Supervisory Instructions for Securities Market Intermediaries

——————— (*) Next to each update, all new printed pages containing the indications of the month and year of issuance of the update itself are indicated.

CREDIT AND FINANCIAL SUPERVISION Supervisory Instructions for Securities Market Intermediaries Circular No. 164 of June 25, 1992

——————— PART INTERMEDIARIES Updates (*): 1st Update of November 12, 1992: Modifications to implementing regulations of Law 1/91 (Appendix A1, pages 1, 2, 9, 18, 25, 26, 28 and 29). 3rd Update of February 9, 1993: Statistical and supervisory reports by securities market intermediaries (Chap. II, pages from 2 to 4). 4th Update of March 17, 1993: Modifications to the Regulation issued by the Bank of Italy, in agreement with the Consob, on July 2, 1991 in implementation of Law 1/91 (Chap. I, pages from 18 to 139; Chap. II, pages 2 and 3). 5th Update of July 29, 1993: Modifications to implementing regulations of Law 1/91 (Appendix A1, pages 15 and 16). 8th Update of March 7, 1994: Provisions applicable to Community intermediaries carrying out securities intermediation activities in Italy within the framework of mutual recognition. – Modifications to Consob Regulation No. 5387 of July 2, 1991 (Chap. V, pages from 1 to 5; Appendix A1, pages from 7 to 16). 9th Update of May 31, 1994: Modification of prudential supervision rules contained in Title IV of the Regulation of July 2, 1991. – New templates for statistical and supervisory reports. – Certification of the conformity of reports on magnetic media with the results of accounting (IMMEDIATE EFFECT: Chap. I, pages 19 and 20; Chap. II, pages 1, 2 and 5; Chap. III, pages 1 and 2. – EFFECT FROM 1.1.95: Chap. I, pages from 9 to 149). 10th Update of August 10, 1994: Communications to the Bank of Italy regarding changes in the components of corporate bodies (Chap. III, pages 1 and 2). 11th Update of January 25, 1995: New Consob Regulation governing the exercise of securities intermediation activities (Appendix A1, pages from 1 to 32). 14th Update of September 4, 1995: Adjustment of provisions regarding statistical and supervisory reports by securities market intermediaries (Chap. II, pages from 1 to 6). 15th Update of October 18, 1995: SIMs and trust companies registered in the special section of the register pursuant to Article 3, paragraph 1, of Law 1/91 admitted to mutual recognition intending to operate in other States of the European Union (Chap. VI, pages from 1 to 6). 16th Update of November 10, 1995: Modification of the Consob Regulation governing the exercise of securities intermediation activities (Appendix A1, pages 17 and 18). 17th Update of May 16, 1996: Inclusion of Table S1 in the "account matrix" of banks (EFFECT FROM 1.1.97: Chap. II, pages 3 and 4). 18th Update of August 28, 1996: Modification of the Consob Regulation governing the exercise of securities intermediation activities (Appendix A1, pages 15 and 16). 19th Update of January 29, 1997: Provisions applicable to investment firms and Community banks providing investment services in Italy (Chap. V, pages from 1 to 4).

20th Update of August 14, 1997: Management of pension fund assets by SIMs (Chap. VII, pages 1 and 2). 21st Update of April 28, 1998: Complete reprint.

Supervisory Instructions for Securities Market Intermediaries Index 1 April 1998

I N D E X

PREMISE

1. GENERAL DEFINITIONS .......................................................................................................................... 1
2. RECIPIENTS OF THE PROVISIONS......................................................................................................... 1 2.1. SIMs and extracommitary investment firms............................................................ 1 2.2. Community investment firms.............................................................................. 2 2.3. Banks authorized in Italy ........................................................................................... 2 2.4. Community banks ....................................................................................................... 3

Title I: Constitution of SIMs and operations abroad CHAPTER 1 MINIMUM CAPITAL

1. LEGAL SOURCES ....................................................................................................................... 1
2. DEFINITIONS................................................................................................................................. 1
3. DISCIPLINE OF MINIMUM CAPITAL ................................................................................................ 1

CHAPTER 2 NOTION OF GROUP RELEVANT FOR THE PURPOSES OF THE ISSUANCE OF AUTHORIZATION

1. LEGAL SOURCES ....................................................................................................................... 1
2. DEFINITIONS................................................................................................................................. 1
3. NOTION OF GROUP ..................................................................................................................... 1

Supervisory Instructions for Securities Market Intermediaries Index 2 April 1998

CHAPTER 3 PARTICIPATION IN THE CAPITAL OF SIMs

1. LEGAL SOURCES........................................................................................................................1
2. DEFINITIONS .................................................................................................................................1 Section I. Notification obligations
3. SCOPE OF APPLICATION .............................................................................................................1 1.1. Subjects required to make notifications.................................................................1 1.2. Methods for calculating the percentage..............................................................................2 1.3. Voting agreements...............................................................................................................3
4. PRIOR NOTIFICATION FOR THE ACQUISITION OF PARTICIPATIONS ....................................3 2.1. Principle of sound and prudent management and suitability not to prejudice the effective exercise of supervision .................................................................................3 2.2. Methods of carrying out the notification and documentation to be produced................3 2.3. Requirements of honorability...................................................................................................5 2.4. Procedure and deadlines........................................................................................................6
5. PRIOR NOTIFICATION FOR THE TRANSFER OF PARTICIPATION.........................................8
6. SUBSEQUENT NOTIFICATIONS ........................................................................................................8 Section II. Compliance by SIMs
7. COMPLIANCE BY SIMs REGARDING CAPITAL PARTICIPANTS.............................................9

CHAPTER 4 OPENING OF BRANCHES AND PROVISION OF SERVICES ABROAD Section I. General provisions

1. LEGAL SOURCES........................................................................................................................1
2. DEFINITIONS .................................................................................................................................1 Section II. Establishment of branches for the provision of services admitted to mutual recognition
3. BRANCHES IN EU COUNTRIES .....................................................................................................2 1.1. First establishment of a branch in an EU Country.............................................2 1.2. Modifications of communicated information.......................................................................3

Supervisory Instructions for Securities Market Intermediaries Index 3 April 1998

2. BRANCHES IN EXTRACOMMUNITY COUNTRIES...................................................................................... 4 2.1. Request for authorization ............................................................................................ 4
3. REPRESENTATIVE OFFICES ABROAD....................................................................................... 5 Section III. Provision of services admitted to mutual recognition without establishment
4. FREE PROVISION OF SERVICES BY SIMs IN EU MEMBER STATES ......................... 5 1.1. Prior notification............................................................................................. 5 1.2. Modifications of communicated information ...................................................................... 6
5. PROVISION OF SERVICES WITHOUT ESTABLISHMENT IN EXTRACOMMUNITY COUNTRIES................................... 6 2.1. Request for authorization ............................................................................................ 6 Section IV. Carrying out abroad activities not admitted to mutual recognition
6. ACTIVITIES IN EU MEMBER STATES............................................................................................ 7
7. ACTIVITIES IN EXTRACOMMUNITY COUNTRIES.......................................................................................... 7 Section V. Loss of authorizations and closure of SIM branches

Title II: Supervision CHAPTER 1 PARTICIPATIONS HOLDABLE BY SIMs

1. PREMISE.................................................................................................................................... 1
2. LEGAL SOURCES ....................................................................................................................... 1
3. DEFINITIONS................................................................................................................................. 2
4. SCOPE OF APPLICATION............................................................................................................. 3
5. FINANCIAL AND INSTRUMENTAL NATURE PARTICIPATIONS............................................................. 3
6. NON-FINANCIAL NATURE PARTICIPATIONS .............................................................................. 3
7. LIMIT ON ASSUMING PARTICIPATIONS ................................................................................. 3
8. PARTICIPATIONS ACQUIRED WITHIN THE FRAMEWORK OF ADHESION TO GUARANTEE AND PLACEMENT CONSORTIA........................................................................................................................... 3
9. PRIOR NOTIFICATION TO THE BANK OF ITALY.................................................................... 4
10. INFORMATION TO THE BANK OF ITALY............................................................................................ 4

Supervisory Instructions for Securities Market Intermediaries Index 4 April 1998

CHAPTER 2 ADMINISTRATIVE AND ACCOUNTING ORGANIZATION AND INTERNAL CONTROLS OF SECURITIES MARKET INTERMEDIARIES

1. LEGAL SOURCES........................................................................................................................1
2. GENERAL PROVISIONS .........................................................................................1 2.1. Information-accounting systems .........................................................................................1 2.2. Internal controls .............................................................................................................3
3. RISK MANAGEMENT .................................................................................................................4 3.1. Risk management procedures and role of top management ...........................................4 3.2. Measurement and control of risk.................................................................................4
4. RULES OF ADMINISTRATIVE AND ACCOUNTING ORGANIZATION .........................................................5
5. NOTIFICATIONS TO THE BANK OF ITALY ........................................................................................5

CHAPTER 3 CAPITAL ADEQUACY AND RISK CONTAINMENT

1. REFERENCE TO THE PROVISIONS OF THE REGULATION OF JULY 2, 1991 ................................................1

CHAPTER 4 SUPERVISION ON A CONSOLIDATED BASIS

1. LEGAL SOURCES........................................................................................................................1
2. SCOPE OF APPLICATION .............................................................................................................1
3. DEFINITIONS .................................................................................................................................1
4. SUBJECTION TO CONSOLIDATED SUPERVISION ................................................................................2
5. EXERCISE OF SUPERVISION ON A CONSOLIDATED BASIS......................................................................3 5.1. Communications to the Bank of Italy..................................................................................3 5.2. Obligations of the entity responsible for consolidated supervision ......................................4
6. COMPLIANCE WITH PRUDENTIAL RULES AT CONSOLIDATED LEVEL ....................................................4 6.1. Structure of consolidated capital ratios ...........................................................5 6.2. Position, settlement and counterparty risks...............................................................5 6.3. Credit, concentration and exchange risks .............................................................5

Supervisory Instructions for Securities Market Intermediaries Index 5 April 1998

7. PRUDENTIAL SUPERVISION RULES ON AN INDIVIDUAL BASIS FOR SIMs AND FOR OTHER ENTITIES SUBJECTED TO CONSOLIDATED SUPERVISION...................................................................... 6
8. CALCULATION OF CONSOLIDATED SUPERVISION CAPITAL................................................................ 6

CHAPTER 5 PROVISIONS APPLICABLE TO SIMs BELONGING TO GROUPS NOT SUBJECT TO CONSOLIDATED SUPERVISION

1. LEGAL SOURCES ....................................................................................................................... 1
2. DEFINITIONS................................................................................................................................. 1
3. SCOPE OF APPLICATION............................................................................................................. 1
4. CHARACTERISTICS OF SYSTEMS FOR VERIFYING CAPITAL AND FUNDING SOURCES ............ 2
5. NOTIFICATIONS TO THE BANK OF ITALY ........................................................................................ 2 5.1. Explanatory report ..................................................................................................... 2 5.2. Periodic communications ............................................................................................. 3 5.3. Communication of risks............................................................................................... 3

CHAPTER 6 INFORMATIONAL SUPERVISION

1. LEGAL SOURCES ....................................................................................................................... 1
2. ASSEMBLY RESOLUTIONS....................................................................................................... 1
3. BALANCE SHEET AND SEMI-ANNUAL REPORT............................................................................................. 1
4. QUALIFIED PARTICIPATIONS IN CAPITAL .................................................................................. 1
5. NOTIFICATIONS BY THE PRESIDENT OF THE AUDIT BOARD.............................................. 2
6. REPORTS ON MAGNETIC MEDIA...................................................................................... 2 6.1. Reporting obligations................................................................................................ 2 6.2. Criteria for compiling reports................................................................................ 2 6.3. Content of reports and sending deadlines.............................................................. 3 6.4. Letter of certification.................................................................................................... 4
7. NOTIFICATIONS REGARDING CORPORATE OFFICERS.................................................................. 5

Supervisory Instructions for Securities Market Intermediaries Index 6 April 1998

CHAPTER 7 INSPECTIVE SUPERVISION

1. LEGAL SOURCES........................................................................................................................1
2. INSPECTIVE VERIFICATIONS.............................................................................................................1
3. INSPECTIVE REPORT....................................................................................................................1

Title III: Financial Statement CHAPTER 1 FINANCIAL STATEMENT

1. LEGAL SOURCES........................................................................................................................1
2. DISCIPLINE...................................................................................................................................1

Title IV: Other provisions CHAPTER 1 METHODS OF DEPOSIT AND SUB-DEPOSIT OF FINANCIAL INSTRUMENTS AND CLIENT MONEY

1. REFERENCE TO THE PROVISIONS OF THE REGULATION OF JULY 2, 1991 ................................................1

CHAPTER 2 MANAGEMENT OF PENSION FUND ASSETS BY SIMs

1. LEGAL SOURCES........................................................................................................................1
2. DEFINITIONS .................................................................................................................................1

Supervisory Instructions for Securities Market Intermediaries Index 7 April 1998

3. SCOPE OF APPLICATION............................................................................................................. 1
4. REQUIREMENTS FOR THE MANAGEMENT OF PENSION FUND ASSETS ................................................. 1
5. NOTIFICATIONS TO THE BANK OF ITALY ........................................................................................ 2
6. DEPOSITORY BANK .................................................................................................................... 2

CHAPTER 3 NATIONAL GUARANTEE FUND PURSUANT TO ART. 15 OF LAW 1/91

1. REPORTING OF COMMISSIONS AND VOLUMES INTERMEDIATED RELATING TO THE ACTIVITY OF TRADING FOR ACCOUNT OF THIRD PARTIES .................................................................................................. 1

Appendix: Regulation of the Bank of Italy of July 2, 1991

Supervisory Instructions for Securities Market Intermediaries Premise 1 April 1998

PREMISE

1. General Definitions Within the scope of this booklet, the following are understood to be: – “Decree”, Legislative Decree July 23, 1996, No. 415; – “Law 1/91”, Law January 2, 1991, No. 1; – “Banking Consolidated Text (T.U. bancario)”, Legislative Decree September 1, 1993, No. 385; – “Regulation of July 2, 1991”, the Regulation issued by the Bank of Italy pursuant to Articles 3, paragraph 2, letter a) and 9, paragraphs 4 and 5 of Law 1/91; – “Consob”, the National Commission for Companies and the Stock Exchange; – “EU”, the European Union; – “securities intermediation company” or “SIM”, enterprises, other than banks and financial intermediaries registered in the list provided for by Article 107 of the Banking Consolidated Text, authorized to provide investment services, having their legal seat and general management in Italy, including trust companies that, pursuant to Article 60, paragraph 4 of the Decree, provide the service of managing investment portfolios, also through fiduciary title; – “Community investment firm”, the enterprise, other than a bank, authorized to provide investment services, having its legal seat and general management in the same State belonging to the EU, other than Italy; – “extracommitary investment firm”, the enterprise, other than a bank, authorized to provide investment services, having its legal seat in a State not belonging to the EU.

2. Recipients of the Provisions 2.1. SIMs and extracommitary investment firms The provisions contained in this booklet apply, unless otherwise specified, to all SIMs and extracommitary investment firms, from the date of registration in the register referred to in Article 9 of the Decree. From that date, all relationships between a SIM and the Bank of Italy must take place through the Branch of the Bank of Italy territorially competent. For this purpose, the administrative seat of the company is relevant.

Supervisory Instructions for Securities Market Intermediaries Preamble 2 April 1998

2.2. Community Investment Firms

2.2.1. Branches The branches of community investment firms providing investment services in Italy shall comply with the provisions regarding: a) submission of statistical reports provided for in Section VII of the "Manual of statistical and supervisory reports for securities market intermediaries," drafted in accordance with the provisions of the Manual itself; b) internal accounting records aimed at ensuring the separation between the assets of the SIM and those of the clients (see Articles 20, paragraph 4, and 22, paragraph 2, first sentence, of the Regulation of July 2, 1991, contained in the Appendix of this booklet).

For the exercise of its supervisory powers, the Bank of Italy may carry out inspections and request from the branches of community investment firms the same information that may be requested for this purpose from Italian securities intermediation companies.

The branch publishes in Italy a copy of the annual financial statements and, if prepared, the consolidated financial statements of its parent company, both prepared in accordance with the methods provided by the legislation of the country where the parent company is headquartered. The financial statements are accompanied by the management and control reports. The methods for publishing these documents are governed by Article 41 of Legislative Decree No. 87 of January 27, 1992.

2.2.2. Free Provision of Services Community investment firms operating under the regime of free provision of services are required – for investment services provided in Italy – to comply with the provisions provided for in the previous paragraph 2.2.1, letter a).

2.3. Banks Authorized in Italy The provisions regarding: – administrative and accounting organization and internal controls (see Title II, Chapter 2), to the extent not provided for in this matter by the provisions issued by the Bank of Italy pursuant to Article 53 of the Banking Consolidated Act; – methods of deposit and sub-deposit of financial instruments and client funds (see Title IV, Chapter 1); – National Guarantee Fund pursuant to Article 15 of Law 1/91 (see Title IV, Chapter 3); apply to banks providing investment services authorized in Italy.

Supervisory Instructions for Securities Market Intermediaries Preamble 3 April 1998

2.4. Community Banks Subject to the general provisions concerning the access of community banks to Italy, the following provisions apply to them – if they provide investment services in our country – regarding internal accounting records aimed at ensuring the separation between the assets of the bank and those of the clients (see Articles 20, paragraph 4, and 22, paragraph 2, first sentence, of the Regulation of July 2, 1991, contained in the Appendix of this booklet).

For any other provision concerning the activity of community banks, including the procedures they must follow to provide their services in Italy, reference is made to the "Supervisory Instructions for Credit Institutions" and the "Manual for the Compilation of the Account Matrix."

TITLE I CONSTITUTION OF SIMs AND OPERATIONS ABROAD

Supervisory Instructions for Securities Market Intermediaries Title I: Constitution of SIMs and Operations Abroad Chapter 1: Minimum Capital April 1998

CHAPTER 1 MINIMUM CAPITAL (1)

1. Legal Sources Article 6, paragraph 1, letter d) of the Decree.

2. Definitions For the purposes of this chapter, the following is defined: – "paid-in capital," the amount paid by shareholders in exchange for the subscription of shares, excluding any premiums over the nominal value.

3. Regulation of Minimum Capital The minimum amounts of paid-in capital for SIMs are set as follows: I) 750 million lire for SIMs intending to carry out, also jointly, the services of: a) placement without prior subscription or purchase on a firm commitment basis, or assumption of guarantee towards the issuer; b) individual management of investment portfolios on behalf of third parties; c) reception and transmission of orders as well as mediation provided that:

4. the SIMs do not hold, even temporarily, the liquid assets and financial instruments of the clients;

5. the activities referred to in the previous points are carried out without the SIMs assuming risks. These limitations must be expressly provided for in the statutes of the SIMs.

II) 2 billion lire for SIMs intending to carry out, also jointly, the services:

1 Footnote 1: The provisions contained in this chapter were issued with a Decision of the Governor of the Bank of Italy of December 24, 1996 (published in the Official Gazette No. 18 of January 23, 1997).

Supervisory Instructions for Securities Market Intermediaries Title I: Constitution of SIMs and Operations Abroad Chapter 1: Minimum Capital April 1998

a) provided for in the previous paragraph I), in the absence of the conditions indicated in the previous points 1 or 2; b) placement with prior subscription or purchase on a firm commitment basis, or assumption of guarantee towards the issuer; c) trading for own account or for third parties.

In the case of companies already operating that have modified their corporate purpose to seek authorization for the provision of investment services, or of SIMs already authorized that intend to carry out investment services for which a higher minimum paid-in capital amount is provided, for the calculation of the minimum amounts indicated above, the reserves resulting from the last approved financial statements that are unavailable by law or by statute shall also be taken into account.

SIMs constantly verify the maintenance of the minimum capital amounts indicated above, also taking into account unavailable reserves. In the event that these minimum amounts are impaired as a result of losses, SIMs promptly proceed to restore them.

Supervisory Instructions for Securities Market Intermediaries Title I: Constitution of SIMs and Operations Abroad Chapter 2: Definition of Relevant Group for Authorization Purposes April 1998

CHAPTER 2 DEFINITION OF RELEVANT GROUP FOR AUTHORIZATION PURPOSES (1)

1. Legal Sources Article 6, paragraph 4 of the Decree.

2. Definitions For the purposes of this chapter, the following is defined: – "control," the relationship indicated in Article 23 of the Banking Consolidated Act.

3. Definition of Group For the purposes of issuing authorization for the provision of investment services, the SIM's group includes Italian and foreign subjects that: a) control the SIM; b) are controlled by the SIM; c) are controlled by the same subject that controls the SIM.

Italian and foreign subjects are also considered part of the SIM's group that: a) hold capital in the SIM to an extent of at least 20% of the capital with voting rights; b) are held by the SIM to an extent of at least 20% of the capital with voting rights.

For the verification of these conditions, holdings held indirectly, through controlled companies, fiduciary companies, or through an intermediary person, are also counted.

1 Footnote 1: The provisions contained in this chapter were issued with a Decision of the Governor of the Bank of Italy of December 24, 1996 (published in the Official Gazette No. 18 of January 23, 1997).

Supervisory Instructions for Securities Market Intermediaries Title I: Constitution of SIMs and Operations Abroad Chapter 3: Participation in SIM Capital April 1998

CHAPTER 3 PARTICIPATION IN SIM CAPITAL (1)

1. Legal Sources Article 10 of the Decree.

2. Definitions For the purposes of this chapter, the following are defined: – "control," the relationship indicated in Article 23 of the Banking Consolidated Act; – "indirect participation," the holding held through controlled companies, fiduciary companies, or through an intermediary person; – "qualified participation," a participation greater than 5 percent of the capital represented by shares with voting rights.

SECTION I COMMUNICATION OBLIGATIONS

1. Scope of Application 1.1. Subjects Required to Make Communications The subjects required to make the communications provided for in this chapter to the Bank of Italy are those intending to: a) acquire, by any title, shares with voting rights that, taking into account those already held, result in: – a participation greater than 5% of the capital represented by shares with voting rights of the SIM or the crossing of the thresholds of 10%, 20%, 33%, and 50%; – the control of the SIM, regardless of the size of the participation;

1 Footnote 1: The provisions contained in this chapter were issued with a Decision of the Governor of the Bank of Italy of December 24, 1996 (published in the Official Gazette No. 18 of January 23, 1997).

Supervisory Instructions for Securities Market Intermediaries Title I: Constitution of SIMs and Operations Abroad Chapter 3: Participation in SIM Capital April 1998

b) dispose, by any title, shares with voting rights such that the amount of the participation held falls below each of the thresholds set above, or such that, regardless of the size of the participation, the loss of control occurs.

These communications are also required, where the conditions are met, by fiduciary companies holding shares on behalf of third parties, as well as by fund management companies with reference to voting rights held on behalf of managed assets.

In the case of shares subject to a repo contract, the communication obligations, if the conditions exist, fall on both the borrower and the lender.

Communications must be made both when intending to acquire or dispose of a participation in the SIM's capital directly, and when intending to acquire or dispose of a participation indirectly (1).

In the latter case, communications may only be made by the subject at the top of the ownership chain, provided that they are signed by the subject intending to acquire or dispose directly of the SIM's shares (when the participation held by this latter subject involves crossing the relevant thresholds, either up or down).

The Ministry of the Treasury is not required to make communications.

1.2. Method of Calculating the Percentage In calculating the percentage, savings shares are not taken into account; instead, preferred shares that grant the right to vote in extraordinary meetings are taken into account.

The following calculation methods are adopted: – in the numerator, consider: a) shares in ownership, those intended to be acquired or disposed of, those subject to a repo contract, even if the subject is deprived of the right to vote; b) shares for which the subject is nevertheless the holder of the right to vote, as in the case of usufruct, pledge, etc.; – in the denominator, consider all shares with voting rights representing the capital of the SIM.

The communication obligations do not cover operations of subscription or purchase of convertible bonds or other securities that grant the right to purchase shares in the capital of SIMs (warrants). However,

1 For operations that involve a modification of the ownership chain, a new communication must be made only if such modifications involve crossing the relevant thresholds, up or down, at the subject at the top of the ownership chain or at the direct holders of the shares. In the case of modifications of the ownership chain that involve crossing the relevant thresholds only at intermediary subjects, only the subsequent communication provided for in paragraph 4 must be made.

Supervisory Instructions for Securities Market Intermediaries Title I: Constitution of SIMs and Operations Abroad Chapter 3: Participation in SIM Capital April 1998

the subscription of shares subsequent to the conversion of bonds or the exercise of option rights is subject to communications if, as a result of the participation intended to be acquired, the relevant thresholds are crossed.

1.3. Voting Agreements Any agreement regulating the exercise of voting in a SIM concerning shares that, considered collectively, exceed the relevant thresholds for the purposes of this regulation is communicated by the participants to the Bank of Italy within 5 days from the date of signing.

Any agreement from which the control of a company interposed to the SIM derives is also subject to communication within the terms indicated above.

To simplify the obligations for individual participants in the voting agreement, a single communication may be produced by the subject delegated by the signatories to the pact.

2. Prior Communication for the Acquisition of Participations 2.1. Principle of Sound and Prudent Management and Suitability to Not Prejudice the Effective Exercise of Supervision Subjects intending to acquire a participation exceeding the relevant thresholds must send a prior communication to the Bank of Italy accompanied by the documentation indicated below, intended to prove the suitability of the potential acquirer to ensure sound and prudent management of the SIM and to not prejudice the effective exercise of supervision over it.

For this purpose, the integrity requirements, correctness in business relations, and reliability of the financial situation of the subjects making the communication are relevant, as well as the existence of links of any nature – even family or associative – between the applicant and other subjects capable of influencing the sound and prudent management of the SIM.

The degree of transparency towards the supervisory Authority of the group structure that may result from the operation is also relevant, as well as the suitability of the same, also in relation to the territorial location of the foreign companies composing it, to not obstruct the effective exercise of supervision.

2.2. Method of Making the Communication and Documentation to Produce The communication must be made according to the schema indicated in Annex 1 and sent in duplicate to the Branch of the Bank of Italy

Supervisory Instructions for Securities Market Intermediaries Title I: Constitution of SIMs and Operations Abroad Chapter 3: Participation in SIM Capital April 1998

where the SIM to which the operation refers has its legal headquarters. It must be accompanied by the following documentation – of recent date:

1. If the subject required to make the communication is a natural person: a) attestations regarding the exercise of professional activities (e.g., registration in professional registers or orders); the "curriculum vitae" and certifications from the entities or companies of origin; b) references regarding business relations (services provided or received, debt/credit relations, etc.) as well as other connections the interested subject has with the SIM to which the participation refers, other SIMs, banks, and other financial intermediaries, and with the participants in the capital of the interested SIM; c) indication of the financing sources the subject intends to potentially activate for the realization of the participation acquisition operation, with the indication of the financing subjects; d) in the case where they exercise business activity directly, information concerning the economic-financial and financial situation of the business exercised; e) documentation intended to prove the possession of integrity requirements as provided for in the following paragraph 2.3.

2. If the subject required to make the communication is a company: a) financial statements of the last fiscal year, accompanied by the report of the board of directors and the statutory auditors' board, and, if existing, the certification of the audit firm; b) professional attestations (e.g., registration in professional registers or orders) and the "curriculum vitae" of the members of the board of directors, the statutory auditors' board, and the general manager; c) the same information requested in letters b), c), and d) of the previous point referred to the company, as well as in letter e) of the same point referred to the corporate executives of the company itself; d) list of shareholders holding a qualified participation in the company required to make the communication or who exercise joint control over the company itself.

If it is a foreign company subject to forms of supervision, in addition to the documentation indicated above, letters of "good standing" or other attestations from the supervisory Authorities of the country of origin must be sent. Foreign companies must also produce a declaration by the company in which it attests to the non-existence of limitations, deriving from legislative, regulatory, or administrative provisions of the legal system of belonging, to provide information to the Bank of Italy.

Supervisory Instructions for Securities Market Intermediaries Title I: Constitution of SIMs and Operations Abroad Chapter 3: Participation in SIM Capital April 1998

In the case of indirect participation, if the interested subjects intend to avail themselves of the facility to send a single communication, the information referred to in the previous points 1 and 2 must be referred to both the subject at the top of the ownership chain and to the company intending to assume directly the participation in the SIM.

In any case, if the subject making the communication is part of a group (1), in addition to the references indicated in the previous points, the following must be sent: a) the group map with the indication of the territorial location of its components; b) the consolidated financial statements of the group for the last fiscal year; c) references regarding the financial and operational relations existing between: – the SIM whose participation is intended to be acquired and the subjects belonging to the group; – the financial entities of the group of belonging (SIMs and other intermediaries) and the other companies included in the same group.

The documentation provided for in this paragraph 2.2 is not required if the subject required to make the communication belongs to an Italian banking group or is a bank or a community investment firm.

For subjects subject to the supervision of the Bank of Italy, the sending of documentation already produced for any other title is not required.

2.3. Integrity Requirements Until the entry into force of the measure provided for by Article 8, paragraph 1 of the Decree, the required integrity requirements are those indicated by Article 3, paragraph 2, letter b) of Law 1/91 (2).

In the case of indirect participation, the integrity requirement is proven only by the subject at the top of the ownership chain and by that which intends to acquire directly shares of the SIM (when the participation held by this latter subject involves crossing the relevant thresholds).

If the subject making the communication is a company or entity, the integrity requirement must be possessed by all members of the board of directors and the general manager or by the subjects holding equivalent positions. In such cases, the verification of the requirements is

1 The information produced must concern exclusively the subjects who, directly or indirectly: – are controlled by who intends to assume the participation in the SIM; – control the subject intending to assume the participation in the SIM; – are controlled by the same subject that controls who intends to assume the participation in the SIM. 2 For the documentation necessary for the verification of the requirement in question, reference is made to the provisions issued by CONSOB pursuant to Article 6, paragraph 3 of the Decree.

Supervisory Instructions for Securities Market Intermediaries Title I: Constitution of SIMs and Operations Abroad Chapter 3: Participation in SIM Capital April 1998

done by the board of directors (1) and the prior communication must be attached the minutes of the relative board resolution together with the documents taken as the basis for the evaluations made.

It is the responsibility of the board of directors or the body with equivalent functions to evaluate the probative completeness of the documentation.

The examination of positions must be conducted for each of the interested parties and with their respective recusal.

Subjects who perform functions of administration, direction, and control in entities or companies subject to the supervision of the Bank of Italy are not required to prove the possession of integrity requirements, nor are subjects who perform analogous functions in: – banks and community investment firms; – banks and non-community investment firms in cases where corporate executives are subject to analogous requirements based on the regulation of the country of origin; this circumstance must be proven by attestation of the supervisory Authority of the country of origin; – public entities, even economic.

For subjects of foreign nationality (natural persons and corporate executives of participating companies), reference is made to the legislation in force in the State of belonging, requiring the existence of requirements analogous to those provided for subjects of Italian nationality. In the case of subjects other than natural persons, the provisions indicated above regarding the competence of the board of directors (or equivalent body) and the methods for verifying the requirements apply.

2.4. Procedure and Terms The Bank of Italy, within 90 days from the date of receipt of the communication, may prohibit the acquisition of the participation when it considers that the potential acquirer is not suitable to ensure sound and prudent management of the SIM or the effective exercise of supervision. The 90-day term is interrupted: a) in the case of a request for further information. From the date of receipt of the same, a new term of 90 days begins to run; b) if the potential acquirer is a foreign subject and the Bank of Italy must involve the foreign supervisory Authority. In such cases, the term is interrupted from the moment the Bank of Italy communicates this circumstance to the interested party. The Bank of Italy also communicates to the potential acquirer the date of receipt of the response from

1 In the case of a sole director, the verification of the requirements is carried out by the statutory auditors' board or the body with equivalent functions.

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Supervisory Instructions for Securities Intermediaries Title I: Constitution of SIMs and Foreign Operations Chapter 3: Participation in the Capital of SIMs April 1998

of the Authority of the foreign country; from that date a new term of 90 days begins to run.

Furthermore, the 90-day term is suspended for the time necessary for the Bank of Italy to obtain from the competent Prefecture the certificates – relating to subjects required to prove possession of the requirements of honorability pursuant to the previous paragraph 2.3 – attesting that they have not been subjected to preventive measures imposed pursuant to Law No. 1423 of December 27, 1956 or Law No. 575 of May 31, 1965 and subsequent modifications and integrations, except for the effects of rehabilitation. The Bank of Italy communicates the suspension of the term to the interested party and the date from which it begins to run again.

It is appropriate that the effectiveness of contracts from which the acquisition of a significant participation arises for the purposes of this regulation be subject to the condition that the Bank of Italy does not prohibit the operation.

In the event that the acquisition of the participation derives from acts of liberality or occurs by succession, the exercise of the right to vote is suspended until the expiration of the 90-day term from the date of receipt of the communication by the Bank of Italy or of any additional information requested.

In the event that the Bank of Italy prohibits the acquisition of the participation, a copy of the related decision is also transmitted to the SIM.

In capital increase operations or other operations involving changes in shareholdings, the communication may be made at the end of the operation if, as a result of the overall outcome of the same operation, a participation exceeding the relevant thresholds is held; in such case, the voting right inherent in the shares exceeding said thresholds is suspended until the expiration of the aforementioned 90-day term.

In the case of public offers for sale and subscription concerning SIM shares, given the irrevocable and unconditional nature of acceptances pursuant to Article 6, paragraph 2, of Law 149/92, subjects intending to adhere to the offer must promptly make the prior communication to the Bank of Italy to allow it, taking into account the timing of the operation, to announce even before the expiration of the 90-day term provided by law the absence of obstructive conditions for the acquisition of the participation.

For the acquisition of participations in the capital of SIMs that entail the obligation of a public takeover bid pursuant to Article 10 of Law No. 149/92, interested subjects cannot promote the offer unless the aforementioned 90-day term has elapsed. An analogous procedure must be followed for participation in operations for which recourse is had to multiple negotiations in trading (e.g., auction systems).

In the event that the Bank of Italy has set a maximum term for the acquisition of the participation, the exercise of the voting right inherent in the shares acquired after the prescribed term is suspended. The right to

Supervisory Instructions for Securities Intermediaries Title I: Constitution of SIMs and Foreign Operations Chapter 3: Participation in the Capital of SIMs April 1998

vote is also suspended when the prescribed communications have not been made, when an express prohibition by the Bank of Italy has intervened, or when the term within which the Bank of Italy can prohibit the acquisition has not yet expired.

In the event that the operation is no longer intended to be concluded, specific communication must be given to the Bank of Italy.

3. Prior communication for the transfer of participation

The subjects indicated in the previous point 1 who intend to transfer a participation may proceed with the completion of the operation only after having made the prior communication to the Bank of Italy. The communication in question must, inter alia, indicate the probable date of conclusion of the operation, the names of the acquiring subjects, and the percentage of the capital of the SIM subject to transfer.

4. Subsequent communications

Subjects required to make prior communications pursuant to the previous paragraphs 2 and 3 send to the Bank of Italy and the SIM within the term of 30 days from the completion of the operation, model 19/L (see Annex 2), to be compiled according to the methods indicated in detail in the instructions for the model itself.

Subjects participating to an extent greater than the relevant thresholds in a newly constituted SIM that requests authorization to exercise investment services pursuant to Art. 6, paragraph 1 of the Decree are required to send model 19/L to the Bank of Italy within 30 days from the issuance of said authorization.

The model is sent in duplicate to the Branch of the Bank of Italy where the SIM to which the operation refers has its legal headquarters.

Supervisory Instructions for Securities Intermediaries Title I: Constitution of SIMs and Foreign Operations Chapter 3: Participation in the Capital of SIMs April 1998

SECTION II COMPLIANCE BY SIMs

1. Compliance by SIMs regarding capital participants

SIMs provide interested subjects with all useful information – particularly in the event of complex operations, such as capital increases – as well as the already printed models in the part regarding the data of the SIMs themselves.

Article 11 of the Decree provides that the voting right inherent in the acquired shares cannot be exercised in the event of omission of the prescribed communications, acquisition of the participation in violation of the prohibition by the Bank of Italy, or before the term within which the Bank of Italy can prohibit the acquisition has expired or beyond the maximum term set by it if any.

It is up to the president of the meeting, in relation to his duties to verify the regular constitution of the meeting and the legitimacy of the shareholders, to admit or not admit to vote those subjects who, based on available information, appear to possess participations that entail communication obligations.

From the minutes of the meeting, it must appear: a) the declaration of the president that participants in the meeting were asked to point out any situations of exclusion from the right to vote pursuant to the current regulations; b) the mention of checks carried out based on available information for admission to vote; c) the indication (1) for each resolution: – of the names of participants in the meeting, also through delegated subjects, and their respective participations; – of favorable, contrary, null, and abstention votes, with the specification of the names of those who expressed a contrary vote or abstained, except obviously for votes carried out, pursuant to the statutes, by secret ballot.

The Bank of Italy reserves the right to request further specific information; in relation to this, SIMs keep for each resolution the documentation regarding the methods of formation of the assembly's will.

1 Such information may result, if deemed more convenient, also from a specific communication by the president.

Supervisory Instructions for Securities Intermediaries Title I: Constitution of SIMs and Foreign Operations Chapter 3: Participation in the Capital of SIMs – Annexes April 1998

Annex 1 To Bank of Italy Branch of

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Subject: Prior communication of acquisition of qualified participation in Securities Intermediation Company pursuant to Art. 10, paragraph 1 of Legislative Decree July 23, 1996, n. 415. DECLARANT If natural person: If legal entity: Surname ____________________________ Social Name __________________ Name _______________________________ Possible Social Acronym___________________ Place of birth _______________________ Tax Code _________________________ Date of birth ________________________ Municipality of legal headquarters _____________________ Tax Code _________________________ Address _____________________________ Municipality of residence____________________ State ________________________________ Address _____________________________ State ________________________________ SIM OF WHICH IT IS INTENDED TO ACQUIRE A PARTICIPATION Name of the SIM of which it is intended to assume the participation __________________ Percentage of shares with voting right intended to be acquired (specifying if it is a controlling participation)................................ of which: – directly....................................................................................... ____________% – indirectly.................................................................................... ____________% (indicate the name and social headquarters of the subject intending to acquire directly the participation in the SIM as well as the interposed subjects):

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Percentage of shares with voting right already possessed in the SIM .................. ____________% of which: – directly....................................................................................... ____________% – indirectly.................................................................................... ____________%

Supervisory Instructions for Securities Intermediaries Title I: Constitution of SIMs and Foreign Operations Chapter 3: Participation in the Capital of SIMs – Annexes April 1998

Attached herewith is the following documentation:

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(date) (signature of the declarant)

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(in the case of indirect participation, signature of the possible subjects who would come to hold direct participations exceeding the relevant thresholds)

Supervisory Instructions for Securities Intermediaries Title I: Constitution of SIMs and Foreign Operations Chapter 3: Participation in the Capital of SIMs – Annexes April 1998

CAPITAL PARTICIPANTS OF SECURITIES INTERMEDIATION COMPANIES Instructions for compiling model 19/L SCOPE OF APPLICATION a) Subjects required to send model 19/L Those required to transmit model 19/L to the Bank of Italy and the participated SIM are subjects who have:

1. acquired, under any title, shares with voting rights that, taking into account those already possessed, give rise to: – a participation greater than 5% of the capital represented by shares with voting rights of the SIM or to the overcoming of the thresholds of 10%, 20%, 33% and 50%; – control of the SIM, regardless of the extent of the participation (1);
2. transferred, under any title, shares with voting rights such that the amount of the participation held is reduced below each of the thresholds above fixed or that, regardless of the extent of the participation, the loss of control occurs.

The forwarding of the model is also due, where the premises occur, by fiduciary companies holding shares on behalf of third parties as well as by fund management companies with reference to the total investments made with managed assets. The communication must be made both when the participation in the capital of the SIM is acquired or transferred directly, and when it is acquired or transferred indirectly. In the latter case, communications can only be made by the subject at the top of the participation chain, provided that the model is also signed by whoever acquired or transferred the SIM shares directly (see upper part of Frame F), when the direct participation has exceeded, in increase or decrease, the relevant thresholds (2). The Ministry of the Treasury is not required to make the communication. b) Methods of calculating the percentage In calculating the percentage, savings shares are not taken into account; instead, preferred shares attributing the right to vote in the extraordinary assembly are taken into account.

1 For the definition of the control relationship, reference is made to the provision of Art. 23 of D.Lgs. 385/93. 2 For operations involving a modification in the participation chain, a new communication must be made only when such modifications involve the overcoming, in increase or decrease, of the relevant thresholds vis-à-vis the subject at the top of the chain itself, the interposed subjects, or the direct holders of the shares (see Frame F).

Supervisory Instructions for Securities Intermediaries Title I: Constitution of SIMs and Foreign Operations Chapter 3: Participation in the Capital of SIMs – Annexes April 1998

In the case of shares subject to a repo contract, the obligation to communicate, where the premises exist, falls on both the borrower and the lender. The following calculation methods are adopted: – in the numerator, consider: a) shares in ownership and those subject to a repo contract, even if the subject is deprived of the right to vote; b) shares for which the subject is nevertheless the holder of the right to vote, as in the case of usufruct, pledge, etc.; – in the denominator, consider all shares with voting rights representing the capital of the SIM.

In the case of capital increases, reference must be made: to the numerator, to the number of shares subscribed, added to those already possibly possessed; to the denominator, to the total amount of shares with voting rights representing the capital of the SIM at the end of the increase operation. Communications are considered made on the day they were delivered directly or sent by registered mail with return receipt. It is specified that the obligation to communicate is considered fulfilled exclusively through the sending of model 19/L. METHODS OF COMPILATION Frame A: DECLARANT In addition to the tax code, the details of the declarant (omitting any titles) for natural persons, and the business name or social denomination, as well as the possible social acronym, for legal entities, partnerships, and entities of different nature, shall be reported precisely.

If the declarant is a credit institution or a SIM, the corresponding code must also be indicated. For the species, the relative boxes must be filled with one of the following codes: SPECIES 08 Simple Partnership 41 Limited Partnership by Shares 42 Simple Limited Partnership 43 General Partnership 51 Joint Stock Company 52 Limited Liability Company 61 Cooperative Limited Liability Company 62 Cooperative Unlimited Liability Company 14 Various Entities 74 Non-resident Entities and Companies

Supervisory Instructions for Securities Intermediaries Title I: Constitution of SIMs and Foreign Operations Chapter 3: Participation in the Capital of SIMs – Annexes April 1998

– Cause of the declaration: the cause of the declaration must be indicated in the appropriate box with reference to one of the following hypotheses:

1. Declaration to be made in cases of overcoming the limit of 5% ownership of shares for which the declaring subject is, directly or through other subjects, the holder of the participation or the right to vote, provided that such overcoming does not entail the hypothesis referred to in the subsequent cause 4.
2. Declaration to be made for variations that involve the overcoming, in increase or decrease, of the thresholds of 10%, 20% and 33%, provided that the variation does not entail the hypothesis referred to in the subsequent causes 3 and 4.
3. Declaration to be made for the reduction of the percentage within the limit provided for 5%. This cause must also be indicated in cases of modifications of the informational content referred to in Frame A (e.g., change of ownership of the participation by inheritance, change of residence, or variation of the social name, transformation, merger, transfer of the legal headquarters). In the event of inheritance or merger, the new subjects holding the participation, in addition to making a report in their own name (with cause 1 or 2), must communicate the reduction of the percentage within the limit provided for vis-à-vis the previous declarant using cause 3.
4. Declaration to be made for variations that involve the overcoming, in increase or decrease, of the threshold of 50% and in any other case of purchase or loss of control over the SIM pursuant to Art. 23 of the Banking Consolidated Act.
5. Declaration to be made in cases where, none of the previous hypotheses having occurred, modifications have intervened in the informational content of Frame F, as specified in the relative instructions. Whatever the cause of the declaration, the model must be completed in all its parts, indicating the situation relative to both the declarant and the other subjects referred to in Frame F, updated at the time of sending the declaration. – Date of purchase, transfer, or variation of the participation: the date of the purchase, transfer, or variation of the participation must be indicated. From this date, the term of 30 days within which the communication must be made begins to run. Frame B: PARTICIPATED COMPANY The following must be indicated, in the appropriate spaces: – the name of the participated company, the tax code, and the identification code; – the number of shares representing the capital with voting rights, as resulting from the deed of incorporation and subsequent modifications; – the number of shares representing the capital with voting rights in the ordinary assembly.

Supervisory Instructions for Securities Intermediaries Title I: Constitution of SIMs and Foreign Operations Chapter 3: Participation in the Capital of SIMs – Annexes April 1998

Frame C: SHARES POSSESSED DIRECTLY BY THE DECLARANT – N. Shares possessed: the declarant must indicate the number of shares with voting rights possessed directly, subdivided according to the title of possession; for shares in ownership and for shares subject to a repo contract, the box must be completed regardless of whether the declarant is the holder or not of the right to vote. – N. Shares for which the declarant is deprived of the right to vote: in this box – which must be completed only by the owner who is deprived of the right to vote or regarding shares subject to a repo contract – the number of shares for which the declarant himself is not the holder of the right to vote must be indicated. – N. Shares with voting right vested in the declaring subject: the total number of shares for which the declarant is the holder of the right to vote must be indicated. This number must correspond to the difference between the total of shares possessed and the total of shares for which the declaring subject is deprived of the right to vote. – Of which with voting right in the ordinary assembly: the number of shares having voting rights in the ordinary assembly must be indicated, even if said number coincides with the number of shares indicated in the previous box. N.B. In the event that the voting rights inherent in the participation possessed directly by the declarant belong to the subjects of Frame D (controlled companies, fiduciaries, and interposed persons), the relative shares should not be indicated in Frame C (e.g., in the case of bare ownership shares for which the declarant has transferred the relative voting rights to a controlled company). To avoid duplication, these participations must be indicated exclusively in Frame D, according to the relative instructions. Frame D: SHARES POSSESSED THROUGH CONTROLLED COMPANIES, FIDUCIARIES, INTERPOSED PERSON – N. Shares possessed: the number of shares with voting rights possessed through controlled companies (1), fiduciaries, and interposed persons must be reported, subdivided by title of possession. For shares in ownership and for shares subject to a repo contract, the box must be completed regardless of whether the interposed subjects are holders or not of the right to vote. The indication of the interposed subjects must be reported in Frame F according to the relative instructions. In the event that the shares belong, under different titles, to one or more subjects (falling within the categories of controlled companies, fiduciaries, or interposed persons), the same must be indicated according to the title of possession. – N. Shares for which controlled companies, fiduciaries, and interposed persons are deprived of the right to vote: in this box, which must be completed only for shares in ownership and for shares subject to a repo contract, the number of shares for which the interposed subjects are deprived of the right to vote must be indicated, unless the vote itself belongs to another controlled company, fiduciary, or interposed person.

1 For the definition of the control relationship, reference is made to the provision of Art. 23 of the Banking Consolidated Act.

Supervisory Instructions for Securities Market Intermediaries Title I: Establishment of SIMs and Operations Abroad Chapter 4: Opening of Branches and Provision of Services Abroad April 1, 1998

CHAPTER 4 OPENING OF BRANCHES AND PROVISION OF SERVICES ABROAD (1)

SECTION I GENERAL PROVISIONS

1. Legal Sources Article 13 of the Decree.

2. Definitions For the purposes of this Chapter, the following are defined:

• "services eligible for mutual recognition": the services referred to in Sections A and C of the table attached to the Decree, authorized pursuant to the Decree itself (Article 1, paragraph 5, letter h);
• "investment services" and "ancillary services": the services provided for in Article 1, paragraphs 3 and 4, respectively, of the Decree;
• "branch": a location that constitutes a part, lacking legal personality, of a SIM and which directly carries out, in whole or in part, the activities of the SIM;
• "provision of services without establishment": the provision of investment services and ancillary services in the territory of a foreign State in the absence of branches. Advertising activity that does not contain informative elements allowing for the conclusion of the contract even at a distance does not constitute provision of services without establishment;
• "free provision of services": the provision of services eligible for mutual recognition in the territory of a State belonging to the EU, carried out using the methods of provision of services without establishment;

(1) The provisions contained in this Chapter were issued with the Measure of the Governor of the Bank of Italy of November 29, 1996 (published in the Official Gazette no. 295 of December 17, 1996).

• "representative office": a structure that the SIM uses exclusively to carry out market study activities as well as activities not included in the provision of services without establishment.

SECTION II ESTABLISHMENT OF BRANCHES FOR THE PROVISION OF SERVICES ELIGIBLE FOR MUTUAL RECOGNITION

1. Branches in EU Countries

1.1. First Establishment of a Branch in an EU Country A necessary condition for a SIM to establish its own branch in another EU Member State for the provision of services eligible for mutual recognition is the receipt by the Bank of Italy of a prior communication containing the following information:

1. the EU Member State in whose territory the SIM intends to establish a branch;
2. a program of activities, indicating the type of operations the SIM intends to carry out in the host country and the organizational structure of the branch;
3. the contact details of the branch in the host State, or of the head office if the branch consists of multiple activity locations, where documents may be requested;
4. the names of the managers responsible for the branch.

Within 90 days from the receipt of the communication, the Bank of Italy proceeds to notify the competent Authority of the host country. The Bank of Italy may request additional information; such a request suspends the term, which resumes from the receipt of such information. The Bank of Italy also communicates to the Authority of the host country clarifications regarding the compensation system recognized pursuant to Article 35 of the Decree that guarantees the rights of the branch's clients. Notice of the notification to the competent Authority of the host country is given to the SIM concerned. The Bank of Italy may refuse to effect the notification to the Competent Authority of the host Member State for reasons relating to the adequacy of the organizational structure and the financial, economic, and asset situation of the SIM (1). Evaluations in matters of organization take into account the greater difficulties that SIMs may encounter in guaranteeing the effectiveness of internal controls on a branch abroad.

Within the term of 90 days from the receipt of the prior communication, the Bank of Italy communicates to the SIM the reasons for the refusal to notify the Competent Authority of the host country, clarifying the technical aspects motivating it and illustrating the problems that the SIM must resolve to proceed with the establishment of branches. The branch may establish itself and operate when it receives specific communication from the Competent Authority of the host country or when 60 days have passed from the moment such Authority received the notification from the Bank of Italy regarding the establishment of the branch. SIMs promptly communicate to the Bank of Italy the actual start of the branch's activity.

1.2. Modifications of Communicated Information The SIM communicates to the Bank of Italy and to the competent Authority of the host country any modification of the information referred to in paragraph 1.1, points 2), 3), and 4) of this Section at least 30 days before proceeding with the change. The Bank of Italy proceeds, within 30 days from the receipt of the aforementioned communication, to effect the relative notification to the Competent Authority of the host country and informs the SIM. If the Bank of Italy refuses to effect the notification referred to in the previous paragraph, it communicates – within 30 days from the receipt of the recalled communication – the reasons for the refusal to the SIM concerned.

2. Branches in Non-Community Countries

2.1. Request for Authorization SIMs may establish branches in non-Community countries subject to the authorization of the Bank of Italy, after consulting Consob. SIMs submit to the Bank of Italy an application for authorization containing the following information:

(1) If the SIM belongs to banking groups, the technical-organizational situation of the group of which it is a part is also taken into account.

Supervisory Instructions for Securities Market Intermediaries Title I: Establishment of SIMs and Operations Abroad Chapter 4: Opening of Branches and Provision of Services Abroad April 1, 1998

1. the foreign State in whose territory the SIM intends to establish a branch;
2. the framing of the initiative within the overall strategy of expansion abroad of the SIM;
3. the activity that the SIM intends to carry out in the host State and the organizational structure that the branch will assume;
4. the contact details of the branch in the foreign State, or of the head office if the branch consists of multiple activity locations, where documents may be requested;
5. the names and an informative curriculum of the managers responsible for the branch;
6. the amount of the branch's endowment fund, where required.

The Bank of Italy issues the authorization within the term of 90 days from the receipt of the communication. The Bank of Italy may request additional information; such a request suspends the term, which resumes from the receipt of such information. The Bank of Italy may request an opinion on the initiative from the Competent Authority of the foreign country. In this case, the 90-day term is interrupted. The Bank of Italy communicates the interruption of the terms to the SIM concerned. The issuance of the authorization by the Bank of Italy is subject to the following conditions: a) existence, in the country of establishment, of legislation and a supervision system adequate; b) existence of specific collaboration agreements between the Bank of Italy and Consob and the competent Authorities of the foreign State aimed, among other things, at facilitating access to information by the Bank of Italy and Consob also through the conduct of controls "in loco"; c) possibility of easy access, by the parent company, to the information of the branch.

The Bank of Italy may also refuse to issue authorization for the establishment of branches in non-Community States for reasons relating to the adequacy of the organizational structure and the financial, economic, and asset situation of the SIM (1). Evaluations in matters of organization take into account the greater difficulties that SIMs may encounter in guaranteeing the effectiveness of internal controls on a branch abroad. The Bank of Italy communicates to the SIM concerned the technical aspects motivating the non-issuance of the authorization and illustrates the problems that the SIM must resolve to proceed with the establishment of branches.

(1) If the SIM belongs to banking groups, the technical-organizational situation of the group of which it is a part is also taken into account.

Supervisory Instructions for Securities Market Intermediaries Title I: Establishment of SIMs and Operations Abroad Chapter 4: Opening of Branches and Provision of Services Abroad April 1, 1998

SIMs communicate to the Bank of Italy the date of the actual start of activity within 15 days from the opening of the branch.

3. Representative Offices Abroad SIMs may open representative offices in other EU States and in non-Community States. The opening of representative offices abroad is subject to the procedures provided by the competent Authority of the host country. SIMs promptly communicate to the Bank of Italy the start of the activity of the representative office, indicating the foreign State of establishment, the contact details of the office, and the activity carried out by it.

SECTION III PROVISION OF SERVICES ELIGIBLE FOR MUTUAL RECOGNITION WITHOUT ESTABLISHMENT

1. Free Provision of Services by SIMs in Member States of the EU

1.1. Prior Communication SIMs intending to operate for the first time in another EU Member State under the regime of free provision of services send a prior communication to the Bank of Italy containing the following information:

1. the State in which the SIM intends to exercise its activity;
2. a program of activities indicating the services that the SIM intends to provide in the host country;
3. the methods with which the SIM intends to operate.

The aforementioned communication is sent to the Bank of Italy at least 30 days before the start of the activity. Within 30 days from the receipt of the communication, the Bank of Italy proceeds to effect the relative notification to the Competent Authority of the host country. The Bank of Italy may request additional information; such a request suspends the term, which resumes from the receipt of such information. Notice of the notification to the Competent Authority of the host country is given to the SIM concerned.

Supervisory Instructions for Securities Market Intermediaries Title I: Constitution of SIMs and Foreign Operations Chapter 4: Opening of Branches and Provision of Services Abroad April 6, 1998

1.2. Modifications of communicated information The SIM communicates to the Bank of Italy and the competent authority of the host country any modification to the content of the information referred to in paragraph 1.1, points 2) and 3) of this section, at least 30 days before proceeding with the change.

2. Provision of services without a branch in non-EU countries

2.1. Request for authorization SIMs may operate in a non-EU country without establishing a branch, subject to authorization issued by the Bank of Italy, after consulting CONSOB, and in compliance with the provisions in force in the host country's legal system.

SIMs submit a request for authorization to the Bank of Italy containing the following information:

1. the State in which the SIM intends to exercise its activity;
2. a business program indicating the services the SIM intends to provide in the host country;
3. the methods by which the SIM intends to operate.

The Bank of Italy issues the authorization within 60 days from receipt of the communication. The Bank of Italy may request additional information; such a request suspends the deadline, which resumes from the receipt of such information.

The Bank of Italy may request an opinion on the initiative from the competent authority of the foreign country. In this case, the 60-day deadline is interrupted. The Bank of Italy communicates the interruption of the deadline to the concerned SIM.

The issuance of authorization by the Bank of Italy is subject to the following conditions: a) existence in the host country of adequate legislation and a supervision system; b) existence of specific collaboration agreements between the Bank of Italy and CONSOB and the competent authorities of the foreign state.

The Bank of Italy does not issue authorization for the provision of services without a branch in non-EU states when the conditions referred to in the previous paragraph are not met and for reasons related to the adequacy of the SIM's organizational structure and its financial, economic, and equity situation (1).

The Bank of Italy communicates to the concerned SIM the technical aspects motivating the non-issuance of the authorization.

SECTION IV CARRIAGE OUTSIDE THE HOME COUNTRY OF ACTIVITIES NOT ADMITTED TO MUTUAL RECOGNITION

SIMs may carry out abroad activities not admitted to mutual recognition, with or without a branch, subject to authorization by the Bank of Italy, after consulting CONSOB. The carrying out of such activities is subject to the provisions in force in the host country's legal system.

1. Activities in EU Member States The issuance of authorization to carry out activities in other EU Member States is subject to the following conditions: a) existence of specific collaboration agreements between the Bank of Italy and CONSOB and the competent authorities of the foreign state; b) possibility of easy access, by the parent company, to information at the branch.

Authorization is issued according to the procedures indicated: – in Section II, paragraph 2 where the SIM intends to carry out activities with a branch; – in Section III, paragraph 2 where the SIM intends to carry out activities without a branch.

2. Activities in non-EU countries For the issuance of authorization to carry out activities in non-EU countries, the provisions provided for in Section II, paragraph 2 where the SIM intends to carry out activities through branches, and in Section III, paragraph 2 where the SIM intends to carry out activities without a branch, apply.

(1) Where the SIM belongs to banking groups, the technical-organizational situation of the group of which it is a part is also taken into account.

Supervisory Instructions for Securities Market Intermediaries Title I: Constitution of SIMs and Foreign Operations Chapter 4: Opening of Branches and Provision of Services Abroad April 8, 1998

SECTION V EXPIRY OF AUTHORIZATIONS AND CLOSURE OF SIM BRANCHES

After the expiration of a 12-month period without the SIMs having implemented the initiatives to operate abroad subject to the authorization of the Bank of Italy, the relevant authorizations are considered expired.

Upon a reasoned request by the concerned SIM, a limited extension period may be granted, normally not exceeding 6 months.

The closure of branches is communicated promptly to the Bank of Italy.

TITLE II SUPERVISION

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 1: Participations Held by SIMs April 1, 1998

CHAPTER 1 PARTICIPATIONS HELD BY SIMs (1)

1. Preamble Through the acquisition of shareholdings in the capital of other companies, SIMs can develop their strategic position, assume an organizational structure configured as a group, enter new operational sectors without modifying their corporate structure, strengthen strategic or commercial collaboration links with other subjects.

In this framework, shareholdings in the banking, financial, and insurance sectors, as well as instrumental ones, are freely assumable by all SIMs.

Given that SIMs are not allowed to carry out activities other than financial ones, as well as connected and instrumental ones, a limit of fifteen percent of the capital of the participating company is provided for the assumption of interests in companies operating predominantly in non-financial sectors.

When acquiring shareholdings, SIMs must pay particular attention to avoid an excessive degree of immobilization of assets, safeguard the balance of the financial structure, and observe adequate fragmentation of positions.

The acquisition of shareholdings entails the assumption of risks connected not only with the fact that the reimbursement of equity rights occurs residually with respect to ordinary creditors, but also with the possible fluctuation of the value of shares or quotas in relation to the economic prospects of the participating company and with the liquidity risks of such investments.

Where the activity in question assumes a relevant character, it is appropriate that SIMs adopt internal structures and procedures suitable to adequately monitor the risks inherent in this form of corporate finance.

2. Legal Sources Art. 25, paragraph 1, letter a) of the Decree.

(1) The provisions contained in this chapter were issued with the Order of the Governor of the Bank of Italy of September 30, 1997 (published in the Official Gazette n. 240 of October 14, 1997).

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 1: Participations Held by SIMs April 2, 1998

3. Definitions For the purposes of this chapter, the following are defined: – "participation", the holding of shares or quotas in the capital of other companies, as provided by Art. 4, paragraph 1 of Legislative Decree January 27, 1992, n. 87 (1); – "control", the relationship indicated in Art. 23 of the Banking Consolidated Act; – "financial companies": • SIMs and investment firms; • financial intermediaries referred to in Title V of the Banking Consolidated Act; • management companies provided for by Laws March 23, 1983, n. 77, August 14, 1993, n. 344, and January 25, 1994, n. 86; • companies, with headquarters in Italy or abroad, exercising, exclusively or predominantly, other financial activities indicated in Art. 59, paragraph 1, letter b) of the Banking Consolidated Act.

"Participation companies" that hold shareholdings predominantly in the financial sector fall under the definition of financial companies, as do those that hold shareholdings predominantly in the industrial sector when their role is that of "merchant banking" and is therefore characterized by the activity of consulting and financial assistance to the company.

"Participation companies" that hold shareholdings predominantly in the industrial sector, with the aim of coordinating the activity of the participating companies, fall under the definition of "non-financial company"; – "insurance companies", the Italian company authorized under Laws June 10, 1978, n. 295, and October 22, 1986, n. 742, as well as foreign ones considered such by their respective legal systems; – "instrumental companies", companies that exercise, exclusively or predominantly, non-financial activities that are auxiliary to the activity of the SIM, such as for example the management of real estate or services including IT; – "non-financial companies", companies that carry out activities other than banking, financial, or insurance, or are not instrumental companies; – "second-level corrected net worth", the aggregate consisting of basic net worth and supplementary second-level net worth, as defined by Art. 46, paragraphs 3 and 4 of the Regulation of July 2, 1991, minus the components indicated in letters a) and d) of paragraph 6 of the same article.

(1) Art. 4, paragraph 1, D.Lgs. 87/92: "For the purposes of this decree, participations are understood as rights, represented or not by securities, in the capital of other companies which, by realizing a situation of lasting link with them, are destined to develop the activity of the participant. A participation exists when a subject is the holder of at least one-tenth of the voting rights exercisable in the ordinary general meeting."

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 1: Participations Held by SIMs April 3, 1998

4. Scope of Application These provisions apply on an individual basis to all SIMs.

5. Financial and Instrumental Participations SIMs may assume even majority shareholdings in banks (1), financial companies, and insurance companies, as well as in instrumental companies, with legal headquarters in Italy or abroad.

The acquisition of such interests, if it entails the assumption of control over the participating company, must be previously communicated to the Bank of Italy as indicated in the following paragraph 9.

6. Non-Financial Participations SIMs cannot hold, directly or indirectly, shareholdings in non-financial companies: a) exceeding 15 percent of the capital with voting rights; b) such as to allow the exercise of control over the company, also through participation in voting agreements.

7. Limit on the Assumption of Participations SIMs cannot assume shareholdings for a total amount exceeding the "second-level corrected net worth".

8. Participations Acquired within the Framework of Adhesion to Guarantee and Placement Consortia The provisions of the preceding paragraphs do not apply to capital titles held within the framework of adhesion to guarantee and placement consortia by SIMs authorized to provide the service referred to in Art. 1, paragraph 3, letter c) of the Decree, until the day of closure of the placement itself.

(1) In this regard, the provisions on participation in the capital of banks provided for in the current "Supervisory Instructions for Credit Institutions" are recalled.

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 1: Participations Held by SIMs April 4, 1998

From that date, the titles remaining in the portfolio owned by SIMs are to be attributed – according to the terms established by Art. 33, paragraph 5 of the Regulation of July 2, 1991 – to the non-immobilized portfolio or, if they present the characteristics, among the shareholdings. In the latter case, the titles in question fall under the discipline of this chapter.

9. Prior Communication to the Bank of Italy SIMs intending to assume controlling participations (1) in financial companies, insurance companies, banks, or instrumental companies make a specific communication to the Bank of Italy at least 60 days before the acquisition of the interest.

The communication is accompanied by the statutes and the last two approved balance sheets of the company whose participation is intended to be acquired, as well as any useful information to frame the operation within the overall corporate strategy.

Information concerning the impact of the operation on the current and prospective financial situation of the participant, as well as on the compliance with capital adequacy ratios, is also provided.

The Bank of Italy, within a maximum term of 60 days from receipt of the communication, expresses its opinion on the operation, evaluating its effects on the technical situation of the SIM.

10. Information to the Bank of Italy SIMs communicate to the Bank of Italy within ten days from the purchase the shareholdings assumed.

(1) The communication must be made both in the case of direct or indirect assumption of control and in the case of adhesion to voting syndicates.

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 2: Administrative and Accounting Organization and Internal Controls April 1, 1998

CHAPTER 2 ADMINISTRATIVE AND ACCOUNTING ORGANIZATION AND INTERNAL CONTROLS OF SECURITIES MARKET INTERMEDIARIES (1)

1. Legal Sources The matter is governed by Art. 25, paragraph 1, letter a) of the Decree.

2. General Provisions The development of financial markets, the high pace of innovation, and the variability of the environmental context in which securities market intermediaries operate make the organizational factor increasingly important in determining their degree of competitiveness and their ability to operate efficiently and according to sound and prudent management criteria.

The Bank of Italy attaches particular importance to the organizational profiles of intermediaries – an need confirmed also by the orientations emerging in international forums – and urges SIMs to pay attention to the necessity of adopting structures and organizational systems adequate in relation to the activity carried out and the risks assumed.

The following provisions therefore constitute minimum organizational requirements and do not exhaust the interventions that can be adopted by the competent corporate bodies.

2.1. Information-Accounting Systems The availability of complete, reliable, and timely information represents an essential condition for the proper functioning of securities market intermediaries and allows the various components of the corporate structure to make conscious decisions suitable for achieving the assigned objectives.

To this end, SIMs must equip themselves with information systems adequate to the complexity of the operational context in which they act, the variety and nature of the services to be provided, as well as the size and territorial articulation of the company.

(1) The provisions contained in this chapter were issued with the Order of the Governor of the Bank of Italy of September 30, 1997 (published in the Official Gazette n. 240 of October 14, 1997).

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 2: Administrative and Accounting Organization and Internal Controls April 2, 1998

The system of internal accounting and management records must have a high degree of reliability, correctly and promptly record management events, and provide a faithful representation of the company's economic-equity, financial, and risk situation. The congruity of the qualitative-quantitative characteristics of the technical and human resources destined for the management and functioning of the system itself must also be ensured.

The adoption of management planning and control tools (budgets, expenditure plans, etc.) capable of orienting behaviors in the different sectors of corporate operations through the setting of objectives, the measurement of deviations, and the evaluation of achieved economic levels is recommended.

Particular importance is assumed by the suitability of procedures aimed at ensuring the link between accounting and non-accounting evidence, the annual financial statements, and the reports to be made to the supervisory authorities.

Information-accounting systems must also be structured taking into account the need to:

1. implement regulations on asset segregation, putting in place necessary measures so that it is possible to distinguish, at any time, the financial instruments and money of individual clients from those of the SIM;
2. reconstruct the set of operations carried out on behalf of each client and their global position;
3. know the volume of activity developed with reference to each of the investment services provided, as well as the specific costs and revenues pertaining to each of them.

The adopted information systems must finally be characterized by high levels of security; under this profile, the suitability of technical-organizational safeguards placed to protect the corporate information asset is relevant, among which: – the correctness of procedures and the adequate documentation thereof; – the proper functioning of equipment and the continuity of processing services; – the possibility of restoring the conditions preceding an accidental event and the existence of specific backup and recovery procedures; – the confidentiality and integrity of information, which must be ensured through both physical measures (provision of access criteria to equipment and documents, methods of storage and distribution of media, etc.) and logical measures (user authorization levels, assignment of passwords, possible use of cryptographic codes, techniques for authenticating teletransmitted information, etc.).

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 2: Administrative and Accounting Organization and Internal Controls April 3, 1998

2.2. Internal Controls SIMs must equip themselves with internal control structures autonomous from those operational; the tasks assigned to them must be defined precisely and approved by the board of directors of the SIM, referring at least to the following criteria:

1. the internal control function must be assigned tasks of verifying compliance with the regulations applicable to the services provided, both on own account and on behalf of investors. In particular, the control must concern: – compliance with prudential rules; – compliance with conduct rules towards clients; – compliance with procedures established for the provision of services; – compliance with provisions on administrative and accounting segregation; – correct application of the principle of asset segregation; – correct maintenance of accounting records; – effectiveness of procedures governing information flows between corporate sectors; – adequacy of information systems with respect to the services provided and their reliability.

In particular, in order to guarantee the functionality and efficiency of the overall corporate "information apparatus", it is appropriate that the process of production, treatment, and distribution of information be subject to periodic checks by internal control bodies, aimed at: • identifying and removing any inefficiencies and/or redundancies; • verifying the adequacy of outputs, in terms of quality and timeliness, to user needs; • evaluating the correspondence of the administrative-accounting process to criteria of correctness and order in the maintenance of accounting; 2) if the SIM carries out activities that entail the assumption of risks on own account, the internal control function must also be assigned the task of verifying the effectiveness of risk control systems.

The obligation to report periodically to the board of directors on the results of the checks carried out must also be provided for.

Supervisory Instructions for Securities Intermediaries

Title II: Supervision

Chapter 2: Administrative and Accounting Organization and Internal Controls

April 1998

3. Risk Management

3.1. Risk Management Procedures and the Role of Senior Management

Securities Investment Companies (SIMs) must have procedures for risk management and clearly define the limits to their assumption, as well as the competencies and corporate responsibilities regarding these profiles. The aforementioned procedures must cover the activity carried out by the SIM as a whole and be approved by the board of directors of the SIM itself.

The senior management of the SIM must ensure that lines of responsibility in risk management are clearly defined and that adequate risk measurement systems, appropriately structured exposure limits, effective internal controls, and an analytical reporting process are provided, also through adequate periodic reports, of risk exposure by the operational structures of the SIM to senior management and the board of directors.

3.2. Risk Measurement and Control

For SIMs that assume risks on their own account, it is essential that informational systems are capable of continuously determining the amount of supervisory capital and the capital requirements required by prudential ratios, as well as compliance with other limits placed on corporate operations, particularly regarding risk concentration.

Where the operational scope of SIMs extends to more complex and innovative segments (derivative instruments, structured operations, etc.), it is appropriate that informational systems be supplemented by adequate risk monitoring and reporting systems, which must be measured according to the most appropriate techniques for the nature of each (e.g., using "value at risk" type models).

The methodology for measuring exposure must be shared by the operational sectors of the SIM and those responsible for control.

The presence of a detailed system of limits, criteria, and other parameters to regulate the assumption of risks by individual operational units constitutes an essential component to ensure prudent management of risks assumed by the SIM.

In more complex organizations, prudent risk management also presupposes the existence of a "risk control unit," autonomous from the operational structures of the SIM, which reports directly to senior management and the board of directors of the intermediary.

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Supervisory Instructions for Securities Intermediaries

Title II: Supervision

Chapter 2: Administrative and Accounting Organization and Internal Controls

April 1998

4. Rules of Administrative and Accounting Organization

The service of individual portfolio management on behalf of third parties (hereinafter referred to, for brevity, as "management service") must be kept separate from other investment services exercised by the SIM as well as from other activities carried out by the SIM itself.

The management service may be provided jointly with investment advisory services on financial instruments.

To this end, the SIM adheres to the following rules:

a) Administrative rules:

• Staff assigned to the management service must operate independently and without subordination constraints relative to other corporate sectors;
• The management service must not be placed in a position of subordination—in terms of functional, decisional, and operational autonomy—relative to other corporate structures, including those provided for the exercise of other investment services;
• Relationships between the management service and other services must originate exclusively at the initiative and under the responsibility of the former;

b) Accounting rules:

• The archives, including electronic ones, of the management structure must be protected to prevent access by operators belonging to other sectors;
• Securities transactions concluded between the structure assigned to the management service and other corporate structures must be evident in specific internal records.

The aforementioned separation obligations do not apply to the operational structures of the intermediary dedicated solely to client contact, provided that the activity carried out by them excludes the existence of discretionary power on the part of such structure.

Compliance with the aforementioned administrative and accounting separation rules leaves unaffected the option to centralize the administrative organization of general services (such as, for example, back-office services) and the function of general accounting.

5. Communications to the Bank of Italy

SIMs must send an annual report to the Bank of Italy, by June 30 of each year, on the organizational structure and accounting framework adopted, drawn up according to the scheme indicated in Annex A.

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Supervisory Instructions for Securities Intermediaries

Title II: Supervision

Chapter 2: Administrative and Accounting Organization and Internal Controls

April 1998

The report need not be sent if there have been no changes compared to the information communicated with the report from the previous year.

For newly established SIMs, the report must be sent within 3 months from the issuance of the authorization.

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Supervisory Instructions for Securities Intermediaries

Title II: Supervision

Chapter 2: Administrative and Accounting Organization and Internal Controls – Annexes

April 1998

Annex A

REPORT ON ORGANIZATIONAL STRUCTURE

I. GENERAL INFORMATION

Provide a company organizational chart. If the SIM has branch offices, indicate their number and location.

A. INFORMATION-ACCOUNTING SYSTEMS

1. Describe, in summary, the architecture of the informational systems used for each activity carried out.
2. Describe the main contents of the system for detecting different types of risk (market risk, counterparty risk, etc.).
3. Describe, in summary, the accounting solutions adopted to know, with reference to each investment service exercised: the volume of activity developed, the specific costs and revenues pertaining to it.
4. Provide references regarding management control methodologies (such as, for example, the existence of budgets, spending plans, etc.).
5. Indicate the computer security measures put in place to protect the company's informational assets, with particular reference to access protection criteria and the backup and recovery procedures provided for.

B. INTERNAL CONTROLS

a) Internal control structures and procedures

1. Describe the location of the SIM's internal control function and indicate the person responsible.
2. Indicate the frequency and manner of carrying out tasks regarding control:
   • of assumed risks;
   • of compliance with prudential rules;
   • of compliance with conduct rules towards clients;
   • of compliance with procedures established for the provision of services;
   • of compliance with provisions on administrative and accounting separation;
   • of the correct application of the principle of asset separation;
   • of the correct keeping of accounting records;
   • of the effectiveness of procedures for regulating information flows between corporate sectors;
   • of the adequacy of informational systems relative to the services provided and their reliability.
3. Indicate the computer control tools available to the SIM.
4. If there is an autonomous risk control unit relative to the operational structures on the markets, communicate:
   • to whom the unit reports;
   • what the role of the unit is;
   • what tools it has available;
   • whether specific manual regarding risk control procedures is prepared, sending a copy in such case;
   • whether regular reporting by the control unit to the board of directors and management on risk exposure is provided for.

b) Limits System

Indicate:

1. What are the methods for defining and formalizing operational limits, with what frequency their compliance is checked, and with what frequency they are reviewed;
2. What is the articulation of limits relative to:
   • type of service provided;
   • operational units involved;
   • levels of autonomy of managers;
3. What procedure is activated and what interventions are provided for in case of exceeding the assigned limits.

c) Delegation System

1. Describe the articulation of delegations within the company with reference to the different services provided;
2. Describe the tools used to make delegated powers known to the structure;
3. Describe the control mechanisms provided for to verify compliance with delegations and indicate if there is a procedure to request the exceeding of attributed powers.

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Supervisory Instructions for Securities Intermediaries

Title II: Supervision

Chapter 2: Administrative and Accounting Organization and Internal Controls – Annexes

April 1998

C. BOARD OF DIRECTORS AND SENIOR MANAGEMENT

Indicate:

1. Whether the board of directors establishes the general lines on the type of activity (products, markets, functions) to be carried out and on their relative risk control policies, as well as with what methods they are communicated within the company (if there is a document containing guidelines, attach a copy);
2. Whether competencies in matters of risk control have been delegated to a specific committee within the board of directors;
3. With what frequency the aggregate level of risk is reviewed;
4. Which corporate bodies participate in the decision to enter new markets or new products;
5. What type of information is provided to the board of directors, senior management, and other responsible managers, and with what periodicity (attach copies of reports produced);
6. What other hierarchical levels are involved in the risk management and control process and what type of delegations they are invested with.

II. INFORMATION ON INDIVIDUAL SERVICES

A. PROPRIETARY TRADING AND TRADING ON BEHALF OF THIRD PARTIES

1. Describe the organization of the trading floors (by function, by product, etc.).
2. Indicate the number of desks existing and the markets in which the SIM operates.

B. PLACEMENT

1. Describe the articulation of the distribution network used, also indicating the distribution by geographic zones.
2. In case of placement with guarantee, indicate if there is within the SIM a specific unit tasked with the analysis of operations and their evaluation in terms of risk. In case of a negative response, describe the methods used for the analysis and evaluation of placement operations.

C. MANAGEMENT

1. Describe the distribution of tasks among staff assigned to the structure (by client, by sector, by market, etc.), indicating the degree of decisional autonomy attributed to them.
2. Describe the systems used for:
   • ensuring that the service is provided independently, in the exclusive interest of investors;
   • preventing staff assigned to other services from accessing the archives, including electronic ones, of the management structure.
3. Describe the systems used to ensure compliance with:
   • provisions on portfolio management provided by regulations;
   • instructions issued by clients.
4. Indicate if tasks are attributed to the unit regarding:
   • choice of investment strategies for portfolios;
   • choice of securities to be included in management.
5. In case of a negative response to the previous question, indicate the administrative unit to which the aforementioned tasks are attributed.
6. In case of delegation of management to external subjects, indicate the extent of the delegation and the nature of the delegated tasks.
7. Indicate the tasks attributed to client contact structures.

D. RECEIPT AND TRANSMISSION OF ORDERS

1. Describe:
   • the methods of obtaining orders (bank channel, sales networks, etc.);
   • the procedures followed for their execution (e.g., transfer to SIM of negotiation of the group, etc.).

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Supervisory Instructions for Securities Intermediaries

Title II: Supervision

Chapter 3: Capital Adequacy and Risk Containment

April 1998

CHAPTER 3

CAPITAL ADEQUACY AND RISK CONTAINMENT

1. Reference to the Provisions of the Regulation of July 2, 1991

Until the issuance of the implementing provisions of Article 25, paragraph 1, letter a) of the Decree, the discipline contained in Title IV of the Regulation of July 2, 1991 (in Appendix) applies – pursuant to Article 67, paragraph 1 of the same Decree.

With reference to Article 30, paragraph 4 of the Regulation of July 2, 1991, an explanatory note of the most widely used basic methodology that may be used for calculating the "delta" coefficient in determining the value of options for the purpose of applying capital "ratios" is reported in Annex A.

Intermediaries intending to operate in the options market are recommended to have access to informational systems that allow calculating the "delta" coefficient to be applied to options using models appropriate to the various instruments traded. The choice of the model deemed most suitable remains subject to the prudent evaluation of each operator – with reference to the type of options considered.

Operators must keep the Bank of Italy informed of a description of the systems actually used.

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Supervisory Instructions for Securities Intermediaries

Title II: Supervision

Chapter 3: Capital Adequacy and Risk Containment – Annexes

April 1998

Annex A

The fundamental reference model for the valuation of options is that of Black and Scholes of 1973, developed for European call options on stocks that do not pay dividends before the expiration of the option. The formula for determining the value of the call option is as follows:

C = S N(d1) – Ke^(-rt) N(d2)

where

d1 = [log(S/K) + (r + σ²/2)t] / (σ√t) d2 = d1 – σ√t

C = value of the option S = price of the underlying asset K = exercise price of the call r = risk-free interest rate (1) σ = volatility of the price of the underlying asset (2) t = time elapsed until the expiration of the option e^(-rt) = discount factor between the price determination date and the expiration date of the option

N(x) is the distribution function for a standardized normal variable.

The volatility of the return of the underlying stock can be estimated in two ways:

1. as historical volatility, based on the analysis of time series of stock prices in a period prior to the valuation date (2);
2. as implied volatility. Starting from the current quotation of the call option and the values of the other factors, the Black and Scholes formula is solved iteratively as a function of σ.

As is well known, the Black and Scholes model assumes:

• that the trend of the prices of the underlying asset can be approximated by a log-normal process;
• the existence of a perfectly efficient and frictionless market;
• that the market interest rate and the variance of the reference value are constant for the duration period of the option.

(1) Operationally, the yield of six-month Treasury bills (BOT) can be adopted as the risk-free interest rate. (2) The volatility of the price of the underlying asset of an option can be determined by calculating the standard deviation of the percentage differences of the daily value of the same asset detected in the preceding six months.

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Supervisory Instructions for Securities Intermediaries

Title II: Supervision

Chapter 3: Capital Adequacy and Risk Containment – Annexes

April 1998

If the market responds to these characteristics, the model under examination offers a rigorous basis for calculating the risk of an options position. The fundamental factor for this calculation is the variations in the stock price.

The sensitivity to the price factor is measured by the "delta" coefficient – the first derivative of C with respect to S – which measures the ratio between the variations of C and those of S keeping other factors constant. The "delta" coefficient thus allows estimating the impact on C of a price variation:

variation in C = delta · variation in S

Mathematically, "delta" is derived from the Black and Scholes formula:

delta = N(d1)

"Delta" varies in an interval between 0 and 1. Its value is minimum when S is much lower than K (exercise price) and the option expiration is near. In this case, the probability of price increases such as to bring the call option "in the money" (1) at expiration is very remote: the market expects the option to expire worthless and therefore the link with the stock price is very weak. "Delta" tends to unity for prices (S) much higher than K, as it is very probable that the option will be exercised (2).

Put Options

In the case of European put options, the equilibrium value coherent with the model described above is obtained from the call-put parity relationship.

The value (P) of the European put will be:

P = Ke^(-rt) N(-d2) – S N(-d1)

In this case, "delta" is equal to the complement to 1 of the "delta" of an equal call option under the same conditions, namely:

delta = | N(d1) – 1 |

Having reference to the Black and Scholes formula, numerous adaptations have been developed in financial theory to take into account specific situations; the most widespread are reported below.

(1) An option is said to be "in the money" when the market price of the underlying asset is greater than the exercise price of the option, "at the money" if the two prices are equal, and "out of the money" if the exercise price is greater than the market price of the asset. (2) For an exemplification of the procedure for calculating the "delta" coefficient, see Table 1.

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Supervisory Instructions for Securities Intermediaries

Title II: Supervision

Chapter 3: Capital Adequacy and Risk Containment – Annexes

April 1998

Currency Options

In the case of currency options, the reference formula requires a modification to take into account the yield associated with the currency (which is not recognized to the option holder).

In such cases, it is sufficient to substitute the value S with Se^(-qt) in the aforementioned formulas, where q is the interest rate of the currency subject to the contract (the one purchasable in the case of a call, the one sellable in the case of a put).

The basic formulas therefore become (1):

C = Se^(-qt) N(d1) – Ke^(-rt) N(d2) P = Ke^(-rt) N(-d2) – Se^(-qt) N(-d1)

where: d1 = [log(S/K) + (r – q – σ²/2)t] / (σ√t) d2 = d1 – σ√t

therefore: "delta" for call options = e^(-qt) · N(d1) "delta" for put options = e^(-qt) · | N(d1) – 1 |

Bond Options

In the case of bond options, the traditional Black and Scholes formula requires the following adjustments:

• where there are no coupon detachments during the life of the option: both the price of the underlying bond and the exercise price of the option are expressed as dirty prices (tel-quel);
• for options with expiration subsequent to the detachment of one or more coupons, the price of the underlying asset is calculated by subtracting from the dirty price of the bond the present value of the coupons maturing during the life of the option (2).

Futures Options

In the case of options on forward contracts and futures, reference can be made to the Black formula:

C = (F N(d1) – K N(d2)) · e^(-rt)

(1) The approach proposed for currency options is also adoptable for stock index options provided such indices are not capitalization indices. In such cases (non-capitalization indices), q will be the annualized average dividend rate of the shares present in the index. (2) This methodology can also be adopted for stock options in the case of dividend detachments during the life of the operation.

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 3: Capital Adequacy and Risk Containment – Annexes April 1998

P = (K N(-d2) – F N(-d1)) · e-rt

log (F/K) + (σ2 /2) t d1 = ------------------------------- d2 = d1 – σ √ t σ √ t

therefore: “delta” for call options = e-rt · N(d1) “delta” for put options = e-rt · | N(d1) – 1 |

F = forward or futures price.

Interest Rate Options (caps, floors) (1) The model of European options on futures can be extended to interest rate options, that is, those contracts that provide for payment from the issuer to the holder at one or more future periodic maturities: – in the case of a cap, the positive difference between a current market rate, chosen as an index, and an exercise rate (strike rate) fixed in the contract; – in the case of a floor, the positive difference between the strike rate and the current level of the index.

In this regard, it is observed that the contracts in question shall be considered as a basket of options that gives rise to a series of possible payments. In particular, for each individual payment provided for in the life of the contract, the Black formula is applied by substituting the future price with the forward value of the market rate (chosen as an index) relative to the period between the date of determination thereof and the date of the possible payment. The strike rate shall be computed as the exercise price.

American Options American options give the holder, compared to European options, the additional right to exercise early relative to the expiration date. In general, the valuation of such options takes as a starting point the value of a corresponding European option, to which the value of early exercise is added, which may be more or less significant depending on the case.

For call options, one must distinguish the case of securities with dividend distribution during the validity period from that without dividend distribution; in practice, in an efficient market only the first type differs from a European-type option as it gives the possibility to exercise the right before the price decrease connected to the dividend distribution occurs.

For put options, the difference between European and American options is a function of the difference between the current value and the exercise price.

1 For the purposes of interest here, so-called “collar” contracts can be broken down into two options: a cap and a floor.

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 3: Capital Adequacy and Risk Containment – Annexes April 1998

To value American options, the following can be used:

1. empirical adaptations of the analytical formulas valid for European options;
2. complex analytical formulas;
3. numerical procedures based, for example, on the construction of binomial trees that describe the evolution of the price of the underlying security over time.

Of the three approaches, the third is the most generally applicable, as it allows simulating, throughout the life of the option, the effect on the price of the distribution of proceeds as well as the choices available to the holder regarding the convenience of early exercise. A disadvantage of binomial models is given by the length of calculation times for the same.

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 3: Capital Adequacy and Risk Containment – Annexes April 1998

Table 1 EXAMPLE OF THE PROCEDURE FOR CALCULATING THE DELTA COEFFICIENT ACCORDING TO THE BLACK AND SCHOLES FORMULA (call options)

1. Determine the annualized volatility (σ) of the price of the underlying asset:

Days | Price of the underlying asset | Variations in the price of each day compared to the previous one (1) | Arithmetic mean of the values in column b | Deviation of the values in column b from the mean | Daily volatility = standard deviation | Annualized volatility (2) (a) | (b) | (c) | (d) | (e) | (f) 1 | P1 | – | | | | 2 | P2 | V1 = log(P2/P1) | | | | 3 | P3 | V2 = log(P3/P2) | M = (1/n) Σ Vi | S = √[(1/(n-1)) Σ (Vi - M)²] | σ = S * √(working days in the year) | ... | ... | ... | ... | ... | ... | n | Pn | Vn-1 = log(Pn/Pn-1) | | | |

(1) For the calculation of variations, the formula Vn = (Pn – Pn-1) / Pn-1 may be used, for operational simplicity, which for price variations that are not excessive provides substantially analogous results. (2) Calculated assuming a linear growth of variability in the year.

2. calculate the ratio between the current price of the asset to which the option refers and the exercise price of the option;
3. determine the natural logarithm of the result of the operation in point 2;
4. square the value of the volatility (point 1) and divide it by 2;

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 3: Capital Adequacy and Risk Containment – Annexes April 1998

5. add to the result of the previous point 4 the absolute value of the interest rate of 6-month BOTs in effect on the valuation date (e.g., 10% BOT rate, 0.10 shall be added);
6. multiply the result obtained in point 5 by the period of time elapsed until the expiration of the option (number of days to expiration/365);
7. calculate the square root of the data relating to the time elapsed until the expiration of the option;
8. multiply the data obtained in the previous point 7 by the volatility of the price of the underlying asset (point 1);
9. the value indicated in the formula with d1 is obtained by adding the result of point 3 to that of point 6 and dividing by the data obtained in point 8;
10. the “delta” coefficient is equal to the absolute value assumed by the normal distribution function at the data obtained in the previous point 9 (d1 in the formula).

The values of the normal distribution are found in the “tables” of the normal distribution generally attached to statistics manuals or calculable with specific software programs.

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 4: Consolidated Supervision April 1998

CHAPTER 4 CONSOLIDATED SUPERVISION (1)

1. Legal Sources – Art. 25, paragraph 1, letter a) of the Decree; – Art. 107, paragraph 2 of the Banking Consolidation Act (T.U. bancario).

2. Scope of Application The application of this regulation is excluded for SIMs belonging to a banking group registered in the register referred to in Art. 64 of the Banking Consolidation Act or to a group subject to consolidated supervision in another country of the European Union (2).

3. Definitions For the purposes of this chapter, the following are defined: – “group”, the set consisting of companies, with headquarters in Italy or abroad, that: a) control the SIM; b) are controlled by the SIM; c) are controlled by the same company that controls the SIM; d) are at least 20 percent owned in share capital with voting rights, also jointly, by the SIM or by the companies referred to in letters a), b) and c).

For the notion of control, reference is made to Art. 23 of the Banking Consolidation Act; participations held indirectly, through controlled companies, trustees, or intermediary persons, are also computed; – “financial entities”: • SIMs and investment firms;

1 The provisions contained in this chapter were issued with the Decree of the Governor of the Bank of Italy of February 25, 1997 (published in the Official Gazette no. 56 of March 8, 1997). 2 Given that in countries adhering to the Basel Committee substantially equivalent consolidated supervision rules to those defined by Community directives are applied, it is noted that SIMs belonging to groups supervised on a consolidated basis in the “G-10” context may also request exemption from observing this regulation, provided that the application is accompanied by the necessary documentation to prove the actual submission to such form of control in the country of origin.

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 4: Consolidated Supervision April 1998

• financial intermediaries referred to in Title V of the Banking Consolidation Act; • management companies provided for by Laws No. 77 of March 23, 1983, No. 344 of August 14, 1993, and No. 86 of January 25, 1994; • companies, with headquarters in Italy or abroad, exercising, exclusively or predominantly, other financial activities indicated in Art. 59, paragraph 1, letter b) of the Banking Consolidation Act; – “supervised financial entities”: • SIMs and investment firms; • financial intermediaries registered in the special list referred to in Art. 107 of the Banking Consolidation Act; • management companies provided for by Laws No. 77 of March 23, 1983, No. 344 of August 14, 1993, and No. 86 of January 25, 1994; – “supervised group”: the set of financial entities subject to consolidated or sub-consolidated supervision pursuant to the following paragraph 4.

4. Submission to Consolidated Supervision SIMs – not included in a banking group nor subject to consolidated supervision in another country of the European Union (1) – that are part of a group in the context of which other financial entities are also included, are subject to consolidated supervision if the following conditions are met:

1. all financial entities of the group are supervised financial entities. In the event that non-supervised financial entities are included in the group, the assets and revenues of the latter must be of negligible amount compared to the total assets and revenues of the financial entities of the entire group;
2. the financial entities of the group are controlled, directly or indirectly, by a single supervised financial entity placed at the top of the group itself or in a sub-holding position relative to the parent company. This entity or the SIM performs the function of reference for consolidated supervision (“reference entity”) towards the Bank of Italy (2). In the participative chain connecting the financial entities of the group, no subjects other than the financial entities themselves must be included.

1 Cf. previous note. 2 The function of “reference entity” for consolidated supervision can be performed by the SIM (or by any SIM of the group if it includes more than one) even if it is not placed at the top of the group or “sub-group”. This circumstance must be indicated in the communication provided for in paragraph 5.1.

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 4: Consolidated Supervision April 1998

Consolidated or sub-consolidated supervision is exercised towards the reference entity and the other supervised financial entities of the group according to the provisions indicated below. These subjects remain subject to consolidated or sub-consolidated supervision until one of the conditions indicated in previous points 1) and 2) ceases to exist.

SIMs included in non-banking groups that have – as provided for in the following Chapter 5 – information systems and procedures for the knowledge of the sources of capital and financing of the other financial entities of the group may request the Bank of Italy to be exempted from observing the provisions on consolidated supervision provided for in this chapter.

5. Exercise of Consolidated Supervision 5.1. Communications to the Bank of Italy If the conditions provided for in the previous paragraph 4 are met, the reference entity communicates to the Bank of Italy: a) the overall structure of the group of which it is a part, with an indication of the territorial location of its components; b) the list of entities included in the perimeter of the group, with an indication of the participative relationships.

The reference entity may request the Bank of Italy that financial entities be excluded from consolidated supervision: – included in the group and not linked to the SIM by vertical control relationships or controlled by the same controlling entity (subjects referred to in letter d) of the definition of group reported in paragraph 3); – that represent a negligible interest compared to the purpose of these provisions.

For the entities for which exclusion is requested, elements suitable for evaluating the relevance of the assets and revenues of the latter compared to the total assets and revenues of the financial entities of the entire group must be provided, as well as references regarding the financial and operational relationships in place with the other financial entities of the group; c) the organizational solutions and internal controls adopted within the group to guarantee compliance with the rules on consolidated supervision; d) the information systems and procedures adopted to guarantee that the reference entity is able to fulfill the tasks of consolidated supervision and to know with timeliness and completeness the relationships inter-

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 4: Consolidated Supervision April 1998

vening between the subjects for which exclusion is requested and the financial entities included in consolidated supervision.

The reference entity communicates to the Bank of Italy any updates to the aforementioned information.

Based on the information received, the Bank of Italy evaluates whether all conditions for the application of consolidated supervision are met and ascertains that the structure of the group as a whole does not constitute an obstacle to the exercise of such supervision.

5.2. Obligations of the Reference Entity for Consolidated Supervision It is the responsibility of the reference entity to verify that the financial entities included in the supervised group respect, on a consolidated basis, according to the criteria reported in the following paragraph 6, the provisions of the Regulation of July 2, 1991, regarding: a) risk concentration; b) capital coefficients on credit and exchange risks; c) capital coefficients on position, settlement, and counterparty risks, provided that there is at least one SIM authorized in the group for the exercise of proprietary trading or placement with prior subscription, purchase at firm commitment, or assumption of guarantee services.

The minimum capitalization requirement of the supervised group is equal to the sum of the coverages required pursuant to letters b) and c) as well as any additional capital coverage provided for by the regulation on risk concentration; the consolidated supervisory capital of the group is calculated as provided for in the following paragraph 8.

The reference entity receives from the financial entities excluded from consolidated supervision the data provided for in Annex A of the following Chapter 5.

The reference entity must, among other things, have technical-organizational structures suitable to allow compliance with the obligations arising from consolidated supervision provisions and verify that adequate organizational safeguards and internal controls are adopted within the group to allow compliance with the rules on consolidated supervision.

6. Compliance with Prudential Rules at Consolidated Level The reference entity ensures compliance with prudential rules at the consolidated level according to the instructions indicated below.

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 4: Consolidated Supervision April 1998

6.1. Structure of Consolidated Capital Coefficients The structure of capital coefficients at the consolidated level is analogous to that of individual capital coefficients provided for in Title IV of the Regulation of July 2, 1991.

Therefore, unless otherwise provided for in this chapter, the rules provided for the calculation of individual coefficients of SIMs are applied in the calculation of consolidated coefficients.

6.2. Position, Settlement, and Counterparty Risks The capital coefficients on position, settlement, and counterparty risks at the consolidated level are calculated with reference to the non-invested portfolio of SIMs and financial intermediaries registered in the list referred to in Art. 107 of the Banking Consolidation Act authorized for the provision of investment services and included in the group. Other supervised financial entities are excluded.

The positions related to the non-invested portfolio held by each SIM and each financial intermediary referred to in Art. 107 of the Banking Consolidation Act authorized for the provision of investment services must be kept distinct to determine the level of capital coverage required for each of them in relation to the risks in question.

With reference to settlement and counterparty risks, positions towards other supervised financial entities of the group are excluded.

The overall capital coverage required for the set of entities included in the consolidation area against position, settlement, and counterparty risks is equal to the sum of the coverages required for each of the intermediaries authorized for the provision of investment services.

6.3. Credit, Concentration, and Exchange Risks For the calculation of consolidated coefficients relating to credit, concentration, and exchange risks, the accounts of the supervised financial entities of the group are preliminarily consolidated based on the methods provided for by the regulation on consolidated financial statements pursuant to Legislative Decree No. 87 of January 25, 1992, and its implementing provisions. In particular: a) the full consolidation method applies to controlled subjects; b) the proportional consolidation method applies to subjects subject to joint control; c) the equity method applies to subjects linked at least 20 percent.

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 4: Consolidated Supervision April 1998

However, if, with reference to the subjects referred to in letter c), situations of broader integration with the participating subject are configured, in the judgment of the Bank of Italy, the submission of such subjects to the full or proportional consolidation method may be required.

For the purposes of the regulation on credit, concentration, and exchange risks, reference is made to the set of exposures of the financial entities forming part of the supervised group as resulting from the consolidation of accounts.

Regarding concentration risk, the exceeding of the limits provided for in Art. 41, paragraphs 1, 2, and 3 of the Regulation of July 2, 1991, may concern only the positions related to the non-invested portfolio of SIMs and other intermediaries authorized for the provision of investment services falling within the consolidation area. In this case, the additional capital coverage referred to in Art. 41, paragraph 5 of the Regulation of July 2, 1991, shall be calculated individually for each intermediary and then added to the other coverages required on a consolidated basis to determine the minimum capitalization requirement of the supervised group.

The regulation on concentration risk at the consolidated level does not apply to credits purchased from third parties by the financial intermediaries of the group, registered in the special list referred to in Art. 107 of the Banking Consolidation Act, and held against companies belonging to the group, provided that the intermediaries in question do not have savings collection operations with the public in place pursuant to Art. 11 of the Banking Consolidation Act.

7. Prudential Supervision Rules on an Individual Basis for SIMs and Other Financial Entities Subject to Consolidated Supervision The minimum capital coverage required on an individual basis to SIMs subject to consolidated supervision is reduced by one-third. The same advantage is granted to SIMs belonging to a banking group registered in the register referred to in Art. 64 of the Banking Consolidation Act.

Financial intermediaries registered in the special list referred to in Art. 107 of the Banking Consolidation Act are exempt from observing the individual supervision rules provided for in Chapter V of the “Supervisory Instructions for financial intermediaries registered in the special list”.

8. Calculation of Consolidated Supervisory Capital For the calculation of consolidated supervisory capital, the accounts of the supervised financial entities of the group are preliminarily consolidated based on the methods provided for by the regulation on consolidated financial statements pursuant to Legislative Decree No. 87 of January 25, 1992, and its implementing provisions. In particular: a) the full consolidation method applies to controlled subjects;

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 4: Consolidated Supervision April 7, 1998

b) the proportional consolidation method applies to entities subject to joint control; c) the net equity method applies to affiliated entities to at least 20 percent.

However, where, in the opinion of the Bank of Italy, situations of broader integration with the participating entity arise with reference to the entities referred to in letter c), the submission of such entities to the full consolidation or proportional consolidation method may be required.

The consolidated supervisory capital consists, in addition to the components of individual supervisory capital, of the characteristic items resulting from consolidation operations (negative or positive consolidation differences, etc.).

In particular, the consolidated supervisory capital is calculated as the algebraic sum of a series of positive and negative elements, the computation of which is permitted, with or without limitations depending on the case, in relation to the capital quality recognized for each of them, as reported in Annex 12 of the Regulation of July 2, 1991.

Paid-in capital, reserves (excluding revaluation reserves), and the general financial risk reserve constitute the primary quality capital elements. The total of the aforementioned elements, after deducting treasury shares, intangible assets, losses from previous years, as well as significant losses recorded in business activity segments other than proprietary trading in the current year, constitutes the "basic capital."

This aggregate is admitted in the calculation of supervisory capital without any limitation.

Groups exercising financial leasing activities also include among the elements of basic capital – according to the relevant algebraic sign – the net effect that would derive on the corporate financial position from the application of the so-called "financial method" to contracts of this type (so-called "financial reserve"), as determined for the purposes of drafting the notes to the financial statements.

Revaluation reserves, hybrid capitalization instruments, subordinated liabilities with an original maturity of not less than 5 years, and risk funds constitute, within the limits and conditions established by Annex 12 of the Regulation of July 2, 1991, the secondary quality capital elements. The total of the aforementioned elements constitutes the "supplementary capital of the second level." This aggregate is computable up to the maximum limit represented by the amount of basic capital; however, the subordinated liabilities referred to above cannot exceed 50 percent of basic capital.

In addition to the elements indicated in the preceding paragraphs, avoiding duplication in the computation, the following elements, which constitute the "supplementary capital of the third level," are included in supervisory capital:

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 4: Consolidated Supervision April 8, 1998

a) net revenues or net losses as well as capital gains and capital losses on the non-fixed portfolio of SIMs authorized for the exercise, even separate, of proprietary trading and placement with prior subscription, purchase for resale, or assumption of guarantee, net of any fiscal charges and further foreseeable charges. This aggregate, which may assume a positive or negative value, is computed without any limitation in supervisory capital; b) subordinated liabilities with an original maturity of not less than 2 years, within the limits and conditions established by Annex 12 of the Regulation of July 2, 1991, issued by SIMs and other intermediaries authorized for the provision of investment services, belonging to the supervised group.

They are computable up to a maximum of 150 percent of the basic capital remaining after the coverage of credit risk. In particular circumstances, with the prior consent of the Bank of Italy, the aforementioned limit may be raised to 250 percent. Instead of the subordinated liabilities referred to in this letter, it is possible to include in the supplementary capital of the third level an equivalent amount of elements of the supplementary capital of the second level.

From the total amount of basic capital and supplementary capital of the second and third levels, the following are deducted: – participations in banks, SIMs, and other financial entities as well as subordinated assets and hybrid capitalization instruments held in such entities, not eliminated in the consolidation process, as reported in Annex 12 of the Regulation of July 2, 1991; – an amount equal to 50 percent of the amount of capital losses on the fixed portfolio of securities of supervised financial entities.

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 5: SIMs Belonging to Groups Not Subject to Consolidated Supervision April 1, 1998

CHAPTER 5 PROVISIONS APPLICABLE TO SIMS BELONGING TO GROUPS NOT SUBJECT TO CONSOLIDATED SUPERVISION (1)

1. Legal Sources Article 25, paragraph 1, letter b) of the Decree.

2. Definitions For the purposes of this Chapter, "group" is defined as the set of companies, with headquarters in Italy or abroad, that: a) control the SIM; b) are controlled by the SIM; c) are controlled by the same company that controls the SIM; d) are at least 20 percent owned in capital with voting rights, even jointly, by the SIM or by the companies referred to in letters a), b), and c).

For the verification of these conditions, participations held indirectly, through controlled companies, trustees, or interposed persons, are also counted.

3. Scope of Application All SIMs belonging to groups that include, in addition to the SIM itself, other companies and financial entities are required to comply with the provisions of this Chapter.

SIMs belonging to a banking group registered in the register referred to in Article 64 of the Banking Consolidated Act or to a group subject to consolidated supervision in another European Union country (2) are excluded, as are SIMs included in a non-banking group that, where the conditions are met, comply with the provisions on consolidated supervision.

1 The provisions contained in this Chapter were issued with the Decision of the Governor of the Bank of Italy of December 24, 1996 (published in the Official Gazette no. 18 of January 23, 1997). 2 Given that consolidated supervision rules substantially equivalent to those defined by Community directives are applied in countries adhering to the Basel Committee, it is noted that SIMs belonging to groups supervised on a consolidated basis in the "G-10" context may also request exemption from observing this regulation, provided that the application is accompanied by the necessary documentation to prove the actual submission to such control in the country of origin.

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 5: SIMs Belonging to Groups Not Subject to Consolidated Supervision April 2, 1998

4. Characteristics of Capital and Financing Source Verification Systems SIMs that are part of a group must enter into agreements with the parent company so that adequate information systems and procedures are established to allow the SIMs themselves to know in a timely and complete manner the capital and financing sources of the companies and financial entities belonging to the group as well as the updated composition of the group itself.

Companies whose activity consists exclusively in the assumption of participations, not for subsequent divestment, in companies exercising activities other than credit and financial activities, are not included among the companies and financial entities.

The systems and procedures provide at least that the SIMs of the group: I) receive – on a semi-annual basis – from the companies and financial entities of the group: a) data on the financial, economic, and financial situation indicated in Annex A; b) all information regarding the risk positions taken by the financial entities necessary to determine the degree of risk concentration at the aggregate level as provided for by the Regulation of July 2, 1991; II) can verify the correctness, completeness, and timeliness of the information received.

5. Communications to the Bank of Italy 5.1. Illustrative Report SIMs send to the competent Branch of the Bank of Italy and to the Central Administration – Supervision on Financial Intermediation Service (Analysis and Interventions Division I) an illustrative report on the systems and procedures adopted in compliance with these provisions.

The report contains at least indications regarding: a) the information sent by the group companies to the SIMs and the frequency thereof; b) the solutions adopted to ensure the completeness and timeliness of the received reports, with particular regard to group companies with headquarters abroad; c) the internal controls put in place to verify the effectiveness of the systems and procedures adopted to communicate to the SIMs information regarding the companies and financial entities of the group.

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 5: SIMs Belonging to Groups Not Subject to Consolidated Supervision April 3, 1998

SIMs also indicate whether systems have been eventually prepared that allow the measurement and control of risks on a consolidated or aggregate basis and the type of risks considered.

A schema with the articulation of the group must be attached to the report. The report is sent within three months from the registration in the register referred to in Article 9 of the Decree. Changes occurring in the capital and financing source verification systems or in the articulation of the group are communicated to the Bank of Italy within thirty days.

5.2. Periodic Communications SIMs send to the competent Branch of the Bank of Italy and to the Central Administration – Supervision on Financial Intermediation Service (Analysis and Interventions Division I), within four months from the reference date (1): a) the information referred to in the previous paragraph 4, point I), letter a), received from the companies and financial entities of the group; b) information regarding the degree of risk concentration at the aggregate level, determined by referring both to the risk positions of the SIM and to those communicated by the companies and financial entities of the group.

5.3. Risk Notification SIMs promptly notify the Bank of Italy of the presence, in the companies and financial entities of the group, of risks that could have negative effects on the financial, economic, and capital situation of the SIMs themselves.

1 In the case of multiple SIMs included in the same group, the requested information may be transmitted by only one of them, with prior communication to the Bank of Italy signed by all SIMs of the group, and provided that the latter must in any case possess all the data in question. Furthermore, it is specified that: – the information referred to in letter a) must be provided in disaggregated form for each financial entity of the group. Where the number of financial entities in the group is particularly high, an aggregated situation should also be prepared; – with reference to letter b), it is not necessary to transmit to the Supervisory Authority all the information received from the financial entities, but only the risk positions that exceed the limits (individual and global) provided by the regulations on risk concentration.

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 5: SIMs Belonging to Groups Not Subject to Consolidated Supervision – Annexes April 1, 1998

Annex A FINANCIAL AND CAPITAL INFORMATION (1)

Credits to banks – belonging to the group – not belonging to the group Debits to banks – belonging to the group – not belonging to the group

Credits to financial entities – belonging to the group – not belonging to the group Debits to financial entities – belonging to the group – not belonging to the group

Credits to customers – belonging to the group – not belonging to the group Debits to customers – belonging to the group – not belonging to the group

Bonds and other debt securities – issued by group financial companies – issued by group non-financial companies – issued by others Debt represented by securities – other liabilities – to group financial companies – to group non-financial companies – to others

Shares, quotas, and other capital securities – of group financial companies – of group non-financial companies – of others

Participations in non-group companies – financial – non-financial Participations in group companies – financial – non-financial

Intangible fixed assets Tangible fixed assets Own shares or quotas Other assets – to group financial companies – to group non-financial companies – to others

Reserves and share premiums General financial risk reserve Risk funds on credits Subordinated liabilities Paid-in capital

1 Among the companies and financial entities, companies are not included whose activity consists exclusively in the assumption of participations, not for subsequent divestment, in companies exercising activities other than credit and financial activities; conversely, the aforementioned companies must be included among non-financial companies.

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 5: SIMs Belonging to Groups Not Subject to Consolidated Supervision – Annexes April 2, 1998

GUARANTEES, COMMITMENTS, AND OFF-BALANCE SHEET OPERATIONS (1)

Guarantees issued – to group financial companies – to group non-financial companies – to others

Commitments

1. Purchase and sale operations of securities and currencies not yet settled – with group financial companies – with group non-financial companies – with others
2. Operations in derivative contracts (2) – with group financial companies – with group non-financial companies – with others

1 Among the companies and financial entities, companies are not included whose activity consists exclusively in the assumption of participations, not for subsequent divestment, in companies exercising activities other than credit and financial activities; conversely, the aforementioned companies must be included among non-financial companies. 2 Option contracts shall also be indicated in this category. Derivative contracts traded on regulated markets must not be computed. Contracts must be valued with reference to the credit equivalent, as defined by the counterparty risk calculation methods of SIMs.

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 5: SIMs Belonging to Groups Not Subject to Consolidated Supervision – Annexes April 3, 1998

INCOME STATEMENT INFORMATION (1)

Passive interest and assimilated charges – to group financial companies – to group non-financial companies – to others Active interest and assimilated revenues – from group financial companies – from group non-financial companies – from others

Passive commissions – to group financial companies – to group non-financial companies – to others Active commissions – from group financial companies – from group non-financial companies – from others

Losses from financial operations – with group financial companies – with group non-financial companies – with others Profits from financial operations – with group financial companies – with group non-financial companies – with others

Administrative expenses – paid to group companies – other Dividends and other revenues – from group financial companies – from group non-financial companies – from others

Other management charges Other costs Other management revenues Other revenues

1 Among the companies and financial entities, companies are not included whose activity consists exclusively in the assumption of participations, not for subsequent divestment, in companies exercising activities other than credit and financial activities; conversely, the aforementioned companies must be included among non-financial companies.

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 6: Informational Supervision April 1, 1998

CHAPTER 6 INFORMATIONAL SUPERVISION

1. Legal Sources Articles 10 and 27 of the Decree.

2. Shareholder Resolutions SIMs send the following documentation to the Bank of Italy: a) before the convening of the shareholder meeting that must discuss them, the proposals involving modifications of the articles of association, issuance of bonds, and mergers with other companies, together with a specific illustrative report by the directors; b) within thirty days from the day on which the shareholder meeting deliberated on the matters indicated in sub a), the minutes of the shareholder meeting and the adopted resolutions.

3. Financial Statements and Semi-Annual Report SIMs ensure that the competent Branch of the Bank of Italy and the Bank of Italy – Central Administration – Supervision on Financial Intermediation Service (Analysis and Interventions Division I) receive: a) within thirty days from the approval by the shareholder meeting, a copy of the annual financial statements and the consolidated financial statements (where required to prepare the same) together with the approval resolution; b) within four months from the end of the first half-year, the semi-annual report referred to in Article 56 of the Regulation of July 2, 1991 (in appendix).

4. Qualified Participations in Capital With regard to the regulations on capital participations (cf. Title I, Chapter 3), it is recalled that Article 10, paragraph 4 of the Decree provides that SIMs communicate to the Bank of Italy: a) the acquisitions and disposals of qualified participations in their own capital; b) at least once a year, the identity of shareholders holding qualified participations and the extent thereof.

Regarding this topic, it is noted that SIMs:

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 6: Informational Supervision April 2, 1998 – comply with the obligation in sub a) by sending to the Bank of Italy a copy of the Model 19L received from the subject who carried out the operation; – for the purposes of what is provided in sub b), they transmit annually – together with the financial documentation – the requested information referring to the shareholding structure at the date of approval of the financial statements.

5. Communications by the Chairman of the Board of Statutory Auditors The minutes of the meetings and audits of the Board of Statutory Auditors concerning irregularities in the management of SIMs, or violations of the regulations governing their activity, are promptly transmitted in copy to the Bank of Italy, by the Chairman of the Board of Statutory Auditors.

In this regard, it is specified that the minutes relating to audits carried out by the Board of Statutory Auditors must not be transmitted if no anomalies or irregularities in the management of the company result from them, or if they do not contain proposals or objections formulated by the supervisory body.

6. Reports on Magnetic Media 6.1. Reporting Obligations SIMs send to the Bank of Italy, with the frequency indicated in paragraph 6.3, the statistical and supervisory reports on magnetic media provided for in the specific "Manual of Statistical and Supervisory Reports for Securities Market Intermediaries."

6.2. Criteria for Compiling Reports The reporting schemas and instructions for the representation of corporate facts in reports on magnetic media are contained in the cited "Manual." The responsibilities regarding the correctness of the reports and, therefore, the adequacy of the production and control procedures for such reports lie with the corporate bodies (directors, auditors, general manager, etc.), each within their own competence.

In this context, it may be appropriate to prepare specific internal control tools aimed at ensuring the necessary consistency of the reported data with the results of the corporate information-accounting systems.

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 6: Informational Supervision April 3, 1998

6.3. Content of Reports and Submission Deadlines SIMs are required to periodically produce to the Bank of Italy the following reports, within the terms provided therein:

CAPITAL DATA (Section I) All SIMs (1) Frequency: Quarterly Reference Date of Report | Final Receipt Date 31 March | 25 April 30 June | 25 July 30 September | 25 October 31 December | 25 February of the following year

INCOME STATEMENT DATA AND OTHER INFORMATION (Section II) All SIMs (1) Frequency: Semi-annual Reference Period of Report | Final Receipt Date January 1 – June 30 | 25 July January 1 – December 31 | 25 February of the following year

(1) SIMs that close their financial statements on a date other than December 31 send the reports referred to in Sections I and II with reference to the calendar year and not to the fiscal year.

PORTFOLIO AND POSITIONS IN DERIVATIVE CONTRACTS (Section III) Only for SIMs providing the proprietary trading service or "with guarantee" placement service Frequency: Monthly Reference Date of Report | Final Receipt Date Last calendar day of each month | 25th day of the following month

SUPERVISORY CAPITAL (Section IV) SIMs providing the proprietary trading service or "with guarantee" placement service Frequency: Monthly Reference Date of Report | Final Receipt Date Last calendar day of each month | 25th day of the following month

Other SIMs Frequency: Quarterly Reference Date of Report | Final Receipt Date (As for Section I) | (As for Section I)

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 6: Informational Supervision April 16, 1998

CAPITAL COEFFICIENTS (Section V)

SIMs providing the service of proprietary trading or placement "with guarantee" Periodicity: monthly

Other SIMs (limitations to sub-sections 5, 8, 9, 10 and 11) Periodicity: quarterly

Reference date of the report | Deadline for receipt | Reference date of the report | Deadline for receipt Last calendar day of each month | 25th day of the following month (as for Section I)

INFORMATION ON ACTIVITIES EXERCISED (Section VI) AND STATISTICAL REPORTS (Section VII)

All SIMs (2) Periodicity: quarterly (data referred to each month of the quarter)

Reference period of the report | Deadline for receipt January, February and March | April 25 April, May and June | July 25 July, August and September | October 25 October, November and December | January 25 of the following year

(2) SIMs providing only the service of order reception and/or mediation do not draft Section VII.

BALANCE SHEET AND SEMI-ANNUAL ACCOUNTS STATEMENT (Section VIII)

All SIMs, including those not operational (3)

Reference period of the report | Deadline for receipt Fiscal year | 25th day of the month following the month in which the balance sheet is approved Semi-annual statement | 25th day of the fourth month following the end of the first semester of the fiscal year

(3) Sub-section 3 of Section VIII, relating to the consolidated balance sheet, obviously concerns only those SIMs required to draft such a document.

The obligation to send sections I to VII arises from the month in which the intermediary begins the operation of at least one of the activities for which it has been authorized. For this purpose, the intermediary itself communicates to the Branch of the Bank of Italy territorially competent and to the Bank of Italy – Central Administration – Supervision Service on Financial Intermediation (Division Analysis and Interventions I), with at least 15 days' notice, the start date of each of the authorized activities, completing the communication form provided in Annex A.

Companies in compulsory administrative liquidation are required only to send sections VI and VII, within the terms indicated above.

6.4. Letter of Attestation

For the purpose of attesting that the reported data corresponds to the company's accounting records, the companies transmit to the Branch of the Bank of Italy territorially competent a communication, drafted according to the facsimile provided in Annex B, signed by the president of the board of directors, the president of the board of statutory auditors, and the general manager. This communication, which must be renewed only in the case of the cessation of office of one of the aforementioned executives, must be sent within 10 days from the date of appointment of the successor.

7. Communications regarding corporate executives

SIMs report to the Bank of Italy, within thirty days from the date of acceptance of the appointment, the changes occurring in the composition of the corporate bodies and the replacements of general managers and executives with representation powers.

The reports are made via magnetic media produced using the computer procedure provided by the Bank of Italy according to the modalities provided in the "Manual for the production of OR.SO. reports".

The magnetic media are accompanied by a letter, automatically generated by the procedure and signed by the legal representative of the reporting company, who thereby attests to the truthfulness of the information.

SIMs belonging to banking groups listed in the register provided by Art. 64 of the Banking Act: – send the reports in paper form to the Branch of the Bank of Italy territorially competent within the terms indicated above; – make the reports on magnetic media through the parent company.

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 6: Informational Supervision – Annexes April 16, 1998

Annex A COMMUNICATION FORM FOR START OF OPERATIONS

Company Name: Tax Code: ABI Code:

TYPE OF AUTHORIZED SERVICES START DATE OF OPERATIONS (DAY, MONTH, YEAR)

1. Proprietary trading ................................................
2. Third-party trading ................................................
3. Placement with prior subscription or firm commitment, or assumption of guarantee towards the issuer ................................................
4. Placement without prior subscription or firm commitment, or assumption of guarantee towards the issuer ................................................
5. Portfolio management, through operations involving financial instruments ................................................
6. Reception and transmission of orders as well as mediation ................................................

---

(date) (the legal representative)

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 6: Informational Supervision – Annexes April 16, 1998

Annex B FAC-SIMILE OF LETTER OF ATTESTATION

To Bank of Italy Branch of

---

__________________________________________________________________________ (company name)

---

(entity code)

With this communication, it is attested that the supervisory reports that this company transmits to your Institute pursuant to current instructions are based on the data from the company's accounting records.

The aforementioned reports derive from the activation of data processing procedures approved by the corporate bodies.

In particular, it is specified that, in order to ensure the necessary consistency of the reported data with the results of accounting, specific internal control tools have been prepared, which also include forms of information visualization for corporate managers.

It is noted that the content of this communication has been brought to the attention of the board of directors.

---

(date) (company stamp) The president of the board of directors ______________________ The president of the board of statutory auditors ______________________ The general manager ______________________

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 7: Inspectional Supervision April 16, 1998

CHAPTER 7 INSPECTIONAL SUPERVISION

1. Legal Sources Art. 29 of the Decree.

2. Inspectional Assessments The Bank of Italy may carry out inspections at SIMs with the power to request the production of documents and the performance of acts deemed necessary.

The Bank of Italy may also request competent authorities of a Member State to carry out assessments at SIM branches established in the territory of said State, or agree on other modalities for verifications, as well as agree with competent authorities of extra-Community States on modalities for the inspection of SIM branches established in their territories.

Inspections aim to ascertain that the activity of supervised entities meets criteria of sound and prudent management and is carried out in observance of the provisions regulating the exercise of said activity. In particular, the inspectional assessment aims to evaluate the overall technical and organizational situation of the entity, as well as to verify the reliability of the information provided to the Supervisory Body.

Assessments may be general or directed at specific sectors of the operations of the inspected subjects.

3. Inspection Report At the conclusion of the assessments, an "inspection report" is drawn up containing the detailed description (so-called findings) of the facts and corporate acts found not in line with criteria of correct management or with the regulations governing the exercise of the activity (1).

The inspection report is delivered to the inspected company; in this instance, where the prerequisites exist, formal contestation of the irregularities found is also carried out.

1 If no deficiencies of the kind have been ascertained, the closure of the inspection procedure is communicated to the SIM with a specific letter.

Supervisory Instructions for Securities Market Intermediaries Title II: Supervision Chapter 7: Inspectional Supervision April 16, 1998

Within thirty days from the delivery of the inspection file, the interested company must inform the Bank of Italy of its considerations regarding what emerged from the inspection, as well as the measures already implemented and those under study to eliminate the anomalies and deficiencies ascertained.

Within the same term, both the SIM and the individual corporate executives concerned must send any counter-arguments regarding the specific irregularities contested.

TITLE III FINANCIAL STATEMENT

Supervisory Instructions for Securities Market Intermediaries Title III: Financial Statement Chapter 1: Financial Statement April 16, 1998

CHAPTER 1 FINANCIAL STATEMENT

1. Legal Sources Legislative Decree January 25, 1992, n. 87.

2. Regulation The individual and consolidated balance sheet of SIMs is drawn up according to the provisions contained in Annex 9 of the Regulation of July 2, 1991 (in appendix).

TITLE IV OTHER PROVISIONS

Supervisory Instructions for Securities Market Intermediaries Title IV: Other Provisions Chapter 1: Modalities of Deposit and Sub-deposit of Financial Instruments April 16, 1998

CHAPTER 1 MODALITIES OF DEPOSIT AND SUB-DEPOSIT OF FINANCIAL INSTRUMENTS AND CLIENT MONEY

1. Reference to the provisions of the Regulation of July 2, 1991 Until the issuance of the implementing provisions of Art. 25, paragraph 1, letter c) of the Decree, the discipline contained in Title III, Chapter II of the Regulation of July 2, 1991 (in appendix) applies – pursuant to Art. 67, paragraph 1 of the Decree itself.

Supervisory Instructions for Securities Market Intermediaries Title IV: Other Provisions Chapter 2: Management of Pension Fund Assets by SIMs April 16, 1998

CHAPTER 2 MANAGEMENT OF PENSION FUND ASSETS BY SIMs

1. Legal Sources Arts. 6, paragraph 4, 6-bis and 9 of Legislative Decree April 21, 1993, n. 124, on the regulation of complementary pension schemes.

2. Definitions For the purposes of this chapter, the following are defined: – "pension funds", the complementary pension schemes referred to in D.Lgs. 124/93; – "free assets", the supervisory assets exceeding the amount necessary to meet the capital requirements required for the provision of investment services.

3. Scope of Application These provisions apply to SIMs authorized to exercise the activity referred to in Art. 1, paragraph 3, letter d) of the Decree (individual management of investment portfolios for third parties) and to foreign investment firms intending to establish and/or manage pension funds.

4. Requirements for the Management of Pension Fund Assets SIMs with supervisory assets not less than 5 billion lire and at least equal to 0.5 percent of the total net value of third-party assets managed may carry out the activity of managing pension fund assets; this latter requirement does not apply when the supervisory assets of the SIM reach 20 billion lire.

In the case of management accompanied by a guarantee of capital repayment, SIMs must also have free assets at least equal to the amount of resources necessary to meet the commitment assumed in relation to the guarantee provided. The criteria and procedures adopted for determining commitments are defined by the board of directors of the SIM, taking into account at least:

Supervisory Instructions for Securities Market Intermediaries Title IV: Other Provisions Chapter 2: Management of Pension Fund Assets by SIMs April 16, 1998

– the consistency between the characteristics of the fund's investments and the commitments assumed towards members; – the risks associated with investments in securities; – the risks associated with the liquidation of assets to meet requests for early benefits from members.

The aforementioned criteria and procedures are subject to the opinion of the audit firm and the board of statutory auditors and brought to the attention of the Bank of Italy with the communication referred to in the subsequent paragraph.

5. Communications to the Bank of Italy SIMs interested in establishing and/or managing pension funds must forward a specific communication to the Bank of Italy, accompanied by a report illustrating at least: – the organizational structure adopted or the modifications they intend to make to it to manage the resources of the pension funds; – the tools and procedures prepared in order to verify compliance with the minimum capital requirements provided in the previous paragraph.

This communication does not exempt SIMs from fulfilling informational obligations towards other supervisory authorities.

Where the conditions provided for the management of pension fund assets indicated in this chapter cease to exist, SIMs are required to give immediate notice to the Bank of Italy.

6. Depositary Bank The resources of pension funds entrusted to SIMs for management must be deposited with a depositary bank that meets the requirements provided by the "Supervisory Instructions for Collective Investment Schemes".

Supervisory Instructions for Securities Market Intermediaries Title IV: Other Provisions Chapter 3: National Guarantee Fund ex Art. 15 of Law 1/91 April 16, 1998

CHAPTER 3 NATIONAL GUARANTEE FUND EX ART. 15 OF LAW 1/91

1. Reporting of commissions and volumes intermediated related to third-party trading activity SIMs and banks authorized to carry out third-party trading activity must submit to the Branch of the Bank of Italy territorially competent, within five days from the end of the first quarter of each year, a report of the amounts of commissions received and volumes intermediated for the third-party trading activity (excluding operations with subjects not assisted by the guarantee of the fund pursuant to D.M. 30.9.1991) during the fiscal year closed on December 31 of the previous year or the last fiscal year closed during the previous year, using the form provided in Annex A.

Supervisory Instructions for Securities Market Intermediaries Title IV: Other Provisions Chapter 3: National Guarantee Fund ex Art. 15 of Law 1/91 – Annexes April 16, 1998

Annex A REPORTING OF COMMISSIONS AND VOLUMES INTERMEDIATED RELATED TO THIRD-PARTY TRADING ACTIVITY

Fiscal Year ......... Entity Name: Tax Code: ABI Code:

VALUES (1) COMMISSIONS INTERMEDIATED VOLUMES (2) Shares Bonds Government Bonds

(1) Operations involving securities other than shares, bonds, and government bonds shall be attributed to one of these categories based on a criterion of assimilation of the traded values. In this regard, derivatives on interest rates and on bonds are assimilated to bonds; those on indices and on shares shall be included in shares; in this latter category, derivatives on currencies are also conventionally included. – (2) Sum of purchases and sales carried out during the exercise of third-party trading activity, excluding operations concerning subjects not assisted by the Guarantee Fund ex Art. 15 of Law 1/91, pursuant to D.M. 30.9.91.

APPENDIX REGULATION OF THE BANK OF ITALY OF JULY 2, 1991

Supervisory Instructions for Securities Market Intermediaries Appendix: Regulation of the Bank of Italy of July 2, 1991 April 16, 1998

Regulation of the Bank of Italy of July 2, 1991 and subsequent modifications and integrations

Articles 1 to 19 are repealed.

TITLE III ORGANIZATIONAL RULES

...................

CHAPTER II DEPOSIT OF SECURITIES

Art. 20 Securities delivered to SIMs for the execution of mandates conferred upon them by clients

1. SIMs not authorized to exercise the activity of custody and administration of securities deposited, within the day following receipt, the securities received from clients for the execution of mandates conferred upon them, with SIMs authorized pursuant to Art. 2, paragraph 2 of the Law, with credit companies or institutes, or with Monte Titoli S.p.A. or the centralized securities management at the Bank of Italy. If the securities are objects of the activity referred to in Art. 1, paragraph 1, letter c) of the Law, the companies and credit institutes must be equipped with the authorization provided by Art. 8, paragraph 1, letter f) of the Law.

2. The deposit is not required if the execution of the mandate provides for the physical delivery of the securities received from the client and such delivery is imminent in relation to the nature of the mandate to be carried out.

3. The deposited securities are registered at the depositaries in accounts held in the name of the SIMs with an indication that they are third-party goods. Said accounts are kept separate from those regarding the securities owned by the SIM and, with reference only to registered securities, are registered per single client if the depositaries are subjects other than Monte Titoli S.p.A.

4. SIMs keep evidence of deposits made in individual accounts held in the name of the client and subdivided by type of service provided.

Supervisory Instructions for Securities Market Intermediaries Appendix: Regulation of the Bank of Italy of July 2, 1991 April 16, 1998

5. SIMs verify the correspondence between the overall consistency of the securities comprising the individual accounts referred to in paragraph 4 and the results of the account statements issued by the depositaries.

Art. 21 Modalities of deposit of sums of money

1. The sums of money delivered by clients to SIMs for the execution of mandates conferred upon them are deposited by the SIMs themselves, within the day following receipt, with credit companies. The provisions of Art. 20, paragraphs 2, 3, 4 and 5 apply.

Art. 22 Modalities of deposit of securities with the SIM

1. In the exercise of the custody and administration of securities activity authorized pursuant to Art. 2, paragraph 2 of the Law, SIMs conclude a deposit contract for the securities belonging to the client with the client. The contract includes clauses according to which:

a) the securities may be sub-deposited with Monte Titoli S.p.A. or with the centralized securities management at the Bank of Italy;

b) securities not admitted to centralized management with the bodies referred to in letter a) may be sub-deposited with companies and credit institutes or with other SIMs authorized pursuant to Art. 2, paragraph 2 of the Law. If the securities are objects of the activity referred to in Art. 1, paragraph 1, letter c) of the Law, the companies and credit institutes must be equipped with the authorization provided by Art. 8, paragraph 1, letter f) of the Law.

2. SIMs establish individual accounts held in the name of the clients and subdivided by type of service provided. In the case of sub-deposit pursuant to Art. 23, each account also reports the indication of the sub-depositary.

Art. 23 Modalities of sub-deposit of securities belonging to clients deposited with the SIM

1. The contracts concluded with sub-depositaries are kept by the SIMs.

2. The sub-deposited securities are registered at the sub-depositaries in accounts held in the name of the SIM, with an indication that they are third-party goods, kept separate from the accounts relating to the securities owned by the SIMs. For registered securities only, the accounts at sub-depositaries other than Monte Titoli S.p.A. are registered per single client as provided by Art. 20, paragraph 3.

3. SIMs verify the correspondence between the overall consistency of the securities comprising the individual accounts referred to in Art. 22, paragraph 2, with the results of the account statements issued by the sub-depositaries.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 3 April 1998 Art. 24 Credit companies and institutes

1. Credit companies and institutes authorized under Articles 8, paragraph 1, letter f) and 16, paragraph 1, of the Law, shall comply, in carrying out securities intermediation activities, with the provisions set out in Articles 22 and 23.

TITLE IV PRUDENTIAL SUPERVISION RULES CHAPTER I MINIMUM CAPITAL COEFFICIENTS AND LIMITS ON RISK CONCENTRATION

Art. 24-bis Definitions

1. For the purposes of this Title, the following shall be understood: a) "non-invested portfolio": securities and other financial instruments not intended for stable corporate investment, including off-balance sheet operations as well as derivative contracts held for trading purposes and those entered into to hedge risks related to securities in the non-invested portfolio. In particular, the non-invested portfolio includes: – the entire securities portfolio – excluding shareholdings – of SIMs authorized to carry out the activity under Article 1, paragraph 1, letter a) on their own account, of the Law; – securities acquired within the framework of placement operations with prior subscription, forward purchase, or guarantee assumption by SIMs authorized to carry out the activity under Article 1, paragraph 1, letter b) of the Law, without prejudice to what is provided for in the subsequent letter b) of this paragraph; b) "invested portfolio": shareholdings, including those in group companies, as well as securities and other financial instruments intended to be used durably by the company, that is, intended to be maintained in the corporate assets for the purpose of stable investment. Positions connected to investments made in accordance with paragraphs 1 and 2 of Article 43 are conventionally included – solely for the purposes of calculating the capital coefficients referred to in this Chapter – among those of the invested portfolio. The invested portfolio also includes off-balance sheet operations and derivative contracts entered into to hedge risks related to securities in the invested portfolio; c) "regulatory capital": the aggregate identified in accordance with Article 46; d) "client": the individual subject or the "group of connected clients" towards whom risks are assumed, including banks, international organizations, and States;

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 4 April 1998 e) "group of connected clients": two or more subjects that constitute a single set from a risk perspective because: – one of them has control power over the other or others ("legal" connection); or, – regardless of the existence of control relationships referred to in the previous paragraph, there are, among the subjects considered, links such that, with all probability, if one of them finds itself in financial difficulties, the other, or all the others, might encounter difficulties in repaying debts ("economic" connection); f) "exposure of the non-invested portfolio": the sum of all exposures towards a client constituted by: – the sum of the net long positions, determined in accordance with Art. 28, in each of the instruments issued by the client or the group of connected clients in question, which are part of the non-invested portfolio; – exposures related to settlement risk under Art. 38 and counterparty risk under Art. 38-bis; g) "total exposure": the exposure of the non-invested portfolio and the sum of all on-balance sheet risk assets – including loans, shareholdings, securities, subordinated loans – and "off-balance sheet" towards a client calculated in accordance with Annex 7/B; h) "risk position": the total exposure weighted according to the rules indicated in Annex 7/B, taking into account the nature of the debtor counterparty and any acquired guarantees; i) "large risks": risk positions with an amount equal to or greater than 10 percent of regulatory capital; j) "connected subjects": – the "significant shareholder", that is, the subject who, directly or indirectly, holds at least 15 percent of the share capital, or in any case controls, the entity or the parent company of the banking group to which it belongs; or, – "significantly held companies", that is, companies held by the entity in a measure not less than 20 percent of the capital or in any case controlled.

Art. 25 General provisions

1. SIMs, in carrying out authorized activities, respect the capital coefficients and concentration limits as defined in Articles 26 and 41 of this Chapter.
2. Banks, in carrying out authorized activities, respect the minimum capital coefficients and concentration limits as defined in Articles 27, 38, 38-bis, and 41 – limited to the part of the non-invested securities portfolio intended for the exercise of the activity referred to in Article 1, paragraph 1, letter a) on own account of the Law as well as to the securities and commitments assumed in the exercise of the activity referred to in Article 1, paragraph 1, letter b) of the Law with prior subscription, forward purchase, or guarantee assumption – and to Art. 37 of this Chapter.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 5 April 1998 3. The Bank of Italy, within the framework of consolidated supervision discipline and in compliance with Community provisions, may establish for banks and SIMs included in consolidated supervision lower capital coefficients and higher concentration limits than those provided for in this Chapter. 4. The Bank of Italy, within the framework of consolidated supervision discipline and in compliance with Community provisions, may allow for banks and SIMs included in consolidated supervision the netting of positions in the non-invested portfolio and positions in foreign exchange with the corresponding positions of other subjects included in the same group subject to consolidated supervision.

Art. 26 Capital coefficients

1. Capital coefficients refer to the following categories of risk: – position risk as defined in Art. 27; – exchange risk as defined in Art. 37; – settlement risk as defined in Art. 38; – counterparty risk as defined in Art. 38-bis; – credit risk as defined in Art. 38-ter; – other risks as defined in Art. 39.

Art. 27 Position risk

1. Position risk expresses the risk deriving to the intermediary from the fluctuation of securities prices due to factors related to market trends and the situation of the issuing entity.
2. Position risk concerns positions related to the non-invested portfolio and is calculated separately for: a) debt securities in accordance with what is provided for in Articles 32 and 33; b) equity securities in accordance with what is provided for in Articles 34, 35, 35-bis, and 36; c) units of collective investment undertakings in securities (UCITS) in accordance with what is provided for in Article 36-bis.

Art. 28 Securities positions

1. Securities positions may be: a) gross creditor (long) or debtor (short); b) netted; c) net creditor or debtor.
2. Gross creditor positions are constituted by securities in the portfolio, securities to be received for operations to be settled, and other "off-balance sheet" operations that entail the obligation or right to purchase securities, rates, or indices.
3. Gross debtor positions are constituted by securities to be delivered for unregulated operations and other "off-balance sheet" operations that entail the obligation or right to sell securities, rates, or indices.
4. Netted positions are constituted by the lesser of the two amounts relating to a debtor position and a creditor position.
5. Net creditor or debtor positions are those remaining from the netting between gross creditor positions and gross debtor positions.
6. Gross and net creditor or debtor positions as well as netted positions may refer to individual securities, categories of securities, or issuers.
7. In the calculation of net creditor and debtor positions, netting between convertible securities and positions in the underlying security is not permitted.

Art. 29 Attribution to positions of particular contracts on debt securities and rates

1. Futures with a fictitious underlying security must not be included in the determination of the net position of specific securities.
2. Futures on securities and interest rates, "forward rate agreements" (hereinafter FRAs), forward purchases and sales of debt securities, and options on debt securities give rise, for each operation, to two opposing positions (double-entry method), one relating to the traded asset with a duration equal to that of the asset itself, increased – for FRAs and for derivative contracts with a fictitious underlying security – by the period elapsed between the valuation date and the settlement date, and the other of opposite sign, with a duration equal to the period elapsed between the valuation date and the settlement date of the operation.
3. A purchase (sale) of futures on debt securities determines: a) a creditor (debtor) position on the underlying security; b) a debtor (creditor) position with maturity equal to the settlement date of the contract.
4. A purchase (sale) of futures on fictitious debt securities determines: a) a creditor (debtor) position, with maturity equal to the future settlement date of the contract plus the duration of the fictitious security subject to the contract; b) a debtor (creditor) position with maturity equal to the settlement date of the contract.
5. The trading of an FRA that provides for the receipt (payment) of the positive (negative) differential between the current rate and the rate contractually fixed determines:

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 7 April 1998 a) a debtor (creditor) position, with maturity equal to the future settlement date of the contract plus the reference period provided for the calculation of interest; b) a creditor (debtor) position, with maturity equal to the future settlement date of the contract. 6. A forward purchase (sale) of a debt security determines: a) a creditor (debtor) position on the underlying security; b) a debtor (creditor) position with maturity equal to the settlement date. 6-bis. A purchase (sale) operation of debt securities with a repurchase agreement (reverse repurchase) determines a creditor (debtor) position with maturity equal to the settlement date of the operation. 7. The purchase (sale) of a call option or the sale (purchase) of a put option determines: a) a creditor (debtor) position on the underlying asset; b) a debtor (creditor) position with maturity equal to the settlement date of the contract. 8. For warrants, the same provisions as those relating to options in the previous paragraph 7 apply. 9. "Caps" and "floors" are assimilated to a series of options, each attributed according to what is provided for in the previous paragraph 7. 10. An interest rate swap in which the entity receives (pays) a variable interest rate and pays (receives) a fixed interest rate is equated to a creditor (debtor) position in a variable rate security with a duration equal to the period up to the next interest rate revision date and to a debtor (creditor) position in a fixed rate security with the same maturity as the swap.

Art. 29-bis Attribution to positions of particular contracts on equity securities and indices

1. Forward operations and futures with a real underlying security are equated to creditor or debtor positions on the securities to which they refer.
2. The purchase of a call option or the sale of a put option on equity securities are equated to creditor positions on the security to which they refer. The sale of a call option or the purchase of a put option on equity securities are equated to debtor positions on the security to which they refer.
3. Purchases of futures on stock market indices are considered creditor positions, sales as debtor positions.
4. The purchase of a call option or the sale of a put option on stock market indices or on futures on stock market indices are equated to creditor positions. The sale of a call option or the purchase of a put option on stock market indices or on futures on stock market indices are equated to debtor positions.

Art. 30 Valuation criteria for assets

1. Debt and equity securities quoted on regulated markets are valued at market value.
2. Debt and equity securities not quoted on regulated markets are valued at their presumed realizable value, taking into account for the former also the trend of interest rates.
3. Options are valued at a value equal to "delta" times that of the underlying asset or the nominal value of the reference capital.
4. The "delta" coefficient referred to in paragraph 3 expresses the relationship between the variation in the option price and the variation in the price (or current level) of the underlying asset. The Bank of Italy provides the most widely used basic methodologies to be adopted for the calculation of the "delta" coefficient. Entities may, however, use "delta" coefficients calculated according to further methodologies, provided that the latter are communicated in advance to the Bank of Italy.
5. For warrants, the same provisions as those relating to options in the previous paragraphs 3 and 4 apply.
6. FRAs and Interest rate swaps are valued at a value equal to the nominal value of the reference capital.

Art. 31 Detection of position risk

1. Position risk relating to debt and equity securities is articulated into: a) generic risk, that connected with variations in the interest rate for debt securities or with the trend of the prices of the set of quoted equity securities (market index) for equity securities; b) specific risk, that connected with factors related to the individual issuer.
2. The global coverage required against position risk on debt securities is equal to the sum of the individual capital coverages referred to in Art. 32, paragraph 14 and Art. 33, paragraph 8.
3. The global coverage required against position risk on equity securities is equal to the sum of the individual capital coverages referred to in Articles 34, paragraph 6, 35, paragraph 8, 35-bis, and 36, paragraph 4.
4. The global coverage required against position risk on units of UCITS is equal to the capital coverage referred to in Art. 36-bis, paragraph 4.

Art. 32 Generic risk on debt securities

1. The measurement of generic risk on debt securities is carried out in accordance with the provisions of the following paragraphs.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 9 April 1998 2. In determining the net debtor or creditor position, securities acquired within the framework of placement operations with prior subscription, forward purchase, or guarantee assumption towards the issuer are not included during the placement period. From the day of closing of the placement itself, they are included – net of irrevocable purchase commitments assumed by third parties based on a formal contract – for reduced amounts of the following percentages: – day of closing of the placement 100 percent – 1st working day following the closing of the placement 90 percent – 2nd-3rd working day following the closing of the placement 75 percent – 4th working day following the closing of the placement 50 percent – 5th working day following the closing of the placement 25 percent – from the 6th working day following the closing of the placement, the securities in question must be included for the full amount. 3. Entities may net positions in forward contracts and instruments of the same type provided that: a) the positions are of equal unit nominal value and are denominated in the same currency; b) the reference rate, for variable rate positions, or the nominal rate, for fixed rate positions, is strictly aligned; c) the next interest rate revision date, for variable rate positions, or the remaining life, for fixed rate positions: – fall on the same day, if less than one month; – differ by no more than seven days, if between one month and one year; – differ by no more than thirty days, if greater than one year. 4. The entity divides its net positions in relation to the currency in which they are denominated and calculates the capital coverage for generic risk separately for each currency. To this end, all net positions are aggregated separately by denomination currency and each aggregate is converted into Italian lire. 5. «omissis» 6. For each aggregate referred to in paragraph 4, the net debtor or creditor position of each security is attributed to one of the remaining life bands referred to in Annex 1 of this measure, bearing in mind that: a) a distinction must be made between securities without coupons or with current coupons having an annual yield of less than 3 percent and securities with current coupons having an annual yield equal to or greater than 3 percent; b) variable rate securities are attributed to the remaining life band corresponding to the next interest rate revision date;

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 10 April 1998 c) the amortization installments of fixed rate debt securities with an installment amortization plan are attributed to the remaining life band relating to the maturity of each installment; d) positions relating to futures, FRAs, options, warrants, and swaps on interest rates or fictitious securities are attributed to the remaining life bands according to what is provided for in Art. 29. 7. The weightings of Annex 2 of this measure are applied to the sum of creditor positions and to the sum of debtor positions of each band. 8. Within each band, netted positions are distinguished from residual positions. 9. On the netted positions (column f) within the individual bands, the capital coefficient of column g) is applied, and thus the capital coverage of the netted positions within each maturity band is determined (column h). 10. The residual positions (columns i and l) in each band are netted within their respective zone of belonging. On the netted positions, the capital coefficient of column n) is applied, and the capital coverage of the netted positions within each zone is determined (column o). 11. The residual positions (columns p and q) within the first zone are netted with those of the second zone. The residual positions within the third zone are netted with the non-netted positions within the second zone. The non-netted positions of the first and third zones are netted with each other. 12. On the positions netted between the different zones, the coefficients of column u are applied, and the required capital coverage for positions netted between different zones is determined (column v). 13. On the positions not netted between the different zones (column z), the coefficients of column aa are applied, and the required capital coverage for positions not netted is determined (column bb). 14. The obligation of global capital coverage relating to generic risk is equal to the sum of the totals referred to in paragraphs 9, 10, 12, and 13 (column cc).

Art. 33 Specific risk on debt securities

1. Net positions are determined with reference to each security and aggregated by issuer categories based on the following criteria.
2. Debt securities are classified into the following three categories: I) Public Administration securities: values issued or guaranteed by governments and central banks of OECD countries or countries that have concluded special loan agreements with the International Monetary Fund (IMF) and are associated with the General Arrangements to Borrow (GAB) as well as by the European Communities; II) Qualified securities: values issued or guaranteed by investment firms falling within the scope of Directive EEC 93/22 as well as of countries of the "Group of Ten", public sector entities (central and local) and credit institutions of OECD countries or countries that have concluded special loan agreements with the International Monetary Fund (IMF) and are associated with the General Arrangements to Borrow (GAB), European Investment Bank

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 11 April 1998 (BEI), multilateral development banks, as well as other securities issued or guaranteed by entities referred to in Article 6, paragraph 1, letter b) of Directive CEE 89/647; securities of EEE issuers quoted in the markets of their country of origin, securities of OECD issuers quoted in markets whose admission rules are equivalent – based on criteria determined by Consob – to those provided for in EEE countries. The Bank of Italy, respecting Community discipline, issues general provisions regarding the characteristics that such securities must present; III) other securities: securities other than those referred to in the preceding points I) and II). 3. Futures and options with a real underlying security are allocated to the relevant issuer category of the security to which they refer. Swaps, futures and options without an underlying security or with a fictitious security, as well as FRAs, are not to be included. 4. The positions referred to in Article 29, letter b), paragraphs 3, 6 and 7, with a duration equal to the period between the date of detection and the date of settlement of the operation, are not included. 5. In determining the net debtor or creditor position, securities assumed within the framework of placement operations with prior subscription, purchase with repo agreement, or assumption of guarantee in favor of the issuer are not included during the placement period. Starting from the day of closing of the placement itself, they are included – net of irrevocable purchase commitments assumed by third parties based on a formal contract – for reduced amounts of the following percentages: – day of closing of the placement 100 percent – 1st working day following the closing of the placement 90 percent – 2nd-3rd working day following the closing of the placement 75 percent – 4th working day following the closing of the placement 50 percent – 5th working day following the closing of the placement 25 percent – from the 6th working day following the closing of the placement, the securities in question must be included for the full amount. 6. The net positions in securities included in category II of paragraph 2 are divided into the following residual life bands: I) up to 6 months; II) from over 6 months to 24 months; III) over 24 months. 7. On the positions determined as indicated in the preceding paragraphs, the coefficients of Annex 3 are applied in relation to the reference category and the residual life, and the required capital coverage for each category is thus determined (column g). 8. The required capital coverage is equal to the sum of the amounts in column g of Annex 3.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 12 April 1998 Article 34 Generic risk on equity securities quoted in regulated markets

1. For the purpose of measuring generic risk, the general net position is determined using the following criteria.
2. For each equity security, the net creditor or debtor position is determined.
3. All net creditor positions are summed and all net debtor positions are subtracted from the total. The difference determines the general net position.
4. As an alternative to what is provided for in Article 29-bis, paragraphs 3 and 4, for the purpose of determining the general net position, futures on stock exchange indices, options on stock exchange indices and on futures on stock exchange indices can be broken down into positions in each of the equity securities that contribute to the calculation of the index subject to the relevant contracts. The positions resulting from the breakdown of the index, therefore, can be offset with the opposite positions in the same equity securities for the purpose of determining net creditor and debtor positions. Offsetting is also permitted even if the set of positions in equity securities that are offset does not reproduce the composition of the index subject to the contract, provided that the total value of such positions represents at least 90 percent of the market value of the index. The part of the index contract that is not offset is treated as a creditor or debtor position. The use of this option must be continuous.
5. Positions arising from placement operations and irrevocable purchase commitments for equity securities are calculated in accordance with what is provided for in Article 32, paragraph 2.
6. On the general net position, the coefficient provided for in Annex 4 is applied, and the required capital coverage for generic risk on quoted equity securities is thus determined (row d of Annex 4). Article 35 Specific risk on equity securities quoted in regulated markets
7. For the purpose of measuring specific risk, the general gross positions are determined separately for qualified securities and for other securities.
8. Qualified securities include those securities for which all of the following conditions are met: a) they are issued by the subjects indicated in Article 33, paragraph 2, point II); b) they present, according to general provisions issued by the Bank of Italy after consulting Consob, a high degree of liquidity; c) no position represents more than 5 percent of the entity's equity securities portfolio. Positions in individual securities exceeding 5 percent and up to a maximum of 10 percent are permitted provided that the aggregate of such positions does not exceed 50 percent of the entity's equity securities portfolio.
9. For each equity security, the net creditor or debtor position is determined.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 13 April 1998 4. The total of net creditor positions is added to the total of net debtor positions, and the general gross position is thus determined. 5. Positions arising from placement operations and irrevocable purchase commitments for equity securities are calculated in accordance with what is provided for in Article 33, paragraph 5. 6. For the purpose of determining the general gross position, entities may disregard the contracts referred to in Article 29-bis, paragraphs 3 and 4, provided they are traded on regulated markets and concern widely diversified indices. The use of this facility is subject to the no-objection of the Bank of Italy. 7. As an alternative to what is provided for in Article 29-bis, paragraphs 3 and 4, as well as in the preceding paragraph 6, for the purpose of determining the general gross position, futures on stock exchange indices, options on stock exchange indices and on futures on stock exchange indices can be broken down into positions in each of the equity securities that contribute to the calculation of the index subject to the relevant contracts. The positions resulting from the breakdown of the index, therefore, can be offset with the opposite positions in the same equity securities for the purpose of determining net creditor and debtor positions. Offsetting is also permitted even if the set of positions in equity securities that are offset does not reproduce the composition of the index subject to the contract, provided that the total value of such positions represents at least 90 percent of the market value of the index. The part of the index contract that is not offset is treated as a creditor or debtor position. The use of this option must be continuous. 8. On the general gross positions, the coefficients provided for in Annex 4 are applied, and the required capital coverage for specific risk on quoted equity securities is thus determined (row d of Annex 4). Article 35-bis Additional capital coverage for derivative contracts on indices

1. If entities perform offsetting pursuant to Article 34, paragraph 4 and Article 35, paragraph 7, they apply an additional capital coverage equal to two percent of the market value of the offset positions. Article 36 Specific and generic risk on equity securities not quoted in regulated markets
2. For the purpose of measuring specific and generic risk on unquoted equity securities, the general gross position is determined using the following criteria.
3. For each equity security, the net creditor or debtor position is determined.
4. The total of net creditor positions is added to the total of net debtor positions, and the general gross position is thus determined.
5. On the general gross position, a coefficient of 12 percent is applied, and the required capital coverage for specific and generic risk on unquoted equity securities is thus determined as reported in Annex 4/B.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 14 April 1998 Article 36-bis Position risk on units of collective investment undertakings (o.i.c.v.m.)

1. For the purpose of measuring risk on units of collective investment undertakings (o.i.c.v.m.), only creditor positions are considered.
2. Entities aggregate long positions in units of o.i.c.v.m. into the following categories, referring to the type of riskiest securities acquirable by the o.i.c.v.m. based on their management regulations or the constituent documents of the investment company: I) category A: securities referred to in Article 33, paragraph 2, point I); II) category B: securities referred to in Article 33, paragraph 2, point II); III) category C: securities referred to in Article 33, paragraph 2, point III) as well as equity securities.
3. On the positions determined as indicated in the preceding paragraph, the coefficients of Annex 4/C are applied in relation to the reference category, and the required capital coverage for each category is thus determined (column d).
4. The required capital coverage is equal to the sum of the amounts in column d of Annex 4/C. Article 37 Exchange rate risk
5. Exchange rate risk expresses the intermediary's exposure to fluctuations in currency exchange rates. For the purposes of this Chapter, the sum of net creditor and debtor positions in each currency, excluding the national currency, is relevant.
6. Active and passive operations involving indexing clauses linked to the performance of exchange rates with a specific currency are to be assimilated to currency positions.
7. Gross creditor and debtor positions consist of the sum of all assets and all liabilities expressed in currency, including "off-balance sheet" operations. For the purpose of determining gross creditor and debtor positions, the following are not included: a) forward purchase or sale operations of securities in currency with settlement in the denomination currency of the security; b) assets that constitute negative elements of equity for supervisory purposes; c) shareholdings and tangible assets. These exclusions are not made in cases where they concern operations or assets globally or specifically covered on the spot market or on the forward market.
8. Purchases of currency futures are considered creditor positions, sales debtor positions.
9. The purchase of a call option and the sale of a put option are equated to creditor positions on currency in an amount equal to the current value of the reference capital multiplied by the "delta" coefficient. For the definition of the "delta" coefficient, the provisions of Article 30, paragraph 4 apply.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 15 April 1998 6. The sale of a call option and the purchase of a put option are equated to debtor positions on currency in an amount equal to the current value of the reference capital multiplied by the "delta" coefficient. 7. Forward contracts providing for the exchange of currency for currency are equated to the combination of a creditor position on the currency to be received and a debtor position on the currency to be delivered. 8. The net position (creditor or debtor) in each currency is determined by the difference between the creditor and debtor positions referred to in paragraph 3. 9. In calculating the net position referred to in paragraph 8, currencies whose gross creditor and debtor position, including "off-balance sheet" operations, expressed in national currency does not exceed 2 percent of the total assets and liabilities in currency of the entity, including "off-balance sheet" operations, are converted into national currency and aggregated together as if they were a single currency. 10. The net positions in each currency are converted into national currency. Current spot exchange rates are adopted for the conversion. For forward operations, the forward exchange rate may be adopted. 11. The net positions (creditor or debtor) in each currency as well as the net position (creditor or debtor) referred to in paragraph 9 are summed separately to form, respectively, the total of net creditor positions and the total of net debtor positions. The higher of these two totals represents the general net position in foreign currency. 12. The required capital coverage for exchange rate risk is determined by applying to the general net position referred to in paragraph 11 the capital coverage coefficient of 8 percent, as reported in Annex 5, column g). 13. In determining the required capital coverage for exchange rate risk, banks add to the general net position referred to in paragraph 11 the general net position in gold and other precious metals. Article 38 Settlement risk

1. Settlement risk is that connected with the failure of the counterparty to deliver at the maturity of the contract the securities or money amounts due for operations related to the non-locked portfolio. This includes operations related to derivative contracts on securities and interest rates as well as contracts on exchange rates concluded for trading purposes or to cover components of the non-locked portfolio.
2. On the operations indicated in paragraph 1 (with the exception of repo agreements and similar contracts as well as those for the lending or borrowing of securities) not settled by the counterparty at maturity, the difference between the agreed value at maturity and the current value of the securities or instruments traded is calculated.
3. In the event that non-performance results in a loss for the entity, starting from the 5th working day following the maturity date, the capital coverage is determined by multiplying the difference referred to in paragraph 2 by the coefficients indicated in Annex 6.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 16 April 1998 4. As an alternative to what is provided for in paragraph 3, it is possible, for the period between the 5th and the 45th working day following the date of maturity of the transaction, to determine the capital coverage by multiplying the transaction price by the coefficients indicated in Annex 6/B. The use of this option must be continuous and must be communicated to the Bank of Italy. Article 38-bis Counterparty risk

1. Counterparty risk is that of the potential default of the counterparty in operations related to the non-locked portfolio.
2. For securities transactions for which the settlement period has not yet elapsed, capital coverage is calculated if the consideration has been paid without receiving the securities or if the securities have been delivered without receiving the consideration.
3. The capital coverage is determined by applying to the consideration paid or to the current value of the securities delivered the coefficients provided for in the scheme of Annex 6/C, depending on the category of the counterparty defined as follows: I) category A: governments and central banks of OECD countries or countries that have concluded special loan agreements with the International Monetary Fund (IMF) and are associated with the General Agreements to Borrow (GAB), as well as the European Communities; II) category B: investment firms falling within the scope of Directive CEE 93/22 as well as countries of the "Group of Ten", public sector entities (central and local), regulated markets and national and foreign clearing houses recognized pursuant to Article 20, paragraph 8 of the Law, credit institutions of OECD countries or countries that have concluded special loan agreements with the International Monetary Fund (IMF) and are associated with the General Agreements to Borrow (GAB), European Investment Bank (EIB), multilateral development banks as well as other entities referred to in Article 6, paragraph 1, letter b) of Directive CEE 89/647; III) category C: counterparties other than those referred to in the preceding points I) and II).
4. For reverse repo operations, sale of securities with repurchase agreement, and lending of securities, the difference between the market price of the securities and the amount of financing obtained or the value of the guarantee received is determined.
5. For repo operations, purchase of securities with resale agreement, and borrowing of securities, the SIM determines the difference between the financing granted or the value of the guarantee released and the market price of the securities received (1).
6. For the purpose of calculating the differences referred to in the preceding paragraphs 4 and 5, accrued interest is to be included in the calculation of the market value of the securities as well as the amount of financing granted or obtained and the guarantees.
7. The following differences are excluded from the determination of counterparty risk: a) those referred to in the preceding paragraphs 4 and 5 where they relate to operations carried out on regulated markets where clearing and guarantee mechanisms are operating;

1 For banks, the current provisions on the credit coefficient continue to apply.

b) those referred to in the preceding paragraph 4 if they relate to securities left on deposit by the counterparty for the entire duration of the contract with the bank or the SIM selling the security, provided that the securities are constituted as real guarantee for the operation. 8. SIMs, in the event that the result of the differences calculated pursuant to paragraphs 4 and 5 is positive, determine the capital coverage for counterparty risk by applying to such amounts the coefficients provided for in the scheme of Annex 6/C, depending on the category of the counterparty defined pursuant to the preceding paragraph 3. 9. Banks, in the event that the result of the differences calculated pursuant to paragraph 4 is positive, determine the capital coverage for counterparty risk by applying to such amounts the coefficients provided for in the scheme of Annex 6/C, depending on the category of the counterparty defined pursuant to the preceding paragraph 3. 9-bis. The requirement for counterparty risk coverage also applies to exposures – in the form of rights, commissions, interests, credits, dividends, and margin deposits related to futures or options contracts traded on regulated markets – connected to items included in the non-locked portfolio. 9-ter. SIMs and banks determine the capital coverage referred to in paragraph 9-bis by applying to such exposures the coefficients provided for in the scheme of Annex 6/C, depending on the category of the counterparty defined pursuant to the preceding paragraph 3. 10. SIMs determine the capital coverage for counterparty risk related to derivative contracts traded outside regulated markets by applying the coefficients provided for in Annex 6/C to the credit equivalents calculated according to the procedure indicated in Annex 6/D, Section II (1). 11. In determining the capital coverage referred to in this article, SIMs and banks take into account any guarantees received. Article 38-ter Credit risk

1. Credit risk expresses the risk of loss due to default of debtors related to risk assets, on and off balance sheet, other than those relating to the non-locked portfolio. Risk assets do not include assets deducted from supervisory equity.
2. On the aggregate of risk assets, weighted as provided for in Annex 6/D, a coefficient of eight percent is applied, and the required capital coverage for credit risk is thus determined.
3. The amount of basic and supplementary second-tier equity referred to in paragraphs 3 and 4 of Article 46, net of the elements referred to in paragraph 6, letters a) and d), of the same article, must be equal to or greater than the required capital coverage pursuant to paragraph 2.

1 For banks, the current provisions on the credit coefficient continue to apply.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 18 April 1998 Art. 39 Other Risks

1. A capital coverage of 25 percent is applied to the fixed operating costs resulting from the balance sheet of the last financial year, as reported in Annex 7. The Bank of Italy has the discretion to reduce this requirement in case of a substantial modification of the activity compared to the previous financial year.
2. Fixed operating costs, where the amounts and criteria followed for their determination are not detailed in the notes to the financial statements, are represented by the sum of items “80. Administrative expenses” and “110. Other management charges” of the individual income statement schema referred to in Annex no. 9.
3. In the first year of activity, a capital coverage of 25 percent of the fixed operating costs forecast in the annual budget is applied. Article 40: repealed Art. 41 Risk Concentration
4. The total amount of large exposures must be kept within the global limit of eight times the supervisory capital.
5. Each risk position must be kept within the individual limit of 25 percent of the supervisory capital.
6. The individual limit referred to in paragraph 2 is reduced to 20 percent when the client is a related party.
7. Without prejudice to what is provided in paragraph 6, the limits referred to in paragraphs 1, 2, and 3 may be exceeded on condition that: – the exceedance is due exclusively to risk positions relating to non-investment portfolio exposures; – if no more than 10 days have passed since the moment the exceedance occurred, the non-investment portfolio exposure does not exceed five times the supervisory capital; – if more than 10 days have passed, the aggregate of the exceedances in question is kept within six times the supervisory capital.
8. For each exceedance referred to in paragraph 4, additional capital coverage is required, calculated as reported in Annex 7/B, Section II.
9. Risk positions relating solely to exposures other than those of the non-investment portfolio may never exceed the limits referred to in paragraphs 1, 2, and 3, calculated using as the denominator the basic capital and supplementary capital of the second level referred to in paragraphs 3 and 4 of art. 46, net of the elements referred to in paragraph 6, letters a) and d), of the same article.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 19 April 1998 Art. 41-bis Transitional provisions relating to the concentration coefficient

1. Until December 31, 1998: – in derogation of art. 24-bis, letter i), “large exposures” mean risk positions equal to or greater than 15 percent of the supervisory capital; – the individual limit referred to in paragraph 2 of art. 41 is raised to 40 percent. Art. 42 Scope of Application
2. The coefficients and limits referred to in articles 26 and 41 apply to SIMs authorized to carry out, also separately, the activities referred to in art. 1, paragraph 1 of the Law, letters a) on own account and b) with prior subscription, purchase for resale, or assumption of guarantee.
3. The coefficients and limits referred to in articles 37, 38-ter, 39, and 41 apply to SIMs authorized to carry out, also separately, activities other than those indicated in paragraph 1.
4. ...omitted... Art. 43 Methods of Investing Own Funds
5. SIMs authorized only for the activities referred to in art. 1, paragraph 1, letters a) on behalf of third parties, b), c), d), e), and f) of the Law invest their own funds in assets for functional use and in shareholdings admitted under Title II. Investment is also permitted in: a) government bonds or guaranteed by the state, bonds issued or guaranteed by foreign states belonging to the OECD area; bonds issued by multilateral development banks; bonds or other credit instruments issued by banks having their headquarters in OECD countries; bonds of EEA issuers listed on the regulated markets of their country of origin; b) units of collective investment undertakings (OICVM) whose investment policies, as resulting from the fund’s regulations or the constitutive documents of the investment company, do not involve assets other than those indicated in sub-letter a) of this paragraph.
6. Solely for the purpose of hedging against market risks connected with the securities referred to in paragraph 1, letters a) and b), the SIMs referred to in paragraph 1 may purchase the securities referred to in art. 1, paragraph 2 of the Law. Art. 44 Capital Adequacy
7. The amount of own funds useful for supervisory purposes of SIMs must be equal to or greater than the capital coverage required to comply with the coefficients indicated in art. 42 according to the schema reported in Annex 7/C.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 20 April 1998 1-bis. The amount of own funds useful for supervisory purposes of SIMs may in any case not be lower than the capital coverage required to comply with the capital coefficient referred to in article 39. 2. SIMs verify daily compliance with the minimum capital coefficients and the limits on risk concentration. Article 45: repealed CHAPTER II OWN FUNDS USEFUL FOR SUPERVISORY PURPOSES Art. 46 Supervisory Capital

1. Supervisory capital is calculated as the algebraic sum of a series of positive and negative elements whose computability is admitted, with or without limitations depending on the case, in relation to the capital quality recognized for each of them, as reported in Annex 12.
2. The positive elements contributing to the quantification of capital must be usable without restrictions or delays to cover risks and corporate losses at the moment such risks or losses manifest. The amount of such elements is purged of any fiscal charges.
3. Paid-in capital, reserves, excluding revaluation reserves, and the general financial risk reserve constitute the primary quality capital elements. The total of the aforementioned elements, after deducting treasury shares, intangible assets, losses from previous years, as well as losses of significant magnitude occurring in business activity segments other than trading on own account in the current financial year, constitutes the “basic capital”. This aggregate is admitted in the calculation of supervisory capital without any limitation.
4. Revaluation reserves, hybrid capital instruments, subordinated liabilities with an original maturity of not less than 5 years, and risk funds constitute, within the limits and conditions established by Annex 12, the secondary quality capital elements. The total of the aforementioned elements constitutes the “supplementary capital of the second level”. This aggregate is computable up to the maximum limit represented by the amount of basic capital; however, the subordinated liabilities referred to above may not exceed 50 percent of the basic capital.
5. In addition to the elements indicated in the previous paragraphs, avoiding duplication in the calculation, the following elements, which constitute the “supplementary capital of the third level”, are included in supervisory capital: a) for SIMs authorized to carry out, also separately, the activities referred to in art. 1, paragraph 1 of the Law, letters a) on own account and b) with prior subscription, purchase for resale, or assumption of guarantee, the net proceeds or net losses as well as capital gains and capital losses on the non-investment portfolio, net of any fiscal charges and further foreseeable charges. This aggregate, which may assume a positive or negative value, is computed without any limitation in supervisory capital; b) for all SIMs, subordinated liabilities with an original maturity of not less than 2 years, within the limits and conditions established by Annex 12. They are computable at most up to 150 percent of the residual basic capital after covering the capital requirement provided by the coefficient on credit risk referred to in art. 38-ter. In particular circumstances, with the prior consent of the Bank of Italy, the aforementioned limit may be raised to 250 percent. Instead of the subordinated liabilities referred to in this letter, SIMs may include in the supplementary capital of the third level an equal amount of elements of the supplementary capital of the second level.
6. From the total amount of basic capital and supplementary capital of the second and third levels, the following are deducted: a) shareholdings held in banks, SIMs, and financial companies as well as subordinated assets and hybrid capital instruments held towards such entities, as reported in Annex 12. SIMs falling within a group subject to consolidated supervision must not deduct from their supervisory capital the shareholdings held in banks, SIMs, and financial companies and consolidated in the capital of the group to which they belong; b) the following non-negotiable components of the asset side: – movable property; – immovable property excluding real estate encumbered by real security for loans obtained; – shareholdings including hybrid capital instruments and subordinated assets towards subjects other than those referred to in letter a); – claims towards any counterparty with a residual life beyond 90 days, with the exception: of those arising from active repo operations, purchase of securities with resale agreement, and securities lending; of deposits made at clearing and guarantee funds against futures contracts and premium contracts concluded in regulated markets; of claims towards the tax authority; c) an amount equal to 8 percent of the gross general position in unlisted equity securities of the non-investment portfolio; d) an amount equal to 50 percent of the amount of capital losses on securities of the investment portfolio.
7. The amount obtained pursuant to the previous paragraphs, as shown in the schema reported in Annex 8, constitutes the supervisory capital. Articles 47 and 48: repealed

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 22 April 1998 TITLE V ACCOUNTING AND STATISTICAL DOCUMENTATION CHAPTER I TECHNICAL FORMS OF BALANCE SHEETS AND PERIODIC STATEMENTS Art. 49 Technical forms of balance sheets

1. SIMs prepare the individual balance sheet and the consolidated balance sheet according to the schemas and compilation rules reported in Annex 9. Articles 50 to 55: repealed Art. 56 Semi-annual Report
2. Within three months from the end of the first half of the financial year, the directors of the SIM transmit to the board of statutory auditors a report on the progress of management during the period. The report consists of a statement of accounts and a commentary.
3. In the statement of accounts, the items provided for in the schema reported in Annex 10 are recorded separately. For the methods of preparation, the provisions contained in Annex 9 apply.
4. The commentary illustrates the corporate policies followed during the half-year and the progress of management as a whole and with reference to each of the different activities carried out, also taking into account the forming revenue components. It contains references on the foreseeable progress of the second half of the financial year and indicates significant events that occurred between the end of the half-year and the date when the report is transmitted to the board of statutory auditors.
5. The report, accompanied by any observations of the board of statutory auditors, is made public within the fourth month following the end of the first half of the financial year by deposit at the company’s headquarters until the approval of the balance sheet of the current financial year, with the obligation to deliver a copy to anyone who requests it.
6. For the purposes of preparing the report referred to in this article, SIMs with shares listed on the stock exchange also comply with the provisions issued by Consob pursuant to the last paragraph of art. 2429-bis of the civil code.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 23 April 1998 CHAPTER II REPORTS FOR THE PREPARATION OF FINANCIAL STATISTICS Article 57: repealed TITLE VI FINAL PROVISIONS Article 58: repealed Art. 59 Annexes

1. The annexes referred to in this regulation form an integral part of the regulation itself. Art. 60 Entry into Force
2. Without prejudice to what is provided in articles 2, paragraph 2, 19, and 45, this regulation enters into force on January 5, 1992.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 1 1 April 1998 Annex 1 POSITION RISK ON DEBT SECURITIES Interest Rate Risk (general risk) POSITIONS RESIDUAL MATURITY Bands SECURITIES WITHOUT OR WITH COUPON LOWER THAN 3% SECURITIES WITH COUPON EQUAL TO OR GREATER THAN 3% Short Long 1 0-1 month 0-1 month 2 >1-3 months >1-3 months 3 >3-6 months >3-6 months 4 >6-12 months >6-12 months 5 >1-1.9 years >1-2 years 6 >1.9-2.8 years >2-3 years 7 >2.8-3.6 years >3-4 years 8 >3.6-4.3 years >4-5 years 9 >4.3-5.7 years >5-7 years 10 >5.7-7.3 years >7-10 years 11 >7.3-9.3 years >10-15 years 12 >9.3-10.6 years >15-20 years 13 >10.6-12 years >20 years 14 >12-20 years 15 >20 years

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 2 1 April 1998 Position Risk Annex 2 DEBT SECURITIES – INTEREST RATE RISK (general risk) WITHIN THE SAME BAND WITHIN THE SAME ZONE BETWEEN DIFFERENT ZONES POSITIONS (1) POSITIONS WTD. POS. COEFF. CAP. POS. RESIDUE POSITIONS CAP. POS. RESIDUE POSITIONS COMPENSATED CAP. POS. COEFF. CAP. TOTAL ZONES BANDS OF RESIDUAL WTD. COMPENS. CAP. FOR COMPENSATED POSITIONS COEFF. FOR POSITIONS COEFF. FOR POSITIONS NON-CAP. CAP. MATURITY IN THE COMPENSATED IN THE COMPENSATED COMPENSATED COMPENS. FOR POS. SHORT LONG SHORT LONG BANDS WITHIN SHORT LONG ZONES WITHIN SHORT LONG BETWEEN ZONES BETWEEN ZONES BETWEEN ZONES BETWEEN ZONES NON- OF THE BANDS OF THE ZONES 1 AND 2 2 AND 3 1 AND 3 (v) = r x u; COMPEN. (a) (b) (c) (d)=axc (e)=bxc (f) (g) (h)=fxg (i) (l) (m) (n) (o) = m x n (p) (q) (r) (s) (t) (u) s x u; t x u (z) (aa) (bb)=zxaa (cc)=h+o+v+bb 1 0.0000 0.1 2 0.0020 0.1 1 3 0.0040 0.1 4 0.0070 0.1 0.4 0.4 5 0.0125 0.1 2 6 0.0175 0.1 7 0.0225 0.1 0.3 0.4 8 0.0275 0.1 9 0.0325 0.1 10 0.0375 0.1 11 0.0450 0.1 3 12 0.0525 0.1 13 0.0600 0.1 14 0.0800 0.1 15 0.1250 0.1 0.3 1.5 1 TOTAL (1) Data resulting from Annex 1

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 3 1 April 1998 Annex 3 Position Risk DEBT SECURITIES SPECIFIC RISK POSITIONS CATEGORY RESIDUAL MATURITY SHORT LONG TOTAL CAPITAL COEFFICIENT CAPITAL COVERAGE (a) (b) (c) (d) (e)=(c)+(d) (f) (g)=(e)x(f) PUBLIC ADMINISTRATION SECURITIES 0.00 0 – 6 months 0.0025 QUALIFIED SECURITIES

6 – 24 months 0.01 24 months 0.016 OTHER SECURITIES 0.08 TOTAL

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 4 1 April 1998 Annex 4 Position Risk LISTED EQUITY SECURITIES TYPE OF SPECIFIC RISK GENERAL ITEMS ORDINARY ITEMS QUALIFIED PROPERTY SECURITIES short long “OFF-BALANCE SHEET” OPERATIONS short long GENERAL NET POSITION (a) AAAA A AAAA A AAAA AA AAAA AA GENERAL GROSS POSITION (b) AAAA AAA AAAA AAA COEFFICIENTS (c) 0.08 0.04 0.02 TOTAL CAPITAL COVERAGE (d) = (a) x (c) CAPITAL COVERAGE (d) = (b) x (c) FURTHER CAPITAL COVERAGE FOR DERIVATIVE CONTRACTS ON INDICES (e) GLOBAL CAPITAL COVERAGE (f) = (d) + (e)

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 4/B 1 April 1998 Annex 4/B Position Risk UNLISTED EQUITY SECURITIES POSITIONS PROPERTY SECURITIES short long “OFF-BALANCE SHEET” OPERATIONS short long GENERAL GROSS POSITION (a) COEFFICIENT (b) 0.12 CAPITAL COVERAGE (c) = (a) x (b)

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 4/C 1 April 1998 Annex 4/C Position Risk RISK ON UNITS OF OICVM CATEGORY (a) POSITIONS (b) CAPITAL COEFFICIENT (c) CAPITAL COVERAGE (d) = (b) x (c) CATEGORY A 0.00 CATEGORY B 0.016 CATEGORY C 0.08 TOTAL

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 5 1 April 1998 Annex 5 Exchange Rate Risk CURRENCIES COMPREHENSIVE POSITION USA DOLLAR (1) GERMAN MARK (2) FRENCH FRANC (3) ....... (i) SECURITIES short long FORWARD CONTRACTS IN CURRENCY short long CURRENCY FUTURES short long OPTIONS AND PREMIUM CONTRACTS ON CURRENCIES short long SWAPS short long OTHERS short long GENERAL NET POSITION short long TOTALS COEFFICIENT CAPITAL COVERAGE EXCHANGE RATE (b) (d) = Σ(ci)short (e) = Σ(ci)long (f) (g) = max(d,e) x (f) TOTALS short long IN LIRA (c) = (a) x (b) 0.08

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 6 1 April 1998 Annex 6 SETTLEMENT RISK NUMBER OF WORKING DAYS SUBSEQUENT TO THE TRADE DATE AMOUNT (a) CAPITAL COEFFICIENT (b) CAPITAL COVERAGE (c) = (a) x (b) from the 5th to the 15th day 0.08 from the 16th to the 30th day 0.5 from the 31st to the 45th day 0.75 from the 46th day onwards 1 TOTAL

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 6/B 1 April 1998 Annex 6/B SETTLEMENT RISK NUMBER OF WORKING DAYS SUBSEQUENT TO THE TRADE DATE AMOUNT (a) CAPITAL COEFFICIENT (b) CAPITAL COVERAGE (c) = (a) x (b) from the 5th to the 15th day 0.005 from the 16th to the 30th day 0.04 from the 31st to the 45th day 0.09 TOTAL

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 6/C 1 April 1998 Annex 6/C COUNTERPARTY RISK COUNTERPARTY AMOUNT (a) CAPITAL COEFFICIENT (b) CAPITAL COVERAGE (c) = (a) x (b) CATEGORY A 0.00 CATEGORY B 0.016 CATEGORY C 0.08 TOTAL

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 6/D 1 April 1998 Annex 6/D CREDIT RISK Section I General Provisions Calculation of Risk Assets

1. The weighting system The credit risk of different assets is assessed based on the following factors: – nature of debtor counterparties; – guarantees received. Table A lists the different types of risk assets, on and off balance sheet, distinguished by weighting factors. 1.1. Nature of debtor counterparties The weighting system, which measures the default risk of debtors in relation to their nature, is articulated in the following multiplicative factors, unless otherwise provided in the following regarding “country risk” and any guarantees received: a) 0 percent for risk assets towards central governments, central banks, and the European Union; b) 20 percent for risk assets towards public sector entities (central and local), banks, and multilateral development banks as well as towards other SIMs or investment companies from EU countries or the “Group of Ten”, clearing houses, and national and foreign regulated markets recognized pursuant to article 20, paragraph 8 of the Law; c) 100 percent for risk assets towards the private sector; for shareholdings, subordinated assets, and hybrid capital instruments not deducted from supervisory capital, and for other equity securities; d) 200 percent for risk assets in default. In measuring the riskiness of assets towards central governments, central banks, public sector entities, and banks, two groups of countries must be distinguished: – the so-called “Zone A”, which includes countries that are full members of the O.C.S.E. and those that have concluded special loan agreements with the International Monetary Fund and are associated with the General Agreements to Borrow (GAB); – the so-called “Zone B”, which includes all other countries.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 6/D 2 April 1998

Risk exposures to central governments, central banks, public sector entities, and banks in countries included in the so-called "Zone A" have a risk weight of 0 and 20 percent, depending on the case, as specified previously with reference to the nature of the counterparties; if belonging to the so-called "Zone B", they have a weight of 100 percent. However, with reference to subjects in "Zone B", the following weight must be applied: – 0 percent, if the counterparty consists of governments or central banks and provided that the exposures are denominated in the currency of the debtor's country and funded with provision in the same currency; – 20 percent, if the counterparty consists of banks (also acting as guarantors) and the risk exposures have a residual maturity of less than one year.

1.2. Guarantees Received In measuring the risk degree of assets, SIMs (Securities Investment Companies) also take into account any personal and real guarantees received, excluding those securing non-performing loans.

Received guarantees must be explicit and must not be subject to conditions. For risk exposures secured in whole or in part by personal guarantees, the weighting factor provided for the guarantor subject is applied (respectively, in full or pro-rata) if it is more favorable than that of the principal debtor.

For the purpose of lower weighting, personal guarantees are taken into consideration only if the guarantor assumes the legally binding commitment to satisfy the obligations related to one or more debts attributable to a specific subject.

The weighting factors for guarantors are those indicated in letters a) and b) of point 1.1. In the case of guarantees issued by banks in the so-called "Zone B", the preferential weighting of 20 percent is applied only if the underlying transaction has a residual maturity equal to or less than 1 year.

Among real guarantees, the following are taken into consideration: a) securities (other than equities, subordinated loans, and hybrid capital instruments) issued by the reporting SIM and deposited with the same; b) securities issued by governments or central banks of the so-called "Zone A" or by the European Union; c) securities (other than equities, subordinated loans, and hybrid capital instruments) issued by multilateral development banks; d) securities issued by public sector entities of the so-called "Zone A"; e) cash deposits with banks of the so-called "Zone A"; f) securities (other than equities, subordinated loans, and hybrid capital instruments) issued by banks of the so-called "Zone A".

SIMs apply (in full or pro-rata) to risk exposures secured (in whole or in part) by the aforementioned securities, the following weighting: – equal to 0 if they are guarantees under letters a) and b); – 20 percent if they are the other guarantees.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 6/D 3 April 1998

The weighting is applied to an amount that does not exceed the market value of the guarantee itself at the time of contract signing, reduced by the following prudential haircuts: – 10 percent for government bonds and certificates of deposit; – 20 percent in other cases.

Securities under points a) and e) are exceptions, to which no prudential haircut is applied.

1.3. Other Asset Components. Cash and other assimilated values have a weight equal to 0. Accrued income not attributed to specific risk categories for counterparty has a weight equal to 50 percent. Tangible assets and participations are weighted at 100 percent, if not already deducted from supervisory capital.

2. Economic sectors of belonging of debtor counterparties and guarantors To identify the different categories of counterparties and guarantors, reference must be made to the criteria reported below.

2.1. Governments and Central Banks Regarding the Italian public administration, in the "governments and central banks" sector (0 percent weighting) fall constitutional bodies, Ministries, Cassa Depositi e Prestiti, Postal Savings Banks, the Special Section for Export Credit Insurance (SACE), the Bank of Italy, and the Italian Foreign Exchange Office.

2.2. Central and Local Public Sector Entities Among "central and local public sector entities" (20 percent weighting) fall the following subjects: a) territorial public entities; b) public entities, national or local, which carry out primarily administrative or service provision activities without profit motive; c) other public bodies, national or local, lacking legal personality.

Public sector entities therefore do not include bodies with public legal personality that carry out production of goods and services intended for sale, even if by legal obligation or at non-remunerative conditions.

To identify subjects to be included in the "governments and central banks" and "public sector entities" sectors of foreign countries in the so-called "Zone A", reference is made analogously to the criteria established for the Italian public administration.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 6/D 4 April 1998

2.3. Banks National banks are understood to be companies, having legal headquarters in Italy, authorized by the Bank of Italy for banking activities pursuant to Art. 14 of the Consolidated Law on Banking and Credit Legislation.

Branches in Italy of foreign banks are excluded.

Foreign banks are understood to be EU and non-EU banks, referred to in Art. 1, paragraph 2, respectively, lett. b) and c), of the Consolidated Law, authorized by the competent authorities of the country of origin for banking activity as defined pursuant to Art. 10 of the Consolidated Law. Their branches abroad are also included, i.e., activity locations, lacking legal personality, established in countries different from that of the head office, including branches in Italy.

Investment companies from countries of the European Union and the "Group of Ten", clearing houses, and recognized national and foreign regulated markets pursuant to Art. 20, paragraph 8, of the Law are assimilated to banks.

2.4. Private Sector The private sector consists of all subjects for whom weights equal to 0 and 20 percent do not apply.

The private sector therefore also includes public entities other than those referred to in letters a), b), and c) of paragraph 2.2.

3. Components of Risk Exposures Among risk exposures subject to capital coverage for credit risk are included, among others: – positions in securities that are part of the immobilized portfolio; – exposures arising from rights, commissions, interest, dividends, and security deposits related to futures or premium contracts traded on regulated markets connected with items of the immobilized portfolio; – exposures arising from rights, commissions, and credits connected with items other than those included in the non-immobilized portfolio; – exposures arising from active "repo" operations and securities lending concluded outside the proprietary trading activity and having as object securities of the immobilized portfolio (see following point 4.2).

4. Treatment of Particular Operations 4.1. Off-Balance Sheet Operations Off-balance sheet operations are divided into two categories: – guarantees issued and commitments assumed; – operations linked to interest and exchange rates.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 6/D 5 April 1998

Off-balance sheet operations must be weighted by calculating for each the amount of the "credit equivalent". This is obtained by multiplying the nominal value of the individual operations by a conversion factor that takes into account the probability that a cash credit exposure will be determined against the operation, the extent of which is estimated.

The conversion factors to determine the "credit equivalents" of guarantees and commitments are as follows: – 100 percent for "full risk" guarantees and commitments as well as those in non-performing status; – 50 percent for "medium risk" guarantees and commitments; – 0 percent for "low risk" guarantees and commitments.

The criteria for identifying risk types and calculating credit equivalents are indicated in Section II.

4.2. Repo and Securities Lending Operations Having as Object Securities of the Immobilized Portfolio Active repo operations are treated as credits secured by securities. Therefore, these operations are computed among risk assets for an amount equal to the spot purchase operation increased by accrued interest if these are not computed among accrued income. In weighting the exposure, the nature and characteristics of the securities pledged as collateral are taken into account according to the methods provided in point 1.2.

Securities lending operations are risk exposures secured by guarantee. Therefore, the coefficient for credit risk applies: – for securities lent, to the difference – if positive – between the value of the same securities and that of the received guarantee; – for securities borrowed, to the difference – if positive – between the value of the issued guarantee and the value of the securities.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 6/D 6 April 1998

Table A WEIGHTING FACTORS: CATEGORIES OF RISK EXPOSURES (CASH CREDITS AND OFF-BALANCE SHEET OPERATIONS)

1. Weighting 0% 1.1 Cash. 1.2 Cash credits and off-balance sheet operations secured by real guarantee on securities (other than equities, subordinated loans, and hybrid capital instruments) issued by the reporting SIM and deposited with the same. 1.3 Cash credits and off-balance sheet operations secured by real guarantee on securities issued by governments or central banks of Zone A or by the European Union. 1.4 Cash credits and off-balance sheet operations towards governments or central banks of Zone A or carrying the explicit guarantee of such subjects. 1.5 Cash credits and off-balance sheet operations towards governments or central banks of Zone B denominated in the debtor's national currency and funded with provision in the same currency. 1.6 Cash credits carrying the explicit guarantee of governments or central banks of Zone B denominated in the common national currency of the guarantor and the debtor and funded with provision in the same currency. 1.7 Cash credits and off-balance sheet operations towards the European Union or carrying the explicit guarantee of such subjects.

2. Weighting 20% 2.1 Cash credits and off-balance sheet operations secured by real guarantee on securities (other than equities, subordinated loans, and hybrid capital instruments) issued by multilateral development banks. 2.2 Cash credits and off-balance sheet operations secured by real guarantee on securities issued by public sector entities of Zone A. 2.3 Cash credits and off-balance sheet operations secured by real guarantee on cash deposits with banks of Zone A. 2.4 Cash credits and off-balance sheet operations secured by real guarantee on securities (other than equities, subordinated loans, and hybrid capital instruments) issued by banks of Zone A. 2.5 Cash credits and off-balance sheet operations towards multilateral development banks or carrying the explicit guarantee of such subjects. 2.6 Cash credits and off-balance sheet operations towards public sector entities of Zone A or carrying the explicit guarantee of such subjects. 2.7 Cash credits and off-balance sheet operations towards banks of Zone A or carrying the explicit guarantee of such subjects. 2.8 Cash credits and off-balance sheet operations with residual maturity up to 1 year towards banks of Zone B or carrying the explicit guarantee of such subjects.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 6/D 7 April 1998

2.9 Cash credits and off-balance sheet operations towards other SIMs or investment companies from countries of the European Union or the "Group of Ten", clearing houses, and recognized national and foreign regulated markets pursuant to Article 20, paragraph 8 of the Law, or carrying the explicit guarantee of such subjects.

3. Weighting 50% 3.1 Contracts on interest and exchange rates towards the private sector. 3.2 Accrued income for which the counterparty cannot be identified.

4. Weighting 100% 4.1 Cash credits and off-balance sheet operations towards governments or central banks of Zone B other than those denominated in the debtor's national currency and funded with provision in the same currency. 4.2 Cash credits and off-balance sheet operations towards public sector entities of Zone B. 4.3 Cash credits and off-balance sheet operations with residual maturity greater than 1 year towards banks of Zone B. 4.4 Cash credits and off-balance sheet operations towards the private sector (other than those under point 3.1). 4.5 Equities, participations, subordinate assets, and hybrid capital instruments not deducted from supervisory capital. 4.6 Other assets, including tangible fixed assets not deducted from supervisory capital.

5. 200% 5.1 Cash credits and off-balance sheet operations in non-performing status.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 6/D 8 April 1998

Section II Methods for determining credit equivalents for off-balance sheet risk exposures for the purposes of credit risk and counterparty risk coefficients

1. Guarantees Issued and Commitments 1.1. Premise The counterparty of issued guarantees to which the weighting factor refers is represented by the ordering subject.

The following items from "commitments and risks" must be excluded from the computation of this category of risk exposure: – securities and other values to be delivered for operations to be settled; – proposals for the sale of securities and other values; – deposits and financing to be received; – deposits and financing to be made, as well as securities and other values to be received for operations to be settled in the case where they constitute renewals of existing financial relationships; – contracts on interest and exchange rates.

1.2. Categories of Guarantees and Commitments 1.2.1. Guarantees Issued and Commitments with "Low Risk" Commitments to provide guarantees with an original duration not exceeding one year are included.

1.2.2. Guarantees Issued and Commitments with "Medium Risk" The following categories of operations are included:

1. performance bonds;
2. assets sold with obligation to repurchase at the request of the assignee (1);
3. facilities in support of securities issuance (N.I.F. and R.U.F.);
4. irrevocable "stand-by" letters of credit that do not assume the character of credit substitutes;
5. "put options" issued concerning securities and other financial instruments other than currencies (2).

1 The counterparty to which the weighting factor refers is represented by the subject that issued the financial instrument subject to negotiation or, in the absence of an issuer, by the debtor subject.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 6/D 9 April 1998

1.2.3 Guarantees Issued and Commitments with "Full Risk" The following categories of operations are included:

1. guarantees issued and commitments assumed irrevocably in the exercise of third-party trading activity and order collection or mediation;
2. guarantees with the character of credit substitutes;
3. irrevocable "stand-by" letters of credit that assume the character of credit substitutes;
4. commitments to purchase spot and forward securities and other financial instruments other than currencies (1);
5. deposits (and financing) to be made spot and forward;
6. unpaid portion of subscribed shares and securities;
7. other financing commitments with certain utilization.

2. Contracts on Interest and Exchange Rates 2.1 Premise In the calculation of the credit risk coefficient and that on counterparty risk, the following are not considered: – off-balance sheet operations on interest and exchange rates traded on official markets, if subject to the constitution of daily margin guarantees; – off-balance sheet operations on interest and exchange rates with an original duration not exceeding 14 calendar days.

Furthermore, if between the SIM and its counterparty there exists a distinct bilateral novation contract, formulated based on generally accepted criteria, recognized by the Bank of Italy, based on which reciprocal payment obligations in a currency and at a specific date are automatically offset with other obligations referred to the same currency and maturing on the same date, the amount to be considered for the calculation of the credit risk or counterparty risk coefficient is equal to the net amount of the obligations.

Off-balance sheet operations towards the private sector, linked to interest and exchange rates, are weighted at 50 percent.

2.2 Main Categories of Operations The main categories of operations linked to rates to be taken into consideration are those reported below. A) Interest Rate Contracts

1. single-currency interest rate swaps;
2. "basis swaps";
3. "forward rate agreements";

2 The counterparty to which the weighting factor refers is represented by the subject that issued the financial instrument subject to negotiation or, in the absence of an issuer, by the debtor subject. 1 The counterparty to which the weighting factor refers is represented by the subject that issued the financial instrument subject to negotiation

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 6/D 10 April 1998

4. "futures" on bond securities and on interest rates;
5. purchases of "cap" and "floor" options on interest rates;
6. purchases of call and put options on bond securities and on bond security indices;
7. other operations with analogous characteristics.

B) Exchange Rate Contracts

1. multi-currency interest rate swaps;
2. forward exchange contracts;
3. currency futures;
4. purchases of currency options;
5. other operations with analogous characteristics.

"Futures" type operations and options related to equities or equity indices are conventionally included among those linked to exchange rates.

2.3 Calculation of Credit Equivalents In the calculation of credit equivalents for interest rate and exchange rate contracts, entities may follow one of the two calculation methods illustrated below.

Once the calculation method is selected, the same is applied to the entirety of the contracts in question and can be modified only with the consent of the Bank of Italy.

2.3.1 Current Value Method This method allows calculating the market value of the rights arising from the contract in favor of the entity. The calculation procedure approximates the cost that the entity should incur to find another subject willing to take over the contractual obligations of the original negotiating counterparty, in the event of its insolvency.

The current value method is articulated in the two calculation phases described below.

2.3.1.1 Calculation of Replacement Cost The replacement cost of each contract is given by its intrinsic value, if positive. The intrinsic value is positive if the comparison between the contractual price of the operation and the market price of the activity subject to negotiation yields a positive result for the entity.

For "futures" and American-type options, the intrinsic value is given by the differential in favor of the reporting entity between current (or prices) rates and agreed (or prices) rates.

Instead, in cases where the execution of the contract can only occur at the agreed maturity between the parties (such as, for example, for "interest rate swaps" and "forward rate agreements", European-type options, forward exchanges, and "cross currency swaps"), the intrinsic value must be calculated by discounting future cash flows based on the conditions in force on the calculation date. Therefore, in the case of a forward negotiation of dollars against lire, for example, the exercise price (forward price of the contract) must be discounted (based on the interest rate differential between the lire and the dollar) before being compared with the current spot lire-dollar exchange rate.

2.3.1.2 Calculation of Future Credit Exposure Future credit exposure approximates the so-called "time value" which, depending on the volatility of interest or exchange rates and the residual life of the contract, takes into account the probability that in the future the intrinsic value of the contract, if positive, may increase or, if negative, may transform into a positive sign position.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 6/D 11 April 1998 It is determined with reference to all contracts – with both positive and negative intrinsic value – by multiplying the nominal value of each contract by the following percentages applied based on the remaining duration of the operations.

REMAINING DURATION CONTRACTS RELATING TO INTEREST RATES CONTRACTS RELATING TO EXCHANGE RATES AND SIMILAR

Up to 1 year ....................... Over 1 year .......................... 0 percent 0.5 percent 1 percent 5 percent

In the case of operations that provide for the settlement of differentials over multiple maturities, the average duration must be calculated, weighting the different maturities based on the reference capital. Future credit exposure is not calculated for "basis swaps" in a single currency, that is, for those contracts that provide for the exchange of two interest rates differently indexed.

2.3.2 Original Exposure Method This method differs from the previous one in the calculation procedure. The credit equivalent is calculated by multiplying the reference capital of each contract by the following conversion factors to be determined based on the original duration of the operations.

ORIGINAL DURATION CONTRACTS RELATING TO INTEREST RATES CONTRACTS RELATING TO EXCHANGE RATES AND SIMILAR

Up to 1 year ........................ Over 1 year and up to 2 years .. Increment for each subsequent year ............................. 0.5 percent 1 percent 1 percent 2 percent 5 percent 3 percent

In the case of operations that provide for the settlement of differentials over multiple maturities, the average duration must be calculated, weighting the different maturities based on the reference capital.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 6/D 12 April 1998 Table B CAPITAL REQUIREMENT FOR CREDIT RISK AMOUNT (a) Coefficient (b) Capital Coverage (c)=(a)x(b) Weighted Risk Assets 0.08

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 7 1 April 1998 Annex 7 OTHER RISKS AMOUNT (a) COEFFICIENT (b) CAPITAL COVERAGE (c) = (a) x (b) FIXED OPERATING COSTS INCURRED IN THE LAST FINANCIAL YEAR 0.25

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 7/B 1 April 1998 Annex 7/B CONCENTRATION RISK Section I Criteria for determining risk positions

1. Determination of risk assets In determining the total exposure towards a single client or a group of connected clients, risk assets are valued according to the following criteria: I. exposures relating to cash credits, assets other than those for proprietary trading and placement, the immobilized portfolio (including related income components), as well as guarantees issued and commitments are computed at book value; II. exposures relating to interest rate and exchange rate contracts (including those attributable to the immobilized portfolio) are computed at the value given by the credit equivalent calculated according to Section II of Annex 6/D; III. net positions relating to the non-immobilized portfolio are determined following the methods indicated in Title IV of the regulation. For this purpose: A. positions arising from placement operations are subject to the reduction coefficients provided for in Article 32, paragraph 2 of the regulation; B. net positions are valued applying the valuation criteria provided for in Article 30 of the regulation; IV. exposures relating to settlement and counterparty risks are determined with the methods indicated in Articles 38 and 38-bis of the regulation without the application of coefficients based on the counterparty.

2. Weighting system The exposures identified pursuant to paragraph 1 are taken at nominal value (weighting of 100%) to constitute risk positions. However, in order to take into account the lower riskiness associated with the nature of the debtor counterparty and any guarantees received, the weighting factors listed in Table A are applied. For risk assets towards banks, weighting coefficients are applied articulated in relation to the remaining life of the asset and the country of origin. Investment firms falling within the scope of Directive 93/22 and from countries of the "Group of Ten", as well as clearing houses and recognized national and foreign regulated markets pursuant to Article 20, paragraph 8 of the Law, are assimilated to Zone A banks.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 7/B 2 April 1998 The weightings relating to received guarantees are applicable only if the guarantees are explicit and not subject to conditions. The rules relating to received guarantees provided for in point 1.2 of Section I of Annex 6/D apply. The exposure refers to the principal debtor even in the presence of assets assisted by personal guarantees. The option to consider the exposure on the guarantor subject is recognized provided that this subject cannot oppose the benefit of the prior execution of the guaranteed party. Risk assets classified as bad debts are weighted at 100% regardless of the guarantee assisting the operation.

3. Weighting of risk assets in the case of a single shareholder Exposures towards companies controlled by a single shareholder are subject to the most favorable weighting provided for this, valuing the guarantee provided for in art. 2362 of the Civil Code; this principle does not extend to credits guaranteed by the aforementioned companies nor to exposures towards companies indirectly controlled, even 100%, by the single shareholder.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 7/B 3 April 1998 Table A WEIGHTING FACTORS: CLASSES OF RISK ASSETS A) Risk assets with 0 weighting A.1) Cash risk assets and off-balance sheet operations towards governments or central banks of Zone A and the European Union and those assisted by the explicit guarantee of such subjects. A.2) Cash risk assets and off-balance sheet operations assisted by real guarantee on values issued by governments or central banks of Zone A or the European Union. A.3) Cash risk assets towards governments or central banks of Zone B, if denominated in the currency of the debtor country and financed with funding in the same currency. A.4) Cash risk assets bearing the explicit guarantee of governments or central banks of Zone B, if expressed in the common national currency of the guarantor and the debtor and financed with funding in the same currency. A.5) Cash risk assets and off-balance sheet operations guaranteed by pledge on cash deposits at a bank of the group of belonging. A.6) Cash risk assets and off-balance sheet operations guaranteed by pledge on securities issued by the SIM or other subject of the group of belonging and deposited at one of such subjects. A.7) Participations in insurance companies. A.8) Cash risk assets and off-balance sheet operations with a remaining duration not exceeding 1 year towards banks of Zone A and those assisted by the explicit guarantee of such subjects. B) Risk assets to be considered at 20% of their nominal value B.1) Cash risk assets and off-balance sheet operations with a remaining duration greater than 1 year but not exceeding 3 years towards or guaranteed by banks of Zone A. B.2) Cash risk assets and off-balance sheet operations with a remaining duration not exceeding 1 year towards or guaranteed by banks of Zone B. B.3) Cash risk assets and off-balance sheet operations assisted by real guarantee on cash deposits at banks of Zone A, or securities with a duration not exceeding 3 years issued by such banks.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 7/B 4 April 1998 B.4) Cash risk assets and off-balance sheet operations towards or assisted by guarantee of public bodies of the States of the European Union. B.5) Cash risk assets and off-balance sheet operations towards or assisted by guarantee of multilateral development banks or assisted by real guarantee on values issued by such banks. B.6) Cash risk assets and off-balance sheet operations towards or assisted by guarantee of other SIMs or investment firms from countries of the European Union or the "Group of Ten", clearing houses and recognized national and foreign regulated markets pursuant to Article 20, paragraph 8 of the Law, or assisted by real guarantee on values issued by such subjects. C) Risk assets to be considered at 50% of their nominal value Cash risk assets and off-balance sheet operations represented or guaranteed by securities (other than subordinated loans and capitalization hybrid instruments) issued by banks of Zone A, with a remaining life greater than 3 years, on condition that such securities are negotiable in official markets and subject to daily quotation or their issuance has been authorized by the competent Authorities. With reference to real guarantees, the aforementioned weightings apply to an amount that does not exceed the market value of the guarantee at the time of the conclusion of the contract and reduced by the following prudential margins: − 10 percent for government bonds and certificates of deposit; − 20 percent in other cases. Values referred to in the previous points A.5, A.6 and B.3 are exceptions, to which no prudential margin is applied.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 7/B 5 April 1998 Section II Calculation of additional capital coverage

1. For the purpose of verifying compliance with limits for large risks towards a single client or group of connected clients, risk positions towards said client not connected to the non-immobilized portfolio must be added to those relating to the net long positions of the non-immobilized portfolio and those relating to counterparty and settlement risks towards the same client. For clients (or groups of connected clients) for whom an exceedance of the concentration limit due to the exposure of the non-immobilized portfolio has occurred, the net long positions of the same portfolio and those relating to counterparty and settlement risks are ordered in ascending order according to the capital coefficient required for the specific position risk, settlement risk, and counterparty risk, in such a way that the exceedance is attributed to the components presenting the highest coefficient. Regarding settlement risk: a) exposures calculated with the method provided for in Article 38, paragraph 3 are always considered as those with the highest coefficient (in fact, the minimum coefficient applicable pursuant to Annex 6 is that of 8 percent, which must be increased as time passes from the date of default); b) exposures calculated with the method provided for in Article 38, paragraph 4 are treated according to the coefficient applicable to them pursuant to Annex 6/B.

2. If the exceedance has not lasted for more than 10 days, the additional capital coverage for concentration risk is equal to double the capital coverage required against the specific position risk, settlement risk, and counterparty risk for the positions identified pursuant to point 1 that constitute the amount of the exceedance.

3. If the exceedance has lasted for more than 10 days, the additional capital coverage for concentration risk is determined: − by attributing the individual components of the exceedance to the brackets indicated in the column of Table B up to the limit of each bracket, in the order determined pursuant to point 1. The percentage in the third column refers to supervisory capital. Therefore, consider, as an example, the following situation: the individual concentration limit is equal to 25; the total exposure towards a single client is equal to 80 lire, of which 25 relate to the immobilized portfolio. In this hypothesis, of the 55 lire that constitute the global exceedance: − 15 will be inserted in the row "up to 40%"; − 20 will be inserted in the row "from 40% to 60%"; − 20 will be inserted in the row "from 60% to 80%". − by multiplying the capital coverages relating to the components thus classified by the corresponding coefficients indicated in the column relating to the additional coefficient of the same table;

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 7/B 6 April 1998 − finally summing the capital requirements resulting from the aforementioned multiplication.

4. The total additional capital coverage required against concentration risk is equal to the sum of the additional capital coverages determined as above for each exceedance.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 7/B 7 April 1998 Table B CONCENTRATION RISK Calculation of additional capital coverage Client or group of connected clients Duration of exceedance Exceedance of limit in percentage of supervisory capital Type of risk relating to the component of exceedance Amount (a) Coefficient for the type of risk (b) Coverage for the type of risk (c)=(a)x(b) Additional Coefficient (d) Additional capital coverage (e)=(c)x(d) Client A Less than or equal to 10 days Up to 200% Greater than 40% between 40% and 60% 300% between 60% and 80% 400% between 80% and 100% 500% between 100% and 250% 600% Over 250% 900% 250% Total additional capital coverage for concentration risk on Client A) Client B Less than or equal to 10 days Up to 200% 40% Greater than between 40% and 60% 300% between 60% and 80% 400% between 80% and 100% 500% between 100% and 250% 600% Over 250% 900% 250% Total additional capital coverage for concentration risk on Client B) (B) ................................................................. ................................................................. TOTAL ADDITIONAL CAPITAL COVERAGE FOR CONCENTRATION RISK ( A + B + ... )

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 7/C 1 April 1998 Annex 7/C GLOBAL CAPITAL REQUIREMENT CAPITAL COVERAGE SUPERVISORY CAPITAL EXCESS (+) TYPE OF COVERAGE AMOUNT (a) COMPONENT AMOUNT (b) DEFICIT (-) (c)=(b)-(a) 1 Credit risk requirement (Ann. 6/D) () BASE CAPITAL AND SUPP. OF 2ND LEVEL (1) 2 Generic risk requirement for securities of bond nature (Ann. 2) () 3 Specific risk requirement for securities of bond nature (Ann. 3) () 4 Generic and specific risk requirement for quoted equity securities (Ann. 4) () 5 Global requirement for unquoted equity securities (Ann. 4/B) () 6 Global requirement for units of OICVM (Ann. 4/C) (**) 7 Global requirement for exchange risk (Ann. 5) () 8 Settlement risk requirement (Ann. 6 or 6/B) () 9 Counterparty risk requirement (Ann. 6/C) () 10 Additional requirement for concentration risk (Ann. 7/B) () 11 FREE RESIDUE (2) 12 SUPPLEMENTARY CAPITAL OF 3RD LEVEL (3) 13 Total market risk requirement (sum from 2 to 10, col. a) TOTAL (rows 11+12, col. b) 14 Requirement for other risks (Ann. 7) () TOTAL CAPITAL (4) NOTES () The requirement is calculated by all SIMs. () The requirement is calculated only by SIMs authorized to exercise, even separately, the activities referred to in Art. 1, paragraph 1 of the Law, letters a) on own account and b) with prior subscription, purchase on forward basis or assumption of guarantee.

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(1) At row 1, column b, the value resulting from the algebraic sum, if positive, of the amounts referred to in rows 14, 22, 33 and 35 (the latter with negative sign) of Annex 8 must be indicated. (2) At row 11, column b, the amount referred to in row 1, column c, with the relevant algebraic sign must be indicated. (3) At row 12, column b, the value resulting from the algebraic sum of the amounts referred to in rows 29 or 30 minus the amounts referred to in rows 34 and 36 of Annex 8 must be indicated. (4) At row 14, column b, the overall positive value of the supervisory capital referred to in row 38 of Annex 8 must be indicated.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 8 1 April 1998 Annex 8 SUPERVISORY CAPITAL BASE CAPITAL AMOUNT Positive elements: 1 subscribed share capital 2 reserves 3 general financial risk fund 4 Total positive elements of base capital (sum of rows 1 to 3) Negative elements: 5 amounts to be paid by shareholders to settle shares 6 shares of own issue in portfolio 7 goodwill 8 other intangible assets 9 losses 10 Total negative elements of base capital (sum of rows 5 to 9) Base Capital: 14 positive value (row 4 – row 10, if positive) 15 negative value (row 4 – row 10, if negative) SUPPLEMENTARY CAPITAL OF 2ND LEVEL AMOUNT Positive elements: 16 revaluation reserves 17 risk funds 18 capitalization hybrid instruments 19 2nd level subordinated liabilities Supplementary Capital of 2nd Level: 20 positive value (sum of rows 16 to 19) 21 excess 22 admitted positive value (row 20 – row 21)

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 8 2 April 1998 SUPPLEMENTARY CAPITAL OF 3RD LEVEL AMOUNT Positive elements: 23 proceeds and capital gains from the non-immobilized portfolio 24 3rd level subordinated liabilities or elements of supplementary capital of 2nd level 25 Total positive elements of supplementary capital of 3rd level (sum of rows 23 and 24) Negative elements: 26 losses/minus values from the non-immobilized portfolio and any charges Supplementary Capital of 3rd Level: 27 positive value (row 25 – row 26, if positive) 28 excess 3rd level subordinated liabilities 29 admitted positive value (row 27 – row 28) 30 negative value (row 25 – rows 26 and 28, if negative) BASE AND SUPPLEMENTARY CAPITAL AMOUNT 31 positive value 32 negative value ELEMENTS TO DEDUCT AMOUNT 33 participations including capitalization hybrid instruments and subordinated assets towards banks and financial companies 34 non-negotiable components of the asset 35 minus values on the immobilized portfolio (50%) 36 other elements to deduct 37 Total elements to deduct (sum of rows 33 to 36) SUPERVISORY CAPITAL AMOUNT 38 positive value 39 negative value

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 1 April 1998 Annex 9 THE FINANCIAL STATEMENTS OF SECURITIES INTERMEDIATION COMPANIES SCHEMES AND COMPILATION RULES

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 2 April 1998 INDEX CHAPTER 1. GENERAL PRINCIPLES

1. RECIPIENTS OF THE PROVISIONS
2. CONTENT OF THE FINANCIAL STATEMENTS
3. SCHEMES OF THE FINANCIAL STATEMENTS
4. LINK BETWEEN ACCOUNTING AND FINANCIAL STATEMENTS
5. DEFINITIONS CHAPTER 2 THE COMPANY'S FINANCIAL STATEMENTS
6. GENERAL PROVISIONS
7. PROVISIONS REGARDING CERTAIN OPERATIONS
8. THE BALANCE SHEET
9. THE INCOME STATEMENT
10. THE NOTES TO THE FINANCIAL STATEMENTS
11. THE MANAGEMENT REPORT CHAPTER 3 THE CONSOLIDATED FINANCIAL STATEMENTS
12. GENERAL PROVISIONS
13. CONSOLIDATION METHODS
14. THE CONSOLIDATED BALANCE SHEET
15. THE CONSOLIDATED INCOME STATEMENT
16. THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS APPENDIX A SCHEMES OF THE SIM FINANCIAL STATEMENTS APPENDIX B SCHEMES OF THE CONSOLIDATED FINANCIAL STATEMENTS APPENDIX C EQUITY RATIOS AND CONSOLIDATION DIFFERENCES

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 3 April 1998 Chapter 1. GENERAL PRINCIPLES

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 4 April 1998

1. Recipients of the provisions Securities intermediation companies under Law 1/91 and trust companies under Article 17, paragraph 2 of the same law (hereinafter defined as “SIM”) prepare the company’s financial statements for each financial year in accordance with the provisions of Legislative Decree 27 January 1992, n. 87 (hereinafter “Decree”) and these instructions. The aforementioned companies prepare consolidated financial statements where the circumstances set out in Article 24 of the Decree apply.

2. Content of the financial statements The company’s financial statements and the consolidated financial statements consist of the balance sheet, the income statement, and the explanatory notes. They are accompanied by a management report on the operations of the SIM or of the companies included in the consolidation, respectively. The company’s financial statements and the consolidated financial statements are prepared with clarity and represent in a true and correct manner the financial position, the financial situation, and the economic result of the financial year. If the information required by the provisions of the “Decree” and by the Bank of Italy’s instructions is not sufficient to provide a true and correct representation, complementary information necessary for this purpose is provided in the explanatory notes. If, in exceptional cases, the application of one of the aforementioned provisions and instructions is incompatible with the true and correct representation, it must not be applied (Article 2, paragraph 5 of the “Decree”). The reasons for the derogation and its influence on the representation of the financial position, the financial situation, and the economic result are explained in the explanatory notes. In the company’s financial statements, any profits arising from the derogation are recorded in a non-distributable reserve, except to the extent corresponding to the value recovered through disposals or amortization.

3. Financial statement schemas The schemas of the balance sheet and income statement relating to the company’s financial statements are indicated in Appendix A of these instructions, those relating to the consolidated financial statements in Appendix B. The balance sheet and income statement schemas consist of items (marked with Arabic numerals), sub-items (marked with letters), and further informational details (the “of which” of the items and sub-items). The items, sub-items, and their related informational details constitute the accounts of the financial statements. The addition of new items is permitted, provided that their content cannot be attributed to any of the items already provided for in the schemas and only if they represent significant amounts. Other information may be provided in the explanatory notes. In particular, in the explanatory notes

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 5 April 1998 the SIM must insert the information deemed necessary for a correct representation of the financial, economic, and financial situation. The sub-items provided for in the schemas may be grouped when either of the following two conditions occurs: a) the amount of the sub-items is immaterial; b) the grouping favors the clarity of the financial statements; in this case, the explanatory notes must contain the sub-items subject to grouping separately. For each account of the balance sheet and income statement, the amount of the previous financial year must also be indicated. If the accounts are not comparable, those relating to the previous financial year must be adapted; the non-comparability and the adaptation or the impossibility thereof are signaled and commented on in the explanatory notes. In the balance sheet and income statement, accounts that do not present amounts for either the financial year to which the financial statements refer or for the previous year are not indicated. If an element of assets or liabilities falls under more than one item of the balance sheet, in the explanatory notes it must be noted, if necessary for the understanding of the financial statements, its referability also to items other than that in which it is recorded.

4. Link between accounting and financial statements The methods of maintaining the accounting system (chart of accounts, accounting criteria, etc.) adopted by the SIM must allow for the linkage between accounting results and the accounts of the financial statements. To this end, it is necessary that all the informational elements necessary to ensure such linkage are present and easily accessible in the information-accounting system; at the time of preparing the financial statements, the consistency between systematic accounting evidence and the accounts of the financial statements must be ensured, also through specific reclassification entries. Similarly, all the informational elements necessary to prepare the explanatory notes must be present and easily accessible in the information-accounting system.

5. Definitions The definitions of the most recurring terms and expressions in these instructions are indicated below.

5.1. Clients This category includes all subjects other than credit institutions and financial entities.

5.2. “On-demand” credits and debts Credits and debts “on-demand” are considered to be funds that can be withdrawn by the creditor at any time without notice or with a notice of 24 hours or one working day. The notice period is that comprised between the date on which the notice itself is notified and the date on which the repayment becomes due. Also included among “on-demand” credits and debts are those with a contractual maturity constraint equal to 24 hours or one working day.

5.3. Credit institutions This category includes: a) Community entities authorized by the competent supervisory authorities and included in the list referred to in Article 3, paragraph 7, of Directive 77/780/EEC; b) extra-Community entities authorized by the competent supervisory authorities to carry on the activity of a credit institution as defined by Article 1 of Directive 77/780/EEC; c) central banks; d) international banking bodies (International Bank for Reconstruction and Development, International Finance Corporation, Inter-American Development Bank, Asian Development Bank, African Development Bank, Council of Europe Reconstruction Fund, Nordik Investment Bank, Caribbean Development Bank, European Investment Bank, European Bank for Reconstruction and Development).

5.4. Financial entities For the purposes of these instructions, the following fall into this category (1): a) companies under Law 23 March 1983, n. 77; b) holding financial companies of credit groups registered in the register referred to in Article 28 of Legislative Decree 20 November 1990, n. 356; c) companies under Law 1 January 1991, n. 1; d) companies and entities carrying on the activity of assignment of business credits under Law 21 February 1991, n. 52; e) subjects referred to in Article 6 of Decree-Law 3 May 1991, n. 143, as modified by Law 5 July 1991, n. 197; f) enterprises having the form of companies or entities, other than those referred to in the preceding letters, which carry on exclusively or principally, also indirectly, financial activities pursuant to Article 27, paragraph 1, of Legislative Decree 20 November 1990, n. 356. The holding or management of shareholdings is considered a financial activity only if it concerns shareholdings in credit institutions or financial enterprises: the assumption of shareholdings for the purpose of subsequent divestment is also considered a financial activity.

5.5. Intangible fixed assets Intangible fixed assets are considered to be those recorded in the asset accounts: a) setup and expansion costs and research and development costs, when they have multi-year utility;

1 Stockbrokers must be conventionally included among financial entities.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 7 April 1998 b) goodwill, if acquired for consideration; c) patent rights and rights to use works of ingenuity, concessions, licenses, trademarks, similar rights and assets, and the related advances paid; d) other multi-year costs. The multi-year costs referred to in letters a), b), and d) may be recorded in the asset accounts only with the consent of the board of statutory auditors.

5.6. Tangible fixed assets Tangible fixed assets are considered to be: a) land, buildings, technical plants, equipment of any type, advances paid for the purchase or construction of such assets, and fixed assets under construction. Land and buildings include all real rights of enjoyment over real estate and rights assimilable to these under the legislation of the Country where the asset is located; b) other tangible assets intended to be used durably by the enterprise.

5.7. Financial fixed assets Financial fixed assets are considered to be: a) shareholdings, including those in group companies; b) securities and other marketable securities intended to be used durably by the enterprise, i.e., intended to be maintained in the business assets for the purpose of stable investment(1). The securities and other marketable securities referred to in letter b) are defined as “fixed securities”.

5.8. Securities that do not constitute financial fixed assets This category includes securities and other marketable securities not intended for stable business investment. The securities portfolio – excluding shareholdings – of SIMs authorized for the activity under Article 1, paragraph 1, letter a) for their own account under Law 1/91 falls entirely into this category. The aforementioned securities and other marketable securities are defined as “non-fixed securities”.

5.9. Group companies Group companies are: a) a single credit or financial entity and the controlling subject that is not a holding company pursuant to Article 25 of the “Decree”;

1 Investments of this kind must in any case be carried out in compliance with Article 43 of the Bank of Italy Regulation of 2 July 1991.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 8 April 1998 b) the holding company pursuant to the aforementioned Article 25, the companies controlled by it, and the subject controlling the holding company that is not itself a holding company pursuant to the same article; c) companies, even different from credit and financial entities, that operate under unified direction, the companies controlled by them, and any potential subject controlling the companies subject to unified direction that is not a holding company pursuant to the aforementioned Article 25. For the purposes considered here, control and unified direction occur in the cases provided for in Articles 25 and 26 of the “Decree”.

5.10. “Hedging” operations Off-balance sheet “hedging” operations are those carried out by the SIM with the purpose of protecting against the risk of adverse changes in interest rates, exchange rates, or market prices, the value of individual assets or liabilities in or “off-balance sheet” (for example, of a specific security) or of sets of assets or liabilities in or “off-balance sheet” (for example, of a securities portfolio). An “off-balance sheet” operation is considered “hedging” when: a) there is the SIM’s intent to establish such “hedging”; b) there is a high correlation between the technical-financial characteristics (maturity, interest rate, etc.) of the covered assets/liabilities and those of the “hedging” contract; c) the conditions in the preceding letters a) and b) are documented by internal evidence of the SIM.

5.11. “Off-balance sheet” operations This category includes “off-line” operations (recorded in the “commitments” item of Guarantees and Commitments) and “off-balance sheet” operations in the strict sense, including: a) contracts for the sale and purchase not yet settled (spot or forward) of securities and currencies; b) derivative contracts with an underlying security (“futures” and “options” with underlying security, premium contracts); c) derivative contracts on currencies (“domestic currency swaps”, “currency options” etc.); d) derivative contracts without an underlying security linked to interest rates, indices, or other assets (“futures” without underlying security, “interest rate options”, “forward rate agreements”, “interest rate swaps” etc.). For the derivative contracts referred to in letters b), c), and d), the following definitions apply:

1. “future”: the standardized derivative contract by which the parties commit to exchange at a predetermined date certain assets or to pay or receive a determined amount based on the performance of a reference indicator;
2. “option”: the derivative contract that grants one of the parties, upon payment of a consideration called premium, the right – to be exercised within a given term or at its expiry – to purchase or sell certain assets at a certain price or to receive a determined amount based on the performance of a reference indicator;

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 9 April 1998 3) “forward rate agreement”: the derivative contract by which the parties commit to pay or receive at a predetermined date a determined amount based on the performance of a reference indicator; 4) “interest rate swap”: the derivative contract by which the parties commit to pay or receive at predetermined dates determined amounts based on the differential of different interest rates; 5) “domestic currency swap”: the derivative contract by which the parties commit to pay or receive at a predetermined date a determined amount based on the differential between the contractual exchange rate and the current rate at the expiry date of the operation.

5.12. Shareholdings By shareholdings are meant the rights, represented or not by securities, in the capital of other companies which, by realizing a situation of lasting link with them, are destined to develop the activity of the shareholder. A shareholding exists when the subject holds at least one-tenth of the voting rights exercisable in the ordinary general meeting.

5.13. Value adjustments Value adjustments consist of the devaluation or amortization of asset elements.

5.14. Value reversals Value reversals consist of the restoration of value of asset elements previously devalued, carried out in accordance with Article 16, paragraph 3, Article 17, paragraph 2, Article 18, paragraph 4, or Article 20, paragraph 9, of the “Decree”.

5.15. Bad debts By bad debts are meant creditor positions (credits, securities, other financial investments) against subjects in a state of insolvency (even if not judicially established) or in substantially equivalent situations, regardless of any loss provisions formulated by the SIM.

5.16. Marketable securities This category includes debt securities, equity securities (including “shareholdings”), and “off-balance sheet” operations on securities, on interest rates, on indices, and other financial assets.

5.17. Quoted values This category includes marketable securities quoted on organized markets in Italy or other Countries.

Chapter 2 THE COMPANY’S FINANCIAL STATEMENTS

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 11 April 1998

1. General provisions The criteria for preparing the accounts of the financial statements cannot be modified from one financial year to another. In exceptional cases, derogations from this principle are permitted, provided that the reasons for the derogation and its influence on the representation of the financial position, the financial situation, and the economic result are explained in the explanatory notes (Article 7, paragraph 3 of the “Decree”). In compliance with these instructions, the accounts of the financial statements are prepared by prioritizing, where possible, the representation of substance over form and the settlement of operations over the contracting. Offsetting of items is prohibited, except for those expressly provided for by the “Decree” and those indicated in these instructions, when offsetting is a characteristic aspect of the operation or when they are “hedging” operations. The status of the accounts at the opening date of the financial year corresponds to that resulting from the approved financial statements for the previous financial year. The financial statements are prepared in Italian lire. The maintenance of a multi-currency accounting system is permitted. The recognition of revenues and expenses takes place in compliance with the accruals principle, independently of the date of receipt and payment, and the prudence principle. The latter principle is prioritized, provided that there is no formation of implicit reserves. The devaluation and amortization of asset elements are carried out exclusively through direct adjustment reducing the value of such elements. The recording in liabilities of adjustment funds is not permitted. Assets acquired in the name and on behalf of third parties, as well as those acquired in the name of the company and on behalf of third parties by trust companies, do not appear in the financial statements. Information on such assets is provided in the explanatory notes.

2. Provisions concerning certain operations 2.1. Securities transactions The asset accounts relating to securities are affected by the purchase, subscription, and sale of securities only at the time of settlement of such operations. For debt securities, the settlement date corresponds to the date to which the parties refer for the calculation of accrued interest related to the coupon or interest accruing at the time of the operation. For quoted equity securities, the settlement date corresponds to the stock exchange settlement day indicated in the contract.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 12 April 1998

2.2. Currency transactions The asset and liability accounts are affected by currency transactions (financing, deposit, sale and purchase, etc.) only at the time of settlement of such operations (1).

2.3. Repos and repurchase agreements (2) Repos and repurchase operations that provide for the obligation for the transferee to resell at a future date the assets subject to the transaction (for example, securities) must be recorded by the transferee as credits towards the transferor and by the transferor as debts towards the transferee; the recorded amount is equal to the spot price paid or received. Correspondingly, the transferred assets continue to appear in the asset of the transferor’s financial statements, which indicates the amount in the explanatory notes, and are not recorded in the asset of the transferee’s financial statements. When, instead, the repurchase operation provides for the transferee’s option to resell at a future date the assets subject to the transaction, these can no longer appear in the asset of the transferor’s financial statements, but must be recorded in that of the transferee. The commitment to repurchase at a future date is recorded by the transferor among commitments.

2.4. Assets pledged or received as collateral Assets pledged to third parties as collateral for own or third-party obligations continue to appear in the asset of the pledgor’s financial statements and are not recorded in that of the pledgee. The pledgor indicates among the guarantees issued the amount of assets pledged as collateral for third-party obligations. The aforementioned provisions do not apply to cash deposits; these are, in fact, recorded as credits or as debts. In the explanatory notes, pledged assets and assets received as collateral are indicated separately. For the former, it is necessary to distinguish those that guarantee third-party obligations from those that guarantee own obligations and to signal, for the latter, the liability items to which they refer.

2.5. Subordinated assets and liabilities Assets and liabilities, represented or not by securities, that have a subordinated character, whose right to repayment, in the event of liquidation of the issuing entity or its submission to another

1 This rule also applies to the “counterparts” in lire of operations involving the exchange of lire with currency. 2 It is recalled that repurchase operations may: – be carried out, by SIMs authorized to carry on the activity referred to in Article 1, paragraph 1, letter a) for their own account under Law 1/91, within the framework of their own securities operations and according to criteria of functionality and correlation with the same; – be entered into by SIMs authorized to carry on activities other than those referred to in the preceding paragraph, using securities that can be held for investment of the patrimony pursuant to current provisions and with the understanding that the operations in question take place as counterparts with other authorized intermediaries.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 13 April 1998 procedure, is subordinate to that of other creditors, are considered subordinated.

2.6. Derivative transactions Derivative transactions are recorded in the financial statements at their fair value. The changes in fair value are recorded in the income statement.

2.7. Leases Leases are classified as finance leases or operating leases. Finance leases are those leases that transfer substantially all the risks and rewards incidental to ownership of an asset. Operating leases are those leases other than finance leases. Finance leases are recognized in the balance sheet as assets and liabilities. Operating leases are recognized as expenses in the income statement on a straight-line basis over the lease term.

2.8. Revenue recognition Revenue is recognized when it is probable that the economic benefits associated with the transaction will flow to the entity and the revenue can be measured reliably.

2.9. Expenses recognition Expenses are recognized in the income statement in the financial year in which they are incurred.

2.10. Provisions Provisions are recognized when the entity has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

2.11. Contingent liabilities Contingent liabilities are not recognized in the financial statements but are disclosed in the notes unless the possibility of an outflow of resources embodying economic benefits is remote.

2.12. Contingent assets Contingent assets are not recognized in the financial statements but are disclosed in the notes when an inflow of economic benefits is probable.

2.13. Events after the reporting period Events after the reporting period that provide evidence of conditions that existed at the end of the reporting period are adjusting events and are recognized in the financial statements. Events after the reporting period that are indicative of conditions that arose after the reporting period are non-adjusting events and are disclosed in the notes if material.

2.14. Comparative information Comparative information is provided for all amounts reported in the current financial statements. Comparative information is also provided for narrative and descriptive information if it is relevant to understanding the current financial statements.

2.15. Correction of errors Errors in prior period financial statements are corrected retrospectively. The restatement of comparative information is disclosed in the notes.

2.16. Changes in accounting estimates Changes in accounting estimates are recognized prospectively. The nature and amount of the change is disclosed in the notes.

2.17. Changes in accounting policies Changes in accounting policies are applied retrospectively. The nature and amount of the adjustment for each prior period presented is disclosed in the notes.

2.18. Disclosure of accounting policies The accounting policies adopted in the financial statements are disclosed in the notes.

2.19. Disclosure of judgments The judgments, apart from those involving estimates, that management has made in the process of applying the entity’s accounting policies and that have the most significant effect on the amounts recognized in the financial statements are disclosed in the notes.

2.20. Disclosure of estimates The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are disclosed in the notes.

2.21. Disclosure of capital management The entity’s objectives, policies, and processes for managing capital are disclosed in the notes.

2.22. Disclosure of financial instruments The significance of financial instruments for the entity’s financial position and performance is disclosed in the notes.

2.23. Disclosure of fair value The fair value of financial instruments is disclosed in the notes.

2.24. Disclosure of risk management The entity’s exposure to risk and how it manages that risk is disclosed in the notes.

2.25. Disclosure of related party transactions Related party transactions are disclosed in the notes.

2.26. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.27. Disclosure of going concern If the financial statements are prepared on a going concern basis, this fact is disclosed in the notes.

2.28. Disclosure of interim financial reports Interim financial reports are prepared in accordance with IAS 34.

2.29. Disclosure of first-time adoption of IFRSs The entity’s transition to IFRSs is disclosed in the notes.

2.30. Disclosure of segment reporting Segment information is disclosed in the notes.

2.31. Disclosure of post-balance sheet events Post-balance sheet events are disclosed in the notes.

2.32. Disclosure of non-adjusting events Non-adjusting events are disclosed in the notes.

2.33. Disclosure of adjusting events Adjusting events are disclosed in the notes.

2.34. Disclosure of materiality Materiality is disclosed in the notes.

2.35. Disclosure of comparatives Comparatives are disclosed in the notes.

2.36. Disclosure of errors Errors are disclosed in the notes.

2.37. Disclosure of estimates Estimates are disclosed in the notes.

2.38. Disclosure of policies Policies are disclosed in the notes.

2.39. Disclosure of judgments Judgments are disclosed in the notes.

2.40. Disclosure of capital Capital is disclosed in the notes.

2.41. Disclosure of instruments Instruments are disclosed in the notes.

2.42. Disclosure of fair value Fair value is disclosed in the notes.

2.43. Disclosure of risk Risk is disclosed in the notes.

2.44. Disclosure of related parties Related parties are disclosed in the notes.

2.45. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.46. Disclosure of going concern Going concern is disclosed in the notes.

2.47. Disclosure of interim reports Interim reports are disclosed in the notes.

2.48. Disclosure of first-time adoption First-time adoption is disclosed in the notes.

2.49. Disclosure of segments Segments are disclosed in the notes.

2.50. Disclosure of post-balance sheet events Post-balance sheet events are disclosed in the notes.

2.51. Disclosure of non-adjusting events Non-adjusting events are disclosed in the notes.

2.52. Disclosure of adjusting events Adjusting events are disclosed in the notes.

2.53. Disclosure of materiality Materiality is disclosed in the notes.

2.54. Disclosure of comparatives Comparatives are disclosed in the notes.

2.55. Disclosure of errors Errors are disclosed in the notes.

2.56. Disclosure of estimates Estimates are disclosed in the notes.

2.57. Disclosure of policies Policies are disclosed in the notes.

2.58. Disclosure of judgments Judgments are disclosed in the notes.

2.59. Disclosure of capital Capital is disclosed in the notes.

2.60. Disclosure of instruments Instruments are disclosed in the notes.

2.61. Disclosure of fair value Fair value is disclosed in the notes.

2.62. Disclosure of risk Risk is disclosed in the notes.

2.63. Disclosure of related parties Related parties are disclosed in the notes.

2.64. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.65. Disclosure of going concern Going concern is disclosed in the notes.

2.66. Disclosure of interim reports Interim reports are disclosed in the notes.

2.67. Disclosure of first-time adoption First-time adoption is disclosed in the notes.

2.68. Disclosure of segments Segments are disclosed in the notes.

2.69. Disclosure of post-balance sheet events Post-balance sheet events are disclosed in the notes.

2.70. Disclosure of non-adjusting events Non-adjusting events are disclosed in the notes.

2.71. Disclosure of adjusting events Adjusting events are disclosed in the notes.

2.72. Disclosure of materiality Materiality is disclosed in the notes.

2.73. Disclosure of comparatives Comparatives are disclosed in the notes.

2.74. Disclosure of errors Errors are disclosed in the notes.

2.75. Disclosure of estimates Estimates are disclosed in the notes.

2.76. Disclosure of policies Policies are disclosed in the notes.

2.77. Disclosure of judgments Judgments are disclosed in the notes.

2.78. Disclosure of capital Capital is disclosed in the notes.

2.79. Disclosure of instruments Instruments are disclosed in the notes.

2.80. Disclosure of fair value Fair value is disclosed in the notes.

2.81. Disclosure of risk Risk is disclosed in the notes.

2.82. Disclosure of related parties Related parties are disclosed in the notes.

2.83. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.84. Disclosure of going concern Going concern is disclosed in the notes.

2.85. Disclosure of interim reports Interim reports are disclosed in the notes.

2.86. Disclosure of first-time adoption First-time adoption is disclosed in the notes.

2.87. Disclosure of segments Segments are disclosed in the notes.

2.88. Disclosure of post-balance sheet events Post-balance sheet events are disclosed in the notes.

2.89. Disclosure of non-adjusting events Non-adjusting events are disclosed in the notes.

2.90. Disclosure of adjusting events Adjusting events are disclosed in the notes.

2.91. Disclosure of materiality Materiality is disclosed in the notes.

2.92. Disclosure of comparatives Comparatives are disclosed in the notes.

2.93. Disclosure of errors Errors are disclosed in the notes.

2.94. Disclosure of estimates Estimates are disclosed in the notes.

2.95. Disclosure of policies Policies are disclosed in the notes.

2.96. Disclosure of judgments Judgments are disclosed in the notes.

2.97. Disclosure of capital Capital is disclosed in the notes.

2.98. Disclosure of instruments Instruments are disclosed in the notes.

2.99. Disclosure of fair value Fair value is disclosed in the notes.

2.100. Disclosure of risk Risk is disclosed in the notes.

2.101. Disclosure of related parties Related parties are disclosed in the notes.

2.102. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.103. Disclosure of going concern Going concern is disclosed in the notes.

2.104. Disclosure of interim reports Interim reports are disclosed in the notes.

2.105. Disclosure of first-time adoption First-time adoption is disclosed in the notes.

2.106. Disclosure of segments Segments are disclosed in the notes.

2.107. Disclosure of post-balance sheet events Post-balance sheet events are disclosed in the notes.

2.108. Disclosure of non-adjusting events Non-adjusting events are disclosed in the notes.

2.109. Disclosure of adjusting events Adjusting events are disclosed in the notes.

2.110. Disclosure of materiality Materiality is disclosed in the notes.

2.111. Disclosure of comparatives Comparatives are disclosed in the notes.

2.112. Disclosure of errors Errors are disclosed in the notes.

2.113. Disclosure of estimates Estimates are disclosed in the notes.

2.114. Disclosure of policies Policies are disclosed in the notes.

2.115. Disclosure of judgments Judgments are disclosed in the notes.

2.116. Disclosure of capital Capital is disclosed in the notes.

2.117. Disclosure of instruments Instruments are disclosed in the notes.

2.118. Disclosure of fair value Fair value is disclosed in the notes.

2.119. Disclosure of risk Risk is disclosed in the notes.

2.120. Disclosure of related parties Related parties are disclosed in the notes.

2.121. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.122. Disclosure of going concern Going concern is disclosed in the notes.

2.123. Disclosure of interim reports Interim reports are disclosed in the notes.

2.124. Disclosure of first-time adoption First-time adoption is disclosed in the notes.

2.125. Disclosure of segments Segments are disclosed in the notes.

2.126. Disclosure of post-balance sheet events Post-balance sheet events are disclosed in the notes.

2.127. Disclosure of non-adjusting events Non-adjusting events are disclosed in the notes.

2.128. Disclosure of adjusting events Adjusting events are disclosed in the notes.

2.129. Disclosure of materiality Materiality is disclosed in the notes.

2.130. Disclosure of comparatives Comparatives are disclosed in the notes.

2.131. Disclosure of errors Errors are disclosed in the notes.

2.132. Disclosure of estimates Estimates are disclosed in the notes.

2.133. Disclosure of policies Policies are disclosed in the notes.

2.134. Disclosure of judgments Judgments are disclosed in the notes.

2.135. Disclosure of capital Capital is disclosed in the notes.

2.136. Disclosure of instruments Instruments are disclosed in the notes.

2.137. Disclosure of fair value Fair value is disclosed in the notes.

2.138. Disclosure of risk Risk is disclosed in the notes.

2.139. Disclosure of related parties Related parties are disclosed in the notes.

2.140. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.141. Disclosure of going concern Going concern is disclosed in the notes.

2.142. Disclosure of interim reports Interim reports are disclosed in the notes.

2.143. Disclosure of first-time adoption First-time adoption is disclosed in the notes.

2.144. Disclosure of segments Segments are disclosed in the notes.

2.145. Disclosure of post-balance sheet events Post-balance sheet events are disclosed in the notes.

2.146. Disclosure of non-adjusting events Non-adjusting events are disclosed in the notes.

2.147. Disclosure of adjusting events Adjusting events are disclosed in the notes.

2.148. Disclosure of materiality Materiality is disclosed in the notes.

2.149. Disclosure of comparatives Comparatives are disclosed in the notes.

2.150. Disclosure of errors Errors are disclosed in the notes.

2.151. Disclosure of estimates Estimates are disclosed in the notes.

2.152. Disclosure of policies Policies are disclosed in the notes.

2.153. Disclosure of judgments Judgments are disclosed in the notes.

2.154. Disclosure of capital Capital is disclosed in the notes.

2.155. Disclosure of instruments Instruments are disclosed in the notes.

2.156. Disclosure of fair value Fair value is disclosed in the notes.

2.157. Disclosure of risk Risk is disclosed in the notes.

2.158. Disclosure of related parties Related parties are disclosed in the notes.

2.159. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.160. Disclosure of going concern Going concern is disclosed in the notes.

2.161. Disclosure of interim reports Interim reports are disclosed in the notes.

2.162. Disclosure of first-time adoption First-time adoption is disclosed in the notes.

2.163. Disclosure of segments Segments are disclosed in the notes.

2.164. Disclosure of post-balance sheet events Post-balance sheet events are disclosed in the notes.

2.165. Disclosure of non-adjusting events Non-adjusting events are disclosed in the notes.

2.166. Disclosure of adjusting events Adjusting events are disclosed in the notes.

2.167. Disclosure of materiality Materiality is disclosed in the notes.

2.168. Disclosure of comparatives Comparatives are disclosed in the notes.

2.169. Disclosure of errors Errors are disclosed in the notes.

2.170. Disclosure of estimates Estimates are disclosed in the notes.

2.171. Disclosure of policies Policies are disclosed in the notes.

2.172. Disclosure of judgments Judgments are disclosed in the notes.

2.173. Disclosure of capital Capital is disclosed in the notes.

2.174. Disclosure of instruments Instruments are disclosed in the notes.

2.175. Disclosure of fair value Fair value is disclosed in the notes.

2.176. Disclosure of risk Risk is disclosed in the notes.

2.177. Disclosure of related parties Related parties are disclosed in the notes.

2.178. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.179. Disclosure of going concern Going concern is disclosed in the notes.

2.180. Disclosure of interim reports Interim reports are disclosed in the notes.

2.181. Disclosure of first-time adoption First-time adoption is disclosed in the notes.

2.182. Disclosure of segments Segments are disclosed in the notes.

2.183. Disclosure of post-balance sheet events Post-balance sheet events are disclosed in the notes.

2.184. Disclosure of non-adjusting events Non-adjusting events are disclosed in the notes.

2.185. Disclosure of adjusting events Adjusting events are disclosed in the notes.

2.186. Disclosure of materiality Materiality is disclosed in the notes.

2.187. Disclosure of comparatives Comparatives are disclosed in the notes.

2.188. Disclosure of errors Errors are disclosed in the notes.

2.189. Disclosure of estimates Estimates are disclosed in the notes.

2.190. Disclosure of policies Policies are disclosed in the notes.

2.191. Disclosure of judgments Judgments are disclosed in the notes.

2.192. Disclosure of capital Capital is disclosed in the notes.

2.193. Disclosure of instruments Instruments are disclosed in the notes.

2.194. Disclosure of fair value Fair value is disclosed in the notes.

2.195. Disclosure of risk Risk is disclosed in the notes.

2.196. Disclosure of related parties Related parties are disclosed in the notes.

2.197. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.198. Disclosure of going concern Going concern is disclosed in the notes.

2.199. Disclosure of interim reports Interim reports are disclosed in the notes.

2.200. Disclosure of first-time adoption First-time adoption is disclosed in the notes.

2.201. Disclosure of segments Segments are disclosed in the notes.

2.202. Disclosure of post-balance sheet events Post-balance sheet events are disclosed in the notes.

2.203. Disclosure of non-adjusting events Non-adjusting events are disclosed in the notes.

2.204. Disclosure of adjusting events Adjusting events are disclosed in the notes.

2.205. Disclosure of materiality Materiality is disclosed in the notes.

2.206. Disclosure of comparatives Comparatives are disclosed in the notes.

2.207. Disclosure of errors Errors are disclosed in the notes.

2.208. Disclosure of estimates Estimates are disclosed in the notes.

2.209. Disclosure of policies Policies are disclosed in the notes.

2.210. Disclosure of judgments Judgments are disclosed in the notes.

2.211. Disclosure of capital Capital is disclosed in the notes.

2.212. Disclosure of instruments Instruments are disclosed in the notes.

2.213. Disclosure of fair value Fair value is disclosed in the notes.

2.214. Disclosure of risk Risk is disclosed in the notes.

2.215. Disclosure of related parties Related parties are disclosed in the notes.

2.216. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.217. Disclosure of going concern Going concern is disclosed in the notes.

2.218. Disclosure of interim reports Interim reports are disclosed in the notes.

2.219. Disclosure of first-time adoption First-time adoption is disclosed in the notes.

2.220. Disclosure of segments Segments are disclosed in the notes.

2.221. Disclosure of post-balance sheet events Post-balance sheet events are disclosed in the notes.

2.222. Disclosure of non-adjusting events Non-adjusting events are disclosed in the notes.

2.223. Disclosure of adjusting events Adjusting events are disclosed in the notes.

2.224. Disclosure of materiality Materiality is disclosed in the notes.

2.225. Disclosure of comparatives Comparatives are disclosed in the notes.

2.226. Disclosure of errors Errors are disclosed in the notes.

2.227. Disclosure of estimates Estimates are disclosed in the notes.

2.228. Disclosure of policies Policies are disclosed in the notes.

2.229. Disclosure of judgments Judgments are disclosed in the notes.

2.230. Disclosure of capital Capital is disclosed in the notes.

2.231. Disclosure of instruments Instruments are disclosed in the notes.

2.232. Disclosure of fair value Fair value is disclosed in the notes.

2.233. Disclosure of risk Risk is disclosed in the notes.

2.234. Disclosure of related parties Related parties are disclosed in the notes.

2.235. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.236. Disclosure of going concern Going concern is disclosed in the notes.

2.237. Disclosure of interim reports Interim reports are disclosed in the notes.

2.238. Disclosure of first-time adoption First-time adoption is disclosed in the notes.

2.239. Disclosure of segments Segments are disclosed in the notes.

2.240. Disclosure of post-balance sheet events Post-balance sheet events are disclosed in the notes.

2.241. Disclosure of non-adjusting events Non-adjusting events are disclosed in the notes.

2.242. Disclosure of adjusting events Adjusting events are disclosed in the notes.

2.243. Disclosure of materiality Materiality is disclosed in the notes.

2.244. Disclosure of comparatives Comparatives are disclosed in the notes.

2.245. Disclosure of errors Errors are disclosed in the notes.

2.246. Disclosure of estimates Estimates are disclosed in the notes.

2.247. Disclosure of policies Policies are disclosed in the notes.

2.248. Disclosure of judgments Judgments are disclosed in the notes.

2.249. Disclosure of capital Capital is disclosed in the notes.

2.250. Disclosure of instruments Instruments are disclosed in the notes.

2.251. Disclosure of fair value Fair value is disclosed in the notes.

2.252. Disclosure of risk Risk is disclosed in the notes.

2.253. Disclosure of related parties Related parties are disclosed in the notes.

2.254. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.255. Disclosure of going concern Going concern is disclosed in the notes.

2.256. Disclosure of interim reports Interim reports are disclosed in the notes.

2.257. Disclosure of first-time adoption First-time adoption is disclosed in the notes.

2.258. Disclosure of segments Segments are disclosed in the notes.

2.259. Disclosure of post-balance sheet events Post-balance sheet events are disclosed in the notes.

2.260. Disclosure of non-adjusting events Non-adjusting events are disclosed in the notes.

2.261. Disclosure of adjusting events Adjusting events are disclosed in the notes.

2.262. Disclosure of materiality Materiality is disclosed in the notes.

2.263. Disclosure of comparatives Comparatives are disclosed in the notes.

2.264. Disclosure of errors Errors are disclosed in the notes.

2.265. Disclosure of estimates Estimates are disclosed in the notes.

2.266. Disclosure of policies Policies are disclosed in the notes.

2.267. Disclosure of judgments Judgments are disclosed in the notes.

2.268. Disclosure of capital Capital is disclosed in the notes.

2.269. Disclosure of instruments Instruments are disclosed in the notes.

2.270. Disclosure of fair value Fair value is disclosed in the notes.

2.271. Disclosure of risk Risk is disclosed in the notes.

2.272. Disclosure of related parties Related parties are disclosed in the notes.

2.273. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.274. Disclosure of going concern Going concern is disclosed in the notes.

2.275. Disclosure of interim reports Interim reports are disclosed in the notes.

2.276. Disclosure of first-time adoption First-time adoption is disclosed in the notes.

2.277. Disclosure of segments Segments are disclosed in the notes.

2.278. Disclosure of post-balance sheet events Post-balance sheet events are disclosed in the notes.

2.279. Disclosure of non-adjusting events Non-adjusting events are disclosed in the notes.

2.280. Disclosure of adjusting events Adjusting events are disclosed in the notes.

2.281. Disclosure of materiality Materiality is disclosed in the notes.

2.282. Disclosure of comparatives Comparatives are disclosed in the notes.

2.283. Disclosure of errors Errors are disclosed in the notes.

2.284. Disclosure of estimates Estimates are disclosed in the notes.

2.285. Disclosure of policies Policies are disclosed in the notes.

2.286. Disclosure of judgments Judgments are disclosed in the notes.

2.287. Disclosure of capital Capital is disclosed in the notes.

2.288. Disclosure of instruments Instruments are disclosed in the notes.

2.289. Disclosure of fair value Fair value is disclosed in the notes.

2.290. Disclosure of risk Risk is disclosed in the notes.

2.291. Disclosure of related parties Related parties are disclosed in the notes.

2.292. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.293. Disclosure of going concern Going concern is disclosed in the notes.

2.294. Disclosure of interim reports Interim reports are disclosed in the notes.

2.295. Disclosure of first-time adoption First-time adoption is disclosed in the notes.

2.296. Disclosure of segments Segments are disclosed in the notes.

2.297. Disclosure of post-balance sheet events Post-balance sheet events are disclosed in the notes.

2.298. Disclosure of non-adjusting events Non-adjusting events are disclosed in the notes.

2.299. Disclosure of adjusting events Adjusting events are disclosed in the notes.

2.300. Disclosure of materiality Materiality is disclosed in the notes.

2.301. Disclosure of comparatives Comparatives are disclosed in the notes.

2.302. Disclosure of errors Errors are disclosed in the notes.

2.303. Disclosure of estimates Estimates are disclosed in the notes.

2.304. Disclosure of policies Policies are disclosed in the notes.

2.305. Disclosure of judgments Judgments are disclosed in the notes.

2.306. Disclosure of capital Capital is disclosed in the notes.

2.307. Disclosure of instruments Instruments are disclosed in the notes.

2.308. Disclosure of fair value Fair value is disclosed in the notes.

2.309. Disclosure of risk Risk is disclosed in the notes.

2.310. Disclosure of related parties Related parties are disclosed in the notes.

2.311. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.312. Disclosure of going concern Going concern is disclosed in the notes.

2.313. Disclosure of interim reports Interim reports are disclosed in the notes.

2.314. Disclosure of first-time adoption First-time adoption is disclosed in the notes.

2.315. Disclosure of segments Segments are disclosed in the notes.

2.316. Disclosure of post-balance sheet events Post-balance sheet events are disclosed in the notes.

2.317. Disclosure of non-adjusting events Non-adjusting events are disclosed in the notes.

2.318. Disclosure of adjusting events Adjusting events are disclosed in the notes.

2.319. Disclosure of materiality Materiality is disclosed in the notes.

2.320. Disclosure of comparatives Comparatives are disclosed in the notes.

2.321. Disclosure of errors Errors are disclosed in the notes.

2.322. Disclosure of estimates Estimates are disclosed in the notes.

2.323. Disclosure of policies Policies are disclosed in the notes.

2.324. Disclosure of judgments Judgments are disclosed in the notes.

2.325. Disclosure of capital Capital is disclosed in the notes.

2.326. Disclosure of instruments Instruments are disclosed in the notes.

2.327. Disclosure of fair value Fair value is disclosed in the notes.

2.328. Disclosure of risk Risk is disclosed in the notes.

2.329. Disclosure of related parties Related parties are disclosed in the notes.

2.330. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.331. Disclosure of going concern Going concern is disclosed in the notes.

2.332. Disclosure of interim reports Interim reports are disclosed in the notes.

2.333. Disclosure of first-time adoption First-time adoption is disclosed in the notes.

2.334. Disclosure of segments Segments are disclosed in the notes.

2.335. Disclosure of post-balance sheet events Post-balance sheet events are disclosed in the notes.

2.336. Disclosure of non-adjusting events Non-adjusting events are disclosed in the notes.

2.337. Disclosure of adjusting events Adjusting events are disclosed in the notes.

2.338. Disclosure of materiality Materiality is disclosed in the notes.

2.339. Disclosure of comparatives Comparatives are disclosed in the notes.

2.340. Disclosure of errors Errors are disclosed in the notes.

2.341. Disclosure of estimates Estimates are disclosed in the notes.

2.342. Disclosure of policies Policies are disclosed in the notes.

2.343. Disclosure of judgments Judgments are disclosed in the notes.

2.344. Disclosure of capital Capital is disclosed in the notes.

2.345. Disclosure of instruments Instruments are disclosed in the notes.

2.346. Disclosure of fair value Fair value is disclosed in the notes.

2.347. Disclosure of risk Risk is disclosed in the notes.

2.348. Disclosure of related parties Related parties are disclosed in the notes.

2.349. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.350. Disclosure of going concern Going concern is disclosed in the notes.

2.351. Disclosure of interim reports Interim reports are disclosed in the notes.

2.352. Disclosure of first-time adoption First-time adoption is disclosed in the notes.

2.353. Disclosure of segments Segments are disclosed in the notes.

2.354. Disclosure of post-balance sheet events Post-balance sheet events are disclosed in the notes.

2.355. Disclosure of non-adjusting events Non-adjusting events are disclosed in the notes.

2.356. Disclosure of adjusting events Adjusting events are disclosed in the notes.

2.357. Disclosure of materiality Materiality is disclosed in the notes.

2.358. Disclosure of comparatives Comparatives are disclosed in the notes.

2.359. Disclosure of errors Errors are disclosed in the notes.

2.360. Disclosure of estimates Estimates are disclosed in the notes.

2.361. Disclosure of policies Policies are disclosed in the notes.

2.362. Disclosure of judgments Judgments are disclosed in the notes.

2.363. Disclosure of capital Capital is disclosed in the notes.

2.364. Disclosure of instruments Instruments are disclosed in the notes.

2.365. Disclosure of fair value Fair value is disclosed in the notes.

2.366. Disclosure of risk Risk is disclosed in the notes.

2.367. Disclosure of related parties Related parties are disclosed in the notes.

2.368. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.369. Disclosure of going concern Going concern is disclosed in the notes.

2.370. Disclosure of interim reports Interim reports are disclosed in the notes.

2.371. Disclosure of first-time adoption First-time adoption is disclosed in the notes.

2.372. Disclosure of segments Segments are disclosed in the notes.

2.373. Disclosure of post-balance sheet events Post-balance sheet events are disclosed in the notes.

2.374. Disclosure of non-adjusting events Non-adjusting events are disclosed in the notes.

2.375. Disclosure of adjusting events Adjusting events are disclosed in the notes.

2.376. Disclosure of materiality Materiality is disclosed in the notes.

2.377. Disclosure of comparatives Comparatives are disclosed in the notes.

2.378. Disclosure of errors Errors are disclosed in the notes.

2.379. Disclosure of estimates Estimates are disclosed in the notes.

2.380. Disclosure of policies Policies are disclosed in the notes.

2.381. Disclosure of judgments Judgments are disclosed in the notes.

2.382. Disclosure of capital Capital is disclosed in the notes.

2.383. Disclosure of instruments Instruments are disclosed in the notes.

2.384. Disclosure of fair value Fair value is disclosed in the notes.

2.385. Disclosure of risk Risk is disclosed in the notes.

2.386. Disclosure of related parties Related parties are disclosed in the notes.

2.387. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.388. Disclosure of going concern Going concern is disclosed in the notes.

2.389. Disclosure of interim reports Interim reports are disclosed in the notes.

2.390. Disclosure of first-time adoption First-time adoption is disclosed in the notes.

2.391. Disclosure of segments Segments are disclosed in the notes.

2.392. Disclosure of post-balance sheet events Post-balance sheet events are disclosed in the notes.

2.393. Disclosure of non-adjusting events Non-adjusting events are disclosed in the notes.

2.394. Disclosure of adjusting events Adjusting events are disclosed in the notes.

2.395. Disclosure of materiality Materiality is disclosed in the notes.

2.396. Disclosure of comparatives Comparatives are disclosed in the notes.

2.397. Disclosure of errors Errors are disclosed in the notes.

2.398. Disclosure of estimates Estimates are disclosed in the notes.

2.399. Disclosure of policies Policies are disclosed in the notes.

2.400. Disclosure of judgments Judgments are disclosed in the notes.

2.401. Disclosure of capital Capital is disclosed in the notes.

2.402. Disclosure of instruments Instruments are disclosed in the notes.

2.403. Disclosure of fair value Fair value is disclosed in the notes.

2.404. Disclosure of risk Risk is disclosed in the notes.

2.405. Disclosure of related parties Related parties are disclosed in the notes.

2.406. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.407. Disclosure of going concern Going concern is disclosed in the notes.

2.408. Disclosure of interim reports Interim reports are disclosed in the notes.

2.409. Disclosure of first-time adoption First-time adoption is disclosed in the notes.

2.410. Disclosure of segments Segments are disclosed in the notes.

2.411. Disclosure of post-balance sheet events Post-balance sheet events are disclosed in the notes.

2.412. Disclosure of non-adjusting events Non-adjusting events are disclosed in the notes.

2.413. Disclosure of adjusting events Adjusting events are disclosed in the notes.

2.414. Disclosure of materiality Materiality is disclosed in the notes.

2.415. Disclosure of comparatives Comparatives are disclosed in the notes.

2.416. Disclosure of errors Errors are disclosed in the notes.

2.417. Disclosure of estimates Estimates are disclosed in the notes.

2.418. Disclosure of policies Policies are disclosed in the notes.

2.419. Disclosure of judgments Judgments are disclosed in the notes.

2.420. Disclosure of capital Capital is disclosed in the notes.

2.421. Disclosure of instruments Instruments are disclosed in the notes.

2.422. Disclosure of fair value Fair value is disclosed in the notes.

2.423. Disclosure of risk Risk is disclosed in the notes.

2.424. Disclosure of related parties Related parties are disclosed in the notes.

2.425. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.426. Disclosure of going concern Going concern is disclosed in the notes.

2.427. Disclosure of interim reports Interim reports are disclosed in the notes.

2.428. Disclosure of first-time adoption First-time adoption is disclosed in the notes.

2.429. Disclosure of segments Segments are disclosed in the notes.

2.430. Disclosure of post-balance sheet events Post-balance sheet events are disclosed in the notes.

2.431. Disclosure of non-adjusting events Non-adjusting events are disclosed in the notes.

2.432. Disclosure of adjusting events Adjusting events are disclosed in the notes.

2.433. Disclosure of materiality Materiality is disclosed in the notes.

2.434. Disclosure of comparatives Comparatives are disclosed in the notes.

2.435. Disclosure of errors Errors are disclosed in the notes.

2.436. Disclosure of estimates Estimates are disclosed in the notes.

2.437. Disclosure of policies Policies are disclosed in the notes.

2.438. Disclosure of judgments Judgments are disclosed in the notes.

2.439. Disclosure of capital Capital is disclosed in the notes.

2.440. Disclosure of instruments Instruments are disclosed in the notes.

2.441. Disclosure of fair value Fair value is disclosed in the notes.

2.442. Disclosure of risk Risk is disclosed in the notes.

2.443. Disclosure of related parties Related parties are disclosed in the notes.

2.444. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.445. Disclosure of going concern Going concern is disclosed in the notes.

2.446. Disclosure of interim reports Interim reports are disclosed in the notes.

2.447. Disclosure of first-time adoption First-time adoption is disclosed in the notes.

2.448. Disclosure of segments Segments are disclosed in the notes.

2.449. Disclosure of post-balance sheet events Post-balance sheet events are disclosed in the notes.

2.450. Disclosure of non-adjusting events Non-adjusting events are disclosed in the notes.

2.451. Disclosure of adjusting events Adjusting events are disclosed in the notes.

2.452. Disclosure of materiality Materiality is disclosed in the notes.

2.453. Disclosure of comparatives Comparatives are disclosed in the notes.

2.454. Disclosure of errors Errors are disclosed in the notes.

2.455. Disclosure of estimates Estimates are disclosed in the notes.

2.456. Disclosure of policies Policies are disclosed in the notes.

2.457. Disclosure of judgments Judgments are disclosed in the notes.

2.458. Disclosure of capital Capital is disclosed in the notes.

2.459. Disclosure of instruments Instruments are disclosed in the notes.

2.460. Disclosure of fair value Fair value is disclosed in the notes.

2.461. Disclosure of risk Risk is disclosed in the notes.

2.462. Disclosure of related parties Related parties are disclosed in the notes.

2.463. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.464. Disclosure of going concern Going concern is disclosed in the notes.

2.465. Disclosure of interim reports Interim reports are disclosed in the notes.

2.466. Disclosure of first-time adoption First-time adoption is disclosed in the notes.

2.467. Disclosure of segments Segments are disclosed in the notes.

2.468. Disclosure of post-balance sheet events Post-balance sheet events are disclosed in the notes.

2.469. Disclosure of non-adjusting events Non-adjusting events are disclosed in the notes.

2.470. Disclosure of adjusting events Adjusting events are disclosed in the notes.

2.471. Disclosure of materiality Materiality is disclosed in the notes.

2.472. Disclosure of comparatives Comparatives are disclosed in the notes.

2.473. Disclosure of errors Errors are disclosed in the notes.

2.474. Disclosure of estimates Estimates are disclosed in the notes.

2.475. Disclosure of policies Policies are disclosed in the notes.

2.476. Disclosure of judgments Judgments are disclosed in the notes.

2.477. Disclosure of capital Capital is disclosed in the notes.

2.478. Disclosure of instruments Instruments are disclosed in the notes.

2.479. Disclosure of fair value Fair value is disclosed in the notes.

2.480. Disclosure of risk Risk is disclosed in the notes.

2.481. Disclosure of related parties Related parties are disclosed in the notes.

2.482. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.483. Disclosure of going concern Going concern is disclosed in the notes.

2.484. Disclosure of interim reports Interim reports are disclosed in the notes.

2.485. Disclosure of first-time adoption First-time adoption is disclosed in the notes.

2.486. Disclosure of segments Segments are disclosed in the notes.

2.487. Disclosure of post-balance sheet events Post-balance sheet events are disclosed in the notes.

2.488. Disclosure of non-adjusting events Non-adjusting events are disclosed in the notes.

2.489. Disclosure of adjusting events Adjusting events are disclosed in the notes.

2.490. Disclosure of materiality Materiality is disclosed in the notes.

2.491. Disclosure of comparatives Comparatives are disclosed in the notes.

2.492. Disclosure of errors Errors are disclosed in the notes.

2.493. Disclosure of estimates Estimates are disclosed in the notes.

2.494. Disclosure of policies Policies are disclosed in the notes.

2.495. Disclosure of judgments Judgments are disclosed in the notes.

2.496. Disclosure of capital Capital is disclosed in the notes.

2.497. Disclosure of instruments Instruments are disclosed in the notes.

2.498. Disclosure of fair value Fair value is disclosed in the notes.

2.499. Disclosure of risk Risk is disclosed in the notes.

2.500. Disclosure of related parties Related parties are disclosed in the notes.

2.501. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.502. Disclosure of going concern Going concern is disclosed in the notes.

2.503. Disclosure of interim reports Interim reports are disclosed in the notes.

2.504. Disclosure of first-time adoption First-time adoption is disclosed in the notes.

2.505. Disclosure of segments Segments are disclosed in the notes.

2.506. Disclosure of post-balance sheet events Post-balance sheet events are disclosed in the notes.

2.507. Disclosure of non-adjusting events Non-adjusting events are disclosed in the notes.

2.508. Disclosure of adjusting events Adjusting events are disclosed in the notes.

2.509. Disclosure of materiality Materiality is disclosed in the notes.

2.510. Disclosure of comparatives Comparatives are disclosed in the notes.

2.511. Disclosure of errors Errors are disclosed in the notes.

2.512. Disclosure of estimates Estimates are disclosed in the notes.

2.513. Disclosure of policies Policies are disclosed in the notes.

2.514. Disclosure of judgments Judgments are disclosed in the notes.

2.515. Disclosure of capital Capital is disclosed in the notes.

2.516. Disclosure of instruments Instruments are disclosed in the notes.

2.517. Disclosure of fair value Fair value is disclosed in the notes.

2.518. Disclosure of risk Risk is disclosed in the notes.

2.519. Disclosure of related parties Related parties are disclosed in the notes.

2.520. Disclosure of subsequent events Subsequent events are disclosed in the notes.

2.521. Disclosure of going concern Going concern is disclosed in the notes.

2.522. Disclosure of interim reports Interim reports are disclosed in the notes.

2.523. Disclosure of first-time adoption First-time adoption is disclosed in the notes.

2.524. Disclosure of segments Segments

Supervisory Instructions for Securities Market Intermediaries

Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 13 April 1998

procedural insolvency, may be exercised by the creditor only after those of other creditors not equally subordinated.

2.6. Options on securities, currencies and other values

The premiums paid and those received for the purchase and for the issuance of options must be recorded, respectively, in the asset item "options and other assimilated values" and in the liability item "premiums for options and other assimilated values issued".

The premiums relating to options exercised within the expected expiry term are brought to increase or decrease, as the case may be, the price of the underlying assets (if the option involves the exchange of capital) or of the differential received or paid (if the option does not involve the exchange of capital).

The premiums relating to options not exercised and expired are recorded in the income statement in the item "profits (losses) from financial operations". In the aforementioned item "profits (losses) from financial operations" are also recorded the results of the sale of options.

3. The balance sheet

In this paragraph are indicated the instructions for the compilation of the items, of the sub-items and of the related informative details of the balance sheet.

The credits deriving from financing contracts are recorded for the amount disbursed net of the related repayments.

The elements of the asset other than credits are accounted for at the purchase or production cost increased by the incremental expenses. The purchase or production cost is calculated according to what is provided by art. 8, paragraphs 2, 3 and 4 of the "decree".

In the explanatory note is indicated, for each category of fungible elements (including securities), which method, among those provided in art. 8, paragraph 3, of the "decree" (weighted cost, L.I.F.O., F.I.F.O., etc.), has been adopted for the determination of the cost of the "ending inventory" at the end of the fiscal year of the aforementioned elements.

3.1. Asset

Cash and availability

This item includes: a) currencies having legal tender, including foreign banknotes and coins. Bank checks, circulars and others; b) "at sight" credits towards postal offices (provided that there are no doubts about their actual enforceability) of the Country or Countries in which the SIM resides with its own branches.

Credits towards credit institutions

In this item must appear all credits towards credit institutions whatever their technical form, with the exception of those represented by securities that must be referred to the item "bonds and other debt securities".

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Supervisory Instructions for Securities Market Intermediaries

Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 14 April 1998

Credits towards financial institutions

In this item must appear all credits towards financial institutions whatever their technical form, with the exception of those represented by securities that must be referred to the item "bonds and other debt securities".

Credits towards customers

In this item must appear all credits towards customers, whatever their technical form, with the exception of those represented by securities that must be referred to the item "bonds and other debt securities".

Bonds and other debt securities

In this item must appear all debt securities present in the portfolio of the SIM (government bonds, bonds, certificates of deposit, other securities).

Also included in this item are securities with variable interest rates, indexed based on a predetermined parameter (such as, for example, the interest rate of the interbank market or that of the euro market).

Among the "own securities" may appear only the securities of its own issuance repurchased and negotiable.

Shares, quotas and other capital securities

This item includes all capital securities (shares and quotas), which do not have the nature of participation. Also must appear there the shares and quotas of collective investment organizations in securities.

Options and other assimilated values

In this item must appear the value of the options and other assimilated contracts not exercised and for which the exercise term has not yet expired.

Participations

SIMs that apply the valuation method provided for in art. 19 of the "decree" must subdivide this item into the following two sub-items: "(a) valued at net equity"; "(b) others".

Participations in group companies

The same instructions apply to the participation item.

Other assets

In this item must be recorded all assets not referable to the other items of the balance sheet. Also included are the "accounting counterparts" of any revaluations of "off-balance sheet" operations. In the "of which: – credits towards financial promoters" converge the creditor positions towards agents and mandataries of the SIM.

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Supervisory Instructions for Securities Market Intermediaries

Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 15 April 1998

Accrued income and deferred charges

Direct correction is permitted, in increase or decrease, of the asset and liability accounts to which the accruals and deferred charges refer, when this is technically appropriate. Therefore: a) the asset accounts relating to credits and securities may include accrued income for interest accrued on such assets; b) the liability accounts relating to debts, represented or not by securities, which include interest "advanced" may be recorded net of deferred charges for interest not yet accrued on such liabilities.

The corrections of appreciable relevance are illustrated in the explanatory note.

3.2. Liability

Debts towards credit institutions

In this item must appear all debts towards credit institutions whatever their technical form, with the exception of those represented by securities that must be referred to the item "debts represented by securities".

Debts towards financial institutions

In this item must appear all debts towards financial institutions whatever their technical form, with the exception of those represented by securities that must be referred to the item "debts represented by securities".

Debts towards customers

In this item must appear all debts towards customers, whatever their technical form, with the exception of those represented by securities that must be referred to the item "debts represented by securities".

Premiums for options and other assimilated values

In this item must appear the value of the premiums received against options issued and other assimilated contracts for which the exercise term has not yet expired.

Other liabilities

The same instructions apply to the asset item "other assets".

Accrued expenses and deferred credits

The same instructions apply to the asset item "accrued income and deferred charges".

Severance pay for subordinate employment

In this item must appear the amount calculated in accordance with art. 2120 of the civil code.

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Supervisory Instructions for Securities Market Intermediaries

Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 16 April 1998

Provisions for risks and charges

The provisions for risks and charges are intended only to cover losses, charges or debts of a determined nature, of probable or certain existence, of which however at the date of closing of the fiscal year are indeterminate or the amount or the date of occurrence. The aforementioned provisions cannot have the function of correcting asset values and cannot exceed the amount necessary to cover the risks against which they were constituted.

In the sub-item (a) "pension funds and similar obligations" are indicated exclusively the pension funds of the personnel without autonomous legal personality.

In the sub-item (b) "tax and duty funds" must appear, in particular, the reserves made against taxes not yet liquidated, taxes installment on capital gains, of any fiscal charges deriving from ongoing litigation.

In the sub-item (c) "other funds" are also included the funds (different from the "provisions for risks on credits") set aside against value losses calculated, based on the valuation criteria established by art. 20 of the "decree", on the guarantees issued and on the commitments recorded in the items "guarantees and commitments".

General financial risk fund

The general financial risk fund being intended for the coverage of risks inherent to financial operations is assimilable to a capital reserve.

The net variation (balance of allocations and withdrawals) recorded by the fund during the fiscal year is recorded, with the relevant algebraic sign, in the income statement item "variation of the general financial risk fund".

Provisions for credit risks

The "provisions for credit risks" include all funds that are intended to face risks only contingent on credits and therefore do not have a corrective function (art. 20, paragraph 6, of the "decree").

Capital

In this item must appear the entire amount of the shares issued by the SIM.

Revaluation reserves

The revaluation reserves constituted before 31.12.1993 may be indicated separately as sub-items of this item.

3.3. Guarantees and commitments

Guarantees issued

In this item appear all guarantees provided by the SIM as well as assets by this ceded as guarantee of third-party obligations.

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Supervisory Instructions for Securities Market Intermediaries

Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 17 April 1998

Commitments

In this item appear all irrevocable commitments assumed by the company. For the determination of the amounts of commitments to be recorded in this item, reference must be made to the contractual price, if it exists (e.g. purchase and sale of securities not yet settled), or to the presumable amount of the commitment itself. The criteria followed and any exceptions must be indicated in the explanatory note.

4. The income statement

In this paragraph are indicated the instructions for the compilation of the items, of the sub-items and of the related informative details of the income statement.

4.1. Income statement

Profits (losses) from financial operations

In this item appear for "overall imbalance" (algebraic sum of the balances of the following letters a), b) and c)): a) the balance between the profits and losses of the operations, on and "off balance sheet", on securities that do not constitute financial fixed assets, including the results of the valuations of such securities carried out in accordance with art. 20 of the "decree"; b) the balance between the profits and losses of the operations, on and "off balance sheet", on currencies, including the results of the valuations of such operations carried out in accordance with art. 21 of the "decree"; c) the balance between the profits and losses of the operations, on and "off balance sheet", on other financial instruments, including the results of the valuations of such values carried out in accordance with art. 20 of the "decree".

From this item are excluded the revenues and expenses relating to operations of "hedging" recorded among interests according to what is indicated in the instructions relating to the items "interests active and assimilated revenues" and "interests passive and assimilated expenses".

The balance referred to in letter a) includes:

1. the profits and losses deriving from the purchase and sale of non-fixed securities; such profits and losses are calculated as the algebraic sum of the initial holdings of the fiscal year (value of the securities corresponding to that recorded in the balance sheet relating to the previous fiscal year), of the costs for purchases settled during the fiscal year (including the subscriptions of securities in issuance), of the revenues from sales settled during the fiscal year (including the repayments of securities expired) and of the final holdings of the fiscal year (at "book values", i.e. before the balance sheet valuations);
2. the positive and negative differentials for derivative contracts with underlying security that fall within the trading activity (1);

1 The purchases and sales of securities carried out following derivative contracts ("futures" and "options") must be recorded according to the "amount due" on the day of settlement of the contracts themselves.

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Supervisory Instructions for Securities Market Intermediaries

Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 18 April 1998

3. the results of the valuations of non-fixed securities, of purchase and sale contracts not yet settled (spot or forward) of non-fixed securities and of the contracts referred to in the previous number 2) not yet expired or closed at the end of the fiscal year.

The balance referred to in letter b) includes:

1. the profits and losses deriving from the negotiation of currencies;
2. the positive and negative differentials for derivative contracts on currencies;
3. the difference between the current value at the end of the fiscal year of the elements of the asset and the liability and of the "off-balance sheet" operations denominated in currency and the accounting value of the same elements and operations.

The balance referred to in letter c) includes:

1. the positive and negative differentials for derivative contracts without underlying security, linked to interest rates, to indices or to other assets and that fall within the trading activity;
2. the results of the valuations of the contracts referred to in the previous number 1) not yet expired or closed at the end of the fiscal year.

Active commissions

Passive commissions

In these items appear the revenues and expenses relating, respectively, to the services provided and to those received by the SIM.

Interest active and assimilated revenues

Interest passive and assimilated expenses

In these items must be recorded, according to the accrual principle, the interests and assimilated revenues and expenses relating to securities, credits and debts, even if indexed or subordi- nated, as well as any other interests.

The revenues and expenses assimilated to interests, to be recorded in the income statement in propor- tion of the time accrued, include in particular: a) the difference between the purchase cost and the higher redemption value of debt securities that constitute financial fixed assets; such difference is brought to increase the interests produced by the securities; b) the difference between the purchase cost and the lower redemption value of debt securities that constitute financial fixed assets (unless the financial institution decides to devalue the securities as provided for in art. 18, paragraph 5, of the "decree"); such diffe- rence is brought to reduction of the interests produced by the securities; c) the reductions and increases of cost resulting from the assumption of debts, respectively, above or below par (they include among the cost increases, for example, the shares of competence of the fiscal year of the discount on bonds); d) the commissions and fees calculated on the basis of the amount or the duration of the credit or the debt to which they refer; e) the revenues and expenses relating to "off-balance sheet" operations intended for the coverage of assets or liabilities that generate interests. In derivative contracts such revenues and expenses correspond to the differentials, respectively positive and negative, calculated on the basis of the

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Supervisory Instructions for Securities Market Intermediaries

Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 19 April 1998 difference between contractual price or rate and price or rate current at the end of the fiscal year or at the date of maturity or closing of the contracts themselves.

In forward purchase and sale contracts of currencies the differentials correspond to the margins between forward exchange rate and spot exchange rate fixed in "swap" contracts or to the margins between forward exchange rate established in "outright" contracts and current spot exchange rate at the time of the conclusion of the contracts themselves.

Based on the principle of coherence in accounting treatment the aforementioned differentials are recorded in the income statements according to a temporal distribution coherent with that of registration of the interests produced by the assets and the liabilities covered, if it is a "specific" coverage, or according to the duration of the contract, if this is of "generic" coverage (1). The balance of all differentials flowing into the income statement is included, according to their relative algebraic sign, among active interests or among passive interests; f) the revenues and expenses relating to repos and repurchase operations that provide for the obligation for the assignee of resale at term of the assets (e.g. of securities) object of the transaction; such revenues and expenses are calculated taking into account both the difference between the spot price and the forward price and the fruits (e.g. of interests) pro- duced during the period of duration of the operation by the aforementioned assets.

In the income statement item "interests active and assimilated revenues", must appear the balance between the default interests accrued during the fiscal year and the value correction correspond- ing to the share of such interests judged unrecoverable.

Dividends and other revenues

In this item must also appear the dividends and the other revenues of shares or quotas of collective investment organizations in securities.

Administrative expenses

In the sub-item (b) "other administrative expenses" must appear, in particular, the expenses for professional services (legal expenses, notarial expenses, etc.), the expenses for the purchase of goods and of non-professional services (electricity, stationery, transport, etc.), the rents and passive fees, the insurance premiums, the indirect taxes and the taxes (liquidated and not liquidated) of competen- ce of the fiscal year.

Value corrections on intangible and material fixed assets

In this item are also recorded any accelerated amortizations.

Provisions for risks and charges

In this item are recorded the provisions to the funds referred to in the sub-item (c) "other funds" of the liability item "provisions for risks and charges", with the exception of those that face value losses of the guarantees issued and of the commitments (to be included in the item "value corrections on credits and provisions for guarantees and commitments).

1 For "futures" and for "options" on securities or interest rates and for "forward rate agreements" it is necessary to refer to the duration of the underlying security (even if notional) or to the period of time in relation to which the interest differential is calculated. If the aforementioned contracts protect a portfolio of non-fixed securities, the differentials of these contracts must be recorded in the balance sheet relating to the fiscal year in which they were produced.

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Supervisory Instructions for Securities Market Intermediaries

Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 20 April 1998

Value corrections on credits and provisions for guarantees and commitments

The provisions for guarantees and commitments referred to in this item include the value losses calculated, based on the valuation criteria established by art. 20 of the "decree", on the guarantees issued and on the commitments recorded in the items "guarantees and commitments".

Value recoveries on credits and on provisions for guarantees and commitments

In this item must also appear the recoveries of credits devalued in previous fiscal years.

Value corrections on financial fixed assets

SIMs that apply the valuation method provided for in art. 19 of the "decree" must indicate separately (with a specific "of which" to be named "– on participations valued at net equity") the amount of the variations in decrease, occurred during the fiscal year for effect of losses of the value of the net equity of the participations.

Extraordinary revenues

Extraordinary expenses

In these items must also appear the active and passive windfalls as well as the profits and losses deriving from the sale of fixed assets not included in other items of the income statement.

Variation of the general financial risk fund

In this item appears (with the indication of the relevant algebraic sign) the balance of the allocations (provisions) and withdrawals (uses) of the general financial risk fund.

5. The explanatory note

5.1. Premise

The explanatory note is divided into the following four parts:

1. Part A – Valuation criteria;
2. Part B – Information on the balance sheet;
3. Part C – Information on the income statement;
4. Part D – Other information.

Each part of the note is articulated in turn into sections, each of which illustrates sin- gular aspects of the company management.

The sections are constituted, as a rule, by items and tables. The items and tables that do not present amounts must not be indicated.

The sections also contain notes of comment of the items and the tables or notes descriptive of the aspects treated.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 21 April 1998 In the notes to the financial statements, SIMs may provide additional information beyond that required by the "Decree" and these Instructions, provided this does not diminish the clarity and immediacy of the information in the notes.

5.2. Part A – Valuation Criteria Section 1 – Illustration of Valuation Criteria This section must indicate at least:

1. the criteria applied in balance sheet valuations, value adjustments, value recoveries, and revaluations;
2. in the event of applying a derogation provided for in Article 2, paragraph 5, Article 7, paragraph 3, or Article 15, paragraph 2 of the "Decree", the reasons for the derogation and its influence on the representation of the financial position, financial situation, and economic result;
3. the modifications, with their respective justifications, made to amortization criteria and coefficients applied in the valuation of tangible and intangible fixed assets whose use is limited in time;
4. the exercise, with justification, of the option to amortize goodwill over a period exceeding five years;
5. the difference, with justification, between the book value of significant participations referred to in Article 19, paragraph 1 of the "Decree" and the lower value resulting from applying the valuation criterion provided for in that article or, if there is no obligation to prepare consolidated financial statements, the value corresponding to the share of net equity resulting from the last financial statement of the participating company;
6. the exercise of the option referred to in Article 19, paragraph 4, last sentence, and paragraph 6 of the "Decree".

Section 2 – Tax Adjustments and Provisions This section must indicate the reasons and separately report the amounts of value adjustments and provisions made exclusively in application of tax laws. Indications are also provided regarding the influence that the aforementioned adjustments and provisions have on the representation of the financial position and economic result, as well as, if of appreciable amount, on future tax burdens.

5.3. Part B – Information on the Balance Sheet Section 1 – Credits The asset accounts relating to items 20, 30, and 40 are subject to illustration in this section.

1.1. Detail of Item 20 "Credits towards credit institutions" The sub-item (a) must show the amount of credits arising from services provided by the SIM within the scope of its typical activity.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 22 April 1998 In sub-item (b) "of which: – on bonds and other debt securities", credits arising from repurchase and reverse repurchase operations on bonds of a nature other than those issued by the Italian State must be indicated, which should instead be indicated in "of which: – on government bonds".

1.2. Detail of Item 30 "Credits towards financial institutions" The sub-item (a) must show the amount of credits arising from services provided by the SIM within the scope of its typical activity. In sub-item (b) "of which: – on bonds and other debt securities", credits arising from repurchase and reverse repurchase operations on bonds of a nature other than those issued by the Italian State must be indicated, which should instead be indicated in "of which: – on government bonds".

1.3. Detail of Item 40 "Credits towards customers" The sub-item (a) must show the amount of credits arising from services provided by the SIM within the scope of its typical activity. In sub-item (b) "of which: – on bonds and other debt securities", credits arising from repurchase and reverse repurchase operations on bonds of a nature other than those issued by the Italian State must be indicated, which should instead be indicated in "of which: – on government bonds".

1.4. Credits towards other SIMs The sub-item (a) must show the amount of credits arising from services provided by the SIM within the scope of its typical activity. In sub-item (b) "of which: – on bonds and other debt securities", credits arising from repurchase and reverse repurchase operations on bonds of a nature other than those issued by the Italian State must be indicated, which should instead be indicated in "of which: – on government bonds".

1.5. Non-performing credits (including default interest) The total amount of non-performing credits as defined in these Instructions must appear in this item. The amount of non-performing credits must be indicated both gross and net of any write-downs.

1.6. Credits for default interest The amount of credits for default interest must be indicated both gross and net of any write-downs.

Section 2 – Securities The asset accounts relating to items 50, 60, and 70 are subject to illustration in this section. The criterion adopted to distinguish held-to-maturity securities from those not held to maturity must be indicated. The amount of differences (positive and negative) between the book value and the redemption value at maturity of held-to-maturity debt securities must also appear. The differences

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 23 April 1998 are calculated separately for homogeneous categories of securities (securities issued by the same entity and having equal characteristics). Furthermore, for foreign listed securities only, the portion of these listed in regulated markets and regularly "recognized" pursuant to Article 20, paragraph 8, Law 1/91 must be indicated.

2.1. Held-to-maturity securities The market value of securities must be calculated based on: a) their respective quotations, for securities listed on organized markets; b) market trends, for other securities. Among government bonds, only those issued by the Italian State must appear.

2.1.1. Annual variations of held-to-maturity securities "Initial holdings" correspond to the value of held-to-maturity securities recorded in the financial statement relating to the previous fiscal year. "Purchases" also include subscriptions to securities in issue. "Final holdings", which represent the difference between "initial holdings" and "increases" of the fiscal year, on the one hand, and "decreases" of the fiscal year, on the other, correspond to the value recorded in the financial statement. Among "other variations", profits and losses deriving from any sales as well as transfers made to (or from) the non-held-to-maturity securities portfolio must be included, among others. In "permanent write-downs" in point C3, the write-downs carried out pursuant to Article 18, paragraph 2 of the "Decree" are indicated.

2.2. Non-held-to-maturity securities The market value of securities must be calculated based on: a) their respective quotations, for securities listed on organized markets; b) market trends, for other securities. Among government bonds, only those issued by the Italian State must appear.

2.2.1. Purchases and sales of non-held-to-maturity securities Purchases and sales also include transfers made from (to) the held-to-maturity securities portfolio during the fiscal year, as well as subscriptions to securities in issue and redemptions of matured securities.

2.3. Options and other assimilated values The asset account relating to item 70 is subject to illustration in this sub-section.

2.3.1. Annual variations of options and other assimilated values "Initial holdings" correspond to the value of options recorded in the financial statement relating to the previous fiscal year. "Final holdings", which represent the difference between "initial holdings" and "increases" of the fiscal year, on the one hand, and "decreases" of the fiscal year, on the other, correspond to the value recorded in the financial statement.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 24 April 1998 Among "revaluations", value recoveries must also be included, while value adjustments will be included in "write-downs".

2.3.2. Purchases and sales of options and other assimilated values

Section 3 – Participations The asset accounts relating to items 80 and 90 are subject to illustration in this section. For participations valued using the method referred to in Article 19 of the "Decree", the amounts of positive and negative differences arising upon first application of the same method must be indicated separately. Positive differences appear net of amortization carried out pursuant to the aforementioned article.

3.1. Significant participations The list of significant participations, held directly or through a trust company or through an intermediary person, must include exclusively those in controlled companies pursuant to Article 25 of the "Decree" and those in companies subject to significant influence pursuant to Article 19, paragraph 1 of the same "Decree". For each participating company, the name, headquarters, amount of net equity, and amount of profit or loss of the last closed fiscal year, the percentage share of capital held, and the value attributed in the financial statement to the participation must be indicated. Net equity is calculated including profit allocated to reserves (or deducting the fiscal year loss); for participating companies valued using the method referred to in Article 19 of the "Decree", the net equity and profit or loss of the fiscal year are those used in the application of that method. It is permitted to omit the information required in the list when it could cause serious prejudice to one of the companies indicated therein. Such omission is mentioned in this section. The financial statements and summary statements that the SIM must keep deposited at its headquarters pursuant to Article 2429, paragraphs 3 and 4, of the Civil Code are those of companies controlled pursuant to Article 25 of the "Decree" and of companies subject to significant influence referred to in Article 19, paragraph 1 of the same "Decree".

3.2. Assets and liabilities towards group companies 3.3. Assets and liabilities towards participating companies (other than group companies) 3.4. Composition of Item 80 "participations" 3.5. Composition of Item 90 "participations in group companies" 3.6. Annual variations of participations "Initial holdings" correspond to the value of participations recorded in the financial statement relating to the previous fiscal year. "Purchases" also include onerous subscriptions to new shares or quotas. "Final holdings", which represent the difference between "initial holdings" and "increases" of the fiscal year, on the one hand, and "decreases" of the fiscal year, on the other, correspond to the value recorded in the financial statement. Among "other variations", profits and losses deriving from any sales as well as transfers from Item 80

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 25 April 1998 ("participations") to Item 90 ("participations in group companies") or to Item 60 ("shares, quotas and other variable income securities") and vice versa must be included. In "total revaluations" and "total adjustments", the amount, respectively, of all revaluations and all value adjustments carried out over time on participations still in the portfolio must appear. Participations in group companies and other participations that have been valued according to the method provided for in Article 19 of the "Decree" must be separately identified in tables 3.6.1. and 3.6.2. Information regarding variations in participations may be provided omitting the distinction between group companies and others in cases where such distinction is not relevant.

Section 4 – Other Asset Items The asset accounts not treated in the previous sections are subject to illustration in this section.

4.1. Tangible and intangible fixed assets The asset accounts relating to items 100 and 110 are subject to illustration in this section. Advances paid for fixed assets must be indicated, as well as, if appreciable, the amount of land and buildings used by the SIM in its activity.

4.1.1. Annual variations of tangible fixed assets 4.1.2. Annual variations of intangible fixed assets "Initial holdings" correspond to the value recorded in the financial statement relating to the previous fiscal year. "Final holdings", which represent the difference between "initial holdings" and "increases" of the fiscal year, on the one hand, and "decreases" of the fiscal year, on the other, correspond to the value recorded in the financial statement. In "total revaluations" and "total adjustments", the amount, respectively, of all revaluations and all value adjustments carried out over time on fixed assets existing at the close of the fiscal year must appear. In sub-item (b) of point C2 ("value adjustments: permanent write-downs") and in sub-item (b) of point F ("total adjustments: permanent write-downs"), the write-downs carried out pursuant to Article 17, paragraph 2 of the "Decree" are indicated.

4.2. Composition of Item 140 "other assets" The composition of Item 140 of the assets must appear only if its amount is appreciable.

4.3. Composition of Item 150 "accrued income and deferred charges" The composition of Item 150 of the assets must appear only if its amount is appreciable.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 26 April 1998 4.4. Adjustments for accrued income and deferred charges In this item, adjustments for accrued income and deferred charges made to the respective asset and liability items must be indicated, when the amount of such adjustments is appreciable.

4.5. Distribution of subordinate assets In this item, the amount of credits towards credit institutions, financial institutions, and customers, and of debt securities that contain subordination clauses, must appear.

Section 5 – Liabilities The liability accounts relating to items 10, 20, 30, and 40 are subject to illustration in this section.

5.1. Detail of Item 10 "Liabilities towards credit institutions" In "of which: – on bonds and other debt securities", liabilities arising from repurchase and reverse repurchase operations on bonds of a nature other than those issued by the Italian State must be indicated, which should instead be indicated in "of which: – on government bonds".

5.2. Detail of Item 20 "Liabilities towards financial institutions" In "of which: – on bonds and other debt securities", liabilities arising from repurchase and reverse repurchase operations on bonds of a nature other than those issued by the Italian State must be indicated, which should instead be indicated in "of which: – on government bonds".

5.3. Detail of Item 30 "Liabilities towards customers" In "of which: – on bonds and other debt securities", liabilities arising from repurchase and reverse repurchase operations on bonds of a nature other than those issued by the Italian State must be indicated, which should instead be indicated in "of which: – on government bonds".

5.4. Liabilities towards other SIMs The sub-item (a) must show the amount of liabilities arising from services received from other SIMs. In "of which: – on bonds and other debt securities", liabilities arising from repurchase and reverse repurchase operations on bonds of a nature other than those issued by the Italian State must be indicated, which should instead be indicated in "of which: – on government bonds".

5.5. Liabilities represented by securities The amount and number of ordinary bonds and those convertible into shares issued by the SIM must be indicated, specifying the rights they confer.

Section 6 – Funds The liability accounts relating to items 80 and 90 are subject to illustration in this section. If of appreciable amount, specific investments of pension funds recorded in sub-item 90 (a) must appear, by category of asset (securities, real estate, etc.). The

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 27 April 1998 variations occurring during the fiscal year in the composition of items (and any sub-items) 80 and 90 must also be indicated, separately indicating, if the amount is appreciable, provisions and uses. The share of "tax and duty funds" referred to in sub-item 90 (b) that offsets expenses for taxes not yet liquidated, as well as the amount of related advances already paid, must also be indicated.

6.1. Composition of sub-item 90 (c) "provisions for risks and charges: other provisions" The composition of sub-item (c) of Item 90 of the liabilities must appear in this item, when the amount of funds is appreciable.

Section 7 – Capital, reserves, general financial risk fund, and subordinated liabilities The liability accounts relating to items 100, 120, 130, 140, 150, and 160 and the asset accounts relating to items 120 and 130 are subject to illustration in this section. The following information must be provided, separately for each subordinated loan whose amount at the end of the fiscal year exceeds 10 percent of the total amount of Item 120 ("subordinated liabilities"): a) the amount, denomination currency, interest rate, maturity date or if it is a perpetual loan; b) the existence of early repayment clauses; c) the conditions of subordination, the existence of provisions allowing the conversion of the subordinated liability into capital or into another type of liability, and the conditions provided for such conversion. For all other subordinated liabilities, the methods governing them must be illustrated collectively. In this section, the nominal value and number of shares composing Item 130 ("capital") as well as those issued and subscribed during the fiscal year must also be indicated.

Section 8 – Other Liability Items The liability accounts not treated in the previous sections are subject to illustration in this section. With reference to Item 50 "options and other assimilated values issued", the total value of options issued by the SIM during the fiscal year must also be indicated. The same instructions as in the previous Section 4 "Other Asset Items" apply.

Section 9 – Guarantees and Commitments The accounts of guarantees and commitments relating to items 10 and 20, as well as other "off-balance sheet" operations, are subject to illustration in this section.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 28 April 1998 9.1. Composition of Item 10 "guarantees issued" The amount and, if relevant, the detail of real and personal guarantees issued on behalf of third parties must be reported, as well as the indication of assets possibly constituted as collateral.

9.2. Assets constituted as collateral for own debts The amount of assets constituted by the SIM as collateral for its own debts must appear in this item, separately for each liability item and by type of asset.

9.3. Composition of Item 20 "commitments" 9.4. Detail of Item 20 "commitments" 9.5. "Off-balance sheet" operations All "off-balance sheet" operations in place at the end of the fiscal year referred to in letters a), b), c), d) of paragraph 5.11 of Chapter 1 must be reported in this table. Negotiations on behalf of third parties to be indicated in the subsequent Section 11.1 are excluded. Other types, not provided for in the aforementioned table, of forward transactions entered into by the SIM must be indicated specifically, if of appreciable amount. The value to be attributed to the operations is as follows: a) for contracts for the sale and purchase of securities and currencies and derivative contracts that involve or may involve the forward exchange of capital (or other assets), the settlement price of the contracts themselves (1); b) for derivative contracts that do not involve the forward exchange of capital (such as, for example, interest rate or index contracts), the nominal value of the reference capital. Contracts providing for the exchange of two currencies (or the exchange rate differential between two currencies) must be indicated only once, making conventional reference to the currency to be purchased. Interest rate derivative contracts are conventionally classified as "purchases" or as "sales" depending on whether they involve the purchase or sale of the fixed rate by the SIM. In this section, the following must also be indicated: a) any other relevant risks with respect to the entity's activity; b) guarantees, if of appreciable amount, received indicating the reference assets.

1 For derivative contracts traded on organized markets that provide for daily settlement of variation margins, the value to be attributed is conventionally equal to the nominal value of the reference capital.

Supervisory Instructions for Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 29 April 1998 Section 10 – Distribution of Assets and Liabilities 10.1. Temporal Distribution of Assets and Liabilities The items in the table refer to the corresponding accounts of the assets and liabilities of the balance sheet. Items 1.5 and 2.5 include "off-balance sheet" operations linked to fixed-rate debt securities or interest rates. The temporal distribution of assets and liabilities must be carried out based on their remaining life. This corresponds to the time interval between the balance sheet reference date and the contractual maturity date of each operation (for this purpose, any modifying agreements to the initial terms must also be taken into account). For operations with an amortization schedule, reference must be made to the remaining duration of the individual installments. In the "on demand" bracket, "on demand" credits and debts from the balance sheet, as well as other assets and liabilities with a remaining duration not exceeding 24 hours, must be included. Overdue or non-performing credits are attributed to the "indeterminate duration" time band. 10.2. Assets and Liabilities in Foreign Currency In this item, the amount, expressed in Italian lire, of assets and liabilities denominated in foreign currency must appear, where material. The exchange rates used for conversion into lire must also be indicated. Section 11 – Other Assets The operations carried out by the SIM within the scope of third-party trading, placement, management, order collection, advice, home solicitation, custody, and administration of securities are illustrated in this section. Other types of services provided to third parties by the SIM, not provided for in this section, must be indicated specifically if material. 11.1. Trading of Securities for Third Parties References must be provided regarding the activity of trading in securities and currencies carried out on behalf of third parties during the financial year (with evidence of operations not yet settled at the close of the financial year). 11.2. Placement Activities 11.3. Portfolio Management 11.4. Order Collection 11.5. Advice 11.6. Home Solicitation In the previous items 11.2 to 11.6, references must be provided regarding the individual activities carried out by the SIM, reporting qualitative and quantitative information regarding the operations carried out during the financial year.

Supervisory Instructions for Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 30 April 1998 11.7. Custody and Administration of Securities 11.8 Other Operations 5.4. Part C – Information on the Income Statement Section 1 – Profits and Losses from Financial Operations This section illustrates the account relating to item 10. 1.1. Composition of Item 10 "Profits/Losses from Financial Operations" In this table, the composition of profits/losses from financial operations must appear, separately for each operating segment (securities, currencies, others) – distinguishing the results of valuations (points A1 and A2) from those of trading (points B1 and B2) – which must also include the differentials generated by derivative contracts closed or expired during the financial year. In the total row, the algebraic sum of all revenues and losses generated by each operating segment must be reported, with the relevant sign. The algebraic sum of the three totals must correspond to the amount indicated in item 10 of the income statement ("profits/losses from financial operations"). For securities operations, the distribution of the total profits/losses of the segment according to the categories of securities (considered in the table) subject to the operations must also appear. For each category, the algebraic sum of revenues and losses resulting from trading and valuations affecting that same category must be indicated, with the relevant sign. Among the profits/losses on government securities, only those related to securities issued by the Italian State must appear. The amount of profits/losses arising from derivative contracts must also be indicated for operations on "currencies" and "others". Section 2 – Commissions This section illustrates the accounts relating to items 20 and 30. Section 3 – Interest This section illustrates the accounts relating to items 40 and 50. Section 4 – Administrative Expenses This section illustrates the account relating to item 80. Section 5 – Write-downs, Reversals, and Provisions This section illustrates the accounts relating to items 90, 100, 120, 130, 140, 150, 160, and 210. Write-downs of value on credits to credit institutions, financial entities, customers, group companies, and other participating companies must be indicated separately when their amount is material.

Supervisory Instructions for Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 31 April 1998 5.1. Composition of Item 120 "Write-downs of value on credits and provisions for guarantees and commitments" In write-downs and flat-rate provisions, the amount of write-downs and provisions determined on a flat-rate basis pursuant to Article 20, paragraphs 5 and 7, of the "Decree" must appear. Section 6 – Other Items of the Income Statement This section illustrates the accounts relating to income statement items 70, 110, 180, and 190. 6.1. Composition of Item 70 "Other Management Revenues" 6.2. Composition of Item 110 "Other Management Expenses" 6.3. Composition of Item 180 "Extraordinary Revenues" 6.4. Composition of Item 190 "Extraordinary Expenses" In these items, the composition of income statement items 70, 110, 180, and 190 must appear when their amount is material. Section 7 – Other Information on the Income Statement 7.1. Territorial Distribution of Revenues In this item, the distribution by geographic markets of revenues relating to items 10, 20, 40, 60, and 70 of the income statement must be indicated, if these areas are significantly different from each other for the organization of the SIM. It is permitted to omit this information when it could cause serious prejudice to the entity preparing the financial statements. Such omission must be mentioned in this section. 7.2. Contributions to the National Guarantee Fund ( 1 ) The aggregates for the determination of the annual contribution to the National Guarantee Fund pursuant to Article 15 of Law 2 January 1991, No. 1, must be indicated. 5.5. Part D – Other Information Section 1 – Directors, Auditors, and Employees 1.1. Remuneration of Directors and Auditors 1.2. Credits and Guarantees Issued in Favor of Directors and Auditors In these items, the amount of remuneration due to the directors and auditors of the SIM and the amount of credits granted and guarantees provided in their favor must be indicated, cumulatively for each category.

1 On this issue, reference is made to Article 14 of the Decree of the Minister of the Treasury of 30 September 1991.

Supervisory Instructions for Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 32 April 1998 1.3. Average Number of Employees by Category The average number is calculated as the arithmetic mean of the number of employees at the end of the financial year and that of the previous financial year. Section 2 – Parent Company 2.1. Name 2.2. Headquarters In these items, the name and headquarters of the parent company preparing the consolidated financial statements in which the SIM preparing the individual financial statements is included, as a controlled or jointly controlled company, must appear (it is also necessary to indicate, if different from the headquarters of the parent company, the place of publication of the consolidated financial statements). An analogous provision applies to SIMs operating under a unified direction when they are not required to prepare consolidated financial statements pursuant to Article 26, paragraph 4, of the "Decree" (in this case, the name and headquarters of the company subject to unified direction preparing the consolidated financial statements must be indicated). In the aforementioned items, the parent company exempted from the obligation to prepare consolidated financial statements pursuant to Article 27 of the "Decree" indicates the name and headquarters of the controlling Community credit institution. The same parent company also indicates the reason for the exemption. 6. The Management Report The company's financial statements are accompanied by a report by the directors on the company's situation and the course of management as a whole and in the various sectors in which the company has operated. The dynamics recorded, compared to the previous financial year, for the main balance sheet and income statement aggregates are illustrated. The report must also show: a) research and development activities; b) the number and nominal value of both own shares and shares or quotas of the parent company held in the portfolio, those purchased, and those alienated during the financial year, the corresponding shares of subscribed capital, the reasons for purchases and alienations, and the consideration; this provision also applies to shares or quotas held, purchased, or alienated through trust companies or through an intermediary; c) significant events occurring after the close of the financial year; d) the foreseeable evolution of management; e) relationships with group companies, distinguishing between controlled companies, controlling companies, and companies subject to the control of the latter, as well as relationships with companies subject to significant influence pursuant to Article 19, paragraph 1, of the "Decree"; in particular, the distribution according to the aforementioned categories of counterparties of the set of assets, liabilities, and guarantees and commitments in place with respect to them must be provided; f) the proposal for the allocation of the financial year's profits or the plan for the settlement of losses.

Supervisory Instructions for Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 33 April 1998 Chapter 3 CONSOLIDATED FINANCIAL STATEMENTS

Supervisory Instructions for Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 34 April 1998

1. General Provisions The instructions on the company's financial statements apply to the consolidated financial statements, insofar as not otherwise provided and subject to the necessary adjustments for the consolidation of accounts. The criteria for preparing the consolidated financial statements cannot be modified from one financial year to the next. In exceptional cases, derogations from this principle are permitted, provided that the reasons for the derogation and its influence on the representation of the financial position, financial situation, and economic result are explained in the consolidated notes (Article 30, paragraph 2, of the "Decree"). If there has been a significant change in the composition of the companies included in the consolidation, information is provided that makes the comparison between the consolidated balance sheet and income statement accounts of the financial year and those of the previous financial year meaningful; such information appears in the sections of the consolidated notes where the accounts themselves are illustrated. The aforementioned information can also be provided by adapting the consolidated balance sheet and income statement of the previous financial year. The reference date of the consolidated financial statements coincides with that of the individual financial statements of the parent company. However, the reference date may also be that of the financial statements of the majority of the companies included in the consolidation or of the most important of them. The use of this option is indicated and duly motivated in the consolidated notes. If the reference date of the financial statements of a company included in the consolidation is different from that of the consolidated financial statements, this company is consolidated based on an interim annual financial statement referring to the same date as the consolidated financial statements and prepared according to the provisions regarding the company's financial statements. In the consolidated management report: a) the provision contained in Chapter 2, paragraph 6, letter b) of these instructions applies only to own shares or quotas of companies included in the consolidation and to shares or quotas of the parent company held, purchased, or alienated by other companies included in the consolidation; b) the provisions contained in letters e) and f) of the aforementioned paragraph do not apply; c) a reconciliation table between the data of the parent company and those of the consolidated financial statements is included with reference to both net equity and the financial year's result; the equity also includes revaluation reserves and provisions for credit risks.
2. Consolidation Methods This paragraph illustrates the consolidation methods to be applied in the preparation of the consolidated financial statements.

Supervisory Instructions for Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 35 April 1998 2.1. Full Consolidation Companies included in the consolidation pursuant to Articles 25, 26, and 28 of the "Decree" (parent company, companies operating under a unified direction, controlled companies exercising credit or financial activities or, exclusively or principally, instrumental activities) are treated using the method of full integration. Under this method, the elements of assets and liabilities and "off-balance sheet" operations, as well as revenues and expenses of the companies included in the consolidation, are fully incorporated into the consolidated financial statements, except as provided for the consolidation of participations and the elimination of reciprocal relationships. 2.1.1. Consolidation of Participations Participations in controlled companies included in the consolidation are offset against the corresponding fraction of the net equity of such companies. Net equity is calculated by summing capital, share premiums, reserves, the general financial risk reserve, brought-forward profits, and the financial year's profit for the part allocated to reserves and dividends, and subtracting brought-forward losses and the financial year's loss(1). In the event that an increase in the capital of the controlled company for consideration has been subscribed but not yet settled in whole or in part, it is necessary to make the two values (participation and net equity) homogeneous for comparison. To this end, the value of the participation must be increased by an amount equal to the "decimi" and "share premiums" that the participating company must still pay, crediting correspondingly: a) the asset account of the controlled company "subscribed but unpaid capital"; b) the liability account of the controlled company "share premiums". If the participation is not total, the net equity of the controlled company must also include the "share premiums" belonging to third parties, debiting the "consolidation adjustments" account (for its functioning, see the instructions contained in the subsequent paragraph 2.1.2). The offset between participation and net equity is carried out based on the values referred to the date on which the controlled company is first included in the consolidation or the date of acquisition of the participation in that company or, if the acquisition was carried out in stages, the date on which the company became controlled. When the offset determines a difference, this is attributed in the consolidated financial statements, where possible, to the elements of the assets and liabilities of the controlled company. If the difference arises on the asset side (participation exceeding net equity), it is offset, for the residual part after the aforementioned attribution to the elements of assets and liabilities, with the revaluation reserves and any provisions for credit risks of the subsidiary to which such difference refers. The remaining difference is recorded, for the share belonging to the group, based on the application of "equity ratios" (see Appendix C regarding this), in the consolidated asset item "positive consolidation differences". If the difference is negative (participation lower than net equity), it is recorded, after attribution to the elements of assets and liabilities and for the share belonging to the group according to the "equity ratios", in the consolidated liability item "negative consolidation differences". When the negative difference is due to the expectation of an unfavorable evolution of the future economic results of the controlled company, the difference itself is recorded for the entire amount (including, therefore, the share belonging to third parties) in the sub-item "consolidation reserve for future risks and expenses" of the consolidated liability item "provisions for risks and expenses". This reserve is transferred to the consolidated income statement (item "use of the consolidation reserve for future risks and expenses") at the time and to the extent that the aforementioned expectation materializes. Positive differences can be offset against negative differences(1) and up to the extent of these. The amount recorded in the assets is amortized according to what is provided for goodwill by Article 16, paragraph 2, of the "Decree". The share of consolidation differences that, based on the "equity ratios", belongs to third parties is recorded (with the relevant algebraic sign) in the consolidated liability item "equity belonging to third parties". In financial years subsequent to the one in which the consolidation difference was calculated, the variations (belonging to the group based on the "equity ratios") of the net equity of the controlled company are recorded in the relevant items of the consolidated liability ("reserves", "general financial risk reserve", "financial year's profit", etc.). Variations attributable to third parties are recorded in the consolidated liability item "equity belonging to third parties". In the event of subsequent purchases of other shares of the same participation, the corresponding consolidation differences must be calculated for each purchase. In the event of sales, it is necessary to correspondingly reduce the existing consolidation differences. If companies operating under a unified direction are included in the consolidation, the elements of the net equity of such companies must be aggregated in the consolidated financial statements. 2.1.2. Elimination of Reciprocal Relationships The following are eliminated from the consolidated financial statements: a) active and passive relationships and "off-balance sheet" operations between the companies included in the consolidation; b) revenues and expenses relating to operations carried out between the companies included in the consolidation;

1 For the overall coherence of the consolidated financial statements discipline for financial entities and taking into account what is prescribed for credit intermediaries, the revaluation reserve is not included in the calculation of the net equity of subsidiaries useful for determining consolidation differences.

1 Unless the negative differences have been recorded in the "consolidation reserve for future risks and expenses".

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 37 April 1998 c) profits and losses resulting from trading operations carried out between the companies included in the consolidation and concerning, in the case of assets other than securities, currencies, and other financial instruments, values included in the equity. The aforementioned eliminations may be omitted if immaterial. Furthermore, the eliminations indicated in letter c) may be omitted, with mention made in the consolidated notes, when the transaction has been concluded under normal market conditions and the elimination could involve disproportionate costs. If the reciprocal relationships do not have identical values in the accounts of the companies between which they occur, their elimination must be preceded by an appropriate alignment operation. The unreconcilable residue is recorded in an account "consolidation adjustments"; this is debited or credited depending on whether the adjustment of the lower value of the reciprocal relationship has a "credit" sign (increase in liabilities or revenues) or "debit" sign (increase in assets or costs). The final balance (after all adjustments) of the aforementioned account is recorded, in the consolidated financial statements, in the item "other assets" or in the item "other liabilities" of the consolidated balance sheet. If the unreconcilable residue, although concerning income statement items, must not modify the result of the year (as in the case of exchange differences arising from the conversion at different rates of values relating to the same relationship), it is necessary that the adjustment of the lower value be neutralized with a correction of equal amount and sign to be made in the consolidated income statement. The final balance of all these corrections is recorded in the item "extraordinary income" or in the item "extraordinary charges".

2.1.3. Dividends, write-downs, and revaluations of consolidated participations To avoid duplications in the consolidated financial statements, dividends, write-downs, and revaluations recorded in the financial statements of the participating companies included in the consolidation and concerning participations in companies included in the same consolidation must be eliminated from it. Dividends, when recorded in the income statement of the participating company relating to the financial year subsequent to that to which the financial statements of the investee company in which the corresponding profits were recorded refer, must be eliminated by crediting the account "other reserves" of the participating company itself. If, however, they are accounted for in the income statement relating to the same financial year to which the financial statements of the investee refer, they must be cancelled by crediting correspondingly the asset account of the participating company in which the credit for the same dividends appears. Write-downs, carried out in accordance with art. 18 or art. 19 of the "decree", must be eliminated by crediting the account "value adjustments on financial fixed assets" and debiting correspondingly the account "participations in group companies" of the participating company. Revaluations, finally, carried out in accordance with art. 19 of the "decree", must be cancelled by debiting the account "other reserves" in which the unavailable reserve fed by the revaluations themselves is registered and crediting correspondingly the account "participations in group companies" of the participating company.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 38 April 1998 2.2. Proportional consolidation The companies included in the consolidation in accordance with art. 35 of the "decree" (companies over which the parent company or companies controlled by it have joint control together with other companies and based on agreements with them, provided that the conditions provided for in the same art. 35 (1) are met) are treated with the method of proportional integration. According to this method, the elements of assets, liabilities, guarantees and commitments as well as "off-balance sheet" operations and revenues and charges of the company subject to joint control are taken up in the consolidated financial statements according to the criterion of proportion with the participation held in it. If the jointly controlled company itself controls other companies exercising credit, financial, or instrumental activities, such companies must also be taken into account in the proportional consolidation. For the rest, the same consolidation criteria indicated for full consolidation apply.

2.3. Net equity Participations in controlled or jointly controlled companies other than credit, financial, and instrumental entities and participations in associated companies referred to in art. 36, paragraph 1, of the "decree" are attributed, in the consolidated financial statements, a value determined according to the method described in art. 19 of the "decree". If at the time of the first application of the method the value of the participation is higher than the corresponding fraction of the net equity of the investee, the difference: a) for the part attributable to depreciable assets, remains recorded in the consolidated asset item "participations" or "participations in group companies" and is amortized according to what is provided by the "decree" for the different categories of depreciable assets. The corresponding amortization shares are brought to decrease (increase) the profits (losses) to be indicated in the consolidated income statement items "profits" or "losses" of the participations valued at net equity; b) for the part attributable to goodwill, is recorded in the consolidated asset item "positive net equity differences" and is amortized according to what is provided for goodwill by art. 16, paragraph 2, of the "decree". If the value of the participation is lower than the net equity of the investee, the difference, for the part not attributable to elements of the assets or liabilities of the investee, is registered in the consolidated liability item "negative net equity differences" or, when it is due to the prediction of an unfavorable evolution of the future economic results of the investee, in the sub-item (c) "consolidation reserve for future risks and charges" of the consolidated liability item "reserves for risks and charges".

1 Group participation at least equal to 20 percent of the voting rights exercisable in the ordinary general meeting of the jointly controlled company, provided that this is a body exercising credit or financial activity or, exclusively or principally, instrumental activity.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 39 April 1998 For the application of the aforementioned method, the net equity of the investee is calculated by summing together the capital, share premiums, reserves, general financial risk reserve, revaluation reserves, credit risk reserves, carried forward profits, and the profit for the year for the part destined to reserves and dividends; from this amount, carried forward losses and the loss for the year must be subtracted. If an increase in the capital of the investee for consideration has been subscribed but not yet settled in whole or in part, criteria analogous to those indicated in the previous paragraph 2.1.1 apply. To the value of the participation resulting from the last consolidated financial statements, the increase or decrease, occurred during the year, in the value of the net equity of the investee corresponding to the share of participation is added or subtracted, if not already accounted for, and the dividends related to it are subtracted. This variation must appear in the consolidated income statement only to the extent that it is referable to profits or losses of the investee (1). In the consolidated income statement items "profits of investees valued at net equity" or "losses of investees valued at net equity" flows the balance of all variations. If the participating company is itself required to draw up consolidated financial statements, these instructions regarding net equity apply to the consolidated net equity of this company. In the calculation of this net equity, negative and positive differences of consolidation and net equity must be taken into account, respectively in increase and decrease; the equity belonging to third parties is not computed. For what is not provided for in this paragraph, the provisions of articles 19 and 36 of the "decree" apply.

3. The consolidated balance sheet 3.1. Assets Bonds and other debt securities For the elimination of securities issued by other companies included in the consolidation, it is necessary to preliminarily cancel any write-downs or revaluations of the securities themselves registered in the account of the owning company. This cancellation must be carried out by crediting (debiting) the write-downs (revaluations) and debiting (crediting) correspondingly the account "bonds and other debt securities". The value of the securities thus recalculated must be compared with the value of the corresponding fraction of the securities themselves recorded in the account "debts represented by securities" of the liabilities of the issuing company (net of any issue discount registered in the assets). The value differences emerging from this comparison are treated according to what is provided for in the previous paragraph 2.1.2.

1 Variations dependent on increases in the revaluation reserves of the investee must not pass through the consolidated income statement, but must be registered directly in the consolidated liability item "negative net equity differences".

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 40 April 1998 Participations in group companies In this item, participations in group companies not included in the consolidation must appear. Own shares or quotas In this item, the shares or quotas of the parent company held by the controlled companies included in the consolidation must also be recorded.

3.2. Liabilities Debts represented by securities See the instructions concerning the consolidated asset item "bonds and other fixed debt securities". Equity belonging to third parties In this item, the fraction of the consolidated net equity attributable to shares or quotas of third parties must appear. This is constituted by: a) the shares of net equity of the controlled companies included in the consolidation that are, based on "equity ratios", belonging to third parties (net of dividends assigned to them); the net equity is calculated by summing together the capital, share premiums, reserves, general financial risk reserve, carried forward profits, and the profit for the year for the part destined to reserves and dividends and subtracting carried forward losses and the loss for the year; b) the shares of negative consolidation differences and positive ones belonging, based on "equity ratios", to third parties (see the previous paragraph 2.1.1). If an increase in the capital of the controlled company for consideration has been subscribed, but not yet settled in whole or in part, the same criteria indicated in the previous paragraph 2.1.1 apply. From "equity belonging to third parties", obviously, the tenths and "share premiums" not yet paid by the third parties themselves must be excluded, crediting correspondingly, respectively, the account "capital subscribed but not paid" and the account "consolidation adjustments". Reserves The differences arising from the conversion, at the exchange rate current at the reference date of the consolidated financial statements, of the net equity of the controlled companies included in the consolidation must be included in the sub-item (d) "other reserves".

4. The consolidated income statement Income taxes for the year In this item, the possible excess of the tax expense calculable based on the consolidated financial statements compared to the expense already paid or to be paid by the companies included in the consolidation must also be registered, if it is probable that such excess will translate into an actual expense for one of such companies.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 41 April 1998 Profit (Loss) for the year belonging to third parties In this item, the fraction of the consolidated economic result attributable to shares or quotas of third parties must appear. This is constituted by the share of the economic result of the controlled companies included in the consolidation that, based on "equity ratios", belongs to third parties. Profit (Loss) for the year In this item, the share of the consolidated economic result belonging to the group based on "equity ratios" is indicated.

5. The explanatory notes to the consolidated financial statements 5.1. Preamble The consolidated explanatory notes are divided into the following four parts:

1. Part A – Valuation criteria;
2. Part B – Information on the balance sheet;
3. Part C – Information on the income statement;
4. Part D – Other information. Each part is itself articulated into sections that illustrate individual aspects of management. In the consolidated explanatory notes, SIMs may provide other information in addition to those required, provided that this does not diminish the clarity and immediacy of information of the notes themselves.

5.2. Content The consolidated explanatory notes indicate at least:

1. the information at the consolidated level provided for the explanatory notes of the individual accounts, where this is significant;
2. the list: a) of the companies included in the consolidation with the full method; b) of the companies included in the consolidation with the proportional method; c) of the participations to which the method referred to in art. 36 of the "decree" is applied; d) of other controlled, associated, or jointly controlled companies. The aforementioned lists indicate for each company: a) the name and headquarters. The amount of the net equity and that of the profit or loss of the year;

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 42 April 1998 b) the shares held, directly or through a trustee company or through an intermediary, by the parent company and by each of the controlled companies; c) if different, the percentage of votes collectively belonging in the ordinary general meeting; d) the reason for inclusion in the list, if it does not already result from the indications required by letters b) and c). It is permitted to omit the above-required information when it can cause serious prejudice to one of the companies indicated therein. Such omission is mentioned. To integrate the data contained in the list, the parent company also indicates the reason for the possible exclusion from consolidation, in accordance with art. 29 of the "decree", of controlled companies; in the case referred to in paragraph 1, letter d), of the aforementioned article, it also illustrates the nature and terms of the financial assistance operation of the controlled credit entity and attaches to the consolidated financial statements or, in the absence thereof, to its own individual financial statements a complete copy of the last approved financial statements of the aforementioned entity; 3) the criteria used for the determination of the items referred to in art. 32, paragraph 4 of the "decree", the significant variations compared to the consolidated financial statements of the previous year as well as, if there has been compensation between the positive and negative differences, the amount of the differences before the aforementioned compensation; 4) the reasons for the possible non-application, in accordance with art. 36, 4th paragraph, of the "decree", of the method provided for by the same article; 5) providing the motivation, the derogations referred to in art. 38, paragraphs 1 and 2 of the "decree"; 6) the average number of employees, divided by categories, of all companies included in the consolidation (that of the proportionally consolidated companies is indicated separately), counting those seconded full-time to other companies included in the consolidation only once; 7) the exercise of the faculty provided for in art. 39, paragraph 2 of the "decree"; 8) the total amount of revaluation reserves and credit risk reserves referable to third parties based on "equity ratios"; 9) information regarding assets and liabilities towards group companies not included in the consolidation, distinguishing between controlled companies, controlling companies, and companies under the control of the latter.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 43 April 1998 Appendix A SCHEMAS OF THE SIM FINANCIAL STATEMENTS

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 44 April 1998 A.1. BALANCE SHEET ASSETS 10. Cash and balances 20. Receivables from credit institutions: (a) on demand (b) other receivables 30. Receivables from financial institutions (a) on demand (b) other receivables 40. Receivables from customers 50. Bonds and other debt securities: (a) of public issuers (b) of credit institutions (c) of financial institutions of which: – own securities (d) of other issuers 60. Shares, quotas, and other capital securities 70. Options and other similar values 80. Participations 90. Participations in group companies 100. Intangible fixed assets of which: – start-up costs – goodwill 110. Tangible fixed assets 120. Capital subscribed but not paid of which: – called-up capital 130. Own shares or quotas (with indication also of the nominal value) 140. Other assets of which: – deposits with clearing and guarantee bodies – receivables from financial promoters 150. Accrued income and deferred charges: (a) accrued income (b) deferred charges Total assets

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 45 April 1998 LIABILITIES 10. Payables to credit institutions: (a) on demand (b) at term or with notice 20. Payables to financial institutions: (a) on demand (b) at term or with notice 30. Payables to customers (a) on demand (b) at term or with notice 40. Debts represented by securities 50. Options and other similar values issued 60. Other liabilities of which: – payables to financial promoters 70. Accrued charges and deferred income: (a) accrued charges (b) deferred income 80. Employment termination indemnity 90. Reserves for risks and charges: (a) pension funds and similar obligations (b) tax and duty funds (c) other funds 100. General financial risk reserve 110. Credit risk reserves 120. Subordinated liabilities 130. Capital 140. Share premiums 150. Reserves: (a) legal reserve (b) reserve for own shares (c) statutory reserves (d) other reserves 160. Revaluation reserves 170. Carried forward profits (Losses) 180. Profit (loss) for the year Total liabilities

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 46 April 1998 GUARANTEES AND COMMITMENTS 10. Guarantees issued 20. Commitments

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 47 April 1998 A.2. INCOME STATEMENT 10. Profits (losses) from financial operations of which: – on securities – on derivative contracts – on currency 20. Active commissions 30. Passive commissions 40. Active interest and assimilated revenues of which: – on debt securities – on repos and repurchase agreements – on other receivables 50. Passive interest and assimilated charges of which: – on repos and repurchase agreements – on other payables 60. Dividends and other revenues a) on shares, quotas, and other capital securities b) on participations c) on participations in group companies 70. Other management revenues 80. Administrative expenses a) personnel expenses of which: – salaries and wages – social charges – employment termination indemnity – pension and similar treatments b) other administrative expenses 90. Value adjustments on intangible and tangible fixed assets 100. Provisions for risks and charges 110. Other management charges 120. Value adjustments on receivables and provisions for guarantees and commitments 130. Reversals of value on receivables and provisions for guarantees and commitments 140. Provisions for credit risk reserves 150. Value adjustments on financial fixed assets 160. Reversals of value on financial fixed assets 170. Profit (Loss) from ordinary activities 180. Extraordinary income 190. Extraordinary charges 200. Extraordinary Profit (Loss) 220. Income taxes for the year 230. Profit (Loss) for the year

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 48 April 1998 A.3. EXPLANATORY NOTES Part A – Valuation criteria Section 1 – The illustration of valuation criteria Section 2 – Fiscal adjustments and provisions Part B – Information on the balance sheet Section 1 – Receivables Section 2 – Securities Section 3 – Participations Section 4 – Other asset items Section 5 – Payables Section 6 – Funds Section 7 – Capital, reserves, general financial risk reserve, and subordinated liabilities Section 8 – Other liability items Section 9 – Guarantees and commitments Section 10 – Distribution of assets and liabilities Section 11 – Other assets Part C – Information on the income statement Section 1 – Profits and losses from financial operations Section 2 – Commissions Section 3 – Interest Section 4 – Administrative expenses Section 5 – Adjustments, reversals, and provisions Section 6 – Other income statement items Section 7 – Other information on the income statement Part D – Other information Section 1 – Directors, auditors, and employees Section 2 – Parent company

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 49 April 1998

Part A – Evaluation Criteria Section 1 – Illustration of evaluation criteria Section 2 – Fiscal adjustments and provisions 2.1 Value adjustments made exclusively in application of tax laws (to be specified) 2.2 Provisions made exclusively in application of tax laws (to be specified)

Part B – Balance Sheet Information Section 1 – Credits 1.1 Detail of item 20 "credits towards credit institutions" (a) for services (b) for repurchase agreements and repo transactions of which:

• on government bonds
• on bonds and other debt securities
• on shares, units and other equity securities 1.2 Detail of item 30 "credits towards financial institutions" (a) for services (b) for repurchase agreements and repo transactions of which:
• on government bonds
• on bonds and other debt securities
• on shares, units and other equity securities 1.3 Detail of item 40 "credits towards customers" (a) for services (b) for repurchase agreements and repo transactions of which:
• on government bonds
• on bonds and other debt securities

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 50 April 1998

• on shares, units and other equity securities 1.4 Credits towards other SIMs (Securities Investment Companies) (a) for services (b) for repurchase agreements and repo transactions of which:
• on government bonds
• on bonds and other debt securities
• on shares, units and other equity securities 1.5 Non-performing loans 1.6 Interest on overdue payments

Section 2 – Securities 2.1 Held-to-maturity securities Items/Values Book Value Market Value

1. Debt securities 1.1 Government bonds – quoted – unquoted 1.2 Other securities – quoted – unquoted
2. Equity securities – quoted – unquoted Totals 2.1.1 Annual changes in held-to-maturity securities A. Opening balances B. Increases B1. Purchases B2. Reversals of value adjustments B3. Other changes C. Decreases C1. Sales C2. Repayments C3. Value adjustments of which: – permanent impairments C4. Other changes D. Closing balances

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 51 April 1998 2.2 Trading securities Items/Values Book Value Market Value

1. Debt securities 1.1 Government bonds – quoted – unquoted 1.2 Other securities – quoted – unquoted
2. Equity securities 2.1 Share securities – quoted – unquoted 2.2 Other securities – quoted – unquoted Totals 2.2.1 Purchases and sales of trading securities (a) purchases
3. debt securities

• government bonds
• other securities

2. equity securities

• share securities
• other securities (b) sales

1. debt securities

• government bonds
• other securities

2. equity securities

• share securities
• other securities 2.2.2 Repurchase agreements and repo transactions (a) securities to be received

1. debt securities

• government bonds
• other securities

2. equity securities

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 52 April 1998

• share securities
• other securities (b) securities to be delivered

1. debt securities

• government bonds
• other securities

2. equity securities

• share securities
• other securities 2.3 Options and other similar instruments Items/Values Book Value Market Value

1. On securities 1.1 on debt securities 1.2 on equity securities
2. On interest rates
3. On indices
4. On currencies
5. Others Totals 2.3.1 Annual changes in options and other similar instruments A. Opening balances B. Increases B1. Purchases B2. Revaluations B3. Other changes C. Decreases C1. Sales C2. Value adjustments C3. Other changes D. Closing balances 2.3.2 Purchases and sales of options and other similar instruments (a) purchases
6. on securities
7. on interest rates
8. on indices
9. on currencies
10. others

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 53 April 1998 (b) sales

1. on securities
2. on interest rates
3. on indices
4. on currencies
5. others

Section 3 – Shareholdings 3.1 Significant shareholdings Names Registered Office Net Equity Profit/Loss Share % Book Value A. Controlled undertakings

1. ....................................
2. .................................... B. Undertakings subject to significant influence
3. ....................................
4. .................................... 3.2 Assets and liabilities towards group undertakings (a) Assets
5. credits towards credit institutions of which: – subordinated
6. credits towards SIMs of which: – subordinated
7. credits towards other financial institutions of which: – subordinated
8. credits towards customers of which: – subordinated
9. bonds and other debt securities of which: – subordinated (b) Liabilities
10. debts towards credit institutions

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 54 April 1998 2. debts towards SIMs 3. debts towards other financial institutions 4. debts towards customers 5. debts represented by securities 6. subordinated liabilities (c) Guarantees and commitments

1. guarantees issued
2. commitments 3.3 Assets and liabilities towards associated undertakings (other than group undertakings) (a) Assets
3. credits towards credit institutions of which: – subordinated
4. credits towards SIMs of which: – subordinated
5. credits towards other financial institutions of which: – subordinated
6. credits towards customers of which: – subordinated
7. bonds and other debt securities of which: – subordinated (b) Liabilities
8. debts towards credit institutions
9. debts towards SIMs
10. debts towards other financial institutions
11. debts towards customers
12. debts represented by securities
13. subordinated liabilities (c) Guarantees and commitments

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 55 April 1998

1. guarantees issued
2. commitments 3.4 Composition of item 80 "shareholdings" (a) in credit institutions
3. quoted
4. unquoted (b) in financial institutions
5. quoted
6. unquoted (c) others
7. quoted
8. unquoted 3.5 Composition of item 90 "shareholdings in group undertakings" (a) in credit institutions
9. quoted
10. unquoted (b) in financial institutions
11. quoted
12. unquoted (c) others
13. quoted
14. unquoted 3.6 Annual changes in shareholdings 3.6.1 Shareholdings in group undertakings A. Opening balances B. Increases B1. Purchases B2. Reversals of value adjustments B3. Revaluations B4. Other changes C. Decreases C1. Sales C2. Value adjustments C3. Other changes D. Closing balances E. Total revaluations F. Total adjustments

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 56 April 1998 3.6.2 Other shareholdings A. Opening balances B. Increases B1. Purchases B2. Reversals of value adjustments B3. Revaluations B4. Other changes C. Decreases C1. Sales C2. Value adjustments C3. Other changes D. Closing balances E. Total revaluations F. Total adjustments

Section 4 – Other asset items 4.1 Tangible and intangible fixed assets 4.1.1 Annual changes in tangible fixed assets A. Opening balances B. Increases B1. Purchases B2. Reversals of value adjustments B3. Revaluations B4. Other changes C. Decreases C1. Sales C2. Value adjustments: (a) depreciation (b) permanent impairments C3. Other changes D. Closing balances E. Total revaluations F. Total adjustments: (a) depreciation (b) permanent impairments 4.1.2 Annual changes in intangible fixed assets A. Opening balances B. Increases B1. Purchases B2. Reversals of value adjustments B3. Revaluations B4. Other changes C. Decreases C1. Sales C2. Value adjustments: (a) depreciation (b) permanent impairments C3. Other changes

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 57 April 1998 D. Closing balances E. Total revaluations F. Total adjustments: (a) depreciation (b) permanent impairments 4.2 Composition of item 140 "other assets" (to be specified) 4.3 Composition of item 150 "accrued income and deferred charges" (to be specified) 4.4 Adjustments for accrued income and deferred charges (a) asset items (to be specified) (b) liability items (to be specified) 4.5 Distribution of subordinated assets (a) credits towards credit institutions (b) credits towards financial institutions (c) credits towards customers (d) bonds and other debt securities

Section 5 – Liabilities 5.1 Detail of item 10 "debts towards credit institutions" (a) for repurchase agreements and repo transactions of which:

• on government bonds
• on bonds and other debt securities
• on shares, units and other equity securities 5.2 Detail of item 20 "debts towards financial institutions" (a) for repurchase agreements and repo transactions of which:
• on government bonds
• on bonds and other debt securities
• on shares, units and other equity securities

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 58 April 1998 5.3 Detail of item 30 "debts towards customers" (a) for repurchase agreements and repo transactions of which:

• on government bonds
• on bonds and other debt securities
• on shares, units and other equity securities 5.4 Debts towards other SIMs (a) for services received (b) for repurchase agreements and repo transactions of which:
• on government bonds
• on bonds and other debt securities
• on shares, units and other equity securities 5.5 Debts represented by securities

Section 6 – Funds 6.1 Composition of sub-item 90 (c) "provisions for risks and charges: other provisions" (to be specified) 6.2 Composition of item 110 "provisions for credit risks"

Section 7 – Capital, reserves, general financial risk fund and subordinated liabilities

Section 8 – Other liability items 8.1 Composition of item 50 "options and other similar instruments issued" (a) on securities:

• debt securities
• equity securities (b) on interest rates (c) on indices (d) on currencies (e) others 8.2 Composition of item 60 "other liabilities" (to be specified)

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 59 April 1998 8.3 Composition of item 70 "accrued charges and deferred income" (to be specified) 8.4 Adjustments for accrued charges and deferred income (a) liability items (to be specified) (b) asset items (to be specified)

Section 9 – Guarantees, commitments and "off-balance sheet" operations 9.1 Composition of item 10 "guarantees issued" 9.2 Assets pledged as security for own debts (to be specified) 9.3 Composition of item 20 "commitments" 9.4 Detail of item 20 "commitments" Securities to be received for settlement operations

• government bonds
• other debt securities
• shares
• other equity securities Securities to be delivered for settlement operations
• government bonds
• other debt securities
• shares
• other equity securities Foreign currencies
• to be received
• to be delivered Currencies
• currency against currency
• purchases against lire
• sales against lire

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 60 April 1998 9.5 "Off-balance sheet" operations Operations/Purpose Hedging Trading Others

1. purchased options a) equity securities – purchases ("call") – sales ("put") b) debt securities – purchases ("call") – sales ("put") c) currencies – currency against currency – purchases against lire ("call") – sales against lire ("put") d) interest rates – purchases – sales e) indices – purchases – sales
2. issued options a) equity securities – purchases ("put") – sales ("call") b) debt securities – purchases ("put") – sales ("call") c) currencies – currency against currency – purchases against lire ("put") – sales against lire ("call") d) interest rates – purchases – sales e) indices – purchases – sales
3. other derivative contracts (with capital exchange) a) securities – purchases – sales b) currencies – currency against currency – purchases against lire – sales against lire
4. other derivative contracts (without capital exchange) a) currencies – currency against currency – purchases against lire – sales against lire b) interest rates – purchases – sales c) indices – purchases – sales

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 61 April 1998 d) other instruments – purchases – sales

Section 10 – Distribution of assets and liabilities 10.1 Temporal distribution of assets and liabilities Determined maturity Over 3 months Over 12 months Over 1 year Over 5 years Indeterminate Duration Items/Remaining Maturity On sight up to up to up to Fixed rate Indicative rate Fixed rate Indicative rate

1. Assets 1.1 credits towards credit institutions of which: – repos and repo transactions 1.2 credits towards financial institutions of which: – repos and repo transactions 1.3 credits towards customers of which: – repos and repo transactions 1.4 bonds and other debt securities 1.5 "off-balance sheet" operations
2. Liabilities 2.1 debts towards credit institutions of which: – repos and repo transactions 2.2 debts towards financial institutions of which: – repos and repo transactions 2.3 debts towards customers of which: – repos and repo transactions 2.4 debts represented by securities 2.5 "off-balance sheet" operations 10.2 Assets and liabilities in foreign currency (a) assets

• credits
• bonds and other debt securities
• shares and other equity securities
• shareholdings
• other assets (b) liabilities
• debts not represented by securities
• debts represented by securities

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 62 April 1998

• other liabilities

Section 11 – Other activities 11.1 Trading on behalf of third parties (a) trading of securities (to be specified) (b) trading of currencies (to be specified) 11.2 Placement activities (a) with guarantee (b) without guarantee 11.3 Asset management (a) assets managed (b) contributions (c) withdrawals 11.4 Order collection 11.5 Advisory services 11.6 Door-to-door solicitation 11.7 Custody and administration of securities (a) third-party securities in custody (b) third-party securities deposited with third parties (c) proprietary securities deposited with third parties 11.8 Other operations (to be specified)

Part C – Income Statement Information Section 1 – Profits and losses from financial operations 1.1 Composition of item 10 "profits/losses from financial operations" Items/Operations Securities Currencies A.1 Revaluations XXX A.2 Depreciations XXX B.1 Realized profits (losses) B.2 Other Profits/Losses Totals

1. Derivative contracts
2. Government bonds
3. Other debt securities
4. Share securities
5. Other equity securities
6. Others Items/Operations Others A.1 Revaluations A.2 Depreciations B.1 Realized profits (losses) B.2 Other Profits/Losses Totals
7. Derivative contracts: a. on interest rates b. on indices
8. Others

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 63 April 1998 Section 2 – Commissions 2.1 Composition of item 20 "Active commissions" (a) for securities trading activities (b) for foreign exchange trading activities (c) for placement activities (d) for asset management activities (e) for order collection activities (f) for advisory activities (g) for door-to-door sale of securities, products and services (h) for custody and administration activities (i) for other services

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 64 April 1998 2.2 Composition of item 30 "Passive commissions" (a) for securities trading activities (b) for foreign exchange trading activities (c) for asset management activities (d) for door-to-door sale of securities, products and services (e) for securities deposit (f) for other services

Section 3 – Interest 3.1 Composition of item 40 "active interest and similar income" (a) on credits towards credit institutions of which:

• for repurchase agreements and repo transactions (b) on credits towards financial institutions of which:
• for repurchase agreements and repo transactions (c) on credits towards customers of which:
• for repurchase agreements and repo transactions (d) on debt securities (e) other active interest (f) other income 3.2 Composition of item 50 "passive interest and similar charges" (a) on debts towards credit institutions of which:
• for repurchase agreements and repo transactions (b) on debts towards financial institutions of which:
• for repurchase agreements and repo transactions (c) on debts towards customers of which:
• for repurchase agreements and repo transactions (d) on debts represented by securities (e) on subordinated liabilities (f) other charges

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 65 April 1998 Section 4 – Administrative expenses

Section 5 – Adjustments, reversals and provisions 5.1 Composition of item 120 "value adjustments on credits and provisions for guarantees and commitments" (a) value adjustments on credits (b) provisions for guarantees and commitments

Section 6 – Other income statement items 6.1 Composition of item 70 "other management income" (to be specified) 6.2 Composition of item 110 "other management charges" (to be specified) 6.3 Composition of item 180 "extraordinary income" (to be specified) 6.4 Composition of item 190 "extraordinary charges" (to be specified)

Section 7 – Other income statement information 7.1 Territorial distribution of income (to be specified) 7.2 Data for contribution to the National Guarantee Fund (a) commissions for third-party trading activities:

• of shares;
• of bonds;
• of government bonds;
• of other securities; (b) sum of purchases and sales made on behalf of third parties:
• of shares;
• of bonds;
• of government bonds;
• of other securities; (c) commissions for placement and distribution activities of securities;

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 66 April 1998 (d) commissions for asset management activities; (e) average monthly balance of third-party managed assets; (f) commissions for order collection activities; (g) commissions for advisory activities on securities; (h) commissions for public savings solicitation activities; (i) sum of purchases and sales made on own account with the public:

• of shares;
• of bonds;
• of government bonds;
• of other securities.

Part D – Other information Section 1 – Directors, auditors and employees 1.1 Remuneration of directors and auditors (a) directors (b) auditors 1.2 Credits and guarantees issued in favor of directors and auditors (a) directors (b) auditors 1.3 Average number of employees by category (a) executives (b) officials (c) other staff

Section 2 – Parent company 2.1 Name 2.2 Registered office

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 67 April 1998 Appendix B CONSOLIDATED BALANCE SHEET SCHEMES

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 68 April 1998 B.1. CONSOLIDATED BALANCE SHEET ASSETS 10. Cash and balances 20. Credits towards credit institutions: (a) on sight (b) other credits 30. Credits towards financial institutions (a) on sight (b) other credits 40. Credits towards customers 50. Bonds and other debt securities: (a) from public issuers (b) from credit institutions (c) from financial institutions of which: – own securities (d) from other issuers 60. Shares, units and other equity securities 70. Options and other similar instruments 80. Shareholdings (a) valued at net asset value (b) others 90. Shareholdings in group undertakings (a) valued at net asset value (b) others 100. Positive consolidation differences 110. Positive net asset differences 120. Intangible fixed assets 130. Tangible fixed assets 140. Subscribed but unpaid capital of which: – called-up capital 150. Own shares or units (indicating also the nominal value) 160. Other assets of which: – deposits with clearing and guarantee bodies – credits towards financial promoters 170. Accrued income and deferred charges: (a) accrued income (b) deferred charges Total Assets

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 69 April 1998 LIABILITIES 10. Debts towards credit institutions: (a) on sight (b) at term or with notice 20. Debts towards financial institutions: (a) on sight (b) at term or with notice 30. Debts towards customers (a) on sight (b) at term or with notice 40. Debts represented by securities: (a) bonds (b) other securities 50. Options and other similar instruments issued 60. Other liabilities of which: – debts towards financial promoters 70. Accrued charges and deferred income: (a) accrued charges (b) deferred income 80. Severance pay for subordinate employment 90. Provisions for risks and charges: (a) pension funds and similar obligations (b) tax and duty funds (c) consolidation fund for future risks and charges (d) other funds 100. General financial risk fund 110. Provisions for credit risks 120. Subordinated liabilities 130. Negative consolidation differences 140. Negative net asset differences 150. Third-party equity (+/-) 160. Capital 170. Share premium 180. Reserves: (a) legal reserve (b) reserve for own shares (c) statutory reserves (d) other reserves 190. Revaluation reserves 200. Retained earnings (Losses) 210. Profit (loss) for the year Total Liabilities

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 70 April 1998 GUARANTEES AND COMMITMENTS 10. Guarantees issued 20. Commitments

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 71 April 1998 B.2. CONSOLIDATED INCOME STATEMENT 10. Profits (losses) from financial transactions of which: – on securities – on derivative contracts – on currencies 20. Active commissions 30. Passive commissions 40. Active interest and assimilated income of which: – on debt securities – on repurchase agreements and term repurchase transactions – on other credits 50. Passive interest and assimilated charges of which: – on repurchase agreements and term repurchase transactions – on other debts 60. Dividends and other income a) on shares, units and other equity securities b) on participations c) on participations in group companies 70. Other management income 80. Administrative expenses: (a) personnel expenses of which: – wages and salaries – social charges – severance pay – pension benefits and similar (b) other administrative expenses 90. Value adjustments on intangible and tangible fixed assets 100. Provisions for risks and charges 110. Other management charges 120. Value adjustments on credits and on provisions for guarantees and commitments 130. Reversals of value adjustments on credits and on provisions for guarantees and commitments 140. Provisions for credit risk funds 150. Value adjustments on financial fixed assets 160. Reversals of value adjustments on financial fixed assets 170. Gains (losses) on participations valued at equity 180. Profit (Loss) from ordinary activities 190. Extraordinary income 200. Extraordinary charges 210. Extraordinary profit (Loss) 220. Use of the consolidation fund for future risks and charges 230. Variation of the fund for general financial risks 240. Income taxes for the year 250. Profit (Loss) for the year attributable to third parties 260. Profit (Loss) for the year

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 72 April 1998 Appendix C EQUITY RATIOS AND CONSOLIDATION DIFFERENCES

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 73 April 1998 C.1. Equity ratios Example 1 The data for the example are as follows: – Company A holds 90 percent of the capital of Company B; – Company B in turn holds 60 percent of the capital of Company C; – Company C in turn holds 70 percent of the capital of Company D; – Company A holds 20 percent of the capital of Company C. The "chain" shareholding structure of this group can be depicted as follows: To calculate the equity ratio (E.R.) of the parent company with respect to an indirectly controlled company (i.e., through other controlled companies), one must multiply the shareholding ratios of the various companies forming the shareholding chain. When a company included in the consolidation is held by more than one company also included in the consolidation, it is necessary to sum the individual products. In the example, the equity ratio of A in D is calculated as follows: D = (0.90 * 0.60 * 0.70) + 0.20 * 0.70 = 0.518

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 74 April 1998 C.2. Consolidation differences C.2.1 Negative consolidation difference arising from a direct controlling participation The data for the example are as follows: – Company A holds 90 percent of the capital of Company B, while the remaining 10 percent belongs to minority shareholders; – The book value of Company A's participation in Company B is L. 70; – The net equity (capital, share premium, reserves, general banking risk fund, carried forward profits, current year profit for the portion allocated to reserves and dividends, net of carried forward losses as well as current year loss) of Company B is L. 100. The comparison between the value of the participation (L. 70) and the corresponding share of the net equity of the controlled company (L. 90, equal to 90 percent of L. 100) reveals a difference of L. 20. If this difference is not attributable to the assets and liabilities of the controlled company, in the consolidated financial statements it must be recorded alternatively: a) in the liability item "negative consolidation differences" of the consolidated balance sheet; b) in the sub-item (c) "consolidation fund for future risks and charges" of the liability item "provisions for risks and charges", when it is due to the expectation of an unfavorable evolution of the future economic results of the controlled company. The share of net equity belonging to minority shareholders, equal to L. 10, must be allocated to the liability item "equity attributable to third parties". C.2.2 Positive consolidation difference arising from a direct controlling participation The data for the example are as follows: – Company A holds 70 percent of the capital of Company B, while the remaining 30 percent belongs to minority shareholders; – The book value of Company A's participation in Company B is L. 100; – The net equity of Company B is composed as follows: · capital L. 60 · reserves L. 40 · revaluation reserves L. 5 · credit risk funds L. 15 The comparison between the value of the participation (L. 100) and the corresponding share of the net equity (which excludes revaluation reserves and credit risk funds) of the controlled company (L. 70, equal to 70 percent of L. 100) reveals a difference of L. 30.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 75 April 1998 Paragraph 2.1.1 of Chapter 3 establishes that, when the participation exceeds the net equity, for the purposes of preparing the consolidated financial statements, the difference must be offset, for the portion remaining after attribution to the elements of the assets and liabilities, with the revaluation reserves and credit risk funds of the controlled company. The residual amount must be allocated, for the group's share, among positive consolidation differences. In the example considered, assuming that attribution to the elements of the assets and liabilities is not possible, it follows that: – the difference of L. 30 is offset by 70 percent of the revaluation reserves (L. 3.5) and credit risk funds (L. 10.5); – the residual difference amount (L. 16) must be recorded in item 100 of the assets ("positive consolidation differences") of the consolidated balance sheet; – the residual amount of revaluation reserves (L. 1.5) and credit risk funds (L. 4.5) must be recorded in the corresponding liability items; – the share of net equity belonging to minority shareholders, equal to L. 30 (30 percent of the sum of capital and reserves), must be allocated to the liability item "equity attributable to third parties". C.2.3 Negative consolidation differences arising from direct and indirect controlling participations It is assumed that as of 12/31/1993 the following situation exists: – Company A holds 90 percent of the capital of Company B, while the remaining 10 percent belongs to minority shareholders; – Company B in turn holds 90 percent of the capital of Company C, while the remaining 10 percent belongs to minority shareholders; – The book value of Company A's participation in Company B is L. 70; – The book value of Company B's participation in Company C is L. 60; – The net equity value of Company B is L. 100; – The net equity value of Company C is L. 100. At the same date, the financial statements of companies A, B and C as of 12/31 are(1):

1 For convenience, it is assumed that the current year profit of the three companies is equal to zero.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 76 April 1998 90% 90% Co. A ——————> Co. B ——————> Co. C Part. L. 70 Cr. L. 90 Cap. L.100 Res. L. 50 C.R. L. 10 Part. L. 60 Cr. L. 45 Cap. L.50 Res. L.50 C.R. L. 5 Cr. L.100 Cap. L.100 LEGEND: – Part. = Participations – Cr. = Credits – Cap. = Capital – Res. = Reserves – C.R. = Credit Risk Fund According to what is established in paragraph 2.1.1 of Chapter 3, the calculation of consolidation differences and minority interests must be performed by applying the "equity ratios". In this case, assuming that the differences emerging from the comparison between participations and net equity are not attributable to the assets and liabilities of the individual controlled companies, there are negative consolidation differences of L. 47 and minority interests of L. 13, determined as follows: Negative consolidation differences a) L. 20 relating to the direct controlling participation of Company A in Company B; b) L. 27 relating to the indirect controlling participation of Company A in Company C (amount equal to 90 percent of the consolidation difference of L. 30 of Company B in Company C)(1); Minority interests a) L. 13 relating to the minority shareholders of Company B, of which L. 10 is directly attributable and L. 3 for the share attributed to them of the consolidation difference of C in B (10 percent of L. 30); b) L. 10 relating to the minority shareholders of Company C. Given this and assuming that no unfavorable evolution of economic results is expected with respect to the controlled companies, the following must be recorded in the liability section of the consolidated balance sheet:

1 The equity ratio of A in B is equal to 90 percent; the equity ratio of A in C is equal to 81 percent (90 percent multiplied by 90 percent). The share of the consolidation difference attributable to the group is calculated as follows: 90% * [L.60 – 90% (L.100)] = 81% (L.100) – 90% (L.100) = – L.27 where the first term represents the share attributable to the parent company of the net equity of C, while the second represents the share attributable to the parent company of the participation of B in C.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 77 April 1998 a) L. 47 in the liability item "negative consolidation differences"; b) L. 23 in the liability item "equity attributable to third parties". The consolidated balance sheet will be as follows: CONSOLIDATED BALANCE SHEET Credits to customers L. 235 Credit risk funds L. 15 Negative consolidation differences L. 47 Equity attributable to third parties L. 23 Capital L. 100 Reserves (a) legal reserve L. 50 L. 235 L. 235 It is assumed that in the following financial year (closed on 12/31/1994) companies A, B and C register the following variations in net equity and credit risk funds(1): a) Company A: – increase in credit risk fund: L. 3; – current year profit: L. 20. b) Company B: – increase in credit risk fund: L. 1, – current year profit: L. 10 (L. 6 allocated to reserves and L. 4 allocated to dividends). c) Company C: – establishment of credit risk fund: L. 2; – current year profit: L. 5 (allocated entirely to reserves). According to the provisions of the instructions (cf. Chapter 3, paragraph 2.1.1), the variations in the net equity of controlled companies that occur in financial years subsequent to that of the first consolidation must be recorded, for the group's share based on the calculation of "equity ratios", in the relevant items of the balance sheet ("reserves", "fund for general financial risks", "current year profit", etc.). It is also established that the "equity attributable to third parties" must include the direct and indirect share of third parties in the net equity of controlled companies (net of dividends assigned to them). In the case considered here, the profit attributable to the group results in L. 33.05, the net equity belonging to minority shareholders of B and C has increased by L. 1.55 and the debt towards

1 It is assumed that these variations are entirely invested in government securities.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 9 78 April 1998 the same shareholders for dividends to be distributed amounts to L. 0.4. These amounts are determined as follows: Profit attributable to the group – L. 20 relating to the current year profit of Company A; – L. 9 (equal to 90 percent of L. 10) relating to the share attributable to Company A of the current year profit produced by Company B; – L. 4.05 (equal to 90 percent of L. 4.5) relating to the share attributable to Company A of the current year profit produced by Company C. Variation of third-party equity – L. 1.05 belonging to the minority shareholders of Company B, of which L. 0.6 is directly attributable(1) and L. 0.45 for the share attributed to them of the net equity increase of Company C; – L. 0.5 (equal to 10 percent of L. 5) belonging to the minority shareholders of Company C. Liabilities to minority shareholders – L. 0.4 relating to dividends assigned to the minority shareholders of Company B. In accordance with the instructions of this manual, the aforementioned variations must be allocated to the relevant items of the consolidated balance sheet as of 12/31/1994, which therefore appears as follows: CONSOLIDATED BALANCE SHEET Credits to customers L. 235 Other liabilities L. 0.4 Bonds and other fixed income securities (a) of public issuers L. 41 Credit risk funds L. 21 Negative consolidation differences L. 47 Equity attributable to third parties L. 24.55 Capital L. 100 Reserves (a) legal reserve L. 50 Current year profit L. 33 L. 276 L. 276

1 The amount of L. 0.6 represents the share (10 percent) of the current year profit of Company B (L.10) attributable to minority shareholders, reduced by the dividends (0.4) assigned to them.

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 10 1 April 1998 Annex 10 SCHEMA OF THE SEMI-ANNUAL ACCOUNTS OF SECURITIES INTERMEDIATION COMPANIES

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 10 2 April 1998 ASSETS 10. Cash and balances 20. Credits to credit institutions: (a) on demand (b) other credits 30. Credits to financial institutions (a) on demand (b) other credits 40. Credits to customers 50. Bonds and other debt securities: (a) of public issuers (b) of credit institutions (c) of financial institutions of which: – own securities (d) of other issuers 60. Shares, units and other equity securities 70. Options and other assimilated values 80. Participations 90. Participations in group companies 100. Intangible fixed assets of which: – setup costs – goodwill 110. Tangible fixed assets 120. Subscribed but unpaid capital of which: – called-up capital 130. Own shares or units (indicating also the nominal value) 140. Other assets of which: – deposits with clearing and guarantee bodies – credits to financial promoters 150. Accrued income and deferred charges: (a) accrued income (b) deferred charges 160. Total costs of the period: (a) losses from financial transactions (b) passive commissions of which: – for securities trading activities – for foreign exchange trading activities – for portfolio management activities – for door-to-door sale of securities, products and services – for securities deposit – for other services (c) passive interest and assimilated charges (d) other costs

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 10 3 April 1998 LIABILITIES 10. Debts to credit institutions: (a) on demand (b) at term or with notice 20. Debts to financial institutions: (a) on demand (b) at term or with notice 30. Debts to customers (a) on demand (b) at term or with notice 40. Liabilities represented by securities: 50. Emitted options and other assimilated values 60. Other liabilities of which: – debts to financial promoters 70. Accrued charges and deferred income: (a) accrued charges (b) deferred income 80. Severance pay for subordinate employment 90. Provisions for risks and charges: (a) pension funds and similar obligations (b) tax and duty funds (c) other funds 100. Fund for general financial risks 110. Credit risk funds 120. Subordinated liabilities 130. Capital 140. Share premium 150. Reserves: (a) legal reserve (b) reserve for own shares (c) statutory reserves (d) other reserves 160. Revaluation reserves 170. Carried forward profits (Losses) 180. Total income of the period (a) profits from financial transactions (b) active commissions of which: – for securities trading activities – for foreign exchange trading activities – for placement activities – for portfolio management activities – for order collection activities – for consulting activities – for door-to-door sale of securities, products and services – for custody and administration activities – for other services (c) active interest and assimilated income (d) other income

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 10 4 April 1998 GUARANTEES AND COMMITMENTS 10. Guarantees issued 20. Commitments

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 11 1 April 1998 Annex 11 [abolished]

Supervisory Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of 2 July 1991 – Annex 12 1 April 1998 Annex 12 ELEMENTS OF SUPERVISORY CAPITAL In this annex, the treatment of certain elements useful for the calculation of supervisory capital is indicated. Section I Positive elements

1. Risk funds. 1.1 Credit risk funds, intended to cover only eventual credit risks and therefore not having a corrective function, fall within the risk funds computable in the determination of the supplementary second-tier capital, up to an amount not exceeding 1.25 percent of risk-weighted assets for credit risk purposes pursuant to Article 38-ter of the Regulation.
2. Hybrid capitalization instruments. 2.1 Hybrid capitalization instruments include irredeemable liabilities or those repayable only at the request of the issuer and with the prior consent of the Bank of Italy when the relevant contract provides that: a) in the event of financial losses that determine a decrease in paid-in capital and reserves below the minimum capital level required for authorization to conduct securities intermediation activities, the sums deriving from the aforementioned liabilities and accrued interest may be used to cover losses, in order to allow the issuing entity to continue its activity; b) in the event of negative management trends, the right to remuneration may be suspended to the extent necessary to avoid or limit as much as possible the emergence of losses; c) in the event of liquidation of the issuing entity, the debt is repaid only after all other equally subordinated creditors have been satisfied. 2.2 Contracts that associate an originally particularly long maturity with the option, exercisable by the issuer, to renew the debt indefinitely are assimilated to irredeemable liabilities. In these cases, the contract expressly provides that repayment at maturity occurs with the prior consent of the Bank of Italy. 2.3 Hybrid capitalization instruments are included in the calculation of supervisory capital subject to the consent of the Bank of Italy and for an amount equal to the sums actually received by the SIM. The Bank of Italy, even in the presence of the aforementioned requirements, may exclude or limit the computability in supervisory capital of hybrid instruments.

Supervision Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of July 2, 1991 – Annex 12 April 1, 1998

patrimonialization based on valuations, even case-by-case, founded on the contractual regulation.

2.4 Hybrid capital instruments may be issued by SIMs in the form of bonds and other similar securities. Issuances are subject to prior approval from the Bank of Italy. The titles must reference the details of the relevant provision as well as the content of the clause indicated in point a) above.

2.5 The provisions provided for subordinate liabilities, as per subsequent points 3.5 and 3.6, apply.

3. Subordinate liabilities included in supplementary capital of the second level

3.1 Contracts regulating the issuance of subordinate liabilities expressly provide that: a) in the event of liquidation of the issuing entity, the debt shall be repaid only after all other creditors not equally subordinated have been repaid; b) the original duration of the relationship is not less than five years and, if the maturity is indefinite, a notice period of at least five years is provided for repayment; c) early repayment of liabilities occurs only at the initiative of the issuer and is subject to no-objection clearance from the Bank of Italy.

3.2 Subordinate liabilities are included in supervisory capital pending consent from the Bank of Italy (for procedures for forwarding requests for prior approval, see subsequent point 5). Even in the presence of the requirements set out in points a), b), and c), the Bank of Italy may exclude or limit the computability in supervisory capital of subordinate liabilities based on valuations, even case-by-case, founded on the contractual regulation. Furthermore, the computability of such amounts is reduced by one-fifth each year during the five years preceding the maturity date of the relationship, unless there is an amortization plan producing analogous effects.

3.3 Subordinate liabilities may be issued by SIMs in the form of bonds and other similar securities. Issuances are subject to prior approval from the Bank of Italy. The titles must reference the details of the relevant provision.

3.4 Subordinate liabilities are included in the capital calculation only for an amount equal to the sums actually received and still available to the entity.

3.5 In the event of repurchase by the issuer of portions of issued subordinate liabilities, two scenarios are distinguished: a) the repurchase is aimed at the cancellation of certificates. This case is considered as a formal early repayment of a portion of the debt and therefore must be subject to no-objection clearance from the Bank of Italy;

Supervision Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of July 2, 1991 – Annex 12 April 1, 1998

b) the repurchase is not aimed at the cancellation of certificates. In this hypothesis, the repurchase may be carried out freely, provided that the obligation to deduct the portions, even temporarily present in their portfolio, from the computation of subordinate liabilities available to the SIM remains. However, issuers are prohibited from holding securities representing their own subordinate liabilities in an amount exceeding 10 percent of each issuance.

3.6 The presence of "illegality clause" type clauses is considered admissible, whereby the creditor or issuer has the option to request early repayment of the subordinated credit/debt if a legal or regulatory provision prohibits possessing assets or liabilities in that form or, more generally, prevents fulfilling obligations assumed under the issuance contract. Although strictly speaking this clause represents a scenario of early repayment outside the issuer's will, it is admissible where it clearly results that the repayment depends on a "factum principis" to which the debtor (creditor) must necessarily conform. In this case, it is not necessary to request prior consent from the Bank of Italy to anticipate the repayment of the contract.

4. Subordinate liabilities included in supplementary capital of the third level

4.1 Contracts regulating the issuance of such instruments expressly provide that: a) in the event of liquidation of the issuing entity, the debt shall be repaid only after all other creditors not equally subordinated have been repaid; b) the original duration of the relationship is not less than two years; c) early repayment of liabilities occurs only at the initiative of the issuer and is subject to no-objection clearance from the Bank of Italy; d) the capital and interest related to the loan can never be repaid if such repayment has the effect of reducing the entity's own funds below its overall capital requirement.

4.2 This instrument is generally used to cover temporary capital deficiencies. In principle, therefore, it should not be computed for the maximum allowed amount. The conditions set out in previous points 3.4, 3.5, and 3.6 apply.

5. Approval from the Bank of Italy for the inclusion in capital of liabilities referred to in previous points 2, 3, and 4.

5.1 The request for prior approval for the computability in supervisory capital of hybrid capital instruments and subordinate liabilities to be included in supplementary capital of II° and III° level must be accompanied by all useful information to allow the Supervisory Body to evaluate the actual extent of commitments assumed by the issuing institution.

Supervision Instructions for Securities Market Intermediaries Appendix: Bank of Italy Regulation of July 2, 1991 – Annex 12 April 1, 1998

5.2 The aforementioned request for admission of the contract and the related documentation are forwarded in duplicate to the Branch of the Bank of Italy competent for the territory.

5.3 Depending on the type of operation and if the contractual structure provides for it, complete attachments are provided: − the issuance contract of the subordinate liability; − the offering circular; − the trust agreement; − any subsequent agreements intervening to modify the aforementioned contracts. Furthermore, all contracts concerning operations connected in any way with the operation under examination must be exhibited and agreements made known.

5.4 In order to reduce the time necessary for verifying the requirements for the admission of subordinated debt, SIMs may submit draft contracts to the examination of the Supervisory Body, provided that the final contract is sent once they have proceeded with the operation.

6. Revenues/losses and plus/minus values on the non-secured portfolio

6.1 The algebraic sum of revenues and losses as well as plus-values and minus-values on the non-secured portfolio detected from the beginning of the fiscal year following the one whose balance sheet has already been approved, deriving from transactions recorded in and off-balance sheet concluded within the scope of proprietary trading activities as well as on securities objects of placement activities with prior subscription, purchase with repo, or guarantee assumption carried out by the SIM, contributes to the determination of "supplementary capital of the third level." The positive or negative income components originating from transactions on securities connected with the aforementioned activities contribute to the determination of this item.

6.2 In the case of a positive value, the aforementioned aggregate is reduced by any fiscal charges, the estimated amount of dividends to be distributed at the end of the fiscal year, and other foreseeable charges.

Section II Negative Elements

1. Participations

1.1 From the total amount of basic capital and supplementary capital, the following are deducted: a) participations in banks, SIMs, and financial companies exceeding 10% of the share capital of the participating entity and hybrid capital instruments and subordinate assets towards such entities; b) participations in banks, SIMs, and financial companies equal to or lower than 10% of the capital of the participating entity, hybrid capital instruments, and subordinate assets towards such entities, different from those indicated in the previous letter a), even if not participated. These interests are deducted for the part of their total amount that exceeds 10 percent of the positive value of basic capital and supplementary capital of the second level, calculated before the deduction of elements referred to in this point 1.1.