Annual Report to the Shareholders on the Corporate Governance

Annual Report to the Shareholders on the Corporate Governance

2007

UniCreditItalian Joint Stock CompanyRegistered Office: Genoa, via Dante, 1General Management: Milan, Piazza CordusioRegistered in the Genoa Trade and Companies Register (Courts of Genoa)Tax Code and VAT No. 00348170101Entered in the Register of Banks Parent Company of the UniCredito Italiano Banking GroupBanking Group Register No. 3135.1Member of the Interbank Deposit Protection FundCapital Stock at 21 march 2007: euro 5,220,422,546.50 fully paid in

2007


3

1. Foreword 5

2. Annual Report to the Shareholders on the Corporate Governance 7

2.1 Section I 8 2.2 Section II 12 2.3 Section III “Information regarding the application by

the end of the financial year 2006 of the Code published in March 2006” 35

Attachment: Summary 39

Index

5

Foreword

Under the terms of the current Instructions to Market Rules organized and managed by Borsa Italiana S.p.A. (Section IA.2.6), companies issuing listed securities are required once a year to furnish proper information about their system of Corporate Governance and compliance with the Corporate Governance Code (“Code”) drawn up by the Committee for Corporate Governance.

Even if Borsa Italiana had issued a new version of the Code (March 2006), the current Instructions to Market Rules organized and managed by Borsa Italiana S.p.A. give the opportunity - on the occasion of approval of the the financial statement concerning the year starting from 2006 - to publish a report referring to the Code drawn up on July 2002; in such case, the report shall inform about the application of the Code issued on March 2006 by the end of the year. Therefore, In the light of the above, we have accordingly prepared a report (the “Report”), drawn up in accordance with the “Guidelines for the compilation of the corporate governance report” published by Assonime and Emittenti Titoli, expressly referred to by the Italian Stock Exchange as the model which the listed companies are to use for preparing their related reports. Considering that the Board of Directors of UniCredit on 19th of December 2006 approved the adoption of the Code issued on March 2006, such Report refers to the Code pubished on July 2002 and it has been supplemented with a special section that informs about the application of the Code published in March 2006 pursuant to the above mentioned regulatory provisions.

In order to facilitate the reading of the document and the comprehensions of the governance of UniCredito Italiano (“UniCredit” or “Company”), the Report has been divided into the following sections:• a first Section, containing information describing the Company, its organization as

well as its relevant bodies;• a second Section, containing information on the UniCredit’s compliance to the

principles set forth in the Code;• a third Section, containing information on the UniCredit’s compliance with che Code

published on March 2006.

A summary in table format is also attached to the Report, in which the company’s status of compliance with the Code’s main provisions is summed up.Unless otherwise indicated, the information contained in the Report refers to the date of its approval by the Board of Directors (21 March 2007).

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Section I 8 Section II 12 Section III “Information regarding the application by the end of the financial year 2006 of the Code published in March 2006” 35


8 Annual Report to the Shareholders on the Corporate Governance · UniCredit

1. On 21 March 2007 UniCredit’s share capital is Euro 5.220.422.546,50, fully subscribed and paid up, divided into 10.440.845.093 shares with a nominal value of Euro 0.50 each, of which 10.419.138.541 are ordinary shares and 21,706,552 savings shares.

2. On the share capital represented by ordinary suares. The Articles of Association provides for a limitation of the voting rights up to 5% of the mentioned share capital.

ItalyOther Countries

Geographical distribution of the shares (%)(ordinary shares)

55

45

At 31 december 2006

Summary table

SITUATION YES NO

Presence of labour contracts in the company ✓

Presence of controlling shareholders in the company ✓

Exercise of an activity of management and coordination by the company ✓

Geographical distributionof the shareholders (%)

14

86

ItalyOther Countries

At 31 december 2006

IndividualsLegal entities

Shares’ ownership (%)(ordinary shares)

92

8

At 31 december 2006

Main Shareholders

SHAREHOLDER’S NAMEORDINAY SHARES

% HELD 2

1. Munich Re Group 499,559,020 4.796%

2. Fondazione Cassa di Risparmio di Torino Via XX Settembre, 31- Torino - Italy 491,744,753 4.721%

3. Fondazione Cassa di Risparmio di Verona Vicenza Belluno e Ancona Via Forti Achille, 3/A - Verona - Italy 491,718,824 4.721%

4. Carimonte Holding S.p.A. Via Indipendenza, 11 - Bologna - Italy 445,467,993 4.277%

5. Allianz Group 322,239,944 3.094%

IndividualsLegal entities

Shareholders’ composition (%)

97

3

At 31 december 2006

Share Capital1

At 31 December 2006 the share capital, fully subscribed and paid up, is Euro 5.219.125.766,50 divided into 10.438.251.533,00 shares of par value of Euro 0.50 each, of which 10.416.544.981,00 are ordinary shares and 21,706,552 savings shares.

Section I

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9UniCredit · Annual Report to the Shareholders on the Corporate Governance

Corporate Bodies of Unicredito Italiano At 31 December 2006

Shareholders

Members

Board of Directors 23 members3, 20 of whom independent4.

A Chairman, 4 Deputy Chairmen, one of whom with deputising, and an Executive Director (Chief Executive Officer)

Board of Statutory Auditors

5 standing members and 2 alternate ones

Term

Shareholders

Board of Directors 3 financial years except where a shorter term in office is established at the time of appointment


3 financial years

Participation and Procedure

Shareholders Shareholders’ Meeting may be attended by those holders of ordinary shares which, while already recorded in the Register of Shareholders, provide a notice from the broker holding their accounts, which states that the shares have been lodged according to the law at least two days before the date on which the Meeting is due to take place. During this period and until the Meeting has taken place, shares shall remain unavailable5.

Persons entitled to attend Shareholders’ meetings may be represented by proxy. The representative need not be a shareholder in compliance with article 13 of the Articles of Association, section of the Civil Code, and sections 136 to 144 of Legislative Decree no. 58/98.

Board of Directors If the Chairman of the Board of Directors deems fit, Board meetings may be held using telecommunication systems, provided each of the participants can be identified by all the others and that each of the participants is able to intervene in real time during the discussion of the items on the agenda and receive, transmit and view documents.

The Board of Directors has adopted its own rules of procedure which govern its operation.


Meetings of the Board of Statutory Auditors can be held using telecommunication systems.

Rules for appointment and renewal

Shareholders

Board of Directors Appointments are made by election of the shareholders6.

The company shall formulate an invitation to those shareholders who wish to designate their candidates to file their designations 10 days prior to the date of the meeting with full information about the personal and professional characteristics of the candidates.

Board members can be re-elected.


Appointments are made by voting for lists, in the manner prescribed by the Articles of Association and shareholders’ meeting rules.

Duties

Shareholders All the powers attributed by law apply.

Board of Directors All the powers for the ordinary and extraordinary management of the company except those restricted to the shareholders’ meeting.


All the powers attributed by law apply

Proxies

Shareholders

Board of Directors The Board may appoint one or more Chief Executive Officers, deciding their powers, and can grant authorities and special proxies to other members. The Board may also delegate powers and authorities to the Executive Committee, particularly as regards granting of loans.


3. Until August, 2, 2006 the Board of Directors has been composed of 24 members. At such date the Deputy Chairman Mr Carlo Salvatori (independent Director) resigned.4. As regards the independence requirements owned by the Board members as at March 21, 2007, please see Section III. 5. The Board of Directors on 21 March 2007 approved a proposal for the Extraordinary Shareholders’ Meeting - to be called with the 2007 General Shareholders’ Meeting – on some amendments to the Articles

of Associations one of which regarding the deletion of the block of the shares lodged to join the Shareholders’ Meetings.6. The Board of Directors on 21 March 2007 approved a proposal for the Extraordinary Shareholder’s Meeting - to be called with the 2007 General Shareholder’s Meeting – containing some amendments to the

Articles of Associations one of which regarding the introduction of the mechanism of voting list for the Directors’ appointment and, in general, the criteria regarding their appointment.7. See footnote 5.


10 Annual Report to the Shareholders on the Corporate Governance · UniCredit

Section ICorporate organization and systems of management and responsibility

RETAIL BUSINESSLINES

THE RETAIL SECTION OF REGIONAL BANKS

1. During the integration period, in coordination with Integration Office; 2. Germany, Austria; 3. Position covered by Group Deputy General Manager; 4. Position covered by a Chief Operating Officer (COO) of the MIB Division.

– SECRETARY TO THE BOARD

(BOARD’S SECRETARY OFFICE)

– GERMAN REGIONSTRATEGIC ADVISORY STAFF

– MANAGEMENTCOMMITTEE STAFF

EXECUTIVECOMMITTEE

REGIONAL ENTITIESMAJOR REGIONAL GEOGRAPHIES OUTSIDE ITALY 2

OTHER HOLDING COMMITTEES

PLANN., FINANCE & ADMINISTRATION (CFO) 3

GROUP INV. RELATIONSGROUP M&A AND B. DEVEL.CAPITAL ALLOCATION

UNICREDIT BANK IRELAND

PLANNING, STRAT.& RESEARCH

GROUP PLANNING & CONTROL – COST & SERVICE LEVEL CONTROL –

RESEARCH & STRATEGY –

GROUP FINANCEGROUP ALM AND FINANCIAL PLANNING –

GROUP FINANCE REPORTING AND OPERATIONS –GROUP TREASURY –

STRATEGIC FUNDING –ACTIVE BALANCE SHEET MANAGEMENT –

STAFF (TRANSACTIONS & DOC. MANAGEMENT) –

ACCOUNTINGCONSOLIDATED ACCOUNTS –

HOLDING COMPANY ACCOUNTS –ACCOUNTING PRINCIPLES & DISCLOSURE –

STAFF (ACCOUNTING COMPLIANCE) –

TAX AFFAIRSTAX RESEARCH & LITIGATION –

TAX GOVERNANCE –GROUP TAX PLANNING –

STAFF (TAX INFORM. SYST. & TRAINING SUPP.) –

SHAREHOLDINGGROUP SHAREHOLDING OPERATIONS –

SHAREHOLDING ADMINISTRATION –

LEGAL, COMPLIANCE AND CORPORATE AFFAIRS

LEGAL AFFAIRS CORPORATE AFFAIRSCOMPLIANCELEGAL CEE

INTERNATIONAL LEGAL AFFAIRSINTERN. INV. BKG. & FINANCING LEGAL SUPP. –INTERN. M&A AND CORPORATE LEGAL SUPP. –

RISK METHODOLOGIESGROUP MARKET RISKS –

CREDIT MODELS –RISK TECHN., DB MNGT. & DATA QUALITY –

RATING DESK – INTERNAL CONTROL –

STAFF (BASEL II PROJECT COORDINATION) –

RISK CONTROL & POLICIESRISK INTEGRATION, REPORTING & POLICIES –

CREDIT RISK STRATEGIES –STAFF (RISK MANAG. INFORM. SYSTEM - MIS) –

MIB MARKET/CREDIT RISKSMIB CREDIT OPERATIONS –

MIB CREDIT RISK REPORTING & POLICIES –MIB MARKET RISKS –

CORPORATE/PB CREDIT RISKS CREDIT OPERATIONS –

CORPORATE/PB CREDIT RISK REP. & POLICIES –

RETAILCREDIT RISKS

RETAIL CREDIT RISKS STRATEGIES & REPORTING –RETAIL CREDIT POLICIES, PRODUCTS & MODELS –

STAFF (RETAIL CREDIT PROJECTS COORDINATION) –

RETAIL DIVISION 3

RETAIL DIVISION PLANNINGRETAIL DIVISION CHANGE MNG.RETAIL CUSTOMER SATISFACTION

PRIVATE BANKING & ASSET MANAGEMENT DIVISION 3

PB PLANNING & DIVISIONALIZATIONPB STRATEGIC MARKETING RESEARCH

CORPORATE DIVISION 3

CORP. DIV. PLANNING & CUSTOMER SATISFACTIONCORPORATE DIVISION CHANGE MNG.STAFF (CORP. DIV. COMMUNICATION ADVISORY)

GLOBAL FINANCIAL SERVICES

CASH MANAGEMENT & E-BANKINGSTRUCTURED TRADE FIN. & EXPORT FINANCEGLOBAL FINANCIAL INSTIT. & TRADE FINANCECORPORATE BANKING FOREIGN NETWORKCROSS BORDER CLIENTS GROUPS

PB BUSINESS LINES

THE PRIVATE BANKING SECTION OF REGIONAL BANKS

CORPORATE BUSINESS LINES

THE CORPORATE SECTION OF REGIONAL BANKS

CHAIRMAN

BOARD OF DIRECTORS

RETAIL ENTITIES/GLOBAL BUSINESS

– UNICREDIT BANCA– CARDS/CONSUMER FINANCE (CLARIMA,...)– RESIDENTIAL HOME FINANCING (UBCASA,...)– BANCASSURANCE LIFE (UNICREDIT ASSICURA,...)– OTHER RETAIL SPECIALIZED BANKS/CO.

PB & AM ENTITIES/GLOBAL BUSINESS

– UNICREDIT PRIVATE BANKING– XELION – PIONEER– OTHER ASSET MANAGEMENT COMPANIES– OTHER PRIVATE BANKING SPECIALIZED BANKS/CO.

CORPORATE ENTITIES/GLOBAL BUSINESS

– UNICREDIT BANCA D’IMPRESA– LEASING (LOCAT,...)– OTHER CORPORATE SPECIALIZED BANKS/CO.– COMMERCIAL RE FINANCING

(DEVELOPERS)

RISK MANAGEMENT (CRO)

OPERATIONAL RISK MNGT

– GERMAN REGION

– MANAGEMENT

CEO

MANAGEMENT COMMITTEEINTEGRATION OFFICEMANGEMENT CONSULTING

INTEGRATION & MANAGEMENT CONSULTANCY

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11UniCredit · Annual Report to the Shareholders on the Corporate Governance

– INVESTMENT BANKING (UBM)– MIB DIVISION OF HVB/BA-CA

MARKETS/INVESTM. BKG. BUSINESS LINE / BANKS

POLAND’S MARKETS DIV. PLANNING & CHANGE MNGT.STAFF (POLAND’S MARKETS BUSINESS ADVISORY)

POLAND’S MARKETS BANKS

POLAND’S MARKETS DIV. PLANNING

POLAND’S MARKETS DIVISION 3

CEE BANKS(not including Poland)

BA-CA SUBHOLDING

– BO & TRANSACTIONAL SERVICES – ICT SERVICES– CREDIT COLLECTION SERVICES – PURCHASING SERVICES – BANCASSURANCE P&C – REAL ESTATE/FACILITY MANAGEMENT– CUSTODY & SECURITY SETTLEMENT

GLOBAL SERVICE FACTORIES

CEE PMO/INTEGRATIONCEE GBSCEE HRCEE STRATEGY, PLANNING & CONTROLCEE RETAIL/PRIVATE BANKINGCEE CORPORATE

CEE PMO/INTEGRATION

CENTRAL EASTERN EUROPE DIVISION 3

MARKETS Supervision Functions

COO Functions 4

INVESTMENT BKG. Supervision Functions

- MIB RESEARCH FUNCTIONS- MIB RESEARCH FUNCTIONSMARKETS & INVESTMENT

BANKING DIVISION 3

GBS LINES

GBS SECTION OF BANKS

PROCESS ANALYSIS & MONITORINGCORPORATE CREDIT PROCESSESRETAIL CREDIT PROCESSESGOVERNANCE RULES & ORGANISATION MODELSPROJECT MANAGEMENT OFFICE (PMO)QUALITY

UGIS

I-FABER

GLOBAL SOURCING

OPERATIONALORGANISATION

– COST MANAGEMENT– INTEGRATION COST MANAGEMENT– HOLDING COMPANY ORGANISATION– SIZING

ICT COMMUNITYICT PLANNING & CONTROLICT PROVIDERS MANAGEMENTICT STRATEGY

– STRATEGIC SOURCING– PROCUREMENT OFFICE (ITALY)– STAFF (SOURCING STRATEGIC PLANNING, SOURCING INTEGRATION PM0)

HR PLANNING & STANDARDSHR MANAGEMENTHR INTERNATIONAL MOBILITYPERSONNEL ADMINISTRATIONLABOUR REGULATIONS & CONTACT CENTERHR GBS DIVISION

ICT INTEGRATION AND ARCHITECTURE

HR MANAGEMENT & PLANNING

GROUPORGANISATION

GROUP ICT

– APPLICATION ARCHITECTURE– ICT OPERATING PROCESSES & QUALITY– IT ARCHITECTURE & BUSINESS CONTINUITY– ICT INTEGRATION CENTRAL EASTERN EUROPE– STAFF (ICT INTEGRATION PROJECTS)

HOLDING COMPANY INTERNAL AUDIT

– AUDIT MONITORING

– AUDIT ON-SITE

– AUDIT INTEGRATION

– AUDIT QUALITY & INTERNAL CONTROL SYSTEMS

INTERNAL AUDIT STAFF

GROUP INTERNAL AUDIT MONIT. & ON-SITE

AUDIT INTEG., QUALITY & INT. CONTROL SYSTEMS

UNICREDIT AUDIT

INTERNAL AUDIT

SECURITYSTAFF (BACK OFFICE STRATEGY)

UPA

UGC

UniCredit Broker

URE

SECURITY

GLOBAL BANKING SERVICES DIVISION 3

GLOBAL COMPENSATION & BENEFITSCORPORATE LEARNINGEXECUTIVE DEVELOPMENTINDUSTRIAL RELATIONSSTAFF (HR INTEGRATION)

UNIMANAGEMENT

PENSION FUND

HR STRATEGY

– BRAND & CHANGE MANAGEMENT– COMMUNICATIONS & EDITORIAL DESK– PUBLIC & COMMUNITY RELATIONS– EVENTS & OPERATIONS– INSTITUTIONAL & INTERNAT. RELATIONS– MEDIA RELATIONS & EXECUTIVE COMMUN.– STAFF (UNIDEA FOUNDATION)

GROUP IDENTITY & COMMUNICATIONS 1

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Annual Report to the Shareholders on the Corporate Governance · UniCredit

[1.1] Listed companies are governed by a Board of Directors that meets at regular intervals and that adopts a organisation and a modus operandi enabling it to guarantee effective and efficient performance of its functions.

[1.2] The Board of Directors shall: a) examine and approve the company’s strategic, operational and financial plans and the corporate structure of the group it may head; b) delegate powers to the managing directors and to the executive committee and revoke them; it shall specify the limits to such

delegated powers, the manner of exercising them and the frequency, as a general rule not less than once every three months, with which such bodies must report to the board on the activity performed in the exercise of the powers delegated to them;

c) determine, after examining the proposal of the special committee and consulting the board of auditors, the remuneration of the managing directors and of those directors who are appointed to particular positions within the company and, where the shareholders’ meeting has not already done so, allocate the total amount to which the members of the board and of the executive committee are entitled;

d) supervise the general performance of the company, with special reference to situations of conflict of interest, paying particular attention to the information received from the executive committee (where established), the managing directors and the internal control committee and periodically comparing the results achieved with those planned;

e) examine and approve transactions having a significant impact on the company’s profitability, assets and liabilities or financial position, with special reference to transactions involving related parties;

f) check the adequacy of the general organisational and administrative structure established by the managing directors for the company and the group;

g) report to the shareholders at shareholders’ meetings.

[1.3] Directors shall act and decide autonomously, having full knowledge of the facts, and pursue the objective of creating value for the shareholders. Directors shall accept their appointment to the board when they deem they can devote the necessary time to the diligent performance of their duties, taking account, among other things, of the number of positions they hold on the boards of directors or auditors of other companies listed on regulated markets, including foreign markets, financial companies, banks, insurance companies and large companies.

[1.4] Directors are required to know the duties and responsibilities associated with their function. Managing directors shall take steps to keep the board informed of the main statutory and regulatory innovations concerning the company and the governing bodies.

Corporate CodeArticle 1. Role of the Board of Directors

[1.1] The Articles of Association specify (paragraph 1, article 22) that the Board of Directors shall meet at regular intervals not exceeding 3 months and whenever the Chairman deems it necessary or a meeting is requested by the Chief Executive Officers or by at least three Board members. The Board of Directors can also be convened at the request of at least 2 Statutory Auditors.

Under the rules of the procedure approved on 22 June 2005 by the UniCredit Board of Directors, as subsequently amended and supplemented (“Rules of Procedure of the Board”), it is expressly envisaged that the Board of Directors shall organize itself and operate

in such a way as to ensure effective and efficient performance of its functions.

It is now permitted (paragraph 2, art. 22 of the Articles of Association) for Board meetings to be held using telecommunication systems (see also point 4.1 below).

Provided that the methods of convening Board meetings and participation by parties outside the Board are governed by paragraph 3 and 4 of art. 22 of the Articles of Association and by the Rules of Procedure of the Board, there were a total of 13 Board meetings

Section II

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UniCredit · Annual Report to the Shareholders on the Corporate Governance

during 2006. A total of 12 meetings have been scheduled for the current year.

The average attendance of the directors at Board meetings held in the period from 1 January 2006 to 31 December 2006 was 84,28%. The average duration of meetings of the Board was about h. 2,30.

The Deputy General Managers and the others members of the Management Committee attended to all the meetings of the Board of Directors during 2006.

[1.2] With the exception of those powers specifically reserved by law to the shareholders’ meeting, the Board is granted all powers of ordinary and extraordinary administration, to be exercised in compliance with the provisions of the law and of the Articles of Association, and with the duties and responsibilities contemplated thereunder, as well as with the general rules contained in the Corporate Governance Code for Listed Companies currently in force.

As part of the above-mentioned powers, the Board has exclusive competence – under the company’s Articles of Association (article 23) and the Rules of Procedure of the Board – to take decisions on the following matters: A) Determination of the criteria for the coordination and direction of

the Group companies as well as for the implementation of the instructions issued by the Bank of Italy, within the scope of the powers granted to the holding company under the applicable legislative and regulatory provisions; issuance of guidance to the Group companies for the aforementioned purposes and supervision on their effective implementation. The Board is thus competent:

A.1) to define the general guidelines for the management of the Group’s development policies which are necessary for drafting long-term plans and annual budgets, approval of such plans and checking that they have been properly implemented; to examine and approve strategic, operational and financial plans of the company and of the corporate structure of the Group;

A.2) to approve any partnership and joint venture agreements or other cooperation agreements, including those limited to specific sectors, with related parties and other banking groups;

A.3) to issue guidelines for the internal control systems as well as the regular checking their suitability and due operation, ensuring that the main business risks are identified and dealt with in a proper manner; approval of the guidelines for auditing activities, supervising the audit function’s implementation of the guidelines on third level controls, and the definition of possible organisational and staffing changes concerning the audit function, with the technical support of the Audit Committee and

with the prior non binding opinion of the Chief Executive Officer; evaluation of the regular reports on control systems; evaluation of the mechanisms for controlling Company and Group results as well as their accounting representation;

A.4) to establish procedures for outbound communication of documents and information concerning the Holding Company and the Group, also with reference to price sensitive information and that relating to dealings in financial instruments by by persons who, by virtue of their position, have access to relevant information (internal dealing);

A.5) to designate the members of the Board – including the Chairmen, Deputy Chairmen and Chief Executive Officers – and statutory auditors of the “relevant companies” as defined by the Board;

A.6) to appoint and revoke the appointment of the members of the Headquarters Management;

A.7) to determine the criteria for the remuneration of the Group’s Top Management (Alta Dirigenza del Gruppo) and for linking part of such remuneration to the achievement of predetermined targets;

A.8) to determine, having obtained the opinion of the Audit Committee, the variable part of the remuneration of the head of the audit function, on the basis of criteria and parameters not related to the performance of the bank;

A.9) to approve stock options and stock granting plans for the employees of the Group.

B) Supervision of the general performance of the Company, with particular reference to conflict of interests, paying particular attention for this purpose to information received from the Executive Committee, the Chief Executive Officer and the Audit Committee, by periodically comparing the results achieved with those planned;

C) Acquisitions and disposals of shareholdings, business and/or business divisions, involving investments or disposals exceeding 5% of the net assets reported in the Company’s lasted approved annual financial statements and, in any case, acquisitions and disposals of shareholdings that alter the structure of the banking group, subject to the provisions of paragraph 2, section 2361 of the Italian Civil Code;

D) Evaluation and approval of any transactions having a significant impact on the Company’s profitability, assets and liabilities and financial position, with particular reference to transactions with related parties, upon prior definition of the criteria for their selection;

E) Evaluation of the adequacy of the administrative and managing structure of the company and of the Group, as established by the Chief Executive Officer;

F) Determination – after examining the proposal of the specific committee and having heard the opinion of the Board of Statutory Auditors – of the remuneration of the Chief Executive Officers and of those directors who are appointed to particular positions, as well

14

Section II



as, when the Shareholders’ Meeting has not resolved thereon, the allocation of the global remuneration due to each member of the Board and of the Executive Committee;

G) Amendment of the company’s Articles of Association to ensure compliance with applicable law;

H) Resolutions on mergers by incorporation in the cases provided for under sections 2505 and 2505 bis of the Italian Civil Code;

I) Resolutions on any reductions of the Company’s share capital following any withdrawals by shareholders;J) Determination of which directors have the power to represent the

company, in addition to those indicated in the Company’s Articles of Association;

K) Determination of the criteria for coordinating and managing Group companies as well as for implementing the Bank of Italy’s instructions;

L) Risk management policies;M) Determination of internal rules;N) Establishment and organisation, in Italy and abroad, of branches,

agencies, counters and representative offices (and closure thereof) also for the purposes of allocating representative powers.

Moreover, it is the Board’s sole prerogative to report the Shareholders in the Shareholders’ meetings.

Lastly, any matters to be resolved upon by qualified majority shall fall within the exclusive competence of the Board.

For Board resolutions to be valid they generally require the presence of a majority of the directors in office.

Voting takes place by way of an open vote, except when one third of the directors present requests that voting take place by way of a secret ballot. Voting to elect persons to executive positions is always carried out using secret voting forms, unless they are elected by unanimous acclamation.

Each director shall disclose any interest that they might have, on their own account of that of third parties, in a transaction on which a resolution is being passed, and they shall provide information in accordance with current regulatory provisions.

Board resolutions are usually adopted by an absolute majority of those voting, excluding those who abstained. In the event of a tie, the meeting’s chairman shall have the casting vote.

Every member of the Board of Directors is entitled to have his vote against and abstention and the related reasons recorded in the minutes.The Board shall approve with the favourable vote of 79% of its

members, with the exclusion of those who abstained, any resolutions concerning the adoption of the Rules of Procedure of the Board, and any amendments thereto, as well as any resolutions contrary to the principles listed below: (i) One third of the total number of the members of the Board, of the

Executive Committee and of the Board Committees shall designated by HVB before the completion of the aggregation;

(ii) Designation of a replacement Chairman responsible for discharging the responsibilities of the Chairman under the Agreements;

(iii) Right of the Chairman to make a proposal for the replacement of any members of the Board, the Executive Committee and the Board Committee, who are designated by HVB before the completion of the aggregation or, thereafter, by the Chairman;

(iv) Right of the Chairman – during a period of 3 years as of the settlement date of the HVB offer – to express his/her consent on any proposal of the Chief Executive Officer to appoint /terminate the office of any members of the Management Committee and of the Group Management Team (unless, removal from office is attributable to failure to achieve the Industrial Plan, in which case only consultation with the Chairman shall be required);

(v) Right of the Chairman – during a period of 3 years as of the settlement date of the HVB offer – to express his/her consent on the Chief Executive Officer’s proposals to change the composition of the Management Committee and of the Group Management Team in terms of number of members and functions represented therein;

(vi) Existence of HVB e Bank Austria Creditanstalt A.G. as a German and Austrian commercial bank respectively and autonomous legal entities, except for a reorganization of their existing business activities into up to five separate legal entities for reasons connected with their development and business needs;

(vii) Prohibition on transferring any HVB shares, acquired following the settlement of the HVB Offer, to third parties outside the UniCredit Group;

(viii) Prohibition on transferring: (1) any HVB Business Lines and/or (2) one or more assets and/or subsidiaries (directly or indirectly held) that are of essential importance for the performance of its activities in Germany and Austria, save for: (i) transfers sub (1) instrumental to any reorganization concerning the entire UniCredit Group or concerning disposals of non-performing or sub-performing loan portfolios; and (ii) transfers sub (2) instrumental to the reorganization of the existing business activities of HVB into up to five separate legal entities that reflect the business and organizational support lines;

(ix) Retaining the “HVB” and “Bank Austria” brand names, provided that they may be accompanied by the UniCredit logo and by the expression “Member of the UniCredit Group”;

(x) Location of Corporates/SMEs Divisions and Multinational/Investment Banking in Munich as well as of the Central Eastern Europe Division

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in Vienna, along with responsibility of the related product companies;(xi) proposal to the shareholders’ meeting to amend the Articles of

Association in order to modify or eliminate the functions of the Management Committee.

Notwithstanding the above, in case of pressures on the level of assets and liabilities of the Group, the Board of Directors will deal with such a situation in the best interest of the Group.

The resolutions adopted by the Board of Directors concerning the management guidelines and the major strategic initiatives of the Group are illustrated by the Chief Executive Officer, in the context of the meetings of the Management Committees, established for this purpose by the Group’s Governance Rules and charged with consultative and informative functions.

In order to identify those operations that, for their importance must be submitted, or reported, to the Board of Directors, thresholds of significance have been defined – also with reference to operations with related parties – of a quantitative nature (for example on the subject of loans; of contracts relating to financial instruments, of the performance of services or consultation; of the purchase or sale of shareholdings; of property management) or of a qualitative nature (such as the entrance/ consolidation of position in a sector or strategic market; definition/alteration of the shareholding position with third partners with which agreements relative to governance are stipulated; decisions having a significant impact on the organizational structure of the company or Group; alterations to the structure of the share capital).

As regards the guidelines established on the subject of operations of economic relevance carried out with related parties and the relative information to the Board of Directors and Shareholders’ Meeting, these are also outlined below with the information provided with reference to art. 11 of the Code.

The powers listed above have been effectively exercised by the Board of Directors during the course of the year of reference, taking into examination the proposals formulated from time to time by the Chief Executive Officer, taking account of the opinion expressed, where requested, of the Presidential Committee, the Auditing Committee, the Remuneration Committee and Appointments Committee.

Under the terms of the Articles of Association, the Board may appoint one or more Chief Executive Officers deciding their functions and may assign offices and special proxies to other Board members (paragraph 2, art. 21). The Board can also assign its powers and functions to the Executive Committee and in particular all powers on the subject of granting credits

(paragraph 4, art. 23). It can also assign powers and functions to the Headquarters Management, deciding in this case the methods of their exercise. Lastly, the Executive Committee can assign the powers and functions assigned to it by the Articles of Association and Board of Directors, to Headquarters Management, deciding the methods of their exercise (paragraph 1, art. 31 of the Articles of Association).

In particular, while maintaining the resolutions reserved to it on the subject of:• costs for the construction, purchase and restructuring of real estate

and for the performance of consultation for fees in excess of 5 million Euro;

• sale of property for values in excess of 5 million Euro for each item, sale of all other tangible and intangible assets belonging to the bank, with the exclusion of artistic assets, for values in excess of 500.000 Euro for each asset;

• stipulation of leasing contracts for property and real estate, and the exercise of the relative option rights, for values in excess of 5 million Euro;

• appointment of members of the Headquarters Management

the Board of Directors has delegated:A. to the Chairman

- jointly with the Chief Executive Officer, the power to authorize operations for acquisition/sale of direct minority shareholdings that do not alter the Group’s perimeter, and capital operations involving the same shareholdings that do not require the prior authorization by the Supervisory Authorities, in both cases for amounts exceeding the powers which can be exercised individually by the Chief Executive Officer and in any case within predetermined limits;

- jointly with the Chief Executive Officer, the power to express the consent of the company, as Hoding company of the banking group UniCredito Italiano, with regard to operations for the acquisition/sale of shareholdings approved by the subsidiaries that do not alter the perimeter of the Group, and operations on the capital of the minority shareholdings held by those subsidiaries where the prior authorization of the supervisory Authorities is not required, in both cases for amounts exceeding the powers which can be exercised individually by the Chief Executive Officer and in any case within predetermined limits;

B. to the Chief Executive Officer - in addition to the powers listed above (to be exercised individually or jointly with the Chairman depending on the value of the operation) as well as the provisions herebelow - the following powers:- to grant members of staff the power to sign individually for

operations of a specific nature;- to represent the bank as holder of the voting rights in regular

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and special meetings of shareholders, also abroad or as the proxy of other partners or shareholders in those foreign companies.

C. to the Executive Committee, powers and functions relative to the performance of all the operations that the bank can perform under paragraph 1, art. 4 of the Articles of Association, with certain stipulations and limitations relating to lending activities, construction costs, the purchase and restructuring of real estate, expenses and investments of an ordinary character necessary for the management of the bank, sale of real estate and of all other tangible and intangible assets, stipulation of contracts for leases on real estate and property and rental contracts, appointment and management of staff, grant of contributions for recreational, sporting and cultural activities, awards for organisational proposals and benefits for active and retired personnel, making donations to organizations with social purposes or aims in the public interest;

Moreover, the Board of Directors has delegated the authority to express the consent of UniCredit as holding company, pursuant to the Section 136 of legislative decree . 1/9/1993 n. 385, on the matter of obligations of bank corporate officer or companies belonging to a banking group, for transactions provided for by the stated Section 136:

- to the Executive Committee, the Credit Committee and to the CEO in accordance with the transactions’ amounts;

- to the CEO for applications for credit lines, designed to pay bank cheques drawn on others banks by corporate officers of group banks, if such banks have passed a corresponding resolution to grant this type of credit, taking into consideration that if the CEO has a relevant interest as defined by Section 2391 of the Italian civil code, the resolution must be adopted by the Credit Committee;

- to the CEO for obligations of any kind contracted by group banks/companies, taking into consideration that if the CEO has a relevant interest as defined by Section 2391 of the Italian civil code, the resolution must be adopted by the Executive Committee;

The Executive Committee has also delegated: - to the Chief Executive Officer, powers within predetermined limits

and with the authority to delegate to others, in all sectors of the bank’s business and specifically: lending activities; trading activities; structural and strategic banking book activities; activities connected with the determination of conditions; sale of real estate; spending powers; powers to make contributions and donations; powers to manage staff and non-performing loans, watchlist loans, restructured loans and loans in the process of being restructured; incidents and controversies. In case of urgency, for operations of amounts in excess of the established limits for the bodies of

the Headquarters Management, though within the predetermined maximums, the Chairman has the power to express his consent on the subject of loans, strategic banking book, contributions and donations, non-performing loans, watchlist loans, restructured loans and loans in the process of being restructured; incidents and controversies;

- to the Credit Committee, powers within the established limits on the subject of loans.

Under the terms of paragraph 2, art. 26 of the Articles of Association, the Board of Directors decides how to allocate to its members the compensation voted by the shareholders’ meeting; in compliance with the aforementioned article of the Articles of Association and UniCredit’s Governance Rules it may also decide – according to the terms of paragraph 2, section 2389 of the Italian Civil Code – the remunerations of the Chairman, the Deputy Chairmen and the Chief Executive Officer, after examining the proposal of the Committee for Remuneration and Appointments and hearing the opinion of the Board of Auditors.

As regards the manner and frequency of how the delegated bodies report on the subject of the powers assigned to them, see point 5 below.

[1.3] The Rules of Procedure of the Board provide that all Board members – each of whom is responsible for making prior evaluation of his own capacity to perform his duties with due diligence and effectively – shall in any case act and decide, having full knowledge of the facts, with autonomy of judgment and devoting sufficient time in the pursuit and supervision of the general performance of the company, with the objective of creating value for the shareholders.

As regards information regarding the number of positions held by the member of the Board of Directors or Statutory Auditors of other companies listed on regulated markets, including aboard, in financial, banking, insurance or other large companies, see point 2.1 below.

[1.4] Bearing in mind that sector regulations already require bank corporate officers to have experience relating to the position they hold, it has been the company’s practice for some time to equip itself with structures that examine the main changes in the laws and regulations regarding the company and its corporate bodies and distribute information thereon. More specifically, the company ensures, especially where new appointments are concerned, that directors receive comprehensive information on general statutory regulations and regulatory provisions referring to the office held and on the structure, composition, functions and powers of UniCredit’s Board of Directors and the company’s governance in general.

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[2.1] Under the terms of paragraphs 1 and 2 of article 20 of the Articles of Association, the Board of Directors is composed of from nine to twenty-four members and their term in office is established as three financial years, unless a shorter term is decided at the time of appointment. The three-year term in office will expire upon approval of the financial statements of their third year in office.

The ordinary shareholders’ meeting held on 16 December 2005 elected 24 new directors for financial years 2006–2008 with their term in office ending with the approval of the financial statements for 2008. The newly-elected directors are as follows: • Dieter Rampl (Chairman), • Gianfranco Gutty (Substitute Deputy Chairman), • Franco Bellei (Deputy Chairman), • Fabrizio Palenzona (Deputy Chairman), • Carlo Salvatori (Deputy Chairman), • Alessandro Profumo (CEO), • Roberto Bertazzoni, • Manfred Bischoff, • Vincenzo Calandra Buonaura, • Giovanni Desiderio, • Volker Doppelfeld, • Giancarlo Garino, • Francesco Giacomin, • Piero Gnudi, • Friedrich Kadrnoska, • Max Dietrich Kley, • Luigi Maramotti, • Dieter Münich, • Carlo Pesenti, • Hans-Jürgen Schinzler, • Giovanni Vaccarino, • Paolo Vagnone,

• Nikolaus von Bomhard• Anthony Wyand.

On August, 2, 2006 Mr. Carlo Salvatori (Deputy Chairman) resigned and, on August, 4, the director Mr. Anthony Wyand was appointed Deputy Chairman.

Members of the Board of Directors in office at 31 December 2006 have an average age of 59.

The Chairman does not hold any managerial authority with the exception of that already specified on the subject of the purchase/sale of shareholdings (see above, point 1.2).

The Chief Executive Officer has also been given all the responsibilities of General Manager for the whole duration of his term in office.

No other member of the Board holds executive authority.

The following is a list of the offices of the director or statutory auditor that the directors in office at 31 December 2006 hold or have held during their term in office in other listed companies, listed on regulated markets in Italy and abroad, in financial, banking, insurance or other major companies:

Dieter Rampl - Chairman- Deputy Chairman and Member of the Executive Commitee of

Mediobanca- Director and Member of the Executive Commitee di A.B.I.- Chairman of the Supervisory Board of Koenig & Bauer AG- Chairman of the Supervisory Board of Bayerische Börse AG- Member of Supervisory Board of FC Bayern München AG

[2.1] The Board of Directors shall be made up of executive directors (i. e. the managing directors, including the chairman where he or she has delegated powers, and those directors who perform management functions within the company) and non-executive directors. The number and standing of the non-executive directors shall be such that their views can carry significant weight in taking board decisions.

[2.2] Non-executive directors shall bring their specific expertise to board discussions and contribute to the taking of decisions that are consistent with the shareholders’ interests.

Corporate CodeArticle 2. Composition of the Board of Directors

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- Director of Bode Grabner Beye AG & Co. KG- Non-executive Director of Babcock and Brown- Chairman of the Managing Board

of Hypo-Kulturstiftung

Gianfranco Gutty - Substitute Deputy Chairman- Chairman of Assindustria – Gorizia, Unione degli Industriali della

Provincia di Gorizia- Member of the Board of Directors of UniCredit Banca Mobiliare S.p.A.- Member of the Board of Directors of the Associazione Bancaria

Italiana- Member of the Board of Directors of Bank Medici AG - Wien (Austria)

Franco Bellei - Deputy Chairman- Chairman of Privata Leasing - Member of the Board of Directors of Aeroporto G Marconi in Bologna- Member of the Board of Directors of the Associazione Bancaria

Italiana- Member of the Board of Directors of Nomisma - Member of the Board of Directors of UniCredit Banca Mobiliare

Fabrizio Palenzona - Deputy Chairman- Chairman of the Board of Directors of Aviva Italia S.p.A.- Chairman of FAISERVICE SCARL - Chairman of AISCAT (Associazione Italiana Società concessionarie

Autostrade e Trafori)- Member of the Board of Directors of Schemaventotto S.p.A. - Member of the Board of Directors and of the Executive Committee

of Mediobanca S.p.A.- Member of the Board of Directors of the Associazione Bancaria

Italiana- Member of the Board of Directors of Fondazione Cassa di

Risparmio di Alessandria

Anthony Wyand- Chairman of Grosvenor Europe- Member of the Board of Directors of Grosvenor Group Ltd- Member of the Board of Directors of Société Générale- Member of the Board of Directors of Société Foncière

Lyonnaise SA- Member of the Board of Directors of AVIVA France- Member of the Advisory Board of Lehman Brothers

Alessandro Profumo - Chief Executive Officer- Chairman of Supervisory Board of HVB- Chairman of the Supervisory Board of BA-CA- Chairman of UniCredit Banca Mobiliare S.p.A.

- Member of the Board of Directors of UniCredit Banca S.p.A.- Member of the Board of Directors of UniCredit Banca d’Impresa S.p.A.- Member of the Board of Directors of UniCredit Private Banking S.p.A.- Member of the Board of Directors of Mediobanca S.p.A.- Member of the Board of Directors and Executive Committee of the

Associazione Bancaria Italiana- Member of Supervisory Board of Deutsche Börse- Member of Investment Advisory Council for Turkey

Roberto Bertazzoni - Chairman of SMEG S.p.A.- Chairman of ERFIN – Eridano Finanziaria S.p.A.- Member of the Board of Directors of RCS Media Group- Member of the Board of Directors and member of the Executive

Committee of UniCredit Banca S.p.A.

Manfred Bischoff- Member of the Board of Directors of di NNC/NNL- Member of the Supervisory Board of DaimlerChrysler AG- Chairman of the Board of Directors of European Aeronautic Defence

and Space Company EADS N.V.- Member of the Supervisory Board of di Fraport AG- Member of the Supervisory Board of Royal KPN N.V.- Chairman of Supervisory Board di DaimlerChrysler Aerospace AG

(Dasa)- Chairman of Supervisory Board di Luft – und Raumfahrt

Holding AG- Member of the Supervisory Board of SMS GmbH- Member of the Supervisory Board of Voith AG

Vincenzo Calandra Buonaura- Chairman of Carimonte Holding S.p.A.

Giovanni Desiderio - Deputy Chairman of UniCredit Banca d’Impresa S.p.A.- Member of the Steering Committee of Fondazione Cassa Risparmio

di Torino- Member of Directive Board of Confindustria Canavese

Volker Doppelfeld- Member of the Supervisory Board of Bizerba GmbH & Co.- Member of the Supervisory Board of Bizerba Beteiligungsges

mbH

Giancarlo Garino- Member of the Board of Directors of UniCredit Xelion Banca- Member of the Board of Directors of UniCredit Clarima Banca

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Francesco Giacomin- Chief Executive Officer of Acegas S.p.A.- Member of the Board of Directors of the Associazione Bancaria

Italiana- Member of the Board of Directors of Rilagas ad

Piero Gnudi - Chairman of Enel S.p.A.- Chairman of Emittenti Titoli S.p.A.- Chief Executive Officer of Carimonte Holding S.p.A.- Liquidating Commissioner of Filippo Fochi S.p.A.

Friedrich Kadrnoska- Member of the Executive Board of Privatstiftung zur Verwaltung von

Anteilsrechten- Chairman of the Supervisory Board of Wienerberger AG- Chairman of the Supervisory Board of Osterreichisches

Verkehrsboro AG- Chairman of the Supervisory Board of Adria Bank AG- Deputy Chairman of the Supervisory Board of Wiener Borse AG- Member of the Supervisory Board of VISA – Service Kreditkarten AG- Member of the Supervisory Board of Wiener Privatbank

Immobilieninvest AG- Member of the Supervisory Board of Convert Immobilieninvest AG- Member of the Board of VISA Europe Limited Board

Max Dietrich Kley- Member of the Supervisory Board of BASF AG- Chairman of the Supervisory Board of Infineon Technologies AG- Member of the Supervisory Board of Schott AG- Chairman of the Supervisory Board of SGL Carbon AG- Member of the Supervisory Board of HeidelbergCement AG

Luigi Maramotti- Chairman of Max Mara Srl- Deputy Chairman of Max Mara Fashion Group Srl - Member of the Board of Directors of Credito Emiliano S.p.A.- Deputy Chairman of Credito Emiliano Holding S.p.A.- Member of the Board of Directors of ABAXBANK S.p.A.- Member of the Board of Directors of COFIMAR- Member of the Board of Directors of Credem Assicurazioni S.p.A.

- Member of the Board of Directors of CredemVita S.p.A.- Member of the Board of Directors of Grosvenor Continental

Europe SAS- Deputy Chairman of Max Mara Finance srl- Deputy Chairman of Marella Srl- Deputy Chairman of Marina Rinaldi Srl

Dieter Münich- Deputy Chairman of Internationales Immobilien Institut GmbH,

Kapitalanlagegesellschaft- Deputy Chairman of HVB Immobilien AG- Chairman of Tivoli AG

Carlo Pesenti - Chief Operating Officer of Italmobiliare S.p.A.- Chief Executive Officier of Italcementi S.p.A.- Deputy Chairman of BRAVOSOLUTION- Member of the Board of Directors of Mediobanca S.p.A.- Member of the Board of Directors and member of the Executive

Committee of RCS Media Group S.p.A.- Member of the Board of Directors of BPU Banca S.p.A.- Member of the Board of Directors of Ciments Francais S.A.

Hans Jürgen Schinzler- Chairman of the Supervisory Board of Munchener

Ruckversicherungs-Gesellschaft- Member of the Supervisory Board of Metro AG- Member of Insurance Advisory Concil of Bundesanstalt fur Finanzdi

enstleistunggsaufsicht- Chairman of the Board of Trustees of Munchener Ruck Stiftung

Paolo Vagnone- Chief Executive Officier of RAS S.p.A.;- Member of the Board of Directors of Pirelli;

Nikolaus von Bomhard- Chairman of the Management Board of Münchener

Rückversicherungs Gesellschaft- Chairman of the Supervisory Board of ERGO

Versicherungsgruppe AG- Member of the Advisory Board of Ba.Fin

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[3.1] The provisions in question have been adopted in the Rules of Procedure of the Board, which require that Board members be independent if called to perform particular functions with regard to such subjects as internal controls, appointment of corporate bodies and deciding their remuneration and that of the Group’s top management.

[3.2] In strict compliance with the requirements of the Code, the members of the Board have been required to provide adequate information about their relationships/situations as outlined in the point 3.1, so as to decide whether or not they meet the requirement of independence. Following the appointment of directors by Shareholders’ Meeting on 16 December 2005 (whose terms in office end with the approval of the 2008 financial statements) and based on the notifications received, the Board of Directors, on 11 January 2006 confirmed that 21 directors met the qualification of “independent director” (namely Dieter Rampl, Gianfranco Gutty, Franco Bellei, Fabrizio Palenzona, Carlo Salvatori, Roberto Bertazzoni, Manfred Bischoff, Vincenzo Calandra Buonaura, Giovanni Desiderio, Volker Doppelfeld, Giancarlo Garino, Francesco Giacomin, Piero Gnudi, Friedrich Kadrnoska, Max Dietrich Kley, Luigi Maramotti, Dieter Münich, Carlo Pesenti, Hans Jürgen Schinzler, Giovanni Vaccarino and Anthony Wyand).

As specified in the Section III of this Report, the Board of Directors,

on 21 March 2007, performed a new evaluation of the independence requirements of each director, on the basis of the information provided or at disposal of the Company, on the basis of the criteria established by the new version of the Corporate Governance Code (Article 3) issued on March 2006.

On the basis of such assessment, the Board of Directors confirmed that 16 directors met the qualification of “independent director”.

The activities carried out by the independent directors has been very important within the Corporate Governance Commission, set during the 2006 as a temporary commission and consisting of 6 directors, the majority of which selected from the non-executive, independent directors. This Commission is entitled to review the internal corporate governance issues.

The members of the Corporate Governance Commission are: Dieter Rampl, Gianfranco Gutty, Anthony Wyand, Vincenzo Calandra Buonaura, Luigi Maramotti and Hans Jürgen Schinzler.

The Corporate Governance Commission met 3 times during 2006, with each meeting lasting an average of about h. 2,30. Average attendance was 100%. The CEO has been invited to all the meetings.

[3.1] An adequate number of non-executive directors shall be independent, in the sense that they: a) do not entertain, directly or indirectly or on behalf of third parties, nor have recently entertained business relationships with

the company, its subsidiaries, the executive directors or the shareholder or group of shareholders who controls the company of a significance able to influence their autonomous judgement;

b) neither own, directly or indirectly or on behalf of third parties, a quantity of shares enabling them to control the company or exercise a considerable influence over it nor participate in shareholders’ agreements to control the company.

c) are not immediate family members of executive directors of the company or of persons in the situations referred to in points a) and b).

[3.2] Directors’ independence shall be periodically assessed by the Board of Directors on the basis of the information provided by each interested party. The results of assessments shall be communicated to the market.

Corporate CodeArticle 3. Independent Directors

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[4.1] Paragraph 3, article 22 of the Articles of Association provides that meetings of the Board of Directors shall be called by the Chairman, or by the person acting in his place, according to the terms of article 21 of the Articles of Association, and that they can be called, in case of urgency, also by telegram or fax.

The Rules of Procedure of the Board specify that notices of call should be given reasonably in advance of the date of the meeting, except in case of urgency, to all the members of the Board. In order to ensure that the participants are sufficiently prepared and informed on the matters for discussion, the notice should contain, unless there are particular reasons for withholding it, the agenda of the meeting with all the items for discussion and must be followed by the appropriate documentation supporting the proposals.

The members should also be provided, at least 24 hours before meetings of the Board, with the documentation and information necessary to enable them to express an informed opinion on the subjects under consideration.

As already mentioned, under the terms of paragraph, article 22 of the Articles of Association, Board meetings can be held using telecommunication systems, provided each of the participants can be identified by all the others and that each can intervene in real time during the discussion of the items on the agenda, and receive, transmit and view documents. If this is the case, the Board meeting is considered as having being held in the place where the Chairman and the secretary are located.

[4.2] The Regulations define the role of the Chairman and

in particular assigns the Chairman the power of impulse and vigilance on the performance of the Board in the sphere of those fiduciary powers that guarantee the shareholders the legality and transparency of company operations.

While the Chairman has the power to represent the company within the limits set by the Articles of Association, he can, without becoming involved in management, which is the duty of the delegated bodies, ensure a continuous relationship between the Board and the directors charged with particular responsibilities, stimulating their activity and ensuring close collaboration.

The Chairman and the Chief Executive Officer, acting in continuous dialogue, identify the opportunities and risks of the entire banking business, related enterprises and the financial system in general, on which the Chairman will keep the Board of Directors informed so that it can make appropriate choices for the strategy and coordination of the holding company and of the Group.

The Chairman is also responsible for monitoring that the standard of management is such as to generate continuity of results, business competitivity and protect the company’s resources and assets.

The Regulations also govern the composition and operation of the Presidential Committee. This committee consists of the Chairman of the Board of Directors and of the Deputy Chairmen.

The Presidential Committee helps identify, In agreement with the Chief Executive Officer, policies for business development

[4.1] The chairman shall call the meetings of the board and shall take steps to ensure that the members of the board are provided reasonably in advance of the date of the meeting (except in cases of necessity and as a matter of urgency) with the documentation and information needed for the board to express an informed view on the matters it is required to examine and approve.

[4.2] The chairman shall co-ordinate the activities of the Board of Directors and moderate its meetings.

[4.3] Where, in order to promote the effective and efficient management of the company, the board has delegated powers to the chairman, it shall disclose adequate information in its annual report on the powers delegated following that organizational choice.

Corporate CodeArticle 4. The Chairman of the Board of Directors

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and guidelines for strategic and operating plans to submit to the Board of Directors. This Committee is specifically called upon to decide on the following matters:a) dividend policy and/ or capital remuneration;b) extraordinary transactions requiring decision by the

shareholders’ meeting, in particular, increase in share capital, issue of convertible bonds, mergers, de-mergers, distribution of reserves and purchase of treasury shares, amendments to the articles of association;

c) extraordinary transactions of major strategic interest or which can anyhow affect the value or the composition of the share capital and significantly influence the share price, such as purchases or transfers of significant shareholdings, mergers or

alliances with other groups, relevant changes in the structure or composition of the group;

d) multi-year strategic plans and annual budgets of the company and of the group.

The Chief Executive Officer attends meetings of the Presidential Committee by right.

[4.3] The Board of Directors is periodically informed of the delegated powers assigned to the Chairman in the directors’ report accompanying the annual financial statements in the section entitled “Delegated powers assigned to the Directors in office”.

[5.1] With a view to providing the Board of Directors with information on the subject of the activities performed in the exercise of the delegated powers assigned to the Executive Committee and Chief Executive Officer, the Regulations provide that the Executive Committee, through its Chairman and the Chief Executive Officer, report on a quarterly basis to the Board of Directors on the activities carried out in the fulfilment of the delegated powers assigned to them. They are also required to provide the Board and Statutory Auditors with due information on any atypical or unusual operations, and transactios with related parties, the examination and approval of which are not reserved to the Board of Directors, within the terms indicated in the assignment of the delegated powers.

The assignment of delegated powers by the Board of Directors to the Executive Committee and to the Chief Executive Officer, requires the Executive Committee to provide the Board of Directors, with the frequency indicated below, with a report on its activities performed in

the exercise of the delegated powers, as follows:a) at the first possible meeting of the Board - information on transactions that significantly affect the economic

and equity situation or that can involve problems, and on transactions between group companies or with related parties, or atypical and unusual transactions relative to the normal conduct of business, carried out by the Executive Committee and any bodies to whom it may have delegated authority;

b) at every meeting of the Board of Directors- for purposes of monitoring transactions authorised by the Executive

Committee that carry risks, the latter must provide the Board of Directors with documents on the related transactions that it approved during its last meeting , as reported in the documents, countersigned by the Chief Executive Officer and the Secretary, accompanying the minutes of the meeting;

c) every three months:- report on borrowers (individual names or economic groups) to

[5.1] The executive committee - in the person of its chairman - and the managing directors shall periodically report to the Board of Directors on the activities performed in the exercise of their delegated powers.The corporate bodies with delegated powers shall also provide proper information on transactions that are atypical, unusual or with related parties whose examination and approval are not reserved to the Board of Directors. They shall provide the Board of Directors and the board of auditors with the same information.

Corporate CodeArticle 5. Information to be provided to the Board of Directors

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whom the Banking Group as a whole has an overall exposure of more than Euro 300 million in respect of every kind of risk;

- report on the exercise of the power delegated to the Chief Executive Officer, in accordance with section 136 of Law Decree n.385 of 1/9/1993, to give the UniCredito Italiano’s consent, as the Holding Company;

- exercise of the powers delegated to the Chairman and Chief Executive Officer on the subject of shareholdings;

- information, on and aggregate basis, on the exercise of delegated powers concerning: real estate management; ordinary expenses and investments; lease and/or rental agreements; management of executive personnel; contributions and donations.

The powers delegated by the Executive Committee to the Chief Executive Officer and to the Headquarters Management also require such delegated bodies to provide the Executive Committee, through the Chief Executive Officer, with:- a quarterly report, on an aggregate basis, on the exercise of the

powers received;- information about transactions that significantly affect the

economic-equity situation or which could present problems, and on

transactions between group companies or with related parties, or any atypical or unusual transactions relative to the normal conduct of business;

- a quarterly report on borrowers (individual names or economic groups) to whom the Banking Group as a whole has an overall exposure of more than Euro 300 million in respect of every kind of risk.

The information on transactions that significantly affect the economic-equity situation or may involve problems, and on transactions between group companies or with related parties, or atypical/unusual transactions relative to the normal conduct of business serves for preparing the quarterly report that Directors must prepare, under paragraph 4, article 23 of the Articles of Association, on the activities carried out and transactions of greatest significance to the company’s results, capital structure and financial position, with particular regard to transactions carried out by the company and its subsidiaries involving a potential conflict of interest.

Details about these types of transactions can be found in point 11.1.

[6.1] The Rules of Procedure of the Board give the Board of Directors exclusive responsibility for defining procedures for the disclosure of documents and information regarding the Holding company and the Group, including with reference to price sensitive information and information relating to dealings in financial instruments by persons whose positions give them access to relevant information (internal dealing).

[6.1] The managing directors shall ensure the correct handling of confidential information; to this end they shall propose to the Board of Directors the adoption of internal procedures for the internal handling and disclosure to third parties of information concerning the company, with special reference to price-sensitive information and information concerning transactions involving financial instruments carried out by persons whose positions give them access to relevant information.

[6.2] TAll the directors are required to treat the documents and information they acquire in the performance of their duties as confidential and to comply with the procedures adopted for the disclosure to third parties of such documents and information.

Corporate CodeArticle 6. Confidential Information

The Board of Directors voted on 11 March 2002, at the Chief Executive Officer’s proposal, t adopt a set of procedures for disclosing confidential information to the market. These procedures involve:a) the giving of responsibility for determining the “price

sensitive” nature of information to the Planning, Finance

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and Administration Department, supported by the Legal, Compliance and Corporate Affairs Department;

b) approval of the statement to be issued to the market by the Board of Directors or, if relating to delegated transactions, by the Chairman and Chief Executive Officer;

c) advance transmission of statement, if necessary, to the Italian Stock Exchange and Consob by the Legal, Compliance and Corporate Affairs Department;

d) disclosure to the market through the Media Relations and Executive Communications Unit.

The statutory and regulatory provisions on internal dealing came into effect on 1 April 2006. These provisions are contained in paragraph 7, article 114 of Decree 58 dated 24 February 1998 (“Consolidated Financial Intermediation Law”) – introduced into Italy to take account of EU rules on market abuse – and in articles 152 et seq of the Regulations adopted by Consob in resolution 11971 dated 14 May 1999 and subsequent amendments thereto (“Consob Regulations”). In light of these changes, during 2006 UniCredit approved a set of “Internal Dealing Rules” describing how to comply with the new statutory and regulatory provisions.

These Rules – which supersede the previous “Code of Behaviour on Internal Dealing”– also contain practical instructions on complying with the reporting obligations, arising from the listing of UniCredit shares on the Frankfurt Stock Exchange, to Germany’s market supervisory authority (“Bundesanstalt für

Finanzdienstlei-stungsaufsicht” – “BaFin”) in accordance with section 15a of the Wertpapierhandelsgesetz –WpHG (“Securities Trading Act”) and the associated instructions issued by BaFin.

The Rules specifically: a) define “relevant persons”, in addition to UniCredito Italiano’s

directors, deputy general managers and standing statutory auditors;

b) require relevant persons to report dealings by their close associates;

c) list the type of dealings that must be reported;d) set the reporting threshold at Euro 5,000 per relevant person,

amounts over which trigger the reporting obligation; e) identify the person in charge of receiving notifications from

relevant persons and disclosing them to the market;f) contain guidelines on the methods of receiving, handling and

publishing the information received;h) envisage periods during which dealing is prohibited (“black out

periods”).

The Rules have been published on the company’s website.

[6.2] The Rules of Procedure of the Board expressly specify that all Directors are required to keep confidential all documents and information acquired in the performance of their duties and to adopt the required procedures for the communication of such documents and information.

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[7.1] As described in the previous Reports, the procedure mentioned in the first paragraph is not included in the current UniCredit’s Articles of Association. However, even in the past the Board of Directors agreed on the logic of such provision and recommended the adoption of such procedure by shareholders who intend proposing their own candidates together with a fully information (personal, professional and independency skills) about the candidates. The Board’s recommendations have been followed during recent appointments of directors – at the Ordinary Shareholders’ Meetings held on 2 May 2005 and 16 December 2005 respectively – with the presentation and filing at the company’s registered office of candidate lists together with the relevant information.

However, the Board of Directors, pursuant to the new version of the Section 147-ter of Legislative Decree 58/98 as amended by the law 28 December 2005, n. 262, has proposed to the Extraordinary Shareholders Meeting called on 30 April 2007 (first call) to amend the Articles of Association in order to adopt the mechanism of voting list as well as the further provisions regarding the appointment of the directors set forth by the current legal and regulatory rules. The current regulation, also in the banking area, defines the directors honorability, professionality and independence requirements, subject to a particular evaluation.

[7.2] The Board of Directors, since June, 22, 2000, set up a Remuneration and Nominations Committee. This Board committee would have investigative, proposal-making and consultative functions and details of how it would be formed and operate were included in the Rules of Board Procedure.

At the beginning of the 2006 financial year, the Board of Directors decided in its meeting of 11 January 2006 to create two separate

committees, namely the Remuneration Committee and the Nominations Committee (with the same functions and duties previously all performed by the Remuneration and Nominations Committee).

At 31 December 2006 the Nominations Committee had seven members, the majority of whom chosen from the non-executive directors, as follows: Dieter Rampl, Gianfranco Gutty, Franco Bellei, Fabrizio Palenzona, Anthony Wyand (substitute of Mr. Carlo Salvatori starting from August, 4, 2006), Alessandro Profumo (all members by right), and Max Dietrich Kley.

This Committee is responsible for expressing its opinion on nominations for the office of Chairman, Deputy Chairman, Chief Executive Officer, director and statutory auditor in “relevant companies”. It was the Chairman’s task in this case to submit such nominations to the Committee, at the Chief Executive Officer’s proposal, after carrying out appropriate prior consultation, also taking account of the need for each company to retain its local character.

This Committee is also responsible for expressing its opinion on the appointment of members of the Executive Committee and the Holding Company’s consultative committees, proposed by the Chairman, on the appointment by co-opting new members to the Holding Company’s Board of Directors, proposed by the Chairman, and on the appointment of the Holding Company’s top management.

The Committee met 13 times during 2006, with each meeting lasting an average of about 22 minutes. Average attendance was 82%.

The Committee’s work during 2006 primarily focused on expressing its opinion on nominations of corporate officers in group companies and on appointments of and movements by the group’s top management.

[7.1] Proposals for appointments to the position of director, accompanied by detailed information on the personal traits and professional qualifications of the candidates with an indication where appropriate of their eligibility to qualify as independent directors as defined in Article 3, shall be deposited at the company’s registered office at least 10 days before the date fixed for the shareholders’ meeting or at the time the election lists, if provided for, are deposited.

[7.2] Where the Board of Directors has established a committee to propose candidates for appointment to the position of director, the majority of the members of such committee shall be non-executive directors.

Corporate CodeArticle 7. Appointment of Directors

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[8.1] The Board of Directors shall form a committee on remuneration and stock option or equity based remuneration plans. The committee, the majority of whose members shall be non-executive directors, shall submit proposals to the board, in the absence of the persons directly concerned, for the remuneration of the managing directors and of those directors who are appointed to particular positions and, acting on a proposal from the managing directors, for the criteria to be used in determining the remuneration of the company’s top management.

[8.2] As a general rule, in determining the total remuneration payable to the managing directors, the Board of Directors shall provide for a part to be linked to the company’s profitability and, possibly, to the achievement of specific objectives laid down in advance by the Board of Directors itself.

Corporate CodeArticle 8. Remuneration of Directors

[8.1] The remuneration-related activities of the Remuneration Committee during 2006 have involved the following tasks:a) the drafting of proposals on the remuneration of Directors

appointed to particular positions in the Holding Company;b) the giving of its consent to the Chairman in relation to the Holding

Company’s General Manager, when the latter is also Chief Executive Officer

c) the drafting of proposals on the remuneration of the Chairmen, Deputy Chairmen and Chief Executive Officer of “relevant companies” put forward by the Chairman at the proposal of the Holding Company’s Chief Executive Officer, after consulting Chairmen of these companies when the proposal concerns the remuneration of Chief Executive Officers;

d) the putting forward of proposals at the request of the Chief Executive Officer of Holding company, after consulting Chairmen of the “relevant companies”, to link part of the remuneration to the achievement of specific targets set in advance by their the Boards of Directors;

e) to making of proposals on the overall remuneration for member of the Board of Directors and Executive Committee of “relevant companies”;

f) the putting forward of proposals, at the request of Holding Company’s Chief Executive Officer, relative to the criteria and parameters for determining the remuneration of the Group’s Top Management and for linking part of such remuneration to the achievement of predetermined targets:

g) the examination of documents concerning the drawing up of and amendments to stock option and stock granting plans for Group employees.

At 31 December 2006 the Remunerations Committee had seven members, the majority of whom chosen from the non-executive directors, as follows: Dieter Rampl, Gianfranco Gutty, Franco Bellei, Fabrizio Palenzona, Anthony Wyand (substitute of Mr. Carlo Salvatori starting from 4 August) all of whom members by right, Max Dietrich Kley and Carlo Pesenti.

The Committee met 10 times during 2006, with each meeting lasting an average of about 60 minutes. Average attendance was 73%.

The Committee’s work during 2006 primarily focused on expressing its opinion on the Group’s incentive schemes, the remuneration company officers and the revision on compensation structures.

[8.2] It is common practice to link part of the Chief Executive Officer’s total remuneration to the company’s economic results.

More details about the directors’ remuneration can be founded in the explanatory notes to the company’s 2006 financial statements.

In order to reward the achievement of individual and group-wide objectives for the period, and at the same time incentivise the achievement of medium-term targets, in 2000 the Group set up incentive schemes for its top management. More specifically, since 2004 schemes have been introduced for awarding top management: (i) options to subscribe to UniCredit shares, vesting 4 years from the date granted and to be exercised in the period determined by the Board, (ii) performance shares, meaning UniCredit ordinary shares given to the recipient free of charge if they achieve their performance targets.

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[9.1] [9.2] These provisions – that have always been adopted by the banks, also in compliance with supervisory regulations – are included in the Rules of Procedure of the Board as well as in the Regulations.

As already mentioned in letter a.3) of point 1.2, the Board of Directors is responsible for:A. establishing the guidelines of the systems of internal control and

periodically verifying their adequacy and effective operations, ensuring that the main corporate risks are identified and managed appropriately;

B. approving the guidelines of the internal auditing activity, monitoring that the audit function implements the guidelines regarding third-level controls and defining organisational and staffing changes within audit function by using the technical support of the Audit Committee and having obtained the CEO’s non-binding approval;

C. examining the regular reports on internal control system;D. Assessing the methods of controlling results by individual

companies and the Group as a whole, as well as their representation in the accounting records.

In accordance with the terms of the Regulations, the control function is performed by the Internal Audit Department, which reports directly to the Board. The purpose of the Internal Audit Department is to help safeguard the company’s assets and stability

and provide “reasonable guarantee” that the organization can achieve its objectives effectively; its does this by evaluating the functionality of the Group’s overall system of internal controls, by verifying compliance by group companies to the Holding Company’s guidelines, by controlling the regularity and compliance of operations with laws and regulations and by assessing the efficiency and effectiveness of the operating processes.

During 2003, it was decided to reorganise the audit function, extending it gradually to all companies in the Group. A company named UniCredit Audit was set up at the start of 2003 as a wholly-owned subsidiary of UniCredito Italiano for the purposes of carrying out this project in order: (i) to maximize the degree of independence of the individual audit functions and the qualitative standards of controls; (ii) to strengthen and develop suitable professional skills devoted to these activities; (iii) to establish common standards of information involving processes common to all group companies; (iv) to maintain a clear separation between auditing controls of group companies and controls of the Group.

[9.3] The Regulations also establish that the Chief Executive Officer is required to identify the main company risks and submit them to the attention of the Board of Directors and carry out the instructions of the Board regarding the planning, management and monitoring of the internal systems of control. As for the third level controls performed by the Internal Audit Department, the

[9.1] The internal control system is the set of processes serving to monitor the efficiency of the company’s operations, the reliability of financial information, compliance with laws and regulations, and the safeguarding of the company’s assets.

[9.2] The Board of Directors is responsible for the internal control system; it shall lay down the guidelines for the system, periodically check that it is adequate and working properly, and verify that the main risks facing the company are identified and managed appropriately.

[9.3] The managing directors shall identify the main risks the company is exposed to and submit them to the Board of Directors for its examination; they shall implement the guidelines laid down by the Board of Directors for the planning, operation and monitoring of the internal control system and shall appoint one or more persons to run it and provide them with appropriate resources.

[9.4] The persons appointed to run the internal control system shall not be placed hierarchically under a person responsible for operations and shall report on their activity to the managing directors and to the internal control committee (provided for in Article 10 below) and the members of the board of auditors.

Corporate CodeArticle 9. Internal Control

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Chief Executive Officer can make proposals to supplement the annual audit programme and can request the audit function to perform specific audits that are not scheduled in this programme. He also gives a preliminary, non-binding opinion on proposals to make management organisational and staffing changes within the Internal Audit Department.

[9.4] The Internal Audit Department reports “continuously” on its activities, also by submitting copies of its audit reports to the Chief Executive Officer, the Board of Statutory Auditors and the Audit Committee. The Head of the Internal Audit Department reports to the Board of Directors, generally every six months, and in cases of particular importance, at the first possible Board meeting.

[10.1] The Board of Directors shall establish an internal control committee, charged with the task of giving and making proposals and made up of non-executive directors, of which the majority shall be independent. The chairman of the board of auditors or another auditor appointed by the same shall participate in the committee’s meetings.

[10.2] In particular the internal control committee shall: a) assist the board in performing the tasks referred to in Article 9.2; b) assess the work programme prepared by the persons responsible for internal control and receive their periodic reports; c) assess, together with the heads of administration and the external auditors, the appropriateness of the accounting standards

adopted and, in the case of groups, their uniformity with a view to the preparation of the consolidated accounts; d) assess the proposals put forward by auditing firms to obtain the audit engagement, the work programme for carrying out the

audit and the results thereof as set out in the auditors’ report and their letter of suggestions; e) report to the Board of Directors on its activity and the adequacy of the internal control system at least once every six months,

at the time the annual and semi-annual accounts are approved; f) perform the other duties entrusted to it by the Board of Directors, particularly as regards relations with the auditing firm.

Corporate CodeArticle 10. Internal Control Committee

[10.1] The Board of Directors voted to set up an Audit Committee since its meeting of 22 June 2000. The Rules of Procedure of the Board contain details of how it is formed and operates.

The Audit Committee, established in compliance with the recommendations contained in the Code, is an offshoot of the Board of Directors.

The Audit Committee has 5 members, who are non-executive directors, the majority of whom are independent. The Chairman of Board of Directors and the Substitute Deputy Chairman are members of the Committee by right. The other members have to be selected on the basis of those best equipped and willing to carry out this functions. The Committee elects, from among the other members with the exception of those who are

members by right, a Chairman and a Secretary. The Secretary, who need not be a member of the Committee, takes the minutes of every meeting.

The following officers may be called upon to attend meetings of the Committee, even separately, with regard to specific matters: the Chief Executive Officer, the Chief Accountant, the Head of Internal Audit, and other members of the Headquarters Management. These persons can always refer topics and matters to the Committee which they deem appropriate for investigation and subsequent reporting to the Board.

At 31 December 2006, the members of the Audit Committee were Anthony Wyand (Chairman), Dieter Rampl, Gianfranco Gutty, Franco Bellei and Paolo Vagnone.

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The Committee met 8 times during 2006. The average duration of meetings was about h. 3,40. The average attendance was 95%.

Mr. Alessandro Profumo has been always invited to attend the Committee’s meetings; as provided, Mr. Gian Luigi Francardo as Chairman of the Board of Statutory Auditors and Mrs Elisabetta Magistretti Manager Director (head of the Internal Audit Department) can attende to the Committee’s meetings.

During its meetings held in 2006, the Committee examined, forming opinions, where necessary, and making proposals to the Board of Directors, the following matters: audit activities within the Group and the process of drafting the company’s individual and Group’s consolidated financial statements. During these meetings, the Committee also received the reports submitted periodically by the Internal Audit Department and appropriate information regarding the Group’s consolidated quarterly and half-year financial reports, also meeting with representatives of the external auditing firm.

[10.2] The Committee carries out investigative, consultative and proposal-making functions. In particular:a) it assists the Board of Directors in the definition of the guidelines

for the internal control systems and periodical evaluation of their adequacy and effective operation, as well as the activity performed by the Board itself to ensure that the main company risks are identified and managed appropriately; it analyzes the periodical reports on the internal control systems;

b) it evaluates the plan of operations by the control functions for control of risk management and activities of auditing, and receives their periodical reports;

c) it evaluates, with the management of the company and auditors, the adequacy of the accounting principles used and their uniformity for purposes of drafting the consolidated financial statement;

d) it evaluates the criteria proposed by the structure for the selection of the auditing company (or “Group auditing companies”) and the evaluation of their work, as well as the examination of the situation of relations with the auditing companies, also as regards the tasks of consultation which may be assigned to them by the Holding company and companies of the Group;

e) it examines the process of drafting the quarterly and semi-annual situation reports and the annual financial statement, on the basis of the reports of the offices assigned to those functions;

f) it examines the processes of drafting the financial statements, including the consolidated statements, performed by the sub-holding companies for the purpose of drawing up the individual financial statement and the consolidated statement of UniCredito Italiano, on the basis of the reports of the persons assigned to the functions and possible meetings with exponents of the sub-holding companies;

g) it evaluates any observations that may emerge from the audit reports of internal auditors of UniCredito or the sub-holding companies, received through the Audit Management of UniCredito Italiano, or the Boards of Statutory Auditors or investigations and/or examinations made by third parties.

h) It evaluates under a quality and a quantity standpoint the internal audit structure requiring the responsible in charge to make proposals to adjust the same structure and asking the CEO for a non binding opinion on it;

i) it gives opinion on the proposal put forward by to the Chairman regarding the appointment or the replacement of the responsible in charge of the audit function and the variable remuneration of the same.

The Audit Committee can be consulted to evaluate operations with related parties and operations in which there may be, directly or indirectly, a situation of conflict of interests, when requested by the Board of Directors.

The Audit Committee also reports, at least every six months, to the Board of Directors on the occasion of approval of the financial statement and semi-annual report on the activities carried out, on the adequacy of the internal controls and on the situation of relations with the auditing companies. Moreover the Committee, generally after each meeting, has provided the Board of Directors with a report regarding its activities: during the 2006 the Committee prepared 7 reports.

The Committee, lastly, ensures the establishment of appropriate relations with the Board of Auditors for the performance of any activities deemed common to the two offices, in respect of their specific areas of intervention. In this connection, in addition to the aforementioned attendance of meetings of the Audit Committee by the Chairman of the Board of Auditors, the minutes of all its meetings are also sent to the Chairman of the Board of Statutory Auditors as well as to the members of the Committee.

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[11.1] Transactions with related parties shall comply with criteria of substantial and procedural fairness.

[11.2] Directors who have an interest, even if only potential or indirect, in a transaction with related parties shall: a) promptly inform the board in detail of the existence of the interest and of the related circumstances. b) abandon the board meeting when the issue is discussed.

[11.3] Where the nature, value or other aspects of a transaction with related parties make this necessary, the board, in order to avoid different conditions being agreed from those that would presumably have been agreed between unrelated parties, shall ensure that the transaction is concluded with the assistance of independent experts for the valuation of the assets and for the provision of financial, legal or technical support.

Corporate CodeArticle 11. Transactions with related parties

[11.1] It is established company practice, in the performance of its activity, to respect at all times the criterion of substantial correctness in transactions with related parties, as identified by the CONSOB, with reference to the international accounting principle known as “IAS 24”.

As regards procedural profiles, as a listed issuer, the company had defined already in the 90’s – complying with the recommendations made on the subject by CONSOB – a process for monitoring and informing the Board of Directors (and the Board of Statutory Auditors) having as its subject operations transacted with related parties.

This process was later implemented with inclusion in art. 23 of the Articles of Association of the provision contained in art. 150 of Legislative Decree 58/98, intending to proceduralise the flow of information for the Board of Statutory Auditors, in the sphere of which all the transactions of this kind were included, with information about their characteristics, the parties involved and the associated effects on the company’s balance sheet, income statement and financial position.

Appropriate information in this connection is also provided periodically, in the management report that accompanies the annual financial statements.

The company, always conscious of its position as a listed issuer, is also required to respect the information requirements foreseen in the regulations in force (Regulations approved by CONSOB resolution 11971/99 – Art. 71 bis) in case of transactions with related parties, even when carried out through subsidiaries,

having as their subject, or involving payments, methods or timing that could affect the safeguarding of company assets or the completeness and accuracy of the information, including accounting information, about the listed issuer. In this case, the company is required to place a suitable informative document at the disposal of the public, drawn up according to the outline indicated in the mentioned regulations.

Notwithstanding the frame of reference indicated above, during the year 2003 the Board of Directors of the company provided to define the criteria of identification of operations carried out with related parties, in compliance with the instructions provided by Consob in its communication no. 2064231 of September 30, 2002.

The definition of a related party was subsequently revised following changes introduced by Consob – in its communication 14990 of 14 April 2005 – to standardise the definition of a related party for issuer company reporting purposes with that used for consolidated financial reporting, by making explicit reference to the definition contained in IAS 24 and thereby repealing its previous instructions issued in communication 2064231 of September 2002.

The Chief Executive Officer of UniCredito Italiano, in the performance of the authority given by the Board of Directors, defined the process for preparation of the information in question, indicating its contents, distribution within the company and to the members of the UniCredito Italiano Group with the necessary instructions.

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This being the case as regards intragroup transactions and/or transactions with related parties in general, both Italian and foreign, carried out by UniCredito Italiano, alla intragroup transactions were carried out on the basis of evaluations of reciprocal economic benefits and the definition if the conditions to apply was made in respect of the criteria of substantial correctness, in line with the shared goal of creating value for the entire group. The operations in question were carried out, generally, at conditions similar to those applied for operations carried out with independent third parties. The same principle was applied also in the case of the performance of services, together with that of regulating such performance on a minimum base commensurate with recovery of the relative costs of their production.

As for the intragroup financial transactions, it is to be noted that they are considered to form part of a banking group holding company’s normal business, also arising from the centralisation of membership of interbank payment systems under UniCredit’s Treasury function and relating to correspondent banking relationships, deposits and loans both for the Group’s banks and other companies. Special agreements have also been stipulated among the companies of the Group regarding the distribution of products and/or financial services or assistance, consultation or, more in general, services complementary to the banking activity.

Details of the more important intragroup transactions can be found in the directors’ report attached to the annual financial statement of the company, and in the management report accompanying the consolidated financial statement of the Group.

[11.2] While the principles contained in in section 2391 of the Italian Civil Code on the subject of directors’ interests, the Company must also complay with article 136 of Legislative Decree 385/93 (Consolidated Banking Law) on the subject of the obligations of banking corporate officers, whereby that they may take obligations, directly or indirectly, for the bank they manage, direct or control only with the governing body’s unanimous approval and the favourable vote of the members of the controlling body . For this purpose, the banking corporate officers are required to give notice of the persons – individuals of legal entities– with whom the establishment of possible dealings could be construed as generating the type of indirect obligation substantially relating to banking corporate officers.

[11.3] It is the company’s practice to use the services of independent experts to issue fairness or legal opinions when the nature of the transaction, including those with related parties, so requires.

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[12.1] Special structures were established some time ago to manage the dialogue with the shareholders in general and the investors in particular, in compliance with regulatory provisions, including internal ones, on the subject of corporate communications.

More specifically, the structure charged with managing the dialogue with the shareholders (a “Call Center” allocated to the Legal, Compliance and Corporate Affairs Department) can be contacted as follows:

Toll-free number 800 307 307 (only for Italy)

E-mail [email protected]

Fax 02 8862.8652

As regards the structure responsible for managing dialogue with investors (Group Investor Relations structure, allocated within the Planning, Finance and Administration Department), it can be contacted as follows:

Antonella Massari - Managertel. +39 02 8862 [email protected]

Monica Allonitel. +39 02 8862 [email protected]

Elena Bolognesitel. +39 02 8862 [email protected]

Giovanni Gasparinitel. +39 02 8862 [email protected]

Cristina Massatel. +39 02 8862 [email protected]

Manuela Müllertel. +39 02 8862 [email protected]

Aurelio Palombo tel. +39 02 8862 [email protected]

Donatella Vespatel. +39 02 8862 [email protected]

Giuseppe Zammarchitel. +39 02 8862 [email protected]

Claudia Zanninitel. +39 02 8862 [email protected]

E-mail [email protected]

Fax +39 02 8862 8503

The company website also serves, though not in real time, to manage the dialogue with the shareholders.

[12.1] The chairman of the Board of Directors and the managing directors shall, while complying with the procedure for the disclosure of documents and information concerning the company, actively endeavour to develop a dialogue with shareholders and institutional investors based on recognition of their reciprocal roles. They shall designate a person or, where appropriate, create a corporate structure to be responsible for this function.

Corporate CodeArticle 12. Relations with Institutional Investors and other Shareholders

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The procedures and positions adopted up to the present time by this company with regard to the organization of the meetings of shareholders – designed to stimulate the most widest participation and smooth conduct of the meetings – appear to be in line with the Code’s principles. The current provisions of the articles of association facilitate participation at shareholders’ meetings by allowing proxies even by simple written appointment without the need of any form of authentication of the signature (article 13 of the Articles of Association). Moreover, in order to promote the widest participation to the shareholders’ meetings, the Board of Directors proposed - to the Extraordinary Shareholders’ Meeting called on 30 April 2007 (first call) - to delete the block

of the shares lodged to join the shareholders’ meeting, currently established by the Articles of Association.

UniCredito Italiano has had a set of regulations for its shareholders’ meeting since 1998; these have been recently updated and approved by the ordinary shareholders’ meeting in order to reflect the latest changes in corporate laws.

The meeting rules, like the Articles of Association and other corporate documents, are available on the internet website of UniCredito Italiano (www.unicredit.it), in the section “About us/ Corporate Governance/ Articles of Association”.

[13.1] The directors shall encourage and facilitate the broadest possible participation of shareholders in shareholders’ meetings.

[13.2] As a general rule, all the directors shall attend shareholders’ meetings.

[13.3] Shareholders’ meetings shall also be an opportunity to provide shareholders with information on the company, while complying with the procedure concerning price-sensitive information.

[13.4] The Board of Directors shall propose for the shareholders’ approval a set of rules to ensure the orderly and effective conduct of the company’s ordinary and extraordinary shareholders’ meetings, while guaranteeing the right of each shareholder to speak on the matters on the agenda.

[13.5] In the event of a significant change in the market value of the company, the composition and/or the number of shareholders, the directors shall assess whether proposals should be submitted to the shareholders’ meeting to amend the bylaws as regards the majorities required for the approval of resolutions to adopt the measures and exercise the rights provided for to protect minority interests.

Corporate CodeArticle 13. Shareholders’ Meetings

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[14.1] The procedure for appointing members of the Board of Statutory Auditors is detailed in the Articles of Association and complies with the regulatory and statutory provisions relating to listed companies.

The appointment of the standing and alternate members of the Board of Statutory Auditors shall be made on the basis of lists presented by shareholders representing at least 1% of the shares with voting rights. Such lists must be deposited at the company’s registered office and published in two national newspapers, one of which financial, at least 10 days in advance of the date of the meeting so as to provide the shareholders with adequate prior information about the characteristics of the candidates as required by the Code. The deposit of the lists care of the registered office shall be accompanied, under the responsibility of those presenting the lists, by the irrevocable acceptance of office of the candidates (if elected), a statement of the lack of any cause of ineligibility and/or invalidity and the documents showing possession of the requirements of experience and integrity demanded by existing laws; if the latter documents cannot be deposited in time, a statement shall be filed in which the candidates declare under their personal responsibility, that they are in possession of the requisites required by law.

The new Sections 148 and 148-bis of Legislative Decree 58/98 as amended by the law 28 dicembre 2005, n. 262, define specific procedure both for the appointment by minority shareholders of the member of the Board of Statutory Auditors and for the limits on the cumulation of the positions of the persons being members of the control bodies of listed companies. In the light of the above

and the subsequent regulatory provisions issued by Consob, the Board of Directors proposed to the Extraordinary Shareholders Meeting called on 30 April 2007 (first call) to amend the Articles of Association in order to align the latter with the current legal and regulatory provisions.

At 31 December 2006, the members of UniCredito Italiano’s Board of Statutory Auditors - appointed by the shareholders’ meeting on 4 May 2004 and whose term in office ends with the approval of the 2006 financial statements – are as follows:Gian Luigi FRANCARDO - ChairmanGiorgio LOLI - (Auditor elected by the minority shareholders)Aldo MILANESE Vincenzo NICASTRORoberto TIMO - (Auditor elected by the minority shareholders)Marcello FERRARI – (Alternate Auditor)Giorgio ARMENISE – (Alternate Auditor)

The auditors Aldo Milanese (IRIDE S.p.A. e Azimut Holding S.p.A.) and Vincenzo Nicastro (Reno de Medici S.p.A. and RDM Realty S.p.A.) hold offices in other listed companies.

The Board of Statutory Auditors met 15 times during 2006, with each meeting lasting an average of about 4 hours.

[14.2] The Board of Directors defers to the sense of responsibility of the Auditors for the maintenance of that independence of judgment and degree of confidentiality that have always distinguished the exercise of the function within the company.

[14.1] Proposals to be submitted to the shareholders’ meeting for appointments to the position of auditor, accompanied by detailed information on the personal traits and professional qualifications of the candidates, shall be deposited at the company’s registered office at least 10 days before the date fixed for the shareholders’ meeting or at the time the related lists are deposited.

[14.2] The members of the board of auditors shall act autonomously with respect to shareholders, including those that elected them.

[14.3] The members of the board of auditors are required to treat the documents and information they acquire in the performance of their duties as confidential and to comply with the procedure for the disclosure to third parties of such documents and information.

Corporate CodeArticle 14. Members of the Board of Auditors

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Section IIIInformation regarding the application by the end of the financial year 2006 of the Code published in March 2006”

Following the issuing by Borsa Italiana S.p.A., on March 2006, of a new version of Corporate Governace Code for listed companies (the “New Code”), the Board of Directors of UniCredit approved, on 19 December 2006, the adoption of the principles set therein. After such resolution, the Company has taken a series of initiatives in view of making its governance fully compliant with such new provision.

First of all, UniCredit has made an analysis – defining a specific document (“Main highlights and UniCredit compliance status“) presented in the above mentioned meeting of the Board – concerning the compliance status of UniCredit to the New Code: on the basis of such analysis UniCredit’s governance appears almost completely aligned with the principles of the New Code.

As to the areas that need, on the contrary, some corrective actions, the Company has chosen to draw up a working plan, on the basis of the analysis and the proposals under evaluation by the Corporate Governance Commission considering the international best practice. The key points of the working plan will be submitted to the Board of Directors as soon as defined by the Commission. It deems that such corrective actions will be adopted within the current year in order to give disclosure on such process in the next Corporate Governance Report.

In the meantime, the Company has already applied some provisions of the New Code that didn’t need further structural analysis.

In the light of the above, the Company has set the following actions:

EVALUATION OF THE DIRECTORS’ INDIPENDENCE (ON THE BASIS OF THE PRINCIPLES AND CRITERIA ILLUSTRED IN THE ARTICLE 3.C.1 OF THE NEW CODE)Following the formal adoption of the New Code, the Company provided the Board members with a specific information document together with the text of the “criteria” illustred in the Article 3 of the New Code (criteria that the Company has decided to apply for the evaluation of the independence). The UnICredit’s Directors were asked to comunicate the relevant status.

On the basis of the statements made by the Directors, on 21 March 2007 the UniCredit Board of Directors confirmed that the following Directors met the qualification of “independent director”:

Gianfranco GUTTY, Anthony WYAND, Manfred BISCHOFF, Vincenzo

CALANDRA-BUONAURA, Giovanni DESIDERIO, Volker DOPPELFELD, Giancarlo GARINO, Francesco GIACOMIN, Pietro GNUDI, Friedrich KADRNOSKA, Max Dietrich KLEY, Luigi MARAMOTTI, Dieter MÜNICH, Carlo PESENTI, Hans Jürgen SCHINZLER, Giovanni VACCARINO.

On the contrary, the following Directors have not been considered independent:

Dieter RAMPL, Franco BELLEI, Fabrizio PALENZONA, Alessandro PROFUMO, Roberto BERTAZZONI, Paolo VAGNONE, Nikolaus von BOMHARD.

Pursuant to the Article 3 of the New Code, the Board of Statutory Auditors has ascertained the correctness of the criteria and the procedures adopted by the UniCredit Board of Directors with regard to the evaluation of the Directors’ independence.

BOARD OF DIRECTORS’ SELF-ASSESSMENT (ON THE BASIS OF THE CRITERIA ILLUSTRED IN THE ARTICLE 1.C.1 OF THE NEW CODE)After the formal adoption of the New Code, the Chairman of the Board of Direcotrs sent a questionnaire to each Director asking to express his opinion regarding the size, composition and performance of the Board as well as, more in general, the performance of its duties in compliance with the current provisions or the international best practice.

All the answers received by the members of the Board – kept confidential in an aggregate form – shall be discussed by the UniCredit Board of Directors to finalize the self evaluation.

INFORMATIC PROCEDURE FOR THE INTERNAL HANDLING OF DOCUMENTS AND INFORMATION ACQUIRED BY THE DIRECTORS (ON THE BASIS OF THE CRITERIA ILLUSTRED IN THE ARTICLE 4.C.1. OF THE NEW CODE)During the 2006 financial year, following the proposal made by the Chairman and the CEO, the Company has adopted a procedure - using a IT platform created for such purpose – in order to allow the internal handling of documents provided to the members of the Board of Directors and the Board of Statutory Auditors in view of the Boards’ meetings.

The adoption of such informatic procedure is aimed at reaching

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the following goals: a) traceability of the terms of approval and of the persons involved in the process of preparing the resolution submitted to the Directors; b) rapidity of the process of sharing the contents of the proposals, with a consequent shortening of the terms for sending them to the Directors, comparied to the past (at the present time the sending out of all the board papers occurs at least five days before the meeting; c) confidentiality on the circulation thanks to a password system for each Director.

RE-EXAMINATION OF THE ROLE OF THE COMMITTEESThe Board of Directors, within the above mentioned action plan, is going to evaluate the possible reorganization of the Board Committees. On the basis of the long-term experience achieved on the functioning of these committees, the Board of Directors is considering to re-examine, according to the provisions of the New Code on this matter, the allocation of the skills and the functioning of the mentioned Committees, taking also into account the

international experience as well as the suggestions provided by the external advisor in charge for supporting the Corporate Governance Commission (see Article 3 above) in drawing up proposals and preparing an action plan. The evaluation process, which began during 2006, should terminate at the end of 2007.

INITIATIVES AIMED TO INCREASE THE DIRECTORS’ KNOWLEDGE ON THE COMPANY’S SITUATION AND STRUCTURE (ON THE BASIS OF THE CRITERIA ILLUSTRED IN THE ARTICLE 2.C.2 OF THE NEW CODE)Since the beginning of 2006, the Board of Directors promoted and approved the initiative called “UCI Governance Cicle” according to which each Division/Department of the Company illustrates, on a periodical basis, its own activities as well as the connected strategic items, providing both the Directors and the Statutory Auditors with all the relevant documentation (included the legal one).

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Board of Directors at 31 December 2006

BOARD OF DIRECTORS

AUDIT COMMITTEE

REMUNERATIONCOMMITTEE

APPOINTMENT COMMITTEE

EXECUTIVE COMMITTEE

OFFICE MEMBERS NON EXECUTIVE

INDIPENAT

31.12.06

INDIPENAT

21.03.07

(1) (2) N° OF POSITIONS

(3)

(4) (1) (2) (4) (1) (2) (4) (1) (2) (4) (1) (2)

ChaimanDieterRAMPL YES YES NO 100% 13 8 X 100% 8 X 100% 10 X 100% 13 X 100% 11

Deputy Chairman substitute

GianfrancoGUTTY YES YES YES 92.31% 13 4 X 87.50% 8 X 100% 10 X 100% 13 X 90.91% 11

Deputy Chairman

Franco BELLEI YES YES NO 100% 13 5 X 100% 8 X 100% 10 X 100% 13 X 100% 11

Deputy Chairman

Fabrizio PALENZONA YES YES NO 100% 13 7 X 77.78% 10 X 83.33% 13 X 100% 11

Deputy Chairman*

AnthonyWYAND YES YES YES 84.62% 13 6 X 100% 8 X 75% 4 X 75% 4 X 80% 5

Chief Executive Officer

AlessandroPROFUMO NO NO NO 100% 13 10 X 100% 13 X 100% 11

DirectorRoberto BERTAZZONI YES YES NO 92.31% 13 4 X 90.91% 11

DirectorManfredBISCHOFF YES YES YES 61.54% 13 9

Director

VincenzoCALANDRA-BUONAURA YES YES YES 100% 13 1

DirectorGiovanniDESIDERIO YES YES YES 100% 13 3

DirectorVolkerDOPPELFELD YES YES YES 61.54% 13 2

DirectorGiancarloGARINO YES YES YES 92.31% 13 2

DirectorFrancescoGIACOMIN YES YES YES 100% 13 3 X 100% 11

DirectorPietroGNUDI YES YES YES 69.23% 13 4

DirectorFriedrichKADRNOSKA YES YES YES 92.31% 13 9 X 90.91% 11

DirectorMax DietrichKLEY YES YES YES 76.92% 13 5 X 0% 10 X 16.67% 13

DirectorLuigiMARAMOTTI YES YES YES 100% 13 12

DirectorDieterMÜNICH YES YES YES 100% 13 3 X 100% 11

DirectorCarloPESENTI YES YES YES 53.85% 13 7 X 55.56% 10

DirectorHans JürgenSCHINZLER YES YES YES 76.92% 13 4

DirectorGiovanniVACCARINO YES YES YES 76.92% 13 0

DirectorPaoloVAGNONE YES NO NO 76.92% 13 2 X 87.50% 8 X 72.73% 11

DirectorNikolaus vonBOMHARD YES NO NO 30.77% 13 3 X 18.18% 11

1. In this column it is mentioned the percentage of attendance of the directors to the Board and to the Committees.2. In this column it is mentioned the numbers of meetings during the office.3. In this column it is mentioned the number of positions as director covered by the person involved in other listed companies (even listed on other market than the Italian one) in financing, banking, insurance

companies.4. In this column it is crossed if the Board member is also member of a Committee.* As substitute of Mr Carlo Salvatori starting from 4th August 2006.

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Attachment


Number of Board meeting held during the year 2006BOARD

OF DIRECTORSEXECUTIVE COMMITTEE

AUDIT COMMITTEE

REMUNERATION COMMITTEE

APPOINTMENT COMMITTEE

13 11 8 10 13

Board of Statutory AuditorsOFFICE MEMBERS PERCENTAGE OF ATTENDANCE TO THE

BOARD OF AUDITORS’ MEETINGSOTHER TASKS6

Chairman Gian Luigi FRANCARDO 100%

Auditor5 Giorgio LOLI 93.33%

Auditor Aldo MILANESE 93.33% 2

Auditor Vincenzo NICASTRO 100% 2

Auditor5 Roberto TIMO 100%

Alternate Auditor Giorgio ARMENISE

Alternate Auditor* Marcello FERRARI

Number of meetings held during the financial period ending 31 december 2006: 15

Quorum to be formed in order to enable the minority shareholders to propose their candidates as minority auditors:1% of the capital share having the right to vote at the ordinary meeting

5. Auditor appointed by the minority shareholders.

6. Number of appointments as directors or auditors held by the parties involved in other listed companies.

Other provisions set forth by the codeEXECUTION POWERS AND TRANSACTIONS WITH RELATED PARTIES

YES NO BRIEF EXPLANATION OF POSITIONS DIFFERENT FROM THOSE

SET IN THE CODE

The board of directors has granted execution powers by defining: X

a) limits X

b) how to exercise X

c) periodically report X

The board of directors has reserved the right to examine and to approve the transactions of particular economic and financial importance (including the transactions with related parties)

X

The board of directors has defined the main guidelines in order to define the “relevant” transactions

X

The guidelines mentioned above are described in the annual report

X

The board of directors has defined special procedures for the examination and the approval of the transactions with related parties

X

The procedures for the examination and the approval of the transactions with related parties are described in the annual report

X

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Appointment of Directors and AuditorsYES NO

BRIEF EXPLANATION OF POSITIONS DIFFERENT FROM THOSE SET IN THE CODE

The deposit of the nominees for the position as director has been made 10 days in advance

X Although the deposit of the nominees for the position as a director is not a specific provision of the Articles of Association, the Board of Directors has expressed its satisfaction to such a deposit to be made by the shareholders at least 10 days in advance.

The nominees for the position as director included a satisfactory report

X

The nominees for the position as director contained details on how to be considered as an independent director

X

The deposit of the nominees for the position as auditor has been made 10 days in advance

X

The nominees for the position as auditor included a satisfactory report

X

Shareholders’ MeetingYES NO BRIEF EXPLANATION OF POSITIONS

DIFFERENT FROM THOSE SET IN THE CODE

The company has approved a shareholders’ regulations X

The regulations are attached to the report (or it is mentioned where they can be found/ or downloaded) X

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Internal auditYES NO BRIEF EXPLANATION OF POSITIONS


The company has appointed the persons in charge of the internal audit X

The persons in charge of the internal audit are not dependent from the responsibles of the professional areas

X

Business unit in charge of the internal audit Group audit management team

Investor RelationsYES NO BRIEF EXPLANATION OF POSITIONS


The company has appointed a responsible in charge of investor relations

X

Business unit, phone and fax number of the responsible Antonella Massari, Responsabile UO Group Investor Relations,Tel +39 02 8862 8136E-Mail [email protected] Fax +39 02 8862 8503

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Graphic development and Composition:Mercurio S.r.l. Studi di promozione pubblicitaria - Milan (Italy)

Printed: CentroStampa 73 S.n.c. - Castelseprio (VA)April 2007

Printed on certified recycled chlorine-free paper.

Annual Report to the Shareholders on the Corporate Governance

Documents

Transcript of Annual Report to the Shareholders on the Corporate Governance