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Joint stock company with sole shareholder Head Office and General Management: Piazza Vittorio Veneto 8, Bergamo 24122 (Italy) Member of the Interbank Deposit Protection Fund and the National Guarantee Fund Share capital of 1.256.300.000,00 EUR fully paid up Tax Code, VAT nr and Registration nr in the Company Register of Bergamo 03034840169 Unione di Banche Italiane Banking Group ABI nr 05428.8 Register of Banks nr 5561 Register of Banking Groups nr 3111.2 Subject to the management and co-ordination of Unione di Banche Italiane S.c.p.a.

www.bpb.it

2 Contents

Notice of call 5 Banca Popolare di Bergamo S.p.A. 7 Members of Corporate Boards and Management 9 The rating 10 Introduction 12 Summary of data and operating and financial indicators 14 Reclassified financial statements 16 Report of the Board of Directors on operations 22 Commercial strategy 23 Operations 31
The macroeconomic scenario 31
Lending 41
Funding from customers and securities in issue 45
Indirect funding and assets under management 47
Operations on the interbank market 48
Available-for-sale financial assets 50
Assets and liabilities held for trading 50
Hedging derivatives 50
Change in value of financial assets subject to general hedging 51
Non current assets 52
Non current assets and liabilities held for disposal and disposal groups 53
Provisions for liabilities and charges 53
Equity and solvency ratios 54
Provision for post-employment benefits 56
Debt for health insurance policies 57
The Income Statement 58
The Statement of Cash Flows 64 Likely future developments in operations 65 Research and development 67 The shares 74 Relations with the companies in the Group 74 Fundamental indicators of the company’s performance, environment and personnel 80 The assumption, management and hedging of financial risks 84

3 Other information 84 The plan for the use of the profits for the year and proposals to the General meeting 85 Other items on the agenda of the Extraordinary and O rdinary meeting 87 The annual financial statements 95 Report of the Statutory Board of Auditors 101 Report of the Independent Auditors 107 Notes to the financial statements 111 Part A – Accounting policies 115 Part B – Information on the Balance Sheet 147 Part C – Information on the Income Statement 199 Part D – Segment reporting 218 Part E – Information on risks and the relative hedging policies 219 Part F – Information on Capital 275 Part G – Business combination transactions concerning companies or lines of 281 business Part H – Transactions with related parties 282 Part I – Share based payment agreements 290 Attachments 291

4 Notice of call of the Extraordinary and Ordinary General Meeting of the Shareholders

An Extraordinary and an Ordinary General Meeting of the Shareholders of Banca Popolare di Bergamo S.p.A is convened to be held on 10 th April 2008 at 03.00 p.m. at the registered address of the Bank, Piazza Vittorio Veneto 8, Bergamo, to resolve on the following

A G E N D A

Extraordinary meeting

1. Amendment to the following articles in the Corporate Statute:

art. 1, art. 17 – new denomination of the Group to which the Bank belongs;
art. 5, art. 14 – integration of further details consistently with provisions in the Italian Civil Code;
art. 26 – granting of tasks/powers to the Statutory Board of Auditors as set out in art. 52 of Legislative Decree 385/1993 (Consolidated Law on Banking);
art. 31 – reformulation of first paragraph concerning use of financial year profits following write-off of use of profit shares foreseen for staff social security and pension and amendment of maximum profit share to be used for welfare and charity activities.

Ordinary meeting

1. Presentation of the draft Annual Report as at and for the year ended 31.12.2007 – after the Reports of Board of Directors, Statutory Board of Auditors and Independent Auditors KPMG S.p.A. - and consequent resolutions;

2. appointment of members of the Directors’ Board after, as set out in the Corporate Statute: − determination of office duration (art. 17, par. 4), − determination of members number (art. 17, par. 1);

3. determination of remuneration to members of the Board of Directors and of the Executive Committee, complying with art. 2389 of the Italian Civil Code and art. 17, par. 9, of the Corporate Statute;

4. determination of an attendance fee to be paid based on attendance to Corporate Bodies meetings.

Participation in the General Meeting is governed by the provisions of the law.

Bergamo, 20 th March 2008

The Chairman of the Board of Directors Emilio Zanetti

5

6 Banca Popolare di Bergamo S.p.A.

Banca Popolare di Bergamo S.p.A., formed on 25 th March 2003, started its banking operations on 1 st July 2003, as Network Bank of the then newly-formed BPU Banca Group. Again on that date the transfer to it of the lines of business took effect, consisting principally of the branch network of Banca Popolare di Bergamo – CV S.c.r.l. founded in 1869, along with the authorisation to operate as a bank issued by the Governor of the Bank of Italy on 24 th June 2003.

As in the past years, also in 2007 the Bank has worked for the attainment of the objectives defined in the strategic lines established by the Parent Bank.

The main event of 2007 in which the Bank has been – indirectly - involved was the merger of Banca Lombarda e Piemontese S.p.A. into BPU Banca S.c.p.A.. The merger plan, as well as the change in the Parent Bank denomination to UBI Banca S.c.p.A., was duly approved during the Extraordinary General meetings of the two Groups held on 3 rd March 2007. The operation has been effective as from 1st April 2007. Such merger – which had already been announced in November 2006 – gave rise to a new Group with adoption of a multi-function, federal and integrated organisation model in which different banking, financial and insurance companies are given the task to carry out a unique entrepreneurial project following the Parent Bank’s directions. Both Groups intend to pursue these objectives increasingly preserving and adding value to their presence on the territory and to the strength of their brands. A governance system has been adopted enabling to obtain a strong direction and government unity and ensuring, on the basis of equal-terms principles, the representation within the new UBI Banca Group of the original components belonging to BPU Banca and Banca Lombarda respectively.

On 1st March 2007 an agreement was reached regarding the renewal of the “company integrative agreement” expired on 31 st December 2005.

The Merger Business Plan 2007 to 2010 was duly approved by the Board during a meeting held on 11 th June 2007. Consistently with the overall plan of the UBI Group, this plan provides for implementation of significant synergies through integration and centralisation of higher specialised functions and structures supporting operations in commercial distribution processes controlled by the Network Banks.

In August an agreement protocol was signed with members of Group trade unions regarding a procedure for the Integration Plan of the UBI Group and in compliance with the current laws and company agreement provisions. A plan has been established for leaving incentives involving a total of 106 resources identified as at today.

Following the merger and subsequent new Parent Bank company name, Banca Popolare di Bergamo S.p.A., during a meeting held on 25 th June 2007, confirmed their will to renew for the period 2007 – 2009 the option with the Parent Bank for the group taxation regime, better known as “national fiscal consolidation”, as settled in art. 117 to 129 of the Presidential Decree 917/1986, Consolidated Law on income taxes. In November, based on a plan outlined during the year by the Bank’s Board of Directors, the Bank transferred four branches – based in the district of Milan - to Banca Popolare Commercio e Industria S.p.A; at the same time three new branches were opened during the year, one in Lombardy (Castiglione delle Stiviere – Mantua) and two in Latium (Pomezia and Monterotondo – Rome). Complying with the provision of 13 th April 2007 by the Competition and Market Authority (antitrust authority) regarding UBI Group, in order to get approval on its constitution –

7 fixing a maximum limit of 35% of market share for short-term funding in the districts of Bergamo and Brescia – together with Banca Popolare Commercio e Industria S.p.A. and Banco di Brescia S.p.A., the Bank has offered for sale starting from 31 st December 2007 eleven branches purchased by Banca Popolare di Vicenza S.c.p.A.. In detail, seven branches are based in the district of Bergamo (Bergamo – Monterosso, Costa di Mezzate, Lallio, Dalmine – Mariano, Mozzo, Alzano Lombardo – Nese, Sorisole – Petosino) and four in the district of Brescia (Brescia – S. Anna, Brescia – Via Crocifissa, Breno, Lumezzane). Finally, new openings for the period 2008-2010 are being identified.

In November the adoption of a new organisation model was approved – with implementation to take place during 2008 – in order to create a new and even more streamlined operation structure, also thanks to the introduction of a new credit model establishing a clear distinction between credit and commercial functions and to the adoption of new credit lines regulations in order to make loans granting processes more efficient.

Regarding distribution structure, the new commercial model provides for implementation, also for Corporate and Private markets, of a structure based on the various operations with creation of new network units named Corporate Banking Units (CBU) and Private Banking Units (PBU). Moreover, as from 1 st January 2008 the management of non-performing loans has been centralised at the Credit Recovery Area of UBI Banca, which has been given powers regarding transactions on such loans. As regards impaired positions, management of the so-called “impaired loans” has been centralised at the Parent Bank as from first quarter of 2008.

Implementation of guidelines established in the Business Plan entailed the adoption of uniform management policies for common customers within the UBI Group, with review and simplification of the management models applied.

During the second half of the year procedures needed for migration of information system of former BPU Banca Group to the target system of former Banca Lombarda e Piemontese Group have also been started. For further details see the paragraph regarding research and development of this report.

Finally, in compliance with provisions settled in the foreign network re-organisation plan of UBI Group - included in the Group Business Plan - during last quarter of 2007 all steps needed were made for transfer of the Munich – Germany branch to the associate UBI Banca International S.A. (Luxemburg).

8 Members of Corporate Boards and Management (*)

BOARD OF DIRECTORS

Chairman * Emilio Zanetti

Deputy Chairman * Mauro Bagini

Deputy Chairman * Antonio Parimbelli

Managing Director * Guido Lupini

Directors * Giampiero Auletta Armenise Adolfo Beneduci * Gaudenzio Cattaneo Alberto Cazzani Mario Comana Giacomo Fustinoni Paolo Lamberti Francesco Lechi * Gregorio Magnetti Raffaele Rizzardi * members of the Executive Committee

STATUTORY BOARD OF AUDITORS

Chairman Ferruccio Rota Sperti Full Auditors Antonio Amaduzzi Luigi Piantoni

Alternates Alberto Carrara Maurizio Vicentini

GENERAL MANAGEMENT

General Manager Guido Lupini

Deputy General Manager Osvaldo Ranica Deputy General Manager Giuseppe Masnaga

INDEPENDENT AUDITORS

KPMG S.p.A.

(*) updated at 26 th March 2008

9 The Rating

After the merger of Banca Lombarda e Piemontese into BPU Banca, on 1 st April 2007, and subsequent adoption of the new name “Unione di Banche Italiane S.c.p.A.–UBI Banca” of the latter, starting from 2 nd April STANDARD & POOR ’S, MOODY ’S and FITCH RATINGS have formally cancelled all ratings attributed to Banca Lombarda and transferred the ratings previously existing for BPU Banca to UBI Banca.

In particular, already on 5th March 2007, following the Extraordinary meetings of BPU Banca and Banca Lombarda for approval of the merger, Standard & Poor’s had in both cases raised their long-term ratings from “A-” to “A” and short-term ratings from “A-2” to “A-1”, keeping a Positive Outlook, which reflected both improvements occurred during the last two years and the features and potentials of the new Group.

Taking into account the increased importance of UBI Banca Group within the Italian banking system, also Fitch Ratings when transferring their ratings to UBI Banca made a partial upgrading, increasing the Support Rating from “3” to “2”, the Support Rating Floor 1 from “BB+” to “BBB” and transforming the Long Term Issuer Default Rating Outlook from Stable into Positive.

On 13 th April 2007 Moody’s published the new ratings on Italian banks based on refinement in Joint Default Analysis (JDA) and updating of assessment methods by the Bank Financial Strength Rating (BFSR), that now consider the bank intrinsic financial soundness regardless of possible outside support in case of need, which on the contrary contribute to determination of rating on debts and long-term deposits. As a consequence, rating on debts and long-term deposits of UBI Banca has improved from “A2” to “A1” whereas the relevant Outlook has changed from Stable into Positive. Rating on the Bank intrinsic financial soundness passed from “C+” to “C” with a Stable Outlook.

For the sake of providing full information, we also report that:
on 1 st October 2007, following usual annual visit and based on results of the first year-half, Fitch Ratings formally confirmed ratings and Positive Outlook already attributed on 2 nd April, after creation of UBI Banca;
on 5 th March 2008, within a general analysis of the difficult current market situation and subsequent slowdown in economy, Standard & Poor’s published an update on the summary concerning the Group showing no changes in the previously assigned ratings or Positive Outlook.

Ratings regarding UBI Banca are summed up in the following tables.

1 On 16 th March 2007 Fitch Ratings made known all Support Rating Floors for those financial institutions subject to their assessment. This is a supplementary information, strictly linked to the Support Rating, enabling to make rating attribution methods more clear due to identification, for each Support Rating level, of the minimum level reached by the Issuer Default Rating in case of negative events. Support Rating Floor for BPU Banca was BB+. 10

STANDARD & POOR’S (i) Indicates the capacity to repay debt maturing in less than 1 year - (A-1: best rating – D: worst rating) Short-term Counterparty Credit Rating (i) A-1 (ii) With reference to debt maturing in more than 1 year, Long-term Counterparty Credit Rating (ii) A indicates the capacity to pay interest and repay principal, together with any sensitivity to the adverse

Outlook Positive effects of changes in circumstances or economic RATINGS ON ISSUES conditions -(AAA: best rating – D: worst rating)

Senior unsecured debt A Short-term debt A-1

Subordinated debt A-

Preference shares BBB+ Tier III subordinated debt BBB+

(I) Indicates the ability to repay long-term debt in local currency (maturity in one year or more). Using the JDA MOODY'S (Joint Default Analysis) method, it combines the intrinsic soundness (Bank Financial Strength Rating) and the Long-term debt and deposit rating (I) A1 assessment of a possible external support in case of need Short-term debt and deposit rating (II) Prime-1 (shareholders, group to which it belongs or official Bank Financial Strength Rating (III) C institutions - (Aaa: prime quality – Baa3 medium quality) Outlook (deposit ratings) Positive (II) Indicates the ability to repay short-term debt in local currency (maturity in less than one year) - (Prime -1: Outlook (Bank Financial Strength Rating) Stable highest quality – Not Prime: speculative grade) RATINGS ON ISSUES (III) This rating does not refer to the ability to repay debt but Senior unsecured LT A1 takes into account the Bank’s intrinsic soundness (based Senior unsecured ST P-1 on analysis of territorial network, activity diversification, financial fundamentals) in the absence of external Upper/Lower Tier II subordinated A2 support - (A: best rating – E: worst rating) Tier III subordinated A2 Preference shares

(ex BPB-CV e Banca Lombarda) A3

1) Indicates the ability to repay debt maturing in the short term (less then 13 months) - (F1: best rating – D: worst FITCH RATINGS rating)

2) Indicates the ability to meet financial commitments in the Short-term Issuer Default Rating (1) F1 long term, irrespective of expiry of the single bonds. It is Long-term Issuer Default Rating (2) A an indicator of the issuer default probability - (AAA: best Bank Individual Rating (3) B/C rating – D: worst rating) Support Rating (4) 2 3) This rating represents a kind of assessment of a bank’s intrinsic soundness (profitability, balance-sheet strength, Support Rating Floor (5) BBB ability of the management, operational environment, Outlook for Long-term Issuer Default Rating Positive commercial network and prospects), on the assumption that the Bank cannot rely on external support (possible RATINGS ON ISSUES intervention by a lender of last resort, support from Senior unsecured debt A shareholders, etc.) -(A: best rating - E: worst rating) Upper/Lower Tier II subordinated A- 4) Rating on the possibility of an adequate and timely Preference shares (ex BPCI) A- external support (from the state or large institutional investors) if the Bank finds itself in difficulty - (1: best Tier III subordinated debt BBB+ rating – 5: worst rating) 5) This rating represents an additional information which is strictly linked to the support rating, in that it calculates for each single Support Rating level the minimum level possibly reached by the Issuer Default Rating in case of negative events.

11 Introduction

In order to make reading and interpreting the financial and operating performance of the Bank in the year 2007 clear and understandable, the comments on the yearly results have been given with a reference to the annual financial statements of 2006.

During the process for alignment of the two former BPU e BLP Groups’ accounting practice, reclassifications have been made in the Balance Sheet regarding fiscal consolidation receivables and payables (from loans and due to banks respectively to other assets/liabilities) as well as trade payables (from due to customers to other liabilities).

Net provisions for liabilities and charges have been recognised under a general item of Income Statement (item 160) instead of in specific items as occurred in the 2006 financial statements. Comparative data previously published have been adjusted accordingly.

Due to a change in the accounting principle used to measure provisions for post- employment benefits and payables for health insurance policies, Balance Sheet data as at 31 st December 2006 have also been adjusted with recording of an increase in payables for post-employment benefits and health insurance policies and a balancing item in a reserve for actuarial gains/losses restated at 1st January 2007. The statement of changes in rquity has also been modified accordingly. See Part A of the Notes to the financial statements for further details.

Following amendment of article 31 of the Corporate Statute – to be discussed during the Extraordinary meeting to take place on 10 th April 2008 – the portion of profit decided on during approval of the allocation of profit for 2006, to be allocated to staff social security and pension, has been recognised under an Equity reserve and not as coverage for social security and pension expenses paid during the year. For proper comparison, 2006 figures included in the reclassified Income Statement and Balance Sheet have been duly modified.

Finally, taking into account the amount and size of non-recurring components of 2007, a proforma reclassified Balance Sheet and a proforma reclassified Income Statement have been prepared both for 2007 and for the comparative data relating to the previous year. Based on the proforma statements above, comments on trends of the main income statement and balance sheet components deriving from the Bank’s ordinary management have been added. More in detail, comparative data for the year 2006 on equity aggregates have been adjusted with exclusion of results from branches transferred as provided for by the antitrust authorities, from branches sold to associate Banca Popolare Commercio e Industria S.p.A., and from the Munich – Germany branch in the course of disposal and therefore classified for 2007 under assets and liabilities held for disposal.

As for other non-recurring income statement components, the effects of the following items have been identified:
Restatement of the provision for post-employment benefits following a reform for their transfer to external pension funds;
Expenses deriving from staff leaving incentives following agreements with trade unions reached on 14 th August 2007;
Harmonisation of calculation methods for collective adjustments on performing loans and alignment to the Basel II conventional criteria;
Gains resulting from sale of 11 branches to Banca Popolare di Vicenza S.c.p.A..

12 As for disposal of the foreign branch based in Munich – Germany, assets and liabilities in this regards are shown in the Balance Sheet under items 140 “Non current assets held for disposal and disposal groups” and 90 “Liabilities associated with assets held for disposal” respectively. This is due to the planned operation for transfer of this branch to the UBI Banca International Group S.A. (Luxemburg), to be performed during the first half of the year 2008.

13 Summary data

(in thousand of euros) % Variation vs Reclassified Income Statement figures 31/12/2007 31/12/2006 Variation vs 31 12 2006 31 12 2006

Net interest 741.282 625.332 115.950 18,54% Net commissions 328.350 309.135 19.215 6,22% Operating income 1.110.552 970.489 140.063 14,43% Operating costs (481.141) (478.123) (3.01 8) 0,63% Net operating income 629.411 492.366 137.045 27,83% Net impairment losses on loans (47.369) (37.694) (9.675) 25,67% Profit/loss on continuing operations before taxes 571.687 442.850 128.837 29,09% Net profit for the year 408.804 261.528 147.276 56,31%

(in thousand of euros) % Variation vs Balance Sheet figures 31/12/2007 31/12/2006 Variation vs 31 12 2006 31 12 2006

Loans to customers 21.390.548 20.811.161 579.387 2,78% Available-for-sale financial assets 0 18.110 (18.110) (100,00%) Non current assets 60.405 60.969 (564) (0,93%) Total assets 25.569.921 24.584.739 985.182 4,01% Direct funding from customers 20.667.506 20.649.577 17.929 0,09% Indirect funding from customers 32.215.824 49.846.270 (17.630.446) (35,37%) of which assets under management 24.240.535 24.754.016 (513.481) (2,07%) Net interbank position 1.143.691 1.538.716 (395.025) (25,67%) Equity 1.759.783 1.601.238 158.545 9,90%

% Variation vs Operating Structure 31/12/2007 31/12/2006 Variation vs 31 12 2006 31 12 2006

Number of employees 3.682 3.824 (142) (3,71%) Number of bank branches 357 375 (18) (4,80%) of which: Italy 356 374 (18) (4,81%) Abroad 1 1 0 0,00%

14 Financial and operating indicators

Variation vs 31/12/2007 31/12/2006 31 12 2006

Structural and positioning indicators

Lending to customers/Direct funding from customers 103,50% 100,78% 2,72% Assets under management (insurance incl.)/Indirect funding 52,75% 54,15% (1,40%)

Profit and efficiency indicators

R.O.E. 30,26% 19,52% 10,74% Cost/Income 43,32% 49,27% (5,95%)

Indicators of productivity, profitability and efficiency per employee (in thousand of euros)

Direct funding from customers/Average number of employees 5.369 5.362 7 Indirect funding from ordinary customers/Nr of employees 6.297 6.428 (131) Lending to customers/Average number of employees 5.557 5.404 153 Net interest income/Operating income 66,75% 64,43% 2,32% Net commission income/Operating income 29,57% 31,85% (2,28%) Operating income/Average number of employees 288,5 252,0 36,5 Staff costs/Average number of employees 69,5 70,8 (1,3)

Risk indicators

Net non performing loans/Net lending to customers 0,57% 0,50% 0,07% Net impaired loans/Net lending to customers 0,62% 0,57% 0,05% Net doubtful loans/Net lending to customers 1,29% 1,24% 0,05% % Non performing loans coverage 49,94% 52,99% (3,05%) % Impaired loans coverage 12,47% 16,41% (3,94%) % Total doubtful loans coverage 34,77% 36,30% (1,53%) % Performing loans coverage 0,24% 0,18% 0,06%

Capital ratios

Core capital/Risk weighted assets 6,38% 6,14% 0,24% Supervisory capital/Risk weighted assets 7,74% 7,37% 0,37%

15 Reclassified financial statements

Reclassified Balance Sheet

(in thousand of euros) % Variation vs 31/12/2007 31/12/2006 Variation vs 31 31 12 2006 12 2006

ASSETS

Cash and cash equivalents 179.105 159.122 19.983 12,56% Financial assets held for trading 62.271 114.848 (52.577) (45,78%) Available-for-sale financial assets 0 18.110 (18.110) (100,00%) Loans to banks 3.189.700 2.900.386 289.314 9,98% Loans to customers 21.390.548 20.811.161 579.387 2,78% Hedging derivatives 1.392 3.414 (2.022) (59,23%) Fair value adjustment to hedged financial assets 384 3.203 (2.819) (88,01%) Property, plant and equipment and investment property 18.260 18.158 102 0,56% Intangible assets 42.145 42.811 (666) (1,56%) of which : goodwill 42.145 42.145 - - Tax assets 73.411 86.859 (13.448) (15,48%) Non current assets held for disposal and disposal groups 209.286 - 209.286 - Other assets 403.419 426.667 (23.248) (5,45%) TOTAL ASSETS 25.569.921 24.584.739 985. 182 4,01%

LIABILITIES

Due to banks 2.046.009 1.361.670 684.339 50,26% Due to customers 12.911.157 13.846.578 (935.421) (6,76%) Securities in issue 7.756.349 6.802.999 953.350 14,01% Financial liabilities held for trading 92.722 167.273 (74.551) (44,57%) Hedging derivatives 10.958 30.755 (19.797) (64,37%) Tax liabilities 110.723 73.459 37.264 50,73% Liabilities associated with assets held for disposal 146.606 - 146.606 - Other liabilities 587.261 520.641 66.620 12,80% Post-employment benefits 96.102 126.316 (30.214) (23,92%) Provisions for liabilities and charges : 52.251 53.810 (1.559) (2,90%) b) other provisions 52.251 53.810 (1.559) (2,90%) Share capital, issue premiums and reserves 1.350.979 1.339.710 11.269 0,84% Profit for the year 408.804 261.528 147.276 56,31% TOTAL LIABILITIES 25.569.921 24.584.739 985.182 4,01%

16 Reclassified Income Statement

(in thousand of euros)

% Variation vs 31/12/2007 31/12/ 2006 Variation vs 31 31 12 2006 12 2006

Net interest income 741.282 625.332 115.950 18,54% Net commission income 328.350 309.135 19.215 6,22%

Net profit on trading and hedging activities and profit on sale or repurchase of loans, available-for-sale financial 17.021 14.664 2.357 16,07% assets and financial liabilities

Other operating income/costs 23.899 21.358 2.541 11,90% Operating income 1.110.552 970.489 140.063 14,43% Personnel expense (267.668) (272.526) 4.858 (1,78%) Other administrative expenses (209.697) (200.710) (8.987) 4,48% Net impairment losses on property, plant and equipment and investment(3.776) property and (4.887)intangible assets 1.111 (22,73%) Operating costs (481.141) (478.123) (3.018) 0,63% Net operating income 629.411 492.366 137.045 27,83% Net impairment losses on loans (47.369) (37.694) (9.675) 25,67% Net impairment losses on other assets/liabilities (1.818) (815) (1.003) 123,07% Net provisions for liabilities and charges (8.512) (10.920) 2.408 (22,05%) Profit/loss on disposal of investments (25) (87) 62 (71,26%) Profit/loss on continuing operations before tax 571.687 442.850 128.837 29,09% Taxes on operating income for continuing operations (235.747) (181.322) (54.425) 30,02% Merger costs (14.200) - (14.200) - - Personnel expense (19.880) - (19.880) - - Other administrative expenses (1.425) - (1.425) - - Taxes 7.105 - 7.105 - Profit (loss) of non current assets held for disposal after 87.064 - 87.064 - taxes Profit for the year 408.804 261.528 147.276 56,31%

The following reclassifications have been performed with respect to the Income Statement scheme according to circular 262/2005:

Tax recoveries recorded under item 190 “Other operating costs/income” were reclassified as a reduction in indirect taxes included under other administrative expenses
The item “Profit (loss) on trading and hedging activity”, includes the item 80 “Net profit (loss) from trading”, item 90 “Net profit (loss) from hedging” and item 100 “Profits (losses) on the sale or repurchase of a) loans and d)financial liabilities.
The item “Other operating costs/income” includes the item 190, net of the reclassifications mentioned above relating to tax recoveries.
The item “Net impairment losses on property, plant and equipment and investment property and intangible assets” includes items 170 “Net impairment losses on property, plant and equipment and investment property” and 180 “net impairment losses on intangible assets” and the depreciation charges on expenses incurred on improvements to leased assets classified under the compulsory scheme, under the item “Other operating costs/income”.
Following amendments in the Corporate Statute to be discussed during the Extraordinary Meeting which will take place on 10 th April regarding use of profits for the year and consequent application of IAS 19 “Employee benefits” – which provides that all social security and pension benefits to the employees, including equity investments plans, are to be recognised under the Income Statement – information on personnel expense for the year 2006 has been adjusted as a liability in the Income Statement and as an assets in Equity for the amount corresponding to the use of profits for the year 2005 for staff social security and pension (10,7 million), this in order to ensure a better comparability between the two years.
Integration charges have been reclassified under current operations profit after relating tax.

17 Income Statements reclassified after main non recurring components

(in thousand of euros)

Variation vs % Variation vs 31/12/2007 31/12/2006 NORMALISED NORMALISED NORMALISED NORMALISED 31/12/2006 31/12/2006

Net interest income 741.282 625.332 115.950 18,54% Net commission income 328.350 309.135 19.215 6,22%

Net profit on trading and hedging activities and profit on sale or repurchase of loans, available-for-sale financial 17.021 10.298 6.723 65,28% assets and financial liabilities

Other operating income/costs 23.899 21.358 2.541 11,90% Operating income 1.110.552 966.123 144.429 14,95% Personnel expense (289.267) (267.729) (21.538) 8,04% Other administrative expenses (209.697) (200.710) (8.987) 4,48%

Net impairment losses on property, plant and equipment and investment(3.776) property and intangible(4.887) assets 1.111 (22,73%)

Operating costs (5 02.740) (473.326) (29.414) 6,21% Net operating income 607.812 492.797 115.015 23,34% Net impairment losses on loans (26.604) (37.694) 11.090 (29,42%) Net impairment losses on other assets/liabilities 407 (815) 1.222 (149,91%) Net provisions for liabilities and charges (8.512) (10.920) 2.408 (22,05%) Profit/loss on disposal of investments (25) (87) 63 (71,84%)

Profit/loss on continuing operations before tax 573.078 443.281 129.797 29,28%

Taxes on operating income for continuing operations (237.379) (185.098) (52.281) 28,24% Integration charges 0 0 - - - Personnel expense 0 0 - - - Other administrative expenses 0 0 - - - Taxes 0 0 - - Profit (loss) of non current assets held for disposal after 0 0 - - taxes Profit for the year 335.699 258.183 77.516 30,02%

18 2007 Income Statement reclassified after main non recurring components

(in thousand of euros)

Impact of ICT Leaving Collective Tax Branches 31/12/2007 31/12/2007 Post -emp. migration incentives charges impairment regulations disposal NORMALISED benefits fees

Net interest income 741.282 741.282 Net commission income 328.350 328.350

Net profit on trading and hedging activities and profit on sale or repurchase of loans, available-for- 17.021 17.021 sale financial assets and financial liabilities

Other operating income/costs 23.899 23.899 Operating income 1.110.552 0 0 0 0 0 0 1.110.552 prsonnel expemse (267.668) 0 (21.599) (289.267) Other administrative expenses (209.697) 0 (209.697) Net impairment losses on property, plant and equipment and investment property and intangible (3.776) (3.776) assets Operating costs (481.141) 0 (21.599) 0 0 0 0 (502.740) Net operating income 629.411 0 (21.599) 0 0 0 0 607.812 Net impairment losses on loans (47.369) 20.765 (26.604) Net impairment losses on other assets/liabilities (1.818) 2.225 407

Net provisions for liabilities and charges (8.512) (8.512) Profit/loss on disposal of investments (25) (25)

Profit/loss on continuing operations before tax 571.687 0 (21.599) 0 22.990 0 0 573.078

Taxes on operating income for continuing (235.747) 0 7.128 0 (7.586) (1.174) (237.379) operations Integration charges (14.200) 13.320 880 0 - Personnel expense (19.880) 19.880 0 - Other administrative expenses (1.425) 1.425 0 - Taxes 7.105 (6.560) (545) 0 Profit (loss) of non current assets held for disposal 87.064 (87.064) 0 after taxes Profit for the year 408.804 13.320 (14.471) 880 15.404 (1.174) (87.064) 335.699

19 2006 Income Statement reclassified after main non recurring components

(in thousand of euros)

IRAP Extra budget for Transfer of 31/12/2006 31/12/2006 regulations leaving incentives loans NORM ALISED on loans

Net interest income 625.332 625.332 Net commission income 309.135 309.135

Net prof it on trading and hedging activities and profit on sale or repurchase of loans, available-for- 14.664 (4.366) 10.298 sale financial assets and financial liabilities

Other operating income/costs 21.358 21.358 Operating income 970.489 0 (4.366) 0 966.123 Personnel expense (272.526) 4.797 (267.729) Other administrative expenses (200.710) (200.710)

Net impairment losses on property, plant and equipment and investment(4.887) property and intangible (4.887) assets Operating costs (478.123) 4.797 0 0 (473.326) Net operating income 492.366 4.797 (4.366) 0 492. 797 Net impairment losses on loans (37.694) (37.694) Net impairment losses on other assets/liabilities (815) (815)

Net provisions for liabilities and charges (10.920) (10.920) Profit/loss on disposal of investments (87) (87)

Profit/loss on con tinuing operations before tax 442.850 4.797 (4.366) 0 443.281

Taxes on operating income for continuing (181.322) (1.583) 1.441 (3.634) (185.098) operations Profit for the year 261.528 3.214 (2.925) (3.634) 258.183

20

21

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22

Commercial strategy

In financial year 2007 the increasing recovery in overall commercial activity already recorded from second half of 2006 continued. In such favourable general context, growth in activities towards customer companies – both of a large and medium-small size - was particularly strong.

Renewed determination of the whole commercial chain to pursue the objectives of the period contributed to the Bank’s success in the various fields.

Particularly significant, also in a prospective sense, was the definition of governance methods and criteria for cooperation in the three markets – Retail, Private and Corporate – whose coordination, also in 2007, made possible to seize synergies and opportunities which would otherwise have been difficult to achieve.

In order to strengthen a cooperative attitude on each commercial level within the Bank, since 2007 the expression of cross-market cooperation has been subject to a specific judgment in the assessment process of commercial staff performance.

A remarkable effort was also made in order to maintain and, where possible, strengthen the Bank’s leadership in those areas where it traditionally operates, particularly with various initiatives performed in cooperation with local bodies and associations as well as other commercial initiatives directly promoted by the Bank. Availability of constantly renewed products and services and wide application of customer relationship management criteria, as well as detailed commercial plans regarding management of sales and services to customers, were crucial for attainment of the period targets.

In the last part of the financial year, following directions given by the Parent Bank due to tensions existing on the monetary markets from the summer, financial lending to large Corporate counterparties was progressively reduced. In the last part of the period actions were also defined, as provided for in the Group’s integration plan, for reshaping of organisation and operations in the Retail, Corporate and Private networks of the Bank and their higher efficiency. The review of the distribution model entailed a re-definition, starting from January 2008 and concerning two of the three markets, of the Corporate and Private territorial areas, whereas structure of the Retail market remained unchanged. Towards the end of the year a project to review organisation in the foreign segment was also started, aiming at increasing the Bank’s incisive commercial actions, starting from the second half of 2008, in favour of customers operating in this field.

Among updating of operational criteria defined in 2007 and implemented in 2008, the adoption of new rules regarding management of Corporate counterparties having a relationship with two or more banks belonging to the UBI Group is worth of a specific mention. For higher overall efficiency in commercial management, a prevailing bank (so- called pivotal bank) has been identified among the Group’s banks for each one of these counterparties, responsible for definition of the most suitable commercial and risk management directions that the other banks (so-called reporting banks) will have to follow within their autonomous business relationships.

To confirm traditional absolute transparency in its relationships to the customers, in 2007 the Bank participated in the initiative 10 – Current account changing – within the PattiChiari project. Such initiative aims at helping customers when evaluating the

23

different current accounts services offered by the banks involved and simplifying the procedure for transfer of accounts to other banks, if needed. With the said participation the Bank confirmed its full and convinced support to the PattiChiari project . Periodical checks performed by the body certifying proper application of the protocol, that all banks participating in the project have to follow, confirmed also for 2007 that the Bank “is operating in observance with the specific protocol requirements”.

Finally, UBI Pramerica SGR – a company belonging to the UBI Banca Group as product company focusing on asset management – was awarded for the third successive year the High Yield Prize promoted by Il Sole 24 Ore in cooperation with CFS Rating, thanks to the brilliant results reached during the last three years as Best Manager of Italian Funds in the Big Group , the one including asset management companies having a equity exceeding 7.500 million euros. The company was also awarded a prize for UBI Pramerica Azioni USA as best geographical share fund – America.

The Retail Market

The second part of the year was marked by the opening of the Bank’s 3 new branches in Pomezia and Monterotondo (both in the district of Rome) and in Castiglione delle Stiviere (district of Mantua); this was included in a multiyear plan also aiming at balancing the disposal of 11 branches following instructions by the Competition and Market Authority when the merger between Banche Popolari Unite Group and Banca Lombarda e Piemontese Group gave rise to the new UBI Banca Group in April 2007. More in detail, following this provision from the antitrust authority, Banca Popolare di Bergamo S.p.A. sold to Banca Popolare di Vicenza S.c.p.A., effective from 31 st December 2007, the following branches: Bergamo – Monterosso, Costa di Mezzate, Lallio, Dalmine – Mariano, Mozzo, Alzano Lombardo – Nese, Sorisole – Petosino (all in the district of Bergamo) and four in the district of Brescia (Brescia – S. Anna, Brescia – Via Crocifissa, Breno, Lumezzane). Moreover, effective from 30 th November 2007 the following four branches have been transferred to Banca Popolare Commercio e Industria S.p.A., also for better network rationalisation: Assago-Milanofiori, Sesto Ulteriano, San Giuliano Milanese and Rozzano (all in the district of Milan) as well as two corporate branches; finally, during the year two branches located in town halls and two located at company-customers were closed.

The Private Segment

The Bank’s commercial action in this segment was supported by important product and process innovations which marked the offer evolution in 2007.

Concerning financing, all branches started to offer personal loans – with duration up to 10 years – from the Group’s company specialised in consumer finance. Results already achieved are particularly significant and go beyond any expectation. Mortgage loans offer for the home is now wider thanks to a new product with a duration up to 50 years, intended for young customers who in this new element can find an adequate solution to the problem of the increasing housing price level. Hopefully, this appealing new product will be able to balance the lower dynamics – compared to the recent years – in the demand for financing for the buying of homes. The promotion of a new range of personal and mortgage loans, named “Prestito light ” and “Mutuo light ” respectively, was efficiently and widely advertised through various media channels and with posters. From the autumn, also following new provisions concerning sustainability of mortgage loans, the Bank offered a support to limit financial charges for those families in difficulty, with a review of mortgage loan transactions settled at other banks or, as already occurred 24

in the past, with renegotiation of mortgage loans when requested and both in term of duration and of interest rates, which showed a sensible growth in the last year.

Regarding assets management, 2007 was marked by a number of new products and services:

trading of open-ended pension funds managed by UBI Assicurazioni, after intense training of sales staff at branches;

new index-linked policies offering the insured party the possibility to seize the opportunities presented by specific countries with a high development rate or by particularly innovative industrial segments, with guaranteed repayment of capital invested and minimum yield.

the assets under management sector – which is also recording a negative market trend – has included two new total-return mutual investment funds that completed the already existing range;

placement of structured debenture loans, issued by primary financial operators and enabling the savers to seize the opportunity of higher yields typically connected with share investments on the main markets, however without jeopardizing the capital invested and with ensured yield;

offer for current account packages designed for affluent customers, with particularly favourable conditions at the beginning and distinguished by a particularly interesting cost structure.

For those branches located in areas with higher commercial development potential and in order to attract new customers, commercial initiatives on points of sale and promotions have been carried out to support, with high-visibility communication solutions, the launch of products regarding financing and assets management under extremely interesting promotional conditions.

In order to maintain and strengthen the relations with local areas and meet the widespread issues regarding environment protection – objectives which led to definition and implementation of the Città Mia project by the Bank – during the first 6 months of the year in more than 100 cities and at the local authorities a special kit was distributed for free consisting of energy-saving light bulbs and water flow reducers, besides offering of financing solutions for support of investments concerning the environment. Initiatives carried out within the Città Mia project in 2007 allowed to get in touch with over 900.000 people.

The Small Business Segment

Also thanks to a favourable trend in the production sectors, the Bank’s commercial action in the small business segment (consisting of small economic operators and companies with a turnover below 5 million euros) reached remarkable results, with a significant increase in both short and medium-long term lending volumes. This led to further improvements in economic margins, in spite of difficulties – due to new regulations regarding unilateral changes in banking interest rates – in maintaining a specific and updated alignment between conditions granted to customers and market interest rates, constantly growing during the whole year 2007.

The main objective of commercial initiatives activated during the period was to increase commercial and financial lending through offers varying according to needs and potential of the different borrowers: small industries, craft industries and commerce. 25

Regarding financing to building companies - accounting for a significant share of lending in this segment - granting of financing lines for residential building sites at low cost continued. This will enable the creation of further cross-segment internal synergy (small business – Private segment) and a wider offer to the companies in this segment, which has recently also benefited from implementation of insurance coverage (CAR policies and 10-year policy for construction faults) and of performance bonds to guarantee advance payments made by the buyers. For an improved action towards commercial operators, the Bank is also reviewing, in cooperation with its technical partners, the offer for of credit and debit cards acceptance services as well as for remote access instruments to the main banking services.

Regarding agriculture, the offer is focused on financing intended for company administration, the purchase of machinery and advance payment of communitarian contributions, seizing each opportunity arising.

Special attention was paid to define a closer cooperation with trade associations and bodies, identifying with many of them the best synergies for new job opportunities. In this sense, meetings between the respective commercial networks are regularly held to agree on an action plan to widespread services to other associate companies.

Regarding the well-established cooperation with underwriting bodies, tranched covered financing was suggested to Confidi (consortia for financing of craft and small-medium industries), whose features enable easier and more convenient credit access for the associates thanks to the peculiar financial structure of the instrument.

Bodies

Commercial relations with this segment are mainly related to treasury and cash services assigned to the Bank. Early in the year this sector was involved in the implementation of a new structure for the said services, with centralisation of operational activities in a specific unit at the Parent Bank and maintenance of commercial control at the Bank’s branches. As a consequence, objectives and strategies for segment control have been redefined by the Bank, including all actions needed to ensure services cost-effectiveness.

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The Private Market

The main objective is as always to maintain customer satisfaction on a high level; this is regarded as an absolutely crucial factor in Private customer management, due to the special expectations and needs of this specific and important segment. In such sense, there has been a development in the service model, passing from impersonal traditional segmentation to a new approach based on actual customer needs and careful observation of his behaviour. Special attention was paid to the concept of “relation” – consisting of all customers related to one another by common interests which, in most cases, corresponds to households –, constituting the real focus in an increasingly customer-oriented commercial strategy . All customers have been divided into groups based on their type of “relation”, so that specific service and product needs can be identified for each of them in each area (financing, succession, pension benefits and insurance, etc...), in maximum synergy with Corporate and Retail markets and on an ongoing basis, i.e., as general management of passage from one generation to another in the case of entrepreneurs customers. The next step in this sense will be the release of specialised supporting instruments and technologies, such as integrated statements and financial plans over more than one period – both regarding liabilities and assets – for each household.

Regarding the offer, new specific investment opportunities have been created:

in the insurance/financial segment, with trading of the “UBI Private Unit Absolute” policy enabling the investor a free and structured choice of underlying elements. In the latest version, up to 50 mutual investment funds were available, with different features and yield expectations, in order to meet any specific yield objectives and propensity to risk;

regarding assets under management, with further enlargement of the so-called “open platform” and addition of products from three investment companies. Thanks to different portfolio management styles and criteria, as well as to differentiation per area and sector, several options are offered to the Private customer for composition and tactical allocation of the owned assets;

in the direct funding segment, with placement of three issues by the Parent Bank for debenture loans with guaranteed capital by the Parent Bank itself, with variable yield depending on trend in the main Italian and European share indexes;

in the non-life insurance segment with three new products by UBI Assicurazioni especially designed for Private market customers who can therefore choose within the "Your Private Protection" range (home, family and car solutions) designed to offer maximum flexibility of use.

Concerning initiatives aiming at maintaining and developing the relations with Private customers, we report intense training activity performed by Private Bankers in order to increase their individual skills and their ability in offering services to the customer.

In this sense, specific events have been promoted for Private customers, such as arts exhibitions (“ Dürer e l’Italia ” in Rome, “ I macchiaioli ” in Turin, “ Piccio, l’ultimo romantico ” in Cremona), a golf contest (held in Carimate) and a sports driving day (at the autodromo of Vairano); all initiatives were highly appreciated by the customers.

Towards the end of the financial year also a re-design of Private commercial network organisation was completed, with creation of new entities in charge of Private Banking

27

Units (PBU, totalling 13) which as from 1st January 2008 are also responsible for coordination of Private Bankers.

The Corporate Market

For the Corporate segment the year 2007 was marked by a lively trend in medium/long term lending, resulting from intense commercial activity for further strengthening of relations already existing and acquisition of new customers. Dynamism in financing demand led to positive economic performance in lending activity, even if in a situation of progressive margin erosion.

Besides growth in lending volumes, a general intensification in commercial relationships enabled the Bank to strengthen its relations with this counterparty through a wider range of products and services. Also regarding the Large Corporate customers, with lending of a merely financial nature – which is presently reducing – the objective was to find new work opportunities. Besides significant results obtained in direct lending, also the flow of lending and other business opportunities from the Corporate commercial network to the companies belonging to the UBI Group was considerable, and namely Centrobanca S.p.A. and BPU Esaleasing S.p.A..

In 2007 trading of factoring services of the Group’s company CBI Factor S.p.A. also commenced. The first results concerning this new initiative seem to be particularly promising, another confirmation of the overall efficacy of the Bank’s commercial network. In the first six months of the year a “developers” task force was also defined, whose aim is to start relations with new Corporate counterparties working in the most interesting territorial areas.

In the foreign segment, in order to improve the support given by the Bank to customers operating on foreign markets, at the end of 2007 a cooperation agreement has been concluded between UBI Banca Group and Standard Chartered which will enable the use of suitable financial supports for customers in a number of countries in Asia, Oceania, South America and Africa. In cooperation with representative offices in Hong Kong and Shanghai, the Bank also promoted meetings with customers interested in possible business relations with China. The number of representative offices for the group (including, besides the said units in Hong Kong and Shanghai, also the offices of Singapore and Sao Paolo) increased in 2007 with the opening of a new unit in Mumbai, India. Finally, some meetings were arranged for customers and staff in charge of foreign countries at first-level branches for a better knowledge of the new regulations concerning documentary credits (the so-called “Brochure 600”) as issued by the International Chamber of Commerce.

In the last part of the financial year actions were also taken for re-organisation of the Corporate market distribution network as follows:
introduction of new Executive Managers operating within the market management for control and coordination over territorial network areas as from 1 st January 2008;
introduction of new managers of Corporate Banking Units (CBU, consisting of 15 units besides one special unit for management and development of the Large Corporate segment) who are responsible for coordination of Corporate Account Managers dealing with company-customers, and who also have significant powers concerning loans as they can decide on granting of credit lines to customers managed by their staff.

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Further efficient support to customers belonging to the foreign segment will make possible to re-organise all the Banks’ structures in charge of commercial management in this sector, starting from the second half of 2008.

The Impact of new regulations on commercial activities

Basel II

The enforcement of the current regulations on banks capital adequacy has entailed a development in the relationship between the Bank and its customers. In the light of the new systems for customers assessment introduced by Basel II, a higher level of transparency and cooperation is now crucial, where companies can share their main strategic decisions with the Bank and with suitable supporting instruments. Ongoing discussion and transparent information will allow the Bank to give continuous support to the companies, whereas the company will be able to understand assessment criteria used by the Bank and face the evaluation process better. With the help of Confidi (consortia for financing of craft and small-medium industries) and trade associations, used to accelerate this approach and dialogue process, local meetings with companies have been organised during the year in order to get information and offer financing lines for strengthening of capital structure and taking advantage of Basel II regulations.

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The new MIFID directive

The adoption of the new directive concerning investment services offered by intermediaries to customers (Markets in Financial Instruments Directive – MiFID) has introduced in-depth changes in the operations of financial markets, intermediaries, distribution network operators and investors. A number of new regulations had an impact on the relationship with the customers, who have been classified based on three categories of investors (retail, professional and qualified counterparties) with three different protection levels, following the principle of “protection gradation”. Protection of investors is therefore ensured according to their performance and to the specific risk relating to each kind of investment. The Bank’s structure is required to make a big effort for adjustment of the contracts already existing and mainly to meet the obligations regarding information to customers who were already making investment transactions with the Bank on 1 st November 2007. Such obligations are to be fulfilled within 30 th June 2008. The hard work performed by the commercial structure can then become a key factor to success, enabling the Bank to strengthen its relationship with the customers on the basis of transparency principles and uniform regulations.

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Operations

The macroeconomic scenario

The crisis on international financial markets

From the second half of July, the crisis in American subprime mortgage loans - in a period of strong uncertainty about exposures entity and distribution – led to considerable turbulences in the international financial, monetary and stock-exchange markets. The general increase in risk premiums - which also involved the emerging countries, even if to a smaller extent compared to the past – entailed a strong fall in prices of the most risky activities.

As from August, central banks of the main industrialised countries have repeatedly injected liquidity into the system, thus contributing to reduce instability and partially recover share prices over the subsequent weeks.

However, mid-October turbulence became stronger, also due to a number of factors such as further worsening of conditions in the American properties sector; a drop in ratings on instruments linked to mortgage loans and other structured finance products; considerable depreciation of such instruments either announced or recognised in the annual financial statements by financial intermediaries 2, with fears of possible repercussions on credit granting to households and companies. International stock exchanges recorded new considerable reductions; yield differentials between corporate bonds and public securities with similar maturity have increased again; variation in prices of fixed rate securities and shares has risen again, exceeding in some cases the levels reached in August; portfolios redistribution based on flight-to-quality concept with more liquid and less risky assets, along with expected economic slowdown intensified the drop in yield of long term public bonds issued by industrial countries.

In November interest rates on the main interbank markets showed a considerable increase, which reflected a higher perception of counterparty risk. Mid–December, Federal Reserve, ECB and the Bank of England as well as the Canadian and Swiss central banks decided to counter such tensions and took an action to meet the liquidity demand from the banks. Such actions enabled to keep proper market conditions at the end of the year and eased pressures on interbank rates, which however could not be totally eliminated.

Over the first weeks of 2008 share prices were further penalised by potential recession in American economy and fears of repercussion on annual results, which provoked high losses both in industrialised and in emerging countries.

2 In many cases intermediaries also had to support those related entities ( conduits or Structured Investment Vehicles) which had difficulties in self-financing, with the issue of commercial paper guaranteed by real and financial assets (asset backed commercial paper). 31

On the whole, the events above – besides reflecting the interaction existing between credit, market and liquidity risks as never experienced in the past – have highlighted some critical aspects in terms of inadequacy of ratings attributed to complex financial products and lack of regulatory and control profile on an international level, above all regarding liquidity risk.

The macroeconomic background

During 2007 turbulence in financial markets contributed to a slowdown in the world economy , which however could increase for the fourth successive year by over 4%, driven by high development in emerging countries, mainly in the Asian Area. The subsequent increase in raw foodstuffs along with geopolitical tensions and fears of future oil shortage contributed to a general recovery of inflation pressures.

2007 - OIL PRICE TREND (B RENT ) - CHART NR 1

Despite increase in production decided by OPEC starting from 1st November, tensions on the oil markets continued: the Brent price, after reaching 93,9 dollars per barrel at year end (+ 54% over twelve months), exceeded 100 dollars over the following weeks as it was the case with the WTI price of American oil.

Fears of possible recession led to a sharp braking in American economy in fourth quarter. GDP annual increase was only 0,6% after reaching + 4,9% in previous quarter, resulting from a general worsening in all components. Investments had a highly negative impact (- 12,5% versus + 5% in July-September) penalised by the crisis in the residential segment (- 25,2%); consumptions, which remained the driving component, slowed down (+ 1,9% compared to + 2,8% in third quarter); the commercial balance positive result was limited by a sharp slowdown in exports (+ 4,8% against + 19,1% of the three previous months), despite the dollar weakness. On an yearly average, total US GDP increased by 2,2%, the lowest level over the last five years. Fragile economy and constant growth of differential compared to European interest rates – following repeated actions made by the Federal Reserve in terms of monetary policies – weakened the American currency against all main international currencies, and particularly the euro; after reaching a new all-time minimum level in November at 1,4879

32

dollars per euro, the US currency reached 1,4589 compared to 1,3196 end of 2006 and even exceeded 1,53 dollars per euro in the following weeks. Dollar weakness and higher prices in energy and foodstuffs led to higher inflation, which after recording minimum level of 2% in August rapidly increased to 4,1% in December (2,8% annual average rate). End of 2006 price increase was 2,5% with an yearly average of 3,2%. Core inflation (net of energy and foodstuffs) was on the contrary 2,4% compared to 2,6% in December 2006. There are negative signs also from the labour market, with a sharp increase in unemployment rate reaching 5% in December, the same level as 2005, due to a reduction in the manufacture and construction segments (4,6% annual average rate). The so-called “twin deficits” remained high but showed a slight decrease: public deficit recorded a further reduction reaching 187,9 billion against 209,2 billion in 2006 (-10,2%); reversing the previous years trend, also the commercial balance deficit in the twelve months fell to 711,6 billion dollars compared to 758,5 billion of 2006 (-6,2%).

Worried by developments in the domestic financial and economic crisis, Federal Reserve followed a different monetary policy and reduced the fed funds rate three times in 2007 (50 basis points in September, 25 points in October and December) and twice in January 2008 (75 and 50 basis points respectively), now settled at 3%. Discount rate was settled at 3,5% accordingly.

2007 - EURO/DOLLAR AND DOLLAR/YEN EXCHANGE RATE - CHART NR 2

For the fifth subsequent year China recorded development exceeding 10% (+ 11,4%), accounting for more that one quarter of global growth: fixes investments increased by 24,8% and supported industrial production (+ 18,5%); internal consumptions are accelerating (+ 16,8%); the record positive performance of commercial interchange (262,2 billion dollars, + 48% compared to 2006) further increased foreign currency reserves which exceeded 1.500 billion dollars at year end (+ 43,3% against end of 2006); only exports, although increasing by 25,7%, showed a slight slowdown compared to previous year, partly due to slower trend in American economy and to revaluation of the yuan versus the dollar (6,4% in 2007). 33

Stronger Chinese currency could contribute to limit the inflation rate, whose annual average grew from 1,5% to 4,8% (reaching 6,9% in November) mainly because of foodstuffs but also raw materials. To cool the economic situation, considering high liquidity levels, and counter an increase in prices, the People’s Bank of China intensified restrictions on financial conditions, increasing six times the bank rate over one year, from 6,12% to 7,47%, and with eleven actions (one in January 2008) on the compulsory reserve, which is now 15%.

Among other emerging countries also India confirmed a high development in GDP (+ 8,5%) in 2007, driven by investments and consumptions. Only the last months of the year showed a certain slowdown, due to changes in the international situation and to restrictions adopted by the Indian central bank (repurchase rate was increased twice and is now 7,75%) to limit consumer inflation, which fell to 5,6% compared to a medium-term objective of 3%. Commercial interchange deficit showed a further increase.

In Russia expansion level continued and exceeded 7% thanks to strong internal demand along with an inflation rate of approx. 11% driven by foodstuffs prices. Both commercial balance, supported by strong growth in prices of exported raw materials (mainly energy), and public balance, supported by oil income, showed a positive performance.

Actual and Forecast Figures (Percentages) GROSS CONSUMER UNEMPLOYMENT PUBLIC DEFICIT (+) DOMESTIC PRODUCT PRICES (average annual rate) SURPLUS ( -) % on GDP (average annual rate) 2006 2007 2008 (1) 2006 2007 2008 (1) 2006 2007 2008 (1) 2006 2007 2008 (1) OECD 2,9 2,5 1,8 2,4 2,2 2,7 n.a. n.a. n.a. n.a. n.a. n.a. NON-OECD 7,3 7,6 6,5 7,4 6,9 7,1 n.a. n.a. n.a. n.a. n.a. n.a. UNITED STATES 2,9 2,2 1,1 3,2 2,8 3,6 4,6 4,6 5,4 2,6 2,8 3,1 JAPAN 2,4 2,1 1,5 0,2 0,1 0,7 4,1 3,9 3,9 4,6 4,8 4,7 EURO AREA 2,8 2,6 1,5 2,2 2,1 2,6 8,2 7,4 7,1 1,6 0,8 1,2 ITALY 1,8 1,5 0,8 2,2 2, 0 2,6 6,8 6,0 5,8 3,4 1,9 2,5 GERMANY 2,9 2,5 1,8 1,8 2,3 2,6 9,8 8,4 7,6 1,6 0,0 0,6 FRANCE 2,0 1,9 1,6 1,9 1,6 2,4 9,2 8,3 8,1 2,5 2,6 2,8 SPAIN 3,9 3,8 2,6 3,6 2,8 3,3 8,5 8,2 8,1 -1,8 -1,6 -0,6 UNITED KINGDOM 2,9 2,9 2,3 2,3 2,3 2,2 5,3 5,4 5,9 2,8 2,6 3,0

(1) Forecast Source: Prometeia and official statistics

Despite uncertainty spreading regarding future economic prospects, GDP in Japan grew with an annual average of 2% and a performance in the last quarter exceeding expectations (+ 0,9% in trend). Against a positive contribution, even if progressively reducing, of consumptions and a more lively investments trend, the residential component showed ongoing negative result, balanced by significant net positive contribution in commercial interchange thanks to good trend in exports. More in detail, during the year export flows were redistributed towards the euro area and even more to China, which replaced the United States – also due to strengthening of the Japanese currency against the dollar (6,5% in 2007) - as main commercial partner. Opposing signals came from the industrial production, which grew only by 0,8% on an annual basis in December, in line with expectations of the Tankan report which had highlighted reduced confidence in large manufacturing companies and in all types of non-manufacturing companies. After accelerating and reaching 4% in September and October – the same level recorded early in the year – unemployment rate fell again to 3,8% in the last two-month period; regarding consumer prices, variations remained negative or at zero level during the first nine months of the year and became positive only in the last quarter (+0,7% in December). 34

Considering uncertainty of internal economic situation, Bank of Japan made no changes in the reference rate (0,5%) (call rate on overnight deposits) and in the discount rate (0,75%), after a rise of 25 and 35 basis points respectively in February 2007.

Despite general slowdown, annual average expansion in the euro area was quite high (+ 2,6% compared to + 2,8% in 2006) and exceeded the USA for the first time after 2001. During the last quarter, however, the variation in GDP trend – due to a general weakening in all components – was only 0,4% against + 0,7% recorded in the summer, mainly affected by slowdown in Germany and France. Industrial production index increased by 1,3% in December (+ 3,4% average in 2007 compared to + 4% in 2006), showing, however, a negative trend variation for the third time over the last four months. At the moment no effects are recorded on unemployment rate, which fell from 7,8% end of 2006 to 7,2% in the last two months of 2007. Uncertainty in the economic situation was increased by a sharp rise in the harmonised consumer price index, from minimum level of 1,7% in August to 3,1% in December (1,9% end of 2006); the trend was then confirmed by the first estimations concerning January (3,2%). The index, net of energy and foodstuffs as well as alcohol and tobacco, was substantially steady at 1,9% for most of the year (1,5% in December 2006).

Usual attention paid by the European Central Bank to inflation risks - in a context of constant high growth in banking credit - along with worries about financial tensions development and consequent impact on real economy, led the ECB, after two rises of 25 basis points each in March in June, to leave unchanged the 4% main refinancing rate during the second half of the year, now exceeding by one percentage point the American fed funds rate.

As from 1st January 2008, following admission of Malta and Cyprus, members of the MONETARY UNION have become 15. Those two countries had joined the European Union on 1st May 2004 and have complied with all standards (public debt, balance deficit, interest rates and inflation) needed for admission.

As the euro area, also the Italian economy was marked by the strengthening of a slowdown already existing when the financial markets crisis broke out. In 2007 GDP growth was 1,5% (+ 1,8% in 2006), driven by a partial redistribution in contribution from investment to family consumptions, besides limited but positive role played by the foreign demand, affected by euro revaluation and slowdown in the main outlet markets. Trend in production activity - as measured by the industrial production index (based on actual working days) - was negative (- 0,2% against + 2,6% in 2006) and worsened considerably in the last quarter (- 3,4%) due to negative performance in some segments, mainly “leather and shoes” and “precision electric equipment”. A positive performance was on the contrary recorded under items “rubber and plastics”, “oil refineries” and “textiles and clothing”.

Encouraging signs continued regarding manpower, which in third quarter showed the ninth subsequent reduction in unemployment rate (net of seasonal adjustments) and is now settled at 5,9%. Regarding inflation, the harmonised consumer price index in fourth quarter recorded a rapid increase and reached 2,8% in December, from minimum level of 1,7% in the summer (2% in terms of annual average rate compared to 2,2% in 2006), mainly due to higher prices of transports and foodstuffs; the trend continued also in January 2008, bringing Italy (3,1%) almost into line with the European data (3,2%). Deficit in the commercial balance fell to 9,5 billion euros from 21,4 billion end of 2006, supported for approx. two thirds by increased gains in operating and consumer goods, and for the remaining part by a reduced deficit in energy.

35

Finally, as regards public finance and particularly commitments undertaken in 2005 within the European Community, the ratio between net public indebtedness/GDP should fall in 2007 to 1,9% from 3,4% - recently reviewed - in 2006, due to a trend in expenses and income respectively lower and higher than the one in gross domestic product. This result, if duly confirmed by the final data and by 2008 forecasts, would ensure closure of the European proceeding against Italy due to excessive deficit. After two years of growth, also the ratio public debt/GDP should fall to approx. 105% compared to 106,8% recorded in 2006.

The Financial Markets

End of 2007 yield curves, particularly in the United States, showed expected slowdown in economic activities, with a negative trend in shorter maturities. Along the medium-long term, despite limited yields suffering from the present “flight to quality” process, curve trend became positive, which confirmed confidence in a rapid economic recovery.

UNITES STATES : YIELD CURVES – CHART NR 3 EUROPE : YIELD CURVES – CHART NR 4

Such trend strengthened in January: also due to two latest expansion actions made by Fed, American curve level was lower than the European regarding all maturities.

As for the euro area, after general increase following two restrictions operated by the ECB, the latest in June, the shape of the yield curve became similar to the American one, although reflecting tensions existing on interbank rates in shorter maturities due to higher perception of counterparty risk, which were only partially eliminated early in the new year when expected drop in official rates became clearer.

Year 2007 was particularly difficult for equity markets . Gains obtained by European, American and Japanese listings before the crisis of subprime mortgage loans were strongly limited and in some cases even turned into losses. In Europe final performance was on average positive, with some brilliant exceptions. Despite increased volatility, Wall Street indexes, after recording some all-time highs in October, closed the year with limited increases thanks to a trend in high-tech and energy stocks which balanced losses suffered in the financial segment. In Japan losses exceeded 10%.

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Finally, concerning emerging markets, progress exceeded 35% as shown by the MSCI Emerging Market share index. Also this year Chinese stock exchange had a driving effect and nearly managed to reach the second position worldwide, in terms of capitalisation, held by Japan.

MAIN LONG AND SHORT TERM INTEREST RATES IN 2007 – CHART NR 5

Performance in 2007 of the main indexes, expressed in local currency, on some of the most important exchanges was as follows: + 22,3% Xetra Dax of Frankfort; + 9,8% Nasdaq Composite and + 6,4% DJ Industrial of New York; + 3,8% Ftse 100 of London; + 3,5% S&P 500 of New York; + 1,3% Cac 40 of Paris; - 7% S&P Mib of Milan; - 11,1% Nikkei 225 and - 12,2% Topix of Tokyo.

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MAIN SHARE INDEXES IN 2007 – CHART NR 6

The situation in Italy was primarily marked by the merger between Borsa Italiana and London Stock Exchange on 1 st October 2007, creating the main stock-exchange group on a European level. This operation of historical importance for Italian financing enabled the integration of two highly efficient and complementary business models : the London Stock Exchange model for equity instruments in the United Kingdom and worldwide and the supremacy of Borsa Italiana in Italian shares, in ETF 3 and securitised derivatives 4, in derivatives and fixed rates as well as in the offer of post-trading services, the most efficient in Europe.

After repeated increases over four years, markets managed by Borsa Italiana Spa recorded a negative performance and a higher volatility level at year end which, however, could not prevent the institution from reaching new objectives.

More in detail, both contracts amount (72,5 million) and the general counter value of equity exchanges (over 1.574 billion euros) reached new maximum levels; counter value of daily average exchanges increased by 37,8% from 4,5 to record level of 6,2 billion; daily contracts average increased for the fifth successive year by 27,3% reaching 288 thousand. Leadership of Borsa Italiana on a European level was also confirmed by turnover velocity of on-line equity exchanges (214%) 5, whereas a new all-time record was established for the counter value exchanged in after-hours trading amounting to 47 million euros per day. At year end there were 344 companies listed, a new primacy for the Italian market : 33 more compared to twelve months before with the contribution of 49 new admissions representing the same record level reached in 2000. Despite wider listing, overall capitalisation dropped to 734 billion (-5,8% compared to over 778 billions end of 2006), corresponding to 48% of GDP (52,8% end of 2006).

The assets management market recorded further reductions during the year. Following the trend existing since early in 2006, net funding showed a negative performance for 53,1 billion euros, the worst result ever. The most penalised segments were bond funds

3 Exchange Traded Fund: funds which faithfully follow the trend of an underlying index and that can be bought as any other share security. 4 Securitised derivatives different from other types of derivative instruments, such as futures and options, in that the are not contracts but securities. 5 Indicator based on ratio between counter value of on-line exchanges and capitalisation to indicate equity rotation rate. 38

(-46,3 billion) and equity funds (-23,6 billion) along with balanced funds (-7,2 billion). Positive trend was still recorded for hedge funds (+5,9 billion) and mainly flexible funds (+10,5 billion) whereas there was a new growth in liquidity funds (+7,6 billion), driven by uncertainty spreading among operators during the second half of the year. Contraction in net funding was particularly strong regarding funds under Italian law (- 52,8 billion) compared to a more limited reduction in roundtrip funds (-3,2 billion) and a limited increase in foreign funds (+2,9 billion). General decrease in the segment had an impact on global net capital of funds and OEIC which dropped to 570,2 billion in December from 609,2 billion end of 2006 (-6,4%); some details worth of mention: a reduction in the bonds component (from 40,4% to 35,8%) against an increase in the liquid component (from 13,7% to 16,5%), in flexible funds (from 8,5% to 11,7%) and in hedge funds (from 4,6% to 6,4%).

The Banking System

End of December direct funding (saving deposits, current accounts, certificates of deposits and bonds) of Italian banks showed an yearly variation of 6,3%, a deceleration compared to end of 2006 (+ 7,6%). This trend resulted from ongoing high bonds development (+ 12,1%) against a slowdown in other technical components (+ 2,4%).

A comparison with Europe – referring to a broader aggregate including besides deposits and bonds also subordinated loans – showed a lower dynamism of Italian banks, with an increase of 7,2% against + 11,4% as recorded in the euro area, involving all main technical components with the sole exception of bonds (+ 11,8% against + 9,4%).

Despite fears of possible restrictions in credit granting criteria, deriving from the financial crisis in progress, expansion on lending in Italy remained high (+ 9,9% in December) - even if with a certain slowdown compared to end of 2006 (+ 11,2%) – driven by a global high demand both from families and companies. As in the recent past, the rise involved mainly the medium and long term segment (+ 11,8%) – where demand for the purchase of homes continued to show considerable dynamism despite a slight decrease – whereas the short term segment (+ 6,6%) has been decelerating since April.

Comparison with Europe – referring to a broader aggregate including non-performing loans and repurchase agreements – showed that annual development of Italian loans (+ 10,1%) was slightly below the average of the euro area (+ 11,4%).

Regarding risks, in December non-performing loans before devaluation recorded an yearly growth of 0,5% (+ 4,9% regarding families and + 0,5% regarding companies), whereas stock of net non-performing loans showed a decrease by 2,4%. Also relating to ongoing expansion in loans, the ratio of net non-performing loans to lending showed an improvement at 1,11% (1,25% in December 2006), whereas the ratio of net non- performing loans to supervisory capital fell to 6,13% from 6,71% end of 2006.

The securities portfolio increased by 5% and showed a substantial redistribution from short-term securities (BOT and CTZ, - 36,5%) towards other securities (+ 8,7%), namely bank bonds, as well as towards medium to long term government securities (CCT and BTP, + 10,3%). In December the ratio of securities to lending in euros fell to 12,8% from 13,4% end of 2006.

Finally, as regards the main banking interest rates , consistently with the market development the average rate on funding from customers (including yield on deposits, bonds and repurchase agreements for households and non-financial companies) reached 2,93% in December, an increase compared to 2,24% end of 2006. At the same time, also 39

the weighted average rate on lending to households and non-financial companies had a progressive growth, reaching 6,17% from 5,39% in December 2006.

Due to limited exposure to risks linked with the subprime segment and to a lower use of securitisation operations when financing new trading volumes, the Italian banking system, although involved in the negative effects deriving from the crisis in progress on the financial markets, has hardly recorded any losses on the market linked to securitisations, with very limited effects on Income Statements.

* * *

In 2007 the macroeconomic scenario for Italian banks was marked by a number of new significant developments.

Implementation of a decree by the Minister of Economy and Finance along with that of new supervisory recommendations, in April and May, completed the framework enabling also in Italy the creation of a market for guaranteed bank bonds (covered bonds) – offering very low risk profile and high liquidity compared to ordinary banking bonds – thus widening the range of financial instruments offered by the banks and improving their funding, also in terms of cost.

In April also a ban was introduced on penalties (or any other type of service) to be paid by customers due to total or partial prepayment of mortgage loans contracted for the buying of homes by private individuals or for purchase/renovation of properties used as accommodation or to carry out economic or professional activities. On 2 nd May the protocol ABI–Associazione Consumatori (Italian banks and consumers associations) was undersigned to identify calculation parameters of penalties due for total or partial prepayment of mortgage loans already existing when the new regulations came into force.

After various delays – leading to initiation of an infringement proceeding against Italy due to breach of a community directive – the MiFID directive (Markets in Financial Instruments Directive) was implemented and became effective as from 1st November. The new regulations, aiming at integration and modernisation of European financial markets, introduced larger protections for savers and offered at the same time wider opportunities to intermediaries, which had to reformulate their strategies in terms of services granted and to identify the most consistent organisation model.

In November the Legislative Decree 195 was published regarding enforcement of the directive on harmonisation of transparency obligations, whose non-implementation within the given times had led to initiation of an infringement proceeding against Italy: among the new provisions, integration of art. 154 bis of Consolidated Law on Finance is worth of mention, establishing more specific tasks for the involved executive, as well as introduction of new art. 154 ter which modified publication terms and minimum content of annual financial statements and other interim financial reports. The new provisions apply to financial periods commencing the day after coming into force of the decree, that is, starting from reports relating to first quarter 2008.

As from 1st January 2008 a unique area for payments in euros (Sepa) was established, to enable gradual exchange of payments in euro currency following uniform basic condition, rights and obligations. 31 European countries have joined the area (27 member countries of the European Union as well as Switzerland, Norway, Iceland and Lichtenstein). Finally, on the same date the Italian exchange office was abolished with transfer of functions to the Bank of Italy, which inherited all the rights and judicial relationship previously held by the institution.

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Lending

The total amount of net loans to customers as at 31st December 2007 reached 21.390,5 million euros; if we compare total lending at the end of 2007 with the adjusted corresponding period of 2006 – that is, with exclusion of loans concerning transfer of 15 branches and the Munich/Germany branch – the “ordinary” increase for the year 2007 would amount to 1.180 million euros with a percentage increase of 5,84%, to be compared to an average growth of lending of the Italian banking system amounting to 9,9%.

A comparison between the accounting data of the two periods – in a non homogeneous context – shows an annual variance in the aggregate increasing by 2,78% (+ 579,4 million euros ).

The table below shows the trend of the main technical components of this item.

Loans to customers – item 70 on the assets side of the Balance Sheet – (Accounting data – non homogeneous context)

(in thousand of euros)

Variation vs % Variation vs 31/12/2007 31/12/2006 31/12/2006 31/12/2006

1. Current account overdrafts 6.485.435 6.079.407 406.028 6,68% 3. Mortgage loans 10.389.110 9.587.420 801.690 8,36% 4. Credit cards, personal loans and wage backed loans 177.835 312.767 (134.932) (43,14%) 7. Other transactions 4.062.121 4.574.032 (511.911) (11,19%) 7.1 Portfolio 25.596 30.101 (4.505) (14,97%) 7.2 Loans for advances 570.899 569.698 1.201 0,21% 7.4 Other transactions 3.465.626 3.974.233 (508.607) (12,80%) 9. Impaired assets 276.047 257.535 18.512 7,19% TOTAL 21.390.548 20.811.161 579.387 2,78%

More in detail, the yearly data show a growth in current accounts for 406 million euros (+ 6,68%) together with an increase in the mortgage loans sector – mainly due to purchase of homes and requalification of financing sources to companies – amounting to 801,7 million euros (+ 8,36%). Such increases have been partially reduced by a decrease recorded in other transactions (- 511,9 million euros , - 11,19%) – mainly due to operations in denaro caldo (short-term financing) performed with Large Corporate customers which were reduced by approx. 519 million euros during the year – and in credit cards, personal loans and wage backed loans (- 134,9 million euros , - 43,14%), lending products managed through the Product Company B@nca 24-7 S.p.A..

As shown in the following table, mortgages granted account for nearly half of lending to customers (48,57%); also current accounts constitute a relevant component accounting for 30,32% of total lending. Compared to 2006, the percentage regarding mortgages has slightly increased (+ 2,50%) as well as the one for current accounts (+ 1,11%), whereas the percentage concerning other transactions has decreased by 2,99%.

Finally, the overall amount of lending to customers at the end of 2007 has been affected by a reduction in loans with very closed maturities and minor profitability, also due to turbulence in short-term interest rates triggered by a crisis in the international financial markets and mainly in the American one.

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Loans to customers – item 70 on the assets side of the Balance Sheet – Percentage

(in thousand of euros)

% % 31/12/2007 31/12/2006 31/12/2007 31/12/2006

1. Current account overdrafts 6.485.435 6.079.407 30,32% 29,21% 3. Mortgage loans 10.389.110 9.587.420 48,57% 46,07% 4. Credit cards, personal loans and wage backed loans 177.835 312.767 0,83% 1,50% 7. Other transactions 4.062.121 4.574.032 18,99% 21,98% 7.1 Portfolio 25.596 30.101 0,12% 0,14% 7.2 Loans for advances 570.899 569.698 2,67% 2,74% 7.4 Other transactions 3.465.626 3.974.233 16,20% 19,10% 9. Impaired assets 276.047 257.535 1,29% 1,24% TOTAL 21.390.548 20.811.161 100,00% 100,00%

Referring to composition by type of borrower, the table below shows that “non-financial companies” are the main type of customer, amounting to 10.691,7 million euros and accounting for nearly half of all lending to customers. Compared to last year, the most relevant growth was in non-financial companies (+ 1.244,2 million euros) balanced by a reduction in financial companies (- 832,8 million euros).

Loans to customers by type of borrower

(in thousand of euros)

Yearly % Yearly 31/12/2007 31/12/2006 variation variation

2. Lending to 21.114.501 20.553.626 560.875 2,73% a) Governments 4.230 26.596 (22.366) (84,10%) b) Other public authorities 27.759 34.290 (6.531) (19,05%) c) Other 21.082.512 20.492.740 589.772 2,88% - Non financial companies 10.691.727 9.447.551 1.244.176 13,17% - Financial companies 3.103.950 3.936.793 (832.843) (21,16%) - Insurance companies 29.745 28.612 1.133 3,96% - Other 7.257.090 7.079.784 177.306 2,50% 3. Impaired assets 276.047 257.535 18.512 7,19% b) Other public authorities 4 1 3 300,00% c) Other 276.043 257.534 18.509 7,19% - Non financial companies 135.723 131.259 4.464 3,40% - Financial companies 7.119 3.033 4.086 134,72% - Insurance companies 0 1 (1) - - Other 133.201 123.241 9.960 8,08% TOTAL 21.390.548 20.811.161 579.387 2,78%

The item “Other” for lending and impaired assets consists almost entirely of household consumer lending amounting to a total of 5.584 million euros.

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Concentration of risk (percentage of the larger customers or groups out of total loans and guarantees)

Yearly 31/12/2007 31/12/2006 variation

Largest 10 11,45% 12,92% (1,47% ) Largest 20 15,50% 17,18% (1,68% ) Largest 30 17,93% 20,08% (2,15% ) Largest 40 19,73% 21,97% (2,24% ) Largest 50 21,09% 23,45% (2,36% )

From the figures above it can be seen that Bank’s lending shows little concentration on the largest 50 customers (21,09% of total compared to 23,45% of 2006); as for variances occurred during the financial year, against a slight decrease in concentration on the first level (- 1,47%) a higher reduction was recorded on the largest 50 customers (- 2,36%).

At 31 st December 2007 total large risks, as defined by the Bank of Italy, amounted to 2.707,3 million euros (9 positions). Even if positions number is the same as the one recorded on 31 st December 2006, the total amount showed a decrease of 263,5 million euros.

Cash loans to customers

(in thousand of euros) Net Gross Value as at % On total impairment exposure 31/12/2007 lending losses

Doubtful loans/Impaired assets 423.217 (147.170) 276.047 1,29% Non performing loans 243.357 (121.539) 121.818 0,57% Impaired loans 152.389 (19.006) 133.383 0,62% Rescheduled 16.361 (4.816) 11.545 0,05% Past due exposures 11.110 (1.809) 9.301 0,04%

Performing loans 21.165.796 (51.295) 21.114.501 98,71%

TOTAL 21.589.013 (198.465) 21.390.548 100,00% Doubtful loans/Total lending 1,29%

At the end of 2007 net doubtful loans, amounting to 276 million euros, showed an increase of 7,19% (+ 18,5 million euros ) and a percentage on total net lending of 1,29% compared to 1,24% as at 31 st December 2006.

More specifically, net non-performing loans passed from 103,4 million euros of last December 2006 to 121,8 million euros end of 2007, with an increase of 17,82% (+ 18,4 million euros), considering that balance as at 31 st December 2006 reflected also disposals occurred during the last financial year. Net impaired loans at the end of the year show a growth of 13,03% compared to the end of 2006 (+ 15,4 million euros ). On the contrary, a reduction in past due exposures has occurred during the year for 11,9 million euros (- 56,13%). Another contraction has been recorded in restructured loans (- 3,4 million euros , - 22,69%).

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As concerns risk indicators, the ratio of net non-performing loans to net loans amounts to 0,57% (slightly higher than 0,50% end of 2006 and better then the banking sector average index which was 1,11%) whereas the ratio of net impaired loans to net loans was 0,62% (higher than 0,57% as recorded at 31 st December 2006).

As for adjustments to non-impaired assets, the increase compared to the year 2006 (20,8 million euros) derives mainly from an harmonisation of the calculation methods of these adjustments in the two groups which formed UBI Banca. Such calculation methods are aligned with Basel II conventional criteria based on a 12-month period for estimation of default forecasts.

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Funding from customers and securities in issue

At the end of 2007 total funding from customers amounts to 20.667,5 million euros; compared to the adjusted data relating to 2006 – that is, with exclusion of UBI Pramerica deposits, of debts concerning 15 branches transferred and of the branch in Munich - Germany – the “ordinary” increase for the year 2007 would be 957,1 million euros corresponding to a percentage growth of 4,86%, which is below the average growth of funding of the Italian Banking system amounting to 6,3%.

A comparison between the accounting data of the two periods – in a non homogeneous context – shows no major changes in the aggregate (+ 17,9 million euros , + 0,09%).

Amounts due to customers – item 20 on the liabilities side of the Balance Sheet – (Accounting data – non homogeneous context)

(in thousand of euros)

Variation vs % Variation vs 31/12/2007 31/12/2006 31/12/2006 31/12/2006

1 . Current accounts and free deposits 11.126.253 12.425.700 (1.299.447) (10,46%) 2 . Time deposits and restricted current accounts 37.073 209.301 (172.228) (82,29%) 4 . Financing 1.661.080 1.061.788 599.292 56,44% 4.1 Finance leasing 5.833 7.472 (1.639) (21,94%) 4.2 Other 1.655.247 1.054.316 600.931 57,00% 7 . Other payables 86.751 149.789 (63.038) (42,08%) TOTAL 12.911.157 13.846.578 (935.421) (6,76%)

Securities in issue – item 30 on the liabilities side of the Balance Sheet – (Accounting data – non homogeneous context)

(in thousand of euros)

Variation vs % Variation vs 31/12/2007 31/12/2006 31/12/2006 31/12/2006

A. Listed securities 250.500 250.397 103 0,04% 1. Bonds 250.500 250.397 103 0,04% B. Unlisted securities 7.505.849 6.552.602 953.247 14,55% 1. Bonds 5.809.512 5.380.486 429.026 7,97% 2. Other securities 1.696.337 1.172.116 524.221 44,72% TOTAL 7.756.349 6.802.999 953.350 14,01%

Total direct funding from customers

(in thousand of euros)

Variation vs % Variation vs 31/12/2007 31/12/2006 31/12/2006 31/12/2006

Due to customers 12.911.157 13.846.578 (935.421) (6,76% ) Securities in issue 7.756.349 6.802.999 953.350 14,01% TOTAL 20.667.506 20.649.577 17.929 0,09%

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As can be seen in the table above, the main technical component under item “Due to customers” consists of current accounts and free deposits, with a percentage of 86,18%.

Compared to 31 st December 2006, amounts due to customers showed a contraction of 935,4 million euros (- 6,76%) mainly due to decreases recorded under item current accounts and free deposits (- 1.299,4 million euros , - 10,46%) – including 469 million deriving transfer to the Parent Bank of activity as depository bank for UBI Pramerica as from 1 st January 2007 – and item time deposits and current accounts (- 172,2 million euros , - 82,29%), partially offset by a growth in other financing (mainly consisting of repurchase agreements) for 600,9 million euros (+ 57%).

Regarding securities in issue, unlisted bonds – accounting for 74,90% of total item amount – showed an increase of 7,97% during the year.

Unlisted bonds also include 50 million euros concerning debenture loan “2007-2017 Ten non call five variable rate (Euribor 3 months + 1% for the first five years, + 1,6% from the sixth year to maturity) – Lower Tier II –” issued by the Bank in September and totally underwritten by the Parent Bank. The loan is not listed and maturity is 28 th September 2017. The amount of bonds listed for 250,5 million euros refers to debenture loan 2001-2012 (Upper Tier II) at quarterly variable rate (Euribor 3 moths + 0,80)/4 listed at the Stock of Exchange of Milan. Maturity is 18 th June 2012 and no early redemption clause is provided for.

A positive trend is to be reported also for item “Other securities” (mainly consisting of deposit certificates in foreign currency), with an increase of 44,72% during the year.

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Indirect funding and assets under management

The total amount of indirect funding from Private customers amounts to 24.240,5 million euros; a comparison between indirect funding components end of 2007 and corresponding adjusted data of 2006 – in a homogeneous context, that is, with exclusion of indirect funding from Private customers deriving from transfer of 15 branches – shows the following trends:

a contraction in net capital of funds and OEIC of 6,6%;
an increase in life policies of 14,90%;
and expansion in funding under administration from customers of 2,0% resulting in a total annual decrease amounting to 0,88%. It is to be reported that the reduction recorded in the funds and OEIC segment is substantially in line with the total banking sector trend, which was – 6,4%.

A comparison between the accounting data of the two periods – in a non homogeneous context – shows a reduction of 2,07 percentage points (- 513,5 million euros) in indirect funding from Private customers.

More in detail, indirect funding under administration from Private customers amounted to 11.453,3 million euros, with a growth of 0,91% (+ 103,3 million euros); an opposite trend was recorded for item assets under management, which fell to 12.787,3 million euros (- 4,60%) at the end of 2007.

Among assets under management, portfolio managements recorded a contraction of 389,1 million euros (- 8,56%); the same trend occurred in the funds segment, with a decrease of 613,8 million euros (- 9,05%). On the contrary, the insurance segment increased by 290 million euros (+ 14,17%) and foreign OEICs increased fourfold during the year thanks to a new placement plan, thus reaching an expansion of 96,2 million euros .

Funding from institutional investors at the end of 2007 amounted to 7.975,3 million euros. This clear annual contraction (- 68,22%) is due to transfer to the Parent Bank of the activity as depository bank for the UBI Pramerica SGR funds, for a total of 15.327,4 million euros as from 1st January 2007.

More generally, total of funds under custody and intermediation amount to 32.215,8 million euros compared to 49.846,3 million as at 31st December 2006.

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Indirect funding and assets under management (Non homogeneous context)

(in thousand of euros) % Variation Variation vs 31/12/2007 31/12/2006 vs 31/12/2006 31/12/2006

PRIVATE CUSTOMERS 24.240.535 24.754.016 (513.481) (2,07%)

- Assets under custody (*) 11.453.282 11.349.972 103.310 0,91% - Assets under management 12.787.253 13.404.044 (616.791) (4,60%) of which: Customer portfolio management 4.156.891 4.546.035 (389.144) (8,56% ) Mutual investment funds 6.167.792 6.781.547 (613.755) (9,05% ) Life policies 2.334.898 2.045.031 289.867 14,17% Foreign Sicav 127.672 31.431 96.241 306,20%

INSTITUTIONAL CUSTOMERS 7.975.289 25.092.254 (17.116.965) (68,22%)

- Other investors 7.975.289 25.092.254 (17.116.965) (68,22%)

TOTAL 32.215.824 49.846.270 (17.630.446) (35,37%)

(*) including bonds issued by UBI Banca Group

Operations on the Interbank Market

Lending activity on the interbank market at the end of 2007 consisted of net loans to banks amounting to 3.189,7 million euros, with an expansion of 9,98% compared to the same period in 2006 (+ 289,3 million euros); a particular growth of 58,23 % (+ 614,7 million euros) was recorded in repurchase agreements following a corresponding growth in repurchase agreements for funding from customers. The counterparty for most of current accounts and deposits is the Parent Bank UBI Banca, at market conditions. Reduction to zero of loans to central banks derives from a reclassification in assets held for disposal for loans held by the branch in Munich – Germany to the German Central Bank.

Loans to banks – item 60 on the assets side of the Balance Sheet –

(in thousand of euros)

Variation vs % Variation vs 31/12/2007 31/12/2006 31/12/2006 31/12/2006

A. Loans to central banks 0 4.312 (4.312) (100,00%) 4. Other 0 4.312 (4.312) (100,00%) B. Loans to banks 3.189.700 2.896.074 293.626 10,14% 1. Current accounts and free deposits 379.820 415.152 (35.332) (8,51%) 2. Time deposits 1.113.738 1.413.978 (300.240) (21,23%) 3. Other financing 1.696.142 1.066.944 629.198 58,97% 3.1 Repurchase agreements 1.670.382 1.055.694 614.688 58,23% 3.3 Other 25.760 11.250 14.510 128,98% TOTAL 3.189.700 2.900.386 289.314 9,98%

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From the viewpoint of funding, amounts due to banks reached 2.046 million euros, with an increase of 684,3 million euros compared to the end of 2006; this reflects the growth recorded in current accounts and free deposits (+ 1.326,9 million euros) and the simultaneous reduction to nearly zero in time deposits expired during the year (- 578,6 million euros, - 96,20%). In detail, they consist mainly of current accounts, free and time deposits with the Parent Bank UBI Banca and other payables.

Amounts due to banks – item 10 on the liabilities side of the Balance Sheet –

(in thousand of euros)

Variation vs % Variation vs 31/12/2007 31/12/2006 31/12/2006 31/12/2006

2. Due to banks 2.046.009 1.361.670 684.339 50,26% 2.1 Current accounts and free deposits 1.978.832 651.904 1.326.928 203,55% 2.2 Time deposits 22.863 601.453 (578.590) (96,20%) 2.3 Financing 28.125 28.408 (283) (1,00%) 2.3.2 Other 28.125 28.408 (283) (1,00%) 2.6 Other payables 16.189 79.905 (63.716) (79,74%) TOTAL 2.046.009 1.361.670 684.339 50,26%

Overall operations on the interbank market resulted in a net interbank position with a positive balance of 1.143,7 million euros (approx. - 395 million euros compared to end 2006). This contraction is mainly due to the trend in funding/lending from customers recorded during the year.

Interbank market

(in thousand of euros)

Variation vs % Variation vs 31/12/2007 31/12/2006 31/12/2006 31/12/2006

Loans to banks 3.189.700 2.900.386 289.314 9,98% Due to banks 2.046.009 1.361.670 684.339 50,26% NET INTERBANK POSITION 1.143.691 1.538.716 (395.025) (25,67%)

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Available-for-sale financial assets

At the end of 2007 the Bank has no available-for-sale financial assets, as those Parmalat shares allotted to the Bank in 2005 in place of loans owed by that group were sold during the year; this originated a gain of 12,2 million euros.

(in thousand of euros)

Variation vs % Variation vs 31/12/2007 31/12/2006 31/12/2006 31/12/2006

2. Equity instruments 0 18.110 (18.110) (100,00%) TOTAL 0 18.110 (18.110) (100,00%)

Financial assets and liabilities held for trading

“Financial assets held for trading” are treated at fair value with a balancing entry in the Income Statement. At 31st December 2007 this item amounted to 62,3 million euros compared to a balance end of 2006 of 114,8 million euros. The full amount of this item consists of the positive value resulting from trading derivatives (mainly on interest rates and foreign currencies) and from implicit options including accrued income.

“Financial liabilities held for trading” are treated at fair value with a balancing entry in the Income Statement. End of December 2007 this item amounted to 92,7 million euros compared to a balance end of 2006 of 167,3 million euros. The full amount of this item consists of the negative value resulting from trading derivatives (mainly on interest rates and foreign currencies) and from implicit options including accrued expenses.

End of 2007, the net value of the two items above showed a negative result of 30,4 million euros compared to a negative result of 52,5 million euros as at 31 st December 2006.

Hedging derivatives

Item 80 of the assets side of the balance Sheet

Hedging derivatives are treated at fair value with a balancing entry in the Income Statement. End of December 2007 this item amounted to 1,4 million euros compared to a balance end of 2006 of 3,4 million euros. The amount of this item consists of the positive value resulting from hedging financial derivatives including accrued income. The amount is mainly originated by a measurement of derivative instruments used for hedging of assets, whereas the remaining amount consists of a measurement of hedging derivatives based on the indexation profile of bond securities directly issued by the Bank.

Item 60 of the liabilities side of the Balance Sheet

Hedging derivatives are treated at fair value with a balancing entry in the Income Statement. End of December 2007 this item amounted to approx. 11 million euros 50

compared to a balance end of 2006 of 30,8 million euros. The amount of this item consists of the negative value resulting from hedging financial derivatives including accrued expenses. The amount is originated by a measurement of derivative instruments used for hedging based on the indexation profile of bond securities directly issued by the Bank.

At 31 st December 2007, the net value of the two items above showed a negative result of 9,6 million euros compared to a negative result of 27,4 million euros end of 2006.

Fair value adjustments to hedged financial assets

Item 90 of the assets side of the Balance Sheet

The change in the balance of this item compared to the end of the previous year is mainly attributable to a redefinition of derivative instruments used for hedging of loans to customers occurred in May.

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Non current assets

Banca Popolare di Bergamo S.p.A. possesses own property, plant and equipment and investment property and other acquired though leasing.

Property, plant and equipment and investment property

At the end of 2007 property, plant and equipment and investment property totalled 18,3 million euros and included owned and leased assets. Compared to 31 st December 2006 a slight expansion of 0,1 million euros was recorded due to increases during the year almost totally absorbed by depreciation charges. Increases of the period (for 1,6 million euros) are mainly included under item “Other property, plant and equipment and investment property” and refer mostly to the re- branding project of branch signs.

(in thousand of euros) Inventories at Initial holdings Increases Decreases 31/12/2007

Land 5.129 0 0 5.129 Buildings 7.729 0 (406) 7.323 Furnishings (works of art) 3.025 296 (151) 3.170 Electric equipment 15 122 (136) 1 Other tangible assets 2.260 1.592 (1.215) 2.637

TOTAL 18.158 2.010 (1.908) 18.260

Intangible assets

As shown in the table below, during the financial year no considerable changes occurred in intangible assets; the fall compared to prior year is mainly due to an amortisation process concerning “Other intangible assets”, which substantially refers to software equipment externally bought and used at the Munich branch, thus reclassified under item “Assets held for disposal”.

(in thousand of euros) Inventories at Initial holdings Increases Decreases 31/12/2007

Goodwill 42.145 0 0 42.145 Other intangible assets 666 84 (750) 0 TOTAL 42.811 84 (750) 42.145

The item “Goodwill” derives from merging of former Banca Brignone S.p.A. and company Ceresole & c. SIM S.p.A. into former Banca Popolare di Bergamo – Credito Varesino S.c.r.l.. For further information on goodwill consult Part B “Information on the Balance Sheet” Section 12 “Intangible assets” of the Notes to the financial statements on impairment test of goodwill which, being an asset with indefinite life, is not subject to systematic

52

amortisation. As in the past years, results of the test showed that adjustment of the goodwill value recorded is not necessary.

Non current assets and liabilities held for disposal and disposal groups

Assets and liabilities include those of the Munich branch which, as set out in the plan for re-organisation and development of the Group’s international network, will be transferred to the Group’s company UBI Banca International Luxemburg during the first six months of 2008.

Provisions for liabilities and charges

These amounted to a total of approx. 52,3 million euros and were substantially unchanged compared to the same data end of 2006 (- 1,6 million euros , - 2,90%).

More in detail, provision for litigation showed a growth of 16,89% for a total of 2,4 million euros. The group “Other provisions” recorded a growth in the provision for adjustments in interests, commissions and expenses (+ 0,4 million euros) and for litigation on investment products (+ 0,8 million euros); whereas a reduction occurred in the provision for revocation risks (- 0,7 million euros). Provision for personnel expense was fully used during the year following trade agreements reached in the year 2007.

(in thousand of euros)

Variation vs % Variation vs 31/12/2007 31/12/2006 31/12/2006 31/12/2006

2. Other provisions 52.251 53.810 (1.559) (2,90%) 2.1 Litigation 16.574 14.179 2.395 16,89% 2.2 Staff costs 0 4.528 (4.528) (100,00%) 2.3 Other 35.677 35.103 574 1,64% TOTAL 52.251 53.810 (1.559) (2,90%)

For further details regarding potential liabilities, whose total amount is however not particularly significant (0,7 million euros), consult Part B - Section 12 of the liabilities in the Notes to the financial statements.

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Equity and solvency ratios

Introduction

The Bank of Italy, with Circular 263 of 27 th December 2006, issued new provisions regarding prudent supervisory requirements for the banks which, with amendment 12 of Circular 155 of 18 th December 1991, has settled new single prudent identification schemes linked to implementation of the community directives concerning capital adequacy (Basel II).

For the year 2006 the Bank – as well as the former BPU Banca Group - had decided to avail themselves of the possibility, provided for by the regulation, to apply the previous rules on determination of capital requirements. Therefore the provisions have been fully applied only starting from 31 st December 2007.

The year’s performance

The Bank has a share capital of 1.256,3 million euros, divided into 1.256.300.000 ordinary shares with a nominal value of 1 euro each. The shares are nominal and indivisible; each share gives right to one vote. Banca Popolare di Bergamo S.p.A. is 100% owned by the Parent Bank which has full control of it.

The situation as at 31 st December 2007 is illustrated in the table that follows which indicates the Bank’s capital requirements and the supervisory ratios.

In detail, Section A gives the size of the supervisory capital and its main components.

At the end of 2007 the tier 1 capital and tier 2 capital amounted to 1.403,7 million euros and 300,3 million euros respectively (with an increase due to issue in September of a debenture loan amounting to 50 million euros and underwritten by UBI Banca) and were calculated following the IFRS methods (on a prudent basis).

Section B of the table gives the absorption of supervisory capital resulting from compliance with the overall capital adequacy requirement. At year end, compliance with that requirement called for capital amounting to 1.538,7 million euros, substantially in relation to volumes of business in the loans to customers sector.

Finally Section C of the table summarises the absorption of the requirements in terms of ratios. As concerns prudent requirements, the ratio of supervisory capital to total risk weighted assets was 7,74% - higher than 7,37% as recorded end of 2006 and 0,74 percentage points higher than the minimum level required by the relevant regulations, which is 7% for all banks belonging to a banking group.

Lending expansion margin is equal to 2.339,1 million.

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(in thousand of euros)

Variation vs % Variation vs 31/12/2007 31/12/2006 31/12/2006 31/12/2006

A. Supervisory capital A.1 Tier 1 capital 1.403.663 1.272.020 131.643 10,35% A.2 Tier 2 capital 300.329 254.184 46.145 18,15% A.3 Elements to be deducted - - - - A.4 Supervisory capital 1.703.992 1.526.204 177.788 11,65%

B. Supervisory pru dential requirements B.1 Credit risk 1.535.599 1.444.274 91.325 6,32% B.2 Market risk 3.115 3.963 (848) (21,40%) of which : - risks of non-tied up portfolio 3.115 3.963 (848) (21,40%) - exchange rate risks - - - - B.3 Other prudential requirements - - - - B.4 Total prudential requirements 1.538.714 1.448.237 90.477 6,25%

C. Risk assets and supervisory ratios C.1 Weighted risk assets 22.003.609 20.709.791 1.293.818 6,25% C.2 Tier 1 capital/Weighted risks assets 6,38% 6,14% C.3 Supervisory capital/Weighted risk assets 7,74% 7,37%

Equity at 31 st December 2006 amounted to 1.601,2 million euros; following distribution of the dividend and other statutory requirements a net total decrease of 270,7 million euros was recorded . The item “Reserves b) Other” includes gains (amounting to 27,8 million euros) deriving from transfer of 4 branches to Banca Popolare Commercio e Industria S.p.A. (gross gain was 38,9 million euros). Following OPI (Assirevi preliminary orientations on IFRS) suggestions, intergroup combination operations without a significant economical relevance are to be recognised based on maximum value collected under Equity instead of Income Statement. Concerning transactions in income-related reserves, an increase of 14,2 million euros is also to be reported following recognition of use for staff social security and pension (share based on profit for the year 2006) under Equity and not as a reduction in personnel expense as was the case until 31 st December 2006. See Part A of the Notes to the financial statements “Accounting policies” for further details.

Compared to the accounts as at 31 st December 2006, the item “Fair value reserves e) Other” includes variations resulting from a change in the accounting principle relating to post-employment benefits and health insurance policies (IAS 8); more in detail, compared to holdings at 31 st December 2006, a higher payable has been recorded for actuarial losses – on post-employtment benefits and health insurance policies (after taxes) – for a total amount of -6,9 million.

During the year fair value reserves showed a decrease of 1,2 million euros; in detail, the fair value reserve concerning available-for-sale assets of 8,4 million euros at 31 st December 2006 was fully reduced to zero following disposal of Parmalat shares held in portfolio end of 2006. Fair value reserves e) “Other” reflected the change in the period of actuarial gains and losses concerning post-employment benefits and health insurance policies (+ 1,6 million euros) as well as the reduction to zero, following a reform in pension, of holdings at 31 st December 2006 concerning the share of post-employment benefits only (6,2 million euros). Such reduction was carried out through a reclassification in item “Reserves b) Other”.

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Equity at 31st December 2007, including profit for the year amounting to 408,8 million euros, recorded a balance of approx. 1.760 million euros.

For further information on the Bank’s capital, consult Part F of the Notes to the financial statements.

Provision for post-employment benefits

At the end of 2007 provision for post-employment benefits totalled 96,1 million euros; the decrease by 23,92% (- 30,2 million euros ) compared to 31 st December 2006 is mainly due to combined effects resulting from provisions for the period, reform on post- employment benefits – accounting for a total reduction of approx. 21,6 million euros – as well as from reduction in staff relating to 15 branches transferred to Banca Popolare Commercio e Industria and to Banca Popolare di Vicenza S.c.p.A..

(in thousand of euros)

Variation vs % Variation vs 31/12/2007 31/12/2006 31/12/2006 31/12/2006 Post -employment benefits 96.102 126.316 (30.214) (23,92%)

(in thousand of euros) 31/12/2007

Payable for post-employment benefits at 31/12/2006 117.773 Suspended actuarial losses at 31/12/2006 8.543 Payable at 31/12/2006 126.316 Yearly transfer (30.214) Payable for post -employment benefits at 31/12/2007 96.102

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Payables for health insurance policies

The payable for health insurance policies at the end of financial year 2007 amounts to 8,7 million euros. The yearly variation is mainly due to recognition under Equity of deferred actuarial losses at 31 st December 2006 for 1,7 million euros and from transactions of the period for approx. 0,5 million euros. A summary of the yearly transactions is given below:

(in thousand of euros) 31/12/2007

Payable for health insurance policies at 31/12/2006 6.470 Suspended actuarial losses at 31/12/2006 1.719 Debt at 31/12/2006 8.189 Yearly transfer 530

Payable for health insurance policies at 31/12/2007 8.719

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The Income Statement

To allow an analysis of the financial performance of the Bank during 2007 a comparison was made with the same results as at 31 st December 2006; the trend analysis of the aggregate balances contained in the reclassified Income Statement is supplemented where necessary with details in the tables presented below. For all other information of a quantitative nature see tables in Part C “Information on the Income Statement” of the Notes to the financial statements.

Moreover, in order to highlight all variations deriving from current operations, changes in reclassified Income Statement after main non recurring components are commented below.

Net interest income : it reached 741,3 million euros, with a growth of 116 million euros (+ 18,54%) compared to 2006. Net interest income from customers, amounting to approx. 692 million euros, has increased due to better profitability in some types of funding together with a higher volume of lending recorded in 2007 compared to previous year.

Net commission income : it amounted to 328,4 million euros, with a growth of 6,22% compared to end of 2006 (+ 19,2 million euros ). They consist for 359,2 million euros of commission income and for 30,8 million euros of commission expenses. Commission income consist for 185,7 million euros of management, trading and advisory services, for 58,3 million euros of collection and payment services, for 102,1 million euros of other services and finally for 13,1 million euros of commissions on guarantees granted. Among commissions for management, trading and advisory services (+ 8,10%, + 13,9 million euros compared to 31 st December 2006) an increase was recorded in securities placement activities (+ 16,53%, + 9,4 million euros), in distribution of insurance products (+ 22,41%, + 4,8 million) as well as under item other products for 14,5 million euros , + 62,06% – particularly a growth of 13,6 million for intermediation on financings granted on behalf of Product Company B@nca 24-7. The positive variations above were offset by a reduction in commissions for depository bank activities (- 13,3 million euros ) following transfer of such activities to the Parent Bank as from 1 st January 2007. Another increase was recorded in collection and payment services, driven by a growth in commissions on Bancomat (ATM services) and Pagobancomat (POS services) (+ 3 million euros ) and in gains from the interbank system (+ 2,2 million euros); this was partially reduced by variances in other services (- 4 million euros ), which as most of commission income and expenses of the interbank system were involved in a redefinition of debits and credits to be offset by data recorded under commissions expenses. A slight contraction compared to end of 2006 (- 2,4 million euros ) was recorded under item “Other services”. Commission expenses were generated by management and trading services (3,6 million euros), collection and payment services (25,3 million euros) and other services (1,9 million euros) with an overall yearly reduction of 12,83% (- 4,5 million euros ). A small increase compared to 31 st December 2006 among management and trading services was recorded in commission expenses relating to outside offers of securities, products and services (+ 0,4 million euros). Among collection and payment services it is to be reported both the increase in interbank system expenses (+ 2,7 million euros) – which in fact offset the same increase in the interbank system income for 2,2 million euros – and the contraction occurred under item “other services” showing an

58

economy of 4,3 million euros, mainly due to a decrease in commission expenses for SIA payments collection (- 3,7 million euros). The balance between commission income and expenses is generated for 55,48% by management and trading services. It is to be underlined that such balance widely covers personnel expense, accounting for 122,67% of it.

Net profit (loss) from trading and hedging activities and profit on sale or repurchase of loans and financial liabilities : this aggregate – amounting to 17 million euros – consisted of a net profit on trading of 1,1 million euros, a net profit on hedging of 1,7 million euros and a profit on sale or repurchase of loans, available-for-sale financial assets and financial liabilities of 14,2 million euros. The main component is originated by gains resulting from sale of Parmalat shares (12,2 million euros ) during the first four months of 2007. The increase of 2,4 million euros recorded compared to December 2006 derives mainly from gains due to sale of the said shares (+ 12,2 million euros ) and from better results on disposals of financial liabilities (+ 0,8 million euros ), offset by a lower net result in trading (- 6,7 million euros ) and minor profits on sale of loans (approx. - 4 million euros). Excluding non current components for the year (profits on sale of loans), the overall annual variation shows a increase of 6,7 million euros due to Parmalat gains, contraction in trading result (- 6,7 million euros) and growth in profits on sale or repurchase of loans and other liabilities.

Other operating costs/income : they amounted to 23,9 million euros and recorded an increased compared to end of 2006 (+ 2,5 million euros). In detail, other operating income was 26,2 million euros while balance of other expenses was 2,3 million euros. The main annual variations in income are attributable to higher recoveries from customers on insurance premiums, higher income for collection and payment services rendered to customers, higher income deriving from prescribed cheques and higher recoveries for appraiser expenses. The negative aggregate component showed no important variations compared to year 2006.

Total operating income : it amounted to 1.110,6 million euros and showed a growth compared to the year 2006 (+ 140,1 million, + 14,43%).

Personnel expense : totalling 267,7 million euros, they showed a decrease compared to 31 st December 2006 (4,9 million euros, – 1,78%). Data as recorded end of 2006 have been duly adjusted based on changes in accounting of staff social security and pension following amendment in the Corporate Statute to be discussed during the extraordinary meeting called for 10 th April. Excluding from data recorded at the end of 2007 those benefits deriving from pension reform on post-employment benefits (21,6 million euros) and neutralising non current components of year 2006, the item would show higher total charges for 21,5 million euros (+ 8,04%) compared to 31 st December 2006. If those non current expenses are excluded, the ratio personnel expense/average number of employees – understood as permanent staff on the payroll, “detachment” and temporary staff – amounted to 75,1 thousand euros compared to 69,5 thousand euros of December 2006. In detail, compared to 31st December 2006 adjusted data, the major variations are attributable to higher provisions for renewal of trade agreements (+8,1 million euros), higher costs for incentives (+4,6 million euros), IFRS-compliant measurement of post- employment benefits (+2 million euros), to alignments with the accounting practice (hour bank for 1,3 million euros) as well as to normal trend in wages.

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Following the above mentioned amendments in the Corporate Statute and a more accurate application of IAS 19 “Employee benefits” – which provides that all social security and pension benefits to employees, including equity investments plans, are to be recognised under the Income Statement – the amount attributed to staff social security and pension in the use of profits for the year 2006 (14,2 million euros) was directly recognised under income-related reserve and not as a reduction in labour costs as in the past.

Other administrative expenses : totalling 209,7 million euros, they show an increase of approx. 9 million euros (+ 4,48%) compared to end of 2006. Considered by nature, they mainly consisted of: expenses for services from Group’s companies for 107,4 million euros; rent of premises for 30,3 million euros; postal and telephone expenses for 10,9 million euros; insurance premiums for 7,3 million euros; use of ICT networks and services for approx. 6,7 million euros; counting and management of valuables for 5,1 million euros and finally costs for electric power, heating and water for 4,9 million euros . Expenses for services from Group’s companies consisted almost entirely in a fee for services obtained by the parent Bank UBI Banca and from the Group’s company UBI Sistemi e Servizi S.p.A.. A comparison with expenses of the same period of 2006 (+ 4,48%) shows higher costs for post and telephone, use of ITC networks and services, tenancy of premises and professional services. On the contrary, savings were recorded in costs for insurance premiums, electric power, heating and water, for information and surveys and for cleaning.

Net operating income : it reached 629,4 million euros with a growth of 27,83% (+ 137 million euros) compared to 31 st December 2006. The cost/income ratio was 43,32%, with an improvement compared to 49,27% end of 2006. If we take into account non current components as described above, this item shows a growth of 115 million euros (+ 23,34%) and an adjusted cost/income ratio of 45,27%.

Net impairment losses on loans and other assets/liabilities : calculated following case- by-case measurement of non-performing loans and collective measurement of performing loans, they amounted to 49,2 million euros. The ratio of net impairment losses to net loans to customers amounted to 0,22%, a higher result compared to the figure recorded end of 2006 (0,18%). During 2007, case-by-case net impairment losses on loans reached 32,1 million euros whereas collective net impairment losses amounted to 17,1 million. This last result is essentially due to harmonisation in calculation methods of collective impairment losses on performing loans; this alignment to conventional criteria of Basel II is based on a time horizon for estimation of default forecasts of 12 months instead of 7 months as applicable until 31 st December 2006 (see also Section E of the Notes to the financial statements). Neutralisation of higher collective net impairment losses because of new time horizon would entail a ratio net impairment losses to loans to customers of 0,12% against a percentage of 0,19% in 2006.

Net provisions for liabilities and charges : following allocation from a specific to a general item (with the only exception of staff provisions) they amounted to 8,5 million euros; a comparison with the same data of year 2006 shows minor charges for 2,4 million euros.

Profit on continuing operations before tax : it amounted to 571,7 million euros with a growth of 29,09% (+ 128,8 million euros) compared to end of 2006. Neutralisation of item concerning non current components would lead to an annual result of 573,1 million euros with a growth of 129,8 million euros (+ 29,28%) for the year.

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Taxes on income for continuing operations : calculated on an accrual basis, they amounted to 235,7 million euros and accounted for 41,24% of profit before tax; in addition to current taxes, the item also includes the effects on profit and loss of deferred tax assets and liabilities. Following amendments implemented with the Financial Law for 2008, deferred tax assets and liabilities have been recalculated based on IRES (corporation tax) and IRAP (local production tax) rates effective as from 1st January 2008. The recalculation caused no significant effect on the average rate of taxation for the year 2007.

Integration charges after taxes : they reached 14,2 million euros and consist of net charges for leaving incentives (13,3 million euros) - following trade agreements signed in August 2007 in compliance with provisions of the UBI Group Business plan - and of 0,9 million euros for net charges due to adaptation of information system to the new Group’s standard, whose implementation will be completed in fourth quarter 2008.

Profit (loss) of non current assets held for disposal after taxes : it amounted to 87,1 million euros and resulted from sale of 11 branches performed in compliance with provisions from the antitrust authority imposed on the UBI Group before approving its constitution. The sale generated a gross gain amounting to 122 million euros, recorded in the financial statements after charges subject to direct recognition and relevant current and deferred taxation.

Profit for the year : it reached 408,8 million euros, a higher result for 147,3 million euros (+ 56,31%) than in financial year 2006. Neutralisation in profit for the years 2006 and 2007 of the non current components above would lead to an annual increase of 77,5 million euros (+ 30,02%).

As a result of the performance reported above, the Income Statement of the Bank recorded a ROE (Return on Equity) amounting to 30,26%, higher than the same figure of December 2006 (19,52%). Adjusted ROE level for 2007 would amount to 24,85%.

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Net interest income

(in thousan d of euros)

Variation vs % Variation vs 31/12/2007 31/12/2006 31/12/2006 31/12/2006

Interest income 1.275.758 968.751 307.007 31,69%

On loans to customers 1.159.386 855.280 304.106 35,56% On financial assets held for trading 3 3 0 0,00% On available-for-sale financial assets 0 52 (52) (100,00%) On loans to banks 114.867 110.695 4.172 3,77% On other assets 1.502 2.721 (1.219) (44,80%)

Interest expense (534.476) (343.419) (191.057) 55,63%

On amounts due to customers (201.630) (142.041) (59.589) 41,95% On financial liabilities held for trading (59.920) (28.593) (31.327) 109,56% On securities in issue (181.387) (149.460) (31.927) 21,36% On amounts due to banks (66.959) (15.309) (51.650) 337,38% On hedging derivatives (24.580) (8.016) (16.564) 206,64%

NET INTEREST INCOME 741.282 625.332 115.950 18,54%

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Net commission income

(in thousand of euros)

Variation vs % Variation vs 31/12/2007 31/12/2006 31/12/2006 31/12/2006

Guarantees granted 13.041 11.118 1.923 17,30% Management, trading and advisory services 185.732 171.821 13.911 8,10% of which: - Trading in foreign currency 5.091 5.259 (168) (3,19%) - Portfolio managements 163 117 46 39,32% individual 163 117 46 39,32% - Custody and administration of securities 2.512 2.887 (375) (12,99%) - Depository bank 1.628 14.957 (13.329) (89,12%) - Placement of securities 66.375 56.959 9.416 16,53% - Stock market orders 14.174 15.905 (1.731) (10,88%) - Advisory activities 25 9 16 - - Distribution of third party services 95.764 75.728 20.036 26,46% Portfolio management 31.957 31.159 798 2,56% Insurance products 25.999 21.240 4.759 22,41% Other products 37.808 23.329 14.479 62,06% Collection and payment services 58.310 57.084 1.226 2,15% - Income from interbank services 7.721 5.489 2.232 40,66% - Bancomat ATM and POS services 9.212 6.195 3.017 48,70% - Other services 41.377 45.400 (4.023) (8,86%) Other services 102.106 104.489 (2.383) (2,28%) - Financing to customers 15.898 15.427 471 3,05% - Current accounts 72.862 72.391 471 0,65% - Transactions with abroad 3.460 4.018 (558) (13,89%) - Issuing and loading of prepaid cards 234 0 234 - - Issuing of bank drafts 2.536 1.747 789 45,16% - Other 7.116 10.906 (3.790) (34,75%) COMMISSION INCOME 359.189 344.512 14.677 4,26%

Guarantees received (92) (3) (89) - Management and trading services (3.552) (3.147) (405) 12,87% - Trading in financial instruments (106) (90) (16) 17,78% - Custody and administration of securities (12) (13) 1 (7,69%) - Securities, products, services offered via indirect networks (3.434) (3.044) (390) 12,81% Collection and payment services (25.303) (27.294) 1.991 (7,29%) - Expenses from interbank system (8.961) (6.254) (2.707) 43,28% - Bancomat ATM and POS services (5.787) (6.257) 470 (7,51%) - Credit cards (64) (36) (28) 77,78% - Other services (10.491) (14.747) 4.256 (28,86%) Other services (1.892) (4.933) 3.041 (61,65%) - Intermediation (51) (5) (46) - - Stock market orders (818) (1.389) 571 (41,11%) - Issuing of bank drafts (19) (74) 55 (74,32%) - Other (1.004) (3.465) 2.461 (71,02%) COMMISSION EXPENSES (30.839) (35.377) 4.538 (12,83%)

NET COMMISSION INCOME 328.350 309.135 19.215 6,22%

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The statement of Cash Flows

Liquidity generated by business operations in 2007 amounted to 131,9 million euros, which was in turn the result of liquidity generated by operating activities for 361,1 million euros, absorbed for 229,3 million euros by the imbalance on financial assets with respect to changes in financial liabilities.

Investment activities generated liquidity due to disposal of 15 company branches for 160,9 million euros and absorbed 2 million euros for purchase of property, plant and equipment and investment property. Investment activities absorbed 0,9 million euros. Funding activities absorbed liquidity – mainly deriving from the payment of dividends – for a total of 270,6 million euros.

Net liquidity generated during the fiscal year 2007 amounted to 20 million euros, bringing the balance of cash and cash equivalents from 159,1 million euros at the beginning of the year to a final balance of 179,1 million euros.

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Likely future developments in operations

Income statement figures for the first two months of 2008 and balance sheet figures available as at today show that trend in the main indicators of Income Statement and Balance Sheet is in line with objectives foreseen for the first part of financial year 2008.

Complying with provisions in the Business plan, in the initial part of this year some structures of the central staff are being re-organised, and namely:

centralisation at the Parent Bank of credit recovery management as from 1 st January 2008;
at the beginning of the year a redefinition of the Bank’s commercial network was also started, with creation of CBU (Corporate Banking Units) for Corporate market and of PBU (Private Banking Units) for Private Market;
at the end of February also the management of non operating impaired loans was centralised at the Parent Bank.

Finally, regarding the foreign branch based in Munich – Germany, which will be transferred according to the plan for re-organisation and development of the Group’s foreign network, all necessary steps have been taken in compliance with the laws and supervisory requirements of the countries involved (Italy, Germany and Luxemburg). The transfer will become effective within the first half of the year.

The social and economic context of the geographical area in which the Bank operates

The economic area in which the Bank operates – substantially the Lombardy region – showed a certain slowdown in economic growth in 2007 despite the upturn trend occurred in 2006.

Although the main reasons for such a slowdown are to be found not only in a national but mainly in an international context – tension on international markets, “subprime effect”, increase in oil prices and dollar weakness – the trend also affected economy in Lombardy and in the other districts where the Bank has always been operating.

In particular, the strengthening of the euro currency reduces the competitiveness of companies offers on the international market; export growth rates in 2007 compared to 2006 showed significant differences and the success of those districts, among the various operating areas of the Bank, highly oriented towards more dynamic segments and countries than the regional average.

Start of the year 2008 showed therefore no positive signals, also strengthened by considerable falls in the main share indexes and significant reductions of wealth managed within mutual investment funds, a context in which the Bank will continue to act as support for companies – including small entities – and as service for its customers - savers and families.

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Update of the Business plan for 2007-2010

The update of the 2007-2010 Business plan, concerning a revision of the 2008 Budget and approved by the Board of Directors on 21 st January 2008, was defined taking into account the commercial objectives agreed with the Parent Bank (volumes and profitability) and consistently with the strategic business policies of the Group.

The hypothesised market scenario, which is common to all the banks in the Group, is of steady interest rates for 2008 (approx. 4,10%) and a performance of volumes managed and administered of approx. 5% for shares and 3,5% for bonds.

Methods used in constructing such objectives reflected the organisation structure of the Bank, with budget plans for each of the markets in which customers are divided.

The revision in the 2008 budget has taken into account the variation in context which has followed branch disposal operations carried out in 2007.

Briefly, the following financial and economical developments for the year 2008 have been provided for: a growth of approx. 3,8% was hypothesised for the volumes of loans to customers and of 4% for total funding from customers, with particularly significant objectives for insurance products. Net interest income is foreseen to remain steady, whereas growth in commissions was estimated at 4,7%.

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Research and Development

Technological and organisational innovations

In the course of 2007 Banca Popolare di Bergamo S.p.A., as network Bank of the UBI Banca Group, performed no direct research and development activities; those fell within the scope of the Services and Systems Organisation Area of the Parent Bank until 30th September 2007 and of UBI Sistemi e Servizi S.p.A. as from 1st October 2007. Following constitution of the UBI Banca Group, all technical and organisation actions needed for implementation of the Group’s organisation and functioning model were updated. More specifically, all support and service activities to the Group were centralised in the Parent Bank and in UBISS in order to optimise operations costs through economies of scale and alignment to the market’s best practice.

In detail, centralisation at the Parent Bank has affected the following activities:

Auditing : regarding centralisation in the Parent Bank, a unique entity responsible for organisation and functioning of internal checks carried out by the units reporting to the Auditing Management, the planning and follow-up service and on the auditing service for sales network.

Strategy and Control : centralisation of Risk Management, Risk Capital and Policies, Strategic development and integration, Cost and Service Management and Planning – Control activities.

Centralisation at UBI Sistemi e Servizi S.p.A. as from 1st October 2007 involved the following functions:

Organisation : designed to maintain reliability and adequacy of organisation variables, to keep the size of organisation resources appropriate to the functions assigned to them and to manage internal regulations.

I.C.T. : management of technology, in its various aspects of maintenance, development and innovation of resources relating to functioning of computer and telecommunication systems.

Logistics : concerning design, implementation, administration, management and maintenance of property assets, ensuring the use of working environments suitable for the functional needs of the various units.

Supporting services : concerning both support services for the Bank’s distribution network (execution of activities of an extensive nature, including “payment services”) and back office activities of a mainly administrative nature (including central support activates for foreign and medium term operations and for financial services).

As regards strategy and control functions centralised at the Parent Bank, activities for development and ongoing refinement of risk measurement and control systems on a Group’s level continued in 2007, also based on Basel II requirements.

Regarding an advanced model for estimation of operational losses distribution, outlined in a multiyear cooperation with the University of Bergamo and aiming at measurement of absorbed capital, implementation of the necessary refinements has started following its wider scope of application due to the merger between former BPU Group and former Banca Lombarda e Piemontese Group. 67

Development of models for assessment of complex financial instruments continued: in particular, besides a refinement of models for the assessment of share-linked options, commodities, indexes and baskets, other models were developed for assessment of inflation-linked and hybrid instruments. Those models are used for mark-to-market estimations (for IFRS purposes) both for assets instruments and for implicit instruments in bond structures issued by the Bank.

Internal rating models, now fully implemented, have been analysed and refined regarding the various risk components (default probability, loss given default and exposure at default).

Special attention was given to the development of risk-adjusted pricing models for customers. Those methods, consistently with assessed risk parameters and measurement metrics for creation of other main components value and cost (capital cost, funding, etc…), give as first output an indication of risk adjusted pricings currently used (by rating, product and duration):
when analysing values for different customers subportfolios (i.e.: mortgage loans, etc...);
when defining pricings for the main Large Corporate counterparties;
when defining intergroup retrocession relating to production/placement of products entailing credit risk assumption.

The model for estimation of portfolio total risk was reviewed in some of its components and a study has been performed for development of a model analysing the relation between macroeconomic variables and trend in impairment rates to assess relations between the defaults.

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The migration of Banks belonging to former BPU Group on the Target System

The case-by-case measurement of differences (GAPs) between the system chosen for the new UBI Banca Group - deriving from the system of former Banca Lombarda e Piemontese Group integrated with the best solutions offered by former BPU Banca Group system – and the overall system of former BPU Banca Group, has enabled to establish in detail the extent of the project and the timing of migration set-up.

To sum up, the project provides for the following:

development of identified application differences (GAPs);
processes for recovery of data from the previous system, with starting of the first unloading flows in October 2007;
a migration timetable, with transfer of a first bank to take place in February 2008 and subsequent banks to be transferred every two months. Migration of Banca Popolare di Bergamo is scheduled for October 2008.

The project has been divided into:

10 different classes, each one including specific “yards” (for a total of 94) with a further division by subject (for a total of 125), corresponding to approx. 120 operational projects.
3 teams for focus on specific subjects: products catalogue, gaps, certification and balancing.

An operational PMO will be provided for coordination purposes supported by programme management resources for project control on a “yard” level.

On an operational level, the project controlled more than 5.000 milestones (mainly concerning application/technology) with:

weekly assessments of work in progress on operational SAL (Stato Avanzamento Lavori - status of work in progress) level (inside the different classes/”yards”);
detailed statements submitted to the Top Management both through the executive SAL (Stato Avanzamento Lavori - status of work in progress) (on a weekly basis and on a cross-class level) and with preparation of an overall Tableau de Bord showing a summary review on the project progress and a drilldown with specific focus by class, “yard” and subject.

Complete migration to the target system is scheduled for last quarter 2008.

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Basel II

The Merger Business Plan 2007 to 2010 includes a “yard” on Basel II, whose objective is integrating risk assessment models already used at the two entities existing before the merging, with optimisation of their prediction performance based on the features of the new Group; a request for approval on use of such models for assessment of capital requirement relating to the Bank’s risks is to be submitted to the Bank of Italy within the year 2009.

In detail, the following has been provided for based on specific types of risk:

Credit risk : use of internal models with advanced approach (AIRB-Advanced Internal Rating Based)6 for exposures to companies and Retail. See also the Notes to the financial statements, Part E, Section 1 on credit risk;
Operating risk : use of the advanced method (AMA-Advanced Measurement Approach) 7;
Market risks : use of an internal model;
Counterparty risks : use of an internal EPE (Expected Positive Exposure) model for future exposure assessment in derivative agreements8.

Internal models – already used for operations, also for notification purposes – enable to obtain a more accurate risk measurement with a subsequent more favourable treatment in terms of capital requirements, which would then reflect specific risk features of the Group’s exposures. This also constitutes an alignment to the national and international best practice, contributing to the development of risk-based management policies .

Various actions have been taken to ensure success of a strategic project such as Basel II, which is extremely complex and involves most of UBI Group areas:

constant updating to the Top management, with weekly reports on activities in progress;
a common Technical Committee for definition of strategic directions;
a regular report to the Management Board and the Supervisory Board at the Parent Bank on activities in progress;
ongoing monitoring through a specific project management for direction and control of projects and prompt implementation of corrections, if needed;
a division by specific “yards” with detailed objectives, responsibilities and work plans;
identification of officers for the organisational units involved and for the Business plan projects with an impact on Basel II;
definition of a process for internal validation of risk measurement systems subject to approval as set out in the relevant regulations (Circular of the Bank of Italy 263 of 27 th December 2006).

Other activities for completion and integration of provisions set out in the Second and Third Pillar of the New Agreement on Capital have also been planned and started.

6 Risk weighting in internal models is made according to various assessments made directly on the borrowers and based on different parameters: default probability (PD), loss rate in case of insolvency (LGD), expected exposure in case of insolvency (EAD), exposure maturity (M). Level of IRB can be basic or advanced according to number of risk parameters taken into account. 7 In the advanced method, the specific capital requirement to face operations risks is calculated on models based on operational loss and other assessment elements as gathered and worked out by the Bank. 8 Replacement cost of a derivative contract is estimated based on a simulation of those trends in market variables affecting determination of future payment flows. 70

In particular, regarding the Second Pillar 9, drawing up of first consolidated statement on capital adequacy (ICAAP) is scheduled within the end of October 2008 in a simplified version and referring to data as at 30 th June; in April 2009 the full ICAAP statement at 31 st December 2008 will be sent to the Bank of Italy. At the same time all steps have been taken for information to the public (Third Pillar 10 ). The Group’s intention for the future is gradual development of an ICAAP process of class 1 - technically more complex - to be implemented in the first year-half of 2010 after obtaining all approvals on internal models use.

The directive on modernisation of financial markets (MiFID)

Directive 2004/39/EC (Markets in Financial Instruments Directive - MiFID), effective as from 1st November 2007, is designed for integration and modernisation of European financial markets on a legislative level, with removal of the main differences existing between member states and with adaptation of community laws to the new market features.

The directive applies to regulated markets and investment firms in the European Union. Its scope is quite wide and also includes the following:

abolition of obligation to concentrate all exchanges at the stock exchange – or obligation for financial intermediaries to trade financial instruments only on regulated markets – allowed to member states by the previous community regulations and introduced, on a national level, by the market regulations set out in the CONSOB resolution 11768 of 1998. With such abolition, MiFID introduces the possibility to trade securities not only at the stock exchange but also on alternative platforms (called Multilateral Trading Facilities - MTF) and/or directly with investment firms for internalisaton of all orders received (called Systematic Internalisers);

provisions on transparency in exchanges, based on an integrated market concept including national stock exchanges, MTF and internalisers;

regulations regarding transaction reporting, providing for new rules concerning communication to be given by each investment firm to the national authority in charge when performing operations on the market;

a detailed review of regulations for protection of investors or, in particular, of regulations concerning orders execution at the best possible conditions for the client and of the rules regulating management of orders from clients, which are divided into three different categories based on different levels of information and protection;

detailed regulations on conflict of interests (obligation to adopt any reasonable measure to identify conflict of interests; organisational and administrative provisions

9 The Second Pillar requires that banks be equipped with processes and instruments needed to calculate the overall internal capital level suitable for facing of all risks (Internal Capital Adequacy Assessment Process ICAAP), also those which are not part of the total capital requirement (first pillar), with performing of specific stress tests. Responsibility for the ICAAP process is given to the corporate governing bodies, however, the Supervisory Authority is given the charge of process revision and results control, to give a overall assessment and implement, where necessary, all correction measures needed (Supervisory Review and Evaluation Process, SREP) 10 The Third Pillar is strictly linked to the second and establishes obligation to inform the public on the Bank’s capital adequacy, risks exposure and on general features of relevant measurement and control systems. 71

designed to avoid that the identified conflict of interests has a negative impact on clients interests);

the provision - strictly linked to the above code of practice for financial intermediaries and concerning conflict of interests – regarding admissibility of commissions (incentives) received for the trading service rendered.

Regarding the national laws and their adaptation to the directive, the implementation process started with Community Law 2006 for issuing of corresponding legislative Decrees by the Government and was completed with publication, at the end of October 2007, of CONSOB regulations on market and on intermediaries as well as with a joint regulation drawn up by the Bank of Italy and CONSOB (complying with art. 6 par. 2-bis of Consolidated Law on Finance), for implementation of the MiFID Directive regarding: transparency in trading, notification of operations concluded and arranging of trading venues; services rendered, investment activities and ancillary services; general requirements regarding organisation, conflict of interests, incentives, provisions for asset management companies and OEICs.

As for the UBI Group and particularly Banca Popolare di Bergamo S.p.A., the first step of the adaptation process is now concluded, whose minimum objective was obtaining compliance within the coming into force of the regulations, focusing on operating aspects with an impact on clients, who also had the possibility to consult the new rules.

Special controls have been activated to monitor impact of the new regulations on daily operations and proper compliance of what provided for. A special staff training plan has also been started to ensure that all operators dealing with customers are properly informed on the subject.

The product and service range offered by the Group and Banca Popolare di Bergamo S.p.A. meet the regulations both regarding transparency, conflict of interests and information to clients, and regarding incentives.

Future developments of MiFID also provide for step-by-step extension – compatibly with the integration plan - of advisory services to all customers, which the directive regards as a proper investment service.

This will enable a further improvement in the quality of the service rendered, thanks to a more appropriate assessment of operations adequacy and products offered, based on the client’s risk profile (deriving from experience and knowledge in finance, equity and financial status and investment objectives).

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The CFO (Chief Financial Officer) project of UBI Banca Group

In compliance with Law 262/2005 and article 154 bis of Legislative Decree 58/98, last November the Parent Bank has started the so-called “CFO” Project for implementation of a financial and administrative governance system. See Part A of the Notes to the financial statements, Section 4 “Other aspects”.

Promotional, cultural and welfare activities

Promotion and focus on culture, arts and history of the area where the Bank cooperates is increasingly becoming a social, educational moral commitment, as well as an institutional one, for the entire economic fabric. Banca Popolare di Bergamo has always paid special and careful attention to identification and creation of events and activities aiming at social and educational development, to form and rediscover the basic ethic values of our society .

During the year the Bank contributed with 0,5 million euros to modernisation and extension of Centro Servizi Psichiatrici Diagnosi e Cura (centre for psychiatric diagnsis and treatment) at the Ospedale Alzano Lombardo , Azienda Ospedaliera Bolognini of Seriate. Two actions were provided for: renovation of day-hospital areas and part of existing hospital wards as well as extention of the same premises with creation of new places and common services.

As far as welfare is concerned, an important action was taken in favour of the Clematis onlus association in Bergamo, with payment of an insurance annual premium for non self-sufficient disabled children of current or retired Bank's employees. Another considerable support was given to the Emmaus community association in Chiuduno for the CasaChiara project aiming at protection of unwanted children who suffered violence and at creation of a family network for parental tutoring; contribution was given to the Associazione Nazionale Invalidi Civili to buy an equipped transport vehicle for disabled people and as usual to the Società di San Vincenzo de Paoli . The Bank also supported health and assistance bodies such as Casa Serena of Leffe and Nuovo Albergo Popolare - Opera Bonomelli of Bergamo, as well as the Club Alpino Italiano unit in Bergamo for a project on requalification of the Alpe Corte refuge in Valcanale, also in order to make those premises suitable for disabled people.

Besides attention paid to local entities, the Bank did not forget the good causes of the Third World, with support given to the staff club of Banca Popolare di Bergamo for a project on children sponsorship and for construction of a nursery school in Malawi; besides other minor interventions responding to the needs of missionary groups working on the territory, a contribution was given for the establishment of a public health centre in Ecuador.

As regards sport, Banca Popolare di Bergamo offered its sponsorship during the Settimana Ciclistica Bergamasca and the Tre Valli Varesine - two well-known international cycling road races, and was involved in the Internazionali di Tennis of Bergamo, in the first edition of OROBIE SKYRAID - the skyrunning world team championship - and in the International Marathon of Bergamo, just to mention the main events; however, it is promotion of sport and of values that go with it that Banca Popolare di Bergamo is most 73

interested into, contributing to the Strabergamo and other traditional charity marches promoted by Agesc , Aido , Uildm and many other “minor” organisations, with the annual support given to the Club Alpino Italiano unit in Bergamo for outspreading of mountain knowledge and practice, the cooperation with Centro Sportivo Italiano and other sports clubs operating on the territory.

Also in 2007 support was given by Banca Popolare di Bergamo to initiatives of cultural nature, expressing its peculiar interest in the area in which it operates. In particular, for the seventh edition of the Festival Internazionale dei Cori of Clusone, an international festival on music and choral singing, as well as the contribution to celebration of Mons. Lorenzo Perosi and Maestro Gui do Gambarini. Finally, the annual edition of Invito a Palazzo is to be reported, the traditional exposition of a part of the Bank’s art collection taking place at the Chiostro di Santa Marta , which also in 2007 was incredibly successful and rewarded the cultural commitment of the Bank and all efforts made in that sense.

The shares

For information concerning the shares of the Bank consult Section “Equity and solvency coefficients” in the Management Report on operations.

Relations with companies in the Group

Management and coordination

In accordance with art. 2497 and following articles of the Italian Civil Code, companies subject to management and coordination by others are required to give an account in the Report on operations of the decisions affected by that activity and of the relevant motives and consequent effects, also indicating the relations with the company performing management and coordination activities and with the other companies that are subject to it.

Given the above, the Bank is subject to the management and coordination of its Parent Bank, UBI Banca S.c.p.A., former BPU Banca S.c.p.A.

As regards relations with it, all the transactions performed with the aforementioned Parent Bank were settled under market conditions or, in the absence of suitable parameters, on the basis of the costs incurred.

In detail, the Parent Bank continued to provide the Network Bank with a series of services - global service – governed by special framework agreements on auxiliary activities underwritten respectively with UBI Banca S.c.p.A. (accounting services, personnel procurement, administration and financial accounting services, internal auditing service, commercial network coordination, advertising and financial services) and with UBI Sistemi e Servizi S.p.A. – which has been in charge of all support and service activities of the UBI Banca Group as from 1st October 2007 – (back office and support services, ICT services, operational organisation and innovation, property services, procurement). Calculation of the amounts paid under such contracts based on 74

the costs incurred by the provider of the services takes into account the circumstance, in compliance with best practices concerning transfer pricing, that the performance of most services under the aforementioned contracts does not fall within the scope of the main purpose of the Parent Bank. On that basis, those transactions were valued as convenient by the Bank in relation to the following objectives of common interest to the Group and also to the Network Bank: a) improvement in levels of efficiency and productivity; b) uniform range of products marketed and consequent promotion of the unified image of the UBI Banca Group; c) progressive creation of synergies and economies of scale; d) recovery of human resources that might be used for the core business of the Bank, i.e. for reinforcement of commercial units.

Furthermore, according to the global service contracts, a special technical coordination commission – composed by an equal number of representatives from the Parent Bank and the Network Bank – continued its activity to verify, by means of periodic meetings, the fairness of the prices agreed, also taking into account the quality of the services rendered.

In the last twelve months the following agreements were reached and actions determined either through or in cooperation with the Parent Bank, with a particular focus on the global operations of Banca Popolare di Bergamo S.p.A.:

Merger Business Plan for 2007-2010 The Bank’s Board of Directors approved during a meeting held on 11 th June 2007 the Merger business pPlan for 2007-2010 prepared by the Parent Bank, whose guidelines provide for adoption of a business model confirming the roles of each entity - the Parent Bank as “integration motive”, the Network Bank as “commercial relation manager”, the Product Company as “specialised factory” - and for an organisational model distinguished by centralisation at the Parent Bank of all functions developing minor relations with the commercial network, maintaining at Network Bank level all units needed to ensure smoothness in ordinary network activities. The objective of the new organisational model, duly approved by the Board during a meeting on 26th November 2007 and implemented as from 1 st January 2008, is to create an even more streamlined operation structure, also thanks to the introduction of a new credit model establishing a clear distinction between credit and commercial functions and to the adoption of new credit lines regulations in order to make loans granting processes more efficient. More in detail, as regards the distribution structure, the new commercial model based on specialised chains, integrated with commercial development strategies/diverse strategic drivers, provides for implementation of a branch scheme, also for Corporate and Private chains, with creation of new network units called Corporate Banking Units (CBU) and Private Banking Units (PBU). Finally, implementation of guidelines established in the Industrial Plan entailed the adoption of uniform management policies for common customers within the UBI Group, with review and simplification of the management models applied.

Transfer of activities to the Parent Bank As for implementation of a new credit model as outlined in the Merger Business Plan for 2007-2010, during a meeting in December the Bank’s Board reviewed and accepted the project to centralise the management of “impaired loanss” and non performing loans at the Credit Recovery Area of the Parent Bank, effective from first quarter of this year and with subsequent implementation of a problem credit management at the Network Bank instead of a pre-litigation management to deal with “operational impairments”. 75

Extension of national fiscal consolidation On 25 June 2007, the Board of Directors of Banca Popolare di Bergamo S.p.A. confirmed their intention \to renew for the 2007-2009 period the option with the Parent Bank for application of a tax regime at Group’s level, better known as “national fiscal consolidation”, as settled in art. 117 to 129 of the Presidential Decree 917/1986, Consolidated Law on income taxes. A confirmation of the option on a three-year basis, which had already been expressed at the end of 2006, became necessary in order to comply with the Tax Agency request following the merger between Banche Popolari Unite and Banca Lombarda e Piemontese. We remind that such fiscal regime enables the Bank to obtain the financial advantages deriving from minor amounts needed to create a provision for payment of advance taxes to be settled following the Group’s income tax return.

Organisational model ex Legislative Decree 231/2001 Following adoption in June 2006 of a model for organisation, management and control developed and implemented in compliance with Legislative decree 231/2001, the supervisory body - as entity ensuring implementation and monitoring of the model itself - has promoted ongoing and specific updating of the model description based on amendments to regulations regarding offences and illegal acts in general, falling within the scope of the said law (with special focus on new regulations set out in Law 62/205 and Law 146/2006 on share manipulation and market abuse as well as transnational crimes). The model was then reviewed by the units involved at the Parent Bank on the basis of the new risks and corresponding regulatory actions needed due to development of the organisation structure and/or the operational features of the Bank. In 2007 further laws were implemented on new responsibilities of institutions concerning health protection and industrial safety and for prevention of laundering in the financial system; the model will be updated accordingly to ensure constant compliance with the current laws in force.

CONSOB regulations and implementation of market rules As for regulations and actions regarding misuse of privileged information and market manipulation (market abuse), the Parent Bank has reviewed the context of those entities assumed to have permanent access to privileged information, with subsequent update of the permanent section in the relevant register. Due to implementation of Directive 2004/39/EC of 21st April 2004 on MIFID (Markets In Financial Instruments Directive) as from 1 st November 2007, the Bank has taken all necessary steps for compliance to the new information and approval obligations based on a specific project of the Parent Bank UBI Banca.

Group’s operations and practice policies In compliance with definition by the Parent Bank of a set of rules regarding propensity to and assumption/management of the different kinds of risks, on 17 th December 2007 the Bank approved a new policy on operating risks management with adoption of a standard method (TSA) combined with a basic method (BIA) for calculation of capital requirement on operating risks and for introduction of a governance model identifying tasks and responsibilities of the management and control units involved. On the same day the bank also decided on the adoption of a policy on structural balance, with rules for achievement and maintenance of a balance in funding and lending structure using associated and efficient funding and lending policies. Regarding operations in the armaments field, with a resolution taken on 22 nd October the Bank, in line with ethical orientations proper of popular banks, decided to implement the new Group policy based on Laws set out in the Italian Constitution 76

– with ethical principles of respect for the people and human rights promotion – but also on the awareness of the necessity to use military instruments and forces to ensure peace and defence of internal and international relationships.

Network branches Within the limits imposed on the Parent Bank by the Competition and Market Authority (antitrust authority) with provision of 13 th April 2007, establishing a maximum market share of 35% in terms of short-term funding in the districts of Bergamo and Brescia, the Bank has started various actions for optimisation of the territorial network. Together with the Parent Bank, 11 branches located in the said districts have been identified and sold to Banca Popolare di Vicenza S.c.p.A. on 31 st December 2007, following a process duly approved by the Parent Bank on 4 th July 2007. To further streamline the territorial network, 4 branches located in the district of Milan were also transferred to Banca Popolare Commercio e Industria S.p.A. on 1st December 2007. Finally, as set out in the plan for re-organisation of the Group’s international network included in the Industrial Plan, in the last quarter of 2007 all necessary steps have been taken for the transfer of the Munich branch to the associated company UBI Banca International S.A., which will presumably take place during the first six months of 2008.

Consistently with strategic lines and economical objectives provided for in the Industrial Plan 2007-2010, the Parent Bank has started a project for a general review of placement agreements regulating the relationships between Product Companies and Network Banks, for alignment of economic profiles with main market standards and definition of common mechanisms within the Group, based on a “value creation” principle.

The most significant transactions of the Bank with other Group member companies are reported below:

Counterparty Type of Service

- UBI Assicurazioni Vita S.p.A. Participation in the agreement between UBI Banca and UBI Assicurazioni Vita S.p.A. to regulate distribution of BPU pension funds.

- UBI Assicurazioni S.p.A Participation in the agreement between UBI Banca and UBI Assicurazioni S.p.A. for distribution of insurance products at the Bank’s branches.

There is also an addition to and/or update of agreements already existing: with UBI Pramerica SGR S.p.A., for the charge of fund placement; with Centrobanca S.p.A., regarding banking services and products; with Mercato Impresa S.p.A, for placement of stand-alone Coralis products.

As for transactions concluded by the Bank with companies outside the Group, those of operating/quantitative importance or qualitative/strategic importance are reported below:

Counterparty Type of Service

- Capital Money S.p.A. Participation in the existing agreement between the Parent Bank and Capital Money S.p.A., replacing the related B@nca 24-7 S.p.A. in granting and management of 77

mortgage loans and becoming reference Bank for the management of mortgage loans procured by the said intermediary. On an organisational level, a specific unit for operational management of all financings raised was created, within the Retail credit granting management, called “Third Networks Unit”.

- ABN AMRO Bank N.V. Participation in the agreement for ABN AMRO bonds placement.

- TLC Italia S.r.l. Participation in the framework agreement on supply conditions of services regarding promotional and commercial incentives campaigns.

- Standard Chartered Bank Participation in the framework agreement (Gateway Program) underwritten between the Parent Bank and SCB and each associated Bank to strengthen management of UBI Corporate customers in the Middle East and South-East Asia markets.

- MasterCard Signing of a licence agreement, as associate, in the MasterCard international circuit for the issue of MasterCard Unembossed pre- paid cards.

- Schroder Investment Management S.A. Participation in the agreement concluded with the Parent Bank to regulate the placement of Schroder International OICR shares under the laws of Luxemburg.

- Blackrock LTD Participation in the agreement concluded with the Parent Bank to regulate the placement of OEIC under the laws of Luxemburg distributed by BlackRock Channel Islands.

- GSE ( Gestore Sistema Elettrico ) Signing of a framework agreement for acquisition under warranty of credits deriving from granting of incentive fees (photovoltaic devices).

- Arca SGR S.p.A. Participation in the agreement for placement of Arca pension funds.

- Arca SGR S.p.A. Participation in a new integrated agreement on placements, applicable in 2007, based on new regulations against laundering and distance placement.

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- Prestitalia S.p.A. Participation in the agreement on promotion, placement and management activities performed by Prestitalia regarding wage- backed loans.

All the above transactions took place under market conditions.

The definition of the economic terms under market conditions of transactions between the Group and third companies makes the advantages for the Bank clear.

More generally and in compliance with art. 2497 bis , par. 5, of the Italian Civil Code, business with the Parent Bank UBI Banca S.c.p.A., as with other UBI Group members, and relevant effects on the Income Statement and Balance Sheet are reported in the Notes to the financial statements, Part H – Transactions with related parties.

Finally, at 31 st December 2007 Banca Popolare di Bergamo S.p.A. held no shares from the Parent Bank in its proprietary securities portfolio.

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Fundamental indicators of the company’s performance, the environment and personnel

Fundamental indicators of the Bank’s performance are reported in the tables “Summary data” and “Financial and operating indicators” appearing in the previous pages.

The operating structure, personnel and training

At the end of 2007 the branch network of Banca Popolare di Bergamo S.p.A. consisted of 356 branches located in Italy and 1 abroad (Munich - Germany) as well as one representative office in Hong Kong, South-East Asia. There are also 4 Corporate Banking Units located in independent premises (Mantua, Milan and, in the district of Bergamo, Dalmine and Trescore Balneario).

As already mentioned in the introduction, complying with the provision of 13 th April 2007 by the Competition and Market Authority (antitrust authority) regarding UBI Group, in order to get approval on its constitution – fixing a maximum limit of 35% of market share for short-term funding in the districts of Bergamo and Brescia – together with Banca Popolare Commercio e Industria S.p.A. and Banco di Brescia S.p.A., the Bank has offered for sale starting from 31 st December 2007 eleven branches purchased by Banca Popolare di Vicenza S.c.p.A.. In detail, seven branches are based in the district of Bergamo (Bergamo – Monterosso, Costa di Mezzate, Lallio, Dalmine – Mariano, Mozzo, Alzano Lombardo – Nese, Sorisole – Petosino) and four in the district of Brescia (Brescia – S. Anna, Brescia – Via Crocifissa, Breno, Lumezzane).

In compliance with the Group’s plan on branches, in November the Bank has also transferred 4 branches to Banca Popolare Commercio e Industria S.p.A.; at the same time three new branches were opened during the year, one in Lombardy (Castiglione delle Stiviere – Mantua) and two in Latium (Pomezia and Monterotondo – Rome).

At the end of 2007 the highest concentration of branches was in Lombardy - totalling 300 offices - followed by Piedmont - 30 offices – then Latium (13), Emilia Romagna (6), Liguria (4) and finally Veneto with 3 branches.

More in detail, as regards the distribution network (previously consisting in 6 Retail Areas, 6 Corporate Areas plus one Large Corporate Area and 4 Private Territory Areas), the new commercial model applicable as from 1 st January 2008 provides for the keeping of 6 Retail Territory Areas (for coordination of branches network) and the implementation, also in Corporate and Private markets, of a branches structure with the creation of new network units called Corporate Banking Unit (CBU, amounting to 16) and Private Banking Unit (PBU, totalling 13).

At the end of 2007 the Bank’s total personnel consisted of 3.682 people, with a reduction of 142 units compared to 31 st December 2006 mainly due to a reduction in the number of branches described above.

Part-time workers numbered 261, accounting for 7,09% of total staff and in slight increase compared to previous year (258 units accounting for 6,75% of total staff).

The amount of female staff has also increased, accounting for 27,95% of the total work force at the end of 2007 (1.029 female workers), compared to 26,70% in 2006. 80

The average length of service during the year was 17,36 years, compared to 16,97 years at 31 st December 2006; the same trend was recorded for average age, which increased from 40,55 years last year to 40,94 in 2007.

The table below provides a schematic description of the changes in the Bank’s work force:

31/12/2007 % 31/12/2006 %

Total employees 3.682 100,00% 3.824 100,00% Male 2.653 72,05% 2.803 73,30% Female 1.029 27,95% 1.021 26,70% Average age 40,94 40,55 Average age of males 41,79 41,32 Average age of females 38,75 38,43 Average length of service 17,36 16,97 Average length of service for males 18,07 17,58 Average length of service for females 15,53 15,27

As occurred in the past years, the Bank resorted again in 2007 to temporary agency staff (mainly to replace staff on leave and to fill temporary needs) as well as to “detached” personnel from other Group member companies – besides temporary transferring on its turn of own resources to the Group itself; consequently, work force at year end totalled 3.718 people (3.813 at 31 st December 2006).

The changes occurred in the level of personnel are reported in the following table:

LEVEL 31/12/2007% 31/12/2006 %

Senior managers 49 1,33% 53 1,39% Middle managers 1.548 42,04% 1.530 40,01% Other professional areas 2.085 56,63% 2.241 58,60% TOTAL 3.682 100,00% 3.824 100,00%

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The distribution of personnel by age group at 31 st December 2007 was as follows:

AGE 31/12/2007 % 31/12/2006 %

Up to 25 years 158 4,29% 192 5,02% 26 to 40 years 1.719 46,69% 1.817 47,51% 41 to 50 years 1.148 31,18% 1.165 30,47% 51 to 55 years 530 14,39% 527 13,78% Over 55 years 127 3,45% 123 3,22% TOTAL 3.682 100,00% 3.824 100,00%

The level of education of the Bank’s work force at the end of the year is summarised as follows:

QUALIFICATION 31/12/2007 % 31/12/2006 %

University degree 828 22,49% 811 21,21% University diploma 10 0,27% 10 0,26% High school diploma 2.594 70,45% 2.726 71,29% Professional diploma 52 1,41% 51 1,33% Other 198 5,38% 226 5,91% TOTAL 3.682 100,00% 3.824 100,00%

Against an increase of 17 units in staff with a university degree, a clear decrease was recorded for staff with a high school dispoma (also due to the transfer of branches occurred during the year).

Leaving incentives

After in-depth discussion with the trade unions, an agreement protocol has been concluded on 14 th August 2007 applicable for the period 2007-2010 and enabling the gradual management on a voluntary basis of a reduction in staff following the Group’s processes for integration and re-organisation.

More in detail, economic, legal and social measures have been defined for those employees who will cease work and be entitled to an income support fund or directly to pension.

As at today, leaving incentives concern a total of 106 resources, all belonging to the staff of Banca Popolare di Bergamo S.p.A., by means of the following levers:

monetary incentive, for those employees who are or will be entitled to a pension by 1 st January 2009 (maximum incentive up to 12 monthly pays);
solidarity fund for income support created by INPS with Ministerial decree 158 of 28/4/2000 (gross amount corresponding to 80% of gross annual pay).

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Training

Training activity performed in 2007 for the personnel of Banca Popolare di Bergamo S.p.A. by the Parent Bank involved the participation of 28.522 employees (compared to 26.162 in 2006, + 9,02%). Training activity was implemented by means of classroom courses, intercompany courses, training on the job and with attendance at meetings and conventions. It was also designed to develop the skills needed to perform activities in the various areas.

The main areas involved were as follows:

Insurance area : 15.564,5 days of training (involving most of staff working on trading of insurance products due to a change in the regulations on this subject);

Credit area : 248 days of training;

Regulations area : 2.623,3 days of training, of which 1.604,1 on the PattiChiari project (1.486,3 at the branch and 117,8 in classroom);

Commercial area: 1.646,4 days of training;

Foreign area : 87 days of training;

Finance area : 1.725,3 days of training;

New staff/Requalification : 567,5 days of training;

Operations area : 543,5 days of training;

Specific projects : 383 days of training mainly on subjects relating to wage-backed loans (176 days) and the new reform of the law on bankruptcy (159,8 days).

Management training amounted to 531 days, mainly aiming at developing and refining skills for managing individuals and teams of managers of branches with 8 to 23 employees, area managers and managers of branches with more that 24 employees, new branch managers and operations area managers of branches with more than 12 employees.

The school for instructors programme continued with excellent results: 32 days of training for new instructors ( “Classroom qualification” courses and “Wednesdays for the instructors”).

As concerns information-training activities, meetings, area-meetings and conventions were organised for a total commitment amounting to 1.592,2 days.

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The assumption, management and hedging of financial risks

This subject is dealt with in Part E of the Notes to the financial statements which may be consulted.

Other information

Legislation on protection of personal data (Legislative Decree 196 of 30 th June 2003)

In compliance with provisions contained in the Consolidated Law on Privacy (Legislative Decree 196/03) and with relevant rules settled by the Privacy Supervisor, on 26 th March 2007 the Board of Directors approved the 2007 Security Programme Document of Banca Popolare di Bergamo; during the fiscal year the document was constantly revised and updated for preparation of the programme applicable in 2008, which was approved by the Bank’s Board of Directors during the meeting held on 17 th March 2008.

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The plan for the use of profits for the year and proposals to the General Meeting

Dear Shareholders,

We invite you to approve the Annual Report for the year ended 31st December 2007 containing Balance Sheet, Income Statement, the statement of changes in Equity, the statement of Cash Flows and the Notes to the financial statements, together with the Report of the Board of Directors on operations and the Report of the Independent Auditors KPMG S.p.A. Considering that the net profit reported below has not been generated by gains that may not be distributed within the meaning of art. 6, par. 1, letter a) of Legislative decree 38/2005, the following use of profit for the year is proposed:

Net profit for the year (in euros) 408.804.234,04

5% to the legal reserve (20.440.211,70)

388.364.022,34

2 % at the disposal of the Board of Directors for educational, cultural and charitable (7.767.280,45) purposes

2007 Profit available for other uses 380.596.741,89

Provision for voluntary reserve 75.000.000,00

Use of 2006 retained earnings 351.324,28

Distributable dividend (corresponding to 0,2433 euros per share) (305.657.790,00)

Remaining amount to be allocated to 2007 retained earnings 290.276,17

The Board of Directors also informs the members of the Ordinary meeting of the Shareholders that the use of the profit for the year described above has been formulated on the assumption that the amendments in the Corporate Statute to be discussed during the Extraordinary meeting taking place on 10 th April 2008 will be accepted.

The Board of Directors therefore invites the Shareholders, if they agree with the proposals submitted and after considering the opinion of the Statutory Board of Auditors, to approve the following resolution:

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“The General Meeting of the Shareholders of Banca Popolare di Bergamo S.p.A.,

- having considered the Management Report, the Balance Sheet, the Income Statement, the statement of changes in Equity, the statement of Cash Flows and the Notes to the financial statements; - having considered the Report of the Board of Statutory Auditors;

resolves to approve: a) the Management Report, the Balance Sheet, the Income Statement, the statement of changes in Equity, the statement of Cash Flows and the Notes to the financial statements as at and for the year ended 31 st December 2007, which recorded a profit for the year of 408.804.234,04 euros, as presented by the Board of Directors as a whole and with regard to the individual entries. b) the use of profits for the year, which – after allocations to the legal reserve, allocations required by the Corporate Statute, allocations to the voluntary reserve and use of retained earnings of the previous year – allows a dividend to be distributed of 0,2433 euros on each of the shares wholly owned by the Parent Bank UBI Banca S.c.p.A. – in addition to retained earnings.

To conclude this report, the Board of Directors renews its very genuine appreciation for the work performed during the year by all staff and presents its more sincere thanks to its customers and to the Parent Bank UBI for the consideration they have reserved to the Bank.

The Board finally wishes to thank the central and local Supervisory Authorities and the business associations for the active support given, as is their custom, to the Bank.

Bergamo, 26 th March 2008

The Board of Directors

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Other subjects on the agenda of the Extraordinary and Ordinary Meeting

Report of the Board of Directors on proposal for amendment of the Corporate Statute

The Board of Directors submits to the General Meeting of the Shareholders a proposal for amendment and integration of some articles in the Corporate Statute, based on formulations as reported in the following table presenting a comparison between the existing and the proposed text. The main objective of the actions taken by the Board of Directors was implementation of recommendations by the Parent Bank regarding the use of profits for the year, which led to reformulation of the first paragraph of art. 31, and namely:

- abrogation of provision referring to letter a), paragraph 1, of current art. 31, on use of 5,5% of net profit (after reserves provisions) “for staff social security and pension benefits to be used primarily for the corresponding corporate institutions; possible remaining amount is to be used as decided by the Board of Directors”. Such provision – following a study conducted by the Parent Bank UBI Banca S.c.p.a. itself, which is also amending its Corporate Statute accordingly – proved to be inadequate and inconsistent with accounting criteria adopted, which based on International Accounting Standard “IAS 19 – Employee Benefits” provide that staff pension and assistance costs are included in the Income Statement, under expenses referring to it. Abrogation of the aforementioned provision, applicable – within the UBI Banca Group – only in the Statutes of Banca Popolare di Bergamo S.p.A. and of the Parent Bank UBI Banca S.c.p.a., will enable equal accounting treatment of the costs above in all the Group’s banks. Finally, the suggested abrogation has been discussed and agreed upon with all staff trade organisations and duly undersigned on 20 th February 2008;

- increase from 1% to 2% of the maximum unit of net profit (net of all previous uses) which following letter b), paragraph 1, of current art. 31, is attributable by the General meeting of the Shareholders to a special fund of the Administrative Body for welfare and charitable purposes. This change reflects the intention – already declared when closing the 2006 annual financial statements – to increase the financial support intended for initiatives in the social, cultural and charitable field developed in the areas where the Bank operates, bringing at the same time such unit to the same level as the one used by associate Banco di Brescia S.p.A. for the same purposes on their territory - a commitment previously met by former Parent Bank Banca Lombarda e Piemontese S.p.A., before its merging into UBI Banca. A wider definition on the purposes of the allocation has been given – based on the formulation used by the Parent Bank – whereas provision that the General meeting “directs” the use of the aforementioned funds has been cancelled; this in fact never occurred, in that the purposes of the allocation constitute an adequate orientation.

While rewriting the whole first paragraph of art. 31 of the Statute, as required by the aforementioned amendments, some necessary technical details have been added [introduction and conclusion of new letter b), of the paragraph], besides cancelling from the introduction the provision for creation or integration of reserves, other than the legal one; this resulted to be a copy of what already stated in current – and new - letter b) and a potential reductive factor of what was intended to be redistributed for the good of the community, as clearly expressed on a statutory and corporate level. 87

On the same occasion, the Board reviewed some other articles in the Corporate Statute, with amendments of a more technical and formal nature, namely:

- art. 1, art. 17: to reflect – and adopting the text consistently with what mentioned in the special book held by the banking supervisory authority – the new denomination of the Group to which the Bank belongs, following corresponding change in the name of the Parent Bank with effect as from 1 st April 2007;

- art. 5: to add a detail needed to render formulation of the first paragraph fully corresponding to what provided for in art. 2328, paragraph 2 - nr 4), of the Italian Civil Code requiring indication of “share capital amount underwritten and fully paid up”;

- art. 14: to avoid – by making specific reference to provisions set out in the Italian Civil Code – any possible doubtful interpretation as regards consistency of these provisions with those established for the “deliberative quorum” of the General meeting, also considering actual equity structure of the company;

- art. 26: to state – as expressly required by art. 52 of Consolidated Law on Banking – assignment to the Statutory Board of Auditors of the specific task /power to inform Bank of Italy about any acts or facts which might constitute a management irregularity or a breach in banking activity regulations, by faithfully reporting the text of the rule of reference.

All amendments suggested in subsequent occasions have been previously submitted to the corresponding bodies of the Parent Bank Unione di Banche Italiane S.c.p.a., which agreed upon them and gave their approval. In the course of the meetings for discussion and approval by the Bank’s Board of Directors, the amendments were also approved by the Statutory Board of Auditors.

The Board of Directors invites therefore the General meeting of the Shareholders to examine the following table, specifying – for a detailed comparison of the articles involved – the amendments to the text of the Corporate Statute proposed for adoption due to the reasons described above (the amendments are in bold letters, in the column “proposed text”):

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STATUTE of BPB S.p.A.- EXISTING TEXT (rev. 05/2006) STATUTE of BPB S.p.A. – PROPOSED TEXT - articles to be amended -

TITLE I - DENOMINATION – MAIN OFFICE - TITLE I - DENOMINATION – MAIN OFFICE - DURATION – CORPORATE PURPOSE DURATION – CORPORATE PURPOSE ART . 1 ART . 1 A joint stock company is established under A joint stock company is established under the name of the name of "Banca Popolare di Bergamo S.p.A." "Banca Popolare di Bergamo S.p.A." The Company will also operate under the The Company will also operate under the name of "Credito Varesino”, “Banca name of "Credito Varesino”, “Banca Brignone” along with its Company name. Brignone” along with its Company name. The Company belongs to the “Banche The company belongs to the “ Gruppo Popolari Unite” Group, in short form “BPU Unione di Banche Italiane ”, in short form Banca”, and is duly recorded in the “Gruppo UBI Banca”, and is duly recorded Register of Banks at the Bank of Italy. in the Register of Banks at the Bank of As such, it will have to comply with Italy. provisions issued by the Parent Bank As such, it will have to comply with within its direction and coordination provisions issued by the Parent Bank activities as well as for the execution of within its direction and coordination recommendations given by the Bank of activities as well as for the execution of Italy and for the sake of the Group’s recommendations given by the Bank of stability. The Directors of the Company will Italy and for the sake of the Group’s provide to the Parent Bank any data and stability. The Directors of the Company will information needed for issuing of the provide to the Parent Bank any data and provisions. information needed for issuing of the ( … ) provisions. ( … )

TITLE II – SHARE CAPITAL - SHARES TITLE II – SHARE CAPITAL - SHARES ART . 5 ART. 5 The share capital amounts to The share capital amounts to 1.256.300.000,00 Euros (onebilliontwo 1.256.300.000,00 Euros (onebilliontwo hundredfiftysixmillionthreehundred hundredfiftysixmillionthreehundred thousand/00), divided into nr thousand/00) fully undersigned and paid 1.256.300.000 (onebilliontwohundred up, and is divided into nr 1.256.300.000 fiftysixmillionthreehundredthousand) (onebilliontwohundred ordinary shares with a nominal value of fiftysixmillionthreehundredthousand) one Euro each. ordinary shares with a nominal value of The share capital can be increased also one Euro each. adding non-monetary contributions or The share capital can be increased also companies. adding non-monetary contributions or The shares are nominal and indivisible. companies. Each ordinary share gives the right to one The shares are nominal and indivisible. vote. Each ordinary share gives the right to one Besides ordinary shares, also shares under vote. different rights can be issued. Besides ordinary shares, also shares under Holdings in the share capital are regulated different rights can be issued. by the current laws. Holdings in the share capital are regulated ( … ) by the current laws. ( … )

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STATUTE of BPB S.p.A.- EXISTING TEXT (rev. 05/2006) STATUTE of BPB S.p.A. – PROPOSED TEXT - articles to be amended -

TITLE III – GENERAL MEETING TITLE III – GENERAL MEETING ( … ) ( … ) ART . 14 ART . 14 The Ordinary general meeting, when called The Ordinary general meeting, when called for the first time, will be properly for the first time, will be properly constituted if attended by a number of constituted if attended by a number of shareholders representing more than one shareholders representing more than one half of the share capital. half of the share capital. The meeting, when called for the second The meeting, when called for the second time, will be properly constituted time, will be properly constituted regardless of the amount of share capital regardless of the amount of share capital represented by the shareholders attending represented by the shareholders attending the meeting. the meeting. In both cases, resolutions will be taken In both cases, resolutions will be taken based on voters’ absolute majority, based on absolute majority , complying therefore without including possible non- with current legal provisions . voters in the calculation. ( … omissis …) ( … )

TITLE IV – ADMINISTRATION TITLE IV – ADMINISTRATION ART . 17 ART . 17 The Company is administered by a Board The Company is administered by a Board of Directors, appointed by the General of Directors, appointed by the General meeting and consisting of minimum nine meeting and consisting of minimum nine and maximum fifteen members. and maximum fifteen members. The Directors have to possess qualities of The Directors have to possess qualities of honour, professionalism and independence honour, professionalism and independence as required by the regulations on banking as required by the regulations on banking exponents. exponents. The Board of Directors during its office will The Board of Directors during its office will appoint a Chairman and may appoint one appoint a Chairman and may appoint one or two Deputy Chairmen among its or two Deputy Chairmen among its members. members. The Chairman, Deputy Chairmen - if The Chairman, Deputy Chairmen - if appointed - and the other Directors will appointed - and the other Directors will stay in office over three financial years and stay in office over three financial years and will expire on the date of the General will expire on the date of the General meeting called for approval of the annual meeting called for approval of the annual financial statements concerning the last financial statements concerning the last year of office; they can be re-appointed. year of office; they can be re-appointed. The Directors may be Directors or The Directors may be Directors or Managing Directors of competitor Managing Directors of competitor companies, prior approval of the General companies, prior approval of the General meeting, needed if those companies do not meeting, needed if those companies do not belong to the BPU Banca Group. belong to the UBI Banca Group. The Chairman directs the work performed The Chairman directs the work performed by the Board, coordinates and oversees the by the Board, coordinates and oversees the activity of the Corporate Bodies, controls activity of the Corporate Bodies, controls over observance of Parent Bank directives over observance of Parent Bank directives and represents the Company before and represents the Company before Institutions and Authorities. Institutions and Authorities.

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STATUTE of BPB S.p.A.- EXISTING TEXT (rev. 05/2006) STATUTE of BPB S.p.A. – PROPOSED TEXT - articles to be amended - For replacement of Directors terminating For replacement of Directors terminating the office, current legal provisions will the office, current legal provisions will apply. apply. If, due to resignation or any other reason, If, due to resignation or any other reason, the majority of the Directors in office - or the majority of the Directors in office - or only the majority of Directors as appointed only the majority of Directors as appointed by the General meeting - ceases to exist, by the General meeting - ceases to exist, the whole Board will be considered as the whole Board will be considered as terminated with effect as from its re- terminated with effect as from its re- constitution. constitution. The General assembly decides The General assembly decides remuneration to be paid to members of the remuneration to be paid to members of the Board of Directors and of the Executive Board of Directors and of the Executive Committee. Committee. The Board of Directors, after consulting the The Board of Directors, after consulting the Statutory Board of Auditors, decides Statutory Board of Auditors, decides remuneration for those Directors in charge remuneration for those Directors in charge of special tasks in accordance with the of special tasks in accordance with the Statute. Statute. ( … ) ( … )

TITLE VI – STATUTORY BOARD OF AUDITORS TITLE VI – STATUTORY BOARD OF AUDITORS AND ACCOUNTING CONTROL AND ACCOUNTING CONTROL ART . 26 ART . 26 The Statutory Board of Auditors, appointed The Statutory Board of Auditors, appointed and operating in compliance with legal and operating in compliance with legal provisions, consists of three Full Auditors provisions, consists of three Full Auditors and two Alternates. and two Alternates. The Auditors will stay in office over three The Auditors will stay in office over three financial years and will expire on the date financial years and will expire on the date of the General meeting called for approval of the General meeting called for approval of the annual financial statements of the annual financial statements concerning the third year of office; they can concerning the third year of office; they can be re-appointed. be re-appointed. Assignments to the Auditors are given as Assignments to the Auditors are given as set out in the current regulations; the set out in the current regulations; the Statutory Board of Auditors controls law Statutory Board of Auditors controls law and Statute compliance, observance of and Statute compliance, observance of correct principles of administration and correct principles of administration and particularly adequacy of the organisational, particularly adequacy of the organisational, administrative and accounting frame administrative and accounting frame adopted by the Company, with relevant adopted by the Company, with relevant proper functioning. proper functioning. ( …) The Statutory Board of Auditors shall inform without delay the Bank of Italy about any acts of facts, coming to its knowledge while performing its tasks, which might constitute a management irregularity or a breach in regulations on banking activity. ( …)

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STATUTE of BPB S.p.A.- EXISTING TEXT (rev. 05/2006) STATUTE of BPB S.p.A. – PROPOSED TEXT - articles to be amended -

TITLE IX – ANNUAL FINANCIAL STATEMENTS TITLE IX – ANNUAL FINANCIAL STATEMENTS AND PROFITS AND PROFITS ( … ) ( … ) ART . 31 ART . 31 The net profit resulting from the annual The net profit resulting from the approved financial statements, net of legal reserve in annual financial statements, net of the the minimum extent provided for by the unit intended for legal reserve in the law and of possible units as resolved by the minimum extent provided for by the law, General meeting for creation or increase of can be distributed as follows , in its reserves – also extraordinary ones – or of distributable part: other reserves, based on prudential a) up to a maximum of 2%, for criteria, is distributed as follows: initiatives and institutions with a) 5,5% for staff social security and charitable, humanitarian, social, pension benefits to be used primarily for cultural and artistic purposes, to be the corresponding corporate granted as decided by the Board of institutions; possible remaining amount Directors, paying special attention to is to be used as decided by the Board of the areas where the Bank operates ; Directors; b) the remaining part will be at disposal of b) the remaining part will be at disposal of the General meeting which will have the the General meeting which will have the faculty to use it , as alternative or faculty to use it, as alternative or addition, for creation or increase of addition, for shareholders, training or reserves – also extraordinary ones – or of increase of other reserves and, within other reserves, and as dividend the maximum limit of 1%, for a attributable to shares based on provision intended for cultural, social resolutions taken, finally also and charity purposes in the areas where deciding on use of possible surplus. the Company operates; this use will be Profit and fair value reserves constituted decided by the Board of Directors, based following application of international on directions given by the General accounting principles are not distributable meeting. among the shareholders in those cases Profit and fair value reserves constituted established by the law. following application of international Dividends not collected within a period of accounting principles are not distributable five years from first valid date will be among the shareholders in those cases prescribed in favour of the Company. established by the law. The Board of Directors can resolve to Dividends not collected within a period of distribute advances on dividends as set out five years from first valid date will be by legal provisions. prescribed in favour of the Company. ( …) The Board of Directors can resolve to distribute advances on dividends as set out by legal provisions. ( …)

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In observance of the latest supervisory regulations, the project for amendment of the Corporate Statute was preliminarily submitted to the Bank of Italy for release of an assessment decision complying with art. 56, par. 2, of Consolidate Law on Banking, a necessary condition for registration of the resolution taken by the General meeting and subsequent deposit of the new text of the Statute with the Company register. Following development of amendment needs, particularly on complex actions taken regarding art. 31, petition to Bank of Italy was divided in two steps: a first project, submitted in December 2007, followed by release of assessment disposition 206136 of 20 th February 2008, and a second project – for integration and slight adjustment to the previous version – followed by release of disposition 407013 of 9 th April 2008. In both occasions no remarks were raised on the proposals. Enforcement of the Statute amendments presented is finally subject to compliance of the resolution, to be taken by the Shareholders meeting, with the project as examined by the Bank of Italy, which will verify in that sense. In this particular case, the Board of Directors is also requesting a mandate to perform all necessary actions to complete and implement the amendment proposal submitted for approval. If the General meeting, convened here in extraordinary session, agrees with the proposal formulated, the Board of Directors invites it to approve the following resolution:

"The Extraordinary General meeting of the Shareholders of Banca Popolare di Bergamo S.p.A.,

- having considered the report of the Board of Directors, - having considered the opinion in favour of the Statutory Board of Auditors,

resolves a) to approve in every detail the proposal to amend/integrate articles 1, 5, 14, 26 and 31 of the Corporate Statute as formulated by the Board of Directors and presented by the Chairman by means of the comparison illustrated and commented on in the report of the Board of Directors between the existing text and the text to be adopted; b) to consequently adopt the new text of the Corporate Statute, having confirmed that it is composed of thirty four articles, which the General Meeting approves and in confirmation is signed by the Chairman and by the notary and is attached to the minutes of this General meeting as an integral and substantial part of them, under letter_); c) to grant the Board of Directors and on its behalf the Chairman, each of the Deputy Chairmen and the Managing Director, if appointed, the necessary powers, all severally and individually, to implement these resolutions and basically do all that is necessary to implement, execute and make public the resolutions adopted above, including all communications and requirements useful or requested for the successful outcome of the resolutions passed."

Bergamo, 20 th March 2008

The Board of Directors

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Report of the Board of Directors on renewal of Corporate Boards members and related decisions

The Shareholders are called to appoint new components of the Bank’s Board of Directors. With approval of the financial statements for the year ended 31 st December 2007, the office comes to expiry for all current members appointed by the General meeting of "Banca Popolare di Bergamo S.p.A." of 21 st April 2006, first, and 11 th April 2007, as integration, for two years - 2006 and 2007 – and therefore until the said approval, by the Shareholders, of the annual financial statements as at 31 st December 2007. In accordance with provisions set out in first paragraph of art. 17 of the Corporate Statute, the Board of Directors "consists of minimum nine and maximum fifteen members", whereas the fourth paragraph of the same art. 17 provides that "Directors stay in office over three financial years". In this respect, prior to members identification, the General meeting is required to establish number and duration of office of the Directors to be appointed. The Shareholders will subsequently have to express themselves – complying with art. 2389 of the Italian Civil Code and with ninth paragraph of art. 17 of the Corporate Statute – regarding amount of remuneration to be paid to the members of the Board of Directors and of the Executive Committee, a body which may be appointed by the Board as set out in art. 23 of the Statute. Finally, the General meeting will also determine the amount of the attendance fee to be paid to the Directors based on their attendance to Corporate Bodies meetings. The Directors, at the conclusion of their office, express their thanks for the confidence showed and ensure to have constantly carried out their tasks with dedication and responsibility, following prudential principles needed by the delicate charge of administering a banking company, to ensure balanced and ongoing development over the time.

Bergamo, 20 th March 2008

The Board of Directors

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FFiinnaanncciiaall ssttaatteemmeennttss

95

Balance Sheet

(in units of euro)

31/12/2007 31/12/2006

ASSETS

10. Cash and cash equivalents 179.105.060 159.121.899 20. Financial assets held for trading 62.271.025 114.848.087 40. Available-for-sale financial assets 1 18.110.440 60. Loans to banks 3.189.700.042 2.900.386.105 70. Loans to customers 21.390.547.593 20.811.160.519 80. Hedging derivatives 1.391.610 3.414.073 90. Fair value adjustments to hedged financial assets 383.648 3.202.569 110. Property, plant and equipment and investment proper18.260.085ty 18.157.953 120. Intangible assets 42.144.603 42.810.534 of which : goodwill 42.144.603 42.144.603 130. Tax assets 73.411.320 86.859.089 a) Current 36.860.981 34.496.832 b) Deferred 36.550.339 52.362.257 140. Non current assets held for disposal and disposal groups 209.285.838 0 150. Other assets 403.419.745 426.667.683 TOTAL ASSETS 25.569.920.570 24.584.738.951

LIABILITIES

10. Due to banks 2.046.009.089 1.361.669.655 20. Due to customers 12.911.157.127 13.846.578.207 30. Securities in issue 7.756.349.304 6.802.998.809 40. Financial liabilities held for trading 92.721.960 167.273.127 60. Hedging derivatives 10.958.443 30.754.701 80. Tax liabilities 110.722.725 73.459.315 a) Current 45.257.699 39.306.024 b) Deferred 65.465.026 34.153.291 90. Liabilities associated with assets held for disposal 146.605.730 0 100. Other liabilities 587.259.876 520.641.263 110. Post-employment benefits 96.102.430 126.315.710 120. Provisions for liabilities and charges 52.250.503 53.809.539 b) Other provisions 52.250.503 53.809.539 130. Fair value reserves 38.774 1.232.230 160. Reserves 94.640.375 71.504.193 180. Share capital, issue premiums and reserves 1.256.300.000 1.256.300.000 200 Profit for the year 408.804.234 272.202.202 TOTAL LIABILITIES 25.569.920.570 24.584.738.951

Data relating to the year 2006 are different from the financial statements approved due to a reclassification deriving from alignment of accounting practice of two former Groups BPU and BL, as well as of recognition of actuarial gains/losses of debts for post-employment benefits and health insurance policies following an amendment in the relevant accounting principle as from 1 st January 2007. See Part A of the Notes to the financial statements for more details on the subject.

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Income Statement

(in units of euro)

31/12/2007 31/12/2006

10. Interest and similar income 1.275.758.213 968.750.999 20. Interest and similar expense (534.476.141) (343.419.348) 30. Net interest income 741.282.072 625.331.651 40. Commission income 359.188.757 344.512.382 50. Commission expense (30.839.033) (35.376.867) 60. Net commission income 328.349.724 309.135.515 70. Dividend and similar income 0 165 80. Net profit from trading 1.139.750 7.855.814 90. Net profit from hedging 1.681.747 1.606.058 100. Profit (loss) from sale or repurchase of: 14.199.784 5.202.426 a) Loans 390.166 4.365.423 b) Available-for-sale financial assets 12.176.497 0 d) Financial liabilities 1.633.121 837.003 120. Gross income 1.086.653.077 949.131.629 130. Net impairment losses on: (49.187.144) (38.508.268) a) Loans (47.369.356) (37.693.622) d) Other financial transactions (1.817.788) (814.646) 140. Net financial operating income 1.037.465.933 910.623.361 150. Administrative expenses: (543.612.302) (506.517.1 29) a) Personnel expense (287.548.040) (261.852.479) b) Other administrative expenses (256.064.262) (244.664.650) 160. Net provisions for liabilities and charges (8.512.489) (10.919.869) 170. Net impairment losses on property, plant and equipment and investment property(980.367) (1.114.275) 180. Net impairment losses on intangible assets (527.916) (448.622) 190. Other operating costs/ income 66.573.177 61.988.197 200. Operating costs (487.059.897 ) (457.011.698) 240. Lloss on disposal of investments (24.706) (87.085) 250. Profit from continuing operations before tax 550.381.330 453.524.578 260. Taxes on profit from continuing operations (228.641.525) (181.322.376) 270. Profit from continuing operations after tax 321.739.805 272.202.202 280 Profit on non current assets held for disposal after tax 87.064.429 0 290. Profit for the year 408.804.234 272.202.202

Data relating to the year 2006 are different from the approved financial statements due to a reclassification deriving from alignment of accounting practice of two former Groups BPU and BL. See Part A of the Notes to the financial statements for more details on the subject.

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st Statement of changes in Equity as at 31 December 2007

(in units of euro) Changes during the year Allocation of prior year profit Situation at Changes in E transactions Situation at Equity at 31/12/2006 opening Chang es in 01/01/2007 Profit for 31/12/2007 (1) balances reserves Extraordinary Change in Derivatives Reserves Dividends and other New shares Purchase of Stock the year (3) - (4) - (5) distribution of capital on own (2) uses issues treasury shares options dividends instruments shares Share capital: 1.256.300.000 - 1.256.300.000 ------1.256.300.000 a) Ordinary shares 1.256.300.000 X 1.256.300.000 X X X - X X X X X X 1.256.300.000 b) Other s hares - X - X X X - X X X X X X - Issue premiums - X - X X X - X X X X X X - Reserves: 71.504.193 - 71.504.193 1.538.457 - 21.597.725 ------94.640.374 a) income-related 69.607.978 69.607.978 1.538.457 X -- X - X - X X 71.146.435 b) Other 1.896.215 - 1.896.215 - X 21.597.725 - X - X X - X 23.493.939 Fair vallue reserves: 1.232.230 - 1.232.230 - - (1.193.456) ------38.774 a) Available for sale 8.397.584 - 8.397.584 X X (8.397.584) X X X X X X X - b) Cash flows hedging - X X X X X X X X X - c) Exchange rate differences --- X X - X X X X X X X - d) Special revaluation laws (289.878) - (289.878) X X -- X X X X X X (289.878) e) Other (6.875.476) - (6.875.476) X X 7.204.128 X X X X X X X 328.652 Capital instruments - X - X X X X X X - X X X - Treasury shares - X - X X X -- X X X X X - Profit the year 272.202.202 - 272.202.202 (1.538.457) (270.663.745) X X X X X X X 408.804.234 408.804.234 Equity 1.6 01.238.625 X 1.601.238.625 - (270.663.745) 20.404.268 ------408.804.234 1.759.783.383

(1) The change in the balance at 31 st December 2006 is due to recording of actuarial gains/losses – included under item Fair value reserves: e) other – following amendment in the accounting principle "corridor method” which had been applied until 31 st December 2006. The amount after taxes concerns both the provision for post-employment benefits and health insurance policies - See also the Notes to the financial statements – Part A – Section 2 “General principles of preparation”, paragraph "Changes in accounting principles".

(2) Income-related reserves – “Allocation of previous year result” – includes not only the resolutions taken during the General meeting for approval of the 2006 annual financial statements but also the use of what intended for staff social security and pension for 2006, amounting to 14,2 million and recognised under Equity. See also Part A of the Notes to the financial statements.

(3) Taxation of fair value reserves for post-employment benefits as at 31 st December 2006 has been modified following the new provisions set out in the Financial Law for 2008 (nr 244/2007).

(4) Due to reform in retirement benefits, the fair value reserve for post-employment benefits as at 31 st December 2006 has been re-classified under “Reserves b) Other”. The fair value reserve regarding available-for-sale securities has been reduced to zero due to disposal of available-for-sale securities.

(5) Reserves “Other” include among the variations of the year gains deriving from transfer of 4 branches to the associate Banca Popolare Commercio e Industria S.p.A. recorded under Equity complying with IAS principles – OPI interpretation – See Part A of the Notes to the financial statements for more details.

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Statement of changes in Equity as at 31 st December 2006

(in units of euro) Changes during the year Allocation of prior year profit Changes in Equity transactions Sit uation at opening Situation at Equity at 31/12/2005 balances 01/01/2006 Changi es in Profit Extraordinary Change in Derivatives 31/12/2006 (1) Dividends and reserves New shares Purchase of Stock for the year Reserves distribution of capital on own other uses issues treasury shares options dividends instr uments shares

Share capital: 1.256.300.000 1.256.300.000 1.256.300.000 a) Ordinary shares 1.256.300.000 X 1.256.300.000 X X X - X X X X X X 1.256.300.000 b) Other shares - X - X X X - X X X X X X - Issue premiums - X - X X X - X X X X X X - Reserves: 34.861.820 35.512.383 71.504.193 a) income-related 44.908.098 44.908.098 35.991.810 X (11.291.930) - X - X - X X 69.60 7.978 b) Other (10.046.278) 650.563 (9.395.715) - X 11.291.930 - X - X X - X 1.896.215 Fair value reserves: 3.720.723 (5.526.525) 6.758.755 1.232.230 a) Available for sale 3.622.769 - 3.622.769 X X 4.77 4.815 X X X X X X X 8.397.584 b) Cash flows hedging - - - X X - X X X X X X X - c) Exchange rate differences - - - X X - X X X X X X X - d) Special revaluation laws 97.954 (387.832) (289.878) X X -- X X X X X X (289.878) e) Other - (8.859.417) (8.859.417) X X 1.983.940 X X X X X X X (6.875.476) Capital instruments - X - X X X X X X - X X X - Treasury shares - X - X X X -- X X X X X - Profit for the year 204.280.601 - 204.280.601 (35.991.810) (168.288.791) X X X X X X X 272.202.202 272.202.202 Equity 1.499.163.144 X 1.490.566.459 - (168.288.791) 6.758.755 ------272.202.202 1.601.238.625

(1) The Changes in opening balances amounting to 8,9 million euros under item “Fair value reserves e) Other” is due to recording of actuarial gains/losses following an amendment in the relevant accounting principle reported in detail in the Notes to the financial statements - Section 2 “General principles of preparation” paragraph "Changes in accounting principles".

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Statement of Cash Flows

(in units of euro)

INDIRECT METHOD 31/12/2007 31/ 12/2006

A. OPERATING ACTIVITIES 1. Operations 361.101.154 325.014.204 - Profit for the year (+/-) 408.804.234 272.202.202 - Gains/losses on financial assets held for trading and on financial assets/liabilities held at fair value (-/+) (2.244.141) 4.614.610 - Gains/losses on hedging activities (-/+) (1.681.747) 2.663.999 - Net impairment losses on loans (+/-) 47.369.356 41.998.750 - Net impairment losses on PPE and investment property and intangible assets (+/-) 1.508.282 1.562.897 - Net provisions for liabilities and charges and other expenses/income (+/-) (88.393.957) 9.574.197 - Outstanding taxes and duties (+) (577.236) 32.647.821 - Other adjustments (+/-) (3.683.637) (40.250.272) 2. Liquidity generated/absorbed by financial assets (1.050.871.652) (1.478.010.169) - Financial assets held for trading 54.821.203 (16.688.333) - Available-for-sale financial assets 18.110.439 5.049.960 - Lending to banks: other loans and receivables (325.263.877) 910.828.878 - Lending to customers (798.539.417) (2.377.200.674) 3. Liquidity generated/absorbed by financial liabilities 821.619.881 1.353.702.210 - Due to banks and other payables 772.927.055 64.907.767 - Due to customers (878.706.961) 1.406.519.738 - Securities in issue 937.577.715 490.082.689 - Financial liabilities for trading (74.551.166) 57.663.338 - Other liabilities/assets (+/-) 64.373.238 (665.471.322) Net liquidity generated/absorbed by operating activities 131.849.383 200.706.245 B. INVESTMENT ACTIVITIES 1. Liquidity generated by 160.892.408 0 - Disposal of lines of business 160.892.408 0 2. Liquidity absorbed by (2.094. 885) (877.620) - Purchase of tangible assets (2.010.536) (776.904) - Purchase of intangible assets (84.349) (100.716) Net liquidity generated/absorbed by investment activities 158.797.523 (877.620) C. FINANCING OPERATIONS - Distribution of dividends and other means (270.663.745) (168.288.791) Net liquidity generated/absorbed by financing activities (270.663.745) (168.288.791) NET LIQUIDITY GENERATED/ABSORBED DURING THE YEAR 19.983.161 31.539.834

LEGEND: (+) generated '( -) absorbed

Reconciliation of statement of Cash Flows

Balance Sheet items 31/12/2007 31/12/2006

Cash and cash equivalents at the start of the year 159.121.899 127.582.065 Total liquidity generated/absorbed during the year 19.983.161 31.539.834 Cash and cash equivalents at the end of the year 179.105.060 159.121.899

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102

Report of the Statutory Board of Auditors to the General Meeting (art. 2429, second paragraph, Italian Civil Code)

Dear Shareholders,

We have examined the draft financial statements of “BANCA POPOLARE DI BERGAMO S.p.A.” as at and for the year ended 31 st December 2007, as prepared by the Directors and notified to the Board of Statutory Auditors together with the Report on operations drawn up by the Board of Directors.

The main events occurred during the year are reported below:

merger into the Parent Bank BPU Banca S.c.p.A. of Banca Lombarda e Piemontese S.p.A., resolved on 3 rd March 2007, followed by a change in the name of the Parent Bank into UBI Banca S.c.p.A.;
approval of the Merger Business Plan 2007-2010 of UBI Banca Group by the Board of Directors on 11 th June 2007;
renewal, resolved during a Board meeting held on 25th June 2007, of adoption of “national fiscal consolidation” taxation regime on a Group’s level for the period 2007- 2009, as set out in art. 117 to 129 of Presidential Decree 917/1986;
implementation of the “CFO” project regarding a financial and administrative governance system as from September;
enforcement of Directive 2004/39EC (MiFID Directive) applicable as from 1 st November 2007;
implementation of new Group policies starting from December 2007, with special focus on operating risks management and structural balance of Network banks and Group companies;
transfer of four branches to Banca Popolare Commercio e Industria S.p.A. and opening of three new branches;
sale of eleven branches to Banca Popolare di Vicenza S.c.p.A. effective from 31 st December 2007;
update in description of the organisational model ex Legislative Decree 231/2001, with enforcement of new rules regarding share manipulation, market abuse and transnational crimes.

Other important events occurred during the year have affected, or will affect, the current year 2008, and mainly:

adoption, in November, of the new organisational model for Network Banks and the new regulations on credit lines;
constitution, complying with the said organisational model, of new Corporate Banking Units (CBU) and Private Banking Units (PBU) at network level, effective as from 1st January 2008;
transfer of non performing and “impaired” loans to the new centralised management at the Credit Recovery Area of the Parent Bank as from January 2008;
activation of procedures for migration of the informative system of former BPU Banca Group to the target system of former Banca Lombarda e Piemontese Group, to be implemented during the second half of 2008.

At year end the Bank’s Board of Directors has also started a procedure for an amendment in the Corporate Statute, which was further integrated last March, also subject to approval of the Shareholders during an Extraordinary meeting. The 103

amendment proposals presented were duly agreed upon and approved by the Statutory Board of Auditors.

No atypical or unusual transactions have been carried out during the year, also regarding related parties.

The supervisory activity of the Statutory Board of Auditors according to the law, and also with reference to art. 149 of Legislative Decree 58/1998 (Consolidated Law on Finance), was performed in compliance with the code of practice of Statutory Boards of Auditors, as recommended by the national council of advisors and accountants, and in observance of instructions issued by CONSOB and the Bank of Italy.

The Board of Auditors also informs the Shareholders that the following activities have been performed during the year:

supervised that law and Corporate Statute as well as correct principles of administration were properly observed;
held 18 meetings, summarising in those meetings all control activities performed by the Board members, even individually; attended the meeting held on 1 st March 2007 by the company’s supervisory body ex Legislative Decree 231/2001 and attended, in the person of the Chairman, the meeting held on 26 th November 2007 by all Chairmen of the Board of Auditors of companies belonging to UBI Banca Group, in compliance with supervisory provisions settled by the Bank of Italy concerning banks organisation and governing bodies;
attended 1 general meeting, 17 meetings of the Board of Directors and 21 meetings of the Executive Committee, which were performed in accordance with the statutory, legal and regulatory provisions which govern their functioning and for which we can reasonably ensure that resolutions taken complied with the law and the Corporate Statute and were not manifestly imprudent, risky, in potential conflict of interests or such as to compromise the integrity of the share capital;
acquired information and supervised adequacy of the company’s structure and observance of law and correct principles of administration, through direct observations, gathering information from those responsible in the various administrative areas and in meetings with the company auditing officer and the Independent Auditors;
assessed and supervised adequacy of internal control and administration/accounting systems, and ascertained that the latter was reliable and faithfully reporting the operating events, by gathering information from the company auditing officer, the Independent Auditors, those responsible in the various units and with examination of the company’s documents;
supervised that the conduct of the Bank was consistent with the guidelines laid down by the Parent Bank;
ascertained that information requested from the Bank was duly reported to the Parent Bank, in compliance with art. 114 par. 2 of Legislative Decree 58/1998;
required and obtained, by the Managing Director and the company’s executives in different meetings, information on the main transactions performed by the Bank and they were not deemed to be manifestly imprudent, risky, in potential conflict of interests or in contrast with resolutions taken by the Shareholders and by the Board of Directors or such as to compromise the integrity of the share capital;
expressed the following recommendations in accordance with the law or the Corporate Statute: - recommendation on charge given to Independent Auditors KPMG S.p.A. concerning accounting control, when discussing extension of total office duration complying with new regulations; - recommendations ex art. 136 of Legislative Decree 385/1993 (Consolidated Law on Banking) concerning obligations of banking exponents when expressing 104

resolutions;
regularly followed internal audit services supplied by the Parent Bank UBI Banca S.c.p.A., expressing its opinion concerning the annual report on the activity performed and the programme to be carried out, checking progress in the audit plan and related results;
verified the trend of customer claims, with periodical opinions on the subject;
generally verified that obligations relating to communication with supervisory bodies were duly respected by the Bank;
verified implementation of processes and frames suitable for monitoring and control of risks deriving from banking activity.

The Statutory Board of Auditors also confirms to the Shareholders that the company:

complied with obligations laid down by Law 197/1991 and provisions of the Italian exchange office – now financial information unit - against laundering;
complied with all obligations on privacy concerning personal data treatment and preparation of a security programme document in accordance with Legislative Decree 196/2003 and other regulations on the subject;
implemented a procedure concerning transactions within the Group and with related parties as set out in art. 2391 bis of the Italian Civil Code;
performed intergroup transactions of a financial and commercial nature and for supply of services during 2007, as described by the Directors in the Report on operations and the Notes to the financial statements. Such transactions have been performed based on rationalisation and economy criteria;
respected capital requirements laid down by supervisory regulations.

The company is subject to management and coordination of the Parent Bank “UBI Banca S.c.p.A.” and all information concerning relations with the Parent Bank have been duly supplied in compliance with the Italian Civil Code.

Periodical accounting control, half-yearly audit and certification of the individual annual financial statements have been conferred upon the Independent Auditors “KPMG S.p.A.”, which performed the following audits, in compliance with the law and based on the following fees, out-of-pocket expenses and VAT excluded:

- audit and certification of the annual financial statements, € 250.000; - half-yearly audit, € 60.000; - attestation services, € 15.000.

The Statutory Board of Auditors has periodically exchanged information with the Independent Auditors and no peculiar facts or circumstances or irregularities emerged to be reported to the Board of Auditors. The Independent Auditors have therefore verified correct accounting and measuring of operations in the accounting records for the year 2007 and in the annual financial statements as at 31 st December 2007, as well as their consistency with accounting results; they have subsequently prepared they report on 27 th March 2008, with no significant remarks worth of mention. The Board of Auditors has in any case supervised the general frame of the annual financial statements and on its compliance with the law and the specific rules set out for preparation of banking financial statements. The annual financial statements were draw up in accordance with Legislative Decree 38/2005, following accounting principles issued by IASB and relevant interpretation of IFRC, and based on instructions regarding preparation of the annual financial statements issued by the Bank of Italy. As laid down by the current regulations, measurement criteria used and all information needed are given in the Notes to the financial statements, including information on credit, market, liquidity and operating risks. Trend in operations is described in the 105

report of the Directors.

In the course of the said supervisory activity no significant facts emerged – also referring to provisions of art. 52 of the Consolidated Law on Banking – to be notified to the control bodies or worth of mention in this report.

The Board of Auditors finally declares that during financial year 2007 it has received to notification within the meaning of art. 2408 of the Italian Civil Code.

Considering the above, the Board of Auditors believes that the financial statements for the year 2007, as prepared by the Directors, can be duly approved by the General Meeting, and agrees on the use of profits for the year as proposed by the Board of Directors.

Bergamo, 27 th March 2008

THE STATUTORY BOARD OF AUDITORS

Ferruccio Rota Sperti Chairman Antonio Amaduzzi Full Auditor Luigi Piantoni Full Auditor

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Part A – Accounting policies

A.1 General part

Section 1 Statement of compliance with IFRS Section 2 Basis of preparation Section 3 Subsequent events Section 4 Other aspects

A.2 The main accounting items

Part B – Information of the Balance Sheet

ASSETS

Section 1 Cash and cash equivalents Section 2 Financial assets held for trading Section 3 Financial assets at fair value Section 4 Available-for-sale financial assets Section 5 Held-to-maturity financial assets Section 6 Loans to banks Section 7 Loans to customers Section 8 Hedging derivatives Section 9 Fair value change in hedged financial assets Section 10 Equity investments Section 11 Property, plant and equipment and investment property Section 12 Intangible assets Section 13 Tax assets and tax liabilities Section 14 Non current assets held for disposal and disposal groups with associated liabilities Section 15 Other assets

LIABILITIES

Section 1 Due to banks Section 2 Due to customers Section 3 Securities in issue Section 4 Financial liabilities held for trading Section 5 Financial liabilities at fair value Section 6 Hedging derivatives Section 7 Fair value change in hedged financial liabilities Section 8 Tax liabilities Section 9 Liabilities associated with assets held for disposal Section 10 Other liabilities Section 11 Post-employment benefits Section 12 Provisions for liabilities and charges Section 13 Reimbursable shares Section 14 Equity

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Part C – Information on the Income Statement

Section 1 Interest Section 2 Commissions Section 3 Dividend and similar income Section 4 Net profit (loss) from trading Section 5 Net profit (loss) from hedging Section 6 Profit (loss) on sales/repurchases Section 7 Net profit (loss) on assets and liabilities at fair value Section 8 Net impairment losses/reversals Section 9 Administrative expenses Section 10 Net provisions for liabilities and charges Section 11 Net impairment losses on property, plant and equipment and investment property Section 12 Net impairment losses on intangible assets Section 13 Other costs and operating income Section 14 Profit (loss) on equity investments Section 15 Net result of fair value measurement of property, plant and equipment and investment property and intangible assets Section 16 Impairment losses on goodwill Section 17 Profit (loss) on disposal of investments Section 18 Taxes on profit from continuing operations Section 19 Profit (loss) on assets held for disposal after tax Section 20 Other information Section 21 Earnings per share

Part D – Segment reporting

A. Primary reporting format B. Secondary reporting format

Part E – Information on risks and relevant hedging policies

Section 1 Credit risk Section 2 Market risk Section 3 Liquidity risk Section 4 Operating risk

Part F – Information on capital

Section 1 Equity Section 2 Capital and supervisory ratios

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Part G – Business combinations concerning companies or lines of business

Section 1 Transations performed during the fiscal year Section 2 Transactions performed after the end of the fiscal year

Part H – Transactions with related parties

Part I – Share based payment agreements

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Part A – Accounting policies

A.1 General part

Section 1 Statement of compliance with IFRS

The draft annual report, approved by the Board of Directors of Banca Popolare di Bergamo on 26 th March 2008 and submitted for the approval of the shareholdersconvened for 10 th April 2008, has been prepared in compliance with the international financial reporting standards issued by the International Accounting Standards Board (IASB) and homologated at the date of publication and also in compliance with the related interpretations of the International Financial Reporting Interpretation Committee (IFRIC) 11 .

This document, consisting of Balance Sheet, Income Statement, Statement of Cash Flows, Statement of changes in Equity, Notes to the financial statements, including the Report on operations, subject to the audit of the Independent Auditors, constitutes the separate annual report of Banca Popolare di Bergamo S.p.A., Network Bank of the UBI Banca Group.

The annual report at 31 st December 2007 was drawn up clearly and gives a true and fair view of the bank’s financial position, results of operations, changes in Equity and cash flows.

List of IFRS endorsedby the European Commission

IAS/IFRS ACCOUNTING STANDARDS APPROVAL Reg. 2238/2004, amend. IAS 1 Presentation of financial statements 1910/2005, 108/2006 Reg. 2238/2004, IAS 2 Inventories 1358/2007 Reg. 1725/2003 amend. IAS 7 Statement of Cash Flows 2238/2004, 1358/2007 IAS 8 Accounting policies, changes in accounting estimates, and errors Reg. 2238/2004 IAS 10 Events after the Balance Sheet date Reg. 2238/2004 IAS 11 Construction contracts Reg. 1725/2003 Reg. 1725/2003 amend. IAS 12 Taxes on income 2236/2004, 2238/2004, 211/2005 Reg. 1725/2003 amend. IAS 14 Segment reporting 2236/2004, 2238/2004, 108/2006 Reg. 2238/2004 amend. IAS 16 Property, plant and equipment 211/2005, 1910/2005 IAS 17 Leasing Reg. 2238/2004, 108/2006

11 See also the “ List of IFRS endorsed by the European Commission”. The standards listed and their interpretation are applied following the occurrence of the events which they regulate and the year in which they come into force. 115

Reg. 1725/2003 amend. IAS 18 Income 2236/2004 Reg. 1725/2003 amend. 2236/2004, 2238/2004, IAS 19 Employee benefits 211/2005, 1910/2005, 1358/2007 Accounting for government grants and disclosure of government Reg. 1725/2003 amend. IAS 20 assistance 2238/2004 IAS 21 The effects of changes in foreign exchange rates Reg. 2238/2004 Reg. 1725/2003 amend. IAS 23 Borrowing costs 2238/2004 Reg. 2238/2004 amend. IAS 24 Related party disclosures 1910/2005 IAS 26 Retirement benefit plans Reg. 1725/2003 Reg. 2238/2004, IAS 27 Consolidated and separate financial statements 1358/2007 IAS 28 Investments in associates Reg. 2238/2004 Reg. 1725/2003 amend. IAS 29 Financial reporting in hyperinflationary economies 2238/2004 IAS 31 Interests in companies subject to joint control Reg. 2238/2004 Reg. 2237/2004 amend. Financial instruments: disclosures in the financial statements of IAS 32 2238/2004, 211/2005, banks and financial institutions 1864/2005, 108/2006 Reg. 2238/2004 amend. IAS 33 Earnings per share 211/2005, 108/2006, 1358/2007 Reg. 1725/2003 amend. IAS 34 Interim financial reporting 2236/2004, 2238/2004, 1358/2007 Reg. 2236/2004 amend. IAS 36 Impairment of assets 2238/2004, 1358/2007 Reg. 1725/2003 amend. IAS 37 Provisions, contingent liabilities and contingent assets 2236/2004, 2238/2004 Reg. 2236/2004 amend. IAS 38 Intangible assets 2238/2004, 211/2005, 1910/2005 Reg. 2086/2004 amend. 2236/2004, 211/2005, IAS 39 Financial instruments: recognition and measurement 1751/2005, 1864/2005, 1910/2005, 2106/2005, 108/2006 IAS 40 Investment properties Reg. 2238/2004 Reg. 1725/2003 amend. IAS 41 Agriculture 2236/2004, 2238/2004 Reg. 707/2004 amend. 2236/2004, 2237/2004, IFRS 1 First-time adoption of international financial reporting standards 2238/2004, 211/2005, 1751/2005, 1864/2005, 1910/2005, 108/2006 IFRS 2 Share-based payment Reg. 211/2005 IFRS 3 Business combinations Reg. 2236/2004 IFRS 4 Insurance contacts Reg. 2236/2004, 108/2006 Reg. 2236/2004, IFRS 5 Non-current assets held for sale and discontinued operations 1358/2007 Reg. 1910/2005, IFRS 6 Exploration for and evaluation of mineral resources 1358/2007 IFRS 7 Financial instruments: disclosures Reg. 108/2006 IFRS 8 Operating segments Reg. 1358/2007

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SIC/IFRIC INTERPRETATION DOCUMENTS APPROVAL Changes in existing decommissioning, restoration and similar IFRIC 1 Reg. 2237/2004 liabilities IFRIC 2 Members' Shares in co-operative entities and similar instruments Reg. 1073/2005 IFRIC 4 Determining whether an arrangement contains a lease Reg. 1910/2005 Rights to interests arising from decommissioning, restoration and IFRIC 5 Reg. 1910/2005 environmental funds Liabilities arising from participating in a specific market – Waste IFRIC 6 Reg. 108/2006 electrical and electronic equipment Applying at restatement approach under IAS 29 “Financial reporting IFRIC 7 Reg. 708/2006 in hyperinflationary economies” IFRIC 8 Scope of IFRS 2 Reg. 1329/2006 IFRIC 9 Reassessment of embedded derivatives Reg. 1329/2006 IFRIC 10 Interim financial reporting and impairment Reg. 610/2007 IFRIC 11 IFRS 2 – Group and treasury share transactions Reg. 611/2007 Reg. 1725/2003 amend. SIC 7 Introduction of the euro 2238/2004 SIC 10 Government assistance – no specific relation to operating activities Reg. 1725/2003 Reg. 1725/2003 amend. SIC 12 Consolidation – special purpose entities 2238/2004, 1751/2005 Reg. 1725/2003 amend. SIC 13 Jointly controlled entities – non-monetary contributions by venturers 2238/2004 SIC 15 Operating leases – Incentives Reg. 1725/2003 Reg. 1725/2003 amend. SIC 21 Income taxes – Recovery of revalued non-depreciable assets 2238/2004 Income taxes – Changes in the tax status of an enterprise or its Reg. 1725/2003 amend. SIC 25 shareholders 2238/2004 Reg. 1725/2003 amend. SIC 27 Evaluating the substance of transactions in the legal form of a lease 2238/2004 SIC 29 Disclosure – service concession arrangements Reg. 1725/2003 Reg. 1725/2003 amend. SIC 31 Revenue – Barter transactions involving advertising services 2238/2004 Reg. 1725/2003 amend. SIC 32 Intangible assets – Website costs 2236/2004, 2238/2004

Section 2 Basis of preparation

The financial statements have been prepared in compliance with the general standards set out in IAS 1 “Presentation of financial statements”. Information is therefore reported on a going concern basis, where expenses and revenue are recorded based on their economic nature, thus avoiding offsets between assets and liabilities, expenses and revenue.

The information mentioned, if not otherwise stated, is expressed in Euros; the balance sheet, income statement, notes there to and explanatory tables are expressed in thousands of euros. Roundings have been made taking into account the provisions of the Bank of Italy. Items with no value to report in the current and previous period have been omitted.

The formatsused in these financial statements comply with provisions contained in Circular 262/2005 by the Bank of Italy and, in addition to figures at 31 st December

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2007, they provide a comparison with the corresponding information at 31 st December 2006.

Accounting policies

The accounting policies set out in Part A.2 concerning classification, measurement and derecognition are basically the same as those adopted and described in the financial statements at 31 st December 2006 by Banca Popolare di Bergamo S.p.A.. The sole exception was the policy adopted for the recognition of post-employment benefits, for which the UBI Group decided to recognise actuarial gains/losses under Equity (see paragraph below 12 ).

The policies used tend to apply cost criteria with the exception of the following financial assets and liabilities which were measured at fair value: financial instruments held for trading (including derivatives) and available-for-sale financial instruments.

Changes in accounting policies

Following introduction of amending Reg. EC 1910/2005, the accounting principle IAS 19 “Employee benefits” provides for two different ways to recognise actuarial gains/losses. More particularly, it is possible to opt for the so-called “corridor” method (used by the former BPU Group and consequently by Banca Popolare di Bergamo S.p.A.) or for recognition of the items mentioned under Equity (used by the former Banca Lombarda e Piemontese Group). For the sake of accounting integration and following the need to adopt a common accounting policy within the new UBI Group, it was decided to recognise actuarial gains/losses under Equity in a fair value reserve; this choice improved the reporting, in that it makes it easier for the reader to perceive the amount of debt to employees, and also entailed a variation in accounting criteria for those companies belonging to the former BPU Group, that is, the recognition of actuarial gains/losses previously accrued instead of holding them out of balance within the limits of the “corridor”.

As at 1 st January 2007 this variation led to recognition of actuarial losses which increased liabilities for post-employment benefits and health insurance policies by 10,3 million euros with the balancing entry in a negative fair value reserve amounting to 6,9 million euros after tax.

Complying with provisions of IAS 8 “Accounting policies, changes in accounting estimates, and errors”, the opening balance of the Equity components involved has been adjusted starting from the furthest fiscal year used for comparison purposes, in this case from 2006.

12 See following paragraph “Changes in accounting policies”. 118

Section 3 Subsequent events

As provided for by IAS 10, we inform that from 31 st December 2007, the reporting date, to 26 th March 2008, date on which the draft financial statements were duly approved by the Board of Directors, no event occurred such to entail a change in the annual accounting data presented.

We report, for information only, that in compliance with the Business Plan some central staff structures are being re-organised during this early part of the year, and namely:
credit recovery management has been centralised at the Parent Bank since 1 st January 2008;
the Bank’s commercial structure has been re-organised with implementation of CBU (Corporate Banking Units) in the Corporate market and of PBU (Private Banking Units) in the Private market from the beginning of the year;
management of non operational impaired loans has also been centralised at the Parent Bank since the end of February.

Finally, regarding the foreign branch based in Munich – Germany, which will be transferred according to the plan for re-organisation and development of the Group’s foreign network, all necessary steps have been taken in compliance with the laws and supervisory requirements of the countries involved (Italy, Germany and Luxemburg). The transfer will become effective within the first half of the year.

Section 4 Other aspects

New regulations on post-employment benefits

The application of Legislative Decree 252/2005 provides for a reform in complementary retirement benefits also affecting the payable for post-employment benefits. According to the said reform - involving exclusively units of post-employment benefits accrued as from 1st January 2007 - starting from that date such units can be used for complementary retirement benefits 13 or kept by the company, as decided by the permanent employee 14 ; in the latter case, if the company staff consist of at least 50 people, the accrued units are transferred to the INPS treasury fund 15 .

For those companies whose annual financial statements are prepared in accordance with IFRS, the introduction of the said regulations has required accounting treatment of the following items:

units of post-employment benefits accrued at 31.12.2006;
units of post-employment benefits accrued from 1.1.2007 intended for complementary retirement benefits;
units of post-employment benefits accrued from 1.1.2007 intended for INPS.

The obligation relating to post-employment benefits accrued until 31 st December 2006 remains in the liabilities of the company’s financial statements even after 1 st January

13 Through a clearly expressed choice, that is, following the so-called assent-by-default mechanism. 14 The choice was to be expressed within 30 th June 2007 for staff employed since 31 st December 2006 or within 6 months from the date on which the service commenced for staff employed since 1st January 2007. 15 This fund, unlike FondInps – the complementary pension plan created at INPS and intended to hold all units of post-employment benefits accrued of workers who decided to use the assent-by-default mechanism - does not represent a complementary retirement benefit plan. 119

2007, and represents a defined benefit plan which is still to be evaluated based on actuarial criteria, consistently with the previous regulations and complying with IAS 19. The sole change compared to the past is that the measurement method used includes possible increases due to revaluation as set out in art. 2120 of the Italian Civil Code instead of those estimated by the company. On the contrary, the model still considers usual demographic and financial hypotheses (i.e., actuarial hypotheses concerning death, disability, resignation or dismissal, request for an advance payment by the employee as well as the trend in the actual purchasing power of money).

The revised measurement model based on the regulations above entailed for Banca Popolare di Bergamo S.p.A. a total reduction in the payable for post-employment benefits, compared to the liabilities recognised in the financial statements at 31 st December 2006, amounting to 21,6 million euros; the difference is recognised in the Income Statement, as non current positive component - under “Personnel expense” as balancing entry to the reduction of the liability above - amounting to 14,5 million after taxes. This is due to the fact that the reform has produced a curtailment in the defined benefit plan for all entities participating in the plan, with a radical change in the conditions of the plan itself.

Regarding units of post-employment benefits accrued as from 1 st January 2007, the reform produces different effects following the date on which the employee service commenced (staff already employed at 31 st December 2006 or staff employed from 1 st January 2007).

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Alignment of accounting practices and processes

As already mentioned in the introduction to the Report on operations, the accounting integration process between Banche Popolari Unite and former Banca Lombarda e Piemontese showed the need of an alignment in accounting practice and processes, which in any case entailed no variation in accounting principles as set out in IAS 8 “Accounting policies, changes in accounting estimates, and errors”.

The following actions were taken accordingly:

1) a uniform classification of income statement itesm (particularly referring to items “Other administrative expenses” and “Other operating costs/income”) and uniformity in details mentioned in the relevant tables referring to Income Statement items “Other administrative expenses” and “Other operating costs/income” totalling 0,9 million euros .

2) identification of common methods for measurement of special accounting events, the main of which are reported below:

- recognition of provision for liabilities and charges : these provisions are normally recorded with a balancing entry under item “Net provisions for liabilities and charges” in the Income Statement, with the sole exception of provisions concerning personnel expense which have a balancing entry under the relevant item; as a consequence, 14 million euros have been reclassified, cancelled from specific items and recognised under item 160 “Net provisions for liabilities and charges”.

- costs and income referring to prior years : they are recognised by nature under the corresponding items of the Income Statement and only those with no suitable item in the Income Statement appear under “Other operating costs/income”;

- due to suppliers , originated by supply of goods as well as services, recognised under item “Other liabilities”; 14,8 million euros have therefore been cancelled from item “Due to customers” and recorded among other liabilities.

- payables and receivables to/from the Parent Bank for fiscal consolidation , they have been recognised for 139,8 million euros under item “Other liabilities” and for 100,3 million euros under “Other assets”.

Effects deriving from the above changes had no impact on profit for the year in that they are merely reclassifications in the Income Statement or the Balance Sheet.

3) harmonisation in calculation methods of collective adjustments on performing loans; this criterion – applicable to all the Group companies as from fiancial year 2007 – is in line with conventional criteria of Basel II considering a time horizon of 12 months for estimation of default forecasts.

This choice was also due to the following main reasons:

- maximum consistency between adoption of a single time parameter and implementation of fully uniform processes, monitoring and reporting systems concerning credit control within the Group, with easier organisation of monitoring and measuring system; - alignment to the practice adopted by the national market, thus enabling higher comparability between the Bank’s financial statements and those of the main national banks; 121

- a time horizon currently supported by the IT system of the Group. The adoption of the said criterion entailed an extraordinary and non current negative impact on net profit of approx. 23 million euros ;

4) finalisation of a measurement model on impairment of goodwill.

Accounting of business combinations between lines of business or jointly controlled entities

During financial year 2007, as already explained in detail in the sections on operational structure and managing and coordination activity, a transfer of branches took place between entities belonging to UBI Banca Group. More in detail, 4 branches were sold to the associate Banca Popolare Commercio e Industria S.p.A. Such transaction, contractually defined as disposal of a line of business, constitutes an aggregation between entities under common control and as such is expressly excluded by the scope of application of IFRS 3 “Business combinations”. In the absence of a specific accounting principle, those transactions were treated in the annual financial statements following the Assirevi preliminary orientations on IFRS (so-called “OPI”), orientation documents used to identify which is the accounting treatment, according to IFRS, in the separate financial statements of entities under common control and involved in intergroup combination transactions. In this case, OPI nr 1 was applied “Accounting treatment of business combinations of entities under common control in the financial and consolidated financial statements ”. In short, the accounting practice as indicated in OPI nr 1 is based on the economic extent of the transaction performed, intended as meaning the added value generated for all parties involved (such as higher gains, cost saving, new synergies) and leading to significant changes in cash flows existing before and after the transfer of assets.

More in detail, the higher value deriving from disposal of the transferred asset is recognised in the Income Statement as a gain when the transaction is attributed a significant economic extent; on the contrary, the higher value is recognised as an increase in Equity under a special reserve.

Considering that as at today there is no uniform and consolidated interpretation of the contents expressed by OPI orientations, mainly regarding definition of significant economic extent, for the 2007 financial statements a prudent approach has been adopted with recording under Shareholder’s Equity of the higher value gained from the said transactions. See also the comment in Section 14 of the liabilities “Equity” in the Notes to the financial statements.

Recognition of staff social security and pension (art. 31 par. 1 a) Corporate Statute of BPB S.p.A)

IAS 19 “ Employee benefits ” provides that all social security and pension benefits for employees, including equity investments plans, are recognised in the Income Statement. For this reason - and also following a notification from the Bank of Italy to the Parent Bank UBI Banca to verify consistency of the Corporate Statute with provisions of the said accounting principle – an amendment 16 in art. 31 par. 1 a) of the Corporate Statute of Banca Popolare di Bergamo S.p.A. will be submitted to the Shareholders during a meeting called for 10 th April in order to comply with IAS 19.

16 See the report on operations in the section on the agenda of the extraordinary meeting. 122

Consistently with the proposed amendment to the Corporate Statute, in the financial statements at 31 st December 2007 the charge was recognised under item 150 in the Income Statement “Personnel expense” amounting to 14,2 million euros, corresponding to what resolved by the General meeting regarding the use of the profit for the year 2006. As a consequence, the same amount – previously recognised among liabilities as a payable for staff social security and pension and used to cover relevant costs incurred – was recognised as an increase in income-related reserves under Equity. See the notes in Section 14 of the liabilities “Equity” of this report. For comparison purposes, also information regarding year 2006 in the reclassified Income Statement and Balance Sheet has been modified accordingly.

The CFO – Chief Financial Officer – Project of UBI Banca Group

In accordance with requirements laid down by Law 262/2005, with amendments of the issuers regulations and with the Consolidated Law on Finance (particularly art. 154 bis of Legislative Decree 58/98), and to enable full application of the new national regulations within the whole UBI Group, last September the Parent Bank started the “CFO” project for activation and implementation of a finance and administrative governance system.

A financial and administrative governance system has been identified, including different analysis fields and using the main reference frameworks known on a national and international level regarding development of internal control systems to be based on the financial information obtained.

The system adopted by UBI Banca Group enables - starting from attestation required in financial and consolidated financial statements at 31st December 2007 - a proper management of the different risk profiles, based on financial information and adequate assignment of powers and means to the executive in charge, all basic elements used by the Managing Director and the executive in charge to comply with the provisions introduced.

Provisions of the financial administrative governance model as adopted by the Parent Bank are summed up below: a) Attestation according to art. 154 bis of Legislative Decree 58 of 24 th February 1998 with relevant report, to be attached to the consolidated financial statements, on adequacy and actual application in the period 2007 of administrative and accounting procedures, on correspondence between corporate documents and results of accounting books and records as well as on their suitability to give a true and fair view of the group’s financial position and results of operations. Such attestation is released by the Managing Director and the executive in charge with preparation of corporate accounting documents at the Parent Bank. b) A corresponding system within the Group, establishing the same obligation towards the Parent Bank for the managing bodies and the administrative manager of each single company belonging to the Group concerning the own administrative and accounting procedures.

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A.2 The main accounting items

1. Financial assets and liabilities held for trading

1.1 Definition of financial assets and liabilities held for trading

A financial asset or liability is classified as held for trading (at fair value through profit or loss – FVPL) and is stated under either item 20 “Financial assets held for trading” or item 40 “Financial liabilities held for trading” if:

it has been acquired or incurred mainly for sale or repurchase in the short term;
it is part of a portfolio of identified financial instruments which are managed together for which there is evidence of a recent and effective strategy of short term profit taking;
it is a derivative (except for derivatives designated and effective as a hedging instrument – see the dedicated paragraph below).

The Bank has classified under “Financial assets held for trading”, where present, bond securities held for trading and PCT, ABS securities issued against securitisation transactions, and share securities held for trading. This item also includes, if existing, units of hedge funds purchased prior to 1 st July 2007 as well as equity instruments, other than those used for control, held for merchant banking and private equity activities.

1.1.1 Derivative financial instruments

A “derivative” is defined as a financial instrument or other contract with the following characteristics:

its value changes in response to the change in an interest rate, in the price of a financial instrument, in a commodity price, in a foreign currency exchange rate, in a price, interest rate or credit rating index, or credit worthiness index or other variable decided on;
it requires no initial investment, or a net initial investment that is smaller than would be required for other types of contract from which a similar response to changes in market factors would be expected;
it is settled at a future date.

The Bank holds derivative financial instruments for both trading and for hedging purposes (see the paragraph below for information on the latter). All derivates held for trading are stated initially at fair value which generally is the same as cost. Subsequently derivative contracts are recognised at fair value, which is the value that the Bank would pay or receive if it terminated the derivative contract at the date of measurement. Each change measured in the fair value is recorded on the Income Statement under the item 80 “Net profit (loss) from trading”. The fair value of derivatives is measured by applying the method described in the paragraph below “Measurement Criteria”.

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1.1.2 Embedded derivative financial instruments

An “embedded derivative financial instrument” is defined as a component of a hybrid (combined) instrument which also includes a “host” non derivative contract such that some of the cash flows of the combined instrument behave in a similar fashion to the derivative as a stand-alone instrument. The embedded derivative is separated from the host contract and treated in the financial statements as a stand-alone derivative if and only if:

the economic risks and characteristics of the embedded derivative are not closely related to the economic risks and characteristics of the host contract;
a separate instrument with the same conditions as the embedded derivative would satisfy the definition of a derivative;
the hybrid (combined) instrument is not recognised under financial assets or liabilities held for trading.

The fair value of separated derivatives is measured by applying the methodology described in the paragraph below “Measurement criteria”.

1.2 Recognition criteria

The financial instruments “Financial assets and liabilities held for trading” are recognised at the time of settlement if they are debt securities or equity instruments or at the trade date if they are derivative contracts and they are valued at cost intended as meaning the fair value of the instrument without considering any transaction costs or income directly attributable to the instruments themselves.

1.3 Measurement criteria

Subsequent to initial recognition, the financial instruments in question are measured at fair value with changes recognised in the Income Statement under item 80 “Net profit (loss) from trading”. The measurement of the fair value of the assets and liabilities held in a trading portfolio is based on prices quoted on active markets or on internal measurement models which are generally used in financial practice and are described below.

1.3.1 Methods for measuring fair value

1.3.1.1 Securities: listed and unlisted

For securities listed on active markets, the measurement of fair value is based on prices quoted on the relative market (that on which the greatest volume of trading occurs) as obtained from international providers and registered on the last day of the financial period. A market is defined as active market if the prices quoted reflect normal market transactions, are readily and regularly available and represent actual and regularly occurring market transactions. For unlisted securities fair value is measured by using measurement techniques that measure the price that an instrument would have had at the measurement date in a free transaction motivated by normal market considerations. Measurement of the fair value is performed by applying methods commonly used on international markets and also internal measurement models. More specifically, for unlisted bonds, models which discount expected future cash flow to present value (using interest rates that take proper consideration of the sector that the

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issuer operates in and the rating class where available) and price option models are used. For equity instruments prices based on comparable transactions, the market multiples of directly comparable companies and capital, income and mixed measurement models are used.

1.3.1.2 Derivatives: listed and unlisted

For listed derivatives the measurement of fair value is based on prices taken from active markets. For unlisted derivatives the fair value is measured by using models which discount future cash flows to present value and which are also weighted for the credit risk associated with the financial instrument. For derivatives traded with institutional counterparties this risk is considered virtually nil because of compensation agreements (CSA) designed to minimise credit risk.

1.4 Derecognition criteria

“Financial assets and liabilities held for trading” are derecognised in the financial statements when the rights to the cash flows from the financial assets or liabilities expire or when the financial assets or liabilities are transferred with the substantial transfer of all the risks and rewards deriving from ownership of them. The result of the transfer of financial assets or liabilities held for trading is recognised in the Income Statement under item 80 “Net profit (loss) from trading”.

2. Available-for-sale financial assets

2.1 Definition

Available-for-sale financial assets (AFS) are defined as non-derivative financial assets designated on initial recognition as such or that are not classified as:

(1) loans and receivables (see paragraph below); (2) financial assets held until maturity (see paragraph below); (3) financial assets held for trading and financial assets at fair value through profit or loss (see paragraph below).

These financial assets are recognised under item 40 “Available-for-sale financial assets”.

2.2 Recognition criteria

Available-for-sale financial assets are recognised initially when, and only when, the Bank becomes a party in the contract clauses of the instrument and that is on the date of settlement, at fair value which generally coincides with their cost. This value includes costs or income directly connected with the instruments themselves. The recognition of available-for-sale financial assets may result from the reclassification of held-to-maturity financial assets; in this case the recognition value is the same as the fair value at the moment of reclassification.

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2.3 Measurement criteria

Subsequent to initial recognition, available-for-sale financial assets continue to be recognised at fair value with interest (resulting from application of the amortised cost) included in the Income Statement and changes in fair value recognised in Equity under item 130 “Fair value reserves” except for permanent impairment losses due to decrease in value, until the financial asset is derecognised, at which time the profit or loss previously recognised in Equity must be recognised in the Income Statement. Equity instruments for which the fair value cannot be reliably measured according to the methods described are recognised at cost.

At the end of each financial year or interim reporting period, objective evidence of impaired value is assessed. If there is permanent impairment, the cumulative changes previously recognised in equity under the item mentioned above are recognised directly in the Income Statement under item 130 “Net impairment losses on b) available-for-sale financial assets”. Permanent impairment is recognised when the acquisition cost (net of any repayments of principal and amortisation) of an available-for-sale financial asset exceeds its recoverable amount. Any reversals of impairment, which are only possible when the causes of the original permanent impairment no longer exist, are treated as follows:

if they relate to investments in equity instruments, with a balancing entry directly in the equity reserve;
if they relate to investments in debt instruments, they are recognised in the Income Statement under item 130 “Net impairment losses on b) available-for-sale financial assets”.

The amount of the reversal may not in any case exceed the amortised cost which, in the absence of previous value adjustments, the instrument would have had at that time. The recoverable amount of investments in listed equity instruments is measured on the basis of the market price should the decrease observed reach such a low level that a reversal could not be reasonably expected in the foreseeable future. The recoverable amount for unlisted equity instruments is measured by applying internationally accepted measurement techniques. The standard method applied is based on observations of the earnings multiples of similar companies found on the market.

2.3.1 Methods for measuring fair value

See paragraph on “Financial assets and liabilities held for trading”.

2.4 Derecognition criteria

Available-for-sale financial assets are derecognised in the financial statements when the contractual rights to the cash flows from the financial assets expire or when the financial assets are sold with the substantial transfer of all the risks and benefits deriving from ownership of them. The result of the disposal of available-for-sale financial assets is recognised in the Income Statement under item 100 “Profit (loss) on the sales or repurchase of b) available-for-sale financial assets”. Upon derecognition any corresponding amount of what was previously recognised in equity under 130 Fair value reserves is written off against the Income Statement.

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3. Loans and receivables

3.1 Definition

Loans and receivables (L&R) are defined as non-derivative financial assets, with fixed or determinable payments, which are not quoted in an active market.

The following are exceptions: a) those which it is intended to sell immediately or in the short term, that are classified as held for trading and those that may have been designated on initial recognition as at fair value measured in the Income Statement; b) those designated upon initial recognition as available for sale; c) those for which the holder may not recover substantially all of its initial investment, other than because of credit deterioration; in this case they are classified as available for sale.

Loans and receivables are recognised under the items 60 “Loans to banks” and 70 “Loans to customers”.

The Bank includes loans to customers and banks among loans whether granted directly or acquired from third parties; the following falls within this category: commercial lending, repurchase agreements, lending originated by finance leasing and factoring as well as interest bearing postal bonds.

3.2 Recognition criteria

Loans and receivables are initially recognised in the financial statements when the Bank becomes part of a loan contract, which is to say when the creditor acquires the right to the payment of the sums agreed in the contract. That moment corresponds to the date on which the loan is granted. The value initially recognised is that of the fair value of the financial instrument, which is the same as the amount granted inclusive of costs or income directly attributable to it and determinable from the outset, independently of when they are paid. The value of the initial recognition does not include all those costs that are reimbursed by the debtor counterparty or that are attributable to internal costs of an administrative character. For loans and receivables not granted under market conditions, the initial fair value is calculated by using special measurement techniques described below; in these circumstances the difference between the fair value that is calculated and the amount granted is included directly in the Income Statement under the item interest. Contango and repo agreements with the obligation or right to repurchase or resell at term are recognised in the financial statements as funding or lending transactions. For transactions with a spot sale and forward repurchase, the spot cash received is recognised in the financial statements as borrowings while the spot purchase transactions with forward resale are recognised as lending for the spot amount paid.

3.3 Measurement criteria

Loans and receivables are valued at amortised cost using the criteria of effective interest. The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability was measured upon initial recognition net of principal repayments, plus or minus the cumulative amortisation using the effective interest

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method on any difference between that initial amount and the maturity amount, and minus any reduction (arising from an impairment or uncollectability). The effective interest method is a method of calculating the amortised cost of an asset or liability (or group of assets and liabilities) and of distributing the interest income or expense over its relative life. The effective interest rate is the rate that exactly discounts the estimated flow of future cash payments or receipts until the expected maturity of the financial instrument. To determine the effective interest rate, the cash flows must be estimated taking into consideration all the contractual conditions of the financial instrument (e.g. payment in advance, a purchase option or similar), but future impairments of the loan are not considered. The computation includes all fees and basis points paid or received between parties to the contract which are integral parts of the effective interest rate, the transaction costs and all other premiums or discounts.

At each balance sheet date or when interim financial reports are prepared any objective evidence that a financial asset or group of financial assets has suffered impairment in value is assessed. This circumstance is repeated when it is probable that a company may not be able to collect amounts due on the basis of the original contracted conditions or, for example, in the presence of: a) significant financial difficulties of the issuer or debtor; b) a violation of the contract such as default or failure to pay interest or repay principal; c) the lender, because of the economic or legal factors relating to the financial difficulties of the debtor, granting a concession to the latter which the lender would not otherwise have considered; d) the probability of the beneficiary declaring procedures for loan restructuring; e) the disappearance of an active market for that financial asset due to financial difficulties; (f) available data which indicate a substantial decrease in expected future cash flows for a similar group of financial assets since the time of the initial recognition of those assets, although the decrease can not yet be identified with the individual financial assets in the group.

The measurement of non-performing loans (loans which, according to Bank of Italy definitions, are non-performing, impaired, rescheduled, past due positions or loans to counterparties resident in countries at risk, not guaranteed by the country risk) is performed on a case-by-case basis. The remaining loans are valued using statistical methods which group uniform classes of risk based on the sector they belong to and the type of security provided.

The method for determining the impairment losses to be applied to non-performing loans is based on discounting expected future cash flows for principal and interest, taking account of any guarantees attached to positions and of any advances received. The basic elements for determining the present value of cash flows are the identification of the estimated receipts, the relative maturity dates and the discount rate to apply. The entity of the loss is equal to the difference between the recognised value of the asset and the present value of expected future cash flows, discounted back at the original effective interest rate.

The collective method is also applied for exposures subject to country risk or for credits with no guarantee to residents in countries with problems in debt service. Impaired exposures are not considered among such credits, in that they are submitted to a case- by-case measurement as reported above.

The measurement of performing loans (performing positions and country risk exposures) relates to asset portfolios for which no objective evidence of impairment exists and which are therefore valued collectively. Rates of loss calculated from historical-statistical data

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are applied to the estimated cash flows from assets, grouped into uniform classes with similar characteristics in terms of credit risk. If a loan is subject to individual measurement and shows no objective loss of value, it is placed in a class of financial assets with similar credit risk characteristics and subjected to collective measurement.

Permanent impairment losses that are found are immediately recognised in the Income Statement under the item 130 “Net impairment losses on a) loans” as are reversals of part or all of the amounts previously impaired. Reversals are recognised where there is an improvement in credit quality sufficient to provide reasonable certainty of prompt collection of the principal and the interest according to the original conditions of the original loan contract or in the presence of a reversal of the present value calculated at the time of recognising the adjustment. Where loans are valued on a collective basis, any upward value adjustments or reversals of impairment losses are recalculated as differences in relation to each performing loan at the measurement date.

3.3.1 Methods for measuring fair value

The fair value of loans and receivables is measured by considering future cash flows discounted at the replacement rate or the market rated existing at the measurement date and relating to a position with the same characteristics as the loan valued. The fair value is measured for all loans for information purposes only. For loans and receivables subject to effective hedging, the fair value is calculated in relation to the risk that is hedged for measurement purposes.

3.4 Derecognition criteria

Loans and receivables are derecognised on the Balance Sheet when the rights to the cash flows from the financial assets expire or when the financial assets are sold with the substantial transfer of all the risks and rewards deriving from ownership of them. Otherwise loans and receivables continue to be recognised on the Balance Sheet for an amount equal to the remaining involvement, even if legal title has been transferred to a third party. The assets in question are derecognised from the Balance Sheet even when the Bank maintains the contractual right to receive cash flows from them, but when at the same time it has a contractual obligation to pay those cash flows to a third party. The profit or loss on the disposal of loans and receivables is recognised in the Income Statement under the item 100 “Profit (loss) on the sale or repurchase of a) Loans”.

4. Hedging derivatives

4.1 Definition

Hedging transactions are designed to neutralise potential losses on a specific item (or group of items) attributable to a determined risk, by means of the gains realised on another instrument or group of instruments if that particular risk should actually occur.

The Bank uses the following type of hedging transaction, appropriately presented in the financial statements and described below:

Fair value hedge: the objective is to offset adverse changes in the fair value of the asset or liability hedged.

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Only derivative contracts with an external counterparty may be designated as hedging instruments.

4.2 Recognition criteria

As with all derivatives, derivative financial instruments used for hedging are initially recognised and subsequently measured at fair value and are classified in the Balance Sheet on the assets side under item 80 “Hedging derivatives” and on the liabilities side under item 60 “Hedging derivatives”.

A relationship qualifies as a hedge and is appropriately presented in the financial statements if, and only if, all the following conditions are satisfied:

at the start of the hedge the relationship is formally designated and documented, including the company’s risk management objective and strategy for undertaking the hedge. This documentation includes identification of the hedging instrument, the item or transaction hedged, the nature of the risk being hedged, and how the entity will assess the hedging instrument effectiveness in offsetting the exposures to changes in the fair value of the item hedged or in the cash flows attributable to the risk hedged;
the hedging is expected to be highly effective;
the planned transaction hedged, for hedging cash flows, is highly probable and presents an exposure to changes in cash flows that could have effects on the Income Statement;
the effectiveness of the hedging can be reliably measured;
the hedging is measured on an ongoing basis and is considered highly effective for all the financial years in which it was designated.

4.2.1 Methods for testing effectiveness

A hedge relationship is judged effective, and as such is appropriately represented in the financial statements, if at its inception and during its life the changes in the fair value or cash flows of the hedged item attributable to the hedged risk are almost always completely offset by the changes in the fair value or cash flows of the hedging instrument. This conclusion is reached when the actual result falls within a range of between 80% and 125%. The effectiveness of hedging is tested at inception by means of a prospective test and when annual reports are prepared by means of a retrospective test; the outcome of the test justifies the application of hedging accounting because it demonstrates its expected effectiveness. Retrospective tests are conducted monthly on a cumulative basis where the objective is to measure the degree of effectiveness of the hedging in the reporting period and therefore to verify whether the hedging has actually been effective in the period. Derivative financial instruments that are considered hedges from a profit and loss viewpoint, but which do not satisfy the requirements to be considered effective instruments for hedging are recognised under item 20 “Financial assets held for trading” or under item 40 “Financial liabilities held for trading” and the profits and losses under the corresponding item 80 “Net profit (loss) from trading”. See paragraph “Financial assets and liabilities held for trading” for a description of the methods used to calculate the fair value of derivatives.

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4.3 Measurement criteria

4.3.1 Fair value hedging

Fair value hedging is treated as follows:

the profit or loss resulting from measuring a hedging instrument at fair value is recognised in the Income Statement under item 90 “Net profit (loss) from hedging”;
the profit or loss on the item hedged attributable to the hedged risk adjusts the value in the financial statements of the hedged item and is recognised immediately, regardless of the type of asset or liability hedged, in the Income Statement under the aforementioned item.

Hedge accounting is discontinued prospectively in the following cases:

• the hedging instrument expires or is sold, terminated, or exercised; • the hedge no longer meets the hedge accounting criteria described above; • the entity revokes the designation.

In case 2, if the assets or liabilities hedged are valued at amortised cost, the higher or lower value resulting from valuing them at fair value as a result of the hedge becoming ineffective is recognised in the Income Statement, according to the effective interest rate method prevailing at the time of revocation of hedge.

The methods used for measurement of the fair value of the risk hedged in the assets or liabilities hedged are described in the notes that comment on available-for-sale financial assets and loans and receivables.

4.3.2 Hedging portfolios of assets and liabilities

Hedging of portfolios of assets and liabilities (“macro-hedging”) and appropriate accounting treatment is possible after first:

identifying the portfolio to be hedged and dividing it by expiry dates;
designating the risk to be hedged;
identifying the interest rate risk to be hedged;
designating the hedging instruments;
determining the effectiveness.

The portfolio for which the interest rate risk is hedged may contain both assets and liabilities. This portfolio is divided on the basis of expected maturity or repricing dates of interest rates after first analysing the structure of the cash flows. Changes in the fair value of the hedged instrument are recognised in the Income Statement under item 90 “Net profits (loss) from hedging” and in the Balance Sheet under item 90 “Fair value adjustments to hedged financial assets” or under item 70 “Fair value adjustments to hedged financial liabilities”. Changes occurring in the fair value of the hedging instruments are recognised in the Income Statement under item 90 “Net profit (loss) from hedging” and on the assets side of the Balance Sheet under item 80 “Hedging derivatives” or on the liabilities side under 60 “Hedging derivatives”.

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5. Property, plant and equipment and investment property

5.1 Definition of assets used in operations

“Assets used in operations” are defined as items of property, plant and equipment possessed to be used for the purpose of carrying on a company’s business and where the use of which is planned to last longer than one year.

5.2 Recognition criteria

Property, plant and equipment used in operations are initially recognised at cost (item 110 “Property, plant and equipment and investment property”), inclusive of all costs directly connected with bringing it to working condition for the use of the assets and purchase taxes and duties that are not recoverable. This value is subsequently increased to include expenses incurred from which it is expected future benefits will be obtained. The costs of ordinary maintenance are recognised in the Income Statement at the time at which they are incurred while extraordinary maintenance costs (improvements) from which future benefits are expected are capitalised by increasing the value of the relative asset.

Improvements and expenses incurred to increase the value of leased assets from which future benefits are expected are recognised:

under the most appropriate category of item 110 “Property, plant and equipment and investment property” if they are independent and can be separately identified, whether they are third party assets held on the basis of an ordinary leasing contract or whether they are held under a finance leasing contract;
under item 110 “Property, plant and equipment and investment property”, if they are not independent and cannot be separately identified, as an increase to the type of assets concerned if held by means of a finance leasing contract, or under item 150 “Other assets”, if they are held under an ordinary leasing contract.

The cost of an item of property, plant and equipment and investment property is recognised as an asset if, and only if:

it is probable that the future economic benefits associated with the asset will flow to the enterprise;
the cost of the asset can be reliably determined.

5.3 Measurement criteria

Subsequent to initial recognition, property, plant and equipment and investment property for use in operations are recognised at cost, as defined above net of accumulated depreciation and any permanent cumulative impairment. The depreciable amount, equal to cost less the residual value (i.e. the amount that would be normally obtained from disposal, less disposal costs, if the asset was normally in the conditions, including age, expected at the end of its useful life), should be allocated on a systematic basis over the asset useful life by adopting the straight line method of depreciation. The useful life of an asset, which is reviewed periodically to detect any significant change in estimates compared to previous figures, is defined as:

the period of time over which it is expected that the asset can be used by the Bank or,

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the quantity of products or similar units that the Bank expects to obtain from the use of the asset.

Since property, plant and equipment and investment property may consist of items with different useful lives, land, whether by itself or as part of the value of a building, is not depreciated since it constitutes a fixed asset with an indefinite useful life. The value attributable to the land is deducted from the total value of a property for all buildings in proportion to the percentage of ownership. Buildings, on the other hand, are depreciated according to the criteria described above.

Works of art are not depreciated because they generally increase in value over time. Depreciation of an asset starts when it is available for use and ceases when the asset is written off the financial statements, which is the most recent of when it is classified as for sale and the date of elimination from the financial statements. As a consequence, depreciation does not stop when an asset is no longer in use or is destined for disposal unless the asset has already been fully depreciated.

Improvements and expenses which increase the value are depreciated as follows:

if they are independent and can be separately identified, according to the presumed useful life as described above;
if they are not independent and cannot be separately identified, if they are held under an ordinary leasing contract, over the shorter of the period in which the improvements and expenses can be used and that of the remaining life of the contract or, if the assets are held under a finance leasing contract, over the expected useful life of the assets concerned.

The depreciation of leasehold improvements and expenses to increase the value of leased assets recognised under item 150 “Other Assets” is recognised under item 190 “Other operating costs/income)”.

At the end of each annual or interim reporting period the existence of indications that demonstrate the impairment of the value of an asset are assessed. The loss is determined by comparing the carrying amount of the item of property, plant and equipment and investment property with the lower recoverable amount. The latter is the greater of the fair value, net of any sales costs, and the relative use value intended as the present value of future cash flows generated by the asset. The loss is immediately recognised in the Income Statement under item 170 “Net impairment losses on property, plant and equipment and investment property”; the item also includes any future reversal of impairment if the causes of the original impairment losses no longer exist.

5.3.1 Definition and measurement of fair value

5.3.1.1 Properties

Fair value is measured on the basis of market value intended as meaning the best price at which the sale of a property might reasonably be expected to have been completed unconditionally for cash consideration on the date of measurement, assuming:

that the seller and the purchaser are independent counterparties;
that the intention of the seller to sell the assets is real;
that there is a reasonable period (having regard to the nature of the property and the state of the market) for the proper marketing of the property and for the agreement of price and terms necessary to complete the sale;

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that the market trend, level of values and other circumstances were, at the date of signing the preliminary contract of purchase and sale, identical to those existing at the date of measurement;
that no account is taken of bids by purchasers for whom the property has characteristics which make it “outside the market range”.

The procedures adopted for determining the market value are based on the following methods:

the direct comparative or market method, based on a comparison between the asset in question and other similar asset subject to sale or currently on sale on the same market or competing markets;

the income method based on the present value of potential market incomes for a similar property, obtained by capitalising the income at a market rate.

The above methods have been performed individually and the values obtained appropriately averaged.

5.3.1.2 Determination of the value of land

The method used for identifying the percentage of the market value attributable to land is based on an analysis of the location of the property, taking account of the type of construction, the state of conservation and the cost of rebuilding the entire building.

5.4 Property, plant and equipment acquired through finance leasing

Finance leasing is a contract that substantially transfers all the risks and rewards incident to ownership of an asset. Legal title may or may not be transferred at the end of the lease term.

The beginning of the lease term is the date on which the lessee is authorised to exercise his right to use the asset leased and therefore corresponds to the date on which the lease is initially recognised. When the contract commences, the lessee recognises the finance leases as assets and liabilities in his Balance Sheets at the fair value of the asset leased or, if lower, at the present value of the minimum payments due. To determine the present value of the minimum payments due, the discount rate used is the contractual interest rate implicit in the lease, if practicable, or else the lessee’s incremental borrowing rate is used. Any initial direct costs incurred by the lessee are added to the amount recognised for the asset.

The minimum payments due are apportioned between the finance charges and the reduction of the residual liability. The former are allocated over the lease term so as to produce a constant rate of interest on the residual liability.

The finance lease involves recognition of the depreciation charge for the asset leased and of the finance charges for each financial year. The depreciation policy used for assets acquired under finance leases is consistent with that adopted for owned assets. See the relative paragraph for a more detailed description.

5.5 Derecognition criteria

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Property, plant and equipment and investment property are derecognised in the Balance Sheet when they are disposed of or when they are permanently retired from use and no future economic benefits are expected from their disposal. Any gains or losses resulting from the retirement or disposal of the asset, calculated as the difference between the net consideration on the sale and the carrying amount of the asset, are recognised in the Income Statement under item 240 “Profit (loss) on the disposal of investments”.

6. Intangible assets

6.1 Definition

An intangible asset is defined as an identifiable non monetary asset without physical substance that is used in carrying on a company’s business.

An asset is identifiable when:

it is separable, which is to say capable of being separated and sold, transferred, licensed, rented, or exchanged;
it arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from other rights and obligations.

An asset possesses the characteristic of being controlled by the enterprise as a result of past events and the assumption that its use will cause economic benefits to flow to the enterprise. The Bank has control over an asset if it has the power to obtain future economic benefits arising from the resource in question and may also limit access by others to those benefits. Future economic benefits arising from an intangible asset might include receipts from the sale of products or services, savings on costs or other benefits resulting from the use of the asset by the Bank.

An intangible asset is recognised if, and only if: a) it is probable that the expected future economic benefits attributable to the asset will flow to the entity; b) the cost of the asset can be measured reliably.

The probability of future economic benefits occurring is assessed on the basis of reasonable and supportable assumptions that represent the best estimate of the economic conditions that will exist over the useful life of the asset.

The degree of probability attaching to the flow of economic benefits attributable to the use of the asset is valued on the basis of the sources of information available at the time of initial recognition, giving greater weight to external sources of information.

The Bank classifies mainly the following as intangible assets: goodwill and third party software.

6.1.1 Intangible assets with a definite useful life

A finite useful life is defined for an asset where it is possible to estimate a limit to the period over which the related economic benefits are expected to be produced.

6.1.2 Intangible assets with an indefinite useful life

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An indefinite useful life is defined for an asset where it is not possible to estimate a predictable limit to the period over which the asset is expected to generate economic benefits for a company. The attribution of an indefinite useful life to an asset does not arise from having already programmed future expenses which restore the standard level of performance of the asset over time and prolong its useful life.

6.2 Recognition criteria

Assets recognised under the Balance Sheet item 120 “Intangible assets” are stated at cost and any expenses subsequent to the initial recognition are only capitalised if they are able to generate future economic benefits and only if those expenses can be reliably determined and attributed to the assets.

The cost of an intangible asset includes:

the purchase price including any non recoverable taxes and duties on purchases after commercial discounts and bonuses have been deducted;
any direct costs incurred in bringing the asset into use.

6.3 Measurement criteria

Subsequent to initial recognition intangible assets with a finite useful life are recognised at cost net of total amortisation and any losses in value that may have occurred. Amortisation is calculated on a systematic basis over the estimated useful life of the asset (see definition included in the Section “Property, plant and equipment and investment property”) using the straight line method. Amortisation begins when the asset is available for use and ceases on the date on which the asset is written off the financial statements.

Intangible assets with an indefinite useful life (see “goodwill” as defined in the paragraph below if positive) are recognised at cost net of any value impairment resulting from periodical reviews when tests are performed to verify the appropriateness of the carrying amount of the assets (see paragraph below). As a consequence, amortisation of these assets is not calculated.

No intangible assets arising from research (or from the research phase of an internal project) are recognised. Research expenses (or the research phase of an internal project) are recognised as costs at the time at which they are incurred.

An intangible asset arising from development (or from the development phase of a internal project) is recognised if, and only if the following can be demonstrated:

(a) the technical feasibility of completing the intangible asset so that it becomes available for sale or use; (b) the intention of the company to complete the intangible asset to use it or sell it; (c) the capacity of the company to use or sell the intangible asset.

At the end of each annual or interim reporting period the existence of potential impairment of the value of intangible assets is assessed. The impairment is given by the difference between the carrying amount of the assets and the recoverable amount and is recognised, as are any reversals of impairment, under the item 180 “Net impairment losses on intangible assets” with the exception of impairment losses on goodwill which are recognised under item 230 “Net impairment losses on goodwill”.

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6.4 Goodwill

Goodwill is defined as the difference between the purchase cost and the fair value of assets and liabilities acquired as part of a business combination which consists of the union of separate enterprises or businesses in a single entity required to prepare financial statements. The result of almost all business combinations consists in the fact that a sole entity, an acquirer, obtains control over one or more separate businesses of the acquiree. When an entity acquires a group of activities or net assets that do not constitute a business it allocates the total cost to the individual assets and liabilities identified on the basis of their relative fair value at the date of acquisition.

A business combination may give rise to a holding relationship between a parent company and a subsidiary in which the acquirer is the parent company and the acquiree is the subsidiary.

All business combinations should be accounted for using the purchase method of accounting. The purchase method involves the following steps:

(a) identification of the acquirer (the acquirer is the combining entity that obtains control of the other combining entities or businesses); (b) determination of the cost of the business combination; (c) on the acquisition date the cost of the business combination is allocated to the assets and liabilities and assumed contingent liabilities acquired.

The acquirer calculates the cost of a business combination as the sum total of:

(a) the fair values, at the date of exchange, of assets sold, liabilities incurred or assumed, and equity instruments issued by the acquirer, in exchange for control of the acquiree; (b) any costs directly attributable to the business combination.

6.4.1 Allocation of the cost of a business combination to the assets and liabilities and assumed contingent liabilities

The acquirer:

a) recognises the goodwill acquired in a business combination as assets; b) measures that goodwill at its cost to the extent that it is the excess of the cost of the business combination over the acquirer's share of interest in the net fair values of the acquiree's identifiable assets, liabilities and contingent liabilities.

Goodwill acquired in a business combination represents a payment made by the acquirer in the expectation of receiving economic future benefits from the asset which cannot be identified individually and recognised separately. After initial recognition, the acquirer values the goodwill acquired in a business combination at the relative cost net of cumulative impairment. The goodwill acquired in a business combination must not be amortised. However the acquirer tests the asset for impairment annually or more frequently if specific events or changed circumstances indicate that it may have suffered a reduction in value, according to the relative accounting standard.

6.5 Derecognition criteria

Intangible assets are derecognised from the Balance Sheet following disposal or when no economic future benefit is expected from its use or disposal.

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7. Payables , securities issued (and subordinated liabilities)

The various forms of interbank and customer funding are recognised under the Balance Sheet items 10 “Due to banks”, 20 “Due to customers” and 30 “Debt securities in issue”. These items also include liabilities recognised by a lessee under finance leases.

7.1 Recognition criteria

The liabilities in question are recognised in the Balance Sheet at the time when the funding is received or when the debt securities are issued. The amount recognised is the fair value inclusive of any additional costs/income that are directly attributable to the transaction and determinable from the outset regardless of when they are paid. The value of the initial recognition does not include all those costs that are reimbursed by the creditor counterparty or that are attributable to internal costs of an administrative character.

7.2 Measurement criteria

After initial recognition financial liabilities are valued at amortised cost using the effective interest method as defined in the previous paragraphs.

7.3 Derecognition criteria

Financial liabilities are derecognised in the Balance Sheet when they expire or are settled. The repurchase of treasury shares in issue results in derecognition of the securities with the consequent redefinition of the liability for debt securities issued. Any difference between the repurchase value of the own securities and the corresponding carrying amount of the liabilities is recognised in the Income Statement under item 100 “Profit (loss) on the sale or repurchase of d) financial liabilities”. Any subsequent re-issue of the securities previously subject to derecognition in the financial statements constitutes a new issue for accounting purposes with the consequent recognition at the new issue price without any effect in the Income Statement.

8. Tax assets and liabilities

Tax assets and liabilities are stated in the Balance Sheet under the items 130 “Tax assets” and 80 “Tax liabilities”.

8.1 Current tax assets and liabilities

Current tax for the current and prior periods is recognised as a liability to the extent that it has not yet been settled; any excess compared to the amount due is recognised as an asset. Current tax liabilities (assets) for the current and prior years, are measured at the amount expected to be paid to (recovered from) tax authorities, using the tax rates and tax laws in force. The amount of tax assets/liabilities also includes the risk attaching to any existing tax litigation. 140

8.2 Deferred tax assets and liabilities

Deferred tax liabilities are recognised for all taxable temporary differences unless the deferred tax liability arises from:

goodwill for which amortisation is not deductible for tax purposes or
the initial recognition of an asset or a liability in a transaction which: - is not a business combination and - at the time of the transaction, affects neither the accounting nor the taxable profit.

Deferred tax assets are not calculated for higher values of assets that are taxable at a later date relating to equity investments and to reserves that are not taxable as there are no reasonable grounds to assume they will be taxed in future.

Deferred tax liabilities are recognised under the Balance Sheet item 80 “Tax liabilities b) deferred”.

A deferred tax asset is recognised for all deductible temporary differences if it is probable that taxable income will be generated against which it will be possible to use the deductible temporary difference, unless the deferred tax asset arises from:

the initial recognition of an asset or liability in a transaction which: - is not a business combination and - affects neither the accounting profit nor the taxable profit.

Deferred tax assets are recognised under the Balance Sheet item 130 “Tax assets b) deferred”.

Deferred tax assets and liabilities are subject to constant monitoring and are valued using the tax rates that it is expected will apply in the period in which the tax asset will be realised of the tax liability will be settled on the basis of the tax regulations established by laws currently in force. Deferred tax assets and liabilities are not discounted to present values nor usually offset one against the other.

9. Non current assets held for disposal and disposal groups – Liabilities associated to assets held for disposal

Non current assets and liabilities and groups of non current assets and liabilities whose accounting value will be presumably recovered through sale or ongoing use are classified respectively under equity item 140 “Non current assets held for disposal and disposal groups” and 90 “Liabilities associated with assets held for disposal”. To be classified under the said accounting items, assets or liabilities (or group held for disposal) have to be immediately available for sale and there must be evidence of active and concrete plans enabling to reach disposal of the asset or liability in the short term. Those assets or liabilities are valued based on the lower between accounting value and fair value after sale expenses. Profits and losses attributable to groups of assets and liabilities held for disposal are shown in the Income Statement under item 280 “Profit (Loss) from disposal groups after tax”. Profits and losses attributable to single assets held for disposal are recognised under the most suitable Income Statement item.

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10. Provisions for liabilities and charges

10.1 Definition

A provision is defined as a liability of uncertain timing or amount.

A contingent liability is defined as:

a possible obligation, the result of past events, the existence of which will only be confirmed by the occurrence or not of future events that are not totally under the control of the Bank;
a present obligation that is the result of past events but which cannot be measured because: - it is improbable that financial resources will be needed to settle the obligations; - the amount of the obligation cannot be measured with sufficient reliability.

Contingent liabilities are not recognised in the financial statements, but are reported only, unless they are considered a remote possibility.

10.2 Recognition and measurement criteria

A provision is recognised if and only if:

there is a present obligation (legal or constructive) that is the result of a past event and
it is probable that the use of resources suitable for producing economic benefits will be required to fulfil the obligation and
a reliable estimate can be made of the amount arising from fulfilment of the obligation.

The amount recognised as a provision represents the best estimate of the expenditure required to settle the present obligation at the Balance Sheet date and reflects the risks and uncertainties that inevitably characterise a number of facts and circumstances. The amount of a provision is measured by the present value of the expenditure that it is assumed will be necessary to settle the obligation where the effect of the present value is a substantial aspect. Future events that might affect the amount required to settle the obligation are only taken into consideration if there is sufficient objective evidence that they will occur.

10.3 Derecognition criteria

The provision is derecognised when the use of resources producing economical benefits to fulfil the obligation becomes improbable.

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11. Foreign currency transactions

11.1 Definition

A foreign currency is currency other than the functional currency of the Bank, which is the currency of the primary economic environment in which the Bank entity operates.

11.2 Recognition criteria

A foreign currency transaction is recorded at the time of initial recognition in the functional currency applying the spot exchange rate between the functional currency and the foreign currency ruling on the date of the transaction.

11.3 Measurement criteria

At each financial statement date: a) foreign currency monetary 17 amounts are translated using the closing rate; b) non-monetary 18 items carried at historical cost in foreign currency are translated using the exchange rate at the date of the transaction; c) non-monetary items carried at fair value in a foreign currency are translated using the exchange rates that existed on the dates when the fair values were determined.

Exchange rate differences arising from the settlement of monetary items or from the translation of monetary items at rates different from those at which they were translated when initially recognised during the year or in previous financial statements are recognised in the Income Statement for the year in which they originated. When a profit or loss on a non monetary item is recognised directly in equity, each change in that profit or loss is also recognised directly in equity. However, when a profit or loss on a non monetary item is recognised in the Income Statement each change in that profit or loss is recognised in the Income Statement.

12. Other information

Provisions for guarantees granted and commitments

Provisions on a case-by-case and collective basis concerning estimate of possible expenses for the credit risk deriving from guarantees granted and commitments are calculated following the same criteria mentioned for credits. Such provisions are recorded under item 100 “Other liabilities” balancing Income Statement item 130 d) “Net impairment losses on: other financial transactions”.

17 The term “monetary” defines all components represented by given amounts in a currency or assets and liabilities to be collected or paid for a given amount in a currency. Their characteristic is therefore the right to receive or the obligation to pay a fixed or determinable amount of currency units. 18 See point 17 for comparison. 143

Employee benefits

Employee benefits are defined as all forms of remuneration given by an enterprise in exchange for services rendered by employees. Employee benefits can be classified as follows:

short-term employee benefits (which differ from post-employment benefits and benefits paid in the form of equity instruments) due entirely within twelve months after end of the fiscal year in which the service is rendered by employees;
post-employment benefits due after the contract of employment has terminated;
post-employment benefit plans subsequent to the termination of the employment contract and that is agreements whereby the enterprise provides benefits subsequent to the termination of the employment contract;
long term benefits, other than the previous ones, due entirely within the twelve months subsequent to the end of the financial year in which employees rendered the relative service.

Post-employment benefits

Recognition criteria

Post-employment benefits as recognised in the annual financial statements are considered a defined benefit plan and as such require the amount of the obligation to be determined on an actuarial basis and to be discounted to present values because the debt may be extinguished a long time after the employees have rendered the relative service. The amount is accounted for as a liability amounting to:

(a) the present value of the defined benefit obligation at the Balance Sheet date; (b) plus any actuarial gains (less any actuarial losses) accounted for in a corresponding equity reserve; (c) less any pension costs relating to past service rendered not yet recognised; (d) less the fair value at the balance sheet date of any assets at the service of the plan.

Measurement criteria

To account for actuarial gains/losses, the Bank has decided to use the method of direct recognition in equity among fair value reserves of these components. Actuarial gains/losses comprise adjustments arising from the reformulation of previous actuarial assumptions as a result of actual experience or from changes in the actuarial assumptions themselves. The Projected Unit Credit Method is used to calculate the present value. This considers each single period of service as giving rise to an additional unit of severance payment and therefore measures each unit separately to arrive at the final obligation. This additional unit is obtained by dividing the total expected service by the number of years that have passed since service commenced until the expected payment date. Application of the method involves making projections of future payments based on historical analysis of statistics and of the demographic curve and discounting these flows on the basis of market interest rates. The rate used for discounting to present value is calculated as the average of the swap, bid and ask rates at the measurement date appropriately interpolated for intermediate maturity dates.

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Revenue

Definition

Revenue is the gross inflow of economic benefits resulting from business arising from the ordinary operating activities of the Bank when these inflows create an increase in equity other than an increase resulting from payments made by Shareholders.

Recognition criteria

Revenue is measured at fair value of the consideration received or due and is recognised in the financial statements when it can be reliably estimated.

The result of the rendering of services can be reliably estimated when the following conditions are met:

the amount of revenue can be measured reliably;
it is probable that the economic benefits arising from the transaction will flow to the Bank;
the stage of completion of the transaction at the Balance Sheet date can be measured reliably;
the costs incurred and the costs to be incurred, to complete the transaction can be measured reliably.

Revenue recognised in return for services rendered is recognised by reference to the stage of completion of the transaction. Revenue is only recognised when it is probable that the economic benefits arising from the transaction will be enjoyed by the Bank. Nevertheless when the recoverability of an amount already included within revenues is uncertain, the amount not recoverable or the amount for which recovery is no longer probable is recognised as a cost instead of adjusting the revenue originally recognised.

Revenue arising from the use by third parties of the company’s assets which generate interest or dividends are recognised when:

it is probable that the economic benefits arising from the transaction will be received by the enterprise;
the amount of the revenue can be reliably measured.

Interest is recognised on a pro-rata basis that takes into account the effective yield of the asset. In detail:

interest income includes the amortisation of any discounts, premiums or other differences between the initial carrying amount for a security and its value at maturity.
interest on arrears that is considered recoverable is recognised under the item 10 “Interest income and similar”.

Dividends are recognised when Shareholders acquire the right to receive payment.

Expenses

Expenses are recognised in the financial statements at the time at which they are incurred and in compliance with the criteria of correlation between expenses and revenues directly and jointly deriving from the same transactions or events. Expenses 145

which cannot be related to revenues are immediately recognised in the Income Statement. Expenses directly attributable to financial instruments valued at amortised cost and determinable from the outset, regardless of the time at which they are settled, flow to the Income Statement by applying the effective interest rate, a definition of which is given in the paragraph “Loans and receivables”. Permanent impairment losses are recognised in the Income Statement when detected.

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Part B – Information on the Balance Sheet

ASSETS

Section 1 Cash and cash equivalents – item 10 –

1.1 Cash and cash equivalents: composition

31/12/2007 31/12/2006

a) Cash 179.105 159.122 b) Free deposits with central banks - - Total 179.105 159.122

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Section 2 Financial assets held for trading – item 20 –

2.1 Financial assets held for trading: composition by type

31/12/2007 31/12/2006 Items/Values Listed Unlisted Listed Unlisted A. Assets 1. Debt securities - - - - 1.1 Structured Securities - - - - 1.2 Other debt securities - - - - 2. Equity instruments - - - - 3. Units in O.I.C.R - - - - 4. Financing - - - - 4.1 Repurchase agreements - - - - 4.2 Other - - - - 5. Impaired assets - - - - 6. Assets transferred not derecognised - - - - Total A - - - B. Derivative instruments 1. Financial derivatives - 62.271 - 114.848 1.1 Held for trading - 53.727 - 61.162 1.2 Linked to fair value option - - - - 1.3 Other - 8.544 - 53.686 2. Credit derivatives - - - - 2.1 Held for trading - - - - 2.2 Linked to fair value option - - - - 2.3 Other - - - - Total B - 62.271 - 114.848 Total (A+B) - 62.271 - 114.848

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

Items/Values 31/12/2007 31/12/2006

A. ASSETS 1.Debt securities - - a) Governments and central banks - - b) Other public authorities - - c) Banks - - d) Other issuers - - 2. Equity instruments - - a) Banks - - b) Other issuers: - - - Insurance companies - - - Financial companies - - - Non financial companies - - - Other - - 3. Units in O.I.C.R. (collective investment instruments - - 4. Financing - - a) Governments and central banks - - b) Other public authorities - - c) Banks - - d) Other entities - - 5. Impaired assets - - a) Governments and central banks - - b) Other public authorities - - c) Banks - - d) Other entities - - 6. Assets transferred not derecognised - - a) Governments and central banks - - b) Other public authorities - - c) Banks - - d) Other issuers - - Total (A) - - B. DERIVATIVE INSTRUMENTS a) Banks 39.337 96.627 b) Customers 22.934 18.221 Total (B) 62.271 114.848 Total (A+B) 62.271 114.848

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2.3 Financial assets held for trading: derivative instruments

Interest Currencies Equity Type of derivative/Underlying assets Lending Other 31/12/2007 31/12/2006 rates and gold instruments

A) Listed derivatives 1. Financial derivatives: • With exchange of principal - Options purchased ------Other derivatives ------• Without exchange of principal - Options purchased ------Other derivatives ------2. Credit derivatives: • With exchange of principal ------• Without exchange of principal ------Total A ------B) Unlisted derivatives 1. Financial derivatives: • With exchange of principal - Options purchased - 5.848 - - - 5.848 4.085 - Other derivatives - 12.186 - - - 12.186 19.502 • Without exchange of principal - Options purchased 1.122 - 6.425 - 2.119 9.666 55.183 - Other derivatives 34.426 145 - - - 34.571 36.078 2. Credit derivatives: • With exchange of principal ------• Without exchange of principal ------Total B 35.548 18.179 6.425 - 2.119 62.271 114.848 Total A+B 35.548 18.179 6.425 - 2.119 62.271 114.848

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2.4 Financial assets in cash held for trading other than those transferred but not derecognised and than those impaired: annual changes

Equity Units in Debt securities Financing Total instruments O.I.C.R.

A. Initial holdings - - - - - B. Increases 1.502.621 25.433 16 - 1.528.070 B.1 Purchases 1.502.004 25.410 16 - 1.527.430 B.2 Positive changes in fair value - - - - - B.3 Other changes 617 23 - - 640 C. Decreases (1.502.621) (25.433) (16) - (1.528.070) C.1 Sales (1.502.483) (25.417) (16) - (1.527.916) C.2 Reimbursements - - - - - C.3 Negative changes in fair value - - - - - C.4 Other changes (138) (16) - - (154) D. Final holdings - - - - -

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Section 3 Financial assets at fair value – item 30 –

No items of this type exist for the Bank.

Section 4 Available-for-sale financial assets – item 40 –

4.1 Available-for-sale financial assets: composition by type

31/12/2007 31/12/2006 Items/Value Listed Unlisted Listed Unlisted

1. Debt securities - - - - 1.1 Structured securities - - - - 1.2 Other debt securities - - - - 2. Equity instruments - - 18.110 - 2.1 Fair value - - 18.110 - 2.2 Cost value - - - - 3. Units in O.I.C.R. (collective investment instruments) - - - - 4. Financing - - - - 5. Impaired assets - - - - 6. Assets transferred not derecognised - - - -

Total - - 18.110 -

The amount of “Equity instruments” as at 31 st December 2006 related to Parmalat shares allotted to the Bank in 2005 in place of loans owed by that Group. Those equity instruments have been sold during financial year 2007.

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4.2 Available-for-sale financial assets: composition by debtors/issuers

Items/Values 31/12/2007 31/12/2006

1.Debt securities - - a) Governments and central banks - - b) Other public authorities - - c) Banks - - d) Other issuers - - 2. Equity instruments - 18.110 a) Banks - - b) Other issuers: - 18.110 - Insurance companies - - - Financial companies - - - Non financial companies - 18.110 - Other - - 3. Units in O.I.C.R. (collective investment instruments - - 4. Financing - - a) Governments and central banks - - b) Other public authorities - - c) Banks - - d) Other entities - - 5. Impaired assets - - a) Governments and central banks - - b) Other public authorities - - c) Banks - - d) Other entities - - 6. Assets transferred not derecognised - - a) Governments and central banks - - b) Other public authorities - - c) Banks - - d) Other issuers - - Total - 18.110

4.3 Available-for-sale financial assets: hedged assets

No items of this type exist for the Bank.

4.4 Available-for-sale financial assets: assets subject to specific hedging

No items of this type exist for the Bank.

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4.5 Available-for-sale financial assets other than those transferred but not derecognised and than those impaired: annual changes

Debt Equity Units in Financing Total securities instruments O.I.C.R.

A. In itial holdings - 18.110 - - 18.110 B. Increases - 334 - - 334 B.1 Purchases - 103 - - 103 B.2 Positive changes in fair value - - - - - B.3 Value recoveries ------Recorded in Income Statement - X - - - - Recorded in Equity - - - - - B.4 Transfers from other portfolios - - - - - B.5 Other changes - 231 - - 231 C. Decreases - (18.444) - - (18.444) C.1 Sales - (17.856) - - (1 7.856) C.2 Reimbursements - - - - - C.3 Negative changes in fair value - - - - - C.4 Impairment losses ------Recorded in Income Statement ------Recorded in Equity - - - - - C.5 Transfers to other portfolios - - - - - C.6 Other changes - (588) - - (588) D. Final holdings - - - - -

Section 5 Held-to-maturity financial assets – item 50 –

No items of this type exist for the Bank.

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Section 6 Loans to banks – item 60 –

6.1 Loans to banks: composition by type

Type of transaction/Values 31/12/2007 31/12/2006

A. Loans to central banks 1. Time deposits - - 2. Compulsory reserve - - 3. Repurchase agreements - - 4. Other - 4.312 B. Loans to banks 1. Current accounts and free deposits 379.820 415.152 2. Time deposits 1.113.738 1.413.978 3. Other financing 1.696.142 1.066.944 3.1 Repurchase agreements 1.670.382 1.055.694 3.2 Financial leasing - - 3.3 Other 25.760 11.250 4. Debt securities - - 4.1 Structured - - 5.1 Other - - 5. Impaired assets - - 6. Assets transferred not derecognised - - Total (carrying value) 3.189.700 2.900.386 Total (fair value) 3.189.700 2.899.685

The Bank has no loans to central banks because authorisation has been issued by Bank of Italy to hold compulsory reserve indirectly through the Parent Bank UBI Banca S.c.p.A.; the amount referring to the branch in Munich – Germany (amounting to 4,3 million euros in 2006) for the year 2007 is shown under item 140 of the Balance Sheet assets “Non current assets held for disposal and disposal groups”.

6.2 Loans to banks: assets subject to specific hedging

No items of this type exist for the Bank.

6.3 Finance leases

The Bank does not carry out this type of activity.

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Section 7 Loans to customers – item 70 –

7.1 Loans to customers: composition by type

Type of transaction/Values 31/12/2007 31/12/2006

1. Current accounts 6.485.435 6.079.407 2. Repurchase agreements - - 3. Mortgage loans 10.389.110 9.587.420 4. Credit cards, personal loans and wage backed loans 177.835 312.766 5. Finance leasing - - 6. Factoring - - 7. Other transactions 4.062.121 4.574.033 8. Debt securities - - 8.1 Structured - - 8.2 Other - - 9. Impaired assets 276.047 257.535 10. Assets transferred not derecognised - -

Total (carrying value) 21.390.548 20.811.161

Total (fair value) 22.015.831 21.354.983

Total fair value of loans during financial year 2006 as shown in the table differs from the value published in the 2006 financial statements because of a new uniform treatment of this item by the Group.

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7.2 Loans to customers: composition by debtors/issuers

Type of transaction/Values 31/12/2007 31/12/2006

1.Debt securities - - a) Governments - - b) Other public authorities - - c) Other issuers - - - non financial companies - - - financial companies - - - insurance companies - - - other - - 2. Financing to : 21.114.501 20.553.625 a) Governments 4.230 26.596 b) Other public authorities 27.759 34.289 c) Other entities 21.082.512 20.492.740 - non financial companies 10.691.727 9.447.544 - financial companies 3.103.950 3.936.798 - insurance companies 29.745 28.612 - other 7.257.090 7.079.786 3. Impaired assets : 276.047 257.536 a) Governments - - b) Other public authorities 4 1 c) Other entities 276.043 257.535 - non financial companies 135.723 131.263 - financial companies 7.119 3.030 - insurance companies - 1 - other 133.201 123.241 4. Assets transferred not derecognised : - - a) Governments - - b) Other public authorities - - c) Other entities - - - non financial companies - - - financial companies - - - insurance companies - - - other - - Total 21.390.548 20.811.161

7.3 Loans to customers: assets subject to specific hedging

No items of this type exist for the Bank.

7.4 Finance leases

The Bank does not carry out this type of activity.

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Section 8 Hedging derivatives – item 80 –

8.1 Hedging derivatives: composition by type of contract and underlying assets

Currencies and Equity Type of derivative/Underlying assets Interest rates Lending Other 31/12/2007 gold instruments

a) Listed derivatives

1) Financial derivatives : ------

• With exchange of principal ------

- Options purchased ------

- Other derivatives ------

• Without exchange of principal ------

- Options purchased ------

- Other derivatives ------

2) Credit derivatives : ------

• With exchange of principal ------

• Without exchange of principal ------

Total A ------B) Unlisted derivatives

1) Financial derivatives : 1.392 - - - - 1.392

• With exchange of principal ------

- Options purchased ------

- Other derivatives ------

• Without exchange of principal 1.392 - - - - 1.392

- Options purchased ------

- Other derivatives 1.392 - - - - 1.392

2) Credit derivatives : ------

• With exchange of principal ------

• Without exchange of principal ------

Total B 1.392 - - - - 1.392 Total (A+B) ( 31/12/2007) 1.392 - - - - 1.392

Total (A+B) ( 31/12/2006) 3.414 - - - - 3.414

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8.2 Hedging derivatives: composition by portfolios hedged and type of hedging

Fair Value Cash flows

Specific Transactions/Type of hedging Macro-hedge Specific Macro-hedge Interest Exchange More than Credit risk Price risk rate risk rate risk one risk

1. Available-for-sale financial assets - - - - - X - X 2. Loans - - - X - X - X 3. Held-to-maturity financial assets X - - X - X - X 4. Portfolio X X X X X 1.059 X - Total assets - - - - - 1.059 - - 1. Financial liabilities 333 - - X - X - X 2. Portfolio X X X X X - X - Total liabilities 333 - - X - - - -

The amounts reported in the table refer for 1.059 thousand euros to derivatives for macro-hedging of loans granted by the Bank and for 333 thousand euros derivatives for specific hedging of bonds issued.

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Section 9 Fair value adjustments to hedged financial assets – item 90 –

9.1 Fair value adjustments to hedged financial assets: composition by portfolios hedged

Fair value adjustments to hedged financial assets/Values 31/12/2007 31/12/2006

1. Positive adjustments 1.1 of specific portfolios : 1.460 3.203 a) loans and receivables 1.460 3.203 b) available-for-sale assets -- 1.2 General -- 2. Negative adjustments 2.1 of specific portfolios : (1.076) - a) loans and receivables (1.076) - b) available-for-sale assets -- 2.2 General -- Total 384 3.203

These are fixed interest rate mortgage loans covered by macro-hedged transactions where the component attributable to the risk hedged is valued at fair value.

9.2 Assets subject to interest rate risk macro-hedging: composition

Hedged assets 31/12/2007 31/12/2006

1. Loans and receivables 185.904 86.124 2. Available-for-sale assets - - 3. Portfolio - - Total 185.904 86.124

Section 10 Equity investments – item 100 –

No assets of this type exist for the Bank.

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Section 11 Property, plant and equipment and investment property – item 110 –

11.1 Property, plant and equipment and investment property: composition of assets valued at cost

Assets/Values 31/12/2007 31/12/2006

A. Assets used in operations 1.1 Owned 10.694 9.531 a) Land 2.522 2.522 b) Buildings 3.698 3.945 c) Furnishings 3.170 3.024 d) Electronic equipment 1 15 e) Other 1.303 25 1.2 Acquired under finance lease 7.566 8.627 a) Land 2.607 2.607 b) Buildings 3.625 3.785 c) Furnishings -- d) Electronic equipment -- e) Other 1.334 2.235 Total A 18.260 18.158 B. Investment property 2.1 Owned - - a) Land -- b) Buildings -- 2.2 Acquired under finance lease - - a) Land -- b) Buildings -- Total B - - Total (A+B) 18.260 18.158

The amount reported for both years under item “A. Assets used in operations, 1.2 Acquired under finance lease e) Other” refers to motorcars.

11.2 Property, plant and equipment and investment property: composition of assets at fair value or deemed value

No items of property, plant and equipment and investment property at fair value or deemed value are held.

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11.3 Property, plant and equipment and investment property used in operations: annual changes

Electronic Land Buildings Furnishings Other Total equipment

A. Initial gross holdings 5. 129 13.297 3.445 45 3.414 25.330

A.1 Total net reductions in value - (5.568) (420) (30) (1.154) (7.172)

A.2 Initial net holdings 5.129 7.729 3.025 15 2.260 18.158

B. Increases - - 296 122 1.592 2.010

B.1 Purchases -- 296 122 1.592 2.010

B.1.1 Purchased -- 296 122 1.592 2.010

B.1.2 Business combination s ------

B.2 Capitalised leasehold improvement s ------

B.3 Value recoveries ------

B.4 Positive changes in fair value recorded in : ------

a) Equity ------

b) Income Statement ------

B.5 Positive exchange rate differences ------B.6 Transfers from investment properties ------

B.7 Other changes ------

C. Decreases - (406) (151) (136) (1.215) (1.908)

C.1 Sales ------

C.2 Depreciation - (406) (7) (15) (551) (979)

C.3 Net impairment losses recorded in : ------

a) Equity ------

b) Income Statement ------

C.4 Negative changes in fair value recorded in : ------

a) Equity ------

b) Income Statement ------

C.5 Negative exchange rate differences ------

C.6 Transfers to : -- (39) (24) (10) (73)

a) Investment property ------

b) Assets held for disposal -- (39) (24) (10) (73)

C.7 Other changes -- (105) (97) (654) (856)

D. Final net holdings 5.129 7.323 3.170 1 2.637 18.260

D.1 Total net adjustments - (5.975) (377) (4) (1.116) (7.472)

D.2 Final gross holdings 5.129 13.298 3.547 5 3.753 25.732

E. Measurement at cost ------

For property assets, the useful life of each asset has been assessed on the basis of the “state of use” of individual properties. Property, plant and equipment and investment property classified under other categories are valued at cost and depreciated. The increase in “Other” is substantially due to the purchase of signs and other material needed to carry out the re-branding project following change of the brand in UBI>

162

Description Depreciation Residual l ife

Land pertaining to properties NO Not depreciable Own properties SI 15,3 years Leased properties SI 24,1 years Various installations SI 6,7 years Machinery, apparatus, various equipment SI 6,7 years Furnishings used in operations SI 6,7 years Electric and electronic office machinery SI 5 years Office ordinary furnishings and machinery SI 8,3 years Motor vehicles (leased for bank and private use) SI Duration of leasing contract

The residual life of assets used in operations is determined by taking account of the property conditions and the date either of construction or of the last refurbishment.

163

11.4 Property, plant and equipment and investment property held for investment: annual changes

No assets of this type exist for the Bank.

11.5 Commitments for the purchase of property, plant and equipment and investment property

Assets/Values 31/12/2007 31 /12/2006

A. Assets used in operations 1.1 Owned - 1.084 a) Land - - b) Buildings - 1.084 c) Furnishings - - d) Electronic equipment - - e) Other - - 1.2 Acquired under finance lease - - a) Land - - b) Buildings - - c) Furnishings - - d) Electronic equipment - - e) Other - - Total A - 1.084 B. Investment property 2.1 Owned - - a) Land - - b) Buildings - - 2.2 Acquired under f inance lease - - a) Land - - b) Buildings - - Total B - - Total (A+B) - 1.084

As at 31 st December 2007 no commitments for the purchase of property, plant and equipment and investment property exist.

164

Section 12 Intangible assets – item 120 –

12.1 Intangible assets: composition by type of asset

31/12/2007 31/12/2006 Assets/Values Finite life Indefinite life Finite life Indefinite life

A.1 Goodwill X 42.145 X 42.145 A.2 Other intangible assets - - 666 - A.2.1 Assets valued at cost - - 666 - a) Internally generated intangible assets - - - - b) Other assets - - 666 - A.2.2 Assets at fair value - - - - a) Internally generated intangible assets - - - - b) Other assets - - - - Total - 42.145 666 42.145

165

12.2 Intangible assets: annual changes

Other intangible assets : Other intangible assets : Internally generated Other Goodwill 31/12/2007 Finite life Indefinite life Finite life Indefinite life

A Initial gross holdings 42.145 - - 1.433 - 43.578 A.1 Total net impairment losses - - - (767) - (767) A.2 Initial net holdings 42.145 - - 666 - 42.811 B. Increases - - - 84 - 84 B.1 Purchases - - - 84 - 84 B.2 Increase in internally generated intangible internal X - -- - - B.3 Reversals of impairment losses X - -- - - B.4 Positive changes in fair value ------in Equity X ------in Income Statement X - -- - - B.5 Positive exchange rate differences ------B.6 Other changes ------C. Decreases - - - (750) - (750) C.1 Sales ------C.2 Adjustments - - - (528) - (528) - Amortisation X - - (528) - (528) - Impairment losses ------in Equity X ------in Income Statement ------C.3 Negative changes in fair value ------in Equity X ------in Income Statement X - -- - - C.4 Transfer of non current assets held for - - - (222) - (222) disposal C.5 Negative exchange rate differences ------C.6 Other changes ------D. Final net holdings 42.145 - - - - 42.145 D.1 Total net adjustments ------E. Final gross holdings 42.145 - - - - 42.145 F. Measurement at cost ------

Intangible assets reported under item C.4 “Transfers to non current assets held for disposal” refer to the value of the software used by the branch in Munich - Germany.

12.3 Other information

Goodwill was recognised in the financial statements of Banca Popolare di Bergamo S.p.A . following a business combination during the second half of 2002 by the former Banca Popolare Di Bergamo – CV and involving 25 branches of Banca Brignone S.p.A.. This goodwill represents the payment in advance made by Banca Popolare di Bergamo S.p.A. for future economic benefits flowing from the business combination in question. As indicated in IAS 36 (Sections 8, 9, 10) an entity must test for impairment at each balance sheet date whether there are indications of impairment losses or not. With regard to goodwill the cited test must be performed at least annually regardless of whether there are any indications of impairment losses. According to IAS 36, an asset has suffered impairment losses when the value recognised in the financial statements exceeds its recoverable amount intended as the greater of the fair value, net of any sales costs, and the relative value in use. The impairment test for the goodwill recognised in the annual financial statements at 31 st December 2007 was performed by defining the value in use of the goodwill and comparing it with the relative carrying amount in the financial statements. The goodwill

166

was allocated to the entire legal unit consisting of Banca Popolare di Bergamo S.p.A. as the overall cash generating unit.

The estimate of the value in use was performed by discounting the cash flows to present values, taking account of the following factors:

Reasonable and demonstrable assumptions which represent the best estimate that can be made by management of the range of possible economic conditions that may manifest over the useful life of the asset in question. The basic assumptions on which management based its cash flow projections can be summarised as follows: cash flow connected with commercial targets agreed with the Parent Bank; projections consistent with the strategic business decisions of the Group (increase in market share of lending, growth in direct funding and growth in assets under management); market interest rate trend objectives estimated on the basis of forecasts by outside institutes.

The latest projections of the plan starting from financial year 2008 (for which the 2008 Budget as approved by the Board of Directors has been taken into account) and covering a further two-year period of explicit forecast (i.e. years 2009 and 2010 of the latest three-year plan as approved by the Board of Directors). While reviewing the Budget, management ascribed the following values for 2008 to the basic assumptions described above: growth in lending 3,8%; growth in overall funding 4%; a substantial steadiness in net interest income and an increase in net commission income of 4,7%.

A growth rate, beyond the explicit forecast period, which is stable and which will not exceed the long term growth rate of the entire banking sector, as is also indicated by the major financial market analysts. The growth rate used was 2,2%.

A discount rate for calculating present values equal to the average used by the financial market analysts which follow the UBI share and which represent the rate used to estimate business in the banking sector. The post tax rate used was 8,90%, corresponding to a gross pre-tax rate of 13,28%.

The analysis performed found no impairment losses on the goodwill recognised in the annual financial statements of Banca Popolare di Bergamo S.p.A . at 31 st December 2007. Furthermore, no reasonable possible changes in the basic assumptions on which the management based its calculation of the recoverable amount of the goodwill were found that were sufficient to alter the results of the analysis by determining a recoverable amount that is lower than the carrying amount.

167

Section 13 Tax assets and tax liabilities – assets item 130 and liabilities item 80 –

13.1 Deferred tax assets: composition

Description/Values 31/12/2007 31/12/2006

Provisions for liabilities and charges not deducted 14.410 14.582 Personnel expense not deducted 6.831 9.693 Impairment losses on loans to be deducted on a straight line basis 4.710 6.783 Agency expenses 86 57 Impairment losses on loans and guarantees granted to banks not deducted 1.583 1.294 Deferred expenses not deducted - 2.435 PPE and investment property - depreciation not deducted 31 24 Post-employment benefits 714 547 Actuarial valuation of 2007 post-emploment benefits 1.704 2.819 Actuarial valuation of 2007 health insurance policies 521 567 Other liabilities – payable for staff health insurance policies 1.877 2.135 Hedging derivatives 3.790 11.186 Other 293 240 TOTAL 36.550 52.362

The balances of deferred tax assets and liabilities have been valued based on new and lower rates of 27,50% for IRES (corporation tax) and 4,8176% for IRAP (local production tax) respectively, as implemented by the Financial Law of 2008 and applicable from 1st January 2008.

Balances as at 31 st December 2006 of deferred tax assets have been integrated by the taxes deriving from transfer from the so-called “corridor” method to recognition in Equity of actuarial gains/losses of the debt relating to post-employment benefits and health insurance policies, for a total amount of 3.386 thousand euros.

The lower balance of deferred tax assets compared to 2006 is mainly justified by transfer of related taxes: measurement of hedging derivatives on bonds; amount relating to the year of non deducted multiyear expenses; amount relating to the year of adjustments on loans with postponed deduction and, more generally, the adjustment to the lower tax rates mentioned as from 1 st January 2008.

168

13.2 Deferred tax liabilities: composition

Description/Values 31/12/2007 31/12/2006

Gains on poswt-employment benefits – discontinuance of "PUCM" (financial package for 5.940 - 2007) Elimination of fiscally-driven entries 36 244 Bad debt provision deducted off-balance-sheet 14.988 12.990 Leased assets - excess lease payments deducted off-balance-sheet 418 265 Intangible assets - goodwill amortisation deducted off-balance-sheet 4.553 4.266 Securities in issue 3.439 11.646 Financial assets held for trading 4 4 PPE and investment property - leased properties 35 42 Revaluation of AFS securities - 4.136 Other liabilities – actualization of payable for income support fund 13 11 Interest on arrears deducted off-balance-sheet 546 295 Gains from disposal of branches 35.413 - Other 80 254 TOTAL 65.465 34.153

The higher balance of deferred taxes compared to the previous year is substantially due to a provision of deferred taxes on gains deriving from transfer of branches (35.413 thousand) and to a reduction in the debt referring to post-employment benefits following termination of Projected Unit Credit Method (5.940 thousand) in compliance with Legislative Decree 252/2005.

Such increase has been partially balanced by the transfer of taxes relating to IAS measurement of securities issued by the Bank, subject to hedging (8.207 thousand) and to transfer of securities classified as AFS (4.136 thousand).

169

13.3 Changes in deferred tax assets (balancing entry in Income Statement)

31/12/2007 31/12/2006

1. Initial amount 44.508 42.197 2. Increases 14.691 26.982 2.1 Deferred tax assets of the year 14.691 26.982 a) relating to previous years 980 5.541 b) due to changes in accounting p olicies - - c) reversals of impairment losses - - d) other 13.711 21.441 2.2 New taxes or increases in tax rates - - 2.3 Other increases - - 2.4 Business combinations - - 3. Decreases (27.009) (24.671) 3.1 Deferred tax assets cancelled during the year (23.421) (24.671) a) redirected (23.421) (24.671) b) impaired because not recoverable - - c) due to changes in accounting policies - - 3.2 Reductions in tax rates (3.588) - 3.3 Other decreases - - 4. Final amount 32.190 44.508

Deferred tax assets are recognised in the financial statements on the basis of the probability of sufficient future taxable income. This recognition was made on the basis of the tax legislation in force, including the measures of Legislative Decree 38/2005.

The initial balance is the amount for residual deferred tax assets at the end of the year 2006 with the balancing entry in the Income Statement and it does not include the effects of the transition to IAS, recognised with a balancing entry in Equity in compliance with IFRS 1.

The decrease in deferred tax assets relating to reductions in tax rates reflects adaptation of the existing balances as at 31 st December 2006 and residual as at 31 st December 2007 to the new tax rates for IRES (corporation tax) and IRAP (local production tax) amounting to 27,50% and 4,8176% respectively, implemented by L. 244/07 (Financial Law for 2008) as from 1 st January 2008.

New provisions for the year have been calculated following the new tax rates mentioned.

Changs in deferred tax assets during the year with a balancing entry in Income Statement mainly concerns a different tax treatment of charges in provisions for liabilities and charges as well as payables to employees.

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13.4 Changes in deferred tax liabilities (balancing entry in Income Statement)

31/12/2007 31/12/2006

1. Initial amount 29.717 14.312 2. Increases 42.156 29.821 2.1 Deferred tax liabilities of the year 42.156 29.821 a) relating to previous years 396 7.058 b) due to changes in accounting policies - - c) other 41.760 22.763 2.2 New taxes or increases in tax rates - - 2.3 Other increases - - 2.4 Business combinations - - 3. Decreases (15.081) (14.416) 3.1 Deferred tax assets cancelled during the year (12.199) (14.416) a) redirected (12.199) (14.416) b) due to changes in accounting p olicies - - c) other - - 3.2 Reductions in tax rates (2.882) - 3.3 Other decreases - - 4. Final amount 56.792 29.717

Deferred taxes were recognised on the basis of temporary differences between the ordinary financial accounting value of an asset or liability and its value for tax purposes. This recognition was made on the basis of the tax legislation in force, including the measures of Legislative Decree 38/2005.

The decrease in deferred taxes relating to reductions in tax rates reflects adaptation of the existing balances as at 31 st December 2006 and residual as at 31 st December 2007 to the new tax rates for IRES (corporation tax) and IRAP (local production tax) amounting to 27,50% and 4,8176% respectively, implemented by L. 244/07 (Financial Law for 2008) as from 1 st January 2008.

New provisions for the year have been calculated following the new tax rates mentioned.

The considerable increase in deferred taxes with balancing entry in Income Statement is due to provisions concerning gains deriving from transfer of branches complying with antitrust regulations, for the amounts with postponed taxation (26.939 thousand euros) as well as to a reduction in the debt relating to post-employment benefit, allotted in the Balance Sheet following implementation of a reform regarding retirement benefits as set out in Legislative Decree 252/2005, for 5.940 thousand euros.

The remaining part of the increase is substantially constituted by off-balance-sheet deductions made in compliance with subparagraph 4 b) art. 109 TUIR (Consolidated Law on income taxes) applicable until 31 st December 2007.

171

13.5 Changes in deferred tax assets (balancing entry in Equity)

31/12/2007 31/12/2006

1. Initial amount 7.854 14.141 2. Increases 58 4.922 2.1 Deferred tax assets of the year 58 1.536 a) relating to previous years - 560 b) due to changes in accounting policies - - c) other 58 976 2.2 New taxes or increases in tax rates - - 2.3 Other increases - 3.386 2.4 Business combinations - - 3. Decreases (3.552) (11.209) 3.1 Deferred tax assets cancelled during the year (2.551) (11.209) a) redirected (2.551) (11.209) b) due to changes in accounting policies - - c) other - - 3.2 Reductions in tax rates (1.001) - 3.3 Other decreases - - 4. Final amount 4.360 7.854

Deferred tax assets of the year have been recognised on the basis of new and lower tax rates implemented as from 1 st January 2008, that is, 27,50% for direct taxes and 4,8176% for IRAP (local production tax). Balances of deferred taxes as at 31 st December 2006, residual as at 31 st December 2007, have been adjusted accordingly. Measurement was made based on tax laws in force, including provisions set out in Legislative Decree 38/2005.

Balances as at 31st December 2006 of deferred tax assets with balancing entry in Equity have been integrated with taxes reflecting the change in the accounting standard regarding recognition under Equity of actuarial gains/losses relating to post-employment benefits and health insurance policies, replacing the so-called “corridor” method, for a total amount of 3.386 thousand euros.

The final balance of deferred tax assets under Equity substantially contains those items that according to international accounting standards are valued with a balancing entry in Equity, whereas values arising from FTA have been almost completely used up.

Most of the amount relating to the decrease in deferred tax assets has been cancelled with a balancing entry in the Income Statement.

172

13.6 Changes in deferred tax liabilities (with balancing entry in Equity)

31/12/2007 31/12/2006

1. Initial amount 4.436 21.192 2. Increases 8.553 2.449 2.1 Deferred tax liabilities of the year 8.553 2.449 a) relating to previous years - 254 b) due to changes in accounting policies - - c) other 8.553 2.195 2.2 New taxes or increases in tax rates - - 2.3 Other increases - - 2.4 Business combinations - - 3. Decreases (4.316) (19.205) 3.1 Deferred tax liabilities cancelled during the year (4.295) (19.205) a) redirected (4.294) (19.205) b) due to changes in accounting policies - - c) other - - 3.2 Reductions in tax rates (22) - 3.3 Other decreases - - 4. Fina l amount 8.673 4.436

Deferred tax liabilities of the year have been made on the basis of new and lower tax rates implemented as from 1 st January 2008, that is, 27,50% for direct taxes and 4,8176% for IRAP (local production tax). Balances of deferred taxes as at 31 st December 2006, residual as at 31 st December 2007, have been adjusted accordingly.

The increase in deferred taxes with balancing entry in Equity is due to taxes on gains deriving from disposal of intergroup branches, whose amount has been spread over five years starting from this year (8.553 thousand euros). The decreases also include reversal of deferred taxes following disposal of securities classified as AFS, occurred during the year and amounting to 4.136 thousand euros.

13.7 Other information

There is no other information to report.

173

Section 14 Non current assets held for disposal and disposal groups and associated liabilities – assets item 140 and liabilities item 90 –

14.1 Non current assets held for disposal and disposal groups: composition by type of asset

31/12/2007 31/12/2006

A. Single assets A.1 Equity investments - - A.2 Property, plant and equipment and investment property - - A.3 Intangible assets - - A.4 Other non current assets - - Total A - - B. Group s of assets ( disposal groups ) B.1 Financial assets held for trading - - B.2 Financial assets at fair value - - B.3 Available-for-sale financial assets - - B.4 Held-to-maturity financial assets - - B.5 Loans to banks 35.931 - B.6 Loans to customers 172.929 - B.7 Equity investments - - B.8 Property, plant and equipment and investment property 73 - B.9 Intangible assets 222 - B.10 Other assets 131 - Total B 209.286 - C. Liabilities associated with assets held for disposal C.1 Debts - - C.2 Securities - - C.3 Other liabilities - - Total C - -

D. Liabilities associated with disposal group s

D.1 Due to banks (88.588) - D.2 Due to customers (56.714) - D.3 Securities in issue - - D.4 Financial liabilities held for trading - - D.5 Financial liabilities at fair value - - D.6 Provisions (230) - D.7 Other liabilities (1.074) - Total D (146.606) -

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14.2 Other information

Receivable and payable portfolios constituting disposal groups and their associated liabilities have arisen on 31 st December 2007 and represent the equity of the branch in Munich – Germany on that date.

The branch in Munich – Germany of Banca Popolare di Bergamo S.p.A. has been offering banking services as well as advisory activities and assistance on the whole German territory since 1991, to Italian entities operating in Germany as exporters or investors. The branch activities include: granting of loans and financings (including intermediation in soft financing), granting of bank guarantees, management of liquidity and time deposits in the main currencies, spot and forward foreign transactions, overdrafts.

Transfer of the above branch to UBI Banca International S.A. Luxemburg is based on the project of a re-organisation of the UBI Group’s foreign network as outlined in the Industrial Plan guidelines. Regarding the branch mentioned, the transfer should take place during the first six months of 2008. Industrial and strategic reasons for the above transfer are attributable to a better and more efficient focus on and use of foreign facilities of the UBI Group for the customers.

Other information on accounting balances as at 31 st December 2007 are as follows: Item B.5 “Loans to banks” consists mainly of loans to the Parent Bank UBI Banca and to a lower extent of the deposit at the German Central Bank. Item B.6 “Loans to customers” consists mainly of financings granted to customers (of a type other than bank accounts) and pool financings. Item B.8 “Property, plant and equipment and investment property” consists mainly of hardware equipment and furniture. Item B.9 “Intangible assets” consists fully of software equipment. Item B.10 “Other assets” consists mainly of sundry debtor items and furniture pertaining to third parties’ properties.

Item D.1 “Amounts due to banks” consists almost completely of amounts due to the Parent Bank UBI Banca. Item D.2 “Amounts due to customers” consists mainly of due to customers represented by bank accounts and other short-term funding. Item D.6 “Provisions” represents the debt regarding post-employment benefits accrued to the branch employees. Item D.7 “Other liabilities” consists mainly of accrued expenses and sundry creditor items.

175

Section 15 Other assets – item 150 –

15.1 Other assets: composition

Description/Values 31/12/2007 31/12/2006

Other assets - tax consolidation 105.557 100.341 Securities, coupons and fees to be debited to customers and correspondents 101.671 107.348 Debtor items in transit in departments and branches 63.041 81.596 Prepaid expenses 38.939 41.329 Sundry debtor items 31.400 27.408 Advance stamp duties on banking documents and deeds 25.021 25.382 Debtor items in transit 20.680 26.105 Improvements on leased assets 6.061 4.766 Cheques drawn on the Bank 4.502 5.771 Withholding tax on merger losses 3.609 4.511 Costs relating entirely to future years 2.450 3 Tax credits for advance on IRPEF and post-employment benefits 307 319 Tax credits relating to prior years and related interest 141 519 Accrued income 41 1.269 Total 403.420 426.667

The item “Other assets – fiscal consolidation” amounting to 105.557 thousand euros relates to loans to the Parent Bank UBI Banca for provisions relating to IRES (corporation tax) and deductions. The item “Bills, securities, coupons and fees to be debited to customers and correspondents” includes 67.286 thousand euros for bills and receipt documents. Items in transit in departments and branches are lower than the threshold set by the Bank of Italy (3%) for the purposes of statistical reporting. Receivable items in transit are the result of suspended accounting entries which will be fully settled the subsequent day. The item “Withholding tax on merger losses” relates to goodwill for Banca Brignone S.p.A. and Ceresole & C. SIM S.p.A. transferred on 1st July 2003. The useful life of improvements to leased assets is equal to the leasing period of the property.

176

LIABILITIES

Section 1 Due to banks – item 10 –

1.1 Due to banks: composition by type

Type of transaction/Values 31/12/2007 31/12/2006

1. Due to central banks - - 2. Due to banks 2.046.009 1.361.670 2.1 Current accounts and free deposits 1.978.832 651.904 2.2 Time deposits 22.863 601.453 2.3 Financing 28.125 28.408 2.3.1 Finance leases - - 2.3.2 Other 28.125 28.408 2.4 Amounts due for commitments to repurchase own equity instruments - - 2.5 Liabilities for assets transferred but not derecognised in the accounts - - 2.5.1 Repurchase agreements (liabilities) - - 2.5.2 Other - - 2.6 Other payables 16.189 79.905 Total 2.046.009 1.361.670 Fair value 2.046.334 1.361.638

1.2 Detail of item 10 “Due to banks”: subordinated debts

No items of this type exist for the Bank.

1.3 Detail of item 10 “Due to banks”: structured debts

No items of this type exist for the Bank.

1.4 Detail of item 10 “Due to banks”: payables subject to specific hedging

No items of this type exist for the Bank.

1.5 Finance lease payments

No items of this type exist for the Bank.

177

Section 2 Due to customers – item 20 –

2.1 Due to customers: composition by type

Type of transaction/Values 31/12/2007 31/12/2006

1. Current accounts and free deposits 11.126.253 12.425.700 2. Time deposits 37.073 209.301 3. Funds administered on behalf of public bodies - - 4. Financing 1.661.080 1.061.788 4.1 Finance leases 5.833 7.472 4.2 Other 1.655.247 1.054.316 5. Amounts due for commitments to repurchase own equity instruments - - 6. Liabilities for assets transferred but not derecognised in the accounts - - 6.1 Repurchase agreements (liabilities) - - 6.2 Other - - 7. Other payables 86.751 149.789 Total 12.911.157 13.846.578 Fair Val ue 12.910.992 13.846.522

The item 4.2 “Financing – Other” includes repurchase agreements not linked to assets (bonds) sold and not derecognised from the financial statements for 1.654.288 thousand euros for the year 2007. This amount at the end of 2006 amounted to 1.053.445 thousand euros.

2.2 Detail of item 20 “Due to customers”: subordinated debts (current regulations)

No items of this type exist for the Bank.

2.3 Detail of item 20 “Due to customers”: structured debts (current regulations)

No items of this type exist for the Bank.

2.4 Due to customers: payables subject to specific hedging

No items of this type exist for the Bank.

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2.5 Finance lease payments

Minimum 31/12/2007 future payments Residual payables to leasing companies - within 1 year 1.684 1.879 - between 1 and 5 years 3.447 3.731 - more than 5 years 702 713

Section 3 Securities in issue – item 30 –

3.1 Securities in issue: composition by type

31/12/2007 31/12/2006 Type of security/Values Carrying value Fair value Carrying value Fair value

A. Listed securities 250.500 258.763 250.397 260.528 1. Bonds 250.500 258.763 250.397 260.528 - structured - - - - - other 250.500 258.763 250.397 260.528 2. Other securities - - - - - structured - - - - - other - - - - B. Unlisted securities 7.505.849 7.482.822 6.552.602 6.530.365 1. Bonds 5.809.512 5.786.485 5.380.486 5.358.249 - structured 206.254 206.203 497.677 497.648 - other 5.603.258 5.580.282 4.882.809 4.860.601 2. Other securities 1.696.337 1.696.337 1.172.116 1.172.116 - structured - - - - - other 1.696.337 1.696.337 1.172.116 1.172.116 Total 7.756.349 7.741.585 6.802.999 6.790.893

Item B.1 “Bonds” consists mainly in bonds issued by the Bank and subscribed by the own customers.

Within structured bonds issued by the Bank, the fair value of options that have been stripped from the said securities recorded a negative amount of 8.267 thousand euros and has been included under item 40 “Financial liabilities held for trading”.

179

3.2 Detail of item 30 “Securities in issue”: subordinated securities

Description/Value 31/12/2007 31/12/2006

A. Securities in issue

A1. Securities in issue - Subordinated 300.532 250.397

A2. Securities in issue - Convertible - -

These are two bonds issued by the Bank as described below:

for 250.500 thousand euros a 2001-2012 bond (Upper Tier II) at a quarterly variable rate (Euribor 3 months + 0,80)/4 listed on the Stock Exchange of Milan. Maturity date is 18 th June 2012, and there is no early redemption clause;
for 50.032 thousand euros a 2007-2017 bond (Lower Tier II) at a quarterly variable rate (Euribor 3 months + 1% for the first five years, + 1,6% from the sixth year to maturity). This loan has been fully subscribed by the Parent Bank UBI Banca, is not listed and maturity date is 28 th September 2017. Early redemption in favour of the issuer is admitted starting from 28 th September 2012, if this is not used the yield offered becomes (Euribor 3 months + 1,6)/4.

3.3 Securities in issue: securities subject to specific hedging

31/12/2007 31/12/2006

1. Securities subject to specific fair value hedges: 1.059.410 1.984.937 a) Interest rate risk 1.059.410 1.984.937 b) Exchange rate risk - - c) More than one risk - - 2. Securities subject to specific cash flow hedges: - - a) Interest rate risk - - b) Exchange rate risk - - c) Other - -

180

Section 4 Financial liabilities held for trading – item 40 –

4.1 Financial liabilities held for trading: composition by type

31/12/2007 31/12/2006

Type of transaction/Values FV FV Nominal value FV Nominal value L UL L UL

A. Cash liabilities

1. Due to banks ------

2. Due to customers ------

3. Debt securities ------

3.1 Bonds ------

3.1.1 Structured - - - X - - -

3.1.2 Other - - - X - - -

3.2 Other securities ------

3.2.1 Structured - - - X - - -

3.2.2 Other - - - X - - -

Total A ------B. Derivative instruments

1. Financial derivatives X - 92.722 X - 167.273

1.1 Held for trading X - 84.455 X X - 114.636

1.2 Linked with fair value option X - - X X - -

1.3 Other X - 8.267 X X - 52.637

2. Credit derivatives X - - X - -

2.1 Held for trading X - - X X - -

2.2 Linked with fair value option X - - X X - -

2.3 Other X - - X X - -

Total B X - 92.722 X X - 167.273

Total (A+B) - - 92.722 - - - 167.273

181

4.2 Details of item 40 “Financial liabilities held for trading”: subordinated liabilities

No items of this type exist for the Bank.

4.3 Details of item 40 “Financial liabilities held for trading”: structured debts

No items of this type exist for the Bank.

4.4 Financial liabilities held for trading: derivative instruments

Type of derivative/ Underlying Interest Currencies Equity Loans Other 31/12/2007 31/12/2006 assets rates and gold instruments

A) Listed derivatives 1) Financial derivatives ------

• With exchange of principal ------

- Options issued ------

- Other derivatives ------• Without exchange of principal ------

- Options issued ------

- Other derivatives ------

2) Credit derivatives ------

• With exchange of principal ------• Without exchange of principal ------

Total A) ------B) Unlisted derivatives

1) Financial derivatives 33.802 50.653 6.188 - 2.079 92.722 167.273

• With exchange of principal - 18.033 - - - 18.033 23.699

- Options issued - 5.856 - - - 5.856 4.088

- Other derivatives - 12.177 - - - 12.177 19.611 • Without exchange of principal 33.802 32.620 6.188 - 2.079 74.689 143.574

- Options issued 1.122 - 6.188 - 2.079 9.389 54.135

- Other derivatives 32.680 32.620 - - - 65.300 89.439

2) Credit derivatives ------

• With exchange of principal ------• Without exchange of principal ------

Total B) 33.802 50.653 6.188 - 2.079 92.722 167.273

Total (A+B) 33.802 50.653 6.188 - 2.079 92.722 167.273

4.5 Financial liabilities held for trading (excluding “technical overdrafts”): annual changes

No items of this type exist for the Bank.

182

Section 5 Financial liabilities held at fair value – item 50 –

No items of this type exist for the Bank.

Section 6 Hedging derivatives – item 60 –

6.1 Hedging derivatives: composition by type of contract and underlying assets

Currencies Equity Type of derivative/ Underlying assets Interest rates Loans Other 31/12/2007 and gold instruments

A) Listed derivatives 1) Financial derivatives ------

• With exchange of principal ------

- Options issued ------

- Other derivatives ------• Without exchange of principal ------

- Options issued ------

- Other derivatives ------

2) Credit derivatives ------

• With exchange of principal ------• Without exchange of principal ------

Total A) ------B) Unlisted derivatives

1) Financial derivatives 10.958 - - - - 10.958

• With exchange of principal ------

- Options issued ------

- Other derivatives ------• Without exchange of principal 10.958 - - - - 10.958

- Options issued ------

- Other derivatives 10.958 - - - - 10.958

2) Credit derivatives ------

• With exchange of principal ------• Without exchange of principal ------

Total B) 10.958 - - - - 10.958 Total (A+B) - ( 31/12/2007) 10.958 - - - - 10.958 Total (A+B) - ( 31/12/2006) 30.755 - - - - 30.755

183

6.2 Hedging derivatives: composition by portfolios hedged and type of hedging

Fair Value Cash flows

Specific Transactions/Type of hedging

Interest Exchange More than Macro- Macro- Credit risk Price risk Specific rate risk rate risk one risk hedge hedge

1. Available-for-sale financial - - - - - X - X assets 2. Loans - - - X - X - X

3. Held-to-maturity financial X - - X - X - X assets 4. Portfolio X X X X X - X -

Total assets ------1. Financial liabilities 10.958 - - - - X - X 2. Portfolio X X X X X - X - Total liabilities 10.958 ------

The whole amount of 10.958 thousand euros concerns hedging derivatives on bonds issued by the Bank.

Section 7 Fair value changed in hedged financial liabilities – item 70 –

No items of this type exist for the Bank.

Section 8 Tax liabilities – item 80 –

Details of tax liabilities are reported in the assets Section 13.

Section 9 Liabilities associated with assets held for disposal – item 90 –

This item regards liabilities associated to groups of assets held for disposal recognised under item 140 of assets.

For further details and information regarding the item above see description in assets Section 14.

184

Section 10 Other liabilities – item 100 –

10.1 Other liabilities: composition

Description/Values 31/12/2007 31/12/2006

Other liabilities - tax consolidation 178.129 139.769 Personnel-related payables 84.839 60.006 Sums available to customers and banks for transactions in course of payment 71.607 84.416 Balance of illiquid portfolio items 59.697 72.534 Creditor items in transit in departments and branches 54.216 55.471 Sundry creditor items 40.849 27.876 Creditor items in transit 26.538 12.733 Items payable to tax authorities on behalf of third parties 24.489 23.462 Tax withheld on income paid to third parties 15.508 16.413 Indirect taxes payable 14.244 9.868 Guarantees and commitments 6.426 4.611 Deferred income 5.907 5.460 Sums due to customers but not available due to various constraints 2.549 1.372 Payables for educational, cultural, charitable and social purposes 2.120 1.253 Accrued expenses 73 32 Advance received by third parties for disposal of premises to be completed 50 40 Social security contributions for third parties in course of payment 16 99 Commitments to FIDT 4 4 Staff pension and social security schemes, including auxiliary costs - 5.222 Total 587.261 520.641

The amount for the item “Items payable to tax authorities on behalf of third parties” consists mainly of sums to be paid to the government in relation to form ‘F24’ payments of taxes made by customers. The item “Sums available to customers and banks for transactions in course of payment” includes 5.061 thousand euros for bills and receipt documents. Illiquid portfolio items also include bills expiring in the last two working days of the year. Items in transit in departments and branches are lower than the threshold set by the Bank of Italy (3%) for the purposes of statistical reporting. Payable items in transit are the result of suspended accounting entries which will be fully settled the subsequent day. The item “Other liabilities – fiscal consolidation” amounting to 178.129 thousand euros relates to the debt to Parent Bank UBI Banca for IRES (corporation tax).

Reduction to zero of payables for staff pension is due to a different timing in settlements of post-employment benefits accrued regarding retirement provisions following a reform on complementary retirement benefits.

The decreased amount of the item “Other liabilities” other than fiscal consolidation is due to a lower proportion of suspended and/or in course of payment items as well as to a considerable reduction in illiquid portfolio items which – besides a contraction in types of funding - have been directly recorded under the corresponding counterparties, in strictly compliance with the current provisions.

185

Section 11 Post-employment benefits – item 110 –

11.1 Post-employment benefits: annual changes

31/12/20 07 31/12/2006

A. Initial holdings 126.316 115.650 Change in initial holdings 11.483 B. Increases 6.210 10.449 B.1 Allocation for the year 1.617 5.724 B.2 Other increases 4.593 4.725 B.3 Business combinations - - C. Decreases (36.424) (11.266) C.1 Payments made (12.477) (8.326) C.2 Other decreases (23.947) (2.940) D. Final holdings 96.102 126.316

The amount shown under item “Change in initial holdings” in due to a change in the accounting standard already described in Part A, Section 2 of the Notes to the financial statements and represents actuarial gains/losses as at 1st January 2006. The item “Other decreases” includes the variation in actuarial gains/losses for the year.

Regarding information on the year 2007, the amount shown under item “Other decreases” includes effects on post-employment benefits deriving from the reform on complementary retirement benefits as described in detail below.

11.2 Other information

New regulations on post-employment benefits

The application of Legislative Decree 252/2005 provides for a reform in complementary retirement benefits also affecting the debt concerning post-employment benefits. According to the said reform - involving exclusively units of post-employment benefits accrued as from 1st January 2007 - starting from that date such units can be used for complementary retirement benefits 19 or kept by the company, as decided by the permanent employee 20 ; in the latter case, if the company staff consist of at least 50 people, the accrued units are transferred to the INPS treasury fund 21 .

The obligation relating to post-employment benefits accrued until 31 st December 2006 remains in the equity liabilities of the company financial statements even after 1 st January 2007, and represents a defined benefit plan which is still to be evaluated based on actuarial criteria, consistently with the previous regulations and complying with IAS 19.

19 Through a clearly expressed choice, that is, following the so-called assent-by-default mechanism. 20 The choice was to be expressed within 30 th June 2007 for staff employed since 31 st December 2006 or within 6 months from the date on which the service commenced for staff employed since 1st January 2007. 21 This fund, unlike FondInps – the complementary pension plan created at INPS and intended to hold all units of post-employment benefits accrued of workers who decided to use the assent-by-default mechanism - does not represent a complementary retirement benefit plan. 186

The revised measurement model based on the regulations above entailed for Banca Popolare di Bergamo S.p.A. a total reduction in the debt due to post-employment benefits, compared to the liabilities recognised in the financial statements at 31 st December 2006, amounting to 21.599 thousand euros and classified among other decreases (line C.2 of table above). This is due to the fact that the reform has produced a curtailment in the defined benefit plan for all entities participating in the plan, with a radical change in the conditions of the plan itself.

Demographic and actuarial hypotheses used for measurement of post-employment benefits provision and seniority premiums

31.12.2007

Based on Istat tables 1999 and RGS48 duly amended to reflect the Death rate company’s historical data Based on equalisation of the company’s historical data of the last years, Turn over rate also considering expenses provided for in the approved update of the Industrial Plan Advance probability based on the company’s historical data is between 1% Advance on post-employment and 4,2%, whereas the average amount required is between 40% and benefits 70%. Based on long-term inflation scenario foreseen, the rates used are 1,7% to Inflation rate 2% Interest rates curve used is calculated as the average of SWAP, BID and Back-to-present value ASK rates as at 31 st December 2007, duly interpolated at intermediate discount rate maturity dates, and of risk-free rates relating to securities of prime quality (up to A+) companies on the Euro market – Bloomberg source

31.12.2006

Based on Istat tables 1999 and RGS48 duly amended to reflect the Death rate company’s historical data Based on equalisation of the company’s historical data of the last years, Turn over rate also considering expenses provided for in the approved update of the Industrial Plan Advance probability based on the company’s historical data is between Advance in post-employment 1% and 4,2%, whereas the average amount required is between 40% and benefits 70%. Based on long-term inflation scenario foreseen, the rates used are 1,7% to Inflation rate 2% Interest rates curve used is calculated as the average of SWAP, BID and ASK rates as at 31 st December 2006, duly interpolated at intermediate Actualisation rates maturity dates, and of risk-free rates relating to securities of prime quality (up to A+) companies on the Euro market – Bloomberg source

Change in accounting policies

The change in the accounting policy (from the “corridor” method to recognition under Equity) led to actuarial losses which increased liabilities due to post-employment benefits by 8.500 thousand euros as at 1 st January 2007.

Complying with provisions set out in IAS 8 “Accounting policies, changes in accounting estimates, and errors”, the opening balance of the debt for post-employment benefits has been adjusted starting from the furthest fiscal year used for comparison purposes, in this case from 2006. Such adjustment has been classified under item C.2 “Other decreases”.

187

For further details on the subject see Part A, Section 2 of the Notes to the financial statements.

Section 12 Provisions for liabilities and charges – item 120 –

12.1 Provisions for liabilities and charges: composition

Items/Values 31/12/2007 31/12/2006

1. Company pension fund - - 2. Other provisions for liabilities and charges 52.251 53.810 2.1 Litigation 16.574 14.179 2.2 Staff costs - 4.528 2.3 Other 35.677 35.103 Total 52.251 53.810

In detail the annual variance of the aggregate (– 1.559 thousand euros) is substantially due to complete use during the year of staff charges provision – following agreements with trade unions signed during the year – together with (see detail in table 12.4) a decrease in the provision for revocation (– 650 thousand euros); besides such decreases there has been an increase in the provision for other litigations (2.395 thousand euros), in the provision for nonperforming bonds (+ 824 thousand euros) and provision for adjustments in interests, commissions and expenses (+ 400 thousand euros). Those provisions whose financial payout has been estimated to take place after the end of the year have been discounted to present value. Expected payout times of most provisions are 2 to 5 years.

12.2 Provisions for liabilities and charges: annual changes

Pension Other Total funds provisions

A. Initial holdings - 53.810 53.810 B. Increases - 11.923 11.923 B.1 Allocation for the year - 9.776 9.776 B.2 Changes due to passing of time - 1.356 1.356 B.3 Changes due to variance in discount rate - 791 791 B.4 Other changes - -- B.5 Business combinations - -- C. Decreases - (13.482) (13.482) C.1 Use for the year - (10.084) (10.084) C.2 Changes due to variance in discount rate - -- C.3 Other changes - (3.398) (3.398) C.4 Business combinations - -- D. Final holdings - 52.251 52.251

188

12.3 Defined benefit company pension funds

No items of this type exist for the Bank.

12.4 Provisions for liabilities and charges – other provisions

Items/Components 31/12/2007 31/12/2006

Other provisions for liabilities and charges 1. Provision for revocation risks 27.341 27.991 2. Provision for adjustments on interest, commission and expenses 5.000 4.600 3. Provision for bonds in default 3.336 2.512 4. Other provisions for liabilities and charges - - Total 35.677 35.103

Contingent liabilities

Contingent liabilities

Provision for compound interest 102 Provision for claim risks 630 Provision for other litigation 131 Total 863

189

Other provisions

A provision for probable contingent liabilities is made when:

the company has a present obligation (legal or implicit, referred to the balance sheet date) that is the result of a past event, which occurred prior to the balance sheet date;

it is probable that the use of resources (suitable for producing economic benefits) will be required to fulfil the obligation and

a reliable estimate can be made of the amount of the obligation.

In assessing the existence of a current obligation triggered by a past event, consideration was given, on the basis of available knowledge, to the circumstance that it was more probable that an obligation existed at the balance sheet date, rather than the contrary.

The amount recognised represents the best estimate of the expenditure required to settle the obligation existing at the balance sheet date and therefore represents the amount that the company would reasonably expect to pay to extinguish the obligation at the balance sheet date. The present value was therefore calculated of the expenditure that it is assumed will be required to extinguish the obligation of the Bank in a specific case of litigation.

In this respect, working on the assumption that the discount rate (or rates) employed must reflect current market measurements of the present value of money and the specific risks attaching to the liability, the process of discounting back to present values is performed for each case of litigation and for the relative residual life. The general and abstract legal parameters underlying the process are as follows:

type/nature of the litigation to be assessed in the light of the legal claims formulated by the counterparty. Various “macro-families” are identifiable in this respect such as corporate litigation, labour law cases, financial intermediation litigation, litigation generically definable as compensations for damages (resulting from non performance of contract obligations, illegal actions, violation of regulations) etc.;

degree of “innovation” in the litigation , to be assessed by considering whether the issue turns on matters already known and “weighed” by the Bank or on completely new matters which required study (e.g. resulting from a change in the legislation or in legal orientations);

degree of “strategic importance” of the litigation to the Bank: for reasons of “policy” the Bank might, for example, decide to fight the case for a long time for deterrent purposes, even without a clearly strong defence. On the other hand, it might decide to end a case rapidly for commercial reasons even if it had grounds to defend and resist for a long time;

average length of litigation , to be weighted taking account of geographical factors, which is to say the location of the jurisdiction in which the case is tried and the state of progress of the trial. In this respect a decision must be taken on the source of the statistics from which data is obtained and assistance can be obtained from the lawyers who represent the Bank in litigation and who have direct knowledge of the jurisdictions concerned for each case;

the “nature” of the counterparty (e.g. a private individual or a recognised organisation, a professional operator or not, a consumer or not. etc.). 190

Potential contingent liabilities for which there is no obligation to make a provision are defined as follows: a) a possible obligation (arising after the Balance Sheet date), the result of past events occurring prior to the Balance Sheet date, the existence of which will only be confirmed by the occurrence (or non occurrence) of one of more uncertain future events that are not totally under the control of the Bank; or b) a current obligation, the result of past events for which provision is not made because:

• it is not probable that the use of resources suitable for producing economic benefits will be required to fulfil the obligation (but a certain margin of doubt remains over a possible payout, even relating to only some of the components considered for the purposes of calculating the expected loss);

• the amount of the obligation cannot be measured with sufficient reliability.

191

Section 13 Reimbursable shares – item 140 –

No items of this type exist for the Bank.

Section 14 Equity – items 130, 150, 160, 170, 180, 190 and 200 –

14.1 Equity: composition

Items/Values 31/12/2007 31/12/2006

1. Share capital 1.256.300 1.256.300 2. Share premium -- 3. Reserves 94.640 71.504 4. (Treasury shares ) -- 5. Fair value reserves 39 1.232 6. Equity instruments -- 7. Profit for the year 408.804 272.202 Total 1.759.783 1.601.238

14.2 “Share capital” and “Treasury shares”: composition

31/12/2007 31/12/2006

Number of ORDINARY shares 1.256.300.000 1.256.300.000 with nominal value in euro per share 1,00 1,00 Number of TREASURY shares - - with nominal value in euro per share - -

192

14.3 Share capital – Number of shares: annual changes

Items/Type Ordinary Other

A. Shares existing at the start of the year 1.256.300.000 - - fully paid up 1.256.300.000 - - not fully paid up - - A.1 Treasury shares (-) - - B.2 Outstanding shares: initial number 1.256.300.000 - B. Increa ses - - B.1 New issues - - - by payment: - - - business combinations - - - conversion of bonds - - - exercise of warrants - - - other - - - free of charge: - - - in favour of employees - - - in favour of directors - - - other - - B.2 Sale of treasury shares - - B.3 Other changes - - C. Decreases - - C.1 Cancellation - - C.2 Purchase of treasury shares - - C.3 Business disposals - - C. 4 Other changes - - D. Outstanding shares: final number 1.256.300.000 - D.1 Own shares (+) - - D. 2 Shares existing at the end of the year - - - fully paid up - - - not fully paid up - -

14.4 Share capital: other information

Nominal value of shares

The share capital consists of 1.256.300.000 shares with a nominal value of 1 euro each.

Rights, privileges and constraints on shares

There are no privileges on shares nor are they pledged. As concerns constraints on the distribution of dividends and the reimbursement of share capital, information is given in the table that summarises the items of Equity by origin indicating the possibilities of use and distribution, in accordance with Art. 2427 paragraph 1, 7 bis of the Italian Civil Code, contained in Part F – Information on capital.

193

14.5 Income-related reserves: other information

Nature/Description 31/12/2007 31/12/2006

Lega l reserve 37.252 23.642 Reserve per art. 2426 Italian Civil Code 1° par. 5 6.021 6.021 Taxable income-related reserve 13.300 13.300 Retained earnings 14.573 26.645

TOTAL income -related r eserves 71.146 69.608

Retained earnings besides the residual amount relating to 2006 have been increased due to the amount of profits intended for staff social security and pension when allocating the profit for 2006. See also Part A of the Notes to the financial statements.

14.6 Equity instruments: composition and annual changes

No items of this type exist for the Bank.

14.7 Fair value reserves: composition

Items/Components 31/12/2007 31/12/2006

1. Available-for-sale financial assets - 8.397 2. Property, plant and equipment and investment property - - 3. Intangible assets - - 4. Hedging of foreign investments - - 5. Cash flows hedging - - 6. Exchange rate differences - - 7. Actuarial profit/loss on provision for post-employment benefits 329 (6.875) 8. Special revaluation laws (290) (290) Tota l 39 1.232

194

14.8 Fair value reserves: annual changes

Actuarial Available for profit/loss on Special sale financial post -emp. revaluation assets benefits and laws health policies

A. Initial holdings 8.398 (6.875) (290) B. Increases - 7.204 - B.1 Increases in fair value - - X B.2 Other changes - 7.204 - B.3 Business combinations - - - C. Decreases (8.398) - - C.1 Decreases in fair value - - X C.2 Other changes (8.398) - - C.3 Business combinations (-) - - - D. Final holdings - 329 (290)

The amount under item B. 2 - “Other changes” for a total of 7.204 thousand euros derives from recognition during the year 2007 of actuarial gains/losses on post- employment benefits and health insurance policies recorded during the year and from transfer to item “Other reserves b) other” of the reserve consisting of actuarial losses on post-employment benefits accrued as at 31 st December 2006 (for further details see the note to the Equity in the Report on operations and in Section 11 of the Notes to the financial statements).

The amount shown under item C. 2 – “Other changes” refers to total selling of AFS securities (Parmalat shares) occurred during 2007.

14.9 Fair value reserves for available-for-sale financial assets: composition

31/12/2007 31/12/2006 Assets/Values Positive Negative Positive Negative reserve reserve reserve reserve

1. Debt securities - - - - 2. Equity instruments - - 8.398 - 3. Units in O.I.C.R. - - - - 4. Financing - - - - Total - - 8.398 -

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14.10 Fair value reserves for available-for-sale financial assets: annual changes

Debt Equity Units in Financing securities instruments O.I.C.R

A. Initial holdings - 8.398 - - 2. Positive changes - - - - 2.1 Increase in fair value - - - - 2.2 Transfer to Income Statement of negative reserves - - - - - from impairment - - - - - from disposal - - - - 2.3 Other changes - - - - 2.4 Business combinations - - - - 3. Negative changes - (8.398) - - 3.1 Decrease in fair value - - - - 3.2 Transfer to Income Statement of positive reserves from disposal - (8.398) - - 3.3 Other changes - - - - 3.4 Business combinations (-) - - - - 4. Final holdings - - - -

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Other information

1. Guarantees granted and commitments

Transactions 31/12/2007 31/12/2006

1) Guarantees of a financial nature 246.627 240.822 a) Banks 99.984 99.990 b) Customers 146.643 140.832 2) Guarantees of a commercial nature 2.259.434 2.123.788 a) Banks 193.868 122.608 b) Customers 2.065.566 2.001.180 3) Irrevocable commitments to pay funds 915.408 706.791 a) Banks 81.504 2.591 i) whose use is certain 81.504 2.591 ii) whose use is uncertain - - b) Customers 833.904 704.200 i) whose use is certain 635.267 414.450 ii) whose use is uncertain 198.637 289.750 4) Commitments underlying credit derivatives : protection sales - - 5) Assets pledged to guarantee obligations of third parties - - 6) Other commitments - - Total 3.421.469 3.071.401

The credit risk attaching to guarantees and commitments is valued in the same way as for loans actually granted. The possible impairment loss for a doubtful outcome is recognised under other liabilities. The amounts stated under item 2 “Guarantees of a commercial nature b) customers” consist mainly of endorsements and guarantees on behalf of others.

2. Assets pledged to secure own liabilities and commitments

No items of this type exist for the Bank.

3. Information on operational leasing

No items of this type exist for the Bank.

197

4. Administration and intermediation on behalf of third parties

Type of services 31/12/2007

1. Trading of financial instruments on behalf of third parties 2 a) Purchases 2 1. settled 2 2. non settled - b) Sales 1. settled - 2. non settled - 2. Portfolio managements a) Individual - b) Collective - 3. Custody and administration of securities 45.508.468 a) Securities of third parties held on deposit (not including portfolio managements) : connected with depository bank activity 743.794 1. Securities issued by the bank that prepares the accounts - 2. Other securities 743.794 b) Other securities of third parties held on deposit (not including portfolio managements) : other 22.867.889 1. Securities issued by the bank that prepares the accounts 7.289.117 2. Other securities 15.578.772 c) Securities of third parties, deposited with third parties 21.870.293 d) Own securities deposited with third parties 26.492 4) Other transactions 27.711

The amount mentioned under item 4. “Other transactions” refers to stock market orders (value of securities to receive and deliver at the balance sheet date).

198

Part C – Information on the Income Statement

Section 1 Interest – item 10 and 20 –

1.1 Interest and similar income: composition

Performing financial assets Impai red Other Items/Type financial 2007 2006 assets Debt assets Loans securities 1. Financial assets held for trading 3 --- 3 3 2. Available-for-sale financial assets - --- - 52 3. Held-to-maturity financial assets ------4. Loans to banks - 114.867 -- 114.867 110.695 5. Loans to customers - 1.129.816 29.548 22 1.159.386 855.280 6. Financial assets at fair value ------7. Hedging derivatives X X X - - - 8. Financial assets transferred not derecognised ------9. Other assets X X X 1.502 1.502 2.721 Total 3 1.244.683 29.548 1.524 1.275.758 968.751

1.2 Interest and similar income: differentials concerning hedges

No item of this type existed for the Bank in 2007.

199

1.3 Interest and similar income: other information

1.3.1 Interest income on financial assets in foreign currency

Items/Values 2007 2006

Interest income on financial assets in foreign currency 13.602 16.819

1.3.2 Interest income on finance leases

No items of this type exist for the Bank.

1.3.3 Interest income on lending with funds administered on behalf of third parties

No items of this type exist for the Bank.

1.4 Interest and similar expense: composition

Other Items/Type Borrowings Securities 2007 2006 liabilities

1. Due to banks (66.959) X - (66.959) (15.309) 2. Due to customers (201.630) X - (201.630) (142.041) 3. Securities in issue X (181.387) - (181.387) (149.460) 4. Financial liabilities held for trading - - (59.920) (59.920) (28.593) 5. Financial liabilities at fair value - - - - - 6. Financial liabilities arising from asse ts transferred but not derecognised - - - - - 7. Other liabilities X X - - - 8. Hedging derivatives X X (24.580) (24.580) (8.016) Total (268.589) (181.387) (84.500) (534.476) (343.419)

In compliance with the principle of reporting information giving priority to economic substance over juridical form, net interest income includes differences between spot and forward exchange rates on funding acquired by issuing certificates of deposit in foreign currency jointly with domestic Domestic Currency Swaps (DCS).

200

1.5 Interest and similar expense: differentials concerning hedges

Items/Values 2007 2006

A. Positive differentials on operations for : A.1 Spedific fair value hedges of assets - 15 A.2 Specific fair value hedges of liabilities 36.172 16.826 A.3 General hedging of interest rate risk 6.103 4.593 A.4 Specific cash flow hedges of assets - - A.5 Specific cash flow hedges of liabilities - - A.6 General cash flow hedges - - Total of positive differentials (A) 42.2 75 21.434 B. Negative differencials on operations for : B.1 Spedific fair value hedges of assets - (23) B.2 Specific fair value hedges of liabilities (59.600) (20.476) B.3 General hedging of interest rate risk (7.255) (8.951) B.4 Specific cash flow hedges of assets - - B.5 Specific cash flow hedges of liabilities - - B.6 General hedging of cash flows - - Total of negative differencials (B) (66.855 ) (29.450) C. Balance (A -B) (24.580) (8.016)

The net balance of differentials concerning hedging operations derives mainly from differentials concerning derivatives for specific hedging of bonds issued; this negative hedging impact is counterbalanced by lower charges sustained by the Bank for interest expenses on securities in issue.

1.6 Interest and similar expense: other information

1.6.1 Interest expense on liabilities held in foreign currency

Items/Values 2007 2006

Interest expense on liabilities held in foreign currency (73.191) (44.687)

201

1.6.2 Interest expense on finance lease payments

Items/Values 2007 2006

Interest expense on finance lease payments (270) (318)

Interest expense on finance lease payments to be recognised during the year amounts to 1.571 thousand euros.

1.6.3 Interest expense on funds administered on behalf of third parties

No items of this type exist for the Bank.

202

Section 2 Commissions – items 40 and 50 –

2.1 Commission income: composition

Type of service/Values 2007 2006 a) Guarantees granted 13 .041 11.118 b) Credit derivatives - - c) Management, trading and advisory services 185.732 171.821 1. Trading in financial instruments - - 2. Foreign currency trading 5.091 5.259 3. Portfolio managements 163 117 3.1. Individual 163 117 3.2. Collective - - 4. Custody and administration of securities 2.512 2.887 5. Depository bank 1.628 14.957 6. Placement of securities 66.375 56.959 7. Stock market orders 14.174 15.905 8. Advisory activities 25 9 9. Distribution of third party services 95.764 75.728 9.1. Portfolio managements 31.957 31.159 9.1.1. Individual 31.957 31.152 9.1.2. Collective - 7 9.2. Insurance products 25.999 21.240 9.3. Other products 37.808 23.329 d) Collection and payment services 58.310 57.084 e) Servicer activities for securitisation operations - - f) Services for factoring operations - - g) Tax collection and payment services - - h) Other services 102.106 104.489 Total 35 9.189 344.512

As for commissions deriving from activity as depository bank, the decrease compared to the previous financial year is due to the transfer of most of these functions to the Parent Bank as from 1st January 2007.

Commissions for the placement of securities are mainly generated by the sale and maintenance of units in mutual investment funds and portfolio managements.

Regarding commissions for distribution of third party services – 9.3 “Other products”, the increase recorded during the year 2007 is mainly attributable to an increase in commissions for intermediation on financings granted on behalf of the Product Company B@nca 24-7.

The item “Other services” consists mainly of current account commissions amounting to 72.862 thousand euros, of financing to customers amounting to 15.898 thousand euros and of other kinds of services for the remaining part.

203

2.2 Commission income: distribution channels for products and services

Channels/Values 2007 2006

a) Through own branches 162.302 132.804 1. Portfolio managements 163 117 2. Placement of securities 66.375 56.959 3. Third party services and products 95.764 75.728 b) Through indirect networks - - 1. Portfolio managements - - 2. Placement of securities - - 3. Third party services and products - - c) Other distribution channels - - 1. Portfolio managements - - 2. Placement of securities - - 3. Third party services and products - -

2.3 Commission expense: composition

Services/V alues 2007 2006

a) Guarantees received (92) (3) b) Credit derivatives - - c) Management and trading services (3.552) (3.147) 1. Trading in financial instruments (106) (90) 2. Foreign currency trading - - 3. Portfolio managements - - 3.1. Own portfolio - - 3.2. Portfolio of others - - 4. Custody and administration of securities (12) (13) 5. Placement of financial instruments - - 6. Securities, products and services offered through indirect network (3.434) (3.044) d) Collection and payment services (25.303) (27.294) e) Other services (1.892) (4.933) Total (30.839) (35.377)

The decrease under item “Collection and payment services” is substantially attributable to a reduction in commission expenses for SIA payments collection, partially balanced by an increase in expenses relating to the interbank system.

The item “Other services” shows savings compared to the previous year mainly due to lower intermediation commissions re-conveyed to third parties, lower expenses for stock market orders and reduced expenses deriving from previous fiscal years.

204

Section 3 Dividend and similar income – item 70 –

3.1 Dividend and similar income: composition

No items of this type exist for the Bank.

Section 4 Net profit (loss) from trading – item 80 –

4.1 Net profit (loss) from trading: composition

Profit on Losses on Net result Transactions/Income components Gains (A) Losses (C) trading (B) trading (D) ((A+B)-(C+D))

1. Financial assets held for trading 10 604 (10) (263) 341 1.1 Debt securities 10 442 (10) (113) 329 1.2 Equities - 5 - (45) (40) 1.3 Units in O.I.C.R. - - - - - 1.4 Financing - - - - - 1.5 Other - 157 - (105) 52 2. Financial liabilities held for trading - - - - - 2.1 Debt securities - - - - - 2.2 Other - - - - - 3. Other financial assets and liabilities : X X X X - exchange rate differences 4. Derivative instruments 10.125 273.745 (8.136) (275.189) 799 4.1 Financial derivatives 10.125 273.745 (8.136) (275.189) 799 - On debt securities and interest rates 3.121 211.446 (1.692) (210.483) 2.392 - On equities and share indexes 6.760 61.514 (6.332) (63.772) (1.830) - On currencies and gold X X X X 254 - Other 244 785 (112) (934) (17) 4.2 Credit derivatives - - - - -

Total 10.135 274.349 (8.146) (275.452) 1.140

The profits and losses from trading reported in the lines “Financial assets held for trading – 1.1 debt securities and 1.2 equities” are the result of trading in securities passing through the portfolio mainly in order to execute transactions ordered by customers.

Regarding net profit/(loss) from trading in derivative instruments under item 4.1 “Financial derivatives – On equities and share indexes” the loss amounting to 1.674 thousand euros derives from derivatives linked to shares.

205

Section 5 Net profit (loss) from hedging– item 90 –

5.1 Net profit (loss) from hedging: composition

Income components/Values 2007 2006

A. Income 22.306 26. 332 A.1 Fair value hedging derivatives 19.490 4.355 A.2 Hedged financial assets (fair value) - - A.3 Hedged financial liabilities (fair value) 2.816 21.977 A.4 Hedging financial derivatives on cash flows - - A.5 Assets and liabilities in foreign currency - - Total income on hedging activity (A) 22.306 26.332 B. Expenses (20.624) (24.726) B.1 Fair value hedging derivatives (343) (20.236) B.2 Hedged financial assets (fair value) (1.692) (3.678) B.3 Hedged financial liabilities (fair value) (18.589) (812) B.4 Hedging financial derivatives on financial flows - - B.5 Assets and liabilities in foreign currency - - Total expenses on hedging activities (B) (20.624) (24.726) C. Net result on hedging activity (A -B) 1.682 1.606

Section 6 Profit (loss) on sales/repurchases – item 100 –

6.1 Profit (loss) on sales/repurchases: composition

2007 2006 Items/Income components Profit Loss Net result Profit Loss Net result

Financial assets 1. Loans to banks ------2. Loans to customers 462 (72) 390 9.588 (5.223) 4.365 3. Available-for-sale financial assets 12.764 (588) 12.176 35 (35) - 3.1 Debt securities - - - 35 (35) - 3.2 Equities 12.764 (588) 12.176 - - - 3.3 Units in O.I.C.R ------3.4 Financing ------4. Held-to-maturity financial assets ------Total assets 13.226 (660) 12.566 9.623 (5.258) 4.365 Financial liabilities 1. Due to banks ------2. Due to customers ------3. Securities in issue 1.737 (104) 1.633 907 (70) 837 Total liabilities 1.737 (104) 1.633 907 (70) 837

206

Profit (loss) amounting to 12.176 thousand euros recorded under item “3. Available-for- sale financial liabilities” is the gain deriving from selling of Parmalat shares allotted to the Bank in 2005 instead of loans owed by that Group.

Section 7 Net profit (loss) on financial assets and liabilities at fair value – item 110 –

No items of this type exist for the Bank.

Section 8 Net impairment losses/reversals – item 130 –

8.1 8.1 Net impairment losses on loans: composition

Impairment losses Reversal s

Transactions/Income Specific Specific Portfolio 2007 2006 components Portfolio Other Other Cancellation Other Of interest Of interest re versals re versals

A. Loans to banks - - (22) - -- 3 (19) 127

B. Loans to customers (12.769) (45.991) (28.53 8) 6.627 20.012 171 13.138 (47.350) (37.821)

Total (12.769) (45.991) (28.560) 6.627 20.012 171 13.141 (47.369) (37.694)

Within portfolio impairment losses the charge is mainly a consequence of an harmonisation in calculation methods of collective impairment losses on performing loans; this alignment to conventional criteria of Basel II considers a time horizon for the estimation of default forecasts of 12 months instead of 7 months as it was applicable until 31 st December 2006. (See also description in Section A of the Notes to the financial statements).

8.2 Net impairment losses on available-for-sale financial assets: composition

No items of this type exist for the Bank.

8.3 Net impairment losses on held-to-maturity financial assets: composition

No items of this type exist for the Bank.

207

8.4 Net impairment losses on other financial transactions: composition

Impairment losses Reversals

Transactions/Income Specific Specific Portfolio 2007 2006 components Portfolio Other Other Cancellation Other Of interest Of interest re versals re versals

A. Guarantees granted - (249) (1.567) - 312 - 819 (685) 336 B. Credit derivatives ------C. Commitments to pay funds - (2) (1.881) --- 750 (1.133) (1.151) D. Other transactions ------E. Total - (251) (3.448) - 312 - 1.569 (1.818) (815)

Section 9 Administrative expenses – item 150 –

9.1 Personnel expense: composition

Type of expenses/Values 2007 2006

1) Permanent employees (279.379) (257.089) a) Wages and salaries (190.280) (184.248) b) Social security charges (54.299) (52.081) c) Post-employment benefits (310) - d) Pension expenses - - e) Provision for post-employment benefits 11.561 (13.655) f) Provision for pension and similar: - - - with defined contribution - - - with defined service - - g) Payments to outside complementary retirement benefit plans: (20.223) (2.332) - with defined contribution (20.223) (2.332) - with defined service - - h) Expenses resulting from share based payment agreements - - i) Other benefits for permanent employees (25.828) (4.773) 2) Other personnel (7.212) (3.823) 3) Directors (957) (940) Total (287.548) (261.852)

The item “Wages and salaries” includes expenses for renewal in trade agreements (+ 8.110 thousand euros), higher expenses due to the incentive system (+ 4.559 thousand euros); the remaining increase compared to the previous year is attributable to normal wage trend during 2007. The balance of item “Provisions for post-employment benefits” showed some benefits deriving from the reform on post-employment benefits (-21.599 thousand). The increase recorded under item “Payments to outside complementary retirement benefit plans” is due to the fact that starting from financial year 2007 the amount intended for staff social security and pension when allocating the profits for 2006 has

208

been directly recognised in a income-related reserve (for a total of 14.223 thousand euros) instead of accounting it as a reduction in labour costs as it was done in the previous years. The item “Other benefits for permanent employees” includes - compared to 2006 – higher expenses due to leaving incentives (+ 19.880 thousand euros). For further information see the note on the Income Statement in the Report on operations.

Composition of expenses resulting from other benefits for permanent employees is described in the following paragraph 9.4. The amount shown under item “2) Other personnel” consists for 6.001 thousand euros of expenses relating to temporary agency staff, for 1.108 thousand euros of expenses regarding “detached” personnel from other Group’s member companies and for 103 thousand of other expenses.

9.2 Average number of employees by category

2007 2006

PERMANENT EMPLOYEES 3702 3784 a) Senior managers 47 47 b) Total managers 1505 1476 - of which: 3rd and 4th level 873 630 c) Other staff 2150 2261 OTHER PERSONNEL 117 66

The number of employees includes employees from other companies “seconded” to the company and does not include company’s employees “seconded” to other companies.

9.3 Defined benefit plans - company pension funds: total costs

No item of this type exists for the Bank.

9.4 Other benefits for permanent employees

The other benefits for permanent employees are as follows:

2007

Other benefits for permanent employees (25.828) - Leaving incentives and income support fund (20.403) - Meal coupon expenses (4.282) - Other expenses (1.143)

To date, costs relating to leaving incentives and income support funds concern a total of 106 resources, all belonging to the staff of Banca Popolare di Bergamo S.p.A., by means of the following levers: 209

monetary incentive, for those employees who are or will be entitled to a pension by 1st January 2009 (maximum incentive up to 12 monthly pays);

solidarity fund for income support created by INPS with Ministerial Decree 158 of 28/4/2000 (gross amount corresponding to 80% of gross annual pay).

For further information see the note on the Income Statement in the Report on operations.

The data shown under item “Other expenses” does not include a contribution of 828 thousand euros recognised by the INPS solidarity fund for training performed by the Bank to its employees.

210

9.5 Other administrative expenses: composition

Type of service/Values 2007 2006

A. Other administrative expenses (210.072) (199.722) Postal, telephone and telegraph charges (10.899) (9.842) Use of networks and ICT services (6.677) (5.357) Professional services (2.708) (1.758) Legal expenses and credit recovery (4.452) (4.238) Maintenance and installation of machines, furnishings, etc… (619) (660) Tenancy and cleaning of premises (9.805) (9.815) Insurance premiums (7.252) (8.190) Counting and management of values (5.125) (4.988) Advertising and promotion (2.298) (1.941) Printing and stationery (2.127) (1.678) Information services and land registry searches (3.497) (3.824) Property maintenance (234) (77) Security (2.564) (2.801) Agency expenses (780) (535) Electronic processing by third parties (1.667) (1.386) Maintenance of equipment (6) (7) Remuneration of Statutory Auditors (172) (165) Membership fees (1.145) (911) Transport, removals and travel expenses (4.776) (3.543) Sundry goods (371) (234) Books and periodicals (309) (308) Maintenance of rented premises and equipment (4.764) (4.375) Lease of premises (30.335) (29.648) Expenses for services rendered by Group companies (107.411) (103.348) Lease instalments on machines, software, furnishings, etc… (4) (50) Other contributions (43) (43) Other (32) - B. Indirect taxes (45.992) (44.943) Stamp duties (36.430) (36.3 90) Municipal property tax (36) (36) Other taxes (9.526) (8.517) Total (256.064) (244.665)

The item “Expenses for services provided by Group member companies” consists primarily of the fee for service activities obtained by the Parent Bank UBI Banca and from the Groups’ member company Group UBI Sistemi e Servizi S.p.A. as described in more detail in the comments on Income Statement of the Report on operations of this annual report. The increase recorded under this item is mainly due to progressive development of centralisation of some activities at the Parent Bank UBI Banca and to a higher cost in non current project activities. The item “Lease of premises” is the result of leasecontracts signed mainly with Group member companies for most of the properties in which the Bank’s branches are located. The contracts are governed by market conditions.

211

Section 10 Net provisions for liabilities and charges – item 160 –

10.1 Net provisions for liabilities and charges: composition

2007 2007 31/12/2007 NET2006 NET PROVISIONS ATTRIBUTIONS PROVISIONS PROVISIONS

Net provisions for liabilities and charges for revocation (3.794) 4.444 650 1.723 Net provisions for value adjustments on interest, commission and expenses (5.000) - (5.000) (4.600) Net provisions for bonds in default (1.181) 230 (951) (349) Net provisions for litigation (4.329) 1.118 (3.211) (7.694) Other net provisions for liabilities and charges -- --

Total (14.304) 5.792 (8.512) (10.920)

Impact on Income Statement of this item compared to the previous year shows lower provisions relating to litigations partially offset by lower reversals of impairment losses concerning risks on revocation.

Section 11 Net impairment losses on property, plant and equipment and investment property – item 170 –

11.1 Net impairment losses on property, plant and equipment and investment property: composition

Impairment Reversals Net result Assets/Income components Depreciation (a) losses (b) (c ) (a+b -c)

A. Property, plant and equipment and investment prope rty A.1 Owned (272) -- (272) - for use in operations (272) -- (272) - investment property - - - - A.2 Acquired under finance lease (708) -- (708) - for use in operations (708) -- (708) - investment property - - - -

Total (980) - - (980)

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Section 12 Net impairment losses on intangible assets – item 180 –

12.1 Net impairment losses on intangible assets: composition

Impairment Reversals Net result Assets/Income components Amortisation (a) losses (b) (c ) (a+b -c)

A. Intangible assets A.1 Owned (528) - - (528) - internally generated by the Bank - - - - - other (528) - - (528) A.2 Acquired under finance lease - - - - Total (528) - - (528)

Regarding goodwill, see Section 12 “Intangible assets”.

Section 13 Other operating costs and income – item 190 –

13.1 Other operating costs: composition

2007 2006

Other operating costs (4.618) (5.165) Depreciation of leasehold improvements (2.268) (3.324) Fines and charges for late tax payments (66) (3) Other costs and prior year expense (2.284) (1.838)

Compared to financial year 2006 the item “Other operating costs” shows lower depreciation of leasehold improvements partially offset by other costs and prior year expense.

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13.2 Other operating income: composition

2007 2006

Other operating income 71.191 67.153 Recovery of taxes 44.942 43.955 Income for services to Group member companies 727 717 Charges to third parties for expenses on deposits and current accounts 6.216 7.009 Recovery of insurance premiums 9.006 8.311 Other income for property management - 265 Lease income 62 61 Other income, recovery of expenses and prior year income 10.238 6.835

The amount recorded under item “Other income, recoveries in expenses and prior year income” includes 2.407 thousand euros which are the result of interbank services granted to customers; recoveries in expenses include reimbursement of appraiser expenses obtained by customers amounting to 1.580 thousand euros and exceptional receivables include exceptional receivables for prescribed cheques amounting to 2.056 thousand euros.

Section 14 Profit (loss) on equity investments – item 210 –

No items of this type exist for the Bank.

Section 15 Net result of fair value measurement of property, plant and equipment and investment property and intangible assets – item 220 –

No items of this type exist for the Bank.

Section 16 Net impairment losses on goodwill – item 230 –

There are no net impairment losses to be recognised under goodwill value; see also description in Section A of the Notes to the financial statements.

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Section 17 Profit (loss) on disposal of investments – item 240 –

17.1 Profit (loss) on disposal of investments: composition

Income components/Values 2007 2006

A. Properties - - - Profits on sale -- - Losses on sale -- B. Other assets (25) (87) - Profits on sale - 16 - Losses on sale (25) (103)

Net loss (25) (87)

The losses on sales reported are attributable to non-recurring expenses relating to leases.

Section 18 Taxes on profit from continuing operations – item 260 –

18.1 Taxes on profit from continuing operations: composition

Income components/Sectors 2007 2006

1. Current taxes (-) (212.373) (179.745) 2. Change in current taxes of prior years (+/-) (1.584) 2.805 3. Reduction in current taxes for the year (+) - - 4. Change in deferred tax assets (+/-) (14.650) (7.356) 5. Change in deferred tax liabilities (+/-) (35) 2.974 6. Taxes for the year (-) (-1+/-2+3+/-4+/-5) (228.642) (181.322)

The total effect on Income Statement of the change in current taxes of prior years, considered after the variation in deferred tax assets/liabilities of prior years, amounts to 328 thousand euros of higher expenses.

Current taxes are recognised on the basis of the tax legislation in force, including the measures of Legislative Decree 38/2005, taking account of the prevailing interpretations and of the absence of official instructions from the tax authorities.

Taxes do not include the effects of redemption option on off-balance-sheet deductions pertaining to the Quadro EC , through payment of a substitute tax ex art. 1 par. 48 of Law

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244/07 (Financial Law for 2008). Since the new frame is not complete, decision on whether such redemption option will be adopted has not been taken yet.

Amounts under the items “Change in deferred tax assets” and “Change in deferred tax liabilities” do not correspond with balances between relevant increase and reduction as indicated in tables 13.3 and 13.4, because drawing up of tables in Section 13 (therefore including tables 13.5 and 13.6) was made on the basis of the origin of the deferred tax assets/liabilities (Equity if under FTA or Income Statement if existing before the change in accounting principles). However, the use of such taxes – which emerged also under the FTA – occurs mainly by the transfer to the Income Statement, even when it is recorded in the Equity tables where they were originally classified.

18.2 Reconciliation between theoretical taxation and actual taxation recorded in the financial statements

Average actual tax rate 41,54% Applicable tax rate * 38,25% Difference 3,29%

Tax effect for determination of IRES (corporation tax): - for tax non deductible expenses 0,30% - for income exempt from taxation (0,12%)

Change effect on deferred tax assets/liabilities 0,14% Total tax effect for determination of IRAP (local production tax) taxable income 2,61% Tax effect due to other tax expenses and change effect on prior year taxes 0,37% Total 3,29%

* The tax rate applicable is calculated by summing the nominal tax rates of the IRES (corporation tax) (33%) and IRAP (local production tax) (5,25%), in force in the regions where the Bank operates most.

The reduction in IRAP (local production tax) taxable income compared to prior years is mainly due to the introduction of the tax wedge (also extended to Banks and other Financial Bodies following Law Decree 81/07 turned into law).

Effect on deferred taxation deriving from reduction as from 1 st January 2008 of IRES (corporation tax) rates (27,5%) and IRAP (local production tax) rates (4,8176%) – complying with art. 1 par. 33 of Law 244/07 – totally amounts to 0,14%.

For the sake of providing full information about theoretical taxation compared to actual taxation in the balance sheet, we report that gains deriving from selling of branches for antitrust purposes have been recorded balancing Income Statement item 280 and that those realised inside the Group have been recorded balancing Equity. On the whole, actual taxation relating to the said gains is lower than the theoretical one (38,25%) by 9,64% because of non-taxability on IRAP (local production tax) basis of those incomes (5,25%), as well as following deferred taxation of IRES (corporation tax) which shows an economy following a reduction of the rate applicable, from 33% to 27,50%, as from 1st January 2008 (4,39%).

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Section 19 Profit (loss) from assets held for disposal after tax – item 280 –

19.1 Profit (loss) from assets held for disposal after tax: composition

Income components/Values 2007 2006

Group of assets/liabilities B.1 Income - - B.2 Costs - - B.3 Measurement of disposal group - - B.4 Profit from disposal 121.982 - B.5 Taxes (34.918) - Profit 87.064 -

Realisation profits and taxes shown in the table are the result of the transfer of 11 branches in compliance with a provision of the antitrust authority imposed on the UBI Group in order to get the antitrust body approval on the constitution of the Group. The selling generated a gross gain amounting to 121.982 thousand euros corresponding to current and deferred taxes amounting to 34.918 thousand euros.

19.2 Detail of income taxes relating to assets/liabilities held for disposal

2007 2006

1. Current taxation (-) (8.058) - 2. Variation in deferred tax assets (+/-) - - 3. Variation in deferred tax liabilities (-/+) (26.860) - 4. Taxes on income for the year (-1+/-2+/-3) (34.918) -

Effective taxation of 28,62% reflects deferred taxation of gains deriving from selling of branches which are only taxable according to IRES (corporation tax), and the part consisting of deferred taxes has been recognised on the basis of IRES rate for 2008 of 27,5%.

Section 20 Other information

There is no other information to report.

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Section 21 Earnings per share

The Bank is not required to compile this Section.

Part D – Segment reporting

The Bank is not required to compile this part because segment reporting is supplied with the Consolidated financial statements by the Parent Bank UBI – Banca S.c.p.A..

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Part E – Information on risks and relevant hedging policies

The risks of the UBI Banca banking Group

In observance of current norms, the UBI Banca Group has applied a governance model which determines - in an integrated manner – the guidelines of the internal control system, intended as organisational, regulatory and methodological context with which all Group members must comply with to allow the Parent Bank to perform its activities of strategic, management and operational control in an effective and economical way.

The Bank co-operates pro-actively in identifying risks to which they are subject and at defining the relative criteria for measuring, managing and monitoring them.

The basic principles for analysis and management of the Group’s risks, in order to pursue a better and better awareness and efficient allocation of economical and regulatory capital, are as follows:

strict restraint of financial and credit risks and strong control on any type of risk;

using of principles for a sustainable creation of value when defining propensity to risk and capital allocation;

identification of the Group’s propensity to risk based on specific types of risk and/or specific assets within a policy regulatory frame both at Group’s and single entity level.

Section 1 Credit risk

Information of a qualitative nature

1. General aspects

When establishing the Bank’s credit policies, special attention is given to the maintenance of an adequate risk/yield profile and to an assumption of risks consistent with the propensity to risk as defined by the Top Management and, more generally, with the UBI Group’s mission.

Particular attention is also given to definition of guidelines concerning new products, by means of adequate information to the Top Management concerning respect of risk/yield objectives, calculation of minimum expenditure rates, borrower’s quality, guarantees received and recovery rates expected in case of insolvency.

Credit policies are mainly oriented towards supporting the following:

local economies;
families, entrepreneurs, professionals and small-medium enterprises (the dimensions reached by credit portfolio together with high credit fragmentation on various entities

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allow to obtain significant benefits in terms of segment diversification and restraint of concentration risk).

The special attention given to maintaining of relations established with customers and their constant development, along with a prudent attitude (breaking-down of information barriers), offers the customers a continuity in relationship and support in a long-term perspective.

Credit policies have been developed on the following basis:

macroeconomic forecasts enabling an assessment of expected risks and growth in 2008 by segment and geographical areas;
lending development forecasts for definition of expected growth rates by sub-portfolio, geographical area, segment and rating class;
an EVA-based model for portfolio optimisation, aiming at creation of maximum value within the Corporate market and complying with limits used for control of ongoing high quality in assets and acceptable risk profile in lending.

In this context some regulations have also been defined regarding operations in denaro caldo (short-term financing) and medium and long-term operations, based on pricing sensitivity and also taking into account funding cost increase.

When formulating credit policies on the national production sector, which is currently going through a structural transformation due to the combined effect of technical developments and exposure to increasingly global markets , the unit in charge at the Parent Bank works out historical and forecast data at economic and financial level coming from various sources, and based on the 23 product macro sectors included in the classification adopted by Bank of Italy and on the relevant detail consisting of 175 micro sectors identified by a specific ASI/Prometeia code.

The variables analysed in the assessment of segment aggregates include those expressing expectations on international and national economic situation, with relevant margins and profitability, expected growth of exposure to the financial system, companies' capitalisation and segment risks expected based on the said variables. An in-depth analysis of ‘exogenous’ factors - linked to non-economical variables such as market control (also on an international level), legislation and other “structural” factors having a significant impact on the national production system - is also carried out.

A joint assessment of the substantial elements analysed will then lead to the assignment of a score based on different levels corresponding to concrete recommendations concerning the Group’s operations on that aggregate.

Specific sectors of special interest for the Group (e.g. sectors being restructured or significant in terms of global exposure or particularly concentrated) are also constantly monitored during the year in order to properly orient credit policies considering signals coming from the market (also for this reason the Group avails itself of the main info- providers working on a national level).

Such indications do not replace the credit risk assessment as established by the account manage, but constitute an instrument of help in the analysis and assessment of specific counterparty risk.

To complete this section on general aspects of credit risks, an explanation of the main terms used in risk management is reported below.

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Credit risk is intended as meaning the possibility of an unexpected deterioration in the creditworthiness of a counterparty towards whom there is credit exposure, which generates a corresponding unexpected change in the market value of a credit position” 22 . In this respect the expected loss, which is the loss that it is expected to be incurred on average on a loan cannot be considered as representative of the credit risk on a position because, it is estimated ex-ante and as such can be adequately managed by means of appropriate pricing and/or provision decisions. The risk is given, however, by the unexpected loss, or in other words by the variation of the loss around its average value, and therefore by the risk that the loss is found, ex post , to be greater than that originally estimated.

The main components of expected and unexpected loss are defined as follows:

Probability of default (PD): the probability that a counterparty will default in a definite time period. It is determined by the creditworthiness of the counterparty, which is in turn determined by both specific and context factors.

Loss Given Default (LGD) : the loss expressed as a percentage of the exposure in the case of default. It is determined by the nature of the loan, by the guarantees received, by the degree of subordination of the exposure, by the liquidity of the corporate assets and by other components.

Exposure at default (EAD): expected exposure in the case of insolvency. It is connected with the particular form used to grant the loan. Where the form of loan allows the borrower discretion over the time and manner by which it is granted, setting a maximum amount only (as with a current account overdraft), the Bank is, as a consequence, unable to predict a priore the behaviour of its customer and therefore how much the exposure will be at the moment of default.

The expected loss for a portfolio of loans is equal to the sum of the expected losses of the loans of which it is comprised, while the unexpected component is not equal to the sum of the unexpected losses of the individual loans because it will also be affected by the degree of correlation between the individual loans. The first component, the expected loss, cannot be eliminated by diversification of the portfolio (in terms of sector, size and geography) while it can be appropriately managed by careful selection of individual positions. The second component, the unexpected loss, can be reduced, however, with good diversification of the portfolio in terms of sector, dimension and geographical area.

22 A. Sironi, “ I rating interni e i modelli per la gestione del rischio di credito ”, in the Bank of Italy , “ Modelli per la gestione del rischio di credito: i rating interni ”, April 2000.

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2. Policies for the management of credit risks

2.1 Organisational aspects

The units in charge of credit activity control have been structured based on the following model:

Units for centralised control and coordination at the Parent Bank;
General Management of subsidiary banks and companies, including:  Credit Management,  Branches,  Corporate Business Units (CBU),  Private Business Units (PBU).

Such organisational model enables strong uniformity between the Parent Bank credit structure and the corresponding structures in the Bank Network - with consequent consistency in processes and optimisation of information flows - and shows a clear distinction between commercial and credit functions. Moreover, credit granting functions change according to customer segment (Retail/Private and Corporate) and to credit status: performing loans (managed by Retail and Corporate Credit Units) and problem loans (managed by Problem Loans Units). The Parent Bank has control over policies management, portfolio overall monitoring, refinement of assessment systems, problem loans management and compliance with the regulations, and this by means of the units in the Credit Area, Strategy and Control Macro-area, Credit Recovery Area and Audit Area of the Parent Bank and of the Group.

The Bank’s credit co-ordination functions and the main interface with the relative functions of the Parent Bank are performed by the Credit Area which reports directly to the General Management of the Bank. Its task is to guarantee, in line with strategic policies drawn up by the Parent Bank, uniformity in the action undertaken by individual departments that report to it in order to achieve the objectives defined by and agreed with the credit function of the Parent Bank. The Credit Area of the Parent Bank supports the Credit Area of the Bank in overseeing the life cycles of loans, ensuring that standard methods and policies are identified, that adequate maximum lending levels and risk limits are defined and proposed with ratings attributed to counterparties, that the total loan portfolio is monitored, that the risk/yield ratio is adequate and that policies are proposed for managing problem positions. It expresses prior opinions on requests for credit and/or on problem positions presented by the Bank.

The departments reporting to the Credit Area are as follows:

Corporate and Retail lending approval : these analyse and assess loan applications from the Corporate and Retail and Private markets respectively, deciding within the limits of their powers and submitting the details of loans beyond those powers to higher loan approval bodies;

Monitoring and support : this ensures constant monitoring of the Bank’s lending portfolio, co-ordinating and directing, where necessary, peripheral units in the management of performing loans and also indicating the most appropriate corrective action to safeguard loans. It carries out all the necessary action to support the proper and timely performance of the lending process.

Pre-litigation: oversees the portfolio of impaired loans or loans being restructured and

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ensures the co-ordination and direction in non centrally managed positions of this type.

Furthermore, the litigation management - directly reporting to the Bank’s General Management – has managed and controlled until 31 st December 2007 the portfolio of non-performing positions, with a focus on high-risk positions due to peculiarity or complexity, whereas management of positions requiring a more standard approach is performed through the help of relation managers and/or specialised external operators.

As from 1st January 2008 the management of non-performing positions has been centralised at the Credit Recovery Area of UBI Banca, which has been given special powers regarding non-performing positions.

The Parent Bank has to express his opinion both regarding classification and management of those non-performing counterparties (default, repeated overdue for more than 180 days, restructured cash loans, impairments, non-performing loans) whose total risk at Group’s level is equal or higher than 1 million euros.

More precisely:

concerning the various types of problem loans (restructured cash loans, impairments, non-performing loans) the body in charge at the Parent Bank express their opinion to the Group’s banks and companies relating to classification and management of the interested counterparties, in order to check if they are consistent with the Group’s directions in the credit field;
concerning positions with repeated overdue for more than 180 days, the body in charge at the Parent bank express their opinion relating to the management and operational proposal which any Network Bank or Product Company has to submit for exposures exceeding 1 million euros.

As for centralisation at the Credit Recovery Area of the Parent Bank of management of impaired positions belonging to the banks of former Group BPU Group, the notion of “operational impairment” has been created: maximum 9 months at the Network Bank then “impaired loans” with centralised management at the Credit Recovery Area of UBI Banca.

The entire lending process of assessment, approval, management and verification is conducted in compliance with internal regulations and manuals, continuously updated as time goes on to further increase the efficiency and effectiveness of lending and to adapt them to changes in legislation and in the organisational structure.

Each loan approval body is granted powers to grant loans up to certain amounts and total approvals granted are reported to the approval body immediately above it in the hierarchy. Central loan approval bodies also provide indications on economic conditions applicable consistent with a proper risk/yield ratio. The total amount of the approvals granted by all authorised approval bodies is also reported to the Board of Directors at its regular meetings.

In accordance, amongst other things, with the new “Patti Chiari” (Clear Pacts) agreement, the assessment stage is based on an examination of an applicant’s earnings, financial and capital situation and of data on counterparty trends and particular attention is paid in the case of firms to an assessment of qualitative information on products and the markets in which they operate, their competitive positioning, form of organisation, management and development projects. Similar attention is also paid to guarantees offered.

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The Bank makes use of reliable up-to-date techniques of analysis and information from reputable and prompt outside sources at the assessment stage which allows it to assess credit worthiness thoroughly. A project to implement an internal rating system was started some time ago at Group level in order to support analysis and to comply with instructions issued by the Basle Committee for Bank Supervision.

The loan approval stage involves the whole structure of the Bank: the branch network (branches, Corporate Account Managers), departments for granting Retail and Corporate loans, the Management Committee, the Executive Committee and the Board of Directors. A prior opinion is requested of the Parent Bank for particularly large loans on compliance with Group portfolio strategies and lending policies by the Bank.

Authorisations and the composition of the approval bodies are defined in the internal regulations governed by the Corporate Statute; in addition, criteria are laid down for “weighting” the various categories of risk and guarantees, for the total amount of permissible lending to an individual customer or to the group to which it belongs.

2.2 Management, measurement and control systems

The development at UBI Group level

The two banking groups involved in the constitution of UBI Group possessed different rating and credit monitoring systems; the concurrence process performed during the year resulted in two basic decisions, closely linked to one another:
adoption of a target information system, based on the system in use at former BLP with specific additions concerning specific procedures of former BPU regarded as best practice;
adoption of internal rating systems to be used in the target information system and to be duly approved by the Bank of Italy for compliance with Basel II provisions.

The credit monitoring instrument adopted is the one used by former BLP with addition of internal rating models. Further developments have been provided for, also based on instruments applied by former BPU, in order to strengthen secondary controls.

As for rating models to be implemented by all the Group’s Network Banks due to the information system migration, the following models were chosen:
models used by former BLP for Retail (private individuals and companies) and Corporate counterparties, already implemented in the informative system and to be refined and maintained in 2008;
the model in use at former BPU for larger counterparties.

Moreover, in the course of 2007 intense activity was performed for revision, updating and adoption of policies and regulations regarding credit risk management. More in detail, a policy on institutional counterparties risk and country risk has been established for management of loans granted to resident and non-resident institutional customers, as well as to ordinary customers resident in risk countries.

Special attention paid to subprime mortgage loans because of recent events occurred mainly on the American market, as well as a perception of higher risk in the mortgage loans segment led to a specific focus on controls performed by the Bank and the Group and to preparation of a policy for external networks support concerning mortgage loans offered to non-captive customers. This kind of placement is more likely to generate contingent credit risks, operating risks and reputation risks for the Bank and the Group.

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Finally, a policy was established on concentration risk concerning exposures on a Group level, designed to control instability risks due to granting of high amounts to large borrowers. In detail, various limit levels have been set based on size of loan application, supervisory capital and internal ratings, with a possibility to extend such limits based on specific features of the operation (guarantees) and type of counterparty.

The activities performed by the Bank in financial year 2007

In 2007, thanks to a refinement in the process and to various implementations, the Bank was able to perform a more efficient credit valuation and specific monitoring.

The main factors are reported below :

Step-by-step development and application of a Group “INTERNAL RATING SYSTEM” on all customer segments, supporting the introduction of a credit risk management and measurement system (for a more accurate calculation of risks involved in the Bank’s activities) complying with Basel II regulations regarding capital requirement. The credit assessment deriving from application of such rating model is then used not only in assessment systems but also as a basis for proper determination of risk/yield ratio.

Systems varying according to customer segments are as follows:

- for companies operating following ordinary accounting principles, a system for assessment of all accounts and qualitative aspects is used integrated by trend analysis components (considering the company’s “behaviour” within the Group and the banking system as a whole);

- for companies operating following simplified accounting principles, the Bank uses models combining financial, qualitative and trend analyses with an analysis on sociological features of shareholders, single proprietors and/or individuals holders of a VAT registration number;

- for Private customers, models for assessment of sociological aspects and product features are used (acceptance component) together with trend analysis components.

Overall coverage of rating activities:

- Overall coverage in terms of various rating systems amounted to 78% as at 31 st December 2006 with a portfolio coverage by market as follows:

Retail Affluent and Retail Small Corporate Mass Market Business & Bodies 89% 91% 34%

- Current coverage recorded at 31 st December 2007 was of 95% with a portfolio coverage by market as follows:

Retail Affluent and Retail Small Corporate Mass Market Business & Bodies 98% 89% 98%

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Full use of GMR/IAC system: credit control instrument enabling, among others, a complete management of individual trend monitoring and implementation of provisions regarding identification of functions and responsibilities, timing and actions as set out in the rules on credit monitoring and problem loans management. Such instrument, also including a sophisticated algorithm for measurement of trend problems, enables specific control activities and directs the process for customers classification attribution. In-depth review of those companies presenting various and significant problems was therefore made easier for Retail and Corporate control services. Such thorough analysis allowed the Bank to advance actions for safeguard of loans and reduced risks to a minimum. The GMR/IAC system proved to be a very efficient instrument for safeguard of loans and also an indirect commercial vehicle, which ensuring specific, efficient and suitable monitoring enables more correct and intense commercial development.

In compliance with specific regulations and standards relating to large risks, suitable credit expenditure progressive thresholds are established for identification of the deliberative body (starting from the single account manager up to the Board of Directors). Group’s Corporate portfolio analyses are periodically performed for monitoring of concentration profile. As for institutional counterparties and/or exposures subject to country risk, special thresholds and methods for fixing of limits are outlined to ensure proper diversification of total Group’s portfolio.

2.3 Techniques for mitigating credit risk

In order to mitigate credit risk, Banca Popolare di Bergamo S.p.A. acquires guarantees typical of banking activities from counterparties for some types of loan, mainly security such as properties and financial instruments as well as personal guarantees.

In order to give proper consideration to those factors, criteria have been set to weight the different categories of risk and security and guarantees in order to calculate the total amount of credit that can be granted to a given customer or group of companies to which the customer belongs. Prudential "discounts" are applied to the estimated value of security offered by counterparties depending on the type of security (i.e. mortgages on properties and pledges on money or other financial instruments). The value of security in the form of listed financial instruments is subjected to constant automatic monitoring which compares the present value of the guarantee to the initial value so that the Bank can act rapidly and effectively if a significant reduction in the value of the security occurs.

Within the Basel II project – Credit Risk “yard”, we report completion of the first step of the Credit Risk Mitigation project, concerning gaps identification and guidelines, and starting of gaps removal activity with the support of external specialised companies. Particular attention is paid to recovery of prior information on mortgages, for compliance purposes at the moment of first supervisory notification. More generally, all measures have been taken for compliance control regarding any type of warranty managed by the Bank.

In order to contain the credit risk resulting from derivatives activity at Group level, overall exposure and concentration limits are defined, as well as qualitative constraints in terms of credit standards for individual counterparties. In addition, collateral lodgement agreements (ISDA - Credit Support Annex of the International Swap Derivatives Association) have been concluded in order to reduce the scale of exposure significantly. 226

For derivatives transactions with Corporate customers, specific credit lines are opened for derivative products, the use of which are calculated on the basis of credit equivalents, appropriately defined for each transaction.

2.4 Impaired financial assets

Classification of problem portfolio complies with the relevant regulations and can be summed up as follows:

continuously overdue amounts for over 180 days;
restructured positions;
impairmed loans;
non-performing loans.

Besides those classes there are still problem loans relating to “country risk”, due to non- guaranteed exposures to institutional and ordinary customers belonging to risk countries as defined by the supervisory body. Problem loans management is controlled based on relevant risk level by the organisational units in charge of management of the Bank’s problem loans. As already mentioned in the introduction, as from 2008 “continuously overdue amounts for over 180 days”, “operational impairmed loans” and “restructured loans” will still be managed within the Bank, whereas “impaired” and “non-performing” positions will be managed by the Credit Recovery Area of the Parent Bank following centralisation of control over such problem loans. Valuation of impairment losses adequacy is performed on a case-by-case level for each single position and ensuring adequate hedging of losses foreseen.

Analysis of impaired exposures is constantly carried out by the single operational units controlling the relative risks and by the Parent Bank. Solution of the difficulties by the counterparties – normally following payment by the counterparty of the whole amount due – is the key factor to make those exposures performing.

2.5 Performing financial assets

For the sake of providing full information, we report that the Bank calculates appropriate flat-rate provisions made to account for the implicit risk attaching to performing loans. Loans subjected to collective measurement (performing loans) are grouped into uniform risk categories. The model currently in use, termed a transitory model, uses impairment rates as the risk driver divided according to economic sectors (and for firms also by lines of business) defined by the Bank of Italy. The target model, however, which will be available when the group rating model project is completed, will use internal rating classes for each portfolio.

In accordance with IAS 39, provisions only cover losses actually incurred determined by observable and quantifiable events at the time of measurement and not expected losses determined by anticipated or future events. As mentioned in Part A “Accounting policies” of the Notes to the financial statements, at an accounting integration stage between former Banche Popolari Unite and former Banca Lombarda e Piemontese the need of a re-alignment in practice and processes emerged, including harmonisation of calculation methods for collective impaired losses on performing loans. The chosen criteria, applicable from this Balance Sheet and for all companies in the Group, is in line with conventional criteria of Basel II which settle a

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time horizon of 12 months – within the limits of the incurred time – for evaluation of default forecasts instead of 7 months as it was applicable until 31 st December 2006.

This choice is also motivated by the following reasons:

maximum consistency between the adoption of a unique time parameter and uniform implementation and use of processes, monitoring and reporting systems for credit control inside the Group, with easier organisation of measuring and monitoring systems;
alignment to the practice adopted on the national market, which enables higher comparability between the financial statements of companies and those of the main national banks;
a time horizon presently supported by the computer system chosen by the Group.

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Information of a quantitative nature

A. CREDIT QUALITY

A.1 Impaired and performing exposures: amounts, impairment losses, dynamics, economic and geographical distribution

A.1.1 Distribution of financial assets by portfolio and according to credit quality (carrying amounts)

Non Impaired Restructured Past due Country Portfolios/Quality performing Other assets Total loans exposures exposures risk loans 1. Financial assets held for trading - - - - - 62.271 62.271

2. Available-for-sale financial assets ------

3. Held-to-maturity financial assets ------

4. Loans to banks - - - - 3.816 3.185.884 3.189.700

5. Loans to customers 121.818 133.384 11.544 9.301 7.504 21.106.997 21.390.548 6. Financial assets at fair value ------

7. Financial assets held for disposal - - - - - 209.501 209.501

8. Hedging derivatives - - - - - 1.392 1.392 Total at 31/12/2007 121.818 133.384 11.544 9.301 11.320 24.566.045 24.853.412

Total at 31/12/2006 103.393 118.006 14.934 21.201 5.154 23.585.231 23.847.919

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A.1.2 Distribution of financial assets by portfolio and according to credit quality (gross and net values)

Impaired assets Other assets

Total (net Portfolios/Quality Gross Specific Portfolio Portfolio exposure) Net exposure Gross exposure Net exposure exposure impairment impairment impairment

1. Financial assets held for trading - - - - X X 62.271 62.271

2. Available-for-sale financial assets ------

3. Held-to-maturity financial assets ------

4. Loans to banks - - - - 3.189.724 (24) 3.189.700 3.189.700

5. Loans to customers 423.217 (147.170) - 276.047 21.165.797 (51.296) 21.114.501 21.390.548 6. Financial assets at fair value - - - - X X - -

7. Financial assets held for disposal - - - - 210.673 (1.171) 209.502 209.502

8. Hedging derivatives - - - - X X 1.392 1.392

Total at 31/12/2007 423.217 (147.170) - 276.047 24.566.194 (52.491) 24.577.366 24.853.413

Total at 31/12/2006 404.284 (146.749) - 257.535 23.509.205 (37.083) 23.590.384 23.847.919

A.1.3 Exposures for loans and off-balance-sheet to banks: gross and net amounts

Specific Portfolio Type of exposure/Values Gross exposure Net exposure impairment impairment

A. Esposure for loans

a) Non performing loans - - - -

b) Impaired loans - - - -

c) Restructured exposures - - - -

d) Past due exposures - - - -

e) Country risk 3.825 X (9) 3.816

f) Other assets 3.222.658 X (16) 3.222.642

Total A 3.226.483 - (25) 3.226.458

B. Off-balance-sheet exposures

a) Impaired - - - -

b) Other 361.568 X (46) 361.522

Total B 361.568 - (46) 361.522

230

A.1.4 Exposures for loans to banks: changes in gross impaired exposures and those subject to “country risk”

Non Impaired Restructured Past due Description/Categories performing Country risk loans exposures exposures loans A. Initial gross exposure - - - - 582

- of which : exposures transferred not derecognised - - - - -

B. Increases - - - - 3.525

B.1 Additions from performing exposures - - - - -

B.2 Transfers from other categories of impaired exposures - - - - -

B.3 Other increases - - - - 3.525

C. Decreases - - - - (282)

C.1 Removed to performing exposures - - - - -

C.2 Cancellations - - - - -

C.3 Payments received - - - - (236)

C.4 From disposals - - - - -

C.5 Transfers to other categories of impaired exposures - - - - -

C.6 Other decreases - - - - (46)

D. Final gross exposure - - - - 3.825 - of which : exposures transferred not derecognised - - - - -

A.1.5 Exposures for loans to banks: changes in total impairment losses

Non Impaired Restructured Past due Description/Categories performing Country risk loans exposures exposures loans A. Total initial net impairment - - - - 1 - of which : exposures transferred not derecognised -- --- B. Increases - - - - 8 B.1 Impairment losses -- -- 8 B.2 Transfers from other categories of impaired exposures -- --- B.3 Other increases -- --- C. Decreases - - - - - C.1 Reversals resulting from measurement -- --- C.2 Reversals from payments received -- --- C.3 Cancellations -- --- C.4 Transfers from other categories of impaired exposures -- --- C.5 Other decreases -- --- D. Total final net impairment -- -- 9 - of which : exposures transferred not derecognised - - - - -

231

A.1.6 Lending and off-balance-sheet exposures to customers: gross and net amounts

Specific Portfolio Type of exposure/Values Gross exposure Net exposure impairment impairment

A. Exposure of loans a) Non performing loans 243.357 (121.539) - 121.818 b) Impaired loans 152.389 (19.006) - 133.383 c) Restructured exposures 16.361 (4.816) - 11.545 d) Past due exposures 11.110 (1.808) - 9.302 e) Country risk 7.734 X (230) 7.504 f) Other assets 21.331.381 X (52.236) 21.279.145

Total A 21.762.332 (147.169) (52.466) 21.562.697 B. Off-balance-sheet exposures a) Impaired 13.546 (1.084) - 12.462 b) Other 3.114.060 X (5.297) 3.108.763 Total B 3.127.606 (1.084) (5.297) 3.121.225

A.1.7 Exposures for loans to customers: changes in gross impaired exposures and those subject to “country risk”

Non performing Restructured Past due Description/Categories Impaired loans Country risk loans exposures exposures

A. Initial gross exposure 219.917 141.182 20.719 22.466 4.686

- of which : exposures transferred not derecognised - - - - -

B. Increases 113.577 111.599 5.224 10.334 5.743

B.1 Additions from performing exposures 61.740 106.708 3.921 9.271 -

B.2 Transfers from other categories of impaired exposures 45.511 2.201 - 383 -

B.3 Other increases 6.326 2.690 1.303 680 5.743

C. Decreases (90.137) (100.392) (9.582) (21.690) (2.695)

C.1 Removed to performing exposures - (23.404) (56) (7.170) -

C.2 Cancellations (35.623) - - - -

C.3 Payments received (50.583) (32.500) (9.526) (5.296) (2.434)

C.4 From disposals (3.829) - - - -

C.5 Transfers to other categories of impaired exposures - (39.772) - (8.322) -

C.6 Other decreases (102) (4.716) - (902) (261)

D. Final gross exposure 243.357 152.389 16.361 11.110 7.734 - of which : exposures transferred not derecognised - - - - -

Item C. 4 includes the gross amount of non-performing loans disposed of during 2007.

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A.1.8 Exposures for loans to customers: changes in total impairment losses

Non performing Restructured Past due Description/Categories Impaired loans Country risk loans exposures exposures

A. Total initial net impairment (116.524) (23.175) (5.785) (1.264) (113) - of which : exposures transferred not derecognised --- - - B. Increases (60.759) (14.212) (1.147) (1.703) (169) B.1 Impairment losses (46.600) (13.906) (1.147) (1.649) (169) B.2 Transfers from other categories of impaired exposures (9.695) (115) - (37) - B.3 Other increases (4.464) (191) - (17) - C. Decreases 55.744 18.381 2.116 1.159 52 C.1 Reversals resulting from measurement 6.907 1.395 1.528 42 20 C.2 Reversals from payments received 12.752 5.258 588 253 32 C.3 Cancellations 35.623 -- - - C.4 Transfers from other categories of impaired exposures - 9.371 - 476 - C.5 Other decreases 462 2.357 - 388 - D. Total final net impairment (121.539) (19.006) (4.816) (1.808) (230) - of which : exposures transferred not derecognised - - - - -

Loans to customers: gross and net amounts

31/12/2007

Non performing Restructured Past due Performing Impaired loans Country risk loans exposures exposures loans

Gross exposure 243.357 152.389 16.361 11.110 7.734 21.158.062

- Loans 243.357 152.389 16.361 11.110 7.734 21.158.062

- Securities ------

Specific impairment (121.539) (19.006) (4.816) (1.808) - X

- Loans (121.539) (19.006) (4.816) (1.808) - X

- Securities - - - - - X

Portfolio impairment - - - - (230) (51.066)

- Loans - - - - (230) (51.066)

- Securities ------

TOTAL 121.818 133.383 11.545 9.302 7.504 21.106.996

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A.2 Exposures classification according to external and internal ratings

A.2.1 Distribution of exposures for loans and off-balance-sheet by type of external rating (carrying amounts)

Type of external rating Exposures Without rating Total AAA/AA- A+/A- BBB+/BBB- BB+/BB- B+/B- Below B- A. Exposures for loans 380.336 3.391.874 250.522 2 4.965 - 20.761.456 24.789.155 B. Derivatives 7 13.995 - - - - 49.661 63.663 B.1 Financial derivatives 7 13.995 - - - - 49.661 63.663 B.2 Credit derivatives ------C. Guarantees granted 52.068 257.469 59.105 4.580 - - 2.132.839 2.506.061 D. Commitments to pay funds 53.987 120.459 24.824 - 3 - 713.751 913.024 Total 486.398 3.783.797 334.451 4.582 4.968 - 23.657.707 28.271.903

The Internal Rating system of the Group consists of the following three models:

• Large Corporate Models - with rating attributable following an analysis of Balance Sheet, company’s qualitative features, trend profile and group to which it belongs.

• Companies Models – for company counterparties which cannot be defined as Large Corporate the used rating model is attributable following analysis of Balance Sheet, company’s qualitative features and trend profile.

• Private Models – they generate a counterparty rating calculated following product type (mortgages, loans, credit cards and lines); the final rating is a synthesis of the analysis of the counterparty’s sociological profile, product features and trend profile.

Distributions by internal rating category as at 31 st December 2007 showing companies models assessed by Large Corporate and Companies under ordinary accounting regime models are given below

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A.2.2.1 Distribution of exposures for loans and off-balance-sheet by type of internal rating (LARGE CORPORATE model, for groups with a total credit limit exceeding 20 million euros, or with a group turnover ot total assets exceeding 150 million euros )

Type of internal rating Without Exposures TOTAL rating LC1 LC2 LC3 LC4 LC5 LC6 LC7 LC8 LC9 LC10 LC11 LC12 LC13 LC14 LC15 LC16 LC17 LC18 LC19

A. Exposures for loans - - 362.571 283.812 654.353 170.932 812.546 569.212 675.462 648.996 886.522 337.468 412.747 271.915 124.644 56.669 17.996 4.238 - - 6.290.083

B. Derivatives ------746 435 - 49 127 685 - 595 - 167 - - - 47.690 50.494 B.1 Financial derivatives ------746 435 - 49 127 685 - 595 - 167 - - - 47.690 50.494 B.2 Credit derivatives ------C. Guarantees granted - - 214.529 - 26.270 31.663 138.611 190.302 172.268 226.557 86.627 110.638 29.444 87.699 28.942 5.860 1.523 - - - 1.350.933 D. Commitments to pay funds - - - 53.987 120.380 - - 24.824 11.439 369 2.695 3.006 4.014 4.507 1.813 34 158 - - 1.360 228.586 Total - - 577.100 337.799 801.003 202.595 951.903 784.773 859.169 875.971 975.971 451.797 446.205 364.716 155.399 62.730 19.677 4.238 - 49.050 7.920.096

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A.2.2.2 Distribution of exposures for loans and off-balance-sheet by type of internal rating (model applicable to companies under ordinary accounting regime with single turnover exceeding 5 million euros)

Type of internal rating Without Exposures Total rating C1 C2 C3 C4 C5 C6 C7 C8 C9

A. Exposures for loans 17.035 102.324 162.303 739.428 469.600 453.661 318.423 244.850 68.180 - 2.575.804

B. Derivatives 58 552 582 4.044 1.911 1.545 1.842 700 - - 11.234

B.1 Financial derivatives 58 552 582 4.044 1.911 1.545 1.842 700 - - 11.234

B.2 Credit derivatives ------

C. Guarantees granted 8.464 39.364 54.051 73.121 32.322 56.066 18.184 17.195 2.574 - 301.341

D. Commitments to pay funds - 1.990 3.269 19.219 18.341 7.848 14.038 13.332 12.730 - 90.767 Total 25.557 144.230 220.205 835.812 522.174 519.120 352.487 276.077 83.484 - 2.979.146

236

A.2.2.3 Distribution of exposures for loans and off-balance-sheet by type of internal rating (model applicable to companies under ordinary accounting regime with single turnover below 5 million euros)

Type of internal rating Exposures Without rating Total SB1 SB2 SB3 SB4 SB5 SB6 SB7 SB8 SB9

A. Exposures for loans 4.307 62.152 203.152 463.670 505.740 910.512 400.649 173.535 26.477 13.173.073 15.923.267

B. Derivatives - 211 39 761 297 492 119 - 15 - 1.934

B.1 Financial derivatives - 211 39 761 297 492 119 - 15 - 1.934

B.2 Credit derivatives ------

C. Guarantees granted 1.696 17.832 30.423 26.763 21.858 35.948 9.486 2.419 280 707.083 853.788

D. Commitments to pay funds 598 1.500 12.345 39.084 28.368 69.978 27.698 4.460 1.096 408.545 593.672

Total 6.601 81.695 245.959 530.278 556.263 1.016.930 437.952 180.414 27.868 14.288.701 17.372.661

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Analysis of percentage coverage on credit portfolio (in thousand of euros)

Exposures based on Trend analysis Total of exposures Non performing Intergroup Total of Coverage Without rating internal ratings model covered by ratings without rating without rating exposures percentage

A. Exposures for loans 11.616.082 8.374.342 19.990.424 256.146 3.046.682 1.495.903 24.789.155 94%

B. Derivatives 15.972 - 15.972 - 45.695 1.995 63.662 97%

B.1 Financial derivatives 15.972 - 15.972 - 45.695 1.995 63.662 97%

B.2 Credit derivatives ------

C. Guarantees granted 1.798.979 201.731 2.000.710 12.002 122.122 371.227 2.506.061 85%

D. Commitments to pay funds 503.120 309.733 812.853 466 - 99.706 913.025 89% Total at 31/12/2007 13.934.153 8.885.806 22.819.959 268.614 3.214.499 1.968.831 28.271.903 93%

Credit portfolio coverage after non-performing loans and intergroup positions as calculated by the UBI internal rating system amounts to 93%. The data concerning total of exposures covered by internal rating includes exposures to Corporate and Retail customers for which an assessment of credit worthiness is provided by a trend profile analysis form.

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A.3 Distribution of guaranteed exposures by type of guarantee

A.3.1 Guaranteed exposures for loans to banks and to customers

Personal securities (2) Real securities (1) Exposure Credit derivatives Signature credits Total (1)+(2) value Other Other Other Other Properties Securities Other assets States public Banks States public Banks subjects subjects bodies bodies 1. Guaranteed exposures to banks

1.1. totally guaranteed 9 ------170 170

1.2. partially guaranteed ------

2. Guaranteed exposures to customers

2.1. totally guaranteed 11.395.914 15.272.830 642.307 143.637 - - - - - 50.837 14.783 13.129.206 29.253.600 2.2. partially guaranteed 1.616.143 2.612 515.872 19.346 ------5.171 400.105 943.106

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A.3.2 Guaranteed off-balance-sheet exposures to banks and to customers

Personal securities (2) Real securities (1) Exposure Credit derivatives Signature credits Total (1)+(2) value Other Other Other Other Properties Securities Other assets States public Banks States public Banks subjects subjects bodies bodies 1. Guaranteed exposures to banks

1.1. totally guaranteed ------

1.2. partially guaranteed ------

2. Guaranteed exposures to customers

2.1. totally guaranteed 976.843 559.495 82.410 70.830 - - - - - 526 17.443 1.182.204 1.912.908 2.2. partially guaranteed 174.270 25 20.432 1.940 ------5.143 19.316 46.856

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A.3.3 Guaranteed impaired cash exposures for loans to banks and to customers

Guarantees (fair value)

Personal securities Real securities Credit derivatives Signature derivatives

Total Exposure value Guaranteed amount Banks Banks Insurance Insurance Properties Securities companies companies companies companies Guarantee surplus (fair value) Other assets Non financial Non financial central banks central banks Other subjects Other subjects Governments and Governments and Other public bodies Other public bodies Financial companies Financial companies

1. Guaranteed exposures to banks:

1.1 over 150% ------

1.2 100% to 150% ------

1.3 50% to 100% ------

1.4 below 50% ------

2. Guaranteed exposures to customers:

2.1 over 150% 162.607 880.845 344.445 10.730 1.275 ------13.478 2.128 33.927 399.722 805.705 1.049

2.2 100% to 150% 28.642 60.887 35.921 2.730 279 ------640 157 22 17.004 56.753 4

2.3 50% to 100% 3.524 7.303 1.970 1.367 54 ------10 91 - 45 3.754 7.291 91 2.4 below 50% 1.216 721 42 73 169 ------426 710 2

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A.3.4 Guaranteed impaired off-balance-sheet exposures to banks and to customers

Guarantees (fair value)

Personal securities Real securities Credit derivatives Signature derivatives

Total Exposure value Guaranteed amount Banks Banks Securities Properties companies companies Other assets Guarantee surplus (fair value) Non financial Non financial central banks central banks Other subjects Other subjects Governments and Governments and Other public bodies Other public bodies Financial companies Financial companies Insurance companies Insurance companies

1. Guaranteed exposures to banks:

1.1 over 150% ------

1.2 100% to 150% ------

1.3 50% to 100% ------

1.4 below 50% ------

2. Guaranteed exposures to customers:

2.1 over 150% 1.339 7.733 380 73 ------26 - 199 6.987 7.665 8

2.2 100% to 150% 227 302 - 6 ------296 302 -

2.3 50% to 100% 21 25 - 21 4 ------25 - 2.4 below 50% ------

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B. DISTRIBUTION AND CONCENTRATION OF CREDIT

B.1 Distribution of exposures for loans and off-balance-sheet to customers

Governments - Central banks Other public bodies Financial companies Insurance companies Non financial companies Other

Exposures/ Counterparties Net exposure Net exposure Net exposure Net exposure Net exposure Net exposure Gross exposure Gross exposure Gross exposure Gross exposure Gross exposure Gross exposure Specific impairment Specific impairment Specific impairment Specific impairment Specific impairment Specific impairment Portfolio impairment Portfolio impairment Portfolio impairment Portfolio impairment Portfolio impairment Portfolio impairment

A. Exposures for loans

A.1 Non performing loans ------3.465 (2.654) - 811 - - - - 102.042 (44.259) - 57.783 137.850 (74.626) - 63.224

A.2 Impaired loans - - - - 5 (1) - 4 6.309 (13) - 6.296 - - - - 73.758 (8.902) - 64.856 72.318 (10.090) - 62.228

A.3 Restructured exposures ------16.361 (4.816) - 11.545 - - - -

A.4 Past due exposures ------17 (5) - 12 - - - - 1.740 (199) - 1.541 9.353 (1.604) - 7.749

A.5 Other exposures 4.231 X (1) 4.230 27.764 X (5) 27.759 3.131.908 X (3.285) 3.128.623 29.745 X - 29.745 10.867.091 X (31.996) 10.835.095 7.278.376 X (17.180) 7.261.196

Total 4.231 - (1) 4.230 27.769 (1) (5) 27.763 3.141.699 (2.672) (3.285) 3.135.742 29.745 - - 29.745 11.060.992 (58.176) (31.996) 10.970.820 7.497.897 (86.320) (17.180) 7.394.397

B. Off-balance-sheet exposures

B.1 Non performing loans ------3.760 (481) - 3.279 62 (3) - 59

B.2 Impaired loans ------1 - - 1 - - - - 5.255 (195) - 5.060 325 (28) - 297

B.3 Other impaired assets ------4.106 (373) - 3.733 37 (5) - 32

B.4 Other 54.000 X - 54.000 7.968 X (1) 7.967 162.719 X (11) 162.708 5.819 X - 5.819 2.702.034 X (4.822) 2.697.212 181.520 X (462) 181.058

Total 54.000 - - 54.000 7.968 - (1) 7.967 162.720 - (11) 162.709 5.819 - - 5.819 2.715.155 (1.049) (4.822) 2.709.284 181.944 (36) (462) 181.446

31/12/2007 58.231 - (1) 58.230 35.737 (1) (6) 35.730 3.304.419 (2.672) (3.296) 3.298.451 35.564 - - 35.564 13.776.147 (59.225) (36.818) 13.680.104 7.679.841 (86.356) (17.642) 7.575.843 31/12/2006 71.533 - (3) 71.530 43.582 - (3) 43.579 4.190.320 (4.746) (3.127) 4.182.447 29.737 - - 29.737 11.862.670 (62.223) (25.840) 11.774.607 7.684.335 (80.941) (11.524) 7.591.870

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B.2 Distribution of loans to resident non-financial companies

31/12/2007

Other services destined for sales 2.860.802 Commerce, recovery and repair services 1.734.735 Construction and public works 1.856.242 Energy products 1.123.485 Metal products other than machinery and transport vehicles 547.259 Other branches 4.364.214

The table includes distribution of financings to resident non-financial companies and producing families.

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B.3 Geographical distribution of exposures for loans and off-balance-sheet to customers

OTHER EUROPEAN ITALY AMERICA ASIA OTHER COUNTRIES Exposures/Geographical areas Gross Gross Gross Gross Gross Net exposure Net exposure Net exposure Net exposure Net exposure exposure exposure exposure exposure exposure

A. Exposures for loans

A.1 Non performing loans 242.889 121.652 469 166 ------

A.2 Impaired loans 151.549 132.709 840 675 ------

A.3 Restructured exposures 16.361 11.544 ------

A.4 Past due exposures 11.083 9.279 23 20 3 1 - - 1 1

A.5 Other exposures 21.097.501 21.049.358 237.854 233.683 2.566 2.500 308 308 886 801

Total 21.519.383 21.324.542 239.186 234.544 2.569 2.501 308 308 887 802

B. Off-balance-sheet exposures

B.1 Non performing loans 3.822 3.339 ------

B.2 Impaired loans 5.580 5.358 ------

B.3 Other impaired assets 4.144 3.766 ------

B.4 Other 3.050.388 3.045.485 63.453 63.067 13 13 - - 206 198

TOTAL 3.063.934 3.057.948 63.453 63.067 13 13 - - 206 198

31/12/2007 24.583.317 24.382.490 302.639 297.611 2.582 2.514 308 308 1.093 1.000 31/12/2006 23.508.835 23.371.547 321.693 315.603 5.815 5.734 350 349 559 534

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B.4 Geographical distribution of exposures for loans and off-balance-sheet to banks

OTHER EUROPEAN ITALY AMERICA ASIA OTHER COUNTRIES Exposures/Geographical areas Gross Gross Gross Gross Gross Net exposure Net exposure Net exposure Net exposure Net exposure exposure exposure exposure exposure exposure

A. Exposures for loans

A.1 Non performing loans ------

A.2 Impaired loans ------

A.3 Restructured exposures ------

A.4 Past due exposures ------

A.5 Other exposures 3.175.432 3.175.424 21.307 21.303 25.625 25.612 3.988 3.987 132 132

Total 3.175.432 3.175.424 21.307 21.303 25.625 25.612 3.988 3.987 132 132

B. Off-balance-sheet exposures

B.1 Non performing loans ------

B.2 Impaired loans ------

B.3 Other impaired assets ------

B.4 Other 284.251 284.230 52.692 52.687 573 570 17.217 17.205 6.835 6.830

TOTAL 284.251 284.230 52.692 52.687 573 570 17.217 17.205 6.835 6.830

31/12/2007 3.459.683 3.459.654 73.999 73.990 26.198 26.182 21.205 21.192 6.967 6.962 31/12/2006 3.254.973 3.254.961 49.771 49.768 5.582 5.576 13.949 13.944 1.653 1.646

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B.5 Large risks (in accordance with supervisory legislation)

31/12/2007

Amount 2.707.298

Number 9

C. SECURITISATION TRANSACTIONS AND DISPOSAL OF ASSETS

The Bank is not required to compile this section in that it acts as subservicer in the collection of securitised loans on behalf of the Parent Bank UBI Banca; all necessary information on securitisation operations and other servicing activities may therefore by found in the Parent Bank’s financial statements.

D. CREDIT RISK MEASUREMENT MODELS

Part E, Section 1, paragraph “Management, measurement and control systems” may be consulted on the subject.

Section 2 Market risk

2.1 Interest rate risk – Supervisory dealing portfolio

For preparation of this Section of the notes only financial instruments (assets and liabilities) included in the supervisory dealing portfolio are taken into account, as defined by the regulations concerning supervisory notifications on market risks. Consequently, all possible transactions allocated in the dealing portfolio but not corresponding to the said definition are excluded. These transactions are included in the notes concerning the “Banking portfolio”.

Information of a qualitative nature

A. General aspects

Compilation of this part was made taking into account exclusively the dealing portfolio, that is, the portfolio of financial instruments subject to capital requirements for market risks as set out in the regulations on supervisory notifications. Balanced dealing portfolios are excluded. Banca Popolare di Bergamo S.p.A. has no significant own portfolios.

247

B. Management processes and measurement methods of interst rate risk

See following par. A “General aspects, management procedures and measurement methods of interest rate risk”.

2.2 Interest rate risk – Banking portfolio

The banking portfolio consists of all financial instruments receivable and payable non included in the dealing portfolio as reported in Section 2.1.

Information of a qualitative nature

A. General aspects, management procedures and measurement methods of interest rate risk

Interest rate risk results from imbalance between expiry (repricing) of credit and debit items belonging to the banking portfolio, which consists of all financial instruments, receivable and payable, non included in the dealing portfolio as set out in supervisory regulations.

Control and management of structural interest rate risk – deriving from fair value and cash flow – are performed by the Risk Management Area / Financial Risks Service of the Parent Bank.

Measurement is carried out each month following a statistical approach, that is, on the assumption that sensitive quantities and relevant mixed as recorded on the date of the analysis will be unchanged during the whole reference period (12 months). The model also takes into account viscosity and elasticity of at-sight items in order to determine impact on net interest income.

Methods for interest rate risk measurement consist mainly in gap analysis and sensitivity analysis models. Sensitivity analysis of economical values is supported by sensitivity analysis of net interest income focusing on income changes occurring in the following 12 months. Both measurement perspectives are integrated by a total risk indicator (total return).

B. Fair value hedges

Within Banca Popolare Bergamo S.p.A. specific and general hedging postings have been activated by means of derivative financial instruments only, in order to reduce exposure to adverse changes in fair value due to interest rate risk. Particularly, lending with mixed and fixed rate schemes exceeding one year length (general hedging), fixed rate issued bonds (specific hedging) and structured debenture loans have been included. Interest rate swap derivative contracts have been used . Special testing of hedging effectiveness is carried out by the Financial Risk Service of the Parent Bank, which examines preconditions for application of hedge accounting and keeps records for each single hedging. Effectiveness tests are performed by means of tests preceding hedging activation, followed by retrospective tests on a monthly basis.

248

C. Cash flow hedges

The Bank does not have any cash flow hedges in accordance with IFRS.

Information of a quantitative nature

1. Banking portfolio – Internal models and other sensitivity analysis methods

Interest rate risk for Banca Popolare Bergamo, based on sensitivity analysis of +100 bp, recorded an average value amounting to approx. –4,85 million euros during 2007, reaching –7,63 million euros at the end of the period (-5,3 million at 31st December 2006). Maximum and minimum values in 2007 were –7,63 million euros and –0,81 million euros respectively. Those amounts are calculated after the so called “viscosity effect”. The table below shows risk measurement referring to the above period – on the basis of a standard parallel shift on the curve of 200 bp, as required by Basel II – compared to individual supervisory capital at the end of the period.

Risk indicators – annual average Year 2007 Year 2006 Parallel shift of 200 bp (100 bp) Sensitivity/ supervisory capital 0,5% 0,4%

Risk indicators – specific values 31.12.2007 31.12.2006 Parallel shift 200 bp (100 bp) Sensitivity/ supervisory capital 0,7% 0,7%

Risk measurement – based on punctual values at 31 st December 2007 for a standard parallel shift of 100bp – referred to the supervisory capital amounts to 0,45% whereas the same risk measurement referred to net profit is of 1,87%. Impact on interest net profit, based on a shift of +100 basis points on the rates curve – as at 31 st December 2007 – amounts to 62,59 million euros taking into account the viscosity effect of at-sight positions (and considering both the percentage of at-sight positions, which absorbs the changes in rate, and the time needed for implementation of such a change). Capitals profiles by repricing date and breakdown of sensitivity by time bucket are given in the charts below.

249

GAPS PROFILE FOR THE YEAR

Profilo dei Gap di Periodo

4 000

3 000

2 000

1 000

0

(milioni di euro) -1 000

-2 000

-3 000

-4 000 Vista 1m 3m 6m 1y 2y 3y 4y 5y 6y 7y 8y 9y 10y 15y 20y Oltre Repricing Gap Sbilancio Derivati Gap complessivo

MEDIUM -LONG TERM SENSITIVITY

BPB:Sensitivity a medio-lungo termine

15.00

10.00

5.00

0.00 (milioni di euro) -5.00

-10.00

-15.00 Vista 1mm 3mm 6mm 1aa 2aa 3aa 5aa 7aa 10aa 15aa 20aa Oltre Poste sensibili Derivati Sensitivity totale (+100 bp)

250

2.3 Price risk – Supervisory dealing portfolio

For drawing up of this Section only those financial instruments (equity instruments, O.I.C.R. (collective investment instruments), derivative contracts on O.I.C.R., on equities, on share indexes, on precious metals (other than gold), on goods, on other assets) belonging to the “supervisory trading portfolio” have been considered, as settled in the provisions regarding market risk supervisory notifications. Information on changing in price depending on fluctuation of market variables and on specific situations of issuers or counterparties have been provided.

Banca Popolare di Bergamo S.p.A. has no supervisory trading portfolio at price risk.

Information of qualitative nature

A. General aspects

See notes in the corresponding part concerning “Interest rate risk” (Section 2.1 – 2.2).

B. Management processes and measuring methods of interest rate risks

See notes in the corresponding part concerning “Interest rate risk” (Section 2.1 – 2.2).

Information of quantitative nature

1. Supervisory dealing portfolio: exposures for loans in equity instruments and O.I.C.R. (collective investment instruments)

No item of this type exists for the Bank.

251

2. Supervisory dealing portfolio: distribution of exposures in equity instruments and share index for the main countries on the listing market

No item of this type exists for the Bank.

3. Supervisory dealing portfolio: internal models and other methods for sensitivity analysis

See notes in the corresponding part concerning “Interest rate risk” (Section 2.1 – 2.2).

2.4 Price risk – Banking portfolio

For drawing up of this Section only those financial instruments (equity instruments, O.I.C.R. (collective investment instruments), derivative contracts on O.I.C.R., on equities, on share indexes, on precious metals (other than gold), on goods, on other assets) other than those belonging to the corresponding notes concerning the “supervisory trading portfolio” (Section 2.3) have been considered. Information on changing in price depending on fluctuation of market variables and on specific situations of issuers or counterparties have been provided. The banking portfolio price risk is monitored at Group’s level in a similar way as the dealing portfolio.

Banca Popolare di Bergamo has no banking portfolio subject to price risk.

Information of a qualitative nature

A. General aspects

See notes in the corresponding part concerning “Interest rate risk - Banking portfolio” (Section 2.2).

B. Management processes and measuring methods of price risk

See notes in the corresponding part concerning “Interest rate risk - Banking portfolio” (Section 2.2).

252

Information of a quantitative nature

1. Banking portfolio: exposures for loans in equity instruments and O.I.C.R.

The Bank has no equity instruments and O.I.C.R..

2. Banking portfolio: internal models and other methods for sensitivity analysis

See notes in the corresponding part concerning “Interest rate risk - Banking portfolio” (Section 2.2).

2.5 Exchange rate risk

Exchange rate risk is calculated on the basis of mismatches in foreign currency receivables and payables (spot and forward) referring to each foreign currency (other than the euro). Exposure to exchange rate risk is assessed starting from a net exchange rates position by means of a method which follows supervisory regulations. Regarding Banca Popolare di Bergamo, there are no relevant mismatches to report regarding net positions in foreign currencies as defined above.

253

Information of a qualitative nature

A. General aspects

See notes in the corresponding part concerning “Interest rate risk - Banking portfolio” (Section 2.2).

B. Hedging activity on exchange rate risk

Regarding an analysis on hedging on exchange rate risk see paragraph 1.2.2 concerning analysis on interest rate risk.

Information of a quantitative nature

1. Distribution of assets, liabilities and derivatives by the foreign currency in which they are denominated

CANADIAN Items US DOLLAR UK STERLING JAPANESE YEN SWISS FRANC DOLLAR

A. Financial assets (135.056) (16.110) (1.872) (13.427) (23.949) A.1 Debt securities - - - - - A.2 Equities - - - - - A.3 Financing to banks (74.839) (13.803) (1.872) (466) (219) A.4 Financing to customers (60.217) (2.307) - (12.961) (23.730) A.5 Other financial assets - - - - - B. Other assets - - - - - C. Financial liabilities 128.646 16.809 2.182 1.669.320 26.438 C.1 Due to banks 403 22 49 7.831 21.807 C.2 Due to customers 115.712 16.578 2.133 3.889 2.059 C.3 Debt securities 12.531 209 - 1.657.600 2.572 D. Other assets - - - - - E. Financial derivatives 122 - - (1.610.549) - E.1 Options - - - - - E.1.1 Long positions (89.766) - - (10.440) - E.1.2 Short positions 89.766 - - 10.440 - E.2 Other derivatives 122 - - (1.610.549) - E.2.1 Long positions (177.225) (13.991) (4.845) (1.927.625) (13.072) E.2.2 Short positions 177.347 13.991 4.845 317.076 13.072 Total assets (135.056) (16.110) (1.872) (13.427) (23.949) Total liabilities 128.646 16.809 2.182 1.669.320 26.438 Balance (+/-) (6.288) 699 310 45.344 2.489

Exposure to exchange rate risk, consistently with the current regulations, is calculated by applying to the open net position in exchange rate a coefficient amounting to 8%. Absorption of regulatory capital (where the coefficient is to be applied only when net position is more than 2% the single supervisory capital) was nil for Banca Popolare di Bergamo S.p.A. as at 31 st December 2007. Absorption including the capital floor (internal model) amounted to approx. 0,25 million euros .

254

2. Internal models and other methods for sensitivity analysis

See notes in the corresponding part concerning “Interest rate risk - Banking portfolio” (Section 2.2).

2.6 Derivative financial instruments

A. FINANCIAL DERIVATIVES

A.1 Supervisory dealing portfolio: end of period and average notional figures

Debt securities and Equities and share Exchange rates and Other values 31/12/2007 31/12/2006 interest rates indexes gold Type of transaction/Underlying elements Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted

1. Forward rate agreement ------

2. Interest rate swap - 4.056.300 ------4.056.300 - 3.993.623

3. Domestic currency swap - - - - - 1.610.549 - - - 1.610.549 - 1.169.404

4. Currency interest rate swap ------

5. Basis swap - 641.198 ------641.198 - 903.010

6. Share index swap ------

7. Real index swap ------

8. Futures ------

9. Cap options - 293.696 ------293.696 - 159.229

- Purchased - 147.429 ------147.429 - 80.583

- Issued - 146.267 ------146.267 - 78.646

10.Floor options - 18.800 ------18.800 - -

- Purchased - 9.400 ------9.400 - -

- Issued - 9.400 ------9.400 - -

11. Other options - - - - - 200.410 - - - 200.410 - 327.342

- Purchased - - - - - 100.205 - - - 100.205 - 163.671

- Plain vanilla - - - - - 100.205 - - - 100.205 - 156.579

- Exotic ------7.092

- Issued - - - - - 100.205 - - - 100.205 - 163.671

- Plain vanilla - - - - - 100.205 - - - 100.205 - 156.579

- Exotic ------7.092

12. Forward contracts - - - - - 940.480 - - - 940.480 - 2.934.448

- Purchases - - - - - 281.762 - - - 281.762 - 1.283.354

- Sales - - - - - 281.895 - - - 281.895 - 1.278.307

- Between two foreign currencies - - - - - 376.823 - - - 376.823 - 372.787

13. Other derivative contracts ------Total - 5.009.994 - - - 2.751.439 - - - 7.761.433 - 9.487.056

Average values - 5.308.124 - 15.472 - 3.621.656 - - - 8.945.252 - 8.366.249

As regards point 12 “Forward contracts” the change compared to 31 st December 2006 is mainly due to “Outright” instruments on exchange rates.

255

A.2 Banking portfolio: year-end and average notional figures

A.2.1 For hedging

Debt securities and Equities and share Exchange rates and Other values 31/12/2007 31/12/2006 interest rates indexes gold Type of derivative/Variance

Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted

1. Forward rate agreement ------

2. Interest rate swap - 1.058.810 ------1.058.810 - 1.897.026

3. Domestic currency swap ------

4. Currency interest rate swap ------

5. Basis swap - 184.293 ------184.293 - 200.124

6. Share index swap ------

7. Real index swap ------

8. Futures ------

9. Cap options ------

- Purchased ------

- Issued ------

10.Floor options ------

- Purchased ------

- Issued ------

11. Other options ------

- Purchased ------

- Plain vanilla ------

- Exotic ------

- Issued ------

- Plain vanilla ------

- Exotic ------

12. Forward contracts ------

- Purchases ------

- Sales ------

- Between two foreign currencies ------

13. Other derivative contracts ------

Total - 1.243.103 ------1.243.103 - 2.097.150

Average values - 1.754.317 ------1.754.317 - 2.164.609

256

A.2.2 Other derivatives

Debt securities and Equities and share Exchange rates and Other values 31/12/2007 31/12/2006 interest rates indexes gold Type of derivative/Underlying elements Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted

1. Forward rate agreement ------

2. Interest rate swap ------

3. Domestic currency swap ------

4. Currency interest rate swap ------

5. Basis swap ------

6. Share index swap ------

7. Real index swap ------

8. Futures ------

9. Cap options ------

- Purchased ------

- Issued ------

10.Floor options ------

- Purchased ------

- Issued ------

11. Other options - - - 373.072 - 37.305 - 6.322 - 416.699 - 1.012.075

- Purchased - - - 188.269 - 18.650 - 3.191 - 210.110 - 509.745

- Plain vanilla ------

- Exotic - - - 188.269 - 18.650 - 3.191 - 210.110 - 509.745

- Issued - - - 184.803 - 18.655 - 3.131 - 206.589 - 502.330

- Plain vanilla ------

- Exotic - - - 184.803 - 18.655 - 3.131 - 206.589 - 502.330

12. Forward contracts ------

- Purchases ------

- Sales ------

- Between two foreign currencies ------

13. Other derivative contracts ------

Total - - - 373.072 - 37.305 - 6.322 - 416.699 - 1.012.075

Average values - - - 750.318 - 39.915 - 8.179 - 798.412 - 1.155.704

257

A.3 Financial derivatives: purchase and sale of underlying elements

Debt securities and Equities and share Exchange rates and Other values 31/12/2007 31/12/2006 interest rates indexes gold Type of transaction/Underlying elements

Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted

A. Supervisory dealing portfolio - 4.368.796 - - - 2.751.439 - - - 7.120.235 - 8.584.048

1. Transactions with exchange of principal - - - - - 1.140.890 - - - 1.140.890 - 3.242.140

- Purchases - - - - - 381.967 - - - 381.967 - 1.437.200

- Sales - - - - - 382.100 - - - 382.100 - 1.432.153

- Between two foreign currencies - - - - - 376.823 - - - 376.823 - 372.787

2. Transactions without exchange of principal - 4.368.796 - - - 1.610.549 - - - 5.979.345 - 5.341.908

- Purchases - 2.182.847 - - - 1.610.549 - - - 3.793.396 - 3.218.003

- Sales - 2.185.949 ------2.185.949 - 2.123.905

- Between two foreign currencies ------

B. Banking portfolio - 1.058.810 - 373.072 - 37.305 - 6.322 - 1.475.509 - 2.909.101

B1. For hedging - 1.058.810 ------1.058.810 - 1.897.026

1. Transactions with exchange of principal ------

- Purchases ------

- Sales ------

- Between two foreign currencies ------

2. Transactions without exchange of principal - 1.058.810 ------1.058.810 - 1.897.026

- Purchases - 884.257 ------884.257 - 1.809.026

- Sales - 174.553 ------174.553 - 88.000

- Between two foreign currencies ------

B2. Other derivatives - - - 373.072 - 37.305 - 6.322 - 416.699 - 1.012.075

1. Transactions with exchange of principal ------

- Purchases ------

- Sales ------

- Between two foreign currencies ------

2. Transactions without exchange of principal - - - 373.072 - 37.305 - 6.322 - 416.699 - 1.012.075

- Purchases - - - 188.269 - 18.650 - 3.191 - 210.110 - 509.745

- Sales - - - 184.803 - 18.655 - 3.131 - 206.589 - 502.330

- Between two foreign currencies ------

258

A.4 Over the counter financial derivatives: positive fair value – counterparty risk

Debt securities and interest rates Equities and share indexes Exchange rates and gold Other values Different underlying elements

Counterparties/Underlying elements Gross w/o Gross w/ Future Gross w/o Gross w/ Future Gross w/o Gross w/ Future Gross w/o Gross w/ Future Future Compensated compensation compensation exposure compensation compensation exposure compensation compensation exposure compensation compensation exposure exposure

A. Supervisory dealing portfolio

A.1 Governments and central banks ------

A.2 Public bodies 118 - 10 ------

A.3 Banks 23.156 - 7.373 - - - 7.637 - 2.975 - - - - -

A.4 Financial companies 1.057 - 1.040 - - - 503 - 29 - - - - -

A.5 Insurance companies ------

A.6 Non financial companies 11.216 - 2.376 - - - 9.895 - 2.988 - - - - -

A.7 Other ------144 - 542 - - - - -

Total A - 31/12/2007 35.547 - 10.799 - - - 18.179 - 6.534 - - - - -

Total - 31/12/2006 36.509 - 10.919 1.019 - 483 23.634 - 16.726 - - - - -

B. Banking portfolio

B.1 Governments and central banks ------

B.2 Public bodies ------

B.3 Banks 1.392 - 1.008 6.425 - 11.413 - - 933 2.119 - 383 - -

B.4 Financial companies ------

B.5 Insurance companies ------

B.6 Non financial companies ------

B.7 Other ------

Total B - 31/12/2007 1.392 - 1.008 6.425 - 11.413 - - 933 2.119 - 383 - - Total - 31/12/2006 3.414 - 51 51.671 - 32.736 64 - 1.074 1.951 - 521 - -

Financial derivatives measured in this table are those mentioned in previous Sections A.1 and A.2 subject to counterparty risk.

259

A.5 Over the counter financial derivatives: negative fair value – financial risk

Debt securities and interest rates Equities and share indexes Exchange rates and gold Other values Different underlying elements

Counterparties/Underlying elements Gross w/o Gross w/ Future Gross w/o Gross w/ Future Gross w/o Gross w/ Future Gross w/o Gross w/ Future Future Compensated compensation compensation exposure compensation compensation exposure compensation compensation exposure compensation compensation exposure exposure

A. Supervisory dealing portfolio

A.1 Governments and central banks ------

A.2 Public bodies ------18 - 12 - - - - -

A.3 Banks 14.786 - 3.917 - - - 10.398 - 2.994 - - - - -

A.4 Financial companies 10.176 - 3.629 - - - 1.791 - 692 - - - - -

A.5 Insurance companies ------

A.6 Non financial companies 8.841 - 3.193 - - - 8.392 - 3.322 - - - - -

A.7 Other ------30.054 - 14.895 - - - - -

Total A - 31/12/2007 33.803 - 10.739 - - - 50.653 - 21.915 - - - - -

Total - 31/12/2006 37.345 - 10.173 1.019 - 483 76.270 - 28.345 - - - - -

B. Banking portfolio

B.1 Governments and central banks ------

B.2 Public bodies ------

B.3 Banks 10.958 - 1.107 6.188 - 11.198 - - 933 2.079 - 376 - -

B.4 Financial companies ------

B.5 Insurance companies ------

B.6 Non financial companies ------

B.7 Other ------

Total B - 31/12/2007 10.958 - 1.107 6.188 - 11.198 - - 933 2.079 - 376 - - Total - 31/12/2006 30.755 - 4.630 50.642 - 32.288 62 - 1.051 1.933 - 516 - -

Financial derivatives measured in this table are those mentioned in previous Sections A.1 and A.2 subject to financial risk.

260

A.6 Residual life of over-the-counter financial derivatives: notional values

More than 1 year Underlying elements/Residual life Up to 1 year and less than 5 More than 5 years Total years A. Supervisory dealing portfolio 4.224.428 3.111.007 425.999 7.761.434 A.1 Financial derivatives on debt securities and interest rates 1.496.347 3.087.647 425.999 5.009.993 A.2 Financial derivatives on equities and share indexes - - - - A.3 Financial derivatives on exchange rates and gold 2.728.081 23.360 - 2.751.441 A.4 Financial derivatives on other values - - - - B. Banking portfolio 1.181.839 400.311 77.652 1.659.802 B.1 Financial derivatives on debt securities and interest rates 820.108 345.343 77.652 1.243.103 B.2 Financial derivatives on equities and share indexes 361.731 11.341 - 373.072 B.3 Financial derivatives on exchange rates and gold - 37.305 - 37.305 B.4 Financial derivatives on other values - 6.322 - 6.322 31/12/2007 5.406.267 3.511.318 503.651 9.421.236 31/12/2006 7.536.416 4.674.996 384.870 12.596.282

B CREDIT DERIVATIVES

No item of this type exists for the Bank.

Section 3 Liquidity risk

Information of a qualitative nature

A. General aspects, management processes and measuring methods of liquidity risk

The management of liquidity on behalf of the Group Network Banks is centralised at the Financial Area of the Parent Bank. Monitoring and control of liquidity risk are performed by the Financial Risks Service.

Liquidity analysis aims at verifying the cover degree of the Bank’s liquidity requirement. This is calculated on the basis of gaps (liquidity gap model) by deadline between sensitive assets and liabilities positions (with exception of assets positions that can be promptly liquidated constituting the available liquidity).

Consistently with directions regarding liquidity risk and structural balance provided for on consolidation level, a policy has been implemented with rules aiming at pursuing and maintaining – through co-ordinated and efficient policies of funding and lending - the structural balance of sources and lending for Network Banks and Product Companies. The objective of this policy – which replaces all previous rules or actions - is to make both actions to be taken and identification criteria of economic conditions uniform for all the Group’s companies, with possible a priore identification of specific exceptions.

261

Information of quantitative nature

1.1 Time distribution by contractual residual life of financial assets and liabilities EURO currency (EUR)

16 days to 1 1 to 3 3 to 6 6 months to At sight 1 to 7 days 8 to 15 days 1 to 5 years Over 5 years month months months 1 year

Assets 9.176.771 309.719 412.826 1.455.843 1.903.489 1.297.521 774.323 3.582.134 5.708.741

A.1 State securities ------

A.2 Listed debt securities ------

A.3 Other debt securities ------

A.4 Units in O.I.C.R. ------

A.5 Financing 9.176.771 309.719 412.826 1.455.843 1.903.489 1.297.521 774.323 3.582.134 5.708.741

- Banks 365.943 37.232 217.603 737.113 960.047 808.612 1.045 570 1.013

- Customers 8.810.828 272.487 195.223 718.730 943.442 488.909 773.278 3.581.564 5.707.728

Liabilities (13.124.443) (57.013) (221.726) (589.907) (1.506.599) (772.978) (1.223.105) (3.427.746) (54.817)

B.1 Deposits (13.022.603) - - - - - (37.650) (5.779) (28.100)

- Banks (1.963.778) - - - - - (37.650) (5.779) (28.100)

- Customers (11.058.825) ------

B.2 Debt securities (6.012) (20.260) (7.166) (153.826) (638.660) (650.746) (1.183.257) (3.412.515) (21.634)

B.3 Other liabilities (95.828) (36.753) (214.560) (436.081) (867.939) (122.232) (2.198) (9.452) (5.083)

Off-balance-sheet transactions (98) (10.278) 465 4.388 (5.434) (20.977) (24.554) 41.876 (13.513) C.1 Financial derivatives with - - - 21 - (313) 441 (27) - exchange of capital

- Long positions - (25.656) (19.427) (36.985) (233.062) (43.131) (376.662) (5.919) -

- Short positions - 25.656 19.427 37.006 233.062 42.818 377.103 5.892 -

C.2 Deposits and financing receivable ------

- Long positions ------

- Short positions ------

C.3 Irrevocable commitments to pay funds (98) (10.278) 465 4.367 (5.434) (20.664) (24.995) 41.903 (13.513)

- Long positions 198.999 2.756 465 5.437 11.434 12.028 18.999 142.382 429.060 - Short positions (199.097) (13.034) - (1.070) (16.868) (32.692) (43.994) (100.479) (442.573)

262

1.2 Time distribution by contract residual life of financial assets and liabilities US DOLLAR currency (USD)

16 days to 1 1 to 3 3 to 6 6 months to At sight 1 to 7 days 8 to 15 days 1 to 5 years Over 5 years month months months 1 year

Assets 84.688 2.092 6.329 15.113 16.561 6.955 1.629 - 3

A.1 State securities ------

A.2 Listed debt securities ------

A.3 Other debt securities ------

A.4 Units in O.I.C.R. ------

A.5 Financing 84.688 2.092 6.329 15.113 16.561 6.955 1.629 - 3

- Banks 66.373 - 1.654 2.316 41 2.463 1.629 - 3

- Customers 18.315 2.092 4.675 12.797 16.520 4.492 - - -

Liabilities (114.893) (679) (1.889) (2.224) (4.850) (3.958) (112) (2.418) -

B.1 Deposits (114.144) - - - - (350) - (2.378) -

- Banks (24) - - - - (350) - (2.378) -

- Customers (114.120) ------

B.2 Debt securities (115) (679) (1.889) (1.759) (4.327) (3.608) (112) (40) -

B.3 Other liabilities (634) - - (465) (523) - - - -

Off-balance-sheet transactions - (448) - (20) 310 387 (378) 27 - C.1 Financial derivatives with - - - (20) - 312 (442) 27 - exchange of capital

- Long positions - 5.772 11.584 25.117 100.633 34.915 183.135 5.919 -

- Short positions - (5.772) (11.584) (25.137) (100.633) (34.603) (183.577) (5.892) -

C.2 Deposits and financing receivable ------

- Long positions ------

- Short positions ------

C.3 Irrevocable commitments to pay funds - (448) - - 310 75 64 - -

- Long positions 879 11.441 - - 310 75 64 - -

- Short positions (879) (11.889) ------

263

1.3 Time distribution by contract residual life of financial assets and liabilities SWISS FRANC currency (CHF)

16 days to 1 1 to 3 3 to 6 6 months to At sight 1 to 7 days 8 to 15 days 1 to 5 years Over 5 years month months months 1 year

Assets 644 1.316 4.676 4.549 10.721 1.908 80 - -

A.1 State securities ------

A.2 Listed debt securities ------

A.3 Other debt securities ------

A.4 Units in O.I.C.R. ------

A.5 Financing 644 1.316 4.676 4.549 10.721 1.908 80 - -

- Banks 219 ------

- Customers 425 1.316 4.676 4.549 10.721 1.908 80 - -

Liabilities (5.149) - (6.055) (5.479) (9.646) (109) - - -

B.1 Deposits (5.132) - (6.043) (5.439) (7.252) - - - -

- Banks (3.073) - (6.043) (5.439) (7.252) - - - -

- Customers (2.059) ------

B.2 Debt securities (17) - (12) (40) (2.394) (109) - - -

B.3 Other liabilities ------

Off-balance-sheet transactions ------C.1 Financial derivatives with ------exchange of capital

- Long positions - 60 151 - 381 91 12.389 - -

- Short positions - (60) (151) - (381) (91) (12.389) - -

C.2 Deposits and financing receivable ------

- Long positions ------

- Short positions ------

C.3 Irrevocable commitments to pay funds ------

- Long positions ------Short positions ------

264

1.4 Time distribution by contract residual life of financial assets and liabilities - JAPANESE YEN currency (JPY)

16 days to 1 6 months to 1 At sight 1 to 7 days 8 to 15 days 1 to 3 months 3 to 6 months 1 to 5 years Over 5 years month year

Assets 1.659 443 1.012 1.057 6.661 1.984 - 577 -

A.1 State securities ------

A.2 Listed debt securities ------

A.3 Other debt securities ------

A.4 Units in O.I.C.R. ------

A.5 Financing 1.659 443 1.012 1.057 6.661 1.984 - 577 -

- Banks 466 ------

- Customers 1.193 443 1.012 1.057 6.661 1.984 - 577 -

Liabilities (12.611) (139.501) (89.594) (255.485) (737.846) (338.823) (87.197) (8.265) -

B.1 Deposits (11.720) ------

- Banks (7.831) ------

- Customers (3.889) ------

B.2 Debt securities (890) (139.501) (89.594) (255.485) (737.846) (338.823) (87.197) (8.265) -

B.3 Other liabilities (1) ------

- (152) - - 152 - - - - Off-balance-sheet transactions

C.1 Financial derivatives with ------exchange of capital

- Long positions - 19.705 7.692 11.065 102.890 5.615 178.656 - -

- Short positions - (19.705) (7.692) (11.065) (102.890) (5.615) (178.656) - -

C.2 Deposits and financing receivable ------

- Long positions ------

- Short positions ------

- (152) - - 152 - - - - C.3 Irrevocable commitments to pay funds

- Long positions - - - - 152 - - - - - Short positions - (152) ------

265

1.5 Time distribution by contract residual life of financial assets and liabilities – BRITISH STERLING currency (GBP)

16 days to 1 6 months to 1 At sight 1 to 7 days 8 to 15 days 1 to 3 months 3 to 6 months 1 to 5 years Over 5 years month year

Assets 13.850 367 8 703 1.141 32 - - -

A.1 State securities ------

A.2 Listed debt securities ------

A.3 Other debt securities ------

A.4 Units in O.I.C.R. ------

A.5 Financing 13.850 367 8 703 1.141 32 - - -

- Banks 13.803 ------

- Customers 47 367 8 703 1.141 32 - - -

Liabilities (16.602) - - (5) (104) (98) - - -

B.1 Deposits (16.281) ------

- Banks (8) ------

- Customers (16.273) ------

B.2 Debt securities (2) - - (5) (104) (98) - - -

B.3 Other liabilities (319) ------

Off-balance-sheet transactions - (375) - - 375 - - - -

C.1 Financial derivatives with ------exchange of capital

- Long positions - - - 205 8.795 2.509 2.482 - -

- Short positions - - - (205) (8.795) (2.509) (2.482) - -

C.2 Deposits and financing receivable ------

- Long positions ------

- Short positions ------

C.3 Irrevocable commitments to pay funds - (375) - - 375 - - - -

- Long positions - - - - 375 - - - - - Short positions - (375) ------

266

1.6 Time distribution by contract residual life of financial assets and liabilities - OTHER CURRENCIES

16 days to 1 6 months to 1 At sight 1 to 7 days 8 to 15 days 1 to 3 months 3 to 6 months 1 to 5 years Over 5 years month year

Assets 23.977 - 79 1.629 5.419 1.520 - - -

A.1 State securities ------

A.2 Listed debt securities ------

A.3 Other debt securities ------

A.4 Units in O.I.C.R. ------

A.5 Financing 23.977 - 79 1.629 5.419 1.520 - - -

- Banks 8.315 ------

- Customers 15.662 - 79 1.629 5.419 1.520 - - -

Liabilities (27.607) - (1.912) (847) (2.779) - - - -

B.1 Deposits (12.003) - - (847) (2.779) - - - -

- Banks (4.347) - - (847) (2.779) - - - -

- Customers (7.656) ------

B.2 Debt securities ------

B.3 Other liabilities (15.604) - (1.912) ------

Off-balance-sheet transactions ------

C.1 Financial derivatives with ------exchange of capital

- Long positions - 118 - 598 20.362 - - - -

- Short positions - (118) - (598) (20.362) - - - -

C.2 Deposits and financing receivable ------

- Long positions ------

- Short positions ------

C.3 Irrevocable commitments to pay funds ------

- Long positions ------Short positions ------

267

2. Distribution of financial liabilities by sector

Governments Other public Financial Insurance Non financial Exposure/Counterparties and central Other bodies companies companies companies banks 1. Due to customers 107.455 171.730 768.963 112.562 3.096.741 8.653.706 2. Securities in issue - 1.143 66.588 - 44.533 7.644.085 3. Financial liabilities held for trading - 18 11.967 - 17.232 63.505 4. Financial liabilities at fair value ------31/12/2007 107.455 172.891 847.518 112.562 3.158.506 16.361.296 31/12/2006 77.322 123.564 1.666.868 58.033 3.519.665 15.371.398

3. Distribution of financial liabilities by geographical area

Other Exposure/Counterparties Italy European America Asia Other countries 1. Due to customers 12.853.057 44.114 10.207 1.499 2.280 2. Due to banks 2.024.925 10.882 10.056 133 13 3. Securities in issue 7.754.900 910 539 - - 4. Financial liabilities held for trading 91.324 330 1.068 - - 5. Financial liabilities at fair value - - - - - 31/12/2007 22.724.206 56.236 21.870 1.632 2.293 31/12/2006 21.926.582 223.356 24.486 1.627 2.469

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Section 4 Operating risk

Information of a qualitative nature

A. General aspects, management processes and measuring methods of operating risk

According to the Group policy, operating risks are to be identified, measured and monitored within a general process of operating risk management with the following objectives:
identification of causes of events originating operational losses with subsequent increase in the company profitability and better management efficiency thanks to identification and monitoring of critical areas as well as optimisation of control systems;
optimisation of risk mitigation and transfer policies such as those relating to insurance policies, based on entity and real risk exposure;
optimisation of capital allocation and absorption for operating risk and of policies regarding provisions, aiming at creating wealth for the shareholders;
supporting decision making processes regarding opening of new businesses, activities, products and systems;
development of operating risk awareness on Business Unit level, involving the whole structure;
compliance with requirements of the new Basel agreement on supervisory capital for banks and banking groups.

Based on regulations laid down in Circular 263 of 27/12/2006 by the Bank of Italy, UBI Banca Group will adopt the standard method (TSA) combined with the basic method (BIA) for calculation of capital requirement on operating risks for 2008, and in 2009 will pass to the use of an advanced internal model (Advanced Measurement Approach-AMA ) combined with TSA and BIA methods (partial AMA method, that is, the advanced method is applied only to some Business Lines/Group entities).

Operating risk is intended as meaning the risk of losses deriving from inadequacy or failing of procedures, human resources and internal systems, or from exogenous events. This type of risk covers, among other things, losses deriving from frauds, human errors, operational breakdown, unavailability of systems, contract breaches and natural disasters. This definition also covers legal risk of losses deriving from breaches in laws or regulations, contractual or extra-contractual liability as well as from other litigation, whereas strategic and reputation risks are excluded. The relationship of cause and effect presented by operating risks is such that the negative effect - directly linked to the economical loss – is originated whenever one or more triggering events occur. Operating loss is therefore intended as meaning a group of negative economic effects deriving from operating events, recorded in the company’s financial statements and such to have an impact on the Income Statement.

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Management processes and measurement methods of operating risk

Following the merger between BPU and BL, new Group policies on operating risk have been established along with alignment and integration of the organisational model on operating risk control and management, loss measurement systems and processes (Loss Data Collection) and risks linked to potential loss events (Self Risk Assessment). In detail, Banca Popolare di Bergamo S.p.A. adopted the new operating risks policy, a development of prior risk identification and measurement methods, in December 2007. The said new policy will be fully implemented during the first months of 2008.

Organisational model

Operating risk regards the whole Bank’s structure, each function and unit. Therefore, a management model has been defined with attribution of tasks and charges, on a local and central level, to the single legal entities involved within the Group. An Operating risk Committee has been constituted at the Parent Bank for direction and control of the whole operating risk management process, whereas in the Risk Management Area a special service deals with design, development and maintenance of measurement and monitoring methods, also verifying efficacy level of operating risk mitigation measures and related reporting systems. Within the Risk Capital & Policies Area, the Financial & Oprisk Policies service - helped by other units involved - establishes operating risk management, control and mitigation policies, including insurance risk management, whereas the Processes and Model Validation service is in charge with validation processes.

Four different levels of responsibility are established for each legal entity within the Group, including Banca Popolare di Bergamo S.p.A.:

Operating risk Officer (RRO) The figure in charge of implementation of the whole operating risk management framework within the own legal entity.

Local Operating risk Support (SROL) The main support to the RRO for implementation of the whole operating risk management process within the own entity.

Risk Champion (RC) The figure who oversees the development of the operating risk management process to obtain final validation of it, on a business area level, offering coordination and support to the relevant Risk Owners. He also helps in the risk monitoring process and in definition and implementation of mitigation strategies.

Risk Owner (RO) For detection and notification of historical and/or potential operational loss events occurring in ordinary daily operations. He contributes to implementation of corrections and improvements as established by higher responsibility officers aiming at reduction of risk exposure level.

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Measurement methods and systems

The operating risk management system within the Group and the Bank consists of the following:

a local process for operational loss census ( Loss Data Collection ) aiming at integrated and systematic measurement of damaging events occurred entailing an actual loss. The measured loss is periodically reconciled with the financial statements and updated on a real-time basis by the Risk Owner and/or Risk Champion using a procedure provided in the Group’s intranet network, with separate mention of possible recoveries obtained also thank to special insurance policies;
a structured process for identification and valuation of risk scenarios ( Risk Assessment ) existing in the Group’s business areas, supported by a computer procedure, to provide a self-analysis on operations performed in terms of potential exposure to future losses and of adequacy of existing control and mitigation measures;
a data base recording all operational losses suffered by the Italian system since 2003. The Group has participated in the DIPO observatory for exchange of data on operational losses started by ABI since its constitution;
a system for measurement of economic and regulatory capital to calculate capital absorption due to operational loss by business unit based on the standard method. Following integration of operational loss measurement processes and identification/assessment of risk scenarios, new analyses have been started for development of an internal model to calculate risk exposure of the new Group based on loss distribution approach.

Reporting

Monitoring of operating risk is performed using a reporting system supplying all information needed for management and mitigation of risks assumed by the Group. The reporting system provides for the same levels of responsibility as established in the organisational model supporting the various information needs within the Group, aiming at ensuring standard information and enabling ongoing control on operating risks assumed in order to define management strategies and objectives consistent with risk levels regarded as acceptable. Reporting to the Corporate Bodies, the Top Management at the Parent Bank and the Bank, and the Operating risk Committee, is regularly prepared on a central level by the operating risk service and includes – with detail levels varying according to the various needs – a trend analysis of internal losses and relevant recoveries compared to system external data, a valuation of risk exposure with identification of vulnerable areas and a description of actions to be taken for risk prevention and reduction, and their efficacy.

Legal risk

Banca Popolare Bergamo S.p.A. is involved in different legal proceedings originated during performance of its ordinary activities. Even if the final outcome of such proceedings cannot be foreseen with certainty, possible negative results – both considered as single factor and as a whole – are not deemed to have a significant negative effect on the Bank’s financial and economical performance.

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Information of a quantitative nature

Descriptive data

The charts below show how the main sources of operating risk for Banca Popolare di Bergamo S.p.A. in the period January 2004 – December 2007 were “External context” (87,9% in impacts and 58,7% in frequency) and “Processes” (8,1% in impacts and 39,1% in frequency). The “External context” risk driver includes human acts provoked by third parties on which the Bank has no direct control, such as thefts and robberies, fraud, damage due to natural events (earthquakes, floods, etc.) and other external events; the “Processes” risk driver includes unintentional mistakes, staff lack of training, inefficiency in procedures and processes, non compliance of procedures and internal controls.

In the said period January 2004 – December 2007, the events occurred representing an operational loss were 407, with impacts totalling 4,8 million euros before insurance and other external recoveries.

The event types originating higher operational loss during the said period (before insurance and other external recoveries) were “External fraud” (78,9%), “Damages due to external events” (9,2%) and “Execution, delivery and management of processes” (7,8%). Data in the banking system ( DIPO-ABI Association, January 2003 - June 2007) are concentrated for 37% on event type “Customers, products and professional practice”, on “External fraud” and “Internal fraud” for 20% and on the Basel business line “Retail banking” for 44%.

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Charts

Percentage of operating losses occurred January 2004 – December 2007 by risk driver

Frequency

Impact

External context - Human factors - Processes - Systems

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Percentage of operating losses occurred January 2004 – December 2007 by type of event

Impact

Frequency

PBP internal data – DIPO external data

- Execution, delivery and management of processes - Breakdown in operations and malfunctions of systems - Damages due to external events - Customers, products and professional practice - Employment and industrial safety - External fraud - Internal fraud

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Part F – Information on capital

Section 1 Equity

A – Information of qualitative nature

Equity is defined by IFRS in a residual manner as “what remains of an entity’s assets after all the liabilities have been deducted”. From a financial viewpoint, equity is the means measured in monetary form contributed by the owners or generated by the entity.

Operational levers are developed on a broader aggregate, consistent with the supervisory aggregate, which are characterised not just by equity in the strict sense but also by intermediate aggregates such as innovative instruments, hybrid instruments and subordinated liabilities.

As the Parent Bank, UBI Banca performs supervision and co-ordination activities for the companies in the Group and, without prejudice to their business and Corporate Statute independence, lays down appropriate guidelines for them. Subsidiaries report their capital requirements, both in the strict sense of equity and also in terms of the issue of subordinated liabilities or hybrid capitalisation instruments, to the bodies in charge at the Parent Bank. The proposal approved by the Parent Bank is then submitted to the appropriate functions and bodies of the subsidiaries.

The Parent Bank analyses and co-ordinates capital requirements on the basis of the Group Development Plan, the related risk profiles and, last but not least, in compliance with supervisory constraints and acts as a privileged counterparty in gaining access to capital markets applying an integrated approach to optimising capital strength.

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B – Information of a quantitative nature

The summary table below gives the origin, the possibility of use and distribution of the items of Equity in compliance with Art. 2427, paragraph 1, 7 bis of the Italian Civil Code.

Use over 3 previous years Amount at Possibi lity of Distributable Nature/Description 31/12/2007 use (1) quota Replenishment Other (11) of losses

Share capital 1.256.300 - Eqquity-related reserves - Reserve for treasury shares Share premium reserve Income -related reserves 71.146 Income-related r eserves Legal reserve (2) 37.252 b) - Reserve per art. 2426 Italian Civil Code 1° par. 5 (3) 6.021 a) b) c) 6.021 Taxed income-related reserve 13.300 a) b) c) 13.300 Reserve for amendment in the Statute ex art. 31 Statute (4) 14.223 a) b) c) 14.223 Retained earnings 351 a) b) c) 351 34.438 Other reserves 23.494 Other reserves in application of IFRS (5) 27.791 a) b) c) 27.791 Reserve for reversal of prior year depreciation (6) 1.896 a) b) c) 1.896 Reserve on actuarial gains/losses for post-employment benefits L.D. 252/05 (7) (6.193) n/d - Fair value reserves 39 Reserve on actuarial gains/losses for debts for post-employment benefits and health policies (8) 329 n/d Fair value reserve - adoption of fair value instead of cost (9) (10) (290) a) b) TOTAL 1.350.979 63.581 Non distributable quota 1.287.398 Remainder distributable 63.581

Notes on the possibility of use

1) Possibility of use: a) for increase of share capital b) to cover losses c) for distribution to shareholders; n/a: not available 2) Usable according to the provisions of art. 2430 of the Italian Civil Code 3) Usable according to the provisions of art. 2426 of the Italian Civil Code, par. 1 nr 5 4) Part of profits intended for permanent staff social security and pension based on profit for the year 2006 (14.223 thousand euros) used as a reserve following change in accounting methods due to future changes in the Corporate Statute. 5) Reserve deriving from disposal of intragroup branches complying with OPI regulations. 6) Reserve available and distributable according to art. 7, par. 4, Legislative Decree 38/2005 of which 1.327.751 euros taxable upon distribution (Reserve for re-alignment ex Law 266/2005). 7) Negative reserve of actuarial gains/losses due to debt on post-employment benefits following reform on retirement benefits ex Legislative Decree 252/05. 8) Reserve of actuarial gains/losses due to debt on post-employment benefits and health insurance policies.

9) Reserve not available but to be recognised in equity and usable for replenishment of losses, according to art. 7, par. 6, Legislative Decree 38/2005. 10) Reserve for realignment of properties and land ex Law 266/2005 recorded after substitute taxes paid in 2006. 11) Use occurred at the time of the distribution of 2004, 2005 and 2006 dividend.

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Section 2 Capital and supervisory ratios

2.1 SUPERVISORY CAPITAL

A – Information of a qualitative nature

The Bank of Italy, with circular 263 of 27 th December 2006, has issued new provisions regarding prudent supervisory requirements for banks which, with amendment 12 of circular 155 of 18 th December 1991, has created new individual supervisory schemes for notification relating to implementation of European directives regarding capital adequacy (Basel II).

For the year 2006 the Bank – as well as former BPU Banca Group – had decided to avail themselves of the possibility, provided for by the regulation, to apply the previous rules on determination of capital requirements. Therefore the regulation has been fully applied starting from 31 st December 2007 only.

Tier 2 capital

A summary of subordinated liabilities issued by the Bank is reported below. In September a debenture loan has been issued amounting to 50 million euros and fully underwritten by the Parent Bank (see also note on funding from customers in the Report on operations).

Early Nominal IFRS value Type of issue Coupon Maturity date redemption value 31/12/2007 clause

Capitalisation hybrid 2001/2012 - variable rate TIER 2 Three -month instruments ISIN IT0003210074 18/06/2012 Not provided 250.000 250.500 CAPITAL Euribor 3M +spread 0,80% (Upper Tier II) Euro currency

2007/2017 Ten non call five Three -month 3M + spread 1% TIER 2 Variable rate ISIN for first 5 years + 1,6% from 28/09/2017 Provided 50.000 50.032 CAPITAL Lower Tier II IT0004281330 Euro 6th year to maturity currency

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B – Information of a quantitative nature

The Bank has share capital of 1.256.300 thousand euro, divided into 1.256.300.000 ordinary shares with a nominal value of 1 euro each. The shares are nominal and indivisible; each share gives the right to one vote. Banca Popolare di Bergamo S.p.A. is 100% owned by the Parent Bank which has full control of it.

Furthermore the Bank has not performed any transactions on its own portfolio to purchase and/or sell its treasury shares or shares in the Parent Bank and it held none of its treasury shares nor of the Parent Bank shares in its portfolio at the end of year.

31/12/2007 31/12/2006

A. Tier 1 capital before application of prudential instruments 1. 403.663 1.272.020 B. Prudential instruments of tier 1 capital - -

B.1 - Positive IAS/IFRS prudential filters (+) - -

B.2 - Negative IAS/IFRS prudential filters (-) - -

C. Tier 1 capital before elements to be deducted (A + B) 1.403.663 1.272.020 D. Elements to be deducted from tier 1 capital - -

E. Total tier 1 capital (C - D) 1.403.663 1.272.020 F. Tier 2 capital before application of prudential instruments 300.329 258 .383 G. Prudential instruments of tier 2 capital - (4.199)

G.1 - Positive IAS/IFRS prudential filters (+) - -

G.2 - Negative IAS/IFRS prudential filters (-) - (4.199)

H. Tier 2 capital before elements to be deducted (F + G) 300.329 254.184 I. Elements to be deducted from tier 2 capital -

L. Total tier 2 capital (H - I) 300.329 254.184 M. Elements to be deducted from core and supplementary capital -

N. Supervisory capital (E + L - M) 1.703.992 1.526.204 O. Third leve l capital (TIER3) (*) -

P. Supervisory capital including TIER 3 (N + O) 1.703.992 1.526.204

(*) part to be recognised against market risks Note: Capital as at 31/12/07 has been prepared complying with 12th update of Circular 155 issued by the Bank of Italy on 5th Feb. 2008 and implemented by Circular 262 through notification of the Bank of Italy 222359 of 22nd Feb. 2008.

2.2 CAPITAL ADEQUACY

The situation as at 31 st December 2007 is illustrated in the table that follows which indicates the Bank’s capital requirements and the supervisory ratios.

In detail, Section A gives the size of the supervisory capital and its main components.

As at 31 st December 2007 the tier 1 capital and tier 2 capital amounted to 1.403,7 million euros and 300,3 million euros respectively and were calculated following the IFRS methods (on a prudent basis).

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Section B of the table gives the absorption of supervisory capital resulting from compliance with the overall capital adequacy requirement. At year end, compliance with that requirement called for capital amounting to 1.538,7 million euros, in relation to volumes of business in the loans to customers sector.

Finally Section C of the table summarises the absorption of the requirements in terms of ratios.

As concerns prudent supervisory requirements, weighted risk assets increased during the year for 1.293,8 million euros. The ratio of supervisory capital to total risk weighted assets was 7,74% - higher than 7,37% as recorded end of 2006 and 0,74 percentage points higher than the minimum level required by the relevant regulations, which is 7% for all banks belonging to a banking group.

Lending expansion margin is equal to 2.339,1 million euros.

(in thousand of euros)

31/12/2007 31/12/2006

A. Supervisory capital A.1 Tier 1 capital 1.403.663 1.272.020 A.2 Tier 2 capital 300.329 254.184 A.3 Elements to be deducted -- A.4 Supervisory capital 1.703.992 1.526.204

B. Supervisory prudential requirements B.1 Credit risk 1.535.599 1.444. 274 B.2 Market risk 3.115 3.963 of which : - risks of non-tied up portfolio 3.115 3.963 - exchange rate risks -- B.3 Other prudential requirements -- B.4 Total prudential requirements 1.538.714 1.448.237

C. Risk assets and supervisory ratios C.1 Weighted risk assets 22.003.609 20.709.791 C.2 Tier 1 capital/Weighted risks assets 6,38% 6,14% C.3 Tier 2 capital/Weighted risk assets 7,74% 7,37%

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Weighted amounts/ Non weighted amounts Requirements Categories/Values 31/12/2007 3 1/12/2006 31/12/2007 31/12/2006

A. RISK ASSETS 26.738.409 25.469.107 22.135.569 20.822.002 A.1 CREDIT RISK STANDARD METHOD ASSETS FOR LOANS 24.722.647 23.692.030 20.370.447 19.327.410 1. Exposures (other than equities and other sub ordinated assets) to (or guaranteed by): 20.375.506 19.448.139 18.261.567 17.286.769 1.1 Governments and central banks 184.895 206.907 - - 1.2 Public bodies 40.580 44.975 8.116 8.995 1.3 Banks 2.062.725 2.062.072 413.003 412.455 1.4 Other (other than mortgage loans on residential and non residential properties) 18.087.306 17.134.185 17.840.448 16.865.319 2. Mortgage loans on residential properties 2.903.467 2.826.522 1.451.733 1.413.261 3. Mortgage loans on non residential properties 884.974 804.882 511.805 456.638 4. Shares, holdings and subordinated assets 20.862 38.945 20.862 38.945 5. Other assets for loans 537.838 573.542 124.480 131.797 OFF -BALANCE -SHEET ASSETS 2.015. 762 1.777.077 1.765.122 1.494.592 1. Guarantees and commitments to (or guaranteed by): 1.928.517 1.609.687 1.728.910 1.439.633 1.1 Governments and central banks 516 7 - - 1.2 Public bodies 4.273 5.000 855 1.000 1.3 Banks 210.731 174.275 42.146 34.855 1.4 Other 1.712.997 1.430.405 1.685.909 1.403.778 2. Derivatives contracts to (or guaranteed by:) 87.245 167.390 36.212 54.959 2.1 Governments and central banks --- - 2.2 Public bodies 43 14 9 3 2.3 Banks 24.660 95.711 4.932 19.142 2.4 Other 62.542 71.665 31.271 35.814 DOUBTFUL RESULTS 203.746 193.494 198.441 189.517

1. Doubtful results 203.746 193.494 198.441 189.517 B. SUPERVISORY CAPITAL REQUI REMENTS B.1 CREDIT RISK - - 1.535.599 1.444.274 B.2 MARKET RISK 3.115 3.963 1. STANDARD METHOD X X 3.115 3.963 of which: + position risk on debt securities X X 510 761 + position risk on equity instruments X X - 75 + exchange rate risk X X - + other X X 2.605 3.127 2. INTERNAL MODELS X X - - of which: + position risk on debt securities X X - - + position risk on equity instruments X X - - + exchange rate risk X X - - B.3 OTHER PR UDENTIAL REQUIREMENTS X X - - B.4 TOTAL PRUDENTIAL REQUIREMENTS (A1+ A2+ A3) X X 1.538.714 1.448.237 C. RISK ASSETS AND SUPERVISORY RATIOS X X 22.003.609 20.709.791 C.1 Weighted risk assets X X 22.003.609 20.709.791 C.2 Tier 1 capital/weighted risk assets (Tier 1 capital ratio) X X 6,38% 6,14% C.3 Tier 2 capital/Weighted risk assets (Total capital ratio) X X 7,74% 7,37%

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Part G – Business combinations concerning companies or lines of business

No item of this type exists for the Bank, with the exception of what reported under Part A Section 4 “Other aspects”.

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Part H – Transactions with related parties

Parent Bank

1. Name

UNIONE DI BANCHE ITALIANE Joint stock co-operative society

In abbreviated form UBI Banca.

2. Head office

Piazza Vittorio Veneto, 8 – 24122 BERGAMO

Company Register of Bergamo nr 03053920165 Association of Banks nr 5678.8 Association of banking groups nr 3111.2

Member of the Interbank Deposit Protection Fund.

Management and co-ordination

In compliance with Art. 2497 bis of the Italian Civil Code, a summary is given below of the main figures of the last annual financial report of the Parent Bank closed at 31 st December 2006 by the then Parent Bank BPU Banca S.c.p.A., then renamed UBI Banca S.c.p.A. following an extraordinary merger with Banca Lombarda e Piemontese Group effective as from 1 st April 2007. Therefore, starting from that date, all management and co-ordination activities over Banca Popolare di Bergamo S.p.A. have been exercised by UBI Banca S.c.p.A..

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ANNUAL FINANCIAL STATEMENTS OF THE COMPANY EXERCISING ACTIVITIES OF MANAGEMENT AND CO-ORDINATION – MAIN FIGURES (Art. 2497 bis, paragraph 4, Italian Civil Code) – ANNUAL FINANCIAL STATEMENTS 2006 - BANCHE POPOLARI UNITE s.c.p.a [from 01/04/07 - UBI BANCA s.c.p.a.]

BALANCE SHEET (in thousands of euros)

31/12/2006

ASSETS Cash in hand and balances with central banks and post offices 69 Financial assets held for trading 1.367.815 Financial assets at fair value 3.307.107 Available-for-sale financial assets 401.517 Held-to-maturity financial assets 1.247.630 Loans to banks 12.204.930 Loans to customers 2.670.908 Hedging derivatives 7.429 Equity investments 5.511.788 Non current assets 706.701 Tax assets 306.304 Other asests 627.490 TOTAL ASSETS 28.359.688

31/12/2006

LIABILITIES Due to customers and securities in issue 8.519.649 Due to banks 14.394.415 Financial liabilities held for trading 166.083 Trading derivatives 36.100 Tax payables 258.787 Other liabilities 763.803 Post-employment benefits 47.202 Provisions for liabilities and charges 7.083 Equity 3.669.579 Profit for the year 496.987 TOTAL LIABILITIES 28.359.688

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INCOME STATEMENT (in thousands of euros)

31/12/2006

Net interest expense (86.049) Net commission expense (5.566) Gross income 504.430 Net operating income 503.890 Operating costs (116.329) Profit from continuing operations before tax 444.701 Income taxes 52.286 PROFIT FOR THE YEAR 496.987

1. Information on remuneration of Directors and Senior Managers

Remuneration of Senior Managers (1)

31/12/2007

Short-term benefits for employees (2) 2.854 Post- employment benefits (3) 208

(1) A “Senior Manager” is intended as meaning “managers with strategic responsibilities of the entity or of its parent… including the Directors of the entity”; (2) For the sake of example: wages, salaries and the relative social security contributions, indemnities to replace vacations not taken or absences for illness, benefits in kind. (3) For the sake of example: pensions, other social security benefits, life and health insurance policies subsequent to termination of employment.

With regard to remuneration paid in 2006 to 7 Senior Managers with strategic responsibilities, including the Managing Director and the General Manager, in addition to the fixed part decided through individual agreements, there is also a variable component linked to the achievement of strategic pre-fixed objectives.

The fixed part of the remuneration not only contains normal payments in cash but also benefits which complete the remuneration such as supplementary pension funds, health insurance policies, accident policies and possible provision of a company car for bank and private use. No medium/long term incentive plans are provided for.

Remuneration to Directors for the year 2007 amounted to 957 thousand euros.

The following types of remuneration were paid (the relevant accounting standard may be consulted for definitions):

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a) Short term benefits Short-term benefits included salaries, social security contributions, indemnities to replace vacations not taken, absences for illness, paid leave and benefits such as medical care, housing and company car. Short term benefits also include the variable remuneration part depending on annual qualitative and quantitative objectives linked to the Industrial Plan. This component accounts on average for approximately 22,5% of the Bank’s total labour costs destined to these items. b) Post-employment benefits Post-employment benefits include providence, pension and insurance plans as well as post-employment benefits. The Senior Managers in question benefit from life and supplementary pension forms of insurance which also extend beyond termination of their employment contracts. Approximately 3% of the total cost is annually destined to these items. c) Other long term benefits No other long term benefits are to be reported. d) Termination benefits In few cases, non-competition agreements and compensation have been stipulated in relation with termination of employment. In other few cases, notice terms as provided for by the contract have been increased, for the sake of a better business continuity of the Group.

2. Definition of “related parties”

In IAS 24 no definition is given concerning measurement and recognition criteria of operations concluded with related parties, which are recorded following the accounting principles of reference, meaning that, for example, a loan granted to an entity or a private individual identified as related party is recognised and valued on an accounting level following the rules set out in IAS 39 and the information given concerning related parties, to be added to the one already provided for by the Standared above, becomes part of the wider accounting item “Loans to customers”. IAS 24, on the contrary, identifies the types relating parties consist of at par. 9 as follows:

“A party is related to an entity if: a) directly, or indirectly through one or more intermediaries, the party: i) controls, is controlled by, or is under common control with, the entity (this includes parents, subsidiaries and fellow subsidiaries); ii) has an interest in the entity that gives it significant influence over the entity; or iii) has joint control over the entity; b) the party is an associate (as defined in IAS 28 Investments in Associates) of the entity; c) the party is a joint venture in which the entity is a venturer (see IAS 31 Interests in Joint Ventures); d) the party is a member of the key management personnel of the entity or its parent. e) the party is a close member of the family of any individual referred to in (a) or (d); f) the party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e); or g) the party is a post-employment benefit plan for the benefit of employees of the entity, or of any entity that is a related party of the entity.

285

The term “Related Parties” can therefore be applied both for private individuals and recognised organisations .

More in detail, the Bank has adopted the following identification criteria:

Members of the key management personnel: Those subjects having direct or indirect power and responsibility over planning, direction and control of the Bank’s activities, including directors (executive and other) of the entity itself. The following subjects were specifically identified as executives with strategic responsibilities:
All executives with strategic responsibilities within UBI Banca
The Board of Directors
The Statutory Board of Auditors
The General Manager
The Deputy General Manager
Executives belonging to the General Management staff

Close members of the family of executives with strategic responsibilities: Family members who are expected to influence, or to be influenced by, members of the key management personnel.

Controlled entities, associated entities, joint ventures in which members of key management personnel and their close family members hold an interest Those entities in which an executive or close family member holds a direct or indirect interest conferring control or significant influence on him, or those companies in which those subjects play the role of managing director or sole director.

In particular, the Parent Bank and other companies belonging to the Group – mainly UBI Sistemi e Servizi S.p.A. - provide their subsidiaries with a series of services, governed by intragroup contracts drawn up in accordance with the principles of consistency, transparency and uniformity in line with the organisational model of the Group. Under this model, strategic, technical, operational and management activities are centralised at UBI Banca. The prices agreed for the services provided under the contracts were determined on the basis of market prices or, where appropriate reference parameters could not be found in the marketplace, in accordance with the particular nature of the services provided, on the basis of the cost incurred. The main intragroup contracts existing at the end of the year included those to implement the policy to centralise the governance, support and business activities at the Parent Bank and UBISS, which involved the Parent Bank and the main banks in the Group, and also contracts to implement the national fiscal consolidation (in accordance with articles 117 to 129 of Presidential Decree 917/1986, the Consolidated Law on income taxes) concluded by the Parent Bank and currently applicable with some of the Italian companies in the Group. See the Report on operations for a detail on the main relations with the other companies belonging to the Group.

As for transactions between the Bank and all of its related parties no atypical and/or unusual transactions were performed; furthermore, no transactions of that type were performed with counterparties that were not related parties. Atypical and/or unusual transactions, as indicated in CONSOB Communications 98015375 of 27 th February 1998 and 102564 of 6 th April 2001, are intended to mean all those transactions which, because of their significance/entity, nature of counterparties, content of the transaction (even in relation to ordinary operations), the way in which the transfer price is decided and the timing of the event (close to the end of the financial year) might give rise to doubts concerning: the correctness/completeness of the information in

286

the financial statements, a conflict of interests, the security of the company’s assets and the rights of minority shareholders. Furthermore, a special procedure has been implemented for census and update of related parties as well as for monitoring of transactions performed with them.

Further information of transactions with related parties is reported in the following tables.

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31/12/2007

Related party Financial Available -for - Financial Hedging Loans to Securities in Other assets held for sale financial Loans to banks Other assets Due to banks Due to customers liabilities held derivatives customers issue liabilities trading assets for trading (liabiliti es)

Parent Company -- 2.882.822 - 105.557 1.997.962 - 50.032 - - 75.076 Subsidiaries ------Associates ------Joint ventures ------Investees of the Parent Company -- 99.112 142.626 - 7.163 239.201 47.968 - - 18.927 Senior managers ------2.529 - 71 - - Other related parties 267 - - 22.249 - - 14.525 - 209 - -

31/12/2007

Related party Financial Other Other Interest Commission Dividend and income/expense operatingt Personnel expenseadministrativecosts income income similar income income/costs expenses Parent Company 19.923 2.900 - - 237 6.063 (118.060) Subsidiaries ------Associates ------Joint ventures ------Investees of the Parent Company (434) 106.446 - - 404 2.509 (27.356) Senior managers (538) 52 - - 8 (228) (90) Other related parties 29.695 645 - 23 9 - (260)

“Subsidiaries” is intended as meaning “economic entities that jointly control or exercise a significant influence over the entity itself”.
“Senior Managers” is intended as meaning “a manager with strategic responsibilities of the entity or of its parent, where a manager with strategic responsibility is intended to mean those who have power and responsibility for the planning, management and control of the activities of the entity including its directors”.
“Other related parties” are those indicated above under letters e), f) and g). and the companies belonging to the UBI Banca Group 288

31/12/2007

Related party Financial Available -for - Financial Hedgi ng Loans to Securities in Other assets held for sale financial Loans to banks Other assets Due to banks Due to customers liabilities held derivatives customers issue liabilities trading assets for trading (liabilities)

With related parties (a) 267 - 2.981.934 164.875 105.557 2.005.125 256.255 98.000 280 - 94.003 Total (b) 62.271 - 3.189.700 21.390.548 403.420 2.046.009 12.91 1.157 7.756.349 92.722 10.958 587.261 Incidence % (a/b*100) 0,43% 0,00% 93,49% 0,77% 26,17% 98,00% 1,98% 1,26% 0,30% 0,00% 16,01%

31/12/2007

Related party Financial Other Other Interest Commission Dividend and income/expense operating Personnel expenseadministrative income income similar income income/costs expenses

With related parties (a) 48.646 110.043 - 23 658 8.344 (145.766) Total (b) 741.282 328.350 - 2.821 66.573 (287.548) (256.064) Incidence % (a/b*100) 6,56% 33,51% - 0,82% 0,99% (2,90%) 56,93%

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Part I – Share based payment agreements

No item of this type exists for the Bank.

Bergamo, 26 th March 2008

The Board of Directors

290

AAttttaacchhmmeennttss

291

List of real estate properties

(in thousands of euro) Revaluations Revaluations from Accumulated Carrying Location Investments FTA adjustments Gross values by law mergers depreciation amounts

Bergamo Piazza Vittorio Veneto, 8 P 2.706 8.308 753 11.767 5.547 6.220 Rome Via Benedetto Croce, 24 L 5.100 5.100 267 4.833 Seregno Via San Vitale, 17/21 L 1.560 1.560 161 1.399

Total 9.366 8.308 0,00 753 18.427 5.975 12.452

Legend:

P: owned properties L: leased properties

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Public information on fees paid for accounting audit and services other than audit complying with CONSOB regulations for issuers, art. 149 duodieces

Complying with provisions set out in art. 149 duodieces of the CONSOB regulations for issuers, the table below reports information concerning the fees paid to the Independent Auditors KPMG S.p.A., and other companies belonging to the same network, for the following services:

1) Audit services including:

Audit of the annual financial statements with expression of a final professional assessment;
Audit of interim financial report

2) Attestation services including evaluation of specific elements - determined by other entities in charge of them - using special criteria in order to express the level of reliability of the said specific element. This category also includes services relating to regulatory accounting.

3) Other services for tasks to be detailed with suitable accuracy, including for example: accounting – tax – legal – administrative due diligence, procedures agreed upon and advisory services to the executive involved.

The fees shown in the table and relating to financial year 2007 are formally agreed upon and include possible indexation (before out-of-pocket expenses, supervisory contribution, if any, and VAT).

As set out in the said provision, fees paid to possible other auditors or entities belonging to their networks are not excluded.

(in thousand of euros)

Type of service Service rendered by: To: Fees

Audit of the annual accounts KPMG SPA BPB S.p.A. 250 Half-yearly audit KPMG SPA BPB S.p.A. 60

Attestation services (Signing of income tax return) KPMG SPA BPB S.p.A. 15 Advisory services 0 Other services (to be listed) 0

TOTAL 325

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Glossary

ABS (A SSET BACKED SECURITIES ) Financial instruments issued for securitisation purposes (cf. definition) whose yield and repayment are ensured by the originator assets (cf. definition) and solely intended to satisfy the rights embodied in the financial instruments themselves. Debt securities are technically issued by a SPV (cf. definition). The underlying securitisation portfolio may consist of mortgage loans, loans, bonds, commercial credits, credits deriving from credit cards and others. Following the type of underlying asset, ABS can be classified as follows: - credit loan obligation (with a portfolio consisting of bank loans); - collateralized bond obligation CBO (with a portfolio consisting of junk bonds); - collateralized debt obligation CDO (with a portfolio consisting of bonds, debt instruments and securities in general); - collateralized mortgage obligation CMO (with a portfolio consisting of mortgage loans on residential properties); - commercial mortgage backed security (with a portfolio consisting of mortgage loans on commercial properties).

ACQUISITION FINANCE Loans used in operations for the acquisition of companies.

ASSET MANAGEMENT Management of financial investments belonging to others.

ALM (A SSET & LIABILITY MANAGEMENT ) Integrated management of assets and liabilities designed to allocate resources in such a way as to optimise the risk/return ratio.

ATM (A UTOMATED TELLER MACHINE ) Automatic device used by customers to perform operations such as withdrawing cash, paying cash or cheques in, requesting information on their accounts, paying utility bills, recharging telephones, etc… Customers operate the machine by inserting a card and typing a personal identification number.

RISK WEIGHTED ASSETS A figure obtained by multiplying the total supervisory capital requirements (credit risks, market risks and other prudential requirements) by a coefficient of: - 14,3 for companies belonging to banking groups; - 12,5 for banking groups (consolidated) and companies not belonging to banking groups.

BACKTESTING Retrospective analysis for control of risk assessment reliability related to positions of assets portfolios.

BANKASSURANCE Expression used to refer to the sale of traditional insurance products through a bank’s branch network.

BANKING BOOK This term usually identifies the part of a securities portfolio, or of financial instruments in general, intended for “ownership” activity.

BASEL II The new Basel agreement on capital has led to a redefinition of the guidelines used to determine banks minimum capital requirements, with new regulations for the assessment of typical banking and financing activity risks providing alternative

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calculation methods based on various complexity levels and with the possibility to use internally developed models subject to approval by the supervisory body.

BASIS POINT Corresponding to one hundredth of one percentage point (0,01%).

BASIS SWAP Contract involving an exchange between two counterparties of payments linked to variable interest rates based on different indexes.

BENCHMARK Reference parameter for financial investments based on the major market indexes or on other data which may offer a better representation of risk/yield profile.

BEST PRACTICE Behaviour based on the most significant experiences and/or on the best level of knowledge concerning a given technical/professional field.

CAGR – COMPOUND ANNUAL GROWTH RATE Annual growth rate applied to an investment or other activities on a multiyear basis, calculated as follows: (current value/basic value)^(1/nr of years).

CAPITAL ALLOCATION Process by which decisions are made on how to distribute investments among different types of financial asset (e.g. bonds, equities and liquidity). Capital allocation decisions are determined by the need to optimise the risk/return ratio in relation to the time horizon and the investor’s expectations.

CAPTIVE This term generally refers to “networks” or companies which only operate with customers of the company or of the group.

SECURITISATION Sale of debts or other financial assets that are not negotiable instruments to a special company (special purpose vehicle) whose sole business is to perform those operations and to convert those loans or assets into securities traded on secondary markets.

(I NSURANCE ) CAPITALISATION CERTIFICATES Capitalisation certificates fall within the scope of regulations concerning life direct insurance as settled by Legislative Decree 174 of 17 th March 1995. As set out in art. 40 of the said Decree, these are agreements with which an insurance company commits itself to paying, as settlement of unique or recurrent premiums, a capital corresponding to the premium paid and periodically revalued on the basis of the yield of a separated internal financial assets management or, if higher, of a minimum guaranteed yield. Their duration must be minimum five years and the contractor may obtain policy surrender starting from the second year. According to article art. 31 of said Decree 174, financial assets for hedging of technical reserves are only used for obligations linked to capitalisation contracts (separate management). Therefore, in case of liquidation of the insurance company (art. 67), the beneficiaries of such policies in fact become holders of specially privileged credit positions.

CONSUMER FINANCE Lending for consumption. Loans granted to private individuals for the consumption of goods and services.

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CORPORATE GOVERNANCE Corporate governance defines the assignment of rights and responsibilities to the participants in the life of a company in relation to the distribution of duties, responsibility and decision making powers by means of the composition and functioning of internal and external Corporate Bodies. One fundamental objective of corporate governance is to create maximum wealth for Shareholders, which in the medium to long term, is also advantageous for other stakeholders, such as customers, suppliers, employees, creditors, consumers and the community.

CREDIT DEFAULT SWAP Contract by which one party transfers, for a periodical payment of a premium to the other, a credit risk attached to a loan or a security when a determined event occurs which results in the deterioration of the solvency of the debtor.

RESCHEDULED LOAN Account for which the Bank has agreed a longer period of repayment for a debtor, renegotiating the exposure at lower than market rates.

DEFAULT A declared condition of being unable to honour debts and/or payment of the relevant interests.

GEOGRAPHICAL DISASTER RECOVERY A set of technical and organisational procedures set in motion when a catastrophe occurs which causes the complete data processing platform to shut down. The objective is to reactivate EDP functions that are vital to the company at a secondary (recovery) site. A disaster recovery system is defined as “geographical” when it is located at least 50 km from the original system. The primary objective is to reduce risk arising from disaster events with a potential impact on an entire metropolitan area (i.e. earthquakes, floods, military intervention, etc.) as prescribed by international safety standards.

FACTORING Contract for the transfer, either without recourse (with the credit risk attaching to the transferee) or with recourse (when the credit risk remains with the transferor), of commercial loans to banks or specialist companies, for management and cash receipt purposes, to which a loan can be associated to the transferor.

FAIR VALUE The amount of consideration for which - under free market conditions - an asset can be exchanged, or a liability settled, between knowledgeable and willing parties. It is often the same as the market price. According to the IAS (cf. definition), banks apply fair value when valuating financial instruments (assets and liabilities) held for trading and available for sale, and derivatives; it can also be used for the measurement of equity investments and property, plant and equipment and investment property and intangible assets (with different impacts on the Income Statement following the various elements considered).

FLOOR Derivatives contract on interest rates, traded outside regulated markets, with which a lower limit is set on the reduction of the lending rate.

FRA (F ORWARD RATE AGREEMENT ) Contract whereby the parties agree to receive (pay) at the end of the contract the difference between the amount calculated by applying a set interest rate and the amount obtained on the basis of the level of a reference rate chosen beforehand by the parties.

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FUNDING Acquisition, in various forms, of the funds required for the activities of a company or for particular financial operations.

FUTURES Standardised forward contracts with which the parties agree to exchange securities or goods at a set price on a future date. These contracts are usually traded on organised markets, where the execution of the contract is guaranteed.

GOODWILL This is the amount paid for the acquisition of an interest in a company which is the difference between the cost and the corresponding proportion of the Equity, for that part that is not attributed to the assets of the company acquired.

HEDGE FUND A mutual investment fund which has permission (denied to traditional fund managers) to use sophisticated investment instruments or strategies, such as short selling, derivatives (options or futures, even up to more than 100% of the assets), hedging (hedging the portfolio against market volatility by short selling and the use of derivatives) and financial leverage (borrowing to then invest the money borrowed).

IFRS International financial reporting standards set by the International Accounting Standards Board (IASB), a private sector international body set up in April 2001, to which the accounting professions of major companies belong, while the European Union, the IOSC (International Organization of Securities Commissions) and the Basle Committee participate as observers. This body has taken over from the International Accounting Committee (IASC), formed in 1973 to promote the harmonisation of rules for preparing company financial statements. When the IASC was transformed into the IASB, one decision taken was to term the new accounting standards “International Financial Reporting Standards” (IFRS).

IDENTITY ACCESS MANAGEMENT A technical and organisational method used to manage and monitor the entire life cycle of granting, managing and revoking access privileges to ICT resources and therefore to company information by each user.

IMPAIRMENT According to the IAS (see relevant definition), this is the loss in value of an asset in the financial statements, recognised when the recorded value is higher than the recoverable value or the amount obtainable from sale or use of the asset. Impairment tests are to be performed on all assets, with the exception of those at fair value, for which possible loss (or gain) in value are implicit.

IMPAIRED LOANS Loans at their face value to persons in situations of objective difficulty where, however, it is felt the difficulties can be overcome in an appropriate period of time.

INDEX LINKED A life policy the performance of which is linked to that of a reference parameter which could be a share index, a basket of securities or another indicator.

INTERNAL AUDIT Function to which internal auditing activity is attributed institutionally.

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INVESTMENT BANKING Investment banking is a highly specialist financial sector which assists companies and governments to issue securities and more generally to obtain funds on capital markets.

INVESTMENT GRADE High quality bond securities which are given a medium-high rating (i.e. not lower than BBB according to the Standard & Poor’s range).

JOINT VENTURE Agreement between two or more companies to perform a determined economic activity usually by forming a joint stock company.

JUNIOR In a securitisation operation it is the most subordinated tranche of the securities in issue, which is the first to meet the losses that may be incurred in the recovery of the underlying assets.

LEASING Contract by which one party (lessor) grants the use of an asset to the other party (lessee) for a determined period of time. The asset is purchased by or constructed for the lessor on the instructions and as selected by the lessee, where the lessee has the right to purchase the ownership of the asset under preset conditions at the end of the leasing contract.

LOWER TIER II Subordinated liabilities which form part of the supplementary or tier 2 capital (cf. definition) on condition that the contracts governing their issue expressly stipulate that: a) in the case of liquidation of the issuer the debt will only be repaid after all the other higher ranking creditors have been satisfied; b) the duration of the contract is equal to or longer than 5 years and, if a maturity date has not been established, it must be set with advance notice of at least 5 years; c) early repayment of the debt may only take place on the initiative of the issuer and must be authorised by the Bank of Italy. In the absence of a depreciation scheme producing the same effect, the amount of subordinated liabilities admitted in the tier 2 capital is reduced by one fifth each year during the 5 years preceding expiry date.

MARK TO MARKET Assessment of a securities portfolio and other financial instruments based on prices expressed by the market.

MARK DOWN Difference between the average borrowing rate for the direct forms of funding employed and the Euribor rate.

MARK UP Difference between the average lending rate for the forms of lending employed and the Euribor rate.

MERCHANT BANKING This activity includes the subscription of securities, equities or debt, of Corporate customers for subsequent sale on the market, the acquisition of equity interests of a more permanent nature but again with the objective of subsequent sale and advisory activities to companies for mergers and acquisitions or restructuring.

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MEZZANINE In a securitisation operation it is the tranche with an intermediate level of subordination between that of the junior tranche and that of the senior tranche .

SUBPRIME LOANS This concept concerns the borrower and not the loan operation itself. On a technical level, the term subprime is used to mean a borrower whose credit history is not fully positive due to negative credit events such as: failure in repayment of instalments on previous loans, unpaid and protested cheques and so on. Such past events represent a higher intrinsic risk of the counterparty with consequent higher remuneration requirements by the intermediary granting the loan. Operations with subprime customers are particularly developed on the American financial market, where the contract of these loans normally entails securitisations and securities issue.

NON PERFORMING A term which refers generally to loans with irregularities in repayment.

NUTS - NOMENCLATURE OF TERRITORIAL UNITS FOR STATISTICS REGARDING ITALY Used by Eurostat for developing statistics on a European level and based on the following zoning: North Italy: Piedmont, Valle Aosta, Liguria, Lombardy, Trentino Alto Adige, Veneto, Friuli Venezia Giulia, Emilia Romagna; Central Italy: Tuscany, Umbria, Marches, Latium; South Italy: Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sicily, Sardinia.

STRUCTURED BONDS Bonds for which the interest and/or the redemption value are linked to a real (a commodity price) parameter, or to index trends. In such cases, in the financial statements the implicit option is separated from the host contract. When rates or inflation are used as parameters (e.g. treasury certificates) in the financial statements the implicit option is separated from the host contract.

OPTION These consist of the right, but not a commitment, acquired with the payment of a premium, to purchase (call option) or sell (put option) a financial instrument at a determined price (strike price) before (American option) or on (European option) a future set date.

OICR (C OLLECTIVE INVESTMENT INSTRUMENTS ) This item includes OICVM (cf. definition) and other mutual investment funds (property mutual investment funds, closed mutual investment funds).

OICVM (C OLLECTIVE EQUITY SECURITY INVESTMENT INSTRUMENTS ) The item includes open, Italian and foreign mutual investment funds and investment firms with variable capital.

ORIGINATOR Entity which transfers its portfolio of deferred liquidity assets to an SPV (cf. definition) for it to be securitised.

OVER THE COUNTER (OTC) Operations concluded directly between parties without the use of a regulated market.

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PAST DUE Exposures that are past due and/or overdue and continuously in arrears for more than 180 days according to the definition contained in the supervisory instructions in force.

SUPERVISORY CAPITAL This consists of the sum of the tier 1 capital (admitted in the calculation without any limitation) and the tier 2 capital which is admitted up to the maximum amount of the tier 1 capital. From such sum the following items are deducted – 50% from the tier 1 capital and 50% from the tier 2 capital: equity holdings, innovative capital instruments, hybrid capital instruments and all subordinated assets held in other banks and financial companies. More specifically, non-consolidated equity holdings of more than 10% held in banks and financial companies as well as all equity holdings of less that 10% in banks and financial companies and all subordinated assets issued by banks, which exceed 10% of the core and tier 2 capital are deducted. Holdings in insurance companies and subordinated liabilities issued by them, as well as positions to securitisations are also deducted.

PLAIN VANILLA SWAP Interest rate swap, in which one counterparty receives a variable payment linked to the LIBOR index (generally the six month LIBOR) and pays a fixed rate to the other counterparty, obtained by adding a spread to the yield on a type of government security.

CAPITALISATION POLICIES See “(Insurance) capitalisation certificates”

POS TERMINAL (POINT OF SALE TERMINAL ) Automatic equipment for the payment of goods or services at the supplier’s premises using credit, debit or prepaid cards.

PREFERENCE SHARES Innovative capital instruments, issued by foreign subsidiaries belonging to the banking Group, which combine yields linked to market rates with particularly low subordination such as for example no recovery in future years of interest not paid by the Parent Bank and sharing in the losses of the Bank itself if these result in a substantial reduction in capital requirements. The conditions under which preference shares can be included in the tier 1 capital of banks and banking groups are set out in the supervisory instructions of the Bank of Italy.

PRICE SENSITIVE A term which generally refers to information or data that is not in the public domain which if disclosed would have a marked effect on the price of a security.

PRIVATE EQUITY Activities involving the acquisition of equity interests and the subsequent placement with specific counterparties without offering them for sale to the public.

PROJECT FINANCE Financing of projects based on a forecast of the cash flows generated by them. Unlike ordinary credit risk analysis, this technique implies not only an analysis on expected cash flows but also a review of specific elements such as project specifications, sponsors suitability, product placement markets.

RATING A rating of the quality of a company or its issues of debt securities on the basis of the soundness of the company’s finances and its prospects.

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SENIOR In a securitisation operation it is the tranche with the highest level of privilege in terms of priority for remuneration and repayment.

SENSITIVITY ANALYSIS Analysis system to identify the variations of determined assets and liabilities depending on fluctuations in rates and other parameters.

SERVICER In securitisation operations, it is a company which continues to manage the debts or assets subject to securitisation on the basis of a special servicing contract after they have been sold to the special purpose vehicle responsible for issuing the securities.

NON PERFORMING LOANS Loans to persons or organisations that are either insolvent (even if not declared as such in the courts) or in equivalent circumstances.

SPREAD This term normally refers to: - the difference between two interest rates; - the difference between the buying (bid) price and the selling (asking) price in securities trading; - the premium that the issuer of securities recognises in addition to a reference rate.

SPV (SPECIAL PURPOSE VEHICLE ) An entity (company, “trust” or other entity) which is formed specifically for the purchase of assets to be securitised. An SPV has a juridical status that is independent from the originator (cf. definition); all its activities are aimed exclusively at the implementation of the operation.

STAKEHOLDER Individuals or groups who have specific interests in an enterprise either because they depend upon it to achieve their goals or because they are considerably effected by the positive or negative effects of its activities.

STOCK OPTION Term used to refer to options offered to the managers of a company which allow them to purchase shares in the company at a set price.

SWAP (ON RATES AND FOREIGN EXCHANGE ) An operation consisting of the exchange of revenues between counterparties according to special contracted conditions. With an interest rate swap the counterparties exchange the interest payments calculated on notional reference capital on the basis of different criteria (e.g. one counterparty pays a fixed rate and the other a variable rate). In the case of currency swaps, the counterparties exchange specific amounts of two different currencies, returning them at set times concerning both capital and interest.

RISK FREE RATE Rate of interest on a risk free asset. In practice it is used to refer to the interest rate on short term government securities even if they cannot be considered as risk free.

TIER I CAPITAL This consists of the share capital paid in, reserves (including shares premium), innovative capital instruments (only if conditions fully guarantee the stability of the Bank) , the profit of the corresponding period and positive prudential instruments of the tier 1 capital. The following is deducted: treasury shares, goodwill, intangible assets, prior and current year

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losses, impairment losses calculated on trading portfolio for supervisory purposes and negative prudential instruments of the tier 1 capital.

TIER II CAPITAL This consists of revaluation reserves, innovative capital instruments which cannot be included in the tier 1 capital, hybrid capital instruments (non redeemable debt and other instruments redeemable on request of the issuer with the prior consent of the Bank of Italy), subordinated liabilities (for an amount reduced by one fifth during the five years preceding expiry date), net capital gains in holdings, positive prudential filters of tier 2 capital, possible surplus on total net impairment losses compared to expected losses, positive differences on exchange rate. From those elements the following negative components are to be deducted: net capital losses in holdings, negative prudential filters of tier 2 capital, other negative elements.

TIER III (THIRD LEVEL SUBORDINATED DEBT ) Subordinated debt that satisfies the following conditions: - they have been fully paid; - they do not form part of the tier 2 capital (cf. definition); - they have a life equal to or longer than two years; if the maturity is not set, the advance notice of the maturity must be at least two years; - they meet the conditions specified for similar liabilities included in the tier 2 capital except, obviously, those concerning the life of the debt; - they are subject to a “lock in” clause, according to which the capital and the interest cannot be repaid if the repayment reduces the total amount of the Bank’s capital to a level lower than 100% of the total capital requirements.

TRADING BOOK This term usually identifies the part of a securities portfolio, or of financial instruments in general, intended for trading activity.

TROR (TOTAL RATE OF RETURN SWAP ) This is a contract with which a “protection buyer” (also known as a “total return payer”) agrees to pay all the cash flows generated by a “reference obligation” to a “protection seller” (also know as the total return receiver), who in return transfers the cash flows linked to the performance of a “reference rate” to the “protection buyer”. On the dates on which the coupons for the cash flows are paid (or at the end of the contract) the “total return payer” pays the “total return receiver” any increase there may be in the “reference obligation”; if, on the other hand, the “reference obligation” has decreased then it is the “total return receiver” who pays the relative amount to the “total return payer”. A TROR is in actual fact a structured financial product consisting of a combination of a credit derivative and an interest rate swap.

TRADING ON LINE System for buying and selling financial instruments on the stock exchange via Internet.

TRIGGER EVENT A previously agreed event which, when occurring, triggers given faculties for the contractors.

UNIT -LINKED Life insurance policies with performance linked to the value of investment funds.

UPPER TIER II Hybrid capitalisation instruments which form part of the supplementary or tier II capital (cf. definition) when the contract specifies that: a) if there are losses in the accounts which cause a decrease in the capital paid in and in the reserves below the minimum level required for the authorisation to operate as a 302

bank, the sums from those liabilities and the interest accruing on them can be used to replenish the losses, in order to allow the issuing entity to continue its business; b) if operating performance is negative, the right to remuneration can be suspended by that amount needed to prevent or limit the occurrence of losses as much as possible; c) in the case of liquidation of the issuer, the debt will only be repaid after all the other higher ranking creditors have been satisfied; Non irredeemable hybrid capitalisation instruments must have a life equal to or longer than 10 years. There must be a specific clause in the contract stating that repayment is dependent on Bank of Italy authorisation.

VAR (VALUE AT RISK ) A measure of the maximum potential loss that may be incurred on a financial instrument or portfolio with a set probability (level of confidence) in a determined time period (the reference or holding period).

WARRANT Negotiable instrument which grants the holder the right to purchase fixed rate securities or shares from the issuer or sell them to the issuer under precise conditions.

ZERO -COUPON Bonds which do not pay an interest note, where the yield is given by the difference between the issue (or purchase) price and the redemption value.

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304

BBrraanncchh NNeettwwoorrkk

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LOMBARDY

District of Bergamo Bergamo Piazza Vittorio Veneto, 8 Viale Vittorio Emanuele II, 5 (c/o Inps Bg) Via dei Caniana, 2 (c/o Università) Via Borgo Palazzo, 51 Via Borgo Santa Caterina, 6 Bergamo Ambiente e Servizi Spa, Via Suardi, 24/b (c/o A2A Spa) Via Gombito, 6 Via Borgo Palazzo, 135 Via Gleno, 49 Via Mattioli, 69 Piazza Risorgimento, 15 Piazza Pontida, 39 Via Leone XIII, 2 Via San Bernardino, 96 Adrara San Martino Via Madaschi, 103 Albano Sant’Alessandro Via Cavour, 2 Albino Via Mazzini, 181 Via Lunga, 1 (Fraz. Fiobbio) Almè Via Torre d’Oro, 2 Almenno San Bartolomeo Via Falcone, 2 Almenno San Salvatore Via Marconi, 3 Alzano Lombardo Piazza Garibaldi, 3 Arcene Corso Europa, 7 Ardesio Via Locatelli, 8 Azzano San Paolo Piazza IV Novembre, 4 Bariano Via A. Locatelli, 12 Barzana Via San Rocco Berbenno – Ponte Giurino Via Stoppani, 88 Piazza Roma, 2 Boltiere Piazza IV Novembre, 14 Bonate Sopra Piazza Vittorio Emanuele II, 20 Brembilla Via Libertà, 25 Brignano Gera d’Adda Via Mons. Donini, 2 Calcinate Via Coclino, 8/C Calcio Via Papa Giovanni, 153 Calusco d’Adda Via Vittorio Emanuele, 7 Capriate San Gervasio Via Parigi, 4 Caravaggio Piazza G. Garibaldi, 1 Carvico Via Europa Unita, 3 Casazza Via Nazionale del Tonale, 92 Casirate d’Adda Piazza Papa Giovanni XXIII, 1 Castione della Presolana Via Donizetti, 2 (Fraz. Bratto - Dorga) Via A. Manzoni, 20 Cazzano Sant’Andrea Via Cav. P. Radici, 23 Cenate Sopra Via Giovanni XXIII, 16 Cenate Sotto Via Verdi, 5 Cene Via Vittorio Veneto, 9 Chiuduno Via Cesare Battisti, 1 Cisano Bergamasco Via Pascoli, 1 306

Caprino Bergamasco Via Roma, 10 Ciserano Via Pilabrocc, 10 Corso Europa, 17 (Fraz. Zingonia) Cividate al Piano Via Papa Giovanni XXIII, 3 Clusone Via Verdi, 3 Colere Via Tortola, 58 Comun Nuovo Via Cesare Battisti, 5 Costa Volpino Via Nazionale, 150 Curno Largo Vittoria, 31 Dalmine Via Buttaro, 2 Piazza Caduti 6 luglio 1944 (c/o Tenaris Spa) Corporate Banking Office – Via Provinciale snc Dezzo di Scalve Via Papa Giovanni XXIII, 33 Dossena Via Carale, 9 Entratico Piazza Aldo Moro, 18 Fontanella Via Cavour, 156 Foresto Sparso Via Tremellini, 1 Gandino Via C. Battisti, 5 Gazzaniga Via Marconi, 14 Gorlago Piazza Gregis, 12 Gorle Piazzetta del Donatore, 5 Grassobbio Viale Europa, 8/B Grumello del Monte Via Martiri della Libertà, 10 Leffe Via Mosconi, 1 Lovere Via Tadini, 30 Lovere Via Paglia, 45 - Lovere Sidermeccanica Spa Madone Via Papa Giovanni XXIII, 44 Mapello Piazza del Dordo, 5 Martinengo Via Pinetti, 20 Nembro Piazza della Libertà Orio al Serio Via Aeroporto, 13 Osio Sopra Via XXV Aprile, 29 Osio Sotto Via Cavour, 2 Paladina Via IV Novembre, 13 Palosco Piazza A. Manzoni, 16 Parre Via Duca d’Aosta, 20/A Piazza Brembana Via B. Belotti, 10 Ponte Nossa Via Frua, 24 Ponte San Pietro Piazza SS Pietro e Paolo, 19 Ponteranica Via Pontesecco, 32 Pontida Via Lega Lombarda, 161 Presezzo Via Capersegno, 28 Ranica Piazza Europa, 2 Romano di Lombardia Via Tadini, 2 Rovetta Via Tosi, 13 San Giovanni Bianco Via Martiri di Cantiglio, 19 San Pellegrino Terme Via S. Carlo, 3 Sant’Omobono Terme Viale Alle Fonti, 8 Sarnico Piazza Umberto I Scanzorosciate Via Roma, 27 Schilpario Via Torri, 8 Sedrina Via Roma, 14 Selvino Via Monte Rosa – angolo Via Betulle Seriate Viale Italia, 24

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Sovere Via Roma, 36 Spirano Via Dante, 9/b Stezzano Via Bergamo, 1 Suisio Via Carabello Poma, 31 Taleggio Via Roma, 63 (Fraz. Olda) Tavernola Bergamasca Via Roma, 12 Telgate Via Morenghi, 17 Torre Boldone Via Carducci, 12 Torre de Roveri Piazza Conte Sforza, 3 Trescore Balneario Via Locatelli, 45 Corporate Banking Office – Piazza S. D’Acquisto, 12 Treviglio Viale Filagno, 11 Urgnano Via Matteotti, 157 Valbrembo Via Roma, 52 Verdello Via Castello, 31 Vertova Via S. Rocco, 45 Villa d’Adda Via Fossa, 8 Villa d’Almè Via Roma – angolo Via Locatelli, 1 Villongo Via Bellini, 20 Vilminore di Scalve Piazza Giovanni XXIII, 2 Zandobbio Via G. Verdi, 2 Zogno Viale Martiri della Libertà, 1

District of Brescia Brescia Via Gramsci, 39 Chiari Via Bettolini, 6 Concesio Viale Europa, 183 Darfo Boario Terme Piazza Col. Lorenzini, 6 Desenzano del Garda Viale Andreis, 74 Esine Via Manzoni, 97 Manerbio Via Dante, 5 Orzinuovi Piazza Vittorio Emanuele II, 31/33 Ospitaletto Via Martiri della Libertà, 27 Palazzolo sull’Oglio Piazza Roma, 1 Paratico Via Don G. Moioli, 17 Rezzato Via Europa, 5 San Paolo Via Mazzini, 62 San Zeno Naviglio Via Tito Speri, 1

District of Como Como Via Giovio, 4 Via dei Mille 2/B Como-Camerlata Via Badone, 48 Cantù Piazza Marconi, 9 Via Enrico Toti, 1/A (Fraz. Vighizzolo) Cermenate Via Matteotti, 28 Erba Via Leopardi, 7/E Mariano Comense Corso Brianza, 20 Oltrona San Mamette Piazza Europa, 6 Rovellasca Via Volta, 1

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District of Cremona Cremona Via Dante, 241 Soncino Via IV Novembre, 25

District of Lecco Lecco Corso Matteotti, 3 Calolziocorte Piazza Vittorio Veneto, 18/A Carenno Via Roma, 36 Cernusco Lombardone Via S. Caterina, 4 Monte Marenzo Piazza Municipale, 5 Olginate Via S. Agnese, 38 Valmadrera Via Fatebenefratelli, 23

District of Mantua Mantova Via Madonna dell’orto, 6 Piazza de Gasperi, 20 Corporate Banking Office – Piazza Vilfredo Pareto, 9 c/o Centro Dir. Boma Bagnolo San Vito Via di Vittorio, 35 (Fraz. San Biagio) Borgofranco sul Po Via Martiri della Libertà, 64 Castiglione delle Stiviere Via Cavour, 36 Magnacavallo Via Roma, 23 Moglia Piazza Libertà, 19 Ostiglia Via Vittorio Veneto, 14 Poggio Rusco Via Trento e Trieste, 9 Quistello Via G. Marconi, 12 Via Europa, 49 (Fraz. Nuvolato) Sermide Via Cesare Battisti, 4 Villa Poma Piazza Mazzali, 7

District of Milan Milano Via Manzoni, 7 Corso Europa, 16 (c/o Centrobanca Spa) Piazzale Zavattari, 12 Via Pellegrino Rossi, 26 Via Melchiorre Gioia, 28 Piazza Cinque Giornate, 1 Piazzale Siena, 18 Piazzale Susa, 2 Via Biondi, 1 Via Foppa, 26 Via Friuli, 16/18 Via C. Menotti, 21 - angolo Via G. Modena Viale delle Rimembranze di Lambrate, 4 Viale L. Sturzo, 33/4 Via Saffi, 6/5 Via C. Olivetti, 2 (c/o St Microelectronics Spa - Agrate Brianza) Via Tolomeo, 1 (c/o St Microelectronics Spa - Cornaredo) Corso Italia, 22 Via Richard, 5 (c/o Nestlè Spa) Via A. Trivulzio, 6/8 Via Palestrina, 12 – angolo Viale Doria

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Abbiategrasso Piazza Cavour, 11 Arluno Via Piave, 7 Bellinzago Lombardo Via delle 4 Marie, 8 Carate Brianza Via Cusani, 49/51 Carnate Via Don Minzoni Cassano D’Adda Via Milano, 14 Cinisello Balsamo Piazza Soncino, 1 Cornaredo Via Magenta, 34 Desio Via Matteotti, 10 Garbagnate Milanese Via Garibaldi, 156 (Fraz. S. M. Rossa) Grezzago Piazza Aldo Moro Inveruno Via Magenta, 1 Legnano Corso Sempione - angolo Via Toselli Piazza Don Sturzo, 13 Magenta Piazza Vittorio Veneto, 11 Meda Via Indipendenza, 111 Melzo Piazza Risorgimento, 2 Mezzago Via Concordia, 22 Monza Via Borgazzi, 83 Piazza Giuseppe Cambiaghi, 1 Via San Rocco, 44 Nova Milanese Via Brodolini, 1 Novate Milanese Via Amendola, 9 Rho Via Pace, 165 (Fraz. Mazzo Milanese) Seregno Via S. Vitale, 17 Sesto San Giovanni Via Casiraghi, 167 Solaro Via Mazzini, 66 Sulbiate Via Mattavelli, 2 Trezzano Rosa Via Raffaello Sanzio, 13/S Trezzo sull’Adda Via A. Sala, 11 Vaprio d’Adda Piazza Caduti, 2 Vimercate Via B. Cremagnani, 20/A Via Torri Bianche, 3 Via Garibaldi, 12 Via Trento, 30 (c/o Alcatel Lucent Spa) Via Monza, 33 Alcatel Italia Spa (Concorezzo)

District of Pavia Vigevano Via Sacchetti Voghera Via XX Settembre, 1

District of Varese Varese Via Vittorio Veneto, 2 Via Dalmazia, 63 Piazza IV Novembre, 1 Viale Luigi Borri, 155 Viale Borri, 237 (c/o Bassani Ticino Spa) Via Pasubio, 2 Via Caracciolo, 24 Via Virgilio, 27

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Abbiate Guazzone Via Vittorio Veneto, 77 Azzate Via Vittorio Veneto, 23 – angolo via Piave Besozzo Via XXV Aprile, 77 Biumo Inferiore Via Valle Venosta, 4 (c/o Ascom Varese) Bodio Lomnago Via Risorgimento, 23 Busto Arsizio Piazza S. Giovanni, 3/A Corso Italia, 33 Via Magenta, 64 Viale Alfieri, 26 Cairate Via Mazzini, 13 Via Genova, 1 (Fraz. Bolladello) Caravate Via XX Settembre, 22 Cardano al Campo Via Gerolamo da Cardano, 19 Caronno Pertusella Via Roma, 190 Casale Litta Via Roma, 4 Casorate Sempione Via Milano, 17 Cassano Magnago Via Aldo Moro, 10/B Castiglione Olona Via Papa Celestino, 22 Cislago Via IV Novembre, 250 Clivio Via Ermizada, 10 Cuvio Via Giuseppe Maggi, 20 Daverio Via Giovanni XXIII, 1 Fagnano Olona Piazza Cavour, 11 Ferno Piazza Dante Alighieri, 7 Gallarate Via A. Manzoni, 12 Via Buonarroti, 20 Via Marsala, 34 Via Varese, 7/A (Fraz. Cascinetta) Gavirate Piazza della Libertà, 2 Gazzada Schianno Via Roma, 47/B Gerenzano Via G.P. Clerici, 124 Gorla Maggiore Via Verdi, 2 Gornate Olona Piazza Parrocchetti, 1 Induno Olona Via G. Porro, 46 Ispra Via Mazzini, 59 Jerago con Orago Via Matteotti, 6 Lavena Ponte Tresa Via Valle, 4 Laveno Mombello Via Labiena, 53 Lonate Ceppino Via Don Albertario, 3 Lonate Pozzolo Piazza Mazzini, 2 Luino Via Vittorio Veneto, 6/A Malnate Piazza Repubblica – angolo Via Garibaldi Marnate Via Diaz, 12 – angolo Via Genova Mercallo Via Prandoni, 19 Mesenzana Via Provinciale, 11 Mornago Via Cellini, 3 – angolo Via Carugo Olgiate Olona Via G. Mazzini, 56 Origgio Via Repubblica, 10 Saltrio Via Cavour, 27 Samarate Via N. Locarno, 19 (Fraz. Verghera)

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Saronno Via P. Micca, 10 Via Roma, 85 Strada Statale Varesina, 233 (c/o Novartis Italia Spa) Sesto Calende Via XX Settembre, 35 Solbiate Arno Via A. Agnelli, 7 Somma Lombardo Corso della Repubblica – angolo Via Rebaglia Ternate Piazza Libertà, 14 Tradate Via XXV Aprile, 1 – angolo Corso Ing. Bernacchi Uboldo Via R. Sanzio, 46 Varano Borghi Via Vittorio Veneto, 6 Vedano Olona Piazza S. Rocco, 8 Venegono Inferiore Via Mauceri, 16 Venegono Superiore Via Paolo Busti, 3 Viggiù Via A. Castagna, 1

PIEDMONT

District of Alessandria Casale Monferrato Via Hugues, 1

District of Asti Canelli Corso Libertà, 68

District of Biella Biella Via Nazario Sauro, 2 Cossato Via Pajetta, 11/B

District of Cuneo Cuneo Piazza Europa, 9 Alba Piazza Savona, 3/A

District of Novara Novara Largo Don Minzoni, 1 Borgomanero Via Garibaldi, 92/94 Oleggio Via Mazzini, 15 Trecate Piazza Dolce, 10

District of Turin Torino Corso Matteotti, 15 Via Alfieri, 17 Piazza Adriano, 5 Corso L. Einaudi, 15/17 Piazza Gran Madre di Dio, 12/A Corso Sebastopoli, 166 Airasca Via Roma, 101 Alpignano Via Cavour, 125 Chianocco Frazione Vernetto, 10 Chivasso Via Po, 5 Collegno Via XXIV Maggio, 1 Moncalieri Strada Villastellone, 2 Nichelino Via Torino, 172

312

None Via Roma, 23 Pinerolo Piazza Vittorio Veneto, 20 Rivoli Piazza Martiri della Libertà, 5 Rondissone Piazza Roma, 1 Santena Via Cavour, 43 Settimo Torinese Via Petrarca, 9 Villar Perosa Via Nazionale, 39/A

LATIUM

District of Rome Roma Via dei Crociferi, 44 Via del Monte della Farina, 23 Via S. Silverio, 57 Largo Salinari, 24 - angolo. Via B. Croce 82/84 Viale Gorizia, 34 Via di Porta Castello, 32 Via Val Maira, 125/131 Via Tiburtina, 604 Via dell’aeroporto, 14/16 Roma Prati Fiscali Via Pietro Boccanelli, 30M(c/o Sviluppo Italia Spa - Campo Elba) Roma Prati Fiscali Via Calabria, 46 (c/o Sviluppo Italia Spa) Monterotondo Via Salaria, 204 Pomezia Via dei Castelli Romani, 22

EMILIA ROMAGNA

District of Bologna Bologna Via Ercolani, 4/E Via Lombardia, 7/A Zola Predosa Via Risorgimento, 109

District of Ferrara Cento Via Ferrarese, 3

District of Modena Carpi Via Baldassarre Peruzzi, 8/B

District of Reggio Emilia Reggio Emilia Via Emilia all’Angelo, 35

LIGURIA

District of Genoa Genova Via Fieschi, 11 Piazza Leopardi, 6 Via Merano, 1/A Nero Rapallo Via A. Diaz, 6

313

VENETO

District of Verona Verona Corte Farina, 4 Via Galvani, 7 Caldiero Via Sandro Pertini, 12

GERMANY Munich Prannerstrasse, 11

REPRESENTATIVE OFFICE HONG KONG Suite 1108A, Asia Pacific Finance Tower, 3 Garden Road Central Hong Kong S.A.R.

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