Our “Mission” ...... 5 Corporate Officers and General Management ...... 6 UBI Banca Group’s Sales Network ...... 7 Ratings ...... 8 Primary data and indicators ...... 10 Directors’ Report ...... 11 The reference scenario ...... 12 Banco di Brescia’s Activities in 2010 ...... 23 The Internal Control System ...... 31 Reclassified Financial Statements ...... 33 Research and Development Activities ...... 44 Contractual Relationships with Group Companies...... 45 Other Information ...... 46 Key Events after the Reporting Period ...... 64 Business Outlook ...... 64 Proposals to the Shareholders ...... 65 Accounting Statements ...... 66 Balance Sheet ...... 67 Income Statement ...... 68 Statement of comprehensive income ...... 69 Statement of Changes in Shareholders’ Equity ...... 70 Cash Flow Statement ...... 72 Notes ...... 73 Part A – Accounting Policies...... 74 A.1 – General Information...... 74 Section 1 Statement of Compliance with the international accounting standards . 74 Section 2 General preparation principles ...... 74 Section 3 Events occurring after the Balance Sheet date ...... 75 Section 4 Other aspects ...... 75 List of the main IAS/IFRS standards endorsed by the European Commission...... 80 A.2 – Part Relating to the Main Financial Statement Items ...... 83 A.3 – Disclosure on the fair value ...... 103 Part B – Information on the Balance Sheet ...... 105 Part C – Information on the Income Statement ...... 151 Part D – Comprehensive income ...... 168 Part E – Information on Risks and the related Hedging Policies ...... 169 Section 1 Credit risk ...... 169 Section 2 Market risk ...... 193 Section 3 Liquidity risk ...... 224 Section 4 Operational risk ...... 235 Part F – Information on Shareholders’ Equity ...... 242 Part G – Business Combination Transactions Regarding Businesses or Business Units ...... 247 Part H –Related Party Transactions ...... 248 Part I – Share-based Payment Agreements ...... 252 Part L – Segment Reporting ...... 253 Attachments to the Financial Statements ...... 254 Independent Auditors’ Report ...... 280 Report of the Board of Statutory Auditors……………………………………………………………….282

Our “Mission”

We are an alliance of Banks, with a rich history, united under a federal model, integrated and multi-functional, able to capitalise on the strength of the sales Network and convey our synergies in the market.

We are integral participants in the economic and social life of the areas in which we operate, with a distinct ability to interpret, serve and support the development of local economies.

We pursue the objective of promoting progress and creating value for all of our stakeholders.

We support the development of a healthy economic and entrepreneurial infrastructure, growing together with our customers through excellent products and services.

(from “The Charter of Values” of UBI Banca Group, approved on 29th January 2008)

Corporate Officers and General Management

BOARD OF DIRECTORS

Chairman Gino Trombi (*)

Vice Chairman Pierfrancesco Rampinelli Rota (*) Costantino Vitali (*)

Director and Secretary Franco Bossoni (*)

Directors Francesco Bettoni, Giuseppe Camadini, Gaudenzio Cattaneo (*), Giorgio Franceschi, Stefano Gianotti, Andrea Gibellini, Pierangelo Gramignola, Victor Massiah, Giambattista Montini, Francesco Passerini Glazel, Flavio Pizzini (*), Franco Polotti (*), Gianfederico Soncini.

(*) members of the Executive Committee

BOARD OF STATUTORY AUDITORS

Chairman Paolo Golia

Standing Auditors Eugenio Ballerio, Alessandro Masetti Zannini

Alternate Auditors Primo Cancarini, Guido Piccinelli

GENERAL MANAGEMENT

General Manager Elvio Sonnino

Vice General Managers Paola Montresor, Stefano Vittorio Kuhn

INDEPENDENT AUDITORS

Reconta Ernst & Young S.p.A.

UBI Banca Group’s Sales Network

Ratings

The tables below summarise the Group’s ratings from the international agencies of Standard & Poor’s, Fitch Ratings, Moody’s.

On 23rd April 2010 Standard & Poor’s, as part of a general analysis on Italian banks, confirmed the short and long term counterpart rating of UBI Banca, reviewing the Outlook from Stable to Negative due to a perceived decreased ability of the Group to absorb a cost of credit higher than expected in case the fragile recovery in progress found it hard to become consolidated.

On 17th December 2010 FitchRatings reduced the long-term counterparty rating of UBI Banca from A to A+, with a Stable Outlook, thus confirming all the other ratings. This action was taken in consideration of the slowdown in economic activities experienced in Italy, and the persisting low market rates which, in the company’s opinion, make a rapid recovery of operating profits very unlikely for UBI Banca. In the meanwhile Fitch underlined: the importance of the Group’s distribution network, located in the richest regions in the country; the solid management and perception of the credit risk, which resulted in a lower credit deterioration than its competitors; the suitable capitalisation as regards the risk conservative approach; the suitable liquidity with well diversified sources of finance.

(i) Ability to repay debt expiring in less than one year

STANDARD & POOR’S (A-1: best rating – D: worst rating)

Short-term Counterparty Credit Rating (i) A-1 (ii) Refers to debt expiring after 1 year, indicates the ability to Long-term Counterparty Credit Rating (ii) A make interest and capital payments, together with any sensitivity to unfavourable changes in circumstances or Outlook Negative changes in economic conditions (AAA: best rating – D: worst rating)

(I) Ability to repay long-term debt in local currency (expiring in 1 MOODY'S year or longer). Through the JDA (Joint Default Analysis)

Long-term debt and deposit rating (I) A1 methodology, this rating associates the Bank Financial Strength Rating with the valuation of the likelihood, if Short-term debt and deposit rating (II) Prime-1 necessary, of intervention from external support Bank Financial Strength Rating (BFSR) (III) C (shareholders, other group companies or official institutions) (Aaa: highest quality - Baa3 average quality) Baseline Credit Assessment (BCA) (IV) A3

Outlook (deposit ratings) Stable (II) Ability to repay short-term debt in local currency (expiring in Outlook (Bank Financial Strength Rating) Negative less than 1 year)

(Prime -1: highest quality – Not Prime: speculative grade)

(III) This rating does not refer to the ability to repay debt, but considers the intrinsic financial stability of the bank (analysing factors such as sales network, asset diversification, financial fundamentals), without external support (A: best rating - E: worst rating)

(IV) The Baseline Credit Assessment is equivalent to the Bank Financial Strength Rating in the traditional scale of long-term rating.

(1)Ability to repay short-term debt (expiring in less than 13 FITCH RATINGS months) (F1: best rating - D: worst rating) Short-term Issuer Default Rating (1) F1 (2)Ability to duly meet financial commitments in the long term,

Long-term Issuer Default Rating (2) A regardless of the expiration of individual bonds. The rating is an indicator of probability of issuer default (AAA: best rating - Bank Individual Rating (3) B/C D: worst rating)

Support Rating (4) 2 (3)Valuation of the intrinsic bank stability (profitability, Support Rating Floor (5) BBB balanced financial statements, commercial network, Outlook for Long-term Issuer Default management ability, operational context and future outlook),

Rating Stable under

the assumption that the bank cannot rely on

external support (intervention from a lender of last resort, shareholder support, etc.) (A: best rating - E: worst rating) (4) Assessment of the probability, sufficiency and timeliness of external support (by the government or reference institutional shareholders) if the bank found itself in difficulty (1: best rating – 5: worst rating) (5) This rating is a supplementary information element, closely linked to the Support Rating, in that it identifies, for each level of the Support Rating, the minimum level if negative events were to occur.

Primary data and indicators

(in millions of euro)

BANCO di BRESCIA S.p.A. 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

FINANCIAL, OP ERATIONAL AND STRUCTURAL DATA

Lo ans to cus to mers 15 .0 7 8 14.179

o f which im paired 7 4 6 532

Direct funding fro m cus to mers 12 .119 19.171

Direct funding fro m cus to mers (res tated) (**) 12 .119 13.542

Indirect funding fro m cus to mers , including ins urance pro ducts (at market value) 2 0 .8 9 5 20.866

To tal financial wealth 33.014 40.037

To tal financial wealth (res tated) (**) 33.014 34.408

Shareho lders ' equity (excluding pro fit fo r the year) 1.3 8 8 1.158

P ro fit (lo s s ) o n co ntinuing o peratio ns befo re tax 119 202

P ro fit fo r the year 7 2 129

Number o f actual emplo yees 2 .6 3 4 2.623

Number o f branches 3 6 2 363

STRUCTURAL INDICATORS

Lending to cus to mers /funding fro m cus to mers 12 4 ,4 2 % 73,96%

Lending to cus to mers /funding fro m cus to mers (res tated) (**) 12 4 ,4 2 % 104,70%

Managed funding (including ins urance)/ indirect funding fro m o rdinary cus to mers 4 9 ,5 1% 47,56%

INDICES OF P ROFITABILITY, EFFICIENCY AND P RODUCTIVITY

ROE (P ro fit fo r the year/Shareho lders ' equity excluding pro fit fo r the year) 5 ,19 % 11,14%

ROE net o f no n recurring items 5 ,3 9 % 10,69%

COST/INCOME 1 (operating costs/operating income) 5 9 ,14 % 53,00%

COST/INCOME 1 net o f no n recurring items 5 8 ,4 2 % 53,00%

COST/INCOME 2 (operating costs + impairment losses on loans/operating income) 7 7 ,3 8 % 64,81%

COST/INCOME 2 net o f no n recurring items 7 6 ,6 6 % 64,81%

Tax rate 3 9 ,4 8 % 35,66%

No rmalis ed tax rate 3 9 ,10 % 38,58%

Net interest income/operating income 6 0 ,7 4 % 60,27%

Net commission/operating income 3 6 ,5 4 % 34,16%

Net co mmis s io n/s taff expens es net o f no n recurring items 116 ,0 0 % 121,71%

Impairment losses on loans/loans to customers 0 ,6 5 % 0,49%

R IS K IN D IC A TOR S

No n perfo rming lo ans /lo ans to cus to mers 1,2 3 % 0,93%

Impaired loans/loans to customers 4 ,9 5 % 3,75%

% co verage o f no n perfo rming lo ans 4 6 ,6 9 % 50,75%

% co verage o f to tal impaired lo ans 2 1,9 0 % 24,83%

% co verage o f perfo rming lo ans 0 ,4 7 % 0,37%

C A P ITA L R A TIOS (*)

Tier 1 capital/Risk-weighted assets 12 ,8 2 % 14,04%

Supervis o ry capital/Ris k-weighted as s ets 13 ,2 8 % 15,23%

(*) Weighted risk assets used to determine the coefficients shown include the 25% discount envisaged for the Banks belonging to the Banking Group that at consolidated level respect the minimum mandatory requirement. (**) Data were reported net of the Luxembourg branch, conferred to UBI International S.A. with effect from 10th December 2010.

The indicators were calculated using the reclassified data reported in the section “Information on the Reclassified balance sheet and income statement”.

It should be noted that the data of the comparison periods is not homogenous due to the Territorial Optimisation Operation, as better specified in the section “Other information – Actions on the Group’s geographic arrangement”.

Directors’ Report

The reference scenario

The deep recession experienced in 2010, which followed the financial crisis triggered by subprime mortgages, has given way to a global economic recovery, despite some uncertainties that seem to prevent a normal situation from being restored: a financial leverage reduction, variable exchange rates and their effect on global unbalances, the high unemployment and public debt rates and, since the winter, a return to inflation also for advanced economies. The tension developed in the spring after the Greek public debt crisis (whose consequences progressively expanded to include the other countries in the euro zone featuring a high debt (Ireland, Portugal and Spain) contributed to making the recovery more fragile, which had already been affected by the weak domestic demand. With tension reappearing on financial markets in the last part of the year, due to the serious difficulties of the Irish banking system and the uncertainties as to the new European anti- crisis regulation1, the yield of long term public securities progressively increased. In parallel, the riskiness of the main international banks has also increased once again with the expansion of credit default swap (CDS) premiums following the downsizing, which had been subsequent to the maximum levels recorded in the spring, at the time of the Greece crisis, thus incorporating the increased perception of risk on sovereign debt. On 21st November Ireland made an official loan request to the European Union and the International Monetary Fund, which was accepted on 28th November with the arrangement of a support plan for a total of 85 billion euro, of which: 45 billion were provided by EU/EMU through the EFSF/EFSM programs and the bilateral loans of the United Kingdom, Sweden and Denmark; 22.5 billion from the IMF and the remaining 17.5 billion from the Irish government (liquid treasury funds and investments in the National Pensions Reserve Fund).

In order to avert new financial crises, important measures were taken during the year. More specifically: • after the adoption of a three-year programme of bilateral loans to Greece for 80 billion euro (in addition to the 30 billion granted by the IMF), the European Union and the countries in the euro zone reached two financial stability agreements: on the one hand, the European Financial Stabilisation Mechanism (EFSM) was created to allow the European Union to collect up to 60 billion euro, guaranteed by the EU budget, for loans to EU member countries in exceptional conditions that are out of their control; on the other hand, a three-year plan was arranged in collaboration with the IMF, to satisfy the needs of these countries in the euro zone featuring high debt levels. 440 billion will be made available through the European Financial Stability Facility (EFSF)2, a vehicle company established on 7 June to issue securities guaranteed by the countries in the euro zone for financing purposes3; • Both in the US and in Europe, reforms were approved as regards the regulation and supervision of the financial system. In the US, the Federal Reserve was attributed greater powers over the main financial groups, envisaging the establishment of a Board for financial stability, made up of regulation authorities, including the FED, to supervise on risks of systemic importance. In Europe, on the other hand, a European System of Financial Supervision (ESFS) has been active since 1st January 2011, which is in turn arranged into a European Systemic Risk Board – ESRB), with

1 The yield differential of the ten-year government bonds of Greece, Ireland, Spain and Portugal recorded a sharp increase compared to those of Germany. A more contained rise was experienced in Italy and Belgium. 2 The IMF will provide 250 billion euro which, when added to the 60 made available by the EFSM and the 440 to be collected by the EFSF, will result in an overall amount equal to 750 billion euro. 3 According to the rules governing the operation of this vehicle company, a 120% ratio must be maintained between the guarantees provided and the securities issued to fund the applying countries. Furthermore, the ratio between the disbursed loans and the issued securities must be equal to around two thirds, with the remaining amount to be invested in a liquid reserve. Moreover, assessments are in progress as to the adequacy of the programme to ensure the management of a crisis extended to more countries, which may soon cause an increase in the amount of the guarantees that set the fund collection and fund disbursement limit. In January 2011, the first European five-year debt security guaranteed directly by the countries in the euro zone was placed on the markets by the EFSF. It is to be used entirely to finance Ireland at a lower rate than the rate this country would have had to pay in case of its own issues. 12

macro prudential supervisory powers, and three new Authorities4 that work together with the 27 national authorities of the individual Union members with micro prudential supervisory tasks; • At the end of November, the financial Ministers from the countries in the euro zone defined the main characteristics of a permanent organisation to protect financial stability in the area (European Stability Mechanism, ESM); this organisation, which should replace the European Financial Stability Facility (EFSF) from June 2013, provides financial support to the countries that require assistance, at strict conditions, similarly to the current EFSF. The initial available funds reach 500 billion euro, to be reviewed at least every two years; • the discussion continued as regards the proposal to strengthen the Stability Pact by introducing monetary sanctions applicable before starting the Excessive deficit procedure, which may be started also in case the decrease in the debt of a country towards the limit of 60% of GDP was not to be considered as satisfactory. A proposal was also made to combine debt/public deficit supervision with a procedure for the prompt identification of macroeconomic unbalances that may be potentially important for the financial stability of the area, by resorting to some quantitative indicators that are being defined, such as savings rate, private debt, balance of trade, income flows from investments and transfers; • at the end of December the Basel Committee on Banking Supervision published the definitive documents on the new banking regulations (Basel III). The new set of rules envisages more capital and better quality, improved risk hedging, the introduction of a leverage ceiling to supplement “risk-based” capital requirements, measures to promote the accumulation of capital in the positive phases of the credit cycle and the introduction of two liquidity requirements. The new regulations shall be absorbed by all member countries through national laws and rules and shall come into force gradually over a period of 6 years, starting from 1st January 2013.

Debito aggregato e sue componenti (in % del PIL) nei principali Paesi europei

Debito aggregato Settore privato(1) Settore pubblico

Valori percentuali 2007 2008 2009 2007 2008 2009 2007 2008 2009 Italia 218,2 226,7 241,3 114,6 120,4 125,3 103,6 106,3 116,0 Germania 196,7 197,8 207,9 131,8 131,5 134,5 64,9 66,3 73,4 Francia 210,3 221,5 240,5 146,5 154,0 162,4 63,8 67,5 78,1 Portogallo 291,6 309,8 336,3 228,9 244,5 260,2 62,7 65,3 76,1 Irlanda 236,8 319,3 397,1 211,8 275,0 331,6 25,0 44,3 65,5 Grecia 212,2 229,4 250,3 107,2 119,1 123,5 105,0 110,3 126,8 Spagna 250,0 259,9 279,2 213,9 220,1 226,0 36,1 39,8 53,2 Regno Unito 253,1 274,0 293,1 208,6 221,9 224,9 44,5 52,1 68,2 , Fonte: Eurostat (1) Per il settore privato (famiglie, istituzioni senza scopo di lucro, società non finanziarie) si sono utilizzati dati non consolidati. Nella nozione di debito del settore privato si sono compresi i prestiti e i titoli, escluse le azioni.

Concerning monetary policies, this year saw some contrasting attitudes between advanced economies and developing ones. In the former case, central banks kept an expansive approach (with official rates at record low levels) to support the fragile recovery in progress in a context featuring inflation rates that have remained very contained most of the year5.

4 One for the banking sector (European Banking Authority – EBA), one for the financial markets (European Securities and Markets Authority – ESMA) and one for insurance and pensions (European Insurance and Occupational Pensions Authority – EIOPA). 5 At the beginning of November the Federal Reserve approved a new programme for the purchase of long term government securities for a total of 600 billion dollars to be completed halfway through 2011. This programme is combined with the re-investment in government securities of the income from the repayment of securities by government agencies and mortgage backed securities, for about 250-300 billion in the same period. In October the Bank of Japan marginally lowered the reference rate (which now ranges between 0 and 0.10%), announcing a quantitative expansion plan that envisages the purchase of stock and real estate funds (for a total of 500 billion yen). The Governing Council of the ECB decided to continue its main refinancing transactions and those transactions with a maturity equal to the period of maintenance of the mandatory reserve through fixed rate auctions, fully accepting the request until necessary and in any case at least until 12th July 2011. It also established that the three-month transactions performed by this date shall be conducted with full recognition of the requests and 13

The rapid price increase in the last quarter may lead to a change in this approach in the coming months. On the other hand, the monetary authorities in the main emerging countries have already taken restrictive measures aimed at containing the pressure generated by the high liquidity poured into the market during the crisis6. The foreign exchange market experienced a generalised loss in the value of the euro against the main international currencies (with a partial recovery felt at the beginning of

2011) as a consequence of the Principali cambi e quotazioni del petrolio (Brent) a fine periodo repeated tension caused by the crisis of sovereign debts. As dic-10 set-10 giu-10 mar-10 dic-09 Var. % highlighted in graph 1, the A B C D E A/E single currency has a partial Euro/Dollaro 1,3377 1,3630 1,2234 1,3510 1,4316 -6,6% recovery in the third quarter, Euro/Yen 108,60 113,75 108,15 126,27 133,08 -18,4% followed by the effect of the new Euro/Yuan 8,8148 9,1192 8,2972 9,2230 9,7726 -9,8% Euro/Franco CH 1,2486 1,3387 1,3177 1,4236 1,4823 -15,8% difficult situation in November, Euro/Sterlina 0,8572 0,8675 0,8183 0,8898 0,8860 -3,3% after reaching one minimum Dollaro/Yen 81,15 83,45 88,39 93,46 92,90 -12,6% point below 1.20 against the Dollaro/Yuan 6,5900 6,6905 6,7815 6,8258 6,8259 -3,5% Futures - Brent (in $) 94,75 82,31 75,01 82,70 77,93 21,6% dollar at the beginning of June. By contrast, the yen showed a more uniform trend, after a progressive appreciation against the dollar between March and November, almost reaching 80 yen a dollar. Despite the intervention of the Chinese Central Bank, which in June restored a regime of controlled fluctuation towards a set of Andamento del cambio euro-dollaro e dollaro-yen (2009-2010) Grafico n.1 reference currencies, 1,58 102 the appreciation of the 1,54 100 yen against the dollar €/$ $/Yen (scala dx.) turned out to be quite 1,50 98 contained. 1,46 96

1,42 94

1,38 92

1,34 90

1,30 88

1,26 86

1,22 84

1,18 82

1,14 80 G F M A M G L A S O N D G F M A M G L A S O N D

2009 2010

with a rate equal to the average rate of the main refinancing transactions throughout the duration of the transaction. 6 Since March 2010, the Indian Central Bank increased the reference rate six times in the year and once in January 2011. The rate stands now at 6.5%. The People’s Bank of China has repeatedly changed the compulsory reserve coefficient (six times in 2010 and twice in January and February 2011), increasing to a record high of 19.5%; the bank loan rate was increased three times (+25 base points in October and December 2010 and February 2011, respectively. It now stands at 6.06%. The Brazilian Central Bank increased the reference rate three times in 2010 and twice in January and March 2011. It now stands at 11.75%. At the end of February also the Russian Central Bank, which in the first half of 2010 had decreased the rate four times in consideration of the fragile recovery experienced after the sharp drop in 2009, increased the reference rate by 25 base points to 8%. 14

The macroeconomic scenario According to the IMF, in the year just passed global GDP returned to grow by 5% (-0.6% in 2009), despite a slowdown in the second half, thus highlighting some clear differences between countries and geographic areas. On the one hand, developing countries and Asian countries in particular, accelerated the pace of their development while increasing their global weight; on the other hand, the recovery of developed economies appeared more modest and uneven at times, as in the case of the euro zone. The scenario featured high unemployment and a Andamento del prezzo del petrolio Brent (2009-2010) Grafico n. 2 progressive recovery of 100 inflation due to the 95 generalised rise in the 90 price of food and energy 85 raw materials, mainly due 80 to a rise in demand and a 75 relative rigid supply, 70 particularly in the case of 65 60 food products. 55 As shown in graph 2, after 50 a long period of fluctuation 45 between 70 and 80 dollars 40 a barrel, the Brent oil price 35 closed the year with a rise, G F M A M G L A S O N D G F M A M G L A S O N D 2009 2010 continuing the trend also in January and February, when it exceeded 110 dollars per barrel, supported by the geopolitical tension experienced in North Africa.

Following slowdown in spring, the US economy progressively accelerated: in the fourth quarter the increase in GDP was 2.8% on an annual basis (+2.6% in the third quarter) most occurring in consumption, in particular of durable assets, but also from positive contribution of certain net exports largely decreasing imports; the contribution of fixed investments, within which the residential component continues to be weak, instead was modest. Overall on the yearly average the US GDP began to grow (+2.8%) following the drop of 2009 (-2.6%). The main weakness today is the unemployment rate (9.4% in December), slightly less compared to the maximum recorded during last year (9.8% in April and November), though fixed above 9% for twenty month. The improvement underway seems to apply to January 2011 as well (9%). The average figure in 2010, equalling 9.6%, was the highest since 1984. After the peak of the end of 2009 (+2.7%), inflation dropped sharply staying just above 1% between June and November and ended the year at 1.5%. “Core” inflation (net of foodstuffs and energy products) has remained fixed below 1% since April (0.8% in December). The “twin deficits”, have continued to show contrasting changes, but with inverted roles compared to the previous year: the federal deficit actually reduced to 1,277 billion dollars, from 1,471.3 billion in 2009 (-13.2%)7 while the negative balance of the trade balance widen again to 497.8 billion dollars (+32.8%), mainly affected by a greater deficit to China and Opec countries.

7 In order to consolidate the recovery, in December the US government started a new fiscal stimulus programme for about 800 billion dollars (equalling 5.5% of GDP), to be implemented in 2011-12. 15

Consuntivi e previsioni: Paesi industrializzati

Prezzi al consumo Disoccupazione Disavanzo Settore Pubblico (% Prodotto Interno Lordo Tassi di riferimento (tasso medio annuo) (tasso medio annuo) del PIL)

(1) (1) (1) (1) (1) Valori percentuali 2009 2010 2011 2009 2010 2011 2009 2010 2011 2009 2010 2011 dic-09 dic-10

Stati Uniti -2,6 2,8 2,1 -0,4 1,6 2,0 9,3 9,6 9,4 11,3 10,3 12,1 0-0,25 0-0,25 Giappone -6,3 3,9 1,3 -1,4 -0,7 0,2 5,2 5,1 5,2 8,7 10,6 9,0 0,10 0-0,10 Area Euro -4,1 1,7 1,5 0,3 1,6 2,2 9,4 10,0 10,0 6,3 6,2 4,8 1,00 1,00 Italia -5,2 1,3 1,1 0,8 1,6 2,2 7,8 8,5 9,2 5,4 4,6 3,9 - - Germania -4,7 3,6 2,2 0,2 1,2 2,1 7,5 6,9 6,6 3,0 3,6 2,6 - - Francia -2,6 1,6 1,6 0,1 1,7 2,1 9,5 9,8 9,7 7,5 7,7 6,5 - - Portogallo -2,5 1,3 -1,0 -0,9 1,4 1,8 9,6 10,9 11,0 9,3 -7,0 -5,3 - - Irlanda -7,6 -0,2 0,9 -1,7 -1,6 0,8 11,9 13,5 14,0 14,4 32,3 10,5 - - Grecia -2,0 -4,2 -3,0 1,3 4,7 3,0 9,5 13,8 13,6 15,4 9,3 7,6 - - Spagna -3,7 -0,2 0,7 -0,2 2,0 3,0 18,0 20,1 20,7 11,1 8,9 7,6 - - Regno Unito -4,9 1,3 2,2 2,2 3,3 3,6 7,6 7,8 7,6 11,4 10,1 7,8 0,50 0,50 , , (1) Previsioni Fonte: Prometeia e Statistiche ufficiali

In Japan the recovery seems to have stopped, after becoming less intense since spring. In the last quarter of the year, GDP reduced by 0.3% compared to the previous period following +0.8% of the third quarter (+1.5% and +0.5% respectively in the first and second quarter). This change summarises a strong slowdown in consumption, the persistent weakness of investments and a progressive weakening of trade, also penalised by the strengthening of the yen. Therefore the current situation seems in line with the advances of the Tankan report in December which shows a worsening in the climate of confidence of the companies for the first time in six quarters. Instead some positive signs seem to come from industrial production, growing since November on the current basis (+3.3% in December) after five consecutive drops, and from the labour market where the unemployment rate in December fell below 5% for the first time after nine months (5.3% the peak reached in June). Japan has still not left the deflation phase underway since February 2009: in December the general consumer price index was zero, while the “core” one, excluding foodstuffs, continued to stay negative (-0.4%).

In 2010 China further increased its development with average growth in GDP equal to 10.3% (+9.2% in 2009) which is launching it to the second global position in front of Japan. The annual change was supported by all the components, in particular internal demand: +23.8% for fixed investments, even if decelerating compared to 2009; +18.4% for the sales of consumer goods; +15.7% for industrial production, drawn along by heavy industry. The positive balance of the trade balance reduced to 183.1 billion dollars (-6.4% compared to 2009) due to a more intense growth in imports (+38.7%) compared to exports (+31.3%). Currency reserves reached 2,600 billion dollars (+7.6%), of which a significant amount (about 1,160 billion) is firmly invested in US securities. Alongside the acceleration of the economy also the inflation rate is reported at high levels (4.6% in December, 4.9% in January 2011) reflecting the increases in the foodstuff and real estate sectors.

Consuntivi e previsioni: principali Paesi emergenti

Prodotto Interno Lordo Prezzi al consumo Disoccupazione Tassi di riferimento (tasso medio annuo) (tasso medio annuo)

Valori percentuali 2009 2010 2011(1) 2009 2010 2011(1) 2009 2010 2011(1) dic-09 dic-10 Cina 9,2 10,3 8,5 -0,7 3,3 2,7 4,3 4,1 4,0 5,31 5,81 India 5,7 9,5 7,3 10,9 13,2 6,7 n.d. n.d. n.d. 4,75 6,25 Brasile -0,6 7,5 4,5 4,9 5,0 4,6 8,1 6,7 7,5 8,75 10,75 Russia -7,9 3,7 4,5 11,7 6,6 7,4 8,4 7,5 7,3 8,75 7,75 , , , , , , (1) Previsioni Fonte: Prometeia, FMI e Statistiche ufficiali

Also the other main emerging countries see a return to high growth rates following the slowdown of 2009. In the third quarter India’s GDP increased by 10.6% in tendential terms which reflected a significant acceleration of the internal demand, both for consumption (+9.3%) and investments (+12.4%), and an improvement in external demand where the continuous contribution therefore remaining marginal. The favourable situation benefited both the industrial sector (+9.5% the annual average increase of industrial production between April

and November) and the service sector. Despite a moderation between August and November, Indian inflation continues to be the highest in the Asian area. Russia regained ground following the serious drop in 2009 benefitting from the gradual recovery of the global economy, and the consequent relaunch of exports (oil in particular), as well as the industrial production. In the third quarter however signs of a slowdown were recorded with GDP only growing by 2.7% on an annual basis, summarising an acceleration of the consumer expenses and a deceleration in investments, but especially a significant increase in imports compared to a more modest change for exports. Reflecting the increase in international prices, inflation increased to 8.8% in December. In Brazil the economy was supported by industrial production (+10.5% on the yearly average) positively feeling the income linked to the prices for raw materials, kept high, and the notable flow of capital from abroad, attracted by favourable conditions of returns in a stable macroeconomic context. The incoming capital flows however contributed to increasing inflation which in December reached 5.9%, rather above the aim set by the Brazilian authorities.

For the euro area overall 2010 was a year of recovery, though at different speeds among the various countries of the Monetary Union and with a deceleration in the second half. Both in the third and fourth quarter GDP only increased by 0.3% o the previous period (+1% in spring), mainly affected by the progressive slowdown of the German economy which in any case is confirmed as the most dynamic. Overall the yearly average of the GDP increased by 1.7% (-4.1% in 2009) supported by positive performance even if with toned down net exports, sensitive to the evolution of the world economy, while for consumption and investments the contribution was modest. The industrial production index from March showed variations on a yearly basis exceeding 5% (+8% in December) but in current terms the trend does not seem well defined (-0.1% in December). Unemployment stayed at high levels (10% at the end of 2010; 9.9% at the end of 2009) with Spain fixed above 20% since May. Inflation increased steadily: the Harmonised Index of Consumer Prices in December reached 2.2% from 0.9% twelve months prior (1.6% the yearly average compared with 0.3% in 2009). The index not inclusive of foodstuffs and energy products, or alcohol and tobacco, remained more or less unchanged (+ 1.1% in December). Since 1st January 2011, with the entry of Estonia, the number of the countries adhering to the Monetary Union has risen to 17. Estonia entered the European Union on 1st May 2004, satisfying all the admission parameters (public debt, deficit net worth, interest and inflation rates).

In line with the international performance, also Italy experienced a weak recovery in the second part of the year. Between September and December, GDP increased by 0.1% only (+0.3% and +0.5% in the third and second quarter, respectively), being affected by the decreased contribution from net foreign demand, also as a result of higher imports due consumption and investments remaining low On average, GDP increased by 1.3% in the year, after the significant contraction of 2009 (- 5.2%), encouraged by the restoring of stocks and recovered private consumption and gross investments, faced with a still negative, though improving, commercial interexchange. Industrial production (adjusted to consider calendar effects), after returning to being positive in February (with tendential changes higher than 7% between March and June and a +9.7% peak in August), subsequently lost momentum, recording a 5.4% increase in December (+5.3% was the average change in the twelve months, after two consecutive years of reductions). In sectorial terms, a better performance was recorded by sectors such as “Refining” (+15.6%), “Production of machinery and equipment” (+13.3%) and “Iron and steel” (+12.2%); a negative contribution came from sectors such as “Computer manufacturing” (- 13.1%), “Pharmaceuticals” (-7.4%), “Mining” (-3.6%), “Manufacturing of electric equipment” (-2.8%) and “Foodstuff” (-2.5%). The latest estimates for December confirmed the unemployment rate at 8.6% (more than 2.1 million people), still close to the maximum levels reached in October (8.7%), but in any case lower than the European average (10%) thanks to the use of redundancy arrangements: in 2010 a total of 1.2 billion hours of Redundancy Payment Fund were authorised, recording a

31.7% rise compared to 914 million in 2009. In the last few months of the year, the already fading trend seems to have turned, with four consecutive downturns being recorded, which in December concerned all the extraordinary and derogated components8. Concerning prices, Italy was affected by a progressive recovery of inflation, though to a slightly smaller extent than in the Eurozone. In December, the Harmonised Consumer Price Index had reached 2.1% (2.2% was the European figure) from 1.1% at the end of 2009 (0.9%). On average, inflation stood at 1.6% in the year (0.8% in 2009), in line with Europe. The Italian payment scale deficit reached 27.3 billion euro, more than quadrupling in value over 2009, mainly as a result of a returning deficit for intermediate products and a growing energy deficit. Imports (+22.6%) exceeded exports (+15.7%), which are in both cases steadier than in non-EU countries. Concerning public finance, the Stability Law for 20119, approved by the Parliament last December, does not affect net indebtedness in the next three years. The objectives stated in the “Public Finance Decision” at the end of September are confirmed, though updated in line with Istat figures for 2010: the deficit/GDP ratio, which decreased to 4.6% (from 5% of PFD), will go below 3% in 2012, in line with the commitments agreed at European level, while the public debt/GDP ratio, which further increased to reach 119% (from 118.5% of PFD), is expected to decrease only from 2012.

Financial markets

The US and European yield curves showed maturities exceeding one year, with a substantial downward movement compared to December 2009, in line with the continuing particularly expansive monetary policies in the two areas. Compared to the situation at the end of June, nevertheless, an increase was recorded – which in the case of the USA only concerned maturities exceeding two years – consequently to both an improvement of the economic growth prospects and an increase in inflation forecasts. The concerns expressed by the ECB, as reiterated during the meeting of March 2011, for the skyrocketing prices of the last few months and the consequent expectation of a possible raise in short-term rates, justify the increase in European yields compared to June, also for expiries of less than two years.

8 According to Bank of Italy’s preliminary estimates, a value measuring the degree of underuse of the labour supply and including the equivalent of the hours of the Redundancy Payment Plan and the discouraged workers who look for employment with less intensity, would stand at least two percentage points above the unemployment rate. 9 This measure, which starting from this year replaces the Finance Law after the reform on accounting and public finance (Law 19/2009), provides for the finding of resources for a total of 6 billion in 2011, 1.6 billion in 2012 and 1.2 billion in 2013. 18

Andamento dei principali tassi a breve e a lungo termine nel 2010 Grafico n. 5 5,25 5,00 4,75 4,50 4,25 4,00 3,75 3,50 3,25 3,00 2,75 2,50 2,25 2,00 1,75 1,50 1,25 1,00 0,75 0,50 0,25 0,00 G F M A M G L A S O N D

US Treasury 10 anni Tasso sui Federal Funds BTP 10 anni Euribor 3 mesi Bund 10 anni Tasso Rifinanziamento principale BCE Libor 3 mesi Usa

After a positive start, in the second quarter of 2010 the equity markets of the main industrial economies experienced a sharp trend reversal caused by the fragility of the recovery and the turbulence triggered by the crisis of sovereign public debts of some European countries, which penalised the banking industry in particular. In the second half of the year, the recovery was generalised, though insufficient in some cases to cover the recorded losses. In the twelve months, the US stock exchanges recorded increases exceeding 10%, managing in some cases to restore the levels existing before Andamenti dei principali indici azionari espressi in valuta locale the fall of Lehman Brothers; on the dic-10 set-10 giu-10 mar-10 dic-09 Var. % A B C D E A/E contrary, the Japanese markets closed with a Ftse Mib (Milano) 20.173 20.505 19.312 22.848 23.248 -13,2% Ftse Italia All Share (Milano) 20.936 21.098 19.869 23.368 23.653 -11,5% slight decrease. In Xetra Dax (Francoforte) 6.914 6.229 5.966 6.154 5.957 16,1% Europe there were Cac 40 (Parigi) 3.805 3.715 3.443 3.974 3.936 -3,3% diverging trends: the Ftse 100 (Londra) 5.900 5.549 4.917 5.680 5.413 9,0% brilliant result of the S&P 500 (New York) 1.258 1.141 1.031 1.169 1.115 12,8% DJ Industrial (New York) 11.578 10.788 9.774 10.857 10.428 11,0% German stock exchange, Nasdaq Composite (New York) 2.653 2.369 2.109 2.398 2.269 16,9% supported by the strong Nikkei 225 (Tokyo) 10.229 9.369 9.192 11.244 10.546 -3,0% recovery of the Topix (Tokyo) 899 830 828 985 908 -1,0% economy, was MSCI emerging markets 1.151 1.076 918 1.010 989 16,4% counteracted by the difficulties faced by the countries mostly concerned by the sovereign debt crisis (Portugal, Ireland, Greece and Spain), with the effects being particularly felt by other markets in the area, such as the Italian one. In line with the trend of the other world stock exchanges, also the share prices of the emerging economies experienced a recovery compared to the lows of the second quarter: at year end, the MSCI Emerging Market share index showed a rise exceeding 16%. The political issues affecting North Africa risk to compromise the progress made by the stock exchanges in the first few weeks of the new year.

After a partial recovery compared to the lows reached in May, the stock exchanges managed by Borsa Italiana suffered a new decrease in the last quarter, ending 2010 with losses exceeding 10% on an annual basis. These are also attributable to the important weight of the banking sector which, despite the solidity of Italian banks, turned out to be particularly

sensitive to the multiple shocks generated by the progressive broadening of the sovereign debt crisis.

Share trading dropped in terms of number of contracts (62.2 million, -3%), but its countervalue increased compared to the previous year (748.2 billion, +11%). Similarly, the amounts of shares traded on a daily basis decreased on average (243 thousand contracts), while the countervalue increased (2.9 billion). Despite the difficult context, in 2010 the markets managed by Borsa Italiana were able to set new boundaries: a new record high for ETF (Exchange Traded Fund) and ETC (Exchange Traded Commodities) transactions, with 78.5 billion of countervalue and 3.4 million contracts, and for MOT and ExtraMOT (in total 230 billion of countervalue and 3.9 million contracts); record trading for IDEM (Italian Derivatives Market) share derivatives, with a daily average of 173 thousand standard contracts; the confirmation of the European leadership for contracts traded both on the electronic markets and on the MOT. Finally there were 332 companies listed on Piazza Affari, unchanged compared to twelve months earlier, due to the 10 new admissions and 10 revocations. The total capitalisation of listed companies dropped to 425 billion euro (27.4% of GDP), from 457 billion at the end of 2009 (30.1% of GDP). This reflected the growing countervalue of shares traded in the presence of a decreased capitalisation; in the twelve months, the turnover velocity10 increased from 147% to 176%.

On 9th February 2011 London Stock Exchange Group, the company that controls Borsa Italiana, and TMX Group, the owner of the Toronto Stock Exchange, announced the next merger, which should lead to the creation of one of the leading organisations in the sectors concerning raw materials, derivatives and bonds, with more than 6,700 companies listed on different price lists and a capitalisation of about 4.5 billion euro. 55% of the new Group will be owned by LSE and 45% by TMX. The transaction will capitalise on Borsa Italiana’s expertise in post trading services as well as on its role as the global centre of fixed income.

After an encouraging start to the year and alternating positive and negative results, starting from the last quarter of 2010, the sector of mutual investment funds began to show signs of weakness. Net funding remained positive for 5.7 billion euro (-0.7 billion in 2009), summarising a contrasting trend between Italian funds (-10.1 billion) – which continue to be penalized also by unfavourable tax treatment11 – and foreign funds (+15.8 billion) whose incidence in terms of equity reached 58%. In terms of type, the disinvestments from liquidity products (-23.7 billion) and hedge funds (-2 billion) were overall more than compensated by the increase in bonds (+19.9 billion), shares (+3.7 billion), balanced funds (+3.6 billion) and flexible funds (+4.2 billion)12. At the end of December the equity stood at 460 billion, up 5.7% compared to 435.3 billion of twelve months prior, showing a recomposition in favour of bonds (growing from 38.1% to 41.1%), shares (from 21.2% to 23.4%) and, to a lower extent, flexible (from 13.1% to 14.6%) and balanced funds (from 3.9% to 4.6%), consequently to a considerable reduction in the share of liquidity funds (from 20% to 13.5%) and, to a more modest extent, hedge funds (from 3.7% to 2.8%).

The banking system During the year, the Italian banking system experienced a slowdown in the growth rate of funding from customers – which was influenced by the decreased propensity of families to save – which was counterbalanced by a slight recovery in the lending activity, after the

10 Indicator which – placing the value of the electronic trades in relation with the capitalisation – indicates the turnover rate of the shares. 11 Leg. Decree 225/2010 converted into Law 10/2011, introduced the expected tax reform for mutual investment funds, which will enter into force on 1st July 2011. Based on the new provisions, the taxation on “realised” amounts will also be applied to Italian real estate funds, i.e. on capital gains or losses recorded upon transferring the share, rather than on the “accrued” amounts, thus equalising the fiscal treatment to the one envisaged for foreign funds. 12 Assogestioni, “Mapping of asset management (collective management and portfolio management)” 4th quarter of 2010”. 20

minimum levels shown in October 2009. The credit quality continued to deteriorate, though with less intensity compared to the recent past.

Based on the data processed by Bank of Italy13, direct funding (deposits from residents and bonds) in December presented an annual change of +3.1% (+9.2% in December 2009), summarising a reduction of the bond component (-1.6% compared to +11.2% at the end of 2009) and a still positive trend for the other technical forms (+6.3% compared to +7.8% in December 2009), mainly supported by repurchase agreements (+82.7%).

By contrast, with regard to loans to private sector residents, at the year end the annual change was forecast at +4.3% (+1.7% in December 2009). Loans to households and non financial companies overall grew by 3.8% (+0.5% at the end of 2009), drawn by the component allocated to households (+7.5% compared to +5.9% twelve months before) and loans for the purchase of houses (+8%) in particular, while the various forms of consumer credit slowed down (+1.8% from +4.9% in December 2009). Loans to companies finally recorded a reversal (+1.6% compared with -2.3% at the end of 2009).

In terms of riskiness, the non performing loans of the private sector, gross of writedowns, increased in the twelve months by 31.2% (+31.3% for households and +31.5% for companies). The ratio of gross non performing loans of the private sector/commitments to the private sector therefore rose to 4.60% (3.81% in December 2009). Net non performing loans significantly growing at stock level since March, showed an increase of 28.9%. The net non performing loans/total loans ratio consequently came to 2.43% from 2.03% at the end of 2009 while the net non performing loans/capital and reserves ratio reached 13.28% (10.47% at the end of 2009).

At year-end securities, other than shares and equity, issued by residents in Italy present in the portfolio of the Italian banks showed a tendential increase of 8.5% attributable to new investments in government bonds (+30.5%) mainly concentrated in the first half of the year, both for medium-long term (CCT and BTP, +36.2%) and short-term (BOT and CTZ, +20.1%) – against a reduction of the “other securities” (-2.7%). Within the latter, more than 70% continued to be represented by bank bonds. Therefore, the securities/private sector loans ratio is forecast at 33.4% (28.3% at the end of 2009).

After reaching minimum levels in June (1.36%), in December the weighted average rate of the bank deposits from customers calculated by ABI14 (which includes the yield of deposits, bonds and repurchase agreements in euro for households and non financial companies) equalled 1.50% compared to 1.59% twelve months before. Similarly, the weighted average rate on loans to households and non financial companies, in line with the trend of the interbanking market conditions, showed signs of recovery compared to the historical low of June (3.52%), taking it to 3.62% (3.76% in December 2009).

* * *

In addition to the aforementioned changes in progress in international regulations, the reference regulatory context for Italian banks was subject to many new developments in 2010: on 1st March, the European Directive regarding payment services (PSD) came into force, with the objective of eliminating regulatory differences between member countries and increasing competition among operators while guaranteeing equal conditions, more transparency and customer protection. In a single legislative framework, the directive organises the entire payment issue with the aim of supporting the creation of a European integrated market, for electronic payments, while reducing the costs and inefficiency associated with paper instruments and cash;

13 Bank of Italy, Supplement to the Statistical Bulletin “Moneta e Banche”, March 2011. 14 ABI Monthly Outlook, “Economia e Mercati Finanziari-Creditizi” February 2011. 21

On 11th October, negotiations started on the new Collateralised Interbank Market(MIC)15, called “New MIC”, with transfer to Cassa di Compensazione e Garanzia and Monte Titoli of the functions previously carried out by Bank of Italy (transaction guarantee, acquisition, valuation, custody and administration of the financial assets conferred to bank operators); Legislative Decree 78/2010, converted into Law 122/2010, reduced the limit for the transfer of cash, the issue of bank cheques/bankers’ draft and postal checks and the holding of bearer passbooks from 12,500 euro to 5 thousand euro; Legislative Decree 39/2010, which implements directive 43/2006, rewrote the rules on the legal audit of the accounts, reorganising them and imposing the respect of specific provisions concerning independence, deontology, training and quality control. For public interest bodies (including banks, companies issuing listed securities, insurance companies and brokerage companies), the legal audit cannot be performed by the Board of Statutory Audits and needs to be entrusted to legal auditors or audit firms for at least seven/nine years; finally, concerning listed banks: • in March Consob16 issued the regulation on operations with related parties that governs the procedures to be followed for the approval of transactions of significant value performed with parties in a potential conflict of interest; • Legislative Decree 27/2010 implements directive 2007/36/EC on shareholders’ rights, updating the Italian Civil Code and the Consolidated Finance Law on many points, with the consequent adjustment also of the Issuers’ Regulations17. The new measures applicable to the meeting called after 31st October 2010, have no effect on cooperative companies, which are expressly excluded from the sphere of application of the new legislation.

15 The MIC was an anonymous segment guaranteed by the e-Mid trading platform, created to encourage the resumption of trading on interbank circuits after the financial crisis of 2008. Upon its creation, the expiry of the guarantees provided by Bank of Italy as at 31st December 2010 has been agreed. 16 Decision no. 17221 amended with subsequent decision no. 17389 of 23rd June 2010. 17 Consob resolution No. 17592 of 14th December 2010. 22

Banco di Brescia’s Activities in 2010

Retail Market Given the well known economic situation, 2010 recorded some mild signs of recovery, though not continuous or of a structural nature, which in any case express the will of the production fabric to react to the recession by increasing productivity and innovation, looking at foreign markets with growing interest. Foreign markets are the real driving force, acting as an instrument for the balanced differentiation of the turnover and a vantage point to anticipate market trends. The persisting economic situation required intense work to be done to achieve the objectives set by the budget, keeping attention towards the financial support of the local economy and households high and constant. Detailed below are the several initiatives taken, arranged by customer type.

Private perimeter During the year, as part of the development of instruments targeting the acquisition of new Customers, especially young people without a bank account, the “Enjoy” card started to be publicised, which was well received throughout 2010 as it combines the advantages and functionalities of a real electronic payment card with those of a current account.

Again in connection with payment systems, the second half of 2010 saw the Branches committed to an important activity of replacement of multifunctional debit and credit cards featuring the magnetic band technology only, with the new Libramat debit cards and the monofunctional Libra credit cards fitted with a microchip to comply with the more stringent EMV - Europay, MasterCard and VISA security standards.

Confirming the attention paid to the young person segment, at the beginning of the year the new “Clubino” chequebook started to be marketed for people aged 0 to 17, at highly competitive conditions and connected to a prize awarding programme dedicated to the youngest people in the bracket.

In assisting Customers in the placement of financial instruments, particular attention was paid to direct medium and long-term funding and the insurance area. The basket of Bond Issues under placement saw both Floating Rate and Fixed Rate issues; the latter, with a short term (25 months) and midterm duration (36/48 months) were particularly appreciated by Customers.

There were four Group Bond Issues, some of which are called “Welcome Edition”, for the collection of fresh money at particularly advantageous rates, which supported the Network in acquiring new masses from other Institutes, thus consolidating the already good relationship with Customers.

With regard to the insurance range, placement was almost entirely concentrated on traditional Class I products,– capitalisation life insurance policies, confirming a positive funding flow. Special consideration was given to the Non-life Sector, with the Network managing to support sales by combining the consultancy from Relation Managers with the technical expertise of the agents from UBI Assicurazioni.

Within the sphere of managed savings, 2010 recorded an intense activity of reallocation of the stocks present on liquidity funds towards funds with a higher added value for Customers (flexible and balanced bond-based funds). Furthermore, with the objective of supporting the Branches in the placement of specific asset management funds, meetings were organised with the Relation Managers, in cooperation with UBI Pramerica, which provided commercial cues and periodic updates on market scenarios.

To provide Customers with a better service in the investment sector, in the first few months of 2010, a new UBI Light/Advanced financial consultancy service was started, which targets the “Private” segment. This service offers Customers customised consultancy on financial investments, based on their investment objectives, financial knowledge and expertise and risk propensity.

Particular attention was paid to the residential Mortgage Loans sector, also consequently to the persisting substantial rigidity of the real estate market and the uncertainty perceived by households. The commitment in the Retail Market took on the form of various activities, such as: a careful “pricing” policy for new borrowers and active subrogations; establishment of agreements with external networks (FIAIP –Federazione Italiana Agenti Immobiliari Professionali and KIRONEPICAS Tecnocasa Group); marketing of products to acquire new Customers and avoid the risk of passive subrogations, in line with the Group.

Concerning the placement of loans granted by B@nca 24/7, for the "Household Plan", in agreement with ABI and the Department for household policies of the Prime Minister’s Office, the product “Loan for newborns” was defined together with B@nca 24-7 to encourage access to credit among those households with a child born or adopted in the years 2009, 2010 and 2011.

As regards the constant attention paid by our institute to the quality of the services offered and their perception by customers, initiatives continued dedicated to the monitoring of Customer Satisfaction, in collaboration with the UBI Banca Contact Center and with external companies, such as GFK Eurisko and Demoskopea.

Concerning the CRM “In Action” instrument, commercial campaigns continued to be activated and developed throughout 2010 to support the Network in the following segments: Funding: analysis of the Customer’s financial position so as to propose the most appropriate financial instruments, on the basis of MiFID profiling; Lending: identification of the Customers with the greatest propensity towards purchasing Personal Loans and Revolving Cards; Retention: contact action aimed at consolidating the Customer base; Protection: identification of the Customers who do not possess insurance coverage and who disclose uncovered protection needs, so as to increase the penetration of Non-life and Health Policies.

The commercial initiative "Christmas 2010" took place in December in cooperation with Vodafone Italia. It involved the granting to Customers of a voucher worth 144 euro to be spent at any Vodafone One outlet to purchase a smart phone, subject to subscribing an Enjoy card or a Libra credit card, both at standard conditions.

In compliance with the Bank of Italy provisions concerning the transparency of transactions and banking and financial services, new elements were introduced as regards the documents to be submitted with the current account statements at year end. The main novelties, which our Institute promptly adjusted to, refer to the obligation for the annual summarising document to report the ISC (Summary Cost Indicator) for "consumer" customers as well as the obligation to forward, for “retail” customers, a new template called “Summary of the total expenses incurred throughout the calendar year for current account management and liquidity and payment management services”.

Company perimeter In 2010 Banco di Brescia tangibly met Company’s needs by financing their working capital. This is confirmed by the increase in self-liquidating loans and commercial portfolio and/or invoice advances compared to 2009.

Worth mentioning is the increase recorded in medium to long term loans, designed to support medium term corporate projects, compared to the prior year; this segment is experiencing a slight trend reversal compared to 2009, when medium term loans were being used to consolidate debts and/or try to dilute indebtedness, with a lighter burden on the financial structure; vice versa, 2010 recorded a growth in transactions aimed at production investments in machinery and processes. A similar trend affected lease transactions, which in terms of amounts, increased compared to 2009, when positive signs had already been seen.

Moreover, the possibility of combining insurance coverage with receivables significantly spurred entrepreneurs’ interest, due to the opportunity of obtaining the payment of mortgage instalments from UBI Assicuarazioni in case of accident and impossibility to work at the company. This instrument proved to be flexible, giving entrepreneurs peace of mind when assuming medium to long term financial commitments, knowing that the business will be less disrupted in case of accident.

In this context, the strong collaboration started between Banco di Brescia and all the credit facilities in the area certainly facilitates the disbursement of loans. The synergy created among the Customers, the Facilities and the Bank resulted in in-depth knowledge of the entrepreneurs and their corporate projects. With this synergic model, the credit risk was evaluated on the basis of a quantitative approach and a qualitative approach.

In 2009 and 2010, Confidi (credit facilities) affirmed their position after a first period of mergers/incorporations, followed by a new and more complex organisational change targeting, in various ways, the structure supervised by Bank of Italy (art. 107). In this context, 2009 saw a remarkable performance, especially to respect the corporate commitment undertaken to support companies in the middle of a financial crisis; these results were consolidated in 2010, with an additional fractioning of transactions performed: the number of disbursed loans increased in comparison with 2009. It is important to underline that the support provided to companies, through a partnership between Banco di Brescia and Confidi, was confirmed in terms of both volumes and prices, which have remained unchanged for several years, as a strong sign of responsibility that the Bank intends to send to the various local entities.

To ensure constant and continuous support to SMEs, in the second quarter the positive “Tavoli del credito” initiative was continued, providing an opportunity for in-depth discussion to the Decentralised Decision Centres and the reference geographical area.

The synergies reached between the Decision Centres and the Small Business Relation Managers, combined with joint visits to Customers and Specialists from the foreign Segment, Agents/Directors from UBI Assicurazioni and Agents from UBI Leasing, meant that the customers of Banco di Brescia were able to receive a comprehensive and suitable service to meet any of their financial and lending needs.

During 2010 the Retail Market – Corporate Segment department was particularly active in defining the basis for a thorough and direct discussion with the territory, by organising or participating in conferences/round tables with different associations on issues related to finance. In the first half of the year, the conference dedicated to the Agricultural sector (“L’agricoltura di fronte al mercato”) was very successful. Very topical issues were discussed, such as the possible ways farming businesses may change their organisational and commercial structure to competitively face the challenges from global markets. In the same period, the Retail Market Department accepted the invitation of ACAI (Associazione Cristiana Artigiani Italiani) to discuss “Innovation and development and ensuring credit to handicraft companies and small business to encourage a recovery” in Milan, where towards the end of the year, another important conference was held with Confapimilano, ConfapiLombarda Fidi and the Chamber of Commerce of Milan on the subject “Between Basel II and Basel III let us put the company back to a central position”.

In June, the strong commitment to supporting the economy of the areas where Banco di Brescia operates was further strengthened with the signing of an important Protocol with the Province of Brescia. The Bank undertook to advance the receivables from the Public Administration of the Province of Brescia to those SMEs making a specific request. This anti-crisis plan is particularly important because the Bodies involved, which are subject to the strict rules of the Internal Stability Pact, can guarantee liquidity to their suppliers through the Banking Systems, by means of advances on receivables, as confirmed by them, expiring after up to 17 months.

In 2010 the Cash Management Service of Public Authorities renewed several agreements and acquired new ones in the Province of Mantua, which is an area of development for Banco di Brescia. There were substantially four drivers behind the correct control of the segment: 1- Review of the conditions of the expiring cash management agreements; 2- Heavy focus on supporting local authorities with loans aimed at respecting the “Stability Pact”; 3- Systematic release of IT orders through the dematerialisation of mandates and reversals with the aid of the digital signature and electronic storage.

In this context, the Bank successfully participated in several tenders for the disbursement of medium to long term loans.

Corporate Market In the difficult economic scenario that started at the end of 2008 and is still persisting despite weak signs of improvement, the Corporate Market of Banco di Brescia focused on consolidating the link with the main areas it is present in, strengthening its presence in the areas of development also thanks to consolidated relationships with Trade Associations, Chambers of Commerce and Public Institutions.

In 2010 there were 15 active Corporate Banking Units of the Corporate Market employing 109 people (15 Managers and 94 Relation Managers).

The volume of loans was affected by the economic performance of 2010. The shrinking turnover for the main production sectors influenced loan volumes which, in any case, recorded a slight growth. The same applies to medium to long term loans which, due to the uncertainty of future demand, generated limited growing volumes. These were also affected by an increasingly selective context and the careful monitoring of the residential sector, which resulted in a gradual reduction that was not offset by the new developments.

The crisis in progress penalised funding during the year, with corporate liquidity being used, whenever possible, to satisfy the company’s needs, and recording a drop towards the end of the year.

Flows and transactions mediated by the foreign area, despite still suffering from a gap compared to the situation before the crisis, if placed within the related economic context, disclose satisfactory recovery in terms of market shares and a greater operating selectivity which produced a minor return in profitability terms, thanks to planned actions aimed at recovering market shares with high margin transactions. The contribution from exports in particular has managed for the time being to offset the drop in imports in some business sectors (iron and steel, metal processing in general, processing of raw materials).

In the derivatives sector, the offer targeted interest rate and exchange rate products with results that were affected by the performance of the dollar, the general uncertainty of foreign exchange markets and the EURIBOR trend, which pushed commercial operators towards a wait-and-see approach.

The collaboration with Product Factories was profitable and reliable, providing satisfactory economic returns for intermediated volumes and commission returns. The close cooperation further strengthened the relationship with companies from our areas and improved our appreciation in development areas.

Private Market Despite a scenario featuring substantially static interest rates and financial markets that have progressively increased their volatility during the year, the Private Market obtained good results in terms of generated profits and the main productivity indicators.

Consequently to a positive growth of the customer base, the Market recorded a margin increase compared to last year. The gross profit increased considerably, also as a result of cost rationalisation.

This allowed the market to move from a “cost/income” of 52.9% in 2009 to a final 45.0% at the end of 2010.

The financial margin held quite well, supported in particular by a careful management of funding costs and a lively trend for loans; service revenues, on the other hand, benefitted from the good sales results and the improved asset mix in the Asset Management sector, in addition to the considerable volumes developed by the market in relation to the placement of Life insurance policies.

More in detail, the Assets under management segment experienced an important improvement action aimed at investment diversification, with the introduction into Customer portfolios of Sicav segments from leading global investment firms in order to support a sustainable growth of revenues over time. In line with market trends, the Bancassicurazione segment recorded growing stocks as a result of placing Class I and Class V products with a minimum guaranteed return. Both segments benefitted from the masses of Customers repatriated during the year after closing any “impedimental” transaction with reference to the Tax Shelter.

The activities for the spreading of services/products reserved exclusively for Market Customers continued during the year; good results were achieved in this field in terms of diffusion of the AWA personalised consultancy service developed by the specific Parent Company structure and with regard to the spreading of the Black Kalia credit card that offers additional prestigious services designed to best meet the needs of Customers of a high standing.

To further support the service margin, some important placements of subordinated/structured bonds of the Group and of third parties were completed during the year; this activity was supported by the new service model for customer consultancy activities which, in compliance with the provisions of Mifid regulations, envisages the use of the new Planning and Financial Advice (PCF) IT platform.

The strategy to increase the number and expand the market share of Private Customers was characterised by specific development initiatives. Drawing from the specialisation and professional skills acquired in the various segments, in the last quarter of the year and for two operating units, an initiative was started to fully capitalise on the potential of the Bank’s customer base, pursuing the objective of supporting its growth through a process that generates contacts deriving from crossed leads on potential Customers in synergy with the Corporate and Private Market; this geographically coordinated action envisages specific joint development meetings between Private bankers and Corporate account managers that, also thanks to a particularly attractive offer, aim to increase the number of Bank Customers. As a consequence of the good results achieved, this initiative will be expanded to the entire network throughout 2011.

Furthermore, in order to increase customers’ awareness of investment choices through economic and financial training and the spreading and update of information, in the last few months of the year, the Private Market promoted a cycle of short training seminars dedicated to its current and potential customers in the development areas (Treviso, Verona and Cremona). The activity involved professors from the Catholic University of Milan and major market operators intervening as external contributors, with the objective of introducing participants to the scientific tools and issues needed to make correct choices on investments and particularly on the management of their family assets.

The year saw a continuation of the training initiatives concerning specific financial issues, with the involvement of the Group SGR and some third party companies (Black Rock - Schroders - Pictet), and regulatory/operating analyses (Isvap - Pcf). An advance asset allocation course was also started, and the training courses to prepare for the financial advisor exam and enrol in the related register continued for the resources recently acquired by the Market.

Loans Loans to customers grew as a whole compared to the prior year, in both the short and the medium to long term segment. In a difficult economic context, this growth reflects the ability to continue to support the economic and social situation of the controlled areas, particularly in the SME segment.

Concerning credit quality, the aforementioned economic context and the persisting crisis that affected all the economic sectors, though with varying intensity, caused impaired loans to rise and the risk trend of the portfolio to increase. Non performing and impaired loans grew, consequently increasing the relevant analytical write downs. At the same time, collective adjustments on performing loans increased to adjust the overall amount to the one emerging from the data deriving from the Basel II model and the updated risk parameters.

Human Resources As at 31st December 2010, there were 2,627 personnel in Banco di Brescia. Given that, at year end 76 personnel had been seconded from other Group companies, while in turn Banco di Brescia had 69 employees seconded to other Group companies, overall the Bank’s operative headcount came to 2,634.

Hires in 2010 amounted to 23, mainly concerning resources employed under fixed-term work contracts and 10 temporary contracts to cover the Bank’s temporary staff needs.

In total, 133 employees left the Bank. There were 81 retirements, of which 74 were incentivised under the Group Framework Agreement of 20th May 2010.

Training activities were mainly aimed at strengthening the professional skills of network personnel (Commercial, Credit and Finance), the Bancassicurance sector, mandatory regulations (Legislative Decree 231) and managerial and behavioural training.

Mention should be made of the actions taken to improve the skills of the “Branch Manager” position – Va.Lo.Re. in Rete – and continue, also in 2010, the Planning and Financial Advice Project for Branch Managers and Affluent and Mass Market Relations Managers in the Private Market, and Private Bankers in the Retail Market.

For the Corporate Market worth mentioning is the specialised training course “Excellence in Corporate Banking” for C.B.U. Managers and Account Managers, aiming to strengthen the skills concerning “Corporate Advisory” and a distinctive approach to the reference Customers.

Finally, the programmes continued within the Training School for future Group Branch Managers, while, also with the formula “Distance Training”, courses on Leg. Decree 231, Patti Chiari and Banking Transparency were provided.

Geographical and organisational development With effect from 25th January 2010, following the approval of the Geographical Optimisation Project by UNI Banca Group, Banco di Brescia transferred 28 branches, located in the areas of Monza and Brianza, Como, Varese, Lecco, Parma, Genoa and Turin and acquired 34 units (plus 3 mini branches) located in the provinces of Mantua, Brescia, Verona, Cremona, Lodi and Padua, thereby becoming the Group’s reference bank for these provinces and for the whole of the Triveneto area. The branches were transferred through intragroup conferrals and transfers of the relevant business segments.

In June 2010, to complete the rationalisation measures started at the beginning of the year, 7 branches and 2 mini branches were closed, which were concerned by geographical overlaps, a 1 branch was turned into a mini branch.

On 10th December 2010, the project to rationalise the presence of the UBI Banca Group in Luxemburg was completed with the conferral to UBI Banca International of the business segment of Banco di Brescia comprising the Luxemburg branch.

Due to the actions describes, 31st December 2010, the Bank’s distribution network was structured as follows: • 362 branches (including 13 Mini branches) in 17 Italian provinces; • 10 Retail Territorial Areas (RTA); • 15 Corporate Banking Units (CBU) and 8 Corporate Corners; • 12 Private Banking Units (PBU) and 4 Private Corners; • 9 Decentralised Decision Centres (PDC); • 7 Foreign Centres.

In September 2010 the UBI Banca Group approved the New Retail Organisational Model aimed at strengthening the geographical presence and improving the commercial efficacy of the small-sized Operating Units (i.e. units employing up to 4 people). According to the model, which is expected to be adopted in 2011, the structure arranged into three Markets (Retail, Corporate and Private) will be maintained and the Branches will be subdivided into “Leader” and “Aggregated”. Each Leader branch will control the Aggregated branches that are contiguous to each other, while the Retail Territorial Areas will directly coordinate the Leader branches under their responsibility.

With the New Distribution Model fully operational, the Retail Commercial Network should evolve as specified below: • 362 branches in 17 Italian provinces: 349 Retail branches - of which 71 are Leaders and 5 Independent offices - and 13 Mini branches; • 7 Retail Territorial Areas (RTA); • 13 Corporate Banking Units (CBU) and 11 Corporate Corners; • 10 Private Banking Units (PBU) and 3 Private Corners; • 7 Decentralised Decision Centres (PDC); • 7 Foreign Centres.

In the second half of 2010, central governance and control functions/structures underwent an organisational review to allow them to better address the primary need of ensuring the quality of the operating coordination and guaranteeing, in a systemic perspective, adequate control of business-related actions, activities and processes, in compliance with legislative and corporate regulations in force. Below are the criteria that inspired the redefinition of the microstructure of the Institute: - obtain a better focus from the functional units supervising operating risks by setting up the “Risk Control Staff” that reports directly to the General Manager;

- reconsider the tasks of the General Staff Management, concentrating its functions on “Operating Coordination” and “Administration and Planning” activities in a way to obtain a centre specialised in the micro-organisation of the branches on the one hand, and a suitable structure in charge of Management Control and management reports; - reconsider the tasks of the Human Resource and Support Management by integrating in one single group all the activities that are typical of “Personnel Management” and those related to “Legal and Corporate Affairs”, to create an organisational entity to support the General Management and the Board Bodies; - provide the commercial area with specific “Supporting Staff” depending directly from the Commercial Management, to activate and ensure the coordinate management and monitoring of all the business development initiatives and the transversal activities with respect to the three market segments.

With regard to ATM and POS facilities, as at 31st December 2010 the Bank had 478 ATMs (17 of which had specific functions for the vision-impaired), including 40 advanced Cashin/Cashout ATMs. At the end of 2010 there were 6,240 sales outlets fitted with Banco di Brescia POS devices.

The Internal Control System Auditing of the Network Banco di Brescia’s internal audit activities were centralised in the Macro Audit Area of the Parent Company and UBI Banca Group based on a special representation contract. This activity was performed as detailed in the “Operating Manual”, which describes operational methods and tools, the complete catalogue of types of intervention, support work papers and check lists, as well as related reports. The following describes the types of activities with a brief description of the related audit objectives:

Framework analysis to evaluate the adequacy of protections implemented for inherent risks in the processes and organisational units being audited, divided into: • Management Audit, designed to evaluate the functionality of the complete internal control system; • Operational Audit, designed to assess the processes and organisational units in terms of effectiveness, efficiency and reliability; • Financial Audit, to assess the processes and organisational units inherent in the administrative accounting system; • Compliance Audit, to evaluate the processes’ observance of external regulatory provisions; • ICT Audit, to evaluate the adequacy of the IT structure; Functional verifications on site on the central processes and organisational units as well as those in the sales network, aimed at determining their consistency with legal and regulatory provisions; Inspections, aimed at observing employee operations to prevent prejudicial events for the company; Administrative investigations, to identify external and internal responsibility following prejudicial events for the company. Remote audits monitoring spheres/phenomena that concern the operations of the Bank structures to ascertain compliance with corporate regulations.

More specifically, the functional verifications on the sales networks involve all activities that were delegated, organized by process/activity (Credit Brokerage Process, Sales Process for Financial Products and Investment Services, Banking Products Sales Process, Front and Back Office Operations, Management of Valuables and Safe Deposit Boxes, Physical and Logical Security, Miscellaneous Adjustments, Operational Monitoring and Management and Treasury). The method adopted envisages the assignment of a rating established in relation to the irregularities found for each process/activity analysed and a summary rating. From these results, it is also possible to extrapolate a “view” of each of the external regulations that are relevant for employee operations in the sales network.

During 2010, a total of 213 audits were performed for the sales outlets of all markets (Retail, Private and Corporate), of which 139 general inspections (that examine the sales network unit in its entirety) at retail branches, 50 at Corporate Banking Units and 24 at Private Banking Units, in additional to periodic remote checks. For details on the measures carried out and the related results, regarding both the central and peripheral structures of Banco di Brescia as well as service activities performed by UBI Banca and UBI Sistemi e Servizi, reference is made to the quarterly reports issued by the Macro Audit Area of the Parent Company and the UBI Banca Group. On this point, it is shortly specified that the on site checks run on sales networks revealed, given a predominantly positive situation, some areas for improvement concerning the Bank Product Sales Process and the Operating Management of the Retail Market.

The remote monitoring revealed a general compliance with corporate regulations, with occasional measures taken towards the Network Units to request greater attention to be paid to the operating areas being audited and to remind the Managers of the importance of promptly performing the first level checks envisaged by the provisions.

It is hereby specified that, in the presence of anomalies the staff are made to dwell on the correct conduct to be adopted and the risks deriving from conduct not in line with the legislative framework. Furthermore, subsequent “follow up” action is envisaged for the purpose of ascertaining the removal of the anomalies and the re-establishment of correct operations.

Administrative Financial Governance Model adopted in accordance with Law 262/05 Italian Law 262 of 28th December 2005 (and subsequent modifications) “Provisions to protect savings and govern financial markets” with the inclusion in the Consolidated Finance Law of Article 154 bis introduced the role of Manager in charge of preparing financial documents for the company in the business organisational structure of publicly quoted companies in Italy. The aforementioned reform proposes, among other things, to strengthen the internal control system in relation to financial communications produced by listed companies.

UBI Banca Group is obliged to apply the new regulatory provision and for this purpose has endowed itself with an organisational and methodological framework (administrative financial governance model) that, included in a context of integrated compliance, makes it possible to continually regulate activities inherent in the verification of adequacy and effective application of controls related to the financial disclosure risk and consequently, perform a proper valuation of the reference internal control system.

The adopted model also envisaged the identification of the application perimeter represented by the companies in UBI Banca Group, as well as the accounts and processes deemed significant for producing financial information. Based on its relevance, the Bank has been included in the project perimeter.

The audit activities performed on the adequacy and effective application of administrative and accounting procedures for the preparation of the 2010 financial statements confirmed the summary positive judgment on the quality and effectiveness of the Bank’s administrative accounting internal control system. This conclusion was further supported by specific internal statements, produced by the delegated bodies of each company/outsourcer of the UBI Banca Group as envisaged by the “Cascading statements system” contemplated in the defined financial administrative governance model.

Based on the work performed, the Bank’s General Management will have to issue the appropriate statement, as delegated by the Board of Directors, to the Parent Company that contains: statement on the veracity, completeness and conformity of the accounting entries for balance sheet, income statement and cash flow data and supplemental information of the individual financial statements provided for drawing up the consolidated financial statements and directors’ report; assessment of the adequacy and effective application of administrative and accounting procedures during the period.

Work environment

As regards the issues governed by Legislative Decree 9th April 2008, no. 81 (Consolidated Security Law), please refer to the section “Principal risks and uncertainties to which the Bank is exposed”, while environmental responsibility issues are covered by the chapter “Other information”, as part of the reporting on social and environmental responsibilities.

Reclassified Financial Statements

Information on the Balance Sheet and Income Statement

For the purpose of facilitating the analysis of the Bank’s economic progress and in pursuance of Consob Communication No. DEM/6064293 dated 28th July 2006, the reclassified statements include a specific statement for highlighting the economic impact of the main non-recurrent events and transactions – since the related equity and financial effects are not significant – which are recapitulated below:

2010:  voluntary redundancy incentives (Trade Union Agreement of 20th May 2010).

2009  statutory/fiscal realignments regarding the three-year period 2005/2007;  10% deduction of Irap from Ires;  absorption charges consequent to the corporate aggregation transaction.

The financial statements below include the reclassified Balance Sheet and Income Statement schedules.

2008 saw the start of a programme to issue Euro Commercial Papers and Certificates of Deposit traded in France and reserved for institutional investors, with the involvement of the Luxembourg branch, which was conferred to UBI Banca International S.A. with legal efficacy from 10th December 2010. In consideration of the special operations performed by the foreign branch and the volumes traded in terms of deposits established at the Parent Company consequently to the issue of CD and ECP, for the purposes of better comparison, we deemed it suitable to re-post the accounts as at 31st December 2009. However, the comparison periods are not homogenous due to the territorial optimisation effect.

Reclassified Balance Sheet (in thousands of euro)

Annual Annual 31/12/2009 Annual Annual ASSET ITEMS 31/12/2010 31/12/2009 change change % restated change change %

10. Cash and cash equivalents 73.922 92.584 (18.662) (20,2) 92.584 (18.662) (20,2) 20. Financial assets held for trading 100.954 114.259 (13.305) (11,6) 108.420 (7.466) (6,9) 40. Available-for-sale financial assets 20.913 26.339 (5.426) (20,6) 26.339 (5.426) (20,6) 60. Loans to banks 851.391 7.442.072 (6.590.681) (88,6) 1.464.430 (613.039) (41,9) 70. Loans to customers 15.078.204 14.178.741 899.463 6,3 14.111.750 966.454 6,8 80. Hedging derivatives 45.471 75.128 (29.657) (39,5) 75.128 (29.657) (39,5) 90. Fair value changes to hedged financial assets 40.200 21.556 18.644 86,5 21.556 18.644 86,5 100. Equity investments 19.022 16.122 2.900 18,0 16.122 2.900 18,0 110. Tangible assets 293.836 297.386 (3.550) (1,2) 297.360 (3.524) (1,2) 120. Intangible Assets 19.705 19.739 (34) (0,2) 19.705 0 - of which: goodwill 19.705 19.705 - - 19.705 - - 130. Tax assets 65.837 76.127 (10.290) (13,5) 75.490 (9.653) (12,8) 150. Other assets 1.012.350 320.367 691.983 216,0 695.402 316.948 45,6 Total assets 17.621.805 22.680.420 (5.058.615) (22,3) 17.004.285 617.520 3,6

Annual Annual 31/12/2009 Annual Annual LIABILITIES AND SHAREHOLDERS' EQUITY ITEMS 31/12/2010 31/12/2009 change change % restated change change %

10. Due to banks 3.341.564 1.370.705 1.970.859 143,8 1.326.245 2.015.319 152,0 20. Due to customers 8.885.718 8.870.849 14.869 0,2 8.607.554 278.164 3,2 30. Securities issued 3.233.256 10.300.310 (7.067.054) (68,6) 4.934.749 (1.701.493) (34,5) 40.+ 50. Financial liabilities held for trading at fair value 76.037 81.138 (5.101) (6,3) 80.770 (4.733) (5,9) 60. Hedging derivatives 64.840 51.429 13.411 26,1 49.958 14.882 29,8 80. Tax liabilities 39.737 59.174 (19.437) (32,8) 59.167 (19.430) (32,8) 100. Other liabilities 432.261 573.303 (141.042) (24,6) 572.530 (140.269) (24,5) 110. Staff severance indemnity 61.987 63.808 (1.821) (2,9) 63.706 (1.719) (2,7) 120. Provisions for liabilities and charges: 26.301 22.999 3.302 14,4 22.999 3.302 14,4 b) other provisions 26.301 22.999 3.302 14,4 22.999 3.302 14,4 130. Valuation reserves 14.182 21.206 (7.024) (33,1) 21.206 (7.024) (33,1)

16 0 .+170 .+18 0 Share capital, share premiums and reserves 1.373.943 1.136.526 237.417 20,9 1.136.429 237.514 20,9 200. Profit for the year 71.979 128.973 (56.994) (44,2) 128.973 (56.994) (44,2) Total Liabilities and shareholders' equity 17.621.805 22.680.420 (5.058.615) (22,3) 17.004.285 617.520 3,6

Reclassified Income Statement (in thousands of euro)

Annual change INCOME STATEMENT ITEMS 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9 Annual change %

10 .- 2 0 . Net interes t inco me 325.858 353.270 (27.412) (7,8)

70. Dividends and s imilar inco me 1.249 1.699 (450) (26,5)

4 0 . - 5 0 . Net commission income 196.007 200.248 (4.241) (2,1)

8 0 .+ 9 0 .+10 0 .+110 . Net pro fit (lo s s ) fro m trading and hedging activities (1.478) 10.204 (11.682) n.s .

19 0 . Other o perating inco me/(expens e) 14.846 20.740 (5.894) (28,4)

Ope ra ting inc o m e 5 3 6 .4 8 2 5 8 6 .16 1 (4 9 .6 7 9 ) (8 ,5 )

15 0 a . Staff co s ts (172.843) (164.528) (8.315) 5,1

15 0 b. Other adminis trative expens es (133.322) (134.507) 1.185 (0,9)

170. + 180. Net impairment adjustments on tangible and intangible assets (11.101) (11.627) 526 (4,5)

Ope ra ting c o s ts (3 17 .2 6 6 ) (3 10 .6 6 2 ) (6 .6 0 4 ) 2 ,1

N e t o pe ra ting inc o m e 2 19 .2 16 2 7 5 .4 9 9 (5 6 .2 8 3 ) (2 0 ,4 )

13 0 a . Net impairment adjustments/value recoveries on loans (97.859) (69.220) (28.639) 41,4

130b. + c.+d. Net impairment adjustments/value recoveries on other assets/liabilities (849) (1.348) 499 (37,0)

16 0 . Net pro vis io ns fo r liabilities and charges (2.875) (3.258) 383 (11,8)

210. + 240. P ro fit (lo s s ) fro m dis po s al o f equity and o ther inves tments 1.296 (76) 1.372 n.s .

Profit (loss) on continuing operations before tax 118 .9 3 0 2 0 1.5 9 7 (8 2 .6 6 7 ) (4 1,0 )

2 6 0 . Inco me taxes fo r the year fo r co ntinuing o peratio ns (46.951) (71.893) 24.942 (34,7)

Merger expens es - (732) 732 - of which: staff costs - (597) 597 -

ne t im pairm e nt adjus tm e nts o n tangible and intangible as s e ts - (441) 441 -

tax - 306 (306) -

290. P ro fit fo r the ye a r 7 1.9 7 9 12 8 .9 7 3 (5 6 .9 9 4 ) (4 4 ,2 )

Methodology for drawing up the reclassified Income Statement

Principal reclassification rules: • the overdraft commission recorded under item 10 - 20 “Net interest income” (747 thousand euro as at 31st December 2010 and 15,503 thousand euro as at 31st December 2009) has been reclassified in the item 40 - 50 “Net commission”; • recoveries of taxes entered in item 190 “Other net operating income/(expense)” (24,103 thousand euro as at 31st December 2010 and 23,491 thousand euro as at 31st December 2009) are reclassified reducing indirect taxes included in other administrative expenses; • the item “Net adjustments on tangible and intangible assets” include items 170 and 180 of the financial statements and the amortisation charges for costs incurred for leasehold improvements (961 thousand euro as at 31st December 2010 and 963 thousand euro as at 31st December 2009) classified under item 190 of the mandatory format; • the “Other operating income/(expense)” item includes item 190, net of the aforementioned reclassifications.

Reclassified Income Statement Net of the Main Non Recurring Components (in thousands of euro)

Non recurring Componenti non ricorrenti components 31.12.10 31/12/2009 INCOME STATEMENT ITEMS 31/12/2010 net of non 31/12/2009 net of non change change % Redundancy recurring items "FTA" tax IRAP rebate M erger recurring items incentives realignment" 2004-2007 expenses

10.- 20. Net interest income 325.858 325.858 353.270 353.270 (27.412) (7,8) 70. Dividends and similar income 1.249 1.249 1.699 1.699 (450) (26,5) 40. - 50. Net commission income 196.007 196.007 200.248 200.248 (4.241) (2,1) 80.+ 90.+100.+110.Net profit (loss) from trading and hedging activities (1.478) (1.478) 10.204 10.204 (11.682) n.s. 190. Other operating income/(expense) 14.846 14.846 20.740 20.740 (5.894) (28,4) Operating income 536.482 - 536.482 586.161 - - - 586.161 (49.679) (8,5) 150a. Staff costs (172.843) 3.869 (168.974) (164.528) (164.528) (4.446) 2,7 150b. Other administrative expenses (133.322) (133.322) (134.507) (134.507) 1.185 (0,9) 170. + 180. Net impairment adjustments on tangible and intangible assets (11.101) (11.101) (11.627) (11.627) 526 (4,5) Operating costs (317.266) 3.869 (313.397) (310.662) - - - (310.662) (2.735) 0,9 Net operating income 219.216 3.869 223.086 275.499 - - - 275.499 (52.413) (19,0) 130a. Net impairment adjustments/value recoveries on loans (97.859) (97.859) (69.220) (69.220) (28.639) 41,4 130b. + c.+d. Net impairment adjustments/value recoveries on other assets/liabilities (849) (849) (1.348) (1.348) 499 (37,0) 160. Net provisions for liabilities and charges (2.875) (2.875) (3.258) (3.258) 383 (11,8) 210. + 240. Profit (loss) from disposal of equity and other investments 1.296 1.296 (76) (76) 1.372 n.s. Profit (loss) on continuing operations before tax 118.930 3.869 122.799 201.597 - - - 201.597 (78.798) (39,1) 260. Income taxes for the year for continuing operations (46.951) (1.064) (48.015) (71.893) (2.767) (3.118) (77.779) 29.764 (38,3) Merger expenses - - - (732) - - 732 - - - of which: staff costs - - (597) 597 - - - net impairment adjustments on tangible and intangible assets - - (441) 441 - - - tax - - 306 (306) - - - 290. Profit for the year 71.979 2.805 74.784 128.973 (2.767) (3.118) 732 123.819 (49.035) (39,6)

Information on the Reclassified Balance Sheet

Introduction

On 25th January 2010, the Territorial Optimisation Transaction of the UBI Banca Group was completed. For the Bank this implied the transfer of 28 branches located in the areas of control of other banks - Banca Popolare di Bergamo, Banca Popolare Commercio e Industria, Banca Regionale Europea and Banco di San Giorgio - and the acquisition of 37 branches located in the reference provinces. Data as at 31st December 2010 felt the effects of this transaction and is not perfectly in line with the comparison data.

Net interbank position

The interbank balance, net of repurchase agreement transactions with the Parent Company against funding in customer repurchase agreements, disclosed a significant drop, passing from a positive balance of 5,708 million to a negative balance of 2,999 million euro. The aggregate is mainly affected by the following factors: - the early repayment of bonds related to the structural rebalancing policy (1,100 million euro) with the consequent increase in debt on the interbank current account held by the Parent Company; - the expiry of time deposits for approximately 700 million euro (of which about 500 million euro related to the abovementioned policy); - the territorial optimisation transaction, which generated an interbanking unbalance of the business segment in debt for about 291.8 million euro; - the transfer of the Luxembourg branch, which resulted in a reduction in active deposits for about 5.6 billion euro related to the funding of French CD and ECP.

(in thousands of euro)

Change Dec. 10/Dec. 09 3 1/ 12 / 2 0 0 9 Change Dec. 10/Dec. 09 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9 A bs o lute % re s ta te d A bs o lute %

Loans to banks 8 5 1.3 9 1 7 .4 4 2 .0 7 2 (6.590.681) (8 8 ,6 ) 1.4 6 4 .4 3 0 (6 13 .0 3 9 ) (4 1,9 ) Due to banks 3 .3 4 1.5 6 4 1.3 7 0 .7 0 5 1.9 7 0 .8 5 9 n.s . 1.3 2 6 .2 4 5 2 .0 15 .3 19 n.s . NET INTERBANK P OSITION (2.490.173) 6.071.367 (8.561.540) n.s . 138.185 (2.628.358) n.s . (-) Revers e repurchas e agreements (508.723) (363.323) (145.400) 40,0 (363.323) (145.400) 40,0

NET INTERBANK P OSITION (2.998.896) 5 .7 0 8 .0 4 4 (8.706.940) n.s . (2 2 5 .13 8 ) (2.773.758) n.s .

Loans to customers

Loans to customers amounted to 15,078 million euro, up by 899 million (+ 6.3%) with respect to the balance at the end of 2009. Net of impaired assets, mortgage loans, which represent 59.4% of total loans (58.7% as at 31st December 2009) disclosed an increase of 6.4%, while other short-term technical forms grew by 9%.

The territorial optimisation transaction led to an increase in volumes of about 553 million euro.

Cash loans situation as at 31st December 2010 (in thousands of euro)

To ta l im pa irm e nt Type of exposure/values Gro s s e xpo s ure N e t e xpo s ure a djus tm e nts

a) No n perfo rming lo ans 346.843 161.931 184.912 b) Impaired lo ans 351.197 32.529 318.668 c) Res cheduled expo s ures 214.801 13.302 201.499 d) P as t due expo s ures 42.421 1.400 41.021 Total impaired loans 9 5 5 .2 6 2 2 0 9 .16 2 7 4 6 .10 0

e) P erfo rming lo ans 14.399.556 67.452 14.332.104

TOTAL 15.354.818 2 7 6 .6 14 15.078.204

Cash loans situation as at 31st December 2009 (in thousands of euro)

To ta l im pa irm e nt Type of exposure/values Gro s s e xpo s ure N e t e xpo s ure a djus tm e nts

a) No n perfo rming lo ans 268.590 136.315 132.275 b) Impaired lo ans 280.583 29.794 250.789 c) Res cheduled expo s ures 81.134 8.210 72.924 d) P as t due expo s ures 77.447 1.439 76.008

Total impaired loans 7 0 7 .7 5 4 17 5 .7 5 8 5 3 1.9 9 6

e) P erfo rming lo ans 13.697.109 50.364 13.646.745

TOTAL 14.404.863 2 2 6 .12 2 14.178.741

The Bank’s net impaired loans amounted to 746.1 million euro, disclosing a 40.2% growth with respect to 31st December 2009, as a consequence of the persisting economic crisis and the tendential increase in credit risk.

Specifically: net non performing loans, equal to 184.9 million euro, increased by 39.8% from the previous year; the ratio to total loans is 1.2%; impaired loans increased from 250.8 to 318.7 million euro and restructured loans grew from 72.9 to 201.5 million euro for the entry of some important counterparts; due loans dropped from 76 to 41 million euro, including 35 million euro of amounts past due between 90 and 180 days relating to exposures guaranteed by properties reclassified under impaired amounts as envisaged by the supervisory legislation for Banks which carry out prudent reporting as per the standard method (55.5 as at 31st December 2009).

The level of hedging for non-performing loans came to 46.7%, down with respect to the same figure at the end of 2009 (50.7%), just as the level of hedging for impaired loans equal to 9.3% (10.6% as at 31st December 2009). The Bank’s generic reserve (67.4 million euro) presents a hedge level for performing loans of 0.47% (0.37% as at 31st December 2009).

Financial assets

As at 31st December 2010, financial assets amounted to 207.5 million euro, against 237.3 million euro at the end of 2009. The individual components feature the performance below:  “Financial assets held for trading” totalled 100.9 million euro, down 11.6% and represent the positive fair value of the trading derivatives. Net of the foreign branch as at 31st December 2009 (5.8 million euro, of which Lehman securities worth 517 thousand euro), the item dropped by 6.9%;

 “Available-for-sale financial assets” dropped from 26.3 to 20.9 million euro. The decrease, equal to 5.4 million euro, is attributable to the fair value valuation of the equity investment held in Intesa S. Paolo,  the “hedging derivatives” amount to 45.5 million euro against 75.1 of the end of 2009;  The “value change of macro-hedged financial assets” increased to 40.2 million euro compared to 21.6 at the end of the previous year and represents the fair value of loans to customers included under macrohedging. The increase in this item is to be valued in combination with the result of liability item 60 “Hedging derivatives” which includes, for about 44 million euro, the valuation of the loan hedging derivative (17 million euro more than in December 2009). The growth is attributable mainly to the significant drop in medium to long term rates, which caused a considerable appreciation of the fair value of fixed rate loans.

Equity investments

The item includes only the equity investments in Group companies. Due to the territorial optimisation transaction, the Bank subscribed shares issued by Banca Popolare di Bergamo, Banca Popolare Commercio ed Industria, Banca Regionale Europea and Banco di San Giorgio, with business segment conferrals for a total of about 32.9 million euro. These were sold to the Parent Company in July. The equity investment held in UBI Banca International S.A. increased (+2.9 million euro) due to the conferral of the Luxembourg branch; as at 31st December 2010 this amounts to 5.2 million euro and accounts for 5.85% of the capital. The equity investments existing at the beginning of the year in UBI Sistemi e Servizi S.c.p.A. and Banca di Valle Camonica have remained unchanged.

Funding from customers

Customer assets under administration as at 31st December 2010, amounted to 33,014.3 million euro, down (-17.5%) with respect to the end of 2009 (-4.1% compared to re-exposed 2009).

Assets under administration (in thousands of euro)

Change Dec. 10/Dec. 09 3 1/ 12 / 2 0 0 9 Change Dec. 10/Dec. 09 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9 A bs o lute % re s ta te d A bs o lute %

Direct funding fro m cus to mers : 12.118.973 19.171.160 (7.052.187) (36,8) 13.542.302 (1.423.329) (10,5) Due to cus to mers 8.885.718 8.870.849 14.868 0,2 8.607.554 278.164 3,2 Securities is s ued 3.233.256 10.300.310 (7.067.055) (68,6) 4.934.749 (1.701.493) (34,5) Indirect funding fro m cus to mers 20.895.362 20.866.197 29.165 0,1 20.866.197 29.165 0,1

TOTAL ASSETS UNDER CUSTODY 33.014.335 40.037.357 (7.023.022) (17 ,5 ) 34.408.499 (1.394.164) (4 ,1)

Direct funding

The balance of direct funding came to 12,119 million euro, down compared to the value at the end of 2009.

Amounts due to customers was 8,885.7 million euro, an increase of 0.2% (15 million). Net of the operations related to the foreign branch, the figure grew by 3.2%, mainly as a result of repurchase agreements.

Securities in issue went from 10,300.3 to 3,233.2 million euro, recording a significant drop. The figure for 2009 included issues by the foreign branch of Certificates of Deposit and Euro Commercial Papers (about 5,200 million euro) and a subordinated deposit open with the same branch of Preferred Capital Company LLC (Delaware – USA) for a total of 165 million euro. Net of these items, securities in issue decreased by 32.5%, mainly as a result of the

early repayment of bonds subscribed by the Parent Company and aimed at rebalancing the assets and liabilities of the Bank (-1,100 million euro).

The territorial optimisation transaction as a whole brought about an increase of about 201.2 million euro in direct funding from customers, and about 23.7 million euro in securities in issue, mostly consisting of certificates of deposit in foreign currency.

Indirect funding (in thousands of euro)

C ha ng e A / B 31/12/2010 31/12/2009 Incidence % Incidence % A B A bs o lute %

- As s ets under cus to dy 7 .2 8 0 .2 8 9 49,0 6 .8 12 .19 0 47,9 4 6 8 .0 9 9 6,9 - As s ets under management 7 .5 6 9 .5 0 9 51,0 7 .4 13 .0 2 8 52,1 15 6 .4 8 1 2,1

C us to m e r po rtfo lio m anage m e nt 1.318.288 8,9 1.224.147 8,6 94.141 7,7 M utual funds and S ICA Vs 3.048.612 20,5 3.141.826 22,1 (93.214) (3,0) Ins uranc e pro duc ts 3.202.609 21,6 3.047.055 21,4 155.554 5,1 P RIVATE CUSTOMERS 14.849.798 100,0 14.225.218 100,0 6 2 4 .5 8 0 4,4 - As s ets under cus to dy 3.270.515 54,1 4.130.212 62,2 (859.697) (20,8) - As s ets under management 2.775.049 45,9 2.510.767 37,8 264.282 10,5 INSTITUTIONAL CUSTOMERS 6 .0 4 5 .5 6 4 100,0 6 .6 4 0 .9 7 9 100,0 (5 9 5 .4 15 ) (9,0) TOTAL INDIRECT FUNDING 20.895.362 20.866.197 2 9 .16 5 0,1

Total indirect funding, at market values, came to 20,895 million euro, in line with the value at the end of 2009.

With reference to private customers, indirect funds under management stood at 7,280.3 million euro (+6.9%), positively influenced by the contribution of bonds issued by the Parent Company, for a total nominal value of about 422 million euro, as well as third-party bonds for about 457 million euro.

Savings under management grew by 2.1%, reaching 7,569.5 million euro, particularly thanks to the insurance saving area, standing at 3,202.6 million euro, up 5.1% with respect to the 2009 year end figure. In 2010 insurance products were placed for about 803 million euro.

Indirect funding from institutional customers dropped (-9%).

The segment was affected by the territorial optimisation transaction, with a net administered indirect funding flow of about 650 million euro and managed savings of about 200 million euro.

Shareholders’ equity

As part of the territorial optimisation transaction, the Bank issued 32,841,516 new shares with conferral of the business segments from Banca Popolare di Bergamo, Banca Popolare Commercio and Industria and Banca Regionale Europea.

The balance of the shareholders’ equity as at 31st December 2010, net of the profit for the period of 71 million euro, was 1,388.1 million (+19.9% compared to December 2009). The rise is mainly attributable to the share capital increase (22.3 million), the allocation of the 2009 profit to reserves (94.2 million) and the switch positive reserve (120.9 million); in the period, valuation reserves caused a reduction in the shareholders’ equity of about 7 million euro.

For greater disclosure detail, please refer to the specific “Statement of changes in shareholders’ equity”.

Information on the Reclassified Income Statement

The interest margin as at 31st December 2010 amounted to 325.8 million euro, disclosing a decrease of 7.8% compared with the corresponding value in the previous year, due essentially to the rate trend, partly mitigated by the managed volumes. The decreased profitability particularly concerned short term loans.

Dividends amount to 1.2 million euro and represent the remuneration of the equity investment held in Banca di Vallecamonica, UBI Banca International and Intesa S. Paolo.

Net commissions stand at 196 million euro, down 2.1% compared to 31st December 2009. The reduction that particularly concerned the segment of current accounts and placement of third party products, was partially offset by the good performance of commissions on savings under management and under administration, the latter being supported by the placement of bonds of the Parent Company (7 million) and third party bonds (12.1 million).

Trading and hedging activities produced a positive result of about 1.5 million euro, compared to 10 million euro in the previous year. The main components of this result are: the negative impact of the hedging of fixed rate loans for a total of 5.9 million. This effect is mainly generated by early repayments, renegotiations and defaults, resulting in the unwinding of the relevant asset hedging derivative contracts, with effects being reflected on item 80 for 12.3 million; the valuation of loan hedging as at 31st December generated profits for 6.3 million euro, posted under item 90. In the previous year, the impact of the loan hedging was negative for 5.9 million, due almost entirely to valuation; • the valuation of the hedging of debenture loans generated profits for 1.6 million, posted under item 90, against 9.1 million of the same period 2009; the lower result is due to the performance of the rate curve, which recorded significant increases for short term maturities; • the transactions for the repurchase of financial liabilities generated losses for 56 thousand euro, posted under item 100, against 139 thousand as at 31st December 2009.

Other operating income/expense amounts to 14.8 million euro compared to 20.7 million of the same period of 2009. The decrease is essentially attributable to the lower expenses recovered from ordinary customers.

Following these changes, operating income was 536.5 million euro, a decrease of 8.5% compared to the prior year.

With regard to costs, “Staff costs” amounted to 172.8 million euro, up 5.1%. During 2010 the cost of the voluntary redundancy incentives related to the Trade Union Agreement of 20th May 2010 was recorded as a non-recurrent component equal to 3.9 million euro; net of this component, staff costs grew by 2.7%. More in detail, the main increases concern the evolution of the workforce (equal on average to 43 extra resources, also consequently to the Territorial Optimisation Transaction) with an economic impact of about 4.5 million euro, and that of remunerations for 2.9 million euro (contractual rises, seniority brackets, effect of carrying carrier advancements from the previous year); the reduction is mainly attributable to the lower provisions for the company bonus and the incentive system for about 6.2 million euro.

The “other administrative expenses” amount to 133.3 million euro, down compared to December 2009 (-0.9%). The main expenditure savings concerned segments such as “tenancy of premises”, “financial leases”, “insurance premiums” and “postal premiums”. The segment “telephone and data transmission” recorded a rise due to the higher costs incurred to adhere to the Guarantee System designed to cover the damages resulting from the fraudulent use of cards. The 2009 figure included about 1.1 million euro of costs regarding the securitisation transaction.

Impairment adjustments on tangible and intangible assets came to around 11 million euro.

Total operating costs were 2009 million stood at 317.3 million euro, + 2.1% compared to the same period of 2009. The cost/income, calculated by placing operating costs in relation with operating income, equalled 59.1% (58.4% net of non-recurrent events).

Following the above changes, the net operating income was 219.2 million euro. Net of non- recurring events, it would reach 233 million.

Net adjustments/value recoveries due to impairment on loans went from 69.2 to 97.9 million euro; 77.2 million of analytical adjustment on non performing loans (of which 59 million on impaired loans) and 20.7 million of collective adjustments on performing loans. For more details, reference is made to Notes - Section 4 - Other Aspects. The cost of credit came to 0.65% (0.49% as at 31st December 2009).

Net adjustments/value recoveries due to impairment of other assets/liabilities, disclosed a negative balance of 849 thousand euro. They include the valuation of endorsement credits, which amounted to 1,130 million euro involving a level of coverage of 0.38%, and the valuation of the commitments, which amounted to 1.137 million euro with a level of coverage of 0.02%.

Net provisions for liabilities and charges decreased from 3.3 to 2.9 million euro. The performance is justified by the release of exceeding funds and lower allocations on revocations that partially offset the higher provisions for legal action relating to compound interest and financial investments.

Profit /(loss) on continuing operations before tax totalled 118.9 million euro; net of non- recurrent components, the profit equals about 122.8 million euro.

The disposal of equity and other investments generated a positive result of about 1.3 million euro, thanks to the capital gains resulting from alienating some real estates.

Taxes stand at 46.9 million euro. The tax rate is equal to 39.5%, compared to 35.7% of the same period of 2009. The normalised tax rate equals 39.1% against 38.6% of 2009.

Profit for the period came to 72 million euro. Net of non-recurrent transactions, the result stands at 74.8 million euro.

Concerning the performances above, the economic management of the Bank expresses a ROE (Return on Equity) of 5.19%, down compared to the final 11.4% as at 31st December 2009; the normalised ROE is equal to 5.39%.

As at 31st December 2010, due to the changes in valuation reserves, overall profitability stood at 65 million euro, compared to 132.2 million as at 31st December 2009.

*****

Research and Development Activities

The main project-related lines developed during 2010 by the Innovation and Architecture Design Department of the Parent Company have been summarized below. In some cases this is the evolution of assets already recorded in the previous years; in other cases, these are new projects started in the year. These initiatives do not necessarily originate from specific business needs but, by starting from technological evolution, study its possible application to benefit from the efficiency and greater efficacy of the business processes, also in dealings with customers.

As part of the “unified communication” project (integration between telephone and workstation-PC), already launched in 2008, on a parallel with the completion of the activation of the Voip18 platform, on the Parent Company and Network Banks perimeter, activities were targeted towards the implementation of Web collaboration19 tools to share documents and applications.

With regard to videoconference systems, 2010 saw the completion of the plan to expand the user base within the Group – with about 300 facilities installed in total, of which about 50 webcams integrated in the same workstation (PC) – in parallel with quality improvement through the introduction of high definition solutions (HD). This technology proved to be a valid instrument for supporting the decision-making process and the sharing of the information, and a qualifying factor for the reduction of costs and risks associated with moving people around.

The first phase of the “new workstation” project, designed first of all to simplify and make more efficient the activities related with the disbursement of loans to retail customers, was completed with the activation of a document management platform able to convert paper documentation into paperless documents, which became operational in January 2011. The second phase was started at the same time, to develop solutions for the integrated management of the digital signature, electronic storage and certified e-mail.

The new paradigms of Mobile Internet and Application Store are increasingly highlighting the potentials of mobile telephony for the provision/use of banking services and contents. An application qualifying for Home Banking20 from the most widespread mobile terminals was studied and developed, in synergy with the Enjoy Card products. The service, already successfully operating on iPhone and Android systems, will be expanded to BlackBerry and Nokia devices in 2011.

As one of the latest technological developments, the iPad platform was assessed to verify its application potentials at corporate level. It was first applied as a top management support tool for the management and sharing of documents concerning the meetings of the Board and the various Committees. With a view to documental evolution, in the future user profiles are expected to be better defined and integration is planned with the corporate document management system.

The need to combine the Group’s attention to maximum security in the field of Home Banking with the operating simplicity required by customers led to the experimentation of a new tool to certify and validate instructions on transactions in combination with the current system based on the use of identification codes.

18 Technology which makes it possible to make telephone calls using an Internet connection. 19 Technology that qualifies for internet collaboration in real time within the company and for customer assistance. 20 Excluding security transactions. 44

Contractual Relationships with Group Companies

In compliance with Circular No. 262 of 22nd December 2005 issued by the Bank of Italy, 1st up-date dated 18th November 2009, and pursuant to IAS 24, the commentary and information regarding equity and economic relationships with Group companies and related parties has been included in the Notes, Part H, to which the reader should refer.

Other Information

Article of Association amendments During the year, Article of Association amendments were resolved, aimed at appointing three auditors rather than five, in compliance with the provisions of art. 2397 of the Italian Civil Code, in order to make the number of the members of the Board of Statutory Auditors of the Bank consistent with the overall corporate governance structure of the Group. An Article of Association amendment was also approved with regard to the increase in share capital (art. 5) resolved by the Extraordinary Meeting of 11th January 2010 for the business segment conferrals performed by Banca Popolare di Bergamo, Banca Popolare Commercio e Industria and Banca Regionale Europea in favour of the Bank.

Information on own shares and those of Parent Companies as per Article 2428 of the Italian Civil Code. The Bank has not purchased or sold own shares, nor purchased or sold those of the Parent Company, and as at the end of the period, there are no own shares or Parent Company shares in the portfolio.

Tax aspects: Summary of changes that occurred over the year At a fiscal level, 2010 featured limiting legislation on the Group’s activities. Nevertheless, it is worth remembering how the banking system has repeatedly requested provisions concerning: • abuse of the taxation law specifically concerning restructuring / reorganisation transactions or transnational financial transactions; • criteria of deductibility of receivable write-downs for IRES and IRAP purposes; • taxation regimes for financial instruments; • VAT treatment of infragroup transactions; and, more generally, on the remarkable tax burden for banks and financial intermediaries, also in relation to the regimes applied by other countries of the Union. An additional critical aspect for the sector is the application of IAS/IFRS principles, which was not followed by an effective definition in fiscal terms. On this point, it should be remembered how the particular Italian taxation system generates a notable entry in the financial statements of the so-called deferred tax assets. In the near future (Basel III) this element will be considered as a negative component for the purpose of the Supervisory Capital; Leg. Decree no. 225/2010 (“Milleproroghe Decree”), converted with Law no. 10 of 26/02/2011, provides for the main types of deferred tax assets (receivable write-downs / intangible assets) to be transformed into tax credits, should a loss for the year be posted in the individual financial statements of the bank. This provision is aimed at making sure that the abovementioned deferred tax assets do not qualify as negative components of the Supervisory Capital.

New VAT adjustments Legislative decree no. 40/2010, converted into Law no. 73/2010, introduces additional identification duties for VAT subjects. In particular it is necessary – starting from 1st July 2010 – to highlight the transactions carried out towards and received from economic operators located, resident or domiciled in Tax havens (Min. Decrees of 4th May 1999 and 21st November 2001). The communication obligation concerns the transactions carried out starting from 1st July 2010. The communication must be submitted on a monthly or quarterly basis according to the amount of the transactions performed in the four previous quarters (more or less than 50 thousand euro). With Circular letter no. 53/E of 21st October 2010 the Revenue Office clarified that, for those subjects operating in the financial sector, and even more so in case these adopt the regime under art. 36 bis of Italian Presidential Decree No. 633/1972, communication must only regard VAT taxable active

transactions, therefore excluding all the passive transactions, as well as the exempt active transactions, not taxable and exempted from VAT. Furthermore, starting from 2010, Legislative Decree 78/2010 converted into Law 122/2010 introduced the obligation to electronically communicate to the Revenue Office any significant transactions for VAT purposes of an amount not lower than 3,000 euro. The provision concerns all the passive subjects for VAT purposes with regard to the transfer of assets and the performance of services rendered and received. The communications must be received by 30th April of the year after the reference year: just for 2010, reporting is to be made by 31st October 2011. Regarding the banking sector, exclusions are envisaged with regard to data already registered in the Central Tax Records (e.g. accounts with customers).

Relations with non resident subjects - Transfer price Legislative Decree no. 78/2010, converted with L. 122/2010, introduced special procedures to avoid the application of any tax sanctions connected to violations concerning the determination of the so-called “transfer prices” for fiscal purposes (art. 110, para. 7 of the TUIR) for resident companies that have relationships with foreign subsidiaries ). Following the Provision of the Director of the Revenue Office issued on 29th September of last year and implementing the abovementioned regulation, with circular letter no. 58/E of 15th December 2010 the Revenue Office provided the necessary operating clarifications. In short, the content was illustrated of the documentation considered fundamental to qualify for the exemption from sanctions in case of assessment: they consist of the Masterfile and the National Documentation. While the former refers to information on the Group, the latter concerns individual companies. The sending of this documentation is optional and the transactions with the foreign counterparties of the Group are at present substantially limited to financial relations; however, the competent departments of the Parent Company are entrusted with identifying the most appropriate models to assess and compare infragroup prices, in line with the complex OECD Guidelines of 28th July 2010, the results of which will be in any case used to prove the correct calculation of the infragroup prices. In general, the companies that operate with foreign parent companies/subsidiaries hope that the Financial Administration will review and simplify the imposed fulfilments, at least in accordance with the size of the transnational relations.

Tax disputes With reference to the survey conducted in 2009 by the Inland Revenue - Regional Department for the Lombardy region - Large Tax-Payers Office - for 2006, we would like to specify that the Official Tax Audit Report (P.V.C.) contains findings – essentially attributable to the re-quantification of the receivable writedown deductible for tax purposes for higher taxes equal to 1.9 million euro and an alleged omitted application of withholdings for 1.6 million euro by way of substitute tax on interest paid by Banco di Brescia via its branch in Luxembourg to Banca Lombarda Preferred Capital Company LLC. The Bank therefore made its observations in this connection, as envisaged by the Articles of Association of the taxpayer (Law No. 212/2000), arguing against the findings as per the afore-mentioned P.V.C., and despite this the Lombardy D.R.E. in any event served a notice of assessment on 22nd December 2009, for the 2004 tax year, which fully acknowledges the findings as per the P.V.C. with regard to the alleged omitted application of withholdings, in relation to the interest paid in 2004. A prompt appeal has been made against this notice of assessment to the competent Provincial Tax Tribunal. The provision against the estimated risk, with reference to the findings concerning the receivables segment, amounts to 1.25 million euro. On 4th November 2010 the Company received a payment report for the provisional collection of 50% of the greater withholding taxes and related interest with pending ruling for a total of 0.95 million euro, duly paid on 30th December 2010.

Based on the abovementioned p.v.c., on 20th December 2010 the Lombardy D.R.E. notified, for the year 2005, an assessment notice concerning the same abovementioned “preference share” transaction, concerning the allegedly omitted levy of withholding taxes relating to the interest of 2005. Against this notice of assessment, an appeal was promptly presented in February 2011 to the pertinent Provincial Tax Tribunal.

In relation to the notice of assessment notified on 29th May 2009, following the verification already completed in previous periods with regard to the year 2004 for IRES, IRAP and VAT, which revealed higher IRES and IRAP for a total of about 1.7 million euro, the Bank has promptly presented an appeal to the pertinent Provincial Tax Tribunal, on a par with UBI Banca S.c.p.a. also the recipient of this notice of assessment in its capacity as the successor of the then consolidating body (tax consolidation scheme as per Articles 117-129 of the ITCA) Banca Lombarda e Piemontese S.p.A.. In the hearing of 13th December 2010, the joining of the appeals of Banco di Brescia and the Parent Company was arranged; the date of the next hearing for the discussion of the joint appeal has not yet been set. With reference to the abovementioned adjustment of the statement of the consolidating Banca Lombarda e Piemontese (greater IRES about 1.9 million euro, of which 1.5 million euro refer to the Company), notwithstanding the joint responsibility of Banco di Brescia within the limits of the greater IRES referred to it, on 22nd October 2010 Banco di Brescia received a payment report for the provisional collection of 50% of the greater withholding taxes and related interest with pending ruling for a total of 1.17 million euro. Since a similar report was notified to the Parent Company UBI Banca (as the successor of the consolidating Banca Lombarda e Piemontese), the latter paid the stated amount, charging Banco di Brescia for the share attributed to it (901 thousand euro). For this dispute, the suitable provisions made in previous years remain the same.

In conclusion, shareholders are reminded that Banco di Brescia – included under the so- called Large Taxpayers pursuant to Article 27, sections 13 and 14 of Italian Decree Law No. 185/2008, as supplemented by the Provisions of the Inland Revenue Director No. 54291 dated 6th April 2009 – is subject to more stringent checks by the tax authorities such as so- called tax tutoring (Article 27, sections 9-12 of Italian Decree Law No. 185/2008) which, according to the recognized approaches, will have to provide constant aid and control on the operations of large taxpayers.

Petition against penalty measures from the Italian Antitrust Authority For an update of the previous financial statement disclosures, it is specified that on 23rd October 2010 the Council of State rejected the appeal of the Italian Antitrust Authority, definitively cancelled the sanctions imposed by the Authority on 23 banks in 2008; the dispute regarded the alleged irregular operations performed by the Bank concerning the transfer of mortgages; this irregularity was considered as non existent by that the Council of State. The dispute was settled with the return, by the Ministry of the Economy and Finance, of the sanction and the legal interest previously paid.

The Trade Union Agreement of 20th May 2010 20th May 2010 saw the completion of the trade union procedure aimed at achieving a significant reduction in costs and the structural cost of work in particular.

The Group Framework Agreement – signed by DIRCREDITO, FABI, FIBA/CISL, FISAC/CGIL, UGL Credito, UIL.CA, SINFUB and FALCRI – acknowledged the unquestionable need to cut costs at a consolidated level, through staff reductions and cuts of the related unit costs. At an operating level, this measure was supported by the transversal adoption (for all the Companies) of appropriate organisational and managerial initiatives aiming to encourage the recovery of efficiency and productivity.

The voluntary redundancy plan concerned all the employees who had the right to retire by 31st December 2011.

Voluntary contributions allowed the set objectives to be almost entirely achieved without resorting to Law 223/1991, mentioned by the Agreement21. The Banks and Companies worked together to achieve the Group’s objective, accepting the applications received in excess of the amount set at individual company level, offsetting them in case the targets had not been fully achieved. The first set of redundancies took place at the end of June, effective from 1st July; the remainder was effective after 1st July 2010, for a total of 74 resources.

The total cost of the manoeuvre for the Bank, equalling 3.9 million euro, was declared as a non recurring event.

Interventions on the Group’s sales network On 25th January the network optimisation project was concluded, which concerned Banca Popolare di Bergamo, Banco di Brescia, Banca Popolare Commercio e Industria, Banca Regionale Europea and Banco di San Giorgio, with the aim of better focusing the activities of these Banks in the respective reference geographical areas, by grouping the branches present in the same territory under a single brand. As a result, the Network Banks currently operate with a single brand in 72 of the 78 provinces where they are present. Technically speaking the project led to the infragroup transfer of 316 branches through 14 transfers of company branches. In July the original ownership structure of UBI Banca was restored (with the repurchase of the crossed minority equity investments purchased by each Network Bank following the transfers carried out).

Interventions on the international structure of the Bank The transfer of the Luxembourg branch to UBI Banca International S.A. was perfected with effect from 10th December 2010. The transaction was carried out as part of the plan to reorganise and enhance the international structure of the UBI Banca Group, with the aim of rationalising the Group’s presence on the Luxembourg market through the aggregation of two entities that already operate at a high level of integration. Pursuant to the transfer agreement, Banco di Brescia increased the equity already held in UBI Banca International by underwriting 3,002 shares of the transferee for a total value of 2.9 million euro. The equity entered in the assets of the Balance Sheet, as at 31st December 2010, is expected at about 5.2 million euro (5.85% of the capital). The gain resulting from the transfer was entered in the shareholders’ equity in compliance with the Assirevi Preliminary Approaches (so-called OPI), similarly to the methodology adopted for the broader territorial optimisation transaction, and amounts to 1.9 million euro net of the related taxation.

The Business Process Reengineering (BPR) Loans The Business Process Reengineering (BPR) Loans is a project started in the second half of 2009 with the intent of improving the effectiveness and efficiency of the lending process of the Group Network Banks, meeting in particular the dual need to reduce the response times to customers and simplify the operators’ administrative activities, without affecting the control of the credit risk. The project developed along the following lines: the excellence in the response times to customers, though keeping a suitable control over the credit risk: the measures taken include the redistribution of the workloads among central and peripheral bodies by broadening the ordinary decision-taking powers of the Decentralised decision bodies and the Decentralised Decision Centres (PDP) regarding the counterparties featuring a lower risk profile (“low” and “average”); the entrusting of external suppliers with the execution of property appraisals and the centralisation at UBI.S of the perfecting of mortgage guarantees, with a gradual implementation during the year at all the Group’s Banks, through:

21 The redundancy plan for 500 resources was implemented by terminating the employment relationship with the managerial personnel entitled to retirement and not voluntarily participating in the Plan, applying the legal and contractual provisions on the subject, until reaching the set number. 49

• the activation of a single procedure to request property appraisals by specialised external companies; • the centralised perfecting of mortgage guarantees at UBI.S, with the aim of reducing the manual administration activities performed by the operators in relation to perfecting the guarantees; the introduction of an Anomaly Index by Counterparty – IAC: calculated automatically according to a mechanism of progressive aggregation of the weighted anomaly phenomena emerged at Network Bank level on each counterparty, it allows prompt intervention warnings to be created, in combination with the internal rating; the default management. The project aims to preserve/protect relationships with customers through the prompt solution of any loan irregularities (arrears/overdue positions) detected for performing customers, private individuals and small economic operators, via direct support offered to the relation manager by a centralised specialist structure operating since June 2010 at UBI.S; the new loan recovery model. In view of a generalised improvement in the efficiency of the processes and structures involved in the activity, the decentralisation at the Network Banks was completed for the management of the relevant customers classified as “Upgraded impaired loans”22, previously managed as a service by the structures of the Parent Company. A specific “Problem Loan Service” structure was set up within the Parent Company’s Loan Area to control the loan recovery processes, support the Banks in debt restructuring operations, monitor the Group’s problem loan portfolio and supervise the processes and the instruments concerning the “default management” model.

The “Simplicity Objective” project The “Simplicity Objective” project was devised with the aim of identifying solutions to improve the service and response time to customers on priority products and services, by optimising the processes and tools to support the activity carried out by the Sales Network. The main areas where action was taken • the simplification of the sales procedures for the main current account and investment products through the integration and automation of the compilation and printing of all the forms and the reduction of the number of signatures necessary to sign the agreements; • the response time on mortgages to private individuals, with the introduction of a conditioned sales offer aimed at informing customers of the feasibility of the transaction within 48 hours from the delivery of the income documentation based on predefined assessment parameters; • the reconsideration of the commercial independence of the branches of larger size/business volume in order to increase the speed of response to customers on the requests of rate and condition changes; • the activation of a specialist “Delivery Management” control system for the entire lifecycle of the payment cards placed by the Network Banks, optimising delivery terms, minimising delays and supporting the Network in the default management; • continuously improved response time and service levels for the Help Desk available to the Network, through initiatives aimed at analysing internal needs, support actions, “professional technical” and “behavioural” training and refresher courses for the Help Desk staff, as well as the enhancement of the information site available to the Network; • the optimised management of the Group internal regulations through an improvement and rationalisation intervention on the existing regulatory body, the simplification of

22These are positions for which total elimination is arranged (amortised exposures, exposures for which an upgrade plan of more than 12 months must be formalised, and exposures that, though with no upgrade plan, are in any case subject to a progressive reduction). Therefore these differ from so-called “Operating impaired loans”, which instead concern positions for which the situation of temporary difficulty is expected to be solved in the short term, and for which controlled operations are allowed in order to reduce the risk and take the position back to the “performing” status, i.e. with an upgrade plan shorter than 12 months; this category also includes the counterparties for which a restructuring plan is being defined with a duration exceeding 6 months (“Stand-Still” phase) 50

the drafting and approval process for the new production and the introduction of an evolved consultancy front end available to the Network.

The renewal of the partnerships in the life bancassurance sector On 30th September 2010 UBI Banca and Cattolica Assicurazioni perfected the agreement for the renewal of the partnership in the life insurance sector expiring at the end of the year, extending it to 31st December 2020. The agreement, signed on 29th July, envisages the distribution of insurance products of the Lombarda Vita joint venture, in an exclusive manner, through the branches of the Network Banks of the former Banca Lombarda Group (Banco di Brescia, Banca Regionale Europea, Banca di Valle Camonica, Banco S. Giorgio).

In this context, the partnership was strengthened with the transfer by the UBI Banca Group of an additional 9.9% of the capital of the joint venture to the Cattolica Assicurazioni Group. Following the completion of the transaction, 60% of Lombarda Vita’s share capital was owned by Cattolica Assicurazioni (compared to the previous 50.1%) and 40% by UBI Banca Group (compared to the previous 49.9%).

Anti-crisis measures supporting small and medium sized businesses23 and households During the year, the Group banks put together a series of measures supporting households and economic and manufacturing concerns in the respective areas they operate in, working together with the public institutions (Chambers of Commerce, Regional and Provincial authorities) and with the Guarantee Bodies24.

The Banks of the Group continued the activities started in 2009 to support households and SMEs in the respective territories, based on actions taken at both local and national level.

As regards measures in favour of SMEs, the Group, which had actively adhered in August 2009 to the so-called “Mutual Notice”, i.e. an ”Agreement to suspend the payables of SMEs to the credit system”25 (and subsequent integrations) signed by the Ministry of Economy and Finance, ABI and other associations of the Osservatorio Banche-Imprese, also agreed, in June 2010, to extend the deadline for the filing of applications by companies to 31st January 2011, thus postponing the original deadline of 30th June 2010 by 7 months. At the end of December the Group had received 14,800 application – essentially associated with medium/long term loans, for a total amount of 4.3 billion euro, more than 13,000 of which already completed, for a suspended capital portion of 520 million euro. The applications meeting the admissibility requirements were accepted almost entirely.

In particular, with regard to the offer, envisaged by the Agreement, of measures for enhancing the capital of the SMEs, the Group made the “200% Ricapitalizzazione immediata” credit facility available, which envisages loans equating to twice the share

23 According to the definition of EU legislation, small and medium sized companies are understood to be the businesses which carry out economic activities, irrespective of their legal form, employing less than 250 individuals, with annual turnover of no more than 50 million euro or with a financial statements total of less than 50 million euro. 24 For the companies in particular, the Group adopted various subsidising instruments such as: in the Piedmont region, actions were taken to innovate SMEs while supporting energy efficiency and the companies operating in the tourist sector; actions also involved agricultural companies (management and mechanisation); in the Lombardy region, measures were adopted to support entrepreneurial activities targeting innovation, the introduction of new technologies and competitive development as well as interventions to meet the operating needs of agricultural companies; in the Calabria region, actions were taken to consolidate short term liabilities, support investments, improve and expand accommodation facilities. Operations were also started in favour of agricultural companies with reference to Rural Development Programmes for 2007-2013 of some regions, also in connection with the measures providing for interest contributions. 25 The agreement, which became operative on 28th September 2009, envisages the possibility for those SMEs in temporary financial difficulty and with suitable economic and business continuity prospects, to benefit from four measures: i) suspension for 12 months of the capital portion of the loan instalments ii) suspension for 12 or 6 months of the capital portion of leasing transaction payments, respectively real estate property or stock & share related; iii) the extension of the deadlines of the bank advances on short-term receivables to 270; iv) provision of specific financing for the purpose of supporting the capital enhancement. 51

capital increase effectively paid in by the shareholders of the company, up to a maximum of 4 million euro.

The commercial range of the Group banks also envisages the following two additional credit facilities backed by guarantees of the main partnered Confidi, which present improved features with respect to those envisaged by the Agreement: • “400% Sostegno e Sviluppo”, loans for an amount up to four times the conferral of capital carried out by the company’s shareholders (involving a maximum of 500 thousand euro), intended to support growth projects by means of achieving fixed investments; • “200% Rafforzamento della struttura patrimoniale”, loans for an amount up to double the conferral of capital carried out by the company’s shareholders (joint- stock companies, partnerships or one-man businesses), involving a maximum of 1 million euro, aimed at supporting capitalization and rebalancing processes for the financial sources of the companies. The disbursement of these loans is also envisaged in the event of capital payments deferred or intended over time for reserves of future operating profits.

Since the economic situation shows weak signs of recovery that suggest that liquidity problems will persist for companies, after the expiry of the suspension described above and to support those companies that have overcome the most arduous phase of the crisis, ABI and the other signatories of the Mutual Notice have proposed some “measures to support companies” ; one of these is the extension of the deadline to file the applications for the suspension of debts towards the banking system by the SMEs that have not yet benefitted from this advantage.

Again with a view to anti-crisis measures, the disbursement continued of loans to households and medium sized businesses, at advantageous conditions, with the aim of supporting the investments to be made and/or in progress as well as the increase in working capital by means of recourse to the funding of the CDP deriving from post office savings. Concerning the first phase of the initiative, which envisaged the conferral at system level of 3 billion euro, the UBI Banks faced about 1,200 requests for intervention, for over 107 million euro of loans disbursed.

As part of the agreement of February 2010 between the Italian Banking Association and CDP to regulate the criteria of subdivision and use of the second tranche of 5 billion euro, the UBI Group signed a new financing contract with Cassa Depositi e Prestiti for the provision of a credit limit to be used by 28th February 2011, equal to 286 million euro (“second agreement”). The duration of the repayment plan for the second tranche of the loan disbursed by CDP was fixed at a maximum 7 years, at a rate equating to the 6-month EURIBOR uplifted by a spread differentiated by loan duration and pre-amortisation and based on the Tier 1 Ratio of the Bank (higher or lower than 7%). In consideration of the adoption of the selected pre- amortisation and a Tier 1 Ratio higher than 7%, in January 2011 the spread was equal to 83 base points for 3-year durations, 90 base points for 5-year durations and 96 base points for 7-year durations. The measure permits the Group network banks to disburse the loans granted to the SMEs under improved conditions, also taking into account the reduction in the cost of the funding provided by Cassa Depositi e Prestiti.

As at January 2011, 1,444 loans had been resolved for about 115 million euro, of which about 86 million already disbursed, and applications being assessed for more than 57 million euro.

On 17th December 2010 ABI and Cassa Depositi e Prestiti signed a third agreement to support the recovery in progress; two credit limits are available: • the “10 year credit limit”, to be added to the 3, 5 and 7 year limit, amounting to 1 billion euro, to be used to support the need for credit related to long term investments by SMSs,

• the “stable credit limit” to fund the development of SMEs, gradually receiving the resources of the previous credit limits not entirely used, offering all the maturities (3, 5, 7 and 10 years).

For the “10 year credit limit” the UBI Group was assigned 51.6 million euro with a deadline for use set at 30th June 2011. The “stable credit limit”, on the other hand, can be used upon request for unsecured loans (duration from 13 to 120 months) and mortgage-backed loans (duration from 61 to 120 months) in favour of SMEs for investments to be made or in progress and for share capital increases (100% financeable with expenditure provisions). In consideration of the Tier 1 Ratio of the UBI Group, the spread reserved for 10-year durations was equal to 106 base points in January 2011 (for the other durations, the previously stated spreads have been confirmed).

With a view to supporting SMEs even further in this difficult situation, in 2010 some memorandums of understanding were signed between the UBI Banks and some Provincial Administrations (the Provinces of Brescia and Bergamo for example) with the aim of facilitating the advances on the receivables of companies from local institutions, thus avoiding any financial tension for the same companies due to possible payment delays. These agreements envisage the concession by the participating Banks of advances on these receivables, subject to the notified disposal of the same, with a duration of up to 17 months and contained spreads. Based on the abovementioned memorandums of understanding, the local bodies certify the receivables of the companies as certain, liquid and payable and state the time period by when the certified amounts will be settled in favour of the transferee banks and the payment methods.

With regard to households, on 20th January 2010 the Group complied with the agreement for the suspension of the repayment of mortgages loans vis-à-vis family units in difficulty due to the crisis, signed by ABI and thirteen Consumer Associations26. It fell under the initiatives of the ABI “Household Plan”, aimed at encouraging the sustainability of the retail credit market. The measures, unique on the European mortgage loan market, represent a similar solution to the “Agreement for the suspension of the debts of small and medium sized businesses vis-à-vis the lending system” described above. During the year, the Moratorium led to the suspension of 1,114 mortgage loans at Group level, for a total residual debt of more than 93 million euro.

The Group also complied with the framework agreement signed in May 2009 by ABI and the CEI (Conferenza Episcopale Italiana), making the “Hope Loan” available, intended for households who have lost all employment income, not availing of other income or annuities other than those generated by ownership of their home or ordinary or extraordinary unemployment benefits and aimed at achieving projects for re-employment or the launch of entrepreneurial activities. The disbursement of these loans, available as from September until 2012, has been concentrated within B@nca 24-7. As part of the initiative, 16 loans were disbursed for a total of 96,000 euro; this is a low figure due to the binding requirement imposed by the memorandum of understanding. Based on these elements, the agreement was recently amended and in 2011 the project is expected to involve a higher number of households with the consequent increase in transactions.

26 In short, the agreement envisages the suspension for at least 12 months of the repayment of the mortgage loans up to 150,000 euro taken out for the purchase, construction or renovation of the first home, also with delays in the payments of up to 180 consecutive days, in relation to customers: • with taxable income of up to 40,000 euro per annum; • who have suffered or are suffering in the two-year period 2009-2010 particularly negative events (death, job loss, the occurrence of conditions of non self-sufficiency, temporary redundancy). 53

Due to the persisting difficult situation faced by families in the region of Abruzzo hit by the earthquake of 2009, the Group adhered to the new agreement entered into between ABI and CDP that supplemented the one signed in 2009, raising the lending limits and adding new lending forms to those already included in the first protocol. In 2010 UBI Banca Private Investment, the reference bank of the Group in the areas of the earthquake, disbursed 34 loans for a total of about 1.3 million euro.

As a confirmation of the social role played by Banks in the territory in case of natural calamities, the UBI Group, through Banco di Brescia, also intervened to support the municipalities in Veneto hit by the flood of 31/10-02/11, promptly complying with the provisions of the order of the Prime Minister no. 3906 of 13th November 2010, for both households and SMEs.

The last quarter saw the inception of a Solidarity Fund for mortgage loans to purchase the main residence, set up upon the initiative of the Ministry of the Economy and Finance with Law no. 244 of 24th December 2007. The legal instruction was aimed at assisting those borrowers facing difficulties in the regular payment of their mortgage instalments, envisaging, inter alia, the points below: • for mortgage contracts referring to the purchase of real estate units to be used as main residence by the borrower, the possibility for Customers, when satisfying certain requirements, to request the suspension of the instalments no more than twice and for a total period of maximum 18 months during the term of the mortgage loan; • the establishment at the Ministry of the Economy and Finance of the abovementioned “Solidarity Fund for mortgage loans to purchase the main residence”, accessible upon the request of those borrowers who intend to exercise the right of suspension, in order to pay the costs of bank procedures and the possible notary charges necessary to suspend the payment of the mortgage instalments; • that the suspension may be requested if the borrower proves not to be able to pay the mortgage instalments and the renegotiation charges and before execution proceedings are started for the enforcement of collateral.

The first participation requests are being received in these weeks, although the results of the initiative will be better monitored in 2011.

Covered Bonds In the previous periods the UBI Group achieved further diversification of its sources of institutional funding by carrying out the first issues of Covered Bank Bonds as part of the Plan involving a maximum of 10 billion euro published in July 2008, the only “multioriginator” plan in Italy which envisages the participation of 10 Group banks when fully operative, among which Banco di Brescia.

The first two public issues were made in the second quarter 2009; in 2010 another three were made (a private one and two public ones) while the latest issues were placed in the first few months of 2011. All the public issues received an AAA/Aaa rating from Fitch and Moody’s, with the exception of the fifth series, have been taken care of by Barclays in its capacity as Arranger.

The party guaranteeing the issues is the vehicle company UBI Finance Srl, care of which a portfolio of residential mortgage loans has been set up transferred by the Group banks complying with the plan; within this sphere, the Bank, which had already transferred some assets in 2009, contributed an additional 675 million euro (capital residual debt), with the transfer of mortgage loans occurred in May 2010.

Below is a summary table of the issues of Covered Bond in place at the date of this Report; for more details on the transaction and the role of the Bank within the Cover Bond Programme, reference is made to the indications in the Notes - Part E - Section 1 Credit Risk - C. Securitisation and asset disposal transactions.

UBI Banca Cover Bond Programme - issues in place

Serial Maturity Name Issue date Share capital: Coupon (*) number date

1 UBI BANCA 3.625% CB due 23/9/2016 23/09/2009 23/09/2016 1,000,000,000 36,250,000 (public) 2 UBI BANCA 4.000% CB due 16/12/2019 16/12/2009 16/12/2019 1,000,000,000 40,000,000 (public) 3 UBI BANCA TV CB due 30/04/2022 30/04/2010 30/04/2022 250,000,000 2,271,200 (private) 4 UBI BANCA 3.375% CB due 15/09/2017 15/09/2010 15/09/2017 1,000,000,000 33,750,000 (public) 5 UBI BANCA 3.125% CB due 18/10/2015 18/10/2010 18/10/2015 500,000,000 15,625,000 (public) 6 UBI BANCA 5.250% CB due 28/01/2021 28/01/2011 28/01/2021 1,000,000,000 52,500,000 (public) 7 UBI BANCA 4.500% CB due 22/02/2016 22/02/2011 22/02/2016 750,000,000 33,750,000 (public)

(*) For the 3rd series, the coupon is biannual with a variable rate; the stated amount refers to the coupon expiring at the beginning of May.

The evolution of the prudent supervisory regulations Provisions of the Bank of Italy concerning prudential filters On 18th May 2010 a measure was issued concerning the supervisory provisions on the prudential treatment of the valuation reserves on the government securities of EU countries held in the “Available-for-sale financial assets (AFS)” portfolio for the purpose of calculating the supervisory capital. As an alternative to the “asymmetrical” approach (integral deduction of the net loss from Tier 1 and partial inclusion of the net gain in Tier 2) currently used, these regulations allow the complete neutralisation of the gains and losses found in the mentioned reserves (“symmetrical” approach). Since the methodology currently used, in highly turbulent market situations such as those recorded on government securities, risks to determine an unjustified volatility of the supervisory capital due to the effect of sudden changes in the performance of securities not linked to long-lasting changes in the credit worth of the issuers; the Group chose to use the “symmetrical” approach. This choice was applied homogeneously by all the components of the Banking Group, as established by the regulation, the prudential reporting of June 2010.

Basel III On 16th December 2010, the Basel Committee on Banking Supervision published the new rules on the capital and the liquidity of banks, which will gradually enter into force starting from 1st January 2013. The new regulations pursue the improvement of the quality and quantity of the banking capital, the containment of the financial leverage of the system, the minimisation of the possible pro-cyclical effects of the prudential rules and a more careful control of the liquidity risk. Compared to the consultation proposal issued in December 2009, the capital requirement was reduced for prepaid tax assets and significant holdings in banks and financial and insurance companies, partially acknowledging the capital contribution to the covering of the risks at consolidated level of the minority interest held in banks and other companies belonging to the group, subject to equivalent regulations to the banking one.

The new rules on capital The new rules provide for a recomposition of the banks’ capital in favour of ordinary shares and retained earnings (Common Equity), the adoption of stricter criteria for the computability of other capital instruments and greater harmonisation at international level

of the elements to be deducted. The requirements were also increased in relation to particularly risky exposures (such as, for example, securitisations and derivative instrument transactions).

According to the law, the capital resources of banks must not be lower than the following levels: primary quality capital (Common Equity): 4.5% of risk weighted assets; core capital (Tier 1): 6% of risk weighted assets; Total Capital: 8% risk weighted assets.

The banks must have capital resources of primary quality in excess of the minimum amounts (capital conservation buffer) for an amount equal to 2.5% of the risk weighted assets, if they do not desire to incur supervisory measures (e.g. constraints on distributing profits or paying bonuses to employees). In periods of excessive expansion of the credit overall disbursed to the economy, the banks may be requested to have an additional buffer of up to 2.5%.

The new standards will be introduced gradually: • starting from 2013, the new minimum requirements referred to the Common Equity and the Tier 1 will be equal to 3.5% and 4.5% of the risk weighted assets respectively and will be progressively increased until reaching the new levels requested in 2015. Likewise, the new deductions from the capital will be entirely applied starting from 2018; • the capital conservation buffer will be introduced starting from 2016 and the transition to the new regime will be completed in 2019; • the capital instruments already issued and computable according to the rules in force will remain entirely computable until 2013; subsequently, the amount acknowledged for prudential purposes will be reduced by 10% each year.

Capital requirements and buffers

Common Tier 1 Total Capital Equity Capital

Minimum 4,5% 6,0% 8,0% Capital Conservation Buffer 2,50% Minimum plus conservation buffer 7,00% 8,5% 10,5% Countercyclical buffer range 0% - 2,5%

Phase-in arrangements (all dates are as of 1st January) 2013 2014 2015 2016 2017 2018 2019

Minimum Common Equity Capital Ratio 3,5% 4,0% 4,5% 4,5% 4,5% 4,5% 4,5% Capital Conservation Buffer 0,625% 1,25% 1,875% 2,5% Minimum Common Equity Capital Ratio plus Capital conservation buffer 5,125% 5,75% 6,375% 7,0% Minimum Tier 1 Capital 4,5% 5,5% 6,0% 6,0% 6,0% 6,0% 6,0% Minimum Total Capital 8,0% 8,0% 8,0% 8,0% 8,0% 8,0% 8,0% Minimum Total Capital plus conservation buffer 8,0% 8,0% 8,0% 8,625% 9,25% 9,875% 10,5%

The Leverage Ratio A Leverage Ratio measure is expected to be introduced to bind the expansion of the overall exposure to the availability of an adequate equity base and to contain, in the expansive phases of the economic cycle, the level of indebtedness in the banks’ balance sheet. The intermediaries must hold a Tier 1 amount related to the non weighted risk assets of at least 3%.

Also this measure will be introduced gradually. In the initial years the Leverage Ratio will be a second pillar measure; possible adjustments to the definition and the calibration of the instrument will be considered before its application as a first pillar rule in 2018. The banks must provide suitable information to the market on the size of the ratio starting from 2015.

Liquidity Risk Standards Two quantitative rules on liquidity were introduced. According to the first (Liquidity Coverage Ratio), banks must maintain liquid resources of a high quality to face significant stress situations lasting 30 days. The second (Net Stable Funding Ratio) aims to avoid structural unbalances in the assets and liabilities breakdown of the balance sheet along a timescale of a year. Like the measures on the capital, the entrance into force of the requirements on liquidity risk will be gradual: after an initial observation phase, the short-term ratio will come into force in 2015, the structural one in 2018.

The assimilation of EU directives On 31st December 2010 the new supervisory provisions came into force, which assimilate some measures approved by EU institutions during 2010 [directives 2009/27/EC, 2009/83/EC and 2009/111/EC amending directives 2006/48 and 2006/49 (so-called CRD)] in order to strengthen the European prudential regulations in some profiles where the financial crisis showed signs of weakness. It is an initial package of amendments (so-called CRD II), which involves various environments and in particular: • liquidity governance and management, with the introduction of rules concerning organisation and internal controls, specifying the role of the corporate departments and boards, outlining the fundamental organisation of the risk management process and envisaging the adoption of a price transfer system that is internal to the funds as well as public information obligations; • the supervisory capital: the notion of “capital” was redefined, in relation to ordinary shares only; the economic characteristics were specified, which innovative and non innovative capital tools (hybrids) must possess in terms of permanence, flexibility of payments and ability to absorb the losses (with computability limits that depend on the capital quality), providing for a thirty-year transitory regime (grandfathering) for the already existing tools that do not comply with the new criteria of admissibility; • risk concentration, with the simplification, on the one hand, of the prudential limit system and the related weighting system, whose criteria were aligned to the discipline of the credit risk reduction techniques; and, on the other hand, with the enforcement of organisational controls referring to the valuation of the credit worthiness of customers towards which the bank is exposed to a significant degree (“large loans”), the monitoring of related exposures, the detection of connection relations among customers.

In 2011 the assimilation of the second package of amendments was started (so-called CRD III): • the new provisions concerning securitisation entered into force, aimed at increasing the level of harmonisation of the discipline through uniform criteria for the acknowledgement, for prudential purposes, of the securitisation transactions, also regarding the disbursement and management of the credit relating to the assets to be securitised. These modify the prudential treatment of the liquidity lines, envisaging higher conversion factors that better respond to the riskiness featured by this form of support during the crisis, also introducing the prohibition for banks to assume positions towards securitisations within which the transferor or the advisor has not made it known that they maintain an amount of risk (so-called retention); • concerning the remuneration policies, the consultancy process of the Bank of Italy on a new single text was started, to replace the entire existing regulatory system, which combines general principles concerning the remuneration policy for all the personnel, to be applied to all the banks according to proportionality criteria, with specific rules especially referring to those who hold key roles within the organisation.

Quality commitments During the year, activities continued for implementing and managing the Quality Commitments and the other initiatives furthered by the PattiChiari Consortium, which all the Group’s network banks comply with so as to contribute towards the improvement of dealings with retail customers. On the one hand, the Quality Commitments not yet activated were launched operatively, as per the calendar agreed on at consortia level, and, on the other hand, the commitments already launched previously were consolidated. The Group banks also continued with the financial education projects in schools, actively furthered for some years now. During the second half of the year, the opportunity of launching a project for rationalising the Quality Commitments emerged, so as to make them clearer and more easy to communicate to customers, and so as to realign the overall framework of the self-regulation with the legislative changes which have taken place in the meanwhile, thereby avoiding pointless overlapping. The dynamic nature of the project has thus led to excluding some of the Commitments initially envisaged from the PattiChiari sphere and grouping together others by similar areas, albeit maintaining all the pre-existing service contents in essence27. Thanks to the optimisation process, what is more consistent with the general principles on which the project is based (simplicity, clarity, comparability and mobility of the clientele), it will be easier for the Banks to spread awareness of the Commitments to their customers, turning to account the role of instruments for more informed and aware choices.

Personal data protection code (Italian Legislative Decree No. 196 dated 30th June 2003) In compliance with Rule 19 of the Technical Specifications, Attachment B of Italian Legislative Decree No. 196/2003, the annual update of the Programmatic Document on Data Safety (DPS) was completed within the timeframe specified by law28, as prescribed by Article 34, para. 1, letter g) of the aforementioned legislative decree. As regards the specific treatment via IT instruments, which the Bank has outsourced to UBI Sistemi e Servizi S.c.p.A., the latter guarantees, as part of the service contract, to observe the regulations and adopt security measures as envisaged by the regulations in force within the timeframe specified by law.

Social and environmental responsibility The Social Responsibility Plan With regard to corporate governance, on conclusion of an agreed process which involved management, via a series of interviews, and an interdepartmental work group made up of the macro Areas of UBI Banca, the network banks and the main product companies, on 13th and 14th December 2010 the Supervisory Board and the Management Board of UBI Banca approved the Code of Ethics, which is an integral part of the “Organisation, Management and Control Model pursuant to Italian Legislative Decree No. 231/2001”. All the Group banks and companies adopt the version approved by UBI Banca - with possible adaptations required by the legislative singularities of their business sector and/or foreign country where they are established - by means of formal resolution of the respective management bodies. The document, which incorporates the Group’s Values Charter and reference to the Global Compact universal principles, defines the methods by means of which UBI Banca and the Group companies intend to pursue their mission and relate with the various stakeholders,

27 At present, the sphere of the project is represented by eleven Quality Commitments (compared current accounts, basic cons, average timescales for closing current accounts, transferability of payment services, transferability of mortgage loan data, transferability of securities portfolios, transferability of bank collection orders, FARO - Cash point functioning services, homebanking security, payment card security, mortgage loan costs and interest certification) and by two initiatives which are optional (list of services handled in accounts, information for gaining access to credit for small and medium-sized companies). 28 The up-date of the DPS for the current year will be approved by the Board of Directors on 24th March 2011. 58

characterising the management and operating activities in observance of the moral and legal obligations contained therein. Said document contains the identification of the stakeholders significant for the Bank’s activities, definition of the general reference ethical principles and rules of conduct in dealings with the stakeholders and indication of the methods for implementing and checking said Code, including the formalities for making reports of suspected violations, for their handling and for the imposition of any fines. The Code applies to every organisational structure and geographic area of UBI Group operations and is brought to the attention of the stakeholders via a series of channels. During 2011, it will be subject to an internal training and communication plan addressing all the Group’s staff. Shortly, it will be up-dated with the issue of the Staff Code of Conduct, currently being drafted according to the Guidelines as per the current Article 8.3 - Attachment C, forming an integral part of the same.

Environmental responsibility The Group, in addition to pursuing full and essential observance of current legislation, proposes to contribute to sustainable economic development, thereby also implementing the principles subscribed to by the Global Compact. The environmental policy, approved in December 2008, commits the Group to reducing its environmental impact through intelligent and responsible management of both the direct impacts (i.e. those generated by its business activities via resource consumption, waste production and emission of harmful substances) and the indirect impacts (those generated by the conduct of third parties with which the Bank deals, such as customers and suppliers). With regard to the direct impacts, the most important objective achieved in 2010 was the exclusive use of certified electricity from renewable sources (RECS certificates). With reference to the indirect impacts, the Group has been active for some time within the commercial sphere by means of the offer of “green” loans, in other words credit facilities aimed at achieving investments for energy saving and for the diversification of the energy sources, with particular reference to the production of energy from renewable or low environmental impact sources.

Principal risks and uncertainties to which the Bank is exposed Risks The Bank attributes primary values to risk measurement, management and control, being activities necessary to guarantee creation of sustainable value over time and consolidate its reputation on the reference markets. In compliance with the current prudent supervisory provisions for banks (Circular 263/2006 of the Bank of Italy), the Bank has endowed itself with a process to determine the total capital - both actual and forecast – suitable for dealing with all the relevant risks to which it is or may be exposed (ICAAP - Internal Capital Adequacy Assessment Process). With a view to this, accurate identification of the risks to be assessed is carried out on an on- going basis.

The risk identification activities are carried out continuously. They are directed at verifying the relevance of the Bank’s risks already assessed and understanding the signs of the occurrence of any other risks. Identification includes an exact conceptual definition of risks to which the Bank is exposed, analysis of factors that produce the risks, as well as the description of related methods of manifestation. These activities were carried out through a centralised analytical process, supplemented by self-assessment that was carried out with reference to all the Bank’s entities.

Once the relevant risk identification activities have been completed, the ICAAP process envisages the assessment of the risks and the determination of the total capital necessary to deal with them (capital adequacy), both on a current and forecast basis. For an improved assessment of risk exposure, mitigation and control systems and capital adequacy, the Bank also performed specific stress tests (through which the impacts on a single risk are

assessed) as well as global stress tests (through which the impacts of all contextual risks are assessed).

The Bank has a risk governance and safeguarding system that considers the organisational, regulatory and methodological structure to guarantee consistency in its operational risk propensities.

Considering the Bank’s mission and operations, as well as the market context in which it operates, the risks to be assessed in the ICAAP process were identified, divided into First Pillar and Second Pillar categories, as indicated in the reference legislation.

First Pillar risks – already governed by the regulatory requirements of the Supervisory Authorities – are:  credit risk (including the counterpart risk): risk of suffering losses from the default of a counterparty with which a credit exposure exists;  financial risks: risk of changes in the market value or the financial instruments held due to unexpected changes in the market conditions and the credit worthiness of the issuer;  operating risk: risk of suffering losses from inadequacy or failure of procedures, human resources and internal systems, or from external events; this includes losses from fraud, human error, operational interruptions, system unavailability, contractual breaches, and natural catastrophes; the legal risk is also included.

In addition to the First Pillar risks, Second Pillar risks have been identified, divided up into:  risks defined as gaugeable, in relation to which consolidated quantitative methods have been identified which lead to the determination of internal capital or for which thresholds or quantitative limits can be usefully defined which - together with qualitative measures - permit the definition of an allocation and monitoring process;  risks defined as ungaugeable, for which policies, control, minimisation or mitigation measures are considered more appropriate since consolidated approaches do not exist for the estimation of the internal capital for the purpose of the allocation process.

The Second Pillar risks subject to analysis are:

Gaugeable risks: • concentration risk: risk arising from exposure in the banking book to counterparties, or groups of counterparties, in the same economic sector or that perform the same activities or are in the same geographic area; the concentration risk can be distinguished in the sub-types “single name concentration risk” and “sector concentration risk”; • interest rate risk: current or forecast risk of a change in interest rate margins and the economic value of the company, following unexpected changes in interest rates that impact the banking book; • business risk: risk of averse and unexpected changes in profits/margins with respect to forecast data, linked to volatility in volumes due to competitive pressures and market situations; • investment risk: risk of losses in the equity investments portfolio; • property risk: risk of change in the value of the property assets.

The gaugeable risks also conventionally include those risks in relation to which, despite consolidated approaches not existing for the estimate of the internal capital, quantitative operating limits can be defined, also agreed on in literature, useful for their gauging, monitoring and mitigation. These risks are: • liquidity risk: risk of non-fulfilment of payment obligations that could be caused by an inability to raise funds or raising them at costs higher than the market (funding

liquidity risk) or from the presence of limits on unfreezing assets (market liquidity risk) resulting in capital losses; • structural liquidity risk: risk deriving from an inadequate balancing of the maturities of the asset and liability items.

Ungaugeable risks: • risk deriving from securitisations: risk that the economic substance of the securitisation transaction is not fully reflected in the measurement and risk management decisions; • compliance risk: risk of incurring judicial or administrative sanctions, significant financial losses or damages to reputation resulting from violations of mandatory rules (legislative or regulatory) or self-regulation norms (statutes, codes of conduct, self-governance codes); • reputational risk: risk of suffering losses deriving from a negative perception of the Bank’s image by customers, counterparties, bank shareholders, investors, supervisory authorities or other stakeholders; • residual risk: risk of suffering losses from unexpected inefficiency of techniques used by the bank to mitigate credit risk (e.g. mortgage guarantees); • strategic risk: current or forecast risk from downturns in profits or capital resulting from changes in the operating context, inadequate decision implementation, or insufficient response to changes in the competitive context.

The credit risk is the characteristic risk of greatest importance for the Bank: on a historical basis, it accounts for 90% of the regulatory risk capital. 2010 was characterised by essential weakness in economic recovery, after the heavy downturn which characterised 2008 and 2009. Even though timid signs of recovery have been seen, the continuation of the difficulties faced by the manufacturing system in general and the crisis affecting consumption continued to negatively influence the ability of businesses and private individuals to meet their commitments, leading to an increase in the credit risk and - consequently - anomalous credit flows and provisions. It is envisaged that 2011 as well will only see a slow pick-up in the aspects determining the riskiness of the financial system and in particular the levels of activities relating to the margins of businesses and to household income.

With regard to the structural liquidity risk, the ratio between the sources of funding and those of use could highlight tensions deriving from the fact that, on the one part, the volumes of loans will be difficult to squeeze, while on the other hand, the need to replace maturing securities and the progressive impoverishment of households will make the funding market feeble. What is more, faced with the envisaged maturities of its bond issues, the Bank has drawn up a structured plan of new issues which at present has been fully observed.

With regard to the liquidity risk, confidence problems remain on institutional and interbank markets, especially due to the fears regarding the solvency of certain sovereign states, in a context of slowdown in the dynamics of traditional funding, caused by the lower disposable income of households. The effect of the country risk significantly penalises Italian banks in funding on wholesale markets with respect to the intermediaries of other European countries.

The risks other than those mentioned, of marginal relevance within the Bank, are not expected to change significantly over the year.

Detailed information on the objectives and policies concerning financial risk management, as well as the Bank’s exposure to price risk, credit risk, liquidity risk and risk of changes in cash flows – envisaged by Article 2428 of the Italian Civil Code – is included in Part E of the Notes, to which the reader is referred.

Uncertainties Uncertainty is defined as a possible event whose potential impact, ascribable to one of the risk categories identified above, is not currently definable and, therefore, not quantifiable.

A scenario of volumes up slightly, contained margins and a still high credit risk looms for the Bank. Economic recovery, which has effectively started, presents highly differentiated trends among the countries: thriving in emerging economies, slow in advanced economies Other potential vulnerabilities remain: the rapid rise in debt of certain countries in the Euro zone could trigger off doubts regarding the sustainability of public finances; the markets are still very volatile and tension could arise for the refinancing of considerable quantities of bank debt in concurrence with the sovereign states and businesses.

The identified elements of uncertainty could manifest themselves with impacts ascribable to credit risk, interest rate risk and liquidity risk.

Specifically, the main uncertainties identified for 2011 are linked to the following aspects: • evolution of the macroeconomic context. The statistics divulged as from the start of 2011 confirmed the continuation of the period of global growth, thus suggesting consolidation of the recovery during the current year. The possibility of temporary moderations in the rates of expansion should however be excluded. More specifically, a positive contribution to the development of the macro-economic scenario should continue to arrive from emerging countries - which were the driving force throughout 2010, despite the monetary squeezes decided by various central banks, including those in India and China, so as to resist inflationary pressure. Within this international context, during 2010 Italian GDP reported progress in real terms of 1.3%, guided considerably by the ascent of exports, even if the contribution of the overseas channel net of exports underwent a slight drop. Furthermore, a significant contribution to the expansion of the economy was provided by national demand net of stocks. Favourable indications also arrived on the industrial front, where there was an average annual rise in output of 5.3% and manufacturing orders of 13.9%. With regard to inflation, over the last few months and especially in the Euro zone, the trend in consumer prices was affected by the decisive increase in stock market price of raw materials, with particular regard to oil in light of the strengthening of the economic situation globally and the geopolitical instability in North Africa and the Middle East. The evolution of commodities also reflects up-stream, disclosing pressure on manufacturing prices. In any event, with regard to Italy, during 2010 inflation rose 1.9% fuelled more by goods than services. • financial market performance and the interest rate curve. During 2010, the process continued for exiting from the expansive monetary policy manoeuvres set up by the ECB so as to deal with the credit crunch seen in previous years. Accordingly, it is highlighted that the main long-term refinancing auctions (6 and 12 months) were not renewed, but replaced by transactions equal to or shorter than 3 months. The past year has seen growth in the tensions linked to the sovereign debt of so-called “peripheral” countries in Euroland (with particular reference to Greece, Spain, Portugal and Ireland). At the end of 2010, moderate growth was seen in interbank rates which followed the process of normalisation dictated by the gradual removal of the extraordinary measures established by the European Central Bank during the last recession, while the swap rates disclosed a marked drop. In conclusion, with regard to the bank’s bond portfolios, the risk remains of extensive volatility in the returns and consequently in the prices, deriving from the uncertainties linked to the solvency of certain sovereign debts, as well as to the monetary policy normalisation process.

The outlined context includes the periodic checking of the recoverability of the goodwill which depends on the parameters and the information which can be significantly influenced by the macro-economic picture and correlated to the difficult situation of the financial markets and - consequently - subject to rapid changes. • changes in the legislative context. The legislative context is subject to various change dynamics further to the issue of a number of legislative provisions, at EU and Italian level, with the related implementation regulatory instructions, regarding the provision of banking services (e.g. on the subject of payment or consumer credit services), and to correlated jurisprudential policies (for example regarding the form of contracts, interest or other items of remuneration for banking services); this scenario, which introduced moments of irregularity, could directly affect the banks’ profits, requiring a concerted effort both on an interpretive and implementation level.

* * *

The risks and uncertainties described above were subject to an assessment process also aimed at highlighting impacts of changes in parameters and market conditions on company performance. In fact, the Bank has instruments to measure the possible impacts of risk and uncertainty on its operations (specifically via sensitivity analysis and stress tests) that allow, in a timely and continual manner, the adjustment of its strategies – in terms of distribution, organisation and cost management/rationalisation models – with respect to the changes in the reference context. The risks and uncertainties are also subject to constant observation via the risk policy regulations adopted by the Group: the policies are up-dated in relation to changes in the strategy, the context and the market expectations. Periodic monitoring is aimed at verifying their implementation status and adequacy. Analyses performed indicate that the Bank is able to deal with the risks and uncertainties to which it is exposed, thus confirming the conditions of its continuity.

Key Events after the Reporting Period

Please refer to the matters indicated in the Accounting Policies – Section 3 Events occurring after the balance sheet date.

Business Outlook

The macro-economic figures relating to performance in the first few months of 2011 and the following on of the catastrophic events in Japan and the unrest in north African countries, are depicting a scene which is less reassuring than that outlined just a few months ago, with a curbing of the recovery rates and the prolonging of the turbulent period. This scenario of overall weakness, where national growth has shown itself to be modest also for the current year, certain areas will continue to maintain growth prospects uncertain, while others will march along at a quicker pace, due to the greater degree of opening up to abroad of their manufacturing systems.

In this situation, monetary policies - in contrast to fiscal policies - should still remain expansive, unless a sudden revival in the inflationary process should emerge, not determined however by the overheating of the economy but, rather, by tension on the raw materials market. The exit strategy should therefore be postponed and the extraordinary support reconfirmed; expectations with regard to the future level of monetary rates should remain depressed, with comparatively contained medium and long-term rates , even if up slightly on a tendential basis.

With regard to the banking system, the economic cycle developments described depict a 2011 characterised by low profitability - with tiny margins, funding costs up, moderation in the rate of increase of volumes handled - and by a still expansive effect on bank non- performing positions determined by the economic cycle at several speeds.

In this context, the strategies which will guide the management policies of Banco di Brescia in 2011 will aim to develop the activities based on the long-term relationship with the customers, also thanks to the work of the New Retail Organisational Model targeted at enhancing the geographic coverage and improving the commercial efficacy. The risk in volumes, the careful cost control, the expenditure/investment gauging, the heavy regulation of the credit quality, should thus lead to an improvement in the profitability of the Bank’s ordinary operations.

Proposals to the Shareholders

Dear Shareholders, We submit the 2010 Financial Statements for your approval with regard to all of the aspects.

In addition, we also submit the allocation of the period profit of 71,978,717 euro for your approval, as follows:

P ROP OSED ALLOCATION OF P ROFIT

N e t pro fit fo r 2 0 10 71.978.717 P ro fit to a llo c a te :

- 5% to legal res erve 3.598.936

- to the Fund fo r the purpo s es as per Article 23 o f the Articles o f As s o ciatio n 1.367.596 - dividend to s hareho lders 18.106.830 - to the extrao rdinary res erve 48.905.355

If you approve these proposals, a dividend of 0.020 euro may be distributed for each of the 905,341,516 shares entitled to dividends for the 2010 financial year.

Brescia, 24th March 2011

The Board of Directors

Accounting Statements

Balance Sheet

(in euro)

Annual change ASSET ITEMS 31/12/2010 31/12/2009 Annual change % 10. Cash and cash equivalents 73.922.079 92.583.622 (18.661.543) (20,16) 20. Financial assets held for trading 100.954.078 114.258.929 (13.304.851) (11,64) 40. Available-for-sale financial assets 20.913.234 26.338.852 (5.425.618) (20,60) 60. Loans to banks 851.390.951 7.442.071.797 (6.590.680.846) (88,56) 70. Loans to customers 15.078.204.303 14.178.740.507 899.463.796 6,34 80. Hedging derivatives 45.470.820 75.128.363 (29.657.544) (39,48) 90. Fair value changes to hedged financial assets 40.200.418 21.556.251 18.644.167 86,49 100. Equity investments 19.022.272 16.122.340 2.899.932 17,99 110. Tangible assets 293.835.505 297.386.463 (3.550.958) (1,19) 120. Intangible Assets 19.705.120 19.739.210 (34.090) (0,17) of which: goodwill 19.705.120 19.705.120 - - 130. Tax assets: 65.836.998 76.127.309 (10.290.311) (13,52) a) current 32.240.476 50.288.791 (18.048.315) (35,89) b) prepaid 33.596.522 25.838.518 7.758.004 30,02 150. Other assets 1.012.349.153 320.366.690 691.982.463 216,00 Total assets 17.621.804.932 22.680.420.333 (5.058.615.401) (22,30)

Annual change LIABILITIES AND SHAREHOLDERS' EQUITY ITEMS 31/12/2010 31/12/2009 Annual change % 10. Due to banks 3.341.563.843 1.370.704.813 1.970.859.030 143,78 20. Due to customers 8.885.717.640 8.870.849.483 14.868.157 0,17 30. Securities issued 3.233.255.630 10.300.310.442 (7.067.054.812) (68,61) 40. Financial liabilities held for trading 76.037.013 81.138.029 (5.101.016) (6,29) 60. Hedging derivatives 64.840.050 51.428.646 13.411.404 26,08 80. Tax liabilities: 39.737.294 59.174.103 (19.436.809) (32,85) a) current 22.725.811 32.199.614 (9.473.803) (29,42) b) deferred 17.011.483 26.974.489 (9.963.006) (36,93) 100. Other liabilities 432.261.984 573.302.445 (141.040.461) (24,60) 110. Staff severance indemnity 61.986.645 63.808.427 (1.821.782) (2,86) 120. Provisions for liabilities and charges: 26.300.925 22.998.809 3.302.116 14,36 b) other provisions 26.300.925 22.998.809 3.302.116 14,36 130. Valuation reserves 14.181.932 21.205.857 (7.023.925) (33,12) 160. Reserves 638.311.027 423.226.411 215.084.616 50,82 170. Share premiums 120.000.000 120.000.000 - - 180. Share capital 615.632.231 593.300.000 22.332.231 3,76 200. Profit for the year 71.978.717 128.972.868 (56.994.151) (44,19) Total Liabilities and shareholders' equity 17.621.804.932 22.680.420.333 (5.058.615.401) (22,30)

The data of the comparison periods is not consistent due to the Territorial Optimisation Operation.

Income Statement

(in euro)

Annual change 31/12/2010 31/12/2009 Annual change %

10. Interest income and similar revenues 508.435.640 668.984.370 (160.548.730) (24,00) 20. Interest expense and similar charges (181.830.662) (300.211.146) 118.380.484 (39,43) 30. Net interest income 326.604.978 368.773.224 (42.168.246) (11,43) 40. Commission income 210.212.875 200.943.307 9.269.568 4,61 50. Commission expense (14.952.686) (16.198.225) 1.245.539 (7,69) 60. Net commission income 195.260.189 184.745.082 10.515.107 5,69 70. Dividends and similar income 1.249.315 1.698.742 (449.427) (26,46) 80. Net profit (loss) from trading activities (9.329.805) 5.513.744 (14.843.549) n.s. 90. Net profit (loss) on hedging activities 7.908.538 4.338.185 3.570.353 82,30 100. Profit (loss) on disposal or repurchase of: (56.333) 351.885 (408.218) n.s. a) loans 19 13 6 44,15 b) available-for-sale financial assets - 490.936 (490.936) - d) financial liabilities (56.352) (139.064) 82.712 (59,48) 120. Gross income 521.636.882 565.420.862 (43.783.980) (7,74) 130. Net adjustments/value recoveries due to impairment on: (98.708.074) (70.568.255) (28.139.819) 39,88 a) loans (97.858.978) (69.219.974) (28.639.004) 41,37 b) available-for-sale financial assets - (93.873) 93.873 - d) other financial transactions (849.095) (1.254.408) 405.313 (32,31) 140. Net financial operating income 422.928.808 494.852.607 (71.923.799) (14,53) 150. Administrative expenses (330.267.253) (323.122.506) (7.144.747) 2,21 a) staff costs (172.842.859) (165.124.307) (7.718.552) 4,67 b) other administrative expenses (157.424.394) (157.998.199) 573.805 (0,36) 160. Net provisions for liabilities and charges (2.874.862) (3.257.733) 382.871 (11,75) 170. Net adjustments/value recoveries on tangible assets (10.105.832) (11.096.152) 990.320 (8,92) 180. Net adjustments/value recoveries on intangible assets (34.090) (9.036) (25.054) n.s. 190. Other operating income/(expense) 37.986.132 43.268.678 (5.282.546) (12,21) 200. Operating costs (305.295.905) (294.216.749) (11.079.156) 3,77 240. Profit (loss) on disposal of investments 1.296.499 (76.193) 1.372.692 n.s. 250. Profit (loss) on continuing operations before tax 118.929.403 200.559.665 (81.630.262) (40,70) 260. Income taxes for the year for continuing operations (46.950.686) (71.586.797) 24.636.111 (34,41) 270. Net profit (loss) on continuing operations 71.978.717 128.972.868 (56.994.151) (44,19) 290. Profit for the year 71.978.717 128.972.868 (56.994.151) (44,19)

The data of the comparison periods is not consistent due to the Territorial Optimisation Operation.

Statement of comprehensive income

(in euro)

Items 31/12/2010 31/12/2009

10 Profit (loss) for the year 71.978.717 128.972.868

Other income components net of taxation

20 Available-for-sale financial assets (5.191.947) 2.825.633

30 Tangible assets

40 Intangible Assets

50 Foreign investment hedges

60 Cash flow hedges (370)

70 Exchange rate differences

80 Non current assets held for sale

90 Actuarial gains (losses) on defined-benefit plans (1.831.608) 445.005

100 Portions of valuation reserves relating to investments carried at equity

110 Total other income components net of taxation (7.023.925) 3.270.638

120 Comprehensive income (Item 10+110) 64.954.792 132.243.506

Statement of Changes in Shareholders’ Equity Movements as at 31st December 2010 (in euro)

Changes in the year Allocation of prior year profit Transactions on shareholders' equity Init ial Shareholders' Balance as at Balance as at Comprehensi b alanc e s Changes in equity as at 3 1/ 12 / 2 0 0 9 0 1/ 0 1/ 2 0 10 dividends and Ow n Extraordinary C ap it al D e rivat ive ve income for c hang e re s e rve s New shares S t o c k 3 1/ 12 / 2 0 10 re s e rve s o t he r s hare s distribution instruments s o n o w n 2 0 10 is s ue d o p t io ns allocations p urc has e d of dividends c hang e s hare s

Share capital: 593.300.000 X 593.300.000 - X X 2 2 .3 3 2 .2 3 1 - X X X X X 6 15.6 3 2 .2 3 1

a) Ordinary shares 593.300.000 x 593.300.000 X X 22.332.231 X X X X X 615.632.231

b) other shares - X - X X X X X X X -

Share premiums 12 0 .0 0 0 .0 0 0 X 12 0 .0 0 0 .0 0 0 X X X X X X X X 12 0 .0 0 0 .0 0 0

R e s e rve s : 4 2 3 .2 2 6 .4 11 - 4 2 3 .2 2 6 .4 11 94.239.884 X 12 0 .8 4 4 .73 1 - - - X - - X 6 3 8 .3 11.0 2 7

a) profit 423.226.411 - 423.226.411 94.239.884 X (97.166) - X X X X 517.369.129

b) other - - - - X 120.941.897 X - X X 120.941.897

Valuation reserves 2 1.2 0 5.8 57 2 1.2 0 5.8 57 X X X X X X X X (7.023.925) 14 .18 1.9 3 2

Capital instruments - X - X X X X X X X X X -

Ow n s hare s - X - X X X X X X X X -

Profit (loss) for the year 12 8 .9 72 .8 6 8 - 12 8 .9 72 .8 6 8 (94.239.884) (34.732.984) X X X X X X X 71.9 78 .717 71.9 78 .717

Shareholders' equity 1.2 8 6 .70 5.13 6 X 1.2 8 6 .70 5.13 6 - (34.732.984) 12 0 .8 4 4 .73 1 2 2 .3 3 2 .2 3 1 - - - - - 6 4 .9 54 .79 1 1.4 6 0 .10 3 .9 0 6

In compliance with the Assirevi approaches (so-called OPI), a positive reserve has been established for 120,941,897 euro, made up as follows:  in relation to the territorial Optimisation Transaction (119,019,389 euro): (22,332,231) euro as a contra entry to the share capital increase serving the business units acquired; 32,731,947 euro as a contra entry to the equity investments recorded in relation to the business units conferred; 108,659,841 euro in net capital gains as a contra entry to the disposal of the equity investments; (40,168) euro as a contra entry to the sundry corporate charges incurred.  in relation to the conferral of the Luxembourg Branch to UBI International S.A., 1,922,508 euro as a contra entry to the equity investment recorded in relation to the business unit conferred.

Statement of Changes in Shareholders’ Equity Movements as at 31st December 2009 (in euro)

Changes in the year Allocation of prior year profit Transactions on shareholders' equity Init ial Shareholders' Balance as at Balance as at Comprehensive b alanc e s Changes in equity as at 3 1/ 12 / 2 0 0 8 0 1/ 0 1/ 2 0 0 9 dividends and N e w Ow n Extraordinary C ap it al D e rivat ive income for c hang e re s e rve s S t o c k 3 1/ 12 / 2 0 0 9 re s e rve s o t he r s hare s s hare s distribution instruments s o n o w n 2009 o p t io ns allocations is s ue d p urc has e d of dividends c hang e s hare s

Share capital: 593.300.000 X 593.300.000 - X X - - X X X X X 593.300.000

a) Ordinary shares 593.300.000 x 593.300.000 X X X X X X X 593.300.000

b) other shares - X - X X X X X X X -

Share premiums 12 0 .0 0 0 .0 0 0 X 12 0 .0 0 0 .0 0 0 X X X X X X X X 12 0 .0 0 0 .0 0 0

R e s e rve s : 264.784.506 - 264.784.506 158 .4 4 1.9 0 5 X - - - - X - - X 4 2 3 .2 2 6 .4 11

a) profit 264.784.506 - 264.784.506 158.441.905 X - X X X X 423.226.411

b) other - - - X X - X X -

Valuation reserves 17.9 3 5.2 19 17.9 3 5.2 19 X X X X X X X X 3 .2 70 .6 3 8 2 1.2 0 5.8 57

Capital instruments - X - X X X X X X X X X -

Ow n s hare s - X - X X X X X X X X -

Profit (loss) for the year 2 16 .6 53 .3 18 - 2 16 .6 53 .3 18 ( 158 .4 4 1.9 0 5) ( 58 .2 11.4 13 ) X X X X X X X 12 8 .9 72 .8 6 8 12 8 .9 72 .8 6 8

Shareholders' equity 1.2 12 .6 73 .0 4 3 X 1.2 12 .6 73 .0 4 3 - ( 58 .2 11.4 13 ) ------13 2 .2 4 3 .50 6 1.2 8 6 .70 5.13 6

Cash Flow Statement (in euro)

INDIRECT METHOD 31/12/2010 31/12/2009

A. OPERATING ACTIVITIES 1. Operations 228.817.468 284.871.388 - profit for the year (+/-) 71.978.717 128.972.868 - gains/losses on financial assets held for trading and on financial assets/liabilities at fair value (-/+) 192.772 1.888.293 - gains/losses on hedging activities (-/+) (7.908.538) (14.327.667) - net impairment adjustments/value recoveries (+/-) 108.410.384 81.407.811 - net adjustments/value recoveries on tangible and intangible assets (+/-) 10.139.922 11.105.188 - net provisions for liabilities and charges and other costs/revenues (+/-) (946.475) 4.238.098 - outstanding taxes and duties (+) 46.950.686 71.586.797 - net adjustments/value recoveries on groups of assets held for sale, net of taxation (+/-) - - - other adjustments (+/-) - 2. Liquidity generated/absorbed by financial assets 4.673.871.022 (1.797.408.201) - financial assets held for trading 7.699.896 26.846.732 - financial assets at fair value - - - available-for-sale financial assets (104.355) (3.096.131) - loans to banks: on demand 6.417.153.906 (2.173.321.035) - loans to banks: other - - - loans to customers (1.070.850.158) 200.667.387 - other assets (680.028.267) 151.494.846 3. Liquidity generated/absorbed by financial liabilities (4.886.723.167) 1.571.962.732 - due to banks repayable on demand 2.127.353.696 (176.226.890) - due to banks - other payables - - - due to customers 235.981.668 (1.157.774.225) - securities issued (7.052.824.581) 3.027.587.772 - financial liabilities held for trading (5.009.127) (25.441.168) - financial liabilities at FV - - - other liabilities (192.224.822) (96.182.757) Net liquidity generated/absorbed by operating activities (+/-) 15.965.324 59.425.919 B. INVESTMENT ACTIVITIES - 1. Liquidity generated by 3.831.787 2.333.385 - disposals of equity investments - - dividends received on equity investments 1.249.315 1.698.742 - disposals of held-to-maturity financial assets - - - disposals of tangible assets 2.582.472 634.643 - disposals of intangible assets - - disposals of business segments - 2. Liquidity absorbed by : (3.725.670) (6.511.994) - purchases of equity investments - - - purchases of held-to-maturity financial assets - - - purchases of tangible assets (3.725.670) (6.496.900) - purchases of intangible assets - (15.094) - purchases of business segments - Net liquidity generated/absorbed by investing activities (+/-) 106.117 (4.178.609) C. FUNDING ACTIVITIES - - - issues /purchases of own shares - - - issues/purchases of capital instruments - - - distribution of dividends and other uses (34.732.984) (58.211.413) Net liquidity generated/absorbed by funding activities (+/-) (34.732.984) (58.211.413) NET LIQUIDITY GENERATED/ABSORBED DURING THE YEAR (18.661.543) (2.964.103)

Key: (+) Generated (-) Absorbed

Cash Flow Reconciliation

ITEM S 31/12/2010 31/12/2009

Cash and cash equivalents at beginning of year 92.583.622 95.547.725 Total liquidity generated/absorbed during the year (18.661.543) (2.964.103) Cash and cash equivalents: effect of exchange rate changes - - Cash and cash equivalents at end of year 73.922.079 92.583.622

Notes

The Notes comprise the following parts:

1) Part A – Accounting policies 2) Part B – Information on the Balance Sheet 3) Part C – Information on the Income Statement 4) Part D – Comprehensive Income 5) Part E – Information on Risks and the related Hedging Policies 6) Part F – Information on Shareholders’ Equity 7) Part G – Business Combination Transactions Regarding Businesses or Business Units 8) Part H – Related Party Transactions 9) Part I – Share-based Payment Agreements 10) Part L – Segment Reporting

Part A – Accounting Policies

A.1 – General Information

Section 1 Statement of Compliance with the international accounting standards

Introduction These financial statements were prepared in accordance with the international accounting standards (IAS) issued by the International Accounting Standards Board (IASB) and endorsed as of the date of preparation of these financial statements, as well as the related interpretations issued by the International Financial Reporting Interpretation Committee (IFRIC)29.

The financial statements consist of the Balance Sheet, Income Statement, Statement of comprehensive income, Statement of Changes in Shareholders’ Equity, Cash Flow Statement and the Notes, and are accompanied by the Directors’ Report.

The financial statements are audited by Reconta Ernst & Young S.p.A., pursuant to Article 155 of Italian Legislative Decree No. 58 dated 24th February 1998 and in compliance with the resolution passed by the Shareholders’ Meeting on 11th April 2007 which engaged the aforesaid auditing company until the drafting of the 2012 financial statements.

The financial statements as at 31st December 2010 were clearly prepared and truthfully and accurately represent the balance sheet situation, the income situation, the financial result for the period, changes in shareholders’ equity and cash flows.

Section 2 General preparation principles

These financial statements were prepared in accordance with the general principles of IAS 1 “Presentation of financial statements” and therefore contain the information with a view to the bank as a going concern, charging costs and revenues on a matching basis and avoiding offsets between assets and liabilities and costs and revenues.

29 In this connection, see the “List of IAS/IFRS standards approved by the European Commission” published in Part A.1 of the Notes to the financial statements. The standards listed therein, as well as the related interpretations, are applied in relation to the occurrence of events disciplined by the same and the year when they became applicable. 74

Information reported herein, unless otherwise stated, is expressed in euro as the accounting currency and the Balance Sheet, Income Statement, Cash Flow Statement, Notes and explanatory tables are expressed in thousands of euro. Rounding off was performed considering the provisions indicated by the Bank of Italy. Items that do not contain values for the current and prior period were omitted. The tables used in these financial statements are compliant with those defined by the Bank of Italy Circular No. 262/2005, as amended by the I update dated 18th November 200930. These tables provide accounting data as at 31st December 2010 and the corresponding data as at 31st December 2009.

On 16th February 2011, the Bank of Italy issued the “handout” letter No. 0142023/11 concerning “Financial Statements and Security reporting” by means of which it informed banks and financial brokers of the answers to a number of requests for clarification, received by the Supervisory Body, regarding the correct formalities for recording certain transactions. An initial examination of this document reveals that the indications contained therein are essentially in line with the practices followed by the UBI Group. Note that with regard to certain types of costs, more accurate analysis is underway with the Supervisory Body via the Italian Banking Association (ABI) and therefore no amendments have been made to the accounting classification already in use in these financial statements.

Accounting standards The accounting standards illustrated in Part A.2, relating to the phases of classification, measurement and cancellation, were essentially the same as those adopted for preparing the 2009 financial statements.

The accounting standards used tend to be directed towards cost application, with the exception of the following financial assets and liabilities whose value was calculated by applying the fair value criteria: financial instruments held for trading (including derivatives) and available-for-sale financial instruments.

So as to be thorough, it is hereby indicated that non-current assets available for sale (and the associated liabilities) are recorded at book value or fair value (net of sales costs), whichever is the lower.

Section 3 Events occurring after the Balance Sheet date

There were no events of particular importance occurring after the Balance Sheet date.

Section 4 Other aspects

Territorial Optimization Transaction The Territorial Optimization transaction led to the conferral in January of 14 business segments – mainly made up of branches – and the subsequent reorganization of the shareholding structures which took place in the following July; therefore, the accounting effects of the entire transaction were recorded in these financial statements.

In greater detail, the transaction in question, achieved between bodies subject to joint control, was recorded in accordance with the “Preliminary Assirevi approaches regarding IFRS” (so-called OPI), since transactions of this type do not fall within the sphere of application of IFRS 3 “Business combinations”.

30 As well as subsequent communications by the Security Body. 75

In accordance with the provisions of the OPI, since these transactions are mainly for reorganizational purposes, the same will therefore be recorded at consistent book values or without the statement of the economic effects. The disposal of the equity investments took place at fair value and the capital gains on disposal were recorded in a specific equity reserve. Foreign branches As part of the plan for reorganising and enhancing the international structure of the UBI Group, as from 10th December 2010 the Luxembourg branch was conferred to UBI Banca International S.A. under “Other information”.

Hedge Accounting It should be noted that until 31st December 2009, the Group used an interest rate risk hedging strategy for medium and long-term assets at a fixed rate in compliance with the provisions of IAS 39 in the version approved by the European Community (so-called carve out), which permits the hedging of a pre-determined amount of mortgage loans (currency quantity, expressed using a layered logic), in relation to which the bank intends to provide hedges against the interest rate risk.

As from 1st January 2010, the quantity of currency hedged in the accounts was re- established, having reduced following early repayments, renegotiations and defaults. From an operating aspect, the fixed-rate assets previously not hedged have been restored to the portfolios subject to hedge accounting.

Subsequently, also faced with the need to achieve a complete alignment between the operational accounting logics, steps were taken to streamline the method used, despite not changing the related hedging strategy, always aimed at hedging the rate risk by means of the use of the same hedging instruments, passing over to the percentage-based hedging logic.

This percentage in fact represents the expected cash flows since it is established on the basis of the estimate of the early repayment which will take place in the future and can be reviewed, up to a maximum of 100% of the residual portfolio, in relation to the change in the early repayment estimates.

The improved definition of the aforesaid method has made it possible to neutralise the effects during 2010, equating to 11.8 million euro, gross of the related tax effect, associated with the early repayments, renegotiations and defaults.

Collective impairments on performing loans During the accounting period under review, the process was concluded for adapting the management and monitoring of credit, with particular reference to the determination of the collective impairment adjustments on performing loans. This process essentially comprises the scheduled adaptation of the calculation algorithm for the collective impairment adjustments, so as to adopt the data originating from the Basel II model on the individual entities.

The financial statement figures as at 31st December 2010 are therefore the first in which the bank’s collective impairment adjustment provision has been established by means of the mere multiplication of the carrying amount, the operating LGD (estimated by the model) and the PD (deriving from the application of the rating models), on a consistent basis with the decision of the Parent Company regarding impairment on performing loans which established the elimination of the re-proportioning logics introduced at the end of 2008, since the procedure for the gradual handling of the elimination of the provision allocation mechanism has been completed.

At the same time, steps were taken to periodically review the risk estimates by means of updating the risk parameters. These activities led to an increase in the collective impairment

adjustments, for 6.7 million euro, due to the inclusion of the time series relating to more recent periods which are more critical in terms of risk.

During 2011, by contrast the production of the new generation of LGD and rating models was scheduled, within the Basel II validation plan on the Business regulatory segment.

Accounting of the “overdraft fine” As already mentioned in the periodic disclosure as at 30th September 2010, pending a more extensive measure on the conditions applied to customers, last August the bank carried out the review of the structure and the regulations concerning the “overdraft fine”. This fine is applied in the event of accounts which do not have credit facilities going into the red or overdrafts on accounts with credit facilities exceeding the agreed limit and the persistence of this situation, and is in essence determined to a fixed extent on occurrence of an overrun greater than a certain amount and in the presence of the debt balance for several consecutive business days.

The new condition is justified by the higher credit risk of overrun situations in relation to which the bank must obtain adequate remunerations also for uses over the agreed credit limit and the overdrafts of accounts without facilities. These are in fact situations which imply the aforesaid higher credit risk and involve an extraordinary cost for the bank for the rapid approval process, handling and monitoring activities for the purposes of protection from this risk.

All this having been stated, it is highlighted how the income relating to the overdraft fine as per the new commission system, is recognised in both the mandatory financial statement formats as per the Bank of Italy Circular 262/05 as well in the reclassified statement under the item “Interest income and similar revenues”, in the fundamental assumption that this remuneration is undoubtedly associated with the effective use of liquidity over time and therefore does not represent the remuneration of a service. This approach is compliant with the sector approach emerging in the wider debate relating to the nature of the “Fund provision Commission”.

Use of estimates and assumptions when preparing the financial statements The amounts in the financial statements are valued according the standards described in Part A.2 “Section relating to the main balance sheet items” of the Accounting Standards. Given the inability to precisely measure certain financial statement items, the application of these standards signifies that, inevitably, estimates and assumptions must be adopted that have a significant impact on the values recorded in the balance sheet and income statement. Confirming that the use of reasonable estimates is an essential part of preparing financial statements, the items listed below should be noted as they make the most significant use of estimates and assumptions: . loan valuation; . valuation of financial assets not listed on active markets; . valuation of intangible assets and equity investments; . quantification of provisions for liabilities and charges; . quantification of deferred taxes; . definition of the depreciation/amortisation rate for tangible and intangible assets with a specified useful duration.

In this connection, the adjustment of an estimate may occur following changes in the circumstances on which the estimates were based or as a result of new information or further still more experience. Any change in the estimate is applied prospectively and therefore impacts the income statement for the period in which the change was made and possibly future periods.

The current financial year was not characterised by significant changes in the estimation criteria already applied for drawing up the financial statements as at 31st December 2009.

******* Changes in IAS 39 Given that the process for the full review of IAS 39 is currently underway and should conclude by the end of the first half of 2011, it should be noted that at present no document issued by the IASB has been endorsed by the European Commission. A brief summary is presented below in relation to the stage of review of said standard.

Phase 1 Classification and Measurement On 12th November, the International Accounting Standards Board (IASB) approved the final version of IFRS 9 “Financial Instruments”, or rather the new accounting standard intended to replace – for the part relating to the recognition and measurement of the financial assets – the provisions of IAS 39 “Financial instruments: classification and measurement”, thereby concluding the first stage of the project for the full review of said accounting standard. This standard, given the criticism received during the commentary period, has not yet been endorsed by the European Commission and therefore is not currently applicable to financial statements of European countries and thus the endorsement process, with regard to this first stage of the IAS 39 review projects, has been deferred.

On 28th October 2010, the IASB published the new provisions relating to the classification and valuation of financial liabilities. In detail, these new provisions, essentially confirming the approach already envisaged by IAS 39, as a rule prescribe - in the event of application of the Fair Value Option to the financial liabilities - the recognition of the value changes attributable to its credit worthiness in the Statement of Comprehensive Income and no longer in the income statement.

Phase 2 Impairment On 5th November, the IASB published for usual consultation, which will end on 30th June 2010, the Exposure Draft “Financial Instruments; Amortised Cost and Impairment”. This draft document, which envisages the review of the methods for determining the impairment losses of all the financial assets valued at amortised cost according to the so- called expected loss model (involving the recording of the expected losses over the entire contractual duration of the asset), has been subject to various criticism from international commentators, with particular regard to the application complexity as well as the non- tangible applicability to so-called “open” portfolios, and so the IASB on 31st January 2011 published under consultation, together with the FASB, the Supplement “Financial Instruments: Impairment”, supplement to the afore-mentioned ED Financial Instruments: Amortised Cost and Impairment published in 2009, the aim of which is to overcome the main critical aspects and operative problems feared by the commentators in the implementation of the proposed model for the calculation of the expected losses.

Phase 3 Hedge Accounting On 9th December 2010, the IASB published for usual consultation, which will end on 9th March 2011, the Exposure Draft “Hedge Accounting”. The ED in question, which does not deal with the still controversial subject being analysed more closely of “Macrohedging”, essentially sets itself the aim, due to the intentions of the IASB, of: • drawing the accounting representation closer to risk management logics; • introducing a principle more focused on the objective which is intended to be achieved with the stipulation of a hedge as well as on the methods intended to be used to achieve the same.

In greater detail, the innovations proposed by the ED in short concern the following aspects:

• change in the accounting of fair value type hedges; • introduction of the possibility of re-weighting the hedging ratio of the hedging relationships, by means of the so-called “rebalancing”, if still in line with the initial purpose; • introduction of the possibility of applying a hedge under the so-called “layer approach” logic; • the possibility of covering net positions; • elimination of the obligatory nature of the 80-125% threshold for the quantitative tests carried out for the purpose of checking efficacy; • elimination of the possibility of hedging financial instruments whose valuation does not affect the income statement; • recording of the time value premium of the options.

Completing the projects in question, the IASB has added a further stage relating to the Asset and Liability Offsetting. In this connection, on 28th January 2011, the IASB issued an Exposure Draft “Offsetting Financial Assets and Financial Liabilities” the aim of which was to deal with the matter of netting in the financial statements of the positions on derivative contracts and other financial instruments which may lead to significant differences in the reporting of the financial institutions.

List of the main IAS/IFRS standards endorsed by the European Commission

IAS/IFRS ACCOUNTING STANDARDS ENDORSEMENT

Reg. 1274/2008, 53/2009, 70/2009, IAS 1 Presentation of financial statements 494/2009, 243/2010, 149/2011 IAS 2 Inventories Reg. 1126/2008 Reg. 1126/2008, IAS 7 Cash Flow Statements 1274/2008, 70/2009, 494/2009, 243/2010 Reg. 1126/2008, IAS 8 Accounting policies, changes in accounting estimates and errors 1274/2008, 70/2009 Reg. 1126/2008, IAS 10 Events after the reporting period 1274/2008, 70/2009, 1142/2009 Reg. 1126/2008, IAS 11 Long-term contracts 1274/2008 Reg. 1126/2008, IAS 12 Income taxes 1274/2008, 495/2009 Reg. 1126/2008, IAS 16 Tangible assets 1274/2008, 70/2009, 495/2009 Reg. 1126/2008, IAS 17 Leasing 243/2010 IAS 18 Revenues Reg. 1126/2008, 69/2009 Reg. 1126/2008, IAS 19 Employee benefits 1274/2008, 70/2009 Accounting for government grants and disclosure on government Reg. 1126/2008, IAS 20 assistance 1274/2008, 70/2009 Reg. 1126/2008, IAS 21 Changes in foreign exchange rates 1274/2008, 69/2009, 494/2009, 149/2011 IAS 23 Financial charges Reg. 1260/2008, 70/2009 IAS 24 Related party disclosures Reg. 632/2010 IAS 26 Retirement benefit plans Reg. 1126/2008 IAS 27 Consolidated and separate financial statements Reg. 494/2009 Reg. 1126/2008, 1274/2008, 70/2009, IAS 28 Investments in associates 494/2009, 495/2009, 149/2011 Reg. 1126/2008, IAS 29 Financial reporting in hyperinflationary economies 1274/2008, 70/2009 Reg. 1126/2008, IAS 31 Interests in joint ventures 70/2009, 494/2009, 149/2011 Reg. 1126/2008, IAS 32 Financial instruments: presentation 1274/2008, 53/2009, 70/2009, 495/2009,

1293/2009, 149/2011 Reg. 1126/2008, IAS 33 Earnings Per Share 1274/2008, 495/2009 Reg. 1126/2008, IAS 34 Interim financial reporting 1274/2008, 70/2009, 495/2009, 149/2011 Reg. 1126/2008, 1274/2008, 69/2009, IAS 36 Impairment of assets 70/2009, 495/2009, 243/2010 Reg. 1126/2008, IAS 37 Provisions, contingent liabilities and contingent assets 1274/2008, 495/2009 Reg. 1126/2008, IAS 38 Intangible Assets 1274/2008, 70/2009, 495/2009, 243/2010 Reg. 1126/2008, 1274/2008, 53/2009, 70/2009, 494/2009, IAS 39 Financial instruments: recognition and measurement 495/2009, 824/2009, 839/2009, 1171/2009, 243/2010, 149/2011 Reg. 1126/2008, Reg. IAS 40 Investment property 1274/2008, Reg. 70/2009 Reg. 1126/2008, IAS 41 Agriculture 1274/2008, 70/2009 Reg. 1126/2009, 1164/2009, 550/2010, IFRS 1 First-time adoption of international financial reporting standards 574/2010, 662/2010, 149/2011 Reg. 1126/2008, IFRS 2 Share-based payments 1261/2008, 495/2009, 243/2010 , 244/2010 IFRS 3 Business combinations Reg. 495/2009, 149/2011 Reg. 1126/2008, IFRS 4 Insurance contracts 1274/2008, 1165/2009 Reg. 1126/2008, 1274/2008, 70/2009, IFRS 5 Non-current assets held for sale and discontinued operations 494/2009, 1142/2009, 243/2010 IFRS 6 Exploration for and evaluation of mineral resources Reg. 1126/2008 Reg. 1126/2008, 1274/2008, 53/2009, IFRS 7 Financial instruments: disclosures 70/2009, 495/2009, 824/2009, 1165/2009, 574/2010, 149/2011 Reg. 1126/2008, IFRS 8 Operating segments 1274/2008, 243/2010, 632/2010

SIC/IFRIC INTERPRETIVE DOCUMENTS ENDORSEMENT

Changes in existing decommissioning, restoration and similar Reg. 1126/2008, IFRIC 1 liabilities 1274/2008

Members’ shares in co-operative entities and similar Reg. 1126/2008, IFRIC 2 instruments 53/2009 Reg. 1126/2008, IFRIC 4 Determining whether an arrangement contains a lease 70/2009 Rights to interests arising from decommissioning, restoration IFRIC 5 Reg. 1126/2008 and environmental funds Liabilities arising from participating in a specific market – waste IFRIC 6 Reg. 1126/2008 electrical and electronic equipment Application of the recalculation method as per IAS 29 “Financial Reg. 1126/2008, IFRIC 7 reporting in hyperinflationary economies” 1274/2008 Reg. 1126/2008, IFRIC 9 Reassessment of embedded derivatives 495/2009, 1171/2009, 243/2010 Reg. 1126/2008, IFRIC 10 Interim financial reporting and impairment 1274/2008

IFRIC 12 Agreements for service under concession Reg. 254/2009

Reg. 1262/2008, IFRIC 13 Customer loyalty programmes 149/2011 Reg. 1263/2008, Reg. IFRIC 14 Advance payments relating to a minimum funding requirement 1274/2008, 633/2010

IFRIC 15 Agreements for property construction Reg. 636/2009

Reg. 460/2009, Reg. IFRIC 16 Hedging of a net investment in a foreign management scheme 243/2010 Distributions to shareholders of assets not represented by cash IFRIC 17 Reg. 1142/2009 and cash equivalents

IFRIC 18 Customer asset disposals Reg. 1164/2009

IFRIC 19 Extinguishing financial liabilities with equity instruments Reg. 662/2010

Reg. 1126/2008, SIC 7 Introduction of the euro 1274/2008, 494/2009 Government assistance – No specific relation to operating Reg. 1126/2008, SIC 10 activities 1274/2008

SIC 12 Consolidation – Special purpose entities (Vehicle companies) Reg. 1126/2008

Jointly controlled entities – Non-monetary contributions by Reg. 1126/2008, SIC 13 venturers 1274/2008 Reg. 1126/2008, SIC 15 Operating lease incentives 1274/2008

SIC 21 Income taxes – Recovery of revalued non-depreciable assets Reg. 1126/2008

Income taxes – Changes in the tax status of an enterprise or its Reg. 1126/2008, SIC 25 shareholders 1274/2008 Evaluating the substance of transactions in the legal form of a SIC 27 Reg. 1126/2008 lease Reg. 1126/2008, SIC 29 Disclosure – Service concession agreements 1274/2008, 70/2009

SIC 31 Revenue – Barter transactions involving advertising services Reg. 1126/2008

Reg. 1126/2008, SIC 32 Intangible assets – Web site costs 1274/2008

A.2 – Part Relating to the Main Financial Statement Items

Below are the recognition, classification, valuation and derecognition criteria adopted for the main financial statement items.

Financial assets and liabilities held for trading

Definition of financial assets and liabilities held for trading A financial asset or liability is classified as held for trading (so-called Fair Value through Profit or Loss - FVPL) and recorded in item 20 “Financial assets held for trading” or item 40 “Financial liabilities held for trading” if it is: purchased or held primarily to be sold or repurchased in the short term; part of a portfolio of identified financial instruments that are managed collectively and for which evidence exists of a recent and effective strategy to achieve a profit over the short term; a derivative (with the exception of a derivative that is a designated and effective hedging instrument – refer to following paragraph).

The Bank recognised bonds held for trading and repurchase agreements under “Financial assets held for trading”, if present.

Derivative financial instruments A derivative is a financial instrument or other contract having the following characteristics: its value changes in relation to the change in an interest rate, the price of a financial instrument or a commodity, the exchange rate of a foreign currency, a price or rate index, creditworthiness, credit ratios or other pre-established variables; it does not require a net initial investment or requires a lower net initial investment that would be required for other types of contracts from which one would expect a similar effect from changes in market factors; it is settled at a future date.

The Bank holds derivative financial instruments both for trading and hedging (for the latter, refer to the subsequent specific paragraph). All trading derivatives are recognised at an initial value equivalent to the fair value, which generally coincides with the cost. Subsequently, the derivative contracts are measured at fair value, equal to the value that the Bank would pay or collect if it were to cancel the derivative contract at the time of valuation. Every change in the fair value is booked to the income statement under item 80 "Net profit (loss) from trading activities". Fair value is determined by applying the methods described in the subsequent paragraph “Measurement criteria”.

Embedded derivative financial instruments An embedded derivative financial instrument is defined as the component of a hybrid (combined) instrument that also includes a non-derivative host contract with the effect that some of the cash flows of the combined instrument vary in a similar way to a stand-alone derivative. The implicit derivative is separated from the host contract and recorded as a stand-alone derivative if and only if: the economic characteristics and risks of the embedded derivative are not strictly correlated to the economic characteristics and risks of the host contract; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; the hybrid (combined) instrument is not recognised under financial assets or liabilities held for trading.

Fair value of the unembedded derivative is determined by applying the methods described in the successive paragraph “Measurement criteria”.

Recognition criteria Assets and liabilities held for trading are recognised at the settlement moment if they are debt securities or equities, or at the subscription date if they are derivative contracts, at a value equivalent to the cost intended as the instrument’s fair value, without considering any costs or revenue from transactions directly attributable to said instruments.

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

Fair value calculation methods Securities: listed and unlisted The fair value of securities listed on active markets is calculated based on reference market quotations (or those with the highest trading volume) inferred from the international provider and indicated on the last reference day for the financial year or reference period. A market is defined as active if the quotations reflect normal market transactions, are readily and regularly available and express the price for effective and normal market transactions. The fair value of unlisted securities is calculated by applying measurement techniques that determine the price that the instrument would have had on the valuation date in a free exchange under normal commercial considerations. The fair value calculation is obtained by applying various methods at international market level and internal measurement models. In particular, for unlisted bonds, models that discount future expected cash flows are applied - using interest rate structures that consider the business sector to which the issuer belongs and the rating class, if available – and option pricing models. Equities use prices inferred from similar transactions, market multiples of directly comparable companies, as well as equity, income and mixed measurement models.

Derivatives: listed and unlisted The fair value of listed derivatives is calculated based on prices inferred from active markets. The fair value of unlisted derivatives is calculated by applying discounted cash flow models that weigh the credit risk associated with the financial instrument. For derivatives traded with institutional counterparties, in consideration of CSA netting agreements designed to mitigate credit risk, this risk can be considered more or less null.

Derecognition criteria Assets and liabilities held for trading are derecognised from the balance sheet when the contractual rights on the cash flows deriving from the financial assets or liabilities expire or when the financial asset or liability is sold, essentially transferring all risks and benefits deriving from ownership. The profit or loss from the sale of financial assets or liabilities held for trading is booked to the income statement in item 80 “Net profit (loss) from trading activities”.

Available-for-sale financial assets

Definition Available for Sale (AFS) assets are non-derivative financial assets that are designated as such or not classified as:

(1) loans and receivables (refer to subsequent paragraph); (2) financial assets held to maturity (refer to subsequent paragraph); (3) financial assets held for trading and valued at fair value recognised in the income statement (refer to preceding paragraph).

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

Recognition criteria Available-for-sale financial assets are initially recognised when, and only when, the company becomes a party in the contractual clauses of the instrument, or at the settlement moment, at fair value, which generally coincides with the cost. This value includes costs or revenues directly connected with the instrument itself. Recognition of available-for-sale financial assets may also derive from reclassification from the “Held-to-maturity financial assets” category or, only in rare cases and only if the asset is no longer held for sale or repurchase in the short term, from the “Financial assets held for trading” category; in this case, the recognition value is equal to the fair value of the asset at the moment of transfer.

Measurement criteria Following initial recognition, the available-for-sale financial assets continue to be valued at fair value with interest charged to the income statement (resulting from applying the amortised cost) and changes in fair value booked to the balance sheet in item 130 “Valuation reserves”, with the exception of losses due to impairment, until the financial asset is derecognised, at which time the total profit or loss previously recorded under shareholders’ equity is recognised in the income statement. Equities for which a reliable fair value cannot be defined based on the described methods are recognised at cost.

At the end of each annual or interim reporting period, a check is made for objective evidence of impairment that, in the case of equities, is considered significant or lasting. With reference to the significance of the impairment, significant signs of impairment are considered to exist when the market value of the security is lower by more than 35% with respect to the original purchase cost. In this case, steps are taken – without further analysis – to record the impairment in the income statement. In the event of impairment to a lower extent, the impairment is only recorded if the valuation of the security carried out on the basis of its fundamentals does not confirm the solidity of the company or its income-earning prospects. With regard to the durability of the impairment, this is defined as prolonged if the fair value continually remains under the value of the original purchase cost for a period of more than 18 months: in this case, steps are taken to record the impairment in the income statement without further analysis. In the event the fair value continues to remain under the value of the original purchase cost for periods of less than 18 months, the eventual impairment to be booked to the income statement is identified also in consideration of the fact that the impairment is attributable to a generalized negative stockmarket trend rather than the specific performance of the individual counterpart.

In the event of impairment, the cumulative change, previously recorded in the aforementioned balance sheet account, is booked directly to the income statement in item 130 “Net adjustments/value recoveries due to impairment on b) available-for-sale financial assets”. The impairment is recorded at the moment in which the acquisition cost (net of any capital or amortisation reimbursement) of an available-for-sale financial asset exceeds its recoverable value. Any value recoveries, which are possible only following elimination of the reasons that caused the impairment, are recorded as following: if referring to equity investments, with a balancing entry to the balance sheet reserve; if referring to debt instruments, they are recorded in the income statement in item 130 “Net adjustments/value recoveries due to impairment on b) available-for-sale financial assets”.

In any event, the amount of the value recovery cannot exceed the amortised cost that the instrument would have recorded at that point, had the previous impairment not occurred.

In relation to the fact that the Bank applies IAS 34 “Interim financial reporting” to the interim financial reports, with the consequent identification of a six-monthly interim period, any impairment recorded is logged at the end of the period.

Fair value calculation methods Please refer to the description in the paragraph “Financial assets and liabilities held for trading”.

Derecognition criteria Available-for-sale financial assets are derecognised from the balance sheet when the contractual rights on the cash flows deriving from the financial assets or liabilities expire or when the financial asset or liability is sold, essentially transferring all risks and benefits deriving from ownership. The profit or loss from the sale of available-for-sale financial assets is booked to the income statement in item 100 “Profits (losses) on disposal or repurchase of b) available-for-sale financial assets. In the event of derecognition, any corresponding amount previously charged to the balance sheet item 130 “Valuation reserves” is reversed and recorded in the income statement.

Loans and Receivables

Definition Loans and receivables (L&R) are defined as non-derivative financial assets with fixed or determinable payments that are not listed on an active market. With the exception of: a) those that are intended to be sold immediately or over the short term, which are classified as held for trading, and those recorded at the moment of initial recognition at fair value and booked to the income statement; b) those initially recorded as available-for-sale; c) those for which the owner cannot essentially recover all of the initial investment for reasons other than impairment losses; in this case they are classified as available- for-sale.

Loans and receivables are recorded in item 60 “Loans to banks” and 70 “Loans to customers”. The Bank includes the financing to customers and banks under loans, whether directly granted or acquired from third parties; commercial loans, repurchase agreements, loans from financial lease transactions and factoring and interest-bearing postal coupons are also included in this category.

Recognition criteria Loans and receivables are initially recorded in the financial statements when the company becomes a party in a financing contract or when the creditor purchases the right to payment of the agreed contract amounts. This moment corresponds with the loan granting date. Recognition is this category can also result from reclassification of the “Available-for-sale financial assets” category or, only in rare cases and only if the asset is no longer held for sale or repurchase over the short term, from the “Financial assets held for trading” category. The initially recognised value is equivalent to the fair value of the financial instrument that corresponds to the amount granted including costs or revenues directly ascribable to the instrument and determinable from the beginning, independent of the moment in which it is repaid. The initially recognised value does not include all charges that are subject to reimbursement by the debtor counterparty or are not ascribable to internal costs of an administrative nature.

If the recognition is a result of reclassification, the asset’s fair value at the moment of transfer is assumed as the new measure of the amortised cost of the asset. For loans and receivables not granted at arm’s length, the initial fair value is calculated by applying appropriate measurement techniques described subsequently; in this event, the difference between the calculated fair value and the amount loaned is recorded directly in the income statement in the interest item. Contango contracts and repurchase agreements with the obligation to repurchase or resell forward are recorded in the financial statements as funding or lending transactions. Specifically, spot sales or forward repurchase transactions are recorded in the financial statements for the amount received in cash, while spot purchase or forward resale transactions are recorded for the amount paid in cash.

Measurement criteria Loans and receivables are valued at amortised cost using the effective interest criteria. The amortised cost of a financial asset or liability is the value at which it was measured upon initial recognition net of capital reimbursements, increased or decreased for total amortisation using the effective interest criteria on any differences between the initial value and the expiration value, and reduced for any impairment or irrecoverability. The effective interest criteria is the amortised cost calculation method of a financial asset or liability (or group of financial assets or liabilities) and distribution of the interest income or expense over the relative duration. The effective interest rate is the rate that precisely discounts the future payments or collections over the expected life of the financial instrument. In order to calculate the effective interest rate it is necessary to value the cash flows considering the contractual terms of the financial instrument (for example, the advance payment, a purchase option or similar), but future impairment on loans is not considered. The calculation includes all charges and basis points paid or received between the contractual parties that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts.

At the end of each annual or interim reporting period, a check is made to determine if a financial asset or group of assets has become impaired. This occurs when it is foreseeable that the company is not able to repay the amount owed, based on the original contract terms or, for example, in the presence of: a) significant financial difficulty of the issuer or debtor; b) a violation of the contract, such as default or a missed interest or capital payment; c) the fact that the financier for economic or legal reasons related to financial difficulties of the borrower, makes a concession to the borrower that the financier would not otherwise have made; d) the likelihood that the borrower will declare financial restructuring procedures; e) the loss of an active financial market for the financial asset due to financial difficulties; f) data that indicates a marked reduction in estimated future cash flows for a group of similar financial assets from the moment of the initial recognition of those assets, even if the reduction cannot yet be identified with the individual financial assets in the Group.

Non-performing loans (loans that, based on definitions assigned by Bank of Italy, are non- performing, impaired, restructured, or past due including exposures overrun by between 90 and 180 days guaranteed by properties) are valued according to analytic methods. The remaining loans are valued based on collective techniques, grouping them into similar risk classes.

The criteria for determining the write-downs required for non-performing loans are based on the discounting of expected future cash flows for principal and interest, considering any guarantees given or advances received. The key elements for determining the present value of cash flows, are represented by the estimated receipts, the related maturity dates and the discount rate to be used. The extent of the loss is equal to the difference between the carrying value of the asset and the current value of expected future cash flows, discounted at the original effective interest rate.

Valuation of performing loans (performing positions and exposures subject to country risk) regard asset portfolios for which there has been no objective evidence of loss and that are therefore subject to collective valuation. Percentage losses taken from estimated statistical time series are applied to the estimated cash flows of the assets, grouped into uniform classes with similar characteristics in terms of credit risk, for the Group network banks, according to the valuation method based on Basel II regulations.

Impairments are immediately recorded in the income statement in item 130 “Net adjustments/value recoveries due to impairment on a) loans” as are value recoveries for all or part of the previous write-down. Value recoveries are recorded for both improved credit quality which results in the reasonable certainty of timely recovery of capital and interest, based on the original loan terms, as well as due to the gradual reduction of the discounting calculated at the moment of the impairment recognition. In the event of collective valuation, any additional impairment adjustments or value recoveries are recalculated differentially with reference to each performing loan at the valuation date.

Fair value calculation methods The fair value of loans and receivables is calculated considering future cash flows, discounted at existing replacement rates or market rates as at the valuation date relative to a position with similar characteristics to the loan subject to valuation. The fair value is calculated for all loans for disclosure purposes only. For loans and receivables subjective to effective hedges, the fair value is calculated in relation to the hedged risk for valuation purposes.

Derecognition criteria Loans and receivables are derecognised from the financial statements when the contractual rights to related cash flows expire or when the financial assets are sold with the essential transfer of all risks and benefits deriving from ownership. Otherwise the loans and receivables continue to be recognised in the financial statements, even if their legal title has transferred to a third party, for an amount equal to the residual involvement. These assets are also derecognised from the financial statement when the Bank maintains the contractual right to receive the related cash flows, but at the same time assumes the contractual obligation to pay said cash flows to a third party. The net profit or loss from the disposal of loans and receivables is booked to the income statement in item 100 “Profits (losses) on disposal or repurchase of a) loans”.

Hedging derivatives

Definition Hedging transactions are undertaken to neutralise the losses arising from a certain element (or group of elements) associated with a defined risk through profits recognised from a different element (or group of elements) in the event that particular risk should effectively manifest itself. The Bank performs the following hedges, which are properly accounted for and described below: Fair Value Hedge: the objective is to offset changes in the fair value of hedged assets or liabilities; Cash Flow Hedge: the objective pursued is to contrast the risk of fluctuations in expected cash flows with respect to the initial hypotheses.

The derivative products stipulated with counterparties external to the company are designated as hedging instruments.

Recognition criteria

Derivative hedging instruments, as with all derivatives, are initially recognised and subsequently measured at fair value and classified in the balance sheet asset item 80 “Hedging derivatives” and balance sheet liabilities item 60 “Hedging derivatives”.

A relationship is defined as a hedge, and accounted for as such if, and only if, the following conditions are satisfied: at the beginning of the hedge there is designation and formal documentation of the hedge relationship, the company objectives in managing the risk and the strategy in carrying out the hedge. This documentation identifies the hedging instrument, the element or transaction covered, the nature of the hedged risk and how the company measures the effectiveness of the hedging instrument in mitigating exposure to fair value changes of the covered element or of cash flows attributable to the covered risk; the hedge is considered highly effective; for cash flow hedges, the planned transaction to be hedged is highly likely and presents a exposure to changes in cash flow that may impact the income statement; the effectiveness of the hedge can be reliably measured; the hedge is valued based on continuity criteria and is considered highly effective for all the reference financial periods for which it was designed.

Methods for performing effectiveness tests The hedge relationship is considered effective, and is properly accounted for, if at the beginning and throughout its life changes in fair value or cash flows of the covered element, associated with the hedged risk, are almost completely offset by changes in the fair value or cash flows from the hedging derivative. This conclusion is reached if the effective result is between 80% and 125%. An effectiveness test on the hedge is performed at the beginning through the prospective test and upon preparation of the annual financial statements through the retrospective test; the test result justifies the application of hedge accounting to the extent that it demonstrates the expected effectiveness. Additionally, a retrospective test is performed each month on a cumulative basis that has the objective of measuring the effectiveness of the hedge achieved during the reference period and thereby verifying that over the period the hedge relationship was effective. Derivative financial instruments that are considered hedges from an economic point of view, but do not satisfy the requirements so as to be considered effective hedging instruments, are recorded in items 20 “Financial assets held for trading” and 40 “Financial liabilities held for trading” and the economic effects in the corresponding item “80 Net profit (loss) from trading activities”. For a description of methods used to calculate the fair value of derivatives, please refer to the section “Financial assets and liabilities held for trading”.

Measurement criteria Fair value hedges Fair value hedges are recorded as follows: the profit or loss resulting from the hedging instrument’s measurement at fair value is recorded in the income statement in item 90 “Net profit (loss) from hedging activities”; the profit or loss on the hedged element associated with the hedged risk adjusts the carrying value of the hedged element and is immediately recognised in the income statement in the aforementioned item, regardless of the category of the hedged asset or liability.

The hedge accounting ceases in perspective in the following cases: 1. the hedging instrument reaches maturity, is sold, transferred or exercised; 2. the hedge no longer satisfies the criteria for hedge accounting as described above; 3. the company revokes the designation.

In sub-case 2, if the hedged asset or liability is valued at amortised cost, the higher or lower value deriving from its fair valuation because the hedge became ineffective, is ascribed to the income statement based on the effective interest rate method in effect at the moment the hedge is revoked. Methods used to calculate the fair value of risk covered by hedged assets and liabilities are described in the sections commenting on available-for-sale financial assets, loans and receivables.

Cash flow hedges When a derivative financial instrument is designated as hedging the change in expected cash flows from an asset or liability recorded in the financial statement or of a future transaction deemed highly probable, the recording of the hedge takes place as follows: . the gains and losses (from the valuation of the hedged derivative) associated with the effective part of the hedge are recorded in the specific equity reserve “130 Valuation reserves”; . the gains and losses (from the valuation of the hedged derivative) associated with the ineffective part of the hedge are recorded directly in the income statement in the item “90 Net profit (loss) from hedging activities”; . the hedged asset or liability is valued according to the specific criteria of the category it belongs to.

If a future transaction takes place leading to the recognition of an non-financial asset or liability, the corresponding gains or losses initially booked to the item “130 Valuation reserves” are at the same time reversed from this reserve and booked at initial cost to the asset or liability being recognised. If the future transaction being hedged subsequently leads to the recognition of a financial asset or liability, the associated gains or losses initially booked to the item “130 Valuation reserves” are reclassified in the income statement in the same period or in periods during which the asset acquired or liability undertaken has an effect on the income statement. If part of the gains or losses booked to said Reserve is not considered recoverable, it is classified in the income statement under item 80 “Net profit (loss) from trading activities”.

In all the cases other than those described previously, the gains or the losses initially booked under the item “130 Valuation reserves” are reversed and booked to the income statement using the same formalities and as at the same maturities by means of which the future transaction effects the income statement.

In each of the following circumstances, a company must cease hedge accounting: (a) the hedging instrument reaches maturity or is sold, transferred or exercised (accordingly, the replacement or the carrying over of a hedging instrument with another hedging instrument is not a conclusion or transfer if this replacement or carrying over is part of the company’s documented hedging strategy). In this case, the overall gain (or loss) of the hedging instrument remains recorded directly under shareholders’ equity until the hedge remains effective and remains separately recorded in the shareholders’ equity until the scheduled transaction, being hedged, takes place; (b) the hedge no longer satisfies the criteria for hedge accounting. In this case, the overall gain or loss on the hedging instrument recorded directly under shareholders’ equity as from the period when the hedge became effective, remains recorded separately under shareholders’ equity until the scheduled transaction takes place; (c) it is not longer believed that the scheduled transaction will take place, and therefore any correlated overall gain or loss on the hedging instrument recorded directly under shareholders’ equity from the period when the hedge became effective is recorded in the income statement; (d) the company revokes the designation. With regard to hedges of a scheduled transaction, the overall gain or loss of the hedging instrument recorded directly under shareholders’ equity as from the period when the hedge became effective remains recorded separately under shareholders’ equity until the scheduled transaction takes place or it is believed it will no longer take place.

If it is believed the transaction shall no longer take place, the overall gain (or loss) which was recorded directly under shareholders' equity is reversed to the income statement.

Hedging asset and liability portfolios The hedging of asset and liability portfolios (macro-hedging) and the associated accounting representation is based on: identifying the hedged portfolio and dividing it by maturity date; designating the hedged item; identifying the interest rate risk of the hedged item; designating the hedging instrument; determining its effectiveness.

The portfolio that is hedged for interest rate risk may include both assets and liabilities. This portfolio is divided up on the basis of the forecasted maturity dates for collections or revaluations of the interest rate upon analysis of the cash flow structure. Changes in fair value of the hedged assets and liabilities are recorded in the income statement in item 90 “Net profit (loss) from hedging activities” and in the balance sheet in either item 90 “Fair value changes to hedged financial assets” or item 70 “Fair value changes to hedged financial liabilities”. Changes in fair value of the hedging instrument are recorded in the income statement in item 90 “Net profit (loss) from hedging activities” and in either balance sheet assets in item 80 “Hedging derivatives" or in liabilities under item 60 “Hedging derivatives”.

Equity investments

Definition Equity investments in subsidiaries Subsidiaries are defined as companies in which the Bank exercises control. This condition exists when the Bank has the power to make, either directly or indirectly, administrative or management decisions for the business such as to be able to derive related benefits. To determine the existence of control, the presence of potential, immediately exercisable voting rights were evaluated. Equity investments in subsidiaries are included in the financial statements on the date at which control begins for as long as the control exists. Equity investments in subsidiaries are valued under the cost method.

Equity investments in associated companies Associated companies are defined as those in which the investing company holds at least 20% of the voting rights or over which the investing company has significant influence and which is not a subsidiary or a jointly controlled company. Significant influence is the power to participate in creating the financial and management policy of the associated company without having control or joint control. Equity investments in associated companies are valued under the equity method.

Equity investments in jointly controlled companies Jointly controlled companies are defined as companies governed by a contractual agreement in which two or more parties initiate an economic activity under joint control. Equity investments in jointly controlled companies are recorded in the financial statements using the equity method or the proportional method.

Recognition and measurement criteria This item includes investments in directly controlled companies and/or associated companies, as well as minority shareholdings in subsidiaries and/or associated companies belonging to other Group companies, which are stated in the financial statements at cost. Minority shareholdings held by the bank are included under “Available-for-sale financial assets” which are accounted for according to the method described above.

If there is objective evidence of impairment, the estimated recoverable value of the investment is calculated taking account of the present value of expected future cash flows that the investment may generate, including the final disposal value of the investment. If the recoverable value is lower than the carrying value, the difference is recognised in the income statement if it is deemed to be permanent. If the reasons for the impairment cease to exist as a result of an event occurring after the impairment was recognised, the write-down is reversed in the income statement up to the maximum amount of the historical purchase cost.

Derecognition criteria Equity investments are derecognised when the contractual rights to the cash flows from those financial assets expire or the financial assets are sold essentially transferring all the risks and benefits of ownership related to the assets.

Tangible Assets

Definition of assets used in operations “Assets used in operations” are defined as tangible assets owned so as to be used to perform company business and whose use is assumed over a time period longer than the financial year in question.

Definition of assets held for investment purposes “Assets used for investment purposes” are those properties owned for the purpose of generating lease payments or the appreciation of the invested capital. Consequently, a real estate property investment differs from an asset held for use by the owners due to the fact that it originates cash flows significantly differentiated from the other assets held by the Bank.

Tangible assets (for use in operations and held for investment) also include those recognised further to financial lease contracts even if the legal title to the same remains with the leasing firm.

Recognition criteria Tangible assets, whether for functional use or otherwise, are initially recorded at cost (in item 110 “Tangible assets”), including all costs directly connected with making them operational and non-recoverable duties and taxes on the purchase. This value is subsequently increased for expenses incurred for which future benefits are expected. Costs for ordinary maintenance performed on the asset are recorded in the income statement at the moment in which they are incurred, as opposed to extraordinary maintenance (improvements) for which future benefits are expected, which are capitalised as an increase to the asset’s value. Improvements and expenses incurred to increase the value of leased assets from which future benefits are expected are recognised: if they are independent and can be separately identified, in item 110 “Tangible assets” under the most appropriate category, whether they are third-party assets used under an ordinary lease contract or assets held under a finance leasing contract; if they are not independent and cannot be separately identified, in item 110 “Tangible assets”, as an increase to the asset to which they refer, if used under an finance leasing contract or in item 150 “Other assets” if they refer to assets used under an ordinary lease contract.

The cost of a tangible asset is recorded as an asset if, and only if: it is likely that future economic benefits associated with the asset will flow to the company; the asset cost can be reliably determined.

Measurement criteria Following the initial recognition, tangible assets used in operations are recorded at cost, as defined above, net of accumulated depreciation and any cumulative impairment. Depreciation, equal to the cost less the residual value (or the amount expected to be obtained on sale under normal conditions, less any expected sale costs, if the asset were in the condition expected at the end of its useful life, including its age) is systematically divided over the asset’s useful life using the straight-line method. The useful life, which is subject to periodic review in order to note any estimates that differ significantly from the previous ones, is defined as: the time period over which the asset is expected to be useful to the company, or the quantity of products or similar units the company expects to obtain from the use of said asset.

Given that tangible assets may include components with different useful lives, land is not subject to depreciation as it is a fixed asset with an indefinite useful life, whether it is independent or included in a building value. The value attributable to land is separated from the total value of the property in proportion to the ownership percentage for all buildings. Buildings are depreciated based on the above criteria. Works of art are not subject to depreciation, as their value is expected to increase over time. Depreciation of an asset begins when the asset becomes available for use and ceases when the asset is removed from this category, which corresponds to the more recent date between the date the asset is classified for sale and the date of derecognition. As a result, depreciation does not cease when the asset is idle or is no longer in active use, unless the asset has already been fully depreciated. Improvements and expenditure that increase the value of the assets are depreciated: if they are independent and can be separately identified, according to the estimated useful life described above; if they are not independent and cannot be separately identified, in the event of assets used on the basis of an ordinary lease contract, according to the shorter period between that when the improvements and expenses can be used and that of the unexpired term of the lease, also considering any individual improvement, or, if the assets are under a finance lease contract, according to the expected useful life of the assets concerned.

The depreciation of improvements and expenses to increase the value of third party assets recognised under item 150 “Other assets” is recorded under item 190 “Other operating income (expense)”.

At the end of each annual or interim reporting period, a check is performed for any indications of asset impairment. Impairment is the difference between the carrying value of the tangible asset and the lower recovery value. The latter is the greater between the fair value, net of any sales costs, and the related value in use, or rather, the current value of the asset’s future cash flows. The impairment is immediately recognised in the income statement in item 170 “Net adjustments/value recoveries on tangible assets”. This item also includes any future recoveries if the reason for the previous impairment no longer applies.

Definition and calculation of fair value Properties Fair value is calculated in reference to the market value, or the best price at which the sale of a property asset may reasonably consider itself to be concluded without conditions against a cash fee, at the valuation date, assuming: the seller and buyer are independent counterparties; the selling party has the real intention of disposing of the assets; there is a reasonable time period (considering the type of asset and the market conditions) to carry out the appropriate marketing, agree on price and the conditions necessary to conclude the sale; the market trend, the value and other economic conditions at the stipulation date of the preliminary sales contract are identical to those existing at the valuation date;

any offers by purchasing parties with characteristics that could be deemed “not at arm's length” are not taken into consideration.

Methods adopted to calculate market value are as follows: direct comparison method or market method, based on comparing the asset in question with other similar assets sold or currently on offer on the same market or competitive forums; income method based on the current value of potential market income of a similar asset, obtained by capitalising the income at a market rate.

The methods described above are performed independently and the values obtained are appropriately intermediated.

Calculating land value The method used for identifying the percentage of market value attributable to land is based on analyses of the location of the fixed asset, considering the construction type, state of maintenance and the cost to entirely rebuild the fixed asset.

Tangible assets purchased under finance leases Finance leases are contracts that essentially transfer all risks and benefits deriving from ownership of the asset. The right of ownership may or may not be transferred at the end of the contract term.

The beginning of the lease is the date on which the lessee is authorised to exercise his right to use the leased asset and therefore corresponds to the date of the initial recognition of the lease. At the moment the contract begins, the lessee records finance lease transactions as assets and liabilities in the financial statements at the fair value of the leased asset or, if lower, the current value of the minimum payments owed. To calculate the current value of the minimum payments owed the discount rate used is the implicit contractual interest rate, if determinable, otherwise the lessee’s marginal financing interest rate is used. Any initial direct costs incurred by the lessee are added to the amount recognised for the asset.

The minimum payments owed are divided between finance costs and reduction of the residual liability. The former are divided over the life of the contract in order to determine a constant interest rate on the residual liability. Under a finance lease, the depreciation expense for the contractual asset and the financial charges for each period are recorded. The depreciation criteria used for leased assets is consistent with that adopted for owned assets; please refer to the appropriate section for further details.

Derecognition criteria A tangible asset is derecognised from the balance sheet when disposed of or when the asset is permanently withdrawn from use and no future benefits are expected from its disposal. Any gains or losses resulting from the sale or disposal of tangible assets, equivalent to the difference between the net sales amount and the carrying value of the asset, are recognised in the income statement in item 240 “Profits (losses) on disposal of investments”.

Intangible Assets

Definition An asset is defined as intangible if it is not monetary, identifiable, has no physical composition and is used in performing company business. The asset is identifiable if: it is separable, or able to be separated or unincorporated and sold, transferred, licensed, leased or exchanged;

results from contractual rights or other legal rights independent of the fact that these rights are transferable or separable from other rights and obligations.

The asset, under these circumstances, is defined as being controlled by the company as a result of past events and under the assumption that through its use economic benefits will flow to the company. The Bank controls an asset if it has the power to make use of the future economic benefits deriving from the resource in question and, furthermore, may limit access to said benefits to third parties. Future economic benefits deriving from an intangible asset may include revenue from the sale of products or services, cost savings or other benefits resulting from the Bank's use of the asset.

An intangible asset is recognised if, and only if: a) it is likely that the company will receive the expected future economic benefits from the asset; b) the asset’s cost can be reliably measured.

The likelihood of deriving future economic benefits is measured using reasonable and sustainable assumptions that represent the best estimate of all economic conditions that will exist over the useful life of the asset. The degree of likelihood connected with the flow of future economic benefits attributed to the use of the asset is measured based on available sources of information at the time of initial recognition, giving greater weight to external information sources. The Bank considers goodwill and software benefiting future periods to be intangible assets.

Intangible assets with defined useful lives An asset with a defined useful life is one for which it is possible to estimate the time period within which the related economic benefits will be produced. Intangible assets recorded include software which is considered to have a defined useful life.

Intangible assets with undefined useful lives An asset with an undefined useful life is one for which it is not possible to reliably estimate the period during which the related economic benefits will be produced for the company. Assigning an undefined useful life to an asset is not the result of having already planned future expenses that, over time, will restore the standard performance level of the asset, prolonging its useful life. Goodwill is considered to have an undefined useful life.

Recognition criteria The asset, recorded in the balance sheet in item 120 “Intangible assets”, is recognised at cost and any subsequent expenses after the initial recognition are capitalised only if they generate future economic benefits and only if the expenses can be reliably determined and attributed to the asset. The intangible asset’s cost includes: the purchase price, including any non-recoverable duties and taxes on the purchase and net of any discounts or allowances; any direct costs incurred to prepare the asset for use.

Measurement criteria Following the initial recognition, an intangible asset with a defined useful life is recorded at cost net of total amortisation and any impairment. Amortisation is calculated systematically on a straight-line method over the best estimate of the useful life of the asset (refer to the definition in “Tangible Assets”).

Amortisation begins when the asset is available for use and ceases on the date the asset is derecognised.

Intangible assets with undefined useful lives (such as goodwill, as defined in the following section if positive) are recorded at cost net of any impairment verified by periodic tests carried out to check the adequacy of the carrying value of the asset (see following section). For these assets, amortisation is consequently not calculated.

An intangible asset resulting from research (or the research phase of an internal project) is not recognised. Research expenses (or expenses for the research phase of an internal project) are recorded as costs when they are incurred.

An intangible asset resulting from development (or the development phase of an internal project) is recognised if, and only if, the following can be demonstrated: a) the technical feasibility of completing the intangible asset so as to be available for use or sale; b) the company’s intention to complete the intangible asset for use or sale; c) the company’s ability or use or sell the intangible asset.

At the end of each annual or interim reporting period, a check is performed for any indications of impairment on intangible assets. Impairment is the difference between the carrying value of the asset and the recoverable value, and is recorded, as are any value recoveries, in item 180 “Net adjustments/value recoveries on intangible assets” with the exception of impairment related to goodwill, which is recorded in item 230 “Net adjustments to goodwill”.

Goodwill Goodwill is defined as the difference between the purchase price and the fair value of assets and liabilities acquired during a business combination that consists of joining businesses or distinct business activities in a single company responsible for preparing the financial statements. The result of almost all company mergers is the fact that only one company, the purchaser, obtains control of one or more distinct business activities as a result of the purchase. When a company acquires a group of activities or net assets that do not constitute a business activity, the company allocates the cost of the total of the individual identifiable assets and liabilities based on the related fair value on the purchase date. A business combination may result in a equity investment link between the parent company and the subsidiary in which the purchaser is the parent company and the acquired company is a subsidiary of the purchaser.

All business combinations are accounted for under the purchase method. The purchase method involves the following stages: a) identifying the purchaser (the purchaser is the aggregating business that obtains control of the other businesses or aggregate business activities); b) determining the cost of the business combination; c) allocating the cost of the business combination to the purchased assets as well as liabilities and potential liabilities undertaken, at the purchase date.

Merger transactions with subsidiaries or companies belonging to the same group are recorded on a consistent basis with the verification of the significant economic substance of the transactions. In application of this principle, goodwill deriving from such transactions is recorded: a) in item 120 of the balance sheet assets in the event significant economic substance is verified; b) otherwise, as a deduction to shareholders’ equity.

Allocation of the business combination costs to assets acquired and liabilities and potential liabilities undertaken The purchaser: a) records the goodwill acquired in a business combination as an asset;

b) gauges said goodwill at cost, in that it constitutes the surplus of the business combination cost compared to the purchaser’s interest in the fair value of the identifiable assets, liabilities and potential liabilities.

Goodwill acquired in a business combination represents a payment made by the purchaser in expectation of future economic benefits deriving from assets that cannot be individually identified and separately recognised. After initial recognition, the purchaser values goodwill acquired in a business combination at cost, net of accumulated impairment. Goodwill acquired in a business combination is not amortised. However, the purchaser must annually check if the goodwill has suffered impairment, or more frequently if specific events or changed circumstances indicate the possibility of an impairment, based on the specific provisions in the accounting standard. The standard states that an asset (including goodwill) has suffered impairment if the relative carrying value is greater than the recoverable value, the latter being the greater between the fair value less sales costs, and the value in use, defined in section 6 of IAS 36. In order to verify impairment, goodwill must be allocated to a unit generating cash flows, or a group of units, within the maximum aggregation constraints that cannot go beyond the operating segments identified in IFRS 8.

Negative goodwill If the purchaser's share of the net fair value of the identifiable assets, liabilities and potential liabilities exceeds the business combination cost, the purchaser: a) reviews the identification and measurement of the identifiable assets, liabilities and potential liabilities and the calculation of the business combination cost; b) immediately recognises in the income statement any residual surplus after the new measurement.

Derecognition criteria The intangible asset is removed from the financial statements following disposal or when no future economic benefit if expected from its use or disposal.

Amounts Payable, Securities issued (and Subordinated Liabilities)

The various forms of interbank and customer funding are included in the financial statements under items 10 “Due to banks", 20 “Due to customers” and 30 “Securities issues”. These items include liabilities for finance leases recorded by the lessee.

Recognition criteria The liabilities in question are recorded in the financial statements when the amounts are collected or when debt securities are issued. The recorded value is the fair value including any additional costs/revenues directly associated with the transaction and determinable from the beginning, irrespective of the time they were settled. The initial value does not include charges that are subject to reimbursement by the creditor counterparty or that are associated with internal costs of an administrative nature.

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

Derecognition criteria Financial liabilities are derecognised from the financial statements when they are discharged or expired. The repurchase of issued securities results in the derecognition of said securities and the resulting redefinition of the liability for securities issued. Any difference between the repurchase value of issued securities and the corresponding carrying value of the liability is recorded in the income statement in item 100 “Profit (loss) on the disposal or repurchase of

d) financial liabilities”. Any subsequent replacement of issued securities, which were previously derecognised, results in a new issue with the consequent recognition at the new placement price, without any income statement effect.

Tax Assets and Liabilities

Tax assets and liabilities are included in the balance sheet in items 130 “Tax assets" and 80 “Tax liabilities”.

Current tax assets and liabilities Current period taxes and those of prior periods that have not been paid are recorded as liabilities. Any surplus compared to what is owed is recorded as an asset.

Current tax liabilities (assets) for the period underway and prior periods are calculated at the value that is expected to be paid to/recovered from tax authorities, applying the tax rates and tax regulations in force. Current tax assets and liabilities are derecognised in the period in which the assets are realised or the liability is discharged.

Deferred tax assets and liabilities All taxable timing differences are recorded as deferred tax liabilities, unless the deferred tax liability derives: from goodwill whose amortisation is not deductible for tax purposes, or from the initial recognition of an asset or liability for a transaction that:  is not a business combination and  does not influence the accounting profit or the taxable income at the time of the transaction.

Deferred taxes are not calculated with regard to higher values of assets qualifying for holdover tax relief related to equity investments and to reserves qualifying for tax relief if it is deemed reasonable, at the present time, that the assumptions for their future taxation do not apply.

Deferred tax liabilities are recorded in the balance sheet in item 80 “Tax liabilities b) deferred”. For all deductible timing differences, a deferred tax asset is recorded if it is likely that taxable income will be used against it, unless the deferred tax asset results from: negative goodwill that is treated as deferred revenue; initial recognition of an asset or liability for a transaction that:  is not a business combination and  does not influence the accounting profit or the taxable income at the time of the transaction.

Prepaid tax assets are recorded in the balance sheet in item 130 “Tax assets b) prepaid”.

Prepaid tax assets and deferred tax liabilities are subject to constant monitoring and are measured based on tax rates that are expected to be applicable in the period in which the tax asset will be realised or the tax liability will be extinguished, considering the tax law currently in effect.

Prepaid tax assets and deferred tax liabilities are derecognised in the period in which: the timing differences from which they originated become taxable in reference to deferred tax liabilities or deductible in reference to prepaid tax assets; the timing difference from which they originated becomes irrelevant for tax purposes.

Prepaid tax assets and deferred tax liabilities are not discounted nor do they offset each other, as provided by law.

Provisions for Liabilities and Charges

Definition The provision is defined as a liability with an uncertain maturity or amount.

Conversely, a potential liability is defined as: a possible obligation arising from past events, the existence of which will be confirmed by the verification or otherwise of one or more future events that are not totally under the Bank’s control; a current obligation arising from past events that has not been recorded because:  it is not likely that it will be necessary to use financial resources to settle the obligation;  the amount of the obligation cannot be reliably determined.

Potential liabilities are not subject to accounting recognition as long as they are judged to be remote possibilities, but they are included for information purposes.

Recognition and measurement criteria The provision is recognised in the financial statements if, and only if: an obligation exists (legal or implicit) that is the result of past events; to fulfil the obligation, the use of resources designed to produce economic benefits is likely to be necessary; and a reliable estimate can be made of the amount required to fulfil the obligation.

The amount recognised as the provision represents the best estimate of the expense required to settle the existing obligation at the balance sheet date and reflects risks and uncertainties that inevitably characterise multiple factors and circumstances. The provision amount represents the current value of the expenses that are assumed to be necessary to settle the obligation if the effect of the current value is relevant. Future factors that may affect the amount required to settle the obligation are considered only if there is sufficient objective evidence that these factors will apply.

Provisions for liabilities and charges include risks from any tax disputes.

Derecognition criteria The provision is reversed when the use of a resource designed to produce economic benefits to settle the obligation becomes unlikely.

Foreign Currency Transactions

Definition Foreign currency is a currency other than the Bank’s reporting currency, which is the predominant currency in the environment in which the Bank operates.

Recognition criteria On initial recognition, a foreign currency transaction is recorded in the reporting currency by applying the spot exchange rate between the foreign currency and reporting currency in force on the transaction date.

Measurement criteria

At each balance sheet date: a) monetary elements31 in foreign currency are converted using the closing rate; b) non-monetary elements32 that are valued at historical cost in foreign currency are converted using the exchange rate on the transaction date; c) non-monetary elements that are valued at fair value in a foreign currency are converted using the exchange rate on the date the fair value was determined.

Exchange differences resulting from settlement of monetary elements or the conversion of monetary elements at rates other than those at which they were converted at initial recognition in the current period or prior periods are recognised in the income statement for the period in which they originated. When a profit or loss of a non-monetary element is recorded directly in shareholders’ equity, each exchange component of the profit or loss is recorded directly in shareholders’ equity. Similarly, when a profit or loss of a non-monetary element is recorded in the income statement, each exchange component of the profit or loss is recorded in the income statement.

Other Information

- Provisions for guarantees granted and commitments Provisions on an analytical and collective basis related to estimates of possible payments connected with credit risk inherent in the guarantees granted and commitments made are determined by applying the same criteria as for loans. These provisions are recorded in item 100 “Other liabilities” as a contra entry to income statement item 130d “Net adjustment/value recoveries due to impairment of: other financial transactions”.

- Employee benefits Definition Employee benefits are all types of remuneration paid by the company in exchange for the work performed by employees. Employee benefits can be divided up as: short-term benefits (other than termination benefits due to employees and remuneration in the form of capital participation) entirely due within twelve months of the end of the period in which the employees performed the work; benefits due after the termination of the working relationship; programmes for benefits following termination or agreements by which the company provides benefits following termination; long-term benefits, other than the above, entirely due within twelve months following the end of the period in which the employees performed the work.

Staff severance indemnity Recognition criteria Following the supplementary pension reform, as per Italian Legislative Decree No. 252/2005, the portions of staff severance indemnity accruing as from 1st January 2007 represent a “defined contribution plan”. The liability relating to the portions is calculated on the basis of the contributions due without the application of any actuarial method. By contrast, the staff severance indemnity accruing up until 31st December 2006 continues to represent a “benefit subsequent to the employment relationship” and thus a “defined benefits plan” and, as such, requires the determination of the obligation’s value based on actuarial assumptions and discounting, given that the liability may be settled at a much later date than the work was performed by the employee.

31 Elements represented by specific currency amounts or by assets and liabilities which must be collected or paid for a specific currency amount are defined as “monetary”. The characteristic of a monetary element is therefore the right to receive or an obligation to pay a fixed or determinable number of currency units. 32 Conversely, see the matters stated for “monetary” elements. 100

The amount recorded as a liability is equal to: a) the current value of the defined benefit obligation at the balance sheet reference date; b) plus any actuarial profits (less any actuarial losses) recorded in the appropriate equity reserve; c) less any pension expenses related to past work performed but not yet recorded; d) less the fair value at the balance sheet reference date of any assets serving the plan.

Measurement criteria The Bank chose to record actuarial profits/losses directly in shareholders’ equity under the valuation reserves for the components. “Actuarial profits/losses” include the adjustments for reformulating prior actuarial assumptions based on effective experience or due to changes in the same assumptions.

The “Projected Unit Credit Method” was used for discounting, which considers each service period as giving rise to an additional unit of staff severance indemnity so that each unit, separately, is used to calculate the final obligation. This additional unit is obtained by dividing the total service rendered by the number of years from the hiring date to the termination date. The application of this method includes projecting each future payment based on historical statistical analyses, the demographic curve and financial discounting of said flows based on market interest rates. The discounting rate used is determined as the average of swap, bid, and ask rates at the reference date of the measurement appropriately interpolated for intermediate maturities.

- Revenue Definition Revenues are gross inflows of economic benefits deriving from performing the business’ ordinary activities, when said inflows result in increases in shareholders’ equity other than increases from shareholder contributions.

Recognition criteria Revenues are valued at the fair value of the amount received or due and are recognised when they can be reasonably estimated.

The result of a transaction to render services can be reasonably estimated when the following conditions are satisfied: the revenue amount can be reliably measured; it is probable that the company will receive the economic benefits resulting from the transaction; the state of completion of the transaction at the balance sheet date can be reliably gauged; the costs incurred for the transaction and the costs to be incurred to complete it can be reliably calculated.

Revenues recognised for the rendering of services are recorded on a consistent basis with the phase of completion of the transaction. Revenues are recorded only when it is likely that the economic benefits from the transaction will flow to the Bank. When the recoverability of a value already included in revenues becomes uncertain, the non-recoverable value, or the value whose recovery is no longer likely, is recorded as a cost that adjusts the revenue originally recognised.

Revenues from third-party use of company assets that generate interest or dividends are recognised when:

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it is probable that the company will receive the economic benefits resulting from the transaction; the revenue amount can be reliably gauged.

Interest is recognised under a timing criteria that considers the effective asset yield. More specifically: interest income includes the amortisation value of any spreads, premiums or other differences between the initial carrying value for a security and its value on maturity; default interest is recorded in item 10 “Interest income and similar revenues” for the portion considered recoverable.

Dividends are recorded in correlation with the shareholders’ right to receive the payment.

Costs or revenues from the trading of financial instruments, determined by the difference between the amount paid or collected in the transaction and the fair value of the instrument, are recorded in the income statement when the financial instrument is recognised only if the fair value is determined: by referencing current and observable market transactions of the same instrument; with measurement techniques that use as variables only data from observable markets.

- Costs Costs are recognised when they are incurred using correlation criteria between costs and revenues that directly and jointly emerge from the same transactions or events. Costs that cannot be associated with revenues are recorded immediately in the income statement. Costs directly attributable to financial instruments valued at amortised cost and determinable from the beginning, independent of when they were liquidated, flow to the income statement by applying the effective interest rate method; please refer to the section “Loans and Receivables” for further information. Impairment losses are recognised in the income statement in the period in which they are discovered.

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A.3 – Disclosure on the fair value

Section A.3 Disclosure on the fair value A.3.1 Transfers between portfolios The bank has not carried out any portfolio reclassification of financial assets from categories valued at fair value to categories valued at amortised cost, either this year or in the previous one, as per the possibilities introduced by EC Regulation No. 1004/2008 of the European Commission.

A.3.2 Hierarchy of the fair value The fair value used for the purpose of the valuation of the financial instruments is determined on the basis of the criteria, indicated below on a hierarchical basis, which suppose the use of so-called observable or unobservable input. The observable input are parameters developed on the basis of available market information and reflect the assumptions that the market participants should use when they price the financial instruments; by contrast, the unobservable inputs are parameters for which market data is not available and which are therefore developed on the basis of the best information available relating to the assumptions that the market participants should use when they price the financial instrument.

Fair value determined on the basis of level 1 input: This valuation is based on observable inputs or rather prices listed on active market for identical financial instruments which the entity can access as of the instrument valuation date. The market is defined as active when the prices expressed reflect normal market transactions, are regularly and immediately available and if said prices represent effective and regular market transactions.

Fair value determined on the basis of level 2 input: This valuation is carried out by means of methods which are used if the instrument is not listed on an active market and is therefore based on different inputs to those of level 1. The valuation of the financial instrument is based on prices derived from similar listings on active markets or through measurement techniques for which the significant factors – credit spread and liquidity – are derived from parameters which are observable on the market. Although a valuation technique is being applied, the resulting listing essentially lacks discretionality since the most significant parameters used are drawn from the market and the calculation methods used replicate listings on active markets.

Fair value determined on the basis of level 3 input: The valuation is carried out by means of methods which involve the development of the unlisted instrument via the use of significant inputs which cannot be taken from the market and therefore involve the adoption by management of estimates and assumptions.

The choice between the afore-mentioned methods for determining the fair value is not optional since the same must be applied in hierarchical order.

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A.3.2.1 Accounting portfolios: breakdown by levels of the fair value

31/12/2010 31/12/2009

Financial assets/liabilities stated at fair value Le v e l 1 Le v e l 2 Le v e l 3 Le v e l 1 Le v e l 2 Le v e l 3

1. Financial as s ets held fo r trading 26.554 74.400 - 26.577 87.682 - 2. Financial as s ets at fair value ------3. Available-fo r-s ale financial as s ets 9.916 2.834 8.163 15.369 2.817 8.153 4. Hedging derivatives - 45.471 - - 75.128 - To ta l 3 6 .4 7 0 12 2 .7 0 5 8 .16 3 4 1.9 4 6 16 5 .6 2 7 8 .15 3 1. Financial liabilities held fo r trading - 76.037 - - 81.138 - 2. Financial liabilities at fair value ------3. Hedging derivatives - 64.840 - - 51.429 - To ta l - 14 0 .8 7 7 - - 13 2 .5 6 7 -

A.3.2.2 Changes during the year in financial assets valued at fair value (level 3)

F IN A N C IA L A S S ETS

he ld fo r tra ding v a lue d a t fa ir v a lue a v a ila ble -fo r-s a le he dg ing

1. Opening balances - - 8 .15 3 - 2 . Inc re a s e s - - 10 4 - 2.1. P urchas es - - 104 - 2.2. Gains booked to: - - - - 2.2.1. Income Statement - - - - − of which capital gains - - - - 2.2.2. Shareho lders ’ equity X X - - 2.3. Trans fers fro m o ther levels - - - - 2.4. Other increas es - - - - 3 . D e c re a s e s - - (9 4 ) - 3.1. Sales - - - - 3.2. Reimburs ements - - - - 3.3. Losses booked to: - - (94) - 3.3.1. Income Statement - - - - − of which capital losses - - - - 3.3.2. Shareho lders ’ equity X X (94) - 3.4. Trans fers to o ther levels - - - - 3.5. Other decreas es - - - - 4. Closing balances - - 8 .16 3 -

A.3.2.3 Changes during the year in financial liabilities valued at fair value (level 3)

These types of transactions did not occur within the Bank.

A.3.3 Disclosure on the so-called “day one profit/loss”

The disclosure refers to section 28 of IFRS 7 which deals with any differences between the price of the transaction and the values obtained by means of the use of valuation techniques which emerge at the time of initial recognition of a financial instrument not recorded immediately in the income statements on the basis of the matters envisaged by sections AG76 and AG76A of IAS 39. When such cases must be presented, the accounting policies adopted by the Bank for booking the differences thus determined to the income statement, after initial recognition of the instrument, must be indicated. Also taking into account the matters expressed in these notes, the Bank has not entered into any transactions which give rise, on initial recognition of a financial instrument, to a difference between the transaction price and the value of the instrument obtained by means of an internal valuation technique.

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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

To tal To tal 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

a) Cash on hand 73.922 92.584 b) Depo s its with central banks - - To ta l 7 3 .9 2 2 9 2 .5 8 4

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Section 2 Financial assets held for trading – Item 20 -

2.1 Financial assets held for trading: composition

To tal To tal Items / Amounts 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9 Le v e l 1 Le v e l 2 Le v e l 3 Le v e l 1 Le v e l 2 Le v e l 3

A . A s s e ts 1. Debt s ecurities 26.553 167 - 26.576 5.588 - 1.1 Structured s ecurities - 55 - - 27 - 1.2 Other debt s ecurities 26.553 112 - 26.576 5.561 - 2. Equities - 2 - - 2 - 3. Units in O.I.C.R. (co llective inves tment ins truments ) ------4. Lo ans ------4.1. Repurchas e agreements ------4.2 Other ------To ta l A 2 6 .5 5 3 16 9 - 2 6 .5 7 6 5 .5 9 0 - B. Derivative ins truments 1. Financial derivatives : 1 74.231 - 1 82.092 - 1.1 trading 1 74.231 - 1 82.092 - 1.2. linked to the fair value o ptio n ------1.3 o ther ------2. Credit derivatives : ------2.1 trading ------2.2. linked to the fair value o ptio n ------2.3 o ther ------To ta l B 1 7 4 .2 3 1 - 1 8 2 .0 9 2 - Total (A+B) 2 6 .5 5 4 7 4 .4 0 0 - 2 6 .5 7 7 8 7 .6 8 2 -

As at 31st December 2009, item “A.1.2 Level 2” included 5,471 thousand euro of securities held in the foreign branch’s portfolio (of which Lehman securities for around 517 thousand euro).

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

To tal To tal Items / Amounts 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

A . A S S ETS 1. D e bt s e c uritie s 2 6 .7 2 0 3 2 .16 4 a) Go vernments and Central Banks 26.719 26.601 b) Other public autho rities - 89 c) Banks 1 4.956 d) Other is s uers - 518 2. Equities 2 2 a) Banks - - b) Other is s uers : 2 2 - ins urance co mpanies - - - financial co mpanies - - - no n financial co mpanies 2 2 - o thers - - 3. Units in O.I.C.R. (collective investment instruments) - - 4 . Lo a ns - - a) Go vernments and Central Banks - - b) Other public autho rities - - c) Banks - - d) Other - - To ta l A 2 6 .7 2 2 3 2 .16 6 B. DERIVATIVE INSTRUMENTS a) Banks - fair value 4.985 9.923 b) Cus to mers - fair value 69.247 72.170 To ta l B 7 4 .2 3 2 8 2 .0 9 3 Total (A+B) 10 0 .9 5 4 114 .2 5 9

As at 31st December 2010, there were no equities issued by non-performing or impaired parties.

2.3 Financial assets held for trading: changes in the year

Units in O.I.C.R. Debt securities Equities (collective Loans Total investment instruments) Opening balances 32.164 2 - - 32.166 B. Increases 164.223 228 - - 164.451 B.1 Purchases 163.823 228 - - 164.051 B.2 Positive changes in fair value 49 - - - 49 B.3 Other changes 351 - - - 351 C. Decreases (169.667) (228) - - (169.895) C.1 Sales (169.642) (223) - - (169.865) C.2 Reimbursements (1) - - - (1) C.3 Negative changes in fair value (1) - - - (1) C.4 Transfers to other portfolios - - - - - C.5 Other changes (23) (5) - - (28) D. Closing balances 26.720 2 - - 26.722

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Section 3 Financial assets at fair value - Item 30 -

These types of transactions did not occur within the Bank.

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

4.1. Available-for-sale financial assets: composition

To tal To tal 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9 Items / Amounts

Le v e l 1 Le v e l 2 Le v e l 3 Le v e l 1 Le v e l 2 Le v e l 3

1. Debt s ecurities ------1.1 Structured s ecurities ------1.2 Other debt s ecurities ------2. Equities 9.916 2.739 8.163 15.369 2.739 8.153 2.1 Valued at fair value 9.916 2.739 1.958 15.369 2.739 1.948 2.2 Valued at co s t - - 6.205 - - 6.205 3. Units in O.I.C.R. (co llective inves tment ins truments ) - 95 - - 78 - 4. Lo ans ------To ta l 9 .9 16 2 .8 3 4 8 .16 3 15 .3 6 9 2 .8 17 8 .15 3

Point 2.2.1 “Level 1” represents the investment held in Intesa S. Paolo.

4.2 Available-for-sale financial assets: composition by debtor/issuer

To tal To tal Items / Amounts 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

1.D e bt s e c uritie s - - a) Go vernments and Central Banks - - b) Other public autho rities - - c) Banks - - d) Other is s uers - - 2. Equities 2 0 .8 18 2 6 .2 6 1 a) Banks 10.087 15.540 b) Other is s uers : 10.731 10.721 - ins urance co mpanies 1.673 1.693 - financial co mpanies 3.239 3.239 - no n financial co mpanies 3.478 3.449 - o thers 2.341 2.340 3. Units in O.I.C.R. (collective investment instruments) 95 78 4 . Lo a ns - - a) Go vernments and Central Banks - - b) Other public autho rities - - c) Banks - - d) Other - - To ta l 2 0 .9 13 2 6 .3 3 9

Equities include shares purchased following the partial conversion of the restructured loan exposure for a nominal value of 2,341 thousand euro.

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4.3 Available-for-sale financial assets: assets subject to specific hedge

Available-for-sale financial assets represent minority shareholdings in companies for which no hedge was deemed necessary.

4.4 Available-for-sale financial assets: changes in the year

Units in O.I.C.R. Debt securities Equities (collective Loans Total investment Opening balances - 26.261 instruments)78 - 26.339 B. Increases - 104 17 - 121 B.1 Purchases - 104 - - 104 B.2 Positive changes in FV - - 17 - 17 B.3 Value recoveries ------recognised in the income statement - X - - - - recognised in shareholders' equity - - - - - B.4 Transfers from other portfolios - - - - - B.5 Other changes - - - - - C. Decreases - (5.547) - - (5.547) C.1 Sales - - - - - C.2 Reimbursements - - - - - C.3 Negative changes in FV - (5.547) - - (5.547) C.4 Writedowns for impairment ------recognised in the income statement ------recognised in shareholders' equity - - - - - C.5 Transfers to other portfolios - - - - - C.6 Other changes - - - - - D. Closing balances - 20.818 95 - 20.913

Section 5 Held-to-maturity financial assets- Item 50 -

These types of transactions did not occur within the Bank.

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Section 6 Loans to banks – Item 60 -

6.1 Loans to banks: composition

To tal To tal Type of transaction/Values 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

A . Lo a ns to C e ntra l B a nks 1. Term depo s its - - 2. Co mpuls o ry res erve - - 3. Revers e repurchas e agreements - - 4. Other - - B . Lo a ns to ba nks 1. Current acco unts and unres tricted depo s its 63.090 236.105 2. Term depo s its 200.579 6.781.810 3. Other lo ans : 587.722 424.157 3.1 Revers e repurchas e agreements 508.723 363.323 3.2 Finance leases - - 3.3 Other 78.999 60.834 4. Debt s ecurities - - 4.1 Structured s ecurities - - 4.2 Other debt s ecurities - - To ta l (c a rrying v a lue ) 8 5 1.3 9 1 7 .4 4 2 .0 7 2 To ta l (fa ir v a lue ) 8 5 1.3 9 8 7 .4 4 2 .0 7 2

The most significant change concerned the item “term deposits”, which as at 31st December 2009,included:  around 5,574,203 thousand euro relating to the use of amounts collected by the foreign branch via the issue of Certificates of Deposit and Euro Commercial Papers subscribed by institutional investors;  around 700,000 thousand euro, of which 500,000 thousand euro strictly linked to the Group policy for structural rebalance, achieved during 2010.

The Compulsory Observe requirement met indirectly amounted to 173,573 thousand euro (163,320 thousand euro as at 31st December 2009).

“Repurchase agreements” were concluded exclusively with the Parent Company and strictly linked to similar funding transactions with customers.

The impaired exposures vis-à-vis the Bank are not significant as to their amount.

6.2 Loans to banks: assets subject to specific hedge

No loans to banks are subject to specific hedges.

6.3 Finance leases

No finance leases were entered into with banks.

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Section 7 Loans to customers – Item 70 -

7.1 Loans to customers: composition

To tal To tal Type of transaction/Values 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

P e rfo rm ing Im pa ire d P e rfo rm ing Im pa ire d

1. Current acco unts 2.422.741 175.074 2.225.093 117.491 2. Revers e repurchas e agreements - - - - 3. Mo rtgages 8.518.976 408.635 8.005.766 279.827 4. Credit cards, personal loans and salary backed loans 89.980 8.300 133.995 7.335 5. Finance leases - - - - 6. Facto ring - - - - 7. Other trans actio ns 3.292.381 154.091 3.273.435 127.343 8. Debt s ecurities 8.026 - 8.456 - 8.1 Structured s ecurities - - - - 8.2 Other debt s ecurities 8.026 - 8.456 - To ta l (c a rrying v a lue ) 14.332.104 7 4 6 .10 0 13.646.745 5 3 1.9 9 6 To ta l (fa ir v a lue ) 14.789.675 7 4 6 .10 0 14.126.395 5 2 5 .3 4 9

“Other transactions” primarily includes advances on notes and subject to collection documents, import-export loans and other grants not regulated in customer current accounts.

The item “mortgages” includes: 1,815,700 thousand euro (of which 20,049 thousand euro impaired) guaranteeing issues of Covered Bonds carried out by the Parent Company. 1,236,895 thousand euro (of which 69,518 thousand euro impaired) pertaining to the securitisation transaction.

Reference should be made to the specific sections for further details.

7.2. Loans to customers: composition by debtor/issuer

To tal To tal Type of transaction/Values 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

P e rfo rm ing Im pa ire d P e rfo rm ing Im pa ire d

1.D e bt s e c uritie s 8.026 - 8.456 - a) Go vernments - - - - b) Other public autho rities 8.026 - 8.456 - c) Other is s uers : - - - - - no n financial co mpanies - - - - - financial co mpanies - - - - - ins urance co mpanies - - - - - o thers - - - - 2 . Lo a ns to : 14.324.078 746.100 13.638.289 531.996 a) Go vernments 609 1 4.888 - b) Other public autho rities 29.380 - 29.483 - c) Other is s uers : 14.294.089 746.099 13.603.918 531.996 - no n financial co mpanies 9.107.722 599.400 8.749.799 434.469 - financial co mpanies 885.013 16.485 843.063 2.577 - ins urance co mpanies 1.294 - 1.629 - - o thers 4.300.060 130.214 4.009.427 94.950 To ta l 14.332.104 7 4 6 .10 0 13.646.745 5 3 1.9 9 6

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7.3 Loans to customers: assets subject to specific hedge

To tal To tal Type of transaction/Values 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

1. Loans to customers subject to specific hedge : a) interes t rate ris k 304.870 442.135 b) exchange rate ris k - - c) credit ris k - - d) multiple ris ks - - 2. Lo ans s ubject to cas h flo w s pecific hedge: a) interes t rate ris k - - b) exchange rate ris k - - c) o ther - - To ta l 3 0 4 .8 7 0 4 4 2 .13 5

7.4 Finance leases

No finance leases were entered into with customers.

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Section 8 Hedging derivatives – Item 80

8.1 Hedging derivatives: composition by contract type and level

FV 31/12/2010 FV 31/12/2009 NV NV 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9 L1 L2 L3 L1 L2 L3

A. Financial derivatives - 4 5 .4 7 1 - 1.8 9 0 .6 7 3 - 7 5 .12 8 - 2 .2 3 7 .5 0 5 1) Fair value - 45.454 - 1.890.575 - 75.128 - 2.237.505 2) Cas h flo ws - 17 - 98 - - - - 3) Fo reign inves tments ------B . C re dit de riv a tiv e s ------1) Fair value ------2) Cas h flo ws ------To ta l - 4 5 .4 7 1 - 1.8 9 0 .6 7 3 - 7 5 .12 8 - 2 .2 3 7 .5 0 5

Key: NV = nominal value L1 = level 1 L2 = level 2 L3 = level 3

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8.2 Hedging derivatives: composition by hedging portfolio and type of hedge

F air V alue Cash flow hedges

Transactions / Type of S p e c if ic F o re ig n he d g ing investments Macro-hedge S p e c if ic Macro-hedge Interest rate Exchange rate Credit risk P ric e ris k Multiple risks ris k ris k

1. Available-for-sale financial - - - - - X - X X assets 2. Loans - - - X - X - X X 3. Held-to-maturity financial X - - X - X - X X assets 4. Portfolios X X X X X 1.152 - X

5, Other transactions ------

Total assets - - - - - 1.152 - - - 1. Financial liabilities 44.302 - - X - X 17 X X

2. Portfolios - - X

Total liabilities 4 4 .3 0 2 - - - - - 17 - - 1. Expected transactions X X X X X X - X X 2. Portfolio of financial assets X X X X X - X - - and liabilities

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Section 9 Fair value changes to hedged financial assets – Item 90-

9.1 Value adjustment of hedged assets: composition by hedged portfolio

To tal To tal Value adjustment of hedged assets / Values 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

1. Positive adjustment

1.1 o f s pecific po rtfo lio s :: 40.200 21.556 a) lo ans 40.200 21.556 b) available-fo r-s ale financial as s ets - - 1.2 general - - 2. Negative adjustments 2.1 o f s pecific po rtfo lio s : - - a) lo ans - - b) available-fo r-s ale financial as s ets - - 2.2 general - - To ta l 4 0 .2 0 0 2 1.5 5 6

9.2 Assets subject to interest rate risk macro hedge

Hedged assets 31/12/2010 31/12/2009

1. Lo ans 927.723 744.442 2. Available-fo r-s ale financial as s ets - - 3. P o rtfo lio s - - To ta l 9 2 7 .7 2 3 7 4 4 .4 4 2

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Section 10 Equity investments - Item 100 -

10.1 Investments in subsidiaries, jointly controlled companies or companies under dominant influence: information on shareholdings

N a m e He a dqua rte rs % ho lding

A. Companies subject to exclusive control (*)

BANCA DI VALLE CAMONICA SpA Share capital 2,738,693 euro in s hares with a value o f 1 euro each. Breno (BS) 8,716

UBI BANCA INTERNATIONAL SA Share capital 59,070,750 euro in s hares with a value o f 510 euro each. Luxembo urg 5,850

UBI SISTEMI E SERVIZI SCpA Share capital 35,136,400 euro in s hares with a value o f 0.52 euro each Bres cia 2,960

B . C o m pa nie s s ubje c t to jo int c o ntro l

C. Companies subject to significant influence

(*) The equity investments in Group companies are included even in the event of minority interests.

(*) The equity investments in Group companies are included even in the case of minority interests.

10.2 Investments in subsidiaries, jointly controlled companies or companies under dominant influence: accounting information

To ta l re v e nue s S ha re ho lde rs ' Name Total assets P ro fit (lo s s ) C a rrying v a lue (*) e quity (**)

A. Companies subject to exclusive control Banca di Vallecamonica SpA 2.122.894 60.463 1.574 112.550 12.266 UBI Banca Internatio nal SA (***) 8.935.468 33.214 8.908 110.414 5.191 UBI Sis temi e Servizi SCpA 205.614 (93) - 51.664 1.565 B . C o m pa nie s s ubje c t to jo int c o ntro l 0 - - - - - C. Companies subject to significant influence 0 - - - - - To ta l 11.263.976 9 3 .5 8 4 10 .4 8 2 2 7 4 .6 2 8 19 .0 2 2

(*) The amounts represent net financial operating income. (**) Shareholders' equity includes the profit shown in the draft 2010 financial statements. (***) The UBI Banca International SA figures are taken from the accounting schedules drawn up for consolidation purposes according to the standards applied by the Parent Company.

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10.3 Equity investments: changes in the year

To tal To tal 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

A. Opening balances 16 .12 2 16 .12 2 B . Inc re a s e s 14 6 .4 2 0 - B.1 P urchas es - - B.2 Value reco veries - - B.3 Write-ups - - B.4 Other changes 146.420 - C . D e c re a s e s (14 3 .5 2 0 ) - C.1 Sales (143.520) - C.2 Value adjustments - - C.3 Other changes - - D. Closing balances 19 .0 2 2 16 .12 2 E. To ta l write -ups - - F. Total value adjustments - -

Following the territorial optimisation transaction, the equity investments relating to Banca Popolare di Bergamo, Banca Popolare Commercio ed Industria, Banca Regionale Europea, and Banco di San Giorgio were recorded in this item, for 32,896 thousand euro; in accordance with the Assirevi OPI, changes were stated under other increases. In July, the same equity investments were transferred to the Parent Company for around 143,520 thousand euro, fully recorded under other decreases. The difference between the carrying value and the disposal value, 110,624 thousand euro, has been included under other increases, as a contra entry to Shareholders’ Equity.

The other increases also comprise the increase (2,899.9 thousand euro) in the investment in UBI International S.A. following the conferral of the Luxembourg branch.

10.4 Commitments relating to equity investments in subsidiary companies

There are no equity investments which can be qualified as subsidiary companies.

10.5 Commitments relating to equity investments in jointly controlled companies

There are no equity investments which can be qualified as jointly controlled.

10.6 Commitments relating to equity investments in companies under dominant influence

There are no commitments or potential liabilities associated with companies under dominant influence.

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Section 11 Tangible assets – Item 110 -

The bank’s tangible assets are stated at cost net of depreciation as specified in part A of these notes.

11.1 Tangible assets: composition of assets valued at cost

To tal To tal Assets/Amounts 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

A. Assets used in operations 1.1 o wne d 2 4 1.7 5 8 17 6 .7 7 4 a) land 145.336 88.331 b) buildings 74.440 62.319 c) furnis hings 7.712 8.298 d) electro nic equipment 4.935 6.059 e) o ther 9.335 11.767 1.2 acquired through finance leases - 1.4 4 7 a) land - 652 b) buildings - 795 c) furnis hings - - d) electro nic equipment - - e) o ther - - To ta l A 2 4 1.7 5 8 17 8 .2 2 1 B. Assets held for investment 2 .1 o wne d 5 2 .0 7 8 119 .16 5 a) land 41.479 92.460 b) buildings 10.599 26.705 2.2 acquired through finance leases - - a) land - - b) buildings - - To ta l B 5 2 .0 7 8 119 .16 5 Total (A+B) 2 9 3 .8 3 6 2 9 7 .3 8 6

11.2 Tangible assets: composition of assets valued at fair value or revalued

Tangible assets are carried at cost, therefore no assets of this type exist.

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11.3 Tangible assets used in operations: changes in the year

Ele c tro nic La nd B uilding s F urnis hing s Othe r To ta l e quipm e nt

A. Gross opening balances 12 2 .9 0 7 10 5 .5 16 3 4 .0 0 9 2 7 .0 9 1 6 8 .2 7 4 3 5 7 .7 9 7 A.1 To tal net reductio ns in value (33.924) (42.402) (25.711) (21.032) (56.507) (17 9 .5 7 6 ) A.2 Net opening balances 8 8 .9 8 3 6 3 .114 8 .2 9 8 6 .0 5 9 11.7 6 7 17 8 .2 2 1 B . Inc re a s e s 5 9 .0 0 9 16 .0 9 1 1.0 7 8 825 1.6 18 7 8 .6 2 1 B.1 P urchas es 1 5 977 650 1.422 3 .0 5 5 B.2 Capitalised improvement expenses - 672 - - - 672 B.3 Value reco veries ------B.4 P o s itive changes in fair value reco gnis ed in: ------a) s hareho lders ' equity ------b) inco me s tatement ------B.5 P o s itive exchange rate differences ------B.6 Trans fers fro m pro perties held fo r inves tment ------B.7 Other changes 59.008 15.414 101 175 196 7 4 .8 9 4 C . D e c re a s e s (2 .6 5 6 ) (4 .7 6 5 ) (1.6 6 4 ) (1.9 4 9 ) (4 .0 5 0 ) (15 .0 8 4 ) C.1 Sales (40) (213) - - (1) (2 5 4 ) C.2 Depreciatio n - (2.380) (1.507) (1.775) (3.442) (9 .10 4 ) C.3 Net impairment adjustments recognised in: - - (12) - - (12 ) a) s hareho lders ' equity ------b) inco me s tatement - - (12) - - (12 ) C.4 Negative changes in fair value recognised in: ------a) s hareho lders ' equity ------b) inco me s tatement ------C.5 Negative exchange rate differences ------C.6 Trans fers to : ------a ) ta ngible a s s e ts he ld fo r inve s tm e nt ------b) as s ets held fo r s ale ------C.7 Other changes (2.616) (2.172) (145) (174) (607) (5 .7 14 ) D. Net closing balances 14 5 .3 3 6 7 4 .4 4 0 7 .7 12 4 .9 3 5 9 .3 3 5 2 4 1.7 5 8 D.1 To tal net reductio ns in value (49.306) (53.746) (26.532) (22.404) (58.067) (2 10 .0 5 5 ) D.2 Gross closing balances 19 4 .6 4 2 12 8 .18 6 3 4 .2 4 4 2 7 .3 3 9 6 7 .4 0 2 4 5 1.8 13 E. Valuatio n at co s t ------

120

Depreciation is calculated with reference to the estimated useful life of the asset as from the date it comes into service. The useful life of the main categories of fixed assets, estimated in months, is shown below:

D e s c riptio n D e pre c ia tio n Us eful life

Land relating to pro perties NO No t depreciated P ro perties - leas ed pro perties YES On bas is o f apprais al Lifting and weighing equipment YES 160 mo nths Light co ns tructio ns and s caffo lding YES 120 mo nths Furnis hings s undry fixtures YES 120 mo nths Ordinary o ffice furnis hings and equipment YES 100 mo nths ATM installations YES 96 mo nths Safes and s tro ng ro o ms YES 80 mo nths Machinery and s undry equipment YES 80 mo nths Sundry machinery, furnis hings and fixtures YES 80 mo nths Bullet pro o d co unters o r with bullet pro o f glas s YES 60 mo nths P ers o nal co mputers YES 60 mo nths Canteen equipment YES 48 mo nths Special internal communication equipment YES 48 mo nths Alarm s ys tems YES 40 mo nths Fire fighting equipment YES 40 mo nths Electrical and electro nic o ffice machinery YES 30 mo nths Mo to r vehicles YES 30 mo nths Cars YES 24 mo nths Leas ed cars YES Bas ed o n duratio n o f co ntract

11.4 Tangible assets held for investment purposes: changes in the year

To tal 3 1/ 12 / 2 0 10

La nd B uilding s

A. Opening balances 9 2 .4 6 0 4 1.10 3 A.1 To tal net reductio ns in value - (14.398) A.3 Net opening balances 9 2 .4 6 0 2 6 .7 0 5 B . Inc re a s e s 2 4 .5 2 5 4 .111 B.1 P urchas es - - B.2 Capitalised improvement expenses - - B.3 P o s itive changes in fair value - - B.4 Value reco veries - - B.5 P o s itive exchange rate differences - - B.6 Trans fers fro m pro perties us ed in o peratio ns - - B.7 Other changes 24.525 4.111 C . D e c re a s e s (7 5 .5 0 6 ) (2 0 .2 17 ) C.1 Sales (886) (1.455) C.2 Depreciatio n (2) (988) C.3 Negative changes in fair value - - C.4 Net impairment adjustments - - C.5 Negative exchange rate differences - - C.6 Trans fers to o ther as s et po rtfo lio s : - - a) pro perties us ed in o peratio ns - - b) no n-current as s ets held fo r s ale - - C.7 Other changes (74.618) (17.774) D. Closing balances 4 1.4 7 9 10 .5 9 9 D.1 To tal net reductio ns in value (8.380) (5.557) D.2 Gross closing balances 4 9 .8 5 9 16 .15 6 E. Valuatio n at fair value 62.423 15.951

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11.5 Commitments to purchase tangible assets (IAS 16/74.c)

Assets/Amounts 31/12/2010 31/12/2009

A. Assets used in operations 1.1 Owned 736 222 a) land - - b) buildings - - c) furnis hings 134 222 d) electro nic equipment 318 - e) o ther 284 - 1.2 Under finance leas es : - - a) land - - b) buildings - - c) furnis hings - - d) electro nic equipment - - e) o ther - - To ta l A 736 222 B. Assets held for investment 2.1 Owned - - a) land - - b) buildings - - 2.2 Under finance leas es : - - a) land - - b) buildings - - To ta l B - - To ta l A +B 736 222

The commitments indicated above fall within the normal corporate planning activities; they concern orders not yet carried out which will be executed during the first few months of 2011.

122

Section 12 Intangible assets – Item 120 -

12.1 Intangible assets: composition by asset type

To tal To tal 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9 Assets/Amounts Finite life Indefinite life Finite life Indefinite life

A.1 Go o dwill X 19 .7 0 5 X 19 .7 0 5 A.2 Other intangible assets - - 34 - A.2.1 Assets valued at cost: - - 34 - a) Internally generated intangible assets - - - - b) Other as s ets - - 34 - A.2.2 As s ets at fair value - - - - a) Internally generated intangible assets - - - - b) Other as s ets - - - - To ta l - 19 .7 0 5 34 19 .7 0 5

As at 31st December 2009, other intangible assets with a finite life represent software of the foreign branch that is amortised over 60 months.

The goodwill recognised represents the amount Banco di Brescia paid for the capacity of the unit subject to merger to produce future economic benefits for the “aggregating” company. In further detail below:

Banca Lombarda Milano Group - 1995 5,567

Banca del Cimino – segment spun-off – 1995 1,250

Banca del Cimino - 1998 9,627

Banca di Valle Camonica branches- 2001 1,164

Banca Regionale Europea branches - 2002 2,097

TOTAL GOODWILL 19,705

As indicated in IAS 36, a company must determine at each balance sheet date if there is any indication that an asset may have become impaired (impairment test). With reference to goodwill, irrespective of whether there were any indications of impairment loss, it is important to perform the aforementioned test at least annually. As per IAS 36, an asset has suffered an impairment loss when its carrying value exceeds its recoverable value, which is the greater of its fair value less sales costs or its value in use. Goodwill was allocated over the entire legal entity as a total unit generating cash flows. Therefore the goodwill impairment test recorded in the financial statements as at 31st December 2009 was performed by comparing the value in use of the entire business entity (which forms a cash generating unit) with its related carrying value. The estimate of the value in use was made on the basis of the discounting back of the income flows, determined on the basis of the 2011 budget and extrapolated on the basis of the 2012-2015 growth rates of the main key components, shown below, as approved by the Bank’s Board of Directors:

Loans to customers cagr% 2010-2015 RWA Loans cagr% 2010-2015 Direct funding cagr% 2010-2015 Assets Management cagr% 2010-2015 Administered funds cagr% 2010-2015 Total funding cagr% 2010-2015

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Operating Income cagr% 2010-2015 - of which net commission cagr% 2010-2015 Operating costs cagr% 2010-2015 Cost income 2015 Lending cost 2015 Average mark up 2015 Average mark down 2015 Indirect funding spread 2015

The growth rate of the earnings used came to 0.82% and is considered stable and such that it does not exceed the long-term growth rates of the entire banking sector. The post-tax discount rate on earnings is 8.82%. This rate together with the growth rate beyond the explicit forecast period of 0.82% contribute to a capitalisation rate for terminal value estimation purposes of 8.0%. This capitalisation rate is in line with that used by equity analysts that follow UBI shares.

The method described above and the supporting quantitative information have been approved independently and formally by the Bank’s Board of Directors. Analysis carried out made it possible to detect the absence of impairment losses on the goodwill recorded in the Bank’s financial statements as at 31st December 2010.

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12.2 Intangible assets: changes in the year

Othe r inta ng ible a s s e ts : g e ne ra te d Othe r inta ng ible a s s e ts : o the r inte rna lly Go o dwill 31/12/2010 Finite life Indefinite life Finite life Indefinite life

A. Opening balances 19 .7 0 5 - - 34 - 19 .7 3 9 A.1 To tal net reductio ns in value ------A.2 Net opening balances 19 .7 0 5 - - 34 - 19 .7 3 9 B . Inc re a s e s ------B.1 P urchas es ------B.2 Increases in internal intangible assets X - - - - - B.3 Value reco veries X - - - - - B.4 P o s itive changes in fair value ------in s hareho lders ' equity X ------in income statement X - - - - - B.5 P o s itive exchange rate differences ------B.6 Other changes ------C . D e c re a s e s - - - (3 4 ) - (3 4 ) C.1 Sales ------C.2 Value adjustments - - - (34) - (3 4 ) - Amo rtis atio n X - - (10) - (10 ) - Writedo wns - - - (24) - (2 4 ) + s hareho lders ' equity X - - - - - + income statement - - - (24) - (2 4 ) C.3 Negative changes in ------in s hareho lders ' equity X ------in income statement X - - - - -

C.4 Trans fers to no n current as s ets held fo r s ale ------

C.5 Negative exchange rate differences ------C.6 Other changes ------D. Net closing balances 19 .7 0 5 - - - - 19 .7 0 5 D.1 To tal net reductio ns in value ------E. Gross closing balances 19 .7 0 5 - - - - 19 .7 0 5 F. Valuatio n at co s t ------

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12.3 Other information

The following additional information is provided: a) there is nothing preventing the capital gains associated with the revaluation of intangible assets from being distributed to shareholders; b) no intangible assets were acquired through government subsidies; c) no intangible assets have been set up to guarantee own payables; d) there are no commitments to acquire intangible assets; e) there are no intangible assets that are the subject of lease transactions.

126

Section 13 Tax Assets and Liabilities - Asset Item 130 and Liability Item 80 -

13.1 Prepaid tax assets: composition

Total 31/12/2010 Total 31/12/2009

Tax effect Tax effect Amount of Amount of (IRES at (IRES at timing timing 27.5%, IRAP 27.5%, IRAP differences differences at 4.82%) at 4.82%)

Prepaid taxes with contra entry in income statement 12 0 .6 7 7 3 3 .4 9 4 9 2 .8 0 0 2 5 .8 3 0 - Lo ans 90.705 24.944 62.067 17.069 - Financial ins truments - - - - - Tangible as s ets - - - - - P ro vis io ns fo r liabilities and charges 18.080 4.972 19.478 5.356 - Staff co s ts 5.316 1.462 4.313 1.186 - Value adjus tments o n multi-year charges - - - - - Go o dwill 1.813 587 1.830 591 - Value adjustments on equity investments and available-for-sale securities 4.650 1.497 5.030 1.601 - Other 114 33 82 27 P re pa id ta xe s with c o ntra e ntry in s ha re ho lde rs ' e quity 5 5 2 10 2 13 8 9 - Staff co s ts 231 14 - - - Other 321 88 138 9 To ta l pre pa id ta xe s re c o g nis e d 12 1.2 2 9 3 3 .5 9 7 9 2 .9 3 8 2 5 .8 3 9 - Timing differences no t included in calculatio n o f prepaid taxes - - - - Total prepaid taxes recognisable 12 1.2 2 9 3 3 .5 9 7 9 2 .9 3 8 2 5 .8 3 9

13.2 Deferred tax liabilities: composition

Total 31/12/2010 Total 31/12/2009

Tax effect Tax effect Amount of Amount of (IRES at (IRES at timing timing 27.5%, IRAP 27.5%, IRAP differences differences at 4.82%) at 4.82%)

Deferred taxes with contra entry in income statement 5 7 .113 16 .5 6 3 9 1.4 3 0 2 5 .9 6 1 - Leased tangible assets 1.801 594 1.837 604 - Financial ins truments - - - - - Tangible as s ets 2.502 887 5.302 1.724 - Go o dwill 11.506 3.719 9.166 2.962 - P ro vis io ns fo r credit ris ks - - - - - Gains in ins talments 36.656 10.084 73.405 20.197 - Staff co s ts 4.648 1.278 1.720 473 - Other - - - - D e fe rre d ta xe s with c o ntra e ntry in s ha re ho lde rs ' e quity 5 .2 5 2 4 4 9 11.5 3 3 1.0 13 - Valuatio n o f available-fo r-s ale s ecurities 5.252 449 10.690 781 - Staff co s ts - - 843 232 To ta l de fe rre d ta xe s re c o g nis e d 6 2 .3 6 5 17 .0 11 10 2 .9 6 3 2 6 .9 7 4 - Timing differences no t included in the calculatio n o f deferred taxes - - - - To ta l de fe rre d ta xe s re c o g nis a ble 6 2 .3 6 5 17 .0 11 10 2 .9 6 3 2 6 .9 7 4

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13.3 Changes in prepaid tax assets (with contra-entry recorded in the income statement)

To tal To tal 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

1. Opening balance 2 5 .8 3 0 2 0 .9 6 7 2 . Inc re a s e s 11.19 7 9 .4 2 8 2.1 P repaid taxes aris ing during the year 10.885 7.309 a) relating to previo us years - - b) due to changes in accounting policies - - c) value reco veries - - d) o ther 10.885 7.309 2.2 New taxes o r increas es in tax rates - - 2.3 Other increas es 312 2.119 2.4 Business combination transactions - - 3 . D e c re a s e s (3 .5 3 3 ) (4 .5 6 5 ) 3.1 P repaid taxes derecognised during the year (2.534) (2.980) a) revers als (2.534) (2.980) b) writedo wns o f no n-reco verable items - - c) due to changes in accounting policies - - d) o ther - - 3.2 Reductions in tax rates - - 3.3 Other decreas es (999) (1.585) 4. Closing balance 3 3 .4 9 4 2 5 .8 3 0

The figures indicated in items 2.3 - Other increases and 3.3 – Other decreases, for the period under review, correspond to the prepaid taxes associated with the items subject to transfer between companies taking part in the territorial optimisation transaction.

13.4 Changes in deferred tax liabilities (with contra-entry recorded in the income statement)

To tal To tal 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

1. Opening balance 2 5 .9 6 1 3 9 .3 6 4 2 . Inc re a s e s 1.9 6 7 3 .12 7 2.1 Deferred taxes aris ing during the year 961 3.127 a) relating to previo us years - - b) due to changes in accounting policies - - c) o ther 961 3.127 2.2 New taxes o r increas es in tax rates - - 2.3 Other increas es 1.006 - 3 . D e c re a s e s (11.3 6 6 ) (16 .5 3 0 ) 3.1 Deferred taxes dereco gnis ed during the year (10.664) (10.918) a) revers als (10.664) (10.918) c) due to changes in accounting policies - - d) o ther - - 3.2 Reductions in tax rates - - 3.3 Other decreas es (702) (5.612) 4. Closing balance 16 .5 6 2 2 5 .9 6 1

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The figures indicated in items 2.3 - Other increases and 3.3 – Other decreases, for the period under review, correspond to the deferred taxes associated with the items subject to transfer between companies taking part in the territorial optimisation transaction.

13.5 Changes in prepaid tax assets (with contra-entry recorded under shareholders’ equity)

To tal To tal 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

1. Opening balance 9 - 2 . Inc re a s e s 94 9 2.1 P repaid taxes aris ing during the year 94 9 a) relating to previo us years - - b) due to changes in accounting policies - - c)o ther 94 9 2.2 New taxes o r increas es in tax rates - - 2.3 Other increas es - - 3 . D e c re a s e s - - 3.1 P repaid taxes derecognised during the year - - a) revers als - - b) writedo wns o f no n-reco verable items - - c) due to changes in accounting policies - - d) o ther - - 3.2 Reductions in tax rates - - 3.3 Other decreas es - - 4. Closing balance 10 3 9

13.6 Changes in deferred tax liabilities (with contra entry recorded under shareholders’ equity)

To tal To tal 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

1. Opening balance 1.0 13 1.2 3 0 2 . Inc re a s e s 6 200 2.1 Deferred taxes aris ing during the year 6 200 a) relating to previo us years - - b) due to changes in accounting policies - - c) o ther 6 200 2.2 New taxes o r increas es in tax rates - - 2.3 Other increas es - - 3 . D e c re a s e s (5 7 0 ) (4 17 ) 3.1 Deferred taxes dereco gnis ed during the year (570) (417) a) revers als (570) (417) c) due to changes in accounting policies - - d) o ther - - 3.2 Reductions in tax rates - - 3.3 Other decreas es - - 4. Closing balance 449 1.0 13

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13.7 Other information

To tal 31/12/2010 To tal 31/12/2009

P ayments on account made to tax authorities 15.946 26.043 Tax credit 16.294 24.246 3 2 .2 4 0 5 0 .2 8 9

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Section 14 Non Current Assets and Groups of Assets Held for Sale and Related Liabilities – Asset Item 140 and Liability Item 90 -

These types of transactions did not occur within the Bank.

131

Section 15 Other assets - Item 150 -

15.1 Other assets: composition

To tal 31/12/2010 To tal 31/12/2009

Items associated with Covered Bond/Securitisation transactions 863.571 108.438 Leasehold improvements 4.288 4.522 Items in trans it 10.495 71.087 Fees to be received 23.999 22.838 Currency differences o n exchange rate and po rtfo lio trans actio ns 3.957 1.679 Cheques drawn o n third parties 34 684 Wo rk in pro gres s 10.279 12.156 Amo unts due fro m tax autho rities 18.746 17.932 Other assets - tax consolidation scheme 66.933 55.235 Other items 10.049 25.798 TOTAL 1.0 12 .3 5 0 3 2 0 .3 6 7

The balances associated with the covered bond and securitisation transactions represent the spread between the subordinated loan disbursed to the issuing special purpose company and the liability due to the same which represents the residual value of the receivables transferred as collateral and securitised.

Amounts receivable for the tax consolidation scheme represent the advances and the direct tax credits transferred to the Parent Company in compliance with national tax consolidation legislation.

The other items include accruals and deferrals not carried back for a total of 3,799 thousand euro.

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LIABILITIES

Section 1 Due to Banks – Item 10 -

1.1 Due to banks: composition

To tal To tal Type of transaction/Values 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

1. Due to central banks - - 2. Due to banks 3 .3 4 1.5 6 4 1.3 7 0 .7 0 5 2.1 Current acco unts and unres tricted depo s its 1.859.062 174.669 2.2 Term depo s its 153.685 95.713 2.3 Lo ans 1.318.314 1.095.154 2.3.1 Repurchas e agreements 1.234.633 1.026.669 2.3.2 Other 83.681 68.485 2.4 Liabilities for commitments to repurchase own equity instruments - - 2.5 Other payables 10.503 5.169 To ta l 3 .3 4 1.5 6 4 1.3 7 0 .7 0 5 F a ir Va lue 3 .3 4 1.5 6 4 1.3 7 0 .7 0 5

The increase is essentially attributable to the debt due to the Parent Company (item “unrestricted current accounts and deposits”) consequent to the early repayment of bonds (totalling 1,100,000 thousand euro) pertaining to the Group policy for structural rebalance;

The “other payables” item represents operating payables.

Repurchase agreements have been concluded exclusively with the Parent Company and closely linked with the securitization transaction.

1.2 Detail of Item 10 “Due to banks”: subordinated debt

There were no subordinated amounts due to banks.

1.3 Detail of Item 10 “Due to banks”: structured debt

There were no structured debts due to banks.

1.4 Due to banks: amounts subject to specific hedge

There were no amounts due to banks that were subject to specific hedge.

1.5 Finance lease liabilities

There were no finance lease liabilities due to banks.

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Section 2 Due to Customers – Item 20 -

2.1 Due to customers: composition

To tal To tal Transaction type/Amounts 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

1. Current acco unts and unres tricted depo s its 8.244.905 8.246.055 2. Term depo s its 28.159 195.208 3. Lo ans 505.573 362.731 3.1 Repurchas e agreements 505.161 362.133 3.2 Other 412 598 4. Liabilities for commitments to repurchase own equity instruments - - 5. Other payables 107.081 66.855 To ta l 8 .8 8 5 .7 18 8 .8 7 0 .8 4 9 F a ir Va lue 8 .8 8 5 .7 18 8 .8 7 0 .8 4 9

The item “other payables” mainly represents banker’s drafts.

2.2 Detail of Item 20 “Due to customers”: subordinated debt

There were no subordinated amounts due to customers.

2.3 Detail of Item 20 “Due to customers”: structured debt

There were no structured amounts due to customers.

2.4 Due to customers: amounts subject to specific hedge

There were no amounts due to customers that were subject to specific hedges.

2.5 Finance lease liabilities

Amounts due to customers for finance lease liabilities amount in total to 411 thousand euro. The amount in question is represented by a real estate contract with UBI Leasing S.p.a., whose total financed amount is equal to 1,417 thousand euro. The contract is due to expire in June 2013. Future payments are detailed as follows:

To tal To tal 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

Residual debt due to leasing companies - within 1 year 206 193 - between 1 and 5 years 206 405 - beyo nd 5 years - -

134

Section 3 Securities issued – Item 30 -

3.1. Securities issued: composition

To tal To tal 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

Type of securities /Values F a ir Va lue F a ir Va lue Carrying Carrying v a lue v a lue Le v e l 1 Le v e l 2 Le v e l 3 Le v e l 1 Le v e l 2 Le v e l 3

A. Securities 1. bo nds 3.209.945 - 3.197.049 - 5.070.761 - 5.068.265 - 1.1 s tructured 1.384.755 - 1.373.918 - 2.385.012 - 2.386.306 - 1.2 o ther 1.825.190 - 1.823.131 - 2.685.749 - 2.681.959 - 2. o ther s ecurities 23.311 - 23.310 - 5.229.549 - 5.229.549 - 2.1 s tructured ------2.2 o ther 23.311 - 23.310 - 5.229.549 - 5.229.549 - To ta l 3 .2 3 3 .2 5 6 - 3 .2 2 0 .3 5 9 - 10.300.310 - 10.297.814 -

The “structured bonds” item includes 280,000 thousand euro (1,380,000 thousand euro as at 31st December 2009) relating to new bond issues, entirely subscribed by the Parent Company for structural rebalancing.

As at 31st December 2009, securities issued comprised: - in the item “Other securities – other”, Certificates of Deposit and Euro Commercial Papers for 5,200,458 thousand euro, issued by the foreign branch; - in the item “Structured Bonds”, a subordinated deposit established at the same branch by Preferred Capital Company LLC (Delaware – USA) for 165,102 thousand euro.

Structured securities predominantly refer to step up, step up callable, constant maturity swap and inflation linked bonds.

3.2 Detail of item 30 “Securities issued”: subordinated securities

The subordinated liabilities satisfy the requirements of the Bank of Italy to be included in the calculation of the supervisory capital, in particular:  early repayment clause, subject to authorisation by the Supervisory Authority;  subordination clause to come into effect in the event that UBI Banca the Parent Company goes into liquidation.

The table below shows the detail of loans (in thousands of euro).

Balance as at Name R a te 3 1/ 12 / 2 0 10

3-mo nth Euribo r + 1.05% fo r the firs t 5 years + 1.65 in the 2) Debenture lo an 2002-2012 (**) fo llo wing years (*) 100.067

(*) Subject to the exercise of the call option that allows early repayment. (**) The loan was underwritten by the UBI Banca Parent Company.

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3.3 Securities issued: securities subject to specific hedge

To tal To tal 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

1. Securities s ubject to fair value s pecific hedge: 2.069.688 2.379.410 a) interes t rate ris k 2.069.688 2.379.410 b) exchange rate ris k - - c) multiple ris ks - - 2. Securities subject to cash flow specific hedge: 790 - a) interes t rate ris k - - b) exchange rate ris k 790 - c) o ther - -

The table shows the financial statement balances of the bonds hedged against interest rate risk (indicated in line 1.a) and the certificates of deposit in Yen subject to cash flow hedging (indicated in line 2.b). The fair value of the hedging derivatives is recorded, according to the sign, in the appropriate Balance sheet asset or liability items.

136

Section 4 Financial Liabilities Held for Trading – Item 40 -

4.1. Financial liabilities held for trading: composition

To tal To tal 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9 Type of transaction/Values FV FV NV FV* NV FV* L1 L2 L3 L1 L2 L3 A. Balance sheet liabilities 1. Due to banks ------2. Due to cus to mers ------3. Debt s ecurities ------3.1 Bo nds ------3.1.1 Structured - - - - X - - - - X 3.1.2 Other bo nds - - - - X - - - - X 3.2 Other s ecurities ------3.2.1 Structured - - - - X - - - - X 3.2.2 Other - - - - X - - - - X To ta l A ------B . D e riv a tiv e ins trum e nts 1. Financial derivatives X - 76.037 - X - 81.138 - 1.1 Trading X - 76.037 - X X - 81.138 - X 1.2 Linked to the fair value o ptio n X - - - X X - - - X 1.3 Other X - - - X X - - - X 2. Credit derivatives X - - - X - - - 2.1 Trading X - - - X X - - - X 2.2 Linked to the fair value o ptio n X - - - X X - - - X 2.3 Other X - - - X X - - - X To ta l B X - 7 6 .0 3 7 - X X - 8 1.13 8 - X Total (A+B) - - 7 6 .0 3 7 - - - - 8 1.13 8 - -

Key: FV = fair value FV* = fair value calculated excluding the changes in value due to the change in the credit worthiness of the issuer with respect to the issue date. NV = nominal or notional value L1 = Level 1 L2 = Level 2 L3 = Level 3

4.2 Detail of item 40 “Financial liabilities held for trading”: subordinated liabilities

There were no subordinated liabilities.

4.3 Detail of item 40 “Financial liabilities held for trading”: structured debt

There were no structured debts.

Section 5 Financial liabilities at fair value - Item 50 -

These types of transactions did not occur within the Bank.

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Section 6 Hedging derivatives – Item 60-

6.1 Hedging derivatives: composition by contract type and level

Fair value 31/12/2010 Fair value 31/12/2009 NV NV 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9 L1 L2 L3 L1 L2 L3

A. Financial derivatives - 6 4 .8 4 0 - 1.3 0 6 .0 0 4 - 5 1.4 2 9 - 1.5 4 2 .6 7 5 1) Fair value - 64.829 - 1.305.312 - 51.429 - 1.542.675 2) Cas h flo ws - 11 - 692 - - - - 3) Fo reign inves tments ------B . C re dit de riv a tiv e s ------1) Fair value ------2) Cas h flo ws ------To ta l - 6 4 .8 4 0 - 1.3 0 6 .0 0 4 - 5 1.4 2 9 - 1.5 4 2 .6 7 5

Key: NV = notional value L1 = Level 1 L2 = Level 2 L3 = Level 3

138

6.2 Hedging derivatives: composition by hedging portfolio and type of hedge

F air V alue C as h f lo w s

Transactions / Type of S p e c if ic F o re ig n he d g ing investments Macro-hedge S p e c if ic Macro-hedge Interest Exchange Credit Price Multiple risks rat e ris k rat e ris k ris k ris k

1. Available-for-sale financial - - - - - X - X X assets 2. Loans 19.905 - - X - X - X X 3. Held-to-maturity financial X - - X - X - X X assets 4. Portfolios x x x x X 43.717 X - X

5. Other transactions - - - - - X - X -

Total Assets 19 .9 0 5 - - - - 4 3 .717 - - - 1. Financial liabilities 1.207 - - X - X 11 X X

2. Portfolios - - X

Total Liabilities 1.2 0 7 - - - - - 11 - - 1. Expected transactions X X X X X X - X X 2. Portfolio of financial assets X X X X X - X - - and liabilities

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Section 7 Fair value changes to hedged financial liabilities – Item 70-

These types of transactions did not occur within the Bank.

Section 8 Tax liabilities - Item 80 -

P ro v is io n fo r dire c t ta xe s

Balance 31/12/2009 32.200 P ro vis io n 17.370 Us es fo r tax payment (29.024) Other changes 2.180 Balance 31/12/2010 2 2 .7 2 6

The above table presents the change in current tax liabilities during the year. The Bank complies with the “National tax consolidation” scheme, pursuant to Article 117 et seq. of Italian Presidential Decree No. 917 dated 22nd December 1986 and subsequent amendments and integrations, therefore receivables and payables relating to IRES (company earnings’ tax) have been transferred to the Parent Company and are recorded in the financial statements under other assets and liabilities; the changes in the table refer to IRAP (regional business tax). The composition of and changes in deferred tax liabilities are stated with the prepaid tax assets, in section 13 of the assets in these notes.

Section 9 Liabilities associated with assets held for sale -Item 90 -

These types of transactions did not occur within the Bank.

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Section 10 Other liabilities - Item 100 -

10.1 Other liabilities: composition

To tal 31/12/2010 To tal 31/12/2009

Amounts due to tax authorities for withholding taxes 34.841 36.326 Other liabilities - tax co ns o lidatio n s cheme 55.739 71.353 Staff fees and co ntributio ns 11.380 18.763 Sums available to customers 13.928 55.954 Wo rk in pro gres s 18.754 34.366 Sundry credito rs 39.586 45.437 Suppliers 19.788 22.778 Currency differences o n exchange rate and po rtfo lio trans actio ns 218.527 186.630 Items in trans it to /fro m branches 9.508 88.111 Impairment o f guarantees granted and co mmitments 4.579 3.904 Other 5.629 9.681 To ta l 4 3 2 .2 6 1 5 7 3 .3 0 3

Payable for charges relating to staff include the residual amount due to INPS (social security institute) for charges relating to redundancy incentive plans, which amounts to 5,605 thousand euro. They also include the amounts due to employees for other remuneration components subject to deferred disbursement.

The liabilities for the tax consolidation scheme are made up of amounts due to the Parent Company for the Income Taxes of the companies transferred in accordance with “National tax consolidation” legislation.

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Section 11 Staff Severance Indemnity – Item 110 -

11.1. Staff severance indemnity: changes in the year

To tal To tal 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

A. Opening balances 6 3 .8 0 8 6 4 .9 2 2 B . Inc re a s e s 7 .8 5 3 1.8 9 2 B.1 P ro vis io n fo r the year - 3 B.2 Other changes 7.853 1.889 C . D e c re a s e s (9 .6 7 4 ) (3 .0 0 6 ) C.1 P ayments made (6.765) (2.391) C.2 Other changes (2.909) (615) D. Closing balances 6 1.9 8 7 6 3 .8 0 8

Other increases/decreases, apart from any conferrals, include:  financial charges of 1,217 thousand euro recognised in the income statement;  actuarial gains/losses of 2,495 thousand euro recognised in valuation reserves, net of the related tax effect.  the changes in the provision linked to the territorial optimisation transactions and the conferral of the foreign branch, in other words 4,123 thousand euro for resources acquired and 2,702 thousand euro for resources disposed of.

11.2 Other information

Table summarising the technical bases adopted for the valuation of the staff severance indemnity and seniority bonuses

31st December 2010

Mortality rate RGS48 tables were used, appropriately updated on the basis of historical corporate data

Turn-over rate A table derived from the appropriate standardisation of historical corporate data for the last few years has been used.

Severance advances The probability of advances has been set at 100%, while the average amounts requested, calculated on the basis of statutory provisions introduced under the 2007 Finance Bill, has been estimated as 100%.

Inflation rates The inflationary scenario which is envisaged may cover the long- term, has led to the use of a rate of 2% per annum.

Discounting rates For the valuation as at 31st December 2010, the EUR composite A rates curve as at 31st December 2010 was used.

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31st December 2009

Mortality rate RGS48 tables were used, appropriately updated on the basis of historical corporate data

Turn-over rate A table derived from the appropriate standardisation of historical corporate data for the last few years has been used.

Inflation rates The inflationary scenario which is envisaged may cover the long- term, has led to the use of a rate of 2% per annum.

Discounting rates For the valuation as at 31st December 2009, a rate of 4.871% was used, taken as the average of the rates of the EUR composite A rates curve as at 30th December 2009 (source: Bloomberg) weighted on the basis of the ratio between the amount paid/advanced and the total amount to be paid/advanced for each maturity until the extinction of the population considered.

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Section 12 Provisions for liabilities and charges - Item 120 -

12.1. Provisions for liabilities and charges: composition

To tal To tal Items / Amounts 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

1. Co mpany pens io n fund - - 2. Other pro vis io ns fo r liabilities and charges 2 6 .3 0 1 2 2 .9 9 9 2.1 legal dis putes 8.651 7.274 2.2 s taff co s ts 6.691 4.486 2.3 o ther 10.959 11.239 To ta l 2 6 .3 0 1 2 2 .9 9 9

Provisions for staff charges comprise the actuarial valuation of the length of service bonus envisaged by current supplementary agreements, in relation to which negotiations are underway with the trade unions.

12.2 Provisions for liabilities and charges: changes in the year

Pension funds Othe r pro v is io ns To ta l

A. Opening balances - 2 2 .9 9 9 2 2 .9 9 9 B . Inc re a s e s - 7 .7 4 4 7 .7 4 4 B.1 P ro vis io n fo r the year - 7.362 7.362 B.2 Changes due to passage of time - 222 222 B.3 Changes due to changes in discount rate - - - B.4 Other changes (-) - 160 160 B.5 Business combination transactions - - - C . D e c re a s e s - (4 .4 4 2 ) (4 .4 4 2 ) C.1 Us e fo r the year - (2.644) (2.644) C.2 Changes due to changes in discount rate - (92) (92) C.3 Other changes - (1.706) (1.706) C.5 Business combination transactions - - - D. Closing balances - 2 6 .3 0 1 2 6 .3 0 1

12.3 Defined-benefit company retirement funds

There were no defined-benefit company retirement funds.

12.4 Provisions for liabilities and charges - other provisions

Inc re a s e s D e c re a s e s

3 1/ 12 / 2 0 0 9 3 1/ 12 / 2 0 10 Othe r Othe r P ro v is io ns Us e s c ha ng e s c ha ng e s

Legal disputes 7.834 4.041 52 2.073 1.202 8.651

Staff charges 3.926 2.833 239 307 - 6.691

Other pro vis io ns 11.239 488 91 264 596 10.959

o f which fo r revo catio n actio n 7.619 235 91 264 590 7.092 To ta l 2 2 .9 9 9 7 .3 6 2 3 8 2 2 .6 4 4 1.7 9 8 2 6 .3 0 1 Estimates were made on a case-by-case basis, by examining the single positions where the counterparty had already filed proceedings against the bank and on the basis of the

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potential risk estimated using historical-statistical series where there were objective elements of risk (e.g. complaints received) that had not yet turned into legal action. If the financial payment relating to the provisions was expected to be made after more than one year, then the effect of discounting was calculated using the 1 year Euribor as the discount rate. On average, the payments are expected to take place within 3 to 5 years.

Potential liabilities

Banco di Brescia is involved in a number of judicial proceedings of differing natures and legal proceedings resulting from the ordinary performance of its activities. While it is not possible to know the final outcomes of these proceedings with certainty, any unfavourable results would not have, either singularly or totally, a significant negative effect on the Bank’s balance sheet or income statement.

In addition, note the fact that in July 2006 the Rome Court of Appeal issued a judgment of second instance in favour of Banco di Brescia regarding an action brought against Milano Assicurazioni, ordering the latter to pay 4.9 million euro to the Bank. This amount was collected and recorded in the 2007 income statement. Despite Milano Assicurazioni’s recourse to the Court of Appeal, there has been no provision made, since, based on the opinion of the Bank’s legal advisors, the risks of losing are deemed not relevant.

In relation to the tax assessment for 2004, 2005 and 2006, please refer to the matters illustrated in detail in the “Director’s Report – Other information”. On the basis of authoritative opinions, it is deemed that the tax regime applied by the bank complies with contractual and legislative dictates, and that the findings may therefore be settled favourably. The risk, established as possible in accordance with IAS 37, can be quantified as 10.13 million euro.

Section 13 Redeemable shares - Item 140 -

These types of transactions did not occur within the Bank.

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Section 14 Shareholders’ Equity - Items 130, 150, 160, 170, 180, 190 and 200 -

14.1 “Share capital” and “Own shares”: composition

To tal To tal 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

No . o f ORDINARY s hares 905.341.516 872.500.000 par value in Euro 0,68 0,68

No . o f OWN s hares - - par value in Euro - -

14.2 Share capital – Number of shares: change in the year

Items/ Type Ordina ry Othe r

A. Shares existing at the start of the year - - - entirely freed up - - - partly freed up - - A.1 Own s hares (-) - - B.2 Shares in circulation: opening balances 872.500.000 - B . Inc re a s e s 32.841.516 - B.1 New is s ues - - - agains t payment: - - - business combination transactions - - - co nvers io n o f bo nds - - - exercis e o f warrants - - - o ther - - - bo nus is s ues : - - - in favo ur o f emplo yees - - - in favo ur o f directo rs - - - o ther - - B.2 Sale o f o wn s hares - - B.3 Other changes 32.841.516 - C . D e c re a s e s - - C.1 Cancellatio n - - C.2 P urchas e o f o wn s hares - - C.3 Business disposal transactions - - C. 4 Other changes - - D. Shares in circulation: closing balances 905.341.516 - D.1 Own s hares (+) - - D.2 Shares exis ting at the end o f the year - - - entirely freed up - - - partly freed up - -

Following the Territorial Optimisation transaction, the Extraordinary Shareholders’ meeting held on 11th January 2010 resolved a share capital increase by means of the issue of 32,841,516 ordinary shares; this increase is represented in the table under line B.3.

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14.3 Share capital: other information

Nominal value of the shares

The share capital is fully subscribed and paid in and is made up of 905,341,516 ordinary shares with a par value of 0.68 euro each.

Rights, benefits and restrictions on shares

There are no benefits or restrictions on the Bank’s shares. For more information on restrictions on dividend distribution and capital repayment, please refer to the summary table for the shareholders’ equity items by origin, indicating the possibility of use and distribution as per Article 2427, para. 1, no. 7bis of the Italian Civil Code, illustrated at the end of this section.

14.4 Retained earnings: other information

Retained earnings amount to 517,370 thousand euro and comprise:  Legal reserve of 90,522 thousand euro; the increase of 6,449 thousand euro corresponds to the amount resolved by the Shareholders’ Meeting in the last financial year when approving the allocation of income;  Extraordinary reserve of 414,669 euro net of First-Time Adoption reserves (-45,531 thousand euro); the increase of 87,791 thousand euro relates to the allocation of income made in the previous financial year;  General Banking Risk Reserve of 9,560 thousand euro;  Reserve for actuarial gains/losses for 2,409 thousand euro;  Reserve pursuant to Article 13 of Italian Law 124/93 of 210 thousand euro.

Furthermore, during the period under review a positive reserve was established in accordance with the Assirevi Preliminary Approaches (OPI 1), amounting to 120,942 thousand euro, in relation to the Territorial Optimisation transaction and the conferral of the Luxembourg branch to UBI International S.A., as already illustrated at the end of the “Statement of changes in shareholders’ equity”.

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Composition of shareholders’ equity according to origin, availability and distribution at 31st December 2010

Summary of the uses made in F IS C A L P OS S IB ILITY S HA R E the thre e pre v io us ye a rs A M OUN T CONSTRAINT OF US E A VA ILA B LE (1) fo r lo s s fo r o the r c o v e ra g e re a s o ns A) CAPITAL - Share capital 615.632 - - 142.479 no us e no us e

B) CAPITAL RESERVES - Share premium res erve 120.000 A B - - - (2)

C) PROFIT RESERVES - Legal res erve 90.522 B - - no us e no us e - Extrao rdinary res erve 424.229 A B C 424.229 - no us e (3) -Supplementary retirement benefits refo rm res erve 2.409 - - - no us e no us e - Reserve pursuant to Legislative Decree No. 124/1993 210 - - 210 no us e no us e

D) OTHER RESERVES -OP I 1 s witch branch res erve 120.942 - - - no us e no us e - Revaluation reserve pursuant to Italian Law No. 342/2000 6.773 A B - 6.773 no us e no us e - Revaluation reserve pursuant to Italian Law No. 350/2003 6.006 A B - 6.006 no us e no us e - Valuatio n res erve o f financial ins truments des tined fo r s ale 4.587 - - - no us e no us e - IAS valuatio n res erve (3.185) - - - no us e no us e

TOTAL 1.388.125 424.229 155.468

-P ro fit fo r 2010 71.979 - - - - - TOTAL SHAREHOLDERS' EQUITY (4) 1.460.104 424.229 155.468 Key: A: For capital increase B: For loss coverage C: For distribution to shareholders

Note: (1) Amounts with suspended taxes. (2) This reserve cannot be distributed since the legal reserve has not reached the limit established by art. 2430 of the Italian Civil Code. (3) During 2005 the extraordinary reserve was reduced by 35,874 thousand euro due to replenishing negative reserves resulting from first time adoption of the international accounting standards. (4) The portion of Shareholders' equity restricted pursuant to Article 109, para. 4, letter b) of Italian Presidential Decree No. 917/86 equals 1.9 million euro.

14.5 Capital instruments: composition and change in the year

There were no instruments representing capital.

14.6 Other information

None of the disclosure envisaged by IAS 1, sections 136A, 137 and 80A requires to be provided for the Bank.

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Other Information

1. Guarantees granted and commitments

Balance Balance Tra ns a c tio ns 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

1) Guarantees granted o f a financial nature 320.696 346.813 a) Banks 21.084 19.633 b) Cus to mers 299.612 327.180 2) Guarantees granted o f a co mmercial nature 817.854 709.174 a) Banks 38.709 9.933 b) Cus to mers 779.145 699.241 3) Irrevo cable co mmitments to pay funds 1.153.200 1.218.999 a) Banks 15.856 15.097 i) o f certain us e 15.856 15.097 ii) o f uncertain us e - - b) Cus to mers 1.137.344 1.203.902 i) o f certain us e 1.308 1.309 ii) o f uncertain us e 1.136.036 1.202.593 4) Co mmitments underlying credit derivatives : s ales o f pro tectio n - - 5) Assets pledged to guarantee third parties obligations 1.916.817 1.589.926 6) Other co mmitments - - To ta l 4 .2 0 8 .5 6 7 3 .8 6 4 .9 12

The credit risk associated with guarantees issued and commitments is recognised on the same basis as for cash loans. The estimated portion of doubtful outcome is stated under “Other liabilities”.

The amount of the commitments to the Interbank Fund for the Protection of Deposits was reclassified under “Financial guarantees issued, point a) Banks”.

The amount included under point 5) corresponds: • to the residual debt of the mortgage loans conferred to guarantee the covered bonds transaction; • to the collateral value of the loans made available to the Parent Company to guarantee the open market transactions with the Bank of Italy.

2. Assets set up as guarantee of own liabilities and commitments

Balance Balance P o rtfo lio s 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

1. Financial as s ets held fo r trading - - 2. Financial as s ets at fair value - - 3. Available-fo r-s ale financial as s ets - - 4. Held-to -maturity financial as s ets - - 5. Loans to banks - - 6. Loans to customers 38.050 65.330 7. Tangible assets - -

3. Information on operating leases

There were no operating leases in place.

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4. Management and trading services on behalf of third parties

Balance Type o f s e rv ic e s 3 1/ 12 / 2 0 10

1. Trading in financial ins truments o n behalf o f third parties a) P urchas es - 1. Settled - 2. Not settled - b) Sales - 1. Settled - 2. Not settled - 2. Portfolio management 427 a) Individual 427 b) Co llective - 3. Custody and administration of securities 30.695.087 a) third party securities held on deposit: linked to custodian bank activities (excluding portfolio management) - 1. s ecurities is s ued by the repo rting bank - 2. o ther s ecurities - b) Third party s ecurities held o n depo s it (excluding po rtfo lio management): o ther 14.083.752 1. s ecurities is s ued by the repo rting bank 2.632.096 2. o ther s ecurities 11.451.656 c) third party s ecurities depo s ited with third parties 14.468.923 d) o wn s ecurities depo s ited with third parties 2.142.412 4 ) Othe r tra ns a c tio ns 4 .17 8 .9 3 0

The item “Other transactions” indicates the volumes referring to stock market orders for securities trading activities.

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Part C – Information on the Income Statement

Section 1 Interest – Items 10 and 20 -

1.1. Interest income and similar revenues: composition

To tal To tal Items / Type D e bt s e c uritie s Lo a ns Othe r tra ns a c tio ns 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

1. Financial as s ets held fo r trading 304 - - 304 580 2. Available-fo r-s ale financial as s ets - - - - - 3. Held-to -maturity financial as s ets - - - - - 4. Loans to banks - 64.972 - 6 4 .9 7 2 116 .10 5 5. Loans to customers 85 434.504 5 4 3 4 .5 9 4 5 4 4 .2 9 2 6. Financial as s ets at fair value - - - - - 7. Hedging derivatives X X 8.537 8 .5 3 7 7 .9 8 7 8. Other as s ets x x 29 29 20 To ta l 389 4 9 9 .4 7 6 8 .5 7 1 5 0 8 .4 3 6 6 6 8 .9 8 4

The item “Loans to customers - financing” includes interest totalling: 49,401 thousand euro accrued on loans granted to guarantee Covered Bond issues; 36,878 thousand euro pertaining to the securitisation transaction.

Total interest on impaired assets amounted to around 35,500 thousand euro (30,048.6 thousand euro as at 31st December 2009).

The overdraft fine, as described in the “Notes - Accounting of the overdraft fine” amounts to 8,380 thousand euro.

The item “Loans to customers” includes Overdraft Commission for a total of 747 thousand euro, compared with 15,503 thousand euro pertaining to the previous year. As from 1st July 2009, following the introduction of the new commission system, this revenue became a component of the new Fund Provision Commission indicated under “Commission income - Other services”.

1.2. Interest income and similar revenues: spread on hedging transactions

To tal To tal Ite m s 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

A. P ositive spreads relating to hedging transactions: 72.037 111.704 B. Negative spreads relating to hedging transactions: (63.500) (103.717) C. Balance (A-B) 8 .5 3 7 7 .9 8 7

The economic effects of the hedging transactions, in compliance with the matters laid down by the rules for drawing up bank financial statements, are stated in the income statement due to imbalance between the interest income since the positive spreads are higher than the negative spreads in absolute value.

1.3 Interest income and similar revenues: other information 1.3.1 Interest income on financial assets in foreign currency

To tal To tal Ite m s 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

Interes t inco me o n financial as s ets held in fo reign currency 1.425 2.477

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1.3.2 Interest income on finance lease transactions

There are no transactions of this type.

1.4 Interest expense and similar charges: composition

To tal To tal Ite m s / Type P a ya ble s S e c uritie s Othe r tra ns a c tio ns 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

1. Due to central banks - X - - - 2. Due to banks (15.809) X - (15 .8 0 9 ) (12 .8 9 4 ) 3. Due to cus to mers (35.766) X - (3 5 .7 6 6 ) (7 7 .2 2 9 ) 4. Securities is s ued X (130.243) - (13 0 .2 4 3 ) (2 0 9 .8 4 2 ) 5. Financial liabilities held fo r trading - - - - - 6. Financial liabilities at fair value - - - - - 7. Other liabilities and pro vis io ns X X (13) (13 ) (2 4 6 ) 8. Hedging derivatives X X - - - To ta l (5 1.5 7 5 ) (13 0 .2 4 3 ) (13 ) (18 1.8 3 1) (3 0 0 .2 11)

1.6 Interest expense and similar charges: other information 1.6.1 Interest expense on liabilities in foreign currency

To tal To tal Ite m s 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

Interes t expens e o n liabilities held in fo reign currency (4.409) (11.211)

1.6.2 Interest expense on finance lease transaction liabilities

To tal To tal Ite m s 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

Interes t expens e o n liabilities fo r financial leas e trans actio ns (13) (34)

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Section 2 Commission – Items 40 and 50 -

2.1 Commission income: composition

To tal To tal Type of services/Amounts 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

a) guarantees granted 8.340 7.888

b) credit derivatives - -

c) management, trading and advis o ry s ervices : 98.772 95.504

1. s ecurities trading 38 40

2. fo reign exchange trading 2.528 2.491

3. po rtfo lio management - 57

3.1. individual - 57

3.2. co llective - -

4. custody and administration of securities 1.845 2.189

5. custodian bank - -

6. placement o f s ecurities 38.483 29.848

7. s to ck market o rders 6.636 7.873

8. advis o ry s ervices 72 2

8.1 fo r inves tments 72 2

8.2 fo r financial s tructure - -

9. dis tributio n o f third party s ervices 49.170 53.004

9.1. P o rtfo lio management 8.373 7.538

9.1.1. individual 8.373 7.538

9.1.2. co llective - -

9.2. ins urance pro ducts 22.948 22.162

9.3. o ther pro ducts 17.849 23.304

d) collection and payment services 30.159 31.806

e) s ervicer activities fo r s ecuritis atio n trans actio ns - -

f) s ervices fo r facto ring trans actio ns - -

g) tax co llectio n and payment s ervices - -

h) multilateral trading system management activities - -

i) current acco unt management 37.763 38.570

j) o ther s ervices 35.179 27.175

To ta l 2 10 .2 13 2 0 0 .9 4 3

The item “Other services” includes the Fund Provision Commission for a total of 22,088 thousand euro, 11,953 thousand euro in the previous year when the new commission system was introduced on 1st July 2009.

The reduction in the item “Distribution of third party services: other products” is mainly due to the drop in commission on consumer credit transactions disbursed by Banca 24/7.

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An analysis of commission generated on other services is presented in the table below.

C o m m is s io n bre a kdo wn "o the r s e rv ic e s " To tal 31/12/2010 To tal 31/12/2009

- lo ans , mo rtgages and CDF 27.995 19.073 - fo reign 2.179 2.323 - o ther 5.005 5.778 To ta l 3 5 .17 9 2 7 .17 5

2.2 Commission income: products and services distribution channels

Products and services are wholly placed through the bank's own branches.

2.3 Commission expense: composition

To tal To tal S e rv ic e s / A m o unts 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

a) guarantees received (2.372) (1.581) b) credit derivatives - - c) management, trading and advis o ry s ervices : (2.100) (3.051) 1. s ecurities trading (1.635) (2.592) 2. fo reign exchange trading (136) - 3. po rtfo lio management: (1) (145) 3.1. o wn po rtfo lio s - - 3.2. po rtfo lio s o f o thers (1) (145) 4. custody and administration of securities (328) (314) 5. placement o f financial ins truments - - 6. s ecurities , pro ducts and s ervices o ffered thro ugh indirect netwo rks - - d) collection and payment services (9.518) (9.826) e) o ther s ervices (963) (1.740) To ta l (14 .9 5 3 ) (16 .19 8 )

The item “guarantees received” includes 2,202 thousand euro (1,446 thousand euro as 31st December 2009) in commission to be paid to the Parent Company for sureties issued to guarantee issues of Certificates of Deposit and Euro Commercial Paper by the foreign branch.

Point c)1 “financial instrument trading” includes brokerage commission on the share and bond market paid to the Parent Company for 1,315 thousand euro (2,032 thousand euro recorded in 2009). Point e) “other services” includes the commission paid to third parties for brokerage activities on loans for around 816 thousand euro (1,721 thousand euro in 2009).

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Section 3 Dividends and similar Income – Item 70 -

3.1. Dividends and similar income: composition ERRORE!

To tal To tal 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9 Items/Income Inc o m e fro m Inc o m e fro m D iv ide nds D iv ide nds units in O.I.C.R. units in O.I.C.R.

A. Financial as s ets held fo r trading - - - - B. Available-fo r-s ale financial as s ets 388 - 88 - C. Financial as s ets at fair value - - - - D. Equity investments 861 X 1.611 X To ta l 1.2 4 9 - 1.6 9 9 -

Section 4 Net Profit (Loss) from Trading Activities - Item 80 -

4.1 Net profit (loss) from trading activities: composition

P ro fit fro m Lo s s e s fro m N e t pro fit [(A +B )- To ta l Transactions/Components of income Ga ins (A ) Lo s s e s (C ) tra ding (B ) tra ding (D ) (C +D )] 3 1/ 12 / 2 0 0 9

1. Financial assets held for trading 86 2 .10 0 (6 2 ) (1.5 6 1) 563 2 .6 2 6 1.1 Debt s ecurities 78 324 (48) (5) 349 1.240 1.2 Equities - - - (4) (4) (9) 1.3 Units in O.I.C.R. ------1.4 Lo ans ------1.5 Other 8 1.776 (14) (1.552) 218 1.395 2. Financial liabilities held fo r trading ------2.1 Debt s ecurities ------2.2 P ayables - - - - - 2.2 Other ------3. Financial assets and liabilities: exchange rate X X X X - 46 diffe re nc e s 4 . D e riv a tiv e ins trum e nts 4 .2 10 7 6 .10 8 (4 .5 7 4 ) (8 7 .5 7 4 ) (9 .8 9 3 ) 2 .8 4 2 4.1 Financial derivatives : 4.210 76.108 (4.574) (87.574) (9.893) 2.842 - On debt s ecurities and interes t rates 3.815 74.612 (4.179) (86.152) (11.904) 2.362 - On equities and share indexes - - - - - 1 - On currencies and go ld X X X X 1.937 428 - Others 395 1.496 (395) (1.422) 74 51 4.2 Credit derivatives ------To ta l 4 .2 9 6 7 8 .2 0 8 (4 .6 3 6 ) (8 9 .13 5 ) (9 .3 3 0 ) 5 .5 14

The negative result is essentially due to the net losses deriving from the unwinding of the asset macro-hedge financial instruments, consequent to the reduction in hedged assets due to repayments, renegotiations and defaults, for a total of 12,269 thousand euro, and included among the losses from trading of financial derivatives on debt securities and interest rates.

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Section 5 Net Profit (Loss) from Hedging Activities - Item 90 -

5.1 Net profit (loss) from hedging activities: composition

To tal To tal Income components/Amounts 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

A. Income relating to: A.1 Fair value hedge derivatives 44.706 17.986 A.2 Hedged financial assets (fair value) 43.875 3.337 A.3 Hedged financial liabilities (fair value) 28.536 15.806 A.4 Cas h flo w hedge financial derivatives - - A.5 As s ets and liabilities in fo reign currency - - Total income from hedging activities (A) 117 .117 3 7 .12 9 B. Expense relating to: B.1 Fair value hedging derivatives (70.546) (14.728) B.2 Hedged financial assets (fair value ) (23.057) (6.819) B.3 Hedged financial liabilities (fair value ) (15.605) (11.244) B.4 Cas h flo w hedge financial derivatives - - B.5 As s ets and liabilities in fo reign currency - - Total expense from hedging activities (B) (10 9 .2 0 8 ) (3 2 .7 9 1) C. Net profit (loss) on hedging activities (A-B) 7 .9 0 9 4 .3 3 8

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Section 6 Profit (Loss) on Disposal/Repurchase – Item 100 -

6.1 Profit (loss) on disposal/repurchase: composition

To tal To tal 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9 Items/Income components

Ga ins Lo s s e s N e t re s ult Ga ins Lo s s e s N e t re s ult

Financial assets 1. Lo ans to banks ------2. Loans to customers ------3. Available-fo r-s ale financial as s ets - - - 491 - 491

3.1 Debt s ecurities ------3.2 Equities - - - 491 - 491 3.3 Units in O.I.C.R (co llective inves tment ins truments ) ------3.4 Lo ans ------4. Held-to -maturity financial as s ets ------

Total assets - - - 4 9 1 - 4 9 1 Financial liabilities 1. Due to banks ------2. Due to cus to mers ------3. Securities is s ued 682 (738) (56) 519 (658) (139) To tal liabilities 682 (7 3 8 ) (5 6 ) 5 19 (6 5 8 ) (13 9 )

At 31st December 2009, point 3.2 included around 486 thousand euro by way of the price adjustment on the sale of the shareholding in Centrale Bilanci, sold in 2008.

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Section 8 Net Adjustments/value recoveries due to impairment- Item 130 -

8.1 Net adjustments due to loan impairment: composition

A djus tm e nts (1) Va lue re c o v e rie s (2 )

S pe c ific S pe c ific P o rtfo lio To tal To tal Transactions/Components of income 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9 P o rtfo lio Othe r Othe r write -o ffs Othe r Inte re s t Inte re s t re c o v e rie s re c o v e rie s

A. Loans to banks ------Lo ans ------Debt s ecurities ------B. Loans to customers (29.171) (65.840) (20.686) 4.416 13.422 - - (97.859) (69.220) - Lo ans (29.171) (65.840) (20.686) 4.416 13.422 - - (97.859) (69.220) - Debt s ecurities ------C . To ta l (2 9 .17 1) (6 5 .8 4 0 ) (2 0 .6 8 6 ) 4 .4 16 13 .4 2 2 - - (9 7 .8 5 9 ) (6 9 .2 2 0 )

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

A djus tm e nts (1) Va lue re c o v e rie s (2 )

Transactions/Components To tal To tal S pe c ific S pe c ific o f inc o m e 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

o the r write -o ffs Othe r inte re s t re c o v e rie s

A. Debt s ecurities ------

B. Equities - - X X - (9 4 )

C. Units in O.I.C.R. - - X - - -

D. Loans to banks ------

E. Loans to customers ------

To ta l - - - - - (9 4 )

The amount indicated as at 31st December 2009 refers to the write-down of the Linea Più position.

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8.4 Net adjustments due to impairment of other financial transactions: composition

A djus tm e nts ( 1 ) Va lue re c o v e rie s ( 2 )

Transactions/Components To tal To tal S pe c ific S pe c ific P o rtfo lio o f inc o m e 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9 P o rtfo lio write -o ffs Othe r Inte re s t Othe r re c o v e rie s Inte re s t Othe r re c o v e rie s

A. Guarantees granted - (1.092) (684) - 989 - - (7 8 7 ) (1.0 6 5 )

B. Credit derivatives ------

C. Commitments to pay funds - - (62) - - - - (6 2 ) (18 9 )

D. Other trans actio ns ------

E. To ta l - (1.0 9 2 ) (7 4 6 ) - 989 - - (8 4 9 ) (1.2 5 4 )

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Section 9 Administrative expenses - Item 150 -

9.1 Staff costs: composition

To tal To tal Type of expense/Amounts 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

1) Emplo yees (17 2 .6 7 1) (16 4 .4 2 5 ) a) Wages and s alaries (118.269) (114.196) b) So cial s ecurity charges (30.370) (30.978) c) Severance indemnity (8.111) (7.781) d) P ens io n expens e - - e) P ro vis io n fo r s everance indemnities (1.294) (2.258) f) P ro vis io n fo r pens io ns and s imilar: - - - defined co ntributio n - - - defined benefits - - g) P ayments to external s upplementary retirement benefit plans : (6.526) (6.013) - defined co ntributio n (6.526) (6.013) - defined benefits - - h) Expens es res ulting fro m s hare-bas ed payment agreements - - i) Other benefits fo r emplo yees (8.101) (3.199) 2 ) Othe r pe rs o nne l in s e rv ic e (4 6 5 ) (2 7 0 ) 3 ) D ire c to rs a nd a udito rs (1.7 5 6 ) (1.8 0 0 ) 4 ) R e tire d pe rs o nne l (6 ) - 5) Costs recharged for employees seconded to other companies 5 .3 9 9 5 .4 2 7 6) Costs reimbursed for employees of third parties seconded to the bank (3 .3 4 4 ) (4 .0 5 6 ) To ta l (17 2 .8 4 3 ) (16 5 .12 4 )

The “Directors” item includes the fees due to the Board of Statutory Auditors.

The cost item “Other employee benefits”, as at 31st December 2010, included 3,869 thousand euro in charges relating to redundancy incentive plans, as illustrated in “Other information - The trade union agreement dated 20th May 2010”.

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9.2 Average headcount by category

To tal 31/12/2010 To tal 31/12/2009

1) EMP LOYEES 2 .5 3 3 2 .5 15 a. s enio r managers 44 52 b. to tal managers 955 876 c. o ther emplo yees 1.534 1.587 2) OTHER PERSONNEL 30 26

The headcount includes employees seconded from other companies and excludes employees of the Bank that have been seconded to other companies. The “Other personnel” item includes directors, statutory auditors and workers with temporary agency contracts.

9.3 Defined-benefit company retirement funds: total costs

There were no defined-benefit company retirement funds.

9.4 Other benefits for employees

The main components of “other benefits for employees” are: • redundancy incentives and income support for 3,901 thousand euro; the increase with respect to the previous year is due to the Agreement dated 20th May 2010 already mentioned; • costs related to lunch vouchers per 2,569 thousand euro (1,778 thousand euro in 2009).

There were no cost items pursuant to IAS 19, sections 131, 141 and 142.

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9.5 Other administrative expenses: composition

To tal To tal Type of services/Amounts 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

A. Other administrative expenses (12 9 .6 14 ) (13 1.2 3 7 ) Rents payable (13.557) (12.855) P ro fes s io nal s ervices and co ns ulting (3.595) (4.919) Leas e ins talments o n hardware, s o ftware and o ther as s ets (2.524) (3.262) Maintenance o n hardware, s o ftware and o ther as s ets (1.520) (2.305) Tenancy o f premis es (7.319) (7.712) P ro perty and plant maintenance (4.267) (3.401) Counting, transport and management of valuables (3.554) (3.557) Members hip fees (1.148) (1.253) Info rmatio n s ervices and land regis try s earches (1.486) (1.554) Magazines and bo o ks (226) (271) P o s tal (4.771) (5.165) Ins urance premiums (6.698) (8.607) Advertis ing (3.380) (3.113) Entertaining (149) (204) Telephone and data transmission (7.731) (6.609) Outs o urcing s ervices (4.721) (4.476) Travel expens es (2.764) (2.448) Fees fo r s ervices pro vided by Gro up co mpanies (54.193) (53.130) Debt collection (2.280) (2.632) Forms, stationery and consumables (1.345) (1.180) Trans po rt (918) (993) Security (1.380) (1.537) UBI merger co s ts - - Other expens es (88) (54) B . Indire c t ta xe s (2 7 .8 10 ) (2 6 .7 6 1) - Indirect taxes and duties (908) (895) - Stamp duty (20.824) (20.065) - Municipal pro perty tax (883) (911) - Other taxes (5.195) (4.890) To ta l (15 7 .4 2 4 ) (15 7 .9 9 8 )

The item “Professional services and consulting” as at 31st December 2009, included around 1,100 thousand euro in costs relating to the securitisation transaction.

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Section 10 Net provisions for liabilities and charges - Item 160 -

10.1. Net provisions for liabilities and charges: composition

P ro v is io ns Reallocations N e t pro v is io ns

Legal disputes (4.043) 1.152 (2.891) Staff charges - - - Other pro vis io ns (539) 555 16 o f whic h fo r re v o c atio n ac tio n (285) 549 264 To ta l (4 .5 8 2 ) 1.7 0 7 (2 .8 7 5 )

Section 11 Net adjustments/value recoveries on tangible assets - Item 170 -

11.1. Net adjustments/value recoveries on tangible assets: composition

Impairment Depreciation Revaluations Net result Asset/Income components adjustments 31/12/09 (a) (c) (a+b-c) (b)

A. Tangible assets A.1 Owned (10.073) (12) - (10.085) (11.064) - For operational use (9.083) (12) - (9.095) (10.053) - For investment (990) - - (990) (1.011) A.2 Acquired through finance leasing (21) - - (21) (32) - For operational use (21) - - (21) (32) - For investment - - - - - Total (10.094) (12) - (10.106) (11.096)

Point “A.1 b” represents the impairment of certain assets (carpets) of the foreign branch.

Section 12 Net adjustments/value recoveries on intangible assets - Item 180 -

12.1. Net adjustments/value recoveries on intangible assets: composition

Impairment Amortisation Revaluations Net result Asset/Income component adjustments 31/12/2009 (a) (c) (a+b-c) (b)

A. Intangible Assets A.1 Owned (10) (24) - (34) (9) - Generated internally by the company ------Other (10) (24) - (34) (9) A.2 Acquired through finance leasing - - - - - Total (10) (24) - (34) (9)

Impairment adjustments refer to the software of the foreign branch.

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Section 13 Other operating income and expense - Item 190 -

13.1 Other operating expense: composition

Detail of Other operating expense To tal 31/12/2010 To tal 31/12/2009

Expenses connected with treasury agreements with public authorities (2.858) (2.896) Expens es fo r trans fers with predated value date (166) (1.436) Depreciatio n o f leas eho ld impro vements (961) (963) Other expens es (1.659) (5.925) To ta l (5 .6 4 4 ) (11.2 2 0 )

13.2 Other operating income: composition

Detail of Other operating income To tal 31/12/2010 To tal 31/12/2009

Rents receivable 1.095 1.128 Reco very o f s tamp duty and tax withheld 24.103 23.491 Recovery of expenses and other income on deposits and current accounts 3.657 10.146 Inco me fro m trans fers with predated value date 99 1.042 Inco me fro m Co vered Bo nds /Securitis atio n trans actio ns 5.086 2.226 Reco very o f co s ts fro m gro up co mpanies 809 801 Other inco me and expens e reco veries 8.781 15.655 To ta l 4 3 .6 3 0 5 4 .4 8 9

Imbalance of operating expense/income 3 7 .9 8 6 4 3 .2 6 9

The sharp reduction, under operating income and expense, in fines for credit transfers with predated value date, is due to the adoption of SEPA regulations, which essentially prevent the execution of such orders.

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Section 17 Profit (Loss) on Disposal of Investments – Item 240 -

17.1 Profit (loss) on disposal of investments: composition

To tal To tal Income components/Amounts 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

A. P ro perties 1.295 - - P ro fits o n dis po s al 1.295 - - Lo s s es o n dis po s al - - B. Other as s ets 1 (76) - P ro fits o n dis po s al 1 - - Lo s s es o n dis po s al - (76) N e t re s ult 1.2 9 6 (7 6 )

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Section 18 Income taxes for the Period on Continuing Operations - Item 260 -

18.1 Income taxes for the period on continuing operations: composition

To tal To tal Income components/Amounts 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

1. Current taxes (-) (64.978) (89.853) 2. Change in current taxes fo r prio r years (+/-) - - 3. Reductio n in current taxes fo r the year (+) - - 4. Change in prepaid taxes (+/-) 8.351 4.863 5. Change in deferred taxes (+/-) 9.676 13.403 6. Taxes fo r the year (-) (-1+/-2+3+/-4+/-5) (46.951) (71.587)

For additional information, please refer to the Directors’ Report – Other information – Tax aspects.

18.2 Reconciliation between the theoretical and actual tax burden

IR ES Taxable amount IR ES %

The o re tic a l ta x c ha rg e s IR ES 118 .9 2 9 (3 2 .7 0 6 ) 2 7 ,5 0 % Permanent increases

- write-do wn o f no n-deductible AFS s ecurities 46 (13) 0,01% - no n-deductible interes t expens e 6.762 (1.859) 1,56% - o ther no n deductible charges 4.934 (1.357) 1,14% - telepho ne charges 303 (83) 0,07% - ro unding o ff - (171) 0,14% Permanent decreases

- untaxed dividends (1.187) 326 (0,27%) - no n-deductible interes t expens e (1.386) 381 (0,32%) - o ther decreas es (2.069) 569 (0,48%) - IRES credit fo r IRAP rebate 10% - 2.374 (2,00%) Actual tax charges IRES 12 6 .3 3 2 (3 2 .5 3 9 ) 2 7 ,3 6 %

IR A P Taxable amount IR A P %

The o re tic a l ta x c ha rg e s IR A P 118 .9 2 9 (5 .7 3 2 ) 4 ,8 2 % Permanent increases

- pers o nnel co s ts no t deductible fo r IRAP purpo s es 172.843 (8.331) 7,01% - value adjustments on non deductible receivables for IRAP purposes 98.662 (4.755) 4,00% - write-do wn o f no n-deductible AFS s ecurities 46 (2) 0,00% - pro vis io ns fo r ris ks 2.875 (139) 0,12% - administrative expenses and non-deductible amortisation/depreciation 17.588 (848) 0,71% - no n-deductible interes t expens e 7.273 (351) 0,30% - reco very o f o perating inco me taxatio n (5.072) 244 (0,21%) - o ther no n-deductible co s ts 3.844 (185) 0,16% Permanent decreases

- dividends (625) 30 (0,03%) - deductio ns fo r tax wedge (53.675) 2.587 (2,18%) - o ther changes (1.458) 70 (0,06%) - deferred taxes acco rding to EC s ectio n - 3.000 (2,52%) Actual tax charges IRAP 3 6 1.2 3 0 (14 .4 12 ) 12 ,12 %

Total actual fiscal charges IRES and IRAP 118 .9 2 9 (4 6 .9 5 1) 3 9 ,4 8 %

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Section 21 Earnings Per Share

The Bank’s shares are not traded on financial markets, therefore disclosure relating to earnings per share is not provided.

Please note that the dividend per share for the 2009 financial year was 0.037 euro for each of the 872,500,000 shares that make up the share capital. For 2010, the proposed allocation, which is currently subject to approval, envisages a dividend distribution of 0.020 euro for each of the 905,341,516 shares.

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Part D – Comprehensive income

Analytical statement of comprehensive income

Items Gross balance Income taxes Net balance

10. Profit (loss) for the year X X 71.979 Other income components

20 Available-for-sale financial assets: (5.530) 338 (5.192) a) change in fair value (5.530) 338 (5.192)

b) transfer to income statement - - -

- adjustments from impairment -

- profit/loss on disposal -

c) other changes - 30 Tangible assets -

40 Intangible Assets -

50 Foreign investment hedges: - - -

a) change in fair value - b) transfer to income statement -

c) other changes -

60 Cash flow hedges: (1) 0 (0)

a) change in fair value (1) 0 (0) b) transfer to income statement -

c) other changes -

70 Exchange rate differences: - - -

a) value changes -

b) transfer to income statement -

c) other changes -

80 Non-current assets held for sale: - - -

a) change in fair value - b) transfer to income statement -

c) other changes -

90 Actuarial gains (losses) on defined-benefit plans (2.526) 695 (1.832)

100 Portions of valuation reserves relating to investments carried at equity: - - -

a) change in fair value -

b) transfer to income statement - - -

- adjustments from impairment - - profit/loss on disposal -

c) other changes -

110 Total other income components (8.057) 1.033 (7.024)

120 Comprehensive income (Item 10+110) X X 64.955

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Part E – Information on Risks and the related Hedging Policies

In compliance with the prevailing regulations, the UBI Group has a risk management system that fully integrates the guidelines of the Internal Control System, including the organisational, regulatory and methodological framework to which the Group companies must conform so that the Parent Company can effectively and economically perform strategic coordination and control, management and technical-operational activities.

The Bank proactively collaborates in identifying risks to which it is subject and defining the relative measurement, management and control criteria.

The basic principles to which the Group’s risk analysis and management refer, in order to pursue economic and regulatory capital allocations with increasing knowledge and efficiency, are: • rigorous containment of financial and credit risk while actively guarding against all types of risk; • use of sustainable value creation logics in defining risk propensity and capital allocation; • decreasing risk propensity of the Group in reference to specific risk factors and/or specific activities in a body of legislative policy at Group level and for individual entities.

In this section, information is provided regarding the risk profiles listed below, the related management and hedging policies used by the Bank, and operations on derivative financial instruments: a) credit risk; b) market risk: • interest rates, • price, • exchange, c) liquidity risk; d) operational risks.

For a complete overview of risks and uncertainties relating to the Bank, refer to the specific section in the Directors’ Report, prepared in compliance with Italian Legislative Decree No. 32 dated 2nd February 2007, in implementation of Directive 2003/51/EC.

Section 1 Credit risk

Qualitative information

1. General aspects

The strategic guidelines, policies and instruments for the assumption and management of credit risk are defined within the Parent Company by the Risk Management Division together with the Loans Division with the support and agreement of the specialised structures set up. In developing credit risk protection policies, particular attention is paid to maintaining an adequate risk/return profile and undertaking risks consistent with the risk propensity defined by Senior Management and, more generally, with UBI Group’s mission. Credit risk protection policies are prioritised based on their support of local economies, households, entrepreneurs, professionals, and small to medium-sized businesses. The specific attention given to maintaining established relationships with customers and developing them over time represents one of the Group’s strengths, reducing information

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mismatches and offering continuity in relationships and support to customers over the long term. Even during the complex economic conditions under way, the Banks ensures an adequate availability of credit to the economy, while preserving the quality of its assets, complying among other aspects with the “Agreements” entered into between the Italian Banking Association, the Ministry of Finance and the Trade Associations.

Specific lending policies are defined for the Corporate and Small Business market to coordinate the development of the loan portfolio in terms of geographic distribution, industry sectors and rating classes. Lending policies support the sales Network in evaluating the attractiveness of particular areas/sectors/counterparties in terms of value creation and in evaluating the creditworthiness of counterparties.

Lending policies are communicated to the network via: • facilitated approval processes for the counterparts belonging to clusters which are the most attractive; • initiatives aimed at containing the risk profile and limiting the negative impact on the creation of the portfolio’s value (corrective pricing action/guarantee gathering/line review) for the counterparts belonging to clusters which are not so attractive.

Finally, specific attention is given to defining the handling of new products, developing adequate reports to management regarding the compliance with the risk/return objectives, calculation of minimum disbursement rates, borrower quality, guarantees received and expected recovery rates in the event of default.

2. Credit risk management policies

2.1 Organisational aspects

In performing standard credit intermediation activities, the Bank is exposed to the risk that loans disbursed may not be reimbursed by the borrower on maturity and may be partially or entirely written down. More specifically, the risk profile of the loans is sensitive to the overall performance of the economy, to deterioration in the financial position of the counterparties (lack of liquidity, default, etc.) or changes in their competitive situation, structural or technological changes in debtor businesses and other external factors (e.g., legislative changes, decline in value of the financial guarantees linked to market performance). An additional risk element to which particular attention is paid is the level of diversification in the loan portfolio among the various borrowers and the various sectors in which they operate.

The organisational model used to structure the units in charge of lending is as follows: Parent Company’s centralised control and coordination structures; Head Offices of Banks and Subsidiaries, which oversee: • Credit Management divisions, • Decentralised Decision Centres, • Branches, • Corporate Business Unit (CBU), • Private Business Unit (PBU).

The characteristics of this organisational model, in addition to highly standardising the Credit organisations within the Parent Company and the same structures in the Network Banks, with the consequent process consistency and optimisation of information flows, emphasise the clear distinction between the commercial functions and lending functions. Loan disbursement is also differentiated by customer segment (Retail/Private and Corporate) and specialised by the status of that segment: performing (managed by the Retail, Private and Corporate Loan Units) and problematic (managed by Problem Loan Units).

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Furthermore, the introduction of Decentralised Decision Centres (PDP) within the banks in support of the Retail Branches and the structures for Private customers, guarantee the effective coordination and liaison of the operating units on the relevant market. The Parent Company, through the structures of the Credit Area, the Risk Control and Development and Strategic Planning Macro-areas, the Loan Recovery Area and Audit Division of the Parent Company and Group, oversees policy management, overall portfolio monitoring, streamlining of evaluation systems, management of problem loans and compliance with regulations. With regard to all the parties (individuals or economic groups) with existing loans with Group Banks and Companies (including risk activities attributable to issuer risk and derivative risk) totalling more than 50 million euro, the Parent Company must decide on an Operating Limit, or a maximum loan limit for said counterparty at UBI Group level. In addition, Group banks and companies must request a non-binding preliminary advisory Opinion from the Parent Company regarding: a) loan amounts and b) certain internal rating classes.

Bank and product company structures carry out commercial and lending tasks and are responsible for supervising both the activities carried out directly and through reporting units. Specifically, responsibility for managing and monitoring performing loans lies, firstly, with the Relation Managers, who maintain relationships with Customers on a daily basis and are the first to notice any signs of difficulty or deterioration in credit quality. However, all employees of Group Companies are expected to note, in a timely manner, any information that may signal the first signs of difficulty, or may advise other methods of relationship management, thereby participating in the monitoring process.

Secondly, the organisational unit for monitoring credit risk – Credit Quality Monitoring Unit – performs control, supervision and analysis of performing positions both in analytical and aggregate terms, with the intensity and depth based on the risk band of the counterparties and the seriousness of the performance anomalies discovered. This unit, which is not involved in the loan deliberation process, on its own initiative or upon request, evaluates and prepares (or makes proposals to higher level decision-making bodies if the decision exceeds its limits) appropriate downgrades of performing counterparties by requesting UBI Banca’s Loan Division – Credit Services Italy – Opinion Group for a preliminary, non-binding opinion in cases provided for under Loan Regulations. In UBI Banca’s Loan Division, the Credit Quality Monitoring Unit coordinates and defines guidelines for monitoring loan portfolios, supports the development of monitoring instruments, controlling credit policies and preparing management reports.

2.2 Management, measurement and control systems

The Parent Company’s Credit Risk service is responsible for providing information on the Bank’s credit risks, in order to monitor the risk trends in loans. The reports – submitted quarterly to the Bank’s Board of Directors - illustrate the distribution by internal rating class, LGD and Expected Loss and therefore the average risk trend of the loan portfolio, focusing on the Corporate Market and the Retail Market, respectively for companies and individuals; they describe loan run-off rate trend; they contain a section dedicated to the quarterly monitoring of the loan concentration and quality policy in terms of distribution of the loans and values of the risk parameters. All the models which make up the Group’s Internal Rating System are handled by the Parent Company’s Risk Management division and the Loan division.

At present, the structures envisage the use of automated models for private customers and smaller businesses, automated models integrating the qualitative questionnaire and the geographical-sectorial module for medium and large businesses, and a predominantly subjective model for larger loans (or economic groups with loans greater than 20 million euro).

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With reference to the Basel II project, a series of activities took place aimed at the bringing onto stream during 2011 of a new generation of LGD estimation and rating models for this portfolio, also further to interaction with the Supervisory Authorities. The main elements of this new generation of rating models concern: the review of the credit risk segmentation, which defines which model applies to each counterpart; the development of a new quantitative component which envisages internal models for the analysis of the financial component, abandoning the use of a model supplied by the external provider; the development of new integration drivers among the various components of the quantitative analysis; the development of new qualitative questionnaires; a different manner of assimilating the information relating to the related economic Group within the automatic rating models; a different method of up-dating the rating aimed at ensuring an optimum mix between the needs to assimilate up-dated information and maintain a contained level of volatility.

With reference to the LGD, steps were taken to up-date the parameters for the operational use in December 2010 and to develop the regulatory model to be used for the parallel running during 2011.

With regard to the rating models in production at present, during 2010 steps were taken to periodically up-date the default probability estimates for all the models (with the exclusion of the Major Borrowers model, which will be discontinued during 2011).

The operating units involved in loan disbursement and renewal use the internal ratings, which are an essential and irreplaceable element of the valuations developed as part of loan approval and revision. Proxies are defined by considering the risk profile of the customer or transaction as represented by the rating, and managed by applying the Electronic Loan Process (PEF). Ratings are used both in management reporting and in information flows available to the Bank’s structures that are involved in the credit process.

A proposal may be made to override the rating class calculated by the Internal Rating System with another rating based on adopted models. These changes occur as a result of evaluating information which is not considered by the rating model, not adequately weighted by the model or whose future impact must be anticipated.

As indicated in the Bank of Italy Circular No. 263/2006 regarding New provisions for Banking Oversight, the Group has adopted the standardised methodology to determine supervisory capital. Specifically, with regard to the “Businesses and other subjects” supervisory exposure class, it was decided to use, where possible, external evaluations of creditworthiness provided by Moody’s and the Cerved Group (formally Lince) recognised as an External Credit Assessment Institution (ECAI) by the Bank of Italy.

The method for calculating collective credit impairment – on a consistent basis with the decisions made by the Parent Company – is based on the internal ratings and internal losses estimated in the event of default (LGD).

Additionally, during 2010 activities continued for revising, updating and adopting policies and regulations for managing credit risk. The current policies are listed below, with a summary of the main contents. Credit Risks Policy, which disciplines in a single document, the provisions relating to the protection of types of credit risk previously dealt with in different policies. The following types are disciplined in this policy: • ordinary customers, establishing norms, standards and limits for the handling of loans to ordinary customers on the basis of the availability of the internal ratings. The structure of the limits materialises in a series of indicators

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expressed in terms of: capital allocation, maximum risk values (understood as maximum expected and target loss), risk undertaking limits in terms of distribution of the exposures by rating classes and in qualitative coverages; • institutional and ordinary counterparts resident in countries at risk, which establishes rules and principles for managing credit granted to resident and non-resident institutional customers, as well as ordinary customers in countries at risk. As in the case of ordinary customers, the structure of the limits materialises in a series of indicators expressed in terms of: capital allocation, risk undertaking limits in terms of distribution of the exposures by rating classes and country and in qualitative coverages; • Single name concentration risk, which establishes maximum limits of exposure on the individual counterpart, so as to limits the risks of instability which could derive from high loan concentration rates on larger borrowers in the event of possible default of the same; Mortgages offered through intermediaries policy, which governs the methods of using external networks to offer mortgages to non-captive customers, in order to contain potential credit risks, operational risks and reputational risks; Policy on transfer, renegotiation, substitution and early redemption of mortgages for direct customers of network banks, which provides UBI Group’s guidelines on active and passive transfer transactions, renegotiations, substitutions and early redemptions (partial or total) of mortgages, with a view to guaranteeing (also by defining minimum service levels) the greatest reduction in timescales, adjustments and related costs, as well as providing the Group with the necessary processes and tools for risk protection (in terms of loans, operations and reputation); Policy on transfer, renegotiation, substitution and early redemption of intermediated mortgages, in reference to intermediated mortgage transactions based on agreements between the Group’s companies/banks and specific distribution networks; Risk-adjusted Pricing Policy, which defines the definition and implementation process for Risk-adjusted Pricing logic for the various products that include the assumption of credit risk; Securitisation risk policy, which defines the guidelines which the Group sets itself with reference to the handling of the risk from securitisation activities; Residual risk policy, which defines the strategic approaches relating to the handling of the “residual risk” defining the control process on the acquisition and use of credit risk mitigations techniques so as to mitigate said risk.

2.3 Techniques for mitigating credit risk

The Bank uses risk mitigation techniques typical of banking activities, acquiring secured, property and financial guarantees, as well as unsecured guarantees, from counterparties for each type of loan. In determining the total amount of the loans to be granted to the same customer and/or legal and economic entity, the specific criteria for weighting the various risk categories and guarantees is taken into consideration. Specifically, precautionary “spreads” are applied to the estimates of secured guarantees, differentiated by type of guarantee.

The main types of secured guarantees accepted by the Group are represented by: • mortgage; • pledge.

So as to ensure the existence of the general and specific requisites for the prudent recognition of the secured guarantees, counted among the Credit Risk Mitigation (CRM) techniques – in accordance with the Bank of Italy Circular No. 263 dated 27th December and subsequent amendments - the UBI Group has: • redefined credit processes related to collecting and managing guarantees. With particular attention to mortgage guarantees, the Network Banks are obliged to include, in the specific IT application available to managers, all the data relating to the

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property necessary for rendering the guarantee eligible. Special attention was paid to the requirement for the surveyor’s report and the timeliness in recovery of inherent information (essential data of the notarial act), elements decisive for the finalisation of the guarantee. • collected all the necessary information for the mortgages guarantees, to ensure the admissibility of the same in line with Basel II conditions in terms of specific requirements.

On a general note, during 2010 organizational and IT solutions were consolidated which permit the handling of the guarantees in line with the defined processes, during the finalization, valorisation and monitoring stages.

2.4 Impaired financial assets

The classification of the problem loan portfolio complies with the provisions of legal regulations and may be summarised as follows: • past due loans and/or credit limits continuously exceeded; • restructured loans; • impaired loans; • non-performing loans.

In addition to the aforesaid classes, there are also problem loans associated with “country risk” for non-guaranteed exposures towards both institutional and ordinary customers from the so-called “risk countries” as defined by the Regulatory Authority. More specifically, “impaired loans” are effectively monitored by distinguishing, for management purposes, positions that are expected to be resolved in the short term (9 months which may be extended for a further 3 months on an exceptional basis) and the remaining positions that the bank wishes to eliminate and recover out-of-court over a longer period of time. In addition, “past due loans and/or credit limits continuously exceeded’ are checked to determine, within a maximum of 60 days, the possibility of upgrading them or assigning them a different problem loan status. Problem loans are managed according to the associated level of risk by the organisational structures tasked with the handling of the Bank’s problems loans with regard to “past due loans and/or credit limits continuously exceeded", “impaired loans” and "restructured loans", whilst “non performing” loans are the responsibility of the Parent Company’s Loan Recovery and Loan Macro Area Non-performing Positions Service, care of which the management concentration process has been completed. The adequacy of adjustments is valued analytically, for each position, assuring adequate hedging levels for expected losses. The analysis of impaired positions is constantly performed by the individual operating units in charge of monitoring risk and by the Parent Company. The key factor for upgrading impaired loans to “performing” status is the ability of the counterparty to resolve its difficulties; this event is essentially concentrated in the relations with “past due loans and/or credit limits exceeded continuously” and those “impaired”.

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Quantitative Information

A. CREDIT QUALITY

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

A.1.1 Distribution of financial assets by portfolio and according to credit quality (carrying values)

N o n pe rfo rm ing Rescheduled P a s t due P o rtfo lio s / Qua lity Im pa ire d lo a ns Othe r a s s e ts To ta l lo a ns e xpo s ure s e xpo s ure s

1. Financial as s ets held fo r trading 72 3.036 2.023 890 94.931 10 0 .9 5 2 2. Available-fo r-s ale financial as s ets ------3. Held-to -maturity financial as s ets ------

4. Loans to banks 20 - - - 851.371 8 5 1.3 9 1 5. Loans to customers 184.912 318.668 201.499 41.021 14.332.104 15.078.204 6. Financial as s ets at fair value ------7. Financial as s ets held fo r s ale ------8. Hedging derivatives - - - - 45.471 4 5 .4 7 1 To tal 31/12/2010 18 5 .0 0 4 3 2 1.7 0 4 2 0 3 .5 2 2 4 1.9 11 15.323.877 16.076.018 To tal 31/12/2009 13 2 .7 7 9 2 5 2 .17 9 7 3 .2 3 0 7 6 .0 7 3 21.275.937 21.810.198

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A.1.2 Distribution of financial assets by portfolio and according to credit quality (gross and net values)

Im pa ire d a s s e ts P e rfo rm ing a s s e ts To tal P o rtfo lio s / Qua lity S pe c ific P o rtfo lio Gro s s e xpo s ure N e t e xpo s ure Gro s s e xpo s ure N e t e xpo s ure (N e t e xpo s ure ) a djus tm e nts a djus tm e nts 1. Financial as s ets held fo r trading 6.609 (588) 6.021 X X 94.931 10 0 .9 5 2 2. Available-fo r-s ale financial as s ets ------3. Held-to -maturity financial as s ets ------4. Loans to banks 22 (2) 20 851.371 - 851.371 8 5 1.3 9 1 5. Loans to customers 955.261 (209.161) 746.100 14.399.556 (67.452) 14.332.104 15.078.204 6. Financial as s ets at fair value - - - X X - - 7. Financial as s ets held fo r s ale ------8. Hedging derivatives - - - X X 45.471 4 5 .4 7 1 To tal 31/12/2010 9 6 1.8 9 2 (2 0 9 .7 5 1) 7 5 2 .14 1 15.250.927 (6 7 .4 5 2 ) 15.323.877 16.076.018 To tal 31/12/2009 7 10 .0 2 1 (17 5 .7 6 0 ) 5 3 4 .2 6 1 2 1.13 9 .16 1 (5 0 .3 6 4 ) 21.275.937 21.810.198

As envisaged by the handout letter of the Bank of Italy dated 16th February 2011, analysis is provided, by portfolio, of the performing loans distinguishing between exposures subject to renegotiation and other exposures, with analysis of the ageing of the past due positions.

P e rfo rm ing a s s e ts To tal P o rtfo lio s / Qua lity Gro s s e xpo s ure P o rtfo lio a djus tm e nts e xpo s ure (N e t e xpo s ure ) Financial assets held for trading: 9 4 .9 3 1 9 4 .9 3 1 Other expo s ures 94.931 94.931 past due 0 to 90 days 94.757 94.757 past due 90 to 180 days 174 174 Lo a ns to ba nks : 8 5 1.3 7 1 - 8 5 1.3 7 1 8 5 1.3 7 1 Other expo s ures 851.371 - 851.371 851.371 past due 0 to 90 days 851.371 851.371 851.371 Lo a ns to c us to m e rs : 14.399.556 (6 7 .4 5 2 ) 14.332.104 14.332.104 Expo s ures renego tiated 196.873 (864) 196.009 196.009 past due 0 to 90 days 195.389 (836) 194.553 194.553 past due 90 to 180 days 1.484 (29) 1.456 1.456 Other expo s ures 14.202.683 (66.587) 14.136.096 14.136.096 past due 0 to 90 days 14.174.820 (64.930) 14.109.890 14.109.890 past due 90 to 180 days 27.864 (1.658) 26.206 26.206 He dg ing de riv a tiv e s : 4 5 .4 7 1 4 5 .4 7 1 Other expo s ures 45.471 45.471 past due 0 to 90 days 45.471 45.471 To tal 31/12/2010 15.250.927 (6 7 .4 5 2 ) 15.323.877 15.323.877

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

S pe c ific P o rtfo lio Gro s s Net Type of exposure/values im pa irm e nt im pa irm e nt e xpo s ure e xpo s ure a djus tm e nts a djus tm e nts

A. On-balance sheet exposures a) No n perfo rming lo ans 22 (2) X 20 b) Impa ire d lo a ns - - X - c ) R e s c he dule d e xpo s ure s - - X - d) P a s t due e xpo s ure s - - X - e ) Othe r a s s e ts 851.372 X - 851.372 To ta l A 8 5 1.3 9 4 (2 ) - 8 5 1.3 9 2 B. Off-balance sheet exposures a ) Impa ire d - - X - b) Othe r 1.946.851 X (133) 1.946.718 To ta l B 1.9 4 6 .8 5 1 - (13 3 ) 1.9 4 6 .7 18 To ta l A +B 2 .7 9 8 .2 4 5 (2 ) (13 3 ) 2 .7 9 8 .110

A.1.4 On-balance sheet exposures to banks: change in gross impaired exposures

N o n pe rfo rm ing Rescheduled P as t due R e a s o ns / c a te g o rie s Im pa ire d lo a ns lo a ns e xpo s ure s e xpo s ure s

A . Initia l g ro s s e xpo s ure 22 - - - - o f which: expo s ures trans ferred no t dereco gnis ed - - - - B . Inc re a s e s - - - - B .1 tra ns fe rs fro m pe rfo rm ing e xpo s ure s - - - - B .2 tra ns fe rs fro m o the r c a te go rie s o f im pa ire d e xpo s ure s - - - - B .3 o the r inc re a s e s - - - - C . D e c re a s e s - - - - C .1 tra ns fe rs to pe rfo rm ing e xpo s ure s - - - - C .2 write -o ffs - - - - C .3 pa ym e nts re c e ive d - - - - C .4 pro fit o n s a le s - - - - C .5 tra ns fe rs to o the r c a te go rie s o f im pa ire d e xpo s ure s - - - - C .6 o the r de c re a s e s - - - - D . F ina l g ro s s e xpo s ure 22 - - - - o f which: expo s ures trans ferred no t dereco gnis ed - - - -

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A.1.5 On-balance sheet exposures to banks: changes in total net impairment adjustments

N o n pe rfo rm ing Res cheduled P as t due R e a s o ns / c a te g o rie s Im pa ire d lo a ns lo a ns e xpo s ure s e xpo s ure s

A. To tal initial impairment adjus tments (2 ) - - - - o f which: expo s ures trans ferred no t dereco gnis ed - - - - B . Inc re a s e s - - - - B .1 im pa irm e nt a djus tm e nts - - - - B .2 tra ns fe rs fro m o the r c a te go rie s o f im pa ire d e xpo s ure s - - - - B .3 o the r inc re a s e s - - - - C . D e c re a s e s - - - - C .1 va lue re c o ve rie s a s a re s ult o f va lua tio ns - - - - C .2 va lue re c o ve rie s fo r pa ym e nts re c e ive d - - - - C .3 c a nc e lla tio ns - - - - C .4 tra ns fe rs to o the r c a te go rie s o f im pa ire d e xpo s ure s - - - - C .5 o the r de c re a s e s - - - - D. Final impairment adjustments (2 ) - - - - o f which: expo s ures trans ferred no t dereco gnis ed - - - -

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

P o rtfo lio Gro s s S pe c ific im pa irm e nt Net Type of exposure/values im pa irm e nt e xpo s ure a djus tm e nts e xpo s ure a djus tm e nts

A. On-balance sheet exposures a ) No n pe rfo rm ing lo a ns 346.898 (161.931) X 184.967 b) Impa ire d lo a ns 351.197 (32.529) X 318.668 c ) R e s c he dule d e xpo s ure s 214.801 (13.302) X 201.499 d) P a s t due e xpo s ure s 42.421 (1.400) X 41.021 e ) Othe r a s s e ts 14.426.220 X (67.452) 14.358.768 To ta l A 15.381.537 (2 0 9 .16 2 ) (6 7 .4 5 2 ) 15.104.923 B. Off-balance sheet exposures a) Impaired 58.994 (2.129) X 56.865 b) Other 2.327.592 X (2.905) 2.324.687 To ta l B 2 .3 8 6 .5 8 6 (2 .12 9 ) (2 .9 0 5 ) 2 .3 8 1.5 5 2 To ta l A +B 17.768.123 (2 11.2 9 1) (7 0 .3 5 7 ) 17.486.475

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A.1.7 On-balance sheet exposures to customers: change in gross impaired exposures

N o n pe rfo rm ing Res cheduled P as t due R e a s o ns / c a te g o rie s Im pa ire d lo a ns lo a ns e xpo s ure s e xpo s ure s

A . Initia l g ro s s e xpo s ure 2 6 8 .5 9 1 2 8 0 .5 8 3 8 1.13 4 7 7 .4 4 7 - o f whic h e xpo s ure s tra ns fe rre d no t de re c o gnis e d 5.022 27.068 4.177 8.767

B . Inc re a s e s 15 9 .18 7 5 4 0 .18 0 4 3 0 .8 0 7 2 8 9 .3 0 5 B .1 tra ns fe rs fro m pe rfo rm ing e xpo s ure s 41.653 282.825 12.682 264.225 B .2 tra ns fe rs fro m o the r c a te go rie s o f im pa ire d e xpo s ure s 112.259 125.989 153.816 9.187 B .3 Othe r inc re a s e s 5.275 131.366 264.309 15.893 C . D e c re a s e s (8 0 .8 8 0 ) (4 6 9 .5 6 6 ) (2 9 7 .14 0 ) (3 2 4 .3 3 1) C .1 tra ns fe rs to pe rfo rm ing e xpo s ure s - (44.396) (5.752) (177.422) C .2 write -o ffs (52.358) - - - C .3 pa ym e nts re c e ive d (25.911) (53.372) (238.196) (2.452) C .4 pro fit o n s a le s - - - - C .5 tra ns fe rs to o the r c a te go rie s o f im pa ire d e xpo s ure s - (263.365) (16.171) (121.717) C .6 o the r de c re a s e s (2.611) (108.433) (37.021) (22.740) D . F ina l g ro s s e xpo s ure 3 4 6 .8 9 8 3 5 1.19 7 2 14 .8 0 1 4 2 .4 2 1 - o f whic h e xpo s ure s tra ns fe rre d no t de re c o gnis e d 16.694 55.101 15.131 9.468

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

N o n pe rfo rm ing Rescheduled P as t due R e a s o ns / c a te g o rie s Im pa ire d lo a ns lo a ns e xpo s ure s e xpo s ure s

A. To tal initial impairment adjus tments (13 6 .3 15 ) (2 9 .7 9 4 ) (8 .2 10 ) (1.4 3 9 ) - o f which: expo s ures trans ferred no t dereco gnis ed 1.453 1.315 - 78

B . Inc re a s e s (9 1.4 2 1) (2 9 .2 9 7 ) (9 .0 7 6 ) (1.5 5 4 ) B.1 impairment adjustments (72.451) (19.349) (4.287) (1.098) B.2 trans fers fro m o ther catego ries o f impaired expo s ures (13.752) (706) (3.879) (26) B.3 o ther increas es (5.218) (9.242) (910) (430) C . D e c re a s e s 6 5 .8 0 5 2 6 .5 6 2 3 .9 8 4 1.5 9 3 C.1 value reco veries as a res ult o f valuatio ns 4.880 1.170 174 304 C.2 value reco veries fo r payments received 6.194 4.116 735 265 C.3 cancellations 52.358 - - - C.4 trans fers to o ther catego ries o f impaired expo s ures 19 17.315 136 892 C.5 o ther decreas es 2.354 3.961 2.939 132 D. Final impairment adjustments (16 1.9 3 1) (3 2 .5 2 9 ) (13 .3 0 2 ) (1.4 0 0 ) - o f which: expo s ures trans ferred no t dereco gnis ed (2.897) (3.125) (658) (146)

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

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

Inte rna l ra ting c la s s e s Expo s ure s With no ra ting To ta l C la s s 1 C la s s 2 C la s s 3 C la s s 4 C la s s 5 C la s s 6

A. On-balance sheet exposures for loans 10 1.3 12 1.2 9 9 .3 7 6 6 .18 8 5 4 2 .9 0 5 9 2 3 .0 4 2 8 8 9 .9 7 7 12.193.516 15.956.316 B . D e riv a tiv e s - 14 .2 15 - 10 .0 7 2 8 .5 15 4 .8 5 7 8 2 .0 4 4 119 .7 0 3 B.1 Financial derivatives - 14.215 - 10.072 8.515 4.857 82.044 119 .7 0 3 B.2 Credit derivatives ------C . Gua ra nte e s g ra nte d 2 6 .5 5 8 3 3 4 .6 5 1 5 6 .7 6 3 3 5 .3 0 4 3 4 .5 3 3 3 3 .9 5 0 2 .5 3 3 .6 0 7 3 .0 5 5 .3 6 6 D. Commitments to grant funds - 4 5 .4 3 5 - 2 8 .6 3 7 7 4 .5 4 4 10 4 .3 5 2 9 0 0 .2 3 2 1.15 3 .2 0 0 To ta l 12 7 .8 7 0 1.6 9 3 .6 7 7 6 2 .9 5 1 6 16 .9 18 1.0 4 0 .6 3 4 1.0 3 3 .13 6 15.709.399 20.284.585

External rating Clas s es Expo s ure s C la s s 9 To ta l C la s s 1 C la s s 2 C la s s 3 C la s s 4 C la s s 5 C la s s 6

of which securitised mortgages - 16 9 .4 4 1 - 110 .7 7 5 16 4 .3 2 5 12 1.7 4 9 7 4 0 .12 2 1.3 0 6 .4 12

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A.2.2 Distribution of on- and off-balance sheet exposures by internal rating class

Inte rna l ra ting c la s s e s Expo s ure s With no ra ting To ta l R a ting 1 R a ting 2 R a ting 3 R a ting 4 R a ting 5 R a ting 6 R a ting 7 R a ting 8 R a ting 9 R a ting 10 R a ting 11 R a ting 12 R a ting 13 R a ting 14

A. On-balance sheet exposures 207.995 256.725 1.448.338 1.299.078 889.330 3.696.439 244.832 2.383.032 838.650 852.606 1.060.455 110.722 411.142 179.000 2.077.975 15.956.316

B . D e riv a tiv e s 956 563 3.428 2.214 1.037 12.904 1.040 4.936 13.367 2.963 9.770 280 1.344 1.151 63.751 119 .7 0 3 B.1 Financial derivatives 956 563 3.428 2.214 1.037 12.904 1.040 4.936 13.367 2.963 9.770 280 1.344 1.151 63.751 119.703 B.2 Credit derivatives ------C . Gua ra nte e s g ra nte d 42.220 22.490 203.759 82.065 211.376 233.258 5.935 61.706 94.045 21.834 25.962 1.152 7.546 5.715 2.036.305 3 .0 5 5 .3 6 6 D. Commitments to grant funds 11.366 9.454 43.904 59.799 26.516 214.397 33.500 91.581 12.924 41.034 127.015 1.217 2.605 12.460 465.427 1.15 3 .2 0 0 To ta l 2 6 2 .5 3 7 2 8 9 .2 3 3 1.6 9 9 .4 2 9 1.4 4 3 .15 5 1.12 8 .2 5 9 4 .15 6 .9 9 8 2 8 5 .3 0 7 2 .5 4 1.2 5 5 9 5 8 .9 8 5 9 18 .4 3 6 1.2 2 3 .2 0 1 113 .3 7 1 4 2 2 .6 3 7 19 8 .3 2 6 4 .6 4 3 .4 5 7 20.284.586

Internal rating clas s es Expo s ure s With no rating To ta l R a ting 1 R a ting 2 R a ting 3 R a ting 4 R a ting 5 R a ting 6 R a ting 7 R a ting 8 R a ting 9 R a ting 10 R a ting 11 R a ting 12 R a ting 13 R a ting 14

With no rating 2 9 .7 0 8 4 7 .0 5 2 119 .0 5 2 14 4 .3 7 4 9 2 .4 7 9 2 13 .6 8 9 4 3 .4 0 8 2 11.8 6 0 8 6 .2 6 4 8 5 .2 2 1 8 3 .7 8 1 14 .10 5 13 .3 9 6 4 4 .6 8 4 7 7 .3 3 9 1.3 0 6 .4 12 The Master Scale classes are made up of PD (Probability Default) intervals which contain the mapping of the specific PDs corresponding to the individual classes of the various internal rating models. This representation ensures the comparability of the exposures relating to counterparts valued using different internal rating models.

The five least risky master scale classes have a concentration of 29.6% of the total of the on-balance sheet exposures with internal rating, while only 4.3% is the concentration of the 2 most risky classes. Class 6 and class 8 are the highest in terms of exposure.

The class without rating contains impaired exposures.

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A.3 Distribution of guaranteed exposures by type of guarantee

A.3.1 Guaranteed exposures to banks

Uns e c ure d g ua ra nte e s (2 ) S e c ure d g ua ra nte e s (1) C re dit de riv a tiv e s Endo rs e m e nt c re dits Net To tal (1)+(2) e xpo s ure Othe r de riv a tiv e s Othe r s e c ure d Go v e rnm e nts a nd Other public P ro pe rtie s S e c uritie s C LN B a nks Othe r g ua ra nte e s c e ntra l ba nks a utho ritie s Go v e rnm e nts a nd Other public B a nks Othe r c e ntra l ba nks a utho ritie s

1. Gua ra nte e d/ s e c ure d c a s h e xpo s ure s

1.1. fully guaranteed ------o f which impaired ------1.2. partially guaranteed 508.723 - (507.401) ------(507.401) - o f which impaired ------2 . "Off-ba la nc e s he e t" g ua ra nte e d/ s e c ure d e xpo s ure s

2.1. fully guaranteed ------o f which impaired ------2.2. partially guaranteed ------o f which impaired ------A.3.2 Guaranteed exposures to customers

1. Gua ra nte e d/ s e c ure d c a s h e xpo s ure s

1.1. fully guaranteed 9.733.957 7.558.355 299.389 3.154 ------16.738 11.121 1.598.743 9 .4 8 7 .5 0 0 - o f which impaired 505.938 344.348 14.005 101 ------37 139.781 4 9 8 .2 7 2 1.2. partially guaranteed 532.540 6.859 77.036 2.895 ------2.218 2.109 208.015 2 9 9 .13 2 - o f which impaired 22.809 334 1.557 2.063 ------204 11.299 15 .4 5 7 2 . "Off-ba la nc e s he e t" g ua ra nte e d/ s e c ure d e xpo s ure s

2.1. fully guaranteed 884.950 362.113 31.960 4.695 ------160 184 329.693 7 2 8 .8 0 5 - o f which impaired 21.244 9.453 590 258 ------39 2.985 13 .3 2 5 2.2. partially guaranteed 137.394 103 9.253 16.741 ------28.553 10.880 6 5 .5 3 0 - o f which impaired 3.305 65 34 ------1.170 1.2 6 9

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B. DISTRIBUTION AND CONCENTRATION OF CREDIT EXPOSURES

B.1 Distribution by business sector of on- and off-balance sheet exposures to customers (carrying value)

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B.2 Geographical distribution of on- and off-balance sheet exposures to customers (carrying value)

ITA LY OTHER EUROP EAN COUNTRIES A M ER IC A A S IA R ES T OF WOR LD

Expo s ure s / Ge o g ra phic a re a s To ta l To ta l To ta l To ta l N e t e xpo s ure N e t e xpo s ure N e t e xpo s ure N e t e xpo s ure N e t e xpo s ure To ta l a djus tm e nts a djus tm e nts a djus tm e nts a djus tm e nts a djus tm e nts

A . Expo s ure s fo r lo a ns A.1 No n perfo rming lo ans 184.816 (161.814) 96 (110) 55 (7) - - - - A.2 Impaired lo ans 318.287 (32.499) 377 (29) 4 - - - - - A.3 Res tructured expo s ures 201.499 (13.302) ------A.4 P ast due loans 41.021 (1.400) ------A.5 Other expo s ures 14.251.591 (66.833) 101.035 (599) 4.476 (7) 359 (1) 1.307 (11) TOTA L A 14.997.214 (2 7 5 .8 4 8 ) 10 1.5 0 8 (7 3 8 ) 4 .5 3 5 (14 ) 359 (1) 1.3 0 7 (11) B . "Off-ba la nc e s he e t" e xpo s ure s B.1 No n perfo rming lo ans 3.628 (305) ------B.2 Impaired lo ans 18.942 (377) ------B.3 Other impaired as s ets 34.295 (1.447) ------B.4 Other expo s ures 2.324.256 (2.901) 3 - - - - - 428 (4) TOTA L B 2 .3 8 1.12 1 (5 .0 3 0 ) 3 - - - - - 428 (4 ) To tal (A+B) 31/12/2010 17.378.335 (2 8 0 .8 7 8 ) 10 1.5 11 (7 3 8 ) 4 .5 3 5 (14 ) 359 (1) 1.7 3 5 (15 ) To tal (A+B) 31/12/2009 16.451.147 (19 9 .4 8 9 ) 6 5 .2 5 8 (4 3 2 ) 5 .0 2 2 (8 8 ) 378 (1) 6 4 1 (15 )

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B.3 Geographical distribution of on- and off-balance sheet exposures to banks (carrying value)

ITA LY OTHER EUROP EAN COUNTRIES A M ER IC A A S IA R ES T OF WOR LD

Expo s ure s / Ge o g ra phic a re a s To ta l To ta l To ta l To ta l To ta l N e t e xpo s ure N e t e xpo s ure N e t e xpo s ure N e t e xpo s ure N e t e xpo s ure a djus tm e nts a djus tm e nts a djus tm e nts a djus tm e nts a djus tm e nts

A . Expo s ure s fo r lo a ns A.1 No n perfo rming lo ans 20 (2) ------A.2 Impaired lo ans ------A.3 Res tructured expo s ures ------A.4 P ast due loans ------A.5 Other expo s ures 815.258 - 23.781 - 15 - 12.163 - 155 - TOTA L A 8 15 .2 7 8 (2 ) 2 3 .7 8 1 - 15 - 12 .16 3 - 15 5 - B . "Off-ba la nc e s he e t" e xpo s ure s

B.1 No n perfo rming lo ans ------B.2 Impaired lo ans ------B.3 Other impaired as s ets ------B.4 Other expo s ures 1.899.904 - 16.013 (33) 24 - 23.464 (75) 7.313 (25) TOTA L B 1.8 9 9 .9 0 4 - 16 .0 13 (3 3 ) 24 - 2 3 .4 6 4 (7 5 ) 7 .3 13 (2 5 ) To tal (A+B) 31/12/2010 2 .7 15 .18 2 (2 ) 3 9 .7 9 4 (3 3 ) 39 - 3 5 .6 2 7 (7 5 ) 7 .4 6 8 (2 5 ) To tal (A+B) 31/12/2009 8 .9 8 2 .2 8 7 (2 ) 16 4 .4 7 0 - 557 - 2 .0 0 7 - 3 .3 4 0 -

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B.4 Large exposures

To tal 31/12/2010

Number 8 Expo s ures 5.248.622 P o s itio n Ris k 1.560.765

As from the report made as at 31st December 2010, “large exposures” are understood to be exposures with a nominal amount equal to or greater than 10% of the Supervisory Capital. The individual banks belonging to banking groups are subject to an individual limit of 40% of their Supervisory Capital. This latter limit refers to the “position risk” or the weighted exposure according to the regulations envisaged by current legislation.

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C. SECURITISATION AND ASSET DISPOSAL TRANSACTIONS

C.1 Securitisation transactions

During the first half of 2009, a securitisation transaction was carried out by means of the transfer of loans granted to small and medium sized companies, classified as performing, to a special purpose vehicle, UBI Finance 2 S.r.l.. Due to the complete repurchase by the Originator of all the liabilities issued by the vehicle company, this transaction is not reported in this section of the Notes. So as to provide complete information, a series of indications are however presented below relating to the issue, the portfolio and the role played by Banco di Brescia in the transaction.

These are the primary characteristics of UBI Finance 2 securities, issued on 27th February 2009: Class A securities (Senior Tranches): 1,559,500,000.00 nominal value at a floating rate, with the highest Fitch rating; these securities were made available to UBI Banca by Banco di Brescia, through purchase agreement transactions to use as collateral for repo transactions with the ECB or as guarantees for infraday transactions with the Bank of Italy. Class B securities (Junior Tranches): 519,850,000.00 nominal value, unrated and with a return equal to the transaction’s additional return, they allow the originator Banco Brescia to benefit from the excess spread of the underlying portfolios.

During the first quarter of 2011, so as to comply with the new requirements for the assignability of the securitised securities in the transactions with the ECB, Moody’s was requested to assign a second rating to the Class A securities; this was Aaa. At present therefore, the Senior Tranche has the highest rating assigned by both Fitch and Moody’s.

As part of the securitisation transaction, the Parent Company UBI Banca undertook the role of Italian Account Bank, Calculation Agent and Servicer, while Banco di Brescia was delegated, in its capacity as sub-servicer, the collection activities and the handling of the securitised transactions (with the exclusion of those which are now classified as non performing, which have been taken over by the Parent Company’s Loan Division); the Bank received a fee for these activities which, for 2010, totalled 616 thousand euro, against collections of around 387 million euro.

C.2 Disposal transactions

No disposal transactions took place.

C.3 Covered bond transactions

Objectives In 2008, UBI Banca’s Management Board decided to go ahead with the achievement of the structured and guaranteed bank bond issue, aimed at obtaining funding benefits and at the same time containing the funding cost.

In detail, the Board of Directors: identified the plan’s objectives; identified the basic structure of the guaranteed bank bond issue transaction with regard to legislation, explaining and examining the main elements, including the initial portfolio of loans and the selection criteria for the same as well as the financial structures of the transaction and the tests; assessed and approved the impacts and the necessary associated adaptations of an organisational, IT and accounting nature. These adaptations were carried out so as to ensure the correct protection from the risks also on the individual banks taking

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part. When drawing up the related procedures, account was also taken of the requirements fixed by Bank of Italy regulations; assessment of the risks associated with the guaranteed bank bond issue transaction; assessment of the organisational and operational set up of the special purpose company so as to check that the contractual documents of the transaction contain clauses suitable for ensuring a due and efficient performance of the related functions by said special purpose company; assessments of the legal aspects, by means of an in-depth examination of the structures and the contractual schemes adopted, with particular attention paid to the features of the guarantee provided by the special purpose company and all the dealings between the issuing bank, the transferring banks and the special purpose company.

The structure The basic structure of the guaranteed bank bond issue transaction envisaged that the following activities are performed: A bank (the transferring bank) transfers a series of assets with specific features to a special purpose company, forming segregated equity (cover pool); The same transferring bank (here as the financing bank) provides the special purpose company with a subordinated loan to finance the payment of the purchase price for the assets; The bank (issuing bank) issues guaranteed bank bonds backed by a primary guarantee - unconditional and irrevocable - issued by the special purpose company for the exclusive benefit of the investors holding the guaranteed bank bonds and the hedging counterparts involved in the transaction. The guarantee is backed by all the assets transferred to the special purpose company which form part of the cover pool.

The structure which has been adopted also envisages that the portfolios which make up the separate equity of the special purpose company are transferred by several originator banks (the transferring banks) other than the issuing bank.

The organisational adaptations and the control procedures Within the sphere of the organisational analysis procedures, steps were taken to identify four macro-processes to which the main activities associated with the plan were assigned and more specifically: 1. Quantification of the liquidity requirements and approval of the transaction by the competent bodies. This macro-process envisages that the hypotheses for the issue of guaranteed bank bonds are assessed within the UBI Banca finance committee and approved as to their policies by the Management Board. Subsequently, disclosure is provided to the network banks involved which, on the basis of the indications received from the parent bank, evaluate the appropriateness revealed and the participation in the issue. In this context, the Arranger who will see to the transaction is identified, and the internal structures involved are activated. 2. Planning and preparation of the transaction. This macro-process envisages that a check is made of the extraction criteria and the assets forming part of the portfolio are validated, guaranteeing the issue and interfacing with the rating agencies and the auditing firms, that the activities are achieved preparatory for the correct segregation of the portfolio assets and the transfer to the special purpose company and that all the contracts relating to the transactions are drawn up by the bank’s internal and external structures. 3. Handling of the transaction: This macro-process envisages that the current accounts for the special purpose company’s operations are opened, the subordinated loan is disbursed, the derivative contracts are entered into between the network banks and the special purpose company, the “payment flow” is established, efficacy tests are carried out on the portfolio, portions of mortgage loans are identified intended to

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reintegrate the portfolio backing the guaranteed bank bonds; these activities are carried out on an on-going basis. 4. Checks envisaged by legislation: This macro-process envisages the allocation of the internal and external checks envisaged by legislation, in particular for analysing and monitoring the requirements for ensuring the quality and integrity of the assets transferred to back the portfolio, defining the efficacy tests and producing the related summary reports, checking the observance of the limits relating to transfer of suitable assets, checking the hedging of the financial risks, checking the fulfilments by the transferee companies of the obligations deriving from the guarantee give, checking the layouts and contractual structures adopted, checking the completeness of the controls to be carried out by the Parent Company. External checks are also drawn up for certifying the compliance of the accounting policies applied by the bank with those which the same must follow when drawing up the annual financial statements, as well as guaranteeing the due nature of the transaction and the integrity of the guarantee provided for the redemption of the guaranteed bank bonds.

The UBI Banca 10 billion euro Covered Bond plan Within the sphere of the model described above, the UBI Banca Group launched a 10 billion guaranteed bank bond issue plan, carrying out the first transfers of mortgage loans in July 2008 by the two Group banks, Banco di Brescia and Banca Regionale Europea for a total of 2 billion euro. In greater detail, the structure adopted for the UBI Banca Guaranteed Bank Bond plan was as follows: a special purpose vehicle was set up, UBI Finance s.r.l., which acting as guarantor of the issues made by UBI Banca, took over a portfolio of residential mortgage loans transferred by the Group’s network banks taking part in the plan both as Originator Banks and Financing Banks.

The role of Master Servicer, Calculation Agent and Cash Manager is performed by the Parent Company, while that of Paying Agent is performed by the Bank of New York (Luxembourg) S.A.; the Bondholders’ Representative is BNY Corporate Trustee Services Limited. UBI Banca then delegated the Originator Banks, acting as Sub-servicers, with the servicing activities associated with the handling of the collections and relations with the customers relating to the portfolio transferred by each Originator; the transferring banks also perform the role of swap counterparts in the balance guarantee swaps entered into with the special purpose company so as to normalise the cash flows generated by the mortgage loan portfolio.

In September 2009, the Bank - with the assistance of Barclays Capital as Arranger - achieved its first public issue of Covered Bonds, for 1 billion euro.

At the end of 2009, Banca Popolare di Bergamo also joined the plan, transferring a portion of its loan portfolio (amounting to around 1.3 billion euro) to service the second public issue, again for 1 billion euro, achieved in December 2009.

The features of the two issues are presented below:

Maturity Name Issue date Nominal value Coupon date

UBI BANCA 3.625% CB due 23/09/2016 23/09/2009 23/09/2016 1,000,000,000.00 36,250,000.00

UBI BANCA 4.000% CB due 16/12/2019 16/12/2009 16/12/2019 1,000,000,000.00 40,000,000.00

Both the issues received a rating of AAA/Aaa from Fitch and Moody’s.

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On 30th April 2010, following the signing between EIB - European Investment Bank and the UBI Group of an Framework Agreement aimed at the disbursement of medium/long-term loans to businesses, a specific, private issue was carried out, fully subscribed by EIB.

These are the features of the EIB issue:

Name Issue date Maturity date Nominal value Coupon (*)

UBI BANCA TV CB due 30/04/2022 30/04/2010 30/04/2022 250,000,000.00 2,271,200.00

(*) the coupon is six-monthly at a floating rate; the amount indicated refers to the coupon falling due at the beginning of May 2011.

In May 2010, Banco di San Giorgio and Banca Popolare di Ancona also joined the Covered Bond plan, transferring their assets in the third transfer transaction which also saw the Originator Banks already participating in the Plan involved, including Banco di Brescia. As a result of this transaction, carried out on 1st May 2010, assets were transferred for a total of 2.7 billion euro, of which around 675 million euro relating to mortgage loans transferred by Banco di Brescia.

Subsequently, on 15th September 2010 a fourth public issue was carried out, for an additional 1 billion, whose features are presented below:

UBI BANCA 3.375% CB due 15/09/2017 15/09/2010 15/09/2017 1,000,000,000.00 33,750,000.00

This issue also received a rating of AAA/Aaa from Fitch and Moody’s.

During the last quarter of 2010, participation in the plan was finalised by the network banks, thanks to the transfer of their portfolios of mortgage loans by Banca Popolare Commercio ed Industria, Banca Carime, Banca di Valle Camonica and UBI Banca Private on 1st October, for a total of 2.4 billion euro.

Again in October, a further public issue was made for 500,000,000, with a duration of five years, the main features of which are as follows:

UBI BANCA 3.125% CB due 18/10/2015 18/10/2010 18/10/2015 500,000,000 15,625,000

This issue also received the maximum rating from Fitch and Moody’s.

On 31st December 2010, therefore, Banco di Brescia, Banca Regionale Europea, Banca Popolare di Bergamo, Banca Popolare di Ancona, Banco di San Giorgio, Banca Popolare Commercio ed Industria, Banca Carime, Banca di Valle Camonica and UBI Banca Private were parties to the plan.

The overall portfolio guaranteeing the issues, which in the accounts has remained recorded under the assets of each transferring bank, amounted as at 31st December 2010 to over 7.7 billion euro in residual capital debt, of which around 1.8 billion originated by Banco di Brescia.

During 2010, the portfolio pertaining to Banco di Brescia generated total collections for around 487 million euro.

With regard to the subservicing activities, the Originator Banks receive a fee, in keeping with the portfolio handled and the duration of the servicing period; this fee amounted to around 700 thousand euro in 2010 for Banco di Brescia.

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So as to provide complete disclosure, in January and February 2011, another two public issues were made of Guaranteed Bank Bonds, for a total of 1.75 billion euro; the related features are as follows:

Maturity Name Issue date Nominal value Coupon date

UBI BANCA 5.250% CB due 28/01/2021 28/01/2011 28/01/2021 1,000,000,000.00 52,500,000.00

UBI BANCA 4.500% CB due 22/02/2016 22/02/2011 22/02/2016 750,000,000.00 33,750,000.00

These first two issues of 2011 also received the maximum rating from Fitch and Moody’s.

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D. MODELS FOR CREDIT RISK MEASUREMENT

As part of measuring credit risk, the UBI Group has developed a Portfolio Credit Risk model using Algorithmics' PCRE calculation engine: it considers the total risk of a loan portfolio by modelling and capturing the component deriving from the default correlation of the counterparties, calculating credit losses and risk capital at portfolio level. The model included - among the various inputs - the PD and LGD variables used for supervisory purposes.

Section 2 Market risk

2.1 Interest rate and price risk – Supervisory trading portfolio

Qualitative information

A. General aspects

In preparing this section, only financial instruments included in the “supervisory trading portfolio” are included, as defined by the regulations regarding supervisory notifications on market risks. Therefore, any transactions allocated to the trading portfolio in the financial statements, but not falling under the definition of “supervisory”, are excluded. These transactions are included in the disclosure related to the “banking book”.

B. Processes for management and methods of measurement of interest rate and price risk

Refer to the following section A “General aspects, procedures for management and methods of measurement of interest rate risk”.

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Quantitative Information

1.1 Supervisory trading portfolio: distribution by residual life (date of revaluation) of on-balance sheet financial assets and liabilities and financial derivatives – EURO

Betw een 6 Betw een 3 and 6 Betw een 1 and 5 Betw een 5 and Indeterminate Type/Residual life On demand Up to 3 months months and 1 Over 10 years months years 10 years life year

1. Assets - - 26.486 - 1 - 112 - 1.1 Debt securities - - 26.486 - 1 - 112 - - with advance reimbursement option ------others - - 26.486 - 1 - 112 - 1.2 Other assets ------2. Liabilities ------2.1 Repurchase agreements ------2.2 Other liabilities ------3. Financial derivatives - (1.932.948) 49.962 78.076 508.941 508.475 784.315 (1) 3.1 With underlying security - - (50) - - - - (1) - Options - - (50) - - - - (1) - Long positions - 96.673 58.644 26.836 2.718 - - - - Short positions - 96.673 58.694 26.836 2.718 - - 1 - Other derivatives ------Long positions ------Short positions ------3.2 Without underlying security - (1.932.948) 50.012 78.076 508.941 508.475 784.315 - - Options ------Long positions - 581.260 415.612 141.325 425.453 139.332 28.145 - - Short positions - 581.260 415.612 141.325 425.453 139.332 28.145 - - Other derivatives - (1.932.948) 50.012 78.076 508.941 508.475 784.315 - - Long positions - 2.429.297 922.510 261.896 1.023.720 1.688.507 817.356 - - Short positions - 4.362.245 872.498 183.820 514.779 1.180.032 33.041 -

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1.2 Supervisory trading portfolio: distribution by residual life (date of revaluation) of on-balance sheet financial assets and liabilities and financial derivatives – USD

Betw een 6 Up to 3 Betw een 3 and Betw een 1 and Betw een 5 and Indeterminate Type/Residual life On demand months and 1 Over 10 years months 6 months 5 years 10 years life year

1. Assets ------1.1 Debt securities ------with advance reimbursement option ------others ------1.2 Other assets ------2. Liabilities ------2.1 Repurchase agreements ------2.2 Other liabilities ------3. Financial derivatives - 2.843 52 - - - - - 3.1 With underlying security - - 52 ------Options - - 52 ------Long positions - 90.752 59.587 21.813 1.593 - - - - Short positions - 90.752 59.535 21.813 1.593 - - - - Other derivatives ------Long positions ------Short positions ------3.2 Without underlying security - 2.843 ------Options ------Long positions - 3.534 136.980 - 134.710 - - - - Short positions - 3.534 136.980 - 134.710 - - - - Other derivatives - 2.843 ------Long positions - 55.049 141.414 23.751 117.565 - - - - Short positions - 52.206 141.414 23.751 117.565 - - -

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1.3 Supervisory trading portfolio: distribution by residual life (date of revaluation) of on-balance sheet financial assets and liabilities and financial derivatives – CHF

Betw een 6 Up to 3 Betw een 3 and Betw een 1 and Betw een 5 and Indeterminate Type/Residual life On demand months and 1 Over 10 years months 6 months 5 years 10 years life year

1. Assets ------1.1 Debt securities ------with advance reimbursement option ------others ------1.2 Other assets ------2. Liabilities ------2.1 Repurchase agreements ------2.2 Other liabilities ------3. Financial derivatives ------3.1 With underlying security ------Options ------Long positions - 776 ------Short positions - 776 ------Other derivatives ------Long positions ------Short positions ------3.2 Without underlying security ------Options ------Long positions ------Short positions ------Other derivatives ------Long positions - 560 ------Short positions - 560 ------

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1.4 Supervisory trading portfolio: distribution by residual life (date of revaluation) of on-balance sheet financial assets and liabilities and financial derivatives – GBP

Betw een 6 Up to 3 Betw een 3 and Betw een 1 and Betw een 5 and Indeterminate Type/Residual life On demand months and 1 Over 10 years months 6 months 5 years 10 years life year

1. Assets ------1.1 Debt securities ------with advance reimbursement option ------others ------1.2 Other assets ------2. Liabilities ------2.1 Repurchase agreements ------2.2 Other liabilities ------3. Financial derivatives ------3.1 With underlying security ------Options ------Long positions - 1.699 - 1.366 - - - - - Short positions - 1.699 - 1.366 - - - - - Other derivatives ------Long positions ------Short positions ------3.2 Without underlying security ------Options ------Long positions - - 232 ------Short positions - - 232 ------Other derivatives ------Long positions - 3.107 1.931 ------Short positions - 3.107 1.931 - - - - -

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1.5 Supervisory trading portfolio: distribution by residual life (date of revaluation) of on-balance sheet financial assets and liabilities and financial derivatives – JPY

Betw een 6 Up to 3 Betw een 3 and Betw een 1 and Betw een 5 and Indeterminate Type/Residual life On demand months and 1 Over 10 years months 6 months 5 years 10 years life year

1. Assets ------1.1 Debt securities ------with advance reimbursement option ------others ------1.2 Other assets ------2. Liabilities ------2.1 Repurchase agreements ------2.2 Other liabilities ------3. Financial derivatives - 233 ------3.1 With underlying security ------Options ------Long positions ------Short positions ------Other derivatives ------Long positions ------Short positions ------3.2 Without underlying security - 233 ------Options ------Long positions ------Short positions ------Other derivatives - 233 ------Long positions - 1.981 ------Short positions - 1.748 ------

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1.6 Supervisory trading portfolio: distribution by residual life (date of revaluation) of on-balance sheet financial assets and liabilities and financial derivatives – NOK

Betw een 6 Up to 3 Betw een 3 and Betw een 1 and Betw een 5 and Indeterminate Type/Residual life On demand months and 1 Over 10 years months 6 months 5 years 10 years life year

1. Assets ------1.1 Debt securities ------with advance reimbursement option ------others ------1.2 Other assets ------2. Liabilities ------2.1 Repurchase agreements ------2.2 Other liabilities ------3. Financial derivatives ------3.1 With underlying security ------Options ------Long positions ------Short positions ------Other derivatives ------Long positions ------Short positions ------3.2 Without underlying security ------Options ------Long positions ------Short positions ------Other derivatives ------Long positions - 2 ------Short positions - 2 ------

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1.7 Supervisory trading portfolio: distribution by residual life (date of revaluation) of on-balance sheet financial assets and liabilities and financial derivatives – PLN

Betw een 6 Up to 3 Betw een 3 and Betw een 1 and Betw een 5 and Indeterminate Type/Residual life On demand months and 1 Over 10 years months 6 months 5 years 10 years life year

1. Assets ------1.1 Debt securities ------with advance reimbursement option ------others ------1.2 Other assets ------2. Liabilities ------2.1 Repurchase agreements ------2.2 Other liabilities ------3. Financial derivatives ------3.1 With underlying security ------Options ------Long positions ------Short positions ------Other derivatives ------Long positions ------Short positions ------3.2 Without underlying security ------Options ------Long positions ------Short positions ------Other derivatives ------Long positions - 629 ------Short positions - 629 ------

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1.8 Supervisory trading portfolio: distribution by residual life (date of revaluation) of on-balance sheet financial assets and liabilities and financial derivatives – CAD

Betw een 6 Up to 3 Betw een 3 and Betw een 1 and Betw een 5 and Indeterminate Type/Residual life On demand months and 1 Over 10 years months 6 months 5 years 10 years life year

1. Assets ------1.1 Debt securities ------with advance reimbursement option ------others ------1.2 Other assets ------2. Liabilities ------2.1 Repurchase agreements ------2.2 Other liabilities ------3. Financial derivatives ------3.1 With underlying security ------Options ------Long positions - 3.686 - 3.788 1.080 - - - - Short positions - 3.686 - 3.788 1.080 - - - - Other derivatives ------Long positions ------Short positions ------3.2 Without underlying security ------Options ------Long positions ------Short positions ------Other derivatives ------Long positions ------Short positions ------

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1.9 Supervisory trading portfolio: distribution by residual life (date of revaluation) of on-balance sheet financial assets and liabilities and financial derivatives – SEK

Betw een 6 Up to 3 Betw een 3 and Betw een 1 and Betw een 5 and Indeterminate Type/Residual life On demand months and 1 Over 10 years months 6 months 5 years 10 years life year

1. Assets ------1.1 Debt securities ------with advance reimbursement option ------others ------1.2 Other assets ------2. Liabilities ------2.1 Repurchase agreements ------2.2 Other liabilities ------3. Financial derivatives ------3.1 With underlying security ------Options ------Long positions - 571 ------Short positions - 571 ------Other derivatives ------Long positions ------Short positions ------3.2 Without underlying security ------Options ------Long positions ------Short positions ------Other derivatives ------Long positions - 279 50 ------Short positions - 279 50 - - - - -

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1.10 Supervisory trading portfolio: distribution by residual life (date of revaluation) of on-balance sheet financial assets and liabilities and financial derivatives – OTHER CURRENCIES

Betw een 6 Up to 3 Betw een 3 and Betw een 1 and Betw een 5 and Indeterminate Type/Residual life On demand months and 1 Over 10 years months 6 months 5 years 10 years life year

1. Assets ------1.1 Debt securities ------with advance reimbursement option ------others ------1.2 Other assets ------2. Liabilities ------2.1 Repurchase agreements ------2.2 Other liabilities ------3. Financial derivatives ------3.1 With underlying security ------Options ------Long positions ------Short positions ------Other derivatives ------Long positions ------Short positions ------3.2 Without underlying security ------Options ------Long positions - - 488 ------Short positions - - 488 ------Other derivatives ------Long positions - 33 ------Short positions - 33 ------

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3. Supervisory trading portfolio: Internal models and other sensitivity analysis methodologies

Banco di Brescia’s supervisory trading portfolio principally consists of Government securities (CCT). At the end of December, the total VaR of the trading portfolio was around 20,515 euro with a NAV of around 26.55 million euro (average VaR in 2010 was 9,511 euro).

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2.2 Interest rate and price risk – Banking book

The banking book consists of all asset and liability financial instruments not included in the trading portfolio described in section 2.1.

Qualitative information

A. General aspects, procedures for management and methods of measurement of interest rate risk and price risk

The interest rate risk is defined as the current or forecast risk of a change in interest rate margins and the economic value of the Bank, following unexpected changes in interest rates that impact the bank book. The measurement, monitoring and reporting of exposure to the interest rate risk is carried out by the Parent Company’s Risk Management division, which on a monthly basis takes steps to: • analyse the sensitivity of the economic value (fair value risk) so as to measure the change in the value of the capital in reference rate curve parallel shock scenarios; • to carry out, using static gap analysis (in other words assuming that the positions are constant during the year), sensitivity analysis on the interest margin (cash flow risk), which focuses on the income changes over a period of twelve months valued in reference rate curve parallel shock scenarios. The economic value sensitivity analysis includes an estimate of the impacts deriving from the phenomenon of early repayment of mortgages and loans, irrespective of the presence of early repayment options established contractually. The estimate of margin change includes both an estimate of the re-investment/refinancing effects of the flows maturing and the effect linked to the elasticity and delayed adjustment of the on-demand items. The elasticity factors and the delay in the adjustment of the contractual rates are differentiated by commercial customer classification segment.

B. Fair value hedging

During 2010, specific and generic hedges were set up with derivative financial instruments in order to reduce exposure to adverse changes in fair value (fair value hedge) due to interest rate risk. In detail, the following were hedged: fixed-rate loans with a duration of more than one year (generic hedge) totalling around 140 million euro in nominal value; Prefix mortgages (generic hedge) totalling around 65 million euro in total; bond issues (micro hedge) at a fixed rate totalling around 500 million euro in nominal value.

The derivative contracts used were Interest Rate Swaps and CAPs. The territorial optimisation process led in January to the transfer, from Banco di Brescia to other Group banks, of hedged loans for around 70 million euro and the acquisition of hedged loans for roughly 110 million euro. The Parent Company's Risk Management Service performed effectiveness tests on the hedges. The effectiveness tests were performed using prospective tests at the beginning of the hedge followed by retrospective tests performed monthly, according to the approaches envisaged by the international accounting standards.

C. Cash flow hedging

Banco di Brescia’s financial statements include the effects of the “cash flow hedges” in relation to just issues of Certificate of Deposit in Japanese yen (JPY); issues hedged by Domestic Currency Swaps (DCS).

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Quantitative Information

1.1 Banking book: distribution by residual life (date of revaluation) of the financial assets and liabilities – currency - EURO

Between 3 and 6 B e twe e n 6 Between 1 and 5 Between 5 and 10 Type/Res idual life On de m a nd Up to 3 months Ov e r 10 ye a rs Inde te rm ina te life m o nths months and 1 year ye a rs ye a rs

1. Assets 4 .9 8 5 .6 17 7 .2 5 7 .5 8 9 1.5 7 8 .9 7 5 2 5 5 .8 3 8 8 0 3 .3 3 9 4 5 4 .9 4 2 4 7 1.3 0 6 - 1.1 Debt s ecurities 38 7.433 - 554 - - - -

- with advance reimburs ement o ptio n ------o thers 38 7.433 - 554 - - - - 1.2 Lo ans to banks 56.851 676.351 67.623 1.027 - 20 - - 1.3 Loans to customers 4.928.728 6.573.805 1.511.352 254.257 803.339 454.922 471.306 - - current acco unts 2.538.039 - - - - 58.756 - - - o ther lo ans 2.390.689 6.573.805 1.511.352 254.257 803.339 396.166 471.306 - - with a dva nc e re im burs e m e nt o ptio n 593.515 5.718.527 1.391.961 244.531 786.991 269.740 466.863 - - o the rs 1.797.174 855.278 119.391 9.726 16.348 126.426 4.443 - 2 . Lia bilitie s 10.203.353 2 .8 11.5 6 4 4 7 6 .0 2 0 4 2 2 .3 7 2 1.3 2 8 .7 0 2 2 2 .8 8 9 - - 2.1 Due to cus to mers 8.231.597 462.657 56.075 1.779 4.325 26 - - - current acco unts 7.981.862 ------o ther payables 249.735 462.657 56.075 1.779 4.325 26 - - - with a dva nc e re im burs e m e nt o ptio n ------o the rs 249.735 462.657 56.075 1.779 4.325 26 - - 2.2 Due to banks 1.950.542 1.357.359 ------current acco unts 1.858.635 ------o ther payables 91.907 1.357.359 ------2.3 Debt s ecurities 21.214 991.548 419.945 420.593 1.324.377 22.863 - - - with a dva nc e re im burs e m e nt o ptio n ------o the rs 21.214 991.548 419.945 420.593 1.324.377 22.863 - - 2.4 Other liabilities ------with a dva nc e re im burs e m e nt o ptio n ------o the rs ------3. Financial derivatives - (10 4 .5 14 ) (6 5 4 .0 12 ) 2 8 8 .6 5 6 1.0 12 .8 8 6 (19 8 .4 0 3 ) (3 5 9 .5 5 1) - 3.1 With underlying s ecurity - - - - 22 - - - - Optio ns - - - - 22 - - - + Lo ng po s itio ns - - - - 22 - - - + Sho rt po s itio ns ------Other derivatives ------+ Lo ng po s itio ns ------+ Sho rt po s itio ns ------3.2 Witho ut underlying s ecurity - (104.514) (654.012) 288.656 1.012.864 (198.403) (359.551) - - Optio ns - (2.180) - (26.180) - - 14.180 - + Lo ng po s itio ns - (1.090) - (13.090) - - 14.180 - + Sho rt po s itio ns - 1.090 - 13.090 - - - - - Other derivatives - (102.334) (654.012) 314.836 1.012.864 (198.403) (373.731) - + Lo ng po s itio ns - 1.041.563 325.506 417.819 1.358.341 25.996 10.470 - + Sho rt po s itio ns - 1.143.897 979.518 102.983 345.477 224.399 384.201 - 206

1.2 Banking book: distribution by residual life (date of revaluation) of the financial assets and liabilities – currency - USD

Between 3 and 6 B e twe e n 6 Between 1 and 5 Between 5 and 10 Type/Res idual life On de m a nd Up to 3 months Ov e r 10 ye a rs Inde te rm ina te life m o nths months and 1 year ye a rs ye a rs

1. Assets 5 1.5 8 7 3 5 .0 3 8 1.6 7 5 4 5 9 6 2 - - -

1.1 Debt s ecurities ------with advance reimburs ement o ptio n ------

- o thers ------

1.2 Lo ans to banks 44.539 165 264 - - - - -

1.3 Loans to customers 7.048 34.873 1.411 459 62 - - -

- current acco unts 527 ------

- o ther lo ans 6.521 34.873 1.411 459 62 - - -

- with a dva nc e re im burs e m e nt o ptio n ------

- o the rs 6.521 34.873 1.411 459 62 - - -

2 . Lia bilitie s 6 7 .6 5 0 2 4 .4 5 6 1.19 0 4 16 5 2 - - -

2.1 Due to cus to mers 67.267 - - - 52 - - - - current acco unts 66.705 - - - 52 - - -

- o ther payables 562 ------

- with a dva nc e re im burs e m e nt o ptio n ------

- o the rs 562 ------2.2 Due to banks 383 24.456 1.190 416 - - - -

- current acco unts 1 ------

- o ther payables 382 24.456 1.190 416 - - - - 2.3 Debt s ecurities ------

- with a dva nc e re im burs e m e nt o ptio n ------

- o the rs ------2.4 Other liabilities ------

- with a dva nc e re im burs e m e nt o ptio n ------

- o the rs ------

3. Financial derivatives ------

3.1 With underlying s ecurity ------

- Optio ns ------

+ Lo ng po s itio ns ------

+ Sho rt po s itio ns ------

- Other derivatives ------

+ Lo ng po s itio ns ------

+ Sho rt po s itio ns ------

3.2 Witho ut underlying s ecurity ------

- Optio ns ------+ Lo ng po s itio ns ------

+ Sho rt po s itio ns ------

- Other derivatives ------+ Lo ng po s itio ns ------+ Sho rt po s itio ns ------207

1.3 Banking book: distribution by residual life (date of revaluation) of the financial assets and liabilities – currency - CHF

Between 3 and 6 B e twe e n 6 Between 1 and 5 Between 5 and 10 Type/Res idual life On de m a nd Up to 3 months Ov e r 10 ye a rs Inde te rm ina te life m o nths months and 1 year ye a rs ye a rs

1. Assets 4 7 8 4 .4 9 3 18 3 - - - - -

1.1 Debt s ecurities ------with advance reimburs ement o ptio n ------o thers ------

1.2 Lo ans to banks 403 ------

1.3 Loans to customers 75 4.493 183 ------current acco unts ------

- o ther lo ans 75 4.493 183 - - - - -

- with a dva nc e re im burs e m e nt o ptio n ------o the rs 75 4.493 183 - - - - -

2 . Lia bilitie s 1.4 2 0 3 .9 9 9 ------

2.1 Due to cus to mers 1.418 ------current acco unts 1.416 ------

- o ther payables 2 ------

- with a dva nc e re im burs e m e nt o ptio n ------

- o the rs 2 ------2.2 Due to banks 2 3.999 ------

- current acco unts ------

- o ther payables 2 3.999 ------

2.3 Debt s ecurities ------

- with a dva nc e re im burs e m e nt o ptio n ------

- o the rs ------

2.4 Other liabilities ------

- with a dva nc e re im burs e m e nt o ptio n ------

- o the rs ------

3. Financial derivatives ------

3.1 With underlying s ecurity ------

- Optio ns ------

+ Lo ng po s itio ns ------+ Sho rt po s itio ns ------

- Other derivatives ------

+ Lo ng po s itio ns ------

+ Sho rt po s itio ns ------

3.2 Witho ut underlying s ecurity ------

- Optio ns ------+ Lo ng po s itio ns ------

+ Sho rt po s itio ns ------

- Other derivatives ------+ Lo ng po s itio ns ------+ Sho rt po s itio ns ------

208

1.4 Banking book: distribution by residual life (date of revaluation) of the financial assets and liabilities – currency - GBP

Between 3 and 6 B e twe e n 6 Between 1 and 5 Between 5 and 10 Type/Res idual life On de m a nd Up to 3 months Ov e r 10 ye a rs Inde te rm ina te life m o nths months and 1 year ye a rs ye a rs

1. Assets 1.6 9 8 3 16 ------

1.1 Debt s ecurities ------with advance reimburs ement o ptio n ------

- o thers ------

1.2 Lo ans to banks 1.204 ------

1.3 Loans to customers 494 316 ------

- current acco unts 494 ------

- o ther lo ans - 316 ------

- with a dva nc e re im burs e m e nt o ptio n ------

- o the rs - 316 ------

2 . Lia bilitie s 2 .2 8 9 ------

2.1 Due to cus to mers 2.289 ------current acco unts 2.279 ------

- o ther payables 10 ------

- with a dva nc e re im burs e m e nt o ptio n ------

- o the rs 10 ------2.2 Due to banks ------

- current acco unts ------

- o ther payables ------2.3 Debt s ecurities ------

- with a dva nc e re im burs e m e nt o ptio n ------

- o the rs ------2.4 Other liabilities ------

- with a dva nc e re im burs e m e nt o ptio n ------

- o the rs ------

3. Financial derivatives ------

3.1 With underlying s ecurity ------

- Optio ns ------

+ Lo ng po s itio ns ------

+ Sho rt po s itio ns ------

- Other derivatives ------

+ Lo ng po s itio ns ------

+ Sho rt po s itio ns ------

3.2 Witho ut underlying s ecurity ------

- Optio ns ------+ Lo ng po s itio ns ------

+ Sho rt po s itio ns ------

- Other derivatives ------+ Lo ng po s itio ns ------+ Sho rt po s itio ns ------209

1.5 Banking book: distribution by residual life (date of revaluation) of the financial assets and liabilities – currency - OTHER CURRENCIES

Between 3 and 6 B e twe e n 6 Between 1 and 5 Between 5 and 10 Type/Res idual life On de m a nd Up to 3 months Ov e r 10 ye a rs Inde te rm ina te life m o nths months and 1 year ye a rs ye a rs

1. Assets 1.0 0 5 4 .6 5 5 3 8 0 - - - - - 1.1 Debt s ecurities ------with advance reimburs ement o ptio n ------o thers ------1.2 Lo ans to banks 993 1.923 ------1.3 Loans to customers 12 2.732 380 ------current acco unts ------o ther lo ans 12 2.732 380 ------with a dva nc e re im burs e m e nt o ptio n ------o the rs 12 2.732 380 - - - - - 2 . Lia bilitie s 1.3 3 2 5 .3 13 5 5 2 - - - - - 2.1 Due to cus to mers 927 ------current acco unts 927 ------o ther payables ------with a dva nc e re im burs e m e nt o ptio n ------o the rs ------2.2 Due to banks 344 2.319 552 ------current acco unts 343 ------o ther payables 1 2.319 552 - - - - - 2.3 Debt s ecurities 61 2.994 ------with a dva nc e re im burs e m e nt o ptio n ------o the rs 61 2.994 ------2.4 Other liabilities ------with a dva nc e re im burs e m e nt o ptio n ------o the rs ------3. Financial derivatives - 7 9 0 ------3.1 With underlying s ecurity ------Optio ns ------+ Lo ng po s itio ns ------+ Sho rt po s itio ns ------Other derivatives ------+ Lo ng po s itio ns ------+ Sho rt po s itio ns ------3.2 Witho ut underlying s ecurity - 790 ------Optio ns ------+ Lo ng po s itio ns ------+ Sho rt po s itio ns ------Other derivatives - 790 ------+ Lo ng po s itio ns 50 2.802 ------+ Sho rt po s itio ns 50 2.012 ------

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2. Banking book: internal models and other sensitivity analysis methods

Banco di Brescia’s exposure to interest rate risk, measured by sensitivity analysis in a scenario of a parallel shift in the rate curve of +100 bps, was -30.56 million euro at the end of the year, gross of the effect deriving from the phenomenon relating to early repayments (- 35.91 million euro as at 31st December 2009). The extent of risk, net of the impact deriving from the phenomenon relating to the early repayments, came to -11.39 million euro (-12.69 million euro as at 31st December 2009), equal to 0.78% of the Supervisory Capital, compared with the threshold – defined by the Group’s Financial Risks Policy for Banco di Brescia on this indicator – of 1% of the Supervisory Capital. The exposure included around - 0.20 million euro relating to firm commitment interest rate swaps on bond issues still in placement as at 31st December 2010 excluded from the calculations. Net of this contribution, the interest rate risk exposure would stand at -11.19 million euro, or 0.77% of the Supervisory Capital. The table below reports the risk measures for the stated periods, for a standardised parallel shift from the curve of +200 bps, consistent with the prudent legislative requirements, compared to the supervisory capital at year end.

Risk indicators – yearly average 2010 2009

parallel shift of +200 bps sensitivity/supervisory capital 1.4% 1.6%

Risks indicators – highest values 31/12/2010 31/12/2009

parallel shift of +200 bps sensitivity/supervisory capital 1.3% 1.6%

As at 31st December 2010, the impact on the interest margin in the hypothesis of a shift in the reference interest rate curve of +100 bps is equivalent to +37.79 million euro, while with a lowering of the same (-100 bps) the impact on the interest rate margin is estimated at - 54.00 million euro. These exposure levels include the delayed adjustment effect (both in terms of transfer elasticity of rate changes from the reference rates to internal rates, as well as time delays in detecting these changes). The capital profiles for repricing data in input to the internal model for the calculation of the exposure to interest rate risk are reported below.

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Within the banking book, the main component is that classified as the IAS Loans and Receivable category, mostly made up of municipal bonds. For information purposes, it should be noted that at the end of December the total VaR of Banco di Brescia’s banking book was around 912 euro (284 euro as at 30th June 2010) with a NAV of around 8.13 million euro (8.54 million euro as at 30th June 2010).

212

2.3 Exchange rate risk

The exchange rate risk represents the risk of undergoing losses, due to adverse changes in the listed prices of foreign currencies, in all the currencies held by the bank, irrespective of the allocation portfolio.

Qualitative information

A. General aspects, management processes and methods for measuring exchange rate risk

As part of the ALM analysis carried out by the Parent Company’s Risk Management division, exchange rate risk exposure is determined on the basis of the method proposed by the Bank of Italy and is quantified as 8% of the “net open position in exchange rates”, in the event that the latter is higher than 2 percent of the supervisory capital. The “net open position in exchange rates” is determined by: 1. calculating the net position in each currency and in gold; 2. converting the net positions into euro on the basis of the exchange rate or the gold price; 3. adding together, separately, all the net long positions and all the net short positions;

The greater between the total of the net long positions and the total of the net short positions represents the “net open position in exchange rates”.

B. Exchange rate risk hedging activities

Transactions on exchange markets are carried out the Group’s Cash Management Service which uses instruments such as forward exchange transactions, forex swaps, domestic currency swaps and exchange rate options, optimizing the profile of the risks originated by the Group’s foreign currency positions.

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Quantitative Information

Exchange rate risk exposure, determined on the basis of the above method, was non- existent as at 31st December 2010.

1. Distribution by currency of assets, liabilities and derivatives

Currencies

Items OTHER UK CANADIAN JAPANESE SW ISS US DOLLARS CURRENCI STERLING DOLLARS YEN FRANCS ES

A. Financial assets 88.819 2.014 311 2.843 5.155 2.886 A.1 Debt securities ------A.2 Equities ------A.3 Loans to banks 44.968 1.204 - 52 403 2.863 A.4 Loans to customers 43.851 810 311 2.791 4.752 23 A.5 Other financial assets ------B. Other assets 451 272 18 15 233 38 C. Financial liabilities 93.764 2.289 330 3.898 5.419 2.978 C.1 Due to banks 26.445 - 311 2.873 4.001 32 C.2 Due to customers 67.319 2.289 19 3 1.418 906 C.3 Debt securities - - - 1.022 - 2.040 C.4 Other financial liabilities ------D. Other liabilities ------E. Financial derivatives 2.895 - - 1.023 - - E.1 Options 52 - - - - - E.1.1 Long positions 179.548 3.297 8.555 - 776 488 E.1.2 Short positions 179.496 3.297 8.555 - 776 488 E.1 Other derivatives 2.843 - - 1.023 - - E.1.1 Long positions 68.359 5.037 - 2.771 560 4 E.1.2 Short positions 65.516 5.037 - 1.748 560 4 Total assets 337.177 10.620 8.884 5.629 6.724 3.416 Total liabilities 338.776 10.623 8.885 5.646 6.755 3.470 Imbalance (1.599) (3) (1) (17) (31) (54)

2. Internal models and other sensitivity analysis methods

Please refer to the description in the identical part relating to “interest rate and price risk” (section 2.1-2.2).

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2.4 Financial derivative instruments

A. FINANCIAL DERIVATIVES

A.1 Supervisory trading portfolio: period end and average notional values

To tal To tal 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9 Underlying assets/ Types of derivative C e ntra l C e ntra l Ov e r the c o unte r Ov e r the c o unte r C o unte rpa rts C o unte rpa rts

1. Debt s ecurities and interes t rates 9.334.072 - 10.591.889 - a) Optio ns 1.994.057 - 2.133.123 - b) Swaps 7.340.015 - 8.458.766 - c) Fo rward agreements - - - - d) Futures - - - - e) Other - - - - 2. Equities and s hare indexes - 1 - 1 a) Optio ns - 1 - 1 b) Swaps - - - - c) Fo rward agreements - - - - d) Futures - - - - e) Other - - - - 3. Currencies and go ld 906.366 - 520.281 - a) Optio ns 778.630 - 435.304 - b) Swaps - - - - c) Fo rward agreements 127.736 - 84.977 - d) Futures - - - - e) Other - - - - 4. Commodities 3.076 - 4.763 - 5. Other underlying as s ets - - - - To ta l 10.243.514 1 11.116 .9 3 3 1 A v e ra g e v a lue s 10.394.511 1 11.109.834 1

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A.2 Banking book: period end and average notional values

A.2.1 For hedging

To tal To tal 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9 Underlying assets/ Types of derivative C e ntra l C e ntra l Ov e r the c o unte r Ov e r the c o unte r C o unte rpa rts C o unte rpa rts

1. Debt s ecurities and interes t rates 3.195.887 - 3.780.181 - a) Optio ns 14.180 - 7.322 - b) Swaps 3.181.707 - 3.772.859 - c) Fo rward agreements - - - - d) Futures - - - - e) Other - - - - 2. Equities and s hare indexes - - - - a) Optio ns - - - - b) Swaps - - - - c) Fo rward agreements - - - - d) Futures - - - - e) Other - - - - 3. Currencies and go ld 790 - - - a) Optio ns - - - - b) Swaps - - - - c) Fo rward agreements - - - - d) Futures - - - - e) Other 790 - - - 4. Commodities - - - - 5. Other underlying as s ets - - - - To ta l 3 .19 6 .6 7 7 - 3 .7 8 0 .18 1 - A v e ra g e v a lue s 3 .3 0 7 .9 7 9 - 3 .9 8 6 .8 6 6 -

216

A.2.2 Other derivatives

To tal To tal 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9 Underlying assets/ Types of derivative C e ntra l C e ntra l Ov e r the c o unte r Ov e r the c o unte r C o unte rpa rts C o unte rpa rts

1. Debt s ecurities and interes t rates - - - - a) Optio ns - - - - b) Swaps - - - - c) Fo rward agreements - - - - d) Futures - - - - e) Other - - - - 2. Equities and s hare indexes 3.691 - 3.691 - a) Optio ns 3.691 - 3.691 - b) Swaps - - - - c) Fo rward agreements - - - - d) Futures - - - - e) Other - - - - 3. Currencies and go ld - - - - a) Optio ns - - - - b) Swaps - - - - c) Fo rward agreements - - - - d) Futures - - - - e) Other - - - - 4. Commodities - - - - 5. Other underlying as s ets - - - - To ta l 3 .6 9 1 - 3 .6 9 1 - A v e ra g e v a lue s 3 .6 9 1 - 3 .6 9 1 -

217

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

P o s itiv e fa ir v a lue P o s itiv e fa ir v a lue

To tal To tal P o rtfo lio s / Type o f de riv a tiv e s 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

C e ntra l C e ntra l Ov e r the c o unte r Ov e r the c o unte r C o unte rpa rts C o unte rpa rts

A. Supervis o ry trading po rtfo lio 74.232 1 82.092 1 a) Optio ns 6.538 1 4.430 1 b) Interes t rate s waps 65.571 - 75.899 - c) Cro s s currency s waps - - - - d) Equity s waps - - - - e) Fo rward agreements 1.927 - 1.172 - f) Futures - - - - g) Other 196 - 591 - B. Banking book - hedging 45.471 - 75.128 - a) Optio ns - - - - b) Interes t rate s waps 45.454 - 75.128 - c) Cro s s currency s waps - - - - d) Equity s waps - - - - e) Fo rward agreements - - - - f) Futures - - - - g) Other 17 - - - C. Banking bo o k - o ther derivatives - - - - a) Optio ns - - - - b) Interes t rate s waps - - - - c) Cro s s currency s waps - - - - d) Equity s waps - - - - e) Fo rward agreements - - - - f) Futures - - - - g) Other - - - - To ta l 119 .7 0 3 1 15 7 .2 2 0 1

218

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

N e g a tiv e fa ir v a lue N e g a tiv e fa ir v a lue

To tal To tal P o rtfo lio s / Type o f de riv a tiv e s 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

C e ntra l C e ntra l Ov e r the c o unte r Ov e r the c o unte r C o unte rpa rts C o unte rpa rts

A. Supervis o ry trading po rtfo lio 76.037 - 81.138 - a) Optio ns 6.540 - 4.430 - b) Interes t rate s waps 67.392 - 74.968 - c) Cro s s currency s waps - - - - d) Equity s waps - - - - e) Fo rward agreements 1.927 - 1.167 - f) Futures - - - - g) Other 178 - 573 - B. Banking book - hedging 64.840 - 51.429 - a) Optio ns - - - - b) Interes t rate s waps 64.829 - 51.429 - c) Cro s s currency s waps - - - - d) Equity s waps - - - - e) Fo rward agreements - - - - f) Futures - - - - g) Other 11 - - - C. Banking bo o k - o ther derivatives - - - - a) Optio ns - - - - b) Interes t rate s waps - - - - c) Cro s s currency s waps - - - - d) Equity s waps - - - - e) Fo rward agreements - - - - f) Futures - - - - g) Other - - - - To ta l 14 0 .8 7 7 - 13 2 .5 6 7 -

219

A.5 OTC financial derivatives – supervisory trading portfolio: notional values, gross positive and negative fair values by counterparts – contracts not included under netting agreements

Go v e rnm e nts a nd Othe r public Ins ura nc e Non financial Contracts not covered by netting agreements B a nks Financial companies Othe r C e ntra l B a nks a utho ritie s c o m pa nie s c o m pa nie s

1) D e bt s e c uritie s a nd inte re s t ra te s - no tio nal value - 8.379 4.964.149 1.851.952 - 1.950.022 559.570 - po s itive fair value - - 2.134 691 - 59.715 3.685 - negative fair value - 10 65.966 22 - 1.759 289 - future expo s ure - 39 37.300 21.423 - 12.128 1.622 2) Equities and share indexes - no tio nal value ------po s itive fair value ------negative fair value ------future expo s ure ------3 ) C urre nc ie s a nd g o ld - no tio nal value - - 453.580 5.322 - 444.230 3.234 - po s itive fair value - - 2.715 43 - 5.030 23 - negative fair value - - 5.108 178 - 2.516 12 - future expo s ure - - 4.738 53 - 4.648 32 4 ) Othe r - no tio nal value - - 1.541 - - 1.535 - - po s itive fair value - - 136 - - 60 - - negative fair value - - 53 - - 125 - - future expo s ure - - 154 - - 154 -

220

A.7 OTC financial derivatives – banking book: notional values, gross positive and negative fair values by counterparts – contracts not included under netting agreements

1) D e bt s e c uritie s a nd inte re s t ra te s - no tio nal value - - 3.195.887 - - - - - po s itive fair value - - 45.454 - - - - - negative fair value - - 64.829 - - - - - future expo s ure - - 18.459 - - - - 2) Equities and share indexes - no tio nal value ------3.691 - po s itive fair value ------negative fair value ------future expo s ure ------295 3 ) C urre nc ie s a nd g o ld - no tio nal value - - - - - 98 692 - po s itive fair value - - - - - 17 - - negative fair value ------11 - future expo s ure - - - - - 1 7 4 ) Othe r - no tio nal value ------po s itive fair value ------negative fair value ------future expo s ure ------

221

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

Between 1 and Underlying assets/Residual life Up to 1 year Ov e r 5 ye a rs To ta l 5 ye a rs

A ) S upe rv is o ry tra ding po rtfo lio A.1 Financial derivatives on debt securities and interest rates 3.484.288 2.848.741 3.001.044 9 .3 3 4 .0 7 3 A.2 Financial derivatives on equities and shares indices - - - - A.3 Financial derivatives on exchange rates and gold 895.312 11.054 - 9 0 6 .3 6 6 A.4 Financial derivatives on other assets 3.076 - - 3 .0 7 6 B) Banking book B.1 Financial derivatives on debt securities and interest rates 832.823 1.703.818 659.246 3 .19 5 .8 8 7 B.2 Financial derivatives on equities and shares indices - 3.691 - 3 .6 9 1 B.3 Financial derivatives on exchange rates and gold 790 - - 790 B.4 Financial derivatives on other assets - - - - To tal 31/12/2010 5 .2 16 .2 8 9 4 .5 6 7 .3 0 4 3 .6 6 0 .2 9 0 13.443.883 To tal 31/12/2009 7 .0 8 0 .0 11 5 .2 5 2 .9 9 4 2 .5 6 7 .8 0 1 14.900.806

222

B. CREDIT DERIVATIVES

There were no credit derivatives.

C. FINANCIAL AND CREDIT DERIVATIVES

There were no financial or credit derivatives.

223

Section 3 Liquidity risk

Self- securitisation transactions UBI Finance 2 transactions As described in part E - Section 1 - 1.1. Credit Risk - C. Securitisation and asset disposal transactions, Banco di Brescia subscribed the entire issue of UBI Finance 2 securitised securities, for whose backing portfolio it is the only originator. The securitisation transaction, finalised during the first half of 2009, was carried out by means of the transfer of loans granted to small and medium sized companies, classified as performing, to a special purpose vehicle, UBI Finance 2 S.r.l., for a total of around 2.1 billion euro. The transfer took place on 13th January 2009, but was effective as from 1st January 2009, while the securitised securities were issued on 27th February 2009. These are the primary characteristics of UBI Finance 2 securities: Class A securities (Senior Tranches): 1,559,500,000.00 nominal value at a floating rate, listed in the Irish Stock Exchange and with the highest Fitch and Moody’s rating; Class B securities ((Junior Tranches): 519,850,000.00 nominal value, unrated and with a return equal to the transaction’s additional return, they allow the originator Banco Brescia to benefit from the excess spread of the underlying portfolios.

By virtue of the contractual clauses and the extension of the interest only payment period on the Senior security until the 24th month after issue, the securitised securities have not yet been redeemed and therefore the residual debt as at 31st December 2010 corresponds with the entire nominal value issued.

These securities were made available to the Parent Company, by means of repurchase agreement transactions, so as to be used as securities assignable for the refinancing transactions with Central banks or on the MIC- Mercato Interbancario Collateralizzato.

At the same time as the issue of the securities, the special purpose company entered into a series of Interest Rate Swap contracts with the originator bank, with the intermediation of the Parent Company, so as to mitigate the mismatching risk between the rates of return on the securitised portfolio and the return on the issued bonds. In order to provide an additional form of collateral, on 23rd February 2011 the Parent Company also granted the special purpose company a liquidity facility to permit the coverage of the payment of the interest on the securities in the event of temporary interruption of the collections on the securitised portfolio.

The following table show the distribution of the portfolio (residual capital debt) by qualitative type of loans as at 31st December 2010:

TYPE OF LOANS Residual capital debt

Performing Loans 1,229,473,329.84 Mortgage 900,285,574.13 Secured (other than mortgage) 121,611,961.50 Unsecured 207,575,794.21

Delinquent Loans 9,058,178.20 Mortgage 5,094,308.60 Secured (other than mortgage) 3,327,948.45 Unsecured 635,921.15

COLLATERAL PORTFOLIO 1,238,531,508.04

224

Defaulted Loans 72,744,900.77 Mortgage 37,969,121.60 Secured (other than mortgage) 13,566,354.11 Unsecured 21,209,425.06

TOTAL UBI FINANCE 2 PORTFOLIO 1,311,276,408.81

Qualitative information

A. General aspects, management processes and methods for measuring liquidity risk

The liquidity risk refers to the Bank’s ability, or lack of, to meet its payment obligations and/or raise additional funds on the market (funding liquidity risk), or the possibility that the value of any liquidation of certain assets differs significantly from current market values (asset liquidity risk). At consolidated and individual levels, the liquidity risk is disciplined via the Financial Risks policy, which not only establishes the exposure limits and the related early warning thresholds, but also includes the rules aimed at pursuing and maintaining structural balance for the Network Banks and the Product Companies, by means of co-ordinated and efficient lending and funding policies. The policy seeks to standardise both the methods of intervention as well as the identification criteria for economic conditions, possibly recognising specific exceptions in advance, for all Group companies. The liquidity risk supports on behalf of the Network Banks are concentrated within the Parent Company and are the responsibility of: • the ALMO Finance and Funding division (1st level support) which takes steps to monitor the liquidity each day and handle the risk within the sphere of the defined limits; • the Risk Management division (2nd level support), which is responsible for gauging the summary risk indicators and periodically checking the observance of the limits.

With particular reference to the position in terms of structural balance, the liquidity risk is essentially monitored by means of a liquidity gap model where the timing evolution of the net cash flows is determined, for the purpose of highlighting any criticalities in the expected liquidity conditions. The total liquidity requirement is determined as the sum total of the negative gaps (outgoing flows greater than incoming flows) detected for each individual time band. Any positive gap detected in a band reduces the negative gaps relating to the subsequent time bands. The liquidity requirement thus established is compared with the total available liquidity – represented by assets which can immediately be made liquid and assets which can easy be made liquid – so as to quantify the degree of coverage of the risk generated by the adopted position.

225

Quantitative Information

1.1 Time distribution of the contractual residual maturity of financial assets and liabilities - currency: EURO

Between 15 B e twe e n 6 Between 1 and B e twe e n 7 Between 1 and B e twe e n 3 Between 1 and 5 Inde te rm ina te Ite m s / M a turitie s On de m a nd days and 1 months and 1 Ov e r 5 ye a rs To ta l 7 da ys and 15 days 3 m o nths and 6 months ye a rs life m o nth ye a r

A s s e ts 4 .7 0 2 .6 9 6 12 5 .4 5 3 16 6 .6 3 7 4 12 .4 7 7 1.15 7 .2 12 5 5 3 .0 3 8 6 17 .2 9 2 3 .3 0 7 .3 8 9 4 .8 7 9 .6 5 2 4 2 1 15.922.267

A.1 Go vernment s ecurities - - - - - 26.552 - - - - 26.552

A.2 Other debt s ecurities ------632 2.120 5.386 55 8.193

A.3 Units in O.I.C.R. 95 ------95

A.4 Lo ans 4.702.601 125.453 166.637 412.477 1.157.212 526.486 616.660 3.305.269 4.874.266 366 15.887.427

- Banks 56.880 37.286 26.979 172.683 439.406 67.623 1.046 - - - 801.903

- Cus to mers 4.645.721 88.167 139.658 239.794 717.806 458.863 615.614 3.305.269 4.874.266 366 15.085.524

Lia bilitie s 10.059.235 3 6 .3 5 1 5 0 .0 7 3 1.5 5 8 .5 0 2 3 4 3 .5 4 2 4 7 7 .0 3 4 7 3 5 .4 9 6 1.6 2 9 .6 2 1 3 10 .0 8 4 - 15.199.938

B.1 Deposits and current accounts 10.039.669 - 298 135.504 3.573 715 1.726 4.000 - - 10.185.485

- Banks 1.858.800 - - 125.000 ------1.983.800

- Cus to mers 8.180.869 - 298 10.504 3.573 715 1.726 4.000 - - 8.201.685

B.2 Debt s ecurities 2.546 657 23.089 26.659 112.603 419.888 727.763 1.563.211 305.645 - 3.182.061

B.3 Other liabilities 17.020 35.694 26.686 1.396.339 227.366 56.431 6.007 62.410 4.439 - 1.832.392

Off-balance-sheet transactions 6 .2 5 4 (2 .10 5 ) 2 1 (3 4 9 .6 8 8 ) (3 6 4 .3 2 4 ) (6 7 0 .7 2 6 ) (1.252.419) 2 .4 8 9 - (2 .3 0 2 ) (2.632.800)

C.1 Financial derivatives with exchange o f principal - (3.129) - - - (50) - 2.302 - (2.302) (3.179)

- Lo ng po s itio ns - 15.816 4.236 33.630 100.277 67.308 33.509 5.089 - - 259.865

- Sho rt po s itio ns - 18.945 4.236 33.630 100.277 67.358 33.509 2.787 - 2.302 263.044

C.2 Financial derivatives witho ut exchange o f principal 5.484 1.024 21 (349.793) (364.324) (670.679) (1.252.419) - - - (2.630.686)

- Lo ng po s itio ns 65.894 1.024 26 1.507 8.019 11.396 16.345 - - - 104.211

- Sho rt po s itio ns 60.410 - 5 351.300 372.343 682.075 1.268.764 - - - 2.734.897

C.3 Deposits and loans receivable ------

- Lo ng po s itio ns ------

- Sho rt po s itio ns ------

C.4 Irrevo cable co mmitments to dis burs e funds ------

- Lo ng po s itio ns ------

- Sho rt po s itio ns ------C.5 Financial guarantees granted 770 - - 105 - 3 - 187 - - 1.065

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1.2 Time distribution of the contractual residual maturity of financial assets and liabilities - currency: USD

A s s e ts 5 1.6 3 6 2 .3 8 7 1.6 3 3 3 .8 0 7 2 7 .3 6 1 1.6 8 7 4 5 9 6 2 - - 8 9 .0 3 2

A.1 Go vernment s ecurities ------

A.2 Other debt s ecurities ------

A.3 Units in O.I.C.R. ------

A.4 Lo ans 51.636 2.387 1.633 3.807 27.361 1.687 459 62 - - 89.032

- Banks 44.539 - - - 165 264 - - - - 44.968

- Cus to mers 7.097 2.387 1.633 3.807 27.196 1.423 459 62 - - 44.064

Lia bilitie s 6 1.0 6 2 7 .7 8 6 2 .0 19 1.2 7 1 17 .111 1.7 5 2 2 .14 8 5 2 - - 9 3 .2 0 1

B.1 Deposits and current accounts 60.706 7.753 2.019 684 14.978 562 1.732 52 - - 88.486

- Banks 27 7.484 - - 14.219 - - - - - 21.730

- Cus to mers 60.679 269 2.019 684 759 562 1.732 52 - - 66.756

B.2 Debt s ecurities ------

B.3 Other liabilities 356 33 - 587 2.133 1.190 416 - - - 4.715

Off-balance-sheet transactions (18 1) 2 .8 4 4 (2 2 5 ) - 5 3 5 7 4 4 9 - - - 2 .9 9 7

C.1 Financial derivatives with exchange o f principal - 2.844 (225) - - 53 - - - - 2.672

- Lo ng po s itio ns - 17.975 4.253 31.032 92.317 66.291 28.351 1.661 - - 241.880

- Sho rt po s itio ns - 15.131 4.478 31.032 92.317 66.238 28.351 1.661 - - 239.208

C.2 Financial derivatives witho ut exchange o f principal ------

- Lo ng po s itio ns 8.195 ------8.195

- Sho rt po s itio ns 8.195 ------8.195

C.3 Deposits and loans receivable ------

- Lo ng po s itio ns ------

- Sho rt po s itio ns ------

C.4 Irrevo cable co mmitments to dis burs e funds (506) - - - 53 4 449 - - - -

- Lo ng po s itio ns 75 - - - 53 4 449 - - - 581

- Sho rt po s itio ns 581 ------581 C.5 Financial guarantees granted 325 ------325

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1.3 Time distribution of the contractual residual maturity of financial assets and liabilities - currency: CHF

A s s e ts 4 8 4 7 11 3 12 7 10 2 .7 7 1 18 3 - - - - 5 .17 1

A.1 Go vernment s ecurities ------

A.2 Other debt s ecurities ------

A.3 Units in O.I.C.R. ------

A.4 Lo ans 484 711 312 710 2.771 183 - - - - 5.171

- Banks 403 ------403

- Cus to mers 81 711 312 710 2.771 183 - - - - 4.768

Lia bilitie s 6 8 4 - - 5 17 4 .0 3 1 13 8 4 6 - - - 5 .4 16

B.1 Deposits and current accounts 684 - - 517 4.031 138 46 - - - 5.416

- Banks 2 - - - 3.999 - - - - - 4.001

- Cus to mers 682 - - 517 32 138 46 - - - 1.415

B.2 Debt s ecurities ------

B.3 Other liabilities ------

Off-balance-sheet transactions ------

C.1 Financial derivatives with exchange o f principal ------

- Lo ng po s itio ns - 50 - 52 1.234 - - - - - 1.336

- Sho rt po s itio ns - 50 - 52 1.234 - - - - - 1.336

C.2 Financial derivatives witho ut exchange o f principal ------

- Lo ng po s itio ns ------

- Sho rt po s itio ns ------

C.3 Deposits and loans receivable ------

- Lo ng po s itio ns ------

- Sho rt po s itio ns ------

C.4 Irrevo cable co mmitments to dis burs e funds ------

- Lo ng po s itio ns ------

- Sho rt po s itio ns ------C.5 Financial guarantees granted ------

228

1.4 Time distribution of the contractual residual maturity of financial assets and liabilities - currency: GBP

A s s e ts 1.7 0 2 5 - 14 2 9 8 - - - - - 2 .0 19

A.1 Go vernment s ecurities ------

A.2 Other debt s ecurities ------

A.3 Units in O.I.C.R. ------

A.4 Lo ans 1.702 5 - 14 298 - - - - - 2.019

- Banks 1.204 ------1.204

- Cus to mers 498 5 - 14 298 - - - - - 815

Lia bilitie s 2 .18 4 9 - 8 5 3 2 3 2 - - - 2 .2 7 9

B.1 Deposits and current accounts 2.184 9 - 8 53 23 2 - - - 2.279

- Banks ------

- Cus to mers 2.184 9 - 8 53 23 2 - - - 2.279

B.2 Debt s ecurities ------

B.3 Other liabilities ------

Off-balance-sheet transactions ------

C.1 Financial derivatives with exchange o f principal ------

- Lo ng po s itio ns - 588 - 1.494 2.723 1.931 1.366 - - - 8.102

- Sho rt po s itio ns - 588 - 1.494 2.723 1.931 1.366 - - - 8.102

C.2 Financial derivatives witho ut exchange o f principal ------

- Lo ng po s itio ns 5 ------5

- Sho rt po s itio ns 5 ------5

C.3 Deposits and loans receivable ------

- Lo ng po s itio ns ------

- Sho rt po s itio ns ------

C.4 Irrevo cable co mmitments to dis burs e funds ------

- Lo ng po s itio ns ------

- Sho rt po s itio ns ------C.5 Financial guarantees granted ------

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1.5 Time distribution of the contractual residual maturity of financial assets and liabilities - currency: JPY

A s s e ts 6 4 2 0 2 2 9 2 2 6 1.9 4 7 3 8 9 - - - - 2 .8 5 7

A.1 Go vernment s ecurities ------

A.2 Other debt s ecurities ------

A.3 Units in O.I.C.R. ------

A.4 Lo ans 64 202 29 226 1.947 389 - - - - 2.857

- Banks 52 ------52

- Cus to mers 12 202 29 226 1.947 389 - - - - 2.805

Lia bilitie s 4 2 9 6 9 8 - 2 .9 4 7 5 5 2 - - - - 3 .8 9 7

B.1 Deposits and current accounts 4 64 - - 2.255 552 - - - - 2.875

- Banks 1 64 - - 2.255 552 - - - - 2.872

- Cus to mers 3 ------3

B.2 Debt s ecurities - 232 98 - 692 - - - - - 1.022

B.3 Other liabilities ------

Off-balance-sheet transactions - 2 3 2 ------2 3 2

C.1 Financial derivatives with exchange o f principal - 232 ------232

- Lo ng po s itio ns - 236 226 - 1.519 - - - - - 1.981

- Sho rt po s itio ns - 4 226 - 1.519 - - - - - 1.749

C.2 Financial derivatives witho ut exchange o f principal ------

- Lo ng po s itio ns ------

- Sho rt po s itio ns ------

C.3 Deposits and loans receivable ------

- Lo ng po s itio ns ------

- Sho rt po s itio ns ------

C.4 Irrevo cable co mmitments to dis burs e funds ------

- Lo ng po s itio ns 50 ------50

- Sho rt po s itio ns 50 ------50 C.5 Financial guarantees granted ------

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1.6 Time distribution of the contractual residual maturity of financial assets and liabilities - currency: CAD

A s s e ts - 16 7 - - 14 5 - - - - - 3 12

A.1 Go vernment s ecurities ------

A.2 Other debt s ecurities ------

A.3 Units in O.I.C.R. ------

A.4 Lo ans - 167 - - 145 - - - - - 312

- Banks ------

- Cus to mers - 167 - - 145 - - - - - 312

Lia bilitie s 3 3 0 ------3 3 0

B.1 Deposits and current accounts 330 ------330

- Banks 311 ------311

- Cus to mers 19 ------19

B.2 Debt s ecurities ------

B.3 Other liabilities ------

Off-balance-sheet transactions ------

C.1 Financial derivatives with exchange o f principal ------

- Lo ng po s itio ns - - - 216 3.471 - 3.788 1.080 - - 8.555

- Sho rt po s itio ns - - - 216 3.471 - 3.788 1.080 - - 8.555

C.2 Financial derivatives witho ut exchange o f principal ------

- Lo ng po s itio ns ------

- Sho rt po s itio ns ------

C.3 Deposits and loans receivable ------

- Lo ng po s itio ns ------

- Sho rt po s itio ns ------

C.4 Irrevo cable co mmitments to dis burs e funds ------

- Lo ng po s itio ns ------

- Sho rt po s itio ns ------C.5 Financial guarantees granted ------

231

1.7 Time distribution of the contractual residual maturity of financial assets and liabilities - currency: SEK

A s s e ts ------

A.1 Go vernment s ecurities ------

A.2 Other debt s ecurities ------

A.3 Units in O.I.C.R. ------

A.4 Lo ans ------

- Banks ------

- Cus to mers ------

Lia bilitie s ------

B.1 Deposits and current accounts ------

- Banks ------

- Cus to mers ------

B.2 Debt s ecurities ------

B.3 Other liabilities ------

Off-balance-sheet transactions ------

C.1 Financial derivatives with exchange o f principal ------

- Lo ng po s itio ns - - - 850 - 50 - - - - 900

- Sho rt po s itio ns - - - 850 - 50 - - - - 900

C.2 Financial derivatives witho ut exchange o f principal ------

- Lo ng po s itio ns ------

- Sho rt po s itio ns ------

C.3 Deposits and loans receivable ------

- Lo ng po s itio ns ------

- Sho rt po s itio ns ------

C.4 Irrevo cable co mmitments to dis burs e funds ------

- Lo ng po s itio ns ------

- Sho rt po s itio ns ------C.5 Financial guarantees granted ------

232

1.8 Time distribution of the contractual residual maturity of financial assets and liabilities - currency: PLN

A s s e ts ------

A.1 Go vernment s ecurities ------

A.2 Other debt s ecurities ------

A.3 Units in O.I.C.R. ------

A.4 Lo ans ------

- Banks ------

- Cus to mers ------

Lia bilitie s ------

B.1 Deposits and current accounts ------

- Banks ------

- Cus to mers ------

B.2 Debt s ecurities ------

B.3 Other liabilities ------

Off-balance-sheet transactions ------

C.1 Financial derivatives with exchange o f principal ------

- Lo ng po s itio ns - - - - 629 - - - - - 629

- Sho rt po s itio ns - - - - 629 - - - - - 629

C.2 Financial derivatives witho ut exchange o f principal ------

- Lo ng po s itio ns ------

- Sho rt po s itio ns ------

C.3 Deposits and loans receivable ------

- Lo ng po s itio ns ------

- Sho rt po s itio ns ------

C.4 Irrevo cable co mmitments to dis burs e funds ------

- Lo ng po s itio ns ------

- Sho rt po s itio ns ------C.5 Financial guarantees granted ------

233

1.9 Time distribution of the contractual residual maturity of financial assets and liabilities - currency: OTHER CURRENCIES

A s s e ts 9 4 0 - - - 1.9 4 7 - - - - - 2 .8 8 7

A.1 Go vernment s ecurities ------

A.2 Other debt s ecurities ------

A.3 Units in O.I.C.R. ------

A.4 Lo ans 940 - - - 1.947 - - - - - 2.887

- Banks 940 - - - 1.923 - - - - - 2.863

- Cus to mers - - - - 24 - - - - - 24

Lia bilitie s 7 8 4 - - 3 3 1.9 7 2 118 2 - - - 2 .9 0 9

B.1 Deposits and current accounts 784 - - 33 - 118 2 - - - 937

- Banks 32 ------32

- Cus to mers 752 - - 33 - 118 2 - - - 905

B.2 Debt s ecurities - - - - 1.972 - - - - - 1.972

B.3 Other liabilities ------

Off-balance-sheet transactions - - - - 6 8 4 - - - - - 6 8 4

C.1 Financial derivatives with exchange o f principal ------

- Lo ng po s itio ns - 35 ------35

- Sho rt po s itio ns - 35 ------35

C.2 Financial derivatives witho ut exchange o f principal - - - - 684 - - - - - 684

- Lo ng po s itio ns 5 - - - 684 - - - - - 689

- Sho rt po s itio ns 5 ------5

C.3 Deposits and loans receivable ------

- Lo ng po s itio ns ------

- Sho rt po s itio ns ------

C.4 Irrevo cable co mmitments to dis burs e funds ------

- Lo ng po s itio ns ------

- Sho rt po s itio ns ------C.5 Financial guarantees granted ------

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Section 4 Operational risk

Qualitative information

A. General aspects, management processes and methods for measuring operational risk

Operational risk refers to the risk of losses originating from inadequate or dysfunctional procedures, human resources or internal systems, or from external events. This type of risk includes losses from fraud, human error, operational interruptions, system unavailability, contractual breaches, and natural catastrophes. The definition also includes the legal risk of losses from violations of legislation or regulations, of contractual or extra-contractual responsibilities or from other disputes, but does not includes reputational or strategic risk. Operational risk is characterized by cause-effect relationships where, due to one or more ensuing factors, a detrimental event, or effect, is generated leading directly to economic loss. Therefore, operational losses are all the negative economic effects deriving from operating events, recorded in the company accounts and such that they have an impact on the income statement. In developing the operational risk management policy, the UBI Banca Group paid particular attention to maintaining an adequate risk profile consistent with the risk propensity defined by Senior Management. Group policy requires that operational risks be identified, measured and monitored as part of the overall Operational Risk Management process with the following objectives: • identify the causes of detrimental events that generate operational losses and, as a result, increase company profitability and improve management efficiency by identifying critical areas, monitoring them and optimising the control system; • optimise risk mitigation and transfer policies such as for example insurance policies in light of the extent and actual exposure to risk; • optimise the amount of capital assets allocated to and required for operational risk as well as the policies for providing against such risks in view of creating value for the shareholders; • support the decision-making process relating to the start-up of new businesses, activities, products and systems. • develop an operational risk culture at Business Unit level making the entire structure aware of the existence of such risk; • satisfy the regulatory requirements of the New Basel Capital Accord on Supervisory Capital of Banks and banking groups.

In light of the regulatory context defined via publication of Circular No. 263 dated 27th December 2006 by the Bank of Italy, the bank adopted the Standardized method (TSA) for the calculation of the capital requirement on Operational Risks and launched a procedure aimed at requesting authorization from the Supervisory Authority for use of an Advanced- type internal model (Advanced Measurement Approach-AMA), currently adopted for just management purposes.

Organisational model

The Organisational model which oversees the operational risks is based on a combination of components, in relation to the responsibilities assigned and the specific position covered in the staff organisation chart, centralised and decentralised on a consistent basis with the Group model, multifunctional and integrated, within the sphere of which the Parent Company undertakes the tasks of management, co-ordination and control, supervision of the business divisions also by means of the support of the activities of the Network Banks and Product Companies in their core businesses, supply of mutual services supporting business directly or via subsidiaries. The outline of a differentiated organisational structure was the result of the size and operational complexity of each entity making up the Group: Parent Company, Service

235

Companies, Commercial banks, Product Companies. The responsibilities, each for the related sphere of competence, concentrated within the Parent Company, are assigned to: • Operational Risks Committee: this is the body for policy, governance and supervision of the entire management process regarding Operating Risks. The composition, regulations for its functioning and powers are disciplined by the General Company Rules; • Operational Risks Service: in its capacity as structure responsible for the entire Operating Risks management system, it is the unit which is tasked with planning, developing and maintaining business methodologies for recording, measuring, monitoring and verifying the effectiveness of operational risk mitigation measures and related reporting systems. It is also assigned the tasks for the co-ordination and control of the entire management system at Group level; • Methods and Models Service: this is the unit charged with calculating the Capital Requirement for the corporate bodies who intend to adopt Advanced methods according to the instructions validated by the Model and Process Validation Service and by the other corporate Entities and Bodies or otherwise, appointed as and when necessary. This Division operates and serves the Operating Risks Service; • Model and Process Validation Service: in its capacity as division independent from parties or units involved in the development of the risk management and gauging systems, it is tasked with the on-going quality assessment activities for the operating risks and their compliance over time with the legislation requirements, the business operating needs and the evolution of the reference market. These activities include the checking of the reliability of the capital requirement calculation and the assessment of the use of the gauging system within the sphere of the decision- making processes and the handling of the operational risks (use test). • Risk Policies Service: this unit is appointed to draft and review the “Policy overseeing the UBI Banca Group operational risks”. It also takes part in the process for the assessment and taking out of insurance coverage for the mitigation of the operational risks as per the methods detailed within the Insurance Risk Management Regulations.

With regard to the components decentralised within the Bank, the organisational model covers four levels of responsibility: Operational Risk Contact (RRO): this is the person responsible within the related legal entity (Parent Company/Network Bank/Product Company) for implementing the total operational risk management framework defined by Group policy and the respective implementing regulations; Local Operational Risk Support (SROL): the principal support role to the Operational Risk Contact in governing the total operational risk management process for the legal entities. With regard to the pertinent corporate body, it also represents the support and co-ordination unit of the reference Risk Champions and Risk Owners for the roles involved in the Operational Risks Management System; Risk Champion (RC): operationally responsible for the operational risk management process (LDC and SRA) so as to achieve full validation, for each business area, coordinating and supporting the reference Risk Owners. It supports the risk monitoring process and participates in defining and implementing mitigation strategies; Risk Owner (RO): responsible for recognising and taking note of historical and/or potential operating loss events (LDC and SRA) that emerge during daily activities. Participates in implementing the corrective and improvement measures communicated from higher levels aimed at reducing the risk exposure level.

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Management, measurement and control systems

The Group Operational Risk Management System comprises: a decentralised process that collects data on operating losses (Loss Data Collection) aimed at the integrated and systematic recording of harmful events that have occurred and caused an actual loss, at almost loss (near miss) or a profitable event. The operational losses detected are periodically reconciled with the accounts and up-dated in real time by the Risk Owners and/or Risk Champions via a procedure, available on the Group intranet, with separate indication of the recoveries eventually obtained, also by means of the activation of specific insurance policies; a structured process for mapping and assessing the risk scenarios and operating context factors and the system of significant internal controls (Risk Assessment) in place at the Group’s business areas, supported by an IT procedure for its integrated management, with the aim of providing a critical self-diagnosis of operations as concerns the potential risk of future losses, adequacy of controls and mitigation procedures in force; a database of operating losses suffered by the Italian system starting from 2003. The Group supports the initiative undertaken by the DIPO Observatory launched by ABI on the subject of operational risks for the exchange of system loss data since its establishment; an economic and regulatory capital measurement system, to determine the operational risk capital requirement by business unit using the Standardised and AMA method. The measuring of the operational risk using the AMA method is carried out using an Extreme Value Theory (EVT) type approach in relation to all the information sources seen in the three previous points (Operating Losses detected internally (LDC), assessment of the potential exposure to risk (SRA) and operating losses suffered by the Italian system (DIPO)).

Reporting To support monitoring activities for operational risks, a reporting system was developed that provides the information necessary for correctly managing, measuring and mitigating the levels of risk borne by the Group. This system reflects the same levels of responsibility envisaged by the organisational model to support the various information needs of the Group’s federal model with the aim of guaranteeing the standardisation of information and allowing regular verification of operational risks taken in preparation of defining strategies and management objectives that are in line with the acceptable risk levels. The reports for the corporate boards, the Parent Company’s Senior Management and the Group’s main Corporate Entities as well as the Operational Risk Committee are prepared centrally, on a regular basis, by the Operational Risk Service and include, with different levels of detail and frequency based on necessity, a trend analysis of internal losses and related recoveries along with a comparison with external system data, the results of the evaluation of risk exposure identifying any vulnerable areas and a description of the action required to prevent and mitigate risk as well as the respective efficacy.

Risk transfer mechanisms The UBI Banca Group has taken out adequate insurance policies covering the main transferable operational risks taking into account the requirements under Prudent Supervisory Legislation (Circular No. 263/2006, Bank of Italy). The policies were stipulated by UBI Banca ScpA in its own name and on behalf of the Group Network Banks and Product Companies concerned.

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Legal risk Banco di Brescia is involved in a number of judicial proceedings of differing natures and legal proceedings resulting from the ordinary performance of its activities. While it is not possible to know the final outcomes of these proceedings with certainty, any unfavourable results would not have, either singularly or totally, a significant negative effect on the Bank’s balance sheet or income statement. Based on the requests received, the Bank deemed it appropriate to make provisions on the basis of a reconstruction of the calculation of the amounts potentially at risk and taking into account the more consolidated case law in this connection. Among the significant proceedings which involve the Bank, bankruptcy revocation action brought by Giacomelli Sport Spa is currently pending, for a requested equivalent value of 830,000 euro, as well as by Formenti Seleco Spa, for a requested equivalent value of 1,447,453 (the proceedings will be updated as at 24th March 2011 due to the filing of the court appointed expert witness’s report). The extraordinary administration of Formenti Seleco Spa summoned another 18 legal entities before the court along with Banco di Brescia, for action concerning the abusive granting of credit. In this connection, it is appropriate to emphasise how the contents of the three sentences of the Supreme Court of Cassation – Joint Sections dated March 2006 are known, relating to the inexistence of the legal standing of the official receiver to exercise, vis-à-vis the banks, “action concerning liability deriving from the abusive granting of credit” (sentences No. 7030, No. 7029 and No. 7031 dated 28th March 2006) confirmed in the following Court case law (see Cassation, civil section I, 13th June 2008 No. 16031). It should also be highlighted that the Monza Court – which is the same legal authority applied to for the afore-mentioned suit – in a recent sentence (12th September 2007) definitely excluded that the disbursement of a mortgage loan under market conditions could represent a source of damage compensable with regard to the financed company. In fact, damage involving unlawful injury to assets cannot be formulated: damage in a legal sense only occurs if the injury of a legally relevant interest and the disbursement of the credit, even if hypothetically abusive, does not create such damage (the case, after the filing of the submissions and statement of rebuttal, was submitted before the bench). With regard to the corporate dispute, not directly attributable to the performance of the core business activities, and the tax dispute, please see the specific section in the consolidated Directors’ Report.

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Quantitative Information

The graphics below show that the main sources of operational risk for the Bank between January 2004 and December 2010 are “Processes” (58% of the impacts and 10% of the frequencies) and “External Causes” (36% of the impacts and 89% of the frequencies). The “Processes” risk driver includes, among other things, unintentional errors, lack of preparation of the staff, procedural and process inefficiencies, lack of observance of procedures and internal controls. The “External Causes” risk driver includes human action triggered by third parties and which the Bank cannot directly control, such as thefts and robberies, credit card fraud, damages caused by natural disasters (earthquakes, floods, etc.) and other external events.

The trend in the impacts, before any insurance claims and other external recoveries, discloses a reduction of 34% with respect to last year essentially caused by the drop in customer complaints. In terms of the numerousness of the events, there has been an increase of 12% essentially due to the rise in payment card fraud in relation to which suitable measures for preventing and reducing the risk have been set up.

Distribuzione delle perdite operative per anno di rilevazione (gennaio 2004 - dicembre 2010)

25%

20%

15%

10%

0% 2004 2005 2006 2007 2008 2009 2010

n° Eventi Impatti

239

List of the top five losses between January 2004 – December 2010

The analysis of the operating losses carried out on the data taken in the period between 1st January 2004 and 31st December 2010 discloses a concentration of the phenomenon in the “Execution, delivery and handing of the processes” (13% of the frequencies and 30% of the total impacts revealed) and “External fraud” event types (60% of the frequencies and 29% of the total impacts revealed). For the same analysis period, the banking system data (DIPO-ABI Association) showed a higher concentration of operating losses corresponding to the “Customer products and professional practices” (20% of the frequencies and 25% of the total revealed) and “External fraud” (44% of the frequencies and 25% of the total impacts revealed) event types.

240

Capital requirement

In 2008 the Bank adopted the Standardized method (TSA) for the calculation of the capital requirement on Operating Risks (see Bank of Italy Circular No. 263 dated 27th December 27/12/2006 relating to the new prudent supervisory provisions for Banks). The capital requirement determined by the Standardized component (TSA) derives from the multiplication of the intermediation margin (so-called “significant indicator” equating to item 120 in the income statement of the financial statements as per the Bank of Italy Circular No. 262 dated 22nd December 2005), divided up by regulatory business line, for the specific beta factors defined by supervisory provisions (see Bank of Italy Circular No. 263 dated 27th December 2006 and No. 155 dated 18th December 1991). The significant indicator by regulatory business line has been extrapolated from the management control figures, applying the classification criteria defined by internal legislation and in observance of regulatory provisions. The capital requirements as at 31st December 2010, calculated as the average of the requisites relating to the last three years, amounts to 79.8 million euro. It is 48% absorbed by the Retail banking business line, 31% by Commercial banking, 10% by Trading & Sales and 10% by Retail brokerage. The average absorption factor with respect to the significant indicator comes to 13%. The capital requirement as at 31st December 2010 discloses a reduction of 6 million euro (- 7%) when compared with 31st December 2009, mainly due to the drop in the intermediation margin.

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Part F – Information on Shareholders’ Equity

Section 1 Shareholders’ equity

A - Qualitative information

Shareholders’ equity comprises the share capital and reserves, set up under any basis. The aggregate (see details in the tables below) covers all the business risks commented on earlier. The policies and processes adopted for the management of the equity concern all the choices aimed at defining the dimension and the optimum combination between the various capitalization instruments, so that the capital endowment is in keeping with the Bank’s propensity to risk, in observance of the supervisory requirements.

In accordance with the supervisory provisions in force, banks belonging to banking groups can benefit from a reduction of 25% of the total capital requirement – applicable on an individual basis – provided that the overall consolidated requirement is observed. Since the latter condition is met, the Bank applies the afore-mentioned reduction. Belonging to the UBI Group is a valid and constant guarantee that the capital requirements are always complied with and, if need be, share capital increases may be carried out.

B - Quantitative information

B.1 Shareholders’ equity: composition

Balance Balance Items / Amounts 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9

1. Share capital 615.632 593.300 2. Share premiums 120.000 120.000 3. Res erves 638.311 423.226 - pro fit 517.369 423.226 a) legal 90.522 84.074 b) s tatuto ry - - c) o wn s hares - - d) o ther 426.847 339.152 - o ther 120.942 - 4. Capital instruments - - 5. (Own s hares ) - - 6. Valuatio n res erves 14.182 21.206 - Available-fo r-s ale financial as s ets 4.587 9.779 - Tangible as s ets - - - Intangible as s ets - - - Hedging o f fo reign inves tments - - - Hedging o f cas h flo ws - - - Exchange rate differences - - - No n current as s ets held fo r s ale - Actuarial gains (lo s s es ) relating to defined-benefit pens io n plans (3.184) (1.353)

- P o rtio ns o f valuatio n res erves relating to inves tments carried at equity - - - Special revaluatio n laws 12.779 12.780 7. P ro fit (lo s s ) fo r the year 71.979 128.973 To ta l 1.4 6 0 .10 4 1.2 8 6 .7 0 5

The increase in shareholders’ equity recorded in the accounts is due to the overall equity enhancement associated with the territorial optimisation transaction (share capital increase for 22.3 million euro and recording of positive OPI reserve for 120.9 million euro) as well as the period profit of 71.9 million euro; the change in the valuation reserves reduced the shareholders’ equity by around 7 million euro.

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B.2 Valuation reserves of available-for-sale financial assets: composition

To tal To tal 3 1/ 12 / 2 0 10 3 1/ 12 / 2 0 0 9 Assets/Amounts

P o s itiv e re s e rv e N e g a tiv e re s e rv e P o s itiv e re s e rv e N e g a tiv e re s e rv e

1. Debt s ecurities - - - - 2. Equities 4.483 (216) 9.471 - 3. Units in O.I.C.R. (co llective inves tment ins truments ) 320 - 308 - 4. Lo ans - - - - To ta l 4 .8 0 3 (2 16 ) 9 .7 7 9 -

B.3 Valuation reserves of available-for-sale financial assets: changes in the year

Units in O.I.C.R. (collective Debt securities Equities Loans investment instruments)

1. Opening balances - 9.471 308 - 2. Positive changes - - 12 - 2.1 Increases in fair value - - 12 - 2.2 Transfer to income statement of negative reserves - - - - for impairment - - - - from disposal - - - - 2.3 Other changes - - - - 3. Negative changes - (5.204) - - 3.1 Decreases fair value - (5.204) - - 3.2 Adjustments from impairment - - - - 3.3 Transfer to income statement of positive reserves: from disposal - - - - 3.4 Other changes - - - - 4. Closing balances - 4.267 320 -

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Section 2 Supervisory capital and Ratios

2.1 SUPERVISORY CAPITAL

A - Qualitative information

Supervisory capital was determined according to current legislation, as defined by the provisions of the Supervisory Authority.

1. Tier 1 capital

Tier 1 capital is made up of share capital, retained earnings less intangible assets; there are no “innovative capital instruments”.

2. Tier 2 capital

Tier 2 capital is made up of valuation reserves and subordinated loans.

3. Tier 3 capital

There is no Tier 3 capital.

B - Quantitative information

Total Total 31/12/2010 31/12/2009

A. Core capital before application of prudent filters 1.406.742 1.211.027 Prudent filters of the core capital: - - - positive IAS/IFRS prudent filters (+) - - - negative IAS/IFRS prudent filters (-) - - C. Core capital gross of deductions (A+B) 1.406.742 1.211.027 D. Deductions from the core capital - - E. Total core capital (TIER 1) (C-D) 1.406.742 1.211.027 F. Supplementary capital before application of prudent filters 49.699 102.608 G. Prudent filters of the supplementary capital (52) (91) - positive IAS/IFRS prudent filters (+) - - - negative IAS/IFRS prudent filters (-) (52) (91) H. Supplementary capital gross of deductions (F+G) 49.647 102.517 I. Deductions from the supplementary capital - - L. Total supplementary capital (Tier 2) (H-I) 49.647 102.517 M . Deductions from the core and supplementary capital - - N. Supervisory capital (E+L-M) 1.456.390 1.313.545 O. TIER 3 capital - - P. Supervisory capital including TIER 3 (N+O) 1.456.390 1.313.545

The capital indicated above has been calculated taking into account the option illustrated in “Other information - Provision of the Bank of Italy concerning prudent filters”.

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2.2 Capital adequacy

A. Qualitative information

The protection of the Bank’s capital adequacy is concentrated with the Parent Company UBI Banca. The latter, carrying out policy and co-ordination activities for the Group Companies – assesses the capitalization requirements, both in a strict sense and via the issue of subordinated liabilities or hybrid capitalisation instruments of the Subsidiaries. The Parent Company’s Senior Management formulated the intervention proposals to the Corporate Bodies who decide accordingly. The proposal, once approved by the Parent Company’s bodies, is then submitted to the competent bodies of the Subsidiary companies. On the basis of the Group’s growth plan, the associated risk profiles and the observance of the supervisory capital restrictions, the Parent Company analyzes and co-ordinates the capitalization requirements, presenting itself as the privileged counterpart when accessing capital markets, with an integrated view to the optimum scaling of the capital.

The approach adopted to evaluate the capital adequacy is based on two assumptions: adequately sustain the Bank’s operations, also in relation to the defined strategic plans; comply as and when necessary with the instructions of the Supervisory Authority as concerns capital requirement levels.

To this end, the trend of both the Capital Ratio (TIER 1) and the Total Capital Ratio are constantly monitored. The growth strategy of lending is outlined taking account of the remuneration and risk levels vis-à-vis the related capital requirement.

B. Quantitative Information

Unweighted amounts We ig hte d a m o unts / re quire m e nts

C a te g o rie s / Va lue s To tal 31/12/2010 To tal 31/12/2009 To tal 31/12/2010 To tal 31/12/2009

A . R IS K A S S ETS

A.1 Credit and co unterparty ris k - - - -

1. Sta nda rd m e tho do lo gy 20.215.799 25.187.474 13.597.584 10.333.247

2. M e tho do lo gy ba s e d o n inte rna l ra tings - - - -

2.1 Ba s ic - - - -

2.2 Adva nc e d - - - -

3. S e c uritis a tio n - - - -

B. SUP ERVISORY CAP ITAL REQUIREMENTS - - - -

B.1 Credit and co unterparty ris k - - 1.087.807 825.642

B.2 Market ris k - - 2.498 6.524

1. Sta nda rd m e tho do lo gy - - 2.498 6.524

2. Inte rna l m o de ls - - - -

3. C o nc e ntra tio n ris k - - - -

B.3 Operatio nal ris k - - 79.860 87.817

1. Ba s ic m e tho d - - - -

2. S ta nda rdis e d m e tho d - - 79.860 87.817

3. Adva nc e d m e tho d - - - -

B.4 Other prudent requirements - - - -

B.5 Other calculatio n metho ds (*) - - (292.541) (229.996)

B.6 To tal prudent requirements - - 877.623 689.987

C. RISK ASSETS AND SUP ERVISORY RATIOS - -

C.1 Ris k weighted as s ets - - 10.970.290 8.624.841

C.2 Co re capital/Ris k weighted as s ets (Tier 1 capital ratio ) - - 12,82% 14,04% C.3 Supervis o ry capital including TIER 3 /Ris k weighted as s ets (To tal capital ratio ) - - 13,28% 15,23% (*) When calculating the total prudent requirements, the banks belonging to Italian banking groups also take into consideration the 25% reduction in requirements indicated in point “B.5 – Other calculation elements”.

245

On the basis of the most recent interpretative approaches, the risk weighted assets are represented as the reciprocal of the minimum requirement envisaged, 8%, including the discount of 25% for banks belonging to a banking group that at consolidated level respect the minimum mandatory requirement. Excluding this discount and for comparison of the values stated with those previously presented, note that the ratios indicated in line C.2 and C.3 would be 9.62% and 9.96% respectively, while those for December 2009 would be 10.53% and 11.42%. The ratios indicated are determined on the basis of the provisions contained in Circulars 263/06 and 155/91, as amended – respectively - by the 7th up-date dated 28th January 2011 and by the 13th up-date dated 9th February 2011. Standardised methods were applied.

246

Part G – Business Combination Transactions Regarding Businesses or Business Units

These types of transactions did not occur within the Bank.

247

Part H –Related Party Transactions

1. Information on the remuneration of senior managers with strategic responsibility

Remuneration of Senior Managers (1)

To tal 31/12/2010

Sho rt-term emplo yee benefits (2) 3.209 Benefits after terminatio n o f emplo yment (3) 273 Other lo ng-term benefits - Terminatio n benefits - Share-bas ed payments -

(1) “Senior Managers” refers to “managers with strategic responsibility belonging to the entity including its directors”. (2) By way of example: wages, salaries, and related social contributions, payment of substitute indemnity for holidays and sick leave, and other similar benefits. The amount includes fixed and variable compensation to Directors relating to the cost for their work and the company's social security payments for employees. (3) By way of example: pensions, other social security benefits, life and health insurance after the employment relationship ends.

As regards compensation paid during 2010, in addition to the fixed remuneration component defined through individual contracts, there is a significant variable component related to achieving the Group's strategic objectives. The full fixed remuneration package includes not only the usual monetary compensation, but also benefits completing the remuneration package such as an additional social security fund, health policy and accident policy. There are no medium/long term incentive plans.

Specifically, the following remuneration institutes are noted (please refer to the appropriate accounting principle for their definition):

a) Short-term benefits Short-term benefits include wages and salaries, social contributions, substitute indemnity for holidays not taken, sick leave, paid leave, other medical assistance benefits and housing.

b) Benefits following the employment relationship The benefits following the employment relationship include welfare, pension and insurance plans as well as the severance indemnity. For the senior managers in question, complementary life insurance and social security insurance plans are in place with time lines that extend beyond the end of the employment relationship.

2. Information on related party transactions

In compliance with current provisions, all transactions by the Parent Company with its related parties were carried out with substantial and procedural correctness, in similar conditions to those applied to transactions carried out with independent third parties.

For the purposes of drawing up these Financial Statements, as per International Accounting Standard (IAS) No. 24, a related party to the issuer is understood to be:

a) one that directly or indirectly controls, is controlled by, or is subject to common control with the issuer; or the issuer holds an equity investment allowing it to exercise significant influence or joint control;

248

b) a company related to the issuer (based on the definition in IAS 28 – Equity investments in associated companies); c) a joint venture in which the issuer is an investor; d) a senior manager with strategic responsibility for the issuer or its parent company, intended as one who has the power and responsibility for planning, managing and controlling activities for the issuer, including directors; e) a close family member of one of the parties indicated in letters a) or d) (close family members means those who could potentially influence the person related to the issuers, or be influenced, in their relations with the issuer); f) a subsidiary, jointly controlled entity or is subject to significant influence by one of the parties indicated in letters d) or e), or those parties hold, directly or indirectly, a considerable number of voting rights in said entity; g) a pension fund for employees of the issuer or of any entity related to it.

As regards the effect relating to the Parent Company’s management and coordination activities, as provided in Article 2497 bis of the Italian Civil Code, the Parent Company and its subsidiary provide the various Group companies with services, governed by special intragroup contracts drafted based on criteria of congruity, transparency and homogeneity, consistent with the adopted organisational model that provides for the centralisation of strategic and management activities with UBI Banca and the centralisation of technical- operational activities with UBI Sistemi e Servizi S.C.p.A. The agreed payments for services in the contracts were determined at market conditions or, when there were no suitable reference parameters on the market for the particular characteristics of the services rendered, on the incurred cost basis. The principal intragroup contracts in effect at year end include the centralisation of the governance and business activities within the Parent Company and those involving the Parent Company and the primary Group banks in the implementation of the national tax consolidation (Articles 117 to 129 of the Presidential Decree No. 917/1986 of the Income Tax Consolidation Act) completed by the Parent Company. There are also the intragroup contracts for centralising the support activities for all of the main UBI Group Companies with UBI Sistemi e Servizi.

Further information regarding transactions with related parties are reported in the following tables.

249

Relationships with Group companies and companies under dominant influence

3 1/ 12 / 2 0 10

He ld-to - F ina nc ia l A v a ila ble -fo r- R e la te d pa rty m a turity Lo a ns to Lo a ns to He dg ing D ue to S e c uritie s Gua ra nte e s assets/liabilities sale financial Due to banks fina nc ia l ba nks c us to m e rs de riv a tiv e s c us to m e rs is s ue d g ra nte d he ld fo r tra ding a s s e ts a s s e ts

P a re nt B a nk - - - 741.885 - - 3.276.199 - 382.209 113 S ubs idia rie s ------Associated companies - - - 21 7.236 - 378 - - 5.889 J o int v e nture s ------Subsidiaries/Associated companies of Parent Bank - - - 15.128 74.379 - 12.864 19.495 - 2.195 S e nio r m a na g e rs - - - - 1.056 - - 28.044 560 - Othe r re la te d pa rtie s - - - - 96.922 - - 178.573 20.655 -

Relationships indicated in the line “Associated companies” are with UBI.S., Banca di Valle Camonica and UBI Banca International, while the line “Subsidiaries/associated companies of the Parent Company” include other fully consolidated Group companies.

3 1/ 12 / 2 0 10

Othe r Inte re s t e xpe ns e Othe r R e la te d pa rty Inte re s t inc o m e a nd Dividends and Commission A dm inis tra tiv e Commission o pe ra ting a nd s im ila r o pe ra ting s im ila r re v e nue s s im ila r inc o m e inc o m e e xpe ns e s e xpe ns e inc o m e c ha rg e s e xpe ns e

P a re nt B a nk 62.140 - 7.221 75 (24.700) (14.450) (3.754) - S ubs idia rie s ------Associated companies 737 861 - 123 (155) (38.680) - - J o int v e nture s ------Subsidiaries/Associated companies of Parent Bank 2.274 - 35.434 2.037 (30.123) (850) (53) (36)

The line “Subsidiaries/associated companies of the Parent Company” includes non-investee Group companies, however included in the line- by-line consolidation perimeter.

250

3 1/ 12 / 2 0 10

Income/expens Othe r N e t R e la te d pa rty e fro m o pe ra ting A dm inis tra tiv e N e t inte re s t commission fina nc ia l income and e xpe ns e s inc o m e tra ns a c tio ns e xpe ns e

S e nio r m a na g e rs (172) 173 2 1 (6) Othe r re la te d pa rtie s (212) 22.708 20 1.832 (3.715)

3 1/ 12 / 2 0 10

With re la te d pa rtie s - - - 757.034 179.594 - 3.289.441 226.111 403.424 8.196 To ta l 24.917 20.913 - 851.391 15.078.204 (19.369) 3.341.564 8.885.718 3.233.256 ------Inc ide nc e 88,92% 1,19% 98,44% 2,54% 12,48%

3 1/ 12 / 2 0 10

Income/expens N e t Othe r o pe ra ting R e la te d pa rty e fro m A dm inis tra tiv e N e t inte re s t D iv ide nds commission income and fina nc ia l e xpe ns e s inc o m e e xpe ns e tra ns a c tio ns

With re la te d pa rtie s 9.788 861 61.730 21 4.032 (57.702) To ta l 326.605 1.249 195.260 (1.478) 37.986 (330.267) Inc ide nc e 3,00% 68,93% 31,61% -1,45% 10,61% 17,47%

251

Part I – Share-based Payment Agreements

These types of transactions did not occur within the Bank.

252

Part L – Segment Reporting

The Bank is not obliged to prepare this section as segment reporting is provided as part of the Consolidated Financial Statements of the Parent Company UBI Banca.

253

Attachments to the Financial Statements

254

Summary Tables of the Key Data Relating to the Parent Company UBI Banca S.c.p.A. (pursuant to Article 2497 bis of the Italian Civil Code)

BALANCE SHEET (in thousands of euro)

31/12/2009 ASSETS Cash and cash equivalents 215.835 Financial assets held for trading 1.857.484 Financial assets at fair value 173.727 Available-for-sale financial assets 4.919.282 Loans to banks 28.278.016 Loans to customers 12.560.060 Hedging derivatives 122.894 Equity investments 12.183.514 Tangible and intangible assets 1.198.709 Tax assets 633.576 Non-current assets and disposal groups held for sale 658.463 Other assets 648.632 TOTAL ASSETS 63.450.192

31/12/2009 LIABILITIES Due to customers and securities issued 21.277.596 Due to banks 27.737.223 Financial liabilities held for trading 1.393.829 Hedging derivatives 379.598 Tax liabilities 472.810 Liabilities associated with assets held for disposal 646.320 Other liabilities 832.235 Staff severance provision 40.120 Provisions for risks and charges 8.231 Equity 10.255.913 Profit for the year 406.317 TOTAL LIABILITIES 63.450.192

255

INCOME STATEMENT (in thousands of euro)

31/12/2009 Net interest expense (108.971) Net commission income 16.349 Gross income 586.122 Net financial operating income 540.743 Operating expenses (162.999) Profit from continuing operations before tax 396.581 Income taxes 9.736 Profit for the year 406.317

256

Disclosure of compensation for auditing of accounts and services other than auditing as per CONSOB Issuers’ Regulations Article 149 duodecies.

In accordance with Article 149 duodecies of the CONSOB Issuers’ Regulations, the tables that follow contain information regarding the compensation paid to Reconta Ernst & Young SPA auditing firm, and to companies belonging to its network, for the following services:

1) Auditing services that include: • auditing the annual accounts, in order to issue a professional opinion; • auditing of the interim accounts.

2) Authentication services that include duties for which the auditors evaluate one specific element, whose measurement is performed by another party who is responsible, with appropriate criteria, so that the auditor may express an opinion that provides the recipient with a degree of reliability for said specific element.

3) Tax consultancy services.

4) Other services.

The compensation shown in the table below, for 2010, is that agreed upon contractually, including any index-linking (but does not include out-of-pocket expenses, any supervisory contribution or VAT). Based on the regulations mentioned, the figures do not include compensation to any secondary auditors or parties in the respective networks.

Compensation Type of service Party that provided the service Recipient of services (euro/thousand) Accounting audit Reconta Ernst & Young SPA Banco di Brescia SPA 340 Authentication services Reconta Ernst & Young SPA Banco di Brescia SPA 3 Tax consultancy services Other services Total 343

257

List of properties

Rivalutazioni Rivalutazioni Rivalutazioni Fondi Altre Ubicazione Investimenti Valori lordi Val. in bilancio di legge di fusioni IAS Ammortamenti M ovimentazioni

1 BRESCIA VIA SAN MARTINO 2 547.492,81 7.328.786,80 0,00 0,00 7.876.279,61 -1.584.688,14 0,00 6.291.591,47 2 SALO PZ VITT EMANUELE II, 20 VIC TEATRO VECCHIO 644.975,26 3.804.619,72 0,00 0,00 4.449.594,98 -1.219.155,13 0,00 3.230.439,85 3 DESENZANO DEL GARDA VIA G. MARCONI, 97 479.788,46 2.030.526,00 0,00 0,00 2.510.314,46 -745.914,43 0,00 1.764.400,03 4 CHIARI PIAZZA GIUSEPPE ZANARDELLI, 7 588.172,47 2.077.402,27 0,00 0,00 2.665.574,74 -873.626,62 0,00 1.791.948,12 5 VEROLANUOVA PIAZZA LIBERTA', 2 412.112,11 1.813.240,05 0,00 0,00 2.225.352,16 -691.569,76 0,00 1.533.782,40 6 PALAZZOLO SULL OGLIO VIA XX SETTEMBRE, 22 622.081,92 1.717.463,91 0,00 0,00 2.339.545,83 -1.019.045,83 0,00 1.320.500,00 7 BRESCIA VIA ORZINUOVI, 9/11 903.892,59 1.771.850,24 0,00 0,00 2.675.742,83 -1.441.109,52 0,00 1.234.633,31 8 CONCESIO VIA EUROPA, 203 705.174,24 1.240.606,49 0,00 0,00 1.945.780,73 -692.970,43 0,00 1.252.810,30 9 VITERBO CORSO ITALIA, 36 164.913,74 1.817.019,71 0,00 0,00 1.981.933,45 -769.206,17 0,00 1.212.727,28 10 PONTEVICO PIAZZA GIUSEPPE MAZZINI, 15 193.273,62 1.351.699,21 0,00 0,00 1.544.972,83 -360.084,00 0,00 1.184.888,83 11 TOSCOLANO MADERNO VIA MONTANA, 1 62,24 835.767,13 0,00 0,00 835.829,37 -227.676,52 0,00 608.152,85 12 LIMONE SUL GARDA VIA DON COMBONI, 24 169.862,67 1.219.313,66 0,00 0,00 1.389.176,33 -230.910,42 0,00 1.158.265,91 13 GUSSAGO VIA IV NOVEMBRE, 112/A 80.050,82 1.460.840,36 0,00 0,00 1.540.891,18 -474.280,35 0,00 1.066.610,83 14 CASTEL MELLA VIA CADUTI DEL LAVORO, 56/A 966.187,56 1.244.044,96 0,00 0,00 2.210.232,52 -1.206.232,50 0,00 1.004.000,02 15 RONCADELLE VIA MARTIRI DELLA LIBERTA', 119/A 218.048,11 1.359.307,97 0,00 0,00 1.577.356,08 -585.119,96 0,00 992.236,12 16 FLERO VIA XXV APRILE, 110 331.152,17 1.211.389,92 0,00 0,00 1.542.542,09 -583.091,55 0,00 959.450,54 17 CREMONA VIALE PO, 33/35 873.178,50 409.165,44 0,00 0,00 1.282.343,94 -398.343,94 0,00 884.000,00 18 MONIGA DEL GARDA PIAZZA SAN MARTINO 289.215,86 1.063.263,22 0,00 0,00 1.352.479,08 -549.067,95 0,00 803.411,13 19 NAVE PIAZZA SANTA MARIA AUSILIATRICE, 19 297.840,70 772.568,81 0,00 0,00 1.070.409,51 -359.236,67 0,00 711.172,84 20 ROVATO CORSO BONOMELLI, 52/54 373.475,07 954.031,86 0,00 0,00 1.327.506,93 -610.506,93 0,00 717.000,00 21 CALCINATO VIA GUGLIELMO MARCONI, 51 171.980,15 940.775,33 0,00 0,00 1.112.755,48 -453.058,97 0,00 659.696,51 22 CASTREZZATO PIAZZA MONS. ZAMMARCHI, 1 57.198,99 771.916,47 0,00 0,00 829.115,46 -164.529,57 0,00 664.585,89 23 REMEDELLO VIA ROMA, 60 372.520,36 831.868,87 0,00 0,00 1.204.389,23 -613.978,25 0,00 590.410,98 24 BAGNOLO MELLA XXVI APRILE, 56/A 17.559,54 842.764,18 0,00 0,00 860.323,72 -283.122,86 0,00 577.200,86 25 GOTTOLENGO PIAZZA XX SETTEMBRE, 16 216.995,17 565.101,27 0,00 0,00 782.096,44 -278.696,47 0,00 503.399,97 26 CAPRIANO DEL COLLE VIA MORARI, 26 51.645,69 648.312,78 0,00 0,00 699.958,47 -200.230,08 0,00 499.728,39 27 ACQUAFREDDA VIA DELLA REPUBBLICA, 52 185.408,03 639.542,33 0,00 0,00 824.950,36 -348.475,17 0,00 476.475,19 28 CALVISANO VIA DANTE ALIGHIERI, 1 23.960,68 577.638,41 0,00 0,00 601.599,09 -170.309,76 0,00 431.289,33 29 PADERNO FRANCIACORTA VIA ROMA, 32 189.281,46 577.937,41 0,00 0,00 767.218,87 -358.018,84 0,00 409.200,03 30 TIGNALE PIAZZALE FRANCESCO D'ASSISI, 11 162.014,82 434.117,11 0,00 0,00 596.131,93 -205.325,42 0,00 390.806,51 31 BOVEGNO VIA CIRCONVALLAZIONE, 5 210.604,51 434.870,25 0,00 0,00 645.474,76 -271.274,74 0,00 374.200,02 32 DELLO PIAZZA ROMA, 36 3.289,89 342.547,63 0,00 0,00 345.837,52 -59.241,41 0,00 286.596,11 33 BAGOLINO VIA SAN GIORGIO, 66 121.445,85 230.657,66 0,00 0,00 352.103,51 -120.753,65 0,00 231.349,86 34 QUINZANO D OGLIO VIA C. CAVOUR, 29 - 31 30,99 443.868,66 0,00 0,00 443.899,65 -92.891,51 0,00 351.008,14 35 ISORELLA VIA A. ZANABONI, 2 279.356,14 431.190,01 0,00 0,00 710.546,15 -113.183,37 0,00 597.362,78 36 PRALBOINO VIA MARTIRI LIBERTA, 52 361,52 330.676,25 0,00 0,00 331.037,77 -96.437,77 0,00 234.600,00 37 BRENO VIA GIUSEPPE MAZZINI 25.536,05 1.665.150,06 0,00 0,00 1.690.686,11 -556.127,24 0,00 1.134.558,87 38 DESENZANO DEL GARDA VIA G. MARCONI, 18 1.124.390,07 1.652.917,39 0,00 0,00 2.777.307,46 -743.732,43 0,00 2.033.575,03 39 TREZZANO ROSA PIAZZA SAN GOTTARDO, 14 777.564,64 14.669,60 0,00 0,00 792.234,24 -307.210,02 0,00 485.024,22 40 BRESCIA CORSO MARTIRI DELLA LIBERTA', 13 2.316.295,24 23.333.057,46 238.904,03 0,00 25.888.256,73 -8.496.788,48 242.639,16 17.634.107,41 41 LUMEZZANE VIA ALCIDE DE GASPERI, 91 233.660,64 1.173.446,90 0,00 0,00 1.407.107,54 -481.215,47 0,00 925.892,07 42 SENIGA VIA SAN ROCCO, 15 85.199,72 387.760,60 0,00 0,00 472.960,32 -193.519,89 0,00 279.440,43 43 GARGNANO PIAZZA FELTRINELLI, 26 15.570,54 1.672.354,14 0,00 0,00 1.687.924,68 -360.068,58 0,00 1.327.856,10 44 ROMA VIA FABIO MASSIMO, 15/17 816.100,77 1.580.241,13 0,00 0,00 2.396.341,90 -922.862,33 0,00 1.473.479,57 45 BRESCIA CORSO MAGENTA, 63 2.348.362,99 285.400,13 0,00 0,00 2.633.763,12 -1.114.713,81 0,00 1.519.049,31 46 ROMA VIA VITTORIO VENETO, 108/B 686.850,78 7.961.716,30 0,00 0,00 8.648.567,08 -3.049.616,59 0,00 5.598.950,49 47 GARDONE VAL TROMPIA VIA G. MATTEOTTI, 212 86.081,03 1.477.863,43 0,00 0,00 1.563.944,46 -565.156,39 0,00 998.788,07 48 MONTICHIARI VIA TRIESTE, 71 918.968,14 783.980,44 0,00 0,00 1.702.948,58 -556.104,75 0,00 1.146.843,83 49 GAVARDO VIA SUOR RIVETTA, 1 700.656,22 1.298.981,32 0,00 0,00 1.999.637,54 -1.083.266,18 0,00 916.371,36 50 MILANO VIA MAC MAHON, 19 231.195,61 966.932,98 0,00 0,00 1.198.128,59 -264.527,21 0 933601,38

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51 MILANO VIA GIORGIO WASHINGTON, 96 477.558,41 741.281,62 0,00 0,00 1.218.840,03 -375.632,59 0,00 843.207,44 52 OSPITALETTO VIA PADANA SUPERIORE, 56 159.013,39 1.042.375,10 0,00 0,00 1.201.388,49 -405.044,34 0,00 796.344,15 53 CHIARI VIA MAFFONI, 25 700.315,55 518.816,95 0,00 0,00 1.219.132,50 -415.161,47 0,00 803.971,03 54 BOTTICINO VIA DON MILANI, 3 229.736,20 914.204,70 0,00 0,00 1.143.940,90 -451.940,66 0,00 692.000,24 55 NUVOLENTO VIA TRENTO, 17 529.875,39 955.665,75 0,00 0,00 1.485.541,14 -805.769,38 0,00 679.771,76 56 VITERBO VIA DELLA SAPIENZA, 3 6.471,82 1.050.337,95 0,00 0,00 1.056.809,77 -363.597,01 0,00 693.212,76 57 LATINA VIA ISONZO, 3 506.542,77 657.393,42 0,00 0,00 1.163.936,19 -503.593,00 0,00 660.343,19 58 BRESCIA VIA VITTORIO VENETO, 73 285.207,65 930.997,65 0,00 0,00 1.216.205,30 -565.458,95 0,00 650.746,35 59 SAREZZO VIA ROMA, 8 60.532,85 909.899,18 0,00 0,00 970.432,03 -345.972,80 0,00 624.459,23 60 BEDIZZOLE VIA TRENTO, 3/5 101.720,34 870.727,86 0,00 0,00 972.448,20 -374.506,51 0,00 597.941,69 61 MILANO VIA MONTE ROSA, 16 365.084,70 513.322,76 0,00 0,00 878.407,46 -271.071,36 0,00 607.336,10 62 GHEDI PIAZZA ROMA, 1 3.615,20 805.950,63 0,00 0,00 809.565,83 -224.267,79 0,00 585.298,04 63 MILANO VIA PONCHIELLI, 1 45.922,55 645.392,74 0,00 0,00 691.315,29 -147.874,39 0,00 543.440,90 64 ALZANO LOMBARDO VIA ROMA, 31 785.530,94 146.306,41 0,00 0,00 931.837,35 -434.902,83 0,00 496.934,52 65 ROMA PIAZZA DEI TRIBUNI, 58 609.938,86 0,00 0,00 0,00 609.938,86 -128.506,14 0,00 481.432,72 66 ADRO VIA ROMA, 1 52.121,61 633.088,77 0,00 0,00 685.210,38 -244.744,82 0,00 440.465,56 67 TRAVAGLIATO PIAZZA LIBERTA', 16 19.108,91 691.819,27 0,00 0,00 710.928,18 -268.865,98 0,00 442.062,20 68 GARDONE RIVIERA VIA ROMA, 8 23.292,21 641.546,99 0,00 0,00 664.839,20 -224.026,38 0,00 440.812,82 69 CARPENEDOLO PIAZZA MARTIRI DELLA LIBERTA', 1 0,00 666.781,96 0,00 0,00 666.781,96 -244.092,06 0,00 422.689,90 70 VILLA CARCINA VIA G. MARCONI, 39/C 37.964,65 598.187,08 0,00 0,00 636.151,73 -256.916,62 0,00 379.235,11 71 BRESCIA VIA AMBARAGA,126 52.202,14 587.285,66 0,00 0,00 639.487,80 -292.954,42 0,00 346.533,38 72 MANERBIO VIA CREMONA, 10 564.384,10 49.862,65 0,00 0,00 614.246,75 -245.246,55 0,00 369.000,20 73 BRESCIA VIA REPUBBLICA ARGENTINA, 90 639.641,59 0,00 0,00 0,00 639.641,59 -285.356,96 0,00 354.284,63 74 LENO VIA GIUSEPPE GARIBALDI, 2 525.168,42 0,00 0,00 0,00 525.168,42 -186.995,62 0,00 338.172,80 75 NOVATE MILANESE VIA G. DI VITTORIO, 22 239.687,17 317.309,28 0,00 0,00 556.996,45 -231.328,69 0,00 325.667,76 76 TREVIOLO PIAZZA MONS. BENEDETTI, 10 494.927,39 34.129,77 0,00 0,00 529.057,16 -218.308,83 0,00 310.748,33 77 COLLIO PIAZZA GIUSEPPE ZANARDELLI, 32 118.896,52 347.042,08 0,00 0,00 465.938,60 -187.699,29 0,00 278.239,31 78 VERONA VIA XXIV MAGGIO, 16 506.068,88 37.292,12 0,00 0,00 543.361,00 -243.780,75 0,00 299.580,25 79 SAN FELICE DEL BENACO VIALE ITALIA, 9 120.222,49 326.748,00 0,00 0,00 446.970,49 -188.227,37 0,00 258.743,12 80 CEDEGOLO VIA NAZIONALE, 105 25.813,58 325.655,49 0,00 0,00 351.469,07 -136.070,15 0,00 215.398,92 81 FABRICA DI ROMA VIALE DEGLI EROI 216.783,82 129.800,48 0,00 0,00 346.584,30 -131.019,19 0,00 215.565,11 82 TORINO C.SO UNIONE SOVIETICA, 503/505 423.095,42 0,00 0,00 0,00 423.095,42 -213.261,46 0,00 209.833,96 83 SULZANO VIA CESARE BATTISTI, 85 59.392,53 135.474,73 0,00 0,00 194.867,26 -85.183,47 0,00 109.683,79 84 MONTEFIASCONE PIAZZALE ROMA 166.940,35 367.093,11 0,00 0,00 534.033,46 -346.534,49 0,00 187.498,97 85 PAVONE DEL MELLA PIAZZA UMBERTO I, 1 219.594,96 228.309,35 0,00 0,00 447.904,31 -283.754,78 0,00 164.149,53 86 MAIRANO PIAZZA EUROPA, 1 446.479,10 0,00 0,00 0,00 446.479,10 -74.938,26 0,00 371.540,84 87 REZZATO VIA ZANARDELLI, 5A/B 226.332,56 31.356,87 0,00 0,00 257.689,43 -103.174,70 0,00 154.514,73 88 MONTALTO DI CASTRO VIA AURELIA TARQUINIA, 5/7 212.683,59 0,00 0,00 0,00 212.683,59 -62.028,22 0,00 150.655,37 89 AMPEZZO VIA NAZIONALE 25.274,36 155.281,04 95.810,03 0,00 276.365,43 -144.907,89 0,00 131.457,54 90 RONCIGLIONE CORSO UMBERTO I, 78 192.841,03 9.548,20 0,00 0,00 202.389,23 -69.544,72 0,00 132.844,51 91 SAN GERVASIO BRESCIANO PZ ANTICA PIAZZOLA, 5 176.953,55 0,00 0,00 0,00 176.953,55 -48.998,84 0,00 127.954,71 92 ARTA TERME VIA ROMA, 2/C 96.332,19 99.523,38 5.225,01 0,00 201.080,58 -73.646,83 0,00 127.433,75 93 OFFLAGA VIA GIUSEPPE MAZZINI, 2 32.512,71 155.562,83 0,00 0,00 188.075,54 -66.699,74 0,00 121.375,80 94 VIGNANELLO VIA VITTORIO OLIVIERI, 1/A 129.431,98 112.870,59 0,00 0,00 242.302,57 -141.117,40 0,00 101.185,17 95 SORIANO NEL CIMINO PIAZZA XX SETTEMBRE, 1/2 98.768,40 141.729,51 0,00 0,00 240.497,91 -139.864,66 0,00 100.633,25 96 BOLSENA VIA ANTONIO GRAMSCI, 28 161.578,86 130.470,24 0,00 0,00 292.049,10 -204.084,81 0,00 87.964,29 97 PAULARO PIAZZA NASCIMBENI, 5 9.513,67 126.256,59 10.145,02 0,00 145.915,28 -55.781,39 0,00 90.133,89 98 SUTRIO PIAZZA XXII LUGLIO 1944, 13 19.149,79 102.169,57 12.848,52 0,00 134.167,88 -52.634,52 0,00 81.533,36 99 VITERBO VIA CARLO CATTANEO, 46/ F 110.666,12 3.888,72 0,00 0,00 114.554,84 -38.988,00 0,00 75.566,84 100 VASANELLO PIAZZA DELLA REPUBBLICA, 55/56 116.202,80 199,78 0,00 0,00 116.402,58 -41.688,04 0,00 74.714,54

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101 GRADOLI PIAZZA VITTORIO EMANUELE II, 15 0,00 107.468,26 0,00 0,00 107.468,26 -35.335,24 0,00 72.133,02 102 MONTEROSI VIA ROMA, 36 21.918,11 114.317,10 0,00 0,00 136.235,21 -65.769,03 0,00 70.466,18 103 PRATO CARNICO VIA PIERIA, 91/D 11.493,86 74.693,46 16.127,88 0,00 102.315,20 -46.315,16 0,00 56.000,04 104 PIANSANO VIA SANTA LUCIA, 54 40.976,72 8.243,04 0,00 0,00 49.219,76 -16.419,78 0,00 32.799,98 105 MEDOLAGO VIA EUROPA, 19/B 444.000,00 0,00 0,00 0,00 444.000,00 -61.135,38 0,00 382.864,62 106 CASTELCOVATI VIA ALCIDE DE GASPERI, 48 470.400,00 0,00 0,00 0,00 470.400,00 -64.770,46 0,00 405.629,54 107 CORCHIANO BORGO UMBERTO I, 54 6.080,16 190.842,46 0,00 0,00 196.922,62 -86.922,60 0,00 110.000,02 108 BRESCIA VIA DELLA CHIESA, 72 540.073,48 0,00 0,00 0,00 540.073,48 -233.876,94 0,00 306.196,54 109 CONCESIO VIA EUROPA, 197 308.318,78 0,00 0,00 0,00 308.318,78 -4.367,31 0,00 303.951,47 110 MILANO VIA BERTOLAZZI, 20 595.239,48 0,00 0,00 94.902,52 690.142,00 -94.237,95 0,00 595.904,05 111 MANTOVA MN-PIAZZA GUGLIELMO MARCONI, 7 337.456,11 1.931.052,25 0,00 0,00 2.268.508,36 -421.258,35 0,00 1.847.250,01 112 PISOGNE PIAZZA UNBERTO I, 11 34.712,48 653.180,23 0,00 0,00 687.892,71 -117.889,60 0,00 570.003,11 113 BRESCIA ARNALDO DA BRESCIA, 2 475,31 197.571,77 0,00 0,00 198.047,08 -51.145,79 0,00 146.901,29 114 SALO PIAZZA VITTORIA 13 - LUNGOLAGO ZANARDELLI 96.972,54 582.065,35 0,00 0,00 679.037,89 -166.439,90 0,00 512.597,99 115 AMPEZZO PIAZZALE AI CADUTI, 3 5.000,00 0,00 0,00 0,00 5.000,00 -200,00 0,00 4.800,00 116 BASSANO DEL GRAPPA VIALE SAN PIO X , 85 818.854,29 38.711,35 0,00 0,00 857.565,64 -125.673,27 0,00 731.892,37 117 BERGAMO VIA DON LUIGI PALAZZOLO, 89 1.452.000,00 0,00 0,00 0,00 1.452.000,00 -182.937,62 0,00 1.269.062,38 118 BERGAMO VIA PALMA IL VECCHIO, 113 3.964.354,42 1.793.641,50 0,00 0,00 5.757.995,92 -2.046.263,38 0,00 3.711.732,54 119 BERGAMO VIA TREMANA, 13 188.584,24 89.455,85 0,00 0,00 278.040,09 -123.862,02 0,00 154.178,07 120 BORGOSATOLLO VIA IV NOVEMBRE, 140 1.076.880,74 1.523.328,45 0,00 0,00 2.600.209,19 -897.390,03 0,00 1.702.819,16 121 BOTTICINO VIA VALVERDE, 1 414.198,43 807.244,96 0,00 0,00 1.221.443,39 -661.818,35 0,00 559.625,04 122 BRESCIA VIA BETTOLE, 1 232.767,12 1.337.770,53 0,00 0,00 1.570.537,65 -711.627,59 0,00 858.910,06 123 BRESCIA CONTRADA DEL CARMINE, 67 2.980.256,92 4.057.467,91 0,00 0,00 7.037.724,83 -3.231.420,31 163.519,52 3.969.824,04 124 BRESCIA VIA CHIUSURE, 333/A 256.386,17 1.427.867,01 0,00 0,00 1.684.253,18 -571.844,76 0,00 1.112.408,42 125 BRESCIA VIA SANTA MARIA CROCIFISSA DI ROSA, 67 235.416,55 999.848,54 0,00 0,00 1.235.265,09 -442.654,49 0,00 792.610,60 126 BRESCIA VIALE DUCA D'AOSTA, 19 36.924,26 1.019.130,08 0,00 0,00 1.056.054,34 -409.390,86 0,00 646.663,48 127 BRESCIA VIA INDIPENDENZA, 43 743.971,07 1.966.431,25 0,00 0,00 2.710.402,32 -1.210.208,82 0,00 1.500.193,50 128 BRESCIA VIA LECCO, 1 ANG. VIA ORZINUOVI, 66 519.757,50 3.400.683,21 0,00 0,00 3.920.440,71 -2.060.068,17 0,00 1.860.372,54 129 BRESCIA VIA MILANO, 21/B 82.829,09 912.793,84 0,00 0,00 995.622,93 -398.456,12 0,00 597.166,81 130 BRESCIA VIA TRIESTE, 4/6/8 - VIA PAGANORA 1.661.418,14 31.981.509,95 0,00 0,00 33.642.928,09 -6.659.979,55 0,00 26.982.948,54 131 BRESCIA VIA SOLFERINO, 30/A 1.033.705,63 162.498,31 0,00 0,00 1.196.203,94 -451.371,33 0,00 744.832,61 132 BRESCIA VIA TRENTO, 25/27 216.826,99 1.402.177,66 0,00 0,00 1.619.004,65 -565.319,72 0,00 1.053.684,93 133 BRESCIA VIA VALLE CAMONICA, 6/B 108.183,97 1.266.361,72 0,00 0,00 1.374.545,69 -564.557,30 0,00 809.988,39 134 CASTELFRANCO VENETO VIA FORCHE, 2 492.137,61 0,00 0,00 252.351,56 744.489,17 -117.180,69 0,00 627.308,48 135 CASTENEDOLO PIAZZA MARTIRI DELLA LIBERTA', 4 14.460,79 858.730,63 0,00 0,00 873.191,42 -268.141,81 0,00 605.049,61 136 CELLATICA VIA PADRE CESARE BERTULLI, 8 56.810,26 566.578,91 0,00 0,00 623.389,17 -234.577,53 0,00 388.811,64 137 CIVITA CASTELLANA VIA DELLA REPUBBLICA 531.698,51 1.035.082,75 0,00 0,00 1.566.781,26 -938.747,61 0,00 628.033,65 138 ISEO VIA RISORGIMENTO, 51/C 380.938,61 582.770,95 0,00 0,00 963.709,56 -335.890,03 0,00 627.819,53 139 COLOGNO MONZESE VIALE LOMBARDIA, 52 2.125.854,90 1.010.201,23 0,00 0,00 3.136.056,13 -1.309.105,72 0,00 1.826.950,41 140 DARFO BOARIO TERME VIA ROMA, 2 24.276,42 911.153,95 0,00 0,00 935.430,37 -425.118,28 0,00 510.312,09 141 EDOLO VIA G. MARCONI, 36/A 627.175,83 878.848,29 0,00 0,00 1.506.024,12 -806.862,52 0,00 699.161,60 142 IDRO VIA TRENTO 48.237,07 105.762,93 0,00 0,00 154.000,00 0,00 0,00 154.000,00 143 ISEO VIA DANTE ALIGHIERI, 10 706.027,77 2.665.387,79 0,00 0,00 3.371.415,56 -956.893,58 0,00 2.414.521,98 144 LEGNANO CORSO MAGENTA, 127 1.219.112,73 0,00 0,00 0,00 1.219.112,73 -543.011,75 0,00 676.100,98 145 LENO VIA DOSSI, 2 1.526,02 652.210,72 0,00 0,00 653.736,74 -224.245,59 0,00 429.491,15 146 STORO VIA CAMPINI, 3/A 159.585,18 359.290,39 0,00 0,00 518.875,57 -122.852,12 0,00 396.023,45 147 LOGRATO PIAZZA ROMA, 11 767.919,77 804.116,63 0,00 0,00 1.572.036,40 -802.391,48 0,00 769.644,92 148 LONATO VIA GUGLIELMO MARCONI 453.195,99 1.062.616,56 0,00 0,00 1.515.812,55 -623.371,73 0,00 892.440,82 149 LUMEZZANE VIA M. D'AZEGLIO, 4 99.004,79 976.455,20 0,00 0,00 1.075.459,99 -438.517,76 0,00 636.942,23 150 LUMEZZANE VIA VIRGILIO MONTINI, 251/ C 1.178.689,08 360.637,68 0,00 0,00 1.539.326,76 -572.217,69 0,00 967.109,07

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Rivalutazioni Rivalutazioni Rivalutazioni Fondi Altre Ubicazione Investimenti Valori lordi Val. in bilancio di legge di fusioni IAS Ammortamenti M ovimentazioni

151 LUMEZZANE VIA MONTINI 15.000,00 0,00 0,00 0,00 15.000,00 0,00 0,00 15.000,00 152 MAIRANO VIA DELLA LIBERTA', 24 8.453,45 256.305,85 0,00 0,00 264.759,30 -100.290,07 0,00 164.469,23 153 MANERBA DEL GARDA VIA VITTORIO GASSMAN, 17/19 522.531,13 35.848,53 0,00 0,00 558.379,66 -149.759,78 0,00 408.619,88 154 MANERBIO VIA XX SETTEMBRE, 21 46.713,38 1.240.608,29 0,00 0,00 1.287.321,67 -268.735,28 0,00 1.018.586,39 155 MANTOVA V.LE RISORGIMENTO, 33 1.046.935,24 241.650,94 0,00 0,00 1.288.586,18 -470.356,00 0,00 818.230,18 156 MILANO PIAZZA BORROMEO, 1 1.859.160,47 13.180.480,36 0,00 0,00 15.039.640,83 -3.944.606,86 0,00 11.095.033,97 157 MILANO VIA CARADOSSO, 16 5.721.993,91 13.444.695,00 0,00 0,00 19.166.688,91 -4.627.303,57 0,00 14.539.385,34 158 MILANO VIA LOMELLINA, 14 460.647,66 139.510,37 0,00 0,00 600.158,03 -222.181,60 0,00 377.976,43 159 MILANO VIALE MARCHE, 40 540.708,48 1.942,86 0,00 0,00 542.651,34 -189.472,02 0,00 353.179,32 160 MILANO VIA PORPORA, 65 754.442,38 293.257,06 0,00 0,00 1.047.699,44 -339.987,10 0,00 707.712,34 161 MILANO LARGO SCALABRINI, 1 1.631.538,99 1.045.879,93 0,00 0,00 2.677.418,92 -1.030.303,91 0,00 1.647.115,01 162 MILANO VIA SILVIO PELLICO, 10/12 8.104.438,13 49.257.789,31 0,00 0,00 57.362.227,44 -11.131.146,89 0,00 46.231.080,55 163 MIRA VIA NAZIONALE, 193 431.109,97 0,00 0,00 0,00 431.109,97 -161.096,08 0,00 270.013,89 164 MONTICHIARI VIA FELICE CAVALLOTTI, 25 604.197,76 521.313,25 0,00 0,00 1.125.511,01 -354.958,48 0,00 770.552,53 165 NUVOLERA VIA ITALIA, 3/A 60.115,58 394.136,86 0,00 0,00 454.252,44 -192.269,31 0,00 261.983,13 166 ODOLO VIA PRAES, 13/BIS 561.073,35 49.020,36 0,00 0,00 610.093,71 -221.344,12 0,00 388.749,59 167 ORZINUOVI PIAZZA VITTORIO EMANUELE II, 1 702.226,44 1.123.948,72 0,00 0,00 1.826.175,16 -456.379,72 0,00 1.369.795,44 168 PADOVA VIALE CODALUNGA, 8/BIS 1.180.793,48 1.365.477,94 0,00 0,00 2.546.271,42 -323.189,83 0,00 2.223.081,59 169 MONTALTO DI CASTRO PIAZZA DELLE MIMOSE, 13 10.597,65 182.718,52 0,00 0,00 193.316,17 -78.493,98 0,00 114.822,19 170 PORDENONE VIA SANTA CATERINA, 4 998.284,44 400.090,52 0,00 0,00 1.398.374,96 -611.871,01 0,00 786.503,95 171 PRATO CARNICO VIA VAL PESARINA 4.000,00 0,00 0,00 0,00 4.000,00 0,00 0,00 4.000,00 172 PREVALLE PIAZZA DEL COMUNE, 7 335.784,72 0,00 0,00 0,00 335.784,72 -69.597,10 0,00 266.187,62 173 REZZATO VIA IV NOVEMBRE, 98 19.481,03 996.619,69 0,00 0,00 1.016.100,72 -310.937,13 0,00 705.163,59 174 RIVOLI VIA ROMBO', 25/E 1.447.006,66 142.734,31 0,00 0,00 1.589.740,97 -746.352,39 0,00 843.388,58 175 ROE VOLCIANO VIA SAN PIETRO, 119 691.933,46 1.390.871,27 0,00 0,00 2.082.804,73 -794.867,89 0,00 1.287.936,84 176 ROMA VIA CRESCENZIO CONTE DI SABINA, 23 250.031,73 8.081,09 0,00 254.847,50 512.960,32 -74.494,60 0,00 438.465,72 177 ROMA VIA FERDINANDO DI SAVOIA, 8 5.591.772,01 3.540.310,12 0,00 0,00 9.132.082,13 -2.300.128,83 0,00 6.831.953,30 178 ROMA VIA CAMILLO SABATINI, 165 2.944.303,57 200.045,08 0,00 0,00 3.144.348,65 -1.459.431,62 0,00 1.684.917,03 179 SALO VIA PIETRO DA SALO' 1.301.921,59 65.605,69 0,00 0,00 1.367.527,28 -599.367,69 0,00 768.159,59 180 SAN GERVASIO BRESCIANO IV NOVEMBRE, 11 342,93 102.818,78 0,00 0,00 103.161,71 -37.156,88 0,00 66.004,83 181 SAN GIOVANNI BIANCO P. VISTALLO ZIGNONI, 33/33 220.526,83 0,00 0,00 0,00 220.526,83 -65.434,65 0,00 155.092,18 182 SERIATE VIA PADERNO, 25 254.419,39 1.478,37 0,00 0,00 255.897,76 -66.182,56 0,00 189.715,20 183 TOLMEZZO PIAZZA XX SETTEMBRE, 2 582.181,12 1.088.244,17 236.021,69 0,00 1.906.446,98 -759.827,52 0,00 1.146.619,46 184 TORINO CORSO RE UMBERTO I 2.369.925,48 0,00 0,00 0,00 2.369.925,48 -293.085,29 0,00 2.076.840,19 185 TOSCOLANO-MADERNO VIA STATALE TOSCOLANO, 114/A 247.796,02 706.140,46 0,00 0,00 953.936,48 -374.498,97 0,00 579.437,51 186 TREZZO SULL' ADDA VIA BAZZONI 722.568,77 59.200,74 0,00 0,00 781.769,51 -304.031,62 0,00 477.737,89 187 UDINE VIA F. DI TOPPO, 87 1.364.894,68 432.083,22 0,00 0,00 1.796.977,90 -684.886,74 0,00 1.112.091,16 188 VESTONE VIA PERLASCA, 5/7/9 17.341,65 2.149.940,04 0,00 0,00 2.167.281,69 -459.694,15 0,00 1.707.587,54 189 VILLAFRANCA DI VERONA VIA DELLA PACE, 58 509.611,79 566.951,03 0,00 0,00 1.076.562,82 -364.699,65 0,00 711.863,17 190 VISANO VIA GUGLIEMO MARCONI, 11 75.507,14 177.144,97 0,00 0,00 252.652,11 -63.038,28 0,00 189.613,83 191 VITERBO VIA MONTE SAN VALENTINO 362.459,27 20.462,96 0,00 0,00 382.922,23 -174.316,42 0,00 208.605,81 192 VOBARNO VIA G. GARIBALDI, 40 10.561,55 332.568,46 0,00 0,00 343.130,01 -129.409,58 0,00 213.720,43 193 BRESCIA PIAZZA DELLA LOGGIA, 3/5 315.398,40 9.075.235,05 0,00 0,00 9.390.633,45 -1.692.129,29 0,00 7.698.504,16 105.441.946,79 281.777.531,88 615.082,18 602.101,58 388.436.662,43 -116.989.406,68 406.158,68 271.853.414,43

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GLOSSARY

262

ABF (FINANCIAL BANKING ARBITRATION BODY) The Financial Banking Arbitration Body (ABF) is a body which decides the out-of-court settlement of the disputes envisaged by Article 128 bis of the TUB (Consolidated Banking Law), introduced by the savings’ law (Italian Law No. 262/2005). The organization and the functioning of the ABF are disciplined by the “Provisions on the out-of-court settlement systems for disputes regarding banking and financial transactions and services” issued by the Bank of Italy on 18th June 2009. Compliance is obligatory for all the banks and other financial intermediaries. The ABF, operative since 15th October 2009, can be submitted all the disputes concerning the assessment of rights, obligations and faculties, irrespective of the value of the relationship to which they refer. If the applicant’s request concerns the payment of a sum of money for any reason, the dispute falls within the sphere of competence of the ABF provided that the amount requested is no higher than 100,000 euro. Disputes pertaining to investment services/activities and the placement of financial products as well as the transactions and services which are components of financial products are excluded; in relation to the latter, at present one can apply to the Banking Ombudsman Jury at the Financial Banking Conciliation Body (see definition) and in the future the Chamber of Conciliation and Arbitration soon to be set up within the Consob33. The accomplishment of the claim stage care of the intermediary is a preliminary and necessary condition for applying to the ABF, to which recourse can be made in cases of unsatisfactory outcome of the claim or failure to reach a settlement on the claim within thirty days of receipt of the same by the bank. Recourse is free-of-charge, except for the payment of 20 euro as a contribution towards the costs of the proceedings which must be reimbursed by the bank to the applicant if the board upholds the request in full or in part. In contrast to the conciliation instrument, which aims to encourage the reaching of an agreement between the parties. The ABF expresses a decision on the appeals received by means of a judgment body, without prejudice to the faculty of the parties to resort to the Legal Authorities or any other means envisaged by the legal system protecting their interests. The ABF is made up of a decision-making body divided up into three boards (Milan, Rome and Naples) and a technical secretarial service carried out by the Bank of Italy. Within each board, the decision-making body is made up of five members, three of which (including the chairman) appointed by the Bank of Italy, one by the intermediary associations and one by the associations which represent the customers.

ABS (ASSET BACKED SECURITIES) Financial instruments issued in securitisation transactions (see definition) whose return and reimbursement are guaranteed by the originator's assets (see definition), exclusively designed to satisfy the rights incorporated in the financial instruments themselves. Technically, debt securities are issued by Special Purpose Vehicles (SPV – see definition). The portfolio underlying the securitisation transaction may consist of property mortgages, loans, bonds, commercial loans, credit card loans or other credit types. Based on the type of underlying asset, ABSs may be classified as: • CLO - credit loan obligations (the portfolio consists of bank loans); • CBO - collateralised bond obligations (the portfolio consists of bonds); • CDO - collateralised debt obligations (the portfolio consists of bonds, debt instruments and securities in general); • RMBS – residential mortgage-backed securities (the portfolio consists of mortgages on residential properties). • CMBS - commercial mortgage-backed securities (the portfolio consists of mortgages on commercial properties).

33 Under Resolution No. 16763 dated 29th December 2008, Consob approved the Regulations implementing Italian Legislative Decree No. 179 dated 8th October 2007, concerning the Chamber of conciliation and arbitration and the related procedures. The Chamber will become fully operative once the necessary fulfilments have been performed. All the disputes regarding investment services, without limits as to the amount, can be submitted to the same, on the investor’s initiative, provided that a claim has been presented care of the intermediary. 263

ACQUISITION FINANCE Loans to finance the company’s acquisition transactions.

ADR (ALTERNATIVE DISPUTE RESOLUTION) This abbreviation indicates all the out-of-court methods, instruments, and techniques for resolving disputes. One or both of the parties entrust an impartial third party to settle a dispute, without applying to the legal authorities.

ALM (ASSET & LIABILITY MANAGEMENT) Integrated management of assets and liabilities, allocating resources to optimise the risk- return relationship.

ALTERNATIVE INVESTMENT Range of investment forms which include, among other aspects, private equity investments (see definition) and investments in hedge funds (see definition).

ASSET MANAGEMENT Managing third party financial investments.

ATM (AUTOMATED TELLER MACHINE) Automated machines used by customers to carry out transactions such as withdrawing cash, depositing cash or checks, requesting account information, paying utility bills or recharging mobile phone cards, etc. The customer activates the terminal by inserting a card and entering a personal identification code.

RISK-WEIGHTED ASSETS The amount obtained by multiplying the total required supervisory capital (credit risks, market risks, and other prudential requirements) by a factor of: 14.3 for companies belonging to banking groups; 12.5 for consolidated banking groups and companies not belonging to banking groups.

AUDIT Audit process on the business activities and the accounts which is carried out both by internal structures (internal audit – see definition) and by third parties (external audit).

BACKTESTING Retrospective analysis to verify the reliability of risk measurements associated with asset portfolio positions.

BANCASSURANCE Term that refers to offering typical insurance products through the operating network of credit companies.

BANKING BOOK Usually identifies part of a securities portfolio, or financial instruments in general, that are dedicated to "proprietary" trading.

BASEL II New International agreement on capital used to redefine the guidelines for determining the minimum capital requirements of banks34.

34 The first version of the agreement, known as Basel I, dates back to 1988 and was also signed in the Swiss city where the Bank for International Settlements (BIS) is located, an organization which since 1930 furthers monetary and financial co-operation on a global scale, known in Italy as the Banca per i Regolamenti Internazionali (BRI). Within the same, the Basel Committee operates, set up by the governors of the central banks of the ten most industrialized countries (G10) at the end of 1974, which is responsible for drafting the 264

The new prudent regulations are based on three pillars. • Pillar 1: without prejudice to the objective of a capitalization level equating to 8% of the risk weighted exposures, a new system of rules has been outlined for the gauging of the risks typical to banking and financial activities (credit, counterpart, market and operational) which envisages alternative calculation methods characterized by different levels of complexity with the possibility of using, subject to the authorization of the Supervisory Body, internally developed models; • Pillar 2: the banks must endow themselves with processes and instruments for determining the overall internal capital level (Internal Capital Adequacy Assessment Process – ICAAP) suitable for dealing with any type of risk, also other than those overseen by the total capital requirement (first pillar). The Supervisory Authority is responsible for the task of examining the ICAAP process, formulating an overall opinion and activating, where necessary, the appropriate corrective measures; • Pillar 3: introduces publication obligations for the information regarding the capital adequacy, exposure to the risks and the general features of the systems assigned with the identification, gauging and management of these risks.

BASIS POINT Corresponds to a hundredth of a percentage point (0.01%).

BASIS SWAP Contract between two counterparties to exchange payments linked to variable rates based on different indices.

BENCHMARK Reference parameter for financial investments: it may represent the more important market indices or other indices deemed more representative of the risk/return profile.

BEST PRACTICE Behaviour commensurate with the most important experience and/or best level achieved for skills in reference to a certain technical/professional area.

CAGR - COMPOUND ANNUAL GROWTH RATE Annual growth rate applied to an investment or other assets for a multi-year period. The formula to calculate CAGR is [(current value/base value)^(1/No. of years)-1].

CAPITAL ALLOCATION Process that results in a decision on the distribution of the investment among the various financial asset categories (in particular, bonds, equity securities and liquidity). The capital allocation choices are determined by the need to optimise the risk/return ratio in relation to the time horizon and investor expectations.

CAPTIVE Generic term that refers to “networks” or companies that operate exclusively with company or group customers

SECURITISATION

agreement. The representatives of Belgium, Canada, France, Germany, Italy, Japan, Luxembourg, the Netherlands, Spain, Sweden, Switzerland, the UK and the USA form part of the same. The Basel Committee does not have supranational authority: the member nations can decide to comply with the agreement but are not bound to accept the Committee’s decisions. The obligatory nature of the matters envisaged by Basel II for the EU nations in fact derives from a European Parliament Directive which was assimilated in September 2005. The first Basel agreement, signed by the central authorities of more than 100 countries, established the obligation for the member banks to set aside a portion of capital corresponding to 8% of the loans disbursed irrespective of the valuation, via rating procedures, of the reliability of the applicant companies. 265

Transferring loans or other non-negotiable financial assets to a qualified company (SPV – see definition) whose exclusive purpose is to realise the transactions and convert the loans or assets into negotiable securities on a secondary market.

CAPITALISATION (INSURANCE) CERTIFICATES Capitalisation contracts fall within the sphere of application of the regulations on direct life assurance as per Italian Legislative Decree No. 174 of 17th March 1995. As defined in Article 40 of said decree, under these contracts an insurance company commits to pay, as compensation for the payment of single or periodic premiums, a capital amount equal to the premium paid, periodically revalued based on the return of a separate internal management of financial assets or, if higher, a minimum guaranteed return. They cannot have a duration of less than 5 years and the contracting party has the right to redeem the contract from the beginning of the second year. In accordance with Article 31 of the aforementioned Italian Legislative Decree No. 174, financial assets to hedge technical reserves are reversed exclusively to fulfil obligations connected with capitalisation contracts (separate management). Thus, in the event the insurance company went into liquidation (Art. 67), the beneficiaries of these policies become the owners of assisted credit positions with special privileges.

COMMERCIAL PAPER Short-term securities issued to raise funds of third party subscribers as an alternative to other forms of borrowing.

FINANCIAL BANKING CONCILIATION BODY The “Financial Banking Conciliation Body– Association for the settlement of banking, financial and corporate disputes – ADR” is an initiative furthered with ABI backed by the ten leading banking groups, including the UBI Banca Group, so as to provide customers with rapid and efficient services for the settlement of disputes, as an alternative to legal proceedings (ADR: Alternative Dispute Resolution – see definition). The services offered are: • Conciliation: this involves the attempt to settle a dispute entrusting an expert and independent individual (the conciliator) with the task of facilitating the reaching of an agreement between the parties for the purpose of avoiding recourse to a judge. The agreement reached is binding between the parties and can be ratified by the Court thereby becoming executive. The conciliation service at the Financial Banking Conciliation Body is carried out by the “Banking Conciliation Body”, enrolled in the register of bodies appointed to handle conciliation attempts as per Article 38 of Italian Legislative Decree No. 5 dated 17th January 2003; • Arbitration: procedure where the parties submit a dispute to an arbitrator or a board of arbitrators, recognising their power to decide in this connection; • Banking Jury Ombudsman: body set up in 1993 within the ABI which can be turned to by customers, who are unsatisfied with the bank’s complaints department’s decisions or for disputes which have not been dealt with by the prescribed deadline, free of charge on a secondary basis. The management of the Ombudsman was transferred to the Financial Banking Conciliation Body as from 1st June 2007. The Ombudsman can be submitted the disputes concerning investment services relating to the assessment of rights, obligations and faculties, irrespective of the value of the transaction to which they refer. If the request concerns the payment of a sum of money, the matter becomes the responsibility of the Ombudsman as long as the amount requested is no higher than 100,000 euro. The Ombudsman decides within 90 days of the date of receipt of the request for intervention. Recourse to the Ombudsman does not preclude the customer from the faculty of applying to the Legal Authorities, a conciliation body or arbitration board at any time, while the decision is binding for the intermediary.

CONDUIT In this connect, see the item SPE/SPV.

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CONSUMER FINANCE Financing to households for personal use linked to the consumption of goods and services.

CONTRACT WORK AGREEMENT Temporary employment relationship, disciplined by Italian Legislative Decree No. 276 dated 10th September 2003 (so-called Biagi law, on the basis of Italian Law No. 30 dated 14th February 2003), by means of which a legal entity avails itself of the work services of a worker taken on by a temporary employment agency authorized by the Department of Labour. The relationships between the user and the employment agency are disciplined by a contract which also disciplines the remuneration and contribution aspects (social security and welfare contributions). This contractual form replaced the temporary employment relationship established by Italian Law No. 196 dated 24th June 1997 (so-called Treu reform).

CORE TIER 1 RATIO Ratio between the Tier 1 capital (see definition) net of the innovative capital instruments and the total of the risk weighted assets (see definition).

CORPORATE GOVERNANCE Through the composition and functioning of the internal and external corporate boards, the corporate governance structure defines the distribution of rights and responsibilities among those involved in the company, in reference to dividing up tasks, assuming responsibility and decision-making power. The fundamental objective of corporate governance is to maximise value for the shareholders, with positive results, over the medium-long term, for other stakeholders, such as customers, suppliers, employees, creditors, consumers and the community.

COST INCOME RATIO Economic indicator defined by the ratio between operating costs and the intermediation margin.

COVERED BONDS Special bank bonds which, besides guaranteeing the issuing bank, may also avail of the guarantee of a portfolio of mortgage loans or other loans of a high quality transferred, for said purpose, to a special purpose company35. The banks which intend to issue covered bonds must avail of equity of no less than 500 million euro and an overall capital ratio at consolidated level of no less than 9%. With regard to the assets which can potentially be used as collateral, the portion transferred cannot exceed the following limits, established in relation to the capitalization level: • 25% in the cases of a capital factor 9% and 10% with Tier 1 ratio 6%; • 60% in cases of a capital factor 10% and 11% with Tier 1 ratio 6.5%; • No limit in the cases of a capital factor 11% with Tier 1 ratio 7%.

CPI (CREDIT PROTECTION INSURANCE) Credit protection insurance policies which can be taken out by those taking out financial loans (personal loans, mortgages and credit cards) so as to guarantee them (in the capacity as insured party) the payment of the residual debt and/or a set number of instalments in the case of temporary or definitive negative events (involuntary loss of employment, illness, accident, permanent invalidity or death). These policies can also be combined with loans to

35 In the Italian legal system, Law No. 130 dated 30th April 1999, disciplined the case of covered bank bonds (Article 7 bis). The operating scheme envisages the transfer by the bank of high quality assets (mortgages loans and public authority loans) to a special purpose company and the issue by a bank, also other than the transferor, of bonds guaranteed by the special purpose company availing of the assets acquired and established as separate equity. The applicative profiles of the discipline are contained in Ministerial Regulation No. 310 dated 14th December 2006 and in the supervisory provisions of the Bank of Italy dated 15th May 2007. 267

businesses, with insurance coverage of the events which may affect shareholders, directors or key company figures.

CREDIT CRUNCH Significant drop (or sudden deterioration of the conditions) in the supply of credit to businesses at the end of a prolonged period of expansion, capable of accentuating a period of recession.

CREDIT DEFAULT SWAP Contract under which a party, after paying a periodic premium, transfers to another party the credit risk inherent in a loan or a security, after an established event occurs that is linked to the solvency level of the debtor.

RESTRUCTURED CREDIT Position for which the Bank has agreed to a payment deferral with the debtor, renegotiating the exposure at tax rates lower than the market.

DEFAULT Identifies the condition of declaring the inability of honouring owns debts and/or the payment of related interest.

OTC DERIVATIVES TRADED WITH CUSTOMERS Activities supporting the customer for the handling of financial risks, in particular those deriving from fluctuations in exchange rates, interest rates and commodities prices (raw materials).

GEOGRAPHIC DISASTER RECOVERY A collection of technical and organisational procedures in the event of a catastrophic event which causes the data processing site to be unavailable. The objective is to reactivate the essential company applications in a secondary site (called recovery). The disaster recovery system is defined as “geographic” when it is located at least 50 km from the original system. The primary objective is to reduce risks from disastrous events that could possibly impact an entire metropolitan area (e.g., earthquakes, floods, acts of war, etc.) as prescribed by international security standards.

DURATION Referring to a security or a bond portfolio, this is the indicator usually calculated as the weighted average of the maturities of the payments for interest and principle associated with said security.

EAD (EXPOSURE AT DEFAULT) Estimate of the future value of an exposure at the time of default (see definition) of the related debtor.

EONIA (EURO OVERNIGHT INDEX AVERAGE) Interest rate calculated as the weighted average of the overnight rates applied on all the loan transactions not guaranteed, concluded on the interbank market by the reference banks.

ETF (EXCHANGE TRADED FUNDS) Particular type of investment funds traded on the stock market like a share, the sole investment aim of which is to replicate the index to which it refers (benchmark) by means of totally passive handling. The ETF summarizes the particular characteristics of a fund and a share, permitting investors to exploit the strong points of both the instruments by means of the diversification and reduction of the risk of the funds, at the same time guaranteeing the flexibility and disclosure transparency of trading in real time on the shares.

ETC (EXCHANGE TRADED COMMODITIES)

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Financial instruments issued against the investment of the issuer in raw physical materials (in this case they are defined as physically-backed ETC) or in derivative contracts on raw materials. The price of the ETCs is, therefore, directly or indirectly linked to the underlying element. On a similar basis to ETFs (see definition), ETCs are traded like shares, passively replicating the performance of the raw material or the raw material indices to which they refer.

EURIBOR (EURO INTERBANK OFFERED RATE) Interbank interest rate at which leading banks exchange deposits in euro on various maturity dates. It is calculated daily as the simple average of the listed prices struck at eleven o’clock on a sample of banks with high credit rating selected periodically by the European Banking Federation. Various floating rate loan contracts are linked to the Euribor (for example home mortgage loans).

FACTORING Contract to sell, without recourse (with credit risk borne by the transferee) or with recourse (with credit risk born by the transferor) of commercial loans to banks or specialised companies, in order to manage and collect, and may involve a loan to the transferor.

FAIR VALUE Amount for which an asset can be exchanged, or a liability extinguished, in a free market between informed and available parties. It is often identical to the market price. Based on IAS standards (see definition), banks apply fair value in measuring financial instruments (assets and liabilities) for trading and available for sale as well as derivatives and may use the fair value method to value the equity investments and tangible and intangible assets (with various methods of impact on the income statement for the different assets in consideration).

FLOOR Derivative contract on interest rates, negotiated outside regulated markets, under which a lowermost limit for the reduction of the creditor interest rate is fixed.

FRA (FORWARD RATE AGREEMENT) Contract under which the parties agree to receive (pay) at maturity the difference between the value calculated by applying a fixed interest rate to the amount of the transaction and the value obtained based on the assumed level of a reference rate fixed in advance by the parties.

FUNDING Provisioning the funds necessary for financing the company activities or specific financial transactions, in all its various forms.

FUTURE Standardised forward contracts, under which the parties agree to exchange securities or goods at a fixed price and future date. These contracts are normally negotiated in organised markets, where their execution is guaranteed. In contrast to options (see definition) which grant the right but not the obligation to buy, the futures oblige two contracting parties to sell or purchase.

GOODWILL Identifies the goodwill paid to purchase an equity share, equal to the difference between the cost and the corresponding share of shareholders’ equity, for the part not attributable to asset elements of the company purchased.

HEDGE FUND

269

Mutual investment fund that has the possibility, not available to traditional funds, to use sophisticated investment instruments or strategies such as short selling, derivatives (options or futures, even beyond 100% of the assets), hedging (hedging the portfolio from market volatility through short selling and use of derivatives) and financial leverage (indebtedness to invest borrowed money).

IAS/IFRS International Accounting Standards issued by the International Accounting Standard Board (IASB), a private international entity established in April 2001, to which accounting professionals in the largest countries belong, as well as the European Union IOSCO (International Organization of Securities Commissions) and the Basel Committee, in the capacity of observers. This entity is the successor to the International Accounting Standards Committee (IASC), established in 1973 to promote standardisation of rules in preparing corporate financial statements. When the IASC was transformed into the IASB, it was decided to call the new accounting standards “International Financial Reporting Standards” (IFRS). At International level, an endeavour to harmonise the IAS/IFRS with the US GAAP is underway (see definition).

IBAN (INTERNATIONAL BANK ACCOUNT NUMBER) International standard used to identify a bank. As from 1st July 2008, the use of the IBAN code – made up of 27 characters – became obligatory not only for foreign payments, but also those made in Italy.

IDENTITY ACCESS MANAGEMENT Technical-organisational solution that administers and controls the entire life cycle of assigning, managing and revoking access privileges to information resources and to company information by each user.

IMPAIRMENT IAS defines impairment as the loss of value in a balance sheet asset, recognised when the carrying value is greater than the recoverable value or the amount that can be obtained by selling or using the asset. The impairment test must be performed on all assets, with the exception of those carried at fair value, for which any losses (or gains) in value are implicit.

IMPAIRED LOANS Loans at nominal value for parties in situations of objective difficulty, that it is believed will be overcome in a reasonable period of time.

INDEX LINKED Life insurance policy whose benefit at maturity depends on the performance of a reference parameter that can be a share index, a basket of securities or another indicator.

TANKAN INDEX Japanese economy indicator established on the basis of the results of a survey carried out by the Bank of Japan in the last month of each quarter. Both the manufacturing sector and the services sector are surveyed, with a segmentation in relation to the size of the businesses (large, medium, small).

INTERNAL AUDIT Department to which the internal audit activities are assigned (see definition).

REAL ESTATE PROPERTY INVESTMENT Property held for the purpose of obtaining income or benefiting from the related increase in value.

INVESTMENT BANKING

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Investment banking is a highly specialised area of finance that is, specifically, involved in helping companies and governments issue securities and, more generally, in procuring funds on capital markets.

INVESTMENT GRADE High quality bond securities with a medium-high rating (see definition) (for example, not less than BBB in the Standard & Poor's scale).

INVESTOR Party, other than the originator (see definition) and the sponsor (see definition), who has an exposure vis-à-vis a securitisation (see definition).

IRB (INTERNAL RATING BASED) Internal rating approach (see definition) within the sphere of Basel II (see definition), divided up into basic and advanced methods. The advanced method can only be used by the banks which satisfy the most stringent minimum requirements and envisages that all the estimates of the inputs for the valuation of the credit risk (PD, LGD, EAD, Maturity – see definition) are achieved internally. Otherwise, according to the basic method, just the PD is estimated by the bank.

JOINT VENTURES Agreement between two or more companies to perform an established economic activity, usually by setting up a joint-stock company.

JUNIOR In a securitisation transaction (see definition), it is the most subordinated tranche of the issued securities, which firstly supports the losses that may occur during recovery of the underlying assets.

LEASING Contract under which one party (lessor) grants the other (lessee) the use of an asset for a fixed period of time, purchased or built by the lessor at the option and indication of the lessee, with the right of the latter to purchase the asset at predetermined conditions at the end of the leasing contract.

LGD (LOSS GIVEN DEFAULT) Estimated loss rate in the event of default (see definition) of the debtor.

LIBOR (LONDON INTERBANK OFFERED RATE) Interest rate calculated, for each envisaged maturity, as the arithmetic average of the recordings included between two central quartiles of the rates at which a group of banks complying with the British Bankers Association (BBA) are willing to grant deposits in the main currencies of the primary customers.

LOWER TIER 2 Subordinated liabilities that are part of the additional, or Tier 2, capital (see definition) on the condition that the contracts that govern the issue expressly provide that: a) if the issuing entity goes into liquidation the debt is reimbursable only after all other creditors not equally subordinated are repaid; b) the duration of the relationship is equal or greater than 5 years, and if the maturity is not fixed, at least 5 years notice must be given for reimbursement; c) early reimbursement of the liability occurs only on the initiative of the issuer and with a waiver from Bank of Italy. The amount of subordinated loans admitted in additional capital is reduced by one-fifth each year during the 5 years prior to the maturity of the relationship, unless there is an amortisation plan in place that produces a similar effect.

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MARK TO MARKET Valuation of a portfolio of securities and other financial instruments based on prices expressed on the market.

MARK DOWN Difference between the average borrowing rate of the technical form of direct funding in consideration and the Euribor.

MARK UP Difference between the average lending rate of the technical form of lending in consideration and the Euribor.

MATURITY Residual life of an exposure, calculated according to prudent regulations.

MERCHANT BANKING This term includes all activities in subscribing securities – equity or debt – for corporate customers to be then placed on the market, assumption of equity investments of a more permanent nature but with the objective of being sold at a later date, and business consultancy services for mergers and acquisitions or restructuring.

MEZZANINE In a securitisation transaction (see definition), it is the intermediate subordination tranche between the junior tranche (see definition) and senior tranche (see definition).

MONOLINE Insurance companies whose sole line of business is financial insurance. Their activities include the insurance of bonds (ABS and MBS type) whose underlying components are debts of private individuals and real estate mortgage loans. In exchange for commission, the insurance guarantees the reimbursement of the bond directly undertaking the risk of the debtor’s insolvency.

SUBPRIME MORTGAGES The concept of subprime does not refer to the mortgage transaction itself, rather to the buyer (borrower). Technically, subprime means a borrower who does not have an entirely positive credit history, or has one characterised by negative credit events, such as: instalments not paid on previous loans, unpaid and/or rejected cheques, etc. These past events are symptomatic of a greater intrinsic risk of the counterparty, who must pay a higher remuneration required by the intermediary that grants the mortgage. Transactions with subprime customers are particularly developed on American financial markets, where, after stipulating these loans, there is usually a corresponding securitisation transaction and securities issue. Loans disbursed on the basis of incomplete or inadequate documentation are defined as Alt- A mortgage loans.

NON PERFORMING Term generally referring to loans with irregular performance.

NUTS - (NOMENCLATURE FOR TERRITORIAL UNITS FOR ITALIAN STATISTICS) Used for statistical purposes at a European level (Eurostat) and divided as follows: Northern Italy: Piedmont, Valle d’Aosta, Liguria, Lombardy, Trentino Alto Adige, Veneto, Friuli Venezia Giulia, Emilia Romagna; Central Italy: Tuscany, Umbria, Marche, Lazio; Southern Italy: Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sicily, Sardinia.

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STRUCTURED BONDS Bonds whose interest and/or reimbursement value depends on a parameter of a real nature (connected to the price of a commodity) or the performance of indices. In these cases the implicit option is unincorporated from the host contract for accounting purposes. When the bond is parameterised to interest rates or inflation (for example Treasury Bills), the implicit option is not unincorporated from the host contract for accounting purposes.

OPTIONS Represent the right, but not the commitment, purchased with a premium, to purchase (call option) or sell (put option) a financial instrument at a fixed price (strike price) within (American option) or at a future date (European option).

OICR (COLLECTIVE INVESTMENT UNDERTAKINGS) This item also includes OICVM (see definition) and other mutual investment funds (real estate mutual funds and closed mutual funds).

OICVM (COLLECTIVE INVESTMENT UNDERTAKINGS IN TRANSFERABLE SECURITIES) This item includes open-end mutual funds, Italian and foreign, and SICAVs.

ORIGINATOR Party that sells its asset portfolio of receivables to the Special Purpose Vehicle (see definition) for securitisation.

OTC (OVER THE COUNTER) Transactions concluded directly between the parties, without going through a regulated market.

PAST DUE Exposures that are overdue and/or exceeded for more than 180 days, based on the definition in the existing Regulatory Instructions.

SUPERVISORY CAPITAL Consists of the sum of core capital (Tier 1) - included without any limitations – and additional capital (Tier 2), which is included to the maximum amount of the core capital. Equity investments, innovative capital instruments, hybrid capital requirement instruments and subordinated assets held at other banks and finance companies are deducted at 50% for core capital and 50% for additional capital (specifically, equity investments in banks and finance companies at more than 10% unconsolidated are deducted, as well as the total of equity investments in banks and finance companies at less than 10% and subordinated assets with banks, considered at the share exceeding 10% of the core and additional capital). Equity investments in insurance companies and subordinated liabilities issued by said insurers are deducted, as well as securitised positions.

PAYOUT RATIO This identifies the percentage of net profit distributed by the company to its shareholders.

PLAIN VANILLA SWAP Interest rate swap (see definition) in which a counterpart receives a variable payment linked to the LIBOR (generally, the six-month LIBOR) and pays another counterpart a fixed interest rate, obtained by adding a spread to the return of a specific type of government bond.

PD (PROBABILITY OF DEFAULT) Probability that the debtor defaults (see definition) within a year.

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CAPITALISATION POLICIES See the definition for “Capitalisation (insurance) certificates”.

POS (POINT OF SALE) Automated equipment with which it is possible to perform payment for goods or services to the supplier using a debit, credit or prepaid card.

SME (SMALL AND MEDIUM-SIZED BUSINESSES) According to the definition of EU legislation, small and medium sized companies are understood to be the businesses which carry out economic activities, irrespective of their legal form, employing less than 250 individuals, with annual turnover of no more than 50 million euro or with a financial statements total of less than 43 million euro.

PREFERENCE SHARES Innovative capital instruments, issued by foreign subsidiaries of the banking group, which associate remuneration forms anchored to market rates characteristic of particularly accentuated subordination, for example, interest not paid by the parent bank and not recovered in subsequent years and the share of losses in the bank itself if the losses result in a significant reduction of capital requirements. The essential conditions on which preference shares are computed in the core capital of banks and banking group are established by the Regulatory Instructions issued by Bank of Italy.

SUBORDINATED LOANS Financial instruments whose trading scheme envisages that the holders of the documents representative of the loan are satisfied after the other creditors in the event of liquidation of the issuer.

PRICE SENSITIVE Term that generally refers to information or data that is not in the public domain, which, if it were to be made public, would have a marked influence on the share price.

PRIVATE EQUITY Activities related to purchasing equity interests and subsequently selling them to specific counterparties, without public placement.

PROJECT FINANCE Financing of projects based on their cash flow projections. As opposed to the ordinary credit risk analysis, the project finance technique involves not only the projected future cash flows, but also specific elements such as the project's technical characteristics, the sponsors’ qualifications for completing the project and the product’s placement market.

RATING Evaluation of a company's quality or the quality of its debt securities based on its financial solidity and its prospects

SECURITISATION RISK Risk that the economic substance of the securitisation transaction is not fully reflected in the measurement decisions and risk management;

BUSINESS RISK Risk of averse and unexpected changes in profits/margins with respect to forecast data, linked to volatility in volumes due to competitive pressures and market situations.

CONCENTRATION RISK

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Risk deriving from exposures on the banking book vis-à-vis counterparts, groups of counterparts from the same economic sector or which carry out the same activities or belong to the same geographic area. The concentration risk can be divided up into two types: • single name concentration risk; • sector concentration risk.

CREDIT RISK Risk of suffering losses from the default of a counterparty with which a credit exposure exists.

COMPLIANCE RISK Risk of incurring judicial or administrative sanctions, significant financial losses or damages to reputation resulting from violations of mandatory rules (legislative or regulatory) or self- regulation (statutes, codes of conduct, self-governance codes).

LIQUIDITY RISK Risk of non-fulfilment of payment obligations that could cause an inability to raise funds or to raise them at costs higher than the market (funding liquidity risk) or from the presence of limits to unfreezing assets (market liquidity risk) resulting in losses in the capital account; In detail, structural liquidity risk is the risk deriving from an inadequate balancing of the maturities of the asset and liability items.

MARKET RISK Risk of changes in the market value of the positions in the trading portfolio for supervisory purposes due to unexpected changes in the market conditions and the credit worthiness. It also contains the risks deriving from unexpected changes in exchange rates and prices of goods which refer to the position in the entire financial statements.

REPUTATION RISK Risk of suffering losses from a negative perception of the Bank’s image by customers, counterparties, Bank shareholders, investors, supervisory authorities or other stakeholders.

INTEREST RATE RISK Current or forecast risk of a change in interest rate margins and the economic value of the company, following unexpected changes in interest rates that impact the bank portfolio.

OPERATIONAL RISK Risk of suffering losses deriving from the inadequacy or dysfunction of procedures, human resources and internal systems, as well as exogenous events. This type of risk includes losses from fraud, human error, operational interruptions, system unavailability, contractual breaches, and natural catastrophes. The legal risk is also included.

EQUITY INVESTMENT RISK Risk of losses in the Equity Investments portfolio.

RESIDUAL RISK Risk of suffering losses from unexpected inefficiency of techniques used by companies to mitigate credit risk (e.g. mortgage guarantees);

STRATEGIC RISK Current or forecast risk of a drop in profit or the capital deriving from: • changes in the operating context; • inadequate implementation of decisions; • scant reactivity to changes in the competitive sphere.

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SENIOR In a securitisation transaction (see definition), it is the tranche with the highest level of privileges in terms of remuneration and reimbursement priority.

SENSITIVITY ANALYSIS System of analysis that measures the changes in certain assets or liabilities in relation to fluctuations in interest rates or other reference parameters.

SEPA (SINGLE EUROPEAN PAYMENTS AREA) Single Euro Payments Area which came into force on 1st January 2008 within which one can gradually make and receive payments in euro with basic conditions, rights and obligations which are uniform. 31 European countries have complied (in addition to the 27 European countries also Switzerland, Norway, Iceland and Liechtenstein). The introduction of the new consolidated banking code IBAN (see definition) is one of the instruments used to standardise banking transactions.

SERVICER In securitisation transactions (see definition), this is the party that, based on a special servicing contract, manages the loans or assets being securitised after they are sold to the special purpose vehicle assigned to issue the securities.

SIDE POCKET This is a measure protecting all the participants in a hedge fund (see definition), which is only activated in exceptional cases where the sudden reduction on the degree of liquidity of the assets held in fund portfolios, associated with the elevated requests for reimbursement of the holdings, may have negative consequences for the management of said funds. In order not to prejudice the interest of the participants in the hedge fund, in the event that it becomes necessary to unfreeze the assets which have become illiquid, in the absence of a market which ensures the formation of reliable prices, the creation of the side pockets makes it possible to transfer the illiquid assets to a closed-end type mutual investment fund set up specifically (so-called closed-end side pocket). The transaction is achieved by means of the partial spin-off of the hedge fund following which the liquid assets continue to be held in said fund, while the illiquid ones are transferred to the side pocket closed-end fund. The hedge fund, streamlined but liquid, continues to carry out its activities as per the investment policy envisaged in the management regulations, while the side pocket closed-end fund (which cannot issue new holdings) is managed with a view to the freeing up of the illiquid assets held, proceeding with the reimbursements of the holdings gradually as the assets are liquidated.

NON PERFORMING LOANS Loans with parties that are insolvent (even if not legally confirmed) or similar situations.

SPONSOR Party, other than the originator (see definition), which establishes and manages a structure of conduits (see definition) within the sphere of a securitisation transaction (see definition).

SPREAD This term usually refers to: • the difference between two interest rates; • the difference between the bid and ask price in securities trading; • the mark-up that the securities issuer recognises in addition to the reference rate.

SPE/SPV The Special Purpose Entities (SPE) or Special Purpose Vehicles (SPV) – also known as “conduits” – are bodies (companies, trusts or another entity) which are specifically set up for the achievement of a specific, well-defined and marked out objective, or for the performance of a specific transaction.

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The SPEs/SPVs have a legal structure which is independent from the other parties involved in the transaction and, generally, do not have their own operating and management structures.

STAND-STILL Agreements aimed at permitting customers with credit facilities who find themselves in temporary economic-financial difficulties, to provisionally freeze the outstanding credit facilities, pending the overcoming of the original difficulty or pending the definition of the overall restructuring of the debt and the drawing up of a new business plan.

STAKEHOLDER Individuals or groups, with specific interests in the company, or dependent on it in order to achieve their objectives or who experience considerable positive or negative effects related to its activities.

STOCK OPTIONS Term used to indicate the options offered to managers in a company to purchase shares in the company based on a fixed exercise price.

STRESS TEST Simulation procedure used to assess the impact of “extreme” but plausible market scenarios on the exposure to the banks’ risk.

SUBROGATION Procedure by means of which the borrower (in other words the party who has stipulated the loan) contracts a new mortgage loan with another bank to pay off the original loan transferring the same guarantees to the new financing bank (in particular the mortgage) which already backed the “original” bank.

SWAPS (INTEREST RATE SWAPS AND CURRENCY SWAPS) Transactions consisting of the exchange of cash flows between parties based on set contractual conditions. In an interest rate swap, the counterparties exchange interest payment flows calculated on a notional reference principal amount based on differentiated criteria (for example, a counterpart pays at a fixed rate, the other at a variable rate). In a currency swap, the counterparts exchange specific amounts of two different currencies, repaying them in the established manner for both principal and interest.

RISK FREE RATE Interest rate for an asset without risk. Used to indicate interest rates on short-term government securities, that technically cannot be considered risk-free.

TIER 1 CAPITAL Consists of capital paid, from reserves (including share premium reserves), from innovative capital instruments (only under conditions that fully guarantee the bank’s stability)36, from profit for the period, and positive prudent filters on core capital. Own shares, goodwill, intangible fixed assets, losses for prior years and the current years, impairment calculated on the supervisory trading portfolio and negative prudential filters on core capital are deducted.

TIER 2 CAPITAL

36 Innovative capital instruments can be calculated in the Tier 1 capital within a limit of 20 percent of the amount of the Tier 1 capital, inclusive of said instruments. Within the sphere of this limit, the instruments which envisage automatic return rate review clauses (so-called step-up) associated with the faculty to reimburse or clauses of another kind aimed at encouraging the reimbursement by the issuer must be contained within the limit equating to 15 percent of the amount of the Tier 1 capital inclusive of said instruments. Any surpluses must be calculated in the Tier 2 capital, in the same way as hybrid capitalization instruments. 277

Consists of valuation reserves, innovative capital instruments not included in core capital, hybrid capital requirement instruments (irredeemable liabilities and other instruments reimbursed at the issuer’s request with preliminary approval from the Bank of Italy), subordinated liabilities (reduced by 1/5 during the five years prior to maturity), net gains on equity investments, positive prudential filters on additional capital, any surplus of total net impairment compared to expected losses, and positive exchange rate differences. The following negative components must be deducted from these elements: net losses on equity investments, negative prudential filters on additional capital (Tier 2), and other negative elements.

TIER 3 CAPITAL (3RD LEVEL SUBORDINATED DEBT) Subordinated debt that satisfies the following conditions: • they are fully paid; • they are not included in the calculation for additional capital (see definition); • they have a duration equal to or greater than 2 years, and if the maturity is not fixed, at least 2 years notice must be given for reimbursement; • they meet the conditions for similar liabilities calculated in additional capital, with the obvious exception of those related to the duration of the debt; • they are subject to “lock-in clauses”, based on which the principal and interest cannot be repaid if the total amount of the bank’s capital funds are less than 100% of the total capital requirements.

TRADING BOOK Usually identifies part of a securities portfolio, or financial instruments in general, intended for trading purposes.

TROR (TOTAL RATE OF RETURN SWAP) A contract under which the protection buyer (or total return payer) commits to grant all cash flows generated by the reference obligation to the protection seller (or total return receiver), who transfers to the protection buyer cash flows associated with a reference rate. On the coupon cash flow’s payment date (or on the contract’s expiration date), the total return payer compensates the total return receiver any appreciation in the reference obligation. If the reference obligation has depreciated, the total return receiver compensates the relative counter value to the total return payer. Essentially the TROR is a structured finance product, consisting of the combination of a credit derivative and an interest rate derivative (or interest rate swap – see definition).

ON LINE TRADING System for buying and selling financial assets on the stock exchange, usually via screen- based means.

TRIGGER EVENT Predefined contract event that, if occurs, gives certain powers to the counterparties.

UNIT-LINKED Life insurance policies connected to investment fund values.

UPPER TIER 2 Hybrid capital requirement instruments that are included in additional, or Tier 2, capital (see definition) when the contract provides that: a) in the event of financial losses that result in a reduction in capital paid and reserves that are lower than the minimum capital levels required for banking activities, the repayment amounts for these liabilities and interest accrued may be used to offset the losses, so that the issuing entity can carry on its business; b) in the event of negative management performance, the repayment right may be suspended as is necessary to avoid or limit losses to the extent possible;

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c) if the issuing entity goes into liquidation the debt is repayable only after all other creditors not equally subordinated are repaid. Redeemable hybrid capital requirement instruments must have a duration equal to or greater than 10 years. The contract must have an explicit clause that subordinates repayment of the loan upon permission from the Bank of Italy.

US GAAP (GENERALLY ACCEPTED ACCOUNTING PRINCIPLES) Accounting standards issued by the FASB (Financial Accounting Statement Board), generally accepted in the USA.

VAR (VALUE AT RISK) Measures the maximum potential loss that a position in a financial instrument or portfolio would sustain under a defined probability (confidence level) in a fixed time period (reference period or holding period).

WARRANT Negotiable instrument that grants the bearer the right to purchase from the issuer or sell to the issuer fixed-income securities or shares based on precise conditions.

ZERO-COUPON Bonds without coupon payments, whose return is determined by the difference between the issue price (or purchase price) and the repayment value.

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REPORT OF THE BOARD OF STATUTORY AUDITORS PURSUANT TO ART. 2429 OF THE ITALIAN CIVIL CODE

Dear Shareholders, considering that Banco di Brescia San Paolo CAB S.p.A., pursuant to the provisions of section V of Legislative Decree no. 39 of 27th January 2010, is a public interest body, the Board of Statutory Auditors does not perform the legal audit, which is entrusted to the independent auditors Reconta Ernst & Young S.p.A.. Furthermore, consequently to the aforementioned Legislative Decree 39/2010, the Board of Statutory Auditors also serves as the Internal control and audit committee. The financial statements for the year ended 31st December 2010 were drawn up in accordance with the international accounting standards (IAS) issued by the International Accounting Standards Board (IASB) and endorsed as of the date of preparation of these financial statements, as well as the related interpretations issued by the International Financial Reporting Interpretation Committee (IFRIC). The balance sheet and income statement results for the year ended 31st December 2010 can be inferred, as a summary, from the financial statements as follows: Assets € 17,621,804,932 Liabilities and provisions € 16,161,701,025 Shareholders' equity € 1,388,125,190 Profit for the year € 71,978,717 The income statement confirms the balance sheet results given above and is composed of the following principal items: Net financial operating income € 422,928,808 Profit on continuing operations before tax € 118,929,403 Income taxes for the period on continuing operations € - 46,950,686 After tax profit on continuing operations € 71,978,717 After tax profit on discontinued operations € 0 Profit for the year € 71,978,717 The Board of Statutory Auditors supervised the arrangement of the financial statements for the year ended 31st December 2010 and their general compliance with the law in terms of formation and structure, and has no remarks to make on these points. The Board of Statutory Auditors confirms to have viewed the Independent Auditors’ report pursuant to articles 14 and 16 of Legislative Decree no. 39 of 27/01/2010 issued by the independent auditors Reconta Ernst & Young S.p.A., and has no remarks to make on it. In the Independent Auditors’ opinion, the financial statements comply with the standards on their preparation; they were clearly prepared and truthfully and accurately represent the balance sheet situation, the income situation, the financial result for the period and the cash flows of Banco di Brescia. The report on operations is consistent with the Financial Statements.

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The Board of Statutory Auditors supervised, together with the Independent Auditors, that the financial statements and the report on operations contain the “Information to be provided in the financial reports on a 'going concern' basis of the company, financial risks, asset value assessments and uncertainties regarding the use of estimates” provided for by the Bank of Italy Document/CONSOB/ISVAP (Supervisory Board for Private Insurance) no. 2 of 6th February 2009 as well as the “Information to be provided in financial reports on impairment tests, the contractual clauses of payables, debt restructuring and fair value hierarchy” provided for by the Bank of Italy Document/CONSOB/ISVAP (Supervisory Board for Private Insurance) no. 4 of 3th March 2010. Pursuant to art. 2429, para. 2 of the Italian Civil Code, the Board acknowledges that, in preparing the financial statements, the derogation provided for by art. 5, para. 1, of Legislative Decree 38/2005 was not applied. The financial statements and the report on operations accompanying them provide an exhaustive view of the company and the performance of operations during the period, and its business outlook. Banco di Brescia S.p.A. is subject to the management and coordination of Unione di Banche Italiane S.c.p.a. and the information on the subject, as provided for by current legislation, is contained in the notes and the report on operations. During the year, the Board of Statutory Auditors performed the supervisory activities established by law and the instructions of the Bank of Italy, also in consideration of the principles of conduct recommended by the National Board of Chartered Accountants and Accounting Experts. More specifically the Board: · participated in the shareholders’ meetings (3); participated in the Board of Directors’ meetings (18) and the Executive Committee’s meetings (8), during which it was able to acquire information from the delegated bodies on the performance of normal operations, the business outlook and the most important transactions performed by the company, in terms of size or characteristics; · carried out periodic audits (17), making use also of the organisational structures in charge of control, and mainly the internal audit department. A systematic and continuous link was established with this department, through the review of the reports forwarded to the Board, periodic meetings as well as specific assessments required by the Board; during the year, the Board of Statutory Auditors also met with the other second level control departments (Compliance, Risk Management, Manager in charge of preparing the corporate accounting documents); · acquired information on the organisational development of the Bank, particularly regarding the effects on the Internal Control System adopted by the UBI Group; · periodically met the independent auditors to exchange data and information that are important to perform the relevant tasks and analyse the results of the work carried out by the same company. The Independent Auditors also informed the Board of the absence of reprehensive actions;

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· made the agreed checks on the foreign branch in Luxembourg, which in December 2010 was conferred to UBI Banca International S.A.; · supervised compliance with the law and particularly with anti-money laundering and loan-sharking provisions as well as the provisions of Bank of Italy related to the specific business; · performed supervisory activities according to article 19, section V of Legislative Decree 39/2010; · acquired information, also through auditions of the Risk Management Department, on the implementation of credit, market, liquidity and operating risk management policies, also in light of the integration of the Bank within the UBI Group; the Board of Statutory Auditors particularly acknowledges that the notes provide information on the control and risk hedging policies adopted by the Bank, also in compliance with the provisions of circular no. 262 of 22nd December 2005 by Bank of Italy; · acquired information on the process in progress regarding the updating of the Organisational Model according to Legislative Decree 231/2001, which ended with the approval of the Board of Directors during the meeting of 24th March 2011, and followed the activities of the Control Body according to Legislative Decree 231/2001, through periodic meetings; · acquired information on the actions taken to implement the provisions of Directive 2004/36/EC (MIFID Directive); · issued thee updates of the opinion given pursuant to regulatory provisions no. 501981 of 17/5/007 (Rules on Italian covered bonds), Section II art. 5 para. 3 – following the amendments resolved by the Board of Directors to the issue programme. Following the activities carried out by the Board of Statutory Auditors: · it ascertained compliance with the principles of correct administration and adherence to the law and the Articles of Association; it can also reasonably guarantee that the actions resolved by the Administrative Body are not clearly imprudent, risky, likely to give rise to conflicts of interest or such to compromise the integrity of the company equity; · assessed the suitability of the organisational structures within the limits of its responsibility; the internal control system, particularly in terms of credit, market, rate and operating risk control; the administrative and accounting system as well as its reliability in correctly representing the operating events. In this connection, the Board of Statutory Auditors also followed the development of the Compliance Department structure and monitored the actions aimed at increasing the efficiency of the organisational units and the Internal Audit procedures. The Board of Statutory Auditors did not receive any complaint pursuant to art. 2408 of the Italian Civil Code.

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In conclusion, in performing the supervisory activities as described above, the Board of Statutory Auditors did not find any additional significant events that are worthy of mention in this report. Dear Shareholders, as a result of the above, no remarks are to be made that prevent the approval of the financial statements as at 31st December 2010, accompanied by the report on operations, and the allocation of the profit for the year of 71,978,717 euro, also with regard to the dividend allocation proposal made by your Board of Directors. We would like to remind you that, with the approval of the financial statements as at 31st December 2010, the mandate of the Board of Directors expires. Therefore, you are invited to act accordingly. Brescia, 25th March 2011. The Board of Statutory Auditors Prof. Paolo Golia (Chairman of the Board of Statutory Auditors) ______Mr. Eugenio Ballerio (Standing auditor)

______Mr. Alessandro Masetti Zannini (Standing auditor) ______

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