CASSA CENTRALE BANCA credito cooperativo del nord est financial statements 2011

(Translation from the Italian original which remains the definitive version)

CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

TABLE OF CONTENTS

COMPOSITION OF THE DIRECTORS’ REPORT BOARD OF STATUTORY INDEPENDENT AUDITORS’ FINANCIAL STATEMENTS CORPORATE BODIES AND ON OPERATIONS AUDITORS’ REPORT REPORT FOR THE YEAR ENDED OFFICERS 31 DECEMBER 2011

List of shareholders p. 9 General Introduction p. 16 Board of Statutory Independent Statement of financial Auditors’ Report p. 93 Auditors’ Report p. 101 position p. 107 Corporate officers p. 13 Main business of Cassa Centrale Banca p. 30 Income statement p. 108 Subsidiaries of Statement of Cassa Centrale Banca p. 56 Comprehensive Income p. 109 Main associates of Statement of changes Cassa Centrale Banca p. 60 in Equity p. 110

Management activity Cash Flow Statement p. 112 of Cassa Centrale Banca p. 66 Management activity of the subsidiaries p. 76 Other information on operations p. 82 TABLE OF CONTENTS

FINANCIAL STATEMENTS EXPLANATORY NOTES FINANCIAL STATEMENTS FINANCIAL STATEMENT AS FOR THE YEAR ENDED OF THE SUBSIDIARIES AS AT DECEMBER 31 2011 31 DECEMBER 2011 AT 31 DECEMBER 2011

Statement of financial Part A Centrale Leasing Nord Est p. 311 Balance sheet p. 319 position p. 107 Accounting policies p. 116 Centrale Corporate p. 313 Profit and loss account p. 320 Income statement p. 108 Part B Information on the Statement of Comprehensive Income p. 109 Statement of financial position p. 148 Statement of changes in Equity p. 110 Part C Information on the Cash Flow Statement p. 112 Income statement p. 196 Part D Comprehensive Income p. 216 Part E Information on risks and hedging policies p. 218 Part F Information on Equity p. 292 Part G Business combinations regarding companies or branches p. 300 Part H Transactions with related parties p. 302 Part I Payment agreements based on own equity instruments p. 306 Part L Segment Reporting p. 306 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011 CoMpoSiTioN oF THE CoRpoRATE BodiES ANd oFFiCERS CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

8 COMPOSITION OF CORPORATE BODIES AND OFFICERS

LIST OF SHAREHOLDERS CASSA CENTRALE BANCA

ORDINARY SHAREHOLDERS

Centrale Finanziaria del Nord Est CENTRALE FINANZIARIA DEL NORD EST Società per Azioni

DZ BANK AG DEUTSCHE ZENTRALGENOSSENSCHAFTSBANK FRANKFURT AM MAIN

CASSE RURALI TRENTINE

CASSA RURALE ADAMELLO - BRENTA Banca di Credito Cooperativo - Cooperative Company CASSA RURALE ALTA VALDISOLE E PEJO B.C.C.Cooperative Company CASSA RURALE ALTA VALLAGARINA di Besenello, Calliano, Nomi, Volano B.C.C. Cooperative Company CASSA RURALE ALTO GARDA B.C.C. Cooperative Company CASSA RURALE BASSA ANAUNIA B.C.C. Cooperative Company CASSA RURALE BASSA VALLAGARINA B.C.C. Cooperative Company CASSA RURALE CENTRO VALSUGANA di Spera, Strigno, Telve, B.C.C. Cooperative Company CASSA RURALE CENTROFIEMME-CAVALESE B.C.C. Cooperative Company CASSA RURALE D’ANAUNIA B.C.C. Taio Cooperative Company CASSA RURALE DELLA BASSA VALSUGANA B.C.C. Cooperative Company CASSA RURALE DELLA VALLE DEI LAGHI B.C.C. Cooperative Company CASSA RURALE DI ALDENO E CADINE B.C.C. Cooperative Company CASSA RURALE DI BRENTONICO B.C.C. Cooperative Company CASSA RURALE DI CALDONAZZO B.C.C. Cooperative Company CASSA RURALE DI CASTELLO TESINO B.C.C. Cooperative Company CASSA RURALE DI FIEMME B.C.C. Cooperative Company CASSA RURALE DI FOLGARIA B.C.C. Cooperative Company CASSA RURALE DI GIOVO B.C.C. Cooperative Company CASSA RURALE DI ISERA B.C.C. Cooperative Company CASSA RURALE DI LEDRO B.C.C. Cooperative Company CASSA RURALE DI LEVICO TERME B.C.C. Cooperative Company CASSA RURALE DI LIZZANA B.C.C. Cooperative Company CASSA RURALE DI MEZZOCORONA B.C.C. Cooperative Company CASSA RURALE DI MEZZOLOMBARDO E S. MICHELE a/A. B.C.C. Cooperative Company CASSA RURALE DI MORI - VAL DI GRESTA B.C.C. Cooperative Company CASSA RURALE DI OLLE - SAMONE - SCURELLE B.C.C. Cooperative Company CASSA RURALE DI PERGINE VALSUGANA B.C.C. Cooperative Company CASSA RURALE DI PINZOLO B.C.C. Cooperative Company CASSA RURALE DI RABBI E CALDES B.C.C. Cooperative Company CASSA RURALE DI RONCEGNO B.C.C. Cooperative Company CASSA RURALE DI ROVERÈ DELLA LUNA B.C.C. Cooperative Company

9 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

CASSA RURALE DI ROVERETO B.C.C. Cooperative Company CASSA RURALE DI SAONE B.C.C. Cooperative Company CASSA RURALE DI SPIAZZO E JAVRÈ B.C.C. Cooperative Company CASSA RURALE DI STREMBO BOCENAGO E CADERZONE B.C.C. Cooperative Company CASSA RURALE DI TASSULLO E NANNO B.C.C. Cooperative Company CASSA RURALE DI TRENTO B.C.C. Cooperative Company CASSA RURALE DI TUENNO VAL DI NON B.C.C. Cooperative Company CASSA RURALE DON LORENZO GUETTI di QUADRA - FIAVÈ - LOMASO B.C.C. Cooperative Company CASSA RURALE GIUDICARIE VALSABBIA PAGANELLA B.C.C. Cooperative Company CASSA RURALE LAVIS - VALLE DI CEMBRA B.C.C. Cooperative Company CASSA RURALE NOVELLA E ALTA ANAUNIA B.C.C. Cooperative Company CASSA RURALE PINETANA FORNACE E SEREGNANO B.C.C. Cooperative Company CASSA RURALE VAL DI FASSA E AGORDINO B.C.C. Cooperative Company CASSA RURALE VALLI DI PRIMIERO E VANOI B.C.C. Cooperative Company

CREDITO COOPERATIVO VENETO

FEDERAZIONE VENETA DELLE BANCHE DI CREDITO COOPERATIVO Cooperative Company BANCA ADRIA - CREDITO COOPERATIVO DEL DELTA Cooperative Company BANCA ALTO VICENTINO - CREDITO COOPERATIVO Cooperative Company SCHIO BANCA DEI COLLI EUGANEI - CREDITO COOPERATIVO LOZZO ATESTINO Cooperative Company BANCA DELLA VALPOLICELLA CREDITO COOPERATIVO DI MARANO (VR) Cooperative Company BANCA DI ROMANO E SANTA CATERINA CREDITO COOPERATIVO (VI) - Cooperative Company BANCA DI VERONA CREDITO COOPERATIVO CADIDAVID S.c.p.A. BANCA PADOVANA CREDITO COOPERATIVO - Cooperative Company BANCA S. BIAGIO DEL VENETO ORIENTALE di Cesarolo, Fossalta di Portogruaro e Pertegada BCC Cooperative Company BANCA SAN GIORGIO E VALLE AGNO CREDITO COOPERATIVO DI FARA VIC. Cooperative Company BANCA VENETA 1896 - Credito Cooperativo delle Province di Verona e Rovigo - Cooperative Company BCC ADIGE PO CREDITO COOPERATIVO Cooperative Company BCC DEL POLESINE (RO) - ROVIGO Cooperative Company BCC DEL VENEZIANO Cooperative Company BCC DELLE PREALPI Cooperative Company BCC DI CARTURA (PADOVA) Cooperative Company BCC DI MARCON - VENEZIA Cooperative Company BCC DI PEDEMONTE Cooperative Company BCC DI PIOVE DI SACCO (PADOVA) Cooperative Company BCC EUGANEA DI OSPEDALETTO EUGANEO (PD) Cooperative Company BCC S. STEFANO CREDITO COOPERATIVO - MARTELLAGO VENEZIA - Cooperative Company CASSA RURALE E ARTIGIANA DI VESTENANOVA CREDITO COOPERATIVO Cooperative Company CASSA RURALE E ARTIGIANA DI CORTINA D’AMPEZZO E DELLE DOLOMITI CREDITO COOPERATIVO Cooperative Com- pany

10 COMPOSITION OF CORPORATE BODIES AND OFFICERS

CASSA RURALE E ARTIGIANA DI ROANA CREDITO COOPERATIVO Cooperative Company CASSA RURALE ED ARTIGIANA DI TREVISO CREDITO COOPERATIVO Cooperative Company CENTROMARCA BANCA CREDITO COOPERATIVO Cooperative Company ROVIGO BANCA CREDITO COOPERATIVO Cooperative Company

BCC FRIULI VENEZIA GIULIA

FEDERAZIONE DELLE BCC DEL FRIULI VENEZIA GIULIA Cooperative Company BANCA DI CARNIA E GEMONESE CREDITO COOPERATIVO Cooperative Company BANCA DI CREDITO COOPERATIVO DEL CARSO Cooperative Company - ZADRUGA ZADRUZNA KRASKA BANKA BANCA DI UDINE CREDITO COOPERATIVO Cooperative Company BCC DEL FRIULI CENTRALE Cooperative Company BCC DI BASILIANO Cooperative Company BCC DI FIUMICELLO ED AIELLO DEL FRIULI (UD) Cooperative Company BCC DI SAN GIORGIO E MEDUNO Cooperative Company BCC DI STARANZANO E VILLESSE Cooperative Company BCC DI TURRIACO Cooperative Company BCC PORDENONESE Cooperative Company CREDITO COOPERATIVO FRIULI Cooperative Company CASSA RURALE E ARTIGIANA DI LUCINICO FARRA E CAPRIVA Cooperative Company

COOPERAZIONE TRENTINA

FEDERAZIONE TRENTINA DELLA COOPERAZIONE Cooperative Company FONDO COMUNE DELLE CASSE RURALI TRENTINE Cooperative Company CAVIT - Cantina Viticoltori Consorzio Cantine Sociali del Trentino - Cooperative Company CON.SOLIDA Cooperative Company Sociale CONSORZIO LAVORO AMBIENTE Cooperative Company CONSORZIO MELINDA Agricultural Cooperative Company CONSORZIO PROVINCIALE PER L’ABITAZIONE ‘G. VERONESI’ Cooperative Company PROMOCOOP TRENTINA S.p.A. SAIT CONSORZIO DELLE COOPERATIVE DI CONSUMO TRENTINE Cooperative Company TRENTINGRANA CONSORZIO DEI CASEIFICI SOCIALI E DEI PRODUTTORI LATTE TRENTINI Agricultural Cooperative Com- pany

11 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

PRIVILEGED SHAREHOLDERS

BANCA DI SALERNO CREDITO COOPERATIVO Cooperative Company BANCA IFIS S.p.A. BANCA POPOLARE ETICA S.c.p.A. CAMERA DI COMMERCIO INDUSTRIA AGRICOLTURA E ARTIGIANATO - TRENTO CASSA RAIFFEISEN DELLA VAL PASSIRIA Cooperative Company CASSA RAIFFEISEN DI NATURNO Cooperative Company CASSA RAIFFEISEN DI SAN MARTINO IN PASSIRIA Cooperative Company CENTRALE FINANZIARIA DEL NORD EST SpA - Joint Stock Company COOPERATIVA PROVINCIALE GARANZIA FIDI Cooperative Company COOPERSVILUPPO S.p.A. DZ BANK AG DEUTSCHE ZENTRALGENOSSENSCHAFTSBANK FRANKFURT AM MAIN MEDIOCREDITO TRENTINO ALTO ADIGE S.p.A. PROVINCIA AUTONOMA DI TRENTO

12 COMPOSITION OF CORPORATE BODIES AND OFFICERS

CORPORATE OFFICERS CASSA CENTRALE BANCA

BOARD OF DIRECTORS

Giorgio Fracalossi Chairman* Luigi Cristoforetti Acting Deputy Chairman* Fabrizio Gastaldo Deputy Chairman* Sergio Stancich Deputy Chairman* Luigi Baldo Director Girolamo da Dalto Director Diego Eccher Director* Lars Hille Director Paolo Marega Director Umberto Martini Director Giorgio Melchiori Director* Gilberto Noacco Director Claudio Ramsperger Director* Franco Senesi Director* Goffredo Zanon Director

BOARD OF STATUTORY AUDITORS

Antonio Maffei Chairman Board of Statutory Auditors Marco dell’Eva Standing auditor Claudio Maugeri Standing auditor Luciano Braito Alternate auditor Diego vichi Alternate auditor

GENERAL MANAGEMENT

Mario Sartori General Manager Giorgio Bagozzi Acting Deputy General Manager Enrico Salvetta Acting Deputy General Manager Sandro Bolognesi Deputy General Manager

(*) member of the Executive Committee

13 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011 DIRECTORS’ REPORT ON OPERATIONS CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

GENERAL INTRODUCTION

16 DIRECTORS’ REPORT ON OPERATIONS

INTERNATIONAL SCENARIO

During the phase of recovery in 2010, global in recent years, leading to the application of heavy economic activity in the subsequent 12 months austerity programs and intense debates between the recorded a gradual slowdown due to worries in various European governments. relation to developments in the European sovereign In addition to these dramatic problems, the Fukushima debt crisis. earthquake also generated negative effects for Japan For this reason, the year 2011 will be remembered along with the geo-political risk that became evident as a year of significant difficulty for the Euro area due during the “Arab spring”. to the economic and financial crises which initially Emerging countries fortunately provided some good affected Greece and then Ireland and Portugal news despite growth rates which were slower in before eventually affecting Spain and Italy. All of recent months and in which China continued to play these events cast doubts on the survival of the Euro a leading role. itself. Government deficits and debt grew significantly

EURO AREA AND UNITES STATES GDP United States

Euro Area

8

6

4

2

0

-2

-4

-6

-8 6 7 5 8 7 7 6 6 0 0 0 0 11 0 DEC. APR. 0 AUG. 0 DIC. APR. AUG. DEC. APR. 08 AUG. 08 DEC. 0 APR. 09 AUG. 09 DEC. 09 APR. 10 AUG. 10 DEC. 10 APR. AUG. 11 DEC. 11

UNITED STATES US economic growth in 2011 began with positive the year was rather disappointing, with a GDP that expectations following the excellent closing of the remained essentially unchanged (+0.40%) in the first previous year and the indications provided by various quarter and only slightly more than a percentage point forecasting indicators, both in terms of companies as (+1.30%) in the April/June period; this was therefore well as consumers. In reality, growth in the first part of significantly below the expected potential, and was

17 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

due to the marked decrease in public spending and very contained and companies began to focus more on the negative contribution of foreign factors (such as the preserving margins and profitability within a situation negative effects associated with the devastating of low economic growth and strong competition. The earthquake in Fukushima) - which affected companies decrease in the unemployment rate, which fell from – and the decrease in consumption which was also 9.40% to 8.50% at the end of 2010, is certainly a weighted down by increases in oil prices. In just the comforting result but we are still certainly far from the first four months of the year, US crude oil was trading 5.00-6.00% rate reported in the first seven years of above 110 $/bar, reporting an increase of more than the new millennium. The decision to increase the work twenty percentage points and resulting in an increase force was therefore only taken after being certain that in gas costs and therefore an additional increase in the the Fed would do everything in its power to sustain the already low income of US families. economy by reducing the cost of financing to families Given this environment, the low economic growth rate and companies with its hyper-accommodating policy therefore did not manage to empower the employment and Fed Funds always hovering around 0-0.25% due market, with the latter again turning out to be one of to price dynamics which do not create worries. the most critical and important factors to monitor. The The result is that GDP accelerated in the second half creation of new job positions was positive but definitely of the year, reaching a growth rate of 3.00% in the weak in May/June as well as not particularly exciting October/December period; this was also due to in the summer period due to internal demand which the stabilization (but still at very contained levels) was met by imports. Improvements were only noted of the real estate market in multiple areas such as towards the end of the year due to positive signals constructions, sales and prices. All of the above linked to unemployment benefits (which fell below occurred in connection with very minimal actions on 400,000 in a stable manner), thereby reporting the the part of the Obama administration which was faced potential for the economy to strengthen itself and with the problem of cutting the enormous public deficit resulting in a virtuous cycle involving consumption, and government debt that was continually growing, all investments and employment. There is still a long road factors which – along with the political impasse linked to travel, however, before recovering the large volume to the increase in the debt ceiling – led the US giant of job positions that were lost after the default of Lehman to be downgraded in rating in the month of August, Brother’s and the triggering of the very heavy financial thereby losing its top position according to Standard crisis that ensued. The hiring of new personnel was & Poor’s.

EURO AREA In the first part of the year, Germany acted as the in both Greece and Ireland along with a request for engine for the entire Euro area, followed by France, financial assistance from Portugal and an increase of while the peripheral countries – starting with Greece 25 bp in the interest rates of reference in order to contain – reported a situation of increasing tension which and stabilize prices, particularly in relation to their reached a peak between July and August. Although exponential rise following the increase in prices of raw Greece had reported signs of weakness since 2010, materials such as oil. The macroeconomic data of the Italy was in a better condition compared to its core countries, however, continued to remain positive, neighbouring countries. As months passed, the gap even leading to an increase in forecasted growth rates between core and peripheral countries began, for 2011; this was due, in particular, to growth in the however, to expand. Ever since the beginning, the German construction sector which was not subject to ECB supported the governments which were any bubble in the years prior to the crisis. In peripheral undergoing the greatest difficulties by buying their countries, the situation remains difficult; this was, in government securities and by being fully available to particular, due to the initial adoption of restrictive fiscal supply liquidity to European financial systems. policies as well as the decrease in family leverage, the Subsequently, the second quarter began with an long time period required for recovery from the real additional intensification of the sovereign debt crisis estate bubble and the high levels of unemployment.

18 DIRECTORS’ REPORT ON OPERATIONS

Between July and August, the situation worsened as second half of the year, the ECB initiated a process confidence decreased and the gap between core and of decreasing interest rates for the upcoming months. peripheral countries increased following the adoption Multiple nations renewed their governments in order to of more stringent fiscal policies, including the approval attempt to reverse situations which were very delicate of a new austerity plan in Athens and the Italian and critical. financial bill of the summer. This was also followed In October, fears linked to a recession in the Eurozone by a worsening of Italian macroeconomic data, with increased due to the presence of a vicious circle the manufacturing and services PMI index falling involving the financial crisis and the family/company below 50 points and industrial production slightly confidence levels. European governments – in order decreasing. Certain initial difficulties also emerged to avoid a potential contagion of the Greek crisis in core countries such as Germany, with the latter to strategic areas such as Italy and Spain - reached reporting a slowdown (more contained GDP increase agreements pertaining to the re-capitalization of banks, of +0.10%), thereby resulting in a strong increase in without defining, however, the modalities and extent worries related to an additional slowdown in the Euro of the operation. The decisions were also related to area. The ECB – acting as a lender of last resort – the issue of Greek debt, including a larger haircut intervened within the market by buying government to apply to its government securities – compared to securities (in particular Italian and Spanish ones) in the initially proposed level of 21,00% - in addition order to reduce volatility and maintain conditions of to a strengthening of the European Financial Stability stability within the European financial systems. After Facility. The year closed with a significant slowdown having lowered its GDP increase forecasts to 1.60% in the core countries as well as a limited recession/ for 2011, and forecasting zero growth for the entire stagnation in peripheral countries.

ASIA AND During the course of 2011, the Asian economies levels with respect to the primary foreign currencies. PACIFIC AREAS responded positively to critical factors which were These are the themes which were, and are, of concern largely external from their fundamentals and which to the central authorities; it should, however, be noted were primarily due to the Western commercial partners, that this delay in the reconstruction phase as well as a thereby effectively increasing the role that the area favourable trend in internal consumption resulted in a plays for global stability. state of health and prospects at the end of the year that After a weak start, the trend in the primary variables are more encouraging compared to other industrial in Japan was strongly affected by the disastrous powers. earthquake in March; this even strongly affected the Within this scenario, China continued to play the population as well as the systems of production of key role in global growth; the effect of foreign the country, thereby compromising its performance difficulties had relatively little impact on the country. in the first half of the year. The subsequent recovery GDP growth in 2011 was +9.20% compared to phase involved two quarters of net growth, in line +10.40% in the previous year while consumer prices with expectations. However, the reconstruction did were subject to lower inflation towards year end after not act as a true flywheel since it was hindered by reaching increases of more than 6.00% during the the global slowdown of the summer months and the summer months, led by food prices. The maintenance risk aversion generated by the European debt crisis. of elevated growth rates was surprising, thereby Despite the high levels of debt of the Japanese demonstrating the strength and greater independence government itself, investors bought the Japanese of national demand in addition to re-iterating the role currency in ample amounts, pushing it to peak of China amongst the world’s primary players.

COMMODITIES The elements of global instability also influenced trends and occasionally unusual manner. An additional in the prices of raw materials, although in a different critical factor was the geopolitical scenario, and in

19 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

particular the so-called “Arab spring” which resulted in role as an asset back-up, the price of gold exceeded revolts, regime changes and a war in Libya. As a 1,900 $/ounce in September following continual result, the WTI oil price in the New York stock exchange growth; it then abruptly fell and was subject to greater at the end of April almost reached a three-year peak of volatility and closed the trading day of 30 December 113.93 $/bar due to a rally of almost +25.00% from at the more contained price of 1,563.7 $/ounce. the start of the year; this then decreased in the second Demand from emerging countries was confirmed to be part of the year and ended with a positive return of an important driver. circa +8.20% and a price of 98.83 $/bar. Brent Industrial commodities, in particular, reported prices, on the other hand, closed at 107.38 $/bar, significant decreases, with losses that even exceeded with a notable difference compared to Texan oil that twenty percentage points. Copper is in an example, reached more than 27 dollars during the course of the losing -23.00%, as well as aluminium, which fell year. Precious metals, and in particular yellow gold, -19.30%. Agricultural materials were also subject to were protagonists within the markets in 2011 as well, a period of uncertainty, with significant negative price reaching new historical peak prices. Due to its historical changes for cotton, cocoa, sugar and soy.

GOLD AND OIL PRiCES Oil Barrel Gold Ounce 130

120

110

100

90

80

70

60 JAN. 11 APR. 11 JUL. 11 OCT. 11 JAN. 12

20 DIRECTORS’ REPORT ON OPERATIONS

MONETARY MARKET

In 2011, the monetary market was again subject to of 1.00%. a significant crisis in confidence which continued to As a result of the new ECB long-term operations, hinder exchanges beyond the very short-term. Within the liquidity present within the system – which had this scenario, the role of the European Central Bank as significantly decreased, even since mid 2010 – began the entity financing the banking system became more to rise again and reached a peak of more than 600 and more relevant, and not just in the short-term. The billion after the settlement of the three-year auction of ECB, in fact, has continued to postpone the regime of December. This had a significant impact on very short- certain awarding of funds in re-financing operations term rates within the monetary market. The overnight and which is forecasted until at least July 2012 in order rate – after increasing to levels that were close to the to allow the system to manage the continuing difficulties rate of reference during the first part of 2011 – was in re-financing itself within institutional markets. These subject to a decrease as a result of the process of difficulties intensified in the second half of the year the normalization resulting from the new liquidity along with the sovereign debt crises in the Euro area, injected into the system, thereby re-aligning the rates thereby leading the ECB to adopt new extraordinary to the one-day deposit rate within the ECB (0.25% in measures in support of the monetary market. December). It should be noted that, in the last part The ECB implemented more long-term re-financing of the year and at the time of the more severe phase operations, and completed an extraordinary operation of the Italian sovereign debt crisis, the overnight rate in December with a duration of three years, totalling EUR within the Italian interbank market increased sharply 489 billion, in addition to announcing an analogous with respect to European levels, thereby incorporating operation in March 2012. In 2011, the Italian banking the greater risk perceived within the national banking system thereby was subject to an exponential increase system. This tension began to decrease following the in funding from the ECB, increasing from EUR 47.6 injections of funds from the three-year ECB auction. billion at the end of 2010 to EUR 210 billion at the Movements in the Euribor rates were analogous: unlike end of 2011. As an additional alleviating measure, 2010, the fixing in 2011 confirmed levels which were the ECB also defined new rules in order to increase the higher than the reference rate in force; this was in line types of collateral which are provided as guarantees with the normalization phase. In the second half of the to banks in connection with financing. year, however, the Italian interbanking system traded at With regard to rates - and following the timid spreads that were significant compared to the Euribor economic recovery which could lead to potential price fixings. As a result of the injection of liquidity in the last increases - the ECB approved two increases of 0.25% part of the year, the rates of the monetary market again in the rate of reference during the first part of 2011. decreased, with the 3-month rate of reference which In the last part of the year, however, and given the fell from 1.60% to 1.35% at the closing of the year. worsening of conditions within the financial markets Finally, the liquidity which was injected by the ECB (also in connection with the change of presidency from continued to not circulate within the financial system Trichet to Draghi), the ECB approved two analogous due to the gradual new increase in the last part of the cuts, bringing the rate of reference to the historical low year of one-day deposits within the ECB itself.

21 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Official rate Change Country Value as at Type Last From start of 2011 31.12.2011 EUROPE Euro area Refi rate 1.00 08.12.2012 -0.25 1.00 --- UK Repo rate 0.50 05.03.2009 -0.50 0.50 --- Switzerland Range target 0.00 03.08.2011 -0.25 0.25 -0.25 USA AND JAPAN United States Fed Funds rate Range 0.00 – 0.25 16.12.2008 -0.75 0.00 – 0.25 --- Japan O/N Call rate 0.10 19.12.2008 -0.20 0.10 ---

22 DIRECTORS’ REPORT ON OPERATIONS

EXCHANGE RATES

The debt crisis in Europe was a key factor in the trends which reported its best revaluation against the Euro within the currency market during 2011, with radical (7.78%) despite an economic situation which was not changes in structure between the first part of the year excellent and a negative trend in prices. The Swiss – in which there was an atmosphere of trust – and the Franc reported an even greater level of appreciation second, which was characterized by a new wave of (in August, the revaluation against the Euro exceeded risk aversion. The first months of the year reported an 16.40%), even to the point of forcing the Swiss appreciation of the Euro, reaching 1.4880 against the National Bank to apply a series of measures with USD, and driven by the restrictive monetary policy of respect to the market in order to devalue the currency the ECB and the growth of Germany while a recovery and thereby prevent exports from being excessively of the global markets was forecasted. In the second damaged. September then officially reported the half of the year, the worsening of the macroeconomic minimum level of 1.20 for the EURO/CHF exchange scenario - as well as of the problems linked to the rate, thereby limiting additional appreciation. unsustainable situation of public debt in the Euro area In this second phase, the USD benefited by serving - led investors to invest in low risk currencies, and as a back-up asset, rising from the minimum levels of thereby selling the Euro. 2009 to end the year with an appreciation of 3.17% This resulted in a strong appreciation for the Yen, against the Euro.

EUR/USD CROSS Eur/Usd Cross 1.50

1.45

1.40

1.35

1,30

1.25

1.20

1.15 11 11 11 11 11 11 11 11 11 11 11 11 NOV. DEC. OCT. JAN. FEB. MAR. APR. JUN. JUL. SEPT. MAY AUG.

23 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

The expansive policy of the Federal Reserve which – in commodities: the South African Rand (Zar) depreciated the first quarter of 2011 – had negatively affected the by 18.28% due to fears of a global slow-down. USD when compared to the more aggressive ECB, Finally, the smaller European economies – which subsequently attracted investors. In the last part of the depended upon exports to the Eurozone – were year, the positive macroeconomic data from the United affected by the crisis of the Euro and the austerity States resulted in flows of purchases for the USD, unlike imposed by the market, thereby resulting in restrictive what had previously occurred in the past with back-up fiscal policies in order to reduce public debt. The Polish assets: a sign of low confidence in the Euro, even in Zloty depreciated by 12.15% during the year, while periods of increased risk propensity. the Hungarian Florin lost 13.18%. Hungary was also In the atmosphere of uncertainty which characterized negatively affected by the request for access to EU-IMF the second half of 2011, the Euro gained with respect funds which applied even more rigorous requirements to the more speculative currencies that were linked to on the country.

Foreign Exchange 31.12.2010 30.12.2011 Change , % EUR/USD 1.3362 1.2939 -3.17% EUR/AUD 1.3136 1.2723 -3.14% EUR/CAD 1.3322 1.3215 -0.80% EUR/CHF 1.2504 1.2156 -2.78% EUR/GBP 0.8608 0.8353 -2.96% EUR/JPY 108.65 100.20 -7.78% EUR/CZK 25.06 25.79 2.91% EUR/DKK 7.4535 7.4342 -0.26% EUR/HUF 277.95 314.58 13.18% EUR/NOK 7.8000 7.7540 -0.59% EUR/NZD 1.7200 1.6737 -2.69% EUR/PLN 3.9750 4.4580 12.15% EUR/SEK 8.9655 8.9120 -0.60% EUR/TRY 2.0694 2.4432 18.06% EUR/ZAR 8.8625 10.4830 18.28% GBP/USD 1.5524 1.5490 -0.22% USD/CHF 0.9358 0.9395 0.40% USD/JPY 81.31 77.44 -4.76% USD/CNY 6.5900 6.2939 -4.49%

24 DIRECTORS’ REPORT ON OPERATIONS

BOND MARKETS

The year 2011 was marked by a significant increase in interest rates of existing debt, and a bond swap in volatility and in the yields of government securities in order to lengthen maturities) was prepared by of peripheral countries due to the continuing crisis of European leaders. This, however, was not sufficient to EU countries. Tensions relative to government securities halt the sales which affected the peripheral areas. were reported as of the first months of 2011 although The re-activation of the Security Market Program of the the situation degenerated, in particular, in the second ECB for Spanish and Italian government securities led half of the year when the crisis also affected Italy and to a period of relief for the yields, but this was followed Spain, and resulting in doubts on the Euro itself. by an escalation in peripheral yields which did not The first quarter of the year was centred on the Greek stop until the end of the year despite progress within situation and the possibility of debt restructuring. This the G20 for the implementation of the EFSF (European led to tensions in other peripheral countries such as Financial Stability Facility) and the increased level Ireland and Portugal which were - along with Greece - of international coordination to tackle the crisis. The the countries which required international aid in 2010. market began to be affected by the default of Greece, Yields on the securities of these three countries rose even in light of the objectives which were not attained significantly due to the negative feelings of investors in relation to budget deficits and rumours of a cut in the with respect to the situation in Greece compared to debt of more than 30.00%. that of the other two countries. In this initial phase, Following a period of speculation on the Spanish there was also in increase in yields on government currency, the period of alarm ended but tension securities of core countries due to fears of rises in remained high for Italian government securities which, inflation caused by the increase in raw material prices. in November, reached the height of the crisis. The The flight to quality trend, however, soon returned after yield of the Italian ten-year bond exceeded the barrier the nuclear disaster in Japan - which led to fears of a of 7.00%, creating many doubts on the sustainability slowdown in the Japanese and global economies – of the debt at such rates. It was necessary for Italy to and as a result of signals of a slowing US economy rapidly change course, beginning with a change in and the fear of a downgrade of the US’s triple A status government which then was followed up by corrective due to the failure to reach an agreement on a policy actions in order to restore public accounts to a state for the debt ceiling. which was sustainable and credible for the market. In June, the debt crisis became significantly worse The worsening of the Italian crisis led the yield spread and slowly eroded confidence in the markets; this between our ten-year bonds and German ones to was primarily due to the continuous lack of decisions become more than 500 bp (the highest since the on how to resolve the Greek crisis at the EU level. introduction of the Euro). The German currency In June, the possibility of involving private owners of continued to be very much in demand, even closing Greek securities – through a cut on the nominal value the year with a yield of 1.90% for the a ten-year bond of the debt – emerged; for the first time, the market compared to 2.92% at the beginning of 2011. became to be worried about the Italian and Spanish In an environment with elevated rates, the last month situations, even following the warnings of the rating of the year was marked by a fermented period of agencies Moody’s and Standard&Poor’s on the state European political decisions. The summit in December of the public accounts of the two countries. The yield resulted in an inter-governmental treaty for the regulation of the Italian benchmark - which was circa 5.00% in of financial services and a greater level of integration the first part of the year - suddenly increased to 6.00%. between various countries; the EFSF was strengthened A overall plan of 160 billion (new loans, decreases and the ESM (European Stability Mechanism) was

25 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

planned to be effective as of July 2012. rationalization of new issues with significant liquidity With regard to the corporate sector, the segment that problems for banks. The re-financing operation was subject to the most difficulties was the banking initiated by the ECB, and totaling EUR 500 billion one which was heavily affected by the situation of at year end, allowed banks to attain new liquidity Italian government securities. The risk premium paid to at low costs. The banking sector was also affected bank issuers increased significantly following growing by a forced recapitalization (requested by the EBA) fears of the overall stability of the financial system. following the worsening of quality of assets due to the The increase in the cost of funding resulted in the known problems of government bonds.

Bund Future

DOUBT ABOUT EURO AREA SURVIVING 138

133 AGGRAVATION OF TOP OF ITALY’S CRISIS FEAR FOR GREECE, THE CRISIS IN ITALY AND DOUBTS ABOUT PORTUGAL AND AND SPAIN THE ABILITY OF REFINANCING IRLAND SITUATION THE COUNTRY 128

123

INCREASE IN RAW MATERIALS PRICES

118 01/03/11 01/17/11 01/31/11 02/14/11 02/28/11 03/14/11 03/28/11 04/11/11 04/25/11 05/09/11 05/23/11 06/06/11 06/20/11 07/04/11 07/18/11 08/01/11 08/15/11 08/29/11 09/12/11 09/26/11 10/10/11 10/24/11 11/07/11 11/21/11 12/05/11 12/19/11

26 DIRECTORS’ REPORT ON OPERATIONS

SHARE MARKETS

The year 2011 began with positive expectations sensitive to provisions and declarations of policy on trends in share markets; these were based on makers pertaining to measures and agreements which encouraging signals from the US economy and from were taken for managing the crisis within the Euro area. growth prospects in emerging markets. This resulted In this environment, the indices in countries with the in two months of positive trends in the primary stock greatest level of debt suffered the most, with elevated indices which reached their maximum values in mid levels of volatility that were marked by sudden and February. This trend was suddenly interrupted by intense trend changes after the issue of news or facts significant exogenous shocks at the end of the first pertaining to the debt crisis. All of the above paved the quarter of the year. The Japanese catastrophe in mid- way for investors with a more speculative agenda and March, along with the relative nuclear danger and who were attracted to the more significant movements developments in the social revolts in the Middle East in the market, thereby moving investments of institutional as well as North Africa, led to a significant increase operators and of investors focused on savings towards in the volatility of the share markets. The uncertainties the bond markets of core government securities and and worries derived from this scenario soon vanished, companies with investment grade ratings. leading share market values and their volatility to return There is no doubt that the banking sector was the one to levels prior to the events. most affected by sales of investors as well as by the It was the second half of the year which created doubts, significant price drops in the government securities perplexities and doubts within the markets. The Greek of peripheral countries; the difficulties in funding crisis – with the potential of default for the country, and activities often reduced and in certain cases eliminated deterioration of the Portughese situation – increased deposits, resulting in consistent decreases in prospects pressure on the government securities of governments for future economic growth. Finally, the estimates of within the Mediterranean area, resulting in indirect the European Banking Authority (EBA) relative to the consequences on the share market indices of the entire capital requirements needs of European banks – equal Eurozone. Tensions within bond markets – along with to EUR 114.7 billion, including 15.4 billion relative the decrease in growth of emerging countries and to the Italian banking system – had a negative effect. the now actual risk of a recession for the year 2012 All of the above led many banks to plan share capital for many European economies – initiated a spiralling increases for the year 2012. sales effect. Developments in the sovereign debt crisis, The Ftse Mib stock exchange – where the banking and its further deterioration, resulted in a decreasing sector plays a significant role – was the one which was trend for all European and US stock markets from the most negatively affected by the difficulties in the sector, beginning of August onwards, bringing the primary reporting one of the worst performances in Europe. indices to levels which were just slightly higher than The most difficult phase for the Italian stock exchange those after the bankruptcy of Lehman Brothers. was in the month of September when the index twice The sectors which were most affected by the fell below the 14,000 level, reaching 13,474 points atmosphere of uncertainty and lack of confidence with decreases caused by exchanged volumes that include the banking sector which, at the European were greater than the average of the period. The Ftse level, lost more than thirty percentage points, in Mib closed the year 2011 at 15,089 points, losing addition to cyclical sectors such as the automotive more than 5,000 points compared to the beginning segment which closed with a negative performance of of the year and following an initial half-year which 26.55% and construction which close with -20.99%. was constantly above the threshold of 20,000 points. The European crisis rendered stock prices particularly The difficulties of the Italian stock exchange also had

27 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

repercussions on capitalization and the incidence of 13.00%. At a corporate level, the best performance of the latter with respect to the GDP of our country, with blue chip companies was that of Lottomatica, with an the latter decreasing significantly to 20.70%, levels increase close to 25.00%, while the worst performers dating back to the mid 1990’s. The repercussions were the banking institutions, in particular Monte also affected the number of listed companies, which dei Paschi di Siena and Popolare di Milano, both decreased from 313 at the end of 2010 to 304, with of which were affected by significant share capital only one registration: the company operating in the increases with consequent decreases of more than luxury clothing sector, Salvatore Ferragamo, whose 60.00% in price. At the European level, the London IPO – despite the difficulties – was quite successful Stock Exchange (-7.50%) and that of Zurich (-8.50%) with demand that was four times higher than the offer. were the ones which were less affected; the worst The interest on the part of investors in the company performance, on the other hand, was that of the Athens remained high in all the remaining months of 2011, Stock Exchange (-53.00%), strongly influenced by the resulting in a positive performance of the stock price of internal crisis.

SHARE INDICES

Stock exchange indices 2011 trading prices Annual change 2011 Aex Holland 312.47 -11.87% Brazil 56,754.08 -18.11% CAC 40 Paris 3,159.81 -16.95% China 2,343.22 -25.10% DAX Xetra 5,898.35 -14.69% DJ EuroStoxx50 2,316.55 -17.05% DJ Stoxx50 2,369.52 -8.39% Dow Jones USA 12,217.56 5.60% Ftse Italy All Share 15,850.49 -24.29% FTSE London 5,572.28 -5.55% FTSE MIB Italy 15,089.74 -25.20% Hong Kong 18,469.25 -19.82% Ibex Madrid 8,566.30 -13.11% India 15,666.82 -23.61% Mexico 37,185.73 -3.54% Nasdaq USA 2,605.15 -1.80% Nikkei 225 Japan 8,455.35 -17.34% Russia 1,396.23 -17.28% S&P/ASX 200 Australia 4,056.60 -14.51% S&P 500 USA 1,257.60 0.00% South Africa 28,486.53 -0.53% Venezuela 116,719.80 78.64%

28 DIRECTORS’ REPORT ON OPERATIONS

29 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

MAIN BUSINESS OF CASSA CENTRALE BANCA

30 DIRECTORS’ REPORT ON OPERATIONS

FINANCE

From a financial viewpoint, Cassa Centrale Banca of the Italian government securities that were present provides intermediation services that protects the within the portfolios. Third parties, on the other hand, reliability, continuity and efficiency of banking even exceeded the countervalue traded in 2010; they operations, allowing institutions to offer their customers were also attracted by initiatives such as BTP Day a vast range of investment solutions. which included a cancellation of trading fees for retail The business is structured to deal with both the customers. continuing innovation that marks the range of financial EUR 4.4 billion were traded with counterparties in the instruments available for customers, and allows the OTC market, a decrease from the EUR 6.1 billion of banks to manage their resources in a rational manner. 2010. In terms of trading, the significant increase in volatility The increase in remuneration from the Italian treasury in and in the yields of government securities of peripheral relation to securities offered in auctions led many retail nations due to the continuing crisis of EU countries also investors – in the last part of the year – to underwrite had repercussions on the bond trading which was Italian government securities with maturities within the brokered by Cassa Centrale Banca. Although the year year. Investors were also attracted by the “BOT Day” 2010 had managed to consolidate the exceptional initiative within the auction of mid-December; this again volumes of the previous year, the year 2011 was included a cancellation of all commissions on securities subject to tensions which presented themselves on the underwritten through the auction. The volumes traded market on a daily basis. This led to an overall decrease for BOT auctions increased by 86.00% while requests in traded volumes of circa 30.00%; the countervalues fro securities with medium-long term decreased by reached EUR 7.2 billion from the EUR 10 billion of 68.00% due to the uncertainties of the period and the 2010 despite the recovery at the end of the year preference of investors for very short-term securities that which was due to trading linked to the Re-Financing were already highly remunerative. Auctions with the ECB. Given the trends in market rates, interest for Covered The decrease in trading was reported across all client Warrant Euribor Caps, instruments which hedge categories with the retail sector being affected the most. against interest rate risk, decreased; the nominal With regard to the stock exchanges, regulated placed amount fell to EUR 12.5 million. markets and MTF’s (Multilateral Trading Facility), such The accessory service of centralized management of as EuroTLX and Extramot, closed with a countervalue the securities database reported a 20.00% growth of of EUR 2.5 billion , a decrease from the 3.8 billion registered financial instruments. The number of banks of the previous year. It should be noted how, in this participating in the Financial Information Services was case, the decrease was significant for the trading of consolidated at a total of 124 institutions following properties of the CR-BCCs due to the bad performance mergers and new participants.

31 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Bond Market Volumes

2011

2010

1400

1200

1000

800

600

400

200

0 JAN. FEB. MAR. APR. MAY JUN. JUL. AUG. SEPT. OCT. NOV. DEC.

Figures in thousands of Euro

Overall share trading performance during 2011 was in orders within the Italian market (-17.58%) continued 7.30% lower than the previous year. The total volumes also in 2011 while funds and ETF’s reported a change traded on share markets had a value of EUR 1.097 in trend (-6.46%). Volumes traded in foreign markets billion compared to the EUR 1.183 billion of 2010. also recovered (+5.07%) also recovered, with the The first months of 2011 reported a sustained and exception of funding through the In-Bank. The reasons growing positive trend following the positive growth for the decrease in the domestic market are certainly of the share markets at the beginning of the year. The linked to the critical situation of the bank stock prices decrease in the months of spring, on the other hand, which led a majority of clientele to exit the Italian was sudden, while a recovery in volumes occurred market while the more stable yet weak trends of foreign in July and August, particularly in the period in which markets was more attractive to investors. the sovereign debt crisis became more acute and The dynamic best execution of stock instruments was volatility increased in an exponential manner. This was expanded in July with the introduction of a new trading followed by a period of decrease until the end of the venue: Retlots Exchange Equity for Italian and German end and without any sign of recovery. The decrease shares.

32 DIRECTORS’ REPORT ON OPERATIONS

Stock Market Volumes

2011

2010

160

140

120

100

80

60

40

20

0 JAN. FEB. MAR. APR. MAY JUN. JUL. AUG. SEPT. OCT. NOV. DEC.

Figures in thousands of Euro

Total interbank funding, including the liquidity held in brokered amount following the settlement of the by the CR-BCCs on current accounts, term deposits 3-year extraordinary operation involving 102 banks and funding from participation in the refinancing adhering to the service. transactions of the ECB in 2011 stood at an average The trading of OTC derivatives was dichotomous in level of EUR 1.965 billion. This figure increased by nature: in the first half of the year, closed transactions 93.65% with respect to the average total funding of reached a notional value of EUR 473 million (+9.54% 2010, equal to EUR 1.015 billion; this was primarily compared to the first half of the previous year) while due to the intermediation activities of CR-BCCs for ECB volumes were equal to 28.4 million as of July. These transactions. trading activities were halted by the rapid fall in swap The same element served as the basis for the decisive rates which reached historical lows due to tensions increase in average interbank loans, which rose to EUR affected very short-term rates. These transactions 1,295 million from EUR 401,3 million the previous primarily involved hedging on the deposits of the year (+222.70%). Direct loans within the interbank CR-BCCs (96.49%) following by direct transactions market were on average 310.0 million, an increase with the clientele of the CR-BCCs (2.20%) and loan with respect to 2010 (228.4 million) which reflects hedging transactions. the greater availability of liquid resources traded by The average volumes of funding/loans in the main the CR-BCCs. currencies (US dollar, Japanese yen and Swiss franc) The intermediation service relative to the re-financing amounted to EUR 92 million, a decrease of 6.41% operations of the ECB played an increasingly important compared to the previous year. Of these components, role in the funding of CR-BCCs, reaching EUR 2.850 the volumes of the USD and the Yen were essentially

33 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

stable; the overall decrease is therefore due to concentrated on short maturities while the medium to the volumes pertaining to the Swiss franc, which long-term component focused on issuers which were decreased by 25.00%. Monthly trends reported a significantly less affected by the volatility of the market. strong decrease from the month of April when the The market environment had a stronger impact on stock currency began to significantly appreciate with respect portfolios, with negative performances of 22.00% for to the Euro, thereby rendering carry trade transactions Italian stocks and 16.00% for Euro stocks compared less convenient. to +6.00% for global stocks. The greater level of Spot and outright trading reported a slight decrease, geographical diversification as well as currency totalling EUR 633.7 million compared to the EUR diversification were elements which provided positive 657.2 million of 2010 (-3.57%). On a more detailed contributions to “global” portfolios. level, the volumes traded with the CR-BCCs increased The result of the Quantitative 1 line should also be by 3.04% while those referring to closed transactions noted; despite a maximum investment of 20.00% for the internal services of Cassa Centrale Banca in stocks, it reported a slightly positive performance decreased by 16.35%; in particular, bond and stock in 2011. The stock component was, in fact, trading volumes fell. Most trading was done on the US systematically underweighted and an attempt was dollar (67.48% of total volumes), followed by the GB made to generate value in the currency markets. The pound (6.82%), Swiss franc (6.66%), and Japanese asset allocation strategy for the Quantitative lines, in yen (6.45%). fact, involves decoupling, an element of fundamental With regard to asset management, the trend in importance, particularly in the critical phases of the managed portfolios in 2011 was influenced - financial markets. particularly in the second half of the year - by Managed assets decreased from EUR 1.301 billion developments and the worsening of the EU debt at the end of 2010 to EUR 1.125 billion at the end crisis. Given an environment market by the problems of 2011. By analyzing the results, withdrawals net of of Greek debt and the impossibility of Ireland and contributions totalled 151 million while 25 million are Portugal to finance themselves within the market, ascribable to the loss of market value of the managed European authorities were not capable of providing assets. Banks which were active in marketing the strong solutions to prevent the propagation of the crisis. service at the end of 2011 increased to 119; The market therefore also focused on Italy due to the during the course of 2011, two new banks initiated structural issues which affect the country: the very high the activity: one in Emilia Romagna and one in the level of public debt and the low level of economic Marche. growth. Yields on the government securities of our During the course of the year, an ambitious project country therefore reached levels which had not been was developed through which Cassa Centrale reported for more than ten years, generating serious Banca deemed it opportune to reformulate its asset repercussions on prospects relative to the costs of management offer by assigning value simultaneously financing public debt. to communication through the creation of a new Bond portfolios within managed assets – created product brand as well a prestigious visual identity. The several years ago with the careful and prudent intent behind this initiative - which was created from selection of issuers - still reported positive returns, in the collaboration between the Finance Division and any case, particularly with regard to Euro bonds which the Marketing Department – was to restyle the offer exceeded 3.00% in performance for the year. The by re-organizing the management lines which exist in investment in government securities was, in fact, only three product families: GP Private, GP Quantitative

34 DIRECTORS’ REPORT ON OPERATIONS

and the new GP Benchmark. The latter includes all and Italy Balanced; the latter were removed from the the Gemo and Multistrategy lines, with the exception offer but will, in any case, remain active for current of Multistrategy Liquidity, Euro Bond, Global Bond customers.

VOLUMES UNDER MANAGEMENT BY REGION

21,50%

12,30%

Trentino 51,10%

Veneto 15,10% 3,0% Friuli Venezia Giulia 12,30% 51,10% 15,10% Others 21,50% 7,4% 12,3% 0,9%

As of 2011, the Institutional Asset Management of exposure during the course of a year which was Department has been created with the objective particularly difficult in this sense. At the same time, of providing support to customer banks on themes new interactive functionalities for the management of pertaining to the owned portfolio. operational limits were made available to the banks, This activity was, first of all, concretely executed including the possibility of obtaining warning notices through the continuation and implementation of the if the specified values are exceeded. In general, there daily supply of a series of operational tools used to has been an intense amount of training and continual monitor exposure to market risk for portfolios as well assistance activities in connection with the supplied used for asset allocation analyses. services. In terms of the content of the service, the year Relations with institutional managers and consultants 2011 included substantial developments, including were further consolidated in order to supply banks with operations pertaining to models for monitoring increasingly refined expectations on developments market risk which guaranteed the quality of estimates in financial markets. In addition, and ten years after

35 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

the start-up of the bond investment lines, significant the financial optimisation of portfolios, including in innovations were applied to the investment sector in relation to the numerous activities needed to organise order to render them even more interesting in light of the preparatory activities required to activate the the changed market characteristics. In general, the service. As clearly specified, in fact, in the guidelines bond lines confirmed positive performances even which are shared with Federcasse, the supply of in 2011 (+1.89% in the Crescita line, +2.39% in advanced consulting services requires the formal and the Dinamica line and +2.97% in the Attiva Line), prior definition and identification of rules, policies and providing proof of the importance to diversify portfolios processes that are appropriately structured in order to even in government and transnational securities. This monitor the implemented activities; they must be based has allowed banks which utilized them to at least on clientele segmentation strategies which are still partly contain the negative trend of reserves following rarely used within cooperative credit environments. the domestic debt crisis. Within an environment that is strongly weighed down Particular effort was applied to create and manage and influenced by the effects of the economic crisis, relations with banks, including institutional exchanges the actions of commercial reference points has been such as visits, conference calls and presentations structured upon a system of active support for training within the registered office. These activities will and macroeconomic education which will target the become increasingly important in light of the reported financial front offices of the CR-BCCs. appreciation which, during the year in question, led to Within the sector of bankassurance, the insurance an increase in participation in the offered services with training continued and was implemented both with more than 108 entities being served at the end of the respect to neophytes as well as for colleagues who year across all regions (+25.00% with respect to the are already authorized for insurance brokerage; there previous year). were 398 participants. With regard to activities implemented by the Advanced In 2011, the fifth edition of the Private Banking Consulting Department, specific presentations were course was implemented in collaboration with SDA made during the year to more than 40 banks; in Bocconi in addition to a few editions of the course numerous cases, a concrete interest was noted along on “Behavioural Finance”; the latter was implemented with the intention to introduce this service amongst upon the request of certain banks and conducted by those offered to retail customers. professors of the University of Trento. During the second part of the year, the number of In summary, the commercial strategy in support of the CR-BCCs – users of the Phoenix and IBT IT services network aimed to stimulate investment strategies which – gradually expanded and they began to utilize the aim to diversify the invested capital. more updated versions of the programs which include In periods of greater volatility and less stability in the all the operational functionalities that are required to financial markets, support for banks was augmented support the supply of the advanced consulting service by increasing the frequency of market reports and vies to clientele. as well as by specifically focusing on market segments. The support activity for banks which utilize the service, Of the activities which are managed by the division, or which are preparing to do so, has also allowed the contribution to drafting the Morning Briefing and Cassa Centrale Banca to refine its skills in assisting the preparation of the periodical “Monitor Mercati”, the banks in addition to the more standard work of should be noted.

36 DIRECTORS’ REPORT ON OPERATIONS

LOANS

In the commentary relative to the financial statements strategic importance, both in terms of the commercial of the previous year, it was noted that – despite there development of carefully selected initiatives as well as being a modest recovery in the economy (+1.10% in terms of risk management, particularly the issue of of GDP) – this period was characterized by the problematic risk, thereby allowing for the exchange emergence,–often in unexpected time periods and of professionalism, energy and experience amongst modalities, of the difficulties which are still latent and the affected partners. Of these, particular note must which existed since the previous year. be given to the increasingly close, concrete and Unfortunately, the year 2011 highlighted the slowdown effective collaboration with Mediocredito Trentino of the economy even more strongly, with both a Alto Adige; we share almost all large operations financial crisis which strongly affected our country or those of complex structures with the latter, with as well as general worsening of the risk profiles of common factors including reciprocal experience companies. The monitoring centre has allowed us to and professional competence, giving due respect to assess and fully note the signs of this deterioration: the the independent credit and financial evaluations for constant phenomenon of erosion of the profitability each individual transaction. Even in the year 2011, capacity of the companies themselves initially the resources utilized to manage complex and/or illustrated a slowdown in the capacity of some of these problematic situations were significant and resulted in firm to punctually honour their periodical commitments strong commitments for the organization; in particular, (expiration of payment instalments) and then gradually the individual corporate managers provided constant revealed the need to analyse the real causes of this professional support for the management of impaired financial process of stiffening which can no longer be or anomalous positions while awaiting for the start-up resolved through mere “injections of liquidity”, even if of operations of the new organization; they will be the latter are increasingly guaranteed. assigned to the newly formed Credit Management Banking operations have therefore had to continue to Department whose resources have supported certain apply, in 2011, a methodology for managing credit CR-BCCs which required permanent support in the that is more professional, thoughtful and incisive; in organization and management of problematic credit. situations of acclaimed default, or where difficulties This did not obviously hinder the continuation of ordinary arise, it was necessary to also take account of the commercial activities as well as the consolidation of regulations governing “company crisis management” the collaboration with numerous CR-BCCs, with the which are still recent, have not yet been subject to result that the objectives were substantially reached consolidated judicial review; there is therefore a lack even in 2011, especially the economic goals where of the reasonable certainty that existed in the past. the budget was exceeded by a significant margin Finally, the increasing difficulty to operate in a serene (+62.00%). manner with other banking institutions, even of A stabilization in the growth of volumes was confirmed national calibre, should not be underevaluated: both as a result of the significant and uninterrupted growth with respect to sharing a common vision of the risk of the past years, a symptom (and confirmation) of a at the authorisation stage as well as with respect to a more moderate and prudent approach to risk. rigid, time consuming approach taken to managing An interesting phenomenon should, in any case, be problematic situations but also in the general reluctance noted; it allows us to assess the year-end balance of to use ever-dwindling financial resources. the total amount of loans as the result of the following: In this context, it is often necessary to create, organize reimbursements (payment of instalments, return of and manage situations that are often complex: once loans with fixed maturities, etc..) for a total of circa again the collaboration and solidarity with the CR- EUR 160 million (70.00% greater than the forecasts of BCCs has been shown to be fundamental and of the beginning of the year) as well as the disbursement

37 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

of new financing for a total of circa EUR 175 million terms of spreads and commissions; as a result, it is (44.00% greater than forecasts). possible to state that the portfolio of receivables has The result, when compared to the budget, was slightly obtained and guaranteed - for the bank - a greater negative: In fact, it reports a value of less than EUR return for a smaller amount of used resources. 24 million (-3.20%) for the average liquid balance It should be noted that an important portion of of the month of December (the traditional and correct “new loans” disbursed in 2011 was managed by parameter for measuring the characteristics of credit extensively utilizing subsided funding: In particular to activity of Cassa Centrale Banca) and a lower value EIB funds totalling EUR 21 million and to Cassa DDPP equal to EUR 28 million (-3.80%) as the average liquid funds totalling EUR 19 million. It is therefore possible balance for the year. to conclude that almost one fourth of new loans are However, this result is generally positive if interpreted in financed with the use of funding that is generally light of the significant returns mentioned above which, speculative in nature and supplied by third party as occurred for the implemented disbursements, were institutions. This is undoubtedly an advantage for the significantly greater than the budgeted amount and treasury of the bank but also, and in particular, for therefore constitute a positive signal of vitality and beneficiary companies (customers of the CR-BCCs) rotation of the portfolio of receivables. which have been able to benefit from spreads which It should also be noted that the result of these elements are certainly much lower than those in the market. The is an economic contribution which is greater both in graph below shows the main figures described above.

Ordinary Loans Volumes

800.000

600.000

400.000

200.000

Average liquid balance annual

Average liquid balance December

Annual net change 0 2006 2007 2008 2009 2010 2011

38 DIRECTORS’ REPORT ON OPERATIONS

With regard to the philosophy pertaining to the The table below shows the overall balance in granting and management of credit (of more qualitative the distribution of the loans between the various nature, but very important), that stated above is again commodity categories, due to the constant, and careful confirmed: it is based on certain key points which development of the various sectors. serve as a the foundation for a professional culture With regard to the real estate sector – which was of the organization, i.e. a focus on the quality of the most likely the one most severely affected by the crisis - loan and diversification in terms of commodity sector, constant attention is given to the operations which are territory and especially size (to spread the risk). currently underway (even with regular and organized A correct understanding of the real requirements of audits) while, in the case of new opportunities, the company as well as the capacity in providing we work almost exclusively with consolidated adequate responses are vital elements in loan activities counterparties, paying maximum attention to the types during these difficult times. In addition, they also of properties involved, checking the demand in the produce an added value that the customer appreciates territory, requiring the contribution of significant own and is increasingly willing to acknowledge, both in funds, acquiring adequate guarantees and making the economic terms and in terms of loyalty. entrepreneur aware of the need (imposed by market For these reasons, the commercial offer of Cassa changes) for substantial pre-sales to have been made Centrale Banca was expanded in 2010 through the on the properties right from when new worksites are addition of Centrale Corporate whose activities and started up in order to ensure predictable and solid results in the year 2010 (the first year of activity) were commercial and financial prospects for the initiative. also extensively confirmed in 2011. In numerical terms, this approach to the real estate The Credit Division and the Centrale Corporate sector has led to a decrease in loans from 237 million naturally and inevitably complement each other’s at the end of 2010 to the current 221 million (-7.00%) activities, supplying the CR-BCCs and their markets as well as an incidence with respect to total loans with increasingly qualified, concrete and innovative which fell from 33.24% at the end of 2010 to the responses. current 30.38%.

2011 LOANS: ECONOMIC SECTORS AND BRANCHES

Sector Quota PROPERTY 30.38% CRAFT-WORKING INDUSTRY 19.39% HOTELS 12.85% SERVICES 10.81% SALES 6.25% HOUSEHOLD CONSUMPTION 6.69% AGRICULTURE 5.39% TRANSPORT 5.09% FINANCIAL AND HOLDINGS 2.32% ENTITIES 1.00%

39 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

A significant portion of the credit lines are secured clearer if the number of banks is added to those of by mortgage coverage and/or by guarantees issued Centrale Leasing del Nord Est, an organization which pro quota, in accordance with the credits project, concentrates in particular on the corporate world of by the CR-BCCs which present the operation. In this north-eastern Italy. way, they are assured a joint ownership as well as A policy of segmenting risk was pursued even in 2011, concrete involvement in the operation and, at the same systematically avoiding concentrating too extensively time, a substantial and consistent return in economic in any one sector, both for the bank and the reference and commercial terms. Other guarantees typical of cooperative system (CR-BCCs). This objective was structured financing are being increasingly proposed, reached both by autonomously establishing prudent such as the transfer of public funding (significant and credit facility limits for individuals or groups (however, long-term investment financing), the transfer of revenue limits which are reasonably flexible in relation to from the GSE (“Energy Services Manager”, renewable the specific market and the value of the individual energy production plants) and liens on production transaction and/or counterparty), and by a constant plants and structures (energy and plant sector). and determined action with respect to the associates if It is thereby confirmed that a high percentage of requested to share or lead the loan risks that involved receivables are guaranteed (more than 75.00%) by a number of different CR-BCCs. guarantees from credit guarantee consortia or by real The graph below clearly shows developments over and/or banking guarantees. time: with respect to a total increase in loans that Diversification, including territorial diversification, is is greater than 100.00%, it can be noted that, in still required for the financial investments, especially absolute terms, the loans for less than EUR 2.5 million with respect to the strategic content in addition to increased by 115.00%. These represented 43.00% the credit content. About half the loans of the bank of loans to customers in 2006, while at the end of were allocated outside the Province of Trento at the 2011 they represent over 59.00%. The other brackets end of 2011 (50.25%), with a large portion reserved all decreased, with the exception of the major one (a to Veneto (33.00%). These percentages fell slightly loan of more than EUR 7.5 million) which however is with respect to 2010 figures; this was not due to a essentially only composed of risks from counterparties decrease in the granting of credit to companies but in the cooperation operation. due to the incidence of two “institutional” entities in the This demonstrates that the considerable increase in Province of Trento. loans was not achieved through the ‘short cuts’ of Therefore the strategy to concentrate on the North East mega transactions, but through the constant, systematic is confirmed, along with the markets covered by the effort of acquiring new clientele and new operations, other CR-BCCs that collaborate with Cassa Centrale thereby significantly reducing the impact of bigger Banca in the corporate loan sector. This is even loans at the same time.

40 DIRECTORS’ REPORT ON OPERATIONS

Risk splittFRingAZIONAMENTO DEL RISCHIO

800.000

600.000

400.000

200.000

2006 2007 2008 2009 2010 2011

Less than 2.5 million Between 2.5 and 3.5 million Between 3.5 and 5 million Between 5 and 7.5 milliom More than 7.5 million

Figures in thousands of Euro

Given the increase in disbursements from the stock those allocated to Work Progress financing. This of receivables in the portfolio with respect to that system allows for the periodical auditing of loan managed, in any case, by Cassa Centrale Banca as positions but, in particular, allows trend and credit the arranger of the pool, and in relation to the negative anomalies to be isolated; these would otherwise not

economic phase, credit management after the credit have been detected by the auditing systems that are granting, or after credit disbursement, has been currently being used in the banking system. organized and structured. A system of periodical audits Similarly, a periodical monitoring system for covenants is being applied, particularly for the management of assumed by clientele has been operational as of 2010 construction and real estate credit; this system forces in order to protect against the risks of Cassa Centrale corporate manages to conduct audits on the basis of Banca and that of CR-BCCs participating in the pool. reports of anomalies from the Credit Department and The impaired positions (doubtful, watch-list, restructured, on the basis of objective data and reports, particularly overdue/overrun > 180 days) are those shown in the with regard to the technical forms of subsidies and table below.

41 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

2006 2007 2008 2009 2010 2011 Change Impaired loans (watch-list + overdue/overrun >180 5,236 3,649 13,498 21,704 24,154 27,798 3,644 days) Restructured loans - - - 1,325 2,345 5,183 2,838 Non-performing loans 1,551 2,411 4,560 10,482 13,859 16,177 2,318 TOTAL 6,787 6,060 18,049 33,511 40,358 49,158 8,800 Figures in thousands of Euro

Problematic positions (non-performing, watch- the anomalous items as well as in terms of positive list, restructured, and overdue/overrun) increased coverage in terms of guarantees. compared to 2010 (by circa EUR 8.8 million, equal As regards the assets in the subsidised loans sector, the to +22.50%) due to the worsening situation caused collaboration with the main territorial entities continues by the ongoing economic crisis. Of these, watch-list (mainly the Autonomous Province of Trento) and with decreased, while the overdue/overrun items increased the trade associations and Collective Consortium of significantly. Credit Line Guarantees in Trentino, Veneto and Friuli The Risks Committee therefore decided to make a Venezia Giulia. prudent classification and write-downs, setting up a With regard to the credit assessment of the banking constant information flow and making suggestions to counterparties, communications with other divisions the management body. (which is epitomized by the Risks Committee) and, Impaired positions are secured by a mortgage and/ in particular, with the colleagues of the Management or banking guarantee totalling circa 90.00% and Consultancy Department, is gradually assuming a more are written down as follows: non-performing loans by central role over time. This constant communicational 47.76%; restructured, watch-list and overdue/overrun exchange allows for the circulation – in real time – of by 24.38%. important information and allows for a more complete Cassa Centrale Banca also classifies those positions and detailed analysis of counterparties in order which are characterized by trend anomalies - and to share the various operational flows with Cassa which don’t display impairment but require particular Centrale Banca. attention and communications for management - under Special attention was paid to reviewing the upper the category “performing - under observation”; these limits for exchange rate and/or structured finance total EUR 29.2 million (with an increase of EUR 18.7 transactions, for the European Central Bank refinancing million). transaction auctions and the securitisation transactions These positions are followed by the manager who of medium and long term assets. More specifically, is responsible for the relationship and are regularly the division was heavily involved in the assignment of monitored by the Risks Committee who shares and upper limits/ceilings to the CR-BCCs for participation in guides its management. the ECB auctions, both for the necessary meetings with Overall, the receivables of the bank are written management and the other divisions (more specifically down by 3.53% (compared to 3.46% in 2010), a the Planning and Organization and Finance areas) and percentage figure which is deemed suitable and in the subsequent formalisation and completion of the prudent, both in relation to the “historical” trend of agreed credit lines. The Corporate Finance Department

42 DIRECTORS’ REPORT ON OPERATIONS

is implementing a complex and sensitive activity for innovation in the management of impaired receivables. coordinating the management of the primary risk In addition, the department directly manages the positions at the provincial level. In order to attain this primary clients of Cassa Centrale Banca with direct objective, certain tools (including IT tools) have been credit lines and which, due to their size, have developed in order to optimize credit management multiple lines of credit and almost always fall within as well as offer qualified assistance to companies the category of positions that must be evaluated in a with more elevated standing in addition and provide systemic manner.

43 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

PAYMENT SYSTEMS

Cassa Centrale Banca is structured to meet the Transfer and Direct Debit. This date must now be requirement of transferring money related to the incorporated and confirmed at the national level exercise of the banking activities and carrying out the in order to allow for the transfer from domestic role of operative and accounting intermediary with procedures within the National Interbank Network to numerous economic and organisational advantages in pan-European instruments. favour of the banks who receive these services. Although there do not seem to be specific problems The year 2011 reported the best absolute result for from the perspective of wire transfers, there are greater the activities relative to the Payment Systems division. doubts in relation to the sector of cash inflows given The volumes handled through the primary interbank that the new applications are not currently capable of procedures and through e-money in general have fully replacing the offer that is composed of the current benefits from the contributions of numerous institutions management of direct debits. which decided to avail themselves of our services. The phase of migration to the microcircuit technology The number of SEPA orders has continued its slow of the e-money instruments - on the part of banks but constant growth trend and, in the meantime, the participating in the service of Cassa Centrale Banca – date of 28.02.2014 has been officialised by the can now be considered almost complete. European Payment Council as the end of the duality The situation as at 31.12.2011 is shown below, (end-date) period for the component Sepa Credit compared with the situation of 2010.

2011 2010 % national % national Total % Chip Total % Chip Chips (*) Chips (*) Debit cards 555,347 99.78% 64.88% 507,203 95.70 48.30 ATM 1,181 100% 84.91% 1,088 99.45 79.50 POS 28,349 97.47 89.13% 26,809 96.08 85.70 Prepaid Not Not 86,183 100% 59,570 84.73 cards available available (*) Source; web-site Bancomat Consortium

The Payments Department, in collaboration with the entities allowed for an increase in volumes relating to Planning and Organization area, supervised the bank transfers and interbank commercial takings by activation and start-up of numerous banks which 4.00%, thereby bringing the number of intermediated participated in our payment services. Out of a total orders to a total of 35 million during the year. of 41 new participants, there were six new banks for The department was also particularly involved in prepaid cards, two banks for the Target2 service, three adjustment for the management of cash in Euro (a new banks for the Sepa SCT and SDD service, two banks contract and preparatory activities for the incorporation for ordinary wire transfers and commercial takings, of the new EU regulations relative to recirculation of and five banks for the Check Processing service. cash). The constant increase in the number of intermediary

44 DIRECTORS’ REPORT ON OPERATIONS

Service Number of Transactions/Public entities Fees Collection of bills/Commercial + 3.90% + 8.22% collection Bank Transfers + 3.98% + 4.97% Bancomat/POS + 8.53% + 7.97% Public entity treasuries + 17.61% +17.35% Checks + 7.11% + 4.83%

Within the foreign sector, it should be noted that the The activities relative to the management of the Swift partial recovery at the end of 2010 was halted during application (Workstation and Webstation) as well as the course of 2011 due to the difficult economic for the updating of BIC’s (Bank identification Codes) period which was not only domestic. for all CR-BCCs following the opening/closing of The number of import and export wire transfers has, in counters, mergers and new participants are significant. any case, reported a positive figure (circa +10.00%) The management of the service for vehicles created due to the activation of certain new banks for the for securitization transactions is assuming increasing specific service. importance for these activities. The number of files relative to Documentary Credits Treasury management services were also carried out and International Guarantees has been confirmed at in the Payment Systems Division, a service which the level of 2010 with a minimum variation of 1.00%. continues to garner appreciation by the banks, and The training and consultancy services provided to which led to further growth in the number of entities the banks continues through the organisation of and transactions managed in 2011. numerous meetings for the purposes of re-launching At the end of 2011, the number of entities increased to and developing know-how in the specific sector which 529, as illustrated in the table below. At the beginning continues to remain undeveloped compared to its of 2012, and following the centralization of certain potential. activities as of 1 January, the number of entities The department constantly monitors developments increased to 568. in the payments market at an international level and There are now a total of 224 entities which have has participated in numerous meetings with primary adopted the IT mandate. international partners in order to improve the quality of It should be noted that the department has supported the service, particularly with regard to the channelling the CR-BCCs during their participation in 95 tenders of payments outside of the EU. for the assignment or renewal of the service.

45 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

DISTRIBUTION OF ENTITIES BY PROVINCE

Type of Entity 2009 2010 2011 Province 2009 2010 2011 Municipalities 180 183 200 Trento 321 320 355 Rest Homes 24 34 40 Udine 28 25 26 Districts 2 2 3 Rovigo 15 19 18 ASUC 38 38 51 Treviso 14 32 62 Consortiums 131 132 146 Brescia 13 13 16 Schools 46 59 82 Venezia 8 11 9 Other Institutes 5 6 7 Belluno 11 9 7 Vicenza 8 7 7 Pordenone 0 4 3 Ferrara 3 4 4 Florence 0 3 5 Padua 1 2 4 Verona 1 2 5 Enna 1 1 6 Gorizia 1 1 1 Trieste 1 1 1

46 DIRECTORS’ REPORT ON OPERATIONS

PLANNING AND ORGANISATION

Cassa Centrale Banca is available to act as the with the management of cooperative credit entities at preferred partner of its client banks in dealing with the national level. financial risk management issues in a comprehensive, The Cassa Centrale Banca Marketing department – timely manner. which provides support to decision-making activities During the course of 2011, the Planning and Strategic and acts as a tool for cross-division oversight and Development area and the Organisation area were coordination of the processes and services supplied to combined into a single area named Planning and clients - focuses on responding to the specific system Organisation. configuration when studying products and services, The Management Consulting Service of Cassa both on the basis of end-customer requirements and Centrale Banca supported client banks, even in 2011, the requirements of the banks that place the products. in managing an appropriate process for monitoring In order to provide a service that can meet the and planning overall risks - current and future – which needs of the client banks, the Marketing department are derived from the implementation of their activities periodically shares its guidelines and projects with the within the territory; there are 182 participating banks, Management Commission, also gathering information a number which grew due to new participating BCCs from the feedback of the sales network of the client from the Marche region. banks and working groups dealing with the issue. Liquidity risk was again the central element this year Periodical research on developments in consumer within financial reporting and during the consulting behaviours and the monitoring of primary market trends meetings which are periodically held within the allow the department to create optimal positioning of registered offices of the participating banks. In the products and services with respect to the client and first part of 2011, the support provided to banks for the market. their activities of measurement and reporting of future During the course of 2011, the Marketing Department capital adequacy was fundamental. The risk analyses was involved in the development and coordination made available each month were also integrated with of the project relative to the restyling of the Asset new forms which measure the current and forecasted Management offer of Cassa Centrale Banca; the credit spread. objective was to obtain a particularly effective Training activities relative to risk management were a competitive positioning by means of a prestigious and fundamental component of implemented activities; in avant-garde visual identity. This would allow the banks 2011, training activities were initiated in collaboration which market the service to increase their client base with local federations of various Italian regions and, in and thereby have broader market coverage. 2012, these activities were further extended. Coordination activities continued on the bankassurance The visits held by the consultants totalled more than brand development, product catalogue and 500 and, in 40 cases, the risk analyses were communication. More specifically, the communication presented directly to the Boards of Directors. Support of the new Assilegal products – a legal protection in interpreting a market characterized by continuous policy – and of Assihome, the multi-risk policy which operational and regulatory novelties - and the capacity covers damages to the home and those linked to to propose concrete operational solutions to problems private life, was followed; for the latter product, an – have contributed to the central role of the consulting important advertising campaign was implemented services. The Management Consulting service with messages sent through a renewed media mix. currently represents – for Cassa Centrale Banca – a Another important project which involved the fundamental channel to develop high-level relations Marketing Department and the Organisational

47 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Development Department concerns “Ricarica EVO”, videos onto YouTube. The projects ‘Alta Quota’ and the new discount card of Cassa Centrale Banca. This ‘Freeluna’ - through which the product Ricarica EVO product – created from the collaboration of various was launched - fall within the strategy for innovating departments of Cassa Centrale Banca and Phoenix marketing channels. The first consists in the presence Informatica Bancaria, and which was eagerly awaited of advertising posters on ski slopes of all the skiing from both client banks and the market - will launch on locations of Trentino, while the second, on the other the market within the first quarter of 2012 following hand, is relative to the communication of promotional/ the completion of the tests and the start-up of certain advertising messages to numerous users of the Freeluna pilot banks. wi-fi service. In addition to the development of Ricarica EVO, a Other areas which involved the acquisition and cross-division project team composed of Marketing, development of clientele loyalty include the advertising Organisational Development and Information campaign dedicated to the NEF competition “Savings Technology personnel, has attained the definitive which reward you” as well as co-marketing initiatives publication of the portal www.carteprepagate.cc such as the Telepass promotion. which is dedicated to the 3599 prepaid offer. The site Specific attention to younger individuals continued by has a completely renewed layout and structure and enrichening already consolidated products such as will serve as a privileged source of information for all “Risparmiolandia”, “oom+” and “Conto Università”; current and potential pre-paid card customers given entertainment and savings education initiatives- which that it allows the user to view the available products as were already started in past years – as well as musical well as their characteristics in a complete and updated and sports-related co-planning activities which were manner. It also displays the list of banks where it is implemented directly with the University of Trento possible to buy them in addition to serving as an favoured the distribution of the offer dedicated to young operational and managerial source for customers on the part of client banks of Cassa Centrale Banca. which own the 3599 prepaid card. Cassa Centrale Banca invests resources in innovation, As part of the institutional communications of the with the aim of identifying areas of improvement for “Casse Rurali Trentine” (rural banks from Trentino), existing products and planning the creation of new a new video ad was created with the objective of ones, through continuous dialogue with its client banks strengthening their position by emphasizing the values and partners. which have always distinguished them. There were a lot of projects which involved the The format – original, innovative and already a Organisational Development department in 2011 in candidate to various awards in the sector – intends to various areas, in addition to the aforementioned cross- expand the message of banks which are close to the division activities related to the Ricarica EVO account people and which carefully cater to the needs of their card and the website www.carteprepagate.cc. host territories by supporting cultural activities, sports In compliance with organizational requirements and the economy. pertaining to banking transparency, the design of the The various projects were followed by communication Products Catalogue of Cassa Centrale Banca was campaigns with messages set out over an updated completed in addition to the consequent activation of media mix. In addition to the traditional instruments, the Do.T form in order to rationalize the management new means of communication were employed in of transparency documentation pertaining to marketing 2011, mainly including the Internet with banners products from the pre-sales to the customer reporting on the main sites of interest and the uploading of phases.

48 DIRECTORS’ REPORT ON OPERATIONS

IT procedures were subject to a number of interventions made to allow the banks to operate in accordance in order to comply with anti-money laundering with the standards imposed by the payment circuits, regulations, and more generally with regulations the international settlement networks and settlement issued by the Government or by other regulatory and/ platforms - especially MasterCard, RNI/Swift, EBA or supervisory authorities. In the acquiring sector, and and Target2 - through Cassa Centrale Banca. Finally, in collaboration with Phoenix Informatica Bancaria, the support and external assistance provided to banks the implementation of the web interface identified by within the various environments - primarily for e-money, Cassa Centrale Banca - for establishing agreements foreign operations and cash inflows and outflows – with operators through the Acquirer SIX PAY - has should not be underestimated. continued. Following the testing phase and the The Information Technology and Systems departments implementation of additional functionalities, the launch are also part of this division and always carefully follow of the service is forecasted during the course of 2012. developments in the areas of IT and reporting sectors The transfer of the foreign “Premia” user banks to the while researching the most advanced techniques, foreign platform SIB2000, which is integrated within particularly those related to security standards. the departmental IT system, continued; in the first half of The need for guarantees on the value generated 2012, the start-up of the remaining 18 banks will be by Information Technology, the management of risk completed in collaboration with Phoenix Informatica related to IT and the increasing number of requirements Bancaria. In the meantime, an initial analysis was to comply with regarding the control of information begun for the development of specific functions for the are key elements in the work carried out by these two foreign operations of Cassa Centrale Banca which will departments. act as the intermediary bank for the offer of centralized The efficiency of the technological infrastructure was services to adhering banks. improved with a technological update of the Bank and The range of products available from the ATM 3599 Group Company storage systems. channel was been expanded following their transfer Online synchronization of data with the secondary site to Web technologies; these include the payment of of Padua – which is required for operational continuity postal payment slips, the re-charging of digital school - demonstrated that the Bank and Group companies food vouchers, the payment of certain sanctions from can resume operation in just a few hours given the local police stations and the possibility to implement completion of the disaster test in May along with the wire transfers from user sections. Phoenix Informatica Bancaria test. Within the e-money sector, the new fraud management The collaboration with the Bank divisions continued system has been implemented; it allows for more rapid with a view towards improving operational efficiency detection of potential fraud deriving from the cloning as well as the planning of new functions for the portals of payment cards. This detection is implemented in of Cassa Centrale Banca, Centrale Leasing Nord Est, a centralized manner by Cassa Centrale Banca on NEF and the company intranet. The Bankassurance behalf of all the banks participating in the “ABI unico project fully absorbed the resources assigned for 3599” e-money services. the creation of new modules for the Assicura and The electronic management of loan positions has Retirement Fund portals. been activated in collaboration with the Information The Planning and Organisation Area activities also Technology Department; it includes the archiving of included providing support on legal matters in order documents within the document platform. to identify adequate solutions - from the regulatory and In addition, and as usual, interventions were also contractual viewpoint – to the specific commercial

49 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

needs and promoted projects. Within the realm of contracts which are necessary for the acquisition or the consulting and legal advisory services provided to the marketing of products and services as well as the company departments in order to outline the problems management of complaints received from customers in related to the activities of the banking group, the a manner that complies with the provisions of internal structuring – implemented with the collaboration of the and external regulations of reference and activities Finance division – of financing operations with ECB pertaining to the coordination and supervision of guarantee became particularly significant during the the drafting and updating of internal regulations of course of 2011; these operations allow the CR-BCCs company-wide relevance (anti-money laundering, to finance themselves at the conditions of re-financing transparency, privacy) as well as sector-specific operations with the ECB. (division/department regulations or relative to specific The additional activities implemented during the course products and services), even with reference to the of 2011 include the analysis and preparation of the companies of the Group.

50 DIRECTORS’ REPORT ON OPERATIONS

MEASUREMENT AND CONTROL OF RISKS

Cassa Centrale Banca places significant focus on the relative economic forecasts. Extensive information process of identification, monitoring, measurement and was also produced for third parties (ratings agencies, control of risks. independent auditors, parent companies) in order to The periodic review and update of the investigation keep them updated on the company’s performance. activities throughout the year required constant and The Compliance Department implements its compliance continued commitment, in view of developments activities by using a risk-based approach, and in the regulations in the sector and supervisory evaluates the probability and intensity of exposure of regulations. In order to ensure safe and prudent the bank to risks of non-compliance with the regulations company management, the controls system evolves and resulting reputational risks. In order to reduce these in accordance with the changes that are applied to risks, the department continuously analyses regulatory the company structure and to the new products and developments that forms part of its sphere of reference, services supplied by the latter. identifying the applicable laws, evaluating their impact As of 2011, the Risk Management Department was on company activity and identifying suitable measures combined with the Management Control Department to prevent significant risks where they are lacking. The in order to create positive synergies between the two results of these analyses are periodically brought to the departments which, on the one hand, manage risk attention of the Risk Committee, the Board of Statutory control and, on the other hand, monitor company Auditors, the Internal Audit committee, and the Board profitability. Given our belief that these two elements of Directors on an annual basis. must increasingly be related to one another in order The department conducted audits on the state of to effectively leverage the capacity of management application (within the bank as well as within banks to create lasting value over time, we believe that this which market the service of Cassa Centrale Banca) of decision will produce the expected results over time. the main provisions regarding banking transparency, From the perspective of regulatory developments, the investment services, anti-money laundering and past year was once again rich in novelties of various privacy use during 2011, checking the adequacy and type. The Risk Management department was therefore efficiency of the company procedures and proposing deeply involved in the analysis of the new provisions in the corrective actions considered to be most suitable to order to align the latter with current company practices, remedy the inadequacies found. even in collaboration with national cooperative bodies. In order to ensure the effective monitoring of money All types of risks which the bank is exposed to are laundering and financing of terrorism risk, the subject to careful monitoring, with specific attention Compliance department - to which the Anti-Money given to credit and liquidity risks which represent the Laundering department also belongs - started to greatest dangers for the national banking system in the constantly monitor implementation of the applicable current period. This activity was also implemented with rules and compliance with the organisational measures the support of the Risks Committee which – during its provided for by the Bank of Italy, formalising the periodical monthly meetings – carefully examined the controls made in the communications and reports and themes which were part of each agenda of the day. promoting implementation of the corrective measures, As part of the Management Control, monthly accounts with reference to the anomalies encountered when continued to be made to Management and the Board the checks are made. The department also prepared of Directors on profitability trends. During the course – for approval on the part of the Board of Directors of autumn, the budget for the next year and the three- - a specific “Anti-Money Laundering Manual” which year strategic plan were presented along with the defines the responsibilities, duties and operating

51 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

methods in managing the risk related to money of reference as well as the company procedures that laundering and terrorism financing. were affected, the severity of the risk and mitigation The department also intervened - to the extent of its measures that were adopted and which can be competence - in the ICAAP process, in adjusting to the adopted. provisions pertaining to consumer credit, remuneration The work of the Internal Audit department, whose audit and incentives to banks and the marketing of new plan was approved by the Board of Directors, mainly products, expressing its opinion in accordance with involved the business divisions of the bank: Loans, applicable regulatory requirements. Financing and Payment Systems. Specific audits The Supervisory Body pursuant to Italian Legislative involved the ICAAP process, the remuneration and Decree 231/2001 provided constant support to incentive system, liquidity risk, while the subsidiaries, this activity; it managed – in collaboration with the and the Payment Services Directive (PSD) while the competent departments - the updating of the risk subsidiary Centrale Leasing Nord Est was subject to a assessment and of the new organizational model. complete audit. In 2011, the Internal Audit department During the year, the Department organised specific initiated a Quality Assurance Review in order to training activities aimed at raising staff awareness of obtain international audit standard qualifications the obligations provided under banking regulations from a qualified and independent external auditor. regarding transparency and anti-money laundering in The results of the internal audits were communicated particular. to the General Management, the Board of Statutory At the same time, the non-compliance risk mapping Auditors and the external auditors. In accordance with work continued through the preparation of specific prevailing law, the Board of Directors was informed of matrices which identify the regulatory requirements the results of the audits.

52 DIRECTORS’ REPORT ON OPERATIONS

HUMAN RESOURCES

As of 31 December 2011, the personnel employed • 37 employees working in the Finance Area, in Cassa Centrale Banca totalled 182 units, three • 25 employees working in the Loan Area; more compared to 2010; this was the result of seven • 48 employees working in the Payment Systems Area, resignations (five of which were voluntary, two due to • 62 employees working in the Planning and the end of a fixed-term contract) and ten hirings. Organisation Area, The new hires were distributed among all divisions of • 10 employees assigned to the General Management the Bank. offices. The internal distribution of Cassa Centrale Banca was as follows at the end of the year: The table below shows the breakdown of the staff.

Occupational category 2009 2010 2011 Managers 4 4 5 Executives 51 49 54 Professional Areas 121 126 123 TOTAL 176 179 182 Data as of 31.12.2011

Employees Composition

Females

Males 31,00%

69,00% 3,0%

53 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

In order to create conditions within the company’s of operating risk - certain changes relating to structure hat would further improve its capacity to organizational structure were implemented; these led respond to market challenges and to promote the to the unification of the Organization area with the growth of internal synergies within the decision-making Planning and Strategic Development area under a process - so as to promote adequate governance single area named Planning and Organisation.

Employees’ Age

80

70

60

50

40

30

20

10

0 <=30 31-40 41-50 51-55 >55

As regards the training activities carried out in 2012, the self-training course on Italian Legislative Decree Cassa Centrale Banca renewed its efforts to ensure 231/2001, and a basic training course on the use that the greatest possible number of resources received of e-learning methods on topics pertaining to Cassa adequate levels of training pertinent to their jobs. Centrale Banca. Training sessions aimed at the entire workforce were There were also numerous specialised courses organised on issues of cross-sector interest such as organised by Formazione Lavoro [work training] the regulations on health and safety (Italian Legislative or other specialised companies and schools (ABI Decree 81/08), anti-money laundering Regulations, Formazione, SDA Bocconi, etc.) in which 115 and transparency. New hires are given access to employees took part. English and German language

54 DIRECTORS’ REPORT ON OPERATIONS

courses continued also, involving 40 employees. When setting the 2012 budget, further investments in Other training activities were also held by Formazione qualified human resources were also considered, with Lavoro aimed at developing skills in managing co- the aim of consolidating operating sectors of special workers; these activities involved 32 department strategic relevance for the company that round off the managers. About EUR 170 thousand was invested in mission to support the work of the member CR-BCCs training in 2011, for a total of over 8,545 hours of and customers. training, almost all of which during work hours.

55 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

SUBSIDIARIES OF CASSA CENTRALE BANCA

56 DIRECTORS’ REPORT ON OPERATIONS

CENTRALE LEASING NORD EST S.P.A.

The market forecasts completed at the end of 2010 investments of circa 9.00%, distributed as follows assumed an overall increase, in 2011, of leasing across the various sectors:

Car +4.90% Operational +11.90% Airplane, ship +5.00% Real estate +9.40% Renewable energy +8.10% Source: Assilea

The forecasts began with the year 2010 as better less than those of the previous year, and respectively than the two previous years given the year closed equal to 281,808 transactions (-0.60%) and EUR with volumes reporting a 5.00% growth compared to 24.57 billion (-9.93%) despite the significant increase 2009 and because the first months of 2011 were, in in leasing investments within the sector for renewable any case, subject to growth. energies, equal to 8.62% in terms of numbers of Unfortunately this did not occur and, beginning with contracts and 10.33% for volumes; these represented the past summer, the word recession began to replace 16.35% of the total stipulated leasing amount of the the word recovery. year which totalled EUR 4.019 billion. The Assilea data confirm that the year 2011 closed In detail, the individual sectors reported the following with a number of transactions and volumes that were performance:

Asset value Change compared to 2010 Car 5,676,593 - 1.08% Operational 7,097,957 - 10.55% Airplane, ship 783,255 - 27.30% Real estate 6,999,645 - 21.27% Renewable energy 4,019,349 +10.33% TOTAL 24,576,799 - 9.93%

The 2011 activities of Centrale Leasing Nord Est of products in a highly unstable market which was S.p.A. were characterized by the consolidation and difficult to interpret, with pricing that always reflected increase of the sales network created by the CR-BCCs; the needs of our partner banks and their customers. at the end of the year, the agreements in force with Therefore, the activity continued to concentrate the banks totalled 100 (compared to 92 at the end essentially on brokerage in the leasing sector in 2011, of 2010). with the same number of employees as last year, The choice made at the beginning to focus attention comprising seven including the General Manager. solely on the brokerage of products by other leasing The sales and brokerage activities were given companies was successful and was further expanded considerable support by the work put into fine-tuning and implemented in 2011. procedures to improve the service provided given in This choice allowed us to maintain a complete range terms of file turnaround and profitability.

57 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Our company has always been proactive with respect • 513 stipulated contracts (+22.00% compared to to our partner leasing companies in order to constantly 2010); improve procedures and searching for new partners • EUR 82 million brokered (+17.00% compared to who can improve and add to the range of services 2010). offered to the CR-BCCs. The following table illustrates the breakdown by type The activities implemented in 2011 led to the of product. attainment of the following results:

% change since Type of product No. amount* % on the total 2010 Finished property leasing 28 15,029 18.29 - 47 Semi-finished property leasing 12 23,405 28.48 + 40 Plant/machinery leasing 105 10,852 13.35 - 26 Renewable source plant leasing 24 21,307 25.93 + 343 Car business leasing 192 5,139 6.25 + 40 Heavy vehicle leasing 53 3,010 3.66 + 25 Light vehicle leasing 82 2,409 2.93 + 73 Private car leasing 15 576 0.70 + 22 Boat leasing 2 340 0.41 - 28 TOTAL 513 82,067 100 + 17 Figures in thousands of Euro

The figures in the table show how the 2011 leading in process - from those where the file has just been products for Centrale Leasing were the electricity opened to those with everything decided and ready production plants using renewable sources and for signature, for a total cost of more than EUR 60 vehicles in general. million. In the energy sector, the positive market trend was The 2012 forecasts prepared on the basis of the followed given that the company can rely upon partners specifications of the Sales Directors of the primary which are adequate in terms of financial capabilities leasing companies were not positive, with an expected and technical know-how. In the motor vehicles section decrease of -23.00% compared to the already – and despite the fact that the market did not report negative figure of 2011; the main reason is the weak any increase at the national level – increasing interest internal demand and a financial system which is highly and response from the CR-BCCs that had stipulated conditioned by funding costs, capital absorption and agreements was noted due to the excellent proposed a credit portfolio with increased numbers of non- conditions. performing positions. There were about 130 transactions regarding files

58 DIRECTORS’ REPORT ON OPERATIONS

CENTRALE CORPORATE S.R.L.

The year 2011, the first real year of operations with full Corporate operated, the most lively was the energy staff, turned out to be particularly complex and difficult. sector, particularly that relative to renewable energy The primary activity of the company – consulting sources (hydroelectric and photovoltaic). services relative to structured finance operations and With regard to structuring activities, numerous projects project financing – was strongly affected by the crisis were examined, even if of reduced amount compared in the financial markets. The banks – particularly in to the previous year. The company, in 2011, acquired the second half of the year - strongly limited their 21 mandates compared to the 20 of the previous operations for all types of financing, including those year; of these, 14 were attained through the stipulation relative to structured financial operations. This has of the relative financing while the remaining seven made the syndication of loans difficult; this activity is will serve as an important basis for work activities in an essential component of the operations of Centrale 2012. The overall amount which was financed by our Corporate since it guarantees the highest added value. banking partners was equal to EUR 56 million. Companies refer to structuring specialists given that With regard to company structure, it should be noted they desire to also delegate the search for financial that – during the course of the month of September, institutions which are interested in entering the credit there was the opportunity – for a new graduate - to syndicate in addition to receiving consulting on the complete an internship within the company which then financial construction of the operation. This atypical led to a hiring. The total number of staff members is difficulty in collecting banks and resources has affected not equal to four people: one executive with the job all company activities during the course of the year, duties of a General Manager, a mid-level execution resulting in a radical revision of economic/commercial acting in the capacity of a Senior Consultant and two planning. Some of the most important operations – and employees which assist the General Manager and the on which the forecasted economic budget was based - Senior Consultant. did not reach the closing phase, resulting in the failure The year 2012, which has just begun, will still to collect significant revenue items. During the course involve significant difficulties for the financial market of the year, as a result, there was the intention, and it in general. The mandates - acquired in 2011, and became necessary, to rapidly remodulate the activities not yet implemented – have allowed the year to begin of the company by focusing more on two different with a work reserve. Of the new mandates which operational segments. Pure consulting services, i.e. were obtained, the mandate to participate – along that which does not directly aim towards issuing with Cassa Centrale Banca and JP Morgan – in the financing, and the structuring of small project finance structuring of a new securitization transactions should operations within the energy sector; operations where be noted; this operation was promoted by the CR- the syndication of the financing could be closed within BCCs and aims to divest trade receivables to small the cooperative credit movement. In this manner, it and medium sized firms. Worries – unchanged from was possible to reach the budget objectives set by the the past year – remained in relation to the continuing Board of Directors. liquidity crisis which characterizes the entire financial Of the various operational sectors in which Centrale market.

59 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

MAIN ASSOCIATES OF CASSA CENTRALE BANCA

60 DIRECTORS’ REPORT ON OPERATIONS

NEAM S.A.

Nord Est Asset Management is a company governed sum payments – implemented during the period – by Luxembourg law and jointly owned by the Veneto totalled EUR 200 million and were entirely cancelled Cooperative Credit banks and the Trentino Rural Banks. by the volume of reimbursements totalling EUR 341 The company NEAM, of which Cassa Centrale million. The key factor for containing the decrease in Banca holds 50.00% of the capital, controls and assets was again the excellent performance of periodic coordinates the multi division and multi manager NEF payment plans totalling circa EUR 150 million. fund management, where the divisions are managed Of the various sectors, the emerging markets stock by international asset managers. sector reached a new high of EUR 148 million and In a particularly difficult year for the collection of the new NEF Coupon reported a balance of more managed savings, the NEF shares underwritten by than EUR 80 million; even the short-term bond sector savers increased by 3.34%, totalling slightly more than maintained an interesting level of capitalization with EUR 79 million compared to the EUR 76 million at the assets of more than EUR 121 million. end of 2010. During the course of the year, 35,145 new periodical Financial assets reported a balance of EUR 902 million payment plans (PACs) were opened (+14.00%), (compared to the 945 million in 2010, a change of thereby allowing for the attainment of the new record -4.49%) resulting from net positive retail inflows of EUR of active PACs on NEF, 133,000. The monthly cash 19 million against divestments in the institutional class flow generated from the PPP instalments is equal to EUR totalling EUR 11 million, but with a highly negative 12 million, distributed across 192 underwriters. incidence given by market trends and equal to EUR – The economic events of 2011 did not allow NEF to 51 million. reach the sought after balance of one billion Euro in Underwritings of capital investments plans with lump- assets.

61 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

CENTRALE TRADING S.R.L.

In the online trading sector, the number of CR-BCCs In 2011, and certainly within a difficult market customers for the Directa Sim platforms distributed by environment, new agreements were undersigned with Centrale Trading increased further. 13 banks; the new year confirmed the strong interest The company provides technical assistance, and, in January, there were already 8 new banks collaborating with the development and maintenance which were evaluating the possibility of operating with of the interface programmes between the Directa Sim the Directa Sim online trading platform offers. IT system and the various security, current account, About fifty days dedicated to visits to client banks, and accounting and bank notification procedures. almost one hundred training days targeting both banks As of 31 December 2011, the banks which had and retail customers, completed the general activities stipulated Directa Sim agreements totalled 172 of Centrale Trading. (including 2 SIM), and a total of 161 agreements are At the end of 2011, Centrale Trading strengthened its with CR-BCCs and Casse Raiffeisen. personnel by hiring a new individual.

PARTNER BANKS BY REGION

CR-BCC Other Trentino 30 Lombardy 23 2 Alto Adige 14 Veneto 16 Emilia Romagna 15 3 Campania 12 1 Piedmont 9 2 Friuli 8 Tuscany 11 Lazio 6 Marche 8 1 Apulia 3 Abruzzo 1 Sicily 4 Calabria 1 SIM 2 TOTAL 161 11

62 DIRECTORS’ REPORT ON OPERATIONS

CENTRALE GESTIONE IMMOBILIARE S.R.L.

During the course of 2011, the company remained of this work and provided indications for additional in- inactive and, in March, a response to the ruling which depth study which is currently underway. The objective was presented to the Inland Revenue for the purposes is to verify the feasibility of a scenario in which the of verifying the fiscal implications related to the auction company assumes the role of manager of an “online operations on behalf of the Rural Banks–Cooperative real estate shop” in the interests of the CR - BCCs and Credit Banks (CR-BCCs) – according the mandate their clientele. without representation transaction - was received. While awaiting for an exact definition of the company’s The outcome of the ruling highlighted the fact that mission – which could influence the initiation of a this structure was not economically convenient for the process authorizing the maintenance of control of the company and for the mandate holder CR–BCCs. In light company on the part of Cassa Centrale Banca – the of the above, the Board of Directors – in conjunction controlling company quota was transferred, on 23 with the top managers of the parent company – have December 2011, to the company Finanziaria Trentina initiated an analysis for the purposes of reviewing the della Cooperazione S.p.A., with Cassa Centrale core business of Centrale Gestione Immobiliare. At the Banca retaining 10.00% of the share capital. end of October, the Board acknowledged the results

63 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

MANAGEMENT ACTIVITY OF CASSA CENTRALE BANCA

66 DIRECTORS’ REPORT ON OPERATIONS

CASSA CENTRALE BANCA S.P.A.

We provide some explanatory notes and considerations 31.12.2011 with those as at 31.12.2010. For more on the capital and financial performance of Cassa information, refer to the Explanatory Notes. Centrale Banca below, comparing the figures as at

STATEMENT OF FINANCIAL POSITION

Change Assets 31.12.2011 31.12.2010 % change 2011/2010 Cash 295,447 96,812 198,635 205.18 Financial assets: - loans to banks 3,483,070 1,356,127 2,126,943 156.84 - loans to customers 708,741 693,616 15,125 2.18 - held for trading 97,509 47,813 49,695 103.94 - at fair value 2,253 2,197 55 2.52 - available for sale 377,739 240,855 136,884 56.83 - held to maturity 388,638 25,160 363,478 1,444.67 TOTAL FINANCIAL ASSETS 5,057,949 2,365,768 2,692,181 113.80 Equity investments 20,465 20,181 283 1.40 Tangible and intangible assets 14,281 14,102 179 1.27 Tax assets 6,573 5,690 883 15.51 Other assets 52,766 67,528 (14,762) (21.86) TOTAL ASSETS 5,447,481 2,570,082 2,877,399 111.96 Figures in thousands of Euro

Change Liabilities and Equity 31.12.2011 31.12.2010 % change 2011/2010 Financial liabilities: - due to banks 4,615,771 1,790,058 2,825,713 157.86 - due to customers 291,512 232,577 58,935 25.34 - for trading 57,776 42,903 14,873 34.67 - at fair value 8,417 8,762 (345) (3.94) TOTAL FINANCIAL LIABILITIES 4,973,476 2,074,300 2,899,176 139.77 Debt securities in issue 200,119 238,883 (38,764) (16.23) TOTAL FUNDING 5,173,595 2,313,183 2,860,412 123.66 Tax liabilities 807 955 (148) (15.48) Other liabilities 75,129 53,001 22,128 41.75 Provision for severance indemnity 2,290 2,376 (86) (3.62) Other provisions for risks and charges 525 468 57 12.13 TOTAL LIABILITIES 5,252,345 2,369,983 2,882,363 121.62 Equity: Share capital 140,400 140,400 - - Legal reserve 20,579 19,899 680 3.42 First time adoption reserves and 9,356 9,384 (28) (0.30) adjustment Other reserves 17,789 12,239 5,550 45.35 Share premium provision 4,350 4,350 - - Adjustment reserve (5,541) 286 (5,828) (2,036.94) Profit for the year 8,202 13,540 (5,338) (39.42) TOTAL EQUITY 195,135 200,098 (4,963) (2.48) TOTAL LIABILITIES 5,447,481 2,570,082 2,877,399 111.96 Figures in thousands of Euro

67 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

CAPITALE SOCIALE

Share capital No. Shares Amount % interest Ordinary shareholders Centrale Finanziaria del Nord Est S.p.A. 1,852,372 96,323,344 68.606% DZ Bank AG 675,001 35,100,052 25.000% Rural banks and Cooperative Federation of Trento 501 26,052 0.019% Cooperative Credit Banks and Federation of the 17,828 927,056 0.660% Cooperative Credit banks of Veneto Cooperative Credit Banks and Federation of the 4,208 218,816 0.156% Cooperative Credit banks of Friuli-Venezia Giulia Cooperazione Trentina 90 4,680 0.003% Privileged shareholders Autonomous Province of Trento 134,000 6,968,000 4.963% Chamber of Commerce Industry Agriculture and 4,000 208,000 0.148% Crafts of Trento Other privileged shareholders 12,000 624,000 0.444% TOTAL 2,700,000 140,400,000 100.00%

ASSETS The liquidity of Cassa Centrale Banca deposited/ by about EUR 14 million (-6.00%). With respect to the invested with banks (3,483.1 million) increased Rural Banks and the Cooperative Credit Banks, Cassa considerably (+156.80%) after the increase recorded Centrale Banca continued to operate in its dual role as in 2010 (+97.20%). More specifically, the term promoter and lead structure for the pool and assistance deposits increased by EUR 2,296 million while the transactions, when requested, in the loans that the CR- current accounts and demand deposits fell by EUR BCCs issued to their customers. Credit commitments fell 141 million. The significant increase in term deposits is from EUR 68.6 million to 65.1 million. largely due to liquidity which was then re-used in The situation with impaired loans is described in detail deposits in favour of CR-BCCs, obtained by Cassa in the explanatory notes - part E. We would just note Centrale Banca for Rural Banks and Cooperative the following here:

Credit Banks following the refinancing transactions of • non-performing positions increased from 23 to 28. the European Central Bank. The gross amount is EUR 16.177 million accounting Loans & receivable securities fell from EUR 300.8 for 2.20% of total gross cash loans with customers million to 272.1 million. There were no repurchase while the percentage of net non-performing loans agreement transactions in place as at 31 December. to net loans to customers is 1.19%. The positions A detailed analysis of the security portfolio is provided were written down by EUR 7.725 million, equal to below. 47.76% of the gross amount;

The amounts due from ordinary customers is slightly • Watch-list positions were 18 in total. The total gross up over 2010, increasing from EUR 693.6 million to amount is EUR 19.829 million, accounting for 708.7 million (+2.20%). More specifically, mortgages 2.70% of the total gross cash loans. The positions have continued to grow and reported an increase of were written down by EUR 5.045 million, equal to about EUR 29 million (+6.30%), while liquidity of active 25.40% of the gross amount;

current accounts and subsidies to customers decreased • Positions that were overdue/overrun by more than

68 DIRECTORS’ REPORT ON OPERATIONS

180 days were 5 in total. The total gross amount losses on a flat rate basis to the performing loans is EUR 7.969 million, accounting for 1.08% of the (EUR 10.237 million) represent 1.49% of the gross total gross cash loans. The positions were written performing loans;

down by EUR 1.180 million, equal to 14.80% of • the provision for risks for guarantees and commitments the gross amount; decreased by EUR 0.765 million to 0.644 million.

• Restructured positions were 4 in total. The total gross amount is EUR 5.183 million, and they were written Own securities down by EUR 1.817 million, equal to 35.00% of The own securities, net of equity investments in the gross amount. subsidiaries and affiliates, derivatives and repurchase The aforementioned positions of impaired receivables transactions significantly increased in volume are entirely secured by mortgage and/or banking compared to the previous year (from EUR 577.1 guarantees. million to 1,083.8 million) with a different distribution

• the percentage of provisions to cover the impairment among the various categories.

IAS Categories Distribution

25 %

36%

4%

L&R 25%

AFS 35%

HTM 36%

HFT 4% 35%

69 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

More specifically the percentage of AFS category (EUR 38.2 million) as well as well shares resulting from securities decreased (from 38.00% to 35.00%) as did the assets under management delegated to Synphonia the L&R category (from 56.00% to 25.00%), while (EUR 0.96 million). the DAFV category stayed stable. The percentage The balance of securities at fair value remained stable of HTM category securities decreased (from 5.00% at circa EUR 2.1 million, and only includes bonds to 36.00%) as did the HFT category (from 1.00% to issued by CR-BCCs. They include securities exchanged 4.00%). The securities in the portfolio held for trading with our bond loans with similar characteristics in terms are almost all bonds issued by the Italian government of maturities and rates.

ASF Portfolio Structure

10%

9%

Government Bonds 81 %

U.I:C.T.S. Units 9 %

Stakeholdings 10 % 81%

70 DIRECTORS’ REPORT ON OPERATIONS

The securities available for sale include about EUR market value of Italian government securities should not 304.9 million of government bonds, EUR 33.9 million be considered as having durability. The EUR 388.6 of UCITS units and EUR 38.9 million of equity securities million in held to maturity securities are represented representing the equity investments in companies entirely by Italian government securities and are up with interests of less than 20.00%. With regard to by EUR 363.5 million compared to the previous government bonds, note that they represent exposure year. As noted in table 5.1 of the Assets Section of to the Italian state and there is no exposure with respect the Explanatory Notes – and in relation to the country to Portugal, Spain, Greece and Ireland. With respect risk assessment made by the directors – the capital to the country risk evaluation made by the Directors, losses pertaining to the portfolio in question are not the capital loss recognised in Equity, resulting from the considered to be lasting in time.

L&R Portfolio Structure

7 % 1 %

92 %

CR-BCC 92 %

MCTAA 7 %

Securitization 1 %

he loans & receivables to customers and banks are subordinate loans resulting from securitisation represented by securities amount to about EUR transactions made with CR-BCCs. 252.1 million of bond loans issued by CR-BCCs, of Equity investments in companies are broken down, which EUR 20.0 million represent bonds issued by on the basis of the percentage interest, into the assets Mediocredito Trentino Alto Adige and EUR 4.1 million available for sale (AFS) and the Equity investments (item

71 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

100 of the Statement of financial position assets). The amounted to EUR 20.5 million as at 31 December assets available for sale represent equity investments 2011. The equity investments in the central bodies of with less than 20.00% interest and amount to EUR the Cooperative Credit and the other more significant 38.9 million, while the equity investments represent ones are shown here below; the complete list can be the interests of equal to or more than 20.00% and found in the Explanatory notes.

no. shares or Nominal Share % in the Investee company units value capital capital Centrale Corporate S.r.l. 1 50,000 50,000 100.00% Centrale Leasing Nord Est S.p.A. 1,100,000 1,100,000 1,100,000 100.00% NEAM S.A. 15,000 187,500 375,000 50.00% Casse Rurali Raiffeisen Finanziaria S.p.A. 16,500,000 16,500,000 33,000,000 50.00% Informatica Bancaria Finanziaria S.p.A. 16,036 1,603,300 3,700,000 43.33% Centrale Trading S.r.l. 3,380 3,380 10,400 32.50% Formazione Lavoro S.c.p.A. 543 271,500 1,214,000 22.36% Pensplan Invest Sgr S.p.A. 85,000 438,600 9,868,500 4.44% Finanziaria Trentina della Cooperazione S.p.A. 100 500,000 12,145,000 4.12% Iccrea Holding S.p.A. 561,333 28,992,849 1,012,420,109 2.86% Iccrea Bancaimpresa S.p.A. 57,736 2,982,064 335,466,750 0.89% Mediocredito Trentino-Alto Adige S.p.A. 850 442 58,484,608 0.00%

With regard to the more significant changes compared • tBanca Agrileasing S.p.A. changed its name to to 31.12.2010, note the following: Iccrea Bancaimpresa S.p.A.;

• the shareholding interest in Centrale Gestione • tthe shareholding in Centro Pensioni Complementari Immobiliare increased from 100.00% to 10.00% Regionali S.p.A. was entirely sold. following the transfer;

LIABILITIES The total deposits of EUR 5,174 million increased Cassa Centrale Banca within the individual CR-BCCs. during the year by EUR 2,860 million (123.70%). The Customer deposits increased from EUR 232.6 million analysis of the fundamental components of the figure to EUR 291.5 million (+25.34%). show that the total deposits of the banking system (EUR The depositors are mainly represented by:

4,616 million), including the term deposits to meet • tleading companies and public institutions whose reserve requirements (EUR 158.3 million), increased relationships operate in accordance with the services by 157.90% and with respect to 2010, as with the managed by Cassa Centrale Banca;

financial liabilities held for trading (34.70%) and those • tcustomers for whom the Associates entrusted the at fair value (3.94%). In particular, the increase in asset management to Cassa Centrale Banca. payables due to banks is primarily due to the liquidity There was 35 million in managed capital as at 31 obtained from the ECB for re-financing operations December 2011 which was not invested in financial granted by the latter and in which Cassa Centrale instruments;

Banca participated primarily on behalf of the CR-BCCs • temployees of Cassa Centrale Banca and other which requested it. This liquidity was then re-used by central entities.

72 DIRECTORS’ REPORT ON OPERATIONS

The bond loans issued and at fair value, equal to EUR decreased by EUR 39 million and amount to EUR 200 8.4 million, are almost the same as for the previous million. year, while those classified as debt securities in issue

INCOME INCOME STATEMENT

Change Income statement 31.12.2011 31.12.2010 % change 2011/2010 Interest Margin 15,366 17,601 (2,235) (12.70) Net commissions 24,921 23,655 1,266 5.35 Other revenue 3,796 10,103 (6,308) (62.43) Net interest and other banking 44,082 51,359 (7,277) (14.17) income Net value adjustments/write-backs (2,355) (5,065) 2,710 (53.51) Net income from financial 41,727 46,294 (4,567) (9.86) management Operating costs (28,288) (27,874) (415) 1.49 - of which personnel costs (14,346) (14,549) 203 (1.40) Profit/loss on equity investments - (187) 187 (100.00) Profit/loss from disposal of 4 32 (28) (87.43) investments Gross profit from current assets 13,443 18,265 (4,822) (26.40) Taxes on income (5,241) (4,725) (516) 10.92 NET PROFIT FOR THE YEAR 8,202 13,540 (5,338) (39.42)

PROFITABILITY Figures in thousands of EuroThe profit made by Cassa proportional to the latter. This shrinking spread was Centrale Banca meant that there was a significant due, yes, to phenomena closely linked to the economic return on capital this year also, and at the same time, a cycle and caused by the effects of the economic crisis higher allocation to reserves than provided for by law. as well as liquidity problems of the interbank system; The Bank continues in its mission to propose high however it was also due to the strategic decision - quality level services with the main objective of made in the second half of the previous year – to supporting the competitiveness of the CR- BCCs. The remunerate deposits from associates more than market main aggregates in the Income statement are analysed rates. In particular, and with regard to term deposits for below; they allowed a net result of EUR 8.2 million to the various expiration dates pertaining to the entire year be achieved. The interest margin decreased from EUR of 2011, a greater spread was applied - compared to 17.601 million to 15.366 million (-12.70%). This the market parameters averaging 80 basis points per decrease was due to the shrinking of the margin year – to the same operations in 2010. Net between the average of the interest-bearing asset and commissions from services increased from EUR 23.7 the average rate of the payable liability, despite the million to 24.9 million. In particular, the increase is due significant increase in volumes; in fact, it was more than to commissions for collection and payment services

73 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

which increased, with respect to the previous year, by adjustments of EUR 9.3 million, including 2.1 million 5.00%, while the other components have confirmed for a single position. Operating costs increased from the previously positive levels of 2010. Other revenues EUR 27.9 million to 28.3 million, an increase of EUR decreased from EUR 10.1 million to 3.8 million 0.4 million. The limited increase is the result of a (-62.43%), with a slight increase in dividends from EUR detailed strategy for progressively reducing staff costs 0.99 million to 1.07 million and profits from financial and administrative expenses without this affecting the transactions related to assets and liabilities at fair value quality of the services or the necessary investments. In (EUR +0.5 million). On the other hand, there were particular, the decrease of EUR 0.2 million in personnel significant decreases in the net profit from trading (item costs, and EUR 0.2 million in other administrative 80) of EUR 1.4 million a decrease in profits from expenses, should be noted; however, these were disposals of securities recorded as item 100 (EUR -5.4 negatively balanced by the simultaneous decrease in million); this was largely due to the capital gain realized other operating income (-0.8 million). Profit before tax during the previous year by the transfer of a significant decreased from EUR 18.3 to 13.4 million (-26.40%). It minority shareholding. The net interest and other should be noted that the result of the previous year was banking income was equal to EUR 44.1 million, with a influenced by the capital gain of EUR 6.4 million, negative change of EUR 7.3 million compared to generated from the sale of the shareholding in 2010. The net value adjustments/write-backs (EUR Mediocredito Trentino Alto Adige. Net of this item, a -2.4 million) represent the negative effects of the comparison with the previous year reports an increase adjustment of the credit portfolio valuations of EUR 2.1 in gross income of the current year equal to EUR 1.5 million (EUR 4.4 million in 2010), the adjustments for million. The income tax was calculated taking account impairment made on the equity shares and UCITS for of the deferred tax regulations. About 39.00% of gross EUR 0.4 million and the write-back relative to the income goes on taxes (EUR 5.241 million). Net Profit decrease in provisions for risks and guarantees for EUR decreased by EUR 5.3 million (-39.42%) and amounts 0.1 million. With reference to the credit portfolio, write- to EUR 8.2 million. backs of EUR 7.9 million were recorded against

MAIN FINANCIAL Some of the general income, physical productivity and be read and interpreted in view of the considerations AND ECONOMIC economic, asset risk and capital adequacy on the financial position provided in the specific INDICATORS management indicators are shown below, which must sections of this Report.

74 DIRECTORS’ REPORT ON OPERATIONS

MAIN INDICATORS OF THE FINANCIAL STATEMENTS

INDICATORS OF THE FINANCIAL Change: 2011 31.12.2011 31.12.2010 STATEMENTS versus 2010 STRUCTURAL RATIOS Loans to customers (item 70) / Total Assets 13.01% 26.99% -13.98 p.p. Direct deposits / Total assets 93.91% 88.33% 5.58 p.p. Equity / Total Assets (1) 3.58% 7.79% -4.20 p.p. PROFITABILITY RATIOS Net profit / Equity (ROE) (1) 4.20% 6.77% -2.57 p.p. Net profit / Total assets (ROA) 0.15% 0.53% -0.38 p.p. Cost to income ratio (Operating costs / net 64.17% 54.27% 9.90 p.p. interest and other banking income) RISK RATIOS Net non-performing loans/net loans to customers 1.19% 0.95% 0.24 p.p. (item 70 assets) Other impaired loans/net loans to customers (item 4.65% 2.80% 1.85 p.p. 70 assets) Adjustments to non-performing loans / gross non- 47.75% 52.52% -4.77 p.p. performing loans Adjustments to other impaired loans / gross other 24.38% 26.84% -2.46 p.p. impaired loans Adjustments to performing loans / Gross 1.49% 1.41% 0.08 p.p. performing loans PRODUCTIVITY RATIOS (2) Net interest and other banking income per 242 285 -14.88% employee (3) Personnel costs (3) (4) 76 78 -2.46% Net earnings per employee (3) 45 75 -39.92% EQUITY RATIOS Tier 1 (Tier 1 capital /Total weighted assets) 14.45% 13.43% 1.02 p.p. Total capital ratio 14.45% 13.43% 1.02 p.p. (Regulatory Capital /Total weighted assets)

1. The Equity includes the profits made during the year. 2. The productivity ratios are expressed in thousands of euros. 3. Indicators calculated using the average number of employees. 4. The ratio for the year 2010 was modified with respect to that published (79) in the 2010 financial statements following a re-classification of certain personnel costs which, in the year 2010, were booked under “personnel expenses”. This modification was made after receiving certain specifications from the Bank of Italy in a technical note.

75 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

MANAGEMENT ACTIVITY OF THE SUBSIDIARIES

We provide some explanatory notes on the capital and financial performance of the subsidiaries of Cassa Centrale Banca below.

76 DIRECTORS’ REPORT ON OPERATIONS

CENTRALE LEASING NORD EST S.P.A.

STATEMENT OF FINANCIAL POSITION

Assets 31.12.2011 31.12.2010 20. Loans and advances to banks 798 645 a) on demand 363 454 b) other receivables 435 191 30. Receivables from financial institutions 705 428 b) other receivables 705 428 40. Loans to customers 10 18 90. Intangible assets 29 44 - including start-up costs 6 9 100. Tangible assets 54 7 130. Other assets 246 250 140. Prepayments and Accrued Income 7 14 b) Prepayments 7 14 TOTAL ASSETS 1,851 1,406 Figures in thousands of Euro

Liabilities and Equity 31.12.2011 31.12.2010 10. Due to banks 454 307 b) on term or at notice 454 307 50. Other liabilties 269 156 60. Accrued expenses and deferred income 4 8 a) Accrued expenses 4 8 70. Provision for severance indemnity 17 16 120. Capital 1,100 1,100 170. Profit/loss for the year 8 (181) Total liabilties and equity 1,851 1,406 Figures in thousands of Euro

77 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

ASSETS The intangible fixed assets, net of the respective equipment recorded at the historical cost of EUR 15 amortisation, amount to EUR 29 thousand, and fell by thousand and depreciated by EUR 10 thousand. EUR 15 thousand compared to the previous year: they The loans and advances to banks include all the mainly comprise the following: receivables, for EUR 798 thousand, due from those

• tstart-up and expansion costs (EUR 6 thousand), which institutions, regardless of technical form. Sub-item a) on include the costs of establishing the Company in demand, equal to EUR 363 thousand, represents the 2006 and the expenditure on the regulatory changes balance of the ordinary current account held with the made in the following years; parent company, Cassa Centrale Banca, while sub-

• tconcessions, licences, trademarks and similar rights item b), other receivables - equal to EUR 435 thousand (EUR 0.8 thousand), referring to fully amortised - includes loans and advances to banks, for invoices software licenses and the cost of registering the issued and pending issue. trademark; The entire amount of the receivables from financial

• tother fixed assets (EUR 23 thousand), which include institutions includes receivables from leasing companies costs for training staff, incurred in relation to the for invoices pending issue of EUR 705 thousand. goodwill of the business, as provided in UCI no. 24. The loans to customers item represent the nominal value The tangible fixed assets, net of depreciation, of the receivables for which no write-downs have been amount to EUR 54 thousand, with an increase of made, since they are considered to be very low risk. EUR 47 thousand compared to the previous year due Other assets, amounting to EUR 246 thousand, include to the acquisition of one vehicle. In addition to the receivables for prepaid taxes (EUR 189 thousand) and single vehicle, this item includes the electronic office tax receivables (EUR 55 thousand).

LIABILITIES The entire amount of item Due to banks, amounting to (EUR 135 thousand) and payables to employees (EUR EUR 454 thousand, is for future payables. 79 thousand). The provision for severance indemnity represents The fully paid-in share capital comprises 1,100,000 the actual debt of the company as at 31.12.2011 shares with a nominal value of EUR 1.00 each. The towards employees net of any advances paid. The loss of the previous year was balanced out by an other liabilities, amounting to EUR 269 thousand, equal payment of the parent company Cassa Centrale mainly represent amounts due to suppliers (EUR 53 Banca. thousand), tax payables and social security payables

78 DIRECTORS’ REPORT ON OPERATIONS

INCOME STATEMENT Costs 31.12.2011 31.12.2010 20. Commission expense 322 207 40. Administrative expenses: 1,121 1,010 (a) personnel costs 901 806 - Salaries and wages 651 580 - Social security charges 211 187 - termination indemnities 35 35 - Other personnel costs 5 5 (b) other administrative expenses 220 203 50. Adjustments to fixed assets 24 21 60. Other operating charges 99 2 110. Extraordinary charges 1 - 130. Income taxes for the year 70 (43) 140. Profit for the year 8 - TOTAL COSTS 1,646 1,197 Figures in thousands of Euro

Revenues 31.12.2011 31.12.2010 10. Interest income and similar revenues 5 2 30. Commission income 1,613 1,000 70. Other operating income 28 14 100. Loss for the year - 181 TOTAL REVENUES 1,646 1,197 Figures in thousands of Euro

PROFITABILITY The most significant items in the Income Statement refer • tpersonnel costs (EUR 901 thousand) and other to: administrative expenses (EUR 220 thousand);

• trevenues for consulting and sales support with • tthe other costs and other operating income mainly respect to leasing (EUR 1,613 thousand) and the derive from the adjustments of the commission fees costs for paying the commissions to Rural Banks and and commissions payable charged to the Income Cooperative Credit Banks (EUR 322 thousand); statement in previous years;

79 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

CENTRALE CORPORATE S.R.L.

STATEMENT OF FINANCIAL POSITION

Assets 31.12.2011 31.12.2010 Fixed assets: - intangible 1 2 - tangible 29 6 - financial TOTAL FIXED ASSETS 30 8 Receivables 84 1 Cash and cash equivalents 294 304 CURRENT ASSETS 378 305 Accruals and deferrals 2 6 TOTAL ASSETS 410 319 Figures in thousands of Euro

Liability and Equity 31.12.2011 31.12.2010 Capital 50 50 Reserves 161 - Profit/loss for the year 74 161 EQUITY 285 211 Provisions for risks and charges 47 72 Payables 78 36 TOTAL LIABILITIES 410 319 Figures in thousands of Euro

ASSETS The intangible fixed assets, net of amortisation, amount customers for invoices issued or pending issue for to EUR 1.5 thousand and comprise the start up and EUR 7.5 thousand and tax receivables for EUR 76.5 expansion costs, which include the costs of establishing thousand. the Company in 2009. The cash and cash equivalents include the The tangible fixed assets, net of depreciation, amount receivables, for EUR 294 thousand, due from lending to EUR 29 thousand and represent the historical cost institutions, regardless of technical form. More (EUR 33 thousand) of the purchase of a vehicle during specifically, it represents the balance of the ordinary the year, depreciated by EUR 4 thousand. current account held with the parent company Cassa The item “Receivables” include the amount due from Centrale Banca.

LIABILITIES The item “Payables” mainly represent tax payables The fully paid-up share capital comprises 1 share for and social security payables (EUR 36 thousand) as EUR 50,000 held by Cassa Centrale Banca S.p.A. well as payables to employees equal to EUR 37 The Provisions for risks and charges represents the thousand. provision for the income taxes to pay.

80 DIRECTORS’ REPORT ON OPERATIONS

INCOME STATEMENT

Income statement 31.12.2011 31.12.2010 Revenues from sales and services 585 339 TOTAL VALUE OF PRODUCTION 585 339 Costs - For services 134 77 - For personnel 329 27 - Amortisation and depreciation 5 1 - Other operating charges 1 1 TOTAL COST OF PRODUCTION 469 106 Difference between value and cost of production 116 233 Other financial income: 2 - Interest and other charges 1 1 TOTAL Financial proceeds and charges: 1 (1) Extraordinary income and charges 1 1 Result before taxes 118 233 Income taxes for the year 44 72 Profit for the year 74 161 Figures in thousands of Euro

PROFITABILITY The most significant items in the Income Statement refer to: • tpersonnel costs (EUR 329 thousand) and other

• tincome from consultancy and services (EUR 585 administrative expenses (EUR 134 thousand);

thousand); • tincome taxes for the year (EUR 44 thousand).

81 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

other information ON OPERATIONS

82 DIRECTORS’ REPORT ON OPERATIONS

THE INFORMATION PURSUANT TO THE DOCUMENTS OF THE BANK OF ITALY / CONSOB / ISVAP NO. 2 OF 6.2.2009 AND NO. 4 OF 3.3.2010

In application of joint document no. 2 issued in of estimates and evaluations that could have significant February 2009 by the Italian control bodies, starting impacts on the recorded amounts and especially those from the 2008 financial statements, Directors must relating to receivables, financial assets, employee provide adequate disclosure so that the impacts of the funds and for risks and charges and the use of crisis on the economic, asset and financial situation evaluation models for the recognition of the fair value are presented clearly, along with the operating and for unlisted instruments in active markets with a view strategic choices made and any corrective actions put towards the company continuing as a going concern. in place to adapt company strategies to the changed The bank has defined the estimation processes in reference situation. In other words, an appropriate support of the book values of the most significant level of reporting transparency can contribute to currency items booked within the financial statements decreasing uncertainty and its negative consequences. of 31 December 2011. The estimation processes The document requires special attention to be paid are based on past experience and other factors to the issues regarding the business continuing as a considered to be reasonable in the case at hand, and going concern, financial risks, estimates/evaluations were adopted to estimate the carrying amount of assets and impairment. and liabilities that cannot be easily calculated from Since the effects of the crisis appeared to be still other sources. Estimation process in particular were significant and widespread in March 2010, these adopted that support the book value of some of the Italian control bodies issued document no. 4 which most important valuation items posted in the accounts, repeated the requirement to supply the information according to reference regulations. These processes provided in the previous document, extend the are mainly based on estimates of future recoverability disclosure and transparency to other company events of the values in the accounts and were carried out on such as measurement/impairment of goodwill and a going concern basis. As regards the calculation of equity instruments classified as ‘available-for-sale’, the fair value hierarchy, please refer to the Explanatory restructuring of customer payables in exchange for Notes for more information. shares, and fair value hierarchies. The adopted processes compare the book values on As regards the assumption of the company continuing the date of preparing the Financial Statements. The as a going concern, the administration and control measurement process turned out to be particularly bodies evaluated the existence and maintenance of complex in consideration of the persisting uncertainty of that assumption for this year also, and established that the macroeconomic and market context, characterised no further analyses would be required to support this by the considerable volatility of the financial parameters assumption beyond the information that emerges from determined for the measurement as well as indicators the contents of the financial statements and the report of impairment of the credit quality that remain high. on operations. The Directors also note that they did not These parameters and the information used to check discern signs that could lead to uncertainties about the the mentioned values are significantly affected by these assumption of the Bank or its subsidiaries continuing factors, which may undergo rapid and unforeseeable as going concerns with respect to capital structure, changes. financial structure or operating performance. The ongoing static performance of the economy and The information regarding financial risks are provided continued volatility of financial markets meant that the under ‘Part E’ of the Explanatory Notes in terms of credit risk had to be evaluated very carefully, as well assumption, management and covering said risks. as the measurement of the financial instruments and the Preparation of the financial statements requires the use impairment test management.

83 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

other information ON OPERATIONS

Further information is provided as set out in the Corporate governance Supervisory Instructions for the financial statements of The shareholders’ meeting of the bank – in compliance banks (chapter 2, paragraph . 8, Circular of the Bank with the supervisory provisions and the corporate of Italy no. 262 of 18.11.2009). governance project of the parent company – has deliberated in favour of modifications to the Articles of Research and Development Association and to the remuneration policies applied The Bank does not carry out research and development to members of the Board, employees and collaborators in the strict sense due to the business it carries out and which are not linked to the company by subordinate the sector it belongs to. employment relationships.

Own shares Protection of personal data The Bank does not hold and did not purchase or sell In compliance with the provisions pertaining to personal own shares or parent company shares. data protection pursuant to Italian Legislative Decree no. 196 of 30.06.2003, the bank has updated the Relations with related parties Policy Document on Security for the year 2012. Part H of the Explanatory Notes contains information on the relations/transactions with related parties. Safety at work With reference to work safety and protection pursuant Disclosure on management and to Italian Legislative Decree 81/2008, the standards coordination governed by the decree in matters of hygiene and The company is an investee of Centrale Finanziaria del work safety were complied with, control was carried Nord Est S.p.A. which holds 68.607% of the share out, any adjustments necessary were made, and the capital. priorities were mapped out. Given this relationship of control, Cassa Centrale Banca S.p.A. is subject to norms pertaining to management Organizational, management and control and coordination, as defined in accordance with model for crime prevention pursuant to Articles 2497 et seq. of the Italian Civil Code, by Italian Legislative Decree no. 231/01 Centrale Finanziaria del Nord Est S.p.A., a financial The parent company has issued and updates the holding company established on 20 October 2006 to guidelines to which the companies of the Group must ensure the maintenance of shareholding control of the comply. The Supervisory Body of the bank was created cooperative credit in the north east in Cassa Centrale in the year 2008, in accordance with and by effect of Banca. Italian Legislative Decree no. 231/2001; in this area, Please refer to the Explanatory notes - Part H - it is assigned full and autonomous powers for initiative transactions with related parties for further information and control over the activities of the bank. on the parent company. This body has approved updates to the “Organizational, management and control model” as well as the “Risk Business continuity Assessment” methodology adopted by the bank, and Part E of the Explanatory Notes provides the information monitors their functioning and compliance in order to required by the Supervisory Instructions (Circular of the prevent the commission of crimes pursuant to Italian Bank of Italy no. 229, Title IV, chapter 11) regarding Legislative Decree no. 231/01 and its subsequent internal controls. amendments and supplements.

84 DIRECTORS’ REPORT ON OPERATIONS

It defined the initiatives which would be most suitable risks resulting from possible involvement in money- to spread knowledge of the “Organizational, laundering or financing of terrorism because of the management and control model”, as well as of the business it is involved in. As organisational protections Code of Ethics, amongst personnel and collaborators introduced in order to reduce these risks and comply by means of continual personnel training. with the obligations imposed by applicable primary It reported on its completed activities to the Board of and secondary regulations, an anti-money laundering Directors and produced an annual report to the Board department was established with the adoption of of Directors and the Board of Statutory Auditors, both specific internal rules that define the organisational and as a summary of completed activities as well as a operational system adopted by the Bank in order to program to implement in the subsequent period. protect against the legal and reputational risks resulting The organizational and control oversight methods of from any potential involvement in unlawful transactions. the bank were deemed adequate to fulfil the provisions There is more information provided regarding the pursuant to Italian Legislative Decree no. 231/2001. regulations for the prudential supervision of banks in parts E and F of the Explanatory Notes of the Financial Money laundering and funding of terrorism Statements (Circular of the Bank of Italy no. 263 of The Bank is exposed to legal and reputational 27.12.2006).

85 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

SIGNIFICANT EVENTS AFTER 31 DECEMBER 2011 AND BUSINESS OUTLOOK

Nothing of relevance occurred after 31 December addition, the high levels of unemployment continue to 2011 which has not already been discussed by the have a strong influence on consumption preventing Parent Company in its report. a return to higher levels and re-establishment of the The general economic situation of 2012 still presents necessary confidence that generally characterises elements of unquestionable uncertainty due to the economic recovery. As regards the prospects of the ongoing negative effects of the international economic Bank, we believe that the right conditions are in place crisis. to allow them to develop successfully, despite the Unfortunately any signs of recovery still appear to difficult economic situation. be too far off to be considered in a positive light. In

86 DIRECTORS’ REPORT ON OPERATIONS

PROPOSAL OF ALLOCATION ON NET INCOME

In accordance with the Law and Articles of Association, the Board of Directors propose the following allocation on net income, amounting to EUR 8,202,224:

1. to legal reserve Euro 410,111 2. to extraordinary reserve Euro 1,850,000 3. to the Shareholders: - Euro 2.080 per ordinary share entirely paid-in, equal to 4.00% Euro 5,304,000 - Euro 2.496 per privileged share entirely paid-in, equal to 4.80% Euro 374,400 4. available to the Board of Directors pursuant to article 28 of the Articles of Euro 263,713 Association

The dividend shall be available for distribution from 1 June 2012.

Trento, 29 February 2012

The Board of Directors

87 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011 BOARD OF STATUTORY AUDITORS’ REPORT CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

92 BOARD OF STATUTORY AUDITORS’ REPORT

BOARD OF STATUTORY AUDITORS’REPORT TO THE GENERAL SHAREHOLDERS’ MEETING DRAFTED IN ACCORDANCE WITH ARTICLE 2429, SECOND PARAGRAPH OF THE ITALIAN CIVIL CODE

Dear Shareholders, principles of correct management, decided and put into effect in accordance with the law and the in accordance with article 2429, paragraph 2 of the articles of association, responding to the interests of Italian Civil Code, The Board of Statutory Auditors was the Company and in accordance with the resolutions asked to report to the Shareholders’ Meeting about the passed at the Shareholders’ Meetings, were not supervision carried out in the previous year and on any manifestly imprudent or risky, lacking the necessary omissions or actions worthy of censure that may have information if there was director interest or were such been found. In addition, the Board of Statutory Auditors as to compromise the integrity of the company’s assets. may make observations and proposals related to the The report on operations, information produced by the financial statements and their approval. Board of Directors and from the Directors, company In the financial year ended as at 31 December 2011, management, the subsidiaries and the Board of the Board of Statutory Auditors performed the audits Statutory Auditors of the subsidiaries where present or required by the Italian Civil Code, Italian Legislative the independent auditors, did not show the existence Decree nos. 385/1993 (‘TUB’), 58/1998 (‘TUF’) of atypical and/or unusual transactions, including and 39/2010 (Consolidated Act on auditing), the intra-group or with related parties. regulations and guidelines issued by public authorities who exercise supervision and control, also considering Supervision in accordance with the the codes of conduct recommended by the National Consolidated Act on Auditing Board of Chartered Accountants. With approval of the Consolidated Act on Auditing, the Board of Statutory Auditors, identified by the Work carried out by the Board of Statutory Consolidated Act as ‘Internal control committee and Auditors for the auditing’ must monitor the following:

During the year under consideration, the Board of • the financial reporting process;

Statutory Auditors carried out the supervision provided • the effectiveness of the internal control, internal by the law and to that end took part in all the Ordinary auditing and risk management processes;

Shareholders’ Meetings, the meetings of the Board of • the audit of the annual accounts and the consolidated Directors and the executive Committee, which took accounts;

place on a regular basis and in accordance with • the independence of the auditing firm, especially the regulations, articles of association, legislation with respect to the non-auditing services. and rules governing their function. In the same With regard to this point, and noting that certain types period, the Board held meetings to make checks in of financial statement information will be discussed accordance with its duties and obtained information in the relative section of this report, it should be from the general management on a regular basis noted that the financial statements of Cassa Centrale on the activities carried out by the Company, on the Banca S.p.A. were drawn up in accordance with the company’s performance and on the most significant international accounting standards IAS/IFRS issued by transactions from an economic, financial and capital the International Accounting Standards Board (IASB) viewpoint. On the basis of the work carried out, we and adopted by the European Union, in effect as at can reasonably confirm that the Board of Statutory 31 December 2011, and in compliance with the Auditors did not find any transactions that were provisions issued in implementation of Article 9 of not carried out in the spirit of compliance with the Italian Legislative Decree no. 38/2005, and were

93 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

prepared on the basis of the instructions issued by the Supervision of the independence of the Bank of Italy with Circular No. 262 of 22 December independent auditors 2005 as amended. The Board of Statutory Auditors examined the report The Report on operations summarises the main risks regarding the independence of the independent and uncertainties and gives an account of the business auditors pursuant to art. 17 of Italian Legislative outlook. Decree 39/2010, and did not find situations that The Board of Statutory Auditors examined all the would compromise the independence or any grounds reports of the independent auditors, KPMG S.p.A., for incompatibility in accordance with articles 10 which integrates the general framework of the control and 17 of Italian Legislative Decree 39/2010 and functions established by the regulations with respect implementing provisions. to the financial reporting process. The independent The Board of Statutory Auditors notes that the auditors was appointed for the nine-year period 2010 independent auditors - during 2011 - in addition to - 2018 by resolution of the Shareholders’ Meeting of its auditing of the financial statements of the company 22 May 2010. and checked the validity of the accounting processes The report issued on 12 April 2012, in accordance and the correct recognition of company affairs in the with Articles 14 and 16 of Italian Legislative Decree accounts (for which it was paid fees of circa EUR 39/2010 shows that the financial statements of the 53,000 after VAT), it was paid total fees (after VAT) of company as at 31 December 2011 comply with EUR 30,000 for the following non-auditing services: International Financial Reporting Standards (IFRS) certification services and half-year report for 30 June adopted by the European Union and with instructions 2011. issued in implementation of Art. 9, Italian Legislative The Board of Statutory Auditors notes that the Decree 38/2005 and were therefore prepared independent auditors and the companies in the KPMG in a clear manner and provide a fair and truthful network were not given other assignments during representation of the financial and equity positions, 2011 by Cassa Centrale Banca S.p.A. economic result and cash flows for the year ended on that date. In addition, the auditing firm is of the Supervision of the financial reporting opinion that the Report on operations is consistent with process the accounting documents. The Board of Statutory Auditors examined the internal The auditing firm, with whom it had periodic meetings regulations regarding the process that permits the in order to exchange information, did not indicate to General Manager and the Chairman of the Board of the Board of Statutory Auditors any actions or facts that Directors to issue the statement letter to the independent would be subject to censure or invalid activities that auditors. would require the formulation of specific notifications. The administrative and accounting procedures to The Board of Statutory Auditors has examined the prepare the financial statements are prepared in information supplied by the independent auditors association with the organisational/administrative in its meeting of 4 April 2012 relative to the report structure, under the responsibility of the General pursuant to Article 19 of Italian Legislative Decree no. Manager, who, along with the Chairman of the Board 39/2010; this report notes the absence of significant of Directors, with the aforesaid letter, confirmed the audit adjustments and of significant critical elements adequacy and their actual application. of the internal control system that concern the financial In the periodic meetings with the Board of Statutory reporting process. Auditors aimed at exchanging information, the Head

94 BOARD OF STATUTORY AUDITORS’ REPORT

of the Accounts and Financial Statements Office and 231/2001. In these minutes, it is noted that the the General Manager did not indicate any significant controls pertaining to sensitive processes did not reveal problems with the operating and control processes, violations of regulations which could generate a risk or which, in accordance with their importance, be classified as crimes. could invalidate the judgement of adequacy and On the basis of the documentation examined and the effective application of the administrative-accounting information received when carrying out the supervision, procedures in order to provide a correct economic, no situations emerged that would require corrective capital and financial representation of company affairs interventions and no situations or critical factors were in accordance with international accounting standards. found by the Board of Statutory Auditors that would During the periodic meetings aimed at exchanging lead it to consider that the internal control system as a information, and in the financial reporting whole was inadequate. documentation drafted in accordance with Article 19 of Italian Legislative Decree no. 39/2010 - the Supervision of the adequacy of the risk independent auditors did not indicate any significant management system critical issues in the internal control system regarding As regards compliance risk, the Board of Statutory the financial reporting process. Auditors examined the annual report of the Compliance In view of the information received and the Department, presented to the Board of Directors on 29 documentation examined, the Board of Statutory February 2012, from which the state of effectiveness Auditors expresses an evaluation on the adequacy of and efficiency of the Compliance Department can be the financial reporting formation process. ascertained, and its complete implementation into the organisational model in the company. Supervision of the adequacy of the internal In 2011, the Compliance Department initiated a control system project for the adoption of the non-compliance risk The Board of Statutory Auditors examined the 2011 matrix and for the definition of the evaluation criteria Report of the Internal Audit Department submitted to the underlying the Compliance Risk Self Assessment. The Board of Directors on 29 February 2012. project will continue in 2012 with the objective of On the basis of the work carried out in 2011, in mapping and evaluating the risks associated with the accordance with the internal audit plan based on primary regulatory realms that are applicable to the the risk analysis, the Internal Audit Department gave department. a ‘positive’ evaluation to the ‘validity of the banking The Board notes how special focus must continue to be activity and company risk performance’. A review given to the completeness, functionality and adequacy of the report highlighted areas of improvement of the anti-money laundering controls, with continuous relating to the mapping and description of company evaluation of the suitability of the procedures in place processes and risks in order to obtain a complete and their function in view of the objective to make definition of operating processes for each individual adequate customer checks, appropriate registration service. and storage of the information and timely signalling The Board of Statutory Auditors has examined the of any suspicious transactions in addition to the due minutes of the 2011 meetings of the Supervisory Body training of employees. that pertain to the implementation of the Organisational As regards operating risk management systems, the and Management Model adopted by Cassa Centrale Board of Statutory Auditors notes the annual report on Banca S.p.A. in accordance with Italian Leg. Decree security presented by the Head of security to the Board

95 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

of Directors on 26 October 2011 in relation to the Supervision of the adequacy of the projects in place and the areas for improvement. The organisational structure report confirms the adequacy and compliance of the The Board of Statutory Auditors has reviewed the overall system, pointing out the need for improvement numerous regulations which were updated during the in certain areas for which plans were in place to deal course of 2011 and resulting from the changes in the with most of these aspects. organisational structure which were approved on 22 In the first part of 2011, the Risk Management office December 2010; these aim to make the company joined up with the Management Control office in structure more streamlined and effective in relation order to supervise risk control and continuously check to the flexibility, efficiency and efficacy of human company profitability. resources. With reference to the credit risk management systems, The organisational chart of the company and the Board of Statutory Auditors acknowledges that, in the detailed documents show the existence of a 2011, the new Credit Management Office began well organised authorisation system, exercised operating and was put in charge of managing the in compliance with the organisational roles and positions about to become impaired or already processes, procedures aimed at ensuring that the impaired as well as monitoring credit risk and the skills of the staff were commensurate with the functions application of best practices with reference to the credit assigned and company instructions to carry out the risk control structures. All of the above, along with the jobs of each managerial function. full operational effectiveness of the Risks Committee, On the basis of the documentation examined and can allow for improvements in the management, the information received when carrying out the control and measurement of credit risk. supervision, the Board of Statutory Auditors believe that The Risk Committee has also verified the supervision the organisational structure is adequate as a whole. and monitoring of market risk and liquidity risk in periodic reports. Remuneration policies In view of what was prepared by the Supervisory Supervision of the adequacy of the internal Authority with respect to remuneration and incentives, audit systems the Board of Statutory Auditors checked the adequacy The Board of Statutory Auditors acknowledged that the of the remuneration procedures adopted by the Internal Audit Department initiated, during the course Company and their compliance with the regulatory of 2011, a Quality Assurance Review process with framework. respect to its business initiated in order to both evaluate The Board of Statutory Auditors has reviewed the and permit the checking of the level of compliance remuneration and incentives policy which was approved of the internal audit with current best practices, and by the shareholders’ meeting on 21 May 2011 as to evaluate the efficiency and effectiveness of the well as the draft of the new text prepared by the Board activities carried out, identifying, if necessary, any of Directors for approval in the next shareholders’ interventions necessary to improve them. The entire meeting, in compliance with the regulations of the process, which will end by July 2012, will allow for Bank of Italy pertaining to remuneration policies and the attainment of a certification of compliance with practices as well as incentives in banks and banking international standards in order to adhere to the groups”. Institutional Guarantee Fund. The Board of Statutory Auditors has also examined the documentation prepared by the internal auditing

96 BOARD OF STATUTORY AUDITORS’ REPORT

department which – in its reports of 12 March and the merits. 6 April 2012 – ascertained the compliance with the In addition to that stated in relation to the financial currently effective remuneration system of the Cassa statements of the year within the section relative to Centrale Banca Group with the policies approved by the monitoring of the regulatory audit, the following the parent company Centrale Finanziaria del Nord Est is noted: S.p.A. and currently effective regulations. • the equity of the Bank as at 31 December 2011, equal to a total of EUR 195,135,061, can be Further work carried out by the Board of broken down as follows: Statutory Auditors Share capital In the exercise of its functions, pursuant to article Item 180 EUR 140,400,000 2403 of the Italian Civil Code, the Board of Statutory Issue price premiums Auditors: Item 170 EUR 4,350,000 • exchanged information with the same body of the Reserves subsidiary and with the directors where there was no Item 160 EUR 47,724,250 control body, with respect to the administration and Valuation reserves control systems and the general performance of the Item 130 EUR -5,541,413 company, without receiving any communication of Profit for the year findings to note in this report; Item 200 EUR 8,202,224 • examined the annual Report on claims contained in the Compliance Report of 23 February 2012, which • The regulatory capital posted in the financial did not indicate any specific problematic issues; statements as at 31 December 2011 was calculated • reports that the company has been audited by the by application of the ‘prudential filter’ method financial administration for the year 2009; this audit specified by the Bank of Italy and updated with ended with a report of alleged charges being unduly a new layout with additions - of Circular no. 155 deducted for an amount totalling Euro 1,347.50; of 18.12.1991 - dated 21.12.2011. The profit • did not receive any claims pursuant to article 2408 obtained shows that as a whole the Regulatory of the Italian Civil Code or complaints; Capital (amounting as at 31 December 2011 to • checked to ensure that the transactions carried out EUR 162,133,917) increased by EUR 1,366,668 with parties that carry out administration, management compared to 31 December 2010 (it had been EUR and control functions were always carried out in 160,767,249, as per the table in the Explanatory accordance with article 136 of the TUB (Consolidated Notes 2.1 Part F). Banking Act) and Supervisory Instructions. The Board of Statutory Auditors also acknowledges the following: Financial statements of the year • that the exception pursuant to article 2423, fourth The Directors duly notified the Board of Statutory paragraph of the Italian Civil Code regarding the Auditors of the financial statements. formation standards of the financial statements was As the Board is not responsible for the statutory audit not exercised; of the financial statements, their general layout was • the intangible fixed assets were amortised directly checked along with the general compliance with legal over three years; provisions in terms of their formation and structure and • the methods adopted to measure the loans is does not have any specific observations to make on compliant in showing the credit risk of the Bank

97 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

correctly and the resulting recognition of the write- Auditors, considering the contents of the reports downs is consistent with the actual risk; drafted by the independent auditors, KPMG S.p.A., • the criteria adopted for the calculation of taxes (current and since no critical issues emerged, believes and deferred) for the year in question, in application there are no reasons to prevent our approval of the amendments made to the tax laws by Italian of the financial statements for the year 2011, Legislative Decree 38 of 28 February 2005, can be acknowledging that the proposal of allocation on agreed with. net income made by the Board of Directors at the In the opinion of the Board of Statutory Auditors, the Shareholders’ Meeting complies with the law and financial statements in question provide, as a whole, the Articles of Association. the Shareholders and third parties, with adequate information regarding the transactions put in place by Trento, 13 April 2012 the Bank, including those with related parties. The Board of Statutory Auditors Conclusions Antonio Maffei Dear Shareholders, Marco Dell’Eva In accordance with the above, the Board of Statutory Claudio Maugeri

98 BOARD OF STATUTORY AUDITORS’ REPORT

99 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011 INDEPENDENT AUDITORS’ REPORT

CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011 FINANCIAL STATEMENTS FOR THE YEAR ENDING 31 DECEMBER 2011

The fi gures shown in the balance sheets are in units of Euro. CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

106 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011

STATEMENT OF CHANGES IN EQUITY

Assets 31.12.2011 31.12.2010 10. Cash and cash equivalents 295,446,646 96,811,779 20. Financial assets held for trading 97,508,611 47,813,170 30. Financial assets at fair value 2,252,766 2,197,369 40. Financial assets available for sale 377,738,966 240,855,376 50. Held to maturity investments 388,638,329 25,160,002 60. Loans to banks 3,483,070,236 1,356,126,879 70. Loans to customers 708,740,857 693,615,550 100. Equity investments 20,464,722 20,181,329 110. Tangible assets 14,004,180 13,637,123 120. Intangible assets 276,825 465,258 130. Tax assets 6,572,830 5,690,073 a) current tax assets 627,653 2,097,310 b) deferred tax assets 5,945,177 3,592,763 150. Other assets 52,765,584 67,527,738 TOTAL ASSETS 5,447,480,552 2,570,081,646

Liabilities and Equity 31.12.2011 31.12.2010 10. Due to banks 4,615,770,932 1,790,057,981 20. Due to customers 291,512,196 232,577,244 30. Debt securities in issue 200,119,273 238,883,143 40. Financial liabilities for trading 57,775,793 42,903,171 50. Financial liabilities at fair value 8,416,804 8,761,679 80. Tax liabilities 807,235 955,071 a) current tax liabilities 280,703 - b) deferred tax liabilities 526,532 955,071 100. Other liabilities 75,128,657 53,000,771 110. Employees’ severance indemnity 2,289,579 2,375,652 120. Provisions for risks and charges 525,022 468,235 b) other 525,022 468,235 130. Valuation reserves (5,541,413) 286,091 160. Reserves 47,724,250 41,522,203 170. Share premium 4,350,000 4,350,000 180. Share capital 140,400,000 140,400,000 200. Net profit (loss) of the year 8,202,224 13,540,405 TOTAL LIABILITIES AND EQUITY 5,447,480,552 2,570,081,646

107 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

INCOME STATEMENT

Items in the Income Statement 31.12.2011 31.12.2010 10. Interest income and similar revenues 55,652,286 30,826,835 20. Interest expenses and similar charges paid (40,286,694) (13,225,784) 30. Net interest margin 15,365,592 17,601,051 40. Commission income 49,486,282 46,803,507 50. Commission expense (24,565,545) (23,148,651) 60. Net commissions 24,920,737 23,654,856 70. Dividend and similar income 1,070,582 986,338 80. Net result from trading (47,026) 1,374,648 100. Gains (loss) on disposal or repurchase of: 2,365,053 7,789,239 a) loans 16,719 575 b) financial assets available for sale 2,343,535 7,779,078 d) financial liabilities 4,799 9,586 Net result on financial assets and liabilities as at fair 110. 407,356 (46,749) value 120. Net interest and other banking income 44,082,294 51,359,383 130. Net value adjustments/write-backs to: (2,354,827) (5,065,168) a) loans (2,051,347) (4,416,581) b) financial assets available for sale (424,388) (456,870) d) other financial transactions 120,908 (191,717) 140. Net income from financial activities 41,727,467 46,294,215 150. Administrative expenses: (27,381,732) (27,846,632) a) personnel cost (14,346,207) (14,548,955) b) other (13,035,525) (13,297,677) 160. Net provisions for risks and charges (93,610) (81,897) 170. Net value adjustments/write-backs to tangible assets (1,304,019) (1,200,776) 180. Net value adjustments/write-backs to intangible assets (255,905) (322,825) 190. Other operating charges/income 746,853 1,578,456 200. Operating costs (28,288,413) (27,873,674) 210. Profits (Losses) on equity investments - (186,893) 240. Gains and losses on disposal of investments 3,974 31,612 250. Profit (Loss) before tax from current operating activities 13,443,028 18,265,260 260. Income taxes for the year on current operating activities (5,240,804) (4,724,855) 270. Profit (Loss) after tax from current operating activities 8,202,224 13,540,405 290. Net profit (loss) of the year 8,202,224 13,540,405

108 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011

STATEMENT OF COMPREHENSIVE INCOME

Items 31.12.2011 31.12.2010 10. Net profit (loss) of the year 8,202,224 13,540,405 Other post tax components if income 20. Financial assets available for sale (5,827,504) (6,551,649) 110. Total other post tax components if income (5,827,504) (6,551,649) 120. Comprehensive income (Item 10+110) 2,374,720 6,988,756

The same amount indicated in item 290 of the Income Statement is in the item ‘Net profit (loss) of the year’. The changes in the amounts of the assets recorded during the year as contra entries to the valuation reserves (net of taxes) is in the items referring to the ‘Other post tax components if income’.

109 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

STATEMENT OF CHANGES IN SHAREHOLDERS 'EQUITY

Allocation of net result Changes during the year from previous year Equity Transactions Balance at 31.12.2010 at Balance balances opening to Adjustment 1.1.2011 at Balance Reserves reserves to Changes allocations other and Dividends shares new of Issue shares treasury of Purchase dividends extraordinary of Distribution instruments equity in Change shares treasury on Derivatives options Stock 2011 for income Comprehensive 31.12.2011 at Equity Share capital: a) ordinary shares 132,600,000 - 132,600,000 ------132,600,000 b) other shares 7,800,000 - 7,800,000 ------7,800,000 Share premium 4,350,000 - 4,350,000 ------4,350,000 Reserves: ------a) earnings 41,522,203 - 41,522,203 6,202,047 ------47,724,250 b) other ------Valuation reserves 286,091 - 286,091 ------(5,827,504) (5,541,413) Capital instruments ------Treasury shares ------Profit (Loss) for the year 13,540,405 - 13,540,405 (6,202,047) (7,338,358) ------8,202,224 8,202,224 Equity 200,098,699 - 200,098,699 - (7,338,358) ------2,374,720 195,135,061

110 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011

Allocation of net result Changes during the year from previous year Equity Transactions Balance at 31.12.2009 at Balance balances opening to Adjustment 1.1.2011 at Balance Reserves reserves to Changes allocations other and Dividends shares new of Issue shares treasury of Purchase dividends extraordinary of Distribution instruments equity in Change shares treasury on Derivatives options Stock 2011 for income Comprehensive 31.12.2011 at Equity Share capital: a) ordinary shares 132,600,000 - 132,600,000 ------132,600,000 b) other shares 7,800,000 - 7,800,000 ------7,800,000 Share premium 4,350,000 - 4,350,000 ------4,350,000 Reserves: ------a) earnings 33,950,622 - 33,950,622 7,571,581 ------41,522,203 b) other ------Valuation reserves 6,837,740 - 6,837,740 ------(6,551,649) 286,091 Capital instruments ------Treasury shares ------Profit (Loss) for the year 14,926,710 - 14,926,710 (7,571,581) (7,355,129) ------13,540,405 13,540,405 Equity 200,465,072 - 200,465,072 - (7,355,129) ------6,988,757 200,098,699

111 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

CASH FLOW STATEMENT (INDIRECT METHOD)

Amount 31.12.2011 31.12.2010 A. OPERATING ACTIVITIES 1. Operations 22,418,301 31,125,953 - income for the period (+/-) 8,202,224 13,540,405 - gains/losses on financial assets held for trading and financial assets/ 2,870,141 3,803,906 liabilities at fair value (-/+) - net value adjustment/write-backs for impairment (+/-) 2,354,827 5,064,710 - net value adjustment/write-backs of tangible and intangible assets 1,559,924 1,523,601 (+/-) - net provisions for risks and charges and other costs/revenues (+/-) 463,195 407,508 - taxes and duties not settled (+) 6,967,990 6,598,930 - other adjustments (+/-) - 186,893 2. Cash flows generated by/used for financial assets (2,330,763,791) (669,324,083) - financial assets held for trading (52,975,136) 13,044,739 - financial assets at fair value (112,669) 17,587,287 - financial assets available for sale (145,901,616) 6,128,652 - loans to banks: on demand 129,697,008 (208,231,243) - loans to banks: other receivables (2,256,640,365) (460,343,446) - loans to customers (17,176,654) (16,380,112) - other assets 12,345,641 (21,129,960) 3. cash flow generated/absorbed by the financial liabilities 2,879,823,982 599,487,831 - due to banks: on demand 109,481,235 (307,331,829) - due to banks: other payables 2,716,231,714 778,157,600 - due to customers 58,934,952 38,078,977 - debt securities in issue (38,763,870) 122,991,491 - financial liabilities held for trading 14,872,622 1,763,761 - financial liabilities at fair value 121,952 (11,487,984) - other liabilities 18,945,377 (22,684,185) Net cash flow generated/used by operations 571,478,492 (38,710,298) B. INVESTMENT ACTIVITIES 1. Cash flows generated by 63,640 9,285 - sale of equity investments 45,000 - - sale of tangible assets 18,640 9,285 2. Cash flows absorbed by (365,568,908) (19,227,424) - equity investment acquisitions (333,393) (17,797,655) - acquisitions of held to maturity investments (363,478,327) (21,919) - tangible asset acquisitions (1,689,716) (1,126,749) - intangible asset acquisitions (67,472) (281,100) Net cash flow generated/used by investment activities (365,505,268) (19,218,139) C. FUNDING ACTIVITIES - dividend distribution and other (7,338,358) (7,355,129) Net cash flow generated/used by funding (7,338,358) (7,355,129) NET CASH FLOW GENERATED/USED DURING THE YEAR 198,634,866 (65,283,567) LEGEND (+) generated (-) absorbed

112 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011

RECONCILIATION

Amount Statement of financial position items 31.12.2011 31.12.2010 Cash and cash equivalents at the beginning of the year 96,811,779 162,095,346 Total net cash flow generated/used during the year 198,634,866 (65,283,562) Cash and cash equivalents: impact of exchange differences - - Cash and cash equivalents at year-end 295,446,646 96,811,779

113 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011 EXPLANATORY NOTES

STRUCTURE AND CONTENT OF THE FINANCIAL STATEMENTS OF THE YEAR AS AT 31 DECEMBER 2011

Part A Accounting policies Part B Information on the Statement of fi nancial position Part C Information on the Income Statement Part D Comprehensive income Part E Information on the risks and related hedging policies Part F Information on Equity Part G Business combinations regarding companies or branches Part H Transactions with related parties Part I Payment agreements based on equity instruments Part L Segment information

The amounts of these explanatory notes are expressed in thousands of Euro. CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Part A Accounting policies

A.1 - GENERAL PART

Section 1 - Statement of compliance with international accounting standards Section 2 - General preparation criteria Section 3 - Subsequent events Section 4 - Other matters

A.2 - PART REGARDING THE MAIN ITEMS IN THE ACCOUNTS

1. Financial assets held for trading 2. Financial assets available for sale 3. Held to maturity investments 4. Receivables 5. Financial assets at fair value 6. Hedging transactions 7. Equity investments 8. Tangible assets 9. Intangible assets 10. Non-current assets and groups of assets held for disposal 11. Current and deferred taxes 12. Provisions for risks and charges 13. Payables and debt securities in issue 14. Financial liabilities held for trading 15. Financial liabilities at fair value 16. Foreign exchange transactions 17. Other information

A.3 - INFORMATION ON FAIR VALUE

A.3.1 Transfers between portfolios A.3.2 Fair value hierarchy A.3.3 Day one profit/loss

116 EXPLANATORY NOTES

A.1 - GENERAL PART

section 1 STATEMENT OF COMPLIANCE WITH international accounting standards Following the issue of Italian Legislative Decree 38/2005, the Bank must prepare the financial statements according to the international accounting standards IAS/IFRS issued by the International Accounting Standards Board (IASB), as transposed by the European Union. The Bank of Italy, for which the mentioned decree confirmed the powers already assigned by Italian Legislative Decree 87/92, established the new formats for the financial statements and the explanatory notes in circular 262 of 22 December 2005, including the updates published in November 2009. These financial statements were prepared in compliance with the accounting standards issued by IASB and endorsed by the European Union until 31 December 2011, including IFRIC and SIC interpretation documents. In interpreting and applying the new international accounting standards, reference was also made to the Framework for the Preparation and Presentation of Financial Statements issued by IASB. In terms of interpretation, also considered were the documents on the application of IAS/IFRS in Italy, prepared by the Italian Accounting Body (OIC) and the Italian Banking Association (ABI).

section 2 GENERAL PREPARATION CRITERIA IAS 1 ‘Presentation of financial statements’, reviewed in its substance in 2007 and endorsed by the European Commission in December 2008, requires the representation of a ‘Comprehensive Income Statement’ illustrating, among the other income components, also the changes in the value of the assets recorded in the period as a counter-entry to the Equity. The company, as allowed by the accounting standard in question, has decided to use two statements to provide the Comprehensive Income Statement: a first statement highlighting the traditional components of the Income Statement and the relevant result for the year, and a second statement that, starting from the first, shows the other components of the Comprehensive income statement (statement of comprehensive income). The financial statements consist of the Statement of financial position, the Income Statement, the Statement of Comprehensive Income, the Cash-flow Statement and these Explanatory notes, together with the Director’s Report on Operations and the situation of the bank. For comparative purposes, the accounts, and where requested, the tables in the Explanatory notes, also report the amounts as at 31 December 2010. The accounting figures match the corporate accounts. The joint cooperation between the Bank of Italy, Consob and Isvap concerning the application of IAS/IFRS, with document 2 of 6 February 2009 ‘Information to be provided in the financial reports about going concern, financial risks, the checks on the reduced value of the assets and the uncertainties as to the use of estimates’, as well as subsequent document 4 of 4 March 2010, required that the Directors conduct particularly precise valuations as regards the assumption of going concern. On this point, paragraphs 23-24 of IAS 1 establish that: ‘When preparing financial statements, management shall make an assessment of an entity’s ability to continue as a going concern. Financial statements shall be prepared on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so. When management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast significant doubt upon the entity’s ability to continue as a going concern, those uncertainties shall be disclosed. When financial statements are not prepared on a going

117 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

concern basis, that fact shall be disclosed, together with the basis on which the financial statements are prepared and the reason why the entity is not regarded as a going concern’. The situation of financial markets and the real economy and the negative forecasts made with reference to the short/medium term require particularly precise valuations to be conducted as regards the assumption of going concern, since the profit history of the company and its easy access to financial resources may not suffice in the current context. On this point, having examined the risks and uncertainties connected with the current macroeconomic context, it is reasonable to expect that the Bank will continue its operations in the foreseeable future and, as a result, the financial statements of 31 December 2011 have been drafted on the assumption of a going concern. The general preparation principles listed below are also used as points of reference:

• True and fair view;

• Accrual principle;

• Principle of consistent presentation and classification from one year to another (comparability);

• Principle of prohibited clearing of entries, except for what is expressly admitted;

• Principle of prevalence of substance over form;

• Principle of prudence in exercising the necessary judgement to make the estimates required in conditions of uncertainty so that the assets or revenue are not overestimated and the liabilities or costs are not underestimated, without this implying the creation of hidden reserves or excessive allocations;

• Principle of neutral nature of information;

• Principle of pertinence/significance of information. In preparing the financial statements, the accounts and rules of preparation under the circular of the Bank of Italy no. 262 of December 2005 were followed, according to the latest update of 18 November 2009. The accounts of the Statement of financial position and the Income Statement comprise items, sub-items and additional detailed information. In compliance with the provisions of circular no. 262 of 22 December 2005 issued by the Bank of Italy, the items that do not show any amount for the year the financial statements refer to or the previous year were not reported. In the Income Statement and the related section of the Explanatory notes, revenues are recorded without sign, while the costs are indicated in brackets. In the statement of comprehensive income the negative amounts are stated in brackets. For the purpose of completeness with the accounts defined by the Bank of Italy, the Explanatory notes also report the headings of the sections regarding items that do not show any amount for the year the financial statements refer to or the previous year. The additional information deemed suitable to supplement the accounts was provided also when not specifically required. The accounts of the Statement of financial position and the Income Statement as well as the statement of comprehensive income, the statement of changes in equity and the cash-flow statement are expressed in Euro, while these Explanatory notes are expressed in thousands of Euro when not otherwise specified. The accounts, and where requested, the tables in the Explanatory notes, report the amounts related to the previous year also for comparative purposes. Any difference found between the amounts in the Notes and the accounts are attributable to rounding up. Based on the latest update of circular no. 262 of 22 December 2005 issued by the Bank of Italy, disclosure obligations were introduced as regards the preparation of the financial statements, starting from 2010. In the broader context of rationalisation and simplification actions, there are those that introduce new tables

118 EXPLANATORY NOTES

and/or amendments to the existing ones in the Explanatory notes to fulfil the disclosure obligations regarding the fair value hierarchy and the transfers of financial instruments among the various portfolios, with indication of the relevant economic and equity effects. Following international consultation among Regulators, Governments and Organisations in charge of preparing and interpreting the accounting rules, during March 2009 the IASB approved an amendment to IFRS 7 in order to improve disclosures regarding fair value measurement and strengthen the previous disclosure requirements concerning the liquidity risk associated with financial instruments. This amendment is applicable as of the current financial statements of the year (IFRS 7 44G). In short, with reference:

• to the criteria to determine the fair value of financial instruments, the changes introduce disclosure obligations, based on what is already provided for by SFAS 157, in terms of fair value hierarchy on three levels determined on the basis of the significance of the inputs on valuations;

• the liquidity risk, a new definition was introduced (as the ‘risk that an entity will encounter difficulty in meeting its obligations associated with financial liabilities that are settled by delivering cash or another financial asset’) and additional quantitative disclosures are envisaged on the methods of managing the liquidity of derivative instruments. Amendment to IFRS 7 introduced the concept of fair value hierarchy (‘FVH’), arranged into three different levels (Level 1, Level 2 and Level 3), which express data in decreasing order of observation of the input used to determine the fair value. According to the FVH, the following levels are attributed alternatively: Level 1: quoted prices in active markets for identical instruments (without changes or repackaging); Level 2: quoted prices in active markets for similar instruments or calculated by using valuation techniques where all the significant inputs are based on observable market data; Level 3: valuation techniques for which any significant input to measure the fair value is based on unobservable market data The need to review this disclosure was also empathised by local Regulators by issuing the joint Bank of Italy/ Consob/Isvap document no. 4 of 3 March 2010, concerning the ‘Information to be provided in financial reports on the impairment test, the contractual clauses of the financial payables, debt restructuring and fair value hierarchy’.

section 3 SUBSEQUENT EVENTs In the period between the date of the financial statements and their approval by the Board of Directors on 21 March 2012, no events took place that imply a change in the relations approved at the time, nor significant events occurred that are such to require any supplementary disclosure in the Explanatory notes or a change in the data reported.

section 4 OTHER MATTERS The joint cooperation between the Bank of Italy, Consob and Isvap concerning the application of IAS/IFRS, with document 2 of 6 February 2009 ‘Information to be provided in the financial reports about going concern, financial risks, the checks on the reduced value of the assets and the uncertainties as to the use of estimates’,

119 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

required that the Directors conduct particularly precise valuations as regards the assumption of going concern, in compliance with the provisions contained in accounting standard IAS1. The abovementioned accounting standard in particular established that ‘The financial statements shall be prepared on a going concern basis unless management either intends to liquidate the entity or cease trading, or has no realistic alternative but to do so. When management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast significant doubt upon the entity’s ability to continue as a going concern, those uncertainties shall be disclosed. The estimation processes are based on past experience and other factors considered to be reasonable in the case at hand, and were adopted to estimate the carrying amount of assets and liabilities that cannot be easily calculated from other sources. Estimation process in particular were adopted that support the book value of some of the most important valuation items posted in the accounts, according to reference regulations. These processes are mainly based on estimates of future recoverability of the values in the accounts and were carried out on a going concern basis. The adopted processes compare the book values on the date of preparing the Financial Statements. The measurement process turned out to be particularly complex in consideration of the persisting uncertainty of the macroeconomic and market context, characterised by the considerable volatility of the financial parameters determined for the measurement as well as indicators of impairment of the credit quality that remain high. These parameters and the information used to check the mentioned values are significantly affected by these factors, which may undergo rapid and unforeseeable changes. Despite its controlling stake, the Bank does not prepare its consolidated financial statements in application of the provisions of paragraph 10 of IAS 27. The consolidated financial statements are thus prepared by its direct parent company Centrale Finanziaria del Nord Est S.p.A The financial statements are audited by the independent auditors KPMG S.p.A, in execution of the Resolution of the Shareholders’ Meeting of 22 May 2010, which assigned this company the task of auditing the accounts for the period 2010 -2018.

120 EXPLANATORY NOTES

A.2 – PART REGARDING THE MAIN ITEMS IN THE ACCOUNTS

Amendments to accounting legislation Compared to the legislative and interpretation framework in force for the previous year, no amendments took place concerning the company. In particular, the original provisions of IAS 39 remained unaltered, which allow for the reclassification from the category of the ‘Held to maturity investments’ to the category of the ‘Financial assets available for sale’ and vice versa. In light of the above, it is reported that the Bank, while drawing up these financial statements, did not reclassify the financial instruments in its portfolio. For the purpose of completeness, please note that during the years 2009/2010/2011 the following Regulations were published, and are applicable as of years beginning on 1 January 2011:

• EC Regulation no. 1293/2009, Amendments to IAS 32;

• EC Regulation no. 574/2010, Amendments to IAS 1;

• EC Regulation no. 632/2010, Amendments to IAS 24;

• EC Regulation no. 633/2010, Amendments to IFRIC 14 interpretation;

• EC Regulation no. 662/2010, ratification of IFRIC 19;

• EC Regulation no. 149/2011, Amendments and interpretations of IFRS no. 1, no. 3, no. 7, IAS 1, IAS 27 and IAS 34;

• EC Regulation no. 1205/2011, Amendments to IFRS 7. The accounting standards adopted for the preparation of the financial statements as at 31 December 2011 are shown below. The illustration of adopted principles was made with reference to the phases of classification, recognition, valuation, cancellation of the assets and liabilities, just as for the methods of recognition of revenues and costs. These standards have not changed compared to last year.

1 - FINANCIAL Classification criteria ASSETS HELD FOR Financial assets held for trading are financial instruments acquired mainly to generate a short-term profit from TRADING changes in their market prices or in the operator’s profit margin. Also included in this category are the derivative contracts connected to the fair value option (defined by accounting standard IAS no. 39 ｧ9, in the version envisaged by the European Commission regulation no. 1864/2005 of 15 November 2005), managerially connected to the assets and liabilities at fair value, which have a positive fair value at the date of the financial statements, except for the derivative contracts designated as effective hedging instruments recorded in item 80 of Assets; if the fair value of a derivative contract subsequently becomes negative, the same is booked among the trading financial liabilities.

Recognition criteria The initial recognition of financial assets takes place at the settlement date if settled with the time intervals set by market practices (regular way), otherwise at the trade date. In case of recognising the financial assets at the settlement date, the profits and losses recorded between the trade date and the settlement date are recognised in the Income Statement. Upon initial recognition, the financial assets held for trading are recorded at fair value; it is represented, unless otherwise indicated, by the amount paid for executing the transaction, without considering the costs or income referring to it and attributable to the same instrument, which are recorded directly in the Income Statement.

121 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Measurement criteria Subsequently to the initial recognition, the financial assets held for trading are designated at fair value with recognition of the related changes in the Income Statement. If the fair value of a financial assets becomes negative, this entry is booked as a trading financial liability. In the change in fair value of the derivative contracts with a ‘customer’ counterparty, their credit risk is accounted for. For details concerning the method of calculating the fair value, please see the paragraph ‘Criteria to determine the fair value of financial instruments’ of ‘Other information’ of this part A.2.

Cancellation criteria The financial assets held for trading are cancelled when the contractual rights on the financial flows deriving from the same expire or when the financial asset is sold by substantially transferring all the risks and benefits connected to it. The securities delivered as part of a transaction which contractually envisages their repurchase are not cancelled from the financial statements.

Recognition of the income components The positive income components represented by the interest income on securities and relating similar income, as well as the differentials and margins accrued until the date of the financial statements relating to the derivative contracts classified as financial assets held for trading, but managerially connected to the assets or liabilities carried at fair value (so-called fair value option), are entered in the Income Statement items relating to interest on an accrual basis. The profits and losses generated by the sale or repayment and the unrealised profits and losses from the changes in the fair value of the trading portfolio are classified in the ‘Net result from trading’, except for the economic results relating to the derivative contracts managerially connected to assets or liabilities carried at fair value, recorded in the ‘Net income from financial assets and liabilities carried at fair value’.

2 - financial Classification criteria assets AVAILABLE Classified in this item are the non-derivative financial assets which are not classified among the assets held for FOR SALE trading or at fair value, among the Held to maturity investments or among loans. This is thus a residual category that will be kept for an undefined time or which may be sold for liquidity needs, changes in interest rates, exchange rates and in market prices. It includes:

• the listed and unlisted debt securities;

• the listed and unlisted equity shares;

• the UCITS investments (mutual funds and SICAV);

• the unqualifiable equity interests of control, connection (significant influence) or joint venture.

Recognition criteria The initial recognition of financial assets takes place at the settlement date if settled with the time intervals set by market practices (regular way), otherwise at the trade date. In case of recognising financial assets at the settlement date, the profits and losses recorded between the trade date and the settlement date are recognised in the Equity. Upon initial recognition, the financial assets held for trading are recorded at fair value; it is represented, unless

122 EXPLANATORY NOTES

otherwise indicated, by the amount paid for executing the transaction, including the costs or income referring to it and attributable to the instrument itself. If the entry takes place following the reclassification of ‘Held to maturity investments’, the recognition value is represented by the fair value at the moment of transfer.

Measurement criteria Subsequently to the initial recognition, the assets available for sale continue to be carried at fair value. For these, the following is recorded:

• in the Income Statement, the interest calculated with the effective interest rate method, which considers the depreciation of both the transaction costs and the differential between the cost and the repayment value;

• in the Equity, in a specific reserve, net of taxation, the changes in fair value. The fair value is calculated according to the criteria illustrated for the financial assets held for trading. Investments in equity instruments unlisted in active markets and whose fair value may not be calculated reliably, or the range of reasonable estimates is significant, are instead maintained at cost. At each statement of financial position date the assets are submitted to an impairment test. For debt securities, at each statement of financial position date, if there is actual evidence (such as the existence of indicators of financial difficulties that are such to jeopardise the collection of the capital and interest), an impairment test is carried out to check the presence of impairment in the asset, which require the entry of a loss in the Income Statement as the difference between the carrying amount of the financial asset and the current value of the estimated future flows discounted at the original effective interest rate. For the listed equity, the existence of impairment losses is valued considering the indicators of a significant or prolonged decline in the fair value. A significant and prolonged decline in fair value means respectively: a reduction in the fair value below the cost exceeding 20.00% at the reporting date; a persisting reduction in the fair value below the cost for more than 9 months at the reporting date. The shares of UCITS funds are similar to equity instruments. Thus, for this type of financial instruments, the same considerations shown above with regard to the identification of the impairment criteria apply. For the financial instruments maintained at cost, the amount of the loss is measured as the difference between the carrying amount of the financial asset and the current value of the financial flows discounted at the original effective interest rate. For the debt securities, in order to check for possible evidence of a reduction in value due to Country Risk, an analysis of the Issuer’s Country is performed. In case a decline in value is suspected, this is booked in the Income Statement for an amount equal to the difference between the book value and the current fair value at the measurement date. If, in a subsequent period, the reasons which led to recording the decline in value are removed, corresponding value write-backs are carried out for the same item of the Income Statement for the bonds and the corresponding equity reserve for the equity shares. The amount of the write-back does not exceed in any case the amortized cost the financial instrument would have had in the absence of previous adjustments.

Cancellation criteria The financial assets available for sale are cancelled when the contractual rights on the financial flows deriving from the same expire or when the financial asset is sold by substantially transferring all the risks and benefits connected to it.

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Recognition of the income components The recognition in the Income Statement, under interest income, of the return of the instrument calculated according to the effective return rate methodology is carried out on an accrual basis, while the profits or losses deriving from a change in fair value are recorded in a specific ‘Equity reserve’ until that financial asset is cancelled or an impairment is recorded. At the time of disposal or recognition of an impairment, the profit or loss accumulated in the valuation allowance are reclassified to the Income Statement in the item ‘Profit (loss) from sale or repurchase: b) financial assets available for sale’ or ‘Net value adjustments/write-backs due to impairment’, adjusting the specific allowance mentioned above. The dividends on an instrument representing the capital available for sale are recorded in the Income Statement in cash under the item ‘Dividend and similar income’.

3 – HELD TO Classification criteria maturity In this category, the debt securities with fixed payments or that can be determined with fixed expiry dates, are INVESTMENTS classified, which are intended and for which there is the ability to hold to maturity. If, following a change in will or if the ability ceases, it is no longer appropriate to hold the investments in this category, these are transferred to the assets available for sale.

Recognition criteria The initial recognition of financial assets takes place at the settlement date if settled with the time intervals set by market practices (regular way), otherwise at the trade date. Upon the initial recognition, the financial assets classified in this category are recorded at fair value, which generally corresponds to the amount paid, including any directly attributable costs and income. If the recognition in this category takes place due to the transfer from the Assets available for sale, the fair value of the asset at the passage date is assumed as the new amortised cost of the same asset.

Measurement criteria Following initial recognition, the Held to maturity investments are measured at the amortised cost, using the effective interest rate method. At the time of closing the financial statements and the interim accounts, the existence of objective evidence of a reduction in value is checked. The criteria adopted are the same described for the ‘Financial assets available for sale’. If these are met, the amount of the loss is measured as the difference between the carrying balance of the asset and the current value of the future financial flows estimated as recoverable, discounted at the original effective interest rate. The amount of the loss is recorded in the Income Statement. If the reasons which originated the adjustment are subsequently removed, the corresponding value written back is carried out.

Cancellation criteria The financial assets are cancelled when the contractual rights on the financial flows deriving from the same assets expire or when the financial asset is sold by substantially transferring all the risks and benefits connected to it.

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Recognition of the income components The positive income components represented by the interest income and similar revenues are entered on an accrual basis, based on the effective interest rate, in the Income Statement items relating to interest. The profits or losses referring to held to maturity investments are recorded in the Income Statement at the time when the assets are sold, under the item ‘Profit (loss) from sale or repurchase of: c) held to maturity investments’. Any reductions in value are recorded in the Income Statement under the item ‘Net value adjustments/write-backs due to impairment: c) held to maturity investments’. If the reasons that led to the evidence of the decline in value are removed, the write-back is entered with recognition in the Income Statement in the same item.

4 - receivables Classification criteria Receivables are included in the broadest category of short and medium/long term financial assets, not derivatives and unlisted, which envisage fixed payments or payments that can in any case be determined. They include the loans to customers and banks, disbursed directly and that were not classified at origin among the Financial assets available for sale, Financial assets carried at fair value, Trading financial assets or Held to maturity investments. Included in receivables are trade receivables, repos operations with a forward resale obligation and securities purchased in private subscription or placement, with fixed or determinable payments, unlisted in active markets.

Recognition criteria The initial recognition of a receivable takes place at the date of disbursement, based on the fair value of the financial instrument. It equals the amount disbursed, including the income and charges directly attributable to the individual receivable and determinable from the origin of the transaction, even when liquidated at a subsequent time. Excluded are the costs that, though having the abovementioned characteristics, are subject to repayment by the debtor counterparty or can be classified among the normal internal costs of an administrative nature. In the case of debt securities, the initial recognition of financial assets takes place at the settlement date if settled with the time intervals set by market practices (regular way), otherwise at the trade date. In cases where the net amount disbursed does not correspond to the fair value of the asset, due to the application of an interest rate significantly lower than the market’s rate or the one normally applied to loans with similar characteristics, the initial recognition is made for an amount equal to the discounting of the future cash flows discounted at an appropriate market rate. The difference compared to the amount disbursed is directly recognised in the Income Statement at the time of initial recognition. The repos operations with a forward resale obligation are entered in the statement of financial position as loan operations. In particular, the spot purchase and forward resale operations are recorded as receivables for the amount paid on the spot.

Measurement criteria Subsequently to the initial recognition, the receivables are valued at the amortised cost, equal to the value of first recognition, decreased/increased by capital repayments, the value adjustments/recoveries and the amortisation - calculated with the effective interest method - the difference between the amount disbursed and the amount repayable at maturity, typically attributable to the costs/income recognised directly to the individual receivable.

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The effective interest rate is the rate that equals the current value of the future flows of receivable, for capital and interest, to the disbursed amount including the costs/income attributable to the receivable. The economic effect of the costs and income is thus distributed along the expected residual life of the receivable. The amortised cost method is not used for receivables whose short duration makes the effect of the application of the discounting logic negligible. These receivables are valued at the disbursed nominal value. The income and charges referring to the same are directly attributed to the Income Statement. The amortised cost method is not used for receivables without a defined maturity or revoked. At each date of preparing the financial statements, the receivables are subject to a recognition aiming to identify those which, following the occurrence of events taking place after their entry, show objective evidence of a possible decline in value. Included in this are the receivables classified as non-performing, watch-list, restructured or overdue according to the current rules of the Bank of Italy. These non performing receivables are subject to a process of analytical assessment and the amount of the adjustment of each receivable is equal to the difference between the book value of the same at the time of the measurement (amortised cost) and the current value of the expected future cash flows, calculated by applying the original effective interest rate. The expected cash flows consider the expected recovery times, the presumable realisable value of any guarantees as well as the costs which are deemed to be incurred for the recovery of the credit exposure. The adjustment is entered in the Income Statement. The component of the adjustment due to the discounting of the financial flows is issued on an accrual basis according to the mechanism of the effective interest rate and posted under the value write-backs. The original value of the receivables is restored in the following years proportionally to the ceasing of the reasons that determined the adjustment, provided that this measurement can be objectively connected to an event taking place after the same adjustment. The write-back is entered in the Income Statement and may not in any case exceed the amortised cost that the receivable would have had in the absence of previous adjustments. The receivables for which objective evidence of loss was not identified individually. i.e. usually performing receivables, are subject to the measurement of a collective decline in value estimated also considering the parameters used for the purpose of Basel II. Each homogeneous receivable category is attributed a probability of default (PD) and an expected loss in case of non-fulfilment (LGD), estimated considering historical series based on elements observable at the measurement date. The methodology adopted integrates the provisions of Basel II with those of the international standards, which exclude the future losses but just consider the losses incurred only, even if not yet occurred on the statement of financial position date, taking into account the time elapsing between the moment when the default occurs and the one when it is absorbed by the company system. The adjustments determined collectively and the write-backs of part or whole values written down previously are recognised in the Income Statement under the item ‘Net value adjustments/write-backs due to impairment’.

Cancellation criteria The receivables are cancelled from the assets in the statement of financial position when the right to receive the cash flows is extinct, when the sale led to the transfer in a substantial manner of all the risks and benefits connected to the same receivables or in case the receivable is considered as definitely unrecoverable after all the necessary

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recovery procedures have been completed. Instead if the risk and benefits relating to the sold receivables were maintained, these continue to be entered among the assets in the statement of financial position, even when the ownership of the receivable was legally effectively transferred. In case it is not possible to ascertain the substantial transfer of the risks and benefits, the receivables are cancelled from the statement of financial position if no type of control on them was maintained. On the contrary, keeping this control, even when partial, means that the receivables are maintained in the statement of financial position proportionally to the residual involvement, measured by the exposure to changes in value of the sold receivables and the changes in their financial flows.

Recognition of the income components The interest on receivables is classified in the ‘Interest income and similar revenues’ deriving from ‘Loans to banks and customers’ and is entered according to the accrual principle, based on the effective interest rate. Value adjustments/write-backs including value write-backs connected to the passing of time, referring to analytical or collective measurements, are recorded at each statement of financial position date under ‘Net value adjustments/write-backs due to impairment’. The profits and losses from the sale of receivables are entered under item 100 a) of the Income Statement ‘Gains (loss) on disposal or repurchase of loans’.

5 - Financial Classification criteria assets at fair Classified in this item are the assets at fair value with the measured results entered in the Income Statement, value based on the fair value option set by IAS standard no. 39 § 9, in the version envisaged by the regulation of the European Commission no. 1864/2005 of 15 November 2005. In particular, the fair value option is used when it allows the significant cancellation or reduction of the accounting imbalance deriving from the inconsistent posting of financial instruments relating to each other (natural hedge) or hedged by derivative contracts for which the application of the hedge accounting is complex. The fair value option is also used in the presence of an instrument containing an implicit derivative which meets certain conditions, in order to not spin off the same from the host instrument, by measuring at fair value the financial instrument overall.

Recognition criteria The initial recognition of financial assets represented by debt securities and capital takes place at the settlement date if settled with time intervals set by market practices (regular way), otherwise at the trade date. In case of recognising the financial assets at the settlement date, the profits and losses recorded between the trade date and the settlement date are recognised in the Income Statement. The initial recognition of the financial assets represented by loans takes place at the date of disbursement. Upon initial recognition the financial assets are recorded at the fair value represented, unless otherwise indicated, by the amount paid or by the amount disbursed for executing the transaction, without considering the costs or income referring to it and attributable to the same instrument, which are recorded directly in the Income Statement.

Measurement criteria Subsequently to the initial recognition, the financial assets are designated at fair value. The fair value of the

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financial assets listed on active markets is determined with reference to the market listings (‘bid’ prices or, in their absence, average prices) recorded at the date of the financial statements. In the absence of an active market, estimate methods and valuation models are used, which consider all the risk factors related to the instruments and which are based in any case on market data. Methods based on the measurement of listed instruments featuring similar characteristics are, in particular, utilized; discounted future cash flow calculations, option price calculation models, values recorded in recent comparable transactions.

Cancellation criteria The financial assets are cancelled when the contractual rights on the financial flows deriving from the same expire or when the financial asset is sold by substantially transferring all the risks and benefits connected to it.

Recognition of the income components The positive income components represented by the interest income are entered on an accrual basis in the items in the Income Statement relating to interest. The profits and losses from the disposal or repayment and the profits and losses not realised deriving from the changes in the fair value of the portfolio, are classified in the ‘Net income from financial assets at fair value’ of the Income Statement.

6 - hedging Classification criteria transactions This item features the derivative contracts designated as effective hedging instruments, which at the date of the financial statements show a positive fair value. The hedging transactions aim to neutralise the losses recorded on a certain element (or group of elements) and attributable to a certain risk through the profits recorded on a different element (or group of elements) in case the particular risk actually occurs. The types of hedging provided for by IAS 39 are:

• fair value hedge, aimed at hedging against the exposure to the change in fair value of a statement of financial position entry attributable to a particular risk;

• cash flow hedge, aimed at hedging against the exposure to the change in future cash flows attributable to a particular risk associated to a highly probable present or future statement of financial position entry;

• hedging instruments of a net investment in a foreign company for which the assets were or are managed in a non Euro country or currency.

Recognition criteria The hedging derivative financial instruments are initially entered at fair value and classified in the statement of financial position item 80 ‘Hedging derivatives and statement of financial position liabilities 60 ‘Hedging derivatives’, depending on whether the date of the financial statements shows a positive or negative fair value. The hedging transaction is attributable to a predefined strategy by Risk management and must be in line with the risk management policies adopted; it is designated as a hedging transaction if a formalised documentation exists about the relation between the hedged instrument and the hedging instrument, including the high initial and future effectiveness during the entire lifespan of the same.

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The effectiveness of the hedge depends on the extent to which the changes in fair value of the hedged instrument or the related expected financial flows are compensated by those of the hedging instrument. Thus the effectiveness is measured by comparison between these changes. The hedging is assumed as highly effective when the expected and effective changes in fair value or the cash flows of the hedging financial instrument neutralise almost completely the changes in the hedged element, within the limits set by the interval 80.00%-125.00%. The assessment of the effectiveness is performed at each year-end or interim period using:

• perspective tests, which justify the application of the hedge accounting, since they show its expected effectiveness;

• retrospective tests, which show the level of effectiveness of the hedging reached in the period they refer to. If the checks do not confirm that the hedging is highly effective, the accounting of the hedging transactions, according to the above, is interrupted and the hedging derivative contract is reclassified among the trading instruments, while the financial instrument subject to hedging goes back to being measured according to the criterion of the original pertinence class and, in case of cash flow hedge, any reserve is reclassified in the Income Statement with the amortised cost method along the residual duration of the instrument. The hedging links also cease when the derivative expires or is sold or exercised and the hedged element is sold or expires or is repaid.

Measurement criteria The hedging derivative financial instruments are initially entered and then designated at fair value. The calculation of the fair value of the derivatives is based on the prices inferred from regulated markets or supplied by operators, on option measurement models or future cash flow discounting models.

Cancellation criteria The hedging derivatives are cancelled when the right to receive the cash flows from the asset/liability has expired, or where the derivative is sold, or when the conditions cease to continue to book the financial instrument among the hedging derivatives.

Recognition of the income components

Fair value hedge The change in fair value of the hedged element attributable to the hedged risk is recorded in the Income Statement, equally to the change in fair value of the derivative instrument; any difference, which represents the partial ineffectiveness of the hedge, consequently determines the net economic effect, recorded in the item “Net income from hedging activities”. If the hedging relation no longer respects the conditions for the application of the hedge accounting and the hedging relation is revoked, the difference between the book value of the hedged element at the time when the hedge ceases and the one which would have been its book value if the hedge had never existed, is amortised in the Income Statement along the residual lifespan of the hedged element based on the effective rate of return in case of instruments entered at the amortised cost. If this difference refers to non interesting bearing financial instruments, it is recorded immediately in the Income Statement. If the hedged element is sold or repaid, the portion of fair value not yet amortised is recognised immediately in the Income Statement.

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Cash flow hedge The changes in fair value of the hedging derivative are booked in the Equity among the valuation reserves of the hedging transactions of the financial flows, for the effective portion of the hedge, and in the Income Statement for the part not considered effective. When the financial flows subject to hedging take place and are recorded in the Income Statement, the related profit or loss on the hedging instrument is transferred from the Equity to the corresponding Income Statement item. When the hedging relation no longer respects the conditions set for the application of the hedge accounting, the relation is interrupted and all the losses and profits recorded in the Equity until this date remain suspended within it and reclassified in the Income Statement under item ‘Net result from trading’ at the time when the flows relating to the risk originally hedged occur.

7 – EQUITY Classification criteria investments Equity investments means stakes in the capital of other companies, generally represented by shares or loans and classified into controlling stakes, connecting stakes (significant influence) and joint ventures. The following definitions in particular apply:

• Subsidiary: a company on which the parent company exercises a ‘dominant influence’, i.e. the power to make administrative and managerial choices and obtain the related benefits;

• Associate: a company in which the investing company has significant influence and which is not a subsidiary or part of a joint venture for the investing company. The direct or indirect possession through the subsidiaries of 20.00% or a higher amount of the votes that can be exercised at the shareholders’ meeting of the investee constitutes significant influence;

• Joint venture company: a company where the investing company, based on a contractual agreement, shares with others the joint control of an economic activity. The notion of control according to the international accounting standards must be examined taking into account the general assumption of the prevalence of economic substance over legal qualification of the transactions.

Recognition criteria Equity investments are entered initially at cost, including the ancillary charges directly attributable.

Measurement criteria Equity investments in subsidiaries, associates and subjects under joint control are shown in the financial statements by using the cost method as measurement criterion, net of the losses of value due to impairment. In order to check the existence of objective evidence of the reduction in value of the investment entered in the accounts, the following indicators are considered, by way of example:

• overt economic/financial difficulty of the investee;

• a number of years with losses exceeding 2;

• subject to bankruptcy proceeding of the investee. If objective evidence of impairment emerges from examining these indicators, an estimate is made of the recoverable value of the same investment, considering the current value of the future financial flows the same may generate, including the final disposal value of the investment. Any decline in value is entered in the Income Statement under the item ‘Profits (Losses) on Equity investments’.

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Cancellation criteria Equity investments are cancelled when the right to receive the cash flow from the activity is expired, or where the equity investment is sold by substantially transferring all the risks and benefits connected to it.

Recognition of the income components The dividends of the investees are booked as cash, in the item ‘Dividend and similar income’, in the year when the company resolved to distribute them. Any value adjustments/write-backs connected to the valuation of the equity investments as well as profits or losses deriving from the disposal are recognised under the item ‘Profits (Losses) on Equity investments’.

8 - tangible Classification criteria assets The item mainly includes land, properties for functional use and properties held for investment purposes, the plants, vehicles, furniture, furnishings and equipment of any type for long-lasting use. ‘Properties for functional use’ are those owned to be used for providing services or for administrative purposes. Instead, included among the properties held for investment purposes are the properties owned in order to receive rental fees and/or for the appreciation of the invested capital. For the free-standing properties for which the value of the land is incorporated in the value of the building, a subdivision is made between the value of the land and the value of the building, in case this cannot be directly inferred from the purchase agreement, based on the appraisals drawn up by industry specialists.

Recognition criteria The tangible assets are initially entered at purchase or construction cost, including any ancillary charges directly attributable to the purchase and commissioning of the asset. The unscheduled maintenance expenses and the costs of an increasing nature that imply increased benefits being generated by the asset, if these can be identified and separated, are attributed to the assets they refer to and amortised in relation to the residual possibility of using the same. If these improvements cannot be identified and separated, they are entered under ‘Other Assets’ and subsequently amortised based on the length of the contracts they refer to for the third party assets, or along the residual life of the asset, if owned. The expenses for repairs, maintenance or other actions to ensure the ordinary operation of the assets are instead recognised in the Income Statement of the year when they are incurred.

Measurement criteria After initial recognition, the tangible assets, including non-instrumental properties, notwithstanding the specifications below, are entered in the accounts at cost, net of accumulated amortisation and any write-downs for the long- lasting reductions in value, in compliance with the ‘cost model’ under paragraph 30 of IAS 16. Tangible assets are systematically amortised each year based on their useful life by adopting the straight line method as amortisation criterion. The following are not subject to amortisation:

• land, whether purchased individually or incorporated in the value of the buildings, since considered to have an undefined useful life. In case their value is incorporated in the value of the building, only the free-standing

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buildings owned are considered as separate assets from the building; the subdivision between the value of the land and the value of the building takes place based on an independent appraisal;

• works of art, whose useful life may not be estimated, also since their value normally increases over time;

• the real estate investments carried at fair value in compliance with accounting standard IAS 40. The amortisation process starts when the asset is available for use. For the assets acquired during the year, the amortisation is calculated on a daily basis starting from the date of using the asset.

Cancellation criteria Tangible assets are eliminated from the Statement of financial position at the time of disposal or when they are permanently withdrawn from use and, as a consequence, no future economic benefits are expected which derive from their sale or use. Capital gains and losses deriving from the release or disposal of the tangible assets are determined as the difference between the net sale payment and the book value of the asset; they are recorded in the Income Statement at the same date when they are eliminated from the accounts.

Recognition of the income components The systematic amortisation is booked in the Income Statement under the item ‘Net adjustments/write-backs on tangible assets’. In the first year the amortisation is recorded proportionally to the effective period of using the asset. The assets subject to amortisation are adjusted for possible losses in value each time events or changes in situations indicate that the book value might not be recoverable. A write-down for persisting decline in value is recorded for an amount corresponding to the excess in the book value compared to the recoverable value. The recoverable value of an asset is equal to the higher of the fair value, net of any sales costs, and the related value of using the asset, meant as the current value of the future flows originating from the asset. Any adjustments are recognised in the Income Statement. If the reasons leading to recording the loss cease to apply, a write-back is recorded, which may not exceed the value that the asset would have had, net of amortisation calculated in the absence of previous losses in value. In the item ‘Profit (Loss) on disposal of investments, the positive or negative balance between the profits and losses on investments is recognised.

9 - Intangible Classification criteria assets Accounting standard IAS 38 defines intangible assets as non-monetary assets without physical substance owned held for use in a multi-year or undefined period, which meet the following characteristics:

• identifiable;

• the company holds the control;

• it is probable that the expected future economic benefits attributable to the asset will flow into the company;

• the cost of the asset may be reliably measured. In the absence of one of these characteristics, the expense to acquire or generate the same internally is recorded as a cost in the year when it was incurred. Intangible assets include, in particular, the application software with multi-year use and the other identifiable intangible assets that originate from legal or contractual rights.

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Recognition criteria Intangible assets are entered at cost, adjusted for any ancillary costs incurred to arrange the use of the asset, only if it is probable that the future economic benefits attributable to the asset will be realised and if the cost of the same asset may be determined reliably. Otherwise the cost of the tangible asset is recorded in the Income Statement in the year when it was incurred.

Measurement criteria After initial recognition, intangible assets with finite useful life are recognised at cost, net of the accumulated amortisation and impairment losses. The amortisation process starts when the asset is available for use, or when it is in the place and conditions suitable to be able to work in the set manner. Amortisation is carried out with the straight line method, in a way to reflect the multi-year use of the assets based on the estimated useful life. In the first year the amortisation is recorded proportionally to the effective period of using the asset. Amortisation ends from the date when the asset is eliminated from the accounts. At each year-end, given the presence of evidence of losses in value, an estimate is made of the recoverable value of the asset. The amount of the loss, recorded in the Income Statement, is equal to the difference between the carrying amount of the asset and its recoverable value.

Cancellation criteria Intangible assets are eliminated from the Statement of financial position at the time of their disposal or when future economic benefits are not expected. Capital gains and losses from the release or disposal of an intangible asset are calculated as the difference between the net sale payment and the carrying amount of the asset and entered in the Income Statement.

Recognition of the income components In the first year the amortisation is recorded proportionally to the effective period of using the asset. In the item ‘Net value adjustments/write-backs on intangible assets’, the positive or negative balance between the value adjustments, amortisation and value write-backs relating to the intangible assets is indicated. In the item ‘Profit (Loss) from disposals of investments’, the positive or negative balance between the profits and losses on investments is recognised.

10 - Non-current Classification criteria assets and This item includes the non-current assets held for sale and the associated groups of assets and liabilities held for groupS of assets disposal, according to the provisions of IFRS 5. held for disposal Assets and groups of assets are classified in this item whose carrying amount will be mainly recovered with a highly probable sale rather than their continuous use. Since the sale is highly probable, Management at a suitable level must be committed to an asset disposal programme, and activities must be started to identify a buyer and complete the programme. In addition, the

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asset must be actively exchanged in the market and put up for sale, at a reasonable price compared to its current fair value (equal value). Furthermore, the completion of the sale should be set within one year from the classification date and the actions requested to complete the sale programme should show the improbability that the programme may be significantly amended or cancelled.

Recognition criteria The non-current assets and asset groups held for disposal are measured, at the time of initial recognition, at the lower between the carrying amount and the fair value net of sales costs.

Measurement criteria These non-current assets and asset groups held for disposal are measured at the lower between the book value and the fair value net of sales costs.

Cancellation criteria The non-current assets and groups of asset held for disposal are eliminated from the Statement of financial position at the time of disposal. If an asset (or group held for disposal) held for sale do not meet the criteria for the entry in accordance with accounting standard IFRS 5, the asset (or group held for disposal) must no longer be classified as held for sale. It is necessary to assess a non-current asset that ceases to be classified as held for sale (or ceases to be part of a group held for disposal and classified as held for sale) at the lower between:

• the accounting value before the asset (or group held for disposal) was classified as held for sale, adjusted for all the amortisation, write-downs or write-backs that would have otherwise been recorded if the asset (or group held for disposal) had not been classified as held for sale;

• its recoverable value at the date of the subsequent decision to not sell.

11 - CURRENT and The items include the current and deferred tax assets and current and deferred tax liabilities. DeFERred taxes The income taxes, calculated in compliance with current taxation regulations, are recorded in the Income Statement on an accrual basis, in line with the recognition in the accounts of the costs and revenues that generated them, except for those relating to the entries charged or credited directly in the Equity, for which the recognition of the related taxation takes place in the Equity.

Current taxes Current tax assets and liabilities are recorded at the value due or recoverable against the tax profit (loss) by applying the rates and the current taxation regulations. Current taxes that are entirely or partially unpaid at the date of the financial statements are posted under ‘Current tax liabilities’ of the Equity. In case of overpayment, which gave rise to a recoverable receivable, this is accounted for among the ‘Current tax assets’ of the Statement of financial position.

Deferred taxes Deferred tax assets and liabilities are booked by using the so-called statement of financial position liability

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method, taking into account the temporary differences between the carrying amount of an asset or a liability and its value recognised for tax purposes. They are calculated using the applicable tax rates according to current laws, in the year when the deferred tax asset will be realised or the deferred tax liability will be settled. Tax assets are recorded only if it is deemed probable that in the future a taxable income will be realised, against which this asset may be used. In particular tax regulations may lead to differences between taxable income and statutory income that, if temporary, only cause a temporal mismatch that implies the advance or deferment of the time of taxation compared to the period of accrual, thus determining a difference between the carrying amount of an asset or a liability in the Statement of financial position and its value recognised for tax purposes. These differences are distinguished between ‘Temporary deductible differences’ and ‘Taxable temporary differences’.

Deferred tax assets ‘Deductible temporary differences’ indicate a future reduction in taxation, against a prepayment of tax compared to the economic-statutory accrual. They generate deferred tax assets since they will determine a lower tax burden in the future, on the condition that in the following years, taxable profits are realised in a sufficient measure to cover the realisation of the taxes paid in advance. ‘Deferred tax assets’ are recorded for all the deductible temporary differences if it is probable that a taxable income will be realised against which the deductible temporary differences may be used. The origin of the difference between the higher fiscal income and the statutory one is mainly due to negative income components fiscally deductable in years that are subsequent to those of recognition in the financial statements.

Deferred tax liabilities ‘Taxable temporary differences’ indicate a future increase in taxation and consequently generate ‘Deferred tax liabilities’, since these differences give rise to taxable amounts in the following years to those when they are attributed to the statutory Income Statement, determining a deferment of the taxation compared to the economic- statutory accrual. ‘Deferred tax liabilities’ are recorded for all the taxable temporary differences with the exception of the deferred tax reserves since transactions that determine the taxation are not envisaged. The origin of the difference between the lower fiscal income and the statutory one is due to:

• positive income components taxable in years after those when they were entered in the accounts;

• deductible negative income components in years prior to the one when they will be entered in the accounts according to statutory criteria. Assets and liabilities entered for advance and deferred taxes are systematically measured to take into account any amendments taking place in the regulations or in the rates. Advance taxes and deferred taxes are accounted for at capital level with open balances and without compensations and are booked in the item ‘Deferred tax assets b)’ and in the item ‘Deferred tax liabilities b)’. If the deferred tax assets and liabilities refer to components which concerned the Income Statement, the counter- entry is represented by income tax. In case the advance and deferred taxes concern transactions which directly regard the Equity without influencing the Income Statement (such as the measurement of financial instruments available for sale), these are entered as a counter-entry to the Equity, as the specific reserve is concerned.

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12 - provisions Classification criteria for RISKS and In compliance with the provisions of IAS 37, the provisions for risks and charges include the provisions relating charges to current (legal or implicit) obligations originating from a past event, for which the use of economic resources is probable to fulfil the same obligation, as long as a reliable estimate of the related amount can be made.

Recognition criteria The sub-item ‘Pension funds’ includes the provisions against benefits provided to the employee after terminating the employment relationship in the form of contribution plans that are defined or with defined performance. Sub-item ‘Other provisions’ of liabilities of the Statement of financial position includes the allowances for risks and charges constituted in compliance with the contents of the international accounting standards, except for write-downs due to deterioration of the issued guarantees, to attributed to the ‘Other liabilities’.

Measurement criteria The amount recorded as allocation represents the best estimate possible of the charge requested to fulfil the existing obligation at the date of the financial statements. Where the time element is significant, the provisions are discounted by using current market rates. The allocated funds are periodically reviewed and possibly adjusted to reflect the best current estimate. If, following the review, the charge becomes unlikely to be incurred, the provision is cancelled. Concerning the funds relating to employee benefits, please see point 17 below.

Cancellation criteria If it is unlikely that the use of resources to produce economic benefits to fulfil the obligation will be necessary, the provision must be cancelled. A provision must be used only for those expenses for which it was originally entered.

Recognition of the economic components The provision is recorded in the Income Statement under the item ‘Net provisions for risks and charges’. The item includes the positive or negative balance between the provisions and any re-attributions to the Income Statement of funds deemed redundant. The net provisions also include the decreases in funds for the discounting effect as well as the corresponding increases due to the passing of time (accrual of the interest implicit in discounting).

13 - payables and Classification criteria debt securities in Payables are included in the broader category of the financial instruments and consist of those relations for which issue there is the obligation to pay certain amounts to third parties at set expiry dates. The liability items of the Statement of financial position ‘10. Due to banks’, ‘20. Due to customers’ and ‘30. Debt securities in issue’ include the various forms of interbanking funding and with customers and the collection through outstanding certificates of deposit and bonds, net of any reacquired amount, not classified under ‘Financial liabilities at fair value’. Included are the securities that at the date of the financial statements are expired but still not repaid.

136 EXPLANATORY NOTES

Recognition criteria The initial recognition of these financial liabilities takes place upon receiving the sums collected or issuing the debt securities. The value at which they are entered corresponds to the related fair value, normally equal to the amount collected or the issue price, increased by any additional costs/income directly attributable to the individual funding or issue transaction and not repaid by the creditor counterparty. Internal costs of an administrative nature are excluded. The fair value of the financial liabilities, possibly issued at different conditions from market conditions, is subject to a suitable estimate and the difference compared to the amount collected is directly recognised in the Income Statement. The re-placement of own securities purchased, subject to previous cancellation from the accounts, is considered as a new issue with entry of the new placement price, without effects on the Income Statement.

Measurement criteria Following initial recognition, the financial liabilities are measured at the amortised cost, using the effective interest rate method. Excluded are the short-term liabilities, where the time factor is negligible, which remain recorded at their collected value, and whose costs and income directly attributable to the transaction are entered in the Income Statement in the relevant items.

Cancellation criteria The financial liabilities are cancelled from the financial statements when settled or expired, or when the Bank reacquired the securities it issued with a consequent redefinition of the debt entered for debt securities in issue.

Recognition of the income components The negative income components represented by the interest expense are entered on an accrual basis in the items in the Income Statement relating to interest. Any difference between the value of repurchasing own securities and the corresponding carrying amount of the liability is entered in the Income Statement under ‘Profit/loss on disposal or repurchase’.

14 - FINANcIAl Classification criteria liabilities HELD Subject to recognition in this item are the financial liabilities, whatever their technical form (debt securities, loans, for trading etc…) classified in the trading portfolio. The item includes the negative value of the trading derivative contracts. Also included in this category are the derivative contracts connected to the fair value option (defined by accounting standard IAS no. 39 § 9, in the version envisaged by the European Commission regulation no. 1864/2005 of 15 November 2005), managerially connected to the assets and liabilities at fair value, which have a negative fair value at the date of the financial statements, except for the derivative contracts designated as effective hedging instruments recorded in item 60 of liabilities; if the fair value of a derivative contract subsequently becomes positive, the same is booked among the trading financial assets.

Recognition criteria The derivative financial instruments are entered at the subscription date designated at fair value.

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Measurement criteria Subsequently to the initial recognition, the financial liabilities are designated at fair value. To calculate the fair value of the financial instruments listed in an active market, the market listings are used. In the absence of an active market, estimate methods and valuation models are used, which consider all the risk factors related to the instruments and which are based in any case on market data. Discounted cash flow calculations and option price calculation models are used especially.

Cancellation criteria Financial liabilities are cancelled from the accounts when they have expired or are settled.

Recognition of the income components The profits and losses deriving from the change in fair value and/or the sale of the derivative instruments connected to the fair value option are booked under ‘Net income from financial assets and liabilities carried at fair value’ in the Income Statement.

15 - FINANcIAl Classification criteria liabilities at fair Classified in this item are the financial liabilities at fair value with the measured results entered in the Income value Statement, based on the fair value option set by IAS standard no. 39 § 9, in the version envisaged by the regulation of the European Commission no. 1864/2005 of 15 November 2005, in other words when:

• the designation at fair value allows the elimination or reduction of significant distortions in the accounting representation of the economic and financial position of the financial instruments;

• there is an instrument containing an implicit derivative that significantly amends the cash flows of the host instrument and which must be detached. In particular classified in the category in question are some own debenture loans swapped with the related issues made by the CR-BCC and purchased by the Bank ( at fair value among financial assets).

Recognition criteria The initial recognition of the financial liabilities takes place at the issue date of the debt securities. Upon recognition, the financial liabilities at fair value are recorded at their fair value, which normally corresponds to the amount collected without considering the transaction costs or income directly attributable to the same instrument, which are instead attributed to the Income Statement.

Measurement criteria Subsequently to the initial recognition, the financial liabilities are designated at fair value. For the calculation of the fair value in the absence of an active market, generally accepted estimate methods and valuation models are used, which are based on market data such as: methods based on the measurement of listed instruments featuring similar characteristics; discounting future cash flows, option price calculation models, values recorded in recent comparable transactions.

138 EXPLANATORY NOTES

Cancellation criteria The financial liabilities carried at fair value are cancelled from the financial statements when they have expired or are extinct. Cancellation also takes place in case of repurchasing previously issued securities. The difference between the carrying amount of the liability and the amount paid to purchase it is recorded in the Income Statement. The re-placement on the market of own shares subsequently to their repurchase is considered as a new issue with entry of the new placement price, without effects on the Income Statement.

Recognition of the income components The cost for interest on debt instruments is classified among the interest expense and similar charges of the Income Statement. The measurement results are included in the ‘Net result on assets and liabilities at fair value’, like the profits and losses deriving from the extinction. The same treatment is reserved for the derivative instruments connected to the fair value option, whose economic effect is classified in the item ‘Net result on financial assets and liabilities carried at fair value’.

16 - foreign Classification criteria exchange Among the assets and liabilities in foreign currencies, in addition to those explicitly expressed in a currency other transactions than the Euro, are also those to which financial indexing clauses apply, connected to the Euro exchange rate with a certain currency or a given basket of currencies. For the purpose of the conversion method to be used, the assets and liabilities in foreign currencies are subdivided into monetary items (classified among the current items) and non-monetary items (classified among the non-current items). The monetary elements consist of cash at hand and in the assets and liabilities to be received or paid, in cash amounts that are fixed or to be determined. In non-monetary elements, the right to receive or the obligation to deliver a cash amount that is fixed or to be determined is absent.

Recognition criteria Transactions in foreign currencies are recorded, at the time of initial recognition, in a currency account, applying the exchange rate in force at the transaction date to the amount in a foreign currency.

Measurement criteria At the time of closing the financial statements or the interim period, the elements originally denominated in foreign currencies are valued as follows:

• the monetary items are converted at the exchange rate at year-end;

• the non-monetary items valued at the historical cost are converted at the exchange rate in force at the transaction date;

• the non-monetary items carried at fair value are converted at the spot exchange rate at year-end.

Recognition of the income components The exchange rate differences found between the transaction date and the related payment date, on the monetary elements, are booked in the Income Statement in the year when they arise, together with those which derive from the conversion of monetary elements at different rates from the initial conversion rates or the conversion at

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the previous year-end. When a profit or loss relating to a non-monetary element is recorded in the Equity, the exchange rate difference relating to this element is also recorded in the Equity. When a profit or loss is recorded in the Income Statement, also the related exchange rate difference is recorded in the Income Statement.

17 - OTHER STATEMENT OF FINANCIAL POSITION INFORMATION Sale and repurchase contracts (repos) The securities sold and subject to repurchase agreements are classified as committed financial instruments, when the purchaser has a right under a contract or agreement to resell or lend the underlying; the liability of the counterparty is included in the liabilities to other banks, other deposits or customer deposits. The securities purchased in relation to a resale contract are accounted for as loans or down payments to other banks or customers. The difference between the sales price and the purchase price is booked as interest and recorded on an accrual basis along the lifespan of the transaction.

Provision for severance indemnity and seniority bonuses Provision for severance indemnity is a form of employment remuneration with deferred payment at the end of the working relationship. It accrues in proportion to the duration of the relationship and constitutes an additional element to the personnel cost. Since the payment is certain, unlike the time when it will take place, the severance indemnity is classified by IAS 19 as a benefit following the termination of the working relationship, of the ‘defined benefit plan’ type. With the amendments made to severance indemnity with Italian Law no. 296 (‘Legge Finanziaria 2007’) of 27 December 2006 and subsequent decrees and Regulations issued in the first few months of 2007, it is possible to distinguish between:

• De fined Benefit Plans, including the provision for severance indemnity existing in the company as at 31 December 2006 and the one subsequently accrued and remaining at the company by choice of the employee concerned (in case the company has fewer than 50 employees at year-end); only these amounts will constitute the severance indemnity provisions booked under liabilities of the statement of financial position;

• Defined Contribution Plans. This applies to the amounts accrued starting from 1 January 2007 and allocated by the employees (by choice or silence–preventive consent), from this date or subsequently to it and in any case by 30 June 2007, to forms of supplementary pension or permanence in the company with more than 50 employees, which will transfer them to the INPS Treasury Fund. These cases are configured as a defined contribution plan since the obligation of the company towards the employee ends with the payment of the accrued amounts. For these cases, only the portion of debt (among the ‘Other liabilities’) for the monthly payments yet to be made to INPS or to supplementary pension fund can be posted in the liabilities of the Cassa Centrale Banca. From an economic point of view, the amounts accrued in the year and to be transferred to the FNP will be considered as personnel expenses for contributions to the supplementary pension funds, while those allocated INPS Treasury Fund will continue to be considered as personnel expenses for allocation to the provision for severance, unless different instructions are given by the Supervisory Body in the meantime.

140 EXPLANATORY NOTES

The amount of the benefits already accrued as at 31 December 2006, which are included in the Defined Benefit Plan for companies with more than 50 employees, must be projected in the future, with suitable actuarial techniques, to estimate the benefit that must be paid to each employee at the time of terminating the employment relationship for any reason (retirement, resignations, death or permanent invalidity). The calculation must consider both the severance indemnity accrued for the working services already provided to the company, and the revaluations envisaged by art. 2120 of the Italian Civil Code (application of a rate consisting of 1.50% in a fixed measure and 75.00% of the ISTAT inflation index) up to retirement. Since the component relating to the future remuneration increases is excluded from this calculation, since the benefit to be assessed may be considered as fully accrued, the Current Service Cost equals zero. These benefits must therefore be discounted to consider the period passed before the actual payment. The portion of provision for severance indemnity accruing from 1 January 2007, being configured as a Defined Contribution Plan for companies with more than 50 employees, are no longer subject to actuarial valuation. Among the ‘other long-term benefits’ described by IAS 19, also the seniority bonuses to employees are included in the operations of the Cassa Centrale Banca. These benefits must be valued, in compliance with IAS 19, with the same methodology used to determine the severance indemnity, as these are compatible. The liability for the seniority bonus is recorded among the provision for risks and charges of the Equity. The allocation, just like the reattribution to the Income Statement of any excesses in the specific provision (due, for example, to changes in actuarial hypotheses), are attributed to the Income Statement under ‘Personnel Costs’. The obligations towards employees are valued by an independent actuary.

Recognition of revenues The revenues are recognised at the time when they are obtained or in any case, in the case of sales of goods or products, when it is probable that the future benefits will be received and these benefits may be quantified in a reliable manner, in the case of providing services, at the time when the same are rendered. In particular:

• the interest is recognised on a temporal basis, based on the contractual interest rate or the effective rate in the case of applying the amortised cost;

• the overdue interest, possibly set contractually, is booked in the Income Statement only at the time of its actual collection;

• the dividends are recorded in the Income Statement in the period when their distribution is resolved, which coincides with the period when they are collected;

• the commissions for revenues from services are entered, based on the existence of contractual agreements, in the period when the same services were rendered;

• the revenues deriving from the brokerage of trading financial instruments, resulting from the difference between the price of the transaction and the fair value of the instrument, are recognised in the Income Statement during the recognition of the transaction if the fair value can be determined with reference to parameters or recent transactions observable in the same market where the instrument is traded. The income relating to financial instruments for which the above mentioned measurement is not possible will flow into the Income Statement along the duration of the transaction;

• the revenues from the sale of non-financial assets are recorded at the time of finalising the sale, unless the bank has maintained most of the risks and benefits connected to the asset.

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Improvements to third-party goods The restoration costs on third party properties are capitalised in consideration of the fact that, throughout the duration of the lease, the utilizing company has the control of the goods and may gain future economic benefits from them. These costs, classified among the ‘Other assets’ as instructed by the Bank of Italy, are amortised for a period not exceeding the duration of the lease.

Provisions for guarantees and commitments The analytical and collective-based provisions, relating to the estimate of possible outflows connected to the credit risk relating to guarantees and commitments, determined by applying the same criteria shown previously with reference to loans, are posted under ‘Other Liabilities’, in accordance with the Instructions of the Bank of Italy.

Payments based on shares This case does not apply to Cassa Centrale Banca since the Bank does not have a so-called ‘stock option plan’ on own shares in place.

Valuation of issued guarantees Given the provisions issued by the Bank of Italy, the valuation of issued guarantees is reflected in the Income Statement under the item “Value adjustments/reinstatements due to impairment of d) other financial operations” as a contra-entry to the liabilities booked within the item “Other liabilities”.

Criteria to determine the fair value of financial instruments In the case of financial instruments listed in active markets, the determination of the fair value is based on the listings of the reference active market (i.e. the one on which the highest volume of trades takes place), also inferred from international providers and recorded on the last reference day of the year. A market is defined as active when the listings reflect normal market transactions, are readily and regularly available and express the actual and regular market transaction price. If the same financial instrument is listed on several markets, the listing to be considered is the one on the most advantageous market the company has access to. In case of unlisted financial instruments the fair value is calculated by applying measurement techniques aiming to determine the price the instrument would have had on the market at the valuation date, with free exchange motivated by normal commercial considerations. The determination of the fair value is obtained through the following techniques: using recent market transactions; reference to the price of financial instruments with the same characteristics as the one being measured; quantitative methods (option pricing models; current value calculation techniques - discounted cash flow analysis; pricing models generally accepted by the market). In particular, for the unlisted bonds, the expected future cash flow discounting models are applied by using interest rate structures that suitably consider the issuer’s industrial sector and the rating class, where available. In the presence of mutual investment funds not traded in active markets, the fair value is determined on the basis of the published Net Asset Value, possibly corrected to consider possible changes in value between the repayment request date and the actual repayment date. Equities not traded in an active market, for which the fair value cannot be calculated in a reliable manner, according to known methodologies (discounted cash flow analysis; Multiples Method), are valued at cost, adjusted to consider any significant decreases in value.

142 EXPLANATORY NOTES

For the sight/revocation loans and deposits, an immediate expiry of the contractual obligations was assumed, which coincides with the reference date; thus their fair value is approximated to the carrying amount. The carrying amount was also assumed for short-term loans. For medium-long-term loans to customers, the fair value is obtained by using internally developed measurement techniques, by discounting the residual contractual flows at the current interest rates, suitably adjusted to consider the credit worthiness of the individual borrowers (represented by the probability of default and the estimated loss in case of default). For impaired assets the carrying amount is deemed to be an approximation of the fair value. For medium-long term debt, represented by securities and for which the application of the fair value option was opted for, the fair value is calculated by discounting the residual contractual flows at the rates at which the Bank could, at the measurement date, issue loans with similar characteristics on its reference collection market and on the date of the financial statements; in case of Tier 1 subordinated loans, the substantial impossibility of early repurchase/repayment and the existence of any clauses/options in favour of the issuer were considered. For the medium-long-term debt represented by securities valued at the amortised cost and subject to hedging for the rate risk, the carrying amount is suitable due to the hedging at fair value attributable to the risk hedged by discounting the related flows. For the derivative contracts traded on regulated markets: the market price of the last day of listing in the year is assumed as the fair value. For over the counter derivative contracts: the market value at the reference date is assumed as fair value, determined according to the following methods in relation to the type of contract:

• for the contracts on interest rates: the market value is represented by the so-called ‘replacement cost’, determined by discounting the differences, at the set settlement dates, between the flows calculated at the contract rates and the expected flows calculated at market rates, objectively determined and applied at year end for equal residual expiry;

• for the option contracts on securities and other values: the market value is determined by referring to the well- known pricing models (e.g.: Black & Scholes formula). The fair value used to measure the financial instruments is determined on the basis of the hierarchy reported below. Level 1 - Listings (without adjustments) based on active markets: the measurement is equal to the price on an active market of the instrument, i.e. its listing. Level 2 - Measurement methods based on observable market inputs: these methods are used if the instrument to be valued is not listed on an active market. The measurement of the financial instrument is based on prices inferred from the market listings of similar assets or through measurement techniques for which all the significant factors – e.g. credit spreads – are inferred from parameters observable directly or indirectly in the market. Despite the application of a measurement technique, the resulting listing has no discretion since all the parameters used are based on the market and the calculation methodologies used replicate listings on active markets. This level also includes the measurements of UCITS units carried out based on the Net Asset Value (NAV) communicated by the management company, whose value is updated and published periodically and represents the amount at which the position may be partially or fully liquidated, on the initiative of the owner. Level 3 - Measurement methods based on unobservable market parameters: these methods determine the listing of the unlisted instrument through the significant use of parameters that cannot be inferred from the market and therefore lead to estimates and assumptions by the technical structure of the Bank (prices provided by the issuing counterparty, inferred from independent appraisals, prices corresponding to the portion of Equity held in the

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company or obtained with measurement models that do not use market data to estimate significant factors that influence the fair value of the financial instrument). The measurements of the financial instruments at cost price belong to this level.

Business Combinations The transactions to acquire control of other entities are dealt with according to the provisions of IFRS 3 (Business Combinations). In particular, any differentials emerging at the date of acquiring control between the price paid and the corresponding carrying amount of the acquired assets and liabilities, are allocated to the higher/lower values at fair value attributable to these items; any residual value is allocated to the item ‘Goodwill’. The latter is subject to an annual impairment test.

144 EXPLANATORY NOTES

A.3 – INFORMATIon on FAIR VALUE

A.3.1 Transfers The Bank has not performed any transfer between the portfolios of the financial instruments. between Thus the compilation of the set Tables is omitted. portfolios

A.3.2 - Fair value A.3.2.1 Accounting portfolios: breakdown by fair value levels hierarchy Financial assets/liabilities Total 2011 Total 2010 at fair value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Financial assets held for trading 39,164 58,345 - 2,751 45,062 - 2. Financial assets at fair value - 2,173 80 - 2,112 86 3. Financial assets available for sale 335,625 3,213 38,901 199,458 3,248 38,150 4. Hedging derivatives ------Total 374,789 63,730 38,981 202,209 50,422 38,235 1. Financial liabilities held for trading 29 57,747 - 12 42,891 - 2. Financial liabilities at fair value - 8,417 - - 8,762 - 3. Hedging derivatives ------TOTAL 29 66,164 - 12 51,652 -

With regard to paragraph 44G of IFRS7 and the subsequent instructions of the Bank of Italy, no comparative information relative to the previous period is supplied. With reference to the previous year, the financial instruments listed in active markets were conventionally classified under level 1, while the remaining financial instruments were assigned to level 2, with the exclusion of non-listed equity representing shareholdings held in the share capital of companies promoted by the Cooperative Credit and of companies or entities which are, in any case, instrumental to the development of the banks activities which are classified in level 3.

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A.3.2.2 Annual changes in financial assets at fair value (level 3)

FINANCIAL ASSETS held for at available hedging trading fair value for sale 1. Opening balances - 86 38,150 - 2. Increases - - 1,095 - 2.1 Purchases - - 1,036 - 2.2 Profit attributed to: 2.2.1. Income Statement - - - - - of which gains - - - - 2.2.2. Equity X X - - 2.3 Transfers from other levels - - - - 2.4 Other increases - - 59 - 3. Decreases - 6 344 - 3.1 Sales - - 153 - 3.2 Reimbursements - 6 - - 3.3 Losses attributed to: 3.3.1 Income Statement - - 191 - - of which capital losses - - 191 - 3.2.2. Equity X X - - 3.4 Transfers to other levels - - - - 3.5 Other decreases - - - - 4. Closing balances - 80 38,901 -

Financial assets available for sale includes the equities ‘valued at cost’ and classified by convention in ‘level 3’, referring to shareholdings in companies promoted by the movement of the cooperative or instrumental credit, for which the fair value cannot be reliably determined or checked.

A.3.2.3 Annual changes in the financial liabilities at fair value (level 3) In the current and previous years the bank did not hold financial liabilities at fair value and classifiable in ‘level 3’.

A.3.3 - The case in question, as established by IFRS 7, paragraph 28, was not reported during this year. INFORMATIon on the DAY ONE PROFIT LOSS

146 EXPLANATORY NOTES

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Part B Information on the Statement of financial position

ASSETS

Section 1 Cash and cash equivalents Item 10 Section 2 Financial assets held for trading Item 20 Section 3 Financial assets at fair value Item 30 Section 4 Financial assets available for sale Item 40 Section 5 Held to maturity investments Item 50 Section 6 Loans to banks Item 60 Section 7 Loans to customers Item 70 Section 8 Hedging derivatives Item 80 Section 9 Adjustment of the financial assets subject to general hedging Item 90 Section 10 Equity investments Item 100 Section 11 Tangible assets Item 110 Section 12 Intangible assets Item 120 Section 13 Tax assets and tax liabilities Item 130 of assets and Item 80 of liabilities Section 14 Non-current assets and groups of assets held for disposal and associated liabilities Item 140 of assets and Item 90 of liabilities Section 15 Other assets Item 150

148 EXPLANATORY NOTES

section 1 CASh AND CASH EQUIVALENTS – item 10

1.1 Cash and cash equivalents: composition

Total 2011 Total 2010 a) Cash 25,445 16,812 b) Demand deposits at central banks 270,002 80,000 TOTAL 295,447 96,812

The currencies with a legal procedure are recorded in this item. The sub-item ‘Cash’ includes foreign currencies for a counter value equal to EUR 3,214 thousand. The sub-item ‘Demand Deposits at Central Banks’ refers to these relations held with the Bank of Italy and the European Central Bank. The latter item reported a significant increase due to the service provided to the CR-BCCs for re-financing operations of the latter with the European Central Bank. The aggregate does not include the obligatory reserve since it is included in item 60 of the asset ‘Loans to banks’.

section 2 FINANCIAL ASSETS HELD FOR TRADING - item 20

2.1 Financial assets held for trading: breakdown by category

Total 2011 Total 2010 Items/values Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A Cash assets 1. Debt securities 38,172 - - 1,421 1,355 - 1.1 Structured securities ------1.2 Other debt securities 38,172 - - 1,421 1,355 - 2. Equities 957 - - 1,317 - - 3. UCITS units ------4. Loans ------4.1 Repos receivables ------4.2 Others ------TOTAL A 39,130 - - 2,738 1,355 - B Derivative instruments 1. Financial derivatives 34 58,345 - 13 43,708 - 1.1 trading 34 58,324 - 13 43,708 - 1.2 connected to the fair value option ------1.3 other - 20 - - - - 2. Credit derivatives ------2.1 trading ------2.2 connected to the fair value option ------2.3 other ------TOTAL B 34 58,345 - 13 43,708 - TOTAL (A+B) 39,164 58,345 - 2,751 45,062 -

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In this item are the financial assets (debt securities, equities, UCITS units and derivative instruments) classified in the trading portfolio. The cash assets under point 2. mainly represent the financial instruments managed by third parties as part of securities asset management. The debt securities consist of Italian government bonds. The amount under item ‘Derivative instruments’ represents the exposure, mainly towards known leading counterparties and CR-BCCs, for the ‘matched trading’ activity where Cassa Centrale Banca stipulates a derivative contract or a forward transaction with an institutional counterparty in relation to a mirrored derivative contract /forward transaction entered into with a CR-BCC or leading customers. The fair value of the derivative contracts with customers as counterparty amounts to EUR 2,348 thousand at year end. Following a careful assessment of the counterparties the Bank believes that there is no need to perform write- downs against the ‘Counterparty risk’.

2.2 Financial assets held for trading: breakdown by debtors/issuers

Items/values Total 2011 Total 2010 A. Cash assets 1. Debt securities 38,172 2,775 a) Governments and Central Banks 38,172 2,775 b) Other public bodies - - c) Banks - - d) Other issuers - - 2. Equities 957 1,317 a) Banks 158 198 b) Other issuers: 799 1,119 - insurance companies 95 95 - financial institutions 59 72 - non financial firms 645 952 - others - - 3. UCITS units - - 4. Loans - - a) Governments and Central Banks - - b) Other public bodies - - c) Banks - - d) Other subjects - - TOTAL A 39,130 4,092 B. Derivative instruments a) Banks fair value 56,030 41,986 b) Customers fair value 2,348 1,734 TOTAL B 58,379 43,721 TOTAL (A+B) 97,509 47,813

150 EXPLANATORY NOTES

The notional value of the derivative instruments to banks is EUR 1,755,367 thousand, while the one to customers equals EUR 28,101 thousand. The distribution of financial assets by economic segment to which debtors or issuers belong was carried out according to the classification criteria set by the Bank of Italy.

2.3 Cash financial assets held for trading: annual changes

Debt UCITS Equities Loans Total securities units A. Opening balances 2,775 1,317 - - 4,092 B. Increases 390,547 1,682 - - 392,229 B1. Purchases 390,269 1,580 - - 391,849 of which: business combinations - - - - - B2. Positive fair value changes - 5 - - 5 B3. Other changes 277 98 - - 375 C. Decreases 355,150 2,042 - - 357,192 C1. Sales 293,298 1,698 - - 294,996 of which: business combinations - - - - - C2. Repayments 60,001 - - - 60,001 C3. Negative fair value changes 1,333 292 - - 1,625 C4. Transfers to other portfolios - - - - - C5. Other changes 517 53 - - 570 D. Closing balances 38,172 957 - - 39,130

Items B2 and C3 include the capital gains and losses respectively from measurements recorded in the Income Statement under item 80 ‘Net result from trading’. Item B3 “Increases – other changes” include capital gains from trading recorded in the Income Statement under item 80 ‘Net result from trading’, totalling EUR 336 thousand. Item C5. ‘Decreases – other changes’ includes losses from trading recorded in the Income Statement under item 80 ‘Net result from trading’, totalling EUR 74 thousand.

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section 3 FINANcIAl Assets at FAIR VALUE - item 30

3.1 Financial assets at fair value: breakdown by category

Total 2011 Total 2010 Items/values Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Debt securities - 2,173 - - 2,111 - 1.1 Structured securities ------1.2 Other debt securities - 2,173 - - 2,111 - 2. Equities ------3. UCITS units ------4. Loans - - 80 - - 86 4.1 Structured ------4.2 Others - - 80 - - 86 TOTAL - 2,173 80 - 2,111 86 COST - 1,911 74 - 1,792 80

The amounts indicated as ‘cost’ correspond to the historical purchase cost of the financial assets in inventories at the date of the financial statements. The application of the fair value option on the financial instruments under Assets is deemed functional to reach the objective of a better accounting representation of company operations as well as the administrative simplification compared to other accounting options such as the fair value hedge accounting. In this item only the bonds purchased from the CR-BCCs are classified. For these securities, related to bonds of equal characteristics and value issued by us and recorded in item 30 under Liabilities, the fair value option is applied. This methodology represented for the Bank the most reliable and convenient possibility to account for the hedging transactions that naturally offset one another (so-called natural hedge). The fair value option is also used in the presence of an instrument containing an implicit derivative, which satisfies the conditions set by IAS39, since the measurement of the entire instrument is less expensive than the separate measurement of the host instrument and the derivative. In item 4.2 ‘Others’, in the column ‘Unlisted’, the loans disbursed to customers are reported for 1 mortgage loan hedged with a derivative contract.

152 EXPLANATORY NOTES

3.2 Financial assets at fair value: breakdown by debtors/issuers

Items/values Total 2011 Total 2010 1. Debt securities 2,173 2,111 a) Governments and Central Banks - - b) Other public bodies - - c) Banks 2,173 2,111 d) Other issuers - - 2. Equities - - a) Banks - - b) Other issuers: - - - insurance companies - - - financial institutions - - - non financial firms - - - others - - 3. UCITS units - - 4. Loans 80 86 a) Governments and Central Banks - - b) Other public bodies - - c) Banks - - d) Other subjects 80 86 TOTAL 2,253 2,197

The distribution of financial assets by economic segment to which debtors or issuers belong was carried out according to the classification criteria set by the Bank of Italy.

3.3 Financial assets at fair value: annual changes

Debt UCITS Equities Loans Total securities units A. Opening balances 2,111 - - 86 2,197 B. Increases 1,122 - - - 1,122 B1. Purchases 1,003 - - - 1,003 of which: business combinations - - - - - B2. Positive fair value changes - - - - - B3. Other changes 119 - - - 119 C. Decreases 1,060 - - 6 1,066 C1. Sales 1,003 - - - 1,003 of which: business combinations - - - - - C2. Repayments - - - 6 6 C3. Negative fair value changes 57 - - - 57 C4. Other changes - - - - - D. Closing balances 2,173 - - 80 2,253

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Items B.2 and C.3 include the capital gains and losses respectively recorded in the Income Statement under item 110 ‘Net result on financial assets and liabilities at fair value’. ‘Other increases’ of sub-item B3 includes the differential between the initial accruals and the final accruals.

section 4 FINANCIAL ASSETS available FOR sale - item 40

4.1 Financial assets available for sale: breakdown by category

Total 2011 Total 2010 Items/values Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Debt securities 304,942 - - 160,220 - - 1.1 Structured securities ------1.2 Other debt securities 304,942 - - 160,220 - - 2. Equities - - 38,901 - - 38,150 2.1 at fair value - - 395 - - 527 2.2 Designated at cost - - 38,506 - - 37,623 3. UCITS units 30,683 3,213 - 39,237 3,248 - 4. Loans ------TOTAL 335,625 3,213 38,901 199,458 3,248 38,150

The portfolio of the Financial assets available for sale includes: • the portion of the banking book not used for trading purposes; • the equity investments for which the stakes held do not refer to controlling stakes, connecting stakes or joint ventures pursuant to IAS27 and IAS28. The securities under point 3 ‘UCITS units’ include the assets on which impairment for EUR 233 thousand was carried out. These are UCITS units that show a depreciation in the fair value for more than 9 months and for which objective evidence is deemed to exist that the asset has suffered a reduction in value to be recognised in the Income Statement, based on IAS 39 par. 59.. The impairment, totalling EUR 188 thousand, fully derives from the negative change in the reserve taking place in 2011. Among the equities, point 2.2 ‘Designated at cost’, impairment was recorded on the shares owned by the company Urbin S.p.A. in liquidation (EUR 132 thousand) and in S. Martino e Primiero Dolomiti Impianti a fune S.p.A. (EUR 59 thousand). The equity relative to point 2 includes shareholdings in companies promoted by the cooperative credit movement or which are instrumental for the development of the bank’s activities. They are listed below and report additional information, including the value of the quota of equity of the subsidiary.

154 EXPLANATORY NOTES

no. of % owned nominal carrying portion of on Description shares value amount the Net investee (unit /1000 /1000 worth share value) capital Essedì S.r.l. 1 13 13 26 16.20 Coopersviluppo S.p.A. 750 750 750 771 15.00 Etica S.g.r. 46,000 460 499 479 10.22 Centrale Partecipazioni Assicurative S.r.l. 10 5 5 5 10.00 Centrale Gestione Immobiliare S.r.l. 1 5 5 5 10.00 Scouting S.p.A. 550 55 154 157 8.26 Colleganza S.r.l. 8,180 8 21 19 8.18 Graffiti2000 S.r.l. 1 6 - 6 7.50 Trevefin S.p.A. 146,834 147 154 148 6.87 Promocoop S.p.A. 12 7 7 1,521 6.00 Sefea S.c.a.r.l. 500,000 250 250 250 5.85 Pensplan Invest S.g.r. S.p.A. 85,000 439 439 424 4.44 San Martino e Primiero Dolomiti Trasporti S.p.A. 84,345 - 141 141 4.22 Finanziaria Trentina della Cooperazione S.p.A. 100 500 500 514 4.12 Bio Energia Fiemme S.p.A. 30,000 180 180 222 3.10 I.C.C.R.E.A. Holding S.p.A. 561,333 28,093 31,104 31,225 2.86 Urbin S.p.A. (in liquidazione) 255,000 255 2 - 2.78 Fondo Comune delle Casse Rurali Trentine S.c.r.l. 8,001 41 41 612 2.52 Tempo Libero Folgaria S.r.l. - 100 100 103 2.41 Funivie Alpe Cermis S.p.A. 60,000 300 305 366 2.05 Interbrennero S.p.A. 57,961 174 214 749 1.99 Federazione Trentina della Cooperazione S.c.r.l. 51 5 5 285 0.95 Iccrea Bancaimpresa S.p.A. 57,736 2,982 3,027 3,355 0.80 Alto Garda Servizi S.p.A. 3,616 188 207 280 0.81 Paganella 2001 S.p.A. 300,528 180 180 178 0.80 Emmeci Group S.p.A. 2,230 12 212 13 0.51 Banca Popolare Etica S.c.p.A. 2,886 150 155 180 0.49 Fondo Garanzia dei Depositanti 1 1 1 0.18 Finest S.p.A. 3,121 161 155 190 0.12 Swift Bruxelles S.A. 22 54 44 - 0.04 Siteba S.p.A. 1,500 1 1 5 0.03 SIA SSB S.p.A. 49,500 6 26 37 0.03 Tassullo Energia S.p.A. 150 - 3 - 0.02 Phoenix Informatica Bancaria S.p.A. 1,099 1 1 5 0.01 Visa Europe S.A. 10 - - - 0.01 Funivie Madonna di Campiglio S.p.A. 4 - - - 0.00 Mediocredito Trentino Alto Adige S.p.A. 850 - 1 1 0.00 TOTAL 38,901 42,272

155 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

The equities ‘designated at cost’ and classified by convention in level 3 refer to shareholdings for which the fair value cannot be reliability determined or checked and thus they are entered at cost, possibly adjusted to consider ascertained losses due to a decline in value. For these equity investments there is no reference market and the Bank does not intend to sell them.

4.2 Financial assets available for sale: breakdown by debtors/issuers

Items/values Total 2011 Total 2010 1. Debt securities 304,942 160,220 a) Governments and Central Banks 304,942 160,220 b) Other public bodies - - c) Banks - - d) Other issuers - - 2. Equities 38,901 38,150 a) Banks 3,183 3,183 b) Other issuers: 35,718 34,967 - insurance companies - - - financial institutions 34,091 33,060 - non financial firms 1,627 1,907 - others - - 3. UCITS units 33,896 42,485 4. Loans - - a) Governments and Central Banks - - b) Other public bodies - - c) Banks - - d) Other subjects - - TOTAL 377,739 240,855

The distribution of financial assets by economic segment to which debtors or issuers belong was carried out according to the classification criteria set by the Bank of Italy. The Bank does not hold government securities issued by the governments of Portugal, Ireland, Greece or Spain in the portfolio ‘Financial assets available for sale’. The implicit capital losses on Italian government securities amount to EUR 7,543 thousand and were fully recorded in the reserve of the ‘Financial assets available for sale’. In consideration of the country risk assessment carried out by the Directors, as described in the report on operations, the Bank deemed not to consider these capital losses as having a long-lasting nature.

156 EXPLANATORY NOTES

4.3 Financial assets available for sale subject to specific hedging At the date of the financial statements, the Bank did not hold financial assets available for sale subject to specific hedging.

4.4 Financial assets available for sale: annual changes

Debt UCITS Equities Loans Total securities units A. Opening balances 160,220 38,150 42,485 - 240,855 B. Increases 210,114 1,095 16,476 - 227,686 B1. Purchases 207,630 1,036 15,550 - 224,216 of which: business combinations - - - - - B2. Positive fair value changes 1,378 - 353 - 1,731 B3. Write-backs ------Attributed to the Income Statement - - - - - Attributed to the Equity - - - - - B4. Transfers from other portfolios - - - - - B5. Other changes 1,106 59 574 - 1,739 C. Decreases 65,393 344 25,065 - 90,803 C1. Sales 47,976 153 24,641 - 72,771 of which: business combinations - - - - - C2. Repayments 10,005 - - - 10,005 C3. Negative fair value changes 7,075 - 191 - 7,266 C4. Write-down from impairment - 191 233 - 424 - Attributed to the Income Statement - 191 233 - 424 - Attributed to the Equity - - - - - C5. Transfers to other portfolios - - - - - C6. Other changes 336 - - - 336 D. Closing balances 304,942 38,901 33,896 - 377,739

Sub-items B2 and C3 include the capital gains and losses respectively, gross of the related tax effect, recorded in the Equity under item 130, “Valuation reserves” under liabilities of the statement of financial position. In ‘Other changes’ of sub-items B5 and C6, the profits and losses deriving from the repayment/sale of Financial assets available for sale entered under item 100. b) “Profits (losses) from disposal/repurchase’ of the Income Statement respectively are stated, together with the reversal in the Income Statement of the related previously established ‘Valuation reserves’ of the Equity. In row C.4, in the columns ‘Equities’ and ‘UCITS units’ respectively, the effect of the impairment of the year, as mentioned in the previous notes, is recorded for the portion of the negative change in fair value taking place in the year.

157 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

section 5 HELD to maturity INVESTMENTS - item 50 This item shows the listed debt securities allocated to the portfolio held to maturity.

5.1 Held to maturity investments: breakdown by category

Total 2011 Total 2010 Transaction type/Values Carrying Fair value Carrying Fair value amount Level 1 Level 2 Level 3 amount Level 1 Level 2 Level 3 1. Debt securities 388,638 386,178 - - 25,160 25,209 - - 1.1 Structured securities ------1.2 Other debt securities 388,638 386,178 - - 25,160 25,209 - - 2. Loans ------TOTAL 388,638 386,178 - - 25,160 25,209 - -

This table highlights the increase in securities held to maturity with respect to 2010: the portfolio is solely composed of Italian government securities and incorporates an implicit capital loss of EUR 2,500 thousand. In consideration of the country risk assessment carried out by the Directors, as described in the report on operations, the Bank deemed not to consider these capital losses as having a long-lasting nature.

5.2 Held to maturity investments: debtors/issuers

Transaction type/Values Total 2011 Total 2010 1. Debt securities 388,638 25,160 a) Governments and Central Banks 388,638 25,160 b) Other public bodies - - c) Banks - - d) Other issuers - - 2. Loans - - a) Governments and Central Banks - - b) Other public bodies - - c) Banks - - d) Other subjects - - TOTAL 388,638 25,160

The distribution of financial assets by economic segment to which debtors or issuers belong was carried out according to the classification criteria set by the Bank of Italy.

5.3 Held to maturity investments subject to specific hedging Held to maturity investments were not subject to specific hedging.

158 EXPLANATORY NOTES

5.4 Held to maturity investments: annual changes

Debt securities Loans Total A. Opening balances 25,160 - 25,160 B. Increases 363,478 - 363,478 B1. Purchases 362,307 - 362,307 of which: business combinations - - - B2. Write-backs - - - B3. Transfers from other portfolios - - - B4. Other changes 1,172 - 1,172 C. Decreases - - - C1. Sales - - - of which: business combinations - - - C2. Repayments - - - C3. Adjustments - - - C4. Transfers to other portfolios - - - C5. Other changes - - - D. Closing balances 388,638 - 388,638

‘Other increases/decreases’ also includes the differential between the initial accruals and final accruals.

section 6 loans to banks - item 60 This item comprises the unlisted financial assets to banks classified in the ‘Receivables’ portfolio. Also included are the amounts due from the Bank of Italy, other than demand deposits, inclusive of the amounts for the obligatory reserve.

159 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

6.1 Loans to banks: breakdown by category

Transaction type/Values Total 2011 Total 2010 A. Loans to Central Banks 77,076 87,915 1. Term deposits - - 2. Compulsory reserve 77,076 87,915 3. Repos - - 4. Other - - B. Loans to banks 3,405,994 1,268,212 1. Current accounts and demand deposits 171,785 301,482 2. Term deposits 2,962,124 665,899 3. Other loans: - - 3.1 Repos receivables - - 3.2 Financial leases - - 3.3 Others - - 4. Debt securities 272,085 300,831 4.1 Structured securities - - 4.2 Other debt securities 272,085 300,831 TOTAL (CARRYING AMOUNT) 3,483,070 1,356,127 TOTAL (FAIR VALUE) 3,483,070 1,356,127

Concerning the criteria to determine the fair value, please refer to Part A - Accounting policies. In consideration of the main short-term duration of the loans to banks, the related fair value is considered equal to the carrying amount. The loans to banks were not written down since deemed fully recoverable. There were no receivables due from banks with subordination restrictions. Loans to banks also include receivables in foreign currencies for a counter-value of EUR 90,671 thousand. The sub-item A.2 ‘Compulsory reserve’ includes, in addition to the one due from the Bank, the reserve managed by proxy for the CR-BCCs. The repos receivables exclusively concern the transactions with a forward resale obligation by the assignee for the assets subject to the transaction, since the Bank does not have any transaction in place that gives the same assignee the right of forward resale. The trend of the item ‘Term Deposits’ is to be attributed, in particular, to the service provided to the CR-BCCs for the settlement of the refinancing transactions of the European Central Bank. As part of the offered service, based on the financial guarantee agreements pursuant to Italian Legislative Decree no. 170 of 21 May 2004, Cassa Centrale Banca obtained the transfer of legal ownership of securities eligible from the CR-BCCs. These securities were therefore used by the bank to guarantee the participation in the refinancing operations of the European Central Bank. The liquidity attained by the latter has allowed for the liquidation of interbank deposits with the CR- BCCs for a total of EUR 2,852,750 thousand.

160 EXPLANATORY NOTES

6.2 Loans to banks subject to specific hedging At the date of the financial statements there are no loans to banks subject to specific hedging.

6.3 Financial leases At the date of the financial statements there are no loans to banks deriving from financial leases.

section 7 loans to customers - item 70 This item includes the unlisted financial assets to customers allocated in the ‘Receivables’ portfolio.

7.1 Loans to customers: breakdown by category

Total 2011 Total 2010 Transaction type/Values Performing Impaired Performing Impaired 1. Current accounts 104,089 9,446 96,700 8,625 2. Repos receivables - - - - 3. Mortgage loans 449,486 23,945 426,413 16,479 4. Credit cards, personal loans and salary - - - - backed loans 5. Financial leases - - - - 6. Factoring - - - - 7. Other loans 117,714 - 140,473 864 8. Debt securities 4,061 - 4,062 - 8.1 Structured securities - - - - 8.2 Other debt securities 4,061 - 4,062 - TOTAL (CARRYING AMOUNT) 675,349 33,391 667,648 25,968 TOTAL (FAIR VALUE) 677,602 33,391 678,206 25,968

Concerning the criteria to determine the fair value, please refer to Part A - Accounting policies. Loans to customers are shown net of adjustments from write-downs. The amount and subdivisions of value adjustments are reported in Part E of these Explanatory Notes. The fair value of short-term or revoked receivables was assumed by convention to be equal to the carrying amount. For the impaired positions it was deemed appropriate to assume the fair value equal to the net carrying amount. The receivables include loans in foreign currencies for a counter-value of EUR 2,188 thousand.

161 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Details of sub-item 7 ‘Other transactions’

Transaction type/Values Total 2011 Total 2010 Loans for advances subject to collection 12,552 10,946 Other granted not settled in the current accounts – other grants 105,053 130,278 Interest-bearing guarantee deposits 9 12 Contributions to be collected from local authorities for 100 100 transactions with a subsidized rate TOTAL 117,714 141,337

Under sub-item 8.2 ‘Other debt securities’ the class B bond - which was issued by the vehicle company Bcc Mortgages as part of the securitisation transaction of third party issuers - is entered; the operation is described in more detail and represented in Part E – C.1 “Securitization transactions”. Impaired assets include the non-performing loans, watch-list, restructured loans or due exposures according to the definitions of the Bank of Italy. The details of these exposures, as well as the one relating to the amount and the division of the adjustments, is shown in Part E of the Explanatory notes – ‘Credit quality’.

162 EXPLANATORY NOTES

7.2 Loans to customers: breakdown by debtors/issuers

Total 2011 Total 2010 Transaction type/Values Performing Impaired Performing Impaired 1. Debt securities: 4,061 - 4,062 - a) Governments - - - - b) Other public bodies - - - - c) Other issuers 4,061 - 4,062 - - non financial firms - - - - - financial firms 4,061 - 4,062 - - insurance companies - - - - - others - - - - 2. Loans to: 671,288 33,391 663,586 25,968 a) Governments - - - - b) Other public bodies 768 - 1,111 - c) Other issuers 670,520 33,391 662,476 25,968 - non financial firms 604,766 30,124 595,943 24,330 - financial firms 14,827 1,591 16,805 - - insurance companies 67 - 31 - - others 50,861 1,676 49,696 1,637 TOTAL 675,349 33,391 667,648 25,968

The distribution of financial assets by economic segment to which debtors or issuers belong was carried out according to the classification criteria set by the Bank of Italy.

7.3 Loans to customers subject to specific hedging At the date of the financial statements the Bank does not have loans to customers subject to specific hedging.

7.4 Financial leases At the date of the financial statements there are no receivables deriving from financial leases.

section 8 hedging DERIVATIves - item 80 The Bank does not have hedging derivatives in place. As a consequence, this Section has not been filled in.

section 9 adjustment of the financial assets subject to general hedging - item 90 At the date of the financial statements there are no assets subject to general hedging. As a consequence, this Section has not been filled in.

163 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Section 10 EQUITY investments - item 100 This item includes the equity investments in subsidiaries (IAS27), companies under joint control or subject to significant influence (IAS28).

10.1 Equity investments in subsidiaries, companies under joint control or subject to significant influence: information on investment ratios

Votes Names Office % interest available% A. Exclusive subsidiaries 1. Centrale Leasing Nord Est S.p.A. Padua 100.00% 100.00% 2. Centrale Corporate S.r.l. Trento 100.00% 100.00% B. Jointly controlled companies 1. negative C. Companies under significant influence 1. NEAM S.A. Luxembourg 50.00% 50.00% 2. Casse Rurali Raiffeisen Finanziaria S.p.A. Bolzano 50.00% 50.00% 3. Informatica Bancaria Finanziaria S.p.A. Trento 43.33% 43.33% 4. Centrale Trading S.r.l. Trento 32.50% 32.50% 5. Formazione Lavoro S.c.p.A. Trento 22.36% 22.36%

The equity investments held refer to companies/entities that are instrumental to achieve the corporate purpose and consist of unlisted securities. The equity investment ratios stated are equal to the voting percentage available. Control is assumed to exist when the parent company, directly or indirectly through its subsidiaries, owns more than half of the voting rights of an entity unless, in exceptional cases, it can be clearly demonstrated that this possession does not constitute control. Control exists also when the parent company owns half, or a lower amount, of the votes that can be exercised at the meeting if it has the actual control pursuant to IAS 27 §13. A connecting stake is assumed when an investing company, directly or indirectly (for example through subsidiaries), owns 20.00% or more of the rights that can be exercised at the shareholders’ meeting of the investee; thus it is assumed that the investing company has a significant influence, unless the contrary can be clearly demonstrated. On the other hand, if the investing company, directly or indirectly (for example through subsidiaries), owns less than 20.00% of the votes that can be exercised at the meeting of the investee, it is assumed that the investing company does not have a significant influence, unless this influence cannot be clearly demonstrated. The fact that another investing company may have the absolute or relative majority does not exclude the possibility for an investing company to have a significant influence.

164 EXPLANATORY NOTES

10.2 Equity investments in subsidiaries, companies under joint control or subject to significant influence: accounting information

Total Total Profit Carrying fair Names Equity assets revenue (Loss) amount value A. Exclusive subsidiaries 1. Centrale Leasing Nord Est S.p.A. 1,851 1,646 8 1,100 1,249 X 2. Centrale Corporate S.r.l. 411 589 74 211 50 X B. Jointly controlled companies 1. negative C. Companies under significant influence 1. NEAM S.A. 4,783 13,627 1,024 628 255 - 2. Casse Rurali Raiffeisen Finanziaria 65,337 1,070 100 33,005 16,549 - S.p.A. 3. Informatica Bancaria Finanziaria S.p.A. 4,977 405 335 4,557 1,944 - 4. Centrale Trading S.r.l. 592 321 91 394 125 - 5. Formazione Lavoro S.c.p.A. 2,967 3,151 2 638 294 - TOTAL 80,918 20,809 1,634 40,533 20,465 -

The Equity shown in the table is net of Profit/Loss for the year reported in the previous column. The fair value is not shown of the investee companies subject to significant influence (associates), since they are unlisted companies. The data refer to the financial statements of 31 December 2011, with the exception of those of Casse Rurali Raiffeisen S.p.A., Informatica Bancaria Finanziaria S.p.A. and Formazione lavoro - Società consortile p.A. which, on the other hand, refer to 31 December 2010. In the column ‘Total revenues’ the total amount is shown of the income components with a positive sign, gross of their tax effect.

165 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

10.3 Equity investments: annual changes

Total 2011 Total 2010 A. Opening balances 20,181 2,571 B. Increases 333 17,798 B.1 Purchases 333 17,798 B.2 Write-backs - - B.3 Revaluations - - B.4 Other changes - - C. Decreases 50 187 C.1 Sales 45 - C.2 Adjustments - 187 C.3 Other changes 5 - D. Final inventories 20,465 20,181 E. Total revaluations 199 199 F. Total adjustments 207 207

The increases include the following changes: - covering of loss for 2010 of Centrale Leasing Nord Est S.p.A. for EUR 181 thousand; - covering of loss for 2010 of Centrale Gestione Immobiliare S.r.l. for EUR 6 thousand; - subscription of no. 293 shares of Formazione Lavoro soc. consortile per azion” for the amount of EUR 146.5 thousand. The decreases include the following changes: - sale of 90.00% of the shareholding in Centrale Gestione Immobiliare S.r.l. for EUR 45 thousand; - reclassification of 10.00% of the shareholding in Centrale Gestione Immobiliare S.r.l. for EUR 5 thousand to the category “Financial assets available for sale”.

10.4 Commitments referring to investments in subsidiaries At the date of the financial statements there are no commitments referring to investments in subsidiaries.

10.5 Commitments referring to investments in subsidiaries under joint control At the date of the financial statements there are no commitments referring to investments in companies under joint control.

10.6 Commitments referring to investments in companies subject to a significant influence At the date of the financial statements there are no commitments referring to investments in companies subject to significant influence.

166 EXPLANATORY NOTES

section 11 tangible assets - item 110

11.1 Tangible assets: breakdown of the assets measured at cost

Assets/Values Total 2011 Total 2010 A. Assets for business use 1.1 owned 14,004 13,637 a) land 2,381 2,381 b) buildings 7,680 7,961 c) furniture 1,877 1,381 d) electronic systems 1,177 847 e) others 890 1,068 1.2 acquired through financial leases - - a) land - - b) buildings - - c) furniture - - d) electronic systems - - e) others - - TOTAL A 14,004 13,637 B. Assets held for investment purposes 2.1 owned - - a) land - - b) buildings - - 2.2 acquired through financial leases - - a) land - - b) buildings - - TOTAL B - - TOTAL (A+B) 14,004 13,637

All the tangible assets of the Bank are valued at cost as specified in part A of the Explanatory notes.

11.2 Tangible assets: breakdown of assets at fair value or revalued There are no tangible assets at fair value or revalued; the relevant table was thus not filled in.

167 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

11.3 Tangible assets for business use: annual changes

Electronic Land Buildings Furniture Other Total systems A. Opening balances 2,381 13,503 4,638 3,344 5,254 29,121 A.1 Total net impairment - 5,543 3,258 2,497 4,186 15,484 A.2 Net opening balances 2,381 7,961 1,381 847 1,068 13,637 B. Increases: - - 772 724 193 1,689 B.1 Purchases - - 772 724 182 1,678 of which: business combinations ------B.2 Expenditures for capitalised ------improvements B.3 Write-backs ------B.4 Positive fair value changes ------attributed to a) Equity ------b) Income statement ------B.5 Positive exchange rate ------differences B.6 Transfers from properties held ------for investment purposes B.7 Other changes - - - - 11 11 C. Decreases: - 281 276 395 372 1,322 C.1 Sales - - - - 11 11 of which: business combinations ------C.2 Amortisation and depreciation - 281 268 395 361 1,304 C.3 Adjustments from impairment ------attributed to a) Equity ------b) Income statement ------C.4 Negative fair value changes ------attributed to a) Equity ------b) Income statement ------C.5 Negative exchange rate ------differences C.6 Transfers to: ------a) tangible assets held for ------investment purposes b) assets held for disposal ------C.7 Other changes - - 7 - - 7 D. Net closing balances 2,381 7,679 1,877 1,176 889 14,004 D.1 Total net impairment - 5,824 3,386 2,892 4,503 16,604 D.2 Gross closing balances 2,381 13,503 5,263 4,069 5,392 30,608 E. Valuation at cost ------

168 EXPLANATORY NOTES

Items A.1 and D.1 ‘Total net impairment’ reports the total acc. depreciation and the adjustments due to impairment. Item E. ‘Valuation at cost’ is not measured since its compilation is only set for tangible assets at fair value in the accounts. This case does not apply to the Bank.

11.4 Tangible assets held for investment purposes: annual changes The Bank does not hold tangible assets for investment purposes.

11.5 Commitments for tangible asset purchases (IAS 16/74.c) The Bank did not assume any commitment to purchase tangible assets.

Revaluations Below is the Statement of the revaluations of assets pursuant to art. 10 of Italian Law no. 72 of 19-03-1983

Amount Amount Amount Amount Amount Amount reval. reval. reval. reval. reval. reval. Location Use pursuant pursuant pursuant pursuant pursuant pursuant to law to law. to law. to law. to law. to law. 576/75 72/83 408/90 413/91 342/00 266/05 Capital property: Property located in Trento, via Office - - - 1,067 - - Segantini no. 5

section 12 INtangible assets - item 120

12.1 Intangible assets: breakdown by type of asset

Total 2011 Total 2010 Assets/Values Defined Undefined Defined Undefined duration duration duration duration A.1 Goodwill X - X - A.2 Other intangible assets 277 - 465 - A.2.1 Assets valued at cost: 277 - 465 - a) Intangible assets generated internally - - - - b) Other assets 277 - 465 - A.2.2 Assets at fair value: - - - - a) Intangible assets generated internally - - - - b) Other assets - - - - TOTAL 277 - 465 -

All intangible assets of the Bank are valued at cost. The other intangible assets under item A.2, of limited duration, mainly include the company software under user license and were amortised on a temporal basis with the constant rate method based on their useful life, estimated at three years. No internally generated intangible assets were posted.

169 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

12.2 Intangible assets: annual changes

Other intangible Other intangible assets: generated assets: internally other Goodwill Total with with with with definite indefinite definite indefinite duration duration duration duration A. Opening balances - - - 4,497 - 4,497 A.1 Total net impairment - - - 4,031 - 4,031 A.2 Net opening balances - - - 465 - 465 B. Increases - - - 67 - 67 B.1 Purchases - - - 67 - 67 of which: business combinations ------B.2 Increase in internal intangible - - - - - assets B.3 Write-backs - - - - - B.4 Positive fair value changes: ------Equity ------Income Statement - - - - - B.5 Positive exchange rate ------differences B.6 Other changes ------C. Decreases - - - 256 - 256 C.1 Sales ------of which: business combination ------transaction C.2 Adjustments - - - 256 - 256 - Amortisation and depreciation - - 256 - 256 - Write-downs: ------+ Equity - - - - - + Income Statement ------C.3 Negative fair value changes: ------Equity ------Income Statement - - - - - C.4 Transfers to non-current assets ------held for disposal C.5 Negative exchange rate ------differences C.6 Other changes ------D. Net closing balances - - - 277 - 277 D.1 Total net adjustments - - - 4,287 - 4,287 E. Gross closing balances - - - 4,564 - 4,564 F. Valuation at cost ------

170 EXPLANATORY NOTES

The intangible assets described were entirely acquired externally and valued at cost. The opening balances of ‘Other intangible assets’ do not include those that are completely amortised at the end of the previous year. Sub-item F. ‘Valuation at cost’ is not measured since its compilation is only set for intangible assets at fair value in the accounts. This case does not apply to the Bank.

12.3 Other information As requested by paragraphs 122 and 124 of IAS 38, it is specified that the Bank did not: • provide intangible assets as guarantee for its debts; • commit to the purchase of intangible assets at the reference date; • acquire intangible assets via operating or financial lease agreements; • acquire intangible assets via government concession; • revalue intangible assets at fair value.

section 13 TAX ASSETS AND TAX LIABILITIES – ITEM 130 OF ASSETS AND ITEM 80 OF LIABILITIES

13.1 Deferred tax assets: breakdown The types of temporary differences that have led to the posting of ‘Deferred tax assets’ concern:

Through the Income Statement IRES IRAP TOTAL Net provisions for risks and charges not deducted 292 - 292 Adjustments on loans 1,952 - 1,952 Adjustments on real estate assets 7 4 11 Other items 111 4 115 TOTAL 2,363 8 2,371

Through the Equity IRES IRAP TOTAL Losses on financial assets available for sale 3,057 517 3,574 TOTAL 3,057 517 3,574

Deferred tax assets are considered as internally recoverable in consideration of the expected taxable income obtainable in the subsequent periods.

13.2 Deferred tax liabilities: breakdown The types of temporary differences that have led to the posting of ‘Deferred tax liabilities’ concern:

171 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Through the Income Statement IRES IRAP TOTAL - other items 3 - 3 TOTAL 3 - 3

Through the Equity IRES IRAP TOTAL Gains on financial assets available for sale 448 76 524 TOTAL 448 76 524 Deferred taxes not recorded No deferred tax liabilities were recorded on tax deferred monetary revaluation reserves.

13.3 Changes in advance taxes (through the Income Statement)

Total 2011 Total 2010 1. Opening amount 2,362 1,758 2. Increases 235 856 2.1 Advance taxes recorded in the year 234 855 a) relating to previous years - - b) due to changed accounting criteria - - c) write-backs - - d) others 234 855 2.2 New taxes or increases in tax rates 1 1 2.3 Other increases - - 3. Decreases 226 252 3.1 Advance taxes cancelled in the year 226 252 a) reversals 226 252 b) write-downs for uncollectible amounts - - c) change in accounting criteria - - d) others - - 3.2 Decrease in tax rates - - 3.3 Other decreases: - - 4. Closing amount 2,371 2,362

172 EXPLANATORY NOTES

13.4 Changes in deferred taxes liabilities (through the Income Statement)

Total 2011 Total 2010 1. Opening amount 4 34 2. Increases - - 2.1 Deferred taxes recorded in the year - - a) relating to previous years - - b) due to changed accounting criteria - - c) others - - 2.2 New taxes or increases in tax rates - - 2.3 Other increases - - 3. Decreases 1 30 3.1 Deferred taxes cancelled in the year 1 30 a) reversals 1 30 b) due to changed accounting criteria - - c) others - - 3.2 Decrease in tax rates - - 3.3 Other decreases - - 4. Closing amount 3 4

Deferred taxes are recorded against the temporary differences between the carrying amount of an asset or liability and its fiscal value, which will be recovered as economic benefits the Bank will obtain in the subsequent years. This recognition was based on tax regulations in force; the rates used to recognise deferred taxes for IRES and IRAP purposes are 27.50% and 4.65% respectively, in consideration of the known projections for future years. The unbalance of advance taxes and deferred taxes was posted in the Income Statement under item 260 ‘Income taxes for the year on current operating activities’ for EUR 9 thousand and EUR 1 thousand, respectively.

173 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

13.5 Changes in advance taxes (through the Equity)

Total 2011 Total 2010 1. Opening amount 1,231 22 2. Increases 3,574 1,231 2.1 Advance taxes recorded in the year 3,574 1,231 a) relating to previous years - - b) due to changed accounting criteria - - c) others 3,574 1,231 2.2 New taxes or increases in tax rates - - 2.3 Other increases - - 3. Decreases 1,231 22 3.1 Advance taxes cancelled in the year 1,231 22 a) reversals 1,231 22 b) write-downs for uncollectible amounts - - c) due to changed accounting criteria - - d) others - - 3.2 Decrease in tax rates - - 3.3 Other decreases - - 4. Closing amount 3,574 1,231

13.6 Changes in deferred taxes liabilities (through the Equity)

Total 2011 Total 2010 1. Opening amount 952 2,627 2. Increases 524 952 2.1 Deferred taxes recorded in the year 524 952 a) relating to previous years 524 952 b) due to changed accounting criteria - - c) others - - 2.2 New taxes or increases in tax rates - - 2.3 Other increases - - 3. Decreases 952 2,627 3.1 Deferred taxes cancelled in the year 952 2,627 a) reversals 952 2,627 b) due to changed accounting criteria - - c) others - - 3.2 Decrease in tax rates - - 3.3 Other decreases - - 4. Closing amount 524 952

Advance and deferred taxes refer to write-downs and revaluations of securities available for sale, respectively. These changes had the reserve on ‘Financial assets available for sale’ as counter-entry.

174 EXPLANATORY NOTES

13.7 Other information

Breakdown of current taxes IRES IRAP OTHER TOTAL Current tax liabilities (-) (3,888) (1,346) - (5,234) Advances paid (+) 4,206 1,065 - 5,271 Other tax credits (+) - - - - Withholding taxes (+) 197 - - 197 Debt balance of item 80 a) of liabilities - (281) - (281) Credit balance of item 130 a) of assets 515 - - 515 Tax credits that cannot be offset: capital portion 113 - - 113 Tax credits that cannot be offset: interest portion - - - - Balance of tax credit that cannot be offset 113 - - 113 Credit balance of item 130 a) of assets 628 - - 628

With regard to the fiscal position of the bank, it should be noted that, in the month of March 2011, a tax assessment relative to income tax and VAT was completed by the Tax Police Department of Trento. On the basis of the minutes drafted by the Italian tax police, no significant non-compliances were noted.

section 14 NON-CURRENT ASSETS AND GROUPS OF ASSETS HELD FOR DISPOSAL AND ASSOCIATED LIABILITIES - ITEM 140 OF THE ASSETS AND ITEM 90 OF THE LIABILITIES No non-current assets or groups of assets held for disposal and related associated liabilities were present on the reference date. The Section was thus not compiled.

175 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

section 15 OTHER ASSETS – ITEM 150

15.1 Other assets: breakdown

Total 2011 Total 2010 Tax receivables from tax authorities for indirect taxes 2,646 2,345 Wire transfers to be settled at the Clearing House 11,555 4,717 Cheques to be settled at the Clearing House or with Associates 1,208 946 Treasury notices in progress 1,427 1,354 Work in progress and other assets 12,500 18,588 Adjustments for illiquid items in the portfolio 20,780 36,922 Other debtors for security transactions 547 115 Customers and revenue to be collected 1,725 1,844 Prepayments and accrued income not capitalised 331 666 Advances to suppliers 47 32 TOTAL 52,766 67,528

‘Other assets’ includes the unbalance between the debt adjustments and the credit adjustments of the portfolio subject to collection and after collection, for which details are stated in the specific Table ‘Other information’ of part B of these Explanatory notes.

176 EXPLANATORY NOTES

177 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Part B Information on the Statement of financial position

LIABILITIES

Section 1 Due to banks Item 10 Section 2 Due to customers Item 20 Section 3 Debt securities in issue Item 30 Section 4 Financial liabilities for trading Item 40 Section 5 Financial liabilities at fair value Item 50 Section 6 Hedging derivatives Item 60 Section 7 Adjustment of the financial liabilities subject to general hedging Item 70 Section 8 Tax liabilities Item 80 Section 9 Liabilities associated to assets held for disposal Item 90 Section 10 Other liabilities Item 100 Section 11 Provision for severance indemnity Item 110 Section 12 Provisions for risks and charges Item 120 Section 13 Repayable shares Item 140 Section 14 Equity Items 130, 150, 160, 170, 180, 190 and 200

Other information 1. Guarantees issued and commitments 2. Asset-backed own liabilities and commitments 3. Information on operating leasing 4. Management and brokering on behalf of third parties 5. Credit collection on behalf of third parties

178 EXPLANATORY NOTES

section 1 DUE to banks - item 10

1.1 Due to banks: breakdown by category

Transaction type/Values Total 2011 Total 2010 1. Due to central banks 3,104,170 550,406 2. Due to banks 1,511,601 1,239,652 2.1 Current accounts and demand deposits 674,516 565,035 2.2 Term deposits 775,418 629,410 2.3 Loans 61,667 45,208 2.3.1 Repos payables - - 2.3.2 Others 61,667 45,208 2.4 Liabilities for commitments to repurchase own equity investments - - 2.5 Other payables - - TOTAL 4,615,771 1,790,058 FAIR VALUE 4,615,771 1,790,058

Concerning the criteria to determine the fair value, please refer to Part A - Accounting policies. This item includes the due to banks in whatever form (deposits, current accounts, loans…). In consideration of the main short-term duration of the due to banks, the related fair value is considered by convention to be equal to the carrying amount. The trend of the item ‘Due to central banks’ is to be attributed in particular to the service provided to the CR-BCCs for the settlement of the refinancing transactions of the European Central Bank. As part of the offered service, based on the financial guarantee agreements pursuant to Italian Legislative Decree no. 170 of 21 May 2004, Cassa Centrale Banca obtains the transfer of legal ownership of securities eligible from CR-BCCs, for which it makes interbanking deposits with the same CR-BCCs, which are represented in the item ‘Loans to banks’. Eligible securities transferred in this way are given by Cassa Centrale Banca to guarantee the participation in the refinancing transactions of the European Central Bank. The liquidity obtained from the ECB through the re- financing operations includes EUR 2,851,750 thousand for the intermediation service on behalf of the CR/BCCs and EUR 250,000 thousand for the requirements of Cassa Centrale Banca.

1.2 Detail of item 10 ‘Due to banks’: subordinated debts At the date of the financial statements, there are no subordinated amounts due to banks.

1.3 Detail of item 10 ‘Due to banks’: structured debts At the date of the financial statements, there are no structured due to banks.

1.4 Due to banks: debts subject to specific hedging At the date of the financial statements there are no due to banks subject to specific hedging.

1.5 Payables for financial leasing The Bank has no transactions of this kind in place.

179 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

section 2 DUE to CUSTOMERS - item 20

2.1 Due to customers: breakdown by category

Transaction type/Values Total 2011 Total 2010 1. Current accounts and demand deposits 164,854 139,688 2. Term deposits 29,834 30,151 3. Loans 35,739 17,450 3.1 Repos payables 5,003 3,709 3.2 Others 30,736 13,741 4. Liabilities for commitments to repurchase own equity investments - - 5. Other payables 61,086 45,289 TOTAL 291,512 232,577 FAIR VALUE 291,512 232,577

The sub-item ‘Other payables’ classifies the banker’s drafts issued and not yet produced for payment. Due to customers include payables in foreign currencies for a counter-value of EUR 41 thousand. The repos payables under sub-item 3.1 exclusively only concern the transactions with a forward resale obligation by the assignee for the assets subject to the transaction, since the Bank does not have any transaction in place that gives the assignee the right of forward resale.

2.2 Detail of item 20 ‘Due to customers’: subordinated debts At the date of the financial statements, there are no subordinated amounts due to customers.

2.3 Detail of item 20 ‘Due to customers’: structured debts There are no structured payables to customers.

2.4 Due to customers: debts subject to specific hedging At the date of the financial statements the Bank does not have payables to customers subject to specific hedging.

2.5 Payables for financial leasing The Banks has no payables for financial leasing to customers in place.

180 EXPLANATORY NOTES

section 3 DEBT SECURITIES IN ISSUE – ITEM 30

3.1 Debt securities in issue: breakdown by category

Total 2011 Total 2010 Security Carrying Fair value Carrying Fair value Type/Values amount Lev. 1 Lev. 2 Lev. 3 amount Lev. 1 Lev. 2 Lev. 3 A. Securities 1. Bonds 200,119 - 199,739 - 238,883 - 238,075 - 1.1 structured ------1.2 others 200,119 - 199,739 - 238,883 - 238,075 - 2. Other securities ------2.1 structured ------2.2 other ------TOTAL 200,119 - 199,739 - 238,883 - 238,075 -

Concerning the criteria to determine the fair value, please refer to Part A - Accounting policies.

3.2 Detail of item 30 ‘Debt securities in issue’: subordinated securities The Bank has issued no subordinated securities.

3.3 Debt securities in issue subject to specific hedging At the date of the financial statements the Bank does not have debt securities in issue subject to specific hedging.

181 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

section 4 FINANCIAL LIABILITIES FOR TRADING – ITEM 40

4.1 Financial liabilities for trading: breakdown by category

Total 2011 Total 2010 FV FV Transaction type/Values FV FV VN Lev. Lev. VN Lev. Lev. 2 * Lev. 2 Lev. 3 * 1 3 1 A. Cash liabilities 1. Due to banks ------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 securities ------3.2.1 Structured - - - - X - - - - X 3.2.2 Others - - - - X - - - - X TOTAL A ------B. Derivative instruments 1. Financial derivatives - 29 57,747 - - - 12 42,891 - X 1.1 For trading X 29 57,738 - X X 12 42,884 - X 1.2 Connected to the fair X - 9 - X X - 6 - X value option 1.3 Others X - - - X X - - - X 2. Credit derivatives ------2.1 For trading X - - - X X - - - X 2.2 Connected to the fair X - - - X X - - - X value option 2.3 Others X - - - X X - - - X TOTAL B X 29 57,747 - X X 12 42,891 - X TOTAL (A+B) X 29 57,747 - X X 12 42,891 - X

Key FV = fair value / FV* = fair value calculated by excluding the value changes due to the changed creditworthiness of the issuer with respect to the issue date VN = notional or nominal value

182 EXPLANATORY NOTES

The amount under letter B point 1.1 refers to derivative contracts with negative value stipulated with known leading counterparties and CR-BCCs, for the ‘matched trading’ activity where Cassa Centrale Banca stipulates a derivative contract or a forward transaction with an institutional counterparty in relation to a mirrored derivative contract /forward transaction entered into with a CR-BCC or leading customers.

4.2 Detail of item 40 ‘Financial liabilities for trading’: subordinated liabilities At the reference date there are no subordinated financial liabilities for trading.

4.3 Detail of item 40 ‘Financial liabilities for trading’: structured debts At the reference date there are no financial liabilities for trading related to structured debts.

4.4 Cash financial liabilities (excluding ‘overdrafts’) for trading: annual changes At the reference date there are no cash financial liabilities for trading.

section 5 FINANcIAl LIABILITIES at FAIR VALUE - item 50

5.1 Financial liabilities at fair value: breakdown by category

Total 2011 Total 2010 FV FV Transaction type/Values VN Lev. Lev. FV* VN Lev. Lev. FV* Lev. 2 Lev. 2 1 3 1 3 1. Due to banks ------1.1 Structured - - - - X - - - - X 1.2 Others - - - - X - - - - X 2. Due to customers ------2.1 Structured - - - - X - - - - X 2.2 Others - - - - X - - - - X 3. Debt securities 9,292 - 8,417 - 9,292 - 8,762 - 3.1 Structured 6,000 - 5,945 - X 6,000 - 6,517 - X 3.2 Others 3,292 - 2,472 - X 3,292 - 2,245 - X TOTAL 9,292 - 8,417 - X 9,292 - 8,762 - X

Key FV = fair value / FV* = fair value calculated by excluding the value changes due to the changed creditworthiness of the issuer with respect to the issue date VN = notional or nominal value

5.2 Detail of item 50 ‘Financial liabilities at fair value’: subordinated liabilities At the date of the financial statements there are no financial liabilities at fair value represented by subordinated securities.

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5.3 Financial liabilities at fair value: annual changes

Debt Due to Due to securities Total banks customers in issue A. Opening balances - - 8,762 8,762 B. Increases - - 233 233 B1. Issues - - - - B2. Sales - - 5 5 B3. Positive fair value changes - - 105 105 B4. Other changes - - 122 122 C. Decreases - - 577 577 C1. Purchases - - 5 5 C2. Repayments - - - - C3. Negative fair value changes - - 572 572 C4. Other changes - - - - D. Closing balances - - 8,417 8,417

section 6 hedging DERIVATIves - item 60 The Bank does not have hedging derivatives in place. As a consequence, this Section has not been filled in.

section 7 adjustment of the financial LIABILITIES subject to general hedging - item 70 The Bank has no financial liabilities subject to general hedging (macrohedging) in place against the interest rate risk. As a consequence, this Section has not been filled in.

section 8 TAX LIABILITIES – ITEM 80 For information on tax liabilities reference is made to Section 13 of the Assets.

section 9 LIABILITIES ASSOCIATED TO ASSETS HELD FOR DISPOSAL – ITEM 90 For information on associated liabilities held for disposal reference is made to Section 14 of the Assets.

184 EXPLANATORY NOTES

section 10 OTHER LIABILITIES – ITEM 100

10.1 Other liabilities: breakdown

Total 2011 Total 2010 Tax payables to tax authorities for indirect taxes 1,746 1,973 Temporary items Centralised Treasury management 363 343 Wire transfers to be settled 11,901 4,849 Housing contributions Public Authorities 5,270 4,270 Due to suppliers and expenses to be settled 6,517 6,381 Collection on behalf of this parties and amounts available to customers 22,433 20,661 or third parties Payables for guarantees issued and commitments 644 765 Due to employees 1,650 1,060 Due to social security institutions and external pension funds 458 644 Other work in progress 23,656 11,697 Accrued expenses and deferred income not attributable to own items 492 357 TOTAL 75,129 53,001

This item includes the liabilities that are not attributable to other items in the liabilities of the Statement of financial position. The increase in the sub-item “Other work in progress” is primarily due to the flow of wire transfers to be settled and not yet processed at the end of the year but deducted in the first days of January 2012.

section 11 PROVISION FOR SEVERANCE INDEMNITY – ITEM 110

11.1 Provision for severance indemnity: annual changes

Total 2011 Total 2010 A. Opening balances 2,376 2,905 B. Increases 64 6 B.1 Charge for the year 64 6 B.2 Other changes - - C. Decreases 150 535 C.1 Payments settled 150 535 C.2 Other changes - - D. Closing balances 2,290 2,376 TOTAL 2,290 2,376

At the reference date the Bank opted to post in the Income Statement the actuarial profits or losses that occurred in the year; therefore the Item D. ‘Closing balances’ of the provision recorded coincides with its actuarial value (Defined Benefit Obligation – DBO).

185 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

11.2 Other information Notwithstanding the indications above, the Provision for severance indemnity, calculated pursuant to art. 2120 of the Italian Civil Code, not allocated to external pension funds or to the INPS treasury fund, amounts to EUR 2,672 thousand and in the year changed as shown below:

Total 2011 Total 2010 Opening provision 2,732 3,188 Increases 153 143 Decreases 213 598 Closing provision 2,672 2,732

section 12 PROVISIONS FOR RISKS AND CHARGES – ITEM 120

12.1 Provisions for risks and charges: breakdown

Items/values Total 2011 Total 2010 1 Company pension funds - - 2. Other provisions for risks and charges 525 468 2.1 legal disputes - - 2.2 personnel charges 102 99 2.3 other 423 370 TOTAL 525 468

The content of item 2 ‘Other provisions for risks and charges’ is shown in point 12.4 below.

12.2 Provisions for risks and charges: annual changes

Items/values Pension funds Other funds Total A. Opening balances - 468 468 B. Increases - 338 338 B.1 Charge for the year - 97 97 B.2 Changes due to time passing - - - B.3 Changes due to changes in the discount rate - - - B.4 Other changes - 240 240 C. Decreases - 281 281 C.1 Use for the year - 74 74 C.2 Changes due to changes in the discount rate - - - C.3 Other changes - 207 207 D. Closing balances - 525 525

186 EXPLANATORY NOTES

Sub-item B.1 ‘Charge for the year’ includes the increase in future estimated debt related to both existing funds and funds established in the year. Sub-item B.4 ‘Other increases’ includes the portion of the profit of the previous year to be allocated to the charity fund. Sub-item C.3 ‘Other decreases’ includes in particular the decreases in the charity fund after using the specific allocations for EUR 199 thousand.

12.3 Defined benefit company pension funds The Bank did not post any funds of this type in the accounts.

12.4 Provisions for risks and charges – other provisions The item ‘Other provisions for risks and charges’ includes:

Personnel charges: • seniority/loyalty bonuses regarding the financial charge that the Bank must incur in future years in favour of the employees in relation to the seniority of service for EUR 102 thousand. In terms of operations, the application of the project Unit Credit Method also required demographic and economic-financial hypotheses applied analytically to each employee. The independent and experienced external firm was in charge of estimating the charge according to IAS 19. The portion accrued in the year was posted in the Income Statement under personnel expenses.

Others: • charity fund, which originates from the Articles of Association (art. 28) for EUR 329 thousand. • fund for actions required by the Cooperative Credit Depositors’ Guarantee Fund for EUR 93 thousand. The measurements made led to the belief that the liabilities reported may be settled within the next twelve/ eighteen months; as a result, the charge connected with these liabilities was not discounted as it was deemed to be negligible.

Potential liabilities No potential liabilities exist at year-end for which a financial disbursement is likely.

section 13 REPAYABLE SHARES – ITEM 140 The Bank has issued no repayable shares.

187 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

section 14 Equity - Items 130, 150, 160, 170, 180, 190 and 200

14.1 ‘Capital’ and ‘Ordinary shares’: breakdown

The share capital of the Bank, equal to EUR 140,400,000, comprises 2,550,000 ordinary shares and 150,000 preference shares, both with a nominal value of EUR 52. There are no shares subscribed and not yet paid-up. There are no repurchased own shares.

14.2 Capital – Number of shares: annual changes

Items/Types Ordinary Others A. Shares at year-start 2,550,000 150,000 - fully paid-up 2,550,000 150,000 - not fully paid-up - - A.1 Own shares (-) - - A.2 OUTSTANDING SHARES: OPENING BALANCES 2,550,000 150,000 B. Increases - - B.1 New issues - - - paid: - - - business combination transactions - - - conversion of bonds - - - exercise of warrants - - - others - - - free of charge: - - - in favour of employees - - - in favour of directors - - - others - - B.2 Sale of own shares - - B.3 Other changes - - C. Decreases - - C.1 Cancellation - - C.2 Purchase of own shares - - C.3 Company transfer transactions - - C.4 Other changes - - D. Outstanding shares: closing balances 2,550,000 150,000 D.1 Own shares (+) - - D.2 Shares at year-end 2,550,000 150,000 - fully paid-up 2,550,000 150,000 - not fully paid-up - - Unit values

The information refers to the number of shares traded during the year.

188 EXPLANATORY NOTES

14.3 Capital: other information 72.64% of ordinary shares are held by Centrale Finanziaria del Nord Est S.p.A., 26.47% by DZ Bank AG and the remainder 0.89% by CR-BCCs and cooperative consortia in the North East. 89.33% preference shares are held by the Trento Autonomous Province and the remainder 10.67% by other subjects.

14.4 Profit reserves: other information These amount to EUR 47,724 thousand and include: the legal reserve (EUR 20,579 thousand), the extraordinary reserve (EUR 17,771 thousand), the reserve pursuant to art. 6 of Italian Legislative Decree 38/2005 (EUR 78 thousand), the reserve according to Italian Legislative Decree 124/93 (EUR 18 thousand) as well as the reserve that incorporates the effect generated by applying the international accounting standards (EUR 9,278 thousand). Consequently to regulatory provisions, at least 5% of the profit for the year is allocated to the legal reserve while the remainder is available for distribution to the Shareholders and for the allocation of a portion of it to the Board of Directors for charity. As provided for by paragraph 76, lett. b) of IAS 1, a description is reported of the nature and purpose of each reserve included in the Equity.

Legal reserve The legal reserve is formed with an allocation of at least 5% of the net profits. The legal reserve also includes the portion of the residual net profits after the allocations established by law and the Articles of Association and resolved by the Shareholders’ meeting. In compliance with article 2427, no. 7-bis of the Italian Civil Code, illustrated below is the detailed breakdown of the Equity of the Bank, excluding the profit for the year, with the origin and level of availability and releasability of the various items being highlighted.

189 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Possibility of Uses made in 2011 and the three Description Total 2011 use previous periods to cover for other

losses reasons to cover losses and Share capital: 140,400 repay the - - value of the shares Capital reserves:

to cover losses and Share premium reserve 4,350 - - repay the premium paid

Reserves (item 160 of liabilities in the Statement of financial position) not admitted to cover Legal reserve 20,579 - as it is losses unavailable not admitted to cover Other reserves (e.g. merger) 17,867 - as it is losses unavailable not admitted to cover First time adoption reserve 9,278 - as it is losses unavailable Valuation reserves (item 130 of liabilities in the Statement of financial position) not admitted to cover Monetary revaluation reserves 896 - as it is losses unavailable not admitted Valuation reserves in First time to cover - - as it is adoption :deemed cost losses unavailable Valuation reserve for financial according to (6,438) - instr. available for sale (AFS) IAS 39 according to Cash flow hedging reserve - - IAS 39 Fair value valuation reserve on according to - - real estate (IAS 16) IAS 39 Other valuation reserves (specify) according to - - according to IAS 39 IAS 39 TOTAL 186,933 - -

The ‘Valuation reserve: financial assets available for sale’ may be moved only as provided for by IAS 39. It originates from the valuation of financial instruments and can not be used to increase the share capital, for distribution to shareholders or to cover losses. Any negative change in this reserve can only take place due to the reduction in fair value, reversals to the Income Statement or the application of current or deferred taxes.

190 EXPLANATORY NOTES

14.5 Capital instruments: breakdown and annual changes No instruments exist that represent the Equity, other than the capital and reserves.

14.6 Other information No other information on instruments exists that represent the Equity, other than the capital and reserves.

other 1. Guarantees issued and commitments information Transactions Total 2011 Total 2010 1) Financial guarantees issued 35,713 49,921 a) Banks 8,243 9,444 b) Customers 27,470 40,478 2) Commercial guarantees issued 30,503 24,600 a) Banks 15,908 17,929 b) Customers 14,595 6,671 3) Irrevocable commitments to disburse funds 64,565 47,306 a) Banks 26,411 7,326 i) certain use 26,411 7,326 ii) uncertain use - - b) Customers 38,153 39,980 i) certain use 15,495 13,282 ii) uncertain use 22,659 26,698 4) Commitments underlying credit derivatives: protection sales - - 5) Asset-backed third-party obligations - - 6) Other commitments - - TOTAL 130,781 121,827

The commercial guarantees released include the credit commitments for personal guarantees backing specific commercial transactions or the regular execution of contracts. Financial guarantees include the personal guarantees backing the suitable provisions of the debt service by the ordering entity. Point 1.a) ‘Financial guarantees issued – Banks’ also includes the commitment to the Cooperative Credit Depositors’ Guarantee Fund, for EUR 1,491 thousand; Point 3 ‘Irrevocable commitments to disburse funds’ also includes: a) banks – with certain use - purchases (spot and forward) of securities not yet settled for EUR 1,023 thousand; - deposits to be made with credit institutes for EUR 6,303 thousand; b) customers – with certain use - purchases (spot and forward) of securities not yet settled for EUR 12,426 thousand; - deposits and loans to be disbursed on a pre-set future date for EUR 56 thousand;

191 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

a) banks – with uncertain use - negative b) customers – with uncertain use - margins usable on irrevocable credit facilities for EUR 26,698 thousand.

2. Asset-backed own liabilities and commitments

Portfolio Total 2011 Total 2010 1. Financial assets held for trading 38,171 - 2. Financial assets at fair value - - 3. Financial assets available for sale 173,227 31,716 4. Held to maturity investments 89,731 - 5. Loans to banks - - 6. Loans to customers - - 7. Tangible assets - -

Posted in the items in particular are the values of the securities relating to: • issue of banker’s drafts for EUR 12,943 thousand; • operations in derivatives for EUR 863 thousand; • operations related to the treasury pool of the Trento Autonomous Province for EUR 15,514 thousand; • participation in the refinancing transactions of the European Central Bank for EUR 271,804 thousand; • other for EUR 5 thousand. With reference to the participation in the refinancing transactions of the European Central Bank, the Bank operated to obtain liquidity for its operations (EUR 250,000 thousand), by providing a guarantee of EUR 271,804 thousand, and for the settlement service offered to the CR-BCCs to allow them access to loans through Cassa Centrale Banca. As part of the offered service, based on the financial guarantee agreements pursuant to Italian Legislative Decree no. 170 of 21 May 2004, the Bank obtained the transfer of legal ownership of securities eligible from CR-BCCs, for which it makes interbanking deposits with the same CR-BCCs, which are represented in the item ‘Loans to banks’. Eligible securities transferred in this way are given by Cassa Centrale Banca to guarantee the participation in the refinancing transactions of the European Central Bank. The portion of the ‘Loans to banks’ relating to the service provided to the CR-BCCs for the settlement of the transactions of European Central Bank equals EUR 2,851,750 thousand. Moreover, according to the financial guarantee contracts used, a greater spread than the one defined by the European Central Bank is applied to determine the value of the transferred securities.

192 EXPLANATORY NOTES

3. Information on operating leasing On the reference date the Bank has no operating leasing transactions in place.

4. Management and brokering on behalf of third parties

Service type Total 2011 1. Execution of orders on behalf of customers 88,766 a) Purchases 8,708 1. settled 8,678 2. unsettled 30 b) Sales 80,058 1. settled 73,545 2. unsettled 6,513 2. Portfolio management 1,125,937 a) individual 1,125,937 b) collective - 3. Safe custody and administration of securities a) third-party securities under custody: connected to the role as depositary bank - (excluding portfolio management) 1. securities issued by the bank that prepares the financial statements - 2. other securities - b) third-party securities under custody (excluding portfolio management): others 19,029,211 1. securities issued by the bank that prepares the financial statements 331,492 2. other securities 18,697,719 c) third-party securities deposited with third parties 19,876,322 d) own securities deposited with third parties 1,130,087 4. Other transactions -

193 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

5. Credit collection on behalf of third parties: debit and credit adjustments

Total 2011 Total 2010 a) Debit adjustments 1,904,744 1,708,212 1. current accounts 1,157,906 1,053,228 2. central portfolio 743,132 652,354 3. cash 3,706 2,629 4. other accounts - - b) Credit adjustments 1,883,946 1,671,290 1. current accounts 839,427 745,610 2. sellers’ bills and documents 1,044,519 925,680 3. other accounts - -

The table shows the differences deriving from the spreads between the economic value dates applied to the different accounts, generated when eliminating from the accounts the entries regarding the amounts credited or debited to the portfolio subject to collection and after collection, for which the settlement date is after the year-end. The difference between ‘debit and credit adjustments’ of EUR 20,798 thousand is posted under ‘Other assets’ – item 150 of the Assets.

194 EXPLANATORY NOTES

195 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

part c INFORMATION ON THE INCOME STATEMENT

Section 1 Interest Items 10 and 20 Section 2 Commissions Items 40 and 50 Section 3 Dividend and similar income Item 70 Section 4 Net result from trading Item 80 Section 5 Net results from hedging activities Item 90 Section 6 Profit (loss) from disposal/repurchase Item 100 Section 7 Net result of financial assets and liabilities at fair value Item 110 Section 8 Net value adjustments/write-backs for impairment Item 130 Section 9 Administrative expense Item 150 Section 10 Net allocations to provisions for risks and charges Item 160 Section 11 Net value adjustments/write-backs for tangible assets Item 170 Section 12 Net value adjustments/write-backs for intangible assets Item 180 Section 13 Other operating income/expenses Item 190 Section 14 Income (loss) attributable to equity investments Item 210 Section 15 Net result of fair value measurement of tangible and intangible assets Item 220 Section 16 Adjustments to goodwill Item 230 Section 17 Profit (loss) from disposal of investments Item 240 Section 18 Income taxes for the year on current operating activities Item 260 Section 19 Net income (Loss) of groups of assets being disposed, net of taxes Item 280 Section 20 Other information Section 21 Earnings per share

196 EXPLANATORY NOTES

section 1 Interest - Items 10 and 20

1.1. Interest income and similar revenues: breakdown

Debt Other Total Total Items/types Financing securities assets 2011 2010 1. Financial assets held for trading 700 - - 700 379 2. Financial assets at fair value 118 4 - 122 178 3. Financial assets available for 5,262 - - 5,262 2,071 sale 4. Held to maturity investments 2,334 - - 2,334 1,184 5. Loans to banks 6,517 20,133 - 26,650 9,148 6. Loans to customers 71 20,430 - 20,501 17,766 7. Hedging derivatives - - - - - 8. Other assets - - 83 83 100 TOTAL 15,003 40,566 83 55,652 30,827

Details of item 6, “Receivables due from customers”, column “Financing”: • Bank accounts totalling EUR 901 thousand; • Loans totalling EUR 13,143 thousand; • Advances subject to collection totalling EUR 414 thousand; • Other financing totalling EUR 5,905 thousand; • Non-performing loans (collected interest) totalling EUR 67 thousand. The interest outlined above includes interest income and similar revenues which accrued in the year and relative to impaired positions on the date of reference of the financial statements, totalling EUR 1,079 thousand. Details of sub-item 2 “Financial assets at fair value”, “Financing” column: • mortgage loans totalling EUR 4 thousand; • bonds totalling EUR 118 thousand. The amount included in the column “Other assets” under sub-item 8 “Other Assets” primarily refers to interest income which accrued in relation to advance payments through the F24 form (EUR 65 thousand) as well as those relative to settlements within the clearing house of interbank charges (EUR 16 thousand).

1.2 Interest income and similar revenues: differentials relative to hedging transactions The Bank does not own hedging derivatives and, as a result, the relative table is not filled out.

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1.3 Interest income and similar revenues: other information

1.3.1 Interest income from financial assets in foreign currency

Items/Values Total 2011 Total 2010 Interest income and similar revenues from financial assets in foreign currency 696 595

1.3.2 Interest income from finance lease operations The Bank is not a party to active finance leasing operations.

1.4 Interest expenses and similar charges paid: breakdown

Other Total Total Items/types Payables Securities operations 2011 2010 1. Due to central banks (13,276) - - (13,276) (2,171) 2. Due to banks (19,480) - - (19,480) (6,639) 3. Due to customers (2,696) - - (2,696) (839) 4. Debt securities in issue - (4,393) - (4,393) (2,846) 5. Financial liabilities held for trading - - (2) (2) (3) 6. Financial liabilities at fair value - (422) - (422) (703) 7. Other liabilities and provisions - - (17) (17) (25) 8. Hedging derivatives - - - - - TOTAL (35,452) (4,815) (19) (40,287) (13,226)

Sub-item 4 “Debt securities in issue”, column “Securities”, reports interest totalling EUR 4,393 thousand in connection with issued bonds. Sub-item 6 “Financial liabilities at fair value”・, column “Securities”, reports interest totalling EUR 422 thousand in connection with issued bonds. Sub-item 7 “Other liabilities and provisions”, column “Other operations”, primarily refer to interest on settlements in clearing house of interbank charges totalling EUR 16 thousand.

1.5 Interest expenses and similar charges paid: differentials relative to hedging transac- tions The Bank did not apply hedging derivatives during the course of the year and, as a result, the relative table is not filled out.

1.6 Interest expenses and similar charges paid: other information

1.6.1 Interest expenses from liabilities in foreign currencies

Items/Values Total 2011 Total 2010 Interest expenses and similar charges paid from liabilities in foreign currency (222) (172)

198 EXPLANATORY NOTES

1.6.2 Interest expenses on liabilities for finance lease operations The Bank did not implement these operations.

Section 2 COMMISSIONS - Items 40 and 50

2.1 Commission income: breakdown

Type of services/values Total 2011 Total 2010 a) guarantees issued 303 339 b) credit derivatives - - c) management, trading and consulting services: 16,096 16,860 1. Trading of financial instruments 60 69 2. Foreign currency trading 168 136 3. Portfolio management 11,488 11,118 3.1. Individual 11,488 11,118 3.2. Collective - - 4. Custody and administration of securities 903 905 5. Custodian bank - - 6. Placement of securities 100 623 7. Collection and transmission of orders 2,805 3,394 8. Consulting activities 9 6 8.1. pertaining to investments - - 8.2. pertaining to financial structures 9 6 9. distribution of third party services 562 609 9.1. Portfolio management - - 9.1.1. Individual - - 9.1.2. Collective - - 9.2. Insurance products 27 83 9.3. Other products 535 526 d) Collection and payment services 26,470 23,996 e) Servicing activities for securitization transactions - - f) Services for factoring operations - - g) Collection and receiving operations - - h) Activities for the management of multilateral trading systems - - i) management of bank accounts 183 163 j) other services 6,434 5,444 TOTAL 49,486 46,804

The amount relative to sub-item j) “other services” is primarily composed of commissions on: • payment brokerage services linked to participation in UCITS, and totalling EUR 2,025 thousand; • centralized securities database service totalling EUR 494 thousand; • financial reporting service totalling EUR 644 thousand;

199 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

• ALM – Management Consulting services totalling EUR 518 thousand; • VAR service totalling EUR 232 thousand; • share price valuation service totalling EUR 238 thousand; • Premia procedure management service totalling EUR 566 thousand; • other services totalling EUR 1,717 thousand.

2.2 Commission income: distribution channels of products and services

Channels/values Total 2011 Total 2010 a) within its own counters: 12,150 12,350 1. Portfolio management 11,488 11,118 2. Placement of securities 100 623 3. Third party services and products 562 609 b) Offers outside the branch - - 1. Portfolio management - - 2. Placement of securities - - 3. Third party services and products - - c) Other distribution channels: - - 1. Portfolio management - - 2. Placement of securities - - 3. Third party services and products - -

2.3 Commission expense: breakdown

Services/Values Total 2011 Total 2010 a) guarantees received (1) - b) credit derivatives - - c) management and trading services: (9,397) (9,142) 1. Trading of financial instruments (720) (720) 2. Foreign currency trading - - 3. Portfolio management (8,119) (7,748) 3.1. own portfolios (8,105) (7,736) 3.2. delegated from third parties (14) (12) 4. Custody and administration of securities (502) (471) 5. Placement of financial instruments (56) (203) 6. Out-of-branch offer of financial instruments, products and - - services d) Collection and payment services (13,526) (12,621) e) other services (1,641) (1,386) TOTAL (24,566) (23,149)

The amount relative to sub-item e) “Other services” is primarily composed of commissions on: • retrocessions to CR-BCCs for lending operations totalling EUR 1,165 thousand; • other services totalling EUR 476 thousand.

200 EXPLANATORY NOTES

section 3 Dividend and similar INCOME - Item 70

3.1 Dividend and similar income: breakdown

Total 2011 Total 2010 Items/Income Income from Income from Dividends Dividends UCITS units UCITS units A. Financial assets held for trading 23 - 32 - B. Financial assets available for sale 598 - 614 - C. Financial assets at fair value - - - - D. Equity investments 450 X 340 X TOTAL 1.071 - 986 -

The item D. “Equity investments” includes the dividends relative to controlling interest and shareholdings in associated companies valuated at cost.

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section 4 Net result from trading - Item 80

4.1 Net result from trading

Net result Operations/ Capital Trading Capital losses Trading [(A+B) - Income elements gains (A) profits (B) (C) losses (D) (C+D)] 1. Financial assets held for 5 336 (1,625) (74) (1,358) trading 1.1 Debt securities - 227 (1,333) (9) (1,116) 1.2 Investment securities 5 109 (292) (64) (242) 1.3 UCITS units - - - - - 1.4 Loans - - - - - 1.5 Other - - - - - 2. Financial liabilities held for - - - - - trading 2.1 Debt securities - - - - - 2.2 Payables - - - - - 2.2 Other - - - - - 3. Other financial assets and liabilities: exchange rate 2,448 differences 4. Derivative instruments 49,735 17,594 (49,602) (17,073) (1,137) 4.1 Financial derivatives: 49,735 17,594 (49,602) (17,073) (1,137) - on debt securities and 49,735 17,593 (49,602) (17,073) 653 interest rates - on investment securities - - - - - and stock market indices - on currencies and gold (1,790) - other - - - - - 4.2 credit derivatives - - - - - TOTAL 49,740 17,930 (51,227) (17,147) (47)

Trading profits (losses) and capital gains (losses) from valuations are reported with balances opened by type of financial instrument. Within the “Net result” of “Other financial assets and liabilities: exchange rate differences” reports the positive or negative balance from changes in value of financial assets and liabilities denominated in foreign currencies; it includes profits and losses deriving from foreign currency exchange trading. “Capital gains”, “capital losses” and “Trading gains and losses” from derivative instruments also include potential exchange rate differences.

202 EXPLANATORY NOTES

section 5 NET Results from HEDGING activities - Item 90 The Bank did not have hedging derivatives during the course of the year.

section 6 PROFIT (loss) from DISPOSAL/REPURCHASE - Item 100

1.1 Profit (loss) from disposal/repurchase: breakdown

Total 2011 Total 2010 Net Net Profit Loss Profit Loss result result Financial assets 1. Loans to banks 17 - 17 1 - 1 2. Loans to customers ------3. Financial assets available for sale 2,344 - 2,344 7,784 (5) 7,779 3.1 Debt securities 37 - 37 813 - 813 3.2 Investment securities 59 - 59 6,455 - 6,455 3.3 UCITS units 2,248 - 2,248 515 (5) 510 3.4 Loans ------4. Held to maturity investments ------TOTAL ASSETS 2,360 - 2,360 7,785 (5) 7,780 Financial liabilities 1. Due to banks ------2. Due to customers ------3. Debt securities in issue 5 - 5 10 - 10 TOTAL LIABILITIES 5 - 5 10 - 10

The table reports the economic result deriving from the sale of financial assets other than those held for trading and those at fair value as well as the result derived from the buyback of the company’s own financial liabilities. In particular: • the amount of EUR 37 thousand specified in row 3.1 represents the net income relative to the transfer of bond securities (in particular, Italian government bonds CIT., B.T.P.,B.E.I.); • the amount of EUR 59 thousand specified in row 3.2 represents the net income relative to the transfer of stock securities pertaining to the shareholding in “Centro Pensioni complementari regionale”; • the amount of EUR 2,248 thousand specified in row 3.3 represents the net income relative to the transfer of shares of NEF funds for EUR 2,169 thousand and other funds for EUR 79 thousand; With regard to financial liabilities, international accounting principles require that the buyback of a company’s financial liabilities must be reported within the financial statements in a manner which gives precedence to substance over form and, as a result, in relation to an actual advance redemption with a cancellation of the financial instrument and the consequent realization of gains or losses.

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section 7 Net result of financial assets and liabilities at fair value - Item 110

7.1 Net change in the value of financial assets and liabilities at fair value: breakdown

Capital Profit on Capital Loss on Net result gains (A) sale (B) losses (C) sale (D) [(A+B) - (C+D)] 1. Financial assets 4 - (61) - (57) 1.1 Debt securities - - (58) - (58) 1.2 Investment securities - - - - - 1.3 UCITS units - - - - - 1.4 Loans 4 - (3) - 1 2. Financial liabilities 572 - (105) - 467 2.1 Debt securities 572 - (105) - 467 2.2 Due to banks - - - - - 2.3 Due to customers - - - - - 3. Financial assets and liabilities denominated in foreign currency: - exchange rate differences 4. Credit and financial - - (2) - (2) derivatives TOTAL 576 - (169) - 407

Trading profits (losses) and capital gains (losses) from valuations are reported with balances opened by type of financial instrument. This item includes capital gains and losses that are derived from the fair value valuation of financial assets/ liabilities that are classified in the portfolio under item 30 of Assets and Item 50 of Liabilities.

204 EXPLANATORY NOTES

section 8 Net VALUE adjustments/WRITE-BACKS for impairment - Item 130

8.1 Net adjustments for impairment of loans: breakdown

Adjustments (1) Value write-backs (2) Specific Specific Of portfolio Total Total 2011 2010 Operations/ Income elements (3)=(1)-(2) (3)=(1)-(2) Cancellations Other portfolio Of Interest write- Other backs Interest write- Other backs A. Loans to banks ------loans ------debt securities ------loans to B. - (9,310) (674) 937 6,996 - - (2,051) (4,417) customers - loans - (9,310) (674) 937 6,996 - - (2,051) (4,417) - debt securities ------C. TOTAL - (9,310) (674) 937 6,996 - - (2,051) (4,417)

Value write-backs include write-backs from collection equal to EUR 473 thousand. Adjustments within the column “Specific – Other” refer to analytical debt write-off while those reported in the column “Specific – Cancellations” are derived from redemption events. Adjustments within column “Of portfolio”, correspond to collective write-downs. Value write-backs within the column “Specific – Interest” refer to value write-backs corresponding to interest which accrued during the year on the basis of the original effective interest rate that was previously utilized to calculate adjustments. For more detailed information pertaining to movements in net adjustments on receivables, refer to Part E of these Explanatory Notes.

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8.2 Net adjustments for impairment of financial assets available for sale: composition

Adjustments (1) Value write-backs (2) Specific Specific Total Total 2011 2010

(3) = (1)-(2) (3) = (1)-(2) Cancellations Other Interest write- Other backs A. Debt securities ------B. Investment securities - (191) (191) (318) C. UCITS units - (233) - (233) (139) D Loans to banks ------E. Loans to customers ------TOTAL - (424) - - (424) (457)

Adjustments relative to the column “Other”, item B. “Investment securities” booked on the basis of forecasts pursuant to IAS 39, paragraph 61, refer to the write-down of the shareholdings held in the companies S.Martino e Primiero Dolomiti Trasporti a fune S.p.A. (EUR 59 thousand) and Urbin S.p.A. in liquidation (EUR 132 thousand). Value adjustments relative to the column “Other”, item C. “UCITS units” booked on the basis of forecasts pursuant to IAS 39, paragraph 59, refer to value decreases of quotas of funds: • MC2 Impresa, totalling EUR 21 thousand; • Nef Japan Stock totalling EUR 109 thousand; • Nef coupon R totalling EUR 23 thousand; • NEF Flexible, totalling EUR 80 thousand. Net adjustments for impairment of financial assets available for sale are derived from the application of the criteria described in Part A of these Explanatory Notes.

8.3 Net adjustments for impairment of held to maturity investments: breakdown In the year of reference, the bank had not booked any impairment in the financial instruments classified under held to maturity investments.

206 EXPLANATORY NOTES

8.4 Net adjustments for impairment of other financial operations: breakdown

Adjustments (1) Value write-backs (2) Specific Specific Of portfolio Total Total 2011 2010 Operations/Income elements (3) = (3) = (1)-(2) (1)-(2) Of portfolio Of Cancellations Other Interest write- Other backs Interest write- Other backs A. Issued guarantees - - - - - 121 121 (192) B. credit derivatives ------C. Commitments to issue funds ------D. Other operations ------E. TOTAL - - - - - 121 121 (192)

section 9 ADMINISTRATIVE EXPENSES – ITEM 150

9.1 Personnel expenses: breakdown

Types of expenses/values Total 2011 Total 2010 1) Employee personnel (13,797) (14,142) a) salaries and wages (9,580) (9,953) b) social security charges (2,548) (2,484) c) severance indemnity - - d) social security expenses - - e) provision for employees ’ severance indemnity (125) (68) f) allocation to retirement and similar obligations - - - with defined contribution - - - with defined benefits - - g) payments to external complementary retirement funds: (967) (966) - with defined contribution (967) (966) - with defined benefits - - h) costs deriving from payment agreements based on own financial - - instruments i) other benefits in favour of employees (577) (549) 2) Other operating personnel (217) (224) 3) Directors and Auditors (483) (454) 4) Personnel expenses for retirement - - 5) Recovery of expenses for employees transferred to other companies 150 149 6) Reimbursement of expenses for third party employees transferred to the - - company TOTAL (14,346) (14,549)

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Following clarifications pertaining to the instructions for preparing the financial statements, and received from the Bank of Italy, certain costs - classified within the previous year as “Personnel expenses - other employee benefits” were re-classified to “Other administrative expenses”. In particular, these include: • costs for detailed and documented reimbursements of board and lodging expenses sustained by travelling employees; • costs for the mileage allowance payments determined on the basis of rates which are recognized as valid and effectively travelled mileage; • costs for check-up visits implemented when hiring personnel as well as costs for mandatory visits of personnel, as required by law (e.g. ophthalmological visits for employees working at video terminals). In the absence of this re-classification, “Personnel expenses” for the year 2010 would have been equal to EUR 14,671 thousand. Sub-item “e) Provision for employees’ severance indemnity” is composed as follows: • figurative financial charge (Interest Cost – IC) totalling EUR 108 thousand; • actuarial gain (Actuarial Gains/Losses – A G/L) totalling EUR 45 thousand, gross of the amount of EUR 57 thousand for the substitute tax for the revaluation of the fund and the additional rate of 0.5% which is payable to INPS; • amounts allocated to the INPS treasury fund, in compliance with the provisions introduced by the social security reform pursuant to Legislative Decree 252/2005 and Law no. 296/2006 totalling 5 thousand Euro. Sub-item g) includes the shares relative to the termination indemnities which accrued during the year and which are allocated to the sector retirement funds, totalling EUR 967 thousand. Item 2) “Other operating personnel” includes: • expenses relative to independent contracting totalling EUR 197 thousand; • scholarships totalling EUR 20 thousand. Item 3) “Directors and auditors” include compensation for directors, including social security charges for the company and expense reimbursement totalling 300 thousand Euro as well as compensation for the Board of Statutory Auditors totalling 183 thousand Euro.

9.2 Average number of employees by sector

Total 2011 Total 2010 Employees: 179 176 a) executives 5 4 b) total mid-level managers 50 49 c) remaining employees 124 123 Other personnel 21 23

The average number is calculated as the weighted average of employees where the weight is given by the number of months worked per year. The relative value of “Other personnel” includes the directors (15), auditors, (3) and other collaborators (3).

9.3 Company pension funds with defined benefits: total costs The bank did not book - on the date of the financial statements – funds of this type given that the contributions which were due on the basis of company agreements were paid to an external fund.

208 EXPLANATORY NOTES

9.4 Other benefits in favour of employees

Total 2011 Total 2010 Expenses for miscellaneous personnel: allocation of loyalty bonus (4) 14 Expenses for miscellaneous personnel: insurance (166) (164) Expenses for miscellaneous personnel: meal vouchers (214) (211) Expenses for miscellaneous personnel: training courses (172) (159) Expenses for miscellaneous personnel: other benefits (21) (27) TOTAL (577) (549)

It should be noted that, as specified at the bottom of table 9.1, the values reported above were subject to re- classification. In the absence of this change, the value for the year 2010 would have been equal to (671).

9.5 Other administrative expenses: breakdown

Total 2011 Total 2010 Administrative expenses (12,175) (12,165) Professional services (889) (631) Expenses for financial reporting (1,531) (1,525) Certifications and ratings (330) (225) Association contributions (520) (480) Advertising and promotions (575) (435) Entertainment (114) (663) Real estate property rentals (89) (25) Other rentals (82) (78) Data processing and transmission (3,578) (3,833) Maintenance (980) (1,003) of which for Ced (Sw and Hw) (649) (721) Premiums for fire and theft insurance (283) (288) Other insurance premiums (25) (26) Supervision (22) (22) Cleaning (127) (117) Printouts, stationary, publications (305) (318) Telephone, postal, transportation expenses (804) (829) Utilities and heating (281) (255) Other administrative expenses (1,484) (1,291) Personnel charges: detailed reimbursements (154) (122) Indirect taxes and duties (861) (1,134) Stamp duties (562) (816) Property tax (ICI) (39) (39) Substitute tax pursuant to DPR 601/73 (242) (246) Other taxes (18) (33) TOTAL OTHER ADMINISTRATIVE EXPENSES (13,036) (13,299)

209 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Following clarifications pertaining to the instructions for preparing the financial statements, and received from the Bank of Italy, certain costs – pertaining to personnel, and classified within the previous year as “Personnel expenses - other employee benefits” were re-classified to “Other administrative expenses”. In the absence of this re-classification, the total of the item for the year 2010 would have been equal to EUR 13,175 thousand. In accordance with the provisions pursuant to Article 2427 of the Italian Civil Code, paragraph 16 bis, the compensation – net of VAT and expenses – which are due to the regulatory audit company as well as other companies of the KPMG Network - for services performed during the course of 2011 - are reported below:

Auditing 53 Certification services 30

section 10 Net allocations to provisions for risks and charges - Item 160

10.1 Net allocations to provisions for risks and charges: breakdown

Revocation Total Total Legal disputes Other actions 2011 2010 A. Increases - - (94) (94) (82) A.1 Allocations for the year - - (94) (94) (82) A.2 Changes due to the passing of - - - - - time A.3 Changes due to modifications in - - - - - the discount rate A.4 Other increases - - - - - B. Decreases - - - - - B.1 Changes due to modifications in - - - - - the discount rate B.2 Other decreases - - - - - NET ALLOCATION - - (94) (94) (82)

The amount reported in row A.1 “Allocations for the year” refers to an allocation implemented in relation to certain operations in favour of consortium BCCs which were requested, but not yet completed, by the Cooperative Credit Depositors’ Guarantee Fund.

210 EXPLANATORY NOTES

section 11 Net VALUE adjustments/WRITE-BACKS for TANGIBLE ASSETS - Item 170

11.1 Net adjustments for tangible assets: breakdown

Adjustments Value write- Net result Asset/income element Depreciation (a) for impairment (b) backs (c) (a + b - c) A. Tangible assets A.1 Owned (1,304) - - (1,304) - For functional use (1,304) - - (1,304) - For investment - - - - A.2 Acquired with finance - - - - leases - For functional use - - - - - For investment - - - - TOTAL (1,304) - - (1,304)

As at the date of reference of the financial statements, there were no assets being disposed of, in accordance with IFRS 5.

section 12 Net VALUE adjustments/WRITE-BACKS for INTANGIBLE ASSETS - Item 180

12.1 Net adjustments for intangible assets: breakdown

Adjustments Value write- Net result Asset/income element Amortization (a) for impairment (b) backs (c) (a + b - c) A. Intangible assets A.1 Owned (256) - - (256) - Generated internally - - - - within the company - Other (256) - - (256) A.2 Acquired with finance - - - - leases TOTAL (256) - - (256)

Adjustments, which refer entirely to amortization, concern intangible fixed assets with a defined useful life that are acquired externally. Intangible fixed assets are more effectively described in Section 12 of the Explanatory Notes.

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section 13 OTHER OPERATING INCOME/CHARGES - Item 190

13.1 Other operating charges: breakdown

Income elements/Values Total 2011 Total 2010 Non-existent and contingent items not ascribable to own items (47) (57) Interventions of the Cooperative Credit Depositors’ Guarantee Fund (57) (81) TOTAL (104) (138)

13.2 Other operating income: breakdown

Total 2011 Total 2010 Recovery of taxes and Indirect duties 511 830 Debits charged to third parties on deposits and bank accounts 5 275 Other receivable rents 95 92 Non-existent and contingent items not ascribable to own items 122 56 Other operating income 117 463 TOTAL 851 1,716

section 14 PROFITS (lossES) ON EQUITY INVESTMENTS - Item 210 This section reports the balance between proceeds and shares relative to equity investments in subsidiaries, joint ventures and firms subject to significant influence. In the year of reference, there were no operations which resulted in gains or losses.

14.1 Profits (losses) on equity investments: breakdown

Total 2011 Total 2010 A. Proceeds - - 1. Revaluations - - 2. Net income from transfers - - 3. Value write-backs - - 4. Other proceeds - - B. Charges - (187) 1. Write-downs - - 2. Adjustments for impairment - (187) 3. Losses from transfers - - 4. Other charges - - NET result - (187)

212 EXPLANATORY NOTES

section 15 Net result of fair value MEASUREMENT of tangible and intangible assets - Item 220 During the course of the year, no fair value measurement were implemented with respect to tangible or intangible assets.

section 16 adjustments TO GOODWILL - Item 230 The Bank has not registered any asset item as goodwill.

section 17 PROFIT (loss) from DISPOSAL OF INVESTMENTS - Item 240

17.1 Profit (loss) from disposal of investments: breakdown

Total 2011 Total 2010 A. Real estate properties - - - Profits from disposals - - - Losses from disposals - - B. Other assets 4 32 - Profits from disposals 11 32 - Losses from disposals (7) - NET result 4 32

Profits on sale refer to the sale of two automobiles for a value exceeding the residual amount to depreciate, while the losses refer to equipped walls but which were not entirely depreciated; they were disposed of since they were no longer usable.

section 18 Income taxes for the year on current operating activities - Item 260

18.1 Income taxes for the year on current operating activities: breakdown This item includes the fiscal charges – equal to the balance between current and deferred taxes - pertaining to net income of the year.

Item/values Total 2011 Total 2010 1. Current taxes (-) (5,232) (5,359) 2. Changes in current taxes of previous years (+/-) (18) - 3. Decrease in current taxes of the year (+) - - 4. Changes in prepaid taxes (+/-) 9 604 5. Changes in deferred taxes (+/-) 1 30 6. Income taxes FOR the year (-) (-1+/-2+3+/-4+/-5) (5,241) (4,725)

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Current taxes were booked in accordance with currently effective legislation: • IRES: 27.50% • IRAP: 4.65% (rate used for the Value of Production realized in the Province of Trento).

18.2 Reconciliation between the theoretical fiscal charge and the effective fiscal charge in the financial statements

Item/Values Tax Rate Profit from current operating activities, gross of tax (Item 250 of the Income 13,443 Statement) IRES income taxes – theoretical fiscal charge (3,327) 27,50% Effects of decreases in taxable income on IRES 25 27,50% Effects of increases in taxable income on IRES (585) 27,50% A. Effective fiscal charge – current IRES tax (3,886) Increases in deferred tax assets 230 Decreases in deferred tax assets (222) Increases in deferred tax liabilities - Decreases in deferred tax liabilities - B. Total effects of deferred IRES taxation 9 C. Changes in current taxes of previous years (18) D. Total accrued IRES (A+B+ C) (3,896) Theoretical fiscal charge for IRAP with application of nominal rate (difference (1,414) 4,65% between earnings margin and allowable deductible costs): Effect of decreases in value of production 177 4,65% Effect of increases in value of production (109) 4,65% Effect of greater rates for value of production in other provinces / regions - E. Effective fiscal charge – current IRAP tax (1,346) Increases in deferred tax assets 4 Decreases in deferred tax assets (4) Increases in deferred tax liabilities - Decreases in deferred tax liabilities - F. Total effects of deferred IRAP taxation - G. Total accrued IRAP (E+F) (1,346) H. IRES/IRAP Substitute tax for exemption of mismatches - TOTAL IRES TAXES – CURRENT IRAP – ITEM 260 is (A+E+H) (5,251) TOTAL IRES TAXES – ACCRUED IRAP – ITEM 260 is (D+G+H) (5,241)

section 19 PROFIT (Loss) oN groups of assets HELD FOR SALE, AFTER tax - Item 280 During the course of the year, the bank did not proceed with disposals of groups of assets.

214 EXPLANATORY NOTES

section 20 other information We believe that the information reported in the preceding sections are completed and sufficiently detailed in order to supply an exhaustive illustration of the economic result.

section 21 EARNINGS PER SHARE The new international standards (IAS33) assign particular relevance to the KPI “Earnings per share”, rendering mandatory its publication in two forms: • Basic Earnings per share, calculated by dividing net income by the weighted average of ordinary shares in circulation; • Diluted Earnings per share, calculated by dividing net income by the weighted average of ordinary shares in circulation and while also taking into account classes of instruments with diluting effects.

Net result for the year in Euro 8,202,224 Number of ordinary shares outstanding 2,550,000 Number of preferred shares outstanding 150,000 Basic EPS 3.07 Diluted EPS 3.07 Amounts rounded to nearest integer In particular: • given that the share capital is also represented by preferred shares, the economic result which is ascribable to parties owning ordinary capital instruments is given by the net income of the year minus the dividends paid to preferred shares; • given that no financial instruments or operations were issued/implemented during the year with potential diluting effects on net income, the calculation of basic EPS coincides with that of diluted EPS; • there were no own shares.

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part D COMPREHENSIVE INCOME

Analytical statement of comprehensive income

216 EXPLANATORY NOTES

Analytical statement of comprehensive income

Gross Income Net Items Amount tax amount Net profit (loss) of the year X X 8,202 Other income items 20. Financial assets available for sale: (7,607) (1,779) (5,828) a) fair value changes (5,535) (1,779) - b) reversal to income statement 657 - - - impairment adjustments 424 - - - profits/losses on sale 232 - - c) other changes (2,729) - - 30. Tangible assets - - - 40. Intangible assets - - - 50. Hedging of foreign investments: - - - a) fair value changes - - - b) reversal to income statement - - - c) other changes - - - 60. Hedging of financial flows: - - - a) fair value changes - - - b) reversal to income statement - - - c) other changes - - - 70. Exchange rate differences: - - - a) value changes - - - b) reversal to income statement - - - c) other changes - - - 80. Non-current assets being disposed: - - - a) fair value changes - - - b) reversal to income statement - - - c) other changes - - - 90. Actuarial income (losses) from defined benefit plans - - - 100. Quota of reserves from the valuation of shareholdings - - - valuated with the equity method: a) fair value changes - - - b) reversal to income statement - - - - impairment adjustments - - - - profits/losses on sale - - - c) other changes - - - 110. TOTAL OTHER INCOME COMPONENTS NET OF TAXES (7,607) (1,779) (5,828) 120. COMPREHENSIVE INCOME (ITEM 10 + 110) - - 2,375

217 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

part e information on risks and on related hedging policies

Section 1 – Credit risk

Information of qualitative nature Information of quantitative nature

A. Credit quality B. Distribution and concentration of credit exposures C. Securitization transactions and transfer of assets D. Models for the credit risk measurement

Section 2 – Market risk

Information of qualitative nature Information of quantitative nature

2.1 Interest rate risk and price risk – Regulatory trading portfolio

2.2 Interest rate risk and price risk – Banking portfolio

2.3 Exchange rate risk

2.4 Derivative instruments A. Financial derivatives B. Credit derivatives C. Credit and financial derivatives

Section 3 – Liquidity risk

Information of qualitative nature Information of quantitative nature

Section 4 – Operating risks

Information of qualitative nature Information of quantitative nature

218 EXPLANATORY NOTES

INTERNAL CONTROL SYSTEM

The principle which serves as the basis for the management of Cassa Centrale Banca cam be expressed as the pursuit of satisfactory profitability which is based on operations that are compatible with the assumption of risks, both within regulatory limits as well as within those which are sustainable by the financial structure of the firm. The bank has created a structured system of internal controls which – on a daily basis and proportionally to the complexity of implemented activities – will involve the entire organizational structure across the following three levels: • line controls, or first level controls, which are assigned to production facilities and which aim to ensure the correct implementation of operations; they are implemented by means of IT barriers or organizational controls; • controls on risk management, or second level controls (Risk Management and Compliance) which have the objective of contributing to the definition of risk measurement methodologies in addition to verifying compliance with limits assigned to operational departments and checking operational consistency of the individual production areas with the assigned risk-return objectives; they aim to identify, measure, monitor and manage risks and are assigned to independent structures that are excluded from the operational phase. The Risk Management department is required to monitor risks and verify compliance with the operational limits set by supervisory regulations and by internal regulations, including verification of the exercising of proxies. This department is also entrusted with the responsibility to draft the ICAAP report. The Compliance department is entrusted with the task of identifying, evaluating, managing and monitoring risks derived from legal and administrative sanctions as well from financial losses or damages to the company’s reputation and which are due to external or internal violations of norms. • internal audits, or third level audits, which aim to identify the existence of anomalies or violations of procedures and in regulations in addition to assessing the functioning and efficacy of the overall internal control system; these controls are assigned to facilities that are different and independent from the productive ones. The Internal Audit department is responsible for monitoring the correct functioning of processes as well as the reliability of accounting information, even by means of direct inspections or remote audits. Auditing operations primarily involve the analysis of the primary working processes (credit, finance, payment systems). Valuations derived from completed assessments are periodically reported to the Board of Directors, General Management, the Independent Auditors and the Board of Directors. Cassa Centrale Banca has outsourced the Information Technology Auditing process to the Federazione Trentina della Cooperazione.. The organization of internal controls also ensures – in addition to a separation of operational functions from auditing ones – an adequate degree of risk management through the constant improvement of IT systems and reporting activities. The Risks Committee – composed of General Manager, Division Managers and a representative of the Risk Management department – is a integral part of the internal control system; this body is entrusted by the Board of Directors to identify all significant risks to which the Bank is exposed during its operations in addition to formulating policies in relation to risk prevention, measurement or evaluation, management and mitigation.

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section 1 CREDIT RISK

Information of qualitative nature

1. General aspects The sales policy of Cassa Centrale Banca - when implementing credit activities – has constantly pursued objectives and strategies which aim to contain a concentration, within its portfolio, of individual counterparties, economic sectors or geographical areas. The Bank operates primarily in a subsidiary manner with respect to shareholder or customer CR-BCCs by implementing operations targeting their clientele; it is not possible to independently operate in relation to the latter due to regulatory and size-specific limits, or for technical reasons. Cassa Centrale Banca applies elevated standards to the analytical methodologies used to assess credit repayment capacity of clientele and has constantly updated and improved the process for monitoring loan positions, both in relation to commercial and territorial expansion and with reference to the size of the loans. This process was continued from the perspective of involving the proposing banks in the risk by means of pool financing or by issuing at least partial guarantees to back up granted loans. Credit risk arising from loans disbursed under various forms to financial institutions, in particular to CR-BCCs which have liquidity needs, is managed by utilizing a internal calculation model for scoring the financial statements of banks. This value acts as a discriminating factor for the powers delegated in relation to credit to banking counterparties. The Risks Committee periodically monitors the exposure of the bank to specific and generic risks - both credit and liquidity risks – which arise from operations with credit institutions; the Risk Management department annually monitors trends in financial statement scoring of banks with which it has business relationships and assess they trends of this indicator at both the individual and system level. Cassa Centrale Banca utilizes the surplus liquidity deposited by the various CR-BCCs within the Interbank Deposit Market or within other credit institutions. The counterparties with which the Finance Division makes these deposits are entrusted with suitable credit limits following a favourable investigation that is conducted independently by the Credit Division in relation to creditworthiness. In order to avoid significant risks, specific attention is assigned to the monitoring of ratings of the counterparty banking positions. During the course of 2011, intermediation activities for auctions with the European Central Bank – conducted by Cassa Central Banca on behalf of the CR-BCCs that participated in the service – reported a significant increase; moreover, the underlying type of loan to CR – BCCs is secured by real financial guarantees which result in a significant decrease in risk. Credit risk can also occur in the owned portfolio of securities. The Finance Regulations establish specific quantitative limits to the assumption of risks associated with these activities; the Regulations provide for structured limits and proxies pertaining to the following: the overall amount of the securities portfolio; the ownership of non-listed securities; the stock portfolio; the concentration of risk within asset management companies; net open exchange rate positions; Value at Risk for HFT and AFS portfolios; maximum losses; amount of the HTM portfolio and potentially related capital losses; the L&R securities portfolio; and risks associated with individual issuers. In the presence of specific market situations, the Risks Committee may establish more stringent limits compared to those provided for in the Regulations. Each quarter, the Board of Directors and - on a weekly basis – General Management are updated on the movements in the portfolio of securities and on compliance with regulatory limits. Credit risk relative securities issued by parties other than government or banking entities is marginal. Strategies for the securities portfolio are established in advance by the Risks Committee and are

220 EXPLANATORY NOTES

subordinate to the positive and independent analysis of creditworthiness by the Credit Division. Cassa Centrale Banca is exposed to counterparty risk in relation to OTC derivative activities and repurchase agreements. Operations pertaining to OTC derivatives are almost entirely balanced; there are therefore sporadic operations for the hedging of assets or liabilities which refer to properties while operations of speculative nature are not implemented. The limits assigned to the CR-BCCs – in relation to their rate hedging activities - and those assigned to institutional counterparties are deliberated by the body of competence following an independent investigation by the Credit Division. Institutional counterparties all have adequate credit standings if one takes into account the phenomenon of generalized decrease in the ratings of financial institutions which occurred in 2011 by the primary rating agencies; an ISDA framework agreement was undersigned with a majority of these counterparties in order to compensate mutual receivables in the case of default. In addition, collateralization agreements were signed with primary institutional partners; these agreements provide for the payment - in cash or securities - of margins as guarantees of credit represented by the market values of the operations being implemented. Even in relation to the dynamics concerning counterparty risk, the Risk Management department periodically updates General Management and the Board of Directors.

2. Policies for managing credit risk

2.1 Organizational factors Banks are exposed to the risk that the receivables are not paid by the debtors on their expiration dates and that, as a result, they must be booked as losses within the financial statements. The event of a failed or delayed reimbursement can occur both within the traditional activities of credit disbursement to clientele as well as in operations that are not booked within the financial statements (for e.g., unsecured loans). Clientele defaults can originate from a lack of liquidity, incapacity to operate, economic events or other internal or external reasons, such as country risk or risks of operational nature. Even activities that differ from traditional lending activities, such as the trading of securities or the underwriting of OTC derivatives, further expose the bank to credit risk. In compliance with the Supervisory Instructions of the Bank of Italy pertaining to internal controls - and given the importance assigned to the efficiency and efficacy of the credit process, as well as of the control system – Cassa Centrale Banca has implemented an organizational structure which is adequate for the implemented activities and which is constantly updated in relation to the market environment. The organizational process is based on the principle of separation between the activities of the investigational phase and those of the operational phase, as well as between management and control activities. This separation is implemented through the creation of separate organizational structures. In addition to line controls, the second and third level control functions manage the monitoring of risks as well as the accuracy and adequacy of the managerial and operational processes. The entire credit process is regulated by the Credit Process Regulations, internal regulations which are approved by the Board of Directors and which contain proxies for credit as well as for economic conditions which are subject to periodical annual audits, or in relation to new laws or regulations or commercial and organizational needs. In particular, it defines the following: • the exercising of proxies which is managed within the IT system of the bank and which is continually verified, or audited by sampling, by the Risk Management and Internal Audit departments; • the criteria and methodologies for valuating creditworthiness as well as for the auditing of loans, trend analysis and initiatives to implement in the case of detection of anomalies.

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The Credit Division is the company body delegated to the governance of the credit process (credit granting and auditing, monitoring, management of disputes) as well as to the coordination and development of credit transactions and loans. The allocation of tasks and responsibilities within this Division aims - to the extent that is feasible – to separate activities that are in conflict of interest, particularly through an opportune ranking of authorization profiles within the IT system. The systematic monitoring of the processes for managing and detecting problematic positions is also guaranteed through the operations of the Risks Committee. The Risk Management department implements activities for controlling risk management through the structuring of tasks deriving from the three primary responsibilities established in the Supervisory Instructions of the Bank of Italy, i.e. contributing to defining methodologies for risk measurement, verifying compliance with the limits assigned to the various operational departments, and verifying the consistency of the operations of individual productive areas with the assigned risk-return objectives.

2.2 Management, measurement and control systems Credit risk is identified and evaluated, even through forecasting, at the level of the individual client; the periodical analyses focus on the credit repayment capacity of the requesting party over time as well as the validity and sustainability of the entrepreneurial projects in addition to the historical and future stability of company financial equilibriums. A similar evaluation is applied to offered guarantees, with particular attention to their level of liquidity. The management and control of individual positions is facilitated by a list of trends in anomalies as well as by access to external databases (for e.g. a list of damaging deeds) and by implementing targeted audits that are adequately spread out over time. The IT system of the bank reports, in an orderly and synthetic manner, the primary quantitative information for each individual client (profitability, trends in risk levels, operations, credit bureau, financial statements). The management and control phase is completed through the periodical auditing of the positions. The portfolio of receivables is subdivided into six risk categories (performing, under observation, overdue/overrun by more than 180 days, doubtful, restructured, non-performing) on the basis of evaluations provided by the Risk Committee and without prejudice to specific deliberative powers assigned to top corporate boards. The phases of identification, measurement, management and control of credit risk within the portfolio also include periodical monthly observations on the distribution by sector and activity branches as well as by technical form of use, geographical localization and concentrations of amount, placing specific attention to the primary sectors of intervention. The assets of the bank would allow for the granting of credit to individual clients or to groups of connected clients beyond the threshold of EUR 45 million; the greatest use of cash ascribable to a group of clients in 2011 was equal to EUR 25.2 million, slightly more than half the maximum credit limit. The methodologies for assessing credit risk are qualitative and quantitative; the combination of evaluation elements and the risk aversion of Cassa Centrale Banca result in a marked selection of received loan requests. The policy for evaluating a portfolio of receivables is prudent and involves the application of particularly intense analytical write-downs with respect to impaired positions as well as lump-sum write-downs on the performing loan portfolio (calculated as a function of PD and LGD) which are higher on average than those of the system. According to the “New regulations for the prudential supervision of banks”, the Board of Directors of Cassa Centrale Banca – in application of the policies deliberated by the Board of Directors of the parent company Centrale Finanziaria del Nord Est – resolved to:

222 EXPLANATORY NOTES

• adopt the standardized methodology for the calculation of the minimum capital requirement for credit risk (First Pillar); • utilize the creditworthiness evaluations issued by ECAI Moody’s Investors Service for the determination of weighting factors for positions included within the following portfolios: - ‘Central Administrations and Central Banks” as well indirectly for those included in the portfolios “Monitored Intermediaries”, “Entities of the public sector” and “Territorial entities” - “Exposures with respect to Multilateral Development Banks”; - “Exposures with respect to Collective Investment Undertakings’. - “Positions relative to securitizations”. With regard to exposures that all within all other portfolios, diversified weighting coefficients are applied, in accordance with the aforementioned prudential regulations and within the realm of the standardized methodology (Circular 263/06, Title II, Chapter 1, Part one, Section III). With reference to internal capital adequacy assessment process (ICAAP) that is required by the Second Pillar of currently effective prudential regulations, and in execution of the principles of proportionality and graduality, the bank has drafted the ICAAP 2010 report by adopting the methodologies which the Supervisory Board requires for intermediaries of class 3. With regard to this point, Cassa Centrale Banca adopts the following methodologies: •  in order to quantify internal capital in connection with the risk of concentration for individual counterparties or groups of related clients, a simplified algorithm is utilized to determine the Granularity Adjustment through the Herfindahl index (refer to Attachment B, Title III, Chapter 1, Circular 263/2006); as of the reporting of December 2010, the model developed within ABI by the “Laboratory for Geo-Sectorial Concentration Risk” will also be utilized. •  in order to determine internal capital in connection with interest rate risk for the banking portfolio, a simplified algorithm is utilized to determine the change in the economic value of the banking portfolio in the case of rate change of 200 basis points (refer to Attachment C, Title III, Chapter 1, Circular 263/2006); •  in order to define procedures for measuring and controlling liquidity risk, the guidelines proposed by the Supervisory authorities are followed; these are based on the monitoring of the net financial position and on potential tools for mitigating risk (refer to Attachment D, Title III, Chapter 1, Circular 263/2006). With regard to this point, the Board of Directors of Cassa Centrale Banca recently deliberated in favour of the new “Policy for the governance and management of liquidity” which further improves the various aspects of the document which was previously introduced during the course of 2009 and which is subject to annual updates. With reference to the execution of stress tests, the following methodologies were applied: •  with regard to concentration risk for individual counterparties or groups of related clients, an increase in the rate of appearance of non-performing loans within the portfolio was assumed, calculated as the average of the worst rates of decline recorded in the last 10 years for an individual branch of economic activity; •  in relation to the implementation of the stress test relative to interest rate risk for the banking portfolio, an increase of 100 basis points - with respect to the threshold of 200 basis points for the ordinary scenario - was applied; •  with reference to credit risk, the execution of the stress test is implemented as follows: 1) within the historical data series of the last 10 years pertaining to the ratio of impaired positions and company loans (net of write-downs), the percentage which represents the worst credit period that occurred is selected and then applied to the system of supervisory portfolios by implementing an adequate migration

223 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

of performing positions to the portfolio of “past dues” until this rate is reached; 2) downgrading of the national sovereign rating from class 2 to class 3, in accordance with the ECAI rating mapping table supplied by the Bank of Italy; this results in an increase in the internal capital requirement for exposures which are assigned a weighting factor on the basis of this parameter. Stress tests are conducted on the basis of forecasted data, which includes the possibility of development of assets that are prepared at the time of definition of the company budget. With regard to investment activities of the portfolio of owned securities, periodical evaluations are implemented on the instruments that are present within the portfolio, both within the Finance Division as well as within the Risks Committee. Compliance with the limits and proxies that are assigned in this area are verified on a weekly basis.

2.3 Techniques for mitigating credit risk The techniques for mitigating credit risk which are most frequently utilized by Cassa Centrale Banca include the acquisition of real and personal guarantees of both financial and non-financial nature. These forms of guarantee are collected in relation to the results of creditworthiness evaluations of the requesting party as well as of the type of loan requested by the clientele and duration of the granted credit line. Most of the medium to long-term exposures of the bank are secured by mortgages on residential or commercial real estate properties, typically of first charge. During the course of 2011, and following the gradual increase in brokerage activities for ECB auctions on behalf of the CR-BCCs, significant amounts of securities were acquired as guarantees of financing in favour of the latter which secure the relative exposures. The securities are not reported under the assets in the financial statements given that their acquisition is subject to the regulations of Italian Legislative Decree no. 170/2004 as well as the provisions of the Bank of Italy which requires – for the preparation of the financial statements - a maintenance of values within the relative financial statements of the CR-BCCs; the latter effectively gain the benefits produced from these values. As of 31 December 2011, cash exposures that were secured by collateral – primarily composed of mortgages – were equal to 78.55% of the total performing portfolio of receivables (79.30% at the end of 2010), while the quota secured by only personal guarantees corresponds to 12.41% (11.60% at the end of 2010); the non-secured amount, on the other hand, totals 9.03% (9.10% at the end of 2010). As of the same date, the portfolio of receivables was guaranteed by bank sureties for 12.60%, sometimes in combination with other real or personal guarantees. Specific attention is given to the process of collection and stipulation of the guarantees so that risks of contractual or operational nature are not incurred during the phase of their potential enforcement; specialized human resources are involved in this process which is structured across several levels of operations and control. With reference to activities within securities markets, and given that the composition of the portfolio primarily targets sovereign issuers, it was not deemed necessary, at the moment, to implement specific forms of credit risk mitigation. OTC derivative contracts stipulated with institutional counterparties – balancing out the hedging implemented with Cassa Centrale Banca with respect to the CR-BCCs - are regulated by ISDA framework agreements which allow for compensation in the case of default. In addition, collateralization agreements have already been stipulated during the course of 2010 with certain counterparties, providing for the creation of a guarantee in cash or securities for the creditor party.

224 EXPLANATORY NOTES

With regard to regulatory provisions pertaining to risk mitigation techniques, Cassa Centrale Banca has stated that it will progressively utilize all required Credit Risk Mitigation (CRM) instruments, i.e.: • financial real (collateral) guarantees involving cash and financial instruments, and lended through agreements for the pledging and transfer of ownership; • residential and non-residential real estate mortgages; • other forms of real protection, represented, for e.g., by deposits in cash with third parties, life insurance policies (with the requirements pursuant to Circular 263/2006 of the Bank of Italy), financial instruments issued by monitored intermediaries which the issuer has committed to buy back upon request of the bearer party; • sureties, warranty bonds, guarantees – within the realm of authorized guarantors – from monitored intermediaries; these also include mutualistic guarantees of personal type provided by credit guarantee consortia which meet the subjective and objective criteria for admissibility; For the purposes of the benefits provided by CRM, the following are also currently taken into consideration: a) personal guarantees issues by monitored intermediaries; b) personal guarantees issued by territorial entities, c) financial collateral pursuant to the provisions of Italian Legislative Decree no. 170 of 21 May 2004; d) financial real (collateral) guarantees involving cash and financial instruments, and lended through repurchase agreements; The first three forms are regulated within the new Regulations which the Board of Directors of the parent company and of the bank approved during the course of 2011 and which describes the process of acquisition of the guarantees, outlining tasks and responsibilities for company departments and operational units. With regard to the most recent contractual form, it should be noted that the regulations themselves provide for the application of the methods require by the CRM in order to determine the capital requirements for lending and borrowing repurchase agreements. Cassa Centrale Banca did not implement any operations on credit derivatives.

2.4 Impaired financial assets The classification, management and control of receivables is organized by the bank through IT facilities and procedures. On each date of the financial statements, and in accordance with IAS/IFRS accounting principles, the presence of objective elements of impairment is verified for each financial instrument or for each group of financial instruments. In compliance with supervisory provisions, any positions which report anomalous trends are classified under different risk categories; impaired positions that are expired/beyond credit limits correspond to the definition established by the regulations of the Bank of Italy. With regard to this point, it should be noted that, as of 01/01/2012, the derogation which allowed for 180 days of limit exceeding rather than 90 days (refer to Circular 263/2006, Title II, Chapter 1, Part One, Section VI, note (4)) will expire. Watch-list conditions are characterized by conditions of temporary difficulty for the client in the case that the latter does not manage to regularly comply with the timing of payment of its obligations due a negative economic cycle or a financial imbalance; these difficulties may be resolved only with a suitable amount of time; the regulations of the Bank of Italy also classify positions which fall within the definition of “objective watch-list positions” within this category by using a series of specific criteria. Positions for which – due to deterioration of the economic/financial conditions of the debtor – the bank authorizes

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a change in the contractual conditions initially stipulated at the time of granting of the credit – which are worse for the bank – are classified as restructured receivables. Finally, positions in a state of insolvency or in comparable situations, or positions for which it is deemed that the normal capacity for repayment of credit no longer exists due to the worsening of the economic/financial situation or due to the effect of the executive action of third parties, are classified as non-performing. Potential re-classification as performing positions is only authorized by means of a resolution of the Board of Directors; this resolution is typically only approved following repayment of past credit due to the bank and following a significant resolution of disputes with respect to the system or creditors that are qualitatively or quantitatively significant. In addition, the current and future normality of the entity’s financial and economic situation must be demonstrated. The Credit Division is responsible for the overall management of impaired positions. With regard to positions classified as non-performing, and for which legal actions of credit collection have been initiated, management of the position can also be implemented in collaboration with external legal firms. The resolutions of the Board of Directors always serve as the basis for decisions which are assumed following a prior analysis of the Risks Committee which discusses and proposes both a correct classification for the positions as well as the most appropriate solutions for improving their status. The activities of the Credit Division primarily involve: • monitoring impaired positions, in compliance with the Risk Management department; • applying the operations recommended by the Risks Committee or deliberated by the Board of Directors in order to restore regularity in payments or a return of the credit; • reporting forecasts for losses on positions to the Risk Management Department and the Risks Committee, and presenting them for approval to the Board of Directors; • proposing – to the Board of Directors – the re-classification as non-performing of those positions which – due to new difficulties – are not expected to normalize. The evaluation of impaired positions is implemented in an analytical manner and whose level of intensity is proportional to the results which emerge from the monitoring process. Company policy in relation to value adjustments is particularly severe, and the continuation of the effects of a difficult economic period have made the firm maintain particular prudence in its determination of write-down policies. During the analysis of individual positions, assumptions relative to the depreciation of realizable value of collateral were applied while, in the case of personal positions, the financial profile of the guarantor was taken into account. In addition, the time periods for recovery of credit were identified as in line with average time periods, adding additional discounting losses to the calculation. This prudential approach resulted in significant value write-backs when the two impaired positions were closed. Lump-sum write-downs were applied with a similar level of prudence and severity, assuming probabilities of default in sectors and branches of economic activity that utilized the impairment rates recorded by the Bank of Italy within the national territory. In accordance with this prudential approach and with the methodology adopted for analytical write-downs, only partial recoveries were assumed on the basis of the various qualitative levels of the collected guarantees.

226 EXPLANATORY NOTES

information of quantitative nature

A. Credit quality

A.1 Impaired and performing credit exposures: amounts, adjustments, dynamics, economic and territorial distribution

A.1.1 Distribution of credit exposures by portfolio and credit quality (financial statement values)

Portfolio/ Non- Restructured Other Watch-list Past due Total quality performing loans assets 1. Financial assets held for - - - - 96,551 96,551 trading 2. Financial assets available - - - - 304,942 304,942 for sale 3. Held to maturity - - - - 388,638 388,638 investments 4. Loans to - - - - 3,483,070 3,483,070 banks 5. Loans to 8,453 14,784 3,365 6,789 675,349 708,741 customers 6. Financial assets at fair - - - - 2,253 2,253 value 7. Financial assets being ------disposed 8. Hedging ------derivatives Total 2011 8,453 14,784 3,365 6,789 4,950,804 4,984,195 Total 2010 6,580 17,139 1,890 359 2,257,849 2,283,816

Derivative contracts were classified under “Other assets”.

227 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

A.1.2 Distribution of credit exposures by portfolio and credit quality (gross and net values)

Impaired assets Performing positions

Portfolio/ Total (net quality exposure) ross ross ortfolio ortfolio G exposure Specific adjustments exposure Net G exposure P adjustments exposure Net 1. Financial assets held for - - - - - 96,551 96,551 trading 2. Financial assets - - - 304,942 - 304,942 304,942 available for sale 3. Held to maturity - - - 388,638 - 388,638 388,638 investments 4. Loans to - - - 3,483,070 - 3,483,070 3,483,070 banks 5. Loans to 49,158 15,767 33,391 685,586 10,237 675,349 708,741 customers 6. Financial assets at fair - - - - - 2,253 2,253 value 7. Financial assets being ------disposed 8. Hedging - - - - - derivatives Total 2011 49,158 15,767 33,391 4,862,236 10,237 4,950,804 4,984,195 Total 2010 40,358 14,390 25,968 2,218,718 9,563 2,257,849 2,283,816

228 EXPLANATORY NOTES

A.1.2.1 Details of the portfolio of loans to customers relative to performing positions subject to re-negotiation within collective agreements and other exposures In accordance with the communication notice of the Bank of Italy of February 2011, details of performing positions relative to cash loans to customers as at 31 December 2011.

A. Performing positions subject to re-negotiation within B. Other performing positions collective agreements ross ross ortfolio ortfolio ortfolio G exposure P adjustments Net exposure G exposure P adjustments Net exposure Non-Expired exposures 85,079 1,237 83,841 3,711,911 8,644 3,703,267 Up to 3 months - - - 10,967 160 10,807 From 3 to 6 months 7,368 195 7,173 - - - From 6 months to a year ------Beyond one year ------TOTAL AS AT 31/12/2011 92,447 1,432 91,015 3,722,878 8,805 3,714,074

A.1.3 Cash credit exposures and Off-balance-sheet exposures relative to banks: gross and net values

Gross Specific Portfolio Net Type of positions/values exposure adjustments adjustments exposure A. CASH EXPOSURES a) Non-performing - - - b) Watch-list - - - c) Restructured loans - - - d) Past due - - - e) Other assets 3,485,243 - 3,485,243 TOTAL A 3,485,243 - - 3,485,243 B. OFF-BALANCE-SHEET

EXPOSURES a) Impaired - - - - b) Other 106,593 - 106,593 TOTAL B 106,593 - - 106,593 TOTAL A+B 3,591,835 - - 3,591,835

Cash credit exposures include all financial assets in cash, excluding equities and UCITS units, regardless of the accounting portfolio: trading, available for sale, held to maturity, receivables, assets at fair value, assets being disposed. “Off-balance sheet” exposures include all financial operations other than cash operations (issued guarantees, commitments, derivatives, etc..) which involve the assumption of credit risk, and regardless of the objective of these operations (trading, hedging, etc..).

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A.1.4 Cash credit exposures due to banks: movements in gross impaired positions The table is not filled out because, on the date of the financial statements in question, there were no balances ascribable to the item in question.

A.1.5 Cash credit exposures due to banks: movements in overall adjustments The table is not filled out because, on the date of the financial statements in question, there were no balances ascribable to the item in question.

A.1.6 Cash credit exposures and off-balance sheet exposures relative to customers: gross and net values

Gross Specific Portfolio Net Type of positions/values exposure adjustments adjustments exposure A. CASH EXPOSURES a) Non-performing 16,178 7,725 - 8,453 b) Watch-list 19,829 5,045 - 14,784 c) Restructured loans 5,183 1,817 - 3,365 d) Past due 7,969 1,180 - 6,789 e) Other assets 1,417,419 - 10,237 1,407,182 TOTAL A 1,466,577 15,767 10,237 1,440,574 B. OFF-BALANCE-SHEET

EXPOSURES a) Impaired - - - - b) Other 82,567 - - 82,567 TOTAL B 82,567 - - 82,567

Cash credit exposures include all financial assets in cash, excluding equities and UCITS units regardless of the accounting portfolio: trading, available for sale, held until maturity, receivables, assets at fair value, assets being disposed. “Off-balance sheet” exposures include all financial operations other than cash operations (issued guarantees, commitments, derivatives, etc..) which involve the assumption of credit risk, and regardless of the objective of these operations (trading, hedging, etc..).

230 EXPLANATORY NOTES

A.1.7 Cash credit exposures due to customers: movements in gross impaired positions

Non- Restructured Description/Categories Watch-list Past due performing loans A. Initial gross exposure 13,859 23,784 2,345 370 - including: positions disposed but not - - - - cancelled B. increases 3,275 13,539 5,044 7,969 B.1 Transfers from performing credit 553 11,917 - 3,243 exposures B.2 Transfers from other categories of 2,579 653 4,702 4,726 impaired positions B.3 Other increases 143 970 342 - C. Decreases 956 17,495 2,206 370 C.1 Transfers to performing credit - 4,935 1,603 370 exposures C.2 Cancellations - - - - C.3 Collections 304 1,146 10 - C.4 Profits from disposals - - - - C.5 Transfers to other categories of 653 11,414 594 - impaired positions C.6 Other decreases - - - - D. Gross final exposure 16,178 19,829 5,183 7,969 - including: positions disposed but not - - - - cancelled

Cash credit exposures include all financial assets in cash, excluding equities and UCITS units, regardless of the accounting portfolio: trading, available for sale, held to maturity, receivables, assets at fair value, assets being disposed.

231 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

A.1.8 Cash credit exposures due to customers: movements in overall adjustments

Non- Restructured Description/Categories Watch-list Past due performing loans A. Initial gross adjustments 7,279 6,645 455 11 - including: positions disposed but not - - - - cancelled B. increases 2,089 4,067 1,974 1,180 B.1 Adjustments 1,191 3,867 519 378 B.2 Transfers from other categories of 898 200 1,455 802 impaired positions B.3 Other increases - - - - C. Decreases 1,643 5,668 612 11 C.1 Value write-backs from valuations 1,293 2,323 474 - C.2 Value write-backs from 149 313 - 11 collections C.3 Cancellations 1 - - - C.4 Transfers to other categories of 200 3,025 130 - impaired positions C.5 Other decreases - 7 7 - D. Final overall adjustments 7,725 5,045 1,817 1,180 - including: positions disposed but not - - - - cancelled

Cash credit exposures include all financial assets in cash, excluding equities and UCITS units, regardless of the accounting portfolio: trading, available for sale, held to maturity, receivables, assets at fair value, assets being disposed.

232 EXPLANATORY NOTES

A.2 Classification of positions on the basis of external and internal ratings

A.2.1 Distribution of cash and off-balance sheet credit exposures by class of external rating

External rating class Without Positions Class Class Class Class Class Class Total rating 1 2 3 4 5 6 A. Cash credit - 941,305 12,347 10,000 - - 3,962,164 4,925,816 exposures B. Derivatives 10,013 28,998 4,480 1,841 - - 13,047 58,379 B.1 Financial 10,013 28,998 4,480 1,841 - - 13,047 58,379 derivatives B.2 Credit ------derivatives C. Issued ------66,216 66,216 guarantees D. Commitments ------64,565 64,565 to issue funds TOTAL 10,013 970,304 16,827 11,841 - - 4,105,992 5,114,976

In order to fill out the table, the ratings from the following companies were utilized: Standard & Poor’s, Fitch and Moody’s. The individual ratings were distributed to the risk categories required by the table, in accordance with the additional information required by Circular no. 263 of the Bank of Italy, outlined below:

Risk category rating 1 from AAA to AA- 2 from A+ to A- 3 from BBB+ to BBB- 4 and 5 from BB+ to B- 6 Less than B-

A.2.2 Distribution of cash and off-balance positions by internal rating class The table is not filled out because, on the date of the financial statements in question, no internal ratings were utilized.

233 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

A.3 Distribution of secured positions by type of guarantee

A.3.1 Guaranteed credit positions relative to banks:

Personal guarantees (2) Collateral Credit guarantees (1) Derivati su crediti commitments Other

derivatives

Total (1)+(2) overnments & central banks central & overnments banks central & overnments Value of net exposure net of Value properties estate Real Securities guarantees collateral Other CLN G entities public Other Banks entities Other G entities public Other Banks entities Other 1. Guaranteed cash credit 2,932,059 - 2,894,243 ------2,894,243 exposures 1.1 Totally 2,858,127 - 2,858,127 ------2,858,127 guaranteed - of which ------impaired 1.2 Partially 73,932 - 36,116 ------36,116 guaranteed - of which ------impaired 2. Secured off- balance sheet ------cash credit exposures 2.1 Totally ------guaranteed - of which ------impaired 2.2 Partially ------guaranteed - of which ------impaired

The economic sectors to which the guarantors (credit commitments) and protection sellers (credit derivatives) belong were identified by referring to the classification criteria outlined in the pamphlet “Classification of customers by sector and branch of economic activity” published by the Bank of Italy.

234 EXPLANATORY NOTES

A.3.2 Guaranteed credit exposures relative to customers

Collateral Personal guarantees (2) guarantees (1) Derivati su crediti Credit commitments Other

derivatives

Total (1)+(2) overnments & central banks central & overnments banks central & overnments Value of net exposure net of Value Real estate properties estate Real Securities guarantees collateral Other CLN G entities public Other Banks entities Other G entities public Other Banks entities Other 1. Guaranteed cash credit 641,777 557,919 80 9,008 ------9,160 103,319 449,000 1,128,485 exposures 1.1 Totally 621,300 557,919 80 7,735 ------9,160 96,968 442,351 1,114,213 guaranteed - of which 27,599 27,479 ------1,500 6,829 17,547 53,356 impaired 1.2 Partially 20,478 - - 1,273 ------6,351 6,648 14,272 guaranteed - of which 3,511 ------4,150 4,150 impaired 2. Secured off-balance sheet cash 18,830 5,604 - 753 ------5,598 11,473 23,429 credit exposures 2.1 Totally 15,985 5,604 ------5,598 11,287 22,490 guaranteed - of which ------impaired 2.2 Partially 2,845 - - 753 ------186 940 guaranteed - of which ------impaired

The economic sectors to which the guarantors (credit commitments) and protection sellers (credit derivatives) belong were identified by referring to the classification criteria outlined in the pamphlet “Classification of customers by sector and branch of economic activity” published by the Bank of Italy.

235 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

B. Distribution and concentration of credit exposures

B.1 Distribution by sector of cash and off-balance sheet credit exposures relative to customers (financial statement items)

Governments Other public entities Positions/ Net Specific Portfolio Net Specific Portfolio counterparties exposure adjustments adjustments exposure adjustments adjustments A. Cash credit

exposures A.1 Non------performing A.2 Watch-list ------A.3 Restructured ------loans A.4 Past due ------A.5 Other 731,753 - - 768 - 1 exposures TOTAL A 731,753 - - 768 - 1 B. Off-balance-sheet

exposures B.1 Non------performing B.2 Watch-list ------B.3 Other impaired ------assets B.4 Other 34,949 - - 200 - - exposures TOTAL B 34,949 - - 200 - - TOTAL (A+B) 2011 766,702 - - 968 - 1 TOTAL (A+B) 2010 200,250 - - 2,465 - 1

236 EXPLANATORY NOTES

Financial companies Insurance companies Positions/ Net Specific Portfolio Net Specific Portfolio counterparties exposure adjustments adjustments exposure adjustments adjustments A. Cash credit

exposures A.1 Non-performing ------A.2 Watch-list 1,591 409 - - - - A.3 Restructured ------loans A.4 Past due ------A.5 Other exposures 18,888 - 177 67 - 1 TOTAL A 20,479 409 177 67 - 1 B. Off-balance-sheet

exposures B.1 Non-performing ------B.2 Watch-list ------B.3 Other impaired ------assets B.4 Other exposures 13,314 - - 70 - - TOTAL B 13,314 - - 70 - - TOTAL (A+B) 2011 33,793 409 177 137 - 1 TOTAL (A+B) 2010 40,853 - 179 51 - -

237 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Non-financial companies Other entities Positions/ Net Specific Portfolio Net Specific Portfolio counterparties exposure adjustments adjustments exposure adjustments adjustments A. Cash credit

exposures A.1 Non-performing 7,409 6,723 - 1,044 1,002 - A.2 Watch-list 12,561 4,398 - 632 237 - A.3 Restructured 3,365 1,817 - - - - loans A.4 Past due 6,789 1,180 - - - - A.5 Other exposures 604,846 - 9,687 50,861 - 371 TOTAL A 634,970 14,119 9,687 52,537 1,239 371 B. Off-balance-sheet

exposures B.1 Non-performing ------B.2 Watch-list ------B.3 Other impaired ------assets B.4 Other exposures 29,174 - - 4,859 - - TOTAL B 29,174 - - 4,859 - - TOTAL (A+B) 2011 664,144 14,119 9,687 57,397 1,239 371 TOTAL (A+B) 2010 672,588 13,108 9,061 54,513 1,283 321

The distribution of cash and off-balance sheet credit exposures by economic sectors of belonging of the debtors and ordering parties (for the issued guarantees) was implemented in accordance with the classification criteria outlined in the pamphlet “Classification of customers by sector and branch of economic activity” published by the Bank of Italy.

238 EXPLANATORY NOTES

B.2 Territorial distribution of cash and off-balance sheet credit exposures relative to customers (financial statement items)

Other EU Rest of the Italy America Asia countries World

Positions/ Geographical areas Net exposure Net adjustments Overall exposure Net adjustments Overall exposure Net adjustments Overall exposure Net adjustments Overall exposure Net adjustments Overall A. Cash credit exposures A.1 Non-performing 8,453 7,725 ------A.2 Watch-list 14,784 5,045 ------A.3 Restructured loans 3,365 1,817 ------A.4 Past due 6,789 1,180 ------A.5 Other exposures 1,402,561 10,232 4,061 - 560 5 - - - - TOTAL A 1,435,952 25,999 4,061 - 560 5 - - - - B. Off-balance-sheet exposures B.1 Non-performing ------B.2 Watch-list ------B.3 Other impaired assets ------B.4 Other exposures 82,538 - 29 ------TOTAL B 82,538 - 29 ------TOTAL (A+B) 2011 1,518,490 25,999 4,090 - 560 5 - - - - TOTAL (A+B) 2010 964,822 23,951 4,081 - 462 2 - - 1,355 -

239 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

B.3 Territorial distribution of cash and off-balance-sheet credit exposures relative to banks (financial statement items)

Other EU Rest of the Italy America Asia countries world

Positions/ Geographical areas Net exposure Net adjustments Overall exposure Net adjustments Overall exposure Net adjustments Overall exposure Net adjustments Overall exposure Net adjustments Overall A. Cash credit exposures A.1 Non-performing ------A.2 Watch-list ------A.3 Restructured loans ------A.4 Past due ------A.5 Other exposures 3,475,269 - 6,080 - 3,451 - 158 - 284 - TOTAL A 3,475,269 - 6,080 - 3,451 - 158 - 284 - B. Off-balance-sheet exposures B.1 Non-performing ------B.2 Watch-list ------B.3 Other impaired assets ------B.4 Other exposures 96,194 - 10,393 - 5 - - - - - TOTAL B 96,194 - 10,393 - 5 - - - - - TOTAL (A+B) 2011 3,571,463 - 16,474 - 3,456 - 158 - 284 - TOTAL (A+B) 2010 1,415,582 - 11,316 - 6,912 - 3 - 1,111 -

B.4 Large risks In the past December of 2010, the Bank of Italy published its 6th update of Circular 263/2006 concerning the new provisions pertaining to the concentration of risks; this update, which aims to incorporate the Capital Requirement Directive II, represents the most significant change in the regulation of major risk since it was introduced. The regulations in question – applicable as of 31 December 2010 - aim to limit instability risks derived from default of a single counterparty to which the bank is exposed in a significant manner; this objective is pursued not only through prudential limits but also organizational oversights relating to the creditworthiness of the clients to which the bank is most significantly exposed as well as the monitoring of the relative positions and research on connection relationships amongst clients. The primary novelties introduced to the regulations include the following:

240 EXPLANATORY NOTES

• simplification of the system of prudential limits; • removal of weighting in favour of interbank exposures and with respect to investment companies; • calculation and weighting criteria for risk positions; • the definition of large risks; • clarification of the criteria for legal and economic connections; • 0% weighting of positions with entities that belong to the same system of institutional oversight.

Total 2011 Total 2010 a) Amount of large risks a 1) carrying amount 4,777,714 2,031,077 A 2) weighted value 1,191,131 913,590 b) Number of positions of large risks 85 52

C. Securitization transactions and disposal of assets

C.1 Securitization transactions

Information of qualitative nature Third party securitization transactions The bank retains, within its portfolio, securities from third party securitization transactions for a total of EUR 4 million. These are securities of mezzanine class with A/A1 ratings issued from the special purpose vehicle BCC Mortgages PLC as part of the issue of an overall total of EUR 1,038,450,000, including EUR 996,050,000 with rating AAA/Aaa, and EUR 42,400,000 with rating A/A1, and relative to the securitization of bond securities issued by the special purpose companies Cassa Centrale Finance and Credico Finance 6. With regard to the aforementioned operation, the bank did not assume any role as servicer. The Bank does not retain any interest in the special purpose company BCC Mortgages PLC. During the course of the year, no value adjustments were applied to the security owned in the portfolio; this security was not deemed to be depreciated in light of the information received from the special purpose company which issued the security and from the companies issuing the securitized bonds.

241 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Information of quantitative nature

C.1.1 Positions deriving from securitization transactions subdivided by the quality of their underlying assets

Cash credit exposures Issued guarantees Credit lines Senior Mezzanine Junior Senior Mezzanine Junior Senior Mezzanine Junior

Quality of underlying asset/exposures ross exposure ross exposure ross exposure ross exposure ross exposure ross exposure ross exposure ross exposure ross exposure ross G exposure Net G exposure Net G exposure Net G exposure Net G exposure Net G exposure Net G exposure Net G exposure Net G exposure Net A. With own ------underlying assets a) Impaired ------b) Other ------B. With third party underlying - - 4,061 4,061 ------assets a) Impaired ------b) Other - - 4,061 4,061 ------

C.1.2 Positions deriving from primary “own” securitization transactions subdivided by type of securitized asset and type of position The table is not filled out because, on the date of the financial statements in question, there were no balances ascribable to the item in question.

242 EXPLANATORY NOTES

C.1.3 Positions deriving from primary “third party” securitization transactions subdivided by type of securitized asset and type of exposure

Cash credit exposures Issued guarantees Credit lines Senior Mezzanine Junior Senior Mezzanine Junior Senior Mezzanine Junior

Type of underlying asset/exposures Carrying amount amount Carrying adjustments/write-backs Value amount Carrying adjustments/write-backs Value amount Carrying adjustments/write-backs Value amount Carrying adjustments/write-backs Value amount Carrying adjustments/write-backs Value amount Carrying adjustments/write-backs Value amount Carrying adjustments/write-backs Value amount Carrying adjustments/write-backs Value amount Carrying adjustments/write-backs Value BCC - - 4,061 ------Mortgages Plc - securities

C.1.4 Exposures deriving from securitization transactions subdivided by portfolio and type

Financial Financial Financial Held to Exposure/ assets Total Total assets held assets at maturity Receivables portfolio available 2011 2010 for trading fair value investments for sale 1. Cash credit - - - - 4,061 4,061 4,062 exposures - senior ------mezzanine - - - - 4,061 4,061 4,062 - junior ------2. Off-balance- sheet ------exposures - senior ------mezzanine ------junior ------

243 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

C.1.5 Total amount of securitized assets underlying junior securities or other forms of credit support The table is not filled out because, on the date of the financial statements in question, there were no balances ascribable to the item in question.

C.1.6 Shareholdings in special purpose companies The table is not filled out because, on the date of the financial statements in question, there were no balances ascribable to the item in question.

C.1.7 Servicer activities – collections of securitized receivables and reimbursements of securities issued by the special purpose company The table is not filled out because, on the date of the financial statements in question, there were no balances ascribable to the item in question.

C.2 Disposal operations

C.2.1 Financial assets disposed but not cancelled

Total Types/portfolio eld to maturity maturity to eld Financial assets assets Financial trading for held assets Financial value fair at assets Financial sale for available H investments banks to Loans to Loans customers Total Total A B C A B C A B C A B C A B C A B C 2011 2010 A. Cash assets ------5,032 - - - - - 5,032 3,713 1. Debt securities ------5,032 - - - - - 5,032 3,713 2. Equities ------3. UCITS ------4. Financing ------B. Derivative - - - - - instruments TOTAL 2011 ------5,032 - - - - - 5,032 of which impaired ------TOTAL 2010 ------3,713 - - - - - 3,713 of which impaired ------Legend: A = financial assets disposed and fully booked (carrying amount) B = financial assets disposed and partially booked (carrying amount) C = financial assets disposed and partially booked (full value)

244 EXPLANATORY NOTES

C.2.2 Financial liabilities relative to financial assets that were disposed but not cancelled

Financial Financial Financial Held to Loans Liability/Portfolio assets loans to assets held assets at maturity to Total of assets available customers for trading fair value investments banks for sale 1. Due to customers - - - - 5,003 - 5,003 a) relative to fully - - - - 5,003 - 5,003 booked assets b) relative to partially ------booked assets 2. Due to banks ------a) relative to fully ------booked assets b) relative to partially ------booked assets TOTAL 2011 - - - - 5,003 - 5,003 TOTAL 2010 - - - - 3,709 - 3,709

C.3 Covered bond operations On the date of the financial statements in question, there were no balances ascribable to the item in question.

D. Models for credit risk measurement The bank does not apply internal models for credit risk measurement.

Section 2 MARKET RISKS

2.1 Interest rate risk and price risk – Regulatory trading portfolio

Information of qualitative nature

A. General aspects The bank implements trading activities, on its own behalf, of financial instruments which are exposed to interest and price risk, both directly as well as through proxies to third parties which operate in compliance with the policies and risk assumption limits stated in the proxy management agreement. Trading on own account is primarily based on compliance with treasury requirements while not neglecting to maximize the risk/return profile of portfolio investments for the elements of interest rate risk and credit risk of the counterparty. The positions held thus far for trading purposes are those which are intentionally allocated for a subsequent short-term disposal or which are acquired for the purposes of benefiting, in the short-term, from differences in acquisition and sales price along with an opportune diversification of investments.

245 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Bond securities and OTC derivatives represent the sources of interest rate risk in the portfolio in question; with regard to operations with derivatives, the bank does not assume speculative positions but implements operations with CR-BCCs or clientele that are balanced out by complementary operations initiated with primary counterparties and which aim to hedge against the interest rate risk assumed by these CR-BCCs or clients; these types of operations allow for a substantial neutralization of interest rate risk in the specific department. During the course of 2011, analyses of OTC derivatives were conducted by using value at risk techniques. These tests have confirmed that the market risk is effectively residual given the modalities and nature of the operations that are implemented. The trading of financial instruments on its own behalf exposes the bank to price risk when investing in debt or equity securities, in UCITS and in derivative contracts on UCITS, equities and stock market indices. Investments in capital instruments almost exclusively refer to listed shares. The Finance Regulations establishes specific quantitative limits to the trading portfolio; the Risks Committee defines strategies and objectives on the basis of market trends and periodically reviews performance. As of 31 December 2011, an asset management line with stock delegation was active and deemed consistent with the investment strategies of the bank for that concerning the basket of investible securities, the risk profile and profitability objectives. The performance of this stock management is reported to the Board of Directors on a quarterly basis.

B. Processes for managing and measurement methods relative to interest rate and price risk Management of interest rate risk of the trading portfolio is implemented by the Risks Committee on the basis of the limits and proxies established by the Board of Directors while activities for the measurement, control and auditing of interest rate risk are implemented by the Risk Management Department which also utilizes the documentation produced by the Finance Division. Management and control of interest rate and price risk for the trading portfolio utilizes a series of reports that also include Value at Risk techniques. Calculation of the maximum potential loss of the trading portfolio occurs on a daily basis and over a time period of 10 working days along with a confidence interval of 99.00%. The model is based on a Montecarlo simulation method. The result is also monitored in order to control the operational limits established in the Finance Regulations. The objective of the reporting is to supply the information which is necessary for the control and correct management of market risk for operational purposes, in compliance with currently effective regulations. The monitored data may also serve to support decisions relative to the asset allocation of portfolios within the specific quantitative limits established by the Finance Regulations. The utilization of What-If analyses for simulation allows for a priori evaluation of the impact of a specific operation on potential losses of a portfolio. The market data utilized by the model are updated on a daily basis. Volatility is calculated with the exponential moving average method in order to lend greater weight to more recent observations compared to past ones. In this way, it is possible to obtain estimates of VaR values which are more reactive to market shocks and which return to phases of normality in faster time periods compared to the use of volatilities which are calculated with a simple average. The length of the historical data series is one year of data. The estimate of the exponential moving average is linked to the decay factor, equal to 0.94, which is deemed a good indicator in the case of calculation of a VaR with a holding period of 10 working days at 99.00%. The use of the exponential moving average is also utilized for the correlation estimate which is directly implemented within the software used for calculating the VaR. The maximum potential loss is subdivided into various risk factors (interest rate, exchange rate, performance of the stock market and specific risk of the issuer, if available) and takes into account their correlations. The reports

246 EXPLANATORY NOTES

that are produced allow for a detailed analysis of the specific risk level of the trading portfolio, not only in terms of VaR, but also in terms of the sensitivity of the specific components to the primary factors of risk, by utilizing numerous statistics and stress scenarios. The maximum potential loss of the trading portfolio is illustrated in detail for each individual security by grouping the various typologies (funds, stocks, government securities with fixed or variable rates, corporate securities, transnational securities, and so forth) in order to highlight the specific risk level for the selected grouping level. Control over the reliability of the model is implemented through theoretical backtesting activities which verify daily changes in the market value of the trading portfolio, as calculated by the model with an estimate of the expected loss for the day. During the course of 2011, and beginning with the portfolio balances as of 31.03.2011, the model has been modified in order to more effectively evaluate the risk level of the Italian Treasury Credit Certificates within the current market context. This change resulted in a significant change in the potential loss of the portfolio, thereby leading to a revision of operational limits. The described risk measurement model is not utilized to determine capital requirements (whose calculation is required by regulations for the portfolio in question) but represents an internal tool to support the management and internal control of risk. With regard to overall monitoring of (interest rate, price and exchange rate) risk, the Finance Regulations define: • the maximum sustainable level of loss, calculated as the sum of net income and losses realized in the year and structured according to a network of powers differentiated by competent body; • the maximum VaR limits in order to set limits on portfolio asset allocation activities by the Risks Committee, and structured according to a network of powers differentiated by competent body. Information relative to VaR calculations for the securities component of the regulatory trading portfolio during the course of 2011 are reported below:

Average VaR, 2011 VaR 31.12.2011 Minimum VaR, 2011 Maximum VaR, 2011 867,964 1,686,744 112,251 2,541,929 Amounts rounded to nearest Euros

The VaR values attained in certain periods were affected by the heavy volatility and stress within the financial markets in 2011. With regard to stress tests, the outcomes of simulations of the impact of different shock scenarios on the theoretical value of the trading portfolio on 31.12.2011 is reported below. These scenarios were revised in 2011 due to the changing market conditions and the sovereign debt crisis. The following shocks were added: • A period of significant losses. It includes a time period relative to the second half of 2011 in which there were significant increases in interest rates of the Italian government curve and a shock in the markets of the Euro area which then had a strong impact on the owned portfolio; • stress on stock market indices. includes a decrease in the primary European stock market indices by 10.00%; • a specific case of non-parallel increase in the Italian rates curve which was composed of the primary daily changes recorded in various points of the curve in the second half of 2011; • parallel rate shocks of +50 and +100 basis points for the primary rate curves that were used in the valuation of securities within the owned portfolio.

247 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Theoretical market value change Rates curves Rates curves Theoretical market Significant Shift in Italian Stock market +50 basis +100 basis value 31.12.2011 losses rates curve indices, -10% points points 39,036,090 (2,668,285) (851,386) (887,059) (304,720) (567,986) Amounts rounded to nearest Euros

As part of the Asset & Liability Management (ALM) analysis, the valuation of the impact on the interest margin and on Equity - following cases of rate shifts equal to +/- 100 basis points – should be noted. The data reported in the table are based on a dynamic model with constant volumes that assume the regeneration of items which expire during the course of the year so that the asset amounts remain constant during the period of analysis. The time period which was utilized is that of a calendar year and the percentage changes are calculated by taking the regulatory capital as a base of reference.

Increase 100 bp Decrease 100 bp Impact on Impact on Change in Change in interest interest Equity Equity margin margin Trading portfolio: securities 42 (586) 35 605 (absolute values in thousands of Euro) as percentage of regulatory capital 0.03% (0.36%) 0.02% 0.37%

Even with regard to price risk, the trading portfolio is constantly monitored by the Finance Division and by the Risk Management department; the latter monitors that the limits set by the Finance Regulations are not exceeded for investments in securities which expose the bank to this risk. Reporting information is available on a daily basis and reports details on securities, completed operations and economic results. The price risk of the trading portfolio is managed by the Finance Division on the basis of structured proxies which limit exposure in terms of total invested amount, listed markets and maximum capital loss amounts. With regard to delegated stock asset management – which is an investment tool with an elevated amount of risk – the contract provides for an early-warning level as well as a stop loss; once the latter is reached, the manager must provide liquidate the assets under management. The price risk measurement model is not utilized to determine capital requirements but represents a tool to support management and internal control.

248 EXPLANATORY NOTES

Information of quantitative nature

1. Regulatory trading portfolio: Distribution by residual duration (re-pricing date) of financial assets and liabilities in cash as well as financial derivatives

Currency: EURO Type/ From 6 On Up to 3 From 3 to From 1 to From 5 to Beyond Indefinite residual months to demand months 6 months 5 years 10 years 10 years duration duration a year 1. Cash assets - - - - 38,171 - 2 - 1.1 Debt - - - - 38,171 - 2 - securities - with option of advance ------reimbursement - other - - - - 38,171 - 2 - 1.2 Other assets ------2. Cash liabilities ------2.1 Borrowing reverse repurchase ------agreements 2.2 Other ------liabilities 3. Financial 301,713 2,213,382 1,745,175 647,506 3,527,968 891,820 305,857 - derivatives: 3.1 With - 69,964 66,780 60 3,003 26 106 - underlying security - Options ------+ long positions ------+ short positions ------Other derivatives - 69,964 66,780 60 3,003 26 106 - + long positions - 34,985 33,390 30 1,501 13 53 - + short positions - 34,979 33,390 30 1,501 13 53 - 3.2 Without 301,713 2,143,418 1,678,395 647,446 3,524,965 891,794 305,752 - underlying security - Options 94,282 86,876 96,155 144,153 1,359,945 676,336 264,512 - + long positions 47,141 43,438 48,077 72,077 679,973 338,168 132,256 - + short positions 47,141 43,438 48,077 72,077 679,973 338,168 132,256 - - Other derivatives 207,431 2,056,542 1,582,241 503,293 2,165,020 215,458 41,240 - + long positions 103,716 1,047,306 792,687 251,909 1,081,947 107,729 20,620 - + short positions 103,716 1,009,235 789,553 251,384 1,083,073 107,729 20,620 -

249 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Currency: JAPANESE YEN Type/ From 6 On Up to 3 From 3 to From 1 to From 5 to Beyond Indefinite residual months to demand months 6 months 5 years 10 years 10 years duration duration a year 1. Cash assets ------1.1 Debt ------securities - with option of advance ------reimbursement - other ------1.2 Other assets ------2. Cash liabilities ------2.1 Borrowing reverse repurchase ------agreements 2.2 Other ------liabilities 3. Financial - 38,741 1,028 63 - - - - derivatives: 3.1 With ------underlying security - Options ------+ long positions ------+ short positions ------Other derivatives ------+ long positions ------+ short positions ------3.2 Without - 38,741 1,028 63 - - - - underlying security - Options ------+ long positions ------+ short positions ------Other derivatives - 38,741 1,028 63 - - - - + long positions - 4 514 31 - - - - + short positions - 38,737 514 31 - - - -

250 EXPLANATORY NOTES

Currency: SWISS FRANC Type/ From 6 On Up to 3 From 3 to From 1 to From 5 to Beyond Indefinite residual months to demand months 6 months 5 years 10 years 10 years duration duration a year 1. Cash assets ------1.1 Debt ------securities - with option of advance ------reimbursement - other ------1.2 Other assets ------2. Cash liabilities ------2.1 Borrowing reverse repurchase ------agreements 2.2 Other ------liabilities 3. Financial - 12,122 2,508 4,195 11,538 - - - derivatives: 3.1 With ------underlying security - Options ------+ long positions ------+ short positions ------Other derivatives ------+ long positions ------+ short positions ------3.2 Without - 12,122 2,508 4,195 11,538 - - - underlying security - Options ------+ long positions ------+ short positions ------Other derivatives - 12,122 2,508 4,195 11,538 - - - + long positions - 569 - 2,098 5,769 - - - + short positions - 11,553 2,508 2,098 5,769 - - -

251 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Currency: USD Type/ From 6 On Up to 3 From 3 to From 1 to From 5 to Beyond Indefinite residual months to demand months 6 months 5 years 10 years 10 years duration duration a year 1. Cash assets ------1.1 Debt ------securities - with option of advance ------reimbursement - other ------1.2 Other assets ------2. Cash liabilities ------2.1 Borrowing reverse repurchase ------agreements 2.2 Other ------liabilities 3. Financial - 22,218 2,300 150 - - - - derivatives: 3.1 With ------underlying security - Options ------+ long positions ------+ short positions ------Other derivatives ------+ long positions ------+ short positions ------3.2 Without - 22,218 2,300 150 - - - - underlying security - Options ------+ long positions ------+ short positions ------Other derivatives - 22,218 2,300 150 - - - - + long positions - 16,130 1,150 75 - - - - + short positions - 6,087 1,150 75 - - - -

252 EXPLANATORY NOTES

Currency: POLISH PLNZLOTY Type/ From 6 On Up to 3 From 3 to From 1 to From 5 to Beyond Indefinite residual months to demand months 6 months 5 years 10 years 10 years duration duration a year 1. Cash assets ------1.1 Debt ------securities - with option of advance ------reimbursement - other ------1.2 Other assets ------2. Cash liabilities ------2.1 Borrowing reverse repurchase ------agreements 2.2 Other ------liabilities 3. Financial - 1,604 ------derivatives: 3.1 With ------underlying security - Options ------+ long positions ------+ short positions ------Other derivatives ------+ long positions ------+ short positions ------3.2 Without - 1,604 ------underlying security - Options ------+ long positions ------+ short positions ------Other derivatives - 1,604 ------+ long positions - 802 ------+ short positions - 802 ------

253 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Currency: AUSTRALIAn dollar Type/ From 6 On Up to 3 From 3 to From 1 to From 5 to Beyond Indefinite residual months to demand months 6 months 5 years 10 years 10 years duration duration a year 1. Cash assets ------1.1 Debt ------securities - with option of advance ------reimbursement - other ------1.2 Other assets ------2. Cash liabilities ------2.1 Borrowing reverse repurchase ------agreements 2.2 Other ------liabilities 3. Financial - 1,003 ------derivatives: 3.1 With ------underlying security - Options ------+ long positions ------+ short positions ------Other derivatives ------+ long positions ------+ short positions ------3.2 Without - 1,003 ------underlying security - Options ------+ long positions ------+ short positions ------Other derivatives - 1,003 ------+ long positions - 943 ------+ short positions - 60 ------

254 EXPLANATORY NOTES

Currency: OTHER CURRENCIES Type/ From 6 On Up to 3 From 3 to From 1 to From 5 to Beyond Indefinite residual months to demand months 6 months 5 years 10 years 10 years duration duration a year 1. Cash assets ------1.1 Debt ------securities - with option of advance ------reimbursement - other ------1.2 Other assets ------2. Cash liabilities ------2.1 Borrowing reverse repurchase ------agreements 2.2 Other ------liabilities 3. Financial - 731 ------derivatives: 3.1 With ------underlying security - Options ------+ long positions ------+ short positions ------Other derivatives ------+ long positions ------+ short positions ------3.2 Without - 731 ------underlying security - Options ------+ long positions ------+ short positions ------Other derivatives - 731 ------+ long positions - 310 ------+ short positions - 421 ------

255 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

2. Regulatory trading portfolio: Distribution of exposures in equities securities and stock market indices for the primary countries of the listed market The table is not reported given that a price risk sensitivity analysis for an internal model is supplied.

3. Regulatory trading portfolio: Internal models and other methodologies for sensitivity analysis Information relative to VaR calculations for equity securities and stock market indices included within the regulatory trading portfolio is reported below:

Average VaR, 2011 VaR 31.12.2011 Minimum VaR, 2011 Maximum VaR, 2011 116,466 131,342 71,143 179,692 Amounts rounded to nearest Euros

With regard to stress tests, the outcomes of simulations of the impact of different shock scenarios on the theoretical value of the trading portfolio on 31.12.2011 is reported below. These scenarios were revised in 2011 due to the changing market conditions and the sovereign debt crisis. The following shocks were added: • A period of significant losses. It includes a time period relative to the second half of 2011 in which there were significant increases in interest rates of the Italian government curve and a shock in the markets of the Euro area which then had a strong impact on the owned portfolio; • stress on stock market indices; includes a decrease in the primary European stock market indices by 10.00%; • a specific case of non-parallel increase in the Italian rates curve which was composed of the primary daily changes recorded in various points of the curve in the second half of 2011; • parallel rate shocks of +50 and +100 basis points for the primary rate curves that were used in the valuation of securities within the owned portfolio.

Theoretical market value change Theoretical Rates curves Rates curves Significant Shift in Italian Stock market market value +50 basis +100 basis losses rates curve indices, -10% 31.12.2011 points points 957,580 (259,162) (32,229) (109,122) 59,002 125,686 Amounts rounded to nearest Euros

256 EXPLANATORY NOTES

2.2 Interest rate risk and price risk – Banking book

Information of qualitative nature

A. General elements as well as interest rate and price risk management processes and measurement methods

Primary sources of interest rate risk Fair value interest rate risk is derived from fixed rate items while interest rate risk from cash flows is derived from variable rate items. The bank is exposed to different sources of interest rate risk for the banking book: these include credit, collection and finance processes given that the banking book is primarily composed of funding and investments in securities from the interbank sector as well as financing to customers and various forms of customer deposits. Items on demand generally include asymmetrical behaviours, depending on whether one considers asset or liability items; the former - being characterized by greater stability - primarily refer to fair value risk while the second are more sensitive to markets changes and therefore ascribable to cash flow risk. The bank – during the course of its operations - assigns adequate attention to both asset and liability items in order to determine interest rate risk. The banking book includes, amongst other times, investments in equities whose purpose is to attain medium to long-term strategic objectives. The banking book therefore also includes – in addition to traditional receivables due from customers and bond instruments, financial instruments which expose the bank to price risk, i.e.: • shareholdings relative to interests in companies promoted by the Cooperative Credit movement or in companies or entities which are instrumental for the development of the bank’s activities or the cooperative movement; • investment funds. • stocks.

Internal processes for managing and measuring interest rate risk Cassa Centrale Banca implements measures for mitigating and controlling interest rate risk in order to avoid the possibility of assuming positions that exceed a certain level of risk. These mitigation and control measures are listed within company regulations, with the latter providing for monitoring that is based on position limits as well as systems with thresholds of attention that are proportional to regulatory capital; once these thresholds are reached, various corrective actions are initiated. With regard to this point, the following are defined: • policies and procedures for managing interest rate risk that are consistent with the nature and complexity of the implemented activity; • operational limits and internal procedural provisions which aim to maintain exposure within limits that are consistent with the managerial policy and with the alert thresholds pursuant to prudential regulations; • measurement of risk which generates warning levels and informational flows so as to allow for the prompt identification and initiative of suitable corrective actions. The bank has appointed the Finance Division, as well as the Risk Management Department and the Risks Committee, as the company bodies which will supervise the process for managing interest rate risk within the banking book.

257 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Monitoring exposure to interest rate risk within the banking book is implemented on a quarterly basis, in compliance with regulations, as well as on a monthly basis on a managerial level and on the basis of internal regulations. The Board of Directors of the bank has deliberated to utilize the simplified algorithm described in Attachment C, Title III, chapter I of Circular no. 263/03 of the Bank of Italy – and subject to recent amendments – for the methodology used to measure risk and quantify the corresponding internal capital. The methodology estimates the change in the economic value of the banking book in the case of a hypothetical change in interest rates of +/- 200 basis points. The application of the aforementioned simplified methodology is based on the following logical steps: 1. definition of the banking book: composed of a group of assets and liabilities which are not part of the trading portfolio for supervisory purposes; 2. determination of “relevant currencies”, i.e. currencies whose measured weight – as a quota of total assets or liabilities of the banking book – is greater than 5.00%. Each relevant current defines a group of positions. Currencies whose weight is less than 5.00% are grouped together; 3. classification of financial assets and liabilities in time periods: 14 time periods are defined. Assets and liabilities with a fixed rate are classified on the basis of their residual useful life, while those with variable rates are classified on the basis of the date of re-pricing of the interest rate. Without prejudice to certain specific classification rules that are explicitly provided for, assets and liabilities are inserted within the maturity ladder according to the criteria pursuant to Circular 272 Manual for filling out the Accounts Matrix”. Non-performing, impaired and expired-exceeded limit positions are re-classified within the relevant sectors of residual life and on the basis of forecasts - for recovery of underlying cash flows – made by the bank for the purposes of financial statement valuations. Impaired positions for which there are no cash flow recovery forecasts are typically allocated within the various time period sectors on the basis of a proportional allocation, utilizing – as a basis for the allocation – the distribution of the recovery forecasts – for the other impaired positions - within the various brackets of residual life (give the same type of impairment); 4. weighting of net positions for each bracket: within each bracket, asset and liability positions are compensated, thereby resulting in a net position. The net position per bracket is multiplied by the corresponding weighting factor. Weighting factors per bracket are calculated as a product of the approximated duration - modified in relation to the bracket - and a hypothetical change in rates of 200 basis points for all brackets; 5. sum of net weighted positions for the various brackets: the net weighted position of the individual aggregate values is an estimate – in the case of the forecasted rate shock – of the change in present value of the items denominated in the currency of the aggregated value; 6. aggregation within the various currencies: positive positions relative to individual “relevant currencies” as well as the aggregate value of the “non-relevant currencies” are summed together. The value which is obtained represents the change in company economic value in the case of the forecasted scenario; 7. determination of the risk indicator which is represented by the ratio between the obtained sum value and the regulatory capital value. The provisions of prudential regulations which regulate the Internal Capital Adequacy Assessment Process (ICAAP) provide for an alert threshold of the risk indicator equal to 20.00%. In the case that this indicator exceeds the alert threshold, the supervisory body will analyze the results in depth with the bank and reserves the right to adopt opportune actions. The risk indicator was not exceeded in 2011 for Cassa Centrale Banca. The bank also implements annual stress tests through the cited methodology by

258 EXPLANATORY NOTES

considering an increase of an additional 100 basis points for the rate shock. The stress tests which are conducted on a quarterly basis (+/- 200 basis points) never reported the risk indicator being reached. In addition to the monitoring activities for interest rate risk through the methodology described above, the bank implements operational management activities by availing itself of the support offered by monthly ALM reporting. Within the analysis, assessment of the impact on capital for various cases of rate shocks is illustrated in the Sensitivity Report; the latter estimates the impact of parallel and simultaneous shifts in the yield curve of +/- 100 and +/- 200 basis points on the present value of assets, liabilities and derivatives. This impact is further broken down by individual type of asset and liability in order to highlight their contribution to overall sensitivity and to understand the various levels of reactivity of items with fixed, variable and mixed rates; in addition, its incidence on the bank’s capital is reported over time in order to promote systematic monitoring. Additional control activities in relation to overall exposure to interest rate risk on the part of the bank is implemented through the measurements that are offered within the realm of the ALM Reports. In particular, variability of both the interest margin as well as of Equity is analyzed for the different scenarios of changing interest rates and bank growth across a time period of 12 months. The simulation assumes that the bank maintains constant assets under management during the 12-month period of analysis with gradual changes in interest rates of +/- 100 basis points, thereby isolating the variability of the margin and Equity in different environments. The ALM analyses are presented by the Risk Management department to the Risks Committee. The Finance Regulations provide for an alert threshold for interest rate risk which is calculated as the net negative value - in the case of a shock increase or decrease of 200 basis points – equal to 15.00% of the regulatory capital of the bank. The bank retains bond securities issued by CR-BCCs which are classified within the portfolio “At Fair Value”; in order to specifically hedge against only interest rate risk for these securities, it issued debenture loans with the same characteristics of duration and rate. They have also been classified under liabilities at their fair value. In relation to the securities component of the banking book, the calculation of the VaR - subdivided by specific IAS portfolio (HTM, AFS and L&R) – is available on a daily basis. With regard to price risk, the Finance Regulations provide for specific limits to operations with stocks and similar instruments (ETF’s, Certificates) as well as with investment funds with a stock component, structured by means of a grid of proxies regardless of the IAS classification category; compliance with regulatory limits is verified with first and second level controls. Limits to the acquisition of investment funds issued by individual asset management companies are also provided for and also structured on the basis of a network of proxies. The Risk Management Department prepares periodical weekly reports which outline the details of securities, completed operations and the economic results which were attained.

B. Fair value hedging activities

Objectives and strategies underlying fair value hedging transactions, types of derivative contracts utilized for hedging and nature of the hedged risk. The bank has implemented operations in order to hedge against changes in fair value; the Fair Value Option provisions are used to book these operations. The strategy adopted by the bank aims to only contain interest rate

259 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

risk and to stabilize the interest margin by means of non-listed interest rate swap operations that are implemented with primary counterparties and in order to specifically hedge against interest rate risk derived from loans or bond issues with fixed rates. The bank does not implement fair value hedging transactions that are booked with fair value hedge accounting.

C. Hedging of financial flows Objectives and strategies underlying operations for the hedging of financial flows, types of utilized derivative contracts and nature of the hedged risk. The bank does not implement hedging transactions that are booked with cash flow hedge accounting.

D. Hedging of foreign investments The Bank does not implement operations for the hedging of foreign investments.

260 EXPLANATORY NOTES

Information of quantitative nature

1. Banking book: distribution by residual duration (re-pricing date) of financial assets and liabilities

Currency: EURO Type/ From 3 From 6 From 1 From 5 Beyond On Up to 3 Indef. residual to 6 months to to 5 to 10 10 demand months durat. duration months a year years years years 1. Cash assets 266,892 3,378,319 382,430 269,832 454,031 27,669 20,765 - 1.1 Debt securities 20,296 216,777 184,202 182,512 340,758 12,219 15,136 - - with option of advance ------reimbursement - other 20,296 216,777 184,202 182,512 340,758 12,219 15,136 - 1.2 Financing to 165,962 2,915,764 - 104 28,628 14,394 - - banks 1.3 Financing to 80,634 245,778 198,228 87,216 84,645 1,056 5,628 - customers - bank accounts 62,827 12,398 3,388 15,933 12,517 18 2,043 - - other financing 17,807 233,380 194,840 71,283 72,128 1,038 3,585 - - with option of advance 10,713 208,707 183,931 43,237 21,116 148 291 - reimbursement - other 7,094 24,673 10,910 28,046 51,012 890 3,294 - 2. Cash liabilities 799,451 3,704,285 42,336 182,616 274,042 2,472 - - 2.1 Due to 164,637 25,203 - 30,706 9,829 - - - customers - bank accounts 164,449 5 - - 9,829 - - - - other payables 188 25,198 - 30,706 - - - - - with option of advance ------reimbursement - other 188 25,198 - 30,706 - - - - 2.2 Due to banks 634,814 3,537,408 27,717 140,892 225,458 - - - - bank accounts 596,609 ------other payables 38,205 3,537,408 27,717 140,892 225,458 - - - 2.3 Debt securities - 141,674 14,619 11,018 38,754 2,472 - - - with option of advance ------reimbursement - other - 141,674 14,619 11,018 38,754 2,472 - - 2.4 Other liabilities ------with option of advance ------reimbursement - other ------

261 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Currency: EURO Type/ From 3 From 6 From 1 From 5 Beyond On Up to 3 Indef. residual to 6 months to to 5 to 10 10 demand months durat. duration months a year years years years 3. Financial 6 3,169 3,551 1,643 5,582 130 42 - derivatives 3.1 With underlying ------security - Options ------+ long positions ------+ short positions ------Other derivatives ------+ long positions ------+ short positions ------3.2 Without 6 3,169 3,551 1,643 5,582 130 42 - underlying security - Options 6 3,091 3,551 1,640 5,555 88 42 - + long positions - 412 147 742 5,555 88 42 - + short positions 6 2,680 3,404 898 - - - - - Other derivatives - 77 - 3 27 42 - - + long positions - 74 ------+ short positions - 3 - 3 27 42 - -

Currency: USD Type/ From 3 From 6 From 1 From 5 Beyond On Up to 3 Indef. residual to 6 months to to 5 to 10 10 demand months durat. duration months a year years years years 1. Cash assets 3,257 18,226 691 11 90 108 - - 1.1 Debt securities ------with option of advance ------reimbursement - other ------1.2 Financing to 3,257 17,478 494 - - - - - banks 1.3 Financing to - 747 196 11 90 108 - - customers - bank accounts ------other financing - 747 196 11 90 108 - - - with option of advance - 747 196 11 90 108 - - reimbursement - other ------2. Cash liabilities 27,926 4,487 649 348 - - - -

262 EXPLANATORY NOTES

Currency: USD Type/ From 3 From 6 From 1 From 5 Beyond On Up to 3 Indef. residual to 6 months to to 5 to 10 10 demand months durat. duration months a year years years years 2.1 Due to 44 ------customers - bank accounts 44 ------other payables ------with option of advance ------reimbursement - other ------2.2 Due to banks 27,882 4,487 649 348 - - - - - bank accounts 27,882 ------other payables - 4,487 649 348 - - - - 2.3 Debt securities ------with option of advance ------reimbursement - other ------2.4 Other liabilities ------with option of advance ------reimbursement - other ------3. Financial - 543 ------derivatives 3.1 With ------underlying security - Options ------+ long positions ------+ short positions ------Other derivatives ------+ long positions ------+ short positions ------3.2 Without - 543 ------underlying security - Options ------+ long positions ------+ short positions ------Other derivatives - 543 ------+ long positions - 271 ------+ short positions - 271 ------

263 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Currency: JAPANESE YEN Type/ From 3 From 6 From 1 From 5 Beyond On Up to 3 Indef. residual to 6 months to to 5 to 10 10 demand months durat. duration months a year years years years 1. Cash assets 255 38,201 398 - - - - - 1.1 Debt securities ------with option of advance ------reimbursement - other ------1.2 Financing to 255 38,201 398 - - - - - banks 1.3 Financing to ------customers - bank accounts ------other financing ------with option of advance ------reimbursement - other ------2. Cash liabilities 206 ------2.1 Due to ------customers - bank accounts ------other payables ------with option of advance ------reimbursement - other ------2.2 Due to banks 206 ------bank accounts 206 ------other payables ------2.3 Debt securities ------with option of advance ------reimbursement - other ------2.4 Other liabilities ------with option of advance ------reimbursement - other ------3. Financial - 9,189 ------derivatives 3.1 With ------underlying security

264 EXPLANATORY NOTES

Currency: JAPANESE YEN Type/ From 3 From 6 From 1 From 5 Beyond On Up to 3 Indef. residual to 6 months to to 5 to 10 10 demand months durat. duration months a year years years years - Options ------+ long positions ------+ short positions ------Other derivatives ------+ long positions ------+ short positions ------3.2 Without - 9,189 ------underlying security - Options ------+ long positions ------+ short positions ------Other derivatives - 9,189 ------+ long positions - 4,594 ------+ short positions - 4,594 ------

Currency: swiss franc Type/ From 3 From 6 From 1 From 5 Beyond On Up to 3 Indef. residual to 6 months to to 5 to 10 10 demand months durat. duration months a year years years years 1. Cash assets 421 16,387 4,190 156 - - - - 1.1 Debt securities ------with option of advance ------reimbursement - other ------1.2 Financing to 421 16,387 3,850 156 - - - - banks 1.3 Financing to - - 340 - - - - - customers - bank accounts ------other financing - - 340 ------with option of advance - - 340 - - - - - reimbursement - other ------2. Cash liabilities 5,772 2,723 35 - - - - - 2.1 Due to ------customers - bank accounts ------other payables ------

265 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Currency: swiss franc Type/ From 3 From 6 From 1 From 5 Beyond On Up to 3 Indef. residual to 6 months to to 5 to 10 10 demand months durat. duration months a year years years years - with option of advance ------reimbursement - other ------2.2 Due to banks 5,772 2,723 35 ------bank accounts 5,772 ------other payables - 2,723 35 - - - - - 2.3 Debt securities ------with option of advance ------reimbursement - other ------2.4 Other liabilities ------with option of advance ------reimbursement - other ------3. Financial - 2,606 ------derivatives 3.1 With ------underlying security - Options ------+ long positions ------+ short positions ------Other derivatives ------+ long positions ------+ short positions ------3.2 Without - 2,606 ------underlying security - Options ------+ long positions ------+ short positions ------Other derivatives - 2,606 ------+ long positions - 1,303 ------+ short positions - 1,303 ------

266 EXPLANATORY NOTES

Currency: CZECH KORUNA Type/ From 3 From 6 From 1 From 5 Beyond On Up to 3 Indef. residual to 6 months to to 5 to 10 10 demand months durat. duration months a year years years years 1. Cash assets 74 1,144 ------1.1 Debt securities ------with option of advance ------reimbursement - other ------1.2 Financing to 74 1,144 ------banks 1.3 Financing to ------customers - bank accounts ------other financing ------with option of advance ------reimbursement - other ------2. Cash liabilities 15 1,280 ------2.1 Due to ------customers - bank accounts ------other payables ------with option of advance ------reimbursement - other ------2.2 Due to banks 15 1,280 ------bank accounts 15 ------other payables - 1,280 ------2.3 Debt securities ------with option of advance ------reimbursement - other ------2.4 Other liabilities ------with option of advance ------reimbursement - other ------3. Financial ------derivatives 3.1 With ------underlying security

267 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Currency: CZECH KORUNA Type/ From 3 From 6 From 1 From 5 Beyond On Up to 3 Indef. residual to 6 months to to 5 to 10 10 demand months durat. duration months a year years years years - Options ------+ long positions ------+ short positions ------Other derivatives ------+ long positions ------+ short positions ------3.2 Without ------underlying security - Options ------+ long positions ------+ short positions ------Other derivatives ------+ long positions ------+ short positions ------

Currency: UK POUND Type/ From 3 From 6 From 1 From 5 Beyond On Up to 3 Indef. residual to 6 months to to 5 to 10 10 demand months durat. duration months a year years years years 1. Cash assets 163 528 116 - - - - - 1.1 Debt securities ------with option of advance ------reimbursement - other ------1.2 Financing to 163 528 116 - - - - - banks 1.3 Financing to ------customers - bank accounts ------other financing ------with option of advance ------reimbursement - other ------2. Cash liabilities 1,511 42 - 24 - - - - 2.1 Due to ------customers - bank accounts ------other payables ------

268 EXPLANATORY NOTES

Currency: UK POUND Type/ From 3 From 6 From 1 From 5 Beyond On Up to 3 Indef. residual to 6 months to to 5 to 10 10 demand months durat. duration months a year years years years - with option of advance ------reimbursement - other ------2.2 Due to banks 1,511 42 - 24 - - - - - bank accounts 1,511 ------other payables - 42 - 24 - - - - 2.3 Debt securities ------with option of advance ------reimbursement - other ------2.4 Other liabilities ------with option of advance ------reimbursement - other ------3. Financial - 47 ------derivatives 3.1 With ------underlying security - Options ------+ long positions ------+ short positions ------Other derivatives ------+ long positions ------+ short positions ------3.2 Without - 47 ------underlying security - Options ------+ long positions ------+ short positions ------Other derivatives - 47 ------+ long positions - 24 ------+ short positions - 24 ------

269 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Currency: OTHER CURRENCIES Type/ From 3 From 6 From 1 From 5 Beyond On Up to 3 Indef. residual to 6 months to to 5 to 10 10 demand months durat. duration months a year years years years 1. Cash assets 3,187 24 ------1.1 Debt securities ------with option of advance ------reimbursement - other ------1.2 Financing to 3,187 24 ------banks 1.3 Financing to ------customers - bank accounts ------other financing ------with option of advance ------reimbursement - other ------2. Cash liabilities 4,324 91 101 - - - - - 2.1 Due to 7 ------customers - bank accounts 7 ------other payables ------with option of advance ------reimbursement - other ------2.2 Due to banks 4,316 91 101 ------bank accounts 4,316 ------other payables - 91 101 - - - - - 2.3 Debt securities ------with option of advance ------reimbursement - other ------2.4 Other liabilities ------with option of advance ------reimbursement - other ------3. Financial ------derivatives 3.1 With ------underlying security

270 EXPLANATORY NOTES

Currency: OTHER CURRENCIES Type/ From 3 From 6 From 1 From 5 Beyond On Up to 3 Indef. residual to 6 months to to 5 to 10 10 demand months durat. duration months a year years years years - Options ------+ long positions ------+ short positions ------Other derivatives ------+ long positions ------+ short positions ------3.2 Without ------underlying security - Options ------+ long positions ------+ short positions ------Other derivatives ------+ long positions ------+ short positions ------

2. Banking book: Internal models and other methodologies for sensitivity analysis In accordance with that reported in the section relative to the regulatory trading portfolio, the measurement of market risk of the banking book is also supported by VaR reporting; information concerning the calculated results, calculated with relation to solely the securities component of the banking book, are provided below:

Average VaR, 2011 VaR 31.12.2011 Minimum VaR, 2011 Maximum VaR, 2011 8,091,715 23,458,309 1,467,301 28,780,808 Amounts rounded to nearest Euros

The VaR values attained in certain periods were affected by the heavy volatility and stress within the financial markets in 2011 as well as by the increase in the securities portfolio. With regard to stress tests, the outcomes of simulations of the impact of different shock scenarios on the theoretical value of the trading portfolio on 31.12.2011 is reported below. These scenarios were revised in 2011 due to the changing market conditions and the sovereign debt crisis. The following shocks were added: • a period of significant losses. It includes a time period relative to the second half of 2011 in which there were significant increases in interest rates of the Italian government curve and a shock in the markets of the Euro area which then had a strong impact on the owned portfolio; • stress on stock market indices. Includes a decrease in the primary European stock market indices by 10.00%; • a specific case of non-parallel increase in the Italian rates curve which was composed of the primary daily changes recorded in various points of the curve in the second half of 2011; • parallel rate shocks of +50 and +100 basis points for the primary rate curves that were used in the valuation of securities within the owned portfolio.

271 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Theoretical market value change Theoretical Stock market Rates curve Rates curves market value Significant Shift in Italian indices +50 +100 basis change, Losses rates curve -10% basis points points 31.12.2011 990,691,446 (42,394,461) (13,146,269) (11,482,139) (5,644,702) (11,155,129) Amounts rounded to nearest Euros

For managerial purposes, the bank also utilizes the quantitative results contained in the monthly ALM reporting. On the basis of dynamic ALM analyses with constant volumes as of 31 December 2011 - and given a scenario of an increase in interest rates of +/- 100 basis points distributed over a time period of one year and uniformly across the entire rates curve (short, medium and long-term) – the effects on the interest margin and on the Equity are reported in relation to the banking book with a specification of the percentage impact compared to regulatory capital:

Increase 100 bp Decrease 100 bp Impact on Change in Impact on Change in interest margin Equity interest margin Equity Banking book: securities 2,404 (6,601) (865) 7,138 (absolute values in thousands of Euro) As percentage of regulatory capital 1.48% (4.07%) (0.53%) 4.40% Banking book: receivables 10,623 (46,402) (7,441) 50,613 (absolute values in thousands of Euro) As percentage of regulatory capital 6.55% (28.62%) (4.59%) 31.22% Liabilities 13,209 (50,217) (9,658) 51,952 (absolute values in thousands of Euro) As percentage of regulatory capital 8.15% (30.97%) (5.96%) 32.04%

2.3 Exchange rate risk

Information of qualitative nature

A. General aspects as well as processes for managing and measuring exchange rate risk Given its role as currency supplier for CR-BCCs and as a result of operations with clientele, the bank is exposed to exchange rate risk; the latter is determined by means of the methodology pursuant to supervisory regulations. The measurement involves the calculation of the “net exchange rate position”, i.e. the balance of all assets and liabilities (in the financial statements and off-balance sheet) relative to each currency, including operations in Euro which are indexed to currency exchange rate changes. The bank has, in any case, established a structure of internal limits and operational proxies for both the net exchange rate position at the end of the day as well as for the net position for individual currencies, thereby confirming a strategy which aims to minimize this type of risk; compliance with limits and proxies is continually verified by the Finance Division and, at the end of each day, by the Risk Management department.

272 EXPLANATORY NOTES

At the end of 2011, the analysis based on Value at Risk techniques was introduced in order to monitor trends in the risk levels of the net exchange rate position, as defined above. This model is not utilized to determine capital requirements but represents an internal tool to support management and internal control of risk.

B. Exchange rate risk hedging activities Exchange rate risk hedging activities are implemented through a policy of essentially balancing booked foreign currency positions; for this purpose, the bank has implemented operations during the course of 2011 for hedging against exchange rate risk by utilize outright derivative instruments.

Information of quantitative nature

1. Distribution of assets, liabilities and derivatives by currency

Currency Items Canadian Swiss Other USD Pounds Yen dollars francs currencies A. Financial assets 22,383 807 38,854 635 21,154 3,793 A.1 Debt securities ------A.2 Equities ------A.3 Financing to banks 21,230 807 38,854 635 20,814 3,793 A.4. Financing to customers 1,153 - - - 340 - A.5 Other financial assets ------B. Other assets 901 761 66 128 869 489 C. Financial liabilities 33,410 1,577 206 737 8,530 5,073 C.1 Due to banks 33,366 1,577 206 737 8,530 5,066 C.2 Due to customers 44 - - - - 7 C.3 Debt securities ------C.4 Other financial liabilities ------D. Other liabilities - - - - 6 - E. Financial derivatives 24,667 54 39,832 73 30,363 3,211 - Options ------+ long positions ------+ short positions ------Other derivatives 24,667 54 39,832 73 30,363 3,211 + long positions 17,355 16 550 8 8,435 2,030 + short positions 7,312 38 39,282 65 21,928 1,181 TOTAL assets 40,640 1,585 39,470 772 30,458 6,312 TOTAL LIABILITIES 40,722 1,615 39,488 802 30,464 6,254 EXCESS (+/-) -83 -30 -18 -30 -6 58

2. Internal models and other methodologies for sensitivity analysis Internal models for sensitivity analysis are not utilized.

273 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

2.4 Derivative instruments

A. Financial derivatives A.1 Regulatory trading portfolio: end period and average notional values

Total 2011 Total 2010 Underlying asset/ Over the Central Over the Central types of derivatives counter counterparties counter counterparties 1. Debt securities and interest rates 3,654,280 - 3,620,696 - a) Options 304,656 - 249,955 - b) Swaps 3,349,624 - 3,370,740 - c) Forwards - - - - d) Futures - - - - e) Other - - - - 2. Equities and stock market indices - - 8,794 - a) Options - - 8,794 - b) Swaps - - - - c) Forwards - - - - d) Futures - - - - e) Other - - - - 3. Currencies and gold 81,129 - 94,525 - a) Options - - 4,011 - b) Swaps - - - - c) Forwards 81,129 - 90,513 - d) Futures - - - - e) Other - - - - 4. Goods - - - - 5. Other underlying assets - - - - TOTAL 3,735,409 - 3,724,014 - AVERAGE values 3,969,886 - 3,696,351 -

A.2 Banking book: end period and average notional values A.2.1 Hedging derivatives The table is not filled out because, on the date of the financial statements in question, there were no balances ascribable to the item in question.

274 EXPLANATORY NOTES

A.2.2. Other derivatives

Total 2011 Total 2010 Underlying asset/ Over the Central Over the Central types of derivatives counter counterparties counter counterparties 1. Debt securities and interest rates 772 - 80 - a) Options 697 - - - b) Swaps 74 - 80 - c) Forwards - - - - d) Futures - - - - e) Other - - - - 2. Equities and stock market indices - - - - a) Options - - - - b) Swaps - - - - c) Forwards - - - - d) Futures - - - - e) Other - - - - 3. Currencies and gold - - - - a) Options - - - - b) Swaps - - - - c) Forwards - - - - d) Futures - - - - e) Other - - - - 4. Goods - - - - 5. Other underlying assets - - - - TOTAL 772 - 80 - AVERAGE values 76 - 82 -

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A.3 Financial derivatives: positive fair value – breakdown by product

Total 2011 Total 2010 Underlying asset/ Over the Central Over the Central types of derivatives counter counterparties counter counterparties A. Regulatory trading portfolio 58,314 - 43,700 - a) Options - - - - b) Interest rate swaps 56,536 - 41,815 - c) Cross currency swaps - - - - d) equity swaps - - 29 - e) Forwards 1,778 - 1,856 - f) Futures - - - - g) Other - - - - B. Hedging banking book - - - - a) Options - - - - b) Interest rate swaps - - - - c) Cross currency swaps - - - - d) equity swaps - - - - e) Forwards - - - - f) Futures - - - - g) Other - - - - C. Banking book: other derivatives 20 - - - a) Options 20 - - - b) Interest rate swaps - - - - c) Cross currency swaps - - - - d) equity swaps - - - - e) Forwards - - - - f) Futures - - - - g) Other - - - - TOTAL 58,335 - 43,700 -

276 EXPLANATORY NOTES

A.4 Financial derivatives: negative fair value – breakdown by product

Total 2011 Total 2010 Underlying asset/types of Over the Central Over the Central derivatives counter counterparties counter counterparties A. Regulatory trading portfolio 57,729 - 42,807 - a) Options - - - - b) Interest rate swaps 55,108 - 40,400 - c) Cross currency swaps - - - - d) equity swaps - - 28 - e) Forwards 2,620 - 2,379 - f) Futures - - - - g) Other - - - - B. Hedging banking book - - - - a) Options - - - - b) Interest rate swaps - - - - c) Cross currency swaps - - - - d) equity swaps - - - - e) Forwards - - - - f) Futures - - - - g) Other - - - - C. Banking book: other derivatives 9 - 6 - a) Options - - - - b) Interest rate swaps 9 - 6 - c) Cross currency swaps - - - - d) equity swaps - - - - e) Forwards - - - - f) Futures - - - - g) Other - - - - TOTAL 57,737 - 42,813 -

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A.5 OTC financial derivatives - regulatory trading portfolio: notional values, positive and negative gross fair values by counterparty – contracts not part of compensation agreements

Contracts Governments Other Non- not part of Financial Insurance Other and central public Banks financial compensation companies companies entities banks entities companies agreements 1) Debt securities and - - 3,685,507 19,902 - 68,978 6,697 interest rates - notional value - - 3,562,759 17,963 - 67,081 6,477 - positive fair - - 54,220 1,091 - 1,077 149 value - negative fair - - 54,361 13 - 680 53 value - future exposure - - 14,167 135 - 140 18 2) Equities and stock market ------indices - notional value ------positive fair ------value - negative fair ------value - future exposure ------3) Currencies - - 86,982 - - - - and gold - notional value - - 81,129 - - - - - positive fair - - 1,778 - - - - value - negative fair - - 2,620 - - - - value - future exposure - - 1,455 - - - - 4) Other assets ------notional value ------positive fair ------value - negative fair ------value - future exposure ------

A.6 OTC financial derivatives: Regulatory trading portfolio: notional values, positive and negative gross fair values by counterparty – contracts that are part of compensation agreements The table is not filled out because, on the date of the financial statements in question, there were no balances ascribable to the item in question.

278 EXPLANATORY NOTES

A.7 OTC financial derivatives: Banking book: notional values, positive and negative gross fair values by counterparty – contracts not part of compensation agreements

Contracts Governments Other Non- not part of Financial Insurance Other and central public Banks financial compensation companies companies entities banks entities companies agreements 1) Debt securities and - - 84 - - - 727 interest rates - notional value - - 74 - - - 697 - positive fair ------20 value - negative fair - - 9 - - - - value - future exposure - - 1 - - - 9 2) Equities and stock market ------indices - notional value ------positive fair ------value - negative fair ------value - future exposure ------3) Currencies ------and gold - notional value ------positive fair ------value - negative fair ------value - future exposure ------4) Other assets ------notional value ------positive fair ------value - negative fair ------value - future exposure ------

A.8 OTC financial derivatives: Banking book: notional values, positive and negative gross fair values by counterparty – contracts that are part of compensation agreements The table is not filled out because, on the date of the financial statements in question, there were no balances ascribable to the item in question.

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A.9 Residual life of OTC financial derivatives: notional values

From 1 to 5 Beyond 5 Underlying/residual life Up to 1 year Total years years A. Regulatory trading portfolio 1,319,068 2,159,644 256,698 3,735,409 A.1 Financial derivatives on debt 1,249,476 2,148,106 256,698 3,654,280 securities and interest rates A.2 Financial derivatives on equities - - - - and stock market indices A.3 Financial derivatives on exchange 69,592 11,538 - 81,129 rates and gold A.4 Financial derivatives on other - - - - assets B. Banking book: 8 133 631 772 B.1 Financial derivatives on debt 8 133 631 772 securities and interest rates B.2 Financial derivatives on equities - - - - and stock market indices B.3 Financial derivatives on exchange - - - - rates and gold B.4 Financial derivatives on other - - - - assets TOTAL 2011 1,319,076 2,159,777 257,329 3,736,181 TOTAL 2010 1,290,209 2,148,371 285,515 3,724,094

A.10 Over the counter financial derivatives counterparty risk/financial risk – internal models The bank does not apply EPE internal models.

B. Credit derivatives This section is not filled out given that the bank does not retain credit derivatives.

C. Credit and financial derivatives This section is not filled out given that the bank does not retain financial and credit derivatives.

Section 3 LIQUIDITY RISK

Information of qualitative nature

A. General elements, liquidity risk management processes and measurement methods and internal systems for liquidity risk measurement and control

Liquidity risk is defined as the possibility that the bank does not manage to maintain its payment obligations due to an incapacity to collect new funds (funding liquidity risk), the incapacity to sell assets on the market to

280 EXPLANATORY NOTES

cover an imbalance requiring financing (asset liquidity risk) or the fact that it may be forced to liquidate its assets in unfavourable market conditions, thereby sustaining very high costs in order to meet its commitments (market liquidity risk). The Board of Directors of the bank – acting in its capacity as a strategic supervisory body - has recently approved a new document named “Policy for the governance and management of liquidity” which defines the policies, responsibilities, processes, operational limits and tools for managing liquidity risk, both during normal business operations as well as during potential liquidity crises. The primary modifications which were introduced concern the complete definition of risk tolerance thresholds, both in the short and the long-term, in addition to new tools for monitoring intraday liquidity risk and the introduction of the indicators prepared by the Institutional Guarantee Fund. The policies include the strategies and organizational measures which serve to promptly contain liquidity risk; the ordinary and stress scenarios which the bank may encounter are defined. The sources of liquidity risk to which the bank is exposed can primarily be identified within the Finance/Treasury, Funding and Credit processes. The bank adopts a liquidity risk governance and management system which, in compliance with the provisions of the supervisory authorities, pursues the double objective of guaranteeing availability of liquid reserves in order to meet its payment obligations as well as financing its assets under the best possible market conditions – present and future – in order to maintain a substantial equilibrium between average due dates of loans and medium-long term deposits. Liquidity management is entrusted, for specific tasks, to the Finance Division, which avails itself of the schedule of cash inflows and outflows as well as of payment forecasts and cash flows nearing expiration. As also occurs for the measurement of interest rate risk for the banking book, the management and measurement of liquidity risk is also supported by the ALM reports. Risk management is conducted by the Finance Division, in collaboration with the Planning and Organizational Division. The bank measures, monitors and controls its liquidity position, both in the short-term (operational, up to 12 months) and in the medium to long term (structural, beyond 12 months). The maturity ladder which is utilized to measure short-term liquidity is produced on a monthly basis. In particular, it is based on the so-called “hybrid method”, which is a hybrid of the “stock approach” and the “cash flow” approach; this method - in addition to the allocating cash flows of asset and liability items on the basis of their residual life – includes a category represented by the stock of financial assets which can easily be liquidated, i.e. the availability of monetary funds and assets which are rapidly convertible on a monetary basis through the liquidation of the relative positions or the attainment of credit lines by granting these with guarantees. Allocation - within the various time brackets - of cash flows generated by the various types of asset items (other than those included in the AEL group) and of liability items is implemented on the basis of prudential criteria (the application of haircuts, discharge coefficients of credit lines, payability of cash inflows and outflows). This breakdown of cash flows of asset and liability items within the time brackets of the maturity ladder aims to reflect the bank’s expectations in addition to being representative of a context of ordinary operations or moderate tension from the liquidity perspective. ICAAP (Capital Adequacy Assessment Process) – pursuant to the second pillar of the new instructions for prudential monitoring - does not require a specific capital requirement in order to cover liquidity risk; by means of certain methodologies, however, it is possible to manage, monitor and effectively control loans and funding, thereby containing this type of risk.

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For this purpose, the Board of Directors has decided to: • draft organizational rules as well as procedures for the measurement and control of liquidity risk by taking into account: - the situation of current and future equilibrium of assets and liabilities as well as of commitments and facilities to respectively to issue or receive funds and financing; - the complexity of the financial instruments which are used to manage activities relative to the collection and use of funds; • assess the net liquidity position of the bank on the basis of the guidelines specified in Circular 236/06 of the Bank of Italy (refer to attachment D, Title III, Chapter 1); • define - as a final method for risk management – the primary guidelines of the so-called Contingency Funding Plan which – through specific responsibilities, as well as procedures and actions that are established in advance – allow a liquidity crisis to be managed. With regard to states of crisis, stress tests will be applied in which the values relative to certain variables - which affect the future inflows and outflows of the bank over a time period of one month - are modified. The percentage change in the values of these variables and the stress scenarios are defined on the basis of the specifications received from the Risks Committee. With regard to the management of structural liquidity, the bank utilizes a method of analysis of the transformation of due dates which are available within the monthly ALM reporting. The report in question measures the duration and amount of the loans and deposits on the due date in order to propose useful summary indicators which can be used to assess the consistency and sustainability of the financial structure of the bank over time. The Net Stable Funding Ratio – which is the ratio between the sources of stable funding and medium to long-term assets - was defined on the basis of the new prudential framework of Basel III. The results of the liquidity risk analysis are presented on a monthly basis from the Risk Management department to the Risks Committee; the latter also offers an evaluation in relation to needs deriving from financial flows as well as in relation to the growth plans of the bank, financing requirements or resources that must be invested in addition to supplying general guidelines for the directly involved organizational units. The positioning of the bank with regard to operational and structural liquidity is also reported to the Board of Directors on a quarterly basis. The requirements of Cassa Centrale Banca are largely ascribable to decreases in liquidity available to shareholder banks or clients; the Risks Committee continually evaluates the bank’s capacity to meet its needs, while taking the following into account, in particular: • availability and price of securities that can be easily liquidated; • availability of credit within the interbank system; • potential of institutional bond funding; • use of other funding tools. With regard to attainable credit and the potential for bond funding, the bank considers its assigned rating of great importance, and consequently adopts the best practices in order to safeguard or improve the ratings attained thus far.

282 EXPLANATORY NOTES

Information of quantitative nature

1. Temporal distribution by contractual residual duration of financial assets and liabilities

Currency: EURO From 15 From more From 6 from Items/time On From 1 From 7 to days than 1 From 3 to months one year Beyond Ind. period brackets demand to 7 days 15 days to 1 month to 6 months to a to 5 5 years durat. month 3 months year years Cash assets 279,401 183,176 3,294 71,453 732,938 79,466 367,394 2,923,805 283,490 - A.1 Government securities - - - - 34,855 - 182,512 489,201 25,185 - A.2 Other debt securities - 296 224 224 14,194 48,885 111,400 120,212 6,234 - A.3 UCITS units 33,896 ------A.4 Financing 245,504 182,880 3,070 71,229 683,890 30,581 73,482 2,314,392 252,071 - - banks 165,962 180,975 119 51,129 657,047 120 204 2,058,756 14,394 - - customers 79,542 1,905 2,951 20,100 26,843 30,461 73,278 255,635 237,677 - Cash liabilities 799,421 215,012 26,026 254,972 739,841 18,360 151,916 2,737,003 70,084 - B.1 Deposits 799,421 33,846 26,026 198,960 151,505 10,858 141,727 235,288 - - - banks 634,814 33,846 26,012 198,941 131,310 10,858 141,727 225,458 - - - customers 164,607 - 15 19 20,195 - - 9,829 - - B.2 Debt securities - 251 - - 21,766 7,502 10,189 165,303 8,417 - B.3 Other liabilities - 180,915 - 56,012 566,570 - - 2,336,412 61,667 - Off-balance-sheet operations 122,133 76,078 18,749 19,179 11,578 9,564 12,494 11,499 13,930 - C.1 Financial derivatives with - 76,078 18,699 18,778 9,469 5,702 3,655 9,552 2 - exchange of capital - long positions - 38,143 18,403 17,484 6,521 4,083 1,831 4,801 1 - - short positions - 37,936 296 1,294 2,948 1,619 1,825 4,751 1 - C.2 Financial derivatives 118,569 ------without exchange of capital - long positions 59,999 ------short positions 58,571 ------C.3 Deposits and receivable ------financing - long positions ------short positions ------C.4 Irrevocable commitments ------to issue funds - long positions ------short positions ------C.5 Issued financial 3,563 - 50 401 2,110 3,861 8,839 1,947 13,928 - guarantees

283 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Currency: JAPANESE YEN From 15 From more From 6 from Items/time On From 1 From 7 to days than 1 From 3 to months one year Beyond Ind. period brackets demand to 7 days 15 days to 1 month to 6 months to a to 5 5 years durat. month 3 months year years Cash assets 255 5,864 9,368 14,230 8,740 398 - - - - A.1 Government securities ------A.2 Other debt securities ------A.3 UCITS units ------A.4 Financing 255 5,864 9,368 14,230 8,740 398 - - - - - banks 255 5,864 9,368 14,230 8,740 398 - - - - - customers ------Cash liabilities 206 ------B.1 Deposits 206 ------banks 206 ------customers ------B.2 Debt securities ------B.3 Other liabilities ------Off-balance-sheet operations - 9,210 17,329 19,916 1,474 1,028 63 - - - C.1 Financial derivatives with - 21 17,329 19,916 1,474 1,028 63 - - - exchange of capital - long positions - 4 - - - 514 31 - - - - short positions - 17 17,329 19,916 1,474 514 31 - - - C.2 Financial derivatives ------without exchange of capital - long positions ------short positions ------C.3 Deposits and receivable ------financing - long positions ------short positions ------C.4 Irrevocable commitments - 9,189 ------to issue funds - long positions - 4,594 ------short positions - 4,594 ------C.5 Issued financial ------guarantees

284 EXPLANATORY NOTES

Currency: SWISS FRANC From 15 From more From 6 from Items/time On From 1 From 7 to days than 1 From 3 to months one year Beyond Ind. period brackets demand to 7 days 15 days to 1 month to 6 months to a to 5 5 years durat. month 3 months year years Cash assets 421 2,976 3,927 3,366 6,118 3,868 174 145 163 - A.1 Government securities ------A.2 Other debt securities ------A.3 UCITS units ------A.4 Financing 421 2,976 3,927 3,366 6,118 3,868 174 145 163 - - banks 421 2,976 3,927 3,366 6,118 3,850 156 - - - - customers - - - - - 18 18 145 163 - Cash liabilities 5,772 2,550 - 49 123 35 - - - - B.1 Deposits 5,772 2,550 - 49 123 35 - - - - - banks 5,772 2,550 - 49 123 35 - - - - - customers ------B.2 Debt securities ------B.3 Other liabilities ------Off-balance-sheet operations 15 4,188 4,748 1,147 5,057 2,508 4,195 11,538 - - C.1 Financial derivatives with - 1,171 4,748 1,147 5,057 2,508 4,195 11,538 - - exchange of capital - long positions - 569 - - - - 2,098 5,769 - - - short positions - 602 4,748 1,147 5,057 2,508 2,098 5,769 - - C.2 Financial derivatives ------without exchange of capital - long positions ------short positions ------C.3 Deposits and receivable ------financing - long positions ------short positions ------C.4 Irrevocable commitments - 2,606 ------to issue funds - long positions - 1,303 ------short positions - 1,303 ------C.5 Issued financial 15 411 ------guarantees

285 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Currency: AUSTRALIAN DOLLAR From 15 From more From 6 from Items/time On From 1 From 7 to days than 1 From 3 to months one year Beyond Ind. period brackets demand to 7 days 15 days to 1 month to 6 months to a to 5 5 years durat. month 3 months year years Cash assets 320 - - 6 ------A.1 Government securities ------A.2 Other debt securities ------A.3 UCITS units ------A.4 Financing 320 - - 6 ------banks 320 - - 6 ------customers ------Cash liabilities 1,250 - - 91 ------B.1 Deposits 1,250 - - 91 ------banks 1,250 - - 91 ------customers ------B.2 Debt securities ------B.3 Other liabilities ------Off-balance-sheet operations - 217 786 ------C.1 Financial derivatives with - 217 786 ------exchange of capital - long positions - 157 786 ------short positions - 60 ------C.2 Financial derivatives ------without exchange of capital - long positions ------short positions ------C.3 Deposits and receivable ------financing - long positions ------short positions ------C.4 Irrevocable commitments ------to issue funds - long positions ------short positions ------C.5 Issued financial ------guarantees

286 EXPLANATORY NOTES

Currency: CZECH koRUNA From 15 From more From 6 from Items/time On From 1 From 7 to days than 1 From 3 to months one year Beyond Ind. period brackets demand to 7 days 15 days to 1 month to 6 months to a to 5 5 years durat. month 3 months year years Cash assets 74 - - 1,121 23 - - - - - A.1 Government securities ------A.2 Other debt securities ------A.3 UCITS units ------A.4 Financing 74 - - 1,121 23 ------banks 74 - - 1,121 23 ------customers ------Cash liabilities 15 - - 1,280 ------B.1 Deposits 15 - - 1,280 ------banks 15 - - 1,280 ------customers ------B.2 Debt securities ------B.3 Other liabilities ------Off-balance-sheet operations - 6 ------C.1 Financial derivatives with - 6 ------exchange of capital - long positions ------short positions - 6 ------C.2 Financial derivatives ------without exchange of capital - long positions ------short positions ------C.3 Deposits and receivable ------financing - long positions ------short positions ------C.4 Irrevocable commitments ------to issue funds - long positions ------short positions ------C.5 Issued financial ------guarantees

287 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Currency: CZECH koRUNA From 15 From more From 6 from Items/time On From 1 From 7 to days than 1 From 3 to months one year Beyond Ind. period brackets demand to 7 days 15 days to 1 month to 6 months to a to 5 5 years durat. month 3 months year years Cash assets 3,030 47 73 360 67 116 - - - - A.1 Government securities ------A.2 Other debt securities ------A.3 UCITS units ------A.4 Financing 3,030 47 73 360 67 116 - - - - - banks 3,030 47 73 360 67 116 - - - - - customers ------Cash liabilities 4,584 - - - 42 101 24 - - - B.1 Deposits 4,584 - - - 42 101 24 - - - - banks 4,577 - - - 42 101 24 - - - - customers 7 ------B.2 Debt securities ------B.3 Other liabilities ------Off-balance-sheet operations - 709 194 745 729 - - - - - C.1 Financial derivatives with - 662 194 745 729 - - - - - exchange of capital - long positions - 267 97 383 364 ------short positions - 395 97 362 364 - - - - - C.2 Financial derivatives ------without exchange of capital - long positions ------short positions ------C.3 Deposits and receivable ------financing - long positions ------short positions ------C.4 Irrevocable commitments - 47 ------to issue funds - long positions - 24 ------short positions - 24 ------C.5 Issued financial ------guarantees

288 EXPLANATORY NOTES

section 4 OPERATING RISKS

Information of qualitative nature

A. General aspects as well as processes for managing and measuring the operational risk of an event

Operating risk is the “risk of sustaining losses deriving from the inadequacy or dysfunction of procedures, human resources and internal systems or those caused by exogenous events”. This definition includes legal risk, but not reputational and strategic risk. Operating risk is a pure risk given that only negative manifestations of the event are linked to it. These symptoms are directly ascribable to the activities of the bank and concern its entire structure (governance, business and support). Operating risk - which is inherent in the exercising of banking activities - is generated across all company processes. In general, the primary sources for manifestation of operating risk are internal fraud, external fraud, workplace employment and safety reports, professional obligations with respect to clients or the nature and characteristics of products as well as damages from external events and the dysfunction of IT systems. Risks related to significant outsourcing activities are relevant in this case. Given that it is a transversal risk across processes, operating risk can be controlled and mitigated through currently effective internal regulations (regulations, executive provisions, proxies) which are drafted primarily for the purposes of prevention. Specific line controls are then set up on the basis of these regulations as a verification and additional system for monitoring this type of risk. Currently effective regulations are also applied to IT procedures with the aim of constantly monitoring the correct assignment of authorization as well as compliance with functional subdivisions on the basis of company roles. The bank has begun the process of process mapping and description by formalizing the relative controls within a specific database; this is based on the belief that process documentation represents the best answer to the need to monitor operating risks. All phases and activities which form standard operating procedures have been recorded, and the potential risks as well as the first level control contents have been identified for these. Specific audits were implemented with regard to authorizations and access to the company IT system as well as to the Internet portal; with regard to this point, criteria and rules for risk containment have been adopted. The bank has an “Operational Continuity Plan” which was drafted in order to protect the bank itself in the case of crises which could damage its full operational capacity; it therefore formalized the operating procedures that must be adopted in the crisis scenarios in question and clearly outlined the roles, responsibilities and time schedules of the various parties that are involved. With regard to organizational safeguards, the Compliance department – delegated to monitor and control compliance with norms – provides support to the process of preventing and managing the risk of being subject to judicial or administrative sanctions as well as the risk of reporting significant losses following the violation of external regulations (laws or regulations) or internal ones (Articles of Association, codes of conduct , corporate governance codes). In addition, second level controls are required for verifying risks associated with the management of the IT system; these controls are implemented by logical security monitoring department as well as by the Compliance department; the Internal Audit office – which is responsible for third level controls – conducts periodical audits on

289 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

the overall functionality of the system of controls within the realm of the various company processes. With regard to the regulatory measurement of the prudential requirement for operating risks, the bank – given that it does not reach the specific thresholds for accessing the advanced methodologies identified by supervisory authorities, and in light of its organizational, operational and size characteristics - applies the Basic Indicator Approach (BIA). On the basis of this methodology, the capital requirement for operating risks is measured by applying the regulatory coefficient of 15.00% to the average of the last three data recordings - on an annual basis – of an indicator of the volume of company operations; this indicator is net interest and other banking income.

Information of quantitative nature

Year Amount December 2011 44,082 December 2010 51,359 December 2009 52,736 Average net interest and other banking income in the last three years 49,392 Capital requirement (15.00% of the average) 7,409

The requirement is calculated by exclusively taking into account the values of the relevant indicator that is determined on the basis of IAS accounting principles and is based on available information of positive value at year end. For the purposes of a more structured evaluation of operating risks, a series of activities have been initiated as of 2009 for the implementation of processes relative to funding as well as the preservation and analysis of internal data relating to the most significant events and operational losses. The mandatory use of a database – where events which caused operational losses, even potential, could be registered - was introduced; this tool represents a development in risk assessment methodologies and serves the purpose of identifying and removing process defects which could result in negative events. As of 31.12.2011, a legal dispute involving the bank was underway; this dispute ended in the first months of 2012.

Disclosure of information to the public In accordance with the requirements of the “New regulations for the prudential supervision of banks (refer to Circular 263/2006, Title IV, Chapter 1, Section II, Point 5), it should be known that Cassa Centrale Banca - with reference to the requirement for disclosure of information to the public introduced by the so-called Third Pillar of Basel II – publishes the required information on its website, www.cassacentrale.it.

290 EXPLANATORY NOTES

291 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

part F INFORMATION ON EQUITY

Section 1 The company’s capital Section 2 Regulatory capital and adequacy ratios

292 EXPLANATORY NOTES

section 1 THE COMPANY’S CAPITAL

a. Information of qualitative nature

One of the consolidated strategic priorities of the bank is represented by the amount and movements of its capital assets. The evolution of company assets not only specifically occurs in connection with a growth in size but represents a decisive element in its development phases. The Equity of the bank is given by the sum of the share capital and of the share price premium reserves, net income reserves, valuation reserves and the net income of the year - for the quota that must be allocated to the reserve - as specified in the subsequent tables. International accounting principles, on the other hand, secondarily define Equity as the amount remaining of a company’s assets after having deducted all liabilities. From a financial perspective, as a result, the assets represent the monetary amount contributed by owned assets or generated by the company. For supervisory purposes, the aggregate capital assets which are relevant for this purpose are determined on the basis of the provisions of the Bank of Italy. These capital assets serve as the safeguard of reference for the provisions of prudential monitoring given that they are a financial resource which is capable of absorbing potential losses produced by exposure of the bank to the typical risks of its operations, thereby providing a guarantee with respect to depositing parties and creditors. The current level of capital assets allows for compliance with the provisions for prudential monitoring that are required for banks. In accordance with these supervisory instructions, in fact, the capital assets of the bank must represent at least 8.00% of the total weighted assets (total capital ratio) in relation to the credit risk profile, evaluated on the basis of the category of debtor counterparties, the duration, the country risk and received guarantees. The banks are also required to comply with capital requirements associated with brokerage activities. Along with compliance with minimum mandatory capital ratios (first pillar), the regulations require the use of internal methodologies which aim to determine present and future capital adequacy (second pillar). The existence of the second pillar – along with the minimum mandatory ratios – effectively expands the concept of capital adequacy, thereby assuming a more global meaning which generally aims towards overall verifying capital requirements and effectively available assets, in accordance with the strategic and growth objectives of the bank itself. The bank utilizes the Internal Capital Adequacy Process, ICAAP, in order to determine the level of internal capital which is adequate to manage all types of risk within the realm of an assessment of current and future exposure that takes into account the strategies and evolution of the context of reference. The objective of the bank is therefore to maintain adequate capital coverage of the requirements required by supervisory norms; as part of the ICAAP process, their development is therefore estimated during the planning phase and on the basis of the objectives established by the Board of Directors. Verification of compliance with supervisory requirements and the consequent adequacy of capital is implemented on a quarterly basis. The elements which are audited primarily include ratios pertaining to the financial structure of the bank (loans, problem receivables, fixed assets, total assets) and the degree of hedging of risks.

B. Information of quantitative nature This section illustrates the composition of accounts pertaining to the capital assets of the bank.

293 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

B.1 Company capital: breakdown

Total Total Items/Values 2011 2010 1. Share capital 140,400 140,400 2. Issue price premiums 4,350 4,350 3. Reserves: 47,724 41,522 - of profit 47,706 41,504 a) legal 20,579 19,899 b) statutory - - c) own shares - - d) other 27,127 21,605 - other 18 18 4. Capital instruments - - 5. (Own shares) - - 6. Valuation reserves (5,541) 286 - Financial assets available for sale (6,438) (610) - Tangible assets - - - Intangible assets - - - Hedging of foreign investments - - - Hedging of financial flows - - - Exchange rate differences - - - Non-current assets being disposed - - - Actuarial income (losses) from defined benefit plans - - - Quotas of valuation reserves relative to shareholdings valuated with the equity - - method: - Special revaluation laws 896 896 7. Net profit (loss) of the year 8,202 13,540 TOTAL 195,135 200,099

The share capital of the bank is composed of 2,550,000 ordinary shares as well as 150,000 preferred shares with a nominal value of EUR 52 each and totalling EUR 140,400,000. The reserves pursuant to point 3 including already existing net income reserves as well as the positive and negative reserves associated with the effects of transition to international IAS/IFRS accounting principles which were not booked under the other items of Equity. The reserves for valuation of financial assets available for sale, and included in point 6, are specified in detail in table B.2 below.

294 EXPLANATORY NOTES

B.2 Valuation reserves relative to financial assets available for sale: composition

Total 2011 Total 2010 Assets/values Negative Negative Positive reserve Positive reserve reserve reserve 1. Debt securities 75 (7,543) - (2,689) 2. Equities 17 - 18 - 3. UCITS units 1,013 - 2,061 - 4. Financing - - - - TOTAL 1,105 (7,543) 2,079 (2,689)

The column “positive reserve” specifies the cumulative amount of valuation reserves relative to financial instruments which – within the realm of the category in question, and on the date of reference of the financial statements - reported a fair value that was greater than their amortized cost (financial assets reporting capital gains). The column “negative reserve”, on the other hand, specifies the cumulative amount of valuation reserves relative to financial instruments which – within the realm of the category in question, and on the date of reference of the financial statements - reported a fair value that was less than their amortized cost (financial assets reporting capital losses). The specified amounts are reported net of the relative tax effect.

B.3 Valuation reserves relative to financial assets available for sale: changes

Debt UCITS Equities Financing securities units 1. Opening balances (2,689) 18 2,061 - 2. Positive changes 5,149 199 1,790 - 2.1 fair value increases 1,378 - 353 - 2.2 Reversals of negative reserves to the income 232 191 233 - statement - from impairment - 191 233 - - on sale 232 - - - 2.3 Other changes 3,539 8 1,204 - 3. Negative changes 9,929 200 2,838 - 3.1 Fair value decreases 7,075 - 191 - 3.2 Impairment adjustments - 191 233 - 3.3 Reversals of positive reserves to the income - - - - statement: - on sale - - - - 3.4 Other changes 2,853 8 2,414 - 4. Closing balances (7,468) 17 1,013 -

The amount reported in point 2.2, column “UCITS units”, refers to the reversal of the negative reserve to the income statement, booked under funds following its impairment.

295 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

Section 2 Regulatory capital and adequacy ratios

2.1 Regulatory capital

a. Information of qualitative nature The regulatory capital and the capital ratios are calculated on the basis of financial values and the economic result which is determined by applying the financial statement regulations pursuant to IAS/IFRS international accounting principles and by taking into account the regulations of the Bank of Italy pertaining to regulatory capital and prudential ratios. The regulatory capital is calculated as the sum of positive and negative items and on the basis of their financial quality; positive elements must be fully available to the bank in order to utilize them within the calculation of capital absorption. The regulatory capital – which serves as the safeguard of reference of prudential supervisory provisions – is composed of tier 1 capital and tier 2 capital, net of deductions. Both tier 1 and tier 2 capital are calculated by algebraically summing their positive and negative elements after taking into account the so-called “prudential filters”. This expression refers to all positive and negative elements which adjust regulatory capital and which were introduced by the supervisory authorities with the explicit aim of reducing the potential volatility of the capital. Always in relation to prudential filters, the provision of the Bank of Italy of 18 May 2010 should be noted; by means of this provision, the prudential treatment of revaluation reserves relative to debt securities issued by the central administrations of EU countries and included within the portfolio “Financial assets available for sale” is modified for the purposes of calculating the regulatory capital. In particular, the possibility of fully neutralizing the capital gains and losses booked within the aforementioned AFS reserves was recognized as of 1.1.2010. The bank has availed itself of the possibility of exercising this option. The elements which, in particular, compose tier 1 and tier 2 capital are illustrated below:

Tier 1 capital Share capital, issue premiums, reserves of net income and capital, constitute the capital elements of primary quality. The total of the aforementioned elements – after deducting own shares or quotas as well as intangible assets and any potential losses recorded in the previous and current year - constitutes the tier 1 capital, gross of the deductible elements. From this total, 50% of the following must be deducted: shareholdings, innovative and non-innovative capital instruments, hybrid capitalization instruments, subordinated assets held in other banks and financial companies, shareholdings and subordinated instruments of insurance companies that are acquired after 20.07.2006.

Tier 2 capital Valuation reserves, hybrid capitalization instruments and subordinated liabilities constitute the positive elements of tier 2 capital; the latter is allowed within the calculation of the regulatory capital for a maximum amount that is equal to the tier 1 capital. Subordinated liabilities may not exceed 50.00% of Tier 1. From this total, 50% of the following must be deducted: shareholdings, innovative and non-innovative capital instruments, hybrid capitalization instruments, subordinated assets held in other banks and financial companies, shareholdings and subordinated instruments of insurance companies that are acquired after 20.07.2006.

296 EXPLANATORY NOTES

Shareholdings and subordinated instruments issued by insurance companies and acquired by the banks before 20.07.2006 must be deducted from these aggregate amounts (tier 1 and tier 2 capital).

Tier 3 capital The Bank does not utilize instruments for calculating this type of capital.

B. Information of quantitative nature

Total 2011 Total 2010 A. Tier 1 capital before the application of prudential filters 194,458 192,009 B. Prudential filters for tier 1 capital - - B.1 Positive IAS/IFRS prudential filters - - B.2 Negative IAS/IFRS prudential filters - - C. Tier 1 capital gross of elements to deduct (A+B) 194,458 192,009 B. Elements to deduct from tier 1 capital 32,324 31,242 E. Total Tier 1 capital (C-D) 162,133 160,767 F. Tier 2 capital before the application of prudential filters 2,337 3,146 G. Prudential filters for tier 2 capital (721) (1,125) G.1 Positive (+) IAS/IFRS prudential filters - - G.2 Negative (-) IAS/IFRS prudential filters (721) (1,125) H. Tier 2 capital gross of elements to deduct (F+G) 1,617 2,021 I. Elements to deduct from tier 2 capital 1,617 2,021 L. Total Tier 2 capital (H-I) - - M. Elements to deduct from total tier 1 and tier 2 capital - - N. Regulatory capital (E + L - M) 162,133 160,767 O. Tier 3 capital - - P. Regulatory capital including Tier 3 capital (N + O) 162,133 160,767

2.2 Capital adequacy

a. Information of qualitative nature The Bank of Italy – through the issue of Circular no. 263 of 27 December 2006 (“New regulations for the prudential supervision of banks”), and its subsequent amendments – has re-designed the prudential regulations of banks and banking groups by incorporating the EU directives pertaining to capital adequacy for financial intermediaries: New Basel Capital Accord (so-called “Basel II”). The new structure for prudential regulation is based on three Pillars: • the first assigns importance to the measurement of risks and capital, providing for compliance with capital requirements in order to cover certain primary types of risks associated with banking and financial activities (credit, counterparty, market and operational risks); for this purpose, alternative methodologies for calculating capital requirements are provided for and characterized by various levels of complexity relating to the measurement of risks and organizational control requirements;

297 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

• the second requires that financial intermediaries to have a strategy and process for controlling both current and future capital adequacy, highlighting the importance of governance as an element of fundamental significance, even for the Supervisory Body which is entrusted with the task of verifying the reliability and accuracy of the internal assessment; • the third introduces specific reporting obligations to the public in relation to capital adequacy, exposure to risks and the general characteristics of the relative management and control systems. The prudential ratios, as of 31 December 2011, are determined in accordance with the methodology pursuant to the Capital Accord - Basel II, adopting the standardized method for the calculation of capital requirements in connection with credit and counterparty risk as well as the basis method for the calculation of operating risks. In accordance with supervisory instructions, the banks must constantly maintain – as a capital requirement connected to the risk of loss due to default of debtors (credit risk) – an amount of regulatory capital that is equal to at least 8.00% of the weighted exposures for the risk (total capital ratio). The banks are also required to continually comply with the capital requirements relative to risks generated by operations in markets and pertaining to financial instruments, currencies and goods. With reference to market risk calculated in relation to the entire trading portfolio, the regulations identify and regulate the treatment of the various types of risk: position risk for debt securities and equities, regulation risks and concentration risk. With reference to the entire financial statements, it is also necessary to determine exchange rate risk and position risk for goods. With regard to the assessment of financial solidity, the Tier 1 capital ratio is also important, and is represented by the ratio of tier 1 capital and the overall weighted risk assets. As illustrated by the composition of regulatory capital and in the following details of prudential requirements, the bank has a Tier 1 capital ratio of 14.45% (13.43% as at 31.12.2010) as well as a total capital ratio equal to 14.45% (13.43% as at 31.12.2010) higher than the minimum requirement of 8.00%. In particular, the requirement for credit and counterparty risk has increased due to the downgrading of the Italian government rating, and which in turn affected the weighting of the monitored intermediaries; the increase in market risk reflects the growth in volumes of the Held for Trading portfolio while operating risk remained essentially stable. The increase in volumes of weighted risk assets is, in particular, due to re-financing operations with the ECB for the CR-BCCs which do not generate a requirement - given the zero percent weighting – but which negatively affect capital ratios. The capital surplus was equal to EUR 72,358,861, net of the quota absorbed by credit risks, market risks and operating risks.

298 EXPLANATORY NOTES

B. Information of quantitative nature

Weighted amounts/ Non-weighted amounts Categories/Values requirements Total 2011 Total 2010 Total 2011 Total 2010 A. Risk assets A.1 Credit and counterparty risk 5,494,419 1,282,091 1,346,260 1,075,851 1. Standardized methodology 5,490,358 1,278,029 1,344,229 1,073,820 2. Methodology based on internal ratings - - - - 2.1 Base - - - - 2.2 Advanced - - - - 3. Securitizations 4,061 4,062 2,031 2,031 B. Regulatory capital requirement B.1 Credit and counterparty risk 107,701 86,068 B.2 Market risk 4,589 2,264 1. Standard methodology 4,589 2,264 2. Internal models - - 3. Concentration risk - - B.3 Operating risk 7,409 7,461 1. Base method 7,409 7,461 2. Standardized method - - 3. Advanced method - - B.4 Other prudential requirements - - B.5 Other calculation elements - - B.6 Total prudential requirements 89,774 71,845 (B1+B2+B3+B4+B5) C. Risk assets and adequacy ratios C.1 Weighted risk assets 1,122,179 1,197,419 C.2 Tier 1 capital ratio 14.45% 13.43% Tier 1 capital/Weighted risk assets C.3 Total capital ratio Regulatory capital/Weighted risk 14.45% 13.43% assets

299 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

part G BUSINESS COMBINATIONS REGARDING COMPANIES OR BRANCHES

Section 1 Operations implemented during the year Section 2 Operations implemented after the closing of the year Section 3 Retrospective adjustments

300 EXPLANATORY NOTES

section 1 Operations implemented during the year During the course of the year, the bank did not implement business combinations with companies or company branches.

section 2 Operations implemented after the closing of the year From the date of closing of the year and up until the date of approval of the draft financial statements on the part of the Board of Directors, the bank did not implement business combinations with companies or company branches.

section 3 RETROSPECTIVE adjustments There are no retrospective adjustments to report.

301 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

part H transactions WITH RELATED PARTIES

1. Information on compensation of executives with strategic responsibilities 2. Information on transactions with related parties

302 EXPLANATORY NOTES

1. Information Executives with strategic responsibilities are those which retain powers and responsibilities pertaining to the on compensation planning, management and control of the company’s activities. of executives In compliance with regulatory provisions pertaining to policies and practices relating to compensation and with strategic incentives within banks, as well as in accordance with the shareholders’ meeting resolution of 22 May 2010, responsibilities the reported compensation refers to executives with strategic responsibilities, i.e. directors and employees which are executives. In addition, the compensation assigned to the auditors of the bank are reported.

Compensation overall disbursed to executives with strategic responsibilities Total 2011 - Salaries and other short-term benefits 1,656 - Benefits relative to the post-employment period (social security, insurance, etc..) 73

Compensation overall disbursed to auditors Total 2011 - Salaries and other short-term benefits 183 - Benefits relative to the post-employment period (social security, insurance, etc..) -

The compensation disbursed to directors and auditors was determined by means of a resolution of the shareholders’ meeting dated 28 May 2010. This compensation includes attendance fees and the office indemnities that are due.

2. Information Issued Received on transactions Assets Liabilities Revenues Costs guarantees guarantees with related Subsidiaries - 661 - - 40 134 parties Affiliated companies 15,650 1,067 - - 1,028 440 Directors and executives ------Other related parties ------Total 15,650 1,728 - - 1,068 574

Other related parties refer to entities that are subject to the control or significant influence of directors or executives, or by parties which could have an influence or be influenced by these parties. An operation with a related party is a transfer of resources, services or obligations between related parties, regardless of whether a compensation has been stipulated. Relations and operations implemented with related parties do not include any critical elements given that they are ascribable to ordinary credit and service activities. During the course of the year, no atypical or unusual operations were implemented with related parties which – due to their significance or amount – could have generated doubts in relation to the protection of company assets. The screening process relative to loan requests from related parties follows the same process used to grant credit to other non-related counterparties with the same creditworthiness level. With regard to operations with entities that exercise functions of administration, management and control within the bank, Article 136 of Italian Legislative Decree 385/1993 and Article 2391 of the Italian Civil Code are applicable.

303 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

With regard to this point, the bank – by means of a framework resolution of the Board of Directors of 30 January 2008 - drafted regulations pertaining to the regulation of conflicts of interest and of the obligations of banking officials; the procedures to follow in the relative cases are regulated. This framework resolution is annually reviewed and, in any case, when the conditions which serve as the basis for the previous resolution have changed. Transactions with related parties are regularly implemented under market conditions and, in any case, on the basis of evaluations of economic convenience and always in compliance with currently effective regulations, providing adequate justification of the reasons and justification to complete them. In particular: • executives with strategic responsibilities are subject to all the conditions reserved for personnel in general or pursuant to employment agreements; • directors and auditors are subject to the conditions of clientele of analogous professional positions and standing. Transactions with related parties do not have a significant incidence on the financial situation, economic result and cash flows of the bank. There were no allocations or booked losses for doubtful receivables relative to related parties within the financial statements. Only a collective write-down is applied to them.

Management and coordination activities on the part of the parent company Following the reform of Italian corporate law (Italian Legislative Decree no. 6 of 17.1.2003), the financial statements relative to the current year 2011, as well as those of 2004 onwards, incorporate the amendments introduced by the aforementioned decree. With regard to this point, and in addition to norms which directly pertain to the preparation of the financial statements, there are other provisions contained in the new regulations which must be taken into account when preparing the financial statements of subsidiaries given that they introduce financial reporting requirements for the companies subject to management and coordination. They are of three types.

Statement summarizing the data of the most recent financial statements of the company which exercises management and coordination activities. The provision contained in paragraph 4 of Article 2497 bis of the Italian Civil Code states that the “subsidiary company must report – within a specific section of its explanatory notes – a statement summarizing the essential data of the most recent financial statements of the company or of the entity which exercises management and coordination activities over it”. We hereby report that the company which exercises management and coordination activities is the following: Centrale Finanziaria del Nord Est S.p.A., with a registered office in via Segantini, 5 - Trento, registration number within the Registry of Companies of Trento, tax ID and VAT no. 04369990967. In compliance with the aforementioned provision of Article 2497 bis, the following pages of this section reports the statement summarizing the data of the 2010 financial statements of Centrale Finanziaria del Nord Est S.p.A.; these are the most recently approved financial statements of the latter company which, during the course of 2011, exercised management and coordination activities over Cassa Centrale Banca.

Reporting of relations with the party exercising management and coordination activities. The new provision contained in paragraph 5 of Article 2497 bis of the Italian Civil Code states that the “directors

304 EXPLANATORY NOTES

must report – within the Report on Operations – the relations which were entertained with the entity which exercises management and coordination activities as well as with other companies of the group which are subject to such management and coordination, in addition to reporting the effect which these activities had on corporate operations and results”. In compliance with this norm, summary information on the operations implemented by Cassa Centrale Banca with respect to the parent company during the course of 2011 - and their economic value - is hereby reported.

Justification, reasons and interests underlying the decisions made by the subsidiary following management and coordination activities. Article 2497 ter states that “the decisions of companies subject to management and coordination activities, and influenced by the latter, must be analytically justified and contain detailed information on the reasons and interests which affected the decisions”. According to this norm, the Report on Operation must include an analytical analysis justifying the decisions of the subsidiary company which were influenced by the parent company, i.e. those which originated or were determined by directives from the latter. With regard to this point, it should be noted that – during the course of the year in question – the decisions of Cassa Centrale Banca were not influenced or determined by the parent company.

STATEMENT OF FINANCIAL POSITION Assets 138.279 Liabilities 116 Share capital 133.000 Legal reserve 785 Other reserves - Profit for the year 4.378 Equity 138.163 Income Statement Revenues from ordinary activities 4,858 Costs of ordinary activities (414) Profit on ordinary activities 4,444 Extraordinary items - Income tax (66) Profit for the year 4,378

Financial and economic items relative to intercompany transactions are reported below:

STATEMENT OF FINANCIAL POSITION Assets Item 60 - Loans to banks Centrale Finanziaria del Nord Est S.p.A. 10,672 Item 10 - Item 150 - INCOME STATEMENT Interest income Administrative expenses Centrale Finanziaria del Nord Est S.p.A. 99 60

305 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

part I PAYMENT AGREEMENTS BASED ON OWN EQUITY INSTRUMENTS

The bank has not implemented payment agreements based on own equity instruments.

part L SEGMENT REPORTING

The bank is not required to fill out this section given that it is not a non-listed intermediary nor does it issue widely distributed securities.

306 EXPLANATORY NOTES

307 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011 FINANCIAL STATeMeNTS OF SUbSIDIARIeS AS AT 31 DeCeMbeR 2011

The data contained in the fi nancial statement tables are expressed in units of euro. CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

310 FINANCIAL STATEMENTS OF SUBSIDIARies AS AT 31 DECEMBER 2011

CENTRALE LEASING NORD EST S.p.A.

STATEMENT OF FINANCIAL POSITION

Asset Items 31.12.2011 31.12.2010 20. Loans and advances to banks 798,081 645,071 a) On demand 363,322 454,134 b) Other receivables 434,759 190,937 30. Loans to financial institutions 705,333 428,355 b) Other receivables 705,333 428,388 40. Loans to customers 10,383 17,902 90. Intangible fixed assets 29,200 43,536 - of which: Start-up costs 5,800 8,770 100. Tangible fixed assets 54,440 7,018 130. Other assets 245,752 249,573 140. Accrued income and prepayments 7,349 14,118 b) Deferred charges 7,349 14,118 TOTAL assets 1,850,538 1,405,573

Liability items of Equity 31.12.2011 31.12.2010 10. Due to banks 453,829 307,191 b) on term or at notice 453,829 307,791 50. Other liabilities 268,540 155,535 60. Accrued liabilities and deferred income 3,616 7,881 a) Accrued liabilities 3,616 7,881 70. Provision for severance indemnity 16,805 16,245 120. Share capital 1,100,000 1,100,000 140. Reserves - - 170. Profit (loss) for the year 7,748 (181,279) TOTAL LiabilitIES AND EQUITY 1,850,538 1,405,573

311 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

INCOME STATEMENT

Costs 31.12.2011 31.12.2010 10. Interest expenses and similar charges paid 6 105 20. Commission expense 322,330 206,932 40. Administrative expenses 1,121,284 1,009,070 a) Personnel expenses 901,510 806,428 - salaries and wages 651,006 579,601 - social security charges 210,596 186,946 - provision for severance indemnity 34,584 35,351 - Other personnel costs 5,324 4,530 b) Other administrative expenses 219,775 202,642 50. Adjustments on fixed assets 24,302 21,300 60. Other operating charges 99,206 2,219 110. Extraordinary charges 996 - 130. Income taxes for the year 69,760 (43,066) - Ires - - - Irap 44,083 18,398 - Prepaid/deferred taxes 25,677 (61,464) 140. Profit for the year 7,748 - total costs 1,645,632 1,196,560

Revenues 31.12.2011 31.12.2010 10. Interest income and similar revenues 4,714 1,512 30. Commission income 1,612,672 999,933 70. Other operating income 28,246 13,836 100. Loss for the year - 181,279 TOTAL REVENUES 1,645,632 1,196,560

312 FINANCIAL STATEMENTS OF SUBSIDIARies AS AT 31 DECEMBER 2011

CENTRALE CORPORATE S.r.l.

STATEMENT OF FINANCIAL POSITION

Code Assets 31.12.2011 31.12.2010 B Fixed assets 30,268 8,571 B I Intangible fixed assets 1,500 2,000 B I 1 Start-up and expansion costs 1,500 2,000 B II Tangible fixed assets 28,568 6,371 B II 4 Other assets 28,568 6,371 Financial fixed assets, with separate reporting - for each item B III 200 200 of receivables – of the amounts due within next year B III 1 Shareholdings in: 200 200 B III 1d Other companies 200 200 C Current assets: 378,323 305,176 Receivables ,with separate reporting - for each item – of the C II 84,080 468 amounts due beyond next year C II 1 Due from customers 7,500 - C II 11 - within the year 7,500 - C II 5 Due from others 76,580 468 C II 51 - within the year 73,791 251 C II 52 - beyond the year 2,789 217 C IV Liquid funds: 294,243 304,708 C IV 1 Bank and postal deposits 294,243 304,708 Accruals and deferrals, with separate specification of D 2,315 5,595 discounts on loans D 2 Deferred charges 2,315 5,595 T TOTAL ASSETS 410,906 319,342

Code Liabilities and Equity 31.12.2011 31.12.2010 A Equity: 285,571 211,370 A I Share capital 50,000 50,000 A IV Legal reserve 8,069 - A VII Other reserves, distinctly specified 153,301 - A IX Net profit (loss) of the year 74,201 161,370 B Provisions for risks and charges: 46,624 72,106 B 2 For taxes 46,624 72,106 Payables ,with separate reporting - for each item – of the D 78,711 35,866 amounts due beyond next year D 6 Payables due to suppliers 3,878 1,647 D 61 - within the year 3,878 1,647 D 11 Tax payables 13,811 16,326 D 111 - within the year 13,811 16,326 D 12 Payables due to social security institutions 12,346 7,085 D 121 - within the year 12,346 7,085 D 13 Other payables 48,676 10,808 D 131 - within the year 48,676 10,808 T TOTAL LIABILITIES 410,906 319,342

313 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

INCOME STATEMENT

Code Description 31.12.2011 31.12.2010 A Value of production: 584,755 338,835 A 1 Revenues from sales and services 584,755 338,835 B Cost of production: 469,650 106,218 B 7 For services 134,146 76,894 B 9 For personnel: 329,215 26,675 B 9a Salaries and wages 237,464 17,873 B 9b Social security charges 67,290 6,823 B 9c Severance indemnity 14,347 1,172 B 9d Retirement and similar benefits 10,114 807 B 10 Amortization/depreciation and write-downs: 4,917 1,384 B 10a Amortization of intangible fixed assets 500 500 B 10b Depreciation of tangible fixed assets 4,417 884 B 14 Other operating charges 1,376 1,266 B T Difference between value and cost of production 115,105 232,617 C Financial proceeds and charges: 1,659 (256) C 16 Other financial income: 2,459 298 Proceeds other than the above, with separate reporting of C 16d 2,459 298 those from subsidiary, affiliated and parent companies Interest and other financial charges, with separate reporting C 17 800 554 of those from subsidiary, affiliated and parent companies E Extraordinary income and charges 1,488 899 Proceeds, with separate specification of capital gains from E 20 1,624 900 disposals whose revenues can not be booked under no. 5 E 20a Capital gains 1,624 - E 20b Other proceeds - 900 Charges, with separate specification of capital losses from E 21 disposals - whose accounting effects can not be booked 136 1 under no. 14 – and of taxes relative to previous years E 21b Other charges 136 1 E T Result before taxes 118,252 233,260 E 22 Income taxes for the year (44,051) (71,890) E 26 26) Net profit (loss) of the year 74,201 161,370

314 FINANCIAL STATEMENTS OF SUBSIDIARies AS AT 31 DECEMBER 2011

315 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011 FINaNCIaL sTaTEMENT as aT DECEMbER 31 2011

The fi gures shown in the balance sheets are in units of Euro. CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

318 financial statement as at december 31 2011

BALANCE SHEET

Assets 31.12.2011 31.12.2010 10. Cash and cash equivalents 295.446.646 96.811.779 20. Financial assets held for trading 97.508.611 47.813.170 30. Financial assets designated as at fair value 2.252.766 2.197.369 40. Financial assets available for sale 377.738.966 240.855.376 50. Held-to-maturity investments 388.638.329 25.160.002 60. Loans to banks 3.483.070.236 1.356.126.879 70. Loans to customers 708.740.857 693.615.550 100. Equity investments 20.464.722 20.181.329 110. Tangible assets 14.004.180 13.637.123 120. Intangible assets 276.825 465.258 130. Tax assets 6.572.830 5.690.073 a) current tax assets 627.653 2.097.310 b) advance tax assets 5.954.177 3.592.763 150. Other assets 52.765.584 67.527.738 Total Assets 5.447.480.552 2.570.081.646

Liabilities and net worth 31.12.2011 31.12.2010 10. Due to banks 4.615.770.932 1.790.057.981 20. Due to customers 291.512.196 232.577.244 30. Outstanding securities 200.119.273 238.883.143 40. Financial liabilities held for trading 57.775.793 42.903.171 50. Financial liabilities designated as at fair value 8.416.804 8.761.679 80. Tax liabilities 807.235 955.071 a) current tax liabilities 280.703 - b) deferred tax liabilities 526.532 955.071 100. Other liabilities 75.128.657 53.000.771 110. Employees’ leaving entitlements 2.289.579 2.375.652 120. Provisions for contingencies and other charges 525.022 468.235 b) other 525.022 468.235 130. Value adjustment reserve (5.541.413) 286.091 160. Reserves 47.724.250 41.522.203 170. Share premium 4.350.000 4.350.000 180. Share capital 140.400.000 140.400.000 200. Net profit (Loss) of the period (+/-) 8.202.224 13.540.405 Total liabilities and net worth 5.447.480.552 2.570.081.646

319 CASSA CENTRALE BANCA / FINANCIAL STATEMENTS / 2011

PROFIT AND LOSS ACCOUNT

Items of the profit and loss account 31.12.2011 31.12.2010 10. interest income and similar revenues 55.652.286 30.826.835 20. interest expenses and similar charges paid (40.286.694) (13.225.784) 30. Net interest margin 15.365.592 17.601.051 40. Commission income 49.486.282 46.803.507 50. commission expense (24.565.545) (23.148.651) 60. Net commissions 24.920.737 23.654.856 70. Dividend and similar income 1.070.582 986.338 80. Net result from trading (47.026) 1.374.648 100. Profit (Loss) on disposal or repurchase of: 2.365.053 7.789.239 a) loans 16.719 575 b) financial assets available for sale 2.343.535 7.779.078 d) financial liabilities 4.799 9.586 Net result on financial assets and liabilities designated as 110. 407.356 (46.749) at fair value 120. Total operating income 44.082.294 51.359.383 130. Net adjustments/recoveries to: (2.354.827) (5.065.168) a) loans (2.051.347) (4.416.581) b) financial assets available for sale (424.388) (456.870) d) other financial assets 120.908 (191.717) 140. Net income from financial activities 41.727.467 46.294.215 150. Administrative expenses (27.381.732) (27.846.632) a) personnel cost (14.346.207) (14.548.955) b) other (13.035.525) (13.297.677) 160. Net provisions for risks and charges (93.610) (81.897) 170. Net adjustment/recoveries to tangible assets (1.304.019) (1.200.776) 180. Net adjustment/recoveries to intangible assets (255.905) (322.825) 190. Other operating charges/income 746.853 1.578.456 200. Operating costs (28.288.413) (27.873.674) 210. Profits (Losses) on equity investments - (186.893) 240. Gain and losses on disposal of investments 3.974 31.612 250. Profit (Loss) before tax from current operating activities 13.443.028 18.265.260 260. Income taxes for the period on current operating activities (5.240.804) (4.724.855) 270. Profit (Loss) after tax from current operating activities 8.202.224 13.540.405 290. Net income (Loss) for the period 8.202.224 13.540.405

320 financial statement as at december 31 2011

321

cassa centrale banca credito cooperativo del nord est

Italian corporation Registered office and general management in Trento (38122) Via Segantini, 5 Tel.0461.313111 Fax 0461.313119 Underwritten share capital, EUR 140,400,000.00, fully paid up Company registered in the roll of banks - ABI code 03599 Registration within the Registry of Companies, TAX ID and Vat no. 00232480228 A member of the Cooperative Credit Depositors’ Guarantee Fund and the National Guarantee Fund A member of the Banking Group Cassa Centrale Banca n. 20026 A company subject to the management and coordination of Centrale Finanziaria del Nord Est S.p.A.

Publication edited by Cassa Centrale Banca - May 2012 Editorial coordination: Cassa Centrale Banca - Marketing

Graphics design: Gabriele Dalla Costa - Archimede Graphical layout: Litografica Editrice Saturnia Photographic references: Corbis/Getty Images Printing: Litografica Editrice Saturnia – printed on ecological paper