NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CAPITALIA DESCRIPTION OF CONSOLIDATION METHODS SCOPE OF CONSOLIDATION The consolidation does not include subsidiaries and companies subject to significant influence that are in The scope of consolidation includes Capitalia S.p.A. liquidation, inactive or for which the necessary (the parent bank) and the companies controlled directly information was not obtained in time. The exclusion of or indirectly by the parent bank that operate in the the latter had no material effect on the presentation of a banking or financial sectors or whose sole or main activity true and fair view of the assets and liabilities, financial is instrumental to the activities of the banking group. The position and results of the Group. Significant equity subsidiaries are consolidated using the full consolidation investments acquired as part of the Group’s merchant method. Companies controlled jointly with other banking activities were also excluded from the companies are consolidated on a proportional basis, consolidation. These holdings are valued at cost, written pursuant to Article 35 of Legislative Decree 87 of 27 down for permanent impairments of value. January 1992. The list of significant equity investments with Equity investments in subsidiaries under joint control information on the related consolidation method is given other than banks, financial companies, instrumental in table 3.1 of the notes to the financial statements. companies and investments in associated companies referred to in Article 36, paragraph 1, of Legislative The following table shows the changes that have Decree 87/1992, are accounted for using the equity occurred in the companies included in the scope of method. consolidation since 2003. COMPANIES INCLUDED IN FULL CONSOLIDATION: Bdr Roma Prima Ireland Ltd Became part of the banking group Cofiri International Inc. Acquired during the period Cofiri S.p.A. Acquired during the period Cofiri Società di Intermediazione Mobiliare S.p.A. Acquired during the period Fineco Mutui S.p.A. (ex Cofiri Capital S.p.A.) Acquired during the period Safei Asesores S.L. Established during the period COMPANIES EXCLUDED FROM FULL CONSOLIDATION: Bafico S.A. Liquidated during the period Banca Manager S.p.A. Merged with FinecoBank S.p.A. 116 117 BBR Rogier S.A. Sold during the period Figeroma – Fiduciaria e di Gestione Roma – Sim S.p.A. Placed in liquidation Fineco Factoring S.p.A. Merged with Capitalia L&F S.p.A. Fineco Gestioni S.p.A. S.G.R. Merged with Fineco Asset Management S.p.A. S.G.R. Fin-Eco Invest A.G. Sold during the period Gesindex SGIIC S.A. Liquidated during the period MC Gestioni Società di Gestione del Risparmio per azioni Sold during the period Multicontrol S.A. Liquidated during the period Safeinvest Conseil S.A. Liquidated during the period COMPANIES ACCOUNTED FOR USING THE EQUITY METHOD: Box 2004 S.p.A. (formerly Roma Sim in liquidazione) Following revocation of liquidation Compagnia Italpetroli S.p.A. Acquired during the period Fineco Assicurazioni S.p.A. (formerly Giano Assicurazioni S.p.A.) Acquired by FinecoGroup S.p.A. COMPANIES EXCLUDED FROM EQUITY ACCOUNTING: Anteis Epargne S.A. Sold during the period Bankpyme SGIIC S.A. Sold during the period BDR Roma Prima Ireland Ltd Fully consolidated Colosseum 2000 Società Consortile per Azioni Liquidated during the period Courtage Etoile Snc Sold during the period Holding Banca Sara S.p.A. (formerly Holding Banca della Rete S.p.A.) Sold during the period Parco Scientifico Biomedico di Roma San Raffaele S.p.A. Following plans to transform company into a foundation Skillpass S.p.A. Placed in liquidation Società dell’aeroporto di Comiso (SO.A.CO.) S.p.A. Sold during the period METHODS OF CONSOLIDATION FULL CONSOLIDATION The figures have been consolidated in compliance The book value of equity investments is eliminated with the general principles laid down in the relevant against the shareholders’ equity in the investee company legislation. They are illustrated briefly below. attributable to the Group. CAPITALIA NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The portion of shareholders’ equity and the results terms and conditions are not excluded pursuant to Article attributable to minority interests are accounted for in a 34, point 2, of Legislative Decree 87/1992. specific line in the consolidated balance sheet and income statement respectively. PROPORTIONAL CONSOLIDATION The offsetting of the book value of equity interests and the shareholders’ equity of the investee company is The same policies adopted for full consolidation also based on the values at 31 December 1993 (the first apply for proportional consolidation. Assets, liabilities, consolidation) or at the purchase date for subsequent off-balance-sheet transactions and income and charges acquisitions. are stated in the consolidated financial statements net of intragroup transactions and in proportion to the Goodwill arising on consolidation relating to the percentage holding owned. Group that cannot be otherwise allocated to the assets and liabilities of the companies is offset against negative goodwill arising during the same period (Article 32 of EQUITY METHOD Leg. Dec. 87/1992) as long as the latter is not charged to the “Consolidation provision for future liabilities and Equity investments accounted for using the equity contingencies” in anticipation of future negative method are valued on the basis of the portion of performance of the subsidiaries. The residual goodwill is shareholders’ equity corresponding to the percentage booked to “Goodwill arising on consolidation” on the holding. Any lower book value with respect to the asset side of the balance sheet and amortized over five corresponding share of equity is posted, for the portion years. attributable to the Group, under “Negative goodwill arising on application of the equity method” unless the In the event an equity investment consolidated fully or conditions for stating it under the “Provision for future accounted for using the equity method is sold, any liabilities and contingencies” are met. Any higher book residual positive or negative differences are imputed to value is stated under “Goodwill arising on application of the economic result of the disposal. the equity method”. Goodwill arising on application of the equity method attributable to the Group is offset The shareholders’ equity of investee companies against any negative differences arising during the same expressed in foreign currencies is translated into euros at period and any positive balance is recognized under end-year exchange rates. Any exchange differences are assets and amortized over five years. recognized, for the portion attributable to the Group, under “Other reserves” as “translation reserves”. Residual goodwill, net of offsets, is taken to the income statement in the event of the sale of the equity Assets, liabilities, off-balance-sheet transactions and investment. income and charges of fully-consolidated companies are stated in the consolidated financial statements net of The results of subsidiaries accounted for using the intercompany transactions. Income and losses on equity method, calculated on the basis of the percentage intercompany transactions involving securities held for holding owned, are recognized at line 170 of the income trading and exchange rates carried out at normal market statement. 118 119 FINANCIAL STATEMENTS INCLUDED approved financial statements have been used. Given the IN THE CONSOLIDATION size of the companies involved, this has not materially affected the presentation of a true and fair view of the The consolidated financial statements are drawn up Group’s assets and liabilities, financial position and on the basis of the financial statements prepared at 31 results. December 2004 by the individual companies, reclassified and adjusted as necessary to standardize them and ensure they conform with the accounting principles CURRENCY OF ACCOUNT adopted by the Group and, for foreign subsidiaries, to ensure they comply with the relevant legislation. The balance sheet, income statement and the notes to the financial statements are drawn up in thousands of In particular, leasing contracts are stated using the euros. finance method. The assets and liabilities of subsidiaries outside the The figures for 31 December 2004 were not available euro area have been translated at the relevant reference for a number of companies subject to significant exchange rate observed by the Bank of Italy at the end of influence. In these case the figures for the most recent the year. CAPITALIA PART A – SIGNIFICANT ACCOUNTING POLICIES Section 1 – DESCRIPTION OF ACCOUNTING are subject to insolvency proceedings (composition POLICIES with creditors, special administration under liquidation, bankruptcy with winding up or compulsory administrative The accounting policies adopted in preparing liquidation); the financial statements at 31 December 2004 are unchanged from those used for the 2003 financial with real estate or building loans, in addition statements. to ordinary loans where applicable, when an action for the sale of the real estate has been lodged, except where the exposure regards real estate loans to natural 1. Loans, guarantees and commitments persons fully secured by a mortgage on residential property, for which grading is effected at the date set for In the performance of Group corporate governance the hearing of the parties (Article 569 of the Code of Civil functions, the bank has set general criteria for grading Procedure). loans,