Half-Year Report for the Six Months Ended 30 June 2018

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Half-Year Report for the Six Months Ended 30 June 2018 HALF-YEAR REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2018 CONTENTS INTERIM REPORT ON OPERATIONS FOR THE SIX MONTHS ENDED 30 JUNE 2018 ............................... 3 1. ORGANISATIONAL STRUCTURE ....................................................................................................... 4 2. MACROECONOMIC ENVIRONMENT ................................................................................................ 11 3. FINANCIAL REVIEW ........................................................................................................................... 12 4. OPERATING RESULTS BY OPERATING SEGMENT ....................................................................... 18 5. NON-FINANCIAL INFORMATION ...................................................................................................... 35 6. RISK MANAGEMENT .......................................................................................................................... 42 7. OUTLOOK ........................................................................................................................................... 43 8. OTHER INFORMATION ...................................................................................................................... 44 9. APPENDIX ........................................................................................................................................... 45 CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2018………………………………………………………………………………...……………………….49 1. INTRODUCTION………………………………………………………………….……………....................50 2. BASIS OF PRESENTATION FOR THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS, SIGNIFICANT ACCOUNTING POLICIES ..………….. ……………………….………...…...................50 3. CHANGES IN ACCOUNTING POLICIES …..….……………………….………………….....................64 4. MATERIAL EVENTS DURING THE PERIOD ……..……………………………………………………..79 5. POSTE ITALIANE GROUP – FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2018………………………………………………………..………………………......................82 6. RISK MANAGEMENT ……………..………………………………………………………….…………...141 7. PROCEEDINGS PENDING AND PRINCIPAL RELATIONS WITH THE AUTHORITIES ...............152 8. MATERIAL NON-RECURRING EVENTS OR TRANSACTIONS..……………………………………156 9. EXCEPTIONAL AND/OR UNUSUAL EVENTS OR TRANSACTIONS …………….…….................156 10. EVENTS AFTER THE END OF THE REPORTING PERIOD ………….………………..…………....156 11. ADDITIONAL INFORMATION..………………………………………………………………..................156 12. ATTESTATION OF THE MANAGER RESPONSIBLE FOR FINANCIAL REPORTING AND INDIPENDENT AUDITORS' REPORT……………………………………………………………………166 2 Interim report on operations for the six months ended 30 june 2018 INTERIM REPORT ON OPERATIONS FOR THE SIX MONTHS ENDED 30 JUNE 2018 Interim report on operations for the six months ended 30 june 2018 3 1. ORGANISATIONAL STRUCTURE Ownership structure 20.02% Institutional Investors 29.26% Retail Investors Cassa Depositi e Prestiti 15.73% Ministry of the Economy and Finance 35.00% Last updated 5 December 2017 Shareholder breakdown 44.0% Institutional Investors Retail Investors 56.0% Last updated 5 December 2017 Geographical breakdown of institutional shareholders 13.8% 19.1% UK Rest of Europe 24.1% Rest of the World North America Italy 30.8% 12.2% Last updated 5 December 2017 4 Interim report on operations for the six months ended 30 june 2018 Management and supervisory bodies Board of Directors (1) Chairwoman Maria Bianca Farina Chief Executive Officer and General Manager Matteo Del Fante Directors Giovanni Azzone Carlo Cerami Antonella Guglielmetti Francesca Isgrò Mimi Kung Roberto Rao Roberto Rossi Board of Statutory Auditors (2) Chairman Mauro Lonardo Auditors Alessia Bastiani Maurizio Bastoni Alternates Marina Colletta Antonio Santi Ermanno Sgaravato Supervisory Board (3) Chairwoman Nadia Fontana Members Paolo Casati (4) Magistrate appointed by the Italian Court of Auditors to audit Poste Italiane Francesco Petronio Independent Auditors PricewaterhouseCoopersSpA Nominations and Corporate Audit, Risk and Sustainability Related and Connected Parties Remuneration Committee(5) Governance Committee(5) Committee(5) Committee(5) Antonella Guglielmetti (Chairwoman) Carlo Cerami (Chairman) Roberto Rao (Chairman) Francesca Isgrò (Chairwoman) Giovanni Azzone Giovanni Azzone Antonella Guglielmetti Carlo Cerami Francesca Isgrò Roberto Rossi Mimi Kung Mimi Kung Roberto Rossi Roberto Rao (1) The Board of Directors was elected by the Annual General Meeting held on 27 April 2017 to serve for a period of three years, and will remain in office until the Annual General Meeting's approval of the financial statements for the year ended 31 December 2019. (2) The Board of Statutory Auditors was elected by the Ordinary General Meeing of 24 May 2016 to serve for a period of three years and will remain in office until the General Meeting's approval of the financial statements for the year ended 31 December 2018. On 30 January 2017, the Alternate Auditor, Andrea Bonechi, resigned from his position with immediate effect. As a result, the Annual General Meeting of 27 April 2017 elected Antonio Santi to serve as an Alternate Auditor. (3) The Supervisory Board was appointed by the Board of Directors' meeting of 24 May 2016 for a three-year term. Giulia Bongiorno, appointed a member of the Supervisory Board by the Board of Directors on 22 June 2017, resigned on 12 March 2018. (4) The only internal member, Head of Poste Italiane SpA's Internal Auditing. (5) Committee members were appointed by the Board of Directors' meeting of 28 April 2017. At the meeting of 19 February 2018, the Board of Directors renamed the Nominations Committee and the Audit and Risk Committee the Nominations and Corporate Governance Committee and the Audit, Risk and Sustainability Committee, respectively. Interim report on operations for the six months ended 30 june 2018 5 Meetings of the Board of Directors of Poste Italiane SpA Poste Italiane's Board of Directors met on 9 occasions in the first half of 2018 to examine the following principal matters and approve the following resolutions. DATE PRINCIPAL RESOLUTIONS Proposed changes to BancoPosta RFC: Injection of fresh capital by Poste Italiane into BancoPosta RFC to boost leverage ratio Proposed changes to BancoPosta RFC (removal from the ring-fence of the “payments and e-money” unit); Changes to the 25 January 2018 subsidiary, PosteMobile: (A) authorisation to establish a separate ring-fenced e-money and payment services entity, (B) the transformation of this entity into a hybrid electronic money institution; Grant of authority to begin the process of applying for authorisation from the Bank of Italy. Participation in Anima Holding SpA's rights issue 19 February 2018 Preliminary results for 2017, proposed dividend 26 February 2018 Approval of the Deliver 2022 Strategic Plan The Company's financial statements for the year ended 31 December 2017 and the consolidated financial statements for the same period 29 March 2018 Proposed appropriation of earnings Revision of the Group's Code of Ethics 19 April 2018 Revision of the Whistleblowing Guidelines Data Protection Guidelines (GDPR) 27 April 2018 Authorisation to purchase and dispose of treasury shares 9 May 2018 Interim report for the three months ended 31 March 2018 29 May 2018 Long-term contract with Amazon for postal delivery services (parcels) 28 June 2018 Revision of the 231 Model Corporate actions during the first half On 7 August 2017, Poste Italiane completed the sale of its 100% interest in Banca del Mezzogiorno-Medio Credito Centrale to Agenzia nazionale per l’attrazione degli investimenti e lo sviluppo d’impresa (Invitalia) for a total consideration of approximately €387 million, including €317 million collected at 30 June 2018. The remaining amount is to be collected in tranches, the last of which five years from the date of the agreement. On 6 March 2018, Poste Italiane SpA and Anima Holding SpA, together with Poste Vita SpA, BancoPosta Fondi SpA SGR and Anima SpA SGR, to the extent of their respective responsibilities, signed implementing agreements designed to strengthen their partnership in the asset management sector, in accordance with the terms and conditions in the agreement of 21 December 2017. The transaction envisages the partial spin-off of management of the assets underlying Poste Vita SpA’s Class I insurance products (totalling over €70 billion), previously attributed to BancoPosta Fondi SpA SGR, to Anima SpA SGR and extension of the partnership that will have a duration of 15 years. Following the transaction, Poste Italiane will retain its 100% interest in BancoPosta Fondi SGR, with the aim of creating a competence centre to manage all the Group’s financial investments. The transaction will also enable the Company to boost training and refresher courses for Poste Italiane’s distribution network, in relation to asset management, and to expand the range of products offered to savers. On 12 April 2018, Poste Italiane implemented the decision taken by its Board of Directors on 25 January 2018, subscribing for its share of the rights issue carried out by Anima Holding SpA, amounting to a total of approximately €30 million. This has enabled the Company to retain its 10.04% interest in Anima Holding SpA. 6 Interim report on operations for the six months ended 30 june 2018 On 19 April 2018, the Board of Directors of BancoPosta Fondi SGR SpA approved the planned spin-off and the application for authorisation to be submitted to the Bank of Italy, which granted clearance
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