Board of Director’s Operating Report for Financial Statement at December 31, 2008 126 Financial Statement 2008 - Management Report Shareholders, The 2008 financial statements, prepared on the basis of IAS/IFRS international accounting standards, report on your company’s twenty-eighth year in business, closing with a profit of 21.2 million euro (+ 18.7% over 2007), after payment of 7.8 million Euro in taxes. R.O.E. was 27.40%, significantly higher than in 2007 (24.05%). On the topic of competitive positioning, note that in 2008 the company ranked fifth in its sector in terms of outstanding credit, with a market share of 6.0%, and fourth in terms of advances and payments made, with a market share of 6.7% (source: Assifact). The annual profit, though it did reflect the effects of certain non-recurrent events, is definitely noteworthy in terms of management of regular operations. In the year 2008 profit margins reflected replacement of about 3.0 million Euro in gains from purchases of credit not at face value (now a residual activity), which were entered under “Other operating income” in 2007, with profit margins from characteristic operations, marking the completion of the commercial strategy undertaken since 2006 aiming to improve performance on the working capital market for customer companies, the number of which has definitely grown (+ 43% active transferring customers). The Operating Margin was 49.2 million euro, up 12.4% over 2007. This performance is primarily attributable to Interest Margin dynamics, which have settled at 34.0 million euro (+26.4% over 2007), while Net Commissions were worth 15.2 million euro (-10.0 % since 2007). Financial performance is attributable to the interest rate dynamic and to a market scenario characterised by widespread shrinkage of the availability of funds. The decision to reduce business with the public sector and the decision to leave high risk market sectors which earned high commissions also explain the reduction in revenues from commissions. Events of significance in regular operations and non-recurrent events included: a) the positive impact of redemption of extra-accounting deductions from “Quadro EC”, permitted under Law 244/2007 (2008 Budget), with a net fiscal benefit of 2.3 million Euro in terms of lower deferred taxes; b) resumption of the Risks and Charges Fund for provisions set aside in previous years for the Parmalat revocatory action, recently settled with signature of a settlement agreement, resulting in release of about Euro 2.0 million from this fund and contributing the same amount to annual net profit. 2008 was characterised by strong growth among customers of the UBI Banca banking group, leading to satisfactory results in terms of volumes but not yet in terms of revenues, as a result of the transactions conducted (guarantees without financing), the clientele selected (Retail and Lower Corporate) and pricing policies, 127 Financial Statement 2008 - Management Report which are initially still aligned with those applied by the bank. This resulted in an Operating Margin on Turnover of 0.37%, far from the expected percentage of 0.76%. Significant initiatives were therefore undertaken in the last quarter of the year: re- pricing of clientele in terms of commissions and a project in collaboration with the parent company aimed at intensifying synergies with banks through a targeted commercial approach, assigning internal bank staff and implementing pricing policies specifically tailored to different segments of the clientele. These actions are expected to produce substantial economic and commercial effects in 2009. World-wide recession has had a significant impact on commercial action, resulting in progressive withdrawal from companies in high risk sectors (such as consumer electronics, construction and textiles) and shrinkage of volumes and revenues from economic groups with which we have specific agreements. Business with the Electrolux Group decreased by an average of 20%, continuing into the month of January 2009. On the other hand, our commercial policy of setting up business partnerships or agreements with companies of high standing continued with the goal of undertaking initiatives capable of guaranteeing significant ongoing volumes of business. An agreement was signed with the Rosso Group, which established the company Incentive Factor. In the public sector, we continued our policy of optimisation aimed at reducing the impact of this business area on the company’s revenues through a number of operations which attempted to reduce exposure toward the Region of Lazio in particular. This process will be completed in April 2009 with collection of a large number of credits. Finally, our international activities continue to grow, based on export and import factoring operations aimed at developing relations with customers of high standing, characterised by good profitability with a very low credit risk, working on both mature and developing markets. In this regard we wish to note the opening of a Polish Branch in Krakow in the last quarter of 2008 and a business partnership with Turkish factoring company Strateji Factoring Hizmetleri A.Ş. which generated a turnover of more than 7 million euro and revenues of about euro 230 thousand in 2008. Following the opening of the UBI Factor S.p.A. branch in Poland (Krakow), all activities preparatory to development of captive factoring operations for the Electrolux and Marcegaglia Group supplier pool were completed, and about 8 million euro in transactions were conducted with Polish suppliers of the FIAT Group; the branch office received operating regulations and was provided with a sufficient number of employees for internal development activities, working in a close partnership with our Pordenone operating unit, which acts as Deputy Manager. Cost/Income was 39.95%, as compared to 44.21% in the previous year, a variation of -4.26 percentage points. Administrative costs were decreased for the second year in a row, settling at Euro 20.5 million (-5.1%). Total turnover from transactions in the year was 5,511.0 million Euro (+12.3% over 2007). Credits to customers totalled 2,133.9 million Euro, up 10.9% over the year 2007 (1,924.1 million Euro). 128 Financial Statement 2008 - Management Report Net non-performing assets due to outstanding credits total 5.1 million euro (3.1 million euro on 31/12/2007), representing 0.24% of all loans, with a coverage of 65%, and impaired credits total 7.5 million euro (6.4 million euro on 31/12/2007), representing 0.35% of all loans. It is also worth noting that impaired items mainly represent credits acquired from the public sector, and more specifically from Institutional Commissarial Operations, the residual duration of which upon collection suggested that they be assigned to this credit category but which certainly does not question their full collectability. Adjustments of the value of analytic entries on credits, worth 3.9 million euro, are considered congruous, on the basis of prudent assessments performed taking into account their total value and market trends. The year 2008 saw the liquidation of Financiera Veneta. This generated 1.3 million Euro in gains, recorded under the Shareholders’ Equity Reserve, after subtraction of deferred taxation. In 2008 the company also purchased 1% of the share capital of UBI Sistemi e Servizi, effective April 24 2008. On the content of Banca d’Italia/CONSOB /ISVAP Documento n° 2 dated February 6 2009, Banca d’Italia, Consob and ISVAP Coordination Table for application of IAS/IFRS, on the subject of “Information to be supplied in financial reports on continuity of business, financial risks, audits due to reduction of the value of assets and uncertainties in the use of estimates”, combined with the provisions of section 2428 of the Civil Code, note that the company is, at present, capable of continuing its operative existence in the foreseeable future and the financial statements that follow are compatible with this assumption. In view of the variety of factors contributing to current and expected future profitability, the plan of payments and collections from contractual counterparts, and the source of financing – primarily the parent company UBI Banca – your company does not at present have any doubt or uncertainty as to the assumption of continuity. In this regard please note that there are no negative indicators, such as, by way of example, those identified in Document 570, “Company Continuity”, recommended by CONSOB resolution n° 16231 on November 21 2007. With reference to the provisions of art. 6, chap. 2 of Banca d’Italia’s July 31 1992 order, and on the basis of the provisions of section 2428 of the Civil Code, please note the following: a) Research and development: the company did not conduct Research and Development during the year. b) Number and face value of own stocks and shares and those of the parent company in portfolio: the company has never directly or indirectly owned its own shares or shares in parent companies. c) Predictable management trends: a process of analysis of other European markets is underway, particularly the Turkish market, in relation to which the 129 Financial Statement 2008 - Management Report company, in close collaboration with the international area of the UBI Banca Group, will in the first half of 2009 proceed to investigate the possibility of forming business alliances with local counterparts in order to offer financial services to a shared clientele and other customers for import, export and domestic factoring activities. d) New organisational structure: consistently with the guidelines set forth in the “2007-2010 Industrial Plan for Integration”, on May 28 2008 the company’s Board of Directors resolved on a new organisational structure, which was gradually applied in the course of the second half of 2008 and which went into effect in full swing in October 2008. This organisational structure recently found its full expression in the establishment of an independent Compliance organisation with the features required by Banca d’Italia.