22000077 AAnnnnuuaall RReeppoorrtt 55tthh FFIINNAANNCCIIAALL YYEEAARR OORRDDIINNAARRYY GGEENNEERRAALL MMEEEETTIINNGG OOFF TTHHEE SSHHAARREEHHOOLLDDEERRSS OOFF 1100tthh AAPPRRIILL 22000088 Joint stock company with sole shareholder Head Office and General Management: Piazza Vittorio Veneto 8, Bergamo 24122 (Italy) Member of the Interbank Deposit Protection Fund and the National Guarantee Fund Share capital of 1.256.300.000,00 EUR fully paid up Tax Code, VAT nr and Registration nr in the Company Register of Bergamo 03034840169 Unione di Banche Italiane Banking Group ABI nr 05428.8 Register of Banks nr 5561 Register of Banking Groups nr 3111.2 Subject to the management and co-ordination of Unione di Banche Italiane S.c.p.a. www.bpb.it 2 Contents Notice of call 5 Banca Popolare di Bergamo S.p.A. 7 Members of Corporate Boards and Management 9 The rating 10 Introduction 12 Summary of data and operating and financial indicators 14 Reclassified financial statements 16 Report of the Board of Directors on operations 22 Commercial strategy 23 Operations 31 The macroeconomic scenario 31 Lending 41 Funding from customers and securities in issue 45 Indirect funding and assets under management 47 Operations on the interbank market 48 Available-for-sale financial assets 50 Assets and liabilities held for trading 50 Hedging derivatives 50 Change in value of financial assets subject to general hedging 51 Non current assets 52 Non current assets and liabilities held for disposal and disposal groups 53 Provisions for liabilities and charges 53 Equity and solvency ratios 54 Provision for post-employment benefits 56 Debt for health insurance policies 57 The Income Statement 58 The Statement of Cash Flows 64 Likely future developments in operations 65 Research and development 67 The shares 74 Relations with the companies in the Group 74 Fundamental indicators of the company’s performance, environment and personnel 80 The assumption, management and hedging of financial risks 84 3 Other information 84 The plan for the use of the profits for the year and proposals to the General meeting 85 Other items on the agenda of the Extraordinary and O rdinary meeting 87 The annual financial statements 95 Report of the Statutory Board of Auditors 101 Report of the Independent Auditors 107 Notes to the financial statements 111 Part A – Accounting policies 115 Part B – Information on the Balance Sheet 147 Part C – Information on the Income Statement 199 Part D – Segment reporting 218 Part E – Information on risks and the relative hedging policies 219 Part F – Information on Capital 275 Part G – Business combination transactions concerning companies or lines of 281 business Part H – Transactions with related parties 282 Part I – Share based payment agreements 290 Attachments 291 4 Notice of call of the Extraordinary and Ordinary General Meeting of the Shareholders An Extraordinary and an Ordinary General Meeting of the Shareholders of Banca Popolare di Bergamo S.p.A is convened to be held on 10 th April 2008 at 03.00 p.m. at the registered address of the Bank, Piazza Vittorio Veneto 8, Bergamo, to resolve on the following A G E N D A Extraordinary meeting 1. Amendment to the following articles in the Corporate Statute: art. 1, art. 17 – new denomination of the Group to which the Bank belongs; art. 5, art. 14 – integration of further details consistently with provisions in the Italian Civil Code; art. 26 – granting of tasks/powers to the Statutory Board of Auditors as set out in art. 52 of Legislative Decree 385/1993 (Consolidated Law on Banking); art. 31 – reformulation of first paragraph concerning use of financial year profits following write-off of use of profit shares foreseen for staff social security and pension and amendment of maximum profit share to be used for welfare and charity activities. Ordinary meeting 1. Presentation of the draft Annual Report as at and for the year ended 31.12.2007 – after the Reports of Board of Directors, Statutory Board of Auditors and Independent Auditors KPMG S.p.A. - and consequent resolutions; 2. appointment of members of the Directors’ Board after, as set out in the Corporate Statute: − determination of office duration (art. 17, par. 4), − determination of members number (art. 17, par. 1); 3. determination of remuneration to members of the Board of Directors and of the Executive Committee, complying with art. 2389 of the Italian Civil Code and art. 17, par. 9, of the Corporate Statute; 4. determination of an attendance fee to be paid based on attendance to Corporate Bodies meetings. Participation in the General Meeting is governed by the provisions of the law. Bergamo, 20 th March 2008 The Chairman of the Board of Directors Emilio Zanetti 5 6 Banca Popolare di Bergamo S.p.A. Banca Popolare di Bergamo S.p.A., formed on 25 th March 2003, started its banking operations on 1 st July 2003, as Network Bank of the then newly-formed BPU Banca Group. Again on that date the transfer to it of the lines of business took effect, consisting principally of the branch network of Banca Popolare di Bergamo – CV S.c.r.l. founded in 1869, along with the authorisation to operate as a bank issued by the Governor of the Bank of Italy on 24 th June 2003. As in the past years, also in 2007 the Bank has worked for the attainment of the objectives defined in the strategic lines established by the Parent Bank. The main event of 2007 in which the Bank has been – indirectly - involved was the merger of Banca Lombarda e Piemontese S.p.A. into BPU Banca S.c.p.A.. The merger plan, as well as the change in the Parent Bank denomination to UBI Banca S.c.p.A., was duly approved during the Extraordinary General meetings of the two Groups held on 3 rd March 2007. The operation has been effective as from 1st April 2007. Such merger – which had already been announced in November 2006 – gave rise to a new Group with adoption of a multi-function, federal and integrated organisation model in which different banking, financial and insurance companies are given the task to carry out a unique entrepreneurial project following the Parent Bank’s directions. Both Groups intend to pursue these objectives increasingly preserving and adding value to their presence on the territory and to the strength of their brands. A governance system has been adopted enabling to obtain a strong direction and government unity and ensuring, on the basis of equal-terms principles, the representation within the new UBI Banca Group of the original components belonging to BPU Banca and Banca Lombarda respectively. On 1st March 2007 an agreement was reached regarding the renewal of the “company integrative agreement” expired on 31 st December 2005. The Merger Business Plan 2007 to 2010 was duly approved by the Board during a meeting held on 11 th June 2007. Consistently with the overall plan of the UBI Group, this plan provides for implementation of significant synergies through integration and centralisation of higher specialised functions and structures supporting operations in commercial distribution processes controlled by the Network Banks. In August an agreement protocol was signed with members of Group trade unions regarding a procedure for the Integration Plan of the UBI Group and in compliance with the current laws and company agreement provisions. A plan has been established for leaving incentives involving a total of 106 resources identified as at today. Following the merger and subsequent new Parent Bank company name, Banca Popolare di Bergamo S.p.A., during a meeting held on 25 th June 2007, confirmed their will to renew for the period 2007 – 2009 the option with the Parent Bank for the group taxation regime, better known as “national fiscal consolidation”, as settled in art. 117 to 129 of the Presidential Decree 917/1986, Consolidated Law on income taxes. In November, based on a plan outlined during the year by the Bank’s Board of Directors, the Bank transferred four branches – based in the district of Milan - to Banca Popolare Commercio e Industria S.p.A; at the same time three new branches were opened during the year, one in Lombardy (Castiglione delle Stiviere – Mantua) and two in Latium (Pomezia and Monterotondo – Rome). Complying with the provision of 13 th April 2007 by the Competition and Market Authority (antitrust authority) regarding UBI Group, in order to get approval on its constitution – 7 fixing a maximum limit of 35% of market share for short-term funding in the districts of Bergamo and Brescia – together with Banca Popolare Commercio e Industria S.p.A. and Banco di Brescia S.p.A., the Bank has offered for sale starting from 31 st December 2007 eleven branches purchased by Banca Popolare di Vicenza S.c.p.A.. In detail, seven branches are based in the district of Bergamo (Bergamo – Monterosso, Costa di Mezzate, Lallio, Dalmine – Mariano, Mozzo, Alzano Lombardo – Nese, Sorisole – Petosino) and four in the district of Brescia (Brescia – S. Anna, Brescia – Via Crocifissa, Breno, Lumezzane). Finally, new openings for the period 2008-2010 are being identified. In November the adoption of a new organisation model was approved – with implementation to take place during 2008 – in order to create a new and even more streamlined operation structure, also thanks to the introduction of a new credit model establishing a clear distinction between credit and commercial functions and to the adoption of new credit lines regulations in order to make loans granting processes more efficient. Regarding distribution structure, the new commercial model provides for implementation, also for Corporate and Private markets, of a structure based on the various operations with creation of new network units named Corporate Banking Units (CBU) and Private Banking Units (PBU).