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BANCA MEDIOLANUM S.P.A.CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS AS AT JUNE 30, 2017

Contents3 Corporate Bodies of Banca Mediolanum S.p.A.

4 Scope of Consolidation as at June 30, 2017

5 Consolidated highlights as at June 30, 2017

15 Group profile

22 Half-Year Report on Operations of the Mediolanum Group

48 Reclassified Consolidated Income Statement as at June 30, 2017

49 Summary of Half-Year 2017 business performance

74 Condensed Consolidated Half-Year Financial Statements as at June 30, 2017

82 Notes

213 Certification of the Condensed Consolidated Half-Year Financial Statements

216 Independent Auditors’ Report

218 Glossary

BANCA MEDIOLANUM S.P.A.CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS AS AT JUNE 30, 2017 2

HALF-YEAR FINANCIAL STATEMENTSCONTENTS

CORPORATE BODIES OF BANCA MEDIOLANUM S.P.A.

Ennio DorisPresidente

GiovanniPirovano

Vice Presidente

LuigiBerlusconiConsigliere

EdoardoLombardi

Vice Presidente

MassimoAntonio DorisAmministratore

delegato

AngeloRenoldi

Consigliere

CarlosJavier

TusquetsTrias de BesConsigliere

PaoloGualtieri

Consigliere

LuigiDel FabbroConsigliere

AnnalisaSara DorisConsigliere

BrunoBianchi

Consigliere

Consiglio di Amministrazione

Direttore generale

Presidente del Collegio SindacaleSindaco EffettivoSindaco Effettivo

Francesca MeneghelAdriano AngeliMarco Giuliani

Gianluca Bosisio

Dirigente preposto alla redazionedei Documenti contabili societari

Angelo Lietti

Segretario del Consiglio

Luca Maria Rovere

Deloitte & Touche S.p.A.

Società di revisione

Collegio sindacale

Corporate Bodies of Banca Mediolanum S.p.A.



SCOPE OF CONSOLIDATION AS AT JUNE 30, 2017

Mediolanum Vita S.p.A.

Banca Mediolanum S.p.A.

Bankhaus AugustLenz & Co.(Società tedesca)

Mediolanum Fiduciaria S.p.A.

GAMAX Management (AG)(Società lussemburghese)

Fermi & GalenoReal Estate S.r.l.

Mediolanum Assicurazioni S.p.A.

Mediolanum InternationalLife Designated ActivityCompany (Società irlandese)

Mediolanum Comunicazione S.p.A.

Capogruppo Gruppo Bancario

PI Servizi S.p.A.

Mediobanca S.p.A. (*)

Mediolanum Gestione Fondi SGR p.A.

Mediolanum Asset Management Ltd (Società irlandese)

Mediolanum International Funds Limited(Società irlandese)

Banco Mediolanum S.A.(Società spagnola)

Fibanc S.A. (Società spagnola)

Mediolanum Pensiones S.A., S.G.F.P. (Società spagnola)

Mediolanum GestiónS.G.I.I.C., S.A.(Società spagnola)

100%

99,998%

100%

99,999%

0,74% 2,58%

99,999%

100%

100%

100%

100%

100%

100%

92%

3%

5%

100%

100%

100%

C

C

100%

CapogruppoGruppo Assicurativo

Gruppo Bancario

Gruppo Assicurativo

Scope of Consolidation as at June 30, 2017

MEDIOLANUM FINANCIAL CONGLOMERATE - CORPORATE STRUCTURE AS AT 06/30/2017

(*) Since Mediobanca holds treasury shares, total shareholding amounts to 3.378% of voting rights.



Consolidated highlights as at June 30, 2017

CONSOLIDATED HIGHLIGHTS AS AT JUNE 30, 2017

The key results of the Mediolanum Group at the end of H1 2017

ECONOMIC PERFORMANCE

The Mediolanum Group closed the first half of 2017 with a net profit of Euro 196.4 million (Euro 170.3 million as at June 30, 2016). The half-year was characterised by a significant inflow under the scope of assets under management, which together with the positive performance by markets, enabled the generation of a constant rise in management fees on the comparative half-year. Please note that the period result was also influenced by two non-recurring events: on the one hand, the capital gain on the sale of the equity investment in Banca Esperia for Euro +41.6 million; by contrast, greater contributions were booked to guarantee funds, in the amount of Euro 25.8 million, due to the impairment of the Atlante I Fund.

CONSOLIDATED INCOME STATEMENTKey Items - Consolidated Income Statement

06/30/2017 06/30/2016

(*) The item also includes the write-down relative to the Atlante I Fund and Caricesena

Commission income

Net financial income

Net insurance income

Equity method valuation

Net income (loss) on other investments

Other revenues

Network commission expenses

Other commission expenses

Total costs

Net income

Taxesof which Guarantee fund contributions*

0

100

-100

-400

-300

-200

200

300

400

500

600

700

800

670.8

102.8

17.5 6.6 14.9

196.4

36.9

(31.5) (32.6)

(327.0)(260.9)

(32.5)

583.1

106.4

11.2 5.5 12.0

170.3

15.4

(5.7) (26.9)

(284.9)(223.3)

(28.1)

€/m



Commission income

Total costs

Net financial income

Net Result

€/m €/m

€/m €/m

Q1 Q1

Q1 Q1

Q2 Q2

Q2 Q2

Total06/30/2017

Total06/30/2017

Total06/30/2017

Total06/30/2017

Quarterly evolution of the key consolidated economic data

0

0

0

0

200

200

200

200

400

400

400

400

600

600

600

600

700

700

700

700

500

500

500

500

300

300

300

300

100

100

100

100

800

800

800

800

351.3

46.6

156.3

84.9

319.4

56.2

170.8

111.5

670.8

102.8

327.0

196.4




44.3

88.7

42.7

19.2

475.8

34.8

82.7

40.6

17.0

408.1

500400350100 200

Commission income: breakdown by nature

06/30/2017 06/30/2016

Other fees

Banking service fees and revenues

Entry fees

Management fees

Performance fees

0

€/m

Amortization and depreciation

Net provisions for risks

Guarantee fund contributions

Administrative costs

3002502001500 10050

255.8

31.5

5.7

17.5

14.9

22.3

14.7

249.7

€/m

Costs: breakdown by nature

06/30/2017 06/30/2016




Commission income: breakdown by operating segments

Germany

Spain

Banking

Asset management

Insurance

31.2

39.2

15.1

31.8

158.8

76.0

61.8

19.6

11.0

139.0

62.4

63.5

10.0

10.2

12.4

30.9

188.8

0

€/m

Costs: breakdown by operating segments

Germany

Spain

Banking

Asset management

Insurance

0

€/m

06/30/2017 06/30/2016

06/30/2017 06/30/2016


20015010050

200 35010050 150 400250 300

374.6

210.8

319.2



DATA FOR INFLOWS AND ASSETS1

Net inflows

Assets under Administration2

(1) It is specified that in order to standardise the comparison with the figures of the previous period, the portion of the contribution generated by Banca Esperia during 2016, has been excluded.(2) The figures relating to Assets under Administration and Net Inflows refer to Retail customers only.

€/m

72,208.6

68,814.6

67,253.4

64,343.1

4,346.8

3,880.3

608.4

591.2

0

Germany

Banca Mediolanum

Total assets under administration

Spain

06/30/2017 12/31/2016


06/30/2017

€/m

Germany

Spain

Banca Mediolanum Assets under management

Total net inflows

Banca Mediolanum Assets under administration

2,306.1

2,970.6

2,280.5

1,124.2

1,680.8

(312.8)

338.8

(0.4)

39.9

125.8

-500 0 500 1000 1,500 2,000 2,500 3,000

06/30/2016



CUSTOMERS

Performance of the Customer Base

Total Customers Italy3 First holders No. account holders4

(3) Customers of the Italian market holders of a Group product.(4) Customers of Banca Mediolanum holders of bank account.

Average assets per customer

Average assets per customer5

(5) Average Assets related to customers in the Italian market and relating to first holder products.


1,013

06/30/2017

1,010

1,198

Units (x 1,000)

600

700

800

900

1,000

1,100

1,200

1,066

886

756

1,043

878

795

1,040

879

761

1,082

907

835

1,128

943

916

1,180

981

1,077

897

774

12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016

987

€/t

12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 06/30/2017

20

30

40

50

60

70

80

42

49

54

5862

65 65

42



ALTERNATIVE PERFORMANCE INDICATORS6

Consolidated equity ratios as at June 30, 2017

Evolution of Common Equity Tier 1 Ratio

(6) The values presented in this disclosure may be subject to updating when reporting to the Supervisory Authorities. As at the date of this Condensed Consolidated Half-year Financial Statements the equity coefficients have been determined considering the profits as at June 30, 2017, net of the dividends estimated at 80% of the consolidated profits of the Mediolanum Group.

Common Equity Tier 1

21.9%Tier 1

21.9%Total Capital Ratio

21.9%


Data expressed in %

15

16

17

18

19

21

22

20

12/31/2014 03/31/2015 06/30/2015 09/30/2015 12/31/2015 03/31/2016 06/30/2016 09/30/2016 12/31/2016 03/31/2017 06/30/2017

18.5 18.518.8

19.7 19.720.2 20.4

20.0 20.1

21.9

18.4



Capital Adequacy - Financial Conglomerate7

€/m 06/30/2017 12/31/2016

Bank-oriented financial conglomerate

Equity 1,929 1,884

Banking capital requirements 721 942

Insurance capital requirements 706 705

Equity surplus (loss) 502 237

Evolution of the equity Surplus of the Financial Conglomerate8


Information on shares

06/30/2017 12/31/2016

Number of ordinary shares (units) 739,802,608 739,191,968

Listing at the end of the period (Euro) 7.3 6.8

Market capitalization (millions of Euro) 5,375 5,049

Shareholders’ equity (millions of Euro) 2,132 2,151

(7) Following the entry into force of the new Solvency II regime for insurance companies, it is noted that the data relating to the requirements of the insurance sector and the related portion of equity corresponding to the reconciliation reserve were calculated in accordance with the new sector regulations. (8) As from January 1, 2017, on the basis of Communication 1537199/16 of 27/12/2016, the new limits are in force as envisaged by the SREP process, equal to CET1 Ratio 6.7%, Tier 1 Ratio 8.6% and Total Capital Ratio 11.0%. It is specified that the data reported coincides with that sent to the Supervisory Authority as at the reference date. It is also specified that as at March 31, 2017, the figure published was 415 million.


€/m

200

400

600

0

12/31/2014 03/31/2015 06/30/2015 09/30/2015 12/31/2015 03/31/2016 06/30/2016 09/30/2016 12/31/2016 03/31/2017 06/30/2017

308 316 337 365325

395 419

335

237

403

502



Earnings per share

Euro 06/30/2017 06/30/2016

Basic earnings per share (basic EPS) 0.266 0.231

Diluted earnings per share (diluted EPS) 0.265 0.230

Consolidated risk indicators

06/30/2017 12/31/2016

Loans to customers (€/t) 8,000,951 8,623,784

Loans to customers - net impaired assets/ Loans to customers (values in %) 0.91% 0.78%

Value adjustments on gross impaired assets/ Gross impaired loans to customers (values in %) 45.83% 45.86%

Net non-performing/Loans to customers (values in %) 0.31% 0.25%

Operational structure

Resources 06/30/2017 06/30/2016

Number of Employees 2,715 2,725

Number of financial advisors 5,242 5,283

For the definitions used in this summary of results, reference is made to the Glossary section at the end of the document.




Group profile

GROUP PROFILE

1982Ennio Doris founds Programma Italia S.p.A. in a partnership with the Fininvest Group. It is the first network in Italy to offer global consultancy in the investments sector.

1996Mediolanum S.p.A. is created, the holding company of all sector businesses, which is listed on the Milan stock exchange on June 3, 1996.

1997Banca Mediolanum is created, an innovative multi-channel bank that exploits all the possibilities offered up by technology and multimedia solutions. Establishment of Mediolanum International Funds, management company with registered office in Dublin.

2000Mediolanum offers the first on-line trading services. Banca Mediolanum arrives in Spain and acquires the Fibanc Banking Group. Mediolanum joins the capital of Mediobanca and with it, thereafter jointly constitutes Banca Esperia, a joint venture and point of reference in the range of private banking services.

2001The Group’s European growth continues with the acquisition of Bankhaus August Lenz & Co. in Germany and Gamax Holding AG in Luxembourg.

2004Mediolanum Channel, the Group’s satellite channel, starts broadcasting. The PrimaFila Club is born, dedicated to customers with major assets.

History of the Group, highlights



GROUP PROFILE

2006As the evolution of the Global Consultant, the figure of the Family Banker® is created. In addition to the qualification of Financial Promoter, regulated by the Law, the figure of the Family Banker® becomes the hallmark of the Bank’s sales network and point of reference for its customers.

2009Mediolanum Corporate University becomes and operative reality of the Mediolanum Group, a primary training centre combining technology and high training capacity.

2013Mediolanum Assicurazioni S.p.A. is acquired - operative in the non-life sector - which thus joins the Mediolanum Group. Banca Mediolanum is the first to offer a money transfer service via smartphone (“ABI” prize for innovation in banking services).

2014Mediolanum S.p.A. becomes the Parent Company of the Banking Group. Banca Mediolanum is awarded the “ABI” prize for innovation in banking services.

2015As from 30 December 2015, Banca Mediolanum becomes the Parent Company of the Mediolanum Group with a view to rationalising the Group structure and assigning the Bank an increasingly central role.

2016Rationalisation of the Group structure continues. As, in recent years, Banca Mediolanum has accrued a specialisation in overseeing and competing more directly on the segment of customers with major assets, the need to maintain the joint venture with Mediobanca in the private sector, no longer applied. On November 16, 2016, an agreement was therefore stipulated with the latter for the sale of 50% of Banca Esperia. This agreement is subject to approval by the Supervisory Authority.

2017On April 4, 2017, once authorisation had been obtained from the competent authorities, ownership of shares relative to 50% of the share capital of Banca Esperia S.p.A., held by Banca Mediolanum S.p.A., was transferred to Mediobanca S.p.A.



GROUP PROFILE

Vision, mission and our values

Vision

The Mediolanum Group brings a change to the market in banking tradition, which goes well beyond technology alone. We offer customers a new concept of relations with the Bank, hinged on freedom and human relations, baptising it “Freedom in Banking”.

Mission

Offering “Freedom in Banking” means adopting simple, user-friendly technological solutions to offer families increasingly customised responses and complete, reassuring financial solutions based on transparency. The concepts of identity expressed by Vision and Mission take the form of concrete values, applied day-in, day-out to all activities - both internally and externally - carried out by all Group companies and collaborators.



GROUP PROFILE

“FREEDOM” IS THE CORNERSTONE VALUE ON WHICH BANCA MEDIOLANUM IS BASED AND WHICH CONSISTS OF GRANTING CUSTOMERS ACCESS TO THE BANK AT ALL TIMES.More specifically, the freedom of having a Family Banker® available, to best manage its savings and interests.

THE “RELATIONSHIP” THAT PUTS CUSTOMERS AT THE HEART OF THE MODEL AND ATTENTION OF BANCA MEDIOLANUM.Everything is designed to optimise the customer’s resources and satisfaction. The Family Banker® is responsible for entertaining relations with the customer and represents the Bank in his regard.

THE “COMMITMENT” TO BE A LEADER AND POINT OF REFERENCE.Banca Mediolanum strives to produce excellent services in its products, solutions in training and in relationships. It focuses on ethics, responsibility, entrepreneurial spirit and knowledge to increase the corporate value and that of people, and thereby disseminate a new approach to opportunities. Banca Mediolanum invests in solidarity, emergencies and development projects, with tangible, wide-reaching interventions.

“INNOVATION” INTENDED AS A CHANGE IN IDEAS AND TECHNOLOGIES TO GIVE ADVANCE LATENT NEEDS ON THE MARKET.The Bank controls and develops new instruments, processes and behaviour to ensure complete customer satisfaction through the efficient use of human, instrumental and financial resources.

The Banca Mediolanum values are:

FREEDOM

REPORT

COMMITMENT

INNOVATION



GROUP PROFILE

The Banca Mediolanum business model is developed to satisfy the extrinsic and intrinsic needs of each and every customer. Thanks to the numerous communication channels available, the customer can choose how to “use” “his” bank, deciding how and when he will communicate with it, as he prefers. Banca Mediolanum offers products and services that meet the needs of people and families, who are the main reference target, in a simple, easily-accessible fashion.

Through the Family Bankers® registered with the single list of financial consultants, Banca Mediolanum offers its customers assistance in managing assets and investment consulting, coupled with the products and services offered by the Bank itself. Banca Mediolanum does not simply sell products; it offers solutions. This principle allows it to operate in the various financial service business areas with the competence and flexibility necessary to best respond to the constant economic, tax, financial and regulatory changes. The investment strategy is the result of a careful study of the world markets and great skills developed by Mediolanum in asset management; the result is a limitation to the risk of concentration in investments.

Mediolanum Group business model



GROUP PROFILE

THE BANK BUILT AROUND THE CUSTOMER

Integrated business model - Banca Mediolanum

APP FOR SMARTPHONES (ALL OPERATING SYSTEMS)

CASH POINTS (WHOLE NETWORK)

FAMILY BANKER®TELEVISION SERVICES TELETEXT AND SMART-TV

WEBSITEAUTOMATED TELEPHONE SERVICES

(VRU/SMS)

AUTHORISED BRANCHES

BANKING TELEPHONE CENTRE

PT

Information on customers

shared in real time

Investment funds

Bank

Insurance

Client



Half-Year Report on Operations of the Mediolanum Group

HALF-YEAR REPORT ON OPERATIONS OF THE MEDIOLANUM GROUP

Half-Year Report on Operations of the Mediolanum Group

The Mediolanum Group closed H1 2017 with a net profit of Euro 196.4 million, compared to a net profit the first year of the previous year of Euro 170.3 million. The result for the half-year, before taxes, instead amounted to Euro 229.0 million compared to Euro 197.2 million in the same period of the previous year, an increase of +16%.

The period income statement is mainly characterised by two extraordinary events, which partly offset each other.On April 4, 2017, the sale was completed of 50% of the share capital of Banca Esperia S.p.A., which generated a capital gain for the Mediolanum Group of Euro 41.6 million (in the first half of 2016, capital gains from disposals, referring to CartaSi and Visa Europe, had respectively generated income of Euro 10.6 million and Euro 9.2 million). This positive effect on the period income statement has been partially balanced by the impairment applied by Banca Mediolanum to the Atlante I Fund (whose main investments are in Banca Popolare di Vicenza and Veneto Banca) for approximately Euro 23.3 million. This impairment was considered, as already when drafting the financial statements, as permanent and was therefore registered on the income statement.

As regards core business, during the period under review, a constant rise was recorded in commission income, equal to Euro +87.7 million, supported by the increase in management fees connected with the growth in assets (Euro +67.7 million) and fund subscription fees (Euro +9.6 million).

Net financial income instead records a decline of Euro -3.6 million; more specifically, net interest income drops by Euro -27.4 million due to the reduction in the marginal profitability of the securities portfolio as a result of the decline in interest rates, whilst the items measured at fair value record an improvement of Euro +23.8 million.




Network commission expenses increase by Euro 37.6 million, both as a consequence of the growth of commission income and due to the increase in incentive components linked to the growth of assets under management. Administrative expenses are basically stable (+2%).Contributions to Guarantee funds are up by approximately Euro 25.8 million on last year, due to greater costs relative to the Single Resolution Fund contribution, Euro +1.6 million, the impairment mentioned previously of the Atlante I Fund, equal to Euro 23.3 million and the impairment of the equity investment in Caricesena, of Euro 1.6 million. Net provisions for risks and charges are up Euro 7.6 million on the same period of 2016, with the change mainly due to the Spanish subsidiary, which, during the first half 2016, in consideration of a second instance ruling that was an improvement in the lawsuit, released a portion of approximately Euro 6 million of the provision originally established.

THE MACROECONOMIC ENVIRONMENT

During the first half of 2017, international political affairs characterised both financial markets and investment choices. Attention was turned to the monetary policy decisions of the main central banks, whose approach remained generally expansive, with the exception of the Federal Reserve, which has begun to increase interest rates. The world economy in the first half of 2017 showed signs of improvement, thanks to the reduced political risk in Europe, the rise in growth forecasts for corporate profits and recovering macro economic data. The political events that have involved many European countries resulted in widespread volatility in springtime financial markets: the Euro-sceptic movements, driven by the English vote that sanctioned the United Kingdom’s exit from Europe (the “Brexit” vote) were somewhat dampened after the vote in Holland and in France. In the early June elections of the United Kingdom, a strengthening was seen of pro-EU forces in continental Europe, whilst the British conservative party, although retaining a relative majority, came out weakened by the elections called by Theresa May. In the United States, by contrast, the settlement of the Trump administration has increased political uncertainty, both on the domestic front and as regards international policy. Investors’ attention also remains focussed on the reduction in oil prices.On the European front, the monetary policies of the ECB influenced the trend of the financial markets in the Eurozone. Before the Dutch parliament, Governor Draghi once again defended the accommodating choices made by the Central Bank, stressing that the benefits easily outweigh the costs and progress is more solid and widespread than it was a few months ago, when it still looked




to be rather fragile and dishomogeneous. Growth forecasts by the European Commission stress that the Eurozone economy has now entered its fifth year of recovery and that this recovery involves all Member States. The growth trend looks to continue decisively in 2017 and 2018. The Eurozone gross domestic product is expected to grow by 1.7% in 2017 and by 1.8% in 2018 (the previous forecasts were respectively 1.6% and 1.8%). The growth of the global economy, with the exception of the Eurozone, should instead be expected at 3.7% in 2017 and 3.9% in 2018, as compared with the 3.2% of 2016; this is thanks to the contribution made by the Chinese economy and the recovery of commodity prices, which will help the economies of other emerging countries. It is expected that in the Eurozone, inflation will grow to 1.6% in 2017 (from 0.2% in 2016), before going back to 1.3% in 2018. The lack of inflation drivers for a prolonged period of time or any more restrictive decisions by the ECB with respect to those currently in place, may harshen market conditions and result in a sharp increase to uncertainty and volatility. As regards the Italian banking system, the government has launched the decree that will enable Intesa Sanpaolo to acquire Veneto Banca and Banca Popolare di Vicenza and to proceed with an “orderly” liquidation, with the approval of the European Commission. The operation will, however, be subject to parliament approval in July. Deposits remain fully protected thanks to the burden sharing procedure whereby holders of senior debt are not called to contribute towards the allocation of losses. The commitment made by Intesa Sanpaolo envisages the decree being transformed into law, without changes, which may result in greater costs for the Bank. As regards the Monte Paschi case, early July, the European Commission announced its approval of the precautionary recapitalisation project for a value of Euro 8.1 billion, of which 5.4 billion held by the Treasury, whilst the remainder of the conversion of subordinate bonds will take place in compliance with burden sharing, in view of a restructuring plan that envisages an institute focus on small and medium enterprises, improved efficiency and better credit risk management. The plan also envisages the sale, at arm’s length conditions, of a portfolio of impaired loans, to a vehicle company financed by private funds (and partially by the Atlante II Fund).In relation to the matter of aid for Greece, the Eurozone Ministers of Finance reached an agreement at the Luxembourg Ecofin and released Euro 8.5 billion. In the monetary policy meeting of the Federal Reserve held on June 14, interest rates were increased in a range between 1 and 1.25%, as expected, after the rise of 25 basis points that took place during the December meeting and thereafter in March. More specifically, queries are raised as to the firm approach shown by Yellen in the last FOMC, showing the desire to continue with the normalisation, despite the lack of any decisive inflation boosts, as shown both by the last figure




relative to the May consumer price index and the cut to price growth forecasts for 2017. The Federal Reserve chose in any case to stress the imminent, gradual reduction of its assets, which will take place at a constant rate and which should lead gradually to a return to normality over the next few years.In turning our focus to Japan, the Bank of Japan (BoJ) held a meeting on June 16, in which the monetary policy was kept unchanged: considering the fact that inflation has come in at values that are still a far cry from the target, the governor of the BoJ, Kuroda, has declared that the monetary policy will continue to be accommodating, despite the fact that the Federal Reserve is pursuing its normalisation. The Governor then expresses his particular optimism over the economic prospects, stressing that private consumption will continue to support the country’s economic growth.In the United Kingdom, June 19 marked the official start to negotiations regarding the conditions under which the country will leave the European Union. As regards the monetary approach adopted by the Bank of England (BoE), the June 15 meeting closed with a vote in favour of keeping official interest rates unchanged. However, a major split was recorded between the members, due to the performance of inflation, which was back to almost 3% in the United Kingdom in May. The alternation of this trend of weakness and strengthening of the English currency is doubtless linked to the evolution of Brexit negotiations.

FINANCIAL MARKETS

In the first half and, in particular, the second quarter of 2017, international stock markets recorded a comprehensive improvement of +9.43% and +3.38% (MSCI World Index in Dollars). In the USA, the S&P500 recorded positive performance of +8.24% and +2.57%, the Nasdaq Composite, positive of +14.07% and +3.87%; the European stock exchanges generically recorded a positive change in the first half (+4.97% and -0.46% STOXX Europe 600); in Asia, the Japanese market (+4.81% and +5.95% Nikkei 225 in JPY) outperformed the Australian stock market (+0.98% and -2.45% S&P/ASX 200 in AUD), whilst that of Hong Kong showed a positive change in the reference periods (+17.11% and +6.86% HANG SENG in HKD). Emerging stock markets achieved respectively a positive result of +17.23% and +5.47% (MSCI Emerging Markets index in dollars).The spread between Italian and German debt on the ten-year maturity went from an initial 161 basis points to 199 as at March 31 to 169 as at June 30, while on two-year maturity it went from an initial 65 basis points to 73 as at March 31 to 48 points as at the end of the half-year. In the periods under review, the Italian government curve registered the following variations in yields: -0.39% and -0.25% from -0.30% at 1 year, -0.13% and -0.06% from -0.19% at 2 years, 0.86% and




1.10% from 0.60% at 5 years, 2.15% and 2.31% from 1.81% at 10 years, 3.29% and 3.27% from to 2.93% at 30 years. The spread between Spanish and German debt on the ten-year maturity went from an initial 119 basis points to 134 as at March 31 and 107 as at end June. During the last session of the quarter, the US government showed a two-year yield of 1.38% and 1.25%, an increase compared to 1.19% at the beginning of the year, while the ten-year yield was of 2.30% and 2.39% from 2.44% as at the beginning of the year.During the first half and second quarter of 2017, a general reduction was seen in returns on the high yield and emerging markets, despite June’s recovery.Following the decline in the cross recorded during the second half of 2016, in the first half of 2017 and the second quarter of the year, the listing of the euro against the US dollar went from 1.0455 at the start of the year to 1.0652 as at March 31, and 1.1426 on June 30, with a low of 1.0405 recorded on January 3 and a peak of 1.1441 on June 29. As regards the ECB and Federal Reserve choices concerning monetary policy, the divergence continues between the two central banks, which began back in December with the first rise in interest rates by the Federal Reserve board taking the cost of money to the range of 0.50-0.75%. Thereafter, during the meeting held on March 15, as expected, a further rise was seen in rates, to 0.75-1.00.The normalisation of the Federal Reserve monetary policy made a further step forward after the meeting held on June 14, through a new rise of 25 basis points (range 1.00-1.25%). In the periods under review, the list price of the euro versus the English sterling, went from 0.85166 at the start of the year to 0.84852 as at March 31 and 0.87710 as at June 30, recording a positive variation respectively of +2.76% and +3.37%. Since the start of the year, the sterling has oscillated considerably within the range of 0.831-0.888: the alternation of this trend of weakness and strengthening of the English currency is doubtless linked to the evolution of Brexit negotiations.The Euro-Yen exchange rate is mainly influenced by the monetary policy actions of the respective central banks, both characterised by an expansionary orientation: the exchange rate, also thanks to the positive valuations from the start of the year on the Japanese economic prospects, reached, from the region of 123.00 at end January and mid-March, the low of 114.85 on April 17. The intention of the BoJ to maintain the mass monetary stimulation programme, to reduce the political risk in Europe and to eliminate, after the last ECB meeting, the reference made to a potential additional reduction in the cost of money, were amongst the main recent drivers strengthening the single currency. The USD-JPY cross, from April’s lows, returned, in the first two weeks of May, to the region of 114.00, before then, partly due to the weakness of the dollar against the single currency, settling during the first two weeks of June, at around an average value of 110.50.




THE INSURANCE MARKET

LIFE INSURANCE PRODUCTS1

A first estimate prepared by ANIA in May suggests that the new production of individual life policies collected in Italy by Italian businesses and representatives of non-EU businesses, including additional single premiums, was Euro 7.4 billion, recording, for the first time since the start of the year, growth (+1.5%) on the same month of 2016; since January, the new life premiums issued have reached Euro 35.2 billion and the reduction has attenuated over time, at end May reaching -14.1% on the same period of last year.Also considering the new life premiums of the sample of EU businesses, of Euro 1.8 billion, up 8.3% on that collected in May 2016, total new life business in the month came to Euro 9.2 billion (+2.7% on the same month of 2016), whilst since the start of the year, they have reached Euro 42.7 billion, 12.0% less than the same period of 2016. As regards Italian and non-EU businesses, in May, the new class I premiums relating to individual policies, came to Euro 4.8 billion, 64% of the entire new life production (it was more than 70% in the corresponding month of 2016), recording an increase of 25.6% on the previous month, but still down 8.5% on May 2016 (the smallest reduction since the start of the year). Since January, class I premiums have reached a total of Euro 22.9 billion, down 27.2% on the same period of 2016. The performance of the inflow of new class V policy premiums is also negative, which in May, for the second month running, recorded a decline (-30.4%) on the same month of 2016, for an amount of Euro 105 million (1% of the entire new production), whilst since the start of the year, the decline is 17.1% as compared with the first five months of 2016, against a volume of premiums that totals Euro 672 million.The remaining portion of new life production regarded almost exclusively class III (in the unit-linked form), which in May, with a volume of new premiums that totals Euro 2.5 billion, also records a significant increase (+30.6%) on the same month of 2016; since January, the inflow of new business has come to Euro 11.6 billion, up 33.6% with respect to the same period of 2016.Inflows relative to new individual adhesions to welfare forms, equal to Euro 112 million (2% of the entire new life production), were down for the first time since the start of the year (-3.5%) on May 2016, reaching a total of Euro 529 million in the first five months of the year, 8.8% more than the same period of the previous year.

(1) Source: ANIA TRENDS - Nuova Produzione Vita (Life New Production) - May 2017




NON-LIFE PREMIUMS2

At the end of the first quarter of 2017, total premiums (Italian businesses and representatives) of the Italian direct portfolio, were 8.9 billion, as in the first quarter of 2016, after nineteen consecutive quarters recording a negative trend. If on the one hand, in fact, the car sector (-2.0%) continues to show a decline, albeit limited, on the other, the premiums of the other non-life classes confirm the growth recorded in recent years.The overall invariance recorded by premiums in the entire non-life sector at the end of Q1 2017 is the consequence of: › a reduction in the car sector, whose premiums dropped by 2%; › an increase in the other non-life classes, whose premiums grew by 1.8%.

More specifically, in the car sector, a reduction was recorded of 3.5% in the third party liability cars and shipping vehicles class, and growth of 5.4% in the land vehicle bodies class. Other non-life classes are still positively influenced by the recovery of the general economic cycle and, with respect to comprehensive growth of 1.8%, an above average positive change was recorded in the following classes: Injuries (+3.5%), third party liability shipping vehicles (+4.4%), pecuniary losses (+5.4%), other damages to property (+6.0%), assistance (+7.1%), illness (+7.2%) and legal protection (+8.6%).

THE BANKING MARKET3

FUNDING

According to the first estimates of the SI-ABI in May 2017, inflows from customers of all banks in Italy, represented by resident customer deposits (deposits in bank accounts, term deposits net of receivables sales, deposits repayable upon notice and repurchase agreements; deposits are net of operations with central counterparties) and bonds (net of those repurchased by banks) increased by about 4.2 billion on an annual basis, showing an annual change of +0.2% (-0.1% the previous month).More specifically, funding from resident customers amounted to Euro 1,714 billion; before the start of the crisis - in late 2007 - the amount of bank deposits was about Euro 1,549 billion (+165 billion from the end of 2007 to date); as follows: 1,024.5 billion of customer deposits (+373 billion from the end of 2007 to date) and 524.5 billion of bonds (-208 billion since 2007).

(2) Source: ANIA TRENDS Quarterly non-life premiums - Q1 2017 data(3) Source: ABI Monthly Outlook - June 2017 - Summary.




The observation of the various components shows the clear gap between short-term and medium/long-term sources. Deposits of resident customers (in current account, deposit certificates, repurchase agreements net of operations with central counterparties, term deposits connected with sales of receivables) recorded a trend of +4.3% in May 2017, an increase in absolute value on an annual basis of over Euro 58 billion.The amount of deposits reached a level of 1,397.7 billion in May 2017. The annual change of the bonds4 amounted to -14.5% (-14.3% in April 2017), showing a decrease in absolute value on an annual basis of approximately Euro 53.6 billion. The amount of bonds was equal to Euro 316.2 billion.In April 2017, the trend for deposits abroad5 was down: in particular, those of Italian banks totalled about Euro 296 billion, 6.8% lower than a year earlier (-5.9% the previous month). The portion of foreign deposits of total funding stood at 11.6% (12.2% a year earlier). The net flow of funding from abroad in the period between April 2016 and April 2017 was negative by about Euro 21.6 billion.In April 2017, net inflows from abroad (foreign deposits less foreign loans) amounted to about Euro 92 billion (-28.9% change in the trend). Of total domestic lending, it was equal to 4.9% (6.8% a year earlier), while foreign loans - also at the same date - amounted to about Euro 203.8 billion. The ratio foreign loans/foreign deposits amounted to 68.9% (59.2% a year earlier).

The harmonized statistics of the European System of Central Banks observe that the average rate on deposits from customers (which includes the return of deposits, bonds and repurchase agreements in Euro applied to households and non-financial companies) was 0.95% in May 2017 (0.95% the previous month too; 2.89% at the end of 2007). The rate on deposits in Euro applied to households and non-financial companies was 0.40% (0.40% the previous month), that of bonds settled at 2.69% (2.67% in April 2017), and the rate on repurchase agreements at 0.82% (0.79% the previous month).On the secondary market for government securities, the Rendistato, i.e. the figure related to the basket of securities with a residual life over one year traded at the Italian Stock Exchange (MOT), stood at 1.33% in May 2017, 8 basis points lower than the previous month (0.66% in August 2016: record low) and 41 basis points above the value of May 2016.In May 2017, the gross yield on the secondary market for CCT amounted to 0.39%

(4) Bonds (resident and not) are net of those repurchased by banks.(5) Indebtedness to non-residents: deposits of MFIs, Central Administrations, other Public Administrations and other residents in other Eurozone countries and the rest of the world.




(0.40% in April 2017, 0.31% in May 2016).With reference to the BTP6, in the average of May 2017, average yield was 1.96% (1.45% in May 2016). Lastly, the annualized gross average yield on Treasury Bills went from -0.33% to -0.37% in the period April - May 2017.

BANK COMMITMENTS

The dynamics of bank lending demonstrated, in May 2017, a positive value; based on initial estimates, total loans to residents in Italy (private sector plus public administrations, net of repurchase agreements with central counterparties), was almost Euro 1,800 billion, marking an annual change - calculated to include loans not recorded in the bank financial statements insofar as securitised and net of changes in balances not connected with transactions (e.g. changes due to fluctuations in the exchange rate and value adjustments or reclassifications) - or +0.3% (+0.5% the previous month). At the end of 2007 - before the start of the crisis - said loans amounted to 1,673 billion; since then marking a growth of Euro 126.5 billion in absolute value.Loans to households and non-financial companies as at May 2017 amounted to Euro 1,403 billion. On the basis of our estimates, in turn based on the data published by the Bank of Italy, at May 2017, the calculated annual change in loans to households and businesses, including loans not recorded on the bank financial statements insofar as securitised and net of changes in balances not connected with transactions (e.g. changes due to fluctuations in the exchange rate and value adjustments or reclassifications), up +0.8%, consolidating the improvement seen to the overall trend of total loans in place.At the end of 2007, these loans amounted to 1,279 billion, with an increase in the period of over 124 billion in absolute value.In April 2017, the dynamics of loans to non-financial corporations amounted to +0.2% (+0.3% in March 2017, -5.9% in November 2013, the most negative value). Industrial and service businesses suggest that over the next few months, business will be supported above all by a consolidation of demand, particularly from abroad; the more favourable credit access conditions will also continue to make a positive contribution, albeit to a minor extent. Moreover, during the fourth quarter, net bond inflows of Italian businesses was, albeit only slightly, negative (-0.2 billion). The trend dynamics in total loans to households7 grew (+2.4% in April 2017; -1.5% in November 2013).

(6) The monthly average of the BTP interest rate is influenced by the different maturities of the securities to be issued each month.(7) Consumer households and family businesses.




Also in March 2017, the total amount of outstanding mortgages of households recorded a positive change of +2.4% against the end of April 2016 (when there had already been signs of improvement), also confirming on the basis of data on existing loans, the recovery of the mortgages market, initially with a peak in new mortgages. In May 2017, interest rates on loans stood at very low levels in Italy. The reports of the SI-ABI show that the weighted average rate on total loans to households and non-financial companies developed by ABI in May 2017 amounted to 2.79% (record low), 2.81% the previous month; 6.18% at the end of 2007. The rate on new loans in Euro to non-financial companies stood at 1.56% in May 2017 (1.53% the previous month; 5.48% at the end of 2007). The rate on Euro loans to households for house purchases - which summarizes the trend of fixed and variable rates and is also influenced by the change of the composition of disbursements based on the type of mortgage - amounted to 2.12% (2.13% the previous month and 5.72% at end 2007). Of the total new mortgages, almost two-thirds are fixed-rate mortgages: in the last month, the portion of the flow of fixed-rate loans amounted to 74.5% (74.9% the previous month; 77% in March 2017).

NON-PERFORMING BANK LOANS

Net of impairment, as at April 2017 net non-performing positions stood at Euro 77.2 billion, below the previous month (77.8 billion) and lower than May 2014, a trend reducing sharply on the December 2016 figure (86.8 billion). The reduction of more than 13% in non-performing positions with respect to the peak of 89 billion at end November 2015, is therefore recorded.Compared to the same month the previous year, they decreased by about 6.7 billion (-8% annual change, down compared to +4.8% at year-end 2015).The ratio of net non-performing loans to total loans reduced to 4.42% (4.43% as at March 2017 and 4.67% as at April 2016).

SECURITIES PORTFOLIO

According to the estimated data of ABI, in May 2017 that securities portfolio of the Banks’ total, came in at Euro 736.1 billion.

HARMONISED INTEREST RATES IN ITALY AND THE EUROZONE

As regards the interest rates applied in the Eurozone on the new loans to non-financial companies in the amount of up to a million euros, the latest data available (April 2017) gives this as 2.20% (2.20% in March 2017; 2.52% in April




2016), a figure that is compared with the 2.18% applied in Italy (2.16% in March 2017; 2.57% in April 2016).The rates applied to new loans to businesses worth more than a million euros are, in April 2017, 1.41% of the Eurozone average (1.41% in March 2017; 1.46% in April 2016), a figure that is compared with the 1.06% applied by Italian banks (1.22% in March 2017; 1.46% in April 2016). Finally, April 2017 saw the rate on active current accounts and revolving loans to households come in at 5.19% in Italy, 5.23% in March 2017 (5.19% in April 2016), a level that compares with the 6.31% of the Eurozone (6.34% in March 2017; 6.54% in April 2016).

NEW PRODUCTS AND MAIN INITIATIVES IN THE HALF-YEAR

Banking Area

During the first half of 2017, Banca Mediolanum renewed a personalised, calibrated offer on the promotional programme Mediolanum For You launched in 2016; this recognised, according to each customer’s profile, a range of important benefits, including personalised offers on current accounts and compulsory services and matching accessories, such as credit cards and securities dossiers.As regard the offer of creditor rates, despite the continuation at all-time lows of the main reference rates on the market, during the first half of 2017, Banca Mediolanum kept creditor rates on free and restricted deposits competitive for more capitalised customers, aiming to facilitate and ease a diversification in the choice of how to allocate equity.

Also with a view to offer differentiation and personalization, again for the first half of 2017, the equity offering was maintained regarding the Double Chance product, differentiated into brackets of amounts recognizing a creditor rate that grows as the amount invested increases.

In terms of acquisition initiative, during the first part of the year, until April, the offer in acquisition on MyFreedom current accounts was enhanced with the proposal of co-marketing with Amazon purchase vouchers for new Bank current account holders.In May, at the same time as its participation as sponsor in the Giro d’Italia 2017, the current account range was enhanced with the promotional initiative “Pedala Sicuro”, whereby the charges of the MyFreedom account were zeroed as was the Mediolanum MyFreedom Protection policy premium (Sections A “Injuries” and/or B “Head of Family Third Party Liability”) until December 31, 2017, for all new current




accounts opened in May. June was instead characterised by the launch of a promotional initiative connected with the Securities Deposit: new current account holders were given the option of obtaining Amazon vouchers of increasing value according to the equivalent value of securities and/or funds of third parties transferred, in addition to free custodian fees for the whole of 2017.

In both Mortgages and Loans, the first half of 2017 saw Banca Mediolanum record total supplies of Euro 718.8 million, basically stable on the same half-year of the previous year (-0.9%), albeit with different signals: loans grow but new mortgages take a slight downturn. The trend revealed a constant monthly increase, with specific reference to the second quarter of the year, where it above all involved the disbursement of loans. As regards the opening of credit in current accounts, disbursements came to Euro 216.4 million (-39% on 2016), in line with the Bank’s strategy to focus on the transformation of overdrafts into loans, thereby facilitating monitoring and control.

As regards Mortgages, during the first half, a series of initiatives were taken, aimed at maintaining and increasing the competitiveness of the offer as well as the reorganisation of the sales force, with the introduction of new specialised family bankers, both in credit and protection, dedicated training courses and interventions aimed at digitising processes to a greater extent, which will yield benefits in the second part of the year.More specifically, starting May, action has been taken to reduce the spread envisaged for the segment with Loan to Value in excess of 60% and maximum term of 20 years, from 2.45% to 1.95%. At the same time, in order to respond to the fixed rate market offers, the offer of “Mortgages with caps” has been re-launched, applying very competitive new rates, and the maximum term of straight-line mortgages has been altered, from 20 to 25 years. Moreover, in order to increase the Bank’s appeal on the loans market, also in terms of active subrogation, the amount of active subrogation has been reduced from the limit of Euro 100,000 to Euro 75,000. Personal loans have also been considered with careful attention paid to pricing, which resulted in a reduction, arranged as from April, of the spreads applied to the capital-backed loans, for customers with total wealth of up to Euro 75,000. Numerous communication initiatives have also been implemented, also in relation to the seasonal nature of the loans product, which sees a disbursement cycle with peaks in the late spring and summer.



It is also noted that as from July 6, 2017, customers have been issued with the mobile payment Apple Pay service, available on the Mediolanum Wallet app. The new function enables NFC payments with the Mediolanum debit card, digitised on iPhone 6 and later or the Apple Watch.

Asset Management Area

In the Asset Management Area, the first half of 2017 saw: › the launch of the new individual management of Mediolanum My

Style portfolios: the start-up of marketing of the new individual portfolio management service comes as part of a strategy for the development and expansion of the range offered by Banca Mediolanum, dedicated to customers with important assets. The commercial proposal seeks to satisfy the needs of those looking for the option of personalising their investment, with flexibility. Mediolanum My Style offers a wide range of solutions, investing in funds of Mediolanum Group companies, funds of third parties, securities and ETFs and is structured into components, families and management lines, the latter characterised by their own investment policy and goal, as well as the related degree of risk and time frame. The management service envisages investment in the “Strategic” component (compulsory), for most of the customer’s equity, and an “Opportunity” component (optional), which allows for a greater degree of personalisation of the investment, dedicated to more discretionary choices.

› the reduction of the investment minimum for the Intelligent Investment Strategy (IIS) and the introduction of the Intelligent Investment Strategy Plus: these are investment strategies that, in exploiting the historic principle of dollar cost averaging, enable not only the opportunities of global financial markets to be made the most of, but also, through automatic options, offer the possibility of making rational choices immediately, before the customer can be involved emotionally. They are investment services with a term of 36, 48 or 60 months, which envisage monthly transfers for Intelligent Investment Strategy and fortnightly transfers for Intelligent Investment Strategy Plus, of a pre-established amount from a starting bond/monetary type segment to one or more equity segments of those available. By thus splitting the investment, market declines can be exploited and a reduction obtained in the average investment purchase price. To strengthen this principle, two automations able to benefit from both rises in the market and declines:




› Automatic Step-In - can increase the amount of the instalment by up to five times its value, in the event of a reduction in the value of equity segments.

› Automatic Step-Out - can re-convert the amounts on the bond segment, if the value of the equity segments should rise.

The minimum investment is Euro 30,000 for IIS and Euro 90,000 for IIS Plus. › the launch of PIR compliant mutual investment funds: identification

of a different, additional investment solution for the establishment of individual savings plans (PIR). It started out on March 16, with the PIR compliant Mediolanum Flessibile Sviluppo Italia (Flexible Development Italy) fund, and, thereafter, on April 18, with the PIR compliant Mediolanum Flessibile Italia (Flexible Italy) fund and with its name change to Mediolanum Flessibile Futuro Italia (Flexible Future Italy), on that same date.

Insurance AreaIn the insurance area, at end June 2017, the offer of Mediolanum Più, Unit-Linked policy issued by Mediolanum International Life DAC, was launched, with sub-delegation to the asset managers Invesco and Tenax, which invests mainly in government and corporate bond securities with the aim to provide protection of capital invested at maturity and, during the contract term, to distribute periodic predefined amounts. More specifically, on June 29, 2017 the following were issued: › Mediolanum Più Global Opportunity 2017 (managed by Invesco); › Mediolanum Più Global Opportunity Premium 2017 (managed by Tenax)

whose ceiling limit is currently Euro 100 million.During the second half of 2017, further issues will follow.

Investment products matched with banking products areaFinally, various commercial initiatives have been launched in connection with investment products matched with banking products by means of the Double Chance Service.During the first half-year of 2017, the following new offers were launched: › Double Chance Red: rates offer dedicated to Double Chance equities and

bonds 12 months; › Double Chance Freedom 5%: rates offer dedicated to Double Chance

equities 6 months and bonds 12 months; › Double Chance Asian: rates offer dedicated to Double Chance equities

and bonds 12 months; › Double Chance Extra: rates offer dedicated to Double Chance equities 6




months and bonds 12 months.

Protection AreaAs regards the Protection Area, as from March 31, 2017, the Temporary Death Case policy of Mediolanum Vita S.p.A., Personal Life Serenity, has been restyled, with various innovations introduced aimed at improving the product characteristics and the underwriting process. With a view to making the product more in line and appropriate to the social conditions of our country and assist our customers in obtaining increasingly effective protection that is ever more appropriate to the value of human capital (estimated by ISTAT in 2014 as Euro 342,000), the threshold of capital that can be insured without a medical check-up was changed from Euro 300,000 to Euro 400,000.

Moreover, with the aim of optimising in the Protection Area too, the approach of a personalised, calibrated service model on the Mediolanum For You programme, a service differential has been introduced for Mediolanum For You Club customers taking out insurance for capital in excess of Euro 400,000: free cost of medical assessments, which are covered directly by Mediolanum Vita and a simplification of the medical assessment booking process, necessary to stipulate the contract, through specific assistance by the office operators.




BUSINESS REVIEW

CONSOLIDATED NET INFLOWS, ASSETS UNDER MANAGEMENT AND ASSETS UNDER ADMINISTRATION

Net inflows8

€/m 06/30/2017 06/30/2016 Change %

ITALY

Funds and Unit Linked products 2,603.3 1,386.9 88%

of which directly in Funds 2,128.8 840.0 153%

of which “My Life” Unit Linked 473.7 367.7 29%

of which other Unit Linked 0.8 179.3 (100%)

Other Life Insurance products (165.9) (179.9) (8%)

Total Managed Assets 2,437.4 1,207.0 102%

Third-party structured bonds (156.9) (82.9) 89%

Total Managed Assets + Structured bonds 2,280.5 1,124.2 103%

Total administered assets (288.7) 1,798.5 n.s.

“Freedom” life policies (24.1) (117.7) (80%)

Total Administered Assets including Freedom (312.8) 1,680.8 (119%)

Total ITALY 1,967.7 2,804.9 (30%)

SPAIN 338.8 125.8 169%

GERMANY (0.4) 39.9 (101%)

TOTAL FOREIGN MARKET 338.4 165.7 104%

TOTAL NET INFLOWS 2,306.1 2,970.6 (22%)

Total net inflows amounted to Euro 2,306.1 million, a decrease of -22% compared to the comparative period.

(8) The figures related to net inflows refer to Retail customers only.It is specified that in order to standardise the comparison with the figures of the previous period, the portion of the contribution generated by Banca Esperia during 2016, has been excluded, which was Euro 132.6 million.




With particular reference to net inflows on the domestic market, a positive balance of Euro +1,967.7 million is recorded with respect to Euro +2,804.9 million in the comparative half-year (-30%), of which Euro +2,280.5 million referring to AuM.

More specifically, net inflows in mutual funds, either through direct investment or through investments in unit-linked policies, showed a balance of Euro +2,603.3 million (06/30/2016: Euro +1,386.9 million). The product “My Life” recorded an increase of Euro +106 million over the comparative period.

Net inflows in other life insurance products, with the exception of Unit-Linked and Freedom policy, were rather negative for Euro -165.9 million (06/30/2016 Euro -179.9 million).

Assets under administration recorded a negative balance for Euro -288.7 million compared to a positive balance of Euro +1,798.5 million in the first half of 2016.




Assets under Administration9

€/m 06/30/2017 12/31/2016 Change % 06/30/2016

ITALY

Funds and asset management and Unit Linked Policies 47,159.8 44,200.6 7% 39,763.6

“Freedom” life policies 212.1 233.8 (9%) 385.4

Other insurance products 1,391.8 1,524.9 (9%) 1,596.7

Bank deposits 18,489.6 18,383.8 1% 17,369.2

Total ITALY 67,253.4 64,343.1 5% 59,114.8

SPAIN 4,346.8 3,880.3 12% 3,516.1

GERMANY 608.4 591.2 3% 524.4

TOTAL FOREIGN MARKETS 4,955.2 4,471.5 11% 4,040.5

TOTAL ASSETS UNDER MANAGEMENT AND ADMINISTRATION 72,208.6 68,814.6 5% 63,155.3

As at June 30, 2017, total assets managed by the Mediolanum Group achieved the balance of Euro 72,208.6 million, with a rise of Euro +3,394.0 million compared to the balance at the end of 2016 (12/31/2016: Euro 68,814.6 million) and growth of Euro +9,053.3 million compared to the balance as at June 30, 2016 (06/30/2016: Euro 63,155.3 million).

(9) The figures relate to retail customers only.It is specified that in order to standardise the comparison with the figures of the previous period, the portion of the contribution generated by Banca Esperia during 2016, has been excluded, which was Euro 9,039.5 million.




The number of Banca Mediolanum Family Bankers has reached 4,310 compared to 4,326 as at December 31, 2016.

INFLOWS AND ASSETS BY OPERATING SEGMENTS

ITALY − BANKING

The analysis of assets under administration, on a management basis, is set out below:

€/m 06/30/2017 12/31/2016 Change % 06/30/2016

Current account deposits 15,284.1 15,541.1 (2%) 14,407.4

Banca Mediolanum Bonds 89.9 115.3 (22%) 125.1

Third-party Structured Bonds 482.5 642.7 (25%) 725.8

Securities in custody and under administration 2,601.9 2,084.8 25% 2,067.9

Repurchase agreements 31.2 - n.s. 43.1

TOTAL ASSETS UNDER ADMINISTRATION 18,489.6 18,383.8 1% 17,369.2

The number of current accounts amounted to 933,752, of which 101,977 deposit accounts, an increase of 31,685 units compared to the figures of year-end 2016.





ITALY − ASSET MANAGEMENT

Net inflows in mutual funds and assets managed amounted to Euro 2,603.3 million, a sharp increase (+88%) on the balance of the same period the previous year, for Euro 1,387.0 million, mainly due to the increase in inflows in other Italian mutual investment funds (Euro +1,174.6 million), mainly relating to PIR compliant products.

Net inflows

€/m 06/30/2017 06/30/2016 Change %

“Best Brands” funds of funds 352.5 618.9 (43%)

“Challenge” funds (168.2) 3.9 n.s.

Other Italy-based mutual funds 1,232.2 57.6 n.s.

Third-party funds and others managed 712.3 159.6 346%

Total direct inflows in mutual funds 2,128.8 840.0 153%

Funds included in “My Life” Unit Linked 473.7 367.7 29%

Funds included in other Unit Linked 0.8 179.3 (100%)

Total indirect inflows in mutual funds 474.5 547.0 (13%)

TOTAL MUTUAL FUNDS AND MANAGEMENT 2,603.3 1,387.0 88%




The analysis of assets managed in Mutual Funds, on a management basis, is as follows:

Assets under administration

€/m 06/30/2017 12/31/2016 Change %06/30/2016

“Best Brands” funds of funds 19,390.0 18,643.4 4% 16,646.5

“Portfolio” funds of funds 330.6 370.0 (11%) 359.9

“Challenge” Funds 13,969.7 14,137.0 (1%) 12,900.6

Hedge funds of funds 73.2 90.0 (19%) 103.4

Other Italy-based mutual funds 8,844.5 7,395.7 20% 6,921.3

“Real estate” funds 309.7 311.9 (1%) 312.3

Third-party funds and others managed 2,806.6 1,986.2 41% 1,594.4

Adjustments for Group funds included in funds of funds and managed (423.7) (441.1) (4%) (427.7)

Funds included in “My Life” Unit Linked 4,827.3 4,278.4 13% 3,689.7

Funds included in other Unit Linked 12,351.9 12,421.4 (1%) 11,272.5

Sub-Total Unit-linked Funds 17,179.2 16,699.8 3% 14,962.2

Adjustments for own funds included in Unit Linked (15,320.0) (14,992.4) 2% (13,609.3)

TOTAL ASSET MANAGEMENT AND MUTUAL FUND PRODUCTS 47,159.8 44,200.6 7% 39,763.6

As at June 30, 2017, assets under management are up 7% on the comparative period (12/31/2016: Euro 44,200.6 million).




ITALY − INSURANCE

Life

At the end of 2016, total assets managed amounted to Euro 18,224.7 million versus Euro 18,571.0 million at the end of the half-year under review, an increase of 2%.

€/m 06/30/2017 12/31/2016 Change % 06/30/2016

Unit Linked life products 17,179.2 16,699.8 3% 14,962.1

Index Linked life products 16.7 178.3 (91%) 264.0

Traditional life products 1,375.1 1,346.6 2% 1,332.6

Total Life Products (excluding “Freedom”) 18,571.0 18,224.7 2% 16,558.7

“Freedom” Life Policies 212.1 233.8 (9%) 385.4

The table below shows the breakdown of inflows as at June 30, 2017:

€/m 06/30/2017 06/30/2016 Change %

Recurring premiums 28.0 22.9 22%

Single premiums and group policies 821.1 724.5 13%

Total new business 849.1 747.4 14%

In-force pension plans 227.3 227.4 -

Other in-force business 172.8 174.4 (1%)

Total Portfolio 400.1 401.8 -

Total premiums written excluding “Freedom” 1,249.2 1,149.2 9%

“Freedom” Premiums Written 304.5 454.7 (33%)

TOTAL GROSS PREMIUMS WRITTEN 1,553.8 1,603.9 (3%)




New business amounted to Euro 849.1 million, an increase compared to the same period of the previous year (06/30/2016: Euro 747.4 million). Total portfolio premiums amounted to Euro 400.1 million, substantially in line with the first half of 2016.It is specified that the gross premiums indicated in the table include the policies relative to the “My Life” product.

Below is a detailed table of liquidations recorded at the end of the first half of 2017:

€/m 06/30/2017 06/30/2016 Change %

Claims 58.5 53.0 10%

Coupons 23.4 27.1 (14%)

Maturities 341.0 362.5 (6%)

Surrenders 517.8 339.6 52%

Amounts paid (excluding “Freedom”) 940.7 782.2 20%

The total number of liquidations excluding “Freedom” amounted to Euro 940.7 million, up compared to the first half of 2016 (+20%).

Damages

As at June 30, 2017, the volume of premiums written amounted to Euro 23,580 thousand (Euro 24,814 thousand as at June 30, 2016), a decrease of 5%.

€/t 06/30/2017 06/30/2016 Change %

Class-01 Accident 6,981.0 9,640.0 (28%)

Class-02 Sickness 10,346.0 9,078.0 14%

Class-07 Goods transported 2.0 2.0 -

Class-08 Fire 2,520.0 2,291.0 10%

Class-09 Other damages to assets 1,225.0 1,208.0 1%

Class-13 TPL General 1,082.0 999.0 8%

Class-16 Pecuniary losses 994.0 1,166.0 (15%)

Class-17 Legal protection 41.0 44.0 (7%)

Class-18 Assistance 389.0 386.0 1%

Total Work Premiums 23,580.0 24,814.0 (5%)




SPAIN

€/m 06/30/2017 12/31/2016 06/30/2016

Assets under Administration: 4,346.8 3,880.3 3,516.1

Assets under Management 3,000.1 2,649.1 2,294.7

Assets under Administration 1,346.7 1,231.2 1,221.4

Gross inflows AuM 690.1 984.1 479.7

Net inflows 338.8 327.2 125.8

Assets under Management 307.8 422.3 210.6

Assets under Administration 31.0 (95.0) (84.8)

Assets under management amounted to Euro 4,346.8 million compared to Euro 3,880.3 million at the end of 2016, and Euro 3,516.1 million in the first half of 2016.Net inflows for the half-year were positive for Euro +338.8 million compared to a balance of Euro +125.8 million in the first half of 2016.

GERMANY

€/m 06/30/2017 12/31/2016 06/30/2016

Assets under Administration: 608.4 591.2 524.4


Assets under Administration 142.4 147.0 114.9

Gross inflows AuM 35.2 63.9 34.5

Net inflows (0.4) 74.1 39.9


Assets under Administration (4.6) 54.5 22.3

Assets under administration as at June 30, 2017 amounted to Euro 608.4 million, up Euro +17.2 million compared to the figures at the end of 2016.




Net inflows for the half-year came to Euro -0.4 million compared to a positive balance of Euro +39.9 million of the comparative period.

THE SALES NETWORKS

Resources 06/30/2017 12/31/2016

ITALY - BANCA MEDIOLANUM 4,310 4,326

SPAIN 882 868

GERMANY 50 55

TOTAL 5,242 5,249

Overall, the sales network consists of 5,242 people (12/31/2016: 5,249 people). The financial advisors of Banca Mediolanum totalled 4,310 compared to 4,326 at the end of 2016, a decrease of 16.




Reclassified Consolidated Income Statement as at June 30, 201710

€/t 06/30/2017 06/30/2016 Change

Value %

Entry fees 44,320 34,759 9,561 28%

Management fees 475,801 408,099 67,702 17%

Performance fees 88,713 82,653 6,060 7%

Banking service fees and revenues 42,726 40,601 2,125 5%

Other fees 19,218 16,960 2,258 13%

Commission income 670,778 583,072 87,706 15%

Interest income 94,344 121,751 (27,407) (23%)

Net income (loss) on investments at fair value 8,427 (15,394) 23,821 n.s.

Net financial income 102,771 106,357 (3,586) (3%)

Net insurance income (excluding commissions) 17,530 11,169 6,361 57%

Equity method valuation 6,611 5,545 1,066 19%

Realised gains (losses) on other investments 46,689 25,713 20,976 82%

Impairment of loans (8,847) (8,560) (287) 3%

Impairment of other investments (987) (1,754) 767 (44%)

Net income (loss) on other investments 36,855 15,399 21,456 139%

Other revenues 14,912 12,036 2,876 24%

Network commission expenses (260,907) (223,309) (37,598) 17%

Other commission expenses (32,486) (28,130) (4,356) 15%

CONTRIBUTION MARGIN 556,064 482,140 73,924 15%

General and administrative costs (255,829) (249,659) (6,170) 2%

Contributions and guarantee funds (31,453) (5,665) (25,788) 455%

Amortization and depreciation (17,486) (14,907) (2,579) 17%

Net provisions for risks and charges (22,271) (14,687) (7,584) 52%

TOTAL COSTS (327,039) (284,919) (42,120) 15%

GROSS PRE-TAX PROFIT 229,026 197,220 31,806 16%

Taxes for the period (32,642) (26,898) (5,744) 21%

NET PROFIT FOR THE PERIOD 196,384 170,322 26,062 15%

(10) This income statement has been prepared according to a scheme that reflects the Group’s management system that provides for the reclassification of the components of net profit before tax by nature and exposing income and expenses related to assets and liabilities for which the investment risk is borne by policyholders in the item “Net insurance income”.




Summary of Half-Year 2017 business performance

€/m 06/30/2017 06/30/2016 Change Change %

Net profit for the period 196.4 170.3 26.1 15.3%

of which Commission income 670.8 583.1 87.7 15.0%

Commission income for the period amounted to Euro 670.8 million compared to Euro 583.1 million in the comparative period. The increase is mainly due to the change in management fees of Euro +67.7 million, due to the growth of assets.

Net financial income 102.8 106.4 (3.6) (3.4%)

Net financial income recorded a downturn of Euro 3.6 million. More specifically, the interest margin suffers the reduction of marginal profitability on the securities portfolio, which is only partly offset by a policy to reduce the remuneration of retail inflows. By contrast, an increase in net profits from investments at fair value, has been recorded, showing a positive impact with respect to the comparative period, due to a rising trend in rates in the first six months of 2017.

Equity method valuation 6.6 5.5 1.1 20%

The Equity method valuation yields, for the period examined, the portion of competence of the result of Mediobanca, for Euro 6.6 million; it is specified that this value refers to the first quarter of 2017, insofar as, as at the date on which this report was prepared, the contribution of the second quarter was not yet available. It should also be recalled that in the comparative half-year, the item also includes the valuation of the equity investment in Banca Esperia for Euro 1.5 million (company transferred to Mediobanca during the second quarter of 2017).




Net income (loss) on other investments 36.9 15.4 21.5 139.3%

Net income (loss) on other investments recorded a positive balance of Euro 36.9 million as compared with the Euro 15.4 million of the first half of 2016; the positive change in the item is mainly due to the capital gain from the sale of the equity investment in Banca Esperia to Mediobanca for Euro 41.6 million.

It should also be recalled that in the first half-year of 2016, the following extraordinary factors were recorded: a capital gain of Euro 10.6 million from the sale of the equity investment in CartaSi held by Banca Mediolanum and a capital gain of Euro 9.2 million from the sale to VISA Inc. of the redeemable share held in VISA Europe by Bankhaus August Lenz and Banco Mediolanum11.

Network commission expenses (260.9) (223.3) (37.6) 16.8%

The growth in Network commission expenses (Euro +37.6 million over the comparable period) is mainly due to the growth of commission income, in particular management fees and fund subscription fees, which result in an increase in rebates to the benefit of the sales network.

General and administrative costs (255.8) (249.7) (6.1) 2.4%

Administrative expenses are substantially in line with the comparative period.

Contributions and guarantee funds (31.5) (5.7) (25.8) 455.2%

Contributions and guarantee funds are up by approximately Euro 25.8 million on last year, mainly due to the impairment of the Atlante I Fund, equal to Euro 23.3 million and of the equity investment in Caricesena, of Euro 1.6 million.

(11) Banco Mediolanum held Visa Europe indirectly through the investment in the company Servired.




Net provisions for risks and charges (22.3) (14.7) (7.6) 51.7%

Expenses for Net provisions for risks and charges remain in line with the previous period; it should, in fact, be recalled that the half-year of 2016 benefitted from the release of approximately Euro 6 million in exchange for a better second instance ruling in a lawsuit relating to the subsidiary Banco Mediolanum.



The analysis of income statement data by operating segment is set out below.

ITALY − BANKING

€/t 06/30/2017 06/30/2016 Change % change

Banking service fees and revenues 30,937 30,655 282 1%

Other fees 238 251 (12) (5%)

Commission income 31,175 30,906 270 1%

Interest income 84,581 106,536 (21,955) (21%)

Net income (loss) on investments at fair value 8,519 (16,756) 25,275 (151%)

Net financial income 93,100 89,780 3,320 4%

Net income (loss) on other investments (4,177) 7,578 (11,755) (155%)

Other revenues 6,703 4,261 2,441 57%

Network commission expenses (20,214) (22,368) 2,154 (10%)

Other commission expenses (9,692) (9,355) (337) 4%

CONTRIBUTION MARGIN 96,894 100,803 (3,908) (4%)

General and administrative costs (112,805) (121,984) 9,179 (8%)

Contributions and guarantee funds (30,384) (4,859) (25,525) 525%

Amortization and depreciation (11,438) (9,619) (1,819) 19%

Net provisions for risks and charges (4,145) (2,535) (1,610) 64%

TOTAL COSTS (158,772) (138,997) (19,775) 14%

GROSS PRE-TAX PROFIT (61,878) (38,194) (23,683) 62%

Gross profit before tax of Italy - Banking recorded a balance of Euro -61.9 million. The reduction on the first half of 2016 (Euro -23.7 million) is mainly due to Guarantee fund contributions (Euro +25.5 million over the comparable period).





Net financial income, which stands at Euro 93.1 million, shows growth of Euro 3.3 million, due to the reduction in the net interest income deriving from the lesser marginal profitability of the securities portfolio, only partly offset by a cost cutting policy of retail inflows and a recovery of items valued at fair value, against a negative result of the first half of last year, caused by the significant reduction in rates seen early 2016.

Revenues from Commission income remain stable, at Euro 31.2 million, in line with the result of Euro 30.9 million seen in the comparative period.

Net income (loss) on other investments went from Euro +7.6 million to Euro -4.2 million in the reporting period. In this respect, it is recalled that during the first half of 2016, a capital gain was realised of Euro 10.6 million on the sale of the equity investment in CartaSi.

Network commission expenses are down by approximately Euro 2.2 million over the comparable period. The reduction is due to the lesser weight of inflows on banking products as compared with the first half of 2016.

Administrative expenses are down Euro 9.2 million (-8%), mainly due to the lesser indirect costs as a result of the commercial volumes of products of the administered sector, which, in the same period of 2016, had recorded significantly high amounts.

Contributions and guarantee funds amounted to Euro 30.3 million. This item includes the impairment of the Atlante I Fund for Euro 23.3 million, the contribution made to the SRF (Single Resolution Fund) for Euro +5.4 million and the impairment of Caricesena, for Euro 1.6 million.




ITALY − ASSET MANAGEMENT

€/t 06/30/2017 06/30/2016 Change % change

Entry fees 38,140 28,662 9,478 33%

Management fees 262,395 226,888 35,507 16%

Performance fees 57,020 48,693 8,327 17%

Other fees 17,026 14,909 2,118 14%


Interest income (222) (30) (192) 640%

Net income (loss) on investments at fair value - - - n.a.

Net financial income (222) (30) (192) 640%

Net income (loss) on other investments 1 42 (41) (99%)

Other revenues 245 268 (23) (9%)


Other commission expenses (7,418) (6,196) (1,222) 20%



Amortization and depreciation (889) (706) (183) 26%

Net provisions for risks and charges (11,893) (11,817) (76) 1%

TOTAL COSTS (75,960) (62,359) (13,602) 22%


Gross pre-tax profit of the Italy − Asset Management segment recorded a balance of Euro 140.8 million over the result of the previous year of Euro 136.5 million (Euro +4.2 million).




Period Commission income comes to Euro 374.6 million, up on the first half of 2016 by Euro +55.4 million. Management fees highlight an improvement of Euro +35.5 million, mainly due to asset growth. An increase is also recorded in fund subscription commission (Euro +9.5 million), due to the increase in gross inflows and further rise in performance fees (Euro +8.3 million).

Network commission expenses increase by Euro 36.1 million, making for a percentage change of 32%. The main contribution towards this change is connected with the growth of commission income (management and subscription), which generates an increase in rebates to the benefit of the network; the impact is also noted of provisions made to premiums and incentives linked to commercial results obtained on segment products, higher than the first half of 2016.

Administrative expenses showed an increase of Euro 13.3 million attributable to greater indirect costs due to trends in commercial volumes. During the first half-year of 2017, these record significantly high figures, in particular due to the impact connected with the PIR (Individual savings plans) product.

Net provisions for risks and charges are in line with the 2016 figure.




ITALY − INSURANCE SEGMENT

€/t 06/30/2017 06/30/2016 Change Change %

Management fees 184,017 158,398 25,619 16%

Performance fees 25,785 29,508 (3,722) (13%)

Other fees 981 885 97 11%


Interest income 5,010 6,610 (1,600) (24%)

Net income (loss) on investments at fair value (256) 1,110 (1,366) (123%)



Net income (loss) on other investments (267) (562) 294 (52%)

Other revenues 6,209 5,944 266 4%

Network commission expenses (68,923) (69,274) 351 (1%)



General and administrative costs (52,286) (53,379) 1,092 (2%)

Amortization and depreciation (3,645) (3,549) (96) 3%

Net provisions for risks and charges (5,836) (6,577) 741 (11%)

TOTAL COSTS (61,767) (63,504) 1,737 (3%)


Gross pre-tax profit Italy − Insurance recorded a balance of Euro 97.2 million compared to the previous year result of Euro 71.8 million.




Period Commission income comes to Euro 210.8 million, up by Euro 22.0 million on the first half of 2016. The change is mainly due to the greater management fees on the segment, due to the growth in assets (Euro +25.6 million). A reduction is recorded in the contribution by performance fees, below the comparative period in the amount of Euro 3.7 million.

Period Net financial income is positive for Euro 4.8 million, but Euro 3.0 million below the comparable period. This difference is mainly due to the reduction in interest income mainly due to the lesser coupon interest (Euro -1.6 million) and the reduction in items measured at fair value (Euro -1.4 million).

Net insurance income, before acquisition costs of investments went from Euro 6.5 million to Euro 11.2 million. The difference relates to the provisions made during the first half-year of 2016, for an increase in rates of an appetite for yield by the insured.

Network commission expenses remain basically stable on 2016; this is due to two divergent factors: on the one hand, the increase in management fees, generating an increase in rebates to the network, on the other a lesser impact of commercial performance incentives linked to the results of inflows of the insurance segment, which come in at a lower percentage than the comparative period.

Net provisions for risks and charges instead reduce on last year by Euro 0.7 million, according to the reduction of the total amount of provisions made in connection with the Network Funds, due to their discounting as a result of the rise in interest rates.




ITALY − OTHER

€/t 06/30/2017 06/30/2016 Change Change %

Equity method valuation 6,611 5,545 1,066 19%

Net income (loss) on other investments 41,551 - 41,551 n.a.

TOTAL REVENUES 48,162 5,545 42,617 769%


The segment under review during the first half-year of 2017 benefits from the capital gain of Euro 41.6 million realised following the sale of the equity investment held in Banca Esperia. The equity method valuation of 2017 therefore only includes the contribution of Mediobanca, equal to Euro 6.6 million (06/30/2016: Euro 4.1 million relative to Mediobanca and Euro 1.5 million relative to Banca Esperia).




SPAIN

€/t 06/30/2017 06/30/2016 Change Change %

Entry fees 5,612 5,795 (183) (3%)

Management fees 24,842 19,064 5,778 30%

Performance fees 4,384 3,871 513 13%

Banking service fees and revenues 3,677 2,486 1,191 48%

Other fees 720 612 108 18%


Interest income 5,472 8,981 (3,509) (39%)

Net income (loss) on investments at fair value 161 257 (96) (37%)



Net income (loss) on other investments (249) 19 (268) (1411%)

Other revenues 1,509 1,191 318 27%



CONTRIBUTION MARGIN 29,379 28,651 728 3%


Contributions and guarantee funds (953) (806) (147) 18%

Amortization and depreciation (1,078) (770) (308) 40%

Net provisions for risks and charges (397) 6,242 (6,639) (106%)

TOTAL COSTS (19,593) (9,968) (9,625) 97%

GROSS PRE-TAX PROFIT 9,786 18,683 (8,897) (48%)




The pre-tax result of the Spain segment records a balance of Euro 9.8 million (Euro 18.7 million as at June 30, 2016).

Contribution margin came to Euro 29.4 million, in line with the previous period. The most significant differences are detailed below.

Commission income increased from Euro 31.8 million to Euro 39.2 million. This trend is mainly due to the contribution made by the management fees, which are higher than the comparative period by approximately Euro 5.8 million, as a result of the growth in assets. A further increase of Euro 1.2 million is due to bank fees, by virtue of the growth of securities custody and trading fees.

Net financial income is down by approximately Euro 3.6 million over the comparable period.

Administrative expenses amounted to Euro 17.2 million compared to Euro 14.6 million in the first half of 2016. The increase is due to a different timing of expenses for advertising communications and events, which in 2016 mainly took place in the second half.

Net provisions for risks and charges have a balance of Euro -0.4 million as compared with the positive balance of Euro 6.2 million booked in the first half-year of 2016. In this respect, it should be recalled that during the first half of 2016, where a second instance ruling was given that was an improvement on the first, in a lawsuit, a portion was released of approximately Euro 6 million, of a provision previously established.




GERMANY

€/t 06/30/2017 06/30/2016 Change Change %

Entry fees 568 302 266 88%

Management fees 4,547 3,749 798 21%

Performance fees 1,523 581 942 162%

Banking service fees and revenues 8,165 7,487 678 9%

Other fees 252 310 (58) (19%)


Interest income (497) (346) (151) 44%

Net income (loss) on investments at fair value 3 (5) 8 (160%)

Net financial income (494) (351) (143) 41%

Net insurance income (excluding commissions) 389 213 176 83%

Net income (loss) on other investments (3) 8,322 (8,325) (100%)

Other revenues 347 448 (101) (23%)

Network commission expenses (2,134) (1,859) (275) 15%


CONTRIBUTION MARGIN 6,057 13,055 (6,998) (54%)

General and administrative costs (10,493) (9,903) (590) 6%

Contributions and guarantee funds (116) (1) (115) 13157%

Amortization and depreciation (436) (263) (173) 66%

Net provisions for risks and charges - - - n.a.

TOTAL COSTS (11,045) (10,167) (878) 9%

GROSS PRE-TAX PROFIT (4,988) 2,888 (7,876) (273%)

Commission income amounted to Euro 15.1 million compared to Euro 12.4 million in the first half of 2016. This change is mainly due to higher management fees and performance fees.




It should be recalled that in the first half-year of 2016, net income from other investments recorded in the gain from the sale to VISA Inc. of the “redeemable shares” held in VISA Europe by Bankhaus August Lenz for Euro 8.4 million.

PERFORMANCE OF GROUP COMPANIES

The following are the main results achieved by the Group companies in the half-year under review.

COMPANIES OPERATING IN THE BANKING SECTOR (INCLUDING GROUP PRODUCT DISTRIBUTION)

Banca Mediolanum S.p.AThe situation of the accounts as at June 30, 2017 showed a net profit of Euro 261.6 million compared to the result for the first half of the previous year equal to Euro 211.5 million. The result for the half-year, before taxes, instead amounted to Euro 240.0 million compared to Euro 192.1 million in the same period of the previous year, an increase of Euro 47.9 million.The better period result is mainly due to the sale of the equity investment in Banca Esperia S.p.A. to Mediobanca, which generated proceeds of Euro 85.2 million.This change was only partially offset by greater adjustments to net value of AFS securities, mainly due to the impairment of the Atlante I Fund, for approximately Euro 23.3 million.It should then be recalled that during the first half of 2016, the capital gain had been booked relative to the sale of the equity investment in CartaSi for approximately Euro 10.6 million.

On May 9, 2017, the Banca Mediolanum Board of Directors approved the plan for the merger by acquisition of the company Fermi & Galeno Real Estate S.r.l.This operation is subject to the authorisation of the Supervisory Authority, which was given by the Bank of Italy by provision no. 903993/17 on July 18, 2017.The merger will be implemented on the basis of the financial statements of the acquiring company and the acquired company as at December 31, 2016, in accordance with Art. 2501-quater of the Italian Civil Code.




Banco Mediolanum S.A. GroupThe Spanish banking group ended the half-year with a consolidated profit of Euro +5.3 million compared to a profit of Euro +12.1 million in HY1 2016. It is specified that in the first half of 2016, against an ameliorative second-instance sentence compared to the previous first-instance sentence, the provision relating to a lawsuit was released for about Euro 6 million.Net inflows for AuM products recorded a positive balance of Euro +307.8 million versus Euro +210.6 million in the first half of the previous year. With regard to assets under administration, the half-year under review recorded a balance of Euro +31.0 million compared to a negative balance of Euro -84.8 million in the same period the previous year.As at June 30, 2017, total assets under management and under administration amounted to Euro 4,346.8 million versus Euro 3,880.3 million as at December 31, 2016.

The sales network consists of 882 people (12/31/2016: 868 people).

Bankhaus August Lenz & Co. AGThe German bank closed the half-year as at June 30, 2017 with a net loss of Euro -2.2 million, compared to the profit in HY1 2016 amounting to Euro +4.4 million.The comparative period result is mainly due to the conclusion of the transaction for the sale of the units in Visa Inc. (the operation had contributed in the amount of approximately Euro 8.4 million).Net inflows of AuM recorded a positive balance of Euro +7.5 million in the half-year (06/30/2016: Euro +18.0 million), while net inflows of assets under administration were negative for Euro -4.6 million (06/30/2016: Euro +22.3 million).At the end of the half-year, total assets under management and under administration of customers amounted to Euro 408.9 million (12/31/2016: Euro 400.9 million).As at June 30, 2017, the sales network consists of 50 people (55 as at December 31, 2016).




ASSET MANAGEMENT COMPANIES

Mediolanum International Funds LtdThe Irish funds company closed the half-year as at June 30, 2017 with a net profit of Euro +178.4 million, up Euro +5.0 million over the same period the prior year (06/30/2016: Euro +173.4 million).Net inflows as at June 30, 2017 were positive for Euro +406.8 million (06/30/2016: Euro 543.9 million).As at June 30, 2017, total assets under management amounted to Euro 35,687.5 million compared to Euro 35,009.8 million as at December 31, 2016 (+1.94%).

Mediolanum Asset Management LtdAs at June 30, 2017, the Irish company recorded a net profit of Euro +7.0 million compared to Euro +6.8 million in the first half of 2016.

Mediolanum Gestione Fondi SGR p.A.The Italian management company reported a net profit as at June 30, 2017 of Euro 27.1 million, an increase compared to Euro 12.6 million in the first half of 2016. This change is mainly due to the increase in performance fees (Euro +15.2 million with respect to the comparable period).As at June 30, 2017, net inflows for both Retail and Institutional Funds amounted respectively to Euro 1,225.6 million and Euro 120.8 million, an increase compared to the comparative period (06/30/2016: Euro 57.4 million and Euro 65.3 million).Total assets managed directly by the Company, relative to the retail segment, as at June 30, 2017, amounts to Euro 8,308.0 million (12/31/2016: Euro 6,999.9 million); whilst assets managed directly by the Company for the Institutional segment, is Euro 1,017.6 million (12/31/2016: Euro 872.5 million).

Gamax Management A.GAs at June 30, 2017, the Luxembourg-based management company recorded a net profit of Euro +2.7 million, an increase compared to the same period the previous year (06/30/2016: Euro +1.9 million). The change is mainly due to the increase in performance fees (Euro +1.3 million on the comparative period).Net inflows in the retail sector in the half-year was negative for Euro -3.3 million (06/30/2016: Euro -0.4 million). The retail assets under management at the end of the half-year amounted to Euro 199.5 million (12/31/2016: Euro 190.3 million).

Mediolanum Fiduciaria S.p.A.As at June 30, 2017, the Company recorded a net loss of Euro -364.7 thousand (06/30/2016: Euro -309.8 thousand).




As at June 30, 2017, assets under management amounted to Euro 290.4 million (12/31/2016: Euro 219.2 million). The mandates completed amounted to 160 (142 at year-end 2016).

INSURANCE COMPANIES

Mediolanum Vita S.p.A.The situation of the IAS/IFRS accounts as at June 30, 2017, shows a net result of Euro 30.8 million compared to Euro 23.3 million in the same period the previous year.The net result for the half-year, calculated on the basis of GAAP was Euro 30.9 million compared to Euro 24.0 million in the same period of the previous year.The application of IAS/IFRS to the situation of the accounts as at June 30, 2017 generated no substantial differences with respect to the value as determined in accordance with GAAP.

Mediolanum International Life DACThe Irish company achieved a net profit of Euro +4.0 million at the end of HY1 2017, up compared to the same period the previous year (06/30/2016: Euro +1.5 million).Net inflows at June 30, 2017 was Euro +75.6 million compared to Euro +191.0 million as at June 30, 2016.As at June 30, 2017, total commitments to policy holders amounted to Euro 1,446.9 million, down compared to the previous year end (12/31/2016: Euro 1,580.2 million).Mediolanum International Life DAC policies are distributed in Italy by Banca Mediolanum, in Spain by Banco Mediolanum and in Germany through Bankhaus August Lenz.




Mediolanum Assicurazioni S.p.AThe situation of the IAS/IFRS accounts as at June 30, 2017 showed a net profit of Euro 4.5 million compared to a net profit for the same period of the previous year of Euro 3.7 million, up Euro 0.8 million.As at June 30, 2017, the volume of premiums written amounted to Euro 23.6 million (Euro 24.8 million as at June 30, 2016), recording a decrease of -5%.The claims settlement activities resulted in a total charge to income statement of Euro 6.2 million, noting a substantial sufficiency of amounts compared to the amounts recognized in reserves in the previous year.Technical reserves amounted to Euro 126.6 million, basically in line with the 2016 year-end figure (12/31/2016: Euro 127,444 thousand).

ASSOCIATES

As at March 31, 2017, the Mediobanca Group showed a net profit of Euro 613.9 million (for the period July 2016 - March 2017) compared to a net profit of Euro 442.4 million in the same period of the previous year.Net consolidated equity as at March 31, 2017, amounted to Euro 9,156.8 million compared to Euro 8,921.8 million as at June 30, 2016.The figures as at June 30, 2017 of the Mediobanca Group were not yet available at the date of preparation of this Condensed Consolidated Half-Year Financial Statements herewith and the Group therefore used the latest available data as at March 2017 in accordance with the provisions of the accounting standards of reference (IAS 28).

CAPITAL ADEQUACY OF THE FINANCIAL CONGLOMERATE MEDIOLANUM S.P.A.12

With reference to the financial conglomerate Mediolanum S.p.A., the calculation of capital adequacy as at June 30, 2017, according to the provisions of supplementary supervision in force, shows that in the face of the conglomerate capital requirements amounting to Euro 1,427 million, the conglomerate’s equity to hedge the required margin amounted to Euro 1,929 million, with a surplus of Euro 502 million:

(12) Following the entry into force of the new Solvency II regime for insurance companies, it is noted that the data relating to the requirements of the insurance sector and the related portion of equity corresponding to the reconciliation reserve were calculated in accordance with the new sector regulations; however, we used the data as at March 31, 2017 since, as at the date of preparation of this Condensed Consolidated Half-Year Financial Statements the values for the first half of 2017 were not yet available.




€/m 06/30/2017 12/31/2016 Change %


Equity 1,929 1,884 2.4%

Capital requirements 1,427 1,647 (13.4%)

Surplus (deficit) of the conglomerate (A-D) 502 237 112%

The change recorded with respect to the cut-off date of 12/31/2016 is mainly due to the reduction of the SREP requirement (11% as at June 30, 2017 with respect to the 13.1% of December 31, 2016) and the sale of the equity investment in Banca Esperia S.p.A.

SHAREHOLDERS’ EQUITY, OWN FUNDS AND THE COEFFICIENTS RELEVANT FOR SUPERVISORY PURPOSES AS AT JUNE 30, 2017

As at June 30, 2017, shareholders’ equity, excluding net profit for the period, amounted to Euro 1,935.4 million versus Euro 1,757.1 million as at December 31, 2016.

The Euro +178.2 million change refers to the allocation to reserves of 2016 profit (Euro +216.7 million net of dividends distributed on balance), the decrease in the valuation reserve (Euro -33.3 million versus the previous year) and the purchase of treasury shares for Euro -10.3 million as compared with the comparable period.

Earnings per share (EPS) amount to Euro 0.266 versus Euro 0.231 in the first half of 2016.

Banca Mediolanum S.p.A. has determined the consolidated Own Funds for Supervisory purposes and the related equity ratios under the rules in force (Regulation no. 575/2013 (EU) - Basel III discipline). For the purposes of supervisory reports, as at June 30, 2017, in the determination of the Own Funds, consolidated net profit as at June 30, 2017 was calculated net of estimated dividends.

The consolidated result as at June 30, 2017 of the Mediolanum Group equal to Euro 196.4 million, has been used to determine the computable profit for the calculation of the Own Funds. The amount computable in the calculation of the Own Funds amounted to Euro 39.3 million.




In light of the foregoing, the Common Equity Tier 1 Ratio (CET1) as at June 30, 2017 amounted to 21.9%.

OTHER INFORMATION

REGISTRATION WITH THE MEDIOLANUM INSURANCE GROUP COMPANIES

Please note that on January 20, 2017, Mediolanum Vita asked IVASS to register the Mediolanum Insurance Group on the list of parent companies.In this regard, it is reported that, upon completion of the investigation, on March 20, 2017, in accordance with Art. 210-ter of Italian Legislative Decree no. 209 of September 7, 2005 and Articles 20 et seq of the IVASS Regulation no. 22 of June 1, 2016, the Institute duly made the registration under no. 055.The Mediolanum Insurance Group, of which Mediolanum Vita is the Parent Company, comprises Mediolanum Assicurazioni S.p.A, the Company operating in the non-life classes, with registered office in Basiglio and Mediolanum International Life DAC, the Irish company operating in life classes.

NEW PRODUCTS

With Italian Law no. 232 of December 2016, the PIR (Individual Savings Plans) were established as “tax containers” within which different types of financial instruments could be included, thereby conveying part of savings to support Italian small and medium enterprises. The equity of the PIR consists of at least 70% financial instruments (both listed and unlisted on regulated markets or multilateral trading systems) issued or stipulated with companies carrying out businesses other than the real estate business, which are resident in Italy or in Europe with a permanent establishment in Italy. Of these 70%, at least 30% must be invested in financial instruments issued by companies other than those included on the FTSE MIB index of Borsa Italiana or equivalent indices of other regulated markets. It is also envisaged that the equity of the PIR cannot be invested more than 10% of its total value in financial instruments issued or stipulated with the same issuer or the same counterparty or with other companies belonging to the same group or deposited in current accounts. The financial instruments held in the PIR are exempt from capital income tax if kept for at least 5 years and are not subject to succession tax. Each natural person with tax residence in Italy may own just one PIR for an invested amount of Euro 30,000 per calendar year, with an overall total of Euro 150,000.




PERFORMANCE SHARE PLANS

The Board of Directors’ meeting held April 27, 2017, following the authorization to purchase and dispose of treasury shares resolved by the Shareholders’ Meeting, approved the launch of a treasury share buyback program in order to achieve the funding of shares of Banca Mediolanum at the service of the Performance Share Plans approved by the Shareholders’ Meeting of the Bank of April 5, 2017.The program involves a maximum of 3,500,000 ordinary shares of Banca Mediolanum, for a maximum counter-value of Euro 25,000,000.00. As at June 30, 2017, a total of 2,008,000 treasury shares were held in portfolio.

CONTINGENT ASSET

As indicated in the Report to the consolidated financial statements as at December 31, 2016, following the definition of the tax dispute with the Italian Tax Authority, the Irish Subsidiary Mediolanum International Funds submitted a request to the Irish Tax Authority for reimbursement of the higher taxes paid in the period to be defined for a total value that can amount to a maximum of about Euro 41 million.In the period under review, there were no additions compared to as already reported in the report to the consolidated financial statements as at December 31, 2016 and the same accounting treatment was therefore applied in continuity. In particular, the above amount was considered a contingent asset (within the application of IAS 37 - Provisions, Contingent Liabilities and Contingent Assets) and it was therefore assessed that, on the basis of information currently available, this receivable does not possess the requirements to be recognized for accounting purposes.




INTERVENTIONS IN SUPPORT OF THE BANKING SYSTEM

The sector regulatory scenario “Bank Recovery and Resolution Directive 2014/59/EU” and “Deposit Guarantee Schemes 2014/49/EU”

With regard to the Resolution Funds, in the discipline “Bank Recovery and Resolution Directive 2014/59/EU” and “Deposit Guarantee Schemes 2014/49/EU”, taking into account the application of IFRIC 21, and also taking into account the different periods of observation on the basis of which the calculation is based of the charges relating to the funds mentioned above, the Group allocated for the year 2017 the “Single Resolution fund” for an amount of Euro 5.9 million. The contribution made to the DGS will be booked at the time it is accrued during the second half of the year.

Atlante I FundAs regards the intervention relative to the Atlante Fund, the Bank had subscribed in 2016, a total amount of Euro 40.6 million which was impaired by a total amount of Euro 17.1 million, gross of the related tax effect.As at June 30, 2017, on the basis of the assessments made by Quaestio Capital Management SGR, the Bank further impaired the Atlante I Fund for a gross amount of Euro 23.3 million. This impairment was considered, as already when drafting the financial statements, as permanent and was registered on the income statement.It is specified that the equivalent value of the residual units of the Atlante I Fund held as at June 30, 2017, is Euro 3.5 million.

KEY CORPORATE EVENTS SUBSEQUENT TO THE END OF H1 2017

In its board meeting held on July 27, 2017, Banca Mediolanum approved the proposal to purchase a company operating in the consumer credit sector. The acquisition aims to further develop the credit business, with a focus also on consumer credit. This operation is subject to the authorisations envisaged by the regulations. It is specified that the acquisition will take place in full and no capital commitments are envisaged such as to significantly alter the equity solidity of the Mediolanum Group.




Except as described above, as at June 30, 2017, there were no other events that might affect to a significant extent the financial position and results of operations of the Mediolanum Group.

OUTLOOK

The first half of 2017 closed positively for the main financial asset classes, in particular for the stock markets, which globally archived the best first half-year since 1998 (+10.25% the performance of the MSCI World All Country index). Above all, the extent of the phenomenon was significant, with rises that were fairly generalised, both on a geographic and sector level.If performance was initially favoured by the expectations over Mr Trump’s tax re-launch, in the second phase, continuous support came from the combination of an improvement to world economic growth and a continuous lack, on the other hand, of inflationist pressure; this combination led financial operators to suffer an extremely low monetary adjustment approach by the main Central Banks and a consequent extension of the expansive phase of the economic cycle. The clearest evidence in this sense was the variation since the start of the year of the return on the American ten-year bonds, slightly negative despite the three rises made by the Federal Reserve from December to date. The apparent loosening up of the link between growth and inflation has, therefore, been one of the most discussed matters by the financial community in recent times. The reasons for the phenomenon include the new descent phase of the price of oil, to a large extent due to the increase in the offer by American producers. However, “core” inflation, which excludes the more volatile components of energy and food, also showed a similar trend. In this regard, the main explanation would appear to be a weak influence, to date, of the economic recovery and decline of unemployment on the rise of salaries (in technical terms, there is a flattening out of the Philips curve - the relationship between unemployment and inflation). This may be due to multiple reasons, from a simultaneous increase in participation in the employment market, to a lesser contractual power of workers, the increase in “sub-employment”, which is not adequately measured by traditional unemployment indices. Other factors may include technological innovation, which has driven the prices down in certain product categories, a certain tendency by companies to absorb any cost increases without raising end prices, as well as several years of inflation falling below expectations, which contribute towards limiting expectations for the future too.In any case, even during the last meeting held in June, the Federal Reserve had expressed its interpretation of the current weakness of inflation as a temporary




phenomenon, destined to be reabsorbed with the pursuit of the economic recovery and had stressed its intention to raise rates and also proceed with a reduction of assets on the books in the near future. Despite this, the monetary adjustment trajectory expected by the market is far more gradual than that indicated by the Committee members. The publication of data on orders of lasting goods coming in below expectations and the cut to the estimates of the International Monetary Fund on US growth (2.1% in 2017 and 2018 from respectively 2.3% and 2.5%) drove the Treasury returns down yet further in recent period, thereby confirming the little likelihood attributed to the finalisation of the tax reforms by the Trump administration. However, other central bankers subsequently expressed an opinion, suggesting a greater alignment with the Federal Reserve message on any opportunities to normalise the monetary policy, also looking beyond short-term inflation. More specifically, during the meeting between the Central Banks of Sintra, Mr Draghi was fairly clear on the future path of the ECB monetary policy, summarising his message in three keywords:1. CONFIDENCE: faith in the effectiveness of the monetary policy and the

strengthening and dissemination of growth2. PERSISTENCE: perseverance in maintaining, for now, monetary support,

which is still deemed necessary3. PRUDENCE: prudence when making monetary adjustments, which should

accompany, rather than destabilise the recoveryIn actual fact, it was not a revolution, but rather a re-affirmation, in terms that are perhaps more explicit, of the normalisation process already indicated in the past. However, this has brought greater awareness amongst financial operators, of the fact that the monetary stimulation will not continue forever and rates will be gradually adjusted, although look to remain relatively low for a long time yet. The more immediate effects related to the bond and currency markets, with a partial increase to government returns, particularly core European returns, and a strengthening of the euro-dollar exchange rate, all also facilitated by the publication of inflation data in the Eurozone that comes in slightly above expectations. There was also a settling on stock markets, in this case too more marked in Europe, in anticipation of a narrowing of financial conditions, also in Europe. If the economic activity indicators continue to show a consolidation of global growth, a certain adjustment of government rates may, however, be well supported by the stock market and, therefore, rather than leading to a major correction, may result in a sector rotation of the more defensive sectors, to those that are more cyclical and Growth at Value style. In the United States of America, this has already partly taken place, with the technological sector, the best in terms of performance since the start of the year, which has recently shown a certain level of weakness, contrary to the financial sector, which has gained




ground, not only thanks to the partial realignment of rates, but also to the good results of stress tests in the USA. Again in the event of confirmation of the good economic outlook, the European stock markets may be favoured in this phase by the greater exposure to financials and assessments that are still relatively far below the American shares, whilst a further strengthening of the euro may cause excessive strengthening of the reason for trade between European and foreign products. On the other hand, the weakness of the dollar remains a supporting factor for securities and currencies of emerging countries, particularly those offering the highest returns, which together with the high yields, remain relatively attractive with respect to the government bonds of the advanced economies. Some of the most important appointments for the near future include the publication of new data on quarterly profits, which will enable verification of whether or not the positive trend observed during the first quarter is effectively continuing. The good holding out of corporate fundamentals will be essential to the trend of stock markets, in a context of valuations that are already relatively high, with a tendency of interest rates to rise and expectations over a tax stimulation in the United States of America, at a low since Mr Trump’s election. Even if to date the markets have reacted well to episodes of greater political and geo-political uncertainty, it is necessary to keep in mind the factors that may cause a certain volatility in the second half of the year: in addition to the pursuit of the debate on the reforms in America, we would recall the negotiations about Brexit, the evolution of the political context in Italy, the tension between the USA and North Korea and the performance by the Chinese economy.Considering the performance in the first six months of the current year, the risks that are inherent in the business conducted by the Bank and the uncertainty that characterizes the evolution of financial markets, barring any exceptional events or circumstances that depend on variables essentially outside the control of Directors and Senior Management - and not in the offing at present - the outlook for 2017 is positive.

Basiglio, July 27, 2017 For the Board of DirectorsManaging Director

Massimo Antonio Doris



Condensed Consolidated Half-Year Financial Statements as at June 30, 2017

CONDENSED CONSOLIDATED HALF YEAR FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Assets

€/t 06/30/2017 12/31/2016

10. Cash and cash equivalents 83,901 86,875

20. Financial assets held for trading (HFT) 687,816 368,268

30. Financial assets measured at fair value 17,693,664 17,363,617

40. Financial assets available for sale 13,721,249 11,547,266

50. Financial assets held to maturity 947,686 1,415,684

60. Loans to banks 831,259 721,090

70. Loans to customers 8,000,951 8,623,784

80. Hedge derivatives 742 532

90. Value adjustment of financial assets backed by generic hedges (+/-) - -

100. Equity investments 355,983 357,094

110. Reinsurers’ share of technical reserves 67,560 68,676

120. Tangible assets 219,543 219,487

130. Intangible assets 200,116 199,382

of which goodwill 125,625 125,625

140. Tax assets 405,686 460,832

a) current 273,400 331,889

b) deferred 132,286 128,943

b1) pursuant to Law 214/2011 6,938 7,033

150. Non-current assets and disposal groups 181 98,175

160. Other assets 437,196 440,598

TOTAL ASSETS 43,653,533 41,971,360



Liabilities and Shareholders’ Equity

€/t 06/30/2017 12/31/2016

10. Amounts due to banks 416,105 462,182

20. Amounts due to customers 19,884,522 18,494,400

30. Securities issued 160,918 187,425

40. Financial liabilities held for trading 518,533 371,597

50. Financial liabilities measured at fair value 4,885,829 4,340,307

60. Hedge derivatives 38,134 46,977 70. Value adjustment of financial liabilities backed by generic hedges (+/-) - -

80. Tax liabilities 75,666 94,409

a) current 15,275 20,843

b) deferred 60,391 73,566

90. Liabilities associated with assets held for sale - -

100. Other liabilities 604,472 667,707

110. Employee completion-of-service entitlements 11,127 11,510

120. Provisions for risks and charges: 226,738 222,502

a) severance benefits and similar obligations 644 644

b) other provisions 226,094 221,858

130. Technical reserves 14,699,658 14,921,684

140. Valuation reserves 94,511 127,847

150. Redeemable shares - -

160. Capital instruments - -

170. Reserves 1,273,094 1,169,825

175. Interim dividend (-) - (117,705)

180. Share premium reserve 1,831 902

190. Share capital 600,140 600,079

200. Treasury shares (-) (34,129) (23,815)

210. Shareholders’ equity attributable to minority interest (+/-) - -

220. Net profit (loss) for the year (+/-) 196,384 393,527

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 43,653,533 41,971,360

For the Board of DirectorsManaging Director





Consolidated income statement

€/t 06/30/2017 06/30/2016

10. Interest income and similar income 160,772 219,116

20. Interest expense and similar charges (44,747) (72,039)

30. Net interest income 116,025 147,077

40. Commission income 695,607 602,416

50. Commission expense (298,156) (248,941)

60. Net commission 397,451 353,475

70. Dividends and similar income 3,467 4,843

80. Net income from trading 9,976 (9,904)

90. Net income from hedging (1,973) (5,276)

100. Gains (losses) on sale or buyback of: 1,890 21,158

a) loans 2 2

b) financial assets available for sale 1,952 21,233

d) financial liabilities (64) (77)

110. Net result from financial assets and liabilities measured at fair value (58,712) (541,528)

120. Banking income 468,124 (30,155)

130. Net impairment/reversal of impairment of: (34,799) (9,777)

a) loans (8,847) (8,560)

b) financial assets available for sale (26,110) (1,659)

d) other financial instruments 158 442

140. Net income from financial operations 433,325 (39,932)

150. Net premiums 905,331 1,137,202

160. Balance of other income/expenses from insurance activities (874,060) (630,859)

170. Net income from financial and insurance operations 464,596 466,411

180. Administrative expenses: (253,442) (249,118)

a) staff costs (99,838) (96,308)

b) other administrative expenses (153,604) (152,810)

190. Net provisions for risks and charges (18,916) (15,836)

200. Impairment/reversal of impairment of tangible assets (3,856) (4,143)

210. Impairment/reversal of impairment of intangible assets (13,631) (10,763)

220. Other operating income/expenses 6,107 5,123

230. Operating costs (283,738) (274,737)

240. Profit (Loss) on equity investments 48,162 5,545

270. Profit (Loss) on disposal of investments 6 1

280. Profit (Loss) before tax on continuing operations 229,026 197,220

290. Income tax expense on continuing operations (32,642) (26,898)

300. Profit (Loss) after tax on continuing operations 196,384 170,322

320. Profit (Loss) for the period 196,384 170,322

340. Profit (Loss) for the period attributable to the Parent Company 196,384 170,322






Consolidated statement of other comprehensive income

€/t 06/30/2017 06/30/2016

10. Profit (Loss) for the period 196,384 170,322

Other comprehensive income components after tax without reversal to the income statement

20. Tangible assets - -

30. Intangible assets - -

40. Defined benefit plans 460 (325)

50. Non-current assets held for sale - -

60. Share of valuation reserves on investments accounted for by the equity method 1,654 (756)

Other comprehensive income components after tax with reversal to the income statement

70. Hedges of investments in foreign operations - -

80. Exchange rate differences - -

90. Cash flow hedges - -

100. Financial assets available for sale (24,851) (47,058)

110. Non-current assets held for sale - -

120. Share of valuation reserves on investments accounted for by the equity method (10,600) 2,405

130. Total other income components net of taxes (33,336) (45,734)

140. Comprehensive income (Captions 10+130) 163,048 124,588

150. Total consolidated comprehensive income (loss) pertaining to minority interests - -

160. Total consolidated comprehensive income (loss) pertaining to the Parent Company 163,048 124,588






BANCA MEDIOLANUM S.P.A.CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS AS AT JUNE 30, 2017 79

Consolidated statement of changes in equityAs at June 30, 2016

€/t Changes occurred in the year

Appropriation of prior year’s profit

Equity transactions

Balance as at 12/31/2015

Changes to opening balances

Balance as at 01/01/2016 Reserves

Dividends and other

allocations

Changes in reserves

Issue of new shares

Purchase of treasury

shares

Extraordinary distribution of

dividends

Changes in equity

instruments

Derivatives on treasury

shares

Stock options and

Performance Shares

Net profit as at 06/30/2016

Shareholders’ equity as

06/30/2016

Share capital:

a) ordinary shares 600,000 600,000 27 600,027

b) other shares - -

Share premium reserve - - - 299 299

Reserves: - - -

a) of profits 827,561 827,561 335,234 224 3,889 - 1,166,908

b) others - - -

Valuation reserves 203,961 203,961 - (45,734) 158,227

Capital instruments - - -

Treasury shares - - - (19,949) (19,949)

Profit (Loss) for the year 438,613 438,613 (335,234) (103,379) 170,322 170,322

Group shareholders’ equity 2,070,135 2,070,135 - (103,379) 224 326 (19,949) - - 3,889 124,588 2,075,834

Minorities shareholders’ equity - - - - - - - - - - - -

CONDENSED CONSOLIDATED HY FINANCIAL STATEMENTS



Consolidated statement of changes in equity As at June 30, 2017

€/t Changes occurred in the year

Appropriation of prior year’s profit

Equity transactions

Balance as at

12/31/2016

Changes to opening

balances

Balance as at 01/01/2017

Reserves Dividends and other

allocations

Changes in reserves

Issue of new shares

Purchase of treasury

shares

Extraordinary distribution of

dividends

Changes in equity

instruments

Derivatives on treasury

shares

Stock options and

Performance Shares

Net profit as at

06/30/2017

Shareholders’ equity as

06/30/2017

Share capital:

a) ordinary shares 600,079 600,079 61 600,140

b) other shares - -

Share premium reserve 902 902 - 929 1,831

Reserves: - - -

a) of profits 1,052,120 1,052,120 216,717 1,225 3,032 - 1,273,094

b) others - - - -

Valuation reserves 127,847 127,847 - (33,336) 94,511

Capital instruments - - -

Treasury shares (23,815) (23,815) - (10,314) (34,129)

Profit (Loss) for the year 393,527 393,527 (216,717) (176,810) 196,384 196,384

Group shareholders’ equity 2,150,660 2,150,660 - (176,810) 1,225 990 (10,314) - - - 3,032 163,048 2,131,831

Minorities shareholders’ equity - - - - - - - - - - - -



CONDENSED CONSOLIDATED HY FINANCIAL STATEMENTS


Statement of cash flows

€/t 06/30/2017 06/30/2016A. OPERATING ACTIVITIES1. Operations 272,046 637,445result for the year (+/-) 196,384 170,322 gains/losses on financial assets held for trading and on financial assets/liabilities at fair value (-/+) (36,948) 432,192gains/losses on hedges (+/-) 1,973 5,276net impairment/reversal of impairment (+/-) 34,799 9,777net write-downs/write-backs of tangible and intangible assets (+/-) 17,487 14,906net provisions for risks and charges and other costs/revenues (+/-) 18,916 15,836taxes, duties and unpaid tax credits (+/-) 36,403 (14,753)other adjustments (+/-) 3,032 3,889

2. Cash generated/absorbed by financial assets (2,239,506) 548,094financial assets held for trading (309,445) 215,714financial assets measured at fair value (303,412) (199,815)financial assets available for sale (2,233,429) 612,970loans to banks: on demand 91,373 27,699loans to banks: other loans (201,542) (114,708)loans to customers 614,144 (35,341)other assets 102,805 41,575

3. Cash generated/used by financial liabilities 1,701,946 (1,043,738)due to banks: on demand 166,040 (1,312)due to banks: other amounts due (212,117) (291,447)amounts due to customers 1,390,122 (528,424)securities issued (26,507) (27,392)financial liabilities held for trading 146,936 218,664financial liabilities measured at fair value 536,679 267,278other liabilities (299,207) (681,105)

Net cash generated/absorbed by operating activities (265,514) 141,801B. INVESTING ACTIVITIES1. Cash generated by 568,491 22,500sales/reimbursements of financial assets held to maturity 568,417 22,500sales of tangible assets 74 -

2. Cash absorbed by (119,817) (19,781)purchase of financial assets held to maturity (100,953) - purchases of tangible assets (4,500) (6,760)purchases of intangible assets (14,364) (13,021)

Net cash generated/absorbed by investing activities 448,674 2,719C. FINANCING ACTIVITIESissue/purchase of treasury shares (formation of share capital) (10,253) (19,922)issue/purchase of equity instruments 929 299dividend distribution and other (176,810) (103,379)

Net cash generated/absorbed by financing activities (186,134) (123,002)NET CASH GENERATED/ABSORBED IN THE PERIOD (2,974) 21,518

Legend: (+) generated (-) absorbed

RECONCILIATION 06/30/2017 06/30/2016€/tBalance sheet itemsCash and cash equivalents at beginning of the year 86,875 84,079 Total net cash generated/used in the period (2,974) 21,518 Cash and cash equivalents at the end of the period 83,901 105,597






NOTES

Notes

PART A − ACCOUNTING POLICIES

A.1 − GENERAL

SECTION 1 − COMPLIANCE WITH THE INTERNATIONAL ACCOUNTING AND FINANCIAL REPORTING STANDARDS

The Condensed Consolidated Half-year Financial Statements of the Mediolanum Group as at June 30, 2017 were prepared pursuant to Legislative Decree February 28, 2005 no. 38 in accordance with the international accounting and financial reporting standards issued by the International Accounting Standards Board (IASB) and the related interpretations of the International Financial Reporting Interpretations Committee (IFRIC) as adopted by the European Commission under European Parliament and Council Regulation (EC) no. 1606 of July 19, 2002 and subsequent.The Mediolanum Group, under Legislative Decree no. 142 of May 30, 2005, is a financial conglomerate that operates primarily in the banking business.The Condensed Consolidated Half-year Financial Statements as at June 30, 2017 were prepared also considering the “Instructions for the preparation of the financial statements of companies and the consolidated financial statements of banks and financial companies that are parent companies of banking groups” issued by the Bank of Italy through Circular no. 262 of 22 December 2005 and subsequent amendments, in the exercise of its powers pursuant to Art. 9 of Legislative Decree 38/2005. As to the entity’s ability to continue as a going concern, the management of Banca Mediolanum S.p.A. confirm they reasonably expect the Group will continue in operation in the foreseeable future and therefore the Condensed Consolidated Half-year Financial Statements were prepared based on the going concern assumption. Following their examination of the financial position, result of operations and cash-flows, they also confirm they did not find any evidence of uncertainties in relation to the ability of the entity to continue in operation as a going concern.



NOTES

SECTION 2 − ACCOUNTING BASIS

These Condensed Consolidated Half-year Financial Statements consist of: › a consolidated balance sheet as of the end of the half-year (06/30/2017)

and a comparative balance sheet as of the end of the previous year (12/31/2016);

› a consolidated income statement of the interim period of reference (1st half-year 2017) compared with the comparative income statement for the corresponding interim period of the previous year (1st half-year 2016);

› a consolidated statement of other comprehensive income of the interim period of reference (1st half-year 2017) compared to the comprehensive income statement for the corresponding interim period of the previous year (1st half-year 2016);

› a consolidated statement of changes in equity for the period between the beginning of the year and the end of the half-year of reference, with a comparative statement for the corresponding period of the previous year;

› a consolidated statement of cash flows for the period between the beginning of the year and the end of the half-year of reference, with a comparative statement for the corresponding period of the previous year;

› consolidated notes, containing references to accounting standards adopted and other specific notes relating to half-year operations.

In particular, IAS 34 provides that, in the interest of time, the half-year report (“condensed financial statements”) information may be provided that is more limited than that contained in the annual report and intended primarily to provide an update with respect to last complete annual financial statements. Accordingly, the condensed report shall be read in conjunction with the Group’s annual consolidated report for the year ended December 31, 2016.



NOTES

SECTION 3 − SCOPE AND METHODS OF CONSOLIDATION

The Condensed Consolidated Half-Year Financial Statements include the accounts of Banca Mediolanum S.p.A. and those of its directly or indirectly controlled subsidiaries.

The subsidiaries which are consolidated on a line-by-line basis in accordance with the international accounting standards are set out in the tables below.



NOTES

1. Investments in subsidiaries

Group companies that are directly owned by Banca Mediolanum S.p.A. and consolidated on a line-by-line basis:

Company (Euro/thousands)

Share capital Holding Registered/

Operating officeType of relation** Business

Mediolanum Vita S.p.A. 207,720 100.00% Basiglio 1 Life Insurance

Mediolanum Comunicazione S.p.A. 775 100.00% Basiglio 1 Audio/film/TV production

PI Servizi S.p.A. 517 100.00% Basiglio 1 Real estate brokerage

Mediolanum International Life DAC 1,395 100.00% Dublin 1 Life Insurance

Mediolanum Assicurazioni S.p.A. 25,800 100.00% Basiglio 1 Damages Insurance

Mediolanum Gestione Fondi SGR p.A. 5,165 100.00% Basiglio 1 Mutual fund management

Mediolanum International Funds Ltd* 150 92.00% Dublin 1 Mutual fund management

Mediolanum Asset Management Ltd 150 100.00% Dublin 1 Asset management and consulting activities

Gamax Management AG 2,000 100.00% Lussemburgo 1 Mutual fund management

Mediolanum Fiduciaria S.p.A. 240 100.00% Basiglio 1 Trust company

Fermi & Galeno Real Estate S.r.l. 10 100.00% Basiglio 1 Real estate management

Bankhaus August Lenz & Co. AG 20,000 100.00% Munich 1 Banking

Banco Mediolanum S.A. 86,032 100.00% Barcelona 1 Banking

(*) The remaining 8% is held indirectly by Banca Mediolanum through Banco Mediolanum and Bankhaus August Lenz, which directly hold 5% and 3%.

(**) Type of relation: 1 = majority of voting rights in the ordinary Shareholders’ Meeting 2 = dominant influence in the ordinary Shareholders’ Meeting 3 = agreements with other shareholders 4 = other forms of control 5 = joint management pursuant to article 26, paragraph 1, Legislative Decree no. 87/92 6 = joint management pursuant to article 26, paragraph 2, Legislative Decree no. 87/92



NOTES

Group companies that are indirectly owned by Banca Mediolanum S.p.A. and owned through Banco Mediolanum S.A., consolidated on a line-by-line basis:



Operating officeType of relation* Business

Mediolanum Gestión S.A. S.G.I.I.C. 2,506 100.00% Barcelona 1 Mutual fund management

Fibanc S.A. 301 100.00% Barcelona 1 Financial consulting firm

Mediolanum Pensiones S.A. S.G.F.P. 902 100.00% Barcelona 1 Pension Fund management

Mediolanum S.p.A. associates accounted for using the equity method:



Operating office Business

Mediobanca S.p.A. 436,401 3.40% Milan Banking

(*) Type of relation: 1 = majority of voting rights in the ordinary Shareholders’ Meeting 2 = dominant influence in the ordinary Shareholders’ Meeting 3 = agreements with other shareholders 4 = other forms of control 5 = joint management pursuant to article 26, paragraph 1, Legislative Decree no. 87/92 6 = joint management pursuant to article 26, paragraph 2, Legislative Decree no. 87/92



Methods of consolidation

Subsidiaries are consolidated on a line-by-line basis, while associates and joint ventures are accounted for using the equity method.

Full consolidation (line-by-line)Consolidation is the combination of the accounts of the Parent Company and those of its subsidiaries line by line by adding together like items of the statement of financial position and the income statement. Following the allocation to minority shareholders of their interests, in a specific item, in equity and in the result for the year, the residual value is eliminated against the book value of the subsidiaries concerned.Any resulting difference, if positive, after recognition of the assets or liabilities of the subsidiary, is recognised as goodwill under “Intangible Assets” on first-time consolidation, and under “Other Reserves” thereafter. Negative differences are recognised in the income statement.Assets, liabilities, income and expense between consolidated companies are fully derecognised.Business combinations are accounted for by applying the purchase method. Goodwill acquired in a business combination is initially measured at cost, being the excess of the cost of the business combination over the Group’s (acquirer’s) interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree.After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is allocated, from the acquisition date, to each of the Group’s (acquirer’s) cash-generating units or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units or groups of units.If goodwill has been allocated to a cash-generating unit (or group of cash-generating units) and the Group disposes of an operation within that unit, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal and is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained.The income and expenses of a subsidiary acquired during the reporting period are included in the consolidated financial statements from the date of acquisition.The income and expenses of a subsidiary acquired during the reporting period are included in the consolidated financial statements from the date of acquisition.

NOTES



Accordingly, the income and expenses of a subsidiary disposed of in the reporting period are included in the consolidated financial statements until the date on which the parent ceases to control the subsidiary. Any difference between the consideration for the disposal of the subsidiary and its carrying amount as at the date of disposal is recognised in the income statement.The financial statements of the Parent Company and those of its subsidiaries used in the preparation of the consolidated financial statements are prepared as at the same reporting date.When a company within the Group uses different accounting policies, in preparing the consolidated financial statements adjustments are made to make them uniform with the accounting policies adopted by the Group.

Consolidation using the equity methodUnder the equity method, an investment is initially measured at cost and its carrying amount is increased or decreased thereafter to reflect the value of the investor’s share of the investee’s equity and profit.The investor’s share of the profit or loss of the investee is recognised under the relevant item in the consolidated income statement, and the investor’s share of changes in the investee’s equity, other than transactions with the shareholders, is recognised under the relevant item in the consolidated statement of other comprehensive income.If there is evidence that an investment may be impaired, its recoverable amount is calculated by estimating the present value of future cash flows expected to be generated by the subsidiary or associate, including the proceeds on the ultimate disposal of the investment.If the recoverable amount is lower than the carrying amount, the resulting difference is recognised in the income statement.In applying the equity method to investments in associates and joint ventures the approved IAS/IFRS annual/interim financial statements of associates were used.

2. Ratings and significant assumptions to determine the scope of consolidation

The following is a summary of key assessments made in the determination of the consolidation area.The reason for which the Mediolanum Group deems it does not control the “Unit Linked” internal insurance funds (for which it holds 100% of the outstanding) and the funds promoted (securities, real estate and Sicav) is the contemporary non-respect of all the conditions for control in IFRS 10.

NOTES



In relation to the Unit Linked the Mediolanum Group believes that:

i) it does not exercise full power over the entity of the investment (Unit Linked) as limited by the requirements laid down in the regulations of the funds in terms of asset allocation and management policies;

ii) it is not significantly exposed to variable returns of the entity involved in the investment.

In fact, the profits or losses related to the valuation of the assets included in the Unit Linked are fully recognized to policyholders through the change in the financial liabilities and only the change in the relative commission impact remains with the Group (impact relating to the variability of flows of the entity and considered as not significant).In relation to the funds, the Mediolanum Group believes that:

i) it does not own the majority of outstanding units and directly support the investment risk (for example: unit funds that hold shares in funds managed, the risk of which is borne by policyholders);

ii) it does not exercise full power over the entity of the investment (funds) as limited by the requirements laid down in the regulations of the funds in terms of asset allocation and management policies;

iii) it is not significantly exposed to variable returns of the entity of the investment as it does not hold or holds a marginal portion of the funds or holds units for which it does not bear the investment risk.

Exposure to changes in the value of the funds, i.e. the gains or losses related to the valuation of assets, are attributable to the subscribers and only the change in the relative commission impact remains with the Group.In particular, the Group is exposed to the risk of variability of subscription fees and charges on premiums, linked to the performance of inflows, management fees relating to assets under management and incentive fees linked to the performance of managed funds, as well as operational, compliance and reputational risks typical of the sector in which the Group operates.

NOTES



SECTION 4 − POST BALANCE SHEET DATE EVENTS

In the period between the end of the first half of 2017 and the date on which the Condensed Consolidated Half-year Financial Statements were prepared, there was no event − other than those set out in the corresponding section of the Report on operations to which readers are referred − which could materially impact the business or result of operations of the Group.

SECTION 5 − OTHER INFORMATION

Information on the business and the results of operations for the first half of 2017 of the main subsidiaries is set out in the Report on Operations accompanying the Condensed Consolidated Half-year Financial Statements.

NOTES



A.2 SIGNIFICANT ACCOUNTING POLICIES

Accounting Policies

This section presents the accounting policies applied in the preparation of the Condensed Consolidated Half-year Financial Statements as at June 30, 2017. The accounting policies applied in the preparation of the Condensed Consolidated Half-year Financial Statements with respect to the classification, measurement, recognition and derecognition of the various items of assets and liabilities as well as the various items of income and expense, are consistent with those applied by the Mediolanum Group in the preparation of the consolidated financial statements for the year ended December 31, 2016.

ACCOUNTING STANDARDS, AMENDMENTS AND IFRS INTERPRETATIONS APPLIED STARTING FROM 01 JANUARY 2017

As the entry into force is not envisaged as from January 1, 2017 of any new accounting standards, amendments and IFRS interpretations, the Group has prepared this Condensed Consolidated Half-year Financial Statements using the same accounting standards as adopted for the consolidated financial statements as at December 31, 2016. ACCOUNTING STANDARDS, AMENDMENTS AND IFRS AND IFRIC INTERPRETATIONS APPROVED BY THE EUROPEAN UNION, NOT YET OBLIGATORILY APPLICABLE AND NOT ADOPTED BY THE GROUP IN ADVANCE AS AT JUNE 30, 2017

Standard IFRS 15 − Revenue from Contracts with Customers (published on May 28, 2014 and integrated with further clarifications published on April 12, 2016), which is destined to replace IAS 18 − Revenue and IAS 11 − Construction Contracts, as well as the interpretations of IFRIC 13 − Customer Loyalty Programmes, IFRIC 15 − Agreements for the Construction of Real Estate, IFRIC 18 − Transfers of Assets from Customers and SIC 31 − Revenues-Barter Transactions Involving Advertising Services. The standard establishes a new model of revenue recognition shall apply to all contracts with clients except those that fall within the scope of application of other IAS/IFRS principals such as leasing, insurance contracts and financial instruments. The fundamental steps for the recognition of revenues according to the new model are:

NOTES



› identification of the contract and with the client; › identification of the performance obligations of the contract; › determination of the price; › allocation of the price to the performance obligations of the contract; › criteria for recognition of revenues when the entity meets each

performance obligation.

The principle is applicable starting from January 1, 2018. However, earlier application is permitted. The changes to IFRS 15, Clarifications to IFRS 15 - Revenue from Contracts with Customers, published by the IASB on April 12, 2016, have not been approved by the European Union.The assessment of the effects of this standard is still underway; at present, it is reasonable to expect an impact in organisational terms and as regards the implementation of the new method of accounting the economic components and fulfilling the additional disclosure obligations expected.

Final version of IFRS 9 − Financial Instruments (published on July 24, 2014). The document includes the results of the IASB draft aimed at replacing IAS 39:

› introduces new criteria for classifying and measuring financial assets and liabilities;

› with reference to the impairment model, the new standard requires the estimate of losses on receivables to be made on the basis of the model of expected losses (and not on the model of incurred losses used by IAS 39) using supportable information, available without unreasonable effort or expense that include current and prospective historical data;

› introduces a new hedge accounting model (increase in the types of transactions eligible for hedge accounting, changes in the accounting method of forward contracts and options when included in a hedge accounting report, changes in the effectiveness test).

The new standard shall be applied for financial statements beginning on January 1, 2018 or later.

As regards the estimate of impacts, the considerations made in the 2016 financial statements are confirmed.

NOTES



ACCOUNTING STANDARDS, AMENDMENTS AND IFRS INTERPRETATIONS NOT YET APPROVED BY THE EUROPEAN UNION

At the date of reference of this document, the EU competent authorities have not yet completed the standardisation process required to adopt the accounting principles and amendments described below.

On January 13, 2016, the IASB published the standard IFRS 16 − Leases, which is intended to replace the standard IAS 17 − Leases, as well as the interpretations IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases−Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

The new standard provides a new definition of lease and introduces a criterion based on control (right of use) of an asset to distinguish lease contracts from service contracts, identifying as discriminants: the identification of the asset, the right to replace the same, the right to obtain substantially all of the economic benefits arising from the use of the asset and the right to direct the use of the asset underlying the contract.

The standard establishes a single model of recognition and evaluation of lease agreements for the lessee, which involves registration of the leased asset to also operational in assets with financial debt balancing entry, while also providing the opportunity to not recognize as leases contracts concerning “low-value assets” and leases with a contract term equal to or less than 12 months. By contrast, the Standard does not include significant changes for lessors.

The standard is applicable as at January 1, 2019. However, earlier application is permitted only for companies that have already applied IFRS 15 - Revenue from Contracts with Customers. The directors do not expect the application of IFRS 16 to have a significant impact on the accounting of lease contracts and the related disclosure in the Group’s consolidated financial statements.

NOTES



On May 18, 2017, the IASB published standard IFRS 17 − Insurance Contracts, which is destined to replace the standard IFRS 4 − Insurance Contracts.

The aim of the new standard is to guarantee that an entity supplies pertinent information that is a faithful representation of the rights and obligations deriving from the insurance contracts issued. The IASB has developed the standard to eliminate discordance and weaknesses of existing accounting policies, forming a single principle-based context to consider all types of insurance contract, including the reinsurance contracts held by an insurer.

The standard is applicable as at January 1, 2021. However, earlier application is permitted only for entities applying IFRS 9 − Financial Instruments and IFRS 15 − Revenue from Contracts with Customers.The Group’s insurance companies are taking action to launch multifunction working parties to develop the new standard that will significantly alter the methods by which revenues are represented on the income statement.

The document “Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts” (published on September 12, 2016). For the entities whose business consists predominantly of insurance activities, the changes aim to clarify concerns deriving from the application of the new standard IFRS 9 (from January 1, 2018) to financial assets, before the current standard IFRS 4 is replaced by the IASB with the new standard, currently being prepared, on which basis financial liabilities are measured.

NOTES



Amendment to IAS 12 “Recognition of Deferred Tax Assets for Unrealised Losses” (published on January 19, 2016). The document aims to provide some clarification on the recognition of deferred tax on unrealized losses upon the occurrence of certain circumstances and on the estimate of taxable income for future years. As these changes, published by the IASB in January 2016 and applicable as from January 1, 2017, have not yet been approved by the European Union, they were not adopted by the Group as at June 30, 2017. The directors do not expect a significant impact on the Group’s consolidated financial statements from the adoption of said amendments.

Amendment to IAS 7 “Disclosure Initiative” (published on January 29, 2016). The document aims to provide some clarification to improve disclosures on financial liabilities. In particular, the amendments require to disclose information that enables users of financial statements to understand the changes in liabilities arising from financing operations. As these changes, published by the IASB in January 2016 and applicable as from January 1, 2017, have not yet been approved by the European Union, they were not adopted by the Group as at June 30, 2017. The directors do not expect a significant impact on the Group’s consolidated financial statements from the adoption of said amendments.

Amendment to IFRS 2 “Classification and measurement of share-based payment transactions” (published on June 20, 2016), which contains some clarifications in relation to the recognition of the effects of vesting conditions in the presence of cash-settled share-based payments, the classification of share-based payments with net settlement characteristics and the accounting of changes to the terms and conditions of a share-based payment, which alter their classification from cash-settled to equity-settled. The amendments are applicable starting from January 1, 2018. However, earlier application is permitted. The directors do not expect a significant impact on the Group’s consolidated financial statements from the adoption of said amendments.

Document “Annual Improvements to IFRSs: 2014-2016 Cycle”, published on 08 December 2016 (including IFRS 1 First-Time Adoption of International Financial Reporting Standards - Deletion of short-term exemptions for first-time adopters, IAS 28 Investments in Associates and Joint Ventures − Measuring investees at fair value through profit or loss: an investment-by-investment choice or a consistent policy choice, IFRS 12 Disclosure of Interests in Other Entities − Clarification of the scope of the Standard), which partially supplement the pre-existing standards. The directors do not expect a significant impact on the Group’s consolidated financial statements from the adoption of said amendments.

NOTES



Interpretation IFRIC 22 “Foreign Currency Transactions and Advance Consideration” (published on 08 December 2016). The interpretation aims to provide guidelines to transactions carried out in foreign currency where recorded in the financial statements of advances or non-monetary accounts, prior to the booking of the related asset, cost or revenue. This document provides indications as to how an entity must determine the date of a transaction and, consequently, the spot exchange rate to be used when transactions take place in foreign currency, in which payment is made or received in advance. IFRIC 22 applies starting from January 1, 2018; however, earlier application is permitted. The directors do not expect a significant impact on the Group’s consolidated financial statements from the adoption of said amendments.

Amendment to IAS 40 “Transfers of Investment Property” (published on 08 December 2016). These changes clarify the transfers of a property to or from investment property. More specifically, an entity must reclassify a property to or from investment property only when there is evidence that there has been a change to the use of the property. This change must be traced to a specific event that has taken place and must not be limited to a change in the intentions of an entity’s management. The amendments are applicable starting from January 1, 2018. However, earlier application is permitted. The directors do not expect a significant impact on the Group’s consolidated financial statements from the adoption of said amendments.

On June 7, 2017, the IASB published the interpretation document IFRIC 23 − Uncertainty over Income Tax Treatments. The document deals with the matter of uncertainty over taxation to apply in terms of income tax.The document envisages that the uncertainty in the determination of tax assets or liabilities is reflected on the financial statements only when it is likely that the entity will pay or recover the amount in question. Moreover, the document does not contain any new disclosure obligation, but rather stresses that the entity must establish whether or not it is necessary to provide information on management consideration and relative to the uncertainty concerning how tax is booked, in accordance with the provisions of IAS 1.

The new interpretation is applicable starting from January 1, 2019. However, earlier application is permitted. The directors do not expect a significant impact on the Group’s consolidated financial statements from the adoption of said interpretation.

NOTES



Amendment to IFRS 10 and IAS 28 “Sales or Contribution of Assets between an Investor and its Associate or Joint Venture” (published on September 11, 2014). The document was published in order to resolve the current conflict between IAS 28 and IFRS 10 related to the valuation of the profit or loss resulting from the sale or transfer of a non-monetary asset to a joint venture or associate in return for a portion in the capital of the latter. For the moment, the IASB has suspended the application of this amendment.

Use of estimates

As for year end 2016, preparation of the Condensed Consolidated Half-year Financial Statements in accordance with International Accounting and Financial Reporting Standards (IAS/IFRS) entailed the use of complex valuations and estimates which had an impact on assets, liabilities, revenues and costs recognised as well as on the identification and quantification of potential assets and liabilities. These estimates primarily related to:

› estimates and assumptions used to determine the fair value of financial instruments that are not quoted in an active market (fair value hierarchy levels 2 and 3);

› identification of loss events as per IAS 39 − IAS 36; › assumptions used for the identification of any objective evidence of

impairment of intangible assets and equity investments recognised in the statement of financial position;

› determination of impairment losses on loans and other financial assets; › estimates to determine technical reserves; › determination of provisions for risks and charges and tax provisions; › estimates and assumptions for the determination of the probability of

utilisation of deferred tax assets; › assumptions used to determine the costs of stock options plans for top

management and employees.

Senior management regularly check valuations and estimates made on the basis of past experience and other reasonable factors. Due to the uncertainty typically related to these financial items, actual values may differ from estimates due to the occurrence of unexpected events or changes in operating conditions.

NOTES



A.4 − FAIR VALUE DISCLOSURE QUALITATIVE INFORMATION

A.4.1 Fair value levels 2 and 3: valuation techniques and inputs used

The level 2 instruments of the Group are represented by bonds issued by third parties and by certain derivative instruments. The securities belonging to this category are valued on the basis of market data inputs, either directly or indirectly observable.The fair value of the bonds is calculated as the sum of the current values at the end of the year of the related cash flows. The discounting rate is calculated as the sum of two components: › the risk-free rate; › the credit spread

The risk-free rate is deducted from the implicit value in IRS contracts (interest rate swap), while the credit spread is deducted from the price of bonds of the same issuer, with fixed coupon and a maturity comparable with the security valued. If there are no securities of the same issuer, and for own bonds, a credit spread is used derived from a weighted average of the observed values for bonds listed on institutional markets of major Italian banks.If the forecast cash flow are not determined but are dependent on market variables they are identified on the basis of: › implicit forward rates in the values of the risk-free rate for different

maturities › implicit volatility in the swaption, cap and floor option prices.

Expected cash flows on the basis of implied volatility are determined (where relevant) using the Black model.The fair value of level 2 derivative financial instruments (represented by Amortizing Interest Rate Swap) is determined by taking into account their level of collateralization: in particular the value of the contracts is calculated by discounting the cash flows arising from them at rates derived from the implicit values in OIS contracts (Overnight Interest Swap) and the relevant Basis Swap contracts.Level 3 assets consist of › units of real estate funds › equity exposures › units of the Atlante Fund › Investment in Cr Cesena › positions in securities relative to index-linked policies › units of Hedge Funds of Funds (HfoF).

NOTES



The logic underlying property assessments aims to determine a fair value through a mark-to-model, which is a theoretical value derived from assumptions that can descend on distinct asset classes regardless of counterparty or property specifications (intrinsic peculiarities, sector, geographical location and so on).The starting point for the determination of the fair value of property (included in property funds) is the lease fee (contractually fixed) that the lessee of the property agrees to pay the lessor for an agreed number of years. These fees are discounted and capitalized using: › initial value of the fee paid; › discount rate of the fee paid; › capitalisation rate of net profit, after an initial start-up of operations.

The first rate is obtained through a linear combination of a market indicator, a spread for the risk of illiquidity, a spread for the risk associated with the property investment and a spread for the industry/urban planning risk (recorded in the discount rates following an asset-dependent logic). The marginal effect of each of the four components will therefore reflect the market sensitivity of the assessor, as well as related predictions and expectations on performance of the same. The capitalisation rate (Exit rate), by contrast, is the factor that allows converting an indication of future income into an indication of present value. It is also determined through a linear combination: the inputs are taken from the financial market and the market of reference of the property, in particular the Risk Out rate is derived from the assessor observing the transactions identified in the relevant market.In accordance with the provisions of existing law, the assets in the property funds are valued by independent experts every six months. The evaluations, assumptions and inputs used by the independent experts are then subject to validation by the risk management of the Company. The price of the shares, in consideration of their low incidence in the portfolios of competence, is assumed to be equal to historical cost.The shares included in financial assets available for sale measured at level 3 of the fair value include the indirect investee VISA Europe Limited. In determining the fair value, the Mediolanum Group considered the value in cash, the value of “preferred” instruments to which a liquidity discount was applied, based on the valuation clauses and decided to value the zero earn-out clause because of the uncertainty related to said component.Unlisted capital securities classified amongst financial assets available for sale were assumed to be equal to the historic cost where there was no data or information available considered as sufficiently reliable by which to reliably determine the fair value. For these securities, it is noted that in any case the impairment testing procedure had been applied.

NOTES



The valuation of the units of the Atlante I Fund was performed on the basis of the unit unitary value as at June 30, 2017, disclosed by the management company Quaestio Capital Management SGR S.p.A. This valuation reflects the zeroing of the value of the Veneto investee banks resulting from the compulsory administrative liquidation procedure, yet leaving the value of the investment in the Atlante II Fund unchanged.Assets hedging Index Linked policies pertaining to the life insurance companies, are represented by bonds and derivative contracts traded outside regulated markets, and characterized by low liquidity and complex financial structures. Therefore, for their valuation, complex stochastic models are used. In particular: › for the components of the contracts related to the interest rate a short-

rate model is used that obtains the future value of interest rates through the evolution of a parameter that represents the instantaneous rate (i.e. the limit of the risk-free rate recognized for an investment of infinitesimal duration). The model used (Pelsser model) ensures the positivity of the interest rate, and is calibrated based on the level of implicit interest rates in the swap curve for the reference currency and the values of the implicit volatilities for swap options characterized by greater liquidity (at-the-money swaptions);

› for the components of the contracts related to credit risk an intensity model is used or a model that is based on a probability of failure of the other party determined at the initial time of the simulation. The model used (non-homogeneous Poisson model) is calibrated on the basis of CDS spreads observed on the market for the reference issuer;

› for the components of contracts linked to the value of indexes, a model based on Geometric Brownian motion is used. The model used (multivariate geometric brownian motion) simulates the future value of the indices taking into account the level of risk-free interest rates, index volatility, the value of expected dividends, and the correlation between their returns. The model is calibrated on the observed value of the indices and the historical volatility and correlations (on an observation period of years).

The value of the positions in HFoF classified as Level 3 is instead determined on the basis of the latest available amount.

Level 3 of the fair value of assets and liabilities that are not measured at fair value on a recurring basis include receivables and payables with customers and banks, as well as properties.

NOTES



For receivables and payables to banks and customers with short-term maturities, the fair value is assumed to be equal to the book value, as it is considered a good approximation. For medium/long-term performing loan exposures, mainly represented by loans for mortgage contracts to customers, the fair value measurement considered the discounting of contractual flows. For non-performing exposures, a fair value corresponding to the book value was assumed. The assumptions at the basis of the determination of fair value, specific of the model and not observable in the market, determined the level 3 classification.The fair value of property owned directly by the Company was determined with general reference to the “comparative” method.

A.4.2 Measurement processes and sensitivity

This section includes the fair value disclosure as required by IFRS 13. The fair value is defined as the amount that could be received to sell an asset or paid to transfer a liability in an orderly transaction between counterparties, on the relevant market at the measurement date. A financial instrument is considered listed on an active market if quoted prices are promptly and regularly available on the regulated market (intended as a platform for trading, dealers or brokers) and such prices are the actual market transactions on a regular basis. If such market prices or other observable inputs are not available, alternative valuation models are used (mark to model).The Company uses valuation methods in line with methods that are generally accepted and used by the market.Valuation models include techniques based on discounted future cash flow (and on volatility estimates) and are reviewed regularly in order to ensure full keeping with the valuation objectives.

A.4.3 Fair value hierarchy

The IFRS13 standard establishes a fair value hierarchy according to the degree of observability of the inputs and parameters used for the assessments. In particular, there are three levels: › Level 1: the fair value of instruments classified in this level is determined on

the basis of price quotes observed in active markets; › Level 2: the fair value of instruments classified in this level is determined

based on valuation models that mainly use observable inputs in active markets;

› Level 3: the fair value of instruments classified in this level is determined

NOTES



based on valuation models that primarily use significant unobservable inputs in active markets.

The Group adopts a policy for the recognition of the fair value level of individual positions. The policy establishes the rules for both the definition of “active market” and the resulting operating procedure of portfolio valuation in order to eliminate any discretion in the identification of the levels.Securities that do not belong to the previous categories are considered part of an inactive market.This definition excludes securities to hedge third-class policies for which there is a repurchase agreement with the issuer.The Risk Management Function of the Company, as part of the coordination for all Group companies, provides methodological and/or operating support to the corresponding risk structures of the conglomerate companies also with regard to the definition of active market.The Company considers listed in an active market: › securities traded on Italian regulated markets (ex. MTS, MOT); › securities traded on organized trading systems authorized or recognized

by Consob (so-called MTF), for which the price significance was determined through the following procedure;

› securities for which there is an executable listing that meets the criteria defined below: › completeness of the historical series of reference; › tolerance thresholds between Money and Letter price differentiated

according to the financial instrument; › significant variability of the daily price in the reference month; › maximum limit of monthly price deviation; › maximum limit of the price deviation relative to a benchmark price.

Securities that meet the aforementioned criteria are classified as listed in an active market and the “fair value” is determined based on the type of financial instrument: › for equity securities listed on Italian and Foreign Stock Exchanges, the

closing price on the last trading day of the reference month; › for bond securities, the Money price will be considered (for long positions)

and the Letter price (for short positions) from executable source.For financial instruments not within the active market, valuation of the same is through the assignment process of fair value level 2 or level 3 as outlined below.

Description of migration between the valuation level of assetsThe Mediolanum Group adopts a policy, defined at the level of Mediolanum Group, for the recognition of the level of fair value of individual positions. The

NOTES



policy sets out the rules that each Company shall follow for both the definition of active market and for the resulting operating procedure of portfolio enhancement with the aim to eliminate any discretion in the identification of the levels.During the first half of 2017, a change in the hierarchy of the fair value levels was seen, between the financial instruments held by the company Mediolanum Vita. More specifically, a bank bond (in position for a nominal of Euro 5 million) in the last reference month went from level 2 to level 1, insofar as it came within the parameters adopted in the internal policies of the active market of financial instruments. The other companies of the Mediolanum Group do not record any further migrations of hierarchy in the valuation levels.

A.4.4 Other information

There are no situations in the Mediolanum Group, in which the maximum and best use of a non-financial asset differs from its current use.Moreover, there are no situations whereby financial assets and liabilities managed on a net basis relative to market risks or the credit risk are measured at fair value on the basis of the price that would be obtained from the sale of a long net position or transfer of a short net position.

NOTES



QUANTITATIVE INFORMATION

A.4.5 Fair value hierarchy

A.4.5.1 Assets and liabilities measured at fair value on a recurring basis: breakdown by fair value levels

€/t 06/30/2017 12/31/2016

L1 L2 L3 L1 L2 L3

1. Financial assets held for trading (HFT) 679,411 7,431 974 353,894 12,144 2,230

2. Financial assets measured at fair value 17,419,073 130,909 143,682 16,852,552 348,953 162,112

3. Financial assets available for sale 13,581,328 12,110 127,811 11,374,786 11,896 160,584

4. Hedge derivatives - 742 - - 532 -

5. Tangible assets - - - - - -

6. Intangible assets - - - - - -

TOTAL 31,679,812 151,192 272,467 28,581,232 373,525 324,926

1. Financial liabilities held for trading 438,258 80,275 - 293,996 77,561 40

2. Financial liabilities measured at fair value 4,884,252 1,511 66 4,337,600 2,590 117

3. Hedge derivatives - 38,134 - - 46,977 -

TOTAL 5,322,510 119,920 66 4,631,596 127,128 157

Legend L1 = Level 1 L2 = Level 2 L3 = Level 3

NOTES



A.4.5.2 Annual changes in financial assets measured at fair value on a recurring basis (level 3)

€/t Financial assets held for trading

(HFT)

Financial assets measured at

fair value

Financial assets available for

sale

Hedge derivatives

Tangible assets

Intangible assets

1. Initial balance 2,230 162,112 160,584 - - -

2. Increases 25,777 9,829 33,226 - - -

2.1. Acquisitions 25,678 - 7,588 - - -

2.2. Profits recognised - - - - - -

2.2.1. Income statement 99 9,829 266 - - -

of which unrealized profits - - - - - -

2.2.2. Shareholders’ equity X X 23,567 - - -

2.3. Transferred from other levels - - - - - -

2.4. Other increases - - 1,805 - - -

3. Decreases 27,033 28,259 65,999 - - -

3.1. Sales 25,927 16,802 16,451 - - -

3.2. Reimbursements 1,099 11,457 - - - -

3.3. Losses recognised - - - - - -

3.3.1. Income statement 7 - 25,646 - - -

of which unrealized losses - - - - - -

3.3.2. Shareholders’ equity X X 23,902 - - -

3.4. Transferred to other levels - - - - - -

3.5. Other decreases - - - - - -

4. Final balance 974 143,682 127,811 - - -


NOTES



A.4.5.3 Annual changes in financial liabilities measured at fair value on a recurring basis (level 3)

€/t Financial liabilities

Financial liabilities held

for trading

Financial liabilities

measured at fair value

Hedge derivatives

1. Initial balance 40 117 -

2. Increases - - -

2.1. Issues - - -

2.2. Losses recognised: - - -

2.2.1. Income statement - - -

of which: losses - - -

2.2.2. Shareholders’ equity X X -

2.3. Transferred from other levels - - -

2.4. Other increases - - -

3. Decreases 40 51 -

3.1. Reimbursements 40 - -

3.2. Repurchases - - -

3.3. Profits recognised: - - -

3.3.1. Income statement - - -

of which: gains - - -

3.3.2. Shareholders’ equity X X -

3.4. Transferred to other levels - - -

3.5. Other decreases - 51 -

4. Final balance - 66 -


NOTES



A.4.5.4 Assets and liabilities not measured at fair value or measured at fair value on a non-recurring basis: breakdown by fair value levels

€/t 06/30/2017 12/31/2016

BV Level 1 Level 2 Level 3 BV Level 1 Level 2 Level 3

1. Financial assets held to maturity 947,686 1,003,622 - - 1,415,684 1,484,710 - -

2. Loans to banks 831,259 10,890 10,096 810,435 721,090 5,755 15,583 699,168

3. Loans to customers 8,000,951 10,823 249,866 8,771,455 8,623,784 11,330 249,191 9,480,061

4. Tangible assets held for investment purposes 106,582 - - 120,760 107,215 - - 120,760

5. Non-current assets and disposal groups 181 - - 181 98,175 - - 141,193

TOTAL 9,886,659 1,025,335 259,962 9,702,831 10,965,948 1,501,795 264,774 10,441,182

1. Amounts due to banks 416,105 - - 416,105 462,182 - - 485,874

2. Amounts due to customers 19,884,522 - - 19,884,685 18,494,400 - - 19,112,299

3. Securities issued 160,918 - 168,946 - 187,425 - 194,820 -

4. Liabilities associated with assets held for sale - - - - - - - -

TOTAL 20,461,545 - 168,946 20,300,790 19,144,007 - 194,820 19,598,173

Legend BV = Book value L1 = Level 1 L2 = Level 2 L3 = Level 3

NOTES



Part B − Information on the consolidated statement of financial position

ASSETS

SECTION 2 − FINANCIAL ASSETS HELD FOR TRADING − CAPTION 20

2.1 Analysis of financial assets held for trading

€/t 06/30/2017 12/31/2016

L1 L2 L3 L1 L2 L3

A. On-balance sheet assets

1. Debt securities 679,408 2,407 861 353,885 5,686 1,865

1.1. Structured notes - - 861 5,224 2 1,861

1.2 Other debt securities 679,408 2,407 - 348,661 5,684 4

2. Equity investments - - - - - -

Holdings in UCITS - - - - - -

4. Loans - - - - - -

4.1 Repurchase agreements - - - - - -

4.2 Others - - - - - -

TOTAL A 679,408 2,407 861 353,885 5,686 1,865

B. Derivatives

1. Financial derivatives: 3 5,024 113 9 6,458 365

1.1 held for trading 3 4,965 - 9 6,361 273

1.2 associated with fair value option - 59 113 - 97 92

1.3 others - - - - - -

2. Credit derivatives: - - - - - -

2.1 held for trading - - - - - -

2.2 associated with fair value option - - - - - -

2.3 others - - - - - -

TOTAL B 3 5,024 113 9 6,458 365

TOTAL (A+B) 679,411 7,431 974 353,894 12,144 2,230

NOTES



SECTION 3 − FINANCIAL ASSETS MEASURED AT FAIR VALUE − CAPTION 30

3.1. Analysis of financial assets measured at fair value:

€/t 06/30/2017 12/31/2016

L1 L2 L3 L1 L2 L3

1. Debt securities 271,559 62,447 143,682 259,748 279,927 162,112

1.1. Structured notes 271,279 62,247 143,682 257,664 241,149 158,657

1.2 Other debt securities 280 200 - 2,084 38,778 3,455

2. Equity investments - - - - - -

3. Holdings in UCITS 17,147,514 68,462 - 16,592,804 69,026 -

4. Loans - - - - - -

4.1 Structured - - - - - -

4.2 Others - - - - - -

TOTAL 17,419,073 130,909 143,682 16,852,552 348,953 162,112

COST - - - - - -


NOTES



SECTION 4 − FINANCIAL ASSETS AVAILABLE FOR SALE − CAPTION 40

4.1 Analysis of financial assets available for sale

€/t 06/30/2017 12/31/2016

L1 L2 L3 L1 L2 L3

1. Debt securities 13,553,424 12,110 - 11,347,103 11,896 -

1.1. Structured notes - - - - - -

1.2 Other debt securities 13,553,424 12,110 - 11,347,103 11,896 -

2. Equity investments 4,049 - 39,968 3,968 - 41,601

2.1 Measured at fair value 4,049 - 2,524 3,968 - 2,521

2.2 Measured at cost - - 37,444 - - 39,080

3. Holdings in UCITS 23,855 - 87,843 23,715 - 118,983

4. Loans - - - - - -

TOTAL 13,581,328 12,110 127,811 11,374,786 11,896 160,584


NOTES



SECTION 5 − FINANCIAL ASSETS HELD TO MATURITY − CAPTION 50

5.1 Analysis of financial assets held to maturity

€/t 06/30/2017 12/31/2016

Fair Value Fair Value

BV L1 L2 L3 BV L1 L2 L3

1. Debt securities 947,686 1,003,622 - - 1,415,684 1,484,710 - -

structured - - - - - - - -

other 947,686 1,003,622 - - 1,415,684 1,484,710 - -

2. Loans - - - - - - - -

TOTAL 947,686 1,003,622 - - 1,415,684 1,484,710 - -

Legend: BV = book valueL1 = Level 1 L2 = Level 2 L3 = Level 3

NOTES



SECTION 6 − LOANS TO BANKS − CAPTION 60

6.1 Analysis of loans to banks

€/t 06/30/2017 12/31/2016



A. Loans to Central Banks 80,133 - - 80,133 150,467 1,340 - 149,127

1. Time deposits - X X X - X X X

2. Reserve requirements 70,025 X X X 115,563 X X X

3. Repurchase agreements - X X X - X X X

4. Others 10,108 X X X 34,904 X X X

B. Loans to banks 751,126 10,890 10,096 730,302 570,623 4,415 15,583 550,042

1. Loans 730,292 - - 730,292 550,028 - - 550,028

1.1 Current accounts and demand deposits 131,384 X X X 222,756 X X X

1.2 Time deposits 176,423 X X X 135,371 X X X

1.3 Other loans: 422,485 X X X 191,901 X X X

Repurchase agreements 383,272 X X X 152,947 X X X

Finance leases - X X X - X X X

Others 39,213 X X X 38,954 X X X

2. Debt securities 20,834 10,890 10,096 10 20,595 4,415 15,583 14

2.1. Structured notes - X X X - X X X

2.2 Other debt securities 20,834 X X X 20,595 X X X

TOTAL 831,259 10,890 10,096 810,435 721,090 5,755 15,583 699,169

Legend: BV = book valueL1 = Level 1L2 = Level 2L3 = Level 3

NOTES



SECTION 7 − LOANS TO CUSTOMERS − CAPTION 70

7.1 Analysis of loans to customers

€/t 06/30/2017 12/31/2016

Book value Fair Value Book value Fair Value

Not impaired

Impaired Purchased

Impaired Others

L1 L2 L3 Not impaired

Impaired Purchased

Impaired Others

L1 L2 L3

Loans 7,668,231 - 72,926 - - 8,771,352 8,296,089 - 67,495 - - 9,479,943

1. Current accounts 302,808 - 3,088 X X X 387,024 - 3,030 X X X

2. Repurchase agreements 48,538 - - X X X 800,148 - - X X X

3. Mortgages 5,643,012 - 58,353 X X X 5,462,291 - 53,398 X X X

4. Credit cards, personal loans and salary-guaranteed loans 1,274,489 - 8,210 X X X 1,210,075 - 7,747 X X X

5. Finance leases - - - X X X - - - X X X

6. Factoring - - - X X X - - - X X X

7. Other loans 399,384 - 3,275 X X X 436,551 - 3,320 X X X

Debt securities 259,794 - - 10,823 249,866 103 260,200 - - 11,330 249,191 118

8. Structured notes - - - X X X - - - X X X

9. Other debt securities 259,794 - - X X X 260,200 - - X X X

TOTAL 7,928,025 - 72,926 10,823 249,866 8,771,455 8,556,289 - 67,495 11,330 249,191 9,480,061

Legend: L1 = Level 1L2 = Level 2L3 = Level 3

NOTES



SECTION 10 − EQUITY INVESTMENTS − CAPTION 100

10.1 Investments: disclosures on holdings

Ownership percentage

Registered office

Operative office

Type of relation 1 Investing company % Held Voting

rights %

B. Companies under significant influenceMediobanca S.p.A. Milan Milan 4 Banca Mediolanum S.p.A

Mediolanum Vita S.p.A. 2.58% 0.74%

2.58% 0.74%

10.2 Subsidiaries, joint ventures and companies over which significant influence is exercised: book value, fair value and dividends received

€/t Book value Fair value

Dividends received

B. Companies under significant influenceMediobanca S.p.A. 355,983 251,382 -

TOTAL

Equity investments as at June 30, 2017 came to Euro 355,983 thousand (December 31, 2016, Euro 357,094 thousand). The variation in the period is related to the valuation using the equity method of shareholdings in Mediobanca on the basis of its consolidated shareholders’ equity at March 31, 2017. In the half-year under review, the Company analysed the main economic-equity indicators of Mediobanca without, moreover, noting any possible indicators of impairment.

(*) Type of relation: 1 = majority of voting rights in the ordinary Shareholders’ Meeting 2 = dominant influence in the ordinary Shareholders’ Meeting 3 = agreements with other shareholders 4 = other forms of control 5 = joint management pursuant to article 26, paragraph 1, Legislative Decree no. 87/92 6 = joint management pursuant to article 26, paragraph 2, Legislative Decree no. 87/92

NOTES



LIABILITIES

SECTION 1 − AMOUNTS DUE TO BANKS − CAPTION 10

1.1 Analysis of amounts due to banks

€/t 06/30/2017 12/31/2016

1. Amounts due to central banks - -

2. Amounts due to banks 416,105 462,182

2.1 Current accounts and demand deposits 167,187 1,147

2.2 Time deposits 163,923 380,370

2.3 Loans 81,259 76,945

2.3.1 Repurchase agreements 81,259 76,945

2.3.2 Others - -

2.4 Commitments to buy back own equity instruments - -

2.5 Other payables 3,736 3,720

TOTAL 416,105 462,182

Fair Value - Level 1 - -


Fair Value - Level 3 416,105 462,182

TOTAL FAIR VALUE 416,105 462,182

NOTES



SECTION 2 − AMOUNTS DUE TO CUSTOMERS − CAPTION 20

2.1 Analysis of amounts due to customers

€/t 06/30/2017 12/31/2016

1. Current accounts and demand deposits 15,713,498 14,449,901

2. Time deposits 831,420 2,284,939

3. Loans 3,179,009 1,568,321

3.1 Repurchase agreements 3,177,226 1,565,714

3.2 Others 1,783 2,607

4. Commitments to buy back own equity instruments - -

5. Other payables 160,595 191,239

TOTAL 19,884,522 18,494,400



Fair Value - Level 3 19,884,685 18,495,951

TOTAL FAIR VALUE 19,884,685 18,495,951

NOTES



SECTION 3 − SECURITIES ISSUED − CAPTION 30

3.1 Analysis of securities issued

€/t 06/30/2017 12/31/2016



A. Securities

1. Bonds 160,918 - 168,946 - 187,425 - 194,820 -

1.1 structured - - - - - - - -

1.2 others 160,918 - 168,946 - 187,425 - 194,820 -

2. Other securities - - - - - - - -

2.1 structured - - - - - - - -

2.2 others - - - - - - - -

TOTAL 160,918 - 168,946 - 187,425 - 194,820 -

LegendBV = Book valueL1 = Level 1L2 = Level 2L3 = Level 3

NOTES



SECTION 4 − FINANCIAL LIABILITIES HELD FOR TRADING − CAPTION 40

4.1 Analysis of financial liabilities held for trading

€/t 06/30/2017 12/31/2016


NV L1 L2 L3 FV(*) NV L1 L2 L3 FV(*)

A. On-balance sheet liabilities

1. Amounts due to banks 360,837 381,482 - - 381,482 239,250 248,446 - - 248,445

2. Amounts due to customers 54,845 56,776 - - 56,776 41,630 45,507 - - 45,507

3. Debt securities - - - - - - - - - -

3.1 Bonds - - - - - - - - - -

3.1.1 Structured - - - - x - - - - x

3.1.2 Other bonds - - - - x - - - - x

3.2 Other securities - - - - - - - - - -

3.2.1 Structured - - - - x - - - - x

3.2.2 Others - - - - x - - - - x

TOTAL A 415,682 438,258 - - 438,258 280,880 293,953 - - 293,953

B. Derivatives

1. Financial derivatives x - 80,275 - x x 43 77,561 40 x

1.1 For trading x - 80,275 - x x 43 77,561 40 x

1.2 Associated with fair value option x - - - x x - - - x

1.3 Others x - - - x x - - - x

2. Credit derivatives x - - - x x - - - x

2.1 For trading x - - - x x - - - x

2.2 Associated with fair value option x - - - x x - - - x

2.3 Others x - - - x x - - - x

TOTAL B x - 80,275 - x x 43 77,561 40 x

TOTAL A+B x 438,258 80,275 - x x 293,996 77,561 40 x

(*) Fair value calculated excluding any changes in value due to changes in the credit standing of the issuer over the date of issue

Legend NV = nominal or notional valueL1 = Level 1 L2 = Level 2 L3 = Level 3

NOTES



SECTION 5 − FINANCIAL LIABILITIES MEASURED AT FAIR VALUE − CAPTION 50

5.1. Analysis of financial liabilities measured at fair value:

€/t 06/30/2017 12/31/2016


NV L1 L2 L3 FV(*) NV L1 L2 L3 FV(*)

1. Amounts due to banks - - - - - - - - - -

1.1 Structured - - - - x - - - - x

1.2 Others - - - - x - - - - x

2. Amounts due to customers 4,885,829 4,884,252 1,511 66 4,885,829 4,340,307 4,337,600 2,590 117 4,340,307

2.1 Structured - - - - x - - - - x

2.2 Others 4,885,829 4,884,252 1,511 66 x 4,340,307 4,337,600 2,590 117 x

3. Debt securities - - - - - - - - - -

3.1 Structured - - - - x - - - - x

3.2 Others - - - - x - - - - x

TOTAL 4,885,829 4,884,252 1,511 66 4,885,829 4,340,307 4,337,600 2,590 117 -

(*) Fair value calculated excluding any changes in value due to changes in the credit standing of the issuer over the date of issue

Legend NV = nominal or notional valueL1 = Level 1 L2 = Level 2 L3 = Level 3

NOTES



SECTION 12 − PROVISIONS FOR RISKS AND CHARGES − CAPTION 120

12.1 Analysis of provisions for risks and charges

€/t 06/30/2017 12/31/2016

1. Company severance entitlements 644 644

2. Other provisions for risks and charges 226,094 221,858

2.1 Legal proceedings 21,367 22,026

2.2 Personnel expenses - -

2.3 Others 204,727 199,832

Total 226,738 222,502

SECTION 13 − TECHNICAL RESERVES − CAPTION 130

13.1 Analysis of technical reserves

€/t Insurance Reinsurance 06/30/2017 12/31/2016

A. Damages 126,478 76 126,554 127,444

A.1 Premium reserves 98,513 - 98,513 98,308

A.2 Claim reserves 24,351 76 24,427 25,165

A.3 Other reserves 3,614 - 3,614 3,971

B. Life 1,647,544 - 1,647,544 1,652,192

B.1 Mathematical reserves 1,533,739 - 1,533,739 1,529,915

B.2 Reserves for outstanding claims 70,418 - 70,418 73,632

B.3 Other reserves 43,387 - 43,387 48,645

C. Technical reserves under which the investment risk is borne by the insurance company 12,925,560 - 12,925,560 13,142,048

C.1 Reserves for contracts whose performance is linked to investment funds and market indices 12,925,560 - 12,925,560 13,142,048

C.2 Reserves relating to the administration of pension funds - - - -

D. Total technical reserves 14,699,582 76 14,699,658 14,921,684

NOTES



SECTION 15 − SHAREHOLDERS’ EQUITY

€/t 06/30/2017 12/31/2016

1. Share capital 600,140 600,079

2. Share premium reserve 1,831 902

3. Reserves 1,273,094 1,169,825

4. Interim dividend (-) - (117,705)

5. Treasury shares (-) (34,129) (23,815)

6. Valuation reserves 94,511 127,847

7. Capital instruments - -

8. Profit (Loss) 196,384 393,527

TOTAL 2,131,831 2,150,660

NOTES



Part C - Information on the consolidated income statement

SECTION 1 − INTEREST − CAPTIONS 10 AND 20

1.1 Analysis of interest income and similar income

€/t Debt securities

Loans Other transactions

06/30/2017 06/30/2016

1. Financial assets held for trading (HFT) 7,382 - - 7,382 5,676

2. Financial assets measured at fair value 8,673 - - 8,673 11,838

3. Financial assets available for sale 50,090 - - 50,090 84,169

4. Financial assets held to maturity 12,922 - - 12,922 27,758

5. Loans to banks 465 705 - 1,170 822

6. Loans to customers 700 78,986 93 79,779 88,124

7. Hedge derivatives x x - - -

8. Other assets x x 756 756 729

Total 80,232 79,691 849 160,772 219,116

NOTES



1.4 Analysis of interest expense and similar charges:

€/t Payables Securities Other transactions

06/30/2017 06/30/2016

1. Amounts due to central banks (75) x - (75) -

2. Amounts due to banks (2,620) x (46) (2,666) (1,788)

3. Amounts due to customers (27,301) x - (27,301) (55,044)

4. Securities issued x (3,373) - (3,373) (4,125)

5. Financial liabilities held for trading (6,231) - - (6,231) (4,071)

6. Financial liabilities measured at fair value - - (26) (26) (8)

7. Other liabilities and funds x x (1,715) (1,715) (2,125)

8. Hedge derivatives x x (3,360) (3,360) (4,878)

Total (36,227) (3,373) (5,147) (44,747) (72,039)

NOTES



SECTION 2 − COMMISSIONS − CAPTIONS 40 AND 50

2.1 Analysis of commission income

€/t 06/30/2017 06/30/2016

a) guarantees issued 25 21

b) credit derivatives - -

c) management, brokerage and consulting services: 583,544 504,423

1. financial instruments brokerage 2,062 1,163

2. currency brokerage 2 1

3. portfolio management 555,766 485,505

3.1. individual 377 104

3.2. collective 555,389 485,401

4. securities in custody and under administration 2,153 1,936

5. custodian bank - -

6. sale of securities 1,667 2,050

7. receipt and transmission of orders 3,205 2,745

8. consulting activities - -

8.1 investment consulting - -

8.2 financial structure consulting - -

9. services to third parties 18,690 11,023

9.1 portfolio management 11,250 6,390

9.1.1. individual - -

9.1.2. collective 11,250 6,390

9.2 insurance products 2,691 260

9.3 other products 4,749 4,373

d) collection and payment services 12,349 11,313

e) servicing for securitization transactions - -

f) factoring services - -

g) tax collection services - -

h) management of multilateral trading systems - -

i) bank accounts custodian and management services 7,012 7,331

j) other services 92,676 79,328

TOTAL 695,607 602,416

NOTES



2.2 Analysis of commission expense

€/t 06/30/2017 06/30/2016

a) guarantees received - -

b) credit derivatives - -

c) management and brokerage services (262,766) (214,920)

1. financial instruments brokerage (801) (378)

2. currency brokerage - -

3. portfolio management: (3,225) (2,571)

3.1 own (2,088) (1,829)

3.2 delegated by third parties (1,137) (742)

4. securities in custody and under administration (324) (347)

5. financial instruments brokerage (12,444) (9,850)

6. off-premises sales of financial instruments, products and services (245,972) (201,774)

d) collection and payment services (16,266) (13,595)

e) other services (19,124) (20,426)

TOTAL (298,156) (248,941)

NOTES



SECTION 3 − DIVIDENDS AND SIMILAR INCOME − CAPTION 70

3.1 Analysis of dividends and similar income

€/t 06/30/2017 06/30/2016

Dividends Income from holdings in UCITS

Dividends Income from holdings in UCITS

A. Financial assets held for trading - - - -

B. Financial assets available for sale 1,538 1,929 3,502 1,341

C. Financial assets measured at fair value - - - -

D. Equity investments - x - x

TOTAL 1,538 1,929 3,502 1,341

NOTES



SECTION 4 − NET INCOME FROM TRADING − CAPTION 80

4.1 Analysis of net income from trading

€/t Gains (A)

Trading gains (B)

Losses (C)

Trading losses (D)

Net income (A+B) - (C+D)

06/30/2017

1. Financial assets held for trading 650 723 (6,162) (656) (5,445)

1.1 Debt securities 650 722 (6,162) (647) (5,437)

1.2 Equity investments - 1 - (9) (8)

1.3 Holdings in UCITS - - - - -

1.4 Loans - - - - -

1.5 Others - - - - -

2. Financial liabilities held for trading 5,768 3,528 (228) (12) 9,056

2.1 Debt securities 5,768 3,527 (228) (1) 9,066

2.2 Payables - - - - -

2.3 Others - 1 - (11) (10)

3. Other financial assets and liabilities: exchange differences x x x x 36

4. Derivatives 10,075 2,737 - (8,390) 6,329

4.1 Financial derivatives 10,075 2,737 - (8,390) 6,329

- debt securities and interest rates 10,075 2,732 - (8,390) 4,417

- equity investments and stock indices - 5 - - 5

- currencies and gold x x x x 1,907

- others - - - - -

4.2 Credit derivatives - - - - -

TOTAL 16,493 6,988 (6,390) (9,058) 9,976

NOTES



SECTION 5 − NET INCOME FROM HEDGING − CAPTION 90

5.1 Analysis of net income from hedging

€/t 06/30/2017 06/30/2016

A. Income from:

A.1 Fair value hedging derivatives 5,903 -

A.2 Hedged financial assets (fair value) - 9,089

A.3 Hedged financial liabilities (fair value) - -

A.4 Cash-flow hedging financial derivatives - -

A.5 Assets and liabilities denominated in foreign currencies - -

Total income from hedging (A) 5,903 9,089

B. Expenses related to:

B.1 Fair value hedging derivatives - (14,365)

B.2 Hedged financial assets (fair value) (7,876) -

B.3 Hedged financial liabilities (fair value) - -

B.4 Cash-flow hedging financial derivatives - -

B.5 Assets and liabilities denominated in foreign currencies - -

Total expense from hedging (B) (7,876) (14,365)

C. Net income from hedging (A-B) (1,973) (5,276)

NOTES



SECTION 6 − GAINS (LOSSES) ON SALE/BUYBACK − CAPTION 100

6.1 Analysis of gains (losses) on sale/buyback

€/t 06/30/2017 06/30/2016

Gains Losses Net income

Gains Losses Net income

Financial assets

1. Loans to banks - - - - - -

2. Loans to customers 2 - 2 4 (2) 2

3. Financial assets available for sale 1,996 (44) 1,952 21,552 (319) 21,233

3.1 Debt securities 421 (43) 378 892 (319) 573

3.2 Equity investments 256 (1) 255 19,784 - 19,784

3.3 Holdings in UCITS 1,319 - 1,319 876 - 876

3.4 Loans - - - - - -

4. Financial assets held to maturity - - - - - -

TOTAL ASSETS 1,998 (44) 1,954 21,556 (321) 21,235

Financial liabilities

1. Amounts due to banks - - - - - -

2. Amounts due to customers - - - - - -

3. Securities issued 1 (65) (64) 2 (79) (77)

TOTAL LIABILITIES 1 (65) (64) 2 (79) (77)

NOTES



SECTION 7 − NET RESULT FROM FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE − CAPTION 110

7.1 Analysis of net change in value of financial assets and liabilities measured at fair value

Gains (A)

Gains on disposal

(B)

Losses (C)

Losses on disposal

(D)

Net income (A+B) - (C+D)

€/t 06/30/2017

1. Financial assets 260,348 52,159 (154,430) (134,875) 23,202

1.1 Debt securities 14,286 3,614 (3,251) (1,506) 13,143

1.2 Equity investments - - - - -

1.3 Holdings in UCITS 246,062 48,545 (151,179) (133,369) 10,059

1.4 Loans - - - - -

2. Financial liabilities - - (79,073) (2,839) (81,912)

2.1 Debt securities - - (1,004) (2,839) (3,843)

2.2 Amounts due to banks - - - - -

2.3 Amounts due to customers - - (78,069) - (78,069)

3. Financial assets and liabilities: exchange differences x x x x -

4. Credit and financial derivatives - - - (2) (2)

TOTAL 260,348 52,159 (233,503) (137,716) (58,712)

NOTES



SECTION 9 − NET PREMIUMS − CAPTION 150

9.1 Analysis of net premiums

€/t Insurance Reinsurance 06/30/2017 06/30/2016

A. Life

A.1 Gross premiums booked (+) 885,882 - 885,882 1,132,514

A.2 Reinsurance premiums (-) (1,327) x (1,327) (1,652)

A.3 Total 884,555 - 884,555 1,130,862

B. Damages

B.1 Gross premiums booked (+) 23,110 - 23,110 10,503

B.2 Reinsurance premiums (-) (1,983) x (1,983) (1,682)

B.3 Change in the gross amount for premiums reserve (+/-) (223) - (223) (2,410)

B.4 Change in premiums reserve borne by reinsurers (+/-) (128) - (128) (71)

B.5 Total 20,776 - 20,776 6,340

C. TOTAL NET PREMIUMS 905,331 - 905,331 1,137,202

NOTES



SECTION 10 − BALANCE OF OTHER INCOME AND EXPENSE FROM INSURANCE ACTIVITIES − CAPTION 160

10.1 Analysis of balance of other income and expenses from insurance activities

€/t 06/30/2017 06/30/2016

1. Net change in technical reserves 211,843 607,780

2. Claims paid during the year (1,081,192) (1,235,530)

3. Other income and expenses (net) from insurance activities (4,711) (3,109)

TOTAL (874,060) (630,859)

NOTES



10.2 Analysis of “Net change in technical reserves”

€/t 06/30/2017 06/30/2016

1. Life

A. Mathematical reserves 126,559 148,431

A.1 Gross annual amount 127,958 149,268

A.2 Reinsurers’ share (-) (1,399) (837)

B. Other technical reserves 327 (24)

B.1 Gross annual amount 327 (24)

B.2 Reinsurers’ share (-) - -

C. Technical reserves under which the investment risk is borne by the insurance company 84,770 459,595

C.1 Gross annual amount 84,770 459,595

C.2 Reinsurers’ share (-) - -

TOTAL LIFE INSURANCE RESERVES 211,656 608,002

2. Damages

Change in other damages technical reserves other than claim net of reinsurance 187 (222)

NOTES



10.3 Analysis of “Claims paid in the year”

€/t 06/30/2017 06/30/2016

Life: expenses relating to claims, net of reinsurance

A. Amounts paid (1,080,417) (1,250,115)

A.1 Gross annual amount (1,083,179) (1,252,456)

A.2 Reinsurers’ share (-) 2,762 2,341

B. Change in reserve for outstanding claims 3,292 19,076

B.1 Gross annual amount 3,212 18,985

B.2 Reinsurers’ share (-) 80 91

TOTAL LIFE CLAIMS (1,077,125) (1,231,039)

Damages: expenses relating to claims, net of recoveries and reinsurance

C. Amounts paid (5,340) (3,878)

C.1 Gross annual amount (5,776) (4,148)

C.2 Reinsurers’ share (-) 436 270

D. Change in recoveries net of reinsurers’ shares 15 26

E. Change in claims reserve 1,258 (639)

E.1 Gross annual amount 739 (743)

E.2 Reinsurers’ share (-) 519 104

TOTAL DAMAGES CLAIMS (4,067) (4,491)

NOTES



SECTION 11 − ADMINISTRATIVE EXPENSES − CAPTION 180

11.1 Analysis of personnel expenses

€/t 06/30/2017 06/30/2016

1) Employees (94,246) (91,014)

a) salaries and wages (66,412) (63,405)

b) social security (18,776) (18,032)

c) completion of service entitlements (44) -

d) pensions - -

e) provision for employee severance indemnity (2,942) (3,116)

f) provisions for severance benefits and similar obligations: - -

- defined contribution plan - -

- defined benefit plan - -

g) external supplementary pension funds: (1,076) (962)

- defined contribution plan (971) (903)

- defined benefit plan (105) (59)

h) expenses in connection with equity-settled share-based payment transactions (1,170) (1,838)

i) other employee benefits (3,891) (3,718)

2) Other personnel (1,256) (2,150)

3) Directors and Statutory Auditors (4,271) (3,087)

4) Retired personnel - -

TOTAL (99,838) (96,308)

NOTES



11.2 Average number of employees by category

Resources 06/30/2017 06/30/2016

1) Employees 2,592 2,570

a) executives 103 102

b) middle managers 407 393

c) other employees 2,082 2,075

2) Other personnel 92 132

TOTAL 2,684 2,702

NOTES



11.5 Analysis of other administrative expenses

€/t 06/30/2017 06/30/2016

IT systems (47,080) (47,653)

Infoprovider services (6,242) (5,157)

Financial services fees and expenses (252) (1,646)

Miscellaneous services (16,369) (14,397)

Taxes and duties (2,033) (1,801)

Television and internet communication services (1,226) (1,588)

Interventions in support of the banking system (6,371) (6,202)

Network advisory services and consulting (2,045) (2,118)

Rentals (8,376) (7,647)

Maintenance and repairs (1,413) (2,589)

Telephone and postal expenses (6,747) (6,417)

Other consulting and collaboration (12,290) (10,607)

Contributions to “Family Banker Offices” (896) (480)

Consumables (3,239) (3,278)

Insurance (959) (1,066)

Member fees (2,410) (2,189)

Advertising and promotional expenses (15,376) (17,565)

Organization of conventions (8,053) (10,472)

Consulting, education and training for sales network (1,577) (342)

Energy utilities (1,162) (949)

Business expenses, gifts and other (3,475) (2,178)

Market research (1,105) (1,450)

Recruitment and selection of employees (488) (328)

Travel expenses (808) (1,136)

Recruitment and selection of financial advisors (55) (188)

Other administrative expenses (3,557) (3,367)

TOTAL (153,604) (152,810)

NOTES



SECTION 12 − NET PROVISIONS FOR RISKS AND CHARGES − CAPTION 190

12.1. Analysis of net provisions for risks and charges

€/t 06/30/2017 06/30/2016

Portfolio allowance (2,669) (5,542)

Supplementary customer indemnity (3,153) (7,552)

Risks for financial advisor offences (2,131) (1,156)

Future expenses on distributed products (778) (1,077)

Legal proceedings (236) 7,534

Managerial allowance (8,642) (6,760)

Other allocations to the provisions for risks and charges (1,307) (1,283)

TOTAL (18,916) (15,836)

NOTES



Part E − Information on risks and risk management

IntroductionBusiness, whether financial or otherwise, is always characterised by a certain level of risk, due to the uncertainty surrounding the achievement of company targets and therefore connected, ultimately, to the variability of the Company’s future economic value. As the risk is intrinsic to the Company’s business, the need arises to define a risk management system within it, aimed at ensuring the control and governance of the company risk. Risk management identifies a process whereby the organisation manages its business considering the costs and benefits associated with each action it takes.Therefore, the main aim of the Risk Management Function is to allow the Company to obtain lasting benefits from each activity it carries out, thereby helping create value for the Company and its stakeholders; managing risk in a continuous, gradual manner, becomes part of the strategic management of each Company. If the process is carried out correctly, it reduces the uncertainty concerning the achievement of company targets, decreasing the probability of failure and increasing that of success.

RISK MANAGEMENT AND INTERNAL CONTROL SYSTEMThe Group’s internal control system consists of the set of rules, procedures and functions established to ensure the effectiveness and efficiency of corporate processes, the protection of Company’s assets and the proper management of customer assets, the reliability and integrity of accounting and management information as well as compliance with internal and external rules, statutes and regulations. The companies of the Mediolanum Group operate a comprehensive, effective internal control system in accordance with applicable regulations and the business they conduct.The Board of Directors and management play a key role in the establishment of an adequate risk management framework and the implementation of an effective internal control system.The control system is organized on various levels, to which different levels of responsibility correspond. Specifically, the internal control system is built around the following three main lines of defence: › line controls: made by the individuals who carry out a certain activity

and by their supervisors. They are generally carried out within the same organizational unit or function and are arranged directly by the same production structures or incorporated in automated procedures or

NOTES



executed as part of back-office activities. › risk or second-level controls: performed by units other than operating

units that contribute to the definition of risk measurement methods, control of operating limits of officers to whom authorities are delegated, and verify compliance of transactions with the risk/return targets set by Corporate Bodies in their respective areas of responsibility. This category includes controls over credit risk, market risk, capital risk, investment risk, operational risk, compliance risk and reputational risk.

› internal audit or third-level controls: entails the periodic assessment of the completeness, effectiveness and adequacy of the internal control system in relation to the nature of the business and the level of risks undertaken. These controls are the responsibility of the Internal Audit function which is separate and independent of operating units.

For the performance of their duties, control staff is granted access to all corporate structures as well as to any information they may need to assess outsourced activities.The Board of Directors and the Board of Statutory Auditors receive regular reports on internal control work so that they can promptly take suitable corrective measures if deficiencies are detected.

RISK CONTROL ORGANISATIONAL STRUCTURE

A control environment is an element of the company culture that determines the level of management’s sensitivity to control requirements.It is the basis for all other internal control system components.Factors that influence the control environment are: the integrity, ethical values and competence of personnel, philosophy and management style of management, methods of delegation of responsibilities, organization and professional development and commitment and the ability to address and guide the Board of Directors.The various companies within the Banking Group undertake to implement a comprehensive and efficient Internal Control System in their operating structures, considering, in accordance with the Parent Company’s guidelines, the different applicable regulations and their various business areas.The Parent Company’s Risk Committee plays a fundamental role, as it provides an opportunity for comparison and analysis to develop a global view of the various risks related to the different types of business activities and to discuss actions taken to manage identified risks.In order to encourage the widespread application of values based on

NOTES



professional integrity and compliance, the Parent Company Banca Mediolanum has also created a Code of Ethics that outlines required conduct, which has been set to the Subsidiaries for implementation.

UNDERLYING PRINCIPLES

The Banking Group assigns strategic importance to the Internal Control System, giving it a pre-eminent position in the scale of corporate values, one that not only concerns the Corporate Control Functions but involves the entire organisation in developing and applying logical and systematic methods for identifying, measuring, communicating about and managing risks.The following general principles form the bedrock of the Group risk management framework: › completeness in the types and location of risks to be governed in

compliance with legislative and regulatory provisions; › adequacy of the control system, ensuring that it is consistent and

organised in proportion to the characteristics of the Group and/or companies concerned;

› system functionality, insofar as the application and suitability of controls enables the pursuit of overall sound and prudent Group management;

› reliability, i.e., that the Internal Control System is continuously effective over time;

› integration through continuously seeking coordination mechanisms to provide senior management with complete, understandable and integrated information;

› extension of control activities to all operational and hierarchical levels; › development through constantly seeking mechanisms to continuously

improve its own structure, effectiveness and efficiency; › timeliness through the prompt, quick knowledge and communication at

the appropriate company levels to allow for the appropriate corrective action to be taken;

› segregation of duties between the second level control function and Operating Units, in accordance with the proportionality principle, which entails an implementation approach by subsidiaries commensurate with the size of the entity;

› use of uniform, consistent models and methods for the collection of data and information as well as for the analysis and measurement of risks by all organisational units and/or companies within a Group, as applicable;

› transparency and dissemination of models, methods and criteria applied in the analysis and measurement of risks to promote a control culture

NOTES



within the organisation and understanding of the reasons underlying the choices made;

› delegation of risk management authorities and responsibilities from the Board of Directors to the Operating Units for their direct management of the risks to which corporate processes are exposed.

The Mediolanum Banking Group has defined as part of the processes that characterize the different business activities, its Risk Appetite Framework (“RAF”) or the level of risk, overall and by type of risk that it intends to adopt for the achievement of its strategic objectives, identifying the metrics being monitored, the relative tolerance thresholds and different limits of risk.To ensure adherence to the above standards, the Mediolanum Banking Group has therefore adopted a system of internal policies that define the comprehensive risk management and control framework of reference.The main objectives of these policies are to: › ensure that any material breaches/anomalies be promptly identified by

the internal control system and adequate corrective/mitigating actions be taken;

› ensure the consistent application of risk management principles and rules across the Group;

› promote a risk management culture at all levels of the organisation and encourage consistent, knowledgeable operating choices and practices, in a structured way.

NOTES



RISK MANAGEMENT FUNCTION

The Risk Management Function (or Risk Control Function) is responsible for implementing the Banca Mediolanum governance policies and its risk management system. The Risk Control Function is responsible for monitoring the exposure of the Bank and the Group to financial and credit risks and assessing the capital impact on operational and reputational risks, keeping under constant control the capital adequacy in relation to the activity performed exercising a role of guidance and coordination on issues related to the management and control of current and perspective risks, in respect of subsidiaries in which there are Risk Management Functions.The Risk Management Function therefore defines and maintains the framework of the control and management of all the risks of the companies belonging to the Banking Group; it is responsible for the supervision of the first pillar risks (credit, market and operational) and conducts qualitative and quantitative assessment of second pillar risks, in compliance with the guidelines of the Board of Directors and the current law provisions. It proposes the quantitative and qualitative parameters necessary for the definition of the RAF, including stress scenarios needed to define the risk tolerance. It also defines the methods for assessing and monitoring reputational risks in coordination by the Compliance Function. It is also responsible for drafting regulation policies regarding all relevant risks and identifies and develops quantitative methodologies for the management of relevant risk pertaining to the first and second pillar.It continuously verifies, for the Banking Group of the adequacy of the Risk Appetite Framework and coordinates the Internal Capital Adequacy Assessment Process (ICAAP) for those activities specifically attributed to them and falling within the scope of the ICAAP Regulation.The Risk Management Function exercises, in accordance with as explicitly required by law, its function of guidance and coordination for all Mediolanum Group companies through different areas of activity including strategic, management and technical/managerial coordination. The Risk Management Function, following assessment by the Risks Committee on the performance of control activities, reports to the Board of Directors on the overall situation of risk in its various components.

NOTES



ANTI-MONEY LAUNDERING FUNCTION

Taking a risk-based approach, the AML Function is responsible for monitoring the risk of money laundering and the funding of terrorism and updating risk management processes in line with changes in the regulatory and procedural context in this respect.It continuously monitors that company procedures are consistent with the aim of preventing and mitigating the violation of external regulations (laws and standards) and internal regulations concerning money laundering and the funding of terrorism.It pays particular attention to the adequacy of systems and internal procedures with respect to customers’ checks and registration and the adequacy of suspicious transaction detection, assessment and reporting systems. It reports directly to the Bank’s Board of Directors and has access to all the Bank’s information and any material information for the performance of its duties.

COMPLIANCE FUNCTION

The Compliance Function oversees the management of non-compliance risks, according to a risk-based approach, with regard to all corporate activities, using, for oversight of certain regulatory areas for which there are forms of specialized oversight, to specifically identified specialist units which are attributed certain stages of the compliance process. In addition to overseeing the regulatory framework, the Function is responsible for specialist consulting, regulatory alert and gap analysis, verification of adequacy of company structures and processes with respect to the existing regulatory framework and identification of actions to mitigate non-compliance risks.The Compliance Function of Banca Mediolanum S.p.A. also oversees the risks of non-compliance also on behalf of the Italian Group companies, by means of specific service agreements, and outsources, for the Risk Management Functions of the Mediolanum Group and other Italian companies of the Group, assessments on operational and reputational risks, as part of the integrated assessment activities and periodically sends the results to the functions, based on the schedule agreed with them.The Function reports to the Board of Directors about the overall situation of non-compliance risk in its various aspects.

NOTES



NETWORK CONTROLS AND PREVENTIVE INDICATORS UNIT

The Network Controls and Preventive Indicators Unit operates through second level controls and checks on the sales network members to make sure their off-premises activities were in full compliance with the regulations in force. Checks and inspections are conducted at the Family Banker® private offices in the field as well as at the archives and corporate Headquarters. Additional checks are conducted via ad-hoc quantitative and statistical indicators monitoring potential operational and reputational risks related to the Sales Network activities.The Unit also avails itself of the support of Banking Centre resource, for the conduct of supplementary direct control activities on customers, also by means of remote communication and information.Upon completion of checks, actions are planned to remedy any irregularities found and, where necessary, sanctions applied to the financial advisors involved or their mandate revoked.

INTERNAL AUDIT TEAM

The Internal Audit Team constantly monitors the internal control system to verify its effectiveness and efficiency and to identify any deficiencies in the system, in procedures or policies, verifies and supplements the effectiveness of the overall management process of financial, credit and operational risk.Internal Auditing provides independent and objective audit services and consulting to improve the effectiveness and efficiency of the organisation and of the overall internal control system.The team monitors operation and assess functionality of the overall internal control system, including via field checks, and reports on possible improvements of risk management policies, risk measurement tools and governance processes to the Board of Directors and the Chief Executive Officer. It performs the above activities also for the companies belonging to the Group with which it has entered into a specific contract; it also carries out coordination activities at Group level with respect to the homologous Functions at the subsidiaries and affiliates. The team regularly reports on its activities to the Board of Directors, the Board of Statutory Auditors and the Risks Committee. In the event of serious irregularities the team immediately reports them to the Board of Statutory Auditors and the Board of Directors.

NOTES



AUDIT COMMITTEE

The Audit Committee provides assistance to the Board of Directors in their at least annual assessment of the conformity, adequacy and effective operation of the internal control system by making sure that key risks, including credit risk, are correctly identified and measured as well as properly managed and monitored.The Committee assists the Board of Directors in the performance of their duties of guidance with respect to the Internal Control System of the Company and its subsidiaries as well as the regular assessment of its adequacy and effective operation. The Committee assesses the audit programme prepared by the Internal Audit team from which it receives regular reports; it examines and assesses any issues raised by control teams, the Statutory Auditors and the independent auditors in their reports; it assesses issues raised and recommendations made following controls by Control and/or Supervisory Authorities. The Audit Committee reports to the Board of Directors on its activities, at least biannually, upon the approval of the half-year report and financial statements; it fulfils the further internal control duties mandated to it by the Board of Directors, in particular in respect of its relationship with the independent auditing firm.

RISK DISCLOSURES PURSUANT TO IFRS 7

IFRS 7 covered in this section, mainly regards the disclosures to be provided concerning the nature and extent of risks arising from financial instruments to which the Company is exposed. The disclosures required under IFRS 7 are both qualitative and quantitative and relate to exposure to credit risk, liquidity risk and market risk. Qualitative disclosures relate to the “objectives, policies, processes and methods adopted by management for risk measurement and management”, while quantitative disclosures relate to quantitative data about the entity’s exposures to credit risk, liquidity risk and market risk.This section provides information that is representative of Mediolanum Group risk exposures pursuant to IFRS 7, in accordance with their relevance for the Group’s operating segments, i.e. insurance, banking and asset management.Pursuant to IFRS7 disclosures are provided in relation to credit risk, market risk and liquidity risk. This section, however, contains further information about risk management policies and techniques for purposes beyond the scope of IFRS 7.It shall also be noted that with the introduction of IFRS 13, a number of amendments have been made to a number of standards, in particular, all related disclosures of the Fair Value Hierarchy (FVH) are no longer regulated by IFRS 7 but by IFRS 13.

NOTES



IFRS 13 thus establishes a single standard for fair value valuation and provides a complete indication on the fair value assessment of financial and non-financial assets and liabilities. IFRS 13 therefore proposes a new definition of fair value, defined as “the price that would be received to sell an asset or that would be paid to settle a liability in a normal transaction between market participants at the measurement date”. The fair value is thus determined based on market values. Disclosures on the different fair value levels of items subject to the relative valuation, as required by IFRS 13 have been extensively outlined in Part A of the Notes.

METHODOLOGY AND CLASSIFICATION OF FINANCIAL INSTRUMENTS

The disclosures required by IFRS 7 can be substantially referred to the classification in three main types of risk:1. Credit Risks. Credit risk is the risk of loss arising from the deterioration in

the creditworthiness up to default of either retail/corporate customers or institutional counterparties of whom the Bank is a creditor in its investment activities, as a result of which debtors fail to meet all or part of their contractual obligations.

2. Market Risks. Market risk is the risk of potential losses, which may also be significant, from adverse movements in market rates and prices to which the Mediolanum Group companies are exposed in their investment activities, such as interest rates, exchange rates, equity prices, volatility, bond spreads.

3. Liquidity Risks. Liquidity risk usually takes the form of difficulties in the disposal of the assets. More specifically, it is the risk that a financial instrument cannot be bought or sold without a material decrease/increase in its price (bid-ask spread) due to the potential inability of the market to settle the transaction wholly or partly. Liquidity risk is also the potential risk that an entity will be unable to obtain adequate funding. Pursuant to Basel II Pillar 2 Supervisory Review of the Internal Capital Adequacy Assessment Process (ICAAP), the regulator requires banking organisations to put in place liquidity risk measurement and management policies and processes. Information on risks is set out below.

NOTES



RISK MANAGEMENT AT CONGLOMERATE LEVEL

For financial conglomerates that engage in both insurance and banking, the traditional approach applied by regulators and supervisors to ensure that enough capital is held against risks has been to consider the risk profile of each business (insurance and banking) and set forth capital requirements against the specific risks to which each business is exposed. The insurance business is subject to Solvency II requirements and the banking business to the ICAAP process. At conglomerate level, compliance with these requirements is compounded by assessment, analysis and monitoring of risk concentration.Risk concentration indicates an exposure with the potential to produce losses that are large enough to threaten the solvency or financial position of the conglomerate entities. Management and control of risk concentration is carried out by aggregating the exposures of all Conglomerate entities to the same counterparty, be it public or private, regardless of the form of exposure.Quarterly reports with particulars on the different types of investments of the Conglomerate with the counterparties with which all Mediolanum Group companies are most exposed, are sent to the Supervisory Body.Owing to their pervasive nature a common risk framework was adopted at Group level for strategic risk, operational risk, compliance risk and reputational risk. Said framework is applied to the various entities within the Group under a proportionate approach according to the characteristics of the specific business and related statutory and regulatory requirements.Given the common framework, information about strategic risk, operational risk, compliance risk and reputational risk provided in the following pages relates to the entire Group; while the information about financial risk and credit risk is given separately for the insurance business and banking business.

SECTION 1 − BANKING GROUP RISKS

IntroductionAs mentioned briefly above, the Internal Audit System of the Mediolanum Group meets the need to ensure sound and prudent management of the activities of both the Bank and the other Group companies, while reconciling the achievement of company objectives, proper and accurate risk monitoring and operability based on criteria of correctness.To this end, the companies of the Banking Group have adequate risk assessment and control systems, in line with the complexity and characteristics of the present and future activities by adopting and formalizing a series of criteria and rules

NOTES



for the definition of their risk appetite through the adoption of the Risk Appetite Framework (RAF).

RISK APPETITE FRAMEWORK AND MAPPING OF MAJOR RISKS

The RAF, approved by the Strategic Supervisory Body of the Parent Company, summarizes the strategies of risk assumption representing the overall structure within which it is intended to manage the risks undertaken, also through the definition of maximum tolerance to risk, with consequent articulation of the oversight adopted overall and divided for each significant risk. The RAF as a tool able to focus attention on the risk profile of the Banking Group through an integrated vision of risks, has significant relations and synergies with the ICAAP process, ideally “upstream” with respect to the latter.

THE INTERNAL CAPITAL ADEQUACY ASSESSMENT PROCESS (ICAAP)

The assessment of the risk profile and the periodic review is carried out continuously and is reported at least annually through the ICAAP (Internal Capital Adequacy Assessment Process) report, which represents the self-assessment process of capital adequacy according to the Group’s internal rules. Under Basel II Pillar 2 (Title III, Chapter 1, of Bank of Italy’s Circular 285/2013) banks are required to have a process to estimate their own internal capital requirements to cover all risks, including those not captured by the total capital requirement (Pillar 1) as part of the assessment of the Bank’s current and future exposure, taking account of the Bank’s strategies and possible developments in the environment in which it operates. Supervisory regulations detail the steps, the frequency and the main risks to be considered and, for certain risks, set out indications on methods that should be used in the assessment. In application of the proportionality principle, banks are classified into different categories that generally identify intermediaries according to their size and the complexity of their activities. Responsibility for the ICAAP rests with corporate governance bodies of the Parent Company.

THE SUPERVISORY REVIEW PROCESS (SRP)

Starting 2014, the Supervisory Review Process - SREP underwent a profound transformation through the establishment of the Single Supervisory Mechanism (MVU), which includes the European Central Bank (ECB) and the National Competent Authorities of EU member states.This body is responsible for the prudential supervision of all credit institutions of

NOTES



the member states and ensuring that the EU policy on prudential supervision of banks is implemented coherently and effectively in all EU countries. Therefore, the new rules introduced require that the supervision of intermediaries defined significant be carried out by the ECB in close cooperation with the national Supervisory Authorities. The supervision of the remaining banks will remain under the responsibility of the Authorities of each country that will proceed on the basis of uniform criteria. Banca Mediolanum currently and according to the criteria established by the ECB, is included in this second group of banks, but in any case the ECB indirectly supervises a category of banks that includes the Mediolanum Group. These banks, according to a principle of proportionality that considers the dimension and risk profile of the intermediary as well as its level of interconnection with the rest of the financial system, is associated increasingly with a more intense direct supervision by the national Supervisory Body and indirectly by the ECB.

CLASSIFICATION OF INTERMEDIARIES IN RELATION TO THE ICAAP

As specified previously, the principle of proportionality applies to: › the methods used to measure/assess risks and related internal capital

adequacy; › the type and characteristics of stress tests; › the treatment of correlations between risks and overall internal capital

requirements; › organisation of the risk management system; › level of detail and sophistication of ICAAP reports to the Bank of Italy.

To facilitate the implementation of the proportionality principle, banks are classified into three categories according to their size and the complexity of their activities. The Mediolanum Banking Group falls within category 2, i.e. banking groups or banks applying the standardised approach, with consolidated or separate assets in excess of Euro 3.5 billion.Banks apply a consistent approach to deriving capital requirements from the Bank’s risk measurement under the first pillar and overall internal capital requirements.It shall also be noted that for the purpose of classification according to the criteria of the current EU provisions (refer to EU regulation no. 575/2013 and circular 285/2013 implementing the CRR) it seems reasonable to consider and qualify “Banca Mediolanum” as “intermediary bank”.

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BANCA MEDIOLANUM’S ICAAP

In accordance with supervisory requirements and in line with best practices, Banca Mediolanum’s ICAAP entails the following steps:1. identification of risks for assessment;2. measurement/assessment of individual risks and related internal capital

level;3. measurement of the overall internal capital;4. determination of overall capital level and reconciliation to regulatory

capital.

KEY RISKS MAPPING

In accordance with Bank of Italy’s Circular 285 of December 2013 and subsequent updates, the process for the identification of the key risks for the Mediolanum Banking Group starts from the analysis of the Bank’s and Group’s statutory lines of business and activities conducted in each of these lines.Risk mapping therefore starts from the macro lines that make up the Banking Group’s business.Within the Mediolanum Banking Group it is possible to identify the following main business segments: › Lending (Retail and Commercial Banking) › Treasury activities (Trading and Sales) › Asset Management › Retail Brokerage

The starting point is risk measurement followed by the definition of relevant risk thresholds for risks for which there is a capital charge requirement as well as for other risks for which there is no capital charge requirement but must be analysed and monitored.

FIRST PILLAR RISKS

Credit Risk (including counter-party risk)Credit risk is the risk of loss arising from the deterioration in the creditworthiness up to default of retail, corporate and institutional counterparties of whom the Bank is a creditor in its investment or lending business, as a result of which debtors fail to meet all or part of their contractual obligations.

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Market RiskFor banks using the standardised approach the capital requirement for market risk is the sum of capital requirements for position risk, settlement risk, concentration risk and commodity risk.

Operational riskBanca Mediolanum defines operational risk as “the risk of economic loss or damage to assets, and sometimes legal and administrative consequences, resulting from any misconduct or inappropriate behaviour of its personnel, inadequate or failed systems or internal processes, or external events.”

PILLAR TWO RISKS OR OTHER RISKS

Concentration RiskConcentration risk is the risk arising from exposure to individual counter-parties, groups of related counter-parties or counter-parties in the same industry, business segment or geographical area.

Interest Rate RiskInterest rate risk arising on activities other than trading: the risk of potential changes in interest rates.

Liquidity riskLiquidity risk usually takes the form of difficulties in the disposal of the assets. More specifically, it is the risk that a financial instrument cannot be bought or sold without a material decrease/increase in its price (bid-ask spread) due to the potential inability of the market to settle the transaction wholly or partly. Liquidity risk is also the potential risk that an entity will be unable to obtain adequate funding.

Residual RiskThe risk that the credit risk mitigation techniques adopted by the Bank turn out to be less effective than anticipated.

Risk of excessive leverageThe risk that a particularly high level of debt with respect to own funds makes the Bank vulnerable, requiring the adoption of corrective measures to the business plan, including the sale of assets with the booking of losses that may entail value adjustments to other assets too.

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Strategic RiskStrategic risk is the current or prospective risk of impact on earnings or capital arising from changes in the industry, adverse business decisions, improper implementation of decisions, lack of responsiveness to industry changes.

Compliance Risk (or Non-conformity Risk)It is the risk of legal penalties or fines, financial losses or reputational damage resulting from failed compliance with statutes, regulations, codes of conduct, self discipline or internal rules.

Reputational RiskReputational risk is the current or prospective risk of impact on earnings or capital arising from the negative perception of the Bank’s image by customers, counterparties, shareholders, investors or Supervisory Authorities.

1.1 CREDIT RISK

QUALITATIVE INFORMATION

General aspectsLending, be it the provision of home loans or consumer credit, or in other forms to meet other financing needs, is part of the business of the Mediolanum Banking Group. Consistently with the Group mission, lending complements the Group primary business i.e. the distribution of banking, asset management, insurance and retirement savings products. The Group applies prudent credit policies, which are geared to develop and strengthen the relationship with customers who invest in products managed by the companies within the Group.With particular reference to Banca Mediolanum, the Lending Department is responsible for ensuring adequate implementation of the Bank’s credit policy in compliance with laws and regulations in force. Currently the Lending Department is divided into the following Units: Ordinary Loans, Special Loans, Corporate Loans, Credit Quality Monitoring and Watch List and Credit Operations.

CREDIT RISK MANAGEMENT

Organizational aspectsThe credit risk management framework includes policies that set out general principles and instructions on lending as well as on monitoring the quality of the loan portfolio. The Parent Company of the Banking Group is responsible for

NOTES



assessing overall exposure to credit risk and defining credit risk measurement policies for Banca Mediolanum.Credit risk exposure is also assessed at the level of individual companies in their respective areas of responsibility, by measuring and monitoring the risk associated with the various categories of financial instruments. Capital adequacy and, in particular, compliance with the solvency ratio and credit risk concentration imposed by local regulators regularly monitored by the competent office of the Company.

Credit risk measurement, management and controlThe control of the quality of the credit is pursued through a systematic analysis of the risk evidence and with the support of specific operational procedures by all companies of the Group in all stages of the disbursement process.In the lending process it is fundamental to have a comprehensive understanding of the financial condition of the borrower and the type of financing which best meets needs, the loan purpose, the borrower creditworthiness and earnings capacity. To that end, each entity within the Group, as part of its loan application analysis, gathers all information needed to assess the consistency of the borrower’s income and exposure (including existing commitments) with the type and purpose of the loan or other financing. In that examination, the entity uses performance and financial analysis tools as well as intelligence obtained from private and public Credit Bureaus.Particular focus is on valuation of guarantees.All loans are also subject to regular review by the competent units within each Group entity. Outstanding loans are continuously monitored focusing especially on riskier positions. Regular reports are presented to the respective boards of directors on the intervention procedures implemented for credit protection purposes.The second-level monitoring process prepared by the Risk Management Function aims to analyse the credit quality and the dynamics of risk exposure along the fundamental regulations and management guidelines by calculating summary risk indicators and representing progress over time in order to prepare action plans necessary to mitigate or avoid risk factors.

NOTES



In particular, the Risk Management Function prepares the following types of audits: › “Massive” audits:

Such audits are applied to the loan portfolio as a whole or its relevant subsets (ex: customer segment, geographical area and type of entrustment, etc.) that allow highlighting potentially “abnormal” behaviour of the portfolio analysed. The overshooting of thresholds identified during bulk controls may activate the execution of controls on a sample basis, to analyse the anomalies observed in individual positions.

› “Sample” audits: Such audits are carried out on individual credit positions that fall within the samples selected by the Risk Management Functions based on specific criteria. Controls on a sample basis may be activated both after the execution of bulk controls and regardless of these. These controls, being focused on individual credit positions, may involve the acquisition of the documentation accompanying the dossier and assessments on the realizable value of the collateral associated to the credit exposure. As part of the sample audits, the Risk Management Function verifies registration in the automatic internal procedures of all the information necessary for the assessment of the credit and traceability of the recovery process. Furthermore, the documentation available is verified on the basis of which the competent structure of the first-level assessment conducted its own analysis.

Credit risk mitigation techniquesLoans extended by the Banking Group entities are secured by collaterals received from borrowers. Collaterals primarily consist of mortgages over property, typical personal guarantees, such as security and other non-typical guarantees, such as a mandate to sell, endorsement and letters of patronage. Even if always subordinated to the assessment of the creditworthiness of the client, great importance is always given to the estimated value of the collateral where prudential haircuts are applied, duly differentiated by collateral type, the value of which is subject to regular review on the basis of market value.The Banking Group does not offset credit risk exposures against positive balances of on- or off-balance sheet items.Credit risk mitigation (CRM) techniques consist of loan-related contracts or other instruments and techniques that reduce credit risk whose risk mitigating effect is recognised in the calculation of regulatory capital, as well as, for risk management purposes, in the internal policies of the Mediolanum Banking Group. Credit risk is inherent in the Credit Division’s lending business and in Financial

NOTES



Management division’s liquidity management.Eligible CRM techniques fall into two broad categories:1. Real guarantees.2. Personal guarantees.

In addition to real and personal guarantees, are the irrevocable mandate to sell the Group’s products and other financial assets held by the customer. As atypical guarantee, the mandate to sell is not eligible for the reduction of capital absorption and therefore not recognized as collateral for mitigation of credit risk, although they contribute to facilitate the decision whether or not to grant an ordinary type of credit facility. The risks taken on the basis of this form of guarantee will thus be necessarily considered full risks.

Evaluating the quality of the portfolioThe Mediolanum Banking Group assesses the quality of the loan portfolio applying the following two-step approach in view of identifying any possible impairment: › identification of assets to be individually or collectively tested for

impairment; › measurement and recognition of the impairment loss in accordance with

the specific impairment rules.The first step is preliminary to the impairment test that assesses and measures the impairment loss, if any.Banca Mediolanum tests for impairment loans and endorsements with fixed or determinable payments extended to retail/corporate and institutional clients. Loans and endorsements to retail/corporate clients typically consist of arranged overdraft facilities, loans and credit lines repayable in instalments, while those extended to institutional clients (banks and other financial institutions) are made up of deposits, repurchase agreements (amount paid for the purchase of the asset under an agreement to resell it at a future date) and hot money facilities.In order to identify the credits to be assessed analytically/jointly for impairment, it is therefore necessary to analyse the significance of the credit and assess the presence of objective evidence of impairment.Loans classified as “non-performing” (past due and/or overdrawn impaired exposures, likely default and non-performing) according to reporting criteria under the current Supervisory provisions, regardless of the significance of individual exposure, are subject to analytical assessment, which differs between “analytical-forfeit” assessment and “analytical-individual assessment”. In all these cases, the impaired credit status identifies an objective evidence of impairment as specified by §64 of IAS 39.

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For impaired exposures (forbearance non-performing) subject to grants, even if they do not form a separate category of loans in default since they are classified as non-performing, likely defaults or past due and/or overdrawn impaired exposures, depending on the case, there shall be an analytical-forfeit or analytical-individual assessment depending on the class and the presence of overdrafts/past due/over due.For exposures that are individually assessed for impairment the recoverable amount of the individual exposure is determined on the basis of: › estimated recoverable cash flows; › timing of recoveries; › the interest rate used to discount future cash flows.

Non-performing loans have a different estimate/treatment approach depending on the class of belonging, the technical form, the value of the collateral backing the loan, the economic-equity assets of the counterparty and all information, internal and external, collected as part of the recovery process that management considered most significant and indicative of the level of potential risk.Exposures that are not individually assessed are grouped on the basis of similar risk characteristics and collectively assessed for impairment.The collective impairment loss is obtained by adding up the losses of each group. The collective impairment amount is compared with the previous carrying amount of loans to determine the amount of provisions to set aside or use.The process for the identification of the groups of loans to be collectively assessed under IAS is in line with the credit risk approach under Bank of Italy’s Circular no. 285 of December 17, 2013 and subsequent updates. Specifically, the risk parameters under said regulation, i.e. probability of default (PD) by rating class and Loss Given Default (LGD), are significant parameters for the classification of loans into groups with similar credit risk characteristics and for the calculation of provisions.

Impaired financial assetsEach Group entity, within its sphere of independence, has its own effective tools for prompt detection of any problem loans.The rules set forth by the Basel Committee introduced significant changes in the general definitions of problem loans and the discretionary guidance of national supervisory authorities.The most significant change relates to the definition of default. A default is considered to have occurred with regard to a particular obligor when either or both of the two following events have taken place: › the Bank considers that the obligor is unlikely to pay its credit

obligations in full, without recourse by the Bank to actions such as

NOTES



realising security (if held); › the obligor is past due more than 90 days on any material credit

obligation to the Bank. In accordance with the discretionary guidance of national supervisory authorities, each entity within the Group classifies troubled positions according to their level of risk.

Each entity has dedicated problem loan management units that apply operating procedures and take action according to the severity of the problem.To determine default Banca Mediolanum refers to the definition of “impaired loans” used for the purpose of financial reporting. Impaired loans include: › overdue and/or past due impaired exposures; › likely defaults; › non-performing.

Past due and/or overdrawn impaired exposuresThey refer to on-balance sheet exposures, other than those classified as non-performing or likely default, which are past due or overdrawn continuously more than 90 days and the higher of the following two values is equal to or higher than the 5% threshold:a) average of amounts past due and/or overdrawn on the entire exposure recorded on a daily basis in the last previous quarter;b) amount past due/overdrawn on the entire exposure referred to the reference date of the report.In particular, in the case of exposures to instalment repayment, the unpaid instalment is considered to represent the most delay and, if a counterparty has several past due and/or overdrawn exposures for more than 90 days, the highest delay is considered.In the case of overdrafts on current accounts “revoked” in which the credit limit granted has been exceeded (although due to the capitalization of interest), the calculation of days of overdraft begins, depending on the fact that occurs first, starting from the first date of failure to pay interest that determines the overdraft or from the date of the first request for return of capital.Past due and/or overdrawn impaired exposures include loans to individuals who fulfil the conditions for their classification among past due and/or overdrawn impaired exposures and which have one or more credit lines that meet the definition of “Non-performing exposures with forbearance measures”.

Likely DefaultsThey refer to on- and off-balance exposures towards the same debtor against whom the Bank deems complete fulfilment unlikely (principal and/or interest) to its credit obligations without recourse to actions such as enforcement of guarantees.

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This assessment is carried out independently of the presence of any amounts (or instalments) past due and not paid if there are elements that imply a situation of risk of default of the debtor (for example, a crisis in the industry in which the debtor operates).Likely defaults include, unless the conditions for their classification as non-performing apply: the overall exposures to persons who fulfil the conditions for their classification as likely default and that have one or more credit lines that meet the definition of “Non-performing exposures with forbearance measures”.In addition, on- and off-balance sheet exposures are allocated in the category of likely defaults for which, due to the deterioration of the economic and financial conditions of the debtor, the Bank agreed to modify the original contractual terms that gave rise to a loss (former restructured loans). This classification is guided by the principle that, at the time of granting, the previous past due is “zeroed” and allocation of the renegotiated exposure among impaired assets implies an evaluation of the status of the debtor on the basis of the principle of the likely default.

Non-performingNon-performing loans consist of on- and off-balance sheet exposures to borrowers that are unable to meet their payment obligations − even if their insolvency has not been established by a court of law − or in equivalent conditions, regardless of any losses estimated by the lender and irrespective of any security taken.They also include exposures to persons who fulfil the conditions for their classification as non-performing and that have one or more credit lines that meet the definition of “Non-performing exposures with forbearance measures”.Excludes exposures whose anomalous situation is caused by factors related to country risk.

Counterparty RiskCounterparty risk is part of credit risk. Counterparty risk is the risk that a party to a derivative contract may fail to perform on its contractual obligations and, when marked to market, the value of the derivative contract turns out to be positive for Banca Mediolanum. Exposure to counterparty risk is measured applying the present value method to OTC derivative contracts. The replacement cost of each contract is its fair value, if positive. Fair value is positive if the Bank is a net creditor of the counterparty.To protect against counterparty risk arising from said derivatives contracts the Group entered into ISDA Master Agreements. It should be noted that Banca Mediolanum has adequate procedures and tools for the management of

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collateral in respect of derivative transactions. The activity on the negotiation of the relevant agreements of the Credit Support Annex is the main exercise on the mitigation of counterparty risk.

Risk of ConcentrationConcentration risk is defined by regulations as the risk arising from exposure to individual counterparties, groups of related counterparties or counterparties in the same industry, business segment or geographical area. Concentration risk thus falls within the wider category of credit risk.As required by the Banking Supervisor (Bank of Italy), in relation to the capital requirement of the single name risk, the Banking Group’s exposure to concentration risk is monitored only for the “Business & Others” Portfolio. The Group exposure in that portfolio is of limited size and relevance. In addition, the Banking Group put in place a system for monitoring concentration risk on a weekly basis in accordance with rules governing management of large exposures.In accordance with regulations in force (Bank of Italy’s Circular 285/2013, second part, Chapter 10, Section 1 and subsequent updates), for large exposures the Mediolanum Banking Group has set the maximum limit for each exposure at 25% of consolidated regulatory capital.

Credit Risk Stress Testing ProceduresCredit risk exposures are essentially gauged using three key parameters: Exposure at Default (EAD), Probability of Default (PD) and Loss Given Default (LGD).As to exposure classes for which the credit risk capital charge is calculated, based on the qualitative and quantitative considerations set out below, it was decided to focus attention exclusively on: › unsecured retail exposures; › exposures secured by property.

The portfolios above (i.e. the portfolios to which stress testing can be applied) include assets in which the Bank intends to continue to invest in the near future while keeping its exposure to other asset classes contained.Stress testing is applied also to past due positions. So, for each asset class and for each portfolio, all exposures, both performing and impaired, at a given baseline date are considered and stressed to see how they would perform under various crisis scenarios.

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QUANTITATIVE INFORMATION

A. LOAN QUALITY

A.1 Impaired and not impaired loans: balance, impairment, developments, business and geographical distribution

A.1.1 Analysis of financial assets by relevant portfolio and loan quality (book values)

€/t Non-performing Likely defaults Past due impaired

Past due not impaired

Not impaired

Total

1. Financial assets available for sale - - - - 13,565,534 13,565,534

2. Financial assets held to maturity - - - - 947,686 947,686

3. Loans to banks - - - 831,259 831,259

4. Loans to customers 25,186 37,764 9,976 64,996 7,863,029 8,000,951

5. Financial assets measured at fair value - - - - 477,688 477,688

6. Financial assets being disposed of - - - - - -

TOTAL 06/30/2017 25,186 37,764 9,976 64,996 23,685,196 23,823,118

TOTAL 12/31/2016 21,568 36,675 9,252 74,848 22,679,001 22,821,344

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A.1.2 Analysis of credit exposures by category and loan quality (gross and net exposures)

Portfolios/quality(€/t)

Impaired assets

Non-impaired assets

Total (Net exposure)

Gross exposure

Specific adjustments Net exposure Gross

exposurePortfolio

adjustments Net exposure

1. Financial assets available for sale - - - 13,565,534 - 13,565,534 13,565,534

2. Financial assets held to maturity - - - 947,686 - 947,686 947,686

3. Loans to banks - - - 831,259 - 831,259 831,259

4. Loans to customers 134,613 (61,687) 72,926 7,938,207 (10,180) 7,928,025 8,000,951

5. Financial assets measured at fair value - - - X X 477,688 477,688

6. Financial assets being disposed of - - - - - - -

TOTAL 06/30/2017 134,613 (61,687) 72,926 23,282,686 (10,180) 23,750,192 23,823,118

TOTAL 12/31/2016 124,676 (57,181) 67,495 22,061,295 (9,233) 22,753,849 22,821,344

Portfolios/quality(€/t)

Assets with evident poor credit quality

Other assets

Accumulated losses Net exposure Net exposure

1. Financial assets held for trading (HFT) - - 687,816

2. Hedge derivatives - - 742

TOTAL 06/30/2017 - - 688,558

TOTAL 12/31/2016 - - 368,800

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F. BANKING GROUP − CREDIT RISK MEASUREMENT MODELS

BANKING GROUP − MARKET RISK

1.2 Market Risk1.2.1 Interest rate risk and pricing risk − Trading book

General aspectsThe Banking Group’s trading book, as defined by supervisory authorities, consists of financial instruments subject to capital requirements for market risk. According to this classification, at present only Banca Mediolanum has a true trading book.Specifically, the trading book consists of positions held by the Banking Group’s functions authorised to take market risk exposures within the limits and the authorities delegated to them by the Boards of Directors. The trading book primarily consists of positions in bonds, equities, derivatives and money market instruments.It should be noted that the portfolio of the Banking Group is characterized by the predominance of domestic government bonds relative to other issuers, represented in the table from the rating assigned to the country, thus presenting a relatively low default risk. Rating analysis for the entire Mediolanum Banking Group’s securities portfolio, including both the trading book and the banking book, is set out below.

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Banking Group securities portfolio - RATING COMPOSITION (S&P Equivalent)Spot data (June 2017 vs December 2016)

Rating Class (S&P Equivalent) 06/30/2017 12/31/2016 Change %

€/t Amounts % Amounts %

TOTAL PORTFOLIO 13,496,187 100% 11,472,608 100% 18%

AAA (394,444) (2.9%) (170,789) (1.5%) 131%

from AA+ to AA- 26,578 0.2% 34,132 0.3% (22%)

from A+ to A- 55,278 0.4% 30,688 0.3% 80%

from BBB+ to BBB- 13,760,269 102.0% 11,559,758 100.8% 19%

BB+ or lower 48,505 0.4% 323 0.0% 0%

Unrated - 0.0% 18,497 0.2% (100%)

Note: the value of the portfolio does not consider the marginal portion of Funds, Shares and Rights.For the current year the rating of the issuer has been indicated.

B. INTEREST RATE RISK AND PRICING RISK - MEASUREMENT AND MANAGEMENT

The Parent Company’s Risk Management Function is responsible for ensuring that the various entities use consistent methods in assessing financial risk exposure. It also contributes to the definition of lending and operating limits. However, each entity within the Group is directly responsible for the control of the risks assumed. Risks are to be in accordance with the policies approved by the respective Board of Directors and consistent with the complexity of managed assets.Exposure to interest rate risk is measured by applying portfolio analyses (e.g. exposure limits, characteristics of the instruments and of the issuers, etc.) as well as by estimating the risk of maximum loss on the portfolio (Value at risk).

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Rating Composition Portfolio − Mediolanum Banking Group

1.2.2 HFT Securities Portfolio - MARKET RISKSpot Data (06/30/2017 vs 12/31/2016)

€/t 06/30/2017 12/31/2016 Change %

Nominal 95,164 (72,849) (231%)

Market value 83,554 (84,805) (199%)

Duration 0.30 0.26 15%

VaR 99% - 1 d 988 534 85%

Interest rate risk and pricing risk - banking book

Interest rate risk is the risk of potential impact of unexpected changes to the market term structure affecting the current earnings and equity value of the Bank. The risk is typically monitored in connection with the positions included in the banking book. The Group’s “banking book” includes all financial instruments not included in the trading book, i.e. all captions (assets and liabilities) on and off the balance sheet that are not held for trading. The banking book therefore includes

NOTES

AAA from AA+ to AA-

from A+ to A-

from BBB+ to BBB-

BB+or lower

Unrated

120

100

80

60

40

20

0

-20(2.9)

0.2 0.4

102

0.4 0

Data expressed in %



the commitments, sources of finance, assets classified in the AFS portfolio and the fixed portion of the securities portfolio (IAS category: Held to Maturity).The interest rate risk on the banking book is monitored by the Parent Company on the basis of an Asset Liability Management model, represented in the financial risk policy document. The structure of the limits established by the policy reflects a level of risk that is considered acceptable and reflected in the Mediolanum Banking Group RAF indicators.Respect of these is guaranteed by the activation of a control process of operative practices, coordinated at the various levels within the organisation, to ensure that they are aligned with the strategic guidelines and policies defined by senior management.

1.2.3 Currency Risk

A. EXCHANGE RISK − GENERAL INFORMATION, MEASUREMENT AND MANAGEMENT

The Group is exposed to currency risk on all its foreign-currency denominated assets and liabilities (both on- and off-balance sheet) including euro-denominated positions linked to the performance of foreign exchange rates.Currency exposure limits were set by reference to the net value of positions in the main operating currencies.

B. CURRENCY RISK-HEDGESThere are no hedges as defined under IAS.

2. INTERNAL MODELS AND OTHER SENSITIVITY ANALYSIS METHODS

VaR (Value at Risk) estimates the risk of loss resulting from adverse movements in the exchange rate of traded financial instruments as a result of adverse market movements.

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1.3 − Banking Group − Liquidity risk

A. Liquidity Risk − General information, Measurement and ManagementThe Mediolanum Banking Group’s liquidity management model is structured in a manner that ensures adequate levels in the short term as well as in the medium and long term. No critical issues can be noted in the liquidity conditions over the time frames indicated thanks to the financial characteristics (duration and risk profile) of the instruments present in the balance sheet assets and the funding strategy adopted. From a structural viewpoint, the Mediolanum Banking Group can rely on a stable core funding and is only marginally exposed to volatility of current accounts. At the same time, the Group implements short-term funding policies through repurchase agreements and longer-term ones through term deposits.The liquidity risk is also managed through the definition of guidelines for the implementation of the monitoring process of the indicators given in the Risk Appetite Framework document. Where applicable, these indicators are adopted by all Group companies and the control process is coordinated by the Parent Company’s Risk Management Function. Under the scope of the more extensive Asset Liability Management model defined for the Banking Group, a system of operational and structural limits has been established that are regulated by the methods set out in the policy on liquidity risk. These are specified in the sections defining the “core” operations of the Group and, in turn, are integrated into the indications to be applied in “extreme, but plausible” situations reported in the contingency funding plan.

1.4 Banking Group − Operational risk

A. General aspects, operational risk measurement and managementThe Mediolanum Group defines operational risk as “the risk of economic loss or damage to assets, and sometimes legal and administrative consequences, resulting from any misconduct or inappropriate behaviour of its personnel, inadequate or failed systems or internal processes, or external events.”In line with what is required by industry regulations, Banca Mediolanum adopted and regularly updates a specific framework for the control and management of operational risk.The Risk Management Function is responsible for overseeing operational risk, using the support of the Framework & Assessment Unit of the Compliance Function to carry out risk assessment activities. It also collaborates with the Network Controls and Preventive Indicators unit, again belonging to the Compliance Function, for the control and management of operational risk

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stemming from the work of the Banca Mediolanum S.p.A. Sales Network and the Accounting and budgets Sector to verify equity adequacy, against requirements of own funds for the operational risk of Banca Mediolanum S.p.A. and the Banking Group.The Risk Management and Compliance Function is separate and independent of operating units and reports directly to the Parent Company’s Corporate Bodies. Specific Risk Management Functions are also present at the main companies of the Banking Group, in order to ensure greater proximity to the business, maintaining at the Parent Company a role of guidance and coordination. The reference framework for the management and control of operational risk adopted by the Mediolanum Banking Group is composed of four basic phases:1. “Identification”;2. “Measurement”;3. “Monitoring, Control and Reporting”;4. “Management”.Each of these phases is characterized by specific objectives, models, methodologies and tools and is implemented by the Group companies, depending on the complexity of the activities carried out, exposure to operational risk and regulatory information - specific regulations, in accordance with the principle of proportionality.

The identification is the activity of finding and collecting information relating to operational risks through the coordinated and consistent processing of all relevant sources of information. The aim is the establishment of a comprehensive information base.The identification is done through the definition and classification of the information needed for the integrated management of operational risks.The information necessary for this purpose includes: › qualitative and quantitative assessments of the risk exposure of key

business processes, as part of the annual risk self-assessment conducted by the Framework & Assessment Unit of the Compliance Function on behalf of the Risk Management Function;

› internal loss data, together with all information relevant to the measurement and management of risks (including recoveries from insurance and direct), collected through the process of Loss Data Collection;

› preliminary analysis, by the Framework & Assessment Unit of the Compliance Function, of the risk exposure to the entry into new businesses or new contracts/commercial agreements, as well as a result of organizational changes/regulations;

NOTES



› “Key Risk Indicators”, i.e. risk and performance indicators that provide insight into the status of operational processes and the main drivers of exposures. These indicators, updated by the Network Controls and Preventive Indicators unit of the Compliance Function, may include “exposure indicators” or “anomaly indicators”.

Measurement is the activity of analysis and optimization of risk.It is an activity aimed at the complete knowledge of the overall risk profile of the Company leading to the quantification of: › regulatory capital: capital requirement defined on the basis of supervisory

regulation provisions (EU 575/2013 Regulation). For the measurement of regulatory capital for operational risk, all the companies belonging to the Mediolanum S.p.A. Banking Group, adopt the “standardized” method to calculate the regulatory capital requirement;

› economic capital: measurement of risk for internal purposes, performed using an integrated approach that reflects both the actual losses from operational risks and potential one valued net of the effectiveness of controls in place to mitigate them. This measurement activity is therefore based on the outcome of risk identification analyses, applies an actuarial statistical model and is a means of verifying the adequacy of regulatory capital for operational risks.

The Monitoring, Control and Reporting is a direct result of the preliminary phases of identification and measurement that allow analysing the overall exposure to operational risks of the various business units and promptly reporting any problems found. The main tool used in the conduct of this process is the drafting of periodic information to the company functions involved, Top Management and the Board of Directors.The Management phase entails the periodic assessment of risk control and mitigation strategies. Depending on the nature and size of risk, in accordance with the risk appetite approved by management, the Bank decides whether it can take the risk, adopt risk mitigation or transfer the risk to third parties.

1.5 Other risks

In addition to the above risks, the Mediolanum Banking Group has identified and monitors the following other risks.

NOTES



General aspects, measurement and managementStrategic riskStrategic risk is the current or prospective risk of impact on earnings or capital arising from changes in the industry, adverse business decisions, improper implementation of decisions, lack of responsiveness to industry changes.All Group companies are potentially exposed to strategic risk, each at different levels according to the volume of business they manage and their operations.Strategic risk may arise from: › business decisions relating to the entry into new (local or international)

markets or new product lines or changes in the distribution model or channels;

› external events, changes in the competitive environment or unexpected market scenarios due to macroeconomic events, or changes in the regulatory environment.

Strategic risk identification processes are part of usual management planning and control, entail analyses of market scenario and changes in the competitive environment resulting from macroeconomic events or regulatory developments. These analyses are typically conducted upon budgeting and planning as well as upon the occurrence of external events that may have a significant impact on the Group’s business.

Compliance RiskAcross the Mediolanum Banking Group, a single compliance risk management framework has been defined that entrusts the Compliance Function with the responsibility of ensuring compliance as well as supervision, guidance and control of Group companies within its remit.The scope of work of the Compliance Function has been defined taking account of the responsibilities given to other functions within the organisation based on the above Group Compliance Model and in relation to specific regulatory areas.The different steps of the Compliance framework, provided by the Group Compliance Policy, updated during the year and implemented by the Company, include the following activities: › Definition of the methodological framework for compliance risk

assessment and monitoring; › Periodic valuation of the methodological compliance risk assessment

framework; › Regulatory scoping; › Planning of compliance activities; › Consulting activities and training; › Monitoring of alert and regulatory developments;

NOTES



› Analysis of the impact of regulatory developments and definition of adjustment interventions;

› Verification of monitoring adequacy; › Verification of operation; › Valuation residual risk; › Preparation and update of documents / specialized compliance

procedures; › Reporting to Corporate Bodies; › Reporting to Supervisory Authorities; › Managing relations with Supervisory Authorities and Category

Associations.

Overall, the Compliance Function has not identified, with regards to its competence, criticalities in the completeness, accuracy, adequacy, operation and reliability of the internal control system of the Company, despite having provided appropriate guidelines on specific regulatory aspects in order to strengthen the existing controls.

Reputational riskReputational risk is the current or prospective risk of impact on earnings or capital arising from the negative perception of the Company’s image by customers, counterparties, shareholders, investors or supervisory authorities.Reputational risk may arise from internal or external events.Internal or external events may include, but are not limited to: › the materialisation of other risks (e.g. market risk, liquidity risk, legal risk or

strategic risk) not adequately kept in check; › the occurrence of operational risk events (e.g. malfunctioning, disservice,

etc.) with impact on the stakeholders’ perception of the Bank; › failed compliance with external regulations (laws and regulations) and

internal regulation (codes of conduct, codes of ethics), including those that may be outside the purview of the Compliance Function;

› internal or external communications being ineffectively or inappropriately handled;

› the behaviour of corporate officers, employees or collaborators.More generally, internal events include all events directly associated with the processes in place and the business conducted by the Company as well as any management or operational choices made by the Bank (e.g. external communications, materialisation of operational risk events, failure to comply with legislation).External events include comments or debates in the media, on social networks,

NOTES



blogs and/or other means of digital communication with circulation of information or opinions that damage the reputation of the Company. These events are not directly associated with processes in place or business conducted by the Company, but are related to the circulation of negative opinions or information about the Company or its management (e.g. debates on blogs or social networks, newspaper articles or opinions about the Company and its management). The materialisation of reputational risk may have effects on other risks. Banca Mediolanum S.p.A. recognises the reputation of the Bank is the bedrock on which the trust-based relationship with customers and market credibility are built. Hence, reputation is managed and protected in accordance with the Group’s guidelines, through: › the values that are embedded across the organisation; › the promotion of a corporate culture built on integrity, fairness and

compliance at all levels of the organisation; › the adoption of a reputational risk governance and control model.

The process of identification, assessment and mitigation of the exposure to reputational risk is carried out by the Framework & Assessment Unit of the Compliance Function, within the integrated Risk Self-Assessment (RSA) activities carried out every year on the different organisational units with reference to operational and non-compliance risk. On this occasion, the employees of the Framework & Assessment Unit require the Heads of Organizational Units whose activities have an impact on the critical values perceived by stakeholders, provide a qualitative assessment of exposure to reputational risk, also analysing data or documents that might lead to better compliance assessment of safeguards in place. Among these elements particularly important factors are complaints received from customers, complaints and inquiries received by the Supervisory Authority, satisfaction surveys, etc.The results of the evaluations made and any mitigation actions are pooled with other units of the Compliance Function and the Risk Management Function which take them into account, within their respective competence, for the planning of their activities and in the preparation of periodical reports to Corporate Bodies.

IT RiskThe risk of financial loss, reputational damage or loss of market share arising from the use of Information and Communication Technology. In the integrated description of business risk for prudential purposes (ICAAP), this type of risk is included, according to the specific aspects, under operational, reputational and strategic risk.The comprehensive reference organisational and methodological framework for the governance of IT risks adopted by the Bank, in line with a policy to reduce

NOTES



operational risk, is able to minimise the possible impacts associated with the regular fulfilment of corporate processes and services offered to customers and guarantee the integrity, confidentiality and availability of the information processed.

Conduct riskConduct risk, as a sub-category of operational risk, can be generally defined as “the current or prospective risk of losses consequent to cases of inappropriate offer of financial services, including cases of inadequate conduct (misconduct/negligence) by the Bank and the sales network”. The approach taken to Conduct risk by Banca Mediolanum involves a clear interrelation between business strategies and the conduct of the financial institution and its family bankers, considering the corporate values and mission.

NOTES



SECTION 2 − INSURANCE COMPANY RISKS

IntroductionThe Mediolanum Insurance Group (hereinafter also referred to as “GAM”) has prepared and adopted an internal risk management and control framework, which allows for the identifying, assessing and managing monitoring risks on an ongoing basis, taking into due account the changes in the nature and size of the business and the market environment, and is attributable to the following phases: A. Identification of risks, definition of the methods of estimation and related

assessment: involves the definition of principles, tools and methodologies for proper identification, description, classification, estimation (qualitative, semi-quantitative and quantitative) and risk assessment.

B. Process of defining the risk appetite: involves combining the previous phase, of identification, mapping and risk assessment of the Company with the definition and quantification of the risk appetite and the resulting allocation of risk tolerances and related operating limits.

C. Governance of process and risks: consists of the definition of policies and guidelines to be followed for the assumption of new risks and/or the conduct of existing risks. The activities of assumption and conduct of various types of risk are governed by specific Policies which establish the principles and/or limits to be met in the course of activities, in order to ensure a risk profile consistent with the risk appetite of the Company and with the internal risk and solvency assessment (ORSA).

D. Monitoring and Reporting: involves continuous monitoring of the risk profile of the Company and the production of adequate information both to the internal bodies and structures of the Company and to the Control Authorities and external stakeholders.

The risk management system was designed to provide a common and consistent approach of risk management at all levels of the Company and in all companies belonging to the GAM and aims to support and facilitate the processes of identification, reduction, transfer or elimination, to the extent in which the residual risk is acceptable, of the impact that the risks have on the ability of the GAM and individual companies to achieve their business objectives.

NOTES



2.1 Insurance risksA. Life Insurance

Pricing riskThe ability of GAM Life Insurance companies to determine adequate premium levels may be adversely influenced by various factors such as, for example, the lack of availability of sufficient and reliable data, the incomplete or incorrect analysis of the available data, the uncertainty of estimates (in particular, those related to the prediction of the number and amount of indemnities to be covered by the tariffs), the application of inappropriate or inadequate formulas and pricing methodologies, the evolution of the regulatory and legal framework, as well as changes underway in jurisprudential practice and guidelines of claims settlement.Despite the mechanisms adopted by Insurance companies, it cannot be excluded that the actual indemnity claims in the future may be significantly higher, as to the number and amount, compared with the forecasts used for the purposes of calculating the price of the products, with possible consequent negative effects on activities and on the economic, capital and/or financial situation of Insurance companies. Moreover, it cannot be excluded that the inadequacy of data and pricing methodologies, resulting in indemnity claims significantly higher than expected, also resulting in a pricing level that is not appropriate to the size of actual risks, may have negative effects on operating results and on the economic, capital and/or financial situation of Insurance companies.The two GAM Life business companies consider the impact on earnings forecasts of all sources of income and expense, especially those associated with optional or early termination of existing contracts. When pricing certain products penalties are included for early termination of contracts. These penalties are calculated to compensate, at least partly, lost revenues. Additionally, under the vast majority of contracts in force, financial guarantees are not paid in the event of early termination of the contract, which is thus discouraged, and potential costs for the Company are reduced. The assumptions used for both product pricing and risk assessment are regularly reviewed and updated based on actual experience of early termination of contracts.The table below provides a breakdown by ranges of contract cut-off date of the technical reserves (insurance) and financial liabilities deriving from investment contracts (investment).

NOTES



€/t Insurance Investment Total

within 1 year 529,112 - 529,112

1 to 2 years 532,804 - 532,804

2 to 3 years 551,051 - 551,051

3 to 4 years 700,052 - 700,052

over 5 years 9,277,219 4,827,274 14,104,493

whole life 2,872,401 58,555 2,930,956

TOTAL 14,462,639 4,885,829 19,348,468

The total includes mathematical reserves and technical reserves for contracts under which the risk is borne by the policyholder amounting respectively to Euro 1,533,739 thousand and Euro 12,925,560 thousand, the reserve for other technical items amounting to Euro 3,340 thousand and investment contracts financial liabilities amounting to Euro 4,885,829 thousand. The reserves to be paid (Euro 70,418 thousand) are therefore excluded, as is the valuation of the rebate of capital gain/capital loss from valuation of securities to hedge contracts with DPF (“Shadow Accounting”), equal to Euro 40,047 thousand.

Demographic-actuarial riskDemographic risk is defined as the risk of occurrence of a future and uncertain event relating to the life of the policyholder, an essential feature of the life insurance contract: in fact, it is upon the occurrence of the event relating to the life of the policyholder that relates to the Company’s commitment to deliver the insurance. Demographic risk occurs both in the case in which the duration of the life of the policyholder is less than the statistical average (mortality risk), and in the case in which it is longer (longevity risk).Despite the measures adopted, the premiums relating to life insurance contracts, which take account of these risks are calculated on the basis of statistical and actuarial projections concerning the population’s life expectancy. If these projections were to prove unreliable, the value of the reserves of the two Life Insurance companies in relation to life insurance and pension products could be higher than expected, resulting in negative effects on the economic, capital and financial situation of the companies.

NOTES



The Books of Mediolanum Vita and Mediolanum International Life largely consist of contracts with a predominantly savings component and a marginal “pure risk” component (death plus other coverage e.g. disability, injury, etc.).The risks related to products with a predominantly savings component, and to guarantees of minimum return, are considered when pricing the products setting guarantees in a prudent way, in line with the specific features of each financial market and considering regulatory constraints, if any.As to the demographic risk associated with death benefit policies, prudent technical rates based on population mortality tables plus adequate loadings are applied when pricing products.To further mitigate mortality risk, Mediolanum Vita reinsures principal in excess of Euro 100,000.With reference to the Italian Life Insurance Company, there are also some annuity books that are exposed to longevity risk.As to longevity risk, Mediolanum Vita regularly reviews the adequacy of technical rates for the annuities it pays out.For contracts featuring an initial accumulation plan with option to convert capital into annuities in the future generally, no guarantee is given of conversion rates for future annuities. The propensity of policyholders to opt for annuities is also monitored so that adjustments can be promptly made to demographic assumptions and rates.Regarding the impact of this variable on earnings, Mediolanum Vita calculated that a 1% change in said variable would bring about a similar movement of Euro 1.7 million in the Group’s net result as at June 30, 2017.

Reserve riskReserve risk is the risk related to non-sufficiency of mathematical reserves against commitments to policyholders. Said risk is managed and overseen by the actuarial function of the two companies during the exact calculation of mathematical reserves, with a series of both detailed controls (for example with preventive control on the correct system storage of the variables needed for calculation such as returns, quotations, technical bases, parameters for supplementary reserves, recalculation of values of individual contracts) as well as overall controls, by comparing results with the estimates made on a monthly basis. Special attention is paid to controlling the correct acquisition of contracts, through the balancing of the relevant portfolio with reconstruction of changes divided by events that occurred during the period and consistency of the amounts settled, with respect to changes in reserves. If, despite the aforementioned measures adopted, the above mathematical reserves are not sufficient enough compared to the commitments made to policyholders, any requests of the latter

NOTES



to insurance companies that exceed expectations, could have adverse effects on the economic, capital and financial situation of the Company and consequently the GAM.

Analysis of insurance technical reserves by level of guarantee offered

€/t 06/30/2017

Liabilities with interest rate guarantee 1,099,991

0% 238,600

2% 20,517

3% 134,079

4% 706,795

Liabilities without interest rate guarantee 12,262,657

TOTAL 14,462,639

Lapse risk (surrenders)With reference to lapse risk (surrenders), Life Insurance companies constantly monitor the progress of the phenomenon, if the controls carried out reveal a sharp growth in surrenders, the same companies would adopt, jointly with the distributor, all initiatives, including commercial ones, to address and manage any critical issues.The Risk Management Function implemented a process that involves monitoring at least quarterly, with communication both to the Product and Equity Committee and to the Board of Directors, of disqualification risk with particular reference to: 1) outputs for redemptions; 2) failure to maintain the existing portfolio.Lapse risk and payment interruption risk are prudentially assessed and incorporated into the pricing of new products. Product pricing and profit testing are based on assumptions derived from the companies’ actual experience. To mitigate risks associated with surrenders in general, penalties are applied. These penalties are calculated to compensate lost revenues. Portfolio reviews on annual planning include analyses that check consistency of assumptions made with actual experiences.

NOTES



An analysis of life insurance gross premiums by product class and geographic area is set out in the table below.

Analysis of life insurance gross premiums by product class and geographic area

€/t Unit Linked Traditional Collective Total

Spain 44,140 - - 44,140

Germany 8,498 - - 8,498

Italy 502,334 324,858 6,052 833,244

TOTAL 554,972 324,858 6,052 885,882

B. Damages Insurance

With regard to the damages class, technical risk is the risk of loss or of adverse change in the value of insurance liabilities due to inadequate assumptions concerning the determination of the premiums of the policies and establishment of reserves.In particular, technical risk includes the following cases:

Pricing riskIt is the risk from fluctuations that can arise at the time of occurrence, in the frequency and severity of insured events. Pricing risk relates to policies underwritten during the year, including renewals, and risks arising from contracts still outstanding at the end of the reference year. It cannot be excluded that the actual indemnity claims in the future may be significantly higher, as to the number and amount, compared with the forecasts used for the purposes of calculating the price of the products, with possible consequent negative effects on activities and on the economic, capital and/or financial situation of Mediolanum Assicurazioni and, consequently, of the Mediolanum Group. Moreover, it cannot be excluded that the inadequacy of data and pricing methodologies, resulting in indemnity claims significantly higher than expected, may also lead to a pricing level that is not appropriate to the size of actual risks, with consequent negative

NOTES



effects on operating results and on the economic, capital and/or financial situation of the Company.

Reserve riskIt expresses the variability between the estimate of the claims reserve (best estimate) evaluated at a given date and its actual development in time (related to future payment flows) which, in line with the Solvency II regulations, is defined on an annual basis; where, despite the measures adopted by Mediolanum Assicurazioni, the variability of the reserve was not properly estimated. Any claims of policyholders with respect to Mediolanum Assicurazioni higher than expectations could have negative effects on the economic, capital and financial position of the Company, the Insurance Group and consequently of the Mediolanum Group.

NOTES



Claims reserve − Amount gross of reinsurance.Figures including IBNR, Reserve for direct and indirect expenses and amounts to be recovered.

Statutory classes(€/t)

06/30/2017

Gross claim reserve %

injury 2,815 11.64%

illness 9,116 37.69%

transport 2 0.01%

fire 1,378 5.70%

adb 606 2.50%

motor third-party liability 3,022 12.49%

general third-party liability 6,192 25.60%

pecuniary losses 862 3.56%

legal protection 111 0.46%

assistance 84 0.35%

TOTAL 24,188 100%

NOTES



Lapse riskThrough the use of the standard formula Solvency II, for some types of products, a potential early lapse rate is estimated by calculating the impact of this risk in terms of regulatory capital loss. Despite the estimates made by Mediolanum Assicurazioni, it cannot be excluded that an increase in prepayments may have negative effects on the financial and economic situation of the Company.

Statutory classes(€/t)

Gross premiums

06/30/2017

injury 6,981

illness 10,346

transport 2

fire 2,520

adb 1,225

general third-party liability 1,082

pecuniary losses 994

legal protection 41

assistance 389

TOTAL 23,580

Risk of catastrophic events (cat risk)Catastrophe risk is the risk of loss or of adverse change in the value of insurance liabilities, resulting from significant uncertainty of the assumptions in the determination of premiums and establishment of reserves related to extreme or exceptional events. This risk derives from events that are not adequately captured by capital requirements for pricing and reserve risk. Mediolanum Assicurazioni limits the economic impact of catastrophic events through the use of reinsurance, allocating risk among reinsurers of selected reliability and financial solidity. Therefore, in the event of one or more catastrophic events such as earthquakes, storms, explosions, floods, fires and terrorist acts, which were to cause damage

NOTES



for an amount exceeding the maximum reinsurance coverage of Mediolanum Assicurazioni, there could be negative effects on the economic, capital and/or financial situation of the Mediolanum Insurance Group and the Conglomerate itself.At present, the most significant exposure regards the earthquake guarantee shown in the table: Products Euro/thousands

Exposure SCR Nat Cat Gross Reins

SCR Nat Cat Net Reins

Capitale casa 213,374 2,220 222

Run off fire and explosion 621,142 2,500 431

TOTAL 834,516 4,720 653

2.2 Financial risks

Market risksRegarding the process for the definition of investment strategies, the proper identification of market risks to which insurance companies are exposed during investment activities is crucial, particularly with regard to the Risk Appetite Framework defined and the relevant economic capital absorbed.While some methodologies adopted reflect mainly operating needs, the framework for the definition, management and control of market risks is based on legal requirements laid down by the Solvency II regulation where applicable.Article 13, point 31) of Directive 2009/138/EC defines the market risk as the risk of loss or unfavourable change in the financial situation deriving, directly or indirectly, from fluctuations in the level and volatility of the market prices of the assets, liabilities and financial instruments.The three companies adopted this definition by identifying and classifying in this category the following risks:1. Interest Rate Risk2. Equity Risk3. Currency Risk4. Spread Risk5. Concentration Risk (subject of specific policy)6. Liquidity Risk (subject of specific policy)7. Financial Instruments Derivatives Risk

NOTES



Interest rate riskInterest rate risk exists for all assets and liabilities whose value is “sensitive” to changes in the term structure of interest rates or volatility of interest rates. This applies to both real and nominal term structures.The activities sensitive to changes in interest rates include fixed income investments, financial instruments (such as loans), loans on policies, derivatives on interest rates and any insurance activities.With reference to this exposure, Mediolanum Vita has simulated the impact of a reduction of -100bps on the foreseeable performance curve for the calculation of the reserve as a guarantee of the interest rate.

Equity riskEquity risk arises from the level or volatility of market prices for securities. The exposure to equity risk refers to all assets and liabilities whose value is sensitive to changes in stock market prices.

Currency riskCurrency risk arises from changes in the level or volatility of exchange rates. Companies may be exposed to currency risk arising from various sources, including their investment portfolios, as well as assets, liabilities and investments in associates.

Property riskProperty risks arise because of the sensitivity of financial assets, liabilities and investments to the level or volatility of property market prices.The following investments are classified as property and their risks are considered in accordance with the sub-form of property risk:1. land, property and rights on property assets;2. direct or indirect investments in real estate companies that generate

regular income, or that are otherwise intended for investment purposes;3. property investments for own use of the insurance company.

Spread riskSpread risk is the part of risk that reflects changes in the value of financial assets, liabilities and instruments due to a change in the level and volatility of credit spreads with respect to the term structure of the risk-free rate. The spread risk applies at least to the following classes of securities: Corporate bonds of high credit quality (investment grade); High-yield corporate bonds; Subordinated debt; Hybrid debt.Moreover, spread risk is applicable to all types of asset-backed securities as well

NOTES



as to all segments of structured credit products such as backed debit bonds. In particular, the risk spread covers credit derivatives, for example, but not limited to, credit default swaps, total return swaps and credit linked notes that are not held as part of a recognized risk mitigation policy. The spread risk also includes the credit risk of other risky investments including in particular: investments; debt securities issued to and from associated companies and companies with which the insurance company has an investment relation; debt securities and other fixed income securities; investments in mutual funds.

Market concentration riskThe risk of market concentration in the field of financial investment derives from the accumulation of exposures with the same counterparty. Concentration risk extends to activities impacted by equity risk, the interest rate and spread and the property risk and excludes those activities of the form of risk of default of the counterparty. It does not include other types of concentration (for example, by geographical area, industrial sector, etc.).

Liquidity riskRisk that the companies are not able to adequately meet expected and unexpected cash outflows. This condition may be linked to the inadequacy of future cash flows to meet expected and unexpected commitments or even the difficulty to liquidate part of the assets to meet cash needs.Regarding Solvency II, a process was implemented that involves monitoring at least quarterly, with communication both to the Product and Equity Committee and to the Board of Directors, of market risks that have a greater impact in terms of absorption of regulatory capital, in this case:1. Equity;2. Currency;3. Interest rate.This in order to make the control process in place consistent with the companies’ Risk Appetite Framework.The controls currently in place monitor the value of underlying assets ex-ante and ex-post. Frequency of controls is established at the level of each entity.In the Traditional Reserve portfolio of the life business, the risk of asset-liability mismatch is periodically assessed using an Asset Liability Management model. In particular, these activities are assessed by Mediolanum Vita using an Asset Liability Management stochastic model. In particular, the model in question is based on stochastic dynamic financial analysis (DFA) which allows evaluating how the situation of the Company may change if several scenarios and strategic decisions vary. It allows projections not only of possible future scenarios but also

NOTES



of their probability. The software generates stochastic projections of the flows of assets and liabilities in the Company’s traditional portfolio. To that end, at each assessment date 1,000 Market-Consistent financial scenarios are generated. Each of these scenarios shows the possible developments of risk factors over a 20-year horizon. The system allows ex-ante modelling for: › current and future asset allocation; › type of securities to be bought/sold; › ranking of securities to be bought/sold; › liabilities paid up and lapse rate assumptions; › return targets; › actions to be taken to meet return targets.

Through ad-hoc reports generated by the system, it is possible to monitor the long-term impact of asset management investment choices on the profitability and solvency of Mediolanum Vita.Under the regulations in force, Mediolanum Vita is authorized to use derivatives to hedge current positions or movements in underlying assets or liabilities.Financial derivatives are primarily used to achieve operating targets with greater efficiency, flexibility and rapidity, to optimise portfolio management (“effective management”) and to mitigate market risk arising on interest rate or foreign exchange rate movements (risk mitigation).In the process of measuring market risk, the Risk Management Functions of the two Italian companies adopted the method of calculation of Value at Risk (VaR).The Value at Risk indicates the maximum potential loss observed with a certain level of probability in a defined period of time, following changes in financial markets: it is estimated by using the Historical Simulation Full Evaluation methodology. The historic simulation method consists of determining the value of the portfolio using the relevant parameters found in the market (“risk factors”), and determining the changes in the value of that portfolio in response to the changes in the parameters observed in the past.The implementation choices of the Company were in line with the best practices of the market: › time horizon of one working day (period = 1 day and 15 days for

Mediolanum Assicurazioni); › observation period of 3 years; › 99% confidence level.

NOTES



The chart below shows Value at Risk (VaR) in the year 2017 for the two Italian companies:

Mediolanum Vita S.p.A.VaR Portfolio

0

2,000

4,000

6,000

8,000

10,000

12,000

€/t

06.30.2016 07.29.2016 01.31.201708.31.2016 02.28.201709.30.2016 03.31.201710.31.2016 04.28.201711.30.2016 05.31.2017 06.30.201712.30.2016

4,560 4,3684,025

4,394

5,190

10,022

6,651

10,040

10,98011,653

6,328

6,9596,584

Mediolanum Assicurazioni S.p.A.P&L VaR performance

0

500

2,500

1,000

1,500

2,000

08.2016 09.2016 03.201710.2016 04.201711.2016 05.201712.2016 01.2017 06.201702.2017

€/t

VaR 1 day VaR 15 day

1,282

1,405

1,591 1,5911,591

1,5911,591 1,591 1,591 1,591 1,591

405 444503 509 483

372 362 355 353 345 343

NOTES



The tables below set out an analysis of the Mediolanum Vita and Mediolanum Assicurazioni portfolios by rate:

74.2%FIXED

35.6%FIXED

3.3%ZERO COUPON

63.7%INDEX-LINKED

13.2%FLOATING

0.8%FIX TO FLOATER

6.4%STEP CPN

2.8%VARIABLE Mediolanum

Vita06/30/2017

Mediolanum Insurance

06/30/2017

With reference to the business of Unit-Linked life insurance the management indicator that has been adopted and used by Mediolanum Vita and Mediolanum International Life to manage market risk is the Tracking Error Volatility (TEV), calculated on a monthly basis.The tracking error measures the added value that the mutual fund in which the UL product invests has realized with respect to the benchmark and represents an initial measurement of sound management.In addition, the two companies also decided to measure the volatility of the tracking error (or Tracking Error Volatility), that is its variability over time, since it indicates the differential risk that the investor bears choosing to invest in the fund rather than directly in the benchmark. The model used is multi-factorial.This model allows analyzing the TEV of the assets and the portfolio of shares, bonds and currencies using different factors depending on the local market of belonging.

Credit and counterparty riskThe credit risk represents the risk that over the life of a financial instrument linked to an insurance product there may be an event which changes the repayment ability (creditworthiness) of the counterparty (issuer) and consequently the value of the credit position. Credit risk can be divided into two components: insolvency and migration risk. Insolvency risk is the risk of not being able to fully collect a certain number of future payments as a result of the insolvency of the debtor; migration risk relates to the risk of a decline in the value of the instrument as a result of the deterioration of the credit standing/rating of the debtor. Counterparty risk arises mainly from typical derivatives of some Class III life products. In

NOTESNOTESNOTES



particular, if the counterparty of the OTC transaction incurs a deterioration of its financial solidity which may involve default, it may not fulfil the obligations arising from the negotiation of said instrument. This risk is monitored by the Company through compliance with European regulations EMIR (European Market Infrastructure Regulation). Credit risk may arise mainly from the issuer risk as a result of the default of the securities in the portfolio. It is noted that the securities portfolio for the two Italian companies is characterized by the prevalence of investments in domestic government securities with respect to other issuers resulting from exposure to the irrelevant default risk.

Mediolanum Vita S.p.A. securities portfolio − RATING COMPOSITIONSpot Data (06/30/2017 vs 12/31/2016)

€/t 06/30/2017 12/31/2016 Change (%)

amounts % amounts %

Total Portfolio 1,311,364 100% 1,429,559 100% (8%)

AAA - - - - n.s.

from AA+ to AA- - - 19,124 1.3% (100%)

from A+ to A- 4,714 0.4% 2,952 0.2% 60%

from BBB+ to BBB- 1,208,511 92.2% 1,310,541 91.7% (8%)

BB+ or lower 90,241 6.9% 87,630 6.1% 3%

Unrated 7,897 0.6% 9,312 0.7% (15%)

NOTE: the value of the securities portfolio does not include residual Index Linked Policies Funds, Shares and Rights.

NOTES



Mediolanum Assicurazioni securities portfolio − RATING COMPOSITION (S&P Equivalent)Spot Data (06/30/2017 vs 12/31/2016)

€/t 06/30/2017 12/31/2016 Change (%)

amounts % amounts %

Total Portfolio 135,906 100% 133,096 100% 2%

AAA - - - - ns

from AA+ to AA- - - - - ns

from A+ to A- - - - - ns

from BBB+ to BBB- 131,872 97.0% 132,026 99% ns

BB+ or lower 2,258 1.7% - - ns

Unrated 1,776 1.3% 1,070 1% 66%

NOTES



The analysis of the Italian companies’ portfolio by IAS/IFRS category is set out below:

Mediolanum Vita securities portfolioSpot Data (06/30/2017 vs 12/31/2016)

IAS Classification€/t

06/30/2017 12/31/2016 Change %

HFT

Nominal 51,456 57,282 (10%)

Market value 54,787 61,190 (10%)

AFS

Nominal 745,418 915,113 (19%)

Market value 815,578 992,844 (18%)

HTM

Nominal 374,856 305,356 23%

Market value 413,485 349,368 18%

L&R

Nominal 27,680 27,691 (0%)

Market value 27,514 26,158 5%

TOTAL

Nominal 1,199,410 1,305,443 (8%)

Market value 1,311,364 1,429,559 (8%)

NOTE: the value of the securities portfolio does not include residual Index Linked Policies Funds, Shares and Rights

NOTES



Mediolanum Assicurazioni securities portfolioSpot Data (06/30/2017 vs 12/31/2016)

IAS Classification€/000

06/30/2017 12/31/2016

HFT

Nominal 2,000 16,000

Market value 2,053 16,769

AFS

Nominal 103,600 105,300

Market value 105,150 108,049

HTM

Nominal 26,500 6,000


L&R

Nominal 1,809 1,812


TOTAL

Nominal 133,909 129,112

Market value 135,906 133,096

Insolvency Risk - Reinsurance CounterpartiesConsidering that with regard to the reinsurance to commercial premiums, the technical reserves of Mediolanum Vita are deposited at the Company (making the risk of insolvency almost null), it is noted that the reinsurance policy adopted by the same provides that the minimum rating required of a reinsurance company in order to conclude a treaty is BBB+.

NOTES



As at June 30, 2017, the minimum credit rating of reinsurers with whom Mediolanum Vita has entered into reinsurance treaties is AA+.In the damages class, according to as established in corporate policy, Mediolanum Assicurazioni may enter into contracts with reinsurers with the following features: › Minimum rating BBB; › Belonging to groups or conglomerates with minimum rating BBB; › Maximum limit of commitment per Reinsurer in the classes of Assistance,

Legal Protection, 90%; maximum limit of commitment per Reinsurer with rating BBB;

› Maximum limit of commitment per Reinsurer with rating higher than or equal to A equal to 60%; maximum limit of commitment per Reinsurer with rating BBB equal to 30%;

› The commitment limits shall be considered as the maximum degree of concentration of the risk on a group basis;

› The minimum rating limits shall be intended for both “short” and “long−tail” risks;

› In the case of specific products, for a defined time frame and with a hypothesis of premium inflows of no more than one million euros, an exception may be made to the commitment limit per Reinsurer, and in any case no more than 95% with a minimum rating of A;

› Reinsurers will be privileged that belong to major European groups, if possible with representatives in Italy and in any case with an operative office in Italy;

As at June 30, 2017, the lowest rating detectable for reinsurance counterparties of Mediolanum Assicurazioni is equal to BBB.

2.3 Other risks

The reference framework for the management and control of operational risks adopted by the Mediolanum Insurance Group companies is composed of the four sequential phases already described with reference to the Group’s overall model: › “Identification”; › “Measurement”; › “Monitoring, Control and Reporting”; › “Management”.

For the “Identification”, “Monitoring, Control and Reporting” and “Management” phases, reference is made to the description provided in relation to the Group model.

NOTES



With reference to the measurement process, however, further details are provided below on the specificity of regulatory capital for companies: › Regulatory capital: regarding the activities for the calculation of

supervisory capital to be held for exposure to these risks, the valuations of the insurance companies of the Mediolanum Group as at June 30, 2017 showed no critical elements;

› Economic capital: measurement of risks for internal purposes, based, in line with the Group model, on the outcome of the risk identification process, applying an actuarial statistical model. Said activity constitutes a means of verifying regulatory capital adequacy in respect of operational risks.

It is specified that the securities portfolio of the Irish company Mediolanum International Life DAC consists of financial assets whose risk is borne by the insured parties.

Other information

Solvency IIThe methodology adopted by individual insurance companies in the definition of the economic financial statements and capital requirements is in line with the technical specifications of the regulatory framework of Solvency II entered into force on January 1, 2016.The Solvency Capital Requirement is calculated through the Standard Formula approach for both the current and prospective assessment of risks.Currently, it is assumed that the risk profile for the Mediolanum Insurance Group and that of the individual companies, is represented by the Standard Formula.As at June 30, 2017, the situation of solvency of the Mediolanum Insurance Group companies calculated according to the principles of Solvency II is such as to cover the regulatory capital requirements.

NOTES



Part F − Information on consolidated equity

Own Funds for Supervisory purposes at June 30, 2017 of the Mediolanum Banking Group

Own Funds were determined according to the regulations relating to prudential supervision in force since January 1, 2014. The rules consist of a Directive (Capital Requirements Directive IV - CRD IV) and a Regulation (Capital Requirements Regulation - CRR) issued by the European Parliament in June 2013 and transposed in Italy by Bank of Italy Circular no. 285 of 17 December 2013. This new regulatory scheme includes a transitional period during which some elements that under the scheme will be computable or deductible in full in the Common Equity, impact Tier 1 Core Capital only for a percentage portion; normally the residual percentage with respect to that applicable is calculated / deducted from the additional capital of Tier 1 (AT1) and Tier 2 (T2) or considered in the risk-weighted assets.

With the entry into force of the Directive and the Regulation, the Italian banks must comply with a minimum CET1 ratio of 4.5%, Tier 1 6% and a Total Capital Ratio of 8%. These minimum regulatory requirements have been integrated with the Capital Conservation reserve (buffer) of 1.25%. The non-compliance of the sum of these requirements (Combined Requirement) by the supervised Entity, determines limitations on dividend distributions, variable remuneration and other elements useful to form the regulatory capital beyond predetermined limits. The Entity will also be required to develop measures necessary to restore the level of capital required through the adoption of a capital conservation plan.

For the determination of Own Funds as at June 30, 2017, the profit for the period was calculated net of dividends that are expected to be placed in distribution.

In light of the foregoing, total Own Funds as at June 30, 2017 therefore amounted to Euro 1,579.2 million and consist of:

› Tier 1 Core Capital (Common Equity Tier 1 − CET 1) equal to Euro 1,576.7 million;

› Additional Tier 1 Capital (Additional Tier 1 − AT1) equal to zero; › Tier 2 Capital (Tier 2 − T2) equal to Euro 2.5 million, including subordinated

loans subject to Grandfathering provisions of Euro 2.6 million.

NOTES



In the calculation of Own funds on the basis of article 467 paragraph 2 of the CRR, implemented by the Bank of Italy in Circular 285 Second Part − Chapter 14 − Section II − Paragraph 2, Banca Mediolanum S.p.A. adopted by resolution of the Board of Directors January 16, 2014, the option to exclude from own funds unrealized gains or losses related to exposures to the central government classified as financial assets available for sale (AFS) for the entire period covered by the CRR.

The consolidated result as at June 30, 2017 of the Mediolanum Group has been used to determine the computable profit for the calculation of the Own Funds.

At the end of the first half of 2017, said profit amounted to Euro 196.4 million, of which Euro 157.1 million is the estimate of the dividends that are expected to be placed in distribution by virtue of said net profit. Therefore, the residual profit computable in the calculation of the Own Funds amounted to Euro 39.3 million.

Bank of Italy − Banking and Financial Supervisory Department − announced on 12/27/2016 the minimum capitalization limits for the Mediolanum Banking Group, as a result of the periodic review process and prudential assessment (SREP1). These requirements are binding as from 01/01/2017.

(1) The SREP is the process by which the European Central Bank and the Bank of Italy review and evaluate the ICAAP; they analyse the risk profiles of the Bank individually and in aggregate perspective, even under stress conditions, and their contribution to systemic risk; they assess the corporate governance system, functions of the bodies, organizational structure and the system of internal controls; they monitor compliance with all the prudential rules. The conduct of such activities is through the use of systems that define the general criteria and methodologies for the analysis and evaluation of the banks (company analysis system). This system allows the European Central Bank and the Bank of Italy to identify and analyze relevant risks assumed by banks and to evaluate the management and control systems, also for the review of the determination of internal capital made by the same. Bank of Italy Circular no. 285 of December 17, 2013 - 14th Update of November 24, 2015.

NOTES



The specific capital requirements attributed to the Mediolanum Banking Group are as follows:

› Tier 1 core capital ratio (CET 1 ratio) of 6.7%, consisting of a binding amount of 5.5% (of which 4.5% with respect to the minimum regulatory requirements and 1% with respect to additional requirements determined following the SREP) and the remainder, the capital conservation reserve component;

› Tier 1 capital ratio (Tier 1 ratio) of 8.6%, consisting of a binding amount of 7.3% (of which 6% with respect to the minimum regulatory requirements and 1.3% with respect to additional requirements determined following the SREP) and the remainder, the capital conservation reserve component;

› total capital ratio of 11%, consisting of a binding amount of 9.7% (of which 8% with respect to the minimum regulatory requirements and 1.7% with respect to additional requirements determined following the SREP) and the remainder, the capital conservation reserve component.

As at June 30, 2017, the ratios of the Mediolanum Banking Group are well above the regulatory thresholds also considering the limits imposed by the Supervisory Authority through the SREP process.

NOTES



B. Quantitative information

€/t 06/30/2017* 12/31/2016

A. Class 1 core capital (Common Equity Tier 1 - CET1) before prudential filters 1,963,529 1,972,587

of which CET1 tools subject to transitional provisions - -

B. CET1 prudential filters (+/-) (1,345) (1,132)

C. CET1 before items to be deducted and effects of the transitional scheme (A +/- B) 1,962,184 1,971,455

D. Deductions from CET1 336,463 329,256

E. Transitional scheme − Impact on CET1 (+/-) (49,055) (76,701)

F. Total Tier 1 Core Capital (Common Equity Tier 1 - CET1) (C - D +/-E) 1,576,666 1,565,498

G. Additional Tier 1 − AT1 before items to be deducted and effects of the transitional scheme - -

of which AT1 tools subject to transitional provisions - -

H. Deductions from AT1 - -

I. Transitional scheme − Impact on AT1 (+/-) - -

L. Total Additional Tier 1 − AT1 (G - H +/- I) - -

M. Additional Tier 2 − AT2 before items to be deducted and effects of the transitional scheme 2,600 3,217

of which T2 tools subject to transitional provisions 2,600 3,217

N. Deductions from T2 55 154

O. Transitional scheme − Impact on T2 (+/-) (52) (2,176)

P. Total Tier 2 capital (Tier 2 − T2) (M - N +/- O) 2,494 887

Q. Total capital (F + L + P) 1,579,160 1,566,385

(*) The values presented in this disclosure may be subject to updating when reporting to the Supervisory Authorities.

NOTES



B. Quantitative information2

€/t Not weighted

Not weighted

Weighted/requirements

Weighted/requirements

06/30/2017 12/31/2016 06/30/2017 12/31/2016

A. RISK ASSETS

A.1 Credit and counterparty risk 26,446,696 25,418,101 5,527,896 6,106,519

1. Standardised approach 26,446,696 25,418,101 5,527,896 6,106,519

2. Approach based on internal ratings - - - -

3. Securitisation - - - -

B. REGULATORY CAPITAL REQUIREMENTS

B.1 Credit and counterparty risk 442,232 488,521

B.2 Credit assessment adjustment risk 971 858

B.3 Regulatory risk - -

B.4 Market risk 13,199 10,658

1. Standard approach 13,199 10,658

2. Internal models - -

3. Concentration Risk - -

B.5 Operational Risk 120,255 125,897

1. Basic approach - 5,642

2. Standardised approach 120,255 120,255

3. Advanced approach - -

B.6 Other computational elements - -

B.7 Total prudential requirements 576,657 625,934

C. RWA AND CAPITAL RATIOS

C.1 Risk-weighted assets (RWA) * 7,208,213 7,824,175

C.2 Tier 1 core capital/RWA (CET 1 capital ratio) 21.87% 20.01%

C.3 Regulatory capital/RWA (Tier 1 capital ratio) 21.87% 20.01%

C.4 Total capital/RWA (Total capital ratio) 21.91% 20.02%

(*) RWA are determined by multiplying total prudential requirements (B.7) by 12.5 (reciprocal of the min. coefficient equal to 8%).

(2) The ratios presented in this disclosure may be subject to updating when reporting to the Supervisory Authorities.

NOTES



€/m 06/30/2017 12/31/2016

Tier 1 Primary Capital (CET1) 1,576,666 1,565,498

Tier 1 capital (T1) 1,576,666 1,565,498

Total Own Funds 1,579,160 1,566,385

Total Risk-Weighted Assets 7,208,213 7,824,175

Common Equity Tier 1 ratio 21.87% 20.01%

Tier 1 Ratio 21.87% 20.01%

Total Capital Ratio 21.91% 20.02%

Capital adequacy of the financial conglomerate Banca Mediolanum as at June 30, 2017

With reference to the financial conglomerate Banca Mediolanum S.p.A., the calculation of capital adequacy as at June 30, 2017, according to the provisions of supplementary supervision in force, shows that in the face of the conglomerate capital requirements amounted to Euro 1,427 million, the conglomerate’s equity to hedge the required margin amounted to Euro 1,929 million, with a surplus of Euro 502 million.

€/m 06/30/2017 (**) 12/31/2016


Equity 1,929 1,884

Capital requirements 1,427 1,647

Surplus (deficit) of the conglomerate (A-D) 502 237 (*) Following the entry into force of the new Solvency II regime for insurance companies, it is noted that the data relating to the requirements of the insurance sector and the related portion of equity corresponding to the reconciliation reserve were calculated in accordance with the new sector regulations.

(**) The values presented in this disclosure may be subject to updating when reporting to the Supervisory Authorities.

NOTES



Part H − Related party transactions

During the first half of 2017, the Mediolanum Group undertook transactions with related parties. Said transactions are part of the ordinary business of companies within the Mediolanum Group and made at arm’s length. In accordance with IAS 24, the following parties are Mediolanum Group related parties: › of associates (Mediobanca Group); › Fin. Prog. companies wholly-owned by the Doris Family and Fininvest

companies.The following parties also fall within the definition of related parties: › Members of the Board of Directors; › Key Managers.

Information on related party transactions The following are the creditor and debtor balances outstanding as at June 30, 2017 in the consolidated accounts with respect to related parties other than intra-group. The scope of the related parties considered for the purposes of the tables of this section is in line with as provided by IAS 24.

NOTES



1. Information on related party transactions

€/t Associates Other related parties

Assets

Financial assets held for trading (HFT) 3,641 -

Financial assets measured at fair value 1,145 -

Financial assets available for sale 5,147 3,818

Financial assets held to maturity

Loans to banks 10,920 -

Loans to customers 1,055 22,058

Other assets - 33

Liabilities

Amounts due to banks (377) -

Amounts due to customers (1,751) (72,140)

Securities issued - (182)

Financial liabilities held for trading (4,794) -

Hedge derivatives (5,289) -

Financial liabilities measured at fair value

Other liabilities (392) (2,475)

Guarantees issued and commitments given 88 165

Guarantees received and commitments received



€/t Associates Other related parties

Income statement

Interest income and similar income 82 202

Interest expense and similar charges (466) (58)

Net interest income (384) 144

Commission income

Commission expense (1,728) (438)

Net commission (1,728) (438)

Net income from trading (276) -

Profit (Loss) from sale or repurchase of: receivables, AFS, HTM, financial liabilities

Net result from financial assets and liabilities measured at fair value

Impairment/reversal of impairment of: receivables, AFS, HTM, other fin. trans.

Premiums written - 549

Administrative costs (273) (6,990)

Other operating income and expenses - (88)

Gains on disposal of equity investments 41,551 -



2. Information on key management compensation

€/t Directors, Executives, General Deputy Executives and Auditors Other key management

Emoluments and social security contributions (5,675) (1,109)

Other remuneration - (36)

NOTES



Part I − Equity-settled share-based payment transactions

STOCK OPTION PLANS

The stock option plans are related to the “2010 Top Management Plan” and the “2010 Contract Workers Plan” approved on March 9, 2010 by the Board of Directors of Banca Mediolanum (Mediolanum S.p.A. prior to the merger). The Plans entail annual awards of rights to subscribe to newly issued ordinary shares of the Company. With respect to said Plans, in the first half of 2017, 610,640 new Banca Mediolanum dividend-bearing ordinary shares were issued following the exercise of stock options by Directors and Sales Network people of companies within the Mediolanum Group. This entailed a Euro 61.1 thousand increase in Banca Mediolanum ordinary share capital and a Euro 929.3 thousand increase in the share premium account. Overall expenses in half-year related to stock option plans amounted to Euro 757.4 thousand (06/30/2016: Euro 84.5 thousand).

PERFORMANCE SHARE PLANS

The Ordinary Shareholders’ Meeting of Banca Mediolanum of April 5, 2017, in line with the previous year, approved the establishment of a new performance share plan called: - “2016 Top Management Plan - Key Personnel”; - “2016 Top Management Plan - Other Personnel”; intended for Directors and Managers of Banca Mediolanum and/or its subsidiaries; - “2016 Contract Workers Plan - Key Personnel”; - “2016 Contract Workers Plan - Other Personnel”; intended as the sales network components of Banca Mediolanum and/or its subsidiaries.The Board of Directors’ meeting held April 27, 2017, following the authorization to purchase and dispose of treasury shares resolved by the Shareholders’ Meeting, approved the launch of a treasury share buyback program in order to achieve the funding of shares of Banca Mediolanum at the service of the Performance Share Plans approved by the Shareholders’ Meeting of the Bank of April 5, 2017. The program involves a maximum of 3,500,000 ordinary shares of Banca Mediolanum, for a maximum counter-value of Euro 25,000,000.00.

NOTES



In compliance with the “Supervisory Provisions for Banks”, “Bank of Italy Circular no. 285 of December 17, 2013” and the “Group Remuneration Policies” approved by the last Meeting of Banca Mediolanum, the Plan provides that: - Part of the variable remuneration related to the incentive system be recognized in financial instruments in a different percentage with respect to total variable remuneration; - The variable component of the remuneration of Key Personnel be subject for a portion of at least 40% to deferred payment systems, with the remainder to be recognized up-front. Banca Mediolanum has decided to resort to “Performance shares”, which provide for the free allocation to the beneficiaries of the plans for rights (“Units”) to receive shares of the parent company Banca Mediolanum. The provision of such shares will be made through the purchase of treasury shares by Banca Mediolanum.As at June 30, 2017, Banca Mediolanum purchased 2,008,000 shares for a total value of Euro 14.8 million. The complex of the circumstances described led the Bank to classify the transaction as a share-based payment to be settled with equity instruments (“Equity-settled share-based payment transactions”) accounted for by the period of reference of the performance and for the period of service, in accordance with IFRS 2. Overall expenses in the half-year related to performance share plans amounted to Euro 2.2 million.

NOTES



Part L − Segmental information

This section presents consolidated financial data reported by operating segment. In compliance with IFRS 8, segment reporting reflects the management reporting approach of the Mediolanum Group (so-called “management reporting approach”), and is consistent with the information disclosed to the market and to the various stakeholders.

Note on the method applied to segment reportingPursuant to IFRS 8, for the purpose of segment reporting of consolidated results the Mediolanum Group identified the following operating segments:

› ITALY − BANKING › ITALY − ASSET MANAGEMENT › ITALY − INSURANCE › SPAIN › GERMANY

For the purpose of segment reporting income and expense items were directly assigned to the specific operating segment by product. Indirect costs and other residual items were spread over the various segments applying allocation policies.

Basiglio, July 27, 2017

NOTES

For the Board of DirectorsThe Managing DirectorMassimo Antonio Doris



Income statement by sectors as at 06/30/2017

€/t Italy Abroad Total

Banking Asset Management

Insurance Other Consolidation adjustments

Total Spain Germany Consolidation adjustments

Entry fees 38,140 38,140 5,612 568 44,320

Management fees 262,395 184,017 446,412 24,842 4,547 475,801

Performance fees 57,020 25,785 82,806 4,384 1,523 88,713

Banking service fees and revenues 30,937 30,937 3,677 8,165 (53) 42,726

Other fees 238 17,026 981 18,246 720 252 19,218

Commission income 31,175 374,582 210,784 - - 616,541 39,235 15,055 (53) 670,778

Interest income 84,581 (222) 5,010 - - 89,369 5,472 (497) 94,344

Net income (loss) on investments at fair value 8,519 (256) 8,263 161 3 8,427

Net financial income 93,100 (222) 4,754 - - 97,632 5,633 (494) 102,771

Net insurance income (excluding commissions) 11,218 11,218 5,923 389 17,530

Equity method valuation 6,611 6,611 - 6,611

Realised gains (losses) on other investments 4,646 99 314 41,551 46,609 70 10 46,689

Impairment of loans (8,516) - - (8,516) (318) (13) (8,847)

Impairment of other investments (307) (98) (581) (986) (1) - (987)

Net income (loss) on other investments (4,177) 1 (267) 41,551 - 37,107 (249) (3) 36,855

Other revenues 6,703 245 6,209 13,157 1,509 347 (101) 14,912

Network commission expenses (20,214) (150,466) (68,923) (239,603) (19,170) (2,134) (260,907)

Other commission expenses (9,692) (7,418) (4,827) (21,937) (3,502) (7,103) 56 (32,486)

CONTRIBUTION MARGIN 96,894 216,721 158,948 48,162 - 520,726 29,379 6,057 (98) 556,064

General and administrative costs (112,805) (63,178) (52,286) (228,269) (17,165) (10,493) 98 (255,829)

Contributions and guarantee funds (30,384) (30,384) (953) (116) (31,453)

Amortization and depreciation (11,438) (889) (3,645) (15,972) (1,078) (436) (17,486)

Net provisions for risks and charges (4,145) (11,893) (5,836) (21,874) (397) - (22,271)

TOTAL COSTS (158,772) (75,960) (61,767) - - (296,499) (19,593) (11,045) 98 (327,039)

GROSS PRE-TAX PROFIT (61,878) 140,761 97,181 48,162 - 224,227 9,786 (4,988) - 229,026

Taxes for the period (30,263) (2,055) (323) (32,642)

NET PROFIT FOR THE PERIOD 193,964 7,731 (5,311) - 196,384

NOTES



Income statement by sectors as at 06/30/2016

€/t Italy Abroad Total

Banking Asset Management

Insurance Other

Consolidation adjustments

Total Spain Germany Consolidation adjustments

Entry fees 28,662 28,662 5,795 302 34,759

Management fees 226,888 158,398 385,286 19,064 3,749 408,099

Performance fees 48,693 29,508 78,201 3,871 581 82,653

Banking service fees and revenues 30,655 30,655 2,486 7,487 (27) 40,601

Other fees 251 14,909 885 16,044 612 310 (6) 16,960

Commission income 30,906 319,152 188,790 - - 538,848 31,828 12,429 (33) 583,072

Interest income 106,536 (30) 6,610 - - 113,116 8,981 (346) - 121,751

Net income (loss) on investments at fair value (16,756) 1,110 (15,646) 257 (5) (15,394)

Net financial income 89,780 (30) 7,720 - - 97,470 9,238 (351) - 106,357

Net insurance income (excluding commissions) 6,505 6,505 4,451 213 11,169

Equity method valuation 5,545 5,545 5,545

Realised gains (losses) on other investments 15,966 111 699 16,776 616 8,321 25,713

Impairment of loans (7,975) - - (7,975) (586) 1 (8,560)

Impairment of other investments (413) (69) (1,261) (1,743) (11) - (1,754)

Net income (loss) on other investments 7,578 42 (562) - - 7,058 19 8,322 - 15,399

Other revenues 4,261 268 5,944 10,473 1,191 448 (76) 12,036

Network commission expenses (22,368) (114,346) (69,274) (205,987) (15,463) (1,859) (223,309)

Other commission expenses (9,355) (6,196) (3,852) (19,403) (2,613) (6,147) 33 (28,130)

CONTRIBUTION MARGIN 100,803 198,891 135,271 5,545 - 440,510 28,651 13,055 (76) 482,140

General and administrative costs (121,984) (49,835) (53,379) (225,198) (14,634) (9,903) 76 (249,659)

Contributions and guarantee funds (4,859) (4,859) (806) (1) (5,665)

Amortization and depreciation (9,619) (706) (3,549) (13,874) (770) (263) (14,907)

Net provisions for risks and charges (2,535) (11,817) (6,577) (20,929) 6,242 - (14,687)

TOTAL COSTS (138,997) (62,359) (63,504) - - (264,860) (9,968) (10,167) 76 (284,919)

GROSS PRE-TAX PROFIT (38,194) 136,532 71,767 5,545 - 175,650 18,683 2,888 - 197,220

Taxes for the period (23,274) (3,383) (242) (26,898)

NET PROFIT FOR THE PERIOD 152,376 15,300 2,646 - 170,322

NOTES




NOTES

Reconciliation of the Income statement at 06/30/2017 to the reclassified Income statement

CONSOLIDATED INCOME

STATEMENT RECLASSIFIED INCOME STATEMENT - REVENUES RECLASSIFIED INCOME STATEMENT - COSTS AND TAXATION

Entry fees Management fees

Performance fees

Banking service fees

and revenues

Other fees Commission income

Interest income

and similar income

Interest expense

and similar charges

Net income (loss) on

investments at fair value

Financial income


Realised gains (losses)

on other investments

Impairment of loans

Impairment of other

investments


other investments

Net premiums

Amounts paid and change in technical

reserves

Other revenues

Network commission

expenses

Other commission

expenses

CONTRIBUTION MARGIN

General and administrative

costs

Guarantee fund

contributions

Amortization and

depreciation

Net provisions for risks and

charges

TOTAL COSTS

GROSS PRE-TAX

PROFIT

Income taxes

Minority profit /

loss

NET PROFIT FOR THE PERIOD

10. Interest income and similar income 160,772 138,950 138,950 138,950 138,950 138,950

20. Interest expense and similar charges (44,747) (44,606) (44,606) (44,606) (44,606) (44,606)

30. Net interest income 116,025 - - - - - - 138,950 (44,606) - 94,344 - - - - - - - - - - 94,344 - - - - - 94,344 - - 94,34440. Commission income 695,607 44,320 475,801 88,713 42,726 19,218 670,778 - 670,778 670,778 670,778

50. Commission expense (298,156) - (260,907) (32,486) (293,393) - (293,393) (293,393)

60. Net commission 397,451 44,320 475,801 88,713 42,726 19,218 670,778 - - - - - - - - - - - - (260,907) (32,486) 377,385 - - - - - 377,385 - - 377,38570. Dividends and similar income 3,467 - 3,467 3,467 3,467 - 3,467 3,46780. Net income from trading 9,976 10,400 10,400 10,400 - 10,400 10,40090. Net income from hedging (1,973) (1,973) (1,973) (1,973) - (1,973) (1,973)100. Gains (losses) on sale or buyback of: 1,890 - - - - - - - - - - - 1,890 - - 1,890 - - - - - 1,890 - - - - - 1,890 - - 1,890

a) loans 2 - 2 2 2 - 2 2

b) financial assets available for sale 1,952 - 1,952 1,952 1,952 - 1,952 1,952

c) financial assets held to maturity - - - - -

d) financial liabilities (64) - (64) (64) (64) - (64) (64)110. Net result from financial assets and liabilities measured at fair value (58,712) - - - - - -

120. BANKING INCOME 468,124 44,320 475,801 88,713 42,726 19,218 670,778 138,950 (44,606) 8,427 102,771 - 5,357 - - 5,357 - - - (260,907) (32,486) 485,513 - - - - - 485,513 - - 485,513130. Net impairment/reversal of impairment of: (34,799) - - - - - - - - - - - - (8,847) (987) (9,834) - - - - - (9,834) - - - - - (9,834) - - (9,834)

a) loans (8,847) - (8,847) (8,847) (8,847) - (8,847) (8,847)

b) financial assets available for sale (26,110) - (1,145) (1,145) (1,145) - (1,145) (1,145)

c) financial assets held to maturity - - - - - -

d) other financial instruments 158 - 158 158 158 - 158 158

140. NET INCOME FROM FINANCIAL OPERATIONS 433,325 44,320 475,801 88,713 42,726 19,218 670,778 138,950 (44,606) 8,427 102,771 - 5,357 (8,847) (987) (4,477) - - - (260,907) (32,486) 475,679 - - - - - 475,679 - - 475,679150. Net premiums 905,331 - - 907,521 907,521 - 907,521 907,521160. Balance of other income/expenses from insurance activities (874,060) - - (889,991) (889,991) - (889,991) (889,991)

170. NET INCOME FROM FINANCIAL AND INSURANCE OPERATIONS 464,596 44,320 475,801 88,713 42,726 19,218 670,778 138,950 (44,606) 8,427 102,771 - 5,357 (8,847) (987) (4,477) 907,521 (889,991) - (260,907) (32,486) 493,209 - - - - - 493,209 - - 493,209

180. Administrative expenses: (253,442) - - - - - - - - - - - - - - - - - - - - - (251,104) (31,453) - - (282,557) (282,557) - - (282,557)a) personnel expenses (99,838) - - - (101,807) (101,807) (101,807) (101,807)

b) other administrative expenses (153,604) - - - (149,297) (31,453) (180,750) (180,750) (180,750)

190. Net provisions for risks and charges (18,916) - - - (22,271) (22,271) (22,271) (22,271)200. Impairment/reversal of impairment of tangible assets (3,856) - - - (3,856) (3,856) (3,856) (3,856)

210. Impairment/reversal of impairment of intangible assets (13,631) - - - (13,630) (13,630) (13,630) (13,630)

220. Other operating income/expenses 6,107 - (225) (225) 14,912 14,687 (4,725) (4,725) 9,962 9,962230. OPERATING COSTS (283,738) - - - - - - - - - - - (225) - - (225) - - 14,912 - - 14,687 (255,829) (31,453) (17,486) (22,271) (327,039) (312,352) - - (312,352)240. Profit (Loss) on equity investments 48,162 - 6,611 41,551 41,551 48,162 - 48,162 48,162250. Net income of valuations at fair value of tangible and intangible assets - - - - - -

260. Impairment of goodwill - - - - - -270. Profit (Loss) on disposal of investments 6 - 6 6 6 - 6 6280. PROFIT (LOSS) BEFORE TAX ON CONTINUING OPERATIONS 229,026 44,320 475,801 88,713 42,726 19,218 670,778 138,950 (44,606) 8,427 102,771 6,611 46,689 (8,847) (987) 36,855 907,521 (889,991) 14,912 (260,907) (32,486) 556,064 (255,829) (31,453) (17,486) (22,271) (327,039) 229,026 - - 229,026

290. Income tax expense on continuing operations (32,642) - - - - - (32,642) (32,642)300. PROFIT (LOSS) AFTER TAX ON CONTINUING OPERATIONS 196,384 44,320 475,801 88,713 42,726 19,218 670,778 138,950 (44,606) 8,427 102,771 6,611 46,689 (8,847) (987) 36,855 907,521 (889,991) 14,912 (260,907) (32,486) 556,064 (255,829) (31,453) (17,486) (22,271) (327,039) 229,026 (32,642) - 196,384

310. Profit (Loss) after tax of non-current assets pending disposal - - - - - -

320. Profit (Loss) for the year 196,384 44,320 475,801 88,713 42,726 19,218 670,778 138,950 (44,606) 8,427 102,771 6,611 46,689 (8,847) (987) 36,855 907,521 (889,991) 14,912 (260,907) (32,486) 556,064 (255,829) (31,453) (17,486) (22,271) (327,039) 229,026 (32,642) - 196,384330. Profit (Loss) for the year attributable to minorities - - - - - -

340. PROFIT (LOSS) FOR THE YEAR ATTRIBUTABLE TO THE PARENT COMPANY (196,384) 44,320 475,801 88,713 42,726 19,218 670,778 138,950 (44,606) 8,427 102,771 6,611 46,689 (8,847) (987) 36,855 907,521 (889,991) 14,912 (260,907) (32,486) 556,064 (255,829) (31,453) (17,486) (22,271) (327,039) 229,026 (32,642) - 196,384



NOTES

Reconciliation of the Income statement at 06/30/2016 to the reclassified Income statement

CONSOLIDATED INCOME

STATEMENTRECLASSIFIED INCOME STATEMENT - REVENUES RECLASSIFIED INCOME STATEMENT - COSTS AND TAXATION

Entry fees Management fees

Performance fees

Banking service fees

and revenues

Other fees Commission income

Interest income

and similar income

Interest expense

and similar charges


investments at fair value

Financial income


Realised gains (losses)

on other investments

Impairment of loans

Impairment of other

investments


other investments

Net premiums

Amounts paid and change in technical

reserves

Other revenues

Network commission

expenses

Other commission

expenses

CONTRIBUTION MARGIN

General and administrative

costs

Guarantee fund

contributions

Amortization and

depreciation

Net provisions for risks and

charges

TOTAL COSTS

GROSS PRE-TAX

PROFIT

Income taxes

Minority profit /

loss

NET PROFIT FOR THE PERIOD

10. Interest income and similar income 219,116 193,712 193,712 - 193,712 193,712 193,712

20. Interest expense and similar charges (72,039) (71,961) (71,961) - (71,961) (71,961) (71,961)

30. Net interest income 147,077 - - - - - - 193,712 (71,961) - 121,751 - - - - - - - - - - 121,751 - - - - - 121,751 - - 121,751

40. Commission income 602,416 34,759 408,099 82,653 40,601 16,960 583,072 - - 583,072 583,072 583,072

50. Commission expense (248,941) - - - (223,309) (28,130) (251,439) - (251,439) (251,439)

60. Net commission 353,475 34,759 408,099 82,653 40,601 16,960 583,072 - - - - - - - - - - - - (223,309) (28,130) 331,633 - - - - - 331,633 - - 331,633

70. Dividends and similar income 4,843 - - 4,843 4,843 4,843 - 4,843 4,843

80. Net income from trading (9,904) - (10,118) (10,118) - (10,118) - (10,118) (10,118)

90. Net income from hedging (5,276) - (5,276) (5,276) - (5,276) - (5,276) (5,276)

100. Gains (losses) on sale or buyback of: 21,158 - - - - - - - - - - - 20,748 - - 20,748 - - - - - 20,748 - - - - - 20,748 - - 20,748

a) loans 2 - - 2 2 2 - 2 2

b) financial assets available for sale 21,233 - - 20,823 20,823 20,823 - 20,823 20,823

c) financial assets held to maturity - - - - - - -

d) financial liabilities (77) - - (77) (77) (77) - (77) (77)110. Net result from financial assets and liabilities measured at fair value (541,528) - - - - - - -

120. BANKING INCOME (30,155) 34,759 408,099 82,653 40,601 16,960 583,072 193,712 (71,961) (15,394) 106,357 - 25,591 - - 25,591 - - - (223,309) (28,130) 463,581 - - - - - 463,581 - - 463,581

130. Net impairment/reversal of impairment of: (9,777) - - - - - - - - - - - - (8,560) (1,754) (10,314) - - - - - (10,314) - - - - - (10,314) - - (10,314)

a) loans (8,560) - - (8,560) (8,560) (8,560) - (8,560) (8,560)

b) financial assets available for sale (1,659) - - (1,754) (1,754) (1,754) - (1,754) (1,754)

c) financial assets held to maturity - - - - - - -

d) other financial instruments 442 - - - - - - -

140. NET INCOME FROM FINANCIAL OPERATIONS (39,932) 34,759 408,099 82,653 40,601 16,960 583,072 193,712 (71,961) (15,394) 106,357 - 25,591 (8,560) (1,754) 15,277 - - - (223,309) (28,130) 453,268 - - - - - 453,268 - - 453,268

150. Net premiums 1,137,202 - - -1,140,095 1,140,095 - 1,140,095 1,140,095160. Balance of other income/expenses from insurance activities (630,859) - - - (1,128,926) (1,128,926) - (1,128,926) (1,128,926)

170. NET INCOME FROM FINANCIAL AND INSURANCE OPERATIONS 466,411 34,759 408,099 82,653 40,601 16,960 583,072 193,712 (71,961) (15,394) 106,357 - 25,591 (8,560) (1,754) 15,2771,140,095 (1,128,926) - (223,309) (28,130) 464,437 - - - - - 464,437 - - 464,437

180. Administrative expenses: (249,118) - - - - - - - - - - - - - - - - - - - - - (245,313) (5,665) - - (250,978) (250,978) - - (250,978)

a) personnel expenses (96,308) - - - - (98,498) (98,498) (98,498) (98,498)

b) other administrative expenses (152,810) - - - - (146,815) (5,665) (152,480) (152,480) (152,480)

190. Net provisions for risks and charges (15,836) - - - - (14,687) (14,687) (14,687) (14,687)200. Impairment/reversal of impairment of tangible assets (4,143) - - - - (4,144) (4,144) (4,144) (4,144)

210. Impairment/reversal of impairment of intangible assets (10,763) - - - - (10,763) (10,763) (10,763) (10,763)

220. Other operating income/expenses 5,123 - - 123 123 12,036 12,159 (4,346) (4,346) 7,813 7,813

230. OPERATING COSTS (274,737) - - - - - - - - - - - 123 - - 123 - - 12,036 - - 12,159 (249,659) (5,665) (14,907) (14,687) (284,918) (272,759) - - (272,759)

240. Profit (Loss) on equity investments 5,545 - - 5,545 - - 5,545 - 5,545 5,545250. Net income of valuations at fair value of tangible and intangible assets - - - - - - -

260. Impairment of goodwill - - - - - - -

270. Profit (Loss) on disposal of investments 1 - - (1) (1) (1) - (1) (1)280. PROFIT (LOSS) BEFORE TAX ON CONTINUING OPERATIONS 197,220 34,759 408,099 82,653 40,601 16,960 583,072 193,712 (71,961) (15,394) 106,357 5,545 25,713 (8,560) (1,754) 15,3991,140,095 (1,128,926) 12,036 (223,309) (28,130) 482,140 (249,659) (5,665) (14,907) (14,687) (284,918) 197,220 - - 197,220

290. Income tax expense on continuing operations (26,898) - - - - - - (26,898) (26,898)300. PROFIT (LOSS) AFTER TAX ON CONTINUING OPERATIONS 170,322 34,759 408,099 82,653 40,601 16,960 583,072 193,712 (71,961) (15,394) 106,357 5,545 25,713 (8,560) (1,754) 15,3991,140,095 (1,128,926) 12,036 (223,309) (28,130) 482,140 (249,659) (5,665) (14,907) (14,687) (284,918) 197,220 (26,898) - 170,322

310. Profit (Loss) after tax of non-current assets pending disposal - - - - - - -

320. Profit (Loss) for the year 170,322 34,759 408,099 82,653 40,601 16,960 583,072 193,712 (71,961) (15,394) 106,357 5,545 25,713 (8,560) (1,754) 15,399 1,140,095 (1,128,926) 12,036 (223,309) (28,130) 482,140 (249,659) (5,665) (14,907) (14,687) (284,918) 197,220 (26,898) - 170,322

330. Profit (Loss) for the year attributable to minorities - - - - - - -340. PROFIT (LOSS) FOR THE YEAR ATTRIBUTABLE TO THE PARENT COMPANY (170,322) 34,759 408,099 82,653 40,601 16,960 583,072 193,712 (71,961) (15,394) 106,357 5,545 25,713 (8,560) (1,754) 15,399 1,140,095 (1,128,926) 12,036 (223,309) (28,130) 482,140 (249,659) (5,665) (14,907) (14,687) (284,918) 197,220 (26,898) - 170,322


Certification of the Condensed Consolidated Half-Year Financial Statements

CERTIFICATION OF THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS

Certification of the Condensed Consolidated Half-Year Financial Statements pursuant to article 81-ter of Consob Regulation no. 11971 of May 14, 1999, as amended

1. We, the undersigned Massimo Antonio Doris, Chief Executive Officer, and Angelo Lietti, Chief Financial Officer responsible for Banca Mediolanum S.p.A. accounting and financial reporting, declare that, also pursuant to article 154-bis, paragraphs 3 and 4, of Legislative Decree 58 of February 24, 1998, the administrative and accounting procedures for the formation of the Condensed Consolidated Half-Year Financial Statements: › were defined in a manner consistent with the administrative/accounting

system and structure of the Company; › the adequacy thereof was assessed; › were actually applied during the period to which the Condensed

Consolidated Half-year Financial Statements refers.

2. The adequacy of accounting and financial reporting procedures in the preparation of the Condensed Consolidated Half-Year Financial Statements as at June 30, 2017 was assessed applying a process defined by Banca Mediolanum S.p.A. in accordance with the Internal Control − Integrated Framework Model issued by the Committee of Sponsoring Organizations of the Treadway Commission, which is an internationally accepted framework.



3. We further certify that the Condensed Consolidated Half-Year Financial Statements: › correspond to the accounting books and records; › is prepared in accordance with International Financial Reporting

Standards as endorsed by the European Community pursuant to Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of July 19, 2002;

› provides a true and fair representation of the equity, economic and financial situation of the Issuer and the whole of the companies included in the scope of consolidation;

› provides a reliable analysis of the performance related to the significant events occurred in the first six months of the year and their incidence on the Condensed Consolidated Half-Year Financial Statements, as well as a description of the principal risks and uncertainties for the remaining six months of the year. The Half-Year Report on Operations also includes a reliable analysis of the information regarding transactions with related parties.

Basiglio, July 27, 2017

Managing DirectorMassimo Antonio Doris

Chief Financial Officer responsible for accounting and financial reporting

Angelo Lietti

CERTIFICATION OF THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS



Independent Auditors’ Report

Deloitte & Touche S.p.A.Via Tortona, 2520144 MilanoItalia

Tel.: +39 02 83322111Fax:+39 02 83322112www.deloitte.it

REPORT ON REVIEW OF THE CONDENSED CONSOLIDATED HALF-YEARFINANCIAL STATEMENTS

To the Shareholders ofBanca Mediolanum S.p.A.

Introduction

We have reviewed the condensed consolidated half-year financial statements of Banca Mediolanum S.p.A.and subsidiaries ("Mediolanum Group"), which comprise the consolidated statement of financial position asof 30th June 2017, the consolidated income statement, the consolidated statement of other comprehensiveincome, the consolidated statement of changes in equity, the statement of cash flows for the six monthperiod then ended, and related notes. The Directors are responsible for the preparation of the condensedconsolidated half-year financial statements in accordance with the International Accounting Standardapplicable to the interim financial reporting (IAS 34) as adopted by the European Union. Our responsibilityis to express a conclusion on the half-year condensed consolidated financial statements based on ourreview.

Scope of Review

We conducted our review in accordance with the criteria recommended by the Italian RegulatoryCommission for Companies and the Stock Exchange ("Consob") for the review of the half-yearly financialstatements under Resolution n° 10867 of July 31, 1997. A review of condensed consolidated half-yearfinancial statements consists of making inquiries, primarily of persons responsible for financial andaccounting matters, and applying analytical and other review procedures. A review is substantially less inscope than an audit conducted in accordance with International Standards on Auditing (ISA Italia) andconsequently does not enable us to obtain assurance that we would become aware of all significant mattersthat might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensedconsolidated half-year financial statements of Mediolanum Group as of 30th June 2017 are not prepared, in all material respects, in accordance with the International Accounting Standard applicable to the interimfinancial reporting (IAS 34) as adopted by the European Union.

DELOITTE & TOUCHE S.p.A.

Signed byPaolo Gibello RibattoPartner

Milan, August 3th, 2017

This report has been translated into the English language solely for the convenience of internationalreaders.

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Glossary

DCBA

GLOSSARY

Assets Under ManagementThey consist of: - assets under management, which include the assets of mutual funds and pension funds, portfolio management and technical reserves of life insurance; - assets unmanaged, which include securities on deposit (net of the Group’s portions of funds), technical reserves of damage insurance and debtor balances of current accounts.

Common Equity Tier 1 or CET 1The component of better quality capital under the Basel III regulation, represented mainly by paid-in ordinary share capital, related share premium reserves, calculable profit for the period, reserves, minority equity (calculable within certain limits), net of certain regulatory adjustments, as required by Regulation (EU) 575/2013 of the European Parliament and of the Council of June 26, 2013.

Common Equity Tier 1 Ratio or CET 1 RatioSolvency ratio expressed by the ratio between the Common Equity Tier 1 and the Risk-Weighted Assets (RWA as defined below) calculated on the basis of the Basel III regulation in application of the provisions of Regulation (EU) 575/2013 of the European Parliament and of the Council of June 26, 2013, by Directive 2013/36/EU (CRD IV).

Family BankerThis is the word and figurative mark, which distinguishes the financial advisors of Banca Mediolanum.

Own FundsOwn funds consist of a series of elements (net of negative elements to be deducted) classified according to asset quality and the ability to absorb certain losses determined pursuant to Part TWO of Regulation (EU) 575/2013 of the European Parliament and of the Council of June 26, 2013. Own funds consist of Tier 1 and Tier 2 Capital.

SREPThe SREP is the process by which the European Central Bank and the Bank of Italy review and evaluate the ICAAP; they analyse the risk profiles of the Bank individually and in aggregate perspective, even under stress conditions, and their contribution to systemic risk; they assess the corporate governance system, functions of the bodies, organizational structure and the system of internal controls; they monitor compliance with all the prudential rules. The conduct of such activities is through the use of systems that define the general criteria and



GLOSSARY

methodologies for the analysis and evaluation of the banks (company analysis system). This system allows the European Central Bank and the Bank of Italy to identify and analyze relevant risks assumed by banks and to evaluate the management and control systems, also for the review of the determination of internal capital made by the same. Bank of Italy Circular no. 285 of 17 December 2013 - 19th Update of November 2, 2016.

Net inflowsAmount of underwriting, net of divestments.

Risk-Weighted Assets (RWA)Represents the weighted value for the risk related to the assets in the balance sheet and off-balance sheet. Depending on the types of assets, banking assets are weighted by factors that represent their risk and their potential default in order to calculate a capital adequacy indicator.

Total Capital RatioSolvency ratio expressed by the ratio between the Total Capital and Risk-Weighted Assets (RWA) calculated on the basis of the Basel regulation applicable until the financial statements as at December 31, 2013.

Diluted earnings per shareNet income attributable to holders of ordinary shares, divided by the weighted average of ordinary shares in issue.



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