The reconciliations have been subject to a Special Purpose Audit Report carried out by

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2 INTRODUCTION The consolidated and individual company reports (Banca Carige Group and Banca Carige) have been prepared in compliance with International Financial Reporting Standards and International Accounting Standards (hereafter collectively IFRS) and related Bank of Italy pronouncements (circular no. 262 of 22 nd December 2005 Format and rules to be followed by banks in their financial reporting and the General Manager s letter of 22 nd December 2005). The annual reports of the following subsidiaries, as decided by the Parent Company Banca Carige SpA, have also been prepared under IFRS: Cassa di Risparmio di Savona SpA, Cassa di Risparmio di Carrara SpA, Banca del Monte di Lucca SpA, Banca Cesare Ponti SpA and Carige Asset Management SpA, having decided Banca Carige SpA both for itself and on behalf of the above-mentioned subsidiaries to take advantage of the provisions of article 4, paragraph 2 of Legislative decree 38/2005. The standards applied will be those issued by the International Accounting Standards Board and endorsed (or where there is reasonable expectation of endorsement) by the European Union at the moment of the approval of these statements. In all respects, this is also expected to be in accordance with IFRS, including the interpretations issued by the International Financial Reporting Interpretations Committee (IFRS) as applicable to the Banca Carige Group. The change in accounting standards will have a significant impact on presentation, valuation of assets and liabilities, in addition to the structure of annual and interim reports. Valuation and measuring criteria are based on the principle of substance over form. Consequently, assets and liabilities are recorded or written down exclusively to illustrate the actual transfer of a benefit or risk. The application of fair value rather than historical valuation impacts in particular financial assets (securities, loans and advances, derivatives, equity investments) and actuarial assessments of staff benefits, such as severance pay and supplementary pension schemes. With regards to the area of consolidation, the Group s two insurance companies Carige Assicurazioni SpA and Carige Vita Nuova SpA are now accounted for using the acquisition method, previously not foreseen under Italian GAAP. The Annual Reports of Banca Carige and the Banca Carige Group at 31 st December 2005 are made up by the following: - Board of Directors Report; - Balance sheet; - Income statement; - Cash flow statement; - Changes to Total Shareholders Equity; - Explanatory notes. The Directors Reports provide all details required regarding the financial and economic situation in addition to a description of risk exposure and the containment and management approaches adopted. Banca Carige has decided to apply IAS 32 and IAS 39 (financial instruments) and IFRS 4 from 1 st January Consequently, comparison cannot be made to figures relating to financial instruments as at 31 st December 2004 (non restated valuations under Italian GAAP). The absence of 2004 comparatives for financial instruments for the reasons given above impacts also the statements of the Group s banks and manager trust. The Banks and the Asset Management Company of the Group have received the same instructions. However, in order to provide some form of comparison with 2004, certain pro forma restatements under IAS 32 and IAS 39 of balance sheet and income statement captions have been made. Information regarding regulatory capital and related prudential filters both at consolidated and single-company level is in compliance with the Bank of Italy s letter no of 1 st December 2005 ( Prudential Filters ). Consolidated reporting requirements relating to regulatory capital are regularly updated in accordance with Bank of Italy indications (13 th update of 25 th January 2006 and letter no of 30 th January 2006). 2

3 The attachment First Time Adoption of International Financial Reporting Standards (IFRS) contains detailed reconciliations relating to Banca Carige and the Banca Carige Group in accordance with IFRS 1 (paragraphs 38,39 and 40) and CONSOB s deliberation no of 14 th April A basis of preparation accompanies the FTA report and provides details of the impact of IFRS on balance sheet lines and the subsequent variation in total shareholders equity. The reconciliations have been subject to a Special Purpose Audit Report carried out by Deloitte & Touche SpA, in accordance with the decision of the Board of Directors of Banca Carige taken during the meeting of 9 th May 2005 and pursuant to CONSOB s communication DEM no of 15 th April These Annual Reports for the Banca Carige Group and the Parent Company have been audited by Deloitte & Touche SpA, in accordance with the decision (article 159 of Legislative decree 58/1998) of the Ordinary Shareholders Meeting of Banca Carige held on 31 st March 2003 for the years

4 BANCA CARIGE GROUP BALANCE SHEET AT 31 TH DECEMBER 2005 CONTENTS NOTICE OF MEETING 6 BASIS OF CONSOLIDATION 7 DIRECTORS, STATUTORY AUDITORS, MANAGEMENT AND AUDIT FIRM OF BANCA CARIGE 8 POWERS OF THE ADMINISTRATIVE BODIES AND THEIR DELEGATED AUTHORITY 9 DIRECTORS, STATUTORY AUDITORS, MANAGEMENT AND AUDIT FIRM FOR THE YEARS 2006, 2007 AND CONSOLIDATED FINANCIAL HIGHLIGHTS 11 CONSOLIDATED BOARD OF DIRECTORS ' REPORT 12 - The year in Italy and abroad 13 - Strategy 15 - Key events for the Banca Carige Group during Financial intermediation activities 20 - Economic results 32 - Insurance business 37 - Marketing, services and customer protection 37 - Public relations and the promotion of cultural, scientific and social activities 39 - Distribution channels and resource management 40 - Tangible and intangible assets, investments in subsidiaries and associates 42 - Corporate governance 43 - Share ownership structure and relations with the Cassa di Risparmio di Genova e Imperia Foundation 43 - Banca Carige share performance Total shareholders' equity 44 - Carige Group Companies 46 - Prospects and conclusions 55 CONSOLIDATED FINANCIAL STATEMENTS 56 - Consolidated Balance Sheet 57 - Income Statement 59 - Statement of changes in stockholders equity 60 - Cash flow statement 62 EXPLANATORY NOTES 64 Part A - Accounting policies 65 A 1 - Introduction 66 Section 1 - Conformity with International Financial Reporting Standards 66 Section 2 Banca Carige Group s general accounting policies 67 Section 3 - Area and method of consolidation 68 Section 4 - Events after 31 th December Section 5 - Other aspects 75 A 2 - Part related to the main balance agregates 76 Part B - Balance sheet 85 Part C - Income statement 143 Part D - Segment reporting 170 Part E - Information on risks and risk hedging policies 173 Part F - Information on consolidated shareholders' equity 222 Part G - Business combinations concerning companies or business branches 229 Part H - Transactions with related parties 232 REPORT OF THE BOARD OF STATUTORY AUDITORS 236 REPORT OF THE INDEPENDENT AUDITORS 245 APPENDIX: ADOPTION OF THE INTERNATIONAL ACCOUNTING STANDARDS (IAS) 248 REMARKS In the charts of the Annual Report the following conventional signs are used: - when data are nought when data are not significant 4

5 BANCA CARIGE SPA BALANCE SHEET AT 31 th DECEMBER 2005 CONTENTS FINANCIAL HIGHLIGHTS 267 BOARD OF DIRECTORS' REPORT Financial intermediation activities Economic results Distribution channels and resource management Property, plant and equipment, intangible assets, equity investments in subsidiaries and associates Shareholders' equity Relations with subsidiaries and related parties Shares owned by Directors, Statutory Auditors and General Manager Prospects and conclusions 297 FINANCIAL STATEMENTS Balance sheet Income statement Statement of changes in stockholders equity Cash flow statement 305 EXPLANATORY NOTES 307 Part A - Accounting policies 308 A 1 - Introduction 309 Section 1 Conformity with International Financial Reporting Standards 309 Section 2 Banca Carige s general accounting policies 310 Section 3 - Events after 31 th December Section 4 - Other aspects 314 A 2 - Part related to the main balance aggregates 315 Part B Balance sheet 322 Part C Income statement 369 Part D - Segment reporting 389 Part E - Information on risks and risk hedging policies 391 Part F - Information on shareholders' equity 427 Part G - Business combinations concerning companies or business branches 433 Part H - Transactions with related parties 435 PROPOSED RESOLUTION 441 REPORT OF THE BOARD OF STATUTORY AUDITORS 443 REPORT OF THE INDEPENDENT AUDITORS 454 APPENDIX: ADOPTION OF THE INTERNATIONAL ACCOUNTING STANDARDS (IAS) 457 ATTACHMENTS 475 REMARKS In the charts of the Annual Report the following conventional signs are used: - when data are nought when data are not significant 5

6 NOTICE OF MEETING The shareholders of Banca Carige SpA are called to an ordinary general meeting to be held at the Bank s headquarters in Genoa (Via David Chiossone, 3) on 20 th April 2006 at am and, if necessary, by adjournment at the same place on 21 st April 2006 at am to discuss and to resolve the following: AGENDA 1. Examination of the financial statements as at 31 st December 2005, together with the reports of the Board of Directors and Statutory Auditors: related resolutions 2. Examination of the consolidated financial statements of the Banca Carige Group as at 31 st December 2005; 3. Appointment of a new Board of Directors subject to the fixing of the number of Board members pursuant to article 2363, Italian Civil Code; 4. Directors remuneration; 5. Appointment of independent auditors for the auditing of the annual (Legislative decree 58/98) and interim financial statements; 6. Deliberation regarding the acquisition of own shares pursuant to article 2357 and following of the Italian Civil Code and to article 132 od Legilative Decree no. 58 of 24 th February Shareholders will be entitled to attend the meeting, in accordance with current legislation and the Company s by-laws, on whose behalf an authorised intermediary has communicated the intention to attend at least two days prior to the date fixed for the meeting as prescribed by articles 33 and 34 of the CONSOB ruling no of 23 rd December 1998 and subsequent modifications. Documentation relating to the above agenda, as required by current legislation, will be deposited not less than 15 days before the date of the meeting at the Bank s head office (in Genoa at 15 Via Cassa di Risparmio, General Secretary relations with members) and at the body that runs the stock market, Borsa Italiana SpA in Milan (Piazza degli Affari 6), for inspection by shareholders who will have an opportunity to make copies for their own use. The documentation specified above will also be available at With reference to point 3, in accordance with the provisions of article 18 of the Bank s By-laws, the list of candidates for the Board of Directors must be deposited along with the required supporting documentation by those shareholders having the right of proposal at the Bank s head offices (Via Cassa di Risparmio, 15, Genoa General Secretary relations with members) no less than 10 days before the date of the meeting. The presentation in question must be made from Monday to Friday between the hours of 8.30 am to 1.30 pm and 2.30 pm and 4.30 pm. Genoa, 21 st March 2006 The Chairman of the Board of Directors (Giovanni Berneschi) Notice of Meeting published in Il Sole 24 Ore of 21/3/06. 6

7 BASIS OF CONSOLIDATION Fondazione Cassa di Risparmio di Genova e Imperia (1) CNCE (1) WestLB (1) (2) Others (1) 43.37% 11.02% 5.84% 39.77% BANCA CARIGE SpA FULL CONSOLIDATION CONSOLIDATION CARRIED OUT WITH THE EQUITY METHOD CONSOLIDATION CARRIED OUT WITH THE COST METHOD BANKING ACTIVITIES BANKING ACTIVITIES Banca del Monte di Lucca SpA (54.00%) Frankfurter Bankgesellschaft AG (47.50%) Cassa di Risparmio di Savona SpA (95.90%) Cassa di Risparmio di Carrara SpA (90.00%) Banca Cesare Ponti SpA (3) (51.09%) INSURANCE ACTIVITIES Carige Assicurazioni SpA (6) (98.24%) 37.50% Carige Vita Nuova SpA (100.00%) 22.50% Assi90 Srl (7) INSURANCE ACTIVITIES FINANCIAL ACTIVITIES AG Srl (7) % Savona 2000 Srl (7) 80.00% Argo Finance One Srl (60.00%) 0.50% Priamar Finance Srl (60.00%) Argo Mortgage Srl (8) (5.00%) Argo Mortgage 2 Srl (8) (5.00%) Carige Asset Management SGR SpA (99.50%) INSTRUMENTAL ACTIVITIES Galeazzo Srl (4) (100.00%) Columbus Carige Immobiliare SpA (99.99%) Immobiliare Ettore Vernazza SpA (5) (90.00%) Immobiliare Carisa Srl % Dafne Immobiliare Srl % Portorotondo Gardens Srl % TRUSTEE ACTIVITIES OTHER ACTIVITIES Centro Fiduciario SpA (76.93%) 20.00% 4.00% Autostrada dei Fiori SpA (16.62%) Banca Carige's share holding is shown in brackets. (1) Quota calculated on the basis of ordinary shares only. (2) Direct holding of 4.989% and indirect holding of 2.480% via subsidiary WestLB (Italy) Finanziaria SpA. (3) Carige holds rights to vote on 58.75% of the capital. (4) The company has a 0.01% holding in Columbus Carige Immobiliare SpA. (5) The company holds 10% of its own shares. (6) The company holds 1.25% of its own shares. (7) Insurance instrumental companies (insurance agencies). (8) This company is going to be included in the Banking Group. 7

8 DIRECTORS, STATUTORY AUDITORS, MANAGEMENT AND AUDIT FIRM OF BANCA CARIGE BOARD OF GENERAL MANAGEMENT BOARD OF DIRECTORS STATUTORY AUDITORS CHAIRMAN GENERAL MANAGER CHAIRMAN Giovanni Berneschi* Alfredo Sanguinetto Antonio Semeria DEPUTY CHAIRMAN DEPUTY GENERAL AUDITORS Alessandro Scajola * MANAGER (Commercial) Massimo Scotton Andrea Traverso DIRECTORS Carlo Arzani DEPUTY AUDITORS Adalberto Alberici DEPUTY GENERAL Piergiorgio Alberti * ** MANAGER Adriano Lunardi Andrea Baldini* (Administration) Luigi Sardano Giorgio Binda Jean-Jacques Bonnaud Giovanni Poggio AUDIT FIRM Luca Bonsignore Mario Capelli (1) DEPUTY GENERAL Deloitte & Remo Angelo Checconi * MANAGER (Credit and Touche SpA Maurizio Fazzari Wealth Management) Pietro Isnardi Ferdinando Menconi Achille Tori Nicolas Mérindol (2) Paolo Cesare Odone * Vincenzo Roppo * Enrico Maria Scerni Francesco Taranto *Member of Executive Committee **Senior Director (1) Died on 15/3/2006. (2) In office from 10/10/2005. The Board of Directors was appointed by the Ordinary Shareholders Meeting for the business years 2003, 2004 and During the course of its business, the Ordinary Shareholders Meeting of 25 th January 2006 approved the appointment of Mr Nicolas Mérindol to the Board of Directors. Mr Merindol, whose term of office expires at the same time as the other Board members, was previously co-opted to the Board of 10 th October 2005 with effect 1 st October 2005 in replacement for the outgoing Mr Oliviero Tarolli. The Executive Committee was appointed by the Board of Directors on 18 th October 2004, as from 1 st November 2004 until the adoption of the balance sheet During the meeting of 20 th June 2005 the Board of Directors appointed Andrea Baldini as member of the Executive Committee in place of the resigning Ferdinando Menconi. The Bank's structural and organizational order was approved by the Board of Directors on 2 nd August 2004, as from 1 st October The Board of Statutory Auditors was appointed by the Ordinary Shareholders Meeting of 28 th April 2005 for the business years 2005, 2006 and The external auditors were appointed by the Ordinary Shareholders Meeting of 31 st March 2003 for the business years 2003, 2004 and

9 POWERS OF THE ADMINISTRATIVE BODIES AND THEIR DELEGATED AUTHORITY As required by directive no of CONSOB dated 20 th February 1997 shown below are the powers and delegated authority belonging to the Directors and Management. Chairman of the Board of Directors According to article 24 of the By-laws the Chairman of the Board of Directors is the legal representative of the Bank vis-à-vis third parties and in court proceedings. He presides at shareholders meetings, convenes and presides at meetings of the Board of Directors of which he is an ex officio member. In a case of compelling urgency not admitting of delay, the Chairman himself may, on a proposal of the Managing Director or General Manager, take decisions falling within the competence of the Board of Directors or the Executive Committee where it is impossible for their members to meet. Decisions so made are to be brought to the notice of the relevant body at its next meeting. The Chairman has no specific delegated powers but has the authority to: a) represent Banca Carige at the shareholders meetings of the Group or associated companies and indicate where necessary the guidelines to be followed by the Bank s representatives on the boards of the same companies; b) attribute the right of proposal regarding relations between the companies of the Group, of which the Bank is parent company; c) confer management or proposal powers on matters concerning human resources and the optimisation thereof. Executive Committee Article 25 of the By-laws provides for the appointment of the Executive Committee by the members of the Board of Directors, which is to fix the number of members, their term of office and their functions. The Executive Committee is made up of the Chairman and Deputy Chairman, who are ex officio members, and between three and five other members. The five members of the executive committee now in office were appointed on 18 th October 2004 by the Board of Directors, who confirmed the number of five elective members, whose duration in office was fixed until the Meeting called for the approval of the Annual report 2005, therefore until 30/4/2006. The Board of Directors in conformity with article 21 of the By-laws has delegated to the Executive Committee within defined limits its powers in regard to: a) the grant, renewal, increase, reduction, confirmation, cancellation and suspension of advances and facilities and general credit operations of every description in all branches as well as the treasury and tax-collection payment functions; b) general decision making powers in matters relating to expenditure (or loss or, anyway, lack of receipts for the Bank), or about profits, without sum limit, but in the observance of the general budget deliberated by the Board of Directors, in every subject with administrative and operational management nature, agreed that the Board of Directors has exclusive competence on the points specified in the article 20 of the By-laws; c) power to determine a range of matters including the management of human resources (excluding the Board of Directors competences as article 20 of the By-laws and the adoption of any initiatives in conformity with the articles of the Civil Code no (Withdrawal from the open-end contract) and 2119 (Withdrawal from lawful case) towards the members of the General Management), management of the treasury and of the Bank s investment portfolio, the use of derivatives and foreign exchange operations, the management of equity investments including decisions relating to the exercise (or not) of pre-emption or option rights on shares or shareholdings in subsidiaries as well as in matters of day-to-day management not involving strategic issues, decisions relating to the entering into litigation affecting the Bank, without limits as to the costs estimated or undetermined, decisions regarding the opening, closing, transfer or reorganisation of the Bank s branches consistent with the Bank s branch policy document deliberated by the Board of Directors. Managing Director - General Manager In accordance with article 27 of the By-laws, a Managing Director or General Manager is appointed by the Board of Directors. The former, if appointed, will also perform the duties of General Manager. Either will exercise those powers belonging to him within the scope of the By-laws and the powers granted to him by the Board of Directors. The General Manager is the head of the Bank s staff and is responsible for the management and coordination of human resources. The Managing Director in office was appointed on 14 th April 2003 and has the following decision-making powers delegated to him: a) with respect to the grant, renewal, increase, reduction, confirmation, cancellation and suspension of advances and facilities and general credit operations of every description in all branches as well as treasury and tax-collection, and payment functions; he can also give guidelines on the above to the banking subsidiaries of the Banca Carige Group as foreseen by current legislation; b) generally with respect to matters relating to expenditure (or loss or, anyway, lack of receipts for the Bank),, or about profits; c) in regard to a range of matters relating to the finances of the Bank, and payment functions; d) with the Chairman s consent, he has the right to represent the Bank at general meetings of subsidiary and associated companies and to decide the Bank s policy as he may think fit; e) matters of day-to-day management not involving strategic issues; f) represent the Bank in litigation in full respect of the powers assigned to the Chairman of the Board of Directors or, in his absence, the Deputy Chairman; g) confer proxy and powers of signature to documents relating to all aspects of the Bank s ordinary activities. 9

10 DIRECTORS, STATUTORY AUDITORS, MANAGEMENT ANDAUDIT FIRM OF BANCA CARIGE FOR THE BUSINESS YEARS 2006, 2007 AND 2008 BOARD OF GENERAL MANAGEMENT BOARD OF DIRECTORS STATUTORY AUDITORS CHAIRMAN GENERAL MANAGER CHAIRMAN Giovanni Berneschi* Alfredo Sanguinetto Antonio Semeria DEPUTY CHAIRMAN DEPUTY GENERAL AUDITORS Alessandro Scajola * MANAGER (Commercial) Massimo Scotton Andrea Traverso DIRECTORS Carlo Arzani DEPUTY AUDITORS Andrea Baldini * DEPUTY GENERAL Giorgio Binda MANAGER Adriano Lunardi Jean-Jacques Bonnaud (Administration) Luigi Sardano Luca Bonsignore Remo Angelo Checconi * Giovanni Poggio AUDIT FIRM Maurizio Fazzari Pietro Isnardi DEPUTY GENERAL Deloitte & Raffaele Lauro MANAGER (Credit and Touche SpA Ferdinando Menconi ** Wealth Management) Nicolas Mérindol Paolo Cesare Odone * Achille Tori Renata Oliveri * Jean-Marie Paintendre Flavio Repetto Vincenzo Roppo * Francesco Taranto *Member of Executive Committee **Senior Director The Board of Directors was appointed by the Ordinary Shareholders Meeting of 20 th April 2006 for the business years 2006, 2007 and The Executive Committee was appointed by the Board of Directors on 8 th May 2006 for the business years 2006, 2007 and The Bank's structural and organizational order was approved by the Board of Directors on 2 nd August 2004, as from 1 st October The Board of Statutory Auditors was appointed by the Ordinary Shareholders Meeting of 28 th April 2005 for the business years 2005, 2006 and The external auditors were appointed by the Ordinary Shareholders Meeting of 20 th April 2006 for the business years 2006, 2007, 2008, 2009, 2010 and

11 CONSOLIDATED FINANCIAL HIGHLIGHTS Change % 31/12/05 30/9/05 31/12/04 31/12/04 12/05 12/05 (2) pro forma (1) 9/05 12/04 p.f. BALANCE SHEET (3) Total assets 23,066,391 22,875,356 20,786,316 22,139, Funding 16,121,278 16,262,775 15,247,225 15,971, Customer Deposits (a) 15,009,329 14,707,403 14,265,399 14,989, * Amounts owed to customers 8,657,736 8,301,384 8,365,078 8,317, * Debt securities in issue 6,351,593 6,406,019 5,900,321 6,671, Deposits from banks 1,111,949 1,555, , , Other Financial Intermediation Activities (OFIA) (b) 18,105,200 17,945,723 16,615,838 16,615, Assets under management 9,743,308 9,446,816 8,406,719 8,406, Assets in custody 8,361,892 8,498,907 8,209,119 8,209, Total Financial Intermediation Activities (TFIA) (a+b) 33,114,529 32,653,126 30,881,237 31,605, Lending (4) 19,924,055 19,690,250 17,787,545 19,059, Loans to customers (4) 14,004,899 13,309,713 11,609,693 12,378, Loans to banks (4) 856, ,387 1,576,866 1,576, Financial assets (4) 5,062,768 5,556,150 4,600,986 5,104, Shareholders' equity 2,136,595 2,134,301 1,734,456 2,115, Change % 31/12/05 30/9/05 31/12/04 12/05 12/05 (2) 9/04 12/04 INCOME STATEMENT (3) Gross operating income 778, , , Net income from financial and insurance management 733, , , Operating income from ordinary activities before taxation 216, , , Net income 131, , , RESOURCES (5) Number of branches Number of employees 4,736 4,759 4, FINANCIAL RATIOS Operating costs /Gross operating income (8) 66.35% 59.95% 67.91% Operating income from ordinary activities before taxation / Shareholders' equity 10.15% 8.82% 9.45% 0.00% ROE 6.15% 5.21% 6.41% 0.00% ROAE (6) 6.18% 5.23% 5.77% SOLVENCY RATIOS (7) Risk-Weighted Assets (3) 15,295,275 13,663,836 12,439, Tier1 % of RWA 6.48% 6.84% 7.38% Total capital % of RWA 8.33% 9.50% 9.64% (1) Amounts calculated on the basis of IAS/IFRS, including IAS 32, 39 and IFRS 4. (2) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32, 39 and IFRS 4. (3) Thousands of euros. (4) Gross of value adjustments. (5) Statistics of the end of period. (6) Net income on average shareholders' equity (Return On Average Equity). (7) Risk-Weighted Assets calculated on the basis of current supervision principles and considering, to calculate the core capital at 31/12/2005, the increase in share capital as free of 164,8 milions, decided by the Extraordinary Meeting of 25/1/2006. (8) Net of provisions for risks and charges. The 2004 value includes the extraordinary components. 11

12 CONSOLIDATED BOARD OF DIRECTORS' REPORT 12

13 THE YEAR IN ITALY AND ABROAD The world s economy continued to record levels of sustained growth during 2005, with GDP only slightly lower than the previous year s figure: 4.5 per cent in comparison to 4.8 per cent for The economies of China and India maintained strong levels of expansion as did albeit to a lesser extent the United States and the European Union. Positive results were for the most part due to investment levels and foreign trade. In the United States, the economy grew by 3.5 per cent, down on the previous year s figure of 4.2 per cent, but with an upturn recorded in the second half of the year in consumption and investments, the latter particularly in the real estate sector. Exports outstripped imports thanks to a weak dollar and strong demand especially from Asian countries. US inflation rate was 3.5 per cent (2004: 2,7 per cent) and unemployment was 5.1 per cent (2004: 5.5 per cent). Economic growth for the European Union area was contained, actually falling from 1.8 per cent in 2004 to 1.4 per cent. This limited vitality is due to weak internal consumption which is reflected by rises in private consumption of 1.3 per cent and in public consumption of 0.9 per cent; gross fixed investment increased by 2.1 per cent and, common to all Member States, there was slight expansion in foreign trade. Inflation was subdued at 2.2 per cent in line with previous year s levels. There was little change also in the Union s unemployment rate in comparison to 2004: 8.6 per cent. There were however some significant differences between individual countries. In Germany, GDP rose slightly in comparison to the previous year by 0.9 per cent, with domestic demand substantially flat (+0.1 per cent) and a positive trend of exports (+0.9 per cent). Inflation increased from 1.8 per cent in 2004 to 2 per cent, whilst unemployment was unchanged at 9.5 per cent. The French economy rose by 1.7 per cent in 2005 (+2 per cent the previous year) thanks to a 2.3 per cent increase in domestic consumption which, though lower than the previous year s figure of 3.2 per cent, managed to offset a 0.7 drop in net exports. Inflation was down from 2.3 per cent in 2004 to 2 per cent and unemployment stayed at around 9.5 per cent, as in In Spain, the economy continued to be one of the Union s most vibrant: the country s GDP rose in 2005 by 3.4 per cent in comparison to 3.1 per cent in Domestic consumption expanded by 5.6 per cent (2004: +5 per cent) and net exports fell to -2.2 per cent. The most significant growth was in gross fixed investments, especially in machinery and equipment (+6.3 per cent). Private consumption levels also rose, by 1 per cent. Inflation was the highest in the EU, at 3.4 per cent. There continued to be improvements on the labour market, evidenced by a fall in the unemployment rate from 11 per cent in 2004 to 9.2 per cent. Outside the European Monetary Union, the United Kingdom s economy was marked by a slowing down in consumption levels. The country s GDP rose by 1.8 per cent, just under half the level recorded in Domestic consumption rose by 1.8 (2004: +3.8 per cent), but the net exports result was negative at -0.3 per cent. The inflation rate was 2.1 per cent (2004: 1.3 per cent) and unemployment was 4.5 per cent (2004: 4.8 per cent). Asian economies continued to grow at significant levels, particularly China and India. The overall growth of these two economies was by 8.9 per cent, similar to previous year s levels, and boosted particularly by strong domestic demand. After years of negative growth, Japan s economy continued the rise begun 2004 (+2.3 per cent) to record expansion in GDP for 2005 of 2.5 per cent. This figure was the result of domestic consumption (+0.4 per cent), investments in machinery, equipment and buildings (+1.6 per cent). The contribution of foreign trade (+0.2 per cent) was modest due to a fall in imports and a small growth in exports. Inflation remained negative at 0.3 per cent and the unemployment rate fell from 4.7 per cent to 4.4 per cent. The other economies of the Asian Pacific area overall expanded by 4.6 per cent (2004: +5.8 per cent), above all due to exports. Latin American economies, after the recent crises in Argentina, Venezuela and Brazil, consolidated recovery in the area with a growth 13

14 in GDP around 3.7 per cent. Political uncertainty however remains high. The performances of other emerging economies - Central Europe, Russia and non- Mediterranean Africa - maintained growth levels recorded in 2004: 4.7, 5.6 and 5.4 per cent, respectively. In Italy, after a weak first half of the year, there was an upturn in the second half, which could not however lift economic growth above zero percent. The previous year s figure of +1.1 per cent was due to growth in investments in machinery, equipment and vehicles, which in 2005 fell by 2.1 per cent (+1.1 per cent in 2004). Consumption (+0.3 per cent) was little changed from the modest growth recorded in the previous year, whilst investments in the building sector registered a slowing down (2004: +3%; 2005: +0,6%). The increase in exports (2004: +3 per cent; 2005: +7.6 per cent) and imports (2004:+2.5 per cent; 2005: +8.9 per cent) reflects the health of world trade despite a worsening national balance of trade. In spite of price rises in oil and other commodities, inflationary pressure remained subdued: the annual inflation rate was 1.7 per cent, slightly lower than the previous year s figure of 2 per cent. On the basis of annual figures from September 2004 to September 2005, the country s employment rate rose by 0.3 per cent. The number of employees in work rose at a rate of 2.7 per cent, whilst there was a 5.9 per cent fall in the number of self-employed. By sector, there was an 8 per cent fall in jobs in agriculture, but rises of 0.9 per cent and 0.6 per cent in industry and services, respectively. The unemployment rate dropped from 2004 s figure of 7.4 per cent to 7.1 per cent. However, there was no substantial narrowing of the yawning gap in unemployment levels that exists between the north and the south of the country. The Italian State s PSBR rose from Euros 44 to around Euros 60 billion. On the basis of initial estimates, the state sector deficit accounted for 4.1 per cent of GDP, up from 3.2 per cent in The Italian State s Debt/GDP ratio rose, for the first time after several years, from per cent to per cent. On the monetary policy front. The European Central Bank (ECB) raised its discount rate by 25 basis points from 2 per cent to 2.25 per cent; the first hike since 9 th June Money market rates rose by between 30 and 40 bps, whilst those on Italian government stock rose by around 20 bps, with the biggest rises being recorded on treasury bills (BOT), which rose by as much as 48 bps. Currency market recorded a gradual depreciation of Euro in comparison to Dollar: the exchange rate, down from 1,355 to 1,185, was on average about 1,245, as in On share markets, the rises in places since 2003 after several years of sharp falls continued. The Milan MIBTEL general share index rose by 13.8 per cent and the banking index by 30.7 per cent. Total balances deposited in Italian bank deposits rose by 8.6 per cent over the previous year s figure of 6.1 per cent. Customer deposits rose by 6.6 per cent and bonds by 11.1 per cent, similar to Savings under management recorded an overall increase of around 10.5 per cent (2004: 7.4 per cent). Increases varied in extent from segment to segment with bancassurance balances increasing by 14.9 per cent (2004: 15 per cent), asset management by 12.2 per cent (2004: 7.3 per cent), and mutual funds by 9.3 per cent (2004: 2.8 per cent). Lending to customers rose by 7.1 per cent in comparison to 5.5 per cent in The medium/long-term component rose by 11.5 per cent, whilst short-term credits increased by only 0.4 per cent. There was a significant improvement in the quality of credit: the annual rise in bad loans in 2005 of 3.4 per cent was significantly down on 2004 s figure of 6 per cent. The systems bad loans:total lending ration improved considerably, dropping from 5.1 per cent in 2004 to 2.3 per cent. Commercial banking rates progressively rose during 2005, inverting the trend recorded in There was however little substantial change in interest rate spreads in comparison to 2004: the average lending rate was 5.3 per cent and the borrowing rate of 0.9 per cent (average margin of 4.4 per cent). 14

15 STRATEGY The mission of the Banca Carige Group ( Carige Group or the Group ) is to create long-term value for its shareholders and other stakeholders. We intend to pursue this objective by consolidating our role as a conglomerate equipped to offer banking, finance and insurance products throughout Italy, whilst at the same time maintaining strong ties with local operating areas. The Group also seeks to achieve competitive advantages in terms of service quality via the Group s multi-channel distribution system, human resources and branch facilities. This mission lies at the heart of the Group s three-year Strategic Plan approved by the Board of Directors of the Group Leader Banca Carige in May 2004 and subsequently revised in November 2005 in the light of the adoption of the International Financial Reporting Standards and International Accounting Standards ( IFRS ). The Plan defines three overarching strategic objectives that are consistent with the Group s mission: - improved operating efficiencies and increased productivity, - expansion in operating capacities through increased productivity; - containment of Group risk profiles. The following priority measures have been identified as the vehicles for realising these objectives: a) increasing profitability of different business areas, by optimising the product chain and consolidating ties with our foreign partners, particularly in the areas of wealth management, payment systems, structured funds and project financing. During 2005 the following measures were carried out across various business lines: - credit solutions for the family. An organic approach was adopted which saw reviews of the delivery and management processes an a renewal of both product and sales effectiveness; - credit solutions to businesses. Particular attention was placed on project financing, carried out in collaboration with Banca Carige, and principally on the small and mediumsized enterprise (SME) segment. In this area, scoring and rating procedures are being developed which not only satisfy the regulatory requirements of Basel 2 (New Agreement on Capital stock), but are also a part of wider review of the credit process aimed at providing significant economic and financial (capital absorption) benefits; - wealth management. During the year there was a progressive shift towards products with higher levels of returns and risk, with increased focus and operating responsibility on the Group s asset management company, Carige Asset Management SGR. By the end of 2005, delivery to the Group s banks of a Personal Financial Planning (PFP) system and related Retail Risk Management (RRM) backup was being completed. The system will allow for the effective monitoring for compatibility between investment choice and customer risk profile as well as the identifying of correctives where necessary. The system will represent the conduit through which Head Office Wealth Management can transmit strategic and operational decisions relating to investment and financial consultancy services. The service will available throughout the Group s distribution network during the first half of 2006; - payment systems. Measures aimed at increasing profitability and reducing the cost income ratio were followed during the year by assigning greater responsibility to specific business units created during the second half of 2005 in addition to heightened coordination with the Group s ITC arm; - life and non-life insurance. The promotion of insurance/banking product packages continued during the year. Within the non life segment, realignment of the Group s product portfolio away from third-party motor insurance 15

16 towards non marine insurance continued. Life insurance saw increased focus on high demand supplementary pension solutions; b) increasing the economic contribution of the Group s companies by continuing the process of integration underway between Banca Carige, the Group s banks and insurance companies. This integration, whilst safeguarding the specificity of each company, will allow for the unitary management of production, distribution and support. Important progress in this direction was represented by the signing of new administrative service contracts between the Banca Carige and its banking subsidiaries; c) increasing the amounts intermediated by each employee by focusing on cross selling and retention in our traditional heartland of Liguria, and in other regions by utilising financial penetration via the exploitation of operating synergies with insurance agents. Action was taken in the following three areas: - the Ligurian network, during the second half of 2005, saw a review of our commercial model which foresees the gradual move away from a nondifferentiated management of relations by operating units to the personalised management of customer profiles assigned to consultants with backup provided by dedicated commercial programmes and innovative sales solutions. With this in mind, specialisation capabilities of the network were strengthened by the creation of an additional two segments: Affluent, within the private costumers, and Small Business, within the corporate customers. Priority was given in the startup phase to our traditional operating area of Liguria, where the Carige Group has market leadership and where the acquisition of new customers and retention of existing account holders is required. During the second half of the year new professional profiles were created to coordinate and supervise the work of wealth managers and advisors working in each customer or client segment. These coordinators have responsibilities to the Commercial Support and Project Innovation Division; - outside Liguria during the year there was the continuing extension of the Commercial Strengthening Project started in The Project aims to acquire new customers and develop the commercial opportunities present in existing customer relations. In addition to achieving significant returns in both volumes and earnings, the Project has enabled the introduction and assimilation of new, more effective working practices throughout the network. At head office level a centralised intelligence based method has been developed which defines and manages objectives and tailors them to the characteristics of single branches in the form of clearly-defined commercial action and constant monitoring of results. At branch level a more proactive approach has been adopted which places greater emphasis on sales activities and which in turn provides branches with clear policy and target guidelines. We believe this to be particularly important as the distribution network expands; - integration between the Group s banking and insurance networks continued with the Insieme di Più Project, aimed at increasing cross selling opportunities between customers of the Group s banks (around one million) and those of the insurance companies (more than 700,000) between which minimal overlaps exist. A constant and systematic exchange of information between the banking and insurance networks allows for the development and delivery of banking products and financial instruments from the Group s banks to customers of the Group s insurance companies and vice versa of insurance products to bank customers (bancassurance); d) review of management processes with the objective of reducing administrative costs and at the same time improving the quality of services offered. Three steps were taken in this area: - the review of acquisition processes and cost management activities, started in 2004, has achieved significant reductions in general costs as well as improving the effectiveness of monitoring activities; 16

17 - centralisation of back office treasury activities (payment and collection services, preparation and management of statements for the public body on whose behalf the service is provided). During the last quarter of 2005, the back office treasury activities of the Group s banks were centralised to a hub at Cassa di Risparmio di Carrara, with a subsequent exploitation of cost synergies and the recovery of human resources for commercial activities; - heightened process efficiencies achieved at the micro-organisational level of single operating units and via the identification of decisional priorities in terms of backup and governance, their analysis, and the definition of policies for the allocation of strategic resources, both human and IT; e) containment of the economic risk stemming from credit, market, liquidity and operational risks by integrating the risk management activities of the Group s banks and insurance companies in addition to maintaining appropriate adequacy levels in terms of capital and liquidity. In this area the following measures were enacted: - reduction of credit risk costs via the firsttime adoption of Basel 2 principles (internal rating and pricing) and the use of credit management solutions in order to optimise relations with SME and small business segments; - awareness and understanding of the impact of operating risks by avoiding management errors, preventing and containing crime (robbery, fraud, etc,), and respecting the correct procedures in the accounting of complex financial instruments. In this area the Group put into place steps to adopt Business continuity and Disaster recovery plans able to guarantee the prompt returns to normal activities in the event of crisis, also technological. KEY EVENTS FOR THE BANCA CARIGE GROUP DURING 2005 Banca Carige The Board of Directors of Banca Carige ( the Bank or the Company ) in their meeting of 21 st February approved the new Group Regulatory Document, which contains regulatory guidelines concerning the Parent Company s powers (policy design and implementation, coordination) with regards to its subsidiaries. The same meeting approved the Group s new branch plan On 24 th February a subordinated loan issue (Tier 3) of Euros 80 million (maturity: 24/8/2007) was completed. The Bank of Italy in its communication no of 18 th February 2005 authorised the inclusion of the issue as part of regulatory capital destined to cover market risk in the calculation of the Company s total capital ratio, with a subsequent rise in the ratio from per cent at 31/12/04 to per cent. Following CONSOB authorisation of the prospectus, on 2 nd March 2005 trading of debt securities related to Carige s loan issue began ( Banca Carige 1.50 per cent, subordinated hybrid with premium at maturity convertible into shares ). On 18 th April, the company s Board of Directors deliberated the purchase of 10 per cent of share capital in Banca Federiciana SpA. The bank, whose registered office is in Andria (Apulia), received Bank of Italy authorisation to carry out banking business on 27 th February The Annual General Meeting of Banca Carige held on 28 th April in addition to approving the Directors Report for 2005 also renewed the Board of Statutory Auditors of the Bank for the period On the same date, the Extraordinary Meeting of the Company s savings shareholders was held, during which Mr Giancarlo Bach was reappointed as representative of the savings shareholders. On 30 th May, the Spanish shareholder Monte de Pietad y Caja de Ahorro de Huelva y Sevilla informed Banca Carige of its reduced holding in the bank under a threshold of 2 per cent. The Italian securities market watchdog CONSOB was subsequently informed on 2 nd June. On 31 st May Mr Ferdinando Menconi resigned as a member of the Executive Committee. The Board of Directors of Banca Carige during its 17

18 meeting of 20 th June appointed in his place Mr Andrea Baldini. Banca Carige s Executive Committee in its meting held on 14 th June deliberated a 7 per cent equity holding (Euros 350,000) in Infrastrutture Lavori Italia Autostrade SpA. The company was set up on 20 th June; its chairman is Mr Giovanni Berneschi and Carige s representative on the Board of Directors is Mr Enrico Scerni. Carige s Board in its meeting of 20 th June deliberated the approval of a paid-up share capital increase of the subsidiary Banca del Monte di Lucca (BML). The Lucca bank s share capital rose from Euros 13 million to Euros 15.6 million via the issue of 5,000,000 new shares with a nominal value of Euros 0.52 each to be offered to shareholders at Euros 1, inclusive of a premium of Euros 0.48, on the basis of one new share for every five shares owned. The share capital increase was fully subscribed on 14 th December: Euros 2.7 million (of which Euros million in the form of issue premium) by Banca Carige; the remaining amount was subscribed by the BML Foundation. During the same meeting of 20 th June, modifications to the subsidiary s by laws were approved as agreed upon by Banca Carige and the BML Foundation. During the same meeting, the document Regulations concerning transactions with related parties was approved. The Executive Committee of Banca Carige in its meeting of 12 th July deliberated the purchase of a 15 per cent holding, subject to Bank of Italy authorisation, in the share capital (total share capital: Euros 1 million) of a new investment management firm promoted by Cofid SpA for the creation and management of closed funds. On 18 th July, Banca Carige took part together with other leading national and international counterparties in Unipol Assicurazioni s offer for Banca Nazionale del Lavoro, at the same time signing related shareholders agreements. In February 2006 following the Bank of Italy s decision not to authorise Unipol s bid and the subsequent cancellation of the shareholders agreement previously signed with Unipol, Carige exercised its option to sell the Unipol shares in its possession previously granted by Unipol and later ceded by the latter to Ariete, FIN.AD (Coop Adriatica), Nova Coop, Talea (Coop Liguria) and Coop Estense. On 20 th September Banca Carige signed individual service contracts with C.R. Carrara and Banca Cesare Ponti by which the Bank will carry out a range of its subsidiaries administrative duties from its head office in Genoa. The Board of Directors in its meeting of 10 th October co-opted Mr Nicholas Mérindol onto the Board following the resignation of Mr Oliviero Tarolli. The Executive Committee s Meeting of 25 th October approved the subscription either directly or indirectly via the Bank s subsidiaries Banca del Monte di Lucca and C.R. Carrara to a maximum of 13,850 shares as part of an equity raising operation in Fidi Toscana SpA for a maximum holding of per cent. The same Committee on 3 rd November agreed to a participate in the share capital of the newlyformed Rapallo Centro Congressi di Tigullio Srl with a holding of 15 per cent, equivalent to Euros 40,000. The company s head offices are in Rapallo. The Board of Directors during the meeting of 28 th November approved changes to the service contract between Banca Carige and C.R. Savona for the three-year period During the same Meeting, in the light of Bank of Italy inspections carried out at the banking subsidiary C.R. Carrara from 25 th May 2005 to 19 th August 2005 and the subsequent explanations by the board of C.R. Carrara, the Board of Directors of Banca Carige approved the document Observations by the Parent Company Banca Carige Spa following the Bank of Italy s inspection carried out at its subsidiary C.R. Carrara. The document was subsequently transmitted to the Bank of Italy. With regards to Carige s distribution network, there were new branches openings in the westernmost Ligurian province of Imperia (Camporosso), in Asti and Ancona (Branch 1), following the transferof the branches flowers market of Sanremo, in central Piedmont (Novi Ligure, Branch 1), and in the Sicilian capital of Palermo (Branch 10). On 15 th June, the bank s business finance consultancy service was extended to the central Italian regions of Latium, Umbria and Marches, with 5 new teams made up each by one adviser and one assistant. On 4 th July a specific consultancy service for the affluent client segment in Liguria was launched available at 93 of the Bank s branches in Liguria. Carige s small business consultancy service also began during 2005 with by the end of the year a small business advisor present in 200 Ligurian branches. 18

19 Cassa di Risparmio di Savona The Board of Directors of C.R. Savona in its meeting of 28th February 2005, following the resignation of Mr Fulvio Rosina as chairman of the bank s Board of Statutory Auditors, approved the appointments of Mr Semeria as Chairman and Mr Traverso as board member pursuant to article 2401 Italian Civil Code. The Annual Meeting held on 15 th April confirmed the above-mentioned appointments in addition to appointing Ms Fabrizia Garibaldi as acting statutory board member in Mr Traverso s absence. On 19 th December the bank opened a branch in Borghetto Santo Spirito. Banca del Monte di Lucca BML s Annual Meeting held on 22nd February appointed Mr Traverso as chairman of the Board of Statutory Auditors, along with Mr Scotton as board member and Mr Semeria as his substitute. Mr Baldini was reappointed as the other board member. On 14 th December the share capital increase from 13 to 15,6 millions, deliberated by the Extraordinary Shareholders Meeting of 26 th September 2005, was fully subscribed. Cassa di Risparmio di Carrara On 1st July an agreement was signed between Banca Carige and trade unions regulating the reorganisation of C.R. Carrara in addition to the transfer to Carrara of the back office treasury activities of Banca Carige and C.R. Savona. Banca Cesare Ponti The Bank of Italy in its letter of 2 nd March 2005 communicated the revised area of consolidation of the Banca Carige Group, which from 29 th December 2004 includes Banca Ponti. On 26 th April the Annual Meeting of Banca Ponti, following the resignation of Prof. Michele Bonaduce as statutory board member, appointed Mr Andrea Rittatore Vonwiller as replacement. On 14 th October the Board of Directors approved a subordinated bond issue of Euros 8 million, which was fully subscribed to by Banca Carige. On 24 th October Bank of Italy authorisation for the inclusion of the issue in the bank s tier 2 capital was requested and subsequently granted on 3 rd January Carige Asset Management SGR The Group s wealth management firm Carige Asset Management SGR during its Annual Meeting of 28 th February appointed its Board of Statutory Auditors. Mr Rosina was appointed Chairman, with Mr Paintendre as his Deputy; Mr Scotton is board member and Mr Stefano Ferrari and Ms Garibaldi acting board members. 19

20 FINANCIAL INTERMEDIATION ACTIVITIES Comparison between results at 31 st December 2004 and 31 st December 2005 are made on the basis of IFRS compliant (including IAS 32, IAS 39 and IFRS 4) pro forma figures. At 31st December 2005, Total Financial Intermediation Activities (TFIA) made up by direct and indirect deposits recorded increases of 4.8 per cent over 31 st December 2004 and 1.4 per cent over 30 th September 2005 to reach Euros 33,114.6 million. This figure includes liabilities of Euros million following the sale of assets not derecognised from the balance sheet relating to the securitisation of performing credits carried out by Banca Carige in June Direct deposits or customer deposits balances - Euros 15,009.3 million - were substantially unchanged over December 2004, though 2.1 per cent higher than at 30 th September Indirect deposits or other financial intermediation activities amounted to Euros 18,105.2 million; an increase of 9 per cent over twelve months, above all due to robust growth in wealth management. This aggregate now accounts for 54.7 per cent of TFIA (December 2004: 52.6 per cent). Wealth management now accounts for 29.4 per cent of TFIA and 53.8 per cent of indirect deposits.(+3 per cent). TOTAL FINANCIAL INTERMEDIATION ACTIVITIES (thousands of Euros) Change % 31/12/05 30/9/05 31/12/04 31/12/04 12/05 12/05 (2) pro forma (1) 9/05 12/04 p.f. Total (A+B) 33,114,529 32,653,126 30,881,237 31,605, Direct deposits (A) 15,009,329 14,707,403 14,265,399 14,989, % Total 45.3% 45.0% 46.2% 47.4% Indirect deposits (OFIA) (B) 18,105,200 17,945,723 16,615,838 16,615, % Total 54.7% 55.0% 53.8% 52.6% - Assets under management 9,743,308 9,446,816 8,406,719 8,406, % Total 29.4% 28.9% 27.2% 26.6% % OFIA 53.8% 52.6% 50.6% 50.6% - Assets in custody 8,361,892 8,498,907 8,209,119 8,209, % Total 25.3% 26.0% 26.6% 26.0% % OFIA 46.2% 47.4% 49.4% 49.4% (1) Amounts calculated on the basis of IAS/IFRS, including IAS 32, 39 and IFRS 4. (2) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32, 39 and IFRS 4. Total funds at 31/12/05, which include customer deposits (Euros 15,009.3 million) and bank deposits (Euros 1,111.9 million) amounted to Euros 16,121.3 million, up 0.9 per cent over twelve months, but down 0.9 per cent over the last quarter. The customer deposits aggregate was basically unchanged (+0.1 per cent), whilst bank deposits rose 13.3 per cent, a result affected during the period by the maturity of a tranche of Carige s Euro Medium Term Note loan issue amounting to Euros 300 million. 20

21 FUNDING (thousands of Euros) Change % 31/12/05 30/9/05 31/12/04 31/12/04 12/05 12/05 (2) pro forma (1) 9/05 12/04 p.f. Total (A+B) 16,121,278 16,262,775 15,247,225 15,971, Direct deposits (A) 15,009,329 14,707,403 14,265,399 14,989, Amounts owed to customers 8,657,736 8,301,384 8,365,078 8,317, current accounts 7,772,259 7,416,697 7,377,471 7,329, saving deposits 601, , , , repurchase agreements 221, , , , loans 3,979 4,026 4,124 4, funds managed on behalf of third parties other borrowings 58,175 13,239 11,584 11,856 Debt securities in issue 6,351,593 6,406,019 5,900,321 6,671, bond certificates 5,961,527 6,011,312 5,493,169 6,264, other securities 390, , , , short term deposits 9,022,709 8,669,301 8,754,749 8,707, % Total long term deposits 5,986,620 6,038,102 5,510,650 6,282, % Total Amounts owed to banks (B) 1,111,949 1,555, , , Deposits of central banks - 19,748 90,002 90, Current accounts 15,405 68,830 18,061 18, Deposits 492, , , , Repurchase agreements 228, ,945 66,810 66, Financing 375, , , , Others (1) Amounts calculated on the basis of IAS/IFRS, including IAS 32, 39 and IFRS 4. (2) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32, 39 and IFRS 4. Of the aggregate total of amounts owed to customers, Euros 7,772.3 million is represented by current accounts, which rose 6 per cent over the previous year. The other components recorded falls: savings deposits down 0.3 per cent to Euros million; sale and repurchase agreements down 39.9 per cent to Euros million. Concerning the securities in issue, bonds amounting to Euros 5,961.5 million fall 4,8 per cent in comparison to the previous December s figure for the maturity of EMTN bonds, placed on international markets. Amounts owed to credit institutions totalled Euros 1,111.9 million, up 13.3 per cent in comparison to 31st December The largest item within the aggregate is represented by deposits (492,8 million), which rose 12.4 per cent in comparison to the previous December s figure. 21

22 DIRECT DEPOSITS (1) - GEOGRAPHICAL DISTRIBUTION (thousands of Euros) 31/12/05 30/9/05 31/12/04 p.f. % % % Liguria 10,210, % 9,948, % 10,529, % Tuscany 1,311, % 1,316, % 1,253, % Latium 877, % 854, % 794, % Lombardy 776, % 801, % 724, % Sicily 560, % 541, % 530, % Piedmont 397, % 395, % 378, % Emilia Romagna 292, % 274, % 229, % Apulia 178, % 175, % 173, % Sardinia 137, % 132, % 127, % Veneto 137, % 130, % 124, % Marches 75, % 71, % 65, % Umbria 29, % 24, % 26, % Total Italy 14,983, % 14,667, % 14,957, % Abroad 25, % 39, % 31, % Total 15,009, % 14,707, % 14,989, % (1) Balance Sheet (Liabilities) captions 20 and 30. Liguria s share of direct deposits fell from 70.4 per cent at 31/12/04 to 68.2 per cent. This fall can be put down on one hand to the effects of the reduction in the number of bonds issued in the Bank s EMTN programme and, on the other, to the increasing share of other regions as the Group expands outside its traditional operating area. In fact, the shares accounted for by Latium, Emilia Romagna, Tuscany and Lombardy recorded rises between 0.3 and 0.5 per cent. DIRECT DEPOSITS (1) - DISTRIBUTION BY SECTOR (thousands of Euros) 1 31/12/05 31/12/04 p.f. % % Amounts owed to customers 8,657,736 8,317,489 Public Administration 532, % 374, % Financial institutions 315, % 701, % Non-financial institutions and personal businesses 1,815, % 1,601, % Private social bodies 283, % 273, % Families 5,645, % 5,292, % Total residents 8,592, % 8,243, % Rest of the world 65, % 74, % Total 8,657, % 8,317, % Debt securities in issue 6,351,593 6,671,850 TOTAL 15,009,329 14,989,339 (1) Captions 20 and 30 of Liabilities and Stockholders' equity. Households account for 65.2 per cent of amounts owed to customers (2004: 63.6 per cent), whilst non financial enterprises and family businesses make up 21 per cent (2004: 19.3 per cent). Deposits by the public administration increased their share from 4.5 per cent in December 2004 to 6.1 per cent, whilst there was a drop in the aggregate share represented by financial institutions. 22

23 INDIRECT DEPOSITS (thousands of Euros) Change % 31/12/05 30/9/05 31/12/04 31/12/04 12/05 12/05 (2) pro forma (1) 9/05 12/04 Total (A+B) 18,105,200 17,945,723 16,615,838 16,615, Assets under management (A) 9,743,308 9,446,816 8,406,719 8,406, Mutual funds and unit trusts 5,759,819 5,643,195 4,892,185 4,892, Private banking 2,866,192 2,772,767 2,588,372 2,588, including: Security management (3) 1,911,181 1,821,452 1,617,403 1,617, Mutual funds management 955, , , , Bancassurance products 1,117,297 1,030, , , Assets in custody (B) 8,361,892 8,498,907 8,209,119 8,209, Government securities 3,900,736 4,041,800 4,010,592 4,010, Others 4,461,156 4,457,107 4,198,527 4,198, (1) Amounts calculated on the basis of IAS/IFRS, including IAS 32, 39 and IFRS 4. (2) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32, 39 and IFRS 4. (3) The figure includes the entire securities portfolio of the insurance subsidiaries. Indirect deposits increased by 9 per cent over 31/12/04 (September 2005: +0.9 per cent) to Euros 18,105.2 million. The aggregate was marked by strong growth in wealth management and more contained expansion in the assets in custody components. Wealth management balances totalled Euros 9,743.3 million, recording strong increases across all product lines except fund management. Mutual funds rose by 17.7 per cent and assets under management by 10.7 per cent. Within the latter there was vibrant growth in securities management solutions (+18,2%), whilst fund management fell by 1.6 per cent. Bancassurance products rise 20.6 per cent thanks to life products, which account for more than 90 per cent of the aggregate total. Premiums relating to the Bank s well-established life product Risparmio Assicurato more than tripled in comparison to In the non life segment, (+14 per cent), there was a significant growth in mortgage-linked product Mutuo 100%, which offers full insurance cover for the amount mortgaged. BANCASSURANCE (thousands of Euros) Change % 31/12/05 31/12/ Total premiums collected 251, , Life, of which: 245, , Unit/Index linked policies 86, , Traditional policies 159,076 48, Non life, of which: 6,123 5, Car insurance 1,138 1, Non car insurance 4,985 4, Assets in custody, amounting to 8,361.9 million, rose 1.9 per cent in annual terms, but fell 1.6 per cent in comparison to September The annual rise was due to a 6.3 per cent increase in bonds and shares. During the same period, the volume of Italian government stock in custody dropped 2.7 per cent. 23

24 INDIRECT DEPOSITS - GEOGRAPHICAL DISTRIBUTION (thousands of Euros) 31/12/05 30/9/05 31/12/04 p.f. % % % Liguria 13,595, % 13,542, % 13,065, % Lombardy 1,273, % 1,236, % 1,099, % Tuscany 984, % 963, % 274, % Latium 638, % 623, % 756, % Piedmont 508, % 510, % 454, % Sicily 427, % 418, % 374, % Emilia Romagna 242, % 222, % 198, % Veneto 126, % 125, % 110, % Apulia 118, % 113, % 102, % Marches 99, % 100, % 103, % Sardinia 53, % 52, % 40, % Umbria 29, % 29, % 29, % Total Italy 18,098, % 17,939, % 16,608, % Abroad 7, % 6, % 7,200 - Total indirect deposits 18,105, % 17,945, % 16,615, % Liguria maintains its primacy, accounting for 75.2 per cent of the indirect deposits aggregate. The figure however represents a gradual fall in favour of the Group s other operating regions, such as Lombardy (up 0.4 per cent to 7 per cent) and Tuscany (up 3.7 per cent to 5.4 per cent). INDIRECT DEPOSITS - DISTRIBUTION BY SECTOR (thousands of Euros) 31/12/05 31/12/04 p.f. % %% Public Administration 270, % 250, % Financial institutions 2,229, % 1,908, % Non-financial institutions and personal businesses 1,015, % 794, % Private social bodies 130, % 123, % Families 14,412, % 13,305, % Total residents 18,058, % 16,383, % Rest of the world 46, % 232, % Total 18,105, % 16,615, % Households make up 79.6 per cent of indirect deposits, little changed over 2004; next comes financial institutions at 12.3 per cent (31/12/04: 11.5 per cent). 24

25 Lending to customers, after value adjustments of Euros million, amounted to Euros 13,661.7 million, an increase of 13.9 per cent in comparison to the figure recorded at 31st December 2004, and one of 5.5 per cent over September This figure includes Euros million in assets sold and not derecognised from the balance sheet relating to the securitisation of performing credits carried out by Banca Carige in June Before value adjustments, the aggregate balance was Euros 14,004.9 million, up 13.1 per cent in comparison to December 2004 (+5.2 per cent over September 2005). Medium/long-term lending (Euros 9,233.4 million) accounts for 65.9 per cent of the aggregate total, an increase of 18 per cent over December Short-term lending solutions (Euros 4,266.4 million) rose 5.3 per cent over the same period. LENDING (thousands of Euros) Change % 31/12/05 30/9/05 31/12/04 31/12/04 12/05 12/05 (2) pro forma (1) 9/05 12/04 p.f. Total (A+B) 14,517,538 13,774,051 12,979,358 13,571, Loans to customers (A) 13,661,663 12,955,013 11,405,391 11,998, Gross value (3) 14,004,899 13,309,713 11,609,693 12,378, Current accounts 2,047,340 1,840,027 1,942,291 1,941, Mortgages 6,907,561 6,388,315 5,463,463 5,463, Leasing 694, , , , Factoring 107, ,623 90,148 90, Others 2,986,637 3,005,386 2,955,545 2,892, Non derecognised sold assets 756, , , short term loans 4,266,346 4,092,439 4,111,402 4,053, % gross value long term loans 9,233,351 8,698,550 6,995,304 7,821, % gross value Bad loans 505, , , , % gross value Allowances for loan losses (-) 343, , , , Loans to banks (B) 855, ,038 1,572,127 1,572, Gross value (3) 856, ,387 1,576,866 1,576, Compulsory reserves 162, , , , Other loans to central banks Current accounts and free deposits 118,823 81, , , Term deposits 452, , , , Repurchase agreements 77, , , , Financing 26,120 27,312 24,878 24, Bad loans 18,509 18,179 18,299 18, % gross value Allowances for loan losses (-) 513 5,349 4,739 4, (1) Amounts calculated on the basis of IAS/IFRS, including IAS 32 and IAS 39. (2) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and IAS 39. (3) Before value adjustments. In detail, there was robust growth in mortgage balances over both twelve and three months, up 26.4 and 8.1 per cent respectively to Euros 6,907.6 million. Mortgage lending now makes up almost half of the Group s total lending portfolio. Current accounts rose by 5.5 per cent over twelve months and there were rises also for lease agreements (+6 per cent) and factoring (+19 per cent). Bad loans amounted to Euros million, up 0.4 per cent over twelve months, but 2.6 per cent lower than at September

26 Amounts owed by banks amounted to Euros million, down 45.6 per cent in comparison to year-end 2004, but 4.5 per cent higher than the figure recorded at 30 th September The limited amount of bad loans (Euros 18.2 million) was similar to previous year s levels (-0.7 per cent) and refer to one past exposure. The interbank balance between amounts receivable and amounts payable to banks at 31 st December 2005 amounted to Euros million payable to banks (December 2004: Euros million receivable by Banca Carige). LOANS TO CUSTOMERS (1) - GEOGRAPHICAL DISTRIBUTION (thousands of Euros) 31/12/05 30/9/05 31/12/04 p.f. % % Liguria 7,926, % 7,341, % 6,860, % Lombardy 1,710, % 1,672, % 1,613, % Tuscany 1,330, % 1,281, % 1,211, % Emilia Romagna 831, % 804, % 645, % Piedmont 711, % 689, % 609, % Latium 535, % 523, % 609, % Sicily 225, % 222, % 175, % Veneto 195, % 211, % 174, % Marches 146, % 147, % 136, % Sardinia 133, % 142, % 111, % Apulia 132, % 132, % 99, % Umbria 82, % 88, % 87, % Total Italy 13,961, % 13,256, % 12,336, % Abroad 43, % 52, % 41, % Total 14,004, % 13,309, % 12,378, % (1) Balance Sheet (Assets) caption 40 inclusive of expected losses. The geographical distribution of the Group s lending portfolio reveals significant differences between regions: Liguria accounts for 55.5 per cent of lending to customers, lower than December 2004 s share (56.7 per cent); Lombardy accounts for 13.1 per cent (up from 12.2 per cent), Emilia Romagna for 5.9 per cent (up from 5.2 per cent ), and Latium for 3.8 per cent (down from 4.9 per cent). There were limited changes in the shares of the Group s other operating regions in comparison to LOANS TO CUSTOMERS - DISTRIBUTION BY BUSINESS SEGMENT (thousands of Euros) 31/12/05 31/12/04 p.f. % Public Administration 904, % 1,126, % Financial institutions 537, % 383, % Non-financial institutions and personal businesses 8,143, % 7,094, % Sales-related services 2,032, % 1,640, % Wholesale & retail trade, salvage and repairs 1,489, % 1,330, % Building and public works 1,323, % 1,083, % Hotel and catering services 423, % 381, % Transport-related services 403, % 354, % Other 2,470, % 2,304, % Private social bodies 77, % 58, % Families 4,263, % 3,425, % Total residents 13,926, % 12,087, % Rest of the world 78, % 290, % Total 14,004, % 12,378, % 26

27 During the year there was strong growth in lending destined to households (31/12/05: Euros 4,263.6 million), which now accounts for 30.4 per cent of the aggregate total (31/12/04: 27.7 per cent). The share of total lending destined to the public administration, amounting to 904,2 million, fell from 9.1 to 6.5 per cent; the shares represented by lending to financial institutions and family businesses both rose: the former, amounting to 537,6 million, from 3.1 to 3.8 per cent and the latter from 57.3 to 58.1 per cent. CREDIT QUALITY (thousands of Euros) 31/12/05 30/9/05 Gross Allowances Net book % Gross Allowances Net book % value value value value (a) (b) (a-b) b/a (a) (b) (a-b) b/a Bad loans 523, , , , , , banks 18,162-18, ,179 4,836 13, customers 505, , , , , , Watchlists, rescheduled loans and country risk 170,294 30, , ,120 31, , banks customers 169,331 29, , ,488 31, , Past due positions (3) 224,992 10, , banks customers 224,788 10, , Total impaired loans 918, , , , , , banks 19, , ,811 5,349 13, customers 899, , , , , , Performing loans 13,942,637 62,043 13,880, ,435,077 74,481 13,360, banks 837, , , , customers 13,105,578 62,043 13,043, ,629,501 74,481 12,555, Total loans and advances 14,861, ,749 14,517, ,134, ,049 13,774, banks 856, , ,387 5, , customers 14,004, ,236 13,661, ,309, ,700 12,955, /12/2004 (2) 31/12/04 pro forma (1) Gross Allowances Net book % Gross Allowances Net book % value value value value (a) (b) (a-b) b/a (a) (b) (a-b) b/a Bad loans 521, , , , , , banks 18,299 4,189 14, ,299 4,226 14, customers 502, , , , , , Watchlists, rescheduled loans and country risk 177,785 17, , ,785 47, , banks customers 177,082 16, , ,082 46, , Total impaired loans 699, , , , , , banks 19,002 4,739 14, ,002 4,776 14, customers 680, , , , , , Performing loans 12,487,488 6,254 12,481, ,255,804 74,622 13,181, banks 1,557,864-1,557, ,557,864-1,557, customers 10,929,624 6,254 10,923, ,697,940 74,622 11,623, Total loans and advances 13,186, ,041 12,977, ,954, ,781 13,570, banks 1,576,866 4,739 1,572, ,576,866 4,776 1,572, customers 11,609, ,302 11,405, ,378, ,005 11,998, (1) Amounts calculated on the basis of IAS/IFRS, including IAS 32, 39 and IFRS 4. (2) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32, 39 and IFRS 4. (3) At september 2005 categorised as performing loans. The total of impaired credits amounted to Euros million; excluding past due positions, which up to September 2005 were categorised as performing loans, the figure falls by 0.8 per cent. Bad loan balances rose by 0.4 per cent to Euros 2.1 million, whilst watchlists (PCRs), rescheduled positions and credits subject to country risk dropped by Euros 7.5 million (-4.2 per cent). Total value adjustments amounted to Euros million, equivalent to 30.7 per cent of the aggregate total. Excluding the past due positions, value adjustments were 12.7 per cent lower on the previous year s pro forma figure at Euros million. Adjustments on past due positions amounted to Euros 10.8 million, 4.8 per cent of the total. The following sentences analyse the single aggregates: Bad loans totalled Euros million, 0.4 per cent higher than at 31/12/04. Impairment allowances represent 47.7 per cent of bad loans in comparison to December 2004 s pro forma figure of 51.5 per cent. With regards to advances to banks classified as bad loans, the balance fell slightly in comparison to December 2004, amounting to Euros 18.2 million. No impairment provisions relating to this item were 27

28 carried out. The customer bad loans:loans ratio at December 2005 was 3.6 per cent in comparison to 4.3 per cent in December 2004 (4.1 per cent on the basis of pro forma figures). Watchlists totalled Euros million, down 4.2 per cent in comparison to 31/12/04. Watchlist positions on loans and advances to customers amounted to Euros million; 17.4 per cent of the aggregate is written down. Non performing loans to banks classified as watchlists amounted to Euros 1 million, written down by 53.3 per cent. Past due positions totalled Euros 225 million, with related impairment charges of Euros 10.8 million. The geographic concentration of bad loans in the Group s heartland of Liguria fell slightly over twelve months to 61.7 per cent from Euros million at 31st December 2004 to Euros million at 31st December BAD LOANS (1) - GEOGRAPHICAL DISTRIBUTION (thousands of Euros) Situazione al 31/12/05 30/9/05 31/12/04 p.f. % % % Liguria 311, % 308, % 315, % Lombardy 46, % 50, % 44, % Piedmont 41, % 40, % 38, % Tuscany 41, % 55, % 47, % Emilia Romagna 22, % 24, % 27, % Latium 12, % 11, % 5, % Sicily 9, % 9, % 8, % Veneto 6, % 6, % 5, % Apulia 3, % 3, % 3, % Marches 3, % 3, % 1, % Umbria 2, % 2, % 2, % Sardinia % % % Total Italy 503, % 516, % 500, % Abroad 1, % 1, % 2, % Total 505, % 518, % 502, % (1) Inclusive of expected losses. BAD LOANS/LENDING RATIO (1) - GEOGRAPHICAL DISTRIBUTION (%) 31/12/05 30/9/05 31/12/04 p.f. Piedmont 5.9% 5.9% 6.4% Sicily 4.0% 4.1% 5.0% Veneto 3.6% 2.9% 3.3% Liguria 5.6% 6.3% 7.0% Umbria 3.3% 3.1% 2.4% Tuscany 3.1% 4.3% 3.9% Apulia 2.9% 2.8% 3.6% Emilia Romagna 2.8% 3.1% 4.3% Lombardy 2.7% 3.0% 2.8% Marches 2.3% 2.1% 0.7% Latium 2.3% 2.2% 0.9% Sardinia 0.7% 0.5% 0.2% Total Italy 3.6% 3.9% 4.1% Abroad 3.5% 3.3% 5.3% Total 3.6% 3.9% 4.1% (1) Inclusive of expected losses. By business segment, the share of bad loans represented by non finance firms and family enterprises rose slightly from 80 to 80.8 per cent (Euros million), with a significant worsening in credit quality associated with the building sector (Euros 88.2 million; 2005:

29 per cent; 2004: 15.2 per cent). Households account for 16.2 per cent of the total bad loans aggregate, slightly down on 2004 (16.4 per cent). The aggregate share represented by financial institutions was unchanged at 2 per cent. BAD LOANS (1) - DISTRIBUTION BY BUSINESS SEGMENT (thousands of Euros) 31/12/05 31/12/04 p.f. % Public Administration Financial institutions 10, % 10, % Non-financial institutions and personal businesses 408, % 402, % Building and public works 88, % 76, % Transport-related services 81, % 85, % Wholesale & retail trade, salvage and repairs 70, % 67, % Sales-related services 51, % 50, % Metal products 14, % 12, % Other 102, % 109, % Private social bodies % 1, % Families 81, % 82, % Total residents 500, % 496, % Rest of the world 4, % 6, % Total 505, % 502, % There were improvements in the quality of credit in terms of the bad loans: total loans ratio has improved for all of the principal segments. The ratio for households dropped from 2.4 per cent at December 2004 to 1.9 per cent at December Over the same period, there were falls in the ratio for non finance and family businesses (from 5.7 per cent to 5 per cent) and for financial institutions (from 2.7 per cent to 1.9 per cent). BAD LOANS/LENDING RATIO (1) - DISTRIBUTION BY BUSINESS SEGMENT 31/12/05 31/12/04 p.f. Public Administration - - Financial institutions 1.9% 2.7% Non-financial institutions and personal businesses 5.0% 5.7% Building and public works 6.7% 7.1% Wholesale & retail trade, salvage and repairs 4.7% 5.1% Hotel and catering services 3.0% 3.4% Transport-related services 20.2% 24.1% Sales-related services 2.5% 3.1% Private social bodies 1.2% 2.0% Families 1.9% 2.4% Total residents 3.6% 4.1% Rest of the world 5.6% 2.3% Total 3.6% 4.1% Financial assets at 31/12/05 totalled Euros million, 0.8 per cent lower than December Equity securities rose 53 per cent to Euros 1,052.6 million. Within the aggregate, there was significant expansion in securities held for trading. Available for sale investments include 29

30 Carige s holding in the Bank of Italy (Euros million), recognised at fair value (net equity as proxy for fair value on the basis of Bank of Italy statements as at 31/12/04). There were falls in both debt securities (Euros 2,894.6 million; -9.8 per cent) and mutual funds (Euros 1,115.6 million; -7.6 per cent). This negative variation is principally the result of the sale from the Group s securities portfolio of the reserved funds Carige Forziere, managed by Carige Asset Management SGR. SECURITIES PORTFOLIO (thousands of Euros) Change % 31/12/05 30/9/05 31/12/04 31/12/04 12/05 12/05 (2) pro forma (1) 9/05 12/04 p.f. Debt securities 2,894,552 3,441,155 3,229,488 3,209, Held for trading 2,181,398 2,731,085 2,577,741 2,540, Available for sale 493, , , , Held at fair value through profit or loss 217, , , , Held to maturity 2,764 2,834 2,907 2, Equity securities 1,052,636 1,033, , , Held for trading 388, ,621 86,348 89, Available for sale (3) 663, ,751 69, , Held at fair value through profit or loss Held to maturity Shares in collective investment schemes 1,115,580 1,081,623 1,215,703 1,207, Held for trading 700, , , , Available for sale 29,328 34,344 37,146 27, Held at fair value through profit or loss 385, , , , Held to maturity Total 5,062,768 5,556,150 4,600,986 5,104, Held for trading 3,270,947 3,773,373 3,473,353 3,440, Available for sale (3) 1,186,091 1,192, ,054 1,133, Held at fair value through profit or loss 602, , , , Held to maturity 2,764 2,834 2,907 2, (1) Amounts calculated on the basis of IAS/IFRS, including IAS 32, 39 and IFRS 4. (2) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32, 39 and IFRS 4. (3) Of which 559,564 thousands of Euros recognised at fair value, using net equity as proxy for fair value on the basis of Bank of Italy statements as at 31/12/04. See "Explanatory Notes", part B, "Balance Sheet - Assets - Section 4 (Available for sale)", table 4.2. With regards to the Group s derivatives portfolio, the value of derivatives used to hedge risk exposures on assets amounted to Euros 61.3 million at 31st December 2005 and is made up almost entirely by swaps. Derivative contracts hedging liabilities amounted to Euros 42.4 million. 30

31 NOTIONAL VALUES OF DERIVATIVES CONTRACTS (thousands of Euros) Change % 31/12/05 31/12/04 12/05 12/04 Financial derivatives 7,353,817 6,650, future - 33, term contracts 1,101,932 - forward rate agreements 20,000 - swap 4,078,414 5,163, options 2,136,472 1,449, others 16,999 5,400 Credit derivatives 135, , tror 51,744 71, cds 83, , TOTAL 7,489,038 6,836, hedging 3,048,359 3,962, trading 4,440,679 2,874, (1) Amounts calculated on the basis of IAS/IFRS, including IAS 32, 39 and IFRS 4. (2) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32, 39 and IFRS 4. 31

32 ECONOMIC RESULTS The Banca Carige Group opted for the possibility of adopting IAS 32 and 39, and IFRS 4, regarding the accounting of financial instruments from 1 st January The income statement for 2004 has been prepared in compliance with IAS/IFRS with the exception of IAS 32, IAS 39 and IFRS 4. Consequently, comparatives for the two periods 2004 and 2005 are not homogeneous with regards to interest income and value adjustments. Homogeneity is further affected by the absence of consolidated figures for 2004 relating to Banca Cesare Ponti, acquired on 29 th December Economic results show a net income of million, 18.2% higher than the figure recorded in 2004 and drown up to the budget. INCOME STATEMENT (thousands of Euros) Change 2005/ /9/ absolute % (1) 10 Interest income and similar revenues 894, , , , Interest expenses and similar charges - 419, , , , NET INTEREST INCOME 475, , ,345 13, Commission income 295, , ,481 69, Commission expenses - 49,280-14,985-17,191-32, NET COMMISSIONS 246, , ,290 37, Dividends and other similar revenues 24,495 13,149 5,784 18, Income (loss) on financial assets and liabilities held for trading (net) 36,166 44,723 34,926 1, Income (loss) from hedging activities - 1, , Income (loss) on disposal of: - 1,972 1,760 9,793-11,765 a) loans 2,075 1, ,505 b) financial assets available for sale 1, ,223-8, d) financial liabilities - 5,361-1, , Net value adjustment on financial assets designated at fair value GROSS OPERATING INCOME 778, , ,364 58, Net value adjustment on: - 54,276-53, , , a) loans - 53,049-50, , , b) financial assets available for sale d) other financial assets - 1,227-2, , NET INCOME FROM FINANCIAL MANAGEMENT 724, , , , Net premiums 651, , ,025 19, Net income (loss) from insurance management - 643, , ,618-29, NET RESULT FROM FINANCIAL AND INSURANCE MANAGEMENT 733, , , , Administrative costs: - 534, , ,906-41, a) staff costs - 334, , ,392-23, b) other administrative costs - 199, , ,514-18, Net provisions for risks and charges - 8,320-3,599 1,284-9, Amortization and depreciation of tangible fixed assets - 18,058-13,533-17, Amortization and depreciation of intangible fixed assets - 11,735-11,154-12, Other operating expenses and revenues 47,850 39,922 94,444-46, OPERATING COSTS - 524, , ,277-97, Income (loss) from equity investments 5,376 2,256 14,507-9, Income (loss) from disposal of investments 3, , OPERATING INCOME (LOSS) FROM ORDINARY ACTIVITIES BEFORE TAXES 216, , ,824 52, Tax expenses (income) related to profit or loss from ordinary activities - 81,745-74,920-49,688-32, INCOME (LOSS) FROM ORDINARY ACTIVITIES AFTER TAXES 135, , ,136 20, NET INCOME (LOSS) FOR THE PERIOD 135, , ,136 20, Minority interests - 3,626-2,149-2, NET INCOME (LOSS) FOR THE PERIOD AFTER MINORITY INTERESTS 131, , ,214 20, (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and 39 and IFRS 4. 32

33 Net interest income amounted to Euros million, an increase of 3 per cent in comparison to December Increases in volumes handled were offset by narrowing interest margins. In detail, interest income rose 18.8 per cent to Euros million, whilst interest charges increased by 43.8 per cent to Euros million. Interest income was impacted by the decision to disinvest a significant amount of bonds related to dedicated collective investment schemes of the Carige Forziere line, the returns of which were in the form of dividends. INTEREST INCOME (thousands of Euros) Change 2005/ /9/ (1) absolute % Loans and advances to customers 579, , ,422 31, Deposits with banks 26,709 20,211 28,048-1, Hedging derivatives Financial assets held for trading 236, , ,975 81, Financial assets designated at fair value 4,575 3,372 4, Financial assets available for sale 12,658 14,730 15,996-3, Financial assets held to maturity Interests on sold, non derecognised financial assets 32,808 25,281-32,808 Other interest income 2,349 1,268 2, TOTAL INTEREST INCOME 894, , , , (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and 39 and IFRS 4. INTEREST CHARGES (thousands of Euros) Change 2005/ /9/ (1) absolute % Deposits from customers 30,559 19,125 33,836-3, Deposits from banks 36,134 25,783 22,391 13, Debt securities in issue 183, , ,738 6, Hedging derivatives 132,609 92,139 56,381 76,228 Financial liabilities held at fair value 1, ,351 Interestsonsold,nonderecognisedfinancial assets 34,554 26,275 1,294 33,260 Other interest charges TOTAL INTEREST CHARGES 419, , , , (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and 39 and IFRS 4. Net fee and commission income rose 18.2 per cent to Euros million thanks to expansion in credit cards, mutual funds and other securities in addition to strong performances by traditional banking services. Commission income recorded a 31 per cent increase in 2005 to Euros 70 million, whilst commission charges almost tripled to reach Euros 32.1 million. This caption was considerably affected by commission income and charges generated on the trading of financial instruments related to the placement of a Banca Carige bond issue distributed outside the Group. 33

34 COMMISSION INCOME (thousands of Euros) Change 2005/ /9/ absolute % Guarantees and commitments 12,167 6,438 8,184 3, Credit risk derivatives Management, dealing and consultancy services: 126,543 72,131 77,520 49, Securities dealing 17,054 1,468 1,534 15, Foreign currency dealing 3,531 2,607 3, Wealth management 47,744 19,940 9,067 38, Securities in custody and under 2,955 2,402 1,827 administration 1, Depositary services 4,275 3,133 2,670 1, Placement of securities 21,919 27,134 47,473-25, Acceptance of orders 8,115 6,092 5,621 2, Consultancy Distribution of third party products 20,950 9,356 7,405 13,545 - wealth management insurance products 9,377 4,554 1,766 7,611 - other products 11,411 4,400 5,578 5,833 Collection and payment services 56,022 37,322 47,956 8, Servicing on securitisation transactions 2,128 1,561 2, Servicing on factoring transactions 1, , Tax collection services Other services 97,283 73,931 87,113 10, TOTAL COMMISSION INCOME 295, , ,481 69, (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and 39 and IFRS 4. COMMISSION CHARGES (thousands of Euros) Change 2005/ /9/ (1) absolute % Guarantees and commitments , Credit derivatives Management, dealing and consultancy services: 19,349 23,383 3,014 16, Securities dealing 842 2, Foreign currency dealing Wealth management , Securities in custody and under administration 2,398 1,475 1, Placement of securities 15, , Offer of securities, products and services outside branch network Collection and payment services 17,230 8,852 11,054 6, Other services 11,854-17,833 2,080 9,774 TOTAL COMMISSION CHARGES 49,280 14,985 17,191 32,089 (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and 39 and IFRS 4. Dividends and similar revenues rose from Euros 5.8 to Euros 24.5 million thanks mainly to dividends distributed to the Group s banks on the Carige Forziere mutual fund. Banca Carige s net trading income increased over year-end 2004 by Euros 1.2 million to Euros 36.2 million (+3.6 per cent), whilst the net hedging result moved from a positive figure last December 2004 of Euros 226,000 to a negative one at 31/12/05 of Euros 1.3 million. Within the trading income result, significant losses on securities were offset by gains on financial derivatives following the completion of a structured transaction in foreign bonds. 34

35 TRADING RESULT (thousands of Euros) Change 31/12/05-31/12/ /9/ (1) absolute % Debt securities - 106,706 3,570 33, ,978 Capital securities and Collective Investment Schemes 35,375 26,030 13,358 22,017 Debt securities, capital securities and CIS - 71,331 29,600 46, ,961 Financial derivatives 100,205 10,474-15, ,215 Credit derivatives 1,648 1, ,262 Exchange translation rate differences 2,772 2,687 2, Other trading gains/losses 2, ,872 TRADING RESULT 36,166 44,723 34,926 1, (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and 39 and IFRS 4. The result of sale and repurchase agreements including lending and securities at 31/12/05 was a loss of Euros 2 million (2004: gain of Euros 9.8 million), which was offset in part by exchange translation gains stated at caption 80. Comparison with 2004 is affected by the decision not to adopt for the year ending 31 st December 2005 IAS 32 and 39, and IFRS 4 in addition to capital gains arising on the sale of non-strategic equity investments. Operating income rose 8.1 per cent over 2004 to Euros million. Impairment loss on loans and advances and other credit risk provisions fell 66.7 per cent per cent in annual terms. The high figure recorded in 2004 was to a great extent as a result of the collapse of the Genoa-based cruise operator Festival during the first half of NETIMPAIRMENTCHARGESONCASHCREDITSAND GUARANTEES (thousands of Euros) Change 31/12/05-31/12/ /9/ (1) absolute % Loans to customers 53,049 50, , , Guarantees 1,227 2, ,511 NET IMPAIRMENT CHARGES ON CREDITS 54,276 53, , , (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and 39 and IFRS 4. The net result from financial and insurance management rose by 27.3 per cent to Euros 733 million. Insurance management in particular recorded a 3.1 per cent increase in net premiums, which reached Euros million, and a 4.8 per cent increase in the positive difference between revenues and charges of Euros million. Operating expenses totalled Euros million, up 22.8 per cent over December In detail, administrative costs totalled Euros million, 8.5 per cent higher than the previous December s figure. This item includes staff costs, which rose by 7.6 per cent to million as a result of agreed pay rises backdated to Other administrative expenses rose 10 per cent to Euros million related to a series of investments in new technology and branch development. Net provisions for risks and charges totalled Euros 8.3 million, an increase over the previous year s figure of Euros 1.3 million as a result of provisions for litigation and claims. Net adjustments to tangible assets amounted to Euros 18.1 million, in line with the previous year s total. Net adjustments to intangible assets dropped 3.2 per cent in comparison to 2004, to Euros 11.7 million. This figure does not include goodwill previously recorded arising from a series of acquisitions carried out over the last ten years (C.R Savona, Banca del Monte di Lucca, C.R. Carrara, Banca Cesare Ponti, Carige Assicurazioni, branch networks previously belonging to Banco di Sicilia, the Banca Intesa 35

36 Group and the Capitalia Group). This is due to the fact that following impairment testing performed in the preparation of these statements the recoverable values of the investments are greater than those recorded. Other operating income fell 49.3 per cent to Euros 47.9 million. The previous year had benefited from the extraordinary contribution of Euros 61.1 million provided by the securitisation of performing mortgages. OTHER OPERATING EXPENSES AND REVENUES (thousand of Euros) Change 31/12/05-31/12/ (1) absolute % Rental income 13,616 10,841 2, Amounts recovered from third parties 40,308 30,454 9, taxes recovered 38,762 28,937 9, customers insurance premiums 1,546 1, Other revenues 23,942 89,764-65, Leasing charges - 2,370-1,366 1, Maintenance charges on investment real estate property - 2,272-12,225-9, Amortisation of charges relating to the improvement of third party assets - 2,019-1, Other expenses - 23,355-21,158 2, TOTALE NET REVENUES 47,850 94,444 46, (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and 39 and IFRS 4. OPERATING COSTS (thousands of Euros) Change 31/12/05-31/12/ /9/ (1) absolute % Staff costs 334, , ,392 23, Administrative costs 199, , ,514 18, Net provisions for risks and charges 8,320 3,599-1,284 9,604 Amortizations on: 29,793 24,687 30, intangible fixed assets 11,735 11,154 12, tangible fixed assets 18,058 13,533 17, Other operating expenses and revenues - 47,850-39,922-94,444 46, TOTAL OPERATING COSTS 524, , ,277 97, (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and 39 and IFRS 4. The profit on equity investments amounted to Euros 5.4 million, 62.9 per cent lower than the previous year s figure of Euros 14.5 million. Gains on the sale of investments rose sharply from Euros 762,000 to Euros 3.3 million, following the sale of property related to the Group s insurance activities. Operating income at 31/12/05 reached Euros million, 32.3 per cent higher than the previous year s result (September 2004: Euros million). After tax provisions of Euros 81.7 million (2004: 49.7 million) and profits recognisable to third parties of Euros 3.6 million (2004: Euros 2.9 million), net profit amounted to Euros million, up 18.2 per cent per cent over December 2004 s figure of Euros million. 36

37 INSURANCE BUSINESS PREMIUMS-RESERVES-ECONOMIC RESULT (thousands of Euros) 31/12/04 31/12/05 30/09/05 31/12/04 pro forma (1) (1) (2) (1) Change % 12/05-12/04 p.f. Net premiums 651, , , , Non life insurance 451, , , , recognised gross premium (+) 530, , , , premiums ceded to reinsurers (-) 55,157 37,800 53,790 53, variations (+/-) to premium reserve gross balances 23,387 19,419-20,335-20,280 variations (-/+) to premium reserves receivable from reinsurers ,073 2,764 2,764 Life insurance 200, , ,922 79,907 recognised gross premiums (+) 211, , ,914 91,899 premiums ceded to reinsurers (-) 10,889 6,498 11,992 11, Technical reserves 1,494,945 1,394,870 1,292,769 1,284, Non life insurance 696, , , , premium reserves 211, , , , accident reserves 484, , , , other reserves Life insurance 797, , , , mathematical reserves 781, , , , reserves for amounts payable 5,512 2,860 4,791 4, other reserves 10,493 10, Technical reserves provisions payable by reinsurers 176, , , , Non life insurance 63,699 70,113 61,400 61, premium reserves 11,183 18,459 14,644 14, accident reserves 52,516 51,654 46,756 46, Life insurance 113, , , , mathematical reserves 111, , , , reserves for amounts payable 2,118 1,012 2,097 2, Economic result 8,707 1,922 6,146 14, Premiums excluding reinsurance 651, , , , Net variations to technical reserves -158,376-55, ,707-38,660 Claims incurred and settled 1/1/05-31/12/05-403, , , , Balance of other insurance income and expenses -81,231-90, , , (1) Amounts calculated on the basis of IAS/IFRS, including IAS 32 and 39 and IFRS 4. (2) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and 39 and IFRS 4. Net premiums rose over 31 st December 2004 by 26.3 per cent to Euros million. In detail, net non life premiums increased by 3.5 per cent from Euros million to Euros million. There was more robust expansion in life premiums, which rose from 2004 s balance of Euros 79.9 million to Euros million. Technical reserves increased by 16.3 per cent to Euros 1,495 million (non life reserves: +6.9 per cent to 697 million; life reserves: per cent to e 798 million). The economic result of the Group s insurance business at 31 st December 2005 was Euros 8.7 million. MARKETING, SERVICES AND CUSTOMER PROTECTION The Group s marketing activities were focused during 2005 on providing support for the launch of new dedicated products for specific customer segments. A new line of current accounts targeted for the family Carige Stile was launched. The product was given maximum visibility throughout the Group s distribution network. Households were also the target segment for expansion of the Group s supply of mortgages and personal loans. The findings of market research programmes were used in developing in branch product promotion and advertising across various media (billboards, newspapers, radio, the Internet). During the second half of the year, a specialised sales point for 37

38 mortgages and personal loans was opened in the centre of Genoa, offering both advice and practical support. The Group s established attention to the family was developed further with heightened collaboration with Carige Asset Management SGR in providing support for the sale of tailored wealth management products. The Group s dedicated product line for the young was reviewed in order to respond more effectively to young customers needs and the competitive scenario: the resulting Carige Stile Giovani is a complete package that offers current or savings account, cash card, net banking capabilities, and insurance cover as well as more tailored solutions in the areas of investment and credits. The new product line targeted to the young is publicised both directly in the Group s branches and through a specific advertising campaign, particularly on radio and television. The Stile Giovani programme dedicated to the 18 to 29 age group is supported by a website ( which provides details about the programme, special offers and competitions. The Group s business segment saw the development of special forms of credit (credit for farming and agriculture, for example) and the marketing of fiancé solutions aimed at bringing firms debt/equity ratios into line with Basel 2 standards. During the year an evaluation of the Group s website was carried out by independent experts. As a result, improvements were made in order to increase the ease of access to information and services. Demonstration versions of on line banking services for the family and enterprises are also now available. With regards to wealth management, all three product lines were expanded. During the year a system of funds investing in other collective investment schemes began distribution. The Sistema Fondi Carige Mosaico follows a multibrand approach and selects for each reference market the products of prime national and international investment houses. Two new asset management lines, following a total return policy, were introduced. In the bancassurance field, three new Carige Index policies Internazionale, Internazionale 2 and Carige Unit Protezione Attiva were launched. The policies integrate the advantages of life policies with diversification of investment opportunity and capital protection. Turning to the Carige Group s payment systems, the range of credit cards was broadened with the introduction via the issuer CartaSì of an innovative product line called Carige Card Choice. These revolving credit cards offer solutions for every day spending as well as for larger purchases. In line with the Group s policy of standardising its credit pricing policy, the customer evaluation procedures or scoring used prior to granting mortgages or personal loans was extended to credit card applications. The number of Carige Group cash cards of the Bancomat circuit amounted to 335,000, 1.3 per cent up on The number of cash withdrawals also rose, by 7 per cent, from 8.8 to 9.4 million for a total of Euros 1,503 million. The average number of withdrawals per card was 28. Payments made using the cards at POS terminals reached 8.7 million, for a total transaction amount of Euros 561 million. CartSì credit cards in circulation rose in number by 11.4 per cent to 142,000. The number of transactions carried out rose from 4.1 to 4.8 million (+17.9 per cent) for an equivalent amount of Euros 478 million. The average amount spent per card was Euros 3,366. The number of prepaid cards at 31/12/05 amounted 27,000 (+75.7 per cent). Customer protection is handled by a specific complaints office, which operates in close collaboration with our legal and internal auditing offices in order to update computer records required by Consob. The complaints office also manages relations with the banking industry Ombudsman and the Bank of Italy; these relations consist principally in responding to observations made by either body following a complaint made by a customer dissatisfied by a previous reply on our part. This office was given the responsibility to manage relations with the Group s banking customers with regards to the requirements contained in article 7 of the Privacy Code 38

39 (replacing article 3 Law 675/96) contained in Legislative decree 196/03 and carry out the necessary formalities relating to customer rights foreseen by the abovementioned article. During the year, the policy document on data security was updated as required by Legislative decree 196/2003. The office has additional responsibilities relating to the handling of customer data arising from the centralised credit risk data warehouse managed by CRIF. PUBLIC RELATIONS AND THE PROMOTION OF CULTURAL, SCIENTIFIC AND SOCIAL ACTIVITIES The Group s activities in the field of public and institutional relations were focused in particular on the sponsorship of cultural and sporting events, the organisation of conferences on a broad range of topics, our well-established presence in specialised publishing, and the commitment to the protection and enhancement of the Group s artistic estate. The visibility of the Group was boosted by its presence as and advertiser in highprofile events such as the Genoa Boat Show and Milan Craft Fair. The Group also sponsored during 2005 several sporting events and conferences, the latter in collaboration with various professional associations. The Genoa Boat Show 2005 was an opportunity for the Group to promote not only its special lease product for boats ( Carige Leasing Nautico ), but also to present the name and brand of the Banca Carige Group to more than 400,000 visitors. In sport, the Group sponsored teams in many different areas, ranging from football, and tennis to water polo and volleyball, in addition to providing financial support to small sporting associations in our operating areas. Highlights of the activities in the conference field, include the organisation at the head offices of Banca Carige of the annual meeting of bankers and academics to discuss the Governor of the Bank of Italy s yearly analysis of the economic situation. On the theme of relations between banking industry and enterprise, especially in the light of Basel 2, the Carige Group collaborated in the organisation of a specific conference. The prestigious book prize for women writers Rapallo-Carige continued to receive considerable attention both in the press and on television nationally and locally, giving the Group considerable visibility. The Banca Carige Group in collaboration with the Colombo Foundation organised the Ligurian Regional Prize to honour Ligurians who have distinguished themselves in different walks of life. The Chairman of Banca Carige, Mr Giovanni Berneschi was won of the year s prize winners. A key activity in the management of Carige s corporate identity is in the field of culture and the arts via our well-established presence in publishing, which includes our arts and culture magazine La Casana. The review offers an insight into the artistic and cultural heritage present in Liguria as well as the other regions that make up our operating network. Carige is also involved specialised publishing: during the year there were editions of the Bank s reviews in law and economics Prospettive dell Economia and Economia e diritto del Terziario, in collaboration with the University of Genoa. During the year, the fourth volume in the series Genoa and its ties with other European regions was published: Genova e l Europa del Mediterraneo was presented in Genoa s historic Palazzo Ducale at the end of the year. Another successful initiative was Invito a Palazzo, which gave visitors to Banca Carige s headquarters in Genoa, the possibility of seeing Carige s prestigious collection of paintings and objects of art. 39

40 DISTRIBUTION CHANNELS AND RESOURCE MANAGEMENT The distribution of the Banca Carige Group s products and services is based on an integrated three-legged multi-channel distribution system: traditional; remote; mobile. The traditional distribution channel is made up by our branch network and a network of private and corporate, and affluent and small business banking advisers. The number of Banca Carige Group branches at 31 st December 2005 increased from 495 to 497,of which 246 in Liguria, with the remaining 251 in other Italian regions. The Group s presence is particularly strong in Tuscany (54 branches), Lombardy (40 branches), Sicily (37 branches), Piedmont (35 branches) and Latium (33 branches). The Group has a network of 395 insurance offices distributed throughout the country. Tailored financial consultancy services for private affluent clients are organised around a network of 103 advisors distributed in 43 districts. Banca Carige accounts for 39 districts, whilst C.R. Savona has 3 and Banca del Monte di Lucca 1. The service is available in Liguria, Tuscany, Lombardy, Piedmont, and Emilia Romagna in the north, Marches, Latium, and Umbria in the centre of the country, and Apulia and Sicily in the south. This service is flanked by a Corporate Consultancy Service for medium and large businesses. The service is characterised by operational and commercial efficiency and careful monitoring of credit risk levels. At 31 st December 2005, there were 101 consultants divided into 46 teams. During the year a financial service for affluent clients in Liguria was launched; a total of 121 advisors offer tailored financial solutions at branches in the region. The service will be extended to distribution network outside Liguria during Financial consultancy for the small business segment was launched in By the end of the year there was a total of 200 advisors. With regards to remote channels, the number of fully-automated branches of the Bancacontinua network remained at 14, whilst the number of ATM-Bancomat cash points increased from 598 to 606. The Group s on line services include the Internet and call centre, with more than 83,000 subscribers at 31/12/05, 8,000 more than at the end of the previous year. The Carige Group s mobile channels are made up principally by the Group s insurance agents. Thanks to rulings made by both the Bank of Italy and the Italian insurance industry regulator ISVAP, which allow for the distribution on one hand of banking products by financial advisors ( promotori finanziari ) and on the other for standardised banking products (current accounts, bonds, certificates of deposit, mortgages, special rate loans) by insurance agents, Banca Carige and Banca del Monte di Lucca stipulated with the Group s two insurance companies Carige Assicurazioni and Carige Vita Nuova agreements for the distribution of Carige banking products at the offices of the insurance companies. The Group intends to consolidate and increase its mortgage business especially in those areas of its network where demand is strong. Consequently, specific agreements with estate agents were signed that aim to create beneficial relations between the Group and property agents. At 31 st December 2005 agreements with 1,700 estate agencies had been signed. During the year 1,162 mortgage agreements were signed (2004: 1,000) out of 3,110 proposals. The average sum per agreement was Euros 125,000 in comparison to Euros 120,000 in

41 BRANCH NETWORK A) TRADITIONAL CHANNELS 31/12/05 30/9/05 31/12/04 number % number % number % NORTHWEST Liguria Genoa Savona Imperia La Spezia Lombardy Piedmont NORTHEAST Emilia Romagna Veneto CENTRE Tuscany Latium Marches Umbria SOUTH AND ISLANDS Sicily Apulia Sardinia ABROAD: Nice (France) TOTALE NUMBER OF BRANCHES /12/05 30/9/05 31/12/04 Private consultants Corporate consultants Affluent consultants Small business consultants B) REMOTE CHANNELS 31/12/05 30/9/05 31/12/04 ATM - Bancomat Self-service "Bancacontinua" branches On line services (1) 83,530 81,130 75,439 (1) Number of Internet banking and Call center contracts. C) MOBILE CHANNELS 31/12/05 30/9/05 31/12/04 Insurance agents (2) (2) Agents of Group insurance subsidiaries distributing Banca Carige products. Staff levels of the Banca Carige Group dropped slightly in comparison to 31st December 2004 by 29 to 5,101. Banking staff totalled 4,736 in comparison to 4,787 at 31/12/05. In detail, senior executives account for 1.3 per cent of the total, managers 22 per cent, clerical and ancillary employees the remaining 76.7 per cent. At December 2005, 70.6 per cent was involved in market activities (70.8 per cent at 31/12/04). The number of insurance employees fell from 371 to

42 PERSONNEL Banking personnel 31/12/05 30/9/05 31/12/04 number % number % number % Grade Executives Managers 1, , Other employees 3, , , TOTAL 4, , , Activities Head-offices 1, , , Branches 3, , , Insurance personnel TANGIBLE AND INTANGIBLE ASSETS, INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES Tangible assets amounted to Euros 1,071 million, an increase of 6.4 per cent in comparison to This positive variation was substantially due to rises in the values of property, plant and equipment held both for operational (734.6 million; +4.3%) and investment (336.4 million; +11.3%) purposes. The value of intangible assets rose 0.6 per cent to Euros million. Within this aggregate, goodwill, determined at Euros million and classified as a long-lived asset, arose on the acquisition of the Group s banks (C.R. Savona, Banca del Monte di Lucca, C.R. Carrara and Banca Cesare Ponti), Carige Assicurazioni, and 124 branches. The latter were acquired by Banca Carige in three distinct operations. Goodwill was reviewed for impairment on first time adoption of IFRS and the original carrying amount was confirmed. No changes arose on impairment review performed for the preparation of these financial statements The value of the Group s holdings in subsidiaries and associates rose 4.4 per cent from Euros 67 million in 2004 to Euros 69.9 million. The Group s investment in associates in which the Group has significant influence is recorded on the basis of the equity method (Autostrada dei Fiori and Franfurter Bankgesellschaft, amounting to Euros 66.6 million), whilst subsidiaries are valued at cost (Euros 3.3 million). With regards to the latter, a distinction is made between those companies that are excluded from consolidation (for instance Asi 90 Srl valued at Euros 3.2 million) and those entities in which the Group has significant influence and in which the investment is recorded at cost rather than carried at equity (investment in Atoma Srl, U.C. Sport e Sicurezza Srl, and Consorzio per il Giurista d Impresa Scrl valued at Euros 43,000). The positive variation recorded during the year is due to an increase in the value of investments accounted for under the equity method. 42

43 YEAR VARIATIONS IN EQUITY INVESTMENTS (thousands of Euros) 31/12/05 A. Opening balances 66,980 B. Increases 2,937 B.1 Purchases B.2 Recoveries B.3 Revaluations 2,930 B.4 Other changes 7 C. Decreases - C1. Sales C2. Write-downs including: - permanent write-downs C3. Other changes D. Closing balances 69,917 CORPORATE GOVERNANCE In February 2001, the Board of Directors of Banca Carige deliberated its adherence to the Code of Best Practice in the area of Self-Regulation for Listed Companies ( the Code ). Banca Carige s governance system is fully in line with the requirements stated by the Code. It should be pointed out that the present structure of Banca Carige, its functional organisation and company procedures were already established and therefore pre-empted the Code s requirements. Full details regarding the governance aspects of Banca Carige and its subsidiaries are contained in the annual corporate governance report deposited at Borsa Italiana SpA and available for shareholders consultation along with other documentation required by the Shareholders Meeting. The same documentation can also be found at SHARE OWNERSHIP STRUCTURE AND RELATIONS WITH THE CASSA DI RISPARMIO DI GENOVA E IMPERIA FOUNDATION At 31 st December 2005, Banca Carige s share capital amounted to Euros 1,113,326,839, consisting of 959,897,518 ordinary shares and 153,429,321 convertible savings shares. The Foundation s holding in Banca Carige was unchanged during the year. The present ownership structure of the Bank is as follows: Cassa di Risparmio di Genova e Imperia Foundation: per cent; CDC- CNCEP: per cent; WestLB: 5.84 per cent. The remaining per cent is in the hands of retail and institutional investors. With regards to business relations existing between the Foundation and Banca Carige, the Bank has liabilities of 58.2 million (of which 52.6 million in the form of convertible subordinated bonds issued during the share capital increase performed by Banca Carige during 2003), which generated interest charges of 1 million. Receivables amount to 0.7 million. Revenues for the Bank relating to transferred personnel, and administrative, accounting and tax-consultancy service contracts amounted to 1.9 million. 43

44 BANCA CARIGE SHARE PERFORMANCE 2005 Greater stability on the international political scene plus economic growth, especially in the United States, boosted share markets, which recorded an upturn during 2005, particularly in the second half of the year. In Italy, the Milan Mibtel general index rose 13.8 per cent over twelve months, with growth distributed evenly in both the first (+5.1 per cent) and second (+8.2 per cent) half of the year. The performance of banking sector shares tracked the general index, but with more substantial rates of growth. In fact the MIB banking index recorded a 30.7 per cent increase over The value of Carige shares continued to rise during The ordinary shares, in their eleventh year of listing, ended the year at Euros 3.293, an increase of 11.4 per cent over December The increase was particularly strong in the second half of the year: per cent after the 1.9 per cent fall recorded in the first half of the year. The share s average price for the year was Euros (2004: Euros 3.022). The Bank s savings share, listed since 4 th December 2002, ended the year at Euros 4.640, up 38.2 per cent over December 2004 s price of Euros 3.357; most of the increase was concentrated in the second half of the year (31.7 per cent). The average price for the year was Euros in comparison to the previous year s figure of Euros The ordinary share dividend was Euros , whilst the dividend per saving share was Euros During 2005, 172,656,940 ordinary shares (2004: 125,531,376 shares) were traded a total of 81,270 transactions (2004: 42,883). The total counter value of ordinary shares traded was Euros million (2004: million). The total number of transactions in Carige savings shares was 7,561 (2004: 1,108) trading 5,202,883 shares (2004: 836,696) for a total counter value of Euros 22.8 million (2004: 2.7 million). CARIGE SHARES PRICES Change % 31/12/05 30/9/05 31/12/04 31/12/ CARIGE CARIGE saving shares Milan general share index 26,756 26,846 23,515 19, Milan banking index 3,230 2,984 2,472 2, TOTAL SHAREHOLDERS'EQUITY Consolidated total shareholders equity and consolidated economic profit at 31 st December 2005 derive from Banca Carige total shareholders equity and economic profit at 31 st December 2005 as a result of the following variations: 44

45 Net equity Profit for the year Balance as at 31/12/05 Banca Carige 2,321, ,899 Positive variations on book value 58,654 35,174 Value adjustments to allocated gains -4, Share options survey - subsidiaries -24,487-1,260 Amortised goodwill (previous accounting periods) -43,485 - Dividends distributed by associated companies and written off -4,091-4,091 Dividends distributed by subsidiaries and written off -34,808-34,808 Others Consolidated balance as at 31/12/2005 2,268, ,437 (1) Thousands of Euros. The Carige Group s solvency ratios are all in line with levels foreseen by Bank of Italy indicators currently in force. Total capital at 31 st December amounted to Euros 1,193.7 million, applying the prudential filters foreseen by the Basel agreement in accordance with Bank of Italy s letter dated 1 st December Further details are provided in the explanatory notes at part B Assets- Section 4 (Assets available for sale ). The following tables illustrate the single components that make up total capital. The method adopted in calculating amounts is that foreseen by current legislation. Pro forma IFRS compliant figures are also provided which recognise in the computation of tier 1 capital the positive variation of Euros million in revaluation reserves following the free capital increase deliberated by the Extraordinary Shareholders Meeting of 25 th January. Comparatives for 31/12/04 were prepared on the basis of Italian GAAP (Legislative decree 87/92), whilst those for 31/12/05 are IAS/IFRS compliant pro forma figures. BREAKDOWN OF TOTAL CAPITAL (thousands of Euros) 31/12/05 31/12/05 31/12/04 31/12/04 IAS IAS pro forma (1) D.lgs. 87/92 IAS pro forma Tier 1 capital: positive elements eligible for inclusion (a) 1,490,540 1,655,379 1,586,264 1,431,255 Share capital 1,122,812 1,287,651 1,113,327 1,113,326 Reserves 100, , ,998 55,090 Additional paid-in capital 266, , , ,839 General banking risks fund Tier 1 capital: negative elements (b) 652, , , ,356 Goodwill 637, , , ,191 Other negative elements 14,798 14,798 33,785 34,165 Prudential filters for regulatory capital (c) -11,415-11,415-26,756 Total Tier 1 capital (c = a-b+c) 826, , , ,655 Supplementary capital (d) 732, , , ,861 Reductions (e) 364,964 (2) 364,964 (2) 237, ,332 Total capital (c+d-e) 1,193,691 (2) 1,193,691 (2) 1,198,977 1,249,184 (1) Taking into account the benefits deriving from utilisation of provisions foreseen by article 7, paragraph 6, Law 38/2005. (2) With the adoption of Directive 2002/B7/EC from 31 st December 2005 pursuant to the Bank of Italy's letter no of 1/12/05, equity investments in insurance enterprises are deducted from regulatory capital. The share of total capital destined to credit and market risks amounts to Euros 1,177.2 million (98.6 per cent of the total). Consequently, taking into account other prudential provisions and subordinated loan issues providing cover for market risks, Euros 50 million is in excess to regulatory requirements. In February 2005, Banca Carige issued a subordinated loan of Euros 80 million which though not calculable as part of total capital has a market risk containment 45

46 function, with a beneficial effect on total capital ratio. TOTAL CORE CAPITAL AND SOLVENCY RATIOS (thousands of Euros) 31/12/05 31/12/05 31/12/04 31/12/04 IAS IAS pro forma (1) D.lgs. 87/92 IAS pro forma Core capital Tier 1 capital 826, , , ,655 Tier 2 capital 732, , , ,861 Deductions 364, , , ,332 Total capital 1,193,691 1,193,691 1,198,977 1,249,184 Weighted assets Credit risks 13,228,705 13,228,705 10,835,575 11,294,670 Market risks 1,486,845 1,486, ,675 1,040,130 Other prudential requirements 579, , , ,850 Total weighted assets 15,295,275 15,295,275 12,439,675 12,705,650 Subordinated loans covering market risks 79,961 79, Solvency ratios (%) Tier 1 capital/weighted assets for credit risks 6.25% 7.49% 8.47% 6.88% Total capital/weighted assets for credit risks (2) 9.02% 9.02% 11.07% 11.06% Tier 1 capital/total weighted assets 5.40% 6.48% 7.38% 6.11% Total capital/total weighted assets (2) 8.33% 8.33% 9.64% 9.83% (1) Taking into account the benefits deriving from utilisation of provisions foreseen by article 7, paragraph 6, Law 38/2005. (2) With the adoption of Directive 2002/B7/EC from 31st December 2005 pursuant to the Bank of Italy's letter no of 1/12/05, equity investments in insurance enterprises are deducted from regulatory capital. CARIGE GROUP COMPANIES A. Banca Carige (Parent Company). The Business Report for Banca Carige SpA follows these consolidated statements. B. Carige Group banking subsidiaries. Total financial intermediation activities for Cassa di Risparmio di Savona rose 4.7 per cent over 31st December 2004 to Euros 2,627.5 million. Within TFIA, direct or customer deposits slipped 1.5 per cent to Euros 1,043.6 million, following a 1.7 per cent fall in the short-term component and one of 1.1 per cent in the medium/long-term component. Indirect deposits rose 9.2 per cent to Euros 1,583.8 million. Wealth management balances rose 12.9 per cent to Euros million, whilst the value of assets in custody increased 4.9 per cent to Euros million. Total lending to customers amounted to Euros million, an increase of 11.4 per cent. There were rises in both the shortterm and medium/long-terms components: the former was up by 8 per cent to Euros million and the latter by 13.7 per cent to Euros million. C.R. Savona s bad loans:lending ratio improved in comparison to December 2004: down from 2.7 per cent to 2 per cent. The bank s securities portfolio amounted to Euros million, down 7.5 per cent in comparison to the value recorded at December With regards to the income statement, net profit fell 23.2 per cent to Euros 10.4 million. Net interest income fell by 17.2 per cent to Euros 30.5 million due to the transfer of a part of investments from the securities portfolio to Carige AM dedicated mutual 46

47 funds (Euros 215 million), the proceeds of which are stated at income statement caption 70 Dividends and similar earnings. Excluding this transfer, the result would have been in line with Net commission income rose 11.6 per cent to Euros 21.6 million and the net trading result dropped from Euros 2.5 million to Euros 0.3 million. Gross operating income remained substantially unchanged at Euros 58.8 million. Impairment loss on loans and advances fell 21.9 per cent to Euros 2.8 million. Operating costs amounted to Euros 37.9, in line with previous year s levels. Total operating income before tax amounted to Euros 18.5 million, an increase of 0.8 per cent over December 2004 s figure of Euros 18.3 million. After tax (Euros 8 million), net profit at 31 st December 2005 totalled Euros 10.4 million, 23.2 per cent higher than in December CASSA DI RISPARMIO DI SAVONA (thousands of Euros) Change % 31/12/05 30/9/05 31/12/04 31/12/04 12/05 (2) pro forma (3) 12/04 p.f. BALANCE SHEET Total assets 1,356,360 1,372,523 1,356,768 1,366, % Direct deposits (A) 1,043,648 1,031,919 1,063,901 1,059, % Indirect deposits (B) 1,583,836 1,575,371 1,450,014 1,450, % - Assets under management 883, , , , % - Assets in custody 700, , , , % Total Financial Intermediation Activities (TFIA) (A+B) 2,627,484 2,607,290 2,513,915 2,509, % Loans to customers (1) 834, , , , % Financial assets 391, , , , % Shareholders' equity 168, , , , % INCOME STATEMENT Gross operating income 58,810 45,277 58, % Net income from financial management 56,246 42,351 55, % Operating income from ordinary activities before taxation 18,454 14,246 18, % Net income 10,430 8,467 13, % RESOURCES Number of branches % Number of employees % (1) Before value adjustments. (2) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and IAS 39. (3) Amounts calculated on the basis of IAS/IFRS, including IAS 32 and IAS 39. Banca del Monte di Lucca recorded an annual increase in its financial intermediation activities 11.3 per cent in comparison to December 2004 to Euros million. Within TFIA, direct deposits rose 10.9 per cent to Euros million, whilst indirect deposits grew 11.8 per cent to Euros million. Within indirect deposits, asset management balances reached Euros million (+28.1 per cent) and assets in custody totalled Euros million (+1.3 per cent). Loans and advances to customers increased by 21.6 per cent over the year to Euros million. Medium/long-term lending (Euros 339 million) accounts for 63.8 per cent of the aggregate total (+24.1 per cent); shortterm credits rose by 17.5 per cent to Euros million. The value of financial assets increased by 0.5 per cent over December 2004 to reach Euros 89.3 million. In particular, available for sale investments rose 10.2 per cent to Euros 704,000 and those held for trading increased by 0.5 per cent to 88.6 million. Net profit for the period rose 7.6 per cent to Euros 4.2 million. Net interest income increased by 2.6 per cent to Euros 16.3 million. Net commission income increased 14.4 per cent to Euros 6.9 million, dividends and similar revenues rose from Euros 117,000 to Euros 1.9 million; net trading income was down from Euros 928,000 to Euros 64,000, and the net result on hedging activity was Euros 139,000 (December 2004: Euros 15,000). 47

48 Gross operating income rose 9.2 per cent to Euros 25.3 million. Impairment loss on loans and advances and other credit risk provisions amounted to Euros 2.7 million, 16.2 per cent higher than at 31/12/04. There was an 8.4 per cent increase in operating costs to Euros 15.2 million following rises in both staff (+6.7 per cent; Euros 10.3 million) and administrativerelated charges (+13.7 per cent; Euros 6 million). Pre-tax profit of Euros 7.4 million was 8.5 per cent higher than December 2004 s figure of Euros 6.8 million. After tax of Euros 3.2 million, net profit for the year was Euros 4.2 million (7.6 per cent higher than December 2004). BANCA DEL MONTE DI LUCCA (thousands of Euros) Change % 31/12/05 30/9/05 31/12/04 31/12/04 12/05 (2) pro forma (3) 12/04 p.f. BALANCE SHEET Total assets 663, , , , % Direct deposits (A) 503, , , , % Indirect deposits (B) 313, , , , % - Assets under management 140, , , , % - Assets in custody 172, , , , % Total Financial Intermediation Activities (TFIA) (A+B) 816, , , , % Loans to customers (1) 531, , , , % Financial assets 89,345 90,410 92,496 88, % Shareholders' equity 32,463 27,431 32,404 27, % INCOME STATEMENT Gross operating income 25,265 18,406 23, % Net income from financial management 22,584 15,402 20, % Operating income from ordinary activities before taxation 7,410 4,617 6, % Net income 4,174 2,329 3, % RESOURCES Number of branches % Number of employees % (1) Before value adjustments. (2) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and IAS 39. (3) Amounts calculated on the basis of IAS/IFRS, including IAS 32 and IAS 39. Cassa di Risparmio di Carrara recorded a 2.5 per cent rise in TFIA rise to Euros 1,499.9 million in comparison to December Customer deposits rose 1.6 per cent to Euros 824 million, whilst there was a 3.5 per cent increase indirect deposits to Euros million, boosted by strong performances in retail mutual funds and bancassurance products. Within indirect deposits, wealth management increased by 14.2 per cent to Euros million, whereas assets in custody fell 6.5 per cent to Euros million. Loans and advances to customers rose 3.4 per cent to Euros 799 million; medium/long-terms loans were basically unchanged over December 2004 at Euros 409 million and now account for 51.2 per cent of C.R. Carrara s loan portfolio. Shortterms credits increased by 7.7 per cent to Euros million. The company s financial assets fell 28.6 per cent to Euros million. In particular, available for sale investments fell 0.2 per cent to Euros 6.4 million, as did assets held for trading: down 29.8 per cent to Euros million. This negative variation was due, one hand, to the transfer of part of the bond portfolio to the Carige Forziere fund line and, on the other, to the completion of transaction in foreign bonds hedged by derivatives for Euros 30 million. Derivatives amounted to Euros 0.9 million with a fall in notional values of 49.7 per cent to Euros 23.3 million. Recognised gains on trading contracts totalled Euros 10.9 million; revaluations and writedowns amounted each to Euros 0.2 million. 48

49 Net profit rose 18.7 per cent in comparison to the previous December s figure to Euros 6.5 million. Net interest income was 3.3. per cent lower at Euros 30.5 million. Net commission income rose 3.1 per cent to Euros 13.9 million thanks above all to good results in the wealth management field. The net trading result was negative at Euros 0.2 million (2004: +0.6 per cent) and dividends and similar revenues totalled Euros 2.5 million (2004: Euros 0.1 million). Gross operating income ended the year up 2.6 per cent at Euros 46.9 million. Provisions for credit impairment were Euros 1.7 million higher than in 2004, reaching Euros 3.7 million at 31/12/05. Operating costs fell by 5 per cent to Euros 31.4 million as a result of reduced administrative charges (-7.6 per cent). Operating income for the year amounted to Euros 11.8 million, 9.5 per cent higher than the previous year s figure. After taxes of Euros 5.3 million, net profit for 2005 reached Euros 6.5 million, 18.7 per cent higher than CASSA DI RISPARMIO DI CARRARA (thousands of Euros) Change % 31/12/05 30/9/05 31/12/04 31/12/04 12/05 (2) pro forma (3) 12/04 p.f. BALANCE SHEET Total assets 1,026,296 1,287,609 1,258,607 1,266, % Direct deposits (A) 824, , , , % Indirect deposits (B) 675, , , , % - Assets under management 359, , , , % - Assets in custody 315, , , , % Total Financial Intermediation Activities (TFIA) (A+B) 1,499,856 1,490,897 1,469,654 1,463, % Loans to customers (1) 799, , , , % Financial assets 118, , , , % Shareholders' equity 92,663 92, , , % INCOME STATEMENT Gross operating income 46,913 35,329 45, % Net income from financial management 43,172 31,368 43, % Operating income from ordinary activities before taxation 11,751 8,097 10, % Net income 6,453 4,165 5, % RESOURCES Number of branches % Number of employees % (1) Before value adjustments. (2) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and IAS 39. (3) Amounts calculated on the basis of IAS/IFRS, including IAS 32 and IAS 39. Banca Cesare Ponti recorded a 7.8 per cent increase in its total financial intermediation activities, which amounted to Euros million at 31 st December There was little change over the year in the aggregate share represented by direct and indirect deposits. Customer deposit balances rose 9.3 per cent to Euros million and indirect deposits ended the year at Euros million (+ 7.2 per cent). Within indirect deposits, wealth management reached Euros million (+19.4 per cent), and assets in custody rose 1.2 per cent to Euros million. Lending to customers amounted to Euros million, slightly higher than December 2004 s figure (+0.8 per cent). Medium/long-term lending (Euros 86.2 million) accounts for 48.5 per cent of the aggregate total, 13.8 per cent higher than in 2004; short-term credits totalled Euros 80.6 million, down 6 per cent. Financial assets rose 67.1 per cent to Euros 73.1 million. In particular, available for sale financial instruments (Euros 2 million) rose 1.8 per cent and those held for trading (Euros 71.2 million) increased by 70.1 per cent. 49

50 Net profit for the year was Euros 894,000 lower than 2004 s result at Euros 1.2 million. Net interest income amounted to Euros 6.6 million, unchanged over Net commission income rose 15 per cent to Euros 5.7 million. Net trading income rose by Euros 103,000 to Euros 1.7 million. This rise was the result of good returns on capital securities, bonds and collective investment schemes, amounting to 2.8 million, which overturned the previous year s negative result of 964,000. Trading of financial derivatives generated a loss of Euros 1.9 million (2004: +Euros 249,000), mostly due to an equity swap transaction, the related benefits of which are stated dividends. Gross operating income rose by 9.6 per cent from Euros 14.1 to Euros 15.5 million. Net provisions for credit losses fell 68.7 per cent to Euros 916,000. Operating costs totalled Euros 12.4 million. The caption is made up almost exclusively by administrative charges of Euros 12.3 million, of which staff costs account for Euros 7.6 million, and other expenses Euros 4.7 million. Pre-tax profit amounted to Euros 2.1 million. After tax (Euros 896,000), net profit at 31 st December 2005 amounted to Euros 1.2 million. BANCA CESARE PONTI (thousands of Euros) Change % 31/12/05 30/9/05 31/12/04 31/12/04 12/05 (2) pro forma (3) 12/04 p.f. BALANCE SHEET Total assets 308, , , , % Customer deposits (A) 262, , , , % Other Financial Intermediation Activities (B) 726, , , , % - Assets under management 268, , , , % - Assets in custody 458, , , , % Total Financial Intermediation Activities (TFIA) (A+B) 989, , , , % Loans to customers (1) 177, , , , % Financial assets 73,133 87,985 43,851 43, % Shareholders' equity 21,149 21,149 23,028 20, % INCOME STATEMENT Gross operating income 15,468 11,731 14, % Net income from financial management 14,552 10,985 11, % Operating income from ordinary activities before taxation 2,138 1,384-1,597 Net income 1, RESOURCES Number of branches % Number of employees % (1) Before value adjustments. (2) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and IAS 39. (3) Amounts calculated on the basis of IAS/IFRS, including IAS 32 and IAS 39. C. Insurance subsidiaries The figures relating to the Banca Carige Group s two insurance subsidiaries Carige Assicurazioni and Carige Vita Nuova have been prepared in accordance with the Italian Civil Code and specific accounting requirements for the insurance sector (Legislative decree 175/95, Legislative decree 173/97, ISVAP ruling 735/97). These results differ from those stated elsewhere in this Consolidated Report ( Insurance Business and Explanatory Notes ), which were prepared on the basis of each company s reporting packages in accordance with rulings by the Bank of Italy (no. 262 of 22 nd December 2005) and the Italian insurance industry watchdog ISVAP (no of 22 nd December 2005), in addition to indications provided by the parent company, Banca Carige. Total shareholder s equity as at 31/12/05 of the Group s non life insurance provider Carige Assicurazioni amounted to Euros million. There were increases in both investments and technical reserves during the year; the former rose by 5.6 per cent to Euros million, the latter by 7.3 per cent to Euros million. 50

51 Net profit for the year rose 28.9 per cent form Euros 3.1 million in 2004 to Euros 3.9 million. Gross premiums received totalled Euros million, an increase of 4.6 per cent in comparison to Excluding reinsurance, the figure represents a 3.5 per cent increase to Euros million. Total accident claims incurred excluding reinsurance amounted to Euros 312 million (+6.1 per cent). Operating costs remained in line with those recorded in 2004, whilst the technical account recorded a positive result of Euros 6.8 million (2004: Euros 9.6 million). CARIGE ASSICURAZIONI (thousands of Euros) Change % 31/12/05 30/9/05 31/12/04 12/05 12/04 Gross premiums 530, , , % Premiums excluding reinsurance 451, , , % Claims incurred and settled 1/1/05-31/12/05 312, , , % excluding reinsurance Operating costs 114,726 82, , % Profit/loss from technical account 6,774 2,464 9, % Net income 3,939 2,370 3, % Investments 651, , , % Technical reserves excluding reinsurance 634, , , % Shareholders' equity 175, , , % Insurance offices % Staff % Total shareholders equity at 31 st December 2005 for the Group s life insurer Carige Vita Nuova amounted to Euros 50 million. Investments and technical reserves net of reinsurance both increased in comparison to the previous annual result, respectively, by 22.4 per cent (to Euros 1,398.5 million) and 23.5 per cent (to Euros 1,295.4 million). The company closed the year with a net profit of Euros 2.2 million, lower than the previous year s result of Euros 4 million. The technical account result was negative at Euros 896,000 (2004: Euros 5.6 million). Gross premiums rose by 42.5 per cent to Euros million; excluding reinsurance the increase is of 45.7 per cent to Euros million. Claims incurred and settled during the year (excluding reinsurance) recorded a 38.5 per cent increase to Euros 92.5 million. Related management costs also rose (+25.1 per cent) to Euros 16.1 million. 51

52 CARIGE VITA NUOVA SPA (thousands of Euros) Change % 31/12/05 30/9/05 31/12/04 12/05 12/04 Gross premiums 296, , , % Premiums excluding reinsurance 285, , , % Claims incurred and settled 1/1/05-31/12/05 92,499 61,605 66, % excluding reinsurance Operating costs 16,094 10,514 12, % Profit/loss from technical account ,596 Net income 2,241 1,545 4, % Investments (1) 1,398,464 1,292,141 1,142, % Technical reserves excluding reinsurance (1) 1,295,384 1,201,293 1,048, % Shareholders' equity 49,964 49,964 49, % Insurance offices % Staff % (1) Including those investments, mostly in the form of index and unit linked products, with risk backing provided by insurers and pension funds. D. Finance subsidiaries The Carige Group s wealth management company Carige Asset Management SGR SpA ( Carige AM ) manages fourteen fully operational funds (twelve of which designed for the Group s retail customers, and two reserved for institutional investors), in addition to the management on behalf of the Group s companies of twenty-six management lines (securities and fund management products), three insurance product lines ( Gestilink ), and three lines as part of the Carige Open Pension Fund scheme. Total assets under management (Group assets, and customer and client assets) amounted to at 31/12/05 Euros 7,466 million, an increase of 21.8 per cent in comparison to the previous year s figure of Euros 6.1 billion. Growth in asset balances was due principally to expansion in collective investment schemes, which rose over twelve months from Euros 4,527 million to Euros 5,701 million. There was more contained growth in individual management programmes and a small increase in assets under management in the Gestilink programme. The company s fully operational status allied to rigorous cost containments meant that at 31 st December 2005 it recorded a net profit of Euros 2.9 million. Gross operating income was Euros 9.6 million and derived from the balance between commission income of Euros 41.2 million and commission expenses of Euros 31.6 million. Operating costs totalled Euros 5.1 million, amortisation charges Euros 0.1 million, and net interest income Euros 0.2 million, which generated an operating result of Euros 4.7 million. After tax for the period of Euros 1.8 million, net profit at 31 st December 2005 amounted to Euros 2.9 million. 52

53 CARIGE A.M. SGR 31/12/05 30/09/05 31/12/04 (1) Change % 12/05 12/04 INTERMEDIATION (millions of Euros) Assets under management 7,466 7,422 6, Mutual funds 5,701 5,667 4, Private banking (securities and fund management) 1,398 1,395 1, Insurance products Pension funds Total excluding duplications 6,864 6,772 5, Total assets 20,258 18,792 11, Shareholders' equity 5,675 5,656 5, INCOME STATEMENT (thousands of Euros) Net commissions 9,641 7,056 2,750 Administrative costs 5,051 3,799 2,281 Operating income 4,739 3, Net income 2,910 2, RESOURCES Staff (2) (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and IAS 39. (2) Group staff posted to the company. Argo Finance One Srl, special purpose entity formed as part of the securitisation of bad loans carried out by Banca Carige at the end of 2000, at 31/12/05 had collected Euros 28.7 million in line with best performance repayment schedules. Total amounts collected at 31 st December 2005 (Euros million) have enabled reimbursement of the entirety of the class A (Euros 40 million) and class B (Euros 70 million) securities. The special purpose entity Priamar Finance Srl, (securitisation of C.R. Savona s non performing loans at the end of 2002) had collected a total of Euros 13.9 million, Euros 5.2 million of which during Argo Mortgage Srl and Argo Mortgage 2 Srl, special purpose entities in which Banca Carige has an indirect holding of 5 per cent via its subsidiary Carige Columbus Immobiliare Srl, were consolidated on the basis of SIC 12. The two companies are included with the Group s banking arm in line with the request for inclusion made. Argo Mortgage, the SPE formed during the securitisation of mortgage loans performed by Banca Carige at the end of 2001, had by December 2005 collected receipts of Euros million, Euros 66.5 million in Argo Mortgage 2, the SPE for a further securitisation transaction carried out by Carige relating to mortgage loans outstanding as at 30 th June 2004, had collected a total of Euros million, Euros million during Other subsidiaries. Galeazzo Srl ended the year with a net profit of Euros 57,000, similar to the previous year s result of Euros 56,000. The company s ordinary activities consist of the leasing of its own real estate portfolio. During the year the company recorded a profit on sales of Euros 6,500. Value adjustments to property totalled Euros 19,000, in line with the previous year. Tax charges recognised in the income statement amounted to Euros 36,000, Euros 9,000 of which in deferred tax (Euros 53

54 2,000 related to profits on instalment sales of properties. The company also has a local property tax charge of Euros 8,000. Columbus Carige Immobiliare Srl, a company operating in the leasing of the Group s real estate portfolio in addition to the purchase and re-sale of property, recorded a net profit for the year of Euros 623,000 in comparison to Euros 332,000 in With regards to the company s property lease activities, six properties were purchased during the year for a total investment of more than Euros 4 million; contracts were also exchanged for the purchase of properties at an overall cost of more than Euros 3 million. Lease income was up slightly over 2004, from Euros 2 million to Euros 2.2 million. Value adjustments amounted to Euros 566,000 in comparison to Euros 523,000 during the previous year. The company s property development activity consisted in the purchase of 7 development sites and the subsequent signing of 35 sale agreements for a capital gain of more than Euros 500,000. The book value of real estate awaiting sale amounted to Euros 13.8 million (2004: Euros 13.3 million). Net profit for Immobiliare Vernazza Srl at 31 st December 2005 rose from Euros 1,007,421 to Euros 1,037,310 thanks to improved lease revenues (Euros 26,000). Value adjustments totalled 114,000, slightly higher than 2004 s figure of Euros 113,000. Tax for the year amounted to Euros 714,000, of which Euros 599,000 in corporation tax (IRES) and Euros 73,000 in regionally-levied tax on businesses (IRAP). Deferred tax charges totalled Euros 42,000. The company also has a local property tax (ICI) bill of Euros 178,000. The total dividend pay out for shareholders was Euros 957,000. Immobiliare Carisa Srl recorded a net profit for 2005 of Euros 21,000, overturning a loss of Euros 16,000 in This improvement stemmed from increases in revenues and reductions in costs, amortisation and finance charges. Turning to the company s balance sheet, there was reduction in the quantity of medium/long-term debt (from Euros 1.6 million to Euros 1.3 million and an increase in short-term liabilities (from Euros 1 million to Euros 1.3 million). Total assets amounted to Euros 4.4 million, slightly down on 2004, and represented by real estate destined fro sale in the Savona area. Amounts receivable account for Euros 33,000, of which Euros 26,000 from customers and Euros 7,000 in tax credits, whilst almost all the assets are represented by property development activities in Carcare and in Cairo. Centro Fiduciario CF SpA s net profit for the year was 3 per cent lower than 2004 at Euros 137,000. Operating revenues rose 11.5 per cent to Euros 951,000, of which Euros 638,000 in trust commissions (+14.9 per cent) and Euros 313,000 in fees received from Banca Carige for securities trading services (2004: +5.2 per cent). Operating costs amounted to Euros 718,000, 13.5 per cent higher than in This increase was partially the result of the renewed national labour contract for the sector plus higher amortisation charges relating to IT&C investments. The net result of the company s ordinary activities was Euros 233,000, up 5.8 per cent over Dealing profits rose 12 per cent principally due to the investment of financial resources generated by assets classified as sostituto d imposta. After tax (Euros 137,000), net profit (Euros 137,000) was 3 per cent lower than the previous year s result (-Euros 4,000), largely as a result of increased tax charges. Total investments made during the year amounted to Euros 109,000 and refer almost entirely to IT&C. The company s assets include Euros 276,000 in amounts in trust (+10.1 per cent) and 835 contracts (+2.1 per cent). 54

55 PROSPECTS AND CONCLUSIONS The Banca Carige Group s overarching strategic aim for the immediate future is to press ahead with operating improvements in order to maximise returns on the substantial investments made in recent years. These improvements consist in achieving in particular: - continuing alignment of the branches and banks acquired to the average performance targets fixed by Banca Carige; - reaching of improved levels of ROE and ROI; - reducing the cost:income ratio to best performer levels. The share capital increase decided by the Board of Directors on 25 th January 2006 for around Euros 200 million will provide Carige with the resources necessary for growth internally (new branch openings) and externally (acquisitions) foreseen in the Group s Strategic Plan Genoa, 20 th March 2006 The Board of Directors 55

56 56

57 CONSOLIDATED BALANCE SHEET ASSETS 31/12/05 31/12/04 (1) 10 - Cash and higly liquid deposits 195, , Financial assets held for trading 3,333,537 3,535, Financial assets designated at fair value 602, , Financial assets available for sale 1,186, , Financial assets held to maturity 2,764 2, Loans to banks 855,875 1,572, Loans to customers 13,661,663 11,405, Hedging derivatives 61,290 23, Equity investments 69,917 66, Technical reserves charged on reinsurers 176, , Tangible assets 1,070,990 1,006, Intangible assets 676, ,073 including: - goodwill 651, , Tax assets 327, ,779 a) currents 153, ,242 b) anticipated 173,805 49, Other assets 844, ,342 Total assets 23,066,391 20,786,316 (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32, IAS 39 and IFRS 4. 57

58 LIABILITIES AND STOCKHOLDERS' EQUITY 31/12/05 31/12/04 (1) 10 - Amounts owed to banks 1,111, , Amounts owed to customers 8,657,736 8,365, Debt securities in issue 6,351,593 5,900, Financial liabilities held for trading 130,617 73, Financial liabilities designed at fair value 1,087, , Hedging derivatives 42,401 2, Tax liabilities 331, ,909 a) currents 102,912 25,038 b) differed 228, , Other liabilities 1,052,397 1,085, Reserves for termination indemnities 130, , Reserves for risks and charges 379, ,707 a) reserves for pensions and similar commitments 320, ,812 b) other reserves 59,470 40, Technical reserves 1,494,945 1,292, Revaluation reserves 721, , Capital instruments 11, Reserves 26, , Additional paid-in capital 263, , Capital stock 1,113,327 1,113, Own shares (-) - - 1, Minority interests (+/-) 27,219 46, Income (Loss) for the period (+/-) 131, ,214 Total liabilities and stockholders' equity 23,066,391 20,786,316 (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32, IAS 39 and IFRS 4. 58

59 INCOME STATEMENT Interest income and similar revenues 894, , Interest expenses and similar charges - 419, , net interest income 475, , Commission income 295, , Commission expenses - 49,280-17, Net commissions 246, , Dividends and other similar revenues 24,495 5, Income (loss) on financial assets and liabilities held for trading (net) 36,166 34, Income (loss) from hedging activities - 1, Income (loss) on disposal of: - 1,972 9,793 a) loans 2, b) financial assets available for sale 1,314 10,223 d) financial liabilities - 5, Net value adjustment on financial assets designated at fair value Gross operating income 778, , Net value adjustment on: - 54, ,939 a) loans - 53, ,348 b) financial assets available for sale d) other financial assets - 1, Net income from financial management 724, , Net premiums 651, , Net income (loss) from insurance management - 643, , Net result from financial and insurance management 733, , Administrative costs: - 534, ,906 a) staff costs - 334, ,392 b) other administrative costs - 199, , Net provisions for risks and charges - 8,320 1, Amortization and depreciation of tangible fixed assets - 18,058-17, Amortization and depreciation of intangible fixed assets - 11,735-12, Other operating expenses and revenues 47,850 94, Operating costs - 524, , Income (loss) from equity investments 5,376 14, Income (loss) from disposal of investments 3, Operating income (loss) from ordinary activities before taxes 216, , Tax expenses (income) related to profit or loss from ordinary activities - 81,745-49, Income (loss) from ordinary activities after taxes 135, , Net income (loss) for the period 135, , Minority interests 3,626 2, Net income (loss) for the period after minority interests 131, ,214 (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32, IAS 39 and IFRS 4. 59

60 STATEMENT OF RIMONIALE CHANGES IN STOCKHOLDERS' EQUITY Group shareholders' equity at 31/12/2004 Third parties shareholders' equity at 31/12/2004 Opening balance change Group shareholders' equity at 1/1/2005 Third parties shareholders' equity at 1/1/2005 Allocation of previous year net income Group reserves Third parties reserves Dividends and others Group reserves variation Third parties reserves variation Group new shares issue Year variation Operations of shareholders' equity Third parties new shares issue Group own shares purchase Third parties own shares purchase Extraordinary distribution dividends Capital instruments variation Derivatives on own shares Stock option Group net income at 31/12/2005 Third parties net income at 31/12/2005 Group shareholders' equity at 31/12/2004 Third parties shareholders' equity at 31/12/2004 Capital stock: 1,113,327 19,614-1,113,327 8,575 1,388 1,113,327 10,192 a) ordinary shares 959,898 19, ,898 8,575 1, ,898 10,192 b) other shares 153, , ,429 Additional paid-in capital 262,839 4, , , ,211 3,831 Reserves: 168,518 14, ,834-2,316 8,138 27,758-1,211-1, ,558 5,608 a) profit 139,589 14, ,607-8,018 8,138 27,758-1,211 1, ,856 5,608 b) others 28, ,227 5,702-5,702 Revaluation reserves: 191,073 5, , ,766 4,162-9, ,982 3,979 a) available for sale , , , , b) hedging cash flows ,033-1, , d) special revaluation laws 191,073 5, ,073 3, ,073 3,605 Capital instruments ,402 11, ,517 Own shares - 1, , , Profit (loss) for the period 111,214 2, ,214 2,534-27,758-83, ,437 3, ,437 3,626 Shareholders' equity 1,845,670 46, ,261 2,226,931 24, ,211-83,456-8, ,673 3, ,437 3,626 2,268,032 27,219 60

61 Group shareholders' equity at 31/12/2003 Third parties shareholders' equity at 31/12/2003 Opening balance change Group shareholders' equity at 1/1/2004 Third parties shareholders' equity at 1/1/2004 Allocation of previous year net income Group reserves Third parties reserves Dividends and others Group reserves variation Third parties reserves variation Group new shares issue Year variations Operations of shareholders' equity Third parties new shares issue Group own shares purchase Third parties own shares purchase Extraordinary distribution dividends Capital instruments variation Derivatives on own shares Stock option Group net income at 31/12/2004 Third parties net income at 31/12/2004 Group shareholders' equity at 31/12/2004 Third parties shareholders' equity at 31/12/2004 Capital stock: 1,113,327 9,907-1,113,327 22,648-1,113,327 19,614 a) ordinary shares 959,898 9, ,898 22, ,898 19,614 b) other shares 153, , ,429 - Additional paid-in capital 255,023 1, ,023 2,610 7, ,839 4,484 Reserves: 162,806 3,807 17, ,376 7,951 1, , ,518 14,083 a) profit 133,877 3,807 17, ,447 7,951 1, , ,589 14,083 b) others 28, ,929-28,929 - Revaluation reserves: 8, , ,073 3, ,073 5,655 a) available for sale b) hedging cash flows d) special revaluation laws 8, , ,073 3, ,073 5,655 Capital instruments Own shares , , Profit (loss) for the period 84,742 2,030 84,742 2,552-1,447-83, ,214 2, ,214 2,534 Shareholders' equity 1,623,948 17, ,593 1,824,541 38, ,295-5, , ,214 2,534 1,845,670 46,353 The increase in shareholders equity attributable to third parties as at 1st January 2004 was principally due to the full consolidation of the Group s insurance companies, previously accounted for under the equity method. Net profit attributable to third parties recorded for the year ending 31st December 2004 is not homogenous with the corresponding income statement item as the loss for the year recorded by Banca Cesare Ponti was not recognised in the consolidated income statement as the acquisition of the company was completed at year end. 61

62 CASH FLOW STATEMENT Direct method A. OPERATIONS 31/12/05 31/12/04 1. Management activities 668, ,106 - interest income received (+) 897, ,370 - interest charges settled (-) - 367, ,500 - dividends and similar revenues (+) 22,949 5,784 - net commission income (+/-) 246, ,291 - personnel charges (-) - 300, ,157 - net premiums received 651, ,025 - other insurance income and charges (-) - 430, ,871 - other costs (-) - 549, ,944 - other revenues (+) 494, ,330 - taxes (-) 4,570-73,222 - costs/revenues from groups of discontinued operations, net of taxes (+/-) 2. Liquid assets generated/absorbed by financial assets - 967,470-1,095,374 - financial assets held for trading 191, ,280 - financial assets designated at fair value - 74,000-87,449 - financial assets available for sale - 58,983 32,640 - loans to customers - 1,854, ,211 - due from banks: repayable on demand - 48, ,986 - due from banks: other loans 767,298 73,019 - other asset captions 108, , Liquid assets generated/absorbed by financial liabilities 455,053 1,085,157 - due to banks: repayable on demend - 5, ,495 - due to banks: other deposits 133,823-65,764 - due to customers 299, ,900 - securities issued - 369, ,930 - financial liabilities held for trading - 60,323 36,343 - financial liabilities held for trading 558, ,975 - other liabilities - 101, ,732 Net liquid assets generated/absorbed by operations 156, ,889 B. INVESTMENTS 1. Liquid assets generated by: 20,210 2,645 - sale of investments - dividends received from equity investments 1,546 - sale of financial assets held to maturity sale of tangible assets 29,037 2,512 - sale of intangible assets - 10,516 - sale of business divisions 2. Liquid assets absorbed by: - 84, ,853 - purchase of investments - purchase of financial assets held to maturity - purchase of tangible assets - 20,579-72,366 - purchase of intangible assets - 10,402 - purchase of business divisions - 64, ,085 Net liquid assets generated/absorbed by investments - 64, ,208 C. FUNDING ACTIVITIES - issue/purchase of own shares 1,301-1,300 - issue/purchase of capital instruments dividend distribution and other uses - 87,177-85,628 Net liquid assets generated/absorbed by funding activities - 85,389-86,928 NET LIQUID ASSETS GENERATED/ABSORBED DURING THE YEAR 6,417-2,247 KEY: (+) generated; (-) absorbed 62

63 RECONCILIATIONS Balance sheet caption Amount 31/12/05 31/12/04 Cash in hand and liquid assets available at the beginning of the year 189, ,301 Net liquid assets generated/absorbed during the year 6,416-2,247 Cash in hand and liquid assets: exchange rate translation effects Cash in hand and liquid assets at the end of the year 195, ,054 63

64 64

65 65

66 A.1 INTRODUCTION SECTION 1 Conformity with international financial reporting standards The Consolidated Financial Statements of the Banca Carige Group, approved by the Board of Directors of Banca Carige during its meeting of 20 th March 2006, were prepared in accordance with International Accounting Standards and International Financial Reporting Standards as issued by the International Accounting Standards Board, endorsed by the European Union as at 31 st December 2005 and in accordance with International Financial Reporting Interpretations (SIC/IFRIC) as applicable to the Banca Carige Group. 66

67 SECTION 2 Banca Carige Croup s general accounting policies These Consolidated Financial Statements refer to the Parent Company Banca Carige and its subsidiaries consolidated on the basis of the methods illustrated in section 5 Area and Method of Consolidation and have been prepared in accordance with the accounting principles stated in part A2 Principal Balance Sheet and Income Statement Aggregates. The Group has adopted the following requirements: IAS 1; Bank of Italy circular no. 262/2005; the transitional requirements presented in the annex to the General Manager of the Bank of Italy s letter of 22 nd December In particular: - Balance sheet and income statement lines and explanatory notes Balance sheet and income statement lines do not illustrate amounts for which figures are not provided either for the year as at 31 st December 2005 or for previous accounting periods. In the explanatory notes captions and tables which do not contain amounts either due to the inexistence of the item or in accordance with the transitional requirements established by the Bank of Italy in its letter of 22 nd December 2005 are not provided. For the year ending 31 st December 2005, in the explanatory notes the absence of figures in balance sheet and/or income statement tables indicates the inexistence of the item in question. - Unit of account and rounding up The consolidated financial statements are presented in euro, which is the functional currency of the Group. In the calculation of amounts illustrated in captions, items and sub-items (i.e. of which ) no account is taken of decimals equal to or lower than 50 eurocents; amounts greater than 50 eurocents are rounded up to the nearest euro (e.g. 86 eurocents = euro 1.00). Rounded up caption totals are calculated on the basis of rounded up items or sub-items where present. The algebraic total of rounding up differences to balance sheet items is recorded at other assets/liabilities and to income statement items at other operating income/expenses. Amounts presented in the explanatory notes are expressed in thousands of euros. Amounts equal to or lower than euros 500 are ignored; amounts greater than euros 500 are rounded up to the nearest thousand. Amounts illustrated in the explanatory notes are rounded up so as to be consistent with amounts presented in the balance sheet and income statement. - Financial Review The Group s financial review has been prepared in accordance with the methodology indicated by the Bank of Italy in its circular no. 262/2005 ( metodo diretto ). - Going concern The statements have been prepared in respect of the going concern principle with assets, liabilities and off-balance sheet transactions recognised at their current realisable value. - Matching/Accruals Costs and revenues are recognised on an accruals basis and recognised in the period top which they relate. - Consistency Items are accounted for in a consistent manner within a period and from one period to another unless a different approach is judged to be necessary in the light of international accounting standards or interpretations. Changes to comparatives deriving from reclassification and/or remeasurement of items are where possible reclassified, setting out the nature and effects arising from reclassification. Balance sheet schemes and explanatory notes have been prepared in conformity with the Bank of Italy circular no. 262 of 22 th dicember Materiality and aggregation Significant categories present in similar items are stated independently as are dissimilar items unless immaterial. - Netting Assets, liabilities, costs and revenues are offset and the net amount reported only if allowed for under IFRS of IFRIC or foreseen by balance sheet/income statement lines specific to banks. - Comparatives In accordance with the transitional provisions set out in IFRS 1, First-time Adoption of 67

68 International Financial Reporting Standards and other relevant standards, the Group has applied IFRS in force as at 31 st December 2005 in its financial reporting with effect from 1 st January 2004, with the exception of the standards relating to financial instruments, insurance contracts and additional information requirements, which were applied with effect from 1 st January Therefore the impacts of adopting IAS 32, IAS 39 and IFRS 4 are not included in the 2004 comparatives in accordance with IFRS 1. Financial instruments and insurance contracts for the year enduing 31 st December 2004 were accounted for under Italian GAAP. In the explanatory notes, comparatives are provided only for total amounts illustrated in tables. Additional information is provided for the reader s benefit where judged necessary. The statements were prepared in accordance with Italian GAAP where compatible with IFRS. Consequently, the Group followed the following Italian GAAP: Legislative decree 87/92; Italian Civil Code and corresponding provisions of the Consolidated Finance Law (TUF) applicable to the reporting obligations of listed companies (article 2428 Italian Civil Code); audit (article 2409-bis Italian Civil Code); publication of financial statements (article 2435 Italian Civil Code). SECTION 3 - Area and method of consolidation 1. SUBSIDIARIES AND JOINTLY- CONTROLLED ENTITIES On the basis of IFRS, the area of consolidation includes all subsidiaries, whether held directly or indirectly. Therefore, also subsidiaries not classified as monetary financial entities or similar have been consolidated. Entities qualify as subsidiaries where the Group has the power to exercise control over the financial and operating policies of the entity, according to the provisions of IAS 27. With regards to special purpose entities, Argo Mortgage and Argo Mortgage 2 have been consolidated on the basis of the interpretation contained in SIC 12 even though the Group s holding is only 5 per cent. These consolidated financial statements take into account the consolidation of the two entities given Banca Carige s intention to request their inclusion within the area of consolidation. 68

69 1. Subsidiaries and jointly-controlled entities Company Name Registered Office Type of control Holding Voting rights (2) (3) Subsidiary Shareholding (%) Effective % Potential % A. Company A.1 Fully Consolidated Banking Group 1. Banca CARIGE SpA Genova 2. Cassa di Risparmio di Savona SpA Savona 1 A Cassa di Risparmio di Carrara SpA Carrara 1 A Banca del Monte Lucca SpA Lucca 1 A Banca Cesare Ponti SpA (4) Milano 1 A Carige Asset Management SpA Genova 1 A A Centro Fiduciario SpA Genova 1 A A Argo Finance One Srl Genova 1 A Priamar Finance Srl Genova 1 A Argo Mortgage Srl Genova 4 A Argo Mortgage 2 Srl Genova 4 A Columbus Carige Immobiliare SpA Genova 1 A A Galeazzo srl Genova 1 A Immobiliare Vernazza Srl (5) Genova 1 A Immobilire CARISA Srl Savona 1 A Insurance companies 16. Carige Assicurazioni SpA (5) Milano 1 A Carige Vita Nuova SpA Genova 1 A Other companies 18. Dafne Immobiliare Srl Milano 1 A Portorotondo Gardens Srl Milano 1 A A.2 Jointly-controlled entities - Key (1) Type of control: 1 = majority of voting rights at the shareholders' meeting 2 = significant influence at shareholders meeting 3 = in agreement with other shareholders 4 = other forms of control 5 = unitary control pursuant to article 26, paragraph 1, Legislative decree 87/92 6 = unitary control pursuant to article 26, paragraph 2, Legislative decree 87/92 7 = joint control (2) Availability of voting rights, effective or potential (3) Figure provided only where different from shareholding (4) Effective voting rights expressed as a percentage differs from the shareholding as this includes voting rights related to shares held as pledge (7.66 per cent) subject also to a call option (see section 10.4) (5) Effective voting rights expressed as a percentage differs from the shareholding as calculation does not take into account own shares in portfolio The activities of the Group s subsidiaries can be categorised as follows: Banks (Banca Carige, Cassa di Risparmio di Savona, Cassa di Risparmio di Carrara, Banca del Monte di Lucca, Banca Cesare Ponti ); wealth mangement entity (Carige Asset Management SGR ); trust enterprise (Centro Fiduciario); SPE s (Argo Mortgage, Argo Mortgage 2); insurance companies (Carige Vita Nuova, Carige Assicurazioni); property companies (Immobiliare Ettore Vernazza, Galeazzo, Immobiliare Carisa, Columbus Carige Immobiliare, Portorotondo Gardens, Dafne Immobiliare). In comparison to the area of consolidation as at 31st December 2004, prepared under Italian GAAP (Legislative decree 87/92), the two insurance companies, previously recorded under the equity method, and the special purpose entities, Argo Mortgage and Argo Mortgage 2, have been fully consolidated. The four special purpose entities Argo Finance One, Priamar Finance, Argo Mortgage and Argo Mortgage 2 were fully consolidated on the basis of the companies individual statements. With regards to the securitisation of performing loans carried out by Argo Mortgage 2 in 2004, 69

70 as the transaction does not fully represent the substantial transfer to third parties of related risks and rewards, consolidation was carried out on the basis of the company s segregated assets as stated in the explanatory notes of these statements, prepared in accordance with the Bank of Italy s provisions on the subject of SPE s set up for the purpose of securitising financial assets. The companies Portorotondo Gardens and Dafne Immobiliare, acquired during 2005, were also consolidated. Further details regarding these transactions can be found in Part G, section of the explanatory notes. The consolidated statements were prepared utilising: - IFRS/IAS-compliant balance sheet and income statement lines of the Parent Company Banca Carige and Group subsidiaries as at 31 st December 2005 as approved by the respective Boards of Directors; - Reporting packages prepared by those companies that did not adopt IFRS/IAS and approved by the respective Boards of Directors. Minor subsidiaries being outside the area of consolidation are recorded at cost in accordance with general framework principles. The Group s banking and insurance companies, along with the two property companies classified as other companies are considered as significant subsidiaries. With regards solely to the other companies, those with balance sheet totals of less than euros 10 million and not more than euros 50 million are classified as minor subsidiaries in accordance with the Bank of Italy s thirteenth update of 25 th January 2006 to its circular no. 115 of 7 th August Non fully consolidated companies Company Name Registered Office Holding Subsidiary Shareholding (%) 1. Assi 90 Srl Genova Carige Ass.ni SpA Carige V. N. SpA AG Srl Genova Assi 90 Srl Savona 2000 Srl Savona Assi 90 Srl AG Srl Associates for which shares with voting rights have been received as a form of credit guarantee rather than as means of exercising control are also excluded from the area of consolidation. In order to isolate the effects of IFRS adoption from those deriving from the full consolidation method, figures contained in balance sheet and income statement reconciliations presented as attachments to these statements under the column Italian GAAP have been calculated with reference to the same area of consolidation as that defined for compliance with IFRS. 2. OTHER INFORMATION Associates, entities in which the Group has significant influence, are valued according to the equity method. 70

71 Holdings in which the Group has a significant influence (investments valued according to the equity method) Company Neme A. Imprese consolidate con il metodo del patrimonio netto Registered Office Holding Subsidiary Shareholding (%) 1. Autostrada dei Fiori Spa Savona Banca Carige SpA Cassa di Risparmio di Savona SpA Frankfurter Bankgesellschaft AG Francoforte Banca Carige SpA Valuation of the Group s investment in Frankfurter Bankgesellschaft AG was performed on the basis of the company s statements as at 31 st December 2005 which were prepared in accordance with German GAAP. A specific IFRS-compliant reporting package for the company was deemed unnecessary. With regards to Autostrada dei Fiori SpA, however, an IFRS-compliant reporting package was prepared. Companies in which the Group has significant influence but which have a non-significant role in the Group s operating and financial strategy are valued at cost. Holdings in which the Group has a significant influence but not valued according to the equity method Company Name Registered office Holding Subsidiary Shareholding (%) 1. Assimilano Srl Milan Assi 90 Srl Assicentro Recina Servizi Srl Rome Assi 90 Srl B.D.A. SpA Milan Assi 90 Srl Atoma Srl Milan Carige Ass.ni SpA Carige V. N. SpA U.C. Sport e Sicurezza Srl Milan Carige Ass.ni SpA Carige V. N. SpA Consorzio per il Giurista di Impresa Scrl Genoa Banca Carige SpA Full Consolidation The Group financial statements consolidate the assets, liabilities, profits and losses of the subsidiaries under one entity. In order to do this, four measures are necessary: - convergence to a uniform set of accounting standards adopted throughout the Group. Value adjustments are to be used in the case of the adoption of a different standard by one Group subsidiary to that adopted for similar transactions in the consolidated statements; - aggregation item-by-item of the parent company s and subsidiaries statements. The assets, liabilities, shareholders equity, profits and losses are added together; - off-setting of the value of the subsidiaries with the corresponding Group s share of the subsidiaries net assets at the date on which control is transferred to the Group. Any positive difference is carried where possible to the subsidiaries balance sheet. The residual amount as goodwill is recorded at Intangible assets. Goodwill is capitalised and reviewed annually for impairment, or 71

72 more frequently when there are indications that impairment may have occurred. Negative differences are stated at the income statement. The share of net assets and profit attributable to shareholders are recorded at specific captions; - elimination of significant intra-group transactions and balances. Goodwill arising from acquisitions prior to 2004 have not been restated, as foreseen by IFRS 1. With reference to the acquisitions of C.R. Carrara and Banca Cesare Ponti occurring after 2004, goodwill and the Group s share of net assets are restated at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed, plus any costs directly related to the acquisitions. Restatement at fair value, with the ensuing effect on goodwill and net assets, was carried out solely with regards to significant elements acquired. Consolidation carried out with the equity method An investment accounted for by the equity method is initially recorded at cost and increased (or decreased) each year according to variations in the Group s share of the equity of the associated or jointly controlled entity. Variations in the Group s share of the equity of the associated or joint entity deriving from post acquisition net income (or loss) are recorded at the investee s income statement. The Group s share of variations to the equity of the investee stated exclusively in its balance sheet is carried to reserves. The excess of the cost of an acquisition over the Group s share of the fair value of the identifiable net assets is not recorded as goodwill at intangible assets, with the specific impairment test this implies, but recorded at the caption equity investments. The book value of the investment is reviewed for impairment (difference between the investment s recoverable value and book value) when there are indications that impairment may have occurred. Significant infra-group returns are eliminated. 72

73 SECTION 4 - Events after 31 th december 2005 The most significant events occurred during the first quarter of 2006 are presented below in chronological order: on 16 th January, following the deliberation of the Board of Directors of Banca Carige of 12 th December 2005, the Bank exercised a call option according to the terms of the shareholders agreement signed on 23 rd March 2001 for the purchase of Stiching Faro s 40 per cent holding in Argo Finance One (equivalent to 4,130 shares). As a result of the acquisition, Carige s holding in the SPE reached 100 per cent; the Bank of Italy in its letter of 17 th January 2006 pursuant to Legislative decree 142/2005 communicated the implementation into Italian law of Directive 2002/87/EC concerning the supplementary regulatory requirements identified in the Directive for banks, insurance companies and investment firms belonging to financial conglomerates. Consequently, the financial conglomerate Banca Carige Group, of which Banca Carige is the Parent Company, will be subject to Bank of Italy oversight in this area; on 20 th January, in accordance with the decision of the Executive Committee of 20 th July 2005, the total acquisition of the share capital of Esaote SpA was finalised. The acquisition was performed via the setting up of new company, Imaging SpA, in which Banca Carige has an per cent investment (12,000,000 shares at a nominal value of euro 1 each). In accordance with the agreement signed by Banca Carige and the other partners of Imaging Spa, Mr Luca Arnaboldi was appointed to the Boards of both Esaote Spa and Imaging SpA. Mr Domenico Sardano was named as acting Statutory Auditor for both companies; on 25 th January the Board of Directors of Banca Carige deliberated a fully-paid up share capital increase, with first right of option given to existing shareholders at a nominal value of euros 76.9 million, of euros 200 million inclusive of premium; the Shareholders Meeting of Banca Carige on 25 th January, within the confines of its ordinary business, confirmed Mr Nicolas Merindol s appointment as Board member. In the course of its extraordinary business, the same Meeting agreed to a free capital increase of euros million and an addition to the Company s articles on the question of limits to the voting rights of banking Foundations; in February, in the light of the Bank of Italy s decision not to authorise Unipol s takeover bid for Banca Nazionale del Lavoro and the subsequent cancellation of the shareholder agreement between the Bank and Unipol, Banca Carige exercised its put option on the BNL shares in its possession, previously underwritten by Unipol and subsequently sold by the latter to Ariete, Fin.Ad. (Coop Adriatica), Nova Coop, Talea (Coop Liguria) and Coop Estense; the Executive Committee in its meeting of 2 nd February agreed to the sale by C.R. Carrara of its shareholding in AREA SpA (total holding: 741 shares) for an overall price of euros 1,350,000 in addition to C.R. Carrara s purchase of 477,347 new shares issued by the company International Marmi e Macchine, as part of an equity raising operation of euros 18,000,000; in February the group of banks with equity investments in SI Holding SpA (San Paolo IMI, Banca Monte dei Paschi di Siena, Banca Lombarda e Piemontese, Banca Carige, C.R. Firenze and C.R. Ravenna) acquired control of the company. Banca Carige s holding in SI Holding rose temporarily to per cent. Equivalent to 4,461,781 shares. The number of shares exceeding the holding previously set for Carige (

74 4.90 per cent) will be redistributed amongst the other banks, partners to the shareholders agreement; with reference to the bond issue Banca Carige 1.50 per cent hybrid subordinated issue with reimbursement convertible into ordinary shares, the number of bonds subject presented for conversion at 28 th February 2006 amounted to 8,762,761 with a nominal value of euros 2.50 each; these bonds were converted into 8,762,761 ordinary shares with a nominal value of euro 1 each. As a result of conversion, the Bank s fully-paid up share capital at 20 th March 2006 amounted to euros 1,122,089,600, made up by 968,660,279 ordinary shares with a nominal value of euros 1 each, and 153,429,321 convertible savings shares with a nominal value of euro 1 each. In March 2006, up to the 17 th, bearing in mind that conversion rights were suspended from 20 th March 2006 inclusive, a further 10,282,684 bonds were presented for conversion into 10,282,684 new ordinary shares. Following this conversion, carried out on 14 th April 2006, the Bank s total share capital amounted to euros 1,132,372,284, made up by 978,942,963 ordinary shares with a nominal value of euro 1 each, and 153,429,321 convertible savings shares with a nominal value of euro 1 each; the Board of Directors of Banca Carige in its meeting of 20 th February approved the guidelines of the strategic plan for for Banca Cesare Ponti, which is part of the overall Strategic Plan for the Banca Carige Group previously defined and agreed on by the Board. The Board of Directors of Banca Cesare Ponti adopted the same proposals in its meeting of 21 st February; on 27 th February the Bank of Italy granted Banca Federiciana SpA authorisation to carry out banking business. Banca Carige has a 10 per cent holding in the company, as deliberated by Carige s Board of Directors on 18 th April 2005; Moody s modified its outlook for Banca Carige on 13 th March from negative to stable as a result of the successful integration of bank and branch acquisitions and the improvement of fundamentals achieved in 2005; as indicated in previous reports, following the suspension in 2001 and then definitive cancellation in 2002 (Law decree 282/2002 converted into Law 27/2003) of the tax breaks previously offered by Law 461/98 and the subsequent Legislative decree 153/99, the economic benefits deriving from the tax breaks were repaid by Banca Carige. The amount paid is stated at a specific item Amounts owed to tax authorities and takes into account litigation at EU level in which Italian banks are represented by its association ABI. Reserves for tax charges subject to litigation were already sufficient to cover a possible negative outcome. The European Court of Justice in its sentence of 15 th December 2005 in response to the appeal made by the Italian State, judged that the tax breaks in question represented state aid. In response to this sentence, ABI instructed its lawyers to drop the appeal lodged before the courts of first instance; ABI s lawyers did so on 10 th March

75 SECTION 5 - OTHER ASPECTS There are not other significant aspects. 75

76 A.2 PART RELATED TO THE MAIN BALANCE AGGREGATES This section sets out the accounting principles adopted for the purpose of preparing the financial statements for the year ending 31 st December In accordance with regulatory requirements, each asset and liability caption provides details of the criteria utilised for the classification, recognition (initial and subsequent), valuation, cancellation and measurement of balance sheet items. 1. Financial assets held for trading This category includes debt securities, equities and positive value held for trading derivative contracts. Derivative contracts include those connected to fair value options or to hedges of held for trading financial assets and liabilities. Financial assets held for trading are: - initially recorded at fair value excluding directly related transaction costs. Debt securities and equities are recorded at the date of settlement, whilst derivatives are recorded at the date of subscription; - subsequently subject to valuation on the basis of the evolution of fair value with any changes being recorded in the income statement; The fair value of: a) financial instruments listed on active markets is represented by related market price; if the prices are not significant, sub b) is applied; b) financial instruments for which no active market exists is determined on the basis of measurement methods and valuation models developed according to the best practices adopted by market participants; - derecognised when the rights to receive cash flows have expired or when the Group has transferred substantially all the risks and rewards of ownership. 2. Available for sale financial assets Available for sale investments are non-derivative financial investments and those not categorised as financial assets held for trading, financial assets held to maturity or loans to banks and customers. This category in particular includes equity investments in subsidiaries or associates. Available for sale financial assets are: - initially recorded at fair value including direct and incremental transaction costs, with the exception of equities for which no active market exists, which are recognised at purchase cost as the determination of their fair value cannot be made on a certain basis. Debt securities and equities are recorded at the date of settlement; - subsequently subject to valuation on the basis of the evolution of fair value, with the exception of equities for which no active market exists, which are recognised at purchase cost as the determination of their fair value cannot be made on a certain basis. Gains and losses arising from changes in fair value are recorded in a specific reserve in equity, net of tax. Gains or losses arising on sale are recognised in the income statement. Impairment losses and positive or negative translation differences are recognised immediately in the income statement. Prolonged impairment of value is recognised in the income statement at the caption Impairment losses to available for sale financial instruments. If the reason for the writedown ceases to exist, the writeback in value is recognised in the income statement. Impairment of value is assessed at the end of each accounting period (annual, interim). - derecognised when the rights to receive cash flows have expired or when the Group has transferred substantially all the risks and rewards of ownership. 76

77 3. Held to maturity financial assets Held to maturity investments are debt securities with fixed or determinable payments that the Group s management has the intention and ability to hold to maturity. When the investment is judged no longer appropriate for HTM status, it is reclassified as an available for sale investment. Held to maturity investments are: - initially recognised at cost including direct and incremental transaction costs. Financial assets previously categorised as available for sale and reclassified as HTM investments are recognised at the fair value at the moment of reclassification, which represents the new amortised cost. HTM investments are recorded at the date of settlement; - subsequently valued at amortised cost using the effective interest method. Gains and losses arising on HTM assets are recorded in the income statement at the moment such assets are eliminated or their value is impaired, also by amortisation. Impairment of value is assessed at the end of each accounting period (annual, interim). Impairment losses are recognised in the income statement and are represented by the difference between the book value of the assets and the present value of expected future financial flows determined using the original effective interest rate. If the reason for the writedown ceases to exist, the writeback in value is recognised in the income statement; - derecognised when the rights to receive cash flows have expired or when the Group has transferred substantially all the risks and rewards of ownership. 4. Loans and Guarantees This category includes loans to customers and banks, commercial credits, sale and repurchase agreements, and receivables arising from finance leases, factoring, and insurance contracts. Loans are represented by non-derivative financial assets with fixed or determinable payments which are not listed on active markets and which have at no time been classified as available for sale financial assets. Loans are recognised at the moment the Carige Group becomes contractual counterpart. Credits are to be unconditional. Loans are initially recognised at fair value, which corresponds to the amount of money provided plus direct and incremental transaction costs. In the case of differences between the amount of money advanced and the fair value of the loan itself, the loan is initially recognised at an amount corresponding to future cash flows actualised at an appropriate rate and the difference recorded in the income statement. Loans are subsequently valued, where possible, at amortised cost, using the effective interest method. Short-term loans are not stated at amortised cost as the effect of applying the effective interest method is negligible. Amortised cost is the initial valuation, decreased or increased by capital repayments, value adjustments (writedowns and writebacks) and amortisation, the latter calculated using the effective interest method. The initial value corresponds to the difference between the amount advanced and that repayable at maturity. The effective interest rate is the rate that exactly discounts the expected future cash payments or receipts through the expected life of the financial instrument. The calculation of future flows and expected contract life takes into account contractual clauses that may impact amounts and maturities, whilst ignoring expected losses arising from the loan. The effective interest rate initially recognised is the rate that will be subsequently used in actualising future cash flows and determining amortised cost. Impairment of value is assessed at the end of each accounting period (annual, interim). In carrying out impairment testing, a distinction is made between non performing and performing loans. Non performing loans include bad loans, watchlists, rescheduled loans, country risk exposures (solely those classified as bad loans or watchlists), and past due positions (solely those classified as watchlists). Impaired loans (excluding past due positions) are valued singly on an analytical basis which takes into account differences between firstly, future expected cash flows and those flows fixed in the loan contract and, secondly, forecasted recovery times for homogeneous lending segments. Impairment testing also takes into account collateral received by the Group in respect of 77

78 customer liabilities and the probability of its liquidation. Performing loans, including loans to customers resident in countries classified at risk, and past due positions, are valued on a collective basis. Valuations are made for categories which are homogenous in terms of credit risk levels; expected loss (in percentages) is calculated on the basis of historical statistics referring to each group. On the basis of these valuations, a collective performing reserve has been established. Loans are derecognised when the asset in question is sold, thereby transferring substantially all the risks and rewards of ownership (in particular in the case of ceding and securitisation transactions), when the rights to receive cash flows have expired, or when the loan is classified as irrecoverable. The amount corresponding to the loss is recorded at the income statement net of previous provisions. In the case of recovery of previously written down exposures, the amount is recorded as a decrease at the caption Impairment losses to loans. With regards to securitisation transactions entered into by certain Group undertakings, the Banca Carige Group has, in accordance with IFRS 1, maintained Italian GAAP for all transactions prior to 1 st January As the securitisation transaction performed in 2004 does not fully represent a transfer of risks and rewards to third parties, it was rerecognised at equity as at 1 st January Financial assets designated at fair value This category includes investments with respect to unit-linked and index-linked insurance policies in which total risk is borne by the insured parties. 6. Hedge accounting The Group makes use of derivatives to hedge potential risks present in one or more asset or liability items (hedged item). The use of a hedging instrument aims to cover potential losses attributable to certain types of risk through gains that may arise on the hedging instrument itself. The Banca Carige Group applies the following types of hedge accounting: - fair value hedge accounting seeks to offset changes in the fair value of a hedged item due a particular risk exposure and is applied to hedged items, such as interbank deposits, loans to customers, postal orders, and bonds; - cash flow hedge accounting seeks to offset changes in future cash flows of a hedged item due to a particular risk exposure and is applied to groups of hedged items (liabilities). The Group enters into derivative contracts for hedging purposes exclusively with external counterparts. Consequently, any effect arising from transactions between Group companies is not recognised in the income statement. Hedging derivatives are recognised at fair value. In particular: - in the case of fair value hedge accounting, any changes in the fair value of hedging instruments and hedged items (as regards the part attributable to the hedged risk and in the case of hedge effectiveness) are recorded in the income statement. The difference between the changes in value represent the ineffective portion of the hedge determinable in terms of net economic impact; - in the case of cash flow hedge accounting, the fair value gain or loss associated with the effective portion of the cash flow hedge is recognised initially in shareholders equity, and recycled to the income statement when the hedged item affects profit or loss. Any ineffective portion of the gain or loss on the hedging instrument is recognised in the income statement immediately. The Group formally documents the relationship between the hedging instrument and hedged item as well as its risk management objectives and its strategy for undertaking the various hedging transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are effective in offsetting changes in fair values or cash flows of hedged items. A hedge is deemed ineffective when the change in the fair value of the hedging derivative differs from the change in the fair value of the hedged risk in the hedged item, or the cumulative change in the fair value of the hedging derivative differs from the cumulative change in the fair value of expected future cash flows of the hedged item. 78

79 At the end of every accounting period (annual, interim) the Group tests the effectiveness of the hedge by means of prospective (evaluation of expected effectiveness) and retrospective (evaluation of recorded effectiveness) tests. When a hedge is deemed ineffective the derivative instrument is immediately reclassified as a trading derivative. Hedged assets/liabilities are valued according to the valuation criteria applied to their category. The new recognised value is the fair value emerging from the most recent (positive) effectiveness test. 7. Equity investments This category includes the Group s holdings in associates and joint ventures accounted for under the equity method. The investment is initially recognised at the date of settlement. The category also includes subsidiaries excluded from the area of consolidation and associates deemed as non significant holdings and consequently not accounted for under the equity method. The Group s investment in these companies is recorded at cost. Minority holdings are classified as available for sale financial assets. The book value of each investment is tested for impairment by means of direct comparison between recoverable value and book value when proof of possible impairment exists. The investment is derecognised when it is sold, thereby transferring substantially all the risks and rewards of ownership, or when the rights to receive future cash flows have expired. 8. Tangible assets Tangible assets include land, functional property, property investments, electrical equipment, furniture and fittings, machinery and equipment, works of art, and leased assets. Functional property is represented by assets that are used by the Group to carry out its business activities or for administrative purposes. Property investments are held for capital appreciation. Tangible assets are: - initially recorded at cost increased by any ancillary charges directly attributable to the acquisition and installation of the assets; On First Time Adoption of IFRS, property functional and investment belonging to the Group s banks is recorded at fair value as deemed cost. The separate values of land and buildings were bifurcated and accumulated depreciation on the part relating to land is recognised in equity. - subsequently carried at cost less accumulated depreciation and any impairment charges. Depreciation is provided on the annual depreciable amount of tangible assets systematically on a straightline basis over the estimated useful life of each asset, with the exception of: - land purchased singly or incorporated into the value of buildings, which has an indefinite life. The bifurcation of land and buildings values that make up a single property asset is made on the basis of independent surveyors reports; - works of art, as their useful life cannot be estimated and their value typically appreciates over time. Depreciation is usually provided at the following rates: - buildings: annual rate of 1.5 per cent; - other tangible assets: at tax rates judged appropriate. - derecognised on sale or when they cease to provide the future economic benefits expected to be derived from their use. 9. Intangible assets Intangible assets include goodwill and software. Goodwill arises on the acquisition of subsidiary and associated entities and joint ventures, and represents the excess of the fair value of the purchase consideration and direct costs making the acquisition over the fair value of the Group s share of the assets acquired and the liabilities assumed on the date of acquisition. When the fair value of the purchase consideration and acquisition costs is lower than the fair value of the Group s share of assets acquired and liabilities assumed (so-called badwill ), or when goodwill recorded appears unjustified on the basis of the asset s future earnings capacity, the difference is recorded directly in the income statement. Goodwill is not systematically amortised. However, it is reviewed annually for impairment, 79

80 or more frequently if there are indications that impairment may have occurred. Impairment loss is recorded in the income statement when the recoverable amount is lower than its current book value. Other intangible assets are recorded as such if the classification is justified by legal or contractual rights and if the assets are able to generate future economic benefits. These intangible assets are recognised at adjusted cost i.e. the initial purchase price inclusive of directly attributable costs less amortisation and impairment (if any) and inclusive of any value adjustments with amortisation provided on the basis of the expected useful life of the asset. Intangible assets are amortised on a straightline basis over their estimated useful life. Intangible assets are derecognised from equity on sale or when they cease to provide future economic benefits. 10. Discontinued operations Discontinued operations are held for sale. Such assets are valued at the lower of book value and fair value, net of selling costs. If depreciation has previously been provided on the assets, it is suspended. The same assets, given their discontinued status, and related economic impacts are recognised separately at equity and the income statement. Single discontinued operations, cash-generating units, either in groups or individual parts, are classified as held for sale when their disposal is considered highly probable. The Group currently has no discontinued operations. 11. Current and deferred taxes Income taxes current, deferred - is calculated according to tax rates currently in force in Italy and are recognised in the income statement with the exception of those relating to items directly debited or credited in equity. Provisions for tax are determined on the basis of forecasted tax charges (current, deferred). In particular, current taxes represented by advances paid or other tax credits, and deferred taxes are determined on temporary timing differences arising from the tax bases of assets and liabilities and their carrying amounts in the financial statements. Current (anticipated) tax assets are recorded in equity to the extent of the likelihood of their recovery and valued on the basis of the single Group companies capacity, also taking into account the impact of exercising the right to adhere to the Italian consolidated tax plan ( consolidato fiscale ), to generate over the medium/long-term taxable income. Deferred tax liabilities are recognised with the exception of reserves subject to suspended liability to tax. The Group is confident that in the light of the volume of available reserves already subject to taxation, no actions will occur that will end suspension, with liability to taxation that this incurs. Anticipated and deferred taxes are recorded in the balance sheet respectively at tax assets and tax liabilities and are not offset. Current tax assets and deferred tax liabilities are valued systematically so as to take into account any changes in legislation or tax rates. The Group makes adequate provisions for potential tax liabilities arising from tax inspections announced or from litigation with tax authorities. 12. Provisions for risks and charges Provisions for retirement and similar obligations as foreseen by specific regulations are recorded under liabilities. The provisions made represent sufficient funds to settle the obligations incurred. Fund balances are calculated by independent actuaries. Provisions are made to other reserves for liabilities, the timing and amount of which are uncertain. Provisions are prudentially calculated in order to satisfy the extent of the obligation and are determined both on the basis of past experience and on independent expert opinion. Fund balances are reviewed at the end of every year and adjusted to reflect best current estimates; in the case of significant additional provisions, term obligations are actualised. In the event of an obligation no longer being likely, the fund is cancelled. Amounts in excess are recognised in the income statement. 13. Debts and securities issued The following are included in this category: amounts to banks, amounts owed to customers, securities issued, subordinated liabilities, finance lease liabilities. Debts, securities issued and subordinated liabilities are: - initially recognised at fair value, normally represented by the amount collected or issue price, plus directly attributable transaction costs. Initial recognition of these liabilities occurs on receipt of funds collected or at 80

81 issuance of debt securities. The difference between the estimated fair value of financial liabilities issued at below-market conditions and market price is recorded in the income statement; - subsequently valued at amortised cost using the effective interest method. Short-term liabilities, minimally impacted by time factors, are recognised at the amount collected; - derecognised on maturity or extinction of contractual obligation, or repurchased in the case of bonds issued, the difference between the book price and repurchase price of which is recorded in the income statement. The subsequent sale of repurchased securities is considered for accounting purposes as a new issue. The new placement price is recorded with no impact on the income statement. 14. Financial liabilities held for trading Financial liabilities held for trading include held for trading derivatives with a negative value including those linked to fair value options, or derivatives held for the management of risk relating to financial assets and liabilities held for trading. Financial liabilities held for trading are: - initially recognised at fair value excluding direct and incremental transaction costs; - recorded at subscription date; - subsequently held at fair value with cumulative gain or loss on sale recognised in the income statement; - derecognised when the related contractual obligations have been substantially satisfied. 15. Financial liabilities designated at fair value The Group has classified the following as financial liabilities designated at fair value: - insurance contracts issued by the Group s insurance subsidiary Carige Vita Nuova in which investment risk is borne totally by the insured parties. The contracts in question unit-linked and index-linked are predominantly financial in nature and, in compliance with IAS 39, are accounted for using deposit accounting; - structured debt securities issued by the Parent Company, Banca Carige. The Group s index-linked and unit-linked contracts are recognised at current value in accordance with the valuation criteria established by Directive 91/EEC referring to insurance companies, and with the provisions contained in Legislative decree 173/97. The liabilities arising under these fund contracts are measured at a value determined by the value of the underlying assets in the investment fund. Changes in the fair value of these liabilities are recognised in the income statement. 16. Currency transactions Foreign currency transactions are translated into euro, the Group s functional currency, using the exchange rates prevailing at the dates of the transactions. At the close of each accounting period (annual, interim) balances denominated in foreign currencies are handled as follows: - monetary items are translated using the exchange rate prevailing at the period end; - non-monetary items measured at historic cost are translated using the exchange rate prevailing at the transaction date; - non-monetary items measured at fair value are translated at the exchange rate prevailing at the period end. Exchange differences arising on the settlement of monetary items, or on the translation of monetary items using rates that differ from those applied when the transaction was initially recorded or different from those applicable in the previous accounting period are recognised in the income statement in the period in which they arise. Translation differences on non-monetary assets the gains or losses on which are recognised in equity are included directly in equity. Translation differences on non-monetary assets the gains or losses on which are recognised in the income statement are included in the income statement. The financial statements of Group entities with a functional currency different from euro are translated using the exchange rate prevailing at the period end. Exchange differences arising on the assets of Group entities are recorded at consolidated reserves and transferred to the income statement solely in the period when the asset is sold. 81

82 17. Insurance assets and liabilities IFRS 4 defines an insurance contract as a "contract under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder." Insurance risk is defined as a risk which, unlike financial risk, is transferred from the insured party to the insurer issuing the insurance contract. Financial risk is the risk of possible future variations in one or more of the following variables: interest rates, financial instrument prices, commodity prices, exchange rates, price or rate indices, credit ratings and any other variable not specific to any of the parties to the financial contract (excluding non financial variables). Significant insurance risk arises if, and only if, the insured event implies significant additional compensation payable by the insurer on the occurrence of any fact, event or circumstance of an economic nature (events with no identifiable economic features are excluded). The Group has applied IFRS 4, Insurance Contracts, to all its non life insurance contracts and its life insurance contracts with the exception of the following: - Unit-Linked, Index-Linked and Pension Funds On the basis of the definition of insurance contracts provided by IFRS 4, these contracts present non-significant insurance risk and are therefore accounted for under IAS 39 ( Financial Instruments: recognition and measurement ) and IAS 18 ( Revenues ). In compliance with IFRS 4, where these contracts contain an insurance and deposit component, the two components are unbundled; the insurance component is accounted for under IFRS 4 (including adequacy testing), whilst the deposit component is accounted for under IAS 39. Capitalisation Policies These contracts are classified as investment contracts with Discretionary Participation Features (discretionary participation in profits - DPF) and, in compliance with paragraph 35, IFRS 4, premiums, payments and variations in the technical reserves of capitalisation policies included under separate management are recognised in the income statement. - Technical reserves attributable to reinsurers This category includes technical reserves relating both to non-life and life insurance attributable to reinsurers with whom the Group s insurance companies have entered into outstanding reinsurance treaties pursuant to IFRS 4. Valuation of these reserves is consistent with the principles applied to the original insurance contracts. - Technical reserves This category includes all technical reserves arising from insurance commitments. In particular: - Non Life technical reserves include premium reserves made up by the fractional premium reserve and the reserve for current risks accident reserves, and retirement reserves; - Life technical reserves include commitments arising from contracts with significant insurance risk features and contracts with performance revaluation linked to separate management with DPF features, pursuant to IFRS 4 inclusive of reinsurance ceded (mathematical reserves, supplementary reserves, reserves for amounts payable). This item also includes reserves requirements following Liability Adequacy Tests and deferred liabilities referring to insured parties ( shadow accounting ). In particular: - L.A.T. According to IFRS 4 paragraphs 15 and 19, the congruity of insurance liabilities is valued on the basis of current forecasts of future cash flows. If the carrying amount of the insurance items is inadequate, the extent of inadequacy should be recognised in the income statement. Liabilities in question correspond to those recorded in single-company statements (technical reserves, additional reserves, etc. excluding catastrophe and equalisation provisions). - Non Life branches Additional provisions attributable to Premium reserves, represented by any contributions from 82

83 the Current Risks Reserve are in accordance with the provisions of IFRS 4, paragraph Life branches The congruity test consists in comparing the carrying amount of insurance liabilities less the value of depreciable assets against current estimates of future cash flows calculated on the basis of current forecasts referring to issued insurance contracts. In particular, the test was performed on fixed tariffs classified as insurance contracts and on non-fixed tariffs classified as DPF insurance contracts and on DPF investment contracts, the performance of which is linked to the separate management lines Norvita and CVitanuova. - Shadow accounting Non-fixed performances linked to separate management lines are classified as insurance or investment contracts with DPF features. The DPF component derives from the existence of recognised unrealised gains or losses. Under IFRS paragraph 30, an entity may modify existing accounting principles as long as a recognised unrealised gain or loss on an asset impacts the valuation of insurance liabilities, related deferred acquisition costs, and related intangible assets (i.e. as in the case of a realised component). Subsequent revaluations are recognised in the balance sheet only if the same approach is adopted for realised gains or losses. Latent gains or losses on assets directly recognised in the income statement (including impairment charges) imply a corresponding adjustment to liabilities and other balance sheet insurance items recognised directly in the income statement. - Other assets This caption includes amongst others deferred commission charges relating to contracts outside the scope of IFRS 4. Incremental acquisition costs and those directly attributable to acquisition or to the renewal of investment contracts are deferred and amortised through the life of the policy according to the recognition of revenues. - Other liabilities This caption includes amongst others costs relating to the management of Carige Vita Nuova investment contracts which, in accordance with IFRS 18, are recognised as revenues when the service is supplied. Consequently, the service component is deferred and recognised in the income statement through the life of the contract so as to offset the service costs borne by the Company. Estimated policy life is calculated for established policies on the basis of historical series of past insured party behaviour, and for new policies on the basis of research currently in progress. Recurring items such as commission income, agency fees and other management costs are recognised directly in the income statement in the period in which they arise. - Impact on income statement of insurance activities In accordance with the provisions of IFRS 4, the Group has recognised the following items in the income statement: - premiums, which include amounts recognisable for the period deriving from the issue of contracts, less cancellations; - variations to technical reserves, which represent variations in future commitments to insured parties deriving from insurance contracts; - cost of claims, redemptions and policies expiring in the period. 18. Other information - Severance pay provisions The severance pay or termination indemnity and long-service awards are recorded on the basis of their current actuarial value calculated by an independent actuary. The Projected Unit Credit Method is used in estimating future requirements on the basis of historical analyses and statistics and demographic curves. The actualisation rate adopted is a market interest rate. Contributions made each year are considered as separate units and valued singly in order to calculate the final entitlement. With regards to severance pay provisions, actuarial calculations are in line with nationallyaccepted standards and in the case of phenomenon not representing significant historical series the actuarial value may be recorded. In the case of doubts regarding the validity of the actuarial calculation, recalculation may be made adopting nationally-accepted standards. 83

84 - Own shares Own shares held are deducted from shareholders equity. Profits or losses on transactions relating to own shares are recorded at specific balance sheet reserves. - Share based payments to employees The Group does not currently engage in equity settled share-based payment transactions in respect for services received from certain of its employees, executives and directors. - Recognition of income receivable Income is recognised at the moment of collection or from the moment it is reasonable to expect that future cash flows will be received. In particular: - interest on arrears and other late payments is recorded in the income statement at the moment of collection; - dividends are recorded in the income statement at the date in which they are approved by Banca Carige SpA shareholders. - Inventories Property held for sale is classified as inventories, which is recorded at either cost or sale price, whichever is lower, and is not depreciated. 84

85 85

86 PART B CONSOLIDATED BALANCE SHEET ASSETS SECTION 1 CASH AND HIGLY LIQUID DEPOSITS - CAPTION Cash and higly liquid deposits: break-down Banking group Insurance company Other companies 31/12/05 31/12/04 a) Cash 195, , ,053 b) Free deposits with Central Banks Total 195, , ,053 86

87 SECTION 2 FINANCIAL ASSETS HELD FOR TRADING CAPTION Financial assets held for trading: product break-down Banking Group Insurance cmpany Other companies 31/12/05 31/12/04 Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted A. Cash assets 1. Debt securities 1,210, , ,663 45,468 1,988, , Structured securities 143,917 14, ,917 14, Others 1,210, , ,746 31,021 1,845, , Equity securities 386,123 2, , Shares in collective investment schemes 635,943 63,509 1, ,099 63, Loans 4.1 Repurchase agreements 4.2 Others 5. Impaired assets 6. Not derecognised sold assets Total A 2,232, , ,636 45,469 3,015, ,937 3,473,330 B. Derivatives instruments 1. Financial derivatives: 29 62, , trading 29 43, , related to fair value option 18,208 18, others 2. Credit derivatives trading linked to the fair value option 2.3 others Total B 29 62, ,561 62,198 Total (A+B) 2,232, , ,636 45,469 3,015, ,498 3,535,528 87

88 2.2 Financial assets held for trading: owers/issuers break-down Banking Insurance Other Group company companies 31/12/05 31/12/04 A. Cash assets 1. Debt securities 1,357, ,131 2,181,399 a) Governments and Central Banks 1,127, ,480 1,374,873 b) Other public bodies 1,914 1,914 c) Banks 48, , ,384 d) Others 178, , , Equity securities 386,123 2, ,940 a) Banks 382, ,158 b) Other issuers: 3,965 2,817 6,782 - insurance companies financial institutions not financial institutions 3,780 3,780 - others 2,785 2, Shares in collective investment schemes 699,452 1, , Loans a) Governments and Central Banks b) Other public bodie c) Banks d) Others 5. Impaired assets a) Governments and Central Banks b) Other public bodie c) Banks d) Others 6. Not derecognised sold assets a) Governments and Central Banks b) Other public bodie c) Banks d) Others Total A 2,442, ,104 3,270,947 3,473,330 B. Derivatives instruments 62,590 62,590 a) Banks 21,463 21,463 b) Customers 41,127 41,127 Total B 62,590 62,590 62,198 Total (A + B) 2,505, ,104 3,333,537 3,535,528 88

89 The break-down of caption 3 ("Shares in collective investment schemes") for Banking Group is: Amount Stock 3,151 Bond 394,289 Flexible 240,241 Balanced 54,475 Hedge Fund 7,232 Other 64 Total A 699, Financial assets held for trading: derivatives instruments Banking Group Derivatives/objects Interest rates Value and gold Equity securities Loans Other 31/12/05 31/12/04 A. Listed derivatives 1. Financial derivatives: * With exchange of principal Options purchased - Other derivatives * Without exchange of principal - Options purchased - Other derivatives 2. Credit derivatives: * With exchange of principal * Without exchange of principal Total A B. Unsted derivatives 1. Financial derivatives: 5,506 50,000 62,067 * With exchange of principal 5,506 21,251 26,757 - Options purchased 5,506 8,989 14,495 - Other derivatives 12,262 12,262 * Without exchange of principal 6,561 28,749 35,310 - Options purchased 40 28,749 28,789 - Other derivatives 6,521 6, Credit derivatives: * With exchange of principal * Without exchange of principal Total B 5,506 50,494 62,561 Total (A+B) 29 5,506 50,494 62,590 62,198 89

90 SECTION 3 FINANCIAL ASSETS DESIGNATED AT FAIR VALUE CAPTION Financial assets designated at fair value: product break-down Caption/Amount Banking Group Insurance company Other companies 31/12/05 31/12/04 listed unlisted listed unlisted listed unlisted 1. Debt securities 217, , Structured securities 186, , Other debt securities 30,695 30, Equity securities 3. Shares in collective investment schemes 382,443 3, , Loans 4.1 Structured 4.2 Others 5. Impaired assets 6. Not derecognised sold assets Total 599,765 3, , ,672 90

91 3.2 Financial assets designated at fair value: owers/issuers break-down Caption/Amount Banking Insurance Other Group companies companies 31/12/05 31/12/04 1. Debt securities 217, ,322 a) Governments and Central Banks b) Other public bodies c) Banks 217, ,322 d) Others 2. Equity securities a) Banks b) Other issuers - insurance companies - financial institutions - not financial institutions - others 3. Shares in collective investment schemes 385, , Loans a) Governments and Central Banks b) Other public bodies c) Banks d) Others 5. Impaired assets a) Governments and Central Banks b) Other public bodies c) Banks d) Others 6. Not derecognised sold assets a) Governments and Central Banks b) Other public bodies c) Banks d) Others Total 602, , ,672 91

92 SECTION 4 FINANCIAL ASSETS AVAILABLE FOR SALE CAPTION Financial assets available for sale: product break-down Caption/Amount Banking Group Insurance companies Other companies 31/12/05 31/12/04 Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted 1. Debt securities 108,967 88, ,747 18, , , Equity securities 62, ,561 25, , , At fair value 62, ,564 25,020 87, , At cost - 16, , Shares in collective investment schemes 29,328 29, Loans 5. Impaired assets 6 6. Not derecognised sold assets Total 171, , ,095 18, , , ,054 92

93 4.2 Financial assets available for sale: owers/issuers break-down Caption/Amount Banking Insurance Other Group companies companies 31/12/05 31/12/04 1. Debt securities 197, , ,068 a) Governments and Central Banks 52, , ,208 b) Other public bodies 7,181-7,181 c) Banks 45,007 65, ,409 d) Others 93,502 84, , Equity securities 638,667 25, ,695 a) Banks 560,132 1, ,027 b) Other issuers 78,535 23, ,668 insurance companies 55,925 1,816 57,741 financial institutions 11,776 1,275 13,051 not financial institutions 10,817 12,171 22,988 others 17 7,871 7, Shares in collective investment schemes 29,328 29, Loans a) Governments and Central Banks b) Other public bodies c) Banks d) Others 5. Impaired assets a) Governments and Central Banks b) Other public bodies c) Banks 6 d) Others 6. Not derecognised sold assets a) Governments and Central Banks b) Other public bodies c) Banks d) Others Total 836, ,523 1,186, ,054 Caption 2a Capital securities- banks includes Banca Carige s holding in the Bank of Italy of euro 559,564 recognised at fair value (the Italian central bank s total shareholders equity at 31/12/2004 divided by the number of shares in possession). This fair value proxy will be used until an IFRS-compliant valuation of shareholders equity is provided by the Bank of Italy. The valuation method adopted by Banca Carige (total shareholders equity of the Bank of Italy divided by shares in possession) has already been adopted in the Italian banking sector by those entitled by law to purchase shares in the Bank of Italy. The validity of the method adopted is further confirmed by the fact that the purchase on the part of a European Member State of a holding in the central bank of another country was recognised at a value higher than recorded total shareholders equity. With reference to the provisions of Law 262/2005 on the question of a redefinition of the ownership structure of the Italian central bank and specifically the methods foreseen for transferring shareholdings, the Board of Directors and the Board of Statutory Auditors intend to promote appropriate legal action when and where required to protect the interests of the Company and its shareholders. 93

94 SECTION 5 FINANCIAL ASSETS HELD TO MATURITY CAPTION Financial assets held to maturity: procuct break-down Banking Group Net book value Fair value Insurance companies Net book value Fair value Other companies Net book value Fair value 31/12/05 Net book value Fair value 31/12/0 Net book value 1. Debt securities 2,764 2,764 2,764 2, Structured securities 1.2 Other debt securities 2,764 2,764 2,764 2, Loans 3. Impaired assets 4. Not derecognised sold assets Total - - 2,764 2, ,764 2,764 2, Financial assets held to maturity: owers/issuers Banking Group Insurance Other companies companies 31/12/05 31/12/04 1. Debt securities 2,764 2,764 a) Governments and Central Banks - - b) Other public bodies 2,155 2,155 c) Banks d) Others Loans a) Governments and Central Banks b) Other public bodies c) Banks d) Others 3. Impaired assets a) Governments and Central Banks b) Other public bodies c) Banks d) Others 4. Not derecognised sold assets a) Governments and Central Banks b) Other public bodies c) Banks d) Others Total - 2,764-2,764 2,907 94

95 SECTION 6 LOANS TO BANKS CAPTION Loans to banks: product break-down Banking Group 31/12/05 31/12/04 A. Deposits with Central Banks 163, Fixed-term deposits Compulsory reserve 162, Repurchase agreements 4. Other 22 B. Deposits with banks 672, Current accounts and deposits 117, Fixed-term deposits 452, Other loans 102, Repurchase agreements 77, Leased assets 3.3 Other 25, Debt securities 4.1 Structured 4.2 Other debt securities 5. Impaired assets 18, Not derecognised sold assets Total (net book value) 854,040 1,571,552 Total (fair value) 854, Insurance companies 31/12/05 31/12/04 A. Deposits with Central Banks 1. Fixed-term deposits 2. Compulsory reserve 3. Repurchase agreements 4. Other B. Deposits with banks 1, Current accounts and deposits 1, Fixed-term deposits Other loans Repurchase agreements 3.2 Leased assets 3.3 Other Debt securities 4.1 Structured 4.2 Other debt securities 5. Impaired loans 6. Not derecognised sold assets Total (net book value) 1, Total (fair value) 1,810 95

96 6.1.3 Other companies 31/12/05 31/12/04 A. Deposits with Central Banks 1. Fixed-term deposits 2. Compulsory reserve 3. Repurchase agreements 4. Other B. Deposits with banks Current accounts and deposits Fixed-term deposits 3. Other loans 3.1 Repurchase agreements 3.2 Leased assets 3.3 Other 4. Debt securities 4.1 Structured 4.2 Other debt securities 5. Impaired loans 6. Not derecognised sold assets Total (net book value) 25 Total (fair value) 25 Loans to banks: assets with specific hedging Banking Group 31/12/05 1. Fair value hedged loans a) interest rate risk b) exchange-rate risk c) credit risk d) more risks 2. Cash flows hedged loans 1,756 a) interest rate risk b) exchange-rate risk c) other 1,756 Total 1,756 96

97 SECTION 7 LOANS TO CUSTOMERS CAPTION Loans to customers: product break-down Banking Group 31/12/05 31/12/04 1. Current accounts 1,747, Repurchase agreements 3. Mortgages 6,277, Credit cards, personal loans and salary backed loans 244, Leased assets 686, Factoring 103, Other operations 3,104, Debt securities 8.1 Structured securities 8.2 Other debt securities 9. Impaired assets 604, Not derecognised sold assets 741,659 Total (net book value) 13,511,341 11,265,493 Total (fair value) 13,680, Insurance companies 31/12/05 31/12/04 1. Loans to insured for premiums 56, Loans to insurance brokers 64, Loans for sums to recover 22, Loans to employees 1, Loans to agents 3, Loans on policies and other loans 3,146 Total (net book value) 150, ,898 Total (fair value) 150,322 97

98 7.2. Loans to customers: owers/issuers break-down Banking Group 31/12/05 31/12/04 1. Debt securities: a) Governments b) Other public bodies c) Other issuers not financial insitutions financial insititutions insurance companies others 2. Loans to: 12,165,053 a) Governments 569,957 b) Other public bodies 521,052 c) Other issuers 11,074,044 not financial insitutions 7,090,911 financial insititutions 467,235 insurance companies others 3,515, Impaired assets: 604,629 a) Governments b) Other public bodies 382 c) Other issuers 604,247 not financial insitutions 443,924 financial insititutions 7,871 insurance companies others 152, Non derecognised sold assets: 741,659 a) Governments b) Other public bodies c) Other issuers 741,659 not financial insitutions 55,994 financial insititutions 65 insurance companies others 685,600 Total 13,511,341 11,265,493 98

99 7.2.2 Insurance companies 31/12/05 31/12/04 1. Debt securities: a) Governments b) Other public bodies c) Other issuers not financial insitutions financial insititutions insurance companies others 2. Loans to: 18,156 a) Governments b) Other public bodies c) Other issuers 18,156 not financial insitutions financial insititutions insurance companies others 18, Impaired assets: a) Governments b) Other public bodies c) Other issuers not financial insitutions financial insititutions insurance companies others 4. Non derecognised sold assets: 132,166 a) Governments b) Other public bodies c) Other issuers 132,166 not financial insitutions financial insititutions insurance companies others 132,166 Total 150, , Loans to customers: assets subject to specific hedge Banking Group 99

100 Transaction type/values 31/12/05 1. Loans subject to fair value hedges 317,098 a) interest rate risk 317,098 b) exchange-rate risk c) credit risk d) multiple risks 2. Loans subject to cash flow hedges a) interest rate risk b) exchange-rate risk c) other Total 317, Finance leases Receivables relating to finance leases recorded at table 7.1 amounting to 686,912,000 are exclusively performing positions collected at year end or due for collection. Gross assets classified as finance leases amounted to 1,071,911 thousands of euros. Net implicit receivables totalled 697,085 thousands of euros and are distributed in the following categories: initial gross investment net implicit receivable motor cars 49,901 23,433 equipment, plant and machinery 163,585 74,444 non industrial property 388, ,735 industrial property 434, ,968 boats and marine craft 35,203 21,505 Total 1,071, ,085 Estimated remaining useful life: assets having reached the end of useful life within 1 year from 1 to 5 years more than 5 years total gross investment 374,826 95, , ,456 1,071,911 remaining implicit receivable - 95, , , ,085 Total 100

101 SECTION 8 HEDGING DERIVATIVES CAPTION Hedging derivatives: break-down on the basis of contracts and underlying assets Banking Group Derivatives/underlying assets Interest rates Foreign currencies and gold Equity securities Loans Other Total A. Listed 1. Financial derivatives: * With exchange of principal - Options purchased - Other derivatives * Without exchange of principal - Options purchased - Other derivatives 2. Credit derivatives: * With exchange of principal * Without exchange of principal Total A B. Unlisted 1. Financial derivatives: 61,290 61,290 * With exchange of principal 61,290 61,290 - Options purchased Other derivatives 60,358 60,358 * Senza scambio di capitale - Options purchased - Other derivatives 2. Credit derivatives: * With exchange of principal * Without exchange of principal Total B 61,290 61,290 Total (A+B) 31/12/05 61,290 61,290 Total (A+B) 31/12/04 23,

102 8.2 Hedging derivatives: break-down for hedged portfolio and hedge type (net book value) Banking Group Fair Value Cash flows Operations/hedge type interest rate risk exchangerate risk Specific credit risk more risks General Specific General 1. Financial assets available for sale 2. Loans Financial assets held to maturity 4. Portfolio Total assets Financial liabilities 60, Portfolio 932 Total liabilities 60,

103 SECTION 10 EQUITY INVESTMENTS CAPTION Holdings in jointly-controlled entities accounted for under the equity method and in entities in which the Group has a significant influence: details regarding the nature and size of the holding Company name Registered Holding Type of holding office Group shareholder Size B. Jointly-controlled entities C. Entities in which the Group has a significant influence 1 Autostrada dei Fiori SpA Savona Associated undertaking Banca Carige SpA 16.62% C. R. Savona SpA 4.00% 2 Frankfurter Bankgesellschaft AG Frankfurt Associated undertaking Banca Carige SpA 47.50% 3. Assimilano Srl Milan Associated undertaking Assi 90 Srl Assicentro Recina Servizi Srl Rome Associated undertaking Assi 90 Srl B.D.A. SpA Milan Associated undertaking Assi 90 Srl Atoma Srl Milan Associated undertaking Carige Ass.ni SpA Carige V. N. SpA U.C. Sport e Sicurezza Srl Milan Associated undertaking Carige Ass.ni SpA Carige V. N. SpA Consorzio per il Giurista di Impresa Scrl Genoa Associated undertaking Banca Carige SpA Voting rights (%) 10.2 Holdings in jointly-controlled entities accounted for under the equity method and in entities in which the Group has a significant influence: balance sheet and income statement lines Name Total assets Total revenues Profit (loss) Shareholders' equity Consolidated book value Fair value A. Entities accounted for under the equity method A.1 jointly controlled A.2 Group has a significant influence 1 Autostrada dei Fiori SpA 823, ,288 27, ,217 55,744 non-listed 2 Frankfurter Bankgesellschaft AG 499,650 16, ,915 10,886 non-listed B. Proportionally consolidated entities 103

104 Holdings in non-fully consolidated subsidiaries Name Total assets Total revenues Profit (loss) Shareholders' equity Consolidated book value Fair value A. Subsidiaries excluded from the area of consolidation 1. Assi 90 Srl 7,608 8,247 1,699 2,161 3,244 non-listed 2. AG Srl 1, non-listed 3. Savona 2000 Srl non-listed B. Entities in which the Group has a significant influence excluded from the accounting for under the equity method 1. Assimilano srl 4,526 2, non-listed 2. Assicentro Recina Servizi srl 11,047 10, ,564 non-listed 3. B.D.A. SpA non-listed 4. Atoma Srl 198 1, non-listed 5. U.C. Sport e Sicurezza Srl 1, non-listed 6. Consorzio per il Giurista di Impresa Scrl 43 3 (35) non-listed Break-down of caption 100 Equity holdings: Name Valuation method Book value Book value 31/12/05 31/12/04 1 Autostrada dei Fiori SpA equity method 55,744 52,937 2 Frankfurter Bankgesellschaft AG equity method 10,886 10, Assi 90 Srl cost 3,244 3, Atoma Srl cost U.C. Sport e Sicurezza Srl cost Consorzio per il Giurista di Impresa Scrl cost Totale 69,917 66,

105 10.3 Equity holdings: annual variations Insurance Other Banking group companies companies 31/12/05 A. Opening balances 63,725 3,255 66,980 B. Increases 2,937 2,937 B.1 Purchases B.2 Recoveries B.3 Revaluations 2,930 2,930 B.4 Other changes 7 7 C. Decreases C.1 Sales C.2 Depreciation and amortization C.3 Other changes D. Closing balances 66,662 3,255 69,917 E. Total revaluations F. Total depreciation and amortization Variations are detailed as follows: REVALUATIONS POSITIVE VARIATIONS IN HOLDINGS ACCOUNTED FOR UNDER THE EQUITY METHOD Autostrada dei Fiori SpA 2,807 Frankfurter Bankgesellschaft AG 123 Total revaluations 2,930 OTHER VARIATIONS CONSORZIO PER IL GIURISTA DI IMPRESA SCRL Amount assignable for the covering of losses recorded during Total other variations 7 105

106 SECTION 11 TECHNICAL RESERVES PROVISIONS PAYABLE BY REINSURERS CAPTION Technical reserves payable by reinsurers: break-down 31/12/05 31/12/04 A. Non life 63,699 A.1 reserves for premiums 11,183 A.2 reserves for claims 52,516 A.3 other reserves B. Life 113,206 B.1 mathematical reserves 111,088 B.2 reserves for amounts payable 2,118 B.3 other reserves C. Technical reserves relating to investment risks to be borne by the insured C.1 funds for contracts with disbursements connected with pension funds and market indices C.2 funds from pension fund management D. Total technical reserve provisions payable by reinsurers 176, ,

107 SECTION 12 TANGIBLE ASSETS CAPTION Tangible assets: break-down of assets valued at cost Asset/Value Banking Group Insurance companies Other companies 31/12/05 31/12/04 A. Functional assets 1.1 owned by the Group 688,916 7,742 34, , ,116 a) land 206, , , ,704 b) buildings 344,331 1,342 22, , ,420 c) furniture and fittings 4,082 2,586 6,668 7,876 d) electrical equipment 7,915 1,128 9,043 9,225 e) other 126,043 1, , , leased assets 3,349 3,349 a) land 1,700 1,700 b) buildings 1,649 1,649 c) furniture and fittings d) electrical equipment e) other Total A 692,265 7,742 34, , ,116 B. Tangible assets held for investment 2.1 owned by the Group 106, ,637 29, , ,515 a) land 49,122 76,512 8, , ,913 b) buildings 56, ,125 20, , , leased assets a) land b) buildings Total B 106, ,637 29, , ,515 Total A+B 798, ,379 64,317 1,070,990 1,006,631 Functional assets include property (IAS 16) amounting to million, which are stated in the explanatory notes by component type (land and buildings). Tangible assets held for investment include investment property (IAS 40) amounting to million, which are stated in the explanatory notes by component type (land and buildings). 107

108 12.3 Instrumental tangible assets: annual variations Banking Group Lands Buildings Furnitures Electronic installations Others Total A. Gross opening balances 205, ,534 28,106 42, , ,659 A.1 Total net value reductions 9,452 23,436 34,543 60, ,840 A.2 Net opening balances 205, ,082 4,670 7, , ,819 B. Increases: 3,210 9, ,148 26,314 43,080 B.1 Purchases 3,210 6, ,148 2,556 15,621 B.2 Capitalizaed expenses for improvements 3, ,524 B.3 Writebacks B.4 Positive variations of assets designated at fair value imputed to: a) stockholders' equity b) income statement B.5 Positive exchange-rate differencies B.6 Transfers from investment properties B.7 Other changes ,631 23,935 C. Decreases: - 5,955 1,143 3,179 3,357 13,634 C.1 Sales 5, ,485 C.2 Amortization 1,118 3,139 3,273 7,530 C.3 Impairment allowances imputed to a) stockholders' equity b) income statement C.4 Negative variations of assets designated at fair value imputed to a) stockholders' equity b) income statement C.5 Positive exchange-rate differencies C.6 Transfers to: a) investment tangible assets b) assets being sold C.7 Other changes D. Net closing balances 208, ,980 4,082 7, , ,265 D.1 Total net value reductions 14,185 23,963 34,449 60, ,586 D.2 Gross closing balances 208, ,165 28,045 42, , ,851 E. Cost valuation Instrumental tangible assets are valued at cost. 108

109 Insurance companies Lands Buildings Furnitures Electronic installations Others Total A. Gross opening balances 1,669 2,374 4,640 1,549 3,113 13,345 A.1 Total net value reductions 36 1, ,308 3,048 A.2 Net opening balances 1,669 2,338 3,206 1,279 1,805 10,297 B. Increases: ,120 B.1 Purchases ,120 B.2 Capitalizaed expenses for improvements B.3 Writebacks B.4 Positive variations of assets designated at fair value imputed to: a) stockholders' equity b) income statement B.5 Positive exchange-rate differencies B.6 Transfers from investment properties B.7 Other changes C. Decreases: , ,675 C.1 Sales C.2 Amortization 44 1, ,781 C.3 Impairment allowances imputed to a) stockholders' equity b) income statement C.4 Negative variations of assets designated at fair value imputed to a) stockholders' equity b) income statement C.5 Positive exchange-rate differencies C.6 Transfers to: ,680 a) investment tangible assets ,680 b) assets being sold C.7 Other changes D. Net closing balances 941 1,342 2,586 1,128 1,745 7,742 D.1 Total net value reductions 80 2, ,254 D.2 Gross closing balances 941 1,422 4,922 1,696 2,015 10,996 E. Cost valuation 109

110 Other companies Lands Buildings Furnitures Electronic installations Others Total A. Gross opening balances A.1 Total net value reductions A.2 Net opening balances B. Increases: 12,087 22,641 34,728 B.1 Purchases B.2 Capitalizaed expenses for improvements B.3 Writebacks B.4 Positive variations of assets designated at fair value imputed to: a) stockholders' equity b) income statement B.5 Positive exchange-rate differencies B.6 Transfers from investment properties B.7 Other changes 12,087 22,327 34,414 C. Decreases: C.1 Sales C.2 Amortization C.3 Impairment allowances imputed to a) stockholders' equity b) income statement C.4 Negative variations of assets designated at fair value imputed to a) stockholders' equity b) income statement C.5 Positive exchange-rate differencies C.6 Transfers to: a) investment tangible assets b) assets being sold C.7 Other changes D. Net closing balances 12,087 22,313 34,400 D.1 Total net value reductions 1,471 1,471 D.2 Gross closing balances 12,087 23,784 35,871 E. Cost valuation 110

111 12.4 Investment tangible assets: annual variations Banking Group Insurance companies Other companies Total Lands Buildings Lands Buildings Lands Buildings Lands Buildings A. Opening balances 49,196 58,132 84, , , ,602 B. Increases: ,992 20,925 9,720 21,877 B.1 Purchases B.2 Capitalized expenses for improvements B.3 Variazioni positive nette di fair value B.4 Writebacks B.5 Positive exchange-rate differencies B.6 Transfers from functional properties B.7 Other changes 8,992 20,925 8,992 20,925 C. Decreases: 74 1,225 8,933 18,297 9,007 19,522 C.1 Sales ,933 16,140 9,007 16,428 C.2 Amortization 937 2,157 3,094 C.3 Negative net variations of assets designated at fair value C.4 Impairment allowances C.5 Negative exchange-rate differencies C.6 Transfers to other assets portfolio a) Functional properties b) not current assets being sold C.7 Other changes D. Closing balances 49,122 56,907 76, ,125 8,992 20, , ,957 E.Fair value valuation 49,122 60,961 76, ,084 9,045 21, , ,152 Investment tangible assets are valued at cost. 111

112 SECTION 13 INTANGIBLE ASSETS CAPTION Intangible assets: assets break-down Banking Group Insurance companies Other companies 31/12/05 31/12/04 Assets/Amount Limited duration Unlimited duration Limited duration Unlimited duration Limited duration Unlimited duration Limited duration Unlimited duration Limited duration Unlimited duration A.1 Goodwill 651, , ,146 A.1.1 Group 651, , ,146 A.1.2 Third parties A.2 Other intangible assets 14,798 10,910 25,708 26,927 A.2.1 Attività valutate al costo: 14,798 10,910 25,708 26,927 a) Internally generated intangible assets b) Other assets 14,798 10,910 25,708 26,927 A.2.2 Assets valued at fair value: a) Internally generated intangible assets b) Other assets Total 14, ,104 10,910 25, ,104 26, ,146 Intangible assets different from goodwill are amortized in five years with constant amount. 112

113 13.2 Intangible assets: annual variations Assignable to the banking Group Goodwill Other intangible assets internally generated Other intangible assets Total Limited Unlimited Limited Unlimited A. Opening balance 704,258 30, ,647 A.1 Total net value reductions 58,112 15,705 73,817 A.2 Net opening balance 646,146 14, ,830 B. Increases: 4,958 7,673 12,631 B.1 Purchases 7,673 7,673 B.2 Increases in internal intangible assets B.3 Value adjustments B.4 Positive variations in fair value - shareholders' equity - income statement B.5 Positive exchange variations B.6 Other variations 4,958 4,958 C. Reductions: 7,559 7,559 C.1 Sales C.2 Value adjustments 7,559 7,559 - Amortisation 7,559 7,559 - Depreciation + shareholders' equity + income statement C.3 Negative variations in fair value - balance sheet - income statement C.4 Transfer to non current assets awaiting sale C.5 Negative exchange variations C.6 Other variations D. Net closing balance 651,104 14, ,902 D.1 Total net value adjustments 58,112 17,487 75,599 E. Gross closing balance 709,216 32, ,501 F. Valuation at cost Key: Limited: assets with limited useful life Unlimited: long-lived assets Following impairment tests carried out on goodwill arising from the purchase of 124 bank branches between 2000 and 2002 in addition to three bank acquisitions carried out between 1993 and 2004 (C.R. Savona, C.R. Carrara, Banca Cesare Ponti) which confirmed a recoverable value higher than book value, the caption Goodwill does not include value adjustments. The calculation of use values is carried out separately for each cash-generating unit (bank branches and banks) on the basis of economic-financial models which take into account the methodological and forecasting choices described below. Methodologically, the models: - elaborate analytically financial and economic flows expected to be generated by individual cashgenerating units (branches and banks) over a ten-year time horizon, identifying for each year the pre-tax economic results; - calculate the residual value of the investment considered as a permanent source of revenue on the basis of the earnings established for the tenth year, applying an actualisation rate appropriate to the Bank s capital cost; - actualise the two series of income flows using the rate described above; 113

114 - calculate investment use value by adding together the actualised flows. Forecasting assumption underlying the models: - a ten-year time horizon for valuation of expected future cash flows was judged appropriate for this investment type; - future financial and economic flows take into account: for the years growth levels set in the Group s Strategic Plan as approved by the Board of Directors of Banca Carige on 16 th January 2006; for the years : - interest rate and risk levels forecasted for 2008 in the Strategic Plan; - available estimates regarding deposit and lending balances, service-generated income, and operating costs for the final year are those supplied by external forecasters Assignable to the Group's insurance companies Goodwill Other intangible assets internally generated Other intangible assets Total Limited Unlimited Limited Unlimited A. Opening balance 14,157 14,157 A.1 Total net value reductions 1,914 1,914 A.2 Net opening balance 12,243 12,243 B. Increases: 2,840 2,840 B.1 Purchases 2,840 2,840 B.2 Increases in internal intangible assets B.3 Value adjustments B.4 Positive variations in fair value - shareholders' equity - income statement B.5 Positive exchange variations B.6 Other variations C. Reductions: 4,173 4,173 C.1 Sales C.2 Value adjustments 4,173 4,173 - Amortisation 4,173 4,173 - Depreciation + shareholders' equity + income statement C.3 Negative variations in fair value - balance sheet - income statement C.4 Transfer to non current assets awaiting sale C.5 Negative exchange variations C.6 Other variations D. Net closing balance 10,910 10,910 D.1 Total net value adjustments 2,306 2,306 E. Gross closing balance 13,216 13,216 F. Valuation at cost Key: Limited: assets with limited useful life Unlimited: long-lived assets 114

115 SECTION 14 TAX ASSETS AND TAX LIABILITIES CAPTION 140 (ASSETS) AND CAPTION 80 (LIABILITIES) 14.1 Current tax assets: break-down Corresponding income statement caption Current tax assets (taxes prepaid/anticipated) recorded amounted to 165,775,000 euros. The most significant items accounted for in the calculation of deferred tax assets are: a) writedowns to credits exceeding the deductible limit (0.40 per cent of credits recognised in the balance sheet) to be deducted over the next nine years exclusively deferred income tax (IRES) assets; b) fair value hedge accounting of derivatives hedging issued bonds (FVO); c) non deductible valuation of bonds issued and covered by derivatives designated fair value hedges (FVH). Corresponding shareholders equity caption Recorded deferred tax assets amounted to 8,030,000 euros. Deferred tax assets refer substantially to derivatives qualifying as cash flow hedges of future cash flows (CHF) recorded as a corresponding shareholders equity caption Deferred tax liabilities: break-down Corresponding income statement caption Deferred tax liabilities recorded amounted to 41,069,000 euros. The most significant items accounted for in the calculation of deferred tax liabilities are: a) revaluation of property on first-time adoption at deemed cost and the transfer of amortisation charges on land to the balance sheet; b) application of fair value hedge accounting to derivatives covering bonds issued; c) tax deduction only of amortisation on property and goodwill (ex. Article 109 TUIR). Corresponding shareholders equity caption Recorded deferred tax liabilities amounted to 187,813,000 euros. The most significant items accounted for in the calculation of deferred tax liabilities are: a) available for sale debt and equity securities recorded at fair value; b) the equity component contained in bonds in issue convertible into shares. 115

116 Variation in current taxes (with corresponding caption recorded in the income statement) Banking Group Insurance companies Other companies 31/12/05 31/12/04 1. Opening balance 48, , Increases 159,492 4, , Current taxes arising during the year 157,964 1, ,067 a) referring to previous business years - 1,081 1,081 b) arising from changes in accounting standards 111, ,382 c) writebacks - d) other 46, , New taxes or fiscal rate increase 1,528 1, Other increases 3,159 3, Reductions 45,722 1,292-47, Current taxes cancelled during the year 45, ,737 a) reallocations 45, ,737 b) writedowns to amounts deemed irrecoverable - c) changes in accounting standards Reductions in tax rates 1,224 1, Other reductions Final amount 161,899 3, ,775 49,035 (1) On first-time adoption of IAS/IFRS (IAS 32 and IAS 39) the contra entry is recorded in the balance sheet and not in the income statement. 116

117 14.3 Variations in deferred taxes (with corresponding amount recorded in the income statement) Banking Group Insurance companies Other companies 31/12/05 31/12/04 1. Opening balance 141,567 6, , Increases 64,573 1, , Current taxes arising during the year 60, ,346 a) referring to previous business years 1,397 1,397 b) arising from changes in accounting 36,048 36,048 c) writebacks 22, , New taxes or increases in tax rates 4,224 4, Other increases 40 1,321 1, Reductions 25, , Current taxes cancelled during the year 25, ,846 a) reallocations 25, ,846 b) writedowns to amounts deemed irrecoverable - c) changes in accounting standards Reductions in tax rates Other reductions - 4. Final amount 180,309 7, , ,738 (1) On first-time adoption of IAS/IFRS (IAS 32 and IAS 39) the contra entry is recorded in the balance sheet and not in the income statement. 117

118 14.4 Variations in current taxes (with corresponding amount recorded at shareholders equity) Banking Group Insurance companies Other companies 31/12/05 31/12/04 1. Opening balance Increases 954 6,577-7, Current taxes arising during the year a) referring to previous business years - b) arising from changes in accounting standards c) writebacks d) other New taxes or increases in tax rates Other increases 6,577 6, Reductions Current taxes cancelled during the year a) reallocations 2 2 b) writedowns to amounts deemed - c) changes in accounting standards Reductions in tax rates Other reductions - 4. Final amount 957 7,073-8, Variations in deferred taxes (with corresponding amount recorded at shareholders equity) Banking Group Insurance companies Other companies 1. Opening balance Increases 40, , Current taxes arising during the year 40, ,477 a) referring to previous business years - 31/12/05 31/12/04 b) arising from changes in accounting standards 7,253 7,253 d) other 33,224 33, New taxes or increases in tax rates Other increases Reductions Current taxes cancelled during the year a) reallocations - b) writedowns to amounts deemed irrecoverable c) changes in accounting standards Reductions in tax rates Other reductions - 4. Final amount 39,968 1,101-41, Other information In line with international accounting standards current tax assets and deferred tax liabilities have been recorded utilising tax rates which, according to tax regulations in force at 31/12/05, will be in force in the period in which the deferred tax asset is realised or the deferred tax liability is settled. In the light of the substantial nature of reserves not subject to suspension which can be utilised for possible provisions, and the fact that distribution from reserves subject to suspension to tax (total amount: 66.2 million) has never previously occurred, no provisions have been made for deferred tax liabilities referring to reserves subject to a suspension of liability to taxation. 118

119 SECTION 16 OTHER ASSETS - CAPTION Other assets: break-down Unprocessed transactions 13,468 Amounts awaiting collection 27,794 Transactions awaiting completion 417,353 Current account cheques drawn on third parties 64,835 Current account cheques drawn on the bank 13,233 Taxes advanced on behalf of third parties 4,201 Deposits representing own-name guarantees 400 Receivables ready for collection 35,557 Upkeep and improvement costs on third party property 3,032 Consolidation adjustments 16,600 Others 248,340 Total 31/12/ ,813 Total 31/12/ ,

120 LIABILITIES SECTION 1 AMOUNTS OWED TO CREDIT INSTITUTIONS CAPTION Amounts owed to credit institutions: product break-down Operations/ Group components Banking Group Insurance companies Other companies 31/12/05 31/12/04 1. Amounts owed to Central banks 2. Amounts owed to banks Current accounts and free deposits Term deposits Financing Leasing Others Repurchase agreements 2.5 Liabilities for non derecognised sold assets Debit repurchase agreements Others 2.6 Others debts Total Fair value

121 SECTION 2 AMOUNTS OWED TO CUSTOMERS CAPTION Amounts owed to customers: product break-down Operations/ Group components Banking Group Insurance companies Other companies 31/12/05 31/12/04 1. Current accounts and free deposits 8,357,996 8,357, Term deposits 10,501 10, Funds managed on behalf of third 558 parties Financing 9,305 9, Leasing 2,242 2, Others 7,063 7, Repurchase agreements 6. Liabilities for non derecognised sold 221,506 assets 221, Debit repurchase agreements 221, , Others Other debts 56,742 1,128 57,870 Total 8,656,608 1,128 8,657,736 8,365,078 Fair value 8,612,902 1,128 8,614,

122 SECTION 3 DEBT SECURITIES IN ISSUE CAPTION Debt securities in issue: product break-down Banking Group Insurance companies Other companies 31/12/05 31/12/04 Securities/ Group components Balance value Fair Value Balance value Fair Value Balanc e value Fair Value Balance value Fair Value Balance value A. Listed securities 5,957,812 5,957,434 5,957,812 5,957, Bonds 5,957,812 5,957,434 5,957,812 5,957, Other securities B. Unlisted securities 392, ,500 1,205 1, , , Bonds 2,510 2,510 1,205 1,208 3,715 3, Other securities 390, , , ,990 Total 6,350,388 6,349,934 1,205 1,208 6,351,593 6,351,142 5,900, Details of the caption 30 "Debt securities in issue" : subordinated securities (current legislation) Code Nominal value Balance value Currency Interest rate Maturity XS , ,527 euro Euribor 3 months + annual spread of /11/2011 IT ,055 90,130 euro 1.5% + 16% at maturity 05/12/2013 XS ,000 80,129 euro IT euro IT euro Euribor 3 months + annual spread of 0.25 Euribor 6 months + annual spread of 1.50 Euribor 6 months + annual spread of /08/2007 indeterminate indeterminate IT ,500 2,510 euro Euribor 6 months 10/05/2006 IT ,500 12,502 euro Euribor 6 months + annual spread of /06/

123 3.3 Caption 30 (detail) Securities in issue : securities by hedge type 31/12/05 1. Fair value hedges 1,573,980 a) interest rate risk 1,573,980 b) exchange rate risk c) multiple risks 2. Cash flow hedges a) interest rate risk b) exchange rate risk c) other Total 1,573,

124 SECTION 4 FINANCIAL LIABILITIES HELD FOR TRADING CAPTION Financial liabilities held for trading: break-down by type Type of Banking group Insurance companies Other companies 31/12/05 31/12/04 transaction/group FV FV FV FV FV components VN FV* VN FV* VN FV* VN FV* VN Q NQ Q NQ Q NQ Q NQ Q NQ FV* A. Cash liabilities 1. Due to banks 2. Due to customers 3. Debt securities 3.1 Bonds 3.2 Other securities Total A B. Derivatives x x x x x x x x x x 1. Financial derivative x 7, ,012 x x x x x x 7, ,012 x x x 2. Credit derivatives x 1,204 x x x x x x 1,204 x x x Total B x 7, ,216 x x x x x x 7, ,216 x x x Total A+B x 7, ,216 x x x x x x 7, ,216 x x 73,834 x Key: FV = fair value FV* = fair value calculated without taking into account value variations deriving from credit rating changes to the issuer since issue date VN = nominal or notional value Q = quoted NQ = non quoted 124

125 4.4 Financial liabilities held for trading: derivatives Pertinence of banking Group Derivatives / Underlying assets Interest rates Currency and gold Shares and other equity securities 31/12/05 A. Quoted derivatives 1. Financial derivatives: 27 7, ,401 * With exchange of principal 27 27? Issued options? Other derivatives * Without exchange of principal 7, ,374? Issued options 7, ,374? Other derivatives 2. Derivatives on credits: * With exchange of principal * Without exchange of principal Total A 27 7, ,401 B. Non quoted derivatives 1. Financial derivatives: 104,240 17, ,012 * With exchange of principal 17,771 17,771? Issued options 5,506 5,506? Other derivatives 12,265 12,265 * Without exchange of principal 104, ,241? Issued options ? Other derivatives 104, , Derivatives on credits: 1,204 1,204 * With exchange of principal 1,204 1,204 * Without exchange of principal Total B 104,240 17, , ,216 Total (A+B) 104,267 24, , ,617 Loans Other 125

126 SECTION 5 FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE CAPTION Financial liabilities designated at fair value: product break-down Banking Group Insurance companies Other companies 31/12/05 31/12/04 Operations/Amounts FV FV FV FV VN VN VN VN Q NQ Q NQ Q NQ Q NQ FV 1. Amounts owed to banks 1.1 Structured 1.2 Others 2. Amounts owed to customers 602, , , , Structured 2.2 Others 602, , , , Debt securities in issue 513,442 21, , ,442 21, , Structured 3.2 Others 513,442 21, , ,442 21, ,206 Total 513,442 21, , , , ,116, , , ,672 FV = fair value FV* = fair value calculated excluding the changes of value due to the changement of crediworthy of the issuer as to the date of issue VN = nominal value Q = quoted NQ = non-quoted 126

127 SECTION 6 HEDGING DERIVATIVES - CAPTION Hedging derivatives: contracts and assets break-down Pertinence of banking Group Derivatives / Underlying assets Interest rates Currency and gold Shares and other equity securities Loans Other Total A. Quoted derivatives 1. Financial derivatives: 42,401 42,401 * With exchange of principal? Issued options? Other derivatives * Without exchange of principa 42,401 42,401? Issued options? Other derivatives 42,401 42, Credit derivatives: * With exchange of principal * Without exchange of principal Total A 42,401 42,401 B. Non-quoted derivatives 1. Financial derivatives: * With exchange of principal? Issued options? Other derivatives * Without exchange of principal? Issued options? Other derivatives 2. Credit derivatives: * With exchange of principal * Without exchange of principal Total B Total A+B (31/12/2005) 42,401 42,401 Total A+B (31/12/2004) 2,813 2,

128 6.2 Hedging derivatives: break-down for hedged portfolio and hedge type Pertinence of banking Group Operations /Hedge type interest rate risk Fair Value Specific exchange rate risk credit risk price risk 1. Financial assets available for sale x x 2. Loans 25,501 x x x 3. Financial assets held to maturity x x x x 4. Portfolio x x x x x x Total assets 25, Financial liabilities 16,900 x x 2. Portfolio x x x x x x Total liabilities 16,900 more risks General Financial flows Specific General 128

129 SECTION 8 TAX LIABILITIES CAPTION 80 See section 14 of the assets. 129

130 SECTION 10 OTHER LIABILITIES CAPTION Other liabilities: break-down Unprocessed transactions and amounts in transit with branches and subsidiaries 13,707 Guarantees granted by third parties 1,394 Amounts due to tax authorities on behalf of third parties 24,383 Negative value adjustments on bills and notes 139,996 Amounts claimable by customers 92,930 Uncompleted transactions 256,140 Amounts payable to suppliers 54,663 Personnel related charges 14,565 Amounts payable due to settlement value date 10,991 Provisions for guarantees and commitments 11,042 Other items 432,586 Total 31/12/05 1,052,397 Total 31/12/04 1,085,

131 SECTION 11 STAFF SEVERANCE PAY PROVISIONS CAPTION Provisions for staff severance pay: annual changes Banking group Insurance companies Other companies 31/12/05 31/12/04 A. Opening balance 122,173 9, ,353 96,814 B.1 Increases 16,390 1,342 17,732 48,711 B.2 Provisions made during the year 16,115 1,310 17,425 17,559 B.3 Other increases ,152 C.1 Decreases 16,715 1,404 18,119 14,172 C2. Amounts paid 13,741 1,147 14,888 11,111 C.3 Other decreases 2, ,231 3,061 D. Closing balance 121,848 9, , , Other information The valuation of future termination provisions was performed by independent actuaries on the basis of the criteria identified by IAS 19 ( employee benefits ). The methodology determined both the defined benefit obligation ( DBO ) at 31/12/05 and current service costs ( CSC ) at 31/12/05. DBO and CSC amounts were calculated on the basis of estimated future provisions which, in line with expected changes in salary, will be paid to each employee on entitlement (retirement age, injury, death, resignation, request for advance). Liabilities of the Group are determined exclusively on the basis of the years of service accumulated on the date of valuation and actualised on the same date. The following statistical sources, with distinctions made according to age and sex, have been used: 1. probability of exclusion from calculation due to death, on the basis of ISTAT - Italian National Statistics Institute figures for 2002; 2. probability from exclusion from calculation due to permanent injury, on the basis of specific credit sector research; (probability levels for both were lowered on the basis of Carige Group employee statistics for the years ); 3. probability of exclusion due to resignation or dismissal was calculated on the basis of Banca Carige employee statistics for the years The following additional elements were also taken into account: - maximum number of requests for advances; - frequency of request for first advances and then successive requests; - the share of total termination entitlement represented by each request. Average annual increases of 2 per cent for inflation and 2 per cent for salary increases were used for the entire period of valuation. The nominal actualisation rate adopted was 4.50 per cent. 131

132 SECTION 12 PROVISIONS FOR RISKS AND CHARGES CAPTION Provisions for risks and charges: break-down Caption/Component Banking group Insurance companies Other companies 31/12/05 31/12/04 1. Company pension funds 319, , , Other provisions for risks and charges 57,477 1,993 59,470 40, Legal claims and disputes 13, ,445 7, Personnel charges 43,928 43,928 29, Other 113 1,984 2,097 3,929 Total 377,037 2, , , Provisions for risks and charges: annual change Banking group Insurance companies Other companies Total Pension funds Other funds Pension funds Other funds Pension funds Other funds Pension funds Other funds A. Opening balance 319,343 37, , ,812 40,895 B. Increases 15,507 45, ,557 45,840 B.1 Provisions during the year 15,507 45, ,557 45,838 B.2 Changes due to elapsing of time B.3 Changes due to discount rate variations B.4 Other changes 2 2 C. Decreases 15,290 25,174 2,091 15,290 27,265 C.1 Use during the year 15,290 24,856 2,091 15,290 26,947 C.2 Changes due to discount rate variations C.3 Other variations D. Closing balance 319,560 57, , ,079 59, Defined benefit company pension funds As the Group s method of calculating actuarial values was substantially in line with the provisions of IAS 19, IFRS adoption did not impact the method used in determining defined benefit funds. It should be noted that: - actuarial calculations regarding the preparation of the technical statements under Italian GAAP were performed on the basis of the indications provided by IAS 19 (closed group, excluding new entries); - the methodology of actuarial calculations required under IAS 19 for both staff currently in service and those now retired is the same as that used for regular valuations of the Fund ( projected unit credit method ). In particular for employees currently in service, the recording of defined benefit plans under IAS 19 requires an actuarial estimate of liabilities calculated on the basis of the total of benefits matured by employees at the date of valuation. This calculation must also take into account future salary increases; - the rate of actualisation is as indicated by IAS 19, which takes into account the macroeconomic situation at the moment of valuation and the average length of time of expected future payments; 132

133 - other technical demographic and economic assumptions are in accordance with IAS 19. In the light of above, the valuation methods and procedures used in determining accumulated staff benefits and the Group s commitments are fully in line with IAS Provisions for risks and charges other provisions 1. Staff charges Staff charges, amounting to 43.9 million, refer to: - short-term productivity bonuses, incentives and amounts payable at 31/12/05 as established in the Parent Company s supplementary staff contact agreement; - other long-term seniority benefits. With regards to the latter, in accordance with IAS 19, the value of the Group s commitments is calculated by an independent actuary using the project unit credit method. 2. Legal claims Reserves have been established for current legal claims for which an estimation of potential liabilities and the expected length of proceedings can be determined, in compliance with IAS 37. At 31 st December 2005 total provisions amounted to 13.4 million. The insignificant amount of guarantees reaching maturity meant that no actuarial calculations of this item were carried out. With regards to proceedings arising from the Parmalat scandal and in particular to sums transferred prior to 24 th December 2004, and in the light of the clearly demonstrable correctness of the Group s behaviour at all times and on the basis of legal advice, the Group has made no provisions for legal claims. 3. Other provisions This item refers to commitments regarding financial advisors and insurance agents who are not employees of the Parent Company. 133

134 SECTION 13 TECHNICAL RESERVES CAPTION Technical reserves: break-down Item corresponds to Liabilities - caption C of an insurance company s balance sheet. Direct work Indirect work 31/12/05 31/12/04 A. Non life 696, , ,888 A.1 premiums fund 211, , ,485 A.2 claims fund 484, , ,406 A.3 other provisions B. Life 797, , ,881 B.1 mathematical reserves 781, , ,311 B.2 funds for amounts to be disbursed 5,512 5,512 4,791 B.3 other reserves 10,493 10,493 16,779 C. Technical reserves for investment risks to be borne by insured C.1 funds for contracts with disbursements connected with pension funds and market indices C.2 funds from pension fund management D. Total technical reserves 1,494, ,494,945 1,292, Technical reserves: annual changes 31/12/04 annual changes 31/12/05 A. Non life 652,888 44, ,991 A.1 premiums fund 188,485 22, ,352 A.2 claims fund 463,406 21, ,913 A.3 other provisions B. Life 639, , ,954 B.1 mathematical reserves 618, , ,949 B.2 funds for amounts to be disbursed 4, ,512 B.3 other reserves 16,779-6,286 10,493 C. Technical reserves for investment risks to be borne by insured C.1 funds for contracts with disbursements connected with pension funds and market indices C.2 funds from pension fund management D. Total technical reserves 1,292, ,176 1,494,

135 SECTION 15 GROUP SHAREHOLDERS' EQUITY CAPTIONS 140, 160, 170, 180, 190, 200 & Group Shareholders' equity: break-down Caption/Value 31/12/05 31/12/04 1. Capital 1,113,327 1,113, Additional paid-in capital 263, , Reserves 26, , (Own shares) -1,301 a) parent company -1,301 b) subsidiaries 5. Valuation reserves 721, , Capital instruments 11, Profit (loss) for the year 131, ,214 Total 2,268,032 1,845, Capital and Own shares : break-down Nominal value of shares issued Ordinary Savings Total Nominal value of shares in circulation at the end of the year 959, ,429 1,113,327 fully paid-up shares 959, ,429 1,113,327 not fully paid-up shares At 31 st December 2005 share capital amounted to 1,113,326,839 euros, made up by 1,113,326,839 shares of 1 euro each. No changes to share capital were recorded during the year. The share portfolio contains 44 old shares with a nominal value of LIT. 10,000, equivalent to 228 current ordinary shares. The book value of these shares amounts to 426 euros. 135

136 15.3 Capital Number of Parent Company shares: annual changes Caption/Type Ordinary Savings A. Number of shares at the beginning of the year 959,897, ,429,321 fully paid-up 959,897, ,429,321 not fully paid-up A.1 Own shares (-) -436,327 A.2 Shares in circulation: opening balance 959,461, ,429,321 B. Increases 10,088,493 B.1 New issues on a payment basis: business combinations conversion of bonds exercise of warrants other on a free basis in favour of employees in favour of directors other B.2 Sale of own shares 10,088,493 B.3 Other changes C. Decreases 9,652,394 C.1 Cancellation C.2 Purchase of own shares 9,652,394 C.3 Business conveyance deals C.4 Other changes D. Shares in circulation: closing balance 959,897, ,429,321 D.1 Own shares (+) 228 D.2 Shares in circulation: closing balance 959,897, ,429,321 fully paid-up 959,897, ,429,321 not fully paid-up 15.5 Income reserves: other information Caption/Value 31/12/05 31/12/04 Income reserves: 20, ,588 - legal reserves 88,725 77,971 - own shares reserve 1,301 - other reserves -67,870 60,316 Other reserves: 5,703 28,930 - merger reserve 12,341 12,341 - concentration reserve 16,589 16,589 - reserves for options on equity investments in subsidiaries -23,227 Total 26, ,

137 15.6 Valuation reserves: break-down Caption/Item Banking Insurance Other group companies companies 31/12/05 31/12/04 1. Financial instruments available for sale 534,989-2, , Tangible assets 3. Intangible assets 4. Foreign investment hedges 5. Cash flow hedges -1,448-1, Exchange differences 7. Discontinued operations 8. Special revaluation laws 191, , ,073 Total 724,614-2, , ,073 Item 8 special revaluation laws is inclusive of 183,023,000 euros, arising from the FTA/IFRS valuation of property and works of art at deemed cost Valuation reserves: annual changes Banking Group Financial instruments available for sale Tangible assets Intangible assets Foreign investments hedge Cash flow hedge Exchange differences Discontinued operations Special revaluation laws A. Opening balance 191,073 B. Increases 564,403 B.1 Increases in fair value 21,173 B.2 Other changes 543,230 C. Decreases 29,414 1,448 C.1 Decreases in fair value C.2 Other changes 29,199 1,033 D. Closing balance 534,989-1, ,073 The valuation reserves closing balance refers to available for sale instruments. The amount relates to after-tax gains on the Banking Group s (Banca Carige, C.R. Savona, C.R. Carrara, BML) equity holding in the Bank of Italy of 527,643,000 euros Insurance companies Financial instruments available for sale Tangible assets Intangible assets Foreign investments hedge Cash flow hedge Exchange differences Discontinued operations Special revaluation laws A. Opening balance B. Increases 3,727 B.1 Increases in fair value 3,727 B.2 Other changes C. Decreases 6,359 C.1 Decreases in fair value 6,359 C.2 Other changes 0 D. Closing balance -2,

138 15.8 Valuation reserves of available for sale instruments: break-down Banking group Insurance companies Other companies 31/12/05 31/12/04 Asset type/value Positive reserve Negative reserve Positive reserve Negative reserve Positive reserve Negative reserve Positive reserve Negative reserve Positive reserve Negative reserve 1. Debt securities 2, , Capital securities 532, , OICR shares 368 2, Loans Total 535, ,728 6, ,349 6, Valuation reserves of available for sale instruments: annual changes Banking group Debt securities Equity securities 1. Opening balance 2. Positive variations 2, , Increases in fair value 2,263 18, Reallocation of negative reserves to income statement - due to impairment - due to realisation 2.3 Other variations , Negative variations , Decreases in fair value Impairment adjustments 3.3 Reallocation of negative reserves to income statement Other variations 29, Closing balance 2, ,232 OICR shares Loans Insurance companies Debt securities Equity securities OICR shares 1. Opening balance 2. Positive variations 3, Increases in fair value 3, Reallocation of negative reserves to income statement - due to impairment - due to realisation 2.3 Other variations 3. Negative variations 4,288 2, Decreases in fair value 4,288 2, Impairment adjustments 3.3 Reallocation to income statement from positive reserves 3.4 Other variations 4. Closing balance 3,271-4,200-1,703 Loans 138

139 SECTION 16 MINORITY INTERESTS CAPTION Minority interests: break-down Captions/Values Banking Group Insurance Other companies companies 31/12/05 31/12/04 1. Capital stock 9, ,191 19, Additional paid-in capital 3, ,831 4, Reserves 5, ,609 14, (Own shares) Revaluation reserves 4, ,979 5, Capital instruments 7. Minority interests 3, ,626 2,534 Total 26, ,219 46, Revaluation reserves: break-down Captions Banking Group Insurance Other companies companies 31/12/05 31/12/04 1. Financial assets available for sale Tangible assets 3. Intangible assets 4. Hedging of foreign investments 5. Hedging of financial flows Exchange rate risks 7. Non current assets to dismiss 8. Special laws of revaluations 3, ,605 5,655 Total 4, ,979 5,

140 16.4 Revaluations reserves of financial assets available for sale: break-down Banking Group Insurance companies Other companies Assets/Values 31/12/05 31/12/04 Positive reserve Negative reserve Positive reserve Negative reserve Positive reserve Negative reserve Positive reserve Negative reserve Positive reserve Negative reserve 1. Debt securities Equity securities Shares in collective investment schemes Financing Total Revaluation reserves: annual changes Pertinence of banking Group Financial assets available for sale Tangible assets Intangible assets Hedging of foreign investments Hedging of financial flows Exchange rate risks Non current assets to dismiss Special laws of revaluation A. Opening balances 3,603 B. Increases 550 B.1 Increases of fair value 238 B.2 Other changes 312 C. Decreases C.1 Decreases of fair value 1 27 C.2 Other changes D. Closing balances , Pertincence of insurance companies Financial assets available for sale Tangible assets Intangible assets Hedging of foreign investments Hedging of financial flows Exchange rate risks Non current assets to dismiss Special laws of revaluation A. Opening balances 2 B. Increases 5 B.1 Increases of fair value 5 B.2 Other changes C. Decreases 32 C.1 Decreases of fair value 32 C.2 Other changes D. Closing balances

141 OTHER INFORMATIONS 1. Guarantees given and commitments Operations Banking Insurance Other Group companies companies 31/12/05 1) Financial guarantees 56,747 1,686 58,433 a) Banks 1,446 1,686 3,132 b) Customers 55,301 55,301 2) Commercial guarantees 1,381,539 1,689 1,383,228 a) Banks 39,663 39,663 b) Customers 1,341,876 1,689 1,343,565 3) Irrevocable commitments to extend credit 953, ,884 a) Banks 31,505 31,505 i) certain to be called on 31,505 31,505 ii) not certain to be called on - b) Customers 922, ,379 i) certain to be called on 157, ,650 ii) not certain to be called on 764, ,729 4) Commitments underlying to credit derivatives: sales 83,744 83,744 5) Assets held to guarantee securities of third parties ) Other commitments 22,308 35,088 57,396 Total ,498,514 38,463 2,536,977 Total ,683, Assets held to guarantee own liabilities and commitments Portfolios 31/12/05 31/12/04 1. Financial assets held for trading 389, , Fiancial assets designated at fair value 3. Fiancial assets available for sale 67,376 22, Held-to-maturity investments 5. Loans to banks 6. Loans to customers 7. Tangible assets 141

142 4. Break-down of investments corresponding to unit-linked and index-linked policies 31/12/05 31/12/04 I Land II Investments in subsidiaries and associates 1. Shares 2. Bonds 3. Loans III OICR shares 382,443 IV Other financial investments 212, Shares 2. Bonds and other fixed income securities 201, Deposits with credit institutions 4. Other financial investments 11,185 V Liquid investments 7,775 Total 602, , Administration and dealing on behalf of third parties: banking group Type of service 1. Financial instruments dealing on behalf of third parties a) Purchases 2,529, Settled 2,526, Not settled 2,899 b) Sales 2,558, Settled 2,550, Not settled 8, Portfolio management 1,722,294 a) individual 1,205,417 b) collective 516, Custody and administration of securities 42,363,682 a) third-party securities held in deposit in connection with depositary bank's services (excluding asset management) 4,977, Securities issued by banks included in the scope of consolidation 13, Other securities 4,963,681 b) other third-party securities (excluding asset management): other 16,530, Securities issued by banks included in the scope of consolidation 5,505, Other securities 11,024,729 c) third party securities deposited with third parties 18,613,899 d) own securities deposited with third parties 2,241, Other transactions - orders: collection, transmission and brokering 13,912,167 a) countervalue of acquisition transactions intermediated during the year 7,652,320 b) countervalue of sale transactions intermediated during the year 6,259,847 - bills and similar commercial paper received for collection on behalf of third parties 1,662,676 - holdings of other banks in syndicated loan transactions 301,774 - total invoices relating to factoring 171,043 - lending transactions performed on behalf of public authorities 8,

143 143

144 SECTION 1 INTEREST CAPTION 10 AND Interest income and similar revenues: break-down Pertinence of banking Group Performing financial assets Impaired Captions financial Other assets 31/12/05 31/12/04 Debt securities Financing assets 1. Finacial assets held for trading 210, , Financial assets designated at fair value 4,575 4, Financial assets available for sale Financial assets held to maturity 5. Loans to banks 26, , Loans to customers 543,405 35, , Hedging derivatives 8. Non derecognised sold assets 32,808 32, Other assets 1,030 1,030 Total 215, ,875 35,413 1, , , Pertinence of insurance companies Performing financial assets Impaired Captions financial Other assets 31/12/05 31/12/04 Debt securities Financing assets 1. Finacial assets held for trading 25,381 25, Financial assets designated at fair value 3. Financial assets available for sale 12,428 12, Financial assets held to maturity Loans to banks Loans to customers Hedging derivatives 8. Non derecognised sold assets 9. Other assets 1,319 1,319 Total 37, ,319 39,902 36,

145 1.3 Interest incombe and similar revenues: other informations Interest income on other currencies financial assets Interest income on other currencies financial assets total 14,338 thousands of euros Interest incombe on leased assets Interest incombe on leased assets total 26,461 thousands of euros Interest income on loans using funds managed on behalf of third parties Interest income on loans using funds managed on behalf of third parties total 4 thousands of euros. 1.4 Interest expenses and similar charges: composition Pertinence of banking Group Captions Debts Securities Other liabilities 31/12/05 31/12/04 1. Amounts owed to banks -36,133-36, Amounts owed to customers -29,299-1,260-30, Debt securities in issue -183, , Financial liabilities held for trading 5. Financial liabilities designated at fair value -1,351-1, Financial liabilities related to not derecognised sold assets -32, , Other liabilities -1,914-1, Hedging derivatives -132, ,609 Total -98, , , , , Pertinence of insurance companies Captions Debts Securities Other liabilities 31/12/05 31/12/04 1. Amounts owed to banks 2. Amounts owed to customers 3. Debt securities in issue Financial liabilities held for trading 5. Financial liabilities designated at fair value 6. Financial liabilities related to not derecognised sold assets 7. Other liabilities Hedging derivatives Total Pertinence of other companies Interest expenses pertinence of other companies total 47 thousands of euros. 145

146 1.5 Interest charges and similar expenses: differences arising from hedging transactions Caption Banking group Insurance companies Other companies 31/12/05 31/12/04 A. Positive differences arising from A.1 Specific fair value hedge of assets A.2 Specific fair value hedge of liabilities 37,175 37,175 A.3 Generic interest rate hedge A.4 Specific cash flow hedge of assets A.5 Specific cash flow hedge of liabilities A.6 Generic cash flow hedge Total positive differences (A) 37,511 37,511 B. Negative differences arising from B.1 Specific fair value hedge of assets 166, ,087 B.2 Specific fair value hedge of liabilities 4,032 4,032 B.3 Generic interest rate hedge B.4 Specific cash flow hedge of assets B.5 Specific cash flow hedge of liabilities B.6 Generic cash flow hedge 2 2 Total negative differences (B) 170, ,121 C. Closing balance (A-B) -132, ,610-56, Interest charges and similar expenses: other information Interes t charges in foreign currency Interest charges generated on liabilities in foreign currency amounted to 14,848 thousands of euros Interest charges on liabilities for financial leasing operations Interest charges on liabilities for financial leasing operations amounted to 94 thousands of euros. 146

147 SECTION 2 COMMISSION CAPTIONS 40 AND Commission income: break-down Pertinence of banking Group Type of services/amount 31/12/05 31/12/04 a) guarantees given 12,167 8,184 b) credit risk derivatives c) mamagement, dealing and consultancy services: 121,386 78, Financial instruments dealing 17,054 1, Foreign currency dealing 3,531 3, Private banking 47,744 17, individuals 7,379 8, collective 40,365 9, Custody and administration of securities 2,955 1, Depositary bank 4,275 2, Placement of securities 21,919 38, Acceptance of orders 8,115 5, Consultancy 9. Distribution of third party products 15,793 7, private banking individuals collective insurance products 4,220 1, other products 11,411 5,578 d) collection and payment services 56,022 47,956 e) servicing relating to securitisation 2,128 2,022 f) servicing relating to factoring 1,319 1,325 g) tax and rates collection h) other services 97,283 87,113 Total 290, ,481 Commissions in caption h) other services are mostly referable to commissions on deposits and overdrawn a/c, credit current accounts and granted loans Pertinence of insurance companies Commissions of insurance companies total 5,157 thousands of euros and are related to the distribution of insurance products. 147

148 2.2 Commission income: distribution channels of products and services (current legislation): banking Group Channels/Amount 31/12/05 31/12/04 a) Distribution at Carige Group branches 85,058 63, Asset management 47,716 17, Securities placement 21,652 38, Services related to third party products 15,690 7,353 b) Distribution at outlets other than at head office Asset management Securities placement Services related to third party products c) Other distribution channels: Asset management 2. Securities placement Services related to third party products Total 85,456 63, Commission expenses: break-down Pertinence of banking Group Services/Amount 31/12/05 31/12/04 a) Guarantees received ,043 b) Credit risk derivatives c) Management and dealing services -19,349-3, Securities dealing Foreign currency dealing 3. Private banking Carige Group's portfolio third party's portfolio Custody and amministration of securities -2,398-1, Placement of securities -15, Securities, products and services not delivered at the Bank's head office d) Collection and payment services -17,230-11,054 e) Other services -10,056-2,080 Total -47,482-17, Pertinence of insurance companies Commissions of insurance companies total 1,798 thousands of euros and are related to other services. 148

149 SECTION 3 DIVIDENDS AND OTHER REVENUES CAPTION Dividends and other revenues: break-down Banking Group Insurance companies Other companies 31/12/05 31/12/04 Captions/Revenues dividends mutual funds and unit trusts revenues dividends mutual funds and unit trusts revenues dividends mutual funds and unit trusts revenues dividends mutual funds and unit trusts revenues A. Financial assets held for trading 5,416 14, ,484 14,917 B. Financial assets available for sale 2, ,548 C. Financial assets designated at fair value D. Equity investments 1,546 1,546 Total 7,630 14,917 1,948 9,578 14,917 5,

150 SECTION 4 INCOME (LOSS) ON FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING, NET CAPTION Income (loss) on financial assets and liabilities held for trading, net: break-down Pertinence of banking Group Revaluations (A) Other gains (B) Write-downs (C) Other losses (D) Net income [(A+B) - (C+D)] 1. Financial assets held for trading 40,477 23,412-19, ,412-57, Debt securities 12,739 9,886-17,974-99,689-95, Equity securities 23,452 2, ,699 24, Shares in mutual funds and unit trusts 4,286 7,306-1, , Financing 1.5 Other 3,476 3, Financial liabilities held for trading 2.1 Debt securities 2.2 Other 3. Other financial liabilities: exchange-rate diffe X X X X 2, Derivatives instruments 45, ,250-32,832-31, , Financial derivatives: 44, ,838-31,961-29,984 99,706 - on debt securities and interest rates 22,640 98,556-21,470-5,587 94,139 - on equity securities and ahre indexes 22,173 18,282-10,491-24,397 5,567 - on foreign currency and gold X X X X Other 4.2 Credit risk derivatives 516 3, ,409 1,648 Total 85, ,662-52, ,805 47, Pertinence of insurance companies Revaluations (A) Other gains (B) Write-downs (C) Other losses (D) Net income [(A+B) - (C+D)] 1. Financial assets held for trading 3,431 3,777-16,578-1,720-11, Debt securities 3,194 2,593-15,805-1,652-11, Equity securities 151 1, , Shares in mutual funds and unit trusts Financing 1.5 Other Financial liabilities held for trading 2.1 Debt securities 2.2 Other 3. Other financial liabilities: exchange-rate differencie X X X X 4. Derivatives instruments 4.1 Financial derivatives: - on debt securities and interest rates - on equity securities and ahre indexes - on foreign currency and gold X X X X - Other 4.2 Credit risk derivatives Total 3,431 3,777-16,578-1,720-11,

151 SECTION 5 INCOME (LOSS) FROM HEDGING ACTIVITIES CAPTION Income (loss) from hedging activities: break-down Captions/Revenues Banking Group Insurance companies Other companies 31/12/05 31/12/04 A. Revenues related to: A.1 Fair value hedging derivatives 12,476 12,476 A.2 Hedged financial assets (fair value) 2,959 2,959 A.3 Hedged financial liablities (fair value) 10,371 10,371 A.4 Financial derivatives hedging financial flows A.5 Assets and liabilities in foreign currency Total revenues from hedging activities (A) 26,049 26,049 B. Expenses related to: B.1 Fair value hedging derivatives -15,429-15,429 B.2 Hedged financial assets (fair value) -2,291-2,291 B.3 Hedged financial liablities (fair value) -9,598-9,598 B.4 Financial derivatives hedging financial flows Total expenses from hedging activities (B) -27,318-27,318 C. Income (loss) from hedging activities (A - B) -1,269-1,

152 SECTION 6 INCOME (LOSS) ON DISPOSAL CAPTION Income (loss) on disposal: break-down Banking Group Insurance companies 31/12/05 Other companie 31/12/04 Income Loss Net income Income Loss Net income Income Loss Net income Income Loss Net income Income Loss Net income Financial assets 1. Lonas to banks 2. Loans to customers 2, ,076 2, , Financial assets available for sale , ,190 2, , Debt securities Equity securities , ,106 1, , Shares in mutual funds and unit trusts Financing 4. Financial assets held to maturity Total assets 2, ,199 1, ,190 4, ,389 10,223 Financial liabilities 1. Amounts owed to banks 2. Amounts owed to customers 3.Debt securities in issue 931-6,292-5, ,292-5,361 Total liabilities 931-6,292-5, ,292-5,

153 SECTION 7 NET VALUE ADJUSTMENT ON FINANCIAL ASSETS AND LIABILITIES DESIGNATED AT FAIR VALUE CAPTION Net value adjustment on financial assets and liabilities designated at fair value: break-down Pertinence of banking Group Revaluations (A) Other gains Write-downs (C) Other losses Net income [(A+B) - (C+D)] (B) (D) 1. Financial assets Debt securities 1.2 Equity securities 1.3 Shares in mutual funds and unit trusts 1.4 Financing 2. Financial liabilities 30,551 30, Debt securities in issue 30,551 30, Amounts owed to banks 2.3 Amounts owed to customers 3. Foreign currency financial assets and liabilities: exchange-rate differences 4. Derivatives 4.1 Financial derivatives: 18,207-49,035-30,828 - on debt securities and interest rates - on equity securities and share indexes 18,207-49,035-30,828 - on foreign currency and gold - other 4.2 Credit risk derivatives Total derivatives 18,207-49,035-30,828 Total 48,758-49,

154 SECTION 8 NET VALUE ADJUSTMENT CAPTION Net value adjustment on loans: break-down Provisions (1) Recoveries (2) Specific 31/12/05 31/12/04 Credits written-off other Portfolio Specific Portfolio A B A B A. Loans to banks 4,915 4,915 B. Loans to customers -14,040-81,329-2,491 19,067 19,472 1,357-57,964 C. Total -14,040-81,329-2,491 19,067 24,387 1,357-53, ,348 Key A = from interests B = other recoveries 8.4 Net value adjustment on other financial assets: break-down Pertinence of banking Group Provisions (1) Recoveries (2) Specific 31/12/05 31/12/04 Credits written-off others Portfolio Specific Portfolio A B A B A. Guarantees given , ,227 B. Credit risk derivatives C. Commitments D. Other operations E. Total -15 ## -1, , Key A = from interests B = other recoveries 154

155 SECTION 9 NET PREMIUMS CAPTION Net premiums: break-down Premiums from insurance activity Direct activity Indirect activity 31/12/05 31/12/04 A. Life branch A.1 Gross premiums accaunted for (+) 211, ,333 A.2 Premiums ceded for reinsurance (-) -10,889-10,889 A.3 Total 200, ,444 B. Non-life branch B.1 Gross premiums accounted for (+) 530, ,753 B.2 Premiums ceded for reinsurance (-) -55,157-55,157 B.3 Changes in the gross amount of premium reserve (+/-) -23, ,387 B.4 Changes in premium reserves attributable to reinsurers (-/+) B.5 Total 451, ,409 C. Total net insurance premiums 651, , ,

156 SECTION 10 NET INCOME (LOSS) FROM INSURANCE MANAGEMENT CAPTION Balance of other income/charges arising on insurance activities: break-down Items 31/12/05 31/12/04 1. Net change in technical reserves -158, Claims accrued and paid during the year -403, Other income/charges arising on insurance activities -81,231 Total -643, , Break-down of sub-caption Claims accrued durino the year Net change in technical reserves 31/12/05 1. Life branch A. Technical reserves -156,721 A.1 Gross annual amount -157,128 A.2 (-) Amount attributable to reinsurers 407 B. Other technical reserves -1,471 B.1 Gross annual amount -1,471 B.2 (-) Amount attributable to reinsurers C. Technical reserves for investment risks to be borne by insured parties C.1 Gross annual amount C.2 (-) Amount attributable to reinsurers Total Life branch reserves -158, Non life branch Change in other technical reserves of non life branch other then claims fund net of reinsurance

157 10.3 Break-down of sub-caption Claims accrued during the year Charges associated to claims 31/12/05 Life branch: charges associatede to claims, net of reinsurance ceded A. Amounts paid -92,201 A.1 Gross annual amount -103,866 A.2 (-) Amount attributable to reinsurers 11,665 B. Changes in funds to be disbursed -298 B.1 Gross annual amount -721 B.2 (-) A,ount attributable to reinsurers 423 Total Life branch claims -92,499 C. Amounts paid: -303,725 C.1 Gross annual amount -344,674 C.2 (-) Amount attributable to reinsurers 40,949 D. Changes in recoveries, net of amounts attributable to reinsurers 8,186 E. Changes to claims fund -15,501 E.1 Gross annual amount -21,510 E.2 (-) Amount attributable to reinsurers 6,009 Total non Life branch claims -311,

158 10.4 Break-down of item Other income and charges arising from insurance activities Life Other income and charges arising from insurance activities 31/12/05 1. Life Income 64,496 - Other technical income net of ceded reinsurance 5,585 - Unrealised income and gains referring to investments for which rewards and risks are 56,997 borne by the insured Changes in commissions and other purchase costs to be amortised - Commission and share of reinsurers' profits 1,652 Charges -26,149 - Other technical charges net of ceded reinsurance -7,309 - Unrealised charges and losses referring to investments for which rewards and risks are borne by the insured -9,089 - Purchase commissions -5,213 - Other purchase expenses -3,140 - Collection commissions -1,398 Total 38, Non life Other income and charges arising from insurance activities 31/12/05 2. Non life Income 33,031 - Other technical income net of ceded reinsurance 22,057 - Changes in commissions and other purchase costs to be amortised 4,815 - Commission and share of reinsurers' profits 6,159 Charges -152,609 - Other technical charges net of ceded reinsurance -45,486 - Purchase commissions -69,842 - Other purchase expenses -25,362 - Collection commissions -11,919 Total -119,

159 SECTION 11 ADMINISTRATIVE COSTS CAPTION Personnel costs: break-down Type of costs/business segment Banking Insurance Other group companies companies 31/12/05 31/12/04 1) Employees -320,703-8, , ,188 a) wages and salaries -211,808-5, , ,817 b) social security charges -59,506-1,557-61,063-54,357 c) termination indemnities d) pension charges c) provisions for termination indemnities -13, ,546-13,960 f) provisions to pension funds and similar commitments -14, ,839-20,123 - defined contribution defined benefit -14,153-14,153-19,311 g) amounts paid to external supplementary pension funds -5,298-5,298-5,184 - defined contribution -4,865-4,865-5,184 - defined benefit h) costs arising on payment agreements based on own financial instruments i) other employee benefits -16, ,853-16,453 2) Other personnel ,212-2,032 3) Directors -3, ,326-4,172 Total -325,436-9, , , Average number of employees by category: banking group Employees (1) a) executives 83 b) total managers of which: 3 rd and 4 th level managers 444 c) other employees Other personnel (2) 69 Total (1+2)

160 11.3 Other administrative costs: break-down Type of costs / Amounts Banking Group Insurance companies Other companies 31/12/05 31/12/04 Indirect taxes -45, ,896-36,175 - stamp duty and stock exchange contracts -33,168-33,168-25,220 - "imposta sostitutiva" Presidential Decree 601/73-7,756-7,756-5,519 - ICI (Municipal real estate tax) -2, ,448-1,639 - other taxes -2, ,524-3,797 Rental expenses -22,100-1,019-23,119-21,639 - properties -10, ,546-12,370 - electronic equipment and software -10, ,207-8,912 - other Maintenance and management expenses -19, ,013-19,002 - instrumental owned premises -4, ,700-3,979 - premises not owned by the Bank -1, ,618-1,378 - furniture -8, ,466-8,764 - software -4, ,229-4,881 Office cleaning -4, ,633-4,333 Lighting, heating and water -5, ,039-5,527 Printing and stationery -2, ,760-2,980 Postage and telephone -14, ,123-16,744 Security services -3, ,204-3,436 Travelling and transport -4, ,396-4,634 Insurance premiums -3, ,599-3,029 Advertising, promotion and publishing -11, ,013-9,525 Entertainment expenses Association fees -1, ,201-1,176 Contributions to institutions and associations Newspapers and reviews subscriptions Professional fees -18,976-2, ,653-22,224 - consultancies -8,539-2, ,642-13,624 - legal expenses -7, ,315-6,962 - business reports -2, ,481-1,267 - other EDP processing with third parties -17,246-1, ,443-15,659 Auditors' fees Other expenses -15, ,606-13,449 Total -190,302-9, , ,

161 SECTION 12 NET PROVISIONS FOR RISKS AND CHARGES CAPTION Net provisions for risks and charges: break-down 31/12/05 31/12/04 - Provisions to reserves for legal risks and disputes -6, Reallocation of amounts to income statement relating to reserves for legal risks and disputes 87 1,061 - Provisions to other reserves -2, Reallocation of amounts relating to other reserves 347 Total -8,320 1,

162 SECTION 13 AMORTIZATION AND DEPRECIATION OF TANGIBLE FIXED ASSETS CAPTION Amortization and depreciation of tangibile fixed asstes: break-down Pertinence of banking Group Asset type/income component Amortisation (a) Impairment adjustments (b) Writebacks (c) Net result (a + b - c) A. Tangible assets A.1 Owned by the Bank -13,815-13,815 - for business use -12,880-12,880 - for investment A.2 Leased assets - for business use - for investment Total -13,815-13, Pertinence of insurance companies Asset type/income component Amortisation (a) Impairment adjustments (b) Writebacks (c) Net result (a + b - c) A. Tangible assets A.1 Owned by the Bank -3,915-3,915 - for business use for investment -3,681-3,681 A.2 Leased assets - for business use - for investment Total -3,915-3, Pertinence of other companies Asset type/income component Amortisation (a) Impairment adjustments (b) Writebacks (c) Net result (a + b - c) A. Tangible assets A.1 Owned by the Bank for business use for investment A.2 Leased assets - for business use - for investment Total

163 SECTION 14 AMORTIZATION AND DEPRECIATION OF INTANGIBLE FIXED ASSETS CAPTION Amortization and depreciation of intangibile fixed assets: break-down Pertinence of banking Group Asset type/income component Amortisation (a) Impairment adjustments (b) Writebacks (c) Net result (a + b - c) A. Intangible assets A.1 Owned by the Bank -7,561-7,561 - Generated internally - Other -7,561-7,561 A.2 Leased assets Total -7,561-7, Pertinence of insurance companies Asset type/income component Amortisation (a) Impairment adjustments (b) Writebacks (c) Net result (a + b - c) A. Intangible assets A.1 Owned by the Bank -4,173-4,173 - Generated internally - Other -4,173-4,173 A.2 Leased assets Total -4,173-4, Pertinence of other companies The amount of amortization and depreciation of intangibile fixed assets is 1 thousand of euros and it s related to amortizations. 163

164 SECTION 15 OTHER OPERATING INCOME (EXPENSES) CAPTION Other operating expenses: break-down 31/12/05 31/12/04 Finance lease expenses -2,370-1,366 Maintenance and upkeep costs on investment propert -2,272-12,225 Upkeep and improvement costs on third-party propert -2,019-1,866 Other costs -23,355-21,158 Total -30,016-36, Other operating income: break-down 31/12/05 31/12/04 Rent and other income from property 13,616 10,841 Costs recoverable from third parties 40,308 30,454 - tax recoveries 38,762 28,937 - customer insurance premiums 1,546 1,517 Direction costs Other income 23,620 89,687 Total 77, ,

165 SECTION 16 PROFITS (LOSSES) ON INVESTMENTS IN ASSOCIATES AND COMPANIES SUBJECT TO JOINT CONTROL CAPTION Profits (losses) on investments: break-down Income components/business segments Banking group Insurance companies Other companies 31/12/05 31/12/04 1) Subject to joint control A) Income 1. Revaluations 2. Profit on disposal 3. Writebacks 4. Other positive changes B) Charges 1. Writedowns 2. Adjustments for impairment 3. Losses on disposal 4. Other negative changes Net income 2) Companies subject to significant influence A) Income 5, Revaluations 5, Profit on disposal 3. Writebacks 4. Other positive changes B) Charges Writedowns 2. Adjustments for impairment 3. Losses on disposal Other negative changes Net income 5,376 Total 5,376 5,376 14,507 Losses on disposal derives from an adjustment to the loss arising from the sale of Eptaconsors SpA in

166 SECTION 19 INCOME (LOSS) FROM DISPOSAL OF INVESTMENTS CAPTION Income (loss) from disposal of investments: break-down Income components/business segments Banking Insurance Other Group companies companies 31/12/05 31/12/04 A. Premises 146 3,252-3,398 - Gains from transfers 146 3,271-3,417 - Losses from transfers B. Other assets Gains from transfers Losses from transfers Net result 88 3,245-3,

167 SECTION 20 INCOME TAXES FOR THE PERIOD CAPTION Income taxes for the period: break-down Banking Insurance Other Income component/business segment 31/12/05 31/12/04 group companies companies 1. Current taxes (-) -87,462-6, , Variations in current taxes of previous periods (+/-) 9, , Decrease in current taxes for the year (+) Changes in advanced taxes (+/-) 3,401 5,446-8, Changes in deferred taxes (+/-) -3,703-2, , Taxes for the year (-) (-1+/-2+3+/-4+/-5) -77,903-3, ,745-49,688 In the light of current legislative uncertainty concerning the tax implications of IFRS adoption, the Group prudentially maintained the current tax surplus recorded in previous years for Reconciliation of theoretical and effective tax charges in the financial statements The tax rate on pre-tax profit for the year calculated on the basis of income statement captions 290 and 280 was per cent. The income tax (IRES) reference rate of 33 per cent was significantly lowered as a result of the substantial exclusion of dividends (95 per cent) from taxable income. Dividends distributed by the subsidiaries and received by the Parent Company amounted to 34 million. This figure is excluded in full from taxable income following Banca Carige s adherence in 2004 to the consolidated tax agreement ( consolidato fiscale ). Non deductible costs account for less than 3 per cent of pre-tax profit (income statement caption 280). With regards to regionally-levied business tax (IRAP) and in the light of its specificity, the tax charge is nearly twice as high as the theoretical rate, which varies from 4.25 to 5.25 per cent from region-to-region. 167

168 SECTION 22 MINORITY INTERESTS CAPTION Detail of the caption 330 minority interests Minority interests refer to the following companies: Cassa di Risp armio di Savona Sp A Banca del Monte di Lucca Sp A 1,920 1,784 Cassa di Risp armio di Carrara Sp A Banca Cesare Ponti Sp A Centro Fiduciario Sp A 4 6 Carige Assicurazioni SpA Total 3,626 2,

169 SECTION 24 PROFIT PER SHARE 24.1 Average number of ordinary shares with diluted capital 31/12/05 31/12/04 Weighted average number of shares in circulation 957,797, ,977,396 Diluition effect from sold put options 214, ,732 Diluition effect from convertible liabilities 102,055, ,055,000 Weighted average number of shares with diluted capital 1,060,066,661 1,052,185, Other informations 31/12/05 31/12/04 Base gain (in thousands of Euros) Net profit 131, ,214 - Profit attributable to other share categories - 20,759-17,972 Net profit attributable to ordinary shares 110,678 93,242 Diluted profit (in thousands of Euros) Net profit 131, ,214 - Profit attributable to other share categories - 20,759-17,972 + Net interest charges payable on convertible instruments 2,789 2,816 Diluted net profit attributable to ordinary shares 113,467 96,058 Profit per share (in Euros) Base profit Diluted profit The calculation of diluted profit per share did not take into account: 153,429,321 potential ordinary shares deriving from the conversion of the same number of preference/savings shares; 11,500,000 own shares; 1 put option contract with an underlying of 5,800,000 own shares. The following transactions after 31 st December 2005 were not taken into account in determining base profit and diluted profit per share: - in January 2006 the Board of Directors of Banca Carige approved a paid-up share capital increase of 76,943,254 euros via the issue of 76,943,254 ordinary shares with a nominal value of 1 euro each to be offered to existing shareholders on the basis of 1 new ordinary share for every 15 old shares and or bonds relating to the convertible loan at a maximum price of 2.8 per share inclusive of premium; - on the same date the Board also approved a free share capital increase for a maximum of 164,878,401 shares assignable on the following basis: - 1 new ordinary share for every 7 in possession; - 1 new convertible savings share for every 7 convertible savings shares in possession. Consequently, the conversion ratio of convertible bonds for bonds convertible after the free share capital increase was changed. 169

170 170

171 PRIMARY REPORTING Primary reporting, consistent with the provisions of IAS 14 (segment reporting), provides income details for the private and affluent, corporate (+89 million) and retail segments in addition to the Group s insurance activities. Sector of activity (thousands of euros) Private and Affluent Corporate Retail Insurance Other TOTAL Net result of financial and insurance activities (1) 160, , ,752 42, , ,709 Operating costs -112,540-36, ,333-32,408-98, ,901 Operating profit (loss) 48,326 89,265 25,419 9,817 43, ,808 Loans to banks 1, , ,875 Loans to customers 508,525 5,949,957 5,393, ,322 1,659,144 13,661,663 Due to banks 1,111,949 1,111,949 Due to customers 3,449, ,288 2,862,997 1,128 1,466,435 8,657,736 Securities issued 3,737,542 74, ,823 1,205 2,017,964 6,351,593 (1) Figure includes profits on investments in subsidiaries and profits arising on the disposal of investments amounting to 8.7 million. 171

172 SECONDARY REPORTING The Group s geographical operating areas in Italy are substantially homogeneous. Consequently, disclosure by geographical areas required by IAS 14 has not been provided. The income-generating contribution of the Group s sole foreign branch (Nice in France) is marginal. 172

173 173

174 The Parent Company is responsible for the management of risks (credit, market, liquidity, operational) across the entire Banca Carige banking Group. Single banking subsidiaries provide complementary oversight and analysis services. In particular, Banca Carige is responsible for the monitoring of each bank s risk profiles. The findings are presented on a monthly basis to the Boards of Directors of the Parent Company and its subsidiaries. SECTION 1 BANKING GROUP RISKS 1.1 CREDIT RISK Qualitative information General aspects The Banca Carige Group s credit policy is characterised by a well-established commitment to families, small and medium-sized enterprises (SMEs) and the public administration. In recent years, there has been increased focus on the large corporate segment. The Parent Company, Banca Carige, is market leader in Liguria and continues to extend its position in operating regions outside its traditional stronghold. The banking subsidiaries have strong ties with their respective local operating areas. Recent branch openings carried out by the banks of the Group have led to a gradual extension of these areas. In Liguria, Banca Carige intends to consolidate its market leadership position by increasing principally cross selling opportunities. Development of its customer base focuses above all on families and households, particularly in the areas of consumer credit and mortgages, on small businesses, and increasingly on large corporate clients, who are offered a range of specialised services designed in collaboration with Carige s Finance Division. Outside Liguria, the primary objective is to acquire new customers, focusing in particular on the private and small business segments. As part of Group policy, similar strategies are followed by the other banks. The desire to provide customers with the quality levels they expect has in recent years gone hand-in-hand with the reorganisation of lending services, which has involved customer segmentation and the assignment of duties to specific units or professional profiles (corporate, large corporate, and small business advisors). The guidelines relating to the Group s lending policies are as follows: - lending to families and households: an organic approach is adopted across the entire lending product portfolio, utilising ex ante and ex post scoring models, renewing product lines and monitoring product appropriateness; 174

175 - lending to businesses: focus is placed on the small business and SME segments, with increasing attention being placed on large corporate clients. Backup is provided by Basel 2 compliant rating models, which are part of a wider review of the Group s lending processes that seeks significant economic and organisational benefits in terms of allocative efficiencies, cost reductions, and pricing improvements. In particular, during 2005 the Parent Company put into place a series of commercial measures aimed at SMEs, flanked by an analytical review of the segment as a whole. Corporate-dedicated teams within lending can now access sophisticated ITC based business plans in developing support. Priority is given to enterprises whose investment plans are centred on expanding market share; - lending to the public administration: the Group s traditionally strong ties with its local operating area will enable it to consolidate this branch of its lending operating operations. The Banca Carige Group examines with particular attention, both in the customer acquisition and management phases, to those enterprises exposed most to competition from east Asia. In 2005, the Group strengthened its position in mortgage lending for the purchase and/or renovation of property. This sector, particularly with regards to residential non-industrial property, continues to be in expansion and the Group has provided support for established building and development operators. Lending to new operators is granted against the provision of appropriate equity resources. Credit risk management policies a) Organisational aspects The credit granting process is decentralised according to powers and limits fixed by the Parent Company s Board of Directors. Lending transactions are generally proposed at branch level, by teams of corporate advisors, by local Credit Departments and by General Management, and are then submitted for approval/opinion by the appropriate bodies of the Bank either at local or head office on the basis of the quality and quality of the credit line. The Group s banking subsidiaries operate within the established lines of conduct and responsibilities fixed by the Parent Company. 175

176 b) Management, measurement and control systems In correlation with decentralised decisional powers, coordination and control of credit procedures and the observance of internally and externally-established rules are assigned to head office structures. Exposure limits used within the Group are those established by external regulators. However, an extensive-scope credit risk monitoring system is in place which: - utilises an electronic oversight subsystem formed by inflows of information from the central computer registries (financial statements and risk levels data banks), trade information, customer transaction data, etc.; - processes data collected both inside and outside the Group; - prepares monthly and quarterly reports on lending and credit risk trends for General Management and the Board. The monitoring of credit risk is based on two distinct, albeit closely inter-related, areas of activity: - traditional monitoring analyses single risk exposures and establishes specific responses; - global oversight of credit quality focuses on trends in major lending aggregates and doubtful loans and the incidence of both on total lending. Oversight activities are standardised by analysing single segment/product combinations or anomalies on a top-down approach which guarantees effective risk governance, whilst allowing for an analytical approach where and when required. In more detail: - the corporate segment utilises a traditional, analytical approach justified on the basis of the size of individual exposures; - the small business and private segments utilise standardised and critical mass controls which, due to the large number of positions (with subsequent fragmentation of risk), allow for a wider-ranging, more thorough oversight and one that respects cost/benefit ratios; - product controls or monitoring of single anomalies are used, which cut across customer segmentation categories. - - Scoring and rating models play a significant role in the Group s management and control of credit risks. The assignment of an internal credit risk rating to customers continued during 2005, coordinated by the Parent Company s Credit Division and Planning and Control Division. Credit scoring techniques are currently applied to private customers principally for the granting of mortgages, special-rate loans, and credit cards. On the basis of the information support provided, the decision to approve a loan application is made at branch level. The extension of credit scoring techniques to the business segment is currently the object of review. With regards to the Parent Company s internal credit rating project, in 2005 the modelling and backtesting phases for small and medium-sized enterprises was completed. The model was extended to the other banks of the Group in the light of substantial homogeneity in rating variables (e.g. population characteristics). Output generated by credit rating was integrated 176

177 into the Bank s electronic loan assignment service ( pratica electronica di Fido- PEF ), which was made available to the Group s operational arm at the beginning of In parallel, the evaluation of models and their application to other customer segments continued during the year. The rating of corporate counterparts was performed on the basis of the score provided by the central registry of financial reports as part of the Italian Credit Risk Information System Project (SIRC). Retail customers (private and small business) were assigned a probability of default (PD) rating. This rating is currently being tested for introduction during 2006 of PD within the electronic loan assignment service described above. This model also will be extended to the banking subsidiaries. The information sources utilised in the evaluation and subsequent application of internal rating systems to the SME segment belong to three main areas: financial reports, economic and financial trends (in-house data and statistics provided by the central risk-information registry), and company registries. Evaluation of the SME segment, in addition to the quantitative information generated by the sources mentioned, is integrated by qualitative assessments via questionnaires provided by dedicated advisors which provide details of the firm s management, its competitive position, and operating environment. Qualitative assessments are forecasted also for the small business segment in In addition to probability of default, loss given default (LGD) and exposure at default (EAD) calculations continued during 2005 made on the basis of customer segment, and product and guarantee type. An initial integration of the LGD model into Banca Carige s ITC systems was performed and the model was applied also to the other banks of the Group following confirmation of homogeneity in recovery levels between those of the Parent Company and its subsidiaries. The Group s LGD and EAD models are currently being reviewed for full compliance with Basel 2 requirements. During 2005 the pilot phase of the commercial development project was completed. The project is based on pricing and performance risk adjusted methodologies and was immediately applied to the Parent Company. It will be extended throughout the Banking Group during The project aims to identify strategies for commercial development which are appropriate to the risk/earnings profile of each customer. To achieve this a web platform has been put into place which allows advisors to access in real time each customer s risk/earnings profile by visualising pricing risk adjusted, effective earnings generated, and all other information necessary to make the transaction economically viable. The project, which began its test phase on corporate counterparts, was extended to small business customers in Liguria. 177

178 c) Credit risk mitigation techniques The Group s credit policy is founded on careful analysis during the selection phase (evaluation of initiative being financed; assessment of customer creditworthiness). Evaluation of the validity of the initiative to be financed takes into account above all the applicant capacity to generate adequate cash flows to service the debt. Additionally, collateral or covenants are required particularly in transactions judged to expose the Group to higher levels of risk. In the case, for example, of small firms which typically are undercapitalised consortia guarantees play an important role. d) Impaired financial assets Classification of impaired assets takes place on the basis of constant review of a position after initial definition in order to identify promptly variations in credit quality level. The procedures for the management of a position in the presence of determinate signs of impairment, as approved by the Board of Directors of Banca Carige, differ according to the degree of impairment. The recovery of a position to performing status occurs only after it has been ascertained that the critical conditions or state of default no longer exist i.e. the debtor can regularise the exposure and provide evidence of the capacity to respect future repayment schedules. A recently predetermined control system automatically measures past due times, a critical factor in the assessment of impairment. 178

179 Quantitative information CREDIT QUALITY A.1 PERFORMING AND IMPAIRED LOANS: AMOUNTS, ADJUSTMENTS, CHANGES, BREAK- DOWN BY TYPE AND GEOGRAPHICAL AREA A.1.1 Financial assets analysed by portfolio and credit quality (book value) Banking Group Other companies (1) Portfolio/Quality Non-performing loans Watchlists Restructured loans 1. Financial assets held for trading 2,505, ,105 3,333, Financial assets available for sale 6 836, ,524 1,186, Financial assets held to maturity 2,764 2, Due from banks 18, ,223 1, , Loans to customers 264, ,911 27, , ,893, ,321 13,661, Financial assets designated at fair value 602, , Financial assets in the course of disposal 8. Hedging derivatives 61,290 61,290 Total 31/12/ , ,040 27, , ,131,727 1,935,515 19,704,186 Total 31/12/ ,664,083 (1) : The caption other companies includes the insurance companies and the real estate subsidiaries. Expired loans Country risk Other assets Impaired Others Total 179

180 A.1.2 Financial assets analysed by portaolio and credit quality Portfolio/Quality Gross exposure Impaired assets Specific adjustments Portfolio adjustments A. Banking Group 1. Financial assets held for trading 2,505,432 2,505,432 2,505, Financial assets available for sale , , , Financial assets held to maturity 4. Due from banks 19, , , , , Loans to customers 898, ,421-10, ,551 12,955,834-62,043 12,893,791 13,511, Financial assets designated at fair value 7. Financial assets in the course of disposal 8. Hedging derivatives 61,290 61,290 61,290 Total A 917, ,934-10, ,052 17,194,662-62,043 17,132,619 17,768,671 B. Other companies included in the consolidation 1. Financial assets held for trading 828, , , Financial assets available for sale 349, , , Financial assets held to maturity 2,764 2,764 2, Due from banks 1,835 1,835 1, Loans to customers 150, , , Financial assets designated at fair value 602, , , Financial assets in the course of disposal 8. Hedging derivatives Total B 1,936, ,935,515 1,935,515 Total 31/12/05 917, ,934-10, ,052 19,130,757-62,623 19,068,134 19,704,186 Total 31/12/04 17,664,083 Net exposure Gross exposure Other assets Portfolio adjustments Net exposure Total (net exposure) 180

181 A.1.3 Cash and off-balance sheet due from banks: gross and net values Gross exposure Specific value adjustment Portfolio adjustment Net exposure A. CASH LOANS A.1 Banking Group a) Non-performing loans 18,162 18,162 b) Watchlists c) Restructured loans d) Expired loans e) Country risk f) Other assets 1,874, ,874,256 Total A.1 1,893, ,893,072 A.2 Other companies a) Impaired b) Others 508, ,240 Total A.2 508, ,240 Total A 2,401, ,401,312 B. OFF-BALANCE SHEET LOANS B.1 Banking Group a) Impaired b) Others 1,039, ,039,664 Total B.1 1,039, ,039,664 B.2 Other companies a) Impaired b) Others 8, ,327 Total B.2 8, ,327 Total B 1,047,991 1,047,

182 A.1.4 Cash credits to banks: gross impaired loans and non-guaranteed credits towards countries at risk Bad loans Watchlists Restructured loans Past due Country risk A. Gross opening exposure 18, of which: non derecognised sold exposures B. Increases 3, B.1 ex-performing loans B.2 transfer from other doubtful loan categories B.3 other increases 3, C. Decreases 3, C.1 re-performing credits C.2 write offs C.3 payments received 3, C.4 gains from ceding C.5 transfer to other doubtful loan categories 10 C.6 other decreases 14 D. Total closing exposure 18, of which: non derecognised sold exposures A.1.5 Cash credits to banks: total allowances Bad loans Watchlists A. Total opening allowances 4, of which: non derecognised sold exposures B. Increases 689 B.1. allowances 689 B.2 transfer from other doubtful loan categories B.3. other increases C. Decreases 4,915 C.1. recoveries by valuation 2,284 C.2. recoveries by collection 2,631 C.3. write offs C.4 transfer to other doubtful loan categories C.5. other decreases D. Total closing allowances of which: non derecognised sold exposures Restructured exposures Past due Country risk 182

183 A.1.6 Cash credits and off bilance to customers: gross and net values Gross exposure Specific allowances Portfolio allowances Net exposure A. Cash exposures A.1 Banking Group a) Bad loans 505, , ,372 b) Watchlists 140,701 28, ,911 c) Restructured loans 28, ,327 d) Past due 224, , ,947 e) Country risk f) Other assets 15,258,222 62,042 15,196,180 Total A.1 16,157, ,421 72,814 15,814,308 A.2 Other companies a) Impaired b) Others 1,427, ,427,275 Total A.2 1,427, ,427,275 Total A 17,585, ,421 73,394 17,241,583 B. Off balance sheet exposures B.1 Banking Group a) Impaired 31,099 4, ,116 b) Others 3,116,580-6,059 3,110,521 Total B.1 3,147,679 4,842 6,200 3,136,637 B.2 Other companies a) Impaired b) Others Total B Total B 3,147,679 4,842 6,200 3,136,

184 A.1.7 Cash due from banks: changes in impaired loans and subject to country risk gross Type/Category Non-performing loans Watchlists Restructured loans Expired loans Country risk A. Total opening loans 502, ,792 4,290 5,812 - of which: loans sold and not cancelled B. Increases 179,716 79,432 26, , B.1 ex-performing loans 81,045 67,767 18,418 B.2 transfer from other categories of impaired loans 79,527 B.3 other increases 19,144 11,665 7, , C. Decreases 177, ,523 2,473 5,651 C.1 writebacks due to valuation 2,123 13, C.2 cancellations 115, C.3 collections 59,310 12,564 1,906 5,229 C.4 recoveries on disposal C.5 transfer to other categories of impaired loans 79,527 C.6 other decreases 808 5, D. Total closing loans 505, ,701 28, , of which: loans sold and not cancelled 2, ,287 A.1.8 Cash due from banks: changes in total value adjustments Type/Category Non-performing loans Watchlists Restructured loans Expired loans Country risk A. Total opening adjustments 178,274 16, Changes in opening balances 80,633 29, of which: loans sold and not cancelled B. Increases 128,972 16, ,841 1 B.1. Adjustments 78,849 15, B.2 transfer from other categories of impaired loans 26,612 B.3. other increases 23, ,841 1 C. Decreases 147,049 33, C.1. Writebacks due to valuation 21,337 4, C.2. Writebacks due to collection 10,449 2,250 5 C.3. Cancellations 115, C.4 transfer to other categories of impaired loans 25,902 C.5. other decreases 710 D. Total closing adjustments 240,830 28, , of which: loans sold and not cancelled

185 A.2 CLASSIFICATION OF EXPOSURES ON THE BASIS OF INTERNAL AND EXTERNAL RATINGS A.2.1 Distribution of cash credits and off-balance sheet loans by external rating class Carige Group lending is concentrated amongst the small business, small/medium-sized enterprise, and mass market segments. Consequently, only a small proportion of the Group s loan portfolio (8 per cent) has been subject to external rating, almost all of which has received a rating higher than A- from Standard and Poor s (S&P). A.2.2 Distribution of cash credits and off-balance sheet loans by internal rating class Internal ratings cover the entirety of the Group s loan portfolio. The probability of default (PDF) rating generated for each exposure has been assigned an S&P rating on the basis of its composition. In spite of the fact that counterpart samples assigned external ratings differ in size and nature from the majority of the Group s borrowers, around 30 per cent of overall Group exposures belong to PDF classes higher than S&P s A- rating. A.3 BREAK-DOWN OF GUARANTEED LOANS BY GUARANTEE TYPE The percentage of guarantee types securing loans to customers at 31/12/05 is shown below: From mortgage loans 46% From pledges 1% From personal guarantees 12% Unsecured 41% Total 100% 185

186 B. CREDIT DISTRIBUTION B.1.1 Distribution by sector of cash credits to customers Governments and Central Banks Other public entities Financial institutions Nonfinancial businesses Other operators TOTAL Net exposure Net exposure Net exposure Net exposure Net exposure Net exposure A. Cash performing exposures Financial assets held for trading 1,127,393 9, ,637 3, ,511 2,109,415 Financial assets designated at fair value Financial assets available for sale 78,103-67,701 12,305 93, ,623 Financial assets held to maturity Financial assets being sold Loans to customers 569, , ,285 7,193,107 4,103,931 12,927,332 Total 1,775, ,147 1,306,623 7,209,191 4,466,956 15,288,370 B. Impaired cash exposures , , , ,556 Total 31/12/2005 1,775, ,529 1,314,500 7,657,812 4,627,632 15,905,926 B.1.2 Distribution by sector of guarantees given to customers Governments and Central Banks Other public entities Financial and insurance institutions Nonfinancial businesses Other operators TOTAL A. Performing exposures 459 8, ,499 1,166,015 57,800 1,373,866 B. Impaired exposures 24,994 1,122 26,116 Total 31/12/ , ,499 1,191,009 58,922 1,399,982 B.2 Distribution of loans to non-financial resident businesses Amount Sales-related services 1,840,149 W holesale & retail trade, salvage and repair 1,387,512 Building and public works 1,242,232 Air and sea transport-related services 408,405 H otel and catering services 343,405 Other 2,349,079 Total 31/12/2005 7,570,

187 B.3.1 Geographical distribution of cash credits to customers ITALY OTHER EUROPEAN COUNTIES AMERICA ASIA REST OF THE WORLD Exposures/Geographical areas Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure A. Cash exposures A.1 Bad loans 500, ,557 4, A.2 Watchlists 140, , A.3 Restructured loans 15,223 14,832 12,835 12, A.4 Past due 224, , A.5 Other exposures 14,684,897 14,623, , ,864 28,026 27,989 26,630 26, Total 15,565,767 15,227, , ,827 28,031 27,993 26,729 26, B.3.2 Geographical distribution of guarantees given to customers ITALY OTHER EUROPEAN COUNTRIES AMERICA ASIA REST OF THE WORLD Exposures/Geographical areas Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure A. Guarantees given A.1 Bad loans 14,599 10,703 3,213 2,995 A.2 Watchlists 10,418 9,711 A.3 Other impaired exposures 2,869 2,707 A.4 Other 1,377,487 1,371,449 2,227 2, Total 1,405,373 1,394,570 5,440 5, B.5 Significant exposures (accordino to Bank of Italy rules) a) Amount b) Number 2 187

188 C. SECURITISATION AND SALE OF ASSET TRANSACTIONS C.1 SECURITISATION TRANSACTIONS Qualitative information (current legislation) Between 2000 and 2004 the banks of the Banca Carige Group performed four securitisation transactions: - the first at the end of 2000 relating to non performing loans; - the second and third, respectively at the end of 2001 and in the first half of 2004, relating to performing credits; - the fourth at the end of 2002 relating to non performing credits. Banca Carige undertook the first three transactions, whilst C.R. Savona performed the fourth. Banca Carige undertook the role of service for all four transactions. The transactions are coordinated and monitored by a dedicated operating unit created within the General Secretariat whose aim is to maintain a unitary perspective of the various aspects of the four transactions. In particular, the measurement and control of risks arising from the transactions are carried out within the confines of the Group s Credit Risk Management system with monitoring of the performing components assigned to the Credit Control Division. The performance of each transaction is constantly reviewed by General Management, which provides the Board of Directors with a half-yearly update. An overview of the four transactions is provided below: a) Banca Carige: securitisation of non performing credits Banca Carige sold without recourse to the special purpose entity (SPE) Argo Finance One Srl (company belonging to the Banca Carige Group) non performing loans backed fully or in part by voluntarily or legally imposed guarantees for euro million (book value: euro million). The sale price agreed was euro million. To finance the acquisition, Argo Finance One Srl issued the following securities: - Senior (class A) securities for euro 40 million; - Mezzanine (class B) securities for euro 70 million; - Junior (class C) securities for euro 56.5 million. By the end of 2005, the class A and B issues had been fully repaid. Class C securities were entirely underwritten by Banca Carige. In January 2006 accumulated interest on these securities had been repaid along with euro 5.6 million in principal. The outstanding consequently amounts to euro 50.9 million. Following the full reimbursement of the class B securities, Banca Carige received full repayment of the limited recourse mortgage previously granted to the SPE. The extinction of the mortgage meant an advance facility of euro 15 million was no longer necessary and ended potential exposure to risks relating to an interest rate cap. Consequently, the outstanding amounts referring to class C securities represent the Bank s sole transaction risk. Banca Carige is servicer for the transaction. Collections in 2005 amounted to euro 28.7 million and servicing commissions totalled euro 1.1 million. The transaction is proceeding according to the schedule fixed at inception. b) Banca Carige: securitisation of performing loans Banca Carige sold without recourse to the SPE Argo Mortgage Srl (in which Carige has a 5 per cent indirect holding through its subsidiary Columbus Carige Immobiliare Srl) 13,858 real estate mortgage loans principally destined for the acquisition of residential property of an overall value at year-end 2001 of euro million at a sale price of euro million (of which euro 24 million in deferred price via profit extraction, which took into account in particular the excess spread after transaction costs borne at each payment date, intrinsic risk levels of the credits sold, and the risk of early extinction). To finance the acquisition, Argo Mortgage Srl issued the following securities: - Class A securities for euro 478 million; - Class B securities for euro 22 million; 188

189 - Class C securities for euro 11.5 million; - Class D securities for euro 9.2 million. The class A, B and C securities are listed on the Luxemburg bond market and were underwritten exclusively by European institutional investors. Class D securities were underwritten by Banca Carige. At 31/12/05, repayments relating to class A securities amounted to euro million out of an initial amount of euro 478 million. Banca Carige provided the SPE with cash collateral amounting to euro 10.4 million. Banca Carige is servicer for the transaction. Collections in 2005 amounted to euro 66.4 million and servicing commissions totalled euro 0.3 million. The transaction is proceeding according to the schedule fixed at inception. c) Banca Carige: securitisation of performing loans Banca Carige sold without recourse to the SPE Argo Mortgage 2 Srl (in which Carige has a 5 per cent indirect holding through its subsidiary Columbus Carige Immobiliare Srl) 13,272 real estate mortgage loans principally destined for the acquisition of residential property of an overall value at 30 th June 2004 of euro million at a sale price of euro million (of which euro 61.1 million in deferred price via profit extraction, which took into account in particular the excess spread after transaction costs borne at each payment date, intrinsic risk levels of the credits sold, and the risk of early extinction). To finance the acquisition, Argo Mortgage 2 Srl issued the following A< anc C securities, all listed on the Luxemburg bond market: - Class A securities for euro million; - Class B securities for euro 26.8 million; - Class C securities for euro 29.4 million; - Class D securities for euro 9.2 million. In January 2006, repayments relating to class A securities amounted to euro million out of an initial amount of euro million. Banca Carige provided the SPE with a subordinated loan of euro 22.8 million, which by January 2006 had decreased to euro 16.4 million. Banca Carige is servicer for the transaction. Collections in 2005 amounted to euro million and servicing commissions totalled euro 0.5 million. The transaction is proceeding according to the schedule fixed at inception. d) Cassa di Risparmio di Savona: securitisation of non performing loans 2002 At the end of 2002, C.R. Savona sold without recourse to the SPE Priamar Finance Srl (in which at 14 th January 2004 Carige has a 60 per cent and part of the Carige Group) non performing loans with and without guarantees amounting to euro 68.8 million, with a book value of euro 33.7 million, at a sale price of euro 28 million. To finance the acquisition, Priamar Finance Srl issued the following securities: - Class A securities for euro 18 million (listed on the Luxemburg bond market); - Class B securities for euro 10.2 million (fully underwritten by C.R. Savona); In January 2006, repayments relating to class A securities amounted to euro 18 million with euro 6.3 million remaining. Banca Carige provided the SPE with an advance facility of euro 2.5 million, whilst C.R Savona granted a limited reimbursement loan of euro 22 million. Banca Carige is servicer for the transaction. Collections in 2005 amounted to euro 5.2 million and servicing commissions totalled euro 0.2 million. The transaction is proceeding according to the schedule fixed at inception. 189

190 Quantitative information C.1.1 Exposures arising from securitisation by underlying assets quality (current legislation) Cash exposures Guarantees given Credit lines Senior Mezzanine Junior Senior Mezzanine Junior Senior Mezzanine Junior Underlying assets quality / Exposures Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure A. With own underlying assets 105,520 99,977 22,000 22,000 2,500 a) Impaired 75,195 77,327 22,000 22,000 2,500 b) Others 30,325 22,650 B. With underlying assets of third parties a) Impaired b) Others The figures shown in the following tables were calculated on the basis of the following criteria: 1) with regards to the securitisation of non performing loans carried out in 2000 via the SPE Argo Finance One Srl, the carrying value of the Junior securities underwritten by Banca Carige (euro 56,500,000) was inserted inclusive of accrued interest (euro 5,759,000). No related writedowns were recognised. In January 2006, accrued interest was fully paid and reimbursements on Junior securities totalled euro 5.6 million; 2) with regards to the securitisation of performing loans carried out in 2001 via the SPE Argo Mortgage Srl, the carrying value of the Junior securities underwritten by Banca Carige (euro 9,190,000) was inserted inclusive of accrued interest (euro 68,000). In addition to the exposures shown in the table, at 31/12/05 a deferred price credit of euro 15,038,000 was recognised in equity; 3) with regards to the securitisation of performing credits in 2004 via the SPE Argo Mortgage 2 Srl, the assets of which have been fully recognised in equity, the carrying value of the subordinated loans granted by Banca Carige at the sale date of 30/6/06 of euro 22,753,000 was recognised as a gross exposure in accordance with reporting provisions, whilst at 31/12/05 it was recognised as a net exposure (euro 17,278,000). The table also contains, in addition to the exposures referred to above, a deferred price credit amounting to euro 15,443,000; the initial carrying value of this item (euro 61 million) was fully written down as a corresponding entry in shareholders equity at 1 st January 2005 in compliance with IAS 39. 4) with regards to the securitisation of non performing credits carried out by the subsidiary C.R. Savona via the SPE Priamar Finance, the carrying value of the Junior securities held by Banca Carige (euro 10,178,000) was inserted inclusive of accrued interest (euro 1,072,000) in addition to the mortgage loan in securities of euro 22,000 granted by Banca Carige as collateral for the class A securities. 190

191 C.1.2 Exposures arising from the most important own securitisation by type of assets subject to securitisation and exposures (current legilation) Cash exposures Guarantees given Senior Mezzanine Junior Senior Mezzanine Junior Senior Credit lines Mezzanine Junior Type of assets subject to securitization / Exposures Book value Value adjustments Book value Value adjustments Book value Value adjustments Net exposure Value adjustments Net exposure Value adjustments Net exposure Value adjustments Net exposure Value adjustments Net exposure Value adjustments Net exposure Value adjustments A. Fully cancelled from the balance sheet 82,767 22,000 2,500 A.1 Argo Finance One Srl - non performing loans 62,259 A.2 Argo Mortgage Srl - performing loans 9,258 A.3 Priamar Finance Srl - non performing loans 11,250 22,000 2,500 B. Partially cancelled from the balance sheet C. Not cancelled from the balance sheet 17,210 C.1 Argo Mortgage 2 Srl - performing loans 17,

192 C.1.4. Exposures towards securitisations by financial assets portfolio and type Exposure/ Portfolio Trading Designated at fair value Available for sale Held Held to maturity Loans 31/12/05 31/12/04 1. Cash exposures 82,767 82,767 85,343 - Senior - Mezzanine - Junior 82,767 82,767 85, Off-balance exposures - Senior - Mezzanine - Junior C.1.5 Total amount of assets subject to securitisation underlying to junior securities or other forms of credit support (current legislation) Assets/Values Traditional securitisations A. Own underlying assets: 1,087,353 A.1 Fully cancelled 344, Non performing 84, Watchlists 3. Restructured exposures 4. Expired exposures 5. Other assets 259,472 A.2 Partially cancelled 1. Non performing 2. Watchlists 3. Restructured exposures 4. Expired exposures 5. Other assets A.3 Not cancelled 743, Non performing 2, Watchlists 3. Restructured exposures 4. Expired exposures 5. Other assets 741,183 B. Underlying assets attributable to third parties 1. Non performing 2. Watchlists 3. Restructured exposures 4. Expired exposures 5. Other assets Synthetic securitisations 192

193 C.1.6 Interests in vehicle companies (current legislation) Name Registered Head Office Interest % Argo Finance One Srl Genova 60% Priamar Finance One Srl Genova 60% Argo Mortgage Srl Genova 5% (1) Argo Mortgage 2 Srl Genova 5% (1) C.1.7 Servicer activity revenues on the credits subject to securitisation and repayments of the securities issued by the vehicle companies (current legislation) Servicer SPE Securitised credits Amounts of loans collected during the year % of securities reimbursed Impaired Performing Impaired Performing Senior Mezzanine Junior Impaired Performing Impaired Performing Impaired Performing Banca Carige Argo Finance One Srl 64,394 28, % 100% Banca Carige Priamar Finance Srl 18,485 5,193 50% Banca Carige Argo Mortgage Srl 261,158 66,426 49% Banca Carige Argo Mortgage 2 Srl 743, ,

194 C.2 SELLING OPERATIONS C.2.1 Sold and not derecognised financial assets Technical form/portfolio Assets held for trading Assets designated at fair value A B C A B C A B C A B C A B C A B C A. Cash assets 741, , Debt securities 2. Capital securities 3. O.I.C.R. shares 4. Loans 741, , Impaired assets B. Derivatives Total 31/12/05 741, ,658 - Total 31/12/ Key: A = fully recognised sold assets (book value) B = partially recognised sold assets (book value) C = partially recognised sold assets (full value) Assets available for sale Assets held to maturity Amounts due from banks Amounts due from customers Total C.2.2 Financial liabilities against sold and not derecognised financial assets Liabilities/Assets portfolio Assets held for trading Assets designated at fair value Assets Assets held to available for maturity sale Amounts due from banks Amounts due from customers Total 1. Amounts owed to customers 743, ,316 a) fully recognised assets 743, ,316 b) partially recognised assets 2. Amounts owed to banks a) fully recognised assets b) partially recognised assets Total 31/12/05 743, ,316 Total 31/12/

195 D. MODELS FOR THE MEASUREMENT OF CREDIT RISK 1.2 MARKET RISKS INTEREST RATE RISK The valuation of interest-rate risk is performed throughout the Group s asset and liabilities portfolio and no distinction is made between banking book and trading book. Consequently, the information provided in Interest-rate risk is a composite of Interest-rate risk Trading portfolio and Interest-rate risk - Non trading portfolio. Qualitative information A. General issues, management and measurement of interest rate risk Interest-rate analysis is performed on a monthly basis by Parent Company structures. At 31 st December 2005, the distribution of assets and liabilities by class was in line with Bank strategy and forecasts: Assets (a) Liabilities (b) Amounts Q % Amounts Q % (a-b) Total 19, % 19, % 0 Non interest bearing 3, % 2, % 605 Interest bearing 16, % 16, % -605 of which (1) (2) FIXED RATE 4, % 4, % -695 short-term 2, % 1, % 908 medium/long term 1, % 2, % -1,603 FLOATING 8, % 3, % 5,208 SIGHT 3, % 8, % -5,406 INSENSITIVE % % 288 (1) Percentage quotas calculated on interest-bearing assets. (2) Percentage quotas calculated on onerous liabilities. Amounts in millions. Operating data. B. Management and measurement of interest-rate risk The following methods are used to measure interest-rate risks: gap analysis and duration analysis. Gap analysis measures variation in interest-rate margin on the basis of the risk in a portfolio at a certain date (static analysis). The Banca Carige Group performs gap analysis via incremental gap, incremental beta gap, and shifted beta gap analyses. Incremental gap analysis measures the impact on interest income of a variation in interest rates, either up or down, assuming a uniform shift of all rates at the moment of variation. Incremental beta gap analysis takes into account with regards to sight positions the percentage 195

196 of absorption by internal rates of a market rate variation. Shifted beta gap analysis valuates the diluted impact of an interest-rate variation on sight positions over time. Duration analysis measures the sensitivity of the market value of assets to a one percent increase in interest rates. Quantitative information Data at 31 st December 2005 reveal, on the basis of a twelve-month time band, shifted gap analysis, a loss in net interest income of 28.5 million generated by a 1 per cent fall in interest rates, and a gain of 31.1 million with a 1 per cent rise in rates. Average data for the year recorded a loss of 32.6 million accompanying a 1 per cent drop in rates and a gain of 33.4 million stemming from a 1 per cent rise. Average values recorded for 2005 are summarised in the table below: Shock: -1% Shock: +1% Balance sheet Off-balance sheet Total Balance sheet Off-balance sheet Total Sight Term Sight Term a Incremental gap b Incremental beta gap c Shifted beta gap Amounts are expressed in millions of euros. In addition to traditional gap analyses aimed at measuring the impact on net interest income over twelve months, the Group also performs duration analysis in order to measure the possible effect of net interest income flows beyond the twelve-month time horizon. The analysis monitors the most stable items, namely those with medium/long-term maturities and fixed rate banking book deposits as well as derivatives hedging interest-rate risk. On the basis of these items only, the negative gap at 31/12/05 amounted to million. Consequently, a rise in medium/long-term rates would mean increased net interest earnings for the Group. Duration analysis at 31/12/2005: December 2004 December 2005 Assets Liabilities Shareholders' Equity and derivatives Shareholders' Equity at market price (millions of euros) 1,831 1,788 The negative duration value of shareholders equity indicates a rise in the market value of the Group s equity as a result of a rise in interest rates. 196

197 1.2.3 PRICE AND EXCHANGE-RATE RISK Price and exchange-rate risk analysis is performed together and refers exclusively to the trading portfolio. Consequently, the information provided in Price and exchange-rate risk is a composite of Price risk Trading portfolio and Exchange-rate risk - Non trading portfolio. The item Price risk- non trading portfolio has been omitted. Qualitative information A. General issues Price and exchange-rate risk measurements are performed by the Parent Company on a daily basis. B. Management and measurement of price and exchange-rate risk Market risk is measured using VaR on the basis of a Monte Carlo simulation. Measurement includes the analysis and evaluation of performances generated by VaR calculation models via the valuation of portfolios over the same holding period as that used by VaR modelling. Quantitative information The Group s VaR model is based on a ten-day holding period and a 99 per cent confidence level and is used for daily monitoring of the Group securities and derivatives portfolios. In 2005, overall average VaR amounted to 12.6 million. The maximum figure of 26.1 million was recorded on 7/7/05, whilst the minimum of 4.8 million was recorded on 17/2/05. VaR Thousands of euros

198 1.2.6 FINANCIAL DERIVATIVES INSTRUMENTS A. FINANCIAL DERIVATIVES A.1 Regulatory trading portfolio: end-of period and average notional values Type of transaction/underlying Debt securities and interest rates Equities and equity price indices Exchange rate and gold Other values Total as at 31/12/05 Total as at 31/12/04 Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted 1. Forward rate agreement - 20, , Interest rate swap - 1,275,397-1,275, Domestic currency swap Currency interest rate swap Basis swap - 437, , Equity index swaps Real index swaps Futures Cap options Purchased - 24,176-24,176 - Issued - 33,135-33, Floor options Purchased 10,353-10,353 - Issued 10,353-10, Other options Purchased Plain vanilla 303,705 75, ,310 - Exotic 65, , ,568 - Issued Plain vanilla 129,144 73, ,516 - Exotic 130, , Forward agreements Purchases 139, , , ,888 - Sales 56, ,681 56, ,681 - Currency against currency Other derivative contracts - - Total 195,962 1,810, ,454-1,322, ,962 3,631, ,662 3,796,

199 A.2. Banking portfolio: end-of-period and average notional values A.2.1 Hedging derivatives Type of transaction/underlying Debt securities and interest rates Equities and equity price indices Exchange rate and gold Other values Total as at 31/12/05 Total as at 31/12/04 Listed Unlisted Listed Unlisted 1. Forward rate agreement 2. Interest rate swap 1,860,551 1,860, Domestic currency swap 4. Currency interest rate swap 5. Basis swap 496, , Equity index swaps 7. Real index swaps 8. Futures 9. Cap options 119, ,208 - Purchased 119, ,208 - Issued 10. Floor options - Purchased - Issued 11. Other options 492, ,100 - Purchased 492, ,100 - Plain vanilla - Exotic 492, ,100 - Issued - Plain vanilla - Exotic 12. Forward agreements - Purchases - Sales - Currency against currency 13. Other derivative contracts Total 2,476, ,100 2,968, ,000 3,140,044 Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted 199

200 A.2 Banking portfolio: end-of-period and average notional values A.2.2 Other derivatives Type of transaction/underlying Debt securities and interest rates Equities and equity price indices Exchange rate and gold Other values Total as at 31/12/05 Total as at 31/12/04 Listed Unlisted Listed 1. Forward rate agreement 2. Interest rate swap Domestic currency swap 4. Currency interest rate swap 5. Basis swap Equity index swaps 7. Real index swaps 8. Futures 9. Cap options Purchased Issued 10. Floor options - Purchased - Issued 11. Other options 557, , Purchased 557, , Plain vanilla - Exotic 557, , Issued - Plain vanilla - Exotic 12. Forward agreements - Purchases - Sales - Currency against currency 13. Other derivative contracts Total - 557, , Unlisted Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted 200

201 A.3 Financial derivatives: purchase and sale of underlying instruments Type of transaction/underlying Debt securities and interest rates Equities and equity price indices Exchange rate and gold Other values Total as at 31/12/05 Total as at 31/12/04 Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted A. Regulatory trading portfolio: 195,962 1,373, ,499-1,322, ,962 3,194, Transactions with underlying asset exchange 195, ,561-1,322, ,962 1,497,387 - Purchases 136, , , ,200 - Sales 59, , ,993 59, ,554 - Currency against currency 82,633 82, Transactions without underlying asset exchange 1,373, ,938 1,697,352 - Purchases 606, , ,538 - Sales 766, , ,814 - Currency against currency B. Banking portfolio: B.1 Hedging instruments - 1,979, , ,471, ,000 2,698, Transactions with underlying asset exchange 230, ,230 - Purchases - Sales - Currency against currency 2. Transactions without underlying asset exchange 1,979, ,100 2,471,859 2,444,814 - Purchases 1,220, ,100 1,712,297 - Sales 759, ,562 - Currency against currency B.2 Other derivatives , , Transactions with underlying asset exchange - Purchases - Sales - Currency against currency 2. Transactions without underlying asset exchange 557, ,750 - Purchases - Sales 557, ,750 - Currency against currency Listed Unlisted Listed Unlisted 201

202 A.4 Over the counter financial derivatives: positive fair value counterparty risk Debt securities and interest rates Equities and equity price indices Exchange rate and gold Other values Different underlying instruments Type of transaction/underlying Gross unsettled Gross settled Future exposure Gross unsettled Gross settled Future exposure Gross unsettled Gross settled Future exposure Gross unsettled Gross settled Future exposure Settled Future exposure A. Regulatory trading portfolio A.1 Governments and central banks A.2 Public entities A.3 Banks 7, ,604 9,747 4,587 3,497 A.4 Financial institutions ,622 2,520 10,373 3,807 A.5 Insurance companies 1, A.6 Non-financial enterprises ,368 11,445 2,756 2,161 A.7 Other entities Total A 31/12/05 8, ,329 24,126 17,769 9,517 B. Banking portfolio B.1 Governments and central banks B.2 Public entities B.3 Banks 61,291 10,605 18,208 1,457 B.4 Financial institutions B.5 Insurance companies B.6 Non-financial enterprises B.7 Other entities Total B 31/12/05 61,291 10,605 18,208 1,

203 A.5 Over the counter financial derivatives: negative fair value financial risk Debt securities and interest rates Equities and equity price indices Exchange rate and gold Other values Different underlying instruments Type of transaction/underlying Gross unsettled Gross settled A. Regulatory trading portfolio A.1 Governments and central banks A.2 Public entities A.3 Banks 56,980 3,685 1,736 2,228 15,341 7,375 A.4 Financial institutions ,736 2, A.5 Insurance companies 8, A.6 Non-financial enterprises ,928 1,465 A.7 Other entities Total A 31/12/05 57,269 4,326 11,799 4,908 17,772 9,339 B. Banking portfolio B.1 Governments and central banks B.2 Public entities B.3 Banks 43,021 4,631 B.4 Financial institutions 48,275 7,382 B.5 Insurance companies B.6 Non-financial enterprises B.7 Other entities Total B 31/12/05 91,296 12,013 Future exposure Gross unsettled Gross settled Future exposure Gross unsettled Gross settled Future exposure Gross unsettled Gross settled Future exposure Settled Future exposure A.6 Residual maturity of over the counter financial derivatives Underlying instruments/residual maturity Up to 1 Over 5 1 to 5 years year years Total A. Regulatory trading portfolio 1,615,126 1,535, ,618 3,631,746 A.1 Financial derivatives on debt securities and interest rates 708, , ,618 1,810,421 A.2 Financial derivatives on equities and equity price indices 150, , ,499 A.3 Financial derivatives on exchange rate and gold 756, ,033 1,322,826 A.4 Financial derivatives on others - B. Banking portfolio 260, ,087 1,928,601 2,968,359 B.1 Financial derivatives on debt securities and interest rates 260, ,087 1,436,501 2,476,259 B.2 Financial derivatives on equities and equity price indices 492, ,100 B.3 Financial derivatives on exchange rate and gold - B.4 Financial derivatives on others - Total 31/12/05 1,875,797 2,314,089 2,410,219 6,600,105 Total 31/12/04 3,403,057 2,165,183 1,871,344 7,439,

204 B.1 Credit derivatives: notional end-of-year and average values Type of transaction Regulatory trading portfolio Single subject notional value Basket notional value Single subject notional value Other transactions Basket notional value 1. Hedging purchases 1.1 With underlying asset exchange 51, Credit default swap 51,477 - Total rate of return swap 1.2 Without underlying asset exchange Credit default swap - Total rate of return swap Total 31/12/05 51, Total 31/12/04 35, Hedging sales 2.1 With underlying asset exchange 12,000-20, Credit default swap 12,000 20,000 - Total rate of return swap 2.2 Without underlying asset exchange - 51, Credit default swap - Total rate of return swap 51,744 Total 31/12/05 12,000 51,744 20,000 - Total 31/12/04 12, ,245 32,

205 B.2 Credit derivatives: positive fair value counterparty risk Type of transaction / Values Notional value Positive fair value Future exposure A. Regulatory trading portfolio 63, A.1 Hedging purchases with counterparties Governments and central banks 2 Public entities 3 Banks 4 Financial institutions 5 Insurance companies 6 Non-financial enterprises 7 Other entities A.2 Hedging sales with counterparties 63, Governments and central banks 2 Public entities 3 Banks 63, Financial institutions 5 Insurance companies 6 Non-financial enterprises 7 Other entities B. Banking portfolio 20, ,200 B.1 Hedging purchases with counterparties Governments and central banks 2 Public entities 3 Banks 4 Financial institutions 5 Insurance companies 6 Non-financial enterprises 7 Other entities B.2 Hedging sales with counterparties 20, ,200 1 Governments and central banks 2 Public entities 3 Banks 20, ,200 4 Financial institutions 5 Insurance companies 6 Non-financial enterprises 7 Other entities Total 31/12/05 83, ,

206 B.3 Credit derivatives: negative fair value counterparty risk Type of transaction / Values Notional value Negative fair value Portafoglio di negoziazione di vigilanza 1 Hedging purchases with counterparties 51,477 1, Governments and central banks 1.2 Public entities 1.3 Banks 51,477 1, Financial institutions 1.5 Insurance companies 1.6 Non-financial enterprises 1.7 Other entities Total 31/12/05 51,477 1,205 B.4 Residual maturità of credit derivative contracts: notional values Underlying instruments / Residual maturity Up to 1 year 1 to 5 years Over 5 years Total A. Regulatory trading portfolio 10,000 90,221 15, ,221 A.1 Credit derivatives with "qualified reference obligation" 71,744 15,000 86,744 A.2 Credit derivatives with "unqualified reference obligation" 10,000 18,477 28,477 B. Banking portfolio 20, ,000 B.1 Credit derivatives with "qualified reference obligation" B.2 Credit derivatives with "unqualified reference - obligation" 20,000 20,000 Total 31/12/05 30,000 90,221 15, ,221 Total 31/12/04 118,245 67, ,

207 1.3 LIQUIDITY RISK Qualitative information Measurement of liquidity risk is performed on a monthly basis by the Parent Company. Risk exposure levels are quantified by measuring the gap between medium/long-term lending and deposits - on the basis of the contractual maturities of assets and liabilities - in terms of volume and flows reaching maturity in order to produce a forecasting instrument equipped to contribute positively to the formulation of Group funding policies. Quantitative information At 31/12/05 was a positive gap (amount of assets higher than amount of liabilities)in the Group s medium/long-term liquidity of 2,420 million. Total medium/long-term assets Total medium/long-term liabilities Gap at 31/12/2005 8,069.1 mln 5,649.1 mln 2,420.0 mln At the same date on the basis of measurements performed by applying transformation of maturities rules, all thresholds foreseen were observed. 207

208 1.4 OPERATIONAL RISK Qualitative information The most appropriate methods of operating risk management are currently under discussion amongst regulators and the domestic and international banking community. Regulatory capital for operational risk is expected to be introduced by the Basel Committee in With this in mind, the Parent Company has already adopted a framework which refers also to its banking subsidiaries. In particular, as the Group s banks participate in loss data sharing initiatives (DIPO in Italy) promoted by the Italian Banking Association (ABI), they have put into place a systematic process for the collection of operational loss data. The ITC systems of the Group s banks are centralised at Parent Company level and business continuity and disaster plans have been designed that identify the steps necessary to guarantee a return to normal operations following a crisis. 208

209 SECTION 2 - INSURANCE COMPANIES' RISKS 2.1 INSURANCE RISKS a) NON-LIFE BRANCH Qualitative information Insurance contracts are exposed to the intrinsic non-financial risk of an uncertain event on the occurrence of which the total amount of claims payable is higher than the value of insurance liabilities as represented by reserve provisions. Two distinct macro-categories of insurance risk can be identified both with a common underlying risk. The Group addresses these risks as follows: - insurance rating risk: actuarial models are used to determine pricing needs and to monitor claims. The sale of insurance products follows precise guidelines which also fix limits for each single of risk category; - reserve risk: independent actuarial calculations are used to determine the adequacy of reserves relating to claims awaiting settlement; - reinsurance risk: after establishing retention levels, reinsurance treaties are signed exclusively with prime market counterparts. 209

210 Quantitative information Total premiums issued in 2005 rose 4.6 per cent to 530,754,000 euros in comparison to 2004 s figure of ,000 euros. B R A N C H PREMIUMS VARIATIONS ABSOLUTE % Accident 58,463 55,769 2, Illness 7,261 5,413 1, Aircraft Boats and marine craft Transported goods 2,240 1, Fire and natural elements 26,221 23,787 2, Other damages 24,892 21,247 3, Third party aircraft insurance Third party general insurance 72,562 66,188 6, Guarantees 9,577 7,662 1, Various monetary losses 36,997 28,565 8, Legal protection 6,944 6, Assistance 7,652 6,442 1, Total non-marine ("elementary")253, ,374 29, Land vehicles 40,292 41, Third party motor vehicle insurance 236, ,654-4, Total Third Party Motor insurance277, ,903-5, Total direct work 530, ,277 23, Total indirect work General Total 530, ,464 23, Amounts in thousands of euros. B R A N C H PREMIUMS VARIATIONS ABSOLUTE % Land vehicles 40,292 41, Third party motor vehicle insurance 236, ,654-4, Elementary motor vehicle liability 21,578 20,234 1, Total Motor insurance 298, ,227-4, Total pure elementary 231, ,140 27, General Total 530, ,367 23, Amounts in thousands of euros. 210

211 There was a 1.4 per cent fall in motor insurance premiums from million in 2004 to million in In particular: - third-party premiums decreased by 2 per cent to million; - accessorial guarantees (elementary) rose by 0.4 million; - diverse risk premiums (land vehicles) dropped 2.3 per cent over 2004 to 40.3 million. Accessorial guarantees now account for 26.1 per cent of third-party motor insurance (2004: 25.4 per cent) as a result of concerted efforts on the part of our insurance office network. The number of outstanding third-party motor insurance contracts at 31 st December 2005 amounted to 574,966, about 4,000 policies lower (-0.7 per cent) than the previous year. This fall was a result of heightened selection in the portfolio carried out since 2003 which has guaranteed technical matching and achieved better-than-system levels in claim rates. Elementary premiums rose 13 per cent from million in 2004 to million in This growth, which was higher than the market level recorded in September 2005 (4.22 per cent), was produced via the diversification of distribution channels away from exclusive traditional office sales: insurance brokers, bank branches, agreements with finance companies. The objective set in the three-year plan of raising the share of non-third party motor insurance up to 47.5 per cent by 2005 was achieved and improved on. Distribution of premiums by macro-branch. December 2005 December 2004 VARIATION Third party motor insurance 44.6% 47.5% -2.9 Other branches 7.6% 8.1% -0.5 Pure elementary 47.8% 44.4% 3.4 TOTAL 100.0% 100.0% = 211

212 The Group s policy for the underwriting of non-life cover focuses on geographical diversification in policies within the Italian market. Non-life component Third party motor insurance Premiums North Centre South Islands TOTAL 111,158 54,655 34,517 36, ,347 Land vehicles 23,847 7,122 4,849 4,473 40,291 Assistance 3,868 1, ,041 7,652 Injury 21,819 28,145 4,025 4,474 58,463 Illness 5,826 1, ,262 Fire and natural elements Other damages to goods and property 17,175 5,320 1,689 2,036 26,220 9,645 2,851 1,071 11,325 24,892 General third party 47,506 16,994 2,977 5,085 72,562 Monetary losses 2,680 33, ,997 Other 10,590 4,385 1,967 2,948 19,890 Total Premiums 254, ,706 52,717 68, ,576 Amounts in thousands of euros. Total claims paid including expenses rose 3.3 per cent in 2005 from million to million. Indemnity-related claims only, excluding liquidation expenses, amount to: Abs. var. % Third party motor insurance Other types Total Amounts in millions of euros. Within the third-party motor insurance segment, both the number of accident claims and average costs paid continued to fall, the former by 6.7 per cent. These falls have enabled for the continuing containment of overall payment volumes achieved over recent years. In particular, the average claim paid dropped on the basis of figures at September 2005 by 2.6 per cent after an increase of 4.8 per cent in 2004 and one of 4.5 per cent system-wide. These results were achieved maintaining the same liquidation times recorded in 2004: 72.1 percentage points in 2005 and 73.3 percentage points in

213 In the elementary segment, the increase in total claims paid out was in line with exopansion in the portfolio. Details are provided below: Abs. var. % Fire Third-party Injury Other damages to goods and property Other Total Amounts in millions of euros. Elementary reserves destined for direct liquidation purposes recorded the following year-onyear changes: Abs. var. % Fire Third-party Injury Other damages to goods and property Other Total Amounts in millions of euros There was an overall increase of 23 per cent in reserves in comparison to the previous year. 213

214 Reserve volumes by insurance type are as follows: Type Risk Reserves 31/12/ /12/2004 Third-party motor insurance Occurrence of event insured against 297, ,458 Land vehicles Occurrence of event insured against 11,010 9,832 Assistance Occurrence of event insured against Injury Occurrence of event insured against 37,126 33,114 Illness Occurrence of event insured against 2,759 2,451 Fire and natural elements Fire and certain other natural disasters insured against 10,504 9,903 Other damages to goods and Occurrence of event insured against property 7,013 5,903 General third party Occurrence of event insured against 94,323 71,341 Monetary losses Risk of utilisation 13,881 8,006 Other Occurrence of event insured against 10,141 9,939 Total reserves 484, ,096 Amounts in thousands of euros In the motor insurance segment in particular quicker liquidation times and technical improvements in the portfolio positively impacted reserves in In detail: - the number of third-party motor insurance claims made in 2005 with reserve cover at December 2005 dropped to 10,897 from 11,203 in 2004 (-2.7 per cent); - the number of third-party motor insurance claims referring to previous years with reserve cover at December 2005 fell from 11,962 to 10,660 (-10.9 per cent); - the total number of third-party motor insurance claims amounted to 21,557 in comparison to 23,165 in 2004 (-1,606; -6.9 per cent); - the average cost covered by reserves related to third-party motor insurance claims in 2005 rose from 7,386 to 7,726 (+4.6 per cent); the average cost covered by reserves referring to previous years rose from 18,017 to 18,860 (+4.7 per cent). These results have been achieved by: - rigorous control on liquidation procedures; - monthly review of average costs by homogeneous types of claim; - systematic collection of data illustrating abnormal variations in claim payouts; - the closure and/or reorganisation of unprofitable offices responsible for the settlement of damages. The management of the direct settlement of damages continues to be at highest market levels. In fact, average settlement times are 4.9 days lower than the market average and related liquidation costs are 2.6 per cent less. These excellent results confirm the operational effectiveness of the Claims Call Centre, which has considerably simplified claims procedures. Volatility in the non-life branch is limited and controlled by means of a careful risk-assumption policy. 214

215 Reinsurance risk The Group s reinsurance policy continues to focus on maintaining levels of cover proportionate and in excess to claims according to risk category. In particular, in the third-party motor insurance segment, cover continued in 2005 solely for excess claims relating to catastrophe risks. Cover of elementary risks continued to be adequate during 2005 with regards to risk retention levels. In 2006, the structure of cover for this branch of activity will continue to be based on diversification according to the nature and type of risk assumed, maintaining also a quota cover and cover for excess claims. Technological risk will however have proportionate cover in addition to that in place for excess claims. The Group s reinsurance plan for 2006 takes into account the indications contained in ISVAP, the Italian insurance industry regulator s circular no. 574/D of 23 rd December 2005 ( Reinsurance liabilities ). In January 2006 the Parent Company in its reinsurance policy document confirmed the transfer plan to be communicated to ISVAP; placement for 2006 was carried out in accordance with the guidelines established by the Board of Directors and reinsurance agreements were entered into according to their effectiveness in terms of risk containment and tolerance levels. Reinsurance treaties will be subject to regular valuation and financial simulation models will be applied to certain insurance branches in order to evaluate capital allocative efficiency. Reinsurers are predominantly from continental Europe with proven financial solidity and high reputational values. Management capacity and technical knowledge are essential factors in reinsurer choice. Information sources include counterparts financial reports and independent audit reports, Standard & Poor s ratings and A.M. Best indices, where available. Concentration risk was mitigated as in previous years by avoiding dominant positions able to exert an influence over risk-assumption policy, and by monitoring closely the concentration of risk amongst reinsurers belonging to the same group. 215

216 b) LIFE ASSURANCE Qualitative information See non-life insurance. Quantitative information Life insurance products distributed by the Group are as follows: Contract name Risks Mathematical reserves at 31/12/05 Mathematical reserves at 31/12/04 Mixed Policy performance, death 188,899, ,047, % Temporary in Death case of death 7,729,927 7,725, % Whole life Policy performance 470,274, ,146, % Deferred capital and annuities Survival, policy performance 76,988,674 78,569, % Unit linked Policy performance/credit 393,076, ,292, % Index linked Policy performance/credit 209,890, ,379, % Supplementary insurance Injury 189, , % Capitalisation Policy performance 33,044,661 24,998, % % Total 1,380,091,989 1,141,360, % *only for performance guarantees provided directly by the Company The table above provides details of the possible risks generated by the guarantees, insurance or financial, present in the life assurance product portfolio. These risks can be summarised in three distinct groups: - death and injury. The in case of death portfolio is markedly diversified as a result of the extensive geographical distribution of the sales network. The following are critical factors that are considered in the risk-assessment phase: healthcare records, profession, sport and free time activities, age (maximum 75 years of age), higher premiums for tares. The use also of demographic factors generalised throughout the Italian population provides significant prudential limits. Reinsurance policy both in terms of new and old positions seeks the limitation of risk also in the area of catastrophes. Maximum retention levels of individual risk between 25,000 and 30,000 are set on certain products, and 15,000 on other products and on the transfer of risks beyond this level; - survival. In the face of increasing longevity, a special reserve was set up on the basis of recent average lifetime statistics (IPS55); - performance. Performance risk, present in most contracts with a financial component linked to the income flows generated by two separate management lines (Norvita and C. Vitanuova), arises on performance levels below those necessary to guarantee the insured the minimum guaranteed income. Asset liability management analysis in accordance with ISVAP s pronouncement no.1801 enables the Parent Company to 216

217 make adequate provisions to cover the any difference between minimum performance levels and income levels forecasted by the two management lines. Products currently on sale offer guaranteed minimum levels on the basis of present market rates, whereas older products require prudential provisions for interest-rate risk. ALM monitoring is performed during the year both for the Norvita (guarantee levels: 5 per cent, 4 per cent, etc.) and C. Vitanuova line (maximum guaranteed interest rate: 3 per cent). Reinsurance risk Life reinsurance risk is principally in the form of credit risk and the inadequacy of reinsurance plans. To limit these risk forms, the adequacy of reinsurance plans is determined on a yearly basis along with the regular review of reinsurers solvency ratings and shareholder structures, and of the degree of counterpart concentration (concentration risk). 217

218 2.2 FINANCIAL RISKS a) NON LIFE Qualitative and quantitative information Credit risk Credit risk, the risk that one of the counterparts to a financial contract defaults, is managed via the careful selection of counterparts, of investments, and hedging instruments. a) Reinsurance Reinsurance companies are internationally established players who are subject to constant monitoring by the Group and whose exposure levels are reviewed annually to determine a variation in the reinsurers credit rating. b) Securities and other financial instruments Investment limits have been determined according to the nature and rating of the counterpart, and the type of investment acquired. More than 20 per cent (21.4 per cent) of the Group s securities portfolio is made up by euro-area government stock, in particular Italian State securities. c) Derivatives Derivatives trading is performed in accordance with Bank of Italy indications. Derivatives are used to hedge risk exposures and are also an integral part of the Group s investment management policy. Contracts are entered into exclusively with prime counterparts and have liquid non-derivative underlying components. The table below illustrates the degree of portfolio risk on the basis of counterpart rating. Rating HTM Loans AFS Financial assets at fair value through profit or loss 31/12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/2004 AAA - 14,820 9,306 AA 24,326 24, ,795 65,326 A 10,972 10,869 99, ,759 BBB 3, ,411 BB 160,180 3,046 B Not rated ,871 28,845 23,159 41,512 Totale ,169 64, , ,360 Amounts in thousands of euros Ratings are provided by leading rating agencies (Standard & Poor s, Moody s, ). Not rated securities are assigned an internal evaluation on the basis of past collection trends. The overall average rating is around Moody s A and Baa. 218

219 Liquidity risk Liquidity risk, i.e. problems in raising funds to meet financial claims, can derive from: - the inability to sell a financial asset rapidly at around its fair value; - the unexpected and premature settlement of insurance damages; - the inability to generate forecasted financial flows. The table below shows the distribution of maturities for assets and liabilities. Assets with an undefined maturity (shares and OICR shares), designated at fair value, are classified as current assets with maturities of less than 12 months. FINANCIAL MATURITY ASSETS <= 1 y > 1 e <= 2 y> 2 e <= 3 y> 3 e <= 4 y> 4 e <= 5 y > 5 y Capital securities and derivatives measured at cost 39,841 Capital securities and derivatives measured at fair value 12,724 of which listed equity securities 12,723 Debt securities 47,112 59,309 63,035 62,663 25, ,288 of which listed bonds 46,106 53,866 59,568 52,915 25, ,420 OICR shares 19,113 Other financial investments 258 Amounts in thousands of euros Market risk Market risk is managed via sensitivity analyses (modified duration and/or Greek analysis by component type). With regards to the bond component, 94 per cent is made up by debt securities listed on regulated markets, whilst with regards to capital securities, 91 per cent is made up by financial instruments listed on regulated markets (figure excludes equity investments in Group subsidiaries). a) Exchange-rate risk The majority of insurance contracts are expressed in euro, the functional currency of the Group. Currencies utilised in other insurance contracts refer to economic environments characterised by substantial exchange-rate stability. Currency of financial asset (available for sale and held to maturity) US Dollar 965 1,027 GB Pound Swiss Franc Other currencies 0 0 TOTAL 1,424 1,229 (amounts expressed in thousands ofeuros) 219

220 b) Interest-rate risk Mitigation of interest-rate risk is achieved via a diversified balanced investment portfolio, substantially floating-rate oriented. The table below illustrates interest-rate exposure by investment type. Bond-rate exposure Fixed rate Floating rate TOTAL Held for trading 178, , ,516 Available for sale 17,560 17,738 35,298 Held to maturity TOTAL 196, , ,308 c) Price risk Price risk is related to possible changes in the price of financial assets and liabilities. In order to limit excessive swings in the value of financial investments, The Group has established a series of limits in terms of issuers, overall exposures, expected yields, types of instrument available for purchase, and derivative usage. The distribution and concentration of assets is monitored regularly on the basis of market trends and expected yields. b) LIFE ASSURANCE Qualitative and quantitative information Investments are substantially concentrated in low risk sectors. The Group prudentially manages its bond market operations in order to guarantee appropriate returns in relation to the commitments undertaken. The Parent Company s risk management policy is grounded on the identifying, understanding, measuring and measuring business risks. Financial risks (credit, liquidity, market, rate and price) arise from the management of the investment portfolio, made up by securities, property, loans and other liquid assets. ISVAP indications in the area of prudential management impact financial risk absorption levels and their possible effect on the Group s insurance activities. The specific components of financial risk are described below. Credit risk Credit risk is managed via the careful selection of counterparts on the basis of ratings provided by international agencies. At 31 st December 2005, around 77 per cent of the securities portfolio was made up by issuers with a Moody s rating ranging from A to Aaa. A further 17 per cent was classified as Baa, 4 per cent Ba, and the remaining 2 per cent is unrated. Concentration limits have been set both for issuer (5 per cent) and sector (20 per cent) and are regularly reviewed. 220

221 Liquidity risk Maturities present in the bond portfolio are distributed as follows: Less than one year: 13 per cent; Between one and five years: 50 per cent; More than five years: 37 per cent. Market risk Sensitivity analyses monitor the sensitivity of securities in portfolio to rate swings. The modified duration level of the portfolio at year end was 3.1, lower than the half-year figure of 3.6. With regards to the bond component, 94.5 per cent is made up fixed-income securities quoted on regulated markets, whilst with regards to capital securities, 100 per cent is made up by financial instruments listed on regulated markets (figure excludes equity investments in Group subsidiaries). Exchange-rate risk exposure is limited as nearly the entirety of the portfolio is quoted in euro, the functional currency of the Group. The residual part of securities are quoted either in US Dollar of GB Pound. Interest rate risk, defined as the risk that the expected value of financial flows generated by a financial asset or liability fluctuate on the back of an interest rate variation, is mitigated via a diversified balanced investment portfolio, substantially floating-rate oriented so as to guarantee appropriate returns in relation to the commitments undertaken. 221

222 222

223 SECTION 1 CONSOLIDATED SHAREHOLDERS' EQUITY A. Qualitative information The Banca Carige Group has adopted those measures necessary to guarantee its capital adequacy during the recent phase of operational expansion. Monitoring duties are carried out by the Parent Company with the aim of preventing possible future tensions. The maintenance of adequate capital levels is a prerequisite for Group expansion. At 31 st December 2005, the Group s free regulatory capital was appropriate to the prudent management of capital risk profiles and, in addition, enables further operational expansion. B. Quantitative information Break-down of shareholders' equity Caption 31/12/ /12/ Capital 1,113,327 1,113, Own shares (-) - - 1, Issue premium 263, , Reserves 26, , Capital instruments 11, Revaluation reserves (1) 721, , Net profit 131, ,214 Total Shareholders' Equity attributable to the Parent Company 2,268,032 1,845, Equity attributable to third parties 27,219 46,353 Consolidated Shareholders' Equity 2,295,251 1,892,023 (1) Inclusive of capital gain on holding in the Bank of Italy ( million euros). Share capital is in the form of 959,897,518 ordinary shares and 153,429,321 savings/preference shares both with a unitary value of 1euro. SECTION 2 REGULATORY CAPITAL AND SOLVENCY RATIOS 2.1 Regulatory capital Consolidated regulatory capital was determined on the basis of the Bank of Italy s indications contained in its letter no of 1 st December 2005 ( discipline of prudential filters ). First-time application of these regulations at consolidated level is for statements at 31 st December 2005, whilst application at single-company level are expected for the interim report at 30 th June Prudential filters introduced by the Bank of Italy seek to protect the quality of regulatory capital and reduce potential volatility arising on first-time application of International Financial Reporting Standards (IFRS/IAS). 223

224 The following three issues arise from the new Bank of Italy provisions: figures refer exclusively to the banking group. Insurance companies and other entities continue to be recorded at cost and elisions of infra-group relations amongst the same entities are ignored. Investments in subsidiaries and subordinated loans granted to the Group s insurance companies are accounted for as elements to be deducted from tier 1 and tier 2 capital; the revaluation of the holding in the Bank of Italy has had no impact on the calculation of consolidated regulatory capital. Deductible elements include a fifth of the value of the investment at 31/12/2004 prior to the revaluation performed at 1/1/2005; the revaluation reserve arising on the revaluation of property and works of art (deemed cost at FTA) was included in tier 2 capital. The amount will be transferred to tier 1 capital on completion of the free capital increase which foresees the cancellation of the reserve and its inclusion in share capital. A. Qualitative information 1. Tier 1 capital Tier 1 capital includes the following positive items: Share capital Issue premium Reserves attributable to the Parent Company and third parties Profit destined to reserves Negative items include: Own shares in portfolio Goodwill Other intangible assets Prudential filters applied to tier 1 capital are: Positive filters Reserves and equity attributable to third parties previously cancelled on consolidation with reference to the commitment to purchase at maturity subsidiaries equity instruments; Negative filters Negative reserves arising on the valuation of capital and debt securities designated as included in the available for sale; Deduction of commitments to purchase at maturity own shares settled on a net basis and consequently not reclassified as a reduction of shareholders equity; Deduction pro quota on the basis of the residual life of commitments to purchase at maturity subsidiaries equity instruments. 224

225 2. Tier 2 capital Tier 2 capital includes the following positive elements: Revaluation reserves deriving from special legislation and first-time application of deemed cost Hybrid instruments Subordinated liabilities Positive reserves, attributable to the Parent Company and third parties, referring to the valuation of capital and debt securities designated as available for sale; Negative items include: Net losses arising from equity investments in non banking and non financial companies listed on a regulated market; Other negative items loans: writedowns to non guaranteed credits granted to residents in countries considered at risk and not recorded up to 30 per cent of their nominal value; Other negative items; - other: asset losses still to be recognised in the income statement. Prudential filters applied to tier 2 capital are: Positive filters The re-inclusion of the quota of shareholders equity attributable to third parties previously cancelled on consolidation with reference to the commitment to purchase at maturity subsidiaries equity instruments; Deduction of 50 per cent of positive revaluation reserve referring to the valuation of capital and debt securities designated as available for sale; Deduction pro quota on the basis of the residual life of commitments to purchase at maturity subsidiaries equity instruments for that part relevant in the calculation of third parties tier 2 capital. Details of hybrid equity instruments and subordinated loans: Hybrid equity instruments are in the form of the Parent Company subordinated convertible bond issue described below: - nominal value: 102,054,947 euros made up by bonds with a nominal unitary value of 2.5 euros; - rate: 1.5 per cent p.a. with a 16 per cent premium payable at maturity on non conversion; - maturity date: 5/12/2013; - subordination clause: in the case of liquidation or winding up proceedings of the Bank, bondholders will be reimbursed only after all not equally subordinated creditors have been satisfied; - conversion ratio: one (ordinary share)-for-one (convertible share) basis from 1 st January Subordinated liabilities are represented substantially by a Parent Company subordinated bond issue described below: - nominal value: 400,000,000 euros made up by bonds with a nominal unitary value of 1,000 euro each; 225

226 - rate: euribor three months + 80 bp and then from 28/9/2006 euribor three months bp; - particular clauses: right of early reimbursement by the issuer from 28/9/2006; - subordination clause: in the case of liquidation or winding up proceedings of the Bank, bondholders will be reimbursed only after all not equally subordinated creditors have been satisfied. 3. Tier 3 capital Tier 3 capital is represented by a subordinated bond issue described below: - nominal value: 80,000,000 euros made up by bonds with a nominal unitary value of 1,000 each; - rate: euribor three months + 25 bp; - subordination clause: in the case of liquidation or winding up proceedings of the Bank, bondholders will be reimbursed only after all not equally subordinated creditors have been satisfied; - the bonds are covered by a lock-in clause. B. Quantitative information 31/12/05 A. Tier 1 capital before application of prudential filters 838,030 Prudential filters for tier 1 capital - Positive IFRS prudential filters 40,208 - Negative IFRS prudential filters 51,623 B. Tier 1 capital after application of prudential filters 826,615 C. Tier 2 capital before application of prudential filters 735,566 Prudential filters for tier 2 capital - Positive IFRS prudential filters 1,542 - Negative IFRS prudential filters 5,068 D. Tier 2 capital after application of prudential filters 732,040 E. Tier 1 and tier 2 capital after application of prudential filters 1,558,655 Items to be deducted from tier 1 and tier 2 capital 364,964 F. Regulatory capital 1,193,691 On completion of the free capital increase of 164,838,000 euros and the ensuing inclusion in share capital of revaluation reserves arising on the first-time designation of property and works of art at deemed cost, tier 1 regulatory capital will amount to 1,032,393,000 euros and tier 2 capital to 541,988,000 euros. Regulatory capital levels under calculated under Italian GAAP at 31 st December 2004 are as follows: 226

227 Consolidated regulatory capital CATEGORY/VALUE 31/12/04 A. Regulatory capital A.1 Tier 1 918,210 A.2 Tier 2 518,099 A.3 Items to be deducted 237,332 A.4 Regulatory Capital 1,198, Capital adequacy A. Qualitative information As part of the Group s asset and liability management (ALM) policy, the Parent Company reviews on a monthly basis all risk profiles relating to shareholders equity to confirm the observance of solvability, total capital, and tier one ratios in addition to forecasting possible variations in free capital availability. Monitoring activities are performed not only in order to satisfy fully regulatory requirements, but also as support in the measurement and optimal management of free capital (equity excluding net investments in property and subsidiaries excluding those that represent permanent fund investments). 227

228 Quantitative information Category/Value Weighted Unweighted amounts amounts/requirements 31/12/05 31/12/04 31/12/05 31/12/04 A. Risk assets A.1 Credit risk 17,312,369 15,163,417 13,228,705 10,835,579 STANDARD METHOD On balance sheet assets 1. Loans (other than equities and other subordinated assets) to (or secured): 1.1 Governments and central banks 993,552 1,026, Public entities 578, , , , Banks 644,039 1,205, , , Other entities (other than residential and non-residential mortgage loans) 6,539,659 5,772,478 6,543,639 5,772, Mortgage loans - residential property 3,007,702 2,012,159 1,503,851 1,006, Mortgage loans - non-residential loans 2,300,324 2,323,330 2,140,682 2,006, Shares, investments and subordinated assets 158, , , , Other assets 1,921, ,442 1,579, ,740 Off-balance sheet assets 1. Guarantees and commitments to (or secured by): 1.1 Governments and central banks 230 6,000 6, Public entities 25,703 26,698 5,141 10, Banks 25, ,707 5,012 31, Other entities 1,032, ,255 1,027, , Derivatives to (or secured by): 2.1 Governments and central banks 2.2 Public entities 2.3 Banks 78,315 79,613 15,663 14, Other entities 7,382 7,772 3,691 3,398 B. Regulatory capital requirements B.1 Credit risk 1,058, ,846 B.2 Market risk 118,948 73, STANDARD METHOD of which: + position risk on debt securities 30,739 27,446 + position risk on equity securities 82,181 43,552 + exchange-rate risk other risks 5,825 2, INTERNAL MODELS of which: + position risk on debt securities + position risk on equity securities + exchange-rate risk B.3 Other regulatory requirements 46,378 54,354 B.4 Total regulatory requirements (A1+A2+A3) 1,223, ,174 C. Risk assets and regulatory ratios C.1 Risk-weighted assets 15,295,275 12,439,675 C.2 Tier 1 capital/weighted risk assets (Tier 1 capital ratio) 5.40% 7.38% C.3 Regulatory capital/weighted risk assets (Total capital ratio) 8.33% 9.64% Market risk values include the tier 3 subordinated loan issue utilisable for hedging purposes. 228

229 229

230 SECTION 1 TRANSACTIONS PERFORMED DURING THE YEAR 1.1 Business combinations Denominazione Data dell'operazione (1) (2) (3) (4) 1. Dafne Immobiliare Srl 31/01/ , Portorotondo Gardens Srl 23/12/ , ,672 3 (1) Costo dell'operazione (2) Percentuale di interessenza acquisita con diritto di voto nell'assemblea ordinaria (3) Totale ricavi del gruppo (4) Utile/perdita netto del gruppo On 31 st January 2005 the subsidiary Carige Assicurazioni acquired outright the share capital of the company Dafne Immobiliare S.r.l. for a total investment of 34,400,000 euros. Columns 3 and 4 illustrate respectively the revenues and profit for the year recorded by the company acquired. The consolidated income statement recognises 11/12ths of these amounts. On 23 rd December 2005 the subsidiary Carige Vita Nuova acquired outright the share capital of the company Portorotondo Gardens S.r.l. for a total investment of 29,972,000 euros. Columns 3 and 4 illustrate respectively the revenues and profit for the year recorded by the company acquired. As the transaction was performed at the end of the year, these amounts are not stated in the consolidated income statement at 31/12/ Other information regarding business combinations With regards to the two acquisitions described in 1.1., the difference between purchase cost and net equity of the two companies acquired is stated in the consolidated income statement, positively impacting the book value of property. Increased property values assignable to each company are as follows: Portorotondo Gardens Srl 8,974,000 euros; Dafne Immobiliare Srl 16,982,000 euros Annual variations in goodwill During the year the value of goodwill recorded increased by 4,250,000 euros following the recognition in the Parent Company s statements of a repayment of tax benefits required under Law decree 282/2002 (previous relief on stamp duties, etc. arising on the acquisitions of business branches from Banco di Sicilia and Banca Intesa). There was a further increase of 709,000 euros following the recalculation of goodwill arising on the acquisition at the end of 2004 of Banca Cesare Ponti. Recalculation was made necessary by the share capital increase, subscribed also by minority shareholders, carried out at the end of

231 SECTION 2 TRANSACTIONS SUBSEQUENT TO THE DATE OF THE FINANCIAL STATEMENTS 2.1 Business combinations On 16 th January 2006 the Parent Company acquired a further 40 per cent of the share capital of Argo Finance One S.r.l., so bringing its holding to 100 per cent. Positive repayment performances enabled the full reimbursement at 25 th July 2005 of class A and B asset-backed securities issued by the SPE. Consequently, in accordance with the shareholders agreement between Banca Carige and Stitching Faro, the former exercised its call option right (option right exercisable no later than six months after the reimbursement described above) on Stitching Faro s holding in Argo Finance One. The acquisition cost was 4,131 euros. 231

232 232

233 1. Information on remuneration of Directors and Executives REMUNERATION 31/12/2005 (a) Directors 2,853 (b) Statutory Auditors 489 (c) Executives with key strategic responsibilities 2,960 Total 6,302 The amounts given above refer to remuneration paid to Directors, Statutory Auditors and key managers for services performed at Banca Carige SpA. 233

234 2. Information on transactions with related parties 2.1 Relations with shareholders (thousands of euros) The "Cassa di Risparmio di Genova e Imperia" Foundation Entities subject to significant influence Assets Liabilities Guarantees and Revenues Expenses Dividends commitments ,189 1,896 1,018 43, ,476 9, , ,197 TOTAL 466,911 1,143,331 4,437 72,240 70,376 34,

235 2.2 Transactions with other related parties (thousands of euros) Transaction type Balance at 31/12/05 Cash credits 24,316 Liabilities 5,702 Guarantees granted 7,624 Related parties are defined as: a) executives with strategic responsibilities of the entity or its subsidiaries. Given the current organisational structure of the Bank, this category included Directors, Statutory Auditors, Managing Director or General Manager, Deputy General Managers and Senior Executives. b) persons with close family ties to any of the persons stated at a). This category includes those who can exercise an influence on or be influenced by any of the persons stated at a) e.g. partners, spouses, etc. c) entities owned singly or jointly or those subject to significant influence by any of the persons stated at a) and b), i.e. entities in which those persons hold directly or indirectly a significant proportion of voting rights. 235

236 236

237 REPORT OF THE BOARD OF STATUTORY AUDITORS ON THE BANCA CARIGE GROUP CONSOLIDATED FINANCIAL STATEMENTS AT 31/12/05 To the shareholders of Banca Carige SpA, The Directors of Banca Carige SpA have prepared the Consolidated Financial Statements at 31/12/05 in accordance with relevant legislation. With regards to the Parent Company Banca Carige, the principal economic and financial transactions carried out during 2005 in addition to those performed in the first quarter of 2006 are reported in detail in the Company s individual statements. The principal economic and financial transactions of the subsidiaries of the Banca Carige Group are as follows: a) Cassa di Risparmio di Savona - on 6th September 2006, Banca Toscana sold 1,000,000 C.R. Savona shares in its possession to the Fondazione Agostino Maria De Mari Cassa di Risparmio di Savona (C.R. Savona Foundation). The share ownership structure of the company following this sale is as follows: Banca Carige, 95.9 per cent and the C.R. Savona Foundation 4.1 per cent; - on 25 th November 2005 C.R. Savona s Board following a review of the administrative service contract existing with the Parent Company, signed an agreement with C.R. Carrara for the back office administration of its treasury services provided for public bodies; - on 19 th December 2005 as part of the Group s expansion programme, C.R. Savona opened a new branch in Borghetto Santo Spirito; b) Banca del Monte di Lucca - on 8th March 2005 a new shareholders agreement was signed between Carige and the BML Foundation; - on 14 th December 2005 an equity raising transaction deliberated by the extraordinary shareholders meeting of BML held on 26 th September 2005 was fully subscribed. The 237

238 company s share capital was raised from 13,000,000 euros to 15,600,000 euros. Banca Carige subscribed 2,700,000 new shares for an overall countervalue of 2,700,000 euros (of which 1,404,000 in nominal value and 1,296,000 euros in premium). On subscription, Banca Carige s holding in BML remained unchanged at 54 per cent. The same meeting also approved certain changes to the company s by-laws in the light of the shareholders agreement mentioned above; c) Cassa di Risparmio di Carrara - on 1 st July 2005 an agreement was signed between Banca Carige and trade unions regarding the reorganisation of C.R. Carrara and the transfer to the bank of the Parent Company s and C.R. Savona s treasury services; - on 28 th July 2005 C.R. Carrara formally approved the agreement with Banca Carige for the transfer to the bank of Carige s administrative service and the agreement with Carige and C.R. Savona for the supply of treasury back office services; d) Banca Cesare Ponti - on 2 nd March 2005 the Bank of Italy communicated the formal modification to the Banca Carige Group following the inclusion of Banca Cesare Ponti on 29 th December 2004; - on 14 th October 2005, the Board of Directors of Banca Cesare Ponti deliberated a subordinated bond loan issue of 8 millions. On 24 th October a request was made to the Bank of Italy authorising the inclusion of the loan in the computation of the bank s tier 2 capital; - provisions amounting to 600,000 euros were made during the year to provide cover for potential liabilities stemming from the illicit behaviour of an ex-member of staff; e) Carige AM SGR On 30 th May 2005, the Board of Directors deliberated the acquisition of the management of the Carige Open Pension Fund, granting the General Manager appropriate powers to finalise an agreement with Banca Carige. Management came into effect on 1 st September Significant events relating to the corporate governance of the Group are listed below: 238

239 - the Board of Directors of Banca Carige in its meeting of 10 th October 2005 co-opted Mr Nicolas Merindol as Board member to replace the outgoing Oliviero Tarolli. The appointment was subsequently approved by the Shareholders Meeting of 15 th January 2006; - on 28 th February 2005 following the resignation of Mr Fulvio Rosina as Chairman of the Board of Statutory Auditors of C.R. Savona, Mr Antonio Semeria was appointed as his replacement and Mr Andrea Traverso as other Board member; - on 15 th April 2005 the Ordinary Shareholders Meeting of C.R. Savona confirmed the above-mentioned appointments and also appointed Ms Fabrizia Giribaldi as acting Board member; - on 22 th February 2005 the Ordinary Shareholders Meeting of Banca del Monte di Lucca deliberated to appoint Mr Andrea Traverso as Chairman of the Board of Statutory Auditors, Mr Massimo Scotton as Auditor and Mr Antonio Semeria as acting Board member; the Director Andrea Baldini was confirmed in the appointment; - on 26 th April 2005 the Ordinary Shareholders Meeting of Banca Cesare Ponti deliberated to appoint Mr Andrea Rittatore Vonwiller as new member of the Board of Statutory Auditors; he will keep the appointment until the Meeting fot the approval of the Balance Sheet at 31/12/2006, date of expiration of the whole Board of Statutory Auditors; - on 28 th February 2005 the Ordinary Shareholders Meeting of Carige AM SGR appointed Mr Fulvio Rosina as Chairman and Mr Jean Marie Paintendre as Deputy Chairman and appointed Mr Massimo Scotton as Auditor and Mr Stefano Ferrari and Ms Fabrizia Giribaldi as acting Board members. We carried out our supervisory duties according to the codes of best practice for statutory auditors of publicly-traded companies recommended by the Italian Council of Chartered Accountants. These financial statements were audited by the Group s auditors, Deloitte & Touche SpA. In the course of our direct inspections and on the basis of information provided to us by the external auditors and the offices of the Group s companies responsible for the preparation of the reports we have examined, we can state that the consolidated financial statements of the Banca 239

240 Carige Group have been prepared in accordance with relevant regulations regarding the form and content of financial statements. We also confirm the existence of effective co-ordination in activities and information flows between the parent company and its subsidiaries and associated companies. In particular: the accounting principles are in compliance with International Financial Reporting Standards (IFRS/IAS) and are appropriate to the Group s activities; balance sheet and income statement figures are expressed in thousands of euros; the area of consolidation conforms to International Financial Reporting Standards in addition to the provisions contained in the Bank of Italy s Circular no. 262 of 22 th December 2005; the methods of consolidation adopted are those foreseen by relevant legislation. With reference to the methods of consolidation we can report that: - the subsidiaries operating in banking and finance-related activities have been fully consolidated. They are: Cassa di Risparmio di Savona SpA; Cassa di Risparmio di Carrara SpA; Banca del Monte di Lucca SpA;Banca Cesare Ponti SpA: Carige Asset Management SGR SpA; Centro Fiduciario CF SpA; Immobiliare Ettore Vernazza SpA; Galeazzo S.r.l; Columbus Carige Immobiliare SpA; Immobiliare Carisa S.r.l.; Portorotondo Gardens S.r.l; Dafne Immobiliare SpA.; Argo Mortgage S.r.l.; Argo Mortgage 2 S.r.l.; Priamar Finance S.r.l.; Carige Vita Nuova S.p.A.; Carige Assicurazioni SpA.; - valuations in holdings in the following companies were carried out according to the equity method: Autostrada dei Fiori SpA; Frankfurter Bankgesellschaft AG; - at 31/12/05 the two insurance companies Carige Vita Nuova S.p.A.; Carige Assicurazioni SpA, previously accounted for under the equity method, were fully consolidated along with the special purpose entities Argo Mortgage S.r.l. and Argo Mortgage 2 S.r.l.; - first time consolidations performed during 2005 regard: = Portorotondo Gardens S.r.l., following the purchase of a controlling interest by Carige Vita Nuova S.p.A.; = Dafne Immobiliare S.r.l. following the purchase of a controlling interest by Carige Assicurazioni S.p.A.; 240

241 - those subsidiaries that do not play a significant role in the Group s operations (Assi 90 S.r.l., AG S.r.l. and Savona 2000 S.r.l.) are excluded from the area of consolidation; all companies belonging to the Banking Group are categorised as significant in terms of their role in Group strategy; other entities categorised as non-significant are those with net assets lower than 10 millions, provided the total of the companies excluded does not exceed 50 millions; - the following companies in which the Group has a significant influence were not recorded under the equity method: Assimilano S.r.l.; Assicentro Recina S.r.l.; B.D.A. S.p.A.; Atoma S.r.l.; U.C. Sport e Sicurezza S.r.l.; Consorzio per il Giurista di Impresa S.c.r.l.; - the consolidation-related transactions described in the Board of Directors Report conform to relevant legislation. *** With reference to Banca Carige s holding in the Bank of Italy and its reporting in the Board of Directors Report, in the Explanatory Notes, and in the Attachment Adoption of New International Financial Reporting Standards, we wish to point out that: a) the holding in question (financial investment with a risk level associated to a share offering dividend distribution privileges, but limited voting rights) has been recorded in agreement with the independent auditors Deloitte & Touche S.p.A. at fair value at the caption available for sale financial assets ; b) fair value as a significant proxy was calculated as equal to the value of Banca Carige s investment in the shareholders equity of the Bank of Italy as at 31/12/03. Figures arising from the valuation of shareholders equity of and by the Bank of Italy at 31/12/03 were also used by the same in determining its IFRS-compliant shareholders equity; c) the independent auditors are in possession of documentation that shows that a sale of a holding in the Bank of Italy was carried out voluntarily between independent parties and that the sale price agreed on corresponded to the assignable value per share on the basis of total shareholders equity as at 31/12/03; d) further validity of the method used in the valuation of Banca Carige s holding in the Bank of Italy (total shareholders equity at 31/12/03 divided by number of shares in possession) is provided by Law 218/1990 (Amato Law), which provided the legislative framework for the privatisation of ex-public sector banks, and the related Legislative decree 356/

242 In the light of points a) and b) above, the value of Banca Carige s holding in the Bank of Italy was revalued from 2,518, euros (amount recorded under Italian GAAP at 31/12/04) to 549,983, euros recorded at Total Shareholders Equity at 1 st January The total revaluation of 547,465, euros was recorded at shareholders equity caption 130 Revaluation reserve. The valuation recorded in these statements as at 31 st December 2005 of 559,564, euros follows the holding s categorisation on first-time adoption of IFRS as an available for sale investment. Given the nature of the variation, pursuant to article 7 Legislative decree 38/2005, rules governing access and limits to availability applicable to revaluation reserves are those established by article 6 of the above-mentioned decree. This article states that shareholders equity reserves established and managed as a direct contra entry of financial assets recognised at fair value, cannot be recognised (also) in the calculation of capital and profit foreseen by the Italian Civil Code (articles 2350, 2357, 2359, 2432 and 2478 bis). On the basis of a recent pronouncement by the Bank of Italy on the question of prudential filters (Bank of Italy note no of 1 st December 2005), revaluations carried out on firsttime adoption of IFRS by banks of their equity holdings in the Bank of Italy at fair value are excluded from the computation of regulatory capital. With reference to the provisions of article 19, line 10, Law 262/2005 on the question of a redefinition of the ownership structure of the Italian central bank and specifically the methods foreseen for transferring shareholdings, this Board fully supports your Company in its determination to protect its interests and those of its shareholders against the possible financial damage it could suffer were a forced transfer of property not to recognise the appropriate value of the Bank s investment. *** We also declare that the contents of the Board of Directors Report, which accompanies these consolidated statements, is in accordance with the provisions contained in the Bank of Italy s circular no.262 of 22 th December

243 *** In accordance with Legislative decree 58/98, the audit firm Deloitte & Touche SpA during the year examined the accounts of the Banca Carige Group on a regular basis and reviewed the contents of the Banca Carige Group Report at 31 st December 2005 for consistency with the financial statements and conformity with current accounting criteria. In its report of 4 th April 2006, the company declared that: "In our opinion, the consolidated financial statements present fairly the financial position of BANCA CARIGE S.p.A. Cassa di Risparmio di Genova e Imperia as of December 31, 2005, the results of its operations, the changes in shareholders equity and the cash flows for the year then ended in accordance with the International Financial Reporting Standards adopted by the European Union The Independent Auditors also state: "For a better understanding of the consolidated financial statements, we draw attention to the fact that, as reported in the consolidated explanatory notes and in the appendix, the investment held in the Bank of Italy has been valued in the financial statements as of December 31, 2005, at fair value, about Euro 557 million higher than the carrying value in the prior year financial statements prepared in accordance with the applicable Italian law; the counter entry of such higher value, net of deferred taxation of about Euro 29 million, has been credited to the caption of shareholders equity Revaluation Reserves. This valuation derives from the application of international accounting principle IAS 39, which provides that investments, which are not in subsidiaries or associated companies and which form part of current assets available for sale, be stated at fair value; in the presence of financial instruments which are not listed, as in the case of the investment in the Bank of Italy, the accounting principle provides for the use of valuation techniques including, amongst others, reference to market transactions. In accordance with the above-mentioned accounting principle, as described in the consolidated explanatory notes and in the appendix, the fair value valuation of the investment has been made on the basis of the shareholders equity of Bank of Italy, in that the Directors are of the opinion that such valuation is objectively comparable to similar prior transactions within the Italian 243

244 banking system and to an operation regarding the acquisition of the ownership of another central bank by a member country of the European Union. Moreover, as reported in the consolidated explanatory notes, Law no. 262/2005 (the socalled Saving Reform ) foresees the adoption of a regulation that redefines the ownership of the Bank of Italy and disciplines the means of transfer, within three years of the entering into force of such law, of interests in the capital of the Bank of Italy owned by parties other than the Italian State or other Public Bodies. The effects of this new law, particularly with regard to the criteria adopted by the Group for the valuation of the investment in Bank of Italy, are not presently determinable: moreover, the Directors of the Bank have expressed their strong determination to promote any action deemed to be in protection of the interests of the shareholders. Accordingly, we release our Report on the consolidated financial statements of the Banca Carige Group as at and for the year ended 31/12/2005. Genoa, 4 th April 2006 The Board of Statutory Auditors Antonio Semeria Chairman Massimo Scotton Board Member Andrea Traverso Board Member 244

245 REPORT OF THE INDEPENDENT AUDITORS 245

246

247

248 APPENDIX: ADOPTION OF THE INTERNATIONAL ACCOUNTING STANDARDS (IAS) 248

249 INTRODUCTION TO THE FIRST TIME ADOPTION IAS/IFRS The accounting requirements of International Financial Reporting Standards and International Accounting Standards (collectively in this Report, IFRS) are adopted via a legislative framework that consists, on one hand, by endorsement by the European Union and, on the other, by changes to relevant legislation at national level. The current situation as to the adoption and implementation of the new standards can be summarised by the following Regulations as published in the Official Journal of the European Communities (OJEC): - Regulation no. 1606/2002 (OJEC L243 of 11/9/2002) adopts IAS/IFRS for EU Member states from 1 st January 2005; - Regulation no. 1725/2003 (OJEC L261/1 of 13/10/2003) and no. 707/2004 (OJEC L111/3 of 17/4/2004) adopts previously endorsed IAS/IFRS considered compatible with the Union s aims of accounting uniformity; - Regulation no. 2086/2004 of 19/11/2004 (OJEC L363/1 of 9/12/2004) modifies Regulation no. 1725/2003 and adopts IAS 39 Financial Instruments: Recognition and measurement ; - Regulation no. 2236/2004 (OJEC L392/1 of 31/12/2004) adopts: IFRS 3 Business combinations, which substitutes IAS 22, and SIC 9, SIC 22 and SIC 28; IFRS 4 Insurance contracts ; IFRS 5 Non-current assets held for sale and discontinued operations; IAS 36 Impairment of assets ; IAS 38 Intangible assets. - Regulation no. 2237/2004 of 29/12/2004 (OJEC L393/1 of 31/12/2004) adopts IAS 32 Financial instruments: Disclosure and presentation and IFRIC 1 Changes to liabilities ; - Regulation no. 2238/2004 of 29/12/2004 (OJEC L394/1 of 31/12/2004) modifies Regulation no. 1725/2003 regarding: IAS 1 Presentation of Financial Statements IAS 2 Inventories IAS 8 Accounting policies, changes in accounting estimates, and errors IAS 10 Events after Balance Sheet Date ; IAS 16 Property, Plant and equipment ; IAS 17 Leases ; IAS 21 The effects of changes in foreign exchange rates ; IAS 24 Related Party Disclosures ; IAS 27 Consolidated and separate financial statements ; IAS 28 Interests in subsidiaries ; IAS 31 Interests in joint ventures ; IAS 33 Earnings per share ; IAS 40 Investment Property. In August 2005 the IASB published its IFRS 7 Financial instruments: disclosure and presentation, an area covered by IAS 30 and IAS 32. At national level, the legislative framework was defined by Law 306/2003 ( Community Law ) and Legislative decree 38/2005 ( IAS Decree ). The Community Law, which established the obligations and options regarding IAS/IFRS adoption in Italy, sought to apply Regulation 1606/2002 to the widest extent possible and fixed the terms required for harmonising civil and tax law. The range and scope of the Law includes the banking and finance industry. All banks, whether listed or not, parent company or not, shall from 1 st January 2006 prepare annual and interim financial statements under IAS/IFRS. In order to reach this objective the Law granted ample delegated powers to the Government to be exercised within 30 th November 2004, with the resulting Legislative decree 38/2005. The IAS Decree identified important aspects for the adoption of IAS/IFRS and its implications for Italian companies: 249

250 - scope and range of application (article 2); - consolidated financial statements (article 3) and single statements (article 4); - preparation of separate and consolidated financial statements according to IFRS (article 5); - distribution of profit and reserves (article 6); - variations to the recognition of shareholders equity on first time adoption of international financial reporting standards (article 7); - powers of lead regulators, Bank of Italy and ISVAP (article 9); - income tax (article 11); - calculation of regionally-levied income tax on enterprises (IRAP) (article 12); - transitional provisions (article 13). The first time adoption of IAS/IFRS by the Banca Carige Group for the period ending 30 th June 2005 reflects on one hand the compulsory provisions contained in the standards and on the other the transitional arrangements permitting a series of exemptions for accounting periods prior to 30/6/05 and subsequent accounting choices made. The Group has used the provisions of IFRS 1 in arriving at appropriate opening balances for these financial statements, as follows: BUSINESS COMBINATIONS The Group has not applied IFRS 3 Business Combinations retrospectively to business combinations prior to the date of transition (1/1/2004). The carrying amount of goodwill in the Italian GAAP balance sheet as at 31 st December 2003 has accordingly been brought forward without adjustments. The business combinations in question refer firstly at the level of separate statements to the acquisitions carried out by the parent company Banca Carige (2000: Banco di Sicilia; 2001: Gruppo Intesa; 2002: Capitalia) and secondly at the level of consolidated statements to acquisitions carried out by Banca Carige, Cassa di Risparmio di Savona, Banca del Monte di Lucca and the insurance subsidiaries. With regards to Banca Carige s acquisitions after 1/1/2004 (Cassa di Risparmio di Carrara and Banca Cesare Ponti), the fair value adjustment of goodwill was performed exclusively on the property and works of art. FAIR VALUE OPTION OVER COST ACCOUNTING The Group has adopted fair value rather than deemed cost in the measurement of its banking subsidiaries property and works of art. Subsequently, these new values will be measured at cost and the resulting value will be amortised at an annual flat rate of 1.5 per cent. SECURITISATION The Group has applied the transitional provision contained in IFRS 1 (paragraphs 27 and 27A), which allows for the non-immediate derecognition of securitisation transactions undertaken prior to 1/1/2004. These transactions identified with the name of the special purpose entity are the following: Argo Mortgage One (2000: Banca Carige non performing loans); Argo Mortgage (2001: Banca Carige performing loans); Priamar Finance (2002: C.R. Savona non performing loans). The securitisation transaction performed by Banca Carige in 2004 (SPE: Argo Mortgage 2) does not fully transfer risks to third parties with the subsequent benefits transfer produces. Consequently, it has been rerecognised in equity as at 1 st January IAS 32 AND 1AS 39 The Group adopted IAS 32 and IAS 39 (Financial Instruments) with effect from 1 st January As a result, the impacts of adopting IAS 32 and IAS 39 are not included in the relevant 2004 comparatives (as at 31/12/04 and 30/6/04). INSURANCE CONTRACTS The Group s insurance companies Carige Assicurazioni and Carige Vita Nuova - have 250

251 adopted IFRS 4 (Insurance Contracts) with effect from 1st January With regards to other IAS/IFRS provisions, the Group has made the following adoptions: - financial instruments securities, loans, amounts payable to banks and customers, derivatives, equity interests have been reclassified under IAS/IFRS. Securities have been substantially classified as held for trading with a remaining amount categorised as available for sale. - The Group has adopted the fair value option in the valuation of insurance and investment contracts, in which Carige Vita Nuova policy holders are exposed to investment risk (unit linked and index linked solutions). - The items amounts owed by banks and customers and amounts payable to banks and customers continue to be recognised under Italian GAAP. However, impairment assessments of the Group s loan portfolio (bad loans, watchlists, rescheduled loans, country risk positions classified as bad loans or watchlists, loans more than 180 days overdue classified as watchlists) is carried out in accordance with IAS/IFRS. Collective valuations of performing loans are measured on the basis of mathematical/statistical analyses foreseen by Basel 2 criteria. Issued debt securities are removed from the balance sheet with a corresponding deduction in the item securities issued ; Related accrued expenses are carried forward to the relevant IAS/IFRS-compliant balance sheet items, rather than the specific accrued expenses item foreseen under Italian GAAP. - Derivatives held for trading rather than risk management purposes are recorded as assets or liabilities according to their value (positive or negative). Derivatives held for risk management (hedging assets and liabilities) are recorded as: hedging derivatives, when after assessment the instrument is deemed an effective hedge; available for trading, when the hedge ceases to be effective (limited occurrence). - Minority interests are recognised as financial assets available for sale. These include the investment in the Bank of Italy fair valued through profit or loss to the corresponding share of shareholders equity recorded at 31 st December This approximated valuation is carried out according to Bank of Italy guidelines regarding the definition of its own shareholders equity under IFRS adoption. The Group believes this valuation is justified on the basis of previous documented transactions performed in the Italian banking industry, such as the sale of shareholdings in the Bank of Italy by parties legally entitled to do so. The value of these shareholdings sold and acquired corresponded to the quota of shareholders equity. Justification for this approach comes from a recent acquisition on the part of an EU Member State of an equity investment in another country s central bank, which was undertaken at values higher than the central bank s shareholders equity. Apart from the validity of the valuation criteria explained above, the Group believes that in the event of any changes made to the capital ownership structure of the Bank of Italy, the elected bodies of Banca Carige (Board of Directors and Board of Statutory Auditors) must at all times safeguard the interests of the Company as a current shareholder in the Bank of Italy. - With regards to property belonging to the Group s companies, land values are bifurcated and attributable amortisation charges are recorded at equity. - Intangible assets not classifiable as such under IAS 38 have been derecognised. These are as follows: plant and improvements costs; R&D costs; software not required to facilitate the use of new hardware; securitisation transaction charges; acquisition charges relating to lease contracts; capital gains on real estate (INVIM ). With regards to goodwill charges relating to the purchase of branches (external growth), the amortisation charge for 2004 is recorded in equity. Value maintenance tests, undertaken on the basis of dedicated internal models, were positive. 251

252 COMMENTARY ON THE USE OF THE INTERNATIONAL ACCOUNTING STANDARDS IAS/IFRS OF FTA (First Time Adoption) This Report sets out the financial and economic results of the Banca Carige Group under IFRS as required by IFRS 1 (paragraphs 39 and 40) and CONSOB s deliberation no of 14 th April 2005 and provides the following Italian GAAP/IFRS reconciliations: - Shareholders equity at 1/1/2004; - Shareholders equity at 31/12/2004; - Economic result at 31/12/2004; - Shareholders equity at 1/1/2005. The results stated may be subject to change arising from the introduction of new principles, modifications to those already adopted and/or changes in tax law or interpretations thereof 1. Amounts recorded are before corporation tax (IRES) at 33 per cent and regionally-levied tax on businesses (IRAP) applied in those regions where the Group s banks have their heads offices. The regions and IRAP rates are as follows: Liguria, for the parent company Banca Carige and the subsidiary C.R. Savona (4.25 per cent); Tuscany, for C.R. Carrara and Banca del Monte di Lucca (4.40 per cent); Lombardy, for Banca Cesare Ponti (5.25 per cent). Tax assets and liabilities are stated at relevant balance sheet items. The caption Shareholders equity comprises net variations. All amounts shown are expressed in thousands of euros. The reconciliations have been subject to a Special Purpose Audit Report carried out by Deloitte & Touche SpA, in accordance with the decision of the Board of Directors of Banca Carige taken during the meeting of 9 th May 2005 and pursuant to CONSOB s communication DEM no of 15 th April The Special Purpose Audit Report in included as an attachment to these statements. IFRS adoption has had the following impacts on shareholders equity: - on one hand, the effects deriving from adoption itself either resulting from transitional provisions or regime changes; - on the other, the effects on tax charged at the rates stated above deriving from variations to shareholders equity. These Explanatory Notes provide restated comparative data and summarise the main policy differences between Italian GAAP at 31 st December 2004 and IFRS at 1 st January Consolidated shareholders equity (including equity attributable to third parties) increases from euro 1,678,090,000 to euro 2,251,237,000 with an increase of euro 575,147,000 (of which euro 547,465,000 derives from the recognition of equity investments in the Bank of Italy 2 ) and is allocated as follows: - Revaluation reserve (shareholders equity caption 140): positive variation of euro 723,117,000, of which euro 547,465,000 is attributable to the valuation of the holding in the Bank of Italy. This positive variation includes the revaluation of property and works of art at fair value rather than deemed cost; - Capital instruments (shareholders equity caption 160): positive variation of euro 11,402,000 attributable entirely to embedded derivative instruments relating to Banca Carige s convertible bond issue performed in 2003; 1 Reconciliation statements, requested by IFRS 1, published and audited by Deloitte & Touche, can t be modified. Therefore, the net equity at 1 st January 2005 (FTA) is unchanged. 2 The Group s holding in the Bank of Italy of euro 547,465,000 is divided between four banks in the following way: Banca Carige: euro 539,216,000; C.R. Savona: euro 3,939,000; C.R. Carrara: euro 4,239,000; Banca del Monte di Lucca: euro 71,

253 - Reserves (shareholders equity caption 170): negative variation of euro 150,077,000 offsetting a positive variation of euro 10,277,000 relating to adjustments to profit attributable to the Group for the year The most substantial negative component is represented by value adjustments to short-term loans granted by the Group s banks; - Equity attributable to third parties (shareholders equity caption 210): negative variation of euro 11,295,000 due entirely to the valuation of purchase agreements entered into by the Group for the purchase at an established price of equity securities issued by the Group s banks (negative variation of euro 18,859,000). Below are provided the most significant differences in results stated under IFRS at 1/1/2005 and Italian GAAP at 31/12/2004. FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING In accordance with IFRS, financial assets and liabilities classified in this category are fair valued through profit or loss. Gains or losses arising from changes in fair value are included directly in the income statement. First time application effects are recognised at a specific reserve at equity. The Group has classified in this category debt securities, equity securities and derivatives held for trading with either a positive or negative value. Debt securities include previously recognised bonds held for trading, whilst equity securities include the share portfolio and mutual fund quotas. The adoption of fair value generated a positive pretax gain in comparison to that recorded at 31/12/2004 under Italian GAAP (quoted securities measured at average market price recorded in December) of euro14,140,000 and one of euro 8,868,000 after tax. Debt and equity securities Derivatives recorded in assets IAS VARIATION Pre-tax After-tax 40,305 25,287 83,166 52,170 Derivatives recorded in liabilities -109,331-68,589 Total 14,140 8,868 Allocations of the after-tax figure with a resulting positive effect to captions balances were as follows: - Caption 170 Shareholders Equity reserve: euro 8,666,000; - Caption 210 Equity attributable to third parties: euro 126,000 An allocation of euro 76,000 decreased the balance of Caption 130 Intangible assets- Goodwill. FINANCIAL ASSETS AVAILABLE FOR SALE Available for sale investments under IFRS are recognised at fair value and recorded at a specific reserve of equity until sale when the cumulative gain or loss is transferred to the income statement. The Group has classified in this category residual debt securities previously recognised as investment securities and minority interests including the Group s holdings in the Bank of Italy. The adoption of fair value generated a pre-tax gain in comparison to that at 31/12/2004 under Italian GAAP (valuation at cost) of euro 536,387 and one of euro 542,361 after tax. The gain deriving form the valuation of investments in the Bank of Italy amounted to euro 547,465 and is exempt from tax pursuant to the provisions contained in article 87 of the Consolidated Tax Law. Details are given in the table below. IAS variation Pre-tax After-tax Bank of Italy 547, ,465 Others - 11,078-5,104 Total 536, ,361 Overall net gains are allocated to captions 140 and 210 in the following way: Caption 140: Shareholders Equity Valuation Reserve: euro 541,726,

254 Caption 210: Equity attributable to third parties: euro 635, Recognition of the Group s holding in Bank of Italy at fair value was undertaken on the basis of the equity method as at 31 st December Shareholders equity of the Bank of Italy is calculated as follows (amounts are expressed in millions of euros): Share Capital 0.1 Reserves (net of quota to 13,620.5 be distributed) Profit for the period 20.9 destined to reserves Total 13,641.5 Bank of Italy share capital is made up by 300,000 quotas. Consequently, the unitary value of the quota is euro 45,472 in comparison with a nominal value of euro 0.52 and an average overall book value at 31 st December 2004 of euro for the Group s four banks (Banca Carige, C.R. Savona, C.R. Carrara, Banca del Monte di Lucca) with holdings in the Bank of Italy. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS A financial asset or liability in this category is designated so by the Group under the fair value option. This category refers exclusively to insurance or investment contracts issued by the Group insurance subsidiary Carige Vita Nuova, in which investment risk is transferred to policy holders pursuant to article 30, Legislative decree, 174/95 and Legislative decree 173/97. The contracts in questions are unit linked and index linked policies. Liabilities relating to these contracts are also recognised at fair value. 3 The Legislative Decree 206/2005, converted in Law 248/2005, modified the net gains taxation in conformity with the article 87 of TUIR, replacing the total allowance with an allowance limited to 91% until to 31 th December 2006 and to 84% from 1 st January Therefore, at the end of the year 2005, debt deferred taxes were charged to the AFS Reserve, insofar of 33% of 16% of accumulated net gain at 31 th December 2005 for a total amount of 29,412,000. First time application of IFRS had no impact on shareholders equity. FINANCIAL ASSETS HELD TO MATURITY Held to maturity investments are debt securities with fixed or determinable payments that the Group s management has the intention and ability to hold to maturity. The Group has classified in this category exclusively ANIA securities held by the Group s insurance subsidiaries for an overall amount of euro 2,907,000. This classification, with related valuation at cost, did not lead to any variation in shareholders equity. LOANS AND SECURITISATION TRANSACTIONS Loans and receivables (banks and customers) under IFRS are initially recognised at fair value including direct and incremental transaction costs. They are subsequently valued at amortised cost using the effect interest method, a method of calculating the amortised cost of a financial asset and of allocating the interest income over the relevant period. The effective interest rate is the rate that exactly discounts the expected future cash payment or receipts through the expected life of the financial instrument to the net carrying amount of the instrument. The application of the method has the effect of recognising income receivable on the asset evenly in proportion to the amount outstanding over the period to repayment. A distinction is made between performing and nonperforming loans. Under IFRS: - non-performing loans are assessed analytically in order to determine the asset s recoverable value and subsequent effective impairment; - performing loans are measured on the basis of mathematical/statistical methods that take into account the historical loss experience for loans granted to the same customer segment. These analyses provide Probability of Default and Loss Given Default figures in line with Basel 2 requirements in the area of credit valuation. The Group classifies its non-performing loans in the following categories: bad loans, watchlists or 254

255 potential credit risk loans (PCRLs), rescheduled loans, country risk loans classified as bad loans or PCRLs. Other country risk positions are classified as performing. Estimates relating to the recovery of bad loans are made on the basis of interest rates in effect at the moment in which the asset is recognised as impaired. When this is not possible, the position is evaluated on the basis of average rates for the period and business segment recorded at the moment of impairment. Recovery times for significant exposures (greater than euro 250,000) are estimated analytically, whilst other positions are measured according to the average period of time a particular loan type is categorised as a bad loan. With this in mind, the Group has defined nine loan product categories. Estimates relating to the recovery of watchlists or potential credit risk loans (PCRLs), including rescheduled loans and country risk positions categorised as watchlists, are as follows: - recoverable amounts relating to exposures greater than euro 250,000 are analysed singly; - LGD relating to all other positions is evaluated on the basis of mathematical/analytical analyses, whilst the PD parameter applied is 1 (non performing loans); - performing loans including past due positions are categorised in groups with similar risk characteristics and the PD parameter is calculated on the basis of customer segment type. Product categories are those defined by the Group s Credit Risk Management project. Total adjustments foreseen under IFRS relating to short-term credits amounted to before tax euro 175,962,000, whilst after tax to euro 117,893,000. The impact of IFRS adoption was recorded as follows: - shareholders equity caption 170 Reserves (Transitional reserve for first time adoption of IFRS foreseen by Legislative decree 38/2005): euro 112,979,000; - shareholders equity caption 210 Equity attributable to third parties : euro 3,822,000; - Intangible assets-goodwill : euro 1,092,000. The impairment allowances of the loan portfolio following the IAS/IFRS value ajustments are euro 181,811,000 before tax and euro 121,563,000 after tax. VALUE ADJUSTMENTS IMPAIRMENT ALLOWANCES BEFORE TAX AFTER TAX BAD LOANS 76,690 52,052 PCRLS 29,647 19,863 PERFORMING 68,625 45,978 LOANS TOTAL 175, ,893 GUARANTEES 5,849 3,670 TOTAL 181, ,563 As previously indicated, the securitisation of performing mortgages undertaken by Banca Carige in 2004 (EPS: Argo Mortgage 2) was recorded in the balance sheet given the fact that risks and rewards of ownership were not fully transferred. Recognition-related impact amounted to euro 55,482,000 before tax and euro 34,816 after. The net figure was recorded in equity at the transitional FTA reserve foreseen by Legislative decree 38/2005 together with allowances for impaired credits. The Group s decision not to derecognise the securitisation transaction referred to above resulted in the rerecognition of outstanding amounts (euro 826,660,000) as at 31 st December 2004 related to the assets securitised, and the recording at Amounts payable to customers of an amount corresponding to that payable to the SPE Argo Mortgage 2. HEDGE ACCOUNTING Derivatives are used substantially to hedge assets and liabilities in accordance with Italian GAAP provisions contained in Legislative decree 87/1992, and are included in assets when the fair value is positive, and liabilities when the fair value is negative. Derivatives hedging interest rate risk in the trading securities portfolio are classified as derivatives held for trading. 255

256 The Banca Carige Group applies fair value hedge accounting and cash flow hedge accounting. Fair value hedge accounting is applied to exchange and interest rate risk implicit in certain financial assets and liabilities (bonds issued, loans to customers, interbank deposits and postal bonds), whilst cash flow hedge accounting is applied to interest rate risk implicit in financial liabilities. Valuation of both hedging derivatives and hedged items generated a negative impact of euro 2,146,000, of which euro 1,820,000 relating to cash flow hedge accounting and euro 326,000 relating to fair value hedge accounting (the latter figure represents the difference between the negative value referring to hedged items (euro 15,703,000) and the positive value referring to the related hedging derivatives (euro 15,377,000). The overall net impact of euro 1,347,000 was allocated in the following way: euro 1,033,000 was recorded in equity at caption 140 Revaluation reserves ; euro 222,000 was recorded caption 170 Reserves ; euro 92,000 was recorded at caption 210 Equity attributable to third parties. The difference (euro 15,377,000) between the values of the hedged risk in the hedged items under fair value hedge accounting represents the value adjustment of the same items (increased balance sheet value of loans totalling euro 25,389,000 and of bonds of euro 41,092,000). At 1st January the Group s hedging derivatives included in assets amounted to euro 67,528,000, whilst those included in liabilities amounted to euro 49,976,000. CAPITAL INSTRUMENTS The Group classifies in this category Banca Carige s convertible bond issue of December 2003 undertaken within the confines of a share capital increase. The bond issue included an embedded call option, which gives the bondholder the option to purchase from 2006 onwards a fixed number of Carige shares in exchange for a fixed amount of bonds. Under IAS 32 this embedded derivative is classified as an equity instrument and is therefore bifurcated from the host contract (bond) and any subsequent changes in value derecognised. On first time adoption, the embedded derivative was bifurcated and reported before tax at euro 18,171,000 and after tax at euro 11,402,000. The after-tax amount was recorded in equity at caption 160 Capital instruments. SUBSIDIARIES AND ASSOCIATES Under IFRS, subsidiaries excluded from the area of consolidation are recorded in the consolidated statements at cost, whilst subsidiaries are carried at equity. On first time adoption, as the variation in the method of consolidation regarding the Group s two insurance companies (from the equity method to full consolidation) had no material effect, there was no impact on total shareholders equity. TANGIBLE ASSETS Under IFRS, tangible assets are evaluated at either cost or fair value. At first time adoption, the valuation of property can be either at fair value or deemed cost. Depreciation is provided on the depreciable amount on the basis of estimated useful life. The land component where present is bifurcated from property and no depreciation is provided, in common with long-lived assets. Previous amortisation charges are recognised at the carrying value of the asset. The Group has classified in this category land, property (operational and investment), property acquired under finance leases, plant and equipment, furniture and fittings, and works of art. On first time adoption the Group has elected to make the following choices: - all property (operational and investment) and works of art belonging to the Group s banks are stated at fair value rather than deemed cost, with a subsequent revaluation of the assets concerned; - property owned by the Group s banks, property development companies and insurance companies is evaluated on the basis of bifurcating land and real estate values calculated by recognised chartered 256

257 surveyors, with the values recorded in equity at caption 170 Reserves less accumulated depreciation; - furniture and fittings continue to be evaluated under previously adopted IFRScompliant Italian GAAP valuation criteria. The positive impacts of first time adoption relating to the three items stated above is before and after tax, respectively, euro 329,565,000 and euro 219,689,000. IAS VARIATION Before tax After tax Property 267, ,402 Works of art 29,730 29,717 Total 297, ,120 Accumulated 32,076 22,569 depreciation of land TOTAL 329, ,689 Net gains resulting from revaluations to property and works of art were allocated in the following way: - euro 183,023,000 to shareholders equity caption 140 Revaluation reserve ; - euro 5,137,000 to caption 210 Equity attributable to third parties ; - euro 8,960,000 to caption 130 Intangible assets-goodwill with a corresponding decrease to the caption balance. Previously accumulated depreciation on land following bifurcation was recorded in the following way: - euro 21,492,000 to shareholders equity caption 170 Reserves ; - euro 493,000 to caption 210 Equity attributable to third parties ; - euro 584,000 to caption 130 Intangible assets- Goodwill, with a corresponding decrease to the caption balance. At Group level, tangible assets include property held for sale by two of the Group s property companies Columbus Immobiliare and Immobiliare Carisa. Under IFRS, this property is classified as inventories and as such is evaluated at either cost or net sale value, whichever is the lower. Depreciation is not provided. First time adoption of IFRS relating to property held for sale had no impact on shareholders equity. INTANGIBLE ASSETS Under IFRS, this category includes solely those intangible assets that will generate future benefits, the cost of which can be measured in reasonable way. Assets not satisfying such criteria are recorded directly in the income statement and on first time adoption are derecognised with a subsequent negative impact on shareholders equity. In compliance with IFRS, the Group has included in this category exclusively goodwill, maintenance costs relating to rented or lease property and computer software. In addition, under IFRS, depreciation of assets with an undefined useful life is not consented, with a subsequent impact on the valuation of goodwill, which is now subject to annual impairment testing, or more frequently if deemed appropriate. Any negative difference between impaired value and balance sheet value is recorded in the income statement. On first time adoption, the Group carried out the following: - intangible assets amounting to euro 12,994,000 before tax and euro 8,596,000 after tax recognisable as such under IAS 38 were allocated to caption 170 "Reserves" (euro 8,145,000) and caption 210 "Equity attributable to third parties" (euro 73,000). The positive impact of euro 420,000 was recorded at caption 130 "Intangible assets"; - goodwill relating to acquired liabilities that have maintained their original value was reviewed for impairment. One of the effects of first time adoption on the consolidated income statement 2004 was the derecognition of accumulated depreciation charges for the period (euro 22,181,000 before tax and euro 18,155,000 after tax) relating to goodwill arising on the purchase of branches from Banco di Sicilia and Capitalia Group. 257

258 OWN SHARES Under IFRS, own shares in portfolio shall be deducted from shareholders' equity. This category relates exclusively to Banca Carige's holding of own shares, which at 31/12/2004 amounted to euro 1,301,000. The same amount is deducted from Shareholders' Equity and stated at caption 200 "Own Shares". PROVISIONS The Group has made the following provisions: - Retirement Benefit Fund; - Severance Pay Fund; - Long-service award Fund; - Litigation and legal claims Fund; - Guarantees and commitments Fund. Under IFRS, funds for employee benefits (retirement benefit, severance pay, long-service) are subject to actuarial valuation, the application of which may generate positive or negative differences in comparison to the method adopted under Italian GAAP. Independent actuarial valuation for each of the funds was performed. Supplementary pension funds established by Banca Carige, C.R Savona and C.R. Carrara, already evaluated on an annual basis by independent actuaries, were IFRS compliant. As a result, no reconciliation between figures at 31 st December 2004 under Italian GAAP 1 st January 2005 under IFRS was required. However, a negative reconciliation difference arose with regards to severance pay and long-service funds, in spite of actuarial valuations under Italian GAAP. The most substantial provisions required under first time adoption of IFRS and for the year 2004 for the Group are as follows: Variation (amounts in thousands of Euros) Before tax After tax SEVERANCE PAY 10,732 8,323 LONG-SERVICE 3,555 2,382 REWARDS TOTAL 14,287 10,705 As a result, there was a net negative variation of euro 10,705,000, of which euro 9,394,000 was recorded, with a corresponding caption decrease, at caption 170 "Reserves", euro 175,000, with a corresponding caption increase, at caption 210 "Equity attributable to third parties" and euro 1,136,000 at caption 130 "Intangible assets- Goodwill". The question of severance pay provisions is currently the subject of wide-ranging debate and the possibility of returning to previously applied Italian GAAP treatment albeit under IFRS cannot be at present excluded. Funds for litigation and outstanding legal claims as IFRS-compliant remain unchanged. At first time adoption, actuarial valuation on related obligations was not performed as the effect on consolidated single items was immaterial. The Fund for Guarantees and Commitments, which provides cover for both performing and nonperforming guarantees given, is stated at "Other liabilities". The Fund was evaluated on the basis of the same criteria applied to performing and non-performing loans. This valuation produced a negative impact before tax of euro 5,849,000 and euro 3,670,000 after tax. Which was recorded as follows: - euro 3,846,000 to shareholders' equity caption 170 "Reserves" and euro 93,000 to caption 210 "Equity attributable to third parties"; - euro 31,000 to asset caption "Intangible assets-goodwill". OTHER LIABILITIES The Group classifies in this composite category purchase commitments at a pre-established price regarding equity securities issued by C.R. Savona, Banca del Monte di Lucca and Banca Cesare Ponti and belonging to Foundations and private individuals. Under IAS 32, these commitments are recorded as liabilities, actualising the value at purchase. 258

259 First time adoption produced a negative variation (immaterial for tax purposes) in shareholders' equity amounting to euro 42,087,000, of which euro 23,228,000 was recorded at caption 170 "Reserves" and euro18,859,000 at caption 210 "Equity attributable to third parties". CARIGE GROUP - CHANGES OF GROUP SHAREHOLDERS'EQUITY 31/12/04 1/1/05 change ante IAS/IFRS IAS/IFRS REVALUATION RESERVES 8, , ,117 a) Financial assets available for sale - 541, ,127 c) Hedging cash flows - -1,033-1,033 d) Special revaluation laws 8,649 8,649 - e) Real estate - 183, , CAPITAL INSTRUMENTS - 11,402 11, RESERVES 158,038-2, , Additional paid-in capital 262, , Capital stock 1,113,327 1,113, Own shares -1,301-1, Minority interests 35,602 24,307-11, Group net income 100, ,214 10,277 SHAREHOLDERS'EQUITY 1,678,091 2,251, ,147 Thousands of Euros. 259

260 RECONCILIATION STATEMENT OF SHAREHOLDERS EQUITY AT 1 ST JANUARY 2004 ASSETS (thousands of Euros) ITALIAN GAAP TRANSITION TO IAS (1) IAS/IFRS (1) 10 -CASH AND HIGHLY LIQUID DEPOSITS 191, , FINANCIAL ASSETS HELD FOR TRADING 2,898,708-2,898, FINANCIAL ASSETS DESIGNATED AT FAIR VALUE 422, , FINANCIAL ASSETS AVAILABLE FOR SALE 620, , HELD-TO-MATURITY INVESTMENTS 3,040-3, LOANS TO BANKS 922, , LOANS TO CUSTOMERS 10,125, ,125, HEDGING DERIVATIVES 23,668-23, EQUITY INVESTMENTS 59,743 2,065 61, TECHNICAL RESERVE PROVISIONS PAYABLE BY REINSURERS 171, , TANGIBLE ASSETS 613, , , INTANGIBLE ASSETS 587,071-15, ,167 including: goodwill 549,862-2, , TAX ASSETS 167,625 4, ,644 a) currents 148, ,142 b) anticipated 19,483 4,019 23, OTHER ASSETS 1,045,115-1,045,115 TOTAL ASSETS 17,853, ,494 18,155,095 LIABILITIES AND STOCKHOLDERS' EQUITY (thousands of Euros) ITALIAN GAAP TRANSITION TO IAS (1) IAS/IFRS (1) 10 -AMOUNTS OWED TO BANKS 1,009,093-1,009, AMOUNTS OWED TO CUSTOMERS 6,816, ,816, DEBT SECURITIES IN ISSUE 5,070,542-5,070, FINANCIAL LIABILITIES HELD FOR TRADING 37,454-37, FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE 422, , HEDGING DERIVATIVES 2,720-2, TAX LIABILITIES 62, , ,874 (a) currents 59,501-59,501 (b) differed 2, , , OTHER LIABILITIES 1,092,225-1,790 1,090, RESERVE FOR TERMINATION INDEMNITIES 106,377 7, , RESERVES FOR RISKS AND CHARGES: 353,776-18, ,118 a) reserves for pensions and similar commitments 295, ,556 b) other reserves 58,699-19,137 39, TECHNICAL RESERVE PROVISIONS 1,223,193-1,223, REVALUATION RESERVES 8, , , RESERVES 162,806 17, , ADDITIONAL PAID-IN CAPITAL 255, , CAPITAL STOCK 1,113,327-1,113, MINORITY INTERESTS (+/-) 32,292 6,318 38, INCOME (LOSS) FOR THE PERIOD (+/-) 84,742-84,742 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 17,853, ,494 18,155,095 (1) Excluding IAS 32, IAS 39 and IFRS 4 260

261 RECONCILIATION STATEMENT OF SHAREHOLDERS EQUITY AT 31 ST DECEMBER 2004 ASSETS (thousands of Euros) ITALIAN GAAP TRANSITION TO IAS (1) IAS/IFRS (1) 10 -CASH AND HIGHLY LIQUID DEPOSITS 189, , FINANCIAL ASSETS HELD FOR TRADING 3,535,528-3,535, FINANCIAL ASSETS DESIGNATED AT FAIR VALUE 527, , FINANCIAL ASSETS AVAILABLE FOR SALE 597, , HELD-TO-MATURITY INVESTMENTS 2,907-2, LOANS TO BANKS 1,572,180-1,572, LOANS TO CUSTOMERS 11,405, ,405, HEDGING DERIVATIVES 23,351-23, EQUITY INVESTMENTS 65,172 1,807 66, TECHNICAL RESERVE PROVISIONS PAYABLE BY REINSURERS 180, , TANGIBLE ASSETS 677, ,565 1,006, INTANGIBLE ASSETS 674,316-1, ,073 including: goodwill 634,395 11, , TAX ASSETS 170,879 10, ,779 a) currents 132, ,242 b) anticipated 38,637 10,900 49, OTHER ASSETS 824, ,342 TOTAL ASSETS 20,445, ,731 20,786,316 LIABILITIES AND STOCKHOLDERS' EQUITY (thousands of Euros) ITALIAN GAAP TRANSITION TO IAS (1) IAS/IFRS (1) 10 -AMOUNTS OWED TO BANKS 981, , AMOUNTS OWED TO CUSTOMERS 8,362,658 2,420 8,365, DEBT SECURITIES IN ISSUE 5,900,321-5,900, FINANCIAL LIABILITIES HELD FOR TRADING 73, , FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE 527, , HEDGING DERIVATIVES 2,813-2, TAX LIABILITIES 57, , ,909 (a) currents 25,038-25,038 (b) differed 32, , , OTHER LIABILITIES 1,088,820-3,809 1,085, RESERVE FOR TERMINATION INDEMNITIES 120,621 10, , RESERVES FOR RISKS AND CHARGES: 358,742 1, ,707 a) reserves for pensions and similar commitments 319, ,812 b) other reserves 39,399 1,496 40, TECHNICAL RESERVE PROVISIONS 1,292,769-1,292, REVALUATION RESERVES 8, , , RESERVES 158,038 10, , ADDITIONAL PAID-IN CAPITAL 262, , CAPITAL STOCK 1,113,327-1,113, OWN SHARES (-) -1, , MINORITY INTERESTS (+/-) 35,602 10,751 46, INCOME (LOSS) FOR THE PERIOD (+/-) 100,936 10, ,214 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 20,445, ,731 (1) Excluding IAS 32, IAS 39 and IFRS 4 20,786,

262 RECONCILIATION STATEMENT OF THE 2004 ECONOMIC RESULTS INCOME STATEMENT (thousands of Euros) ITALIAN GAAP TRANSITION TO IAS (1) IAS/IFRS (1) 10 - INTEREST INCOME AND SIMILAR REVENUES 752, , INTEREST EXPENSES AND SIMILAR CHARGES - 291, , NET INTEREST INCOME 461, , COMMISSION INCOME 225, , COMMISSION EXPENSES - 17, , NET COMMISSIONS 208, , DIVIDENDS AND OTHER SIMILAR REVENUES 5,784-5, INCOME (LOSS) ON FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING (NET) 34,926-34, INCOME (LOSS) FROM HEDGING ACTIVITIES INCOME (LOSS) ON DISPOSAL OF: 9, ,793 a) loans b) financial assets available for sale 10,223-10, NET VALUE ADJUSTMENT ON FINANCIAL ASSETS DESIGNATED AT FAIR VALUE GROSS OPERATING INCOME 720, , NET VALUE ADJUSTMENT ON: - 142,365-20, ,939 a) loans - 142,774-20, ,348 b) financial assets available for sale d) other financial assets NET INCOME FROM FINANCIAL MANAGEMENT 577,748-20, , NET PREMIUMS 632, , NET INCOME (LOSS) FROM INSURANCE MANAGEMENT - 613, , NET RESULT FROM FINANCIAL AND INSURANCE MANAGEMENT 596,155-20, , ADMINISTRATIVE COSTS: - 485,969-6, ,906 a) staff costs - 308,850-2, ,392 b) other administrative costs - 177,119-4, , NET PROVISIONS FOR RISKS AND CHARGES ,453 1, AMORTIZATION AND DEPRECIATION OF TANGIBLE FIXED ASSETS - 16,585 1,386-17, AMORTIZATION AND DEPRECIATION OF INTANGIBLE FIXED ASSETS - 16,001-3,873-12, OTHER OPERATING EXPENSES AND REVENUES 95,757 1,313 94, OPERATING COSTS - 422,967-4, , INCOME (LOSS) FROM EQUITY INVESTMENTS 6,031 8,476 14, VALUE ADJUSTMENTS OF GOODWILL - 22,181 22, INCOME (LOSS) FROM DISPOSAL OF INVESTMENTS 1, OPERATING INCOME (LOSS) FROM ORDINARY ACTIVITIES BEFORE TAXES 158,722 5, , TAX EXPENSE (INCOME) RELATED TO PROFIT OR LOSS FROM ORDINARY ACTIVITIES - 54,554 4,866-49, INCOME (LOSS) FROM ORDINARY ACTIVITIES AFTER TAXES 104,168 9, , NET INCOME (LOSS) FOR THE PERIOD 104,168 9, , MINORITY INTERESTS 3, , NET INCOME (LOSS) FOR THE PERIOD AFTER MINORITY INTERESTS 100,936 10, ,214 (1) Excluding IAS 32, IAS 39 and IFRS 4 262

263 RECONCILIATION STATEMENT OF SHAREHOLDERS EQUITY AT 1 ST JANUARY 2005 ASSETS (thousands of Euros) ITALIAN GAAP TRANSITION TO IAS IAS/IFRS 10 -CASH AND HIGHLY LIQUID DEPOSITS 189, , FINANCIAL ASSETS HELD FOR TRADING 3,535,528 39,186 3,574, FINANCIAL ASSETS DESIGNATED AT FAIR VALUE 527, , FINANCIAL ASSETS AVAILABLE FOR SALE 597, ,387 1,133, HELD-TO-MATURITY INVESTMENTS 2,907-2, LOANS TO BANKS 1,572, ,572, LOANS TO CUSTOMERS 11,405, ,316 11,998, HEDGING DERIVATIVES 23,351 44,177 67, EQUITY INVESTMENTS 65,172 1,807 66, TECHNICAL RESERVE PROVISIONS PAYABLE BY REINSURERS 180, , TANGIBLE ASSETS 677, ,565 1,006, INTANGIBLE ASSETS 674, ,118 including: - - goodwill 634,395 12, , TAX ASSETS 170, , ,267 a) currents 132, ,242 b) anticipated 38, , , OTHER ASSETS 824,343 13, ,556 TOTAL ASSETS 20,445,585 1,693,907 22,139,492 LIABILITIES AND STOCKHOLDERS' EQUITY (thousands of Euros) ITALIAN GAAP TRANSITION TO IAS IAS/IFRS 10 -AMOUNTS OWED TO BANKS 981, , AMOUNTS OWED TO CUSTOMERS 8,362,658-3,354 8,359, DEBT SECURITIES IN ISSUE 5,900, ,530 6,671, FINANCIAL LIABILITIES HELD FOR TRADING 73, , , FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE 527, , HEDGING DERIVATIVES 2,813 47,163 49, TAX LIABILITIES 57, , ,131 (a) currents 25,038-25,038 (b) differed 32, , , OTHER LIABILITIES 1,088,820 21,572 1,110, RESERVE FOR TERMINATION INDEMNITIES 120,621 10, , RESERVES FOR RISKS AND CHARGES: 358,742 1, ,707 a) reserves for pensions and similar commitments 319, ,812 b) other reserves 39,399 1,496 40, TECHNICAL RESERVE PROVISIONS 1,292,769-7,171 1,285, REVALUATION RESERVES 8, , , CAPITAL INSTRUMENTS - 11,402 11, RESERVES 158, ,354-2, ADDITIONAL PAID-IN CAPITAL 262, , CAPITAL STOCK 1,113,327-1,113, OWN SHARES (-) -1, , MINORITY INTERESTS (+/-) 35,602-11,295 24, INCOME (LOSS) FOR THE PERIOD (+/-) 100,936 10, ,214 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 20,445,585 1,693,907 22,139,

264 SUMMARIES OF INTERNATIONAL FINANCIAL REPORTING ACCOUNTING STANDARDS INTERNATIONAL ACCOUNTING STANDARDS Homologation rules IFRS 1 First-time Adoption of International Financial Reporting Standards 707/2004 mod. 2236/ / / /2005 IFRS 2 Share-based Payment 211/2005 IFRS 3 Business Combinations 2236/2004 IFRS 4 Insurance Contracts 2236/2004 IFRS 5 Non-current Assets Held for Sale and Discontinued 2236/2004 Operations IFRS 6 Esploration and evaluation of the mineral resources 1910/2005 IAS 1 Presentation of Financial Statements 2238/2004 IAS 2 Inventories 2238/2004 IAS 7 Cash Flow Statements 1725/2003 mod. 2238/2004 IAS 8 Accounting Policies, Changes in Accounting Estimates 2238/2004 and Errors IAS 10 Events after the Balance Sheet date 2238/2004 IAS 11 Construction Contracts 1725/2003 IAS 12 Income Taxes 1725/2003 mod. 2236/ / /2005 IAS 14 Segment Reporting 1725/2003 mod. 2236/ /2004 IAS 16 Proprty, Plant and Equipment 2238/ /2005 IAS 17 Leasing 2238/2004 IAS 18 Revenues 1725/2003 mod. 2236/2004 IAS 19 Employee Benefits 1725/2003 mod. 2236/ / /2005 IAS 20 Accounting for Government Grants and Disclosure of 1725/2003 mod. 2238/2004 Government Assis IAS 21 The effects of changes in Foreign Exchange Rates 2238/2004 IAS 23 Borrowing Costs 1725/2003 mod. 2238/2004 IAS 24 Related Party Disclosures 2238/2004 IAS 26 Accounting and Reporting by Retirement Benefit Plans 1725/2003 IAS 27 Consolidated and Separate Financial Statements 2238/2004 IAS 28 Investments in Associates 2238/2004 IAS 29 Financial Reporting in Hyperinflationary Economies 1725/2003 mod. 2238/2004 IAS 30 Dislosures in the Financial Statements of Banks and 1725/2003 mod. 2238/2004 similar Financial Istitutions IAS 31 Interests in Joint Ventures 2238/2004 IAS 32 Financial Instruments: Disclosure and Presentation 2237/2004 mod. 2238/ /2005 IAS 33 Earnings per Share 2238/ /2005 IAS 34 Interim Financial Reporting 1725/2003 mod. 2236/ /2004 IAS 36 Impairment of Assets 2236/2004 mod. 2238/2004 IAS 37 Provisions, Contingent Liabilities and Contingent Assets 1725/2003 mod. 2236/ /2004 IAS 38 Intangible Assets 2236/2004 mod. 2238/ /2005 IAS 39 Financial Instruments. Recognition and Measurement 2086/2004 mod. 2236/ /2005 IAS 40 Investment Property 2238/2004 IAS 41 Agriculture 1725/2003 mod. 2236/ /

265 INTERPRETATION DOCUMENTS Homologation rules IFRIC 1 Changements in the liabilities regitered for dismantling, 2237/2004 restorations and similar liabilities IFRIC 2 Shares of the shareholders in cooperative entities and similar 1073/2005 instruments IFRIC 4 To determine if an agreement hold a leasing 1910/2005 IFRIC 5 Rights stemming from interests in funds for dismantlings, 1910/2005 restorations and environmental reclamations SIC 7 Introduction of the Euro 1725/2003 mod. 2238/2004 SIC 10 Government Assistance No specific Relation to Operating 1725/2003 Activities SIC 12 Consolidation Special Purpose Entities 1725/2003 mod. 2238/2004 SIC 13 Jointly Controlled Entities Non-monetary Contributions by 1725/2003 mod. 2238/2004 Venturers SIC 15 Operating Leases - Incentives 1725/2003 SIC 21 Income Taxes Recovery of Revalued Non-Depreciable Assets 1725/2003 mod. 2238/2004 SIC 25 Income Taxes Changes in the Tax Status of an Entity or its 1725/2003 mod. 2238/2004 Shareholders SIC 27 Evaluating the Substance of Transactions Involving the Legal 1725/2003 mod. 2238/2004 Form of a Lease SIC 29 Disclosure Service Concession Arrangements 1725/2003 SIC 31 Revenue Barter Transactions Involving Advertising Services 1725/2003 mod. 2238/2004 SIC 32 Intangible Assets Web Site Costs 1725/2003 mod. 2236/ /

266 BANCA CARIGE SpA - Cassa di Risparmio di Genova e Imperia 266

267 FINANCIAL HIGHLIGHTS Change % 31/12/05 30/9/05 31/12/04 31/12/04 12/05 12/05 (2) pro forma (1) 9/05 12/04 p.f. BALANCE SHEET (3) Total assets 18,025,874 17,805,258 16,014,217 17,359, Funding 13,696,854 13,893,044 12,941,390 13,684, Customer deposits (a) 12,517,279 12,182,710 11,811,966 12,555, * Amounts owed to customers 7,841,871 7,442,647 6,710,231 7,536, * Debt securities in issue 4,675,408 4,740,063 5,101,735 5,018, Deposits from banks 1,179,575 1,710,334 1,129,424 1,129, Other Financial Intermediation Activities (OFIA) (b) 14,904,776 14,765,913 13,640,556 13,640, Assets under management 8,093,515 7,834,622 6,977,540 6,977, Assets in custody 6,811,261 6,931,291 6,663,016 6,663, Total Financial Intermediation Activities (TFIA) (a+b) 27,422,055 26,948,623 25,452,522 26,195, Lending (4) 15,224,737 15,033,818 13,403,810 14,674, Loans to customers (4) 11,554,376 10,993,957 9,349,132 10,144, Loans to banks (4) 955, ,540 1,595,471 1,595, Financial assets (4) 2,714,453 3,162,321 2,459,207 2,935, Shareholders' equity 2,184,222 2,182,418 1,772,242 2,188, Change % 31/12/05 30/9/05 31/12/04 12/05 12/05 (1) (1) (2) 9/05 12/04 INCOME STATEMENT (3) Gross operating income 632, , , Net income from financial management 587, , , Operating income from ordinary activities before taxation 193, , , Net income 136, ,288 89, RESOURCES (5) Number of branches Number of employees 3,695 3,709 3,719 3, FINANCIAL RATIOS Operating costs /Gross operating income (8) 61.37% 53.39% 63.59% #DIV/0! Operating income from ordinary activities before taxation /Shareholders' equity 8.88% 8.54% 6.34% 0.00% ROE 6.27% 5.88% 5.08% 0.00% ROAE (6) 6.26% 5.87% 5.10% 0.00% Net income per share SOLVENCY RATIOS (7) Risk-Weighted Assets (3) 13,146,279 12,184,861 10,955,800 ###### Tier1 % of RWA 9.25% 9.80% 10.73% 10.73% Total capital % of RWA 10.90% 12.64% 13.19% 13.19% (1) Amounts calculated on the basis of IAS/IFRS, including IAS 32 and IAS 39. (2) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and IAS 39. (3) Thousands of euros. (4) Gross of value adjustments. (5) Statistics of the end of period. (6) Net income on average shareholders' equity (Return On Average Equity). (7) Risk-Weighted Assets calculated on the basis of current supervision principles. Estimates on the basis of IAS/IFRS principles: a) Risk-Weighted Assets at 31st December 2005: 12,918.3 million; b) Tier1: 9.29%; c) Total Capital Ratio: 11.00%. (8) Net of provisions for risks and charges. The 2004 value includes the extraordinary components. 267

268 BOARD OF DIRECTORS REPORT FINANCIAL INTERMEDIATION ACTIVITIES Comparison with results for 2004 are made on the basis of pro forma statements prepared in compliance with International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS), referred to in this Report collectively as IFRS, inclusive of IAS 32 and 39. Total financial intermediation activities direct and indirect deposits amounted to Euros 27,422.1 million at 31 st December 2005, an increase of 1.8 per cent over 30 th September 2005, and one of 4.7 per cent in comparison to 31 st December Direct or customer deposit balances reached Euros 12,517.3 million, similar to previous year levels, whilst indirect deposits rose 9.3 per cent to Euros 14,904.8 million. This aggregate now accounts for 54.4 per cent of TFIA (December 2004: 52.1 per cent). Wealth management now accounts for 54.3 per cent of indirect deposits (+3 per cent). TOTAL FINANCIAL INTERMEDIATION ACTIVITIES (thousands of Euros) Change % 31/12/05 30/9/05 31/12/04 31/12/04 12/05 12/05 (2) pro forma (1) 9/05 12/04 p.f. Total (A+B) 27,422,055 26,948,623 25,452,522 26,195, Direct deposits (A) 12,517,279 12,182,710 11,811,966 12,555, % Total 45.6% 45.2% 46.4% 47.9% Indirect deposits (OFIA) (B) 14,904,776 14,765,913 13,640,556 13,640, % Total 54.4% 54.8% 53.6% 52.1% - Assets under management 8,093,515 7,834,622 6,977,540 6,977, % Total 29.5% 29.1% 27.4% 26.6% % OFIA 54.3% 53.1% 51.2% 51.2% - Assets in custody 6,811,261 6,931,291 6,663,016 6,663, % Total 24.8% 25.7% 26.2% 25.4% % OFIA 45.7% 46.9% 48.8% 48.8% (1) Amounts calculated on the basis of IAS/IFRS, including IAS 32 and IAS 39. (2) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and IAS 39. Total deposits, which includes customer deposits (Euros 12,517.3 million) and amounts payable to banks (Euros 1,179.6 million), totalled Euros 13,696.9 million, little changed in comparison to 31/12/

269 FUNDING (thousands of Euros) Change % 31/12/05 30/9/05 31/12/04 31/12/04 12/05 12/05 (2) pro forma (1) 9/05 12/04 p.f. Total (A+B) 13,696,854 13,893,044 12,941,390 13,684, Direct deposits (A) 12,517,279 12,182,710 11,811,966 12,555, Amounts owed to customers 7,841,871 7,442,647 6,710,231 7,536, current accounts 6,519,284 6,062,552 6,042,514 6,042, repurchase agreements 111, , , , saving deposits 453, , , , financing 1,619 1,591 1,527 1, funds managed on behalf of third parties liabilities for non derecognised sold assets 743, , , other debts 11,620 11,038 9,291 9, Debt securities in issue 4,675,408 4,740,063 5,101,735 5,018, bonds 4,311,458 4,372,817 4,729,308 4,645, outstanding cheques 106, ,646 82,333 82, other securities 257, , , , short term deposits 7,446,381 7,027,313 7,063,650 7,063, % Total long term deposits 5,070,898 5,155,397 4,748,316 5,491, % Total Amounts owed to banks (B) 1,179,575 1,710,334 1,129,424 1,129, Deposits of central bank - 21,521 90,002 90, Current accounts for services 20,093 74,030 14,097 14, Free deposits 2,680 59, Term deposits 499, , , , Repurchase agreements 278, , , , Financing 379, , , , Others (1) Amounts calculated on the basis of IAS/IFRS, including IAS 32 and IAS 39. (2) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and IAS 39. Direct deposits were slightly down on the previous year to Euros 12,517.3 million (-0.3 per cent). The medium/long-term aggregate fell 7.7 per cent; its share of total deposits also decreased from 43.7 per cent in 2004 to 40.5 per cent. The short-term component rose 5.4 per cent, increasing its share of total deposits from 56.3 per cent at December 2004 to 59.5 per cent. Bonds in particular amounted to Euros 4,311.5 million, 7.2 per cent lower than year-end 2004 following the maturity of a tranche of the EMTN issue. Customer deposits or amounts payable to customers rose 4 per cent over twelve months thanks to a 7.9 per cent increase in current account balances (Euros 6,519.3 million), which offsets a falls in: sale and repurchase agreements (-42.7 per cent to Euros 112 million), deposit accounts (-1.6 per cent to Euros million), liabilities related to the sale of assets not derecognised from the balance sheet (-10.1 per cent to Euros million). Amounts owed to banks totalled Euros 1,179.6 million, up 4.4 per cent on the back of a 13 per cent rise in term deposits (up to Euros million), and a 29.4 per cent increase in repo agreements (up to Euros million). With regards to the geographical distribution of loans, the Bank s operating stronghold of Liguria saw its share drop from 76.3 per cent at 31/12/04 to 74.1 per cent; the central region of Latium increased its share of total deposits from 6.3 per cent to 7 per cent as did Emilia Romagna, up from 1.8 per cent in 2004 to 2.3 per cent. 269

270 DIRECT DEPOSITS (1) - GEOGRAPHICAL DISTRIBUTION (thousands of Euros) 31/12/05 30/9/05 31/12/2004 p.f. % % % Liguria 9,278, % 8,984, % 9,581, % Latium 877, % 854, % 794, % Sicily 560, % 541, % 530, % Lombardy 513, % 546, % 483, % Piedmont 385, % 381, % 364, % Emilia Romagna 292, % 274, % 229, % Apulia 178, % 175, % 173, % Sardinia 137, % 132, % 127, % Veneto 137, % 130, % 124, % Marches 75, % 71, % 65, % Umbria 29, % 24, % 26, % Tuscany 26, % 23, % 21, % Total Italy 12,491, % 12,142, % 12,523, % Abroad 25, % 39, % 31, % Total direct deposits 12,517, % 12,182, % 12,555, % By business segment, 57.5 per cent of deposit balances are held by households, 18.6 per cent by non-financial institutions and family enterprises, and 15.7 per cent by financial institutions. DIRECT DEPOSITS (1) - DISTRIBUTION BY BUSINESS SEGMENT (thousands of Euros) 31/12/05 30/9/05 31/12/04 p.f. % % % Amounts owed to customers 7,841,871 7,442,647 7,536,891 Public Administration 398, % 379, % 293, % Financial institutions 1,233, % 1,157, % 1,367, % Non-financial institutions and personal businesses 1,457, % 1,402, % 1,295, % Private social bodies 193, % 199, % 191, % Families 4,507, % 4,196, % 4,326, % Total residents 7,790, % 7,334, % 7,475, % Rest of the world 51, % 107, % 61, % Total 7,841, % 7,442, % 7,536, % Debt securities in issue 4,675,408 4,740,063 5,018,139 TOTAL 12,517,279 12,182,710 12,555,030 (1) Balance Sheet (Liabilities) captions 20 and 30. Indirect deposits totalled Euros 14,904.8 million, up 9.3 per cent in comparison to December Over twelve months, there was a 16 per cent increase in wealth management balances, thanks to robust performances across all product lines, funds in particular, and more contained expansion (+2.2 per cent) in assets in custody. At 31 st December 2005, wealth management amounted to Euros 8,093.5 million (2004: Euros 6,977.5 million). Within the aggregate, mutual funds rose by 17.5 per cent, asset management by 11.5 per cent, and bancassurance products by 20.7 per cent. Within asset management, there was a 20.4 increase in securities management solutions, whilst fund management dropped 1.4 per cent. 270

271 Assets in custody recorded a 2.2 per cent in balances at 31 st December 2005, rising to Euros 6,811.3 million. Within the aggregate, the share of Italian government stock dropped by 2.1 per cent, whereas that of other securities rose 6.4 per cent. INDIRECT DEPOSITS (thousands of Euros) Change % 31/12/05 30/9/05 31/12/04 12/05 12/05 9/05 12/04 Total (A+B) 14,904,776 14,765,913 13,640, Assets under management (A) 8,093,515 7,834,622 6,977, Mutual funds and unit trusts 4,680,375 4,590,707 3,983, Private banking 2,421,535 2,327,540 2,172, including: Security management (1) 1,546,735 1,457,200 1,285, Mutual funds management 874, , , Bancassurance products 991, , , Assets in custody (B) 6,811,261 6,931,291 6,663, Government securities 3,225,616 3,375,194 3,294, Others 3,585,645 3,556,097 3,368, (1) The figure includes the entire securities portfolio of the insurance subsidiaries. Within bancassurance, life products have a significant share: related premiums collected amounted to Euros million, of which Euros million refers to traditional policies and Euros 30.3 million to unit/index-linked policies. Non life premiums totalled Euros 5.9 million (non marine: Euros 4.8 million; motor insurance: 1.1 million). BANCASSURANCE (thousands of Euros) Change % 31/12/05 31/12/ Total premiums 220, , Life, of which: 214, , Unit/Index linked policies 30,310 63, Traditional policies 184,555 86,121 Non life, of which: 5,912 5, Car insurance products 1,134 1, Other products 4,778 4, The geographical distribution of indirect deposits is concentrated in Liguria, which accounts for 81.2 per cent of the aggregate total. By business segment, 78.6 per cent is held by households and 13 per cent by banks and financial institutions. 271

272 INDIRECT DEPOSITS - GEOGRAPHICAL DISTRIBUTION (thousands of Euros) 31/12/05 30/9/05 31/12/04 % % % Liguria 12,100, % 12,046, % 11,039, % Latium 638, % 623, % 756, % Lombardy 546, % 513, % 421, % Piedmont 493, % 493, % 438, % Sicily 427, % 418, % 374, % Emilia Romagna 242, % 222, % 198, % Veneto 126, % 125, % 110, % Apulia 118, % 113, % 102, % Marches 99, % 100, % 103, % Sardinia 53, % 52, % 40, % Umbria 29, % 29, % 29, % Tuscany 19, % 18, % 17, % Total Italy 14,897, % 14,759, % 13,633, % Abroad 7, % 6, % 7, % Total indirect deposits 14,904, % 14,765, % 13,640, % INDIRECT DEPOSITS - DISTRIBUTION BY BUSINESS SEGMENT (thousands of Euros) 31/12/05 31/12/05 31/12/04 % % % Public Administration 265, % 307, % 236, % Financial Institutions 1,933, % 1,923, % 1,686, % Non-financial institutions and personal businesses 851, % 821, % 653, % Private social bodies 103, % 95, % 92, % Families 11,717, % 11,581, % 10,750, % Total residents 14,871, % 14,728, % 13,420, % Rest of the world 33, % 37, % 220, % Total 14,904, % 14,765, % 13,640, % Loans to customers, excluding value adjustments (Euros million), amounted to Euros 11,272.5 million, an increase of 14.6 per cent in comparison to the figure recorded at the end of This expansion is substantially the result of continuing expansion in the Bank s mortgage business which, the balances of which after value adjustments, amounted to Euros 11,554.4 million (+13.9 per cent). On the basis of maturities, medium/long-term loans rose by 19.3 per cent to Euros 7,792.6 million, and now account for 67.4 per cent of the lending aggregate. Short-term credits totalled Euros 3,329.5 million, up 4.3 per cent. 272

273 LENDING (thousands of Euros) Change % 31/12/05 30/9/05 31/12/04 31/12/04 12/05 12/05 (2) pro forma (1) 9/05 12/04 p.f. Total (A+B) 12,227,921 11,590,143 10,788,819 11,431, Loans to customers (A) 11,272,526 10,717,952 9,198,087 9,840, Gross value (3) 11,554,376 10,993,957 9,349,132 10,144, Current accounts 1,450,329 1,333,875 1,424,787 1,424, Mortages 5,597,362 5,171,009 4,322,516 4,344, Leasing 694, , , , Factoring 107, ,623 90,147 90, Others 2,516,266 2,488,539 2,434,307 2,375, Non derecognised sold assets 756, , , short term loans 3,329,487 3,251,378 3,228,337 3,191, % gross value long term loans 7,792,629 7,312,694 5,698,594 6,530, % gross value Bad loans 432, , , , % gross value Allowances for loan losses (-) 281, , , , Loans to banks (B) 955, ,191 1,590,732 1,590, Gross value (3) 955, ,540 1,595,471 1,595, Compulsory reserves 130, , , , Other loans to central banks Current accounts and free deposits 234, , , , Term deposits 470, , , , Repurchase agreements 75, , , , Financing 26,683 24,190 22,738 22, Bad loans 18,162 18,179 18,298 18, % gross value Allowances for loan losses (-) 513 5,349 4,739 4, (1) Amounts calculated on the basis of IAS/IFRS, including IAS 32 and IAS 39. (2) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and IAS 39. (3) Before value adjustments. An analysis of the aggregate in greater detail shows strong performance of mortgages during 2005, which rose 28.8 per cent to Euros 5,597.4 million, accounting for almost half of total lending. Other increases includes lease contracts (up 6 per cent to Euros million), factoring (+19 per cent: Euros million), and current accounts (+1.8 per cent; 1,450.3 million). Bad loans totalled Euros million, 2.4 per cent higher than 31/12/04. The annual increase in Liguria s share of loans continued to rise at the same rate, whilst lending outside the region also continued to grow. Credits destined to Ligurian customers account for 60.4 per cent of the total lending aggregate, slightly higher than the previous year s share of 59.1 per cent. 273

274 LOANS AND ADVANCES TO CUSTOMERS - GEOGRAPHICAL DISTRIBUTION (thousands of Euros) 31/12/05 30/9/05 31/12/2004 p.f. % % % Liguria 6,977, % 6,442, % 5,993, % Lombardy 1,532, % 1,496, % 1,437, % Emilia Romagna 831, % 804, % 645, % Latium 535, % 523, % 609, % Piedmont 681, % 689, % 592, % Sicily 225, % 222, % 175, % Veneto 195, % 211, % 174, % Marches 146, % 147, % 136, % Sardinia 133, % 142, % 111, % Apulia 132, % 132, % 99, % Umbria 82, % 88, % 87, % Tuscany 36, % 39, % 37, % Total Italy 11,511, % 10,941, % 10,102, % Abroad 43, % 52, % 41, % Total 11,554, % 10,993, % 10,144, % By business segment, 58 per cent of the aggregate total is destined to family enterprises and non financial firms, followed by families (30.5 per cent), and the public administration (6.4 per cent). The most prominent sectors include other services destined for sale (14.8 per cent of the aggregate total), trade and repair services (10.3 per cent), and the building and public works sector (9.1 per cent). LOANS AND ADVANCES TO CUSTOMERS - DISTRIBUTION BY BUSINESS SEGMENT (Thousands of Euros) 31/12/05 30/9/05 31/12/04 p.f. % % % Public Administration 734, % 892, % 951, % Financial institutions 462, % 443, % 325, % Non-financial institutions and personal businesses 6,708, % 6,337, % 5,755, % Sales-related services 1,706, % 1,548, % 1,358, % Wholesale & retail trade, salvage and repairs 1,193, % 1,120, % 1,038, % Building and Public Works 1,055, % 955, % 855, % Air and sea transport- related services 381, % 354, % 332, % Hotel and catering services 310, % 290, % 275, % Other 2,060, % 2,068, % 1,895, % Private social bodies 64, % 64, % 47, % Families 3,524, % 3,213, % 2,793, % Total residents 11,494, % 10,950, % 9,872, % Rest of the world 59, % 43, % 271, % Total 11,554, % 10,993, % 10,144, % Lending to banks, before value adjustments (Euros 513,000) reached Euros million, 39.9 per cent lower than in comparison to December The fall affected all credit components with the exception of financing, which rose 17.3 per cent to Euros 26.7 million. In detail, compulsory reserve balances fell by 10.3 per cent to Euros million; there were other falls in current and sight accounts (-25.1 per cent to Euros million), term deposits (-46.3 per cent to Euros million) and repos (-65.6 per cent to Euros 75.7 million) Non performing amounts, remaining at limited levels, fell by 0.7 per cent to Euros 18.2 million. The interbank balance (difference between amounts receivable and payable) ended the year with a total amount payable of Euros

275 million in comparison to the previous year s result of Euros million receivable. Impaired credits, excluding past due positions categorised as performing credits up to the end of the third quarter 2005, amounted to Euros million, up 1.7 per cent in comparison to Despite a 2.3 per cent increase in bad loans to Euros 9.9 million, watchlist, rescheduled and country risk positions remained substantially unchanged (-0.1 per cent) at Euros million. Impairment charges for the period, excluding exposures at maturity, represent 38.4 per cent of impaired credits, lower than the previous December s figure of 43.2 per cent. Value adjustments overall amount to Euros million, 8.5 per cent lower than at 31/12/04. Out of this total, Euros million refers to impaired credits and Euros 47.2 million to performing credits accounted for on the basis of IAS-compliant valuation techniques. Within the impaired credits aggregate, bad loans amounted to Euros million at 31/12/05, 2.3 per cent higher than in The increase is attributable exclusively to customer lending, which totalled Euros million (+2.4 per cent), following the transfer of certain watchlist positions to this category. Related impairment charges represent 45 per cent of the aggregate total (2004: 48.4 per cent). The bad loans:customer lending ratio improved from 4.2 per cent in December 2004 to 3.7 per cent. Watchlist, rescheduled loans and country risk positions amounted to Euros million, similar to previous year levels. Almost all the aggregate refers to customer lending (Euros million). Impairment charges represent 17.1 per cent of the aggregate in comparison to 27.2 per cent in

276 CREDIT QUALITY (thousands of Euros) 31/12/05 30/9/05 Gross Specific Net book % Gross Specific Net book % value allowances value value allowances value (a) (b) (a-b) b/a (a) (b) (a-b) b/a Bad loans 450, , , , , , banks 18,162-18, ,179 4,836 13, customers 432, , , , , , Watchlists, rescheduled loans and country risk 139,755 23, , ,007 25, , banks customers 138,791 23, , ,375 24, , Past due 177,938 8, , banks customers 177,735 8, , Total impaired loans 768, , , , , , banks 19, , ,811 5,349 13, customers 748, , , , , , Performing loans 11,742,169 47,176 11,694, ,294,426 55,834 11,238, banks 936, , , , customers 10,805,590 47,176 10,758, ,435,697 55,834 10,379, Total loans and advances 12,510, ,363 12,227, ,871, ,354 11,590, banks 955, , ,540 5, , customers 11,554, ,850 11,272, ,993, ,005 10,717, /12/04 (2) 31/12/04 pro forma (1) Gross Specific Net book % Gross Specific Net book % value allowances value value allowances value (a) (b) (a-b) b/a (a) (b) (a-b) b/a Bad loans 440, , , , , , banks 18,298 4,226 14, ,298 4,263 14, customers 422, , , , , , Watchlists, rescheduled loans and country Risk 139,938 12, , ,938 37, , banks customers 139,235 12, , ,235 37, , Total impaired loans 580, , , , , , banks 19,001 4,739 14, ,001 4,776 14, customers 561, , , , , , Performing loans 10,364, ,363, ,159,276 57,426 11,101, banks 1,576,470-1,576, ,576,470-1,576, customers 8,787, ,787, ,582,806 57,426 9,525, Total loans and advances 10,944, ,784 10,788, ,739, ,431 11,431, banks 1,595,471 4,739 1,590, ,595,471 4,776 1,590, customers 9,349, ,045 9,198, ,144, ,655 9,840, (1) Including IAS 32 and 39. (2) Excluding IAS 32 and 39. (3) A Settembre 2005 gestiti nell'ambito dei crediti in bonis. Non performing loans are concentrated in Carige s traditional operating area of Liguria, although the region s share fell from 69.5 per cent in 2004 to 66.9 per cent. There were increases in the shares of other regions: Piedmont (from 9.2 per cent to 9.6 per cent); Lombardy (from 7.2 per cent o 8.4 per cent); Latium (from 1.4 per cent to 2.8 per cent); Veneto (from 1.4 per cent to 1.6 per cent); Marches (from 0.2 per cent to 0.8 per cent). 276

277 BAD LOANS (1) -GEOGRAPHICAL DISTRIBUTION (thousands of Euros) 31/12/05 30/9/05 31/12/2004 p.f. % % % Liguria 289, % 291, % 293, % Piedmont 41, % 40, % 38, % Lombardy 36, % 33, % 30, % Emilia Romagna 22, % 24, % 27, % Latium 12, % 11, % 5, % Sicily 9, % 9, % 8, % Veneto 6, % 6, % 5, % Apulia 3, % 3, % 3, % Marches 3, % 3, % 1, % Umbria 2, % 2, % 2, % Tuscany 1, % 1, % 2, % Sardinia % % % Total Italy 430, % 428, % 419, % Abroad 1, % 1, % 2, % Total 432, % 429, % 422, % (1) Inclusive of expected losses.. The Bank s bad loans: lending ratio improved in comparison to 2004 to 3.7 per cent. This fall in the ratio was greater in those regions with the highest ratio, particularly in Tuscany, where the ratio fell from 7.4 per cent in December 2004 to 4.8 per cent in December BAD LOANS/LENDING (1) - GEOGRAPHICAL DISTRIBUTION (%) 31/12/05 30/9/05 31/12/04 p.f. Piedmont 6.1% 5.9% 6.5% Tuscany 4.8% 3.5% 7.4% Sicily 4.0% 4.1% 5.0% Veneto 3.6% 2.9% 3.3% Liguria 4.1% 4.5% 4.9% Umbria 3.3% 3.1% 2.4% Apulia 2.9% 2.8% 3.6% Emilia Romagna 2.8% 3.1% 4.3% Marches 2.3% 2.1% 0.7% Lombardy 2.4% 2.2% 2.1% Latium 2.3% 2.2% 0.9% Sardinia 0.7% 0.5% 0.2% Total Italy 3.7% 3.9% 4.2% Abroad 3.5% 3.3% 5.3% Total 3.7% 3.9% 4.2% (1) Inclusive of expected losses. 277

278 The business segment with the highest concentration of bad loans continues to be non financial firms and family enterprises (slightly higher from 81 per cent to 82 per cent); there were no major changes in the shares of other sectors in comparison to Within this segment, sea and air transport services, and building and public works remain those sectors with the highest levels of credit risk. BAD LOANS (1) - DISTRIBUTION BY BUSINESS SEGMENT (thousands of Euros) 31/12/05 30/9/05 31/12/2004 % % % Public Administration Financial institutions 10, % 10, % 10, % Non-financial institutions and personal businesses 354, % 355, % 342, % Air and sea transport-related services 81, % 87, % 85, % Building and public works 79, % 80, % 66, % Wholesale & retail trade, salvage and repairs 57, % 55, % 56, % Sales-related services 43, % 44, % 42, % Metal products 13, % 13, % 10, % Other 79, % 75, % 81, % Private social bodies % % 1, % Families 62, % 58, % 61, % Total residents 427, % 425, % 415, % Rest of the world 4, % 4, % 6, % Total 432, % 429, % 422, % (1) Inclusive of expected losses. There were falls in the bad loans/lending ratio across all sectors, with the exception of the item rest of the world, which rose from 2.4 per cent to 7.3 per cent. Sea and air transport services, and building and public works are the sectors most at risk. BAD LOANS/LENDING RATIO (1) - DISTRIBUTION BY BUSINESS SEGMENT Public Administration 0.0% 0.0% 0.0% Financial institutions 2.2% 2.4% 3.2% Non-financial institutions and personal businesses 5.3% 5.6% 5.9% Sales-related services 2.5% 2.9% 3.1% Wholesale & retail trade, salvage and repairs 4.8% 4.9% 5.4% Building and public works 7.5% 8.4% 7.8% Air and sea transport-related services 21.4% 24.8% 25.7% Hotel and catering services 3.2% 3.3% 3.6% Other 4.0% 3.8% 4.3% Private social bodies 1.1% 1.2% 2.3% Families 1.8% 1.8% 2.2% Total residents 3.7% 3.9% 4.2% Rest of the world 7.3% 10.2% 2.4% Total 3.7% 3.9% 4.2% (1) Inclusive of expected loss. 31/12/05 30/9/05 31/12/2004 The Bank s securities portfolio amounted to Euros 2,714.5 million, down 7.5 per cent over 2004 following a 24 per cent reduction (to Euros 1,409.2 million), particularly noticeable during the third quarter, in debt securities, and quotas in collective investment schemes (-33 per cent to Euros million). This negative variation was mostly the result of the transfer of own securities from Carige s reserved funds of the Carige Forziere line to other more profitable investment solutions. Capital securities rose to Euros 1,008.8 million (+58.2 per cent), of which Euros million are held for trading, whilst Euros million refer to available for sale securities. Within available for sale equities, Carige s holding in the Bank of Italy (Euros million) is recognised at fair value, utilising as a proxy of 278

279 fair value the book value of the holding as reported in the financial statement of the Bank of Italy as at 31 st December Banca Carige as at 31 st December 2005 had no held to maturity securities (HTM). FINANCIAL INSTRUMENTS (thousands of Euros) Change % 31/12/05 30/9/05 31/12/04 31/12/04 12/05 12/05 (2) pro forma (1) 9/05 12/04 p.f. Debt securities 1,409,201 1,906,759 1,913,795 1,855, Held for trading 1,255,623 1,742,931 1,748,815 1,689, Available for sale 153, , , , Held to maturity Equity securities 1,008, , , , Held for trading 385, ,497 82,178 85, Available for sale (3) 622, ,580 22, , Held to maturity Shares in collective investment schemes 296, , , , Held for trading 296, , , , Available for sale Held to maturity Total 2,714,453 3,162,321 2,459,207 2,935, Held for trading 1,938,034 2,386,913 2,272,186 2,217, Available for sale (3) 776, , , , Held to maturity (1) Amounts calculated on the basis of IAS/IFRS, including IAS 32 and IAS 39. (2) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and IAS 39. (3) Of which 549,109 thousands of Euros recognised at fair value, using net equity as proxy for fair value on the basis of Bank of Italy statements as at 31/12/04. See "Explanatory Notes", "Part B", "Balance Sheet - Assets - Section 4" ("Available for sale"), table 4.2. With regards Banca Carige s derivatives portfolio, the notional value of derivatives increased by 9.7 per cent to Euros 7,797.1 million. The notional value of derivatives used to hedge risk exposures fell from Euros million at 31/12/04 to Euros 94.7 million at 31/12/05. The difference between assets and liabilities hedged saw a fall in the former to Euros 55 million (down 10.9 per cent in annual terms) and a fall in the latter to Euros 39.7 million (December 2004: per cent). DERIVATIVE ASSETS BY HEDGING TYPE (thousands of Euros) Change % 31/12/05 30/9/05 31/12/04 31/12/04 12/05 12/05 (2) pro forma (1) 9/05 12/04 p.f. Derivatives held for risk management of assets Fair value hedges interest rate Derivatives held for risk management of liabilities 54,965 66,491 20,885 61, Fair value hedges 54,104 65,435 17,970 60, interest rate 54,104 65,435 17,347 60, other risks Cash flow hedges 861 1,056 2,915 1, expected transactions 861 1,056 2,915 1, Total 54,985 66,506 20,885 61, (1) Amounts calculated on the basis of IAS/IFRS, including IAS 32 and IAS 39. (2) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and IAS

280 DERIVATIVE LIABILITIES BY HEDGING TYPE (thousands of Euros) Change % 31/12/05 30/9/05 31/12/04 31/12/04 12/05 12/05 (2) pro forma (1) 9/05 12/04 p.f. Derivatives held for risk management of assets 23,046 30, , Fair value hedges 23,046 30, , interest rate 23,046 30, , Derivatives held for risk management of liabilities 16,651 15,022 2,611 24, Fair value hedges 16,651 15,022 2,611 24, interest rate 5,255 5,095 2,611 8, other risks 11,396 9,927-15, Total 39,697 45,178 2,750 48, (1) Amounts calculated on the basis of IAS/IFRS, including IAS 32 and IAS 39. (2) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and IAS 39. TRADING DERIVATIVES (thousands of Euros) Change % 31/12/05 30/09/05 31/12/04 31/12/04 12/05 12/05 (2) pro forma (1) 9/05 12/04 p.f. Positive fair values 91, ,545 86, , Financial derivatives 90, ,124 84, , term contracts 12,183 52,643 9,621 79, swaps 23,904 32,895 30,066 31, options purchased 54,813 54,586 45,166 45, Credit derivatives 493 1,421 2,028 2, tror ,947 1, cds Negative fair values 151, ,440 94, , Financial derivatives 149, ,448 93, , term contracts 12,183 3,602 5,911 5,911 swaps 113, ,763 62, , options purchased 24,499 36,083 24,558 25, Credit derivatives 1, ,632 2, cds 1, ,632 2, TOTAL 242, , , , (1) Amounts calculated on the basis of IAS/IFRS, including IAS 32 and IAS 39. (2) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and IAS

281 NOTIONAL VALUE OF DERIVATIVE CONTRACTS (thousands of Euros) Change % 31/12/05 31/12/04 12/05 12/04 Financial derivatives 7,661,876 6,925, futures - 33, term contracts 1,084,832 - forward rate agreements 20,000 - swaps 4,382,555 5,366, options 2,174,489 1,526, Credit derivatives 135, , trar 51,744 - cds 83,477 - TOTAL 7,797,097 7,110, hedging 2,713,960 3,596, trading 5,083,137 3,514,

282 ECONOMIC RESULTS INCOME STATEMENT (thousands of Euros) Variaz. 2005/ /9/ assoluta % (1) 10 Interest income and similar revenues 735, , , , Interest expenses and similar charges - 382, , , , NET INTEREST INCOME 353, , ,333 11, Commission income 232, , ,354 47, Commission expenses - 43,691-13,771-18,026-25, NET COMMISSIONS 188, , ,328 21, Dividends and other similar revenues 49,025 46,643 34,409 14, Income (loss) on financial assets and liabilities held for trading (net) 45,337 40,636 18,119 27, Income (loss) from hedging activities - 1, , Income (loss) on disposal of: - 2,978 1,067 10,084-13,062 a) loans 2,075 1, ,106 b) financial assets available for sale ,115-10,122 d) financial liabilities - 5, , Net value adjustment on financial assets designated at fair value GROSS OPERATING INCOME 632, , ,483 59, Net value adjustment on: - 44,336-41, , , a) loans - 42,969-38, , , d) other financial assets - 1,367-2, , NET INCOME FROM FINANCIAL MANAGEMENT 587, , , , Administrative costs: - 413, , ,451-29, a) staff costs - 257, , ,069-15, b) other administrative costs - 155, , ,382-13, Net provisions for risks and charges - 5,677-3, , Amortization and depreciation of tangible fixed assets - 10,260-7,423-10, Amortization and depreciation of intangible fixed assets - 7,270-6,574-7, Other operating expenses and revenues 43,305 35,329 96,296-52, OPERATING COSTS - 393, , ,579-88, Income (loss) from equity investments Income (loss) from disposal of investments OPERATING INCOME (LOSS) FROM ORDINARY ACTIVITIES BEFORE TAXES 193, , ,395 81, Tax expenses (income) related to profit or loss from ordinary activities - 57,074-58,169-22,426-34, INCOME (LOSS) FROM ORDINARY ACTIVITIES AFTER TAXES 136, ,288 89,969 46, NET INCOME (LOSS) FOR THE PERIOD 136, ,288 89,969 46, (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and

283 Banca Carige opted to apply IAS 32 (financial instruments: disclosure and presentation) and 39 (financial instruments: recognition and measurement) for the first time for the purpose of preparing financial statements for the year ending 31 st December The income statement for the year ending 31 st December 2004 was prepared in accordance with IAS/IFRS with the exception of IAS 32 and IAS 39. Consequently, income statement comparatives relating to net interest income and value adjustments are not homogenous. Net profit for 2005 rose 52.2 per cent to Euros million. Results for the year are in line with those set by the Bank s Strategic Plan for Net interest income amounted to Euros million, an increase of 3.3 per cent in comparison to December 2004 thanks to an increase in volumes handled, which more than offset the narrowing of interest rate margins recorded during the year. Although in absolute terms the rise of interest income was higher than that of income expenses, the percentage variation of the former was 22.9 per cent and the latter 49.1 per cent. In detail, interest income amounted to Euros million; interest income generated on lending to customers rose from Euros to Euros 470 million (+4.4 per cent), whilst interest on held for trading financial securities increased by 68.9 per cent to Euros million. Interest income on non derecognised sold financial assets relating to the securitisation of performing mortgages carried out by Banca Carige in 2004 (SPE: Argo Mortgage 2), recorded under the provisions of first-time adoption, totalled Euros 42.6 million. The performance of interest income was impacted by management decisions relating to the own securities portfolio: at the end of 2004 a significant amount of bonds in portfolio was sold and the proceeds utilised in the subscription of dedicated mutual funds of the Carige Forziere line, the returns on which are in the form of dividends. Interest charges for the year totalled Euros 382 million, an increase of 49.1 per cent over Amounts owed to customers rose 13.6 per cent from Euros 43.5 to Euros 49.4 million, whilst there was a fall in interest payable on bonds in issue of 2.5 per cent to Euros million. Subordinated liabilities, however, rose 20.9 per cent to Euros 18.3 million. Financial losses on sold nonderecognised financial assets (securitisation of performing mortgages, Argo Mortgage 2) amounted to Euros 32.8 million. INTEREST INCOME (thousands of Euros) Change 2005/ /9/ (1) absolute % Loans and advances to customers 470, , ,222 19, Deposits with banks 27,427 20,609 28, Financial assets held for trading 191, , ,235 77, Financial assets available for sale 3,517 7,057 5,696-2, Interests related to sold financial assets not written off 42,609 32,505-42,609 Other interest income , TOTAL INTEREST INCOME 735, , , , (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and

284 INTEREST EXPENSES (thousands of Euros) Change 2005/ /9/ (1) absolute % Deposits from customers 49,394 35,287 43,488 5, Deposits from banks 38,406 28,038 25,342 13, Debt securities in issue 119,891 93, ,964-3, Subordinated liabilities 18,341 13,475 15,173 3, Hedging derivatives 120,100 82,485 48,580 71,520 Financial liabilities designated at fair value 1, ,351 Interests related to sold financial assets not written off 32,809 24,872-32,809 Other interest expenses 1,745 1, ,123 TOTAL INTEREST EXPENSES 382, , , , (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and 39. Net fee and commission income rose 12.8 per cent to Euros million. Commission income rose by 25.4 per cent to Euros million as a result of expansion across the aggregate as a whole: management, intermediation and consultancy increased by 42.4 per cent to Euros 97.4 million, collection and payment commissions by 18 per cent to Euros 45.1 million, and other services by 10.9 per cent to Euros 75.4 million. In detail, the rise in management, intermediation and consultancy commissions was due to increases in: - financial securities trading from Euros 1.5 million to Euros 16.5 million, principally stemming from the valuation of a derivative correlated to an Italian Post Office ( Poste Italiane ) placement. With regards to this figure, commission expenses of the same amount relating to the placement of financial securities were recorded. Excluding this figure, commission income on financial securities intermediation amounted to Euros 1.6 million, up 5.3 per cent over 2004; - placing of securities (up 12.2 per cent to Euros 43.4 million) as a result of increased commission revenues generated by the placement of CIS (+5.1 per cent to Euros 40.2 million) and securities (from Euros 0.4 million to Euros 3.2 million); - the distribution of third-party services (+72.4 per cent to Euros 14.1 million) following a 34.5 per cent increase in the distribution of insurance services to Euros 4.9 million, and growth in the distribution of other products, from Euros 4.5 million to Euros 9.1 million. Commission expenses rose from Euros 18 million to Euros 43.7 million as a result of expansion in management and intermediation (from Euros 4.4 to Euros 20.8 million), collection and payment (from Euros 9 to Euros 14.7 million), and other (from Euros 3.9 millionto Euros 7.4 million) services. Expansion in management and intermediation services follows increases in securities placements (from Euros 38,000 to Euros 15.2 million) principally linked to commission expenses assignable to the Poste Italiane bond placement mentioned above. 284

285 COMMISSION INCOME (thousands of Euros) Change 2005/ /9/ (1) absolute % Guarantees given 11,169 5,596 7,393 3, Management, dealing and consultancy services: 97,415 56,025 68,416 28, Securities dealing 16,510 1,194 1,493 15, Foreign currency dealing 2,844 2,109 2, Private banking 8,085 5,951 7, Custody and administration of securities 2,451 1,846 2, Depositary bank 4,275 3,133 2,670 1, Placement of securities 43,362 30,821 38,650 4, Acceptance of orders 5,833 4,289 4,656 1, Distribution of third party products 14,055 6,682 8,152 5, insurance products 4,919 2,996 3,656 1, other products 9,136 3,686 4,496 4,640 Collection and payment services 45,088 28,892 38,221 6, Servicing relating to securitisation 2,128 1,561 2, Servicing relating to factoring 1, , Other services 75,391 54,947 67,977 7, TOTAL COMMISSION INCOME 232, , ,354 47, (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and 39. COMMISSION EXPENSES (thousands of Euros) Change 2005/ /9/ (1) absolute % Guarantees given Management, dealing and consultancy services: 20,822 3,895 4,434 16, Securities dealing , Private banking 2,739 1,883 1,700 1, Custody and administration of securities 1,916 1,255 1, Placement of securities 15, , Securities, products and services not delivered at Collection and payment services 14,683 7,279 9,021 5, Other services 7,433 2,077 3,573 3,860 TOTAL COMMISSION EXPENSES 43,691 13,771 18,026 25,665 (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and 39. Dividends and similar revenues rose 42.5 per cent from Euros 34.4 to Euros 49 million, mainly thanks to higher dividends collected by C.R. Carrara (dividends distributed from the general banking risk fund) and dividends on funds belonging to the Forziere line. Banca Carige s net trading income increased by Euros 27.2 million from Euros 18.1 to Euros 45.3 million. The Bank s net hedging result slipped from a profit of Euros 210,000 at December 2004 to a loss of Euros 1.4 million. 285

286 TRADING RESULT (thousands of Euros) Change 2005/ /9/ (1) absolute % Debt securities - 83,523 3,717 16, ,397 Equity securities and mutual funds 33,582 23,192 13,248 20,334 Debt securities, equity securities and mutual funds - 49,941 26,909 30,122-80,063 Financial derivatives 88,597 10,002-15, ,620 Credit derivatives 1,648 1, ,262 Change differences 2,799 1,763 2, Other assets/liabilities held for trading 2, ,234 TRADING RESULT 45,337 40,636 18,119 27,218 (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and 39. Losses on sale and repurchase agreements including lending and securities amounted to Euros 3 million in comparison to the previous yearend gain of Euros 10.1 million. This result stems from losses on securities of Euros 5 million, which were only partially offset by gains on transactions relating to lending of Euros 2.1 million. Operating income amounted to Euros million at 31 st December 2005, up 10.4 per cent in comparison to the previous year. Impairment loss on loans and advances and other credit risk provisions fell 71.3 per cent in annual terms to Euros 44.3 million as a result of the substantial writedowns carried out in the wake of the collapse of the Genoa-based cruise operator Festival during the first half of NET IMPAIRMENT CHARGES ON CASH CREDITS AND GUARANTEES (thousands of Euros) Change 2005/ /9/ (1) absolute % Loans to customers 42,969 38, , , Guarantees 1,367 2, ,425 NET IMPAIRMENT CHARGES ON CREDITS 44,336 41, , , (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and 39. Operating expenses totalled Euros million, up 28.8 per cent over December Administrative costs totalled Euros million, up 7.6 per cent and include staff costs, which rose by 6.6 per cent to Euros 258 million. This rise was due to staff pay increases back-dated to 2004; other administrative expenses rose 9.4 per cent to Euros million following strategically essential IT&C investments. General costs amounted to Euros million, an increase of 4.5 per cent. Indirect tax charges increased by 29.7 per cent to Euros 36.1 million. Net provisions for risks and charges amounted to Euros 5.7 million (December 2004: Euros +0.7 million) due to increased provisions for legal costs. Net adjustments to tangible assets increased by 0.4 per cent to Euros 10.3 million, whilst net adjustments to intangible assets fell by 7.6 per cent Euros 7.3 million. Under IAS/IFRS, assets are no longer amortised over indefinite expected 286

287 economic life. Consequently, net adjustments to intangible assets do not include goodwill arising on the acquisition of bank branches from Banco di Sicilia, Gruppo Intesa and Gruppo Capitalia. The original value was confirmed by impairment tests performed at first-time adoption and for the year ending 31 st December Details are provided in the section First-Time Adoption of International Financial Reporting Standards (IFRS) Other operating income fell 55 per cent to Euros 43.3 million. The previous year benefited from the non-routine contribution of Euros 61.1 million deriving from the securitisation of performing mortgages. OTHER OPERATING REVENUES AND CHARGES (thousands of Euros) Change 31/12/05-31/12/ (1) assoluta % Rent 3,281 Amounts payable by from third parties 32,114 taxes recovered 30,815 customers insurance premiums 1,299 Organization charges 322 Other revenues 14,480 Management charges on finance leases - 2,370 Routine maintenance charges on investment property Amortisation of expenses relating to improvements carried out on third-party properties - 1,537 Other charges - 2,665 TOTALE NET REVENUES 43,305 96,296-52, (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and 39. OPERATING COSTS (thousands of Euros) Variaz. 2005/ /9/ (1) assoluta % Staff costs 257, , ,069 15, Administrative costs 155, , ,382 13, general costs 129,036 78, ,382-13, indirect tax charges 26,748 27,862-26,748 Net provisions for risks and charges 3,467 3, ,134 Amortizations on: 14,693 13,997 18,091-3, intangible fixed assets 7,270 6,574 7, tangible fixed assets 7,423 7,423 10,223-2, Other operating expenses and revenues - 43,305-35,329-96,296 52, TOTAL OPERATING COSTS 388, , ,579 83, (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and 39. Pre-tax Operating income at 31/12/05 reached Euros 194 million, 72.6 per cent higher than the previous year s result. After tax (December 2005: Euros 57.1 million) net profit amounted to Euros million, up 52.2 per cent per cent over December 2004 s figure of Euros 90 million. Earnings per share totalled Euros On the basis of a net profit for the year ending 31 st December 2005 of Euros 136,898, and taking into account the balance of the reserve for dividends on own shares of Euros 105, the following distribution is proposed: 287

288 DISTRIBUTION OF NET PROFIT Net profit 136,898, Reserve for dividends on own shares 105, Total 137,004, Legal reserve 13,689, Extraordinary reserve 35,318, Ordinary share dividend pay out (euro per share) 73,420, Savings share dividend pay out (euro per share) 14,575, Distribution of net profit takes into account the conversion into ordinary shares of 19,045,445 bonds relating to the issue Banca Carige 1.50 per cent hybrid subordinated issue with reimbursement convertible into ordinary shares, presented for conversion from 26 th January 2006 onwards. Ordinary shares amount to 978,942,963 with a dividend per share of Euros and a total of Euros 73,420, Saving shares amount to 153,429,321 with a dividend per share of Euros 0,095 Euros and a total of Euros 14,575, The total sum to distribuite amounts to Euros 87,996,507.72; the pay out is 64.3 per cent. In accordance with the Bank s by-laws, 10 per cent of net profit was assigned to the legal reserve (Euros 13,689,869.64), whilst the remaining amount (Euros 35,318,186.01) is destined to the extraordinary reserve. The resulting total shareholders equity of Euros 2,221.7 million is made up as follows: SHAREHOLDERS' EQUITY (thousands of Euros) 31/12/05 Capital Stock 1,113,327 Additional paid-in capital 263,211 Revaluation reserves 698,526 a) Financial assets available for sale 527,021 b) Hedging cash flows -1,289 d) Special revaluation laws 172,794 Reserves 146,649 Reseve art. 55, DPR 917/ legal reserve 102,415 taxed extraordinary reserve 90,722 merger reserve 12,341 reserve for incorporation 16,589 reserve for purchase of treasury stock - reserve for purchase of treasury stock - disposable amount 77,000 reserve for dividends on own shares reserve 106 Reserve D.Lgs. 153/99 11,718 Reserve D.Lgs. 124/ FTA IAS reserve - art. 7.3, D.Lgs. 38/2005 6,779 FTA IAS reserve - art. 7.4 D.Lgs. 38/ ,418 FTA IAS reserve - art. 7.5 D.Lgs. 38/ ,916 FTA IAS reserve - art. 7.7 D.Lgs. 38/ ,036 Reserve for IAS profit adjustment -17,572 (-) Own shares - TOTALE 2,221,

289 DISTRIBUTION CHANNELS AND RESOURCE MANAGEMENT The distribution of the Banca Carige Group s products and services is based on an integrated three-legged multi-channel distribution system: traditional; remote; mobile. The traditional distribution channel is made up by our branch network and a network of private and corporate banking advisers. The number of Banca Carige Group branches at 31 st December 2005 remained unchanged in comparison to the figure at 31/12/04 following three new branch openings (one each in Liguria, Piedmont and Marches) and three closures: in total 393 branches, 201 in Liguria (51.1 per cent), 37 in Sicily, 36 in Lombardy, 33 in Latium, 31 in Piedmont, 19 in Emilia Romagna, 12 in Veneto, 9 in Apulia, 7 in Sardinia, 3 in Tuscany, 3 in Marches and one in Umbria. The Bank also has a branch in Nice, France and representative offices in Frankfurt and London, with other offices in Moscow, Beijing and New York. In Brussels, the Bank also has a desk at the offices of the Regione Liguria. BRANCH NETWORK A) TRADITIONAL CHANNELS 31/12/05 30/9/05 31/12/04 numero % numero % numero % NORTHWEST Liguria Genova Imperia La Spezia Savona Lombardy Piedmont NORTHEAST Emilia Romagna Veneto CENTRE Latium Tuscany Marches Umbria SOUTH AND ISLANDS Sicily Apulia Sardinia ABROAD: Nice (France) TOTAL NUMBER OF BRANCHES /12/05 30/9/05 31/12/04 Private banking consultants Corporate consultants Affluent consultants Small business consultants B) REMOTE CHANNELS 31/12/05 30/9/05 31/12/04 ATM - Bancomat Self-service "Bancacontinua" branches On line services (1) 72,957 70,772 66,602 (1) Number of Internet banking and call center contracts. C) MOBILE CHANNELS 31/12/05 30/9/05 31/12/04 Insurance agents (2) (2) Agents of the Group's insurance subsidiaries distribuiting Banca Carige products. 289

290 Banca Carige has established a personalised financial consultancy service for private clients, which offers differentiated service and attractive returns. At 31/12/05, the network consisted of 92 advisors distributed over 38 districts. During the year the service was extended to three of our branches in central Italy (2 in Rieti and 1 in Viterbo). The Corporate Consultancy Service is offered to medium and large businesses and at 31 st December 2005, there were 86 consultants operating over 43 districts situated in Liguria, Tuscany, Lombardy, Piedmont, Emilia Romagna, Veneto, Marches, Latium and Umbria. During the year dedicated consultancy networks for the affluent and small business segments was launched with the creation of a network of 121 advisors for affluent clients operating in 102 Ligurian branches, and 200 dedicated advisors for small businesses each working from a branch in Liguria. With regards to remote channels, the number of fully-automated branches of the Bancacontinua network remained at 13, whilst the number of ATM-Bancomat cash points amounted to 468, three more than at the end of The need to provide our customers with access to banking services outside the normal business hours of branches has led to the development of alternative channels of distribution. The Group s on line services (Family, dedicated services for businesses, the self-employed and professionals) include the Internet and call centre and allows the customer to access information and carry out transactions including securities trading via computer and/or phone. There was considerable growth in net banking also during 2005 in terms of the number of subscribers and transactions (money-movement transactions, involving the movement of money with a subsequent effect on the balance of the account, and information-related transactions, such as balance enquires, which have no effect on the balance of the account). At the end of 2005, there were more than 56,000 contracts (2004: 50,000). The number of active customers, namely those subscribers who effected at least one transaction during the year, amounted to around 51,000. More than 5.8 million transactions were carried out on the Internet during 2005, a 4.4 per cent increase in comparison to Expansion was particularly strong on line trading, which rose by 33.9 per cent to almost 2 million transactions, and now accounts for a third of the aggregate total. The share of traditional banking transactions (3.9 million) fell 6 per cent to 66.7 per cent of the total. Money-movement transactions rose by 24.5 per cent to almost 800,000 relating to an underlying amount of almost Euros 1.4 billion (+26 per cent). The number of Carige Call centre contracts was basically unchanged over 2004 at 16,000, of which just over 2,000 (13 per cent) had utilised the service at least once during the year. Transactions performed amounted to 190,000 (2004:+15.8 per cent), 20,000 of which relating to money-movement transactions (underlying amount intermediated: Euros 80,000). Carige s mobile channels are made up principally by the Group s insurance agents. Thanks to rulings made by both the Bank of Italy and the Italian insurance industry regulator ISVAP, Banca Carige stipulated with the Group s two insurance companies Carige Assicurazioni and Carige Vita Nuova agreements for the distribution of Carige banking products at the offices of the insurance companies. A total of 268 insurance offices has signed these agreements which aim not only to find new customers, but also to revitalise contacts with existing customers in terms of fidelity and net worth to the Bank. Support to the offices is provided by a group of 37 financial advisors ( promotori ) who promote a package of products and related services. Estate agents working in agreement with the Bank (1,700 agencies) are also part of the mobile distribution network. During 2005 the number of mortgage contracts signed reached 1,162 in comparison to 1,000 in 2004 out of a total of 3,110 proposed. The average mortgage loan rose both with regards to those contracts proposed (Euros 132,000 in 2005 in comparison to Euros 128,000 in 2004), and to those concluded (Euros 125,000 in 2005 in comparison to Euros 120,000 in 2004). The number of Banca Carige employees dropped during the year from 3,719 at 31 st December 2004 to 3,695. In detail, the total is made up by 53 senior executives, 776 managers, and 2,866 clerical and ancillary members of staff. There are 2,071 male 290

291 employees (56 per cent) and 1,624 female employees. The average age of employees is around 44 with 19 years service. Around 28.3 per cent of staff (1,046 employees) is employed in Carige s Genoa head offices; the remaining amount is involved in market activities. Permanent full-time staff account for 95.6 per cent of total human resources, whilst the remaining amount is represented by permanent part-time staff. PERSONNEL 31/12/05 30/9/05 31/12/04 number % number % number % Grade Executives Managers Other employees 2, , , TOTAL 3, , , Activities Head-offices 1, , , Branches 2, , , Transferred personnel (1) (1) Staff members of the Group's banks transferred to the Parent Company to perform support duties (IT&C, organisation, administration, internal auditing, human resources, management control, risk management, etc.). PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS, EQUITY INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES The value of the Bank s property, plant and equipment amounted to Euros million at 31 st December 2005, an increase of 4.2 per cent in comparison to the previous year s figure. The increase was mostly due to an increase (+5 per cent) in functional assets, i.e. property and plant required for the Bank to perform and deliver its services, which reached Euros million, of which property accounts for Euros million. The book value of investment property dropped 1.4 per cent to Euros 69.1 million, following sales amounting to Euros 337,000 and depreciation charges of Euros 624,000. Within the Bank s functional assets, total increases recorded during the year amounted to Euros 36.2 million. The breakdown of this aggregate is as follows: - purchases: Euros 9.7 million (of which Euros 4.6 million for property: Euros 0.4 million for furniture and fittings: Euros 2.8 million for electrical equipment: Euros 1.8 million for other tangibles): - upkeep and improvements: Euros 3 million: - assets held subject to finance leases: Euros 23.5 million. Decreases totalled Euros 9.7 million, almost exclusively in the form of depreciation (of which Euros 4 million relating to property). Intangible assets amounted to Euros million, up 1 per cent over December Goodwill (Euros million) is classified as long-lived asset and refers to the purchase of 124 bank branches by Banca Carige carried out in three distinct acquisitions. Goodwill arising on these acquisitions was reviewed for impairment at first-time adoption of IFRS and again in the preparation of these annual statements for the year ending 31 st December Both tests confirmed the original value previously calculated under Italian GAAP. 291

292 With regards to other intangible assets, as at 31/12/05 increases related to purchases (Euros 7.5 million) and amortisation (Euros 7.3 million). The book value of the Bank s equity holdings rose 0.3 per cent to Euros million, of which Euros 15.9 million refers to holdings in associates. The value of Carige s holdings in its subsidiaries amounted to Euros million, 0.3 per cent higher than the previous year s figure. The following companies belong to the Banca Carige Group: - Banca del Monte di Lucca, C.R. Savona, C.R. Carrara and Banca Cesare Ponti are banks; - Carige Assicurazioni and Carige Vita Nuova are insurance companies; - Carige Asset Management SGR is a wealth management company; - Centro Fiduciario is a trust company; - Galeazzo, Columbus Carige Immobiliare and Ettore Vernazza are property companies; - Argo Finance One and Priamar Finance are special purpose entities set up for the securitisation of non performing credits. The following companies belong to the Group via indirect holdings, the value of which is subsequently not included in the figure stated above: - Immobiliare Carisa, a property company owned indirectly via the subsidiary C.R. Savona; - Assi90, an insurance services company, owned indirectly via the subsidiaries Carige Assicurazioni and Carige Vita Nuova; - AG and Savona 2000, insurance companies owned indirectly via Assi90; - Dafne Immobiliare and Portorotondo Gardens, property companies owned indirectly vai, respectively, Carige Assicurazioni and Carige Vita Nuova. The two special purpose entities Argo Mortgage and Argo Mortgage 2 in which Banca Carige has a 5 per cent holding via its subsidiary Carige Columbus Immobiliare was included within the area of consolidation in accordance with SIC 12. In the consolidated financial statements both companies are classified as part of the Group s banking activities following the request for their inclusion within the Group made by Banca Carige to the Bank of Italy. The book value of associate entities outside the Group (companies in which the Group has a significant influence, but not control over, operating and financial management policy decisions) amounted to Euros 15.9 million, up 63.6 per cent over December The three associates are Autostrada dei Fiori, Frankfurter Bankgesellschaft AG and Consorzio per il Giurista di Impresa. SHAREHOLDERS' EQUITY Total shareholders equity excluding net profit for the year amounted to Euros 2,184.2 million at 31 st December Liquidity generated amounted to Euros 5.1 million in comparison to a capital absorption in 2004 of Euros 15 million. The total dividend payout for 2005 was Euros 83,563,000, of which Euros 69,401,000 relating to ordinary shares (Euros per share) and Euros 14,162,000 relating to savings shares ( per share). Banca Carige at year end held own shares for a corresponding nominal value of Euros The Bank continues to be in line with all risk indicators currently in force as set by the Bank of Italy. Regulatory capital, calculated on the basis of current legislation (Legislative decree 87/92) and the Bank of Italy s pronouncements contained in its letter of 1 st December 2005, amounted to Euros 1,353.1 million. In the light of the latter, for the year beginning 1 st January 2006, interests in insurance companies in addition to those in the Bank of Italy will be not be eligible for inclusion in calculating regulatory capital resources. Further details are provided in the explanatory notes: part B ( Balance Sheet information ), Assets, Section 4 (Available for sale assets ). No substantial differences arise concerning the calculation of regulatory capital under IFRS as at 31/12/05 and the previous figure stated under Italian GAAP. The following tables illustrate the composition of the Bank s regulatory capital in accordance with current legislation (Legislative decree 87/92). IAS/IFRS-compliant figures have also been prepared in line with the requirements contained in the Bank of Italy s letter of 1 st December With regards to the free share 292

293 capital increase approved by the Extraordinary Shareholders Meeting of 25 th January, pro forma IFRS figures have also been prepared for the amount corresponding to the positive variation in tangible assets (Euros million) stated at the caption revaluation reserves and included within tier 1 capital. BREAKDOWN OF TOTAL CAPITAL (thousands of Euros) 31/12/05 31/12/05 31/12/05 31/12/04 D.lgs. 87/92 IAS IAS pro forma (1) D.lgs. 87/92 Tier 1 Capital: positive elements eligible for inclusion (a) 1,665,104 1,534,295 1,699,132 1,638,195 Share capital 1,113,327 1,113,327 1,278,164 1,113,327 Reserves 288, , , ,030 Additional paid-in capital 262, , , ,839 Tier 1 Capital: negative elements (b) 449, , , ,113 Goodwill 422, , , ,849 Other negative elements 27,257 14,460 14,460 30,264 Prudential filters (c) -47,075-47,075 Total Tier 1 capital (c = a-b) 1,215,785 1,026,119 1,190,956 1,176,082 Tier 2 capital (d) 500, , , ,752 Reductions (e) 362,740 (2) 362,740 (2) 362,740 (2) 230,800 Total capital (c+d-e) 1,353,094 1,332,513 1,332,513 1,445,034 (1) Taking into account the benefits deriving from utilisation of provisions foreseen by article 7, paragraph 6, Law 38/2005. (2) With the adoption of Directive 2002/B7/EC from 31 st December 2005 pursuant to the Bank of Italy's letter no of 1/12/05, equity investments in insurance enterprises are deducted from regulatory capital. Consequently, Banca Carige's holding in the subsidiary Carige Vita Nuova of million Euros was deducted. The Bank's holding in Carige Assicurazioni and its related subordinated bond issue were previously excluded from the computation of the Bank's and the Group's regulatory capital following a Bank of Italy inspection (letter dated no of 24 th February 2003). Pursuant to the Bank of Italy's letter of 1 st December 2005 mentioned above, Banca Carige's investment in the Bank of Italy was deducted from regulatory capital. Capital resources destined to cover credit and market risks amounts to Euros 877 million (64.8 per cent of the total); consequently, taking into account other prudential requirements, the amount in excess to the limits laid down in the supervisory requirements totals Euros million. In February 2005, Banca Carige issued a subordinated loan (tier 3) which, although excluded from the computation of regulatory capital, does provide cover for market risk with a subsequent positive effect on the Bank s total capital ratio. 293

294 CAPITAL RESOURCES AND SOLVENCY RATIOS (thousands of Euros) 31/12/05 31/12/05 31/12/05 31/12/04 D.lgs. 87/92 IAS IAS pro forma (1) D.lgs. 87/92 Core Capital Tier 1 capital 1,215,785 1,026,119 1,190,956 1,176,082 Tier 2 capital 500, , , ,752 Reductions -362, , , ,800 Total capital resources 1,353,094 1,332,513 1,332,513 1,445,034 Weighted assets Credit risk 11,181,089 11,566,001 11,566,001 9,526,938 Market risk 1,346,792 1,346,792 1,346, ,610 Other prudential requirements 618, , , ,252 Total weighted assets 13,146,279 13,222,622 13,222,622 10,955,800 Subordinated loans covering market risks (Tier 3) 79,961 79,961 79,961 - Solvency ratios % Tier 1/weighted assets for credit risk 10.87% 8.87% 10.30% 12.34% Total capital/weighted assets for credit risk (2) 12.10% 11.52% 11.52% 15.17% Tier 1 capital/total weighted assets 9.25% 7.76% 9.01% 10.73% Total capital/total weighted assets (2) 10.90% 10.68% 10.68% 13.19% (1) Taking into account the benefits deriving from utilisation of provisions foreseen by article 7, paragraph 6, Law 38/2005. (2) With the adoption of Directive 2002/B7/EC from 31st December 2005 pursuant to the Bank of Italy's letter no of 1/12/05, equity investments in insurance enterprises are deducted from regulatory capital. Consequently, Banca Carige's holding in the subsidiary Carige Vita Nuova of million Euros was deducted. The Bank's holding in Carige Assicurazioni and its related subordinated bond issue were previously excluded from the computation of the Bank's and the Group's regulatory capital following a Bank of Italy inspection (letter dated no of 24th February 2003). Pursuant to the Bank of Italy's letter of 1st December 2005 mentioned above, Banca Carige's investment in the Bank of Italy was deducted from regulatory capital. SHARE MARKET PERFORMANCE INDICATORS 31/12/05 30/09/05 31/12/04 Return on Equity (ROE) % Return on Average Equity (ROAE %) Earnings per share (EpS) (1) Price/Earnings ratio (P/E) (2) (6) Price/Book value (P/BV) (3) (6) Dividend yield (%) (4) (6) Net profit (thousands of euros) 136, ,288 89,969 Annual percentage variation (%) Equity (thousands of euros) (5) 2,184,222 2,182,418 1,772,242 Number of shares/1000 1,113,327 1,113,327 1,113,327 Average share price for the period (6) (1) Earning per share. (2) Price/Earning. (3) Price/Book value. (4) Dividend for share / Average share price in the period. (5) Capital and reserves (including general banking risk fund) prior to profit allocation (6) Ordinary shares only. 294

295 RELATIONS WITH SUBSIDIARIES AND RELATED PARTIES Relations between Banca Carige and its subsidiaries and other related parties are conducted as part of the Bank s normal activities and are regulated according to market conditions in accordance with Consob, the Italian Securities Market Regulator, recommendation no of 20/2/97. In particular, at 31 st December 2005 total lending granted to subsidiaries amounted to Euros million, whilst deposits amounted to Euros 1,143.3 million. Guarantees and commitments totalled Euros 70.4 million. The following table Relations with Subsidiaries illustrates in detail relations with subsidiaries and other companies in which Banca Carige has significant influence. RELATIONS WITH SUBSIDIARIES (thousands of Euros) 31/12/05 Assets Liabilities Guarantees & c Dividends Other Expenses Commitments revenues SUBSIDIARIES 299,435 1,133,492 4,412 34,786 65,557 70,207 Cassa di Risparmio di Carrara SpA 37,153 46, ,924 2,739 7,096 Cassa di Risparmio di Savona SpA 48,609 50, ,287 11,072 10,058 Banca del Monte di Lucca SpA 95,012 21, ,066 4,106 4,211 Banca Cesare Ponti SpA 15,803 16, Carige Asset Management Sgr SpA 7,865 9, ,358 1,701 Centro Fiduciario SpA 439 1, Argo Finance One Srl Argo Mortgage Srl Argo Mortgage 2 Srl 32, , ,738 33,356 Priamar Finance Srl Galeazzo Srl - 2, Columbus Carige Immobiliare SpA 9, ,153 Immobiliare Ettore Vernazza SpA Carige Vita Nuova SpA 3,502 26,932-3,649 3,320 9,608 Carige Assicurazioni SpA 47,944 63,177 2,802 2,815 3, Dafne Srl Portorotondo Gardens SIGNIFICANT HOLDINGS 167,476 9, ,324 6, Frankfurter Bankgesellschaft AG 139, , Assimilano Srl - 1, Recina Servizi Srl - 5, Consorzio per il giurista d'impresa S.C. Srl Diadass Srl Assistars Srl B.D.A SpA U.C. Sport e Sicurezza Srl ATOMA Srl Autostrada dei Fiori SpA 27, , Assi 90 Srl 58 1, , AG Srl Savona 2000 Srl TOTAL 466,911 1,143,331 4,437 38,110 72,240 70,

296 SHARES OWNED BY DIRECTORS, STATUTORY AUDITORS AND GENERAL MANAGER The table below provides information requested by Consob in its deliberation no of 14/5/99 and later modifications, in addition to the regulation enacting Legislative decree 58/98 regarding the disclosure of shareholdings in a company or its subsidiaries on the part of its directors, statutory auditors, senior executives or, either directly or on their behalf, by their spouses or children under the age of 18. Name and Surname Company represented Number of shares in possession 31/12/2004 Number of shares bought Number of shares sold Number of shares in possession 31/12/2005 Giovanni Berneschi CARIGE S.p.A. 116,170 = = 116,170 Alberto Berneschi CARIGE S.p.A. 1,425,556 = = 1,425,556 Alessandro Scajola CARIGE S.p.A. 2,200 = = 2,200 Adalberto Alberici CARIGE S.p.A. 13,000 = = 13,000 Annamaria Galli CARIGE S.p.A. 10 = = 10 in Alberici Piergiorgio Alberti CARIGE S.p.A. 5,454 = 5,454 = Mario Capelli CARIGE S.p.A. 10,000 = = 10,000 Remo Angelo Checconi CARIGE S.p.A. 3,100 = = 3,100 Pietro Isnardi CARIGE S.p.A. 11,360 = = 11,360 Alfredo Sanguinetto CARIGE S.p.A 70,636 10,000 = 80,636 Silvana Ferrero CARIGE S.p.A 40,858 = 20,000 20,858 in Sanguinetto Share ownership is direct unless otherwise stated 296

297 PROSPECTS AND CONCLUSIONS The Carige Group s overarching strategic aim for the immediate future is to bring up to fully operational status the significant investments made in recent years which goes hand-in-hand with heightened operational efficiency. These objective will be achieved via: - convergence in terms of performance on the part of the branches acquired to parent company standards; - achievement by subsidiaries of appropriate returns on equity (ROE) and, above all, of returns on the sizeable investments made by Banca Carige (ROI); - reduction of our cost income ratio to best performer levels. The share capital increase decided by the Board of Directors on 25 th January 2006 for around Euros 200 million will provide Carige with the resources necessary for growth internally (new branch openings) and externally (acquisitions) foreseen in the Group s Strategic Plan

298 To the Shareholders of Banca Carige, Your Bank during 2005 achieved continued growth in spite of the uncertain economic and financial climate. The positive results described in this Report along with those of recent years will provide support for our future development as a national universal financial services provider. The Board of Directors would like to thank all those who have contributed to the development of Banca Carige and the Carige Group. In particular, thanks are owed to our shareholders who continue to provide their invaluable support. We are proud to serve our customers. Our commitment is to strive to provide them with service and courtesy and to maintain the strong ties that exist between them and the Bank. Our thanks must go also to the General Manager and all our staff for their contribution during the year as well as to employees' trade union representatives. The assistance provided to us by the Board of Statutory Auditors in their carrying out of their oversight duties was of immense help. Many thanks clearly go to each member. We would like to express our appreciation of the work of the Italian banking industry's three regulators, the Bank of Italy, Consob, and Borsa Italiana SpA. Here, too, they provided crucial support and advise; relations with each was at all times characterised by efficiency and cordiality. Finally, our condolences go to the family and friends of Mr Mario Capelli, who passed away in His excellent service for many years on Carige s Board of Directors will not be forgotten. Genoa, 20 th March 2006 The Board of Directors 298

299 299

300 BALANCE SHEET ASSETS 31/12/05 31/12/04 (1) 10 - Cash and highly liquid deposits 156,986, ,897, Financial assets held for trading 2,029,427,409 2,359,066, Financial assets available for sale 776,418, ,310, Loans to banks 955,396,208 1,590,731, Loans to customers 11,272,526,482 9,198,086, Hedging derivatives 54,984,727 20,884, Equity investments 895,794, ,087, Tangible assets 629,396, ,849, Intangible assets 461,101, ,599,225 including: - goodwill 446,641, ,391, Tax assets 259,312, ,905,245 a) currents 115,265,985 84,929,767 b) anticipated 144,046,156 37,975, Other assets 534,529, ,797,636 Total assets 18,025,874,397 16,014,216,683 (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and IAS

301 LIABILITIES AND STOCKHOLDERS' EQUITY 31/12/05 31/12/04 (1) 10 - Amounts owed to banks 1,179,575,357 1,129,424, Amounts owed to customers 7,841,871,021 6,710,230, Debt securities in issue 4,675,407,827 5,101,735, Financial liabilities held for trading 151,120,246 94,872, Financial liabilities designated at fair value 484,226, Hedging derivatives 39,697,026 2,750, Tax liabilities 260,473, ,736,351 a) currents 66,445,641 6,788,172 b) differed 194,027, ,948, Other liabilities 638,284, ,290, Reserve for termination indemnities 88,614,000 89,637, Reserves for risks and charges: 345,483, ,328,781 a) reserves for pensions and similar commitments 296,791, ,310,000 b) other reserves 48,692,658 29,018, Revaluation reserves 698,525, ,793, Capital instruments 11,517, Reserves 97,641, ,583, Additional paid-in capital 263,211, ,838, Capital stock 1,113,326,839 1,113,326, Own shares (-) ,300, Income (Loss) for the period (+/-) 136,898,696 89,969,211 Total liabilities and stockholders' equity 18,025,874,397 16,014,216,683 (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and IAS

302 INCOME STATEMENT Captions (1) 10 - Interest income and similar revenues 735,641, ,501, Interest expenses and similar charges -382,037, ,169, Net interest income 353,604, ,332, Commission income 232,509, ,353, Commission expenses -43,691,005-18,025, Net commissions 188,818, ,328, Dividends and other similar revenues 49,025,081 34,408, Income (Loss) on financial assets and liabilities held for trading (net) 45,337,146 18,118, Income (Loss) from hedging activities -1,376, , Income (Loss) on disposal of: -2,978,492 10,083,676 a) loans 2,074,762-31,359 b) financial assets available for sale -6,949 10,115,035 d) financial liabilities -5,046, Net value adjustment on financial assets designated at fair value -276, Gross operating income 632,153, ,482, Net value adjustment on: -44,335, ,376,597 a) loans -42,968, ,434,577 d) other financial assets -1,366,904 57, Net income from financial management 587,818, ,106, Administrative costs: -413,735, ,450,742 a) staff costs -257,951, ,069,024 b) other administrative costs -155,783, ,381, Net provisions for risks and charges -5,677, , Amortization and depreciation of tangible fixed assets -10,260,312-10,222, Amortization and depreciation of intangible fixed assets -7,269,655-7,868, Other operating expenses and revenues 43,304,635 96,296, Operating costs -393,638, ,578, Income (loss) from equity investments -180, Income (loss) from disposal of investments -27, , Operating income (loss) from ordinary activities before taxes 193,972, ,395, Tax expense (income) related to profit or loss from ordinary activities -57,073,889-22,426, Income (loss) from ordinary activities after taxes 136,898,696 89,969, Net income (loss) for the period 136,898,696 89,969,211 (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and IAS

303 STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY Shareholders' equity at 31/12/2004 Opening balance change Shareholders' equity at 1/1/2005 Allocation of previous year net income Reserves Dividends and others Reserves variation New shares issue Own shares purchase Year variation Operations of shareholders' equity Dividends extraordinary distribution Capital instruments variation Derivatives on own shares Stock options Net income at 31/12/2005 Shareholders' equity at 31/12/2005 Capital stock: 1,113,327-1,113, ,113,327 a) ordinary shares 959, , ,898 b) other shares 153, , ,429 Additional paid-in capital 262, , ,212 Reserves: 224, ,455 91,128 6, ,641 a) profit 195, ,455 62,198 6, ,711 b) others 28,930-28, ,930 Revaluation reserves: 172, , , , ,526 a) available for sale - 539, , , ,021 b) hedging cash flows ,289 c) special revaluation laws 172, , ,794 Capital instruments - 11,402 11, ,517 Own shares - 1, , , Profit (loss) for the period 89,969-89,969-6,513-83, , ,899 Shareholders' equity 1,862, ,390 2,278, ,456-12,711 1, ,899 2,321,122

304 Shareholders' equity at 31/12/2003 Opening balance change Shareholders' equity at 1/1/2004 Allocation of previous year net income Reserves Dividends and others Reserves variation New shares issue Own shares purchase Year variation Operations of shareholders' equity Dividends extraordinary Capital instruments variation Derivatives on own shares Stock options Net income at 31/12/2004 Shareholders' equity at 31/12/2004 Capital stock: 1,113,326,839-1,113,326, ,113,326,839 a) ordinary shares 959,897, ,897, ,897,518 b) other shares 153,429, ,429, ,429,321 Additional paid-in capital 255,023, ,023, ,815, ,838,899 Reserves: 229,722,987-13,467, ,255,529 22,637, ,309, ,583,493 a) profit 200,793,623-13,467, ,326,165 22,637, ,309, ,654,129 b) others 28,929,364-28,929, ,929,364 Revaluation reserves: 7,956, ,837, ,793, ,793,716 a) available for sale b) hedging cash flows c) special revaluation laws 7,956, ,837, ,793, ,793,716 Capital instruments Own shares ,300, ,300,874 Profit (loss) for the period 106,199, ,199,427-22,637,310-83,562, ,969,211 89,969,211 Shareholders' equity 1,712,228, ,370,200 1,863,598, ,562,117-6,493, ,300, ,969,211 1,862,211,284

305 CASH FLOW STATEMENT Direct method A. OPERATIONS 31/12/05 31/12/04 1. Management activities 291,032, ,737,516 - interest income received (+) 737,422, ,367,459 - interest charges settled (-) -330,412, ,290,673 - dividends and similar revenues (+) 10,287,652 1,224,734 - net commission income (+/-) 188,818, ,328,281 - personnel charges (-) -233,511, ,775,550 - other costs (-) -312,015, ,764,686 - other revenues (+) 222,383,894 89,407,925 - taxes (-) 8,059,236-71,759,974 - costs/revenues from groups of discontinued operations, net of taxes (+/-) 2. Liquid assets generated/absorbed by financial assets -658,770,425-1,062,032,483 - financial assets held for trading 369,264, ,997,709 - financial assets designated at fair value - financial assets available for sale -73,773,876 18,191,754 - loans to customers -1,470,107, ,304,478 - due from banks: repayable on demand 70,343,832 59,759,054 - due from banks: other loans 561,843, ,853,713 - other asset captions -116,340, ,172, Liquid assets generated/absorbed by financial liabilities 443,218,555 1,248,234,898 - due to banks: repayable on demand 7,260,726-74,489,268 - due to banks: other deposits 41,704,619 61,226,465 - due to customers 304,994, ,678,749 - securities issued -391,829, ,811,643 - financial liabilities held for trading -28,889,730 44,022,656 - financial liabilities evaluated at fair value 482,871,240 - other liabilities 27,106,368-19,015,347 Net liquid assets generated/absorbed by operations 75,480, ,939,931 B. INVESTMENTS 1. Liquid assets generated by: 38,510,754 47,316,439 - sale of investments 12,985,808 - dividends received from equity investments 38,109,942 33,134,547 - sale of financial assets held to maturity - sale of tangible assets 400,812 1,196,084 - sale of intangible assets - sale of business divisions 2. Liquid assets absorbed by: -27,233, ,658,694 - purchase of investments -2,706, ,148,317 - purchase of financial assets held to maturity - purchase of tangible assets -12,755,000-41,969,649 - purchase of intangible assets -11,771,690-8,540,728 - purchase of business divisions Net liquid assets generated/absorbed by investments 11,277, ,342,255 C. FUNDING ACTIVITIES - issue/purchase of own shares 1,300,447-1,300,447 - issue/purchase of capital instruments 487,371 - dividend distribution and other uses -83,456,250-83,295,117 Net liquid assets generated/absorbed by funding activities -81,668,432-84,595,564 NET LIQUID ASSETS GENERATED/ABSORBED DURING THE YEAR 5,089,427-14,997,888 - Amounts in units of Euro - KEY: (+) generated, (-) absorbed 305

306 RECONCILIATIONS Balance sheet caption 31/12/05 31/12/04 Cash in hand and liquid assets available at the beginning of the year 151,897, ,895,348 Net liquid assets generated/absorbed during the year 5,089,427-14,997,888 Cash in hand and liquid assets: exchange rate translation effects Cash in hand and liquid assets at the end of the year 156,986, ,897,460 Pursuant to IFRS paragraph 40, the following significant value adjustments recognised in the cash flow statement as at 31/12/04 refer to: - dividends distributed amounting to euro 83 million, previously classified under management activities and reclassified in accordance with IAS 7 as funding activities; - dividends collected on holdings amounting to euro 34 million, previously classified under management activities and reclassified under investments. Economic items in general have been redetermined on the basis of the liquidity criteria requirements of IAS

307 TA INTEGRATIN 307

308 308

309 A.1 PARTE GENERALE A.1. INTRODUCTION SECTION 1 Conformity with international financial reporting standards The Financial Statements of Banca Carige, approved by the Board of Directors during its meeting of 20 th March 2006, were prepared in accordance with International Accounting Standards and International Financial Reporting Standards as issued by the International Accounting Standards Board, endorsed by the European Union as at 31 st December 2005 and in accordance with International Financial Reporting Interpretations (SIC/IFRIC). 309

310 SECTION 2 Banca Carige s general accounting policies In these Financial Statements, Banca Carige has adopted the following requirements: IAS 1; Bank of Italy circular no. 262/2005; the transitional requirements presented in the annex to the General Manager of the Bank of Italy s letter of 22 nd December In particular: - Balance sheet and income statement lines and explanatory notes Balance sheet and income statement lines do not illustrate amounts for which figures are not provided either for the year as at 31 st December 2005 or for previous accounting periods. In the explanatory notes captions and tables which do not contain amounts either due to the inexistence of the item or in accordance with the transitional requirements established by the Bank of Italy in its letter of 22 nd December 2005 are not provided. For the year ending 31 st December 2005, in the explanatory notes the absence of figures in balance sheet and/or income statement tables indicates the inexistence of the item in question. - Unit of account and rounding up The consolidated financial statements are presented in euro, which is the functional currency of the Group. In the calculation of amounts illustrated in captions, items and sub-items (i.e. of which ) no account is taken of decimals equal to or lower than 50 eurocents; amounts greater than 50 eurocents are rounded up to the nearest euro (e.g. 86 eurocents = euro 1.00). Rounded up caption totals are calculated on the basis of rounded up items or sub-items where present. The algebraic total of rounding up differences to balance sheet items is recorded at other assets/liabilities and to income statement items at other operating income/expenses. Amounts presented in the explanatory notes are expressed in thousands of euros. Amounts equal to or lower than euros 500 are ignored; amounts greater than euros 500 are rounded up to the nearest thousand. Amounts illustrated in the explanatory notes are rounded up so as to be consistent with amounts presented in the balance sheet and income statement. - Financial Review The Group s financial review has been prepared in accordance with the methodology indicated by the Bank of Italy in its circular no. 262/2005 ( metodo diretto ). - Going concern The statements have been prepared in respect of the going concern principle with assets, liabilities and off-balance sheet transactions recognised at their current realisable value. - Matching/Accruals Costs and revenues are recognised on an accruals basis and recognised in the period top which they relate. - Consistency Items are accounted for in a consistent manner within a period and from one period to another unless a different approach is judged to be necessary in the light of international accounting standards or interpretations. Changes to comparatives deriving from reclassification and/or remeasurement of items are where possible reclassified, setting out the nature and effects arising from reclassification. - Materiality and aggregation Significant categories present in similar items are stated independently as are dissimilar items unless immaterial. - Netting Assets, liabilities, costs and revenues are offset and the net amount reported only if allowed for under IFRS of IFRIC or foreseen by balance sheet/income statement lines specific to banks. - Comparatives In accordance with the transitional provisions set out in IFRS 1, First-time Adoption of International Financial Reporting Standards and other relevant standards, the Group has applied IFRS in force as at 31 st December 2005 in its financial reporting with effect from 1 st January 2004, with the exception of the standards relating to financial instruments, insurance contracts and additional information requirements, which were applied with effect from 1 st January Therefore the impacts of adopting IAS 32, IAS 39 and IFRS 4 are not included in the 2004 comparatives in accordance with IFRS 1. Financial instruments and insurance contracts for the year enduing 310

311 31 st December 2004 were accounted for under Italian GAAP. In the explanatory notes, comparatives are provided only for total amounts illustrated in tables. Additional information is provided for the reader s benefit where judged necessary. The statements were prepared in accordance with Italian GAAP where compatible with IFRS. Consequently, the Group followed the following Italian GAAP: Legislative decree 87/92; Italian Civil Code and corresponding provisions of the Consolidated Finance Law (TUF) applicable to the reporting obligations of listed companies (article 2428 Italian Civil Code); audit (article 2409-bis Italian Civil Code); publication of financial statements (article 2435 Italian Civil Code). 311

312 SECTION 3 - EVENTS AFTER 31 TH DECEMBER 2005 The most significant events occurred during the first quarter of 2006 are presented below in chronological order: on 16 th January, following the deliberation of the Board of Directors of Banca Carige of 12 th December 2005, the Bank exercised a call option according to the terms of the shareholders agreement signed on 23 rd March 2001 for the purchase of Stiching Faro s 40 per cent holding in Argo Finance One (equivalent to 4,130 shares). As a result of the acquisition, Carige s holding in the SPE reached 100 per cent; the Bank of Italy in its letter of 17 th January 2006 pursuant to Legislative decree 142/2005 communicated the implementation into Italian law of Directive 2002/87/EC concerning the supplementary regulatory requirements identified in the Directive for banks, insurance companies and investment firms belonging to financial conglomerates. Consequently, the financial conglomerate Banca Carige Group, of which Banca Carige is the Parent Company, will be subject to Bank of Italy oversight in this area; on 20 th January, in accordance with the decision of the Executive Committee of 20 th July 2005, the total acquisition of the share capital of Esaote SpA was finalised. The acquisition was performed via the setting up of new company, Imaging SpA, in which Banca Carige has an per cent investment (12,000,000 shares at a nominal value of euro 1 each). In accordance with the agreement signed by Banca Carige and the other partners of Imaging Spa, Mr Luca Arnaboldi was appointed to the Boards of both Esaote Spa and Imaging SpA. Mr Domenico Sardano was named as acting Statutory Auditor for both companies; on 25 th January the Board of Directors of Banca Carige deliberated a fully-paid up share capital increase, with first right 312 of option given to existing shareholders at a nominal value of euros 76.9 million, of euros 200 million inclusive of premium; the Shareholders Meeting of Banca Carige on 25 th January, within the confines of its ordinary business, confirmed Mr Nicolas Merindol s appointment as Board member. In the course of its extraordinary business, the same Meeting agreed to a free capital increase of euros million and an addition to the Company s articles on the question of limits to the voting rights of banking Foundations; in February, in the light of the Bank of Italy s decision not to authorise Unipol s takeover bid for Banca Nazionale del Lavoro and the subsequent cancellation of the shareholder agreement between the Bank and Unipol, Banca Carige exercised its put option on the BNL shares in its possession, previously underwritten by Unipol and subsequently sold by the latter to Ariete, Fin.Ad. (Coop Adriatica), Nova Coop, Talea (Coop Liguria) and Coop Estense; in February the group of banks with equity investments in SI Holding SpA (San Paolo IMI, Banca Monte dei Paschi di Siena, Banca Lombarda e Piemontese, Banca Carige, C.R. Firenze and C.R. Ravenna) acquired control of the company. Banca Carige s holding in SI Holding rose temporarily to per cent. Equivalent to 4,461,781 shares. The number of shares exceeding the holding previously set for Carige ( per cent) will be redistributed amongst the other banks, partners to the shareholders agreement; with reference to the bond issue Banca Carige 1.50 per cent hybrid subordinated issue with reimbursement convertible into ordinary shares, the number of bonds subject presented for conversion at 28 th February 2006 amounted to 8,762,761 with a nominal value of euros 2.50 each; these bonds were converted into 8,762,761 ordinary shares with a nominal value of euro 1 each. As a result of conversion, the Bank s fully-paid up share capital at 20 th March 2006 amounted to euros 1,122,089,600, made up by

313 968,660,279 ordinary shares with a nominal value of euros 1 each, and 153,429,321 convertible savings shares with a nominal value of euro 1 each. In March 2006, up to the 17 th, bearing in mind that conversion rights were suspended from 20 th March 2006 inclusive, a further 10,282,684 bonds were presented for conversion into 10,282,684 new ordinary shares. Following this conversion, carried out on 14 th April 2006, the Bank s total share capital amounted to euros 1,132,372,284, made up by 978,942,963 ordinary shares with a nominal value of euro 1 each, and 153,429,321 convertible savings shares with a nominal value of euro 1 each; on 27 th February the Bank of Italy granted Banca Federiciana SpA authorisation to carry out banking business. Banca Carige has a 10 per cent holding in the company, as deliberated by Carige s Board of Directors on 18 th April 2005; Moody s modified its outlook for Banca Carige on 13 th March from negative to stable as a result of the successful integration of bank and branch acquisitions and the improvement of fundamentals achieved in 2005; as indicated in previous reports, following the suspension in 2001 and then definitive cancellation in 2002 (Law decree 282/2002 converted into Law 27/2003) of the tax breaks previously offered by Law 461/98 and the subsequent Legislative decree 153/99, the economic benefits deriving from the tax breaks were repaid by Banca Carige. The amount paid is stated at a specific item Amounts owed to tax authorities and takes into account litigation at EU level in which Italian banks are represented by its association ABI. Reserves for tax charges subject to litigation were already sufficient to cover a possible negative outcome. The European Court of Justice in its sentence of 15 th December 2005 in response to the appeal made by the Italian State, judged that the tax breaks in question represented state aid. In response to this sentence, ABI instructed its lawyers to drop the appeal lodged before the courts of first instance; ABI s lawyers did so on 10 th March

314 SECTION 4- OTHER ASPECTS There are not other significant aspects. 314

315 A.2 PART RELATED TO THE MAIN BALANCE AGGREGATES This section sets out the accounting principles adopted for the purpose of preparing the financial statements for the year ending 31 st December In accordance with regulatory requirements, each asset and liability caption provides details of the criteria utilised for the classification, recognition (initial and subsequent), valuation, cancellation and measurement of balance sheet items. 1. Financial assets held for trading This category includes debt securities, equities and positive value held for trading derivative contracts. Derivative contracts include those connected to fair value options or to hedges of held for trading financial assets and liabilities. Financial assets held for trading are: - initially recorded at fair value excluding directly related transaction costs. Debt securities and equities are recorded at the date of settlement, whilst derivatives are recorded at the date of subscription; - subsequently subject to valuation on the basis of the evolution of fair value with any changes being recorded in the income statement; The fair value of: a) financial instruments listed on active markets is represented by related market price; b) financial instruments for which no active market exists is determined on the basis of measurement methods and valuation models developed according to the best practices adopted by market participants; - derecognised when the rights to receive cash flows have expired or when the Bank has transferred substantially all the risks and rewards of ownership. 2. Available for sale financial assets Available for sale investments are non-derivative financial investments and those not categorised as financial assets held for trading, financial assets held to maturity or loans to banks and customers. This category in particular includes equity investments in subsidiaries or associates. Available for sale financial assets are: - initially recorded at fair value including direct and incremental transaction costs, with the exception of equities for which no active market exists, which are recognised at purchase cost as the determination of their fair value cannot be made on a certain basis. Debt securities and equities are recorded at the date of settlement; - subsequently subject to valuation on the basis of the evolution of fair value, with the exception of equities for which no active market exists, which are recognised at purchase cost as the determination of their fair value cannot be made on a certain basis. Gains and losses arising from changes in fair value are recorded in a specific reserve in equity, net of tax. Gains or losses arising on sale are recognised in the income statement. Impairment losses and positive or negative translation differences are recognised immediately in the income statement. Prolonged impairment of value is recognised in the income statement at the caption Impairment losses to available for sale financial instruments. If the reason for the writedown ceases to exist, the writeback in value is recognised in the income statement. Impairment of value is assessed at the end of each accounting period (annual, interim). - derecognised when the rights to receive cash flows have expired or when the Bank has transferred substantially all the risks and rewards of ownership. 315

316 3. Held to maturity financial assets Held to maturity investments are debt securities with fixed or determinable payments that the Bank s management has the intention and ability to hold to maturity. When the investment is judged no longer appropriate for HTM status, it is reclassified as an available for sale investment. Held to maturity investments are: - initially recognised at cost including direct and incremental transaction costs. Financial assets previously categorised as available for sale and reclassified as HTM investments are recognised at the fair value at the moment of reclassification, which represents the new amortised cost. HTM investments are recorded at the date of settlement; - subsequently valued at amortised cost using the effective interest method. Gains and losses arising on HTM assets are recorded in the income statement at the moment such assets are eliminated or their value is impaired, also by amortisation. Impairment of value is assessed at the end of each accounting period (annual, interim). Impairment losses are recognised in the income statement and are represented by the difference between the book value of the assets and the present value of expected future financial flows determined using the original effective interest rate. If the reason for the writedown ceases to exist, the writeback in value is recognised in the income statement; - derecognised when the rights to receive cash flows have expired or when the Bank has transferred substantially all the risks and rewards of ownership. Banca Carige hasn t any held to maturity financial assets. 4. Loans and Guarantees This category includes loans to customers and banks, commercial credits, sale and repurchase agreements, and receivables arising from finance leases, factoring, and insurance contracts. Loans are represented by non-derivative financial assets with fixed or determinable payments which are not listed on active markets and which have at no time been classified as available for sale financial assets. Loans are recognised at the moment Banca Carige becomes contractual counterpart. Credits are to be unconditional. Loans are initially recognised at fair value, which corresponds to the amount of money provided plus direct and incremental transaction costs. In the case of differences between the amount of money advanced and the fair value of the loan itself, the loan is initially recognised at an amount corresponding to future cash flows actualised at an appropriate rate and the difference recorded in the income statement. Loans are subsequently valued, where possible, at amortised cost, using the effective interest method. Short-term loans are not stated at amortised cost as the effect of applying the effective interest method is negligible. Amortised cost is the initial valuation, decreased or increased by capital repayments, value adjustments (writedowns and writebacks) and amortisation, the latter calculated using the effective interest method. The initial value corresponds to the difference between the amount advanced and that repayable at maturity. The effective interest rate is the rate that exactly discounts the expected future cash payments or receipts through the expected life of the financial instrument. The calculation of future flows and expected contract life takes into account contractual clauses that may impact amounts and maturities, whilst ignoring expected losses arising from the loan. The effective interest rate initially recognised is the rate that will be subsequently used in actualising future cash flows and determining amortised cost. Impairment of value is assessed at the end of each accounting period (annual, interim). In carrying out impairment testing, a distinction is made between non performing and performing loans. Non performing loans include bad loans, watchlists, rescheduled loans, country risk exposures (solely those classified as bad loans or watchlists), and past due positions (solely those classified as watchlists). Impaired loans (excluding past due positions) are valued singly on an analytical basis which takes into account differences between firstly, future expected cash flows and those flows fixed in the loan contract and, secondly, forecasted recovery times for homogeneous lending segments. 316

317 Impairment testing also takes into account collateral received by the Bank in respect of customer liabilities and the probability of its liquidation. Performing loans, including loans to customers resident in countries classified at risk, and past due positions, are valued on a collective basis. Valuations are made for categories which are homogenous in terms of credit risk levels; expected loss (in percentages) is calculated on the basis of historical statistics referring to each group. On the basis of these valuations, a collective performing reserve has been established. Loans are derecognised when the asset in question is sold, thereby transferring substantially all the risks and rewards of ownership (in particular in the case of ceding and securitisation transactions), when the rights to receive cash flows have expired, or when the loan is classified as irrecoverable. The amount corresponding to the loss is recorded at the income statement net of previous provisions. In the case of recovery of previously written down exposures, the amount is recorded as a decrease at the caption Impairment losses to loans. With regards to securitisation transactions entered into by certain Group undertakings, the Banca Carige has, in accordance with IFRS 1, maintained Italian GAAP for all transactions prior to 1 st January As the securitisation transaction performed in 2004 does not fully represent a transfer of risks and rewards to third parties, it was rerecognised at equity as at 1 st January Financial assets designated at fair value Financial assets designated at fair value are: - initially recorded at fair value excluding directly related transaction costs. and revenues; - subsequently subject to valuation on the basis of the evolution of fair value with any changes being recorded in the income statement; The fair value of: a) financial instruments listed on active markets is represented by related market price; if the prices are not significant, sub b) is applied; b) financial instruments for which no active market exists is determined on the basis of measurement methods and valuation models developed according to the best practices adopted by market participants; - derecognised when the rights to receive cash flows have expired or when the Group has transferred substantially all the risks and rewards of ownership. Banca Carige hasn t designed any financial asset at fair value. 6. Hedge accounting The Bank makes use of derivatives to hedge potential risks present in one or more asset or liability items (hedged item). The use of a hedging instrument aims to cover potential losses attributable to certain types of risk through gains that may arise on the hedging instrument itself. Banca Carige applies the following types of hedge accounting: - fair value hedge accounting seeks to offset changes in the fair value of a hedged item due a particular risk exposure and is applied to hedged items, such as interbank deposits, loans to customers, postal orders, and bonds; - cash flow hedge accounting seeks to offset changes in future cash flows of a hedged item due to a particular risk exposure and is applied to groups of hedged items (liabilities). The Bank enters into derivative contracts for hedging purposes exclusively with external counterparts. Hedging derivatives are recognised at fair value. In particular: - in the case of fair value hedge accounting, any changes in the fair value of hedging instruments and hedged items (as regards the part attributable to the hedged risk and in the case of hedge effectiveness) are recorded in the income statement. The difference between the changes in value represent the ineffective portion of the hedge determinable in terms of net economic impact; - in the case of cash flow hedge accounting, the fair value gain or loss associated with the effective portion of the cash flow hedge is recognised initially in shareholders equity, and 317

318 recycled to the income statement when the hedged item affects profit or loss. Any ineffective portion of the gain or loss on the hedging instrument is recognised in the income statement immediately. The Bank formally documents the relationship between the hedging instrument and hedged item as well as its risk management objectives and its strategy for undertaking the various hedging transactions. The Bank also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are effective in offsetting changes in fair values or cash flows of hedged items. A hedge is deemed ineffective when the change in the fair value of the hedging derivative differs from the change in the fair value of the hedged risk in the hedged item, or the cumulative change in the fair value of the hedging derivative differs from the cumulative change in the fair value of expected future cash flows of the hedged item. At the end of every accounting period (annual, interim) the Bank tests the effectiveness of the hedge by means of prospective (evaluation of expected effectiveness) and retrospective (evaluation of recorded effectiveness) tests. When a hedge is deemed ineffective the derivative instrument is immediately reclassified as a trading derivative. Hedged assets/liabilities are valued according to the valuation criteria applied to their category. The new recognised value is the fair value emerging from the most recent (positive) effectiveness test. 7. Equity investments This category includes the Bank s holdings in associates and joint ventures accounted for under the equity method. The investment is initially recognised at the date of settlement. The category also includes subsidiaries excluded from the area of consolidation and associates deemed as non significant holdings and consequently not accounted for under the equity method. The Bank s investment in these companies is recorded at cost. Minority holdings are classified as available for sale financial assets. The book value of each investment is tested for impairment by means of direct comparison between recoverable value and book value when proof of possible impairment exists. The investment is derecognised when it is sold, thereby transferring substantially all the risks and rewards of ownership, or wh This section sets out the accounting principles adopted for the purpose of preparing the financial statements for the year ending 31 st December In accordance with regulatory requirements, each asset and liability caption provides details of the criteria utilised for the classification, recognition (initial and subsequent), valuation, cancellation and measurement of balance sheet items. 8. Tangible assets Tangible assets include land, functional property, property investments, electrical equipment, furniture and fittings, machinery and equipment, works of art, and leased assets. Functional property is represented by assets that are used by the Bank to carry out its business activities or for administrative purposes. Property investments are held for capital appreciation. Tangible assets are: - initially recorded at cost increased by any ancillary charges directly attributable to the acquisition and installation of the assets; On First Time Adoption of IFRS, property functional and investment belonging to the Bank s banks is recorded at fair value as deemed cost. The separate values of land and buildings were bifurcated and accumulated depreciation on the part relating to land is recognised in equity. - subsequently carried at cost less accumulated depreciation and any impairment charges. Depreciation is provided on the annual depreciable amount of tangible assets systematically on a straightline basis over the estimated useful life of each asset, with the exception of: - land purchased singly or incorporated into the value of buildings, which has an indefinite life. The bifurcation of land and buildings values that make up a single property asset is made on the basis of independent surveyors reports; 318

319 - works of art, as their useful life cannot be estimated and their value typically appreciates over time. Depreciation is usually provided at the following rates: - buildings: annual rate of 1.5 per cent; - other tangible assets: at tax rates judged appropriate. - derecognised on sale or when they cease to provide the future economic benefits expected to be derived from their use. 9. Intangible assets Intangible assets include goodwill and software. Goodwill arises on the acquisition of subsidiary and associated entities and joint ventures, and represents the excess of the fair value of the purchase consideration and direct costs making the acquisition over the fair value of the Bank s share of the assets acquired and the liabilities assumed on the date of acquisition. When the fair value of the purchase consideration and acquisition costs is lower than the fair value of the Bank s share of assets acquired and liabilities assumed (so-called badwill ), or when goodwill recorded appears unjustified on the basis of the asset s future earnings capacity, the difference is recorded directly in the income statement. Goodwill is not systematically amortised. However, it is reviewed annually for impairment, or more frequently if there are indications that impairment may have occurred. Impairment loss is recorded in the income statement when the recoverable amount is lower than its current book value. Other intangible assets are recorded as such if the classification is justified by legal or contractual rights and if the assets are able to generate future economic benefits. These intangible assets are recognised at adjusted cost i.e. the initial purchase price inclusive of directly attributable costs less amortisation and impairment (if any) and inclusive of any value adjustments with amortisation provided on the basis of the expected useful life of the asset. Intangible assets are amortised on a straightline basis over their estimated useful life. Intangible assets are derecognised from equity on sale or when they cease to provide future economic benefits. 10. Discontinued operations Discontinued operations are held for sale. Such assets are valued at the lower of book value and fair value, net of selling costs. If depreciation has previously been provided on the assets, it is suspended. The same assets, given their discontinued status, and related economic impacts are recognised separately at equity and the income statement. Single discontinued operations, cash-generating units, either in groups or individual parts, are classified as held for sale when their disposal is considered highly probable. The Bank currently has no discontinued operations. 11. Current and deferred taxes Income taxes current, deferred - is calculated according to tax rates currently in force in Italy and are recognised in the income statement with the exception of those relating to items directly debited or credited in equity. Provisions for tax are determined on the basis of forecasted tax charges (current, deferred). In particular, current taxes represented by advances paid or other tax credits, and deferred taxes are determined on temporary timing differences arising from the tax bases of assets and liabilities and their carrying amounts in the financial statements. Current (anticipated) tax assets are recorded in equity to the extent of the likelihood of their recovery and valued on the basis of the single Group companies capacity, also taking into account the impact of exercising the right to adhere to the Italian consolidated tax plan ( consolidato fiscale ), to generate over the medium/long-term taxable income. Deferred tax liabilities are recognised with the exception of reserves subject to suspended liability to tax. The Group is confident that in the light of the volume of available reserves already subject to taxation, no actions will occur that will end suspension, with liability to taxation that this incurs. Anticipated and deferred taxes are recorded in the balance sheet respectively at tax assets and tax liabilities and are not offset. Current tax assets and deferred tax liabilities are valued systematically so as to take into account any changes in legislation or tax rates. The Bank makes adequate provisions for potential tax liabilities arising from tax inspections announced or from litigation with tax authorities. 319

320 12. Provisions for risks and charges Provisions for retirement and similar obligations as foreseen by specific regulations are recorded under liabilities. The provisions made represent sufficient funds to settle the obligations incurred. Fund balances are calculated by independent actuaries. Provisions are made to other reserves for liabilities, the timing and amount of which are uncertain. Provisions are prudentially calculated in order to satisfy the extent of the obligation and are determined both on the basis of past experience and on independent expert opinion. Fund balances are reviewed at the end of every year and adjusted to reflect best current estimates; in the case of significant additional provisions, term obligations are actualised. In the event of an obligation no longer being likely, the fund is cancelled. Amounts in excess are recognised in the income statement. 13. Debts and securities issued The following are included in this category: amounts to banks, amounts owed to customers, securities issued, subordinated liabilities, finance lease liabilities. Debts, securities issued and subordinated liabilities are: - initially recognised at fair value, normally represented by the amount collected or issue price, plus directly attributable transaction costs. Initial recognition of these liabilities occurs on receipt of funds collected or at issuance of debt securities. The difference between the estimated fair value of financial liabilities issued at below-market conditions and market price is recorded in the income statement; - subsequently valued at amortised cost using the effective interest method. Short-term liabilities, minimally impacted by time factors, are recognised at the amount collected; - derecognised on maturity or extinction of contractual obligation, or repurchased in the case of bonds issued, the difference between the book price and repurchase price of which is recorded in the income statement. The subsequent sale of repurchased securities is considered for accounting purposes as a new issue. The new placement price is recorded with no impact on the income statement. 14. Financial liabilities held for trading Financial liabilities held for trading include held for trading derivatives with a negative value including those linked to fair value options, or derivatives held for the management of risk relating to financial assets and liabilities held for trading. Financial liabilities held for trading are: - initially recognised at fair value excluding direct and incremental transaction costs; - recorded at subscription date; - subsequently held at fair value with cumulative gain or loss on sale recognised in the income statement; - derecognised when the related contractual obligations have been substantially satisfied. 15. Financial liabilities designated at fair value Banca Carige has classified in this category the structured debt securities issued by the Bank. The inscription, evaluation and derecognition policies are explained at sub 5) Financial assets designated at fair value. 16. Currency transactions Foreign currency transactions are translated into euro, the Bank s functional currency, using the exchange rates prevailing at the dates of the transactions. At the close of each accounting period (annual, interim) balances denominated in foreign currencies are handled as follows: - monetary items are translated using the exchange rate prevailing at the period end; - non-monetary items measured at historic cost are translated using the exchange rate prevailing at the transaction date; - non-monetary items measured at fair value are translated at the exchange rate prevailing at the period end. Exchange differences arising on the settlement of monetary items, or on the translation of monetary items using rates that differ from those applied when the transaction was initially recorded or different from those applicable in the previous accounting period are recognised in the income statement in the period in which they arise. Translation differences on non-monetary assets the gains or losses on which are recognised in equity are included directly in equity. 320

321 Translation differences on non-monetary assets the gains or losses on which are recognised in the income statement are included in the income statement. The financial statements of Group entities with a functional currency different from euro are translated using the exchange rate prevailing at the period end. Exchange differences arising on the assets of Group entities are recorded at consolidated reserves and transferred to the income statement solely in the period when the asset is sold. - interest on arrears and other late payments is recorded in the income statement at the moment of collection; - dividends are recorded in the income statement at the date in which they are approved by Banca Carige shareholders. 17. Other information - Severance pay provisions The severance pay or termination indemnity and long-service awards are recorded on the basis of their current actuarial value calculated by an independent actuary. The Projected Unit Credit Method is used in estimating future requirements on the basis of historical analyses and statistics and demographic curves. The actualisation rate adopted is a market interest rate. Contributions made each year are considered as separate units and valued singly in order to calculate the final entitlement. With regards to severance pay provisions, actuarial calculations are in line with nationallyaccepted standards and in the case of phenomenon not representing significant historical series the actuarial value may be recorded. In the case of doubts regarding the validity of the actuarial calculation, recalculation may be made adopting nationally-accepted standards. - Own shares Own shares held are deducted from shareholders equity. Profits or losses on transactions relating to own shares are recorded at specific balance sheet reserves. - Share based payments to employees The Group does not currently engage in equity settled share-based payment transactions in respect for services received from certain of its employees, executives and directors. - Recognition of income receivable Income is recognised at the moment of collection or from the moment it is reasonable to expect that future cash flows will be received. In particular: 321

322 322

323 PART B BALANCE SHEET ASSETS SECTION 1 CASH AND HIGLY LIQUID DEPOSITS - CAPTION Cash and higly liquid deposits: break-down 31/12/05 31/12/04 a) Cash 156, ,897 b) Free deposits with Central Banks Total 156, ,

324 SECTION 2 FINANCIAL ASSETS HELD FOR TRADING CAPTION Financial assets held for trading: product break-down 31/12/05 31/12/04 Listed Unlisted Listed Unlisted A. Cash assets 1. Debt securities 1,066, , Equity securities 385, Shares in collective investment schemes 236,002 60, Loans 4.1 Repurchase agreements 4.2 Others 5. Impaired assets 6. Not derecognised sold assets Total A 1,688, ,863 B. Derivatives instruments 1. Financial derivatives: 24 90, trading 24 72, related to fair value option 18, others 2. Credit derivatives trading related to fair value option 2.3 others Total B 24 91,369 Total (A+B) 1,688, ,232 1,922, ,

325 2.2 Financial assets held for trading: owers/issuers break-down 31/12/05 31/12/04 A. Cash assets 1. Debt securities 1,255,623 a) Governments and Central Banks 997,257 b) Other public bodies 1,913 c) Banks 44,610 d) Others 211, Equity securities 385,914 a) Banks 382,092 b) Other issuers: 3,822 - insurance companies - financial institutions 81 - not financial institutions 3,741 - others 3. Shares in collective investment schemes 296, Loans a) Governments and Central Banks b) Other public bodies c) Banks d) Others 5. Impaired assets a) Governments and Central Banks b) Other public bodies c) Banks d) Others 6. Not derecognised sold assets a) Governments and Central Banks b) Other public bodies c) Banks d) Others Total A 1,938,034 B. Derivatives instruments 91,393 a) Banks 48,548 b) Customers 42,845 Total B 91,393 Total (A + B) 2,029,427 2,359,

326 The break-down of caption 3 ("Shares in collective investment schemes") is: Amount Stock 2,988 Bond 94,176 Flexible 142,764 Balanced 54,475 Hedge Fund 2,030 Other 64 Total A 296, Financial assets held for trading: derivatives instruments Derivatives/objects Interest rates Foreign currency and gold Equity securities Loans Other Total 31/12/05 Total 31/12/04 A. Listed derivatives 1. Financial derivatives: * With exchange of principal Options purchased - Other derivatives * Without exchange of principal - Options purchased - Other derivatives 2. Credit derivatives: * With exchange of principal * Without exchange of principal Total A B. Unlisted derivatives 1. Financial derivatives: 24,017 17,665 49,194 90,876 * With exchange of principal 17,665 8,989 26,654 - Options purchased 5,506 8,989 14,495 - Other derivatives 12,159 12,159 * Without exchange of principal 24,017 40,205 64,222 - Options purchased ,205 40,318 - Other derivatives 23,904 23, Credit derivatives: * With exchange of principal 188 * Without exchange of principal 305 Total B 24,017 17,665 49, ,369 Total (A+B) 24,041 17,665 49, ,393 86,

327 SECTION 4 FINANCIAL ASSETS AVAILABLE FOR SALE CAPTION Financial assets available for sale: product break-down Caption/Amount 31/12/05 31/12/04 Listed Unlisted Listed Unlisted 1. Debt securities 75,894 77, Equity securities 61, , At fair value 61, , At cost 12, Shares in collective investment schemes 4. Loans 5. Impaired assets 6. Not derecognised sold assets Total 137, ,373 80,227 98,

328 4.2 Financial assets available for sale: owers/issuers break-down Caption/Amount 31/12/05 31/12/04 1. Debt securities 153,578 a) Governments and Central Banks 52,211 b) Other public bodies c) Banks 19,115 d) Other 82, Equity securities 622,841 a) Banks 549,109 b) Other issuers: 73,732 insurance companies 55,925 financial institutions 8,477 not financial institutions 9,330 others 3. Shares in collective investment schemes 4. Loans a) Governments and Central Banks b) Other public bodies c) Banks d) Other 5. Impaired assets a) Governments and Central Banks b) Other public bodies c) Banks d) Other 6. Not derecognised sold assets a) Governments and Central Banks b) Other public bodies c) Banks d) Other Total 776, ,310 Caption 2a Capital securities- banks includes Banca Carige s holding in the Bank of Italy of euro 549,109 recognised at fair value (the Italian central bank s total shareholders equity at 31/12/2004 divided by the number of shares in possession). This fair value proxy will be used until an IFRS-compliant valuation of shareholders equity is provided by the Bank of Italy. The valuation method adopted by Banca Carige (total shareholders equity of the Bank of Italy divided by shares in possession) has already been adopted in the Italian banking sector by those entitled by law to purchase shares in the Bank of Italy. The validity of the method adopted is further confirmed by the fact that the purchase on the part of a European Member State of a holding in the central bank of another country was recognised at a value higher than recorded total shareholders equity. With reference to the provisions of article 19, line 10, Law 262/2005 on the question of a redefinition of the ownership structure of the Italian central bank and specifically the methods foreseen for transferring shareholdings, the Board of Directors and the Board of Statutory Auditors intend to promote appropriate legal action when and where required to protect the interests of the Company and its shareholders. 328

329 SECTION 6 LOANS TO BANKS CAPTION Loans to banks: product break-down 31/12/05 31/12/04 A. Deposits with Central Banks 130, Fixed-term deposits Compulsory reserve 129, Repurchase agreements 4. Other 7 B. Deposits with banks 824, Current accounts and deposits 234, Fixed-term deposits 470, Other loans 100, Repurchase agreements 75, Leased assets 3.3 Other 25, Debt securities 5. Impaired assets 18, Not derecognised sold assets Total (net-book value) 955,396 1,590,732 Total (fair value) 955, Loans to banks: assets with specific hedging 31/12/05 1. Fair value hedged loans 25,186 a) interest rate risk 25,186 b) exchange-rate risk c) credit risk d) more risks 2. Cash flows hedged loans a) interest rate risk b) exchange-rate risk c) Other Total 25,

330 SECTION 7 LOANS TO CUSTOMERS CAPTION 70 Loans to customers: product break-down 31/12/05 31/12/04 1. Current accounts 1,280, Repurchase agreements 3. Mortgages 5,220, Credit cards, personal loans and salary backed loans 159, Leased assets 686, Factoring 103, Other operations 2,578, Debt securities 9. Impaired assets 500, Not derecognised sold assets 741,659 Total (net book value) 11,272,526 9,198,087 Total (Fair value) 11,391,

331 7.1 Loans to customers: owers/issuers break-down 31/12/05 31/12/04 1. Debt securities a) Governments b) Other public bodies c) Other issuers not financial insitutions financial institutions insurance companies others 2. Loans to: 10,030,065 a) Governments 449,828 b) Other public bodies 468,185 c) Other issuers 9,112,052 not financial insitutions 5,894,279 financial institutions 466,590 insurance companies others 2,751, Impaired assets: 500,802 a) Governments b) Other public bodies 382 c) Other issuers 500,420 not financial insitutions 380,911 financial institutions 6,818 insurance companies others 112, Not derecognised sold assets: 741,659 a) Governments b) Other public bodies c) Other issuers 741,659 not financial insitutions 55,994 financial institutions 65 insurance companies others 685,599 Total 11,272,526 9,198,

332 Loans to customers: assets with specific hedging Transaction type/values 31/12/05 1. Loans subject to fair value hedges 277,803 a) interest rate risk 277,803 b) exchange-rate risk c) credit risk d) multiple risks 2. Loans subject to cash flows hedges a) interest rate risk b) exchange-rate risk c) Other Total 277, Leased assets Receivables relating to finance leases recorded at table 7.1 amounting to 686,912,000 are exclusively performing positions collected at year end or due for collection. Gross assets classified as finance leases amounted to 1,071,911 thousands of euros. Net implicit receivables totalled 697,085 thousands of euros and are distributed in the following categories: initial gross investment net implicit receivable motor cars 49,901 23,433 equipment, plant and machinery 163,585 74,444 non industrial property 388, ,735 industrial property 434, ,968 boats and marine craft 35,203 21,505 Total 1,071, ,085 The distribution by remaining contract life is: Distribution by remaining contract life Estimated remaining useful life assets having reached the end of useful life within 1 year from 1 to 5 years more than 5 years Total gross investment 374,826 95, , ,456 1,071,911 Remaining implicit receivable - 95, , , ,085 Total 332

333 SECTION 8 HEDGING DERIVATIVES CAPTION 80 Hedging derivatives: break-down on the basis of contracts and underlying assets Derivatives/underlying assets Interest rates Foreign currencies and gold Equity securities Loans Other Total A. Listed derivatives 1. Fiancial derivatives: * With exchange of principal - Options purchased - Other derivatives * Without exchange of principal - Options purchased - Other derivatives 2. Credit derivatives: * With exchange of principal * Without exchange of principal Total A B. Unlisted derivatives 1. Fiancial derivatives: 54,985 54,985 * With exchange of principal - Options purchased - Other derivatives * Without exchange of principal 54,985 54,985 - Options purchased Other derivatives 54,124 54, Credit derivatives: * With exchange of principal * Without exchange of principal Total B 54,985 54,985 Total 31/12/05 (A+B) 54,985 54,985 Total 31/12/04 (A+B) 20, Hedging derivatives: break-down for headged portfolio and hedge type (net book value) Fair Value Cash flows Operations/hedge type interest rate risk exchangerate risk Specific credit risk price risk more risks 1. Financial assets available for sale X X 2. Loans 20 X X X 3. Financial assets held to maturity X X X X 4. Portfolio X X X X X X Total assets Financial liabilities 54,104 X X X 2. Portfolio X X X X X X 861 Total liabilities 54, General Specific General 333

334 SECTION 10 EQUITY INVESTMENTS CAPTION Holdings in jointly-controlled entities accounted for under the equity method and in entities in which the Group has a significant influence: details regarding the nature and size of the holding Company name Registered office Size of holding % Voting rights (1) (2) Effective Potential A. Outright control 1. Cassa di Risparmio di Savona SpA Savona Cassa di Risparmio di Carrara SpA Carrara Banca del Monte Lucca SpA Lucca Banca Cesare Ponti SpA (3) Milan Carige Assicurazioni SpA (4) Milan Carige Vita Nuova SpA Genoa Carige Asset Management SpA Genoa Centro Fiduciario SpA Genoa Argo Finance One Srl Genoa Priamar Finance SpA Genoa Columbus Carige Immobiliare SpA Genoa Galeazzo srl Genoa Immobiliare Vernazza Srl (4) Genoa B. Jointly-controlled entities C. Companies subject to significant influence 1. Autostrada dei Fiori SpA Savona Frankfurter Bankgesellschaft AG Frankfurt Consorzio per il Giurista di Impresa Scrl Genoa (1) Availability of voting rights, effective or potential. (2) Figure provided only where different from shareholding. (3) Effective voting rights expressed as a percentage differs from the shareholding as this includes voting rights related to shares held as pledge (7.66 per cent) subject also to a call option (see section 10.4). (4) Effective voting rights expressed as a percentage differs from the shareholding as a calculation does not take into account own shares in portfolio. 334

335 10.2 Holdings in jointly-controlled entities accounted for under the equity method and in entities in which the Bank has a significant influence: balance sheet and income statement lines Name Total assets Total revenues Book value Fair value A. Outright control 879, Cassa di Risparmio di Savona SpA 1,356,360 82,357 10, , ,587 X 2. Cassa di Risparmio di Carrara SpA 1,026,294 78,723 6,453 99, ,606 X 3. Banca del Monte Lucca SpA 663,595 38,597 4,174 36,637 65,310 X 4. Banca Cesare Ponti SpA 308,385 20,610 1,242 22,391 34,128 X 5. Carige Assicurazioni SpA 1,126, ,304 3, , ,226 X 6. Carige Vita Nuova SpA 1,585, ,071 2,241 52, ,347 X 7. Carige Asset Management SpA 20,258 41,567 2,910 8,585 5,424 X 8. Centro Fiduciario SpA 2, , X 9. Argo Finance One Srl X 10. Priamar Finance SpA X 11. Columbus Carige Immobiliare SpA 54,788 6, ,446 36,818 X 12. Galeazzo srl 4, ,962 3,836 X 13. Immobiliare Vernazza Srl 10,600 2,308 1,037 6,221 31,164 X B. Jointly-controlled entities X C. Companies subject to significant influence 15, Autostrada dei Fiori SpA 823, ,288 27, ,217 6,185 non-listed 2. Frankfurter Bankgesellschaft AG 499,650 16, ,915 9,712 non-listed 3. Consorzio per il Giurista di Impresa Scrl 43 3 (35) non-listed Total 895,795 Profit (loss) Shareholders' equity 10.3 Equity holdings: annual variations (current legislation) 31/12/05 A. Opening balances 893,088 B. Increases 2,707 B.1 Purchases 2,700 B.2 Recoveries B.3 Revaluations B.4 Other changes 7 C. Decreases C.1 Sales C.2 Depreciation and amortization C.3 Other changes D. Closing balances 895,795 E. Total revaluations F. Total depreciation and amortization 335

336 Variations are detailed as follows: PURCHASES BANCA DEL MONTE DI LUCCA SPA Subscription of 2,700,000 shares, nominal unit value euro 0,52. (Our share holding 54,00%) 2,700 Total purchases 2,700 OTHER VARIATIONS CONSORZIO PER IL GIURISTA DI IMPRESA SCRL Amount assignable for the covering of losses recorded during Total other variations Commitments referred to holdings in controlled entities Company subject to commitment purchase % Commitment Year of expiry 1. Cassa di Risparmio di Savona SpA 4,10 11, Banca Cesare Ponti SpA 20,00 13, , ,66 4, Banca del Monte di Lucca 6,00 5, Total 48,939 The amount stated in the table refers to a commitment to purchase on the part of C.R. Savona and corresponds to the minimum amount stipulated in the contract. On exercising the put option, an independent expert appointed in agreement with both parties will perform a valuation. In contrast, the figure referring to Banca Cesare Ponti corresponds to the maximum amount payable. In the event of negative performances recorded by financial and economic parameters fixed in the contract, the price may be lowered. The commitment on the part of Banca del Monte di Lucca represents the completion of a residual part of an already exercised option. 336

337 SECTION 11 TANGIBLE ASSETS CAPTION Tangible assets: break-down of assets designated at purchased cost Asset/Value 31/12/05 31/12/04 A. Functional assets 1.1 owned by the Bank 560, ,740 a) land 171, ,245 b) buildings 263, ,452 c) furniture and fittings 2,991 3,465 d) electrical equipment 6,636 6,193 e) other 115,304 92, leased assets a) land b) buildings c) furniture and fittings d) electrical equipment e) other Total A 560, ,740 B. Tangible assets held for investment 2.1 owned by the Bank 69,148 70,109 a) land 28,825 28,898 b) buildings 40,323 41, leased assets a) land b) buildings Total B 69,148 70,109 Total A+B 629, ,849 Functional assets include property (IAS 16) amounting to million, which are stated in the explanatory notes by component type (land and buildings). Tangible assets held for investment include investment property (IAS 40) amounting to 69.1 million, which are stated in the explanatory notes by component type (land and buildings). Caption A.1.1 e) others includes leased assets for 84.9 million. 337

338 11.3 Instrumental tangible assets: annual variations Lands Buildings Furnitures Electronic installations Others Total A. Gross opening balances 170, ,953 18,608 35, , ,649 A.1 Total net value reductions 4,501 15,143 28,842 41,423 89,909 A.2 Net opening balances 170, ,452 3,465 6,193 92, ,740 B. Increases: 1,623 6, ,880 25,306 36,236 B.1 Purchases 1,623 3, ,880 1,825 9,716 B.2 Capitalized expenses for improvements 3,039 3,039 B.3 Writebacks B.4 Positive variations of assets designated at fair value imputed to: a) stockholders' equity b) income statement B.5 Positive exchange-rate differencies B.6 Transfers from investment properties B.7 Other changes 23,481 23,481 C. Decreases: 4, ,437 2,386 9,726 C.1 Sales C.2 Amortization 4, ,397 2,354 9,636 C.3 Impairment allowances imputed to a) stockholders' equity b) income statement C.4 Negative variations of assets designated at fair value imputed to a) stockholders' equity b) income statement C.5 Negative exchange-rate differencies C.6 Transfers to: a) investment tangible assets b) assets being sold C.7 Other changes D. Net closing balances 171, ,450 2,991 6, , ,250 D.1 Total net value reductions 7,917 15,392 28,008 41,164 92,481 D.2 Gross closing balances 171, ,367 18,383 34, , ,731 E. Cost valuation Instrumental tangible assets are valued at cost. Caption B.7 Other changes includes net variation of leased assets. 338

339 11.4 Investment tangible assets: annual variations Lands Buildings A. Opening balances 28,898 41,211 B. Increases: B.1 Purchases B.2 Capitalized expenses for improvements B.3 Positive variations of assets designated at fair value B.4 Writebacks B.5 Positive exchange-rate differencies B.6 Transfers from functional properties B.7 Other changes C. Decreases: C.1 Sales C.2 Amortization 624 C.3 Negative variations of assets designated at fair value C.4 Impairment allowances C.5 Negative exchange-rate differencies C.6 Transfers to other assets portfolio a) funcional properties b) not current assets being sold C.7 Other changes D. Closing balances 28,825 40,323 E. Valued at fair value 28,825 41,570 Investment tangible assets are valued at cost. 339

340 SECTION 12 INTANGIBLE ASSETS CAPTION Intangible assets : assets break-down 31/12/05 31/12/04 Caption/Value Definite life Indefinite life Definite life Indefinite life A.1 Goodwill X 446,642 X 442,392 A.2 Other intangible assets 14,459 14,207 A.2.1 Assets valued at cost: 14,459 14,207 a) Generated internally intangible assets b) Other assets 14,459 14,207 A.2.2 Assets designated at fair value: a) Generated internally intangible assets b) Other assets Total 14, ,642 14, ,392 Intangible assets different from goodwill are amortized in five years with constant amount Intangible assets: annual variations Goodwill Other intangible assets internally generated Other intangible assets Limited Unlimited Limited Unlimited Total A. Opening balance 463,663 29, ,216 A.1 Total net value reductions 21,271 15,346 36,617 A.2 Net opening balance 442,392 14, ,599 B. Increases: 4,250 7,522 11,772 B.1 Purchases 7,522 7,522 B.2 Increases in internal intangible assets B.3 Value adjustments B.4 Positive variations in fair value - shareholders' equity - income statement B.5 Positive exchange variations B.6 Other variations 4,250 4,250 C. Reductions: 7,270 7,270 C.1 Sales C.2 Value adjustments 7,270 7,270 - Amortisation 7,270 7,270 - Depreciation + shareholders' equity + income statement C.3 Negative variations in fair value - balance sheet - income statement C.4 Transfer to non current assets awaiting sale C.5 Negative exchange variations C.6 Other variations D. Net closing balance 446,642 14, ,101 D.1 Total net value adjustments 21,271 17,045 38,316 E. Gross closing balance 467,913 31, ,417 F. Valuation at cost 340

341 During the year the value of goodwill recognised in the balance sheet rose by euro 4,250,000 as a result of the return pursuant to Legislative decree 282/2002 of previously recognised stamp duty concessions granted on the acquisitions of business branches belonging to Banco di Sicilia and Banca Intesa. Following impairment tests carried out on goodwill arising from the purchase of 124 bank branches between 2000 and 2002 in addition to three bank acquisitions carried out between 1993 and 2004 (C.R. Savona, C.R. Carrara, Banca Cesare Ponti) which confirmed a recoverable value higher than book value, the caption Goodwill does not include value adjustments. The calculation of use values is carried out separately for each cash-generating unit (bank branches and banks) on the basis of economic-financial models which take into account the methodological and forecasting choices described below. Methodologically, the models: - elaborate analytically financial and economic flows expected to be generated by individual cash-generating units (branches and banks) over a ten-year time horizon, identifying for each year the pre-tax economic results; - calculate the residual value of the investment considered as a permanent source of revenue on the basis of the earnings established for the tenth year, applying an actualisation rate appropriate to the Bank s capital cost; - actualise the two series of income flows using the rate described above; - calculate investment use value by adding together the actualised flows. Forecasting assumption underlying the models: - a ten-year time horizon for valuation of expected future cash flows was judged appropriate for this investment type; - future financial and economic flows take into account: for the years growth levels set in the Group s Strategic Plan as approved by the Board of Directors of Banca Carige on 16 th January 2006; for the years : - interest rate and risk levels forecasted for 2008 in the Strategic Plan; - available estimates regarding deposit and lending balances, service-generated income, and operating costs for the final year are those supplied by external forecasters. 341

342 SECTION 13 TAX ASSETS AND TAX LIABILITIES CAPTION 130 (ASSETS) AND CAPTION 80 (LIABILITIES) Current tax assets: break-down Corresponding income statement caption Current tax assets (taxes prepaid/anticipated) recorded amounted to euro million (income tax (IRES): euro million; regional business tax (IRAP): euro 7.5 million). The most significant items accounted for in the calculation of deferred tax assets are: a) writedowns to credits exceeding the deductible limit (0.40 per cent of credits recognised in the balance sheet) to be deducted over the next nine years exclusively deferred income tax (IRES) assets; b) non deductible valuation arising from fair value hedge accounting of derivatives hedging issued bonds advanced taxes of euro 10.2 million (IRES) and euro 1.6 million (IRAP); c) valuation of bonds issued and covered by derivatives designated fair value hedges- advanced taxes of euro 11 million (IRES) and euro 1.7 million (IRAP); d) derecognition of credit determined at the deferred price arising on the sale of securitised credits (following rerecogntion of the same) - advanced taxes of euro 15.1 million (IRES) and euro 2.4 million (IRAP); Corresponding shareholders equity caption Recorded deferred tax assets amounted to euro 0.8 million (IRES: euro 0.7 million; IRAP: euro 0.1 million). Deferred tax assets refer substantially to derivatives qualifying as cash flow hedges of future cash flows with a corresponding shareholders equity caption Deferred tax liabilities: break-down Corresponding income statement caption Deferred tax liabilities recorded amounted to euro million (IRES: euro million; IRAP: euro 20.6 million). The most significant items accounted for in the calculation of deferred tax liabilities are: a) revaluation of property on first-time adoption at deemed cost and the transfer of amortisation charges on land to the balance sheet deferred tax liabilities of euro 80.3 million (IRES) and euro 12.3 million (IRAP); b) application of fair value hedge accounting to derivatives covering bonds issued deferred tax liabilities of euro 11.2 million (IRES) and euro 1.8 million (IRAP); c) tax deduction only of amortisation on property and goodwill (ex. Article 109 TUIR) deferred tax liabilities of euro 13.5 million (IRES) and euro 2.2 million (IRAP). Corresponding shareholders equity caption Recorded deferred tax liabilities amounted to euro 39.2 million (IRES: million; IRAP: euro 0.7 million). 342

343 The most significant items accounted for in the calculation of deferred tax liabilities are: a) available for sale debt and equity securities recorded at fair value (IRES: euro 32.9 million); b) the equity component contained in bonds in issue convertible into shares (IRES: euro 5.6 million; IRAP: euro 0.1 million). Variations in current taxes (with corresponding captino recorded in the incombe statement) 31/12/05 31/12/04 1. Opening balance 37, Increases 141, Current taxes arising during the year 140,384 a) referring to previous business years b) arising from changes in accounting standards (1) 97,997 c) writebacks d) other 42, New taxes or increases in tax rates 1, Other increases - 3. Reductions 36, Current taxes cancelled during the year 36,520 a) reallocations 36,520 b) writedowns to amounts deemed irrecoverable - c) changes in accounting standards Reductions in tax rates Other reductions - 4. Final amount 143,281 37,975 (1) On first-time adoption of IAS 32 and IAS 39 the contra entry is recorded in the balance sheet and not in the income statement. 343

344 Variations in deferred taxes (with corresponding amount recorded in the income statement) 31/12/05 31/12/04 1. Opening balance 115, Increases 56, Current taxes arising during the year 52,894 a) referring to previous business years 1,355 b) arising from changes in accounting standards 29,526 c) other 22, New taxes or increases in tax rates 3, Other increases - 3. Reductions 17, Current taxes cancelled during the year 17,964 a) reallocations 17,964 b) changes in accounting standards - c) other Reductions in tax rates Other reductions - 4. Final amount 154, ,948 (1) On first-time adoption of IAS 32 and IAS 39, the contra entry is recorded in the balance sheet and not in the income statement Variations in current taxes (with corresponding amount recorded at shareholders equity) 31/12/05 31/12/04 1. Opening balance - 2. Increases Current taxes arising during the year 765 a) referring to previous business years b) arising from changes in accounting standards 538 c) other New taxes or increases in tax rates Other increases - 3. Reductions 3.1 Current taxes cancelled during the year a) reallocations b) writedowns to amounts deemed irrecoverable c) changes in accounting standards 3.2 Reductions in tax rates 3.3 Other reductions 4. Final amount

345 13.3 Variations in deferred taxes (with corresponding amount recorded at shareholders equity) 31/12/05 31/12/04 1. Opening balance - 2. Increases 39, Current taxes arising during the year 39,732 a) referring to previous business years b) arising from changes in accounting standards 7,103 c) other 32, New taxes or increases in tax rates Other increases - 3. Reductions Current taxes cancelled during the year 509 a) reallocations - b) changes in accounting standards 509 c) other Reductions in tax rates Other reductions - 4. Final amount 39,223 - Other informations Deferred tax rates are: Income tax (IRES): 33 per cent; regional business tax (IRAP): 5.25 per cent. The regional tax rate of 5.25 per cent is that applied from 2006 in Liguria, the Bank s primary operating area. No provisions have been made for deferred tax liabilities referring to reserves subject to a suspension of liability to taxation (total amount: euro 40.7 million)in the light of: - the substantial nature of reserves not subject to suspension which can be utilised for possible provisions; and - the fact that distribution, even partial, from reserves subject to suspension to tax has never previously occurred and is widely considered to be an extremely remote possibility (Law 576/1975 and Law 72/1983). 345

346 SECTION 15 OTHER ASSETS - CAPTION Other assets: break-down Unprocessed transactions 12,135 Amounts awaiting collection 20,919 Transactions awaiting completion 372,996 Current account cheques drawn on third parties 51,273 Current account cheques drawn on the bank 11,384 Taxes advanced on behalf of third parties 2,606 Deposits representing own-name guarantees 336 Receivables ready for collection 41,096 Upkeep and improvement costs on third party property 2,182 Others 19,602 Total ,529 Total ,

347 LIABILITIES SECTION 1 AMOUNTS OWED TO CREDIT INSTITUTIONS - CAPTION Amounts owed to credit institutions: product break-down Type of operations/values 31/12/05 31/12/04 1. Amounts owed to central banks Amounts owed to banks 1,179, Current accounts and free deposits 22, Term deposits 499, Financing 379, Leasing Others 379, Repurchase agreements Liabilities for non derecognised sold assets 278, Debit repurchase agreements 278, Others Other debts - Total 1,179,575 1,129,424 Fair value 1,179,

348 SECTION 2 AMOUNTS OWED TO CUSTOMERS CAPTION Amounts owed to customers: product break-down Type of transaction/value 31/12/05 31/12/04 1. Current accounts and demand deposits 6,961, Tied deposits 6, Third party funds under administration Loans 6, Finance leases Other 6, Debts for the repurchase of own capital instruments - 6. Liabilities corresponding to assets sold and not derecognised 855, Repos 111, Other 743, Other amounts payable 11,620 Total 7,841,871 6,710,231 Fair value 7,841,

349 SECTION 3 DEBT SECURITIES IN ISSUE CAPTION Debt securities in issue: product break-down 31/12/05 31/12/04 Securities/Values Balance Balance Fair Value value value A. Listed securities 4,311,458 4,308, Bonds 4,311,458 4,308, Other securities B. Unlisted securities 363, , Bonds 2. Other securities 363, ,950 Total 4,675,408 4,672,342 5,101, Details of the caption 30 "Debt securities in issue" : subordinated securities Code Nominal value Balance value Currency Interest rate Maturity XS , ,527 euro Euribor 3 months + annual spread of 0,80 28/11/2011 IT ,055 90,130 euro 1,5% + 16% at maturity 05/12/2013 XS ,000 80,129 euro Total 582, ,786 Euribor 3 months + annual spread of 0,25 24/08/2007 Qualitative informations related to issued subordinated securities are in the Part F of the Balance sheet. 3.3 Securities in issue: securities by hedge type 31/12/05 1. Fair value hedges 1,377,187 a) interest rate risk 1,377,187 b) exchange rate risk c) multiple risks 2. Cash flow hedges a) interest rate risk b) exchange rate risk c) other 349

350 SECTION 4 FINANCIAL LIABILITIES HELD FOR TRADING CAPTION Financial liabilities held for trading: break-down by type 31/12/05 31/12/04 Type of transaction/values FV FV VN FV* VN Q NQ FV* A. Cash liabilities 1. Due to banks 2. Due to customers 3. Debt securities 3.1 Bonds X X 3.2 Other securities X X Total A B. Derivatives X X X X 1. Financial derivatives X 7, ,815 X X X 1.1 trading X 19 93,920 X X X 1.2 Connected with the fair value option X 48,895 X X X 1.3 Others X 7,082 X X X 2. Credit derivatives X 0 1,204 X X X 2.1 trading X 1,204 X X X 2.2 Connected with the fair value option X X X X 2.3 Others X X X X Total B X 7, ,019 X X X Total A+B X 7, ,019 X X 94,872 X 350

351 4.4 Financial liabilities held for trading: derivatives Derivatives / Underlying assets Interest rates Currency and gold Shares and other equity securities Total 31/12/05 A. Quoted derivatives 1. Financial derivatives: 19 7,082 7,101 * With exchange of principal 19 19? Issued options? Other derivatives * Without exchange of principal 7,082 7,082? Issued options 7,082 7,082? Other derivatives 2. Derivatives on credits: * With exchange of principal * Without exchange of principal Total A 19 7,082 7,101 B. Non quoted derivatives 1. Financial derivatives: 113,347 17,670 11, ,815 * With exchange of principal 17,670 17,670? Issued options 5,506 5,506? Other derivatives 12,164 * Without exchange of principal 113,347 11, ,145? Issued options ,798 11,911? Other derivatives 113, , Derivatives on credits: 1,204 1,204 * With exchange of principal 1,204 1,204 * Without exchange of principal Total B 113,347 17,670 11,798 1, ,019 Total (A+B) 113,366 17,670 18,880 1, ,120 Loans Other 351

352 SECTION 5 FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE CAPTION Financial liabilities designated at fair value: product break-down 31/12/05 31/12/04 Type of transaction/value FV FV VN FV* VN Q NQ Q NQ 1. Amounts owed to banks 2. Amounts owed to customers 3. Debt securities 513,422 21, , ,227 Total 513,422 21, , ,227 FV* Liabilities designated at fair value include structured debt securities issued by the Bank, illustrating the value of the related hedging derivative at 2.1 Financial assets held for trading and 4.1 Financial liabilities held for trading in part B of the explanatory notes. 352

353 SECTION 6 HEDGING DERIVATIVES - CAPTION Hedging derivatives: contracts and assets break-down Derivatives / Underlying assets Interest rates Currency and gold Shares and other equity securities Loans Other Total A. Quoted derivatives 1. Financial derivatives: * With exchange of principal - Issued options - Other derivatives * Without exchange of principal - Issued options - Other derivatives 2. Credit derivatives: * With exchange of principal * Without exchange of principal Total A B. Non-quoted derivatives 1. Financial derivatives: 39,697 39,697 * With exchange of principal - Issued options - Other derivatives * Without exchange of principa 39,697 39,697 - Issued options - Other derivatives 39,697 39, Credit derivatives: * With exchange of principal * Without exchange of principal Total B 39,697 39,697 Total A+B (31/12/2005) 39,697 39,697 Total A+B (31/12/2004) 2,

354 6.2 Hedging derivatives: break-down for hedged portfolio and hedge type Operations /Hedge type interest rate risk Fair Value Specific exchange rate risk credit risk price risk 1. Financial assets available for sale X X 2. Loans 23,046 X X X 3. Financial assets held to maturity X X X X 4. Portfolio X X X X X X Total assets 23, Financial liabilities 16,651 X 2. Portfolio X X Total liabilities 16,651 more risks General Financial flows Specific General 354

355 SECTION 8 TAX LIABILITIES CAPTION 80 See section 13 of the assets. 355

356 SECTION 10 OTHER LIABILITIES CAPTION Other liabilities: break-down Unprocessed transactions and amounts in transit with branches and subsidiaries 9,146 Guarantees granted by third parties 1,232 Amounts due to tax authorities on behalf of third parties 18,561 Negative value adjustments on bills and notes 128,440 Amounts claimable by customers 71,013 Uncompleted transactions 239,137 Amounts payable to suppliers 44,208 Personnel related charges 10,797 Amounts payable due to settlement value date 9,537 Provisions for guarantees and commitments 9,146 Other items 97,067 Total 31/12/05 638,284 Total 31/12/04 575,

357 SECTION 11 STAFF SEVERANCE PAY PROVISIONS CAPTION Provisions for staff severance pay: annual charges 31/12/05 31/12/04 A. Opening balance 89,637 78,303 B. Increases 11,923 21,261 B.1 Provisions made during the year 11,923 13,294 B.2 Other increases - 7,967 C. Decreases 12,946 9,927 C.1 Amounts paid 10,221 7,431 C.2 Other decreases 2,725 2,496 D. Closing balance 88,614 89,637 The amount recorded at B.2 other increases (euro 7,967,000) at 31/12/04 derives from the first-time adoption of IFRS Other information Termination indemnities cover rights accumulated up to 31 st December 2005 by members of staff in accordance with current legislation and national and company labour agreements. The total amount calculated pursuant to article 2120 Italian Civil Code amounted to at 31/12/05 euro 77,783,000 in comparison to euro 79,244,000 at 31/12/04. The valuation of future termination provisions was performed by independent actuaries on the basis of the criteria identified by IAS 19 ( employee benefits ). The methodology determined both the defined benefit obligation ( DBO ) at 31/12/05 and current service costs ( CSC ) at 31/12/05. DBO and CSC amounts were calculated on the basis of estimated future provisions which, in line with expected changes in salary, will be paid to each employee on entitlement (retirement age, injury, death, resignation, request for advance). Liabilities of the Group are determined exclusively on the basis of the years of service accumulated on the date of valuation and actualised on the same date. The following statistical sources, with distinctions made according to age and sex, have been used: 1. probability of exclusion from calculation due to death, on the basis of ISTAT - Italian National Statistics Institute figures for 2002; 2. probability from exclusion from calculation due to permanent injury, on the basis of specific credit sector research; (probability levels for both were lowered on the basis of Carige employee statistics for the years ); 3. probability of exclusion due to resignation or dismissal was calculated on the basis of Banca Carige employee statistics for the years The following additional elements were also taken into account: - maximum number of requests for advances; 357

358 - frequency of request for first advances and then successive requests; - the share of total termination entitlement represented by each request. Average annual increases of 2 per cent for inflation and 2 per cent for salary increases were used for the entire period of valuation. The nominal actualisation rate adopted was 4.50 per cent. Details of net provisions 31/12/05 Current service costs 3,768 Financial expenses 4,034 Actuarial losses 1,396 Total 9,

359 SECTION 12 PROVISIONS FOR RISKS AND CHARGES CAPTION Provisions for risks and charges: break-down Caption/component 31/12/05 31/12/04 1. Company pension funds 296, , Other provisions for risks and charges 48,693 29, Legal claims and disputes 9,445 4, Personnel charges 39,146 24, Other Total 345, , Provisions for risks and charges: annual changes Pension funds Other funds Total A. Opening balance 296,310 29, ,329 B. Increases 13,619 41,278 54,897 B.1 Provisions during the year 13,619 41,276 54,895 B.2 Changes due to elapsing of time B.3 Changes due to discount rate variations B.4 Other changes 2 2 C. Decreases 13,138 21,604 34,742 C.1 Use during the year 13,138 21,595 34,733 C.2 Changes due to discount rate variations C.3 Other variations 9 9 D. Closing balance 296,791 48, , Defined benefit company pension funds The Supplementary Pension Fund is an internal defined benefit fund without legal personality and has since 14 th October 1999 been enrolled at the Registry of Pension Funds at section III, no The Fund is recorded in the financial statements as a provision for future liabilities. It is grounded on principles of solidarity, e.g. in case of illness of injury, the length of service recognised is higher than that effectively worked. The Fund: - ignores the earnings potential of the provisions made; - protects the assets of the fund member from attack in case of debt; - guarantees exclusively the amount paid in by the employee plus accrued interest in case of premature termination. The characteristics outlined above are supported by case law. 359

360 In accordance with article 9 of Regulation dated 23/1/92, Fund members are: - all employees of Cassa di Risparmio di Genova e Imperia at 30/11/91 and transferred to Banca Carige on 1/12/91, excluding those in temporary employment; - employees of the ex-istituto di Credito Fondiario della Liguria and the ex-mediocredito Ligure in service prior to or at 31/12/91; - former employees of the ex-collection service already in retirement at 1/1/73. Employees taken on after 1/12/91 are the beneficiaries of a fixed cost indemnity payment not covered by the Fund. IFRS adoption did not impact the method used in determining defined benefit funds as the Bank s method of calculating actuarial values was substantially in line with the provisions of IAS 19. The Fund s balance at 31/12/05 amounted to euro 296,791,000, a figure corresponding to the actuarial valuation of the mathematical reserve performed using the project unit credit method and sufficient to guarantee the supplementary pension rights of fund members. 1. Changes during the year During 2005, the Fund s balance rose by euro 0.5 million as a result of benefits paid of euro 13.1 million and provisions of euro 13.6 million, of which euro 0.5 million in staff contributions and euro 7.8 million in revenue contributions. 3 Changes during the year to Fund assets and other information The Fund, which represents the capitalisation of the Company s commitments, is made up by the following elements: 31/12/05 31/12/04 Bonds 215, ,431 Equity investments 35,000 35,000 Property (1) 44,984 21,267 (2) Liquid assets 1,723 31,612 Total 296, ,310 (1) Book value (2) Value ante IAS/IFRS Description of the main actuarial hypothesis As the Group s method of calculating actuarial values was substantially in line with the provisions of IAS 19, IFRS adoption did not impact the method used in determining defined benefit funds. It should be noted that: - actuarial calculations regarding the preparation of the technical statements under Italian GAAP were performed on the basis of the indications provided by IAS 19 (closed group, excluding new entries); - the methodology of actuarial calculations required under IAS 19 for both staff currently in service and those now retired is the same as that used for regular valuations of the Fund ( projected unit credit method ). In particular for employees currently in service, the recording of defined benefit plans under IAS 19 requires an actuarial estimate of liabilities calculated on the basis of the total of benefits matured by employees at the date of valuation. This calculation must also take into account future salary increases; - the rate of actualisation is as indicated by IAS 19, which takes into account the macroeconomic situation at the moment of valuation and the average length of time of expected future payments; - other technical demographic and economic assumptions are in accordance with IAS 19. In the light of above, the valuation methods and procedures used in determining accumulated staff benefits and the Group s commitments are fully in line with IAS

361 12.4 Provisions for risks and charges other provisions 1. Staff charges Staff charges refer to: - short-term productivity bonuses, amounting to 36.2 million, incentives and amounts payable at 31/12/05 as established in the supplementary staff contact agreement; - other long-term seniority benefits, amounting to 3.0 million, payed after 25 years With regards to the latter, in accordance with IAS 19, the value is calculated using the project unit credit method. 2. Legal claims Reserves have been established for current legal claims for which an estimation of potential liabilities and the expected length of proceedings can be determined, in compliance with IAS 37. At 31 st December 2005 total provisions amounted to 9.4 million. The insignificant amount of guarantees reaching maturity meant that no actuarial calculations of this item were carried out. With regards to proceedings arising from the Parmalat scandal and in particular to sums transferred prior to 24 th December 2004, and in the light of the clearly demonstrable correctness of the Bank s behaviour at all times and on the basis of legal advice, the Bank has made no provisions for legal claims. 3. Other provisions This item refers to commitments regarding financial advisors and insurance agents who are not employees of the Bank. At 31 st December 2005 potential liabilities amounted to around euro 900,000, of which euro 700,000 refers to customer claims regarding alleged bond trading irregularities, and euro 200,000 to other claims. The Bank is confident that the claims will be judged unfounded with no negative economic outcome. 361

362 SECTION 14 COMPANY SHAREHOLDER S EQUITY CAPTIONS 130, 150, 160, 170, 180, 190 & Company shareholders equity: break-down Caption/Value 31/12/05 31/12/04 1. Capital 1,113,327 1,113, Additional paid-in capital 263, , Reserves 97, , (Own shares) (1,301) 5. Valuation reserves 698, , Capital instruments 11, Profit (loss) for the year 136,899 89,969 Total 2,321,121 1,862, Capital and Own shares : break-down Nominal value of shares issued Ordinary Savings Total Nominal value of shares in circulation at the end of the year 959, ,429 1,113,327 fully paid-up shares 959, ,429 1,113,327 not fully paid-up shares At 31 st December 2005 share capital amounted to 1,113,326,839 euros, made up by 1,113,326,839 shares of 1 euro each. No changes to share capital were recorded during the year. The share portfolio contains 44 old shares with a nominal value of LIT. 10,000, equivalent to 228 current ordinary shares. The book value of these shares amounts to 426 euros. 362

363 14.3 Capital Number of shares: annual changes Caption/Type Ordinary Savings A. Number of shares at the beginning of the year 959,897, ,429,321 fully paid-up 959,897, ,429,321 not fully paid-up A.1 Own shares (-) -436,327 A.2 Shares in circulation: opening balance 959,461, ,429,321 B. Increases 10,088,493 B.1 New issues on a payment basis: business combinations conversion of bonds exercise of warrants other on a free basis in favour of employees in favour of directors other B.2 Sale of own shares 10,088,493 B.3 Other changes C. Decreases 9,652,394 C.1 Cancellation C.2 Purchase of own shares 9,652,394 C.3 Business conveyance deals C.4 Other changes D. Shares in circulation: closing balance 959,897, ,429,321 D.1 Own shares (+) 228 D.2 Shares in circulation: closing balance 959,897, ,429,321 fully paid-up 959,897, ,429,321 not fully paid-up 363

364 14.5 Income reserves: other information 31/12/05 Legal reserve 88,725 Extraordinary taxed reserve 55,404 Own share reserve - Reserve for the purchase of own shares available 77,000 Reserve for dividends on own shares 106 Reserve pursuant to Legislative Decree 153/99 11,718 Reserve pursuant to Legislative Decree 124/ Reserve pursuant to article 55, Decree of the President of the Republic (DPR) 917/ Reserve following IFRS revaluation of net profit ,572 Reserve following first-time adoption of IFRS (FTA/IFRS) pursuant to article 7, line 3 Legislative Decree 38/2005 6,779 Reserve following first-time adoption of IFRS (FTA/IFRS) pursuant to article 7, line 4 Legislative Decree 38/ ,418 Reserve following first-time adoption of IFRS (FTA/IFRS) pursuant to article 7, line 5 Legislative Decree 38/ ,916 Reserve following first-time adoption of IFRS (FTA/IFRS) pursuant to article 7, line 7 Legislative Decree 38/ ,036 Total profit reserves 68,711 Merger reserve 12,341 Concentration reserve 16,589 Total other reserves 28,930 Total 97,641 The legal reserve was created pursuant to article 2430 Italian Civil Code. The extraordinary taxed reserve was created and is managed according to the decision of the Shareholders Meeting in line with the Bank s by-laws. The reserve for the purchase of own shares was created pursuant to article 2357 et seq. Italian Civil Code. The reserve for dividends on own shares is set up and managed according to the decision of the Shareholders Meeting on the approval of the annual statements. Dividends on own shares in portfolio on the payment date are destined to this reserve. The reserve pursuant to Legislative decree 153/99 was formed in 2000 in order to take advantages of the tax relief foreseen by the same decree (see Explanatory Notes, part A.1 General Introduction section 3 events after 31 st December 2005). The reserve pursuant to Legislative decree 124/93 was formed in 2003 in relation to annual staff termination provisions destined to supplementary pension solutions. The merger reserve was created utilising residual amounts following the merger operations performed in The concentration reserve was set up in 1994 pursuant to Law 218/90 article 7 and subsequent modifications (article 1, Law 489/93) The reserve pursuant to article 55, Decree of the President of the Republic (DPR) 917/86 was created pursuant to the same Decree. 364

365 14.6 Capital instruments: break-down and annual changes Break-down 31/12/05 1. Bonds issued - convertible into shares - equity component 11,517 Total 11,517 Details of the changes in the year: Bonds issued - convertible into shares - equity component A. Opening balance - B. Increases 11,517 B.1 Valuation at FTA 11,402 B.2 Changes arising from sale of convertible bonds in portfolio at 1/1/ D. Closing balance 11, Valuation reserves: break-down and annual changes Caption/Item 31/12/05 31/12/04 1. Available for sale instruments 527, Tangible assets 3. Intangible assets 4. Foreign investment hedges 5. Cash flow hedges -1, Exchange differences 7. Discontinued operations 8. Special revaluation laws 172, ,794 Total 698, ,794 Item 8 special revaluation laws is inclusive of 164,838,000 euros, arising from the FTA/IFRS valuation of property and works of art at deemed cost. 365

366 14.8 Valuation reserves: annual changes Available for sale instruments Tangible assets Intangible assets Foreign investment hedge Cash flow hedge Exchange differences Discontinued operations Special revaluation laws A. Opening balance 172,794 B. Increases 556,150 B.1 Increases in fair value 16,801 x B.2 Other changes 539,349 C. Decreases 29,129 1,289 C.1 Decreases in fair value x C.2 Other changes 28, D. Closing balance 527,021-1, ,794 The values indicated at item B.2 other changes, referring to available for sale financial instruments, and item C.2 Other changes, referring to cash flow hedges, were determined at first-time adoption of IFRS. The designation of the holding in the Bank of Italy at fair value had the following impact on items B.2, C.2 and B.1: - B2: euro 539,216,000; - C.2: euro 28,967 (deferred tax arising on revaluation); - B.1: 9,402,000 (value increase after FTA) Valuation reserves of available for sale instruments: break-down Asset type/value 31/12/05 31/12/04 Positive reserve Negative reserve Positive reserve Negative reserve 1. Debt securities 2, Capital securities 525, O.I.C.R. Shares 4. Loans Total 527, Valuation reserves of available for sale instruments: annual changes Debt securities Equity securities 1. Opening balance 2. Positive variations 2, , Increases in fair value 1,731 15, Reallocation of negative reserves to income statement - due to impairment - due to realisation 2.3 Other variations , Negative variations , Decreases in fair value Reallocation to income statement from positive reserves: due to realisation Other variations 28, Closing balance 2, ,773 O.I.C.R. shares Loans 366

367 SECTION 15 OTHER INFORMATIONS 1. Guarantees given and commitments Operations 31/12/05 31/12/04 1) Financial guarantees 28,562 a) Banks 1,446 b) Customers 27,116 2) Commercial guarantees 1,223,805 a) Banks 7,453 b) Customers 1,216,352 3) Irrevocable commitments to extend credit 811,234 a) Banks 30,354 i) certain to be called on 30,354 ii) not certain to be called on - b) Customers 780,880 i) certain to be called on 154,592 ii) not certain to be called on 626,288 4) Commitments underlying to credit derivatives: sales 83,744 5) Assets held to guarantee securities of third parties 25 6) Other commitments 22,308 Total 2,169,678 2,348, Assets held to guarantee own liabilities and commitments Portfolios 31/12/05 31/12/04 1. Financial assets held for trading 332, , Fiancial assets designated at fair value 3. Fiancial assets available for sale 45, Held-to-maturity investments 5. Loans to banks 6. Loans to customers 7. Tangible assets Bonds provided as collateral for bankers drafts and amounts owed relating to sale and repurchase transactions are shown in the table. 367

368 3. Administration and dealing on behalf of third parties Type of service 1. Financial instruments dealing on behalf of third parties a) Purchases 1,972, Settled 1,970, Not settled 1,858 b) Sales 2,004, Settled 1,996, Not settled 8, Portfolio management 1,290,148 a) individual 1,203,178 b) collective 86, Custody and administration of securities a) third party securities held in deposit in connection with depositary bank's services (excluding asset management) 4,977, Securities issued by the Bank 13, Other securities 4,963,681 b) other third party securities (excluding asset management): other 14,713, Securities issued by the Bank 4,436, Other securities 10,276,913 c) third party securities deposited with third parties 16,823,572 d) own securities deposited with third parties 1,747, Other transactions - orders: collection, transmission and brokering 13,023,424 a) countervalue of acquisition transactions intermediated during the year 7,116,518 b) countervalue of sale transactions intermediated during the year 5,906,906 - bills and similar commercial paper received for collection on behalf of third parties 1,449,452 - holdings of other banks in syndicated loan transactions 301,774 - total invoices relating to factoring 171,043 - lending transactions performed on behalf of public authorities 8,

369 369

370 SECTION 1 INTEREST CAPTIONS 10 AND Interest income and similar revenues: break-down Voci/forme tecniche Attività finanziarie in bonis titoli di Finanziamenti Attività finanziarie Altre attività Totale 31/12/05 Totale 31/12/04 debito deteriorate 1. Attività finanziarie detenute per la negoziazione 191, , Attività finanziarie disponibili per la vendita 3,517 3, Attività finanziarie detenute sino alla scadenza 4. Crediti verso banche 27, , Crediti verso la clientela 441,091 28, , Attività finanziarie valutate al fair value 7. Derivati di copertura 8. Attività finanziarie cedute non cancellate 42,609 42, Altre attività Totale 194, ,093 28, , , Interest income and similar revenues: other informations Interest income on other currencies financial assets total 13,175 thousands of Euros Interest income on leased assets total 26,461 thousands of Euros Interest income on loans using funds managed ob behalf of third parties total 4 thousands of Euros. 1.4 Interest expenses and similar charges: composition Voci/Forme tecniche Debiti Titoli altre passività 31/12/05 31/12/04 1. Debiti verso banche -38,406-38, Debiti verso clientela -49,394-49, Titoli in circolazione -138, , Passività finanziarie di negoziazione 5. Passività finanziarie valutate al fair value -1,351-1, Passività finanziarie a fronte di attività cedute non cancellate -32,809-32, Altre passività -1,745-1, Derivati di copertura -120, ,100 Totale -120, , , , , Interest charges and similar expenses: differences arising from hedging transactions 370

371 Caption 31/12/05 31/12/04 A. Positive differences arising from: A.1 Specific fair value of assets 334 A.2 Specific fair value of liabilities 34,764 A.3 Generic interest rate hedge A.4 Specific cash flow hedge of assets A.5 Specific cash flow hedge of liabilities A.6 Generic cash flow hedge Total positive differences (A) 35,098 B. Negative differences arising from: B.1 Specific fair value of assets -151,235 B.2 Specific fair value of liabilities -3,963 B.3 Generic interest rate hedge B.4 Specific cash flow hedge of assets B.5 Specific cash flow hedge of liabilities B.6 Generic cash flow hedge Total negative differences (B) -155,198 C. Closing balance (A-B) -120,100-48, Interest charges and similar expenses: other information Interest charges generated on liabilities in foreign currency amounted to 14,675 thousands of euros 371

372 SECTION 2 COMMISSION CAPTIONS 40 AND Commission income: break-down Type of service/value 31/12/05 31/12/04 a) guarantees granted 11,169 7,393 b) credit derivatives c) management, dealing and advisory services: 97,415 68, Trading of financial instruments 16,510 1, Currency trading 2,844 2, Portfolio management 8,085 7, individual 7,109 6, collective Custody and administration of securities 2,451 2, Depositary bank 4,275 2, Placement of securities 43,362 38, Order collections 5,833 4, Advisory services 9. Distribution of third-party services 14,055 8, portfolio management individual collective 9.2 insurance products 4,919 3, other products 9,136 4,496 d) collection and payment services 45,088 38,221 e) servicing for securitisation transactions 2,128 2,022 f) services for factoring transactions 1,319 1,325 g) tax collection services h) other services 75,391 67,977 Total 232, ,354 Commissions in caption h) other services are mostly referable to commissions on deposits and overdrawn a/c, credit current accounts and granted loans. 372

373 2.2 Commission income: distribution channels of products and services Channels/Amounts 31/12/05 31/12/04 a) Distribution at Carige branches 65,277 54, Asset management 8,057 7, Securities placement 43,213 38, Services related to third party products 14,007 8,137 b) Distribution at outlets other than at head office Asset management Securities placement Services related to third party products c) Other distribution channels 1. Asset management 2. Securities placement 3. Services related to third party products Total 65,502 54, Commission expenses: breakdown Services/Amounts 31/12/05 31/12/04 a) Guarantees received b) Credit risk derivatives c) Management and dealing services -20,822-4, securities dealing , foreign currency dealing 3. private banking -2,739-1, Bank's portfolio third party's portfolio -2,670-1, custody and administration of securities -1,916-1, placement of securities -15, securities, products and services not delivered at the Bank's head office d) Collection and payment services -14,683-9,021 e) Other services -7,433-3,573 Total -43,691-18,

374 SECTION 3 DIVIDENDS AND OTHER SIMILAR REVENUES CAPTION Dividends and other similar revenues: break-down Captions/Revenues 31/12/05 31/12/04 dividends mutual funds and unit trusts dividends mutual funds and unit trusts revenues revenues A. Financial assets held for trading 4,040 4, B. Financial assets available for sale 2,064 3, C. Financial assets designated at fair value D. Equity investments 38,110 X 29,673 X Total 44,214 4,811 33,

375 SECTION 4 NET INCOME ON FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING CAPTION Net income on financial assets and liabilities held for trading: break-down Revaluations (A) Other gains (B) Write-downs (C) Other losses (D) Net income 1. Financial assets held for trading 40,160 18,217-16,731-89,353-47, Debt securities 12,658 7,131-15,387-87,925-83, Equity securities 23,444 1, ,404 23, Shares in mutual funds and unit trusts 4,058 7,067-1, , Financing 1.5 Other 2,234 2, Financial liabilities held for trading 2.1 Debt securities 2.2 Other 3. Other financial liabilities: exchange-rate difference X X X X 2, Derivatives 53, ,455-42,808-44,023 90, Financial derivatives: 52, ,043-41,937-42,614 88,597 - on debt securities and interest rates 25, ,099-26,564-20,414 80,676 - on equity securities and share indexes 27,056 17,944-15,373-22,200 7,427 - on foreign currency and gold X X X X other 4.2 Credit risk derivatives 516 3, ,409 1,648 Total 93, ,672-59, ,376 45,

376 SECTION 5 NET INCOME FROM HEDGING ACTIVITIES CAPTION Net income from hedging activities: break-down Income types / Values 31/12/05 31/12/04 A. Income from: A.1 Derivatives designated as fair value hedges 12,159 A.2 Hedged assets designated at fair value 1,894 A.3 Hedged liabilities designated at fair value 9,785 A.4 Derivatives designated as cash flow hedges A.5 Assets and liabilities in foreign currency Total income from hedging activities (A) 23,838 B. Expenses relating to: B.1 Derivatives designated as fair value hedges -13,942 B.2 Hedged assets designated at fair value -2,291 B.3 Hedged liabilities designated at fair value -8,981 B.4 Derivatives designated as cash flow hedges B.5 Assets and liabilities in foreign currency Total expenses relating to hedging activities (B) -25,214 C. Net result of hedging activities (A - B) -1,

377 SECTION 6 INCOME (LOSS) ON DISPOSAL CAPTION Income (Loss) on disposal: break-down Income 31/12/05 31/12/04 Loss Net income Income Loss Net income Financial assets 1. Loans to banks 2. Loans to customers 2, , Financial assets available for sale Debt securities Equity securities Shares in mutual funds and unit trusts 3.4 Financing 4. Financial assets held to maturity Total assets 2, ,068 10,084 Financial liabilities 1. Amounts owed to banks 2. Amounts owed to customers 3. Debt securities in issue 807-5,853-5,046 Total liabilities 807-5,853-5,

378 SECTION 7 NET VALUE ADJUSTMENT ON FINANCIAL ASSETS AND LIABILITIES DESIGNATED AT FAIR VALUE CAPTION Net value adjustment on financial assets and liabilities designated at fair value: break-down Revaluations (A) Other gains (B) Write-downs (C) Other losses (D) Net income [(A+B) - (C+D)] 1. Financial assets 1.1 Debt securities 1.2 Equity securities 1.3 Shares in mutual funds and unit trusts 1.4 Financing 2. Financial liabilities 30,551 30, Debt securities in issue 30,551 30, Amounts owed to banks 2.3 Amounts owed to customers 3. Foreign currency financial assets and liabilities: exchange-rate differences X X X X 4. Derivatives Financial derivatives: 18,207-49,035-30,828 - on debt securities and interest rates -49,035-49,035 - on equity securities and share indexes 18,207 18,207 - on foreign currency and gold X X X X - other 4.2 Credit risk derivatives Total derivatives 18,207-49,035-30,828 Total 48,758-49,

379 SECTION 8 NET VALUE ADJUSTMENT CAPTION Net value adjustment on loans: break-down Provisions (1) Recoveries (2) Credits written-off Specific other Portfolio Specific Portfolio 31/12/05 (1)-(2) 31/12/04 A B A B A. Loans to banks 4,915 4,915 B. Loans to customers -11,674-68, ,330 16,299 1,352-47,884 C. Total -11,674-68, ,330 21,214 1,352-42, , Net value adjustment on other financial assets: break-down Cancellazioni Specifiche Provisions (1) Recoveries (2) altre Di portafoglio Specifiche Di portafoglio A B A B 31/12/05 (1)-(2) 31/12/04 A. Guarantees given , ,367 B. Credit risk derivatives C. Commitments D. Altre operazioni E. Total , , Key A = From interests B = Other recoveries 379

380 SECTION 9 ADMINISTRATIVE COSTS CAPTION 150 Personnel costs: break-down Type of costs / Values 31/12/05 31/12/04 1) Employees -255, ,356 a) wages and salaries -167, ,018 b) social security charges -47,643-41,838 c) termination indemnities d) pension charges e) provisions for termination indemnities -9,303-10,891 f) provisions to pension funds and similar commitments: -13,133-19,120 - defined contribution - defined benefit -13,133-19,120 g) amounts paid to external supplementary pension funds: -4,024-4,059 - defined contribution -4,024-4,059 - defined benefit h) costs arising on payment agreements based on own financial instruments i) other employee benefits -13,493-13,430 2) Other personnel ) Directors -2,116-2,114 Total -257, , Average number of employees by category Employees (1) a) executives 51 b) total managers of which: 3 rd and 4 th level 306 managers c) other employees Other personnel (2) 17 Total (1+2) Defined benefit company pension funds: total costs Total provisions to the Defined Benefit Company Pension Fund amounted to euro 13.1 million. More details are provided at section 12 Assets. 9.3 Other employee benefits 380

381 This item includes expenses relating to termination incentives and healthcare policies. 9.4 Other administrative costs: break-down 31/12/05 31/12/04 Indirect taxes -36,140-27,863 - stamp duty and stock exchange contracts -26,254-20,175 - "imposta sostitutiva" Presidential Decree 601/73-6,438-4,528 - ICI (Municipal real estate tax) -1,355-1,316 - other taxes -2,093-1,844 Rental expenses -21,358-19,012 - properties -10,726-10,764 - electronic equipment and software -10,560-8,210 - other Maintenance and management expenses -16,349-15,271 - instrumental owned premises -3,539-3,007 - premises not owned by the Bank -1,272-1,191 - furniture -6,980-7,158 - software -4,558-3,915 Office cleaning -3,757-3,623 Lighting, heating and water -4,524-4,253 Printing and stationery -1,759-2,178 Postage and telephone -11,432-13,025 Security services -2,686-2,945 Travelling and transport -3,349-3,544 Insurance premiums -2,425-2,424 Advertising, promotion and publishing -9,817-7,833 Entertainment expenses Association fees Contributions to institutions and associations Newspapers and reviews subscriptions Professional fees -14,909-16,769 - consultancies -7,758-10,793 - legal expenses -5,474-5,158 - business reports -1, other EDP processing with third parties -11,959-11,137 Auditors' fees Other expenses -13,481-10,670 Total -155, ,

382 SECTION 10 NET PROVISIONS FOR RISKS AND CHARGES CAPTION Net provisions for risks and charges: break-down 31/12/05 31/12/04 - Provisions to reserves for legal proceedings -5,642 - Provisions to other reserves -35 Total -5,

383 SECTION 11 AMORTIZATION AND DEPRECIATION OF TANGIBLE FIXED ASSETS CAPTION Amortization and depreciation of tangibile fixed assets: break-down Asset type/income component Amortisation (a) Impairment adjustments (b) Writebacks (c) Net result (a + b - c) A. Tangible assets A.1 Owned by the Bank -10,260-10,260 - for business use -9,636-9,636 - for investment A.2 Leased assets - for business use - for investment Total -10,260-10,

384 SECTION 12 AMORTIZATION AND DEPRECIATION OF INTANGIBLE FIXED ASSETS CAPTION Amortization and depreciation of intangibile fixed assets: break-down Asset type/income component Amortisation (a) Impairment adjustments (b) Writebacks (c) Net result (a + b - c) A. Intangible assets A.1 Owned by the Bank -7,270-7,270 - Generated internally - Other -7,270-7,270 A.2 Leased assets Total -7,270-7,

385 SECTION 13 OTHER OPERATING INCOME (EXPENSES) CAPTION Other operating expenses: break-down 31/12/05 31/12/04 Finance lease expenses -2,370 Maintenance and upkeep costs on investment property -320 Upkeep and improvement costs on third-party property -1,537 Other costs -2,665 Total -6,892-4, Other operating incombe: break-down 31/12/05 31/12/04 Rent and other income from property 3,281 Costs recoverable from third parties 32, tax recoveries 30,815 - customer insurance premiums 1,299 Direction costs 322 Other income 14,479 Total 50, ,

386 SECTION 14 PROFITS (LOSSES) ON INVESTMENTS IN ASSOCIATES AND COMPANIES SUBJECT TO JOINT CONTROL CAPTION Profits (losses) on investments: break-down Income component/value 31/12/05 31/12/04 A. Income 1. Revaluations 2. Profit on disposal 3. Writebacks 4. Other positive changes B. Expenses Writedowns 2. Adjustments for impairment 3. Losses on disposal Other negative changes Net income Losses on disposal derives from an adjustment to the loss arising from the sale of Eptaconsors SpA in

387 SECTION 17 INCOME (LOSS) FROM DISPOSAL OF INVESTMENTS CAPTION Income (loss) from disposal of investments: break-down 31/12/05 31/12/04 A. Premises Gains from transfers Losses from transfers B. Other assets Gains from transfers Losses from transfers Net result

388 SECTION 18 INCOME TAXES FOR THE PERIOD CAPTION Income taxes for the period: break-down Income component/business segment 31/12/ /12/ Current taxes (-) -64, Variations in current taxes of previous periods (+/-) 9, Decrease in current taxes for the year (+/-) 4. Changes in advanced taxes (+/-) 7, Changes in deferred taxes (+/-) -9, Taxes for the year (-) (-1+/-2+3+/-4+/-5) -57,074-22,426 In the light of current legislative uncertainty concerning the tax implications of IFRS adoption, the Bank prudentially maintained the current tax surplus recorded in previous years for Reconciliation of theoretical and effective tax charges in the financial statements The tax rate on pre-tax profit for the year calculated on the basis of income statement captions 260 and 250 was around 30 per cent. The income tax (IRES) reference rate of 33 per cent was significantly lowered as a result of the substantial exclusion of dividends (95 per cent) from taxable income. Dividends distributed by the subsidiaries and received by Banca Carige amounted to 34 million euros. This figure is excluded in full from taxable income following Banca Carige s adherence in 2004 to the consolidated tax agreement ( consolidato fiscale ). Non deductible costs account for around 2.5 per cent of pre-tax profit (income statement caption 250). With regards to regionally-levied business tax (IRAP) in the light of its specificity and the different definition of taxable income in comparison to that stated at caption 250, the tax charge is nearly twice as high as the theoretical rate. 388

389 389

390 PRIMARY REPORTING Primary reporting, consistent with the provisions of IAS 14 (segment reporting), provides income details by customer-segment type, with the corporate segment starting at 73 million euros. Sectors of activity (thousands of euros) Private and Affluent Corporate Retail Equity investments Other TOTAL Net result of financial activity (1) 118, , ,265 18, , ,611 Operating costs - 90,672-30, , , ,638 Operating profit (loss) 28,059 77,056 6,868 18,091 63, ,972 Loans to banks 955, ,396 Loans to customers 398,179 5,106,912 4,304,134 1,463,301 11,272,526 Equity investments 895, ,795 Due to banks 1,179,575 1,179,575 Due to customers 2,953, ,079 2,326,341 1,785,036 7,841,871 Securities issued 3,138,648 57, ,076 1,065,530 4,675,408 (1) figure includes profits on investments in subsidiaries and profits arising on the disposal of investments. SECONDARY REPORTING The Bank s geographical operating areas in Italy are substantially homogeneous. Consequently, disclosure by geographical areas required by IAS 14 has not been provided. The income-generating contribution of the Bank s sole foreign branch (Nice in France) is marginal. 390

391 391

392 SECTION 1 CREDIT RISKS Qualitative information General issues Banca Carige s credit policy is characterised by a well-established commitment to families, small and medium-sized enterprises (SMEs) and the public administration. In recent years, there has been increased focus on the large corporate segment. Banca Carige, is market leader in Liguria and continues to extend its position in operating regions outside its traditional stronghold. In Liguria, Banca Carige intends to consolidate its market leadership position by increasing principally cross selling opportunities. Development of its customer base focuses above all on families and households, particularly in the areas of consumer credit and mortgages, on small businesses, and increasingly on large corporate clients, who are offered a range of specialised services designed in collaboration with Carige s Finance Division. Outside Liguria, the primary objective is to acquire new customers, focusing in particular on the small business segments. The desire to provide customers with the quality levels they expect has in recent years gone hand-in-hand with the reorganisation of lending services, which has involved customer segmentation and the assignment of duties to specific units or professional profiles (corporate, large corporate, and small business advisors). The guidelines relating to the Bank s lending policies are as follows: - lending to families and households: an organic approach is adopted across the entire lending product portfolio, utilising ex ante and ex post scoring models, renewing product lines and monitoring product appropriateness; - lending to businesses: focus is placed on the small business and SME segments, with increasing attention being placed on large corporate clients. Backup is provided by Basel 2 compliant rating models, which are part of a wider review of the Bank s lending processes that seeks significant economic and organisational benefits in terms of allocative efficiencies, cost reductions, and pricing improvements. In particular, during 2005 Banca Carige put into place a series of commercial measures aimed at SMEs, flanked by an analytical review of the segment as a whole. Corporate-dedicated teams within lending can now access sophisticated ITC based business plans in developing support. Priority is given to enterprises whose investment plans are centred on expanding market share; - lending to the public administration: the Bank s traditionally strong ties with its local operating area will enable it to consolidate this branch of its lending operating operations. 392

393 The Bank examines with particular attention, both in the customer acquisition and management phases, to those enterprises exposed most to competition from east Asia. In 2005, the Group strengthened its position in mortgage lending for the purchase and/or renovation of property. This sector, particularly with regards to residential non-industrial property, continues to be in expansion and Banca Carige has provided support for established building and development operators. Lending to new operators is granted against the provision of appropriate equity resources. Credit risk management policies a) Organisational aspect The credit granting process is decentralised according to powers and limits fixed by Banca Carige s Board of Directors. Lending transactions are generally proposed at branch level, by teams of corporate advisors, by local Credit Departments and by General Management, and are then submitted for approval/opinion by the appropriate bodies of the Bank either at local or head office on the basis of the quality and quality of the credit line. The Bank s banking subsidiaries operate within the established lines of conduct and responsibilities fixed by Banca Carige. b) Management, measurement and control systems In correlation with decentralised decisional powers, coordination and control of credit procedures and the observance of internally and externally-established rules are assigned to head office structures. Exposure limits used within the Group are those established by external regulators. However, an extensive-scope credit risk monitoring system is in place which: - utilises an electronic oversight subsystem formed by inflows of information from the central computer registries (financial statements and risk levels data banks), trade information, customer transaction data, etc.; - processes data collected both inside and outside the Group; - prepares monthly and quarterly reports on lending and credit risk trends for General Management and the Board. The monitoring of credit risk is based on two distinct, albeit closely inter-related, areas of activity: - traditional monitoring analyses single risk exposures and establishes specific responses; - global oversight of credit quality focuses on trends in major lending aggregates and doubtful loans and the incidence of both on total lending. Oversight activities are standardised by analysing single segment/product combinations or anomalies on a top-down approach which guarantees effective risk governance, whilst allowing for an analytical approach where and when required. In more detail: - the corporate segment utilises a traditional, analytical approach justified on the basis of the size of individual exposures; - the small business and private segments utilise standardised and critical mass controls which, due to the large number of positions (with subsequent 393

394 fragmentation of risk), allow for a wider-ranging, more thorough oversight and one that respects cost/benefit ratios; - product controls or monitoring of single anomalies are used, which cut across customer segmentation categories. - - Scoring and rating models play a significant role in the Bank s management and control of credit risks. The assignment of an internal credit risk rating to customers continued during 2005, coordinated by Banca Carige s Credit Division and Planning and Control Division. Credit scoring techniques are currently applied to private customers principally for the granting of mortgages, special-rate loans, and credit cards. On the basis of the information support provided, the decision to approve a loan application is made at branch level. The extension of credit scoring techniques to the business segment is currently the object of review. With regards to Banca Carige s internal credit rating project, in 2005 the modelling and backtesting phases for small and medium-sized enterprises was completed. The model was extended to the other banks of the Group in the light of substantial homogeneity in rating variables (e.g. population characteristics). Output generated by credit rating was integrated into the Bank s electronic loan assignment service ( pratica electronica di Fido- PEF ), which was made available to the Bank s operational arm at the beginning of In parallel, the evaluation of models and their application to other customer segments continued during the year. The rating of corporate counterparts was performed on the basis of the score provided by the central registry of financial reports as part of the Italian Credit Risk Information System Project (SIRC). Retail customers (private and small business) were assigned a probability of default (PD) rating. This rating is currently being tested for introduction during 2006 of PD within the electronic loan assignment service described above. This model also will be extended to the banking subsidiaries. The information sources utilised in the evaluation and subsequent application of internal rating systems to the SME segment belong to three main areas: financial reports, economic and financial trends (in-house data and statistics provided by the central risk-information registry), and company registries. Evaluation of the SME segment, in addition to the quantitative information generated by the sources mentioned, is integrated by qualitative assessments via questionnaires provided by dedicated advisors which provide details of the firm s management, its competitive position, and operating environment. Qualitative assessments are forecasted also for the small business segment in In addition to probability of default, loss given default (LGD) and exposure at default (EAD) calculations continued during 2005 made on the basis of customer segment, and product and guarantee type. An initial integration of the LGD model into Banca Carige s ITC systems was performed and the model was applied also to the other banks of the Group following confirmation of homogeneity in recovery levels between those of Banca Carige and its subsidiaries. The Bank s LGD and EAD models are currently being reviewed for full compliance with Basel 2 requirements. During 2005 the pilot phase of the commercial development project was completed. The project is based on pricing and performance risk adjusted methodologies and was immediately applied to Banca Carige. It will be extended throughout the Banking Group during The project aims to identify strategies for commercial development which are appropriate to the risk/earnings profile of each customer. To achieve this a web platform has been put into place which allows advisors to access in real time each customer s risk/earnings profile by visualising pricing risk adjusted, effective earnings generated, and all other information necessary to make 394

395 the transaction economically viable. The project, which began its test phase on corporate counterparts, was extended to small business customers in Liguria. c) Credit risk mitigation techniques The Bank s credit policy is founded on careful analysis during the selection phase (evaluation of initiative being financed; assessment of customer creditworthiness). Evaluation of the validity of the initiative to be financed takes into account above all the applicant capacity to generate adequate cash flows to service the debt. Additionally, collateral or covenants are required particularly in transactions judged to expose the Group to higher levels of risk. In the case, for example, of small firms which typically are undercapitalised consortia guarantees play an important role. d) Impaired financial assets Classification of impaired assets takes place on the basis of constant review of a position after initial definition in order to identify promptly variations in credit quality level. The procedures for the management of a position in the presence of determinate signs of impairment, as approved by the Board of Directors of Banca Carige, differ according to the degree of impairment. The recovery of a position to performing status occurs only after it has been ascertained that the critical conditions or state of default no longer exist i.e. the debtor can regularise the exposure and provide evidence of the capacity to respect future repayment schedules. A recently predetermined control system automatically measures past due times, a critical factor in the assessment of impairment. The adequacy of the Bank s impairment valuations was positively tested at balance-sheet date. 395

396 QUANTITATIVE INFORMATION A. CREDIT QUALITY A.1 PERFORMING AND IMPAIRED LOANS: AMOUNTS, ADJUSTMENTS, CHANGES, BREAK-DOWN BY TYPE AND GEOGRAPHICAL AREA A.1.1 Financial assets analysed by portfolio and credit quality (book value) (IAS 1/103.c) Portfolio/Quality Non-performing loans 1. Financial assets held for trading 2,029,427 2,029, Financial assets available for sale 776, , Financial assets held to maturity 4. Due from banks 18, , , Loans to customers 229,397 87,675 27, , ,758,414 11,272, Financial assets designated at fair value 7. Financial assets in the course of disposal 8. Hedging derivatives 54,985 54,985 Total 31/12/ ,559 87,804 27, , ,555,825 15,088,753 Total 31/12/ ,347,081 Watchlists Restructured loans Expired loans Country risk Other assets Total Expired loans are recognised for the first time as at 31/12/

397 A.1.2 Financial assets analysed by portfolio and credit quality (gross and net values) Impaired assets Other assets Portfolio/Quality Gross exposure Specific adjustments Portfolio adjustments Net exposure 1. Financial assets held for trading X X 2,029,427 2,029, Financial assets available for sale 776, , , , Financial assets held to maturity 4. Due from banks 19, , , , , , Loans to customers 748, ,264 8, ,725 10,805,978 47,177 10,758,801 10,758,801 11,272, Financial assets designated at fair value X X 7. Financial assets in the course of disposal 8. Hedging derivatives X X 54,985 54,985 54,985 Total 31/12/ , ,777 8, ,219 12,519,299 47,177 12,527,107 14,556,534 15,088,753 Total 31/12/ ,347,081 Gross exposure Portfolio adjustments Net exposure Total (net exposure) Total (net exposure) Impaired assets are tested for impairment on an asset-by-asset basis unlike expired loans, which are tested collectively. Value adjustments at 31/12/04 were under Italian GAAP prior to FTA/IFRS. A.1.3 Cash and off-balance sheet due from banks: gross and net values Gross exposure Specific value adjustment Portfolio adjustment Net exposure A. CASH LOANS a) Non-performing loans 18,162 18,162 b) Watchlists c) Restructured loans - d) Expired loans e) Country risk f) Other assets 1,980,054 X 1,980,054 Total A 1,999, ,998,870 B. OFF BALANCE SHEET LOANS a) Impaired b) Other 986,011 X 986,011 Total B 986, ,

398 A.1.4 Cash credits to banks: gross impaired loans and non-guaranteed credits towards countries at risk Bad loans Watchlists Restructured loans Past due Country risk A. Gross opening exposure 18, of which: non derecognised sold exposures B. Increases 3, B.1 ex-performing loans B.2 transfer from other doubtful loan categories 10 B.3 other increases 3, C. Decreases 3, C.1 re-performing credits C.2 write offs C.3 payments received 3, C.4 gains from ceding C.5 transfer to other doubtful loan categories 10 C.6 other decreases 14 D. Total closing exposure 18, of which: non derecognised sold exposures 398

399 A.1.5 Cash credits to banks: total allowances (IAS 30/43.b, 47; ED 7/17; current legislations) Bad loans Watchlists A. Total opening allowances 4, of which: non derecognised sold exposures B. Increases 689 B.1. allowances B.2 transfer from other doubtful loan categories B.3. other increases 689 C. Decreases 4,915 C.1. recoveries by valuation 2,284 C.2. recoveries by collection 2,631 C.3. write offs C.4 transfer to other doubtful loan categories C.5. other decreases D. Total closing allowances of which: non derecognised sold exposures Restructured exposures Past due Country risk A.1.6 Cash credits and off balance to customers: gross and net values Gross exposure Specific allowances Portfolio allowances Net exposure A. Cash exposures a) Bad loans 432, , ,397 b) Watchlists 110,345 22,670 87,675 c) Restructured loans 28, ,327 d) Past due 177,735 8, ,326 e) Country risk 388 X f) Other assets 12,567,962 X 47,176 12,520,786 Total A 13,316, ,264 55,586 13,034,898 B. Off balance sheet exposures a) Impaired 25,824 3, ,149 b) Other 2,818,409 X 5,471 2,812,938 Total B 2,844,233 3,593 5,553 2,835,

400 A.1.7 Cash due from banks: changes in impaired loans subject to country risk - gross Type/Category Non-performing loans Watchlists Restructured Expired loans loans Country risk A. Total opening loans 422, ,171 4,064 5,122 - of which: loans sold and not cancelled B. Increases 152,829 63,079 26, , B.1 ex-performing loans 70,362 55,055 18,418 B.2 transfer from other categories of impaired loans 66,917 B.3 other increases 15,550 8,024 7, , C. Decreases 142,770 87,905 2,247 5,117 C.1 writebacks due to valuation 2,123 11, C.2 cancellations 89, C.3 collections 50,410 4,204 1,906 5,117 C.4 recoveries on disposal C.5 transfer to other categories of impaired loans 66,917 C.6 other decreases 808 5,416 D. Total closing loans 432, ,345 28, , of which: loans sold and not cancelled 2, ,287 The item expired loans is recognised for the first time as at 31/12/05. The sub-item B.3 other increase in expired loans column represents the effect of reclassifying the performing loans that are part of the total adjustments aggregate. 400

401 A.1.8 Cash due from banks: changes in total value adjustments Type/Category Non-performing loans Watchlists Restructured Expired loans loans Country risk A. Total opening adjustments 135,470 12, Changes in opening balances 73,276 25,214 - of which: loans sold and not cancelled B. Increases 110,081 12, ,409 1 B.1. Adjustments 67,666 12, B.2 transfer from other categories of impaired loans 22,006 B.3. other increases 20, ,409 1 C. Decreases 115,964 27, C.1. Writebacks due to valuation 18,088 3, C.2. Writebacks due to collection 8,447 1,628 C.3. Cancellations 89, C.4 transfer to other categories of impaired loans 22,006 C.5. other decreases D. Total closing adjustments 202,863 22, , of which: loans sold and not cancelled The item expired loans is recognised for the first time as at 31/12/05. The sub-item B.3 other increase in expired loans column represents the effect of reclassifying the performing loans that are part of the total exposure. 401

402 A.2 CLASSIFICATION OF EXPOSURES ON THE BASIS OF INTERNAL AND EXTERNAL RATINGS A.2.1 Distribution of cash credits and off-balance sheet loans by external rating class Carige s lending is concentrated amongst the small business, small/medium-sized enterprise, and mass market segments. Consequently, only a small proportion of the Bank s loan portfolio (8 per cent) has been subject to external rating, almost all of which has received a rating higher than A- from Standard and Poor s (S&P). A.2.2 Distribution of cash credits and off-balance sheet loans by internal rating class Internal ratings cover the entirety of the Bank s loan portfolio. The probability of default (PDF) rating generated for each exposure has been assigned an S&P rating on the basis of its composition. In spite of the fact that counterpart samples assigned external ratings differ in size and nature from the majority of the Bank s borrowers, around 25 per cent of overall Group exposures belong to PDF classes higher than S&P s A- rating. 402

403 A.3 BREAK-DOWN OF GUARANTEED LOANS BY GUARANTEE TYPE The percentage of guarantee types securing loans to customers at 31/12/05 is shown below: From mortgage loans 46% From pledges 1% From personal guarantees 11% Unsecured 42% 403

404 B. CREDIT DISTRIBUTION B.1.1 Distribution by sector of cash credits to customers Governments and Central Banks Other public entities Financial institutions Insurance companies Nonfinancial businesses Other operators A. Cash performing exposures Financial assets held for trading 997,257 1, ,578 3, ,688 1,554,177 Financial assets designated at fair value - Financial assets available for sale 52,211 8,477 55,925 9,330 82, ,195 Financial assets held to maturity - Financial assets being sold - Loans to customers 449, , ,655 5,950,273 3,423,860 10,758,801 Total 1,499, , ,710 55,925 5,963,344 3,760,800 12,521,173 B. Impaired cash exposures 382 6, , , ,725 Total 31/12/2005 1,499, , ,528 55,925 6,344,255 3,886,414 13,034,898 TOTAL B.1.2 Distribution by sector of guarantees given to customers Governments and Central Banks Other public entities Financial and insurance institutions Non-financial businesses Other operators TOTAL A. Performing exposures 458 4, ,289 1,052,101 44,951 1,221,319 B. Impaired exposures 21, ,149 Total 31/12/ , ,289 1,073,758 45,443 1,243,468 B.2 Distribution of loans to non-financial resident businesses A mount S a le s-re la te d se rvic e s 1,564,958 W holesale & retail trade, salvag e and rep air 1,115,221 B u ild in g and p u b lic w o rks 993,450 A ir and sea transp o rt-rela ted services 323,978 Hotel and catering services 301,251 Other 1,970,067 Total 31/12/2005 6,268,

405 B.3.1 Geographical distribution of cash credits to customers ITALY OTHER EUROPEAN COUNTIES AMERICA ASIA REST OF THE WORLD Exposures/Geographical areas Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure A. Cash exposures A.1 Bad loans 427, ,582 4, A.2 Watchlists 110,335 87, A.3 Restructured loans 15,223 14,832 12,835 12,495 A.4 Past due 177, , A.5 Other exposures 12,017,545 11,971, , ,022 19,259 19,258 26,612 26, Total 12,748,114 12,470, , ,974 19,263 19,261 26,711 26, B.3.2 Geographical distribution of guarantees given to customers ITALY OTHER EUROPEAN COUNTIES AMERICA ASIA REST OF THE WORLD Exposures/Geographical areas Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure A. Guarantees given A.1 Bad loans 10,282 7,570 3,213 2,995 A.2 Watchlists 10,333 9,659 A.3 Other impaired exposure 2,007 1,925 A.4 Other 1,224,417 1,218,971 2,210 2, Total 1,247,039 1,238,125 5,423 5, B.5 Significant exposures (according to Bank of Italy rules) a) Amount 139,932,000 b) Number 1 405

406 C. SECURITISATION AND SALE OF ASSET TRANSACTIONS C.1 SECURITISATION TRANSACTIONS Qualitative information (current legislation) Between 2000 and 2004 Banca Carige performed three securitisation transactions: - the first at the end of 2000 relating to non performing loans; - the second and third, respectively at the end of 2001 and in the first half of 2004, relating to performing credits; A further securitisation transaction relating to non performing loans, was undertaken by C.R. Savona at the end of Banca Carige undertook the role of service for all four transactions. The transactions are coordinated and monitored by a dedicated operating unit created within the General Secretariat whose aim is to maintain a unitary perspective of the various aspects of the four transactions. In particular, the measurement and control of risks arising from the transactions are carried out within the confines of the Group s Credit Risk Management system with monitoring of the performing components assigned to the Credit Control Division. The performance of each transaction is constantly reviewed by General Management, which provides the Board of Directors with a half-yearly update. An overview of the four transactions is provided below: a) Banca Carige: securitisation of non performing credits Banca Carige sold without recourse to the special purpose entity (SPE) Argo Finance One Srl (company belonging to the Banca Carige Group) non performing loans backed fully or in part by voluntarily or legally imposed guarantees for euro million (book value: euro million). The sale price agreed was euro million. To finance the acquisition, Argo Finance One Srl issued the following securities: - Senior (class A) securities for euro 40 million; - Mezzanine (class B) securities for euro 70 million; - Junior (class C) securities for euro 56.5 million. By the end of 2005, the class A and B issues had been fully repaid. Class C securities were entirely underwritten by Banca Carige. In January 2006 accumulated interest on these securities had been repaid along with euro 5.6 million in principal. The outstanding consequently amounts to euro 50.9 million. Following the full reimbursement of the class B securities, Banca Carige received full repayment of the limited recourse mortgage previously granted to the SPE. The extinction of the mortgage meant an advance facility of euro 15 million was no longer necessary and ended potential exposure to risks relating to an interest rate cap. Consequently, the outstanding amounts referring to class C securities represent the Bank s sole transaction risk. Banca Carige is servicer for the transaction. Collections in 2005 amounted to euro 28.7 million and servicing commissions totalled euro 1.1 million. The transaction is proceeding according to the schedule fixed at inception. b) Banca Carige: securitisation of performing loans Banca Carige sold without recourse to the SPE Argo Mortgage Srl (in which Carige has a 5 per cent indirect holding through its subsidiary Columbus Carige Immobiliare Srl) 13,858 real estate mortgage loans principally destined for the acquisition of residential property of an overall value at year-end 2001 of euro million at a sale price of euro million (of which euro 24 million in deferred price via profit extraction, which took into account in particular the excess spread after transaction costs borne at each payment date, intrinsic risk levels of the credits sold, and the risk of early extinction). To finance the acquisition, Argo Mortgage Srl issued the following securities: 406

407 - Class A securities for euro 478 million; - Class B securities for euro 22 million; - Class C securities for euro 11.5 million; - Class D securities for euro 9.2 million. The class A, B and C securities are listed on the Luxemburg bond market and were underwritten exclusively by European institutional investors. Class D securities were underwritten by Banca Carige. At 31/12/05, repayments relating to class A securities amounted to euro million out of an initial amount of euro 478 million. Banca Carige provided the SPE with cash collateral amounting to euro 10.4 million. Banca Carige is servicer for the transaction. Collections in 2005 amounted to euro 66.4 million and servicing commissions totalled euro 0.3 million. The transaction is proceeding according to the schedule fixed at inception. c) Banca Carige: securitisation of performing loans Banca Carige sold without recourse to the SPE Argo Mortgage 2 Srl (in which Carige has a 5 per cent indirect holding through its subsidiary Columbus Carige Immobiliare Srl) 13,272 real estate mortgage loans principally destined for the acquisition of residential property of an overall value at 30 th June 2004 of euro million at a sale price of euro million (of which euro 61.1 million in deferred price via profit extraction, which took into account in particular the excess spread after transaction costs borne at each payment date, intrinsic risk levels of the credits sold, and the risk of early extinction). To finance the acquisition, Argo Mortgage 2 Srl issued the following A< anc C securities, all listed on the Luxemburg bond market: - Class A securities for euro million; - Class B securities for euro 26.8 million; - Class C securities for euro 29.4 million; - Class D securities for euro 9.2 million. In January 2006, repayments relating to class A securities amounted to euro million out of an initial amount of euro million. Banca Carige provided the SPE with a subordinated loan of euro 22.8 million, which by January 2006 had decreased to euro 16.4 million. Banca Carige is servicer for the transaction. Collections in 2005 amounted to euro million and servicing commissions totalled euro 0.5 million. The transaction is proceeding according to the schedule fixed at inception. d) Cassa di Risparmio di Savona: securitisation of non performing loans 2002 At the end of 2002, C.R. Savona sold without recourse to the SPE Priamar Finance Srl (in which at 14 th January 2004 Carige has a 60 per cent and part of the Carige Group) non performing loans with and without guarantees amounting to euro 68.8 million, with a book value of euro 33.7 million, at a sale price of euro 28 million. To finance the acquisition, Priamar Finance Srl issued the following securities: - Class A securities for euro 18 million (listed on the Luxemburg bond market); - Class B securities for euro 10.2 million (fully underwritten by C.R. Savona); In January 2006, repayments relating to class A securities amounted to euro 18 million with euro 6.3 million remaining. Banca Carige provided the SPE with an advance facility of euro 2.5 million, whilst C.R Savona granted a limited reimbursement loan of euro 22 million. Banca Carige is servicer for the transaction. Collections in 2005 amounted to euro 5.2 million and servicing commissions totalled euro 0.2 million. The transaction is proceeding according to the schedule fixed at inception. 407

408 Quantitative information C.1.1 Exposures arising from securitisation by underlying assets quality (current legislation) Cash exposures Guarantees given Credit lines Senior Mezzanine Junior Senior Mezzanine Junior Senior Mezzanine Junior Type of underlying asset / Exposures Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure Gross exposure Net exposure A. With own underlying assets 94,270 88, a) Impaired 63,945 66,077 b) Others 30,325 22,650 B. With underlying assets of third parties 2,500 2,500 a) Impaired 2,500 2,500 b) Others The figures shown in the following tables were calculated on the basis of the following criteria: 1) with regards to the securitisation of non performing loans carried out in 2000 via the SPE Argo Finance One Srl, the carrying value of the Junior securities underwritten by Banca Carige (euro 56,500,000) was inserted inclusive of accrued interest (euro 5,759,000). No related writedowns were recognised. In January 2006, accrued interest was fully paid and reimbursements on Junior securities totalled euro 5.6 million; 2) with regards to the securitisation of performing loans carried out in 2001 via the SPE Argo Mortgage Srl, the carrying value of the Junior securities underwritten by Banca Carige (euro 9,190,000) was inserted inclusive of accrued interest (euro 68,000). In addition to the exposures shown in the table, at 31/12/05 a deferred price credit of euro 15,038,000 was recognised in equity; 3) with regards to the securitisation of performing credits in 2004 via the SPE Argo Mortgage 2 Srl, the assets of which have been fully recognised in equity, the carrying value of the subordinated loans granted by Banca Carige at the sale date of 30/6/06 of euro 22,753,000 was recognised as a gross exposure in accordance with reporting provisions, whilst at 31/12/05 it was recognised as a net exposure (euro 17,278,000). The table also contains, in addition to the exposures referred to above, a deferred price credit amounting to euro 15,443,000; the initial carrying value of this item (euro 61 million) was fully written down as a corresponding entry in shareholders equity at 1 st January 2005 in compliance with IAS

409 C.1.2 Exposures arising from the most important own securitisation by type of assets subject to securitisation and exposures (current legilation) Cash exposures Guarantees given Senior Mezzanine Junior Senior Mezzanine Junior Senior Credit lines Mezzanine Junior Type of assets subject to securitization / Exposures Book value Value adjustments Book value Value adjustments Book value Value adjustments Net exposure Value adjustments Net exposure Value adjustments Net exposure Value adjustments Net exposure Value adjustments Net exposure Value adjustments Net exposure Value adjustments A. Fully cancelled from the balance sheet 71,517 A.1 Argo Finance One Srl - non performing loans 62,259 A.2 Argo Mortgage Srl - performing loans 9,258 A.3 Priamar Finance Srl - non performing loans B. Partially cancelled from the balance sheet C. Not cancelled from the balance sheet 17,210 C.1 Argo Mortgage 2 Srl - performing loans 17,210 C.1.4. Exposures towards securitisations by financial assets portfolio and type Exposure/ Portfolio Trading Designated at fair value Available for sale Held Held to maturity Loans 31/12/05 31/12/04 1. Cash exposures 71,517 71,517 74,396 - Senior - Mezzanine - Junior 71,517 71,517 74, Off-balance exposures - Senior - Mezzanine - Junior 409

410 C.1.5 Total securitised assets underlying junior securities and other asset-backed forms (current legislation) Assets/Values Traditional securitisations Synthetic securitisations A. Own underlying assets: 1,068,868 A.1 Fully cancelled 325, Non performing 66, Watchlists 3. Restructured exposures 4. Expired exposures 5. Other assets 259,472 A.2 Partially cancelled 1. Non performing 2. Watchlists 3. Restructured exposures 4. Expired exposures 5. Other assets A.3 Not cancelled 743, Non performing 2, Watchlists 3. Restructured exposures 4. Expired exposures 5. Other assets 741,183 B. Underlying assets attributable to third parties 1. Non performing 2. Watchlists 3. Restructured exposures 4. Expired exposures 5. Other assets (1) Values determined on the basis of the book value of securitised assets communicated by the special purpose entities. 410

411 C.1.6 Interests (%) in Special Purpose Entities (current legislation) Name Registered Head Office Interest % Argo Finance One Srl Genoa 60% Priamar Finance One Srl Genoa 60% Argo Mortgage Srl Genoa 5% (1) Argo Mortgage 2 Srl Genoa 5% (1) (1) Subsidiary company whose Banca Carige has an indirect holding of 5% through the subsidiary Columbus Carige Immobiliare C.1.7 Servicing collections on securities credits and reimbursements of securities issued by SPE (current legislation) Servicer SPE Amounts of loans Securitised credits % of securities reimbursed collected during the year Senior Mezzanine Junior Impaired Performing Impaired Performing Impaired Performing Impaired Performing Impaired Performing Banca Carige Argo Finance One Srl 64,394 28, % 100% Banca Carige Priamar Finance Srl 18,485 5,193 50% Banca Carige Argo Mortgage Srl 261,158 66,426 49% Banca Carige Argo Mortgage 2 Srl 743, ,

412 C.2 SALE OF ASSET TRANSACTIONS C.2.1 Assets sold and not cancelled Technical form/portfolio Assets held for trading Assets designated at fair value A B C A B C A B C A B C A B C A B C A. Cash assets 741, , Debt securities 2. Capital securities 3. O.I.C.R. shares 4. Loans 741, , Impaired assets B. Derivatives Total 31/12/05 741, ,658 - Total 31/12/ Key: A = fully recognised sold assets (book value) B = partially recognised sold assets (book value) C = partially recognised sold assets (full value) Assets available for sale Assets held to maturity Amounts due from banks Amounts due from customers Total C.2.2 Financial assets sold and not cancelled: liabilities Liabilities/Assets portfolio Assets held for trading Assets designated at fair value Assets Assets held to available for maturity sale Amounts due from banks Amounts due from customers Total 1. Amounts owed to customers 743, ,316 a) fully recognised assets 743, ,316 b) partially recognised assets 2. Amounts owed to banks a) fully recognised assets b) partially recognised assets Total 31/12/05 743, ,316 Total 31/12/

413 D. MODELS FOR THE MEASUREMENT OF CREDIT RISK SECTION 2 MARKET RISKS 2.1 INTEREST-RATE RISK The valuation of interest-rate risk is performed throughout the Bank s asset and liabilities portfolio and no distinction is made between banking book and trading book. Consequently, the information provided in 2.1 Interest-rate risk is a composite of 2.1. Interest-rate risk Trading portfolio and 2.2 Interest-rate risk - Non trading portfolio. Qualitative information A. General issues Interest-rate analysis is performed on a monthly basis. At 31 st December 2005, the distribution of assets and liabilities by class was in line with Bank strategy and forecasts: Assets (a) Liabilities (b) Amounts Q% Amounts Q% (a-b) Total 15, % 15, % 0 Non interest bearing 2, % 2, % 775 Interest bearing 13, % 13, % -775 of which (1) (2) FIXED RATE 3, % 4, % -767 short term 2, % 1, % 657 medium/long term % 2, % FLOATING 6, % 2, % SIGHT 2, % 6, % INSENSITIVE % % 290 (1) Percentage quotas calculated on interest-bearing assets; (2) Percentage quotas calculated on onerous liabilitie Amounts in millions operating data B. Management and measurement of interest-rate risk The following methods are used to measure interest-rate risks: gap analysis, duration analysis and sensitivity analysis. Gap analysis measures variation in interest-rate margin on the basis of the risk in a portfolio at a certain date (static analysis). Banca Carige performs gap analysis via incremental gap, incremental beta gap, and shifted beta gap analysis. 413

414 Incremental gap analysis measures the impact on interest income of a variation in interest rates, either up or down, assuming a uniform shift of all rates at the moment of variation. Incremental beta gap analysis takes into account with regards to sight positions the percentage of absorption by internal rates of a market rate variation. Shifted beta gap analysis valuates the diluted impact of an interest-rate variation on sight positions over time. Duration analysis measures the sensitivity of the market value of assets to a one percent increase in interest rates. Sensitivity analysis measures the sensitivity of the Bank s assets to external rates. The analysis seeks to provide a valuation of assets at market prices in a different scenario of external rates from that at initial recognition. Quantitative information Data at 31 st December 2005 reveal, on the basis of a twelve-month time band, shifted gap analysis, a loss in net interest income of 24.8 million generated by a 1 per cent fall in interest rates, and a gain of 26.7 million with a 1 per cent rise in rates. Average data for the year recorded a loss of 26.9 million accompanying a 1 per cent drop in rates and a gain of 28.3 million stemming from a 1 per cent rise. Average values recorded for 2005 are summarised in the table below: Shock: -1% Shock: +1% Balance sheet Off-balance sheet Total Balance sheet Off-balance sheet Total Sight Term Sight Term a Incremental gap b Incremental beta gap c Shifted beta gap Beta: indicator of elasticity with regards to estimated variations in interest rates on sight positions Amounts are expressed in millions of euros. In addition to traditional gap analyses aimed at measuring the impact on net interest income over twelve months, the Bank also performs duration analysis in order to measure the possible effect of net interest income flows beyond the twelve-month time horizon. The analysis monitors the most stable items, namely those with medium/long-term maturities and fixed rate banking book deposits as well as derivatives hedging interest-rate risk. On the basis of these items only, the negative gap at 31/12/05 amounted to million. Consequently, a rise in medium/long-term rates would mean increased net interest earnings for the Bank. Duration analysis at 31/12/05 shows a duration of derivatives of

415 Dec Dec Assets Liabilities Shareholders Equity and derivatives Sensitivity of shareholders equity to a 1 pc interest rate rise (millions) Sensitivity of shareholders equity to a 1 pc rise in market value 1.30% 0.76% Shareholders equità market value (millions) 1,831 1,847 The negative duration value of shareholders equity indicates a rise in the market value of the Bank s equity at 31/12/05 as a result of a rise in interest rates of 14.1 million. This value in relation to market value determines an interest-rate sensitivity value of 0.76 per cent. Results deriving from the sensitivity analyses described are consistent with expected rate trends. 415

416 2.3 PRICE AND EXCHANGE-RATE RISK Price and exchange-rate risk analysis is performed together and refers exclusively to the trading portfolio. Consequently, the information provided in 2.3 Price and exchange-rate risk is a composite of 2.3 Price risk Trading portfolio and 2.5 Exchange-rate risk - Non trading portfolio. The item 2.4 Price risk- non trading portfolio has been omitted. Qualitative information A. General issues Price and exchange-rate risk measurements are performed by Banca Carige on a daily basis. B. Management and measurement of price and exchange-rate risk Market risk is measured using VaR on the basis of a Monte Carlo simulation. Measurement includes the analysis and evaluation of performances generated by VaR calculation models via the valuation of portfolios over the same holding period as that used by VaR modelling. Quantitative information The Bank s VaR model is based on a ten-day holding period and a 99 per cent confidence level and is used for daily monitoring of the Bank s securities and derivatives portfolios. In 2005, overall average VaR amounted to 11.2 million. The maximum figure of 25.4 million was recorded on 7/7/05, whilst the minimum of 4.3 million was recorded on 17/2/05. Details of VaR movements and trading portfolios by type of risk are provided in the following table: VaR Movements , ,000.0 thousands of euros 20, , , , /01/ /02/ /03/ /04/ /05/ /06/ /07/ /08/ /09/ /10/ /11/ /12/

417 31/12/2005 Average 2005 Low 2005 High 2005 VaR total 11, , , , Equity price risk 10, , , , Foreign exchange risk Interest-rate risk , Diversification effect , , Amounts in thousands of euros 2.6 FINANCIAL DERIVATIVE INSTRUMENTS A FINANCIAL DERIVATIVES A.1 Regulatory trading portfolio: end-of-period and average notional values Debt securities and interest rates Equities and equity price index Exchange rate and gold Other values 31/12/05 31/12/04 Type of transaction/underlying Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted 1. Forward rate agreement 20,000 20, Interest rate swap 1,672,397 1,672, Domestic currency swap 4. Currency interest rate swap 5. Basis swap 582, , Equity index swaps 7. Real index swaps 8. Futures 9. Cap options 117, ,268 - purchased 58,634 58,634 - issued 58,634 58, Floor options 20,706 20,706 - purchased 10,353 10,353 - issued 10,353 10, Other options 493, , ,356 - purchased 363, , ,523 - Plain vanilla 303,705 75, ,310 - Exotic 60, , ,213 - issued 129, , ,833 - Plain vanilla 129,144 73, ,516 - Exotic 130, , Forward agreements 174, , , ,916 - purchases 131, , , ,016 - sales 43, ,900 43, ,900 - currency against currency Other derivative contracts Total 174,916 2,412, ,099 1,315, ,916 4,220, ,577 4,389,

418 A.2 Banking portfolio: end-of-period and average notional values A.2.1 Hedging derivatives Type of transaction/underlying Debt securities and interest rates Equities and equity price index Exchange rate and gold Other values 31/12/05 31/12/04 Listed Unlisted Listed Unlisted 1. Forward rate agreement 2. Interest rate swap 1,704,151 1,704, Domestic currency swap 4. Currency interest rate swap 5. Basis swap 424, , Equity index swaps 7. Real index swaps 8. Futures 9. Cap options 93,709 93,709 - purchased 93,709 93,709 - issued 10. Floor options - purchased - issued 11. Other options 492, ,100 - purchased 492, ,100 - Plain vanilla - Exotic 492, ,100 - issued - Plain vanilla - Exotic 12. Forward agreements - purchases - sales - currency against currency 13. Other derivative contracts Total 2,221, ,100 2,713, ,000 2,878,215 Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted 418

419 A.2 Banking portfolio: end-of-period and average notional values A.2.2 Other derivatives Type of transaction/underlying Debt securities Equities and equity and interest rates price index Listed Unlisted Listed Unlisted Exchange rate and gold Listed Unlisted Other values 31/12/05 31/12/04 1. Forward rate agreement 2. Interest rate swap 3. Domestic currency swap 4. Currency interest rate swap 5. Basis swap 6. Equity index swaps 7. Real index swaps 8. Futures 9. Cap options - purchased - issued 10. Floor options - purchased - issued 11. Other options 552, ,350 - purchased 552, ,350 - Plain vanilla - Exotic 552, ,350 - issued - Plain vanilla - Exotic 12. Forward agreements - purchases - sales - currency against currency 13. Other derivative contracts Total 552, , Listed Unlisted Listed Unlisted Listed Unlisted 419

420 A.3 Financial derivatives: purchase and sale of underlying instruments Type of transaction/underlying Debt securities and interest rates Equities and equity price indices Exchange rate and gold Other values 31/12/05 31/12/04 Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted A. Regulatory trading portfolio: - 1,830, ,099-1,315, ,638, ,577 3,691, Transactions with underlying asset exchange ,561-1,315, ,489, , ,917 - Purchases 611, ,328 - Sales 174, , ,773 - Currency against currency 82,633 82, Transactions without underlying asset exchange 1,830, ,538 2,148,909 7,169 2,856,939 - Purchases 863, ,394 1,052,637 - Sales 967, ,144 1,096,272 - Currency against currency B. Banking portfolio: B.1 Hedging instruments - 1,797, , ,289, ,000 2,436, Transactions with underlying asset exchange , ,230 - Purchases - Sales - Currency against currency 2. Transactions without underlying asset exchange 1,797, , ,289,960-2,182,985 - Purchases 1,096, ,100 1,588,897 - Sales 701, ,063 - Currency against currency B.2 Other derivatives , , Transactions with underlying asset exchange - 552, , Purchases - Sales 552, ,350 - Currency against currency 2. Transactions without underlying asset exchange Purchases - Sales - Currency against currency 420

421 A.4 Over the counter financial derivatives: positive fair value counterparty risk Debt securities and interest rates Equities and equity price indices Exchange rate and gold Other values Different underlying instruments Type of transaction/underlying Gross unsettled Gross settled Future exposure Gross unsettled Gross settled Future exposure Gross unsettled Gross settled Future exposure Gross unsettled Gross settled Future exposure Settled Future exposure A. Regulatory trading portfolio A.1 Governments and central banks A.2 Public entities A.3 Banks 23,401 3,611 20,262 9,315 4,497 3,469 A.4 Financial institutions ,622 2,520 10,373 3,807 A.5 Insurance companies 1, A.6 Non-financial enterprises ,368 11,445 2,756 2,161 A.7 Other entities Total A 31/12/05 24,017 3,734 30,987 23,694 17,666 9,477 B. Banking portfolio B.1 Governments and central banks B.2 Public entities B.3 Banks 54,985 8,281 18,208 1,457 B.4 Financial institutions B.5 Insurance companies B.6 Non-financial enterprises B.7 Other entities Total B 31/12/05 54,985 8,281 18,208 1,457 A.5 Over the counter financial derivatives: negative fair value financial risk Debt securities and interest rates Equities and equity price indices Exchange rate and gold Other values Different underlying instruments Type of transaction/underlying Gross unsettled Gross settled Future exposure Gross unsettled Gross settled Future exposure Gross unsettled Gross settled Future exposure Gross unsettled Gross settled Future exposure Settled Future exposure A. Regulatory trading portfolio A.1 Governments and central banks A.2 Public entities A.3 Banks 64,163 6,008 1,736 2,228 15,329 7,363 A.4 Financial institutions ,736 2, A.5 Insurance companies 8, A.6 Non-financial enterprises ,877 1,451 A.7 Other entities Total A 31/12/05 64,452 6,649 11,799 4,908 17,669 9,301 B. Banking portfolio B.1 Governments and central banks B.2 Public entities B.3 Banks 40,317 4,094 B.4 Financial institutions 48,275 7,382 B.5 Insurance companies B.6 Non-financial enterprises B.7 Other entities Total B 31/12/05 88,592 11,

422 Residual maturity of over the counter financial derivatives Underlying instruments/residual maturity Up to 1 year 1 to 5 years Over 5 years Total A. Regulatory trading portfolio 1,607,473 1,829, ,575 4,220,650 A.1 Financial derivatives on debt securities and interest rates 708, , ,575 2,412,378 A.2 Financial derivatives on equities and equity price indices 150, , ,099 A.3 Financial derivatives on exchange rate and gold 749, ,033 1,315,173 A.4 Financial derivatives on others B. Banking portfolio 260, ,187 1,782,102 2,713,960 B.1 Financial derivatives on debt securities and interest rates 260, ,187 1,290,002 2,221,860 B.2 Financial derivatives on equities and equity price indices 492, ,100 B.3 Financial derivatives on exchange rate and gold B.4 Financial derivatives on others Total 31/12/05 1,868,144 2,500,789 2,565,677 6,934,610 Total 31/12/04 3,396,508 2,271,483 2,072,873 7,740,864 B.1 Credit derivatives: notional end-of-year and average values Type of transaction Regulatory trading portfolio Single subject notional value Basket notional value Other transactions Single subject notional value Basket notional value 1. Hedging purchases 1.1 With underlying asset exchange 51, Credit default swap 51,477 - Total rate of return swap 1.2 Without underlying asset exchange Credit default swap - Total rate of return swap Total 31/12/05 51, Total 31/12/04 35, Hedging sales 2.1 With underlying asset exchange 12,000-20, Credit default swap 12,000 20,000 - Total rate of return swap 2.2 Without underlying asset exchange - 51, Credit default swap - Total rate of return swap 51,744 Total 31/12/05 12,000 51,744 20,000 - Total 31/12/04 12, ,245 32,

423 B.2 Credit derivatives: positive fair value counterparty risk Type of transaction / Values Notional value Positive fair value Future exposure A. Regulatory trading portfolio 63, A.1 Hedging purchases with counterparties 1 Governments and central banks 2 Public entities 3 Banks 4 Financial institutions 5 Insurance companies 6 Non-financial enterprises 7 Other entities A.2 Hedging sales with counterparties 63, Governments and central banks 2 Public entities 3 Banks 63, Financial institutions 5 Insurance companies 6 Non-financial enterprises 7 Other entities B. Banking portfolio 20, ,200 B.1 Hedging purchases with counterparties 1 Governments and central banks 2 Public entities 3 Banks 4 Financial institutions 5 Insurance companies 6 Non-financial enterprises 7 Other entities B.2 Hedging sales with counterparties 20, ,200 1 Governments and central banks 2 Public entities 3 Banks 20, ,200 4 Financial institutions 5 Insurance companies 6 Non-financial enterprises 7 Other entities Total 31/12/05 83, ,

424 B.3 Credit derivatives: negative fair value counterparty risk Type of transaction / Values Notional value Negative fair value Portafoglio di negoziazione di vigilanza 1 Hedging purchases with counterparties 51,477 1, Governments and central banks 1.2 Public entities 1.3 Banks 51,477 1, Financial institutions 1.5 Insurance companies 1.6 Non-financial enterprises 1.7 Other entities Total 31/12/05 51,477 1,205 B.4 Residual maturity of credit derivative contracts: notional values Underlying instruments / Residual maturity Up to 1 year 1 to 5 years Over 5 years Total A. Regulatory trading portfolio 10,000 90,221 15, ,221 A.1 Credit derivatives with "qualified reference obligation" 71,744 15,000 86,744 A.2 Credit derivatives with "unqualified reference obligation" 10,000 18,477 28,477 B. Banking portfolio 20, ,000 B.1 Credit derivatives with "qualified reference obligation" B.2 Credit derivatives with "unqualified reference obligation" 20,000 20,000 Total 31/12/05 30,000 90,221 15, ,221 Total 31/12/04 118,245 67, ,

425 SECTION 3 LIQUIDITY RISK Qualitative information Measurement of liquidity risk is performed on a monthly basis by Banca Carige. Risk exposure levels are quantified by measuring the gap between medium/long-term lending and deposits - on the basis of the contractual maturities of assets and liabilities - in terms of volume and flows reaching maturity in order to produce a forecasting instrument equipped to contribute positively to the formulation of the Bank s funding policies. Quantitative information At 31/12/05 was a positive gap (amount of assets higher than amount of liabilities) in the Bank s medium/long-term liquidity of 1,951.3 million. Total medium/long-term assets Total medium/long-term liabilities Gap at 31/12/2005 6,758.1 mln 4,806.8 mln 1,951.3 mln At the same date on the basis of measurements performed by applying transformation of maturities rules, all thresholds foreseen were observed. 425

426 SECTION 4 OPERATIONAL RISKS Qualitative information The most appropriate methods of operating risk management are currently under discussion amongst regulators and the domestic and international banking community. Regulatory capital for operational risk is expected to be introduced by the Basel Committee in With this in mind, the Bank participates in loss data sharing initiatives (DIPO in Italy), promoted by the Italian Banking Association (ABI), and it has put into place a systematic process for the collection of operational loss data. The ITC systems of the Bank are centralised and business continuity and disaster plans have been designed that identify the steps necessary to guarantee a return to normal operations following a crisis. 426

427 427

428 SECTION 1 BANK SHAREHOLDERS EQUITY A. Qualitative information Banca Carige has adopted those measures necessary to guarantee its capital adequacy during the recent phase of operational expansion. Monitoring duties are carried out by Banca Carige with the aim of preventing possible future tensions. The maintenance of adequate capital levels is a prerequisite for Group expansion. At 31 st December 2005, the Bank s free regulatory capital was appropriate to the prudent management of capital risk profiles and, in addition, enables further operational expansion. Break-down of shareholders equity Caption 31/12/05 31/12/ Capital 1,113,327 1,113, Own shares (-) - - 1, Issue premium 263, , Reserves 97, , Capital instruments 11, Revaluation reserves (1) 698, , Net profit 136,899 89,969 Total Shareholders' Equity 2,321,121 1,862,211 (1) Inclusive of capital gain on holding in the Bank of Italy (Euros million). Share capital is in the form of 959,897,518 ordinary shares and 153,429,321 savings/preference shares both with a unitary value of 1 euro. 428

429 2.1 Regulatory capital A. Qualitative information Regulatory capital was determined on the basis of the Bank of Italy s indications contained in its letter no of 1 st December 2005 ( discipline of prudential filters ). First-time application of these regulations at single-company level is expected for the interim report at 30 th June In the light of the first-time adoption of IFRS and the ensuing provisions of the Bank of Italy comparatives for 2005 and 2004 are not fully homogeneous. In particular as at 31/12/05 the carrying value of the holding in the Bank of Italy recorded at 31/12/04 must be deducted in five equal instalments and, in order to avoid the multiple computation phenomenon latent in assets across different sectors, the equity investments in the insurance companies, reinsurance companies and other insurance companies have been included at items to be deducted. With regards to Banca Carige, the impact of this new regulation is the deduction of the holding in Carige Vita Nuova (life assurance subsidiary) as, in accordance with Bank of Italy pronouncements, holdings and subordinated loans referring to Carige Assicurazioni (non life insurance subsidiary) had already previously been deducted. To sum up, items to be deducted from tier 1 and tier 2 capital with no 2004 comparatives include: - 1/5 th of the holding in the Bank of Italy at 31/12/2004: 98,077 euro - holding in Carige Vita Nuova: 131,346,501 euro. 1. Tier 1 capital Tier 1 capital includes the following positive items: Share capital Issue premium Reserves Profit destined to reserves No innovative capital instruments are included in tier 1. Negative items include: Own shares in portfolio Goodwill Other intangible assets 2. Tier 2 capital Tier 2 capital includes the following positive elements: 429

430 Revaluation reserves Hybrid instruments Subordinated liabilities Hybrid equity instruments are in the form of Banca Carige subordinated convertible bond issue described below: - nominal value: 102,054,947 euros made up by bonds with a nominal unitary value of 2.5 euros; - rate: 1.5 per cent p.a. with a 16 per cent premium payable at maturity on non conversion; - maturity date: 5/12/2013; - subordination clause: in the case of liquidation or winding up proceedings of the Bank, bondholders will be reimbursed only after all not equally subordinated creditors have been satisfied; - conversion ratio: one (ordinary share)-for-one (convertible share) basis from 1 st January Subordinated liabilities are represented substantially by a subordinated bond issue described below: - nominal value: 400,000,000 euros made up by bonds with a nominal unitary value of 1,000 euro each; - rate: euribor three months + 80 bp and then from 28/9/2006 euribor three months bp; - particular clauses: right of early reimbursement by the issuer from 28/9/2006; - subordination clause: in the case of liquidation or winding up proceedings of the Bank, bondholders will be reimbursed only after all not equally subordinated creditors have been satisfied. No innovative capital instruments are included. Negative items include: Net losses arising from equity investments in non banking and non financial companies listed on a regulated market; Other negative items loans: writedowns to non guaranteed credits granted to residents in countries considered at risk and not recorded up to 30 per cent of their nominal value; Other negative items; - other: asset losses still to be recognised in the income statement. 3. Tier 3 capital Tier 3 capital is represented by a subordinated bond issue described below: - nominal value: 80,000,000 euros made up by bonds with a nominal unitary value of 1,000 euro each; - rate: euribor three months + 25 bp; - maturity date: 24/08/2007; 430

431 - subordination clause: in the case of liquidation or winding up proceedings of the Bank, bondholders will be reimbursed only after all not equally subordinated creditors have been satisfied; - the bonds are covered by a lock-in clause. B. Quantitative information Regulatory capital 31/12/05 31/12/04 A. Regulatory capital A.1 Tier 1 1,215,784 1,176,082 A.2 Tier 2 500, ,752 A.3 Items to be deducted 362, ,800 A.4 Regulatory capital 1,353,093 1,445, Capital adequacy A. Qualitative information As part of the Bank s asset and liability management (ALM) policy, Banca Carige reviews on a monthly basis all risk profiles relating to shareholders equity to confirm the observance of solvability, total capital, and tier one ratios in addition to forecasting possible variations in free capital availability. Monitoring activities are performed not only in order to satisfy fully regulatory requirements, but also as support in the measurement and optimal management of free capital (equity excluding net investments in property and subsidiaries excluding those that represent permanent fund investments). 431

432 B. Quantitative information Unweighted amounts Weighted amounts/requirements 31/12/05 31/12/04 31/12/05 31/12/04 A. Risk assets A.1 Credit risk 14,733,276 13,320,745 11,181,091 9,526,938 STANDARD METHOD On balance sheet assets 1. Loans (other than equities and other subordinated assets) to (or secured): 1.1 Governments and central banks 782, , Public entities 516, , , , Banks 752,265 1,247, , , Other entities (other than residential and non-residential mortgage loans) 5,530,541 4,666,980 5,530,313 4,666, Mortgage loans - residential property 2,492,975 1,589,212 1,246, , Mortgage loans - non-residential property 1,890,149 1,975,979 1,730,199 1,656, Shares, investments and subordinated assets 681, , , , Other assets 1,101, , , ,666 Off-balance sheet assets 1. Guarantees and commitments (or secured by): 1.1 Governments and central banks 230 6,000-6, Public entities 9,260 13,137 1,852 7, Banks 8, ,604 1,711 30, Other entities 890, , , , Derivative contracts to (or secured by): 2.1 Governments and central banks 2.2 Public entities 2.3 Banks 69,685 73,371 13,937 12, Other entities 7,382 7,772 3,691 3,398 B. Regulatory capital requirements B.1 Credit risk 782, ,886 B.2 Market risk 94,276 53, STANDARD METHOD of which: 94,276 53,172 + position risk on debt securities 19,803 15,305 + position risk on equity securities 68,703 34,951 + exchange rate risk + other risks 5,770 2, INTERNAL MODELS of which: + position risk on debt securities + position risk on equity securities + exchange rate risk B.3 Other regulatory requirements 43,288 46,848 B.4 Total regulatory requirements (B1+B2+B3) 920, ,906 C. Risk assets and regulatory ratios C.1 Risk-weighted assets 13,146,286 10,955,800 C.2 Tier 1 capital/weighted risk assets (Tier 1 capital ratio) 9.25% 10.73% C.3 Regulatory capital/weighted risk assets (Total capital ratio) 10.90% 13.19% Market risk values include the tier 3 subordinated loan issue utilisable for hedging purposes. Line C.3 was determined by taking into account the regulatory capital numerator increased by tier 3 subordinated loans up to a maximum amount equal to market risk stated at line B

433 433

434 SECTION 1 TRANSACTIONS PERFORMED DURING THE YEAR 1.1 Business Combinations No business combinations were carried out during Annual variations in goodwill Amounts referring to goodwill and recognised in the balance sheet were tested for impairment with no subsequent impairment charge carried to the income statement. During the year the value of goodwill recorded increased by 4,250,000 euros following the recognition in Banca Carige s statements of a repayment of tax benefits required under Law decree 282/2002 (previous relief on stamp duties, etc. arising on the acquisitions of business branches from Banco di Sicilia and Banca Intesa). SECTION 2 TRANSACTIONS SUBSEQUENT TO THE CLOSE OF THE YEAR 2.1 Business combinations On 16 th January 2006 Banca Carige acquired a further 40 per cent of the share capital of Argo Finance One S.r.l., so bringing its holding to 100 per cent. Positive repayment performances enabled the full reimbursement at 25 th July 2005 of class A and B asset-backed securities issued by the SPE. Consequently, in accordance with the shareholders agreement between Banca Carige and Stitching Faro, the former exercised its call option right (option right exercisable no later than six months after the reimbursement described above) on Stitching Faro s holding in Argo Finance One. The acquisition cost was 4,131 euros. 434

435 435

436 1. Information on Remuneration of Directors and Executives REMUNERATION 31/12/2005 (a) Directors 1,921 (b) Statutory Auditors 192 (c) Executives with key strategic responsibilities 2,910 Total 5,023 The amounts given above refer to remuneration paid to Directors, Statutory Auditors and key managers for services performed at Banca Carige SpA. The details provided below are in accordance with CONSOB provisions: GROSS REMUNERATION PAID TO TO DIRECTORS, STATUTORY AUDITORS AND GENERAL MANAGER (art. 78 CONSOB Regulation n ) NAME POSITION SALARY (bifore tax and social securities payments) Name/Surname Position held Term of office Expiry of appointment Emoluments for positions held in the company preparing the accounts Benefits in kind Bonuses Others Giovanni BERNESCHI Chairman 1/1-31/12 * 1,000, , (1) Alessandro SCAJOLA Deputy Chairman 1/1 31/12 * 250, , (2) Adalberto ALBERICI Director 1/1-31/12 * 47, , (3) Piergiorgio ALBERTI Andrea BALDINI Director Executive Committee Member Director Executive Committee Member 1/1-31/12 * 53, , (4) 1/1 31/12 20/6-31/12 * 53, , (5) Giorgio BINDA Director 1/1 31/12 * 44, , (6) Jean Jacques BONNAUD Director 1/1 31/12 * 47, Luca BONSIGNORE Director 1/1-31/12 * 44, Mario CAPELLI Director 1/1 31/12 * 42, Remo Angelo CHECCONI Director Executive Committee Member 1/1 31/12 * 56, Maurizio FAZZARI Director 1/1 31/12 * 47,

437 Pietro ISNARDI Director 1/1 31/12 * 44, Ferdinando MENCONI Director Executive Committee Member 1/1 31/12 1/1-31/5 Nicolas MÉRINDOL Director 10/10-31/12 * 9, Paolo Cesare ODONE Vincenzo ROPPO Director Executive Committee Member Director Executive Committee Member * 48, , (7) 1/1 31/12 * 53, /1 31/12 * 57, , (8) Enrico Maria SCERNI Director 1/1 31/12 * 42, Francesco TARANTO Director 1/1 31/12 * 45, Oliviero TAROLLI Director 1/1 30/9 ** 33, Antonio SEMERIA Chairman of Board of Statutory Auditors 1/1 31/12 *** 79, , (9) Massimo SCOTTON Auditor 1/1 31/12 *** 56, , (10) Andrea TRAVERSO Auditor 1/1 31/12 *** 56, , (11) Alfredo SANGUINETTO General Manager 1/1-31/12-471, , (12) * Annual Shareholders Meeting called to approve annual statements as at 31/12/2005 ** Resigned on 30 th September 2005 *** Annual Shareholders Meeting called to approve annual statements as at 31/12/2007 (1) of which: 39, euros paid to Banca Carige as remuneration for the position of Deputy Chairman of Carige Assicurazioni from 1 st January to 31 th December; 1, euros received from Carige Assicurazioni as non-monetary benefits; 70, euros paid to Banca Carige, as remuneration for the position of Chairman of Carige Vita Nuova from 1 st January to 31 th December; 1, euros received from Carige Vita Nuova as non-monetary benefits; 23, paid to Banca Carige, as remuneration for the position of Board Member and Executive Committee Member of Cassa di Risparmio di Savona from 1 st January to 31 th December; 11, euros paid to Banca Carige as remuneration for the position of Deputy Chairman of Banca Cesare Ponti from 1 st January to 31 th December; 17, euros paid to Banca Carige as remuneration for the position of Chairman of Carige Asset Management SGR from 1 st January to 27 th February and for the position of Board Member from 28 th February to 31 th December; 30, euros paid to Banca Carige as remuneration for the position of Deputy Chairman of Cassa di Risparmio di Carrara from 1 st January to 31 th December; euros paid to Banca Carige as remuneration for the position of Deputy Chairman of Centro Fiduciario from 1 st January to 31 th December; (2) of which: 34, euros paid to Banca Carige as remuneration for the position of Deputy Chairman of Carige Vita Nuova from 1 st January to 31 th December; 17, euros paid to Banca Carige as remuneration for the position of Chairman of Board of Directors of Carige Asset Management SGR from 1 st January to 27 th February and for the position of Board Member from 28 th February to 31 th December; (3) of which: 17, euros as remuneration for the position of Board Member of Carige Assicurazioni from 1 st January to 31 th December; 10, euros as remuneration for the position of Board Member of Banca Cesare Ponti from 1 st January to 31 th December; 437

438 (4) of which: 6, euros as remuneration for the position of member of the Editorial Committee of a review published by Banca Carige; (5) of which: 11, euros as remuneration for the position of Board Member of Banca del Monte di Lucca from 1 st January to 31 th December; 12, euros as remuneration for the position of Board Member of Cassa di Risparmio di Carrara from 1 st January to 31 th December; (6) of which: 16, euros as remuneration for the position of Board Member of Carige Asset Management SGR from 1 st January to 31 th December; 10, euros as remuneration for the position of Board Member of Banca Cesare Ponti from 1 st January to 31 th December; (7) of which: 316, euros as remuneration for the position of Chairman of Carige Assicurazioni from 1 st January to 31 th December; 1, euros received from Carige Assicurazioni as non-monetary benefits; 255, euros as remuneration for the position of CEO of Carige Vita Nuova from 1 st January to 31 th December; 1, euros received from Carige Vita Nuova as non-monetary benefits; (8) of which: 17, euros as remuneration for the position of Board Member of Carige Asset Management SGR from 1 st January to 31 th December; 6, euros as remuneration for the position of member of the Editorial Committee of a review published by Banca Carige; (9) of which: 42, euros as remuneration for the position of Chairman of the Board of Statutory Auditors of Carige Assicurazioni from 1 st January to 31 th December; 37, euros as remuneration for the position of Chairman of the Board of Statutory Auditors of Carige Vita Nuova as remuneration for the position of Statutory Auditor of; 45, euros as remuneration for the position of Statutory Auditor of Cassa di Risparmio di Savona from 1 st January to 27 th February and for the position of Chairman of the Board of Statutory Auditors from 28 th February to 31 th December; 6, euros as remuneration for the position of Statutory Auditor of Carige Asset Management SGR from 28 th February to 31 th December; 2, euros as remuneration for the position of Statutory Auditor of Immobiliare Vernazza from 1 st January to 31 th December; (10) of which: 10, euros as remuneration for the position of Chairman of the Board of Statutory Auditors of Banca Cesare Ponti from 1 st January to 31 th December; 10, euros as remuneration for the position of Statutory Auditor of Banca del Monte di Lucca from 22 th February to 31 th December; 6, euros as remuneration for the position of Statutory Auditor of Carige Asset Management SGR from 28 th February to 31 th December; (11) of which: 23, euros as remuneration for the position of Chairman of the Board of Statutory Auditors of Cassa di Risparmio di Carrara from 1 st January to 31 th December; 9, euros as remuneration for the position of Chairman of the Board of Statutory Auditors of Carige Asset Management SGR from 1 st January to 31 th December; 28, euros as remuneration for the position of Statutory Auditor of Carige Assicurazioni from 1 st January to 31 th December; 25, euros as remuneration for the position of Statutory Auditor of Carige Vita Nuova from 1 st January to 31 th December; 27, euros as remuneration for the position of Statutory Auditor of Cassa di Risparmio di Savona from 28 th February to 31 th December; 16, euros as remuneration for the position of Statutory Auditor of Banca del Monte di Lucca from 1 st 438

439 January to 21 th February and for the position of Chairman of the Board of Statutory Auditors from 22th February to 31 th December; 4, euros as remuneration for the position of Statutory Auditor of Columbus Carige Immobiliare from 1 st January to 31 th December; 2, euros as remuneration for the position of Statutory Auditor of Immobiliare Vernazza from 1 st January to 31 th December; (12) of which: 11, euros as remuneration for the position of Board Member of Banca Cesare Ponti from 1 st January to 31 th December; 17, euros as remuneration for the position of Board Member of Carige Asset Management SGR from 1 st January to 31 th December; 20, euros as remuneration for the position of Board Member of Cassa di Risparmio di Carrara from 1 st January to 31 th December; euros as remuneration for the position of Board Member of Centro Fiduciario from 1 st January to 31 th December; 2. Information on transactions with related parties 2.1 Relations with subsidiaries and the Parent Company (thousands of euros) Assets Liabilities Guarantees and commitments Revenue s Expenses Dividends The Cassa di Risparmio di Genova ,189 1,896 1,018 43,991 e Imperia Foundation Owned entities 299,435 1,133,492 4,412 65,557 70,207 34,786 Entities subject to significant 167,476 9, , ,324 influence TOTAL 466,911 1,143,331 4,437 72,240 70,376 34, Transactions with other related parties (thousands of euros) Transaction type Bilance at 31/12/05 Cash credits 24,113 Liabilities 5,602 Guarantees granted 7,

440 SHARES OWNED BY DIRECTORS, STATUTORY AUDITORS AND GENERAL MANAGER (1) The table below provides information requested by Consob in its deliberation no of 14/5/99 and later modifications, in addition to the regulation enacting Legislative decree 58/98 regarding the disclosure of shareholdings in a company or its subsidiaries on the part of its directors, statutory auditors, senior executives or, either directly or on their behalf, by their spouses or children under the age of 18. Name and Surname Company represented Number of shares in possession at 31/12/2004 Number of shares bought Number of shares sold Number of shares in possession at 31/12/2005 Giovanni Berneschi CARIGE S.p.A. 116,170 = = 116,170 Alberto Berneschi CARIGE S.p.A. 1,425,556 = = 1,425,556 Alessandro Scajola CARIGE S.p.A. 2,200 = = 2,200 Adalberto Alberici Annamaria Galli CARIGE S.p.A. CARIGE S.p.A. 13, = = = = 13, in Alberici Piergiorgio Alberti CARIGE S.p.A. 5,454 = 5,454 = Mario Capelli CARIGE S.p.A. 10,000 = = 10,000 Remo Angelo Checconi CARIGE S.p.A. 3,100 = = 3,100 Pietro Isnardi CARIGE S.p.A. 11,360 = = 11,360 Alfredo Sanguinetto CARIGE S.p.A 70,636 10,000 = 80,636 Silvana Ferrero CARIGE S.p.A 40,858 = 20,000 20,858 in Sanguinetto (1) Share ownership is direct unless otherwise stated 440

441 441

442 ADOPTION OF ANNUAL REPORT AND ALLOCATION OF NET PROFIT To the Shareholders of Banca Carige, We submit for your approval the financial statements of your Company for the year ending 31 st December The statements include the Board of Directors Report, the Statutory Auditors Report and the Independent Auditors Report. In particular your Board proposes: 1) the approval of the financial statements for Banca Carige SpA as at 31/12/05 made up by balance sheet, income statement, statement of changes in shareholders equity, cash flow statement, explanatory notes and Board of Directors Report; 2) the distribution of net profit for the year of euro 136,898, in addition to the balance of the own shares reserves of euro 105, for a total of euro 137,004, in the following way: - Euro 13,689, to the legal reserve; - Euro 35,318, to the extraordinary taxed reserve; - Euro 73,420, in dividends payable on a total of 978,942,964 ordinary shares at a dividend per share of euro 0.075; - Euro 14,575, in dividends payable on a total of 153,429,321 preference (savings) shares at a dividend per share of euro The dividend coupon will be available on 24 th April 2006 with payment from 27 th April 2006 onwards. Dividend payment will be made by intermediaries belonging to the system for the centralised management of financial instruments in accordance with Borsa Italiana SpA recommendations. 3) to destine dividends on own shares in portfolio at the moment of distribution to a specific available profit reserve. On approval, total shareholders equity of Banca Carige would amount to euro 2,221,713,000. Genoa, 20th March 2006 The Board of Directors 442

443 443

444 STATUTORY AUDITORS' REPORT TO THE SHAREHOLDERS' MEETING IN ACCORDANCE WITH ARTICLE 153 OF LEGISLATIVE DECREE 58/98 AND ARTICLE 2429 SECTION 3 OF THE ITALIAN CIVIL CODE To the shareholders of Banca Carige SpA, During the business year ending 31/12/05 we carried out those supervisory duties foreseen by law in accordance with the Code of Best Practice recommended by the Italian Council of Chartered Accountants. *** In particular we took part in the meetings of both the parent company s Board of Directors and Executive Committee and received on a quarterly basis (in accordance with article 150 of Legislative Decree 55/98 and article 20 of the Bank s Articles of Association) information concerning the activities of the Bank in addition to significant economic and financial transactions carried out by the Bank and/or its subsidiaries. During the year the Shareholders Meeting met once, Board of Directors met thirteen times, the Executive Committee forty-seven times, the Internal Control Committee met nine times and this Board of Statutory Auditors met fifty-six times. *** The following significant economic and financial transactions, outlined in chronological order, took place during the year: 1. in its meeting of 21 st February 2005, the Board of Directors of Banca Carige approved the new Group Regulatory Document, which provides guidelines for the management and coordination of the Parent Company s relations with its subsidiaries, 2. on 21 st February 2005, the Board of Directors of Banca Carige approved the Group s branch plan as part of the Group s territorial expansion; 3. on 24 th February 2005 a tier 3 subordinated loan was issued for euro 80 million with maturity 24 th August The Bank of Italy in its communication no of 18 th February 2005 authorised the inclusion of the issue in the computation of regulatory capital for the covering of market risk necessary for determining the Company s total capital ratio; 4. on 2 nd March 2005, on receiving CONSOB s approval, trading began of the bond issue Banca Carige 1.50 per cent hybrid subordinated loan with premium at reimbursement convertible into ordinary shares ; 5. the Bank of Italy in its letter of 2 nd March 2005 communicated the variation to the Group s area of consolidation with the inclusion of Banca Cesare Ponti with effect 29 th December 2004; 6. on 18 th April 2005, the Board of Directors of Banca Carige deliberated the subscription, subject to bank of Italy authorisation, to a 10 per cent shareholding in Banca Federiciana; 7. on 30 th May 2005, Monte de Pietad y Caja de Ahorro de Huelva y Sevilla communicated a reduction of its shareholding in Banca Carige below the 2 per cent threshold. The change in the Spanish bank s holding was communicated to CONSOB on 2 nd June 2005; 444

445 8. the Executive Committee of Banca Carige in its meeting of 14 th June 2005 deliberated its intention to participate in the initial share capital of the company Infrastrutture Lavori Italia Autostrade SpA. The Bank s holding in the company, which was formally established on 21 st June 2005, is made up of 350,000 shares at a nominal value of euro 1 each. The investment (euro 350,000) is recorded at the caption Equity investments ; 9. the Board of Directors of Banca Carige during its meeting of 20 th June 2005 approved a fullypaid up share capital increase on the part of the subsidiary Banca del Monte di Lucca (BML). The company s equity was raised from euro 13 million to euro 15.6 million as a result of the issue of 5,000,000 new shares of a nominal value of euro 0.52 each. Existing shareholders will be able to receive one new share at euro 1 each (of which euro 0.48 in premium) for every 5 shares in possession. Changes to the subsidiary s by-laws were also approved following the signing of a new shareholders agreement between Banca Carige and the BML Foundation on 8 th March The transaction received Bank of Italy authorisation on 21 st October 2005; 10. The Board of Directors of Banca Carige in the same meeting of 20th June 2005 also approved the new document Regulations regarding transactions with related parties ; 11. the Executive Committee of Banca Carige in its meeting of 21 st June 2005 voted in favour of the Parent Company s entering into an agreement with other shareholders of SI Holding SpA; 12. on 1 st July 2005 agreement was reached between the Parent Company and trade unions regarding the restructuring of C.R. Carrara and the transfer to the subsidiary of treasury services previously managed by Banca Carige and C.R. Savona; 13. in its meeting of 12 th July 2005, the Executive Committee of Banca Carige approved the purchase, subject to Bank of Italy authorisation, of a 15 per cent holding in a proposed wealth management company specialising in the creation and management of closed real estate funds promoted by Cofid SpA; 14. on the same date the Executive Committee also approved the sale on the part of BML to the local council of Capannori of 10,000 shares in the company Gesam SpA (equivalent to per cent of the company s share capital); 15. on 20 th September 2005 respective servicing contracts were signed between Banca Carige and its subsidiaries C.R Carrara and Banca Cesare Ponti for the transfer of service duties to the Parent Company; 16. the Board of Directors of Banca Carige in its meeting of 10 th October co-opted Mr Nicolas Mérindol as Board Member in place of the outgoing Mr Oliviero Tarolli. The appointment was confirmed by the Shareholders Meeting of 25 th January 2006; 17. the Board of Directors of Banca Cesare Ponti deliberated the issue of a subordinated bond loan of euro 8 million; 18. on 24 th October 2005, authorisation was requested from the Bank of Italy for the inclusion of the above-mentioned bond issue in the computation of the subsidiary s supplementary regulatory capital; 19. on 29 th November 2005, the Executive Committee of Banca Carige deliberated the signing of an agreement between the Parent Company and Banca Cesare Ponti regarding factoring transactions; 20. on 14 th December 2005, the equity raising transaction (from euro 13 to euro 15.6 million) deliberated by the extraordinary shareholders meeting of BML of 26 th September 2005 was fully subscribed and paid up. Carige subscribed 2,700,000 new shares (of which euro 1,404,000 in nominal value and euro 1,296,000 in premium) with no change to its holding of 54 per cent. We also outline below the principal economic and financial transactions occurring after 31 st December 2006: 1. on 25 th January 2006, the Board of Directors deliberated a paid share capital increase to be offered to existing shareholders for a nominal value of euro 76.9 million, corresponding to a countervalue inclusive of premium of around euro 200 million; 445

446 2. on 25 th January 2006, the Extraordinary Shareholders Meeting of Banca Carige in the course of its business deliberated an unpaid share capital increase of euro million; 3. on 16 th January 2006, following the decision of the Board of Directors of 12 th December 2005, Carige exercised its call option right in accordance with the shareholders agreement signed on 22 nd March 2001 on 40 per cent of Argo Finance One s share capital, held by Stitching Faro. The acquisition of 4,130 shares brings Carige s holding up in the SPE to 100 per cent; 4. on 20 th January 2006, a pool of investors, which includes Banca Carige, in accordance with the deliberation of the Executive Committee of 20 th July 2005, completed the acquisition of Esaote SpA. Conduit for the acquisition was the newly-formed company Imaging SpA, in which Carige acquired 12,000,000 shares of a nominal value of euro 1 each, equivalent to per cent (euro 102,000,000) of the company s share capital; 5. on 14 th February 2006, in relation to the bond issue Banca Carige 1.50 per cent hybrid subordinated loan with premium at reimbursement convertible into ordinary shares and in accordance with article 5 of the Issue Regulations, Carige began the issue of ordinary shares destined to those who had requested conversion during January A total of 2,290,370 bonds were converted (overall nominal value of euro 5,725,925,000) into 2,290,370 new ordinary shares with a nominal value of euro 1 each. Consequently the subscribed, fully paid-up share capital of the Bank amounted to euro 1,115,617,209, made up by 962,187,888 ordinary shares with a nominal value of euro 1 each, and 153,429,321 convertible savings shares with a nominal value of euro 1 each; 6. on 6 th March 2006, in relation to the same bond issue, there was a further issue of ordinary shares to meet the conversion rights exercised in February A total of 6,472,391 bonds (overall nominal value of euro 16,180,977.50) were converted into 6,472,391 new ordinary shares with a nominal value of euro 1 each. The Bank s resulting share capital amounted to euro 1,122,089,600, made up by 968,660,279 ordinary shares with a nominal value of euro 1 each, and 153,429,321 convertible savings shares with a nominal value of euro 1 each. The Board of Statutory Auditors declares that: *** 1. during the year it has expressed its opinion on matters and in the form foreseen by current legislation; 2. as deliberated by the Bank s Board of Directors in its meeting of 18 th October 2005, Carige has adopted the new consolidated tax system and carried out the formalities arising on adoption; 3. Carige has completed the work regarding the creation of an organisational and management model for the prevention of offences foreseen by Legislative decree 231/01 (administrative liability of companies); 4. Carige communicated adequate and complete instructions to its subsidiaries pursuant to article 114, section 2, Legislative decree 58/98; 5. Carige s financial and economic dealings with its subsidiaries and associated undertakings have been carried out in the best interest of your Company and regulated by market conditions. These dealings have at no time given rise to conflicts of interest, whether real or potential; 6. as deliberated by the Board of Directors on 25 th July 2005, the Banca Carige Group adopted the new International Financial Reporting Standards for the preparation of the Parent Company s Interim Reports (consolidated and single company) as at 30 th June The same accounting principles were applied to the Group s banks, to Carige Asset Management SGR, and to the reporting packages prepared by other entities, and in particular to the Group s insurance companies as required for the preparation of consolidated statements. In line with the opportunities offered by Legislative decree 38/2005, the financial statements of the Group s banks and wealth management company were prepared under IAS/IFRS. The financial statements of the banking subsidiaries were prepared under IFRS currently in force in accordance with the following Bank of Italy pronouncements: 446

447 a) circular no. 262 of 22 nd December 2005 (banks financial statements: format and preparation, and the transitional indications attached to the General Manager of the Bank of Italy s letter of 22 nd December 2005); b) instructions of 14 th February 2006 for wealth management companies (instructions regarding the preparation of financial statements of financial intermediaries). The reporting packages of the Group s two insurance companies Carige Vita Nuova and Carige Assicurazioni were prepared in accordance with the reporting format indicated by ISVAP, the Italian insurance industry watchdog, as communicated in its ruling no of 22 nd December Balance sheet and income statement lines used in single-company and consolidated statements (banks and wealth management company) are those established by the Bank of Italy. *** We found no evidence of transactions, either infra-group or with related parties, which could be classified as unusual, atypical, imprudent or any way contrary to the Law, the Articles of the Bank or the deliberations of the Shareholders Meeting. *** The Board of Directors Report provides information concerning relations between Banca Carige and its subsidiaries and related parties. We can confirm that, as stated in the Report, such relations are part of the Bank s normal business activities and are regulated by market conditions in the best interests of your Company. *** Within the scope of this Board s competence, we monitored the adequacy of the Bank s organisational structure, and the respect of the codes of best practice concerning its administration by means of relevant documentation provided by the Bank s senior offices in addition to meetings with the external auditors. In the light of the information in our possession we can confirm the adequacy of the Bank s operating structure and the respect of best practice standards. *** During the year, we evaluated and monitored the adequacy of the Bank s internal auditing system. Internal auditing is carried out by a dedicated body as foreseen by Bank of Italy indications, which has access to all areas of the Bank s activities as well those of the other banks of the Group. This body is outside the line of command foreseen by the Bank s organisational structure and offers General Management (with regards to which it functions as a staff position) details of its activities on a systematic basis. It also reports on a monthly basis to the Board of Directors and to this Board of Statutory Auditors as well as to every meeting of the Internal Control Committee. The internal auditing plan for 2005, examined by the Internal Control Committee on 21 st February 2005, was established in agreement with this Board on 22 nd February The work foreseen in the plan was carried out during the course of the year. This Board performed constant oversight of any operational anomalies that were communicated to it by the unit in order to guarantee effective and appropriate follow up. This Board believes, therefore, that the internal auditing system is suitably equipped to guarantee the effective and efficient management of the Bank s activities. *** We also evaluated and monitored the adequacy of the Bank s administration and accounting systems. With regards to the latter, information was collected from senior officers in the form of company 447

448 documents and audit analyses in order to verify that such a system was suitably equipped to give a true and fair picture of the Bank s affairs. *** We can confirm that your Company has put into place the IT&C requirements arising from IAS/IFRS adoption by the Group as identified by a specific project begun in Following work carried out on 19 th July 2005 as a result of the meeting called pursuant to article 151 of Legislative decree 58/1988, we were able to confirm, also thanks to the information support provided by the independent auditors Deloitte & Touche, the adequacy of the Group s accounting system. *** In particular, throughout the year we controlled the Bank s internal monitoring of all its risk profiles and can confirm the Bank s position throughout the year within the limits of all indicators fixed by the Bank of Italy and the Interbank Deposit Protection Fund. On the basis of the activities carried out by this Board, we believe that the administrative and accounting systems of the Bank are appropriate for and provide a true and fair picture of its activities. *** During 2005, the Board of Statutory Auditors During the year the Board received no claims pursuant to article 2408 Italian Civil Code. *** In the light of the requirements established by the article 114 c.2 of Legislative decree 58/98, your Company has since 1999 in its role as Group leader provided its subsidiaries with adequate and complete instructions. During 2005 Banca Carige continued to supply the Group companies with management and organisation-related indications as foreseen by the Consolidated Banking Law and the regulatory indications issued by the Bank of Italy. Similar instructions were also supplied to the insurance companies of the Group in addition to other companies where required. *** In accordance with the above-mentioned Legislative decree 58/98, the audit firm Deloitte & Touche SpA (appointed as the Bank s independent auditors by the ordinary shareholders meeting of 31 st March 2003) during the year examined the accounts of the Bank on a regular basis and reviewed the contents of the directors report at 31 st December 2005 for consistency with the financial statements and conformity with current accounting criteria. In its report of 4 th April 2006, the company declared that: "In our opinion, the financial statements present fairly the financial position of Banca CARIGE S.p.A. Cassa di Risparmio di Genova e Imperia as of December 31, 2005, the results of its operations, the changes in shareholders equity and the cash flows for the year then ended in accordance with the International Financial Reporting Standards adopted by the European Union The Independent Auditors also state: "For a better understanding of the financial statements, we draw attention to the fact that, as reported in the explanatory notes and in the appendix, the investment held in the Bank of Italy has been valued in the financial statements as of December 31, 2005, at fair value, about Euro 549 million higher than the carrying value in the prior year financial statements prepared in accordance with the applicable Italian law; the counter entry of such higher value, net of deferred taxation of about Euro 29 million, has been credited to the caption of shareholders equity Revaluation Reserves. This valuation derives from the application of international accounting principle IAS 39, which provides that investments, which are not in subsidiaries or associated companies and which form part of current assets available for sale, be stated at fair value; in the presence of financial instruments which are 448

449 not listed, as in the case of the investment in the Bank of Italy, the accounting principle provides for the use of valuation techniques including, amongst others, reference to market transactions. In accordance with the above-mentioned accounting principle, as described in the consolidated explanatory notes and in the appendix, the fair value valuation of the investment has been made on the basis of the shareholders equity of Bank of Italy, in that the Directors are of the opinion that such valuation is objectively comparable to similar prior transactions within the Italian banking system and to an operation regarding the acquisition of the ownership of another central bank by a member country of the European Union. Moreover, as reported in the explanatory notes, Law no. 262/2005 (the so-called Saving Reform ) foresees the adoption of a regulation that redefines the ownership of the Bank of Italy and disciplines the means of transfer, within three years of the entering into force of such law, of interests in the capital of the Bank of Italy owned by parties other than the Italian State or other Public Bodies. The effects of this new law, particularly with regard to the criteria adopted by the Bank for the valuation of the investment in Bank of Italy, are not presently determinable: moreover, the Directors of the Bank have expressed their strong determination to promote any action deemed to be in protection of the interests of the shareholders. *** During the course of the year Banca Carige SpA assigned Deloitte & Touche SpA as deliberated by the Board of Directors during its meeting of 9 th May 2005 the following duties for a total of euro 301,500 (VAT and CONSOB contributions excluded). The Board of Statutory Auditors believes that these further duties were fully justified in the light of the Bank s needs and that the remuneration agreed on was appropriate. The additional services provided by the independent auditors during 2005 were as follows: a) assistance provided during transition to IFRS during the months of May and November 2005: euro 240,000; b) M&A consultancy: euro 32,500; c) Limited scope audit of third quarter consolidated and parent-company statements at 30 th September 2005: euro 25,000; d) Monitoring of preparation of tax returns for 2004; - Deloitte & Touche received a further euro 50,355 for IFRS-adoption services performed arising from CONSOB communication DAC RM of 18 th April 1996 and euro 57,000 for IFRS-reconciliation services arising from CONSOB communication DEM no of 15 th April 2005; - during the year we were aware of no positions or duties assigned by your Company to persons or entities with continuing relations with the independent auditors; - in accordance with article 150, paragraph 2, Legislative decree 58/98, regular meetings were held between this Board and the auditors Deloitte & Touche SpA for the reciprocal exchange of information. During these meetings no facts worthy of censure or further investigation came to our notice. *** As a result of this Board s direct examination of the statements and in cooperation with the auditors, we also can confirm that the financial statements have been prepared in accordance with the requirements governing financial statements. In particular: - the structure of the financial statements is in accordance with that required by circular no. 262 of 22 nd December 2005 (banks financial statements: format and preparation, and the transitional 449

450 indications attached to the General Manager of the Bank of Italy s letter of 22 nd December 2005); - in accordance with the Board of Directors decision of 25 th July 2005, the financial statements were prepared in compliance with IAS/IFRS and related interpretations (SIC/IFRIC) as endorsed by the European Union and in force at the moment of deliberation; - the financial statements so prepared are consistent with the facts and information at our disposal following meetings with the governing bodies of the Bank and the external auditors. The principal results can be summarised as follows: Balance sheet Assets euro 18,02,848,194 Liabilities euro 15,704,727,294 Shareholders equity euro 2,184,222,204 Share capital euro 1,113,326,839 Capital instruments euro 11,517,292 Reserves euro 97,641,296 Revaluation reserves euro 698,525,747 Share issue premium euro 263,211,456 Own shares (euro 426) Net profit for the year euro 136,898,696 Income Statement Net interest income euro 632,153,748 Impairment losses/writebacks (euro 44,335,493) Net result of financial activities euro 587,818,255 Operating costs (euro 393,638,270) Losses on investments in associates and entities (euro 180,00) subject to joint control Losses on disposal of investments (euro 27,400) Operating profit before tax euro 193,972,585 Income tax (euro 57,073,889) Net profit for the year euro 136,898,696 * negative amounts are given in brackets - the Board of Directors Report illustrates in a consistent manner balance sheet and income statement data and results as well as outlining the prospects for the Bank. *** In the explanatory notes the directors of the Bank provide clear details regarding the securitisation of credits without recourse (Law 130/99) and the performance recorded during In particular: 1. on 21 st December 2000 (with effect 31 st December 2000) the Bank securitised without recourse non performing credits classified as bad loans fully or partially backed by voluntary of legallyimposed guarantees for a gross book value of Italian Lire (LIT) billion. Securitisation generated value losses in the assets ceded amounted to LIT billion which, on the basis of the opportunities provided by Law 130/99, was recorded at Liabilities caption 130 Issue Premium. The value loss is amortised over five years from 2000 onwards and deducted from the income statement. Carige is the servicer for the special purpose entity Argo Finance One S.r.l., which acquired the credits. Total revenues collected amounted to euro million, of which euro 28.7 million during

451 The positive performance in collection has already enabled full repayment of both class A securities, amounting to euro 40 million and class B securities, amounting to euro 70 million. On 25 th January 2006 euro 5.6 million referring to class C securities was repaid, leaving a further euro 50.9 million referring to class C securities. 2. on 21 st December 2001 (with effect 31 st December 2001) the Bank securitised without recourse performing real estate mortgage loans granted to private customers for a gross book value of LIT billion. The credits were ceded at a total price of LIT 1037 billion (of which LIT billion in nominal value and LIT 46.6 billion generated by profit extraction). Carige is the servicer for the special purpose entity Argo Mortgage S.r.l., which acquired the credits. Total revenues collected amounted to euro million of which euro 66.4 million during The positive performance in collection enabled repayment of class A securities, amounting to euro 244 million. On 30 th January 2006 a further euro 14.3 million referring to class A securities was repaid, leaving a further euro million to be repaid referring to class A securities, euro 22 million referring to class B securities, and euro 11.5 million referring to class C securities. Outstanding amounts relating to class D securities at the same date totalled euro 9.2 million. 3. With regards to the securitisation transaction performed by the bank subsidiary C.R. Savona pursuant to Law 130/99, Carige is the servicer for the special purpose entity Priamar Finance S.r.l. Collection flows since the beginning of the transaction have been slightly higher than those forecasted. During the year, the transaction proceeded according to the terms and conditions agreed upon among the parties. 4. in June 2004 Banca Carige securitised without recourse, pursuant to Law 130/99, performing real estate mortgage loans granted to private customers for a gross book value at 30 th June 2004 of euro million. The credits were ceded at a total price of euro million (of which euro million in nominal value and euro 61.1 million generated by profit extraction). Carige is servicer for the special purpose entity Argo Mortgage 2, which acquired the credits. Total revenues collected amounted to euro million, of which euro million during Repayment of class A securities began in January 2006 (euro million collected). The transaction proceeded according to the terms and conditions agreed upon among the parties. The attachment Adoption of International Financial Reporting Standards includes reconciliations of Italian GAAP to IFRS in accordance with IFRS and CONSOB s deliberation no of 14 th April Reconciliations were audited by the Bank s independent auditors Deloitte & Touche (Audit Report of 14 th October IFRS adoption at 1 st January 2005 had a positive effect on total shareholders equity, which increased by euro 550,189, as specified in the notes First Time Adoption of International Financial Reporting Standards. Total shareholders equity as a result rose from euro 1,728,412, at 31/12/04 to euro 2,278,601, The positive variation on IFRS adoption to total shareholders equity of euro 550,189, impacts the following items: 1. revaluation reserve (total shareholders equity caption 130): positive impact with new increased reserve balance of euro 703,281,005.38; 2. capital instruments (total shareholders equity caption 150): positive impact with new increased valuation of euro 11,402,477.51; 451

452 3. reserves (total shareholders equity caption 160): negative impact with new decreased reserve balance (inclusive of negative variation of net profit for 2004 of euro 17,571,462.65) of euro 164,494,078.72; The Explanatory Notes accompanying the Board of Directors Report provides precise details of the impacts on shareholders equity deriving from IFRS compliance and the subsequent effects on specific reserves. In the light of these variations, the composition of reserves under first-time adoption of IFRS (FTA/IFRS) is detailed in the Board of Directors Report also pursuant to article 7, Legislative decree 38/2005. The analysis also illustrates the portion of reserves utilisable for share capital increases. Legislative decree 38/2005 states that negative variations used in the creation of FTA/IFRS reserves must be accounted for in the distribution of dividends in the event of insufficient balances of other reserves. Such a limit does not apply to Banca Carige. *** With reference to Banca Carige s holding in the Bank of Italy and its reporting in the Board of Directors Report, in the Explanatory Notes, and in the Attachment Adoption of New International Financial Reporting Standards, we wish to point out that: a) the holding in question (financial investment with a risk level associated to a share offering dividend distribution privileges, but limited voting rights) has been recorded in agreement with the independent auditors Deloitte & Touche S.p.A. at fair value at the caption available for sale financial assets ; b) fair value as a significant proxy was calculated as equal to the value of Banca Carige s investment in the shareholders equity of the Bank of Italy as at 31/12/03. Figures arising from the valuation of shareholders equity of and by the Bank of Italy at 31/12/03 were also used by the same in determining its IAS/IFRS-compliant shareholders equity; c) the independent auditors are in possession of documentation that shows that a sale of a holding in the Bank of Italy was carried out voluntarily between independent parties and that the sale price agreed on corresponded to the assignable value per share on the basis of total shareholders equity as at 31/12/03; d) further validity of the method used in the valuation of Banca Carige s holding in the Bank of Italy (total shareholders equity at 31/12/03 divided by number of shares in possession) is provided by Law 218/1990 (Amato Law), which provided the legislative framework for the privatisation of expublic sector banks, and the related Legislative decree 356/1990. In the light of points a) and b) above, the value of Banca Carige s holding in the Bank of Italy was revalued from euro 490, (amount recorded under Italian GAAP at 31/12/04) to euro 539,706,604.90, recorded at Total Shareholders Equity at 1 st January The total revaluation of euro 539,216, was recorded at shareholders equity caption 130 Revaluation reserve. The valuation recorded in these statements as at 31 st December 2005 of euro 549,108, follows the holding s categorisation on first-time adoption of IFRS as an available for sale investment. Given the nature of the variation, pursuant to article 7 Legislative decree 38/2005, rules governing access and limits to availability applicable to revaluation reserves are those established by article 6 of the above-mentioned decree. This article states that shareholders equity reserves established and managed as a direct contra entry of financial assets recognised at fair value, cannot be recognised (also) in the calculation of capital and profit foreseen by the Italian Civil Code (articles 2350, 2357, 2359, 2432 and 2478 bis). 452

453 On the basis of a recent pronouncement by the Bank of Italy on the question of prudential filters (Bank of Italy note no of 1 st December 2005), revaluations carried out on first-time adoption of IFRS by banks of their equity holdings in the Bank of Italy recognised at fair value are excluded from the computation of regulatory capital. With reference to the provisions of article 19, line 10, Law 262/2005 on the question of a redefinition of the ownership structure of the Italian central bank and specifically the methods foreseen for transferring shareholdings, this Board fully supports your Company in its determination to protect its interests and those of its shareholders against the possible financial damage it could suffer were a forced transfer of property not to recognise the appropriate value of the Bank s investment. *** Accordingly, we release our Report on the financial statements of Banca Carige as at and for the year ended 31/12/2005 and approve the distribution of net profit proposed therein. Genoa, 4 th April 2006 The Board of Statutory Auditors Antonio Semeria Chairman Massimo Scotton Board Member Andrea Traverso Board Member 453

454 REPORT OF THE INDIPENDENT AUDITORS 454

455

456

457 APPENDIX: ADOPTION OF THE INTERNATIONAL ACCOUNTING STANDARDS (IAS) 457

458 INTRODUCTION TO THE FIRST TIME ADOPTION IAS/IFRS The first time adoption of IAS/IFRS by Banca Carige for the period ending 30 th June 2005 reflects on one hand the compulsory provisions contained in the standards and on the other the transitional arrangements permitting a series of exemptions for accounting periods prior to 30/6/05 and subsequent accounting choices made. a) The Company has used the provisions of IFRS 1 in arriving at appropriate opening balances for these financial statements, as follows: - BUSINESS COMBINATIONS Banca Carige has not applied IFRS 3 Business Combinations retrospectively to business combinations prior to the date of transition (1/1/2004). The carrying amount of goodwill in the Italian GAAP balance sheet as at 1 st January 2004 has accordingly been brought forward without adjustments. The business combinations in question refer to the following acquisitions: Banco di Sicilia (2000); Gruppo Intesa (2001); Gruppo Capitalia (2002). - FAIR VALUE OPTION OVER COST ACCOUNTING Banca Carige has adopted fair value rather than deemed cost in the measurement of its banking subsidiaries property and works of art. Subsequently, these new values will be measured at cost and the resulting value will be amortised at an annual flat rate of 1.5 per cent. - SECURITISATION Banca Carige has applied the transitional provision contained in IFRS 1 (paragraphs 27 and 27A), which allows for the nonimmediate derecognition of securitisation transactions undertaken prior to 1/1/2004. The provision in fact was not applied as the two transactions - Argo Finance One (2000) non performing loans and Argo Mortgage (2001) performing loans were performed before the starting date of the period subject to retroactive IFRS provisions (1 st January 2002). The securitisation transaction performed by Banca Carige in 2004 (SPE: Argo Mortgage 2) does not fully transfer risks to third parties with the subsequent benefits transfer produces. Consequently, it has been rerecognised in equity as at 1 st January IAS 32 AND 1AS 39 Banca Carige adopted IAS 32 and IAS 39 (Financial Instruments) with effect from 1 st January As a result, the impacts of adopting IAS 32 and IAS 39 are not included in the relevant 2004 comparatives (as at 31/12/04 and 30/6/04). b) With regards to other IAS/IFRS provisions, the Group has made the following adoptions: - financial instruments securities, loans, amounts payable to banks and customers, derivatives, equity interests have been reclassified under IFRS. Securities have been substantially classified as held for trading with a remaining amount categorised as available for sale. - The fair value option has not been exercised. - The items amounts owed by banks and customers and amounts payable to banks and customers continue to be recognised under Italian GAAP. However, impairment assessments of the Group s loan portfolio (bad loans, watchlists, rescheduled loans, country risk positions classified as bad loans or watchlists, loans more than 180 days overdue classified as watchlists) is carried out in accordance with IFRS. Collective valuations of performing loans are measured on the basis of mathematical/statistical analyses foreseen by Basel 2 criteria. Issued debt securities are removed from the balance sheet with a corresponding deduction in 458

459 the item securities issued ; Related accrued expenses are carried forward to the relevant IFRS-compliant balance sheet items, rather than the specific accrued expenses item foreseen under Italian GAAP. - Derivatives held for trading rather than risk management purposes are recorded as assets or liabilities according to their value (positive or negative). Derivatives held for risk management (hedging assets and liabilities) are recorded as: hedging derivatives, when after assessment the instrument is deemed an effective hedge; available for trading, when the hedge ceases to be effective (limited occurrence). - Minority interests are recognised as financial assets available for sale. These include the investment in the Bank of Italy fair valued through profit or loss to the corresponding share of shareholders equity recorded at 31 st December This approximated valuation is carried out according to Bank of Italy guidelines regarding the definition of its own shareholders equity under IFRS adoption. The Company believes this valuation is justified on the basis of previous documented transactions performed in the Italian banking industry, such as the sale of shareholdings in the Bank of Italy by parties legally entitled to do so. The value of these shareholdings sold and acquired corresponded to the quota of shareholders equity. Justification for this approach comes from a recent acquisition on the part of an EU Member State of an equity investment in another country s central bank, which was undertaken at values higher than the central bank s shareholders equity. Apart from the validity of the valuation criteria explained above, the Group believes that in the event of any changes made to the capital ownership structure of the Bank of Italy, the elected bodies of Banca Carige (Board of Directors and Board of Statutory Auditors) must at all times safeguard the interests of the Company as a current shareholder in the Bank of Italy. - With regards to property belonging to the Company, land values are bifurcated and attributable amortisation charges are recorded at equity. - Intangible assets not classifiable as such under IAS 38 have been derecognised. These are as follows: plant and improvements costs; R&D costs; software not required to facilitate the use of new hardware; securitisation transaction charges; acquisition charges relating to lease contracts; capital gains on real estate (INVIM ). With regards to goodwill charges relating to the purchase of branches (external growth), the amortisation charge for 2004 is recorded in equity. Value maintenance tests, undertaken on the basis of dedicated internal models, were positive. 459

460 COMMENTARY ON THE USE OF THE INTERNATIONAL ACCOUNTING STANDARDS IAS/IFRS OF FTA (First Time Adoption) This Report sets out the financial and economic results of the Banca Carige Group under IFRS as required by IFRS 1 and CONSOB s deliberation no of 14 th April 2005 and provides the following Italian GAAP/IFRS reconciliations: - Shareholders equity at 1/1/2004; - Shareholders equity at 31/12/2004; - Economic result at 31/12/2004; - Shareholders equity at 1/1/2005. The results stated may be subject to change arising from the introduction of new principles, modifications to those already adopted and/or changes in tax law or interpretations thereof 1. The tax effects on single captions is calculated according to tax rates currently in force. Tax assets and liabilities are stated at relevant balance sheet items. The caption Shareholders equity comprises net variations. - on one hand, the effects deriving from adoption itself either resulting from transitional provisions or regime changes; - on the other, the tax effects deriving from variations to shareholders equity charged at the rates stated below: - IRES (Corporation tax): 33 per cent; - IRAP (Regionally-levied income tax on businesses): 4.25 per cent. Total Shareholders Equity at 1 st January 2005 under IFRS amounted to euro 2,278,602,000 in comparison to euro 1,728,413,000 under Italian GAAP. The increase of euro 550,189,000 includes Banca Carige s holding in the Bank of Italy, which measured on the basis of the equity method, amounted to euro 539,216,000. All amounts shown are expressed in thousands of euros. The reconciliations have been subject to a Special Purpose Audit Report carried out by Deloitte & Touche SpA, in accordance with the decision of the Board of Directors of Banca Carige taken during the meeting of 9 th May 2005 and pursuant to CONSOB s communication DEM no of 15 th April The Special Purpose Audit Report is included as an attachment to these statements. IAS/IFRS adoption has had the following impacts on shareholders equity: 1 Reconciliation statements, requested by IFRS 1, published and audited by Deloitte & Touche, can t be modified. Therefore, the net equity at 1 st January 2005 (FTA) is unchanged. 460

461 CHANGES OF SHAREHOLDERS' EQUITY 31/12/04 01/01/05 change ante IAS/IFRS IAS/IFRS REVALUATION RESERVES 7, , ,281 a) Financial assets available for sale - 539, ,349 c) Hedging cash flows d) Special revaluations laws 7, , ,838 e) Others CAPITAL INSTRUMENTS - 11,402 11, RESERVES 238,051 91, ,922 - Legal reserve 77,971 77, Taxed extraordinary reserve 41,913 41, merger reserve 12,340 12, reserve for incorporation 16,589 16, reserve on own shares 1,301 1, reserve for purchase of own shares 75,699 75, reserve for dividends on own shares reserve legislative decree 17/5/99 n ,718 11, reserve legislative decree 21/4/1993 n reserve art.55 Decree 917/ reserve for F.T.A. IAS - Art. 7.3 legislative decree 38/2005-6,778 6,778 - reserve for F.T.A. IAS - Art. 7.4 legislative decree 38/ ,418 12,418 - reserve for F.T.A. IAS - Art. 7.5 legislative decree 38/ ,917 12,917 - reserve for F.T.A. IAS - Art. 7.7 legislative decree 38/ , , Additional paid-in capital 262, , Capital stock 1,113,327 1,113, Own shares -1,301-1, Net income 107,541 89,969-17,572 SHAREHOLDERS' EQUITY 1,728,413 2,278, ,189 (thousands of Euros) The variation in total shareholders equity (euro 550,189,000) is allocated to the following IFRS-specific transitional reserves: - Revaluation reserve (shareholders equity caption 130): positive variation of euro 703,281,000, of which euro 539,216,000 is attributable to the valuation of the holding in the Bank of Italy; - Capital instruments (shareholders equity caption 150): positive variation of euro 11,402,000; - Reserves (shareholders equity caption 160): negative variation of euro 164,494,000, which includes a negative variation of euro 17,572,000 relating to value adjustments to profit for the year Details of positive and negative variations to components making up total shareholders equity are provided below (article 7, Legislative decree 38/2005): - positive variations deriving from the valuation of tangible assets, amounting to euro 164,838,000 (property: euro 141,473,000; works of art: euro 23,365,000) that are stated at 461

462 revaluation reserves can only be included in tier 1 capital after an equity raising transaction as foreseen by article 7, paragraph 6 of Legislative decree 38/2005; - positive variations allocated to IFRS Reserves pursuant to Legislative decree 38/2005 amounting to euro 32,113,000, of which euro 12,418,000 refers to revaluations to accumulated depreciation provided on land and euro 12,917,000 refers to revaluations to credit risk and other risk funds, can be utilised in share capital increases. Whether utilised or not for this purpose, the variations are included in the calculation of tier 1 capital; - residual positive variations of euro 549,845,000, of which euro 539,349,000 refers to available for sale financial assets fair valued through profit or loss (inclusive of Banca Carige s holding in the Bank of Italy of euro 539,216,000 fair valued at equity) and euro 11,402,000 refers to capital instruments. The total referring to available for sale assets, stated at IFRS reserves pursuant to article 7.2 of Legislative decree 38/2005, cannot be stated in equity. In accordance with Bank of Italy indications issued during the Spring of 2005, only 50 per cent of the total amount is calculable for Tier 2 2. The second amount referring to capital instruments is immaterial in the calculation of capital resources (tier 1 and tier 2); - negative variations, totalling euro 196,607,000, derive from: increased impairment allowances to cash credits and guarantees (euro 105,810,000); economic effects from the rerecognition of the securitisation transaction undertaken in 2004 (euro 34,816,000); deductions from equity of dividends distributed (euro 24,702,000); other components (euro 31,279,000). According to the provisions of Legislative decree 38/2005, the negative variations recorded at IFRS transitional reserves pursuant to article 7.7 of the same legislation shall provide cover for the distribution of dividends were other reserve balances to be insufficient. Given the adequacy of the reserve balances in question, this does not apply for Banca Carige. 2 In line with the Bank of Italy s indications contained in its letter no of 1 st December 2005 ( discipline of prudential filters ), equity investments on the part of banking groups in the Bank of Italy are to be deducted from regulatory capital (tier 1 plus tier 2) at both consolidated and single-company levels. In order to reduce the impact of these changes, the carrying value of the holding in the Bank of Italy recorded at 31/12/04 is depreciable in five equal instalments over five years. Any variations in fair value arising from IFRS adoption for the year ending 31/12/05 are excluded from the calculation of regulatory capital. 462

463 - VARIATION TO TOTAL SHAREHOLDERS' EQUITY: COMPONENTIAL ANALYSIS TOTAL SHAREHOLDERS' EQUITY under Italian GAAP (Legislative decree 87/92) 1,728,413 as at 31/12/2004 Positive variations IAS/IFRS 746,796 Financial assets and derivatives 5,872 Avalilable for sale financial assets 539,349 (including holding in Bank of Italy valued at 539,216,000) Capital instruments 11,402 Tangible assets - Property 141,473 Tangible assets - Works of art 23,365 Tangible assets - Land 12,418 Fund for Credit risks - Caption 90 11,295 Fund for risks and charges 1,622 Negative variations IAS/IFRS 196,607 Non performing loans 64,016 Performing loans 38,625 Securitisation transaction 2004 (performing loans) 34,816 Intangible assets 7,097 Guarantees 3,169 Severance pay provisions 5,338 Fund for risks and charges 1,272 Dividends 24,702 Net profit ,572 TOTAL SHAREHOLDERS' EQUITY under IAS/IFRS 2,278,602 as at 1/1/2005 (thousands of Euros) Below are provided the most significant differences in results stated under IAS/IFRS at 1/1/2005 and Italian GAAP at 31/12/2004. FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING In accordance with IAS/IFRS, financial assets and liabilities classified in this category are fair valued through profit or loss. Gains or losses arising from changes in fair value are included directly in the income statement. First time adoption effects are recognised at a specific reserve in equity. The Group has classified in this category debt securities, equity securities and derivatives held for trading with either a positive or negative value. Debt securities include previously recognised bonds held for trading, whilst equity securities include the share portfolio and mutual fund quotas. The adoption of fair value generated a positive pretax gain in comparison to that recorded at 31/12/2004 under Italian GAAP (quoted securities 463

464 measured at average market price recorded in December) of euro 11,571,,000 and one of euro 7,260,000 after tax. IAS variation Pre-tax After-tax DEBT AND EQUITY 29,915 18,771 SECURITIES DERIVATIVES RECORDED 71,967 45,159 IN ASSETS DERIVATIVES RECORDED -90,311-56,670 IN LIABILITIES TOTAL 11,571 7,260 FINANCIAL ASSETS AVAILABLE FOR SALE Available for sale investments under IAS/IFRS are recognised at fair value and recorded at a specific reserve of equity until sale when the cumulative gain or loss is transferred to the income statement. The Group has classified in this category residual debt securities previously recognised as investment securities and minority interests including the Group s holdings in the Bank of Italy. The adoption of fair value generated a pre-tax gain in comparison to that at 31/12/2004 under Italian GAAP (valuation at cost) of euro 539,684,000 before tax and one of euro 539,349,000 after tax. The gain deriving form the valuation of investments in the Bank of Italy amounted to euro 539,216,000 and is exempt from tax pursuant to the provisions contained in article 87 of the Consolidated Tax Law. The net gain is recorded at caption 130 Revaluation Reserve. 3 Recognition of the Company s holding in the Bank of Italy at fair value was undertaken on the basis of the equity method. On the basis of 3 The Legislative Decree 206/2005, converted in Law 248/2005, modified the net gains taxation in conformity with the article 87 of TUIR, replacing the total allowance with an allowance limited to 91% until to 31 th December 2006 and to 84% from 1 st January Therefore, at the end of the year 2005, debt deferred taxes were charged to the AFS Reserve, insofar of 33% of 16% of accumulated net gain at 31 th December 2005 for a total amount of 28,967,000. the Bank of Italy s total shareholders equity at 31 st December 2003 as approved by the annual general meeting of 31 st May 2004 (shareholders equity under Italian GAAP), the unitary value of the quota is euro 45,472 in comparison with a nominal value of euro 0.52 and an average overall book value at 31 st December 2004 of euro 41. Shareholders equity of the Bank of Italy as at 31/12/2003 is calculated as follows (amounts are expressed in millions of euros): Share capital 0.1 Reserves (net of quota to be 13,620.5 distributed) Profit for the period 20.9 destined to reserves TOTAL 13,641.5 LOANS AND SECURITISATION TRANSACTIONS Loans and receivables (banks and customers) under IAS/IFRS are initially recognised at fair value including direct and incremental transaction costs. They are subsequently valued at amortised cost using the effective interest method, a method of calculating the amortised cost of a financial asset and of allocating the interest income over the relevant period. The effective interest rate is the rate that exactly discounts the expected future cash payment or receipts through the expected life of the financial instrument to the net carrying amount of the instrument. The application of the method has the effect of recognising income receivable on the asset evenly in proportion to the amount outstanding over the period to repayment. A distinction is made between performing and nonperforming loans. Under IAS/IFRS: - non-performing loans are assessed analytically in order to determine the asset s recoverable value and subsequent effective impairment; - performing loans are measured on the basis of mathematical/statistical methods that take into account the historical loss experience for loans granted to the same customer segment. These analyses provide Probability of Default and Loss Given Default figures in line with Basle 2 requirements in the area of credit valuation. 464

465 Banca Carige classifies its non-performing loans in the following categories: bad loans, watchlists or potential credit risk loans (PCRLs), rescheduled loans, country risk loans classified as bad loans or PCRLs (other country risk positions are classified as performing), and past due, when classified as watchlists, other wise categorised as performing loans. Estimates relating to the recovery of bad loans are made on the basis of interest rates in effect at the moment in which the asset is recognised as impaired. When this is not possible, the position is evaluated on the basis of average rates for the period and business segment recorded at the moment of impairment. Recovery times for significant exposures (greater than euro 250,000) are estimated analytically, whilst other positions are measured according to the average period of time a particular loan type is categorised as a bad loan. With this in mind, the Company has defined nine loan product categories. Estimates relating to the recovery of watchlists or potential credit risk loans (PCRLs), including rescheduled loans and country risk positions categorised as watchlists, are as follows: - recoverable amounts relating to exposures greater than euro 250,000 are analysed singly; - LGD relating to all other positions is evaluated on the basis of mathematical/analytical analyses, whilst the PD parameter applied is 1 (non performing loans); - performing loans including past due positions are categorised in groups with similar risk characteristics and the PD parameter is calculated on the basis of customer segment type. Product categories are those defined by the Group s Credit Risk Management project. Total impairment allowances on short-term credits were recorded at caption 160 Reserves (IFRS first time adoption reserves foreseen by Legislative decree 38/2005) with a subsequent negative impact on total shareholders equity. Total adjustments (short-term (cash) credits and guarantees) foreseen under IFRS relating to shortterm credits amounted to before tax euro 158,245,000, whilst after tax to euro 105,810,000. VALUE ADJUSTMENTS / IMPAIRMENT ALLOWANCES BEFORE TAX AFTER TAX BAD LOANS 70,333 47,123 WATCHLISTS 25,213 16,893 PERFORMING 57,649 38,625 LOANS 153, ,641 GUARANTEES 5,050 3,169 TOTAL 158, ,810 As previously indicated, the securitisation of performing mortgages undertaken by Banca Carige in 2004 (EPS: Argo Mortgage 2) was recorded in the balance sheet given the fact that risks and rewards of ownership were not fully transferred. Recognition-related impact amounted to euro 55,482,000 before tax and euro 34,816,000 after. The net figure was recorded in equity at the transitional FTA reserve foreseen by Legislative decree 38/2005 together with allowances for impaired credits. Banca Carige s decision not to derecognise the securitisation transaction referred to above resulted in the rerecognition of outstanding amounts (euro 826,660,000) as at 31 st December 2004 related to the assets securitised, and the recording at Amounts payable to customers of an amount corresponding to that payable to the SPE Argo Mortgage 2. HEDGE ACCOUNTING Derivatives are used substantially to hedge assets and liabilities in accordance with Italian GAAP provisions contained in Legislative decree 87/1992, and are included in assets when the fair value is positive, and liabilities when the fair value is negative. Derivatives hedging interest rate risk in the trading securities portfolio are classified as derivatives held for trading. Banca Carige applies fair value hedge accounting and cash flow hedge accounting. 465

466 Fair value hedge accounting is applied to exchange and interest rate risk implicit in certain financial assets and liabilities (bonds issued, loans to customers, interbank deposits and postal bonds), whilst cash flow hedge accounting is applied to interest rate risk implicit in financial liabilities. Valuation of both hedging derivatives and hedged items generated a negative impact of euro 2,212,000, of which euro 1,443,000 relating to cash flow hedge accounting and euro 769,000 relating to fair value hedge accounting (the latter figure represents the difference between the negative value referring to hedged items (euro 13,218,000) and the positive value referring to the related hedging derivatives (euro 12,449,000). The overall net impact of euro 1,388,000 was allocated in the following way: euro 906,000 was recorded in equity at caption 130 Revaluation reserves ; euro 482,000 was recorded at caption 160 Reserves. The difference (euro 13,218,000) between the values of the hedged risk in the hedged items under fair value hedge accounting represents the value adjustment of the same items (increased balance sheet value of loans totalling euro 23,897,000 and of bonds of euro 37,115,000). At 1st January the Company s hedging derivatives included in assets amounted to euro 61,722,000, whilst those included in liabilities amounted to euro 48,166,000. CAPITAL INSTRUMENTS This category refers exclusively to Banca Carige s convertible bond issue of December 2003 undertaken within the confines of a share capital increase. The bond issue included an embedded call option, which gives the bondholder the option to purchase from 2006 onwards a fixed number of Carige shares in exchange for a fixed amount of bonds. (bond) and any subsequent changes in value derecognised. On first time adoption, the embedded derivative was bifurcated and reported before tax at euro 18,171,000 and after tax at euro 11,402,000. The after-tax amount was recorded in equity at caption 150 Capital instruments. TANGIBLE ASSETS Under IAS/IFRS, tangible assets are evaluated at either cost or fair value. At first time adoption, the valuation of property can be either at fair value or deemed cost. Depreciation is provided on the depreciable amount on the basis of estimated useful life. The land component where present is bifurcated from property and no depreciation is provided, in common with long-lived assets. Previous amortisation charges are recognised at the carrying value of the asset. Banca Carige has classified in this category land, property (operational and investment), property acquired under finance leases, plant and equipment, furniture and fittings, and works of art. On first time adoption Banca Carige has elected to make the following choices: - all property (operational and investment) and works of art are stated at fair value rather than deemed cost, with a subsequent revaluation of the assets concerned; - property is evaluated on the basis of bifurcating land and real estate values calculated by recognised chartered surveyors, with accumulated depreciation recorded in equity at Reserves ; - furniture and fittings continue to be evaluated under previously adopted IFRScompliant Italian GAAP valuation criteria. The positive impacts of first time adoption relating to the first two items stated above is before and after tax, respectively, euro 267,757,000 and euro 177,256,000. Under IAS 32 this embedded derivative is classified as an equity instrument and is therefore bifurcated from the host contract 466

467 IAS variations Before tax After tax Property 224, ,473 Works of art 23,365 23,365 Total 248, ,838 Accumulated 19,732 12,418 depreciation of land TOTAL 267, ,256 Net gains resulting from revaluations to property and works of art were recorded at caption 130 Revaluation reserve, whilst those relating to land were recorded at caption 160 Reserves. INTANGIBLE ASSETS Under IFRS, this category includes solely those intangible assets that will generate future benefits, the cost of which can be measured in reasonable way. Assets not satisfying such criteria are recorded directly in the income statement and on first time adoption are derecognised with a subsequent negative impact on shareholders equity. In compliance with IFRS, Banca Carige has included in this category exclusively goodwill, maintenance costs relating to rented or lease property and computer software. In addition, under IFRS, depreciation of assets with an undefined useful life is not consented, with a subsequent impact on the valuation of goodwill, which is now subject to annual impairment testing, or more frequently if deemed appropriate. Any negative difference between impaired value and balance sheet value is recorded in the income statement. On first time adoption, the Company carried out the following: - intangible assets non recognisable under IAS 38 (before tax: euro 11,311,000; after tax: euro 7,097,000) recorded at caption 160 Reserves were written off; - goodwill relating to acquired liabilities that have maintained their original value was reviewed for impairment. One of the effects of first time adoption on the income statement 2004 was the derecognition of accumulated depreciation charges for the period (euro 10,542,000 before tax and euro 6,615,000 after tax) relating to goodwill arising on the purchase of branches from Banco di Sicilia and Capitalia Group. SUBSIDIARIES AND ASSOCIATES Under IFRS solely subsidiaries and associates are classified in this category, with the acquisition stated at cost. Banca Carige, in accordance with IFRS, classified its minority interests as available for sale financial assets. At first time adoption, no balance sheet differences between IFRS and Italian GAAP valuations arose. OWN SHARES Under IFRS, own shares in portfolio shall be deducted from shareholders' equity. This category relates exclusively to Banca Carige's holding of own shares, which at 31/12/2004 amounted to euro 1,301,000. The same amount is deducted from Shareholders' Equity and stated at caption 190 "Own Shares". PROVISIONS Banca Carige has made the following provisions: - Retirement Benefit Fund; - Severance Pay Fund; - Long-service award Fund; - Litigation and legal claims Fund; - Guarantees and commitments Fund. Under IFRS, funds for employee benefits (retirement benefit, severance pay, long-service) are subject to actuarial valuation, the application of which may generate positive or negative differences in comparison to the method adopted under Italian GAAP. Independent actuarial valuation for each of the funds was performed. Supplementary pension funds established by Banca Carige already evaluated on an annual basis by independent actuaries, were IFRS compliant. As a result, no reconciliation between figures at 31 st December 2004 under 467

468 Italian GAAP 1 st January 2005 under IFRS was required. However, a negative reconciliation difference arose with regards to severance pay and long-service funds, in spite of actuarial valuations under Italian GAAP. The most substantial provisions required under first time adoption of IFRS and for the year 2004 for the Group are as follows: IAS variation Before tax After tax SEVERANCE PAY 11,334 7,594 LONG-SERVICE 2,072 1,388 REWARDS TOTAL 13,406 8,982 Amounts in thousands of Euros As a result, there was a net negative variation of euro 8,982,000 of which euro 6,610,000 was recorded at caption 160 "Reserves" and euro 2,372,000 in value adjustments to net profit for the year ending 31/12/2004. The question of severance pay provisions is currently the subject of wide-ranging debate and the possibility of returning to previously applied Italian GAAP treatment albeit under IFRS cannot be at present excluded. Funds for litigation and outstanding legal claims as IFRS-compliant remain unchanged. At first time adoption, actuarial valuation on related obligations was not performed as the effect on consolidated single items was immaterial. The Fund for Guarantees and Commitments, which provides cover for both performing and nonperforming guarantees given, is stated at "Other liabilities". The Fund was evaluated on the basis of the same criteria applied to performing and nonperforming loans. This valuation produced a negative impact before tax of euro 5,050,000 and euro 3,169,000 after tax, which was recorded at caption 160 "Reserves". DIVIDENDS Under IFRS, dividends are recognised in the period in which they are approved by the shareholders meeting. The deduction from equity of dividends in the period in which they are approved rather than received had a significant balance sheet impact. Dividends payable to equity holders for the year 2003 net of related income tax amounted to euro 24,702,000 (euro 25,116,000 before tax). 468

469 RECONCILIATION STATEMENT OF SHAREHOLDERS EQUITY AT 1 ST JANUARY 2004 ASSETS (thousands of Euros) ITALIAN GAAP TRANSITION TO IAS/IFRS (1) IAS/IFRS (1) 10 -CASH AND HIGHLY LIQUID DEPOSITS 166, , FINANCIAL ASSETS HELD FOR TRADING 2,018,261-2,018, FINANCIAL ASSETS AVAILABLE FOR SALE 191, , LOANS TO BANKS 940, , LOANS TO CUSTOMERS 9,005, ,005, HEDGING DERIVATIVES 22,318-22, EQUITY INVESTMENTS 632, , TANGIBLE ASSETS 305, , , INTANGIBLE ASSETS 468,019-11, ,708 including: - goodwill 442, , TAX ASSETS 122,951 3, ,293 a) currents 106, ,303 b) anticipated 16,648 3,342 19, OTHER ASSETS 634,702-25, ,586 TOTAL ASSETS 14,510, ,048 14,744,529 LIABILITIES AND STOCKHOLDERS' EQUITY (thousands of Euros) ITALIAN GAAP TRANSITION TO IAS/IFRS (1) IAS/IFRS (1) 10 -AMOUNTS OWED TO BANKS 1,142,631-1,142, AMOUNTS OWED TO CUSTOMERS 5,958,566-5,958, DEBT SECURITIES IN ISSUE 4,608,087-4,608, FINANCIAL LIABILITIES HELD FOR TRADING 34,565-34, HEDGING DERIVATIVES 3,979-3, TAX LIABILITIES 64,042 92, ,475 (a) currents 58,650-58,650 (b) differed 5,392 92,433 97, OTHER LIABILITIES 573, , RESERVE FOR TERMINATION INDEMNITIES 78,303 7,967 86, RESERVES FOR RISKS AND CHARGES: 334,611-17, ,888 a) reserves for pensions and similar commitments 289, ,632 b) other reserves 44,979-17,723 27, REVALUATION RESERVES 7, , , RESERVES 229,723-13, , CAPITAL STOCK 1,113,327-1,113, INCOME (LOSS) FOR THE PERIOD (+/-) 106, ,199 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 14,510, ,048 14,744,529 (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and IAS

470 RECONCILIATION STATEMENT OF SHAREHOLDERS EQUITY AT 31 ST DECEMBER 2004 ASSETS (thousands of Euros) ITALIAN GAAP TRANSITION TO IAS/IFRS (1) IAS/IFRS (1) 10 -CASH AND HIGHLY LIQUID DEPOSITS 151, , FINANCIAL ASSETS HELD FOR TRADING 2,359,067-2,359, FINANCIAL ASSETS AVAILABLE FOR SALE 178, , LOANS TO BANKS 1,590,732-1,590, LOANS TO CUSTOMERS 9,198, ,198, HEDGING DERIVATIVES 20,885-20, EQUITY INVESTMENTS 893, , TANGIBLE ASSETS 336, , , INTANGIBLE ASSETS 457, ,599 including: - goodwill 431,850 10, , TAX ASSETS 114,416 8, ,905 a) currents 84,930-84,930 b) anticipated 29,486 8,489 37, OTHER ASSETS 473,584-34, ,798 TOTAL ASSETS 15,773, ,248 16,014,217 LIABILITIES AND STOCKHOLDERS' EQUITY (thousands of Euros) ITALIAN GAAP TRANSITION TO IAS/IFRS (1) IAS/IFRS (1) 10 -AMOUNTS OWED TO BANKS 1,129,424-1,129, AMOUNTS OWED TO CUSTOMERS 6,710,231-6,710, DEBT SECURITIES IN ISSUE 5,101,735-5,101, FINANCIAL LIABILITIES HELD FOR TRADING 94,872-94, HEDGING DERIVATIVES 2,750-2, TAX LIABILITIES 28,702 94, ,737 (a) currents 6,788-6,788 (b) differed 21,914 94, , OTHER LIABILITIES 575, , RESERVE FOR TERMINATION INDEMNITIES 79,244 10,393 89, RESERVES FOR RISKS AND CHARGES: 323,309 2, ,329 a) reserves for pensions and similar commitments 296, ,310 b) other reserves 26,999 2,020 29, REVALUATION RESERVES 7, , , RESERVES 238,050-13, , ADDITIONAL PAID-IN CAPITAL 262, , CAPITAL STOCK 1,113,327-1,113, OWN SHARES (-) - 1, , INCOME (LOSS) FOR THE PERIOD (+/-) 107,540-17,571 89,969 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 15,773, ,248 16,014,217 (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and IAS

471 RECONCILIATION STATEMENT OF THE 2004 ECONOMIC RESULTS (thousands of Euros) ITALIAN GAAP TRANSITION TO IAS/IFRS (1) IAS/IFRS (1) 10 - INTEREST INCOME AND SIMILAR REVENUES 598, , INTEREST EXPENSES AND SIMILAR CHARGES - 256, , NET INTEREST INCOME 342, , COMMISSION INCOME 185, , COMMISSION EXPENSES - 18, , NET COMMISSIONS 167, , DIVIDENDS AND OTHER SIMILAR REVENUES 44,078-9,669 34, INCOME (LOSS) ON FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING (NET) 18,119-18, INCOME (LOSS) FROM HEDGING ACTIVITIES INCOME (LOSS) ON DISPOSAL OF: 9, ,084 a) loans b) financial assets available for sale 10,115-10, GROSS OPERATING INCOME 581,825-9, , NET VALUE ADJUSTMENT ON: - 136,377-18, ,377 a) loans - 136,435-18, ,435 d) other financial assets NET INCOME FROM FINANCIAL MANAGEMENT 445,448-27, , ADMINISTRATIVE COSTS: - 378,435-6, ,451 a) staff costs - 239,470-2, ,069 b) other administrative costs - 138,965-3, , NET PROVISIONS FOR RISKS AND CHARGES AMORTIZATION AND DEPRECIATION OF TANGIBLE FIXED ASSETS - 10, , AMORTIZATION AND DEPRECIATION OF INTANGIBLE FIXED ASSETS - 11,427 3,559-7, OTHER OPERATING EXPENSES AND REVENUES 97,865-1,569 96, OPERATING COSTS - 302,006-3, , VALUE ADJUSTMENTS OF GOODWILL - 10,542 10, INCOME (LOSS) FROM DISPOSAL OF INVESTMENTS OPERATING INCOME (LOSS) FROM ORDINARY ACTIVITIES BEFORE TAXES 133,510-21, , TAX EXPENSE (INCOME) RELATED TO PROFIT OR LOSS FROM ORDINARY ACTIVITIES - 25,970 3,544-22, NET INCOME (LOSS) FOR THE PERIOD 107,540-17,571 89,969 (1) Amounts calculated on the basis of IAS/IFRS, excluding IAS 32 and IAS

472 RECONCILIATION STATEMENT OF SHAREHOLDERS EQUITY AT 1 ST JANUARY 2005 ASSETS (thousands of Euros) ITALIAN GAAP TRANSITION TO IAS/IFRS IAS/IFRS 10 -CASH AND HIGHLY LIQUID DEPOSITS 151, , FINANCIAL ASSETS HELD FOR TRADING 2,359,067 17,052 2,376, FINANCIAL ASSETS AVAILABLE FOR SALE 178, , , LOANS TO BANKS 1,590, ,590, LOANS TO CUSTOMERS 9,198, ,203 9,840, HEDGING DERIVATIVES 20,885 40,837 61, EQUITY INVESTMENTS 893, , TANGIBLE ASSETS 336, , , INTANGIBLE ASSETS 457, ,599 including: - goodwill 431,850 10, , TAX ASSETS 114, , ,179 a) currents 84,930-84,930 b) anticipated 29, , , OTHER ASSETS 473,584-34, ,798 TOTAL ASSETS 15,773,969 1,585,557 17,359,526 LIABILITIES AND STOCKHOLDERS' EQUITY (thousands of Euros) TRANSITION TO IAS/IFRS ITALIAN GAAP IAS/IFRS 10 -AMOUNTS OWED TO BANKS 1,129,424-1,129, AMOUNTS OWED TO CUSTOMERS 6,710, ,660 7,536, DEBT SECURITIES IN ISSUE 5,101,735-83,596 5,018, FINANCIAL LIABILITIES HELD FOR TRADING 94,872 92, , HEDGING DERIVATIVES 2,750 45,416 48, TAX LIABILITIES 28, , ,690 (a) currents 6,788-6,788 (b) differed 21, , , OTHER LIABILITIES 575,291 5, , RESERVE FOR TERMINATION INDEMNITIES 79,244 10,393 89, RESERVES FOR RISKS AND CHARGES: 323,309 2, ,329 a) reserves for pensions and similar commitments 296, ,310 b) other reserves 26,999 2,020 29, REVALUATION RESERVES 7, , , CAPITAL INSTRUMENTS - 11,402 11, RESERVES 238, ,922 91, ADDITIONAL PAID-IN CAPITAL 262, , CAPITAL STOCK 1,113,327-1,113, OWN SHARES (-) - 1, , INCOME (LOSS) FOR THE PERIOD (+/-) 107,540-17,571 89,969 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 15,773,969 1,585,557 17,359,

473 SUMMARIES OF INTERNATIONAL FINANCIAL REPORTING ACCOUNTING STANDARDS INTERNATIONAL ACCOUNTING STANDARDS Homologation rules IFRS 1 First-time Adoption of International Financial Reporting Standards 707/2004 mod. 2236/ / / /2005 IFRS 2 Share-based Payment 211/2005 IFRS 3 Business Combinations 2236/2004 IFRS 4 Insurance Contracts 2236/2004 IFRS 5 Non-current Assets Held for Sale and Discontinued 2236/2004 Operations IFRS 6 Esploration and evaluation of the mineral resources 1910/2005 IAS 1 Presentation of Financial Statements 2238/2004 IAS 2 Inventories 2238/2004 IAS 7 Cash Flow Statements 1725/2003 mod. 2238/2004 IAS 8 Accounting Policies, Changes in Accounting Estimates 2238/2004 and Errors IAS 10 Events after the Balance Sheet date 2238/2004 IAS 11 Construction Contracts 1725/2003 IAS 12 Income Taxes 1725/2003 mod. 2236/ / /2005 IAS 14 Segment Reporting 1725/2003 mod. 2236/ /2004 IAS 16 Proprty, Plant and Equipment 2238/ /2005 IAS 17 Leasing 2238/2004 IAS 18 Revenues 1725/2003 mod. 2236/2004 IAS 19 Employee Benefits 1725/2003 mod. 2236/ / /2005 IAS 20 Accounting for Government Grants and Disclosure of 1725/2003 mod. 2238/2004 Government Assis IAS 21 The effects of changes in Foreign Exchange Rates 2238/2004 IAS 23 Borrowing Costs 1725/2003 mod. 2238/2004 IAS 24 Related Party Disclosures 2238/2004 IAS 26 Accounting and Reporting by Retirement Benefit Plans 1725/2003 IAS 27 Consolidated and Separate Financial Statements 2238/2004 IAS 28 Investments in Associates 2238/2004 IAS 29 Financial Reporting in Hyperinflationary Economies 1725/2003 mod. 2238/2004 IAS 30 Dislosures in the Financial Statements of Banks and 1725/2003 mod. 2238/2004 similar Financial Istitutions IAS 31 Interests in Joint Ventures 2238/2004 IAS 32 Financial Instruments: Disclosure and Presentation 2237/2004 mod. 2238/ /2005 IAS 33 Earnings per Share 2238/ /2005 IAS 34 Interim Financial Reporting 1725/2003 mod. 2236/ /2004 IAS 36 Impairment of Assets 2236/2004 mod. 2238/2004 IAS 37 Provisions, Contingent Liabilities and Contingent Assets 1725/2003 mod. 2236/ /2004 IAS 38 Intangible Assets 2236/2004 mod. 2238/ /2005 IAS 39 Financial Instruments. Recognition and Measurement 2086/2004 mod. 2236/ /2005 IAS 40 Investment Property 2238/2004 IAS 41 Agriculture 1725/2003 mod. 2236/ /

474 INTERPRETATION DOCUMENTS Homologation rules IFRIC 1 Changements in the liabilities regitered for dismantling, 2237/2004 restorations and similar liabilities IFRIC 2 Shares of the shareholders in cooperative entities and similar 1073/2005 instruments IFRIC 4 To determine if an agreement hold a leasing 1910/2005 IFRIC 5 Rights stemming from interests in funds for dismantling, 1910/2005 restorations and environmental reclamations SIC 7 Introduction of the Euro 1725/2003 mod. 2238/2004 SIC 10 Government Assistance No specific Relation to Operating 1725/2003 Activities SIC 12 Consolidation Special Purpose Entities 1725/2003 mod. 2238/2004 SIC 13 Jointly Controlled Entities Non-monetary Contributions by 1725/2003 mod. 2238/2004 Venturers SIC 15 Operating Leases - Incentives 1725/2003 SIC 21 Income Taxes Recovery of Revalued Non-Depreciable Assets 1725/2003 mod. 2238/2004 SIC 25 Income Taxes Changes in the Tax Status of an Entity or its 1725/2003 mod. 2238/2004 Shareholders SIC 27 Evaluating the Substance of Transactions Involving the Legal 1725/2003 mod. 2238/2004 Form of a Lease SIC 29 Disclosure Service Concession Arrangements 1725/2003 SIC 31 Revenue Barter Transactions Involving Advertising Services 1725/2003 mod. 2238/2004 SIC 32 Intangible Assets Web Site Costs 1725/2003 mod. 2236/ /

475 475

476 INFORMATION ON SUBSIDIARIES AND OTHER SIGNIFICANT COMPANY INTERESTS DATI DI SINTESI DEL INFORMATION ON OTHER SUBSIDIARIES AND OTHER SIGNIFICANT COMPANY INTERESTS Galeazzo Srl Columbus Carige Immobiliare SpA Immobiliare Ettore Vernazza SpA Centro Fiduciario SpA (thousands of Euros) BALANCE SHEET (1) (1) (1) (1) ASSETS Loans to banks 2, ,221 Other loans (2) Securities Equity investments Tangible and intangible fixed assets 1,006 33,418 5, Other assets , Total assets 4,061 47,780 5,967 2,497 LIABILITIES AND STOCKHOLDERS' EQUITY Amounts owed to banks - 9, Other payables (3) Other liabilities 99 1,231 1, Stockholders' equity 3,962 37,051 3,898 1,131 Total liabilities and stockholders' equity 4,061 47,780 5,967 2,497 INCOME STATEMENT Profit (loss) on ordinary activities 93 1,186 1, Extraordinary profit (loss) Changes of reserves for general banking risks Taxation Profit (loss) for the financial year , Net equity includes profit (loss) for the financial year (1) Financial statements as at 31/12/05 prepared by Directors. (2) Includes shareholders' provisions for losses recorded during the year (3) Financial statements as at 31/12/04 prepared by Directors. 476

477 Carige Ass.ni Carige Vita Nuova Frankfurter Bankgesellschaft Argo Finance Priamar Finance Srl Consorzio per SpA SpA AG One Srl Giurista di Impresa (1) (1) (1) (1) (1) (3) 56,565 14, , , , , ,068 64, ,433 31, ,018 67, ,533 11, , (2) 1,126,281 1,585, , , ,831 1,531,984 11, ,699 1,172 1, ,751 52,206 22, (2) 1,126,281 1,585, , ,142 2, , ,940 2,

478 INFORMATION ABOUT INDIRECT EQUITY INVESTMENTS ON SUBSIDIARIES AND COMPANIES SUBJECT TO SIGNIFICANT INFLUENCE Assimilano Srl Savona 2000 Srl Bda SpA Autostrade Assi 90 Ag. Srl dei Fiori srl (thousands of Euros) BALANCE SHEET (1) (1) (1) (4) (1) (4) ASSETS Loans to banks 259 1, Other loans (2) 4, , Securities Equity investments 31,492 1, Tangible and intangible fixed assets 625, Other assets 161,614 3, , Total assets 823,047 7,608 1,309 4, LIABILITIES AND STOCKHOLDERS' EQUITY Amounts owed to banks 148,972 Other payables (3) 140,586 1, Other liabilities 263,272 4, , Stockholders' equity 270,217 2, Total liabilities and stockholders' equity 823,047 7,608 1,309 4, INCOME STATEMENT Profit (loss) on ordinary activities 44,487 2, Extraordinary profit (loss) Changes of reserves for general banking risks Taxation 17,642 1, Profit (loss) for the financial year 27,208 1, '(1) Financial statements as at 31/12/05 prepared by Directors. '(2) With reference to insurance companies, item includes reserves of reinsurers and retrocessionaries. '(3) With reference to insurance companies, item includes actuarial, premium and damage reserves. '(4) Financial statements as at 31/12/04 prepared by Directors. 478

479 Recina U.C. Sport e servizi sicurezza Atoma Dafne Sgr srl Srl Srl Argo Mortgage srl Argo Mortgage 2 Srl Portorotondo Immobiliare Carisa (4) (4) (4) (1) (1) (1) (1) (1) (1) 3, , ,277 1, , , ,000 3, , ,418 11,047 1, ,752 20, ,378 4, ,841 2,585 3,531 1, , , , , ,577 8, ,035 1,811 11,047 1, ,752 20, ,378 4,418 1, , , ,

480 INFORMATION ON SUBSIDIARIES WITH ADOPTION OF INTERNATIONAL ACCOUNTING STANDARDS IAS/IFRS Banca del Monte Cassa di Risparmio Cassa di Risparmio Banca C.Ponti Carige Asset Management di Lucca SpA di Savona di Carrara SGR SpA (thousands of Euros) BALANCE SHEET (1) (1) (1) (1) (1) ASSETS Financial assets (2) 92, , ,437 73,189 7,181 Loans to banks 15,747 23,528 60,134 40,687 9,183 Loans to customers 517, , , ,877 3,626 Equity investments - 1, Tangible and intangible assets 20,303 41,786 25,707 14, Other assets (3) 18,393 73,307 46,398 12, Total assets 663,595 1,356,359 1,026, ,374 20,258 LIABILITIES AND STOCKHOLDERS' EQUITY Amounts owed to banks 91,369 35,493 23,554 4,220 8,960 Amounts owed to customers 288, , , ,426 1,110 Securities in issue 214, , ,314 50,227 - Financial liabilities (4) , Other liabilities (5) 31,816 87,304 79,049 19,053 1,603 Stockholders' equity (6) 36, ,286 99,116 22,390 8,585 Total liabilities and stockholders' equity 663,595 1,356,359 1,026, ,374 20,258 INCOME STATEMENT Gross operating income 25,266 58,811 46,915 15,468 9,877 Net value adjustments 2,681 2,564 3, Operating costs (7) 15,178 37,887 31,424 12,432 5,138 Other profits and revenues Taxation 3,236 8,024 5, ,829 Profit (loss) for the financial year 4,174 10,429 6,453 1,240 2,910 (1) Financial statements as at 31/12/05 prepared by Directors. (2) Includes items "financial assets held for trading" (caption 20), "financial assets designated at fair value" (caption 30), "financial assets available for sale" (caption 40), "financial assets held to maturity (caption 50), "hedging derivatives" (caption 80). (3) Includes items: "cash and highly liquid deposits" (caption 10), "tax assets" (caption 130), "other assets (caption 150). (4) Includes items: "financial liabilities held for trading" (caption 40), "financial liabilities designated at fair value" (caption 50), "hedging derivatives" (caption 60). (5) Includes items: "tax liabilities" (caption 80), "liabilities associated to dismissal assets" (caption 90), "other liabilities" (caption 100), "reserve for termination indemnities (caption 110), "reserves for risks and charges" (caption 120). (6) Includes profit (loss) for hte year. (7) Includes items: "administrative costs" (caption 150), "net provisions for risks and charges" (caption 160), "Amortization and depreciation of tangibile and intangibile fixed assets" (captions ), "other operating expenses and revenues" (caption 190). (8) Includes items: "incombe (loss) from equità investments" (caption 210), "net result of tangibile and intangibile assets designated at fair value" (caption 220), "value adjustments of goodwill" (caption 230), "income (loss) from disposal of investments" (caption 240). 480

481 INFORMATION ON OPEN PENSION FUND FONDO PENSIONE APERTO CARIGE "Asset defence" investment "Contribution paid development" investment "Long term asset revaluation" investment BALANCE SHEET - ACCUMULATION OF CAPITAL 31/12/ /12/ /12/ /12/ /12/ /12/ Investments 22,805,107 15,976,933 29,499,441 21,460,338 36,110,388 26,800, a) - Investments - banking deposits 36,621 81,986 32,498 1,856,743 70,506 1,862, b) - Loans for repurchase agreements 597, , , c) - Securities issued by Countries or international entities 11,186,018 10,339,000 7,640, d) - Quoted debt securities 1,142,352 6,791,041 6,335, e) - Quoted equity securities - 171, , h) - Investments - mutual funds and unit trusts 9,435,989 15,882,822 11,074,203 19,584,159 20,706,239 24,906, l) - Investments - accrued income and prepaid expenses 397, , , n) - Financial trust management: other assets 8,632 12,125 13,047 19,436 26,553 30, Tax credits 9,345 1, ,086 68, , , Pension and health trust management: liabilities a) - Pension and health trust management: amounts owed Financial mamagement liabilities -14,817-10,385-28,832-20,839-47,120-34, c) - Accruals and payable liabilities 30 d) - Financial trust management: other liabilities -14,817-10,385-28,832-20,839-47,120-34, Tax liabilities Net asset for benefit 22,799,635 15,967,666 29,578,695 21,508,118 36,404,233 27,016,873 Credit account (1) 1,290,969 1,202,483 1,280,089 1,281,549 1,144,956 1,233,215 INCOME STATEMENT - ACCUMULATION OF CAPITAL 10 - Settlement of social security contributions 6,377,361 6,581,426 6,765,356 7,390,676 6,407,612 7,408, a) - Social security contributions 6,184,643 6,255,729 7,235,079 7,479,758 7,159,789 7,622, b) - Advances -25, , , c) - Transfer and redemptions 224, , ,420-54, , , e) - Distributions of capital f) - Other contributions -7,198-6,191-12,303-10,953-15,155-15, Settlement of financial management 603, ,543 1,572, ,386 3,392,106 1,415, a) - Dividends and interests 48,174 10, ,734 16, ,182 20, b) - Profits (losses) from financial transactions, net 553, ,992 1,448, ,608 3,280,847 1,395, d) - Profits (losses) from repurchase agreements transactions 1,938-2,639-2, Operating expenses -157, , , , , , a) - Management trust -157, , , , , , b) - Other expenses , "Imposta sostitutiva" (Law 85/95) 8,227 1,118 39,468 19,811 89,243 32,548 Changes on net assets for benefits (10)+(20)+(30)+(50) 6,831,969 6,873,836 8,070,577 8,109,266 9,387,360 8,492,

482 CONVERTIBLE BONDS (Amounts in Euros) Balance at 31/12/2004 Code Description Nominal Value Cost Price Book Value Nominal Value SIAS 2, ,575,000 Total ,575,

483 Variations Balance at 31/12/2005 Countervalue Gains/losses Revaluations/write backs Nominal Value Cost Price Book Value 1,700, ,820 1,575, ,645,875 1,700, ,820 1,575,000 1,645,

484 PROPERTIES Location Area Ias Value Ias Depreciation Fund Balance Sheet Value m 2 at 31/12/2005 at 31/12/2005 at 31/12/2005 a) Productive Head Office Via Cassa di Risparmio 15 Genova ,350, ,233, ,116, Web Point Via Cassa di Risparmio 12 Genova , , , Banca continua Via XXV Aprile 10/12 r. Genova 204 1,224, , ,201, Other head office Vico Monte di Pietà 4 Genova ,078, , ,004, buildings Piazza dei Garibaldi 29 r. Genova 34 74, , , Via D. Chiossone 7 - fondi Genova , , , Via D. Chiossone 12 Genova ,772, , ,614, Vico Monte di Pietà 6/8 r. Genova , , , Vico Monte di Pietà 10 r. Genova , , , Via D. Chiossone 7/6 Genova , , , Piazza dei Garibaldi 33 r. Genova 45 94, , , Piazza dei Garibaldi 31 r. Genova 37 77, , , Via G. D'Annunzio Torri E e F Genova ,464, , ,035, Via G. D'Annunzio Torri E e F 2 p. Genova " 1,524, , ,496, Warehouse Via Emilia 48 C E r. Genova ,413, , ,361, Via Emilia 48 D r. Genova " 1,051, , ,028, Via G. D'Annunzio "A" (q.9,40) Genova 27 31, , Via G. D'Annunzio "B" (q.10,75) Genova 50 75, , , Via G. D'Annunzio "B" (q.10,75) Genova , , , Via G. D'Annunzio "C" (q.14,95) Genova , , , Car parking Corso Sardegna Genova 18 39, , Warehouse Via Arrivabene 39 r. Genova , , , Car parking areas Via G. D'Annunzio - 66 posti auto Genova ,782, , ,748, Archivie Via Pelio 6 Genova ,563, , ,441, Archivie Via Pelio 6 Genova " 351, , , Archivie Via Pelio 6 Genova " 506, , , Archivie Via Monticelli 13/2 Genova 50 82, , , Employees Club Via XX Settembre 41 6 piano Genova 830 2,282, , ,251, Genoa branch n. 87 Via Pisa 58 Genova ,254, , ,237, Genoa branch n. 41 Via G. D'Annunzio 25-29c Genova ,760, , ,674, E.A.D. Via Isonzo 21 Genova ,492, , ,977, Genoa branch n. 39 Piazza delle Americhe 1 Genova ,907, , ,732, Sede Milano Piazza Pattari 5-7 Milano ,661, , ,559, Main Office Milan Piazza Pattari p. Milano " 4,066, , ,027, Main Office Milan Piazza Pattari p. Milano " 2,765, , ,738, Main Office Turin Corso Matteotti 13 Torino ,438, , ,387, Main Office Turin Via Parini 13 piano terra e 1 piano interrato Torino , , , Genoa branch n. 1 Via Cesarea 60 r. Genova 536 2,142, , ,109, Genoa branch n. 2 Via B. Buozzi rr. Genova , , , Genoa branch n. 2 Piazza Dinegro rr. Genova , , , Genoa branch n. 3 Via G. Torti 80 r. Genova , , Genoa branch n. 3 Via G. Torti 24 Genova " 1,423, , ,397, Genoa branch n. 4 Via Lagustena 40/48 Genova 465 1,674, , ,642, Genoa branch n. 5 Via Monticelli 70 r. Genova , , , Genoa branch n. 5 Via Monticelli Genova " 2,165, , ,123, Genoa branch n. 6 Piazza Dante 30 r. Genova , , , Genoa branch n. 6 Via Fieschi 47 r. Genova " 518, , , Genoa branch n. 7 Via della Liberta' A-78 rr. Genova , , , Genoa branch n. 7 Via L. Pareto 6/8 Genova " 792, , , Genoa branch n. 8 Piazza S. Sabina 6 Genova 872 2,531, , ,484, Genoa branch n. 9 Corso Sardegna 94 r. Genova , , Genoa branch n. 9 Corso Sardegna 90 r. Genova " 4, , Genoa branch n. 9 Corso Sardegna 96 r. p.t. Genova " 189, , , Genoa branch n. 9 Corso Sardegna 44/1 Genova " 808, , , Genoa branch n. 9 Corso Sardegna 98 r. Genova " 241, , , Genoa branch n. 10 Via S. Vincenzo 26 Genova 760 2,541, , ,503, Genoa branch n. 10 Via Galata 51 A r. Genova " 196, , , Genoa branch n. 11 Via Piacenza 94 E Genova 391 1,032, , ,010, Genoa branch n. 11 Via Piacenza 179 G Genova " 23, , Genoa branch n. 13 Via XII Ottobre 7 r. Genova 536 2,356, , ,320, Genoa branch n. 14 Piazza Manin 2/1 Genova , , , Genoa branch n. 14 Piazza Manin 2/1 Genova " 382, , , Genoa branch n. 15 Via Napoli 40 r. Genova , , , Genoa branch n. 16 Viale des Geneys 2/1-2/A/B/C/D/E Genova 423 1,098, , ,074, Genoa branch n. 17 Via Posalunga 11 r. Genova , , , Genoa branch n. 17 Via Timavo r. Genova " 449, , , Genoa branch n. 17 Via Posalunga 5 r. Genova " 265, , , Genoa branch n. 17 Via Timavo Genova " 797, , , Genoa branch n. 17 Via Posalunga 7-9 r. Genova " 333, , , Genoa branch n. 18 Via Corsica r. Genova 802 2,602, , ,557, Genoa branch n. 19 Via Quinto 38 r. Genova , , , Genoa branch n. 20 Via Avio 2 r. Genova 765 1,629, , ,593, Genoa branch n. 20 Via Pesce - Via Mamiani 3 Genova , , ,

485 PROPERTIES Location Area Ias Value Ias Depreciation Fund Balance Sheet Value m 2 at 31/12/2005 at 31/12/2005 at 31/12/2005 Genoa branch n. 21 Via Sestri 114 r. Genova , , , Genoa branch n. 21 Via Sestri 24/1 r. Genova " Genoa branch n. 21 Via Donizetti 46/46A/46B/48 Genova " 1,907, , ,865, Genoa branch n. 21 Via Donizetti 8 A/3-8 A/4 Genova " 253, , , Genoa branch n. 21 Via Donizetti 8 A/1-8 A/2 Genova " 253, , , Genoa branch n. 21 Via Donizetti 8 A Genova " 635, , , Genoa branch n. 21 Via Donizetti 50 r. Genova " 160, , , Genoa branch n. 21 Via Donizetti 52 r. Genova " 117, , , Genoa branch n. 21 Piazza Rosolino Pilo 1 Genova 15 45, , Genoa branch n. 22 Piazza Sebastiano Gaggero 9 r. Genova 730 2,189, , ,141, Genoa branch n. 22 Via Don G. Verità 28 r. Genova " 10, , Genoa branch n. 22 Via Don G. Verità 6/2 Genova " 2, , Genoa branch n. 23 Via Pastorino 26 - Via Custo 22 r. Genova 831 2,561, , ,505, Genoa branch n. 23 Via G.B. Custo r. Genova , , , Genoa branch n. 24 Via F. del Canto 4 A Genova , , , Genoa branch n. 25 Via G. Jori 22 A - B Genova , , , Genoa branch n. 25 Via G. Jori 22/1 Genova " 288, , , Genoa branch n. 26 Via Martiri della Libertà 3 A Genova , , , Genoa branch n. 26 Via Garelli 11 r. Genova " 728, , , Genoa branch n. 26 Via Garelli r. Genova " 522, , , Genoa branch n. 26 Via Martiri della Libertà 7-9 Genova " 492, , , Genoa branch n. 27 Via Oberdan 120 A Genova 243 1,145, , ,120, Genoa branch n. 28 Via Molassana 70 r. - Via S. D'Acquisto Genova 512 1,311, , ,282, Genoa branch n. 29 Via C. Rolando 56 E r. Genova , , , Genoa branch n. 29 Via C. Abba r. Genova " 468, , , Genoa branch n. 30 Via S. G. D'Acri 6 r. Genova , , Genoa branch n. 30 Via S. G. D'Acri 4 r. Genova " 117, , , Genoa branch n. 30 Via S. G. D'Acri 12 r. Genova " 372, , , Genoa branch n. 30 Via S. G. D'Acri 4-1 Genova 576, , , Genoa branch n. 31 Via Pra 140 A/R Genova , , , Genoa branch n. 31 Via Venezian 1 Genova " 627, , , Genoa branch n. 32 Piazza Banchi 2 r Genova , , , Genoa branch n. 32 Via S. Luca 2 Genova , , , Genoa branch n. 34 Via Struppa 146 C e via Buscaglia 18 r Genova , , , Genoa branch n. 47 Via di Francia 3 r. Genova 770 2,464, , ,412, Genoa branch n. 55 Via del Capriolo 1-3 rr. Genova , , , Genoa branch n. 60 Piazza Leopardi 2 Genova 426 1,938, , ,917, Branch Recco Via IV Novembre 2r - P.za N.da Recco27/2 Recco , , , Branch Recco P.za N. da Recco 24 Recco " 2,130, , ,091, Branch S.Margherita L. Via XXV Aprile 6/1 S.Margherita , , , Branch S.Margherita L. Largo Giusti 17 S.Margherita 311 1,959, , ,925, Branch Chiavari Piazza Roma 34 r. - Piazza Roma 10/1 Chiavari , , , Branch Chiavari Corso Dante p.t. Chiavari " 4,068, , ,995, Branch Chiavari Corso Dante 16/4 Chiavari " 2,878, , ,826, Branch Sestri L. Corso Colombo 19 r. Sestri Levante 311 1,430, , ,404, Branch Rapallo Via Giustiniani 9 Rapallo , , , Branch Rapallo Galleria Raggio 2D e 3D Rapallo " 120, , , Branch Rapallo Via Matteotti 7/3 Rapallo " 180, , , Branch Rapallo Via Giustiniani 7 Rapallo " 1,599, , ,571, Branch Rapallo Galleria Raggio 4/D Rapallo " 455, , , Branch 1 - Rapallo Via del Pozzo 24 Rapallo , , , Branch Lavagna Piazza della Libertà 40/2 Lavagna , , , Branch La Spezia Corso Nazionale 252 La Spezia ,869, , ,742, La Spezia Branch2 Corso Cavour 154 La Spezia 153 1,084, , ,061, La Spezia Branch2 Via Monale 76 La Spezia , , , Branch Rezzoaglio Via Roma 12 Rezzoaglio , , , Branch Montoggio Via Roma 89 Montoggio , , , Branch Torriglia Via Matteotti 48 r. Torriglia , , Branch Torriglia Loc.piano fondi con acc.via Molinetto 7 Torriglia " 259, , , Branch Campoligure P.za Martiri della Benedicta 2 Campoligure , , Branch Campoligure Via Trento 2 Campoligure " 594, , , Branch Campoligure Via Trento 6 Campoligure , , , Branch Arenzano Via Pallavicini 25 Arenzano , , , Branch Arenzano Via Pallavicini 29 Arenzano " 1,671, , ,639, Branch Ronco Scrivia Corso Italia 29 Ronco Scrivia 562 1,306, , ,278, Branch Cogoleto Piazza Giusti 1 Cogoleto 564 2,030, , ,990, Branch Cogoleto Piazza Giusti 1 Cogoleto " 225, , , Branch Isola Cantone Via Roma 118 r. Isola Cantone , , Branch Isola Cantone Via Roma 182 1^ p. Isola Cantone " 556, , , Branch Camogli Piazza Schiaffino 9 Camogli 225 1,039, , ,023, Branch Rossiglione Via Roma 10 Rossiglione , , , Branch Masone Via Veneto 6 Masone , , , Branch Masone Via Roma 27 Masone " 373, , , Branch Casella Viale Mandelli Casella , , , Branch Savignone Via Giovanni XXIII 1 Savignone , , , Branch Sori Via Garibaldi 6 B - C Sori , , , Branch Sori Via Garibaldi 6 D Sori " 209, , , Branch Moconesi Viale De Gasperi 19 Moconesi , , ,

486 PROPERTIES Location Area Ias Value Ias Depreciation Fund Balance Sheet Value m 2 at 31/12/2005 at 31/12/2005 at 31/12/2005 Branch Moconesi Viale De Gasperi 19 Moconesi " 12, , Branch Pedemonte Via Medicina p.t. 104 Serra Ricco' , , , Branch Pedemonte Via Medicina p.fondi 104 Serra Ricco' " 144, , , Branch S.Olcese Via Poire'43 S.Olcese di M , , , Branch S.Olcese Via Poire'69 S.Olcese di M " 308, , , Branch Casarza L. Via IV Novembre 28 B Casarza L , , , Branch S.Colombano C. Via D.Cuneo 163/C - D - E S.Colombano , , , Branch S.Colombano C. Via D.Cuneo 163/C - D - E S.Colombano " 130, , , Branch Campomorone Via De Gasperi Campomoron 408 1,122, , ,097, Branch Alassio Via Mazzini 2 Alassio 683 3,556, , ,481, Branch Alassio Via Mazzini 2 Alassio " 2, , Branch Alassio Via Dante 114/1 Alassio " 24, , Branch Leca d'albenga Piazza del Popolo 13 Leca d'albeng , , , Branch Toirano Via Braida Toirano , , , Branch Toirano Via Braida Toirano " 78, , , Branch Finale Ligure Via Garibaldi 1 - Via Roma 12/1 Finale L ,260, , ,235, Branch Varazze Piazza Dante 6 Varazze 280 1,344, , ,317, Branch Cairo M. Via F.lli Francia 3 Cairo M , , , Branch Loano Corso Roma 198 Loano , , , Branch Loano n. Sede Via Stella (Pal. Sirena) Loano 404 1,555, , ,524, Branch Pietra L. P.zza Martiri Libertà 10 ) Pietra L Branch Pietra L. Via Vinzone 1/1^-2^p. ) Pietra L. " 2,072, , ,031, Branch Pietra L. Via Vinzone 1/3^p. Pietra L. " 246, , , Sport. Pietra L. Lev. Corso Italia 15 Pietra L , , , Main Office Imperia Via Berio 14 r. Imperia , , , Main Office Imperia Via Berio 4/1 e 4/2 Imperia " 180, , , Main Office Imperia Via Berio 4 Imperia " 279, , , Main Office Imperia Via Berio 10/5 Imperia " 70, , , Main Office Imperia Via Berio 10/8 Imperia " 2,027, , ,986, Main Office Imperia Via Berio 6 Imperia " 718, , , Main Office Imperia Via Berio 10/6 Imperia " 2,499, , ,444, Branch Sanremo Corso Mombello 25,25 A,27,29 Sanremo ,794, , ,657, Branch Bordighera Corso V.Emanuele 153/155 r. Bordighera 810 3,714, , ,639, Branch Pieve di Teco Via Eula 33 Pieve di Teco , , , Branch Arma di Taggia Via Blengino 19 Arma di Tagg 236 1,038, , ,017, Branch P.Maurizio P.zza F.lli Serra 10 Imperia , , , Branch P.Maurizio P.zza F.lli Serra 9 Imperia " 753, , , Branch S.Bartolomeo M. Nuova P.zza Comunale 49/51 r. S.Bartolomeo , , , Branch S.Bartolomeo M. Piazza Magnolia 32 S.Bartolomeo " 115, , , Branch S.Stefano Mare Piazza A. Saffi 4 S.Stefano M , , , Branch S.Stefano Mare Piazza A. Saffi 5 S.Stefano M. " 367, , , Branch S.Stefano Mare Piazza A. Saffi 6 S.Stefano M. " 388, , , Branch Ventimiglia Condominio Le Palme Ventimiglia 876 1,622, , ,586, Branch Ventimiglia Condominio Le Palme Ventimiglia " 167, , , Branch Ventimiglia Via Roma (fondi) Ventimiglia " 303, , , Branch Ventimiglia Via Matteotti 1 Ventimiglia , , , Branch Diano Marina Piazza Maglione 1 Diano Marina , , , Branch Vallecrosia Via Giovanni XXIII Vallecrosia 327 1,079, , ,053, Branch Ovada Via Torino 10 Ovada 501 1,653, , ,616, Branch Alessandria Centro Agorà - Corso Borsalino 46 Alessandria ,780, , ,718, Branch Bologna Via Riva del Reno 67 Bologna 883 3,208, , ,165, Rappres. Londra Hornton Street 12 Londra 150 1,155, , ,143, Office Private (Roma 7) Via Piemonte 39/8 Roma 251 1,656, , ,639, Branch Reggio Emilia P.zza del Tricolore 2c e 2d Reggio Emilia , , , Branch Reggio Emilia Piazza del Tricolore 4 r. Reggio Emilia " 324, , , Genoa branch 63 Via Donghi n. 20/22/24/26/28 r. Genova , , , Branch Carrara Viale XX Settembre 209/211 Carrara 406 1,232, , ,206, Branch Brugnato Via Briniati 3 Brugnato , , , Branch Acqui Terme Via Mazzini 43/45 Acqui Terme , , , Branch Acqui Terme Via Mazzini 47 Acqui Terme , , , Branch 1 Lavagna P. la Scafa 16 Lavagna , , , Genoa branch 65 Via Marchini 39 r Genova , , , Branch 3 - Sanremo Corso Cavallotti 232 Sanremo , , , Branch Sarzana Via Brigate Partigiane Muccini 65 Sarzana 340 1,436, , ,408, Genoa branch 66 Via Merano 99 Genova , , , Branch 3 - Ventimiglia Corso Genova 82 Ventimiglia , , , Branch 1 - Chiavari Via S. Rufino 18 Chiavari , , , Genoa branch 69 Via Paleocapa 135/137 Genova , , , Branch 3 - La Spezia Via Genova 103 La Spezia , , , Branch Ameglia Via XXV Aprile 51 Ameglia , , , Genoa branch 71 Via dei Mille 57/59 Genova , , , Branch Lerici Via Gerini 10 Lerici 214 1,059, , ,038, Branch Sassuolo Via Circonvallazione Sud/Est Sassuolo 739 1,153, , ,127, Parma Branch 1 Via Emilia 65 Parma , , , Parma Branch 1 Via Emilia 65 Parma " 25, , Branch Savona Piazza Dallara 42 Savona , , , Genoa branch n. 75 Via Gramsci 135/137/139 Genova , , ,

487 PROPERTIES Location Area Ias Value Ias Depreciation Fund Balance Sheet Value m 2 at 31/12/2005 at 31/12/2005 at 31/12/2005 Milano Branch 1 Via Morosini 7 Milano 320 1,016, , ,001, Branch Valenza Via Canonico Zuffi 3 Valenza 309 1,201, , ,174, Genoa branch 76 Via Bobbio 62/64/66 r. Genova , , , Branch Monterosso Via Vittorio Emanuele 69 Monterosso , , , Branch 5 - Milano Via Bertini 1 Milano , , , Branch 5 - Milano Via Bertini 1 Milano " 163, , , Branch 2 - Ventimiglia Corso Nizza Ventimiglia , , , Genoa branch 81 Via Torti 236/238 rr. Genova , , , Genoa branch 81 Via Barrili 26 r. Genova " 210, , , Genoa branch 78 Via Murcarolo 4 r. Genova , , , Branch Tortona Piazza Roma 34 Tortona , , , Branch Rho Via Lainate 60 Rho , , , Branch Riva Ligure Corso Villaregia 54 Riva Ligure , , , Genoa branch 83 Via Lido di Pegli 2/3 rr. Genova , , , Genoa branch 83 Via Lido di Pegli 2/3 rr. Genova " 458, , , Branch 1 - Bologna Via Emilia Levante 61/63 Bologna , , , Branch 2 - Torino Via Borgaro 119 Torino 40 p.t.+165 p 847, , , Branch 3 - Torino Via Viberti 1 Torino 0+30 s , , , Genoa branch 85 Via Teglia 23/25/27 rr Genova , , , Branch 7 - Milano Via Rembrandt Milano 182 p.t ,207, , ,189, Branch 1 - Palermo Via F. Crispi 146 Palermo 303 1,246, , ,224, Branch 7 - Palermo Via Castelforte 5 Palermo , , , Main Office Palermo Piazza Monte di Pietà Palermo ,119, , ,063, Branch Lercara Friddi Via V.Emanuele 30 Lercara Friddi , , , Branch Termini Imerese C.so Umberto e Margherita Termini Imere ,231, , ,202, Branch Leonforte C.so Umberto I 168 Leonforte , , , Branch Nicosia Via F.lli Testa Nicosia , , , Other office Via G. D'Annunzio - Lotto "D" Genova ,386, , ,342, buildings Via G. D'Annunzio - Lotto "E" Genova ,694, , ,662, Via G. D'Annunzio - Lotto "F" Genova , , , Via G. D'Annunzio - Lotto "G" Genova 607 1,092, , ,072, Car parking 1-2 B2 Via D'Annunzio 31 Genova 27 54, , , Via D'Annunzio 31 Genova " Via D'Annunzio 23 Genova ,872, , ,782, Via D'Annunzio 23 Genova " 4,378, , ,297, Via D'Annunzio 23 Genova " 21, , Via D'Annunzio 23 Genova " Garage Via D'Annunzio 23 Genova , , , N. 4 car parking Via D'Annunzio 23 (+ cantina) Genova , , , Garage Via D'Annunzio 23 Genova 27 9, , Via D'Annunzio 23 Genova " 40, , N. 2 car parking Via D'Annunzio Genova 25 51, , N. 4 car parking Via D'Annunzio Genova , , , Branch Corte Brugnatella Via Genova loc. Marsaglia Corte Brugnat , , , Branch Villa Guardia Via Varesina 42 Villa Guardia , , , Branch Taranto Via Berardi 48/B Taranto ,154, , ,129, Branch Fidenza Via Tagliasacchi 7-P.za Pezzana Fidenza 421 1,247, , ,220, Branch Alcamo Corso VI Aprile V. F. Gioia Alcamo , , , Branch Marsala Via XI Maggio Marsala , , , Branch Vescovato Piazza Roma 28 Vescovato , , , Branch Treviglio P.za L.Manara ang. Via S. Martino Treviglio , , , Main office Perugia Via Sicilia 35 Perugia ,222, , ,169, Branch Treviso Viale N.Bixio 31 Treviso , , , Branch Frosinone Via A.Paleario 3 Frosinone " 753, , , Branch Rieti Via Cintia 65 Rieti 503 1,729, , ,689, Branch Sora Via Vittorio Veneto 8 A Sora " 1,650, , ,610, Branch Catania Piazza del Duomo 5 Catania " 1,006, , , Branch 8 - Roma Piazza Risorgimento 56 Roma 47 2,009, , ,988, Branch 10 - Roma Piazza Vega 34/40 - Ostia Lido Roma , , , Branch 11 - Roma Via Emanuele Filiberto 180 E Roma 355 2,006, , ,973, Branch 14 - Roma Via Tiburtina 493 ang. Via Morello Roma ,913, , ,835, Main office Ancona Corso Garibaldi 13/15 Ancona " 5,039, , ,947, Branch Sesta Godano Via Sogari 25 Sesta Godano " 286, , , Branch Viterbo Via della Ferrovia Viterbo " 947, , , Flat Via Blengino 12/2 Arma di Tagg , , , Via Bissolati Roma ,200, , ,073, Piazza del Pigneto 12 Roma ,620, , ,601, Via XXV Aprile 51 ( terreno) Ameglia 70 6, , Total (a) 438,717, ,847, ,869,

488 PROPERTIES Location Area Ias Value Ias Depreciation Fund Balance Sheet Value m 2 at 31/12/2005 at 31/12/2005 at 31/12/2005 b) Staff accomodation Flat Via XX Settembre 20/131 Genova , , , Flat Via XX Settembre 20/132 Genova , , , Flat Via XX Settembre 20/133 Genova , , , Flat Via XX Settembre 20/134 Genova , , , Flat Via XX Settembre 20/136 Genova , , , Flat Via Ceresio 3 int.4/1 Milano , , , Flat Via Ceresio 3 int.5/1 Milano , , , Flat Via Ceresio 3 int.6/1 Milano , , , Flat Via Ceresio 3 int.9/1 Milano , , , Flat Via Ceresio 3 int.9/2 Milano , , , Flat Via Ceresio 3 int.8/3 Milano , , , Flat Via Ceresio 3 int.8/5 Milano , , , Flat Via Ceresio 3 int.9/5 Milano , , , Flat Corso Mombello 25 p.attico/1 S.Remo , , , Flat Corso Mombello 25 p.attico/2 S.Remo , , , Flat Corso Mombello 25 p.attico/3 S.Remo , , , Flat Via Roma 12 a/1 Rezzoaglio 48 52, , , Flat Via Roma 12 a/2 Rezzoaglio 73 80, , , Flat Via Perletti 9-2^ p. Piacenza , , , Flat Via Mezzacosta 1 Bologna , , , Flat Corso Matteotti 13 Torino , , , Flat Via XX Settembre /154 Genova , , , Total (b) 4,518, , ,448, Total (a+b) 443,235, ,917, ,318, Other properties a) Supplementary pension fund Shop Via Luccoli r. Genova , , , Shop Via XXV Aprile r. Genova , , , Flat Via Cassa di Risparmio 4/1 Genova , , , Flat Via Cassa di Risparmio 4/3 Genova , , , Flat Via Cassa di Risparmio 4/6 Genova , , , Flat Via Cassa di Risparmio 4/13 Genova , , , Flat Via Cassa di Risparmio 4/14 Genova , , , Shop Via F. Turati rr. Genova , , , Shop Via F. Turati 8/10 rr. Genova , , , Shop Via S. Martino 65 B - C (piani terra e fondi) Genova ,298, , ,273, Shop Via S. Martino rr. Genova , , , Offices Via XX Settembre 41-5 piano Genova 700 2,100, , ,071, Offices Via XX Settembre 41-5 piano Genova 380 1,140, , ,124, Offices Via XX Settembre 41-6 piano Genova , , , Offices Via XX Settembre 41-7 piano Genova 600 1,800, , ,775, Shop Vico Casana rr. Genova , , , Shop Vico Casana 38 r. Genova , , , Shop Vico Casana 40 r. Genova , , , Shop Vico Casana 42 r. Genova , , , Shop Vico Casana 44/46 r. Genova , , , Shop Vico Casana 48 r. Genova " 138, , , Shop Vico Casana 50 r. Genova " 138, , , Warehouse Via G. D'Annunzio p. A/3 (lotto B q. 10,75) Genova , , , Office Piazza Dante 8/2 Genova , , , Shop Via Fiasella rr. Genova , , , Shop Via Cesarea 66 r. Genova , , , Shop Via Cesarea 68 r. Genova , , , Car parkings Via G. D'Annunzio - 14 posti auto Genova , , , Shop V.le Des Geneys 14 r. Genova , , , Shop Via de Nicolay 44 r. Genova , , , Shop Via Monticelli 35 Genova 720 1,080, , ,058, Flat/Office Via Monticelli 11/1 Genova , , , Shop Via Colombo 49 r. Genova , , , Shop Via G.B. Custo 11 r. Genova , , , Office Via di Francia 5 A r. Genova , , , Flat Piazzetta dei Garibaldi 27 r. Genova 35 70, , , Shop Via Lungomare S.Maria 9/11/13 Cogoleto , , , Shop Via Dante 225 B Alassio , , , Shop Via Dante 229 Alassio , , , Shop Via della Concezione 60 Finale Ligure , , , Shop Via S. Maurizio 25 Imperia 35 70, , , Shop Via S. Maurizio 27 Imperia 40 80, , , Shop Via S. Maurizio 27 A Imperia 40 80, , , Flat C.so Mombello 25 piano 3 int. 3 Sanremo , , , Flat C.so Mombello 25 piano 3 int. 4 Sanremo , , , Shop Corso Mombello 46/48/50 rr. Sanremo , , , Shop Via Boselli 21 r. Arma di Tagg , , , Shop Via Vittorio Emanuele 176 Bordighera , , ,

489 PROPERTIES Location Area Ias Value Ias Depreciation Fund Balance Sheet Value m 2 at 31/12/2005 at 31/12/2005 at 31/12/2005 Offices Via D'Annunzio 79 Genova 615 1,691, , ,659, Offices Via Sestri 128/130/132 rr. Genova 2,076 3,148, , ,079, Offices Via Sestri 128/130/132 rr. Genova " 1,545, , ,511, Offices Via D'Annunzio Genova 680 1,530, , ,501, Offices Via Ceccardi 4/16 Genova 500 1,422, , ,396, Offices Via D'Annunzio Genova , , Offices Via D'Annunzio Genova " 2,088, , ,049, Offices Piazza Faralli 36/38 rr. Genova 854 1,921, , ,885, Cellar Via Corsica 3 Genova 9 5, , Offices Via D'Annunzio Lotto D Genova , , , Offices Via D'Annunzio 41 Genova ,102, , ,951, Offices Via D'Annunzio 27 (81) Genova 6 11, , ex Branch Via Mazzini 30 A Fidenza , , , Totale (a) 45,830, , ,983, b) Reserve for termination indemnities Offices Via XXV Aprile 4/7 Genova , , , Offices Via XXV Aprile 4/8 Genova , , , Offices Via XXV Aprile 4/9 Genova , , , Offices Via XXV Aprile 4/12 Genova , , , Flat Via XXV Aprile 6/6 amm.to Genova 40 60, , , Warehouse Vico Monte di Pietà 3/5/7 rr. Genova , , , Shop Sottopassaggio Via XXV Aprile 2 Genova 40 40, , Shop Via Antica Accademia 1 r. Genova 35 43, , Shop Via Antica Accademia 3 r. Genova 35 43, , Shop Via Antica Accademia 5 r. Genova 40 52, , , Shop Piazza S. Matteo 6 A - 6 B (piani terreno e amm.to) Genova , , , Office Piazza S. Matteo 15/3-4 Genova , , , Shop Vico S. Matteo 13 r. - Piazzetta Tavarone 15 r. Genova 35 87, , , Shop Vico dell'isola 4 r. Genova 35 70, , , Shop Vico dell'isola 6 r. Genova 35 52, , , Offices Via Luccoli 17/3 Genova , , , Offices Via Luccoli 17/6 Genova , , , Offices Via Luccoli 17/9 Genova , , , Offices Via Luccoli 17/9 A Genova , , , Offices Via Luccoli 17/10 A-B-C Genova , , , Offices Via Luccoli 17/11 A Genova 36 63, , , Offices Via Luccoli 17/12 Genova , , , Offices Via Luccoli 17/13 Genova 45 78, , , Offices Via Luccoli 17/14 A Genova 50 87, , , Shop Via Cassa di Risparmio 14 Genova , , , Offices Via Davide Chiossone 7/2 Genova , , , Shop Via Davide Chiossone 8/1 Genova 55 96, , , Shop Via Davide Chiossone 8/2 Genova , , , Shop Via Davide Chiossone 26 r. Genova , , , Office Via G. D'Annunzio Lotto "I" (quota 24,50) Genova , , , Office Sal. Montagnola della Marina 3-1 piano sot. Genova , , , Office Sal. Montagnola della Marina 3-2 piano sot. Genova " 275, , , Office Sal. Montagnola della Marina 3 - piano terreno Genova " 361, , , Office Sal. Montagnola della Marina 3-1 piano Genova " 361, , , Office Sal. Montagnola della Marina 3-2 piano Genova " 391, , , Office Sal. Montagnola della Marina 3-3 piano Genova " 361, , , Office Sal. Montagnola della Marina 3-4 piano Genova " 391, , , Office Sal. Montagnola della Marina 3-5 piano Genova " 361, , , Office Sal. Montagnola della Marina 3-6 piano Genova " 391, , , Flat Via G. Jori 22/2 Genova , , , Flat Via S. D'Acquisto 1/1 Genova , , , Shop Via XXV Aprile 2 B S. Margherita , , , Shop Via Roma 1 Busalla , , , Garage Via Molinetto 7 (parte - mq. 15) Torriglia 15 16, , Flat Via Sauli Pallavicini 27/4 Arenzano , , , Cellar Via Sauli Pallavicini 25 Arenzano 5 3, , Shop Piazza Camillo Golgi 19 D Arenzano , , , Flat Piazza Schiaffino 11 Camogli , , , Warehouse Piazza Schiaffino 6-2 piano interrato Camogli , , , Flat Via Mandelli 29/2 Casella , , , Shop Via Medicina 102 Serra Riccò , , , Shop Piazza La Scafa - Residence al Porto Lavagna , , , Flat Piazza Unità Nazionale 19/9 sc. A Imperia , , , Cellar Via Berio 10 Imperia 6 3, , Shop Via Eula 31 A/29 Pieve di Teco , , , Flat Via Blengino 12/1 Arma di Tagg , , , Offices Piazzetta Pattari 5/7 4 piano Milano 350 2,800, , ,773, Offices Piazzetta Pattari 5/7 5 piano Milano 220 1,760, , ,743, Shop Corso Italia 55 F. Ronco Scrivia , , , Offices leased to Levante Centro Agorà - Corso Borsalino 46 Alessandria , , , S.G.R.Spa Via Pisa 58 Genova 6,188, , ,109, Total (b) 24,092, , ,702,

490 PROPERTIES Location Area Ias Value Ias Depreciation Fund Balance Sheet Value m 2 at 31/12/2005 at 31/12/2005 at 31/12/2005 c) Other premises Flat Corso Gastaldi 9/12 Genova , , , Total (c) 131, , , d) Credit recovery Flat Via Lorano 5A/B Castellarano , , , Building Località Prau primo Perinaldo 153, , , Total (d) 340, , , Total (a+b+c+d) 70,394, ,247, ,147, TOTAL PROPERTIES 513,630, ,164, ,465,