Unipol Banca S.p.A.Registered and Head Office:

Via Stalingrado, 53 - 40128 BolognaTel.: +39.051.3544111 - Fax: +39.051.3544100/101Company Register, Tax and VAT No. 03719580379

Share Capital € 426,300,000 fully paid-upRegistered as Bank within the Gruppo Bancario Unipol Banca

Registered as Banking GroupMember of the Interbank Deposit Guarantee Fund

Member of the National Guarantee FundABI No. 3127.8

2002 Annual Accounts

Bologna - Fontana del Nettuno (Fountain of Neptune) and Palazzo Re Enzo (King Enzo’s Palace)

(photograph by Emiliano Trentini - Foto Arcobaleno Group)

5

Contents

Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Boards and Officials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Distribution Network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Shareholders' Meeting Agenda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

2002 Accounts: Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Board Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56Guarantees and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58Profit and Loss Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61General Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62Part A: Accounting criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63Part B: Notes to the Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68Part C: Notes to the Profit and Loss Account . . . . . . . . . . . . . . . . . . . . . . . . . . 99Part D: Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

Additional Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107Reclassified Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108Reclassified Profit and Loss Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110Statement of Changes in Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . 111Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112

Statutory Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115

Independent Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

Consolidated Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123

Board Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125

Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . 137

Additional Statements to the Consolidated Accounts . . . . . . . . . . . . . . . . . . . 183Reclassified Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184Reclassified Consolidated Profit and Loss Account . . . . . . . . . . . . . . . . . . . . . . 186Statement of Changes in Consolidated Shareholders’ Equity . . . . . . . . . . . . . . . . 187

Statutory Auditors’ Report on the Consolidated Accounts . . . . . . . . . . . . . . . . 189

Independent Auditors’ Report on the Consolidated Accounts . . . . . . . . . . . . . 191

Resolutions of the Shareholders’ Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . 195

Shareholders

COMPAGNIA ASSICURATRICE UNIPOL S.p.A. 81.070%

FINSOE S.p.A. 11.793%

COOP ESTENSE S.c.r.l. 6.511%

FINPAR S.p.A. 0.624%

C.G.I.L. F.I.L.T. REG. LOMBARDIA 0.002%

7

9

Boards and Officials

Board of Directors

ChairmanSACCHETTI Ivano

Vice Chairman and Managing DirectorCONSORTE Giovanni

Board MembersALBERTINI Claudio

BRIGHI DomenicoCIMBRI Carlo

COLLINA PieroDALL’AGLIO StefanoDE CAROLIS Paolo

GALANTI VanesGELMI Giampiero

GIULIANI FrancoGUIDETTI Oscar

ROFFINELLA LorenzoSTEFANINI Pierluigi

VENTURI Marco Giuseppe

Board of Statutory Auditors

ChairmanMELLONI Umberto

Standing MembersCHIUSOLI Roberto

NOTARI Gastone

Alternate MembersCAFFAGNI Omer

ZUCCHELLI Renzo

General Manager

DI MATTEO Antonio

Independent Auditors

RECONTA ERNST & YOUNG SPA

Distribution Network

11

178 BANK COUNTERS56 FINANCIAL COUNTERS

62

71

234

1 13

4

47

22

16

63

1

33

2

12

26

37

5

10

2

4

as at 28 April 2003

4

6

Our Bank Counters

12

Emilia Romagna

BOLOGNA Via Saffi, 6BOLOGNA Piazza Mickiewicz, 6BOLOGNA Via Stalingrado, 59/ABOLOGNA Via Bentini, 31BOLOGNA Via Mezzofanti, 89BOLOGNA Via Farini, 28/2BOLOGNA Via Indipendenza, 8/hBAZZANO (BO) Piazza Garibaldi, 6/ACASALECCHIO DI RENO (BO) Via Marconi, 10CASTEL SAN PIETRO (BO) Via Mazzini, 204IMOLA (BO) Via Appia, 86/88IMOLA (BO) Via Bentivoglio, 36SAN GIORGIO DI PIANO (BO) Via Fariselli, 1SAN LAZZARO DI SAVENA (BO) Via Emilia, 1SASSO MARCONI (BO) Via della Stazione, 33-35FORLI’ (FC) Via Hercolani, 2FORLI’ (FC) Via Cignani, 44CESENA (FC) Viale Carducci, 79CESENA (FC) Via Finali, 62 ang. Via PiaveFERRARA Via Bologna, 110FERRARA Largo Castello, 32/34ARGENTA (FE) Piazza Mazzini, 1MODENA Via Zucchi, 21/EMODENA Viale Trento e Trieste, 15MODENA Via Giardini, 187MODENA Via Nonantolana, 685/BMODENA Via Vignolese, 439/1CARPI (MO) Via Cantina della Pioppa, 1MIRANDOLA (MO) Via Agnini, 94SASSUOLO (MO) Via Gramsci, 14SASSUOLO (MO) Via Archimede, 9 (C.to Com. PANORAMA)VIGNOLA (MO) Via Belluci, 2PARMA Via La Spezia, 75/bPARMA Via Venezia, 46/aCASTELL’ARQUATO (PC) Piazza San Carlo, 13RAVENNA Via Faentina, 67-69RAVENNA Via Ravegnana, 217/cRAVENNA Piazza Kennedy, 14ALFONSINE (RA) Piazza Gramsci, 26FAENZA (RA) Viale Baccarini, 31

Telebanking Services

BOLOGNA - VIRTUAL COUNTER www.unipolbanca.it

13

REGGIO EMILIA Via Toschi, 10/dREGGIO EMILIA Via Martiri di Cervarolo, 19REGGIO EMILIA Via Fratelli Cervi, 5REGGIO EMILIA Via della Repubblica, 19/eRUBIERA (RE) Via P. Togliatti, 1/gSCANDIANO (RE) Corso Vallisneri, 17/RRIMINI Via Marecchiese, 52

Liguria

GENOA Via L. Dalmazia, 75RGENOA Via De Marini, 15GENOA Via Napoli, 139/b-rGENOA Via Orefici, 18rGENOA Via Cantore, 238/240LA SPEZIA Via del Prione, 15SARZANA (SP) Via Brigata Partigiana Muccini, 20

Piedmont

TURIN Corso De Gasperi, 20/aTURIN Via Pomaretto, 6/bTURIN Via Principi D’Acaja, 65/cMONCALIERI (TO) Via Cavour, 14-16BIELLA Via Gramsci, 9/aNOVI LIGURE (AL) Piazza della Repubblica, 6/9

Lombardy

BERGAMO Via Palma il Vecchio, 2BERGAMO Via Borgo Palazzo, 142COSTA VOLPINO (BG) Via Nazionale, 212/bBRESCIA Corso Martiri della Libertà, 15BRESCIA Via F.lli Lechi, 52BRESCIA Via G. Verdi, 2/aBRESCIA Via XX Settembre, 42-46MANERBIO (BS) Via Mazzini, 9ROVATO (BS) Via Dieci Giornate, 5CREMONA Piazza Cadorna, 9MANTOVA Via Principi Amedeo, 9 MANTOVA Corso Vittorio Emanuele, 106MILAN Piazza Buonarroti, 25MILAN Corso di Porta Romana, 89MILAN Via Binda, 56MILAN Via Mercantini, 4MILAN Viale Papiniano ang. Via Calco, 2MILAN Via A. Traversi ang. Via GazzolettiMONZA (MI) Via Casati, 13

SUZZARA (MN) Via Guido, 3/aVOGHERA (PV) Via Emilia 16VARESE Via Milano, 15GALLARATE (VA) Via San Francesco, 4

Veneto

PADUA Via Rezzonico, 12PADUA Via Palermo, 9/bisROVIGO Via Minelli, 1 ang. Corso del PopoloVERONA Via Pisano, 69

Friuli Venezia Giulia

TRIESTE Via Milano, 3

Tuscany

AREZZO Via Mecenate, 35FLORENCE Viale Matteotti, 7/rFLORENCE Borgo La Croce, 65/rFLORENCE Viale Belfiore, 36EMPOLI (FI) Viale Petrarca, 4SCANDICCI (FI) Via Roma, 53/55SESTO FIORENTINO (FI) Piazza Del Mercato, 24GROSSETO Via Svizzera, 229GROSSETO Via Adige, 68LIVORNO Viale Italia, 185/187CECINA (LI) Via Circonvallazione, 17/19LUCCA Via S. Paolino, 14/18 VIAREGGIO (LU) Via U. Foscolo/Ang. Piazza ShelleyMASSA Via Roma, 103-105PISA Via Matteucci, 85PISA Via Mazzini, 126PISA Via G. di Simone, 10PONTEDERA (PI) Via E. Toti angolo Via Diaz PISTOIA Via Del Villone, 37/41PRATO Via Firenzuola, 8PRATO Viale Montegrappa, 220 a/fSIENA Via Mazzini, 105

Umbria

PERUGIA Via Fontivegge, 45PERUGIA - PONTE SAN GIOVANNI Via Quintina, 50CITTÀ DI CASTELLO (PG) Via Luca della Robbia, 55 TERNI Via Tre Monumenti, 34

14

Marches

JESI (AN) Via XXIV Maggio, 22MACERATA Via dei Velini, 14TOLENTINO (MC) Via Matteotti, 29FANO (PU) Via XXIV Maggio, 11

Abruzzi

AVEZZANO (AQ) Via Muzio Febonio, 32PESCARA Piazza Garibaldi, 21

Latium

ROME Via Saturnia, 21ROME Via Messina, 24ROME Via T. Arcidiacono, 93/95ROME Viale America, 107ROME Via C.F. Bellingeri, 7/aROME Via di Tor Bella Monaca, 461/463ROME Via R. Fucini, 16/18/20ROME Largo Arenula, 32ROME Via Ostiense, 73/hROME Atrio Stazione Termini/Lato Via GiolittiROME Via delle Cave, 38/d-40ROME Viale G. Agricola, 51ROME Via Casalotti, 185/a-bROME Via G. Chiabrera, 53ROME Via Dei Crispolti, 15/IROME Via Gasperina, 263ROME Via Nomentana Nuova, 71ROME Piazza Scotti, 22ROME Viale di Porta Tiburtina, 46ROME Via Zenodossio, 33GUIDONIA (RM) Via U. Maddalena, 9/ATIVOLI (RM) Via Tiburtina Valeria, 211/213FILETTINO (FR) Via Aniene, 1SAN GIOVANNI INCARICO (FR) Via Civita Farnese, 43STRANGOLAGALLI (FR) Via Madonna di Loreto, 3SUPINO (FR) Viale Regina Margherita, 35/37TREVI NEL LAZIO (FR) Via delle Fornaci LATINA Via Villafranca, 39SANTI COSMA E DAMIANO (LT) Via F. Baracca, 452/454SPIGNO SATURNIA (LT) Via Martiri d’Ungheria, 6/8/10TERRACINA (LT) Via Tripoli, 2VITERBO Via Garbini, 84/hCIVITA CASTELLANA (VT) Via Nepesina, 7

15

Campania

NAPLES Piazzetta Arenella, 12NAPLES Via Dell'Epomeo, 83NAPLES Via Riviera Di Chiaia, 14NAPLES Corso Vittorio Emanuele, 678SAN GIUSEPPE VESUVIANO (NA) Via Passanti, 243/245SANTA MARIA CAPUA VETERE (CE) Piazza Mazzini, 35SALERNO Via Orofino, 6

Apulia

MOLFETTA (BA) Viale Pio XI, 28TRANI (BA) Via Napoli, 20

Sardinia

CAGLIARI Via Cugia, 40CAGLIARI Via Tuveri, 124IGLESIAS (CA) Via XX Settembre ang. Via CrocifissoCAPOTERRA (CA) Via Diaz, 124 ang. Via MameliNUORO Piazza Italia, 3ORISTANO Via Mazzini, 32/34ORISTANO Via S. Francesco d’Assisi, 8TERRALBA (OR) Viale Sardegna, 27SASSARI Via Carlo Felice Ang. Via CoraduzzoOLBIA (SS) Via Roma, 21

Sicily

PALERMO Via Roma, 52/54/56PALERMO Via Emerico Amari, 94PALERMO Via Agrigento, 8CATANIA Viale Africa, 126MESSINA Via Garibaldi, 254/aTRAPANI Corso Italia, 1/a

16

Our Financial Counters

Emilia Romagna

BOLOGNA Via della Barca, 5BOLOGNA Via S. Felice, 11/E (Circolo ATC)BOLOGNA Piazza XX Settembre, 6BOLOGNA Centro Commerciale PIANETA - Via Larga, 49ALTEDO (BO) Via Nazionale, 112/ABORGO TOSSIGNANO (BO) Piazza Unità d’Italia, 10CASTELMAGGIORE (BO) Via Lirone, 9SAN GIOVANNI IN PERSICETO (BO) Via Pellegrini, 3SAN LAZZARO DI SAVENA (BO) Via Carlo Iussi, 16/MMODENA Centro Commerciale I Portali - Via Dello Sport, 50/31CASTELNUOVO RANGONE (MO) Via Zanasi, 37/AFORMIGINE (MO) Via Piave, 2-4NONANTOLA (MO) Via Vittorio Veneto, 25/2FIDENZA (PR) Via Bacchini, 39CASTELBOLOGNESE (RA) Via Garavini, 13CONSELICE (RA) Piazza Foresti, 12

Liguria

CHIAVARI (GE) Via della Cittadella, 26

Piedmont

OVADA (AL) Corso Italia, 43VERBANIA Via Rosmini, 29

Lombardy

GALLARATE (VA) Via Checchi, 7PAVIA Via Ferrini, 77 ang. Via S. Paolo, 47SENAGO (MI) Via Cavour, 1SUZZARA (MN) Via Alcide Cervi, 4

Veneto

MAROSTICA (VI) Via Montegrappa, 37/BPADOVA Via Cavallotti, 20/AVERONA Via Scuderlando, 358

17

Trentino Alto Adige

TRENTO Via Roma, 7

Tuscany

GROSSETO Via De Barberi, 108FOLLONICA (GR) Via Della Pace, 42/AMASSA MARITTIMA (GR) Via Cappellini, 25LUCCA Via J. Della Quercia, 25PIOMBINO (LI) Via del Fosso, 34SIENA Via Zani, 7 ang. Viale Toselli

Umbria

SPOLETO (PG) Via F.lli Cervi, 9

Marches

PESARO Via Pontevecchio, 41RECANATI (MC) Via Ceccaroni, 1SENIGALLIA (AN) Viale G. Bruno, 26

Abruzzi

PIANE D’ARCHI (CH) Via Nazionale, 23

Latium

RIETI Via F.lli Sebastiani, 197TERRACINA (LT) Via Roma, 127

Campania

CASTELLAMMARE (NA) Via Pricipe Amedeo, 77/79SALERNO Via C. Mauro, 17TELESE (BN) Via Roma, 36/38/40

Apulia

ANDRIA (BA) Via Cavallotti, 2FASANO (BR) Via Contardo FerriniLECCE Viale Libertà, 133LECCE Via Aldo Moro, 23

18

MAGLIE (LE) Corso CavourMELENDUGNO (LE) Corso Cavour, 26/A

Sardinia

NUORO Via Biasi, 10SERRAMANNA (CA) Viale Matteotti, 3

Sicily

CATANIA Viale Mario Rapisardi, 507MILAZZO (ME) Via Tre Monti, 78PALERMO Via Ausonia, 120SIRACUSA Viale Teracati, 182TRAPANI Via Degli Iris, 2

19

Ordinary Shareholders' Meeting

Bologna, 28 April 2003

AGENDA

1. Board of Directors’ Report on business performance and Board of Statutory Auditors’Report, related and consequent resolutions

2. Financial statements as at 31 December 2002, related and consequent resolutions

3. Appointment of External Auditors

21

Bologna - Palazzo della Mercanzia (Merchants’ Lodge)

(photograph by Emiliano Trentini - Foto Arcobaleno Group)

2002 Accounts: Highlights

25

Highlights 2002 2001

Assets and Liabilities (€ ‘000)Total Assets 3,176,378 1,582,570 Loans and advances to customers 1,646,775 739,063 of which: net bad and doubtful loans 9,838 5,652 Securities 145,205 83,529Customer deposits and funds 9,207,628 7,396,265 Direct customer deposits 2,228,257 1,120,890 of which: current accounts 2,065,921 1,046,506

debts evidenced by certificates 162,336 74,384 Customer funds 6,979,371 6,275,375of which: assets under management 999,385 512,292

assets under administration 5,979,986 5,763,083 Net interbanking balance 468,026 412,356 Shareholders’ equity 327,152 286,868

Profit and Loss Account (€ ‘000)Net interest income 37,425 29,994 Gross operating income 83,673 55,497 Net operating income 7,065 4,017 Balance on ordinary activities 1,880 1,236 Net profit for the financial year 5,319 1,554

OrganisationNo. staff as at 31 December 736 665 No. counters as at 31 December 173 95 No. financial counters as at 31 December 57 60 No. financial advisers as at 31 December 408 373

27

Board Report

NATIONAL ANDINTERNATIONALECONOMIC CLIMATE

OverviewThe year 2002 has been a time oftransition for the world’s principaleconomies.Initial predictions that the world’seconomy would grow were lateramended, so that now a weak economicclimate is predicted.The critical situation in international

politics, which affected the whole of2002 and which has still not beenresolved, has made the prospect of aneconomic recovery seem all the moreunlikely. In the short term, with the onsetof the war in Iraq, it is possible that 2003will see a weaker economy than 2002,although some observers are predictingthat the economy will recover once thewar has ended.In 2002, world GDP grew by the samerate as it did in 2001.GDP growth in the Euro area has alsobeen disappointing, with the Europeaneconomy failing to grow faster than thatof the United States, contrary topredictions to that effect.The Euro made strong gains against theUS Dollar on the foreign exchange

markets and, with a rise of 5.6%, hasremained above parity since November2002. Even more consistent gains havebeen made against the Yen (8.6%), asituation due to the persistent weaknessin the economy of Japan which, despitethe wide-ranging monetary and fiscalpolicies introduced in that country, stillshows no signs of recovery.In light of this poor general economicclimate, it is hardly surprising that thecentral banks in the principal economiesaround the world decided to further

loosen monetary policy by reducingofficial interest rates by 50 basis points.

ItalyFor Italy as well, 2002 has proven to be atougher year than the previous one hadbeen. In 2002, Italy’s GDP grew by adisappointing 0.4%, despite the fact thatgreater growth had been predicted.Industrial output also declined for thesecond year in a row, falling by 2.1%compared with -1% in 2001.The propensity of Italian households tosave money rose once more, againmaking Italy the number one nation ofsavers in Europe. In line with theincrease in savings, there was acorresponding slowdown in the rate of

28

Board Report

Maurizio Bottarelli, “Australian Landscape” - UNIPOL BANCA Collection

growth of consumer spending over theperiod in question.Both of these phenomena may beattributed to the perceived sense ofinsecurity caused by the gloomyeconomic climate and by the uncertaintyof the international political situation.Another contributing factor to this senseof insecurity is the marked increase inthe prices of consumer goods due tointroduction of the Euro at the beginningof 2002.Fixed investments have also decreasedby 1% compared with a year ago.Levels of inflation higher than those ofItaly’s competitors have again begun tomaterialise, and those, combined withthe general slowdown in internationaltrade, have resulted in a worsening ofthe trade gap with the rest of the world.On a positive note, however, the rate ofunemployment fell by 0.5% in 2002.Italian Government accounts have alsobeen affected by the generally negativeeconomic climate and have, as a result,experienced some difficulties, althoughwithin the context of the three leadingeconomies of the single currency area,Italy is the only country to have reducedits structural deficit.

Stock ExchangesWorld stock market indices havedeclined markedly over the course of2002, with decreases ranging from -18%to -33%.Share prices for the majority of ‘neweconomy’ companies have also fallen,continuing the downward trend whichbegan in 2000, a tendency reflected inthe indices for the sector in world stockmarkets, with the Nasdaq registering afall of 31% and the German Nemaxindex registering a fall of 63%.In Italy, the Mibtel index concluded the

year with a 23.5% decrease. The Mib30fell by 26%, a figure similar to that of2001.Average daily trading figures were downslightly in comparison with 2001, both interms of overall value and in terms of thenumber of trades.

Banking SectorIn 2002, as in 2001, there was a markedreallocation of investment portfolioswithin the private sector towards lessvolatile investments. In particular, assetsmanaged by mutual funds furtherreduced, both as a result of their generalloss of value and of a negative balance oninvestments of this type. Likewise,portfolios under banks’ management alsofell, whereas growth in customer funds,whilst not outstanding, was neverthelesspositive, registering an upswing of 6.6%.Investment in insurance products alsoshowed a positive trend, increasing by14%, with the greatest growth seen inpension funds and personal pensionschemes (+37%).With reference to the funding situation inItaly, there was an increase in deposits ofall types and, in particular, an increase indeposits to current accounts, a situationthat has been helped by the persistentuncertainty surrounding the financialmarkets.Bank lending activity also slowed downas a result of the general slowdown inthe economy and of the decrease in thenumber of extraordinary financingoperations being carried out. Totallending saw an increase of 6.3%.Bank lending activities over this periodwere almost exclusively sustained bymedium to long-term loans and byhousehold loans, particularly consumercredit. Mortgage lending also saw anincrease on 2001, with the most marked

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Board Report

30

Board Report

increase occurring within the last fewmonths of the financial year.The total value of bad and doubtful loans,net of write-downs, further decreasedand, as a result, the proportion of net badand doubtful loans to the total number ofloans fell to 2.2%.The banks decreased their securitiesportfolio by approximately 8% andincreased their holdings of short-termsecurities. There was also a markeddecrease in the number of longer-terminvestments (BTP - Long-Term TreasuryBonds and CCT - Treasury CreditCertificates) held.The continuing policy of reducing theofficial interest rate adopted by theCentral Bank has obviously had an

their customers. This has led to areduction of 17bps in the medium-terminterest rate on deposits and to areduction of 25bps in the medium-terminterest rate on loans. In particular, theinterest rate on new loans within thefamily sector has decreased by 0.5%,and the interest rate charged tobusinesses by 0.32%.As a result, the spread between themedium-term rate on deposits and themedium-term rate on loans has beenreduced on average over 2002 by 8bpsto a figure of 4.36%.In terms of the profitability of thebanking sector, it is important to notethat the interest spread will continue tosuffer as a result of the reduction ininterest rates, and this reduction inearnings is unlikely to be offset by newlending activity, given the negativeeconomic situation.As far as the commissions spread isconcerned, there is not a lot of room formanoeuvre, given the negativeperformance of the markets in 2002 andthe likelihood that this situation will notimprove in 2003.

Furthermore, the weak economic climatewill inevitably mean that the number ofloan provisions will increase, especiallyon loans to large industries.With so little room to manoeuvre withregard to earnings and valueadjustments, the reduction of costs willbecome even more important in 2003,as we are still not competitive on thisfront in comparison with our mainforeign competitors.

YOUR BANKTo the Shareholder,During the 2002 financial year we wereable to consolidate the 51 branchesacquired from the Intesa Group in 2001,and we also had the opportunity to drawup and implement a specialised salesand marketing strategy across thebanking network for each of thepredefined customer segments.The segmentation we have adopted is adirect response to the current situation,where it has become more and moreevident that the customers themselves,and their demands, are a crucial andsignificant factor in the banking sector. Asa result, two principle channels havebeen identified: Retail (Private Customersand Small Businesses) and Corporate,which has been further subdivided inorder to meet the particular needs of thebusinesses concerned.During the course of the financial year,the sales network was expanded byopening a further 20 integrated bankingbranches, 10 of which were upgradedfrom financial counters. The expansionof the sales network was furtherachieved by opening 7 financialcounters, and by increasing the networkof financial advisors by 35.Your bank also furthered its aim toexpand rapidly by acquiring 60 bankcounters from the Capitalia Group.

impact on the rates that banks charge

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Board Report

This acquisition, authorised by theSupervisory Authorities, took legal effectfrom 31 December 2002 and, as such, allof the relevant assets and liabilities havebeen included in the Balance Sheet foryour bank for the financial year inquestion. This acquisition, however, hasnot been shown on the Profit and Lossaccount, as a sufficient amount of timehas not yet passed for its economiceffects to manifest themselves.This acquisition, as well as theacquisition from the Intesa Group in2001, allows Your Bank to increase itssales network significantly in areas wherethe Group’s insurance arm is alreadywell established. In this regard, theacquisition of six bank counters in Sicilyis of particular importance, as this was anarea where the Group had already builtup a strong insurance presence, butwhere the Bank had yet to establishitself.The transaction was entirely self-financedthrough an increase in share capital of€142.1m, as well as a premium of

€42.6m, effected with the approval andsignature of the ExtraordinaryShareholders’ Meeting on 13 January2003.The network of bank counters as at 31December 2002 consisted of 173 salespoints (of which 60 were integrated withinsurance agencies), as well as 57financial counters and 408 financialadvisors.Unipol Banca is in the process ofopening an additional nine bankbranches, all of which will be integratedwith insurance agencies, to complete theauthorisations issued to date by the Bankof Italy.In the first few months of the financialyear, as has already been indicated in the‘Significant Events After the Closing ofThe Financial Year’ section in the 2001Board Report, Unipol Banca acquired theentire participating interest in UnipolFondi Ltd from the holding companyUnipol Assicurazioni, thus restructuringthe Unipol Banca Banking Group (whichincludes the securitisation vehicle

32

Board Report

company Grecale Srl) in the process.Furthermore, Your Bank has acquired a5.25% stake in Unipol Merchant SpA, amerchant bank which, for its part, hasrequested authorisation from theSupervisory Authorities to increase itsfield of activities to the banking sector, byoffering medium- to long-term productsand services. This acquisition isstrategically important for Your Bank as,once authorisation has been granted,Unipol Banca will acquire a controllingstake in Unipol Merchant, thus creating aBanking Group with a presence in allfinancial and lending sectors andincreasing the range of products andservices it offers to its customers.

OVERVIEW OF THEBANK’S OPERATINGPERFORMANCEThe accounts for the financial yearended 31 December 2002 highlight anincrease in all operating and financialsectors.Assets soared to €3,176m, an increaseof 101% in comparison with theprevious year. In particular, acomparison with the previous year’s datashows an increase in loans and advancesto both customers (+123%) and banks(+95%). Intangible fixed assets alsocontinued to increase followingrecording of the goodwill on theacquisition made at the end of thefinancial year, a situation which has not,however, impacted the Profit and Lossaccount. Deposits by customers andbanks have also seen a significantincrease (+97% and +777%,respectively).The first quarter saw the completion ofthe securitisation process, begun in the2001 financial year. This securitisationhas been well received by the

international market which has, in itsturn, placed orders to underwrite a sumequivalent to approximately twice thevalue of the securities offered.Also during the financial year inquestion, given the increase in newresidential mortgage business seenduring this period, a securitisationoperation was carried out on residentialand business performing mortgageloans, raising a total sum of €188m.The transfer of these loans to the vehiclecompany created for that purpose tookplace in two tranches. The first tranche,amounting to €126m, was carried out inDecember.The transaction was overseen by JPMORGAN, in collaboration with UNIPOLMERCHANT, which will be responsiblefor placing the underlying securities.Approximately 88% of the issue (class A)will have an AAA/Aaa rating, whilst theclass B issue (6%) will have an A1/A+rating. The junior bonds (class C –approximately €20m) are not rated andwill be subscribed entirely by Your Bankand inserted in its own portfolio of long-term investment securities.The transaction will provide the Bankwith fresh liquidity at an advantageousprice in order to finance new residentialmortgage loans and has generated again of approximately €11.8m. Aportion of this will be recorded in theyear under review, while the remainderwill be recorded in the 2003 accounts.Your Bank will also act as a ‘servicer’against payment of a fee, on behalf ofthe vehicle company, which essentiallymeans that the Bank will continue tomanage the loans assigned and will alsokeep its accounting records andcorporate books.A breakdown of operating sectors showsthat both net interest income (+24.8%)and non-interest income (+81.3%)increased.

33

As a result, gross operating income,which measures the performance of corebusiness, increased by 50.8%.Administrative expenses, includingamortisation of goodwill whichamounted to 11%, also increasedsignificantly (+49%) due to thecontinued expansion of the Bank, butthis was against the backdrop of adecrease in the ratio of administrativecharges to gross operating income (91%compared with 93% in the financial year2001). It should be noted here that overthe last three financial years, the Bankhas expanded significantly. Therefore,despite the continuing drive to keepcosts to a minimum, the bank has onlypartially been able to streamline itsspending to achieve savings. Given therise in total administrative expenses,future savings such as these can beexpected to be significant. Since January2003, Your Bank has been negotiatingwith its major suppliers to amend theterms and conditions under which goodsand services are supplied, with theobjective of significantly reducing theimpact this has on total administrativeexpenses over the short term.As far as other profit and loss items areconcerned, there was a net increase ofapproximately €5m in value adjustmentson receivables.The item ‘Extraordinary income’, net ofextraordinary charges, includes moniesreceived by the Banca Intesa Group as aresult of the transaction on non-performing loans deriving from theacquisition that took place in the 2001financial year. The extraordinary chargesitem includes a figure of €637,291,corresponding to the all-inclusive taxamnesty subscribed to, comprising boththe direct tax liability and the VAT liabilityfor the financial years 1996 to 2001, asset out in the 2003 financial act (Law 289of 27/12/2002).

On the basis of these figures, UnipolBanca ended the 2002 financial year witha pre-tax profit up from the €3.6mregistered in 2001 to a figure of €7.3mfor the financial year in question.A figure of approximately €2m wasdebited to the profit and loss account,corresponding to the direct tax liability,IRAP (Regional Tax on ProductiveActivity) and IRPEG (Corporate IncomeTax) for the financial year in question.This figure was net of prepaid tax, andbrings the net profit for the financial yearto €5.3m (a 242% increase comparedwith 2001). The prepaid tax item shownin the assets on the balance sheetcorresponds to expected future income,as envisaged by the three-year Plan,which has been submitted to theSupervisory Authorities.Our figures are even more significant ifviewed together with other indicators ofefficiency, such as EBITDA, at over€24m, and ROE, equivalent to 2%.Estimated figures for the next three yearspredict a considerable improvement,too.

COMMENTARY ONTHE MAIN ITEMS OFTHE BALANCE SHEETAND PROFIT ANDLOSS ACCOUNT

Balance SheetDirect customer depositsThe 2002 financial year closed withdirect customer deposits of €2,228m, ofwhich €444m derived from theacquisition from the Capitalia Group.Net of this figure, this asset itemincreased by 59% as a result of the salesactivity. This sales activity not onlyincreased the number of new customersbut also broadened loyalty by existingcustomers.

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34

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The chart above, which shows the totalnumber of deposits, also allows us tounderstand the increase in mean figuresover the years, and clearly illustrates thegrowth in volumes in comparison withthe previous financial year. The 2001financial year shows mean figures of€678m, whilst the 2002 financial yearshows a mean figure of €1,212m(+79%). In the financial year just ended there wasa dramatic increase in the uptake ofbonds and certificates of deposits(+100%), which reached a figure of€132m, and an exponential rise in thenumber of repurchase agreements(+492%), due to uncertainties over thesecurities market. On the other hand,deposits with greater liquidity, such as

current and savings accounts, whilstreaching the not insignificant figure of€1,555m (not including the formerCapitalia sums) did not increase asmarkedly.This increase is largely the result of theunique distribution model that the Bankhas decided to pursue, which aims toreach a wider customer base by utilisingthe insurance agencies run by theGroup.

Customer fundsAs at 31 December 2002, customerfunds amounted to €6,979m, of which€858m resulted from the recentacquisition of bank counters, addressedabove. In comparison with 2001,customer funds increased by 11.2%.

1998 1999 2000

243367 483

1121

2001

2228

2002

Direct customer deposits(in €m)

1999 2000 2001

137242

513

29042104 5763

2002

999

5980

assets under administration assets under management

Customer funds(in €m)

The increase in this item is also partly aresult of the network of ‘personalbankers’ in the bank branches, now fullyup and running, who provide advice andassistance to customers.The network of financial advisers is beingconstantly strengthened and isincreasingly loyal (despite the lack ofvertical growth), and is becomingincreasingly integrated with the Unipoland MeieAurora networks of insurancebranches.

Lending activities

In 2002, the Bank continued to focus itsattention on developing this activity,particularly with regard to small andmedium sized firms and privateindividuals, and in particular themortgage business.This activity will become even more of afocus during the current financial year,

when the synergies being forged withother companies in the Group becomeoperational. Once this has beenachieved, the Bank will be able toapproach its customers, the businessesthat form its customer base, and as aresult the staff and personnel of thesesame companies.At the close of the 2002 financial year,loans and advances to customersamounted to €1,647m, of which€562m came from the former Capitaliacounters.There was a significant increase in theuse of authorised overdraft facilitieswhich, excluding the contribution of theformer Capitalia branches, increased by59%. This was due to the progressiveincrease in the number of new Bankbranches in particularly active areas andto the sales and marketing initiativeslaunched in synergy with the ParentCompany.

third-party products

446.8

group products

552.5

359.2

181.8

118.45

169.13

125

ucits insurance pmssicav pmf unipol fondi

45.7

Breakdown of assets under management(in €m)

Relazione sulla gestione

35

Specifically, this item comprises assetsunder administration (€5,980m statedat the last market valuation), includingthe contribution of the Unipol Group,

and assets under management(€999m), consisting of portfoliomanagement, mutual funds, Sicav andlife assurance policies.

36

Disbursements in the corporate segmentconsisted mainly of factoring of tradereceivables from medium-smallcompanies, limiting purely financialtransactions.Careful, constant, monitoring of riskpositions made it possible to reduce therisk of default.Loan and decision-making regulationswere constantly updated during the yearto ensure that the loan disbursementprocess kept pace with the Bank andwith specific regulatory requirements.

Bad and doubtful debtsAs at 31 December 2002, this itemamounted to €27.2m which, net of therelated provisions of €17.4m andincluding overdue interest, generated anet figure of €9.8m compared with€5.7m at the close of the 2001 financialyear. Despite the increase in the absolutevalue of bad and doubtful debts, therewas clear improvement in the ratio ofthis item compared to total loans, from0.76% in 2001 to the current 0.60%.An analysis of banking system indicatorsreveals that at the end of the financialyear in question net bad and doubtfuldebts stood at 2.22%. In light of thisfigure, Your Bank’s current ratio of badand doubtful debts is even moreencouraging.Bad and doubtful debts generatedapproximately €320,000 of overdueinterest during the year, posted entirelyto the related item regarding uncollectedfunds.Bad and doubtful debts are constantlymonitored by the Bank’s Legal Unit inorder to maximise the results of creditrecovery operations.The actions for revocation that were setin motion following the bankruptcy ofthe Fochi Group bore no furtherdevelopments during 2002, thus

confirming Your Bank’s assessment ofthe matter. In spite of this, a sum of€207,000 was posted to this position,corresponding to the value indicated bythe Bank’s Legal Unit as the potential riskinvolved.

Securities portfolio

In 2002, liquid assets earmarked forfinancial investments amounted toapproximately €132m (€92m in 2001).The average return from coupons andinterest generated by these investmentswas 3.69%, a slight decrease withrespect to the previous financial year.Adding income from coupons andinterest to trading gains, the totalfinancial return from liquid assetsinvested in securities amounted to€13m.As at 31 December 2002, the Bank’s ownsecurities portfolio was worth €145.2m,of which approximately €114.3m is inbonds held for trading, and €30.9m inlong-term investment securities.Valuation of trading securities at theDecember average prices showed acapital loss of approximately €24,000.Long-term investment securities, ifvalued by the criterion adopted fortrading securities would have showncapital losses of €328,000 as at 31December 2002.Total long-term investment securitiescomply with the parameters establishedby the framework resolution of theBoard of Directors.With regard to long-term investmentsecurities, securities to the value of€7.5m matured during the course of theyear, and US$5m of American bondswere sold for a capital gain of €34,000.This item (long-term investmentsecurities) also comprises €18.2m injunior securities that were purchased as aresult of the first round of securitisation.

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To complete the analysis of resourcesused by the Bank for financialmanagement, the average liquidityinvested in interbanking activities for2002 amounted to approximately€374m (+€98m compared with 2001),producing an average return of 3.26%.

Participating interests

In 2002, participating interests increasedby €5.9m following the acquisition ofthe entire fully paid-up share capital ofUnipol Fondi Ltd, of a 5.25% stake inUnipol Merchant SpA and of an increasein the stake already held in CSE, theBank’s IT outsourcer.

Guarantees andcommitments

The Bank issued 35% fewer guaranteesas compared with 2001; these amountedto €215m, of which €20.5m derivedfrom guarantees issued at formerCapitalia counters.

Profit and LossAccountGross operating income In 2002, the gross operating income,consisting of net interest income andnon-interest income, amounted to€83.7m, reflecting a marked 51%increase over the previous financial year.A breakdown shows that net interestincome amounted to €37.4m and non-interest income to €46.2m.With regard to net interest income, thespread between lending and borrowingrates increased slightly to 3.528%,despite the generalised decrease in rateson the money markets. A considerabledeviation (of approximately onepercentage point) still exists with regardto market data, but is being reducedgradually, pending transfer of the sumsto retail customers.It should be noted that this spreadincrease was partially offset by therequirement to increase both long-termdeposits and to increase capital to the

37

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21.3%

trading securitieslong-term investment securities

78.7%

27.76%

bondsgovernment securities

72.24%

Securities portfolio

38

required level for regulatory purposes,obtained by issuing bonds and bydeliberately streamlining specificproducts (such as residential loans) forthat purpose. Furthermore, there was alarge number of loans issued toinstitutional customers which, whilstbeing low in risk, nevertheless do notprovide a satisfactory return on the sumsof money invested.Non-interest income also increased due,in particular, to charges levied on currentaccounts and collection and paymenttransactions, whilst fees relating totrading and assets under managementfailed to reach the expected levels, dueto the continuing uncertainty of the

equity market. Specifically, charges to

customers arising from the management

of current accounts and to collection and

payment transactions are rapidly falling

in line with those seen in the rest of the

banking system.

The aggregate increase was brought

about by net banking commissions of

€19.4m (+72%), due to the continuing

increase in the customer base and to

gains generated by the securitisation

operation carried out during the financial

year and to the commissions generated

by the sale of Unipol Assicurazioni life

assurance policies, which began during

this period.

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net non-interest incomenet interest incomegains and losses on financial transactions

38.8

37.4

7.5

Breakdown of gross operating income(in €m)

Administrative expenses

In 2002, administrative expenses

continued to grow, as they had the

previous year, driven by the further

expansion of the distribution network, by

the recruitment of professionally

qualified human resources at Head Office

and as a result of the acquisition of bank

counters in 2001, the cost of which had

an impact on the whole of the 2002

financial year. In 2002, administrative

expenses amounted to €76.6m, an

increase of 49% compared with 2001.

In particular, the cost of personnel rose

by €23.8m to €37m (+55%), inresponse to an increase in the averagenumber of staff from 491 in the previousfinancial year to 701 in 2002. The needto bring the newly acquired bankbranches in line with Unipol’s sales andmarketing strategy, together withagreements struck with the unions whichhad the initial effect of limiting employerflexibility, meant that the Bank was notable to reduce its administrativeexpenses immediately. Another factorwas the difficulty the bank has had inbringing the supplementary labouragreement of the staff belonging to the

newly acquired branches in line withthose already in place. This has resultedin the Bank’s human resources costs for2002 being higher than those at otherbanks. However, this situation will soonbe rectified as the process of integrationshould be fully completed during the2003 financial year, and this will allowthe Bank to make significant savings onits human resource costs.However, it should still be noted that ourHead Office costs in relation to the totalworkforce (22%) are still excellent incomparison to the 27% for the industryas a whole. It would be fair to expectfurther improvements in this ratio onceUnipol Banca has completed thestreamlining of its branch networkworkforce.The ratio of managers to staff is also betterthan the industry standard. In 2002, thiswas 61 members of staff per manager,against an industry average of 52-55. Withthe former Capitalia acquisition factoredin, this figure improves even further to104 per manager.Other administrative expenses, totalling€30.2m, rose by 58%. This was due tothe expansion of the distributionnetwork, to the increase in the totalnumber of customers and to consequentadjustments to the Head Office structure.Amortisation and depreciation increasedby 10% to €9.3m, reflecting theconsiderable resources invested topromote rapid growth of the Bank in linewith the objectives of the business planlaunched in 1999.Approximately 50% of the cost ofamortisation and depreciation is due tothe posting of the year’s portion ofgoodwill referring to the acquisition of51 counters from the Intesa Group. Thisgoodwill has been stated under assetsunder intangible fixed assets and will beamortised over a period of twenty yearsat increasing sums over the 2002 to

2006 period, and at fixed sums over thefollowing 15 years.As mentioned in the section onaccounting criteria in the Notes to theFinancial Statements, the duration of theamortisation is due to the exceptionalnature of the transaction; the need toestablish a time-frame, set at five years,to reorganise the Bank’s internalstructure in line with its business strategy(and, at the same time to improve theefficiency and productivity of the bankbranches acquired); and the resultant,longer impact this transaction will haveon the Bank’s business. This method is inline with the policy adopted by othercredit institutions in similar cases. Thesame criterion will also be applied to theacquisition of the Capitalia Group,signed on 30 December 2002.

Value adjustments -Provisions

Valuation of loans as at 31 December2002 has evidenced the need to postwrite-downs for doubtful andsubstandard loans amounting to €5.3m,of which €3.5m is the figure fordoubtful and substandard loans and€1.8m the figure for performing loans.On the other hand, value re-adjustmentsof €350,000, deriving from creditrecovery, were posted during the year.A further provision of €207,000 hasbeen made to counter any potential riskderiving from possible revocatory actions.

Income taxes

In 2002, prepaid taxes relative to costs,generated in the financial year inquestion and in previous financial years,was calculated. Such prepaid taxes maybe deducted, as set out in the relevant taxprovision. The calculation was based oncurrent rates applied to future financial

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years. The first prepaid tax item wasposted in the 1999 financial year and thisfigure decreased over the following twofinancial years as a result of absorption,without any increase in this figure due tonewly generated amounts.As a result, the figure shown on thebalance sheet for this financial year islower for a total of €1.506m.That same item reflects the prepaid tax(€1.455m) posted in the 1999 balancesheet, which takes effect fiscally in 2002.Therefore, the total sum of the prepaidtax for the 2002 financial year amountsto €3.134m. However, whilst it is alwayswise to be cautious, it is fairly safe toassume that the costs that make up thisfigure will be more than adequately metby earnings made in future years.Direct income tax amounts to €2.010m,of which €1.682m refers to IRAP(Regional Tax on Productive Activity) and€328,000 to IRPEG (Corporate IncomeTax), after having taken the tax loss forthe 2001 financial year into account.

SALES ANDMARKETINGACTIVITIESIn 2002 the Bank expanded further,adding 20 new branches and 7 newfinancial counters and increasing thenumber of financial advisers from 373 to408. Of particular note is the fact that 17 ofthese new branches are fully-fledged‘integrated branches’, meaning theycombine banking operations with anagency or sub-agency of the Group’sinsurance arm. This is in line with theGroup’s business strategy, which aims toachieve important synergies between thebanking and insurance arms of itsbusiness by innovatively combining thetwo. The firmly held view that this is the

right strategy has also had an impact onthe branches acquired from BancaIntesa: during the course of 2002 workwas begun on restructuring 16 of thebranches thus acquired to combinethem with insurance agencies.The branches acquired from the BancaIntesa in 2001 are being integratedprogressively into Unipol Banca’sorganisation and into its businessculture. This was achieved as a result ofthe product and procedure trainingcourses carried out throughout 2002 andthe further focusing of business in ourpreferred market. In particular, stronglinks have been established betweenthese branches and the insuranceagencies operating in their areas. Some(2) of these agencies have beentransformed into fully-fledged integratedbranches with on-site insuranceagencies, whilst others (9) are in theprocess of becoming integrated and willbecome fully operational in 2003.The introduction of specialised salesunits focusing on different customersegments (private individuals andfamilies, professionals and smallbusinesses, companies) has led to thecreation of two new Head Officedepartments, the Retail/Small Businessoffice and the Corporate office, set upwith the aim of co-ordinating andfacilitating development of thesebusiness areas.Treasury activities, gained through theacquisition of the branches formerlybelonging to the Intesa Group, arecarried out on behalf of 14 bodies, andUnipol Banca has also won the tender toprovide the same services for the ASL[local health board] in Oristano(approximately 1,500 employees).In terms of the products and servicesoffered, the Conto Completo [CompleteAccount] package, a product designedwith five distinct lines to meet the needs

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and particular requirements of each ofthe five distinct customer areasidentified, continued to be popular. Atthe end of the year, this product alreadyhad 12,000 account holders.Furthermore, the range of mortgageswas completely revised and newproducts were added, to bring the totalnumber of products to eight, each ofwhich has different rates and financialstructures and all of which have provenpopular with our customers. In thefinancial year in question, 1,788mortgages were issued for a total valueof over €181m. Unipol Assicurazioniproducts were sold alongside thesemortgage policies. These include atemporary insurance policy that pays offthe residual sum of the mortgage shouldthe borrower die, and a home insurancepolicy covering against fire andexplosion, both of which haveparticularly favourable terms.In 2002, bank branches also began tosell life assurance policies incollaboration with the holding companyUnipol Assicurazioni. There are lifeassurance policies that correspond to theentire range of products on the market,

and, although these products only wenton sale toward the end of April, they stillsaw income of over €34m.As far as assets under management areconcerned, a new line of corporatebonds has been introduced.With regard to mutual funds, the processof converting assets under managementprovided by other product providers toUnipol products and, in particular, toUnipol Fondi products, was continuedthroughout the course of 2002. Thisprocess will allow the Bank to reduceover the short term the number ofproducts being offered simultaneouslywithout, obviously, having a negativeeffect on the overall completeness of theproduct range. To complement the comprehensiverange of products the Bank has to offer,the sales and marketing strategy for thesale of loan products (leasing andconsumer credit) has been identifiedand put into place together with MPSLeasing&Factoring and MPS AssetManagement mutual funds.In the first half of the financial year, anumber of sales initiatives wereundertaken in synergy with Unipol

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Board Report

43%

30%

11%

6%10%

change in conditions

various fees and expenses a/c closing

investment services

central, south and islands northeast Emilia Romagna northwest

30%

25%

22%

23%

Complaints by type

Complaints by geographical area

Assicurazioni and the insurance branchesbelonging to the Group located in thesame areas as the bank branches.In particular, this means that thecompanies and organisations that theUnipol Group has identified as itspreferred market have been targeted,with 26 loan guarantee consortia (inparticular with CNA and Confesercenti)and the arrangement of 61 currentaccount agreements with unions andtrade associations, thus targeting theirmembers. These agreements have led tocreation of 3,000 current accounts.The sale of standard banking productsby the insurance branches to theircustomers is proceeding satisfactorily. Inthe financial year just ended, thisparticular sales channel resulted in over7,000 new current accounts beingopened and issuing of a total ofapproximately €38m in loans.The network of financial advisers alsoperformed well, despite the stock

market’s disappointing performanceduring the period.In a year when almost all of the leadingnetworks of financial advisers posted anegative performance in terms ofdeposits, the Bank’s gross depositsamounted to €62m, whilst net depositswere also positive, at a figure ofapproximately €26m.

ACTIVITIESOF THE RESEARCH,ELECTRONIC MONEYAND CUSTOMERCOMPLAINTS SERVICEResearch, Electronic Money andCustomer Complaints activities consistedmainly in handling customer complaints.With regard to customer complaints, atotal of 255 cases were handled duringthe course of the financial year, a slightincrease (5%) on 2001.

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Board Report

The first graph shows that the largestnumber of complaints related tochanges to terms and conditions and tofees charged. In fact, approximately 40%of the complaints made were of thiskind. Customers were unhappy that theyhad not been informed personally ofthese changes, even though there is nolegal requirement to do so.It is therefore important that particularattention be paid to the degree ofcustomer transparency, as customerservice of this kind, including informingthe customer of changes made to his orher account, is an important factor inpromoting business and maintainingone’s image, all the more so giventoday’s competitive environment wheremore and more attention is being paidto consumer rights. Awareness of thisissue has been achieved by issuingvarious circulars to this effect.In order to further promote transparencyat all levels, the creation of a home pageon the Bank’s website clearly setting outthe corporate governance is currentlyunderway.During 2002, a number of customerslodged complaints with the Bank and, asthey were dissatisfied with the outcome,they subsequently took their complaintsto the banking Ombudsman. However,in each case the banking Ombudsmanruled in favour of the Bank,demonstrating that the Bank’s actionswere pursuant to the relevant norms.Customer service activity, with the activeparticipation of internal departments andbranch personnel, has allowed the Bankto ‘recover’ dissatisfied Customers. Thishas been achieved thanks in part to thecustomer satisfaction strategy adoptednot only by Banca Unipol, but also by theGroup as a whole.A number of activities are currently beingconsidered that will affect not onlystructural aspects, but also culture and

behaviour within the department. Theaim of these activities is to transform thecomplaint process into an opportunity tofurther promote customer loyalty and toimprove the products and servicesoffered.Another noteworthy factor is theturnaround time for complaints.Whereas a timeframe for customercomplaints has been established at 60days, the majority of cases in our Bankwere handled within 30 days of the dateof the complaint being made.The Service has also put in place a set ofprocedures for recovering fraudulentpayments/withdrawals made on debitcards (ATM cards) that have alreadybeen reported as lost or stolen by thecustomer.The result, satisfactory as far as both theBank and the customer are concerned,emphasises the importance of customersatisfaction, which remains the highestpriority of this department.With regard to the e-money unit, creditcard use is up with the number of creditcards in circulation and transactionsbeing made with cards are continuallyincreasing.The Italian market still has huge potentialfor growth, in light of the fact thatroughly 48% of the cards in circulationare unused and that Italy has the lowestlevels of penetration and card use inEurope. The use of revolving cards inItaly is also at a very low level.Although this is also true for Your Bank,its situation is better because the Bankoperates across a large number ofsectors and thus has access to a hugepotential customer base in developingthis service.The foundations for developing specificpartnerships with associations operatingin the Bank’s preferred market havealready been laid with the aim ofacquiring new business.

This has meant that it has beennecessary to set up a single point ofreference within the Head Office tomanage and oversee this potentialbusiness.

SECURITIESAND ASSETMANAGEMENTSERVICE ACTIVITIESThe ‘personal banker’ project waslaunched at the beginning of the year. A‘personal banker’ in each branch wasassigned the specific task of looking afteraffluent customers and of satisfying all oftheir needs relating to assets undermanagement and assets underadministration. One of the mainpriorities of the Securities and AssetManagement Service has been toprovide support to the ‘personalbankers’ in order to improve the servicethey can offer to customers and topromote greater customer loyalty. Anumber of other initiatives were alsolaunched with the aim of increasingcustomer satisfaction and of rationalisingthe distribution of asset managementproducts by concentrating on Unipolproducts. In particular, rationalisation ofthe asset management business derivingfrom the acquisition of the former BancaIntesa counters was undertaken. A specific sales campaign was launchedto promote Unipol financial products(funds and policies) to customers whohad products managed by otherproviders. A particular effort has beenmade to favour assets undermanagement business as opposed toassets under administration, through theconversion of the latter in order toachieve more efficient and profitablemanagement of these products. Theseinitiatives have allowed the Bank to

obtain positive results at a time when theassets under management market isexperiencing real difficulties. In fact,assets invested in Unipol funds increasedby 85% in 2002, up from €147.6m inthe 2001 financial year to €272.4m atthe end of 2002, compared with a 9.4%dip in the rest of the sector (source:Assogestioni). In the last quarter, a marketing campaignfor Unipol Assicurazioni’s life assurancepolicies was undertaken by theMarketing and Retail departments. Thisprovided the branches with informationon how to sell the products undervarious stock market conditions. Thisactivity made ample use of web cams,which permitted a much faster and moreefficient channel of communicationbetween Head Office and the Branches.This initiative led to a notable increase inthe volume of life assurance policies sold(more than 70% of those sold during thefinancial year).In the second half of the year, a new trialline of portfolio management products(GPM Corporate) was launched togetherwith the Financial Counters and AdvisersService. This achieved appreciable resultsin terms of both deposits and earnings.Particular efforts have been made toenlarge the finance section on theIntranet site, in part by increasing theamount of information available tosupport the network’s efforts at financialadvisement.The Customer Desk department, createdin September 2001, has considerablyexpanded its activities during the courseof the year, both in terms of the numberof customers using the service and interms of the range of services providedto existing customers. Positive resultsboth in terms of customer satisfactionand in terms of earnings for the Bankhave been achieved.

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LOANS AREAACTIVITIESThe Bank’s lending activities significantlyincreased as a result of the retail activitiescarried out (with particular reference tothe disbursement of loans). The averagenumber of loan decisions grew by 83%,with a 94% increase in loans to individualsand a 64% in loans to companies.The number of direct financingoperations (mortgage and non-securedloans) increased by 130%. The Service underwent majorrestructuring, and of particular note is thecreation of the REGIONAL LOAN OFFICESand the introduction of the new decision-making departments within the HeadOffice (Regional Auditors/Decision-makers), which add to and complementthe decision-making structures already putin place during the previous financial year.This Service has also been maderesponsible for all activities relating tothe general register.Also of note are the training courses thatwere carried out in the branches.All forms relating to loan agreementsand guarantees, whether mortgage ornon-secured, have been revised andimproved and have been placed on thecompany’s Intranet to make themavailable to the whole network.Loan regulations were constantlyupdated to ensure that they are in linewith the credit strategy of the Bank.

AUDITING ANDMONEY LAUNDERINGPREVENTIONACTIVITIESIn 2002, the Auditing and MoneyLaundering Prevention Service carried out65 audits at bank branches. In particular,all of the branches acquired from BancaIntesa in July 2001 were audited. These

audits looked at all of the activities carriedout by the bank branches and alsointroduced a set of controls governinghow co-operation with the insuranceagencies was to be carried out, going intosuch areas as transparency, privacy andthe sale of asset management productsand services.In co-operation with parent companyUnipol Assicurazioni’s Auditing Division,34 audits of financial advisers at financialcounters were carried out to ensure thatcontractual relationships with customerswere being handled correctly and thatthe correct procedures were beingfollowed to ensure compliance withexternal regulations and internalprocedures governing off-site sale offinancial instruments. Compliance withthe Bank’s internal code of conduct wasalso monitored.Between September and October 2002,the Italian Exchange Office carried out aseries of audits to verify that the Bankwas in compliance with money-laundering prevention and moneymanagement regulations. Thedepartment gave full support to theExchange Office during these audits.During and upon completion of theseaudits, the Auditing and MoneyLaundering Prevention Service set aboutamending some of the Bank’s internalprocedures and norms in order to bringthem into full compliance in response toany indications and observationsreceived from the auditing team.The Service ensured that full support wasgiven to the Unione Fiduciaria companyby providing them with all documents,information and materials that theyrequired. This company is acting as aconsultancy firm, helping the Bank toimprove its system of internal controlsand to set up an Internal Auditdepartment, something the Bank is keento see happen very soon.

45

Board Report

An audit of the administrativeprocedures was carried out in sevendepartments within the Head Office, andno major areas for concern wereidentified. Specifically, the CustomerDesk department was monitored inorder to improve the controls andadministrative procedures in place there.In order to improve the system ofinternal controls and to facilitate thework of the external auditors who carryout a specific audit of the Bank, an auditof the control systems relating to thevarious services identified by Consob(the Italian Stock Market Regulator) wascarried out in co-operation with RecontaErnst & Young.Money-laundering prevention activitieswere updated on various occasions and,in particular, following the Gianosrelease (March 2002), and as a result ofthe audit by the Italian Exchange Office,which constituted an important test ofthe validity and correctness of theprocedures in place at the Bank.During this period, the Italian ExchangeOffice was informed of 10 suspect cases,as defined in the Money Laundering law197/91, 7 of which were reported by thebranches themselves and 3 of whichwere identified by the MoneyLaundering Prevention office.With regard to the notice issued by theSupervisory Authorities relating toemergency procedures, the Service,together with the Bank InformationSystems Service and the IT outsourcerCSE, made sure that an adequate‘disaster recovery’ plan was in place.To ensure that the Bank’s IT systemswere reliable and their internalorganisation consistent and efficient,especially with regard to security anddisaster recovery, a plan was drawn upidentifying the main risks and targets tobe achieved in order to limit damageshould such an event occur.

An analysis of the results of the cross-audit check (developed by the AuditingService in the prior months) has beenunderway since September. This analysislooked at the data relating to staffpresence and cross-checked it againstdata deriving from the CSE system(system authentication, SRCAtransaction). The purpose of this analysisis to identify any unauthorised orirregular access to the CSE system fromworkstations within the bank using usernames and passwords of employeeswho were not present on that day (theuse of somebody else’s ID is a violationof Article 4 of the President of theRepublic’s Decree no. 318/99). Similar automatic checks were alsocarried out with regard to e-mail byexamining who was present on aparticular day, but no causes for concernwere identified in this analysis.Of relevance also is a system put in placeto determine whether the systemadministrator is using the system in anappropriate manner.The Service also assisted the branches inimproving their transparency during theaudits carried out by the Bank of Italy onsome of the branches. These auditsreported some infractions, and a promptresponse to the Supervisory Authoritieswas formulated.

RISK CONTROLOFFICE ACTIVITIESIn 2002, the Risk Control Officemonitored and assessed all problematicrisk positions, with the aim of ensuringthat the risk of insolvency was avoided.Integral to this activity was the definitionand implementation of a set ofprocedures in co-operation with thebranches to normalise substandardloans, monitor their progress and,

46

Board Report

47

Board Report

should they default, to inform the LegalOffice forthwith so that the relevantaction may be taken.As a result of this activity, the RiskControl Office examined approximately1,300 risk positions (worthapproximately €37m) and, in co-operation with the Branches where thesesubstandard loans had derived, achievedsignificant results, particularly withregard to the number of recoverieseffected. Many of the risk positionsdefined as ‘substandard’ acquired fromBCI were brought back to ‘at risk’ andsubsequently to ‘performing’ statusthrough the restructuring of the termsand conditions of the loans, or with theissue of new guarantees.Other risk positions have been redefinedby setting up new repayment plansbased on the debtor’s ability to repay orhave been written off, whilst others havebeen referred to the Legal Office forproceedings to be taken to recover thedebt. At the same time, the process ofmonitoring, evaluating and classifyingproblematic risk positions has beencarried out with those being identified asproblematic singled out for attention.This activity, which forms the core activityof the Service and which will expand infuture, is aimed at preventing andresolving any loan risk and withdrawingbusiness where persistent problems ofthis type occur.Ongoing monitoring of problematic riskpositions and performance has identifieda series of classification procedures andhas resulted in an increase in thenumber of ‘at risk’ loans being identified.However, this is not cause for concern;rather, this increase is the naturalresponse to the expansion the Bank haseffected recently both in terms of thenumber of bank branches and of its loanbusiness.

It should be noted that, during thisphase, the Bank has paid particularattention to identifying the problematicrisk positions of the business it acquiredfrom the BCI Group, identifying thoseloans for restructuring and those to bewritten off wherever it was deemedfavourable to do so by the Bank.During the second half of the financialyear, the control procedures wereexpanded to cover the new generationof products, such as derivatives andfutures, that, due to their intrinsic level ofrisk, need to be monitored constantly inco-operation with the Finance Service.In the 2002 financial year, theregulations governing payment (bankchecks and credit cards) came intoeffect. To this effect, a centralised database orC.A.I. (Interbank Alarm Centre) has beenset up at the Bank of Italy for all banks toregister any case of check and/or creditcard irregularity occurring anywhere inthe country, indicating those cards orchecks that have been lost, stolen orcancelled. This database is regularly usedby the Bank.With regard to the internal rating project,a number of further initiatives have beenundertaken to bring procedures in linewith the indications set out by theSecond Basel Committee with the goalof further streamlining the automaticevaluation process.

LEGAL DEPARTMENTACTIVITIESThe Legal Department essentially carriesout two types of activity: legal consultingwithin the company and litigation withthird parties.With regard to providing legalconsulting, the Department has:

48

• identified, studied and interpreted thelaws and regulations in force that mayhave an effect on Bank business;

• revised and updated the Bank’sinternal procedures to reflect changesto the law;

• provided legal consulting to the headoffice and branch networks in the formof oral and written responses;

• vetted all standard contracts anddocumentation in general;

• drawn up specific contracts;

• prepared items of a legal nature forsubmission to the Board of Directors.

With regard to litigation, it has:

• provided support in the technical andlegal handling of substandard riskpositions and, together with the RiskControl Office and Branches, set inplace actions aimed at reducing thelevel of risk on loans granted;

• handled legal management of the levelof risk of bad and doubtful loans byevaluating the appropriateness ofguarantees against the level of risk, anddeciding upon a relevant course ofaction;

• drawn up transaction documents andrecovery plans;

• overseen the work of external lawyerswith regard to both forensic andadministrative work;

• handled cases against us stemmingeither from customer complaints orfrom bankruptcies, and especially torevocation actions;

• handled both in and out of courtlitigation with correspondent banksrelating to erroneous payments arisingfrom fraudulent and/or stolen creditinstruments, or similar cases;

• reported all decisions relating to newbad loan cases, to losses and toprovisions, as well as all other

communication relating to problematic

risk positions to the Board of Directors,

where necessary.

In 2002 there was a marked increase in

the activity of the Legal Department as a

result of the acquisition of the Banca

Intesa business branch, the growth of

banking business in general and of the

second round of securitisation that was

carried out.

This also led to an increase in the

number of in- and out-of-court litigation

cases with correspondent banks

concerning erroneous payments

deriving from fraudulent, lost or stolen

credit instruments.

The Legal Department resolved its

recruitment issues by hiring six

additional people during the course of

the year.

As at 31 December 2002, positions

managed by the Legal Department

amounted to approximately 708,

subdivided as follows:

• 608 positions classified as ‘bad and

doubtful’;

• 48 positions including collective credit

recovery actions (‘large groups’) and

revocation actions;

• 52 positions already posted to losses

but with legal proceedings still

pending.

During the course of the financial year,

149 positions which had already been

written to losses and which originally

came to a value of €834,000 were

assigned without recourse to Toscana

Finanza.

As at 31 December 2002, the bad and

doubtful loan situation in comparison

with the same period in the previous

financial year had changed as follows

(figures in thousands of Euros):

Board Report

49

Board Report

Year ending Amount Related % Amount RecoverableBad and Doubtful Provisions Cover value %

31/12/2001 21,180 15,528 73.3% 5,652 26.7%

31/12/2002 27,259 17,421 63.7% 9,838 36.3%

The work of external lawyers wasconstantly monitored by the Bank’s LegalDepartment, which directly managed allnegotiations regarding possible out-of-court settlements, as well as submittingits opinions to the appropriate bodies. Out-of-court settlements were anessential part of the Legal Department’sactivity, as they enabled the recovery ofcredits comparable in value to those thatcould have been obtained in legalproceedings, but in a much shorter time.In evaluating whether to settle out ofcourt or not, in the vast majority of casesthe overall size of the real and personalguarantees held by the Bank, and theirlikely duration, were taken into accountand the likelihood of credit beingrecovered was assessed. Naturally, thenet value of exposure on the balancesheet was also factored into theequation.In 2002 approximately €1,184,900 werereceived, of which roughly 20% derivedfrom legal proceedings and the rest fromout-of-court settlements.

INFORMATIONSYSTEMS,PROCEDURESAND ORGANISATIONSERVICE ACTIVITIESFor this Service, too, 2002 was aparticularly challenging year, as many ITprojects were initiated, nearly all of whichcompleted during the course of the year.These projects were aimed at handlingthe new sales initiatives and providingthe networks with technological supportat the point of sale, as well as improving

communication between the Head Officeand branches on the network andimproving some of the Bank’s internalprocedures.Of particular note was creation of avideoconferencing facility and intranetaccess at all of the branches, as well ascreation of a system showing real-timestock exchange data at all branches.An Internet site has specifically beencreated to allow the financial advisersaccess to their customer portfolios aswell as to provide them with all thedocumentation they require.An extremely important step was thecreation of the system for selling lifeassurance policies at the branches whichmeant, as a consequence, that it waspossible to enter these policies directlyinto the Company’s system right at thepoint of sale.The procedure for paying claims throughcertified checks was expanded to theentire Unipol Assicurazioni Group and asystem, SIM@rk, for monitoring salesinitiatives via the web was implemented.The growing interest in e-commerce hasled Unipol Banca to propose its ownrange of e-commerce services to itscustomers, as well as providing a highlypersonalised service for Linear SpA (theGroup’s telephone insurance arm). With regard to the procedures used bythe Head Office, a number of newprocedures and systems were put inplace. These included the following: anew, much more flexible and completeprofit and loss account was arranged foreach of the branches; the variousprocedures of each of the productproviders were combined and unified to

50

create a single point of reference for theasset management business; an earlywarning system for the consolidatedfinancial statements was created; the CAI[Interbank Alarm Centre] procedure wasinitiated; IT procedures for securitisationoperations were established; and aninternal rating system, meaning a systemof procedures and organisationalprocesses that allow credit assessment tobe carried out for each of the Bank’scustomers, was created.With regard to the activities carried outby the Organisation during the first partof the financial year, the Serviceprovided support to the consultantcompany charged with the task ofredesigning the Bank’s sales network.During the following months, visits weremade to 12 of the bank branches with

the aim of ensuring that the correct

organisational procedures were being

implemented, as well as ensuring that

the branches themselves were meeting

the guidelines set forth in that plan with

regard to branch management.

PERSONNELDEPARTMENTACTIVITIESThe Bank’s workforce increased from a

total of 665 at 31 December 2001 to 736

at 31 December 2002 (including 23

members of staff on a temporary

contract), a 10.6% increase.

Specifically, as at 31 December 2002, the

workforce was sub-divided as follows:

Board Report

Permanent Contract Total

M F TOT M F TOT M F TOT

Head Office 147 91 238 1 6 7 148 97 245

Sales Network 300 175 475 8 8 16 308 183 491

Total 447 266 713 9 14 23 456 280 736

1999 2000 2001

118 178 459

114111 206

2002

491

245

head office branches

Staff

The Bank increased the number ofemployees in order to make thepersonnel structure suitable to the newlyenlarged company and as part of thebusiness plan that the Bank had adopted

that called for opening new branchesand acquiring new counters from otherbanks virtually throughout the country.More specifically, new hires wereintended to staff the branches that were

51

being opened in areas where the Bankhad not been present previously and toconsolidate the Head Office workforce inorder to enable it to provide betterassistance and support to the salesnetwork.The Bank’s expansion policy and growthhave therefore led to the creation of asignificant number of new jobs in asector that is currently depressed as faras the job market is concerned.During the course of the year, 36 peoplecame to work in the various departmentsof the Bank as part of training andorientation programmes for recent highschool and university graduatesorganised by external training institutions.In order to further increase the level of

staff identification and degree ofcommitment to company goals, anincentive plan was created whereby staffwould be rewarded for meeting specifictargets and objectives. This ties in withthe company’s strategy of promoting amuch more flexible remuneration policy,where the people who contribute mostto the Bank’s productivity are rewardedaccordingly.During the course of the year, thePersonnel Department allocated a totalof 2,429 professional training daysinvolving 588 members of staff. The training courses related to each areawithin the Bank’s organisational structureand were broken down as shown in thefollowing chart:

Board Report

technical courses courses on IT and procedures management courses

cross company courses law 626-privacy-money laundering-euro

34%

3%

18%

8% 16%

21%

sales courses

Training course types out of the total man/days

Training courses were, on the whole,

taught in the traditional way (in a

classroom). ‘Distance learning’ (i.e., self-

learning) was implemented with the use

of computer tools.

The most significant event in relations

with unions over the course of the

financial year was the occurrence of

intense negotiations related to the

Bank’s expansion and restructuring. The

atmosphere was generally positive and

marked by mutual and productive co-

operation.

Specifically, in 2002, there were a total of

29 meetings with union officials, during

which the negotiations over the

introduction of the staff incentive

scheme were brought to a conclusion,

and important agreements were reached

regarding the supplementary health

benefits scheme for all staff members.

The trade unions presented the platform

for renewal of the supplementary labour

agreement and the negotiations – which

are still underway – were begun based

on the provisions contained in the CCNL

52

[National Collective Labour Agreement].Finally, in relation to the acquisition ofthe business arm from Capitalia Group,after intense and prolonged negotiationsagreement was reached with the tradeunions on 28 December 2002 over theterms and conditions under which 397members of staff were integrated intoUnipol’s workforce as of 1 January 2003.Reaching this agreement – consideredfully satisfactory by both partiesconcerned – achieved an importantobjective; it meant that the Unipol Bancasupplementary labour agreement wouldnow be applied to members of staff fromnewly acquired business arms, andtherefore the workforce had beenharmonised.

SIGNIFICANT EVENTSAFTER THE CLOSINGOF THE FINANCIALYEAROn 2 January 2003, the 60 bankbranches acquired from the CapitaliaGroup officially became operative asUnipol Banca branches and the processof replacing signage was begun, a

process completed by the end ofJanuary.For these branches to become fullyoperative, it was first necessary totransfer or ‘migrate’ all of the data fromdatabases held by the former owners ofthe branches. This was done byemploying staff on a temporary basisuntil all such data had been successfullymigrated. With regard to the formerBipop counters, this was completed onthe 31st of January, with regard to theformer Banco di Sicilia counters on the15th of March and with regard to theformer Banca di Roma counters this willtake place on the 5th of April.An analysis of the assets and liabilitiesreceived from Capitalia is currentlyunderway, with particular attention beingpaid to the loans to customers, in orderto ensure that all loans acquired wereclassified correctly. The Bank has thecontractual right to refuse any loanbusiness deemed to be non-performing,as only performing loans were coveredby the terms of the acquisitionagreement.As has already been mentioned, thecapital increase and the underwritingand paying-in of the sums received were

Board Report

53

concluded by the extraordinaryshareholders’ meeting in January. Thisbrings Your Bank’s share capital to€426,300,000 with a share premiumfund of €42,630,000.New branches continue to open basedon authorisation already received, andtwo new integrated branches wereopened in this first part of the currentfinancial year.The second tranche of mortgage loansinvolved in the securitisation processbegun in December was transferred onthe 21st of March, and the bondsecurities underlying this operation willbe assigned by the vehicle company,Grecale ABS Srl, by the time thesefinancial statements reach the approvalstage.The process of restructuring and re-dimensioning the recently acquiredbranch network, in co-operation with the

consultants Accenture SpA, is currentlyunderway. The goal is to re-organise thebranches along the lines set out in thenew commercial specialisation modeldeveloped in the previous financial year.

PROPOSEDALLOCATIONOF THE PROFITFOR THE YEAR

Shareholders, The financial statements herewithpresented for your approval have beenaudited by Reconta Ernst & Young S.p.A.The year closed with a net profit of€5,318,798 which, in accordance withArticle 24 of the Bank’s by-laws, wepropose be allocated as follows:• 10% to the Legal Reserve,• the remaining amount to Other Reserves.

Board Report

55

Financial Statements

56

Financial Statements

Assets Financial year 2002 Financial year 2001 Changes

10 Cash and balances at central banks and post offices 32,808,848 18,405,679 14,403,169

20 Treasury bills and other eligible billsfor refinancing with central banks 15,751,836 21,639,361 (5,887,525)

30 Loans and advances to banks: 897,622,124 460,953,821 436,668,303a) receivable on demand 254,488,442 350,167,974 (95,679,532)

b) other receivables 643,133,682 110,785,847 532,347,835

40 Loans and advances to customers, 1,646,774,947 739,063,416 907,711,531of which:

loans with third-party’s assets under administration - - -

50 Bonds and other debt securities issued by: 129,452,846 61,685,024 67,767,822a) public bodies 89,149,006 49,130,222 40,018,784

b) credit institutions 20,881,841 6,713,324 14,168,517

of which:

- own securities 6,451,399 4,589,194 1,862,205

c) financial institutions 19,067,989 330,304 18,737,685

of which:

- own securities - - -

d) other issuers 354,010 5,511,174 (5,157,164)

60 Stocks, shares and other equity securities - 205,643 (205,643)70 Participating interests: 6,929,268 2,562,670 4,366,598

valued by the equity method - - -

other participating interests 6,929,268 2,562,670 4,366,598

80 Participating interests in Group undertaking s 1,561,940 - 1,561,940 90 Intangible fixed assets, 369,034,677 201,234,979 167,799,698

of which:

- start-up costs 8,816,963 5,853,427 2,963,536

- goodwill 354,826,424 194,009,115 160,817,309

100 Tangible fixed assets 13,711,782 9,561,622 4,150,160130 Other assets 54,676,909 64,307,501 (9,630,592)140 Prepayments and accrued income: 8,052,930 2,950,757 5,102,173

a) accrued income 7,579,985 2,619,449 4,960,536

b) prepayments 472,945 331,308 141,637

Total assets 3,176,378,107 1,582,570,473 1,593,807,634

BALANCE SHEET(in €)

57

Financial Statements

Liabilities Financial year 2002 Financial year 2001 Changes

10 Deposits by banks: 429,595,979 48,598,252 380,997,727a) repayable on demand 69,155,802 26,180,038 42,975,764

b) with agreed maturity dates or periods of notice 360,440,177 22,418,214 338,021,963

20 Deposits by customers: 2,065,920,858 1,046,506,096 1,019,414,762a) repayable on demand 1,554,777,278 958,952,399 595,824,879

b) with agreed maturity dates or periods of notice 511,143,580 87,553,697 423,589,883

30 Debts evidenced by certificates: 162,336,419 74,383,878 87,952,541 a) bonds 96,699,026 47,154,685 49,544,341

b) certificates of deposit 36,197,571 15,394,427 20,803,144

c) other securities 29,439,822 11,834,766 17,605,056

50 Other liabilities 118,495,073 91,278,367 27,216,70660 Accruals and deferred income: 5,741,299 1,335,743 4,405,556

a) accruals 5,224,943 1,030,834 4,194,109

b) deferred income 516,356 304,909 211,447

70 Provision for staff-leaving indemnity 17,099,407 7,029,716 10,069,69180 Provisions for liabilities and charges: 6,267,772 2,757,880 3,509,892

b) tax and duties provisions 5,187,672 2,756,090 2,431,582

c) other provisions 1,080,100 1,790 1,078,310

90 Provisions for credit risks 929,622 929,622 -110 Subordinated liabilities 42,840,000 22,883,000 19,957,000120 Share capital 284,200,000 284,200,000 -140 Reserves: 37,632,880 1,114,067 36,518,813

a) legal reserve 267,460 112,075 155,385

d) statutory reserves 37,365,420 1,001,992 36,363,428

170 Profit (Loss) for the financial year 5,318,798 1,553,852 3,764,946

Total liabilities 3,176,378,107 1,582,570,473 1,593,807,634

BALANCE SHEET(in €)

58

Financial Statements

Items Financial year 2002 Financial year 2001 Changes

10 Guarantees given, 214,635,435 333,209,571 (118,574,136)of which:

- acceptances 301,601 53,865 247,736

- other guarantees 214,333,834 333,155,706 (118,821,872)

20 Commitments, 16,635,646 1,456,732 15,178,914of which:

- for sales with obligation of re-purchase 14,903,832 953,885 13,949,947

GUARANTEES AND COMMITMENTS(in €)

59

Financial Statements

Items Financial year 2002 Financial year 2001 Changes

10 Interest receivable and similar income, 67,228,426 52,005,192 15,223,234of which:

- on loans and advances to customers 49,975,372 36,625,457 13,349,915

- on debt securities 4,865,595 3,617,347 1,248,248

20 Interest payable and similar charges, (30,290,443) (22,015,338) (8,275,105)of which:

- on customer deposits (24,590,386) (18,906,499) (5,683,887)

- on deposits represented by securities (5,308,778) (2,671,515) (2,637,263)

30 Dividends and other income: 486,568 3,571 482,997a) on stocks, shares and other equity securities 292 3,571 (3,279)

b) on participating interests 448,197 - 448,197

c) on participating interests in Group undertakings 38,079 - 38,079

40 Fees and commissions receivable 29,772,466 20,432,656 9,339,81050 Fees and commissions payable (10,348,818) (9,107,603) (1,241,215)60 Gains (losses) on financial operations 7,540,333 4,530,044 3,010,28970 Other operating income 19,365,790 9,651,186 9,714,60480 Administrative expenses: (67,283,930) (42,968,654) (24,315,276)

a) staff costs, (37,083,319) (23,846,815) (13,236,504)

of which:

- wages and salaries (25,281,199) (16,748,903) (8,532,296)

- social security costs (6,974,547) (4,509,043) (2,465,504)

- staff-leaving indemnities (1,936,666) (1,251,865) (684,801)

- retirement pensions and similar costs (868,597) (459,751) (408,846)

b) other administrative expenses (30,200,611) (19,121,839) (11,078,772)

90 Value adjustments on intangible and tangible fixed assets (9,324,402) (8,511,048) (813,354)

100 Provisions for liabilities and charges (207,000) (1,790) (205,210)110 Other operating expenses (80,870) (3,570) (77,300)120 Value adjustments on receivables and provisions

for guarantees and commitments (5,328,221) (3,249,580) (2,078,641)130 Value re-adjustments on receivables and provisions

for guarantees and commitments 349,703 276,494 73,209140 Provisions for credit risks - (103,291) 103,291160 Value re-adjustments on long-term investment securities - 297,518 (297,518)170 Profit (Loss) on ordinary activities 1,879,602 1,235,787 643,815180 Extraordinary income 7,181,023 3,019,934 4,161,089190 Extraordinary charges (1,781,968) (649,619) (1,132,349)200 Profit (Loss) on extraordinary activities 5,399,055 2,370,315 3,028,740220 Tax on profit for the financial year (1,959,859) (2,052,250) 92,391230 Profit (Loss) for the financial year 5,318,798 1,553,852 3,764,946

PROFIT AND LOSS ACCOUNT(in €)

61

Notes to the Financial Statements

General Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

Part A - Accounting criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63Section 1 - Significant accounting criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63Section 2 - Value adjustments and tax provisions . . . . . . . . . . . . . . . . . . . . . . 67

Part B - Notes to the Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . 68Section 1 - Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68Section 2 - Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73Section 3 - Participating interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76Section 4 - Tangible and intangible fixed assets . . . . . . . . . . . . . . . . . . . . . . . . 79Section 5 - Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80Section 6 - Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83Section 7 - Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84Section 8 - Share capital, equity reserves, provision for general

banking risks and subordinated liabilities . . . . . . . . . . . . . . . . . . . . 86Section 9 - Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89Section 10 - Guarantees and commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . 90Section 11 - Concentration and distribution

of assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92Section 12 - Asset management and dealing for third parties . . . . . . . . . . . . . . . 98

Part C - Notes to the Profit and Loss Account . . . . . . . . . . . . . . . 99Section 1 - Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99Section 2 - Fees and commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100Section 3 - Gains and losses on financial operations . . . . . . . . . . . . . . . . . . . . 101Section 4 - Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101Section 5 - Value adjustments, value re-adjustments and provisions . . . . . . . . . . 102Section 6 - Other items of the Profit and Loss Account . . . . . . . . . . . . . . . . . . 104Section 7 - Other information on the Profit and Loss Account . . . . . . . . . . . . . . 105

Part D - Other information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106Section 1 - Directors and Statutory Auditors . . . . . . . . . . . . . . . . . . . . . . . . . 106Section 2 - Parent company or controlling EU bank . . . . . . . . . . . . . . . . . . . . . 106

62

General Introduction

Basis of presentationThe financial statements have been prepared in accordance with the provisions of Legislative Decree 87 of 27 January 1992 and with theinstructions issued by Banca d’Italia in the Governor’s Measure of 30 July 2002. Reference has also been made to accounting criteriaapproved in Italy and in Europe.The financial statements as at 31 December 2002 consist of the balance sheet, profit and loss account and notes to the financial statementsand are accompanied by the Board Report. These are presented clearly and give a true and fair view of the state of affairs and financial position of the Bank and its profit for the financialyear.The notes to the financial statements provide the information required by the aforementioned legislation together with other non-compulsory information deemed appropriate in order to give a correct representation of the bank’s situation.The following additional statements are attached to the notes to the financial statements:- reclassified balance sheet;- reclassified profit and loss account;- statement of changes in shareholders’ equity;- cash flow.The values indicated in the notes to the financial statements are expressed in thousands of Euros, unless otherwise specified.The financial statements are drawn up in comparative form showing the values corresponding to the previous financial year and the changesin the items. In order to interpret the comparative data correctly, refer to the instructions given in the paragraph: ‘Extraordinary transactions:acquisition of business line’.The criteria applied in preparing the financial statements have not been changed from the previous financial year, with the exception of thecriteria used for the amortisation of goodwill paid on the acquisition of the business line from the Banca Intesa Group and the reclassificationof certain items.As regards the change to the criteria for amortising goodwill, it is specified that the changes made, together with the relevant reasons andeffects, are illustrated in detail in Part A, Section 1, Point 6 of these Notes to the financial statements to which express reference is made.However, a detailed description of the changes occurring on account of the reclassification of the financial statements is given below.In particular, the pre-existing reserve of € 4,502,883, which was previously posted under item 80 c) ‘provisions for liabilities and charges:other reserves’, has now been posted to reduce item 130 ‘other assets’, as this is a direct adjustment of an item under the assets sectionof the balance sheet.Furthermore, the reserves previously posted under item 140 c) ‘statutory reserves’ have now been reclassified under item 140 d) ‘otherreserves’ as the by-laws do not enforce any allocation of profit to reserves in addition to the allocations made to the legal reserve as specifiedby the Civil Code.As a result of the changes adopted in 2002, the items of last year’s financial statements have been accordingly reclassified in order to ensurethat the two sets of figures are suitably comparable.The financial statements are audited by Reconta Ernst & Young Spa, in accordance with the resolution of the Shareholders’ Meeting of 20April 2000, which appointed the firm for the three-year period 2000-2002.

Extraordinary transactions: acquisition of business lineAs described in the Board Report, a business line acquisition agreement was signed on 30 December 2002 with three banks of the CapitaliaGroup, which involved the acquisition by Unipol Banca of 60 branches and the contractual relationships relating thereto.The agreement came into effect at 11:59 p.m. on 31 December 2002. Therefore, the items of the balance sheet for the 2002 financialstatements also include the value of the relationships acquired, as taken from the permanent assignment positions on 31 December 2002.The effects on the profit and loss account, for obvious reasons, will only be produced as from the 2003 financial year.In order to facilitate comparison of the balance sheet items for the 2002 financial year and the previous financial year, the main aggregatesconcerning the newly-acquired branches are provided below and expressed in Euros:

Notes to the Financial Statements

63

Loans and advances to banks 216,842,081 Deposits by banks 315,334,230

Loans and advances to customers 562,113,726 Deposits by customers 426,296,201

Goodwill 163,400,000 Debts evidenced by certificates 17,843,879

Other assets 23,927,190 Other liabilities 43,408,687

Total assets 966,282,997 Total liabilities 802,882,997

Given that the negotiations concluded with the signing of the agreement right at the end of the financial year, the process of migrating thedata relating to the relationships taken over to Unipol Banca’s information and accounting system could only be started in 2003 and will becompleted in early April. Therefore, given the lack of availability of all the necessary data, some of the detailed information required in thenotes to the financial statements only corresponds to the relationships already in place at Unipol Banca and excludes those arising from theacquisition of the business line. Information on these omissions is given at the foot of the individual tables concerned.

Part A

ACCOUNTING CRITERIA

Section 1 - Significant accounting criteria

The accounting criteria adopted in preparing the financial statements, agreed with the Board of Statutory Auditors, are in accordance withrelevant legislation. All amounts are stated according to the criteria of prudence and going concern. Revenues and expenses are shown on an accrual basis and according to the principle of prudence, stating therefore only the result at theend of the financial year. Risks and losses relating to the financial year have been taken into account even if they became known only after the end of the financialyear.Unless specifically permitted by current legislation, items are not set off against each other. Items are disclosed giving precedence to substance over form and to the date at which transactions are settled rather than when they werecontracted.Assets are written down in accordance with the valuation criteria set out below for individual assets items and amortised by adjustments toreduce their value. Such adjustments are written back if the reasons for making them no longer hold.

1. Loans, guarantees and commitments

Loans are stated on the balance sheet at estimated realisable value, calculated taking into account the solvency of the debtors. Adjustmentsto the value of both capital and accrued interest are written off directly against the corresponding items. In subsequent years, the original values may be restored if the reasons for the write-down no longer apply. Doubtful and substandard loans are valued analytically, according to the debtor’s solvency situation, taking into consideration the possibleexistence of guarantees.Loans that have been restructured or are in course of restructuring are valued analytically by reference to the individual position or group,taking into account the related financial losses.Performing loans, and substandard loans that have not shown specific losses on the basis of the analytical valuation process, are writtendown on a lump sum basis, taking into consideration both ‘country risk’ and the individual risk of insolvency.Guarantees given are recorded at the total value of the exposure. Commitments to grant finance to counterparties are booked at the full amount. Guarantees and commitments are valued on the same criteria as those applied to loans. Expected losses are covered by the correspondingprovisions.As required by Banca d’Italia, the criteria adopted in classifying non-performing loans are set out below:

- a loan is classified as substandard when the borrower finds himself in difficulties judged to be of a temporary nature, and when there is a

Notes to the Financial Statements

64

prospect of the loan being readmitted to the category of performing loans;

- a loan is classified as doubtful when creditors have started proceedings or when the Bank or another creditor has started recoveryproceedings. In addition the Bank considers a loan to be doubtful if the debtor is in grave financial crisis not of a temporary nature whichis likely to lead to proceedings for recovery even if these have not yet been started;

- the Bank considers as restructured or in course of restructuring loans to enterprises or groups where the terms of the loans have beenrenegotiated to enable borrowers to restore their financial situation.

Our entire business of granting and managing loans is monitored constantly and systematically by our internal audit and by our risks controlteam.

2. Securities and off-balance sheet transactions (other than foreign currency transactions)

Transactions in bills and other securities are booked at the time of settlement.The instruments concerned are Treasury bills and similar securities eligible for refinancing with central banks, bonds and other debtsecurities and equities, as adjusted for both positive and negative issue spreads in accordance with legal and fiscal regulations.

2.1 Long-term investment securities

Instruments held as long-term investment securities are valued at historic purchase cost. Apart from participating interests, such long-terminvestment securities are written down if there is a lasting deterioration in the issuer’s solvency. Long-term investment securities are restoredto their original value when the reasons for any write-downs cease to apply. The difference between purchase cost and redemption valuefor fixed interest securities is charged to the interest account for the same securities on an accrual basis taking into account their residuallife. The securities booked under this category were included amongst long-term investment securities in the 1999 financial year. Theirallocation is the result of a decision by the Board of Directors and is handled within a framework also agreed by the Board of Directors. Asat 31 December 2002 they account for 21.3% of the Bank’s securities portfolio.These securities, if valued by the same criteria as trading securities, would have shown a capital loss of € 328 thousand as at 31 December2002. The market value of the long-term investment portfolio is determined on the basis of the arithmetical average of quotations duringthe six months preceding the end of the financial year.

2.2 Trading securities

Instruments not constituting long-term investment securities are valued at the lower of purchase cost, determined by the LIFO method onan annual basis, or market price determined as follows:

- for securities listed on Italian and foreign markets, on the basis of the arithmetical average of quotations during the month of December;

- for securities not listed on regulated markets, at purchase cost, adjusted if necessary to take account of any estimated loss in value,comparing them with the value of securities with similar maturities and yields traded on regulated markets.

Commitments to buy and sell securities under forward contracts concluded but still to be settled at the end of the financial year are valuedon a basis similar to that set out above. Repurchase agreements and reverse repurchase agreements are considered as loans on negotiable securities and the amounts received and paid are therefore shown as payables and receivables.The cost of such agreements and the yield from them, comprising interest coupons on securities and the differential between the spot andforward prices for such securities, are recorded on an accrual basis under the heading of interest in the profit and loss account.

3. Participating interests

The portfolio of participating interests is valued at purchase cost less any loss of value deemed to be permanent. The original value isrestored should the reasons for any write-downs cease to apply.

4. Foreign currency assets and liabilities (including off-balance sheet transactions)

Assets and liabilities in foreign currencies are converted into euros at the spot rate of exchange on the last day of the financial year.

Notes to the Financial Statements

65

Foreign currency costs and revenues are stated using the exchange rates applying at the time they were booked. Transactions are booked on the date of settlement.

5. Tangible fixed assets

Tangible fixed assets are recorded at purchase cost, including incidental charges, and stated net of accumulated depreciation. Depreciationis calculated on a straight-line basis according to the estimated useful lives of the assets concerned. The depreciation rates adopted aredeemed to be adequate and aligned with those normally accepted by the tax authorities for the various asset categories. Such rates arehalved for tangible fixed assets acquired during the financial year.

6. Intangible fixed assets

Intangible fixed assets are stated with the consent of the Board of Statutory Auditors.Multi-year costs arising out of extraordinary maintenance for leasehold improvements and refurbishing are amortised as follows:

- on a straight-line basis over five financial years in relation to multi-year costs formed before 1 January 1999;

- according to the duration of the lease (first renewal) for costs incurred subsequently.

The costs of goodwill are amortised on the basis of different criteria depending on whether or not they relate to extraordinary transactionsowing to the complexity of the network acquired or due to the size of the respective relationships.Goodwill paid upon the acquisition of the business lines from the Intesa Group, which took place in 2001, and from the Capitalia Group,which took place this year, is amortised according to the estimated period of recovery.In particular, with respect to the goodwill paid for the acquisition of the outlets from the Intesa Group, amortisation is calculated byestimating a useful life of 20 years and by using increasing differentiated rates for the years up to 2006 and, subsequently, on a straight-line basis.As regards the duration of goodwill, there are reasons to point to the exceptional nature of the operation and to the long-term economiceffects associated with the greater potential for development generated by a broader presence on the market.The reasons underlying the use of differentiated rates can be found in the development plan that the Bank has been working on with aview to incorporating the acquired branches into its own business model. This model involves integrating the banking network with theinsurance network, leading to a significant increase in productivity over the next five financial years. In the same period, measures must beimplemented to improve staff productivity with positive repercussions in terms of lower costs. The integration process can be expected tobe complete by the year 2007, at which time straight-line amortisation will be brought back.The rate applied in the 2002 financial year is 2% and is determined on the basis of a mathematical algorithm that takes into considerationthe difference between gross operating income and net interest income (core activities) of the branches taken over compared with the samefigures at completion of the integration process (2007). This difference is considered suitable to represent the effects of the aforementionedgrowth plan.In 2001 a rate of 5% (reduced to 2.5% given that the acquisition of the branches took place from an accounting point of view as from 1July 2001) was applied. The change made in 2002 to the original amortisation plan stemmed from the fact that only in 2002 was the processof integrating the branches completely defined, so that the bank was then able to assess systematically the amortisation plan at differentiatedrates.If the Company had not changed the method of amortisation and continued to apply the 5% rate in this year, the amount of amortisationwould have been in excess of € 5,935,770.The goodwill paid for the acquisition of the former Capitalia branches will be amortised as from the 2003 financial year for accrual reasons.Goodwill costs paid for other transactions are amortised over 10 financial years.The costs of migrating the data relating to the business lines acquired are amortised over 10 financial years.Software purchase and update costs are amortised over three financial years except for costs related to the setting up of the call centreservice, that being amortised over five financial years. Other multi-year costs are amortised over five financial years.With regard to multi-year costs which can be amortised over more than five financial years, this policy has been adopted as acquisition ofcommercial activities (such as goodwill for the network of financial advisers and of bank branches) and costs incurred for technological

Notes to the Financial Statements

reasons (migration of the information system) are expected to benefit the Bank for a much longer time than the usual amortisation period. The values shown in the accounts are stated at cost price less accrued amortisation.

7. Other items

Prepayments and accrued income, accruals and deferred incomePrepayments and accrued income, accruals and deferred income are recognised on an accrual basis, taking into account the conditions ofindividual relationships.

Provision for staff-leaving indemnitiesThe provision for staff-leaving indemnities covers the liability accrued as at 31 December 2002 to all employees on the payroll at year-endin accordance with the law, collective and supplementary labour agreements currently in force.

Provisions for liabilities and chargesThese provisions cover losses, charges or payables the existence of which is certain or likely, the amount of which and the date of occurrencecan be realistically estimated at year-end. The tax and duties provision represents provisions made to cover income tax on the basis of a prudent estimate of current and deferredtax liabilities, and stamp duties settled virtually.The other provisions include:- a provision for estimated losses on guarantees and commitments;- a provision for estimated risks on actions for revocation in insolvency;- a provision for charges, the existence of which is certain or likely, but the amount or date of occurrence of which is unspecified.

Provisions for credit risksThese provisions are intended to cover latent possible risks of insolvency in respect of loans outstanding. They have therefore no rectifyingfunction.

Treatment of deferred/prepaid income taxesThe financial statements show the effects of deferred and prepaid taxes in order to correctly calculate income tax charges for the period,irrespective of when they are posted.Assets arising out of prepaid taxation are entered on the balance sheet under item 130 ‘Other assets’ where there is reasonable certaintythat sufficient taxable income will be produced in future years to allow for their recovery. Liabilities arising out of deferred taxation are postedunder item 80 b) ‘Tax and duties provision’ in the amount not offset by assets arising out of prepaid taxation. Prepaid and deferred taxescan only be offset against each other within the context of the same individual tax and with reference to the same year of taxation.Assets arising out of prepaid taxation were posted for the first time in the 1999 financial year; in the following two financial years, theseassets were reduced in relation to the portion respectively absorbed without, however, incremental changes being made for the newly-formed portion.Prepaid and deferred taxes were quantified on the basis of the rates currently in force for future financial years.Changes in prepaid taxation and the respective economic effects are indicated in detail in the special sections of the notes to the financialstatements.

Posting of dividendsDividends from subsidiaries are posted according to the accruals principle so that the accounts show the effects of the profits distributedby the subsidiaries in the same period in which these are formed.The application of this principle has led to a double recording of dividends in this financial year. Having acquired the entire controllinginterest in Unipol Fondi in January 2002, Unipol Banca during the financial year collected the dividends distributed in relation to the profitsproduced in 2001. These dividends, amounting to € 36,704, were recorded amongst extraordinary income, in application of the accrualsprinciple. However, the dividends accrued in 2002 are entered under item 30 of the profit and loss account.Dividends from companies other than subsidiaries are recorded in the financial year in which they are actually distributed.

Notes to the Financial Statements

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Section 2 - Value adjustments and tax provisions

2.1 Value adjustments made in application of the tax laws only

None made.

2.2 Provisions made in application of the tax laws only

None made.

Notes to the Financial Statements

67

68

Cash and balances at central banks and post offices (item 10) The breakdown is shown below:

Loans and advances to banks (item 30)Breakdown of Item 30 ‘Loans and advances to banks’

1.1 Detail of item 30 ‘Loans and advances to banks’

Notes to the Financial Statements

Part B

NOTES TO THE BALANCE SHEET

Section 1 - Loans

This section illustrates the following items from assets:

31/12/2002 31/12/2001

Banknotes and coins 32,804 18,406

Balances at central banks - -

Balances at post offices 5 -

Total 32,809 18,406

31/12/2002 31/12/2001

- Loans and advances to banks 422,766 349,480

- Current accounts 25,489 45,418

- Repurchase agreements 409,449 66,306

- Other 39,918 -

Total 897,622 460,954

31/12/2002 31/12/2001

a) Loans and advances to central banks 5,328 37,529

b) Bills eligible for refinancing with central banks - -

c) Repurchase agreements 409,449 66,306

d) Securities lent - -

31/12/2002 31/12/2001

10. Cash and balances at central banks and post offices 32,809 18,406

30. Loans and advances to banks 897,622 460,954

40. Loans and advances to customers 1,646,775 739,063

Total 2,577,206 1,218,423

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1.2 Demand loans and advances to banks

Notes to the Financial Statements

1.3 Non-performing loans and advances to banks

Gross Total Netexposure value adjustments exposure

A. Non-performing loans 3 - 3

A.1 Doubtful loans - - -

A.2 Substandard loans - - -

A.3 Loans being restructured - - -

A.4 Restructured loans - - -

A.5 Unsecured loans exposed to country risk 3 - 3

B. Performing loans 897,619 - 897,619

Total 897,622 - 897,622

Doubtful Substandard Loans being Restructured Unsecured loansloans loans restructured loans exposed to country risk

A. Gross exposure as at 01/01/2002 - - - - -

A.1 Overdue interest - - - - -

B. Increases, out of - - - - 3

B.1 Transfers from performing loans - - - - -

B.2 Overdue interest - - - - -

B.3 Transfers from other categories of non-performing loans - - - - -

B.4 Other increases - - - - 3

C. Decreases, out of - - - - -

C.1 Transfers to performing loans - - - - -

C.2 Write-offs - - - - -

C.3 Collections - - - - -

C.4 Assignments - - - - -

C.5 Transfers to other categories of non-performing loans - - - - -

C.6 Other decreases - - - - -

D. Gross exposure as at 31/12/2002 - - - - 3

D.1 Overdue interest - - - - -

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Loans and advances to customers (item 40)Breakdown of item 40 ‘Loans and advances to customers’

1.5 Detail of item 40 ‘Loans and advances to customers’

The breakdown given in the table above does not include any positions acquired from Capitalia.

Notes to the Financial Statements

1.4 Overall value adjustments to loans and advances to banks

Doubtful Substandard Loans being Restructured Unsecured Performingloans loans restructured loans loans exposed loans

to country risk

A. Value adjustments as at 01/01/2002

A.1 Overdue interest - - - - - -

B. Increases, out of - - - - - -

B.1 Value adjustments, of which - - - - - -

B1.1 Overdue interest - - - - - -

B.2 Amounts released from provisions for credit risks - - - - -

B.3 Transfers from other categories of non-performing loans - - - - - -

B.4 Other increases - - - - - -

C. Decreases, out of - - - - - -

C.1 Value re-adjustments, of which - - - - - -

C.1.1 Overdue interest - - - - - -

C.2 Value re-adjustments upon collection, of which - - - - - -

C.2.1 Overdue interest - - - - - -

C.3 Write-offs - - - - - -

C.4 Transfers to other categories of non-performing loans - - - - - -

C.5 Other decreases - - - - - -

D. Value adjustments as at 31/12/2002 - - - - - -

D.1 Overdue interest - - - - - -

31/12/2002 31/12/2001

- Current accounts 629,044 295,771

- Mortgage loans 470,487 238,405

- Prefinancing 223,659 89,178

- Other loans not settled in current accounts 172,335 11,983

- Portfolio risk 5,516 1,417

- Net doubtful loans 9,838 5,652

- Loans for securitization in progress 135,071 94,167

- Other 825 2,940

Total 1,646,775 739,063

31/12/2002 31/12/2001

a) Bills eligible for refinancing with central banks 1,417 569

b) Repurchase agreements - -

c) Loans of securities - -

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1.6 Secured loans to customersLoans to customers secured or guaranteed wholly or in part, excluding those acquired from Capitalia, are set forth below (secured orguaranteed portion only):

1.7 Demand loans and advances to customers

Doubtful loans (including overdue interest)

Net doubtful loans, including overdue interest, were equal to 0.60% of outstanding loans.

Receivables, out of overdue interestReceivables out of overdue interest, net of value adjustments, are broken down as follows:

Notes to the Financial Statements

31/12/2002 31/12/2001

a) Mortgage loans 155,071 205,493

b) Loans secured on: 44,994 19,709

1. Cash deposits 50 415

2. Securities 21,162 13,822

3. Other instruments 23,782 5,472

c) Loans guaranteed by: 280,344 100,239

1. Governments - -

2. Other public bodies - -

3. Banks 138,365 -

4. Other operators 141,979 100,239

Total 480,409 325,441

Gross Total Netexposure value adjustments exposure

A. Non-performing loans 40,755 18,421 22,334

A.1 Doubtful loans 27,259 17,421 9,838

A.2 Substandard loans 12,989 847 12,142

A.3 Loans being restructured - - -

A.4 Restructured loans - - -

A.5 Unsecured loans exposed to country risk 507 153 354

B. Performing loans 1,626,113 1,672 1,624,441

Total 1,666,868 20,093 1,646,775

31/12/2002 31/12/2001

Doubtful loans (including overdue interest) 9,838 5,652

31/12/2002 31/12/2001

a) Doubtful loans 7 21

b) Other loans 125 87

Total overdue interest 132 108

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1.8 Changes in non-performing loans to customers

Notes to the Financial Statements

Doubtful Substandard Loans being Restructured Unsecured loansloans loans restructured loans exposed to country risk

A. Gross exposure as at 31/12/2002 21,180 8,691 - - -

A.1 Overdue interest 1,423 42 - - -

B. Increases, out of 8,555 24,911 - - 507

B.1 Inflows from performing loans 77 21,742 - - -

B.2 Overdue interest 368 173 - - -

B.3 Transfers from other categories of non-performing loans 7,276 - - - -

B.4 Other increases 834 2,996 - - 507

C. Decreases, out of 2,476 20,613 - - -

C.1 Outflows to performing loans - 4,591 - - -

C.2 Write-offs 1,279 - - - -

C.3 Collections 1,197 8,540 - - -

C.4 Assignments - - - - -

C.5 Transfers to other categories of non-performing loans - 7,276 - - -

C.6 Other decreases - 206 - - -

D. Gross exposure as at 31/12/2002 27,259 12,989 - 507

D.1 Overdue interest 1,250 94 - - -

Doubtful Substandard Loans being Restructured Unsecured Performingloans loans restructured loans loans exposed loans

to country risk

A. Value adjustments as at 01/01/2002 15,528 608 - - - -

A.1 Overdue interest 1,402 - - - - -

B. Increases, out of 3,425 357 - - 153 2,069

B.1 Value adjustments, of which 3,126 261 - - 153 2,069

B1.1 Overdue interest 320 - - - - -

B.2 Amounts released from provisions for credit risks - - - - - -

B.3 Transfers from other categories of non-performing loans 44 - - - - -

B.4 Other increases 255 96 - - - -

C. Decreases, out of 1,532 118 - - - 397

C.1 Value re-adjustments, of which - - - - - -

C.1.1 Overdue interest - - - - - -

C.2 Value re-adjustments upon collection, of which 253 67 - - - -

C.2.1 Overdue interest 149 - - - - -

C.3 Write-offs 1,279 7 - - - 397

C.4 Transfers to other categories of non-performing loans - 44 - - - -

C.5 Other decreases - - - - - -

D. Value adjustments as at 31/12/2002 17,421 847 - - 153 1,672

D.1 Overdue interest 1,243 - - - - -

1.9 Changes in overall value adjustments to loans and advances to customers

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Notes to the Financial Statements

Section 2 - Securities

Securities owned by the Bank are analysed as follows in the financial statements:

The securities portfolio analysed above includes trading and long-term investment securities.

2.1 Long-term investment securitiesThe table below shows the book value of long-term investment securities, compared with their market value, determined on the basis ofthe average prices recorded in the last six months.

The book value of long-term investment securities as set out above, is compared below with market value based on the average prices ofDecember 2002.

31/12/2002 31/12/2001

- Treasury Bills and other eligible bills for refinancing with central bank (item 20) 15,752 21,639

- Bonds and other debt securities (item 50) 129,453 61,685

- Stocks, shares and other equity securities (item 60) - 206

Total 145,205 83,530

Items/Value Book value Market value Book value Market valueas at second half-year as at second half-year

31/12/2002 2002 31/12/2001 2001

1. Debt securities 30,877 30,374 25,798 24,746

1.1 Government securities 12,647 12,144 17,672 16,807

- listed 12,647 12,144 17,672 16,807

- unlisted - - - -

1.2 Other securities 18,230 18,230 8,126 7,939

- listed 18,230 18,230 8,126 7,939

- unlisted - - - -

2. Equity securities - - - -

- listed - - - -

- unlisted - - - -

Total 30,877 30,374 25,798 24,746

Items/Value Book value Market value Book value Market value31/12/2002 December 2002 31/12/2001 December 2001

1. Debt securities 30,877 30,601 25,798 24,724

1.1 Government securities 12,647 12,371 17,672 16,917

- listed 12,647 12,371 17,672 16,917

- unlisted - - - -

1.2 Other securities 18,230 18,230 8,126 7,807

- listed 18,230 18,230 8,126 7,807

- unlisted - - - -

2. Equity securities - - - -

- listed - - - -

- unlisted - - - -

Total 30,877 30,601 25,798 24,724

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2.2 Changes in long-term investment securities during the financial year

Purchases relate to the subscription of junior securities issued by Grecale Srl as part of securitising performing loans issued by Unipol Banca.Sales relate to the full assignment of a US government security expressed in dollars, sold toward the end of the financial year at a gain of€ 34,000.Other downward changes include € 729 thousand owing to the fluctuation of exchange rates on the security sold, offset in economic termsby proceeds from hedging transactions of € 705 thousand.

Notes to the Financial Statements

31/12/2002 31/12/2001

A. Balance as at 01/01/2002 25,798 25,521

B. Increases 18,266 305

B1. Purchases 18,230 -

B2. Value re-adjustments - -

B3. Transfers from trading portfolio - -

B4. Other changes 36 305

C. Decreases 13,187 28

C1. Sales 4,933 -

C2. Repayments 7,500 -

C3. Value adjustments - -

C4. Transfers to trading portfolio - -

C5. Other changes 754 28

D. Balance as at 31/12/2002 30,877 25,798

Items/Value Book value Market value Book value Market value31/12/2002 December 2002 31/12/2001 December 2001

1. Debt securities 114,328 114,522 57,526 57,549

1.1 Government securities 92,254 92,434 47,469 47,486

- listed 92,254 92,434 47,469 47,486

- unlisted - - - -

1.2 Other securities 22,074 22,088 10,057 10,063

- listed 15,009 15,023 5,468 5,474

- unlisted 7,065 7,065 4,589 4,589

2. Equity securities - - 206 206

- listed - - 206 206

- unlisted - - - -

Total 114,328 114,522 57,732 57,755

2.3 Trading securities

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2.4 Changes in trading securities during the financial year

Volumes traded during the financial year, broken down according to type of security, are summarised below:

Notes to the Financial Statements

31/12/2002 31/12/2001

A. Balance as at 01/01/2002 57,732 48,045

B. Increases 1,153,215 901,701

B.1 Purchases 1,146,365 896,546

- Debt securities 1,141,816 866,113

- Government bonds 254,534 90,878

- Other securities 887,282 775,235

- Equity securities 4,549 30,433

B.2 Value re-adjustments and write-ups - 8

B.3 Transfers from long-term investment portfolio - -

B.4 Other changes 6,850 5,147

C. Decreases 1,096,619 892,014

C.1 Sales and repayments 1,096,552 891,861

- Debt securities 1,091,753 860,952

- Government bonds 210,054 90,397

- Other securities 881,699 770,555

- Equity securities 4,799 30,909

C.2 Value adjustments 24 152

C.3 Transfers to long-term investment portfolio - -

C.5 Other changes 43 1

D. Balance as at 31/12/2002 114,328 57,732

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Section 3 - Participating interests

Total participating interests held are broken down as follows:

During the 2002 financial year, the Gruppo Bancario Unipol Banca was re-formed. In January, the Bank acquired the entire shareholding inUnipol Fondi Ltd, previously held by the parent company Unipol Assicurazioni.It then purchased a 60% stake in the capital of Grecale Srl, a vehicle company for the loan securitisation transaction which took place lastyear and which was completed in March 2002.

3.1 Major participating interests

The shareholders’ equity of the subsidiaries includes the profit for the financial year 2002, for the part allocated to the reserve alone.The negative differences between the value of the shareholders’ equity for the financial year and the book value of the participating interestsare due to the goodwill paid at the time of the acquisition.

3.2 Amounts due to and from Group undertakings

Notes to the Financial Statements

Name Head Shareholders’ Profit/ Quota Book

office equity Loss % value

A. Subsidiaries

1. Unipol Fondi Ltd Dublin 129 38 100% 1,550

2. Grecale Srl Bologna 10 - 60% 12

B. Companies subject to relevant influence -

Total 1,562

31/12/2002 31/12/2001

Participating interests (item 70) 6,929 2,563

Participating interests in Group undertakings (item 80) 1,562 -

Total 8,491 2,563

31/12/2002 31/12/2001

a) Assets 117,381 2,374

1. Due from banks, of which - -

subordinated -

2. Due from financial institutions, of which - -

subordinated

3. Due from other customers, of which 98,926 2,374

subordinated - -

4. Bonds and other debt securities, of which 18,455 -

subordinated 18,230 -

b) Liabilities 794,157 282,238

1. Due to banks - -

2. Due to financial institutions 21,422 17,038

3. Due to other customers 771,695 265,200

4. Debts evidenced by certificates 1,040 -

5. Subordinated liabilities - -

c) Guarantees and commitments 15,488 19,861

1. Guarantees given 15,488 19,861

2. Commitments - -

-

- -

77

3.3 Amounts due to and from non-Group undertakings

3.4 Breakdown of item 70 ‘Participating interests’

3.5 Breakdown of item 80 ‘Participating interests in Group undertakings’

Notes to the Financial Statements

31/12/2002 31/12/2001

a) Assets 48,386

1. Due from banks, of which

subordinated - -

2. Due from financial institutions, of which 48,386 -

subordinated - -

3. Due from other customers, of which

subordinated - -

4. Bonds and other debt securities, of which

subordinated - -

b) Liabilities 53,115 17,036

1. Due to banks - -

2. Due to financial institutions 4,520 3,700

3. Due to other customers 1,005 134

4. Debts evidenced by certificates 47,590 13,202

5. Subordinated liabilities - -

c) Guarantees and commitments 10 10

1. Guarantees given 10 10

2. Commitments - -

31/12/2002 31/12/2001

a) In banks - -

1. Listed - -

2. Unlisted - -

b) In financial institutions 5,966 1,806

1. Listed - -

2. Unlisted 5,966 1,806

c) Other 963 757

1. Listed - -

2. Unlisted 963 757

Total 6,929 2,563

31/12/2002 31/12/2001

a) In banks - -

1. Listed - -

2. Unlisted - -

b) In financial institutions 1,562 -

1. Listed - -

2. Unlisted 1,562 -

c) Other - -

1. Listed - -

2. Unlisted - -

Total 1,562 -

- -

-

- -

- -

78

3.6 Changes in participating interests during the financial year

3.6.1 Participating interests in Group undertakings

3.6.2 Other participating interests

Sub-item F, ‘Total value adjustments’, refers to overall losses accumulated on the participating interest in Unicard SpA.

Breakdown of changes in participating interests in Group undertakings

Notes to the Financial Statements

31/12/2002 31/12/2001

A. Balance as at 01/01/2002 - -

B. Increases 1,562 -

B.1 Purchases 1,562 -

B.2 Value re-adjustments - -

B.3 Write-ups - -

B.4 Other changes - -

C. Decreases - -

C.1 Sales - -

C.2 Value adjustments, of which - -

- permanent write-downs - -

C.3 Other changes - -

D. Balance as at 31/12/2002 1,562 -

E. Total write-ups - -

F. Total value adjustments - -

31/12/2002 31/12/2001

A. Balance as at 01/01/2002 2,563 3,045

B. Increases 4,366 2,946

B.1 Purchases 4,366 -

B.2 Value re-adjustments - -

B.3 Write-ups - -

B.4 Other changes - 2,946

C. Decreases - 3,428

C.1 Sales - 3,428

C.2 Value adjustments, of which - -

- permanent write-downs - -

C.3 Other changes - -

D. Balance as at 31/12/2002 6,929 2,563

E. Total write-ups - -

F. Total value adjustments 1,272 1,272

Sub-item B.1 - Purchases Amount

Unipol Fondi Ltd 1,550

Grecale Srl 12

Total 1,562

79

Breakdown of changes in non-Group participating interests

Section 4 - Tangible and intangible fixed assets

Tangible fixed assets, net of value adjustments, amount to € 13,712 thousand and, compared with their historical cost, are depreciated by35%. Intangible fixed assets, net of value adjustments, amount to € 369,035 thousand and, compared with their historical book value, areamortised by 4.4%.The increase in the value of such assets is mainly due to:- the value of goodwill for the acquisition of the business line from the Capitalia Group;- the renovation of premises to make them suitable for use by new banking and financial counters;- work already carried out by Capitalia on premises included in the branch disposal.

4.1 Changes in tangible fixed assets during the financial year

Notes to the Financial Statements

31/12/2002 31/12/2001

A. Balance as at 01/01/2002 9,562 5,483

B. Increases 6,483 5,513

B.1 Purchases 6,475 5,506

B.2 Value re-adjustments 8 -

B.3 Write-ups - -

B.4 Other changes - 7

C. Decreases 2,333 1,434

C.1 Sales 63 8

C.2 Value adjustments 2,217 1,426

a) Depreciation 2,217 1,426

b) Permanent write-downs - -

C.3 Other changes 53 -

D. Balance as at 31/12/2002 13,712 9,562

E. Total write-ups - -

F. Total value adjustments 7,262 5,250

a) Depreciation 7,262 5,250

b) Permanent write-downs - -

Sub-item B.1 - Purchases Amount

Unipol Merchant Spa 4,061

CSE Srl 206

Agefin Spa 99

Total 4,366

80

4.2 Changes in intangible fixed assets during the financial year

Section 5 - Other assets

5.1 Breakdown of item 130 ‘Other assets’

Notes to the Financial Statements

31/12/2002 31/12/2001

A. Balance as at 01/01/2002 201,235 7,397

B. Increases 174,906 200,923

B.1 Purchases 174,906 200,923

B.2 Value re-adjustments - -

B.3 Write-ups - -

B.4 Other changes - -

C. Decreases 7,106 7,085

C.1 Sales - -

C.2 Value adjustments 7,106 7,085

a) Depreciation 7,106 7,085

b) Permanent write-downs - -

C.3 Other changes - -

D. Balance as at 31/12/2002 369,035 201,235

E. Total write-ups - -

F. Total value adjustments 17,114 10,008

a) Depreciation 17,114 10,008

b) Permanent write-downs - -

31/12/2002 31/12/2001

Net receivables for financial transactions under dispute: 500 500

- nominal value of receivables 5,003 5,003

- adjusting fund -4,503 -4,503

Receivables from Inland Revenue: 10,578 7,269

- tax surplus refund 4,211 4,211

- interest accrued 1,535 1,325

- tax credit on dividends and withheld tax 138 24

- advance payments 2,898 1,286

- other receivables from Inland Revenue 1,796 423

Securities transactions to be settled 1,585 774

Premiums paid for options 857 65

Current account checks being processed 2,480 12,710

Non-interest bearing guarantee deposits 34 97

Debits being processed 26,512 29,688

Bill portfolio - 399

Amounts in transit with subsidiaries 1,666 61

Corporate tax (IRPEG) prepaid taxation 2,785 2,886

Regional tax (IRAP) prepaid taxation 349 197

Other 7,331 9,661

Total 54,677 64,307

81

As regards disputed derivatives transactions, the Board of Directors wishes to inform the Shareholders that the judgment of first instancewent against the Bank which has therefore increased the existing provision stated under ‘Other provisions’ up to 90% of the amount. Onthe basis of legal opinion, the Board of Directors confirms its belief that it may obtain partial satisfaction from the courts and is thereforecarrying on the proceedings. Allocations to the adjustment reserve have been fully recovered in taxation in the related years.

No value adjustments have been made to any of the other assets shown as collectible in the above table.

As regards ‘Corporate and regional tax prepaid taxation’, these amounts have been stated according to the principle of prudence as areasonable certainty exists that the Bank’s growth plans for future years will generate a sufficient taxable income to absorb the costs whosedeductibility has been deferred under the present tax laws.The financial statements show the total value of assets arising out of prepaid taxation in relation to all income components, pertaining tothe present financial year and also to previous financial years, which have deferred taxation relevance as at 31 December 2002. These werequantified on the basis of the rates currently in force for future financial years: more specifically, for the regional tax (Irap), the basic rate of4.25% was applied without therefore considering the incremental effects associated with regional surcharges, whereas for corporate tax(Irpeg), the rate of 19% was applied for the net costs that will be deductible in 2003 and the rate of 34% for those that will be deductiblein later financial years. The different Irpeg rates are due to DIT surpluses from previous financial years which are expected to be absorbedin the next financial year.

The following table shows the changes in assets arising out of prepaid taxation during the financial year.

Table A. Assets arising out of prepaid taxation

Notes to the Financial Statements

Irpeg Irap Totale

1. Balance as at 01/01/2002 2,886 197 3,083

2. Increases 1,266 240 1,506

2.1 Prepaid taxation of the financial year 1,266 240 1,506

2.2 Other increases - - -

3. Decreases 1,367 88 1,455

3.1 Prior financial years’ prepaid taxation 1,367 88 1,455

3.2 Other decreases - - -

4. Balance as at 31/12/2002 2,785 349 3,134

82

5.2 Breakdown of item 140 ‘Prepayments and accrued income’

5.4 Breakdown of subordinated assets

Notes to the Financial Statements

Accrued income 31/12/2002 31/12/2001

- Interest and other income on securities 1,241 889

- Interest on loans to banks 1,616 469

- Interest on loans to customers 3,885 921

- Interest on interest rate swaps 733 206

- Price difference on repurchase agreements with customers 36 44

- Withholding tax on interest due to customers 69 90

Total 7,580 2,619

Prepayments 31/12/2002 31/12/2001

- Rents 217 72

- Insurance premiums 91 43

- Telephone costs - data lines 40 0

- Maintenance expenditure 13 22

- Luncheon vouchers for staff 62 68

- Advertising 48 54

- Securities depository and custody 0 42

- Other prepayments 2 30

Total 473 331

31/12/2002 31/12/2001

a) Receivables from banks - -

b) Receivables from customers - -

c) Bonds and other debt securities 28,428 482

Total 28,428 482

83

Section 6 - Deposits

Breakdown of item 10 ‘Deposits by banks’

The overall total is shown after deduction of non-liquid items.

6.1 Detail of item ‘Deposits by banks’

Breakdown of item 20 ‘Deposits by customers’

6.2 Detail of item ‘Deposits by customers’

Breakdown of item 30 'Debts evidenced by certificates'

‘Other securities’ consist of certified checks issued on customers’ order.Debts evidenced by certificates include accruals on zero coupon securities of € 1,913 thousand.

Notes to the Financial Statements

31/12/2002 31/12/2001

a) Payables on demand 69,156 26,180

- current accounts 156 26,180

- demand deposit accounts 69,000 -

b) Payables with agreed maturity dates or period of notice 360,440 22,418

- time deposit accounts 337,427 22,418

- other 23,013 -

Total 429,596 48,598

31/12/2002 31/12/2001

a) Repurchase agreements - -

b) Securities lent - -

31/12/2002 31/12/2001

a) Payables on demand 1,554,777 958,952

- current accounts 1,477,156 920,014

- demand deposit accounts 77,621 38,938

b) Payables with agreed maturity dates or period of notice 511,144 87,554

- time savings deposit accounts 1,070 662

- repurchase agreements 510,074 86,892

Total 2,065,921 1,046,506

31/12/2002 31/12/2001

a) Repurchase agreements 510,074 86,892

b) Securities lent - -

31/12/2002 31/12/2001

Bonds 96,699 47,155

Certificates of deposit and interest-bearing bonds 36,197 15,394

Other securities 29,440 11,835

Total 162,336 74,384

-

84

Section 7 - Provisions

The provisions illustrated in this section are as follows:

Changes in item 70 ‘Provision for staff-leaving indemnity’

This item recorded a significant increase in 2002 and 2001 owing to the transfer of provisions for staff-leaving indemnity arising from theacquisition of business lines from the Capitalia Group and the Intesa Group. The closing balance provided full coverage of the rights accrued by all staff on the payroll as at 31 December 2002.

7.1 Breakdown of item 90 ‘Provisions for credit risks’

7.2 Changes during the financial year in ‘Provisions for credit risks’

Notes to the Financial Statements

31/12/2002 31/12/2001

Provision for staff-leaving indemnity (item 70) 17,099 7,030

Provisions for liabilities and charges (item 80): 6,268 2,758

- provisions for taxes and duties (item 80b) 5,188 2,756

- other provisions (item 80c) 1,080 2

Provision for credit risks (item 90) 930 930

Total 24,297 10,718

31/12/2002 31/12/2001

A. Balance as at 01/01/2002 7,030 991

B. Increases 11,889 6,900

B.1 Amounts allocated for the financial year 1,936 1,252

B.2 Transfers 9,953 5,648

C. Decreases 1,820 861

C.1 Amounts released out of staff leaving and advances paid 787 138

C.2 Other decreases 1,033 723

D. Balance as at 31/12/2002 17,099 7,030

31/12/2002 31/12/2001

Provision for credit risks 930 930

Provision for credit risks, overdue interest - -

Total 930 930

31/12/2002 31/12/2001

A. Balance as at 01/01/2002 930 826

B. Increases - 104

B.1 Amounts allocated for the financial year - 104

B.2 Other increases - -

C. Decreases - -

C.1 Amounts released - -

C.2 Other decreases - -

D. Balance as at 31/12/2002 930 930

85

Notes to the Financial Statements

As previously described in the introduction to the Notes to the financial statements, this sub-item was reclassified in relation to the previousfinancial year, insofar as a value adjustment, previously included amongst the provisions for liabilities, was posted to directly reduce item130 ‘Other assets’. The reclassification was also carried out on values relating to the previous financial year in order to facilitate comparison.The provision for risks on revocation actions is intended to cover the potential risk associated with the current action for revocation ininsolvency relating to companies of the Fochi Group, cautiously estimated on the basis of the valuations expressed by our lawyers.The provision for sundry future charges is intended to cover the estimated charges relating to the variable item of remuneration pertainingto the financial year, the cost of which is allocated to the Profit and Loss Account under item 80 a) Staff costs.

31/12/2002 31/12/2001

Provision for risks on guarantees received 39 -

Provision for risks on revocation actions 207 -

Provision for sundry future charges 834 2

Total 1,080 2

7.3 Breakdown of sub-item 80 (c) ‘Provisions for liabilities and charges (Other provisions)’

31/12/2002 31/12/2001

A. Balance as at 01/01/2002 2,756 1,234

B. Increases 5,167 2,746

B.1 Amounts allocated for current income tax 2,010 1,150

B.2 Amounts allocated for prior financial years’ tax amnesty 637 -

B.3 Amounts allocated for indirect taxes 2,520 1,596

C. Decreases 2,735 1,224

C.1 Amounts released 2,735 1,224

C.2 Other decreases - -

D. Balance as at 31/12/2002 5,188 2,756

Changes in sub-item 80 (b) ‘Tax and duties provision’

Provisions for direct taxes amount to € 1,682 thousand for Irap and € 328 thousand for Irpeg. The Irpeg charge is moderate owing to theconsistent tax losses of previous financial years used to offset this charge.The Board of Directors chose to use the right of all-inclusive tax amnesty introduced by Article 9 of Law 289 of 27 December 2002 (‘condonotombale’) for direct taxes and VAT, and in accordance with the principle of prudence, made provisions for the respective charge in the 2002accounts.Provisions for indirect taxes correspond to the stamp duty owed on banking agreements, issued documents and stock exchange contracts.

31/12/2002 31/12/2001

Balance as at 01/01/2002 2 9

Amounts allocated: 1,080 2

- for risks on guarantees received 39 -

- for risks on revocation actions 207 -

- for staff charges 834 -

- for other charges - 2

Amounts released 2 9

Balance as at 31/12/2002 1,080 2

Changes in sub-item 80 (c) ‘Provisions for liabilities and charges (Other provisions)’

86

Changes in ‘Assets arising out of prepaid taxation’ and ‘Liabilities arising out of deferred taxation’

The accounts do not show any liabilities arising out of deferred taxation as these amount to just € 362 and have been offset against assetsarising out of prepaid taxation. Those offset amounts corresponded to assets and liabilities relating to the same tax and the same year oftaxation.Information on the treatment of deferred taxation is given in section 5, in the comments under item 130 ‘Other assets’.

Section 8 - Share capital, equity reserves, provision for general banking risks andsubordinated liabilities

In this section, comments are made on the following items:

Subordinated liabilities

Under the terms of the (a) debenture loan, 60 months after the issue and with the prior agreement of Banca d’Italia, the Bank may redeemall or part of the bonds after giving at least two months’ notice. The rules of the subordinated loan under b) specify a maximum issue amount of € 25m.Under the terms of both debenture loans, should the Bank go into liquidation, they will be repaid only after all creditors not equallysubordinate have been satisfied. The terms of the issue do not provide for the conversion of the subordinated liability into capital or into another type of liability.

Shareholders' equity

The overall changes to the items of the shareholders’ equity during 2002 are provided in a special statement attached to the Notes to thefinancial statements.The share capital is subscribed and paid-up in full and, at the end of the financial year, consists of 284,200,000 ordinary shares, each witha nominal value of 1 euro.On 9 December 2002, in anticipation of the acquisition of the business line from the Capitalia Group, the Board of Directors decided to callan Extraordinary General Meeting to approve a proposal to increase the share capital by € 142,100 thousand, through payment of a sharepremium of 30% corresponding to € 42,630 thousand. The capital increase operation was completed on 13 January 2003, with theapproval of the Meeting and simultaneous subscription on the part of the shareholders.

Notes to the Financial Statements

31/12/2002 31/12/2001

Subordinated liabilities (item 110) 42,840 22,883

Share capital (item 120) 284,200 284,200

Equity reserves (item 140) 37,633 1,114

a) Legal reserve 267 112

d) Other reserves 37,366 1,002

Profit (loss) for the financial year (item 170) 5,319 1,554

Total shareholders' equity 327,152 286,868

Total shareholders' equity and subordinated liabilities 369,992 309,751

Interest Issue Expiry Early Currency Amountrate date date repayment

a)Subordinated debenture loan 6% fixed 15/06/2001 15/06/2011 Yes Euro 22,883

Euribor 6 monthsb)Subordinated debenture loan (1st coupon: 2,25) 01/04/2002 01/04/2007 No Euro 19,957

Total 42,840

87

The respective payment was made prior to the resolution of the Meeting. At the end of 2002, payments for the capital increase totalled€ 34,965 thousand, which formed an equity reserve and were posted under the item ‘Other provisions’.On 2 January 2003, the parent company Unipol Assicurazioni paid an amount of € 149,757 thousand, corresponding to the sharesavailable to it under the option. On 13 January 2003, the remaining amount of € 8 thousand was paid.

Shareholders’ equity for supervisory purposes

Since the effective date of the acquisition of the business line from the Capitalia group and the total payments to increase the share capitaldid not coincide exactly, the shareholders’ funds for supervisory purposes at year-end are negative as they are reduced by the sums paidon account of goodwill. This phenomenon was, however, short-lived. Indeed, on 2 January 2003, with the capital contribution received fromthe parent company as mentioned above, the adequacy of the Bank’s shareholders’ funds for supervisory purposes was restored.For the purposes of formal precision, table 8.1 shows the exact status of the shareholders’ equity for supervisory purposes and thesupervisory requirements at the close of the financial year. To further understanding, we have also provided a comparison of the samevalues as at 31 December 2002, before the business line acquisition agreement came into effect (the operation was contractually set tocome into effect at 11:59 p.m. on 31 December 2002) and as at 2 January 2003, following the payment of the capital contribution.It is specified that the value of the weighted risk assets acquired from the Capitalia Group, included in the values given in table 8.1 and table8.2 (column relating to 2 January 2003) is an estimated value, as all the analytical information necessary to quantify accurately the respectiveweighting coefficients with reference to 31 December 2002 is not available.

8.1 Shareholders’ equity and minimum supervisory requirements as at 31 December 2002

Notes to the Financial Statements

Items/Value Amount

A. Shareholders’ equity for supervisory purposes

A.1 Core capital (Tier 1) -39,017

A.2 Supplementary capital (Tier 2) 37,275

A.3 Amounts to be deducted from above -100

A.4 Shareholders’ equity for supervisory purposes -39,117

B. Minimum supervisory requirements

B.1 Credit risks 99,699

B.2 Country risks 4,672

including:

- risks on trading portfolio 2,424

- currency risks 2,248

B.3 Tier 3 subordinated loans -

B.4 Other minimum requirements 11,515

B.5 Total minimum requirements 115,886

C. Risk assets and supervisory ratios

C.1 Risk-weighted assets 1,654,851

C.2 Ratio of Tier 1 core capital to risk-weighted assets N/A

C.3 Ratio of supervisory capital to risk-weighted assets N/A

8.2 Shareholders’ equity and minimum supervisory requirements: as at 31/12/2002 (before coming intoeffect of acquisition of business line) and as at 02/01/2003

The solvency ratio (meaning the ratio between the shareholders’ equity for supervisory purposes and the net weighted assets) is estimatedto be 10.39% on 2 January 2003, which also includes the assets acquired from the Capitalia Group.

Also, the shareholders’ equity for supervisory purposes were further increased in the months immediately following the end of the financialyear and other increases will follow in the forthcoming months. On 24 March 2003, the subordinated loan issued during 2002 was furthersubscribed in the amount of € 5,043 thousand. An application was also lodged with the Banca d’Italia for a new issue of a subordinatedloan with a total value of € 25 m to be offered for subscription in future months.

Notes to the Financial Statements

88

Items/Value 31/12/2002 02/01/2003

at 11:58 p.m.

A. Shareholders’ equity for supervisory purposes

A.1 Core capital (Tier 1) 124,383 110,740

A.2 Supplementary capital (Tier 2) 37,275 37,275

A.3 Amounts to be deducted from above -100 -100

A.4 Shareholders’ equity for supervisory purposes 161,558 147,915

B. Minimum supervisory requirements

B.1 Credit risks 69,689 99,699

B.2 Country risks 4,672 4,672

including

- risk on trading portfolio 2,424 2,424

- currency risks 2,248 2,248

B.3 Tier 3 subordinated loans - -

B.4 Other minimum requirements 11,515 11,515

B.5 Total minimum requirements 85,876 115,886

C. Risk assets and supervisory ratios

C.1 Risk-weighted assets 1,226,308 1,654,851

C.2 Ratio of Tier 1 core capital to risk-weighted assets 10.14 6.69

C.3 Ratio of supervisory capital to risk-weighted assets 13.17 8.94

Section 9 - Other liabilities

9.1 Breakdown of item 50 ‘Other liabilities’

9.2 Breakdown of item 60 ‘Accruals and deferred income’

9.3 Value adjustments for accruals and deferred income

Notes to the Financial Statements

89

31/12/2002 31/12/2001

Due to Inland Revenue 3,571 3,683

Due to social security institutions 1,489 1,290

Due to pension fund 329 323

Bank transfers being processed 4,841 8,749

Due to suppliers 5,703 6,520

Utility bills paid by customers 333 167

Check and bill discounts- subject to/after collection 47,447 -

Portfolio risk liabilities 326 128

Inter-branch transit items 173 36

Items being processed 22,970 56,366

Option premiums received 871 69

Other liabilities 30,442 13,947

Total 118,495 91,278

Accruals 31/12/2002 31/12/2001

- Interest on certificates of deposit 358 294

- Interest and other charges on trading in securities portfolio - 28

- Interest on variable-rate bonds 102 150

- Interest on fixed-rate bonds 1,037 28

- Interest on subordinated debenture loans 223 60

- Interest due to customers 2,320 255

- Interest due to banks 961 27

- Rent on premises 28 53

- Interest on interest rate swaps 194 121

- Other 2 15

Total 5,225 1,031

Deferred income 31/12/2002 31/12/2001

- Interest on agricultural loans 96 40

- Interest on discounted commercial bills 31 5

- Commissions on endorsement credits 312 259

- Other 77 1

Total 516 305

31/12/2002 31/12/2001

a) Liabilities

30. Debts evidenced by certificates 1,913 1,533

b) Assets - -

Notes to the Financial Statements

90

Section 10 - Guarantees and commitments

10.1 Breakdown of item 10 ‘Guarantees given’

31/12/2002 31/12/2001

a) Commercial endorsement credits: 136,604 103,194

- Documentary credits 3,945 917

- Bankers’ acceptances 302 54

- Endorsements and sureties 132,357 102,223

b) Financial endorsement credits: 78,031 230,016

- Endorsements and sureties 78,031 230,016

- Bankers’ acceptances - -

- Other - -

c) Assets lodged in guarantee - -

Total 214,635 333,210

10.2 Breakdown of item 20 ‘Commitments’

The amounts certain to be called on correspond to the Bank’s commitments in relation to securities receivable. Those not certain to be calledon correspond to commitments arising out of the participation to the Fondo Interbancario di Tutela dei Depositi (Interbank DepositGuarantee Fund).Risks connected with guarantees and commitments to grant finance are valued in a similar way to demand loans and advances.

31/12/2002 31/12/2001

a) Commitments to grant finance (certain to be called on) 14,904 954

b) Commitments to grant finance (not certain to be called on) 1,732 503

Total 16,636 1,457

10.3 Assets lodged as guarantee for the Bank’s own liabilities

31/12/2002 31/12/2001

- Securities to guarantee repurchase agreements 87,526 38,498

- Securities lodged with Banca d’Italia to guarantee advances 2,500 2,500

- Securities guaranteeing bankers’ drafts 6,042 4,200

Total 96,068 45,198

10.4 Unused margin on lines of credit

Lines of credit received and not yet used break down as follows:

31/12/2002 31/12/2001

a) From central banks - -

b) From other banks - -

91

10.5 Forward transactions

Notes to the Financial Statements

ItemsHedging Trading Other Hedging Trading Other

31/12/2002 31/12/2002 31/12/2002 31/12/2001 31/12/2001 31/12/2001

1. Purchase/Sale 17,325 95,842 - 2,228 33,935 -

1.1 Securities: - 19,968 - - 1,784 -

- purchases - 14,904 - - 954 -

- sales - 5,064 - - 830 -

1.2 Currency: 17,325 75,874 - 2,228 32,151 -

- currency against currency 17,325 7,197 - 2,228 - -

- purchases against Euro - 32,281 - - 14,549 -

- sales against Euro - 36,396 - - 17,602 -

2. Deposits and financing: 756 - - - 2,327 -

- to be granted - - - - - -

- to be received 756 - - - 2,327 -

3. Derivatives

3.1 With exchange of capital - 79,549 - 2,837 3,971 -

a) Securities: - 7,500 - - - -

- purchases - - - - - -

- sales - 7,500 - - - -

b) Currencies: - 72,049 - 2,837 3,971 -

- currency against currency - 27,895 - 2,837 3,971 -

- purchases against Euro - 22,077 - - - -

- sales against Euro 22,077

c) Other instruments: - - - - - -

- purchases - - - - - -

- sales - - - - - -

3.2 Without exchange of capital 11,926 387,660 - 6,844 - -

a) Currencies: - - - - - -

- currency against currency - - - - - -

- purchases against Euro - - - - - -

- sales against Euro - - - - - -

b) Other instruments: 11,926 387,660 - 6,844 - -

- purchases 9,426 193,830 - 6,844 -

- sales 2,500 193,830 - - - -

92

Section 11 - Concentration and distribution of assets and liabilities

This section shows the concentration and distribution of risks, except for the details relating to the relationships acquired from the CapitaliaGroup, as the necessary analytical information is unavailable.

11.1 Major risks

Following the remarks made in Section 8 on the shareholders’ equity for supervisory purposes, it is impossible to specify the major risks ineffect as at 31 December 2002.For information purposes only, the previous table, in the column relating to 31 December 2002, shows the major risks in effect calculatedon the basis of the values of the shareholders’ equity for supervisory purposes and loans and advances before the acquisition of the businessline from Capitalia came into effect.

11.2 Breakdown of loans to customers by main type of borrower

11.3 Breakdown of loans to resident non-financial and family businesses

11.4 Breakdown of guarantees given by main type of counterparty

Notes to the Financial Statements

31/12/2002 31/12/2001

a) Amount 67,679 109,992

b) Number 3 7

31/12/2002 31/12/2001

a) Governments - -

b) Other public bodies 5,430 2,007

c) Non-financial companies 642,698 409,124

d) Financial companies 239,552 73,798

e) Family businesses 42,071 41,379

f) Other operators 154,910 212,755

Total 1,084,661 739,063

31/12/2002 31/12/2001

a) Other services for sale 318,970 193,717

b) Construction and building enterprises 100,806 60,213

c) Commerce; salvage and repairs 87,411 75,592

d) Agricultural and forest products 21,420 14,722

e) Food, drink and tobacco 20,557 21,640

f) Other sectors 135,605 84,619

Total 684,769 450,503

31/12/2002 31/12/2001

a) Governments - -

b) Other public bodies 18 -

c) Banks 294 -

d) Non-financial companies 169,697 310,596

e) Financial companies 4,794 16,054

f) Family businesses 1,033 1,373

g) Other operators 18,295 5,187

Total 194,131 333,210

93

11.5 Geographical distribution of assets and liabilities

11.6 Duration of assets and liabilities

Notes to the Financial Statements

Items/ Countries Italy Other EU Countries Other Countries Total

1. Assets 1,896,899 3,015 10,732 1,910,646

1.1 Receivables from banks 668,250 2,350 10,180 680,780

1.2 Receivables from customers 1,084,287 20 354 1,084,661

1.3 Securities 144,362 645 198 145,205

2. Liabilities 1,924,296 16,032 892 1,941,220

2.1 Payables to banks 99,712 14,550 - 114,262

2.2 Payables to customers 1,637,251 1,482 892 1,639,625

2.3 Debts evidenced by certificates 144,493 - - 144,493

2.4 Other accounts 42,840 - - 42,840

3. Guarantees and commitments 210,624 143 - 210,767

Specified duration

On Up to 3 Up to 12 Between 1 Over 5 yearsItems/Residual duration demand months months and 5 years Unspecified

Fixed Indexed Fixed Indexedduration

rate rate rate rate

1. Assets 1,124,169 559,722 81,203 35,979 116,475 19,731 188,404 18,943

1.1 Treasury bills eligible for refinancing - - 6 - 3,205 5,091 7,450 -

1.2 Receivables from banks 254,489 420,963 5,328

1.3 Receivables from customers 673,303 125,537 72,820 26,825 72,381 9,207 90,973 13,615

1.4 Bonds and other debt securities 47 21 2,647 2,043 40,717 4,255 79,723 -

1.5 'Off-balance sheet' transactions 196,330 13,201 5,730 7,111 172 1,178 10,258 -

2. Liabilities 1,237,480 564,197 56,707 86,360 25,451 11,175 - 193,830

2.1 Payables to banks 69,161 35,101 10,000 - - - - -

2.2 Payables to customers 1,128,960 497,715 12,927 14 9 - - -

2.3 Debts evidenced by certificates 29,933 15,693 30,727 62,861 5,279 - - -

- bonds - 9,246 20,941 61,329 5,183 - - -

- certificates of deposit 493 6,447 9,786 1,532 96 - - -

- other securities 29,440 - - - - - - -

2.4 Subordinated liabilities - - - 22,883 19,957 - - -

2.5 'Off-balance sheet' transactions 9,426 15,688 3,053 602 206 11,175 - 193,830

94

Notes to the Financial Statements

Receivables from the vehicle company before the issuing of the securities are classified amongst ‘loans and advances to customers’.Receivables from Grecale Srl were fully paid off in March 2002 upon the issue of the securities.

11.7 Assets and liabilities in foreign currencies

Assets and liabilities in foreign currencies are set out below at their value in euros.

11.8 Securitisation

11.8.1 Balance sheet and ‘off-balance-sheet’ positions

31/12/2002 31/12/2001

a) Assets

1. Receivables from banks 22,556 6,801

2. Receivables from customers 12,546 14,473

3. Securities 5 5,628

4. Participating interests - -

5. Other accounts 527 400

Total assets 35,634 27,302

b) Liabilities

1. Payables to banks 25,101 22,418

2. Payables to customers 6,817 1,805

3. Debts evidenced by certificates - 45

4. Other accounts - -

Total liabilities 31,918 24,268

ABS securities in portfolio 31/12/2002 31/12/2001

Long-term investment securities: 18,230 -

- Senior - -

- Mezzanine - -

- Junior 18,230 -

Trading securities - -

Total 18,230 -

ABS securities for underlying assets 31/12/2002 31/12/2001

1. Own underlying assets: 18,230 -

1.1 Mortgage loans 18,230 -

- doubtful loans - -

- substandard loans - -

- performing loans 18,230 -

2. Third-party underlying assets - -

Total 18,230 -

Loans to customers 31/12/2002 31/12/2001

Receivables from Grecale ABS Srl 135,071 -

Receivables from Grecale Srl - 94,167

Total 135,071 94,167

Notes to the Financial Statements

95

Forward transactions 31/12/2002 31/12/2001Derivatives without exchange of capital on other values 193,830 -

Participating interests in vehicle companies 31/12/2002 31/12/2001% Amount % Amount

Grecale Srl (included in the basis of consolidation) 60% 12 - -Grecale ABS Srl - - - -Total - 12 - -

Servicer activity: receipts by securitisation operation Capital Other Totalquota receipts receipts

Receipts for Grecale Srl: 18,086 9,053 27,139- for current financial year 17,394 8,505 25,899- for previous financial years 692 548 1,240Receipts for Grecale ABS Srl: 1,460 604 2,064 - for current financial year 1,460 604 2,064 - for previous financial years - - -Total receipts: 19,546 9,657 29,203- for current financial year 18,854 9,109 27,963- for previous financial years 692 548 1,240

Loans securitised during the financial year Gross amount Write-down Net amountMortgage loans 219,701 - 219,701a) Doubtful loans - - -b) Substandard loans - - -c) Other assets 219,701 - 219,701Other - - -a) Doubtful loans - - -b) Substandard loans - - -c) Other assets - - -

Guarantees backing underlying securitised loans Guaranteed amounta) Mortgage-based 219,701b) Pledged on securities - c) Other guarantees - Total 219,701

Geographical distribution of assigned debtors Italy Other EU countries Other countriesTotal amount of assigned debtors 219,701 - -

Breakdown of assigned debtors by economic activity AmountPublic bodies - Financial companies 1,417 Non-financial companies 19,434 Households 198,850 Other debtors - Total 219,701

11.8.2 Assignment of securitised assets performed in the financial year

11.8.3 Securitisation transaction through Grecale Srl completed in 2002

In March 2002, the operation to securitise performing residential loans issued by Unipol Banca was completed. This operation had beenstarted in the previous financial year with ABN AMRO Bank serving as arranger.Sale of the securitised loans took place in two tranches, the first on 19 December 2001 and the second on 8 March 2002.Overall, Unipol Banca assigned to Grecale Srl loans with a capital value of € 180,818 thousand and a total value of € 192,918thousand, broken down as follows:

The loans assigned are all made to subjects residing in Italy and are assisted by first mortgages or equivalent mortgage with a ratio between residual debt and property value as determined by an expert valuation of no more than 80%.The vehicle company financed the operation by issuing three classes of securities with a total nominal value of € 193,830 thousand on28 March 2002. The first two classes were placed with institutional investors, whilst the junior class was fully subscribed by Unipol Banca.The following table summarises the main characteristics of the securities issued.

The three classes of securities are characterised by increasing degrees of subordination, with absolute priority for Class A securities, whichwill start to be repaid as from October 2003.

Unipol Banca acts as servicer in the securitisation process and is also responsible for managing any positions that become non-performingduring the securitisation transaction. As at 31 December 2002, there were no doubtful positions and the total amount of instalments dueand not paid totalled € 319 thousand (of which € 192 thousand relating to principal amount) of which approximately 66% related to ‘technical delays’ for instalments due at the end of December. The overall amount of collections is shown in the special table referred to in the previous paragraph.

ABN AMRO Bank, Milan office, provided the vehicle with a credit facility in a total amount of € 10 m, which is currently not used.

In order to protect the vehicle from interest rate risks, ABN AMRO signed an interest rate swap contract with Grecale Srl, covered with a

Notes to the Financial Statements

96

Assignment price of securitised loans Grecale Grecale ABS Total

Assignment price - capital quota 93,506 126,195 219,701

Assignment price - interest quota 243 531 774

Assignment price - premium quota 5,002 8,345 13,347

Total 98,751 135,071 233,822

Price of loans assigned to Grecale Srl Dec-01 March-02 Total

Assignment price - capital quota 87,312 93,506 180,818

Assignment price - interest quota 393 243 636

Assignment price - premium quota 6,462 5,002 11,464

Total 94,167 98,751 192,918

Class Legal Estimated Interest Rating Faceexpiry date duration rate S&P/Fitch value

Class A 20/04/2036 4.7 years Euribor 3 months + 29 bps AAA/AAA 163,000

Class B 20/04/2036 5 years Euribor 3 months + 70 bps AA/A 12,600

Class C 20/04/2036 Euribor 3 months n/r 18,230

Total 193,830

97

Notes to the Financial Statements

back-to-back operation with Unipol Banca, on the basis of which the issuer pays the counterparty the amount of expected interest incomeand those actually produced, whichever is lower, minus costs of the securitisation process and a further sum, as an excess spread, equal to1% per annum of the residual capital loan. Similarly, the counterparty pays the issuer the share of interest due on the securities in equalmeasure to the ratio, if less than 1, between actual and expected interest income.

Finally, on the basis of the rules for issuing securities, the vehicle granted Unipol Banca the right to buy back the portfolio assigned witheffect from the payment date falling due on 20 April 2007.

11.8.4 Securitisation transaction through Grecale ABS Srl still underway

For the securitisation transaction in question, loans are meant to be assigned in two tranches, the first on 20 December 2002 and the secondon 21 March 2003.For this transaction, J.P. Morgan Securities Ltd is serving as arranger, and Unipol Merchant SpA as coarranger.The assets assigned consist of credits arising from performing residential and commercial mortgage loans granted to Italian residents.The securities will be issued in April 2003 by the date on which these financial statements are approved and will have a total estimatedvalue of approximately € 200 m.For this operation too, it is planned to make a credit facility available, to sign a derivative contract for hedging the interest rate risk and togrant the originator the right to buy back the portfolio, under conditions still being defined.

98

Section 12 - Asset management and dealing for third parties

12.1 Dealing in securities

The Bank carried out no dealing in securities as intermediary for third parties during the financial year.

12.2 Portfolio management

12.3 Custody and administration of securities

The details of securities under custody and administration are shown below. The amounts reflect nominal values.

12.4 Checks and bills discounted to be collected on behalf of third parties: debit and credit adjustments

Receivables from customers and banks arising out of checks and bills discounted but not yet due or on hand at year-end have been adjustedas shown below:

The adjustments above do not include those made on former Capitalia positions.

12.5 Other transactions

Notes to the Financial Statements

31/12/2002 31/12/2001

a) Securities: 270,966 209,475

- securities issued by Unipol Banca 4,028 -

- other securities 266,938 209,475

b) Other 15,612 29,239

Total 286,578 238,714

31/12/2002 31/12/2001

a) Securities deposited by third parties: 5,816,438 5,342,364

1. Securities issued by Unipol Banca 376,112 -

2. Other securities 5,440,326 5,342,364

b) Third-party securities deposited with third parties 5,353,408 4,441,329

c) Own securities deposited with third parties 152,650 79,736

31/12/2002 31/12/2001

a) Debit adjustments 306,423 203,874

1. Current accounts 1,492 940

2. Central portfolio 234,776 165,235

3. Cash - -

4. Other accounts 70,155 37,699

b) Credit adjustments 323,997 203,475

1. Current accounts 70,155 37,699

2. Bills and instruments discounted 252,350 164,836

3. Other accounts 1,492 940

31/12/2002 31/12/2001

1. Placing of securities without prior underwriting or purchase in 152,479 92,884the primary market, or providing guarantees to the issuer

99

Part C

NOTES TO THE PROFIT AND LOSS ACCOUNT

Section 1 - Interest income

1.1 Breakdown of item 10 ‘Interest receivable and similar income’

1.2 Breakdown of Item 20 ‘Interest payable and similar charges’

Sub-item c), relating to interest on debts evidenced by certificates, is different from the similar ‘of which’ in item 20 of the profit and lossaccount in that the interest accrued on subordinated liabilities evidenced by certificates has been posted under sub-item e).

1.3 Detail of item 10 ‘Interest receivable and similar income’

1.4 Detail of item 20 ‘Interest payable and similar charges’

Notes to the Financial Statements

31/12/2002 31/12/2001

a) On loans and advances to banks, 12,122 11,508

including loans and advances to central banks 673 618

b) On loans and advances to customers, 49,975 36,625

including loans granted with third-party assets under administration - -

c) On debt securities 4,866 3,617

d) Other interest receivable 210 210

e) Credit balance on hedging operations spreads 55 45

Total 67,228 52,005

31/12/2002 31/12/2001

a) On amounts due to banks 391 437

b) On amounts due to customers 24,590 18,906

c) On debts evidenced by certificates, of which: 3,710 1,998

certificates of deposit 474 325

d) On third-party assets under administration - -

e) On subordinated liabilities 1,599 674

f) Debit balance on hedging operations spreads - -

Total 30,290 22,015

31/12/2002 31/12/2001

a) On assets denominated in foreign currency 637 344

31/12/2002 31/12/2001

a) On liabilities denominated in foreign currency 356 418

100

Section 2 - Fees and commissions

2.1 Breakdown of item 40 ‘Fees and commissions receivable’

2.2. Detail of item 40 ‘Fees and commissions receivable’

Notes to the Financial Statements

31/12/2002 31/12/2001

a) Guarantees given 764 626

b) Loan derivatives - -

c) Management, brokerage and consulting services: 7,266 5,172

1. Dealing in securities - 47

2. Dealing in currency 321 201

3. Portfolio management 962 654

3.1 Individual 962 654

3.2 Collective - -

4. Custody and administration of securities 1,324 653

5. Depository bank - -

6. Placing of securities 2,747 2,531

7. Acceptance of instructions 1,086 813

8. Consulting - 129

9. Providing third-party services and products 826 144

9.1 Portfolio management: 30 127

9.1.1 Individual 30 127

9.1.2 Collective - -

9.2 Insurance products 757 4

9.3 Other products 39 13

d) Collection and payment services 11,520 9,634

e) Servicing securitisation operations 39 -

f) Tax collection services - -

g) Other services 10,183 5,001

Total 29,772 20,433

Distribution channels for products and services 31/12/2002 31/12/2001

a) On our premises 3,609 1,839

1. Portfolio management 962 578

2. Placing of securities 1,851 1,240

3. Third-party services and products 796 21

b) Doorstep selling 926 1,490

1. Portfolio management - 76

2. Placing of securities 896 1,291

3. Third-party services and products 30 123

Total 4,535 3,329

101

2.3. Breakdown of item 50 ‘Fees and commission payable’

Section 3 - Gains and losses on financial operations

3.1 Breakdown of item 60 ‘Gains and losses on financial operations’

Section 4 - Administrative expenses

4.1 Average number of employees by category

Notes to the Financial Statements

31/12/2002 31/12/2001

a) Guarantees received - -

b) Loan derivatives - -

c) Management and brokerage services: 1,686 1,075

1. Dealing in securities 69 18

2. Dealing in currencies - -

3. Portfolio management - -

3.1 Own portfolio - -

3.2 Third-party portfolios - -

4. Custody and administration of securities 245 122

5. Placing of securities - -

6. Doorstep selling of securities, products and services 1,372 935

d) Collection and payment services 8,534 7,867

e) Other services 129 165

Total 10,349 9,107

Items/Operations Dealing in Dealing in Other Dealing in Dealing in Othersecurities currencies operations securities currencies operations

31/12/2002 31/12/2002 31/12/2002 31/12/2001 31/12/2001 31/12/2001

A.1 Write-ups - - - - - -

A.2 Write-downs -24 - - -154 - -

B. Other gains/losses 6,784 304 476 5,083 -390 -17

Total 6,760 304 476 4,937 -390 -17

1. Government securities 273 -66

2. Other debt securities 6,443 5,076

3. Equity securities 44 -73

4. Derivatives on securities - -

31/12/2002 31/12/2001 Average 2002

a) Senior officials 11 9 10

b) Junior officials (grade 3 and 4) 94 78 86

c) Other employees 631 578 605

Total 736 665 701

Breakdown of item 80 ‘Administrative expenses’

Section 5 - Value adjustments, value re-adjustments and provisions

5.1. Breakdown of item 120 ‘Value adjustments on receivables and provisions for guarantees and commitments’

Breakdown of item 90 ‘Value adjustments on intangible and tangible fixed assets’

102

Notes to the Financial Statements

31/12/2002 31/12/2001

a) Staff costs: 37,083 23,847

wages and salaries 25,281 16,749

social security contributions 6,975 4,509

staff-leaving indemnity 1,937 1,252

pensions and similar 869 460

other staff costs 2,021 877

b) Other administrative expenses: 30,201 19,122

purchasing non-professional goods and services 13,273 8,372

purchasing professional services 1,516 1,139

rents paid 6,971 3,898

maintenance of furniture, office equipment and building s 982 615

insurance premiums 636 484

insurance premiums in favour of customers 180 89

indirect duties and taxes for the financial year 3,342 1,894

other 3,301 2,631

Total 67,284 42,969

31/12/2002 31/12/2001

a) Value adjustments on tangible fixed assets: 2,217 1,426

- furniture and fixture and fittings 384 263

- machinery and equipment 1,833 1,163

b) Value adjustments on intangible fixed assets: 7,107 7,085

- goodwill 4,318 5,245

- other multi-year charges 2,789 1,840

Total 9,324 8,511

31/12/2002 31/12/2001

a) Value adjustments on receivables from customers, 5,289 1,749

of which:

- flat-rate value adjustments out of country risk 153 -

- other flat-rate value adjustments 1,672 284

b) Provisions for guarantees and commitments, 39 -

of which:

- flat-rate provisions out of country risk - -

- other flat-rate provisions - -

c) Value adjustments on sundry receivables (other assets) - 1,501

Total 5,328 3,250

103

Breakdown of item 100 ‘Provisions for liabilities and charges’

In this item, a provision was made in last year’s accounts in an amount of € 1,501 thousand in relation to the value adjustments on disputedfinancial transactions, now reclassified under item 120 ‘Value-adjustments on receivables and provisions for guarantees and commitments’.During the financial year, an amount of € 207 was set aside in relation to the actions for revocation brought by the receivers of thecompanies of the Fochi Group, for which the lawyers assisting the Bank believe the reasons to be unfounded, with the exception of theamount set aside as a precaution.

Breakdown of item 130 ‘Value re-adjustments on receivables and provisions for guarantees and commitments’

These are exclusively value re-adjustments made following intake of revenues.

Breakdown of item 140 ‘Provisions for credit risks’

Breakdown of item 160 ‘Value re-adjustments on long-term investment securities’

The value re-adjustments reflect the year-end write-up of a dollar-denominated security held in the long-term investment portfolio.

Notes to the Financial Statements

31/12/2002 31/12/2001

- Provision for Cogeban contributions - 2

- Provision for revocation actions 207 -

Total 207 2

31/12/2002 31/12/2001

- Value re-adjustments - capital quota 171 75

- Value re-adjustments - interest quota 149 72

- Value re-adjustments on loans written off in previous financial years 30 129

Total 350 276

31/12/2002 31/12/2001

- Amounts allocated - capital quota - 103 - Amounts allocated - overdue interest quota - - Total - 103

31/12/2002 31/12/2001

- Exchange rate write-up of long-term investment securities - 298 Total - 298

104

Section 6 - Other items of the Profit and Loss Account

Breakdown of item 30 ‘Dividends and other income’

The dividends include the related tax credit.

6.1 Breakdown of item 70 ‘Other operating income’

6.2 Breakdown of item 110 ‘Other operating expenses’

6.3 Breakdown of item 180: ‘Extraordinary income’

Notes to the Financial Statements

31/12/2002 31/12/2001

- Income from loan securitisation 13,347 6,462

- Refund of stamp duty 2,524 1,569

- Recovery of substitute tax from customers 553 167

- Employment-related tax relief accrued in the financial year 359 -

- Refund of utility bills and rents 343 187

- Reimbursement of legal cost 323 156

- Reimbursement of services invoiced 276 208

- Refund of postal and telephone expenses 143 89

- Reimbursement of reporting expenses on portfolio management 21 14

- Refund of indemnities and attendance fees from companies where participating interests are held 4 3

- Other operating income 1,473 796

Total 19,366 9,651

31/12/2002 31/12/2001

- Losses due to thefts and burglaries 78 -

- Other operating expenses 3 4

Total 81 4

31/12/2002 31/12/2001

- Gains on Banca Intesa transaction 6,603 -

- Unanticipated income 303 67

- Employment-related tax relief accrued in previous financial years 233 -

- Gains on disposal of long-term investment securities 34 2,946

- Gains on disposal of tangible fixed assets 8 7

Total 7,181 3,020

31/12/2002 31/12/2001

1.1 Dividends received 448 4

- on stocks, shares and other equities - 4

- on participating interests 448 -

1.2 Dividends accrued on participating interests in Group undertakings 38 -

Total 486 4

105

6.4 Breakdown of item 190 ‘Extraordinary charges’

Breakdown of item 220 ‘Tax on profit for the financial year’

Section 7 - Other information on the Profit and Loss Account

7.1 Geographical distribution of income

As these correspond to credit institutions with an exclusively domestic network of branches, all the proceeds relate to Italy.

Notes to the Financial Statements

31/12/2002 31/12/2001

- Unanticipated charges 1,092 650

- Charges for all-inclusive tax amnesty as per Law 289/2002 637 -

- Losses on disposal of tangible fixed assets 53 -

Total 1,782 650

31/12/2002 31/12/20001

1. Current taxation (-) -2,010 -1,150

2. Changes in prepaid tax (+/-) 50 -902

3. Changes in deferred tax (+/-) - -

4. Tax on profit for the financial year (-1+/-2+/-3) -1,960 -2,052

106

Part D

OTHER INFORMATION

Section 1 - Directors and Statutory Auditors

This section provides details of emoluments, loans and guarantees to Directors and to Members of the Board of Statutory Auditors.

Loans have been granted in full conformity with the provisions of Article 136 T.U. on ‘Obligations of bank representatives’.

Section 2 - Parent company or controlling EU bank

2.1 Company name

Unipol Banca Spa is entered in the Register of Banks and is the parent company of the Gruppo Bancario Unipol Banca, entered in theRegister of Banking Groups.

2.2 Head office

The head office of Unipol Banca Spa is in Bologna, via Stalingrado 53.

2.3 Subject controlling the Parent Company

Unipol Banca Spa is controlled by the company ‘Compagnia Assicuratrice Unipol Spa’, with its head office in Bologna, via Stalingrado 45, asubject different from the parent company as defined under Article 25 of Legislative Decree 87/92.

Notes to the Financial Statements

31/12/2002 31/12/2001

1.1 Emoluments 261 188

a) Directors 220 143

b) Statutory Auditors 41 45

1.2 Loans and guarantees given 369 644

a) Directors 359 534

b) Statutory Auditors 10 110

107

Additional Statements

108

Additional Statements

RECLASSIFIED BALANCE SHEET(in € ‘000)

Assets 2002 2001 Changes

Cash and liquidity 32,809 18,406 14,403

Trading securities 114,328 57,731 56,597

Loans and advances to banks 897,622 460,954 436,668

Loans and advances to customers 1,646,775 739,063 907,712

Fixed assets: 422,115 239,158 182,957

Long-term investment securities 30,877 25,798 5,079

Participating interests 8,491 2,563 5,928

Intangible fixed assets 369,035 201,235 167,800

Tangible fixed assets 13,712 9,562 4,150

Other assets 62,729 67,258 (4,529)

Total assets 3,176,378 1,582,570 1,593,808

2002

18114

2001

cash securities banks customers other assets

58

461739

239 6733

898

1.647

422

63

fixed assets

Breakdown of assets

109

Additional Statements

RECLASSIFIED BALANCE SHEET(in € ‘000)

Liabilities 2002 2001 Changes

Deposits by banks 429,596 48,598 380,998

Deposits by customers 2,228,257 1,120,890 1,107,367

Other liabilities 124,236 92,613 31,623

Provisions for staff-leaving indemnity 17,099 7,030 10,069

Provisions for liabilities and charges 6,268 2,758 3,510

Provisions for credit risks 930 930 -

Subordinated liabilities 42,840 22,883 19,957

Total liabilities 2,849,226 1,295,702 1,553,524

Share capital 284,200 284,200 -

Reserves 37,633 1,114 36,519

Profit for the financial year 5,319 1,554 3,765

Shareholders' equity 327,152 286,868 40,284

Total liabilities 3,176,378 1,582,570 1,593,808

2002 2001

banks customers other liabilities subordinated liabilities shareholders' equityprovisions

430

2.228

124 24 43327

1.121

49 93 10 23287

Breakdown of liabilities

110

Additional Statements

RECLASSIFIED PROFIT AND LOSS ACCOUNT(in € ‘000)

Financial year 2002 Financial year 2001 Changes

Investment income from: 67,228 52,005 15,223

- customers 49,975 36,626 13,349

- banks 12,123 11,508 615

- debt securities 4,866 3,617 1,249

- tax credit 209 210 (1)

- other income 55 44 11

Dividends 487 4 483

Interest payable: (30,290) (22,015) (8,275)

- customers (24,590) (18,906) (5,684)

- banks (391) (437) 46

- debt securities (5,309) (2,672) (2,637)

Net interest income 37,425 29,994 7,431

Fees and commissions receivable 29,772 20,433 9,339

Fees and commissions payable (10,349) (9,108) (1,241)

Gains (losses) on financial operations 7,540 4,530 3,010

Other net income 19,285 9,648 9,637

Non-interest income 46,248 25,503 20,745

Gross operating income 83,673 55,497 28,176

Staff costs (37,083) (23,847) (13,236)

Administrative expenses (30,201) (19,122) (11,079)

Amortisation and depreciation (9,324) (8,511) (813)

Operating expenses (76,608) (51,480) (25,128)

Net operating income 7,065 4,017 3,048

Value adjustments on receivables (5,328) (3,250) (2,078)

Value re-adjustments on receivables 350 276 74

Value re-adjustments on long-term investment - 298 (298)

Provisions for credit risks - (103) 103

Provisions for liabilities (207) (2) (205)

Balance on ordinary activities 1,880 1,236 644

Net extraordinary income 5,399 2,370 3,029

Pre-tax profit 7,279 3,606 3,673

Tax on profit for the financial year (1,960) (2,052) 92

Net profit for the financial year 5,319 1,554 3,765

111

Additional Statements

Share Legal Other Profit Totalcapital reserve reserves for the fin. year shareholders’ equity

Balances as at 31/12/2001 284,200 112 1,002 1,554 286,868

Appropriation of the profit for the financial year 2001

according to the resolution of the Shareholders’ Meeting:

- to reserves 155 1,398 (1,554)

Payments on account of share capital increase 34,965 34,965

Profit for the financial year 2002 5,319 5,319

Balances as at 31/12/2002 284,200 267 37,365 5,319 327,152

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYFOR THE YEAR ENDED 31 DECEMBER 2002(in € ‘000)

112

Additional Statements

Cash inflow Financial year 2002 Financial year 2001

Profit for the financial year 5,319 1,554

Value adjustments on tangible and intangible fixed assets 9,324 8,511

Value adjustments/(re-adjustments) on long-term investment securities - (298)

Value adjustments/(re-adjustments) on receivables 4,978 2,974

Increase/(decrease) in provision for credit risks - 104

Provision for staff-leaving indemnity not transferred to pension fund 903 529

Decrease/(increase) in assets out of prepaid taxes (50) 902

Increase/(decrease) in provision for taxation 2,432 1,522

Increase/(decrease) in other provisions for liabilities and charges 1,039 (7)

Decrease/(increase) in prepayments and accrued income (3,989) (1,220)

Increase/(decrease) in accruals and deferred income 4,085 603

Cash inflow from management activities 24,041 15,174

Increase in deposits by customers 1,019,415 609,317

Increase in deposits by banks 380,998 36,459

Increase in customer deposits represented by securities 87,953 27,955

Increase in subordinated liabilities 19,957 22,883

Cash inflow from fund-raising 1,508,323 696,614

Share capital increase - 155,014

Payments on account of share capital increase 34,965 -

Cash inflow out of increase in shareholders’ equity 34,965 155,014

Increase in other liabilities 27,538 50,382

Increase in staff-leaving indemnity not arising from allocations 9,953 5,649

Decrease in other assets 8,567 -

Decrease in participating interests - 482

Other cash inflow 46,058 56,513

Total cash inflow 1,613,387 923,315

CASH FLOW(in € ‘000)

113

Additional Statements

Cash outflow Financial year 2002 Financial year 2001

Increase in loans and advances to customers 912,651 376,262

Increase in loans and advances to banks 436,668 283,833

Increase in securities 61,676 9,666

Increase in cash and liquidity 14,403 14,074

Increase in participating assets 5,928 -

Funds invested in financial activities 1,431,326 683,835

Increase in tangible and intangible fixed assets 181,274 206,428

Amounts released from the staff-leaving indemnity provision 787 138

Increase in other assets - 32,914

Other cash outflow 182,061 239,480

Total cash outflow 1,613,387 923,315

CASH FLOW (continued)(in € ‘000)

115

To the Shareholders’Meeting of UNIPOL BANCA S.p.A.

In the course of the financial year whichclosed on 31 December 2002, we carriedout the monitoring activities prescribedby law and the principles of behaviour ofthe Board of Statutory Auditorsrecommended by the National Boards ofChartered Accountants.In particular, in compliance also withinstructions received from Consob, in anotice dated 6 April 2001, we report thefollowing:

• We have ensured that all actions havebeen carried out in compliance withthe law and Company’s by-laws.

• We have obtained monthly reportsfrom the Directors regarding theactivities carried out and majoreconomic, financial and equitytransactions entered into by theCompany. We can confirm that actionsresolved upon and undertaken werecarried out in accordance with the lawand the Company’s by-laws and do notappear to be imprudent, risky, inpotential conflict of interest or incontrast with the resolutions passed bythe Shareholders’ Meeting or such aswould compromise the integrity of theCompany’s equity.

• Within the limits of our duties, we haveassessed and monitored suitability ofthe Company’s organisational structure,compliance with the principles ofcorrect administration and suitabilityand timeliness of the reporting requiredby the Parent Company, in order tosatisfy the obligations set down underArticle 114 (1) of Legislative Decree58/98, by collecting information from

the organisational function managersand in meetings with the externalauditors at which we exchangedrelevant data and information. In thisregard we have no particularobservations to report.

• We have assessed and monitoredsuitability of the internal control systemand administrative-accounting systemand reliability of the latter to representmanagement data correctly. To do thiswe obtained information frommanagers of the respective divisions,examined company documents andanalysed the results of work carried outby the external auditors, monitoring thework of in-house auditors. In this regardthere are no facts, circumstances orirregularities to report.

• We have had meetings with theexternal auditors, under Article 150 (2),Legislative Decree 58/98 and nosignificant facts or information came toour attention such as to requiremention in this report.

• We have not encountered atypical (orunusual) transactions carried out withCompanies in the Group or relatedparties.

• Ordinary and regular transactions havebeen carried out with and for the ParentCompany relating to financial and realestate management, current accountsand security deposits. These transactions(set down in detail in the AdditionalStatements to the Notes to the FinancialStatements) are deemed appropriateand in the interests of the Company.

• The Report by the external auditorsReconta Ernst&Young S.p.A. containsno comments of note or calls forfurther information.

Statutory Auditors’ Report Under Article 153, Legislative Decree 58/98 and Article 2429 (3), Civil Code

116

• At the express statement of the Directors,confirmed by the external auditors, wewould point out that no furtherassignments have been conferred uponthem, nor have assignments beenconferred upon parties engaged inongoing relationships with the externalauditors.

• The Board of Statutory Auditors andthe external auditors have not, duringthis financial year, issued any of theopinions provided for in law.

• We have verified correct application ofthe accounting principles and valuationcriteria to the aforesaid accounts. Wherenecessary we have given our consent tothe valuation criteria relating tointangible fixed assets. In particular, thecriteria for recording depreciation of thegoodwill resulting from the acquisition ofthe branches of the Banca Intesa S.p.A.Group, which took place during financialyear 2001, and the branches of Capitalia,which took place in 2002, have beenamended to a twenty-year term withincreasing quotas for the first fivefinancial years and constant quotas inthe following years. The logic underlyingthis methodology results from the planto restructure and integrate the branchesinto the organisation. The increasedproductivity and efficiency resulting fromthe restructuring was taken as theparameter; in greater detail, theparameter is the difference in growthbetween the net interest income fromcore business and the average incomecalculated over five financial years. Thisdifference determines an upward curvein the rates of depreciation, where break-even is achieved within five financial

years. For a like depreciation criterion in2001, total depreciation would havebeen in excess of € 5,935,770.

• The monitoring activity describedabove was undertaken at six meetingsof the Statutory Auditors and inattending meetings of the Board ofDirectors under Article 149 (2) ofLegislative Decree 58/98, ten of whichwere held. During the course of theforegoing monitoring activities and onthe basis of information obtained fromthe external auditors, no omissions,facts, irregularities or significant factscame to our attention such as torequire notification to the supervisoryauthorities or mention in this report.

****

In inviting the Meeting to approve thefinancial statements as at 31 December2002, as presented by the Board ofDirectors, the Board of the StatutoryAuditors expresses its favourable opinionregarding appropriation of the profit forthe year amounting to € 5,318,798 asproposed by the Board of Directors.

Bologna, 11 April 2003

THE BOARD OF STATUTORY AUDITORS

Dott. UMBERTO MELLONI - ChairmanDott. ROBERTO CHIUSOLIDott. GASTONE NOTARI

Relazione del Collegio Sindacale

Independent Auditors’ Report

117

118

Independent Auditors’ Report

(Translation from the original Italian text)

119

Independent Auditors’ Report

Bologna - Fontana del Nettuno (Fountain of Neptune)

(photograph by Emiliano Trentini - Foto Arcobaleno Group)

123

Consolidated Accounts

125

Consolidated Accounts

Board Report

126

Consolidated Accounts

Board Report

To the shareholders,The consolidated accounts for the yearending 31 December 2002 have beendrawn up in accordance with Articles 24and 26 (2) (a) of Legislative Decree 87/92.The basis of consolidation embraces thecredit and financial institutions belongingto the Unipol Banca Banking Group andthose belonging to the UnipolAssicurazioni Corporate Group, i.e.under unified management by acontrolling body other than a credit orfinancial institution. In particular, thefollowing companies are included in thebasis of consolidation:- Unipol Banca SpA, a credit institution

(Banking Group);- Unipol Fondi Ltd, an Irish-registered

UCITS management company (BankingGroup);

- Grecale Srl, a securitisation vehiclecompany (Banking Group);

- Unipol SGR SpA, a savings managementcompany (Corporate Group).

During the 2002 financial year UnipolBanca acquired from its parent companythe entire share capital of Unipol FondiLtd and also acquired from third parties60% of the share capital of Grecale Srl, avehicle company set up in order tomanage the initial securitisationtransaction of performing loans carriedout by the Bank. The Bank is also a‘servicer’ of the vehicle company, that is,it sees to the management of collectionsand the accounts of the above-mentioned vehicle company.Aggregated assets and liabilities andprofit and loss account items are mainlyattributable to Unipol Banca. The companies in the Group conduct atypical range of banking activities,supplemented by the provision ofinvestment services to private individualsand to enterprises, with a specialisationin individual and collective portfoliomanagement.

THE GROUP’SPERFORMANCEIN 2002The Group’s performance closely mirrorsthe performance and development ofUnipol Banca, not only because of thelatter’s preponderant size but alsobecause the Bank provides the channelsthrough which the Group’s investmentservices are delivered to the public inItaly. It also generated essentially all thereceivables needed for the securitisationmanagement company to becomeoperational.During the financial year sales networkscontinued to be expanded with theopening of 20 new integrated branches,bringing the number of branches to 113,the opening of 2 financial counters andan increase of 35 units in the network offinancial advisers. An extension whichculminated in the latter part of thefinancial year with the acquisition of 60branches from the Capitalia Group, thusexpanding the Bank’s presence in areaswhere it was already present andintroducing it in other areas where, whilethe Group had no banking presence, itsinsurance business was strongly rooted.

Customer depositsand funds

As at 31 December 2002 Group directcustomer deposits totalled €2,226m asagainst €1,119m in the previousfinancial year (+99%). Customer funds were up 11% to€7,065m, of which €5,980m wereassets under administration and€1,085m assets under management.Assets managed on behalf of customersexperienced healthy growth, both whereindividual management and the UCITSsmanaged by the Group were concerned.In particular, assets managed by Unipol

127

Consolidated Accounts

Board Report

Fondi rose by 84% to €272m at yearend, thanks mainly to the specificcommercial policies put in place byUnipol Banca. These were aimed atconverting savings under administrationand savings products managed by thirdparties into Group investment products.Unipol Fondi manages a multi-portfolioumbrella fund under the name UnipolFunds, which has ten sub-funds. Ofthese, one is of the money-market type,three are mainly invested in bonds, two

are balanced funds, another three aremainly invested in equities and one isflexibly managed.Assets under management as at 31December 2002, given the persistentnegative performance of the equitymarkets, favoured bond and money-market investments in particular, as thechart below shows.At the end of 2002 some 69% ofinvestors were retail customers and theremainder institutional customers,

inverting the ratio for the previousfinancial year. This was the result, as wehave said, of greater market penetrationon the part of Unipol Banca.

Lending

Lending to customers increased from€739m as at 31 December 2001 to€1,647m as at 31 December 2002. Ourfinancing business, carried out solely byUnipol Banca, is conducted mainly withsmall and medium-size businesses andwith households. In the business sectorwe are mainly concerned with variouskinds of bill discounting, whereas in thehousehold sector the emphasis is onmortgage loans.This means that, due in part to a carefullyconsidered credit policy, we suffer a verylow incidence of doubtful loans: they fell

from 0.76% in 2001 to 0.60% in 2002. During the last quarter of 2002, with thehelp of JP Morgan and Unipol Merchant,we launched a further securitisationprogramme for performing loans,derived from residential and commercialmortgage loans, to a total value of€188.6m. The loans were assigned intwo tranches, the first during December2002 and the second during March2003. The securities will be issued by 30April 2003, to a total value of some€200m. Approximately 85% of the issuewill be made up of ‘A’ bonds, with anAAA/Aaa rating, and some 7% of ‘B’bonds with an A/A rating. Both classes ofbonds will be placed with institutionalinvestors by the above arrangers. The junior bonds, with no credit rating,will be taken up in their entirety byUnipol Banca.

money market bonds balanced equity flexible

UNIPOL FUNDSAssets under management as at 31 December 2002

128

Consolidated Accounts

Board Report

Securities

Our investment in securities is mainlycarried out by Unipol Banca and to amarginal extent by Unipol SGR.Our securities portfolio was worth€146m at the end of 2002, of which21.2% was in long-term investmentsecurities. During the financial year thejunior bonds underwritten under the firstsecuritisation transaction for €18.2mwere entered in the long-terminvestment portfolio and two securitieswith a value of €7.5m came to expiry; asecurity issued by the United StatesTreasury was also sold off for a nominalUS$5m, from which we achieved capitalgains of around €34,000.

Own shares

None of the companies within the basis

of consolidation held own shares at year-

end, or had engaged in any buying or

selling of such shares.

Shareholders’ equity

Consolidated shareholders’ equity stood

at €329m at the end of 2002 compared

with €289m a year earlier. The

difference was mainly due to changes in

the share capital.

In the course of the year Unipol Banca

effected a capital increase of some

€142.1m, and also a share premium of

some €42.63m, partly paid over in

advance of the date of closing of the

2002 financial year and in any event fully

subscribed and paid up at the date the

consolidated balance sheet was

approved.

Profit and Loss Account

The Group made a consolidated profit of

€5.2m in 2002. Gross operating income

was €84.5m compared with €56.9m

the previous year. The growth in the

scale of the Group caused a marked

increase in administrative expenses and

amortisation and depreciation charges,

even if to a lesser extent than the

increase in our revenues from our core

business. After absorption of operatingcosts there was a margin of €7.0mcompared with €3.7m the previousyear.Net write-downs and amounts allocatedto provisions for liabilities and chargesabsorbed some €5.2m, so that the profitfrom ordinary activities came to €1.8m.The profit and loss account also reflectednet extraordinary income amounting to€5.4m, mostly resulting from capital

Shareholders’ funds of which: profit

Parent Company 327,152 5,319

Consolidation of subsidiaries 38 38

Consolidation of companies under unified management 2,363 11

Depreciation of positive consolidation differences -144 -138

Off-setting of intra-group dividends -75 -75

Elimination of intra-group profits -335 42

Consolidated financial statements 328,999 5,197

Reconciliation between Unipol Banca’s shareholders’ funds and profit for the yearand consolidated shareholders’ funds and profit for the year (EUR ‘000)

129

Consolidated Accounts

Board Report

gains on the securitization of loansrelating to the counters acquired fromthe Banca Intesa Group.

Significant eventsafter the closingof the financial year

The Group’s growth continued in themonths following the 2002 year-end. Unipol Banca has opened two newbranches combining banking andinsurance and is in the process of settingup seven new branches to complete theauthorisations issued to date by theSupervisory Body.The branch organisational model, whichseeks to divide customers into macro-channels, is also being applied to theformer Capitalia branches acquiredrecently.Unipol Fondi continued to be successfulin attracting funds, so that at the date ofapproval of these financial statements ithad assets of €345m, an increase of€73m in close to three months, due to

continuation of the commercial actionundertaken by the Bank, together withthe conversion activities immediatelyundertaken by the former Capitaliabranches. Following the revocation duringDecember 2001 of its last portfoliomandates still in existence, Unipol Sgrtemporarily suspended business witheffect from 1 January 2002, pending theevaluation of new entrepreneurialprojects which could allow business inthe financial investment area to befurther extended; the Supervisory Bodyhas been informed of this situation.The 2003 financial year will see furthergrowth in our banking business, mainlyaddressed to consumer households andsmall and medium-size businesses, thelatter in particular linked to the UnipolGroup’s preferred market, in such a wayas to continue to pay particular attentionto some transactions of considerableimportance with customers whorepresent a very low or non-existent risk.

Consolidated Financial Statements

Consolidated Accounts

131

Consolidated Financial Statements

132

Consolidated Accounts

Assets Financial year 2002 Financial year 2001

10 Cash and balances at central banks and post offices 32,809 18,40620 Treasury bills and other eligible bills

for refinancing with central banks 15,752 21,63930 Loans and advances to banks: 898,329 461,204

a) receivable on demand 255,195 350,418

b) other receivables 643,134 110,786

40 Loans and advances to customers, 1,646,965 739,454of which:

- loans with third-party’s assets under administration - -

50 Bonds and other debt securities issued by: 129,949 62,337a) public bodies 89,149 49,285

b) credit institutions, 21,378 7,210

of which: own securities 6,451 4,589

c) financial institutions, 19,068 330

of which: own securities - -

d) other issuers 354 5,511

60 Stocks, shares and other equity securities - 20670 Participating interests: 6,929 2,563

a) valued by the equity method - -

b) other participating interests 6,929 2,563

90 Positive consolidation differences 1,246 -110 Intangible fixed assets, 368,702 200,858

of which:

- start-up costs 8,819 5,853

- goodwill 354,492 193,632

120 Tangible fixed assets 13,730 9,589150 Other assets 54,337 64,352160 Prepayments and accrued income: 8,057 2,955

a) accrued income 7,584 2,624

b) prepayments 473 331

Total assets 3,176,805 1,583,562

CONSOLIDATED BALANCE SHEET(in € ‘000)

Consolidated Financial Statements

133

Consolidated Accounts

CONSOLIDATED BALANCE SHEET(in € ‘000)

Liabilities Financial year 2002 Financial year 2001

10 Deposits by banks: 429,596 48,598a) repayable on demand 69,156 26,180

b) with agreed maturity dates or periods of notice 360,440 22,418

20 Deposits by customers: 2,064,040 1,044,668a) repayable on demand 1,552,896 957,114

b) with agreed maturity dates or periods of notice 511,144 87,554

30 Debts evidenced by certificates: 162,336 74,384a) bonds 96,699 47,155

b) certificates of deposit 36,197 15,394

c) other securities 29,440 11,835

50 Other liabilities 118,916 91,88460 Accruals and deferred income: 5,741 1,336

a) accruals 5,225 1,031

b) deferred income 516 305

70 Provision for staff-leaving indemnity 17,099 7,07680 Provision for liabilities and charges: 6,304 2,795

b) tax and duties provisions 5,203 2,773

d) other provisions 1,101 22

90 Provisions for credit risks 930 930110 Subordinated liabilities 42,840 22,883140 Shareholders’ equity - minority interests 4 -150 Share capital 286,200 286,325170 Reserves 37,602 1,444

a) legal reserve 312 160

d) other reserves 37,290 1,284

200 Profit (Loss) for the financial year 5,197 1,240

Total liabilities 3,176,805 1,583,562

Consolidated Financial Statements

134

Consolidated Accounts

GUARANTEES AND COMMITMENTS(in € ‘000)

Items Financial year 2002 Financial year 2001

10 Guarantees given, 214,635 333,210of which:

- acceptances 301 54

- other guarantees 214,334 333,156

20 Commitments, 16,636 1,457of which:

- for sales with obligation of re-purchase 14,904 954

Consolidated Financial Statements

135

Consolidated Accounts

Items Financial year 2002 Financial year 2001

10 Interest receivable and similar income, 67,259 52,211of which:

- on loans and advances to customers 49,975 36,625

- on debt securities 4,887 3,737

20 Interest payable and similar charges, (30,237) (21,846)of which:

- on deposits by customers (24,537) (18,737)

- on debts evidenced by certificates (5,309) (2,672)

30 Dividends and other income: 448 4a) on stocks, shares and other equity securities - 4

b) on participating interests 448 -

40 Fees and commissions receivable 30,851 21,63650 Fees and commissions payable (10,688) (9,158)60 Gains (losses) on financial operations 7,520 4,38570 Other operating income 19,387 9,66480 Administrative expenses: (68,047) (44,651)

a) staff costs, (37,083) (24,371)of which:

- wages and salaries (25,281) (17,102)

- social security costs (6,975) (4,611)

- staff-leaving indemnities (1,937) (1,279)

- retirement pensions and similar costs (869) (460)

b) other administrative expenses (30,964) (20,280)90 Value adjustments on intangible and tangible fixed assets (9,431) (8,512)100 Provisions for liabilities and charges (207) (2)110 Other operating expenses (81) (4)120 Value adjustments on receivables and provisions

for guarantees and commitments (5,328) (3,250)130 Value re-adjustments on receivables and provisions

for guarantees and commitments 350 276140 Provisions for credit risks - (103)160 Value re-adjustments on long-term investment securities - 298180 Profit (Loss) on ordinary activities 1,796 949190 Extraordinary income 7,153 3,023200 Extraordinary charges (1,785) (656)210 Profit (Loss) on extraordinary activities 5,368 2,367240 Tax on profit for the financial year (1,967) (2,076)260 Profit (Loss) for the financial year 5,197 1,240

CONSOLIDATED PROFIT AND LOSS ACCOUNT(in € ‘000)

137

Consolidated Accounts

Notes to the Consolidated Financial Statements

General Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

Part A - Accounting criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139Section 1 - Significant accounting criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139Section 2 - Value adjustments and tax provisions . . . . . . . . . . . . . . . . . . . . . . 143

Part B - Notes to the Consolidated Balance Sheet . . . . . . . . . . . 144Section 1 - Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144Section 2 - Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149Section 3 - Participating interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152Section 4 - Tangible and intangible fixed assets . . . . . . . . . . . . . . . . . . . . . . . . 155Section 5 - Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156Section 6 - Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159Section 7 - Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160Section 8 - Share capital, equity reserves, provision for general

banking risks and subordinated liabilities . . . . . . . . . . . . . . . . . . . . 162Section 9 - Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165Section 10 - Guarantees and commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . 166Section 11 - Concentration and distribution of assets and liabilities . . . . . . . . . . . . 168Section 12 - Asset management and dealing for third parties . . . . . . . . . . . . . . . 174

Part C - Notes to the Consolidated Profit and Loss Account . . . 176Section 1 - Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176Section 2 - Fees and commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177Section 3 - Gains and losses on financial transactions . . . . . . . . . . . . . . . . . . . 178Section 4 - Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178Section 5 - Value adjustments, value re-adjustments and provisions . . . . . . . . . . 179Section 6 - Other items of the Profit and Loss Account . . . . . . . . . . . . . . . . . . 181Section 7 - Other information on the Profit and Loss Account . . . . . . . . . . . . . . 182

Part D - Other information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182Section 1 - Directors and Statutory Auditors . . . . . . . . . . . . . . . . . . . . . . . . . 182

Notes to the Consolidated Financial Statements

138

Consolidated Accounts

GENERAL INTRODUCTION

Basis of presentationThe consolidated financial statements have been prepared in accordance with the provisions of Legislative Decree 87 of 27 January 1992and with the instructions issued by Banca d’Italia in the Governor’s Measure of 30 July 2002. Reference has also been made to accountingcriteria approved in Italy and in Europe.The financial statements as at 31 December 2002 consist of the balance sheet, profit and loss account and notes to the financial statementsand are accompanied by the Board Report.These are presented clearly and give a true and fair view of the state of affairs and financial position of the Bank and its profit for the year.All the values indicated in the Notes to the financial statements are expressed in thousands of Euros, unless otherwise specified.The notes to the financial statements provide the information required by the aforementioned legislation together with other non-compulsory information deemed appropriate in order to give a correct representation of the bank’s situation.The following additional statements are attached to the Notes to the financial statements:- reclassified consolidated balance sheet;- reclassified consolidated profit and loss account;- statement of changes in consolidated shareholders’ equity.The financial statements are drawn up in comparative form showing the values corresponding to the previous financial year and the changesin the items. In order to interpret the comparative data correctly, refer to the instructions given in the paragraph: ‘Extraordinary transactions:acquisition of business line’.The principles applied in preparing the financial statements have not been changed from the previous year, with the exception of theprinciple used for the amortisation of goodwill paid on the acquisition of the business line from the Banca Intesa Group. The changes made,together with the relevant reasons and effects, are illustrated in detail in Part A, Section 1, Point 6 of these Notes to the financial statements,to which express reference is made.A reclassification has also been made in some balance sheet items: in particular, the existing reserve of € 4,503 thousand, which waspreviously posted under item 80 d) ‘Provisions for liabilities and charges: other provisions’, has now been posted to reduce item 150 ‘Otherassets’ as this is a direct adjustment of an item under the assets section of the balance sheet.As a result of this, the items of last year’s financial statements have been accordingly reclassified in order to ensure that the two sets offigures are suitably comparable.The financial statements are audited by Reconta Ernst &Young Spa.

Basis and methods of consolidationDuring the 2002 financial year, the Gruppo Bancario Unipol Banca was re-formed. In January 2002, the Bank purchased from the parentcompany Unipol Assicurazioni the entire stake in Unipol Fondi Ltd, the company that has set up and manages Unipol Funds, a multi-portfolio umbrella fund under the laws of Ireland which Unipol Banca places with the Italian public. In May, a controlling interest in thecompany Grecale Srl was acquired from third parties. Grecale Srl is the vehicle company that performed the first securitisation transactionin relation to the performing mortgage loans issued by Unipol Banca.Starting from the 2002 financial year, Unipol Banca is thus required to prepare its consolidated financial statements as a parent companyin accordance with Article 25, sub-section 1, letter a) of Decree 87/92. In previous financial years the bank prepared its consolidated financialstatements as an entity treated as the parent company of credit and financial institutions under unified management, in accordance withArticle 26, sub-section 2, letter a) of the above decree.The scope of consolidation as at 31 December 2002 is therefore broken down as follows:- Unipol Banca SpA, based in Bologna, parent company credit institution;- Unipol Fondi Ltd, based in Dublin (Ireland), management company of EU-harmonised foreign UCITS, a subsidiary wholly owned bythe parent company (already consolidated under unified management in previous financial years);- Grecale Srl, based in Bologna, a vehicle company for securitisation transactions, 60% directly owned by the parent company;- Unipol SGR SpA, based in Bologna, an asset management company undergoing temporary suspension of business, consolidated under unified management as it is wholly owned by Unipol Assicurazioni, the parent company of Unipol Banca.

Notes to the Consolidated Financial Statements

139

Consolidated Accounts

The changes that have occurred in the scope of consolidation, which essentially concern only the takeover of the company Grecale, do notimpede comparison with the figures from the previous financial year.All the companies included in the scope of consolidation are consolidated according to the line-by-line method, which involves recordingin the consolidated financial statements all the balance sheet and off balance sheet items of the consolidated companies, subject to theprovisions for the consolidation of participating interests and the disregarding of reciprocal transactions.The value of participating interests held in the consolidated companies is written off against the portion of shareholders’ equity relating tosubsidiaries and any portion pertaining to third parties is classified in a special item under liabilities. The set-off is carried out on the basisof the values on the acquisition date or, if subsequent, on the consolidation date. Any differences in value arising from the set-off that couldnot be assigned in full or in part to specific items of the assets or liabilities, are posted as either positive or negative consolidation differences.Positive differences are amortised according to the criteria given in Part A, Section 1 - Point 6, of these Notes to the financial statements.The shareholders’ equity of the companies consolidated under unified management are added together in the consolidated finan-cial statements.With regard to reciprocal transactions, none of the following are taken into consideration: credit and debit relations between the consolidatedcompanies, income and expenses relating to transactions between the same companies, and profits and losses arising from infra-grouptransactions and therefore not yet completed in relation to third parties.Capital transactions strictly relating to the securitisation operation and the corresponding economic effects are not disregarded, in accordancewith the principle of the legal separation between the company’s capital and the capital arising from the securitisation process. The sameapplies to transactions concerning UCITS established by Unipol Fondi.

Extraordinary transactions: acquisition of business lineThe parent company Unipol Banca signed a business line acquisition agreement on 30 December 2002 with three banks of the CapitaliaGroup, which involved the acquisition by Unipol Banca of 60 branches and the contractual relationships relating thereto.The agreement came into effect at 11:59 p.m. on 31 December 2002. Therefore, the items of the balance sheet for the 2002 financialstatements also include the value of the relationships acquired, as taken from the permanent assignment positions on 31 December 2002.The effects on the profit and loss account, for obvious reasons, will only be produced as from the 2003 financial year.In order to facilitate comparison of the balance sheet items for the 2002 financial year and the previous financial year, the main aggregatesconcerning the newly-acquired branches are provided below and expressed in Euros:

Loans and advances to banks 216,842,081 Deposits by banks 315,334,230

Loans and advances to customers 562,113,726 Deposits by customers 426,296,201

Goodwill 163,400,000 Debts evidenced by certificates 17,843,879

Other assets 23,927,190 Other liabilities 43,408,687

Total assets 966,282,997 Total liabilities 802,882,997

Given that the negotiations concluded with the signing of the agreement right at the end of the year, the process of migrating the datarelating to the relationships taken over to Unipol Banca information and accounting system could only be started in 2003 and will becompleted in early April. Therefore, given the lack of availability of all the necessary data, some of the detailed information required in theNotes to the financial statements only corresponds to the relationships already in place at Unipol Banca and excludes those arising from theacquisition of the business line. Information on these omissions is given at the foot of the individual tables concerned.

Part A

ACCOUNTING CRITERIA

Section 1 - Significant accounting criteriaThe accounting criteria adopted in preparing the financial statements, agreed with the Board of Statutory Auditors, are in accordance withrelevant legislation.

Notes to the Consolidated Financial Statements

140

Consolidated Accounts

All amounts are stated according to the principles of prudence and going concern.

Revenues and expenses are shown on an accrual basis and according to the principle of prudence, stating therefore only the result at the

end of the financial year.

Risks and losses relating to the financial year have been taken into account even if they became known only after the end of the year.

Unless specifically permitted by current legislation, items are not set off against each other.

Items are disclosed giving precedence to substance over form and to the date at which transactions are settled rather than when they were

contracted.

Assets are written down in accordance with the valuation criteria set out below for individual assets items and amortised by adjustments to

reduce their value. Such adjustments are written back if the reasons for making them no longer hold.

1. Loans, guarantees and commitments

Loans are stated on the balance sheet at estimated realisable value, calculated taking into account the solvency of the debtors. Adjustments

to the value of both capital and accrued interest are written off directly against the corresponding items.

In subsequent years, the original values may be restored if the reasons for the write-down no longer apply.

Doubtful and substandard loans are valued analytically, according to the debtor’s solvency situation, taking into consideration the possible

existence of guarantees.

Loans that have been restructured or are in course of restructuring are valued analytically by reference to the individual position or group,

taking into account the related financial losses.

Performing loans, and substandard loans that have not shown specific losses on the basis of the analytical valuation process, are written

down on a lump sum basis, taking into consideration both ‘country risk’ and the individual risk of insolvency.

Guarantees given are recorded at the total value of the exposure.

Commitments to grant finance to third parties are booked at the full amount.

Guarantees and commitments are valued on the same criteria as those applied to loans. Expected losses are covered by the corresponding

provisions.

As required by Banca d’Italia, the criteria adopted in classifying non-performing loans are set out below:

- a loan is classified as substandard when the borrower finds himself in difficulties judged to be of a temporary nature, and when there is

a prospect of the loan being readmitted to the category of performing loans;

- a loan is classified as doubtful when creditors have started proceedings or when the Bank or another creditor has started recovery

proceedings. In addition the Bank considers a loan to be doubtful if the debtor is in grave financial crisis not of a temporary nature which

is likely to lead to proceedings for recovery even if these have not yet been started;

- the Bank considers as restructured or in course of restructuring loans to enterprises or groups where the terms of the loans have been

altered to enable borrowers to restore their financial situation.

Our entire business of granting and managing loans is monitored constantly and systematically by our internal audit and by our risks control

team.

2. Securities and off-balance sheet transactions (other than foreign currency transactions)

Transactions in bills and other securities are booked at the time of settlement.

The instruments concerned are Treasury bills and similar securities eligible for refinancing with central banks, bonds and other debt

securities and equities, as adjusted for both positive and negative issue spreads in accordance with legal and fiscal regulations.

2.1 Long-term investment securities

Instruments held as long-term investment securities are valued at historic purchase cost. Apart from participating interests, such investment

securities are written down if there is a lasting deterioration in the issuer’s solvency. Investment securities are restored to their original value

Notes to the Consolidated Financial Statements

Consolidated Accounts

141

when the reasons for any write-downs cease to apply. The difference between purchase cost and redemption value for fixed interestsecurities is charged to the interest account for the same securities on an accrual basis taking into account their residual life. The securitiesbooked under this category were included amongst long-term investment securities in the 1999 financial year. Their allocation is the resultof a decision by the Board of Directors and is handled within a framework also agreed by the Board of Directors.As at 31 December 2002 they account for 21.2% of the Bank’s securities portfolio.Long-term investment securities, if valued by the same criteria as trading securities, would have shown a capital loss of € 328,000 at 31December 2002. The market value of the long-term investment portfolio is determined on the basis of the arithmetical average ofquotations during the six months preceding the end of the financial year.

2.2 Trading securities

Instruments not constituting long-term investment securities are valued at the lower of purchase cost, determined by the LIFO method onan annual basis, or market price determined as follows:- for securities listed on Italian and foreign markets, on the basis of the arithmetical average of quotations during the month of December;- for securities not listed on regulated markets, at purchase cost, adjusted if necessary to take account of any estimated loss in value,

comparing them with the value of securities with similar maturities and yields traded on regulated markets. Commitments to buy and sell securities under forward contracts concluded but still to be settled at the end of the financial year are valuedon a basis similar to that set out above. Repurchase agreements and reverse repurchase agreements are considered as loans on negotiable securities and the amounts receivedand paid are therefore shown as payables and receivables.The cost of such agreements and the yield from them, comprising interest coupons on securities and the differential between the spot andforward prices for such securities, are recorded on an accrual basis under the heading of interest in the profit and loss account.

3. Participating interests

The portfolio of participating interests, other than the relevant ones, is valued at purchase cost less any loss of value deemed to bepermanent. The original value is restored should the reasons for any write-downs cease to apply.As at 31 December 2002, no major participating interests in companies are held or have been held throughout the financial year, with theexception of participating interests consolidated according to the line-by-line method.

4. Foreign currency assets and liabilities (including off-balance sheet transactions)

Assets and liabilities in foreign currencies are converted into euros at the spot rate of exchange on the last day of the financial year. Foreign currency costs and revenues are stated using the exchange rates applying at the time they were booked.Transactions are booked on the date of settlement.

5. Tangible fixed assets

These are entered in the balance sheet at purchase cost, including incidental costs incurred, adjusted by depreciation, and they aresystematically depreciated in relation to their remaining useful life. The adjustments made are fair and commensurate with the ratespermitted from a taxation perspective for the various categories of assets; tangible fixed assets acquired in the financial year are depreciatedat a rate of 50% of the tax rate specified for the first year.

6. Intangible fixed assets

Intangible fixed assets are stated with the consent of the Board of Statutory Auditors.Multi-year costs arising out of extraordinary maintenance for leasehold improvements and refurbishing are amortised as follows:

Notes to the Consolidated Financial Statements

142

Consolidated Accounts

- on a straight-line basis over five financial years in relation to multi-year costs formed before 1 January 1999,

- according to the duration of the lease (first renewal) for costs incurred subsequently.

The costs of goodwill are amortised on the basis of different criteria depending on whether or not they relate to extraordinary transactions

owing to the complexity of the network acquired or due to the size of the respective relationships.

Goodwill paid upon the acquisition of the business lines from the Intesa Group, which took place in 2001, and from the Capitalia Group,

which took place this year, is amortised according to the estimated period of recovery.

In particular, with respect to the goodwill paid for the acquisition of the branches from the Intesa Group, amortisation is calculated by

estimating a useful life of 20 years and by using increasing differentiated rates for the years up to 2006 and, subsequently, on a straight-

line basis.

As regards the duration of goodwill, there are reasons to point to the exceptional nature of the operation and to the long-term economic

effects associated with the greater potential for development generated by a broader presence on the market.

The reasons underlying the use of differentiated rates can be found in the development plan that the parent company has been working

on with a view to incorporating the acquired branches into its own business model. This model involves integrating the banking network

with the insurance network, leading to a significant increase in productivity over the next five financial years. In the same period, measures

must be implemented to improve staff productivity with positive repercussions in terms of lower costs. The integration process can be

expected to be complete by the year 2007, at which time straight-line amortisation will be brought back.

The rate applied in the 2002 financial year is 2% and is determined on the basis of a mathematical algorithm that takes into consideration

the difference between gross operating income and net interest income (core activities) of the branches taken over compared with the same

figures at completion of the integration process (2007). This difference is considered suitable to represent the effects of the aforementioned

growth plan.

In 2001 a rate of 5% (reduced to 2.5% given that the acquisition of the branches took place from an accounting point of view as from 1

July 2001) was applied. The change made in 2002 to the original amortisation plan stemmed from the fact that only in 2002 was the process

of integrating the branches completely defined, so that the bank was then able to assess systematically the amortisation plan at differentiated

rates.

If the method of amortisation had not been changed and the Company continued to apply the 5% rate in this financial year, the amount

of amortisation would have been in excess of € 5,935,770.

The goodwill paid for the acquisition of the former Capitalia branches will be amortised as from the 2003 financial year for accrual reasons.

Goodwill costs paid for other transactions are amortised over 10 financial years.

The costs of migrating the data relating to the business lines acquired are amortised over 10 financial years.

Software purchase and update costs are amortised over three financial years except for costs related to the setting up of the call centre

service, that being amortised over five financial years.

Other multi-year costs are amortised over five financial years.

With regard to multi-year costs which can be amortised over more than five financial years, this policy has been adopted as acquisition of

commercial activities (such as goodwill for the network of financial advisers and of bank branches) and costs incurred for technological

reasons (migration of the information system) are expected to benefit the Bank for a much longer time than the usual amortisation period.

The values shown in the accounts are stated at cost price less accrued amortisation.

Positive consolidation differences are amortised on a straight-line basis over 10 financial years. The positive difference of € 6,000 relating

to the subsidiary Grecale Srl was fully offset under ‘Other provisions’ at the time it was first included in consolidation, and the subsidiary’s

corporate purpose was also considered.

7. Other items

Prepayments and accrued income, accruals and deferred income

Prepayments and accrued income, accruals and deferred income are recognised on an accrual basis, taking into account the conditions of

individual relationships.

Notes to the Consolidated Financial Statements

143

Consolidated Accounts

Provision for staff-leaving indemnities

The provision for staff-leaving indemnities covers the liability accrued as at 31 December 2002 to all employees on the payroll at year-endin accordance with the law, collective and supplementary labour agreements currently in force.

Provisions for liabilities and charges

These provisions cover losses, charges or payables the existence of which is certain or likely, the amount of which and the date of occurrencecan be realistically estimated at year-end.The tax and duties provision represents provisions made to cover income tax on the basis of a prudent estimate of current and deferredtax liabilities, and stamp duties settled virtually.The other provisions include:- a provision for estimated losses on guarantees and commitments;- a provision for estimated risks on actions for revocation in insolvency;- a provision for charges, the existence of which is certain or likely, but the amount or date of occurrence of which is unspecified.

Provisions for credit risks

These provisions are intended to cover latent possible risks of insolvency in respect of loans outstanding. They have therefore no rectifyingfunction.

Treatment of deferred/prepaid income taxes

The financial statements show the effects of deferred and prepaid taxes in order to correctly calculate income tax charges for the period,irrespective of when they are posted.Assets arising out of prepaid taxation are entered on the balance sheet under item 150 ‘Other assets’ where there is reasonable certaintythat sufficient taxable income will be produced in future years to allow for their recovery. Liabilities arising out of deferred taxation are postedunder item 80 b) ‘Tax and duties provision’ in the amount not offset by assets arising out of prepaid taxation. Prepaid and deferred taxescan only be offset against each other within the context of the same individual tax and with reference to the same year of taxation, separatelyfor every company included in the consolidation.Prepaid and deferred taxes were quantified on the basis of the rates currently in force for future financial years.Changes in prepaid taxation and the respective economic effects are indicated in detail in the special sections of the Notes to the financialstatements.

Posting of dividends

Dividends from companies included in the scope of consolidation are eliminated from the consolidated financial statements.Dividends from other companies are recorded in the financial year in which they are actually distributed.

Section 2 - Value adjustments and tax provisions

2.1 Value adjustments made in application of the tax laws only

None made.

2.2 Provisions made in application of the tax laws only

None made.

Notes to the Consolidated Financial Statements

144

Consolidated Accounts

Part B

NOTES TO THE CONSOLIDATED BALANCE SHEET

Section 1 - Loans

This section illustrates the following items from assets:

Cash and balances at central banks and post offices (item 10)

The breakdown is shown below:

Loans and advances to banks (item 30)

Breakdown of item 30 ‘Loans and advances to banks’

1.1 Detail of item 30 ‘Loans and advances to banks’

31/12/2002 31/12/2001

Banknotes and coins 32,804 18,406

Balances at central banks - -

Balances at post offices 5 -

Total 32,809 18,406

31/12/2002 31/12/2001

- Loans and advances to banks 422,766 349,480

- Current accounts 26,196 45,418

- Repurchase agreements 409,449 66,306

- Other 39,918 -

Total 898,329 461,204

31/12/2002 31/12/2001

a) Loans and advances to central banks 5,328 37,529

b) Bills eligible for refinancing with central banks - -

c) Repurchase agreements 409,449 66,306

d) Securities lent - -

31/12/2002 31/12/2001

10. Cash and balances at central banks and post offices 32,809 18,406

30. Loans and advances to banks 898,329 461,204

40. Loans and advances to customers 1,646,965 739,454

Total 2,578,103 1,219,064

Notes to the Consolidated Financial Statements

145

Consolidated Accounts

1.2 Demand loans and advances to banks

The breakdown is shown below:

1.3 Non-performing loans and advances to banks

Gross Total Netexposure value adjustments exposure

A. Non-performing loans 3 - 3

A.1 Doubtful loans - - -

A.2 Substandard loans - - -

A.3 Loans being restructured - - -

A.4 Restructured loans - - -

A.5 Unsecured loans exposed to country risk 3 - 3

B. Performing loans 898,326 - 898,326

Total 898,329 - 898,329

Doubtful Substandard Loans being Restructured Unsecured loansloans loans restructured loans exposed to country risk

A. Gross exposure as at 01/01/2002 - - - - -

A.1 Overdue interest - - - - -

B. Increases, out of - - - - 3

B.1 Transfers from performing loans - - - - -

B.2 Overdue interest - - - - -

B.3 Transfers from other categories of non-performing loans - - - - -

B.4 Other increases - - - - 3

C. Decreases, out of - - - - -

C.1 Transfers to performing loans - - - - -

C.2 Write-offs - - - - -

C.3 Collections - - - - -

C.4 Assignments - - - - -

C.5 Transfers to other categories of non-performing loans - - - - -

C.6 Other decreases - - - - -

D. Gross exposure as at 31/12/2002 - - - - 3

D.1 Overdue interest - - - - -

Notes to the Consolidated Financial Statements

146

Consolidated Accounts

1.4 Overall value adjustments to loans and advances to banks

Loans and advances to customers (item 40)

Breakdown of item 40 ‘Loans and advances to customers’

1.5 Detail of item 40 ‘Loans and advances to customers’

The breakdown given in the table above does not include any positions acquired from Capitalia.

Doubtful Substandard Loans being Restructured Unsecured Performingloans loans restructured loans loans exposed loans

to country risk

A. Value adjustments as at 01/01/2002

A.1 Overdue interest - - - - - -

B. Increases, out of - - - - - -

B.1 Value adjustments, of which - - - - - -

B1.1 Overdue interest - - - - - -

B.2 Amounts released from provisions for credit risks - - - - -

B.3 Transfers from other categories of non-performing loans - - - - - -

B.4 Other increases - - - - - -

C. Decreases, out of - - - - - -

C.1 Value re-adjustments, of which - - - - - -

C.1.1 Overdue interest - - - - - -

C.2 Value re-adjustments upon collection, of which - - - - - -

C.2.1 Overdue interest - - - - - -

C.3 Write-offs - - - - - -

C.4 Transfers to other categories of non-performing loans - - - - - -

C.5 Other decreases - - - - - -

D. Value adjustments as at 31/12/2002 - - - - - -

D.1 Overdue interest - - - - - -

31/12/2002 31/12/2001

- Current accounts 629,044 295,771

- Mortgage loans 470,487 238,405

- Prefinancing 223,659 89,178

- Other loans not settled in current accounts 172,335 11,983

- Portfolio risk 5,516 1,417

- Net doubtful loans 9,838 5,652

- Loans for securitization in progress 135,071 94,167

- Other 1,015 2,881

Total 1,646,965 739,454

31/12/2002 31/12/2001

a) Bills eligible for refinancing with central banks 1,417 569

b) Repurchase agreements - -

c) Loans of securities - -

Notes to the Consolidated Financial Statements

147

Consolidated Accounts

1.6 Secured loans to customers

Loans to customers secured or guaranteed wholly or in part, excluding those acquired from Capitalia, are set forth below (secured orguaranteed portion only):

1.7 Demand loans and advances to customers

Doubtful loans (including overdue interest)

Net doubtful loans, including overdue interest, were equal to 0.60% of outstanding loans.

Receivables, out of overdue interest

Receivables out of overdue interest, net of value adjustments, are broken down as follows:

31/12/2002 31/12/2001

a) Mortgage loans 155,071 205,493

b) Loans secured on: 44,994 19,709

1. Cash deposits 50 415

2. Securities 21,162 13,822

3. Other instruments 23,782 5,472

c) Loans guaranteed by: 280,344 100,239

1. Governments - -

2. Other public bodies - -

3. Banks 138,365 -

4. Other operators 141,979 100,239

Total 480,409 325,441

Gross Total Netexposure value adjustments exposure

A. Non-performing loans 40,755 18,421 22,334

A.1 Doubtful loans 27,259 17,421 9,838

A.2 Substandard loans 12,989 847 12,142

A.3 Loans being restructured - - -

A.4 Restructured loans - - -

A.5 Unsecured loans exposed to country risk 507 153 354

B. Performing loans 1,626,303 1,672 1,624,631

Total 1,667,058 20,093 1,646,965

31/12/2002 31/12/2001

Doubtful loans (including overdue interest) 9,838 5,652

31/12/2002 31/12/2001

a) Doubtful loans 7 21

b) Other loans 125 87

Total overdue interest 132 108

Notes to the Consolidated Financial Statements

148

Consolidated Accounts

1.8 Changes in non-performing loans to customers

1.9 Changes in overall value adjustments to loans and advances to customers

Doubtful Substandard Loans being Restructured Unsecured loansloans loans restructured loans exposed to country risk

A. Gross exposure as at 31/12/2002 21,180 8,691 - - -

A.1 Overdue interest 1,423 42 - - -

B. Increases, out of 8,555 24,911 - - 507

B.1 Inflows from performing loans 77 21,742 - - -

B.2 Overdue interest 368 173 - - -

B.3 Transfers from other categories of non-performing loans 7,276 - - - -

B.4 Other increases 834 2,996 - - 507

C. Decreases, out of 2,476 20,613 - - -

C.1 Outflows to performing loans - 4,591 - - -

C.2 Write-offs 1,279 - - - -

C.3 Collections 1,197 8,540 - - -

C.4 Assignments - - - - -

C.5 Transfers to other categories of non-performing loans - 7,276 - - -

C.6 Other decreases - 206 - - -

D. Gross exposure as at 31/12/2002 27,259 12,989 - 507

D.1 Overdue interest 1,250 94 - - -

Doubtful Substandard Loans being Restructured Unsecured Performingloans loans restructured loans loans exposed loans

to country risk

A. Value adjustments as at 01/01/2002 15,528 608 - - - -

A.1 Overdue interest 1,402 - - - - -

B. Increases, out of 3,425 357 - - 153 2,069

B.1 Value adjustments, of which 3,126 261 - - 153 2,069

B1.1 Overdue interest 320 - - - - -

B.2 Amounts released from provisions for credit risks - - - - - -

B.3 Transfers from other categories of non-performing loans 44 - - - - -

B.4 Other increases 255 96 - - - -

C. Decreases, out of 1,532 118 - - - 397

C.1 Value re-adjustments, of which - - - - - -

C.1.1 Overdue interest - - - - - -

C.2 Value re-adjustments upon collection, of which 253 67 - - - -

C.2.1 Overdue interest 149 - - - - -

C.3 Write-offs 1,279 7 - - - 397

C.4 Transfers to other categories of non-performing loans - 44 - - - -

C.5 Other decreases - - - - - -

D. Value adjustments as at 31/12/2002 17,421 847 - - 153 1,672

D.1 Overdue interest 1,243 - - - - -

Section 2 - Securities

Securities owned by the Bank are analysed as follows in the financial statements:

The securities portfolio analysed above includes trading and long-term investment securities.

2.1 Long-term investment securities

The table below shows the book value of long-term investment securities, compared with their market value, determined on the basis ofthe average prices recorded in the last six months.

The book value of long-term investment securities as set out above, is compared below with market value based on the average prices ofDecember 2002.

Notes to the Consolidated Financial Statements

149

Consolidated Accounts

31/12/2002 31/12/2001

- Treasury Bills and other eligible bills for refinancing with central bank (item 20) 15,752 21,639

- Bonds and other debt securities (item 50) 129,949 61,337

- Stocks, shares and other equity securities (item 60) - 206

Total 145,701 84,182

Items/Value Book value Market value Book value Market valueas at second half-year as at second half-year

31/12/2002 2002 31/12/2001 2001

1. Debt securities 30,877 30,374 25,798 24,746

1.1 Government securities 12,647 12,144 17,672 16,807

- listed 12,647 12,144 17,672 16,807

- unlisted - - - -

1.2 Other securities 18,230 18,230 8,126 7,939

- listed 18,230 18,230 8,126 7,939

- unlisted - - - -

2. Equity securities - - - -

- listed - - - -

- unlisted - - - -

Total 30,877 30,374 25,798 24,746

Items/Value Book value Market value Book value Market value31/12/2002 December 2002 31/12/2001 December 2001

1. Debt securities 30,877 30,601 25,798 24,724

1.1 Government securities 12,647 12,371 17,672 16,917

- listed 12,647 12,371 17,672 16,917

- unlisted - - - -

1.2 Other securities 18,230 18,230 8,126 7,807

- listed 18,230 18,230 8,126 7,807

- unlisted - - - -

2. Equity securities - - - -

- listed - - - -

- unlisted - - - -

Total 30,877 30,601 25,798 24,724

Notes to the Consolidated Financial Statements

150

Consolidated Accounts

2.2 Changes in long-term investment securities during the financial year

Purchases relate to the subscription of junior securities issued by Grecale Srl as part of securitising performing loans issued by Unipol Banca.Sales relate to the full assignment of a US government security expressed in dollars, sold towards the end of the year at a gain of € 34,000.Other downward changes include € 729 thousand owing to the fluctuation of exchange rates on the security sold, offset in economic termsby proceeds from hedging transactions of € 705 thousand

2.3 Trading securities

31/12/2002 31/12/2001

A. Balance as at 01/01/2002 25,798 25,521

B. Increases 18,266 305

B1. Purchases 18,230 -

B2. Value re-adjustments - -

B3. Transfers from trading portfolio - -

B4. Other changes 36 305

C. Decreases 13,187 28

C1. Sales 4,933 -

C2. Repayments 7,500 -

C3. Value adjustments - -

C4. Transfers to trading portfolio - -

C5. Other changes 754 28

D. Balance as at 31/12/2002 30,877 25,798

Items/Value Book value Market value Book value Market value31/12/2002 December 2002 31/12/2001 December 2001

1. Debt securities 114,824 115,018 58,178 58,201

1.1 Government securities 92,254 92,434 47,624 47,641

- listed 92,254 92,434 47,624 47,641

- unlisted - - - -

1.2 Other securities 22,570 22,584 10,554 10,560

- listed 15,009 15,023 5,468 5,474

- unlisted 7,561 7,561 5,086 5,086

2. Equity securities - - 206 206

- listed - - 206 206

- unlisted - - - -

Total 114,824 115,018 58,384 58,407

Notes to the Consolidated Financial Statements

151

Consolidated Accounts

2.4 Changes in trading securities during the financial year

Volumes traded during the financial year, broken down according to type of security, are summarised below:

31/12/2002 31/12/2001

A. Balance as at 01/01/2002 58,384 52,751

B. Increases 1,153,215 901,701

B.1 Purchases 1,146,365 896,546

- Debt securities 1,141,816 866,113

- Government bonds 254,534 90,878

- Other securities 887,282 775,235

- Equity securities 4,549 30,433

B.2 Value re-adjustments and write-ups - 8

B.3 Transfers from long-term investment portfolio - -

B.4 Other changes 6,850 5,147

C. Decreases 1,096,775 896,068

C.1 Sales and repayments 1,096,707 895,763

- Debt securities 1,091,908 864,854

- Government bonds 210,209 90,397

- Other securities 881,699 774,457

- Equity securities 4,799 30,909

C.2 Value adjustments 24 156

C.3 Transfers to long-term investment portfolio - -

C.4 Other changes 44 149

D. Balance as at 31/12/2002 114,824 58,384

Notes to the Consolidated Financial Statements

152

Consolidated Accounts

Section 3 - Participating interests

3.1 Major participating interests

The shareholders’ equity of the subsidiaries, indicated in the previous table, includes the financial results for the financial year 2002.

The changes that have occurred in the basis of consolidation are illustrated in the General Introduction of these Notes to the financialstatements.

3.2 Amounts due to and from Group undertakings

31/12/2002 31/12/2001

a) Assets 117,381 2,374

1. Due from banks, of which - -

subordinated - -

2. Due from financial institutions, of which - -

subordinated - -

3. Due from other customers, of which 98,926 2,374

subordinated - -

4. Bonds and other debt securities, of which 18,455 -

subordinated 18,230 -

b) Liabilities 792,276 280,400

1. Due to banks - -

2. Due to financial institutions 19,541 15,200

3. Due to other customers 771,695 265,200

4. Debts evidenced by certificates 1,040 -

5. Subordinated liabilities - -

c) Guarantees and commitments 15,488 19,861

1. Guarantees given 15,488 19,861

2. Commitments - -

Participating interestsName Head Relation Shareholders’ Profit/ Participating Quota Votes in Book

office type equity Loss undertaking % AGM % value

A. Consolidated

undertakings

Parent Company

Unipol Banca Spa Bologna 327,152 5,319

A.1 Line-by-line

1. Unipol Fondi Ltd Dublin 1 167 38 Unipol Banca 100% 100% -

2. Grecale Srl Bologna 1 10 - Unipol Banca 60% 60% -

3. Unipol SGR Spa Bologna 6 2,363 11 Unipol Assicurazioni 100% 100% -

Key ‘Relation type’1 – control in accordance with Article 2359 (1) (1) of the Civil Code (majority of voting rights in ordinary shareholders’ meetings)6 – unified management in accordance with Article 26 (2) of Legislative Decree 87/92.

Notes to the Consolidated Financial Statements

153

Consolidated Accounts

3.3 Amounts due to and from non-Group undertakings in which the Group holds participating interests

3.4 Breakdown of item 70 ‘Participating interests’

31/12/2002 31/12/2001

a) Assets 48,386 -

1. Due from banks, of which - -

subordinated - -

2. Due from financial institutions of which 48,386 -

subordinated - -

3. Due from other customers, of which - -

subordinated - -

4. Bonds and other debt securities, of which - -

subordinated - -

b) Liabilities 53,115 17,036

1. Due to banks - -

2. Due to financial institutions 4,520 3,700

3. Due to other customers 1,005 134

4. Debts evidenced by certificates 47,590 13,202

5. Subordinated liabilities - -

c) Guarantees and commitments 10 10

1. Guarantees given 10 10

2. Commitments - -

31/12/2002 31/12/2001

a) In banks - -

1. Listed - -

2. Unlisted - -

b) In financial institutions 5,966 1,806

1. Listed - -

2. Unlisted 5,966 1,806

c) Other 963 757

1. Listed - -

2. Unlisted 963 757

Total 6,929 2,563

Notes to the Consolidated Financial Statements

154

Consolidated Accounts

3.6 Changes in participating interests during the financial year

3.6.2 Other participating interests

Sub-item F, ‘Total value adjustments’, refers to overall losses accumulated on the participating interest in Unicard SpA.

Breakdown of changes in non-Group participating interests

31/12/2002 31/12/2001

A. Balance as at 01/01/2002 2,563 3,045

B. Increases 4,366 2,946

B.1 Purchases 4,366 -

B.2 Value re-adjustments - -

B.3 Write-ups - -

B.4 Other changes - 2,946

C. Decreases - 3,428

C.1 Sales - 3,428

C.2 Value adjustments, of which - -

- permanent write-downs - -

C.3 Other changes - -

D. Balance as at 31/12/2002 6,929 2,563

E. Total write-ups - -

F. Total value adjustments 1,272 1,272

Sub-item B.1 - Purchases Amount

Unipol Merchant Spa 4,061

CSE Srl 206

Agefin Spa 99

Total 4,366

Section 4 - Tangible and intangible fixed assets

Tangible fixed assets, net of value adjustments, amount to € 13,712 thousand and, compared with their historical cost, are depreciated by35%.Intangible fixed assets, net of value adjustments, amount to € 368,702 thousand and, compared with their historical book value, areamortised by 4.4%.The increase in the value of such assets is mainly due to:- the value of goodwill for the acquisition of the business line from the Capitalia Group;- the renovation of premises to make them suitable for use by new banking and financial counters;- work already carried out by Capitalia on premises included in the branch disposal.

4.1 Changes in tangible fixed assets during the financial year

Notes to the Consolidated Financial Statements

155

Consolidated Accounts

31/12/2002 31/12/2001

A. Balance as at 01/01/2002 9,589 5,538

B. Increases 6,483 5,520

B.1 Purchases 6,475 5,506

B.2 Value re-adjustments 8 -

B.3 Write-ups - -

B.4 Other changes - 14

C. Decreases 2,342 1,469

C.1 Sales 63 32

C.2 Value adjustments 2,226 1,437

a) Depreciation 2,226 1,437

b) Permanent write-downs - -

C.3 Other changes 53 -

D. Balance as at 31/12/2002 13,730 9,589

E. Total write-ups - -

F. Total value adjustments 7,321 5,299

a) Depreciation 7,321 5,299

b) Permanent write-downs - -

Notes to the Consolidated Financial Statements

156

Consolidated Accounts

4.2 Changes in intangible fixed assets during the financial year

Section 5 - Other assets

5.1 Breakdown of item 150 ‘Other assets’

31/12/2002 31/12/2001

A. Balance as at 01/01/2002 200,858 7,429

B. Increases 174,908 200,504

B.1 Purchases 174,906 200,504

B.2 Value re-adjustments - -

B.3 Write-ups - -

B.4 Other changes 2 -

C. Decreases 7,064 7,075

C.1 Sales - -

C.2 Value adjustments 7,064 7,075

a) Depreciation 7,064 7,075

b) Permanent write-downs - -

C.3 Other changes - -

D. Balance as at 31/12/2002 368,702 200,858

E. Total write-ups - -

F. Total value adjustments 17,030 10,069

a) Depreciation 17,030 10,069

b) Permanent write-downs - -

31/12/2002 31/12/2001

Net receivables for financial transactions under dispute: 500 500

- nominal value of receivables 5,003 5,003

- adjusting fund -4,503 -4,503

Receivables from Inland Revenue: 10,631 7,400

- tax surplus refund 4,229 4,229

- interest accrued 1,535 1,325

- tax credit on dividends and withheld tax 152 70

- advance payments and tax rebate for prior financial years 3,246 1,352

- other receivables from Inland Revenue 1,469 424

Securities transactions to be settled 1,585 774

Premiums paid for options 857 65

Current account checks being processed 2,480 12,710

Non-interest bearing guarantee deposits 34 97

Debits being processed 26,512 29,688

Bill portfolio - 399

Amounts in transit with subsidiaries 1,666 61

Corporate tax (IRPEG) prepaid taxation 2,785 2,886

Regional tax (IRAP) prepaid taxation 349 197

Other 6,938 9,575

Total 54,337 64,352

Notes to the Consolidated Financial Statements

157

Consolidated Accounts

As regards disputed derivatives transactions, the Board of Directors wishes to inform the Shareholders that the judgment of first instancewent against the Bank which has therefore increased the existing provision stated under ‘Other provisions’ up to 90% of the amount. Onthe basis of legal opinion, the Board of Directors confirms its belief that it may obtain partial satisfaction from the courts and is thereforecarrying on the proceedings.Allocations to the adjustment reserve have been fully recovered in taxation in the related financial years.

No value adjustments have been made to any of the other assets shown as collectible in the above table.

As regards ‘Corporate and regional tax prepaid taxation’, which refer exclusively to the Parent Company, their amounts have been statedaccording to the principle of prudence as a reasonable certainty exists that the Bank’s growth plans for future years will generate a sufficienttaxable income to absorb the costs whose deductibility has been deferred under the present tax laws.The financial statements show the total value of assets arising out of prepaid taxation in relation to all income components, pertaining tothe present financial year and also to previous financial years, which have deferred taxation relevance as at 31 December 2002. These werequantified on the basis of the rates currently in force for future years: in particular for the regional tax (Irap), the basic rate of 4.25% wasapplied, without therefore considering the incremental effects associated with regional surcharges, whereas for corporate tax (Irpeg), therate of 19% was applied for the net costs that will be deductible in 2003 and the rate of 34% for those that will be deductible in laterfinancial years. The different Irpeg rates are due to DIT surpluses from previous financial years which are expected to be absorbed in thenext financial year.

The following table shows the changes in assets arising out of prepaid taxation during the financial year.

Table A. Assets arising out of prepaid taxation

Irpeg Irap Totale

1. Balance as at 01/01/2002 2,886 197 3,083

2. Increases 1,266 240 1,506

2.1 Prepaid taxation of the financial year 1,266 240 1,506

2.2 Other increases - - -

3. Decreases 1,367 88 1,455

3.1 Prior years’ prepaid taxation 1,367 88 1,455

3.2 Other decreases - - -

4. Balance as at 31/12/2002 2,785 349 3,134

Notes to the Consolidated Financial Statements

158

Consolidated Accounts

5.2 Breakdown of item 160 ‘Prepayments and accrued income’

5.4 Breakdown of subordinated assets

Accrued income 31/12/2002 31/12/2001

- Interest and other income on securities 1,245 894

- Interest on loans to banks 1,616 469

- Interest on loans to customers 3,885 921

- Interest on interest rate swaps 733 206

- Price difference on repurchase agreements with customers 36 44

- Withholding tax on interest due to customers 69 90

Total 7,584 2,624

Prepayments 31/12/2002 31/12/2001

- Rents 217 72

- Insurance premiums 91 43

- Telephone costs - data lines 40 -

- Maintenance expenditure 13 22

- Luncheon vouchers for staff 62 68

- Advertising 48 54

- Securities depository and custody - 42

- Other prepayments 2 30

Total 473 331

31/12/2002 31/12/2001

a) Receivables from banks - -

b) Receivables from customers - -

c) Bonds and other debt securities 28,428 482

Total 28,428 482

Notes to the Consolidated Financial Statements

159

Consolidated Accounts

Section 6 - Loans and advances

Breakdown of item 10 ‘Deposits by banks’

The overall total is shown after deduction of non-liquid items.

6.1 Detail of item ‘Deposits by banks’

Breakdown of item 20 ‘Deposits by customers’

6.2 Detail of item ‘Deposits by customers’

Breakdown of item 30 ‘Debts evidenced by certificates’

‘Other securities‘ consist of certified checks issued on customers’ order.Debts evidenced by certificates include accruals on zero coupon securities of € 1,913 thousand.

31/12/2002 31/12/2001

a) Payables on demand 69,156 26,180

- current accounts 156 26,180

- demand deposit accounts 69,000 -

b) Payables with agreed maturity dates or period of notice 360,440 22,418

- time deposit accounts 337,427 22,418

- other 23,013 -

Total 429,596 48,598

31/12/2002 31/12/2001

a) Repurchase agreements - -

b) Securities lent - -

31/12/2002 31/12/2001

a) Payables on demand 1,552,896 957,114

- current accounts 1,475,275 918,176

- demand deposit accounts 77,621 38,938

b) Payables with agreed maturity dates or periods of notice 511,144 87,554

- time savings deposit accounts 1,070 662

- repurchase agreements 510,074 86,892

Total 2,064,040 1,044,668

31/12/2002 31/12/2001

a) Repurchase agreements 510,074 86,892

b) Securities lent - -

31/12/2002 31/12/2001

Bonds 96,699 47,155

Certificates of deposit and interest-bearing bonds 36,197 15,394

Other securities 29,440 11,835

Total 162,336 74,384

Notes to the Consolidated Financial Statements

160

Consolidated Accounts

Section 7 - Provisions

The provisions illustrated in this section are as follows:

Changes in item 70 ‘Provision for staff-leaving indemnity’

This item recorded a significant increase in the 2002 financial year and in the previous financial year owing to the transfer of provisions forstaff-leaving indemnity arising from the acquisition of business lines from the Capitalia Group and the Intesa Group. The closing balance provided full coverage of the rights accrued by all staff on the payroll as at 31 December 2002.

7.1 Breakdown of item 90 ‘Provisions for credit risks’

7.2 Changes during the financial year in ‘Provisions for credit risks’

31/12/2002 31/12/2001

Provision for staff-leaving indemnity (item 70) 17,099 7,076

Provisions for liabilities and charges (item 80): 6,304 2,795

- provisions for taxes and duties (item 80b) 5,203 2,773

- other provisions (item 80d) 1,101 22

Provision for credit risks (item 90) 930 930

Total 24,333 10,801

31/12/2002 31/12/2001

A. Balance as at 01/01/2002 7,076 1,201

B. Increases 11,889 6,850

B.1 Amounts allocated for the financial year 1,936 1,279

B.2 Transfers 9,953 5,571

C. Decreases 1,866 975

C.1 Amounts released out of staff leaving and advances paid 833 242

C.2 Other decreases 1,033 733

D. Balance as at 31/12/2002 17,099 7,076

31/12/2002 31/12/2001

Provision for credit risks 930 930

Provision for credit risks, overdue interest - -

Total 930 930

31/12/2002 31/12/2001

A. Balance as at 01/01/2002 930 826

B. Increases - 104

B.1 Amounts allocated for the financial year - 104

B.2 Other increases - -

C. Decreases - -

C.1 Amounts released - -

C.2 Other decreases - -

D. Balance as at 31/12/2002 930 930

Notes to the Consolidated Financial Statements

Consolidated Accounts

161

As previously described in the introduction to the Notes to the financial statements, this sub-item was reclassified in relation to the previousfinancial year, insofar as a value adjustment, previously included amongst the provisions for liabilities, was posted to directly reduce item150 ‘Other assets’. The reclassification was also carried out on values relating to the previous financial year in order to facilitate comparison.The provision for risks on revocation actions is intended to cover the potential risk associated with the current action for revocation ininsolvency relating to companies of the Fochi Group, cautiously estimated on the basis of the valuations expressed by our lawyers.The provision for sundry future charges is intended for 834,000 euros to cover the estimated charges relating to the variable item ofremuneration pertaining to the financial year, the cost of which is allocated to the Profit and Loss Account under item 80 a) ‘Staff costs’.

31/12/2002 31/12/2001

Provision for risks on guarantees received 39 -

Provision for risks on revocation actions 207 -

Provision for sundry future charges 855 22

Total 1,101 22

7.3 Breakdown of sub-item 80 (d) ‘Provisions for liabilities and charges (Other provisions)’

31/12/2002 31/12/2001

A. Balance as at 01/01/2002 2,773 1,344

B. Increases 5,173 2,756

B.1 Amounts allocated for current income tax 2,016 1,160

B.2 Amounts allocated for prior financial years’ tax amnesty 637 -

B.3 Amounts allocated for indirect taxes 2,520 1,596

C. Decreases 2,743 1,327

C.1 Amounts released 2,743 1,327

C.2 Other decreases - -

D. Balance as at 31/12/2002 5,203 2,773

Changes in sub-item 80 (b) ‘Tax and duties provision’

31/12/2002 31/12/2001

Balance as at 01/01/2002 22 61

Amounts allocated: 1,080 2

- for risks on guarantees received 39 -

- for risks on revocation actions 207 -

- for staff charges 834 -

- for other charges - 2

Amounts released 1 41

Balance as at 31/12/2002 1,101 22

Changes in sub-item 80 (d) ‘Provisions for liabilities and charges (Other provisions)’

Changes in ‘Assets arising out of prepaid taxation’ and ‘Liabilities arising out of deferred taxation’

The accounts do not show any liabilities arising out of deferred taxation as these amount to just 362 euros and have been offset againstassets arising out of prepaid taxation. Those offset amounts corresponded to assets and liabilities relating to the same tax and the sameyear of taxation.

Information on the treatment of deferred taxation is given in section 5, in the comments under item 150 ‘Other assets’.

Notes to the Consolidated Financial Statements

162

Consolidated Accounts

Section 8 - Share capital, equity reserves, provision for general banking risks andsubordinated liabilities

In this section, comments are made on the following items:

31/12/2002 31/12/2001

Subordinated liabilities (item 110) 42,840 22,883

Share capital (item 150) 286,200 286,325

Equity reserves (item 170) 37,602 1,444

a) Legal reserve 312 160

d) Other reserves 37,290 1,284

Profit (loss) for the financial year (item 200) 5,197 1,240

Total capital and reserves 328,999 289,009

Total capital, reserves and subordinated liabilities 371,839 311,892

Subordinated liabilities

The item refers entirely to the parent company. Under the terms of the (a) debenture loan, 60 months after the issue and with the prior agreement of Banca d’Italia, the Bank may redeemall or part of the bonds after giving at least two months’ notice.The rules of the subordinated loan under b) specify a maximum issue amount of € 25m.Under the terms of both debenture loans, should the Bank go into liquidation, they will be repaid only after all creditors not equallysubordinate have been satisfied.The terms of the issue do not provide for the conversion of the subordinated liability into capital or into another type of liability.

Capital and reserves

The overall changes to the items of the shareholders’ equity during 2002 are provided in a special statement attached to the Notes to thefinancial statements.The Board report also provides a reconciliation table between the parent company’s capital, reserves and profit and consolidated capital,reserves and profit.Given that the basis of consolidation also encompasses companies under unified management, the shareholders’ equity also reflects theaggregation of the respective net components. In particular, item 150 ‘Capital’ is broken down as follows:

As at 31 December 2002, the share capital is fully paid-up and distributed into shares as follows:- Unipol Banca SpA: 284,200,000 shares with a unit nominal value of € 1;- Unipol SGR SpA: 2,000,000 shares with a unit nominal value of € 1.

Interest Issue Expiry Early Currency Amountrate date date repayment

a) Subordinated debenture loan 6% fixed 15/06/2001 15/06/2011 Yes Euro 22,883

Euribor 6 monthsb) Subordinated debenture loan (1st coupon: 2.25) 01/04/2002 01/04/2007 No Euro 19,957

Total 42,840

31/12/2002 31/12/2001

- Unipol Banca SpA 284,200 284,200

- Unipol SGR SpA 2,000 2,000

- Unipol Fondi Ltd - 125

Total 286,200 286,325

Notes to the Consolidated Financial Statements

163

Consolidated Accounts

On 9 December 2002, in anticipation of the acquisition of the business line from the Capitalia Group, the Board of Directors of Unipol Bancadecided to call an Extraordinary General Meeting to approve a proposal to increase the share capital by € 142,100 thousand throughpayment of a share premium of 30% corresponding to € 42,630 thousand. The capital increase transaction was completed on 13 January2003, with the approval of the Meeting and simultaneous subscription on the part of the shareholders.The respective payment was made prior to the resolution of the Meeting. At the end of 2002, payments for the capital increase totalled€ 34,965 thousand, which formed an equity reserve and were posted under the item ‘Other provisions’.On 2 January 2003, the parent company Unipol Assicurazioni paid an amount of € 149,757 thousand corresponding to the shares availableto it under the option. On 13 January 2003, the remaining amount of € 8 thousand was paid.

Shareholders’ equity for supervisory purposes

Since the effective date of the acquisition of the business line from the Capitalia group and the total payments to increase the share capitaldid not coincide exactly, the shareholders’ funds for supervisory purposes at year-end are negative as they are reduced by the sums paidon account of goodwill. This phenomenon was, however, short-lived. Indeed, on 2 January 2003, with the capital contribution received fromthe parent company as mentioned above, the adequacy of the shareholders’ equity for supervisory purposes was restored.For the purposes of formal precision, table 8.1 shows the exact status of the shareholders’ equity for supervisory purposes and thesupervisory requirements at the close of the year. To further understanding, we have also provided a comparison of the same values as at31 December 2002, before the business line acquisition agreement came into effect (the operation was contractually set to come into effectat 11:59 p.m. on 31 December 2002) and as at 2 January 2003, following the payment of the capital contribution.It is specified that the value of the weighted risk assets acquired from the Capitalia Group, included in the values given in table 8.1 and table8.2 (column relating to 2 January 2003) is an estimated value, as all the analytical information necessary to quantify accurately the respectiveweighting coefficients with reference to 31 December 2002 is not available.

8.1 Shareholders’ equity and minimum supervisory requirements as at 31 December 2002

Items/Value Amount

A. Shareholders’ equity for supervisory purposes

A.1 Core capital (tier 1) -38,079

A.2 Supplementary capital (tier 2) 37,275

A.3 Amounts to be deducted from above -99

A.4 Shareholders’ equity for supervisory purposes -38,178

B. Minimum supervisory requirements

B.1 Credit risks 113,816

B.2 Country risks 4,672

including:

- risks on trading portfolio 2,424

- currency risks 2,248

B.3 Tier 3 subordinated loans -

B.4 Other minimum requirements 11,515

B.5 Total minimum requirements 130,003

C. Risk assets and supervisory ratios

C.1 Risk-weighted assets 1,625,038

C.2 Ratio of Tier 1 core capital to risk-weighted assets N/A

C.3 Ratio of supervisory capital to risk-weighted assets N/A

Notes to the Consolidated Financial Statements

164

Consolidated Accounts

8.2 Shareholders’ equity and minimum supervisory requirements: as at 31/12/2002 (before coming intoeffect of acquisition of business line) and as at 02/01/2003

Items/Value 31/12/2002 02/01/2003

11.58 p.m.

A. Shareholders’ equity for supervisory purposes

A.1 Core capital (Tier 1) 125,321 111,678

A.2 Supplementary capital (Tier 2) 37,275 37,275

A.3 Amounts to be deducted from above -99 -99

A.4 Shareholders’ equity for supervisory purposes 162,497 148,854

B. Minimum supervisory requirements

B.1Credit risks 78,841 113,816

B.2 Country risks 4,672 4,672

including

- risk on trading portfolio 2,424 2,424

- currency risks 2,248 2,248

B.3 Tier 3 subordinated loans - -

B.4 Other minimum requirements 11,515 11,515

B.5 Total minimum requirements 95,028 130,003

C. Risk assets and supervisory ratios

C.1 Risk-weighted assets 1,187,850 1,625,038

C.2 Ratio of Tier 1 core capital to risk-weighted assets 10.55 6.87

C.3 Ratio of supervisory capital to risk-weighted assets 13.68 9.16

The solvency ratio (meaning the ratio between the shareholders’ equity for supervisory purposes and the net weighted assets) is estimatedto be 10.46% on 2 January 2003, which also includes the assets acquired from the Capitalia Group.

Also, the shareholders’ equity for supervisory purposes were further increased in the months immediately following the end of the year andother increases will follow in the forthcoming months. On 24 March 2003, the subordinated loan issued during 2002 was further subscribedin the amount of € 5,043 thousand. An application was also lodged with the Banca d’Italia for a new issue of a subordinated loan with atotal value of € 25m to be offered for subscription in future months.

Notes to the Consolidated Financial Statements

165

Consolidated Accounts

Section 9 - Other liabilities

9.1. Breakdown of item 50 ‘Other liabilities’

31/12/2002 31/12/2001

Due to Inland Revenue 3,574 3,700

Due to social security institutions 1,490 1,307

Due to pension fund 329 323

Bank transfers being processed 4,841 8,749

Due to suppliers 6,120 6,735

Utility bills paid by customers 333 167

Check and bill discounts - subject to/after collection 47,447 -

Portfolio risk liabilities 326 128

Inter-branch transit items 173 36

Items being processed 22,970 56,366

Option premiums received 871 69

Other liabilities 30,442 14,304

Total 118,916 91,884

9.2. Breakdown of item 60 ‘Accruals and deferred income’

Accruals 31/12/2002 31/12/2001

- Interest on certificates of deposit 358 294

- Interest and other charges on trading in securities portfolio - 28

- Interest on variable-rate bonds 102 150

- Interest on fixed-rate bonds 1,037 28

- Interest on subordinated debenture loans 223 60

- Interest due to customers 2,320 255

- Interest due to banks 961 27

- Rent on premises 28 53

- Interest on interest rate swaps 194 121

- Other 2 15

Total 5,225 1,031

Deferred income 31/12/2002 31/12/2001

- Interest on agricultural loans 96 40 - Interest on discounted commercial bills 31 5 - Commissions on endorsement credits 312 259 - Other 77 1 Total 516 305

9.3 Value adjustments for accruals and deferred income

31/12/2002 31/12/2001

a) Liabilities30. Debts evidenced by certificates 1,913 1,533

b) Assets - -

Notes to the Consolidated Financial Statements

166

Consolidated Accounts

Section 10 - Guarantees and commitments

10.1 Breakdown of item 10 ‘Guarantees given’

31/12/2002 31/12/2001

a) Commercial endorsement credits: 136,604 103,194

- Documentary credits 3,945 917

- Bankers’ acceptances 302 54

- Endorsements and sureties 132,357 102,223

b) Financial endorsement credits: 78,031 230,016

- Endorsements and sureties 78,031 230,016

- Bankers’ acceptances - -

- Other - -

c) Assets lodged as guarantee - -

Total 214,635 333,210

10.2 Breakdown of item 20 ‘Commitments’

The amounts certain to be called on correspond to the Bank’s commitments in relation to securities receivable. Those not certain to be calledon correspond to commitments arising out of the participation to the Fondo Interbancario di Tutela dei Depositi (Interbank Guarantee Fund).Risks connected with guarantees and commitments to grant finance are valued in a similar way to demand loans and advances.

31/12/2002 31/12/2001

a) Commitments to grant finance (certain to be called on) 14,904 954

b) Commitments to grant finance (not certain to be called on) 1,732 503

Total 16,636 1,457

10.3 Assets lodged as guarantee for the Bank’s own liabilities

31/12/2002 31/12/2001

- Securities to guarantee repurchase agreements 87,526 38,498

- Securities lodged with Banca d’Italia to guarantee advances 2,500 2,500

- Securities guaranteeing bankers’ drafts 6,042 4,200

Total 96,068 45,198

10.4 Unused margin on lines of credit

Lines of credit received and not yet used break down as follows:

31/12/2002 31/12/2001

a) From central banks - -

b) From other banks - -

Notes to the Consolidated Financial Statements

167

Consolidated Accounts

10.5 Forward transactions

Items Hedging Trading Other Hedging Trading Other31/12/2002 31/12/2002 31/12/2002 31/12/2001 31/12/2001 31/12/2001

1. Purchase/Sale 17,325 95,842 - 2,228 33,935 -

1.1 Securities: - 19,968 - - 1,784 -

- purchases - 14,904 - - 954 -

- sales - 5,064 - - 830 -

1.2 Currency: 17,325 75,874 - 2,228 32,151 -

- currency against currency 17,325 7,197 - 2,228 - -

- purchases against Euro - 32,281 - - 14,549 -

- sales against Euro - 36,396 - - 17,602 -

2. Deposits and financing: 756 - - - 2,327 -

- to be granted - - - - - -

- to be received 756 - - - 2,327 -

3. Derivatives

3.1 With exchange of capital - 79,549 - 2,837 3,971 -

a) securities: - 7,500 - - - -

- purchases - - - - - -

- sales - 7,500 - - - -

b) currency: - 72,049 - 2,837 3,971 -

- currency against currency - 27,895 - 2,837 3,971 -

- purchases against Euro - 22,077 - - - -

- sales against Euro - 22,077 - - - -

c) other instruments: - - - - - -

- purchases - - - - - -

- sales - - - - - -

3.2 Without exchange of capital 11,926 387,660 - 6,844 - -

a) currencies: - - - - - -

- currency against currency - - - - - -

- purchases against Euro - - - - - -

- sales against Euro - - - - - -

b) other instruments: 11,926 387,660 - 6,844 - -

- purchases 9,426 193,830 - 6,844 - -

- sales 2,500 193,830 - - - -

Notes to the Consolidated Financial Statements

168

Consolidated Accounts

Section 11 - Concentration and distribution of assets and liabilities

This section shows the concentration and distribution of risks, except for the details relating to the relationships acquired from the CapitaliaGroup, as the necessary analytical information is unavailable.

11.1. Major risks

Following the remarks made in Section 8 on the shareholders’ equity for supervisory purposes, it is impossible to specify the major risks ineffect as at 31 December 2002.For information purposes only, the previous table, in the column relating to 31 December 2002, shows the major risks in effect calculatedon the basis of the values of the shareholders’ equity for supervisory purposes and loans and advances before the acquisition of thebusiness line from Capitalia came into effect.

11.2. Breakdown of loans to customers by main type of borrower

11.3. Breakdown of loans to resident non-financial and family businesses

11.4. Breakdown of guarantees given by main type of counterparty

31/12/2002 31/12/2001

a) Amount 67,679 109,992

b) Number 3 7

31/12/2002 31/12/2001

a) Governments - -

b) Other public bodies 5,430 2,007

c) Non-financial companies 642,698 409,124

d) Financial companies 239,552 73,798

e) Family businesses 42,071 41,379

f) Other operators 155,100 213,146

Total 1,084,851 739,454

31/12/2002 31/12/2001

a) Other services for sale 318,970 193,717

b) Construction and building enterprises 100,806 60,213

c) Commerce, salvage and repairs 87,411 75,592

d) Agricultural and forest products 21,420 14,722

e) Food, drink and tobacco 20,557 21,640

f) Other sectors 135,605 84,619

Total 684,769 450,503

31/12/2002 31/12/2001

a) Governments - -

b) Other public bodies 18 -

c) Banks 294 -

d) Non-financial companies 169,697 310,596

e) Financial companies 4,794 16,054

f) Family businesses 1,033 1,373

g) Other operators 18,295 5,187

Total 194,131 333,210

Notes to the Consolidated Financial Statements

169

Consolidated Accounts

11.5 Geographical distribution of assets and liabilities

11.6 Duration of assets and liabilities

Items/Countries Italy Other EU Countries Other Countries Total

1. Assets 1,897,585 3,722 10,732 1,912,039

1.1 Receivables from banks 668,250 3,057 10,180 681,487

1.2 Receivables from customers 1,084,477 20 354 1,084,851

1.3 Securities 144,858 645 198 145,701

2. Liabilities 1,922,415 16,032 892 1,939,339

2.1 Payables to banks 99,712 14,550 - 114,262

2.2 Payables to customers 1,635,370 1,482 892 1,637,744

2.3 Debts evidenced by certificates 144,493 - - 144,493

2.4 Other accounts 42,840 - - 42,840

3. Guarantees and commitments 210,624 143 - 210,767

Specified duration

On demand Up to 3 Up to 12 Between 1 Over 5 yearsItems/Residual duration months months and 5 years Unspecified

Fixed Indexed Fixed Indexedduration

rate rate rate rate

1. Assets 1,124,875 559,912 81,699 35,979 116,475 188,404 18,943 -

1.1 Treasury bills eligible for refinancing - - 6 - 3,205 7,450 - -

1.2 Receivables from banks 255,195 420,963 - - - - 5,328 -

1.3 Receivables from customers 673,303 125,727 72,820 26,825 72,381 90,973 13,615 -

1.4 Bonds and other debt securities 47 21 3,143 2,043 40,717 79,723 - -

1.5 ‘Off-balance sheet’ transactions 196,330 13,201 5,730 7,111 172 10,258 - -

2. Liabilities 1,235,599 564,197 56,707 86,360 25,451 - 193,830 -

2.1 Payables to banks 69,161 35,101 10,000 - - - - -

2.2 Payables to customers 1,127,079 497,715 12,927 14 9 - - -

2.3 Debts evidenced by certificates: 29,933 15,693 30,727 62,861 5,279 - - -

- bonds - 9,246 20,941 61,329 5,183 - - -

- certificates of deposit 493 6,447 9,786 1,532 96 - - -

- other securities 29,440 - - - - - - -

2.4 Subordinated liabilities - - - 22,883 19,957 - - -

2.5 ‘Off-balance sheet’ transactions 9,426 15,688 3,053 602 206 - 193,830 -

Notes to the Consolidated Financial Statements

170

Consolidated Accounts

The loans granted to the vehicle company before the issuing of the securities are classified amongst ‘loans and advances to customers’.The loan to Grecale Srl was fully paid off in March 2002 upon the issue of the securities.

11.7 Assets and liabilities in foreign currencies

Assets and liabilities in foreign currencies are set out below at their value in euros.

11.8 Securitisation

11.8.1 Balance sheet and ‘off-balance-sheet’ positions

31/12/2002 31/12/2001

a) Assets

1. Receivables from banks 22,574 7,082

2. Receivables from customers 12,546 14,473

3. Securities 5 5,628

4. Participating interests - -

5. Other accounts 527 400

Total assets 35,652 27,583

b) Liabilities

1. Payables to banks 25,101 22,418

2. Payables to customers 6,817 1,805

3. Debts evidenced by certificates - 45

4. Other accounts - 14

Total liabilities 31,918 24,282

ABS securities in portfolio 31/12/2002 31/12/2001

Long-term investment securities: 18,230 -

- Senior - -

- Mezzanine - -

- Junior 18,230 -

Trading securities - -

Total 18,230 -

ABS securities for underlying assets 31/12/2002 31/12/2001

1. Own underlying assets: 18,230 -

1.1 Mortgage loans 18,230 -

- doubtful loans - -

- substandard loans - -

- performing loans 18,230 -

2. Third-party underlying assets - -

Total 18,230 -

Loans to customers 31/12/2002 31/12/2001

Receivables from Grecale ABS Srl 135,071 -

Receivables from Grecale Srl - 94,167

Total 135,071 94,167

Notes to the Consolidated Financial Statements

171

Consolidated Accounts

Forward transactions 31/12/2002 31/12/2001Derivatives without exchange of capital on other values 193,830 -

Participating interests in vehicle companies 31/12/2002 31/12/2001% Amount % Amount

Grecale Srl (consolidated company) 60% - - -Grecale ABS Srl - - - -Total - -

Servicer activity: receipts by securitization operation Capital Other Totalquota receipts receipts

Receipts for Grecale Srl: 18,086 9,053 27,139- for current financial year 17,394 8,505 25,899- for previous financial years 692 548 1,240Receipts for Grecale ABS Srl: 1,460 604 2,064 - for current financial year 1,460 604 2,064 - for previous financial years - - -Total receipts: 19,546 9,657 29,203- for current financial year 18,854 9,109 27,963- for previous financial years 692 548 1,240

11.8.2 Assignment of securitised assets performed in the financial year

Loans securitised during the financial year Gross amount Write-down Net amountMortgage loans: 219,701 - 219,701a) doubtful loans - - -b) substandard loans - - -c) other assets 219,701 - 219,701Other loans: - - -a) doubtful loans - - -b) substandard loans - - -c) other assets - - -

Guarantees backing underlying securitised loans Guaranteed amounta) Mortgage-based 219,701b) Pledged on securities - c) Other guarantees - Total 219,701

Geographical distribution of assigned debtors Italy EU countries Other countriesTotal amount of assigned debtors 219,701 - -

Breakdown of assigned debtors by economic activity AmountPublic bodies - Financial companies 1,417 Non-financial companies 19,434 Households 198,850 Other debtors - Total 219,701

Notes to the Consolidated Financial Statements

172

Consolidated Accounts

Assignment price of securitised loans Grecale Grecale ABS Total

Assignment price - capital quota 93,506 126,195 219,701Assignment price - interest quota 243 531 774Assignment price - premium quota 5,002 8,345 13,347Total 98,751 135,071 233,822

11.8.3 Securitisation transaction through Grecale Srl (Group vehicle company) completed in 2002

Summary of securitised assets and securities issued (in €)

Situation as at Situation as at31 December 2002 31 December 2001

A. Securitised assets 171,523,672 93,155,866A.1 Debtors 171,523,672 93,155,866A.2 Securities - -A.3 Other assets - -

B. Investment of proceeds from debtors management 23,028,922 1,240,070B.1 Debt securities - -B.2 Equity capital - -B.3 Other:

- liquid assets 23,028,922 1,240,052- accrued income on liquid assets - 18

C. Securities issued 193,830,000 -C.1 Class A securities 163,000,000 -C.2 Class B securities 12,600,000 -C.3 Class C securities 18,230,000 -

D. Financing received - -

E. Other liabilities 1,652,325 94,184,546- payable to originator - 94,184,128- deferred income on securities and interest rate swaps 1,588,144 -- issuer’s expenses to refund 7,500 418- payables to servicer 12,564 -- payables to other counterparties 10,889 -- other 33,228 -

F. Interest payable on securities issued 5,564,554

G. Fees and commissions charged on the operation 90,635 -- for the servicing 39,010 -- for other services 51,625 -

H. Other charges 3,730,972 17,420- premium quota on debtors assignment 2,871,378 -- charges on interest rate swaps 509,209 -- other charges 350,385 17,420

I. Interest income from securitised assets 8,300,353 227,510

L. Other income 605,154 1,300

Notes to the Consolidated Financial Statements

173

Consolidated Accounts

In March 2002, the operation to securitise performing residential loans issued by Unipol Banca was completed. This operation had been

started in the previous year with ABN AMRO Bank serving as arranger.

Sale of the securitised loans took place in two tranches, the first on 19 December 2001 and the second on 8 March 2002.

In total, Unipol Banca assigned to Grecale Srl loans with a capital value of € 180,818 thousand and an exchange value of € 192,918

thousand broken down as follows:

The loans assigned are all made to subjects residing in Italy and are assisted by first mortgages or equivalent mortgage with a ratio between

residual debt and property value as determined by an expert valuation of no more than 80%.

The vehicle company financed the operation by issuing three classes of securities with a total nominal value of € 193,830 thousand on 28

March 2002. The first two classes were placed with institutional investors, whilst the junior class was fully subscribed by Unipol Banca.

The following table summarises the main characteristics of the securities issued.

The three classes of securities are characterised by increasing degrees of subordination, with absolute priority for Class A securities, which

will start to be repaid as from October 2003.

Unipol Banca acts as servicer in the securitisation process and is also responsible for managing any positions that become non-performing

during the securitisation transaction. As at 31 December 2002, there were no doubtful positions and the total amount of instalments due

and not paid totalled € 319 thousand (of which € 192 thousand relating to principal amount) of which approximately 66% related to

‘technical delays’ for instalments due at the end of December. The overall amount of collections is shown in the special table referred to in

the previous paragraph.

ABN AMRO Bank, Milan office, provided the vehicle with a credit facility in a total amount of € 10m, which is currently not used.

In order to protect the vehicle from interest rate risks, ABN AMRO signed an interest rate swap contract with Grecale Srl, covered with a

back-to-back operation with Unipol Banca, on the basis of which the issuer pays the counterparty the amount of expected interest income

and those actually produced, whichever is lower, minus costs of the securitisation process and a further sum, as an excess spread, equal to

1% per annum of the residual capital loan. Similarly, the counterparty credits the issuer the share of interest due on the securities in equal

measure to the ratio, if less than 1, between actual and expected interest income.

Finally, on the basis of the rules for issuing securities, the vehicle granted Unipol Banca the right to buy back the portfolio assigned with

effect from the payment date falling due on 20 April 2007.

Price of loans assigned to Grecale Srl Dec. 01 March 02 Total

Assignment price - capital quota 87,312 93,506 180,818

Assignment price - interest quota 393 243 636

Assignment price - premium quota 6,462 5,002 11,464

Total 94,167 98,751 192,918

Class Legal Estimated Interest Rating Faceexpiry date duration rate S&P/Fitch value

Class A 20/04/2036 4.7 years Euribor 3 months + 29 bps AAA/AAA 163,000

Class B 20/04/2036 5 years Euribor 3 months + 70 bps AA/A 12,600

Class C 20/04/2036 Euribor 3 months n/r 18,230

Total 193,830

Notes to the Consolidated Financial Statements

174

Consolidated Accounts

11.8.4 Securitisation transaction through Grecale ABS Srl still underway

For the securitisation transaction in question, loans are meant to be assigned in two tranches, the first on 20 December 2002 and the secondon 21 March 2003.For this transaction, J.P. Morgan Securities Ltd is serving as arranger, and Unipol Merchant SpA as coarranger.The assets assigned consist of credits arising from performing residential and commercial mortgage loans granted to Italian residents.The securities will be issued in April 2003 and will have a total estimated value of approximately € 200m.For this operation too, it is planned to make a credit facility available, to sign a derivative contract for hedging the interest rate risk and togrant the originator the right to buy back the portfolio, under conditions still being defined.

Section 12 - Asset management and dealing for third parties

12.1 Dealing in securities

The Bank carried out no dealing in securities as intermediary for third parties during the year.

12.2. Portfolio management

12.3. Custody and administration of securities

The details of securities under custody and administration are shown below. The amounts reflect nominal values.

31/12/2002 31/12/2001

a) Portfolio management on individual basis 286,578 238,714

b) Portfolio management through UCITS 272,370 147,617

Total 558,948 386,331

31/12/2002 31/12/2001

a) Securities deposited by third parties (excluding portfolio management) 5,815,942 5,341,709

b) Third-parties’ securities deposited with third parties 5,352,912 4,440,674

c) Own securities deposited with third parties 153,146 80,391

Notes to the Consolidated Financial Statements

175

Consolidated Accounts

12.4 Checks and bills discounted to be collected on behalf of third parties: debit and credit adjustments

Receivables from customers and banks arising out of checks and bills discounted but not yet due or on hand at year-end have been adjustedas shown below:

The adjustments above do not include those made on former Capitalia positions.

12.5 Other transactions

31/12/2002 31/12/2001

a) Debit adjustments 306,423 203,874

1. Current accounts 1,492 940

2. Central portfolio 234,776 165,235

3. Cash - -

4. Other accounts 70,155 37,699

b) Credit adjustments 323,997 203,475

1. Current accounts 70,155 37,699

2. Bills and instruments discounted 252,350 164,836

3. Other accounts 1,492 940

31/12/2002 31/12/2001

1. Placing of securities without prior underwriting or purchase in the primary market, 48,402 29,280or providing guarantees to the issuer

Notes to the Consolidated Financial Statements

176

Consolidated Accounts

Parte CNOTES TO THE CONSOLIDATED PROFIT AND LOSS ACCOUNT

Section 1 - Interest income

1.1. Breakdown of item 10 ‘Interest receivable and similar income’

1.2. Breakdown of item 20 ‘Interest payable and similar charges’

Sub-item c), relating to interest on debts evidenced by certificates, is different from the similar ‘of which’ in item 20 of the profit and lossaccount in that the interest accrued on subordinated liabilities evidenced by certificates has been posted under sub-item e).

1.3. Detail of item 10 ‘Interest receivable and similar income’

1.4. Detail of item 20 ‘Interest payable and similar charges’

31/12/2002 31/12/2001

a) On loans and advances to banks, 12,132 11,524

including loans and advances to central banks 673 618

b) On loans and advances to customers, 49,975 36,625

including on loans granted with third-party assets under administration - -

c) On debt securities 4,887 3,737

d) Other interest receivable 210 280

e) Credit balance on hedging operations spreads 55 45

Total 67,259 52,211

31/12/2002 31/12/2001

a) On amounts due to banks 391 437

b) On amounts due to customers 24,537 18,737

c) On debts evidenced by certificates, of which: 3,710 1,998

certificates of deposit 474 325

d) On third-party assets under administration - -

e) On subordinated liabilities 1,599 674

f) Debit balance on hedging operations spreads - -

Total 30,237 21,846

31/12/2002 31/12/2001

a) On assets denominated in foreign currency 638 356

31/12/2002 31/12/2001

a) On liabilities denominated in foreign currency 356 418

Notes to the Consolidated Financial Statements

177

Consolidated Accounts

Section 2 - Fees and commissions

2.1. Breakdown of item 40 ‘Fees and commissions receivable’

31/12/2002 31/12/2001

a) Guarantees given 764 626

b) Loan derivatives - -

c) Management, brokerage and consulting services: 8,345 6,378

1. Dealing in securities - 47

2. Dealing in currency 321 201

3. Portfolio management: 2,898 2,192

3.1 Individual 962 1,096

3.2 Collective 1,936 1,096

4. Custody and administration of securities 1,324 653

5. Depository bank - -

6. Placing of securities 1,890 2,275

7. Acceptance of instructions 1,086 813

8. Consulting - 129

9. Providing third-party services and products 826 68

9.1 Portfolio management: 30 51

9.1.1 Individual 30 51

9.1.2 Collective - -

9.2 Insurance products 757 4

9.3 Other products 39 13

d) Collection and payment services 11,520 9,634

e) Servicing securitisation operations 39 -

f) Tax collection services - -

g) Other services 10,183 4,998

Total 30,851 21,636

2.2. Detail of item 40 ‘Fees and commissions receivable’

Distribution channels for products and services 31/12/2002 31/12/2001

a) On our premises 4,569 2,911

1. Portfolio management 2,608 1,870

2. Placing of securities 1,165 1,035

3. Third-party services and products 796 6

b) Doorstep selling 1,045 1,624

1. Portfolio management 290 322

2. Placing of securities 725 1,240

3. Third-party services and products 30 62

Total 5,614 4,535

Notes to the Consolidated Financial Statements

178

Consolidated Accounts

2.3. Breakdown of item 50 ‘Fees and commission payable’

Section 3 - Gains (losses) on financial operations

3.1. Breakdown of item 60 ‘Gains and losses on financial operations’

Section 4 - Administrative expenses

4.1. Average number of employees by category

31/12/2002 31/12/2001

a) Guarantees received - -

b) Loan derivatives - -

c) Management and brokerage services: 2,025 1,131

1. Dealing in securities 69 18

2. Dealing in currencies - -

3. Portfolio management 339 56

3.1 own portfolio - -

3.2 third-party portfolios 339 56

4. Custody and administration of securities 245 122

5. Placing of securities - -

6. Doorstep selling of securities, products and services 1,372 935

d) Collection and payment services 8,534 7,867

e) Other services 129 160

Total 10,688 9,158

Items/Operations Dealing in securities Dealing in currencies Other operations Dealing in securities Dealing in currencies Other operations31/12/2002 31/12/2002 31/12/2002 31/12/2001 31/12/2001 31/12/2001

A.1 Write-ups - - - 8 - -

A.2 Write-downs -24 - - -158 - -

B. Other gains/losses 6,784 284 476 4,934 -382 -17

Total 6,760 284 476 4,784 -382 -17

1. Government securities 273 -67

2. Other debt securities 6,443 4,924

3. Equity securities 44 -73

4. Derivatives on securities - -

31/12/2002 31/12/2001 Average 2002

a) Senior officials 11 10 11

b) Junior officials (grade 3 and 4) 94 78 86

c) Other employees 631 583 607

Total 736 671 704

Notes to the Consolidated Financial Statements

179

Consolidated Accounts

Breakdown of item 80 ‘Administrative expenses’

Section 5 - Value adjustments, value re-adjustments and provisions

5.1 Breakdown of item 120 ‘Value adjustments on receivables and provisions for guarantees and commitments’

Breakdown of item 90 ‘Value adjustments on intangible and tangible fixed assets’

31/12/2002 31/12/2001

a) Staff costs: 37,083 24,371

wages and salaries 25,281 17,102

social security contributions 6,975 4,611

staff-leaving indemnity 1,937 1,279

pensions and similar 869 460

other staff costs 2,021 919

b) Other administrative expenses: 30,964 20,280

purchasing of non-professional goods and services 13,924 9,278

purchasing of professional services 1,581 1,271

rent paid 6,971 3,955

maintenance of furniture, office equipment and buildings 982 615

insurance premiums 638 491

insurance premiums in favour of customers 180 89

indirect duties and taxes for the financial year 3,344 1,900

other administrative expenses 3,344 2,681

Total 68,047 44,651

31/12/2002 31/12/2001

a) Value adjustments on receivables from customers, 5,289 1,749

of which:

- flat-rate value adjustments out of country risk 153 -

- other flat-rate value adjustments 1,672 284

b) Provisions for guarantees and commitments 39 -

of which:

- flat-rate provisions out of country risk - -

- other flat-rate provisions - -

c) Value adjustments on sundry receivables (other assets) - 1,501

Total 5,328 3,250

31/12/2002 31/12/2001

a) Value adjustments on tangible fixed assets: 2,227 1,437

- furniture and fixture and fittings 385 274

- machinery and equipment 1,842 1,163

b) Value adjustments on intangible fixed assets: 7,204 7,075

- goodwill 4,276 5,203

- consolidation differences 138 -

- other multi-year charges 2,790 1,872

Total 9,431 8,512

Notes to the Consolidated Financial Statements

180

Consolidated Accounts

Breakdown of item 100 ‘Provisions for liabilities and charges’

In this item, a provision was made in last year’s accounts in an amount of € 1,501 thousand in relation to the value adjustments on disputedfinancial transactions, now reclassified under item 120 ‘Value-adjustments on receivables and provisions for guarantees and commitments’.During the financial year, an amount of € 207 thousand was set aside in relation to the actions for revocation brought by the receivers ofthe companies of the Fochi Group, for which the lawyers assisting the Bank believe the reasons to be unfounded, with the exception of theamount set aside as a precaution.

Breakdown of item 130 ‘Value re-adjustments on receivables and provisions for guarantees and commitments’

These are exclusively value re-adjustments made following intake of revenues.

Breakdown of item 140 ‘Provisions for credit risks’

Breakdown of item 160 ‘Value re-adjustments on long-term investment securities’

The value re-adjustments reflect the year-end write-up of a dollar-denominated security held in the long-term investment portfolio.

31/12/2002 31/12/2001

- Provisions for Cogeban contributions - 2

- Provision for revocation actions 207 -

Total 207 2

31/12/2002 31/12/2001

- Value re-adjustments - capital quota 171 75

- Value re-adjustments - interest quota 149 72

- Value re-adjustments on loans written off in previous financial years 30 129

Total 350 276

31/12/2002 31/12/2001

- Amounts allocated - capital quota - 103 - Amounts allocated - overdue interest quota - - Total - 103

31/12/2002 31/12/2001

- Exchange rate write-up of long-term investment securities - 298 Total - 298

Notes to the Consolidated Financial Statements

181

Consolidated Accounts

Section 6 - Other items of the Profit and Loss Account

6.1. Breakdown of item 70 ‘Other operating income’

6.2 Breakdown of item 110 ‘Other operating expenses’

6.3 Breakdown of item 190 ‘Extraordinary income’

6.4 Breakdown of item 200 ‘Extraordinary charges’

31/12/2002 31/12/2001

- Income from loan securitization 13,347 6,462 - Refund of stamp duty 2,524 1,569 - Recovery of substitute tax from customers 553 167 - Employment-related tax relief accrued in the financial year 359 - - Refund of utility bills and rents 343 187 - Reimbursement of legal costs 323 156 - Reimbursement of services invoiced 270 209 - Refund of postal and telephone expenses 143 89 - Reimbursement of reporting expenses on portfolio management 21 18 - Refund of indemnities and attendance fees from companies where participating interests are held 4 3 - Other operating income 1,500 804 Total 19,387 9,664

31/12/2002 31/12/2001

- Losses due to thefts and burglaries 78 -- Other operating expenses 3 4 Total 81 4

31/12/2002 31/12/2001

- Gains on Banca Intesa transaction 6,603 - - Unanticipated income 275 70 - Employment-related tax relief accrued in previous financial years 233 - - Gains on disposal of long-term investment securities 34 2,946 - Gains on disposal of tangible fixed assets 8 7 Total 7,153 3,023

31/12/2002 31/12/2001

- Unanticipated charges 1,095 656 - Charges for tax amnesty as per Law 289/2002 637 - - Losses on disposal of tangible fixed assets 53 - Total 1,785 656

Notes to the Consolidated Financial Statements

182

Consolidated Accounts

Breakdown of item 240 ‘Tax on profit for the financial year’

Section 7 - Other information on the Profit and Loss Account

7.1 Geographical distribution of income

All the proceeds relate to Italy, as Group companies operate exclusively in Italy. Unipol Fondi, an Ireland-based company, has also placedthe UCITS set up solely with customers in Italy.

Parte DOTHER INFORMATION

Section 1 - Directors and Statutory Auditors

This section provides details of emoluments, loans and guarantees to Directors and to Members of the Board of Statutory Auditors.

Loans have been granted in full conformity with the provisions of Article 136 T.U. on ‘Obligations of bank representatives’.

31/12/2002 31/12/2001

1. Current taxation (-) -2,017 -1,160 2. Changes in pre-paid tax (+/-) 50 -916 3. Changes in deferred tax (+/-) - - 4. Tax on profit for the financial year (-1+/-2+/-3) -1,967 -2,076

31/12/2002 31/12/2001

1.1 Emoluments 298 188 a) Directors 236 143 b) Statutory Auditors 62 45

1.2 Loans and guarantees given 369 644 a) Directors 359 534 b) Statutory Auditors 10 110

183

Consolidated Accounts

Additional Statementsto the Consolidated Accounts

184

Consolidated Accounts

Additional Statements to the Consolidated Accounts

RECLASSIFIED CONSOLIDATED BALANCE SHEET(in € ‘000)

Assets Financial year 2002 Financial year 2001 Changes

Cash and liquidity 32,809 18,406 14,403

Trading securities 114,824 58,384 56,440

Loans and advances to banks 898,329 461,204 437,125

Loans and advances to customers 1,646,965 739,454 907,511

Fixed assets: 421,484 238,808 182,676

Long-term investment securities 30,877 25,798 5,079

Participating interests 6,929 2,563 4,366

Intangible fixed assets 368,702 200,858 167,844

Tangible fixed assets 13,730 9,589 4,141

Positive consolidation differences 1,246 - 1,246

Other assets 62,394 67,306 (4,912)

Total assets 3,176,805 1,583,562 1,593,243

185

Consolidated Accounts

Additional Statements to the Consolidated Accounts

RECLASSIFIED CONSOLIDATED BALANCE SHEET(in € ‘000)

Liabilities Financial year 2002 Financial year 2001 Changes

Deposits by banks 429,596 48,598 380,998

Deposits by customers 2,226,376 1,119,052 1,107,324

Other liabilities 124,657 93,219 31,438

Provisions for staff-leaving indemnity 17,099 7,076 10,023

Provisions for liabilities and charges 6,304 2,795 3,509

Provisions for credit risks 930 930 -

Subordinated liabilities 42,840 22,883 19,957

Shareholders’ equity - minority interests 4 - 4

Total liabilities 2,847,806 1,294,553 1,553,253

Share capital 286,200 286,325 (125)

Reserves 37,602 1,444 36,158

Profit for the financial year 5,197 1,240 3,957

Shareholders' equity 328,999 289,009 39,990

Total liabilities 3,176,805 1,583,562 1,593,243

186

Consolidated Accounts

Additional Statements to the Consolidated Accounts

RECLASSIFIED CONSOLIDATED PROFIT AND LOSS ACCOUNT(in € ‘000)

Financial year 2002 Financial year 2001 Changes

Investment income from: 67,259 52,211 15,048

- customers 49,975 36,625 13,350

- banks 12,132 11,524 680

- debt securities 4,887 3,737 1,150

- tax credit 209 210 (1)

- other income 56 115 (59)

Dividends 448 4 444

Interest payable: (30,237) (21,846) (8,391)

- customers (24,537) (18,737) (5,800)

- banks (391) (437) 46

- debt securities (5,309) (2,672) (2,637)

Net interest income 37,470 30,369 7,101

Fees and commissions receivable 30,851 21,636 9,215

Fees and commissions payable (10,688) (9,158) (1,530)

Gains (losses) on financial operations 7,520 4,385 3,135

Other net income 19,306 9,661 9,645

Non-interest income 46,989 26,524 20,465

Gross operating income 84,459 56,893 27,566

Staff costs (37,083) (24,371) (12,712)

Administrative expenses (30,964) (20,280) (10,684)

Amortisation and depreciation (9,431) (8,512) (919)

Operating expenses (77,478) (53,163) (24,315)

Net operating income 6,981 3,730 3,251

Value adjustments on receivables (5,328) (3,250) (2,078)

Value re-adjustments on receivables 350 276 74

Value re-adjustments on long-term investment securities - 298 (298)

Provisions for credit risks - (103) 103

Provisions for liabilities (207) (2) (205)

Balance on ordinary activities 1,796 949 847

Net extraordinary income 5,368 2,367 3,001

Pre-tax profit 7,164 3,316 3,848

Tax on profit for the financial year (1,967) (2,076) 109

Net profit for the financial year 5,197 1,240 3,957

187

Consolidated Accounts

Additional Statements to the Consolidated Accounts

Share Legal Other Profit Totalcapital reserve reserves for the fin. year shareholders’ equity

Balances as at 31/12/2001 286,325 160 1,284 1,240 289,009

Appropriation of the profit for the financial year 2001:

- dividends to shareholders -37 -37

- appropriated to reserves 156 1,047 -1,203

Payments on account of share capital increase 34,965 34,965

Changes in the basis of consolidation

under unified management -125 -4 -129

Other changes - 6 -6

Profit for the financial year 2002 5,197 5,197

Balances as at 31/12/2002 286,200 312 37,290 5,197 328,999

STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITYFOR THE YEAR ENDED 31 DECEMBER 2002(in € ‘000)

189

Consolidated Accounts

Statutory Auditors’ Report on theConsolidated Financial Statements

Dear Shareholders,

The Gruppo Unipol Banca S.p.A.’sconsolidated financial statements for theyear 2002, together with the Boardof Directors’ Report on businessperformance, were submitted to us inaccordance with the law.Our audit of the financial statements wasperformed in accordance with theprinciples of conduct applicable to theBoard of Statutory Auditors asrecommended by the National Boards ofChartered Accountants and, incompliance with these principles, wereferred to the laws governing financialstatements, interpreted andsupplemented by the correct accountingprinciples formulated by the NationalBoards of Chartered Accountants. TheBoard of Statutory Auditors thusconfirmed that the consolidated financialstatements were prepared in accordancewith current statutory provisions and,given the Group’s involvement in thebanking industry, in line with specificindustry standards, in relation to theirlayout and provisions.The consolidated Balance Sheet andProfit and Loss Account are prepared incomparative form with figures from theprevious year and incorporate, with theline-by-line method, the financialstatements of Unipol Banca S.p.A. withthe financial statements of theconsolidated Companies.The Group’s consolidated financialstatements show a net profit of €5,197thousand, total assets of €3,176,805thousand and Group shareholders’equity of €328,999 thousand.The audits were carried out inaccordance with the provisions of thelaw and those of the Banca d’Italia

applicable to audits; efforts were alsomade to ensure that:

• the consolidated financial statementswere fair and agreed with the results ofthe book entries of the ParentCompany, Unipol Banca S.p.A., andwith the information provided by thecompanies included in the scope ofconsolidation;

• the Board of Directors’ Report wascoherent with the results of theconsolidated financial statements.

Having identified the scope ofconsolidation, the Board certifies that:

• the assets and liabilities have beenvalued correctly;

• the consolidation principles adoptedcomply with legal provisions.

The Board Report and the Notes to thefinancial statements, in accordance withcurrent regulations, provide informationon the Group’s performance during theyear and, in our view, an exhaustivecommentary on the main items of theconsolidated financial statements, whichhave been supplemented by a summarystatement of the consolidated profit andloss account and by a statement ofchanges in the consolidated shareholders’equity.On account of the above, the Boardconcurs with the results of the Group’sconsolidated financial statements as at31 December 2002.

Bologna, 11 April 2003

THE BOARD OF STATUTORY AUDITORS

Dott. UMBERTO MELLONI - ChairmanDott. ROBERTO CHIUSOLIDott. GASTONE NOTARI

191

Consolidated Accounts

Independent Auditors’ Report on the on theConsolidated Accounts

Independent Auditors’ Report on the Consolidated Accounts

192

Consolidated Accounts

Independent Auditors’ Report on the Consolidated Accounts

193

Consolidated Accounts

195

Resolutions of the Shareholders’ Meeting

Resolutions of the Shareholders’ Meeting - 28 April 2003

196

Items 1 and 2 on the Agenda

Having heard the reports of the Board of Directors and the Board of Statutory Auditors,the Meeting unanimously approved the Financial Statements for the year 2002 anddecided to allocate the profit for the year, amounting to € 5,318,798, as follows:- 10% to the legal reserve;- the remainder to other reserves.

Item 3 on the Agenda

The Meeting decided to appoint the company Reconta Ernst & Young S.p.A. to audit thefinancial statements for the three-year period 2003-2005. The duties resulting from thatappointment include auditing unconsolidated and consolidated annual financialstatements and the respective half-yearly reports, as well as the auditing activities specifiedin Article 155 (1) (a) of Legislative Decree 58 of 24 February 1998.

Bologna - Porte di Bologna (Doors of Bologna)

(photograph by Emiliano Trentini - Foto Arcobaleno Group)

Translation from the original Italian text