CONSOLIDATED ANNUAL REPORT 2007 A. Palladio, Palazzo Thiene (XVI century) - Historical headquarters of the Banca Popolare di Vicenza Società Cooperativa per azioni - Member of the Italian bankers association an italian interbank deposit protection fund - Parent of the Banca Popolare di Vicenza Bank- ing Group Registered office: I-Vicenza - Via Btg. Framarin, 18 - Tax Code 00204010243 - Vicenza Business Register 1858 Bank listing n. 1515 - Capital stock as of 31.12.2007 € 261,656,497.500 Banking Group 5728.1 CONSOLIDATED ANNUAL REPORT 2007 Translation from the Italian original which remains the definitive version. INDEX Corporate officers 3 Individual and consolidated financial ratios 4 Consolidated report on operations 7 Report by the Board of Statutory Auditors 48 Balance sheet 50 Income statement 52 Statement of changes in equity 54 Statement of cash flows 58 Explanatory notes to the consolidated Financial statements 61 Attachments: Remuneration of independent auditors 309 Financial statements of consolidated companies 311 Independent Auditors’ Report 371 Balance Sheet in Euro and Us Dollars 374 Income statement in Euro and Us Dollars 376 Branch network 377 2 3 CORPORATE OFFICERS BOARD OF DIRECTORS Chairman * Giovanni Zonin Deputy Chairmen * Giovanni Bettanin * Marino Breganze Managing Director * Divo Gronchi Director and Secretary * Giorgio Tibaldo Director Paolo Bedoni Alessandro Benetton Mario Bonsembiante Giovanni Fantoni * Zeffirino Filippi Franco Miranda Gianfranco Pavan Paolo Sartori * Fiorenzo Sbabo Maurizio Stella Paolo Tellatin * Ugo Ticozzi * Giuseppe Zigliotto BOARD OF STATUTORY AUDITORS Chairman Giovanni Zamberlan Acting Auditors Giacomo Cavalieri Laura Piussi Alternate Auditors Giuseppe Mannella Marco Poggi BOARD OF ARBITRATORS Chairman Gianfranco Corà Acting Arbitrators Gian Paolo Boschetti Pierantonio Maule Alternate Arbitrators Altegrado Zilio General Manager Samuele Sorato Deputy General Manager Franco Tonato Deputy General Manager Mauro Micillo Deputy General Manager Emanuele Giustini * Members of the Executive Committee. 3 INDIVIDUAL AND CONSOLIDATED FINANCIAL RATIOS 5 BANCA POPOLARE DI VICENZA GROUP Balance Sheet (in thousands of Euro)Costi 31/12/2007 31/12/2006 Net total assets 27,254,619 23,750,074 Net total loans 22,880,288 18,865,621 Equity 2,742,882 2,335,115 Balance Sheet (in thousands of Euro)Costi 31/12/2007 31/12/2006 Direct deposits 19,483,539 17,379,154 Loans and advances to customers 20,839,193 17,129,972 Income statement (in thousands of Euro)Costi 31/12/2007 31/12/2006 Net interest income 589,836 521,163 Net interest and other banking income 877,166 881,430 Net income from financial and insurance activities 735,722 761,583 Net income (loss) for the year 113,731 144,502 Financial ratios (%)Costi 31/12/2007 31/12/2006 Net income (loss) for the year / Equity 4.15% 6.19% Net income (loss) for the year / Net total assets 0.42% 0.61% Net income from financial and insurance activities / Net total assets 2.70% 3.21% Equity / Net total assets 10.06% 9.83% Equity / Net total loans 11.99% 12.38% 5 BANCA POPOLARE DI VICENZA PARENT COMPANY Balance Sheet (in thousands of Euro)Costi 31/12/2007 31/12/2006 Net total assets 21,411,027 17,536,287 Net total loans 17,629,767 13,997,441 Equity 2,783,607 2,347,771 Balance Sheet (in thousands of Euro)Costi 31/12/2007 31/12/2006 Direct deposits 13,884,771 12,393,895 Loans and advances to customers 14,912,681 12,035,469 Income statement (in thousands of Euro)Costi 31/12/2007 31/12/2006 Net interest income 355,272 312,919 Net interest and other banking income 582,679 590,637 Net income from financial activities 470,473 496,554 Net income (loss) for the year 110,090 120,025 Financial ratios (%)Costi 31/12/2007 31/12/2006 Net income (loss) for the year / Equity 3.95% 5.11% Net income (loss) for the year / Net total assets 0.51% 0.68% Net income from financial activities / Net total assets 2.20% 2.83% Equity / Net total assets 13.00% 13.39% Equity / Net total loans 15.79% 16.77% 6 BANCA POPOLARE DI VICENZA BANKING GROUP Consolidated Report ON Operations DURING 2007 The year 2007 will probably be remembered for the subprime mortgage crisis and its major re- percussions on international financial markets and the real economy, which showed visible signs of slowing in the last part of the year. In Europe, the tension on markets translated into a genu- ine crisis of liquidity and confidence, which continues, causing interbank rates to reach a level not seen in the recent past. The Italian economy, after emerging from a long period of stagnation in 2006, gradually lost momentum in 2007, with a marked slowdown towards year end. Despite this troubled context, the Banca Popolare di Vicenza Group has confidently pursued its growth strategy and objectives, based on the guidelines announced by the Board of Directors at the end of 2006. In fact, the Plan for 2007-2008 envisaged a sharp acceleration in the growth process, both by internal and external means. In terms of internally-led growth, Group banks were involved throughout the year in carrying out the ambitious program of new branch openings. Banca Popolare di Vicenza opened up 25 new branches, located in the regions of Veneto and Friuli and in the strategically important re- gions of Emilia Romagna and Lombardy. Cariprato carried on diversifying and strengthening its network in provinces adjoining its traditional stronghold in the province of Prato, opening 12 new branches. Lastly, Banca Nuova opened 3 branches in the region of Lazio (in Rome, Frosi- none and Latina), serving to strengthen this bank’s presence even more in this region. Internally- led growth has resulted in the opening of 40 new branches for the Group as a whole, meaning that the branch network is 7.6% larger than it was in 2006. In terms of externally-led growth, an important strategic and business alliance was made be- tween Banca Popolare di Vicenza and Cattolica Assicurazioni in January, becoming fully effective from September 2007 after obtaining all the required approvals from the Supervisory Authori- ties; this alliance is designed to create a strategic partnership in the provision of insurance, bank- ing and financial services, with each of the partners retaining their respective independence. In particular, the agreement between Cattolica Assicurazioni and Banca Popolare di Vicenza, with an initial duration of five years and automatic renewal for a further five, has involved (a) the Par- ent Bank taking an 8% interest in Cattolica Assicurazioni, by subscribing to the first tranche of a reserved capital increase (at 31 December 2007 the Parent Bank’s interest was 11.8% while the Group’s was 12.7% as a result of having bought shares directly on the market), and (b) agree- ments to dispose of interests in certain “product companies”, allowing the pooling of respective specialist skills in the life and pensions business, the loss insurance business, asset management services for institutional and private customers and the placement of banking products. The agreement with Cattolica Assicurazioni has also required the various companies involved in the partnership to enter into commercial agreements relating to the distribution of life and loss insurance products, to asset management and to the sale of banking products through a new credit mediation company called Cattolica-BPVI Mediazione Creditizia S.p.A., in which BPVI and Cattolica each have a 50% stake. Externally-led growth also received a big boost towards the end of 2007 after acquiring 61 branches in the provinces of Brescia (37 branches) and Bergamo (24 branches) from UBI Banca. This operation has allowed the Group to strengthen its presence in Lombardy, thereby creating a continuous link in this area sitting between the provinces of Verona and Milan. The acquisition of these 61 branches has also made it possible to reach in advance the target contained in the Growth Plan for 2007-2008 of 624 branches by the end of 2008, while also pursuing the Plan’s other goals which entail expanding into highly attractive areas and diversifying risk by extend- ing operations outside the Group’s traditional markets. Based on the provisional balance sheets of these branches at 31 December 2007, their total loans and deposits amount to 2,050 million euro, of which 470 million euro in direct deposits, 892 million euro in indirect deposits and 688 million in loans. The acquisition became effective on 31 December 2007, having obtained the necessary approvals from the Supervisory Authorities. The Group also took up a number of interesting opportunities in terms of equity investments, amongst which the acquisition of an initial 38.88% interest (47.44% at 31 December 2007) in 7 Farbanca S.p.A., a company specialized in offering banking services to the pharmacy sector. This operation, designed to strengthen the Group’s position in the health-care sector, will make it possible to reap important synergies with Farmanuova, a company 30% owned by Banca Nuova which operates in Sicily by providing loans to pharmacies and other recognized health-care op- erators. Other strategically important initiatives on this front have included the agreement made at year end to sell the entire 47.96% interest in Linea S.p.A., no longer deemed strategic, to Compass S.p.A. (Mediobanca Group) for 194 million euro, valuing the company at 405 million euro. The Group will nonetheless continue to have a presence in the consumer credit sector by distribut- ing Linea’s products and through Prestinuova, a wholly-owned subsidiary specializing in loans secured against “one-fifth of salary”. The need to have an appropriate level of capital adequacy in relation to the Group’s recent ex- pansion and to support its future development plans, has resulted in the preparation of a capital strengthening program, recently approved by the Parent Bank’s Board of Directors and designed to ensure continuous and complete observance of the various supervisory ratios at a group level.