Banca del Mezzogiorno – MedioCredito Centrale S.p.A. Inaugural Social Bond Executive Summary • Strategic Government-linked entity promoting investments in the South of Italy • Unique business model focused on development support • Strong financials within the Italian banking system • Rated Ba1 by Moody’s / BBB- by S&P • Inaugural Social Bond Transaction 2 Content 1 MedioCredito Centrale ("MCC") Overview 2 Financial Overview 3 Social Framework 4 Transaction Overview MCC Overview Group Profile and Mission MCC at a Glance MedioCredito Centrale S.p.A.: a Bank 100% owned by Italian State through Invitalia MCC Evolution and Overview Board of Directors • Established in 1952 as a public entity, its mission was Chairman Massimiliano CESARE focused on delivering public finance and supporting the expansion of Italian companies overseas. In 2011, following CEO Bernardo MATTARELLA the MEF developing program for the southern Italy, its corporate name was changed to Banca del Mezzogiorno- Directors Pasquale AMBROGIO MedioCredito Centrale Gabriella FORTE • Since August 2017 the Bank has been owned by Invitalia Leonarda SANSONE S.p.A. (formerly Sviluppo Italia S.p.A.) and regulated by the Bank of Italy with a full banking licence • No branch network (Banca di II Livello), MCC operates under Shareholding Structure cooperation agreements with the main Italian banking groups • Total employees as of 31/12/2018, 283: 14 managers, 163 senior officers and 106 employees (and 9 trainees) Board of Statutory Auditors Chairman Paolo PALOMBELLI Standing Auditors Carlo FEROCINO 100% Marcella GALVANI 100% Alternative Auditors Roberto MICOLITTI Sofia PATERNOSTRO 5 Key Stages of MCC’s Development A more than 60 years long history of success, with focus on South of Italy SMEs development since 2011 1952 1994 1999 2007 2011 2017 TODAY Poste Italiane acquires 100% of Law no. 949 – July 25 1952 In December 1999, 100% shares MCC, pursuant to a MEF project for Definition of the new (Measures for the of MCC sold by the Ministry of the setting up of Banca del Guidelines: focus from development of economy the Economy and Finance to Mezzogiorno with a view to retail to SMEs and and employment) Banca di Roma contributing to the development of other corporates companies in the South of Italy Conversion from public entity to limited liability company. The new In August 2017 MCC is purchased MCC becomes part of the UniCredit mission was to develop project & by Invitalia(1), the Economic Group as its public sector division export finance activities, corporate Development arm of the MEF finance, leasing and factoring (1) Invitalia, an operating entity of MEF whose mission is to promote the development and competitiveness of the national economic system, with a particular view to reducing the gap between the economy of the South of Italy and the rest of the Country 6 Organisational Structure and Governance MCC is committed to the highest standards of corporate governance Throughout the Bank, responsibilities and related controls are defined and delineated BOARD OF DIRECTORS President MASSIMILIANO CESARE Hierarchic Reference Internal Audit Functional Reference CEO BERNARDO MATTARELLA Data Protection Officer HR and Org., Compliance and Administration Risk Management Legal, Purchases Corporate Affairs Antilaundering and Finance and Services Technology, Guarantee Development Innovation and SMEs Channel Corporate Channel Credit Department Supporting Finance Digital Services Instruments 7 Mission Main drivers of MCC mission are set out in the Establishing Law and in the By-Law Mission Art. 2, Law nr. 191, Dec. 23 2009 Ensure the presence of a credit Art. 3, Articles of Associaton institution able to foster the economic • • Increase the availability of growth and development of the South of Act as a guarantee bank in the financing within the South of Italy South of Italy, also by Italy supporting the collective • Support creditworthy business1) credit guarantee consortium initiatives (“consorzi di garanzia collettiva dei fidi”) activities • Channel resources into • Implement and integrate public • Manage the Guarantee Fund economic initiatives that2) foster policies to develop the economic the creation of jobs in the system through a wide range of and other public subsidised South of Italy financial instruments funds • Help the SMEs’ growth starting from 3) those located in the South of Italy • Support infrastructure projects 8 The New Business Model Changing rules to meet emerging economic opportunities and social needs Focused Synergetic Flowing • Work in synergy with Invitalia to • Shutdown of new Retail lending further promote financing aimed at • Improve the operating structure and the creation and development of • Develop SMEs product supply reduce costs businesses • Strengthen distribution channels • Increase Digital operations • Develop distribution agreements with other credit institutions and participate in syndicated loans Evolution of our Value Proposition Redefining the Operating Model 9 Overview of Business Activities Strategic priorities Development Lending activties • Focus on investments in SMEs and other corporates, • Loans - faster access to credit facilities for SMEs particularly in the South of Italy • Development of a SME Website to provide SMEs with • Promotion and support of infrastructure projects training and self-assessment tools and facilitate access • Integration of activities with subsidies financed to subsidised credit through domestic and European Union funds • Lending services with a focus on SMEs based in • Offer of bank guarantees to accelerate public sector particular in the South of Italy investments Acting as second-tier bank • Agreements with other credit institutions Actions for development • Participation in syndicated loans • Management of subsidised instruments to promote research and innovation and support investment in Acting as a service bank new manufacturing plants and machinery • Implementation of public policies in order to speed up • Subsidised loans, contributions towards interests and the finance granting processes while containing principles, guarantees on loans, participation in risk related costs capital investments, negotiated capital • • Management of the Guarantee Fund and other Guarantees - cooperation with Guarantee Fund to subsidised funds focus on SMEs incentives 10 Strategic Model The diagram is a representation of the current business activities of MCC SME’s Corporates • Direct Channel • Direct Channel • Indirect Channel • Banks Channels Banks SME’s Confidi • Semi-automatic management of unsecured financing operations up Financial SME’s Current Activity of to €200k Partners Institutions • Entry of unsecured financing Website the Bank operations of over €200k up to Intermediaries €500k Associations /Others Marketing Marketing & New Products Products • CRM • Advance payments and Complementary • Digital Marketing facilities • Strategic and Operational • Factoring Marketing • BEI-MIUR • InnovFin • Basket Bond/ABS 11 “Prevalenza” – Support South of Italy’s Economy (1/2) In compliance with its statutory function, MCC provides credit support mainly to SMEs in the South of Italy Loans to the South of Italy At least one of the following criteria must be satisfied: 1) the borrower is based in, or has a registered office and is operative within, the South of Italy 2) the borrower does not have a registered office within the South of Italy but the loan proceeds are utilised for business projects or for the creation of jobs in the South of Italy 3) the provision of funding to other credit institutions is for the specific purpose of lending to areas within the South of Italy 4) acquisition of portfolios comprising loans whose borrowers are located in the South of Italy 12 “Prevalenza” – Support South of Italy’s Economy (2/2) To monitor its own activities the Issuer has identified the following indicators, which are monitored semi-annually Lending activties Actions for development 1) Loans (amount, existing) to the South of Italy on total 1) Aggregate amount of lending made available to businesses loans(*): 55.9% in the South of Italy related to the Issuer’s activities as 2) Business customer (number) based in the South of Italy manager of public subsidy schemes: out of total business customers: 66.7% • € 13.4 bln of loans with guarantees given pursuant 3) Territorial presence in the South of Italy: 80% to the Guarantee Fund (+ 13.6% vs 2017) 4) Business loan files (number) for the South of Italy: • € 1.33 bln of subsidised loans and grants pursuant 59.71% to the Fondo Crescita Sostenibile (FCS) (+ 11.5% vs 2017) (*) Minimum target 50%, • € 1.55 bln of subsidised loans and contributions from other national and regional subsidy schemes 2) Resources assigned to companies in the South of Italy through co-lending agreements with third parties: € 138 mln 3) Study, promotion and social support initiatives: in 2018 the Issuer promoted or participated in numerous initiatives such as events aimed at promoting awareness of the Guarantee Fund and other local social mobility Data as at 31 December 2018 initiatives 13 The Guarantee Fund (Fondo di Garanzia) The most important public subsidy fund, established in 2000 and managed by MCC on behalf of the Ministry of Economic Development Its purpose is to facilitate access to financing for SMEs through the granting of a public guarantee • Members of the Investment Committee Financing(€/bn) Fund are named both from Government and Management Financial Institutions • Guarantee • Counter-guarantee