Cas at December 31, - Investis Digitalfiles.investis.com/profilo/reports/ar03.pdfPrivate Banking activities of HSBC Bank Plc. The transaction had an overall cost of 10.037 mil-lion

onsolidated Financial Statementsas at December 31, 200C 3

CONSOLIDATEDFINANCIALSTATEMENTS AS AT 12.31.2003

ConsolidationAreaPage 5

Company Offices of the Bank and of GroupCompaniesPage 6

BOARD OFDIRECTORS’REPORT ONCONSOLIDATEDOPERATIONS

1. IntroductionPage 9

2. MacroeconomicSituation and MarketCommentaryPage 15

3. FinancePage 18

4. Private BankingPage 21

5. AssetManagementPage 23

6. Credit ActivityPage 24

7. Strategic PlanningPage 25

8. Corporate ReportPage 28

9. SignificantSubsequent Eventsand ExpectedEvolution ofOperationsPage 33

10. Reconciliationbetween ParentCompany’s FinancialStatements andConsolidatedFinancial StatementsPage 34

CONSOLIDATEDFINANCIALSTATEMENTS

Balance Sheet Page 36

Income StatementPage 38

NOTES TO THECONSOLIDATEDFINANCIALSTATEMENTS

1. Part A: Valuation CriteriaPage 41

2. Part B:Information on theBalance SheetPage 45

3. Part C:Information on theIncome Statement Page 61

4. Part D: OtherInformation Page 66

ATTACHMENTS TO THE NOTES TO THECONSOLIDATEDFINANCIALSTATEMENTS

StatutoryAuditors’ ReportPage 69

IndependentAuditors’ ReportPage 71

679

355 39

table of contents

PARENTCOMPANY’SFINANCIALSTATEMENTS ASAT 12.31.2003

Company Officesand IndependentAuditors Page 74

Powers of theCompany Officesand ProxiesAssigned to Them

BOARD OF DIRECTORS’REPORT ON OPERATIONS

1. Commentary onthe Balance Sheetand IncomeStatementPage 81

2. Charts Page 87

3. Risks and InternalAuditing SystemPage 88

4. GeographicNetwo0rkPage 91

5. Relations withGroup and InvesteeCompaniesPage 92

6. Other InformationPage 95

a) SharePerformance in theYear Under ReviewPage 95

b) Operations withRelated PartiesPage 5

c) ShareholdingBreakdownPage 96

d) Report onAcquisitions andDisposals of OwnSharesPage 96

e) Shareholdings ofDirectors andStatutory Auditors inBanca Profilo and itsSubsidiariesPage 97

f) Report on StockOption PlansPage 98

7. SignificantSubsequent Eventsand ExpectedEvolution ofOperationsPage 98

8. Proposal forAllocation of the Net ProfitPage 99

FINANCIALSTATEMENTS

NOTES TO THE FINANCIALSTATEMENTS AND VALUATIONCRITERIA Page 105

Attachments to the Notes to the FinancialStatementsPage 131

REPORTS

StatutoryAuditors’ Reportto theShareholders’MeetingPage 137

IndependentAuditors ReportPage 142

78

73109100

Consolidated Financial Statementsas at december 31, 200

Approved by the Shareholders’ Meeting on March 22, 2004 3

PROFILO IMMOBILIARE

S.R.L.

BANCA PROFILO

S.P.A.

PROFILO SGRS.P.A.

BANCA PROFILOGROUP

PROFILO HEDGE SGR

S.P.A. PROFILO ASSETMANAGEMENT SGR

S.P.A.

PROFILO SUISSE

S.A.

consolidation area

6

Auditors

Guido MongelliChairman

Walter BonardiStatutory Auditor

Andrea RittatoreVonwillerStatutory Auditor

Andrea MariaVenturiniAlternate Auditor

Michele SaracinoAlternate Auditor


IndependentAuditorsDeloitte & ToucheS.p.A.

BANCA PROFILO SPA

Board of Directors

Sandro Capotosti *Chairman and ChiefExecutive Officer

Marco Manara *Vice Chairman

Arnaldo Grimaldi *Vice Chairman

Nicolò Angileri *Director andGeneral Manager

Riccardo LagorioSerra *Director

Silvana Cavanna*Director

Gaetano GaleoneDirector

Giorgio AngeloGirelliDirector

Riccardo LagorioSerra *Director

Renzo TorchianiDirector

Sandro TorchianiDirector

Renzo TorchianiDirector

Giorgio AngeloGirelli

Director

* Member of the ExecutiveCommittee

Board of Statutory

CompanyOffices

of the Bankand of Group

Companies

7

Board of Directors

Marco ManaraChairman and ChiefExecutive Officer

Nicolò AngileriDirector

Silvana CavannaDirector

Board of StatutoryAuditors

AlessandroSagramosoChairman

Guido MongelliStatutory Auditor

Andrea MariaVenturiniStatutory Auditor

Gilberto ComiAlternate Auditor


IndependentAuditors

Deloitte & ToucheS.p.A.

Board of Directors

Marco Manara *Chairman

Marco Farina *Chief ExecutiveOfficer



*Member of the ManagingCommittee


Maurizio DattiloChairman

Massimo GentileStatutory Auditor

AlessandroSagramosoStatutory Auditor



IndependentAuditors

KPMG S.p.A.

Board of Directors

Sandro CapotostiChairman

Nicolò AngileriChief ExecutiveOfficer

Elena HennyDirector

Sole Director

Michele Antonini

IndependentAuditors

TS Corporate S.A.

Board of Directors

Marco ManaraChairman




AlessandroSagramosoChairman

Guido MongelliStatutory Auditor

Andrea MariaVenturiniStatutory Auditor

Gilberto ComiAlternate Auditor


PROFILO SGR SPAPROFILO ASSETMANAGEMENT SGR SPA

PROFILO IMMOBILIARE SRL PROFILO SUISSE S.A.

PROFILO HEDGE SGR SPA

9


BOARD OF DIRECTORS’ REPORT ON CONSOLIDATED OPERATIONS

1.INTRODUCTIONDear Shareholders,

2003 was under many aspects a significant year for the future of the BancaProfilo Group. The extensive reorganisation carried out during the last two yearshas resulted in the recovery of operational efficiency, leading to a significantreduction in costs and expansion of the activities and services offered to custo-mers, with a subsequent increase in income.The joint effect of these two factors has enabled the Group to close the year witha consolidated net profit of 6.514 million Euros, recording a substantial increa-se with respect to the previous year (+141%).The Bank’s contribution to achievement of the consolidated result, with an indi-vidual net profit as at 12.31.2003 of 7.064 million Euros (+116% in one year),was instrumental.

10

CONSOLIDATED financialstatements

The year 2003 was important in terms of bothgrowth as well as consolidation of the Group’smarket position. In this sense, three major eventsoccurred:

- completion of the acquisition of the ItalianPrivate Banking activities of HSBC Bank Plc. Thetransaction had an overall cost of 10.037 mil-lion Euros, 5.527 million of which representedthe start-up cost;

- the results achieved by the Bank’s Equity Desk,reinforced during second semester 2002 withthe addition of a team of qualified resourceshighly specialised in arbitrage;

- rationalisation of the Private Banking activity.

In addition, the new Investment Banking structure,which, during its first year of operations, produced3 million Euros in income, achieved excellentresults. This new activity, particularly as Advisor ofthe Profilo Spinnaker Investment Fund for the dive-

The table below indicates the contributions of thecompanies of the Group in forming the consolida-ted net income.

Companies Net profit

of the Group as at 12.31.2003(Data in thousands of Euros)

Banca Profilo S.p.A. 7,064

Profilo SGR S.p.A. -182

Profilo Asset Management SGR S.p.A. -346

Profilo Immobiliare S.r.l. 1,591

Profilo Suisse S.A. -4

Profilo Hedge SGR S.p.A. -5

Total profit 8,118

Consolidation elisions -1,937

Third-party income 333

Consolidated profit 6,514

A part of the costs affecting companies of theGroup (approx. 10%) is directly or indirectly assi-gned to the parent company, which carries out, forits subsidiaries, the following services in outsour-

THE YEAR 2003 WAS IMPORTANT IN TERMS OFBOTH GROWTH AS WELL AS CONSOLIDATION OFTHE GROUP’S MARKET POSITION.

stment by Alitalia S.p.A. of 80% of the share capitalof Eurofly S.p.A. (company specialised in charterflights), contributed to creating awareness of theBank’s name on the market, increasing its visibility.

For the first time since its constitution, the BancaProfilo Group consolidated its financial statements.In addition to the Bank, the companies Profilo SGRS.p.A., Profilo Asset Management SGR S.p.A., ProfiloImmobiliare s.r.l., Profilo Suisse S.A. and ProfiloHedge SGR S.p.A. were part of the consolidation.

The consolidated net profit as at 12.31.2003 wasequal to 6.5 million Euros. Consolidated grossincome amounted to 56.8 million Euros, while2003 consolidated administrative costs equalled29.5 million Euros.

cing: - internal control; - accounting and budge-ting; - information technology; - personnel admini-stration; - legal and corporate assistance; - marke-ting and communication; - security.Within the cost item, personnel expenses totalled16,664,851 Euros, while other administrativeexpenses were equal to 12,815,424 Euros. In thiscontext, note that Profilo Suisse S.A. and ProfiloHedge SGR S.p.A. do not have employees. As at 12.31.2003, the Banca Profilo Group had 192employees, 174 of which were assigned to theBank, 2 to Profilo Immobiliare s.r.l., 4 to Profilo SGRS.p.A. and 12 to Profilo Asset Management SGRS.p.A..

At 12.31.2003 the consolidated shareholders’equity was equal to 105.516 million Euros.

11


At end 2003, administered assets at the Grouplevel, therefore also taking into account depositsallocated to Profilo Asset Management SGR S.p.A.(already HSBC SGR (ITALIA) S.p.A.), were equal to2,696 million Euros, a significant growth (37%)with respect to the 1,963 million Euros at12.31.2002.

SUMMARY OF GROUP DEPOSITS

Direct Deposits, Bank 611,287,179

Indirect Deposits, Bank 1,584,809,239

of which:

Administered 641,678,119

Managed 506,218,037

Deposits,

Profilo Asset Management 500,499,623

of which:

Institutional 113,258,681

Total Deposits 2,696,596,041

The increase in consolidated deposits, achievedalso thanks to the HSBC transaction, will allowimportant industrial and commercial synergies atthe Group level, via rationalisation of activities,services and distribution channels.

*******

We now move on to a detailed analysis of the perfor-mance of companies included in the consolidation:

Banca Profilo S.p.A.2003 was a very satisfying year. The gross profitas at 12.31.2003 was equal to 10,730,780 Euros,an increase of 134% with respect to the 4,577,442Euros as at 12.31.2002. The net profit, whichincreased from 3,270,085 Euros at the end of 2002to 7,064,050 Euros as at 12.31.2003 (+116%),pays for removal of the tax benefit regarding appli-cation of the Dual Income Tax to newly listed com-panies in the first three-year period of listing.

Compared to previous years, where in the case offalling income, the Bank acted on the cost compo-nent, it was the greater income in 2003 that led tothe significant increase in gross profit.

In fact, total gross income increased from 43.9 mil-lion Euros as at 12.31.2002 to 55.3 million Eurosas at December 2003 (+26%). The Finance Divisioncontributed 40.2 million Euros of this income(72.7% of the total), while the Private BankingDivision produced 15.1 million Euro in income,equal to 27.3% of the total.

Total administrative costs as at 12.31.2003 wereequal to 27.8 million Euros, an increase of 10%with respect to the 25.3 million Euros of the sameperiod the previous year. Within the item, “staffexpense” increased by 16% compared to last year,going from 13.2 million Euros as at 12.31.2002 to15.4 million Euros as at 12.31.2003. In particular,this total was impacted by the increase in numberof employees during 2003, mostly due to the inte-gration of resources from the division acquiredfrom HSBC Bank Plc. and to the addition of newresources in the Finance Division. In fact, the totalnumber of employees increased from 163 units asat 12.31.2002 to 174 units as at 12.31.2003(+6.7%). The “staff expense” amount also sufferedthe impact of additional expenses for incentivesand costs related to variable remuneration mecha-nisms. The “other administrative expenses” were equal to12.4 million Euros, a slight increase (+3%) withrespect to the 12.1 million Euros as at 12.31.2002.The table below describes the distribution of the

bank’s human resources by division/service:

Division/Service staff as at 12/31 12/31 12/31

2001 2002 2003

Asset Management 11 8 6

Finance 45 36 43

Internet 2 1 1

Private Banking 65 69 64

Strategic Planning 47 37 44

Risks 5 7 6

Staff 6 5 10

Total 181 163 174

The net shareholders’ equity of the bank at end2003 was equal to 107.9 million Euros.

As at 12.31.2003, total deposits amounted to2,696 million Euros, an 11.8% growth with respectto the 1,964 million Euros as at 12.31.2002. Theincrease also included 107 million Euros in depo-sits resulting from acquisition of the HSBC division.

12


During the year, the territorial network of the Bankwas rationalised. In March 2003, the Cento branchwas amalgamated with the nearby Ferrara branch,leading to significant savings in terms of effi-ciency. The Piacenza and Pordenone branches wereclosed in November 2003, not having achieved thecritical volume necessary to guarantee an adequa-te profitability. In general, in the year just ended, the Bank wascommitted to redefining its Private Banking struc-ture, aimed at improving its quality, profitabilityand efficiency, also in light of the acquisition of theItalian Private Banking activities of the HSBCGroup.

Completion of the HSBC deal at the end of 2003also had an impact on the credit activity carriedout by the Bank, traditionally considered a margi-nal and purely accessorial element in the relation-ship with the customer and, in any case, strictlysubordinated to the establishment of real guaran-tees. The credit exposure of the Bank with respectto its private customers increased from 26.296million Euros as at 12.31.2002 to 74.022 millionEuros as at 12.31.2003.

The Bank, aware of the risks accompanying thenew area taken on by the credit activity, has takenmeasures to protect itself. The granting of creditremains, in any case, instrumental to the PrivateBanking activity.

Important transformations should also be highligh-ted as far as the Finance Division is concerned, notso much as and not only in terms of resources(which increased by 7 units during the year), butrather in terms of competencies, functions and com-plexities. New professional competencies and newbusiness opportunities have incremented the activi-ties traditionally carried out by the Division and, inparticular, the segment dedicated to Fixed Incomesecurities, which continues to represent the histori-cal core. Trading and analysis desks for in-housecreation of the financial components useful for therealisation of complex products to offer the marketare now active, alongside the typical activity ofstructuring and brokerage of innovative financialtools, without the assumption of particular risks. A comparison of certain summary data furtherdemonstrates the excellent results of the bank inthe 2003 financial year.

THE BANK WAS COMMITTED TO REDEFINING ITSPRIVATE BANKING STRUCTURE, AIMED AT IMPRO-VING ITS QUALITY, PROFITABILITY AND EFFICIENCY

Financial Data 2002 2003 VAR %Shareholders’ equity 107,452,000 107,951,000 0.5

Total Assets 774,125,732 1,390,886,944 79.7

Consolidated deposits 1,963,649,519 2,696,596,042 37.3

Securities Portfolio 77,245,747 345,392,009 347.1

Due from customers 26,296,256 74,021,441 181.5

Economic Data 2002 2003 VAR %Brokering Margin 34,101,757 43,502,641 27.6

Administrative Costs 25,358,253 27,820,015 9.7

Staff 13,283,272 15,401,843 15.9

general expenses 12,074,981 12,418,172 2.8

Gross Profit 4,577,442 10,730,780 134.4

Net Profit 3,270,085 7,064,050 116.0

ROE 3.04% 6.54% 115.1

During the second half of the year, the Bank of Italy conducted inspections of a general nature on the Bank,as part of its ordinary supervisory activity. The inspections, carried out with the utmost collaboration, were completed at the end of December.

13


Profilo Immobiliare S.r.l.Profilo Immobiliare closed 2003 with a net profit of1,590,804 Euros, a growth of 311.4% with respectto the 386,594 Euros recorded as at 12.31.2002.During the year, the company concluded twoimportant real estate disposal transactions, one ofwhich will be completed during the first half of2004. More specifically, the building situated in Via S.Lucia 3, Milan, was sold, achieving a capital gain of1.4 million Euros. At the end of December, the company stipulated anagreement for the disposal of the building in CorsoItalia 36, Milan, for which the company received adeposit of 700,000 Euros. Disposal of the buildingis expected by April 2004. As at 12.31.2003, Profilo Immobiliare owned thefollowing properties:- the building located in Via S. Martino della

Battaglia 10, Milan, leased to the Parent Bank atmarket conditions;

- portions of buildings in Milan, in Via Melegnano2 and 6, destined for office use and already lea-sed;

- the apartment in Rome, Via del Gambero 30,leased to the Bank at market conditions;

- the building located in Corso Italia 36, Milan.

Profilo Immobiliare holds 100% of the share capitalof Immobiliare Missaglia S.r.l., real estate companyexternal to the group and established during thesecond half of 2002. The company closed itsfinancial statements as at 12.31.2003 with a netprofit of 977,548 Euros, an increase of 110% com-pared to 465,392 Euros in 2002. In 2003, Immobiliare Missaglia acquired two buil-dings in Via Bugatti, Milan, one of which was soldin December. This disposal earned the company acapital gain of 1.677 million Euros. As at 12.31.2003, the company owned only thebuilding in Via Bugatti 10, Milan.

Profilo SGR S.p.A.Profilo SGR S.p.A. closed its financial statements asat 12.31.2003 with a loss of 181,494 Euros. 2002had closed with a loss of 283,575 Euros, followingthe start-up costs sustained. The company began operations in January 2003with the launch of management of a fund of flexi-ble funds named “Profilo Best Funds”. Profilo SGR has a streamlined organisational struc-ture, having outsourced the fund’s administration

1,963,649,519

12,696,596,042

2002

2003

TOTAL DEPOSITS

3,270,085

7,064,050

2002

2003

NET PROFIT

14


activity to a major external outsourcer external tothe Group and the other support activities to theBank. The trustee function has been entrusted to abank external to the Group. As at 12.31.2003, the fund had total deposits of34 million Euros. The growth trend over the lastfew months leads to the assumption that depositsof 50 million Euros, necessary to reach the break-even point, could be reached during the first halfof 2004. The value of the quota, from the begin-ning of management, has increased from 5 Eurosto 5.208 at year-end, resulting in a net performan-ce of + 4.16%. Banca Profilo is the only seller for the fund.

Profilo Asset Management SGR S.p.A (previously HSBC SGR (ITALIA) S.p.A.)

Profilo Asset Management (previously HSBC SGR(ITALIA) S.p.A.) became part of the Group on 1December 2003, following completion of the HSBCtransaction, with the purchase by the Bank of 100%of the share capital of the same.

The company carries out ordinary managementactivities on both an individual as well as collecti-ve basis, via 5 specially created harmonised open-ended mutual funds, 4 of which are bond fundsand one flexible.

The company closed its financial statements as at12.31.2003 with a loss of 346,068 Euros, while2002 had closed with a loss of 247,031 Euros.The increase in operating costs and, in particular,administrative costs, was not accompanied by acorresponding increase in income, since theincrease in deposits recorded in 2003 mostlyregarded GPA - “Gestioni Patrimoniali con

Preventivo Assenso” (Asset Management withPreventive Consent), which has commission levelsthat are lower than traditional individual manage-ment. On a yearly basis, deposits have gone from334.3 million Euros to 500.5 million Euros(+49.6%).

The acquisition of Profilo Asset Management ena-bled the Group to increase total deposits substan-tially, equal to 2,696 million Euros as at12.31.2003.

Profilo Suisse S.A.Profilo Suisse S.A., with headquarters in Lugano, isa trustee bank regulated by Swiss law, authorisedto carry out activities of asset management andbrokerage of movables and currencies. Since 2002, Profilo Suisse has been managed by aSole Director, no longer has any employees and islocated within the Swiss studio of TS Accounting.The company closed the period with a loss of CHF6,488, equal to approximately 4,165 Euros.

Profilo Hedge SGR S.p.A.The company closed its financial statements as at12.31.2003 with a loss of 5,083 Euros. The reque-st for authorisation to carry out speculative assetmanagement has been temporarily suspended. Aneventual repeated request will depend on the deci-sions made at the group level, with respect to theoverall management activity.

THE COMPANY BEGAN THE LAUNCH

OF MANAGEMENT OF A FUND OF FLEXIBLE

FUNDS NAMED “PROFILO BEST FUNDS”

15

2.MACROECONOMICSITUATION AND COMMENT ON THE MARKETS

The global macroeconomic and financial situation in 2003 was dominated by sharp contrasts. Alongsidenegative events, such as the war in Iraq, the SARS outbreak, and the default of important multinationalcompanies, there were also positive signs that fuelled hopes for a better 2004: the economic recovery inthe USA, the reduction in international tension and monetary stability at the systemic level.

From a realistic point of view, the indicators of a recovery in America are numerous, unequivocal and con-siderable. The so-called “twin deficits” weigh on the prospects for a robust and long-term recovery. In fact,the state deficit and the balance of payments deficit risk creating a critical condition for the United States’economy, already reflected in its weak currency (depreciated by over 20% compared to the Euro in 2003).Depreciation of the Dollar against the Euro is currently looked upon as favourable by the USA monetaryauthorities, and price movements seem to be widely under control, but this is not enough to discouragethe triggering of possible inflationary processes.

16


During 2003, the Central Banks implemented an expansive monetary policy already launched in 2002. TheFED reduced prime rates from 1.25% to 1%, bringing them to the lowest level in the last 40 years. The ECBreacted by reducing its rates from 2.75% to 2%. The impact on growth was positive, and forecasts havebeen constantly revised upwards. In 2003, global GDP increased by 4.5%, with the major contributorsbeing the United States (+4%) and Emerging Countries, especially China (+9%) and Russia (+6%). Despite thestagnation of recent years, Japan recorded a 1.5% increase in GDP. In Europe, the recovery was slow inemerging, also due to the progressive strengthening of the Euro/Dollar exchange rate, which curbed thepressure on exports. GDP in the Euro zone grew by a modest 0.5%.

There are essentially two economic issues in Europe: the slowness in recovery and the public deficit of cer-tain Countries. The two phenomena are linked and can by explained by the inability of Countries in theEuro zone to carry out the structural reforms that would both stimulate development and limit publicexpenditure, especially in the social security sector. In Europe, therefore, the macroeconomic situation is difficult, with a lack of stimuli for recovery and sepa-rated from the driving force of the growing American economy, at least until the Dollar continues to remainat low exchange rates with respect to the Euro.

In Italy, to the situation described above, we must add inflation, which crosses over from the technicaldimension to become a uniquely social and political phenomenon. The problem is observed and borne par-ticularly by consumers, who testify to the difference between official numbers and the real cost of livingand, above all, complain that even a slight decline in purchasing power has a significant impact onmedium-low level salaries.

The good news of 2003, covered in greater detail below, comes from the financial markets. The increasein value of Stock Exchange lists was substantial, especially where, like in the USA, a recovery seems immi-nent (+49.5% of the Nasdaq index), or where, as in Germany, the penalisation of trends was more marked(+37.1% of the Dax 30 index). Investors gradually returned to making financial investments, reducing,albeit to a slight degree, liquidity reserves and stimulating both equity and bond markets.

The financial market in Italy, recovering in 2003 after the effects of the Argentinean situation and the caseof Cirio, was hard hit by the insolvency of Parmalat, company listed on the Telematic Stock Market, at theend of the year. The most immediate effects of the Parmalat case in Italy include a political debate on the necessity toreform the savings protection system, expected with respect to the structure of controls and the weightsof the various Supervisory Authorities. However, it is not yet possible to quantify the impact at the finan-cial markets level nor evaluate the damage to the Italian banking system, in terms of image generated bythe Parmalat crisis, after Argentina and Cirio.

After a 2003 full of contrasts, the recovery in the American economy, the reduction in international ten-sions and the monetary stability at a systematic level, as mentioned previously, give us reason to hope for2004. The experience of these last few years, however, has taught us that sudden events able to triggerinternational crises are always around the corner, and their repercussions tend to have a global impact.Examples of this, in this first part of 2004, are the not-only-political consequences of the bombing attackin Madrid, with 200 people killed and thousands injured.

****

During 2003, foreign exchange markets experienced a repetition of a large part of the trends observedduring the previous year. The Euro, which appreciated with respect to most of the world’s currencies andin particular with respect to the Dollar, recorded phases of sharp growth during the second and third quar-ters of the year. In 2003, the amount of appreciation of the Euro with respect to the US dollar and the extre-me volatility of the dollar/Euro exchange rate were the distinguishing events of the foreign exchangemarkets.

17


During 2003, the rates trend in both Europe and the United States regained a more marked positive ten-dency. In fact, during the year, the trend of medium to long-term rates differed from the decreasing short-term rates trend, reflecting the progressive improvement in growth estimates in the manufacturing sector.Starting from mid-June, following consolidation of recovery signals in the international economic situation,long-term rates underwent a sudden trend inversion in all the major markets. The Japanese economic reco-very also contributed to stimulating the long-term portion of the rates trend, leading to an increase of overone percentage point in the third quarter of the year.

In this context, the fixed-income markets have, in any case, confirmed good solidity. In addition, theperformance of corporate bonds, which, especially in the telecommunications sector, reduced the spreadowing to the credit market, was decisively positive. Nevertheless, the Parmalat crack at the end of 2003 created suspiciousness and mistrust of the domesticcorporate bond market by institutional as well as private investors.

After three years of consecutive declines, equity markets started offering positive returns once again. Onthe eve of the military conflict in Iraq, world markets started increasing, betting on a reduction in tensionsand an improvement in the international economic situation. Thanks to the abundant liquidity and pro-gressive increase in corporate profits, the rise in stock markets continued almost uninterruptedly for therest of 2003, causing average positive variations of twenty percent on global stock exchanges, with peaksof fifty percent.In the United States, the best performance was achieved by the technological index (Nasdaq: +49.5%). Verygood performance was also achieved by the Dow Jones index (+28.3%) and the Standard & Poors index(+28.7%).European stock markets also had positive results, but with significant differences in terms of absolutevalue. Germany and Spain performed very well, recording +37.1% and +31.5% respectively. France (+18.9%)and Italy (+17.4%) recorded lower growth rates. In particular, Italy was adversely affected by the Parmalatcrack which, during the last month of the year, penalised the performance of banks with the greatest expo-sure in terms of the company as well as of the banking sector as a whole. Outside of the Euro Zone, strong recoveries were experienced by the Asian stock markets and a slowerrecovery by Great Britain (+18.4%).

As far as raw materials are concerned, general growth of the major commodities continued. Gold reachedthe record level of $418 an ounce (+19.5%). Oil prices maintained high levels throughout 2003, with signi-ficant volatility during the breakout of the war in Iraq. The average price of oil in 2003 was $28.50 a bar-rel, a 15.1% increase in comparison to 2002. The price of oil at the end of the year was $30.30 a barrel

28,5$30,3$

2002

2003

AVERAGE PRICE OF OIL

18

3.FINANCEDuring the year, the Finance Division received inve-stments aimed at a consolidation of business. Theactions implemented regarded both an improve-ment of the information technology tools as wellas of the quality of resources, also through theaddition of new professional skills. As part of the corporate management policy tradi-tionally aimed at the cost/income ratio, the Bankfavoured actions that were structural and strategicin terms of future growth.

The income statement of the Finance Divisionshowed a gross operating result of 16.6 millionEuros, with costs increasing 36% from the previousyear, and income that grew from the 28.4 millionEuros as at December 31, 2002 to 40.2 millionEuros as at December 31, 2003, equal to +41.5%.The Division’s substantial increase in income,which represents 72.7% of the total of the same, isindicative of the effectiveness of the strategic deci-sions made by management.

In 2003, management of the bank-owned portfoliowas particularly profitable, recording returns signi-ficantly higher than monetary market rates, evenin the absence of significant risk.

After consolidation of the Equity sector, whichtook place in the second half of 2002, the Bankintervened in the Bond sector and in Treasuryduring third quarter 2003, with the addition ofnew senior resources, identification of a FinancialDirector and an important restructuring of thebusiness activities.

The Finance Division was thus enhanced with newskills, which will be adequately supported by bud-geted expenditures on information technologysystems. In fact, at the end of 2003, new front offi-ce software was acquired, to be implementedthroughout all of 2004. In addition to providingthe pricing and risk analysis functions typical ofthe more advanced front office tools, this softwarewill allow the entire administrative process relatedto financial instruments used in the FinanceDivision, including derivatives and OTC options, tobe managed within a single system.

Restructuring of the Division, at least with respect tothe business type, can now be considered complete.

Below is a brief analysis of the performance of thesingle operational units that make up the FinanceDivision.

A) FIXED INCOME AND TREASURY

Throughout the year, the traditional activity ofstructured products brokerage carried out by theFixed Income Sales and Trading Division was facedwith a market that offered few opportunities andeven a certain alienation as a result of theArgentina and Cirio cases and, at the end of 2003,the Parmalat default. Faced with a smaller numberof transactions closed form the desk, businessnevertheless focussed on the structuring of largerissues than in the past.

19


This operational decision was rewarded with a netincome of 5 million Euros, essentially in line withthat of 2002, despite the difficult market context.

As mentioned in the introduction, the Treasuryachieved excellent results with respect to manage-ment of the bank-owned bonds portfolio, whichproduced income, net of commissions and interestexpense, of approximately 6.5 million Euros.

Following the restructuring launched during thesecond half of 2003, the Fixed Income Trading,Fixed Income Sales, Treasury and CorporateFinance desks have been combined to form theFixed Income and Treasury division.

Traders and analysts have been added to the histo-rical core active in the structuring of insurance pro-ducts and in the brokerage of financial instrumentsfor institutional counterparts. The new structure is divided into four separategroups: Credit Trading, Derivatives Trading,Treasury and Debt Capital Market.

Credit Trading acts as the desk for market makingand trading, bank-owned corporate bonds andissuers with rating. A team of internal analystssupports this activity. The Desk also uses financialinstruments such as Credit Default Swaps, which –given their liquidity – allow credit risk to be mana-ged very efficiently. The Derivatives Trading desk, also supported by

the study and research activities of internal quan-titative analysts, focuses its activities on interestrate derivatives and credit derivatives. To this end,it used both internal and external pricing models. The Treasury works for a more efficient manage-ment of liquidity and improved diversification ofdeposit sources, supporting all sectors of the Bank.Its primary objective is to best manage possibleexcess liquidity or to obtain the necessary liquidityon the market. To this end, in 2003, the bank beca-me a direct member of e-MID (“MercatoInterbancario dei Depositi” - Interbanking DepositsMarket). Direct access to the platform permitsdevelopment and diversification of the depositsand loans channels.The currency business, which is residual, is instru-mental to the activity of Private Banking.The Corporate Finance activity has been absorbedby the Debt Capital Market desk, which in additionto the syndication of pool loans, will also work onthe origination of structured bank bond issues,even in a public form. Said subdivision also aims to provide competitive-ness to the brokerage activity and become an ope-rator able to provide liquidity to structured finan-cial products

The number of resources working in Fixed Incomeand Treasury is 20.

THE INCOME STATEMENT OF THE FINANCEDIVISION SHOWED A GROSS OPERATINGRESULT OF 16.6 MILLION EUROS, WITH COSTSINCREASING 36% FROM THE PREVIOUS YEAR,AND INCOME THAT GREW FROM THE 28.4MILLION EUROS AS AT DECEMBER 31, 2002TO 40.2 MILLION EUROS AS AT DECEMBER31, 2003, EQUAL TO +41.5%.

20


B) EQUITY DESK

In 2003, the Bank’s Equity Desk, whose develop-ment began in 2002 with the addition of profes-sional resources specialised in arbitrage activities,was further strengthened. Investments regardedthe development of new business, the hiring ofspecialists to work alongside the resources alreadypresent, intervention on the IT system in order toautomate certain processes and expansion of thedivision dedicated to market research and analysis.

During the year, the addition of three new speciali-sed resources enabled the star-up of brokerageactivities on the foreign equity market on behalf ofboth institutional and retail clients. The Research Office, which takes on strategicimportance in the development of relationshipswith qualified operators, including investmentfunds, was also strengthened in terms of resourcesand skills, achieving a high level of efficiency. In 2003, organisation of the negotiation service forcaptive clientele was also completed, giving excel-lent results in terms of both quality of service offe-red as well as income. Throughout the year, the desk also managed thebank-owned equity portfolio, with the aim of opti-mising on particular market situations. Furthermore, growth in volumes with respect tobrokerage activities for institutional clients as wellas activity in the OTC options market during 2003was significant.

The investments and the decisions made had adirect positive effect on the creation of income,

which grew 160% compared to the previous year,going from 6.3 million Euros as at 12.31.2002 to16.4 million Euros as at 12.31.2003.

As at 12.31.2003, the number of resources in theEquity Desk of the Bank totalled 19.

C) INVESTMENT BANKING

In 2003, Investment Banking achieved importantqualitative and quantitative objectives, contribu-ting to the income of the Finance Division in theamount of 3 million Euros (7.4% of the divisiontotal).The Investment Banking team worked alongsidemanagement in the evaluation of strategic growthtransactions by external routes, which then led toacquisition of the Italian Private Banking activitiesof HSBC. The desk also worked on the constitution of aPrivate Equity fund regulated by Luxembourg law,which occurred during 2003 and for which thebank is exclusive advisor. On behalf of the fund, the Bank’s InvestmentBanking conducted negotiations aimed at acqui-ring the charter company Eurofly from AlitaliaS.p.A..The structure was also engaged in consulting cor-porate clientele regarding merger and acquisitiontransactions and Extraordinary Finance.

A total of 4 resources currently work in InvestmentBanking.

77,245,747

345,392,009

2002 20

03PORTAFOGLIO TITOLI

774,125,732

1,390,886,944

2002

2003

TOTALE ATTIVO

4.PRIVATE BANKING

21

Consulting and assistance services for clientelewith significant financial worth (high net worthindividuals and ultra-high net worth individuals),whose distinctive and typical feature consists of apersonalised and sophisticated relationship, areprovided within the Private Banking Division of theBank. Through its Private Bankers, the Bank acts asexclusive Advisor and manager of solutions for itsclients. In an extremely competitive environment, in whichnumerous players aim for the same select target,the Bank has decided to focus on a wide and diver-sified range of products, on the increasing integra-tion between Private Banking and CorporateBanking services and on the professional andhuman quality of the resources to which theresponsibility for and development of the clientrelationship is entrusted. In line with the trends expressed by the referencemarket, the Bank is headed towards a PrivateBanking model that, in addition to consulting withrespect to asset allocation of financial and insu-rance tools, provides consulting on services, suchas Real Estate Management, Trust Management andArt Banking.In a historical moment in which the relationship oftrust between bank and client seems to have dete-riorated beyond repair, Banca Profilo wants to reaf-firm the central position of the client and of clientneeds, firmly focusing on the development of atransparent and long-lasting relationship.

During 2003, the structure dedicated to the PrivateBanking service was updated, in light of the futuregrowth plans. In addition to activities aimed at increasing depo-sits in order to reach the critical volume necessaryto guarantee profitability levels, rationalisation ofthe territorial network continued. The organisatio-nal architecture of the structure was partly revisi-ted and, as a result of this process, a “Bank

Division” was established within this Division,including the following operational units:- the central structure of Private Banking;- the new Sport&Entertainment division;- strategic, operational and product Marketing;- the branch offices;- the InClub site.

The following remain outside the division:- the structure dedicated to Executive Clientele;- Customer Relations Management.

Completion of acquisition of the Italian PrivateBanking activities of HSBC, carried out at end2003, had a significant impact on the Division,especially in terms of deposits. The transaction involved, on one hand, transfer ofthe custody and lending units of HSBC Bank Plc. toBanca Profilo, and in particular to the Milan branchand, on other hand, acquisition of 100% of theshare capital of the Italian asset management com-pany HSBC (HSBC SGR (ITALIA) S.p.A.).Consolidated deposits of the Group, also takinginto account those of the ex-HSBC SGR, now ProfiloAsset Management SGR S.p.A. (500 million Euros),amounted to 2,696 million Euros, a significantincrease (+ 37%) compared to 1,964 million Eurosas at 12.31.2002.

Of the total consolidated deposits, managedsavings totalled 1,214 million Euros. In the future,further growth of assets from administered tomanaged is desirable.The Bank’s deposits, on the other hand, grew from1,964 million Euros as at 12.31.2002 to 2,196 mil-lion Euros as at 12.31.2003 (+11.8%). If we sub-tract the 107 million Euros resulting from acquisi-tion of the HSBC division, year on year, the increa-se in deposits is equal to 6%. The Private Banking service for Profilo Asset Manage-ment clientele is provided by the Milan branch.

22


As already mentioned in other parts of this report,completion of the HSBC transaction resulted in anexpansion of the activities traditionally carried outby the Bank, especially with respect to loans andpayment systems. The cash and cheque servicescurrently offered only by the Milan branch willgradually be extended to the other branches aswell.

2003 also saw the establishment of the“Sport&Entertainment” unit, dedicated specificallyto the requirements of a specific category of clien-tele – sports professionals and entertainers – withcommon characteristics and needs. The objectivewas to become a point of reference for the targetclientele, in the management of personal assets,the financial planning of future asset requirementsand in the offer of exclusive products and services.

The territorial consolidation was completed duringthe year, with the closure of the Cento branch in

March and of the Piacenza and Pordenone bran-ches in November. Clients and Private Bankers ofthe Cento branch were transferred to the nearbyFerrara branch, with significant savings in terms ofefficiency and profitability. The total number ofbranches as at 12.31.2003 decreased, therefore, to9, compared to 12 as at 12.31.2002.

Following the aforementioned events, the totalnumber of employees as at 12.31.2003 was equalto 64, compared to 69 as at 12.31.2002.

In 2003, the Private Banking Division had revenuesof 15.1 million Euros, essentially in line with thoserecorded in 2002, while cost diminished by 7.2%.Improvement of the cost structure on one handand revenues in line with the previous year on theother have resulted in an improvement in the grosscontribution margin of the sector. In percentageterms, the Division’s contribution to total incomeamounted to 27.3%.

Throughout the year, the InClub site took on anincreasingly instrumental connotation and one ofgreater support to the activities of the PrivateBankers, thanks to the completeness of informa-tion provided. The site is also a useful tool forclients who, through InClub, may autonomouslyenter the world of investment funds and create apersonal asset allocation, choosing from a largevariety of Italian and foreign funds.

Below is a summary of data regarding deposits asat December 31, 2003:

CONSOLIDATED DEPOSITS AS AT 12.31.2003 (data in Euros)

Direct Deposits, Bank 611,287,179

Indirect Deposits, Bank 1,584,809,239

of which:

Administered* 641,678,119

Managed 506,218,037

Deposits, Profilo Asset Management 500,499,623

of which:

Institutional 113,258,681

Total Deposits 2,696,596,041

* The volume administered includes common shares of Banca Profilo S.p.A. equal to 164.1 million Euros

COMPLETION OF ACQUISITION OF THE

ITALIAN PRIVATE BANKINGACTIVITIES OF HSBC,

CARRIED OUT AT END2003, HAD A

SIGNIFICANT IMPACT ONTHE DIVISION, ESPECIALLY

IN TERMS OF DEPOSITS.

5.ASSET MANAGEMENT

23

Portfolio management on an individual and collective basis is instrumental to the Private Banking serviceoffered by the Bank. In particular, individual asset management (discretional and non) represents a key pro-duct of the Private Banking service, given its flexibility, which can be combined with the various risk/returnrequirements of target clientele.

In 2003, the Asset management activity was necessarily analysed and evaluated in a Group context. Asfrom January 1, 2003, as a result of the HSBC deal, a third operator – Profilo Asset Management S.p.A. (pre-viously HSBC SGR (ITALIA) S.p.A.), active in both individual and collective management of assets – joins theBank and Profilo SGR. The subsequent fragmentation of the management activity and of the products and services offered toclientele now requires a significant rationalisation effort. To this end, a study is currently underway for theconcentration of the individual asset management activity under the Bank and the creation of a single com-pany for the ordinary group operations, to be realised either through amalgamation of the two SGRs orthrough assignment of the company. As at 12.31.2003, total consolidated managed assets were equal to 1.2 million Euros.

During the year, in expectation of the developments mentioned, the Asset Management Division of the Bankpursued and achieved the objective of optimising the portfolio models, with the intent of recovering effi-ciency. Today, the structure is focussed on the management of 5 portfolio models, which are the “moneta-rio” (money market), “obbligazionario globale” (global bond market), “azionario globale” (global equitymarket), “flessibile” (total return) and “direzionale flessibile” (flexible executive) assets.As at 12.31.2003, the volume managed directly by the Bank, including both institutional and private custo-mers, was equal to 714 million Euros, a growth of 34.2% compared to 12.31.2002. In general, performance of the Bank’s asset management was in line with or exceeded the respective ben-chmarks. In 2003, there was also a consolidation of asset management for institutional clientele, aimed par-ticularly at insurance companies, through the offer of traditional and capital-guaranteed asset management.

Il 2003 was the first year for the fund of flexible funds established and managed by Profilo SGR S.p.A.,“Profilo Best Funds”.As at 12.31.2003, deposits invested in the fund were equal to 34 million Euros. From the launch of thefund in January 2003, the value of the quota increased by 4.16%, net of management costs. The growthtrend of deposits in the fund over recent months indicates that, already in the first half of 2004, it may bepossible to reach the 50 million Euros in deposits necessary to break even.

Profilo Asset Management SGR S.p.A. carries out both individual asset management as well as collectiveasset management, with 5 harmonised, open-ended funds, of which one is flexible and 4 bond-based.Of the 500 million Euros in deposits allocated to the company, 228.8 millions Euro are invested in indivi-dual asset management, 158.3 million in asset management with preventive consent and 113.2 millionwith managed institutional clientele. During 2003, individual asset management had varied returns, depending on the type and on the invest-ment policies implemented. Portfolios with a higher equity component ended 2003 with returns that were generally lower than the ben-chmark. The more flexible lines, given their increased adaptability, provided returns that were greater thanthe benchmark. Bond-based products under-performed with respect to the index, the fund portfolios hadreturns that were greater than their respective benchmarks.

As at 12.31.2003, funds established and managed by the company had total deposits of 37 million Euros.

6.CREDIT ACTIVITY

24

The credit activity provided by the Bank to its clientelehas always been marginal and accessory to its invest-ment services, and has mainly consisted of the openingof credit in current accounts and the issuance of bankguarantees, adequately backed by collateral.As a result of the transfer to the Bank of the loans fromthe division purchased from HSBC Bank Plc (which total-led 64.5 million Euros), the credit activity takes on amore significant role and a different connotation withrespect to the past.

The granting of credit remains nevertheless functionalto the Private Banking business, as it is instrumental forconsolidation of the “private” client relationship. Thegranting of any form of financing is subordinated toestablishment of the appropriate guarantees, mainly inthe form of collateral. Total loans to private clientele increased from 23.483million Euros as at 12.31.2002 to 74.022 million Eurosas at 12.31.2003.

The above-described development of credit activitieswas accompanied by decisive and organisational inter-vention on the relevant structures, aimed at strengthe-ning them, both in terms of human resources as well asin terms of technologies and procedures. Adequatecontrol of the risks connected with the increasing ope-rations is, in fact, a primary objective of the Bank.

The credit management process is based on the fol-lowing assumptions:- separation of duties and responsibilities among the

functions that involved in the various phases of gran-ting and management of credit and monitoring ofrisks;

- attribution to collective bodies of authorisation withrespect to the granting of credit;

- line controls and risk management aimed at ensuringthe correct implementation of transactions by theindividual functions involved;

- periodic review of the processes by the Bank’s InternalAuditing function.

Growth of the Bank in terms of credit activity will begradual. as at 12.31.2003, the Bank did not have anyrisk positions with watch-list or non-performing status.

The table below illustrates the composition of the pri-vate clients credit portfolio, classified according totechnical form as at 12.31.2003:

(Data in thousands of Euros)

Technical forms Amount % of Total

Current accounts 61,794 83.5

Mortgage loans 6,467 8.7

Other technical forms 5,761 7.8

Total 74,022 100

7.STRATEGICPLANNING

25

The Strategic Planning Division of the Bank is insti-tutionally appointed with identification of thegeneral objectives of the company and definitionof the global action plan to achieve them, on anindividual and Group level. This division is respon-sible for planning and control activities, admini-stration and accounting management, personnelmanagement, development and implementation ofinformation systems and general services.This organisational scheme, which charges theparent company with the tasks of establishing andcoordinating the strategies of the business units,in order to plan and implement the synergies pre-sent, is considered to be coherent with the multi-functional nature of the Banca Profilo Group, in acontext of joint and efficient management.

During the past year, the Strategic PlanningDivision has taken on a central role in the growthand development of the Bank and of the Group, forwhich it has planned, coordinated and managedthe integration of workers and activities, the deve-lopment of new business and intervention on theinformation systems. In addition, important projects for the future of theBank and of the Group were established and imple-mented, requiring significant investment in termsof human, financial and technological resources.

The addition of professionals in the FinanceDepartment, the subsequent development of newbusiness and the expansion of traditional businesshave required the automation of certain processesand access to computer-based risk management.Said intervention was accompanied and supportedby an almost complete overhaul of the proceduresand regulations that deal with this activity. The equity sector in particular benefited from theinvestments made and the projects realised for theFinance Division. In fact, automatic processesallowing the branches to transmit client ordersdirectly to the market and receive results in realtime have been activated, technological interven-tions were carried out and new software suppor-ting the Desk’s activities was acquired and imple-mented.

The increase in Front Office activities resulted inexponential growth in the number of transactionscarried out, which increased tenfold in 2003 com-pared to the previous year. Plans for 2004 includeintervention on the information system, aimed atreducing the burden that currently impacts theadministrative and support structures.

The desire to provide the business areas with thetools necessary for development of operations, to

26


improve the level of service offered to private andcorporate clients and to reduce the margins oferror to a minimum, limiting human intervention inthe processes as much as possible, has inducedthe Bank to plan for significant investments in2004. The planned intervention regards, on one hand,development of new applications for the informa-tion system currently being used in the bank and,on the other, acquisition of an information systemspecifically for the Finance Division and to supple-ment the one already being used. In fact, theplanning and implementation of software is essen-tial, given the human resource investments madeby the Finance Division.In response to the needs expressed by the busi-ness structure, the Bank has searched the marketand identified an integrated software able to:- support the management of orders and comple-

ted orders both with reference to listed securitiesas well as OTC (Over The Counter);

- benefit from a position-keeping report in realtime;

- constantly monitor operations via automaticverification that position and credit limits arerespected;

- manage risk in terms of VaR.

A fundamental strength of the product selected tothis end is its capacity to control the process’ enti-re supply chain, starting from the Front Office acti-vity and ending at the Back Office, after passingthrough the Middle Office and, in particular, RiskManagement. The system will enable the develop-ment of important synergies with the variousDivisions and, in particular, with AssetManagement, especially as regards risk control. Implementation of the software, which representsthe Bank’s largest investment for 2004, will takethe entire year and will require the contribution ofa team of internal and external resources, repre-senting all professions and functions involved inthe system, in addition to the InformationTechnology team.

2003 also marked the beginning of the Profilo SGRS.p.A. business, with the launch of a fund of flexi-ble funds. The parent company handles the fol-lowing activities completely in outsourcing: - inter-nal control; - accounting and budget; - informationtechnology; - personnel administration; - legal andcorporate assistance; - marketing and communica-tion; - safety. As at the end of 2003, the outsour-cing service is also provided to subsidiary com-pany Profilo Asset Management SGR S.p.A., withthe exclusion of administration activities, carriedout autonomously by the company. During the year, the Bank joined the e-MID(Interbank Deposits Market), an extremely usefultool for the treasury activity.

In 2003, the planning and start-up of new paymentsystems for the Milan branch, which acquired cashand cheque procedures, was also carried out.During 2004, the services will be progressivelyextended to all branches.

Closure of the branches of Cento – whose cliente-le and Private Bankers were transferred to thenearby Ferrara branch – Pordenone and Piacenzaaffected the operational structure transversally,involving it especially with respect to the disposalof buildings and the dismantling of technologicaland computer connections.

In the past year, the Strategic Planning Division hasbeen very involved in growth projects outside ofthe Bank and of the Group, both with reference to

DURING 2003, THE STRATEGIC

PLANNING DIVISION HASTAKEN ON A CENTRALROLE IN THE GROWTH

AND DEVELOPMENT OF THE BANK AND

OF THE GROUP

27


the HSBC deal, completed at the end of November,as well as to the evaluation of purchasing anetwork of financial promoters, a project cancelledduring the second half of the year, due to the lackof a satisfactory economic agreement between theparties.

Completion of the HSBC transaction representedthe Bank’s first successful merger. Thanks to theprofuse efforts of the functions at the variouslevels involved, it was possible to respect contrac-tually agreed times for the integration of resour-ces, business and clientele acquired. The transfer of clients was accompanied by thecomputer migration of related Bank flows and rela-tionships. This activity was planned and managedby a team consisting of resources from InformationTechnology, Organisation, Back Office andCustomer Relations Management. The 36 resources acquired together with the assetmanagement company and the company divisionwere all assigned to the Milanese offices of theGroup. In percentage terms, the increase was equalto 40%. The transfer of resources was well handledby the structure and did not create any particularinconvenience or slowdown in operations, nor anyinterruptions in the continuity of business.

During the second semester of the year, the Bankunderwent an inspection by the Bank of Italy.Among the Strategic Planning Division functions,Information Technology was the one most involvedin supporting the Supervisory Authority, in particu-lar for the retrieval of data from the computersystem and for their processing.

Expenses in 2003, which increased with respect tothe previous year, reflect the investments made tosupport the internal and external growth under-taken by the Bank and, more generally, by theGroup.Consolidated administrative expenses increasedfrom 25.3 million Euros as at 12.31.2002 to 29.5million Euros as at 12.31.2003. This increase alsotakes into consideration the addition of ProfiloAsset Management SGR S.p.A. (previously HSBCSGR (ITALIA) S.p.A. to the Group in December 2003and the integration of this division.On an individual level, total expenses, which alsoinclude indirect charges related to outsourcingactivities provided to subsidiary companies,

increased from 25.3 million Euros as at12.31.2002 to 27.8 million Euros as at 12.31.2003(+10%).Within this item, the “staff expenses” componentincreased the most (+16%). This is attributable tothe growth in number of resources compared tothe previous year (+10 units), to the increased costfor incentives and to the variable remunerationmechanisms. The “other administrative expenses”increased from 12.1 million Euros as at12.31.2002 to 12.4 million Euros as at 12.31.2003(+3%).The impact of the HSBC transaction (second seme-ster 2003) on fixed costs was limited, since it didnot require investments for logistic or computeradaptation. In fact, there was enough space towelcome the new resources, together with the divi-sion and the company, and the Bank’s computersystem was able to manage the business activitiestransferred.

In 2005, in accordance with regulations, the Bankwill draw up the financial statements using theInternational Accounting Principles (IAS). Thisinvolves an alignment of the Bank’s accountingprocedures from January 1, 2004, in order to takeinto account the IAS to enable comparison with thesubsequent financial statements in 2005. In thiscontext, the Bank has already taken measuresinternally and with the support of the administrati-ve computer outsourcer.

As a result of the acquisition of the HSBC division,the total number of resources in the StrategicPlanning Division increased from 37 to 44 units.

8.CORPORATEREPORT

28

In a year marked by a significant corporate deve-lopment process and by the relative consequenceson the organisational structure, the companymaintained control on its values and awareness ofthe sense of social responsibility that derives fromits status as an economic and social entity. With a Group perspective, as opposed to singlecompany, an increasing sensibility was developedtowards the conciliation of economic and socialobjectives and “intangible capital” was optimised,via a more in-depth conception of the interdepen-dence between external and internal relations,image and public reputation, productive activityand consensus among all those involved directlyor indirectly.

Thus, awareness of the necessity to analyse theoverall value of the company in terms of tangiblebut also intangible variables, which take into con-sideration the legitimate interests of all stakehol-ders, has been progressively reinforced:

■ employees, directly involved in the develop-ment of organisational processes, interested inthe growth of results and of the services offeredand participants of the company’s shareholdingpolicy

■ clients, whose sensibilities and requirementsare used to continuously develop operationalprocesses of the company and whose satisfac-tion is motivation for improvement;

■ suppliers, always viewed as partners of thecompany, with which to share achievement ofthe final objectives through promotion of a com-mon vision;

■ the Community – or rather the State, to whichresources are supplied under the form of taxesand corporate charges – and society, with whichthe company interacts through social activities inthe fields of training, social solidarity and culture;

■ competitors, who represent the competitivecontext necessary to stimulate productivity, effi-ciency and innovation.

The efforts of the Group in its multifaceted opera-tional expression has thus been directed towardsthe reinforcement of the company’s global value asthe result of a joint action of economic-financialelements and professional, cultural and relationalcontent which, in their complexity, also provide aservice to the economic-social community.Transparency, accessibility, knowledge and availa-bility are the necessary and essential tools requi-red to spread the corporate culture and obtain apositive perception and reputation.

EmployeesGROWTH OF BANCA PROFILO S.P.A.EMPLOYEES

Employment 2001 2002 2003Men 111 110 117Women 70 53 57Total 181 163 174

2001 2002 2003College graduates 85 79 76High school graduates 96 84 98Total 181 163 174

2001 2002 2003Average seniority 2.7 3.2 5.3Hires 41 42 47Leaves 53 60 36

Average age 2001 2002 2003Executives 41 45 48Managers 38 39 40Office workers 29.5 31 33Average age overall 36 38 39

29


TRAINING 2003 continued to require the commitment of thecompany in terms of employee training, as well asfor the placement of new human resources withdifferent professional backgrounds and, therefore,to be introduced to a common corporate directionand culture. Overall, 35,760 Euros were invested,for a total of over 761 hours of training involving25 employees.

CORPORATE SITUATIONGrowth in activities that characterised develop-ment of the company throughout all of 2003 requi-red a significant reorganisation of the operationalfunctions. Accompanying this was also a physicalturnover of professionals which, as a result, requi-red significant commitment in terms of internalcommunication and organisational arrangementsnecessary to maintain high integration amongfunctions and motivation of human resources.To this end, a significant role in the inter-functionalstrategic-operational sharing and information pro-cess was carried out by the Division Committees(Private Banking, Finance, Management), which,via periodic meetings, had the opportunity toexchange views and decide on the direction totake. As regards the issues of new employee integration,the official nature of corporate information, andthe spirit of sharing and sense of belonging, theGlobal Convention (Montecarlo, September 13-14)was the initiative that provided the most signifi-cant results.

Profilo Magazine, the monthly internal magazinedistributed to all employees, was a very effectivetool for corporate communication and informationon important events in the company.

SAFETY AND HEALTH As part of the consolidation of the CorporateProcedures’ Manual, a specific safety manual wasprovided to all employees in 2003, outlining theactivities carried out by the Safety Office, the rela-tionships with other corporate services and thelegal references applicable as regards security andprivacy.

Operationally speaking, the Safety Office, in colla-boration with companies and specialised profes-sionals, has reinforced the security systems andprocedures via the following functional subdivi-sions:

Workers’ safetyn compliance with law 626/94 and subsequentamendments, the manager of this office is the cur-rent Manager of the Worker Injury Protection andPrevention Service and, given the sensitivity of theduties assigned to him, he also serves as the repre-sentative of the Board of Directors, with the wide-st powers and autonomy, for direct implementa-tion of safety measures. Internal training courseshave been organised within the Bank andemployee risk factors have been thoroughlychecked, particularly at bank branches.

Physical safetyWithin this scope, the fundamental aspect onwhich the office has intervened is the set-up andmaintenance of anti-burglar, fire prevention andvideo recording systems as well as controlledaccess to the offices; to this end, a computersystem for remote management and control of allsecurity sub-systems has been implemented.Greater attention has been dedicated to the activa-tion of security systems and procedures necessarydue to the increase and diversification of cash orcash equivalents, following acquisition of the HSBCbranch.

Information security In collaboration with the Information TechnologyService, the Security Office has dealt with maintai-ning and improving the security of the Bank’s infor-mation through the creation of specific securityprocedures and by purchasing I.T. means andseeking specialised consulting. During 2003 BancaProfilo updated its Pragmatic Document on DataSecurity (known as “DPS”), as required by law675/1996 and by the relative provisions in force.By June 30, 2004, said DPS will be further integra-ted and updated in accordance with LegislativeDecree 196/2003.

30


Shareholders In line with the trend that accompanied the entirestock exchange list, the stock also underwent sud-den growth phases linked to expectations onresults of the period and on the company’s growthpossibilities, achieving a performance of approxi-mately 43% compared to end 2002.

The availability of a dedicated function and thecompany’s willingness to handle investor relationswith the utmost openness and collaboration havefacilitated the consolidation of continuous andfunctional relationships for correct interpretationof the company’s business values and prospects.

ClientsThe significant increase in business and the chan-ged market condition have led to a progressivediversification and articulation of clients to whomBanca Profilo S.p.A. has proposed its services,always enhanced by the professionalism and flexi-bility expressed by the company resources in esta-blishing a scrupulous relationship based on trust.As far as institutional clients are concerned, theFinance Division has maintained and developedspecial relationships through a consolidated ope-rational partnership. In terms of private clientele,Customer Relations Management has acted as aquality and institutional guarantor for the relation-ship between Client and Bank, to consolidate exi-sting relations, transfer strategic visions and ope-rating skills and confirm the consulting and spe-cialised vocation of the Company.

SuppliersFurther selection was carried out also with respectto suppliers – companies or professional studios –that have worked with Banca Profilo, providing rawmaterials and intermediate services necessary forachievement and quality of the end result. Thecareful selection of partners and the constructivecollaboration relationship established at all levelshave undoubtedly had a positive effect on thecommercial relationships between the Company

and its suppliers. In 2003, the contribution ofBanca Profilo S.p.A. to outside economies amoun-ted to 8,457 thousand Euros, a decrease of about7% with respect to 2002.

Community and StateThe economic commitment and operating stabilityachieved also during 2002 have enabled the com-pany to confirm its role in the communities inwhich it is directly involved and, indirectly, in thegeneral context of the country-system. The State collected 4,181,514 Euros in direct andin direct taxes.

(in thousands of Euros)

Labour costs 2001 2002 2003

Employees 14,409 13,283 15,402

Directors 3,018 2,302 2,793

Consultants 1,347 1,318 735

Total 18,774 16,903 18,930

Taxes 2001 2002 2003

Indirect 503 183 514

Direct 1,468 1,307 3,667

Total 1,971 1,490 4,181

Suppliers 2001 2002 2003

Total 12,018 9,109 8,457

Write-downs 2001 2002 2003

Total 3,367 4,255 3,977

Charitable initiatives Loyal to its vocation and sensitive to social issues,the Bank continued its support during 2003, allo-cating approximately 83,000 Euros to the fol-lowing organisations:

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SUMMARY OF MAJOR CONTRIBUTIONS

Recipient Euros

FISM – fondazione italiana sclerosi multipla

(Italian MS Foundation) 25,822.80

NPH - Fondazione Francesca Rava

(Francesca Rava Foundation) 10,000.00

Opera San Francesco per i poveri

(St. Francis Foundation for the poor) 10,000.00

L’Albero della vita Onlus

(ONLUS Tree of life) 10,000.00

Firc – Fondazione italiana ricerca sul cancro

(Italian cancer research foundation) 7,747.00

Fondazione Benedetta D'Intino

(Benedetta D’Intino Foundation) 5,681.00

Progetto P.C.I. – paralisi cerebrale infantile – Rotary

(Infantile Cerebral Palsy Project) 3,600.00

Medici senza frontiere onlus

(Doctors without borders, ONLUS) 2,500.00

Associazione Variopinto

(Variopinto Association) 2,000.00

Monastero Janua Coeli – Santuario dell’Addolorata

(Janua Coeli Monastery – Madonna Sanctuary) 2,000.00

By your side onlus 2,000.00

Associazione Amici di Francesco

(Amici di Francesco Association) 1,000.00

Progetto Togo – Istituto Figlie della Carità Canossiane

(Togo Project – Daughters of the Canossiane

Charity Institute) 500.00

Croce Santa Rita (Santa Rita Red Cross) 260.00

A.I.A.B.A. Assistenza bambini artistici

(Assistance for artistic children) 250.00

Total 83,360.80

AISM AND FISMThe Italian Multiple Sclerosis Association (AISM)was established in 1968 to represent the rightsand desires of individuals afflicted with this disea-se. In its thirty years of activity, the Association hasexpanded, becoming one of the most importantItalian non-profit organisations. Today it is ONLUS,Organizzazione Non Lucrativa di Utilità Sociale(Non-profit Organisation for Social Utility). In 1998,in accordance with the new Italian law on non-pro-fit organisations, the AISM entrusted the task ofpromoting and financing scientific research onmultiple sclerosis to the Italian Multiple SclerosisFoundation (FISM), also part of ONLUS, which con-tinues the commitment carried out by AISM until

1997. The main objectives of AISM and itsFoundation are to provide social and health assi-stance, distribute accurate information on thedisease, awaken public opinion and promote scien-tific research. Nobel Prize Winner Rita LeviMontalcini is Honorary President of AISM and FISM,and Professor Mario Alberto Battaglia is NationalPresident.

AIRC AND FIRCThe Italian Cancer Research Association (AIRC),private non-profit organisation, was founded in1965, thanks the initiative of several researchersat Milan’s Tumour Institute, including ProfessorUmberto Veronesi, and with the support of well-known Milanese entrepreneurs. Since its founda-tion, the AIRC has always been involved in pro-moting oncological research in our Country andhas progressively grown to currently include 17Regional Committees and over 1,800,000 mem-bers. The activities of AIRC consist of collectingand disbursing funds in favour of oncologicalresearch and providing the public with correctinformation on this issue. In particular, the AIRCis committed to: financing research projects byuniversity laboratories, hospitals and scientificinstitutes; improving the knowledge of youngresearchers in Italy and abroad through the assi-gnment of study grants; creating awareness andinforming the public on the progress in oncologi-cal research. AIRC, together with FIRC, has beco-me the main private financing source (approxi-mately 36% of the total) for cancer research inItaly, often taking on the fundamental role ofmotivator and coordinator.

DOCTORS WITHOUT BORDERSThe work of Doctors Without Borders is aimed athelping populations in crisis situations. They pro-vide their emergency care to poor populations, tovictims of natural or man-provoked catastrophesand to victims of war, without discrimination ofany kind, be it racial, religious, philosophical orpolitical. Doctors Without Borders consists of 5operational divisions that manage projects in theareas of intervention directly, and by 13 partnerdivisions that support the activities by collectingfunds, recruiting volunteers, informing the mediaand awaking public opinion.

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BENEDETTA D’INTINO FOUNDATIONThe Benedetta D'Intino non-profit Foundation,recognised by the Lombardy region, was created toprotect children and teenagers who suffer abuseand physical and psychological violence, childrenseverely neural impaired or at psychopathologicalrisk and their families. The Foundation also sup-ports all foster or adoptive families, which oftenrepresent the new reality of these children. TheBenedetta D'Intino Centre has launched a campai-gn to make public opinion and social service ope-rators aware of the problems of abused childrenand teenagers, in order to promote dialogue andcall attention to this serious problem. TheBenedetta D'Intino Centre cooperates with associa-tions and public and private institutions with simi-lar tasks.

NPHN.P.H. (Nuestros Pequenos Hermanos) is an inter-national organisation that supports orphaned andabandoned children in Central America (more than50 offices all over the world). N.P.H. was foundedin 1954 by Father William Wasson, attorney andprofessor of criminology at the Santa BarbaraUniversity of California, who gave up his profes-sion as an attorney to follow his vocation, anddevoted his life to homeless and orphaned chil-dren. More than 20,000 children were rescued andbrought up in N.P.H. orphanages and hospitals allover Central America (Mexico-Honduras-Guatemala-Haiti-Nicaragua-El Salvador). N.P.H.Italy, certified according to ONLUS, has been pre-sent in our country since June 2000. In 2003, the cooperation with N.P.H. was characte-rised by a marked operational synergy through thecollection of funds for the construction of twohospitals in Belize and Haiti, an example of the vir-

tuous and active relationship between profit andnon-profit enterprise, in which Banca Profilo hasworked on promoting awareness and the involve-ment of other operators and has put in place sim-ple but important management and transfersystems for the funds to be employed in theseprojects.

BY YOUR SIDE ONLUSBy Your Side is a non-profit organisation that aimsto promote “clown therapy” for children in hospi-tals/institutes or who are experiencing desperatefamily situations and live in institutes for minors.Clown therapy offers support to traditional medi-cine and is recognised by paediatricians and allhospital personnel as an integral part of the careprogram because useful in playing down thesituation and making children more serene andreceptive.

VARIOPINTO ASSOCIATIONThis non-profit, non-party and non-sectarianAssociation organizes socio-cultural activities forsolidarity purposes in the social, cultural, educa-tional and sports fields. The Association aims atproviding aid and support to promote the well-being of the individual and the community,without distinctions based on race, gender, lan-guage, religion, political opinion, social origin,wealth, birth or other conditions. The Associationpursues its goals both directly and by providingcultural and operational support to anyone willingto pursue the same goals, by spreading a culture ofcooperation. The Association promotes dialoguebetween individuals and public and private institu-tions, with the aim of performing effective andhumane interventions.

CROCE SANTA RITACreated in 1968, the Croce Santa Rita First AidAssociation has 21 ambulances and 4 intensivetherapy mobile centres. It provides first aid duties,internal and external patient transport service inthe main city hospitals, and also prisoner transferservice. The activity is carried out both by staffmembers as well as by more than 100 volunteerswho devote their time to helping the needy every-day.

LOYAL TO ITS VOCATIONAND SENSITIVE

TO SOCIAL ISSUES, THE BANK CONTINUED

ITS SUPPORT DURING 2003

9.SIGNIFICANT SUBSEQUENT EVENTSAND EXPECTED EVOLUTION OF OPERATIONS

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No significant events occurred after closure of the financial year at the consolidated level.

For a description of the evolution in operations, see the general content of this report.

10.RELATIONSHIP BETWEENTHE PARENT COMPANY’S FINANCIALSTATEMENTS AND THE CONSOLIDATEDFINANCIAL STATEMENTS

34

(in thousands of Euros) Profit Capital Shareholders’ and reserves equity

Balances as at December 31, 2003as per company financial statements 7,064 100,887 107,951

Effect of the consolidation with the integral method of subsidiaries 1,054 15,558 16,612

Consolidation write-downs- book value of investments - (17,404) (17,404)- dividends (1,560) - (1,560)- other (377) (377)

Third-party interests * 333 (39) 294

Balances as at December 31, 2003 as per consolidated financial statements 6,514 99,002 105,516

* includes the loss of Profilo Asset Management SGR S.p.A. (previously HSBC SGR S.p.A.) from January 1, 2003 to November 30, 2003, which is of third parties.

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CONSOLIDATEDbalance sheet as at December 31, 2003Comparison with the financial year ending December 31, 2002

Assets Dec. 31, 2003 Dec. 31, 200210. Cash and due from central banks

and post offices 807,509 84,450

20. Treasury bills and other bills eligible for refinancing with central banks 58,373,050 24,427,251

30. Due from banks: 470,449,993 544,528,834a) on demand 77,950,132 54,991,083b) other deposits 392,499,861 489,537,751

40. Due from customers 467,224,785 45,909,339of which:- third-party funds under administration - -

50. Bonds and other debt securities: 263,772,072 45,683,785a) issued by governments - -b) issued by banks 43,777,509 12,592,681of which: own securities 4,111,400 -c) issued by financial institutions 160,757,860 -of which: - own securities - -d) issued by others 59,236,703 33,091,104

60. Equity shares, quotas and other share capital securities 23,381,316 - 6,560,836

70. Equity investments 9,851,611 9,580,597

80. Equity investments in Group companies - -a) valued at shareholders’ equity - -b) other - -

90. Positive consolidation differences 1,508,542 39,819

110. Intangible fixed assets 7,422,366 3,354,892of which:- start-up costs 483.067 1,018,235- goodwill 5,259,868 -

120. Tangible fixed assets 8,707,175 14,601,012

140. Own equity shares or quotas 142,725 855,071

150. Other assets 72,033,792 64,334,529

160. Accrued income and prepaid expenses: 21,743,938 5,241,351a) accrued income 11,728,927 4,996,415b) prepaid expenses 10,015,011 244,936of which:- issue discount on securities - -

Total Assets 1,405,418,874 765,201,766

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Liabilities Dec. 31, 2003 Dec. 31, 200210. Due to banks: 262,751,208 10,946,995

a) on demand 35,740,803 6,027,978b) on maturity or with notice 227,010,405 4,919,017

20. Due to customers: 803,785,685 570,051,232a) on demand 82,005,643 69,733,154b) on maturity or with notice 721,780,042 500,318,078

30. Amounts due on securities issued: 50,000,000 12,208,000a) bonds 50,000,000 12,208,000b) certificates of deposits - -c) other securities - -

50. Other liabilities 168,157,413 58,323,539

60. Accrued liabilities and deferred income: 5,522,268 3,370,967a) accrued liabilities 5,500,394 3,341,729b) deferred income 21,874 29,238

70. Staff severance provision 2,493,783 1,456,858

80. Provisions for risks and charges: 5,169,508 1,920,140a) retirements and similar benefits - -b) taxation 5,168,508 1,920,140c) other - -

90. Provision for doubtful debts 100,000 -

100. Provision for general banking risks - -

110. Subordinated liabilities - -

120. Negative consolidation differences - -

140. Third-party equity 38,518 39,679

150. Share capital 63,703,640 63,063,000

160. Share premium account 24,400,138 27,651,027

170. Reserves: 12,770,925 13,467,671a) legal reserve 12,612,600 12,612,600b) reserve for own shares 142,725 855,071c) statutory reserves - -d) other reserves 15,600 -

190. Profit (loss) carried forward 11,965 -

200. Profit (loss) for the year 6,513,823 2,720,658

Total Liabilities 1,405,418,874 765,201,766

Guarantees and commitments Dec. 31, 2003 Dec. 31, 200210. Guarantees given 48,874,752 14,157,990

of which:- acceptances - -- other guarantees 49,874,752 14,157,990

20. Commitments 287,497,092 87,345,798of which:- for sales with repo - -

30. Derivative contracts on loans 500,000,000 -

38


01/01/2003 12/31/2003 01/01/2002 12/31/200210. Interest income and similar items 15,465,605 15,458,520

of which:- on amounts due from customers 6,752,764 2,047,331- on debt securities 4,263,317 7,258,849

20. Interest expense and similar items -9,195,477 -8,259,848of which :- on amounts due to customers -5,912,703 -7,702,750- on securities issued -813,875 -106,045

30. Dividends and other income: 9,201,072 1,363,782a) on equity shares, quotas and other share capital securities 8,321,072 644,420b) on equity investments 880,000 719,362c) on equity investments in Group companies - -

40. Commission income 22,912,948 18,232,546

50. Commission expense -2,754,918 -1,523,361

60. Profit/(loss) on financial transactions 6,540,139 8,276,272

70. Other operating income 2,723,723 368,766

80. Administrative expenses: -29,480,275 -25,331,893a) staff expenses -16,664,851 -13,676,540of which:- wages and salaries -11,157,827 -8,790,898- social security charges -3,219,662 -2,421,375- staff severance retirements -705,311 -627,104and similar benefits - -b) other -12,815,424 -11,655,353

90. Write-downs to tangible and intangible fixed assets -4,912,305 -3,718,908

110. Other operating expenses -206,568 -37,753

120. Value adjustments on loans and provisions for guarantees and commitments -269,059 -

140. Bad debt provision -100,000 -

150. Write-downs to financial fixed assets -248,750 -869,030

180. Profit (loss) on ordinary activities 9,676,135 3,959,093

190. Extraordinary income 1,997,180 565,306

200. Extraordinary expenses -1,387,703 -468,270

210. Extraordinary profit/(loss) -609,477 97,036

240. Income taxes for the year -4,104,704 -1,355,399

250. Third-party profit (loss) for the year 332,915 1,928

260. Profit/(loss) for the year 6,513,823 2,702,658

NOTESTO THE CONSOLIDATED FINANCIAL STATEMENTSThe financial statements as at December 31, 2003 have been drawn up in compliance withthe provisions set forth by Legislative Decree n. 87 dated January 27, 1992 and pursuantto the provisions of the implementation measure issued by the Banca d’Italia on January17, 1995, modified by the last provision of 31 July, 2002, which sets out the instructionsin respect of drawing up the financial statements of banks and financial companies thatare parent companies of banking groups.

39

40

Part A Valuation CriteriaPreambleSection 1 - Valuation criteria explanationSection 2 - Adjustments and Provisions solely for Tax Purposes

Part B Information on the Balance SheetSection 1 - LoansSection 2 - SecuritiesSection 3 - Equity InvestmentsSection 4 - Tangible and Intangible Fixed AssetsSection 5 - Other AssetsSection 6 - PayablesSection 7 - ProvisionsSection 8 - Capital, Reserves, Provision for General Banking Risks and Subordinate LiabilitiesSection 9 - Other LiabilitiesSection 10 - Guarantees and CommitmentsSection 11 - Concentration and Distribution of Assets and LiabilitiesSection 12 - Management and Brokering on Behalf of Third Parties

Part C Information on the Income StatementSection 1 - InterestSection 2 - CommissionsSection 3 - Profit and Loss on Financial TransactionsSection 4 - Administrative ExpensesSection 5 - Write-downs, Write-ups and ProvisionsSection 6 - Other Items in the Income StatementSection 7 - Other Information on the Income Statement

Part D Other informationSection 1 - Directors and Statutory AuditorsSection 2 - Parent Company or Supervising Credit Institution

NOTES to the consolidated financial statements

41

NOTES to the consolidated financial statements

Preamble

The financial statements as at December 31, 2003 have been drawn up in compliance with the provi-sions set forth by Legislative Decree n. 87 dated January 27, 1992 and pursuant to the provisions ofthe implementation measure issued by the Banca d’Italia on January 17, 1995, modified by the last pro-vision of 31 July, 2002, which sets out the instructions in respect of drawing up the financial state-ments of banks and financial companies that are parent companies of banking groups.

The consolidated financial statements comprise the balance sheet, income statement and the notes tothe financial statements, as well as the report on operations.

The financial statements of Banca Profilo (Parent Company) and those of equity investments in finan-cial companies and companies that carry out instrumental activities, in which the Parent Companyholds the majority of capital directly or indirectly, have been consolidated in the present financial sta-tements with the integral consolidation method. De

Documents

Cas at December 31, - Investis Digitalfiles.investis.com/profilo/reports/ar03.pdfPrivate Banking activities of HSBC Bank Plc. The transaction had an overall cost of 10.037 mil-lion