization of the hedged item, the overall change in said item’s fair value, which is carried for such time as the hedge remains effective, is then recognized on the statement of income according to the amortized cost method.

77 Notes to the Annual Report - Part A – Accounting policies

7. Equity investments Equity investments are defined as investments in subsidiaries, joint ventures and companies subject to significant influence.

Subsidiaries are defined as companies for which the Bank or Group is able to determine administrative, financial and managerial policies and in which the Bank or Group typically holds more than half of voting rights or a lesser share of voting rights that nonetheless entitles the Bank or Group to appoint the majority of the directors or determine financial and operational policies.

Associates, i.e. entities subject to significant influence, are defined as companies in which the Group holds at least 20% of voting rights and companies in which, although the Group holds a lesser share of voting rights, it is nonetheless able to participate in the determination of the company’s financial and managerial policies by virtue of existing legal and de facto relationships.

Joint ventures are defined as companies for which a contractual agreement is in force requiring the unanimous consent of the Group and the other participants, resulting in the sharing of control over administrative, financial and management decisions.

Equity investments in subsidiaries and in companies subject to significant influence are measured at cost, and adjusted for impairment, if necessary.

The Bank does not hold any equity investments in joint ventures.

8. Property and equipment Property and equipment are recognized at their purchase cost, plus any accessory expenses capital expenditures, and are stated net of depreciation, which is applied on a straight-line basis beginning with the period in which the assets come on stream in the production process.

Maintenance and repair expenses that do not entail an increase in the carrying value of the assets are charged to the statement of income for the period. Paintings and other works of art, which are considered goods having indefinite useful lives, are included among capital property and equipment by convention.

9. Intangible assets Intangible assets, which consist of software and intellectual property rights, trademarks and other intangible assets, are recognized at purchase cost, including accessory expenses, where the Board of Auditors provides its consent, and in the circumstances set forth in the law. Intangible assets are recognized solely where the assets may be identified and originate in legal or contractual rights. When this is not the case, the cost of the intangible asset is recognized in the statement of income for the period in which it is incurred.

The value of intangible assets is systematically amortized beginning when the asset effectively comes on stream in the production process over a period of three years for software and other IT procedures and five years for all other intangible assets.

Periodically, where there are signs of impairment, the recoverable amount of the asset is estimated. The amount of impairment, which is recognized on the statement of income, is the difference between the as- set’s carrying value and recoverable value.

Intangible assets are recognized when they are disposed of or when no future economic benefits are expected from their use.

78 Notes to the Annual Report - Part A – Accounting policies

11. Current and deferred taxes Allocations for income taxes are determined on the basis of forecasts of current, prepaid and deferred tax charges, and by taking the tax consolidation program into account.

In particular, prepaid and deferred taxes are calculated based on the temporary differences – without time limits – between the carrying amount of assets and liabilities according to statutory criteria and their corresponding values for tax purposes. Prepaid tax assets referring to tax-loss carry-forwards, where recognized, are determined within the limits of the expected benefits for future taxable income, considering budget projections and foreseeable revenue trends. Such assets are quantified by referring to the tax rates established in applicable legislation. Prepaid and deferred taxes are recognized on the statement of income, with the exception of those which, in the interest of consistent application of IAS/IFRS, are normally taken directly to shareholders’ equity. The same treatment is applied to changes arising from the modification of tax rates.

Deferred tax liabilities on equity reserves for which taxation is suspended are not recognized inasmuch as it is reasonable to believe that the Bank will not choose to undertake transactions that would lead to the taxation thereof.

12. Provisions for risks and charges Allocations to provisions for risks and charges are recognized to account for legal obligations associated with employment agreements or pertaining to disputes originating in prior events. They consist of liabilities the amount or maturity of which is uncertain and are recognized to the extent to which: – the Bank has a current (legal or implicit) obligation owing to a prior event; – it is likely that financial resources will be expended to discharge the obligation; – it is possible to make a reliable estimate of the likely future outlay.

Where the time element is significant, provisions are discounted according to current market rates. Alloca- tions to this provision are recognized on the statement of income, as are any interest expenses accrued on provisions subject to discounting.

No allocations are recognized in connection with merely potential and improbable liabilities. However, a description of the nature of such liabilities is provided in the Notes where they are deemed significant.

The provisions allocated are reviewed at each reporting date and adjusted to reflect the best current esti- mates. When it appears unlikely that resources capable of generating economic benefits will need to be expended to discharge the obligation, allocations are reversed.

13. Payables and securities issued Payables to banks and customers and securities in circulation include the various forms of funding, such as loans, repurchase agreement, securities lending and bonds. They also include operational payables, with the exception of those to suppliers of goods and services. Such financial liabilities are initially recognized on the contractually established settlement date, which normally coincides with the moment in which the sums raised are received or the debt securities are issued.

Initial recognition is based on fair value of the liabilities, which is normally the amount received or the issue price, plus or minus any costs or income directly attributable to the funding transaction or issue. Internal administrative costs are excluded.

Subsequently, except in the case of items the contractual maturities for which fall in the near term and effects of which are not viewed as significant, payables are stated at amortized cost. Securities in circulation are measured at amortized cost according to the effective interest rate method and are carried on the financial statements net of any repurchased shares.

Derivatives may be embedded in host contracts. Such combinations, known as hybrid instruments, mainly originate from the issuing of structured debt securities.

79 Notes to the Annual Report - Part A – Accounting policies

Embedded derivatives are separated from their host contracts and are carried as ordinary derivative instruments at their fair value, if, and only if: – the economic features and the risks of the derivative instrument are not strictly correlated to the economic features and the risk of the host contract; – the embedded instruments, considered separately, meet the definition of a derivative; – the hybrid instruments in which they are embedded are not measured at fair value with the respective changes through the statement of income.

When dealing with own securities, the difference between the cost incurred to repurchase the securities issued and their respective book value is charged to the statement of income. The sale of any previously repurchased securities, from an accounting standpoint, is treated as a new placement and therefore gives rise to a change in the average book value of the related liabilities.

Liabilities are derecognized when they mature or have been discharged.

14. Financial liabilities held for trading This item includes the negative value of trading derivative contracts measured at fair value and liabilities, also measured at fair value, originating from technical overdrafts resulting from securities trading operations.

Changes in fair value are taken through the item 80 of the statement of income, “Profit (loss) on trading”.

15. Financial liabilities at fair value Financial liabilities at fair value consist of bonds issued by the Bank the original yield of which is linked to the performance of baskets of investment fund shares, carried on the balance sheet among “Financial assets held for trading”.

These liabilities are recognized on the date of issue at their fair value, on the basis of the application of the fair value option under IAS 39, including the value of any embedded derivatives and net of placement commissions entered directly to the statement of income. The difference between the amount collected at issue, net of placement commissions, and the fair value, including change in creditworthiness, of the bond at the date of issue is entered to the statement of income on a pro rata basis over the life of the bond.

Electing for the fair value option for this category of structured securities allows for a decrease in the accounting asymmetry resulting from the measurement of the securities associated with bonds at their fair value.

16. Foreign currency transactions Transactions in foreign currencies are recognized according to when they are settled by applying the exchange rate for the transaction to the amount in the original currency. Assets and liabilities denominated in foreign currencies are measured at the spot exchange rates in force at the reporting date (ECB official average).

“Off-balance sheet” transactions are measured: – at the spot exchange rate on the reporting date, in the case of unsettled spot transactions; – at the current forward rate on the above date for maturities corresponding to that of the transactions measured, in the case of forward transactions.

Exchange rate differences that result from the settlement of monetary items or the translation of monetary items at a rate that differs from the one used for initial translation or for the translation of the previous year’s financial statements are recognized on the statement of income during the period in which they arise.

80 Notes to the Annual Report - Part A – Accounting policies

17. Other information

Employee termination indemnities Following the entry into force of Legislative Decree No. 252 of 5 December 2005, the staff severance indemnity is no longer considered a “defined-benefit plan” but rather a “defined-contribution plan”. The consequence of this new scheme, which shifts actuarial risk and investment risk from the bank, which provides benefits, to a supplementary pension fund or the treasury fund managed by Italy’s national social- security agency (INPS), lies in the differing treatment applicable to sums accrued after 1 January 2007.

Sums accrued prior to 31 December 2006, inasmuch as the staff severance indemnity provision is considered to be a “defined-benefit plan” under which the Bank holds actuarial and investment risk, remains subject to actuarial valuation according to the projected-unit credit method, without pro-rata application of the current service cost.

The discounting rate used is determined as the weighted average of euro-swap (zero-coupon IRS) rates and credit spreads on benchmark Italian government securities at the measurement date, weighted on the basis of the percentage of the total paid and advanced, for each maturity, with respect to the total payable or to be advanced until final discharge of the obligation in its entirety.

The plan’s service costs are recognized among personnel expenses. Actuarial gains and losses are calculated according to the corridor method, i.e. solely when they exceed, with respect to the end of the previous year, the greater of 10% of the actuarial value of the benefits generated by the plan and 10% of the fair value of the assets in service of the plan. Said surplus amount is also considered in proportion to the expected average length of service of the plan’s participants.

Sums accrued and to be accrued after 1 January 2007 are considered a “defined-contribution plan”, shifting actuarial and investment risk outside of the Bank, which provides the benefits, regardless of whether the employee elects for a supplementary pension scheme or allocates contributions to the national treasury fund. Since the Bank’s obligation is limited solely to the sums it pays, it is no longer necessary to make adjustments using particular actuarial calculation methods, with the result that the amount of the sums recognized among personnel expenses is determined exclusively by the contributions paid.

Leasehold improvements Costs associated with refur hing properties owned by third parties are capitalized provided that, for the duration of the lease, the company using the property has full control of the assets, with the power to limit access thereto by third parties, and is therefore able to receive the related future economic benefits. The above costs, which are classified among “Other assets”, as required by the Bank of Italy’s Instructions, are amortized over a period that may not exceed the term of the lease agreement.

Revenue recognition Revenue is recognized when it is collected or the transactions that generated it have been closed and, with the result that it is likely that future benefits will be received and said benefits may be reliably quantified.

In further detail: – interest income is recognized on a pro-rata basis according to the contractual interest rate; – dividends are recognized on the statement of income during the year in which they are collected, which normally coincides with the year in which distribution is authorized; – commissions for service revenue are recognized on the basis of the existence of contractual agreements during the period when said services were provided; – revenue on the brokerage of held-for-trading securities are recognized on the statement of income upon the contractual settlement of the transaction.

Fair value of securities Fair value is the amount for which an asset (or a liability) may be exchanged in a transaction between independent counterparties having a reasonable understanding of market conditions and significant facts associated with the object of the trade. In the definition of fair value, the presumption that an entity is fully operational and is not forced to wind down or significantly decrease its operations or undertake transactions

81 Notes to the Annual Report - Part A – Accounting policies under unfavourable transactions is fundamental. Fair value typically reflects the credit quality of the security inasmuch as it incorporates counterparty risk.

The fair value of securities is determined through the use of prices attained from the markets, in the case of securities listed on active markets, or through the use of internal valuation models, in the case of other securities. A market is considered active if listing prices representing effective, regular market transactions undertaken during an appropriate reference period are readily and regularly available from stock exchanges, dealers, brokers, industry companies, listing services or authorized entities.

The valuation method defined for a security is adopted consistently over time and modified solely in response to significant changes to the market or subjective conditions of the security’s issuer.

Mutual funds and equivalent investment schemes, spot and forward currency transactions, futures, options and securities listed on a regulated market are considered listed on an active market. In a like manner, bonds for which at least two “executable” type prices are consistently available from a listing service, and which show a bid-ask spread under a certain threshold deemed appropriate, are also considered listed on an active market. On the other hand, all securities that do not fall into the categories described above are not considered listed on an active market.

Benchmark prices, official prices at closing or winding-down of the contract (always on the last day of market operation during the reference period) are used for securities listed on active markets. Shares of mutual finds and similar securities are measured according to the share values provided by their respective management firms on dates that coincide with the prices of the underlying securities.

Where no active, liquid market exists, the fair value of securities is determined primarily through the use of valuation techniques that aim to establish the price of a hypothetical arm’s-length transaction driven by normal market considerations on the date of measurement. In order to incorporate all factors that operators contemplate when establishing pricing, valuation models take account of the financial value of time at the risk-free rate, the risks of default, early payment and redemption, the volatility of the security, and, where appropriate, the foreign currency exchange rates, commodity prices, and share prices.

The valuation models applied to bonds and derivatives refer to the current market values of substantially identical securities, the financial value of time and option pricing models, on the basis of specific traits of the entity subject to measurement and considering the parameters available from the market. These parameters are identified and applied on the basis of the liquidity, depth and visibility of the reference markets and the changes in the creditworthiness of counterparties and issuers.

In the case of derivatives, given their number and complexity, a systematic framework of reference has been identified that represents common guidelines (calculation algorithms, processing models, market data used, assumptions underlying the model) on which the measurement of each class of derivatives is founded.

82 Part B – Information on the balance sheet

ASSETS

SECTION 1 - CASH AND CASH EQUIVALENTS - ITEM 10

1.1 Cash and cash equivalents: breakdown

31 December 2008 31 December 2007 a) Cash 4 6 b) On demand deposits with Central Banks - - Total 4 6

83 Notes to the Annual Report - Part B – Information on the balance sheet

SECTION 2 - FINANCIAL ASSETS HELD FOR TRADING - ITEM 20

2.1 Financial assets held for trading: breakdown by category

31 December 2008 31 December 2007 Quoted Unquoted Quoted Unquoted A. Cash assets 1. Debt securities 1.1 structured securities 289,300 308,002 140,527 293,791 1.2 other debt securities 4,300,591 573,610 2,057,485 1,854,057 2. Equities 204,580 - 1,227,756 - 3. Quotas of UCITS 761,199 - 6,086,542 2,013 4. Loans 4.1 repurchase agreements - - - - 4.2 other - - - - 5. Non-performing assets 4,589 182 3,829 4,721 6. Assets sold not derecognised 2,219,134 13,126 2,753,946 319,984 Total A 7,779,393 894,920 12,270,085 2,474,566 B. Derivatives 1. Financial derivatives 1.1 trading 717,571 37,342,477 902,548 15,753,172 1.2 fair value option - - - - 1.3 other - - - - 2. Credit derivatives 2.1 trading - 1,938,590 - 252,740 2.2 fair value option - - - - 2.3 other - - - - Total B 717,571 39,281,067 902,548 16,005,912

Total (A+B) 8,496,964 40,175,987 13,172,633 18,480,478

Please refer to the section of the accounting standards entitled “Other information” for the definition of listed security.

Structured securities, which came to 597 million at 31 December 2008, include 345 million in securities with rate options (in particular reverse floaters, step-ups and step-downs) and 252 million in equity-linked securities.

Assets sold not derecognized, a category included according to the provisions of IAS 39, refer to owned securities forming the object of repurchase agreements.

Securities originated by the Bank subject to securitization (sale to the vehicle SPQR II) of 711 million are recognized under item 1.2 “Other debt securities” in accordance with the most recent instructions from supervisory entities.

84 Notes to the Annual Report - Part B – Information on the balance sheet

2.2 Financial assets held for trading: breakdown by debtor/issuer

31 December 2008 31 December 2007 A. Cash assets 1. Debt securities a) Governments and Central Banks 95,837 100,028 b) Other public entities 344,006 495,613 c) Banks 2,761,210 2,375,743 d) Other issuers 2,270,450 1,374,476 2. Equities a) Banks 64,396 213,089 b) Other issuers - insurance companies 27,083 92,683 - financial institutions 23,538 127,188 - non-financial companies 89,563 794,796 - other - - 3. Quotas of UCITS 761,199 6,088,555 4. Loans a) Governments and Central Banks - - b) Other public entities - - c) Banks - - d) Other counterparties - - 5. Non-performing assets a) Governments and Central Banks - - b) Other public entities 112 4,613 c) Banks 3,163 - d) Other counterparties 1,496 3,937 6. Assets sold not derecognised a) Governments and Central Banks 1,962,768 2,563,218 b) Other public entities 141,195 117,680 c) Banks 55,440 16,088 d) Other issuers 72,857 376,944 Total A 8,674,313 14,744,651 B) Derivatives a) Banks 35,794,032 14,664,851 b) Customers 4,204,606 2,243,609 Total B 39,998,638 16,908,460

Total (A+B) 48,672,951 31,653,111

Shares of UCITS in portfolio at year-end were broken down into 458 million in bond funds, 193 million in equity funds, and 91 million in money-market funds. In addition, there were 14 million in investments in listed real-estate funds, 3 million in commodities funds, and 2 million in quotas of SICAVs.

85 Notes to the Annual Report - Part B – Information on the balance sheet

2.3 Financial assets held for trading: derivatives

Type of derivatives Interest Currencies Equities Loans Other 31 December 31 December and gold 2008 2007

A) QUOTED DERIVATIVES 1) Financial derivatives – with exchange of underlying asset - options bought 3 - 67,604 - 1,077 68,684 57,620 - other derivatives ------– without exchange of underlying asset - options bought - - 648,887 - - 648,887 844,928 - other derivatives ------2) Credit derivatives – with exchange of underlying asset ------

– without exchange of underlying asset ------Total A 3 - 716,491 - 1,077 717,571 902,548 B) UNQUOTED DERIVATIVES 1) Financial derivatives – with exchange of underlying asset - options bought 7 233,995 301,646 - - 535,648 397,588 - other derivatives 8,279 2,656,478 9,415 - - 2,674,172 963,464 – without exchange of underlying asset - options bought 3,650,842 19,827 792,837 - 67,836 4,531,342 3,077,271 - other derivatives 29,491,053 562 41,354 - 68,346 29,601,315 11,314,849 2) Credit derivatives – with exchange - - - 1,599,909 - 1,599,909 233,228 of underlying asset

– without exchange - - - 338,681 - 338,681 19,512 of underlying asset Total B 33,150,181 2,910,862 1,145,252 1,938,590 136,182 39,281,067 16,005,912

Total (A+B) 33,150,184 2,910,862 1,861,743 1,938,590 137,259 39,998,638 16,908,460

86 Notes to the Annual Report - Part B – Information on the balance sheet

2.4 Financial assets held for trading (other than those sold not derecognised and non-performing): annual changes

Debt Equities Quotas of Loans Total securities UCITS A. Initial amount 4,345,860 1,227,756 6,088,555 - 11,662,171 B. Increases 340,912,253 28,129,116 18,789,962 - 387,831,331 B1. purchases 334,902,599 26,430,067 18,308,587 - 379,641,253 of which business combinations B2. positive fair value differences 442,330 67,765 67,493 - 577,588 B3. other changes 5,567,324 1,631,284 413,882 - 7,612,490 C. Decreases (339,786,610) (29,152,292) (24,117,318) - (393,056,220) C1. sales (331,330,373) (26,644,445) (23,448,860) - (381,423,678) of which business combinations C2. reimbursements (1,668,660) - - - (1,668,660) C3. negative fair value differences (593,985) (86,275) (97,415) - (777,675) C4. other changes (6,193,592) (2,421,572) (571,043) - (9,186,207) D. Final amount 5,471,503 204,580 761,199 - 6,437,282

The “Other changes” under “Increases” and “Decreases” refer to the amount of “technical overdrafts” at the beginning and end of the year, which are included in the item “Financial liabilities held for trading” on the liabilities section of the balance sheet.

SECTION 4 - FINANCIAL ASSETS AVAILABLE FOR SALE - ITEM 40

4.1 Financial assets available for sale: breakdown by category

31 December 2008 31 December 2007 Quoted Unquoted Quoted Unquoted 1. Debt securities 1.1 Structured securities - - - - 1.2 Other debt securities 236,620 - - - 2. Equities 2.1 Measured at fair value 560 15,363 150,013 25,619 2.2 Measured at cost - 264 - 264 3. Quotas of UCITS - - - - 4. Loans - - - - 5. Non-performing assets - - - - 6. Assets sold not derecognised - - - - Total 237,180 15,627 150,013 25,883

87 Notes to the Annual Report - Part B – Information on the balance sheet

4.2 Financial assets available for sale: breakdown by debtor/issuer

31 December 2008 31 December 2007 Quoted Unquoted Quoted Unquoted 1. Debt securities a) Governments and Central Banks 236,620 - b) Other public entities - - c) Banks - - d) Other issuers - - 2. Equities a) Banks - - b) Other issuers - insurance companies - - - financial institutions 560 8,738 1,743 18,994 - non-financial companies - 6,889 148,270 6,889 - other - - 3. Quotas of UCITS - - 4. Loans a) Governments and Central Banks - - b) Other public entities - - c) Banks - - d) Other counterparties - - 5. Non-performing assets a) Governments and Central Banks - - b) Other public entities - - c) Banks - - d) Other counterparties - - 6. Assets sold not derecognised a) Governments and Central Banks - - b) Other public entities - - c) Banks - - d) Other counterparties - - Total 237,180 15,627 150,013 25,883

88 Notes to the Annual Report - Part B – Information on the balance sheet

4.5 Financial assets available for sale other than those sold and not derecognized and those that have become impaired: changes during the year

Debt Equities Quotas of Loans Total

A. Initial amount 175,896 175,896 B. Increases 236,793 3,223 - - 240,016 B1. Purchases 235,620 - - - 235,620 of which business combinations 1,173 3,223 - - 4,396 B2. Positive fair value differences B3. Write-backs recognised in - income statement - X - - - - shareholders' equity - - - - - B4. Transfers from other portfolios - - - - - B5. Other changes - - - - - C. Decreases (173) (162,932) - - (163,105) C1. Sales - (160,521) - - (160,521) of which business combinations - - - - - C2. Reimbursements C3. Negative fair value differences (173) (2,411) - - (2,584) C4. Impairment losses recognised in - income statement ------shareholders' equity - - - - - C5. Transfers to other portfolios - - - - - C6. Other changes - - - - - D. Final amount 236,620 16,187 - - 252,807

The item “Sales” under C.1 refer to the sale of the equity interest in the London Stock Exchange and MTS.

The debt securities were purchased within the framework of the strategy of forming a bond portfolio with a medium-/long-term investment holding period aimed at maximizing the bank’s strong capital position and proven funding capacity in terms of profitability, while at the same time limiting the volatility caused to the statement of income by price fluctuations in the short term.

The assets that may be entered to this portfolio consist solely of government securities issued by countries in the European Union or the U.S. Treasury or guaranteed by these governments with long- term maturities (up to thirty years).

The investments in question may be the object of hedging through interest-rate swap contracts for corresponding maturities in order to protect the portfolio from interest-rate fluctuations.

89 Notes to the Annual Report - Part B – Information on the balance sheet

SECTION 6 - DUE FROM BANKS - ITEM 60

6.1 Due from banks: breakdown by category

Items 31 December 2008 31 December 2007 A. Due from Central Banks 1. Time deposits - - 2. Compulsory reserve 13,563 16,792 3. Repurchase agreements - - 4. Other - - B. Due from banks 1. Current accounts and deposits 408,058 1,536,735 2. Time deposits 18,826,267 3,074,519 3. Other loans 3.1 Repurchase agreements 7,106,318 14,459,125 3.2 Financial leases - - 3.3 Other 54,975 16,587 4. Debt securities 4.1 Structured - - 4.2 Other - - 5. Non-performing assets - - 6. Assets sold not derecognised - - Total (book value) 26,409,181 19,103,758

Total (fair value) 25,875,189 19,103,758

90 Notes to the Annual Report - Part B – Information on the balance sheet

SECTION 7 - LOANS TO CUSTOMERS - ITEM 70

7.1 Loans to customers: breakdown by category

Items 31 December 2008 31 December 2007 1. Current accounts - - 2. Repurchase agreements 2,660,690 2,152,681 3. Mortgages - - 4. Credit card loans, personal loans and assignments of the fifth - - 5. Financial leases - - 6. Factoring - - 7. Other operations 2,158,385 2,154,618 8. Debt securities - 8.1 Structured securities - - 8.2 Other debt securities 640,692 - 9. Non-performing assets 9,483 - 10. Assets sold not derecognised - - Total (book value) 5,469,250 4,307,299

Total (fair value) 5,397,030 4,307,299

Item 8.2 “Other debt securities” refers to a portfolio of retail-mortgage backed securities, primarily highly rated (A/AAA) senior-class notes.

As previously disclosed in the Quarterly Report at 30 September 2008, due to changes to accounting standards, and most markedly the amendments to IAS 39 concerning the option of reclassifying out of the held-for-trading portfolio securities for which the resumption of orderly trading may not be fore- seen in the near term due to changed market conditions, the Bank proceeded to reclassify 721 million of the aforementioned securities to the loans and receivables portfolio with the aim of establishing a high-yield portfolio consisting essentially of Italian issues having a loan-to-value ratio of below 50%.

These securities were reclassified on the basis of their fair value at 30 June 2008 (the date of the most recent interim report published), resulting in a difference of 13.2 million with respect to their value at 30 September.

The changes during the quarter are summarized in the following table:

01.07.2008 Initial Book Value 721,223

Repayments (85,245) Changes due to amortized cost (915) Accrual at the end of the quater 9,017 Portfolio adjustments (3,388)

31.12.2008 Final Book Value 640,692

At year-end the portfolio had a fair value of 568.5 million, marking a difference of 72.2 million com- pared to its book value. The significant depreciation during the fourth quarter may be attributable to the contingent market phase, which penalized securitized loans and receivables, regardless of the quality of the issuers. By way of example, we report that more than two thirds of the above difference is attributable to se- curities issued by the vehicle FIP Funding during the securitization of public real properties originated by the Republic of Italy. 91 Notes to the Annual Report - Part B – Information on the balance sheet

The portfolio’s average internal rate of return came to 5.52% in the second half of the year.

Non-performing assets consist of the net exposures claimed from the Lehman Brothers Group, as il- lustrated in further detail in E below.

7.2 Loans to customers: breakdown by debtor/issuer

31 December 2008 31 December 2007 1. Debt securities a) Governments - b) Other public entities - c) Other issuers - non-financial companies - - financial institutions 640,692 - insurance companies - - other - 2. Loans a) Governments - b) Other public entities - c) Other counterparties - non-financial companies 259,714 - financial institutions 4,549,128 4,307,299 - insurance companies 10,233 - other - 3. Non-performing assets a) Governments - b) Other public entities - c) Other counterparties - non-financial companies - - financial institutions 9,483 - insurance companies - - other - 4. Assets sold not derecognised a) Governments - b) Other public entities - c) Other counterparties - non-financial companies - - financial institutions - - insurance companies - - other - Total 5,469,250 4,307,299

92 Notes to the Annual Report - Part B – Information on the balance sheet

SECTION 8 - HEDGING DERIVATIVES - ITEM 80

8.1 Hedging derivatives: breakdown by type of derivatives and underlying assets

Type of derivatives/Underlying assets Interest Currencie Equities Loans Other Total rate and gold 2008

A) QUOTED DERIVATIVES 1) Financial derivatives – with exchange of underlying asset - options bought ------other derivatives ------– without exchange of underlying asset - options bought ------other derivatives ------2) Credit derivatives – with exchange of underlying asset ------– without exchange of underlying asset ------Total A ------B) UNQUOTED DERIVATIVES 1) Financial derivatives – with exchange of underlying asset - options bought ------other derivatives ------– without exchange of underlying asset - options bought 316,694 - - - - 316,694 - other derivative 44,851 - - - - 44,851 2) Credit derivatives – with exchange of underlying asset ------– without exchange of underlying asset ------Total B 361,545 - - - - 361,545

Total (A+B) 361,545 - - - - 361,545

Total (A+B) 31.12.2007 - 22,689 - - - 22,689

93 Notes to the Annual Report - Part B – Information on the balance sheet

8.2 Hedging derivatives: breakdown by hedged portfolios and type of hedge

Operations/Type of hedge Fair Value Cash flow Specific Interest Foreign Credit Price Various

rate exchange Generic Specific Generic

1. Financial assets available for sale X - X 2. Loans X - X 3. Investments held to maturity X - - X - X - X 3.1 Equity investments - X 4. Portfolio X X X X X X 5. Foreign investments X X X X X X X X Total assets ------1. Financial liabilities 361,545 - - X - X - X 2. Portfolio X X X X X X Total liabilities 361,545 ------1. Forecast transactions X X X X X X

94 Notes to the Annual Report - Part B – Information on the balance sheet

SECTION 10 - EQUITY INVESTMENTS - ITEM 100

10.1 Equity investments in subsidiaries, joint ventures and companies subject to sig- nificant influence: information on the investment relations

Registered % held Votes office available % A. Wholly-owned subsidiaries 1. IMI Investments S.A. Luxembourg 99.99 99.99 C. Companies subject to significant influence 1. TLX S.p.A. Milano 50.00 50.00 3. Consorzio Studi e Ricerche Fiscali Roma 7.50 7.50

10.2 Equity investments in subsidiaries, joint ventures and companies subject to sig- nificant influence: financial highlights

Total Total Net income Shareholders’ Book Fair value assets revenues (loss) equity(1) value

A. Wholly-owned subsidiaries 1. IMI Investments S.A. (2) (3) 36,135 7,457 7,072 32,425 21,556 X C. Companies subject to significant influence 1. TLX S.p.A. (3) 7,503 11,952 - 4,868 2,434 X 2. Consorzio Studi e Ricerche fiscali (3) (4) 995 2,326 - 258 19 X Total 44,633 21,735 7,072 37,551 24,009 -

(1) Including net income for the period. (2) The company prepares the financial statements in USD. The conversion from USD into euro occurred using the spot exchange rate as at 31 Decem- ber 2008 of 1.3917 euro. (3) Figures referred to the approved 2008 financial statements. (4) The Group holds all quotas.

10.3 Equity investments: changes during the year

31 December 2008 31 December 2007 A. Initial amount 107,806 119,569 B. Increases 303 6 B.1 Purchases - 6 B.2 Write-backs - B.3 Revaluations - B.4 Other changes 303 C. Decreases (84,100) (11,769) C.1 Sales (3,195) C.2 Impairment losses (566) C.4 Other changes (80,339) (11,769) D. Final amount 24,009 107,806 E. Total revaluations - - F. Total impairment losses 566 -

Sales refer to the equity investment in Global Menkul. The other decreases include 76 million in re- demption of share capital by IMI Investments.

95 Notes to the Annual Report - Part B – Information on the balance sheet

SECTION 11 - PROPERTY AND EQUIPMENT - ITEM 110

11.1 Property and equipment: breakdown of assets measured at cost

Total Total 31 December 2008 31 December 2007 A. Property and equipment used in operations 1.1 owned a) land - - b) buildings - - c) furniture 543 672 d) electronic equipment 693 826 e) other 18 26 1.2 acquired in financial lease a) land - - b) buildings - - c) furniture - - d) electronic equipment - - e) other - - Total A 1,254 1,524 B. Investment property 2.1 owned a) land - - b) buildings - - 2.2 acquired in financial lease a) land - - b) buildings - - Total B - -

Total (A+B) 1,254 1,524

96 Notes to the Annual Report - Part B – Information on the balance sheet

11.3 Property and equipment: changes during the year

Land Buildings Furniture Electronic Other Total equipment A. Gross initial carrying amount - - 5,318 66,422 9,321 81,061 A.1 Total net adjustments - - (4,646) (65,596) (9,295) (79,537) A.2 Net initial carrying amount - - 672 826 26 1,524 B. Increases - - 25 153 8 186 B.1 Purchases - - 23 153 8 184 B.2 Capitalised improvement costs ------B.3 Write-backs recognised in ------a) shareholders' equity b) income statement B.4 Positive fair value differences recognised in a) shareholders' equity ------b) income statement ------B.5 Positive foreign exchange differences ------B.6 Transfer from investment property ------B.7 Other changes - - 2 - - 2 C. Decreases - - (154) (286) (16) (456) C.1 Sales ------C.2 Depreciation - - (154) (286) (14) (454) C.3 Impairment losses recognised in a) shareholders' equity ------b) income statement ------C.4 Negative fair value differences recognised in a) shareholders' equity ------b) income statement ------C.5 Negative foreign exchange differences ------C.6 Transfer to a) investment property ------b) non-current assets held for sale and discontinued operations ------C.7 Other changes - - - - (2) (2) D. Net final carrying amount - - 543 693 18 1,254 D.1 Total net adjustments - - (4,808) (65,882) (9,301) (79,991) D.2 Gross final carrying amount - - 5,351 66,575 9,319 81,245 E. Measurement at cost - - 543 693 18 1,254

97 Notes to the Annual Report - Part B – Information on the balance sheet

SECTION 12 - INTANGIBLE ASSETS - ITEM 120

12.1 Intangible assets: breakdown by type of asset

31 December 2008 31 December 2007 Finite Indefinite Finite Indefinite useful life useful life useful life useful life A.1 Goodwill X - X A.2 Other intangible assets 206 - 588 - A.2.1 Assets measured at cost a) Internally generated intangible assets - - - - b) Other assets 206 - 588 - A.2.2 Assets measured at fair value a) Internally generated intangible assets - - - - b) Other assets - - - - Total 206 - 588 -

98 Notes to the Annual Report - Part B – Information on the balance sheet

12.2 Intangible assets: changes during the year

Goodwill Other intangible assets: Other intangible assets: Total internally generated other Fin Ind Fin Ind A. Gross initial carrying amount - - - 14.393 - 14.393 A.1 Total net adjustments - - - (13.805) - (13.805) A.2 Net initial carrying amount - - - 588 - 588 B. Increases - - - 94 - 94 B.1 Purchases - - - 94 - 94 B.2 Increases of internally generated intangible assets X - - - - - B.3 Write-backs X - - - - - B.4 Positive fair value differences recognised in - shareholders' equity X ------income statement X - - - - - B.5 Positive foreign exchange differences ------B.6 Other changes ------C. Decreases - - - (476) - (476) C.1 Sales ------C.2 Impairment losses - Amortisation X - - (476) - (476) - Write-downs recognised in + shareholders' equity X - - - - - + income statement - - - - - C.3 Negative fair value differences recognised in - shareholders' equity X ------income statement X - - - - - C.4 Transfer to non-current assets held for sale and discontinued operations ------C.5 Negative foreign exchange differences ------C.6 Other changes ------D. Net final carrying amount - - - 206 - 206 D.1 Total net adjustments - - - (14.281) - (14.281) E. Gross final carrying amount - - - 14.487 - 14.487 F. Measurement at cost - - - 206 - 206

Legenda. Fin.: Finite useful life. Ind.: Indefinite useful life.

12.3 Other information Pursuant to IAS 38, we report that intangible assets were not revalued, nor have any of them been purchased, in whole or in part, under government concession. At year-end there were no commitments to purchase new intangible assets or third-party rights to those carried in these financial statements.

99 Notes to the Annual Report - Part B – Information on the balance sheet

SECTION 13 - TAX ASSETS AND LIABILITIES - ASSET ITEM 130 AND LIABILITY ITEM 80

13.1 Prepaid tax assets: breakdown

13.2 Deferred tax liabilities: breakdown Prepaid and deferred taxes are recognized in connection with all temporary differences that arise from increases and decreases in the taxable base, without any time limits.

The primary deductible temporary differences refer chiefly to personnel expenses recognized on an accruals basis (approximately 9 million in prepaid taxes), adjusts to receivables (approximately 9 mil- lion), and allocations to provisions for risks and charges (approximately 8 million).

Deferred tax liabilities refer essentially to measurements of securities classified as available for sale.

13.3 Changes in deferred tax assets (through profit and loss)

31 December 2008 31 December 2007 1. Initial amount 67,039 66,335 2. Increases 18,087 69,392 2.1 Deferred tax assets recognised in the period a) related to previous years - - b) due to changes in accounting criteria - - c) value recoveries - - d) other 18,046 69,392 2.2 New taxes or tax rate increases - - 2.3 Other increases 41 - 3. Decreases (53,986) (68,688) 3.1 Deferred tax assets eliminated in the period a) reversals (48,780) (56,367) b) write-offs - (222) c) due to changes in accounting criteria - - 3.2 Tax rate reductions - (12,099) 3.3 Other decreases (5,206) - 4. Final amount 31,140 67,039

Other decreases refer to the determination of current tax assets, without any effective associated tax liability, following the final submission of tax returns for 2007, in the amount of 4.7 million. The remainder refers to the exchange-rate effect of the prepaid taxes reported by the London branch.

100 Notes to the Annual Report - Part B – Information on the balance sheet

13.4 Changes in deferred tax liabilities (through profit and loss)

31 December 2008 31 December 2007 1. Initial amount 27,677 29,604 2. Increases 3 31,842 2.1 Deferred tax liabilities recognised in the period a) related to previous years - 18 b) due to changes in accounting criteria - - c) other - 31,824 2.2 New taxes or tax rate increases 3 - 2.3 Other increases - - 3. Decreases (27,680) (33,769) 3.1 Deferred tax liabilities eliminated in the period a) reversals (27,612) (29,284) b) due to changes in accounting criteria - - c) other - (199) 3.2 Tax rate reductions - (4,286) 3.3 Other decreases (68) - 4. Final amount - 27,677

13.5 Changes in deferred tax (recorded in equity)

31 December 2008 31 December 2007 1. Initial amount 876 1,052 2. Increases 137 - 2.1 Deferred tax assets recognised in the period a) related to previous years - - b) due to changes in accounting criteria - - c) other 137 - 2.2 New taxes or tax rate increases - - 2.3 Other increases - - 3. Decreases - (176) 3.1 Deferred tax assets eliminated in the period a) reversals - - b) write-offs - - c) due to changes in accounting criteria - - 3.2 Tax rate reductions - (176) 3.3 Other decreases - - 4. Final amount 1,013 876

The increases for the year refer to the recognition at fair value of the portfolio of debt securities car- ried among available-for-sale assets.

101 Notes to the Annual Report - Part B – Information on the balance sheet

13.6 Changes in deferred taxes (recorded in equity)

31 December 2008 31 December 2007 1. Initial amount 1,408 5,689 2. Increases 839 244 2.1 Deferred tax liabilities recognised in the period a) related to previous years - - b) due to changes in accounting criteria - - c) other 839 58 2.2 New taxes or tax rate increases - 186 2.3 Other increases - - 3. Decreases (489) (4,525) 3.1 Deferred tax liabilities eliminated in the period a) reversals (411) - b) write-offs - - c) other - - 3.2 Tax rate reductions - (218) 3.3 Other decreases (78) (4,307) 4. Final amount 1,758 1,408

SECTION 15 - OTHER ASSETS - ITEM 150

15.1 Other assets: breakdown

31 December 2008 31 December 2007 Amounts to be debited - deriving from securities transactions 277,286 385,860 Due from Parent Company on fiscal consolidation 33,351 55,519 Leasehold improvements 785 1,133 Margins on behalf of third parties 5,892 83,040 Premiums to be settled 20,910 40,613 Other 30,571 129,575 Total 368,795 695,740

102 Notes to the Annual Report - Part B – Information on the balance sheet

LIABILITIES

SECTION 1 - DUE TO BANKS - ITEM 10

1.1 Due to banks: breakdown by category

Total Total 31 December 2008 31 December 2007 1. Due to Central Banks - - 2. Due to banks 2.1 Current accounts and deposits 3,238,763 4,957,481 2.2 Time deposits 2,460,386 2,749,482 2.3 Loans 2.3.1 Financial leases - - 2.3.2 Other 1,500,000 1,415,000 2.4 Debts for commitments to repurchase own equity instruments - - 2.5 Liabilities related to assets sold not derecognised - 2.5.1 Repurchase agreements 5,949,889 12,889,166 2.5.2 Other - - 2.6 Other debts 55,165 111,683 Total 13,204,203 22,122,812

Fair value 13,204,203 22,122,812

SECTION 2 - DUE TO CUSTOMERS - ITEM 20

2.1 Due to customers: breakdown by category

Total Total 31 December 2008 31 December 2007 1. Current accounts and deposits 175,483 37,695 2. Time deposits 368,077 374,587 3. Public funds under administration - - 4. Loans 4.1 Financial leases - - 4.2 Other - - 5. Debts for commitments to repurchase own equity instruments - - 6. Liabilities related to assets sold not derecognised 6.1 Reverse repurchase agreements 2,633,344 2,750,840 6.2 Other - - 7. Other debts - - Total 3,176,904 3,163,122

Fair value 3,176,904 3,163,122

103 Notes to the Annual Report - Part B – Information on the balance sheet

SECTION 3 - SECURITIES ISSUED - ITEM 30

3.1 Securities issued: breakdown by category

Total Total 31 December 2008 31 December 2007 Book Fair Book Fair value value value value A. Quoted securities 1. bonds 1.1 structured 7,636,344 7,021,358 - - 1.2 other 327,333 294,431 128,721 128,680 2. other 2.1 structured - - - - 2.2 other - - - - B. Unquoted securities 1. bonds 1.1 structured 777,041 760,193 975,755 975,752 1.2 other 9,082,527 8,959,068 2,273,669 2,286,691 2. other 2.1 structured - - - - 2.2 other - - - - Total 17,823,245 17,035,050 3,378,145 3,391,123

3.2 Detail of item 30 “Securities issued”: subordinated notes At 31 December 2008 the item “Securities in circulation” included a nominal 165 million in tier-two subordinated loans maturing 30 June 2014 with the option for early redemption by the issuer on each ex-dividend date beginning with 30 December 2009. Said loans have been underwritten in their entirety by the Parent Company, Intesa Sanpaolo, and offer a return of 30 BPs above the Euribor (90 BPs effective 1 January 2010).

3.3 Breakdown of caption 30 Securities issued: securities with specific hedges

Total Total 31 December 2008 31 December 2007 1. Securities with specific fair value hedges 9,068,283 1,151,230 a) interest rate risk 9,068,283 1,151,230 b) foreign exchange risk - - c) various risks - - 2. Securities with specific cash flow hedges - - a) interest rate risk - b) foreign exchange risk - - c) other - -

104 Notes to the Annual Report - Part B – Information on the balance sheet

SECTION 4 - FINANCIAL LIABILITIES HELD FOR TRADING - ITEM 40

4.1 Financial liabilities held for trading: breakdown by category

Total 31 December 2008 Total 31 December 2007 FV FV NV FV* NV FV* Q UQ Q UQ A. Cash liabilities 1. Due to banks 1,632,332 1,749,396 5,004 1,754,400 3,026,100 3,134,877 82,288 3,217,165 2. Due to customers ------3. Debt securities 3.1 Bonds 3.1.1 Structured - - - x - - - x 3.1.2 Other bonds - - - x - - - x 3.2 Other 3.2.1 Structured - - - x - - - x 3.2.2 Other - - - x - - - x Total A 1,632,332 1,749,396 5,004 1,754,400 3,026,100 3,134,877 82,288 3,217,165 B. Derivatives x x x x 1. Financial derivatives 1.1 Trading x 1,213,133 36,339,873 x x 1,151,205 16,640,763 x

1.2 Fair value option x - - x x - - x 1.3 Other x - - x x - - x 2. Credit derivatives 2.1 Trading x - 1,886,280 x x 236,955 x

2.2 Fair value option x - - x x - - x 2.3 Other x - - x x - - x Total B 1,213,133 38,226,153 1,151,205 16,877,718

Total (A+B) 1,632,332 2,962,529 38,231,157 1,754,400 3,026,100 4,286,082 16,960,006 3,217,165

Legenda: FV = fair value. FV* = fair value calculated excluding changes in creditworthiness of the issuer after issue date. NV = nominal value or notional. Q = quoted. UQ = unquoted.

The item “Due to banks” refers to short securities positions.

105 Notes to the Annual Report - Part B – Information on the balance sheet

4.4 Financial liabilities held for trading: derivatives

Type of derivatives/Underlying assets Interest Currencie Equities Loans Other Total Total rate and gold 2008 2007

A) QUOTED DERIVATIVES 1) Financial derivatives - with exchange of underlying asset - options issued 1 - 103,584 - - 103,585 89,335 - other derivatives ------without exchange of underlying asset - options issued - - 1,103,055 - 6,493 1,109,548 1,061,870 - other derivatives ------2) Credit derivatives - with exchange of underlying asset ------without exchange of underlying - asset ------Total A 1 - 1,206,639 - 6,493 1,213,133 1,151,205 B) UNQUOTED DERIVATIVES 1) Financial derivatives - with exchange of underlying asset - options issued 246 184,981 194,614 - - 379,841 284,442 - other derivatives 13,470 2,496,281 9,541 - - 2,519,292 1,141,917 - without exchange of underlying asset - options issued 3,637,367 17,123 1,008,526 - 3,930 4,666,946 4,178,061 - other derivatives 28,665,670 59 66,115 - 41,950 28,773,794 11,036,343 2) Credit derivatives - with exchange of underlying asset - - - 1,612,524 - 1,612,524 232,446 - without exchange of underlying - - - 273,756 - 273,756 4,509 asset

Total B 32,316,753 2,698,444 1,278,796 1,886,280 45,880 38,226,153 16,877,718

Total (A+B) 32,316,754 2,698,444 2,485,435 1,886,280 52,373 39,439,286 18,028,923

106 Notes to the Annual Report - Part B – Information on the balance sheet

SECTION 5 - FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE - ITEM 50

5.1 Financial liabilities designated at fair value: breakdown by category

Total 31 December 2008 Total 31 December 2007 FV FV NV FV* NV FV* Q UQ Q UQ 1. Due to banks 1.1 Structured - - - x - - - x 1.2 Other - - - x - - - x 2. Due to customers 2.1 Structured - - - x - - - x 2.2 Other - - - x - - - x 3. Debt securities 3.1 Structured 4,111,055 - 3,878,144 x 4,306,455 - 4,213,970 x 3.2 Other - - - x - - - x Total 4,111,055 - 3,878,144 - 4,306,455 - 4,213,970 -

Legenda: FV = fair value. FV* = fair value calculated excluding changes in creditworthiness of the issuer after issue date. NV = nominal value or notional. Q = quoted. UQ = unquoted.

The measurement at fair value at 31 December 2008 includes the sum of 146 million owing to the change in creditworthiness.

5.3 Financial liabilities designated at fair value: changes during the year

Due to Due to Securities Total banks customers issued A. Initial amount - - 4,213,970 4,213,970 B. Increases - - 2,052 2,052 B1. Issues - - - - B2. Sales - - - - B3. Positive fair value differences - - - - B4. Other changes - - 2,052 2,052 C. Decreases - - (337,878) (337,878) C1. Purchases - - (176,630) (176,630) C2. Reimbursements - - (21,581) (21,581) C3. Negative fair value differences - - (139,667) (139,667) C4. Other changes - - - - D. Final amount - - 3,878,144 3,878,144

107 Notes to the Annual Report - Part B – Information on the balance sheet

SECTION 6 - HEDGING DERIVATIVES - ITEM 60

6.1 Hedging derivatives: breakdown by type of derivatives and underlying assets

Type of derivatives/ Interest Currencie Equities Loans Other Total Underlyng assets rate and gold 2008

A) QUOTED DERIVATIVES 1) Financial derivatives – with exchange of underlying asset - options issued ------other derivatives ------– without exchange of underlying asset - options issued ------other derivatives ------2) Credit derivatives – with exchange of underlying asset ------– without exchange of underlying asset ------Total A ------B) UNQUOTED DERIVATIVES 1) Financial derivatives – with exchange of underlying asset - options issued ------other derivatives - 2,451 - - - 2,451 – without exchange of underlying asset - options issued ------other derivatives 216,285 - - - - 216,285 2) Credit derivatives – with exchange of underlying asset ------– without exchange of underlying asset ------Total B 216,285 2,451 - - - 218,736

Total (A+B) 31 December 2008 216,285 2,451 - - - 218,736

Total (A+B) 31 December 2007 70,519 - - - - 70,519

108 Notes to the Annual Report - Part B – Information on the balance sheet

6.2 Hedging derivatives: breakdown by hedged portfolios and type of hedge

Fair Value Cash flow Specific Interest Foreign Credit Price Various

rate exchange risk risk risk Generic Specific Generic risk risk 1. Financial assets available for sale - - - - - X - X 2. Loans - - - X - X - X 3. Investments held to maturity X - X - X - X 3.1 Equity investments 2,451 4. Portfolio X X X X X X 5. Foreign investments X X X X X X X Total assets - 2,451 ------1. Financial liabilities 216,285 - - X - X - X 2. Portfolio X X X X X X Total liabilities 216,285 ------1. Forecast transactions X X X X X X

Hedging derivatives refer to the interest-rate risk on bonds and the hedging of exchange-rate risk on the investee IMI Investments.

SECTION 8 - TAX LIABILITIES - ITEM 80

Please refer to Section 13 under assets for information on tax liabilities.

SECTION 10 - OTHER LIABILITIES - ITEM 100

10.1 Other liabilities: breakdown

Total Total 31 December 2008 31 December 2007 Due to suppliers 25,482 24,499 Due to employees 38,116 62,752 Due to social security entities 5,103 4,933 Amounts to be paid - deriving from securities transactions 65,228 86,012 Other creditors for other items 2,645 19,377 Transit item 43,019 166,536 Guarantees given and commitments 8,334 4,143 Accrued expenses and deferred income not restated 6,417 12,022 Total 194,344 380,274

109 Notes to the Annual Report - Part B – Information on the balance sheet

SECTION 11 - EMPLOYEE TERMINATION INDEMNITIES - ITEM 110

11.1 Employee termination indemnities: annual changes

Total Total 31 December 2008 31 December 2007 A. Initial amount 8,546 10,501 B. Increases 445 2,493 B.1 Provisions in the year 317 1,768 B.2 Other 128 725 C. Decreases (1,831) (4,448) C.1 Benefits paid (704) (2,509) C.2 Other (1,127) (1,939) D. Final amount 7,160 8,546

Following the reform of supplementary pension schemes enacted by Legislative Decree No. 252 of 5 De- cember 2005, severance indemnity benefits accrued after 1 January 2007 may, at the employee’s choice, be allocated to supplementary pension schemes or transferred to the fund managed by Italy’s social- security agency (INPS) and do not appear among annual changes.

The remaining increases and decreases refer to the complex changes in human resources as part of the integration process, particularly transfers to and from the Parent Company.

11.2 Other information Pursuant to article 2424-bis of the Italian Civil Code, we report that the statutory liability accrued at year-end in connection with termination indemnities came to 8.4 million euro (10.4 million at 31 De- cember 2007).

110 Notes to the Annual Report - Part B – Information on the balance sheet

SECTION 12 - ALLOWANCES FOR RISKS AND CHARGES - ITEM 120

12.1 Allowances for risks and charges: breakdown

Total Total 31 December 2008 31 December 2007 1. Post employment benefits - - 2. Other allowances for risks and charges 2.1 legal disputes 10,464 6,809 2.2 personnel charges 2,309 4,400 2.3 other 4,031 4,671 Total 16,804 15,880

12.2 Allowances for risks and charges: annual changes

Post Other Total employment allowances benefits A. Initial amount - 15,880 15,880 B. Increases - 5,000 5,000 B.1 Provisions in the year - 5,000 5,000 B.2 Time value changes - - B.3 Changes due to discount rate variations - - B.4 Other - - - C. Decreases - (4,076) (4,076) C.1 Uses in the year - (2,515) (2,515) C.2 Changes due to discount rate variations - - C.3 Other - (1,561) (1,561) D. Final amount - 16,804 16,804

SECTION 14 - SHAREHOLDERS’ EQUITY - ITEMS 130, 150, 160, 170, 180, 190 AND 200

14.1 Shareholders’ equity: breakdown

Total Total 31 December 2008 31 December 2007 1. Share capital 662,464 662,464 2. Share premium reserve 131,260 131,260 3. Reserves 688,387 477,706 4. (Treasury shares) - - 5. Valuation reserves 12,613 15,358 6. Equity instruments - - 7. Net income (loss) 293,358 210,681 Total 1,788,082 1,497,469

111 Notes to the Annual Report - Part B – Information on the balance sheet

14.2 “Share capital” and “Treasury shares”: breakdown Share capital consists of 662,464,000 shares without express nominal value. The Company does not hold any treasury shares.

14.3 Share capital - number of shares: annual changes

Ordinary Other A. Initial number of shares - fully paid-in 662,464,000 - not paid-in A.1 Treasury shares (-) B.2 Shares outstanding: initial number 662,464,000 - B. Increases - - B.1. New issues - for consideration - business combinations - conversion of bonds - exercise of warrants - other - for free - in favour of employees - in favour of directors - other B.2 Sale of treasury shares B.3 Other C. Decreases - - C.1 Annulment C.2 Purchase of treasury shares C.3 Disposal of companies C.4 Other D. Shares outstanding: final number 662,464,000 - D.1 Treasury shares (+) D.2 Final number of shares - fully paid-in 662,464,000 - - not paid-in

14.5 Detained earnings: other information Profit reserves, which are allocated in accordance with the Italian Civil Code, the Articles of Associa- tion, or in connection with specific resolutions passed by the Shareholders’ Meeting during the al- location of earnings for the period, aim to strengthen the Company’s capitalization.

A portion of these reserves, 180 million at 31 December 2008 and 31 December 2007, was identi- fied as coverage, pursuant to article 2359-bis of the Italian Civil Code, of the purchases of shares of the Parent Company, Intesa Sanpaolo. Said purchases were undertaken in the context of brokerage transactions on equity indices and listed options (in particular the SPMIB40) or on behalf of customers who requested temporary activity on their proprietary accounts.

The reader is referred to the Directors’ Report on Operation for further details in this regard.

112 Notes to the Annual Report - Part B – Information on the balance sheet

Pursuant to article 2427, section 7, of the Italian Civil Code, the following table shows an analysis of shareholders’ equity items, indicating the uses to which they may be put, and any effective draw- downs during the past three years.

Shareholders’ equity

Amount Portion Portion Uses in the past usable (*) available three years

loss coverage other Share capital 662,464 - Share premium reserve 131,260 Reserves: a) legal reserve 80,742 B - b) reserves for own shares or quotas(**) 180,000 A, B, C 178,263 c) statutory reserve 427,645 A, B, C 427,440 - - d) other reserves - Valuation reserves 12,613 A, B, C Net income 293,358 A, B, C 179,961 Shareholders' equity 1,788,082

(*) A = capital increase; B = loss coverage; C = distribution to shareholders. (**) Amount authorised for the purchase of Parent Company shares included in the financial statement forms under the caption “Reserves”.

The unavailable share of profit for the year refers to the sum allocated to the legal reserve and the unavailable reserve pursuant to article 6 of Legislative Decree No. 38/2005.

14.7 Valuation reserves: breakdown

Total Total 31 December 2008 31 December 2007 1. Financial assets available for sale 12,609 15,354 2. Property and equipment - 3. Intangible assets - 4. Foreign investment hedges - 5. Cash flow hedges - 6. Foreign exchange differences - 7. Non-current assets held for sale and discontinued operations - 8. Legally-required revaluations 4 4 Total 12,613 15,358

113 Notes to the Annual Report - Part B – Information on the balance sheet

14.8 Valuation reserves: changes during the year

Financial Property Intangible Foreign Cash flow Foreign Non-current Legally- assets and assets investment hedges exchange assets held required available equipment hedges differences for sale and revaluations for sale discontinued operations A. Initial amount 15,354 ------4

B. Increases

B1. Fair value increases 2,688 ------X

B2. Other changes ------

C. Decreases

C1. Fair value decreases (1,503) ------X

C2. Other changes (3,930) ------

D. Final amount 12,609 ------4

14.9 Valuation reserves for financial assets available for sale: breakdown

Total Total 31 December 2008 31 December 2007

Positive Negative Positive Negative reserve reserve reserve reserve 1. Debt securities 713 (35) 2. Equities 11,931 - 15,354 3. Quotas of UCITS - - 4. Loans - - Total 12,644 (35) 15,354 -

14.10 Valuation reserve for financial assets available for sale: changes during the year

Debt Equities Quotas of Loans securities UCITS 1. Initial amount - 15,354 - - 2. Positive fair value differences 2.1 Fair value increases 713 1,975 - - 2.2 Reversal to the income statement of negative reserves - impairment - - - - - disposal - (3,930) - - 2.3. Other changes - - - - 3. Negative fair value differences 3.1 Fair value decreases (35) (1,468) - - 3.2 Reversal to the income statement of positive reserves - disposal - - - - 3.3. Other changes - - - - 4. Final amount 678 11,931 - -

114 Notes to the Annual Report - Part B – Information on the balance sheet

OTHER INFORMATION

1. Guarantees and commitments

Total Total 31 December 2008 31 December 2007 1) Financial guarantees given a) Banks - 147,101 b) Customers 889,517 958,542 2) Commercial guarantees given a) Banks 369 369 b) Customers - - 3) Irrevocable commitments to lend funds a) Banks i) of certain use 5,995,736 5,929,547 ii) of uncertain use 12,300,732 1,084,443 b) Customers i) of certain use 1,425,595 922,789 ii) of uncertain use 1,796,792 2,599,927 4) Underlying commitments on credit derivatives: protection sales 45,063,774 26,123,745 5) Assets pledged as collateral of third party commitments - - 6) Other commitments - - Total 67,472,515 37,766,463

Irrevocable commitments to lend funds to banks consist of purchases of securities to be settled and options sold.

2. Assets pledged as collateral of liabilities and commitments

Total Total 31 December 2008 31 December 2007 1. Financial assets held for trading 4,384,552 5,456,492 2. Financial assets designated at fair value through profit and loss - 3. Financial assets available for sale 233,525 4. Investments held to maturity - 5. Due from banks - 6. Loans to customers - 7. Property and equipment - Total 4,618,077 5,456,492

The amount refers to the carrying value of owned securities used in funding repurchase agreements and derivatives transactions.

115 Notes to the Annual Report - Part B – Information on the balance sheet

4. Management and dealing on behalf of third parties

Amount 1. Dealing in financial instruments on behalf of third parties a) purchases 1) settled 430,771,248 2) to be settled 1,073,046 b) sales 1) settled 438,676,779 2) to be settled 77,060 2. Portfolio management a) individual - b) collective - 3. Custody and administration of securities a) third party securities held in deposit: related to depositary bank activities (excluding individual portfolio management schemes) 1. securities issued by the reporting bank - 2. other securities - b) other third party securities held in deposit (excluding individual portfolio management schemes): other 1. securities issued by the reporting bank 21,925,831 2. other securities 9,385,324 c) third party securities deposited with third parties 5,892,098 d) portfolio securities deposited with third parties 11,158,712 4. Other 31,867,602

The item “Other” refers to the receipt and collection of orders and placements.

116 Part C – Information on the Income Statement

SECTION 1 - INTEREST - ITEMS 10 AND 20

1.1 Interest and similar income: breakdown

Performing financial Non-perfor- Other 2008 2007 assets ming assets financial Debt assets Loans securities

1. Financial assets held for trading 373,011 - - - 373,011 331,294 2. Financial assets available for sale ------3. Investments held to maturity ------4. Due from banks - 934,487 - 12,666 947,153 710,334 5. Loans to customers 17,799 141,837 - 11,264 170,900 282,799 6. Financial assets designated at fair value through profit and loss ------7. Hedging derivatives X X X - - - 8. Assets sold not derecognised ------9. Other assets X X X 225 225 3,963 Total 390,810 1,076,324 - 24,155 1,491,289 1,328,390

1.3 Interest and similar income: other information

1.3.1 Interest income on foreign currency financial assets

2008 2007 currency 39,837 228,300

1.4 Interest and similar expense: breakdown

Debt Securities Other 2008 2007 securities liabilities

1) Due to banks (687,085) X (3,625) (690,710) (963,825) 2) Due to customers (141,111) X (14,074) (155,185) (358,988) 3) Securities issued X (461,280) - (461,280) (85,767) 4) Financial liabilities held for trading - - - - - 5) Financial liabilities designated at fair value - - - - - through profit and loss 6) Financial liabilities associated to assets sold not derecognised - - - - - 7) Other liabilities X X (525) (525) (4) 8) Hedging derivatives X X (9,071) (9,071) (4,089) Total (828,196) (461,280) (27,295) (1,316,771) (1,412,673)

117 Notes - Part C – Information on the Income Statement

1.5 Interest and similar expense: spreads on hedging transactions

2008 2007 A. Positive differentials on A.1 Specific fair value hedges of assets - - A.2 Specific fair value hedges of liabilities - - A.3 Generic hedges of interest rate risk - - A.4 Specific cash flow hedges of assets - - A.5 Specific cash flow hedges of liabilities - - A.6 Generic cash flow hedges - - Total positive differentials (A) - - B. Negative differentials on B.1 Specific fair value hedges of assets - - B.2 Specific fair value hedges of liabilities (9,071) (4,089) B.3 Generic hedges of interest rate risk - - B.4 Specific cash flow hedges of assets - - B.5 Specific cash flow hedges of liabilities - - B.6 Generic cash flow hedges - - Total negative differentials (B) (9,071) (4,089)

C. Balance (A-B) (9,071) (4,089)

1.6 Interest and similar expense: other information

1.6.1 Interest expense on foreign currency financial liabilities

2008 2007 currency (40,443) (168,713)

The decrease in absolute value between the two years in review of the “of which” for interest income (expense) on assets (liabilities) in foreign currencies is primarily due to the discontinuation of repur- chase agreement transactions with the subsidiary IMI Securities.

118 Notes - Part C – Information on the Income Statement

SECTION 2 - NET FEE AND COMMISSIONS - ITEMS 40 AND 50

2.1 Fee and commission income: breakdown

2008 2007 a) guarantees given 12,189 20,605 b) credit derivatives - - c) management, dealing and consultancy services 1. dealing in financial instruments 67,866 112,991 2. dealing in foreign exchange - - 3. portfolio management 3.1 individual - - 3.2 collective - - 4. custody and administration of securities 13 3 5. depositary bank - - 6. placement of securities 243,461 202,372 7. acceptance of trading instructions 4,656 8,964 8. consultancy services 61,494 25,096 9. distribution of third party services 9.1 portfolio management 9.1.1 individual - - 9.1.2 collective - - 9.2 insurance products - - 9.3 other products - - d) collection and payment services - - e) servicing related to securitisations 41 - f) services related to factoring - - g) tax collection services - - h) other services 10,900 15,856 Total 400,620 385,887

2.2 Fee and commission income: distribution channels for products and services

2008 2007 a) Branches - - 1. portfolio management - 2. placement of securities - 3. third party services and products - b) “Door-to-door” sales 243,461 202,372 1. portfolio management - 2. placement of securities 243,461 202,372 3. third party services and products - c) Other distribution channels - - 1. portfolio management - 2. placement of securities - 3. third party services and products - Total 243,461 202,372

119 Notes - Part C – Information on the Income Statement

2.3 Fee and commission expense: breakdown

2008 2007 a) Guarantees received (618) (1,339) b) Credit derivatives - - c) Management, dealing and consultancy services 1. dealing in financial instruments (33,207) (63,226) 2. dealing in foreign exchange - (51) 3. portfolio management 3.1 own customers - - 3.2 delegated - - 4. custody and administration of securities (14,451) (11,129) 5. placement of financial instruments (222,248) (197,278) 6. “door-to-door” sale of financial instruments, products and services - - d) Collection and payment services (3,413) (4,001) e) Other services - - - distribution of OTC derivatives (2,596) (31,142) - other transactions (1,601) (2,210) Total (278,134) (310,376)

Under the OTC derivatives service model between Banca IMI and the Group’s distribution networks, which entered into force in 2008, the trading revenue to which the various parties are entitled is directly settled within the securities themselves, as opposed to the separate, subsequent payment of commis- sions paid in force through 2007.

SECTION 3 - DIVIDENDS AND SIMILAR INCOME - ITEM 70

3.1 Dividends and similar income: breakdown

2008 2007 Dividends Income Dividends Income from from quotas of quotas of UCITS UCITS A. Financial assets held for trading 403,178 10,129 276,658 8,647 B. Financial assets available for sale 2,047 - 3,858 - C. Financial assets designated at fair value through profit and loss - - - - D. Equity investments - X 2,754 X Total 405,225 10,129 283,270 8,647

120 Notes - Part C – Information on the Income Statement

SECTION 4 - PROFITS (LOSSES) ON TRADING - ITEM 80

4.1 Profits (losses) on trading: breakdown

Revaluations Profits on Write- Losses Net result (A) trading downs (C) on trading (A+B ) - (C+D) (B) (D)

1. Financial assets held for trading 1.1 Debt securities 396,355 499,430 (563,804) (523,995) (192,014) 1.2 Equities 52,854 941,627 (69,416) (1,426,344) (501,279) 1.3 Quotas of UCITS 55,098 288,210 (86,572) (500,746) (244,010) 1.4 Loans - - - - - 1.5 Other - 812 - (799) 13 2. Financial liabilities held for trading 2.1 Debt securities 45,975 216,257 (60,936) (193,315) 7,981 2.2 Other 27,306 357,555 (26,938) (496,296) (138,373) 3. Foreign exchange differences X X X X 57,923 4. Derivatives 4.1 Financial derivatives - On debt securities and interest rates 23,251,082 35,380,531 (22,789,062) (35,609,843) 232,708 - On equities and stock indexes 2,158,820 4,930,668 (1,803,193) (4,727,841) 558,454 - On foreign exchange and gold X X X X 39,674 - Other 93,103 152,234 (58,382) (168,066) 18,889 4.2 Credit derivatives 1,686,167 2,026,738 (1,649,466) (1,967,594) 95,845 Total 27,766,760 44,794,062 (27,107,769) (45,614,839) (64,189)

121 Notes - Part C – Information on the Income Statement

SECTION 5 - FAIR VALUE ADJUSTMENTS IN HEDGE ACCOUNTING - ITEM 90

5.1 Fair value adjustments in hedge accounting: breakdown

2008 2007 A. Income from A.1 Fair value hedge derivatives 392,484 12,489 A.2 Financial assets hedged (fair value) - - A.3 Financial liabilities hedged (fair value) - 16,571 A.4 Cash flow hedge: derivatives - - A.5 Foreign exchange assets and liabilities - - Total (A) 392,484 29,060 B. Expenses for B.1 Fair value hedge derivatives - (17,123) B.2 Financial assets hedged (fair value) - - B.3 Financial liabilities hedged (fair value) (426,269) - B.4 Cash flow hedge: derivatives - - B.5 Foreign exchange assets and liabilities (4,810) (12,000) Total (B) (431,079) (29,123)

Total (A-B) (38,595) (63)

The item took on a negative value in the fourth quarter due to the sharp decline in interest rates on the short-term portion of the curve. The situation of constantly falling rates resulting in capital losses on most of floating-rate funding, which fixed its benchmark during the previous months.

The ineffective portion is not structural and will gradually decrease upon the conclusion of the decline in money-market rates.

122 Notes - Part C – Information on the Income Statement

SECTION 6 - PROFITS (LOSSES) ON DISPOSAL OR REPURCHASE - ITEM 100

6.1 Profits (losses) on disposal or repurchase: breakdown

2008 2007 Profits Losses Net result Profits Losses Net result Financial assets 1. Due from banks - - - - 2. Loans to customers - - - - 3. Financial assets available for sale 3.1 Debt securities - - - - 3.2 Equities 4,189 - 4,189 126,807 - 126,807 3.3 Quotas of UCITS - - - - 3.4 Loans - - - - 4. Investments held to maturity - - - - Total assets 4,189 - 4,189 126,807 - 126,807 Financial liabilities 1. Due to banks - - - - 2. Due to customers - - - - 3. Securities issued 1,119 - 1,119 - Total liabilities 1,119 - 1,119 - - -

The revenues reported on financial assets available for sale refer to the equity investments in MTS and the London Stock Exchange during 2008 and 2007, respectively.

The 1.1 million in profits on financial liabilities refer to the trading on secondary markets of securities issued by Banca IMI, measured at amortized cost.

123 Notes - Part C – Information on the Income Statement

SECTION 7 - PROFITS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES DESIGNATED AT FAIR VALUE - ITEM 110

7.1 Profits (losses) on financial assets and liabilities designated at fair value: breakdown

Revaluations Profits on Write- Losses Net result (A) trading downs (C) on disposal (A+B ) - (C+D) (B) (D)

1. Financial assets 1.1 Debt securities - - - - - 1.2 Equities - - - - - 1.3 Quotas of UCITS - - - - - 1.4 Loans - - - - - 2. Financial liabilities 2.1 Securities issued 152,603 13,467 (12,936) (41,142) 111,992 2.2 Due to banks - - - - - 2.3 Due to customers - - - - - 3. Foreign currency financial assets and liabilities: foreign exchange differences X X X X - 4. Derivatives 4.1 Financial derivatives - On debt securities and interest rates ------On equities and stock indexes ------On currencies and gold X X X X - - Other - - - - - 4.2 Credit derivatives - - - - - Total derivatives - - - - -

Total 152,603 13,467 (12,936) (41,142) 111,992

In application of IFRS 7 (§10), we report that the change in the fair value during the period and on a cumulative basis (since the date of issue) attributable to changes in the credit risk associated with financial liabilities issued by the Bank came to 146 million.

124 Notes - Part C – Information on the Income Statement

SECTION 8 - NET LOSSES/RECOVERIES ON IMPAIRMENT - ITEM 130

8.1 Impairment losses of receivables: breakdown

Impairment losses (1) Recoveries (2) 2008 2007 Individual Collective Individual Collective

write-offs other A B A B A. Due from banks ------(1,925) B. Loans to customers - (28,449) (3,716) - - - - (32,165) - C. Total - (28,449) (3,716) - - - - (32,165) (1,925)

Legenda A = of interest. B = other.

Specific value adjustments refer to net receivable positions claimed from companies belonging to the Lehman Group. Portfolio adjustments include the collective write-down of the securities portfolio reclassified to loans and receivables.

8.4 Impairment losses on other financial transactions: breakdown

Impairment losses (1) Recoveries (2) Total Total 31 december 31 december Individual Collective Individual Collective 2008 2007 write-offs other A B A B

A. Guarantees given - - (4,191) - - - - (4,191) - B. Credit derivatives ------C. Commitments to lend ------funds D. Other - (566) - - - - - (566) - E. Totale - (566) (4,191) - - - - (4,757) -

Legenda A = of interest. B = other.

Specific adjustments to “Other transactions” refer to the decrease in the value of the TLX.

125 Notes - Part C – Information on the Income Statement

SECTION 9 - ADMINISTRATIVE EXPENSES - ITEM 150

9.1 Personnel expenses: breakdown

2008 2007 1) Personnel employed a) wages and salaries (57,780) (90,135) b) social security charges (14,795) (21,540) c) termination indemnities - d) supplementary benefits (533) (112) e) provisions for termination indemnities (317) (1,851) f) provisions for post employment benefits - defined contribution plans - - - defined benefit plans - - g) payments to external pension funds - defined contribution plans (4,100) (4,174) - defined benefit plans - - h) costs from share-based payments - (220) i) other benefits in favour of employees (763) (492) l) costs for seconded personnel (net) (4,919) (2,119) 2) Other personnel (1,192) (1,293) 3) Directors (1,011) (1,286) 4) Expenses lost exit incentives - - Total (85,410) (123,222)

At 31 December 2008 employees on the payroll came to 538 (586 at 31 December 2007), of which 62 were managers (63), 339 officers (381), and 137 belonged to the remaining professional categories (142).

The average workforce for the year came to 569 resources, including part-time workers.

9.2 Average number of employees by categories

Category 2008 2007 Personnel employed a) managers 63 73 b) officers 360 435 - of which 3rd and 4th level 242 279 c) other employees 141 198 Other personnel 5 35 Total 569 741

The average number of employees is calculated as the semi-sum of the resources on the payroll at the beginning and end of the year.

126 Notes - Part C – Information on the Income Statement

9.5 Other administrative expenses: breakdown

2008 2007 Taxes and duties - stamp duty on stock exchange contracts - (5,915) - other taxes and duties - Italy (27) (68) - other taxes and duties - Abroad (684) (768) Total taxes and duties (711) (6,751)

Information technology, processing and data processing services (92,074) (102,420) Expenses for consultancy fees (47,432) (34,376) Telephonic, teletransmission and transmission expenses (898) (2,309) ICT services: maintenance (720) (521) Real estate rental and management expenses (5,636) (8,123) Data base subscriptions (1,896) (3,616) Advertising and promotional expenses (4,355) (4,119) Associations and subscriptions (1,322) (1,154) Reimbursements to personnel and business travels (1,333) (1,886) Legal expenses (2,912) (2,240) Training and other personnel expenses (112) (1,094) Lighting, central heating and air conditioning (1,179) (1,588) Expenses for maintenance of furniture and equipments (161) (470) Security services (311) (269) Maintenance of real estate assets (134) (408) Cleaning services (257) (550) Rentals of other property and equipment (224) (675) Printing, stationery and consumables (473) (694) Insurance premiums (100) (454) Data storage and document processing (245) (87) Charities (10) (31) Postal and telegraphic (21) (58) Transport and other connected services (204) (176) Other (1,291) (3,784) Total (164,011) (177,853)

Following the abrogation of the “tax on stock market contracts”, the Company remains liable for indi- rect taxes (such as TARSU and TOSAP) and non-deductible VAT.

The latter cost item is stated on a separate line for foreign branches whereas it is included in the indi- vidual statement of income items for the Milan branch.

127 Notes - Part C – Information on the Income Statement

SECTION 10 - NET PROVISIONS FOR RISKS AND CHARGES - ITEM 160

10.1 Net provisions for risks and charges: breakdown

Tipologie di Spese/Valori 2008 2007 Net provisions for legal disputes (5,000) (20,085) Net provisions for risks and charges - (6,400) Total (5,000) (26,485)

SECTION 11 - NET ADJUSTMENTS TO/RECOVERIES ON PROPERTY AND EQUIPMENT - ITEM 170

11.1 Net adjustments to/recoveries on property and equipment: breakdown

Depreciation Impairment Recoveries Net result (a) losses (b) (c) (a+b-c)

A. Property and equipment A.1 Owned - used in operations (454) - - (454) - investment - - - - A.2 Acquired in financial leases - used in operations - - - - - investment - - - - Total (454) - - (454)

SECTION 12 - NET ADJUSTMENTS TO/RECOVERIES ON INTANGIBLE ASSETS - ITEM 180

12.1 Net adjustments to/recoveries on intangible assets: breakdown

Depreciation Impairment Recoveries Net result (a) losses (b) (c) (a+b-c)

A. Intangible assets A.1 Owned - internally generated - - - - - other (476) - - (476) A.2 Acquired in financial leases - - - - Total (476) - - (476)

128 Notes - Part C – Information on the Income Statement

SECTION 13 - OTHER OPERATING EXPENSES/INCOME - ITEM 190

13.1 Other operating expenses: breakdown

2008 2007 Contingent liabilities and items to be reconciliated (3,762) (2,234) Amortisation of leasehold improvements (381) (766) Other (43) (1,030) Total (4,186) (4,030)

13.2 Other operating income: breakdown

2008 2007 Contingent liabilities and items to be reconciliated 20,700 15,611 Recovery of taxes 2 4,952 Recovery of other expenses 628 2,078 Other 308 140 Total 21,638 22,781

Out-of-period items include the release to the statement of income of allocations to provisions exceed- ing the amount of the effective liability discharged, in the amounts of 16 and 12 million, respectively.

SECTION 14 - PROFITS (LOSSES) ON EQUITY INVESTMENTS - ITEM 210

14.1 Profits (losses) on equity investments: breakdown

2008 2007 A. Profit 305 - 1. Revaluations - 2. Profits on disposal 305 3. Write-backs - 4. Other - B. Losses - - 1. Write-downs - 2. Impairment losses - 3. Losses on disposal - 4. Other - Net Result 305 -

129 Notes - Part C – Information on the Income Statement

SECTION 17 - PROFITS (LOSSES) ON DISPOSAL OF INVESTMENTS - ITEM 240

17.1 Profits (losses) on disposal of investments: breakdown

2008 2007 A. Real estate assets - profits on disposal - - - losses on disposal - - B. Other assets - profits on disposal 1 1 - losses on disposal - - Net result 1 1

SECTION 18 - TAXES ON INCOME FROM CONTINUING OPERATIONS - ITEM 260

18.1 Taxes on income from continuing operations: breakdown

2008 2007 1. Current taxes (-) (150,778) (90,614) 2. Changes in current taxes of previous years (+/-) - - 3. Reduction in current taxes of the year (+) - - 4. Changes in deferred tax assets (+/-) (35,899) 528 5. Changes in deferred tax liabilities (+/-) 27,677 2,086 6. Taxes on income for the year (-) (-1+/-2+3+/-4+/-5) (159,000) (88,000)

130 Notes - Part C – Information on the Income Statement

18.2 Reconciliation of theoretical tax charge to total income tax expense for the period

31 December 2008 31 December 2007 Amount Tax rate Amount Tax rate

MAIN TAX Income before tax 452,358 27.5 298,681 33 Theoretical tax expense (124,398) 27.5 (98,565) 33 - permanent positive differences 54,565 27.5 210,508 33 - permanent negative differences (8,451) 27.5 (347,007) 33 - tax losses carried forward 0 27.5 (53,449) 33 - temporary positive differences 132,277 27.5 266,639 33 - temporary negative differences (156,127) 27.5 (177,400) 33 Taxable income 474,622 197,972 Current IRES (130,521) (65,330)

SECONDARY TAX Income before tax 452,358 4.82 298,681 5.25 Theoretical tax expense (21,804) 4.82 (15,681) 5.25 - permanent positive differences 196,627 4.82 334,463 5.25 - permanent negative differences (335,901) 4.82 (274,669) 5.25 - temporary positive differences 187,132 4.82 214,599 5.25 - temporary negative differences (113,011) 4.82 (263,251) 5.25 Taxable income 387,205 309,823 Current IRAP (18,663) (16,266)

Taxes paid abroad (1,594) 28% (9,018) 30%

- changes in deferred tax assets (35,899) 12,626 - changes in deferred tax liabilities 27,677 (2,199) - changes in tax rate 0 (7,813) Deferred tax assets and liabilities (8,222) 2,614

Income tax (159,000) (88,000)

131 Notes - Part C – Information on the Income Statement

SECTION 20 - OTHER INFORMATION

Over 97.1% of operating revenues (compared to 96.8% in 2007) is recognized on the Milan office’s books. The remaining 2.9% (3.2% in 2007) corresponds to the net revenues generated by brokerage of listed de- rivatives, which is recorded on the books of the London branch. The Athens branch, which engages in the commercial promotion of the origination of debt securities, did not report revenues locally during the year.

Given the particular nature of operations, a significant portion of which is carried out through remote access to organized systems of exchange or multilateral trading circuits, the geographical breakdown of revenues is not directly correlated to the geographical location of the Bank’s branches.

SECTION 21 - EARNINGS PER SHARE

Earnings per share came to 0.443 euro in 2008 and 0.318 euro in 2007. Said amount was determined by considering the net profit for the year in relation to the number of ordinary shares in circulation at year-end.

21.1 Diluted average number of ordinary shares In all of 2008, share capital consisted of 662,464,000 shares without an express nominal value. At the date of this report, the sole shareholder is Intesa Sanpaolo.

21.2 Other information Earnings per share, as calculated above, coincides with both base and diluted earnings per share, inasmuch as no capital transactions were undertaken or debt securities convertible into shares were issued such as to modify said ratio.

Please refer to the Proposal to the Shareholders’ Meeting in the Report on Operations for details concerning the allocation of net profit for the year.

132 Part E – Information on risks and hedging policies

Risk monitoring and control system Banca IMI has always attached great importance to risk monitoring and control and viewed these as es- sential to: – ensuring reliable, sustainable creation of value in a context of controlled risk; – protecting the Company’s financial solidity and reputation; – permitting a transparent representation of the degree of risk associated with the Bank’s portfolios.

It is in this light that one ought to interpret the efforts of recent years aimed at obtaining validation from Regulatory Bodies, including for regulatory purposes, of internal market risk models. The definition of operational limits linked to risk indicators (such as VaR) and the management’s use of the measurement of “value at risk” implicit in the various portfolios are some of the steps taken in accord- ance with the strategic and decision-making guidelines laid down by the Board of Directors.

Controls, which are spread along the Bank’s entire decision-making chain, extend all the way to individual operating units and desks.

Within the system of the controls, the departments of the Parent Company charged with risk management and internal audit activity under specific service agreements –Risk Management and Internal Audit – pe- riodically meet with the departments of the Bank entrusted with line controls and the heads of operational units, both in the course of day-to-day operations and in specific committees, particularly the Risk Meet- ing, Market Meeting and New Products Committee.

Risk management activity aims to ensure constant monitoring of the main risks, regulatory compliance and effective support for the decision-making process.

This process involves: – the rigorous, timely measurement of risks: analyses are conducted primarily on effective positions with respect to normal, historical market conditions and are enriched by portfolio analyses, stress test estimates, and what-if and scenario simulations; – the definition of parameters and rules for measuring contracts subject to mark-to-market and fair value, and direct structuring and measurement where this may not be obtained through the standard tools available to business units; – interaction with the supervisory authority for the validation and development of internal models; – the provision of information in support of company planning and to the top management to enable the measurement of the generation of value; – support for communication to pursue goals of transparency towards customers and the market.

133 Notes - Part E – Risks and hedging policies

SECTION 1 - CREDIT RISK

QUALITATIVE INFORMATION

1. General aspects Credit risk results from the possibility that a counterparty may not fulfil the obligations it has contracted in the course of the Bank’s normal business operations, in particular due to transactions in securities, deriva- tives and structured finance.

The credit risk attributable to securities transactions is mitigated by extensive use of collateralization and netting agreements.

Exposures resulting from credit risk originating in the disbursement of loans attributable to structured fi- nance operations may be classified into two categories: a. endorsement exposures on guarantees provided to the Parent Company and Banche dei Territori, which hold direct on-balance sheet and endorsement exposures to end borrowers in their capacities as fronting banks, as a way for Banca IMI to share in credit risk. Such operations are governed by a specific commercial agreement, under which Banca IMI assists the Network Bank with: the analysis of potential transactions; the preparation/structuring of offers; the coordination of third-party advisors; and support for the negotiation of commercial agreements with customers; b. exposures due to market transactions (usually through participation as mandated lead arrange, ar- ranger and/or underwriter), typically for loans to international clients. Such transactions are closely tied to the Bank’s operations on financial markets and may yield returns in the short term.

2. Credit risk management policies

2.1 Organizational aspects Within the context of the powers delegated by the Board of Directors, the monitoring of credit risk has been attributed to the Loan Department, both during the loan authorization phase and the management and monitoring of credit risk.

This latter activity aims to identify doubtful and/or non-performing loans, ensure they are properly meas- ured, and define the strategy best suited to protecting the Bank’s claims.

In this regard, the Loan Department benefits from the coordination provided by the Parent Company, Intesa Sanpaolo.

Loans are authorized by resolution of the Board of Directors and/or the decision-making bodies to which the former has delegated its authority according to a system of internal operational powers and delegation of authority.

The process of managing and monitoring credit risk conforms to the criteria established by the Parent Company and is conducted within the framework of parameters according to which Banca IMI’s loan- authorization autonomy is determined and exercised. Where the loan autonomy limits are exceeded, authorization of the loan is subject to the issue of an ad- vance Conformity Opinion by the Parent Company.

Credit exposures are measured for impairment testing and portfolio value adjustments are estimated pursuant to IAS 39 in accordance with the Parent Company’s risk management policies.

In further detail, loans for which there is not objective evidence of impairment on an individual basis are sub- ject to the determination of collective impairment. This is done for homogeneous categories of loans in terms of credit risk by associating them with “weighted”

134 Notes - Part E – Risks and hedging policies impairment percentages on the basis of historical series, according to elements observable on the assessment date, thus allowing for an estimate of the value of the impairment existing in each category of loans.

The method developed by the competent Risk Management functions calls for the incurred loss to be calcu- lated on the basis of the expected loss, which is determined for each individual transaction according to risk parameters (PD and LGD) estimated through the IRB models established by supervisory rules, supplemented by external evaluations or average figures by segment/portfolio.

The expected loss thus calculated is then aggregated into pools according to predetermined criteria (reporting company, business segment, geographical location) and transformed into incurred loss by applying factors that capture: – LCP (Loss Confirmation Period), a factor representative of the time interval between the event that generates default and the manifestation of the sign of default, which permits the transformation of the loss from “expected” to “incurred”; – economic cycle, through an adjustment coefficient that is required inasmuch as ratings are calibrated on the average level expected over the long term and only partially reflect current conditions; – portfolio concentration, a prudential corrective factor.

2.2 Management, measurement and control systems Counterparty risk is monitored through an application into which data from the position keeping systems is entered, and which is capable of reflecting the effects of the transactions undertaken in real time.

The operational limits approved and the draw-downs for individual positions are subsequently entered into a specific Loan Data Warehouse that permits the exposure to individual clients to be displayed. Where there exist agreements for collateralization and mutual payment of guarantee margins, the exposure is entered net of the collateral provided by counterparties. Overruns, in terms of amount and duration, are monitored on a daily basis.

During the current period of transition leading up to the transfer of a larger portion of the activities cur- rently performed by Intesa Sanpaolo, Banca IMI’s structured finance business unit is supported by the Parent Company’s central departments (Loans, Risk Management) in the process of measuring and monitoring risk in this area. This is true for aspects pertaining to the measurement and monitoring of exposures, the assessment of creditworthiness, and the determination of the existence of impairment.

2.3 Credit risk mitigation techniques As stated in the previous paragraph, “General aspects”, the Bank uses (bilateral) netting agreements that, in the event of default, permit the offsetting of all receivable and payable positions in connection with out- standing derivatives, repurchase agreements and securities lending transactions. The ISDA (for derivatives transactions) and ISMA (for securities transactions) protocols are generally adopt- ed. Both of these protocols allow for the management and mitigation of credit risk. In certain circumstances, they may contribute to the reduction of the absorption of regulatory capital.

There are currently 195 collateral agreements in effect, of which 117 CSAs securing OTC derivatives transac- tions and 78 GMRAs (Global Master Repurchase Agreements) securing repurchase agreement transactions.

In addition, securities lending transactions are always undertaken following the signature of a Global Master Securities Lending Agreement, which calls for daily exchanges of collateral (normally in the form of cash) equal to the notional value of the individual loan, plus a percent increase (normally no less than 5%).

Another mitigation technique employed by the Bank is participation in the SwapClear service. This service provides clearing (executed by LCH Clearnet Ltd. for the professional interbank market) for the most stand- ard types of over-the-counter derivatives contracts (plain-vanilla IRSs).

Individual transactions previously undertaken by participants in the service are subsequently transferred to the clearing house which, similarly to the case of listed derivatives, becomes the counterparty to the original contracting parties through the legal mechanism of novation. 135 Notes - Part E – Risks and hedging policies

SwapClear calls for the payment of daily margins of change on individual transactions so that mutual receiv- able and payable positions are automatically offset with one another.

In addition to the reduction of operational risk (through daily offsetting of all cash flows and timely match- ing of transactions), SwapClear allows the Bank to take advantage of the typical benefits of centralized netting and collateralization agreements.

Recent participation in the CLS circuit – Continuous Linked Settlement – and the corresponding settlement services in payment-versus-payment mode also permitted the mitigation of settlement risk associated with mutual payments with counterparties.

Lastly, the Bank’s credit risk mitigation techniques also include credit derivative products, a segment in which it operates primarily with the chief aim of optimizing the management of its trading books, typically taking the position of net protection buyer.

Said transactions were undertaken with leading institutional counterparties.

2.4. Non-performing financial assets When a default takes place, debt recovery procedures are initiated in coordination with Banca IMI’s Legal Affairs Office and the Parent Company’s Legal and Dispute Department.

In 2008 the Company was affected by the defaults of the Lehman Brothers Group and the Icelandic bank Glitnir.

As regards the first case, it should be noted that on 15 September 2008 the investment bank’s holding company was placed in Chapter 11 bankruptcy, whereas the European subsidiaries (Banca IMI’s market counterparties) were declared going concerns.

Said event also represented the condition for unilateral termination of outstanding financial transactions and the concurrent initiation of the most appropriate methods of recovering the amounts claimed by Banca IMI, including through the enforcement of mutually provided collateral.

Legal procedures aimed at recovering the gross nominal exposure of approximately 38 million (which al- ready takes account of the sums collected on guarantees received and includes receivables for pledges pro- vided) are still in progress. The date of final resolution is therefore difficult to determine at this time, given the subject matter’s breadth and complexity. In accordance with the decisions made at the Group level, the three operating companies that serve as counterparties to Banca IMI were classified as non-performing and the carrying value of the receivables was written down by 75%, a percentage deemed appropriate to reflect the presumed realizable value thereof in the absence of information concerning the amount of and timeframe for effective recovery, the outcome of which remains linked to the progress of the individual procedures.

The amounts of the securities issued by the Lehman Brothers holding company in the trading portfolio (nominal value of approximately 9 million) were written down by 90% on the basis of the recovery rate marked by the sale at auction (21 October 2008) of the credit derivatives having as their reference entity the U.S. investment bank.

The outstanding transactions with the Icelandic bank, all of which pertained to the trading book, were more modest in extent. The payables and receivables claimed by Banca IMI in connection with these transactions were substantially offset with one another.

The extension of the moratorium on Glitnir’s debt through November 2009 led to a general postponement of the deadlines for formal procedural action.

136 Notes - Part E – Risks and hedging policies

QUANTITATIVE INFORMATION

A. CREDIT QUALITY

A.1 Non-performing and performing exposures: amounts, adjustments, trends, and distribution by business segment and geographical area

A.1.1 Breakdown of financial assets by portfolio and credit quality (carrying values)

Non- Doubtful Restructured Past due Country Other Total Performing loans exposures exposures risk assets loans 1. Financial assets held for trading - - - 4,771 5,178 48,663,002 48,672,951 2. Financial assets available for sale - - - - - 252,807 252,807 3. Investments held to maturity ------4. Due from banks - - - - - 26,409,181 26,409,181 5. Loans to customers 9,483 - - - - 5,459,767 5,469,250 6. Financial assets designated at fair value through profit and loss ------7. Financial assets under disposal ------8. Hedging derivatives - - - - - 361,545 361,545

Total 2008 9,483 - - 4,771 5,178 81,146,302 81,165,734

Total 2007 - - - 8,550 13,045 55,241,158 55,262,753

For the purposes of this table, only exposures to countries in “Area B”, for which a lump-sum im- pairment percentage is provided, are considered subject to “country risk”4.

137 Notes - Part E – Risks and hedging policies

A.1.2 Breakdown of the financial assets by portfolio and credit quality: (gross and net values)

Non-performing assets Other assets Total (net Gross Individual Collective Net Gross Collective Net exposure) exposure adjustments adjustments exposure exposure adjustments exposure 1. Financial assets held for trading 11,859 (7,088) - 4,771 X X 48,668,180 48,672,951 2. Financial assets available for sale - - - - 252,807 - 252,807 252,807 3. Investments held to maturity ------4. Due from banks - - - - 26,409,181 - 26,409,181 26,409,181 5. Loans to customers 37,932 (28,449) - 9,483 5,465,517 (5,751) 5,459,767 5,469,250 6. Financial assets designated at fair value through profit and loss - - - - X X - - 7. Financial assets under disposal ------8. Hedging derivatives - - - - X X 361,545 361,545

Total 2008 49,791 (35,537) - 14,254 32,127,505 (5,751) 81,151,480 81,165,734

Total 2007 9,337 (787) - 8,550 23,588,988 (2,035) 55,254,203 55,262,753

The gross exposure of non-performing assets – financial assets held for trading – corresponds to the average weighted cost of purchasing such assets, prior to year-end assessments.

A.1.3 On- and off-balance sheet exposures to banks: gross and net values

Gross Individual Collective Net exposure adjustments adjustments exposure A. On-balance sheet exposures a) non-performing loans - - - - b) doubtful loans - - - - c) restructured exposures - - - - d) past due exposures 3,163 - - 3,163 e) country risk - X - - f) other assets 29,290,227 X - 29,290,227 Total A 29,293,390 - - 29,293,390 B. Off-balance sheet exposures a) non-performing - - - - b) other 35,472,992 X (10,743) 35,462,249 Total B 35,472,992 - (10,743) 35,462,249

138 Notes - Part E – Risks and hedging policies

A.1.4 On-balance sheet exposures to banks: changes in gross non-performing exposures and exposures subject to “country risk”

Non- Doubtful Restructured Past due Country Performing loans exposures exposures risk loans A. Initial gross exposure of which exposures sold not derecognised B. Increases - - - 3,163 - B1. inflows from performing exposures 3,163 B2. transfers from other non-performing exposure categories B3. other increases C. Decreases - - - - - C1. outflows to performing exposures C2. write-offs C3. repayments C4. credit disposals C5. transfers to other non-performing exposure categories C6. other decreases D. Final gross exposure - - - 3,163 - of which exposures sold not derecognised

Past-due exposures to banks consist of the trading-book transactions outstanding with the Icelandic bank Glitnir, which continued to be carried at their book values by virtue of the substantial offset- ting between the payable and receivable positions claimed by Banca IMI.

A.1.6 On- and off-balance sheet exposures to customers: gross and net values

Gross Individual Collective Net exposure adjustments adjustments exposure A. On-balance sheet exposures a) non-performing loans 37,932 (28,449) - 9,483 b) doubtful loans - - - - c) restructured exposures - - - - d) past due exposures 8,696 (7,088) - 1,608 e) country risk 5,178 x - 5,178 f) other assets 11,501,643 x (5,751) 11,495,892 Total A 11,553,449 (35,537) (5,751) 11,512,161 B. Off-balance sheet exposures a) non-performing - - - - b) other 40,196,370 - (22,177) 40,174,193 Total B 40,196,370 - (22,177) 40,174,193

On- and off-balance sheet exposures are attributed to the appropriate counterparty category re- gardless of the portfolio applicable. Exposures to governments and public entities are included in table A.1.6 by convention.

139 Notes - Part E – Risks and hedging policies

A.1.7 On-balance sheet exposures to customers: changes in non-performing expo- sures and gross exposures subject to “country risk”

Non- Doubtful Restructured Past due Country Performing loans exposures exposures risk loans A. Initial gross exposure - - - 9,337 13,045 of which exposures sold not derecognised B. Increases 37,932 - - 8,696 5,178 B1. inflows from performing loans 37,932 B2. transfers from other non-performing exposure categories B3. other increases 8,696 5,178 C. Decreases - - - (9,337) (13,045) C1. outflows to performing loans C2. write-offs C3. repayments C4. credit disposals (9,337) (13,045) C5. transfers to other non-performing exposure categories C6. other decreases D. Final gross exposure 37,932 - - 8,696 5,178 of which exposures sold not derecognised

A.1.8 On-balance sheet exposures to customers: changes in total adjustments

Non- Doubtful Restructured Past due Country Performing loans exposures exposures risk loans A. Initial total adjustments - - - (787) - of which exposures sold not derecognised B. Increases (28,449) - - (7,088) - B1. impairment losses (28,449) - B2. transfers from other non-performing exposure categories B3. other increases (7,088) C. Decreases - - - 787 - C1. recoveries on impairment losses C2. recoveries on repayments C3. write-offs C4. transfers to other non-performing exposure categories C6. other decreases 787 D. Final total adjustments (28,449) - - (7,088) - of which exposures sold not derecognised

140 Notes - Part E – Risks and hedging policies

A.2 Classification of exposures based on external and internal ratings

A.2.1 Breakdown of on- and off-balance sheet exposures by external rating classes

External rating classes Unrated Total AAA/AA- A+/A- BBB+/BBB- BB+/BB- B+/B- Under B- A. On-balance sheet exposures 27,470,265 8,259,813 2,246,882 936,079 99,698 53,691 1,739,123 40,805,551 B. Derivatives B.1 Financial derivatives 18,890,255 13,012,970 4,234,427 167,706 205,958 2,413 828,748 37,342,477 B.2 Credit derivatives 12,007,776 15,050,164 11,714,199 7,925,526 156,186 35,643 - 46,889,494 C. Guarantees given - 25,163 28,594 275,968 23,726 12,177 524,258 889,886 D. Commitments to lend funds 14,774,378 556,091 140,411 230,908 78,284 - 5,408,963 21,189,035 Total 73,142,674 36,904,201 18,364,513 9,536,187 563,852 103,924 8,501,092 147,116,443

Notes: B.1 – Financial derivatives: positive fair value of OTC derivatives. B.2 – Credit derivatives: notional value of protection sales and positive fair value of protection purchases. D. – Deposits to be made with banks, securities to be received and the notional value of the physical OTC put options sold.

Financial derivative exposures are stated gross of offsetting agreements, in accordance with the information provided in the balance sheet. Unrated on-balance sheet exposures include 966 million in equities and UCITS.

Commitments to lend funds refer primarily to financial contracts with mutual benefits, which are settled according to the delivery versus payment method. In further detail, the unrated segment includes commitments in the form of purchases to be settled.

141 Notes - Part E – Risks and hedging policies

A.3 Breakdown of guaranteed exposures by type of guarantee

A.3.1 Guaranteed on-balance sheet exposures to banks and customers

Collateral (1) Guarantees (2) Total (1)+(2) Credit derivatives Guarantees given Exposure Other Banks Banks Securities Other assets Governments Governments counterparties Real estate assets Other public entities Other public entities Other counterparties

1. Guaranteed exposures to banks

1.1 totally guaranteed 7,159,651 7,030,422 129,228 7,159,650 1.2 partly guaranteed -

2. Guaranteed exposures to customers

2.1 totally guaranteed 3,141,872 2,512,042 129,830 550,000 3,191,872 2.2 partly guaranteed -

Exposures backed by securities are represented by repurchase agreements and securities loans.

A.3.2 Guaranteed off-balance sheet exposures to banks and customers

Collateral (1) Guarantees (2) Total (1) + (2) Credit derivatives Guarantees given Exposure Other Banks Banks Securities Other assets Governments Governments counterparties Real estate assets Other public entities Other public entities Other counterparties

1. Guaranteed exposures to banks

1.1 totally guaranteed 2,387,902 - 21,854 2,365,679 ------369 - 2,387,902 1.2 partly guaranteed ------

2. Guaranteed exposures to customers

2.1 totally guaranteed 367,176 - - 367,176 ------367,176 2.2 partly guaranteed ------

The collateral acquired to secure off-balance sheet exposures refers to net counterparty risk, deter- mined on the basis of netting and CSA agreements, implicit in OTC derivatives contracts.

142 Notes - Part E – Risks and hedging policies

B. Credit distribution and concentration

B.1 Breakdown of on- and off-balance sheet exposures to customers by business segment

Governments and central banks Other public entities losses losses Portfolio Portfolio Net exposure Net exposure Net exposure Gross exposure exposure Gross Gross exposure exposure Gross impairment losses impairment losses Specific impairment Specific impairment Specific A. ON-BALANCE SHEET EXPOSURES

A.1 Non-Performing loans ------

A.2 Doubtful loans ------

A.3 Restructured exposures ------

A.4 Past due exposures - - - - 209 (97) - 112

A.5 Other exposures 2,295,226 x - 2,295,226 497,545 x - 497,545

TOTAL 2,295,226 - - 2,295,226 497,754 (97) - 497,657

B. OFF-BALANCE SHEET EXPOSURES

B.1 Non-Performing loans ------

B.2 Doubtful loans ------

B.3 Other non-performing assets ------

B.4 Other exposures 2,391,307 x - 2,391,307 227,402 x - 227,402

TOTAL 2,391,307 - - 2,391,307 227,402 - - 227,402

TOTAL 31 DECEMBER 2008 4,686,533 - - 4,686,533 725,156 (97) - 725,059

TOTAL 31 DECEMBER 2007 3,742,756 (787) - 3,741,969 853,639 - - 853,639

143 Notes - Part E – Risks and hedging policies

Financial institutions Insurance companies losses losses Portfolio Portfolio Net exposure Net exposure Net exposure Gross exposure exposure Gross exposure Gross impairment losses impairment losses

impairment Specific impairment Specific A. ON-BALANCE SHEET EXPOSURES

A.1 Non-Performing loans 37,932 (28,449) - 9,483 - - - -

A.2 Doubtful loans ------

A.3 Restructured exposures ------

A.4 Past due exposures 7,872 (6,654) - 1,218 - - - -

A.5 Other exposures 7,999,741 x (5,131) 7,994,610 158,038 x - 158,038

TOTAL 8,045,545 (35,103) (5,131) 8,005,311 158,038 - - 158,038

B. OFF-BALANCE SHEET EXPOSURES

B.1 Non-Performing loans ------

B.2 Doubtful loans ------

B.3 Other non-performing assets ------

B.4 Other exposures 20,567,491 x (4,242) 20,563,249 3,745,183 x - 3,745,183

TOTAL 20,567,491 - (4,242) 20,563,249 3,745,183 - - 3,745,183

TOTAL 31 DECEMBER 2008 28,613,036 (35,103) (9,373) 28,568,560 3,903,221 - - 3,903,221

TOTAL 31 DECEMBER 2007 14,587,804 - - 14,587,804 1,785,016 - - 1,785,016

Non - financial companies Other counterparties losses losses Portfolio Portfolio Net exposure Net exposure Net exposure Gross exposure exposure Gross exposure Gross impairment losses impairment losses

impairment Specific impairment Specific A. ON-BALANCE SHEET EXPOSURES

A.1 Non-Performing loans ------

A.2 Doubtful loans ------

A.3 Restructured exposures ------

A.4 Past due exposures 615 (337) - 278 - - - -

A.5 Other exposures 556,271 x (620) 555,651 - x - -

TOTAL 556,886 (337) (620) 555,929 - - - -

B. OFF-BALANCE SHEET EXPOSURES

B.1 Non-Performing loans ------

B.2 Doubtful loans ------

B.3 Other non-performing assets ------

B.4 Other exposures 13,264,987 x (17,935) 13,247,052 - x - -

TOTAL 13,264,987 - (17,935) 13,247,052 - - - -

TOTAL 31 DECEMBER 2008 13,821,873 (337) (18,555) 13,802,981 - - - -

TOTAL 31 DECEMBER 2007 13,356,058 - (6,581) 13,349,477 - - - -

144 Notes - Part E – Risks and hedging policies

B.3 Breakdown of on- and off-balance sheet exposures to customers by geographical area (book value)

Italy Other European America Asia Rest of the Total countries World Net Net Net Net Net Net Net Gross Gross Gross Gross Gross Gross Gross exposure exposure exposure exposure exposure exposure exposure exposure exposure exposure exposure exposure A. On-balance sheet exposures A.1 Non-Performing loans - - 2,603 651 35,329 8,832 - - - - 37,932 9,483

A.2 Doubtful loans ------

A.3 Restructured exposures ------A.4 Past due exposures 134 134 8,027 1,222 535 252 - - - - 8,696 1,608

A.5 Other exposures 6,971,624 6,968,183 3,797,929 3,795,619 723,660 723,660 12,927 12,927 681 681 11,506,821 11,501,070

TOTAL 6,971,758 6,968,317 3,808,559 3,797,492 759,524 732,744 12,927 12,927 681 681 11,553,449 11,512,161 B. Off-balance sheet exposures B.1 Non-Performing loans ------

B.2 Doubtful loans ------

B.3 Restructured exposures ------B.4 Other exposures 6,118,808 6,100,897 30,844,774 30,843,634 2,767,462 2,764,823 375,958 375,471 89,368 89,368 40,196,370 40,174,193

TOTAL 6,118,808 6,100,897 30,844,774 30,843,634 2,767,462 2,764,823 375,958 375,471 89,368 89,368 40,196,370 40,174,193

TOTAL 31 DECEMBER 2008 13,090,566 13,069,214 34,653,333 34,641,126 3,526,986 3,497,567 388,885 388,398 90,049 90,049 51,749,819 51,686,354

TOTAL 31 DECEMBER 2007 22,121,335 22,114,754 11,694,807 11,694,807 509,131 508,344 - - - - 34,325,273 34,317,905

B.4 Breakdown of on- and off-balance sheet exposures to banks by geographical area (book value)

Italy Other European America Asia Rest of the Total countries World Net Net Net Net Net Net Net Gross Gross Gross Gross Gross Gross Gross exposure exposure exposure exposure exposure exposure exposure exposure exposure exposure exposure exposure A. On-balance sheet exposures A.1 Non-Performing loans ------

A.2 Doubtful loans ------

A.3 Restructured exposures ------

A.4 Past due exposures - - 3.163 3.163 ------3.163 3.163

A.5 Other exposures 21.267.077 21.267.077 7.937.660 7.937.660 85.251 85.251 156 156 83 83 29.290.227 29.290.227

TOTAL 21.267.077 21.267.077 7.940.823 7.940.823 85.251 85.251 156 156 83 83 29.293.390 29.293.390 B. Off-balance sheet exposures B.1 Non-Performing loans ------

B.2 Doubtful loans ------B.3 Other non-performing assets ------B.4 Other exposures 22.746.356 22.742.677 12.092.499 12.086.472 629.864 628.832 4.273 4.268 - - 35.472.992 35.462.249

TOTAL 22.746.356 22.742.677 12.092.499 12.086.472 629.864 628.832 4.273 4.268 - - 35.472.992 35.462.249

TOTAL 31 DECEMBER 2008 44.013.433 44.009.754 20.033.322 20.027.295 715.115 714.083 4.429 4.424 83 83 64.766.382 64.755.639

TOTAL 31 DECEMBER 2007 16.559.950 16.559.950 15.237.570 15.229.865 123.077 123.077 - - - - 31.920.597 31.912.892

B.5 Large credit risks

a) Amount 3.788.379 b) Number 11

145 Notes - Part E – Risks and hedging policies

C. SECURITIZATION AND THE DISPOSAL OF ASSETS

C.1 Securitization

QUALITATIVE INFORMATION

Banca IMI traditionally deals in securitization in the context of its primary market operations, by organizing and/or placing third-party issues, and its brokerage operations on the secondary markets. The risks associ- ated with temporarily held positions are monitored by risk management functions in the context of market risk assessment.

In July 2008 the Company undertook the securitization of assets carried among held-for-trading financial assets with the goal of reducing the overall cost of funding an increasing the liquidity of assets and the aim of rendering the portfolio sold more efficiently financeable with the European Central Bank.

Said transaction involved the transfer of a portfolio of debt securities without recourse to SPQR II S.r.l., a multi-segment special-purpose vehicle governed by Law No. 130/99, previously used for a similar transac- tion originated by the former Banca OPI. These securities, which were issued by Italian and foreign banks, insurance companies and securitization vehicles, had a market value of approximately 748 million at the date of transfer. The vehicle concurrently entered into a series of interest-rate and liquidity risk hedging con- tracts with Banca IMI, which in terms of cash flow led to the up-front collection of approximately 30 million.

SPQR II in turn issued: – 696,250,000 euro in A-rated (Fitch Ratings) senior class-A notes, listed on the Luxembourg stock ex- change; – 82,195,000 euro in unlisted, unrated class-D junior notes.

Both types of securities were underwritten by Banca IMI at their nominal value. Inasmuch as the Company thereby retained substantially all of the risks and rewards underlying the transferred assets, the transaction was not derecognized from these financial statements. In operational terms, the senior-class notes were set aside with the European Central Bank through repur- chase agreement transactions undertaken via the Parent Company, Intesa Sanpaolo.

Banca IMI acted as originator, sole arranger, lead manager and swap counterparty for hedges in the transac- tion described. It also supported the credit enhancement of the overall structure through a subordinated loan agreement in the maximum amount of 100 million, which may be drawn down by SPQR II S.r.l. if certain conditions are satisfied.

Banca IMI also acted as servicer.

146 Notes - Part E – Risks and hedging policies

QUANTITATIVE INFORMATION

C.1.1 Breakdown of exposures deriving from securitization, classified according to the quality of the underlying assets

On-balance sheet exposures Senior Mezzanine Junior Gross Net Gross Net Gross Net exposure exposure exposure exposure exposure exposure A. Originated underlying assets a) Non-performing b) Other 122,153 111,036 - - - - B. Third party underlying assets a) Non-performing ------b) Other 968,885 952,685 23,485 22,733 19,844 18,243

Originated underlying on-balance sheet assets refer to the securitized loans sold to the vehicle SPQR II but not derecognized from these financial statements, although said securities were issued by parties unrelated to Banca IMI.

Guarantees given Credit lines Senior Mezzanine Junior Senior Mezzanine Junior Net exposure Net exposure Net exposure Net exposure Net exposure Net exposure Gross exposure Gross exposure Gross exposure Gross exposure Gross exposure Gross exposure Gross

A. Originated underlying assets a) Non-performing ------b) Other ------B. Third party underlying assets a) Non-performing ------b) Other ------

In compliance with the principle of non-derecognition, the line of credit of 100 million provided to the vehicle, as commented upon above, does not appear among credit commitments.

147 Notes - Part E – Risks and hedging policies

C.1.2 Breakdown of exposures deriving from originated securitizations type of securitized assets and type of exposure

Type of underlying asset/exposure On-balance sheet exposures Senior Mezzanine Junior Book Adjustments Book Adjustments Book Adjustments value /recoveries value /recoveries value /recoveries A. Fully derecognised A.1 Securitization - Type B. Partly derecognised B.1 Securitization - Type C. Not derecognised C.1 SPQR II S.r.l. - IMI Series - Securitized Banco Pastor S.A. 2,466 (120) - Consumer credit Vela Lease s.r.l. 14,892 (858) - Leasing Arcobaleno Finance s.r.l. 2,148 (182) - Health care receivable Ducato Consumer s.r.l. 17,557 (1,836) - Consumer credit Sestante Finance s.r.l. 7,162 (809) - Residential mortgage loans Intesa Sec 3 s.r.l. 49,787 (3,488) - Residential mortgage loans Intesa Sec 3 s.r.l. 7,757 (1,424) - Residential mortgage loans Claris Finance 2003 s.r.l. 7,844 (1,211) - Residential mortgage loans Preps 2007-1 PLC 1,423 (1,189) - Other loans - Not securitized - Debt Securities Italian banks 455,203 (8,191) - Debt Securities foreign banks 87,231 (4,217) - Debt Securities Italian financial istitutions 3,661 (751) - Debt Securities foreign financial istitutions 3,556 (1,476) - Debt Securities other issuers 29,134 (1,392) Total 689,821 (27,144) - - - -

The above table includes the assets sold but not derecognized underlying the SPQR II self-securitization. Although these exposures were issued by third parties and not by Banca IMI, in the interest of exposition it was decided to provide a breakdown thereof in this table by virtue of the legal transaction for the transfer of these exposures to the above vehicle, which acquired ownership thereof. Table C.1.3 below refers to the securitized assets originated by Banca IMI.

148 Notes - Part E – Risks and hedging policies

C.1.3 Breakdown of exposures deriving from third-party securitizations by type of securitized assets and type of exposure

Type of underlying asset/exposure On-balance sheet exposures

Senior Mezzanine Junior Book Adjustments Book Adjustments Book Adjustments value /recoveries value /recoveries value /recoveries A.1 A.B.E.S.T. s.r.l. Consumer credits – car/automotive 4,053 189 - - - - A.2 ABF Finance s.r.l. Leasing 72 (4) - - - - A.3 ABN Amro Bouwfonds Mortgages Nederland ------A.4 Adriano Finance Srl Resid. mortgage loans ------A.5 AGRI Securities s.r.l. Leasing 17,918 (92) - - - - A.6 APULIA FINANCE 4 SRL Leasing ------A.7 Arcobaleno Finance s.r.l. Loans to pharmacies ------A.8 Argo Mortgage 2 s.r.l. Resid. mortgage loans 1,445 - - - - - A.9 Asset-Backed European Leasing Securitisation Transact Milano 6,738 3 - - - - A.10 ASTI FINANCE SRL Resid. mortgage loans ------A.11 Athlon Securitisation BV Leasing 1,770 (15) - - - - A.12 Atlante Finance s.r.l. Resid. mortgage loans 5,218 (28) - - - - A.13 Atlantide Finance s.r.l. Health receivables (insured) 1,249 (3) - - - - A.14 AYT CEDULAS CAJA X Covered bond ------A.15 AYT CEDULAS CAJAS FTA Covered bond ------A.16 AYT CEDULAS CAJAS II Covered bond ------A.17 AYT Cedulas Cajas V F.T.A. Covered bond ------A.18 BANCAJA 6 FONDO DE TITULIZAC Covered bond ------A.19 Banco Pastor S.A. Consumer credits ------A.20 BBVA-5 FTPYME F.T.A. Resid. mortgage loans 4,835 - - - - - A.21 Beluga Master Issue BV Resid. mortgage loans 2,743 (22) - - - - A.22 Berica 3 MBS s.r.l. Resid. mortgage loans 1,380 (4) - - - - A.23 BERICA 5 RESIDENTIAL MBS SRL Resid. mortgage loans 862 (56) - - - - A.24 Berica 6 Residential MBS s.r.l. Resid. mortgage loans 21,964 248 - - - - A.25 Berica MBS s.r.l. Resid. mortgage loans 457 (1) - - - - A.26 BERICA RESIDENTIAL MBS1 SRL Resid. mortgage loans 1,340 158 - - - - A.27 BP Mortgage s.r.l. Resid. mortgage loans 16,900 (2,087) (0) - - - A.28 BPL Consumer s.r.l. Consumer credits 14,082 (123) - - - - A.29 BPM SECURITISATION SRL Resid. mortgage loans ------A.30 C.P.G. s.r.l. Central and local public adm. - - - - 6,275 23 A.31 Campidoglio Finance s.r.l. Sale of residential, business real estate assets - - - - 1,824 (31) A.32 Capital Mortgage s.r.l. Resid. mortgage loans 16,569 (434) - - - - A.33 CARS ALLIANCE FUNDING PLC Consumer credits – car/auto- motive 170 (23) - - - - A.34 CASTORO RMBS SRL Resid. mortgage loans ------A.35 CEDULAS TDA 5 Covered bond ------A.36 CF FINANCE SRL Health receivables (insured) ------A.37 Claris Finance 2003 s.r.l. Resid. mortgage loans 2,530 (3) - - - - A.38 Claris Finance 2005 s.r.l. Resid. mortgage loans 926 (0) - - - - A.39 Colombo s.r.l. Resid. mortgage loans - - - - 3,157 (470) A.40 Consumo Santander 1, F.T.A. Consumer credits ------A.41 Cordusio RMBS s.r.l. Resid. mortgage loans 72,388 (1,080) - - - - A.42 CR Firenze Mutui s.r.l. Resid. mortgage loans 1,857 (453) - - - - A.43 Credico Finance 2 s.r.l. Resid. mortgage loans 503 (43) - - - -

149 Notes - Part E – Risks and hedging policies

Type of underlying asset/exposure On-balance sheet exposures

Senior Mezzanine Junior Book Adjustments Book Adjustments Book Adjustments value /recoveries value /recoveries value /recoveries

A.44 Credico Funding 2 s.r.l. Other loans ------A.45 Credico Funding 3 s.r.l. Unsecured bond ------A.46 DELPHINUS 2004-II BV Resid. mortgage loans ------A.47 DELPHINUS 2006-II BV Resid. mortgage loans ------A.48 DU.CA. SPV s.r.l. Consumer credits ------A.49 Ducato Consumer s.r.l. Consumer credits 263 20 2,062 - - - A.50 Dutch MBS XII BV Resid. mortgage loans 1,577 55 - - - - A.51 Dutch MBS XIV BV Resid. mortgage loans 1,128 42 - - - - A.52 Dutch MTG Portfolio Loans III BV Resid. mortgage loans ------A.53 EGIDE SA Resid. mortgage loans 2,702 (211) - - - - A.54 Essential Public Infrastructure Syntetic CDO Capital ------A.55 F.I.P. Funding s.r.l. Public real estate assets 179,830 (5,045) - - - - A.56 F-E GOLD SRL Leasing ------A.57 F-E GREEN SRL Leasing ------A.58 F-E Mortgages s.r.l. Resid. mortgage loans 604 (42) - - - - A.59 France Titrisation Auto ABS FCC Leasing 1,311 37 - - - - A.60 Garda Securitisation 2001-01 Resid. mortgage loans ------A.61 Giotto Finance 2 S.p.A. Resid. mortgage loans 1,659 24 - - - - A.62 Golden Bar (Securitisation) s.r.l. Consumer credits 195 0 - - - - A.63 GOLDMAN SACHS CAPITAL Financial subordin. ------A.64 Granite Master Issuer PLC Resid. mortgage loans 3,541 - - - - - A.65 Grecale ABS s.r.l. Resid. mortgage loans ------A.66 Holland Euro Den MTG S. Resid. mortgage loans 2,996 (89) - - - - A.67 Intesa Lease Sec. S.r.l. Leasing 25,182 (25) - - - - A.68 Intesa Sec 3 s.r.l. Resid. mortgage loans 62,828 (2,606) - - 3,639 (270) A.69 IntesaBci Securitization Resid. mortgage loans 14,873 (323) 4,723 (61) - - A.70 Italease Finance S.p.A. Leasing 15 0 - - - - A.71 Italfinance Securitisation Leasing Vehicle s.r.l. - - 444 (24) - - A.72 JUMP SRL Consumer credits ------A.73 LAMBDA FINANCE BV Corporate loans ------A.74 Leasimpresa Finance s.r.l. Leasing 1,576 - - - - - A.75 LEONARDO SYNTHETIC PLC Corporate loans ------A.76 Locat Securitisation Vehicle 3 s.r.l. Leasing 69,671 (39) - - 1,015 (144) A.77 Lombarda Lease Finance 3 s.r.l. Leasing 1,333 (48) - - - - A.78 Lombardo Mortgage Finance 1 Srl Resid. mortgage loans ------A.79 Mantegna Finance s.r.l. Resid. mortgage loans 1,434 (713) - - - - A.80 Manzano Bond SPV s.r.l. Resid. mortgage loans 819 (9) - - - - A.81 Marche Mutui Societa per la Resid. mortgage loans cartol. s.r.l. 9,192 - - - - - A.82 MARS 2600 SRL Resid. mortgage loans ------A.83 Master Dolfin s.r.l. Consumer credits ------A.84 Mecenate Leasing s.r.l. Resid. mortgage loans ------

150 Notes - Part E – Risks and hedging policies

Type of underlying asset/exposure On-balance sheet exposures

Senior Mezzanine Junior Book Adjustments Book Adjustments Book Adjustments value /recoveries value /recoveries value /recoveries

A.85 Mercurio Mortgage Finance Srl Unsecured bond ------A.86 MOSAICO FINANCE Resid. mortgage loans ------A.87 MPS Assets Securitisation S.p.A. Other loans 15,605 (110) - - - - A.88 Patrimonio Uno CMBS s.r.l. Public real estate assets 12,441 (110) 1,780 (59) - - A.89 PHARMA FINANCE 2 SRL Health receivables (insured) ------A.90 PMI 2 Finance s.r.l. Corporate loans ------A.91 PMI Uno Finance s.r.l. Corporate loans ------A.92 Ponte Vecchio Finance N.2 s.r.l. Leasing ------A.93 Preps 2007-1 PLC Other loans ------A.94 Provide Blue 2005-2 Syntetic CDO ------A.95 Quarzo Lease s.r.l. Leasing 14,189 45 - - - - A.96 Romagna Finance s.r.l. Resid. mortgage loans 804 (26) - - - - A.97 Ryder Square Ltd Other loans - - 9,179 (608) - - A.98 S.C.C.I. S.p.A. Social security charges 87,409 (589) - - - - A.99 S.C.I.C. A.r.l. Consumer credits 94,789 (287) - - - - A.100 S.C.I.P. s.r.l. Public real estate assets 17,205 1 - - 2,334 (708) A.101 Saecure 5 BV Resid. mortgage loans ------A.102 San Giorgio S.p.A. Other loans 0 (0) - - - - A.103 Santander Financiacion 1,F.T.A. Consumer credits 982 - - - - - A.104 SCHNEIDER ELECTRIC SA Resid. mortgage loans ------A.105 Sestante Finance s.r.l. Resid. mortgage loans - (260) - - - - A.106 Siena Mortgages 03-4 s.r.l. Resid. mortgage loans 25,237 46 - - - - A.107 Split 2 s.r.l. Leasing 20,843 (500) 3,815 - - - A.108 STORM 2003 BV Resid. mortgage loans ------A.109 Storm 2004 II BV Resid. mortgage loans ------A.110 Storm 2005 BV Resid. mortgage loans 65 (6) - - - - A.111 Sunrise s.r.l. Consumer credits 4,165 (9) - - - - A.112 TAURUS CMBS 2 SRL Resid. mortgage loans ------A.113 TREVI FINANCE 2 SPA Non Performing loans ------A.114 TREVI FINANCE 3 SPA Portfolio of non-performing assets ------A.115 Tricolore Funding s.r.l. Leasing 9,615 (50) 731 - - - A.116 Vela Home s.r.l. Resid. mortgage loans 51,766 (1,239) - - - - A.117 Vela Lease s.r.l. Leasing 16,872 (262) - - - - A.118 Velites s.r.l. Resid. mortgage loans ------A.119 VESPUCCI INVESTMENTS PLC Syntetic CDO ------A.120 VOBA FINANCE SRL Resid. mortgage loans ------

Total 952,685 (16,200) 22,733 (752) 18,243 (1,601)

At the date of these financial statements there were no off-balance sheet exposures (guarantees pro- vided and lines of credit) in connection with third-party securitization transactions.

151 Notes - Part E – Risks and hedging policies

C.1.4 Exposures to securitizations by financial assets portfolio and by type.

Financial Financial Financial Investments Loans Total Total assets held assets - assets held to 2008 2007 for trading fair value available maturity for sale 1. On-balance sheet exposures - "Senior" 443,053 - - - 620,668 1,063,721 766,660 - "Mezzanine" 10,045 - - - 12,688 22,733 27,039 - "Junior" 14,605 - - - 3,638 18,243 35,982 2. Off-balance sheet exposures - "Senior" ------"Mezzanine" 24 - - - - 24 145 - "Junior" ------

Off-balance sheet exposures refer to purchases of securities to be settled.

C.1.5 Total amount of securitized assets underlying junior notes or other forms of security

For the purposes of the following table, the assets underlying junior notes were considered to an extent proportional to said securities, net of the rights of pre-emption to which holders of outstand- ing senior and mezzanine notes are entitled.

Traditional Synthetic securitisations securitisations A. Originated underlying assets A.1 Fully derecognised 1. Non-Performing loans X 2. Doubtful loans X 3. Restructured exposures X 4. Past due exposures X 5. Other assets X A.2 Partly derecognised 1. Non-Performing loans X 2. Doubtful loans X 3. Restructured exposures X 4. Past due exposures X 5. Other assets X A.3 Not derecognised 1. Non-Performing loans 2. Doubtful loans 3. Restructured exposures 4. Past due exposures 5. Other assets B. Third party underlying assets B.1 Non-Performing loans - B.2 Doubtful loans - B.3 Restructured exposures - B.4 Past due exposures 60 B.5 Other assets 27,664

Banca IMI does not hold equity interests in special-purpose vehicles. 152 Notes - Part E – Risks and hedging policies

C.1.7 Servicer activities – collection of securitized loans and redemption of notes issued by the special-purpose vehicle

Special purpose Securitised assets Collection of loan Percentage of reimbursed securities vehicles in the year (period-end figure)

Non- Performing Non- Performing Senior Mezzanine Junior performing performing Non- Performing Non- Performing Non- Performing performing performing performing

S.P.Q.R. II 111,036 9,589 8.64%

C.2 Asset disposal

C.2.1 Financial assets sold but not derecognized

Financial assets held for trading Total A B C 2008 2007 A. CASH ASSETS 1. Debt securities 2,943,252 2,943,252 3,073,930 2. Equities - - 3. UCITS - - 4. Loans - - 5. Non-performing assets - - B. DERIVATIVES TOTAL 31 DECEMBER 2008 2,943,252 - - 2,943,252 3,073,930

TOTAL 31 DECEMBER 2007 3,073,930 - -

A = financial assets sold totally derecognised (book value). B = financial assets sold partly derecognised (book value). C = financial assets sold partly derecognised (full value).

Assets sold not derecognized refer to securities forming the object of repurchase agreements classi- fied to the HFT portfolio and the securities sold to the special-purpose vehicle SPQR II. In the interest of clarity of exposition, the remaining sections of the compulsory table are not pre- sented inasmuch as they were devoid of values in both years under review.

153 Notes - Part E – Risks and hedging policies

C.2.2 Financial liabilities relating to financial assets sold but not derecognized

Financial Financial Financial Investments Due from Loans to Total assets assets assets held to banks customers held for measured available maturity trading at fair for sale value 1. Due to customers a) fully derecognized - b) partly derecognized - 2. Due to banks a) fully derecognized 2,257,576 2,257,576 b) partly derecognized - TOTAL 31 DECEMBER 2008 2,257,576 - - - - - 2,257,576

TOTAL 31 DECEMBER 2007 3,076,470 - - - - - 3,076,470

D. CREDIT RISK MEASUREMENT MODELS The Company does not make use of internal models for the measurement of exposure to credit risk.

SECTION - 2 MARKET RISK

Although the illustration of market risks – namely, interest-rate and price risks – provided below substantially complies with the scheme outlined by the Bank of Italy, it has been formulated, including in its quantitative aspects, in accordance with the use of internal risk measurement models.

2.1 Interest rate risk – regulatory trading book

QUALITATIVE INFORMATION

The quantification of trading risks is founded on a daily and periodic analysis of the vulnerability of trading portfolios to adverse market movements in the following risk factors: – interest rates; – equities and indices; – mutual funds; – exchange rates; – implicit volatility; – spreads on credit default swaps; – spreads on bonds; – correlation instruments; – dividend derivatives; – asset-backed securities; – commodities.

The supervisory authority validated (on 16 January 2004) Banca Caboto’s internal models for reporting the capital absorbed in connection with several of the above risk factors. In the first quarter of 2008 this model was extended to the portfolios of the former Banca d’Intermediazione Mobiliare IMI.

154 Notes - Part E – Risks and hedging policies

The analysis of market risk profiles for the trading book is founded on several quantitative indicators, of which VaR is the most important. Since VaR is a synthetic indicator that does not fully capture all possible types of potential losses, risk monitoring was expanded to include other measures, in particular simulations of value at risk for risks arising from illiquid parameters (dividends, correlation, ABS). VaR represents the fundamental framework for the estimation of value at risk, estimates of which are conducted on a daily basis using historical simulation methods, a 99% confidence interval and a holding period of one day.

The nature and pay-off of several trading products require the application of illiquid risk factors that are not readily available, sometimes rendering them inappropriate for the application of VaR methods. Alternative measures have been identified in order to complete estimates of capital at risk: – Non-correlated simulation: this method of calculation applies to quantized derivatives and basket op- tions exposures. It is founded on a statistical estimate of the volatility of risk factors without permitting the diversification of exposures, resulting in a more highly prudential view of capital at risk. – Correlated simulation: this method of calculation applies to bond and inflation-linked derivatives exposures and permits the consideration of the correlation between indices on the basis of an historical analysis of the change in the returns on risk factors over a holding period of ten days. In both cases, the results of risk simulations contribute to the determination of the absorption of regulatory capital.

Stress tests measure the change in the value of securities or portfolios in response to changes in risk fac- tors of unexpected or extreme intensity and correlation, as well as changes representative of expectations as to future trends in market variables. Stress tests are applied weekly to market risk exposures by adopt- ing scenarios founded on the historical analysis of risk factors with the aim of identifying past worst cases and defining a deterministic grid of changes to highlight pin-risk, directionality or implied views.

Sensitivity measures allow the Bank to increase the accuracy of its risk profiling, especially in the presence of non-linear components. Sensitivity analyses measure the risk attributable to the change in the theo- retical value of a financial position in correlation to a shift in associated risk factors of a given amount. The primary sensitivity indicators currently employed are pv01 (a change in interest-rate curves of one basis point), vega01 (a change in implicit volatilities of one percentage point) and cr01 (a change in credit spreads of one basis point).

Level measures are risk indicators founded on the assumption that there is a direct relationship between the extent of a financial position and its risk profile. They are used to monitor exposures to issuer/seg- ment/country risk for the purposes of concentration analysis through the identification of the notional value, market value or translation of the position of one or more benchmarks (“equivalent positions”).

The market risks arising from trading operations are managed in the trading units at the Milan and London branches.

From a management standpoint, Banca IMI’s operations may be divided according to the following risk factors: – Equity risks: these are assumed in the context of securities and listed derivatives brokerage operations and the management of positions acquired in equity origination operations (IPOs, share offerings). The organization and management of risk for the most innovative products is more highly complex and is based on the use of dynamic hedging through cash and listed derivatives securities. – Credit risks: these are managed in the context of operations on primary and secondary bond markets (in both mature and emerging economies) and involve in particular the trading of bonds issued by cor- porations and financial institutions, primarily within the euro area, and the management of risk profiles essentially through regulated derivatives and credit derivatives. – Interest-rate risk: this risk is concentrated in the euro rates area and originates in both the risks as- sumed as part of trading on financial markets (driven by the products distributed by the Group to its clients) and directional and optional strategies on the rates and volatilities market. Risks are managed through the use of dynamic hedging on the OTC derivatives market (for the management of both vola- tility and interest-rate risks) and listed derivatives (futures). – Goods risk: this risk is assumed in the context of brokerage operations with clients, through both listed and OTC derivatives.

155 Notes - Part E – Risks and hedging policies

QUANTITATIVE INFORMATION

Regulatory trading book: internal models and other methods of sensitivity analysis

Composition of value at risk The information of a quantitative nature provided below refers to the management perimeter of the trading portfolio subject to market risks1. In the following paragraphs, value at market risk is estimated by summing management VaR and simulations of illiquid parameters, as illustrated above.

Development of value at risk During the fourth quarter of 2008, the market risks originated by Banca IMI increased, resulting in a daily average operating VaR (average for the fourth quarter of 2008) of 18.3 million (8.2 million in the fourth quarter of 2007).

The overall risk profile for all of 2008 – 12.5 million – is up markedly on the average values for 2007 (6.9 million).

Daily operating trading VaR for Banca IMI – comparison between the quarters of 2008 (million euro) average minimum maximum average average average 4Q 4Q 4Q 3Q 2Q 1Q

Banca IMI 18,3 11,9 21,2 10,1 12,9 9,0

Daily operating trading VaR for Banca IMI (minimum, average and maximum values for the period in millions of euro) 2008 2007 average minimum maximum last day average minimum maximum

Banca IMI 12,5 6,4 21,2 17,4 6,9 4,3 11,1

In terms of the composition of the risk profile by the various factors, the risk associated with the volatility of credit spreads was the most significant in the fourth quarter of 2008, representing 40% of the total.

Contribution of risk factors to daily operating VaR (percentage of the area total for the period) 4Q 2008 Shares Hedge Rates Credit Forein Other fund spread exchange paratemers

Banca IMI 27% - 21% 40% 5% 7%

This breakdown of risk factors is peculiar to the year in review, primarily due to the general financial crisis beginning in September. To the contrary, in the fourth quarter of 2007 equity risk factors were more significant, most markedly for the former Banca Caboto, and were equal in weight to credit risk, as shown in the following table:

1 The regulatory perimeter for the application of the internal model is a sub-set of the internal market risk management model. This is a function of both the differing state of the art of the methods used, the extension of which has not been authorized for prudential super- visory purposes (for example, VaR spread on bonds and CDS), and of the applicable legislation governing the exclusion from the perimeter of internal models of several risk items treated according to the standard method (such as investments in UCITS). 156 Notes - Part E – Risks and hedging policies

Contribution of risk factors to daily operating VaR (percentage of the area total for the period) 4Q 2007 Shares Hedge Rates Credit Forein Other fund spread exchange paratemers ex-Banca Caboto 43% - 22% 36% - 0% ex-Banca mi 32% - 27% 36% 3% 1% Banca IMI 37% - 24% 36% 2% 1%

Issuer risk associated with the held-for-trading portfolio is subject to mark-to-market analysis through the aggregation of exposures by rating class and is monitored using a system of operational limits founded on both rating classes and concentration indicators.

Breakdown of exposures by type of issuer for Banca IMI (percent values of the area total at year-end, excluding government securities and the Group’s securities and including CDS hedges) Total of which: of which: Corporate Financial Emerging Covered Securitis. Investment Speculative grade grade

Banca IMI 100% 9% 64% 1% - 26% 96% 4%

The composition of the trading book by rating is substantially investment grade.

Distribution by rating class of debt securities

Rating class 31.12.2008 from AAA to AA- 69.9% from A+ to A- 25.0% from BBB+ to BBB- 2.9% from BB+ to B- 1.2% Speculative grade 1.0%

157 Notes - Part E – Risks and hedging policies

There was an uptrend in Banca IMI’s daily operating VaR in the course of 2008. Said trend is explained in particular by the increased volatility on the markets beginning in September with the Chapter 11 procedure requested by Lehman Brothers.

DAILY EVOLUTION OF MARKET RISKS - OPERATING VAR

25,0 Million

20,0

15,0

10,0

5,0

0,0 Mar-08 Jun-08 Sep-08 Dec-08

BANCA IMI

Following the reclassification of highly illiquid securities (primarily ABSs) to the L&R category, the associated VaR was separately monitored. The average figure for said segment came to 1.5 million in 2008.

The monitoring of risks associated with Banca IMI’s trading operations also involves the use of scenario analyses and stress tests. The following table provides an overview of the impact of selected scenarios in- volving trends in equity prices, interest rates, credit spreads and exchange rates on the statement of income at the end of December: (million euro) Equity Rates Credit spread Forein exchange

volatility +10% volatility -10% -25bp +25bp -25bp +25bp -10% +10% and prices -5% and prices +5% Banca Imi -5 3 3 -5 18 -18 1 1 of which: SCP 4 -4

In further detail: – a bearish scenario involving a decline in prices of 5% and a concurrent increase in volatility of 10% would have resulted in a loss of 5 million on equity market positions; a bullish scenario involving an increase in prices of 5% and a concurrent decrease in volatility of 10% would have resulted in a profit of 3 million; – a parallel shift in interest rates of +25 basis points would have resulted in a loss of 5 million, whereas a parallel shift of -25 basis points would have resulted in a profit of 3 million; – a widening of credit spreads on exposures sensitive to this factor by 25 basis points would have resulted in a loss of 18 million, of which 4 million would have been attributable to structured credit products (SCPs); – lastly, the portfolio’s market exposure to exchange rates is substantially protected from both impairment and recovery for the various currencies due to the optional structures aimed at protecting against direc- tional movements.

158 Notes - Part E – Risks and hedging policies

The structure of operational limits reflects the level of risk deemed acceptable for individual business areas in accordance with the management and strategic guidelines laid down by the top management. Limits are set and monitored at the various hierarchical levels by assigning powers to the various managers of the business areas, with the aim of achieving the best trade-off between a controlled risk environment and the requirements of operational flexibility.

The effective operation of the system of limits and delegated powers is founded on the basic concepts of hierarchy and interaction, the application of which led to the definition of a structure organized into: – tier-one limits: these are assigned with the prior approval of the Parent Company’s Management Com- mittee and are subsequently the object of an opinion by the Financial Risks Committee. Changes in limits are proposed to Risk Management, after consulting with the heads of the operational departments. The trend in the absorption of these limits and the assessment of the adequacy thereof is the object of periodic analysis by the Group’s Financial Risks Committee; – tier-two limits: these control the operations of individual desks on the basis of measures differentiated according to the specific nature of the securities treated and operational strategies, such as sensitivities, the Greeks and equivalent exposures.

At the meeting of the Parent Company’s Management Committee held on 11 November 2008, a new VaR limit for Banca IMI of 24 million was authorized, followed by approval by the Company’s Board of Directors.

Given the trend in the volatility of the risk factors employed for the calculation of historical VaR, which reached unprecedented levels, said limit increase was authorized in order to ensure adequate operational flexibility for the Risk Trading unit, to permit pro-active management of company risks, and, more specifi- cally, to continue to stimulate market-making operations in support of the liquidity of issues placed, as well as to undertaken market transactions so as to modify the risk profile of investment banking operations in accordance with expected future market trends. It should be emphasized that this limit increase was less than proportional to the increase in volatility registered on the market.

In the light of the new limits, the use of VaR operating limits, within the component sub-allocated to the organizational units, came to an average of 58% (compared to an average of 53% in 2007), with a peak of 96% (80% in 2007).

The efficacy of the VaR calculation model must be monitored daily through the use ofback-testing analy- ses, which, by comparing the estimated value at risk with the corresponding profits/losses for the period, highlight the model’s ability accurately to capture the variability inherent in the revaluation of trading posi- tions from a statistical standpoint.

From a regulatory standpoint, back-testing covers a period of observation of one year (approximately 250 estimates) through the use of the effective operating profit and loss reported by individual desks, after re- moving components not pertinent to risk estimates such as commissions and intraday operations. The perimeter of application of back-testing is narrower than that employed in the estimate of value at risk, inasmuch as the perimeter of application of the internal model applies to a sub-set of the items subject to market risk included in management estimates.

159 Notes - Part E – Risks and hedging policies

Banca IMI’s regulatory back-testing, as illustrated in the following graph, does not indicate any critical situ- ations, which would have occurred had the daily profits and losses according to back-testing exceeded the estimated VaR on more than three occasions during the period of observation.

8

Million 6

4

2

0

-2

-4

-6

-8

-10 Jan-08 Mar-08 Jun-08 Sep-08 Dec-08

Daily profit/loss - backtesting

Daily VaR

Counterparty risk is measured in terms of the cost of replacing derivatives contracts and is monitored both in terms of future exposure and aggregations by segment and risk class. Banca IMI’s typical counterparties on the OTC market are lenders, financial institutions, insurance companies and, solely in a limited number of cases, corporations. The model employed for the distribution of derivatives to non-institutional clients (primarily IRSs and ex- change-rate transactions) calls for the maintenance of credit risk on the books of the commercial banks and the transfer of market risks to Banca IMI through the use of intergroup contracts. In this regard, please refer also the foregoing Section 1 - Credit risks.

160 Notes - Part E – Risks and hedging policies

INFORMATION CONCERNING FINANCIAL PRODUCTS

Pursuant to the disclosure and transparency recommendations made by Italian and supra-national super- visory authorities, the following section contains a series of disclosures, referring both to the indications provided by the Bank of Italy (communication of 18 June 2008) and CONSOB in its letter of 23 July 2008, and taking account of the recommendations contained in the April 2008 Report issued by the Financial Stability Forum.

DETERMINATION OF THE FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

The information contained in this chapter is based on the accounting standards adopted by Banca IMI and illustrates measurement concepts and parameters. In preparing this information, the Bank has striven to achieve clarity and simplicity and to avoid the excessive use of technical terminology insofar as possible.

General principles International accounting standards (IAS/IFRS) require that financial products classified to the trading book or subject to the fair value option be measured with a balancing entry to the statement of income. The existence of official quotes on an active market2 represents the best evidence of a security’s fair value. The fair value of securities not listed on an active market is determined through the use of measure- ment techniques aimed at establishing the price that would have been attributed to the product on the ref- erence date in a free exchange inspired by normal commercial considerations, taking account of the market values of similar products in terms of risk characteristics. In the absence of the foregoing, the fair value of such securities is determined through the use of estimates and assumptions formulated by the measurer on the basis of inputs drawn from parameters not directly observable on the market. The choice between the foregoing methods is not optional, inasmuch as said methods must be applied in hierarchical order. In particular, where a price expressed on an active market is available the other measure- ment approaches may not be used.

Fair value hierarchy The hierarchy of measurement models, i.e. the approaches adopted for the determination of fair value, attributes absolute priority to official prices available on active markets for the assets and liabilities to be measured (effective market quotes) or similar assets and liabilities (comparable approach). A lower priority is assigned to unobservable, and hence more highly discretionary, inputs (mark-to-model approach).

1. Effective market quotes The indicator of reference is the market price of the security being measured, which is obtained on the basis of quotes registered on an active market. The percentage of securities measured according to this method (determined in relation to fair value in the case of derivatives) of the total securities measured at fair value is as follows:

Financial assets: - on-balance sheet 89.80% 8.0 billion - derivatives 1.78% 0.7 billion

Financial liabilities: - on-balance sheet 31.06% 1.7 billion - derivatives 3.06% 1.2 billion

2 A security is regarded as listed on an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry company, pricing service or authorized entity, and those prices represent effective, regularly occurring market transactions on an arm’s length basis over a normal reference period. The criteria for determining the reliability of prices are described in the paragraph concerning the identification, validation and processing of market data.

161 Notes - Part E – Risks and hedging policies

Comparable approach Measurement is founded on the prices or credit spreads drawn from official bid prices for securities substantially similar in terms of risk factors through the use of a predetermined method of calculation (pricing model). The use of this approach translates into the search for transactions on active markets involving securities comparable in terms of risk factors with the security being measured. The pricing models employed in the comparable approach allow for the reproduction of prices of securities listed on active markets (the calibration of the model) without including discretionary parameters that may have a significant impact on the final measurement price. The percentage of securities measured according to this method (determined in relation to fair value in the case of derivatives) of the total securities measured at fair value is as follows:

Financial assets: - on-balance sheet 8.73% 0.8 billion - derivatives 98.22% 39.6 billion

Financial liabilities: - on-balance sheet 68.94% 3.9 billion - derivatives 96.94% 38.4 billion

2. Mark-to-model approach Measurements are conducted by using various inputs, not all of which are drawn directly from param- eters observable on the market, and which therefore require the use of estimates and assumptions by the measurer. In particular, securities are measured by using a predetermined method of calculation (the pricing mod- el) founded upon specific hypothesis as to the trend in future cash flows, taking account of those future events or hypotheses of conduct that historical experience leads the Bank to believe probable. Other parameters are included in the model. In estimating these parameters, the Bank privileges the informa- tion it has obtained from the market concerning prices and spreads, but it also makes use of historical data regarding the specific underlying risk factor or specialized studies (e.g. reports by rating agencies or leading market players where the former are not available). The percentage of securities measured according to this method (determined in relation to fair value in the case of derivatives) of the total securities measured at fair value is as follows:

Financial assets: - on-balance sheet 1.47% 0.1 billion - derivatives - -

Financial liabilities: - on-balance sheet - - - derivatives - -

The measurement process for securities The measurement process for the securities held by Banca IMI is fully centralized with the Risk Management Department of the Parent Company, Intesa Sanpaolo.

1. Identification, validation and processing of market data and sources for measurement The process of calculating fair value and the need to distinguish between products measurable accord- ing to effective market prices rather than through the application of comparative of model-based ap- proaches highlight the need to establish unequivocal principles for determining market parameters. To this end, the Market Data Reference Guide, a document prepared and updated by the Risk Manage- ment Department according to the Group’s Internal Rules and Procedures approved by the boards of directors of the Parent Company and Group companies, has established the processes required for the identification of market parameters and the methods according to which such data are to be collected and used. Such market data may be drawn from primary or derived information. In further detail, the rules and procedures determine the requirements and cut-off and validation conditions for each refer- ence category (asset class).

162 Notes - Part E – Risks and hedging policies

Said document provides a formal structure for surveying data sources deemed suitable to the measure- ment of securities. Suitability is ensured by compliance with the applicable requirements, which refer to principles of the comparability, availability and transparency of data, or the ability to obtain data from one or more info-providing systems, to measure the bid-ask price, and, lastly, in the case of OTC prod- ucts, to verify the comparability of data sources. An unequivocal cut-off time is determined for each category of market parameter in connection with data survey timing, the bid/ask side of reference, and the number of observations required to verify the price. The use of all market parameters is contingent upon validation (through the Validation Process) by the Risk Management Department in terms of double-checking (surveying the accuracy of the historical figure by comparing the results of the proprietary platform with those of the data source), plausibility testing (the consistency of each individual figure with similar or comparable data) and assessment of the effective methods of application.

2. Validation of pricing models and the Risk Assessment Model This phase is primarily aimed at assessing the consistency and adherence of the various measurement methods used by the Bank with current market practice, highlighting any critical issues inherent in the pricing models used, and determining any adjustments that need to be made to measurement. The validation process is particularly important where the Bank begins to undertake transactions in a new security, which requires the development of additional pricing models, as well as where the Bank decides to use a new model to assess pay-offs previously managed using models deemed less adequate. In general, all of the models used by the Bank for measurement must be subjected to an internal vali- dation process that involves the various competent entities. In cases of high complexity and/or market dislocation, independent validation may also be obtained from accredited financial service firms.

The analysis of new models calls not only for an in-depth analysis of financial aspects but also the full understanding of numerical issues, replicating, where viewed as necessary, the pricing libraries of front- office systems, after having analyzed the available literature and the independent derivation ofthe required analytical results, including the consideration of numerical implementation issues. In addition, a detailed analysis is conducted of the types of pay-offs associated with the model under review and the pertinent market data (by verifying the presence, liquidity and frequency of update of contributions) as well as of the calibration methods selected. The fundamental requirements for the validation of a pric- ing model include that it be capable of replicating available market prices by optimizing its internal pa- rameters (or meta-data) in order to best capture the information provided by listed securities (calibration procedure). Once the quality of the repricing of the securities selected for calibration has been validated, an analysis is conducted of the influence of parameters inherent to the model (unlisted parameters or parameters not observable on the markets) on the pricing of complex securities. Lastly, where possible, market tests are conducted by comparing the prices of complex securities obtained from the model with available quotes.

Where the analysis described above does not generate any clear critical issues, the model is deemed validated and may be used for official measurements. If, on the other hand, the analysis highlights limits or areas deserving of attention for a given pricing model that are not sufficient to result in the available analytical framework being considered- inad equate, Risk Management conducts further analyses to determine any appropriate adjustments to the model risk. Please refer to the paragraph on this subject set out below for a more detailed discussion.

Monitoring the consistency of pricing models over time Once a pricing model for the measurement of complex securities has been validated and put into use, its consistency with the market must be periodically monitored in order to detect any discrepancies and initiate the necessary assessments and action in a timely manner.

– Repricing of elementary securities surveyed The consistency of a calibrated pricing model with the market is reviewed by verifying that the model used effectively reproduces all market prices deemed significant and sufficiently liquid. In the case of interest-rate derivatives in particular, the Bank’s front-office systems also include an automatic system for the repricing of elementary securities, which permits the systematic verification of discrepancies between models and the market and any impacts thereof on book risk positions. Where significant discrepancies are detected such that the price of a given elementary security falls

163 Notes - Part E – Risks and hedging policies

beyond market bid-offer quotes, the impact on the risk positions of the respective portfolios is analyzed and any adjustment to be made to the measurements of the respective portfolios is determined.

– Comparison with benchmark data The monitoring method described above is further reinforced through extensive use to the benchmark- ing of the data employed. In particular, access to the services of a qualified external provider (Markit) permits the obtainment of detailed information on parameters provided by primary market counter- parties relating to interest-rate securities (caps/floors, European and Bermudan swaptions, and CMS), equity securities (options on indices and single stocks) and CDS. Such information is much more detailed than that normally available from standard info-providers in terms, for example, of maturities, underly- ing assets and strikes. Any significant discrepancies are quantified with respect to the average range provided by the external provider and then treated as in the case of repricing of elementary securities provided. The possibility of extending this comparison of benchmark data to other securities or underly- ing assets is constantly monitored.

Information on the measurement models effectively used to measure securities

1. The pricing model for unlisted securities The pricing of securities for which official quotes submitted to an active market are not available is car- ried out through the use of an appropriate credit spread (in application of the comparable approach): the credit spread of such securities is measured on the basis of liquid securities sharing similar charac- teristics for which official data are available. The sources from which such data may be drawn are, in hierarchical order: 1. liquid (benchmark) securities provided by the same issuer; 2. credit default swaps on the same reference entity; 3. liquid securities provided by an issuer with the same rating and belonging to the same segment. The differing seniority of the security to be priced with respect to the issuer’s debt structure is always taken into account.

When pricing an unlisted security, any lesser liquidity associated with the security is taken into account, considered as an additional negative premium (with respect to the benchmarks and CDS from which credit spreads representing liquid securities are drawn) to be paid to the counterparty in event of the disposal of the security on the market. It is periodically estimated through back-testing on the prices of less liquid securities by verifying the spreads on new issues and recent significant transactions un- dertaken with counterparties of high standing. The result is the identification of a matrix of illiquidity premiums determined according to the rating and segment of operation of the issue and the maturity of the security, which is added to the credit spread described above.

2. Pricing models for interest-rate, exchange-rate, equity and inflation derivatives Interest-rate, exchange-rate, equity and inflation derivatives, where not traded regulated markets, are over-the-counter (OTC) securities, i.e. traded bilaterally with market counterparties and are measured through the use of specific pricing models, driven by input parameters (such as rate curves, exchange rates, volatilities) observed on the market and subject to the monitoring process described above. In terms of the fair value hierarchy, the prices thus determined are attributable to the comparable ap- proach category. The following table illustrates the main models used for the pricing of OTC derivatives according to the class of the underlying asset.

164 Notes - Part E – Risks and hedging policies

Class of Pricing models Main Input parameters of models underlying assets

Interest Rates Net Present Value, SABR, Libor Market Rate curves ( on deposits, FRA, Futures, OIS Model, Hull-White with 1 and 2 factors, and swaps), cap/floor and swaption volatility, Mixing of the Hull-White with 1 and 2 factors, correlation between interest rates Lognormal, Bivariate, Rendistato

Forein exchange Garman-Kohlhagen, Lognormal with Rate curves, FX spot and forward, uncertain volatility volatility FX Equity NPV, Generalized Black-Scholes, Spot prices of underlying assets, rate curves, Heston expected dividend, volatility of underlying, correlation between underlyings Inflation Bifactorial Nominal rate curves, inflation rate curves, interest rate volatility, seasonal coefficients of CPI

In addition, in determining fair value, not only must market factors and the nature of the contract (dura- tion, technical form, etc.) be considered, but also the counterparty’s credit quality. In further detail, the following are contemplated: – mark-to-market, or the pricing determined using risk-free curves; ­ – fair value, which takes account of the counterparty’s credit risk and the contract’s future exposures. The difference between fair value and mark-to-market - known as the Credit Risk Adjustment (CRA) - co- incides with the current discounted value of the expected future loss, considering that the variability of the future exposure is linked to that of the markets. Said method is applied as follows: – in cases of positive current exposure, the CRA is calculated on the basis of said exposure, market spreads, and the average residual life of the contract; ­ – in cases of current exposure near zero or negative, the CRA is determined by assuming the future exposure will be estimable through the use of Basil 2 add-on factors.

3. The pricing model for structured credit products Where significant prices (level 1, effective market quotes) are not available for ABS, the Bank makes use of measurement techniques that take account of parameters observable on the market (level 2, compa- rable approach). Spreads are drawn from new issues and/or surveyed from major investment houses, verifying the con- sistency of such measurements with prices drawn from the market (level 1). In addition to these quantitative controls, price formation or review is further strengthened by a qualita- tive analysis of the performance of underlying assets available from periodic investor reports. In addi- tion, a further step is included that takes account of the illiquidity to which unlisted securities are ex- posed with respect to those listed on active markets, and appropriate penalties in terms of basis points per year are consequently added to spreads. Said penalties are identified according to the complexity of the structure, the rating assigned and the segment of collateral. Lastly, the prices thus calculated are back-tested with respect to effective prices of sale to verify their consistency with levels expressed by the market.

The pricing of CDOs is determined through the use of a quantitative model that estimates losses on col- lateral by means of an approach that simulates the associated cash flows by drawing on copula functions. The most significant factors considered in the simulation - for individual collateral - are the risk-neutral probabilities of default derived from market spreads, recovery rates, correlations between the values of collateral present in the structure and the expected residual lives of contracts. The measurement process for spreads incorporates all market input in as timely a manner as possible: synthetic indices such as the ABX, consensus parameters prepared by multi-source platforms, and mar- ket spread estimates made available by leading dealers are thus used. The Market Data Reference Guide, which contains the data sources for credit spreads, has also been expanded to include specific policies for other input data such as correlations and recovery rates.

165 Notes - Part E – Risks and hedging policies

Adjustments adopted to reflect model risk and other measurement uncertainties In general, model risk consists of the possibility that the measurement of a complex security is materially sensitive to the choice of a model. Inasmuch as alternative models often exist for the pricing of the same security and there is no single market standard for the measurement of hybrid securities, it is possible that different models, despite attributing similar quality to the underlying securities, may give rise to different pricing for exotic securities. In such cases, where possible, the alternative models are compared and, where necessary, the model inputs are subjected to stress, thereby obtaining information useful in quantifying fair value adjustments. Such adjustments, expressed in terms of measurable financial quantities (vega, delta, correlation shift), are periodically revised, including in light of market changes, or the introduction of new liquid securities, different calculation methods and, in general, methodological refinements, which may also lead to substantial changes to the predetermined models and the implementation thereof.

These adjustments to fair value due to model risks are part of a Mark-to-Market Adjustment Policy adopted in order to contemplate other factors that may have an impact on measurement, in addition to the model risk illustrated above. These other factors are, essentially: – high and/or complex risk profile; – the illiquidity of positions determined by temporary or structural market conditions or in relation to the amount of the values held (in the case of excessive concentration) and – difficulty in measurement due to the absence of available liquid market parameters. In further detail, where a product is illiquid, its fair value is adjusted.

Said adjustment is generally largely insignificant for securities the measurement of which is provided directly by the market. To this end, listed securities characterized by a high level of liquidity are measured directly at mid-price, whereas listed securities with a low level of liquidity and unlisted securities are measured accord- ing to the bid price for long positions and the ask price for short positions. The adjustment of derivatives the fair value of which is determined according to a measurement technique may be calculated according to different methods depending on the availability on the market of bid and ask quotes for products having similar characteristics in terms of type, underlying asset, currency, maturity and volumes exchanged to be used as a benchmark. Where none of the foregoing indications is available, the process relies on stressing model input parameters deemed relevant.

The primary factors deemed illiquid (in addition to those used as inputs for the measurement of structured credit products, as discussed above), for which the respective adjustments were calculated, are: the correla- tions of CMS spread options, certain inflation rates, Rendistato, and the volatility of 1 and 12 month Euribor caps/floors.

The process of managing adjustments is formally established in appropriate calculation methods depending on the varying configurations of the foregoing items. The criterion for release is contingent on the discontinuation of the foregoing factors and is overseen by the Risk Management Department.

Said processes are a combination of rigidly specified quantitative elements and qualitative elements neces- sarily derived from management assessments.

STRUCTURED CREDIT PRODUCTS

The business model: goals, strategies and relevance Structured credit transactions represent an insignificant portion of Banca IMI’s proprietary trading opera- tions. In the past, the Bank also undertook such transactions using a typical carry-trade approach aimed at achieving appreciable returns on assets deemed to be of good credit quality. This activity has always been conducted within operational limits appropriate to ensuing that outstanding volumes were consistent with the Bank’s overall risk appetite, without ever employing an originate-to-distribute type business model.

166 Notes - Part E – Risks and hedging policies

The most recent strategies for structured credit products refer to the management of outstanding invest- ments and have led to: 1. the reclassification of a portfolio of Italian RMBSs, primarily highly rated senior notes, to loans and re- ceivables in the third quarter of the year, with the aim of establishing a high-return portfolio free of price dislocation in the near term; 2. the securitization of a portfolio of debt securities issued by the Bank with the goal of reducing the cost of funding and optimizing refinancing characteristics with the European Central Bank.

Highlights The qualitative and quantitative composition of investments in structured credit products is significantly documented by the following indicators: – 100% of exposures are investment-grade; – 95.5% of exposures are rated AAA; – only 0.8% are rated BBB; – 31% are of vintages3 earlier than 2005; – 15% are of 2005 vintage; – almost all exposures pertain to the European area.

In terms of underlying technical forms, 80% of exposures are ABS (35.9%) and RMBS (44.1%), whereas the remainder consists of CDOs and CLOs. (million euro) Tecnichal form AAA AA A BBB Total %

ABS 221 - 3 5 229 35.9 CDO 106 9 - - 115 18.0 CLO 4 6 3 - 13 2.0 RMBS 279 - 2 - 281 44.1 Total 610 15 8 5 638 100.0

95.5% 2.4% 1.3% 0.8% 100.0%

As regards the measurement methods used, it was not possible to make use of the effective market quotes method for funded products. The measurement technique used in 81% of cases was the comparable ap- proach or the mark-to-model approach (18.1% of cases).

The following table sets out the risk exposure figures at 31 December 2008 and highlights statement of income items (the algebraic sum of expenses and revenues, adjustments and net value increases).

Exposition ABS/CDO funded (million euro) Product IAS Position at 31.12.2008 Income statement at 31.12.2008 Category Result of trading activity

Post-reclassifica- Nominal Risk exposition Profit/Loss Depreciation/ Total tion Value (talking account of Revaluation depreciation and Year of which: revaluation) 4Q European ABS/CDO funded Held for trading 399 354 3 -34 -31 -20 Loans and Receivebles 308 285 - -1 -1 - Long position 707 639 3 -35 -32 -20

3 Date of origination of the collateral underlying the securitization. It is an important factor in judging the risk level of the mortgage portfolios underlying securitizations inasmuch as, particularly on the U.S. market, the phenomenon of mortgages issued to parties with inadequate incomes and scarce documentary evidence began to become significant in 2005. 167 Notes - Part E – Risks and hedging policies

2.2 Interest rate risk – banking book

QUALITATIVE INFORMATION

General aspects, management processes and measurement methods for interest rate risk Banca IMI’s banking book operations consist chiefly of the issue of bonds. These bonds are subject to two different accounting treatments depending on their characteristics and the risk management methods ap- plied to them: – bonds carried at amortized cost: this category includes bonds the returns on which are correlated to the performance of interest rates, exchange rates and/or the baskets of equities. Such bonds are stated under liability item 30, “Securities issued”; – bonds carried at fair value: this category includes bonds the returns on which are correlated to the performance of baskets of UCITS in which the funds originally raised are invested. Said bonds are stated under liability item 50, “Financial liabilities designated at fair value”.

From a management standpoint, all risks arising from the type of operations described above are hedged through the use of securities transactions specifically undertaken with parties unrelated to the Bank. It should also be noted that the Bank takes an integrated approach to monitoring its exposure to interest- rate risk for both the regulatory trading book and regulatory banking book.

Fair value hedging From an accounting standpoint, the Bank has set itself the goal of rendering the result on the statement of income immune from interest-rate risk. For this reason, the accounting treatment adopted for the category of bonds carried at amortized cost calls for hedge accounting solely for changes in fair value associated with interest rates. When a bond is issued, the derivative contract entered into to hedge interest-rate risk is subjected to an ef- ficacy test on the basis of a method in line with international accounting standards. Such tests are repeated by the Parent Company’s Risk Management Department quarterly, including on a prospective basis.

Where efficacy tests yield positive results, the contra entry in the statement of income of the hedged liabilities and the associated underlying derivative is recognized under item 90, “Fair value adjustments in hedge ac- counting”.

Where efficacy tests yield negative results: – discharge of the hedged security – the changes in the fair value of the derivative from the date in which it was determined to be ineffective to the date of discharge are recognized under item 80 of the state- ment of income, “Profits (losses) on trading”. Said item also records profits and losses on the early redemption of the bond; – non-discharge of the hedged security – the security is amortized for accounting purposes on the basis of the internal rate of return of the value adjustments applied over the life of the hedge. Said amortization begins on the date of the latest efficacy test passed and refers to the value adjustment recognized after said date.

Cash flow hedging The Bank has not engaged in cash flow hedging.

Bonds measured at fair value The fair value option has been applied to bonds the return on which are correlated to baskets of mutual funds and in connection with which the Bank undertakes initial hedging of financial risk through direct investment in the underlying assets, also measured at fair value, in order to replicate their performance. Said bonds may be broken down, from the standpoint of financial risks, into a forward sale of synthetic in- dices and a put option with a strike price equal to the nominal value of the funds, plus the minimum return.

The settlement of this type of bond calls for the payment to the underwriter of a redemption premium at maturity or the date of exercise of the early redemption clause. Said redemption premium is calculated ac-

168 Notes - Part E – Risks and hedging policies cording to the appreciation of a reference basket (“basket”) consisting of bond and/or equity mutual funds and a bond having an identical cash-out profile to that of any guaranteed coupons and the redemption price guaranteed by the underwriter in the rules and procedures of the bond issue.

The composition of the basket over the life of the bond, in terms of the percent weight of the three cat- egories indicated (equity funds, bond funds and bonds), varies according to the predetermined rules that tend to overweight the percentage of equity funds when equity markets are bullish, and to overweight the percentage of bond funds and bonds where equity markets are bearish4.

It should be noted that, due to the characteristics of the products in question, the Bank does not recognize any day-one profit on the date of issue of such bonds.

2.3 Price risk – regulatory trading book

QUALITATIVE INFORMATION

For qualitative information on the trading book, please refer to paragraph 2.1 above.

QUANTITATIVE INFORMATION

1. Regulatory trading book: on-balance sheet exposures in equities and UCITS

Book values Quoted Unquoted A. Equities A.1. Shares 204,580 - A.2. Innovative equity instruments - - A.3. Other equities - -

B. UCITS B.1. Italian - harmonised open-ended - 5,291 - not harmonized open-ended - 18 - closed-ended 14,094 - - reserved - - - speculative - - B.2. Other EU Countries - harmonised open-end 167,152 568,789 - not harmonized open-ended - - - not harmonised closed-ended - - B.3. Other non-EU Countries - open-ended 4,467 1,388 - closed-ended - - Total 390,293 575,486

4 The original percentage of the investment in funds may range from a minimum of 50% to a maximum of 100% of the basket’s origi- nal value and, subsequently, vary over the course of the life of the bond according to the security’s predetermined rules and procedures.

169 Notes - Part E – Risks and hedging policies

For the purposes of this table, only securities traded on officially regulated markets are considered to be “listed”.

Quotas of UCITS in the book at year-end were broken down into 458 million in bond funds, 193 million in equity funds, and 91 million in money-market funds. In addition, there were 2 million in shares of SICAVs, 14 million in investments in listed real-estate funds, 3 million in commodities funds.

2. Regulatory trading book: breakdown of exposures in equities and equity indices by main country of listing

Quoted Unquoted Italy USA France Germany Singapore Other countries A. Equities - long positions 129,378 16,755 7,581 24,778 - 26,088 - - short positions 19,720 7,616 20,790 4,915 - 9,711 - B. Purchase/sale of equities not yet settled - long positions 15,914 1,079 101 575 - 1,806 - - short positions 9,968 469 101 551 - 1,952 - C. Other derivatives on equities - long positions 57,597 4,093 463 52,540 - 1,948 - - short positions 80,196 2,956 500 29,148 - 260 - D. Derivatives on equity indices - long positions 536,205 73,156 - 4,549,651 11,696 262,732 - - short positions 7,875,904 108,715 498 4,290,023 37,437 266,175 - Total 8,724,882 214,839 30,034 8,952,181 49,133 570,672 -

170 Notes - Part E – Risks and hedging policies

2.4 Price risk – banking book

QUALITATIVE INFORMATION

The banking book subject to price risk consists of equity interests in market companies carried among “Fi- nancial assets available for sale”.

QUALITATIVE INFORMATION

1. Banking book: on-balance sheet exposures to equities and UCITS

Book values Quoted Unquoted A. Equities A.1. Shares 560 15,627 A.2. Innovative equity instruments - - A.3. Other equities - - B. UCITS B.1. Italian - harmonised open-ended - - - not harmonized open-ended - - - closed-ended - - - reserved - - - speculative - - B.2. Other EU Countries - harmonised open-end - - - not harmonized open-ended - - - not harmonised closed-ended - - B.3. Other non-EU Countrie - open-ended - - - closed-ended - - Total 560 15,627

171 Notes - Part E – Risks and hedging policies

2.5 Exchange-rate risk

QUALITATIVE INFORMATION

General issues, management processes and assessment methods for exchange-rate risk “Exchange-rate risk” is defined as the possibility that fluctuations in market exchange rates may result in significant increases or decreases in the value of the Bank’s assets, understood as the fair value of the risk positions managed. Qualitative information on the trading book is included in the section on market risks set forth above.

Foreign exchange hedging The exchange-rate risk arising from the brokerage of securities and derivatives is measured at the level of each individual operational unit through the use of cash and derivatives securities. Any “open” positions are transferred by the individual units to the Treasury desk in order to optimize exchange-rate risk management at the Company level.

The primary risk mitigation strategy is securing funding in the same currency as assets through disbursal from the Parent Company or, alternatively, the synthetic transformation of funding into euro.

QUANTITATIVE INFORMATION

1. Breakdown of assets, liabilities and derivatives by currency of denomination

Currencies US dollar Pound Yen Canadian Swiss franc Other sterling dollar currencies A. FINANCIAL ASSETS A.1 - Debt securities 393,092 8,368 14 485 62 38,439 A.2 - Equities 84,881 3,072 4,965 2 2,642 545 A.3 - Loans to banks 86,611 40,299 126,257 5,732 29,193 91,849 A.4 - Loans to customers 132,897 15,520 A.5 - Other financial assets B. OTHER ASSETS 9,237 35 214 4 53 623 C. FINANCIAL LIABILITIES C.1 - Due to banks 132,778 53,951 38,739 - 14,908 119,388 C.2 - Due to customers 360,318 8,480 4,713 124 824 88 C.3 - Debt securities D. OTHER LIABILITIES 2,629 184 1 7 15 574 E. FINANCIAL DERIVATIVES - Options + long positions 1,231,324 147,598 159,361 335 48,198 11,135 + short positions 1,218,715 169,079 104,667 13,416 23,315 16,013 - Other derivatives + long positions 3,496,448 1,884,237 167,501 4,228 683,934 165,022 + short positions 3,877,341 1,871,262 209,509 - 718,730 203,706 Total assets 5,434,490 2,099,129 458,312 10,786 764,082 307,613

Total liabilities 5,591,781 2,102,956 357,629 13,547 757,792 339,769

Imbalance (+/-) (157,291) (3,827) 100,683 (2,761) 6,290 (32,156)

172 Notes - Part E – Risks and hedging policies

Changes in exchange rates after year-end did not result in significant effects on the statement of income. The following table summarizes exchange rates between the euro and the main currencies in which assets and liabilities are denominated, at year-end and 16 March 2009, respectively.

Currency Code 31.12.2008 16.03.2009 Change US Dollar USD 1.3917 1.3042 (0.08750) Pound sterling GBP 0.9525 0.9205 (0.03200) Swiss Franc CHF 1.4850 1.5421 0.05710 Japan Yen JPY 126.1400 128.5100 2.37000 Czech Republic Crown CZK 26.8750 26.5230 (0.35200) Hungary forint HUF 266.7000 295.5300 28.83000 Poland Zloty PLN 4.1535 4.4330 0.27950 Turkey New Lira TRY 2.1488 2.2067 0.05790 South Africa Rand ZAR 13.0667 12.9043 (0.16240)

173 Notes - Part E – Risks and hedging policies

2.6 Derivative securities

A. FINANCIAL DERIVATIVES A.1 Regulatory trading book: period-end and average notional values

Debt securities Equities and Foreign Other Total 2008 Total 2007 and interest rates stock exchange values indexes rates and gold Quoted Quoted Quoted Quoted Quoted Quoted Unquoted Unquoted Unquoted Unquoted Unquoted Unquoted

1. Forward rate - 564,034,527 - - - 23,161 - - - 564,057,688 - 59,100,402 agreement 2. Interest rate swap - 976,393,443 - 210,442 - - - 78,693 - 976,682,578 - 1,035,033,226 3. Domestic currency swap ------4. Currency interest rate swap - - - - - 11,546,228 - - - 11,546,228 - 6,264,223 5. Basis swap - 331,022,537 - 86,374 - - - - - 331,108,911 - 58,097,599 6. Exchange of stock indices ------7. Exchange of real indices ------8. Futures 97,056,632 - 617,819 - 1,658 - 195,050 - 97,871,159 - 95,261,025 -

9. Caps

- Bought - 98,252,694 ------98,252,694 - 104,454,569

- Issued - 121,912,869 ------121,912,869 - 151,976,601

10. Floors

- Bought - 91,110,870 ------91,110,870 - 71,847,449

- Issued - 88,677,418 ------88,677,418 - 75,928,386

11 Other options

- Bought

- Plain vanilla 213,618,107 59,339,675 5,501,631 - 3,983,832 3,846 215,888 219,123,584 73,957,166 47,484,938 48,166,233 10,417,771 - Exotic ------

- Issued

- Plain vanilla 161,288,391 56,711,909 13,140,245 20,815,428 - 3,892,259 489 264,840 174,429,125 81,684,436 24,706,021 54,256,118

- Exotic ------

12. Forward contracts

- Purchases - - - - - 826,725 - - - 826,725 - 2,222,801

- Sales - - - - - 880,073 - - - 880,073 - 1,237,962 - Currency against currency - - - - - 382,873 - - - 382,873 - 347,295 13. Other derivatives ------

Total 471,963,130 2,387,455,942 19,259,695 31,530,015 1,658 21,535,151 199,385 559,421 491,423,868 2,441,080,529 167,451,984 1,668,932,864

Average values 309,000,375 1,999,345,460 20,308,566 34,215,173 3,406 20,900,951 125,580 545,114 329,437,926 2,055,006,697 112,803,494 1,174,749,699

The table does not include securities to be collected and to be collected and to be delivered. Collars are represented through breakdown in elementary options.

174 Notes - Part E – Risks and hedging policies

A.2 Banking book: period-end and average notional amounts

A.2.1 Hedging

Debt securities Equities Foreign ex- Other Total 2008 Total 2007 and interest and share change rates values rates indexes and gold Quoted Quoted Quoted Quoted Quoted Quoted Unquoted Unquoted Unquoted Unquoted Unquoted Unquoted

1. Forward rate agreement ------2. Interest rate swap - 1,707,252 ------1,707,252 - 1,252,132 3. Domestic currency swap ------4. Currency interest rate swap ------124,585 5. Basis swap - 1,707,401 ------1,707,401 - 25,162 6. Exchange of stock indices ------7. Exchange of real indices ------8. Futures ------9. Caps - Bought ------Issued ------10. Floors - Bought - 5,958,721 ------5,958,721 - - - Issued ------11. Other options - Bought - Plain vanilla ------Exotic ------Issued - Plain vanilla ------Exotic ------12. Forward contracts - Purchases - - - - - 20,357 - - - 20,357 - - - Sales ------Currency against currency ------13. Other derivatives ------Total - 9,373,374 - - - 20,357 - - - 9,393,731 - 1,401,879

Average values - 5,325,334 - - - 72,471 - - - 5,397,805 - 700,940

175 Notes - Part E – Risks and hedging policies

A.2.2 Other derivatives

Debt Equities and Foreign Other Total 2008 Total 2007 securities and share exchange values interest rates indexes rates Quoted Quoted Quoted Quoted Quoted Quoted Unquoted Unquoted Unquoted Unquoted Unquoted Unquoted 1. Forward rate agreement ------2. Interest rate swap ------3. Domestic currency swap ------4. Currency interest rate swap ------5. Basis swap ------6. Exchange of stock indices ------7. Exchange of real indices ------8. Futures ------9. Caps - Bought ------Issued ------10. Floors - Bought ------Issued ------11. Other options - Bought - Plain vanilla - - - 247,421 - - - - - 247,421 - 247,421 - Exotic ------Issued - Plain vanilla - 27,758 - 2,216,378 - - - - - 2,244,136 - - - Exotic ------818,299 12. Forward contracts - Purchases ------Sales ------Currency against currency ------13. Other derivatives ------Total - 27,758 - 2,463,799 - - - - - 2,491,557 - 1,065,720

Average values - 137,590 - 1,379,738 - 259,811 - 1,500 - 1,778,639 - 532,860

Other transactions refer to derivatives embedded in bond issues.

176 Notes - Part E – Risks and hedging policies

A.3 Financial derivatives: purchase and sale of underlying assets

Debt securities Equities and share Foreign exchange Other Total 2008 Total 2007 and interest rates indexes rates and gold values Quoted Quoted Quoted Quoted Quoted Quoted Unquoted Unquoted Unquoted Unquoted Unquoted Unquoted

A. Regulatory trading book 471,963,130 2,718,478,479 19,259,695 31,616,389 1,658 28,607,485 199,385 559,421 491,423,868 2,779,261,774 167,451,984 1,733,294,686 1. Operations with exchange of underlying asset

- Purchases 456,831 21,745,482 608,408 850,517 - 14,721,196 - 1,253,756 37,317,195 3,137,728 18,925,250 188,517 - Sales 461,842 19,990,000 548,892 993,570 1,658 11,996,620 6,611 - 1,019,003 32,980,190 4,464,333 13,211,030 - Currency against currency - - - - - 1,661,831 - - - 1,661,831 - 2,629,227 2. Operations without exchange of underlying asset - Purchases 260,431,534 1,347,530,049 5,461,583 13,291,705 - 128,317 3,768 271,459 265,896,885 1,361,221,530 97,315,247 842,606,129

- Sales 210,612,923 1,329,212,948 12,640,812 16,480,597 - 85,520 489 287,962 223,254,224 1,346,067,027 62,534,676 855,921,984 - Currency against currency - - - - - 14,001 - - - 14,001 - 1,066

B. Banking book - 11,108,533 - 2,463,799 - 20,357 - - - 13,592,689 - 2,617,346

B.1 Hedging - 11,080,775 - - - 20,357 - - - 11,101,132 - 1,551,626 1. Operations with exchange of underlying asset - Purchases ------

- Sales ------Currency against currency ------2. Operations without exchange of underlying asset - Purchases - 9,103,570 - - - 20,357 - - - 9,123,927 - 1,401,879

- Sales - 1,977,205 ------1,977,205 - 149,747 - Currency against currency ------B.2 Other - 27,758 - 2,463,799 - - - - - 2,491,557 - 1,065,720 derivatives 1. Operations with exchange of underlying asset - Purchases ------

- Sales ------Currency against currency ------2. Operations without exchange of underlying asset - Purchases - - - 247,421 - - - - - 247,421 - 247,421

- Sales - 27,758 - 2,216,378 - - - - - 2,244,136 - 818,299 - Currency against currency ------

In this table basis swaps and cross currency interest rate swaps are represented both under purchases and under sales respectively for 331.109 million euro and 7.072 million euro.

177 Notes - Part E – Risks and hedging policies

A.4 Over the counter financial derivatives: positive fair value – counterparty risk

Debt securities Equities and Foreign exchange rates Other values Diverse underlying and interest rates stock indexes and gold assets settled settled settled settled settled exposure exposure exposure exposure exposure exposure not settled not settled not settled not settled Gross amount Gross amount Gross amount Gross amount Gross amount Gross Gross Amount Gross Amount Gross Amount Gross Amount Gross Potential future future Potential future Potential future Potential future Potential future Potential A. Regulatory trading book A.1 Governments and Central Banks ------412,632 35,927 - - - 411,739 35,881 A.2 Public entities 34,619 - 4,678 948 - 1,525 ------

A.3 Banks 1,761,395 29,274,815 4,993,728 58,865 780,532 626,247 49,940 1,272,926 281,706 35,327 83,442 3,108 2,842,262 2,079,038

A.4 Financial institutions 252,101 7,308,402 1,188,360 1,383 226,525 210,598 5,101 231,329 45,478 - 3,597 978 448,647 249,581

A.5 Insurance companies 163,217 - 17,842 1,383 - 6,049 20 - 27,173 - - - 162,739 27,165

A.6 Non-financial companies 39,498 9,318 7,567 80,913 6,195 12,768 6,208 - 1,460 938 - 124 1,003 683

A.7 Other counterparties ------12,878 - 1,813 - -

Total A - Year 2008 2,250,830 36,592,535 6,212,175 143,492 1,013,252 857,187 61,269 1,916,887 391,744 49,143 87,039 6,023 3,866,390 2,392,348

Total A - Year 2007 1,077,121 16,549,926 298,264 97,490 1,508,635 49,605 45,665 852,879 31,627 - - - 2,196,258 2,917,666

B. Banking book B.1 Governments and ------Central Banks B.2 Public entities ------

B.3 Banks - 361,545 ------

B.4 Financial institutions ------

B.5 Insurance companies ------

B.6 Non-financial companies ------

B.7 Other counterparties ------

Total B - Year 2008 - 361,545 ------

Total B - Year 2007 ------22,689 - - 22,689 - - - -

For the purpose of determining counterparty risk contracts with margins in the Swapclear circuit are considered similar to due from banks.

178 Notes - Part E – Risks and hedging policies

A.5 Over the counter financial derivatives: negative fair value – financial risk

Debt securities Equities and Foreign exchange rates Other values Diverse underlying and interest rates stock indexes and gold assets settled settled settled settled settled exposure exposure exposure exposure exposure exposure not settled not settled not settled not settled Gross amount Gross amount Gross amount Gross amount Gross amount Gross Gross Amount Gross Amount Gross Amount Gross Amount Gross Potential future future Potential future Potential future Potential future Potential future Potential A. Regulatory trading book A.1 Governments and - 893 ------Central Banks A.2 Public entities 15,198 - 241 17,210 ------

A.3 Banks 924,428 29,252,741 2,948,013 38,908 923,570 978 26,174 1,530,609 241,591 31 43,923 1,396 (3,078,828) 2,013,925

A.4 Financial institutions 75,683 7,384,837 1,191,772 9,434 161,228 291 11,790 425,314 52,118 - 1,905 945 (796,077) 875,413

A.5 Insurance companies 184,668 - 44,704 84,265 - - 851 ------

A.6 Non-financial companies 4,382 - 683 - - - 1,228 - 1,236 - - - - -

A.7 Other counterparties ------

Total A - Year 2008 1,204,359 36,638,471 4,185,413 149,817 1,084,798 1,269 40,043 1,955,923 294,945 31 45,828 2,341 (3,874,905) 2,889,338

Total A - Year 2007 1,740,523 16,348,110 164,525 323,707 2,299,147 27,565 60,226 851,520 18,262 60,226 851,520 18,262 1,815,776 2,314,726

B. Banking book B.1 Governments and ------Central Banks B.2 Public entities ------

B.3 Banks - 216,285 - - - - - 2,451 ------

B.4 Financial institutions ------

B.5 Insurance companies ------

B.6 Non-financial companies ------

B.7 Other counterparties ------

Total B - Year 2008 - 216,285 - - - - - 2,451 ------

Total B - Year 2007 70,519 ------

A.6 Residual maturity of over the counter financial derivatives: notional amounts

Up to 1 year Between Over 5 years Total 1 and 5 years A. Regulatory trading book A.1 Financial derivatives on debt securities 852,347,435 874,252,671 660,855,836 2,387,455,942 and interest rates A.2 Financial derivatives on equities 5,539,470 18,703,802 7,286,743 31,530,015 and stock indexes A.3 Financial derivatives on foreign 10,339,099 5,788,224 5,407,828 21,535,151 exchange rates and gold A.4 Financial derivatives - other 69,936 489,485 - 559,421 B. Banking book B.1 Financial derivatives on debt securities 521,822 1,036,963 7,842,347 9,401,132 and interest rates B.2 Financial derivatives on equities 519,622 361,921 1,582,256 2,463,799 and stock indexes B.3 Financial derivatives on foreign 20,357 - - 20,357 exchange rates and gold B.4 Financial derivatives - other - - - - Total 31 December 2008 869,357,741 900,633,066 682,975,010 2,452,965,817

Total 31 December 2007 453,112,210 689,332,690 527,889,843 1,670,334,743

179 Notes - Part E – Risks and hedging policies

B. CREDIT DERIVATIVES

B.1 Credit derivatives: period-end and average notional amounts

Regulatory trading book Other operation single more single more counterparty counterparties counterparty counterparties (basket) (basket) 1. Protection purchases 1.1 Physical settlement - credit default swaps 18,693,042 27,078,219 - - 1.2 Cash settlement - credit default swaps 76,917 305,600 - - Total 31 december 2007 18,769,959 27,383,819 - -

Total 31 december 2006 9,478,325 16,383,863 - -

Average values 14,124,142 21,883,841 - - 2. Protection sales 2.1 Physical settlement - credit default swaps 17,722,927 26,940,246 - - 2.2 Cash settlement - credit default swaps 50,000 350,600 - - Total 31 december 2008 17,772,927 27,290,846 - -

Total 31 december 2007 10,314,461 15,809,285 - -

Average values 14,043,694 21,550,066 - -

180 Notes - Part E – Risks and hedging policies

B.2 Credit derivatives: positive fair value - counterparty risk

Notional amount Positive fair value Future exposure A. REGULATORY TRADING BOOK A.1 Protection purchases with 1 Governments and Central Banks - - - 2 Other public entities - - - 3 Banks 31,279,527 1,404,404 2,238,701 4 Financial institutions 9,341,728 421,317 518,273 5 Insurance companies - - - 6 Non-financial companies - - - 7 Other counterparties - - - A.2 Protection sales with 1 Governments and Central Banks - - - 2 Other public entities - - - 3 Banks 4,219,682 90,759 - 4 Financial institutions 951,487 22,110 - 5 Insurance companies - - - 6 Non-financial companies - - - 7 Other counterparties - - - B. BANKING BOOK B.1 Protection purchases with 1 Governments and Central Banks - - - 2 Other public entities - - - 3 Banks - - - 4 Financial institutions - - - 5 Insurance companies - - - 6 Non-financial companies - - - 7 Other counterparties - - - B.2 Protection sales with 1 Governments and Central Banks - - - 2 Other public entities - - - 3 Banks - - - 4 Financial institutions - - - 5 Insurance companies - - - 6 Non-financial companies - - - 7 Other counterparties - - - Total 31 december 2008 45,792,424 1,938,590 2,756,974

Total 31 december 2007 26,521,871 252,740 358,854

181 Notes - Part E – Risks and hedging policies

B.3 Credit derivatives: negative fair value - financial risk

Notional amount Negative fair value REGULATORY TRADING BOOK 1. Protection purchases with 1.1 Governments and Central Banks - - 1.2 Other public entities - - 1.3 Banks 4,144,165 92,372 1.4 Financial institutions 1,388,358 25,524 1.5 Insurance companies - - 1.6 Non-financial companies - - 1.7 Other counterparties - - Total 31 december 2008 5,532,523 117,896

Total 31 december 2007 4,363,914 38,235

Only the negative fair value of protection purchases was considered for the purposes of the foregoing table.

B.4 Residual maturity of credit derivatives contracts: notional amounts

Up to 1 year Between Over 5 years Total 1 and 5 years A. Regulatory trading book A.1 Credit derivatives with "qualified reference obligation" 4,194,095 76,107,268 9,193,223 89,494,586 A.2 Credit derivatives with "unqualified reference obligation" 172,076 1,397,776 153,113 1,722,965 B. Banking book B.1 Credit derivatives with "qualified reference obligation" - - - - B.2 Credit derivatives with "unqualified reference obligation" - - - - Total 31 december 2008 4,366,171 77,505,044 9,346,336 91,217,551

Total 31 december 2007 1,880,057 41,971,002 8,134,875 51,985,934

182 Notes - Part E – Risks and hedging policies

SECTION 3 – LIQUIDITY RISK

QUALITATIVE INFORMATION

General issues, management processes and assessment methods for liquidity risk “Liquidity risk” is defined as the chance that the Bank may not be able to discharge its commitments to make payments due to its inability to procure new funds (funding liquidity risk) or sell assets on the market to make up for the shortage (market liquidity risk), or otherwise be forced to incur very high costs to discharge its commitments.

The Finance and Treasury department in Banca IMI’s Capital Management unit is responsible for managing and controlling the Company’s cash flows. It also oversees and develops refinancing of the securities portfolio in coordination with the heads of other trading units and manages rehedging of materiality in securities settlement. The desk supervises collateral in the form of cash and debt securities exchanged with counterparties in OTC derivatives transactions in order to optimize overall liquidity management.

The sole interlocutor for technical forms of short-term funding is the Parent Company’s Central Treasury Department. A specific liquidity policy is currently being defined for Banca IMI to take account ofthe investment bank’s particular needs within the framework of the guidelines established in the liquidity policy adopted by Intesa Sanpaolo.

Intesa Sanpaolo also acts as depositary bank for the settlement of all transactions involving securities, OTC derivatives and derivatives listed on the IDEM market, both on a proprietary basis and on behalf of third parties, originated by the market rooms in Milan and London. The management of cash flows originating with clients towards clearing houses in listed foreign derivatives brokerage operations is supported by a leading bank’s global network.

QUANTITATIVE INFORMATION

The distribution of securities that generate/absorb liquidity by residual contractual life is depicted by sepa- rately securities denominated in euro separately from those denominated in other currencies. There was no further degree of detail in the separate representation of the latter given the relative significance (1.98% of total on-balance sheet assets and liabilities) and the absence of a primary currency.

1. Breakdown of financial assets and liabilities by residual contractual maturity In the following tables, the technical forms characteristic of the investment bank – repurchase agreements, securities lending and short sales and included in the items “Loans” and “Other liabilities”.

Assets with “Unspecified maturity” include in particular quotes of UCITS, the compulsory reserve, and the net value of non-performing assets.

183 Notes - Part E – Risks and hedging policies

1. Breakdown by contractual residual maturity of financial assets and liabilities

Currency: euro

On Between Between Between Between Between Between Between Over 5 Unspe- Total demand 1 and 7 and 15 15 days 1 and 3 and 6 months 1 and years cified 7 days days and 1 3 months 6 months and 1 5 years maturity month year Cash assets 163,506 3,184,677 2,479,367 3,295,841 3,499,000 749,223 2,864,988 12,346,834 10,326,577 722,957 39,632,970

A.1 Government bonds - - 5,508 2,627 130,187 338,668 688,582 534,600 354,610 - 2,054,782

A.2 Quoted debt securities 4,694 10,184 3,330 15,345 179,099 159,597 259,256 2,753,234 1,167,637 4,304 4,556,680

A.3 Other debt securities 3,011 - 538 1,844 48,905 85,593 92,903 485,625 160,726 181 879,326

A.4 Quotas of UCITS ------689,519 689,519

A.5 Loans

- Banks 145,718 2,294,473 2,017,632 2,399,828 1,675,215 34,280 1,720,347 7,752,292 7,980,994 19,470 26,040,249

- Customers 10,083 880,020 452,359 876,197 1,465,594 131,085 103,900 821,083 662,610 9,483 5,412,414

Cash liabilities 3,181,656 8,377,138 491,543 957,382 1,676,507 812,305 3,107,753 12,183,357 8,348,221 - 39,135,862

B.1 Deposits

- Banks - 1,500,000 - - - - - 3,665 - - 1,503,665

- Customers ------

B.2 Debt securities - - - - 65,449 6,000 2,427,719 11,266,531 7,935,690 - 21,701,389

B.3 Other liabilities 3,181,656 6,877,138 491,543 957,382 1,611,058 806,305 680,034 913,161 412,531 - 15,930,808

Off-balance sheet transactions 12,306 8,381,035 58,391 144,450 1,260,113 949,303 3,308,256 45,052,707 4,225,250 - 63,391,811 C.1 Financial derivatives with exchange of capital - Long positions 134 3,976,123 8,969 14,244 53,036 74,959 270,289 23,413 - - 4,421,167

- Short positions 143 4,319,595 1,655 15,026 37,699 77,051 347,255 41,895 - - 4,840,319 C.2 Deposits and loans to be settled - Long positions ------

- Short positions ------C.3 Irrevocable commitments to lend funds - Long positions 12,029 85,317 43,568 115,114 342,274 358,757 1,758,501 10,122,589 - - 12,838,149

- Short positions - - 4,199 66 827,104 438,536 932,211 34,864,810 4,225,250 - 41,292,176

184 Notes - Part E – Risks and hedging policies

Currency: other

On Between Between Between Between Between Between Between Over 5 Unspe- Total demand 1 and 7 and 15 15 days 1 and 3 and 6 months 1 and years cified 7 days days and 1 3 months 6 months and 1 year 5 years maturity month Cash assets 250,007 218,967 35,084 1,027 23,290 3,156 5,949 317,337 25,119 71,693 951,629

A.1 Government bonds - - 2,514 - - 63 - 526 719 - 3,822

A.2 Quoted debt securities - 548 1,258 1,027 6,073 3,092 5,946 156,926 24,236 12 199,118

A.3 Other debt securities - - - - - 1 3 14,452 164 1 14,621

A.4 Quotas of UCITS ------71,680 71,680

A.5 Loans

- Banks 250,007 109,974 821 - 8,130 - - - - - 368,932

- Customers - 108,445 30,491 - 9,087 - - 145,433 - - 293,456

Cash liabilities 262,419 240,644 - 2 4,252 1,354 3,472 83,134 43,006 - 638,283

B.1 Deposits

- Banks 262,419 88,415 - 2 825 1,354 3,472 83,134 43,006 - 482,627

- Customers - 2 - - 3,427 - - - - - 3,429

B.2 Debt securities ------

B.3 Other liabilities - 152,227 ------152,227 Off-balance sheet 95,240 392,459 182,182 191,140 1,262,637 1,769,435 1,323,150 6,353,681 6,797,602 - 18,367,526 transactions C.1 Financial derivatives with exchange of capital - Long positions 47,620 207,034 51,099 70,272 402,561 823,420 626,529 1,727,612 3,235,332 - 7,191,479

- Short positions 47,620 185,425 46,859 68,190 415,154 822,653 626,237 1,729,232 3,235,332 - 7,176,702 C.2 Deposits and loans to be settled - Long positions ------

- Short positions ------C.3 Irrevocable commitments to lend funds - Long positions - - 84,224 26,521 56,907 107,197 23,679 - - - 298,528

- Short positions - - - 26,157 388,015 16,165 46,705 2,896,837 326,938 - 3,700,817

2. Breakdown by sector of financial liabilities

Govern- Other Financial Insurance Non- Other Total ments public institu�����- compa- financial counter- and entities tions nies companies parties Central Banks 1. Due to customers - - 2,939,999 - 236,905 - 3,176,904 2. Securities issued - - - - - 17,823,245 17,823,245 3. Financial liabilities held for trading - 2,166 3,411,290 240,745 33,301 37,506,184 41,193,686 4. Fair value financial liabilities - - - - - 3,878,144 3,878,144 Total 31 december 2008 - 2,166 6,351,289 240,745 270,206 59,207,573 66,071,979

Total 31 december 2007 - 1,226 4,684,786 1,085,563 6,626 26,223,124 32,001,325

Technical overdrafts are included among “Other counterparties” under item “3. Financial liabilities held for trading”.

185 Notes - Part E – Risks and hedging policies

3. Geographical breakdown of financial liabilities

Italy Other America Asia Rest of the Total European World Countries 1. Due to customers 2,420,611 443,838 312,455 - - 3,176,904 2. Due to banks 8,111,303 5,092,900 - - - 13,204,203 3. Securities issued 17,823,245 - - - - 17,823,245 4. Financial liabilities held for trading 1,754,400 - - - - 1,754,400 5. Fair value financial liabilities 3,878,144 - - - - 3,878,144 Total 31 december 2008 33,987,703 5,536,738 312,455 - - 39,836,896

Total 31 december 2007 25,984,990 7,185,981 2,923,321 922 - 36,095,214

Financial liabilities held for trading are exclusively on-balance sheet and consist of short positions in fixed- income securities and equities, typically traded on regulated and/or organized markets. The liquidity generated by transactions is concurrently used to enter into securities lending or repurchase agreement investment transactions.

186 Notes - Part E – Risks and hedging policies

SECTION 4 - OPERATIONAL RISK

QUALITATIVE INFORMATION

A. General aspects, management processes and assessment methods for operational risk Operational risk can be defined as the risk of suffering losses due to the inadequacy or failure of processes, human resources and internal systems, or external events. Operational risk includes legal risk, which may be defined as the risk of losses arising from breaches of laws or regulations, liability under contract or in tort, or other disputes. It does not include strategic and reputational risks.

The Intesa Sanpaolo Group has defined an overarching framework for the management of operational risks by establishing rules and organizational procedures for assessing, managing and controlling these risks. Governance of operational risks is attributed to the Board of Directors, which identifies the strategic orienta- tions and management policies for risk and ensures the operation, efficiency and effectiveness of the opera- tional risk management and control system. The General Manager ensures the accuracy and completeness of information flows with the aim of integrating the system for the measurement, management and control of operational risks into the Company’s decision-making processes and management of operations.

Banca IMI has established an operational risk management function run by the Management Planning and Control Unit, the Decentralized Operational Risk Manager. The latter, in coordination with the Parent Company’s Operational Risk Management function, is responsible for collecting and updating information on operational risks, the process of surveying exposure to operational risks, and the generation of regular reports. In accordance with the requirements of applicable legislation, indi- vidual organizational units were involved in the process of surveying, managing and reporting operational events.

The first “integrated” self-diagnosis process was implemented at the Group level in 2008. This activity aims to measure the exposure to Operational Risk at the level of the Organizational Unit and company process, providing data for the model used to determine the Group’s operational risks, and to generate synergies with the information flows to other control and company units. Banca IMI has conducted this analysis for a total of 10 business and support units, including its foreign branches.

The Operational Context Assessment conducted for the first time in the second six months of the year is a qualitative analysis of the current exposure to operational risks undertaken according to an assessment of risk factors in terms of “relevance” and “protection” aimed at identifying areas of vulnerability and any mitigating steps that may be taken to fill these gaps, thereby promoting pro-active risk management (risk ownership).

The Scenario Analysis, already in use, instead aims to identify operational risks on a forward-looking basis by measuring exposure in terms of frequency, average impact, and worst cases.

The self-diagnosis procedure indicated the existence of good overall protection against operational risks and contributed to the spreading of a company culture aimed at constantly averting such risks.

The internal model for the calculation of capital absorption is conceived in such a way as to combine in a homo- geneous manner all primary information sources both of a quantitative (internal and external historical loss data) and qualitative (scenario analysis and operational context assessment) nature.

The quantitative component is based on an analysis of historical data concerning internal events (collected by decentralized units, appropriately verified by the centralized function, and managed by a dedicated IT system) and external events (through participation in consortium initiatives such as the Italian Operational Loss Database managed by the Italian Banking Association and the Operational Riskdata eXchange Association) by applying actuarial techniques that involve the separate study of the frequency and impact of events and the subsequent creation of annual loss distributions and the ensuing risk measurements through appropriate Montecarlo tech- niques.

The qualitative component (scenario analysis) is focused on the prospective assessment of each unit’s risk profile and is founded on the structured, organized survey of subjective estimates formulated directly by the manage- 187 Notes - Part E – Risks and hedging policies ment concerning the assessment of the potential impact on the statement of income of operational events of particular gravity. Such assessments, prepared according to statistical and actuarial technical analyses, result in an estimate of unexpected loss that is then supplemented by the measurement obtained in the analysis of historical loss data. Value at risk is then identified as the minimum amount at the Group level, net of outstanding insurance cove- rage, required to cover the maximum potential loss. Value at risk is estimated using a loss distribution approach model (an actuarial-based statistical model for the calculation of value at risk in operational losses), applied to both quantitative data and the results of the scenario analysis over a holding period of one year, with a 99.96% confidence interval (99.90% for the regulatory measurement). This method also calls for the application of a corrective factor deriving from the qualitative analyses of the level of risk inherent in the operational context in order to account for the efficacy of internal controls within the various organizational units.

Banca IMI, in accordance with the guidelines laid down by the Parent Company, Intesa Sanpaolo, implements a traditional policy of transferring operational risk (insurance) in order to pursue the goal of mitigating the impact of any unexpected losses, thereby contributing to the reduction of value at risk.

Operational risks are monitored using an integrated reporting system that provides management with the infor- mation needed to manage and/or mitigate the risks assumed.

A structured training program was prepared for persons actively involved in the operational risk management and mitigation process in order to provide constant support for said process.

QUANTITATIVE INFORMATION

The integrated reporting system provides management with the information required to manage and/or mitigate the risks assumed.

The quantitative data surveyed by organizational units are analyzed by the Operational Risk Management function. These reports discuss the primary operational events detected during the reference period, analyze the performance of risk exposure over time, and compare the results with the losses estimate in the previous year’s scenario analysis.

The proprietary scheme for the classification of operational events employed by the Bank is complaint with that established by the supervisory authority: – Unlawful actions by internal personnel: events attributable to voluntary action involving at least one person internal to the Bank and that result in damages (monetary losses) for the Bank. – Unlawful actions by external persons: events attributable to voluntary action taken solely by persons that may not be considered internal to the Company, in general perpetrated in order to secure personal benefits. – Staff relations and workplace safety: events attributable to the Company’s relations with its staff or the non-compliance of the workplace with health and safety requirements; these include liabilities due to accidents suffered by employees in the Bank’s offices or using the Bank’s vehicles. – Commercial practices: events tied to services rendered and products supplied to clients executed improperly or negligently (including fiduciary requirements and adequate information concerning investments), or due to defects in the nature or characteristics of products/models/contracts. This category also includes claw-back suits in bankruptcy proceedings and liabilities due to the breach of public safety legislation or legislation not specific to the banking industry. – Disasters or other events: events deriving from natural causes or human actions that result in damages or injuries to company resources (tangible or intangible assets, persons, etc.) and/or the suspension of service, or other events (including improper conduct and/or actions by third-party companies that damage the Company). This category also includes liabilities arising from political, legislative and fiscal changes effective retroactively. – Technological systems and services: events due to malfunctions, logical or structural flaws in technological systems and other support systems. – Execution, delivery and process management: events due to unintentional errors in the management of operational and support activity, or caused by counterparties other than clients and suppliers. This category also includes events related to the pricing models employed.

188 Notes - Part E – Risks and hedging policies

BANCA IMI PERCENTAGE BREAKDOUN OF LOSSES BY EVENT

CUSTOMERS, PRODUCTS AND OPERATING PRACTICES 0.74%

IT SERVICES AND PUBLIC UTILITIES 1.12%

EXECUTION, DELIVERY AND PROCESS MANAGEMENT 98.14%

Legal risks The risks associated with legal disputes, potential disputes and any complaints received are subject to perio- dic analysis. Where there exist legal obligations in connection with which the Bank will likely be required to make a financial outlay, and the amount thereof may be reliably estimated, the appropriate allocations are made to provisions for risks and charges. The amount of such allocations is periodically adjusted to account for the evolution of the underlying risks.

189 Part F – Information on capital

SECTION 1 – THE BANK’S CAPITAL

A. QUALITATIVE INFORMATION

The objectives pursued in the management of the Bank’s capital are inspired by prudential supervisory provisions and aim to maintain adequate levels of capitalization for the assumption of the risks typical of investment banking, which may include temporary absorptions of regulatory capital due to placements on primary markets or concentration requirements for given issuers or groups.

The policy for the allocation of profit for the year aims to enhance the Bank’s capital, with a particular focus on tier-one capital, inspired by prudent distribution of operating profit, and to ensure a properly balanced financial position.

The issuance of subordinated liabilities was aimed at maintaining minimum requirements when faced with contingent needs. Accordingly, such liabilities have been redeemed early upon the discontinuation of such needs or not renewed upon contractual maturity. Credit risk mitigation techniques (netting) and internal market risk models have been introduced with the aim of optimizing the use of regulatory capital.

B. QUANTITATIVE INFORMATION

Please refer to section 14 of the Notes for the details of the composition of the Bank’s capital.

SECTION 2 - REGULATORY CAPITAL AND CAPITAL RATIOS

2.1 Regulatory Capital

A. QUALITATIVE INFORMATION

1. Tier-1 capital Tier-1 capital consists of share capital and profit reserves, net of the book value of intangible assets and leasehold improvements (the latter of which are included among “Other assets”). No hybrid capitalization securities have been issued. In accordance with the new rules introduced by Circular No. 263, 50% of the “Items to be deducted” has a direct impact on the aggregate. Said items include, inter alia, equity interests in lenders other than those assumed in the course of trading and market-making operations.

2. Tier-2 capital The positive components of tier-2 capital consist of the subordinated tier-2 loan of 165 million and revaluation reserves (for assets available for sale pursuant to Law No. 413/91). The negative components refer to the remaining 50% of the “Items to be deducted” cited above.

190 Notes - Part F – Information on capital

3. Tier-3 capital All subordinated tier-3 loans issued with the aim of protecting against market risks were redeemed in their entirety during the year.

B. QUANTITATIVE INFORMATION

Total Total 31 December 2008 31 December 2007

A. Tier 1 capital before the application of prudential filters 1,641,986 1,480,391 B. Tier 1 capital prudential filters B.1 - Positive IAS/IFRS prudential filters - - B.2 - Negative IAS/IFRS prudential filters (98,729) - C. Tier 1 before items to be deducted (A+B) 1,543,257 1,480,391 D. Items to be deducted from Tier 1 (7,617) (87,078) E. Total Tier 1 capital (C-D) 1,535,640 1,393,313 F. Tier 2 capital before the application of prudential filters 177,613 180,361 G. Tier 2 capital prudential filters G.1 - Positive IAS/IFRS prudential filters - - G.2 - Negative IAS/IFRS prudential filters (6,304) (7,828) H. Tier 2 before items to be deducted (F + G) 171,309 172,533 J. Items to be deducted from Tier 2 (7,617) (87,078) L. Total Tier 2 capital (H-I) 163,692 85,455 M. Items to be deducted from total Tier 1 and Tier 2 capital - - N. Regulatory capital (E +L-M) 1,699,332 1,478,768 O. Tier 3 capital - 530,000 P. Regulatory capital including Tier 3 (N+O) 1,699,332 2,008,768

It should be noted that, under the regulations in force, the cumulative positive impact of 98.7 million, net of the associated tax effect, arising from the change in creditworthiness did not contribute to the determi- nation of regulatory capital. In addition, a corresponding amount was allocated to non-distributable reserves pursuant to article 6 of Legislative Decree No. 38/2005 when allocating net profit for the year.

191 Notes - Part F – Information on capital

2.2 Capital Adequacy

A. QUALITATIVE INFORMATION

Capital adequacy is assessed by taking into account the planned developed of the Group’s capital market and investment banking operations and the process of centralizing them with Banca IMI. In this regard, the Bank also determines the precise capital requirements arising from the transfer of business units.

B. QUALITATIVE INFORMATION

Unweighted amounts Weighted amounts / requirements

31 December 2008 31 December 2007 31 December 2008 31 December 2007

A. RISK ASSETS

A.1 CREDIT AND COUNTERPARTY RISK

1. Standard methodology 40,172,137 6,394,441

2. Methodology based on internal ratings

2.1 Base - -

2.2 Avanced - -

3. Securitisations 635,215 351,057

B. CAPITAL REQUIREMENTS

B.1 CREDIT AND COUNTERPARTY RISK 539,640

B.2 MARKET RISK

1. Standard methodology 365,510

2. Internal models 100,888

3. Concentration risk 3,167

B.3 OPERATIONAL RISK

1. Basic indicator approach (BIA) 114,526

2. Traditional standardized approach (TSA) -

3. Advanced measurement approach (AMA) -

B.4 OTHER CAPITAL REQUIREMENTS -

B.5 TOTAL CAPITAL REQUIREMENTS 842,798

C. RISK-WEIGHTED ASSETS AND CAPITAL RATIOS

C.1 Risk-weighted assets 13,990,446

C.2 Tier 1 capital / Risk-weighted assets (Tier 1 capital ratio) 10.98% C.3 Total capital / Risk-weighted assets (Total capital ratio) 12.15%

In determining capital requirements, the Company adopts the internal model in reference to the specific risk associated with equities and UCITS, generic risk associated with equities and debt securities, and the standard model for determining the remaining requirements for market risks. The standard models are also employed to determine credit-related risks (counterparty, issuer and credit risks) and monitoring exchange-rate and goods risks and, to a residual extent, for certain mutual fund operations.

The presentation of the foregoing table has been modified with respect to the previous year due to the letter from the Bank of Italy dated 2 January 2009 in accordance with the introduction of the new Basel 2 rules. Accor- dingly, the information for 2007 founded on Basel 1 rules has not been presented.

Please refer to the Report on Operations for quarterly ratio trends beginning with 31 December 2007.

192 Part H – Related-party disclosure

1. Information on the compensation of Directors, Statutory Auditors and Executives

The Bank has decided to include within the scope of “key management personnel” under IAS 24 (hereinaf- ter “officers”) the Boards of Directors, Auditors, General Manager, the heads of the capital markets and in- vestment banking units and the executive in charge of the preparation of company accounting documents.

The following table shows the main benefits paid by the Bank to its officers in 2008.

Short-term benefits 2,719 Post-retirement benefits 52 Other long-term benefits Employee termination indemnity Stock option plans Total 2,771

2. Information on related party transactions

On 15 May 2007, as part of the process of consolidating corporate governance mechanisms, Intesa Sanpaolo’s Board of Directors approved the rules and procedures for the management of related-party transactions. Said rules and procedures were published by the Parent Company in Service Order No. 18/2007 and were subsequently implemented by Banca IMI.

These rules and procedures establish specific guidelines, and, in further detail: – the verification by units of the Parent Company and its Subsidiaries that recently undertaken dealings involve “related party of the Parent Company” identified according to a list updated on a monthly basis; – that the proposing entity conduct a specific preliminary inquiry to ensure that the contents required by the Rules and Procedures are present and acquire full documentation of the obligations discharged for its records; – that the authority to approve transactions with related parties has been established, considering the cha- racteristics of the individual transactions proposed, according to the thresholds of significance set out in the Rules and Procedures.

Financial dealings undertaken with those defined as “related” parties according to the indications provi- ded by CONSOB in its Recommendation No. 97001574 of 20 February 1997 and Recommendation No. 98015375 of 27 February 1998 are essentially related to normal financial brokerage or investment service operations.

Such dealings, where present, are also assessed from the standpoint of potential conflicts of interest and are settled at normal arm’s-length conditions. Please refer to the Report on Operations for information on dealings with Intesa Sanpaolo Group companies.

It should also be noted that no losses were reported on on-balance sheet exposures and lending commit- ments to related parties during the current and previous years.

193 Notes - Part H – Related-party transactions

The Parent Company

Intesa Sanpaolo S.p.A. Registered office: Piazza S. Carlo 156 – 10121 Turin (Italy) Branch office: Via Monte di Pietà 8 – 20121 Milan (Italy)

Article 2497-ter of the Italian Civil Code requires that companies subject to management and control in- clude a statement that sets forth salient financial data for the Parent Company in their financial statement packages. The following table shows the highlights of the most recently approved financial statements.

Intesa Sanpaolo – Financial highlights and alternative performance measures (in millions of euro) 2007 2006 changes 2006 (**) changes restated (*) amount % amount % Statement of income Net interest income 5,067 4,598 469 10.2 2,956 2,111 71.4 Net fee and commission income 3,154 3,357 -203 -6.0 2,002 1,152 57.5 Profits (Losses) on trading 18 1,122 -1,104 -98.4 445 -427 -96.0 Operating income 9,653 12,294 -2,641 -21.5 6,515 3,138 48.2 Operating costs -5,605 -6,061 -456 -7.5 -3,356 2,249 67.0 Operating margin 4,048 6,233 -2,185 -35.1 3,159 889 28.1 Net adjustments to loans -660 -644 16 2.5 -450 210 46.7 Net income 5,811 4,622 1,189 25.7 2,241 3,570

Balance sheet Loans to customers 196,463 183,737 12,726 6.9 112,314 84,314 74.9 Financial assets / liabilities held for trading 14,108 26,376 -12,268 -46.5 22,825 -8,717 -38.2 Financial assets available for sale 4,021 4,020 1 - 3,041 980 32.2 Investments 53,225 31,135 22,090 70.9 13,821 39,404 Total assets 394,869 376,992 17,877 4.7 216,208 178,661 82.6 Direct customer deposits 230,195 225,352 4,843 2.1 143,355 86,840 60.6 Indirect customer deposits 424,931 397,008 27,923 7.0 203,738 221,193 of which assets under management 109,449 113,831 -4,382 -3.8 29,593 79,856 Net interbank position 14,824 10,004 4,820 48.2 9,725 5,099 52.4 Shareholders' equity 48,442 29,356 19,086 65.0 15,323 33,119 Operating structure Number of employees 45,684 49,034 -3,350 30,434 15,250 - Italy 45,175 48,475 -3,300 30,060 15,115 - Abroad 509 559 -50 374 135 Number of branches 3,440 3,467 -27 2,107 1,333 - Italy 3,426 3,448 -22 2,101 1,325 - Abroad 14 19 -5 6 8 (*) Restated on homogeneus basis. (**) Date referred to ISP.

194 Attachments

Indipendent Auditors’ fees

Earnings and financial position figures of subsidiaries

Details of bond issues

195

Attachments Fees for auditing and services other than auditing pursuant to article 149-duodecies of CONSOB Regulation No. 11971

The reform of the Consolidated Finance Act contained in Law No. 262 of 28.12.2005, supplemented by Legislative Decree No. 3032 of 29 December 2006, resulted in the amendment of provisions governing the incompatibility of auditing firms and the introduction of new obligations concerning the disclosure of audi- ting fees pursuant to article 160, section 1-bis.

Article 149-duodecies of the CONSOB Issuer Regulations implemented the authority delegated under the above article. In particular, the provision of implementation established that companies that have engaged an auditing firm must disclose auditing fees in their financial statements for years beginning after 30 June 2006.

The following table summarizes the auditing fees paid by Banca IMI for 2008.

(in thousands of euro) Type of service Reconta Reconta Ernst & Young Ernst & Young Network

Independent audit 663 - Release of attestations 30 - Tax consulting services - - Other: audit procedures - - social report audit - - other 87 - Total 780 -

197 Attachments Earnings and financial position figures of subsidiaries

IMI Investments S.A. Société Anonyme

BALANCE SHEET (Amounts in USD ($)) (Amounts in Euro) Assets 31.12.2008 31.12.2007 31.12.2008 31.12.2007 60 Due from banks 16,278,039 26,365,366 11,696,514 17,910,037 70 Loans to customers 100 Equity investments 33,711,061 133,711,061 24,222,937 90,830,148 140 Tax assets: a) current 275,052 190,676 197,637 129,527 b) deferred 160 Other assets 25,582 78,470 18,382 53,305 Total assets 50,289,734 160,345,573 36,135,470 108,923,017

Liabilities and shareholders' equity 31.12.2008 31.12.2007 31.12.2008 31.12.2007 90 Tax liabilities: a) current 5,141,472 5,048,036 3,694,382 3,429,140 b) deferred 110 Other liabilities 22,009 12,855 15,815 8,732 170 Equity instruments 180 Reserves 5,284,682 4,780,245 3,797,285 3,247,228 190 Share premium reserve 200 Share capital 30,000,000 150,000,000 21,556,370 101,895,252 210 Treasury shares (-) 230 Net income (loss) 9,841,571 504,437 7,071,618 342,665 Total liabilities and shareholders' equity 50,289,734 160,345,573 36,135,470 108,923,017

198 Attachments

INCOME STATEMENT (Amounts in USD ($)) (Amounts in Euro) 31.12.2008 31.12.2007 31.12.2008 31.12.2007 10 Interest and similar income 1,770,905 1,511,293 1,272,476 1,026,624 20 Interest and similar expense -653,567 0 -443,969 30 Interest margin 1,770,905 857,726 1,272,476 582,655 40 Fee and commission income 0 50 Fee and commission expense (Note 1) 60 Net fee and commission income 0 0 0 0 70 Dividend and similar income 8,606,840 6,184,408 130 Net interest and other banking income 10,377,745 857,726 7,456,884 582,655 150 Net income from banking activities 10,377,745 857,726 7,456,884 582,655 190 Administrative expenses: -118,713 -218,650 -85,301 -148,529 a) personnel expenses b) other administrative expenses -118,713 -218,650 -85,301 -148,529 240 Other operating expenses (income) 1,722 0 1,169 250 Operating expenses -118,713 -216,928 -85,301 -147,360 280 Income (Loss) before tax from continuing operations 10,259,032 640,798 7,371,583 435,295 290 Taxes on income from continuing operations -417,461 -136,361 -299,965 -92,630 300 Income (Loss) after tax from continuing operations 9,841,571 504,437 7,071,618 342,665 330 Net income (loss) 9,841,571 504,437 7,071,618 342,665

The subsidiary prepares the financial statements in USD. The conversion into euro has occurred using the spot exchange rate as at 31 December 2008 of 1.3917 euro and as at December 2007 of 1.4721 euro.

199 Attachments

IMI Finance Luxembourg S.A. Société Anonyme

BALANCE SHEET (Amounts in euro) Assets 31.12.2008 31.12.2007 40 Financial assets available for sale 77,213,164 158,695,361 50 Investments held to maturity 60 Due from banks 963,757 277,297 70 Loans to customers 144,992,651 112,090,767 140 Tax assets: a) current 6,545,281 3,740,161 b) deferred 150 Non-current assets held for sale and discontinued operations 160 Other assets 3,107 5,690 Total assets 229,717,960 274,809,276

Liabilities and shareholders' equity 31.12.2008 31.12.2007 10 Due to banks 166,140,074 216,475,071 90 Tax liabilities: a) current 15,710,047 11,206,711 b) deferred 110 Other liabilities 1,709,226 5,304,065 180 Reserves 34,903,429 27,395,850 200 Share capital 100,000 100,000 230 Net income (loss) 11,155,184 14,327,579 Total liabilities and shareholders' equity 229,717,960 274,809,276

200 Attachments

INCOME STATEMENT (Amounts in euro) 31.12.2008 31.12.2007 10 Interest and similar income 28,317,084 30,293,802 20 Interest and similar expense -10,209,225 -12,954,206 30 Interest margin 18,107,859 17,339,596 40 Fee and commission income 2,527,813 4,623,846 50 Fee and commission expense (Note 1) 60 Net fee and commission income 2,527,813 4,623,846 110 Net value change of financial assets designated at fair value -4,971,954 -1,360,734 120 Net value change of financial liabilities designated at fair value 130 Net interest and other banking income 15,663,718 20,602,708 150 Net income from banking activities 15,663,718 20,602,708 160 Net insurance premiums 170 Other net insurance income (expense) 180 Net income from banking and insurance activities 15,663,718 20,602,708 190 Administrative expenses: -83,493 -180,508 a) personnel expenses b) other administrative expenses -83,493 -180,508 240 Other operating expenses (income) 190,190 -16,780 250 Operating expenses 106,697 -197,287 280 Income (Loss) before tax from continuing operations 15,770,415 20,405,421 290 Taxes on income from continuing operations -4,615,231 -6,077,842 300 Income (Loss) after tax from continuing operations 11,155,184 14,327,579 330 Net income (loss) 11,155,184 14,327,579

201 Attachments

IMI Capital Markets S.A.

BALANCE SHEET (Dollars in Thousands) Assets 31.12.2008 60 Due from banks 1,204 70 Loans to customers 100 Equity investments 100,897 140 Tax assets: a) current b) deferred 160 Other assets 13 Total assets 102,114

Liabilities and shareholders’ equity 31.12.2008 110 Other liabilities 28 170 Equity instruments 180 Reserves -5,880 190 Share premium reserve 107,998 200 Share capital 5 210 Treasury shares (-) 230 Net income (loss) -37 Total liabilities and shareholders' equity 102,114

INCOME STATEMENT (Dollars in Thousands) 31.12.2008 190 Administrative expenses: -44 a) personnel expenses b) other administrative expenses -44 250 Operating expenses -44 280 Income (Loss) before tax from continuing operations -44 290 Taxes on income from continuing operations 7 300 Income (Loss) after tax from continuing operations -37 330 Net income (loss) -37

202 Attachments

Banca IMI Securities Corp.

CONSOLIDATED STATEMENT OF FINANCIAL CONDITION DECEMBER 31, 2008

(Amounts in USD ($)) Assets Cash and cash equivalents 3,881,396 Securities segregated under federal and other regulations 4,993,697 Securities borrowed 931,077,628 Financial instruments owned at market value 44,692,721 Receivables from brokers dealers and clearing organizations 6,070,856 Receivables from affiliates 2,438,584 Receivables from customers 69,343 Exchange memberships at cost (market value $ 290.000) 96,348 Fixed assets at cost (net of accumulated depreciation and amortization of $ 625.586) 683,405 Taxes receivable 2,292,663 Deferred tax asset 1,820,000 Other assets 1,690,136 Total assets 999,806,777

Liabilities and stockholder’s equity Securities loaned 895,175,948 Payables to broker dealers and clearing organizations 69,862 Payables to affiliated customers 766,684 Payables to affiliated non-customers 510,428 Accounts payable and accrued expenses 2,312,910 Other liabilities 74,077 Total liabilities 898,909,909 Stockholder’s equity Common stock (66.500 shares authorized; 44.500 shares issued and outstanding no par value) 44,500,000 Additional paid-in capital 102,000,000 Accumulated deficit -45,603,132 Total stockholder’s equity 100,896,868

Total liabilities and stockholder’s equity 999,806,777

203 Attachments

Banca IMI Securities Corp.

CONSOLIDATED STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 2008

(Amounts in USD ($)) Revenues Interest 39,236,270 Commissions 6,805,698 Operational service fees Principal transactions, net -3,507,715 Other 110,923 Total revenues 42,645,176

Expenses Interest 27,050,554 Employee compensation 6,700,812 Floor brokerage, commissions and fees 1,278,547 Communications and data processing 1,758,657 Occupancy and equipment costs 734,931 Business development 704,733 Professional fees 306,052 Other 228,124 Total expenses 38,762,410

Income before provision for income taxes 3,882,766 Provision for income taxes 1,670,144 Net income 2,212,622

NOTES “Banca IMI Securities Corp.”’ financial results are presented in accordance with the US GAAP principles. For Group’s financial reporting purposes, above results are restated in accordance with IFRS principles.

Main differences among these standards concern the valuation of AFS assets. Reconciliations between the individual and the Group result is the following ( thousands $ ):

US GAAP Result 2,213 Unrealized losses from valuation of stock investments designated as AFS ( entered in the consolidated balance sheet of Intesa Sanpaolo between financial reserves, net to tax effect ) 1,554 IFRS Result 3,767

204 Attachments Details of bond issues

Bond issues - Rates indexed

ISIN code Description Issue Maturity Cur- Nominal Repurchases Book value Quo- Market Struct. Inflation Callable date date rency value (net) tation Place Non YES/NO clause indicator Struct

XS0379942609 Banca Imi Tasso Z.C. 16-dic-08 16-dic-12 EUR 5,000,000 - 4,374,199 Q Lux Non struct NO

XS0390338019 Banca Imi Tasso Z.C. 3-dic-08 3-dic-13 EUR 154,588,000 - 128,479,215 Q Lux Non struct NO

XS0389817064 Banca Imi Tasso Variabile con minimo 18-nov-08 18-nov-14 EUR 667,964,000 695,000.0 660,102,900 Q Lux Struct NO

XS0386332281 Banca Imi Inflation/ equity due 2016 15-ott-08 15-ott-13 EUR 50,000,000 - 48,078,396 Q Lux Struct YES

XS0382367091 Banca Imi Tasso Fisso 10-ott-08 10-ott-14 EUR 2,550,000 230,000.0 2,108,776 Q Lux Non struct NO

XS0390665213 Banca Imi Tasso Variabile 7-ott-08 7-ott-10 EUR 5,000,000,000 106,000.0 5,006,285,042 NQ Non struct NO

XS0377044317 B.IMI Low Coupon 30-set-08 30-set-14 EUR 50,950,000 - 42,977,737 NQ Non struct NO

XS0376072236 Banca Imi Tasso Variabile con minimo 13-ago-08 13-ago-14 EUR 536,688,000 2,675,000.0 549,684,941 Q Lux Struct NO

IT0004388887 Banca Imi Tasso Variabile (eur. 3m) 31-lug-08 31-lug-23 EUR 50,000,000 501,000.0 48,641,415 NQ Non struct NO

XS0371420182 Banca Imi Tasso Variabile con minimo 31-lug-08 31-lug-14 EUR 1,662,248,000 12,006,000.0 1,705,748,392 Q Lux Struct NO

XS0370200528 Banca Imi Cedola usa luglio 31-lug-08 31-lug-14 EUR 27,758,000 863,000.0 25,891,643 NQ Struct NO

IT0004381635 B.IMI Tasso Fisso semestrale 2,15% 2-lug-08 30-giu-13 EUR 45,067,000 - 46,361,897 NQ Non struct NO

XS0374293768 B.IMI Zero Coupon Notes due june 2030 2-lug-08 30-giu-13 EUR 40,000,000 - 34,099,201 Q Lux Non struct NO

XS0367497681 B.IMI Tasso Variabile con minino - 2A em 30-giu-08 30-giu-14 EUR 1,127,772,000 7,035,000.0 1,156,999,037 Q Lux Struct NO

XS0362401480 B.IMI Tasso Variabile con minino 30-giu-08 30-giu-14 EUR 1,964,049,000 14,647,000.0 2,027,771,697 Q Lux Struct NO

XS0361254385 B:IMI Z.C 30-giu-08 1-lug-13 EUR 14,000,000 300,000.0 11,737,833 Q Lux Non struct NO

XS0366014933 B.IMI Step_up switchable due 2015 30-giu-08 30-giu-15 EUR 15,000,000 - 15,270,752 Q Lux Non struct NO

IT0004357429 B.IMI Inflazione 16/05/2012 16-mag-08 16-mag-12 EUR 177,683,000 873,000.0 177,958,289 NQ Mot Non struct YES

IT0004345143 B.IMI 08/10 TV 28-mar-08 28-mar-10 EUR 2,000,000,000 201,000.0 2,019,914,638 NQ Non struct NO

IT0004304900 Banca IMI 2007/2009 Floater 20-dic-07 20-dic-09 EUR 1,500,000,000 952,000.0 1,489,986,875 NQ Non struct NO

IT0004241425 Banca IMI 2007/2009 Tasso Misto 15-giu-07 15-giu-09 EUR 6,000,000 - 5,999,467 NQ Non struct NO

IT0004190127 Banca IMI 2007/2011 Cedola Reale Più 1^ emissione 20-mar-07 20-mar-11 EUR 42,121,000 1,076,000.0 41,214,190 NQ Non struct YES

IT0001349023 Banca IMI 1999/2024 CMS 10Y linked 5-lug-99 5-lug-24 EUR 10,000,000 - 9,301,270 NQ Non struct NO

IT0001304341 Banca IMI 1999/2024 Fixed & Zero 1-feb-99 1-feb-24 EUR 29,000,000 2,096,000.0 33,787,119 Q Mot Non struct NO

IT0001271003 Banca IMI 1998/2018 Step down 16-nov-98 4-nov-18 ITL 94,253,384 4,846,948.0 97,475,903 Q Mot Non struct NO

IT0003724157 Banca IMI 2004/2011 Step Up callable 18-ott-04 18-ott-11 EUR 247,421,000 1,534,000.0 253,086,981 NQ Struct NO Callable

IT0004077571 Banca IMI 2006/2011 INFLAZ EURO III 19-giu-06 19-giu-11 EUR 6,000,000 300,000.0 5,859,925 NQ Non struct YES

IT0004062342 Banca IMI 2006/2011 INFLAZ EUROP II 12-giu-06 12-giu-11 EUR 8,000,000 168,000.0 8,012,124 NQ Non struct YES

IT0004060296 Banca IMI 2006/2011 INFLATION LINK 12-mag-06 13-mag-11 EUR 5,000,000 - 5,126,877 NQ Non struct YES

IT0004036916 Banca IMI 2006/2011 FIXED&10Y CMS 10-apr-06 10-apr-11 EUR 9,662,000 207,000.0 9,751,990 NQ Non struct NO

IT0003920425 Banca IMI 2005/2009 Dollar plus 10-ott-05 10-ott-09 EUR 519,622,000 14,117,000.0 495,946,202 NQ Struct NO

Total Bond issues - rate indexed 16,068,396,384 65,428,948 16,168,034,920

205 Attachments

Bond issues - Equity indexed

ISIN code Description Issue Maturity Cur- Nominal Repurchases Book value Quotation Market Place Struct. date date rency value (net) indicator Non Struct.

IT0004436108 BancaIMI 2008/2011 Crescita Europa 29-dic-08 29-dic-11 EUR 2,200,000 - 2,116,485 NQ Struct.

XS0392979901 Banca Imi Altipiano 11-dic-08 11-dic-13 EUR 15,000,000 - 13,885,051 Q Lux Struct.

IT0004397292 Banca Imi Top Ten Banco Posta 27-nov-08 27-nov-14 EUR 667,382,000 59,000.0 590,490,565 Q MOT Struct.

XS0386499908 Banca Imi Altipiano 22-ott-08 22-ott-13 EUR 32,300,000 - 30,150,045 Q Lux Struct.

XS0376868161 B.IMI Raimbow 30-set-08 30-set-14 EUR 40,902,000 - 42,144,312 Q Lux Struct.

IT0004375736 Banca IMI Reload Banco Posta 23-set-08 23-set-14 EUR 843,972,000 - 788,975,004 Q MOT Struct.

XS0376935028 Banca IMI Equity Linked 30-lug-08 31-lug-23 EUR 30,000,000 - 14,756,490 Q Lux Struct.

XS0366925377 B.IMI DJ Eurotoxx digital 15 years 12-giu-08 12-giu-13 EUR 15,000,000 - 7,556,805 Q Lux Struct.

Total bond issues equity indexed 1,646,756,000 59,000 1,490,074,757.0

Bonds issues - CPPI indexed

ISIN code Description Issue Maturity Cur- Nominal Repurchases Book value Quotation Struct. date date rency value (net) indicator Non Struct.

IT0004295645 Banca IMI 2007/2012 Strategia Dinamica XXII emissione. 28-dic-07 28-dic-12 Euro 117,866,000.0 902,000.0 102,530,702 NQ Struct.

IT0004288830 Banca IMI 2007/2012 Strategia Dinamica XXI emissione. 30-nov-07 30-nov-12 Euro 246,699,000.0 805,000.0 216,335,363 NQ Struct.

IT0004252364 Banca IMI 2007/2012 Strategia Dinamica XIX emissione. 31-ago-07 31-ago-12 Euro 107,886,000.0 857,000.0 95,158,752 NQ Struct.

IT0004252331 Banca IMI 2007/2011 Strategia Dinamica XVIII emissione.Z.C. 31-ago-07 28-feb-11 Euro 147,562,000.0 2,237,000.0 133,883,634 NQ Struct.

IT0004159551 Banca IMI 2007/2012 Strategia Dinamica XV emissione. 29-mar-07 29-mar-12 Euro 82,792,000.0 768,000.0 74,292,089 NQ Struct.

IT0004159536 Banca IMI 2007/2011 Strategia Dinamica XIV emissione. Z.C. 29-mar-07 1-feb-11 Euro 35,095,000.0 873,000.0 31,780,743 NQ Struct.

IT0004140148 Banca IMI 2007/2012 Strategia Dinamica XI emissione. 27-feb-07 27-feb-12 Euro 131,613,000.0 260,000.0 117,791,843 NQ Struct.

IT0004140130 Banca IMI 2007/2010 Strategia Dinamica X emissione. Z.C. 27-feb-07 27-feb-10 Euro 114,454,000.0 453,000.0 109,156,952 NQ Struct.

IT0004140163 Banca IMI 2007/2012 Strategia Dinamica XIII emissione 25-gen-07 25-gen-12 Euro 121,337,000.0 731,000.0 109,448,720 NQ Struct.

IT0004140155 Banca IMI 2007/2010 Strategia Dinamica XII emissione. Z.C. 25-gen-07 25-gen-10 Euro 95,831,000.0 270,000.0 91,811,964 NQ Struct.

IT0004013238 Banca IMI 2006/2011 Strategia Dinamica III emissione 7-mar-06 7-mar-11 Euro 286,000,000.0 894,000.0 264,498,268 NQ Struct.

IT0004013253 Banca IMI 2006/2011 Strategia Dinamica IV emissione 7-mar-06 7-mar-11 Euro 188,913,000.0 909,000.0 174,412,203 NQ Struct.

IT0003933311 Banca IMI 2005/2010 Strategia Dinamica II emissione 7-nov-05 7-nov-10 Euro 282,000,000.0 659,000.0 263,375,574 NQ Struct.

IT0003929988 Banca IMI 2005/2010 Strategia Dinamica I emissione 31-ott-05 31-ott-10 Euro 279,500,000.0 1,003,000.0 261,098,524 NQ Struct.

IT0003873376 Banca IMI 2005/2010 Dynamic Fund Bond XVI 30-giu-05 30-giu-10 Euro 234,207,000.0 1,082,000.0 221,717,986 NQ Struct.

IT0003860027 Banca IMI 2005/2010 Dynamic Fund Bond XV 24-giu-05 24-giu-10 Euro 338,999,000.0 1,636,000.0 320,826,229 NQ Struct.

IT0003825681 Banca IMI 2005/2010 Dynamic Fund Bond XIV Z.C. 30-mar-05 30-mar-10 Euro 236,397,000.0 1,762,000.0 228,992,244 NQ Struct.

IT0003799969 Banca IMI 2005/2010 Dynamic Fund Bond XIII 31-gen-05 31-gen-10 Euro 286,000,000.0 1,894,000.0 276,051,024 NQ Struct.

IT0003792964 Banca IMI 2005/2010 Dynamic Fund Bond XII 26-gen-05 26-gen-10 Euro 287,500,000.0 1,790,000.0 277,782,066 NQ Struct.

IT0003743264 Banca IMI 2004/2009 Dynamic Fund Bond XI 5-nov-04 5-nov-09 Euro 197,500,000.0 1,374,000.0 194,042,885 NQ Struct.

IT0003724827 Banca IMI 2004/2009 Dynamic Fund Bond X 11-ott-04 11-ott-09 Euro 251,500,000.0 2,317,000.0 247,709,066 NQ Struct.

IT0003624431 Banca IMI 2004/2009 Dynamic Fund Bond IX callable 27-feb-04 27-feb-09 Euro 66,170,000.0 1,290,000.0 65,447,186 NQ Struct.

Total bonds issues CPPI indexed 4,135,821,000 24,766,000 3,878,144,017

206

PREPRESS AND PRINTING: AGEMA CORPORATION – ITALIA

PRINTED ON FSC ECOLOGICAL PAPER WITH ECO-COMPATIBLE VEGETABLE INKS BY GRAFICHE AGEMA S.P.A. ITALIA – CERTIFIED COMPANY FOR ECO-SUSTAINABLE DEVELOPMENT.