financial statements as at 31 december 2008 · 31 december 2008 our commitment is our strength 2008...

Financial Statements as at 31 December 2008

Share capital: 200,070,430.89 fully paid-up, divided into 606,274,033 shares with a face value of 0.33 and 100% held by Unicredit S.p.A..Registered offi ce: Piazza Durante 11, 20131 Milan, Italy

“FinecoBank Banca Fineco S.p.A.” in abbreviated form “FinecoBank S.p.A.”, or “Banca Fineco S.p.A.” or “Fineco Banca S.p.A.”Company controlled by Unicredit S.p.A., Gruppo Bancario Unicredito Italiano, Register of Banking Groups no. 3135.1, Member of the Interbank Fund for the Protection of Deposits, Italian Banking Association Code 03015, Tax Code and Milan Register of Companies no. 01392970404 - R.E.A. (Economic and Administrative Index) no. 1598155, VAT no. 12962340159

Financial Statements as at 31 December 2008

Our Commitment is Our Strength2008 was a year that posed significant challenges to the global economy, to the financial services industry and to our business. To date, our business model remains sound, and our outlook is positive for our future operations.

We remain positive because we know that we can count on our greatest strength. It is our solid and rigorous commitment - to our customers, to our people, to our investors, to the communities we serve, to our core values, to culture, to quality in everything we do, and to the sustainable success of our enterprise.

Every day we renew that commitment through the efforts and expertise of more than 174,000people in 22 countries.

That is why this year’s Annual Report features the photographs and words of UniCredit Group employees. No one could express our commitment more eloquently than the men and women who live it every day.

They speak to you from our branches and offices across Europe. Each message is different. Each expresses what commitment means to them, to their customers, and to their colleagues every single working day.

We feel that their words, their ideas truly capture the spirit of UniCredit Group – the spirit of commitment, our greatest strength.

Andre NoltingGermany

«I think that we are always close to our customers. Even more so if the markets are diffi cult, as last year. We organized events for our customers to discuss the situation in the fi nancial markets. We keep our promise always to be there - especially in times of need.»

3FinecoBank · Financial Statements as at 31 December 2008

Notes 75

Part A) Accounting policies 77

Part B) Information on the Balance Sheet 105

Part C) Information on the Income Statement 161

Part D) Segment reporting 187

Part E) Information on risks and hedging policies 189

Part F) Information on shareholders' equity 253

Part G) Combination transactions involving businesses or business divisions 259

Part H) Related party transactions 263

Part I) Payment agreements based on own equity instruments 275

Appendix 281

DISCLOSURE OF AUDITORS’ FEES pursuant to art. 160 paragraph 1 bis of Legislative Decree 58/98 282

Balance Sheet of the “Mortgages” business division spun off to UniCredit banca per la Casa S.p.A., Now UniCredit Consumer Financing Bank S.p.A. On 1 july 2008 283

Balance Sheet of the “salary-guaranteed loans” business division spun off to UniCredit Consumer Financing Bank S.p.A. on 1 july 2008 284


Management Bodies 5

Report on Operations 7

Introduction to Report on Operations 8

Summary data 10

Key figures 12

Main initiatives during the year 13

Commercial activities and development of new products and services 16

Operating structure 25

Resources 25

Technology infrastructure 29

Internal control system 30

Risk measurement and control 31

Organisational structure 33

Document on Security Planning 35

Business Continuity Plan (BCP) 35

Key balance sheet aggregates 36

Regulatory capital and prudential requirements 45

Income statement figures 46

Other information on operations 55

Securitization operations 55

Related party transactions 56

Significant events occurring after year end and business outlook 57

Proposal for the approval of the financial statements and allocation of profits for the year 58

Reconciliation of income statement with reclassified income statement 59

Report of the Board of Statutory Auditors 60

Independent Auditors' Report 63

Bank Financial Statements 67

Balance sheet 68

Income statement 69

Statement of changes in shareholders' equity 70

Statement of cash flow 72

Contents

Marco ScarricoItaly

«A client started up an international business venture, but he was worried about how to manage all his banking activities from Italy. In just a couple of days, we had gotten in touch with our colleagues in Germany and Austria and we had set up what was needed. Professionalism and an international network are our values for business sustainability.»


Management Bodies

Board of Directors

Cesare Farsetti Chairman

Enrico Cotta Ramusino Deputy Chairman Girolamo Ielo

Alessandro Foti Chief Executive Officer

Giovanni Valter Burani Directors Dario Frigerio Frederik Herman Geertman Alfredo Michele Malguzzi Claudio Ognibene Ranieri De Marchis Marina Natale

Board of Statutory Auditors

Giancarlo Noris Gaccioli Chairman

Antonio Passantino Permanent Statutory Auditors Gabriele Villa

Umberto Bocchino Alternate Auditors Luciano Masini

Management

Franco Ravaglia General Manager

KPMG S.p.A. Independent auditors

On 18 September 2008 Mrs. Marina Natale was appointed Director.

On 18 September 2008 Mr. Francesco Giordano resigned from his position as Director.

On 1 August 2008 Mr. Ranieri De Marchis was appointed Director.

On 10 June 2008 Mr. Luca Remmert resigned from his position as Director.

On 14 April 2008 the Ordinary Shareholders’ Meeting of FinecoBank:

- appointed Mr. Cesare Farsetti, Mr. Girolamo Ielo, Mr. Giovanni Burani, Mr. Francesco Giordano, Mr. Alfredo Malguzzi, Mr. Claudio Ognibene and Mr. Luca Remmert as Directors;

- confirmed Mr. Enrico Cotta Ramusino, Mr. Dario Frigerio, Mr. Frederik Geertman and Mr. Alessandro Foti as Directors;

- appointed Mr. Cesare Farsetti as Chairman of the Board of Directors ;

- appointed Mr. Enrico Cotta Ramusino and Mr. Girolamo Ielo as Deputy Chairman and Chairman of the Board of Directors ;

- appointed Mr. Giancarlo Gaccioli and Mr. Gabriele Villa as Statutory auditors;

- confirmed Mr. Antonio Passantino as Statutory auditor, and Mr. Umberto Bocchino and Mr. Luciano Masini as Alternate auditors and Mr. Alessandro Foti as Chief Executive Officer;

- appointed Mr. Giancarlo Gaccioli as Chairman of the Board of Statutory Auditors.

On 7 June 2008 Ms. Emma Marcegaglia resigned from her position as Director.

Julia ShagovaRussian Federation

«We are the people who determine our future. There is no doubt that the atmosphere of our Group and benefi cial relationships with our clients depend on us. To achieve this, we should stand by our moral and professional convictions and also consider our peoplÈs opinions. When we commit ourselves to that principle, then we will succeed at everything we do.»


Report on Operations

Introduction Report on Operations 8

Summary data 10

Key figures 12

Main initiatives during the year 13

Commercial activities and development of new products and services 16

Operating structure 25

Resources 25

Technology infrastructure 29

Internal control system 30

Risk measurement and control 31

Organisational structure 33

Document on Security Planning 35

Business Continuity Plan (BCP) 35

Key balance sheet aggregates 36

Regulatory capital and prudential requirements 45

Income statement figures 46

Other information on operations 55

Securitization operations 55

Related party transactions 56

Significant events occurring after year end and business outlook 57

Proposal for the approval of the financial statements and allocation of profits for the year 58

Reconciliation of income statement with reclassified income statement 59

Report of the Board of Statutory Auditors 60

Independent Auditors' Report 63


8 Financial Statements as at 31 December 2008 · FinecoBank

The annual financial statements as at 31 December 2008 of FinecoBank Banca Fineco S.p.A. (hereinafter referred to as FinecoBank) were prepared, as required by Italian Legislative Decree no. 38/2005, in accordance with International Financial Reporting Standards and International Accounting Standards (hereinafter referred to as “IFRS”, “IAS”, or international accounting standards) issued by the International Accounting Standards Board (IASB) and the relative interpretations of the International Financial Reporting Interpretations Committee (IFRIC), approved by the European Commission according to the procedure set forth under article 6 of Community Regulation (EC) no. 1606/2002 of 19 July 2002.The Bank of Italy - whose powers already set forth by Legislative Decree no. 87/92 as regards the financial statements of banks and financial companies subject to supervision have been further confirmed by said decree - established the formats for the financial statements and for the relative notes in its Circular no. 262 of 22 December 2005.

Due to the reorganisation of the UniCredit Group following the merger by incorporation of Capitalia S.p.A., in 2008 FinecoBank underwent several corporate changes: In particular, the process that led to the new configuration of the Bank entailed the following extraordinary transactions:- as of 1 January 2008, transfer of the

“Salary-guaranteed loans” business division to Fineco Prestiti S.p.A.;

- as of 1 July 2008, acquisition through partial spin-off of the “Asset-gathering” business division of UniCredit Private Banking S.p.A. to Fineco Bank, including the shareholding in UniCredit Xelion Banca S.p.A.;

"Profit (Loss) from discontinued operations after tax” and identified as “pro-forma”.The figures identified as being 31 December 2007 relate to the separate December 2007 relate to the separate December 2007financial statements of Finecobank.

As of 1 January 2008 any bonds issued by the Parent Bank, subscribed to for the purpose of investing liquidity and, at the same time, to be used in repurchase agreements with retail customers were reclassified under "Loans and Receivables” and booked in item 60 “Loans to banks”, following a change made to a Group policy, to bring them in line with the business model. As at 31 December 2007 the same bonds had been accounted for as Financial assets designated at fair value in accordance designated at fair value in accordance designated at fair valuewith the policies of the new Group in force at the time.

As a result of the clarifications provided by the Bank of Italy, the emoluments paid to the Statutory Auditors were conventionally included under personnel expenses in the sub-item including the fees paid to Directors. Due to the change made, the balance of the item as at 31 December 2007 was also reclassified.

A table reconciling the income statement items with those of the reclassified income statement has been added at the end of the Report on Operations.

The section “Bank Financial Statements” contains the Bank’s financial statements as at 31 December 2008 and 31 December 2007, prepared in accordance with IAS/IFRS. In this section, the extraordinary transactions described above were stated in a simplified manner, without changing the Bank Financial Statements

- as of 1 July 2008, partial spin-off of FinecoBank’s loan business to UniCredit Banca per la Casa S.p.A., now UniCredit Consumer Financing Bank S.p.A., including the 100% stake in Fineco Credit S.p.A.;

- as of 1 July 2008, partial spin-off of the remaining assets of FinecoBank related to the “Salary-guaranteed loans” business division to UniCredit Consumer Financing Bank S.p.A., including the 100% stake in Fineco Prestiti S.p.A.;

- as of 7 July 2008, merger by incorporation of UniCredit Xelion Banca S.p.A. and XAA Agenzia Assicurativa S.p.A. into FinecoBank.

For comparison purposes, the accounts as at 31 December 2007 set out in the Report on Operations were revised taking account of the extraordinary transactions described above and are referred to as 31 December 2007 pro-forma.To that end, all the assets and liabilities related to the “Salary-guaranteed loans” and “Mortgages” business divisions were reclassified and identified with the “pro-forma heading” under asset item 140 forma heading” under asset item 140 forma heading”“Non-current assets and discontinued operations” and liability item 90 “Liabilities associated with discontinued operations”, whilst the single financial statement items include the income statement and balance sheet items of UniCredit Xelion Banca S.p.A., XAA Agenzia Assicurativa S.p.A. and of the “Asset gathering” business division of UniCredit Private Banking S.p.A. at the respective balance sheet dates.Also the operating result for the year allocated to the “Salary-guaranteed loans” business division as at 31 December 2007 and “Mortgages” business division as at 31 December 2008 and 31 December 2007 was reclassified under

Introduction to the Report on Operations


During 2009 loans classified as non-performing were assigned to Aspra Finance S.p.A.. Also this transaction was accounted for in a simplified manner, without applying the provisions of IFRS 5.

The “Accounting Policies” section sets out the international accounting standards used in preparing the financial statements as at 31 December 2008.

Prestiti S.p.A, (ii) the spin-off of the « Mortgages » business division to UniCredit Banca per la Casa S.p.A., (iii) the spin-off of the « Salary-guaranteed loans » business division to UniCredit Consumer Financing Bank S.p.A., (iv) the merger by incorporation of UniCredit Xelion Banca S.p.A., XAA Agenzia Assicurativa S.p.A. and of the “Asset gathering” business division of UniCredit Private Banking S.p.A..

hence recording “Non-current assets and discontinued operations” in compliance with the provisions of IFRS 5, as they are transactions carried out to achieve a business reorganisation which do not involve subjects outside the Group and do not give rise to value gaps within the Group. As a result, no operating adjustments were booked as a result of (i) the transfer of the « Salary-guaranteed loans » business division to Fineco



Reclassified Financial Statements

Summary Data

Balance sheet (Amounts in Euro/000)

ASSETS 31.12.200831.12.2007

PRO-FORMA

CHANGES

ABSOLUTE % 31.12.2007

Cash and cash equivalents 2 429 (427) -99.5% 357

Financial assets held for trading 39,504 46,049 (6,545) -14.2% 46,934

Loans to banks 12,746,886 4,224,914 8,521,972 201.7% 1,866,952

Customer loans 1,219,418 685,919 533,499 77.8% 6,034,891

Financial investments 418 5,510,098 (5,509,680) -100.0% 5,190,120

Hedges 41,892 (3,205) 45,097 1407.1% (1,069)

Property, plant and equipment 10,487 11,715 (1,228) -10.5% 7,460

Goodwill 89,602 89,602 - - 21,583

Other intangible assets 9,424 8,569 855 10.0% 8,477

Tax assets 76,655 40,589 36,066 88.9% 27,629

Non-current assets and discontinued operations 145 5,561,754 (5,561,609) -100.0% 145

Other assets 335,812 217,507 118,305 54.4% 148,393

Total assets 14,570,245 16,393,940 (1,823,695) -11.1% 13,351,872

LIABILITIES AND SHAREHOLDERS’ EQUITY 31.12.200831.12.2007

PRO-FORMA

CHANGES

ABSOLUTE % 31.12.2007

Deposits from banks 865,332 281,795 583,537 207.1% 3,707,075

Customer accounts and securities 12,637,239 9,942,281 2,694,958 27.1% 8,960,213

Financial liabilities held for trading 130,217 66,438 63,779 96.0% 66,164

Hedges 155,922 - 155,922 - 2,110

Provisions for contingencies and charges 87,218 84,371 2,847 3.4% 38,528

Liabilities associated with discontinued operations 20,655 37,971 (17,316) -45.6% 17,476

Tax liabilities - 5,311,114 (5,311,114) -100.0% -

Other liabilities and employee severance indemnity 288,527 294,929 (6,402) -2.2% 209,526

Shareholders’ equity 385,135 375,041 10,094 2.7% 350,780

- share capital and reserves 293,316 311,829 (18,513) -5.9% 287,318

- valuation reserves for available-for-sale financial assets (15) - (15) - 565

- net profit 91,834 63,212 28,622 45.3% 62,897

Total liabilities and shareholders’ equity 14,570,245 16,393,940 (1,823,695) -11.1% 13,351,872

In the “31 December 2007 pro-forma column, 31 December 2007 pro-forma column, 31 December 2007 pro-formaall the assets and liabilities related to the “Salary-guaranteed loans” and “Mortgages” division were reclassified under asset item 140 “Non-current assets and discontinued operations” and liability item 90 “Liabilities associated with discontinued operations”, whilst the single financial statement items

include the income statement and balance sheet items of UniCredit Xelion Banca S.p.A., XAA Agenzia Assicurativa S.p.A. and of the “Asset gathering” division of UniCredit Private Banking S.p.A. at the respective balance sheet dates.The figures shown under “31 December 2007” relate to the separate financial 2007” relate to the separate financial 2007”statements of Finecobank.


The single Income Statement items under 31 December 2008 pro-forma are shown 31 December 2008 pro-forma are shown 31 December 2008 pro-formaafter the operating result allocated to the “Mortgages” division, stated under “Profit (Loss) from discontinued operations after tax”. The single Income Statement items shown as 31 December 2007 pro-formaare stated after the operating result allocated to the “Mortgages” and “Salary-guaranteed loans” divisions, included in “Profit (Loss) from discontinued operations after tax”, and include the income statements of UniCredit Xelion Banca S.p.A. and XAA Agenzia Assicurativa S.p.A..The figures shown under “31 December 2007” relate to the separate financial 2007” relate to the separate financial 2007”statements of Finecobank.

Income statement (Amounts in Euro/000)

31.12.200831.12.2008

PRO-FORMA31.12.2007

PRO-FORMA

CHANGES

ABSOLUTE % 31.12.2007

Net interest 175,579 172,046 120,645 51,401 42.6% 142,999

Dividends and other income on equity investments 1,709 1,451 14 1,437 1,0264.3% 1,414

Net interest income 177,288 173,497 120,659 52,838 43.8% 144,413 Net commissions 162,264 160,791 218,773 (57,982) -26.5% 140,951

Income from trading, hedges and fair value 11,980 10,605 4,667 5,938 127.2% 8,658

Balance of other income/expenses 778 1,723 (593) 2,316 n.c. 1,289

Income from brokerage and other income 175,022 173,119 222,847 (49,728) -22.3% 150,898 TOTAL INCOME 352,310 346,616 343,506 3,110 0.9% 295,311 Personnel expenses: (60,252) (58,540) (61,067) 2,527 -4.1% (50,258)

Recovery of expenses (183,838) (181,942) (187,922) 5,980 -3.2% (126,405)

Other administrative expenses 39,459 39,065 37,913 1,152 3.0% 38,107

Net adjustments to property, plant and equipment and intangible assets (8,274) (8,274) (10,664) 2,390 -22.4% (8,748)

Operating costs (212,905) (209,691) (221,740) 12,049 -5.4% (147,304)GROSS OPERATING PROFIT 139,405 136,925 121,766 15,159 12.4% 148,007 Provisions for contingencies and charges (9,776) (11,149) (16,330) 5,181 -31.7% (9,504)

Merger expenses (2,593) (2,593) (6,443) 3,850 -59.8% (4,818)

Net adjustments to loans (199) (548) (10,264) 9,716 -94.7% (15,181)

Net profit from investments 10,103 10,103 83 10,020 1,2072.3% (1,727)

GROSS PROFIT FROM CONTINUING OPERATIONS 136,940 132,738 88,812 43,926 49.5% 116,777 Income tax for the period (45,106) (43,740) (43,602) (138) 0.3% (53,880)

NET PROFIT FROM CONTINUING OPERATIONS 91,834 88,998 45,210 43,788 96.9% 62,897 Profit (Loss) from discontinued operations after tax - 2,836 18,002 (15,166) -84.2% -

NET PROFIT (LOSS) FOR THE YEAR 91,834 91,834 63,212 28,622 45.3% 62,897

Key balance sheet figures (Amounts in Euro/000)

31.12.200831.12.2007

PRO-FORMA

CHANGES

31.12.2007ABSOLUTE %

Customer loans 1 335,484 302,278 33,206 11.0% 5,965,437

Total assets 14,570,245 16,393,940 (1,823,695) -11.1% 13,351,872

Direct customer funding 2 11,840,726 9,800,731 2,039,995 20.8% 7,245,413

Indirect customer funding 3 17,315,535 23,516,637 (6,201,102) -26.4% 9,056,850

Total customer funding 29,156,261 33,317,368 (4,161,107) -12.5% 16,302,263

Shareholders’ equity 385,135 375,041 10,094 2.7% 350,780

(1) Ordinary customer loans relate solely to loans granted to customers;(2) Direct funding from customers includes overdrawn current accounts and repurchase agreements;(3) Indirect funding from customers consists of the Bank’s own products and third-party products placed online or through the sales

networks of FinecoBank.



Key Figures

Operating structure

31.12.200831.12.2007

PRO-FORMA 31.12.2007

No. of employees 855 1,021 814

No. of financial planners 2,681 2,878 1,071

No. of operating financial shops 356 437 161

Profitability ratios

31.12.200831.12.2008

PRO-FORMA31.12.2007


ROE* 30.23% 28.16% 14.33% 21.62%

Costi/income ratio 60.43% 60.50% 64.55% 49.88%

* ROE at “31-Dec-08 pro-forma” and “31-Dec-08 pro-forma” and “31-Dec-08 pro-forma” “31-Dec-07 pro-forma” was calculated as the ratio of profit from continuing operations and the pro-forma average shareholders’ equity, i.e. taking account of the extraordinary “31-Dec-07 pro-forma” was calculated as the ratio of profit from continuing operations and the pro-forma average shareholders’ equity, i.e. taking account of the extraordinary “31-Dec-07 pro-forma”transactions which took place in 2008.

Balance sheet highlights

BREAKDOWN 31.12.200831.12.2007


Ordinary customer loans/Total assets 2.30% 1.84% 44.68%

Loans to banks/Total assets 87.49% 25.77% 13.98%

Financial assets/Total assets 0.27% 33.89% 39.21%

Ordinary customer loans/Direct customer funding 2.83% 3.08% 82.33%

31.12.2008BASILEA II

31.12.2007BASILEA I

FINECOBANK31.12.2007

BASILEA I XELION

Tier 1 Capital/Weighted assets - Tier 1 capital ratio 11.73% 5.56% 31.12%

Regulatory capital/Weighted assets - Total capital ratio 11.73% 7.65% 31.12%

Risk ratios

31.12.200831.12.2007


Net non-performing loans* Ordinary customer loans * 1.80% 1.32% 0.64%

Net doubtful loans* / Ordinary customer loans* 2.21% 1.67% 1.23%

* Net bad debts, Net doubtful loans and Ordinary customer loans are shown net of non-performing mortgages which were not part of the spin-off in UniCredit Banca per la Casa S.p.A., now UniCredit Consumer Financing Bank S.p.A..

LegendNumber of operating financial shops: financial shops managed by the Bank and financial shops managed by financial planners.ROE: the shareholders’ equity used for the ratio is the average figure for the period (excluding distributable dividends and valuation reserves for available-for-sale assets).Doubtful loans: bad debts and substandard loans.


Partial and non-proportional spin-offOn 26 July 2007, with the objective of shifting total control of FinecoBank to UniCredit S.p.A., prior to the beginning of operations envisaged by the plan for the merger of the UniCredit and Capitalia Banking Groups, the Board of Directors resolved a squeeze-out via:- the repurchase of shares from minority

shareholders;- partial and non-proportional spin-off of

FinecoBank assets pursuant to art. 2506 of the Italian Civil Code.

On 4 September 2007, following the resolution of 26 July 2007, the Board of Directors approved the partial and non-proportional spin-off project of FinecoBank and the relative share swap ratio, namely of 4 shares of the newly-established company for each share of FinecoBank, with the consequent cancellation of a total of 609,910 shares of the Bank with a par value of 0.33 and establishment of a new beneficiary company, named Localmind S.p.A..On 29 April 2008 the spin-off deed of FinecoBank was signed, its object being the partial and non-proportional spin-off of the Bank through the allocation of part of its shareholders’ equity to a newly set-up joint-stock company named "Localmind S.p.A." based in Milan, whose company object is the management of sales outlets of the Bank’s direct networks, an activity that is necessary to maintain efficient territorial structures which are a critical success factor.Due to the aforesaid spin-off, no. 609,910 shares of the Bank were cancelled and, as a result, the share capital was reduced by 201,270.30 and the Extraordinary reserve by 2,238,369.70.With effect from the deed registration date, i.e. 6 May 2008, Finecobank is 100% controlled by the shareholder UniCredit S.p.A..

2008 the Shareholders' Meeting of the Bank resolved on the partial spin-off of part of the company represented by the « Salary-guaranteed loans » division of Finecobank, including the 100% shareholding held in Fineco Prestiti S.p.A. in favour of UniCredit Consumer Financing Bank S.p.A.. The spin-off transaction took place on 1 July 2008.

Step up and call Garda Securitisation 2001-1 and VelitesOn 24 April 2008 FinecoBank exercised, after obtaining the authorisation by the Bank of Italy, the Optional Redemption included in the “Step-Up and Call” clause envisaged for the Garda Securitisation 2001-1 and Velites securitisation transactions, as per resolution passed by the Board of directors on 14 December 2007. The loan repurchase transaction was economically effective on 10 April 2008 and the (ABS) notes were redeemed on 5 May 2008.The Garda Securitisation 2001-1 Series securitised receivables were repurchased by FinecoBank and Bipop Carire S.p.A., each for their respective share, at the fair value established at the date of repurchase.The Velites securitised receivables were repurchased at fair value by FinecoBank, the sole originator.The premium paid by FinecoBank to repurchase the securitised receivables gave rise to a negative reserve from repurchase of receivables of approximately 40 million ( 27 million less the tax effect) after any coupons in arrears, the additional return on the Garda junior security and the excess liquidity inherent in the Garda vehicle.

Equity investmentsOn 1 January 2008, FinecoBank fully subscribed the increase in share capital resolved by the Fineco Prestiti S.p.A. shareholders’ meeting of 26 October 2007, for an amount equal to 100,000,000.00 and simultaneously transferred to the same the « Salary- guaranteed loans » business division, as per the Board of Directors' resolution of 18 October 2007.The shareholding in Fineco Prestiti S.p.A., of 100,015,000.00, was spun-off to UniCredit Consumer Financing Bank S.p.A. on 1 July 2008.

The shareholding in Fineco Prestiti S.p.A., of 860.000,00, was spun-off to UniCredit Banca per la Casa S.p.A., now UniCredit Consumer Financing Bank S.p.A. on 1 July 2008.

Transfer and spin-off of the «Salary guaranteed loans» business divisionAs part of the project involving ‘customer segmentation’ and the ‘identification of global product companies’, on 27 December 2007, with effect from 1 January 2008, the deed of the spin-off of the « Salary-guaranteed loans » business division was signed by and between Finecobank and Fineco Prestiti S.p.A.. As a result of the transfer, Fineco Prestiti S.p.A. will fall within the limits required for registration of the company in the special list pursuant to art. 107 of the Consolidated Banking Act, to which it will apply for registration, carrying out the disbursement of salary guaranteed loans and delegation of payment activity on an almost exclusive basis.Moreover, following the authorisation granted by the Bank of Italy, on 6 June

Main initiatives during the year



ordinary shares and by recognising a share premium account of 1,048,006.13;

The three share capital increases totalled 420,713.70 and the Share premium account 1,934,116.62.

In the first half of 2008 UniCredit Xelion Banca S.p.A. had already issued ordinary shares linked to the “Long Term Incentive Plan” for a total 934,179, in addition to the Share premium of 390,219, wholly subscribed by UniCredit Private Banking S.p.A.. The share capital and the share premium account of UniCredit Xelion Banca S.p.A. were cancelled on 7 July 2008 as a result of the partial spin-off of UniCredit Private Banking S.p.A. to FinecoBank of the company’s “Asset gathering” division, including the 100% shareholding in UniCredit Xelion Banca S.p.A., and of the following merger by incorporation of UniCredit Xelion Banca S.p.A. in FinecoBank.

XAA Agenzia Assicurativa S.p.A.. The same Shareholders' Meeting also resolved on the merger by incorporation of UniCredit Xelion Banca S.p.A. and of XAA Agenzia Assicurativa S.p.A. in FinecoBank. The merger transactions took place on 7 July 2008.

“Long Term Incentive Plan” - stock option planThe Shareholders' Meeting held on 6 June 2008 resolved upon a share capital increase of 3,041,683.26 to be carried out in one or more tranches, linked to the “Long Term Incentive Plan”, that is the Stock Option plan associated with UniCredit Xelion Banca S.p.A. shares (now FinecoBank shares) in favour of the financial planners of the merged company. The procedure for exercising the rights started in October 2007 and ended on January 2009.The new shares issued pursuant to the Bank's share capital increase, as permitted in specific periods of the financial year, were simultaneously repurchased by the sole shareholder UniCredit S.p.A. upon exercising the “call” option. In 2008 the options exercised were as follows :- 20 October 2008 - the first share capital

increase of 126,901.50 nominal value by issuing no. 384,550 ordinary shares and by recognising a share premium account of 506,966.85;

- 20 November 2008 - the second share capital increase of 76,006.92 nominal value by issuing no. 230,324 ordinary shares and by recognising a share premium account of 379,139.64;

- 19 November 2008 - the third share capital increase of 217,805.28 nominal value by issuing no. 660,016

Spin-off of the «Mortgages» business division

As part of the integration plan involving the UniCredit and Capitalia Banking Groups, based on customer segmentation and the identification of global product companies, the meeting of the Board of Directors of 18 October 2007 approved the reorganisation of the mortgages business run by FinecoBank in favour of UniCredit Banca per la Casa S.p.A., now UniCredit Consumer Financing Bank S.p.A., the beneficiary of the spin-off transaction of the “Mortgages” of FinecoBank.Moreover, following the authorisation granted by the Bank of Italy, on 6 June 2008 the Shareholders' Meeting of the Bank resolved on the partial spin-off of FinecoBank in favour of UniCredit Banca per la Casa, now UniCredit Consumer Financing Bank S.p.A., of the “Mortgages” business division, including the 100% shareholding held in Fineco Prestiti S.p.A..

"Asset gathering" business divisionFinecoBank was identified as the beneficiary of the business division of UniCredit Private Banking S.p.A., represented by the shareholding in UniCredit Xelion Banca S.p.A. and by the back office activities associated with the latter’s activity. Following the authorization granted by the Bank of Italy, on 6 June 2008 the Shareholders' Meeting of the Bank resolved to approve the partial spin-off of UniCredit Private Banking S.p.A. to FinecoBank of the company’s “Asset gathering” business division which includes the 100% shareholding in UniCredit Xelion Banca S.p.A. and, through the latter, in

Main initiatives during the year (CONTINUED)


“Lehman Brothers” financial instrumentsThe Board of directors acknowledged the agreement entered into by and between UniCredit S.p.A. and CNP Assurances S.A. which regulates the terms for carrying out the initiative in favour of CNP UniCredit Vita's current customers holding index-linked products associated with the ‘Lehman Brothers’ financial instruments.The Board of directors also approved FinecoBank’s contribution to the customer-care initiative defined with CNP Assurance, by setting aside a specific provision for contingencies and charges. In particular, the agreement establishes that, upon the customer’s acceptance, CNP UniCredit Vita:- converts the existing index-linked

product, associated with a ‘Lehman Brothers’ financial instrument, into a new insurance policy (Line 1), guaranteed by CNP UniCredit Vita, which allows the customer to recover the invested capital less any coupons already cashed, or,

- alternatively, immediately repays 50% of the premium paid, in cash, preserving the customer’s right to recover the value of the underlying ‘Lehman Brothers’ financial instrument.

The cost of the initiative will be partly sustained by CNP UniCredit Vita and, via a direct contribution, by the Italian distributing banks of the UniCredit Group. FinecoBank’s share, equal to 853 thousand, was provided for in the Provision for contingencies and charges. Conversely, the Bank is willing to support customers which purchased bonds issued by companies belonging to the Lehman Brothers Group by analysing and assessing the respective positions so as to help them protect their interests. In line with the decision taken at Group level, FinecoBank is willing to provide the aforesaid bond

awareness rate on the offline channel. The big advertisements were matched by a billposting campaign in the Milan and Rome undergrounds and by a presence on the mega rear bus advertising circuit of the main cities of central and northern Italy.

holders with the necessary legal advice to file their claims in the Lehman Brothers bankruptcy proceedings. Therefore, as soon as the bodies of the various proceedings notify the procedures required and related deadlines, the bank will inform the single customers to enable them to assess whether to join the initiative, it being understood that the legal costs and the joining fees will be borne by the Bank.

Communications and external relationsThe objective of the 2008 communication strategy was threefold:1. Client acquisition2. Positioning3. Increase of brand awareness

The objective of “client acquisition” was achieved through a multi-channel communication campaign focused on the Bank’s online presence, supported by tactic actions on the economic and financial press.This strategy, supported by the “Member get member” promotion and boosted by the massive involvement of the financial planners network, helped the Bank open a record 24,000 new accounts in the first three months of the year.In 2008 FinecoBank gained recognition as “Customer satisfaction” bank, through the “Fineco’s satified customers: 91% “key message included in all its campaigns. The focus on customer satisfaction strengthened FinecoBank’s positioning compared to its competitors, mainly focused on acquisition actions based on bank account interest rates.The customer satisfaction positioning found its utmost expression in the huge advertisements planned in Italy's main cities during the second half of the year with the aim of increasing the brand



FinecoBank focuses almost exclusively on the retail customer segment.It is a direct bank which offers all the investment bank services provided by traditional banks, distinguishing itself for its marked propensity for innovation. Its propensity for innovation mainly stems from the development of innovative business; when the market was in its start-up phase, FinecoBank was at the forefront of innovation offering banking and online trading services, eventually becoming a leader in the trading segment, both at domestic and European level.Following the merger with UniCredit Xelion Banca S.p.A., FinecoBank is now the reference bank for ‘asset gathering’ within the UniCredit Group, boasting approximately 2,700 financial planners dedicated to those customers which prefer to deal with professionals.FinecoBank continues its consolidation process as well as the development of its range of services.The main products and services released in 2008 are summarised below:

Online Operations- cheques available in advance, on-line,

for investment purposes;- SuperSave Flex for the network: the

new product, added to the repurchase agreements already available on the website, offers a higher interest rate than the SuperSave standard which increases in relation to the amount invested offering customers a higher rate than the returns available on line. Moreover, as of 1 April 2008, the new version of SuperSave will be available with just two amount bands, both for the Euro and the Dollar, with two standard rates and two flex rates, the latter ones however will be available only to financial planners;

- Chat service with the aim of improving service efficiency to the customers

the possibility of activating the cheque/cash deposit service at UniCredit Banca, UniCredit Banca di Roma e Banco di Sicilia via advanced ATM bancomat cards and the cheque deposit service via financial planners;

- as of August the introduction of the Interbanking Corporate Banking service as “passive bank”; this service allows business undertakings to work directly with all banks with which it deals;

Asset Gathering- widening the offer of funds that can be

subscribed to online by launching new Investment Houses (Goldman Sachs, Lemanik, Jiulius Baer and Caam Funds); moreover, as of May a new version of the funds platform for the complete management of orders by financial planners on all Sicav sub-funds and funds distributed by FinecoBank will be available, except for the management company Sarasin;

- launch of 13 Investment Certificates and 4 new Bonds, two at variable rate and two zero-coupon;

- in April 2008 the new asset management lines dealing with the Pioneer funds of Sistema Gestione di Pioneer Investment Management SGR S.p.A. were launched; the new GPFs aim at extending the range of products and services made available to the FinecoBank network;

- from May 2008 the financial planners have the possibility of informing Locat Leasing of any customers wishing to receive information on the products and services offered;

Loans- as of May 2008, based on the new

credit policy of UniCredit Banca per la Casa S.p.A., now UniCredit Financing Consumer Bank S.p.A., called “Price at Risk”, new economic terms of ‘my

through specific actions focused on:a) specialisation: the request is sent

directly to the dedicated team;b) speed: avoiding intermediate steps, all

the necessary support is provided as soon as possible;

- from March 2008 Fineco HI-Fi allows to accumulate points also using the Banking, Credit and Investing services (the programme allows to choose from 150 gifts);

- Intraday margin lending also available on Futures; it allows all customers to exploit a greater leverage effect with margins reduced up to 50%; Furthermore, customers will be able to take advantage of a new degressive commission scheme (the customers which will generate more than 500 Euros or Dollars in commissions in a month will be able to move to the reduced commission band and will automatically maintain it in the following month);

- possibility of joining the TLX and EuroTLX markets available on the website and PowerDesk2 from 15 May 2008 which grant access to more than 2,000 bonds worldwide;

- from June onwards, the new « Securities Trading » application will be available on the Extranet; this application allows all financial planners to input proposals and purchase/sale orders on Shares, EFTs and Bonds on behalf of their customers; also repurchase agreements (SuperSave) will be shortly made available giving the added possibility of monitoring the status of the investments held in the customer’s portfolio;

- as of June, the customers of FinecoBank will have the opportunity of trading equities and bonds in a currency other than the Euro without the need to activate the Multicurrency service;

- as of July the possibility of depositing and withdrawing cash and cheques also at UniCredit Banca branches as well as

Commercial activities and development of new products and services


solution’ mortgages were applied to all current account holders of FinecoBank;

- introduction of new conditions for Unsecured Credit lines and review of the rate applicable to ‘Extra Cash’ Personal Loans of up to 30,000;

- possibility of applying for a current account overdraft guaranteed by a lien on funds, managed assets or guaranteed by a lien on insurance policies.

The following sections contain commentary on the main balance sheet indicators and figures of the Business Areas into which the Bank’s operations are divided: On-line Trading, On-line Banking, Financial Planners Network.All the activities were carried out with the aim of obtaining economic results from the “industrial” management of the businesses themselves, minimizing the financial risk profile thereof. The financial management of FinecoBank tends towards risk management aimed at protecting the industrial returns on various businesses and not assuming risk positions on its own account.

In 2008 FinecoBank confirms its market leadership in terms of traded volumes and executed orders also thanks to the strategy aimed at completing the offer of new products and services to support investors and retail traders. Direct connections to all the markets handled and ongoing technological research generated better execution performances and improved market

information circulation. Thus the platform could meet the expectations of the different user profiles, from professional customers to investors.The range of products and services supplied though the various channels was again extended by adding bonds traded in the TLX market and by strengthening the risk management system through automatic, fixed and dynamic ‘stop losses’.

On-line trading

Value of FinecoBank orders executed on the equity market (online only)

7,216,2778,205,876

10,373,821

14,897,373

17,020,823

2004 2005 2006 2007 2008

FinecoBank orders executed broken down by market (online only)

GermanyFranceUSAItaly (MTA+AH)Other markets

0 3,000,000 6,000,000 9,000,000 12,000,000 15,000,000

2004

2005

2006

2007

2008

2004 2005 2006 2007 2008

Germany 41,522 43,592 86,189 144,771 203,248

France 31,888 27,275 67,033 97,037 151,631

US 900,190 1,036,523 1,333,894 2,250,107 3,988,694

Italy (MTA+AH) 6,242,677 7,098,486 8,880,796 12,358,292 12,609,973

Other markets 0 0 5,909 47,166 67,277



transactions, despite the drop in volumes for this type of operating mode. The service was further strengthened by updating, yet again, the leverage levels available and by improving the risk control functions, thanks to the use of new fixed and dynamic « stop losses » also for leverage transactions.The significant growth in transactions on all Futures markets was under observation, in terms of traded volumes and operating customers. Offering different versions of the product on all the direct channels allowed to reach new segments of users thus helping loyalty and acquisition strategies. The product was also innovated through the new « intraday » operating modality which enabled to improve the levels of the minimum margin requested from customers as a guarantee for their operations. To complete the product innovation,

Commercial activities and development of new products and services (CONTINUED)

Average amount per Borsa Italiana order (online only) (Euro/000)

11.8814.21

21.04

32.64

20.68

Year 2004 Year 2005 Year 2006 Year 2007 Year 2008

On-line trading (CONTINUED)

PowerDesk2, the integrated platform for advanced users, was developed to streamline and speed up use and achieve completeness of professional operating tools and system soundness.By strengthening the reporting tool the Bank achieved better control over the operations of the different user segments. In addition, the new graphical interface allowed the immediate sizing of the platform on the various types of monitors used. More complete market information was achieved especially thanks to the availability, within the platform, of new international indices. The number of users allowed to use the platform increased thanks, most of all, to the new pricing strategies aimed at enlarging the potential segment of users.Furthermore, FinecoBank confirmed its market leadership in margin lending

new pricing policies were proposed for the more active customer segments which, along with improved execution performances allowed to requalify the Futures offer of FinecoBank also for the more sophisticated public.It is also worth noting the ever increasing number of new users that are familiarising with the Finecobank direct platform. These results confirm the uniqueness and the strength of FinecoBank single account in the Italian competitive scenario, as a platform granting access to several financial and banking services which allows cross-selling and the arrangement of commercial initiatives aimed at fulfilling the expectations of the different segments.In this respect, it is pointed out that the Bank has incurred and continues to incur research and development costs for both introducing new products and financial services and for the IT sector; more specifically, the latter aims at ensuring high security standards, quality and technological innovation of the portal of banking services and trading platforms.


No. of current accounts and balance of direct deposits

615,234

640,301

01,000,0002,000,0003,000,0004,000,0005,000,0006,000,0007,000,0008,000,0009,000,000

10,000,00011,000,00012,000,00013,000,000

2007 2008570,000580,000590,000600,000610,000620,000630,000640,000650,000660,000670,000680,000690,000700,000balance of

direct deposits

no. ofcurrent accounts

On-line Banking

The direct bank continues to reap success as “asset gatherer”, reporting remarkable growth in direct funding, amounting to 11,841 million as at 31 December 2008, up by 21% compared to 31 December 2007 pro-forma figures. Funding through current accounts in Euro and foreign currencies as at 31 December 2008 reached 8,274 million compared to 7,426 million as at 31 December 2007 (pro-forma figures), highlighting an 11% increase, and funding through repurchase agreements stood at 3,567 million compared to 2,375 million as at 31 December 2007 (pro-forma figures), data which confirm the constant growth trend.The number of current accounts grew by 4% compared to the stock as at 31 December 2007, totalling more than 640,000 active current accounts.

The main activities related to planning and managing marketing campaigns aimed at the on-line target and grapevine initiatives (member-gets-member) addressed to the customers of the Bank. These are complex initiatives which combine creative, promotional, logistics and monitoring activities.

Simultaneously, existing services which are constantly reviewed in a “circular” logic to reduce the involvement of the Bank’s structures were optimised in order to provide customers with a more satisfying experience. The on-line booking of cash withdrawals and cheques at the branches of the UniCredit Group falls within the above initiatives and so does the review of some graphical interfaces and related processes.The maxi withdrawal (MaxiPrelievo) function, in line with the customers’ expectations, allowed the setting of

the ATM bancomat to withdraw up to 2,000 a day from all ATMs of the UniCredit Group.Finally, to save time and avoid customers having to queue, the Bank introduced the possibility of depositing cheques and notes directly through the thousand advanced branches of the UniCredit Group.Lastly, in order to comply with the payment requirements of SEPA (Single European Payments Area), V-Pay was added to the services already covered by FinecoBank ATM cards, such service being available throughout Europe.



In 2008 also the indicators relating to the credit card sector reported positive growth.More specifically, compared to the same period of the previous financial year, a 27% increase was recorded in the number of active credit cards with full payment of the balance at term, whilst a 12% increase was recorded in the number of credit cards with instalment payment plans (also known as «revolving»). Spending, which remains the main profitability driver, has increased by 14% compared to December 2007, by approximately 3,170 million (FinecoBank cards and UniCredit cards); the spending of revolving cards stood at 2.1% of the total.Furthermore, the servicing activity provided on behalf of Group retail banks (UniCredit Banca di Roma, UniCredit Banca and Banco di Sicilia) involved the issue of approximately 243 thousand new credit cards in 2008 (excluding expired cards), bringing the total number of cards managed for the Group to more than 1.3 million.It is worth noting that as of November 2008, following the progressive transfer of the card management activities to the new Card Payment Solution Department of the Holding company, the activity of FinecoBank is now limited to the management of top-up cards and the renewal, upon expiry, of revolving cards already issued. Moreover, in 2008, approximately 100 thousand revolving cards expired at UniCredit Consumer Financing Bank S.p.A..

i.e. card not present transactions) the “Verified By Visa” certification process if Visa card holders or the “Secure Code” process if Mastercard card holders. This certification process allows customers more protection and safeguards for Internet purchases by credit card.

In 2008, FinecoBank issued the Black Fineco Card, a new chip-technology product on the Mastercard circuit; in addition, the “3D Secure” service was launched which imposes on credit card holders which make purchases on the Internet (also known as CNP transactions,


331,557

2004

383,175

2005

448,731

812,177

2006

510,600

1,083,899

2007

615,044

1,327,274

2008

Number of credit cards issued, net of expired cards

FinecoBank cardsUniCredit cards

Historical performance of total spending (cash and revolving) (amounts in Euro/000)

Cash spending Revolving spending

25,004

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

0

5,000

10,000

15,000

20,000

25,000

30,00026,456

1,253,308

2008

1,097,264

2007

924,300

23,022

2006

704,424

16,313

2005

613,940

14,185

2004

On-line Banking (CONTINUED)


The purpose of the Financial Planners Network Business Area is to allow the Bank to cover a business segment that, despite having reached a more advanced stage of development, nonetheless proves useful and synergetic to the goal of completing the products and services offered by the Bank and the Group to which it belongs.After the deep hierarchical/organisational revision which concerned the Fineco network as well as the Bank’s commission structure in the last few years, following the merger with UniCredit Xelion Banca S.p.A., on 7 July 2008, 1,722 financial planners joined Fineco and 15,7 billion were received in direct and indirect funding.The adoption of an open architecture, based on multi-brand Funds and Investment Certificates, and the prospects of an ever wider distribution network, also thanks to the integration with UniCredit Xelion Banca S.p.A., have further strengthened the relationship with the main global investment houses, giving additional boost to the virtuous comarketing circuit and network training which had consolidated over the previous

year. The impact has been extremely positive and the financial planners, the bank and the investing customers were offered many opportunities to meet and develop relationships.

The above table shows the stock of assets accumulated by the financial planners network as at 31 December 2008. With a total of more than 24,131 million in overall assets under management and administration and direct funding through both FinecoBank and other Group Banks, the financial planners network represents a significant asset. As at 31 December 2008 the network comprised 2,681 staff. A decrease of 197 staff was recorded from the situation as at 31 December 2007.In 2008, the inflow of new assets under management, net of disinvestment, came to approximately - 2,513 million. This inflow is comprised of - 1,735 million of funds of the Bank and third parties, - 81 million of insurance products, approximately - 779 million of discretionary accounts and + 82 million of new Certificates.On the one hand, 2008 is characterised

by a strong growth in net funding in securities (+ 1,059 million compared to December 2007, +101%), and in repurchase agreements (net funding of 1,184 million, +26%); the non-harmonisation of tax rates on financial income and the deep market crisis directed customers preferences towards short-term financial instruments like repurchase agreements, rather than more volatile forms of investment.In 2008, the range of funds offered for subscription online was significantly expanded through the placement of the products of 8 new SICAVs (Golman Sachs, Lemanik, Julius Baer, Oyster, Credit Agricole AM, Sarasin Sicav and Euromobiliare) with over 300 new funds, and the strengthening of the pre-existing offer through the launch of approximately 500 new funds.In addition, 2008 was characterised by the opening to multi-brand life insurance products, by adding to the range 4 new Insurance companies, namely AIG Life, Aviva, CreditRas and Skandia, whose products were already placed by UniCredit Xelion Banca S.p.A..Moreover, following the merger of CAM

Direct and indirect funding - Financial Planners Network

31.12.2008 % OF TOTAL31.12.2007

% CHANGE % % OF TOTALABSOLUTE

CHANGE % CHANGE

DIRECT FUNDINGCurrent acc. in euro, foreign currencies and repos 8,540,527 35.4% 6,947,616 24.4% 1,592,911 22.9%

Total direct funding 8,540,527 35.4% 6,947,616 24.4% 1,592,911 22.9%ASSETS UNDER MANAGEMENTDiscretionary Accounts 880,587 3.6% 2,032,288 7.1% (1,151,701) -56.7%

Mutual funds and other funds 6,790,358 28.1% 11,275,622 39.6% (4,485,264) -39.8%

Insurance products 2,342,285 9.7% 3,227,296 11.3% (885,011) -27.4%

Other assets under management 382,214 1.6% 583,582 2.0% (201,368) -34.5%

Total assets under management 10,395,444 43.1% 17,118,788 60.1% (6,723,344) -39.3%ASSETS UNDER ADMINISTRATIONGovernment securities, stocks and bonds 5,195,288 21.5% 4,417,415 15.5% 777,873 17.6%

Total assets under administration 5,195,288 21.5% 4,417,415 15.5% 777,873 17.6%Total customer funding 24,131,259 100.0% 28,483,819 100.0% (4,352,560) -15.3%

Financial planners network



Sgr in P.I.M. Sgr, the Bank started selling Discretionary Accounts in Pioneer funds as well as those of JP Morgan and Credit Agricole, with the objective of widening the range of instruments available to the network and meet the investors’ different needs; with this in mind, during the year the Bank also placed 22 Investment Certificates of various types (Twin Win, Equity Protection, Express Bonus, Cash Collect) and 19 Group or third party’s’ bonds, in addition to hundreds already quoted on the regulated market. The certificates and the bonds are first placed by the financial planners then traded online, through FinecoBank internalisation system (Fineco IS).The distribution network as at 31 December 2008 operates nationwide relying on 157 operating financial shops directly managed by the company, as well as other 199 shops managed by the financial planners.


% Composition of Total Stock of Assets in Financial Advisors Networkas at 31 December 2008

56.9 43.1

28.1

9.7

1.63.6

Under management/DirectGPF/GPMFundsInsurancesCertificates

% Composition of Total Stock of Assets in Financial Advisors Network as at 31 December 2007

Under management/DirectGPF/GPMFundsInsurancesCertificates

39.9 60.1

39.6

11.3

2.07.1

Financial planners network (CONTINUED)


products (equal respectively to 1,148 million and 898 million); with regard to assets under administration, instead, the considerable market volatility adversely affected equities (which showed a decrease of over 927 million), offset by the increase in Government bonds and debentures, highlighting an increase of 632 million.

The above table highlights the figures for the stock of assets under management and administration of FinecoBank customers, whether the customers are linked to a financial planner or are online customers. The figures shown refer to the Bank’s own products and those of third parties placed online or through the Bank’s sales networks.

Total indirect funding highlights a drop of over 6,201 million compared to December 2007, mainly due to the negative performance of the financial markets.As regards managed assets, a significant fall was recorded by mutual funds and foreign SICAVs ( 4,581 million) and discretionary account and insurance

Indirect funding (FinecoBank)

31.12.2008 % OF TOTAL31.12.2007

PRO-FORMA % OF TOTALABSOLUTE

CHANGE % CHANGE

ASSETS UNDER MANAGEMENTDiscretionary Accounts 880,887 5.1% 2,029,011 8.6% (1,148,124) -56.6%

Mutual funds and other funds 6,896,748 39.8% 11,477,827 48.8% (4,581,079) -39.9%

Insurance products 2,362,271 13.6% 3,260,661 13.9% (898,390) -27.6%

Other assets under management 387,676 2.2% 593,029 2.5% (205,353) -34.6%

Total assets under management 10,527,582 60.8% 17,360,528 73.8% (6,832,946) -39.4%

ASSETS UNDER ADMINISTRATIONGovernment securities and bonds 4,377,069 25.3% 2,817,591 12.0% 1,559,478 55.3%

Stocks 2,410,884 13.9% 3,338,518 14.2% (927,634) -27.8%

Total assets under administration 6,787,953 39.2% 6,156,109 26.2% 631,844 10.3%Total indirect customer funding 17,315,535 100.0% 23,516,637 100.0% (6,201,102) -26.4%



On 1 July 2008 the “Mortgages” business division was spun off to UniCredit Banca per la Casa S.p.A., now UniCredit Consumer Financing Bank S.p.A., which represents the product company specialised in granting mortgages for the entire UniCredit Group.FinecoBank, however, satisfies the loan applications submitted by its customers by offering, on line, the “my solution” mortgage granted by UniCredit Consumer Financing Bank S.p.A., as well as the possibility of being contacted by a specialist to obtain more details and develop a customised solution.

On 1 January 2008 the “Salary-guaranteed loans” business division was spun off to Fineco Prestiti S.p.A., which represents the product company specialised in granting salary-guaranteed loans for the entire UniCredit Group. As of 1 July 2008, the remaining assets of FinecoBank related to the ‘Salary-guaranteed loans’ business division as well as the stake in Fineco Prestiti S.p.A. were transferred to UniCredit Consumer Financing Bank S.p.A. via a partial spin-off.

Mortgages Salary-guaranteed loans



As at 31 December 2008 the workforce of FinecoBank S.p.A. counted 914 employees. The 31 December 2007 pro-forma figures exclude the employees of the "Mortgages" and the "Salary-guaranteed loans” divisions and include the employees of former UniCredit Xelion Banca S.p.A. and the “Asset gathering” business division of UniCredit Private Banking S.p.A..The figures relating to 31 December 2007 relate to the separate financial statements of FinecoBank.

In 2008 corporate transactions such as the merger by incorporation of UniCredit Xelion Banca S.p.A. and the acquisition of the “Asset gathering” business division of UniCredit Private Banking S.p.A. were carried out leading to the addition of 233 employees and to the spin-off of the assets of the ‘Mortgages’ and ‘Salary-guaranteed loans’ business divisions in the respective specialised companies of the Group. Consequently, tremendous efforts were made in human resource management in order to rationalise the workforce and improve efficiency which lead to the reallocation of 168 employees, in line with the technical, organisational, productive and personal needs of the concerned parties. Worthy of notice is the considerable increase in the number of employees with atypical contracts (+184%), mainly linked to the use of employment agency contracts, needed to cope with operating peaks due to the reorganisation, yet maintaining adequate flexibility. Within the atypical contracts, a further percentage (29%) is represented by project-based contracts aimed at introducing Junior profiles in the Personal Financial Advisers network of FinecoBank. Despite the significant reduction in new staff recruited on the market, 24 employees were hired in 2008, mainly in the last quarter of the year in the Customer Care area.

- no. 40 due to resignations resulting from reduced interest in the Fineco brand on the market.

The Bank’s workforce may be broken down by classification as follows:

A total of 216 employees left the Bank, of which:- no. 176 due to intra-group mobility and

planned retirements;

Resources

Operating structure

EMPLOYEES31 DECEMBER

200831 DECEMBER

2007 PRO-FORMA31 DECEMBER

2007

FinecoBank employees 855 1,021 814

Employees with atypical contracts (+) 125 56 44

Group employees seconded to FinecoBank (+) 0 4 4

FinecoBank employees seconded to the Group (-) 66 35 35

Total 914 1,046 827

CLASSIFICATION MEN WOMEN TOTAL

Executives 33 1 34

Managers 187 59 246

Professional Areas 294 281 575

Total 514 341 855



The Bank continued to dedicate constant attention to the women in its workforce, which made up approximately 36.72% of the total, and represented 90% of the Bank’s 44 part-time contracts at the end of 2008 with a view to meeting their personal and career needs.Average length-of-service stood at 4 years and one month, whereas the average age was approximately 36 and 11 months, well below the sector average.

In 2008 the Bank’s employees were trained on various topics linked to the Institutional, Technical, Specialised and Behavioural area with the aim of guaranteeing the continuous professional development of the workforce and facilitating the integration and alignment of skills between UniCredit Xelion Banca S.p.A. and FinecoBank.

As regards the Institutional area, training paths were organised, mostly in the second half of the year, to prepare the new recruits or employees changing job within the Bank to fill in their positions either through classroom lessons or on-the-job training. In addition, employees continued to enrol in on-line courses held by ABI on legal compliance concerning the training of bank personnel (e.g. administrative liability within Banks, Security measures for data protection, New Privacy code, Health & Safety in the workplace) paying special attention to Moneylaundering; the updated version of the course dealing with Legislative Decree no, 231 of 21 November 2007 was published online.During the year the company has invested a lot of resources in language courses (English) also taking account of the large scale, international nature of the Group, organising classroom training (group or individual) and on-line lessons through its e–learning platform.The IT basic training linked to the office

In addition to what has been said so far, this year too witnessed the participation in financed training initiatives aimed at inplacement and development of employees (Fondo di Solidarietà) as well as the subscription to the new Bank Insurance Fund (Fondo Banche Assicurazioni). Furthermore, language courses were also organised for top managers, financed by Fondir (Fondo Paritetico Interprofessionale per la Formazione Continua).

Here below is the training provided to the Bank’s personnel during the year:- Institutional Area: no. 17,059 training

hours - Technical/Specialised Area: no. 2,635

training hours - Behavioural Area: no. 606 training hours

In 2008 the training aimed at the Personal Financial Advisors network was characterised by behavioural, specialised and compulsory training courses.

Behavioural training was provided mainly to group managers, Area managers and PFAs.

software was completed, especially through classroom tuition on Excel and Access or through on-line courses.In this regard, in the second half of the year, in addition to My learning Center, an on-line platform currently in use for personnel hired though employment agency contracts and for PFAs, the use of the Group “UCILearning” e-learning platform was extended thus widening the range of training courses available on the catalogue.

Classroom lessons were also organised for Technical and Specialised training to update and specialise personnel, especially IT employees. Moreover, ongoing training was guaranteed for the Customer Care structure, through updating courses on new products, foundation courses for new recruits and on communication and service issues.

As regards training on Behavioural aspects, courses were organised to deal with topics such as communication, management of collaborators and leadership development also taking advantage of Group initiatives (Leadership for Results).

Operating structure (CONTINUED)

Resources (CONTINUED)

AREA CONCERNED TYPE OF TRAINING HOURS

Institutional

Role and commercial 9,835

Basic on legal issues 1,148

IT Foundation 426

Languages 5,650

Technical/Specialised Specialisation and updating courses 2,635

Behavioural

Collaborators Guide 281.5

Communication 324.5

Total hours 20,300


series of on-line courses (MIFID, Privacy and Moneylaundering) organised for the entire network (CM, AM, GM and PFA), but also on the organisation and provision of a course aimed at maintaining the registration with the Single Register of Intermediaries (ISVAP), through 15 hours of on-line tuition and 15 hours in the classroom distributed nationwide.In addition to the above, the financial planners of the Xelion Network were involved in courses focused on FinecoBank operations and the main instruments available to the commercial network. The courses held in the year relate to:- behavioural training: a total of 13,400

training hours were provided involving 372 individuals

- compulsory training: a total of 55,896 hours were provided involving 5,069 individuals

- specialised training: a total of 48,285 hours were provided involving 10,431 individuals.

Specialised training related to professional development paths with special attention to: in-depth examination and study of Mifid regulations and related application to FinecoBank, re-examination of the main investment techniques associated with accumulation plans; analysis of macroeconomic scenarios and related investment solutions linked to the Fineco Personal Portfolio tool.Particular attention was paid in the year to organising courses addressed to the new PFAs (“Induction” course) and to the training provided by the colleagues of the Developers network, aimed at training the PFAs on the Advice service. Moreover, agreements were made with the training company TESEO, to achieve the EFA (European Financial Advisor) qualification and to maintain the certification through three editions of a specialisation courses.

Compulsory training focused not just on a

Some Group Managers and the PFAs coordinated by the former were involved in the Moving Target pilot project to promote the development of their role, improve the behavioural and commercial management of their teams and adopt a set of effective methodologies and easy-to-implement tools to face the new macroeconomic scenario.Group Managers and Area Managers were involved in courses focused on the role played by the Manager through two ad hoc courses called “Managing meetings effectively” and “Time, Results and Stress: planning to gain effectiveness». In the second half of 2008, the Area Managers were involved in a training project aimed at professional growth with the objective of making them more aware of their role and help them develop skills in recruiting and managing resources at their disposal. The PFAs attended courses on Selling Techniques (5 editions).

COURSE METHOD

NO. OF PARTICIPANTS HOURS

NORTH CENTRE SOUTH TOTAL SINGLE TOTAL

Recruitment tools Classroom 11 8 6 25 32 800

Moving Target ADV Classroom 49 57 50 156 56 8,736

Moving Target SPV Classroom 5 6 6 17 32 544

EFPA compliance Blended 43 18 5 66 20 1,320

Midif implementation On-line 414 352 214 980 8 7,840

Fineco Client Piloting Solution Classroom 397 305 229 931 8 7,448

Isvap 60 hours (30 online and 30 classroom) Blended 20 29 36 85 60 5,100

Efpa 2007-2008 Blended 21 19 9 49 150 7,350

Efpa 2008 Blended 15 18 17 50 150 7,500

Taxation On-line 156 127 91 374 4 1,496

Network safety training On-line 119 94 59 272 4 1,088

Banks administrative liability On-line 34 26 20 80 4 320

Pac trainers’ training Classroom 11 13 7 31 16 496

Mifid trainers’ training Classroom 10 11 8 29 16 464

FPP trainers’ training Classroom 10 13 7 30 16 480

New Moneylaundering regulations On-line 424 381 227 1,032 4 4,128

Privacy On-line 169 140 79 388 4 1,552

Patti chiari On-line 426 382 232 1,040 1 1,040

ISVAP compliance Blended All All All 1,000 30 30,000

FFP Classroom All All All 1,000 7 7,000



Resources (CONTINUED)

The Bank maintained a constructive and proactive role during the year with respect to union relations; signing various agreements among which the most significant ones are outlined below:- agreement for the setting up of the Training Joint Committee;- granting of the loan (pursuant to art.5

paragraph 1 letter a, point 1 of Ministerial Decree no. 158 of 28 April 2000) by the

UniCredit Banca per la Casa S.p.A., now UniCredit Consumer Financing Bank S.p.A.;

- trade union agreement for the reorganisation of the ‘asset granting’ activities of the Private Banking & Asset Management division - Merger by incorporation of UniCredit Xelion Banca S.p.A. in FinecoBank and acquisition of the business division from UniCredit Private Banking S.p.A.

special Italian Social Security Fund for Credit Institutions’ Employees (“Fondo di Solidarietà per il Sostegno del Reddito, dell’Occupazione e della Riconversione e Riqualificazione del Personale del Credito”) for training programmes provided to the bank’s employees in 2008;criteria for fixing and paying the company bonus for 2007;

- trade union agreement for the spin-off of the “Mortgages” business division to

COURSE METHODNO. OF

PARTICIPANTS EDITIONS HOURS

Selling techniques Classroom 58 5 928

Managing meetings effectively Classroom 23 1 368

Time, results and stress : planning to be effective - Loiano Classroom 90 7 1,980

Guidance course Classroom 14 2 224

Advice “Developers” Classroom 668 45 5,344

« Allied networks » Project Classroom 135 7 540

”Xelion-Fineco integration” training Classroom 135 5 2,160

New Moneylaundering regulations On-line 1,719 - 8,595

Isvap Blended 1,719 - 51,570

Privacy On-line 1,719 - 8,595

Mifid On-line 1,719 - 8,595

fpa (compliance) Classroom 220 editions with sundry suppliers 4,400

« Network trainers » training Classroom 3 1 44

Isvap new enrolments (60 hours) Blended 15 2 900



Technology infrastructure

strengthening of the capacity management, naturally including the ongoing improvement and tuning of the architecture developed to safeguard the application software; finally, the general downsizing of the infrastructure was completed so as to be able to deal with new volumes and related peaks of activity following the integration of UniCredit Xelion Banca S.p.A..To guarantee customers an increasingly higher security level, Host Based IDS (Intrusion Detection System) and IPS (Intrusion Prevention System) systems were implemented and their size defined; these systems are constantly monitored to increase the security standards of applications.Similarly, the DataWarehouse system underwent a general infrastructure overhaul, with Xelion in mind, whilst from the application viewpoint, it was provided with all the functionalities necessary for migrating the Funds and GP xelion, feeding Advice and processing the data coming from the FINBAS Insurance environment.As regards Mortgages, worthy of notice is the Carve-Out of all the activities towards UniCredit Banca per la Casa S.p.A..

migration activities and in the integration of UniCredit Xelion Banca S.p.A.;; the migration activities, concentrated in the first half of the year, were carried out in depth, to allow both Xelion’s customers to use all the banking and Trading services offered by our Institution, and to integrate the functional areas and the Xelion financial planners network within our infrastructure; in the second half of the year both corrective and integration actions were taken, pursuing the very same objective. At the same time, improvement and advancement activities continued on the IT system in order to provide customers with new and ever more versatile services with high added value, simultaneously supporting the Bank’s internal functional areas. As regards the architecture of the entire system, improvements continued to be made to infrastructures and software to streamline and make more reliable and scalable the entire system which provides Online services; worthy of notice is the tuning and refactoring of the Online Trading architecture, the development and support of direct channels and the further

The information technology systems of FinecoBank essentially consist of six elements:- Banking activity application procedures;- Online Trading System (dedicated

applications for the sale/purchase, in real time, of securities and financial instruments on the main European and American markets);

- the Management system for the operations room and the institution investors room, and access to the information and order sections of a variety of Italian/foreign markets for other group companies;

- Management system of investment services such as Funds, SICAVs and Bank insurance;

- Credit card management system, with the issue of cards for the VISA and MasterCard circuits, now also with Microchip EMV;

- Financial planners network management system which allows to operate in an integrated way, through a single portal, on all the products of FinecoBank and the other Group companies.

In 2008 all the internal functions of the IT area employed most of their resources in



The Bank adopted an Internal Control System that is organized into four levels.

- The 1st level controls are incorporated into operating procedures and are known as "line controls". These controls are consequently included in the services and Bank segments charged with performing various work tasks by following specifically created executive procedures. With a view to the efficient performance of these controls, said procedures have been formally set out in internal regulations, which have been documented and published on the Bank's intranet in order to facilitate the access of personnel to the provisions issued by the Bank.

- Oversight and constant updates of processes are entrusted to "process supervisors” who are charged with devising controls able to ensure the proper performance of daily activity by affected personnel, as well as the observance of any delegated powers.

including those of the Board of Statutory Auditors, must be included.

In 2008 the business processes continued to be published on the Bank’s intranet so as to complete and update the set of operating procedures.

The control activity carried out by UniCredit Audit S.p.A. according to an outsourcing contract, in the second half of 2008, concerned some of the Bank's operating areas (implementation of Group guidelines in the loans area, MiFID-adequacy and appropriateness controls, MiFID-conflicts of interest and inducements, MiFID-consultancy, MiFID-execution policy, MiFID-customers’ classification, MiFID-contracts and information for the customers, verifications on the financial planners network) to establish the adequacy of the processes from both the point of view of compliance with legal regulations (laws, regulations and internal rules) as well as with efficiency and effectiveness.

- The formally established processes concern both structures in contact with customers and office structures.

- The 2nd level controls are associated with day-to-day operations applied to quantifiable risks; they are carried out constantly by structures separate from operating structures and are also performed on a preventative basis in order to make full use of the possibilities offered by information technology. The controls of market, credit and operational risks are assigned to the “Risk management” function which operates according to the instructions of the Parent Bank and approved by the Management Body.

- The 3rd level controls are typical of internal auditing, culminating in onsite inspections conducted with the aim of assessing procedural flow, and incorporating paper documents drawn from databases or company reports.

- Finally, Institutional Supervisory controls,

Internal control system



instruments) whenever changes in market conditions occur.Market risk was measured through an operating outsourcing on the calculation systems of the Parent Bank which will calculate the VaR using the historical simulation approach, with a 99% confidence level and a one-day holding period. Limits are in place on the trading activity carried out on the Bank’s own account; the structure was defined using VaR, exposure to mark-to-market, and credit equivalent value measurements.

Interest rate risk (Asset/Liability Management - ALM)Interest rate risk is the risk of potential loss deriving from significant changes in the interest rate curve over the long term (at least one year) in the presence of gaps in the Bank’s account structure (cash inflows/outflows).Risk Management avails of VaR values calculated in outsourcing by the Parent Bank using a process that is similar to the one developed for market risk. These measurements refer to the interest rate risk on the entire banking book and enable the Bank to carry out a static and dynamic ALM analysis using homogeneous methods at the Group level.

Operational riskOperational risk originates in the complexity and variety of the business activities undertaken. It is defined as the risk of incurring losses deriving from the inadequacy or improper functioning of internal processes, the behaviour of personnel (error, fraud), and the functioning of outside systems or events. It includes legal risks. Pending the estimate via the advanced method, economic capital absorbed by operational risks is calculated using a “top-down” method according to the standard

methodologies, aimed at controlling the main risk categories, which is still under way.

Credit riskFollowing the aforesaid carve-out transactions, credit risk, defined as the probability that the counterparty to a contract becomes insolvent, is managed by monitoring the credit quality on the technical forms left with the company: personal loans, credit cards and current account overdrafts.In 2008 the company’s banking book was reduced and displayed a minor concentration level. A Scoring system is currently in place to monitor the trend in personal loans and credit card issues; the system was developed by a specialised external company which uses socio-demographic information obtained from private credit bureaus. As regards current account overdrafts, the Bank relies on customer profiling, based on income and asset generating ability, information provided by public and private databases and any guarantees offered.

As regards trading portfolio exposures, the calculation of the Credit VaR is being implemented according to the model used by the Parent Bank. A model has been set up to gather data on losses for internal valuation of loss given default. Risk on exposures deriving from the trading portfolio is calculated using the VaR credit method in the form of the model used by the Parent Bank.

Market risksTradingMarket risk is considered as the total sum of losses that may be incurred, including in the short term, on positions in securities or derivative instruments (financial

FinecoBank has arranged its risk control structure in accordance with the provisions prescribed by the Supervisory Bodies and in line with the directives issued by the Parent Bank.

The function in charge of measuring and controlling risk is the Risk Management function which reports directly to the Chief Executive Officer; the main objective of the Function is to identify all the risks connected with the activity of the Bank, identifying, from the management point of view, any adequate mitigation actions required to contain the risks of each business to a minimum. The results of such activities are periodically communicated to the Top Management which is therefore updated on all the main risks inherent in the business activities.More specifically, Risk Management is responsible for monitoring market, interest, credit and operational risks to which the Bank is exposed; the Risk Management activity also entails the control of business and reputation risk.Market and interest rate risks on the securities portfolio and the banking book are kept to the minimum levels compatible with the conduct of business, also through appropriate hedging transactions with derivative instruments. The credit risk associated with the banking book is constantly monitored. The Bank also measures counterparty risk for its trading portfolio consisting of fixed-income instruments and over-the-counter derivatives.

The risk profile of FinecoBank has changed over 2008 due to the extraordinary carve-out transactions concerning salary-guaranteed loans and mortgages towards other Group companies, which ended on 1 July 2008. These extraordinary transactions were carried out along with the alignment with Parent Bank's

Risk measurement and control



approach as a percentage of annual total income of individual business lines, weighted differently for each of the various activity types. Within the Risk Management function, the control over such risk was strengthened following the merger by incorporation of UniCredit Xelion Banca S.p.A. in FinecoBank and the simultaneous increase in the number of financial planners. In accordance with the provisions of the Assoreti Supervisory Code, FinecoBank equipped itself with a remote control model on the operations of its financial planners, developed a set of anomaly indicators the objective of which is to identify those financial planners whose conduct, in the performance of their activities, does

This conduct may lead to potential operating losses linked to lawsuits and possible sanctions by the Supervisory Bodies; in fact, according to the provisions of the TUF, the intermediaries who rely on the services of financial planners are jointly and severally responsible for any violations of the law committed by the latter.For more details please refer to Section E of the Notes to the financial statements.

not fully comply with the reference legal regulations or internal procedures. The Model was entirely devised and developed within Finecobank and uses the data available from the electronic databases of the Bank. The results of such indicators identify potential misconduct which is verified in detail by the Risk Management function, to avoid the assumption of undesired risks ascribable to the following cases in point:- fraud risk – which identifies potentially

illegal conduct aimed at misappropriation, embezzlement or diversion of customers’ assets;

- compliance risk – which identifies conduct which is potentially wrong for failure to comply with primary or secondary regulations or internal procedures.

Risk measurement and control (CONTINUED)



Organisational structure

More specifically:- the Investment Services Division

is responsible for monitoring the development of products placed and consulting services provided to all the Bank's customers.

- The Direct Bank Division is responsible for monitoring the development of new products in the two core entities, namely FinecoBank (Trading and Banking) and the related distribution method through direct channels (internet and telephone).

- The Investment Services Division and Direct Bank Divisions operate in strict collaboration in order to develop an offer to the synergic customers and coherent with the marketing guidelines and the Bank's business strategies.

- The GBS (Global Banking Services) Division coordinates the organisational structures in charge of monitoring the organisational/operational processes, IT and logistics systems, necessary to guarantee the effective and efficient operation of the systems for the business activity.

The synergies between the distribution channels and the monitoring of the decision-making processes affecting all the Divisions are guaranteed by the operation of the following Committees: - Management Committee, a body that

supports the Chief Executive Officer and comprises the following Members: Chief Executive Officer, General Manager, CFO and Division Managers;

- Products Committee, which must guarantee that products issued/sold and/or services offered by the Bank comply with legal regulations.

The following also report to the Chief Executive Officer: Legal & Corporate Affairs Area, Human Resources Area and the Risk Management and External Communications organisational units and the Compliance

current formulation applies the “functional" specialisation concept, a project-based approach is maintained in every phase of definition and release of products and services.The horizontal links are guaranteed by the operation of specific Committees monitoring the Business lines and the stage of completion of the main projects, also to guarantee the necessary synergies of distribution channels.

The organisational model described above allows to identify five functional lines, reclassified, according to the Parent Bank’s Governance indication, in Divisions:

The DIVISIONS govern :- the sales network - the investment services- the direct bank - the operating performance.

The PFA network Commercial Division and the Channel coordination and integration Division report directly to the Chief Executive Officer. The structures that monitor the development and management of the financial planners sales network and the distribution of products are placed under the first Division, whilst the second Division supports the Chief Executive Officer in the activity aimed at facilitating the interaction process involving the sales network and the other Bank’s Divisions (Investment Services, Direct Bank and GBS) reporting hierarchically to the General Manager.The adoption of this framework confirms the organisational model already adopted by FinecoBank before incorporating UniCredit Xelion Banca S.p.A., which envisages the commercial coordination of the physical networks separate from that of direct channels, though guaranteeing constant uniformity with all the Bank's strategies.

In 2008, FinecoBank was concerned by important corporate transactions and, more specifically by the merger by incorporation of UniCredit Xelion Banca S.p.A.. In consideration of the above, the organisational structure of the Bank was obviously significantly changed in order to allow a more effective application of the business strategies of the new merged entity, reporting the expected cost synergies and maintaining the strengths and values of the two entities, by reinforcing the commercial control on the sales channels and the widening of the range of services offered to customers. In this regard it is worth noting that in the first phase immediately following the extraordinary transaction represented by the merger by incorporation mentioned above, the hierarchical control points that regulate the two Sales networks (former Fineco and former Xelion ones) were kept separate to keep the management structures unchanged, thus successfully preserving the balance and features; in a second stage, instead, in an effort to align FinecoBank’s organisational model with the gradual integration process of the two Sales Networks, the two structures were merged under a single Commercial Department.

Functional organisational model: FinecoBank operational modelFinecoBank operational model is based on a functional-style model.A functional-style model promotes economies of scale and facilitates the development of skills and vertical knowledge within each area. The model guarantees the necessary decision-making dynamics yet maintains the “horizontal link” between the various functions. Although the



officer, responsible for ensuring the implementation of legal regulations, jurisprudence and sector case law, also providing the necessary support to the Bank's internal structures.The Chief Executive Officer and the Credit

S.p.A., a Group outsourcer. In relation to the aforesaid model, the Audit Committee is required to act as a "liaison" between the Bank and the Group audit companies.The new organisational structure of FinecoBank is as follows.

Area also report to the General Manager.Finally, as regards audit activities, FinecoBank, in line with the indications provided by the Parent Bank has adopted an outsourcing method based on a specific service contract signed with UniAudit

Organisational structure (CONTINUED)


MANAGING DIRECTOR

CHANNEL COORD. AND INTEGRATION

DEPT.*

GENERALMANAGER

PFA COMMERCIAL NETWORK DEPT.

INVESTMENT SERVICE DEPT.

DIRECT BANKING DEPT.

GBS* DEPT.

CHAIRMAN BOARD OF DIRECTORS AUDIT COMMITTEE

RECEIVABLES

COSTOMER RELATIONSHIP MANAGEMENTMANAGEMENT

ITC

BANK ORGANISATION

AND OPERATIONS

SECURITIES TRADING

NETWORK SERVICES

CHIEF FINANCIALOFFICE

MANAGEMENTCOMMITEE

LEGAL & CORPORATEAFFAIRS

- Legal Affairs- Corporate Affairs- Complaints- Judicial Searches

HUMANRESOURCES

- Personnel Management- HR Planning and Development- Network Training

- Financial statements and Reports to Supervisory Bodies- Administration- Tax- Management Planning and Control- Treasury

- Market Trading Support- Costumer Care- Outbound

- Planning and Coordination- Networking - Architecture- Datawerehouse - Operations- Legacy Systems - Developments

- Organisation and Process Development [Org. Szng]

- BPR and PMO- Banking and Rate Operations- PFA Operations- Payment Systems- ATMs

- B.C. Retail Securities- B.C. Institutional Securities

- Commercial Monitoring - Network assistance- Commissioning

- Personal Loans and Credit Cards- Credit lines and Head Office

–

UNIAUDIT

EXTERNAL COMMUNICATION

REFERENTE COMPLIANCE

RISK MANAGEMENT

MD, General Manager and Departments

Functional areas

Sales networks

Business units

Office held by the Deputy General Manager

COMMERCIAL SUPPORT

TERRITORIAL COORDINATION

MARKETING

TRADING PRODUCTS

BANKING PRODUCTS

MARKETS

INVESTMENT PRODUCTS AND THIRD-PARTY RELATIONS

ADVICE

PFA NETWORK

NETWORK LOGISTICS

GENERAL SERVICES


to the effect that the Document on security planning has been prepared or updated.To this end, it is hereby notified that our Company is currently updating the Document on Security Planning for 2009, drawn up in accordance with art. 34, paragraph 1 letter g) and of Appendix B) – Technical regulations, rule 19 of the Code, which will be completed in accordance with the law.

At the same meeting, the Board of directors also approved the updated version of the Disaster Recovery Plan of FinecoBank (“DRP v. 2”), which was fine tuned in collaboration with the ITC AREA as it falls within the scope of its responsibility. The DRP – which only concerns issues associated with the restoration of applications and IT systems in the event that they were hit by a “disaster” and envisages suitable structures in charge of handling the crisis from the operating point of view – was updated to implement the aforesaid organisational amendments, in compliance with the methodologies and guidelines of the Parent Bank and the indications provided by the Bank of Italy.

Security Measures”. This rule requires the Data Processor to draw up a document on security planning by 31 March of each year, with special attention to electronically processed “sensitive” and legal data.In addition, rule 26 of the Technical Regulations appended to the Code (Safeguards and Protective Measures) requires, inter alia, that the Notes to the financial statements include a statement

Opinion of the Parent Bank, such as the amendment proposals concerning the maintenance of the Plan and the management of the Test Plan and related outcomes);

- implement the regulations issued by the Bank of Italy on “Special business continuity requirements for processes exposed to systemic risk” (Supervisory Rules of 21 March 2007);

- implement the amendments to the organisational structure of FinecoBank, in consideration of the extraordinary corporate transactions which occurred in 2008 (transfer of the activities related to the “Salary-guaranteed loans” and spin-off of the “Mortgages” business division, as well as the integration with UniCredit Xelion Banca S.p.A.).

The “Personal Data Protection Code” (hereinafter referred to as the “Code”) described in Italian Legislative Decree no. 196 of 30 June 2003, requires, among the various obligations for the security of data and systems, under article 34, that an updated document on security planning be drafted and kept according to the methods indicated under rule 19 of appendix B, “Technical Regulations for Minimum

At the meeting held on 11 December 2008, the Board of Directors approved the updated version of FinecoBank’s Business Continuity Plan (the “Plan” or “BCP” v. 3), which describes the operations and strategies adopted by the Bank to guarantee, under emergency conditions, the service continuity for its customers and the banking system. The BCP, already drawn up based on the guidelines issued by the Parent Bank and the Bank of Italy dealing with business continuity was adequately updated in order to:- introduce additional governance flows

(e.g. the procedure for sharing mutual aid solutions provided to the Group’s legal entities, in line with the instructions given by the Parent Bank; the management of activities that require the Non-Binding

Document on security planning

Business continuity plan



Key balance sheet aggregates

(Amounts in Euro/000)

ASSETS 31.12.200831.12.2007

PRO-FORMA ABSOLUTE % 31.12.2007

Cash and cash equivalents 2 429 (427) -99.5% 357

Financial assets held for trading 39,504 46,049 (6,545) -14.2% 46,934

Loans to banks 12,746,886 4,224,914 8,521,972 201.7% 1,866,952

Customer loans 1,219,418 685,919 533,499 77.8% 6,034,891

Financial investments 418 5,510,098 (5,509,680) -100.0% 5,190,120

Hedges 41,892 (3,205) 45,097 1407.1% (1,069)

Property, plant and equipment 10,487 11,715 (1,228) -10.5% 7,460

Goodwill 89,602 89,602 - - 21,583

Other intangible assets 9,424 8,569 855 10.0% 8,477

Tax assets 76,655 40,589 36,066 88.9% 27,629

Non-current assets and discontinued operations 145 5,561,754 (5,561,609) -100.0% 145

Other assets 335,812 217,507 118,305 54.4% 148,393

Total assets 14,570,245 16,393,940 (1,823,695) -11.1% 13,351,872

LIABILITIES AND SHAREHOLDERS’ EQUITY 31.12.200831.12.2007

PRO-FORMA ABSOLUTE % 31.12.2007

Deposits from banks 865,332 281,795 583,537 207.1% 3,707,075

Customer accounts and securities 12,637,239 9,942,281 2,694,958 27.1% 8,960,213

Financial liabilities held for trading 130,217 66,438 63,779 96.0% 66,164

Hedges 155,922 - 155,922 - 2,110

Provisions for contingencies and charges 87,218 84,371 2,847 3.4% 38,528

Tax liabilities 20,655 37,971 (17,316) -45.6% 17,476

Liabilities associated with discontinued operations - 5,311,114 (5,311,114) -100.0% -

Shareholders’ equity 288,527 294,929 (6,402) -2.2% 209,526

Other liabilities 385,135 375,041 10,094 2.7% 350,780

- share capital and reserves 293,316 311,829 (18,513) -5.9% 287,318

- valuation reserves for available-for-sale financial assets (15) - (15) - 565

- net profit 91,834 63,212 28,622 45.3% 62,897

Total liabilities and shareholders’ equity 14,570,245 16,393,940 (1,823,695) -11.1% 13,351,872

In the 31-Dec-07 pro-forma column, all 31-Dec-07 pro-forma column, all 31-Dec-07 pro-formathe assets and liabilities related to the 'Salary-guaranteed loans’ and ‘Mortgages' business division were reclassified under asset item 140 “Non-current assets and discontinued operations” and liability item 90 “Liabilities associated with discontinued

operations”, whilst the single financial statement items include the income statement and balance sheet items of UniCredit Xelion Banca S.p.A., XAA Agenzia Assicurativa S.p.A. and of the “Asset gathering” division of UniCredit Private Banking S.p.A. at the respective balance sheet dates.

The figures identified as 31-Dec-07 relate to the separate financial statements of Finecobank.


Loans to banks

Loans to banks in the form of current accounts and demand deposits were mainly represented by lending with UniCredit S.p.A. and by current accounts held with Société Generale Securities Services for transactions involving securities.The savings accounts recognised under assets consist of the deposit held with UniCredit S.p.A. for compulsory reserves, with a book value of 165 million, in addition to short-term savings accounts held with UniCredit S.p.A. for 3.741 million.As at 31 December 2007, reverse repurchase agreements were mainly represented by transactions with Unicredito Italiano Bank Ireland, amounting to 503 million, necessary to execute repurchase agreements with customers.

The increase in debt securities is solely attributable to the reclassification of bonds issued by the Parent Bank and subscribed in order to invest liquidity and, at the same time, to be used for repurchase agreements with retail customers, accounted for as at 31 December 2007 under item 30 "Financial assets designated at fair value”. It is important to specify that the securities issued by UniCredit S.p.A. are hedged against by derivative contracts also entered into with the Parent Bank.Assets sold but not eliminated refer to the bonds issued by the Parent Bank and used for repurchase agreements with customers.

Financial assets held for trading

Financial assets held for trading include the positive fair value measurement of derivative contracts entered into for trading purposes, amounting to 26 million, the positive valuation of commitments for currencies and securities to be received and delivered of 3.5 million in addition to stocks and bonds classified as FVPL (Fair Value through Profit or Loss), for a total amount of 10 million held for sale in the short term. It is worth noting that the positive fair value measurement of derivative contracts held for trading corresponded to equal negative fair value measurements booked under item 40 Financial liabilities held for trading. FinecoBank, in fact, does not assume risk positions on its own account.


TYPE OF TRANSACTION/AMOUNT 31.12.2008

31.12.2007PRO-FORMA ABSOLUTE % 31.12.2007

1. Current accounts and demand deposits 2,531,491 978,844 1,552,647 158.6% 822,620

2. Savings accounts 3,906,265 2,738,473 1,167,792 42.6% 536,735

3. Other financings: - -

3.1 Reverse repurchase agreements 3,914 504,768 (500,854) -99.2% 504,768

3.2 Finance leases - - - - -

3.3 Other 3,401 1,701 1,700 99.9% 1,701

4. Debt securities - -

4.1 Structured securities 60,573 659 59,914 9091.7% 659

4.2 Other debt securities 2,618,670 469 2,618,201 558251.8% 469

5. Impaired assets - - - - -

6. Assets sold not derecognised 3,622,572 - 3,622,572 - -

Total 12,746,886 4,224,914 8,521,972 201.7% 1,866,952



Customer loans

Customer loans, totalling 1,219 million, may be broken down as follows:- 335 million in loans to ordinary

customers; - 57 million in reverse repurchase

agreements;- 793 million in securities lending;- 34 million in collateral deposits,

initial margins and variation margins with clearing systems for derivative transactions.

Reverse repurchase agreements are solely represented by customer loans for “Leva Multiday” transactions, which are securities Multiday” transactions, which are securities Multiday”lending transactions guaranteed by sums of money readily available to the lender and which are basically the equivalent of repurchase agreements on securities, as well as securities lending. The other transactions are mainly made up of collateral deposits, initial margins and variation margins with clearing systems for derivative transactions, mostly on behalf of third parties

The ordinary customer loans portfolio is mainly represented by short and medium-term receivables for personal loans and by short-term receivables for credit card use. Overall ordinary customer loans highlight an 11% increase mainly due to credit card use, as well as an increase in non-performing loans. As described earlier on, following the integration of the UniCredit Group with the Capitalia Group and the new “specialised product companies” framework, FinecoBank has gradually reduced the direct loan granting activity and concentrated on placing mortgages and personal loans on behalf of UniCredit Consumer Financing Bank S.p.A..

Key balance sheet aggregates (CONTINUED)


TYPE OF TRANSACTION/AMOUNT 31.12.2008

31.12.2007PRO-FORMA ABSOLUTE % 31.12.2007

1. Current accounts 51,509 49,082 2,427 4.9% 17,695

2. Reverse repurchase agreements 850,288 307,787 542,501 176.3% 307,787

3. Mortgages - - - - 2,306,279

4. Credit cards, personal loans and salary-guaranteed loans 247,890 223,067 24,823 11.1% 1,554,494

5. Finance lease - - - - -

6. Factoring - - - - -

7. Other transactions 34,812 75,266 (40,454) -53.7% 79,365

8. Debt securities:

8.1 Structured 2 1,594 (1,592) -99.9% 1,594

8.2 Other - - - - -

9. Impaired assets 34,917 29,123 5,794 19.9% 71,958

10. Assets sold not derecognised - - - - 1,695,719

Total 1,219,418 685,919 533,499 77.8% 6,034,891


ORDINARY CUSTOMER LOANS(MANAGEMENT ADJUSTMENT) 31.12.2008

31.12.2007PRO-FORMA

CHANGESABSOLUTE % 31.12.2007

Current accounts 53,311 50,858 2,453 4.8% 18,874

Use of credit cards 147,262 127,035 20,227 15.9% 127,035

Personal loans 101,447 96,426 5,021 5.2% 96,387

Other financings 1,218 1,867 (649) -34.8% 5,453

Non-performing loans 5,555 3,684 1,871 50.8% 4,021

Sub-total of ordinary customer loans 308,793 279,870 28,923 10.3% 251,770Non-performing loans relating to the Mortgages division 26,691 22,408 4,283 19.1% 22,408

Total ordinary customer loans* 335,484 302,278 33,206 11.0% 274,178

* Ordinary customer loans at 31-Dec-07 included mortgage loans (own, sold, sold but not eliminated), salary-guaranteed loans and delegated payment loans (own and sold but not eliminated) and non-performing loans (sold but not eliminated) amounting to 5,691 million, the total ordinary customer loans being equal to 5,965. In 2009, the non-performing loans will be assigned to Aspra Finance S.p.A..


securitised, spun off to UniCredit Banca per la Casa S.p.A., now UniCredit Consumer Financing Bank S.p.A., amounting to 30,306 thousand;

- problem salary-guaranteed loans, both owned and securitised, transferred to Fineco Prestiti S.p.A. for 20,009 thousand;

- past due mortgages, both owned and securitised, spun off to UniCredit Banca per la Casa S.p.A., now UniCredit Consumer Financing Bank S.p.A., for 1,996 thousand;

- past due salary-guaranteed loans, both owned and securitised, transferred to Fineco Prestiti S.p.A. for 13,002 thousand;

The following tables show the coverage ratios for doubtful loans, expressed as the ratio of total specific and portfolio writedowns made to total gross exposures.

- non-performing loans repurchased for 6,888 thousand;

- problem loans repurchased for 5,524 thousand;

Other decreases include impaired assets for mortgages and salary-guaranteed loans which were respectively spun off to UniCredit Banca per la Casa S.p.A., now UniCredit Consumer Financing Bank S.p.A., on 1 July 2008 and transferred to Fineco Prestiti S.p.A. on 1 January 2008:- non-performing securitised mortgages

spun off to UniCredit Banca per la Casa S.p.A., now UniCredit Consumer Financing Bank S.p.A., amounting to 23,820 thousand;

- non-performing salary-guaranteed loans, both owned and securitised, transferred to Fineco Prestiti S.p.A. for 2,453 thousand;

- problem mortgages, both owned and

Impaired assetsImpaired assets as at 31 December 2007, as specified in the introduction, are shown net of salary-guaranteed loans, delegated payment loans and related non-performing loans assigned to Fineco Prestiti S.p.A. on 1 January 2008, and net of mortgage loans and securitised non-performing loans spun off to UniCredit Banca per la Casa S.p.A.(now UniCredit Consumer Financing Bank S.p.A.) on 1 July 2008 and include the problem and non-performing loans of UniCredit Xelion Banca S.p.A. which was merged by incorporation on 7 July 2008.Doubtful loans (non-performing and problem loans) net of value adjustments amounted to 34 million, a 24% increase compared to 27 million at December 2007, whilst the increase in gross doubtful loans is equal to 15% compared to 31 December 2007. It is worth underlining that the impaired exposures of FinecoBank are mainly represented by non-performing loans for guaranteed mortgages that were not spun off to UniCredit Banca per la Casa S.p.A., now UniCredit Consumer Financing Bank S.p.A., which are planned to be assigned, together with the remaining non-performing loans, to Aspra Finance S.p.A. in 2009.Of the total amount of doubtful loans less the writedown reserve, net non-performing loans amounted to 32 million, up by 24% compared to 26 million as at 31 December 2007; 83% of the amount relates to mortgages. Net non-performing loans, excluding mortgages, represent 1.80% of ordinary customer loans. Net problem loans amounted to 1.3 million and are represented by receivables for personal loans and current accounts.Net expired exposures amounted to 1.4 million.Other increases relate to impaired assets, Garda Securitisation Series 2001-1 and Velites, repurchased from FinecoBank on 24 April 2008:


TYPE/CATEGORY

NON-PERFORMING

LOANS PROBLEM

LOANSEXPOSURES

RESTRUCTUREDEXPOSURES

OVERDUERISK

COUNTRY

Opening Gross Exposure at 1 January 2008 78,509 45,704 - 24,097 4,114 of which spun-off mortgages 19,710 22,614 7,036 -

of which salary-guaranteed loans and delegated payment loans 2,453 20,009 13,002 -

of which UniCredit Xelion Banca 5,892 825 1,065 -

Increases 23,952 35,858 - 9,549 1,360Transfers from performing loans 626 17,854 - 9,103 1,360

Category changes 14,497 11,147 - - -

Other increases 8,829 6,857 - 446 -

Decreases (37,708) (77,871) - (30,591) (5,290)Loans transferred back to 'performing loans' (1,255) (9,843) - (1,880) -

Derecognitions (913) (275) - - -

Collections (9,267) (2,655) - (2,350) (5,290)

Category changes - (14,317) - (11,327) -

Other decreases (26,273) (50,781) - (15,034) -

Closing Gross Exposure at 31 December 2008 64,753 3,691 - 3,055 184




Total doubtful loans before the writedown reserve (Amounts in Euro/000)

CATEGORY

MORTGAGESPERSONAL LOANS AND CURRENT ACCOUNTS TOTAL

31.12.200831.12.2007

PRO-FORMA 31.12.200831.12.2007

PRO-FORMA 31.12.200831.12.2007

PRO-FORMA

Non-performing loans 42,996 37,499 21,757 18,846 64,753 56,345

Problem loans - - 3,691 3,082 3,691 3,082

Total 42,996 37,499 25,448 21,928 68,444 59,427

Total doubtful loans net of the writedown reserve (Amounts in Euro/000)

CATEGORY


31.12.200831.12.2007

PRO-FORMA 31.12.200831.12.2007

PRO-FORMA 31.12.200831.12.2007

PRO-FORMA

Non-performing loans 26,691 22,408 5,555 3,684 32,246 26,092

Problem loans - - 1,266 987 1,266 987

Total 26,691 22,408 6,821 4,671 33,512 27,079

Coverage ratios for doubtful loans

CATEGORY


31.12.200831.12.2007

PRO-FORMA 31.12.200831.12.2007

PRO-FORMA 31.12.200831.12.2007

PRO-FORMA

Non-performing loans 37.92% 40.24% 74.47% 80.45% 50.20% 53.69%

Problem loans - - 65.70% 67.96% 65.70% 67.96%

Total 37.92% 40.24% 73.20% 78.70% 51.04% 54.43%

Coverage ratios for performing and expired loans

CATEGORY


31.12.200831.12.2007

PRO-FORMA 31.12.200831.12.2007

PRO-FORMA 31.12.200831.12.2007

PRO-FORMA

Performing loans - - 1.00% 0.86% 1.00% 0.86%

Overdue loans - - 54.01% 49.68% 54.01% 49.68%

Total - - 1.90% 1.60% 1.90% 1.60%


The book value of property, plant, and equipment includes the historical cost and the accumulated depreciation of assets obtained under finance lease, as allowed by IAS 17.The only building owned by FinecoBank, previously classified as an items for functional use since it was occupied by the structure dedicated to the granting of salary-guaranteed loans - a business division spun-off on 1 January 2008 to Fineco Prestiti S.p.A. - in the first half of 2008 it was classified under ‘Property, plant and equipment held for investment purposes’.

retail customers. As of 1 January 2008, bonds issued by the Parent Bank have been classified as Loans and Receivablesand accounted for under item 60 “Loans to banks”.

Plant, property and equipmentAs in previous financial years, investments in electronic machines were made to guarantee the ongoing update of the hardware used by all the structures of FinecoBank. Investments in furniture, fittings and equipment are primarily intended for use in new financial shops

HedgesHedged assets are represented by personal loans and securities falling under the Loans and receivables category. As at 31 December and receivables category. As at 31 December and receivables2007 the securities were classified in the financial statements as Financial assetsdesignated at fair value and, consequently, measured at fair value.Positive and negative measurements of derivatives relate solely to derivative contracts that the bank has entered into to provide a macro-hedge against interest rate risk inherent in salary-guaranteed loans and securities classified as Loans and Receivables.The negative measurement of hedge derivatives includes 114 million relating to accrued expenses matched by accrued income of the same amount matured on loans and portfolio securities found respectively in line 70 “Customer loans” and line 60 “Loans to banks”.

Financial investmentsFinancial investments are only comprised of Available-for-sale financial assets which Available-for-sale financial assets which Available-for-saleinclude investments in companies in which the Bank does not exercise, either directly or through subsidiaries, control or significant influence, amounting to 418 thousand, of which 400 thousand are represented by the Visa shareholding. The latter, following the IPO transaction successfully carried out in 2008, awarded circuit members a bonus in shares which cannot be sold before three years have elapsed since the assignment date.

As at 31 December 2007 Financial assetsdesignated at fair value only included bonds designated at fair value only included bonds designatedissued by the Parent Bank and classified as FVPL, i.e. fair value through profit or loss, amounting to 5,510 million. The securities issued by the Parent Bank were underwritten in order to invest liquidity and, simultaneously, to be used in repurchase agreements with


HEDGES 31.12.200831.12.2007

PRO-FORMA

CHANGE


Hedge derivatives – positive measurements 1,094 - 1,094 - 21,370

Hedge derivatives – negative measurements (155,922) - (155,922) - (2,110)

Adjustments to the value of assets under macro-hedge 40,798 - 40,798 - (22,439)

Difference (114,030) - (114,030) - (3,179)


FINANCIAL INVESTMENTS 31.12.200831.12.2007

PRO-FORMA

CHANGE


Financial assets designated at fair value - 5,510,080 (5,510,080) -100.0% 5,109,262

Available-for-sale financial assets 418 18 400 2,222.2% 78,983

Equity investments - - - - 1,875

Total 418 5,510,098 (5,509,680) -100.0% 5,190,120


PLANT, PROPERTY AND EQUIPMENT

PRO-FORMA BALANCE

AS AT 01.01.2008

INVESTMENTS AS AT

31.12.2008

OTHERCHANGES-

SALES

DEPRECIATION AND

ADJUSTMENTS AS AT 31.12.2008 *

BALANCE AS AT

31.12.2008

Buildings 3,276 - - (108) 3,168

EDP machines 2,731 1,130 (4) (1,230) 2,627

Furniture and fittings 3,785 955 (177) (1,667) 2,896

Plant and equipment 1,923 749 (115) (761) 1,796

TOTAL 11,715 2,834 (296) (3,766) 10,487

* of which Integration cost -1.



GoodwillGoodwill recorded in the balance sheet did not show any losses in value, as determined by the impairment test, and is broken down as follows:

Goodwill relating to Fineco On Line Sim S.p.A.On 3 April 2001, the merger by incorporation of Fin-Eco On Line Sim S.p.A., business division of Fin-Eco Sim S.p.A., into FinecoBank took place.This merger was carried out on the basis of a share swap ratio of 3.7 shares of the incorporating company for each share of the incorporated company, with a consequent increase in the share capital of FinecoBank. The difference between the increase in capital of the incorporating company and the amount of shareholders’ equity of the incorporated company gave rise to a share swap loss recorded under goodwill.The balance, amounting to 16 million, is equal to the balance at 1 January 2004, the date of transition to the IAS, plus the unamortised amount of the substitute tax, paid for recognition of the loss for tax purposes.

Goodwill relating to the Trading and Banking division of Banca della ReteOn 1 September 2003, FinecoBank acquired the “Banca On Line” and “Trading On Line” business division of Banca della Rete, as part of the business plan aimed at rationalising the reorganisation project of Banca della Rete, in accordance with the directives of then Parent Bank Capitalia S.p.A..The goodwill recorded in the balance sheet amounts to 2 million, equal to the amount as at 1 January 2004, the date of transition to the IAS.

- year 2004: 34.1 million goodwill recorded following the acquisition of the financial planners division from Ing Italia.

It is worth underlining that all the goodwill (totalling 90 million) relates to acquisitions of business divisions or companies carrying out trading activity or management of financial planners.These activities have been fully integrated with FinecoBank’s ordinary operations, as a result it is no longer possible to isolate the contribution of each company/business division from the Bank's overall income; this means that to establish the reasonableness of the value of goodwill recognised in the financial statements it is necessary to take account of the Bank's overall income. The cash generating unit (CGU) is the bank as a whole.In fact, the specific business model adopted by FinecoBank, which envisages the strong integration of financial planners and trading and banking platform, does not account costs/revenues by allocating them to the business units; the financial planners network is an integral part of the overall offer, which includes banking and trading services.The impairment test did not highlight the need for value adjustments.

Other intangible assetsOther intangible assets solely include purchases and the implementation of information technology procedures with useful lives of several years, required in order to manage the development and the constant offer of new financial products by the Bank.

Goodwill relating to the Financial planners division formerly Finecogroup S.p.A.On 1 October 2005, FinecoBank acquired from FinecoGroup S.p.A. the Financial planners business division, which was created from the progressive merger of three different group networks: FinecoBank S.p.A., former Bipop Carire S.p.A. and Banca Manager S.p.A..The transaction was carried out for a consideration mutually agreed by the parties and submitted to the appropriate 'fairness opinion'; as a result, 3.5 million goodwill was recorded in the books.

Goodwill relating to the Financial planners division formerly UniCredit Xelion Banca S.p.A.As a result of the merger by incorporation of UniCredit Xelion Banca S.p.A. in FinecoBank on 7 July 2008, FinecoBank S.p.A. recorded a 68 million goodwill in intangible assets, arising from previous extraordinary transactions carried out by UniCredit Xelion Banca S.p.A., more specifically:- year 2000: 1 million goodwill recorded

following the acquisition of the financial planners division, formerly Fida SIM, by UnicreditSIM;

- year 2001: 13.8 million goodwill recorded following the merger by incorporation of UnicreditSIM in UniCredit Xelion Banca S.p.A.;

- year 2003: 19.1 million goodwill recorded following the spin-off of the financial planners division, formerly Credit, Rolo and CRT by UniCredit Banca to UniCredit Xelion Banca S.p.A.;



INTANGIBLE ASSETS

PRO-FORMA BALANCE

AS AT 01.01.2008

INVESTMENTS AS AT

31.12.2008

OTHER CHANGES-

SALES

AMORTISATION AND ADJUSTMENTS AS

AT 31.12.2008*

BALANCE AS AT

31.12.2008

Software 8,569 5,891 (296) (4,740) 9,424

* of which Integration cost - 231 thousand.


Due to banksThe item current accounts and demand deposits consist primarily of reciprocal current accounts and lending for trading in securities and derivatives.The item “Other” under “Due to banks” includes repurchase agreements involving securities received through reverse repurchase agreements.

Customer deposits Direct customer funding is represented by sums raised through current accounts and repurchase agreements with retail and institutional customers, for a total amount of 11,841 million, which registered an increase of 21% over 31 December 2007 pro-forma figures.Other loans include securities borrowing by the Bank, which came to a total of 793 million, corresponding to an equal sum of reverse repurchase agreements for securities lending recognised under asset item 70, "Customer loans", and repurchase agreements undertaken involving reverse repurchase agreements, for a total of 27 million.

Financial liabilities held for tradingFinancial liabilities held for trading include the negative fair value measurement of derivative contracts entered into for trading purposes, amounting to 26 million, the negative valuation of commitments for currencies and securities to be received and delivered of 3 million in addition to technical overdrafts classified as FVPL (fair value through profit or loss), for a total amount of 101 million.The negative measurement of derivative contracts held for trading corresponded to


DEPOSITS FROM BANKS 31.12.200831.12.2007

PRO-FORMA

CHANGES


1 Current accounts and demand deposits 141,517 45,108 96,409 213.7% 90,030

2 Savings accounts 2,102 132,053 (129,951) -98.4% 912,053

3 Financings

3.1 Finance leases - - - - -

3.2 Other 717,120 93,694 623,426 665.4% 2,694,052

4 Payables for obligations to repurchase own equity instruments - - - - -

5 Liabilities from assets sold but not eliminated

5.1 Repurchase agreements 4,593 - 4,593 - -

5.2 Other - - - - -

6 Other payables - 10,940 (10,940) -100.0% 10,940

Total 865,332 281,795 583,537 207.1% 3,707,075


AMOUNTS DUE TO CUSTOMERS 31.12.200831.12.2007

PRO-FORMA

CHANGES


1. Current accounts and demand deposits 8,273,768 7,425,218 848,550 11.4% 4,869,899

2. Savings accounts 123 329 (206) -62.6% 329

3. Third-party funds under administration - - - - -

4. Financings

4.1 Finance leases - 1 (1) -100.0% 1

4.2 Other 820,203 460,995 359,208 77.9% 460,995

5. Payables for obligations to repurchase own equity instruments - - - - -

6. Liabilities from assets sold but not eliminated - - - - -

6.1 Repurchase agreements 3,539,378 2,045,404 1,493,974 73.0% 2,045,404

6.2 Other - - - - 1,572,063

7. Other payables 3,767 10,334 (6,567) -63.5% 11,522

Total 12,637,239 9,942,281 2,694,958 27.1% 8,960,213Of which direct customer funding 11,840,726 9,800,731 2,039,995 20.8% 7,245,413

an equal sum of positive measurements of derivatives classified under item 20 “Financial assets held for trading", as FinecoBank does not assume risk positions on its own account.

Provisions for contingencies and charges

Provisions for contingencies and charges include allowances for a total of 87 million, for which, given a liability of



- as described earlier on, following the closure, on 5 May 2008, of the Garda Securitisation Series 2001-1 and Velites securitisation transactions, the following were recorded in shareholders’ equity: (i) a negative reserve of 27 million (less any related taxes) equal to the difference between the nominal value of loans, less any value adjustments, and the fair value at the repurchase date and (ii) the positive difference between the redemption value and the carrying value of the securities withheld by FinecoBank as a result of the securitisation transactions no longer in place (previously the balance under item 40 “Available-for-sale financial assets”);

- following the valuation at fair value of the Visa shareholding, a negative Valuation reserve for available-for-sale assets was set up for 15 thousand.

As a result of the aforesaid spin-off, no. 609,910 shares of the Bank were cancelled giving rise to a reduction in the share capital of 201 thousand and in the Extraordinary reserve of 2.2 million;

- the Shareholders' Meeting held on 6 June 2008 resolved a share capital increase of 3 million, to be carried out in one or more tranches, related to the "Long Term Incentive Plan", that is the Stock Option plan on Xelion Banca shares (now FinecoBank shares) in favour of the financial planners of the merged company. Following the Bank's share capital increase, no. 1,274,890 shares were issued, as permitted in specific periods of the financial year, which were simultaneously repurchased by the sole shareholder UniCredit S.p.A. as a result of the exercised "call" option. The total share capital increase amounted to 420 thousand and resulting Share Premium Account to 2 million;

uncertain amount and expiry, a current obligation was identified as the result of a past event and it was possible to make a reliable estimate of the amount resulting from the fulfilment of said obligation.The disbursements, with estimated maturity exceeding 18 months, were discounted using a rate (yield) equal to the time value of money.

Shareholders’ equityAs at 31 December 2008, the Bank’s share capital came to 200 million, and was divided into 606,274,033 shares with a par value of 0.33 each.The legal reserve amounts to 10 million, the other reserves are comprised of:- Share premium account 2 million;- Extraordinary reserve 84 million;- Negative reserve from repurchase of

securitised receivables (27) million;- Reserve from the spin-off of UniCredit

Private Banking S.p.A. division 24.5 million.

The Bank does not hold Own shares.

Compared to the balance as at 31 December 2007, the following changes were reported in shareholders’ equity in 2008: - on 14 April 2008, upon allocating the net

profit for the year 2007, 3 million were allocated to legal reserve and 5 million to extraordinary reserve; the remaining 55 million were distributed to the shareholders;

- on 29 April 2008 the spin-off deed of FinecoBank was signed; the object of the spin-off was the partial, non-proportional spin-off of the bank by transferring part of the Bank’s assets to a newly set-up joint-stock company called “Localmind S.p.A.” with offices in Milan, whose company object is the management of the sales outlets of the company’s direct networks.



PROVISION FOR CONTINGENCIES AND CHARGES31.12.2007

PRO-FORMAUTILISATIONS

2008EFFECT OF

DISCOUNTING2008 NET

PROVISIONS 31.12.2008

Disputes and other charges related to financial planners’ activity 51,226 (2,147) 601 4,130 53,810

Agents' termination entitlement provision 23,388 (1,211) - 3,965 26,142

Financial shops closure charges 1,108 (529) - 108 687

Other charges and minor disputes 8,649 (3,043) 57 916 6,579

Total provision for contingencies and charges 84,371 (6,930) 658 9,119 87,218


SHAREHOLDERS’ EQUITY 31.12.200831.12.2007

PRO-FORMA

CHANGES


1. Share capital 200,070 199,851 219 0.1% 199,851

2. Share premium account 1,934 - 1,934 - -

3. Reserves

- Legal reserve 10,011 6,877 3,134 45.6% 6,866

- Reserve for merger surpluses 58 - 58 - -

- Restatement reserve - - - - -

- Other reserves 81,243 105,101 (23,858) -22.7% 80,601

4. (Own shares) - - - - -

5. Valuation reserves (15) - (15) - 565

6. Capital instruments - - - - -

7. Net profit (loss) for the year 91,834 63,212 28,622 45.3% 62,897

Total 385,135 375,041 10,094 2.7% 350,780


As at 31 December 2008 the regulatory capital amounted to 226 million. The total of risk-weighted assets as at 31 December 2008 was calculated using the standard method set forth in the Basel II applicable supervisory provisions.Tier 1 capital includes the share of the net profit as increased by the legal reserve amounting to 4.5 million, and the Extraordinary reserve equal to 14 million.The figures as at 31 December 2007 were calculated in accordance with the supervisory provisions applicable at that date.

Regulatory capital and prudential requirements


REGULATORY CAPITAL31.12.08

BASILEA II

31.12.07BASILEA I

FINECOBANK

31.12.07BASILEA I

XELION

Core capital (Tier 1) 225,637 265,650 209,586

Supplementary capital (Tier 2) (6) 100,263 -

Deductions - - -

Regulatory capital 225,631 365,913 209,586Prudential requirements 115,456 334,666 47,139

Risk-weighted assets 1,924,274 4,780,947 673,414

Tier 1 11.73% 5.56% 31.12%

Tier 2 0.00% 2.10% 0.00%

Regulatory capital/risk-weighted assets 11.73% 7.65% 31.12%



Reclassified income statement

The single items of the 31 December 2008 pro-forma income statement exclude the pro-forma income statement exclude the pro-formaoperating result allocated to the Mortgages division, shown under "Profit (Loss) from discontinued operations after tax".

The single items of the 31 December 2007

The figures identified with 31 December 2007 relate to the separate financial 2007 relate to the separate financial 2007statements of FinecoBank.

The analysis of the income statement and the absolute and percentage changes were calculated by comparing the pro-forma figures as at 31 December 2008 and as at 31 December 2007.

pro-forma income statement exclude the pro-forma income statement exclude the pro-formaoperating result allocated to the “Mortgages” and “Salary-guaranteed loans” business divisions, shown under "Profit (Loss) from discontinued operations after tax" and include the income statements of UniCredit Xelion Banca S.p.A. and XAA Agenzia Assicurativa S.p.A.. It is important to note that the ‘Salary-guaranteed loans’ and the ‘Mortgages’ divisions were allocated the notional interest calculated on customer funding.

Income statement figures


31.12.200831.12.2008

PRO-FORMA31.12.2007

PRO-FORMA

CHANGES


Net interest 175,579 172,046 120,645 51,401 42.6% 142,999

Dividends and other income on equity investments 1,709 1,451 14 1,437 1,0264.3% 1,414

Net interest income 177,288 173,497 120,659 52,838 43.8% 144,413 Net commissions 162,264 160,791 218,773 (57,982) -26.5% 140,951


Balance of other income/expenses 778 1,723 (593) 2,316 n.c. 1,289

Income from brokerage and other income 175,022 173,119 222,847 (49,728) -22.3% 150,898 TOTAL INCOME 352,310 346,616 343,506 3,110 0.9% 295,311 Other administrative expenses (60,252) (58,540) (61,067) 2,527 -4.1% (50,258)

Personnel expenses (183,838) (181,942) (187,922) 5,980 -3.2% (126,405)

Recovery of expenses 39,459 39,065 37,913 1,152 3.0% 38,107

Net adjustments to property, plant and equipment and intangible assets (8,274) (8,274) (10,664) 2,390 -22.4% (8,748)

Operating costs (212,905) (209,691) (221,740) 12,049 -5.4% (147,304)GROSS OPERATING PROFIT 139,405 136,925 121,766 15,159 12.4% 148,007 Provisions for contingencies and charges (9,776) (11,149) (16,330) 5,181 -31.7% (9,504)

Merger expenses (2,593) (2,593) (6,443) 3,850 -59.8% (4,818)


Net profit from investments 10,103 10,103 83 10,020 1,2072.3% (1,727)

GROSS PROFITFROM CONTINUING OPERATIONS 136,940 132,738 88,812 43,926 49.5% 116,777 Income tax for the period (45,106) (43,740) (43,602) (138) 0.3% (53,880)

NET PROFITFROM CONTINUING OPERATIONS 91,834 88,998 45,210 43,788 96.9% 62,897 Profit (Loss) from discontinued operations after tax

NET PROFIT (LOSS) FOR THE YEAR - 2,836 18,002 (15,166) -84.2% -

UTILE (PERDITA) D'ESERCIZIO 91,834 91,834 63,212 28,622 45.3% 62,897


Net interest incomeThe pro-forma Net interest income as at 31 December 2008 is 173 million, up by 44% compared to the 2007 pro-forma figure relating to the same period.


INTEREST INCOME 31.12.200831.12.2008

PRO-FORMA31.12.2007

PRO-FORMA

CHANGES


1. Financial assets held for trading 612 612 18,207 (17,595) -96.6% 17,688

2. Available-for-sale financial assets 2,904 - - - - 3,601

3. Held-to-maturity financial assets - - - - - -

4. Loans to banks 362,380 362,380 143,797 218,583 152.0% 50,401

5. Customer loans 95,585 31,895 68,032 (36,137) -53.1% 253,388

6. Financial assets designated at fair value - - 5,322 (5,322) -100.0% 5,322

7. Hedge derivatives 95,794 96,834 - 96,834 - 5,003

8. Financial assets sold but not eliminated 157,131 119,120 54,254 64,866 119.6% 147,690

9. Other assets 2,043 2,043 1,629 414 25.4% 1,208

Total interest income 716,449 612,884 291,241 321,643 110.4% 484,301


INTEREST EXPENSE 31.12.200831.12.2008

PRO-FORMA31.12.2007

PRO-FORMA

CHANGES


1. Deposits from banks (78,274) (20,940) (7,832) (13,108) 167.4% (35,294)

2. Amounts due to customers (263,086) (257,697) (113,024) (144,673) 128.0% (174,622)

4. Financial liabilities held for trading - - - - - -

3. Securities in issue (18,334) (18,334) (2,661) (15,673) 589.0% (2,661)

5. Financial liabilities designated at fair value - - - - - -

6. Financial liabilities associated with assets sold but not eliminated (179,335) (142,026) (45,980) (96,046) 208.9% (127,671)

7. Other liabilities (1,841) (1,841) (1,099) (742) 67.5% (1,054)

8. Hedge derivatives - - - - - -

Total interest expense (540,870) (440,838) (170,596) (270,242) 158.4% (341,302)Dividends and other income on equity investments 1,709 1,451 14 1,437 10264.3% 1,414

Net interest income 177,288 173,497 120,659 52,838 43.8% 144,413

Interest income totalled 613 million, a 322 million increase compared to the same period of the previous financial year.



The following table provides a detailed breakdown of interest income associated with banks, customers, and assets sold but not eliminated from the balance sheet:

Income statement figures (CONTINUED)


BREAKDOWN OF INTEREST INCOME 31.12.200831.12.2008

PRO-FORMA31.12.2007

PRO-FORMA

CHANGES


Interest income on loans to banks 362,380 362,380 143,797 218,583 152.0% 50,401- current accounts 7,869 7,869 9,517 (1,648) -17.3% 8,825

- repurchase agreements 9,134 9,134 5,357 3,777 70.5% 5,357

- demand deposits 11,904 11,904 12,574 (670) -5.3% 1,973

- savings accounts for compulsory reserve 6,285 6,285 5,206 1,079 20.7% 3,713

- savings accounts 223,211 223,211 109,841 113,370 103.2% 28,281

- other loans 2,814 2,814 1,223 1,591 130.1% 2,173

- debt securities 101,163 101,163 79 101,084 1,27954.4% 79

Interest income on customer loans 95,585 31,895 68,032 (36,137) -53.1% 253,388- current accounts 4,172 4,163 4,911 (748) -15.2% 2,068

- repurchase agreements 14,587 14,587 46,835 (32,248) -68.9% 46,835

- mortgages 63,553 - - - n.c. 113,679

- salary-guaranteed loans and delegated payment loans - - - - n.c. 74,229

- credit cards 2,028 2,028 1,699 329 19.4% 1,699

- personal loans 9,015 9,062 9,029 33 0.4% 9,023

- other loans 1,938 1,940 5,547 (3,607) -65.0% 5,687

- debt securities 11 11 11 - 0.0% 11

- non-performing loans 281 104 - 104 n.c. 157

Interest income on financial assets sold and not derecognised 157,131 119,120 54,254 64,866 119.6% 147,690- mortgages 38,011 - - - n.c. 84,640

- salary-guaranteed loans and delegated payment loans - - - - n.c. 8,796

- debt securities 119,120 119,120 54,254 64,866 119.6% 54,254

Interest income on loans to banksamount to 362 million, an overall increase of 219 million compared to the figure for the year ended on 31 December 2007. The liquidity generated by funding though current accounts and repurchase agreements entered into with customers is mainly invested in debt securities and deposits with UniCredit S.p.A.. It is worth stressing that as at 31 December 2007 debt securities issued by UniCredit S.p.A. had been recorded as Financial assets designated at fair value and the related designated at fair value and the related designatedinterest amounted in total to 74 million.

Interest income on customer loansamounts to 32 million, down by 36 million compared to 31 December 2007 due to the effect of the reduction in interest income from repurchase agreements associated with securities lending guaranteed by “Leva Multiday” sums of “Leva Multiday” sums of “Leva Multiday”money.

Interest income on Financial assets sold and not derecognised relates to own securities employed in repurchase agreements.

The overall increase of 65 million is attributable to the gradual increase in the volumes involved as well as to the increase in Euribor rates which characterised the first 9 months of 2008.

Interest expense stood at 441 million, an increase of 270 million compared to 31 December 2007.


The following table provides a detailed breakdown of interest expense related to banks, customers, and liabilities associated with assets sold but not eliminated:


BREAKDOWN OF INTEREST EXPENSE 31.12.200831.12.2008

PRO-FORMA31.12.2007

PRO-FORMA

CHANGES


Interest expense on amounts due to banks (78,274) (20,940) (7,832) (13,108) 167.4% (35,294)- current accounts (3,023) (2,494) (683) (1,811) 265.2% (1,616)

- savings accounts (14,104) (132) - (132) n.c. (24,174)

- other loans (42,008) (1,767) (881) (886) 100.6% (2,265)

- repurchase agreements (15,529) (15,529) (5,595) (9,934) 177.6% (5,595)

- subordinated liabilities (2,592) - - - n.c. (971)

- demand deposits (764) (764) (55) (709) 1289.1% (55)

- other payables (254) (254) (618) 364 -58.9% (618)

Interest expense on amounts due to customers (263,086) (257,697) (113,024) (144,673) 128.0% (174,622)- current accounts and initial futures margins (255,220) (255,220) (185,928) (69,292) 37.3% (148,992)

- savings accounts (12) (12) (12) - 0.0% (12)

- repurchase agreements (3,289) (3,289) (17,212) 13,923 -80.9% (17,212)

- securities borrowings (4,461) (4,461) (4,507) 46 -1.0% (4,507)

- other payables (104) (104) (128) 24 -18.8% (128)

- subordinated liabilities - - - - n.c. (3,771)

- ‘Salary-guaranteed loans’ and ‘Mortgages’ notional interest - 5,389 94,763 (89,374) -94.3% -

Financial liabilities associated with assets sold but not eliminated (179,335) (142,026) (45,980) (96,046) 208.9% (127,671)- repurchase agreements (142,026) (142,026) (45,980) (96,046) 208.9% (45,980)

- securitisation transactions (37,309) - - - n.c. (81,691)

Interest expense on amounts due to banks amounts to 21 million, highlighting an increase of 13 million compared to 31 December 2007 mainly due to funding through repurchase agreements matched with reverse repurchase agreements.

Interest expense on amounts due to customers stood at 258 million, an increase compared to 31 December 2007, less the notional interest of the “Salary-guaranteed loans” and “Mortgages” business divisions, of 145 million, mainly ascribable to higher interest paid

on funding through current accounts as a result of the significant growth in volumes, offset by lower interest paid on funding through repurchase agreements.

Interest expense on Financial liabilities associated with assets sold but not eliminated refers to repurchase agreements involving own securities, the increase of which is correlated to the growth in funding volumes that are matched by just as much interest income on Financial assets sold but not eliminated.




Income from brokerage and other income(Amounts in Euro/000)

INCOME FROM BROKERAGE AND OTHER INCOME 31.12.200831.12.2008

PRO-FORMA31.12.2007

PRO-FORMA

CHANGES


Net commissions 162,264 160,791 218,773 (57,982) -26.5% 140,951


Balance of other income/expenses 778 1,723 (593) 2,316 n,c, 1,289

Total income from brokerage and other income 175,022 173,119 222,847 (49,728) -22.3% 150,898

Net commissions(Amounts in Euro/000)

NET COMMISSIONS 31.12.200831.12.2008

PRO-FORMA31.12.2007

PRO-FORMA

CHANGES


Mortgages area 1,473 - - - n.c. 3,867

Salary-guaranteed loans Area - - - - n.c. 43

Financial planners Area 71,015 71,015 105,715 (34,700) -32.8% 30,235

On Line Area 8,972 8,972 16,622 (7,650) -46.0% 11,206

- of which Credit Cards 9,629 9,629 8,437 1,192 14.1% 8,437

- of which Online Banking (657) (657) 8,185 (8,842) -108.0% 2,769

Securities Brokerage Area 80,804 80,804 96,436 (15,632) -16.2% 95,600

- of which Online Banking 69,743 69,743 72,619 (2,876) -4.0% 71,783

- of which Institutional 11,061 11,061 23,817 (12,756) -53.6% 23,817

Total net commissions 162,264 160,791 218,773 (57,982) -26.5% 140,951

The balance other income/expensebenefits from extraordinary charges associated with credit card frauds sustained by the Bank in 2008 compared to the previous financial year, also thanks to the widespread use of microchip cards. This item was adversely affected by the value adjustments booked with regard to the improvements made to the premises located on Via Pirelli in Milan, which UniCredit Xelion Banca S.p.A. left on 30 June 2008.

negative variations in interest expense paid on current account deposits which caused a negative variation in the 2007 Income Statement then fully recovered in 2008 when the same contracts expired.The result includes the recording of the positive valuation as at 31 December 2007 of Financial assets designated at fair value in the Income Statement, following the reclassification of the bonds issued by UniCredit S.p.A. in the L&R category, and the related hedging derivatives, as well as the positive effect of the valuation of loans subject to macro-hedging against interest risk due to the change to hedge accounting used by the UniCredit Group.

Net commissions amount to 161 million, highlighting a decrease of 26%. This decrease is attributable to the drop in net commissions in the Securities Brokerage Area (especially to lower commission received from institutional customers as a result of lower net commissions due to less market trading by Captive customers) and in the Financial Planners Area, mainly associated with the impairment of assets administered and managed with the ensuing reduction in management fees.

Growth in Income from trading, hedges and fair value is primarily attributable to the closure of derivative contracts held for trading signed in 2007 with the objective of neutralising positive and


reduction thanks to lower advertising investments, less expenses incurred for financial planners (Enasarco, FIRR, recruitment costs) of approximately 1.5 million due to a lower number of financial planners (approximately 200 less than in 2008), less costs for sundry services provided by third parties – ITC service approximately 1.8 million and rental costs of approximately 1.5 million mainly related to the network reorganisation following the merger of the financial planners networks of FinecoBank and Xelion.

Personnel expenses as at 31 December 2008 highlight a decrease of 2.5 million compared to 31 December 2007.The total workforce, i.e. the Bank’s employees and the balance of seconded personnel, went down from a 2007 pro-forma average of 1,022 staff to a 2008 average of 931 staff, a decrease of 91 staff.The lower costs associated with the reduction of the workforce were absorbed by higher costs for temporary staff.

Other administrative expensesand Recovery of expenses as at 31 December 2008 show a 7 million

Operating costs(Amounts in Euro/000)

OPERATING COSTS 31.12.200831.12.2008

PRO-FORMA31.12.2007

PRO-FORMA

CHANGES


Personnel expenses (60,252) (58,540) (61,067) 2,527 -4.1% (50,258)

Other administrative expenses (183,838) (181,942) (187,922) 5,980 -3.2% (126,405)

Recovery of expenses 39,459 39,065 37,913 1,152 3.0% 38,107

Adjustments to plant, property and equipment and intangible assets (8,274) (8,274) (10,664) 2,390 -22.4% (8,748)

Total operating costs (212,905) (209,691) (221,740) 12,049 -5.4% (147,304)


PERSONNEL EXPENSES 31.12.200831.12.2008

PRO-FORMA31.12.2007

PRO-FORMA

CHANGES


1) Employees (55,814) (54,102) (57,902) 3,800 -6.6% (48,652) - wages and salaries (37,838) (37,837) (44,967) 7,130 -15.9% (34,717)

- social security contributions (10,146) (10,146) (12,655) 2,509 -19.8% (9,791)

- employee severance payment fund (283) (283) (81) (202) 249.4% (81)

- provision for severance payment fund (170) (170) (38) (132) 347.4% (181)

- payments to external pension funds (3,165) (3,165) (3,086) (79) 2.6% (2,204)

- costs due to share-based payments involving own equity instruments (224) (224) (78) (146) 187.2% -

- other employee benefits (3,988) (3,988) (2,747) (1,241) 45.2% (1,678)

- ‘Salary-guaranteed loans’ and ‘Mortgages’ personnel expenses - 1,711 5,750 (4,039) -70.2% -

2) Other personnel (3,365) (3,365) (1,756) (1,609) 91.6% (1,124)3) Directors (1,073) (1,073) (1,409) 336 -23.8% (482)Total personnel expenses (60,252) (58,540) (61,067) 2,527 -4.1% (50,258)




OTHER ADMINISTRATIVE EXPENSES AND RECOVERY OF EXPENSES 31.12.2008

31.12.2008PRO-FORMA

31.12.2007PRO-FORMA

CHANGES


Stamp duty (25,967) (25,967) (25,011) (956) 3.8% (18,000)

Registration tax (43) (43) (376) 333 -88.6% (319)

Other municipal taxes and duties (306) (306) (495) 189 -38.2% (380)

Other taxes and duties (834) (834) (3,011) 2,177 -72.3% (3,001)

advertising, promotion and entertainment expenses

- ass media communications (6,491) (6,491) (11,207) 4,716 -42.1% (10,833)

- communications at outlets & direct marketing (534) (534) (415) (119) 28.7% (337)

- promotional expenses (8,467) (8,467) (6,274) (2,193) 35.0% (2,829)

- sponsorships (51) (51) (152) 101 -66.4% (88)

- market research (104) (104) (84) (20) 23.8% (6)

- entertainment expenses (80) (80) (233) 153 -65.7% (54)

Conventions and internal communications (111) (111) (70) (41) 58.6% (70)

Fees to external experts

- legal costs for credit collection (4,286) (4,286) (2,062) (2,224) 107.9% (2,062)

- technical consulting services (1,506) (1,506) (2,487) 981 -39.4% (2,088)

- other professional services (1,090) (1,090) (3,086) 1,996 -64.7% (2,229)

- strategic-management consulting services - - (539) 539 -100.0% -

- legal costs and notary fees (2,554) (2,554) (3,564) 1,010 -28.3% (2,498)

Various services provided by third parties

- credit collection service (19) (19) (25) 6 -24.0% -

- real estate area services (160) (160) (178) 18 -10.1% (114)

- personnel area services (2,717) (2,717) (1,627) (1,090) 67.0% (1,412)

- administrative services (24,833) (24,833) (29,142) 4,309 -14.8% (17,611)

- logistics services (819) (819) (421) (398) 94.5% (298)

- branch services (600) (600) (1,229) 629 -51.2% (27)

- ICT services (17,206) (17,206) (18,996) 1,790 -9.4% (6,444)

- personnel recruitment and training (240) (240) (541) 301 -55.6% (394)

- financial infoproviders (8,996) (8,996) (9,798) 802 -8.2% (8,554)

- financial planners’ expenses (20,280) (20,280) (21,905) 1,625 -7.4% (2,120)

Commercial information and company searches (589) (589) (1,038) 449 -43.3% (995)

telephone, swift and data transmission expenses (6,073) (6,073) (6,734) 661 -9.8% (5,686)

Postage expenses (5,522) (5,522) (6,120) 598 -9.8% (4,280)

Rental cost of buildings leased for personnel use (160) (160) (175) 15 -8.6% (31)

Rental costs on buildings (19,686) (19,686) (21,216) 1,530 -7.2% (14,223)

Maintenance of areas (463) (463) (355) (108) 30.4% (299)

Surveillance of areas (54) (54) (71) 17 -23.9% (9)

Cleaning of areas (467) (467) (563) 96 -17.1% (267)

Utilities (1,854) (1,854) (1,824) (30) 1.6% (1,005)

Leasing of office machinery (97) (97) (19) (78) 410.5% (19)

Leasing of ICT machinery and software (10,535) (10,535) (8,654) (1,881) 21.7% (8,353)

ICT printing and stationery (895) (895) (1,595) 700 -43.9% (911)

Various office supplies (88) (88) (9) (79) 877.8% -

Various ICT office supplies (520) (520) (480) (40) 8.3% (135)

ICT office supplies (268) (268) (139) (129) 92.8% (113)



Maintenance of furniture, machines and systems (403) (403) (535) 132 -24.7% (312)

Maintenance and repair of ICT equipment (1,157) (1,157) (1,111) (46) 4.1% (1,094)

Transport of valuables and documents (1,057) (1,057) (1,329) 272 -20.5% (853)

Travel expenses and vehicle hiring costs (677) (677) (954) 277 -29.0% (503)

Insurance (3,671) (3,671) (6,483) 2,812 -43.4% (4,497)

Charitable donations (169) (169) (226) 57 -25.2% (224)

Fees, dues and contributions to trade associations (489) (489) (464) (25) 5.4% (309)

Other expenses (651) (651) (764) 113 -14.8% (519)

Recovery of expenses - recovery of ancillary expenses 13,705 13,545 13,391 154 1.2% 14,300

Recovery of expenses - customer insurance premiums 154 - - - n.c. 3,505

Recovery of expenses - recovery of taxes 25,601 25,520 24,522 998 4.1% 20,302

‘Salary-guaranteed loans’ and ‘Mortgages’ administrative expenses - 1,897 15,864 (13,967) -88.0% -

Total (144,379) (142,877) (150,009) 7,132 -4.8% (88,298)

Segue (Amounts in Euro/000)

OTHER ADMINISTRATIVE EXPENSES AND RECOVERY OF EXPENSES 31.12.2008

31.12.2008PRO-FORMA

31.12.2007PRO-FORMA

CHANGES


Value adjustments to intangible assetsrelate solely to the amortisation of the costs incurred for computer software with a long-term useful life. The reduction compared to the previous financial year is attributable to the write-offs made in 2007, of the computer software acquired to manage mortgages and salary-guaranteed loans, a business that was the object of a spin-off and transfer in 2008.

Value adjustments to property, plant and equipment refer to the amortisation charges booked for electronic machines, plant and machinery, furniture and fittings and did not show any significant changes compared to 31 December 2007.

Provisions for contingencies and chargesbenefit from reallocations to the Income Statement of provisions made in previous years. The increase in provisions for the 2008 financial year includes the Customer Care initiative promoted by UniCredit S.p.A. and CNP in favour of customers which purchased CNP UniCredit Vita index-linked products linked to Lehman financial instruments.

Gross profit from continuing operations(Amounts in Euro/000)

GROSS PROFIT FROM CONTINUING OPERATIONS 31.12.2008

31.12.2008PRO-FORMA

31.12.2007PRO-FORMA

CHANGES


Gross operating profit 139,405 136,925 121,766 15,159 12.4% 148,007Provisions for contingencies and charges (9,776) (11,149) (16,330) 5,181 -31.7% (9,504)

Merger expenses (2,593) (2,593) (6,443) 3,850 -59.8% (4,818)


Net profit from investments 10,103 10,103 83 10,020 12072.3% (1,727)

Gross profit from continuing operations 136,940 132,738 88,812 43,926 49.5% 116,777

Merger expenses as at 31 December 2008 relate to costs for technical consultancies, professional services and marketing expenses of 2.3 million, amortisation charges of 0.2 million and early retirement incentives of 0.1 million, incurred to merge UniCredit Xelion Banca S.p.A. into FinecoBank on 7 July 2008.



Current income taxes were calculated according to the legal provisions introduced by Legislative Decree no. 38 of 28 January 2005, issued after the implementation of the IAS/IFRS in the Italian legal system. Furthermore, the amount of taxes was influenced by the provisions set forth in Law no. 244 of 24 December 2007 (2008 Finance Act) and Law no. 133 of 6 August 2008.Legislative Decree no. 185 of 29 November 2008 converted, with amendments, by Law no. 2 of 28 January 2009 introduced the possibility of aligning and revaluing book values as a result of business combinations. Following the merger with UniCredit Xelion Banca S.p.A., FinecoBank received a goodwill amount associated with the recording of a merger difference arisen from the extraordinary transaction or merger of UniCredit Xelion Sim S.p.A. in UniCredit Xelion Banca S.p.A. carried out in 2001, which originally had not been written off. The ‘Substitute tax’ line includes the amount of substitute tax relating to the write-off of the aforesaid goodwill of 2.2 million and the amount of the substitute tax for the realignment of the differences between the statutory (or Civil Code) account values and the values for tax purposes, pursuant to article no. 128 of the Tuir, applying art. 1,

paragraph 49 of Law 244/2007, of 89 thousand. The tax benefits expected from the amortisation of goodwill entailed the recording of a write-off benefit of 4.5 million.For the 2007–2009 three-year period, being a consolidated company, FinecoBank is subject to Domestic tax consolidation introduced by Legislative Decree no. 344 of 12 December 2003 -, which is carried out by the Parent Bank UniCredit S.p.A..

Net profit from continuing operationsNet profit from continuing operations amounts to 89 million compared to 45 million reported for the same period of the previous financial year, highlighting a 97% increase.

Profit for the yearThe profit for the year reached 92 million and includes approximately 3 million relating to the Mortgages division, spun off into UniCredit Banca per la Casa S.p.A., now UniCredit Consumer Financing Bank S.p.A., with effect from 1 July 2008.

Net adjustments to loans are the result of specific writebacks and writedowns to doubtful loans (non-performing and problem loans) amounting to 2.5 million and of portfolio writebacks and writedowns to performing loans and personal loans expired by more than 180 days, use of credit cards and customers' current accounts amounting to 1 million.The item also includes writedowns of amounts receivables from financial planners and relating to other financial transactions amounting to 4 million.In 2008, following the spin-off of the Mortgages division to UniCredit Banca per la Casa S.p.A., now UniCredit Consumer Financing Bank S.p.A., the volume of non-performing loans gradually decreased and, as a result, there was a reduction in value adjustments. It is worth stressing that non-performing mortgages owned by the Bank were not spun off to UniCredit Banca per la Casa S.p.A., now UniCredit Consumer Financing Bank S.p.A., but will be assigned to Aspra Finance S.p.A. in 2009.

Net profits from investments primarily include the writeback relating to the redemption of the junior notes Garda Securitisation Series 2001-1 and Velites, following the closure of the securitisation transactions, as better specified in the next pages under "Other information on operations: Securitisation transactions »

Gross profit from continuing operationsamounts to 133 million, highlighting a 50% increase compared to 31 December 2007.


Taxes(Amounts in Euro/000)

TAXES 31.12.200831.12.2008

PRO-FORMA31.12.2007

PRO-FORMA

AMENDMENT CHANGES


Current IRAP charges (37,317) (37,317) (51,767) 14,450 -27.9% (42,479)

Total current taxes (8,730) (8,730) (12,906) 4,176 -32.4% (10,564)

Current IRES charges (46,047) (46,047) (64,673) 18,626 -28,8% (53,043)Change in prepaid taxes (302) (302) 4,261 (4,563) -107.1% (1,552)

Change in deferred taxes (918) (918) 2,132 (3,050) -143.1% 715

Total deferred taxes (1,220) (1,220) 6,393 (7,613) -119.1% (837)Substitute tax (2,295) (2,295) - (2,295) n.c. -

Gain from substitute tax exemption 4,456 4,456 - 4,456 n.c. -

Salary-guaranteed loans’ and ‘Mortgages’ Tax - 1,366 14,678 (13,312) -90.7% -

Total taxes for the year (45,106) (43,740) (43,602) (138) 0.3% (53,880)


Securitization Transactions

The spin-off of the “Salary-guaranteed loans” business division carried out on 1 January 2008 to Fineco Prestiti S.p.A. also included the transfer of the junior security issued by F-E Personal Loans of 7 million nominal value, the derivative contracts, the credit enhancements, the role of originator and all the contracts linked to the transaction.The spin-off of the “Mortgages” business division, carried out on 1 July 2008 to UniCredit Banca per la Casa S.p.A., now UniCredit Consumer Financing Bank S.p.A., included the transfer of the Heliconus and F-E Mortgages Series 1-2003 Junior securities of 17 million nominal value, the subordinated loan issued by F-E Mortgages 2005 of 15 million nominal value, the lines of credit granted, the derivative contracts, the credit enhancements, the role of originator, the role of servicer and all the contracts linked to the transaction and the roles played by FinecoBank.

For further information on securitization operations, reference should be made to part E, section C of the Notes.

The positive difference between the redemption value and the book value of the securities withheld by FinecoBank following the securitisation transactions now closed (the balance previously shown under item 40 "Available-for-sale financial assets” - less any writebacks up to the maximum amount of value adjustments made in the previous financial years ( 10 million) – equal to 8 million was booked in Shareholders’ equity.

The overall effect on Shareholders' equity is therefore - 40 million (- 27 million less the related tax effect), whilst the effect on the income statement is 10 million (Item 130 “Net adjustments for impairment” of: b) Available-for-sale financial assets).

Due to the extraordinary transactions referred to in the introduction, as at 31 December 2008 FinecoBank has no exposures to the securitisation except for a line of credit and the servicing activity linked to the F-E Personal Loans 2003-1 securitisation transaction. The line of credit of 15 million can be used by the vehicle company in the event of a shortfall in cash on hand in the interest account.

On 5 May 2008, subject to authorisation by the Bank of Italy, the following securitisation transactions were closed early by exercising the Optional Redemption set out in the “Step-Up and Call” clause:- Garda Securitisation Series 2001-1 (in

brief “Garda 1”) – originated by UniCredit Banca S.p.A., Bipop-Carire S.p.A. on the date of the transaction, and FinecoBank

- Velites – originated exclusively by FinecoBank

which, based on the accounting standards in force at the date of the closing, had been derecognised.

Thus, FinecoBank repurchased, at market value, the residual underlying mortgages falling under its responsibility.

The Fair Value of the outstanding loans at the date of the repurchase amounted to 897 million (of which 434 million related to FinecoBank and 463 million to Bipop-Carire S.p.A., now UniCredit Banca S.p.A.). In FinecoBank financial statements such loans were stated at 386 million, equal to their nominal value less any related value adjustments, whilst the negative difference between the nominal value less the respective value adjustments and the fair value, equal to - 48 million, was booked in shareholders' equity.

Other information on operations



With regard to Consob communications no. 97001574 of 20 February 1997 and no. 98015375 of 27 February 1998 and more specifically :- the topics dealt with in the chapter

"Results of Subsidiaries”.- year-end asset and liability figures, costs

and revenue arising from dealings with Group companies and subsidiaries.

- compliance with art. 136 of Legislative Decree no. 385 (Consolidated Banking and Financing Act) dealing with the obligations of executives of credit institutions and companies belonging to Banking groups,

it is worth noting that the transactions carried out with subsidiaries and related parties, both Italian and foreign, fall within the Bank’s normal operations and were entered into in the latter’s interest.

The Bank is subject to the management and control activity of Unicredito Italiano S.p.A..As regards intra-group transactions pursuant to art. 2506-bis, paragraph 4 of the Italian Civil Code, in the year under review the Bank carried out transactions with group companies which were regulated by market conditions and agreements. In the financial year the Bank did not make any decisions which, influenced by the entity that exercises management and control over it, produced harmful effects pursuant to art. 2497-ter of the Italian Civil Code.

In order to provide indications as to the relationships and service contracts in place with group companies, the existing relationships are set out below, however, for further details the reader should refer to Part H - Related party transactions of the Notes to the financial statements.As part of the Bank’s own activity and in accordance with the Group’s business model, the Bank has entered into a series of agreements for the distribution/

Furthermore, as part of the 2008 UniCredit Group Employee share option plan (Esop), the Bank took on the role of “negotiator appointed” for the purchase of the shares (Investment Shares) which the employees will request during the subscription period, as well as any shares allocated for free (Discount Shares and Maching Shares).

As part of the Group reorganisation process following the merger by incorporation of Capitalia S.p.A. in UniCredit S.p.A., and on the basis of the indications given by the Parent Bank on the assignment of any non-performing loans (NPLs) already present in Capitalia to a vehicle company subsequently identified as Aspra Finance S.p.A., approval was granted for the assignment to the latter of the non-performing loans recorded in the Bank’s books and the related legal relationships. Finally, compliance with art. 136 of Legislative Decree no. 385 of 1 September 1993 and subsequent amendments (Consolidated Banking and Financing Act) dealing with the obligations of executives of credit institutions and companies belonging to Banking groups is confirmed.The details of the relationships entertained with the Parent bank and other Group companies are shown in Part H of the Notes.

recommendation of products to be offered to its customers for the recommendation of mortgages with UniCredit Banca per la Casa S.p.A., for the distribution of insurance products with Capitalia Assicurazioni S.p.A., for the recommendation of leasing contracts with Locat S.p.A. and placement with Pioneer Investment.

Following the merger with UniCredit Xelion Banca S.p.A., FinecoBank took over the contract with Cordusio Società Fiduciaria S.p.A. the subject of which is the performance of trustee services regulated by Law no. 1966 of 23 November 1939 and Royal Decree no. 531 of 22 April 1940 as well as the agreement with UniCredit Consumer Financing Bank S.p.A., the subject of which is the granting of personal loans and credit cards.As part of the optimisation of the Treasury management and in accordance with the Group’s Liquidity Policy, the bank granted and/or renewed credit lines to UniCredit S.p.A..As part of the compliance with the instructions given by the Parent Bank, UniCredit S.p.A., in the Integration Plan and in accordance with the UniCredit Group guidelines on the centralisation of third-level controls, an outsourcing contract was signed with UniCredit Audit S.p.A. for the Internal Audit activity.

In 2008, specific agreements with the Bank regulated the services provided to Fineco Credit S.p.A., Fineco Prestiti S.p.A. and Localmind S.p.A. (administration, personnel, corporate affairs, legal matters, etc.).

Other information on operations (CONTINUED)

Related party transactions


Number of own shares or of the parent bankFinecoBank does not hold, even through other companies or third parties, own shares or shares of the Parent Bank.

Main risks and uncertainties and business outlookThe Bank’s future objectives follow the strategic lines of the 2009 budget, hinged on actions aimed at supporting income and continuing the cost-reduction exercise, trying to strengthen the business model, characterised by innovation, efficiency and long-term sustainability. The economic results are expected to fall compared to those achieved in 2008 as they take account of the new financial context and the worsening of the economic crisis started in the last quarter of 2008. Even considering such uncertainty, there are no events or circumstances which may have a significant impact on business continuity.

During 2008, the business management of FinecoBank continued according to the guidelines set out in the three-year plan and the budget, allowing the company to fully achieve the preset objectives.No events occurred after the year end which entail adjustments to the figures stated in the financial statements as at 31 December 2008.

Significant events occurring after year end and business outlook



Dear Shareholder, we submit to your approval the financial statements as at 31 December 2008 comprising the Balance sheet, Income statement and the Notes of the 2008 financial year, as well as the Directors’ Report on Operations.

We also recommend the following allocation of the net profits for the year:

We also propose to pay the aforesaid dividend amount, in accordance with legal regulations, starting from 28 April 2009.

If the financial statements and the allocation of the profits for the year obtain your approval, the shareholders' equity as at 31 December 2008 will be as follows:

Proposal for the approval of the financial statements and allocation of profits for the year

Milan, 16 March 2009

FinecoBank S.p.A. FinecoBank S.p.A. The Chief Executive Officer The Chairman Alessandro Foti Cesare Farsetti

(Amounts in Euro)

Net profit for the year 91,834,375.83

to legal reserve (5% of the profit for the year pursuant to art. 34 of the by-laws) 4,591,718.79

to the shareholder, allocating to 606,274,033 shares representing the entire share capital to charitable donations 72,752,883.96

a dividend per share of 0.12 500,000.00

to retained earnings 13,989,773.08

(Amounts in Euro)

Share capital 200,070,430.89

Legal reserve 14,602,753.39

Share premium account 1.934.112,62

Retained earnings 97,599,833.66

Reserve for merger surpluses 57,776.42

Reserve from buy-back of securitised loans (26,868,442.39)

Available reserve from the spin-off of UniCredit Private Banking S.p.A. 18,829,521.00

Unavailable reserve from the spin-off of UniCredit Private Banking S.p.A. 5,670,479.00

Total 311,896,464.59


RECLASSIFIED INCOME STATEMENT ITEMS AS PER CIRCULAR NO. 262 OF THE BANK OF ITALY OF 22 DECEMBER 2005

Net interest Item 30 Net interest income

Dividends and other income on equity investments Item 70 Dividends less dividends on equities held for trading included in item 70

Net interest incomeNet commissions Item 60 Net commissions

Income from trading, hedges and fair value Item 80 Net income from trading activities, item 90 Net income from hedging activities, item 100 b) Profit (loss) from disposal or repurchase of available-for-sale assets, item 100 d) Profit (loss) from disposal or repurchase of financial liabilities, Net income from financial assets and liabilities designated at fair value, Dividends on equities held for trading included in item 70

Balance of other income/expenses Item 190 Other operating income/expenses less Recoveries of expenses and integration costs

Income from brokerage and other incomePersonnel expenses Item 180 a) Administrative expenses – personnel expenses less integration costs

Other administrative expenses Item 180 b) Administrative expenses – other administrative expenses less integration costs

Recovery of expenses Item 190 Other operating income/expenses less Recoveries of expenses

Net adjustments to property, plant and equipment and intangible assets Item 170 Net adjustments to property, plant and equipment less integration costs, Item 180 Net adjustments to intangible assets less integration costs

Operating costsGross operating profitProvisions for contingencies and charges Item 160 Net provisions for contingencies and charges less integration costs

Net adjustments to loans Item 100 a) Profit (loss) from disposal or repurchase of loans, Item 130 a) Net adjustments for impairment of loans, Item 130 d) Net adjustments for impairment of other financial transactions

Net profit from investments Item 100 b) Profit (loss) from disposal or repurchase of financial assets held to maturity, Item 130 b) Net adjustments for impairment of available-for-sale financial assets, Item 130 c) Net adjustments for impairment of financial assets held to maturity, Item 240 Profit (losses) from disposal of investments

Merger expenses

Gross profit from continuing operationsIncome tax for the period Item 260 Income taxes on continuing operations

Net profit Item 290 Profit (loss) for the year

Proposal for the approval of the financial statements and allocation of profits for the year

Reconciliation of the Income Statement with Reclassified Income Statement



Dear Shareholder,

pursuant to art. 2429, paragraph 2, of the Italian Civil Code and art. 153 of Legislative Decree no. 58 of 24 February 1998 and subsequent amendments and integrations, the Board reports on the results for the financial year and its supervisory activity performed in the financial year ended on 31 December 2008.The Board, which was appointed on 14 April 2008, carried out its supervisory activity prescribed by the law pursuant to art. 2403 of the Italian Civil Code, in accordance with the provisions issued by the Bank of Italy and Consob, and in compliance with its own role.Implementing its work plan, the Board held many meetings with the Top Management and the Heads of the management areas, examining in depth all the principal issues concerning the Company’s management and organisation and overseeing the adequacy of the organisational structure and its proper operation also following the various extraordinary corporate transactions which took place in 2008. In particular, an analysis was conducted not only of the internal control system processes, but also the issues concerning credit, investment services, organisation and commercial activity as well as the company’s management plans. The supervisory activity and the information requested and received from the Company did not reveal any facts or irregularities worthy of mention or such that they required to be reported to the competent Authorities and Supervisory and Control Bodies. Pursuant to the indications given by Consob by communication DEM 1025564 of 6 April 2001, we also specify the following.

Correct management practicesThe Board oversaw proper compliance with the law and the Articles of Association as well as correct management practices both at Board of Directors' meetings, which it has always attended, and at the Meetings with

processes as well as Network structures - previously approved by the Board of directors as part of the acceptance of the Guidelines issued by the Audit Department of the Parent Bank. The Board has profitably and systematically interacted with the Chief Audit Executive (CAE), the head of the internal audit function; the meetings held involved, inter alia, the interim/quarterly reports specifically drawn up for the Board of directors and the Board of Statutory auditors. The Board expresses a positive opinion on the internal audit activity carried out for the Bank. The Company also set up and operated the ORM (“Operational Risk Management”) function for the purpose of evaluating and monitoring the adequacy of operating risk control and management systems and of verifying that transactions and initiatives are taken by the Bank to mitigate business risks. In the performance of its activity, the Board meat the Head of the “O.R.M.” function to assess, among other things, its operations and to examine the quarterly reports prepared by the O.R.M. function. The Board expresses a positive opinion on the activity performed by the Head of the Risk Management function.On 7 May 2008, as part of the implementation of the Group’s Organisational Model of the Compliance Function, the Board of directors appointed the Bank’s Compliance Contact also by signing the related outsourcing contract. In carrying out its activity, the Board has frequently met the Head of the Compliance Function and has positively evaluated the reports, plans and activity performed by the Function in question. In addition, the Board took note of the recently set-up Audit Committee which, as requested by the Board of directors, is responsible for providing support to the management body in assessing the effectiveness and efficiency of the overall internal control system. The Audit Committee, set up on 17 June 2008 by the Board of directors which also appointed its members, started its activity on 15 July 2008; the meetings held by the Committee will be

the Top Management and the Heads of the various Areas and Functions of the Bank. The Board can assert that, on the basis of the information obtained, the resolutions passed comply with legal regulations and with the Articles of Association, are not in conflict of interest, are in line with administrative prudence and do not jeopardise the Bank’s financial stability. Our examinations did not reveal that the Bank entered into blatantly risky or careless transactions or transactions which may prejudice the integrity of the company’s net assets. With regard to the collapse of the US Bank Lehman Brothers, the Board of Statutory auditors has promptly verified the relationships entertained by Finecobank with the aforesaid insolvent bank and noticed that the transactions in place and the amounts involved did not raise concern.

Organizational structureIn 2008 the Board of Statutory auditors supervised the initiatives aimed at improving the business management and took note of the amendments made to the Bank’s head office and network structures, its organisational chart and internal regulations.Following the extraordinary transactions which occurred in 2008, the Bank adopted the necessary amendments to the Articles of Association.The Board took note of the implementation of the Guidelines issued by the Parent Bank and of the consequent organisational changes made by the Bank to align its structure to the target organisational model of the Group.

Internal control systemThe Board noticed that the Internal Audit activity was outsourced to UniCredit Audit S.p.A., a 100% subsidiary of UniCredit S.p.A. and entails the performance of internal audit procedures mainly with regard to group companies. In the performance of its activity the Board verified compliance with the Audit plan - in terms of both central structures and

Report of the Board of Statutory Auditors


Meetings held by the Shareholders, the Board of directors and the Supervisory BodyIn 2008 the Board of Statutory auditors in office attended 2 Shareholders’ meetings, 8 Board of directors’ meetings and 4 Audit Committeès meetings. The Board of Statutory auditors met 22 times. The Chairman of the Board took part in the meeting of the Supervisory Body set up pursuant to Legislative Decree no. 231 of 2001.

ConclusionsThe Board, based on the supervisory activity performed, can reasonably guarantee that the activity carried out by FinecoBank S.p.A. was conducted in accordance with the Law and the Articles of Association. Moreover, the Board underlines that in the performance of its duties it did not notice any irregularities pursuant to art. 149, paragraph 3, of Legislative Decree no. 58/98.Having received the financial statements as at 31 December 2008 with the Directors’ Report on Operations by the legal deadline, having acknowledged the results stated in the financial statements and having also received the audit report with no significant remarks from the Independent Auditors, the Board agrees with the proposal on the allocation of the profits for the year expressed by the Board of directors.

Milan, 3 April 2009

Noris Gian-Carlo Gaccioli, ChairmanAntonio Passantino, Statutory auditorGabriele Villa, Statutory auditor

Transactions with related parties and atypical and/or unusual transactions The dealings with group companies and other related parties are clearly specified in the financial statements, especially in the Notes and the Directors’ Report on Operations; based on the information available they appear to be at arms’ length.No atypical and/or unusual transactions are reported.In line with the directives issued by the Parent Bank and in accordance with internal directives, the information flows which ensure a correct and systematic recording of related party transactions are guaranteed.

Relations with the Independent AuditorsIn accordance with art. 150, paragraph 3, of Legislative Decree no. 58/98, the Board held periodic meetings with the Independent Auditors which did not highlight any particular facts worthy of notice or considered reprehensible pursuant to art. 155, paragraph 2, of Legislative Decree no. 58/98.The Board reminds that KPMG has regularly carried out - based on the resolution passed on 14 April 2008 by the Ordinary shareholders' meetings of FinecoBank S.p.A. - the audit assignment and the periodical verifications. The Board of Statutory auditors is not aware of any other assignments given to the aforesaid Independent Auditors in 2008, subject to the provisions of specific legal regulations.

Complaints pursuant to art. 2408 of the Italian Civil Code In 2008 no complaints were filed pursuant to Article no. 2408 of the Italian Civil Code.

Opinions issued in accordance with the lawThe Board issued a favourable opinion, pursuant to art. 2389, third paragraph of the Italian Civil Code, in relation to the emoluments paid to Directors holding special offices.

attended by the Chairman of the Board of Statutory auditors or another statutory auditor acting, by proxy, on behalf of the latter. The Board of Statutory auditors has been constantly in touch with the Audit Committee by frequently attending its meetings and has closely collaborated with the Committee in relation to the shared control objectives.Furthermore, the Board of Statutory auditors attended the meetings of the Supervisory Body set up pursuant to Legislative Decree no. 231 of 2001 and, in that respect, it acknowledged the resolution passed by the Board of directors on 14 April 2008 to postpone the renewal of the aforesaid Body.

Administrative-accounting systemThe Board oversaw - also by visiting the Functions and by holding regular meetings with the officers in charge - the administrative-accounting system and verified that it was adequate and reliable to provide a true and fair view of the company’s business activity.The Board acknowledges that the financial statements as at 31 December 2008 were been drawn up in accordance with the International Accounting Standards (IAS/IFRS) approved by the European Commission as established by Community Regulation no. 1606 of 19 July 2002 and with the instructions issued by the Bank of Italy through Circular letter no. 262 of 22 December 2005. The financial statements of FinecoBank S.p.A. as at 31 December 2008 comply with the IFRS and the IAS approved by the European Union, without any departure and with the appropriate disclosure of any reclassifications made and related information.The Board of Statutory auditors agree with the recording of goodwill under balance sheet assets in the financial statements as at 31 December 2008 since it represents the value deemed to be recoverable from future business operations.


Independent Auditors’ Report

Niccolò CeciItaly

Lucia Rossi De GasperisItaly

«There is always a way to meet the customer’s needs. Along this path, our experience serves as our compass and the customer’s satisfaction is our fi nal destination. The work we do along the entire journey is our commitment. The certainty of the result is our strength.»

«Every day, my work requires the use of both brain and heart. Using your brain means creating value with each service delivered. And using your heart means letting the customer feel the commitment you put into your work.»


Bank Financial Statements

Balance Sheet 68

Income Statement 69

Statement of changes in shareholders' equity 70

Statement of cash flow 72



Balance Sheet

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

10. Deposits from banks 865,332,374 3,707,074,681 (2,841,742,307) -76.7%

20. Amounts due to customers 12,637,239,133 8,960,213,345 3,677,025,788 41.0%

40. Financial liabilities held for trading 130,216,624 66,164,437 64,052,187 96.8%

60. Hedge derivatives 155,921,674 2,110,344 153,811,330 7,288.4%

80. Tax liabilities 20,654,695 17,476,088 3,178,607 18.2%

a) current 5,653,091 13,979,976 (8,326,885) -59.6%

b) deferred 15,001,604 3,496,112 11,505,492 329.1%

100. Other liabilities 283,945,291 205,906,440 78,038,851 37.9%

110. Employee severance payment fund 4,582,444 3,618,634 963,810 26.6%

120. Provisions for contingencies and charges: 87,217,764 38,527,926 48,689,838 126.4%

b) other provisions 87,217,764 38,527,926 48,689,838 126.4%

130. Valuation reserves (14,663) 564,436 (579,099) -102.6%

160. Reserves 91,310,429 87,466,782 3,843,647 4.4%

170. Share premium account 1,934,113 - 1,934,113 -

180. Share capital 200,070,431 199,850,987 219,444 0.1%

200. Net profit (loss) for the year 91,834,376 62,897,498 28,936,878 46.0%

Total liabilities and shareholders’ equity 14,570,244,685 13,351,871,598 1,218,373,087 9.1%

ASSET ITEMS 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

10. Cash and cash equivalents 2,453 356,575 (354,122) -99.3%

20. Financial assets held for trading 39,503,672 46,933,767 (7,430,095) -15.8%

30. Financial assets designated at fair value - 5,109,262,212 (5,109,262,212) -100.0%

40. Available-for-sale financial assets 417,660 78,982,847 (78,565,187) -99.5%

60. Loans to banks 12,746,885,541 1,866,951,532 10,879,934,009 582.8%

70. Customer loans 1,219,418,485 6,034,891,167 (4,815,472,682) -79.8%

80. Hedge derivatives 1,093,982 21,370,139 (20,276,157) -94.9%

90. Adjustments to the value of financial assets under macro-hedge (+/-) 40,797,591 (22,439,000) 63,236,591 281.8%

100. Equity investments - 1,875,000 (1,875,000) -100.0%

110. Property, plant and equipment 10,487,140 7,460,171 3,026,969 40.6%

120. Intangible assets 99,026,021 30,060,327 68,965,694 229.4%

of which - goodwill 89,601,768 21,583,442 68,018,326 315.1%

130. Tax assets 76,655,336 27,628,786 49,026,550 177.4%

a) current 31,879,713 - 31,879,713 -

b) prepaid 44,775,623 27,628,786 17,146,837 62.1%

140. Non-current assets and discontinued operations 144,608 144,608 - -

150. Other assets 335,812,196 148,393,467 187,418,729 126.3%

Total assets 14,570,244,685 13,351,871,598 1,218,373,087 9.1%


Income Statement

INCOME STATEMENT 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

10. Interest income and similar revenue: 716,449,375 484,300,272 232,149,103 47.9%

20. Interest expense and similar charges (540,870,692) (341,301,511) (199,569,181) 58.5%

30. Net interest income 175,578,683 142,998,761 32,579,922 22.8%40. Net commission income 319,304,973 237,626,842 81,678,131 34.4%

50. Net commission expense (157,040,973) (96,676,281) (60,364,692) 62.4%

60. Net commissions 162,264,000 140,950,561 21,313,439 15.1%70. Dividends and similar income 1,720,538 1,435,990 284,548 19.8%

80. Net income from trading activities 11,491,565 2,018,135 9,473,430 469.4%

90. Net income from hedging activities 3,016,557 4,295,871 (1,279,314) -29.8%

100. Profit (loss) from disposal or repurchase of: 200,992 54,837 146,155 266.5%

a) loans 200,992 54,837 146,155 266.5%

110. Net income from financial assets and liabilities designated at fair value (2,539,669) 2,321,831 (4,861,500) -209.4%

120. Total income 351,732,666 294,075,986 57,656,680 19.6%130. Net adjustments for impairment of: 9,778,663 (17,076,018) 26,854,681 157.3%

a) loans 3,792,553 (11,927,141) 15,719,694 131.8%

b) available-for-sale financial assets 10,179,043 (1,839,745) 12,018,788 653.3%

d) other financial transactions (4,192,933) (3,309,132) (883,801) 26.7%

140. Net result of financial management activities 361,511,329 276,999,968 84,511,361 30.5%150. Administrative expenses (246,450,422) (179,750,001) (66,700,421) 37.1%

a) personnel expenses (60,308,758) (52,193,454) (8,115,304) 15.5%

b) other administrative expenses (186,141,664) (127,556,547) (58,585,117) 45.9%

160. Net provisions for contingencies and charges (9,776,362) (9,775,942) (420) 0.0%

170. Net adjustments to property, plant and equipment (3,765,783) (2,112,542) (1,653,241) 78.3%

180. Net adjustments to intangible assets (4,740,121) (7,961,038) 3,220,917 -40.5%

190. Other operating expenses 40,237,668 39,263,598 974,070 2.5%

200. Operating costs (224,495,020) (160,335,925) (64,159,095) 40.0%210. Gains (losses) from investments - 74,576 (74,576) -100.0%

240. Profit (loss) from sale of investments (75,604) 39,219 (114,823) -292.8%

250. Profit (loss) from continuing operations before tax 136,940,705 116,777,838 20,162,867 17.3%260. Income taxes on continuing operations (45,106,329) (53,880,340) 8,774,011 -16.3%

270. Profit (loss) from continuing operations after tax 91,834,376 62,897,498 28,936,878 46.0%290. Net profit (loss) for the year 91,834,376 62,897,498 28,936,878 46.0%



Statement of changes in shareholders' equity

Statement of Changes in Shareholders' Equity at 31 December 2008

BALA

NCE

AT 3

1 DE

C. 2

007

ADJU

STM

ENT

TO O

PENI

NG B

ALAN

CES

BALA

NCE

AT 0

1.01

. 200

8

ALLOCATION OF THE RESULT FOR THE PREVIOUS YEAR

CHANGES DURING THE YEAR

RESE

RVES

DIVI

DEND

S AN

D OT

HER

ALLO

CATI

ONS

CHAN

GES

IN R

ESER

VES

TRANSACTIONS ON THE SHAREHOLDERS' EQUITY

PROF

IT (L

OSS)

AS

AT 3

1.12

.08

SHAR

EHOL

DERS

' EQU

ITY

AS A

T 31

.12.

08

ISSU

ES O

F NE

W S

HARE

S

PURC

HASE

OF

OWN

SHAR

ES

EXTR

AORD

INAR

Y DI

STRI

BUTI

ON O

F DI

VIDE

NDS

CHAN

GES

IN E

QUIT

IES

DERI

VATI

VES

ON O

WN

SHAR

ES

STOC

K OP

TION

S

Share capital:

a) ordinary shares 199,850,987 199,850,987 219,444 200,070,431

b) other shares

Share premium account 1,934,112 1,934,112

Reserves:

a) retained earnings 87,466,782 87,466,782 8,392,683 (4,549,036) 91,310,429

b) other -

Valuation reserves:

a) available for sale 564,436 564,436 (579,099) (14,663)

b) cash flow hedges Capital instruments

c) other -

Own shares

Azioni proprie -

Profit (loss) for the year 62,897,498 62,897,498 (8,392,683) (54,504,815) 91,834,376 91,834,376

Shareholders' equity 350,779,703 - 350,779,703 - (54,504,815) (3,194,023) - - - 219,444 - - 91,834,376 385,134,685


Statement of Changes in Shareholders' Equity at 31 December 2007

BALA

NCE

AT 3

1 DE

C. 2

006

ADJU

STM

ENT

TO O

PENI

NG B

ALAN

CES

BALA

NCE

AT 0

1.01

. 200

7ALLOCATION OF THE

RESULT FOR THE PREVIOUS YEAR

CHANGES DURING THE YEAR

RESE

RVES

DIVI

DEND

S AN

D OT

HER

ALLO

CATI

ONS

CHAN

GES

IN R

ESER

VES

TRANSACTIONS ON THE SHAREHOLDERS' EQUITY

PROF

IT (L

OSS)

AS

AT 3

1.12

.07

SHAR

EHOL

DERS

' EQU

ITY

AS A

T 31

.12.

07

ISSU

ES O

F NE

W S

HARE

S

PURC

HASE

OF

OWN

SHAR

ES

EXTR

AORD

INAR

Y DI

STRI

BUTI

ON O

F DI

VIDE

NDS

CHAN

GES

IN E

QUIT

IES

DERI

VATI

VES

ON O

WN

SHAR

ES

STOC

K OP

TION

S

Share capital: -

a) ordinary shares 199,850,987 199,850,987 199,850,987

b) other shares

Share premium account

Reserves:

a) retained earnings 43,029,691 43,029,691 40,879,005 3,558,086 87,466,782

b) other 2,416,723 2,416,723 (2,416,723) -

Valuation reserves:

a) available for sale 1,653,426 1,653,426 (1,088,990) 564,436

b) cash flow hedges Capital instruments

c) other 1,141,362 1,141,362 (1,141,362) -

Own shares

Azioni proprie - - -

Profit (loss) for the year 65,103,367 65,103,367 (40,879,005) (24,224,362) 62,897,498 62,897,498

Shareholders' equity 313,195,556 - 313,195,556 - (24,224,362) (1,088,989) - - - - - - 62,897,498 350,779,703



Statement of cash flow

Indirect method

A. OPERATING ACTIVITIES 31.12.2008 31.12.2007

1. Operations 699,092 162,400,819- net profit 91,834,376 62,897,498

- capital gains/losses on financial assets held for trading and on assets/liabilities designated at fair value (17,913,133) 32,765,094

- capital gains/losses on hedging activities (3,016,557) (4,295,871)

- net adjustments for impairment (7,872,728) 19,087,478

- net adjustments to property, plant and equipment and intangible assets 8,505,904 10,073,580

- net provisions for contingencies and charges and other costs/revenue 9,945,930 9,956,487

- unpaid taxes (27,423,597) 12,799,586

- other adjustments (53,361,103) 19,116,967

2. Cash flows from/used in financial assets 4,020,236,948 (3,998,287,158)- financial assets held for trading 32,446,827 (991,969,907)

- financial assets designated at fair value - (3,250,660,098)

- available-for-sale financial assets 88,744,230 917,123

- loans to banks: other loans (675,749,231) (499,706,854)

- customer loans 4,804,339,610 765,147,557

3. Cash flows from/used in financial liabilities (229,544,488) (22,014,979)

- deposits from banks : other deposits 1,359,464,082 3,798,299,490- customer accounts (2,532,501,834) 2,565,478,652

- deposits from banks : other deposits 3,678,212,019 1,215,978,342

- financial liabilities held for trading 94,545,519 (358,045)

- other liabilities 119,208,378 17,200,541

Net cash from/used in operating activities 5,380,400,122 (37,586,849)B. INVESTING ACTIVITIES1. Cash flows from

- sale of equity investments 101,875,000 258,228

- net dividends collected on equity investments 257,159 1,406,500

- property, plant and equipment 466,929 18,423

- intangible assets 507,046 -2. Cash flows used in

- purchases of equity investments (100,000,000) (1,015,000)

- purchases of property, plant and equipment (7,259,682) (2,588,605)

- purchases of intangible assets (74,212,860) (5,230,598)

Net cash from/used in investing activities (78,366,408) (7,151,052)C. FINANCING ACTIVITIES

- issue/purchases of equity instruments (2,395,479) -

- dividends and other distributions (54,504,815) (24,224,362)

Net cash from/used in financing activities (56,900,294) (24,224,362)NET CASH FOR THE PERIOD 5,245,133,420 (68,962,263)RECONCILIATION

Balance sheet items

Cash and cash equivalents at the beginning of the year 811,740,109 881,032,989

Net increase/decrease in cash and cash equivalents 5,245,133,420 (68,962,263)

Cash and cash equivalents : effect of exchange rate changes 3,102,069 (330,617)

Cash and cash equivalents at the end of the year 6,059,975,598 811,740,109


“Cash on hand and deposits with central banks” means deposits with banks accounted for under item 10 of balance sheet assets “Cash on hand and deposits with central banks” and cash equivalents represented by short-term and highly-liquid financial investments recorded in item 60 of balance sheet assets “Loans to banks” and item 10 of balance sheet liabilities “Deposits from banks”.

Attention is drawn to the fact that the Liquidity generated/absorbed by financial assets and liabilities through continuing operations is affected by a number of corporate transactions that occurred in 2008 which, except for the merger with UniCredit Xelion banca S.p.A., did not generate an increase in total liquidity.

The merger with UniCredit Xelion Banca S.p.A. increased the total net liquidity generated in the financial year by 2,402,294,708, equal to the Cash on hand and deposits with central banks stated in the financial statements of UniCredit Xelion Banca S.p.A. at the end of the 2007 financial year.

Paolo MassolaRomania

Agnieszka KukPoland

«Often, at the end of a demanding day of hard work, we feel beat and dead tired and look for the meaning of all this. Often enough we don’t need to look very far, because it’s there, in our email inbox: a message from an unknown colleague with “a big thank for your help” in the subject fi eld.»

«Monday morning, my smiling face and the confi dence that I am the right person in the right place. On the front of my desk is a plaque about my customers: SERVE ME THE WAY YOU WANT ME TO SERVE YOU. This is the golden rule of my commitment, which has given me the power and passion to work every day for the last ten years.»


Notes

Part A) Accounting policies 77

Part B) Information on the balance sheet 105

Part C) Information on the income statement 161

Part D) Segment reporting 187

Part E) Information on risks and hedging policies 189

Part F) Information on shareholders' equity 253

Part G) Combination transactions involving businesses or business divisions 259

Part H) Related party transactions 263

Part I) Payment agreements based on own capital instruments 275


Part A) Accounting policies

A.1) General Part 78

A.2) Part relating to the main Financial Statement items 80

Notes


A.1) General Part

Section 1 - Statement of conformity with international accounting standardsThese financial statements were drawn up in accordance with the accounting standards issued by the International Accounting Standards Board (IASB), including the SIC and IFRIC interpretations, approved by the European Commission, as envisaged by EU Regulation no. 1606/2002 implemented in Italy by Legislative Decree no. 38 of 28 February 2005, until 31 December 2008 (see also Section 4 – Other aspects). It is also an integral part of the Annual Report pursuant to paragraph 1 of art.154-ter of the Consolidated Finance Act (”TUF”) (Legislative Decree no. 58 of 24 February 1998).The Bank of Italy - whose powers already set forth by Legislative Decree no. 87/92 as regards the financial statements of banks and financial companies subject to supervision have been confirmed by said decree - established the formats for the financial statements and for the relative notes in its Circular no. 262 of 22 December 2005.

Section 2 - General principles of preparation As stated earlier on, the financial statements were drawn up in accordance with the International Accounting Standards approved by the European Commission up to and including 31 December 2008. The following documents were used for interpretation and support purposes despite they have not been approved by the European Commission:- Framework for the Preparation and Presentation of Financial Statements issued by IASB in 2001;- Implementation Guidance, Basis for Conclusions, IFRIC and any other documents drafted by the IASB or the IFRIC (International

Financial Reporting Interpretations Committee) to complement the international standards issued;- the interpretation documents concerning the application of the IAS/IFRS in Italy prepared by the OIC (Organismo Italiano di

Contabilità- Italian Accounting Body) and by ABI (Associazione Bancaria Italiana – Italian Banking Association).Associazione Bancaria Italiana – Italian Banking Association).Associazione Bancaria Italiana

The financial statements were drawn up using the Euro as the accounting currency, and comprise the Balance Sheet, the Income Statement, the Statement of Changes in Shareholders’ Equity, the Cash Flow Statement and the Notes; the latter ones, however, were drawn up in thousands of . The valuation principles are adopted on a going concern and accruals basis and satisfy the general principles of relevance and significance of accounting information and prevalence of economic substance over legal form. Each material class of similar items is presented separately. Items of a dissimilar nature or function are presented separately unless they are immaterial. Offsetting of assets with liabilities or income with expenses is prohibited, unless it is explicitly endorsed or required by a standard or by an interpretation. The balance sheet faces do not contain items with null values for both the year under review and the previous one. Revenues in the income statement are indicated without a sign, while costs are indicated in brackets.

Part A) Accounting policies


Section 3 - Events after the balance sheet dateNo significant events occurred after the balance sheet date which require adjustments to the balances stated in the financial statements as at 31 December 2008.

Section 4 - Other aspectsFrom 1 January 2008 the bonds issued by the Parent Bank, subscribed in order to invest liquidity and, at the same time, to be used in purchase agreements with retail customers, were reclassified as Loans and Receivables and recorded in item 60 “Loans to banks” in accordance with an amended Group policy, so as to bring them in line with the business model. As at 31 December 2007 the same bonds had been recorded in Financial assets designated at fair value based on the policies of the new Group then in force.When drawing up the financial statements in accordance with IFRS, the top management must formulate valuations, estimates and assumptions that influence the application of the accounting principles and the amounts of assets, liabilities, costs and revenue accounted in the period.The estimates and related assumptions are based on past experience and other factors deemed reasonable in the case in point and have been adopted to assess the book value of assets and liabilities which is not easy to obtain from other sources. These assumptions and estimates are regularly revised.Any changes arising from the revised accounting estimates are recognised in the period in which the revision made if the latter only concerns the period in question. In the event that the revision concerns both the current period and future ones the change is recorded in the period in which the revision is made and the future periods concerned.In accordance with the provisions of IAS 10, the Bank authorised the publication of these financial statements within the terms prescribed by current legal regulations.

Notes


Part A) Accounting policies (CONTINUED)

A.2) Part relating to the main Financial Statement itemsThis chapter sets out the accounting standards adopted to prepare the annual financial statements as at 31 December 2008. The presentation of accounting standards is divided into the stages of recognition, classification, measurement, and derecognition of the various asset and liability items. A description of the related economic effects is included for each of the above stages, when relevant.

1 - Financial assets held for tradingA financial asset is classified as held for trading if:1) if it is acquired mainly for the purpose of selling in the short term;2) it is part of a portfolio of financial instruments managed jointly and for which there is a strategy aimed at achieving profits over the

short term;3) it is a derivative contract (except for derivative contracts which represent financial guarantees, see chapter 17, and those designated

as hedging instruments, see chapter 6).

Like all other financial instruments, financial assets held for trading are initially recognised at fair value, which corresponds to the consideration paid, excluding transaction costs and revenue which are immediately recorded in the income statement provided that they are directly attributable to that financial asset.

Also subsequently, such financial assets are valued at fair value and the effects of the application of this valuation criterion are booked in the income statement.

Any gains and losses realised on the sale or on the redemption, and any unrealised gains and losses arising from fair value changes in the Trading portfolio, are booked in the income statement under item 80 “Net income from trading activities”, except for financial derivatives associated with the “fair value option” the economic result of which is booked under item 110 “Net income from financial assets and liabilities at fair value” (see chapter 5). If the fair value of a financial asset becomes negative, which may happen for derivative contracts or “technical overdrafts” in securities, the asset is accounted for under item 40 "Financial liabilities held for trading”.

A financial instrument or any other contract is considered a derivative if it has the following characteristics:1) its value changes in relation to changes in an interest rate, in the price of a financial instrument, in the price of a commodity, in a

foreign exchange rate, in a price or interest rate index, in a rating or in rating indices or other pre-established variable (generally referred to as "underlying");

2) it does not require an initial net investment, or it entails a lower initial net investment than the one required for other types of contracts from which a similar fluctuation with respect to changes in market factors is expected;

3) is settled at invoice date.

An embedded derivative is a component of a hybrid (combined) instrument that also includes a primary, non-derivative contract, with the resulting effect that some of the cash flows of the overall instrument vary in a manner similar to that of the derivative alone. A derivative associated to a financial instrument but contractually transferable separately from that instrument, or having a different counterparty than said instrument, is not considered to be an embedded derivative but a separate financial instrument.

An embedded derivative is separate from the primary contract and is recorded as a derivative if:1) the economic characteristics and the risks of the embedded derivative are not strictly correlated to those of the host contract;2) a separate instrument with the same conditions as the embedded derivative would satisfy the definition of a derivative; and3) the hybrid instrument is not measured at fair value, with effect recorded in the income statement.


Should there be a requirement to separate an embedded derivative from its primary contract, but it is not possible to separately measure the embedded derivative upon acquisition or at a subsequent measurement date, the entire combined contract is treated as a financial asset or liability held for trading.

In cases where the embedded derivatives are separated from the primary contracts, these are recorded according to their relative category.

The European Commission implemented the amendments to IAS 39 and IFRS 7 “Riclassification of financial assets”, approved by the IASB, through Regulation no. 1004 of 15 October 2008. These amendments, which have retrospective effect to 1 July 2008, allow, after initial recognition, to reclassify certain financial assets in headings other than “held for trading” and “available for sale”.

In particular, the reclassification can apply to:- financial assets held for trading or available for sale which would have satisfied the definition provided for by the International

Accounting Standards for loan portfolios (in case those assets were not respectively classified as held for trading or available for sale upon initial recognition) if the entity intends and can hold them in the foreseeable future or until expiry;

- “only in exceptional circumstances” those financial assets held for trading which upon initial recognition satisfied the requirements for being classified as loans. Art. 2 of the aforesaid Regulation also specifies that « the current financial crisis is considered as one of those exceptional circumstances which can justify the use of this [reclassification] possibility by companies”.

The Bank has not reclassified any financial assets held for trading.

2 - Available-for-sale financial assetsThese are non-derivative financial assets which are not classified as loans, held-to-maturity financial assets, assets designated at fair value. These assets are held for an undefined period of time and meet the need for access to liquidity or to handle changes in interest rates, exchange rates or prices.

Money-market securities, debt securities and equities may be classified as financial investments available for sale.

Available-for-sale financial assets are initially measured at fair value, which normally corresponds to the transaction cost including any ancillary costs and revenue directly attributable to the instrument and less any commissions.

The interest accrued on interest-bearing instruments is accounted for at amortised cost, using the effective interest rate method.

These assets are subsequently measured at fair value and, as said earlier on, the interest amount is recorded in the income statement at amortised cost. Any gains and losses arising from changes in fair value are recorded under item 130. “Valuation reserves” in Shareholders’ equity - except for impairment losses and exchange gains and losses on monetary assets (debt securities) which are stated respectively in item 130.b) “Net adjustments for impairment of available-for-sale financial assets” and item 80. “Net income from trading activities” – until the financial asset is sold, that is the time when the cumulative gains and losses are recorded in the income statement under item 100.b) “Profits (losses) from sale or repurchase of available for sale financial assets”.

Capital instruments (shares) that are not listed in an active market and the fair value of which cannot be determined reliably are valued at cost.

Should there be objective evidence of an asset’s impairment loss, the accumulated loss, , which was recognised directly in item 130 of shareholders' equity "Valuation reserves", is transferred to the income statement under item 130.b) “Net adjustments for impairment of available-for-sale financial assets”.

Notes



Evidence of a permanent loss in value of a debt instrument is the existence of circumstances indicating that the entity’s financial hardships are such as to jeopardise the collection of the principal and related interest.

The existence of impairment of equity instruments is assessed considering not only the difficulty in repaying the debt on the part of the issuer, but also other indicators such as the fair value falling below cost and adverse changes in the environment in which the company operates.

In the event that the reduction in the fair value below cost exceeds 50% or lasts for longer than 18 months, the impairment loss is nevertheless deemed to be permanent except for cases where evidence to the contrary can be proved.

Conversely, where the fall in the fair value of the instrument below cost is less than or equal to 50% but exceeds 20% or lasts for no more than 18 months but no less than 9 months, the Bank analyses further income and market indicators.

If the results of the above analysis are such that may cast significant doubt on the ability to recover the amount originally invested, then an impairment loss is recognised.

The amount transferred is equal to the difference between the book value (purchase cost net of any impairment previously recorded in the income statement) and the current fair value.

In the case of instruments valued at cost, the amount of the loss is determined as the difference between the book value of such instruments and the present value of the estimated future cash flows, discounted using the current market yield of similar financial assets.

If, in a subsequent period, the fair value of a debt instrument increases and such increase may be objectively correlated to an event that took place in a period following the one in which the impairment loss was recognised in the income statement, such loss is reversed by recording the corresponding amount in the same item of the income statement. The writeback cannot result in a book value that is higher than the value obtained from application of the amortised cost had the impairment not been recognised.

Impairment losses with respect to equities, recognised in the income statement, are not subsequently written back to the income statement but to shareholders' equity, even if the reasons that led to the recording of a writedown no longer exist.

3 - Held-to-maturity financial assetsInvestments held to maturity are represented by non-derivative financial instruments with fixed or determinable payments and fixed maturity, which the company intends and is able to hold until maturity.

If during the year a significant amount of these investments is sold or reclassified before maturity, the remaining held-to-maturity financial asset would be reclassified as available for sale and the use of the portfolio in question would be precluded for the following two financial years, unless the sales or reclassifications:a) are so close to maturity or to the option date of the financial asset that any fluctuations in the market interest rate would not have a

significant effect on the fair value of said assets;b) occurred after the collection of essentially all of the original principal of the financial asset, through planned or advance ordinary

payments; orc) are attributable to an isolated, uncontrollable and non-recurring event that one cannot, therefore, reasonably foresee.

After the initial recognition at fair value, which usually corresponds to the consideration paid including any transaction costs and revenue directly attributable to the purchase or the issue of the financial asset (provided that they are yet to be paid), such assets are


valued at amortised cost using the effective interest rate method. Any gains and losses are recognised in the income statement under item 100.c) “Profits (losses) from sale or repurchase” when such assets are derecognised.

Should there be objective evidence that the assets is impaired, the amount of the loss is measured as the difference between the book value of the asset and the present value of estimated future cash flows, discounted based on the original effective interest rate of the financial asset. The book value of the asset is therefore reduced and the amount of the loss is recognised in the income statement under item 130.c) “Net adjustments for impairment of held-to-maturity financial assets”.

If, during a subsequent period, the amount of the impairment loss decreases and this reduction can be objectively linked to an event that occurred after its recognition (such as an improvement in solvency of the debtor), the impairment amount previously recorded is eliminated. The writeback cannot result in a book value that is higher than the value obtained from application of the amortised cost had the impairment not been recognised. The writeback is recorded under the same income statement item.

At the balance sheet date the Bank did not hold any financial assets classified as “Held-to-maturity financial assets”.

4 - Loans Loans are represented by non-derivative financial assets for amounts due by customers and banks, with fixed or determinable payments and which are not quoted on an active market. Loans are recognised at the date the contract is signed, which normally coincides with the date the loan is granted to the counterparty.

These items also include debt securities with similar characteristics.

After the initial recognition at fair value, which usually corresponds to the consideration paid including any transaction costs and revenue directly attributable to the purchase or the disbursement of the financial asset (provided that they are yet to be settled), such loans are valued at amortised cost using the effective interest rate method, amended where necessary for any writedowns/writebacks arising from the evaluation process.

Gains (losses) on loans, where not hedged, are recorded in the income statement:- when the financial asset in question is derecognised, under item 100.a) “Gains (losses) from assignment of loans”;or:- when the financial asset becomes impaired, under item 130.a) “Net adjustments for impairment of loans”.

The interest on loans disbursed is recorded under item 10 "Interest income and similar revenue" on an accrual basis.Late-payment interest is recognised in the income statement upon collection.

A loan is considered to be impaired when it is deemed that it will probably not be possible to recover the entire amount, based on the original contractual conditions, or an equivalent value.

The criteria used to determine the adjustments to loans are based on the discounting of expected cash flows for principal and interest, net of recovery charges and any advance payments received; in order to determine the present value of the cash flows, the fundamental elements are represented by the identification of estimated cash flows, the related maturity dates and the discounting rate to apply.

In fact, the amount of the loss, for impaired exposures classified as non-performing and problem loans, according to the categories specified later on, is obtained as the difference between the book value and the present value of the estimated cash flows, discounted at the original interest rate of the financial asset.

Notes



Where it was not possible to obtain the original interest rate of the financial asset that is being discounted for the first time in the financial year of the transition to the application of the IAS/IFRS, or where it would have been extremely costly to obtain such information, the average rate applied is the one recorded on performing positions in the year in which the original impairment of the asset had taken place. Such rate was maintained constant also in the following financial years.

The timeframes for recovering the amounts are estimated on the basis of the maturity dates agreed with the debtors or the deadlines set out in the business plan or reasonable forecasts, based on the historical experience of the recoveries observed by similar classes of loans, taking account of the technical form, the geographical location, the type of collateral and any other factors deemed relevant.

Loans are subject to verification aimed at identifying those which, following events subsequent to their recognition, show objective evidence of possible impairment loss. These problem loans are periodically reviewed and analysed, at least once a year. Each subsequent change in the amounts or maturity dates of expected cash flows, which generates a reduction compared to the initial estimates, gives rise to an adjustment to income statement item 130.a) "Net adjustments for impairment of loans”.

Value adjustments on impaired exposures are classified as analytical in the aforesaid income statement item also when they are calculated on a lump-sum basis or using statistical data.

Should the quality of the impaired loan improve, and should there be reasonable certainty of timely recovery of the principal and interest, in accordance with the original contractual terms, a writeback is posted to the same income statement item, to the extent of the amortised cost that would have existed had there been no prior writedowns.

A loan is completely eliminated when it is considered unrecoverable or is written off in its entirety. Eliminations are directly recorded under item 130.a) “Net adjustments for impairment of loans” of the income statement and are entered as a reduction in the principal share of the loan. Recoveries of part or entire amounts previously written down are recorded under the same item.

Impaired exposures are subdivided into the following categories:- bad debts - these comprise loans that are formally impaired, consisting of exposures to customers who are insolvent, even if not

established judicially, or equivalent situations. Measurement is usually carried out on a case-by-case basis or, in the event of amounts that are not individually significant, on a lump-sum basis by category of similar exposures;

- problem loans - these refer to loans to subjects experiencing temporary financial difficulties, expected to be resolved within a reasonable amount of time: Problem loans also include exposures that are not classified as non-performing and granted to subjects other than public administrations in respect of which both of the following conditions are met:• they are overdue by more than 270 consecutive days;• the total amount of exposures referred to in the point above and of other amounts expired by less than 270 days towards the same

debtor, is at least equal to 10% of the entire exposure to that debtor.

Problem loans are analytically valued, if deemed advisable, due to the presence of specific elements ; in other cases, instead, they are evaluated by analytically applying the percentages determined on a lump-sum basis according to historical/statistical data;- expired exposures - these represent the entire exposure with respect to counterparties, other than those classified under the

previous categories, which, as at the reporting date, had expired loans or loans past due by more than 90 days.

Retail loans, loans to public entities and to enterprises, in the case of subjects resident or with offices in Italy, are considered impaired if the related exposures are expired or past due by more than 180 days instead of 90 days.

The total exposure is recognised when, as at the reporting date:• the amount has expired and/or is past due,or:


• the average amounts expired and/or past due, recorded on a daily basis in the preceding quarter, are equal to or greater than 5% of the exposure.

Expired exposures are valued on a lump-sum basis using historical/statistical data by applying, where feasible, the riskiness measured by the appropriate risk factor used for Basel II purposes (Loss Given Default).

Collective valuation regards assets portfolios which, although no individual, objective loss items have been identified, can be attributed a latent, measurable loss, also taking into account the risk factors used for the purposes of Basel II requirements.

In particular, each asset having similar credit risk characteristics, proportionate to the type of loan, or the technical form, the business sector, the type of guarantee or other significant factors, is associated with a Probability of Default and a Loss Given Default, homogeneous by class.

The method adopted integrates Basel II provisions with those of the international accounting standards. In fact, the latter exclude expected future losses on loans that have not yet been sustained, but include those already sustained although not yet disclosed at the valuation date, based on the past experience of losses on assets with credit risk characteristics similar to those under consideration.

The parameter which expresses, for the different categories of homogenous exposures, the average delay running between the worsening of a debtor's financial conditions and its classification as an impaired exposure is the “Loss Confirmation Period”.

The collective assessment is therefore calculated as the product of the risk factors used for Basel II requirements (the timeframe of which is one year) and the aforesaid Loss Confirmation Periods, expressed as the fraction of a year and diversified by classes of assets based on the characteristics and the evolution of the credit processes.

Should the aforementioned indicators not be available, the estimated and lump-sum values calculated from internal historical series and sector research are used.

Unsecured loans to residents in Countries with difficulty in repaying debt are generally measured on a lump-sum basis, in order to allocate the relative latent loss on the basis of shared parameters.

Writedowns for loan losses are recorded as a reduction to the book value of the loans, whilst the risk of off-balance-sheet items, such as commitments to disburse loans, is recorded in the income statement under item 130 d) “Net adjustments for impairment of other financial transactions”, with balancing entry under item 120 b) “Provisions for contingencies and charges” of liabilities (except for writedowns due to impairment of guarantees given and related credit derivatives according to IAS 39, which have their balancing entry under item 100 "Other liabilities").

Both assets and liabilities are valued at amortised cost and the related interest is recognised in the income statement.

5 - Financial assets designated at fair valueAny financial asset may be designated at fair value upon initial recognition, except for :- investments in equity instruments which are not listed in active markets and the fair value of which cannot be determined reliably;- derivative instruments.

This category includes financial assets that do not belong to the trading book but whose risk profile is:- related to debt positions which are measured at fair value (see chapter 15 “Financial liabilities designated at fair value”.- managed by means of derivative contracts that do not allow recognition of hedges.

Notes



The accounting treatment of such transactions is similar to the one of “Financial assets held for trading” (see chapter 1), recording the gains and losses, whether realised or unrealised, under item 110. “Net income from financial assets and liabilities at fair value”.

At the balance sheet date the Bank did not hold any financial assets classified as “Financial assets designated at fair value”.

6 - Hedging transactionsDerivative hedging instruments include:a) instruments to hedge the fair value of a recognised asset or liability or of an identified part of said asset or liability;b) instruments to hedge the exposure to changes in cash flows attributable to a specific risk associated to an asset or liability or to an

expected transaction, which may impact the income statement;c) instruments to hedge a net investment in a foreign company whose assets are located or managed in a country or currency other

than the euro.

A derivative financial instrument is classified as a hedging instrument provided that the relationship between the hedging instrument and the hedged item is formally documented, including the risk management objectives, the strategy for undertaking the hedge and the methods used to assess the hedging instrument’s effectiveness. Therefore, both at the start and during the life of the transaction, the hedge using derivative instruments must be highly effective in achieving offsetting changes in fair value or the expected cash flows of the hedged item.

Generally a hedge is considered as such if at the start and in the following periods the hedge is highly effective and its actual results are within a defined range (80% - 125%). The hedge is evaluated based on the consistency of its effects. It must therefore remain highly effective on a prospective basis for all periods in which the hedge is designated.

Effectiveness is measured at the end of each year or interim period, at the reporting date. If verifications do not confirm hedging effectiveness, accounting for the hedging transactions is suspended and the derivative contract is reclassified among trading instruments.

Hedge accounting is discontinued and transactions are no longer accounted for as hedges if the hedge achieved through a derivative instrument ceases or is no longer highly effective; if the derivative expires, is sold, terminated or exercised; the hedged item is sold, expires or is repaid; it is no longer highly probable that the future hedged transaction will take place.

Hedge derivatives are measured at fair value. In particular:1. in the case of fair value hedges, the change in fair value of the hedging instrument is recorded in the income statement under

item 90 “Net income from hedging activities”. Changes in fair value of the hedged item, which are attributable to the risk hedged through the derivative instrument are recorded under the same item of the income statement as the balancing entry of the change in book value of the hedged item. If the hedging relationship ceases to exist, for reasons other than the sale of the hedged item, the difference between the book value of the hedged item at the time the hedging ceases and the book value of the hedge as if it had never existed is recorded in the income statement under the relative interest income or expense items, throughout the residual life of the original hedge, in the case of interest-bearing financial instruments; however, in the case of non-interest bearing financial instruments, the difference is immediately recognised in the income statement under item 90 “Net income from hedging activities”.

If the hedged item is sold or redeemed, the portion of unamortised fair value is immediately recorded in the income statement under item 100 “Profits (losses) from sale or repurchase”; at the balance sheet date the Bank had not entered into any fair value hedges.2. in the case of cash flow hedges, the portion of profit or loss on the hedging instrument that is considered effective is initially

recorded under item 130 of shareholders’ equity “Valuation reserves”. The ineffective part of the hedge, instead, is recognised in the income statement under item 90 “Net income from hedging activities”.


If the cash flow hedge is no longer considered to be effective, or if the hedging relationship ceases, the total amount of gains and losses on the hedging instrument, already recorded in “Valuation reserves” remains there until the transaction occurs or it is no longer expected to take place; in the latter case, any gains or losses are recycled from shareholders' equity to item 80 “Net income from trading activities” of the income statement. At the balance sheet date the Bank had no cash flow hedges in place.

3. hedges of net investments in foreign companies, whose assets are located in a country other than the Eurozone or managed in a currency other than the euro, are recognised in a similar manner as cash flow hedges:• the effective part of the change in value of the hedging instrument is recorded directly under item 130 “Valuation reserves” and

shown in the statement of changes in shareholders' equity;• the ineffective part of the hedging instrument, instead, is recognised in the income statement under item 90 “Net income from

hedging activities” of the income statement.

The profit or loss on the hedging instrument relative to the effective part of the hedge is classified under shareholders’ equity and recorded in the income statement at the time the net investment in the company is sold; At the balance sheet date the Bank had no hedges of net investments in foreign companies in place.4. for macro-hedging transactions, IAS 39 allows the subject of fair value hedges against interest rate risk to be not only a single

asset or liability but even a monetary amount, resulting from several financial assets and liabilities (or portions thereof), so that a set of derivative contracts may be used to reduce fluctuations in fair value of the hedged items from changes in market interest rates. Net amounts from negative balances of assets and liabilities cannot be the subject of macro-hedging.

As for fair value hedges, a macro-hedge is considered to be highly effective if at the beginning, as well as throughout its life, the fair value changes of the hedged monetary amount are offset by fair value changes in the hedging derivatives, and if the effective results fall within the range of 80-125%.

The respective balance, positive or negative, of changes in the value of assets and liabilities subject to macro-hedging is recorded under item 90 of assets or 70 of liabilities, as a balancing entry to item 90 “Net income from hedging activities” of the income statement.

The hedge ineffectiveness is represented by the difference between the change in fair value of the hedging instruments and the change in the fair value of the hedged item. The ineffective part of the hedge, instead, is recognised in the income statement under item 90 “Net income from hedging activities”.

If the hedging relationship ceases to exist, for reasons other than the sale of the hedged items, the revaluation/writedown recorded under the present items is recorded in the income statement under interest income or expense, throughout the residual life of the hedged assets or liabilities. In the event that the latter are sold or redeemed, the unamortised portion of the fair value is immediately recognised under item 90 “Net income from hedging activities” in the income statement.

7 - Equity investmentsEquity investments are considered as shareholders’ equity instruments and, as a result, as financial instruments as defined by IAS 32.

Investments in shareholders’ equity instruments, made with the intention of establishing or maintaining a long-term operating relationship with the subsidiaries can be considered as “strategic investments”.

More specifically they can be subdivided into:

SubsidiariesSubsidiaries are defined as companies in which:- the reporting entity holds, either directly or indirectly through its subsidiaries, more than half of the voting rights unless, in exceptional

circumstances, it may be demonstrated that holding said rights does not amount to control;

Notes



- the reporting entity holds half, or a lower share, of the votes that can be cast at the shareholders’ meeting and it has:• control over more than half of the voting rights by virtue of an agreement with other investors;• the power to influence the financial and management policies of such entity by virtue of a clause contained in the Articles of

Association or in a contract ;• the power to appoint or remove from office the majority of the members of the Board of directors or equivalent governing body,

and the management of the company rests with that Board or body;• the power to exercise the majority of the voting rights at the meetings of the Board of directors or equivalent governing body, and

the management of the company rests with that Board or body.

The existence and the effect of potential voting rights that can effectively be exercised or converted are taken into account when assessing whether or not the reporting entity has the power to influence the financial and management policies of another business undertaking.

At the balance sheet date the Bank held no investments in subsidiaries.

Associated CompaniesAssociates are defined as companies over which the reporting entity exercises significant influence but which are neither subsidiaries nor joint ventures. Significant influence is presumed when the entity holds, either directly or indirectly, at least 20% of the share capital of another company, unless the contrary can be clearly proven.

If the reporting entity holds, either directly or indirectly, less than 20% of the votes that can be cast at the shareholders’ meeting, no significant influence is inferred, unless such influence can be clearly proven. Significant influence may exist also if another investing company controls the absolute or relative majority.

At the balance sheet date the Bank held no investments in associated companies.

Joint VenturesJoint ventures are defined as jointly-controlled companies for which control is shared with other parties according to a contractual agreement; joint control exists only when, for strategic financial and management decisions concerning the company, unanimous consent is required by all the parties sharing control.

Investments in subsidiaries, associates and joint ventures are valued at cost.The purchase cost of an investment is determined as the sum of :- the fair values, at the acquisition date, of the assets sold, the liabilities taken over and the shareholders’ equity instruments issued

by the purchaser, in exchange for the control over the acquired company; and- any cost directly attributable to the acquisition.

If there is evidence that the value of an investment may be impaired, then the book value is immediately compared with the estimated realisable value. Such realisable value is determined by reference to the value in use of the equity investments. The value in use is determined by applying valuation models used according to generally accepted financial practices and based on the discounting of estimated future cash flows generated by the investment (also called Discounted Cash Flow method).

If it is impossible to gather sufficient information then the value in use is deemed to be the value of the company’s shareholders’ equity.

If the realisable value is lower than the book value, the related difference is recognised in the income statement under item 210


"Profit/loss from equity investments”. If the reasons for the impairment loss cease to exist following an event occurring after the value adjustment was booked in the company’s records, the related writebacks are booked in the same income statement item.

The investments considered as "strategic investments", and not falling under the definitions set out above and different from those recorded under item 140 "Non-current assets and disposal groups” and item 90 “Liabilities associated with discontinued operations” (see chapter 10), are classified as Available-for-sale financial assets or as Financial assets designated at fair value and treated accordingly (see chapter 2 and 5).

At the balance sheet date the Bank held no investments in joint ventures.

8 - Property, plant and equipmentThe item includes:• land• buildings• furniture and fittings• plant and machinery• other machines and equipment• improvements to third-party assetsand is subdivided into the following categories:• assets for functional use;• assets held for investment purposes.

Assets for functional use have physical consistency, are held to be used in production or in the supply of goods and services or for administrative purposes and can be used for more than one period.

This item includes also assets used as lessor by virtue of finance lease contracts.

Improvements to third-party assets under this item are improvements and additional expenses relative to identifiable and separable assets. These investments are usually sustained in order to render the buildings leased from third parties suitable for their expected use.

Improvements and additional expenses relative to identifiable and non-separable tangible assets are recorded instead under item 150 "Other assets".

Assets held for investment purposes refer to real estate investments as per IAS 40, that is real estate owned for rental income and/or appreciation of capital invested.

Property, plant and equipment are initially recognised at cost, including any charges directly attributable to the operation of the asset (transaction costs, professional fees, direct transport costs incurred to bring the asset to the designated location, installation costs, dismantling costs).

Any costs subsequently sustained are added to the book value of the asset or recorded as separate assets if it is probable that future economic benefits beyond those initially estimated will be achieved and the cost can be reliably estimated.

All other costs subsequently incurred (e.g. ordinary maintenance) are recognised in the income statement of the financial year in which they are incurred, under item:

Notes



• 150.b) “Other administrative expenses”, if relating to assets for functional use;or:• 190. “Other operating income/expenses”, if referred to buildings held for investment purposes.

After initial recognition, property, plant and equipment are recognised at cost less any accumulated depreciation and impairment losses.Finite-life fixed assets are systematically depreciated on a straight-line basis over their economic useful life.

The depreciation rates used for the main categories of property, plant and equipment are as follows: furniture (12 percent), fittings (15 percent), ordinary office machines (12 percent), miscellaneous machines, devices and equipment (15 percent), alarm systems and camera and television circuits (30 percent), electronic machines (20 percent), hoisting systems and equipment (7.5 percent). The base value to be depreciated is the cost of the assets since the residual value at the end of the depreciation process is considered insignificant.

Property, plant and equipment with an unlimited useful life or those whose residual value is equal to or greater than the book value of the assets are not depreciated.

Land and buildings are handled separately for accounting purposes, even when purchased together. Land is not depreciated, as it normally has an unlimited useful life. Buildings, instead, have a finite useful life and as a result are depreciated.

The useful life of property, plant and equipment is reviewed at the end of every period and, if expectations differ from the previous estimates, the depreciation amount for the current year and subsequent ones is adjusted.

Should there be objective evidence of a single asset’s impairment loss, a comparison is carried out between the book value of the asset and its recoverable value, equal to the greater of fair value, less sales costs, and the relative value in use, which is the present value of future cash flows expected to be generated by the asset. Any value adjustments are recorded in the income statement under item 170 “Net adjustments to property, plant and equipment".

Should the value of a previously written down asset be restored, the new book value cannot exceed the net book value had no impairment been recorded on the assets during prior years.

An item of Property, plant and equipment is derecognised from the Balance sheet upon disposal or when no further economic benefits are expected to be generated by its use or its disposal and any difference between the disposal and the book value is recognised in the income statement under item 240 “Profit/loss from disposal of investments”.

9 - Intangible assetsIntangible assets are non-monetary assets that are identifiable, although not physically tangible, controlled by the Bank and which are likely to produce future economic benefits.

Intangible assets are mainly represented by goodwill and software.Intangible assets other than goodwill are recognised in the financial statements at purchase cost, including any other direct costs incurred to prepare the asset for use, net of accumulated amortisation and impairment.

Finite-life intangible fixed assets are systematically amortised on a straight-line basis over their economic useful life. The useful lives which are normally estimated are as follows:- software maximum 5 years;- other intangible assets maximum 5 years.


Conversely, intangible assets with an indefinite useful life are not amortised.Should there be objective evidence of single asset impairment, a comparison is carried out between the book value of the asset and its recoverable value, equal to the greater of fair value, less costs to sell, and the relative value in use, which is the present value of the future cash flows expected to be generated by the asset. Any value adjustments are recorded in the income statement under item 180 “Net adjustments to intangible assets".

Every year, the book value of intangible assets with indefinite life is compared with the recoverable value even if there is no evidence of impairment. If the book value is higher than the recoverable value, a loss equal to the difference between the two values is recorded under income statement item 180 "Net adjustments to intangible assets".

Should the value of a previously written down intangible asset other than goodwill be restored, the new book value cannot exceed the net book value had no impairment been recorded on the asset in the preceding financial years.

An intangible asset is eliminated from the balance sheet upon disposal or when no further economic benefits are expected to be generated by its use or its disposal and any difference between the disposal and the book value is recognised in the income statement under item 240 “Profit/loss from disposal of investments”.

GoodwillGoodwill is represented by the excess of acquisition cost over net fair value, as at the purchase date, of balance sheet assets and liabilities acquired. Goodwill on mergers or mergers by incorporation is accounted for under intangible assets; goodwill arising from the acquisition of subsidiaries, associated companies and joint ventures instead is included in the acquisition cost therefore recorded as part of the value of the investment.

Goodwill is recognised in the balance sheet at cost, net of any accumulated impairment, and is not subject to amortisation.Every year goodwill is tested for impairment just like any other intangible asset with indefinite life. Value adjustments to goodwill are recorded in the income statement under item 230 "Net adjustments to goodwill". No writebacks are allowed on goodwill.

10 - Non-current assets and discontinued operations"Non-current assets or directly-connected groups of assets/liabilities", which comprise a set of cash generating units whose sale is highly probable, are recorded respectively under item 140 "Non-current assets and discontinued operations” and item 90 “Liabilities associated with discontinued operations” at the lower the book value and the fair value less any costs to sell.

The positive or negative balance of income and expenses (dividends, interest, etc.) as well as the valuations, as determined above, of said assets/liabilities, net of the relative current and deferred taxes, is recorded under income statement item 280 "Profit (Loss) from discontinued operations after tax".

11 - Current and deferred taxationIncome taxes, calculated in accordance with national tax legislation, are recorded as a cost during the same economic period as the profits that originated them.

A prepaid tax asset (item 130 b) of the balance sheet) is recorded for all temporary deductible differences if it is considered probable that taxable income will be created in the future, against which said asset may be applied. The deferred tax asset is not recognised if it originates from the initial recognition of an asset/liability associated with a transaction that:• is not a business combination transaction; and

Notes



• at the moment of the transaction does not impact the profit recorded or the taxable income (tax loss).

A deferred tax liability (item 80.b of the balance sheet) is recognised for all taxable temporary differences except for cases where the difference is attributable to:• the initial recognition of goodwill ; or• the initial recognition of an asset or liability in a transaction that:

1. is not a business combination transaction; and2. at the time of the transaction does not impact the profit recorded or the taxable income (tax loss).

Deferred tax assets and liabilities are determined using tax rates which are expected to apply in the financial year in which the tax asset will be realised or the tax liability settled, based on the tax regulations in force or effective at the time of their recognition.

A deferred tax liability is recorded for all temporary taxable differences arising from investments in subsidiaries, or associated companies and interests in joint ventures. No deferred tax liabilities are recognised if both of the two conditions set out below are satisfied:• the Parent Bank, the investor or the partner in the joint venture can control the timing of the reversal of the temporary differences; and • it is probable that the temporary difference will not reverse in the foreseeable future.

The deferred tax asset for all taxable temporary differences arising from financial investments in subsidiaries, branches and associated companies, and interests in joint ventures is recognised only to the extent that it is probable that:• the temporary difference will reverse in the foreseeable future; and• sufficient taxable profit will be available against which that temporary difference ca be utilised.

Deferred tax assets and liabilities are offset when they are due to the same tax authority and when the right to offsetting is recognised by the law.Current and deferred taxes are recognised in the income statement under item 260 “Income taxes on continuing operations” with the exception of those relating to gains or losses on Available-for-sale financial assets and those relating to changes in fair value of derivative financial instruments for cash flow hedges, the value changes of which are recognised directly in Valuation reserves less the related tax effect.

12 - Provisions for contingencies and chargesPensions and similar provisionsPension funds - provisions for employee benefits disbursed after termination of employment - are classified as defined-contribution plans or defined-benefit plans, depending on the nature of the plan.In particular:- a defined-benefit plan guarantees a series of benefits based on factors like age, years of service and compensation requirements. In

this case, the actuarial risk and investment risk fall upon the company;- a defined-contribution plan, on the other hand, is a plan based on which the company makes fixed contributions. The benefit consists

of the accumulated amount of these contributions and the return earned on them. This type of benefit does not involve any risk for the disbursing party, as there is no legal or implicit obligation to pay additional contributions if the fund does not contain sufficient assets to pay benefits to all employees. Consequently, the actuarial risk and investment risk fall upon the employees.

In the event that such funds are of the defined-benefit type, the present values requested are calculated by an external actuary using the “Projected unit credit method”.

This method distributes the cost of the benefit uniformly throughout the employment period of the employee. The obligations are equal to the present value of future average disbursements, adjusted on the basis of the ratio of years of service completed to overall seniority reached at the time the benefit is paid.


More precisely, the amount accounted for as a liability under item 120.a) is equal to the present value of the obligation at the balance sheet date, plus/minus any actuarial gains/losses which are not recognised according to the so-called “corridor method”, which does not require their recognition if they amount to less than 10% of the present value of the obligation, less any social security costs relating to the services already provided and not yet recorded, less the fair value of the plan assets at the balance sheet date which will be used to settle the obligations directly. The rate used to discount the obligations (whether funded or not funded) connected to the benefits following termination of employment varies according to the country of allocation of the liability, and is determined based on market yields at the balance sheet date of bonds issued by leading companies, with an average maturity in line with that of the liability.

At the balance sheet date the Bank had not recorded any Pensions and similar provisions.

Other provisionsProvisions for contingencies and charges are represented by liabilities recorded when:- there is a current obligation (legal or implicit) deriving from a past event;- it is likely that disbursement of resources to produce economic benefits to fulfil the obligation will be necessary; and- a reliable estimate of the amount of the obligation can be made.

No liability is recorded if these conditions are not satisfied.

The amounts allocated are calculated so as to represent the best estimate of the expenditure required to fulfil the obligations. In determining said estimate, the risks and uncertainties relating to the facts and circumstances under analysis are considered.

In particular, where the effect of the timing difference in sustaining the expense is significant, the amount of the allocation is calculated as the present value of the cost expected to settle the obligation. In this case, the discounting rate used, before taxes, reflects the current market valuations of the present value of money and the specific risks connected to the liability.

The provisions allocated are periodically reviewed and adjusted, if necessary, to reflect the best current estimate. When, following the review, its seems unlikely that the cost will be incurred, the provision is reversed.

A provision is utilised only for costs in respect of which it was originally set up.Provisions for the year, recorded under income statement item 160 “Net provisions for contingencies and charges”, include increases in the provision made in the year and are net of any reallocations.

« Other provisions » include also obligations concerning the benefits due to agents and more specifically the agents’ termination entitlement provision, the contractual indemnity and the non-competition agreement which were valued as defined-benefit plans hence the related obligations were calculated using the “Projected unit credit method” (see above at the paragraph dealing with “Pensions and similar provisions”).

13 - Payables and debt securities in issueDeposits from banks, securities issued and subordinated liabilities are initially recognised at fair value, which normally corresponds to the consideration received, less any transaction costs directly attributable to the financial liability. After the initial recognition, these instruments are valued at amortised cost, using the effective interest rate method.

Compound debt instruments, equity-, currency-, or index-linked or linked to credit instruments are considered to be structured securities. The embedded derivative is separated from the primary contract and represents a stand-alone derivative if the separation requirements are met. The embedded derivative is recognised at fair value and subsequently evaluated. Any changes in fair value are recognised in the income statement under item 80 "Net income from trading activities”.

Notes



The primary contract is assigned the value corresponding to the difference between the overall amount cashed and the fair value of the embedded derivative.

Instruments convertible into own shares involve the recognition, as at the issue date, of a financial liability and of a component of shareholders’ equity recorded under item 150 “Capital instruments”, should the contract regulation require physical delivery.

In particular, the shareholders’ equity component is assigned the residual value after having deducted, from the total value of the instrument, the value determined separately for a financial liability without the conversion clause and having the same cash flows.The financial liability is recognised and subsequently measured at amortised cost using the effective interest rate method.

The securities in issue are stated net of any amounts repurchased; the difference between the book value of the liability and the amount paid to purchase it is recorded in the income statement under item 100.d) “Profits (losses) from repurchase of Financial liabilities”. The subsequent replacement by the issuer is considered as a new issue without generating any economic effect.

At the balance sheet date the Bank had no debt securities and subordinated liabilities in issue.

14 - Financial liabilities held for tradingFinancial liabilities held for trading include:- derivative contracts not recognised as hedging instruments;- obligations to deliver financial assets in the event of short transactions;- financial liabilities issued with the intention of being repurchased in the short term;- financial liabilities that are part of a portfolio of financial instruments considered individually and for which there is evidence of a

trading approach in its management.

Financial liabilities falling in that category, including derivative contracts are valued at fair value both initially and for the entire duration of the transaction, except for derivative contracts to be settled by delivering an unquoted instrument representing capital the fair value of which cannot be determined reliably, and which therefore is valued at cost.

15 - Financial liabilities designated at fair value Financial liabilities, like financial assets, may be designated, upon initial recognition, as financial liabilities designated at fair value, provided that:- said designation eliminates or significantly reduces a lack of uniformity that would have otherwise been present due to the valuation

of assets or liabilities and of the relative profits and losses on different bases;or:- a group of financial assets, liabilities or both is managed and measured at fair value according to risk management or an investment

strategy documented within the Management Bodies of the Company.

the accounting treatment of such transactions is similar to the one of “Financial liabilities held for trading” where gains and losses, whether realised or unrealised, are recognised under item 110 “Net income from financial assets and liabilities at fair value”.

At the balance sheet date the Bank had not issued any financial liabilities classified as “Financial liabilities designated at fair value”.

16 - Foreign currency transactionsForeign currency transactions are recorded at the exchange rate ruling at the transaction date.


Monetary assets and liabilities are converted using the exchange rate effective as at the end of the period.

Exchange rate differences resulting from the settlement of transactions at rates that are different from the one ruling at the transaction date and unrealised exchange differences on foreign currency monetary assets and liabilities not yet settled, other than those designated at fair value and as hedging, are recognised under item 80 “Net income from trading activities" of the income statement.

Non-monetary assets and liabilities, recorded at historical cost, are converted using the historical exchange rate, while those measured at fair value are converted using the exchange rate ruling at the period end; in this case, the exchange rate differences are recorded:- in the income statement if the asset or liability is classified in the trading book;- in valuation reserves if the asset is classified as available for sale.

17 - Other informationBusiness combinationsA business combination is a merger of distinct companies or businesses into a single entity that is required to prepare financial statements.

A business combination may also involve the acquisition of the net assets of another company, including any goodwill, or purchase of the capital of another company (mergers and transfers).

Based on the provisions of IFRS 3, business combinations must be accounted for by applying the acquisition method, which involves the following phases:- identification of the purchaser;- determination of the cost of the business combination;and:- allocation, at the acquisition date, of the cost of the business combination to the assets acquired and to the liabilities and potential

liabilities assumed.

More specifically, the cost of a business combination is calculated as the sum of the fair values, at the transaction date, of the assets sold, the liabilities incurred or assumed and issued instruments representing capital, in exchange for control of the acquiree, plus any cost directly attributable to the business combination.

The acquisition date is the date in which control of the acquiree is effectively obtained. When the acquisition is carried out via a single exchange transaction, the exchange date coincides with the acquisition date.

When a business combination is carried out via several exchange transactions, the cost of the combination is the total cost of the individual transactions and the exchange date is the date of each exchange transaction, while the acquisition date is the date in which effective control of the acquiree is obtained.

The cost of a business combination is allocated by recording the assets, liabilities and identifiable potential liabilities of the acquiree at the relative fair values at the acquisition date.

The assets, liabilities and identifiable potential liabilities of the acquiree are recorded separately at the acquisition date only if, at said date, they satisfy the following criteria:- in the case of an asset other than an intangible asset, it is likely that the related future economic benefits will be received by the

acquirer and the fair value can be reliably determined;- in the case of a liability other than a potential liability, it is likely that the use of resources to produce economic benefits will be

required in order to settle the obligation and the fair value can be reliably determined;- in the event of an intangible asset or potential liability, the relative fair value can be reliably estimated.

Notes



The positive difference between the cost of the business combination and the acquirer's interest in the net fair value of the assets, liabilities and identifiable potential liabilities must be recorded as goodwill.

After initial recognition, the goodwill acquired in a business combination is valued at cost, and is subjected to an impairment test at least annually.

A new measurement is carried out in the event of a negative difference. This negative difference, if confirmed, is immediately recorded as revenue in the income statement.

IFRS 3 does not apply to:a) business combinations where separate entities or business activities are brought together to form a joint venture ;b) business combinations involving entities under common control;c) business combinations involving two or more mutual entities; d) business combinations involving separate businesses or entities being brought together to form a reporting entity by contract alone

without obtaining an ownership interest (e.g. forming a dual listed entity).

IFRS 3 was not applied to the business combinations finalised by the Bank in 2008 as they are transactions carried out by entities and businesses under UniCredit S.p.A.’s common control.

Fair valueFair value is the amount at which an asset may be exchanged, or a liability settled, in an arm’s length transaction between independent parties.

The fair value of a financial asset that is collectable (for example, a demand deposit) cannot be lower than the amount collectable upon request, discounted from the first date in which payment could be requested.

The fair value of financial instruments listed on active markets is determined starting from the official listings of the most advantageous and accessible market.

A financial instrument is considered to be listed in an active market if the listed prices are readily and regularly available in a stock exchange list or at a regulation authority, and if these prices represent actual market transactions that occur regularly under normal trading. If the official listing in an active market does not exist for an overall financial instrument, but there are active markets for the parts which comprise said instrument, the fair value is calculated on the basis of the relevant market prices of the various parts.

If market prices are not available, valuation models such as Mark to Model are used in line with methods generally accepted and used by the market. The valuation models include techniques that discount estimated future cash flows or carry out an estimate of volatility and are revised both during their development and at regular intervals, in order to ensure they are fully and constantly consistent.

Said methods rely on inputs based on prices applied to recent transactions dealing with the instrument being evaluated and/or prices/listings of instruments with similar risk profile characteristics.In fact, these prices/listings are relevant for determining the significant parameters, in terms of credit, liquidity and price risk of the instrument being evaluated.

Reference to such “market” parameters allows to limit the discretionary element in the measurement, guaranteeing, at the same time, the possibility of verifying the resulting fair value.


If, due to one or several risk factors, it is not possible to refer to market data, the input used by the valuation models will be estimates based on historical data.

The book value of the financial instruments is equal to their fair value at the same date. In the event of financial instruments held for trading (see chapters 1 and 14) and of instruments designated at fair value (see chapters 5 and 15), any difference compared to the amount collected or paid is booked in the relevant items of the income statement.

The processes described above with regard to the revision of the valuation models used and related parameters, the value adjustments required to take account of the model risk and the use of prudent valuation models ensure that the amount booked in the income statement is not the result of parameters assessed that are unverifiable.

In the case of financial instruments other than the ones mentioned above, the fair value at the date of recognition is assumed to be equal to the amount collected or paid.

DerecognitionDerecognition is the elimination of a previously recognised financial asset or liability from the balance sheet.

Before evaluating the existence of conditions for elimination of financial assets from the balance sheet, it is necessary, in accordance with IAS 39, to verify if these conditions are to be applied to these assets in their entirety or if they refer to only a part of these. The rules on derecognition are applied to a part of the financial assets subject to transfer only if at least one of the following requirements are met:- the part includes only the cash flows relative to one financial asset (or group of assets) that are specifically identified (for example,

only the interest portion associated with the asset);- the part includes the cash flows according to a well-defined percentage of their total (for example, 90% of all cash flows generated

by the asset);- the part includes a well-defined and specifically identified percentage of the cash flows (for example, 90% of the cash flows solely

from the interest portion associated with the asset).

In the absence of said requirements, the rules on derecognition are applied to the financial asset (or group of financial assets) in its entirety.

A financial asset can be fully derecognised provided that the contractual rights associated with it are cancelled or expired, or else the rights to collect the cash flows arising from such asset are assigned to an third party.

The collection rights are deemed to have been assigned also if the contractual rights to receive the cash flows generated by the asset are maintained, provided that an obligation is undertaken to pay those cash flows to one or more entities and all the following three conditions occur (passthrough agreement): - the Bank has no obligation to pay any uncollected amounts associated with the original asset;- the original asset cannot be sold or used as a guarantee, except where it guarantees the obligation to pay the cash flows;- the collected cash flows must be assigned without delay and cannot be invested, except for investments in liquid assets in the short

period between the collection and the payment dates, provided that also any interest accrued in the period is due.

Furthermore, derecognition of a financial asset is subject to verification that all of the risks and rewards deriving from ownership of the rights have been effectively transferred (true sale). If substantially all of the risks and rewards have been transferred, the asset (or group of assets) transferred is derecognised and the rights and obligations relative to the transfer are recognised separately as assets or liabilities.

Notes



Vice versa, in the event of retention of the risks and rewards, the asset (or group of assets) transferred must continue to be recognised.

In this case, it is also necessary to recognise a liability corresponding to the amount received as payment for the transfer and subsequently record all income accrued on the asset and all charges accrued on the liability.

The main transactions which, based on the aforesaid rules, do not allow the total derecognition of a financial asset are securitisation transactions involving loans, repurchase agreements and securities lending transactions.

As to securitisation transactions, the financial assets are not derecognised in the case of equity tranche purchase or supply of other types of support to the structure, where the Bank remains exposed to the credit risk associated with the securitised portfolio.

As to repurchase agreements and securities lending, the assets dealt with by the transactions are not derecognised as the terms of the transactions provide that the Banks keeps all the risks and rewards associated with those assets.

Own sharesOwn shares present in the portfolio are subtracted from shareholders’ equity. In the event of subsequent disposal, the difference between the sale price of own shares and the relative repurchase cost, net of taxes, is recorded directly under shareholders' equity as a balancing entry.At the balance sheet date the Bank did not hold own shares.

Finance leasesFinance leases are those whereby all the risks and ownerships connected to ownership of the asset are transferred to the lessee. Ownership of the assets is not necessarily transferred to the lessee at the end of the contract.- In substance, in these contracts the lessee acquires the economic benefits resulting from use of the leased asset for the majority of

its economic life, with the commitment to pay an amount approaching the fair value of the asset and the relative financial charges.

Repurchase agreementsSecurities received as part of a transaction that contractually requires their subsequent sale, and securities delivered as part of a transaction that contractually requires their repurchase, are not recognised in and/or derecognised from the balance sheet. As a result, in the case a security acquired with an agreement to resell, the amount paid is recognised as a customer loan or a loan to banks, like a financial asset held for trading; in the case of a security sold with an agreement to repurchase, the liability is recognised under due to banks or customer funding, like financial liabilities held for trading. Income from loans, which consists of coupons accrued on securities and the difference between the spot price and forward price of the same, is recorded on an accrual basis under the income statement items relating to interest.

The two types of transactions are offset if and only if carried out with the same counterparty and if offsetting is specifically foreseen in the contract.

Employee severance payment fundThe employee severance payment fund (TFR – trattamento di fine rapporto) is intended as a post employment “defined-benefit fund”. (TFR – trattamento di fine rapporto) is intended as a post employment “defined-benefit fund”. (TFR – trattamento di fine rapporto)Consequently, its recognition in the balance sheet required an estimate, through actuarial techniques, of the amount of the provision accrued for employees and the subsequent discounting to obtain the related net present value. These benefits were calculated by an external actuary using the Projected Unit Credit Method (see chapter 12 – Provisions for contingencies and charges - pension funds and similar provisions).

Following the reform of supplementary pension funds pursuant to Legislative Decree no. 252 of 5 December 2005, the employee severance payment fund amounts accrued to 31 December 2006 continue to be held by the company and to be treated as “defined-


benefit fund subsequent to the term of employment” hence they are subjected to actuarial valuation, though using simplified actuarial assumptions which do not take account of estimates of future pay rises.

The employee severance payment fund amounts accrued from 1 January 2007 onwards (date when the Legislative Decree no. 252 came into force) and which the employee has chosen to transfer to supplementary pension funds or to leave with the company and paid by the latter (if the workforce exceeds 50 staff) to the INPS Treasury Fund, instead, were considered as a ‘defined-contribution’ plan.

The costs relating to the employee severance payment fund accrued in the year were recorded in the income statement under item 150.a) “Personnel expenses” and include the interest accrued in the year (interest cost) on the bond already in place at the date of the reform and the amounts matured in the year and paid to the supplementary pension plans or the INPS Treasury Fund.

Actuarial profits and losses, defined as the difference between the book value of the liability and the present value of the obligation at the end of the period, are recognised based on the ‘corridor’ method, that is only when they exceed 10% of the present value of said obligation at the end of the period. Any excess is recorded in the income statement, with amortisation over the remaining average term of employment of employees participating in the plan, starting from the subsequent period.

Share-based paymentsThese are payments in favour of employees, as compensation for employment service, based on shares representing capital and consisting of the assignment of:- rights to subscribe capital increases upon payment (stock options);- rights to receive shares upon achievement of quantitative-qualitative objectives (performance shares);- shares subject to unavailability clauses (restricted shares).Considering the difficulty in reliably evaluating the fair value of the services received in exchange for instruments representing capital, reference is made to the fair value of the latter, measured on the date they are assigned.

Regarding share-based payments settled in cash, the benefits obtained and liabilities undertaken are measured at the fair value of the latter, recorded under item 100 “Other liabilities”. The fair value of a liability is recalculated at each balance sheet date until such liability is eventually extinguished, by recording under item 150 “Administrative expenses” any changes in the fair value of the liability.

Other long-term employee benefitsLong-term employee benefits – such as those resulting from seniority premiums, disbursed upon achievement of a specific length of service – are recorded under item 100 “Other liabilities” based on the valuation as at the balance sheet date of the liability assumed, determined also in this case by an external actuary using the Projected Unit Credit Method (see the chapter Provisions for contingencies and charges – pension funds and similar provisions). For this type of benefit, the actuarial profits/losses are promptly recorded in the income statement, without using the corridor method.

Guarantees given and similar credit derivativesUpon initial recognition, the value of guarantees given and similar credit derivatives pursuant to IAS 39 (i.e. contracts which provide that the issuer makes fixed payments to compensate the insured of an actual loss suffered due to a default by a specific debtor at the maturity date of a debt instrument), and the subsequent impairment losses are recognised in item 100. “Other liabilities”. Impairment losses are recognised under item 130.d “Net adjustments for impairment of other financial transactions” of the income statement.

Notes



INCOME STATEMENT

Interest income and expenseInterest income and expense and similar income and expenses regard cash at hand, financial assets and liabilities held for trading and those designated at fair value, available-for-sale financial assets, held-to-maturity financial assets, loans, payables and debt securities in issue.

Interest income and expense are recorded in the income statement for all instruments valued according to the amortised cost criterion, using the effective interest rate method.

Interest includes the net balance, positive or negative, of differentials and margins linked to financial derivative contracts:- for the hedging of interest- bearing assets and liabilities;- classified in the trading book but linked - from a management point of view - to assets/liabilities designated at fair value (fair value

option);- linked - from a management point of view - to assets/liabilities classified in the trading book and which involve the settlement of

differentials or margins on several maturity dates.

CommissionsCommissions are recorded on an accrual basis.

Trading commissions are recognised at the moment in which the service is provided. Portfolio management, consulting and mutual fund management commissions are recognised based on the duration of the service.

Commissions included in amortised cost for the purposes of determination of the effective interest rate are excluded, as these are recognised within interest.

DividendsDividends are recognised in the income statement during the period in which their distribution is decided.


IAS/IFRS-RELEVANT DEFINITIONS

The main concepts introduced by the IAS/IFRS, as well as those already dealt with in the previous chapters are illustrated here below.

Amortised costThe amortised cost of a given financial asset or liability equals its value at initial recognition, net of payments against principal, increased or decreased by total amortisation, calculated according to the effective interest rate method on any differences between the initial value and the value at maturity, and deducting any writedowns subsequent to impairment or irrecoverability.

The effective interest rate method distributes the interest income or expense throughout the duration of a financial asset or liability. The effective interest rate is the rate that precisely discounts the future expected payments or collections throughout the life of the financial instrument to the net book value of the financial asset or liability. It includes all charges and basis points paid or received between the parties of a contract that are an integral part of said rate, the transaction costs and all other premiums or discounts.

The commissions considered to be an integral part of the effective interest rate include the initial commissions received for the issue or purchase of a financial asset not designated at fair value, such as those received as compensation for the evaluation of the financial conditions of the debtor, for the valuation and registration of guarantees and, more generally, for completion of the transaction.

Transaction costs, on the other hand, include fees and commissions paid to agents, consultants, brokers and operators, contributions to regulation commissions and stock exchanges, taxes and transfer fees. Transaction costs do not include financing costs or internal administrative or management costs.

Impairment of financial assetsAn impairment test is carried out at every reporting date in order to determine if there is objective evidence that a financial asset or group of financial assets has undergone a reduction in value.

An asset or group of assets has undergone impairment and the impairment losses are accounted if and only if there is objective evidence of impairment following one or more events occurring after initial recognition of the asset, and if said event has an impact on the future cash flows of the asset which can be reliably determined.

The impairment may be caused not only by a single separate event but by the combined effect of several events.

The losses expected as a result of future events, regardless of their likelihood of occurrence, are not recorded.

Notes



Objective evidence that a financial asset or group of financial assets has undergone impairment includes measurable data identified with respect to the following events:- significant financial difficulties of the issuer or debtor;- violation of the contract, such as breach or non-payment of interest or principal;- granting of a concession to the beneficiary by the bank, predominantly for economic or legal reasons related to the financial or legal

difficulties suffered by the beneficiary and which it would not have otherwise granted;- reasonable probability of the beneficiary declaring bankruptcy or other financial restructuring procedures;- disappearance of an active market for the financial asset, due to financial difficulties. However, the disappearance of an active market

due to the fact that the financial instruments of the company are no longer publicly traded is not evidence of impairment;- measurable data that indicate the existence of a significant reduction in future estimated cash flows for a group of financial assets

from the moment of initial recognition of those assets, even though the reduction can no longer be identified with the individual financial assets in the group, including:• unfavourable changes in the payment status of beneficiaries in the group; or• local or national economic conditions correlated to the breaches regarding assets within the group.

Objective evidence of impairment for an investment in an instrument representing capital includes information on important changes with an adverse effect occurring in the technological, market, economic or legal realm in which the issuer operates, and indicates that the cost of the investment cannot be recovered. A significant or prolonged reduction in the fair value of an investment in an instrument representing capital below its cost also constitutes objective evidence of impairment.

If there is objective evidence that an impairment loss has been incurred on loans or on held-to-maturity financial assets (recorded at amortised cost), the impairment amount is measured as the difference between the book value of the asset and the present value of the estimated future cash flows (excluding future loan losses that have not yet occurred), discounted at the original effective interest rate of the financial asset. The impairment loss amount is recorded under income statement item 130 “Net adjustments for impairment” and the book value of the asset is reduced.

If the conditions of a loan or held-to-maturity financial asset are renegotiated or otherwise modified due to the financial difficulties of the debtor, an impairment loss is measured using the original effective interest rate before the change in conditions. Cash flows relative to short-term loans are not discounted if the effect of discounting is negligible. If a loan or held-to-maturity financial asset has a variable interest rate, the discounting rate used to measure any impairment loss is the current effective interest rate at the contractually established date.


Calculation of the present value of estimated future cash flows of a pledged financial asset reflects the cash flows that may result from seizure, less the costs to obtain and sell the pledge.

Nevertheless, a reduction in the fair value of a financial asset below cost or amortised cost is not necessarily evidence of impairment (e.g. a reduction in the fair value of an investment in a debt instrument resulting from an increase in the risk-free interest rate).

However, if no objective evidence of individual impairment loss is found to exist, said asset is included in a group of financial assets with similar credit risk characteristics and valued collectively.

The approaches based on a formula or on statistical methods can be used to determine the losses from impairment of a group of financial assets. Any models used incorporate the effect of the time value of money, consider the cash flows for the entire residual life of an asset (not only the subsequent year) and do not allow a loss for impairment at the moment of initial recognition of a financial asset. They also take into account the existence of losses already sustained but not yet expressed in the group of financial assets as at the valuation date, based on historical experiences of losses for assets with similar credit risk characteristics to those of the group considered.

The impairment loss estimate process considers all credit exposures, not only those regarding low credit quality, which reflect serious impairment of positions.

WritebacksIf, during a subsequent period, the amount of the impairment loss decreases and this reduction can be objectively linked to an event that occurred after its recognition (such as an improvement in solvency of the debtor), the impairment amount previously recorded is eliminated. The amount of the reversal is recognised in the income statement under item 130 “Net adjustments for impairment”, unless otherwise specified for equities classified as available-for-sale financial assets (see chapter 2).

The writeback, as at the date in which the original value of the financial asset is restored, cannot result in a book value that is higher than the amortised cost that would have existed at the same date had the impairment loss not been recorded.


Part B) Information onthe Balance Sheet

Liabilities 138

Section 1 - Deposits from banks - Item 10 138

Section 2 - Due to customers- Item 20 140

Section 3 - Securities in issue - Item 30 141

Section 4 - Financial liabilities held for trading - Item 40 142

Section 5 - Financial liabilities designated at fair value - Item 50 144

Section 6 - Hedge derivatives - Item 60 145

Section 7 - Adjustment to the value of financial liabilities under macro-hedge - Item 70 147

Section 8 - Tax liabilities - Item 80 147

Section 9 - Liabilities associated with discontinued operations - Item 90 147

Section 10 - Other liabilities - Item 100 148

Section 11 - Employee severance payment fund - Item 110 149

Section 12 - Provisions for contingencies and charges Item 120 150

Section 13 - Redeemable shares - Item 140 152

Section 14 - Bank's shareholders' equity - Items 130, 150, 160, 170, 180, 190 and 200 152

Section 15 - Other information 158

Assets 106

Section 1 - Cash on hand and deposits with central banks Item 10 106

Section 2 - Financial assets held for trading - Item 20 106

Section 3 - Financial assets designated at fair value Item 30 111

Section 4 - Available-for-sale financial assets - Item 40 114

Section 5 - Held-to-maturity financial assets - Item 50 117

Section 6 - Due from banks - Item 60 118

Section 7 - Customer loans - Item 70 119

Section 8 - Hedge derivatives - Item 80 121

Section 9 - Adjustments to the value of financial assets under macro-hedge - Item 90 123

Section 10 - Equity investments - Item 100 124

Section 11 - Property, plant and equipment - Item 110 125

Section 12 - Intangible assets - Item 120 128

Section 13 - Tax Assets and Tax Liabilities - Asset item 130 and liability item 80 131

Section 14 - Non-current assets and discontinued operations and associated liabilities - Assets item 140 and liabilities item 90 136

Section 15 - Other assets - Item 150 137

Notes


The assets underlying the derivative contracts incorporated in the structure of the Bank’s structured debt security issues consist largely of market variables such as market indices.

Part B) Information onthe Balance Sheet(Amounts in Euro/000)

Assets

Section 1 - Cash on hand and deposits with central banks - Item 10

Section 2 - Financial assets held for trading - Item 20

1.1 Cash on hand and deposits with central banks: breakdown

31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

(a) Cash 2 357 (355) -99.4%

(b) Demand deposits with central banks - - - -

Total 2 357 (355) -99.4%

2.1 Financial assets held for trading: breakdown by category

ITEM/AMOUNT

31.12.2008 31.12.2007

LISTED UNLISTED LISTED UNLISTED

A. Cash assets

1. Debt securities

1.1 Structured securities 1,735 17 370 43

1.2 Other debt securities 7,880 561 18,834 110

2. Equities 13 2 372 23

3. UCIT units - - - -

4. Loans

4.1 Reverse repurchase agreements - - - -

4.2 Other - - - -

5. Impaired assets - - - -

6. Assets sold not derecognised - - - -

Total A 9,628 580 19,576 176

B. Derivative instruments

1. Financial derivatives

1.1 used for trading activities 304 28,992 47 26,488

1.2 associated with the fair value option - - - 647

1.3 Other - - - -

2. Credit derivatives

2.1 used for trading activities - - - -

2.2 associated with the fair value option - - - -

2.3 other - - - -

Total B 304 28,992 47 27,135

Total (A+B) 9,932 29,572 19,623 27,311


2.2 Financial assets held for trading: breakdown by debtors/issuers

ITEM/AMOUNT 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

A. CASH ASSETS

1. Debt securities

a) Governments and central banks 6,276 12,392 (6,116) -49.4%

b) Other public entities 399 577 (178) -30.8%

c) Banks 2,467 2,231 236 10.6%

d) Other issuers 1,051 4,157 (3,106) -74.7%

2. Equities

a) Banks - - - -

d) Other issuers :

- Insurance companies - 149 (149) -100.0%

- financial companies - - - -

- non-financial companies 15 246 (231) -93.9%

- other - - - -


4. Loans - -

a) Governments and central banks - - - -

b) Other public entities - - - -

c) Banks - - - -

d) Other entities - - - -

5. Impaired assets - -



c) Banks - - - -


6. Assets sold not derecognised - -



c) Banks - - - -

d) Other issuers - - - -

Total A 10,208 19,752 (9,544) -48.3%

B. DERIVATIVE INSTRUMENTS

a) Banks 19,646 24,817 (5,171) -20.8%

b) Customers 9,650 2,365 7,285 308.0%

Total B 29,296 27,182 2,114 7.8%

Total (A+B) 39,504 46,934 (7,430) -15.8%

Assets (CONTINUED)

Notes


Part B) Information onthe Balance Sheet (CONTINUED)

2.3 Financial assets held for trading: derivative instruments as at 31.12.08

TYPE OF DERIVATIVE/UNDERLYING ASSETINTEREST

RATESCURRENCIES AND

GOLD EQUITIES LOANS OTHER TOTAL

A) Listed derivatives

1. Financial derivatives:

With exchange of capital

- Options purchased - - - - - -

- Other derivatives 12 - 292 - - 304

Without exchange of capital


- Other derivatives - - - - - -

2. Credit derivatives:

With exchange of capital - - - - - -

Without exchange of capital - - - - - -

Total A 12 - 292 - - 304

B) Unlisted derivatives




- Other derivatives 7 3,115 - - - 3,122


- Options purchased 33 - - - - 33

- Other derivatives 25,837 - - - 25,837




Total B 25,877 3,115 - - - 28,992

Total (A+B) 25,889 3,115 292 - - 29,296


2.3 Financial assets held for trading: derivative instruments as at 31.12.07


RATESCURRENCIES AND













Total A 17 - 30 - - 47




- Options purchased - - 1 - - 1

- Other derivatives - 3,651 - - - 3,651


- Options purchased 339 - - - - 339

- Other derivatives 23,144 - - - 23,144




Total B 23,483 3,651 1 - - 27,135

Total (A+B) 23,500 3,651 31 - - 27,182

Assets (CONTINUED)

Notes



Item B.3 Other increases in Debt securities includes the year-end balance of “technical overdrafts” of 99,591 thousands.

Item B.3 Other increases in Equities includes a gain of 94,304 thousand realised on the “short sale” of an equity security offset by the loss realised on a correlated stock futures contract. In fact, Finecobank does not assume risk positions on its own account.

“Other increases” and “Other decreases” include the variation in interest accrued in connection with financial assets held for trading as at 31 December 2008.

The item C.4 “Decreases - Other changes” includes 510,541 thousand referring to the balance as at 30 September 2007 of bonds issued by the Parent Bank which, on 1 October 2007, following the merger of Capitalia S.p.A. into UniCredit S.p.A., were reclassified under "Financial assets designated at fair value”.“Other increases” and “Other decreases” include the variation in interest accrued in connection with financial assets held for trading as at 31 December 2007.

2.4 Cash financial assets held for trading other than those sold but not eliminated and impaired assets: changes over the yearas at 31.12.2008

DEBT SECURITIES EQUITIES UCIT UNITS LOANS TOTAL

A. Opening balance 19,357 395 - - 19,752

B. Increases

B1. Purchases 654,580 2,311,999 88,188 - 3,054,767

B2. Increases in fair value 60 103 - - 163

B3. Other changes 102,710 94,931 159 - 197,800

C. Decreases

C1. Sales (751,153) (2,406,655) (88,344) - (3,246,152)

C2. Redemptions (13,613) - - - (13,613)

C3. Decreases in fair value (377) (9) - - (386)

C4. Other changes (1,371) (749) (3) - (2,123)

D. Closing balance 10,193 15 - - 10,208

2.4 Cash financial assets held for trading other than those sold but not eliminated and impaired assets: changes over the yearas at 31.12.2007


A. Opening balance 303,703 23 - - 303,726

B. Increases

B1. Purchases 2,277,272 495,098 163,278 - 2,935,648

B2. Increases in fair value 150 7 - - 157

B3. Other changes 14,374 894 64 - 15,332

C. Decreases

C1. Sales (2,005,357) (494,416) (163,329) - (2,663,102)

C2. Redemptions (47,253) - - - (47,253)

C3. Decreases in fair value (8,646) (1) - - (8,647)

C4. Other changes (514,886) (1,210) (13) - (516,109)

D. Closing balance 19,357 395 - - 19,752


As at 31 December 2007, financial assets designated at fair value included only bonds issues by the Parent Bank, partly locked up in repurchase agreements as highlighted in item 6. Assets sold but not eliminated. As of 1 January 2008, bonds issued by the Parent Bank have been classified under item 60 “Loans to banks”.

Section 3 - Financial assets designated at fair value - Item 30

3.1 Financial assets designated at fair value: breakdown by category

ITEM/AMOUNT

31.12.2008 31.12.2007


1. Debt securities

1.1 Structured securities - - - -

2. Equities - - - 3,033,690

1.2 Other debt securities - - - -


4. Loans

4.1 Structured - - - -


4.2 Other - - - -

6. Assets sold but not eliminated - - - 2,075,572

Total - - - 5,109,262

Cost - - - 5,108,592

Assets (CONTINUED)

Notes



3.2 Financial assets designated at fair value: breakdown by debtors/issuers

ITEM/AMOUNT 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

1. Debt securities


b) Other public entities - 3,033,690 (3,033,690) -100,0%

c) Banks - - - -


2. Equities

a) Banks - - - -

d) Other issuers:

- Insurance companies - - - -

- financial companies - - - -

- non-financial companies - - - -

- other - - - -


4. Loans



c) Banks - - - -


5. Impaired assets



c) Banks - - - -


6. Assets sold not derecognised



c) Banks - 2,075,572 (2,075,572) -100,0%


Total - 5,109,262 (5,109,262) -100,0%


Other decreases relate to the transfer of bonds issued by the Parent Bank under the Loans and Receivables category, with simultaneous recording under item 60 “Loans to banks”Other increases relate to securities issued by UniCredit S.p.a. and purchased at the time of the merger with UniCredit Xelion Banca S.p.A.on 7 July 2008.

3.3 Financial assets designated at fair value other than those sold but not eliminated and impaired assets: changes over the year as at 31.12.08


A. Opening balance 3,033,690 - - - 3,033,690

B. Increases

B1. Purchases - - - - -

B2. Increases in fair value - - - - -

B3. Other changes 400,818 - - - 400,818

- of which business combinations 400,818 - - - 400,818

C. Decreases

C1. Sales - - - - -

C2. Redemptions - - - - -

C3. Decreases in fair value - - - - -

C4. Other changes (3,434,508) - - - (3,434,508)

D. Closing balance - - - - -

3.3 Financial assets designated at fair value other than those sold but not eliminated and impaired assets: changes over the year as at 31.12.07


A. Opening balance - - - - -

B. Increases

B1. Purchases 3,715,144 - - - 3,715,144

B2. Increases in fair value 9,226 - - - 9,226

B3. Other changes 515,816 - - - 515,816

C. Decreases

C1. Sales (942,826) - - - (942,826)

C2. Redemptions (249,192) - - - (249,192)

C3. Decreases in fair value (5,571) - - - (5,571)

C4. Other changes (8,907) - - - (8,907)

D. Closing balance 3,033,690 - - - 3,033,690

Assets (CONTINUED)

Notes



As at 31 December 2008, Available-for-sale financial assets are represented by investments in companies where the Bank does not exercise, either directly or indirectly through subsidiaries, either control or significant influence. Equities valued at cost refer to the investment in Monte Titoli S.p.A., Consorzio per la gestione del Marchio Patti Chiari and Caricese.Equities valued at fair value are represented by the Visa shareholding. The latter, following the IPO transaction successfully carried out in 2008, awarded circuit members a bonus in shares which cannot be sold before three years have elapsed since the allotment date; as at 31 December 2007 they were solely represented by the 13% stake in Net Insurance, and part of the spin-off to UniCredit Consumer Financing S.p.A. on 1 July 2008.

As at 31 December 2007 debt securities were represented by the Garda Securitisation Series 2001-1 and Velites junior securities subscribed following the securitisation transactions carried out in 2001 and 2002 respectively.On 24 April 2008, having obtained the authorisation by the Bank of Italy, FinecoBank exercised the Optional Redemption included in the “Step-Up and Call” clause envisaged for the Garda Securitisation 2001-1 and Velites securitisation transactions, as per resolution passed by the Board of directors on 14 December 2007. On 5 May 2008 the notes relating to the Garda Securitisation Series 2001-1 were fully redeemed, whilst the notes relating to the Velites transaction were only partially redeemed.The partial redemption of the notes issued by the Velites vehicle company gave rise to a loss recorded in the income statement of FinecoBank as the security held in the portfolio had already been written down in previous financial years.

Section 4 - Available-for-sale financial assets - Item 40

4.1 Available-for-sale financial assets: breakdown by category

ITEM/AMOUNT

31.12.2008 31.12.2007


1. Debt securities

1.1 Structured securities - - - -

1.2 Other debt securities - - - 70,781

2. Equities

2.1 Measured at fair value 400 - - 8,189

2.2 Measured at cost - 18 - 13


4. Loans - - - -


6. Assets sold not derecognised - - - -

Total 400 18 - 78,983


4.2 Available-for-sale financial assets: breakdown by debtors/issuers

ITEM/AMOUNT 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

1. Debt securities



c) Banks - - - -

d) Other issuers - 70,781 (70,781) -100,0%

2. Equities

a) Banks - - - -

d) Other issuers :

- Insurance companies - 8,189 (8,189) -

- financial companies 413 8 405 5062,5%

- non-financial companies 5 5 - 0,0%

- other - - - -


4. Loans



c) Banks - - - -


5. Impaired assets



c) Banks - - - -





c) Banks - - - -


Total 418 78,983 (78,565) -99,5%

4.3 Available-for-sale financial assets: hedged assetsNo data to report.

4.4 Available-for-sale financial assets: assets under micro-hedgeNo data to report.

Assets (CONTINUED)

Notes



As stated earlier on, on 5 May 2008 the Garda Securitisation Series 2001-1 and Velites junior securities were redeemed. The securities had already been written down in previous financial years by an amount that exceeded the loss realised, resulting in the recording of a writebackof 10,179 thousand.Other increases in Equities relate to the investment in Caricese, purchased following the merger by incorporation of UniCredit Xelion Banca S.p.A. in FinecoBank on 7 July 2008, whilst Other decreases in Equities relate to the investment in Net Insurance, which was spun off to UniCredit Consumer Financing Bank S.p.A. on 1 July 2008.

4.5 Available-for-sale financial assets other than those sold but not eliminated and impaired assets: changes over the yearas at 31.12.08


A. Opening balance 70,781 8,202 - - 78,983

B. Increases

B1. Purchases - 417 - - 417

B2. Increases in FV - - - - -

B3. Writebacks

- to income statement 10,179 - - - 10,179

- to shareholders' equity - - - - -

B4. Transfers from other portfolios - - - - -

B5. Other changes - 5 - - 5

- of which business combinations - 5 - - 5

C. Decreases

C1. Sales - - - - -

C2. Redemptions (80,960) - - - (80,960)

C3. Decreases in FV - (17) - - (17)

C4. Writedowns for impairment

- to income statement - - - - -


C5. Transfers to other portfolios - - - - -

C6. Other changes - (8,189) - - (8,189)

- for de-merger/spin-off transactions - (8,189) - - (8,189)

D. Closing balance - 418 - - 418


Section 5 - Held-to-maturity financial assets - Item 50

FinecoBank did not record financial assets under “Held-to-maturity financial assets”.

4.5 Available-for-sale financial assets other than those sold but not eliminated and impaired assets: changes over the yearA 31.12.07


A. Opening balance 75,137 8,262 - - 83,399

B. Increases

B1. Purchases - - - - -

B2. Increases in FV - - - - -

B3. Writebacks

- to income statement - - - - -


B4. Transfers from other portfolios - - - - -

B5. Other changes - - - - -

C. Decreases

C1. Sales (485) (60) - - (545)

C2. Redemptions (372) - - - (372)

C3. Decreases in FV - - - - -

C4. Writedowns for impairment

- to income statement (1,840) - - - (1,840)

- to shareholders' equity (1,659) - - - (1,659)

C5. Transfers to other portfolios - - - - -

C6. Other changes - - - - -

D. Closing balance 70,781 8,202 - - 78,983

Assets (CONTINUED)

Notes



Loans to banks in the form of current accounts and demand deposits were mainly represented by lending with UniCredit S.p.A. and by current accounts held with Société Generale Securities Services for transactions involving securities.The savings accounts recognised under assets consist of the deposit held with UniCredit S.p.A. for compulsory reserves, with a book value of 165,399 thousand, in addition to short-term savings accounts held with UniCredit S.p.A. for 3,740,866 thousand.The increase in debt securities is solely attributable to the reclassification of bonds issued by the Parent Bank and subscribed in order to invest liquidity and, at the same time, to be used for repurchase agreements with retail customers, accounted for as at 31 December 2007 under item 30 “Financial assets designated at fair value”. It is important to specify that the securities issued by UniCredit S.p.A. are hedged against by derivative contracts also entered into with the Parent Bank.The fair value of debt securities issued by the Parent Bank and recognised in the income statement of FY 2007 amounts to 5,656 thousand, offset by the negative valuation of the correlated derivatives, the latter also entered into with UniCredit S.p.A., for 3,334 thousand. The net effect of 2,322 thousand was accounted for under item 110 “Net income from financial assets and liabilities at fair value”.Assets sold but not eliminated refer to the bonds issued by the Parent Bank and used for repurchase agreements with customers.

Section 6 - Due from banks - Item 60

6.1 Due from banks: breakdown by category

TYPE OF TRANSACTION/AMOUNT 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

A. Loans to central banks - - - -

1. Savings accounts - - - -

2. Compulsory reserve - - - -

3. Reverse repurchase agreements - - - -

4. Other - - - -

B. Loans to banks 12,746,886 1,866,952 10,879,934 582.8%

1. Current accounts and demand deposits 2,531,491 822,620 1,708,871 207.7%

2. Savings accounts 3,906,265 536,735 3,369,530 627.8%

3. Other loans:

3.1 Reverse repurchase agreements 3,914 504,768 (500,854) -99.2%

3.2 Finance leases - - - -

3.3 Other 3,401 1,701 1,700 99.9%

4. Debt securities

4.1 Structured securities 60,573 659 59,914 9091.7%

4.2 Other debt securities 2,618,670 469 2,618,201 558251.8%


6. Assets sold but not eliminated 3,622,572 - 3,622,572 -

Total (book value) 12,746,886 1,866,952 10,879,934 582.8%

Total (fair value) 12,678,928 1,866,952 10,811,976 579.1%


As described earlier on, following the integration of the UniCredit Group with the Capitalia Group and the new "specialised product companies” logics, FinecoBank carried out two corporate transactions involving the transfer and spin-off of the “Salary-guaranteed loans” and “Mortgages” business divisions, which led to a significant reduction in customer loans.

7.1 Customer loans: breakdown by category


CHANGES

ABSOLUTE %

1. Current accounts 51,509 17,695 33,814 191.1%

2. Reverse repurchase agreements 850,288 307,787 542,501 176.3%

3. Mortgages - 2,306,279 (2,306,279) -100.0%

4. Credit cards, personal loans and salary-guaranteed loans 247,890 1,554,494 (1,306,604) -84.1%

5. Finance lease - - - -

6. Factoring - - - -

7. Other transactions 34,812 79,365 (44,553) -56.1%

8. Debt securities:

8.1 Structured 2 1,594 (1,592) -99.9%

8.2 Other - - - -

9. Impaired assets 34,917 71,958 (37,041) -51.5%

10. Assets sold but not eliminated - 1,695,719 (1,695,719) -100.0%

Total (book value) 1,219,418 6,034,891 (4,815,473) -79.8%

Total (fair value) 1,223,453 6,503,309 (5,279,856) -81.2%

6.2 Due from banks: assets under micro-hedgeNo data to report.

6.3 Finance leasesNo data to report.

Section 7 - Customer loans - Item 70

Assets (CONTINUED)

Notes



7.2 Customer loans: breakdown by debtors/issuers


CHANGES

ABSOLUTE %

1. Debt securities


b) Other public entities 2 2 - 0.0%

- non-financial companies

c) Other issuers: - 1,159 (1,159) -100.0%

- financial companies - 433 (433) -100.0%

- insurance - - - -

- other - - - -

2. Loans to:



c) Other issuers :

- non-financial companies 8,465 7,426 1,039 14.0%

- financial companies 44,408 88,187 (43,779) -49.6%

- insurance 1,003 27 976 3614.8%

- other 1,130,623 4,169,980 (3,039,357) -72.9%

3. Impaired assets



c) Other issuers :

- non-financial companies 237 225 12 5.3%

- financial companies 175 979 (804) -82.1%

- insurance - - - -

- other 34,505 70,754 (36,249) -51.2%




c) Other issuers :

- non-financial companies - 598 (598) -100.0%

- financial companies - 111 (111) -100.0%

- insurance - - - -

- other - 1,695,010 (1,695,010) -100.0%

Total 1,219,418 6,034,891 (4,815,473) -79.8%

7.3 Customer loans: assets under micro-hedgeNo data to report.

7.4 Finance leasesNo data to report.


Section 8 - Hedge derivatives - Item 80

8.1 Hedge derivatives: breakdown by type of contracts and underlying assets as at 31.12.08


RATESCURRENCIES

AND GOLD EQUITIES LOANS OTHER TOTAL












Total A - - - - - -








- Other derivatives 1,094 - - - - 1,094




Total B 1,094 - - - - 1,094

Total (A+B) 1,094 - - - - 1,094

Assets (CONTINUED)

Notes





RATESCURRENCIES













Total A - - - - - -












Total B 21,370 - - - - 21,370

Total (A+B) 21,370 - - - - 21,370

8.2 Hedge derivatives: breakdown by portfolios hedged and by type of hedge as at 31.12.08

TRANSACTION/TYPE OF HEDGE

FAIR VALUE CASH FLOWS

MICRO

MACRO MICRO MACROINTEREST

RATE RISKEXCHANGE RATE RISK

CREDITRISK

PRICERISK

SEVERAL RISKS

1. Available-for-sale financial assets - - - - - -

2. Loans - - - - -

3. Financial assets held to maturity - - - -

4. Portfolio 1,094 -

5. Foreign investments -

Total assets - - - - - 1,094 - -

1. Financial liabilities - - - - -

2. Portfolio - -

Total liabilities - - - - - - - -

1. Planned transactions - -





MICRO


RATE RISKEXCHANGE RATE RISK

CREDITRISK

PRICERISK

SEVERAL RISKS


2. Loans - - - - -




Total assets - - - - - 21,370 - -


2. Portfolio - -



9.1 Adjustments to the value of hedged financial assets: breakdown of hedged portfolios

ADJUSTMENTS TO THE VALUE OF HEDGED FINANCIAL ASSETS/AMOUNT 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

1. Increase

1.1 of specific portfolios

a) loans 45,442 - 45,442 -

b) available-for-sale financial assets - - - -

1.2 total - - - -

2. Decrease

2.1 of specific portfolios

a) loans (4,644) (22,439) 17,795 -383.2%

b) available-for-sale financial assets - - - -

2.2 total - - - -

Total 40,798 (22,439) 63,237 -281.8%

9.2 Assets macro-hedged against interest rate risk: breakdown

HEDGED ASSETS 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

1. Loans 40,798 (22,439) 63,237 -281.8%

2. Available-for-sale financial assets - - - -

3. Portfolio - - - -

Total 40,798 (22,439) 63,237 -281.8%

Section 9 - Adjustments to the value of financial assets under macro-hedge - Item 90

Assets (CONTINUED)

Notes



As at 31 December 2008 the loans subject to macro-hedging against interest risk are represented by fixed-rate personal loans and debt securities issued by UniCredit S.p.A. and classified as Loans and Receivables. As at 31 December 2007 the loans subject to macro-hedging were represented by salary-guaranteed loans, delegated payment loans and fixed-rate mortgages.

Section 10 - Equity investments - Item 100

10.1 Equity investments in subsidiaries, jointly owned companies and companies subject to significant influence: information on investment relationshipsNo data to report.

10.2 Equity investments in subsidiaries, jointly owned companies and companies subject to significant influence: accounting dataNo data to report.

On 1 January 2008 FinecoBank subscribed the entire share capital increase resolved by the shareholders’ meeting of Fineco Prestiti S.p.A. of 26 October 2007, of 100,000 thousand shown under item B.4 Other increases.

Due to the reorganisation of the UniCredit Group mentioned above, on 1 July 2008 the shareholding in Fineco Credit S.p.A. and the shareholding in Fineco Prestiti S.p.A. were spun off in UniCredit Banca per la Casa S.p.A., now UniCredit Consumer Financing Bank S.p.A., and in UniCredit Consumer Financing Bank S.p.A. respectively for 860 thousand and 100,015 thousand, included under item C.3 Other decreases.

10.3 Equity investments: changes over the year

31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

A. Opening balance 1,875 1,118 757 -

B. Increases

B.1. Purchases - 25 (25) -100.0%

B.2. Writebacks - - - -

B.3. Revaluations - - - -

B.4. Other changes 100,000 1,065 98,935 9289.7%

C. Decreases

C.1. Sales - (333) 333 -100.0%

C.2. Writedowns - - - -

C.3. Other changes (101,875) - (101,875) -

- for de-merger/spin-off transactions (101,875) - (101,875) -

D. Closing balance - 1,875 (1,875) -100.0%

E. Total revaluations - - - -

F. Total adjustments - - - -


10.4 Commitments relating to equity investments in subsidiaries

No data to report.

10.5 Commitments relating to equity investments in jointly owned companiesNo data to report.

10.6 Commitments relating to equity investments in companies subject to significant influenceNo data to report.

Section 11 - Property, plant and equipment - Item 110

Reference should be made to section 11 of the income statement for a description of the methods used to calculate amortization.

11.1 Property, plant and equipment: breakdown of assets valued at cost

ASSET/AMOUNT 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

A. Functional assets

1.1 owned

a) land - - - -

b) buildings - 3,276 (3,276) -100.0%

c) furniture 2,896 929 1,967 211.7%

d) electronic equipment 2,627 2,238 389 17.4%

e) other 1,796 1,012 784 77.5%

1.2 acquired under finance leases

a) land - - - -

b) buildings - - - -

c) furniture - - - -

d) electronic equipment - - - -

e) other - 5 (5) -100.0%

Total A 7,319 7,460 (141) -1.9%

B. Assets held for investment purposes.

2.1 owned

a) land - - - -

b) buildings 3,168 - 3,168 -

2.2 acquired under finance leases

a) land - - - -

b) buildings - - - -

Total B 3,168 - 3,168 -

Total (A+B) 10,487 7,460 3,027 40.6%

Assets (CONTINUED)

Notes



11.2 Property, plant and equipment: breakdown of assets measured at fair value or revalued amounts

No data to report.

11.3 Functional items of property, plant and equipment: changes over the year as at 31.12.08

LAND BUILDINGS FURNITUREELECTRONIC EQUIPMENT OTHER TOTAL

A. Gross opening balance - 3,600 3,886 16,163 4,913 28,562

A.1 Total reductions in value, net - (324) (2,957) (13,925) (3,896) (21,102)

A.2 Net opening balance - 3,276 929 2,238 1,017 7,460

B. Increases:

B.1 Purchases - - 955 1,130 749 2,834

B.2 Capitalised improvement costs - - - - - -

B.3 Writebacks - - 1 - 5 6

B.4 Increases in fair value charged to - - - - - -

a) shareholders’ equity - - - - - -

b) income statement - - - - - -

B.5 Exchange gains - - - - - -

B.6 Transfers from buildings held for investment purposes - - - - - -

B.7 Other increases - - 2,858 559 1,009 4,426

- of which business combinations - - 2,858 559 1,009 4,426

C. Decreases:

C.1 Sales - - (93) (4) (11) (108)

C.2 Depreciation - - (1,642) (1,230) (740) (3,612)

C.3 Adjustments for impairment charged to


b) income statement - - (26) - (27) (53)

C.4 Decreases in fair value charged to



C.5 Exchange losses - - - - - -

C.6 Transfers to:

a) PPE held for investment purposes - (3,276) - - - (3,276)

b) discontinued operations - - - - - -

C.7 Other decreases - - (86) (66) (206) (358)

- for de-merger/spin-off transactions - - (2) (66) (104) (172)

D. Net closing balance - - 2,896 2,627 1,796 7,319

D.1 Total reductions in value, net - - (8,376) (17,171) (6,918) (32,465)

D.2 Gross closing balance - - 11,272 19,798 8,714 39,784

E. Measurement at cost - - 2,896 2,627 1,796 7,319


11.3 Functional items of property, plant and equipment: changes over the year as at 31.12.07

LAND BUILDINGS FURNITUREELECTRONIC EQUIPMENT OTHER TOTAL

A. Gross opening balance - 3,600 3,519 15,801 4,622 27,542

A.1 Total reductions in value, net - (216) (2,491) (13,901) (3,931) (20,539)

A.2 Net opening balance - 3,384 1,028 1,900 691 7,003

B. Increases:

B.1 Purchases - - 513 1,441 634 2,588

B.2 Capitalised improvement costs - - - - - -

B.3 Writebacks - - - - - -

B.4 Increases in fair value charged to - - - - - -




B.6 Transfers from buildings held for investment purposes - - - - - -

B.7 Other decreases - - - - - -

C. Decreases:

C.1 Sales - - - (12) (6) (18)

C.2 Depreciation - (108) (589) (1,091) (291) (2,079)

C.3 Adjustments for impairment charged to


b) income statement - - (23) - (11) (34)

C.4 Decreases in fair value charged to




C.6 Transfers to:

a) PPE held for investment purposes - - - - - -

b) discontinued operations - - - - - -

C.7 Other decreases - - - - -

D. Net closing balance - 3,276 929 2,238 1,017 7,460

D.1 Total reductions in value, net - (324) (2,957) (13,925) (3,896) (21,102)

D.2 Gross closing balance - 3,600 3,886 16,163 4,913 28,562

E. Measurement at cost - 3,276 929 2,238 1,017 7,460

Assets (CONTINUED)

Notes



11.4 Property, plant and equipment held for investment purposes: changes over the year31.12.2008 31.12.2007

LAND BUILDINGS LAND BUILDINGS

A Opening balance - - - -

B. Increases:

B.1 Purchases - - - -

B.2 Capitalised improvement costs - - - -

B.3 Net increases in fair value - - - -

B.4 Writebacks - - - -

B.5 Exchange gains - - - -

B.6 Transfers from functional assets - 3,276 - -

B.7 Other increases - - - -

C. Decreases:

C.1 Sales - - - -

C.2 Depreciation - (108) - -

C.3 Net decreases in fair value - - - -

C.4 Adjustments for impairment - - - -

C.5 Exchange losses - - - -

C.6 Transfers to other asset portfolios

a) functional assets - - - -

b) non-current assets and discontinued operations - - - -

C.7 Other decreases - - - -

D. Closing balance - 3,168 - -

E. Measurement at fair value - 3,600 - -

12.1 Intangible assets: breakdown by type of asset

ASSET/AMOUNT

31.12.2008 31.12.2007

FINITE LIFE INDEFINITE LIFE DEFINITE LIFE INDEFINITE LIFE

A.1 Goodwill - 89,602 - 21,583

A.2 Other intangible assets 9,424 - 8,477 -

A.2.1 Assets measured at cost : 9,424 - 8,477 -

a) Intangible assets generated internally - - - -

b) Other assets 9,424 - 8,477 -

A.2.2 Assets designated at fair value: - - - -

a) Intangible assets generated internally - - - -

b) Other assets - - - -

Total 9,424 89,602 8,477 21,583

11.5 Commitments to purchase property, plant and equipmentAs at 31 December 2008 the Bank had no contractual commitments to purchase property, plant and equipment.

Section 12 - Intangible assets - Item 120


12.2 Intangible assets: changes over the year as at 31.12.08

GOODWILL

OTHER INTANGIBLE ASSETS: GENERATED INTERNALLY

OTHER INTANGIBLE ASSETS:OTHER

TOTALFINITE LIFE INDEFINITE LIFE FINITE LIFE INDEFINITE LIFE

A. Gross opening balance 27,738 - - 68,442 - 96,180

A.1 Total reductions in value, net (6,155) - - (59,965) - (66,120)

A.2 Net opening balance 21,583 - - 8,477 - 30,060

B. Increases

B.1 Purchases - - - 5,891 - 5,891

B.2 Increases in internal intangible assets - - - - -

B.3 Writebacks - - - - -

B.4 Increases in fair value charged to

a) shareholders’ equity - - - - -

b) income statement - - - - -


B.6 Other increases 68,019 - - 303 - 68,322

- of which business combinations 68,019 - - 303 - 68,322

C. Decreases

C.1 Sales - - - - - -

C.2. Writedowns

- Amortisation - - (4,740) - (4,740)

- Writedowns

+ shareholders’ equity - - - - -

+ income statement - - - - - -

C.3 Decreases in fair value



C.4 Transfers to non-current assets classified as held for sale - - - - - -


C.6 Other decreases - - - (507) - (507)

- of which business combinations - - - (211) - (211)

D. Net closing balance 89,602 - - 9,424 - 99,026

D.1. Total net writedowns (6,155) - - (25,820) - (31,975)

E. Gross closing balance 95,757 - - 35,244 - 131,001

E. Measurement at cost 89,602 - - 9,424 - 99,026

Assets (CONTINUED)

Notes



12.2 Intangible assets: changes over the year as at 31.12.08

GOODWILL

OTHER INTANGIBLE ASSETS: GENERATED INTERNALLY

OTHER INTANGIBLE ASSETS:OTHER

TOTALFINITE LIFE INDEFINITE LIFE FINITE LIFE INDEFINITE LIFE

A. Gross opening balance 27,738 - - 65,076 - 92,814

A.1 Total reductions in value, net (6,155) - - (53,868) - (60,023)

A.2 Net opening balance 21,583 - - 11,208 - 32,791

B. Increases

B.1 Purchases - - - 5,418 - 5,418

B.2 Increases in internal intangible assets - - - - -

B.3 Writebacks - - - - -

B.4 Increases in fair value charged to

a) shareholders’ equity - - - - -

b) income statement - - - - -


B.6 Other increases - - - - - -

C. Decreases

C.1 Sales - - - - - -

C.2. Writedowns

- Amortisation - - (6,635) - (6,635)

- Writedowns


+ income statement - - - (1,326) - (1,326)

C.3 Decreases in fair value


+ income statement - - - - -

C.4 Transfers to non-current assets classified as held for sale - - - - - -


D. Net closing balance - - - (188) - (188)

C.6 Other decreases 21,583 - - 8,477 - 30,060

D.1. Total net writedowns (6,155) - - (59,965) - (66,120)

E. Gross closing balance 27,738 - - 68,442 - 96,180

F. Measurement at cost 21,583 - - 8,477 - 30,060

12.3 Other informationThe useful life of software, considered for the calculation of the amortisation charges is 3 years. Reference should be made to section 12 of the income statement for a description of the methods used to calculate amortization.

As at 31 December 2008 the Bank had no contractual commitments to purchase intangible assets.

It is worth underlining that all the goodwill relates to acquisitions of business divisions or companies carrying out trading activity or management of financial planners (in particular goodwill of former Xelion). These activities have been fully integrated with FinecoBank’s ordinary operations, as a result it is no longer possible to isolate the contribution of each company/business division from the Bank's overall income; this means that to establish the reasonableness of the value of goodwill recognised in the financial statements it is necessary to take account of the Bank's overall income. The cash generating unit (CGU) is the bank as a whole.


In fact, the specific business model adopted by FinecoBank, which envisages the strong integration of financial planners and trading and banking platform, does not account costs/revenues by allocating them to the business units; the financial planners network is an integral part of the overall offer, which includes banking and trading services.The impairment test was carried out by the competent structures of the Parent Bank, relying on a ‘free cash flow to equity’ model which took account of the following factors:- NP and RWA as per the 2209 budget and the three-year plan for 2010, approved by the competent administrative bodies of FinecoBank e/

or of the Parent Bank:- 2% constant growth in NP from 2011 to 2017 (prudential assumption compared to CAGR 07-10)- 4.5% convergent growth in RWA from 2011 to 2017 (CAGR 07-10) at 2% of TV- 6.4% constant target CT1 ratio

The impairment test did not highlight the need for value adjustments.

NP= Net ProfitRWA= Risk Weighted AssetsCT1= Capital Tier 1

Section 13 - Tax Assets and Tax Liabilities - Asset item 130 and liability item 80

General aspectsThe item “Tax assets” amounting to 76,655 thousand comprises:- the balancing entry of prepaid tax assets of 44,773 thousand recognised in the income statement;- prepaid tax assets of 2 thousand as the balancing entry of Shareholders' equity associated with the writedown of the investment recorded

in available-for-sale assets;- current tax assets of 31,880 thousand relating to IRES national tax consolidation and IRAP prepaid.The item “Tax liabilities”, which amounted to 20,655 thousand, with a balancing entry in the income statement, is broken down as follows:- Current tax liabilities of 5,653 thousand; - Deferred tax liabilities of 15,002 thousand;

The calculation of the aforementioned asset and liability items was affected by the impact of the adoption of "national tax consolidation" and the application of IAS/IFRS.

National tax consolidationFor the 2007-2009 three-year period, FinecoBank, in its capacity as consolidated company, was subject to what is known as “national tax consolidation”, as established by Italian Legislative Decree no. 344 of 12 December 2003, which was carried out by the Parent Bank, UniCredit S.p.A.

Current tax liabilitiesLegislative Decree no. 185 of 29 November 2008 converted, with amendments, by Law no. 2 of 28 January 2009 introduced the possibility of aligning and revaluing book values as a result of business combinations.Following the merger with UniCredit Xelion Banca S.p.A., FinecoBank received a goodwill amount associated with the recording of a merger difference arisen from the extraordinary transaction or merger of UniCredit Xelion Sim S.p.A. in UniCredit Xelion Banca S.p.A. carried out in 2001, which originally had not been written off.Current tax liabilities include the amount of substitute tax for the write-off of the aforesaid goodwill for 2,206 thousand.

Assets (CONTINUED)

Notes



Prepaid/deferred tax assets/liabilitiesIn accordance with the law and regulations currently in force note that:- the valuation of prepaid taxes for IRES purposes takes into account the expected income figures for future years, according to the provisions

established by competent company bodies;- the valuation of prepaid taxes for IRAP purposes takes place on the basis of the company’s expected income figures for future years, and

takes into account changes in the legal context;- deferred taxes are recognized whenever the relevant requirements are satisfied.Deferred/prepaid tax assets and liabilities were determined assuming an IRES rate of 27.5% and an IRAP rate of 4.8176%.

For more detailed information concerning “Prepaid tax assets”, reference should be made to the contents of sections 13.1, 13.3 and 13.5 below. For similar information concerning “Deferred tax assets”, reference should be made to the contents of sections 13.2, 13.4 and 13.6 below.

13.1 Prepaid tax assets: breakdown

ASSET/AMOUNT 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

Financial assets/liabilities held for trading - 4,649 (4,649) -100.0%

Provisions 29,873 12,830 17,043 132.8%

Other expenses 6,959 1,135 5,824 513.1%

Loans to banks and customers 7,719 8,415 (696) -8.3%

Property, plant and machinery/intangible assets 223 600 (377) -62.8%

Equity investments 2 - 2 -

Total 44,776 27,629 17,147 62.1%

13.2 Deferred tax liabilities: breakdown

ASSET/AMOUNT 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

Property, plant and machinery/intangible assets 14,620 3,225 11,395 353.3%

Other financial instruments / assets / liabilities - 8 (8) -100.0%

Other expenses 382 263 119 45.2%

Total 15,002 3,496 11,506 329.1%


The main increases in prepaid taxes recorded in the financial year as a balancing item of the income statement refer to the following principal items:- increase in the provision for contingencies and charges, loan writedowns, administrative expenses and future personnel costs;- transactions involving the merger by incorporation of di UniCredit Xelion Banca S.p.A. and Xaa Agenzia Assicurativa S.p.A., the purchase of

the “asset gathering” business division of UniCredit Private Banking S.p.A..The main decreases in prepaid taxes recorded in the financial year as a balancing item of the income statement refer to the following principal items:- writeback of AFS junior securities, reversal of writedowns over 18 years, utilisation of the provision for contingencies and charges and

payments to personnel; - spin-off of the “Salary-guaranteed loans” division in Fineco Prestiti S.p.A. on 1 January 2008, and spin-off of the “Mortgages" division in

UniCredit Banca per la Casa S.p.A., now UniCredit Consumer Financing Bank S.p.A., on 1 July 2008.

13.3 Changes in prepaid taxes (balancing entry in income statement)

31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

1. Opening balance 27,629 23,479 4,150 17.7%

2. Increases

2.1 Prepaid taxes charged in the year 11,952 14,663 (2,711) -18.5%

a) relating to prior financial years - -

b) due to changes in accounting policies - 6,323 (6,323) -100.0%

c) writebacks - - - -

d) other 11,952 8,340 3,612 43.3%

2.2 New taxes or increases in tax rates - - - -

2.3 Other increases 22,199 22,199 -

- for business combination transactions 22,199

3. Decreases

3.1 Prepaid taxes paid in the year (12,253) (6,978) (5,275) 75.6%

a) reversals (12,253) (6,357) (5,896) 92.7%

b) writedowns for irrecoverability - - - -

c) change in accounting policies - (621) 621 -100.0%

3.2 Reduction in tax rates - (3,535) 3,535 -100.0%

3.3 Other decreases (4,753) - (4,753) -


4. Closing balance 44,774 27,629 17,145 62.1%

Assets (CONTINUED)

Notes



The main increases in deferred taxes recorded in the financial year as a balancing item of the income statement refer to the following principal items:- deferred taxes arisen as a result of the new tax treatment of goodwill;- mergers by incorporation of UniCredit Xelion Banca S.p.A.The main decreases in deferred taxes recorded in the financial year as a balancing item of the income statement refer to the following principal items:- deferred taxes related to amortisation and depreciation charges;- spin-off of the “Salary-guaranteed loans" business division in Fineco Prestiti S.p.A. on 1 January 2008.

13.4 Changes in deferred taxes (balancing entry in income statement)

31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

1. Opening balance 3,488 4,204 (716) -17.0%

2. Increases

2.1 Deferred taxes charged in the year 1,049 1,162 (113) -9.7%

a) relating to prior financial years - - - -

b) due to changes in accounting policies - - - -

c) other 1,049 1,162 (113) -9.7%


2.3 Other increases 10,671 10,671 -

- for business combination transactions 10,671 10,671 -

3. Decreases

3.1 Deferred taxes paid in the year (131) (1,402) 1,271 -90.7%

a) reversals (131) (1,402) 1,271 -90.7%


c) other - - - -

3.2 Reduction in tax rates - (476) 476 -100.0%

3.3 Other decreases (75) (75) -

- for de-merger/spin-off transactions (75) (75) -

4. Closing balance 15,002 3,488 11,514 330.1%


13.5 Changes in prepaid taxes (balancing entry in shareholders' equity)

31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

1. Opening balance - - - -

2. Increases

2.1 Deferred taxes charged in the year 2 - 2 -



c) other 2 - 2 -


2.3 Other increases - - -

3. Decreases

3.1 Deferred taxes paid in the year - - - -

a) reversals - - - -


c) other - - - -

3.2 Reduction in tax rates - - - -

3.3 Other decreases - - -

4. Closing balance 2 - 2 -

13.6 Changes in deferred taxes (balancing entry in shareholders' equity)

31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

1. Opening balance 8 577 (569) -98.6%

2. Increases

2.1 Deferred taxes charged in the year - - - -



c) other - -


2.3 Other increases - -

3. Decreases

3.1 Deferred taxes paid in the year - (547) 547 -100.0%

a) reversals - (547) 547 -100.0%


c) other - - - -

3.2 Reduction in tax rates - (22) 22 -100.0%

3.3 Other decreases (8) - (8) -

- for de-merger/spin-off transactions (8) - (8) -

4. Closing balance - 8 (8) -100.0%

Assets (CONTINUED)

Notes



Section 14 - Non-current assets and discontinued operations and associated liabilities - Assets item 140 and liabilities item 90

14.1 Non-current assets and discontinued operations: breakdown by type of asset

31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

A. Individual assets

A.1 Equity investments - - - -

A.2 Property, plant and equipment 145 145 - -

A.3 Intangible assets - - - -

A.4 Other non-current assets - - - -

Total A 145 145 - -

B. Groups of assets (operating units sold)

B.1 Financial assets held for trading - - - -

B.2 Financial assets designated at fair value - - - -

B.3 Available-for-sale financial assets - - - -

B.4 Held-to-maturity financial assets - - - -

B.5 Loans to banks - - - -

B.6 Customer loans - - - -

B.7 Equity investments - - - -

B.8 Property, plant and equipment - - - -

B.9 Intangible assets - - - -

B.10 Other assets - - - -

Total B - - - -

C. Liabilities associated with non-current assets for disposal

C.1 Payables - - - -

C.2 Securities - - - -

C.3 Other liabilities - - - -

Total C - - - -

D. Liabilities associated with discontinued operations

D.1 Deposits from banks - - - -

D.2 Customer accounts - - - -

D.3 Securities in issue - - - -

D.4 Financial liabilities held for trading - - - -

D.5 Financial liabilities designated at fair value - - - -

D.6 Provisions - - - -

D.7 Other liabilities - - - -

Total C - - - -

14.3 Information on equity investments in companies subject to significant influence not valued according to the equity method

No information to report.


15.1 Other assets: breakdown

31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

Accruals other than those capitalisedon the relative financial assets 23 88 (65) -73.9%

securities payable on sight, revenue stamps and other paperItems in transit not allocated to relevant accounts - 446 (446) -100.0%

Cash and other valuables held by the teller: coupons, 15 8 7 87.5%

Items under construction:

- notes, cheques and other documents 15,022 11,515 3,507 30.5%

- POS and ATM cards 2 703 (701) -99.7%

- other items under construction 399 45 354 786.7%

Definitive items not recognised under other items:

- securities and coupons to be settled 47,965 1,460 46,505 3185.3%

- advances to suppliers and professionals 12,251 511 11,740 2297.5%

- receivables from financial planners 4,816 233 4,583 1967.0%

- receivables from suppliers 577 353 224 63.5%

- receivables for outstanding invoices and commissions to be collected 46,807 28,543 18,264 64.0%

- amounts to be settled via clearing house 4,879 12,330 (7,451) -60.4%

- other transactions 65,321 17,830 47,491 266.4%

Tax items other than those recognised under item 140:

- tax advances 100,324 49,546 50,778 102.5%

- tax credits 1 4 (3) -75.0%

- tax advances on severance indemnities 6 11 (5) -45.5%

Deficits, misappropriations, theft and other contingent assets 6 19 (13) -68.4%

Disputed items not deriving from lending 177 232 (55) -23.7%

Collateral deposits in own name 652 254 398 156.7%

Prepayments 25,103 20,459 4,644 22.7%

Improvement and incremental expenses incurred on leasehold assets 11,466 3,803 7,663 201.5%

Total 335,812 148,393 187,419 126.3%

Section 15 - Other assets - Item 150


Notes


Section 1 - Deposits from banks - Item 10


Liabilities

1.1 Due to banks: breakdown by category


CHANGES

ABSOLUTE %

2. Deposits from banks absolute - - - -

2.1 Current accounts and demand deposits 865,332 3,707,075 (2,841,743) -76.7%

2.2 Savings accounts 141,517 90,030 51,487 57.2%

2.3 Loans 2,102 912,053 (909,951) -99.8%

2.3.1 Finance leases

2.3.2 Other - - - -

2.4 Payables for obligations to repurchase own equity instruments 717,120 2,694,052 (1,976,932) -73.4%

2.5 Liabilities of assets sold - - - -

but not eliminated

2.5.1 Repurchase agreements 4,593 - 4,593 -

2.5.2 Other - - - -

2.6 Other payables - 10,940 (10,940) -100.0%

Total 865,332 3,707,075 (2,841,743) -76.7%

Fair value 865,332 3,707,075 (2,841,743) -76.7%

Other loans as at 31 December 2008 include only repurchase agreements undertaken involving securities received through reverse repurchase agreements.Deposits from banks relating to Savings accounts and Other loans as at 31 December 2007 included funding collected by the Parent Bank with the aim of maintaining a correlation between medium/long-term loans and funding, as provided for by the Group policy. These contracts were transferred to Fineco Prestiti S.p.A. and spun off in UniCredit Banca per la Casa S.p.A., now UniCredit Consumer Financing Bank S.p.A., as part of the corporate transactions described earlier on.


1.2 Breakdown of item 10 "Deposits from banks": subordinated debts


CHANGES

ABSOLUTE %

1. Deposits from central banks - - - -

2. Deposits from banks - 100,358 (100,358) -100.0%

2.1 Current accounts and demand deposits - - - -

2.2 Savings accounts - - - -

2.3 Loans

2.3.1 Finance leases - - - -

2.3.2 Other - 100,358 (100,358) -100.0%

2.4 Payables for obligations to repurchase own equity instruments - - - -

2.5 Liabilities of assets sold but not eliminated

2.5.1 Repurchase agreements - - - -

2.5.2 Other - - - -

2.6 Other payables - - - -

Total - 100,358 (100,358) -100.0%

Fair value - 100,358 (100,358) -100.0%

1.3 Breakdown of item 10 "Deposits from banks": structured debts

No data to report.

1.4 Deposits from banks: liabilities under micro-hedgeNo data to report.

1.5 Finance lease debtsNo data to report.

Liabilities (CONTINUED)


Notes


Section 2 - Due to customers - Item 20

2.1 Due to customers: breakdown by category


CHANGES

ABSOLUTE %

1. Current accounts and demand deposits 8,273,768 4,869,899 3,403,869 69.9%

2. Savings accounts 123 329 (206) -62.6%

3. Third-party funds under administration - - - -

4. Loans

4.1 Finance leases - 1 (1) -100.0%

4.2 Other 820,203 460,995 359,208 77.9%

5. Payables for obligations to repurchase own equity instruments - - - -

6. Liabilities for assets sold but not eliminated

6.1 Repurchase agreements 3,539,378 2,045,404 1,493,974 73.0%

6.2 Other - 1,572,063 (1,572,063) -100.0%

Total 3,767 11,522 (7,755) -67.3%

7. Other deposits 12,637,239 8,960,213 3,677,026 41.0%

Fair value 12,637,239 8,960,213 3,677,026 41.0%

“Financial liabilities from assets sold but not eliminated - other” as at 31 December 2007 represented the balance of Financial liabilities stated as a balancing item of securitised loans after 1 January 2002. As part of the transfer of the “salary-guaranteed loans” business division and of the spin-off of the “Mortgages” division, the Bank transferred the junior securities, the subordinated loan, the derivative contracts, the credit enhancements, the role of originator and all the contracts related to the transaction to Fineco Prestiti S.p.A. and UniCredit Banca per la Casa S.p.A., now UniCredit Consumer Financing Bank S.p.A. respectively.

2.2 Breakdown of item 20 “Due to customers”: subordinated debtsNo data to report.

2.3 Breakdown of item 20 "Due to customers": structured debtsNo data to report.

2.4 Due to customers: liabilities under micro-hedgeNo data to report.


2.5 Finance lease debts

FinecoBank has entered into finance lease agreements, for non significant amounts, for the use of electronic machines and motor vehicles.

The following table presents the information required by paragraphs 31 and 65 of IAS 17.

Minimum future payments: outstanding lease payments.CV of minimum future payments: current value of outstanding lease payments.Effective financial charges: effective financial charges accrued during the year and charged to the income statement.Historical cost: the historical cost of the leased assets entered to the assets section of the balance sheet.Accumulated depreciation: accumulated depreciation for the leased assets entered to the assets section of the balance sheet.Depreciation, writedowns and writebacks: depreciation, writedowns and writebacks recorded in the income statement.

Section 3 - Securities in issue - Item 30

No data to report.

31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

CV minimum future payments due within 1 year - 1 (1) -100.0%

Minimum future payments due within 1 year - 1 (1) -100.0%

Minimum future payments due within 1-5 years - - -

CV Minimum future payments due within 1-5 years - - -

Effective financial charges - - -

Historical cost 964 964 - 0.0%

Accumulated depreciation (964) (960) (4) 0.4%

Net book value - 4 (4) -100.0%

Depreciation, writedowns and writebacks (4) (4) - 0.0%



Notes


Section 4 - Financial liabilities held for trading - Item 40

4.1 Financial liabilities held for trading: breakdown by category

TYPE OF TRANSACTION/AMOUNT

31.12.2008 31.12.2007

NV

FV

FV* NV

FV

FV*L UL L UL

A. Cash liabilities

1. Deposits from banks 5 - 5 5 3 3 - 3

2. Due to customers 101,673 100,804 - 100,804 19 151 - 151

3. Debt securities

3.1 Bonds

3.1.1 Structured - - - - - -

3.1.2 Other bonds - - - - - -

3.2 Other securities

3.2.1 Structured - - - - - -

3.2.2 Other - - - - - -

Total A 101,678 100,804 5 100,809 22 154 - 154

B. Derivative instruments

1. Financial derivatives

1.1 used for trading activities 301 29,107 67 26,687

1.3 Other - - - 39,256

1.2 Associated with the fair value option - - - -

2. Credit derivatives

2.1 used for trading activities - - - -

2.2 Associated with the fair value option - - - -

2.3 Other - - - -

Total B 301 29,107 67 65,943

Total (A+B) 101,678 101,105 29,112 100,809 22 221 65,943 154

FV = fair valueFV* = Fair value calculated by excluding the changes in value due to the change in the issuer's credit rating since the issue dateNV = nominal or notional valueL = listedUL = unlisted

4.2 Item 40 "Financial liabilities held for trading": subordinated liabilitiesNo data to report.

4.3 Item 40 "Financial liabilities held for trading": structured debtsNo data to report.


4.4 Financial liabilities held for trading: derivative instruments as at 31.12.08

TYPE OF DERIVATIVE/UNDERLYING ASSET INTEREST RATESCURRENCIES





- Options issued - - - - - -








Total A 10 - 291 - - 301





- Other derivatives 4 3,126 - - - 3,130


- Options issued 29 - - - 29





Total B 25,981 3,126 - - - 29,107

Total (A+B) 25,991 3,126 291 - - 29,408



Notes


4.5 Financial cash liabilities (excluding "technical overdrafts") held for trading: changesNo data to report.

Section 5 - Financial liabilities designated at fair value - Item 50

FinecoBank has not booked any financial liabilities under the item “Financial liabilities designated at fair value”.

4.4 Financial liabilities held for trading: derivative instruments as at 31.12.07

TYPE OF DERIVATIVE/UNDERLYING ASSET INTEREST RATESCURRENCIES AND













Total A 36 - 31 - - 67




- Options issued - - 1 - - 1

- Other derivatives - 3,644 - - - 3,644


- Options issued 40 - - - 40





Total B 62,298 3,644 1 - - 65,943

Total (A+B) 62,334 3,644 32 - - 66,010


Section 6 - Hedge derivatives - Item 60















Total A - - - - - -












Total B 155,922 - - - - 155,922

Total (A+B) 155,922 - - - - 155,922



Notes
















Total A - - - - - -












Total B 2,110 - - - - 2,110

Total (A+B) 2,110 - - - - 2,110




MICRO


RATE RISKEXCHANGE RATE RISK CREDIT RISK PRICE RISK

SEVERAL RISKS


2. Loans - - - - -




Total assets - - - - - 155,922 - -


2. Portfolio - -




Section 7 - Adjustment to the value of financial liabilities under macro-hedge - Item 70No data to report.

Section 8 - Tax liabilities - Item 80See section 13 of the balance sheet – assets.

Section 9 - Liabilities associated with discontinued operations - Item 90See section 14 of the balance sheet – assets.




MICRO


RATE RISKEXCHANGE RATE RISK CREDIT RISK PRICE RISK

SEVERAL RISKS


2. Loans - - - - -




Total assets - - - - - 2,110 - -


2. Portfolio - -





Notes


Section 10 - Other liabilities - Item 100

10.1 Other liabilities: breakdown

31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

Impairment of financial guarantees issued 600 600 - 0.0%

Accrued liabilities other than those capitalised

Other liabilities relative to employees 171 34 137 402.9%

on the relative financial liabilities 18,589 13,521 5,068 37.5%

Other liabilities relative to other personnel 637 15 622 4146.7%

Other liabilities relative to Directors and Auditors 91 85 6 7.1%

Sums available to be paid to customers 7,359 8,756 (1,397) -16.0%

Items under construction:

- incoming bank transfers 12,291 1,354 10,937 807.8%

- outgoing bank transfers 27,934 20,754 7,180 34.6%

- POS and ATM cards 1 1 - 0.0%

- other items under construction 2,216 1,318 898 68.1%

Definitive items not recognised under other items:

- sums due to suppliers 63,107 37,826 25,281 66.8%

- other items 44,548 44,285 263 0.6%

Adjustments for illiquid portfolio items 26,677 26,450 227 0.9%

Tax items other than those recognised under item 80:

- sums withheld from third parties as withholding agent 75,444 45,674 29,770 65.2%

Social security contributions to be paid - 1,059 (1,059) -100.0%

Deferred income 4,280 2,401 1,879 78.3%

Other items - 1,775 (1,775) -100.0%

Total 283,945 205,908 78,037 37.9%


Section 11 - Employee severance payment fund - Item 110

The increases due to business combinations relate to personnel of UniCredit Xelion Banca S.p.A., merged by incorporation into FinecoBank on 7 July 2008, and of the “asset gathering” division of UniCredit Private Banking S.p.A., following the spin-off in favour of FinecoBank which took place on 1 July 2008.The decreases due to business combinations relate to FinecoBank’s personnel transferred to Fineco Prestiti S.p.A. on 1 January 2008 and spun off in UniCredit Banca per la Casa S.p.A., now UniCredit Consumer Financing Bank S.p.A., and UniCredit Consumer Financing Bank S.p.A. on 1 July 2008 as part of the Group reorganisation plan described earlier on.

Other decreases, net of changes due to business combinations, comprise decreases in the employee severance payment fund resulting from transfers of personnel to other Group companies.

11.2 Other informationThe Employee severance payment fund covers the amount of the rights matured in that respect up to 31 December 2008 by employees, in accordance with current legal regulations as well as national collective bargaining agreements and supplementary company agreements.The financial year under review was characterised by :1) normal events relating to the employee severance payment fund (increases, payments for termination of employment, advances for reasons

permitted by the law, amounts transferred to supplementary pension funds and to INPS managed fund) in accordance with legal provisions and company agreements in force;

2) changes associated with employment contracts pursuant to art. 1406 and ff. of the Civil Code dealing with individual mobility within the Group;

3) changes associated with spin-offs, transfers and mergers which took place in the 2008 financial year.

In 2007 the new supplementary pension reform pursuant to legislative Decree no. 252/2005 became effective and, as a result the amounts accrued up to 31 December 2006 were kept with the company, whilst the amounts of employee severance payment fund accruing as of 1 January 2007 were transferred to the supplementary pension fund that is the INPS Treasury fund if the employee so opted within 30 June 2007. As a consequence:- the employee severance payment fund accrued up to 31 December 2006 (or until the date of the option – falling between 1 January 2007

and 30 June 2007 – made by the employee if the latter decided to transfer his employee severance payment fund to a Supplementary pension fund) continues to be a “defined-benefit” plan hence subject to actuarial valuation, although based on simplified actuarial assumptions which no longer take account of estimated future pay rises;

11.1 Employee severance payment fund: changes over the year

31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

A. Opening balance 3,619 3,834 (215) -5.6%

B. Increases

B.1 Amount provided in the year 169 181 (12) -6.6%

B.2 Other increases 2,493 2 2,491 124550.0%

- of which business combinations 2,493 - 2,493 -

C. Decreases

C.1 Payments made (479) (313) (166) 53.0%

C.2 Other decreases (1,220) (85) (1,135) 1335.3%

- for de-merger/spin-off transactions (610) (85) (525) 617.6%

D. Closing balance 4,582 3,619 963 26.6%



Notes


- the amounts matured up to 1 January 2007 (or the date of the option - falling between 1 January 2007 and 30 June 2007 - by the employee if the latter decided to transfer his employee severance payment fund to a Supplementary pension fund), were considered as a « defined-benefit” plan (as the company’s liability ceases at the time it pays the employee severance payment fund matured to the pension fund chosen by the employee) and therefore the related cost for the period is equal to the amounts paid to the Supplementary Pension fund that is the INPS Treasury fund.

As at 31 December 2008, the employee severance payment fund recalculated in accordance with IAS 19 was a liability of 4,582 thousand.Here below attention is drawn to the reconciliation of the present value of the employee severance payment fund (calculated by an independent actuary appointed by the Parent Bank UniCredit S.p.A. for that specific purpose) and the related liability stated in the financial statements, as well as the main actuarial assumptions used.

The economic effects of the 2008 financial year, highlighted in item B.1 "Accruals for the year" totalling 169 thousand are solely represented by the Interest cost (financial charge that is interest accrued on the bond in the year under review).

Section 12 - Provisions for contingencies and charges - Item 120

Personnel charges stated at point 2.2 refer to pending disputes with former employees of the Bank.

Reconciliation of the Present value of the fund with the related financial statement liability

Present value of the defined-benefit plan – (Employee Severance Payment Fund) 4,408

Actuarial profits (losses) not recognised 174

Net liability 4,582

Description of principal actuarial assumptions

Discounting rate 5.50%

Expected inflation rate 2.00%

12.1 Provisions for contingencies and charges: breakdown

31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

1. Company pension funds - - - -

2. Other provisions for contingencies and charges

2.1 legal disputes 47,501 27,171 20,330 74.8%

2.2 Personnel charges 1,676 93 1,583 1702.2%

2.3 other 38,041 11,264 26,777 237.7%

Total 87,218 38,528 48,690 126.4%


12.2 Provisions for contingencies and charges: changes over the year

Pension fundsNo data to report.

Other provisions

Increases linked to business combination transactions relate to the provision for contingencies and charges of UniCredit Xelion Banca S.p.A., merged by incorporation in FinecoBank on 7 July 2008, amounting to 43,987 thousand, and the provision for risks of the “asset gathering” division of UniCredit Private Banking S.p.A., following the spin-off in favour of FinecoBank of 1 July 2008, amounting to 2,461 thousand.The decreases due to business combinations relate to the provision for risks of FinecoBank transferred to Fineco Prestiti S.p.A. on 1 January 2008 and spun off in UniCredit Banca per la Casa S.p.A., now UniCredit Consumer Financing Bank S.p.A., on 1 July 2008 as part of the Group reorganisation plan described earlier on.

12.3 Defined-benefit company pension fundsNo data to report.

31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

A. Opening balance 38,528 32,342 6,186 19.1%

B Increases - - - -

B.1 Amount provided in the year 8,310 9,173 (863) -9.4%

B.2 Changes due to the passage of time 1,201 878 323 36.8%

B.3 Changes due to variations in the discount rate 265 - 265 -

B.4 Other increases 46,448 - 46,448 -

- of which business combinations 46,448 - 46,448 -

C Decreases - - - -

C.1 Amounts used in the year (6,103) (3,590) (2,513) 70.0%

C.2 Changes due to variations in the discount rate - (275) 275 -100.0%

C.3 Other decreases (1,431) - (1,431) -


D. Closing balance 87,218 38,528 48,690 126.4%



Notes


The column “Effects of discounting” includes the variations due to the change in the discount rate, the passage of time and the change in the payment timeline.

Section 13 - Redeemable shares - Item 14013.1 Redeemable shares: breakdown

No data to report.

Section 14 - Bank's shareholders' equity - Items 130, 150, 160, 170, 180, 190 and 200

12.4 Provisions for contingencies and charges - other provisions

PROVISION FOR CONTINGENCIES AND CHARGES 31.12.2007

XELION MERGERSPIN-OFF OF UPB

SPIN-OFF OF BUSINESS DIVISION “MORTGAGES” AND

“SALARY-GUARANTEED LOANS”UTILISATIONS

2008EFFECT

DISCOUNTINGPROVISIONS

2008 NET 31.12.2008

Disputes and other charges related tofinancial planners’ activity 24,702 27,129 (157) (2,594) 601 4,129 53,810

Agents' termination entitlement provision 4,905 18,483 - (1,211) - 3,965 26,142

Financial shops closure charges 272 836 - (529) - 108 687

Other charges and minor disputes 8,649 - (1,274) (1,769) 57 916 6,579

Total provision for contingencies and charges 38,528 46,448 (1,431) (6,103) 658 9,118 87,218

14.1 Bank's shareholders' equity: breakdown

ITEM/AMOUNT 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

1. Share capital 200,070 199,851 219 0.1%

2. Share premium account 1,934 - 1,934 -

3. Reserves

- Legal reserve 10,011 6,866 3,145 45.8%

- Reserve for merger surpluses 58 - 58 -

- Restatement reserve - - - -

- Other reserves 81,243 80,601 642 0.8%

4. (Own shares) - - - -

5. Valuation reserves (15) 565 (580) -102.7%

6. Capital instruments - - - -

7. Net profit (loss) for the year 91,834 62,897 28,937 46.0%

Total 385,135 350,780 34,355 9.8%


As at 31 December 2008 the Bank’s share capital came to 200,070 thousand, and was divided into 606,274,033 shares with a nominal value of 0.33 each.The legal reserve amounts to 10,011 thousand, the Share Premium Account amounts to 1,934 thousand, and the other reserves are comprised of:- Extraordinary reserve - 84 million;- Negative reserve from repurchase of securitised receivables - (27) thousand;- Reserve from the spin-off of UniCredit Private Banking S.p.A. business division - 24.5 million.

On 14 April 2008, upon allocation of the profit for the 2007 financial year, 3,145 thousand were allocated to legal reserve and 5,248 to Extraordinary reserve; the remaining 54,505 thousand were distributed to the shareholders.

On 29 April 2008 the Finecobank spin-off deed was signed the subject of which was the partial, non-proportional spin-off of the Bank involving the transfer of part of the company’s net worth to the newly set-up joint-stock company called Localmind S.p.A., with head office in Milan. As a result of the aforesaid spin-off, no. 609,910 shares of the Bank were cancelled, the share capital reduced by 201 thousand and the Extraordinary reserve by 2,238 thousand.

As described earlier on, following the closure, on 5 May 2008, of the Garda Securitisation Series 2001-1 and Velites securitisation transactions, a negative reserve was recorded in Shareholders’ equity for 26,868 thousand after the related adjustments and the fair value at the repurchase date as well as the positive difference between the redemption value and the book value of the securities held by FinecoBank following the securitisation transactions now extinguished (previously held under item 40 “Available-for-sale financial assets”).

The Shareholders' Meeting held on 6 June 2008 resolved a share capital increase, to be carried out in one or more tranches, of 3,096 thousand relating to the “Long Term Incentive Plan”, that is the Stock Option Plan concerning Xelion Banca shares (now FinecoBank shares) in favour of the financial planners of the merged company. The new shares issued in relation to the share capital increase of the Bank, as permitted in specific period of the financial year, were 1,274,890 and were simultaneously repurchased by the sole shareholder, UniCredit S.p.A. as a result of the “call” option exercised. Overall, the share capital increase was equal to 420 thousand and the Share premium account amounted to 1,934 thousand.

On 1 July 2008 FinecoBank was the beneficiary of the “asset gathering” business division of UniCredit Private banking S.p.A., represented by the shareholding in UniCredit Xelion Banca S.p.A. merged by incorporation in FinecoBank on 7 July 2008 and of the back-office activities associated with the business of the latter. The transaction entailed the recognition of a spin-off reserve of 274,500 thousand.

A portion of some reserves was transferred following the spin-off of the “Salary-guaranteed loans" division in favour of UniCredit Consumer Financing Bank S.p.A., carried out on 1 July 2008, namely 10,000 of the reserve arisen from the spin off of the “asset gathering” division of UniCredit Private Banking S.p.A. mentioned above and 565 thousand of the Reserve from the Valuation of assets available for sale relating to the shareholding in Net Insurance S.p.A. which was also part of the spin-off.

Following the spin-off of the “Mortgages” division in favour of UniCredit Banca per la Casa, now UniCredit Consumer Financing Bank S.p.A., carried out on 1 July 2008, part of the reserve arisen from the spin off of the “asset gathering” division of UniCredit Private Banking S.p.A. mentioned above amounting to approximately 150,000 thousand was transferred.

Following the merger by incorporation transactions of UniCredit Xelion Banca S.p.A. and Xaa Agenzia Assicurativa S.p.A., carried out on 7 July 2008, a Merger surplus reserve was recorded for 58 thousand.

Following the valuation of the Visa shareholding at fair value, a negative Reserve arising from the valuation of assets available for sale was recorded for 15 thousand.



Notes


Information on the availability and distributability of shareholders’ equityFollowing the modification of article 2427 of the Italian Civil Code, due to the effect of the new provisions of Legislative Decree no. 6 of 17 January 2003, and in accordance with document no. 1 issued on 25 October 2004 by the Italian Accounting Board, the following table provides an analytical description of the individual items of shareholders’ equity, including their availability, distributability, and any utilization during the past three years.

TYPE/DESCRIPTION AMOUNT POSSIBLE USEAVAILABLE FOR

DISTRIBUTION

SUMMARY OF AMOUNTS USED IN THE LAST THREE YEARS

TO COVER LOSSES FOR OTHER REASONS

Share capital 200,070 - - - 2,442

Capital reserves :

Share premium account 1,934 A, B, C -1 - -

Retained earnings: -

Legal reserve 10,011 B - - -

Extraordinary reserves 83,610 A, B, C 83,6102 - -

Reserve for merger surpluses 58 A, B, C 58 - -

Reserve from buy-back of securitised loans (26,868) A, B, C (26,868) - -

Reserve from the spin-off of UniCredit Private Banking 24,500 A, B, C 18,830 - -

Other reserves - A, B, C - - 2,442

Valuation reserves:

Valuation reserves for available-for-sale financial assets (15) D - - -

TOTAL 293,300 75,630 - -

Undistributable share

Distributable balance 75,630 - -

Legend:A: for capital increase. B: to cover losses. C: for distribution to shareholders.D: availability and distribution limit prescribed by art. 6 of Legislative Decree no. 38/2005

Notes:(1) Pursuant to article 2431 of the Italian Civil Code, the sum total of said reserve may only be distributed on the condition that the legal reserve has reached the limit set out under article 2430 of the Italian Civil Code.(2) They cannot be distributed until the balance sheet value of Property, plant and equipment is covered, as prescribed by art. 2426 no. 5 of the Civil Code.

14.2 "Share capital" and "Own shares": breakdownThe share capital is made up of 606,274,033 ordinary shares with a face value of 0.33 each.As at 31.12.08, FinecoBank held no own shares in portfolio.


14.3 Share capital - Number of shares: changes over the year

ITEM/TYPE

31.12.2008 31.12.2007

ORDINARY OTHER ORDINARY OTHER

A. Existing shares at the beginning of the year

- fully paid up 605,609,053 - 605,609,053 -

- not fully paid up - - - -

A.1 Own shares (-) - - - -

A.2 Securities in issue: opening balance 605,609,053 - 605,609,053 -

B. Increases

B.1 New issues

- for cash :

- business combination transactions - - - -

- conversion of bonds - - - -

- exercise of warrants 1,274,890 - - -

- other - - - -

- scrip issues

- to employees - - - -

- to Directors - - - -

- other - - - -

B.2 Sale of own shares - - - -

B.3 Other increases - - - -

C. Decreases

C.1 Cancellation - - - -

C.2 Purchase of own shares - - - -

C.3 Business transfer transactions - - - -

C.4 Other decreases (609,910) - - -

D. Securities in issue: closing balance 606,274,033 - 605,609,053 -

D.1 Own shares (+) - - -

D.2 Existing shares at the end of the year - - - -

- fully paid up 606,274,033 - 605,609,053 -

- not fully paid up - - - -

14.7 Valuation reserves: breakdown

31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

1. Available-for-sale financial assets (15) 565 (580) -102.7%

2. Property, plant and equipment - - - -

3. Intangible assets - - - -

4. Hedge of foreign investments - - - -

5. Cash flow hedges - - - -

6. Exchange differences - - - -

7. Non-current assets and discontinued operations - - - -

8. Special revaluation laws - - - -

Total (15) 565 (580) -102.7%



Notes


The Reserve from available-for-sale financial assets includes the negative fair value measurement, less the related tax, of the Visa shareholding.

As at 31 December 2008 the Valuation reserve of 565 thousand, made up solely of the revaluation of the shareholding in Net Insurance less any related tax effect, was spun off to UniCredit Consumer Financing Bank S.p.A. on 1 July 2008.

14.8 Valuation reserves: changes over the year as at 31.12.08AVAILABLE-

FOR-SALE FINANCIAL

ASSETS

PROPERTY, PLANT AND EQUIPMENT

INTANGIBLE ASSETS

HEDGE OF FOREIGN

INVESTMENTSCASH FLOW

HEDGESEXCHANGE

DIFFERENCES

NON-CURRENT ASSETS AND

DISCONTINUED OPERATIONS

SPECIAL REVALUATION

LAWS

A. Opening balance 565 - - - - - - -

B. Increases

B.1 Increases in fair value - - - - - - -

B.2 Other increases - - - - - - - -

C. Decreases

C.1 Reductions in fair value (15) - - - - - -

- for de-merger/spin-off transactions (565) - - - - - - -

C.2 Other decreases (565) - - - - - - -

D. Closing balance (15) - - - - - - -

14.9 Valuation reserves for available-for-sale financial assets: breakdown

ASSET/AMOUNT

31.12.2008 31.12.2007

POSITIVE RESERVE NEGATIVE RESERVE POSITIVE RESERVE NEGATIVE RESERVE

1. Debt securities - - - -

2. Equities - (15) 565 -


4. Loans - - - -

Total - (15) 565 -

14.8 Valuation reserves: changes over the year as at 31.12.07AVAILABLE-

FOR-SALE FINANCIAL

ASSETS

PROPERTY, PLANT AND EQUIPMENT

INTANGIBLE ASSETS

HEDGE OF FOREIGN

INVESTMENTSCASH FLOW

HEDGESEXCHANGE

DIFFERENCES

NON-CURRENT ASSETS AND

DISCONTINUED OPERATIONS

SPECIAL REVALUATION

LAWS

A. Opening balance 1,654 - - - - - - 1,141

B. Increases

B.1 Increases in fair value - - - - - - -

B.2 Other increases 23 - - - - - - -

C. Decreases

C.1 Reductions in fair value (1,112) - - - - - -

C.2 Other decreases - - - - - - - (1,141)

D. Closing balance 565 - - - - - - -


14.10 Valuation reserves for available-for-sale financial assets: changes over the year as at 31.12.08DEBT SECURITIES EQUITIES UCIT UNITS LOANS

1. Opening balance - 565 - -

2. Increases

2.1 Increases in fair value - - - -

- due to impairment

- due to disposal - - - -

- due to impairment - - - -

2.3 Other increases - - - -

3. Decreases

3.1 Reductions in fair value positive: due to disposal - (15) - -

3.2 Reserves recycled to income statement - - - -

3.3 Other decreases - (565) - -

- for de-merger/spin-off transactions (565)

4. Closing balance - (15) - -

14.10 Valuation reserves for available-for-sale financial assets: changes over the year as at 31.12.07DEBT SECURITIES EQUITIES UCIT UNITS LOANS

1. Opening balance 1,112 542 - -

2. Increases

2.1 Increases in fair value - - - -

2.2 Negative reserves recycled to income statement

- due to impairment - - - -

- due to disposal - - - -

2.3 Other decreases - 23 - -

3. Decreases

3.1 Reductions in fair value (1,112) - - -

3.2 Reserves recycled to income statement positive: due to disposal - - - -

3.3 Other decreases - - - -

4. Closing balance - 565 - -



Notes


3. Information on operational lease FinecoBank signed a number of operating lease contracts relating to electronic machines lease rentals. Future lease rentals amount to- Within one year: 5,402 thousand- From on to five years: 6,467 thousand

The Bank did not undertake any subleasing transactions.

Section 15 - Other information

1. Guarantees given and commitments

TRANSACTIONS 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

1) Financial guarantees given

a) Banks 27,964 26,983 981 3.6%

b) Customers - - - -

2) Commercial guarantees given

a) Banks - - - -

b) Customers 2,410 2,597 (187) -7.2%

3) Irrevocable commitments to lend funds

a) Banks

i) certain to be called on 745 721 24 3.3%

b) Customers 25,629 16,353 9,276 56.7%

i) certain to be called on

ii) not certain to be called on 22,514 110,209 (87,695) -79.6%

4) Commitments underlying credit derivatives: 32 - 32 -

b) Customers protection sold - - - -

5) Assets given as collateral for third-party obligations - - - -

6) Other commitments - 32 (32) -

Total 79,294 156,895 (77,601) -49.5%

2. Assets given as collateral for own liabilities and commitments

PORTFOLIOS 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

1. Financial assets held for trading - - - -

2. Financial assets designated at fair value - 2,075,572 (2,075,572) -100.0%

3. Available-for-sale financial assets - - - -

4. Held-to-maturity financial assets - - - -

5. Loans to banks 3,622,572 - 3,622,572 -

6. Customer loans - - - -

7. Property, plant and equipment - - - -

Total 3,622,572 2,075,572 1,547,000 74.5%


4. Administration and brokerage for third parties

TYPE OF SERVICE 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

1. Trading of financial instruments on behalf of third parties

Securities

a) Purchases

1. Settled 131,742,153 213,503,889 (81,761,736) -38.3%

2. Unsettled 561,596 1,621,077 (1,059,481) -65.4%

b) Sales

1. Settled 130,693,768 212,235,852 (81,542,084) -38.4%

2. Unsettled 569,255 1,688,944 (1,119,689) -66.3%

Derivative contracts

a) Purchases

1. Settled 163,992,711 192,790,325 (28,797,614) -14.9%

2. Unsettled 5,056 5,554 (498) -9.0%

b) Sales

1. Settled 164,001,150 192,957,718 (28,956,568) -15.0%

2. Unsettled 4,358 5,092 (734) -14.4%

2. Discretionary Accounts

b) collective - - - -

a) individual - - - -

3. Custody and administration of securities

a) third-party securities deposited: (excluding discretionary accounts)

1. securities issued by the bank drawing up the F/S - - - -

2. other securities - - - -

b) third-party securities (excluding discretionary accounts): other 6,942,136 2,807,121 4,135,015 147.3%

1. securities issued by the bank drawing up the F/S - 1 (1) -100.0%

2. other securities 6,942,136 2,807,120 4,135,016 147.3%

c) third-party securities deposited with third parties 6,942,136 2,807,121 4,135,015 147.3%

c) own securities deposited with third parties 6,196,221 5,198,609 997,612 19.2%

4. Other transactions - - - -


Part C) Information on the Income Statement

Section 1 - Interest - Items 10 and 20 162

Section 2 - Commissions - Items 40 and 50 167

Section 3 - Dividends and similar income - Item 70 169

Section 4 - Net income from trading activities - Item 80 170

Section 5 - Net income from hedging activities - Item 90 171

Section 6 - Profit (Loss) from sale/repurchase - Item 100 171

Section 7 - Net income from financial assets and liabilities at fair value - Item 110 172

Section 8 - Net adjustments for impairment - Item 130 173

Section 9 - Administrative expenses - Item 150 175

Section 10 - Net provisions for contingencies and charges - Item 160 177

Section 11 - Net adjustments to property, plant and equipment - Item 170 178

Section 12 - Net adjustments to intangible assets - Item 180 179

Section 13 - Other operating income and expenses - Item 190 180

Section 14 - Gains (losses) from investments - Item 210 181

Section 15 - Net income from the fair value measurement of property, plant and equipment and intangible assets - Item 220 181

Section 16 - Net adjustments to goodwill - Item 230 181

Section 17 - Profit (Loss) from sale of investments - Item 240 182

Section 18 - Income taxes on continuing operations - Item 260 182

Section 19 - Profit (Loss) from discontinued operations after tax - Item 280 183

Section 20 - Other information 183

Section 21 - Earnings per share 185

Notes


Section 1 - Interest - items 10 and 20

1.1 Interest income and similar revenue: breakdown

Part C) Information on the Income Statement


as at 31.12.08

ITEM/TECHNICAL FORM

PERFORMING FINANCIAL ASSETS IMPAIRED FINANCIAL ASSETS OTHER ASSETS TOTALDEBT SECURITIES LOANS

1. Financial assets held for trading 612 - - - 612

2. Available-for-sale financial assets 2,904 - - - 2,904

3. Held-to-maturity financial assets - - - - -

4. Loans to banks 101,163 261,217 - - 362,380

6. Financial assets designated at fair value 11 94,037 1,537 - 95,585

5. Customer loans - - - - -

7. Hedge derivatives - - - 95,794 95,794

8. Financial assets sold but not eliminated 119,120 37,675 336 - 157,131

9. Other assets - - - 2,043 2,043

Total 223,810 392,929 1,873 97,837 716,449

as at 31.12.07

ITEM/TECHNICAL FORM

PERFORMING FINANCIAL ASSETS IMPAIRED FINANCIAL ASSETS OTHER ASSETS TOTALDEBT SECURITIES LOANS

1. Financial assets held for trading 15,680 - - 2,008 17,688

2. Available-for-sale financial assets 3,601 - - - 3,601

3. Held-to-maturity financial assets - - - - -

4. Loans to banks 79 50,322 - - 50,401

5. Customer loans 11 250,160 3,217 - 253,388

6. Financial assets designated at fair value 5,322 - - - 5,322

7. Hedge derivatives - - - 5,003 5,003

8. Financial assets sold but not eliminated 54,254 92,872 564 - 147,690

9. Other assets - - - 1,207 1,207

Total 78,947 393,354 3,781 8,218 484,300


The following table provides a breakdown of interest income on loans to customers, banks, and financial assets sold but not eliminated:

31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

Interest income on loans to banks 362,380 50,401 311,979 619.0%- current accounts 7,869 8,825 (956) -10.8%

- repurchase agreements 9,134 5,357 3,777 70.5%

- demand deposits 11,904 1,973 9,931 503.3%

- savings accounts for compulsory reserve 6,285 3,713 2,572 69.3%

- other loans 223,211 28,281 194,930 689.3%

- savings accounts 2,814 2,173 641 29.5%

- debt securities 101,163 79 101,084 127954.4%

Interest income on customer loans 95,585 253,388 (157,803) -62.3%- current accounts 4,172 2,068 2,104 101.7%

- repurchase agreements 14,587 46,835 (32,248) -68.9%

- mortgages 63,553 113,679 (50,126) -44.1%

- salary-guaranteed loans and delegated payment loans - 74,229 (74,229) -100.0%

- credit cards 2,028 1,699 329 19.4%

- personal loans 9,015 9,023 (8) -0.1%

- other loans 1,938 5,687 (3,749) -65.9%

- debt securities 11 11 - 0.0%

- bad debts 281 157 124 79.0%

Interest income on financial assets sold but not eliminated 157,131 147,690 9,441 6.4%- mortgages 38,011 84,640 (46,629) -55.1%

- salary-guaranteed loans and delegated payment loans - 8,796 (8,796) -100.0%

- debt securities 119,120 54,254 64,866 119.6%

1.2 Interest income and similar revenue: differentials relating to hedging transactions

ITEM/AMOUNT 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

A. Positive differentials relative to transactions for :A.1 Micro-hedges of fair value of assets - - -

A.2 Micro-hedge of fair value of liabilities - - -

A.3 Macro-hedges of interest rate risk 261,808 8,139 253,669 3116.7%

A.4 Micro-hedges of cash flows of assets - - -

A.5 Micro-hedges of cash flows of liabilities - - -

A.6 Cash flow macro-hedges - - -

Total positive differentials (A) 261,808 8,139 253,669 3116.7%B. Negative differentials relative to transactions for :

B.1 Micro-hedges of fair value of assets absolute - - -

B.3 Macro-hedges of interest rate risk - - -

B.2 Micro-hedges of fair value of liabilities (166,014) (3,136) (162,878) 5193.8%

B.4 Micro-hedges of cash flows of assets - - -

B.5 Micro-hedges of cash flows of liabilities - - -

B.6 Cash flow macro-hedges - - -

Total negative differentials (A) (166,014) (3,136) (162,878) 5193.8%C. Balance (A-B) 95,794 5,003 90,791 1814.7%

Notes


Part C) Information onthe Income Statement (CONTINUED)

1.3 Interest income and similar revenue: other information


1.3.1 Interest income on foreign currency financial assets

ITEM/TECHNICAL FORM 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

Interest income on foreign currency financial assets 16,744 24,693 (7,949) -32.2%

1.3.2 Interest income on finance lease transactions

No data to report.

1.3.3 Interest income on loans with third-party funds under administrationNo data to report.

1.4 Interest expense and similar charges: breakdown as at 31.12.08

ITEM/TECHNICAL FORM PAYABLES SECURITIES OTHER LIABILITIES TOTAL

1. Deposits from banks (78,274) - - (78,274)

2. Due to customers (263,086) - - (263,086)

3. Securities in issue - - - -

4. Financial liabilities held for trading (868) - (17,467) (18,335)

5. Financial liabilities designated at fair value - - - -

6. Financial liabilities associated with assets sold and not eliminated (179,335) - - (179,335)

7. Other liabilities - - (1,841) (1,841)

8. Hedge derivatives - - - -

Total (521,563) - (19,308) (540,871)


1.4 Interest expense and similar charges: breakdown as at 31.12.07

ITEM/TECHNICAL FORM PAYABLES SECURITIES OTHER LIABILITIES TOTAL

1. Deposits from banks (35,294) - - (35,294)

2. Due to customers (174,622) - - (174,622)

3. Securities in issue - - - -

4. Financial liabilities held for trading - - (2,661) (2,661)

5. Financial liabilities designated at fair value - - - -

6. Financial liabilities associated with assets sold and not eliminated (127,671) - - (127,671)

7. Other liabilities - - (1,054) (1,054)

8. Hedge derivatives - - - -

Total (337,587) - (3,715) (341,302)

The following table provides a breakdown of interest expense paid to customers and banks:

BREAKDOWN OF INTEREST EXPENSE 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

Interest expense on amounts due to banks (78,274) (35,294) (42,980) 121.8%- current accounts (3,023) (1,616) (1,407) 87.1%

- savings accounts (14,104) (24,174) 10,070 -41.7%

- other loans (42,008) (2,265) (39,743) 1754.7%

- repurchase agreements (15,529) (5,595) (9,934) 177.6%

- subordinated liabilities (2,592) (971) (1,621) 166.9%

- demand deposits (764) (55) (709) 1289.1%

- other payables (254) (618) 364 -58.9%

Interest expense on amounts due to customers (263,086) (174,622) (88,464) 50.7%- current accounts and initial futures margins (255,220) (148,992) (106,228) 71.3%

- savings accounts (12) (12) - 0.0%

- repurchase agreements (3,289) (17,212) 13,923 -80.9%

- securities borrowings (4,461) (4,507) 46 -1.0%

- other payables (104) (128) 24 -18.8%

- subordinated liabilities - (3,771) 3,771 -100.0%

Financial liabilities associated withassets sold but not eliminated (179,335) (127,671) (51,664) 40.5%- repurchase agreements (142,026) (45,980) (96,046) 208.9%

- securitisation transactions (37,309) (81,691) 44,382 -54.3%

1.5 Interest expense and similar charges: differentials relating to hedging transactions

This table was not included since the balance of differentials relating to hedging transactions was positive.

Notes



1.6 Interest expense and similar charges: other information


1.6.1 Interest expense on foreign currency liabilities


CHANGES

ABSOLUTE %

Interest expense on foreign currency liabilities (9,674) (30,773) 21,099 -68.6%

1.6.2 Interest expense on finance lease liabilities


CHANGES

ABSOLUTE %

Interest expense on finance lease transactions - - - -

1.6.3 Interest expense on third party funds under administration

No data to report.


Section 2 - Commissions - items 40 and 50

2.1 Commission income: breakdown

TYPE OF SERVICE/AMOUNT 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

(a) guarantees given 1 8 (7) -87.5%

(b) credit derivatives - - -

(c) management, brokerage and consulting services:

1. trading of financial instruments 92,155 101,438 (9,283) -9.2%

2. foreign currency trading 1,713 2,789 (1,076) -38.6%

3. discretionary Accounts

3.1. individual - - -

3.2. collective - - -

4. custody and administration of securities 1,096 327 769 235.2%

5. custodian bank - - -

6. securities placement 130,517 64,072 66,445 103.7%

7. acceptance of instructions 4,285 - 4,285

8. consulting activities 3,843 - 3,843

9. distribution of third-party services

9.1. discretionary accounts: 16,529 5,087 11,442 224.9%

9.1.1 individual 757 386 371 96.1%

9.1.2 collective 15,772 4,701 11,071 235.5%

9.2. insurance products 30,602 11,777 18,825 159.8%

9.3. other products 4,746 160 4,586 2866.3%

(d) collection and payment services 17,273 14,367 2,906 20.2%

(e) servicing for securitisation transactions 192 46 146 317.4%

(f ) services for factoring transactions - - -

(g) tax collection services - - -

(G) other services 16,353 37,556 (21,203) -56.5%

Total 319,305 237,627 81,678 34.4%

Notes



2.2 Commission income: distribution channels for products and services

CHANNEL/AMOUNT 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

(a) at own branches:

1. discretionary accounts - - -

2. securities placement - - -

3. third-party products and services - - -

(b) cold calling:

1. discretionary accounts 16,528 5,087 11,441 224.9%

2. securities placement 100,604 31,256 69,348 221.9%

3. third-party products and services 34,998 11,792 23,206 196.8%

(c) other distribution channels: -

1. discretionary accounts - - -

2. securities placement 29,913 32,816 (2,903) -8.8%

3. third-party products and services 349 145 204 140.7%

Total 182,392 81,096 101,296 124.9%

Securities placement commissions through "other distribution channels" refer to commissions collected on the subscription of shares with advance subscription, units of OICR and SICAVs undertaken directly by customers online.

2.3 Commission expense: breakdown

SERVICE/AMOUNT 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

(a) guarantees received (51) (102) 51 -50.0%

(b) credit derivatives - - -

(c) management and brokerage services:

1. trading of financial instruments (11,131) (12,089) 958 -7.9%

2. foreign currency trading (9) - (9)

3. discretionary accounts

3.1 own portfolio - - -

3.2 third-party portfolio - - -

4. custody and administration of securities (5,023) (13) (5,010) 38,538.5%

5. placing of financial instruments - - -

6. cold calling to offer securities, products and services (128,765) (73,798) (54,967) 74.5%

(d) collection and payment services (11,238) (9,311) (1,927) 20.7%

(e) other services (824) (1,363) 539 -39.5%

Total (157,041) (96,676) (60,365) 62.4%


Section 3 - Dividends and similar income - Item 70

3.1 Dividends and similar income: breakdown

ITEM/INCOME 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

A. Financial assets held for trading

Dividends 12 22 (10) -45.5%

Income from UCIT units - - -

B. Available-for-sale financial assets

Dividends 1,452 7 1,445 20,642.9%

C. Financial assets designated at fair value - - -

Income from UCIT units

Dividends - - -

Income from UCIT units - - -

D. Equity investments

Dividends 257 1,407 (1,150) -81.7%

Income from UCIT units

Total 1,721 1,436 285 19.8%

Notes



4.1 Net income from trading activities: breakdown as at 31.12.07

TRANSACTION/INCOME ITEMCAPITAL GAINS

(A)PROFITS FROM

TRADING (B)CAPITAL LOSSES

(C)LOSSES FROM

TRADING (D) NET PROFIT

1. Financial assets held for trading

1.1 Debt securities 331 4,013 (23,556) (4,059) (23,271)

1.2 Equities 2 2,976 (2) (3,179) (203)

1.3 UCIT units - - - - -

1.4 Loans - - - - -

1.5 Other - 771 - - 771

2. Financial liabilities held for trading

2.1 Debt securities - - - - -

2.2 Other 5 26 - (23) 8

3. Other financial assets and liabilities: exchange differences 24,140

4. Derivative instruments

4.1 Financial derivatives:

- Debt securities and interest rates 6,324 79,862 (6,168) (78,953) 1,065

- Equities and share indices 7,497 - (7,498) (498) (499)

- Currencies and gold 7

- Other - - - - -

4.2 Credit derivatives - - - - -

Total 14,159 87,648 (37,224) (86,712) 2,018

Section 4 - Net income from trading activities - Item 80

4.1 Net income from trading activities: breakdown as at 31.12.08


(A)PROFITS FROM


(C)LOSSES FROM


1. Financial assets held for trading

1.1 Debt securities 58 2,570 (162) (644) 1,822

1.2 Equities 1 1,887 (9) (1,917) (38)

1.3 UCIT units - - - - -

1.4 Loans - - - - -

1.5 Other - 4,121 - - 4,121

2. Financial liabilities held for trading

2.1 Debt securities - - - - -

2.2 Other 103 94,463 (214) (4) 94,348

3. Other financial assets and liabilities: exchange differences (1,238)



- Debt securities and interest rates 47,289 64,151 (44,784) (63,453) 3,203

- Equities and share indices 292 129 (291) (90,845) (90,715)

- Currencies and gold (11)

- Other - - - - -


Total 47,743 167,321 (45,460) (156,863) 11,492


Section 5 - Net income from hedging activities - Item 90

Section 6 - Profit (Loss) from sale/repurchase - Item 100

5.1 Net income from hedging activities: breakdown

INCOME ITEMS/AMOUNTS 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

A. Income relating to:A.1 Fair value hedge derivatives 18,084 11,139 6,945 62.3%

A.2 Financial assets hedged (fair value) 48,170 412 47,758 11591.7%

A.3 Financial liabilities hedged (fair value) - - -

A.4 Cash flow hedge financial derivatives - - -

A.5 Foreign currency assets and liabilities - - -

Total income from hedging activities (A) 66,254 11,551 54,703 473.6%B. Expenses relating to:

B.1 Fair value hedge derivatives (48,524) (4,098) (44,426) 1084.1%

B.2 Financial assets hedged (fair value) (14,714) (3,157) (11,557) 366.1%

B.3 Financial liabilities hedged (fair value) - - -

B.4 Cash flow hedge financial derivatives - - -

B.5 Foreign currency assets and liabilities - - -

Total expenses from hedging activities (A) (63,238) (7,255) (55,983) 771.6%C. Net income from hedging activities (A-B) 3,016 4,296 (1,280) -29.8%

6.1 Profit (Loss) from sale/repurchase: breakdown

ITEM/INCOME ITEM

31.12.2008 31.12.2007

PROFIT LOSS NET PROFIT PROFIT LOSS NET PROFIT

Financial assets1. Loans to banks 176 (4) 172 59 (5) 54

2. Customer loans available for sale 29 - 29 - - -

3. Financial assets

3.1 Debt securities - - - - - -

3.2 Equities - - - - - -

3.3 UCIT units - - - - - -

3.4 Loans - - - - - -

4. Financial assets held to maturity - - - - - -

Total assets 205 (4) 201 59 (5) 54Financial liabilities1. Due to banks - - - - - -

2. Due to customers - - - - - -

3. Securities in issue - - - - - -

Total liabilities - - - - - -

Notes



Section 7 - Net income from financial assets and liabilities at fair value - Item 110

7.1 Net change in the value of financial assets/liabilities at fair value: breakdown as at 31.12.08


(A)PROFITS FROM


(C)LOSSES FROM


1. Financial assets

1.1 Debt securities 10,883 - (12,371) - (1,488)

1.2 Equities - - - - -

1.3 UCIT units - - - - -

1.4 Loans - - - - -

2. Financial liabilities

2.1 Securities in issue - - - - -

2.2 Customer accounts - - - - -

2.3 Customer accounts exchange differences - - - - -

3. Other foreign currency financial assets and liabilities: -



- Debt securities and interest rates 5,969 - (7,021) - (1,052)

- Equities and share indices - - - - -

- Currencies and gold -

- Other - - - - -


Total derivatives 5,969 - (7,021) - (1,052)Total 16,852 - (19,392) - (2,540)

7.1 Net change in the value of financial assets/liabilities at fair value: breakdown as at 31.12.07


(A)PROFITS FROM


(C)LOSSES FROM


1. Financial assets

1.1 Debt securities 11,618 29 (5,991) - 5,656

1.2 Equities - - - - -

1.3 UCIT units - - - - -

1.4 Loans - - - - -

2. Financial liabilities

2.1 Securities in issue - - - - -

2.2 Deposits from banks - - - - -

2.3 Customer accounts - - - - -

3. Other financial assets and liabilities: exchange differences -



- Debt securities and interest rates 2,079 - (5,413) - (3,334)

- Equities and share indices - - - - -

- Currencies and gold -

- Other - - - - -


Total derivatives 2,079 - (5,413) - (3,334)Total 13,697 29 (11,404) - 2,322


Section 8 - Net adjustments for impairment - Item 1308.1 Net adjustments for impairment of loans: breakdown as at 31.12.08

TRANSACTION/INCOME ITEM

WRITEDOWNS (1) WRITEDOWNS (2) TOTAL

SPECIFIC

PORTFOLIO

SPECIFIC PORTFOLIO

OTHER WRITE-OFFS A B A B

A. Loans to banks - - - - - - - -

B. Customer loans (333) (10,950) (140) 2,230 12,500 - 486 3,793

C. Total (333) (10,950) (140) 2,230 12,500 - 486 3,793

8.1 Net adjustments for impairment of loans: breakdown as at 31.12.07



SPECIFIC

PORTFOLIO

SPECIFIC PORTFOLIO

OTHER WRITE-OFFS A B A B

A. Loans to banks - - - - - - - -

B. Customer loans (130) (23,272) (296) 1,100 4,241 - 6,430 (11,927)

C. Total (130) (23,272) (296) 1,100 4,241 - 6,430 (11,927)

LegendA = From interest B = Other writebacks


8.2 Net adjustments for impairment of available-for-sale financial assets: breakdown as at 31.12.08



SPECIFIC SPECIFIC

WRITE-OFFS OTHER A B

A. Debt securities - - - 10,179 10,179

B. Equities - - -

C. UCIT units - - - -

D. Loans to banks - - - - -

E. Customer loans - - - - -

F. Total - - - 10,179 10,179

8.2 Net adjustments for impairment of available-for-sale financial assets: breakdown as at 31.12.07



SPECIFIC SPECIFIC

WRITE-OFFS OTHER A B

A. Debt securities - (1,840) - - (1,840)

B. Equities - - -

C. UCIT units - - - -

D. Loans to banks - - - - -

E. Customer loans - - - - -

F. Total - (1,840) - - (1,840)

Writebacks of 10,179 thousand were booked with regard to the Garda Securitisation Series 2001-1 and Velites junior securities following the closure of the securitisation transactions and subsequent redemption of the securities. The writebacks were booked in the income statement up to the maximum amount of value adjustments made in the previous financial years.

Notes



8.3 Net adjustments for impairment of held-to-maturity financial assets: breakdown

No data to report.


8.4 Net adjustments for impairment of other financial transactions: breakdown as at 31.12.08



SPECIFIC

PORTFOLIO

SPECIFIC PORTFOLIO

WRITE-OFFS OTHER A B A B

A. Guarantees given - - - - - - - -

B. Credit derivatives - - - - - - - -

C. Commitments to lend funds - - - - - - - -

D. Other transactions - (2,145) (2,048) - - - - (4,193)

E. Total - (2,145) (2,048) - - - - (4,193)

8.4 Net adjustments for impairment of other financial transactions: breakdown as at 31.12.07



SPECIFIC

PORTFOLIO

SPECIFIC PORTFOLIO

WRITE-OFFS OTHER A B A B

A. Guarantees given - - (121) - - - - (121)

B. Credit derivatives - - - - - - - -

C. Commitments to lend funds - - - - - - - -

D. Other transactions - (3,188) - - - - - (3,188)

E. Total - (3,188) (121) - - - - (3,309)


Section 9 - Administrative expenses - Item 150

9.1 Personnel expenses: breakdown

TYPE OF EXPENSE/AMOUNT 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

1) Employees (55,871) (50,587) (5,284) 10.4%a) wages and salaries (37,838) (34,717) (3,121) 9.0%

b) social security contributions (10,146) (9,791) (355) 3.6%

c) employee severance payment fund (283) (81) (202) 249.4%

d) pension costs - - -

e) provision for severance payment fund similar funds: (170) (181) 11 -6.1%

f) provisions fro retirement benefits and similar funds: -

- defined contribution - - -

- defined benefit - - -

pension funds : -

g) payments to external supplementary (3,165) (2,204) (961) 43.6%

- defined contribution - - -

- defined benefit (224) - (224)

h) costs arising from share-based agreements involving own equity instruments (2,052) (1,678) (374) 22.3%

i) other employee benefits (1,993) (1,935) (58) 3.0%

j) voluntary redundancies (3,365) (1,124) (2,241) 199.4%2) Other personnel (1,073) (482) (591) 122.6%3) Directors (60,309) (52,193) (8,116) 15.5%Total

9.2 Average number of employees by category

31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

Employees 784 760 24 3.2%(a) executives 27 21 6 28.6%

(b) Total managers 219 205 14 6.8%

- of which: 3rd and 4th level 78 67 11 16.4%

(c) other employees 538 534 4 0.7%

Other personnel 96 79 17 21.5%

9.3 Defined-benefit company pension funds: total costsNo data to report.

Notes



9.4 Other employee benefits

TYPE OF EXPENSE/AMOUNT 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

Exit incentives (1.993) (1.935) (58) 3.0%

Medical plan (704) (521) (183) 35.1%

Other (1.348) (1.157) (191) 16.5%

Total (4.045) (3.613) (432) 12.0%

9.5 Other administrative expenses: breakdown

OTHER ADMINISTRATIVE EXPENSES 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

Stamp duty (25,967) (18,000) (7,967) 44.3%

Registration tax (43) (319) 276 -86.5%

Other municipal taxes and duties (306) (380) 74 -19.5%

Other taxes and duties (834) (3,001) 2,167 -72.2%

Advertising, promotion and entertainment expenses

- mass media communications (6,491) (10,833) 4,342 -40.1%

- communications at outlets & direct marketing (841) (337) (504) 149.6%

- promotional expenses (8,467) (2,829) (5,638) 199.3%

- market research (51) (88) 37 -42.0%

- sponsorships (104) (6) (98) 1633.3%

- entertainment expenses (80) (54) (26) 48.1%

Conventions and internal communications (111) (70) (41) 58.6%

Fees to external experts

- legal costs for credit collection (4,286) (2,062) (2,224) 107.9%

- technical consulting services (3,221) (2,088) (1,133) 54.3%

- other professional services (1,178) (3,381) 2,203 -65.2%

- strategic-management consulting services - - - n.c.

- legal costs and notary fees (2,748) (2,498) (250) 10.0%

Various services provided by third parties

- credit collection service (19) - (19) n.c.

- personnel area services (160) (114) (46) 40.4%

- real estate area services (2,717) (1,412) (1,305) 92.4%

- administrative services (24,833) (17,611) (7,222) 41.0%

- logistics services (819) (298) (521) 174.8%

- branch services (600) (27) (573) 2122.2%

- ICT services (17,206) (6,444) (10,762) 167.0%

- personnel recruitment and training (240) (394) 154 -39.1%

- financial planners’ expenses (8,996) (8,554) (442) 5.2%

- financial infoproviders (20,280) (2,120) (18,160) 856.6%

Commercial information and company searches (589) (995) 406 -40.8%

Telephone, swift and data transmission expenses (6,073) (5,686) (387) 6.8%

Postage expenses (5,522) (4,280) (1,242) 29.0%

Rental cost of buildings leased for personnel use (160) (31) (129) 416.1%

Rental costs on buildings (19,686) (14,223) (5,463) 38.4%

Maintenance of areas (463) (299) (164) 54.8%


Surveillance of areas (54) (9) (45) 500.0%

Cleaning of areas (467) (267) (200) 74.9%

Utilities (1,854) (1,005) (849) 84.5%

Leasing of office machinery (97) (19) (78) 410.5%

Leasing of ICT machinery and software (10,535) (8,353) (2,182) 26.1%

Printing and stationery (895) (911) 16 -1.8%

ICT printing and stationery (88) - (88) n.c.

Various office supplies (520) (135) (385) 285.2%

Various ICT office supplies (268) (113) (155) 137.2%

Maintenance of furniture, machines and systems (403) (312) (91) 29.2%

Maintenance and repair of ICT equipment (1,157) (1,094) (63) 5.8%

Transport of valuables and documents (1,057) (853) (204) 23.9%

Travel expenses and vehicle hiring costs (677) (503) (174) 34.6%

Insurance (3,671) (4,497) 826 -18.4%

Charitable donations (169) (224) 55 -24.6%

Fees, dues and contributions to trade associations (489) (309) (180) 58.3%

Other expenses (650) (519) (131) 25.2%

Total (186,142) (127,557) (58,585) 45.9%

9.5 Other administrative expenses: breakdown (continued)

Section 10 - Net provisions for contingencies and charges - Item 160

10.1 Net provisions for contingencies and charges: breakdown

31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

Disputes and other charges related to financial planners’ activity (4,731) (3,932) (799) 20.3%

Agents' termination entitlement provision (3,965) (2,679) (1,286) 48.0%

Financial shops closure charges (108) 46 (154) -334.8%

Other charges and minor disputes (972) (3,211) 2,239 -69.7%

Total (9,776) (9,776) - 0.0%

Notes



Section 11 - Net adjustments to property, plant and equipment - Item 170

11.1 Net adjustments to property, plant and equipment: breakdown as at 31.12.08

ASSET/INCOME ITEMDEPRECIATION

(A)WRITEDOWNS

OR IMPAIRMENT (B)WRITEBACKS

(C) NET PROFIT

A. Property, plant and equipment

A.1 owned

- functional use (3,608) (52) 6 (3,654)

- for investment (108) - - (108)

A.2 acquired under finance leases

- functional use (4) - - (4)

- for investment - - - -

Total (3,720) (52) 6 (3,766)

11.1 Net adjustments to property, plant and equipment: breakdown as at 31.12.07


(A)WRITEDOWNS

OR IMPAIRMENT (B)WRITEBACKS

(C) NET PROFIT

A. Property, plant and equipment

A.1 owned

- functional use (2,075) (34) - (2,109)


A.2 acquired under finance leases

- functional use (4) - - (4)


Total (2,079) (34) - (2,113)

Percent amortization rates applied during the reporting period:• 3% instrumental properties• 15% fittings• 15% miscellaneous plant and equipment• 12% furniture and ordinary machines:• 20% EDP machines• 20% mobile phones and television camera systems• 30% alarm and security systems• 7.5% hoisting equipment and systems• 25% motor vehicles.


Section 12 - Net adjustments to intangible assets - Item 180

12.1 Net adjustments to intangible assets: breakdown as at 31.12.08


(A)AMORTISATION

OR IMPAIRMENT (B) WRITEBACKS (C) NET PROFIT

A. Intangible assets

A.1 owned

- Generated internally by the company - - - -

- Other (4,740) - - (4,740)

A.2 Acquired under finance leases

Total (4,740) - - (4,740)

12.1 Net adjustments to intangible assets: breakdown as at 31.12.07


(A)AMORTISATION

OR IMPAIRMENT (B) WRITEBACKS (C) NET PROFIT

A. Intangible assets

A.1 owned

- Generated internally by the company - - - -

- Other (6,635) (1,326) - (7,961)

A.2 Acquired under finance leases

Total (6,635) (1,326) - (7,961)

Intangible assets are represented exclusively by software amortised over three years.

Notes



Section 13 - Other operating income and expenses - Item 190

13.1 Other operating expenses: breakdown

TYPE/AMOUNT 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

Charges for repurchase and renegotiation of securitised loans not re-entered (1,287) (1,074) (213) 19.8%

Refunds and allowances (1,819) (503) (1,316) 261.6%

Penalties, fines and unfavourable sentences (918) (1,054) 136 -12.9%

Improvement and incremental expenses incurred on leasehold assets (3,138) (973) (2,165) 222.5%

Improvement and incremental expenses incurred on Group property (91) (33) (58) 175.8%

Contingent assets (3,867) (5,381) 1,514 -28.1%

Other overhead costs (303) (843) 540 -64.1%

Total (11,423) (9,861) (1,562) 15.8%

Non-existent assets include costs incurred for credit card fraud for 3,664 thousand, partly recovered by Group banks and accounted for under “Other operating income” as part of the service for banks of the Group networks.Improvements and additions incurred on properties owned by third parties include the adjustments booked with regard to the improvements made to the premises located on Via Pirelli, in Milan, which UniCredit Xelion Banca S.p.A. has occupied until 30 June 2008, date when it left said premises.

13.2 Other operating income: breakdown

TYPE/AMOUNT 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

Recovery of expenses:

- ancillary expenses - other 2,062 3,118 (1,056) -33.9%

- ancillary expenses - credit cards 11,643 11,182 461 4.1%

- taxes 154 3,505 (3,351) -95.6%

- customer insurance premiums 25,601 20,302 5,299 26.1%

Other operating income 12,201 11,017 1,184 10.7%

Total 51,661 49,124 2,537 5.2%


Section 14 - Gains (losses) from investments - Item 210

Section 15 - Net income from the fair value measurement of property, plant and equipment and intangible assets - Item 220

Section 16 - Net adjustments to goodwill - Item 230

14.1 Gains (losses) from investments: breakdown


CHANGES

ABSOLUTE %

A. Income 1. Revaluations - - -

2. Profits on disposal - 75 (75) -100.0%

3. Writebacks - - -

4. Other increases - - -

B. Expenses 1. Writedowns - - -

2. Adjustments for impairment - - -

3. Losses on disposal - - -

4. Decreases - - -

Total - 75 (75) -100.0%

15.1 Net income from the fair value measurement of the revalued value of property, plant and equipment and intangible assets: breakdown

No data to report.

16.1 Net adjustments to goodwill: breakdown

No data to report.

Notes



Section 17 - Profit (Loss) from sale of investments - Item 240

Section 18 - Income taxes on continuing operations - Item 260

17.1 Profit (loss) from sale of investments: breakdown


CHANGES

ABSOLUTE %

A. Buildings

- Profits on disposal - - -

- Losses on disposal - - -

B. Other assets

- Profits on disposal 8 51 (43) -84.3%

- Losses on disposal (84) (12) (72) 600.0%

Net profit (76) 39 (115) -294.9%

18.1 Income taxes on continuing operations: breakdown

ITEM/AMOUNT 31.12.2008 31.12.2007

CHANGES

ABSOLUTE %

1. Current taxes (48,342) (53,043) 4,701 -8.9%

2. Changes in current taxes from previous years - - - -

3. Decrease in current taxes for the year 4,456 - 4,456 -

4. Change in prepaid taxes (302) (1,553) 1,251 -80.6%

5. Change in deferred taxes (918) 716 (1,634) -228.2%

6. Income taxes for the year (45,106) (53,880) 8,774 -16.3%

18.2 Reconciliation between theoretical taxes and actual taxes

Statutory profit before taxes 136,941

IRES IRAP TOTAL

Amount corresponding to theoretical tax rate 37,658 6,597 44,255+ Tax effects of charges not relevant to the calculation of the taxable base (8,830) 220 (8,610)

- Tax effects of income not relevant to the calculation of the taxable base - - -

- Tax effects deriving from the use of tax losses from previous years - - -

- Tax effects deriving from the application of substitute taxes 2,206 - 2,206

Amount corresponding to actual tax rate 31,034 6,817 37,851


Section 19 - Profit (Loss) from discontinued operations after tax - Item 280

Section 20 - Other information

19.1 Profit (Loss) from discontinued operations after tax: breakdown

No data to report.

19.2 Breakdown of income taxes on discontinued operations (assets/liabilities)No data to report.

1.1 Designation of Parent Bank

UniCredit Società per AzioniGenoa Register of CompaniesRegister of Banking Groups no. 3135.1

1.2 Registered Office of Parent BankVia Dante, 1 - Genoa

Notes



1.3 Key figures for the Parent Bank (income statement, balance sheet, structure)

UniCredit S.p.A. - Reclassified balance sheet as at 31.12.07 (Importi in milioni)

ASSETS 31.12.2007

Cash and cash equivalents 4,027

Financial assets held for trading 11,157

Loans to banks 162,820

Customer loans 21,716

Financial investments 78,469

Hedges 568

Property, plant and equipment 24

Goodwill 3,544

Other intangible assets 106

Tax assets 4,113

Non-current assets and discontinued operations 712

Other assets 2,281

Total assets 289,537

LIABILITIES AND SHAREHOLDERS’ EQUITY 31.12.2007

Due to banks 97,941

Customer accounts and securities 118,738

Financial liabilities held for trading 7,726

Financial liabilities designated at fair value 6,016

Hedges 1,886

Provisions for contingencies and charges 1,105

Tax liabilities 1,884

Liabilities associated with discontinued operations 371

Other liabilities 3,250Shareholders’ equity 50,620- share capital and reserves 48,581

- valuation reserves for available-for-sale financial assets 173

- Net profit 1,866

Total liabilities and shareholders’ equity 289,537


UniCredit S.p.A. – Reclassified income statement as at 31.12.07 (Importi in milioni)

31.12.2007

Net interest (1,158)

Dividends and other income on equity investments 2,783

Net interest income 1,625 Net commissions 61

Income from trading, hedges and fair value 66

Balance of other income/expenses 23

Income from brokerage and other income 150 TOTAL INCOME 1,775 Personnel expenses (346)

Other administrative expenses (300)

Recovery of expenses 39

Net adjustments to property, plant and equipment and intangible assets (14)

Operating costs (621)GROSS OPERATING PROFIT 1,154 Provisions for contingencies and charges (18)

Merger expenses (67)

Net adjustments to loans 22

Net profit from investments 564

GROSS PROFITFROM CONTINUING OPERATIONS 1,655 Income tax for the period 211

NET PROFITFROM CONTINUING OPERATIONS 1,866 NET PROFIT (LOSS) FOR THE YEAR 1,866

Section 21 - Earnings per share

21.1 Average number of diluted ordinary shares

No data to report.

21.2 Other informationNo information to report.


Part D) Segment Reporting

The Bank does not provide any segment reporting, as this is optional in individual financial statements.


Part E) Information on risks and hedging policies

Section 1 - Credit risk 190Section 2 - Market Risk 224Section 3 - Liquidity Risk 245Section 4 - Operational Risk 249

Notes


Part E) Information on risks and hedging policies ( thousands)

The responsibility for the development and definition of the methods used to measure risks, the activity of controlling risks at the firm-wide level, and the strategic management of these risks is centralized with the Parent Bank. Group companies retain the responsibility for first-level monitoring, especially for verifying that the risk level of individual companies is compatible with the guidelines set by the Parent Bank, individual companies’ equity, and prudential supervisory rules. In order to ensure efficient management of risks, the risk management process is structured in accordance with the organizational choices made for the Group and the provisions of the Supervisory Instructions for Banks pertaining to the internal control system.

Section 1 - Credit risk

QUALITATIVE INFORMATION

1. General issuesThe objective of FinecoBank is to provide an adequate range of products able to satisfy and encourage loyalty among customers, through a competitive and complete offer. The development of the products and of the product line must be accompanied by maintenance of portfolio quality and, in any case, adequate coverage of risks, allowing the monitoring of profitability.

Lending is expanded through the development of new products, or modification of existing ones, as well as through the protection of market share achieved.

The quality of the loans portfolio, constantly monitored and supported by risk mitigation instruments, is protected by rating and scoring tools that contribute to evaluation during the approval process, ensuring that it is consistent and controlled. In addition to adequate coverage of the risk levels, monitoring of the portfolio and its segmentation by product and seniority allow a better understanding of the best loan issue strategies. The identification of any high-risk areas allows for intervention on the automated measurement systems as well as on policies, with the possibility to take measures to limit credit risk in advance.

The Bank seeks to increase its profitability by developing new products and by protecting its existing portfolio against changes in the competitive scenario.

In 2008, thanks to the spin-off of the mortgages and salary or pension-guaranteed loans business divisions, the Bank’s exposure and outflows associated with new loans fell considerably. The credit activity was concentrated on granting credit lines, mostly backed by assets, in issuing credit cards with full payment of the balance at term to current account holders and in granting personal loans within the limits set out by the legal regulations governing consumer credit. The acquisition of UniCredit Xelion Banca S.p.A. did not considerably change either the quality of the loans or the offer of the products to the bank’s customers.

As part of its trading activity, the Treasury assumes minimal positions in terms of the specific risk associated with operations in bonds and derivatives. Choices concerning the investment of the Bank's liquidity are governed by a prudential approach aimed at containing credit risk and mainly involve the use of Parent Bank issues.

2. Risk management policies2.1 Organizational aspectsThe factors that generate credit risk spring from acceptance and creditworthiness assessment policies, which are always sufficiently correlated with the ratio of risk to return and, consequently, product yield.


Risk factors are managed through the use of scoring/rating tools that analyse the social and demographic profiles of customers by conducting a statistical assessment of individual counterparties and incorporating this assessment into the support provided by credit bureaus.

FinecoBank’s Credit Division is charged with the management and monitoring of risks related to the activity of issuing credit and is divided into three main areas: the valuation of creditworthiness through various structures subdivided by product that direct, assess and deliberate the request by evaluating the counterparty risk or complete the measurement by specific automated systems.

The management of irregularly performing loans which, for the various products, carries out classification, analytical measurement of the loss probabilities and all the activities related to credit recovery. In particular, as regards credit collection activities, the assignment of the non-performing loans portfolio to the vehicle company defined by the Parent Bank as well as the delegation of a number of operating activities concerning the management of outstanding or non-performing loans are being defined and will be fully implemented in 2009.

Credit monitoring, which for each line of products provides the appropriate reports and identifies the greatest risk profiles, in order to support the determination of the best rules to limit credit risk.

The Credit Division, therefore, oversees the issuing of credit, which is carried out at the level of individual functional units within the various business units, while individual credit functional units are charged with managing the granting of credit to customers in accordance with established procedures and evaluating customers’ current and potential risk profiles while respecting strategic guidelines.

2.2 Management, measurement and control systemThe measurement of credit risk during the issue process is supported by credit scoring or rating systems for all products. Furthermore, the assessment systems are integrated with all the available information and evidence: public and private data provided by Credit rating bureaus, Risk Centre data flows or information requests submitted to the Bank of Italy, Government archives with data relating to positions shared with other Group banks and other performance information on customers, historicised by FinecoBank. During the loan application process, attention is always focussed on the possibility of optimising all information concerning customers that has been provided by the Bank, the Group and the System.

The collection of guarantees, if any, their valuation and the margins between the fair value of the guarantee and the amount of the loan granted are a simple kind of support to risk mitigation, but there is no relevant positive correlation between the value of the financial guarantee and the applicant’s creditworthiness.

The collective writedowns of the loans portfolio were determined using creditworthiness migration rates, through transition matrices, both from performing loans to non-performing loans both for each classification status (past due, problem, non-performing) by combining the default rates with the expected recovery rates analytically calculated for non-performing loans and taking account of any supporting guarantees.

The monitoring of credit risk as part of the management of the trading book is conducted through the calculation of indicators of exposure and expected and unexpected loss (Credit VaR), on the basis of which the composition of the trading book is then analysed by rating class and sector of issue and the risk implicit in contracts deriving from unexpected changes in the creditworthiness of said contracts. Indicators of exposure and expected loss are calculated on a monthly basis.

In its trading in over-the-counter derivatives in particular, the Treasury deals exclusively with bank counterparties and on specific lines of credit set by the Division in coordination with the Credit Policies Division of the Parent Bank.

Notes


Part E) Information on risks and hedging policies (CONTINUED)

2.3 Techniques for mitigating credit riskIn order to mitigate risk in the various types of credit granting facilities, various kinds of securities are obtained; in fact, liens on shares or investment funds guarantee current account overdraft facilities whilst the registration of first mortgages is quite rare.

2.4 Impaired financial assetsLoans are classified as problem loans or non-performing loans in accordance with the criteria set forth by the Bank of Italy, with methods differing according to product type. Generally speaking, the classification of problem loans is usually objective, while the classification as bad debt, linked to the customer’s insolvency, is always analytical and defined based on the performance of measures to recover the loans.

The loss estimate for classified positions is also analytical.Loans classified as expired or past due by more than 180 days are limited in amount because they may largely be considered problem loans. The classification criterion used for overdrawn accounts is related to the performance of debt recovery activity or the forced sale of securities to cover debts.

The restructuring of loans is only authorised if the amount past due has been paid in full in observance of the original payment schedule, or if considerable payments have been made leading the Bank to believe the debt exposure is highly likely to be repaid.

The procedure for the management of irregularly performing loans involves actions that may be taken to recover debts by ranking them by seniority of expiration.

QUANTITATIVE INFORMATION

A. Credit quality

A.1 Impaired and performing exposures: values, adjustments, trend, economic and geographical distribution

A.1.1 Breakdown of financial assets according to portfolios and credit quality (book values)as at 31.12.08

PORTFOLIO/QUALITYBAD

DEBTSPROBLEM

LOANS RESTRUCTURED EXPIREDCOUNTRY

RISKOTHER

ASSETS TOTAL

1. Financial assets held for trading exposures exposures 39,504

2. Available-for-sale financial assets - - - - - 418 418

3. Held-to-maturity financial assets - - - - - - -

4. Loans to banks - - - - - 12,746,886 12,746,886

5. Customer loans 32,246 1,266 - 1,405 174 1,184,327 1,219,418

6. Financial assets designated at fair value - - - - - - -

7. Financial assets being disposed of - - - - - - -

8. Hedge derivatives - - - - - 1,094 1,094

Total 32,246 1,266 - 1,407 184 13,972,217 14,007,320


A.1.1 Breakdown of financial assets according to portfolios and credit quality (book values)as at 31.12.07

PORTFOLIO/QUALITYBAD

DEBTSPROBLEM

LOANS RESTRUCTURED EXPIREDCOUNTRY

RISKOTHER

ASSETS TOTAL

1. Financial assets held for trading exposures exposures

2. Available-for-sale financial assets - - - - - 78,983 78,983

3. Held-to-maturity financial assets - - - - - - -

4. Loans to banks - - - - - 1,866,952 1,866,952

5. Customer loans 38,287 35,184 - 19,593 3,996 5,937,831 6,034,891

6. Financial assets designated at fair value - - - - - 5,109,262 5,109,262

7. Financial assets being disposed of - - - - - - -

8. Hedge derivatives - - - - - 21,370 21,370

Total 38,287 35,184 - 19,606 4,114 13,061,201 13,158,392

A.1.2 Breakdown of financial assets according to portfolios and credit quality (gross and net values)as at 31.12.08

PORTFOLIO/QUALITY

IMPAIRED ASSETS OTHER ASSETS

TOTAL (NET EXPOSURE)

GROSSEXPOSURE

SPECIFICADJUSTMENTS

PORTFOLIOADJUSTMENTS

NETEXPOSURE

GROSSEXPOSURE


NETEXPOSURE

1. Financial assets held for trading 2 - - 2 39,502 39,504

2. Available-for-sale financial assets - - - - 418 - 418 418

4. Loans to banks - - - - 12,746,886 - 12,746,886 12,746,886

5. Customer loans 71,499 (36,582) - 34,917 1,186,278 (1,777) 1,184,501 1,219,418

6. Financial assets designated at fair value - - - - - -

8. Hedge derivatives - - - - 1,094 1,094

Total 71,501 (36,582) - 34,919 13,933,582 (1,777) 13,972,401 14,007,320

A.1.2 Breakdown of financial assets according to portfolios and credit quality (gross and net values)as at 31.12.07

PORTFOLIO/QUALITY

IMPAIRED ASSETS OTHER ASSETS

TOTAL (NET EXPOSURE)

GROSSEXPOSURE

SPECIFICADJUSTMENTS


NET EXPOSURE

GROSSEXPOSURE


NET EXPOSURE

1. Financial assets held for trading 13 - - 13 46,921 46,934

2. Available-for-sale financial assets - - - - 96,637 (17,654) 78,983 78,983

4. Loans to banks - - - - 1,866,952 - 1,866,952 1,866,952

5. Customer loans 140,439 (43,936) (3,440) 93,063 5,948,564 (6,736) 5,941,828 6,034,891

6. Financial assets designated at fair value - - - - 5,109,262 5,109,262

8. Hedge derivatives - - - - 21,370 21,370

Total 140,452 (43,936) (3,440) 93,076 7,912,153 (24,390) 13,065,316 13,158,392

Notes



A.1.3 Cash and off-balance-sheet exposures to banks: gross and net values as at 31.12.08

TYPE OF EXPOSURE/AMOUNTGROSS

EXPOSURESPECIFIC

ADJUSTMENTSPORTFOLIO

ADJUSTMENTSNET

EXPOSURE

A. Cash exposuresa) Bad debts - - - -

b) Problem loans - - - -

c) Restructured exposures - - - -

d) Expired exposures - - - -

e) Country risk - - -

f) Other assets 12,749,357 - 12,749,357

Total 12,749,357 - - 12,749,357

B. Off-balance sheet exposures

a) Impaired - - - -

b) Other 84,456 - 84,456

Total 84,456 - - 84,456

A.1.3 Cash and off-balance-sheet exposures to banks: gross and net values as at 31.12.07


EXPOSURESPECIFIC


ADJUSTMENTSNET

EXPOSURE

A. Cash exposuresa) Bad debts - - - -

b) Problem loans - - - -


d) Expired exposures - - - -

e) Country risk 1 - 1

f) Other assets 6,978,444 - 6,978,444

Total 6,978,445 - - 6,978,445


a) Impaired - - - -

b) Other 86,224 - 86,224

Total 86,224 - - 86,224


A.1.4 Cash exposures to banks: trend of impaired and "country risk" exposures as at 31.12.08

TYPE/CATEGORY BAD DEBTS PROBLEM LOANSRESTRUCTURED

EXPOSURESESPOSIZIONI

SCADUTECOUNTRY

RISK

A. Opening gross exposure - - - - 1 of which: exposures transferred but not

eliminated - - - - -

B. Increases

B.1 inflows from performing loans - - - - -

B.2 transfers from other categories of impaired exposures - - - - -

B.3 other increases - - - - -

C. Decreases

C.1 outflows to performing loans - - - - -

C.2 write-offs - - - - -

C.3 collections - - - - (1)

C.4 disposals - - - - -

C.5 transfers to other categories of impaired exposures - - - - -

C.6 other decreases - - -

D. Closing gross exposure - - - - - of which: exposures transferred but not


A.1.4 Cash exposures to banks: trend of impaired and "country risk" exposures as at 31.12.07


EXPOSURESESPOSIZIONI

SCADUTECOUNTRY

RISK

A. Opening gross exposure - - - - 1 of which: exposures transferred but not


B. Increases

B.1 inflows from performing loans - - - - -

B.2 transfers from other categories of impaired exposures - - - - -

B.3 other increases - - - - -

C. Decreases

C.1 outflows to performing loans - - - - -

C.2 write-offs - - - - -

C.3 collections - - - - -


C.5 transfers to other categories of impaired exposures - - - - -

C.6 other decreases - - -

D. Closing gross exposure - - - - 1 of which: exposures transferred but not


Notes



Cash exposures to banks: trend in gross adjustments No data to report.

A.1.6 Cash and off-balance-sheet exposures to customers: gross and net values as at 31.12.08


EXPOSURESPECIFIC


ADJUSTMENTSNET

EXPOSURE

A. Cash exposuresa) Bad debts 64,753 (32,507) - 32,246

b) Problem loans 3,691 (2,425) - 1,266


d) Expired exposures 3,055 (1,650) - 1,405

e) Country risk 184 - 184

f) Other assets 1,194,248 (1,777) 1,192,471

Total 1,265,931 (36,582) (1,777) 1,227,572


a) Impaired 514 - - 514

b) Other 25,314 (600) 24,714

Total 25,828 - (600) 25,228

A.1.6 Cash and off-balance-sheet exposures to customers: gross and net values as at 31.12.07


EXPOSURESPECIFIC


ADJUSTMENTSNET

EXPOSURE

A. Cash exposuresa) Bad debts 72,527 (34,240) - 38,287

b) Problem loans 44,879 (9,696) - 35,183


d) Expired exposures 23,033 - (3,440) 19,593

e) Country risk 4,114 - 4,114

f) Other assets 6,058,608 (24,390) 6,034,218

Total 6,203,161 (43,936) (27,830) 6,131,395


a) Impaired 899 - - 899

b) Other 118,960 (600) 118,360

Total 119,859 - (600) 119,259


A.1.7 Cash exposures to customers: trend of impaired and "country risk" exposures, gross as at 31.12.08


EXPOSURESEXPIRED

EXPOSURESCOUNTRY

RISK

A. Opening gross exposure 72,527 44,879 - 23,033 4,114 of which: exposures transferred but not

eliminated 19,711 10,691 - 1,276 -

B. Increases

B.1 inflows from performing loans 626 17,854 - 9,103 1,360

B.2 transfers from other categories of impaired exposures 14,498 11,147 - - -

B.3 other increases 14,810 7,682 - 1,510 -

- of which business combinations 5,982 825 1,065 -

C. Decreases

C.1 outflows to performing loans (1,255) (9,842) - (1,880) -

C.2 write-offs (913) (275) - - -

C.3 collections (9,267) (2,655) - (2,350) (5,290)


C.5 transfers to other categories of impaired exposures - (14,317) - (11,327) -

C.6 other decreases (26,273) (50,782) (15,034) -

- for de-merger/spin-off transactions (26,273) (50,314) (14,998) -

D. Closing gross exposure 64,753 3,691 - 3,055 184 of which: exposures transferred but not


A.1.7 Cash exposures to customers: trend of impaired and "country risk" exposures, gross as at 31.12.07


EXPOSURESEXPIRED

EXPOSURESCOUNTRY

RISK

A. Opening gross exposure 48,660 39,560 - 10,411 433 of which : exposures transferred but not

eliminated 8,894 5,898 - 784 -

B. Increases

B.1 inflows from performing loans 2,316 45,408 - 34,454 4,156

B.2 transfers from other categories of impaired exposures 27,331 15,996 - - -

B.3 other increases 2,357 2,727 - 1,505 -

C. Decreases

C.1 outflows to performing loans - (22,364) - (1,831) -

C.2 write-offs (1,042) (5) - (1) -

C.3 collections (7,095) (8,124) - (5,376) (475)


C.5 transfers to other categories of impaired exposures - (27,329) - (15,998) -

C.6 other decreases - (990) (131) -

D. Closing gross exposure 72,527 44,879 - 23,033 4,114 of which : exposures transferred but not

eliminated 19,711 10,691 - 1,276 -

Notes



A.1.8 Cash exposures to customers: trend in gross adjustments as at 31.12.08


EXPOSURESEXPIRED

EXPOSURESCOUNTRY

RISK

A. Opening total adjustments 34,240 9,696 - 3,440 - of which: exposures transferred but not

eliminated 7,853 2,535 - 185 -

B. Increases

B.1. Writedowns 5,544 7,032 - 668

B.2 transfers from other categories of impaired exposures 3,763 - - - -

B.3 other increases 9,346 2,741 - 687 -

- of which business combinations 5,761 606 687

C. Decreases

C.1 writebacks from measurement (6,824) (2,534) - (2,374) -

C.2 writebacks from collection (2,642) (614) - - -

C.3 write-offs (913) (275) - - -

C.4 transfers to other categories of impaired exposures - (3,763) - - -

C.5 other decreases (10,006) (9,858) (771)

- for de-merger/spin-off transactions (10,006) (9,858) (771)

D. Closing total adjustments 32,508 2,425 - 1,650 - of which: exposures transferred but not


A.1.8 Cash exposures to customers: trend in gross adjustments as at 31.12.07


EXPOSURESEXPIRED

EXPOSURESCOUNTRY

RISK

A. Opening total adjustments 23,760 3,280 - 1,084 2 of which : exposures transferred but not

eliminated 3,330 722 - 18 -

B. Increases

B.1. Writedowns 13,922 9,376 - 2,364

B.2 transfers from other categories of impaired exposures 2,458 - - - -

B.3 other increases 30 - - - -

C. Decreases

C.1 writebacks from measurement (2,894) (299) - (7) -

C.2 writebacks from collection (1,994) (198) - - (2)

C.3 write-offs (1,042) (5) - (1) -

C.4 transfers to other categories of impaired exposures - (2,458) - - -

C.5 other decreases - -

D. Closing total adjustments 34,240 9,696 - 3,440 - of which: exposures transferred but not

eliminated 7,853 2,535 - 185 -


A.2 Classification of exposures based on external and internal ratingsFinecoBank credit granting activity has been considerably reduced by the spin-off of the "Mortgages" and "Salary-guaranteed loans” business divisions. As at 31 December 2008 the credit exposure was limited to personal loans, credit cards issued and current account overdrafts. The regulatory requirements are calculated by applying the Basel II Standardised Method which envisages the subdivision of the exposures in different classes (“portfolios”) depending on the type of counterparty that is the technical characteristics of the relationship or the methods followed to handle the latter and the application of different weighting ratios to each portfolio.

FinecoBank does not intend to rely on the valuations issued by recognised credit rating agencies, by applying, in general, a weighting factor of 100 to credit exposures, without prejudice to the main exceptions established by Circular letter no. 263 of the Bank of Italy.

Exposures to non-retail entities derive from trading in derivative products to cover banking-book interest rate positions and, to a residual extent, over-the-counter brokerage activity. These contracts were entered into with the Parent Bank and leading bank counterparties with high credit standing.

A.2.1 Breakdown of cash and off-balance-sheet exposures by external rating class

EXPOSURES

EXTERNAL RATING CLASS IMPAIRED

EXPOSURESNO

RATING TOTALAAA/AA- A+/A- BBB+/BBB- BB+/BB- B+/B- BELOW B-

A. Cash exposures 46,479 12,712,062 141 171 7 - 34,917 1,183,153 13,976,930B. Derivatives

B.1 Financial derivatives 763 26,945 - - - - 2 2,680 30,390

B.2 Credit derivatives - - - - - - - - -

C. Guarantees given - 27,964 - - - - 512 1,898 30,374D. Commitments to

lend funds 1,105 174 - - - - - 47,642 48,921Total 48,347 12,767,145 141 171 7 - 1,235,373 14,086,615

Notes



A.3 Breakdown of secured loans by type of security

A.3.1 Secured cash exposures to banks and customers as at 31.12.2008

COLLATERAL SECURITIESPERSONAL SECURITIES

CREDIT DERIVATIVES ENDORSEMENT CREDITS

VALU

E OF

EXP

OSUR

E

BUIL

DING

S

SECU

RITI

ES

OTHE

R AS

SETS

GOVE

RNM

ENTS

OTHE

R PU

BLIC

IN

STIT

UTIO

NS

BANK

S

OTHE

R EN

TITI

ES

GOVE

RNM

ENTS

OTHE

R PU

BLIC

IN

STIT

UTIO

NS

BANK

S

OTHE

R EN

TITI

ES

TOTA

L

1. Secured exposures to banks :1.1 fully secured - - - - - - - - - - - - -1.2 partly secured - - - - - - - - - - - - -

2. Secured exposures to customers:2.1 fully secured 50,066 25,391 9,797 14,690 - - - - 186 - - 2 50,066

2.2 partly secured 5,489 - 455 90 - - - - 23 - - - 568

A.3.1 Secured cash exposures to banks and customers as at 31.12.2007



VALU

E OF

EXP

OSUR

E

BUIL

DING

S

SECU

RITI

ES

OTHE

R AS

SETS

GOVE

RNM

ENTS

OTHE

R PU

BLIC

IN

STIT

UTIO

NS

BANK

S

OTHE

R EN

TITI

ES

GOVE

RNM

ENTS

OTHE

R PU

BLIC

IN

STIT

UTIO

NS

BANK

S

OTHE

R EN

TITI

ES

TOTA

L


2. Secured exposures to customers:2.1 fully secured 4,798,173 3,922,392 955 237 - - - - - - 4,522 869,564 4,797,6702.2 partly secured 9,239 7,284 - - - - - - - - - - 7,284


A.3.2 Secured “off-balance-sheet” exposures to banks and customers as at 31.12.2008



VALU

E OF

EXP

OSUR

E

BUIL

DING

S

SECU

RITI

ES

OTHE

R AS

SETS

GOVE

RNM

ENTS

OTHE

R PU

BLIC

IN

STIT

UTIO

NS

BANK

S

OTHE

R EN

TITI

ES

GOVE

RNM

ENTS

OTHE

R PU

BLIC

IN

STIT

UTIO

NS

BANK

S

OTHE

R EN

TITI

ES

TOTA

L


2. Secured exposures to customers:2.1 fully secured 40 - 40 - - - - - - - - - 40

2.2 partly secured 50 - 47 - - - - - - - - - 47

A.3.2 Secured “off-balance-sheet” exposures to banks and customers as at 31.12.2007



VALU

E OF

EXP

OSUR

E

BUIL

DING

S

SECU

RITI

ES

OTHE

R AS

SETS

GOVE

RNM

ENTS

OTHE

R PU

BLIC

IN

STIT

UTIO

NS

BANK

S

OTHE

R EN

TITI

ES

GOVE

RNM

ENTS

OTHE

R PU

BLIC

IN

STIT

UTIO

NS

BANK

S

OTHE

R EN

TITI

ES

TOTA

L


2. Secured exposures to customers:2.1 fully secured 134 - 61 - - - - - - - - - 612.2 partly secured - - - - - - - - - - - - -

Notes



A.3.3 Secured impaired cash exposures to banks and customers as at 31.12.2008SECURITIES (FAIR VALUE)

COLLATERAL SECURITIES

PERSONAL SECURITIES


VALU

E OF

EXP

OSUR

E

AMOU

NT S

ECUR

ED

BUIL

DING

S

SECU

RITI

ES

OTHE

R AS

SETS

GOVE

RNM

ENTS

AND

CEN

TRAL

BAN

KS

OTHE

R PU

BLIC

INST

ITUT

IONS

BANK

S

FINA

NCIA

L CO

MPA

NIES

INSU

RANC

E CO

MPA

NIES

NON-

FINA

NCIA

L CO

MPA

NIES

OTHE

R EN

TITI

ES

GOVE

RNM

ENTS

AND

CEN

TRAL

BAN

KS

OTHE

R PU

BLIC

INST

ITUT

IONS

BANK

S

FINA

NCIA

L CO

MPA

NIES

INSU

RANC

E CO

MPA

NIES

NON-

FINA

NCIA

L CO

MPA

NIES

OTHE

R EN

TITI

ES

TOTA

L

FAIR

VAL

UE E

XCES

S, S

ECUR

ITY

1. Secured exposures to banks :1.1 more than 150% - - - - - - - - - - - - - - - - - - - - -

1.2 between 100% and 150% - - - - - - - - - - - - - - - - - - - - -

1.3 between 50% and 100% - - - - - - - - - - - - - - - - - - - - -

1.4 less than 50% - - - - - - - - - - - - - - - - - - - - -

2. Secured exposures to customers:2.1 more than 150% 25,114 25,114 25,028 85 - - - - - - - - 1 - - - - - - 25,114 58,560

2.2 between 100% and 150% 347 347 301 44 - - - - - - - - 2 - - - - - - 347 443

2.3 between 50% and 100% 23 23 - - - - - - - - - - 23 - - - - - - 23 29

2.4 less than 50% 22 17 - 17 - - - - - - - - - - - - - - - 17 -


A.3.4 Secured impaired “off-balance-sheet” exposures to banks and customers

No data to report.

A.3.3 Secured impaired cash exposures to banks and customers as at 31.12.2007SECURITIES (FAIR VALUE)

COLLATERAL SECURITIES

PERSONAL SECURITIES


VALU

E OF

EXP

OSUR

E

AMOU

NT S

ECUR

ED

BUIL

DING

S

SECU

RITI

ES

OTHE

R AS

SETS

GOVE

RNM

ENTS

AND

CEN

TRAL

BAN

KS

OTHE

R PU

BLIC

INST

ITUT

IONS

BANK

S

FINA

NCIA

L CO

MPA

NIES

INSU

RANC

E CO

MPA

NIES

NON-

FINA

NCIA

L CO

MPA

NIES

OTHE

R EN

TITI

ES

GOVE

RNM

ENTS

AND

CEN

TRAL

BAN

KS

OTHE

R PU

BLIC

INST

ITUT

IONS

BANK

S

FINA

NCIA

L CO

MPA

NIES

INSU

RANC

E CO

MPA

NIES

NON-

FINA

NCIA

L CO

MPA

NIES

OTHE

R EN

TITI

ES

TOTA

L

FAIR

VAL

UE E

XCES

S, S

ECUR

ITY

1. Secured exposures to banks :1.1 more than 150% - - - - - - - - - - - - - - - - - - - - -

1.2 between 100% and 150% - - - - - - - - - - - - - - - - - - - - -

1.3 between 50% and 100% - - - - - - - - - - - - - - - - - - - - -

1.4 less than 50% - - - - - - - - - - - - - - - - - - - - -

2. Secured exposures to customers:2.1 more than 150% 29,269 29,269 29,040 1 - - - - - - - - - - - 213 - 13 2 29,269 78,434

2.2 between 100% and 150% 27,237 27,237 27,156 1 - - - - - - - - - - - 80 - - - 27,237 30,540

2.3 between 50% and 100% - - - - - - - - - - - - - - - - - - - - -

2.4 less than 50% - - - - - - - - - - - - - - - - - - - - -

Notes



B. Credit distribution and concentration

B.1 Breakdown of cash exposures and off-balance-sheet exposures to customers by sector as at 31.12.2008

EXPOSURE /COUNTERPARTY

GOVERNMENTS AND CENTRAL BANKS OTHER PUBLIC INSTITUTIONS FINANCIAL COMPANIES

GROS

S EX

POSU

RE

SPEC

IFIC

ADJ

USTM

ENTS

PORT

FOLI

O AD

JUST

MEN

TS

NET

EXPO

SURE

GROS

S EX

POSU

RE

SPEC

IFIC

ADJ

USTM

ENTS

PORT

FOLI

O AD

JUST

MEN

TS

NET

EXPO

SURE

GROS

S EX

POSU

RE

SPEC

IFIC

ADJ

USTM

ENTS

PORT

FOLI

O AD

JUST

MEN

TS

NET

EXPO

SURE

A. Cash exposuresA.1 Bad debts - - - - - - - - 405 (246) - 159

A.2 Problem loans - - - - - - - - 40 (25) - 15

A.3 Restructured exposures - - - - - - - - - - - -

A.4 Expired exposures - - - - - - - - 1 - - 1

A.5 Other exposures 6,271 - - 6,271 401 - - 401 45,534 - (19) 45,515

TOTAL 6,271 - - 6,271 401 - - 401 45,980 (271) (19) 45,690

B. Off-balance sheet exposuresB.1 Bad debts - - - - - - - - - - - -

B.2 Problem loans - - - - - - - - - - - -

B.3 Impaired assets - - - - - - - - - - - -

B.4 Other exposures 337 - - 337 - - - - 9,097 - - 9,097

TOTAL 337 - - 337 - - - - 9,097 - - 9,097



INSURANCE COMPANIES NON-FINANCIAL COMPANIES OTHER ENTITIES

GROS

S EX

POSU

RE

SPEC

IFIC

ADJ

USTM

ENTS

PORT

FOLI

O AD

JUST

MEN

TS

NET

EXPO

SURE

GROS

S EX

POSU

RE

SPEC

IFIC

ADJ

USTM

ENTS

PORT

FOLI

O AD

JUST

MEN

TS

NET

EXPO

SURE

GROS

S EX

POSU

RE

SPEC

IFIC

ADJ

USTM

ENTS

PORT

FOLI

O AD

JUST

MEN

TS

NET

EXPO

SURE

- - - - 428 (200) - 228 63,920 (32,061) - 31,859

- - - - 5 (4) - 1 3,646 (2,397) - 1,249

- - - - - - - - - - - -

- - - - 18 (10) - 8 3,037 (1,640) - 1,397

1,027 - - 1,027 8,861 - (44) 8,817 1,132,337 - (1,714) 1,130,623

1,027 - - 1,027 9,312 (214) (44) 9,054 1,202,940 (36,098) (1,714) 1,165,128

- - - - - - - - - - - -

- - - - - - - - 463 - - 463

- - - - - - - - 51 - - 51

640 - - 640 10,874 - - 10,874 4,366 - - 3,766

640 - - 640 10,874 - - 10,874 4,880 - - 4,280

Notes




EXPOSURE/COUNTERPARTY

GOVERNMENTS AND CENTRAL BANKS OTHER PUBLIC INSTITUTIONS FINANCIAL COMPANIES

GROS

S EX

POSU

RE

SPEC

IFIC

ADJ

USTM

ENTS

PORT

FOLI

O AD

JUST

MEN

TS

NET

EXPO

SURE

GROS

S EX

POSU

RE

SPEC

IFIC

ADJ

USTM

ENTS

PORT

FOLI

O AD

JUST

MEN

TS

NET

EXPO

SURE

GROS

S EX

POSU

RE

SPEC

IFIC

ADJ

USTM

ENTS

PORT

FOLI

O AD

JUST

MEN

TS

NET

EXPO

SURE

A. Cash exposuresA.1 Bad debts - - - - - - - - 488 (348) - 140

A.2 Problem loans - - - - - - - - 13 (9) - 4

A.3 Restructured exposures - - - - - - - - - - - -

A.4 Expired exposures - - - - - - - - 836 - (2) 834

A.5 Other exposures 12,392 - - 12,392 579 - - 579 181,067 - (17,683) 163,384

TOTAL 12,392 - - 12,392 579 - - 579 182,404 (357) (17,685) 164,362

B. Off-balance sheet exposuresB.1 Bad debts - - - - - - - - - - - -

B.2 Problem loans - - - - - - - - - - - -

B.3 Impaired assets - - - - - - - - - - - -

B.4 Other exposures 481 - - 481 151 - - 151 103,587 - - 103,587

TOTAL 481 - - 481 151 - - 151 103,587 - - 103,587



INSURANCE COMPANIES NON-FINANCIAL COMPANIES OTHER ENTITIES

GROS

S EX

POSU

RE

SPEC

IFIC

ADJ

USTM

ENTS

PORT

FOLI

O AD

JUST

MEN

TS

NET

EXPO

SURE

GROS

S EX

POSU

RE

SPEC

IFIC

ADJ

USTM

ENTS

PORT

FOLI

O AD

JUST

MEN

TS

NET

EXPO

SURE

GROS

S EX

POSU

RE

SPEC

IFIC

ADJ

USTM

ENTS

PORT

FOLI

O AD

JUST

MEN

TS

NET

EXPO

SURE

- - - - 439 (233) - 206 71,600 (33,659) - 37,941

- - - - 2 (1) - 1 44,864 (9,686) - 35,178

- - - - - - - - - - - -

- - - - 31 - (12) 19 22,166 - (3,426) 18,740

8,369 - - 8,369 9,732 - (9) 9,723 5,850,583 - (6,698) 5,843,885

8,369 - - 8,369 10,204 (234) (21) 9,949 5,989,213 (43,345) (10,124) 5,935,744

- - - - - - - - - - - -

- - - - - - - - - - - -

- - - - - - - - - - - -

3,722 - - 3,722 940 - - 940 10,079 - (600) 9,479

3,722 - - 3,722 940 - - 940 10,079 - (600) 9,479

Notes



B.3 Breakdown of cash and off-balance-sheet exposures to customers by geographical area as at 31.12.2008

EXPOSURE / GEOGRAPHICAL AREA

ITALYOTHER EUROPEAN

COUNTRIES AMERICA ASIA REST OF THE WORLD

GROS

S EX

POSU

RE

NET

EXPO

SURE

GROS

S EX

POSU

RE

NET

EXPO

SURE

GROS

S EX

POSU

RE

NET

EXPO

SURE

GROS

S EX

POSU

RE

NET

EXPO

SURE

GROS

S EX

POSU

RE

NET

EXPO

SURE

A. Cash exposuresA.1 Bad debts 64,677 32,198 76 48 - - - - - -

A.2 Problem loans 3,691 1,266 - - - - - - - -

A.3 Restructured exposures - - - - - - - - - -

A.4 Expired exposures 3,054 1,405 1 - - - - - - -

A.5 Other exposures 1,177,065 1,175,288 16,184 16,184 1,147 1,147 36 36 - -

TOTAL 1,248,487 1,210,157 16,261 16,232 1,147 1,147 36 36 - -B. Off-balance sheet exposures

B.1 Bad debts - - - - - - - - - -

B.2 Problem loans 463 463 - - - - - - - -

B.3 Impaired assets 51 51 - - - - - - - -

B.4 Other exposures 22,172 21,572 3,121 3,121 22 22 - - - -

TOTAL 22,686 22,086 3,121 3,121 22 22 - - - -

TOTAL 1,271,173 1,232,243 19,382 19,353 1,169 1,169 36 36 - -

B.3 Breakdown of cash and off-balance-sheet exposures to customers by geographical area as at 31.12.2007


ITALYOTHER EUROPEAN


GROS

S EX

POSU

RE

NET

EXPO

SURE

GROS

S EX

POSU

RE

NET

EXPO

SURE

GROS

S EX

POSU

RE

NET

EXPO

SURE

GROS

S EX

POSU

RE

NET

EXPO

SURE

GROS

S EX

POSU

RE

NET

EXPO

SURE

A. Cash exposuresA.1 Bad debts 72,411 38,230 116 57 - - - - - -

A.2 Problem loans 44,879 35,183 - - - - - - - -


A.4 Expired exposures 23,032 19,593 1 - - - - - - -

A.5 Other exposures 5,990,168 5,965,781 20,321 20,318 52,201 52,201 19 19 13 13

TOTAL 6,130,490 6,058,787 20,438 20,375 52,201 52,201 19 19 13 13B. Off-balance sheet exposures

B.1 Bad debts - - - - - - - - - -

B.2 Problem loans - - - - - - - - - -

B.3 Impaired assets 899 899 - - - - - - - -

B.4 Other exposures 110,558 109,958 7,933 7,933 405 405 - - 64 64

TOTAL 111,457 110,857 7,933 7,933 405 405 - - 64 64

TOTAL 6,241,947 6,169,644 28,371 28,308 52,606 52,606 19 19 77 77


B.4 Breakdown of cash and off-balance-sheet exposures to banks by geographical area as at 31.12.08


ITALYOTHER EUROPEAN


GROS

S EX

POSU

RE

NET

EXPO

SURE

GROS

S EX

POSU

RE

NET

EXPO

SURE

GROS

S EX

POSU

RE

NET

EXPO

SURE

GROS

S EX

POSU

RE

NET

EXPO

SURE

GROS

S EX

POSU

RE

NET

EXPO

SURE

A. Cash exposuresA.1 Bad debts - - - - - - - - - -

A.2 Problem loans - - - - - - - - - -


A.4 Expired exposures - - - - - - - - - -

A.5 Other exposures 12,745,554 12,745,554 3,655 3,655 106 106 - - 42 42

TOTAL 12,745,554 12,745,554 3,655 3,655 106 106 - - 42 42B. Off-balance sheet exposures

B.1 Bad debts - - - - - - - - - -

B.2 Problem loans - - - - - - - - - -

B.3 Impaired assets - - - - - - - - - -

B.4 Other exposures 82,484 82,484 1,961 1,961 12 12 - - - -

TOTAL 82,484 82,484 1,961 1,961 12 12 - - - -

TOTAL 12,828,038 12,828,038 5,616 5,616 118 118 - - 42 42

B.4 Breakdown of cash and off-balance-sheet exposures to banks by geographical area as at 31.12.07


ITALYOTHER EUROPEAN


GROS

S EX

POSU

RE

NET

EXPO

SURE

GROS

S EX

POSU

RE

NET

EXPO

SURE

GROS

S EX

POSU

RE

NET

EXPO

SURE

GROS

S EX

POSU

RE

NET

EXPO

SURE

GROS

S EX

POSU

RE

NET

EXPO

SURE

A. Cash exposuresA.1 Bad debts - - - - - - - - - -

A.2 Problem loans - - - - - - - - - -


A.4 Expired exposures - - - - - - - - - -

A.5 Other exposures 6,470,015 6,470,015 508,093 508,093 304 304 - - 33 33

TOTAL 6,470,015 6,470,015 508,093 508,093 304 304 - - 33 33B. Off-balance sheet exposures

B.1 Bad debts - - - - - - - - - -

B.2 Problem loans - - - - - - - - - -

B.3 Impaired assets - - - - - - - - - -

B.4 Other exposures 73,894 73,894 10,980 10,980 1,350 1,350 - - - -

TOTAL 73,894 73,894 10,980 10,980 1,350 1,350 - - - -

TOTAL 6,543,909 6,543,909 519,073 519,073 1,654 1,654 - - 33 33

Notes



B.5 Significant exposures

The Bank did not have any positions that were considered “significant exposures” according to current supervisory regulations as at 31 December 2008.

C. Securitization and asset transfer transactions

C.1 Securitization transactions


On 5 May 2008, subject to authorisation by the Bank of Italy, the following securitisation transactions were closed earlier by exercising the Optional Redemption contained in the “Step-Up and Call” clause.- Garda Securitisation Series 2001-1 (in brief “Garda 1”) – originated by UniCredit Banca S.p.A., Bipop-Carire S.p.A. on the date of the

transaction, and FinecoBank- Velites – originated solely by Fineco Bankwhich had been derecognised in accordance with the accounting principles in force at the time of the closing.

Thus, FinecoBank repurchased its remaining underlying mortgages at market value.

The fair value of existing loans at the repurchase date amounted to 896,675 thousand (of which 433,943 thousand related to FinecoBank and 462,732 thousand related to Bipop-Carire S.p.A., now UniCredit Banca S.p.A.) These loans were included in FinecoBank for 385,887 thousand, equal to their nominal value less the related adjustments, whilst the negative difference between the nominal value less the related adjustments and the fair value, equal to -48,056 thousand was booked in Shareholders’ equity.

At the same time an entry of 8,358 thousand was recorded in Shareholders’ equity which corresponds to the positive difference – less the writebacks up to the maximum amount of the value adjustments made in the previous financial years ( 10,179 thousand) – between the redemption value and the book value of the securities held by FinecoBank following the securitisation transactions now extinguished (previously included under item 40 «available-for-sale financial assets »).

Therefore, the overall impact on the Shareholders' equity is -39.698 thousand ( -26,868 thousand net of the tax effect), whilst the impact on the income statement is 10,179 thousand (item 130 Net adjustments for impairment of : b) available-for-sale financial assets).

Due to the extraordinary transactions described in the foreword, on 31 December 2008 FinecoBank had no exposures vis-à-vis the securitisation except for a line of credit and the servicing activity related to the F-E Personal Loans 2003-1 securitisation transaction. The liquidity line of 15 million can be used by the vehicle company in case of a shortfall in cash on hand in the interest account.

As part of the transaction involving the transfer of the “Salary-guaranteed loans” business division carried out on 1 January 2008 in favour of Fineco Prestiti S.p.A., the junior security issued by F-E Personal Loans was transferred for a face value of 6,810 thousand, along with the derivative contracts, the credit enhancements, the role of originator and all the contracts linked to the transaction.

The spin-off of the “Mortgages” business division carried out on 1 July 2008 in favour of UniCredit Banca per la Casa S.p.A., now UniCredit Consumer Financing Bank S.p.A., entailed the transfer of the Heliconus and F-E Mortgages Series 1-2003 junior securities of a nominal value of 16,620 thousand, the subordinated loan issued by F-E Mortgages 2005 of a nominal value of 15,430 thousand, the lines of credit granted, the derivative contracts, the credit enhancements, the role of originator, the role of servicer and all the contracts linked to the transaction and the roles played by FinecoBank.


The analysis and performance of the securitisation transactions and the consequent repurchase of the securitised assets was carried out by the structures of the Bank in close collaboration with the Parent Bank. This process entails an economic feasibility study aimed at evaluating the impact on regulatory capital and on the risk-adjusted profitability measures. In the event of a positive outcome of this initial phase, a technical-operational feasibility study is launched, with examination of the assets subject to securitisation, and definition of the structure of the transaction or of the repurchase methods. Once the technical feasibility is confirmed, the transaction is carried out.

Reporting on the economic results of securitisationThe economic results of outstanding securitisation transactions essentially reflect, at the end of the year, the estimate of cash flows calculated in the start-up phase and in subsequent updates of estimates, and they also depend on the amount of defaults, prepayments and renegotiations during the period. The economic results shown below with regard to the Heliconus, F-E Mortgages Series 1-2003 and F-E Mortgages 2005 transactions relate to the period running from 1 January 2008 to 1 July 2008, the date when the Mortgages division was spun off to UniCredit Banca per la Casa S.p.A., now UniCredit Consumer Financing Bank S.p.A., whilst the results of the F-E Personal Loans transaction relate to the servicing activity alone.

Information of the economic results of the 2008 financial yearIn order to assess the effect that the securitization transactions had on the income statement during 2008, it is essential that transactions that were fully or partially derecognized from the financial statements be considered separately from transactions involving loans that have been sold but not eliminated.

Transactions that have been fully eliminated from the balance sheet

SPECIAL PURPOSE VEHICLE

ITEM 10INTEREST

INCOME

ITEM 20INTEREST EXPENSE

ITEM 40COMMISSION

INCOME

ITEM 80NET PROFIT

ON TRADING ACTIVITY

ITEM 130ADJUSTMENTS

TO AFS ASSETS

ITEM 130NET

ADJUSTMENTS TO LOANS

ITEM 190OTHER

EXPENSES /OTHER INCOME TOTAL

Garda Securitisation S.r.l. Mortgage loansRenegotiation - - - - - - (660) (660)

Cash flow swaps - (938) - 1,537 - - - 599

Juniornotes - - - 154 - - - 154

Valuation swap - - - - 1,839 - - 1,839

Servicing - - 7 - - - - 7

Assigned loans 7 - - - - - - 7

Amort. cost of loans - - - - - - - -

Writedown of loans - - - - - 143 - 143

Total 7 (938) 7 1,691 1,839 143 (660) 2,089

Notes





ITEM 40COMMISSION

INCOME

ITEM 80NET PROFIT

ON TRADING ACTIVITY

ITEM 130ADJUSTMENTS TO AFS ASSETS

ASSETS

ITEM 190OTHER

EXPENSES /OTHER INCOME TOTAL

Velites S.r.l.Mortgage loansBuy-back - - - - - -

Renegotiation - - - - (627) (627)

Valuation swap (780) - 1,193 - - 413

Cash flow swap - - 422 - - 422

Junior notes - - - 8,340 - 8,340

Servicing - 5 - - - 5

Total (780) 5 1,615 8,340 (627) 8,553


ITEM 10INTEREST

INCOME


ITEM 40COMMISSION

INCOME

ITEM 130NET

ADJUSTMENTSTO LOANS

ITEM 150ADMINISTRATIVE

EXPENSES TOTAL

F-E Personal Loans S.r.l.Salary-guaranteed loans and delegated payment loansAssigned loans - - - - - -

Amort. cost of assigned loans - - - - - -

Financial liabilities - - - - - -

Ongoing expenses - - - - - -

Swap commissions - - - - (23) (23)

Writedown of loans - - - - - -

Servicing - - 180 - - 180

Total - - 180 - (23) 157

Transactions involving loans sold but not eliminated from the balance sheet


ITEM 10INTEREST

INCOME


ITEM 50COMMISSION

EXPENSE

ITEM 130NET

ADJUSTMENTSTO LOANS


EXPENSES TOTAL

Heliconus S.r.l.Mortgage loansAssigned loans 7,595 - - - - 7,595

Amort. cost of assigned loans (957) - - - - (957)

Financial liabilities - (6,131) - - - (6,131)

Amort. cost of financial liabilities - (97) - - - (97)

Swap commissions - - - - - -

Ongoing expenses - - - - - -

Writedown of loans - - - 333 - 333

Total 6,638 (6,228) - 333 - 743

For the F-E Personal Loans 2003-1 transaction, it should be noted that the junior note was transferred to Fineco Prestiti S.p.A. as part of the transaction of 1 January 2008, while FinecoBank retained the servicing activity.



ITEM 10INTEREST

INCOME


ITEM 50COMMISSION

EXPENSE

ITEM 130NET

ADJUSTMENTSTO LOANS


EXPENSES TOTAL

F-E Mortgages S.r.l.Mortgage loansAssigned loans 14,425 - - - - 14,425

Amort. cost of assigned loans (1,988) - - - - (1,988)




Ongoing expenses - - - - (35) (35)

Writedown of loans - - - (50) - (50)

Total 12,437 (12,509) - (50) (35) (157)


ITEM 10INTEREST

INCOME


ITEM 50COMMISSION

EXPENSE

ITEM 130NET

ADJUSTMENTSTO LOANS


EXPENSES TOTAL

F-E Mortgages S.r.l.Mortgage loansAssigned loans 22,048 - - - - 22,048

Amort. cost of assigned loans (3,119) - - - - (3,119)




Ongoing expenses - - - - (33) (33)

Writedown of loans - - - (284) - (284)

Total 18,929 (16,854) - (284) (33) 1,758

The main characteristics of the securitisation transactions carried out by FinecoBank

Garda Securitisation S.r.l. special purpose vehicle Following the early repurchase request of the securitised portfolios filed by the Parent Bank on behalf of the subsidiaries FinecoBank and Bipop Carire S.p.A., now UniCredit Banca S.p.A., on 10 January 2008 and 20 March 2008, the Bank of Italy completed the preliminary investigation with positive outcome through order no. 416516 of 11 April 2008.On 10 June 2008 the Parent Bank informed the Bank of Italy of the closure of the transaction which took place on 5 May 2008.

For this transaction the originators, FinecoBank and Bipop Carire S.p.A., now UniCredit Banca S.p.A., exercised the option for the early repurchase of the portfolio on 24 April 2008 (effective as of 10 April 2008), financing the vehicle company for the early redemption of the securities issued.On 5 May 2008 the « Step-up and call » option, which granted the vehicle company, by reference to that date or subsequent dates, the right to the early redemption of the securities issued, was exercised. The early closure of the transaction was caused by the increase in the spread of the securities (step up) which occurred starting from the payment date following the one of 5 May 2008, with ensuing negative result borne by the Originators, holders of securities with higher levels of subordination.

Notes



When the loans were repurchased, the vehicle company redeemed the entire value of the securities in advance.The securities in issue, at the date the loans were repurchased, were equal to the issue value of the same as, given that the transaction was associated with the "revolving" mechanism, the liquidity of the principal amount that was accumulated in the vehicle from time to time, was used to purchase new loans from the Originators.The loans were repurchased at fair value; the share premium paid by FinecoBank for the repurchase of the securitised loans gave rise to a negative reserve from the repurchase of loans of 25,362 thousand, partly offset by the payment of coupons in arrear on the Junior securities of 3,928 thousand and the additional return on the junior security, generated by 4,430 thousand excess liquidity held by the vehicle.The junior security held in portfolio amounting to 38,335 thousand nominal value, written down for impairment in previous financial years, was fully repaid, generating a positive effect on the income statement of 1,839 thousand.

Loans were assessed by distinguishing between performing and non-performing loans.The repurchase price of the non-performing loans was determined by considering the potential recovery value. Late-payment interest was written down in full.

The Basis Swap and Back-to-back swap contracts entered into to mitigate the risk of the portfolio of mortgages signed respectively by the issuer with a highly-rated intermediary (Dresdner Bank) and by the latter with FinecoBank, to mitigate the exposure of the vehicle company to the risk of unfavourable changes in lending interest rates on loans and borrowing interest rates on notes, became automatically extinguished as the transaction was closed.

Velites S.r.l. special purpose vehicleFollowing the early repurchase request of the securitised portfolios filed by the Parent Bank on behalf of the subsidiary FinecoBank on 10 January 2008 and 20 March 2008, the Bank of Italy completed the preliminary investigation with positive outcome through order no. n.416516f 11 April 2008.On 10 June 2008 the Parent Bank informed the bank of Italy of the closure of the transaction which took place on 5 May 2008.

For this transaction the originator, FinecoBank, exercised the option for the early repurchase of the portfolio on 24 April 2008 (effective as of 10 April 2008), financing the vehicle company for the early redemption of the securities issued.On 5 May 2008 the “Step-up and call” option, which granted the vehicle company, by reference to that date or subsequent dates, the right to the early redemption of the securities issued, was exercised. The early closure of the transaction was caused by the increase in the spread of the securities (step up) which apparently occurred starting from the payment date following the one of 5 May 2008, with ensuing negative result borne by the Originators, holders of securities with higher levels of subordination.When the loans were repurchased, the vehicle company redeemed the entire value of the Class A and B securities (rated) and part of the Class C securities (not rated and fully subscribed by the assignor) in advance. FinecoBank S.p.A., as Junior Noteholder, expressly waived its receivable from the Vehicle company in relation to the principal amount of Class C securities of 7,475 thousand nominal value and the interest amount of 3,985 thousand nominal value. The expected loss on the class C Notes had been estimated in advance and set aside in a provision on the income statement of FinecoBank S.p.A. during previous years.The junior security held in portfolio, amounting to 50,100 thousand nominal value, written down for impairment in previous financial years for 15,815 thousand was repaid for 42,625 thousand, with a positive effect on the income statement of the year of 8.340 thousand.The loans were repurchased at fair value; the share premium paid by FinecoBank for the repurchase of the securitised loans gave rise to a negative reserve from the repurchase of loans of 22,694 thousand.

Loans were assessed by distinguishing between performing and non-performing loans.The repurchase price of the non-performing loans was determined by considering the potential recovery value. Late-payment interest was written down in full.


The Basis Swap and Back-to-back swap contracts entered into to mitigate the risk of the portfolio of mortgages signed respectively by the issuer with a highly-rated intermediary (Dresdner Bank) and by the latter with FinecoBank, to mitigate the exposure of the vehicle company to the risk of unfavourable changes in lending interest rates on loans and borrowing interest rates on notes, became automatically extinguished as the transaction was closed.

Heliconus S.r.l. special purpose vehicle A securitisation transaction was carried out on 5 August 2002 with the special purpose vehicle Heliconus S.r.l.; the transaction involved the assignment of a performing mortgage loan portfolio at par. The vehicle company of the securitisation, Heliconus S.r.l. was set up pursuant to Law no 130/99. The loans were assigned to the vehicle company under the non-recourse clause.As stated earlier on, as a result of the spin-off of the "Mortgages" business division to UniCredit Banca per la Casa S.p.A., now UniCredit Consumer Financing Bank S.p.A. on 1 July 2008, the latter was assigned the junior security, along with the derivative contracts, the credit enhancements, the liquidity line, the role of originator, the role of servicer as well as all the contracts linked to the transaction and the roles played by Finecobank as part of the securitisation transaction with Heliconus.

F-E Personal Loans S.r.l. special purpose vehicleA securitisation transaction was carried out on 16 June 2003 with the special purpose vehicle F-E Personal Loans S.r.l.; the transaction involved the assignment of a portfolio of performing salary-guaranteed loans and delegated payment loans assigned at par value on 23 April 2003.F-E personal Loans S.r.l., the vehicle company involved in the securitisation transaction, was set up pursuant to Law no. 130/99. The loans were assigned to the vehicle company on a non-recourse basis.On 1 January 2008, the junior security subscribed, the other credit enhancements, the role of originator and the derivative contracts associated with the transaction were transferred to Fineco Prestiti S.p.A., following the spin-off of the “Salary-guaranteed loans” business division of FinecoBank. FinecoBank retained the role of servicer.In the event of a shortfall in cash on hand in the interest account, the vehicle may draw on the liquidity line granted by FinecoBank, in conjunction with Dresdner Bank, up to a maximum value of 15,000,000.00.

F-E Mortgages S.r.l. special purpose vehicles Two securitisation transactions, namely F-E Mortgages Series 1-2003 and F-E Mortgages 2005, were entered into with the vehicle company F-E Mortgages S.r.l..

F-E Mortgages Series 1-2003The F-E Mortgages Series 1-2003 securitisation transaction was carried out on 28 November 2003 and comprised a portfolio of performing mortgage loans assigned at par value on 30 June 2003 and 30 September 2003. F-E Mortgages S.r.l., the vehicle company involved in the securitisation transaction, was set up pursuant to Law no. 130/99. The loans were assigned to the vehicle company on a non-recourse basis.

F-E Mortgages 2005 transactionF-E Mortgages 2005 securitisation transaction was carried out on 8 April 2005, and comprised a portfolio of performing mortgage loans assigned at par value on 28 February 2005. F-E Mortgages S.r.l., the vehicle company involved in the securitisation transaction, was set up pursuant to Law no. 130/99. The loans were assigned to the vehicle company on a non-recourse basis.

As stated earlier on, as a result of the spin-off of the “Mortgages” division to UniCredit Banca per la Casa S.p.A., now UniCredit Consumer Financing Bank S.p.A. on 1 July 2008, the latter was assigned the junior security, the derivative contracts, the credit enhancements, the line of credit, the role of originator, the role of servicer as well as all the contracts linked to the transaction and the roles played by Finecobank with regard to the F-E Mortgages Series 1-2003 and F-E Mortgages 200 securitisation transactions.

Notes



C.1.1 Exposures from securitization transactions broken down by underlying asset qualityCASH EXPOSURES GUARANTEES GIVEN CREDIT LINES*

UNDERLYING ASSET QUALITY / EXPOSURES AT 31 DECEMBER 2008

SENIOR MEZZANINE JUNIOR SENIOR MEZZANINE JUNIOR SENIOR MEZZANINE JUNIOR

GROS

S EX

POSU

RE

NET

EXPO

SURE

GROS

S EX

POSU

RE

NET

EXPO

SURE

GROS

S EX

POSU

RE

NET

EXPO

SURE

GROS

S EX

POSU

RE

NET

EXPO

SURE

GROS

S EX

POSU

RE

NET

EXPO

SURE

GROS

S EX

POSU

RE

NET

EXPO

SURE

GROS

S EX

POSU

RE

NET

EXPO

SURE

GROS

S EX

POSU

RE

NET

EXPO

SURE

GROS

S EX

POSU

RE

NET

EXPO

SURE

A. Own underlying assets :a) Impaired

b) Other

B. Third-party underlying assets :a) Impaired

b) Other 15,000 15,000

* Revocable credit lines



C.1.2 Exposures from the main Bank securitization transactions broken down by type of securitized assets and type of exposureCASH EXPOSURES GUARANTEES GIVEN CREDIT LINES

UNDERLYING ASSET TYPE / EXPOSURES AT 31 DECEMBER 2008


BOOK

VAL

UE

ADJU

STM

ENTS

BOOK

VAL

UE

ADJU

STM

ENTS

BOOK

VAL

UE

ADJU

STM

ENTS

BOOK

VAL

UE

ADJU

STM

ENTS

BOOK

VAL

UE

ADJU

STM

ENTS

BOOK

VAL

UE

ADJU

STM

ENTS

BOOK

VAL

UE

ADJU

STM

ENTS

BOOK

VAL

UE

ADJU

STM

ENTS

BOOK

VAL

UE

ADJU

STM

ENTS

A. Fully derecognisedA.1 Garda Securitisation Series

2001-1

- Performing mortgage loans 622

A.2 Velites

- Performing mortgage loans 8,340

B. Partly derecognisedC. Not derecognised

C.1 Heliconus


C.2 F-E Mortgages Series 1-2003

- Performing mortgage loans (50)

C.3 F-E Mortgages 2005

- Performing mortgage loans (284)

C.4 Garda Securitisation Series 2001-1


* Revocable credit lines

Notes



C.1.3 Exposures from the main third-party securitization transactions broken down by type of securitized assets and type of exposure

CASH EXPOSURES GUARANTEES GIVEN CREDIT LINES

UNDERLYING ASSET QUALITY / EXPOSURES AT 31 DECEMBER 2008


BOOK

VAL

UE

ADJU

STM

ENTS

BOOK

VAL

UE

ADJU

STM

ENTS

BOOK

VAL

UE

ADJU

STM

ENTS

BOOK

VAL

UE

ADJU

STM

ENTS

BOOK

VAL

UE

ADJU

STM

ENTS

BOOK

VAL

UE

ADJU

STM

ENTS

BOOK

VAL

UE

ADJU

STM

ENTS

BOOK

VAL

UE

ADJU

STM

ENTS

BOOK

VAL

UE

ADJU

STM

ENTS

A.1 Garda Securitisation Series 2001-1

- Performing mortgage loans 1,217

A.2 F-E Personal Loans 2003-1

- Performing salary-guaranteed loans 15,000

C.1.4 Exposures to securitizations broken down by portfolio and type as at 31.12.2008


C.1.4 Exposures to securitizations broken down by portfolio and type as at 31.12.2008

EXPOSURE/PORTFOLIO

FINANCIAL ASSETS HELD FOR

TRADING

FINANCIAL ASSETS DESIGNATED AT

FAIR VALUE

AVAILABLE-FOR-SALE FINANCIAL

ASSETS

HELD-TO-MATURITY

FINANCIAL ASSETS LOANS TOTAL

1. Cash exposures- “Senior” - - - - - -

- “Mezzanine” - - - - - -

- “Junior” - - 70,781 - - 70,781

2. Off-balance sheet exposures- “Senior” - - - - - -

- “Mezzanine” - - - - - -

- “Junior” - - - - - -


C.1.7 Servicing: collection of securitized loans and payment of notes issued by the special purpose vehicle as at 31.12.2008

SPECIAL PURPOSE VEHICLES

SECURITISED ASSETS (YEAR-END FIGURE)

LOANS COLLECTED IN THE YEAR % SHARE OF NOTES REDEEMED (YEAR-END FIGURE)

IMPAIRED PERFORMING IMPAIRED PERFORMINGSENIOR MEZZANINE JUNIOR

IMPAIRED ASSETS

PERFORMING ASSETS

IMPAIRED ASSETS

PERFORMING ASSETS

IMPAIRED ASSETS

PERFORMING ASSETS

2001-1 Garda Securitisation Series n.d. n.d. 133 15,695 n.d. n.d. n.d. n.d. n.d. n.d.

Velites n.d. n.d. 104 12,164 n.d. n.d. n.d. n.d. n.d. n.d.

Heliconus n.d. n.d. 517 32,229 n.d. n.d. n.d. n.d. n.d. n.d.

1-2003 F-E Mortgages Series 926 55,651 118 43,395 0.00% 86.60% 0.00% 0.00% 0.00% 0.00%

F-E Mortgages Series 1-2003 n.d. n.d. 268 64,248 n.d. n.d. n.d. n.d. n.d. n.d.

2005 F-E Mortgages Series n.d. n.d. 687 95,713 n.d. n.d. n.d. n.d. n.d. n.d.

The amounts collected specified above for the Heliconus, F-E mortgages Series 1-2003 and F-E Mortgages 2005 transactions relate to the period from 1 January 2008 to 1 July 2008,date of the spin-off of the “Mortgages” business division to UniCredit Banca per la Casa S.p.A., now UniCredit Consumer Financing Bank S.p.A..

C.1.5 Total amount of securitized assets underlying the junior notes and other forms of credit enhancement


C.1.6 Equity interests in special purpose vehicles


Notes



C.2.1 Financial assets sold but not eliminated

TECHNICAL FORMS /PORTFOLIO

FINANCIAL ASSETS HELD FOR TRADING

FINANCIAL ASSETS DESIGNATED AT FAIR VALUE

AVAILABLE-FOR-SALE FINANCIAL ASSETS

A B C A B C A B C

A. Cash assets1. Debt securities

2. Equities

3. UCIT units

4. Loans

5. Impaired assets

B. Derivative instrumentsTotal at 31 December 2008 - - - - - - - - -

Legend: A = financial assets sold and fully booked (book value) B = financial assets sold and partly booked (book value) C = financial assets sold and partly booked (full value)

C.2.1 Financial assets sold but not eliminated

TECHNICAL FORMS /PORTFOLIO


FINANCIAL ASSETS DESIGNATED AT FAIR VALUE

AVAILABLE-FOR-SALE FINANCIAL ASSETS

A B C A B C A B C

A. Cash assets1. Debt securities 2.075.572

2. Equities

3. UCIT units

4. Loans

5. Impaired assets

B. Derivative instrumentsTotal at 31 December 2008 - - - 2.075.572 - - - - -

Legend: A = financial assets sold and fully booked (book value) B = financial assets sold and partly booked (book value) C = financial assets sold and partly booked (full value)

C.2 Transfer transactions


C.2.1 Financial assets sold but not eliminatedHELD-TO-MATURITY FINANCIAL

ASSETS LOANS TO BANKS CUSTOMER LOANS

TOTALA B C A B C A B C

3,622,572 3,622,572

-

-

-

-

- - - 3,622,572 - - - - - 3,622,572

C.2.1 Financial assets sold but not eliminatedHELD-TO-MATURITY FINANCIAL

ASSETS LOANS TO BANKS CUSTOMER LOANS

TOTALA B C A B C A B C

2.075.572

-

-

1.674.614 1.674.614

21.105 21.105

-- - - - - - 1.695.719 - - 3.771.291

Notes



C.2.2. Financial liabilities from assets sold but not eliminated

LIABILITIES / ASSET PORTFOLIO


FINANCIAL ASSETS

DESIGNATED AT FAIR VALUE


ASSETS

HELD-TO-MATURITY FINANCIAL

ASSETSLOANS TO

BANKSCUSTOMER

LOANS TOTAL

1. Due to customersa) from fully recognised assets 3,539,378 3,539,378

b) from partly recognised assets -

2. Due to banksa) from fully recognised assets 4,592 4,592


Total at 31 December 2008 - - - - 3,543,970 - 3,543,970


C.2.2. Financial liabilities from assets sold but not eliminated

LIABILITIES / ASSET PORTFOLIO


FINANCIAL ASSETS

DESIGNATED AT FAIR VALUE


ASSETS

HELD-TO-MATURITY FINANCIAL

ASSETSLOANS TO

BANKSCUSTOMER

LOANS TOTAL

1. Due to customersa) from fully recognised assets 2,045,404 1,572,064 3,617,468


2. Due to banksa) from fully recognised assets -


Total at 31 December 2008 - 2,045,404 - - - 1,572,064 3,617,468

Notes



D - Credit risk measurement models

D.1. Measurement of Credit Risk - Trading BookThe credit risk to which the Bank is exposed by managing the trading book is monitored by analysing the instruments held in the portfolio by rating class.

D.2 Measurement of Credit Risk - Banking BookThe concentration level of FinecoBank’s banking book is negligible. As mortgages and salary-guaranteed loans were assigned in the year under review, the retail activity is limited to the granting of personal loans. These loans are hedged through swap contracts entered into with UniCredit Group companies.

Section 2 - Market riskThe finance activity is aimed at the efficient management of liquidity, and the owned securities portfolio is mainly represented by variable-rate bonds issued by the Parent Bank. The portfolio also contains, to a residual extent, stock deriving from brokerage activity with retail and institutional customers and concerning various types of plain-vanilla and structured listed and unlisted bond issues. Listed derivative instruments are used to cover interest rate and equity risk inherent in positions.The Bank measures and monitors market risks with reference to the entire trading book, which includes both positions that the Bank has assumed as part of its management of its owned asset portfolio and the positions it has assumed as part of its brokerage activity.

Market risks are measured monthly using VaR (Value at risk) type methods in accordance with the methods adopted by Unicredt. The calculation method adopted by the Holding company is the two-tailed historical simulation method. The method is based on the revaluation of daily positions based on the historical prices recorded over a one-year interval (250 scenarios). The VaR is the higher of the greater loss and the gain with a 99% confidence level.

2.1 Interest rate risk - Regulatory trading book


A. General aspectsThe Bank aims at protecting itself against the interest rate risk potentially arising from the trading book.

B. Processes for managing and methods for measuring interest rate riskThe exposure to market risks associated with the management of the trading book of the Bank will be measured and monitored using the results of the VaR model. Especially as regards interest rate risk factors, the VaR Interest Rate indicator will be calculated every month to measure the maximum potential loss attributable to adverse changes in the structure of interest rates and the related volatilities. In fact, activities are under way to align former Capitalia’s VaR calculation methods with the new ones used by UniCredit.



1. Regulatory trading book: distribution by residual maturity (repricing date) of cash financial assets and liabilities and financial derivatives

1. Regulatory trading book: distribution by residual maturity (repricing date) of cash financial assets and liabilities and financial derivatives. Currency: Euro

TYPE/UNEXPIRED TERM ON DEMANDUP TO 3

MONTHS

FROM OVER 3 MONTHS TO 6

MONTHS


YEAR

FROM OVER 1 YEAR TO 5

YEARS


YEARSOVER 10

YEARSINDEFINITE DURATION

1. Cash assets1.1 Debt securities

- with early redemption option - - - - - - - -

- other 1 5,989 1,157 231 2,312 66 18 -

1.2 Other assets - - - - - - - -

2. Cash liabilities2.1 Repurchase agreements

2.2 Other liabilities - 21,584 74,310 3,674 20 2 - -

3. Financial derivatives3.1 With underlying security

- Options

+ Long positions - - - - - - - -

+ Short positions - - - - - - - -

- Other

+ Long positions - 23,137 122 - 773 - 10 -

+ Short positions - 22,803 29 1 1,198 - 10 -

3.2 Without underlying security

- Options

+ Long positions - 30,484 536 2,481 2,026 - - -

+ Short positions 86 8,601 481 3,863 22,496 - - -

- Other

+ Long positions - 2,195,478 125,833 232,070 815,895 63,470 - -

+ Short positions - 2,075,651 155,960 241,009 872,749 88,843 - -

Notes



1. Regulatory trading book: distribution by residual maturity (repricing date) of cash financial assets and liabilities and financial derivatives. Currency: dollars


MONTHS


MONTHS


YEAR


YEARS


YEARSOVER 10




- other - - 13 - 93 26 91 -

1.2 Other assets - - - - - - - -


2.2 Other liabilities - - - - - - - -


- Options



- Other

+ Long positions - 13 - - 14 - - -

+ Short positions - 14 - - 13 - - -


- Options



- Other

+ Long positions - 203,486 - - - - - -

+ Short positions - 203,709 - - - - - -


1. Regulatory trading book: distribution by residual maturity (repricing date) of cash financial assets and liabilities and financial derivatives. Currency: other currencies


MONTHS


MONTHS


YEAR


YEARS


YEARSOVER 10




- other - 21 - - 8 19 - -

1.2 Other assets - - - - - - - -


2.2 Other liabilities - - - - - - - -


- Options



- Other




- Options



- Other

+ Long positions - 134,658 - - - - - -

+ Short positions - 132,981 - - - - - -

Notes



2. Regulatory trading book: internal models and other methods of sensitivity analysisAs at 31 December 2008 no VaR value is available for the Trading Book. As mentioned in the above point, the VaR calculation method is being aligned with the standards and methods adopted by UniCredit. Testing activity is being carried out by the Bank and once the testing phase is completed a VaR value will produced on a weekly basis. The reason behind the decision to calculate a weekly VaR value is based on the fact that FinecoBank's trading positions are not subject to such significant changes hence do not require more frequent calculations.

2.2 Interest rate risk - Banking book


A. General aspects, management processes and measurement methods for interest rate riskIn order to measure and monitor the interest rate risk profile at the individual and consolidated level, an ALM system is in place to enable the calculation on a monthly basis of the impacts generated by changes in the structure of interest-rates on the entirety of the annual financial statements, expressed in terms of the change in the economic value of shareholders’ equity and net interest income. As regards Net interest income, the model allows to estimate any changes in value assuming parallel shifts in the interest rate curves (+100 and -100 b.p.) using the repricing gap of balance sheet assets and liabilities (Net Interest Income Sensitivity). As regards changes in the economic value of capital, the impact of parallel shocks of interest rate curves on the value of all future cash flows generated by balance sheet assets is estimated using a shift of 200 b.p. according to Basel II requirements. As opposed to the analysis of net interest income, it provides a long-term view of the entire banking book, as it takes account of the present value of all cash flows generated by assets, liabilities and off-balance sheet items. This analysis is integrated with the measure of the VaR interest rate indicator obtained using the historical simulation method and a one-day holding period.In line with the strategic risk management process established by the Parent Bank’s Board of Directors, the interest rate risk profile is managed at the consolidated level in order to exploit the natural diversification existing between the deposit and loan positions of the various subsidiary banks.In particular, interest rate risk will be managed on a weekly basis, once the aforesaid alignment with UniCredit’s calculation method has been completed.

B. Fair value hedging activitiesLa copertura delle posizioni a rischio di tasso di interesse è effettuata con il metodo del “macrohedging”, nel rispetto dei principi IAS previsti Any positions exposed to interest rate risk are hedged using the macrohedging method in accordance with the IAS standards governing fair value hedging. In particular, as at 31 December 2008 interest rate swaps were in place to hedge against the fixed-rate personal loans portfolio. Thus, the risk elements that were hedged against are related to the fair value change arising from the effect of fluctuations in the yield curve of interest rates on the value of the loans portfolio (personal loans).

C. Cash flow hedging activityThere are currently no cash flow hedges generated by FinecoBank business operations.



Quantitative tables referring to the entire banking book are provided below, in addition to an analysis of sensitivity to interest rate risk based on internal models, also developed with respect to the entire banking book.

1. Banking book: distribution by residual maturity (repricing date) of financial assets and liabilities. Currency: Euro


MONTHS


MONTHS


YEAR


YEARS


YEARSOVER 10




- Other 30 2,135,829 152,420 3,736,390 136 7 7 -

1.2 Loans to banks 2,476,028 2,006,807 1,156,114 584,442 - 551 - 165,399

1.3 Customer loans

- current accounts 52,255 - - - - - - -

- other loans

- with early redemption option 6,164 141,676 15,626 26,357 56,615 3,487 - -

- other 11,692 64,724 5 4,514 - 2,520 - 32,246

2. Cash liabilities2.1 Customer accounts

- current accounts 8,037,625 - - - - - - -

- other payables


- other 2,371 2,856,850 637,753 5,360 - 8,871 - -

2.2 Deposits from banks


- other payables 50 622,715 - 51,233 - 49,817 - -

2.3 Debt securities


- other - - - - - - - -

2.4 Other liabilities


- other - - - - - - - -

3. Financial derivatives3.1 with underlying security

- Options



- Other




- Options



- Other

+ Long positions 2,100,000 3,527,846 - - - - - -

+ Short positions 2,100,000 3,415,060 13,987 22,674 74,220 1,905 - -

Notes



1. Banking book: distribution by residual maturity (repricing date) of financial assets and liabilities. Currency: Dollar


MONTHS


MONTHS


YEAR


YEARS


YEARSOVER 10




- Other - 51,514 102,519 122,966 - - - -

1.2 Loans to banks 15,330 - - 260 - 6 - -

1.3 Customer loans

- current accounts 742 - - - - - - -

- other loans


- other 1,461 4,865 - 610 - 412 - -



- other payables


- other 561 46,666 11,286 - - - - -



- other payables - - - - - - - -

2.3 Debt securities


- other - - - - - - - -



- other - - - - - - - -


- Options



- Other




- Options



- Other

+ Long positions 237,047 - - - - - - -

+ Short positions 237,047 - - - - - - -


1. Banking book: distribution by residual maturity (repricing date) of financial assets and liabilities. Currency: Currency: other currencies


MONTHS


MONTHS


YEAR


YEARS


YEARSOVER 10




- Other - - - - - - - -

1.2 Loans to banks 40,132 - - - - - - -

1.3 Customer loans

- current accounts 9 - - - - - - -


- other 382 137 - - - 171 - -



- other payables


- other - 48 - - - - - -



- other payables - - - - - - - -

2.3 Debt securities


- other - - - - - - - -



- other - - - - - - - -


- Options



- Other




- Options



- Other



Notes



2. Banking book: internal models and other methods of sensitivity analysisThe following table provides key figures for the results of the analyses that were conducted.

One-day holding period, 99% confidence interval (amounts in millions of )

Value analysis (shift + 200 bp) Net interest analysis (shift + 100 bp) IRVaR

-27 -15 1.68

Interest rate risk indicatorsThe sensitivity analysis on net interest income, which was conducted assuming a shift of +100 basis points on the euro interest rate curve, highlighted an impact of -15 million as at 31 December 2008, or approximately 7% of FinecoBank’s individual shareholders’ equity.The sensitivity analysis on the value of shareholders’ equity, which was conducted assuming a shift of +200 basis points on the euro interest rate curve, showed an impact of - 27million, equal to approximately 12% of FinecoBank’s individual shareholders’ equity.The interest rate VaR figure for FinecoBank came to approximately 1.68 million, equal to approximately 1% of FinecoBank’s individual shareholders’ equity.

2.3 Price risk - trading book


A. General issuesThe amount of equity securities held in the Trading book is negligible.

B. Management processes and measurement methods for price riskThe exposure to market risks associated with the management of the trading book will be measured and monitored by the Bank using the results of the VaR model.


Quantitative tables referring to the entire regulatory trading book are provided below, in addition to an analysis of sensitivity to price risk based on internal models, also developed with respect to the entire regulatory trading book.


1. Regulatory trading book: cash exposures to equities and units in O.I.C.R.

TYPE OF EXPOSURE/AMOUNT

BOOK VALUE

LISTED UNLISTED

A. EquitiesA.2 Innovative capital instruments 13 2

A.3 Other capital instruments - -

B. UCIT units - -

A.3 Other equitiesB.1 Italian-law

- harmonised open funds - -

- unharmonised open funds - -

- closed funds - -

- reserved funds - -

- speculative funds - -

B.2 of other EU countries

- harmonised funds - -

- unharmonised funds - -

- unharmonised closed funds - -

B.2 of other non-EU countries

- open funds - -

- closed funds - -

Total 13 2

2. Regulatory trading book: breakdown of exposures in equities and equity indices by main country of listing

TYPE OF TRANSACTION/LISTING INDEX

LISTED

UNLISTEDCANADA NETHERLANDS ITALY GERMANY LUXEMBOURGOTHER

COUNTRIES

A. Equities- long positions 10 - - - - 2 2

- short positions - - - - - - -

B. Unsettled transactions- long positions - 676 19,025 - 541 - -

- short positions - 676 19,025 - 541 - -C. Other equity derivatives

- long positions - - - - - - -

- short positions - - - 4 - - -

D. Equity index derivatives- long positions - - - - - - -

- short positions - - - - - - -

3. Regulatory trading book: internal models and other methods of sensitivity analysisThe positions of Finecobank’s trading book are marginally exposed to price risk.

Notes



2.4 Price risk - banking book


A. General aspects, management processes and measurement methods for price riskPrice risk affecting FinecoBank’s banking book is mainly concentrated within the available-for-sale portfolio. The risk absorbed by this portfolio is measured and monitored through the use of the same instruments developed for the trading book.

B. Price risk hedging activitiesConsidering the small amount of the exposure, no price risk hedging activities are provided.


1. Banking book: cash exposures to equities and units in O.I.C.R.

TYPE OF EXPOSURE/AMOUNT

BOOK VALUE

LISTED UNLISTED

A. EquitiesA.1 Stock 400 18

A.2 Innovative capital instruments - -

A.3 Other equities - -

B. UCIT unitsB.1 Italian-law

- harmonised open funds - -

- unharmonised open funds - -

- closed funds - -

- reserved funds - -

- speculative funds - -

B.2 of other EU countries

- harmonised funds - -

- unharmonised funds - -

- unharmonised closed funds - -

B.2 of other non-EU countries

- open funds - -

- closed funds - -

Total 400 18

2. Banking book: internal models and other methods of sensitivity analysisConsidering the small amount of the exposure, no internal models or other methods have been provided for sensitivity analysis.


2.5 Exchange rate risk


A. General aspects, management processes and measurement methods for exchange rate riskAs part of its treasury activities, FinecoBank collects funding in foreign currencies, mainly in U.S. dollars, through customer current accounts. It then uses this funding in short-term monetary instruments denominated in the same currency.The impact on balance sheet items is estimated using the FX VaR indicator obtained using the historical simulation approach and a one-month holding period.

B. Exchange rate risk hedging activitiesExchange rate risk is hedged through the matching of assets and liabilities in foreign currencies or through spot transactions in foreign currencies. The component of exchange rate risk that contributes to the preparation of the overall VaR is tied to the temporal mismatch between lending in securities denominated in USD and the undertaking of repurchase agreements with customers involving the same securities.. Nonetheless, the Bank’s exposure to EUR/USD exchange rate risk is on the whole hedged against.


1. Breakdown of assets, liabilities and derivatives by currency of denomination

EXPOSURE/PORTFOLIO

US DOLLARS

POUND STERLING CURRENCIES YEN SWISS FRANCS SWEDISH CORONAOTHER

CURRENCIES

A. Financial assets 301,313 29,033 59 4,802 1,130 5,867A.1 Debt securities 277,226 49 - - - -A.2 Equities 400 - 2 - - 10A.4 Loans to customers 15,596 28,753 3 4,626 1,127 5,623A.5 Other financial assets 8,091 231 54 176 3 234A.3 Loans to banks - - - - - -

B. Other assets 1,663 332 3,800 254 - 298C. Financial liabilities 301,731 19,291 96 4,865 702 3,680

C.2 Due to customers 31,548 - 96 - 628 3,388C.1 Due to banks 270,183 19,291 - 4,865 74 292C.3 Debt securities - - - - - -

D. Other liabilities 232 68 - 4 2 9E. Financial derivatives

- Options+ Long positions - - - - - -+ Short positions - - - - - -

- Other+ Long positions 203,486 41,196 51,395 15,460 1,663 24,944+ Short positions 203,709 41,625 48,674 15,250 1,633 25,799

Total assets 506,462 70,561 55,254 20,516 2,793 31,109Total liabilities 505,672 60,984 48,770 20,119 2,337 29,488Imbalance 790 9,577 6,484 397 456 1,621

2. Internal models and other methods of sensitivity analysisAs at 31 December 2008 the daily Forex Var of the banking book was approximately 826 thousand.

Notes



2.6 Derivative financial instruments

A. Financial derivatives

A.1 Regulatory trading book: notional year-end and average values

TYPE OF TRANSACTION / UNDERLYING

DEBT SECURITIES AND INTEREST RATES

EQUITIES AND SHARE INDICES EXCHANGE RATES AND GOLD

LISTED UNLISTED LISTED UNLISTED LISTED UNLISTED

1. Forward rate agreement

2. Interest rate swap - 2,856,483 - - - -

3. Domestic currency swap - - - - - -

4. Currency interest rate swap - - - - - -

5. Basis swap - 300,000 - - - -

6. Share index swaps - - - - - -

7. Real index swaps - - - - - -

8. Futures 997 - 199 - - -

9. Cap transactions

- Purchased - 56,561 - - - -

- Issued - 7,390 - - - -

10. Floor options

- Purchased - 3,739 - - - -

- Issued - 3,364 - - - -

11. Other options

- Purchased

- Plain vanilla - - - - - -

- Exotic - - - - - -

- Issued


- Exotic - - - - - -

12. Forward contracts

- Purchases 710 680 21,869 - - 280,483

- Sales 1,061 533 21,871 - - 279,032

- Currency swaps - - - - - 57,662

13. Other derivative contracts - - - - - -

Total 2,768 3,228,750 43,939 - - 617,177Average values 7,306 6,779,273 25,347 35 - 917,672


A.1 Regulatory trading book: notional year-end and average values

OTHER STOCKS TOTAL AT 31 DECEMBER 2008 TOTAL AT 31 DECEMBER 2007


- - - -

- - - 2,856,483 - 8,802,726

- - - - - -

- - - - - -

- - - 300,000 - 6,819,890

- - - - - -

- - - - - -

- - 1,196 - 5,081 -

- -

- - - 56,561 - 74,196

- - - 7,390 - 13,892

- - - 3,739 - 9,851

- - - 3,364 - 8,422

- - - - - 37

- - - - - -

- - - - - 32

- - - - - -

- - 22,579 281,163 4,769 384,027

- - 22,932 279,565 8,748 387,090

- - - 57,662 - 447,050

- - - - - -

- - 46,707 3,845,927 18,598 16,947,213- - 32,653 7,696,980 11,071 11,422,324

Notes



A.2.1 Hedges


DEBT SECURITIES AND INTEREST RATES

EQUITIES AND SHARE INDICES EXCHANGE RATES AND GOLD


1. Forward rate agreement - - - - - -

2. Interest rate swap - 127,846 - - - -

3. Domestic currency swap - - - - - -

4. Currency interest rate swap - - - - - -

5. Basis swap - 5,773,047 - - - -

6. Share index swaps - - - - - -

7. Real index swaps - - - - - -

8. Futures - - - - - -

9. Cap transactions

- Purchased - - - - - -

- Issued - - - - - -

10. Floor options

- Purchased - - - - - -

- Issued - - - - - -

11. Other options

- Purchased


- Exotic - - - - - -

- Issued


- Exotic - - - - - -

12. Forward contracts

- Purchases - - - - - -

- Sales - - - - - -

- Currency swaps - - - - - -

13. Other derivative contracts - - - - - -

Total - 5,900,893 - - - -Average values - 5,996,719 - - - -

A.2.2 Other derivatives

No data to report.

A.2 Banking book: notional year-end and average values


A.2.1 Hedges



- - - - - -

- - - 127,846 - 2,249,300

- - - - - -

- - - - - -

- - - 5,773,047 - -

- - - - - -

- - - - - -

- - - - - -

- - - - - 37,486

- - - - - -

- - - - - -

- - - - - -

- - - - - -

- - - - - -

- - - - - -

- - - - - -

- - - - - -

- - - - - -

- - - - - -

- - - - - -

- - - 5,900,893 - 2,249,300- - - 5,996,719 - 2,076,671

Notes



A.3 Derivatives: purchase and sale of underlying securities


DEBT SECURITIES AND INTEREST RATES EQUITIES AND SHARE INDICES EXCHANGE RATES AND GOLD


A. Regulatory trading book:1. Transactions with exchange of capitals

- Purchases 710 680 21,869 - - 280,483

- Sales 2,058 533 21,871 - - 279,032

- Currency swaps - - - - - 57,662

2. Transactions without exchange of capitals

- Purchases - 1,378,372 - - - -

- Sales - 1,549,165 199 - - -


B. Banking book:B.1 Hedges

1. Transactions with exchange of capitals

- Purchases - - - - - -

- Sales - - - - - -



- Purchases - - - - - -

- Sales - 127,846 - - - -


B.2 Other derivatives

1. Transactions with exchange of capitals

- Purchases - - - - - -

- Sales - - - - - -



- Purchases - - - - - -- Sales - - - - - -- Currency swaps - - - - - -


A.3 Derivatives: purchase and sale of underlying securities



- - 22,579 281,163 4,769 384,096

- - 23,929 279,565 10,002 387,090

- - - 57,662 - 447,050

- - - 1,378,372 - 4,529,583

- - 199 1,549,165 3,827 4,379,504

- - - - - -

- - - - - -

- - - - - -

- - - - - -

- - - - - -

- - - 127,846 - 2,249,300

- - - - - -

- - - - - -

- - - - - -

- - - - - -

- - - - - -

- - - - - -- - - - - -

Notes



A.4 Over-the-counter derivatives: positive fair value - counterparty risk

COUNTERPARTY/ UNDERLYING

DEBT SECURITIES AND INTEREST RATES EQUITIES AND SHARE INDICES

GROSS VALUE PRIOR TO NETTING

GROSS VALUE AFTER NETTING

FUTURE EXPOSURE



FUTURE EXPOSURE

A. Regulatory trading book:A.1 Governments and central banks - - - - - -A.2 Other public institutions - - - - - -A.3 Banks 18,899 - 4,352 - - -A.4 Financial companies 6,965 - 1,033 - - -A.5 Insurance companies 7 - 6 - - -A.6 Non-financial companies - - - - - -A.7 Other entities - - - - - -

Total at 31 December 2008 25,871 - 5,391 - - -Total at 31 December 2007 23,482 - 22,316 1 - 4B. Banking book:

B.1 Governments and central banks - - - - - -B.2 Other public institutions - - - - - -B.3 Banks 1,094 - - - - -B.4 Financial companies - - - - - -B.5 Insurance companies - - - - - -B.6 Non-financial companies - - - - - -B.7 Other entities - - - - - -

Total at 31 December 2008 1,094 - - - - -Total at 31 December 2007 21,370 - 9,046 - - -

A.5 Over-the-counter derivatives: negative fair value - financial risk

COUNTERPARTY/ UNDERLYING

DEBT SECURITIES AND INTEREST RATES EQUITIES AND SHARE INDICES



FUTURE EXPOSURE



FUTURE EXPOSURE

A. Regulatory trading book:A.1 Governments and central banks - - - - - -A.2 Other public institutions - - - - - -A.3 Banks 24,610 - 4,583 - - -A.4 Financial companies 435 - 637 - - -A.5 Insurance companies 932 - 363 - - -A.6 Non-financial companies - - - - - -A.7 Other entities - - - - - -

Total at 31 December 2008 25,977 - 5,583 - - -Total at 31 December 2007 62,298 - 21,338 1 - 3B. Banking book:

B.1 Governments and central banks - - - - - -B.2 Other public institutions - - - - - -B.3 Banks 155,922 - 400 - - -B.4 Financial companies - - - - - -B.5 Insurance companies - - - - - -B.6 Non-financial companies - - - - - -B.7 Other entities - - - - - -

Total at 31 December 2008 155,922 - 400 - - -Total at 31 December 2007 2,110 - 2,713 - - -


A.4 Over-the-counter derivatives: positive fair value - counterparty risk

EXCHANGE RATES AND GOLD OTHER STOCKS DIFFERENT UNDERLYING



FUTURE EXPOSURE



FUTURE EXPOSURE AFTER NETTING

FUTURE EXPOSURE

- - - - - - - -- - - - - - - -- - - - - - - -- - - - - - - -- - - - - - - -- - - - - - - -- - - - - - - -- - - - - - - -

3,651 - 2 - - - - -

- - - - - - - -- - - - - - - -- - - - - - - -- - - - - - - -- - - - - - - -- - - - - - - -- - - - - - - -- - - - - - - -- - - - - - - -

A.5 Over-the-counter derivatives: negative fair value - financial risk

EXCHANGE RATES AND GOLD OTHER STOCKS DIFFERENT UNDERLYING



FUTURE EXPOSURE



FUTURE EXPOSURE AFTER NETTING

FUTURE EXPOSURE

- - - - - - - -- - - - - - - -- - - - - - - -- - - - - - - -- - - - - - - -- - - - - - - -- - - - - - - -- - - - - - - -

3,644 - 2 - - - - -

- - - - - - - -- - - - - - - -- - - - - - - -- - - - - - - -- - - - - - - -- - - - - - - -- - - - - - - -- - - - - - - -- - - - - - - -

Notes



A.6 Residual maturities of over-the-counter derivatives: notional values

UNDERLYING /UNEXPIRED TERM UP TO 1 MONTHSFROM OVER

1 YEAR TO 5 YEARS OVER 5 YEARS TOTAL

A. Regulatory trading book:A.1 Financial derivatives on debt securities and interest rates 1,339,156 1,737,689 152,313 3,229,158

A.2 Financial derivatives on equities and share indices - - - -

A.3 Financial derivatives on exchange rates and gold 617,177 - - 617,177

A.4 Financial derivatives on other instruments - - - -

B. Banking book:B.1 Financial derivatives on debt securities and interest rates 2,724,768 2,424,220 751,905 5,900,893

B.2 Financial derivatives on equities and share indices - - - -

B.3 Financial derivatives on exchange rates and gold - - - -

B.4 Financial derivatives on other instruments - - - -

Total at 31 December 2008 4,681,101 4,161,909 904,218 9,747,228Total at 31 December 2007 7,855,786 5,399,408 5,941,320 19,196,514

B. Credit derivatives

No data to report.


Section 3 - Liquidity risk


A. General aspects, management processes and measurement methods for liquidity riskAs part of its normal business operations, FinecoBank S.p.A. undertakes short-term funding operations (customer current accounts) and long-term lending operations (mostly bonds), resulting in structural liquidity gaps. The Bank’s Treasury coordinates the management of liquidity risk with the Parent Bank. Treasury policies are aimed at maintaining the balance between the maturities of lending and funding. Transactions with the Parent Bank allow the Bank to handle any liquidity shortfalls/surpluses.


1. Distribution of financial assets and liabilities by residual contractual maturity. Currency: Euro

ITEM/TIME BRACKETSBETWEEN 1 AND 7 DAYS

BETWEEN 7 AND 15

DAYS

BETWEEN 15 AND 1

MONTH

BETWEEN 1 AND 3

MONTHS ON DEMAND

BETWEEN 3 AND 6

MONTHS

BETWEEN 6 MONTHS

AND 1 YEAR

BETWEEN 1 AND 5

YEARSOVER 5 YEARS

INDEFINITEDURATION

Cash assetsA.1 Government securities - - - - - - 5,133 1,044 43 -

A.2 Listed debt securities 1 - - - 20 69 80 2,695 257 -

A.3 Other debt securities - 731,167 - 255,441 458,168 152,395 1,636,669 2,152,338 639,216 -

A.4 UCIT units - - - - - - - - - -

A.5 Loans

- Banks 2,476,029 614,858 357,645 224,336 809,968 1,156,114 584,442 - 551 165,399

- Customers 68,923 45,448 132,114 2,570 25,025 15,723 31,041 57,606 6,177 35,216

Cash liabilitiesB.1 Deposits

- Banks 105,858 50 - - 2,052 - - - - -

- Customers 8,037,625 - - - - - - - 123 -

B.2 Debt securities - - - - - - - - - -

B.3 Other liabilities 2,249 1,006,591 442,464 819,250 1,231,308 712,739 60,293 20 58,691 -

C.1 Financial derivatives with exchange of capital

Off-balance sheet exposures

- Long positions - 297,932 - - 997 122 204 909 141 -

- Short positions - 299,192 - - 997 36 204 1,265 75 -

C.2 Deposits and loans to be collected

- Long positions - - - - - - - - - -

- Short positions - - - - - - - - - -

C.3 Irrevocable commitments to lend funds

- Long positions - - - - - - - - - -

- Short positions - - - - - - - - - -

Notes



1. Distribution of financial assets and liabilities by residual contractual maturity. Currency: US Dollar


BETWEEN 7 AND 15

DAYS

BETWEEN 15 AND 1

MONTH

BETWEEN 1 AND 3

MONTHS ON DEMAND

BETWEEN 3 AND 6

MONTHS

BETWEEN 6 MONTHS

AND 1 YEAR

BETWEEN 1 AND 5

YEARSOVER 5 YEARS

INDEFINITEDURATION

Cash assetsA.1 Government securities - - - - - 1 - 1 1 -

A.2 Listed debt securities - - - - - 11 - 94 117 -

A.3 Other debt securities - - - 51,513 - 102,519 122,966 - 2 -

A.4 UCIT units - - - - - - - - - -

A.5 Loans

- Banks 15,330 - - - - - 260 - 6 -

- Customers 2,198 2,904 530 23 1,409 - 610 - 412 5


- Banks 31,548 - - - - - - - - -

- Customers 211,670 - - - - - - - - -


B.3 Other liabilities 561 11,710 6,041 13,887 15,028 11,286 - - - -



- Long positions - 203,499 - - - - - 14 - -

- Short positions - 203,723 - - - - - 13 - -


- Long positions - - - - - - - - - -

- Short positions - - - - - - - - - -


- Long positions - - - - - - - - - -

- Short positions - - - - - - - - - -


1. Distribution of financial assets and liabilities by residual contractual maturity. Currency: other currencies


BETWEEN 7 AND 15

DAYS

BETWEEN 15 AND 1

MONTH

BETWEEN 1 AND 3

MONTHS ON DEMAND

BETWEEN 3 AND 6

MONTHS

BETWEEN 6 MONTHS

AND 1 YEAR

BETWEEN 1 AND 5

YEARSOVER 5 YEARS

INDEFINITEDURATION

Cash assetsA.1 Government securities - - - - 21 - - 8 19 -

A.2 Listed debt securities - - - - - - - - - -

A.3 Other debt securities - - - - - - - - - -

A.4 UCIT units - - - - - - - - - -

A.5 Loans

- Banks 40,132 - - - - - - - - -

- Customers 389 92 - 2 43 - - - 171 2


- Banks 4,112 - - - - - - - - -

- Customers 24,473 - - - - - - - - -


B.3 Other liabilities - 10 17 - 21 - - - - -



- Long positions - 134,658 - - - - - - - -

- Short positions - 132,981 - - - - - - - -


- Long positions - - - - - - - - - -

- Short positions - - - - - - - - - -


- Long positions - - - - - - - - - -

- Short positions - - - - - - - - - -

Notes



2. Distribution of financial liabilities by segment

EXPOSURE/COUNTERPARTY

GOVERNMENTS AND CENTRAL

BANKSOTHER PUBLIC INSTITUTIONS

FINANCIAL COMPANIES

INSURANCE COMPANIES

NON-FINANCIAL COMPANIES OTHER ENTITIES

1. Due to customers 2,553 37,016 122,353 43,821 276,162 12,155,334

2. Securities in issue - - - - - -

3. Financial liabilities held for trading 100,786 - 679 932 2 2,423

4. Financial liabilities designated at fair value - - - - - -

Total at 31 December 2008 103,339 37,016 123,032 44,753 276,164 12,157,757 Total at 31 December 2007 - 1 162,305 18,465 51,855 7,158,446

3. Geographical distribution of financial liabilities

EXPOSURE/COUNTERPARTY ITALYOTHER EUROPEAN

COUNTRIES AMERICA ASIAREST OF THE

WORLD

1. Due to customers

2. Due to banks 837,623 27,710 - - -

3. Securities in issue - - - - -

4. Financial liabilities held for trading 119,003 7,646 3,567 - -

5. Financial liabilities designated at fair value - - - - -

Total at 31 December 2008 13,520,213 91,548 19,932 1,010 85 Total at 31 December 2007 10,695,499 444,907 20,041 442 500


Section 4 - Operational Risks


A. General aspects, management processes and measurement methods for operational risk

Definition of operational riskOperational risk is defined as the risk of losses due to errors, violations, interruptions, or damage caused by internal processes, personnel, systems or by external events. This definition includes legal and compliance risk, but not strategic and reputational risk.An operational event is defined as one resulting from the inadequacy or malfunctioning of internal processes, actions by persons or malfunctioning of systems or other external events: internal or external fraud, workplace safety and employment relationship, customer complaints, distribution of products, fines and other sanctions resulting from regulatory violations, damage to the assets of the company, interruption of operations and malfunctioning of systems, management of processes.

Group framework for the management of operational risksThe UniCredit Group has defined the operational risk management system as the set of policies and procedures for the control, measurement and mitigation of operational risk within the Group and its subsidiaries.The operational risk policies, applicable to all entities of the Group, are common principles that establish the role of the company bodies and of the risk management function, as well as the interaction will the other functions involved in the process. The Parent Bank coordinates Group companies in accordance with the internal regulations and the manual on operational risk control. Specific risk committees (risk committee, ALCO, operational risk committee) have been established in order to monitor exposure, mitigation measures and measurement and control methods.The methods for classification and completeness of data, scenario analyses, risk indicators, reporting and measurement of risk capital are the responsibility of the operational risk management function of UniCredit and must be applied by Group companies. A key element of the control system is the IT application supporting the collection of data, risk control and capital measurement.In 2008 efforts were made to align FinecoBank with the standards of the Group’s Framework for controlling operational risks. These activities are aimed at sending an application to the Bank of Italy, in 2009, to adopt the AMA method for the calculation of the necessary capital to hedge against such risks.


Here below is the breakdown in percentage terms of the operation risk sources by type of event that were accounted in 2008, according to the provisions of the New Basel Capital Accord and implemented by the New prudential regulatory provisions for banks issued by the Bank of Italy in December 2006 (Circular no. 263).

The classifications are the following:Internal fraud: losses due to unauthorised activities, fraud, embezzlement or infringement of laws, regulations or company directives that involve at least one internal staff member of the bank;External fraud: losses due to fraud, embezzlement or infringement of laws by parties outside of the bank;Workplace safety and employment relationship: losses due to actions not compliant with the law or to agreements regarding employment, health and safety, to the payment of compensation for bodily harm, or to cases of discrimination or non-application of equality conditions;Customers, products and professional procedures: losses due to breaches relative to professional responsibilities with respect to customers, or to the nature or characteristics of the product or service provided;Damage due to external events: losses due to external events, such as natural catastrophes, terrorism, vandalism;Interruption of operations and system malfunctioning: losses due to interruption of operations, malfunctioning or unavailability of systems;

Notes



Execution, delivery and management of processes: losses due to deficiencies in the completion of transactions or management of processes, as well as losses due to relations with commercial counterparties, vendors and suppliers.

The main source of 2008 operating losses was internal fraud which includes embezzlement and misappropriation of funds by the company’s network of financial planners.

The second category of losses in terms of amount is represented by lawsuits due to withdrawal, for just cause, from the agency contract by financial planners, due to factors linked to the work relationship of safety in the workplace. The extent of the above category of losses was surely influenced by the extraordinary transaction involving the merger by incorporation of UniCredit Xelion Banca S.p.A. in FinecoBank and the consequent integration and reorganisation of the financial planner networks of the two companies.

To further clarify the figures provided, attention is drawn to the fact that 66% of the losses for the period are represented by provisions for estimated future losses rather than by losses actually incurred in the period.

Reference Classes (%)

27

19

1

37

80

Internal FraudExternal FraudWork relationsCustomers, ProductsDamage to propertySystemsExecution

8


Part F) Information on shareholders’ equity

Ssection 1 - Bank's shareholders' equity 254Ssection 2 - Regulatory capital and capital-adequacy ratios 254

Notes


Section 1 - Bank's shareholders' equity

A. Qualitative informationShareholders’ equity is the Bank’s first line of defence against risks associated with banking activity.

Equity is calculated on a quarterly basis in accordance with supervisory regulations by the Financial Statement Administration and Supervisory Body Reporting Division. The results are reported to the Parent Bank’s Board of Directors.

B. Quantitative information

Coefficiente di Assorbimento Patrimoniale Individuale31-DEC-08

BASEL II31-DEC-07

BASEL I FINECOBANK31-DEC-07

BASEL I XELION

Absorption of credit and counterparty risk 91,760 256,386 47,139

Absorption of market risk 5,824 6,784 -

Absorption of operating risk 56,358 - -

Absorption of other requirements - 71,496 -Reduction as belonging to a Banking group (38,486) - -

Total assets (credit, market, operational and other requirements) 115,456 334,666 47,139Bank asset absorption ratio 1,924,274 4,780,947 673,414

Total asset absorption 11,73% 7,65% 31,12%

Section 2 - Regulatory capital and capital-adequacy ratios

2.1 Regulatory capitalAs at 31 December 2008 the Bank’s regulatory capital stood at 225,637 thousand and satisfied the mandatory prudential requirements established by current Bank of Italy regulations. Regulatory capital and total weighted risk assets were calculated by applying current supervisory provisions on the basis of accounting figures prepared in accordance with international accounting standards.

A. Qualitative information31-DEC-08

BASEL II31-DEC-07


BASEL I XELION

Core capital (Tier 1) 225,637 265,650 209,586

Supplementary capital (Tier 2) (6) 100,263 -

Deductions - - -

Regulatory capital 225,631 365,913 209,586

Core capitalThe positive elements of Tier 1 capital are represented by the share capital, made up of no. 606,274,033 ordinary shares of 0.33 nominal value each, the reserves and the share of the economic result for the financial year ended on 31 December 2008 which the directors intend to allocate to reserve.The negative elements of Tier 1 capital are represented by the book value of goodwill, less any deferred taxes, and other Intangible assets.

Part F) Information on shareholders’ equity (Amounts in Euro/000)


Tier 1 capital is then adjusted by the prudential filters relating to the negative reserve from the valuation of available-for-sale financial assets ( 15 thousand) and 50% of the net effect deriving from the tax exemption of goodwill (art. 15 of Law no. 185/2008 converted through Law no. 2 of 28 January 2009) of 1,125 thousand.

Supplementary capitalThe negative value of the supplementary capital is represented by non-existent assets not yet debited to the Income statement.

B. Quantitative information31-DEC-08

BASEL II31-DEC-07


BASEL I XELION

A. Core capital before the application of prudential filters 226,777 265,650 209,586B. Prudential filters on core capital

B.1 Positive IAS/IFRS prudential filters - - -

B.2 Negative IAS/IFRS prudential filters (1,140) - -

C. Core capital before items to be deducted (A+B) 225,637 265,650 209,586D. Items to be deducted from core capital - - -

E. Total core capital (TIER 1) (C-D) 225,637 265,650 209,586F. Supplementary capital before the application of prudential filters (6) 100,545 -G. Prudential filters on supplementary capital

G.1 Positive IAS/IFRS prudential filters - - -

G.2 Negative IAS/IFRS prudential filters - (282) -

H. Supplementary capital before items to be deducted (A+B) (6) 100,263 -I. Items to be deducted from supplementary capital - - -

L. Total supplementary capital (TIER 2) (H-I) (6) 100,263 -M. Items to be deducted from core and supplementary capital - - -

N. Regulatory capital (E + L – M) 225,631 365,913 209,586O. Tier 3 capital - - -

P. Regulatory capital including TIER 3 (N + O) 225,631 365,913 209,586

2.2 Capital adequacy

A. Qualitative informationThe Financial Statement Administration and Supervisory Body Reporting Division periodically calculate an estimate of the changes in Bank capital in relation to the income statement and balance sheet aggregates forecast in the budget and the business plan. In the event of a capital shortfall, the internal Risk Management and Treasury Divisions are activated, and capitalisation proposals are forwarded to the Parent Bank.

Notes


Parte F) Informazioni sul patrimonio (CONTINUED)


CATEGORY/VALUE

UNDERWEIGHTED VALUES WEIGHTED VALUES

31-DEC-08BASEL II

31-DEC-07BASEL I

FINECOBANK

31-DEC-07BASEL IXELION

31-DEC-08BASEL II

31-DEC-07BASEL I

FINECOBANK

31-DEC-07BASEL IXELION

A. RISK ASSETS 14,691,846 10,825,984 2,998,612 1,147,001 3,662,654 673,414A.1 Credit and Counterparty risk 14,691,846 10,825,984 2,998,612 1,147,001 3,662,654 673,414 1. Standard approach 14,691,846 10,825,984 2,998,612 1,147,001 3,662,654 673,414

2. Internal rating method - - - - - -

2.1 Basic - - - - - -

2.2 Advanced - - - - - -

3. Securitisation - - - - - -

B. REGULATORY CAPITAL REQUIREMENTSB.1 Credit and Counterparty risk 91,760 256,386 47,139B.2 Market risks 5,824 6,784 - 1. Standard approach 5,824 6,784 -

2. Internal models - - -

3. Concentration risk - - -

B.3 Operational risk 56,358 - - 1. Basic method 56,358 - -

2. Standard approach - - -

3. Advanced method - - -

B.4 Other prudential requirements - 71,496 -B.5 Total prudential requirements 115,456 334,666 47,139C. RISK ASSETS AND CAPITAL RATIOSC.1 Risk-weighted assets 1,924,274 4,780,947 673,414

C.2 Core capital/Risk-weighted assets(Tier 1 capital ratio) 11.73% 5.56% 31.12%

C.3 Core capital including TIER 3/Risk-weighted assets (Total capital ratio) 11.73% 7.65% 31.12%

(*) In the calculation of the total prudential requirements, the banks belonging to Italian banking groups also take account of a 25% reduction in requirements. At 31 December 2008, the reduction in prudential requirements applied by Finecobank S.p.A. is approximately € 38 million.


Part G) Combination transactions involving businesses or business divisions

Notes


Section 1 - Transactions undertaken during the year

For more details on the business combinations carried out please refer to the Report on Operations under “Main initiatives during the year”. IFRS 3 was not applied to the business combinations finalised by FinecoBank in 2008 as they are transactions carried out by entities and businesses under UniCredit S.p.A.’s common control.

Section 2 - Transactions undertaken after year-endNo information to report.

Part G) Combination transactions involving businesses or business divisions


Part H) Related party transactions

Notes


1. Informazioni sui compensi degli amministratori e dei dirigenti"Key management personnel" refers to directors and managers with strategic responsibilities as regards planning, management and control of FinecoBank’s activities.

31.12.2008 31.12.2007

CHANGE

ABSOLUTE %

Fees paid to « Strategic Managers » and Directors

a) short-term benefits 2,865 2,484 381 15.3%

b) post-termination benefits 81 96 (15) -15.6%

of which relative to defined-benefit plans 6 - 6 -

TOTAL 2,946 2,580 366 14.2%

2. Information on related party transactionsIn order to ensure constant compliance with current legal provisions and regulations governing company disclosure of information concerning related-party transactions, FinecoBank identifies such transactions separately.In this respect, in accordance with the instructions given by the Parent Bank, the criteria for identifying the transactions completed with related parties were defined, in line with the indications supplied by Consob.The transactions in question were usually carried out at the same terms as those applied to transactions entered into with independent third parties.No evidence was found of transactions deemed to be atypical and/or unusual, including infragroup or related-party transactions which are carried out as part of normal business operations.The following statement shows the out standing assets, liabilities, guarantees and commitments as at 31 December 2008, separately identified depending on the type of related party.

BALANCES AT 31 DECEMBER 2008

GROUP COMPANIES

UNCONSOLIDATED JOINT VENTURES

ASSOCIATED COMPANIES

DIRECTORS AND STRATEGIC

MANAGERSOTHER RELATED

PARTIES

Financial assets held for trading - - - - -

Financial assets designated at fair value - - - - -

Hedge derivatives - - - - -

Loans to banks - - - - -

Customer loans - - - 669 3

Other assets - - - - 1,653

Total assets - - - 669 1,656Due to banks - - - - -

Due to customers - - - 1,173 7,891

Financial liabilities held for trading - - - - -

Hedge derivatives - - - - -

Tax liabilities - - - - -

Other liabilities - - - - -

Total liabilities - - - 1,173 7,891Guarantees given and commitments - - - - -

Part H) Related party transactions (Amounts in Euro/000)


It is worth noting that the “Directors and strategic managers” category includes FinecoBank’s directors and top management (“key management personnel”).The “Other related parties” category combines the figures relating to the close relatives of “Key management personnel” (meaning those subjects who are assumed to be able to influence or be influenced by the concerned subject), the figures relating to the companies controlled by “Key management personnel” or their close relatives, as well as the figures relating to the employees’ Pension Funds or any entity related to it.

Dealings with the parent bank and other Companies of the UniCredit Group

TOTAL DEALINGS WITH COMPANIES OF THE UNICREDIT GROUP 31 DECEMBER 2008

AssetsItem “Financial assets held for trading” 25,903

Item “Loans to banks” 12,701,554

Item “Hedge derivatives” 1,092

Item “Tax assets” 50,270

Item “Other assets” 33,823

LiabilitiesItem “Deposits from banks” 629,097

Item "Due to customers" 13,781

Item “Financial liabilities held for trading” 12,063


Item “Tax liabilities” -

Item “Other liabilities” 22,134

GuaranteesItem “Guarantees given” 27,964

Income statement

Item “Interest income and similar revenue” 575,191

Item “Interest expense and similar charges” (86,078)

Item “Commission income” 49,466

Item “Commission expense” (3,281)

Item “Net income from trading activities": 40,194

Item “Net income from hedging activities": (26,901)

Item “Net income from financial assets and liabilities at fair value" (2,540)

Item “Administrative expenses” (27,011)

Item “Other operating income/expenses” 20,236

Notes


The following table summarises the dealings with companies of the UniCredit Group as at 31 December 2008:

COMPANY ASSETS LIABILITIES GUARANTEES INCOME STATEMENT

UniCredit S.p.A. 12,528,262 712,222 17,964 523,833

Fineco Prestiti S.p.A. 7,188 8,288 - 9,165

Fineco Credit S.p.A. 1,303 1,126 - 2,556

Banca Roma S.p.A. - - - -

UniCredit Banca Roma 167,813 504 - 1,190

Banco di Sicilia S.p.A. - - - -

Banco di Sicilia 60,519 65 - 643

Bipop Carire S.p.A. - - - -

Unicredito Italiano Bank Ireland 308 25 - 4,734

UniCredit Banca per la Casa S.p.A. 394 - - 2,893

UniCredit Private Banking S.p.A. 22 - - (4,306)

UniCredit Consumer Financing Bank S.p.A. 35 - - 236

HVB Milano S.p.A. 505 23,627 - (11,155)

HVB Bayerische - - - (54)

UniCredit Banca S.p.A. 21,305 40,839 10,000 824

Pioneer Ireland Financial Service - 58 - (323)

UniCredit Audit S.p.A. - 150 - (1,988)

UniCredit Luxemburg - - - (7,413)

Pioneer Investment Management S.g.r. S.p.A. 7,338 563 - 24,886

Pioneer AM Luxemburg 1,877 - - 12,870

Fineco Leasing S.p.A. 4 1,615 - 851

UniCredit Processes and Administration S.p.A. 84 106 - (1,719)

Cordusio Fiduciaria 8 - - 17

UniCredit Real Estate S.p.A. 10,776 12,018 - (10,311)

Kyneste S.p.A. - - - (50)

UniCredit Global Information Services S.p.A. 961 1,881 - (10,097)

Localmind S.p.A. 27 2,691 - (90)

Pioneer Alternative Investment Management 277 - - 1,422

T.L.X. S.p.A. - - - (5)

Quercia S.r.l. - - - (2)

Locat S.p.A. - - - 27

UniCredit Corporate Banking S.p.A. 3,619 26,635 505

UniCredit Bancassurance S.r.l. 17 - - 129

UniCredit Factoring S.p.A. - - - 14

UniCredit Credit Management Service S.r.l. - - - (19)

UniCredit Broker S.p.A. - - - 13

Total 12,812,642 832,413 27,964 539,276

Part H) Related party transactions (CONTINUED)


The following tables contain a breakdown of the items relating to Assets, Liabilities, Costs and Revenue for each individual Group company.

Dealings with Parent Bank

DEALINGS WITH UNICREDIT S.P.A.


Item “Loans to banks” 12,456,863


Item “Tax assets” 50,270



Item “Financial liabilities held for trading” 283


Item “Other liabilities” 593


Income statement

Item “Interest income and similar revenue” 566,374



Item “Commission expense” (1,979)

Item “Net income from trading activities”: 39,881

Item “Net income from hedging activities”: (38,486)

Item “Net income from financial assets and liabilities at fair value” (2,540)

Item “Administrative expenses” 253


Notes


Dealings with companies controlled by UniCredit S.p.A.

DEALINGS WITH FINECO PRESTITI S.P.A.


Item “Other assets” 250

LiabilitiesItem "Due to customers" 7,858

Item “Financial liabilities held for trading” 430

Income statementItem “Interest expense and similar charges” (1,047)

Item “Net income from trading activities”: 8,989



DEALINGS WITH FINECO CREDIT S.P.A.

AssetsItem “Other assets” 1,303


Income statementItem “Interest expense and similar charges” (45)


Item “Commission expense” (326)


Item “Other operating income/expenses” 721

DEALINGS WITH UNICREDIT BANCA ROMA

AssetsItem “Loans to banks” 161,885


LiabilitiesItem “Other liabilities” 504

Income statementItem “Interest income and similar revenue” 48

Item “Interest expense and similar charges” (1)






DEALINGS WITH BANCO DI SICILIA


Liabilities 1,009

Item “Other liabilities”Income statement 65

Item “Interest income and similar revenue”Item “Interest expense and similar charges” 86


Item “Net income from trading activities”: 12


DEALINGS WITH UNICREDITO ITALIANO BANK IRELAND

AssetsItem “Financial assets held for trading” 308


Income statementItem “Interest income and similar revenue” 7,817



Item “Net income from trading activities”: (466)

DEALINGS WITH UNICREDIT BANCA PER LA CASA S.P.A.

AssetsItem “Other assets” 394

Income statementItem “Commission income” 2,272


DEALINGS WITH UNICREDIT PRIVATE BANKING S.P.A.


Income statementItem “Commission income” 9

Item “Administrative expenses” (4,325)


DEALINGS WITH UNICREDIT CONSUMER FINANCING BANK S.P.A.




Notes



DEALINGS WITH HVB MILANO S.P.A.

AssetsItem “Financial assets held for trading” 402



Item “Financial liabilities held for trading” 11,350


Item “Other liabilities” 6,057




Item “Net income from trading activities”: (8,404)

Item “Net income from hedging activities”: 11,585


DEALINGS WITH HVB BAYERISCHE

Income statementItem “Administrative expenses” (54)

DEALINGS WITH UNICREDIT BANCA S.P.A.











DEALINGS WITH PIONEER IRELAND FINANCIAL SERVICE


Income statementItem “Commission expense” (323)

DEALINGS WITH UNICREDIT AUDIT S.P.A.


Income statementItem “Administrative expenses” (1,988)


DEALINGS WITH UNICREDIT LUXEMBURG

Income statementItem “Interest expense and similar charges” (7,421)

Item “Commission income” 8

DEALINGS WITH PIONEER INVESTMENT MANAGEMENT S.G.R. S.P.A.


LiabilitiesItem "Due to customers" 563





DEALINGS WITH PIONEER AM LUXEMBURG



DEALINGS WITH FINECO LEASING S.P.A.





Item “Net income from trading activities”: 194

DEALINGS WITH UNICREDIT PROCESSES AND ADMINISTRATION S.P.A.




DEALINGS WITH CORDUSIO FIDUCIARIA




Notes



DEALINGS WITH UNICREDIT REAL ESTATE S.P.A.


LiabilitiesItem “Other liabilities” 12,018



DEALINGS WITH KYNESTE S.P.A.


DEALINGS WITH UNICREDIT GLOBAL INFORMATION SERVICES S.P.A.


LiabilitiesItem “Other liabilities” 1,881


DEALINGS WITH LOCALMIND S.P.A.





Item “Administrative expenses” (45)


DEALINGS WITH PIONEER ALTERNATIVE INVESTMENT MANAGEMENT S.P.A.



DEALINGS WITH T.L.X. S.P.A.



DEALINGS WITH QUERCIA S.R.L.


DEALINGS WITH LOCAT S.P.A.


DEALINGS WITH UNICREDIT CORPORATE BANKING S.P.A.









Dealings with UniCredit Bancassurance S.r.l.


Income statementItem “Administrative expenses” 129

DEALINGS WITH UNICREDIT FACTORING S.P.A.


DEALINGS WITH UNICREDIT CREDIT MANAGEMENT SERVICE S.R.L.


DEALINGS WITH UNICREDIT BROKER S.P.A.



Part I) Payment agreements based on own equity instruments

Notes


A. Qualitative information

Description of share-based payments based on own equity instruments

1. Instruments in issueAs part of the medium/long-term bonus plans for the Company’s employees and financial planners, the following types of instruments may be identified:- Equity-Settled Share Based Payments involving the award of equity instruments of the Parent Bank, UniCredito Italiano S.p.A. (UCI);- Cash Settled Share Based Payments involving the payment of cash.

The following allocations fall under the first category:- Stock Options allocated to selected beneficiaries such as Top and Senior Managers;- Performance Shares allocated to selected beneficiaries, namely Top and Senior Managers, and represented by free ordinary shares of

UniCredit which the Parent Bank undertakes to allocate, subject to the achievement of pre-established performance objectives, at Group and individual business division level, in the Strategic Plan approved and, if need be, amended by the Board of Directors of the Parent Bank;

- Stock Options allocated to selected beneficiaries such as Top and Senior Managers;

The second category includes allocations similar to Share Appreciation Rights linked to the share price and the Company’s performance.

2. Valuation model

2.1 Stock OptionThe economic value of the Stock Options was estimated using the Hull and White model.The model is based on a distribution of prices, based on a trinomial tree, determined using Boyle’s algorithm and estimates the probability of the early exercise of stock options on the basis of a deterministic model linked to:- the achievement of a Market Value equal to a multiple (M) of the value of the strike price;- the propensity by assignees (E) to exit early once the Vesting period is over.

The following table shows the values obtained and the parameters used for the Stock Options assigned in 2008.

2008 STOCK OPTION VALUATION 2005 STOCK OPTION 2006 STOCK OPTION 2007 STOCK OPTION 2008 STOCK OPTION

Strike price () 4,817 5,951 7,094 4,185

Market price of UniCredit shares () 4,817 5,951 7,094 4,185

Grant date approved by the B.o.D. of UniCredit 18.11.2005 13.06.2006 12.06.2007 25.06.2008

Start of Vesting period 25.11.2005 27.06.2006 13.07.2007 9.07.2008

End of Vesting period 18.11.2009 13.06.2010 13.07.2011 9.07.2012

Plan expiry date 31.12.2018 31.12.2019 15.07.2017 9.07.2018

Multiple for the year (M) 1.5 1.5 1.5 1.5

Exit Rate - Post Vesting (E) 2.36% 3.73% 3.73% 3.73%

Dividend Yield 3.15% 3.168% 2.8306% 4.8459%

Implicit volatility 22.29% 21.685% 17.296% 20.564%

Risk Free Rate 3.66% 4.254% 4.626% 4.649%

Option unit value at grant date () 1.0548 1.269 1.3292 0.6552

Dividend Yield means the ratio of the average dividends paid by UniCredit S.p.A. in the 2004-2008 period to the market price of the share at the time of assignment.

Part I) Payment agreements based on own equity instruments (Amounts in Euro/000)


The parameters were quantified thus :- Exit rate: annual percentage of cancelled rights following dismissals in the Vesting period;- Dividend Yield: average dividend yield of the last four years, in line with the Vesting horizon;- Implicit volatility : average of daily implicit volatility on a historical series relating to a time horizon equal to the Vesting period;- Strike price : arithmetic mean of the official listings of UniCredit shares in the month preceding the assignment resolution of the Board of Directors of UniCredito Italiano S.p.A.;- Market price of UniCredit shares : equal to the Strike Price, so as to reflect the allocation of “at-the-money” options on the assignment day.

2.2 Other equity instruments (Performance Shares)The economic value of a Performance Share is equal to the market price of the share reduced by the present value of the dividends that were not assigned in the period that runs between the commitment date and the future delivery date of the share. The parameters are estimated using methods that are similar to those applied to the stock options.The following table shows the parameters of the Performance Shares promised in 2008 and their unit values.

VALUATION PERFORMANCE SHARE 2008PERFORMANCE 2005 SHARES

PERFORMANCE 2006 SHARES



Grant date approved by the B.o.D. of UniCredit 18.11.05 13.06.06 12.06.07 25.06.08

Start of Vesting period 01.01.08 01.01.09 01.01.10 01.01.11

End of Vesting period 31.12.08 31.12.09 31.12.10 31.12.11

Market price of UniCredit shares () 4.817 0.951 7.094 4.185

Economic Value of Vesting terms () (0.534) (0.566) (1.015) (0.705)

Unit value of Performance Share upon promise () 4.283 5.385 6.079 3.480

2.3 Other equity instruments (Restricted Shares)The value of the Restricted Shares is equal to the market value of the share at the time of assignment.

VALUATION OF RESTRICTED SHARES ASSIGNEDRESTRICTED

2006 SHARES

Grant date 03.01.06

End of Vesting period 03.01.09

Unit value of Restricted Shares at grant date () 5,87

In 2008 the Parent Bank has not allotted new plans of Restricted Shares.


Effects on the Economic ResultAll the share-based payments assigned after 7 November 2002 with Vesting period ending after 1 January 2005 fall within the scope of legal regulations.

Notes


Effects of share-based payments on the balance sheet and income statement

31.12.2008TOTAL VESTED PLANS

31-DEC-07*TOTAL VESTED PLANS

Expenses (965) (455)

- relative to Cash Settled Plans 224 78

- relative to Equity Settled Plans (1,189) (533)

Payables paid to UniCredit S.p.A. for “vested” plans2 54 118

Payables accrued towards UniCredit S.p.A.2 373 153 -

Payables for Cash Settled amounts due3 - - 2,166 1,837

- of which Intrinsic Value - 1,718

1) It refers to the reversal of the charges relating to Share Appreciation Rights (shown under “Other administrative expenses).2) Amount equal to the economic value accrued for services rendered by employees that are the beneficiaries of the plans entitling to UniCredit shares.3) The figures as at 31 December 2007 show the amount due by UniCredit Xelion Banca S.p.A. to UniCredit Private Banking S.p.A., which was its direct Parent Bank responsible for settling the Share Appreciation

Rights of the assignees in cash.

Part I) Payment agreements based on own equity instruments (Amounts in Euro/000)

Ernst Jürgen RohdeGermany

Sandra StiggerAustria

«A good customer relationship is about more than just the volume of business. I am not satisfi ed until my clients recognize me and my company as their preferred business partner. This recognition I have to earn every day anew.»

«Based on my experience, I am convinced of the importance of long-lasting customer relationships. The roots of my success are anchored in deep customer satisfaction, followed with a steadily growing confi dence in myself, my personal competence and my ability to fi nd the right solutions.»


Appendix

DISCLOSURE OF AUDITORS’ FEES pursuant to art. 160 paragraph 1 bis of Legislative Decree 58/98 282

Balance Sheet of the “Mortgages” business division spun off to UniCredit banca per la Casa S.p.A., Now UniCredit Consumer Financing Bank S.p.A. On 1 july 2008 283



Appendix


This table shows the detailed fees paid to the Independent Auditors, KPMG S.p.A., and the entities of the network that the latter belongs to.

FINANCIAL STATEMENTS as at 31 December 2008 (fees net of VAT and expenses) (Amounts in Euro)

TYPE OF SERVICE SERVICE PROVIDER FEES

Audit KPMG S.p.A. 260.720

260.720

DISCLOSURE OF AUDITORS’ FEES pursuant to art. 160 paragraph 1 bis of Legislative Decree 58/98


Balance Sheet of the “Mortgages” business division spun off to UniCredit banca per la Casa S.p.A., Now UniCredit Consumer Financing Bank S.p.A. On 1 july 2008

ASSET ITEMS 01.07.08

20. Financial assets held for trading 1,000

60. Loans to banks 5,816,507

70. Customer loans 3,909,953,429

80. Hedge derivatives 13,272,856

90. Adjustments to the value of financial assets (13,226,793)

100. under macro-hedge (+/-) 860,000

130. Equity investments 3,582,161

Tax assets -

a) current 3,582,161

150. b) prepaid 3,471,450

Total assets Other assets

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 01.07.08

10. Due to banks 2,544,445,775

20. Due to customers 1,220,960,490

40. Financial liabilities held for trading 1,100

60. Hedge derivatives 46,063

80. Tax liabilities 19,128

a) current -

b) deferred 19,128

100. Other liabilities 7,589,430

110. Employee severance payment fund 225,451

120. Pensions and similar provisions 443,173

Provisions for contingencies and charges : -

b) other provisions 443,173

160. Reserves 150,000,000

Total liabilities and shareholders’ equity 3,923,730,610

Appendix


The difference between assets and liabilities, equal to 100,000,000.00, represents the amount of the increase in share capital of Fineco Prestiti S.p.A. underwritten by FinecoBank upon transfer of the business division as at 1 January 2008.

Balance Sheet of the “salary-guaranteed loans” business division spun off to UniCredit Consumer Financing Bank S.p.A. on 1 july 2008 (Amounts in Euro)


10. Cash and cash equivalents 261

20. Financial assets held for trading 16,678,036

60. Loans to banks 11,066,862

70. Customer loans 1,461,301,454

Adjustments to the value of financial assets under macro-hedge (+/-) (16,076,681)

110. Property, plant and equipment 166,250

120. Intangible assets 210,655

130. Tax assets 1,170,410

a) current -

b) prepaid 1,170,410

150. Other assets 2,024,609

Total assets 1,476,541,856


10. Due to banks 1,270,000,000

20. Due to customers 85,836,949

40. Financial liabilities held for trading 601,355


a) current -

b) deferred 56,246

100. Other liabilities 18,676,639


120. Provisions for contingencies and charges : 988,412

Pensions and similar provisions -

b) other provisions 988,412

Total liabilities and shareholders’ equity 1,376,541,856


Balance Sheet of the “salary-guaranteed loans” business division spun off to UniCredit Consumer Financing Bank S.p.A. on 1 july 2008 (Amounts in Euro)


40. Available-for-sale financial assets 8,189,000

100. Equity investments 101,015,000

110. Property, plant and equipment 6,885

Total assets 109,210,885


10. Due to banks 8,612,773


a) current -

b) deferred 8,000

100. Other liabilities 23,141


130. Valuation reserves 564,436

160. Reserves 100,000,000

Total liabilities and shareholders’ equity 109,210,885

Creative concept, Graphic development and Composition:Mercurio S.r.l. Studi di promozione pubblicitaria - Milan

www.mercurioitaly.it

Printed: CPZ SpA (Bergamo)June 2009

Pictures

Cover and sorter pages

Courtesy Ferruccio Torboli (UniCredit Group)

Printed on paper certified CoC-FSC 000010 CQ Mixed sources

financial statements as at 31 december 2008 · 31 december 2008 our commitment is our strength 2008...

Documents