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 Banking Group Registered office: I-Vicenza - Via Btg. Framarin, 18 - Tax Code 00204010243 - Vi- cenza Business Register 1858 Bank listing n. 1515 - Capital stock as of 12.31.2005 € 183,816,738.00 Banking Group 5728.1 2005 ANNUAL REPORT The (consolidated) financial statements have been translated from those issued in Italy, from the Italian into the English language solely for the convenience of international readers. INDEX Directors and officers 3 Financial highlights 4 Report on operations 7 Report of the Board of Statutory Auditors 36 Consolidated balance sheet 38 Consolidated statement of income 40 Explanatory notes 51 Attachments: Adoption of IAS/IFRS 218 Changes introduced by IAS/IFRS 219 Balance sheets and statements of income of the consolidated companies 237 Independent Auditors’ report 287 Consolidated balance sheet in Euro and US Dollars 292 Consolidated statement of income in Euro and US Dollars 294 Branch network 295 2 BANCA POPOLARE DI VICENZA BOARD OF DIRECTORS Chairman * Giovanni Zonin Deputy Chairmen * Giovanni Bettanin * Marino Breganze Director and Secretary to the Board * Giorgio Tibaldo Directors Mario Bonsembiante Giuseppe Di Lenardo * Zeffirino Filippi Franco Miranda Gianfranco Pavan Paolo Sartori * Fiorenzo Sbabo * Gianfranco Simonetto Maurizio Stella Paolo Tellatin * Ugo Ticozzi * Giuseppe Zigliotto BOARD OF STATUTORY AUDITORS Chairman Giovanni Zamberlan Auditors Giacomo Cavalieri Laura Piussi Alternate auditors Giuseppe Mannella Marco Poggi BOARD OF ARBITERS Chairman Nicola Amenduni Arbiters Gian Paolo Boschetti Pierantonio Maule Alternate arbiters Gianfranco Corà Altegrado Zilio General Manager Luciano Colombini Joint General Manager Samuele Sorato Deputy General Manager Ippolito Fabris Deputy General Manager Franco Tonato * Members of the Executive Committee. 3 FINANCIAL HIGHLIGHTS BANCA POPOLARE DI VICENZA GROUP Balance Sheet (in thousand of Euro)Costi 31 December 2005 31 December 20041 Net total assets 21,116,434 17,696,774 Net total loans 16,241,521 12,855,676 Stockholders' equity 2,275,572 1,716,752 1 excluding IAS 32, 39 and IFRS 4 application Balance Sheet (in thousand of Euro)Costi 31 December 2005 01January 20052 Direct deposit 14,189,022 12,764,493 Loans to customers 14,773,936 12,564,364 2 including IAS 32, 39 and IFRS 4 application Statement of income (in thousand of Euro)Costi 31 December 2005 31 December 20043 Net interest income 441,750 383,615 Net interest and other banking income 790,169 681,462 Net income from financial activities 687,730 618,989 Net income (loss) for the year 125,770 117,656 3 excluding IAS 32, 39 and IFRS 4 application Financial ratios (%)Costi 31 December 2005 31 December 20044 Net income (loss) for the year / Stockholders' equity 5.53% 6.85% Net income (loss) for the year / Net total assets 0.60% 0.66% Net income from financial activities / Net total assets 3.26% 3.50% Stockholders' equity / Net total assets 10.78% 9.70% Stockholders' equity / Net total loans 14.01% 13.35% 4 excluding IAS 32, 39 and IFRS 4 application 5 BANCA POPOLARE DI VICENZA PARENT COMPANY Balance Sheet (in thousand of Euro)Costi 31 December 2005 31 December 20041 Net total assets 15,980,120 12,795,539 Net total loans 12,369,109 9,522,481 Stockholders' equity 2,310,834 1,756,961 1 excluding IAS 32-39 application Balance Sheet (in thousand of Euro)Costi 31 December 2005 01January 20052 Direct deposit 9,545,975 8,764,973 Loans to customers 10,480,570 9,073,890 2 including IAS 32-39 application Statement of income (in thousand of Euro)Costi 31 December 2005 31 December 20043 Net interest income 269,504 251,524 Net interest and other banking income 528,231 482,528 Net income from financial activities 439,710 428,381 Net income (loss) for the year 92,266 90,983 3 excluding IAS 32-39 application Financial ratios (%)Costi 31 December 2005 31 December 20044 Net income (loss) for the year / Stockholders' equity 3.99% 5.18% Net income (loss) for the year / Net total assets 0.58% 0.71% Net income from financial activities / Net total assets 2.75% 3.35% Stockholders' equity / Net total assets 14.46% 13.73% Stockholders' equity / Net total loans 18.68% 18.45% 4 excluding IAS 32-39 application 6 BANCA POPOLARE DI VICENZA BANKING GROUP CONSOLIDATED REPORT ON OPERATIONS Group structure The various initiatives taken by the Group during 2005 were mainly designed to achieve the ob- jectives contained in the new 2005-2007 Business Plan for the Bank and Group, approved by the Board of Directors on 22 February 2005. The new plan’s goal is to achieve a further im- provement in the Group’s productivity, efficiency and profitability. While it represents continu- ity with the recent past, it lays the foundations for exploiting new opportunities for external growth that creates value for stockholders. The Group’s growth in size and its organizational structure, already rationalized in the past, mean that the bedrock of the 2005-2007 plan is the explicit, structured definition of rules de- signed to organize the Group along federal lines, geared to maintaining its foothold in local mar- kets under the direction of a Corporate Center forming part of the Parent Bank. The strategic guidelines contained in the plan for pursuing the goals of further improvements in the Group’s productivity, efficiency and profitability are: • consolidation of the growth of Banca Popolare di Vicenza, on the basis of strategies already adopted in recent years; • rationalization of the Group’s cost structure, by revising organizational processes and autho- rization limits for expenditure/investment considered of strategic for the Group, by complet- ing the centralization and rationalization of back office activities and by reorganizing and ra- tionalizing departmental information systems; • improvement in the profitability and efficiency of the subsidiary banks, including through lo- cal expansion by internal means; • growth by external means, with the goal of reaching the target size of 800 branches; A number of projects in implementation of the Business Plan have already been started, such as the revision of rules on Group spending and investment limits, the definition of new rules for the Group’s governance and the enhancement of its commercial structure. Details of the projects and activities in implementation of the 2005-2007 Business Plan can be found in a specific sec- tion of the Report on Operations accompanying the Bank’s statutory financial statements. The Board of Directors voted on 30 August 2005, under the authority received from the stock- holders, to increase capital stock by approximately Euro 489 million, the purpose being to strengthen its capital structure and to support the business expansion being pursued by the Bank and Group as a whole. This operation, terminating at the end of October, was very suc- cessful, reflecting stockholder confidence in the Bank’s management and results. New strategically important ventures undertaken during the year regarding equity investments included the incorporation of the new company known as Prestinuova, specializing in the dis- bursement of loans secured by the withholding of one-fifth of wages. The Group continued to work during 2005 on achieving a more rational, effective management of its equity investment portfolio. The principal actions undertaken were as follows: Partnership between the BPVI Group and the 21 Investimenti Group Following on from the joint venture agreement consummated in October 2004 between Banca Popolare di Vicenza, Nordest Merchant S.p.A., 21 Investimenti SpA and 21 Investimenti Part- ners SpA, designed to reorganize the business of merchant banking and private equity, the pur- chase of the following equity interests was completed in January 2005: • BPVi acquired 20% of the capital stock in 21 Investimenti Partners S.p.A., while selling the latter its 50% interest in 21 Partners SGR S.p.A.; • 21 Investimenti Partners SpA acquired 20% of Nordest Merchant S.p.A. NEM SGR S.p.A. started doing business at the start of 2005, having obtained Bank of Italy au- thorization to carry out asset management services. It set up “NEM Imprese”, a closed-end in- 7 vestment fund for qualifying investors amounting to Euro 30 million, which was fully subscribed in May 2005. The venture has started to produce its first positive results, with Nordest Merchant closing the year with net income of Euro 3.9 million and the funds managed by 21 Partners SGR S.p.A. ex- pected to perform well. Prestinuova A new company was set up on 8 June 2005 under the name of Prestinuova (with its registered office in Palermo), with the purpose of increasing the BPVI Group’s penetration of the con- sumer credit market. This company is wholly-owned by the Group, with 90% of its shares held by Banca Nuova. The company disburses credit and provides loans secured by the withholding of one-fifth of wages, now also through the business transferred by its parent Banca Nuova with effect from 1 January 2006. The decision to attack this market with a specialized company is based on the growth in consumer credit reported in other European countries relative to Italy, on the basis of which the domestic market is expected to grow by an average of 20% per annum in the next 3 years. In this context Banca Nuova entered into a three-year agreement with IN- PDAP (public-sector employees pension fund), together with Banca Nazionale del Lavoro, to provide personal loans secured by one-fifth withholdings from income and home loans to pen- sioners.