S ANP A OLO IMI€¦ · Historical evolution Mission and values Compliance with principles The path of social responsibility ... Our activities are inspired by this virtuous circle

S A N P A O L O I M I

S O C I A L R E P O R T

2003 Social Report

REGISTERED OFFICE: PIAZZA SAN CARLO 156, TURIN, ITALY

SECONDARY OFFICES:

- VIALE DELL’ARTE 25, ROME, ITALY

- VIA FARINI 22, BOLOGNA, ITALY

COMPANY REGISTER OF TURIN N. 06210280019

SHARE CAPITAL 5,144,064,800 EURO FULLY PAID

PARENT BANK OF THE SANPAOLO IMI BANKING GROUP

MEMBER OF THE INTERBANK DEPOSIT GUARANTEE FUND

Luigi Arcuti Honorary Chairman

Rainer Stefano Masera (*) Chairman

Pio Bussolotto (*) Managing Director

Alberto Carmi Director

Giuseppe Fontana Director

Richard Gardner Director

Alfonso Iozzo (*) Managing Director

Mario Manuli Director

Luigi Maranzana (*) Managing Director

Antonio Maria Marocco Director

Virgilio Marrone (*) Director

Abel Matutes Juan Director

Iti Mihalich (*) Director

Anthony Orsatelli Director

Emilio Ottolenghi Director

Orazio Rossi (*) Deputy Chairman

Gian Guido Sacchi Morsiani Director

Enrico Salza (*) Deputy Chairman

Remi François Vermeiren Director

(*) Members of the Executive Committee

Mario Paolillo Chairman

Aureliano Benedetti Auditor

Maurizio Dallocchio Auditor

Paolo Mazzi Auditor

Enrico Vitali Auditor

Stefania Bortoletti Auditor

Antonio Ottavi (**) Auditor

(**) Prof. Ottavi has resigned on January 19, 2004

Abel Matutes Juan Chairman

Alberto Carmi Member

Richard Gardner Member

Mario Manuli Member

Antonio Maria Marocco Member

Rainer Stefano Masera Member

Remi François Vermeiren Member

PricewaterhouseCoopers S.p.A.

Board of Directors

Board of Statutory Auditors

Ethical Commitee

Independent Auditors

ContentsLetter to Stakeholders

Introduction and preparation principles

1. IDENTITY AND GOVERNANCE

Group profile

Historical evolution

Mission and values

Compliance with principles

The path of social responsibility

Strategy guide-lines

Geographical presence

Organization

Corporate governance

Relevant stakeholders

2.SOCIAL AND ENVIRONMENTAL REPORT

Customers

- Retail

- Corporate

People

Shareholders

Community

Environment

Suppliers

3.ECONOMIC REPORT

4.BANCA FIDEURAM

5.OBJECTIVES FOR 2004

6.PRICEWATERHOUSECOOPERS’ OPINION

ATTACHMENTS

Glossary

Index

9

12

14

16

18

20

22

24

26

28

32

34

42

44

46

50

66

86

106

116

140

160

164

176

216

226

230

232

236

Letter to Stakeholders

Rainer MaseraChairman of Sanpaolo IMI

Abel Matutes JuanChairman of the Sanpaolo IMI Ethical Committee

Last year, when we published our first Social Report, we set ourselves a new challenge: to make it an instrument ofgovernance, not just communication, according to an increasingly systematic approach and organized by the issues of thesocial responsibility of a business.

Today we can say that we have created the conditions to win this challenge. First, because this second edition of the SocialReport involves the entire Group. This extension concerns above all the various Banking Networks, through a choiceconsistent with the Sanpaolo IMI organization and distribution model, based on the unity of lines and on a common businessculture while, at the same time, valuing the identity and the strong territorial roots of the individual Banks. A greateremphasis has also been reserved for the specialized Group companies. Second, this year the Social Report is in line with thepublication of the Annual Report: an increasingly widespread choice throughout Europe, which combines the presentation ofthe economic results with the social and environmental elements. Finally, we report on the achievement of the objectives setlast year and we identify new objectives for this year, following a path of continual improvement.

This is an approach which correctly represents our meaning of corporate social responsibility, based on the conviction that thereshould be complete consistency between the creation of value for shareholders and the moral behavior which is substantiated bythe attention paid to relationships with all the stakeholders: the customers, the people that work for the Group, local communitiesand the environment in which we operate. Our activities are inspired by this virtuous circle in which the business and its interlocutorsconverge, to which the Ethical Committee actively contribute through its role as stimulus, evaluation and control.

Our first and most important asset is composed of the 7 million private and business customers of the Group. In the currentenvironment, the first and most urgent challenge is towards them. Our main objective is to reinforce the confidence ofinvestors, by safeguarding and enhancing savings and, at the same time, providing adequate support to the development ofthe business system: two principles already contained in our mission. To this end we consider it important to underline how, inall seriousness, our Group has - for some time now – consistently continued to pursue its commitment to define and applyinternally rules and instruments of absolute transparency, aimed at providing substance and solidity to ethical principles andsocial responsibilities, so that they do not remain mere statements of principle.

In particular, 2003 saw considerable efforts to encourage greater internalization of these values and their daily application at alllevels of business. In our relations with private customers and businesses, we adopted charters of value which confirm theimportance of operating in the interests of and to satisfy customers, our commitment to offer expertise and professionalism, as wellas the respect toward the ethical principles recognized by the Group. These were widely diffused, accompanied by intensive trainingof employees and the development of particularly advanced computer software. We reasserted and strengthened the Group’sorientation to asset management, an area in which Sanpaolo IMI is leader in Italy, in the belief that professional management ofassets is the most appropriate, efficient and secure approach for our customers. We have also developed new instruments andmethods to support businesses in an environment which, unfortunately, still does not show any significant and long-term sign ofrecovery. Finally, we prepared an Ethical Code which was sent out at the beginning of 2004 to all Group employees and privatebankers. This Code defines the general principles and rules of conduct which all internal and external interlocutors must adhere to.

There is no doubt that the serious illegal accounting practices, which came to light within important quoted industrial groupsin the United States and in Italy, originated from a deviation from the most elementary principles of correctness and honesty.These events have determined a situation in which the aspiration for ethics has assumed a crucial function and become anurgent matter of priority. As a matter of fact, over a span of two years these events have seriously damaged the entireeconomic-financial system, creating a climate that is irreconcilable with the needs of a market which is ever more global and,for this reason, increasingly in need of guarantees and certainties.

On the basis of the above projects and major actions, which by now constitute structural elements of our commitment, wehave started an initiative aimed, on one side, at intervening in respect of holders of bonds in default where, from the positionsof some customers, it may emerge that case by case valuations would not be sufficient and, on the other side, at offeringconcrete support to the Committee of Group customers holding Parmalat bonds.

92003 Social Report

112003 Social Report

We believe that our efforts to refine and constantly improve the mechanisms of support to operators and preventive andinternal controls should be combined with a commitment common to all economic and social parties, in which each, withinits own specific role, will contribute toward the ethical growth of the company, thereby giving rise to consent and solidarity.Also on our part, exactly in this spirit, in this second edition of the Social Report we have especially dedicated ample space tothe topics of corporate governance. As a matter of fact we consider that these are essential elements of corporate socialresponsibility, in that they safeguard not only the shareholders, but all the interlocutors of a company and contribute towardsupholding the medium/long-term value created by the company. Sanpaolo IMI, the only Italian bank quoted on the New Yorkexchange, accomplished further significant steps in 2003, in compliance with the strict provisions of American law, inparticular the Sarbanes-Oxley Act.

Submitting this Social Report to the stakeholders for their evaluation, we would like to underline that we are convinced of theimportance of forceful and constructive communication with all our interlocutors. Only through open and constantcommunication, of which the Social Report is a periodical summary, shall we be able to comprehend the external perceptionof the importance and social impact of our decisions and actions, to prevent any risk of conceit, and in strong and concreteform, characterize our way of being a socially responsible business.

Rainer Stefano Masera Abel Matutes JuanChairman of Sanpaolo IMI Chairman of the Sanpaolo IMI Ethical Committee

12 2003 Social Report

This second Social report is presented from thestructure’s viewpoint for the purposes of continuity:our initial intent to use this tool to carry out a self-analysis of our activities in the light of the principlesof social corporate responsibility and to look for waysof communicating with stakeholders has not changedand leads us to prefer an arrangement of thisdocument which remains constant, enabling, as far aspossible, comparison with subsequent editions.Since this is the second step on our journey toreport the social responsibility, we also wanted todevelop the document, expanding the reportingcontext, enriching the contents and articulating theways in which it is distributed. We can describe this year’s edition as the firstedition of a consolidated Social Report: theinformation and figures reported concern manycompanies within the Sanpaolo IMI Group. The dateof issue has also been brought forward to coincidewith that of the Annual Report. This choice has made it necessary to overcome certaindifficulties because the gap between the first edition ofthe Social Report and the second has been less than ayear. The time available to plan and implement thestages necessary to achieve the aims we set with the2002 Report turned out to be very short. In observanceof the intentions of the Social Report, which is agovernance and monitoring tool, we have periodically

registered the trend of the indicators used in the 2002Report and the level of progress of the activities toachieve the aims set: the results have been summarizedin special schedules.

As regards the reporting principles adopted, again thisyear we have decided to avoid using a prearrangedreporting model, preferring the construction of adocument which adapts as much as possible to thespecific characteristics of the Sanpaolo IMI Group.Despite this, our reporting activity has been inspired bycertain fundamental social reporting principles and wehave taken into consideration suggestions from differentguidelines prepared specifically for the credit sector,such as the ABI guidelines, and those of a more generalnature, such as the GRI (Global Reporting Initiative) andGBS (Gruppo Bilancio Sociale) guidelines.

Continuing on from the work done last year, we havetried to:

• make it possible to clearly identify the referencestakeholders;

• clarify the reporting context: to enable easierunderstanding we have introduced into thisdocument a Group sociogram and the indication ofthe reporting setting when it differs from that of theGroup as a whole;

Introduction and preparation principles

132003 Social Report

• supply useful information for stakeholders in asummarized, linear format. For example, to fullyillustrate how we operate, we have included anorganization chart which graphically illustrates themain activities of our divisions and functions and thechannels and tools through which these arecoordinated;

• present facts and data to support the claims made;

• choose indicators which enable comparison ofinformation in time. We have increased the numberand types of indicators, trying to build an increasinglyorganized monitoring system;

• explaining economic and other impacts of the activitiesperformed. After having identified the contextsinvolved, we have tried to expand the range of theimpacts monitored, such as certain indirectenvironmental impacts for example;

• defining improvement targets. For every stakeholderwe have set improvement targets for 2004, striving todistinguish wide scope targets and specific actions;

• understanding the degree of satisfaction ofstakeholders. Again this year in some cases it has beenpossible to check this directly, while in other cases it hasbeen verified indirectly, through the analysis ofparticularly relevant figures. Our intention for 2003 is,in particular, the use of the Social Report as a tool forcommunicating with personnel and for the systematiccollection of feedback on the document from readers.

The Social Report comprises the following sections:

• Identity and Governance: this section has the purpose ofpresenting the Group profile, both from the strategicand value-related viewpoint and from the historical,geographical, organizational and corporate viewpoint.Particular attention is devoted to control, to the tools andactions implemented in the field of social responsibility;relevant stakeholders on which the socio-environmentalreport is based are also identified. The section extensivelyillustrates the corporate governance system, a system ofdefense for all stakeholders.

• Socio-environmental Report, dedicated to theinterlocutors with whom the Sanpaolo IMI Group relates.Every section examines a different stakeholder and theactions, policies and results achieved, comparing themwith the targets set in the 2002 Social report. The reportcontains various boxes dedicated to certain specializedcompanies within the Group.

• Economic Report: this section presents the Group’seconomic performance and the allocation of addedvalue according to the ABI model guidelines.

• Banca Fideuram, to which a specific section has beendedicated, due both to its specific business compared withthe rest of the Group and because it is a listed company.

• Objectives for 2004.

• PricewaterhouseCoopers’ Opinion

• The glossary and analytical index are attached.

14 2003 Social Report – Identity and Governance

152003 Social Report – Identity and Governance

Identity and Governance

Cont

rast

o


The Sanpaolo IMI Group is one of the principal Italianbanking and financial realities. With more than 3,000 branches in Italy and a presence in30 countries, it has a national coverage and wealth ofdistribution capacities which allow deep rooting in boththe family and business markets, with market sharesabove 10%.The vast network of branches, headed by theGroup’s Banks – characterized by trademarksstrongly rooted within their reference territories –and an avant-garde multi-channel approach, aresupported by a single IT and management system,within the framework of an efficient operatingmodel. Completing the distribution structures arealmost 4,700 recently integrated private bankersfrom Banca Fideuram and Banca Sanpaolo Invest.Through their know-how and that of its 43,500employees, the Group serves around 7 million customers.Sanpaolo IMI is highly specialized in financial servicesaimed at private customers and, in particular, it is leaderin Italy in asset management with a share of more than21% of mutual funds. It also plays a leading role forbusiness customers, focusing specifically on small- and

Turin, piazza San Carlo

Group profile


medium-sized businesses, thanks to a dedicatedstructure and specialist know-how. Making use of dedicated companies it has a role ofprimary importance in asset management throughSanpaolo IMI Wealth Management; in investmentbanking through Banca IMI; in financing and assistanceto Public Authorities, particularly in respect ofinvestments for infrastructures through Banca OPI; inprivate equity activities and in the management ofclosed-end funds with Sanpaolo IMI Private Equity; inconsumer credit with Finemiro.

Rome, viale dell’Arte Bologna, via Farini


The roots of the Sanpaolo IMI Group go back a long way: as amatter of fact, two of its current components – the Parent Bankand Banco di Napoli – originated from charitable initiativesdating back to the 16th century. From then to date the Grouphas, before taking on its current appearance, naturallyundergone significant changes in terms of financial and creditactivities which see it at the head of the national system andprojected with incisiveness in the international panorama.

The most significant stages in this evolution are shown below:

1563The Compagnia della Fede Cattolica sotto l’invocazione diSan Paolo is established in Turin. It is dedicated toproviding help to the needy and to fighting against usury.A few years later the Compagnia begins grantinggratuitous loans on pledge to the poor, through theMonte di Pietà.19th centuryThe Napoleonic administration places emphasis on thebanking characteristics of the Monte which then, after theRestoration, becomes a true bank empowered to applyinterest. After the Unity of Italy, its managers are appointedby the government and the city council and from 1866 it isentitled to operate as a mortgage loan bank.1900-1910After surviving the banking recession at the end of the1800’s, in addition to becoming increasingly active in itsloan operations, San Paolo continues with its charitableactivity, to the extent that in 1928 it takes the name ofIstituto di San Paolo di Torino – Beneficenza e Credito.1931San Paolo acquires Banca Agricola Italiana in Piedmont,Liguria and the province of Pavia: its branches increasefrom 6 to 120, of which 10 are located in Turin and theothers mainly distributed between Piedmont and Liguria.

In the same year, to face the difficulties following theworld-wide recession, IMI was founded as a Public lawbody, with investments held by the Treasury Ministry. 1932San Paolo becomes a public law credit institute.After the warAfter the second world war, both San Paolo and IMIcontribute actively to the reconstruction of the country:the Roman bank in particular, starts up many of theinterventions provided for by the European RecoveryProgram in the context of the “Marshall Plan”.1970’s, 80’s and 90’sSanpaolo accelerates its growth process in Italy andabroad, also by starting a model of territorialexpansion with the acquisition of national and foreignlocal banks. The dimensional growth goes with agreat development of the services and products mixoffered to customers. 1992 - 1997With the enactment of the “Amato-Carlì” Law218/1990, the bank abandons its status of State OwnedBank: and is transformed into a SpA (joint-stockcompany) with parallel assumption of non profitactivities by Compagnia di San Paolo. The privatizationprocess of the Bank is completed in 1997.1998Merger with IMI and subsequent denomination asSANPAOLO IMI: the resulting multi-functional Groupoperates in various sectors of activity through ad hoccompanies or business units.2000 - 2003Sanpaolo IMI completes its process of growth atnational level first acquiring Banco di Napoli and thenmerging itself with the newly formed Veneto-Emiliabanking conglomerate Cardine Group (refer to therespective box).

Historicalevolution


The Group’s Banks in the North East of Italy

Cassa di Risparmio di Padova e Rovigo (Cariparo)Formed in 1828 from the merger of Cassadi Risparmio di Padova and Cassa di Rispar-mio di Rovigo, with two main offices - ahead office in Padova and a main office inRovigo – with a network of branches distri-buted throughout the two provinces. Fol-lowing the rhythm of development of thenational economy, by constantly giving pri-vilege to its relations within the territory inwhich it was originally established, Cariparois active in interpreting and responding tolocal socio-economic and financial needs.

Cassa di Risparmio di Venezia (Carive)Established in 1822. After becomingfully autonomous in 1853 and ha-ving opened the first branch outsideof the city center in 1910 at Mestre,from 1988 it develops outside of itsprovince with the acquisition of Ban-ca Popolare S. Stefano di Portogrua-ro. Today it is present in seven provin-ces in the regions of Veneto and Friu-li and conserves its strong local cha-racter and a distinct vocation foroperations supporting small- andmedium-sized businesses.

Cassa di Risparmio in Bologna (Carisbo)Formed in 1837 by one hundred emi-nent citizens. Over time it has developed its activitiesoriginally aimed above all at the agricul-tural sector and at the economic-popu-lar construction sector, to include opera-tions across all typical bank sectors, evenoutside of its regional boundaries.

Cassa di Risparmio di GoriziaFormed in 1831 by project to re-esta-blish a Monte di Pietà and a Cassa diRisparmio with strong roots in the ter-ritory of Gorizia. The Cassa di Rispar-mio becomes one of the leaders in thereconstruction of the economy and so-cial community in that region after theSecond World War.

The Cassa di Risparmio di Udine, wasestablished in 1876 to continue thework of a Monte di Pietà originally da-ting back to 1494. With the setting upof the Province of Pordenone in 1968,it changed its name to Cassa di Ri-sparmio di Udine e Pordenone(CRUP). After the earthquake whichseverely hit Friuli in 1976, CRUP contri-buted extraordinarly to the strength ofthe chorus for recovery, mainly by pro-viding loans.

In 1994, Cariparo and Carive set up theCasse Venete Group, which is later wi-dened to include the Banca Agricola diCerea (1995) and CRUP and Cassa di Ri-sparmio di Gorizia (1998).

In 1992 Cassa di Risparmio di Bologna is among the promoters of the setting up ofthe holding Gruppo Bancario Casse Emiliano Romagnole (CAER). In 1994 it incor-porates Bimer Banca, a leader in medium-term loans. In 1997, it is joined by BancaPopolare dell’Adriatico, Banca Agricola KMECKA and Finemiro Banca.

The Cardine Group, merged in 2002 with the Sanpaolo IMI Group, was formed in 2000 from the union of the Casse Venete and CasseEmiliano Romagnole (CAER) Groups and their seven banks (Cariparo, Carisbo, Carive, Cassa di Risparmio di Udine e Pordenone, Cassa di Ri-sparmio di Gorizia, Banca Popolare dell’Adriatico and Banca Agricola di Cerea) the Group operates with a total of around 900 branches loca-ted in the North East of Italy. Its objective is to set up a banking center strongly rooted within its territory, with the aim of making the most ofthe competitive advantages of the consolidated local presence of each bank within the Group. On the other hand, the banks are geneticallycompatible by way of the reasons behind their formation (to encourage the general public to save and to support the economic develop-ment of their respective local communities), the historical period in which they were set up, their operating activities and the meaning, evenpsychologically and symbolically, that they can apply in perceiving territorial realities.- In June 2003 Cariparo incorporated Banca Agricola di Cerea. - In December 2003 CRUP and Cassa di Risparmio di Gorizia were merged, forming Friulcassa – Cassa di Risparmio Regionale.

Banca Popolare dell’Adriaticois set up in 1994 from the mergerbetween Banca Popolare Pesarese eRavennate (Pesaro) and Banca Popola-re Abruzzese e Marchigiana (Teramo),thanks to which it reaches the size ofan inter-regional bank. The current territorial network isspread across seven regions, concen-trated along the Adriatic backbone. In1997 it is partially purchased by Cari-sbo and CAER.


MissionThe mission of Sanpaolo IMI is to exercise the financial andlending activity, offering services of excellence aimed at theprudent management of the resources of households and at acommitment towards the sustainable development of theentrepreneurial system, also with the aim of contributing to thecountry’s global economic growth.The aim of creating value for shareholders is pursued with a view tolong-term sustainability and in the context of constant, responsibleattention to the company’s various stakeholders.

Phot

oDisc


The idea of value that we pursueintegrates the dimensions of sustainabledevelopment, meaning:

• the creation of economic wealth;

• the promotion of social cohesion;

• the defense of the environment andnatural resources.

We place the customer at the center ofour aims for a constant improvement.We intend to ensure that every singlecustomer is served in a flexible andinnovative way, to the best of our ability,adopting the same spirit of service tointernal customers.

We orient the actions and behavior ofthose who operate on behalf of theGroup towards criteria of integrity andhonesty, in full and substantialobservance of the legal directives andthe financial and lending system and ofthe spirit of the agreements subscribedwith our counterparties.

We intend to offer high quality services,constantly setting ourselves the aim ofimproving, looking to the future,anticipating challenges and cultivatinginnovation and creativity.

We intend to combine bigdimensions with strong territorialroots; to be a bank that is capable ofthinking but without losing sight ofthe individual.

We aim to make attentive use ofresources, encouraging behavior whichavoids ostentation and waste.

Responsibilityin the use of

resources

(Values

Creation of value

Customerorientation

Integrity

Commitment toexcellence

Growth inobservance of

specific qualities


UNEPIn 2002 Sanpaolo IMI complied with the UNEP Declarationfor financial institutes in respect of the environment andsustainable development, an initiative set up in 1992 withthe aim of involving a wide range of financial institutionsin constructive debate on the link between economicdevelopment, environmental protection and sustainabledevelopment.On the basis of the Declaration we:

• “consider sustainable development an essentialcomponent for businesses to be run successfully”;

• “are in favor of far-sighted environmental managementin order to ascertain quickly and to prevent possibledamage to the environment”, “aim to use the bestmethods for environmental management” and “aim totake into account environmental needs in all of ouractivities”;

• “encourage the financial services industry to developproducts and services in favor of protecting theenvironment”;

• “are committed to opening up and speaking ofenvironmental issues” and “are committed to sharingour experience and know-how”.

UN Global CompactIn May 2003 Sanpaolo IMI formalized its compliance tothe UN Global Compact, a voluntary initiative launchedby the Secretary General of the United Nations, KofiAnnan, and which intends to promote the disseminationof practices aimed at achieving a sustainabledevelopment program.On the basis of the nine principles of the UN GlobalCompact, we are committed:

• in respect of human rights, to “observe and promote therespect of human rights” and to “ensure that the activitiesperformed do not support any kind of abuse”;

• as far as employment is concerned, to support “thefreedom to join trade unions” and to eliminate “everyform of coercion to work, child labor and discrimination inthe workplace”;

• in respect of the environment, we shall pursue a “sensitiveapproach towards environmental issues” and we shallalso make every effort to “promote initiatives todisseminate responsibility towards the environment” andto “encourage the development and dissemination ofenvironmentally friendly technologies”.

Compliancewith principles


Crea

tiv C

olle

ctio

n


In 1992, with the quotation of San Paolo, the Bank wasprogressively separated from Compagnia di San Paolo: onone side the Bank continued its financial operations fullyrespecting the ethical and social criteria and principles whichare part of its tradition, and on the other side Compagnia diSan Paolo undertook as its institutional mission the providingof loans for charitable and social benefit, becoming moresystematic, articulated and regulated. After thistransformation and the privatization of the Bank in 1997, theprincipal stages in the path towards Corporate SocialResponsibility were the following: 1997- Launching of the Ethical System Funds2001- Setting up of the Ethical Committee within the Board of

Directors, as a governance body to deal with promotingand controlling social/ethical/environmental issues;

- inclusion of the Sanpaolo IMI share within the FTSE4GoodEurope index1.

2002

environmental protection and support of sustainabledevelopment detailed in the UNEP Declaration for financialinstitutions;

- creation, together with EIB, of a European Forum for thedissemination of environmental policies and practices;

- participation in the Forum for Sustainable Finance, a multi-stakeholder association aimed at spreading the culture ofsocial responsibility within the financial community, Italianrepresentative of Eurosif.

2003- Formalization of the compliance with the principles of the

UN Global Compact relating to human rights, employeerights and environmental protection;

- publication of the first Social Report for the year 2002,referring to the Parent Bank, presented in July 2003;

- the Board of Directors approves the Ethical Code, after theEthical Committee expresses a favorable opinion;

- setting up of the Social Responsibility Unit.Some examples of initiatives:- launch of a policy for managing customer relations: in

particular, the Investment Policy concentrates on the assetmanagement of private customers and the CommercialPolicy on business customers, on the basis of projects set upin 2002;

- participation in the social micro-credit project promoted byCompagnia di San Paolo.

2004- distribution of the Ethical Code to all Group employees and

financial planners;- publication of the 2003 Social Report, referring to the

entire Group.

The path of socialresponsibility

Corb

is

- Sanpaolo IMI’s compliance with the principles of


The Ethical Code2

Of particular importance is the definitive approval of theEthical Code by the Board of Directors and the favorableopinion expressed by the Ethical Committee. The EthicalCode which was sent out at the beginning of 2004 to allGroup employees and financial planners, explains theprinciples of honesty, loyalty, fairness and impartiality andgenerally defines the rules of conduct which themanagement, employees and external co-workers mustadhere to. It also envisages mechanisms and a controllingbody, identified in the Ethical Committee, which is alsorequired to carry out any modifications and integrationnecessary.

The Code is composed of three sections:

• General Principles;

• Rules of conduct, which include the rights andobligations of managing and controlling bodies,employees and co-workers and relations with PublicInstitutions;

• Implementation and fulfillment, which also includetraining activities, methods of reporting violations andthe resulting consequences. More specifically, it clarifiesthat violation of the provisions of the Code is forbiddenand is subject to disciplinary action which may includepenalties.

The aforementioned Ethical Code satisfies therequirements of the Sarbanes-Oxley Act, the American lawapproved in the summer of 2002. It also completes theframework of initiatives linked to the implementation oflaw decree 231/2001 on the responsibility of themanagement of companies.

The letter accompanying the Code, signed by theChairman of the Group and by the Chairman of theEthical Committee, makes reference to theimportance of not only formally complying with theCode and includes an invitation to apply it to the day-to-day aspects of the business: ‘The major asset for abanking group is the respect for a high standard ofbehavior. This requires complete compliance withlegal and deontological rules of transparency andfairness. Such rules should be shared in their essenceand survive if internalized and applied to every daylife and to relations with customers and with otherstakeholders of the Group.’

1. Footsie for good is a series of benchmark indexes whose selection criteria include, together with financial performance, conducts consistent with corporate social responsibility.

2. Available on the website www.grupposanpaoloimi.com.


Italy – Campania, Apulia, Basilicata and Calabria –were of spun-off in two separate operations, one inJuly and one in September and transferred to thenewly formed Sanpaolo Banco di Napoli.

On 31 December 2003 the merger by incorporationof Cardine Finanziaria into Sanpaolo IMI wascompleted. Cardine Finanziaria was the sub-holdingwhich coordinated the business activities of theformer Cardine Group. To facilitate the integrationprocess of the latter company, an aggregationprocess between companies operating within thesame territory was set up: Banca Agricola di Cereawas absorbed by Cariparo, while CRUP and Cassa diRisparmio di Gorizia were merged into Friulcassa –Cassa di Risparmio Regionale. At the same time, aNorth East Territorial Direction was created. Withhead office in Padova, its aim is to support anddevelop the banks in Triveneto and Emilia in respectof their commercial activities coordinating them withother Group structures.

Other activities with the same aims refer to thedevelopment of advanced financial instruments forsmall- and medium-sized businesses and the publicbodies sector, as well as the development of thelife insurance sector. In this latter sector fullcontrol of the Noricum Vita insurance companywas acquired in December 2003, into which all ofthe Group’s insurance companies will beconcentrated, on the basis of calculations made inFebruary of this year.

As far as curbing costs is concerned, activitiesduring the year referred to:

• optimization of the human resources of theNetworks and of the other Group companies. Inthis respect a plan was set up for staff leavingincentives, through the “Income, employmentand re-training fund for staff in the bankingindustry”;

• realization and optimization of the Group’sIntegrated Operating Vehicle;

• rationalization of real estate.Among the measures taken in 2003 aimed atexploiting the other activities, it is worth mentioningthe growth in the market share of mortgage loans

The initiatives undertaken by the Group in 2003 wereaimed at pursuing the targets of the 2003-2005 strategicPlan, which is articulated in five issues:

• improving the performance of the core business;

• curbing costs;

• exploiting other atypical banking activities;

• active management of the investment portfolio;

• transparent communication and constant monitoring ofthe progress of the Plan.

In relation to the first objective, the most significantaction taken refers to the steps necessary to ensurethe integration of Banco di Napoli and the banks fromthe former Cardine Group.

After the merger of Banco di Napoli at the end ofDecember 2002, work commenced on the activitiesnecessary for the integration of the Sanpaolo andformer Banco di Napoli branches from a commercial,credit, organizational and IT perspective, which wereconcluded in June with the extension of the ITsystem to the Banco di Napoli branches. All of the755 branches of Sanpaolo IMI and Banco di Napolioperating in the four Southern regions of mainland

Strategyguide-lines

Corb

is


and consumer credit, as well as the completion of theintegration of Banca Sanpaolo Invest with BancaFideuram by transferring the banking activity of theformer to the latter.

Lastly, activities have commenced to develop andrationalize the investment portfolio and of businessportfolio.In respect of the first profile, the steps taken to developcommercial synergies with bank shareholdings stand outin particular over the acquisition of investments aimedmainly at exploiting other shareholdings already held inportfolio. These include:

• the partnership in various operating sectors with theCassa di Risparmio di Firenze, among which worthhighlighting are Wealth Management, InvestmentBanking and Risk Management;

• the strengthening of the alliance with Cassa deiRisparmi di Forlì, for which the portion attributable toSanpaolo IMI rose from 21.02% to 29.77%; the currentpartnership aims at improving the range of services andproducts offered by Cassa to its customers, as well asstrengthening its presence in some areas of operations,such as loans, financing, planning and control;

• the agreement with Banca delle Marche, sealed bythe acquisition of a 7% shareholding. Co-operation agreements are envisaged in manysectors: today they refer to Wealth Management,International Banking, finance and public works,tomorrow they could be extended to include PrivateEquity, Information Technology, investmentmanagement and debit cards.

In the context of management activities, in additionto the progressive realization of a medium termprogram of selective disposal of minorityshareholdings, two sales transactions were made toimportant international partners: the first referred tothe disposal of 60% of Banque Sanpaolo to CaisseNationale des Caisses d’Epargne (CNCE), the thirdlargest French banking group (the agreementenvisages a put and call option on the remaining 40%exercisable after four years, in exchange for cash orshares in one of the companies of the CNCE Group);the second was the sale to Santander Central Hispanoof the Finconsumo shareholding owned by SanpaoloIMI (completed in January 2004).

In the same context, it is worth mentioning therationalization activities in the business area and thesimplification of the corporate structure of somesectors, such as Wealth Management, tax collection,closed-end Private Equity funds and insurancebrokerage. In the banking sector, shareholdings in Inter EuropaBank (Hungary), Kredyt Bank (Poland) and BIAT(Tunisia) were transferred to Sanpaolo ImiInternazionale – the company responsible forcontrolling the markets in Central and EasternEurope and the Mediterranean, which are consideredstrategic to the Group. It is planned to transfer theshareholding in Sanpaolo Bank, Rumania in the nearfuture. Sanpaolo IMI Internazionale also controlsBanka Koper (Slovenia). The last objective, that of transparentcommunication to the market, was pursued boththrough compulsory communications for theRegulatory Authorities, through quarterly conferencecalls by top management presenting intermediateresults, and through Investor Relations activitieswhich are described in more detail in the section“Shareholders”.

• Stockholm

• Sao Paolo

• Mexico City

• New York

• Los Angeles

• Nassau

• SantiagoBuenos Aires•

• Amsterdam• Bruxelles

Munich • • Prague• Warsaw

•

Wien • • Budapest

• Arad

Athens •

•Zagreb

•Geneve

• Frankfurt

Dublin •

Koper •

London •

Madrid •Barcelona •

Luxembourg •

Paris •


GeographicalpresenceWith the aim of offering operative support to itsItalian customers, particularly businesses involved ininternational exchanges, the Group boasts a directand indirect presence in 30 countries around theworld, including the principal nations in Europe, Asiaand the Americas. In 2004 Sanpaolo IMI plans toexpand its presence in the direction of theMediterranean and the Middle East.


• Mumbay

• Singapore

• Bangkok

Hong Kong •

Shanghai •

Beijing •

Tokyo •

Moscow

Wien, AustriaSanpaolo Bank AustriaBudapest, HungaryInter.Europa BankDublin, IrelandSanpaolo IMI Bank IrelandLuxembourgSanpaolo Bank LuxembourgArad, RomaniaSanpaolo IMI Bank RomaniaKoper, SloveniaBanca KoperGeneve, SwitzerlandSanpaolo Bank (Suisse)

• Istanbul

SubsidiariesBranchesRepresentative offices


Sanpaolo IMI Group covers all of Italy with around3,000 branches spread throughout the country.

North WestEmployees: 16,131Branches: 1,039Market share: 11.1%

SouthEmployees: 8,069Branches: 694Market share: 19.3%

IslandsEmployees: 1,003Branches: 114Market share: 4.9%

North EastEmployees: 10,222Branches: 857Market share: 10.4%

CentreEmployees: 5,453Branches: 394Market share: 5.7%


Terra

Italy

(TM

)by

Com

pagn

ia G

ener

ale

Ripr

esea

eree

S.p

.A.

Turin, piazza Castello and piazza San Carlo


Managing DirectorA. Iozzo

Board of Statutory AuditorsAudit Technical Committee

Group Risks Technical CommitteeRemuneration and Personnel Policies Technical Committee

Ethical Committee Social Responsibility

Unit

GroupCredit

Management

GeneralSecretaryship

IntegratedOperational

Vehicle

Banca OPI

Banca Popolaredell'Adriatico

Territorial policies and local development

SanpaoloNewtwork

CorporateDivision

Privateand Retail Division

Group CorporateIdentity

SanpaoloBanco di Napoli

IMI Investimenti

Audit

The organization reflects the business positionalready described, based on diverse BankNetworks strongly rooted within the territory, aseries of specialized companies and CentralFunctions to direct, support, monitor andcoordinate. The following organization chart shows the maincompanies and divisions of the Group. Specific control on matters concerning the socialresponsibility of the company is guaranteed bythe presence of the Ethical Committee and theSocial Responsibility Unit.

The Ethical CommitteeThe Ethical Committee has a particularly importantrole in governing ethical matters related to socialresponsibility. Established in 2001 it is a body withinthe Board of Directors. The Ethical Committeeissues guidelines on ethical, social andenvironmental matters. It has specific tasks, also tocontrol, and acts as a propulsive stimulus andcoordinator in respect of the aforementionedmatters across all areas of the Group. In 2003 the Committee met three times and once itrequested an external opinion outside of a meeting.The Committee has examined many issues: somerelate to customers (for example the investmentpolicy and the ethical fund Venezia Serenissima),the environment (such as a position paper on theKyoto Protocol, the High Capacity Turin-Lyonrailway, sustainable mobility, the use of recycledpaper), the community (such as the launch andconstant monitoring of the micro-credit project, thesenior citizens project Facciamo Futuro) and othermatters and initiatives involving the Group (forexample the risk to reputation or research activitiescarried out by Banca IMI). The Committee was alsoinvolved in approving the Ethical Code, which wasdeliberated by the Board of Directors. The Committee also closely followed thepreparation of the Social Report, examining threedrafts and providing suggestions, comments andrequesting changes. The Committee is also providedperiodically with information about the activitiescarried out in respect of SRI investors (SociallyResponsible Investors), inclusion in ethical indicesand news on publications relating to ethical mattersand governance.

The Social Responsibility UnitIn October 2003 a Social Responsibility Unit was setup. Reporting directly to the Managing DirectorAlfonso Iozzo, it is responsible for monitoring thedifferent areas comprised in the Social Report and fordefining action plans in respect of corporate giving, inorder to render it more useful to the objectives of theBank in a social context. The Unit was also appointedsecretary to the Ethical Committee.

Organization


Board of DirectorsExecutive Committee

ChairmanRainer Masera

Managing DirectorP. Bussolotto

Managing DirectorL. Maranzana

Purchaseand Logistics

ManagementControl Financial reporting

Group Finance

Foreign Network

Sanpaolo IMI Private Equity

Banca Fideuram Sanpaolo IMI Wealth Management

Sanpaolo IMI Internazionale

Banca IMI

CorrespondentBanking

Risk Management

Gest Line (tax collection)

North EastNetwork

Cassa di Risparmioin Bologna

Cassa di Risparmiodi Venezia Friulcassa

Cassa di Risparmiodi Padova e Rovigo

Other Italian Networks

HumanResources


CorporateGovernanceSanpaolo IMI has complied with the aims andguidelines of the Code of Conduct for ListedCompanies ever since it was issued. Based on themodel contained therein, considered in-line withinternational best practices, the following representsSanpaolo IMI’s corporate governance model3.

To facilitate understanding of this structure, an explanatorydiagram is used here to analytically summarize the maincharacteristics into four interpretations:1. Proprietary structure2. Company management structure3. Transparency and control4. Rights and duties of shareholders

1. PROPRIETARY STRUCTURE

ShareholdersSanpaolo IMI’s capital equals 5,144,064,800 eurodivided into 1,448,831,982 ordinary shares and388,334,018 preferred shares, which do not havevoting rights in ordinary Shareholders’ Meetings. Themain shareholders are described in the“Shareholders” section, which also indicates theholders of preferred shares.In particular, the shares held by members of the Boardare published in the Annual Report.

Agreements between shareholdersAs of April 2001, consultation agreements exist betweenshareholder Compagnia di San Paolo and shareholdersIFI/IFIL4 and Società Reale Mutua di Assicurazioni, extendedin February 2002 to shareholder CDC. These agreements –which will expire on 13 April 2004 – are aimed at keepingthe shares held by them stable until the next Shareholders’Meeting, which will deliberate on the 2003 Annual Report. In June 2002, following the incorporation of Cardine Bancainto Sanpaolo IMI, a letter of intent was signed betweenCompagnia di San Paolo, Fondazione Cassa di Risparmio diPadova e Rovigo, and Fondazione Cassa Risparmio inBologna regarding the Bank’s management rules, whosemain elements are described in the “Shareholders” section.

A summary of the aforementioned agreements is availableat: www.grupposanpaoloimi.com.

3. Updated March 2004. More information on Sanpaolo IMI’s corporate governance model, untilnow contained in the Corporate Governance Report, is available on its internet site:www.grupposanpaoloimi.com.

4. On 23 April 2003, IFI SpA transferred its Sanpaolo IMI shares to the subsidiary IFIL SpA.

Cont

rast

o


2. COMPANY MANAGEMENT STRUCTURE

5. Brief biographical and professional notes on the current Board members are available on the internet site: www.grupposanpaoloimi.com.6. To identify the significance requirement, the following thresholds were established: 50,000 euro for atypical or unusual transactions and 10 million euro for loans and other transactions at

standard conditions, undertaken with correlated parties outside the Group. Moreover, the definition of correlated parties adopted is particularly restrictive: in addition to that already provided forby the Consob and on the basis of SEC provisions, those adhering to parasocial agreements have also been included.

* Members of the Executive Committee

It performs strategic tasks and holds all powers for managing the Bank, excluding those expresslyattributed by law to exclusive competence of Shareholders’ Meetings. It approves, after examinationby the Board of Auditors, transactions with correlated parties considered to be significant6.

18 directors - of which 15 non-executive (including the Chairman)- of the non-executive directors, 12 are independent,

as defined by the Code- Rainer Masera* (Chairman)- Pio Bussolotto* (Managing Director) - Giuseppe Fontana - Alfonso Iozzo* (Managing Director)- Luigi Maranzana* (Managing Director)- Virgilio Marrone*- Iti Mihalich*- Emilio Ottolenghi - Gian Guido Sacchi Morsiani- Remi François Vermeiren- Alberto Carmi- Richard Gardner- Mario Manuli- Antonio Maria Marocco- Abel Matutes- Anthony Orsatelli- Orazio Rossi* (Vice-Chairman)- Enrico Salza* (Vice-Chairman)

17

At the time of approval of the 2003 Annual Report

Functions

Composition

No. meetings in 2003

Expiry

Functions

Composition


Board of Directors5

Executive Committee

It has powers to be exercised within the context of the strategies, policies, and planslaid out by the Board of Directors, with the obligation of reporting to the Board,every 3 months, on the activities carried out. It can undertake urgent measures, inthe interests of the Bank, reporting them to the Board at the next meeting.

8 directors, of which:- 5 non-executive, 3 of which are independent

20

((


The Board of Directors is supported in itsinstitutional functions by 4 technical committeesformed by its members, with advisory, guidance, andmanagement functions.

It has the task of evaluating, in agreement with the Chairman of the Board ofStatutory Auditors, the remuneration of the directors that hold special offices,examining the remuneration structure for directors, and considering in depth issuesconcerning top management remuneration policies and approval and modificationof the general regulations regarding employer/employee relations.

- 9 directors- 6 non-executive, 4 of which are independent:Enrico Salza (Chairman)Giuseppe FontanaMario ManuliVirgilio MarroneIti MihalichOrazio RossiPio Bussolotto, Alfonso Iozzo, and Luigi Maranzana as far as regards the definition ofthe general policies on remuneration.

6

Remuneration and Personnel Policies Committee

It has the responsibility of analyzing the problems and relevant practices related toevaluating the internal control system, with the possibility to make specific analysesand further investigations. It also considers the adoption of corrective measures forimproving audits (both internal ones and those of the auditing company).

4 non-executive directors, 3 of which are independent:Giuseppe Fontana (Chairman)Virgilio MarroneEmilio OttolenghiEnrico SalzaThe Chairman of the Board of Statutory Auditors, the Managing Directors and, asspeakers, the Report and Audit Management Heads, take part in the meetings.

17

Internal Audit Committee

Functions

Composition


Functions

Composition


((


The Board of Statutory Auditors represents the main corporate internal supervisory body and is regulated by Art.2397- 2409 of the Civil Code.

It has the responsibility of setting the risk strategies and policies for the Group, providingthe guidelines for defining the risk measurement methods and criteria.

- 8 directors -5 non-executive, 4 of which are independent:Rainer Masera (Chairman) Anthony OrsatelliPio Bussolotto Emilio OttolenghiAlfonso Iozzo Orazio RossiLuigi Maranzana Remi François Vermeiren

8

Group Risks Committee

It has the task of studying in depth the principles for identifying an ethical/environmental companypolicy, examining compliance with declarations of principles or with sector organizations, and thedefinition of codes of conduct and the monitoring of their internal implementation. It alsosupervises the writing of a Social Report and its external communication process.

7 directors, all independent: Richard GardnerAbel Matutes (Chairman) Mario ManuliRainer Masera Antonio Maria MaroccoAlberto Carmi Remi François Vermeiren

3

Ethical Committee

Functions

Composition


Functions

Composition


It is called on to supervise observance of the law and the articles of association regarding theprinciples of proper administration and the adequacy of the organizational structure, in terms ofcompetence, the company’s internal control system, and the administrative accounting system,as well as the adequacy of the regulations that the company grants to its subsidiaries in order tofulfill the communication and information obligations provided for by law. It has ample powersfor internal inspection and investigation. It may convene – where provided for by law –Shareholders’ Meetings and contest decisions made by the Board of Directors. It notifiesCONSOB and Bank of Italy, without delay, of irregularities found during supervision activities.

Mario Paolillo (Chairman) Aureliano Benedetti (Statutory Auditor)Maurizio Dallocchio (Statutory Auditor) Enrico Vitali (Statutory Auditor)Paolo Mazzi (Statutory Auditor) Stefania Bortoletti (Alternate Auditor)7

The current Board was elected at the Shareholders’ Meeting on 30 April 2002 and willexpire upon approval of the 2004 Annual Report.

It is elected at the Shareholders’ Meeting through a vote on a list of the candidates, whichensures representation of minority shareholders, published at least 10 days in advance. Theproposing shareholders must represent at least 1% of the ordinary shares.

19

Board of Statutory AuditorsFunctions

Composition(5 Statutory Auditors and2 Alternate Auditors)

Nomination


(

((

7. Nomination of the second Alternate Auditor is provided for by the agenda of the Shareholder’s Meeting on 28/29 April 2004. This decision will be implemented, according to Art. 19, paragraph16, of the company’s articles of association, with relative majority and without resorting to the list voting process.


• “Independent” directors may be proposed by thecontrolling or majority shareholders themselvessince independence is objective and may not beconditioned by the type of shareholders proposingthe nomination.

In consideration of the relations between certainshareholders and Sanpaolo IMI, and the tasks they carryout, the following were considered Directors who are notindependent:

• Anthony Orsatelli

• Virgilio Marrone

• Iti Mihalich

Nomination proceduresThe directors are nominated based on proposals presentedduring Shareholders’ Meetings, at which time theshareholders also illustrate the resumes and professionalexperience of the candidates. Sanpaolo IMI has not deemednecessary to create a Committee for Director nominationproposals since that task must be fulfilled by the shareholdersthrough their active participation at the Shareholders’Meetings. It must also be pointed out that, according tocurrent banking rules and regulations, the Board’s membersmust hold specific professional and respectability requisites,whose existence is verified by the Board of Directors withinthirty days of the nomination.

RemunerationThe remuneration of Directors consists of a fixed annualpart, a variable part determined on the basis of parametersapproved at a Shareholders’ Meeting, and a fixed amountinclusive of the allowance for attending Board meetings(with reimbursement of expenses). In compliance withwhat is provided for by the Code of Conduct, the Board ofDirectors, as proposed by the Remuneration and PersonnelPolicies Committee, has established for the Chairman andthe Managing Directors a fixed remuneration and avariable part linked with the achievement of specific Bankand Group targets, integrated with stock option plans.The latter, described in detail in the Annual Report, aredivided into a fixed component and a variable componentfixed to share performance.

The pay of the Board of Statutory Auditors wasestablished at the Shareholders’ Meeting and consists of afixed annual part and a fixed amount that includes anallowance for every Board of Statutory Auditors meetingthat is attended.

A detailed description of the remuneration received by theDirectors and the Statutory Auditors for the activities

Role of the Chairman, Vice-Chairmen, and Managing DirectorsThe Chairman of the Board of Directors is responsiblefor coordinating company activities and is its legalrepresentative. Furthermore, he or she has the powerto take any urgent measures in the company’sinterest, in agreement with the relevant ManagingDirector, informing the Board of Directors or ExecutiveCommittee about them at the next meeting. TheChairman is considered a non-executive Director sincehe or she is not assigned effective powers of attorneyby the Board, without prejudicing the aforementionedtasks assigned by the Articles of Association. The two Vice-Chairmen – nominated from and bythe Board of Directors – are also non-executiveDirectors since they are not assigned powers ofattorney by the Board but are exclusively able totake on, for all practical purposes, the Chairman’spowers in the case of his or her absence orimpediment, according to the order of successionestablished by the Board itself.The Board has granted each Managing Directorpowers that are to be exercised within his or herrespective area of competence as well as thestrategies and plans laid out by the Board, with theobligation of reporting to the Board every threemonths on the activities performed. The sharing ofresponsibilities between the three ManagingDirectors is useful for achieving Group objectives.This division proceeds from the identification of relatedbut separate operational areas and market areas,keeping in mind the various important mergers of majorbanking institutes, such as the former Banco di Napoliand Cardine Banca, into Gruppo Sanpaolo IMI.

Independence of directorsBased on the guidelines contained in the Code ofConduct, the Board of Directors periodically evaluates theexistence of the requirement of independence concerningnon-executive Directors.

In particular, the Code of Conduct states that:

• Shares held by the company’s director do notinvalidate the requirement of independence, unlesstheir size permits control or considerable influence;

• Any existing economic relations prejudice therequirement of independence, if significant;

• For the purposes of evaluating independence,economic and “indirect” shareholding reports arealso important (family, companies controlled evenindirectly, etc.);


carried out during the 2003 financial year can be found inSection D of the company’s Annual Report.

Finally, a total compensation of 1,302,000 euro foraccounting audits carried out during 2002 by the auditingcompany, PricewaterhouseCoopers, was communicatedat the Shareholders’ Meeting held last April 2003.

3. TRANSPARENCY AND CONTROL

The great deal of attention that the Group placeson the transparency and accessibility of Group datamay be verified by the quality and content of thepublic information. In this sense, continuousupdating of the company’s internet site, both inItalian and English, plays an important role. The sitecontains special sections on Investor Relations,Press Releases, and Corporate Governance; thelatter contains all of the documentation of the lastShareholders’ Meeting.In order to implement recent national andinternational regulatory innovations, in October2003 Sanpaolo IMI’s Board of Directors granted finalapproval of a special Ethical Code8.

US Rules and RegulationsAs the only Italian bank listed on the NYSE andregistered with the SEC (Securities and ExchangeCommission - the American supervising authority), themarket notification system is particularly large-scale. Inregards to financial information, Sanpaolo IMI mustprepare Form 20-F - the annual informative document.Prompt reconciliation between national and US GAAPsare also supplied for greater transparency on the Anglo-Saxon and American market.The introduction of the Sarbanes-Oxley Act of 2002added further measures of guarantees for the public.Among the more important obligations is the duty ofthe principal executive officer and the principal financialofficer to include in the annual reports to be sent to theSEC the aforementioned Form 20-F - certificationstating that they have audited the documents andtherefore guarantee the absence of false declarations oromissions of relevant facts, as well as the correct natureof the reported financial conditions. For implementationof the Act, a Disclosure Committee was formedconsisting of the Managers of Central ManagementDepartments, who have the job of assisting the Bank’scorporate bodies in fulfilling the duties andresponsibilities regarding the control of the accuracyand timeliness of the disclosure activities.

Internal dealingIn 2002, the Bank’s Board of Directors approved the“Code of Conduct” for Relevant People which, accordingto the intentions of Borsa Italiana in the Regulatoryprovisions for markets, intends to give transparency to thepurchase and sale transactions of listed securities of Groupcompanies carried out by Directors and other ‘relevantpeople’ who could, by virtue of assigned roles, have accessto privileged information. Within ten days of the end ofeach quarter, the Bank informs the market about thetransactions performed by relevant people, which areequal to or more than 50,000 euro and, without delay,amounts that are greater than 250,000 euro. Provision hasalso been made for the Board of Directors to establish, forspecific periods of time, prohibitions or restrictionsregarding security transactions.

Correlated PartiesThe Board of Directors has identified correlated parties ofthe Bank, for which it has defined a Group procedure fordeliberating on loans and other transactions. Formaximum transparency, the Bank has extended correlatedparties to include all of the subjects who comply with theagreements between Sanpaolo IMI shareholders as well asthe directors of the parent Bank’s Central Management.The parent Bank’s departments and the subsidiaries mustreport to the Internal Audit Committee and the Board ofDirectors every three months, therefore ensuring carefuland continuous monitoring of relations with thesecounterparties.

The system of controlsThe system of controls is part of company life, forwhich Sanpaolo IMI is subject to precise rules andregulations and verification by Bank of Italy. Thistakes place at three levels: Audit Department,Internal Audit Committee, and the Board ofStatutory Auditors.The Audit Department is an internal structure thatreports directly to the Managing Directors and issufficiently independent from the operating structuresso that it has access to company data and files. Theactivity carried out in Sanpaolo IMI is even moredetailed and complex than the provisions made bythe Code of Conduct itself. In short, it evaluates thefunctionality of the Group’s overall system ofinternal controls and verifies its operationalregularity, providing the Board of Directors withpossibilities for improving policies on riskmanagement. The Audit Department notifies theInternal Audit Committee and the Board of the

8. See page 25.


The Boardroom in the office of piazza San Carlo in Turin


results of its activities at least every three months.The Internal Audit Committee therefore relies onit for periodic verification of the adequacy of theinternal control system. Since it is a Committeemade up of Board members, relations with theinternal operating unit are crucial for validlyestablishing guidelines and verifications of theactual functioning of the internal control system.This Committee therefore represents the bodycapable of autonomously and independentlyevaluating the Managing Directors and othersubjects such as the auditing company. It is alsoresponsible for staying in close contact with theBoard of Statutory Auditors for the purpose of amutual and timely report on topics important tothe control system. Unlike the Internal AuditCommittee, the Board of Statutory Auditors iselected and answers concerning its activitiesdirectly and only to Board members atShareholders’ Meetings.

4. RIGHTS AND DUTIES OF SHAREHOLDERS

Sanpaolo IMI shares refer to certain and explicitrights. The Bank has a shareholders register that isperiodically updated. The principle of “one share,one vote” applies to all subject matter discussed atShareholders’ Meetings, the distribution of dividends,and the residual value of the security in the case ofcompany liquidation. As described in the“Shareholders” section, there is a class of preferredshares solely held by the three institutions thatoriginated the merger between Sanpaolo IMI andCardine, which only have voting rights inextraordinary Shareholders’ Meetings.The shareholders have the right of pre-emptionregarding new issues, with the exceptions sanctionedby the Civil Code, and there are no specific measures(for example, golden share) or voting limits forhindering the entry of new shareholders or purchaseby third parties.

Election and annulment of the Board of DirectorsThe Board of Directors – elected according to thepreviously described procedures – has a term ofoffice that lasts three financial years, whichpermits adequate development of the company’sindustrial plans. Shareholders who represent atleast 10% of the capital may, nevertheless,convene a meeting and propose modification ofthe Board’s composition.

Shareholders’ MeetingShareholders’ Meetings were held twice during 2003.The following was approved at the ordinaryShareholders’ Meeting on April 29: The 2002 AnnualReport, the purchase and transfer limits regardingown shares, and remuneration of the Directors. Anaverage of 50.5% of shareholders participated inthese votes. On the same date, but during anextraordinary meeting, an increase in the legalreserve was approved with 61.7% participation ofthe total capital.On November 25, the composition of the Board ofDirectors was decided on at the ordinaryShareholders’ Meeting following the resignation oftwo members that held 49% of the ordinary capital.In an extraordinary meeting, a decision was maderegarding the merger through incorporation project ofCardine Finanziaria and compliance of the company’sArticles of Association with company law reform: Sixtypercent of the total capital participated in these votes.Starting in the financial year of 2004, in application ofthe new provisions of Art. 2370 of the Civil Code9, noadvance depositing of shares is required. Theshareholders may indicate delegates forShareholders’ Meetings and therefore exercise theirown voting right even if they are not physicallypresent (proxy voting). Furthermore, thedocumentation regarding the agenda’s topics ispublished on the company’s Internet site suitably inadvance, as well as the detailed voting results assoon as they become available.

Dividend policyAmong the values that are the basis for relations withits shareholders, the Group emphasizes that it intendsto guarantee adequate remuneration of the capitalinvested by shareholders over the medium/long termthrough the distribution of dividends and increases inthe security’s value on the stock exchange.Dividend proposals are communicated in advance bythe Board of Directors and subsequently discussedand decided on at the Shareholders’ Meeting thatapproves the Annual Report. The identification of afixed payout is therefore not considered necessary,even in consideration of a historic trend which revealsthat the Group has always adopted a generous profitdistribution plan, nevertheless maintaining rigorousfinancial stability.

9. Introduced by legislative decree no. 6/03 concerning company law reform.


RelevantStakeholdersAll those who establish with Sanpaolo IMI arelationship which may create needs andexpectations are defined “stakehoders”. In thisSocial Report, they are grouped in macro-categoriesbased on their different needs and expectations.

Adopting a categorization that is not intended tobe rigid but it is aimed at simplifying a complexand articulated situation where the boundariesbetween the different interests are not alwayssharp and some subjects can belong to more thanone category, we can identify, among ourstakeholders: the shareholders, the customers, thepeople, the suppliers, the social communities andthe institutions and the environment.

Along the uneasy path of sustainabledevelopment, it is our intention to pay maximumattention to the needs and problems of each ofthese groups, trying to establish and to keep alivea dialogue and an open, loyal and usefulrelationship with them.

SuppliersThe Group cultivates relationships with its

suppliers based upon principles ofreciprocal transparency and correctness,

starting with the selection processes, whichprioritise expertise and competitiveness

with the aim of creating an economicadvantage, as well as technical and

operational advantage, for the Group.

CustomersThe customer, whether retail or company, represents themain element in the life and development of the Group.

Today we can count on about 7 million customers,including retail and companies of every dimension.

Phot

oDisc


EnvironmentWe believe in a sustainable development,which respects the environment as the vitalcontext in which we operate. Therefore,besides complying with importantcommitments at international level on thisissue, we also try to direct our activities tothe reduction of environmental impactsand we support initiatives aimed atenvironmental protection.

PeopleOver 48,000 people work in the Group. TheGroup’s success depend on them. Therefore weconsider the exploitation of their professionalismthe center of the personnel management anddevelopment policies and systems.

ShareholdersThe first 13 shareholders ofSanpaolo IMI hold al 31/12/2003,about 47% of the Bank’s ordinaryshare, while the remaining 53% isdisseminated in the market amongmore than 185,000 Italian andforeign shareholders.

CommunityWe offer the services of a big banking and financial Groupto households, companies and Public Authorities at alllevels, in every Italian region and in cities and towns of everydimension, favoring the development of the territory and ofthe local communities and at the same time, dedicatingconstant attention to specific local situations.

44 2003 Social Report – Social and Environmental Report

Social and Environmental Report

Cont

rast

o

2003 Social Report – Social and Environmental Report 45

Our work aims to produce realbenefits for our customers, and isdirected at producing results that are --and are perceived-- as consistent withtheir expectations and correspondingto the economic return expected.

We want our customers to feel theyare guided by a working organizationthat focuses on their concrete needsand that is available for dialogue andwith good listening abilities.

We believe that, in the long term,loyalty and transparency in dealingwith customers will translate intofurther sources of benefit for theentire organization.

Through the Network of branches andall virtual channels, we want to offerour customers easily accessible,quality products and services,integrated with the convenience andwealth of information available fromtechnological instruments.

We operate in order to ensure thatthe highest attention is paid toindividuals and, in particular, to theneeds of specific categories ofcustomers.

We aim towards the responsible useof financial resources in order to bringtogether, through our daily work, theneed for savings protection anddeposit remuneration for families withthe financing needs of theentrepreneurial world.

Value in detail

Creation of value

Customerorientation

Integrity

Commitmentto excellence


specific qualities


sources

(Customers


VALUES

North West

LoansFinancial Assets

North East


Center


South


Islands


472003 Social Report – Customers

The approximately 7 million customers constitute the firstand most important asset of the Group: customerorientation and centrality are the founding values of theGroup. Our efforts are oriented towards products andservices of excellent quality, as well as profitable dialogueand collaboration, whose final objective is theestablishment and maintenance of lasting and trust-basedrelationships.

36 billion euro111 billion euro




2.6 billion euro5 billion euro

7.6%

11.8%

7.0%

16.1%

6.5%

ValueMarket

Share

VOLUMES OF ACTIVITY (Bank Networks’ data)

Loans broken down by branch’s province. Source of loans’ data: Banca d’Italia.

Pier

o O

ttavia

no


Key specialization and proximity principlesThe branching of the Group through Bank Networksresponds to the need of maintaining a strong link with theterritory, emphasizing local rooting and knowledge ofcustomers. The principle of proximity, which translates intoan extended local presence, is linked to that of specialization,which involves the movement from a full service branchmodel to a specialized branch model combining a diffusepresence on the territory with the possibility of offeringspecialized consultancy in order to more effectively andadequately respond to customer needs. The choice of thismodel has led to the current configuration which, togetherwith retail branches, includes private operational points --directed at customers with greater financial resources-- andbranches dedicated to companies.The strong coordination across the territory through BankNetworks or Areas guarantees a suitable presiding overthe territory, even while considering the specificity of thediverse territories.

Investment and Commercial PolicyOn the basis of the projects started in 2002, 2003witnessed the implementation and presentation of thetwo “value papers” containing guidelines --one for thedelivery of investment services to retail customers, and theother for company credit servicing.These policies, which will be described in more detailin the sections dedicated to retail and companycustomers, underline the importance of operating inthe interest and for the satisfaction of customers, andwith the commitment to offer competency,professionalism and the respect for the ethicalprinciples recognized by the Group.

Multi-channelingSanPaolo IMI is on the cutting edge for constantdevelopment of its multi-channeling services, both toretail as well as corporate customers who use the Internet,fixed phone and mobile phone channels. The Group hasfor some time been strongly involved in the offer of easilyaccessible products and services, integrating thetraditional assistance of a “traditional bank” with theconvenience and information wealth of technologicalinstruments. In addition, special attention has beenreserved to a particular set of customers that are more“evolved” from the IT perspective, such as youth andcompanies, who prefer the facility of use and flexibilitythat are typical of a multi-channel environment.Through Direct Bank, retail customers can operate on theiraccounts and investments through the Internet, fixedphone or mobile phone without having to go to a branchand at any time of the day. As far as company customersare concerned, these can take advantage of a wide varietyof online commercial services which allow a more efficientmanagement of the company’s financial processes and alsoconstitute a convenient tool for the access of informationof diverse nature. The Internet channel, in particular, istherefore used not only as an operational tool but also as aknowledge acquiring instrument.

The Clear Deal Project“Clear Deal” (PattiChiari) is a project promoted by ABI (ItalianBankers Association) directed towards the improvement ofthe relationship between the bank and its customers andwith particular reference to the values of comprehensibility,awareness, compatibility and clarity in communication, andwhich involves teller operators and users every day.The objective of the Clear Deal Consortium --anautonomous entity initially constituted of 13 banks,including Sanpaolo IMI-- is to supply the customer withsimple and concrete instruments that facilitate the

492003 Social Report – Customers

understanding of banking products and allow easycomparison of the offers of several banks in order tochoose the product that is best suited to one’s needs. In thisway the customers, now made more aware, can take on amore active role in their relationship with the bank.Sanpaolo IMI has participated in the development andrealization of “Clear Deal” and, together with SanpaoloBanco di Napoli, has adhered to all the initiativesundertaken so far, committing considerable organizational,training, IT and financial resources to the project.Carisbo, Friulcassa, Banca Popolare dell’Adriatico andCariparo, have so far adhered to the “F.A.R.O.” initiativesand to the “Clear Information on Structured andSubordinated Bonds”, while Carive, in addition to the twoinitiatives cited above, has adhered to the “List of Bondswith Low Risk and Return”.Clear Deal can be broken downinto eight initiatives that refer to the savings, credit andservice sectors and which will be further analyzed in theirsections of stakeholder impact and for which the followingcalendar was set:

In order to make project initiatives more visible tocustomers, the Clear Deal Consortium has decided tocharacterize them with a “quality brand” --the “ClearDeal” brand-- which guarantees the adherence of theindividual bank to the predefined organizational,procedural and communication rules that are codifiedin relative “protocols”. For greater customerprotection, an independent certification entity isperiodically required to verify each individual adheringbank’s respect for these protocols.Sanpaolo IMI has already started a pre-certificationprocess of the first three initiatives: from this survey, “anadequate level of application of the Clear Deal protocols,the object of evaluation,” was determined. The pre-certification was conducted in conjunction with theCisqCert company (for the part relative to Managementand Central Services) and the Det Norske Veritas company(for the part relative to bank branches).

15 October 20031.FARO (Online ATM detection): a service which allows the

user to use the Internet or phone to determine thelocation of the nearest functional ATM.

15 November 20032.A list of bonds of low risk and return: an instrument

designed to make customers aware that a greaterreturn comes with a greater risk.

3.Clear information on structured and subordinatedbank bonds: an information tool created for thepurpose of faciliating understanding of complexsecurities and to make the investor aware of the risksassociated with this type of investment.

15 December 20034.Evaluation criteria of the credit capacities of SMEs: a

manifesto with a clear and simple indication of thecriteria with which banks generally evaluate loans tosmall and medium-sized companies.

15 January 20045.Bank account comparisons: an Identity Card with

the clear and easily understandable indications ofthe characteristics, services and prices of bankaccounts.

15 February 20046.Basic banking service: a product which makes all basic

banking services available and easily accessible forsimplicity and costs to all parties that today do not havea bank account, ranging from youth to retirees.

15 March 20047.Average response times on credit for small

companies: communication aimed at allowing oneto know, in advance, the time that a bank willtypically need to provide a (positive or negative)response to a financing request.

8.Definite availability times for sums deposited by check:communication on the timing for judicial availability ofsums deposited by check on one’s bank account.


Retail customersThe Group’s Bank Networks have a total of 5,600,000retail customers covering all age groups and thewhole peninsula.

TERRITORIAL DISTRIBUTION OF RETAIL CUSTOMERS(BANK NETWORKS)

BREAKDOWN OF RETAIL CUSTOMERS BY AGE (BANK NETWORKS)

53-67 years26%

68 and above20%up to 32 years

15%

33-42 years20%

Number of customers

Over 1,000,000 700,000 to 1,000,000

300,000 to 700,000150,000 to 300,000 50,000 to 150,000

Below 50,000

43-52 years19%

512003 Social Report – Retail customers

As previously described, one of the primary strategicreferences for Sanpaolo IMI Group is customerorientation. This value is expressed in specific actions andsystematic developments of constant improvement. TheCustomer Satisfaction program is an integral part of theoverall strategies for improvement of our relationshipwith customers, and represents an instrument forkeeping the satisfaction level of the customers undercontrol and for defining which interventions have priorityin increasing that satisfaction.The work plan involves two levels of investigation:

• A micro level, finalized towards supplying detailedindications on specific topics. In the course of 2003, fivemarket analyses were conducted in relation to satisfactionlevels of Sanpaolo IMI customers (and in some cases eventhe interest of non-customers) on single commercialinitiatives. This research was conducted through 3,456quantitative telephone interviews, 40 qualitativetelephone interviews and 64 individual interviews. Inaddition, approximately 11,000 telephone interviews with

Sanpaolo IMI and Sanpaolo Banco di Napoli customerswere conducted in order to evaluate the quality ofdelivered services using the Customer Satisfactionmeasure. From this investigation, it was determined that,on the basis of an evaluation scale of 1 to 10, more than50% of interviewed customers expressed an overallsatisfaction level of over 8 for the services offered by thebank. This percentage surpasses 70% when referenced tooverall satisfaction with respect to the personnel of thebank branches, and in particular referred to the courtesyand availability of the personnel itself.

• A macro level, finalized towards supplying informationon the satisfaction or dissatisfaction elements ofItalians with respect to all banks and conducted by theABI Customer Satisfaction Observatory of the retailsegment. In the course of 2003, a survey onCompetitive Positioning (not yet concluded), and towhich the whole Sanpaolo IMI Group is taking part,was launched. This survey will involve 300 phoneinterviews for each bank of the Group.

Pier

o O

ttavia

no

Customer Satisfaction


The evolution of customer needs, in particular related tonew security and protection needs expressed by theconsumer, induces an ever increasing development of thecapacity to build and maintain a solid relationship withthe customer: the commitment of the Sanpaolo IMIGroup, in this sense, has consolidated into thedevelopment of a distribution scheme based on servicemodels differentiated by customer segment.In this light, the diffusion of an organizational modelbased on specialized modules capable of combining atargeted and personalized commercial approach with anelevated level of distributive efficiency was completed inthe course of 2003 in the Private and Retail Branches. Theevolution of this organizational model responds, in fact,to the customer “proximity” criterion and aims to build,through integrated action with operators based on “teamplay” logic, a lasting relationship with customers that isbased on professionalism and the knowledge of thecustomer’s needs. For this purpose, professionalspecialized positions, with relative training investments ofconsiderable entity and aimed at developingprofessionalism, will be created for each market segment.

The Family SegmentIThe Family segment is composed of customerscharacterized by medium to low asset levels and generallywithout sophisticated expectations, but with goodpotential for operational development.The “first line” access to the branch, which gives thecustomer the first sensation on quality level in terms ofreception, professionalism and service, has been subjectto significant interventions that were completed in thecourse of 2003; these interventions involved:- Operational/information instruments, aimed at

improving customer knowledge and as a result

personalizing the relationship, as well as making thecommunication between the Registered Office and andthe Network more efficient and dynamic;

- The structural innovation and accessibility to “electronicchannels”, with the implementation of the newATMWeb and the first implementation of ATM servicesdedicated to the blind, while beginning to place strongattention on the education of customers for thewidespread use of non-teller channels for the executionof the more common banking transactions;

- Training of human resources on both relationship andspecialistic topics, with 400 delivered days totalling8,700 labor days.

Private bankingDevelopment activity of the new service model continuedin 2003. All completed interventions (and those yet to becompleted) are characterized by a high propensity forimprovement of the service level offered to customers ofhigher standing, and pursued through:

• The capillary presence of specialized structurespresiding over a segment (69 private points, 170private consultants as of December 2003);

• Widening of the dedicated product and service range;

• The constant development of the professionalism ofresources dedicated to the management of retailcustomers (MasterPrivate and training courses on non-financial consulting services).

Small businessThe Small Business segment, composed of small-scaleentrepreneurs and professionals, presents specificelements both on the part of retail customers as wellas company customers: please consult the“Corporate Customers” section for further details.

Specialization: differentiatedservice models


Current AccountsDuring 2003, relationship activity with respect to the Under18 target group was consolidated through conversionactivity towards the new strategic line and the “HappyBirthday” initiative. At the moment of the opening ofBenefit Under 18, he/she may choose from a series of gifts(such as atlases and magazine subscriptions): the insertionof WWF (World Wildlife Fund) and Unicef amongst theopportunities of choice has attracted the interest of 3,000young men and women with a total of 20,000 opened bankbooks and an adherence rate of about 15%. The range ofcurrent account products was also enriched with BenefitStart --Basic Banking Service, a simple and low-cost accountaimed at easing access to banking services for those whostill do not take advantage of them (see more on this in the“Community” section).The whole range of currently available products from theSanpaolo and Sanpaolo Banco di Napoli Network iscurrently being spread to the other Networks and inaccordance with the integration plan of the Group.

Executive ProgramThe Executive Program continued throughout 2003; thisprogram allows the accumulation of points through theuse of services, as well as banking and investmentproducts connected to the Multibenefit account. Thesepoints allow members to obtain prizes or to offerdonations to non-profit entities. During 2003, therequested donations from our customers, using theconversion of their Executive points, were the following:

Meeting customerneeds

100 euro AIRC*

500 euro AIRC*

100 euro FAI**

500 euro FAI**

100 euro Save the Children

500 euro Save the Children

Total

* AIRC Italian Association for the Research against Cancer** FAI Italian Foundation for the Environment

111

27

13

5

8

1

165

11,100

13,500

1,300

2,500

800

500

29,700

Number Amount (euro)

Pier

o O

ttavia

no


Insurance products for protection needsAlways in light of customer orientation, Sanpaolo IMI offersinsurance products that are strongly focused on theprotection of the individual, the family and their assets. Withreference to protection of the individual and pensions, theoffer proposes an insurance policy that protects thecustomer and his family from events related to health andthe possible financial repercussions derived from it. Inrelation to pensions, the Open Pension Fund allows theestablishment of an integrated pension to which it is possibleto accede by both individual as well as collective adhesion;the Individual Pension Form (FIP, “Forma Individuale diPrevidenza”) allows the single individual to build up a flexibleand personalized complementary pension; the rates ofreturn --immediate or deferred-- sustain income delivery inperiods of inactivity. In addition, three accessory guaranteescan be activated at any time: - Long Term Care, which insures against the risk of lacking

self-sufficiency in everyday life;- Permanent Disability, which covers the risk of total and

permanent disability as a result of disease or physical lesion;- Dread Disease, which covers the risk of insurgency of

certain diseases or particular situations.Investments for pension plans draw inspiration from theprinciples of integrity, rectitude and caution, allowing theunderwriter a greater level of serenity for his or her elderlyyears. In reference to the protection of physical assets, the firepolicy protects the most valuable good: the home. We aretherefore particularly sensitive to that which represents theprimary asset base of the individual; at the moment of deliveryof the mortgage, the insurance policies connected with itprotect the customer and his/her family from unfavorableevents relating to the individual or the home, whileextinguishing residual debt. In the future, it is our intention topursue a path of excellence and total attention to theprotection needs that are expressed by the customers, as thelatter remains our highest prioritized center of attention.

MortgagesAll the banks of the Sanpaolo IMI Group have adhered to theEuropean Code of Conduct for home mortgages. Sanpaolo IMIand Sanpaolo Banco di Napoli are completing activities for theattainment of the certification UNI EN ISO 9001:2000 of themortgage concession process and, according to forecasts, the firstapproach with the certification companies should take placewithin April 2004.Carisbo, Carive and Cariparo have also placed particular attentionto the residential necessities of young families for which the

commercialization of special mortgage forms with particularlyadvantageous economic conditions have been started1.

Financing to Students Particular attention is dedicated to university students.Carisbo, for example, proposes soft financing for participants inthe post-university master Almaweb (Management & IT). Themaximum value of the financing is equal to the tuition of 10,500euro. Students pay a soft rate of 2% and to which a contributionby the Carisbo Foundation is added. In 2003, 22 of thesefinancings were issued for 135,000 euro, while 57 are alreadyunder amortization.A non-finalized zero-interest rate financing is connected to apacketed account of Carisbo targeted at youth (already namedClick@Work) and with a maximum value of 1,500 euro. At themoment, the financing exists with about 1,500 young men andwomen.Cariparo, in addition, has confirmed for 2003 the special line ofcredit known as “prontoPRESTITO MASTER” (“Quick MasterLoan”), reserved for students that intend participating in the post-university training courses organized by CUOA– CentroUniversitario di Organizzazione Aziendale (“University Center forCompany Management”)– Altavilla Vicentina (VI).This initiative will include the concession of loans of value up to18,000 euro and of a maximum term of 48 months (including aperiod of pre-amortization of 12 months), and with soft rates (0%

1. For example a mortgage lasting up to 25 years reserved for borrowers that are up to 40years of age, and with a favorable starting rate set at 2.95%. In 2003, Carive issued1,000 mortgages of this type, for a total of 91 million euro while Cariparo issued 1,721for a total of 150 million euro.

Laur

a Ro

nchi


in the pre-amortization period and the first instalments decreasedsuccessively by 1%). For this purpose, a ceiling of 400,000 eurohas been allocated.

Payment SystemsSanpaolo IMI is capable of offering its customers the possibility ofreaching any other bank located within the territories of theEuropean Union in the span of two working days: the objective is tomake the conduction of commercial transactions in Italy or in any ofthe other member states of the Union completely indifferent tocustomers, both in terms of price as in execution times.In order to supply the Sanpaolo IMI customers with the sameefficiency --even for operations with banks located in countries thatwill enter to become part of the European Union from 1 May 2004-- the stipulation process for commercial agreements, regardingservices guaranteed with the most important credit institutions inthe so-called acceding countries, has been initiated.In the course of 2003, Sanpaolo IMI has also promoted,developed and adhered to a new system known as EBA STEP2,which represents the first concrete realization of a Pan-Europeanclearing house.Particular attention has been dedicated to the specialization ofprepaid cards, also with the aim of allowing access to electronicmoney tools to social strata that are typically not users ofelectronic payment methods or which do not have bank or postalaccounts. Amongst these new functionalities, the automaticcrediting of a salary on the part of Companies or Entities hasbeen made available. Sanpaolo IMI is also particularly sensitive to the needs of peoplewho are resident in Italy but are not European citizens.For this reason, in the course of 2003, the planning foundationswere laid for an initiative aimed at directly executing fundtransfer operations, from every operational point, towards therespective countries of origin of people who have immigrated toItaly. In order to attain this goal, Sanpaolo IMI is completing aseries of commercial agreements with the most important bankslocated in these countries in order to sensibly reduce thecommissions and execution times of the operations in question.In this light, a new product called “Money to Family” will bemade available in 2004, and whose purpose is to satisfy theneeds described above.It is similarly important to highlight the fact that the relevantauthorities have confirmed the certification in accordance withUNI EN ISO 9001:2000 for planning and delivering EuropeanUnion and international payments even in 2003.

Multi-channellingSanpaolo IMI has decided to develop direct channels(Internet, phone and mobile banking) in close integrationwith the branch Networks --on the one hand valuing thecontent of the relationship and the assistance of the “classic

bank”, while at the same time offering the customer thecomfort and wealth of information of the most sophisticatedtechnological instruments. In addition to going to a branch,the subscriber of the Sanpaolo multi-channel service can infact operate --from home-- on their bank accounts andinvestments in a simple fashion and at any time of the day.Internet banking allows a great number of operations to beexecuted from one’s PC; phone banking allows operationsthrough a simple phone call and mobile banking directly fromthe mobile phone.The Internet Banking service for retail customers has beencertified according to the BSS 7799 standard of the companyDet Norske Veritas.As far as offered services are concerned, in 2003 the servicefor payment of post office paying-in slip for contractedcompanies has been activated; in 2004 this will be extendedto the payment of all types of post office paying-in slip.Even in the course of 2003 there has been a considerable increasein the use of direct channels with respect to the previous year.

USE OF DIRECT CHANNELS ON THE PART OF CUSTOMERS OF THE SANPAOLO NETWORK

These services were further extended in June 2003 to thecustomers of Sanpaolo Banco di Napoli Network, with a result, atthe end of 2003, of 60,500 multi-channel contracts, 80,500operations including wire transfers, credit transfer systems,cellphone recharges, residential utility charges, tax and post officepaying-in slip payments and 42,600 trading operations ofsecurities and funds.The Contact Unit during 2003 has intensified telephonecampaigns in support of commercial development strategieswhich are also suitable for monitoring Customer Satisfaction andthe use of direct channels. In addition, it provided operationalsupport to the integration process of the ex Banco di Napoli withinthe Group and strengthened assistance services (customer care) tonon-multi-channel customers and to the Branch Network.For 2004, further development of these activities is forecasted --even for the banks of the North East to which the multi-channelservices will be extended.

Year-end contracts

Number of banking operations2

Number of trading operationsof securities and funds

400,000

1,000,000

636,000

+23%

+50%

+12%

2003% Change

versus 2002

2. Wire transfers, credit transfer systems, mobile phone recharges, residential utilitycharges, and tax and post office paying-in slip payments.


The context of reference for the distribution ofinvestment assistance services has become even morecomplex in the course of 2003. Certainly, there has beenan increase in the sensitivity of savers with respect todifferent risk factors which could affect the medium/long-term stability of the economic well-being of the averagefamily. This has to do with factors related to the financialsphere, such as the evolution of economic variables andthe development of the creditworthiness of issuers, butalso to events of another nature, such as unpredictableevents that can affect the individual or non-financialassets. The increased sensitivity to these themes has alsooffered favorable grounds for the continuation ofactivities started in the course of 2002 within the ClientFinancial Planning Project.The particular emphasis that Sanpaolo IMI places on thedistribution of investment assistance services is evidentfrom the approval by the Board of Directors, on 14 May2002, of the general structure and criteria of the“Guidelines on Sales/Allocation Activities to the Public ofSavings and Risk Management Products”. Theseguidelines, as far as the activity of the allocation/sales ofsecurities to customers is concerned, propose rules ofconduct that aim to protect the private investor through:- the strong committment to communication with the

public and maximum transparency of informationon the risk levels of proposed investment products,

- coherence between investment selection criteriaproposed to customers --and the subsequentmonitoring of existing portfolios-- and the directionadopted by the Group for the assumption of creditrisks and for shareholding investments.

In April 2003, the Investment Policy document --incorporating both the behavioral rules for all thosewho assist customers on investments, as well as thecommitment of the Central Office to complete supportsystems, commercial practices and products coherentwith the Policy principles-- was officialy presented tothe Sanpaolo Network and Sanpaolo Banco di Napoli.In accordance with that enunciated in the Policy,several operational tools were completed in the courseof 2003:

• The new manual, “Investing Today- Client FinancialPlanning”;

• The new WorkStation;

• Benchmarking of portfolios and the commercialanalysis tools for customers.

These tools are available on the Sanpaolo Network andare being spread to the other Networks in accordancewith the integration plans of the Group.The diffusion of the Investment Policy principles and theknowledge of the new tools has been made possible bythe implementation of a training plan that involved thedistribution --between May and December 2003-- ofabout 8,000 classroom days on the Sanpaolo andSanpaolo Banco di Napoli Network.The distribution of the training plan was conducted withthe contribution of a task force of over 150 trainers of thetwo Networks, and which will continue their activity in2004 with the distribution of an additional 4,000classroom days for a total of over 12,000 classroom days.

The manual, “Investing Today- Client Financial Planning”This manual, aimed at all the consultants and managersof the Network, is a tool for orienting oneself in theworld of investments and systematically collects theprimary information support on the product range andthe new commercial orientation for Customer FinancialPlanning needs.

The manual, distributed for the first time in thecourse of 2003, will include annual updates, but allproduct specifications are posted monthly onWorkStation. The contents are not limited to thecommercial aspect but also cover the principalfinancial and legal topics that are necessary for thedelivery of investment assistance services.Particular emphasis is placed on the issue of risk,with the objective of providing support in order tofacilitate correct communication with Customerson the risks linked to each type of investment andtherefore to promote awareness in investmentchoices.

Investment assistanceservices


Pier

o O

ttavia

no


- Determine the return on the investment portfolioof the customer, providing updates on the courseof ongoing investments with information on thevalue and return of the portfolio in a specifiedperiod of time;

- Analyze the customer’s portfolio, highlighting thedifferent risk factors to which the customer isexposed (e.g. market risk, issuer risk,demographic risks, etc.) and measuring theintensity of the latter, including the “Value atRisk” of the portfolio of the Customer;

- Identify the needs of the customer by testing thelatter’s risk tolerance;

- Propose the best suited commercial strategies tosatisfy each need;

- Monitor the investments of the customer in orderto constantly verify coherence with the evolutionof the former’s personal characteristics andinvestment objectives.

The tools that are available through our Networkalso include:

• Portfolio benchmarking, aimed atproviding a clear sense of thecommercial efficacy of the activitiesof the consultants/managersthrough the analysis of relevantindicators both from a temporalpoint of view and in comparison toother consultants/managers;

• Some “query” tools which allow apunctual verification of thecomposition of customer portfoliosas well as the realization ofcommercial initiatives that areincreasingly in tune with thefinancial profile of the customer.

The new WorkStationThe new WorkStation concretely incorporates theinvestment assistance model illustrated in theInvestment Policy. It is an Intranet tool available toall of those whom, in the branch, manage privatecustomer portfolios. The tool comprises a series offunctionalities that accompany the preparationphase for the customer meeting as well as themeeting itself.WorkStation draws inspiration from the carefulanalysis of the customer’s financial needs and theconstant verification of portfolio coherency withrespect to customer’s objectives and to the latter’srisk tolerance. In addition, the tool systematicallycombines all the economic, financial and productinformation necessary for the day-to-day activitiesof consultants and managers, allowing a reductionin collection times and an enrichment of thequalitative content of customer meetings.

In accordance wih the Operational Notes of theInvestment Policy, the WorkStation allows the user,amongst other things, to:


Sanpaolo IMI Wealth Management (SPWM), whichcontains eight product companies, is a Sanpaolo IMIGroup holding that is active in consulting servicesand asset management. Created in the second half of2001 (and operational since January 2002), SPWMwas the first company within the banking group tohave combined asset management and insuranceactivities within one entity, eventually becoming oneof the primary Italian operators in the assetmanagement sector. The mission of SPWM is to bethe center of excellence for asset management andinsurance products in support of the Group’s BankNetworks and for the development of a wide rangeof complete, coherent and effective offers withinasset management. Outside the Group, SPWM isdetermined to be the leader in the institutionalmarket through a range of offerings that is innovativeand strongly services-oriented.SPWM manages assets of almost 115 billion euro asof 31/12/03, with a market share of 12.1% incommon funds and 9.3% in capital assetmanagement. Funds raised in 2003 exceeded 4.7billion euro in asset management products andtouched 6 billion euro for insurance products.Operational results and the primary initiatives beingundertaken were presented in a meeting with SPWMand the financial community on 6 October 2003.

Commitment to transparencyIn the light of making customer relationships moretransparent, SPWM has been involved, in the course of2003, to the preparation and distribution of numerousinformational documents, including the following:- a commentary on Individual Management, which is

composed of a market analysis and a synthesis of chosenmanagement strategies and operational choices;

- “Fund News” and “International Fund News”, monthlypublications which contain the product specifications ofItalian and Luxembourg funds, detailing their principalcharacteristics, assets, portfolio composition, returnsand benchmark comparisons.

A post-sales call center is also dedicated to final customersand capable of offering specific product details orinformation on the status of requests submitted to thecompanies of the Group.In relation to Business customers, SPWM presents itself as

the primary intermediary of the networks by supplyingconsulting and support for its distributed products. Forthis reason, a specific help desk service has been createdto offer pre- and post-sale assistance on the compositionof fund portfolios, performance analysis, marketconsultancy and management of adminstrativeprocedures.

ETHICAL SYSTEMSPWM, through Sanpaolo IMI Asset Management SGR, wasone of the first Italian operators to introduce products basedon “socially responsible” investments into its product range.SPWM currently manages 4 common funds which are partof the “Ethical System” of the Sanpaolo IMI Group: from’97, this included 3 common funds under Italian legislation(International Ethical Shares, Ethical Bonds, Foreign EthicalBonds) and to which was added, in December 2003, theEthical Venezia Serenissima fund. On 31 December 2003,the managed assets were equal to 867 million euro, or1.8% of the common funds managed by Sanpaolo IMI SGRand 1.4% of the total funds of SPWM.

Investment Process for Ethical FundsThe investment process is based on three key elements:

External selection process of investments- selection of investments on the basis of both positive

(inclusive principle) and negative (exclusive principle)criteria.Positive criteria aim to identify the presence of ethicalcharacteristics in the analyzed companies or entities.They verify:

- if the issuer is a nation, the safeguarding of humanrights, the commitment to settle conflicts and to createthe conditions for stable and pacific dialogue betweenpeoples and nations, and the intervention in support ofunderdeveloped countries or those afflicted by wars ornatural catastrophes;

- if the issuer is a company, the sensitivity demonstratedtowards environmental conservation, commitment toactivities and projects that can contribute to an improvementof quality of life, attention to quality and security of productsand to the health and security of workers.Negative selection criteria identify the three areasconsidered in contrast with ethical principles, byinvestigating:


- if the issuer is a state, the presence of an oppressiveregime, or the involvement in military action that wasnot conducted under the supervision of internationalorganizations;

- if the issuer is a company, the realization of a majority ofbusiness or profit generation through the production orcommercialization of weapons, tobacco, alcohol,genetically modified organisms or products harmful tohuman dignity or health, or the direct production orrealization of nuclear facilities.In this context, the best in class principle was introduced,allowing the combination of positive and negativeselection criteria that allow the identification ofcompanies that distinguish themselves within certainmarkets at risk (e.g. in the oil sector) for achievementson social/environmental themes.

In addition, Sanpaolo Wealth Management maintains opencommunication channels with some listed companies forthe purpose of sensitizing social responsibility andenvironmental sustainability practices in the light of applyingSoft Engagement.

Control SystemThe second pillar on which SPWM’s Ethical System is based isa system of ex-post control of investments.In fact, in order to ensure corrispondence of managementchoices with the ethical principles declared by the Funds, theBoard of Directors of Sanpaolo IMI SGR uses an EthicalCommittee, an advisory body independent of themanagement company.The functions of the Ethical Committee are handled by theassociation “Ethica --Association for Socially ResponsibleFinance” which is composed of:- His Reverend Eminence Cardinal Ersilio Tonini, Emeritus

Bishop of Ravenna, President of the Committee;- His Reverend Eminence Mr. Rino Fisichella, Rector of

Pontificia Lateranense University;- Prof. Padre Abelardo Lobato O.P., Rector of the

University of Theology of Lugano, Vatican representativefor human rights within the European Union;

- Prof. Luigi Lodovico Pasinetti, lecturer on economicanalysis at the Catholic University of Milan;

- Mr. Antonio Socci, Vice Director of RAI DUE;- Mr. Ernesto Olivero, founder and animator of SERMIG.

External AdvisorySince 2002, SPWM uses ethical benchmarks managed bythe company E-Capital Partner which fully respect theconstituent directives of the funds and those of theEthical Committee.For in-depth research required for analysis and

management activities, SPWM makes use of thecollaboration of two important external consultantssuch as the Italian company Avanzi and theAmerican company Kinder Lydenberg Domini, bothof the SIRI Group, which provide aqualitative/quantitative evaluation grid used by themanager in his/her investment choices.

Ethical Offer to Retail CustomersInternational Ethical Shares3

This fund primarily invests in shares of US currency, orJapanese Yen or other currencies of European countries(Assogestioni category: Other Specialty Share Funds).Ethical Bonds4

This fund invests in bonds or money marketsecurities traded in euro; the investments inforeign currency securities may not exceed 25%

of capital assets (Assogestioni category: OtherSpecialty Bond Funds).The underwriters of this fund have the possibility ofdonating the total or partial return to one or moreselected associations.Foreign Ethical Bonds 5

This fund invests in bonds or money market securities tradedin US dollars, Yen or euro (Assogestioni category: OtherSpecialty Bond Funds). Sanpaolo Venezia Serenissima EthicalThis fund primarily invests in bonds or money marketsecurities traded in euro; share investments do not exceed15% of total capital assets.The fund also pursues the goals of promoting andprotecting the historical, artistic and cultural heritage of theCity of Venice; within the realm of undersigned operations,the undersigner devolves a contribution to the “Cassa diRisparmio di Venezia Foundation” which is then directed toinstitutions and initiatives whose aim is the protection of the


aforementioned heritage. Particular interest is paid to thenecessities of the “Teatro Fenice di Venezia Foundation” andto that of the “High Studies on Art Foundation”(Assogestioni category: Mixed Bond Funds).

Donation modalitiesThe possibility for undersigners to donate part of theproceeds to the Ethical Bonds fund is being contemplated,and in any case Sanpaolo WM has committed to donate,on a yearly basis, at least 0.01% of the overall capital assetsof the Ethical Bonds, Foreign Ethical Bonds andInternational Ethical Shares funds, as well as a part of themanagement commission of the Venezia SerenissimaEthical Fund . The Associations which received thesedonations in 2003 were a total of 176, in addition to thefinancing of 8 specific initiatives7, and which all togethertotalled 126 thousand euro.

Ethical Offer to Institutional CustomersSPWM offers its institutional customers, through SanpaoloIMI Institutional Asset Management, the following services:- capital asset management;- advisory and SRI (Socially Responsible Investment) portfolio

optimization;- control system.Sanpaolo IMI Institutional Asset Management currentlymanages Socially Responsible Investments on behalf of fiveinvestors, including the Cariplo/GEO Foundation, thepension fund Previambiente and religious entities for a totalof 74 million euro.The control system for management makes use of the sameEthical Committee described within the Ethical System.

SRI Initiatives in 2003During 2003, SPWM participated in thematic seminars (e.g. “Financeand Ethical Values: Prospectives” at Carisbo) and international workinggroups such as the United Nations program (UNEP) sensitizing publicopinion on the theme of Socially Responsible Investments.UNEP (United Nations Environment Program) is an initiative launchedby the United Nations in 1972 with the objective of encouragingsustainable development. From the beginning of its activity, UNEP hasworked in close contact with companies in the development ofmanagement strategies that respect the environment and society. Thisled to the birth of a partnership in 1992 called UNEP FI between UNEPand certain financial institutions --partnerships which in the span of 10years have collected the adhesion of more than 275 highlyrepresentative companies on a global scale.The mission of UNEP FI is to promote the adoption of sustainable andenvironmentally friendly practices within financial institutions and at alllevels of operation, even in the selection of investment opportunities.Within UNEP FI, four working groups were created:- Asset Management- Climate Change- Environment Management, Reporting & Indicators- Financial System, Global CompactIn detail, the Asset Management working group is composed of 12primary companies for a total of 1.6 billion US dollars of managedassets and including the only Italian company, SPWM.Amongst the numerous initiatives started by the Asset Managementworking group, there are a few that are particularly worth noting. Forexample, assuming that an effective corporate governance and theapplication of principles of social responsibility are prerequisites forbusiness sustainability, the working group has launched a project withthe objective of:- - identifying corporate governance practices and relationships

between shareholders and companies in various markets;- quantifying the existing correlation between a management style

based on sustainability and economic results;- highlighting investment opportunities and the risks associated with

climate change and the conservation of biodiversity.The results of this analysis are particularly significant for theimplications they may have on investment processes that are appliednot only to ethical funds, but also to traditional ones.

Market Research in 2003In order to understand retail customers orientations with respect toSRI and to offer products in accordance with customer needs,SPWM has commissioned, in 2003, specific market research to thecompany Eurisko-Prometeia.

3.The first ten shareholdings held by Sanpaolo Ethical Shares as of 9 February 2004, are: MicrosoftCorp Usd, Intel Corporation Usd, Vodafone Group Plc Gbp, Hsbc Hld /lon Plc Gbp, Bp Plc Gbp, CiscoSystem Usd, Glaxosmithkline Gbp, Nokia Ab Oyj Eur, Shell Transport Trad. Gbp, American Intl.groupUsd.

4.The principal issuers on which the Ethical Bond funds invest are reported here in synthesis –Governmental: Belgium, Germany, Greece, Holland, Spain – Internationals: KFW, BEI, CAF, IADB -Corporate: Rabobank, Ing, Telecom Italia, Unicredito, Aviva.

5.As of 31/12/03 the managed assets were equal to 867 million euro.6.Gruppo Abele, Don Gnocchi, Lega Contro i Tumori, Sermig, Opera di San Francesco, Legambiente,

Amu, Banco Alimentare, Aism, WWF, Ai.Bi., Fanep, Opera di Santa Teresa, Adventum, A.N.T.,Cometa, Fondazione Vita

7.Educational project in Burundi, Project for priests in Benin, Professional School “La S. Biagio Statue” inSenegal, Casa Famiglia for children in need in Romania, “Obra social PP. Dominicos Letràn” in Cuba,support for activities tackling HIV/AIDS in St. Joseph’s Hospital in Uganda, contribution for aid in Georgia.


In the second half of the 90’s -as a result of a series offactors based upon the brusque reduction in interest ratesthat originated from the convergence process towards thesingle European currency and the rise of global stockexchanges-- a considerable shift was seen in the savingspatterns of families from government securities toinvestments in shares and from these to corporate oremerging market bonds.Among the reasons that induced a portion of savers to orientthemselves towards these choices, the need, on their part, tomaintain a high nominal return from public debt securitiesduring a period of high inflation certainly played adetermining role. As a result, as these securities reached theirexpiration dates, investor demand spontaneously moved inthe direction of other financial products, such as corporate oremerging market bonds which offer tempting returns.Given the fact that asset management products were notyet particularly well-developed, these corporate andemerging market bonds were widely successful in the retailsector; this was amplified by information spread byfinancial newspapers.The peculiarity of the Italian financial market, characterizedby a more restricted number of issuers with respect to otherEuropean countries that were also affected by the samegrowth in demand for corporate bonds, has determined agreater concentration level in terms of both issuers andindustrial sectors, with the added effect of reducing thepossibility for diversification for investors that intend tolimit their choices to national issuers.Another peculiarity of our system is the fact that, becauseof the different fiscal and legislative regulations, manyItalian issuers have preferred to resort to corporatechannels and stock exchange listings in foreign markets.This phenomenon --combined with the use of complexcorporate structures, often with offshore spin-offs whichare allowed by the European law, on the part of Italianindustrial groups-- has reduced transparency of both theissuers and the single emissions.It is therefore in this context that our Group has had to dealwith the extremely strong demand for financial productsfrom retail customers who are not always willing, for thereasons stated above, to direct their choices towards assetmanagement despite the fact that the Sanpaolo IMI Group--in its relationship with customers-- has always preferredthis typology of products which, with respect to shares orbonds of single issuers, allow a better and moreprofessional diversification of risk.

Single Cases The Cirio and Parmalat cases, despite the fact that they hadsimilar effects on savers, are very different.From the industrial model and financial solidity perspective,the two companies were perceived differently: the CirioGroup, because of a very aggressive acquisitions policy, andits financing through the massive use of bank debt, wasconsidered a company characterized by a delicate financialsituation but at the same time detaining a strongcommercial component through the possibility of exploitingwell-known international brands that were dominant intheir sector, such as the agricultural/food sector that wasnot affected by recessions.The Parmalat Group, which was also in a phase of constantgrowth through national and foreign company acquisitions,projected, through its own information documents directedat the market, the image of an apparently solid financialposition: the substantial net debt was balanced by relevantfinancial assets that were certified in the consolidatedfinancial statements.The different financial position of the two groups wasfurther validated by a different evaluation of theirrespective creditworthiness. While Parmalat was attributeda BBB rating (according to S. & P) which indicates lowinsolvency risk, the Cirio Group was not rated. Thesubsequent discovery that asset line items declared in theParmalat financial statements were in fact totally non-existent makes this a fraudulent case of completelyunpredictable proportions.

1. CIRIOGiven the effects of the Cirio insolvency, declared inAugust 2003, on its customers- savers, Sanpaolo IMI,starting in October 2003, was the first of Italiancredit companies to begin verifying whether theinvestors, when buying a bond - had adequateknowledge of the level of risk that was inherent inthat security; this was done without hiding behindthe current legal prescriptions.It was therefore decided to re-examine theacquisition operations of this security on a case-by-case basis, giving particular relevance to substantialfactors that could trigger the emergence of cases inwhich acquisition operations could have been notconcretely adequate to the profile of the customer,while keeping in mind the propensity for risk of thelatter in the course of his/her banking relationship,as well as the age and education level of the subjectand the composition of his/her portfolio at the timeof the bond negotiation.The company organ entrusted to perform these

Problems of assetadministration

COMMITTEE TO DEFEND

SANPAOLO IMI GROUP

PARMALAT BONDHOLDERS


Based on the initiative of a few customers of the SanpaoloIMI Group who were damaged by the insolvency of theParmalat Group companies, on 2 February 2004, the“Committee to defend SANPAOLO IMI Group Parmalatbondholders” (in short, Sanpaolo IMI Parmalat BondholdersCommittee) was constituted in Turin.To cover the office of Chairman --which by Charter must bechosen from individuals of recognized economic-financial orlegal competence and experience, and who do not hold titles inthe credit or financial sector-- Prof. Paolo Vercellone, the eminentmagistrate from Turin, was called.The goal of the Committee is to defend and uphold the rightsof the Sanpaolo IMI Group customers that were in possession ofParmalat bonds (as long as they were deposited within thebanks and companies of the Group), assisting and eventuallylegally representing the Adherents with respect to the ParmalatGroup companies.Sanpaolo IMI has defined an agreement with the Committee,committing to supply both the logistical and organizationalsupport needed for the management of the Committee,including the activation of a toll-free number, 800-980-002, andthe Internet site cpbclientisanpaoloimi.org, as well as financialsupport in the form of grants for further needs and includingcosts for the assistance of external professionals in the legal,fiscal and accounting fields.Adhesion to the Committee is free, as is withdrawal, anddoes not involve any cost nor affects any autonomousactions that the Adherent may wish to exercise againstthose he/she considers responsible for any sustaineddamages. In order to adhere to the Committee,customers may contact any of the bank branches orGroup promoters, through which it is possible toobtain full documentation. On 5 April 2004, over22,500 customers had adhered to the Committee.

evaluations is the Technical Audit Committee whichoffers wide guarantees of autonomy since it iscompletely extraneous to operational processes andis primarily composed of independent directors, inaccordance with that required by the autodisciplinecode for listed companies. The evaluation andrefund activity, where required and for singlecustomers (the potentially affected investors areabout 5,800 at Group level), has already beenstarted and is currently in operation.

2. PARMALATShortly after the emergence of the Parmalat insolvency,declared towards the end of 2003, Sanpaolo IMI andother banks of the Group seeked to reduce, as far aspossible, the distress caused to their own customers(overall the affected portfolios were about 24,700 for theentire Group) by this exceptional and unpredictable event.For this purpose, Sanpaolo IMI has favorably acceptedthe creation of a committee of customers detainingParmalat bonds (see the relevant text box), initiallycreated to freely provide the assistance andrepresentation needed by customers to obtain theadmission of their credit in bankruptcy resulting fromthe legal procedures applied to the companies of theParmalat Group. In addition, the Committee, inaccordance with the terms of its Charter, may alsocarry out --always freely and without charge to anyadherents-- damage claims with respect to individualswho, due to the offices held and functions undertakenat the insolvent companies, may be held responsible forthe economic bias subjected to the investorsthemselves.In order to support the actions of the committee,Sanpaolo IMI has decided to provide the latter withlogistical assistance and adequate financial support,while guaranteeing its total managerial autonomy.Naturally, adherence to the activities of the Committeedoes not preclude the single customer from providingfeedback to the Bank on any failures in adequacy of theeffected investment. In this case, the same mechanism ofguarantee adopted for the Cirio bonds will be activated,so that the usable evaluation criteria, because of thepositive credit rating that Parmalat bonds detained, willfocalize attention not so much on the propensity to risk ofthe customer but more on the quality of his/her portfolio,in terms of an adequate level of risk diversification. If casesemerge where the investments of our customers turn outto be excessively concentrated on Parmalat as an issuer,these will be individually examined in the light of anequitable definition of the specific position.

(


ARGENTINA

The association for the protection of investors in securities fromArgentina (TFA- Task Force Argentina) acts through a mandate of

450,000 Italian investors who retain a nominal value of approx. 13 billioneuro, equal to over 90% of the total investment of Italian savers which isestimated at 14 billion euro. TFA works as a non-profit making associationwith costs completely charged to the adhering banks and including all thebanks of the Sanpaolo IMI Group.This allows the association to be accredited with respect to issuers fromArgentina by acting as a reference point of major relevance within themeetings for debt restructuring.TFA has discussed and negotiated with numerous issuers from Argentina andtheir relative advisers, attempting to bring weight to the defining discussionsof the issuer’s restructuring plans.TFA continues its sensitization activities with the main national andinternational authorities (Italian government, European Commission, IMF) inorder to exert pressure on Argentina and induce it to revise therestructuring conditions proposed up until today.While remaining aware of the gravity of Argentina’s crisis, the objectiveremains to protect the invested capital, even if with a fair lengthening ofexpiration dates and a significant reduction in coupon interest.Updates relative to the association, from 19 May 2003, are available onthe ad hoc Internet site, www.tfargentina.it.

(3. GIACOMELLIThe insolvency of the Giacomelli Group had a lessrelevant impact on the Group’s customers fromthe volume perspective, given that only 480positions were affected.In accordance with strategy of the whole bankingsystem, Sanpaolo IMI will provide freerepresentation to customers in possession ofthese bonds in order to obtain admission inbankruptcy for the credits with the insolventcompanies.In addition, for these securities, customerpositions which could have had potentialshortcomings in the adequacy of the singleeffected investment will be re-examined --usingthe same mechanism described above.

In the course of 2003, the total amount of refunds fromthe Group Banks was equal to 1,012,705 euro, whileappeals from unsatisfied customers to the BankOmbudsman were 263.

Opportune corrective actions

Accepted complaints

Examination

Rejected complaints

Ombudsman and/or judicial authorities

Customer branch( (complaintsoffice

Accounts & deposits

Investments

Financing

Payment systems

1,389

1,589

1,157

1,529

1,747

1,596

1,031

1,221

+25.77

+0.44

-10.89

-20.14

20032002 % Change

Direct Banking

Anatocism

Other

Total

357

47

490

6,558

45

67

330

6,037

-87.39

+42.55

-32.65

-7.94

20032002 % Change

Complaints


Retail customers: objectives for 2003

OBJECTIVES ACTIVITIES & RESULTS

Development of commercial policiesb a s e d o n c u s t o m e r n e e d s .Imp lementa t ion o f the C l i en tFinancial Planning project througha vast training plan intended forconsultants and network agents,i m p l e m e n t i n g t h e I T t o o l sconcerned.

Growing use of direct channels forrepetitive operations which do notrequire any interaction with the Bankstaff. On the one hand, this allowscustomers to use basic banking servicesindependently and without timeconstraints and, on the other hand, thisgives the bank staff the opportunity tochiefly focus on the analysis of customerneed and relational aspects.

✓ Finalization of three operational tools: the manual“Investing Today --Customer Financial Planning”, the“Workstation”, portfolio “benchmarking” andcommercial analysis tools for customers (all availablethrough the Sanpaolo Network and currently beingspread to the other Networks).

✓ Training plan for the diffusion of the Investment Policyprinciples and knowledge on the new operational toolswhich included the issuing, between May andDecember 2003, of about 8,000 classroom days acrossthe Sanpaolo and Sanpaolo Banco di Napoli network.

✓ Significant training investments for the developmentof specific professionalism;

✓ A new service model directed at retail customers andcompleted at the end of 2003;

✓ A new Private banking model developed in thecourse of 2003 through:

• The capillary presence of specialized structuresmanaging the segment;

• The widening of the range of dedicated productsand services.

✓ a 23% growth rate in multi-channel contracts (Internet,phone and mobile banking) with respect to 2002;

✓ a doubling of operational activity (1,000,000 operationsincluding wire transfers, bank transfers, mobile phonerecharges, etc… in 2003);

✓ a 12% increase in securities trading;✓ Internet, phone and mobile banking extended in June

2003 to the customers of the Sanpaolo Banco di NapoliNetwork with a result --at the end of 2003-- of 60,500multi-channel contracts and 80,500 operations;

✓ Activation of the service of post office paying-in slippayments for contracted companies;

✓ Attention given to the education of customers to diffusethe use of channels alternative to the bank teller for theexecution of routine banking transactions.

Creation of branch organizationalmodels special ized in customersegments: creation of differentiatedareas within the same branch, basedon specif ic modules combiningd i s t r i bu t i ve e f f i c i ency w i th apersonalized commercial approach(personal consultants).


LOANS TO COMPANIES, INSURANCE COMPANIES ANDFINANCIAL INSTITUTIONS, BROKEN DOWN BYCATEGORY AND INCOME BRACKET(excluding non-performing loans)

BREAKDOWN OF LOANS PORTFOLIO TO COMPANIES BY SECTOR(exluding non-performing loans)

Othercompanies 67%

Large to medium(sales over 50 mil. €)25.8%

SME with sales from 5 to 50 mil. €

19.5%

SME with sales below 5 mil. €

14.8%

Family businesses6.9%

Insurance, financial institutions and other

8%

Agriculture and food industry

9%

Manufacturing27%

Construction12%

Commercial 4%

Services34%

Other14%

Foreign companies9%

Large companies16%

Corporate customers Customer ProfileThe companies with loan commitments to the banksof the Group are about 530,000. The total issuedloans to non-financial companies, Italian or foreign,to insurances and other financial institutions totaledalmost 82.5 billion euro. Detail of the portfolio isprovided in the graphic table.

672003 Social Report – Corporate customers

In the course of the last three years, Sanpaolo IMI hasbrought important changes in the organizationalmodel, aimed at building a personalized relationshipwith customers, and increasingly based onprofessionalism, knowledge of the client’s needs andenriched with greater advisory contributions.For this purpose, in the second half of 2003, theorganizational model based on specialization, alreadytested in Sanpaolo IMI, was extended to SanpaoloBanco di Napoli: this process led to the creation of anetwork dedicated to companies that is todaycomposed of 151 branches and 63 teams onsecondment, with a total of 3,000 dedicatedresources, of which 700 managers—in other wordsthose individuals whose task is to directly handle therelationship with the client and therefore take care ofall the financial needs of the company.This process was supported by careful externalcommunication: in the months preceding the launchof activities, informational letters explaining thechanges that were affecting the company’s branch, aswell as any repercussions these interventions may haveon their daily relationship with the Bank, were sent to

all companies customers of operational points thatwere affected by the organizational variations.External communication activity was accompanied byimportant internal coordination work, both throughmeetings with operators in order to share pursuedgoals and chosen strategies and to predict anypotential operational impacts that could develop, aswell as through the creation of a task force whose aimwas to support the branches in the period immediatelyfollowing the integration. Internal communicationwas also linked to the extension of informationsystems supporting daily management of the clientand to training on the new procedures in order toalign and homogenize competencies. Particularattention was given to the training of resources on theprocesses of credit management. To this end, thecredit policy of the Sanpaolo network was extended tothe Sanpaolo Banco di Napoli resources; this policy iscontained in a document called, “Guiding Principles

Proximity and specialization

North WestBranches: 87Teams on secondment: 33

SouthBranches: 23Teams on secondment: 12

SardiniaBranches: 3Teams on secondment: -

North EastBranches: 8Teams on secondment: 2

Abruzzo-MoliseBranches: 5Teams on secondment: 1

CentreBranches: 15Teams on secondment: 4

Tosco-EmilianaBranches: 8Teams on secondment: 4

SicilyBranches: 2Teams on secondment: 7


THE SMALL BUSINESS SEGMENT

The small business segment represents anextremely significant productive reality in the Italianmacro-economic scenario. 96% of over 4 millionItalian companies have dimensions that areclassifiable as small business (about 3.9 millioncompanies). Agricultural companies (over 700,000)and self-employed workers and professionals withVAT registration must also be added to these.The added value generated by small business productiveactivities largely surpasses 50% of the national total. Inaddition, this segment is in constant growth due to theincreasing use of self-employment which between 1996and 2000 grew at a 2% annual rate.In order to maximize the professionalism andspecialization of the resources dedicated to thesegment, a national network exclusively dedicated tosmall companies and professionals was created,consisting of:- Specialized managers present in all the mainoperational branches: this is a training project which willinvolve about 700 resources with the aim ofstrengthening the technical/professional and commercialqualifications of the professionals dedicated to thesegment;- Area structures with the function of service qualitycontrol, analysis of demand evolution, operationalsupport and interface reference with the rest of theNetwork;- a central function dedicated to the definition ofcommercial strategies, the monitoring of the evolutionof results, professional development of the Network’sresources, the constant drive to perfect the range ofoffered products and services, and coordinationactivities of the Network.This process of greater value creation also includesthe Quality Agriculture Project (a complete offer ofspecific products for the agricultural segment,based upon the various productive lines),collaboration with professional associations,category associations and, last but not least,the loan consortia (Confidi), for thedevelopment of initiatives in favor of thethose adhering to them.

for Credit Management in the Central Management ofthe Sanpaolo Network”, in which the “base” normsfor credit management are listed with the objective ofproviding a “risk vocabulary” that is consistent acrossthe two banks.In the course of the last quarter of 2003, a project forthe extension of the branch specialization model wasstarted through the creation of company branches inthe network banks of the North East: the firstoperational phase is forecast for March 2004. Also inthis case, using similar initiatives to those described forSanpaolo Banco di Napoli, maximum attention will begiven in order to guarantee, even when the change inthe operational systems of the branches will takeplace, a qualitatively excellent service to the client andcontinuity in the relationship.

*In Sanpaolo IMI, the segment includes companies and family businesses with:• Maximum revenue of 1,050,000 euro.• Number of employees equal to or below 20• Loans below 130,000 euro.These criteria are combined with subjective elements, such as the entrepreneurial style, the structuralcharacteristics of the company, the degree of IT use, the types of information and consultancy, theusage modalities of financial services.

(Pier

o O

ttavia

no


As illustrated in the company mission, the Sanpaolo IMIGroup is committed to promoting sustainabledevelopment of the entrepreneurial system as well as localeconomies, with particular focus on small- to medium-sized companies which constitute the majority and thebackbone of Italian entrepreneurial activity. The Group

pursues these objectives both by granting loans, whichoccurs according to the criteria defined in the Loan Policyand the Commercial Policy, and by promoting and activelyparticipating in entrepreneurial projects and companieswith risk capital—primarily through the activitiesconducted by Sanpaolo IMI Private Equity.

Activities favoringentrepreneurial and localeconomic development

Mission

• Agreements between Group Banks and the loan consortia (“Confidi”)of Northern and Central Italy;

• Agreements of Sanpaolo Banco di Napoli with the Confidi di Napoliand those of Caserta;

• Carive has agreements with 31 Confidi and has concluded 3,500operations in 2003.

• Banca Popolare Adriatico has cooperated with 66 Confidi and hasrealized, in 2003, 2,000 financings.

• Carisbo has issued, in 2003, over 1,400 mortgages on the basis of 54partnership agreements with the Confidi;

• Cariparo has concluded, in 2003, almost 4,300 operations on the basisof conventions stipulated with 55 Confidi

• Agreement with the wine district of southern Piedmont;

• Agreement with the Consortium for the protection of wine of theFranciacorta district;

• Agreement with the Industrial Union and Confidi of Como for thesupport of the silk district, with particular attention paid todevelopment needs

Product line of funds with territorial focus:

• Fund promoting the risk capital invested in southern Italy with atotal capital of 100 million euro;

• The North West Company Fund, with the objective of collecting100 million euro;

• The Centre Company Fund;

• The pan-European E.A. Partners fund with CDC Ixis and BayernLB with a capital target between 300 to 500 million euro.

• Partnershipagreements with theloan consortia(“Confidi”),aggregation organsbetweenentrepreneurs thatfavor access to creditfor companies.

• Support for districtactivities andexcellence andinnovative centers.

LOAN POLICY

COMMERCIAL POLICY

• Projects supportinginitiatives aimed atsectors, territorialareas or specificprojects

Promotes andmanages funds thatinvest risk capital insmall to medium-sized companies tosupport theirdevelopment.

RISK CAPITALINVESTMENT

ISSUINGOF CREDIT

“...perform financial and creditactivities through services ofexcellence directed at...thecommitment for sustainabledevelopment of theentrepreneurial system, inorder to contribute to theoverall economic growth ofthe Country...”

ACTIVITY ACTIONS EXAMPLES

SANPAOLO IMIPRIVATE EQUITY


Banca IMI, the Group’s Investment Bank, is one of theprimary Italian financial operators, with a strong presencein equity and bond placement, specialised financialoperations and securities’ trading.The Bank performs financial service consulting forcompanies; risk and debt capital collection activities;tading on its own and for third parties on a wide range offinancial products both on the regulated financial marketsand out of the market; structuring and completion ofinvestment products for retail clients; and riskmanagement products for companies and local bodies. Inaddition, it offers accessory services, including researchactivities, and clearing and settlements on the mainnational and international markets in conjunction withservices of securities custody and trustee bank.In addition to Italy, with registered offices in Milan andoffices in Rome, Banca IMI is operational in London,Luxembourg—with IMI Bank Lux—and New York—withBanca IMI Securities Corporation.Banca IMI activities are organized in two business areas:“Global Markets” and “Corporate Finance and CapitalMarkets". The Operations Area completes the structure: itsupports the Bank’s operational activities.

Reorganization of the Research Area In September 2003, Banca IMI decided to redesign theproduction and distribution of its financial analysisactivities by internally distinguishing commercialcommunication activities or more generally “salesliterature”—aimed, in other words, at directly andexplicitly supporting the performance of investmentservices—from that which continues to be defined asresearch activity, characterized by the presence of financialanalysts independent of operational departments.To the latter typology belong the following research areas:I) global asset allocation analysis; ii) macroeconomic studies;iii) equity segment analyses; IV) retail segment studies.In order to underline the net separation of the Researchstructure with respect to operational areas, theorganizational solution involving direct reporting to theManaging Director, in place of the previous reporting tothe managers of the Global Markets Area, was adopted.The following belong to other forms of communication of“commercial nature” (sales literature): I) credit strategyproducts supporting activities/debt in the primary market;

ii) fixed income strategy products (quantitative-statisticalanalysis products on the volatility and correlation of thevariables that influence the course of the financedinstruments).With regards to these activities, the organizational choicethat was made was to reallocate some human resources inthe business areas as “strategists” in direct support of thesales activities of the Bank.In synthesis, the reorganization guidelines of the researcharea were:

1. A distinction between “research report” (assigned to the“Research” Unit) and “sales literature” (assigned to theoperational departments of the Global Markets Area);

2. The separation between “internal” analysts (meaningserving operational departments) and “external orindependent” analysts (meaning financial analysts inthe common sense of the term);

3. A differentiation between the contents, the editoriallayout and the distribution modalities of “salesliterature” with respect to “research reports”;

4. The possibility of differentiated compensation for the“internal” analyst (as an employee of the operationaldepartment) with respect to the “independent” analyst(subject to the constraints of the US norms, the Consobprovisions, the code of conduct and the best practice ofthe subject matter).

Community InitiativesBanca IMI regularly supports various institutions involved involunteer and solidarity work. In the last few years, inparticular, the Bank has supported the association Comunità diSant’Egidio, Save the Children and Médecins sans Frontières,both through direct contributions as well as the commitmentto spread their projects and values. In this light, the Bankregularly sponsors the weekly “Vita” (Life) periodical,dedicated to volunteer work and the non-profit sector.


Commercial Policy

OUR RELATIONS WITHTHE ARMAMENTS SECTOR

In accordance with the constitutional principle by which Italyrejects war as a means of offense to the freedom of other

peoples and as a means of resolution of internationalcontroversies, the Sanpaolo IMI Group has decided to limit itssupport exclusively to goals directed towards the defense of theCountry and the protection of its citizens, tasks that the Groupconsiders to be indispensable for a democratic State.It has therefore decided—applying rigorous evaluation criteriafor every single proposed operation—to limit financing ofmilitary supplies exclusively to operations from and towards“Countries that are members of the European Union and/orNATO, i.e. to operations accounted for by specificintergovernmental agreements, authorized in accordance withLaw 185/90, and which are not in contrast with theConstitution, the international duties of Italy and the State’smain safety interests, the struggle against terrorism and themaintenance of good relationships with other Countries.” InSeptember 2002, the Group Loans Committee, supportedby the Ethical Committee, drafted an internal code ofdiscipline which regulates this subject in order to align theorientation of all companies of the Group with theillustrated guidelines.

(

The path taken for revising the mechanisms for loangranting, started in 1999 with the issuing of the LoanPolicy and continued with the creation of specializedcompany branches, ended in 2003 with the introductionof a Commercial Policy on the part of Sanpaolo IMI andSanpaolo Banco di Napoli.The Commercial Policy represents a real and actualstatement of values—a reference to principles that guidethe specialists of the company branch networks that arespread across the territory, and which each day mustunderstand client needs and propose “tailor-made”solutions. This should be done however, while taking intoaccount the principles for risk evaluation and pricing. Allof this in a context requiring rapid, professional andcompetent responses to increasingly complex needs.Today’s market, in fact, is characterized by a relationshipwith a counterparty that is more and more evolved andinformed, and which uses bank services and products inan instrumental fashion for his/her core business. To actupon the values illustrated in the Commercial Policytherefore allows homogeneity in the behaviors of thesingle operators, favoring group spirit and collaborationand converging towards a common respect of the ethicalvalues recognized as fundamental to the Bank.In order to present this statement of values and servicesand to draw conclusions on a period characterized byintense changes, at the end of October 2003, over 1,500representatives of the Sanpaolo and Sanpaolo Banco diNapoli Networks and the managers of the companysector met in a Convention in Turin. This was an importantinitiative for socializing and represented an occasion toshare the values that are common to the Group.


Globalization has activated competitive forms that aredifferent from those in the past: competition does nottake place exclusively between companies, but alsobetween aggregates, groups of companies andincreasingly between territorial area-systems. The capacityto compete on a global level also depends on the qualityof local development; local systems that are economicallyand socially developed allow companies producing goods,as well as financial institutions and the publicadministration, to increase their competitive capacity.From this point of view Sanpaolo IMI faces twointerlocutors in particular: the Confidi and the industrialdistricts.

The Consortia for Collective Credit Guarantees (Confidi)The Confidi are associations for entrepreneurs which, byoffering supplementary guarantees, favor the access toloans by member companies and allow for morecompetitive conditions. Collaboration between Banks andthe Confidi can take on the role of a true engine for thecapacities of small- to medium-sized companies inobtaining loans, even through the structuring of specificfinancial instruments.With this viewpoint, the following primary initiatives areillustrated:

• A specific project of the Sanpaolo IMI Group is in theprocess of being defined with the major ConfidiConfindustriali in Northern and Central Italy with the aimof favoring access to loans by small- to medium-sizedcompanies operating in the regions of Piedmont, Valled’Aosta, Lombardia, Liguria, Veneto, Trentino, Friuli,Emilia Romagna and Tuscany. The initiative accounts forthe launch of an interregional bond through thesecuritization of the generated loan portfolio. Financing,issued from the Bank Networks of the Group present onthe referenced territories and by the Cassa di Risparmiodi Firenze, with which the Group has a close partnership,is supported by guarantees of the major ConfidiConfindustriali in Northern and Central Italy for apercentage between 50% to 80%. This financing, witha term of up to five years and with the possibility ofextremely flexible use up to the extent of the total, aredistinguished by the manifold of allowed aims such as,for example, research, technological innovation, training,and internationalization processes. This program thataims at responding to all the financial needs connectedto company growth and, at strengthening the weight of

debt in the medium to long term, allows for a positiveinfluence on the financial structure of the companies.

• Sanpaolo Banco di Napoli has stipulated agreements atthe end of 2003 with the Confidi of Naples and Casertathat will involve a wide range of financing in the short tomedium term (with maximum values set, in theagreements with the Confidi of Caserta, at 400,000 eurofor the short term and 260,000 euro for the mediumterm).

• Carive, in 2003, has concluded 3,500 operations in favorof artisans and small entrepreneurs associated with theConfidi: the stipulated conventions include 31Guarantee Consortia, of which 14 only in the province ofVenice.

• The Banca Popolare dell’Adriatico, which acts prevalentlyalong the Adriatic coast—an area strongly characterizedby the presence of small industrial, artisan andcommercial operators—cooperates with 66 Confidi andGuarantee Cooperatives which just in the medium tolong term department has allowed the issuing of 2,000financing contracts in 2003.

• Carisbo has issued, in 2003, 1,413 mortgages for almost81 million euro, on the basis of 54 agreements forcollaboration with Confidi in the commerce, services,agriculture, industry, crafts and cooperative sectors.

• Cariparo, in 2003, has concluded 4,286 operations for atotal of about 230 million euro on the basis ofconventions stipulated with 55 Guarantee Bodies, whichrepresent the category associations present across thewhole regional territory.

Within the realm of collaboration with the Confidi,the process for the launch of a Sanpaolo IMIfinancing product, named Yes Capitalizzazione, isalso underway; the latter plans to indirectly favor thestrengthening of assets by supplying liquidity to

Credit and local economicdevelopment

Cont

rast

o


Cont

rast

o


The

Imag

e Ba

nk

small- to medium-sized corporations which are usingor plan to implement a capitalization plan. Theintervention will be reserved to operations inaccordance with the Confidi and which guarantee atleast 50% of the exposure.

The industrial districtsThe industrial districts can also guarantee a model ofexcellence since they are connected to the capacity of

operators to “network”. The economic performance of thedistricts is based, in fact, on the presence of projects commonto different groups of companies, a leadership capable ofstrategically leading common actions, a base of commonshared values and, last but not least, the development of aspecific district identity. Several concrete advantages arederived, such as the intensification of knowledge exchange,the stimulus to start highly innovative projects and thecompetitive growth of the companies in the area.


The commitment of the Sanpaolo IMI Group to thedevelopment of the local economy, in addition to theabove-mentioned collaboration with the Confidi and thesupport for industrial districts, is visible in a series ofinitiatives and projects that are aimed at specific sectors orat well identified territorial areas. The main initiatives ofrelevance are listed below:

• the underwriting—in December 2003—of adeclaration of intent for the transfer of EIB provisionfinancing to the companies of the automotive sectorthat collaborate with Fiat Auto. The objective is to favorsmall- to medium-sized companies, headquartered inthe most active provinces in this sector, in therealization of restructuring and productivediversification projects. In the case that the projectspresented to the companies are directed towards themaintenance of employment levels or to create new jobpositions, the EIB Board of Directors predicts that theintervention percentage may grow to up to 75% of theinvestment, with respect to the normally applicablethreshold of 50%.

• A series of financing initiatives directed at theagricultural/food sector, such as “Agrimutuo”. Thelatter is part of a larger project named “QualityAgriculture”, and is meant to support thegastronomical “Made in Italy” statement not only at anational but also at a global level. An objective which isalso at the basis for the partnership with the Slow FoodAssociation and which, in November, witnessedSanpaolo Banco di Napoli as a sponsor of theInternational Slow Food Prize for the protection ofbiodiversity in Naples;

• the underwriting, in October 2003 in Venice, of anagreement with which EIB assigns Sanpaolo IMI,trhough Sanpaolo IMI Internazionale, a first tranche offunds (about 100 million euro) directed to financingprojects and companies of small- to medium-size inCentral-Eastern Europe. The financing of EIB provisionmay also affect local small- to medium-sized companiesin the process of internationalization anddelocalization, as well as projects with goals for theprotection and improvement of the environment, themore rational use of energy, and the completion ofsmall- to medium-sized infrastructures.

• The organization of a very large loan — syndaceted bya pool of ten banks—in favor of Acquedotto Pugliese,directed to the start-up of investment and developmentprograms foreseen in the three-year plan of thecompany and having as objective the strengtheningand modernization of the plants managed in Apulia,Basilicata and Campania;

• Financing of the “short sea shipping” and “door-to-door” services promoted by the Grimaldi NapoliGroup. This Group is attempting to build a networkconnecting the harbors of the peripheral areas ofEurope and the Mediterranean in order to provide anincentive for automobiles to board ships andcontribute to the European Community’s program forthe transfer of traffic from roads to sea transports,with the benefit of reducing pollution and trafficcongestion (the “Sea Freeways” project).

• The underwriting of the “Agreement Protocol for thefacilitation of Access to Ordinary Credit and CapitalMarkets in the Sicily Region” on the part of Sanpaolo IMIand the State Commissioner of the Sicily Region. Theprimary objective of this protocol is the improvement ofloan access conditions and the realization of economicconditions favoring the activation of new entrepreneurialinitiatives, aimed at consolidating and developing theproductive system already present in the region, andthinning out the burocratic process in order to ensurequick timing (not higher than 30 days after thepresentation of the application) in handling financingrequests presented by entrepreneurs, while limiting tothe greatest degree possible the requirement ofadditional documents and/or requests;

• Support for the “Start Cup Federico II” initiative,promoted in conjunction with the Università degli Studidi Napoli “Federico II” which rewards entrepreneurialideas and projects in the Neapolitan territory and whichare based on university research activities;

• The underwriting of an agreement betweenPadovafiere and Cariparo for the activation of anintegrated group of services and the availability of ateam of specialists in favor of companies of the NorthEast, with the objective of providing support forinternationalization strategies.

In line with the highlighted projects, and directedtowards specific sectors and territories, areinterventions—operating mostly using credit ceilings—created by the banks of the Group to counter criticalevents or exceptional circumstances that affect therespectively referenced territories. In this area, theinterventions of Cariparo in response to violent hailingat the end of August 2003, as well as the long periodof draught, are highlighted. That included theactivation of specific lines of credit to sustain thefinancial necessities of damaged operators; in addition,in October 2003, a specific credit ceiling was allocatedby Carive to favor agricultural companies damaged bythe draught (a total of about 120 operations for a totalof 4.5 million euro).


Sanpaolo IMI has an important role for the economicdevelopment of its operational areas also through acquisitionactivities of risk capital: by selecting worth-notingentrepreneurial initiatives, it holds the role of fundamentalpartner for the development of companies, which in turncreate employment and economic welfare in the referencedareas. This is particularly obvious in the case of recentlyconstituted companies and in those with high potential.Sanpaolo IMI Private Equity also presents itself as a referencepoint in the Italian market of private equity and its missionconsists in promoting and managing closed-end investmentfunds that invest in risk capital of small- to medium-sizedcompanies, supporting their development, aggregation andre-organization. Activities are conducted in close collaborationwith the Bank Networks in order to guarantee the needs ofdifferent territories and the investment teams themselves arewidely spread over the whole national territory (Bologna, Turin,Milan, Treviso, Rome, Naples).The strength of a Group such as Sanpaolo IMI becomesevident not only with reference to territorial needs, but also inthe possibility of attracting important and qualified investors—including foreign—in support of local entrepreneurial projects.

Promotion of a Risk Capital Fund for Southern ItalyThe Fund, which became operational in April 2003, includescapital of considerable size (100 million euro), underwrittennot only by Sanpaolo IMI Private Equity but also by otherimportant foreign investors, such as the EuropeanInvestment Fund (EIF), currently the most importantEuropean operator in the sector, and CDC PME, part of theCaisse des Dépôt et Consignations Group, active in themanagement of closed-end private equity funds for small-to medium-sized French companies. These are also flankedby prestigious banking Foundations and a some Southernentrepreneurs and industrial associations.The objective of the Fund, managed by NHS Mezzogiorno inNaples, is to contribute to the development ofentrepreneurship and local employment, in order to stimulatethe creation of an effective risk capital market in Southern Italy.Towards the end of 2003, the Risk Capital Fund forSouthern Italy, concluded its first two investment operations,first entering into the share capital of Hardis, a Neapolitanpharmaceutical company active in the hemoderivates sector,and then into the share capital of Proel Spa, a companybased in Teramo and leader in the sector of entertainmentequipment and accessories.

Other Closed-end Territorial FundsTrust in the importance and the prospects of thisactivity sector have induced Sanpaolo IMI PrivateEquity to constitute other funds specialized ininvestments in small- to medium-sized companiesfor other territorial areas:1.The Northwestern Company Fund, specialized in

the investment in small- to medium-sizedcompanies located in Piedmont, Lombardia, Liguriaand Valle d’Aosta. In the course of 2003, the FundRegulations and the structure of the investmentteam (headquartered in Turin) were established andthe necessary authorizations were requested. It isforecast that in the first quarter 2004, thecollection activities will be concluded, with anobjective set at 100 million euro;

2.The Center Company Fund, with the samecharacteristics of the previous fund but active in theinvestment of small- to medium-sized companieslocated in Emilia Romagna, Tuscany, Umbria, Marcheand Lazio. Also for this initiative, after all preliminaryactivities were conducted in the course of 2003, thestart-up of investments is forecast for 2004, once thecollection phase is complete. The registered office ofthe investment team is in Bologna, in accordancewith the choice of the Group to guarantee controlover the investments in close contact with theoperational territory of the Fund.

Both of these initiatives are meant to contributeto the development of companies involved inprojects of process/product innovation andgrowth through internal/external lines in additionto allowing the re-positioning of corporateshareholdings or a generation change, in thepresence of a growth project.On the international front, the agreementreached with CDC IXIS Private Equity and BayernLB Private Equity GmbH has been realized withthe E.A.Partners initiative, a pan-European fundthat will invest in small- to medium-sizedcompanies, primarily French, Italian and German.Towards the end of 2003, the Fund started thecollection phase, with an objective between 300and 500 million euro, and which will also involveinternational investors in addition to thecommitment of three sponsors.


Phot

oDisc

78 Bilancio Sociale 2003 – La Relazione Socio-Ambientale

In order to underline the strong rooting of the Banks withlocal realities, it is necessary to remember certain initiativesfinalized towards promoting “cultural” exchanges betweenthe banking and the entrepreneurial world, thanks tomeetings with entrepreneurs on topics of particular interestand current relevance. One initiative of particularimportance is the constitution of Consultative Committeeson the local economy, bodies aimed at favoring exchangesamong the main players in the local economies, and towhich the primary exponents of the productive worldparticipate: the first was established in Bari in November2003 (see “Community” section).Other meeting and exchange projects completed in 2003were: internships on the part of companies managers of theGroup’s Banks at customer companies, directed at gainingan “internal” understanding of the intrinsic characteristicsof the industrial world and at an in-depth study of theproblems associated with financial management ofcompanies, training programs and conventions.

With regards to training, programs for mixed entrepreneur-manager training were completed with a view tostrengthening the partnership relationship. In 2003, twoprograms were started regarding the economic contexts ofTurin and Naples. The course started in Turin, incollaboration with the Industrial Union and the Departmentof Economy and Commerce of the Università degli Studi diTorino, was aimed at studying in more depth the main topicsregarding the evaluation of credit risk, also in light of thenovelties introduced by “Basel II”, through the examinationof real cases and first-hand experiences of the participants.The course started in Naples was organized together withthe Compagnia delle Opere and the Università degli Studi diUrbino and was centered on subjects of common interestfor the Bank and the entrepreneur: analysis of companyprofitability and competitive edge, evaluation of financialdynamics, and analysis of the financial equilibrium throughcash flows analysis, the financial structure of the companyand the recourse to sources of external financing. Theteaching program was developed through exercises anddirect interventions and on site experience of the SanpaoloBanco di Napoli managers, thereby generating a climate of

Bank-company exchanges


(BASEL II PROJECT

The Basel Capital Accord, established by the SupervisoryAuthorities of the G10 making part of the Basel Committee onBanking Supervision of the Bank of International Settlements hasdetermined since 1988 the international regulations for thecalculation of the minimum capital requirements that banks mustattain in order to guarantee stability and efficiency within theinternational financial system.Currently, the supervisory capital of banks is calculated as a fixedpercentage of financial loans (8%) while considering to a limitedextent the risk profile of single credit activities.After a long series of consultations begun in 1999, the Basel Committeepublished, in April 2003, the most recent proposal for the modificationof the 1998 Accord and announced, in June 2004, the final draft of theNew Accord. This will be followed by the new European directives oncapital adequacy which will incorporate the New Accord into theEuropean community legislation. Through these European directives, therules issued by the Basel Committee will be submitted to the EuropeanParliament for careful review in order to obtain democratic legitimacy.The New Capital Accord (“Basel II”) aims at creating a closer linkbetween capital and risk profiles of banking activities. The supervisoryauthorities have identified in the rating, i.e. an analytical evaluation ofthe creditworthiness of the counterparties, the measure through whichthe credit risk is quantified, thereby managing to calibrate capital pre-requisites with the risk profiles of the individual counterparties.In the course of 2003, Sanpaolo IMI started the “Basel II Project” withthe aim of pursuing all necessary implementations in order for theGroup to adopt the most evolved and sophisticated approach when theNew Accord will become effective (envisaged for the end of 2006). Thisoption allows, through a proven and effective capacity in measuringand managing risk, to obtain results in terms of minor capital assetrequirements associated to the credit portfolio. The adoption of thisapproach represents a strategic opportunity for the attainment of acompetitive advantage in terms of less absorbed capital, and at thesame time improving the efficiency and effectiveness profiles of ourservice to customers.A Steering Committee, composed of Sanpaolo IMI Top Management,has taken full responsibility for the “Basel II Project” and has elaboratedthe workload across 18 technical areas, involving so far over 200qualified resources in the various project activities. Investments of 30million euro were approved and will be made available in the course of2004 to sustain the first activities necessary for satisfying theregulatory requirements and to deal with all the strategicopportunities that could come out. The working groups areinvolved in the measurement of the gap between the currentsystem and the one required by law, and in the drafting of anoverall Project Plan whose aim is the identification of all theactivities that will be required to cover the identified gap. ThisProject Plan will be presented and shared with the SupervisoryAuthorities in the course of 2004.

Corb

is


great collaboration and a profitable debate amongstentrepreneurs.Always with a view to collaboration and exchange, theBanks of the Sanpaolo IMI Group have given life to a seriesof initiatives, including:- Numerous meetings organized within the national

territory, confirming the particular attention reserved tothemes related to the new regulatory system provided forby “Basel II” and to the consequent impact on thecompany-bank relationship;

- the organization and sponsoring of conferences andseminars related to the main foreign markets in order toease the internationalization process of Italianentrepreneurship. In 2003, Sanpaolo IMI closed the cycleof initiatives and conferences dedicated to Latin America.

In this regard, the Group was sponsor, as well as provider oftechnical/specialized contents and organizer of the eventconnected to the first annual convention of the Inter-American Development Bank (IDB) in Italy. The conventionwas held in Italy in March 2003 and brought together someof the primary exponents of the international businesscommunity in Milan in order to discuss strategies andprojects aimed at the social and economic development ofLatin American countries;

- the convention on “New Finance” organized by theIndustrial Union of Pordenone and Friulcassa, centered onthe evolution of the companies of the North East;

- conventions and seminars organized in conjunction by Cariveand C.U.P. (“Comitato Unitario Permanente delle Professioni”,Unitary Standing Committee of Professions), with thepublication of reports on the daily paper “Il Gazzettino” whichreached about 14,000 professionals in the province of Venice;

- a convention organized in March 2003 together withFinpiemonte for the purpose of an in-depth study of thepossibility of recourse to financing leveraged by RegionalFunds, and the possibility of bringing companies close to thestructural aids of the European Community. Consulting andtechnical assistance were offered by the Production Functionof the Sanpaolo IMI Company Division;

- the convention organized in June 2003 with Finpiemonte totackle the problems associated with “Microcredit,interventions for entrepreneurial development in degradedareas of the Turin Area”;

- the meeting—organized in November 2003 in collaborationwith the Committee for the promotion of Women’sEntrepreneurship and CCIAA for the convention “From anIdea to a Partnership: Informational meeting forEntrepreneurial Activities”—on the following theme:“Support Financing: Credit Institutions”;

- the meeting held at the “incubator” (the combination ofphysical facilities and services capable of activating,sustaining and promoting new entrepreneurial activities onthe market) of the Politecnico di Torino to discuss the topic“Overview of the conditions/products of the Bank andopportunities for facilitating laws for companies emergingfrom the incubator”;

- the convention “2004: Slovenia enters the EU—Opportunityfor companies of the Friuli Venezia Giulia Region”, organizedby Friulcassa together with Sanpaolo IMI International, held atthe Assindustria of Udine and to which the EconomicsMinister of the Slovene Republic and the Governor of FriuliVenezia Giulia participated, among others.

- meetings between banks and entrepreneurs during regionalfairs, such as the convention on the agricultural and foodsector of Apulia organized by Sanpaolo Banco di Napoliduring the Levante di Bari Fair.

Corb

is


Competitiveness of companies and of the Country asa whole is more and more linked to the quality andsize of investments made in research anddevelopment, as well as innovation. Sanpaolo IMI setsitself as a Group that is in the forefront, both interms of products/financing offered and of accessand relationship modalities available for customers.

Support for research and technologyAs far as Research and Development is concerned,Sanpaolo IMI has formed a team with consolidatedexpertise, both in business analysis as well as in projectmanagement, derived from the traditional skillsdeveloped in IMI. This area takes on an importance ofabsolute relevance in the current productive system,characterized by the loss of competitive edge andglobalization of markets: the world of small- tomedium-sized companies needs to keep pace more andmore with innovation in order to face competition fromthe Asian countries and those of Eastern Europe, whichbenefit from drastically lower labor costs compared tothose in Italy, in addition to the weakness of theircurrencies when compared to the strength of the euro.Within this typology of investments, a very importantelement is the availability of public incentives whichreduce the quota and charge of the financialcommitment on private citizens. In Italy, the primarytools for stimulating company R&D is based on funds ofthe Education, University and Research Ministry(“Ministero dell’Istruzione, Università e Ricerca”, MIUR),and the Ministry of Productive Activities (“Ministerodella Attività Produttive”, MAP). The MIUR inparticular—through the Facilitated Research Funds(“Fondo Agevolazioni alla Ricerca, FAR)—grantsincentives to research projects (projects whose resultsare transferable to upchain production that may not beincluded in the financed program); the MAP—throughthe Fund for Technological Innovation (“Fondo perl’Innovazione Tecnologica”, FIT)—provides incentivesfor development projects (projects whose results are,on the countrary, close to productive finalization). TheSanpaolo IMI Group actively works within both areas.With regards to technological districts, there arecurrently three initiatives in an advanced stage ofprogress: the “Wireless Turin” district for Informationand Communication Technology, the one in Campaniafor the engineering of polymer materials and

composites, and one in the Veneto region fornanotechnologies. The Group, through Sanpaolo IMIand Sanpaolo Banco di Napoli, is among the promotingpartners of “Wireless Turin” and the Campania district,while in the “Veneto Nanotech” district there is alsothe collaboration of the Fondazione Cassa di Risparmiodi Padova e Rovigo.With regard to public facilitation of R&D, Sanpaolo IMI isaccredited with both the MIUR and the MAP (in this lastcase, as an agent bank of the Temporary Aggregation ofCompanies that also includes Banca OPI, Cassa deiRisparmi di Forlì, Cassa di Risparmio di Firenze eSanpaolo Banco di Napoli). Management activity of thesefacilitations is conducted by the Research & DevelopmentIncentives Function, which, in addition to conductingservices for the Ministries, assists companies:- in the identification of facilitations that are available

and best corresponding to the required investments;- in the interpretation of the facilitation legislation

and in fulfilling key requirements;- in the establishment of an industrial accounting

system for the management of project costs.Among the financing products, Yes IT should be noted;it is designed to satisfy the requirements of the small-to medium-sized companies that invest in theInformation & Communications Technology sector.

Multi- channellingA series of telematic services are available to the clientsof the Group’s Banks that supply a notablecontribution to the development of companies: on theone hand they constitute a convenient tool foraccessing information of diverse nature, and on theother hand they allow more efficient management ofcompany financial processes. In the course of the year,the Portal “SanpaoloImprese.com” has promoted, withregard to a public of companies and professionals,constant upgrading of information on topics of currentrelevance and generally on company management,distributed in particular under the form of specificnewsletters (10,000 registered readers in 2003; +60%compared to 2002), downloadable dossiers, news anddatabanks. The elaboration of contents requiresspecific sections that go into more depth, fromfinancial administration to marketing, and fromforeign topics to research and development. The offerof useful and educational contents for business is alsoexpressed through “channels” centered on specificareas: in 2003, one dedicated to “Quality Agriculture”(www.agricoltura.sanpaoloimprese.com) and onenamed “European Horizons”

The Bank of researchand technology


Phot

oDisc


(www.europa.sanpaoloimprese.com), which respondsto informational needs of companies on themes ofEuropean Community Facilitated Finance, offering afirst level of interactive study together with a freeservice of “The Expert Answers”. The international vocation of the online offer of theBank has also been expressed in the predispositionof operational services capable of facilitating thecompany in moving on international markets. In2003, within the Sanpaolo Links, Internet bankingfor companies, evolved cash inflow and internationalpayment services were issued in advance ofanalogous solutions at the system level.The operational level of company clients using Websolutions, today over 48,000 (about +45%, net ofclients acquired with the merger with the Banco diNapoli and the integration of the Cardine Group), hasalso benefited from the availability of the “real time”and “cash pooling” functionalities for all the accountsopened within the Bank Networks of the Group.In the course of the year, important releases of theInternet banking station for companies have madeavailable a series of innovative services, which arecapable of supporting the management and of wideningcompany activities, for small- to medium-sizedcompanies. The choice of integrating applications suchas the “Online Treasury Management” and the“Business & Balance Station” is an example of theGroup strategy for favoring company clients in accessingprofessional IT solutions at a much lower cost comparedto direct acquisition by taking advantage of the flexibilityof the Web and the modern disbursement ofASP–(application service provisioning).The selection of proposed online services and productshave privileged solutions capable of favoring the auto-analysis capacity of company clients, both from thepoint of view of project choices as well as from the pointof view of control of short-term financial balance (forexample, management of anticipated and predictedliquidity, control of performance indicators andprofitability/company asset development). Commercialinformation (such as investigations, complaints, financialstatements and corporate structures) fundamental forthe improvement of trust in relations with clients andsuppliers were also made available to companies directlyon the Web. Finally, concrete opportunities forcompanies to grow through a more aware use of web-based technologies were discussed in a series ofmeetings in the territory, proposed by the Bank inconjunction with qualified consultants (for example theone day workshop on the “Company on the Net”).

The weight of exports in the national economy andthe new challenges that are placed to companies bythe globalization process make theinternationalization processes and the support toexporters factors of particular importance.The Sanpaolo IMI Group is present in 30 countriesacross the world, with the objective of supportingforeign activities of national clients. In order tostrengthen its positioning on the referenced markets,the organization of the Foreign Network is centeredon three regional offices (Americas, Europe and Asia)with the function of directing and controlling differentoperational points. On the basis of an ever greaternumber of Italian companies present in China and theconsiderable development of the commercial flowsbetween the two countries, the Sanpaolo IMI Group,in November 2003, strengthened its presence in Chinawith the opening of a branch in Shanghai (which isadded to that of Hong Kong and to the representativeoffice in Peking) and the underwriting of anagreement with the two primary Chinese banks.The foreign Network pays particular attention insupporting SMEs whose objective is to increase theirinternational presence, as well as the promotionabroad of the economic model that mostlycharacterizes Italy—that of sectorial poles andindustrial sectors. This commitment is expressedthrough a series of initiatives that are aimed atcertain territorial areas or specific productive sectors.Those of major relevance are described below:

• the underwriting—in Mexico City in March 2003—ofan agreement between SACE8, Nacional Financiera9

and Sanpaolo IMI for a credit line of US$ 20 million insupport of small- to medium-sized Mexican companiesthat import machinery from Italy. This is a completelynew initiative where the risk of the Mexicancounterparty is equally subdivided between thecontracting parties and which will allow the Italiancompanies that export machinery to overcome theobstacles today represented by the difficulty inaccessing credit on the part of Mexican companies;

• the development, during the last years, of a strategicalliance with the Santander Central Hispano Group in theLatin American region, through which Italian small- tomedium-sized companies—that intend to create a stablepresence in the Countries of this region—may make useof a privileged channel of access to local financial services;

Presence abroad andsupport for import-export

8. Italian export credit insurance company.9. Banca Nacional Financiera is an entity dedicated to the financial support of the industrialdevelopment of Mexico and conducts activities directed at the SME system: promotion and supportof industrial development projects and professional training activities for small to medium-sizedentrepreneurs.


• participation in the “project of sectorial poles andindustrial districts in Brazil” which PROMOS10, SEBRAE11

and IDB, in collaboration with companies of Lombardia,are bringing forward in four local productive sectors:underwear apparel, handmade clothing, footwear,wood/furniture. In this regard, Sanpaolo IMI hasobtained from SACE a specific insurance coverage andoffers interested Italian companies the necessaryassistance for the export of machinery and equipment.

Within the area related to support for import-exportactivities of Italian companies, Sanpaolo IMI haspromoted several initiatives and collaborates withinternational bodies such as SACE and Simest (“SocietàItaliana per le Imprese all’Estero”, Italian Association forCompanies Abroad). With SACE, in November 2003, the“Framework Insurance Convention” was renewed, aninsurance tool directed at facilitating exporters of goodsand services of Italian manufacturing, covering the creditrisks associated with their activities (with a guaranteeequal to 95%): the renewal has created the opportunityto increase the number of Countries and banks coveredby the insurance policy.Sanpaolo IMI is also the only Italian bank to be part of theconsortium—headed by JP Morgan—for the supply offinancial support for the reconstruction of Iraq, makingthe “Trade Bank of Iraq” (TBI) operational. This body,established in July 2003 with UN resolution no. 1483 to

supply financial support for the recovery of import andexport activities of the country, will be the only institutionto manage these activities on the part of the Iraqi publicauthorities. In general, each Bank adhering to theconsortium (a total of 13) will represent the privilegedinterlocutor (the so-called agent bank) of TBI forconducting the activities linked to the management of thecommercial tools that this bank will issue in favor of theexporters of the respective countries. The commitmentstaken on by Sanpaolo IMI with the confirmation of lettersof credit will be assisted by a SACE insurance guaranteefor 95% of the total commercial credit, on the basis of aMemorandum of Understanding signed on 5 December2003 by Sanpaolo IMI and SACE, and which provides forthe activation of a first tranche of 250 million euro—within a total credit ceiling of 1,000 million euro—guaranteeing short-term operations (letter of creditconfirmations) carried out in Iraq by Italian exporters andchanneled onto the accounts of Sanpaolo IMI. SanpaoloIMI will thereby be capable of offering Italian companies afull assistance on the commercial exchanges relative tothe supply of materials and machinery for thereconstruction of Iraq, by lending adequate coverage tothe payment of invoices—obviously if done in accordancewith agreements.In the last few years, Sanpaolo IMI has distinguished itself—thanks to the presence of a specifically appointed unit—within the sector for Development Aid for its high level ofcompetence and specialization that has allowed it to obtainthe appreciation of other counterparts involved cooperation.This sector primarily promotes investments ofcompanies—with particularly favorable conditions—inDeveloping Countries, with the intent of favoringeconomic growth and quality of life improvement.The projects currently underway and the assistanceprovided include

• administrative assistance for programs of multilateraland bilateral Cooperation—cooperation in the form ofdonations (Nicaragua, Zambia, Egypt, Ethiopia,Senegal, Zimbabwe, Somalia suspended), cooperationthrough credit aid (Tunisia), and multilateralcooperation (Albania);

• assistance and consulting—very appreciated since itrepresents a valid complement to the offer of exporters’services—to operational points and to other partners(Ministry for Foreign Affairs, Procurement Company,Surveillance Company), and to exporters with regardsto Italian Cooperation procedures;

• the diffusion of know-how at the operational pointsand other units regarding the functioning ofinternational Cooperation.

10. Promos is the agency of the Camera di Commercio di Milano (Commerce Department of Milan)for international activities.11. SEBRAE is the Brazilian government institution that sustains SME development.

Cont

rast

o


Corporate customers: 2003 objectives

OBJECTIVES ACTIVITIES AND RESULTS

Ever greater attention to the SMEsector and the financing of specificlocal realities, while continuing toensure support to the whole nationaleconomy.

Further in-depth study of the under-standing of local productive realities inorder to respond in a more elaborateand precise manner to their varied fi-nancing and support needs.

Development of training and speciali-zation activities of professionals dedi-cated to company branches. This acti-vity shall mainly concern the resourcesoperating in the area of competenceof the former Banco di Napoli, in orderto achieve an improvement in logisticsand an adjustment in the productportfolio with the aim of aligning as awhole the pre-existing structures withthe qualitative standards of analogousSanpaolo structures.

✓ Further development of agreements with the loansconsortia (“Confidi”) and Industrial Districts, aimedat facilitating access to credit on the part of small- tomedium-sized companies.

✓ The start-up of initiatives directed to specific sectors(e.g. the agricultural/food sector) or to well identifiedterritorial areas (e.g., initiatives for development ofentrepreneurship in the Sicily Region).

✓ The establishments of consultative committees onthe local economy and numerous meetings withentrepreneurs.

✓ Realization of exchange meetings among colleagues toshare pursued objectives and chosen action strategies;the creation of a task force of trainers to support thebranches; the establishment of informational toolssupporting the daily management of the client; theextension, to the resources of Sanpaolo Banco di Napoli,of the credit policy of the Sanpaolo network.

✓ The launch of the portals “Quality Agriculture” and“European Horizons”; the release, within the SanpaoloLinks, Internet Banking for Companies, of evolved cashinflow and international payment systems.

A further expansion of the range of te-lematic services for companies, in parti-cular favoring access to clients of the exBanco di Napoli.

86

We pay attention to people and valuetheir skills and experience becausethey are the key factors for generatingsustainable competitive benefits and,therefore, creating value.

We pay the highest attention to eachStaff member—who represent“internal customers”—providingthem with support and information sothat they can perform their best.

We want to constantly expressbehaviors, actions and decisionsoriented toward impartiality, honesty,ethics and social responsibility.

We cultivate drive and innovation byfollowing operational proceduresaligned to best practices andconsistent with the needs of thebusiness; we develop a sense ofresponsibility through forecastedobjectives while paying attention tofuture implications.

It is our intention to develop aharmonious and integrated socialsystem within the company which,while valuing individual identity andprofessional skills, is a trigger fordevelopment.

We seek efficiency and theresponsible use of staff and payattention to each source of cost toensure future growth.

Value in detail

Creation of value

Customerorientation

Integrity



specific qualities


resources

(2003 Social Report – Social and Environmental Report

People

VALUES

The Group, on 31 December 2003, included 43,465 humanresources, including 276 with a foreign Sanpaolo IMIcontract, and distributed as follows:- 36,187 people within the Bank Networks of the Group;- 1,151 including IMI Bank Groups, Wealth Management,

OPI Bank;- 6,127 human resources part of other corporate structures.97.6% of employees of the Group have open-endcontracts.The total personnel of the Group (Table 1) is composed of:66.4% by personnel in professional areas, 31.7% bymanagers, and 1.9% by executives.In the Group, female presence accounts for 19,140resources and constitutes 44.7% of the whole personnel.Within this area, 3,771 women belong to the managercategory (3,711 managers and 60 executives) andconstitute 8.7% of the overall work force of the Group,with a higher percentage incidence in specialized sectors.Male managerial personnel are equal to 24.9% of thewhole personnel.

With regards to personnel variables, such as thecomposition by contractual category, the average age ofemployees, the average education and seniority level, thedata of the Group highlight differences between thevarious organizations, since each corporate reality ischaracterized by the technical/productive nature of itsown business processes as well as different labor marketdynamics.- In the Bank Networks, where the business model is that of

a commercial bank, the incidence of managerial personnel(managers and executives) is lower with respect to otherspecialized areas of the Group (Table 1), and mostly for thecategory of executives; the educational level of theemployees is also lower (Table 2).

- in the Wealth Management and Investment Bankingdepartment, the average age of the employees (Table 3)is strongly lower, in line with the peculiarity of the sector.Also the low seniority of the company’s employees (Table4) is a reflection of the strong mobility that hascharacterized all of these sectors in the very recent past.

872003 Social Report – The people


Executives

Managers

Professional Areas

TOTAL

761

10,078

13,216

24,055

1.8

23.1

30.4

55.3

Table 1GROUP PERSONNEL men

no. %women

no. %Total

no. %

60

3,711

15,639

19,410

0.1

8.6

36.0

44.7

821

13,789

28,855

43,465

1.9

31.7

66.4

100

Executives

Managers

Professional Areas

TOTAL

561

8,663

10,988

20,212

1.5

24.0

30.4

55.9

of which BANK NETWORKSmen

no. %

womenno. %

Totalno. %

33

3,093

12,849

15,975

0.1

8.5

35.5

44.1

594

11,756

23,837

36,187

1.6

32.5

65.9

100

Executives

Managers

Professional Areas

TOTAL

24

96

82

202

6.2

24.8

21.2

52.2

of which WEALTH MANAGEMENT Groupmen

no. %women

no. %Total

no. %

3

62

120

185

0.8

16.0

31.0

47.8

27

158

202

387

7.0

40.8

52.2

100

Executives

Managers

Professional Areas

TOTAL

48

212

134

394

7.9

34.9

22.0

64.8

of which IMI BANK Group

menno. %

womenno. %

Totalno. %

5

103

106

214

0.8

16.9

17.5

35.2

53

315

240

608

8.7

51.8

39.7

100

Executives

Managers

Professional Areas

TOTAL

14

50

28

92

9.0

32.0

18.0

59.0

of which OPI BANK Groupmen

no. %women

no. %Total

no. %

0

24

40

64

0.0

15.4

25.6

41.0

14

74

68

156

9.0

47.4

43.6

100


The Convention "Building success withcompanies", held at Lingotto, in Turin.


Group totals*

Of which:

Bank networks*

Wealth Management Group

IMI Bank Group

OPI Bank Group

* Sanpaolo IMI data referring to Italian contracts Sanpaolo IMI Foreign Contracts 276

10,855

8,140

256

386

96

25.1

22.7

66.2

63.5

61.5

Table 2 - EDUCATION LEVELSGraduates

no. %High school graduates

no. %Other

no. %Total

no. %

28,563

24,656

117

173

24

66.2

68.6

30.2

28.4

15.4

43,189

35,911

387

608

156

100

100

100

100

100

3,771

3,115

14

49

36

8.7

8.7

3.6

8.1

23.1

Executives

Managers

Professional Areas

* Sanpaolo IMI data referring to Italian contracts

49.4

45.4

39.2

Table 3 - AVERAGE AGE

Total GROUP Bank Networks Wealth Manag.Group IMI Bank Group OPI Bank Group

50.8

45.9

39.6

40.7

37.4

34.1

53.0

47.3

36.5

40.4

35.8

31.6

Executives

Managers

Professional Areas

* Sanpaolo IMI data referring to Italian contracts

20,4

20,5

14,6

Table 4 - AVERAGE COMPANY SENIORITY

Total GROUP Parent Bank Wealth Manag.Group IMI Bank GroupOPI Bank

Group

23,7

21,8

15,4

6,7

5,4

4,5

22,4

19,0

9,7

2,7

4,5

3,8


Sanpaolo IMI fully applies the rights guaranteed toworkers by Italian and EU law, with particularattention given to the attainment of actual conditionsfor equal professional opportunities for all partieswho perform their services within their respectiveareas of competence.

Relations with Trade UnionsThe rate of trade union adherence on the part of thePersonnel of the Group is about 78%, in line with thenational averages of the sector.The complex operations of company restructuringwhich involved the Group in the course of 2003 withthe spin-off of the Sanpaolo Banco di Napoli weremanaged, from the perspective of industrial relations,without conflicts, and with the attainment of specificagreements with the Trade Unions that havesubstantially extended to the former Banco di Napolipersonnel involved (approx. 6,000 people) the level ofguarantees granted to Sanpaolo IMI workers.In the course of the year, the company welfare toolswere also strengthened: in this regard, it should benoted that, in relation to integrated health care, themain services offered were improved, ensuring widercoverage in favor of disabled personnel.

Effects of the industrial plan on work relationsThe restructuring processes were developedsimultaneously with the preparation of all the toolsavailable through law and collective negotiation, andfinalized towards the protection of employment,professional levels and work quality.In this context, in the second half of the year, the“Income, employment and re-training fund for staff inthe banking industry” was activated for the personnel ofSanpaolo IMI and Sanpaolo Banco di Napoli and later forthose operating in the former Cardine Bank Networks.This fund, completely leveraged by the companiesinvolved, represents a tool useful not only for makingthe restructuring processes efficient, but also for thework force structural rejuvenation, thanks to the newhirings resulting from personnel substitution.Personnel is entitled to the provisions provided for bythe fund and resolves, on a voluntary basis andwithin the realm of specific legislative and economicguarantees established between the parties, the work

relationship in advance with respect to the right ofpension.In relation to this, it should be highlighted howapplications for access to the Fund received overall bySanpaolo IMI and Sanpaolo Banco di Napoli wereover 2,200, equal to about 77% of those entitledaccording to the set prerequisites.The rationalization interventions at Group level,essential for the creation of a Bank of Europeancaliber, were gradually completed with theconstruction of common infrastructure (informationsystem, Corporate Center, etc.) and, in parallel, withthe stengthening of the commercial networks. All ofthis took place by placing particular attention to thefactors protecting employment and attained levels ofprofessionalism, with the contextual activation -where necessary - of reconversion and requalificationprocesses for involved personnel.These general commitments are applied within therealm of specific operations that involve areorganization or the termination of activities, as inthe case of the EPTA Group, whose excess personnel(about 200 people) was re-allocated throughcollective agreements reached at the time within theGroup and without any occupational tensions.

Protected categoriesWithin the Group, 1,639 people belong to thedisabled and protected categories. On that issue,procedures have been taken to ensure that legalrequirements for employment of this category havebeen fully respected. In particular, the tools forterritorial compensation and the stipulation ofconventions were used, as in the case of SanpaoloIMI in the Provinces of Turin and Milan; the sameprocess was started with the Sanpaolo Banco diNapoli in the Province of that region’s capital city.

Industrial relations in the group restructuring process


Executives

Managers

Professional Areas

Total personnel

2002 2003

457

9,678

17,901

28,036

(1.6%)

(34.5%)

(63.9%)

(100%)

451

9,496

16,825

26,772

(1.7%)

(35.5%)

(62.8%)

(100%)

Table 5 - PERSONNEL: A COMPARISON BETWEEN HOMOGENOUS SETTINGS 12

Resignations

Staff leaving incentives

Other

Foreign contracts

No. Total resignations

2002 2003

160

1,104

188

94

1,546

(10.3%)

(71.4%)

(12.2%)

(6.1%)

(100%)

101

1,467

236

43

1,847

(5.5%)

(79.4%)

(12.8%)

(2.3%)

(100%)

Table 6 - DEPARTURES: COMPARISON BETWEEN HOMOGENOUS SETTINGS12

For the aggregate Sanpaolo IMI e Sanpaolo Banco diNapoli, on a total of 2,900 departing individuals,over 2,200 people have adhered to the “Fund forstaff in the banking industry” (841 of which leavingin 2003), adding to a total of 530 personnel goinginto pension with incentives and to 111 departuresmotivated by a previous initiative at the formerBanco di Napoli.These initiatives were also started in the banks of theformer Cardine setting, and overall involved morethan a thousand people.

Actions for increasedefficiency and growth

FOCUS ON SANPAOLO IMI AND SANPAOLO BANCO DI NAPOLI

We have set the objective of completing actions forincreasing efficiency in order to promote future growth,consistent with the indications of the industrial plan, andwe have pursued it by placing particular attention topersonnel sizing, labor costs and generational change.In this company policy scenario, the activation of the“Income, employment and re-training fund for staff inthe banking industry” has allowed a reduction inpersonnel, particularly in the structure subject toefficiency actions, and to start a rejuvenation of thepersonnel with new recruitment.

Comparing the homogeneous settings between 2002and 2003 , the objective of improving efficiency that wehave set was attained through a reduction in personnelof 1,264 human resources.This reduction in human resources is the net result of1,847 resignations and 583 new hires.Resignations were obtained primarily through staff-leaving incentive plans (fund for staff in the bankingindustry and retirement incentives).As far as new hires are concerned, we have continuedthe policy followed for several years in safeguarding thevalue of investing in new human resources, payingattention not only to the cost variable, but also to theverification of the professional level of resources increating value.For this reason the percentage of human resourceshired with flexible contracts has remained highthroughout the course of 2003, while at the same timeincreasing the movement towards open-end contractsfor those who had fixed-term and apprenticeshipcontracts in the previous year.

the average age of the population has fallen,particularly for executives (from 51 years to 50.2)

- the average education level has grown, with a 1%increase of university graduates (from 20.8% to21.8%)

Actions upon personnel, in conjunction with:- rationalization interventions on activities;- further organizational specialization of the branches


Open end contracts

Fixed term contracts

Apprenticeships

Other

Foreign contracts

No. of total hires

2002 2003

113

265

164

4

27

573

(19.7%)

(46.3%)

(28.6%)

(0.7%)

(4.7%)

(100%)

249

185

108

0

41

583

(42.7%)

(31.7%)

(18.5%)

(0%)

(7.0%)

(100%)

Table 7 - HIRES: COMPARISON BETWEEN HOMOGENOUS SETTINGS12

for overseeing customer segments with the subsequentreview of professional profiles;

- have generated significant benefits in the distribution ofresources amongst the various entities of the ParentBank with a two point percentage decrease in thepersonnel of the central structures in favor of distributivestructures (+0.7%).

2.4% of the personnel is partly on secodment in Groupcompanies and are partly inserted in professional re-training programs.

Andr

ea Po

lato

Distributive Structures2002: 22,248 (79.4%)2003: 21,454 (80.1%)

Governing structures ofthe Group, business linesof the Parent Bank,support functions2002: 5,441 (19.4%)2003: 4,667 (17.4%)

Detachments and re-training for the Network:

2002: 347 (1.2%)2003: 651 (2.4%)

12. 2002: Sanpaolo IMI with a merger by incorporation of Banco di Napoli; 2003:Sanpaolo IMI net of the merger by incorporation of Cardine Finanziaria, plusSanpaolo Banco di Napoli


In the course of 2003, the objective of introducinginnovations in the systems and tools of human resourcemanagement was undertaken in order to better contributeto the objectives of the Group.The undertaken actions included: the extension of the BankNetworks to the main systems existing within Sanpaolo IMIand the development of new governance systems.

Extension of the management systems to the GroupThe “integrated system ofplanning/management/development of resources”currently in use within Sanpaolo IMI was extended to all thecommercial Banks of the Group, concluding the adoptionof a “personnel budget system”, a “competence system”,a system of “valuation and incentives”, as well as the “toolsfor the identification of high growth potential resources”,thereby realizing a methodological and managerialintegration for the Group.This integration was supported by a departmental ITinfrastructure realized in light of a “multifirm” perspectiveand capable of managing all the Group needs. In 2003,the following were realized:

• A single IT system for human resources for SanpaoloIMI and Sanpaolo Banco di Napoli, where theadministrative areas were intergrated with themanagerial ones. The integration with the banks of theformer Cardine setting was also started.

• IT management of the valuation and incentive systemof Sanpaolo IMI Wealth Management.

Development of new Governance SystemsIncluded the following:

• implementation of a “system directing humanresources and labor cost management of the Group”,in order to:- increase oversight capacity over the Group’s

personnel cost;- develop a system of indicators for information flow

to the top management;

• the development of a model relative to a “system forthe evaluation of the incidence of Human Capital onCompany Value creation”, in order to:- create a directional control panel (Tableau de bord)

with key indicators relative to phenomena inherent to human resources;

- evaluate the impact of human resources management on business growth and outline appropriate strategies to grow the capacity for company value creation.

In accordance with the developed model, the ITdevelopment activities were also started. The first launchof this system is forecasted for Spring 2004.

Pier

o O

ttavia

no

Towards updating human resourcesmanagement


We have continued our efforts aimed at implementing aGroup model composed of a network of competent,motivated individuals, capable of pursuing precise objectives,with strong operational autonomy, and believing in theimportance of knowledge, capacities and accumulatedexperiences for the generation of sustainable competitiveadvantage.As a result, in 2003, the training days and the average numberof per capita training hours were increased, a trend in constantdevelopment in the last five year period.The strong recorded increment is also attributable to thetraining efforts that were conducted in conjunction with theintegration of IT systems in Sanpaolo Banco di Napoli.Training activities in the Group were created and realized inaccordance with the needs for individual development, withsectorial needs, with company development plans and weredeveloped along three macro axes, continuing and perfectingthe planning and didactic set-up of the previous year.- development of specialized know-how,- support for organizational and commercial development;- support for policies and actions for the development of key

resources and management.In accordance with the evolution of the distributive model andthe network professionals, the training offer was reviewed; thisis available online through the company’s Intranet.The overall standard training offer of Sanpaolo IMI was extendedto Sanpaolo Banco di Napoli, in accordance with thestandardization of the distributive model.Our training activities were developed through several trainingchannels:

internal training. For this type of training, 720 people withhigh professional qualifications within the Group wereinvolved as internal teachers;

- distance training through an e-learning platform; - interfirm specialized training courses, organized and held

outside the company (Table 10)The rationalizations brought to conclusion in Sanpaolo IMI andin Sanpaolo Banco di Napoli have created the need for trainingin order to allow easy insertion—into new operationalrealities—of the resources involved in a “professionalreconversion”.In order to continue the actions of the past years, the trainingprogram for these resources (436 participating people) waselaborated through an institutional path (classroom lessonsalong with work in branch offices) and a moretechnical/professional one in the branch.

As a result of the professional re-training program, in 2003,219 human resources were assigned to branches and 27 tocentral structures.In the last months of 2003, a training plan supporting thetransfer of the IT system into the former Cardine Banks, andwhich also involved Carisbo and Carive, was also established.Our investment in human resources also comprises the use offull-time training and internship programs at central officesand foreign branches.Followed by tutors, youth are put in contact with the reality ofwork. Through practical experience, they refine the technicalskills acquired during the university period and also gain aprestigious, concrete and marketable job experience. In thisregard, in the 2002-2003 period, the foreign network ofSanpaolo IMI has offered more than thirty internships toworthy graduating students and graduates and this trainingopportunity has developed —in many cases (over 50%)—into a concrete professional opportunity within the Group.

Investmentin training

Total Training Days

Average training per-capita (hours)

2002 (Sanpaolo IMI merged with Banco di Napoli)2003 (Sanpaolo IMI and Sanpaolo Banco Napoli)

2002 2003

140,356

36.8

153,117

43.3

Table 8 - INVESTMENT IN TRAINING:COMPARISON BETWEEN HOMOGENOUS SETTINGS

Former Cardine Bank Networks

Wealth Management

IMI Bank Group

Days of training Per-capita average

39,439

2,264

1,082

31.4

43.9

13.3

Table 9 - INVESTMENT IN TRAINING:OTHER GROUP SOCIETIES

Sanpaolo IMI+ Sanpaolo Banco Napoli*

Former Cardine Bank Networks*

* Based on 153,117 days

Internal

73.0%

91.4%

Online

23.0%

5.5%

Lang.

2.0%

0.0%

External

2.0%

3.1%

Table 10 - WORKING HOURS COURSESBREAKDOWN BY TYPE*


We have intensified the development path for the people,which places, together with the “families” and theprofessional profiles, the relevant population segments ofthe Group (which we define with the term “community”)in both a short-term and medium-term perspective.The four managed communities are: newly employed,promising young employees (human resources of 32 yearsor less), promising employees (resources of 32 years ofage or more) and executives.This segmentation allows better focus on investments inhuman resources and is an integrating factor for theGroup in governing:

• professional growth;

• mobility towards strategic positions within the Group,thereby becoming a governance system for thequalitative programming of personnel and themanagerial needs of the Group in the medium time

• compensation policy guidelines.On 31 December 2003, the number of the “communities”in relation to the Bank Networks of the Group grew by 701units with respect to the previous year.

This increase is the result of the application of themanagement systems in all the Bank Networks and theextension of the management methodology to thesecommunities, as defined by Sanpaolo IMI.New classroom programs for “promising youngemployees” and “promising employees” were introducedin addition to the set of initiatives already present forthese two segments; a list of these is shown in Table 13,which highlights the innovations introduced in the twoyear period 2002-2003.In 2003, the training offer for the executive component ofthe Group was also perfected, and includes:

• a base program for new executives, elaborated inmodules;

• an elaborate proposal of modules for the acquisition ofmanagerial tools and the development of skills whichdevelop specific managerial competencies throughaction learning modalities;

• events with viewpoint exchanges on particular themes,through internal workshops and inter-firm seminars.

In addition to the increase in number of human resourcesof dedicated communities and programs, the number ofeditions of each initiative and the number of people thathave partecipated in these have also grown.The number of people in the communities easily allowsneeds to be met with regards to “positions ofresponsibility” for personnel that already left and thoseleaving in 2004 as a result of adherence to the Fund forstaff in the banking industry.Management by community is therefore characterizedas a tool for managerial exchange and for the valuationof emerging human resources, as well as a system forhandling managerial needs, even in the medium timeperiod, for the coverage of strategic roles and themanagement of executive candidacies.

Managementby community

Newly employed

Promising y.empl.

Promising empl.

Executives

Total density

* Figures of Bank Networks (Total personnel of Bank Networks 36,187)

2002 2003 %n° of personnel

957

316

284

411

2,013

1,149

516

455

594

2,714

3.2

1.4

1.2

1.6

Table 11 - PEOPLE WITHIN THE “COMMUNITY”*

programs for newly employed

programs for promising young empl.

programs for promising empl.

programs for executives

Total

54

17

5

7

83

800

220

67

85

1,172

Table 12 - EDITIONS AND PARTICIPATION IN PROGRAMS DEDICATED TO COMMUNITY HUMAN RESOURCES

2002number of editions number of partecipants days/Classroom

2003number of editions number of partecipants days/Classroom

800

400

256

680

2,136

82

46

28

13

160

1,020

490

184

156

1,850

1,020

970

782

1,248

4,020


Table 13 - SYNTHESIS OF THE EVOLUTION OF HIGH-GROWTH POTENTIAL HUMAN RESOURCES VALUATION PROGRAMS

Program Objective

Newly Employed

PROGRAM

• Check-up meeting

• Motivational meeting

• Orientation meeting

manage and monitorthe process ofintroducing anddeveloping newlyemployed staff

2002 2003

✓ ✓✓ ✓✓ ✓

2002 2003

✓ ✓

✓ ✓

✓

✓

Program Objective

Young promisingemployees

PROGRAM

• IOS (Orientation and development meeting)provides an opportunity for autovaluation and analysis ofrelevant capacities, allowing the acquisition of furtherinformation on individual skills

• Leadershipfavors awareness of one’s influence and the effects itproduces on others, increasing base skills for managingcomplex situations

• Problem solvingincreases team management competencies through aconcrete experience; allows testing of problem solving toolsand methods

• COS (Costruire orizzonti e sfide, Building the Future and Challenges)develops awareness of one’s skills, aids in orienting one’spersonal commitment path, creates focus for a prioritarydevelopment path, supports management choices

2002 2003

✓ ✓

✓

PROGRAM

• Project Workstructured planning activity that allows the development andand observation of certain managerial competencies

• Sit-Comprovides an opportunity for autodiagnosis and orientationcreating a sense of self-responsibility for one’s professionaland personal development

identify, manage anddevelop young promisingemployees for thepurpose of covering rolesof greater responsibilityand complexity

Program Objective

PromisingEmployees

identify, manage andvalue people withelevated potential inorder to create areference pool for thecoverage of managerialroles within the Group


Our merit-based policy is expressed through careerdynamics based on three factors: “skills, performanceresults, growth potential”.In 2003, in the Sanpaolo IMI and Sanpaolo Banco diNapoli setting, 2,032 human resources have benefitedfrom career advancement.

Careerevolution

Promotions to executive

Promotions within first-line manager cat.

Non-managerial pers, promoted to manager

Promotions within professional areas

Total

men women Total

49

519

435

325

1,328

5

171

204

324

704

54

690

639

649

2,032

Table 14 - 2003 PROMOTIONSPi

ero

Otta

viano


Our objective of continuing our flexible compensationpolicy can be set within two strategic lines of action:

• Substantial stability in gross compensations net ofextraordinary and contractual phenomena and anincrease in the incidence of the variable component tofavor a greater contribution of people pursuingcompany and Group objectives and to make the overallcost component more flexible;

• Rewarding professionalism and its market value andthe commitment of people to performance excellence.

The average compensation data of Sanpaolo IMI andSanpaolo Banco Napoli highlight an average incidence ofthe variable component on Gross Annual Compensation(“Retribuzione Annua Lorda”, RAL) equal to 11.2% andon the Global Annual Compensation (“RetribuzioneGlobale Annua”, RGA) of 10.1%, confirming thecompensation policy adopted several years ago whichemphasizes the incidence of the variable component onpersonnel cost. This incidence is reduced in relation to thecontractual category.The average compensation data by contractual categoryare substantially in line with the averages of the system.However, the incidence of the variable component isgreater than system average.In order to involve personnel more fully in the objectivesof the industrial plan, stock incentive plans were alsolaunched in 2003, subscribed by more than 14,090human resources.A series of benefits also assume a non-negligibleeconomic value; these are distributed in order to favor thedevelopment of a feeling of belonging, and whosetypology has remained unchanged with respect to thatoutlined in the Shareholder’s Report of 2002 and withimprovements regarding integrated health care.

Flexibilityand compensation efficacy

Executives

Managers

Professional Areas

Sanpaolo IMI and Sanpaolo Banco di Napoli setting

Category averages (€)

108,947

47,298

30,292

Table 15 - FIXED GROSS COMPENSATION FOR 2003

Executives

Managers

Professional Areas

Tot. (weighted average)

Sanpaolo IMI and Sanpaolo Banco di Napoli setting

of RAL

31.8

12.3

5.8

11.2

of RGA

24.1

10.9

5.5

10.1

Table 16 - VARIABLE COMPONENT


Within the Sanpaolo IMI Group, communication withemployees fulfills a fundamental role in allowing full andactive participation in company life and provides concretesupport for the course of one’s professional position.In the course of 2003, several activities and initiativeswere created in relation to a plan of internalcommunication—an objective declared in theShareholder’s Report of 2002.

The “Internal Communication” ProjectStarted in the second half of 2002 and supported byhigh profile external consulting services, the internalcommunication project was developed in the courseof 2003 by completing the analysis of communicationneeds and—with respect to attained results—formulating proposals for the rationalization ofexisting tools and for the activation of new initiativesfinalized at increasing the efficiency and effectivenessof communication processes, as well as of methodsused to verify the effectiveness of conducted actions.The results were submitted to the Top Executives ofthe Group and a first, wide training initiative wasoutlined which in the course of 2004 will involve apopulation of about 4,000 people, including branchdirectors and managers of operational units.

Communication ToolsThe Sanpaolo IMI Group uses multiple elaboratedcommunication tools directed at satisfying specific needsin relation to content, targeted public and specificoperational contexts.As far as the initiatives linked to specific organizationaland business areas are concerned, in the course of2003 the following were continued: the use ofinformational brochures issued by company structures,and spread in order to supply news and updates onactivities and initiatives; teleconferences and meetings;and Internet sites managed by specific companystructures with informational functions andoperationally supporting activities.

The Intranet Portal as a new tool for internalcommunicationSince June 2003 an Intranet Portal for internalcommunication known as Green Village has beenoperational. The Portal is accessible to all the personnel ofSanpaolo IMI and Sanpaolo Banco di Napoli; by the

second half of 2004 this access will be progressivelyextended to the personnel of all the other Bank Networksof the Group and simultaneous with the integration ofthe IT systems.The contents of the Green Village portal can be brokendown into two macro areas: information and services.The first includes, with differing publishing modalities,articles, interviews, news and updates in relation toevents and topics of company life. The second iscomposed of thematic sections and links to sites thatoffer information, data, documentation and personalservices to personnel, such as coverage for integratedhealth care, supplementary pension of the Pensions Fundof the Sanpaolo IMI Group, consultation of companyprovisions, forms which submitted on line, etc..The Portal includes a mail box through which visitors canmake suggestions and comments, in addition tosearching for answers to specific questions or solutions tocontingent problems linked to daily company life.In the implementation period of the Fund for staff in thebanking industry for Sanpaolo IMI and Sanpaolo Banco diNapoli, the necessary informational and assistance activityfor interested individuals was also guaranteed by adedicated section within the Portal, within which it waspossible to find answers to questions and, more generally,to find all the information needed to decide whether toadhere to the Fund.In the beginning of 2004, the definition of new serviceimplementations was started.

Communicatingwith employees


“Sanpaolo magazine” House Organ In the course of 2003, a profound redefining of the“Sanpaolo magazine” house organ was conceived andimplemented; the latter has become the magazine of allthe Sanpaolo IMI and the Bank Networks personnel, andis sent to one’s workplace (or at home in the case ofextended leave, e.g. maternity leave).The magazine, overall distributed in about 43 thousandcopies per issue, is also sent to the Group subsidiaries.“Sanpaolo magazine” sets itself as a complementary toolwith respect to online media, and particularly in relationto the Green Village portal, offering—with services,articles, interviews and news—an in-depth discussionboth on corporate themes and on those relative to therealms and contextual markets for Sanpaolo IMI activities.Informational “coverage” is guaranteed by thesupervision of an Editorial Committee and by editorialoffice reporters in the Networks.

Special initiativesSanpaolo IMI has adhered to all the initiatives of theClear Deal project launched by the Italian BankersAssociation, and is one of the founding partners ofthe Consortium which handles the completion ofthe project itself.In fact, the diffusion of information and usefulknowledge to personnel was ensured, in order toenable the full understanding of the goals and logicalsteps of the project, as well as the implementation ofthe specific initiatives emerging from it. For thispurpose, both the internal communication toolsdescribed above, as well as the online and printedmaterials prepared by the Clear Deal Consortium foradhering bank personnel, were used.In the “Basel II” and “2006 Olympics” projects, thereis maximum dissemination and involvement of theGroup’s personnel in the many activities required inorder to ensure their completion.

magazineAnno II - n. 3 - marzo 2004

Reg

istr

azio

ne

n.5

699

del

2/5

/03

pre

sso

il T

rib

un

ale

di T

ori

no

Mission e ruolodella DirezioneTerritoriale Nord Est

Enrico Bertolino:dalla banca alla TV

Ricerca Eurisko:clienti e banchea confronto

Il progetto strategicoper attuare “Basilea II”

Cina: alla scoperta del nuovo protagonistadello scenario economico internazionaleMission e ruolodella DirezioneTerritoriale Nord Est


Cina: alla scoperta del nuovo protagonistadello scenario economico internazionale



Anno II - n. 3 - marzo 2004

Mission e ruolodella DirezioneTerritoriale Nord Est




Cina: alla scoperta del nuovo protagonistadello scenario economico internazionaleMission e ruolodella DirezioneTerritoriale Nord Est


Cina: alla scoperta del nuovo protagonistadello scenario economico internazionale




Prevention and Protection Service (“Servizio di Prevenzione e Protezione”, SPP)The Prevention and Protection Service (SPP) is composed ofresources allocated both at the Safety Office, part of theSecurity Function of the Purchases and LogisticsDepartment, as well as at the Technical Structure (Centraland Territorial) within this same Department. The SPP ispresent on the territory in which the Bank Networksoperate, uses internal company experts and collaborateswith the Security Representatives for Workers13 —alsodistributed within the various territorial realms—and withthe Vigilance Organs.The Safety Office is composed of 15 employees distributedacross the territory in the North West Regional Office, theNorth East Regional Office (Padova) and the Center/SouthRegional Office (Naples). This structure has the objective ofoverseeing and finding solutions to problems related toworkstation ergonomics, exposure to microclimates andenvironmental factors (noise, light, temperature, humidity,suitability of work premises) and emergency management(fire prevention and first aid). The office is closely connectedto and operates together with the Operational Security Unitas far as the risk of theft is concerned (protection of people,security services, relationships with Security Representativesfor Workers).The extension of the Prevention and Protection Service to allthe Bank Networks of the Group is currently underway andimplies, amongst other things, the union of the RiskEvaluation Documents, the emergency and first aidprocedures and the contents of the information andtraining programs.Banking activity has historically been an area of very lowrisk, as shown by the figures of the Bank Networks.Accidents on the job suffered by employees in 2003 were atotal of 388, and characterized by a generally low level ofseriousness. The presence of pathologies attributable toprofessional diseases is negligible.

Some specific projectsIn order to ensure maximum well-being for ourcollaborators, certain health risks and workers’ securityhave been subject to further analysis with respect to thatrequired by law.

13. The Security Representatives for Workers are present in the following companies:- Sanpaolo IMI : no. 25- Sanpaolo Banco di Napoli : to be appointed- Friulcassa : to be appointed- Carisbo : no. 7- Carive : no. 6- Cariparo : to be appointed

• Antismoking CampaignOn the basis of an awareness of the risks linked to active andpassive tobacco smoke, an antismoking campaign has beenrealized in the course of 2003, resulting in the extension of asmoking ban in all closed buildings and environments (theban was made effective in February 2004).

• Radon Gas Monitoring ProgramThe radon gas emits radioactive particles and itsconcentration in the air, beyond certain limits, cancreate a risk factor for human health. In 2003, amonitoring program for determining the presence ofradon gas in all underground work environments wasstarted and will be completed by the end of 2004.

• Improvement of workstation ergonomics In order to improve workstation ergonomics in theoperational points that were not completed recentlyand which have armored counters, the substitution oftraditional with flat screen monitors wasimplemented, and the workplace counters aremodified by widening the leaning surface; wherepossible, and in conjunction with operationalrestructuring, the workplace counters have beencompletely replaced.

Safety

Sanpaolo IMI

Sanpaolo Banco di Napoli

Cassa di Risp. di Padova e Rovigo

Friulcassa

Cassa di Risparmio di Venezia

Cassa di Risparmio in Bologna

Banca Popolare dell’Adriatico

Total Bank Networks

* Relationship between the number of company accidents and the annual number of work days.

** Relationship between the number of company accidents and the number of days of absence.

No.accidents

261

28

13

13

18

26

29

388

accidentfrequency*

1.13

0.24

0.06

0.06

0.08

0.11

0.13

-

seriousnessof accidents**

0.01

0.01

0.04

0.08

0.05

0.06

0.05

-

Table 17 - ACCIDENTS


In order to provide adequate protection from physicalrisks deriving from willful acts to which employees andclients may be exposed while conducting bankingactivities, Sanpaolo IMI has created a specific structurewithin the Purchases and Logistics Department, theOperational Security Unit, entrusted with identifying andimplementing the most suitable security measures(systems and provisions).With regards to provisions, a leaflet called “BehavioralModalities for the Protection of People and Goods” hasbeen drafted and is constantly updated, and can beconsulted online. As far as procedural aspects areconcerned, considerable effort is directed towardscontrolling the robbery phenomenon—the most commonrisk to which branches are exposed. In particular, an internalprocedure of integrated analysis has been developed whichtakes into consideration the diverse factors that affect thisphenomenon and allow to measure the interventions tostrengthen security measures for branch protection. Inaddition, a series of training courses completed in the lastcouple of years on security topics will be integrated, in2004, with a specific course on “robbery risks”.In the course of 2003, the provisions and securitymanagement procedures were extended to theoperational points of the Sanpaolo Banco di Napoli (in

progress, but the extension of the “robbery risks”evaluation system still needs to be completed).The constant commitment to supplying adequateprotection to all branches allows us to be a Banking Groupthat is more secure with respect to the average of thesector. The extension of these provisions and securityprocedures to all the Bank Networks of the North East,which will take place in the course of 2004, should allow afurther improvement of these results.

Security

Laur

a Ro

nchi

Sanpaolo IMI


Cassa di Risp. di Padova e Rovigo

Friulcassa

Cassa di Risparmio di Venezia

Cassa di Risparmio in Bologna

Banca Popolare dell’Adriatico

Total Bank Networks

System

No.robberies

100

52

29

6

9

21

13

230

2,427

No.robberies/100branches

No.thefts/100branches

6.8

7.5

10.3

4.1

6.3

10.1

9.3

7.8

8.0

No.thefts

3

6

4

1

1

3

0

18

272

0.4

0.4

1.4

0.7

0.7

1.4

0.0

0.6

0.9

Table 18 - ROBBERIES AND THEFTS


People: 2003 objectives


Continuation of people developmentand valorization policy, with specialconsideration given to successfulresources within the Group.

Implementation of actions to increaseefficiency and foster future growthconsistently with the indications of theindustrial plan.

✓Training days and the average per capita hours of training wereincreased (+6.5% in the Sanpaolo IMI and Sanpaolo Banco di Napoliperimeters).

✓ 436 human resources in the Sanpaolo IMI and Sanpaolo Banco di Napoliperimeters were inserted into professional re-training programs; 219were assigned to the distribution network and 27 to central structures.

✓ The number of human resources belonging to the followingcommunites were increased: promising employees (+701, for a total of2,714 people), the number of editions (+77) of dedicated developmentprograms and the number of involved people (+848)

✓ Management by community turned out to be a tool for managementof the executive needs of the Group and for managerial exchange, aswell as a valuation method of emerging human resources.

✓ The management systems defined by Sanpaolo IMI and constituting an“integrated system of planning, management and development ofresources” were extended to all commercial banks of the Group.

✓ The “departmental type” informational system completed with amultifirm perspective, capable of managing all the components of theGroup was completed. In this context, the integration of the BankNetworks has already been activated.

✓ The “directional system of management of Group personnel and itscosts” was completed.

✓ The “evaluation system of the effect of human capital on value creation”was developed with the start-up of the first IT development activities.

✓ Over 2,200 adhesions to the Fund for staff in the bankingindustry of the Sanpaolo IMI and Sanpaolo Banco di Napoliperimeter (equal to 77% of those entitled); about 700 in theformer Cardine Banks.

✓ In the Sanpaolo IMI and Sanpaolo Banco di Napoli setting:- a decrease of 1,264 human resources as a net result of 1,847resignations and 583 new hires;- a rejuvenation of personnel and increase in overall education level;- a personnel reduction in central structures (-2 %) in favor of thedistribution network (+0.7 %)

Continuation of the flexiblecompensation policy

✓ Average compensation data by contractual category in line withsystem averages

✓ Incidence of the variable component superior to the system average

Development of new systems andtools for the management of humanresources:1) managerial control over Group

personnel and its costs;2) an evaluation system of Human

Capital in creating company value;3) support tools for decisions made

with IT solutions.



Application of a merit-based award-granting system based on three factorsdetermining the value of a person:“skills”, “performance”, “potentialfor development”.

✓Rate of unionization of the Group personnel is in line withnational averages of the sector.

✓ Absence of conflicts in the complex operations of corporaterestructuruing or which have involved the Group in 2003 withthe founding of Sanpaolo Banco di Napoli and extension, tothe latter’s personnel (about 6,000 people), of the level ofguarantees of Sanpaolo IMI personnel.

✓ The “Fund for staff in the banking industry” was activated for thepersonnel of Sanpaolo IMI and Sanpaolo Banco di Napoli and,later, for those operating in the former Cardine Banks.

✓ The company welfare tools were strengthened.

✓ The recruitment of employees of protected categories wassafeguarded (1,639 human resources of the overall Group personnel)

✓ The analysis of communication needs was completed and abroad training initiative defined for 2004.

✓ An Intranet Portal as a new tool dedicated for internalcommunication became operational.

✓ The house organ directed at personnel was restructured.

✓ Support for the “Clear Deal” project.

✓ Extension of the “Behavioral Modalities for theProtection of People and Goods” guide to the branchesof the Sanpaolo Banco di Napoli;

✓ Extension of the “robbery risk” evaluation system to allthe branches of the Sanpaolo Banco di Napoli (not yetcompleted).

✓ 2,032 human resources in the Sanpaolo IMI and SanpaoloBanco di Napoli have benefited from a career advance:

• 54 promotions to executive level

• 690 promotions within the managerial category;

• 639 people promoted to the managerial category;

• 649 promotions within the professional areas category.

Confirmation of the transparentindustrial relations policy open tosocial profiles.

Creation of an internalcommunication plan.

Extension, to the Banco di Napoli, ofall the security and “risk evaluation”procedures of Sanpaolo, in particularwith regards to the indirect risksderived from work environments.

106

We intend to guarantee, in themedium and long term, an adequatereturn on the capital invested byshareholders whether by dividenddistribution or the appreciation ofshares in the Stock Exchange.

We believe that attending theinterest of our clients with themaximum spirit of service is a pre-eminent condition for the Group’sgrowth and the appreciation of ourshareholders’ stock.

We intend to have the Groupgovernance permanently marked byhonesty, fairness and transparency.

We set ambitious profitability andperformance goals, aligned with thebest European levels, developing asense of responsibility of each memberin the pursuit of this objective.

We desire to treat every singleshareholder with the same respect andconsideration as that given to largeinvestors.

We are well aware of the fact thatBank capital is made up of theresources of our shareholders and thatwe have a duty to use it with respect,because it is from our care andattention that their future is ensured.

Creation of value

Customerorientation

Integrity

VALUES



specific qualities

Responsibilityin the use

of resources

(Value in detail

2003 Social Report – Social and Environmental Report

Shareholders

1072003 Social Report – The shareholders

Sanpaolo IMI’s share capital is represented by1,837,166,000 shares, comprising 1,448,831,982ordinary shares and 388,334,018 privileged shares.Privileged shares, held by Compagnia di San Paolo,Fondazione Cassa di Risparmio di Padova e Rovigoand Fondazione Cassa di Risparmio in Bologna, areentitled to vote only during Special Shareholders’Meetings. As compensation for that limitation, the“privilege” is related to:

• privileged rights in the event of capitalrepayment;

• an interest in the balance sheet net profitsequivalent to 5% of share nominal value;

• a right to accumulate non perceived dividendswith those pertaining to two successive fiscalyears.

Compagnia di San Paolo

Fondazione CR Padova e Rovigo

Santander Central Hispano*

Fondazione CR Bologna

Giovanni Agnelli & C.

Deutsche Bank AG**

Mediobanca

Fondazione Cariplo

Caisse des Depots et Consignation

Società Reale Mutua Assicurazioni

Ente Cassa di Risparmio di Firenze

Credit Lyonnais SA

Fondazione C.R. Venezia

14.5

10.8

7.7

7.7

3.8

2.1

1.9

1.7

1.7

1.5

1.5

1.5

1.5

7.5

4.4

9.8

3.1

4.9

2.7

2.4

2.2

2.2

1.9

1.9

1.9

1.9

% of share capital

MAIN SHAREHOLDERS (percent)

OrdinaryTotal

Such Foundations have also agreed to hold aninterest in the ordinary share of an ad hoccompany (Fondaco SGR), created in January 2002,where a minority interest is held by a technicalpartner, Ersel Finanziaria. The capital contributionto such undertaking has not yet been realized inwait of the completion of the regulatoryframework in relation to that business.The first thirteen shareholders own, as of 31December 2003, based on available information,46.8% of the ordinary shares and 57.9% of thetotal share capital.Specific consulting agreements have entailedcertain arrangements amongst the principalshareholders aggregating 16.5% of the ordinaryshares. Such agreements expire on April 13, 2004.

*After 31 December 2003, notice has been received from Santander CentralHispano of an increase to 8.6% of the interest held in Sanpaolo IMI total sharecapital.

**Early in March 2004 Deutsche Bank has advised of a reduction to 2% of theinterest held in the total share capital.

Cont

rast

o


From the geographic point of view, about 58% ofthe ordinary shares is held by Italian shareholders,while the remaining 42%, held by foreign investors,reflects a strong European pre-eminence (35%).It is worth noting also, that in the framework of thepublic shareholding initiative, promoted in June2003, 14,090 Sanpaolo IMI employees haverequested allocation of the Bank’s ordinary shares.

Sanpaolo IMI’s shares are traded in New York in the form ofAmerican Depositary Shares (ADSs), promoted by JP Morganas trustee, at a rate of 2 common shares per 1 ADS. As at theend of 2003, 11.7 million ADS are held by registered holders.

Italy58%

Spain & Portugal11%

GEOGRAPHICAL DISTRIBUTION OF ORDINARY SHARES

Scandinavia1%Benelux4%

France10%

UK4%

Germany5%

USA5%

Rest of World2%


Assembly room of the Executive Commitee in the office of piazza San Carlo in Turin


The Group has adopted a three-year strategic plan in2002, intended for the creation of value forshareholders. Upon confirmation of its focus onstrengthening its position in the domestic market, theplan outlines the Group’s priorities, led by theconsolidation of the position achieved in the retail andbusiness banking services.Within the prevailing uncertainty of the economiccontext, the plan has set quite ambitious objectives, asmeasured by the target profitability and performanceindexes, but in light of the results attained, they can beconsidered within reach through the implementation ofthe actions planned, which, as explained in theparagraphs devoted to the Group’s strategic objectives,are designed to follow five specific guidelines.

2003-2005Strategic plan

1. Focus on “Core Retail Banking Assets”

• Adherence to the current strategy

• Innovative distribution model

• Growth in revenues within a challengingenvironment

2. Cost control

• Human resources

• IT platform optimization

• Logistics/procurement process

4. Portfolio Management

• Active and efficient managementof equity

3. Appreciation of other activities

• Profit growth of the business portfolio

• Improvement of the Group’s share inbusinesses with high growth potential

5. Commitment to market communications

• Permanent updating of strategic lines andobjectives attained

Cont

rast

o


Thanks to the results obtained over time, the Grouphas always adopted a generous dividend distributionpolicy, which is also true for fiscal year 2003, whenthe pay-out ratio was equivalent to 74% of theconsolidated profits. The main credit rating agenciesin the world, on the other hand, have, with theirratings, underscored Sanpaolo IMI’s economic andfinancial strength.

Here below follow other indicators of particularinterest to the shareholders and more closely relatedto the strategic plan:

• Dividend yield (dividend/annual average price): togetherwith share performance, it delivers the average annualreturn of an equity investment. In 2003, it was 4.8%, upcompared to the past two years and exactly equivalent to3.97% in 2001 and 3.18% in 2002;

• Three year CAGR (compound annual growth rate) ofearnings per share, which measures the annual averagegrowth target for the medium to long-term: for the threeyears 2003-2005 it is set at +25.7%.

• NPL ratio: it shows the relation between net nonperforming loans/net loans. For 2003, it is equal to 0.9%,with a further improvement compared to the past fiscalyear and reaching absolute excellence with respect toEurope levels.

As regards the targets for 2003, as announced at the beginningof the fiscal year, positive results have been attained:

Credit rating and dividend policy

Fitch

Moody’s Investors Service

Standard & Poor’s

F1+

P-1

A-1

AA-

Aa3

A+

SANPAOLO IMI DEBT RATINGS

OPERATINGRESULT

NETPROFIT COST/INCOME ROE

Medium/long-termdebt

Short-termdebt

Target Result Target Result Target Result Target Result

2003 data

2,372

2,717

934 972

65.5 61.9

8.8 9.0


The performance of Sanpaolo IMI share prices alongthe whole 2003 has been positive, with a net 66.8%increase. On the other hand, in order to evaluate thecreation of value for the shareholders in the mediumand long term, great significance is given to thecomparison between Sanpaolo IMI shares performanceand the Mib bancario, which effectively shows whatintrinsically distinguishes the specific equity from thoseof other companies in the same sector, listed on thesame stock markets, even if exposed to the sameexogenous phenomena. Such indicator has resultedequal to +28% and is witness to the fact that themarket has effectively taken note of:

• he rapid progress of the operations related to the integrationof the former Banco di Napoli and Cardine networks;

• the significant influence of the traditional business atrevenue level;

• the consistent cost control policy;

• the maintenance of a good asset quality and soundequity ratios;

• streamlining of the portfolio related to non-typicalbanking business.

During 2004, Sanpaolo IMI shares have been impacted bythe still challenging environment, recording, as of April 5,a 5.8% decline; in the same period, the Mib bankingindex has also fallen by about 3.1%.

Cont

rast

o


Investor relations

Transparency and direct communications with shareholders,institutional investors and the financial community is securedand managed by the Investor Relations Department, whichascertains that timely information on the activities, strategiesand results of the Group is released in full compliance withregulations on price sensitive information. Communicationsfor the general public are designed with stringenttruthfulness, clarity and completeness criteria.Financial statements are issued on a quarterly, semi-annual

and annual bases and are prepared according to theaccounting standards in effect in Italy. In addition, an annualbalance sheet prepared according the US Generally AcceptedAccounting Principles, 20-F standard, can always be obtainedeither in hard copy or at the Sanpaolo IMI internet site.Communications directed to the financial community --analysts, institutional investors, credit rating agencies-- aredisseminated through two channels: all what is describedabove plus an intense internal communication activity. The topmanagement is always informed of Sanpaolo IMI sharesperformance and the views of the market with respect to ourshares and the banking industry in general, the expectationsof the market with respect to the Group’s results and finally,reports on the communications issued. To this end, regularlyusing the input of 30 other brokers, consensus on theeconomic data and the target price is maintained updated.Aside from meetings in person, our internet site is a significanttool to maintain communications with the financialcommunity and retail investors. News are posted from time totime in the different specific sections taking into account theGroup’s profile and governance, economic and financialinformation (balance sheets, semi-annual and quarterly reportsand summary tables), as well as the headings of news releasesissued by the Company in addition to the calendar of importantcorporate events for the year. Information on the meetingsperiodically held with financial analysts is disclosed through thesite, where usually there is available a copy of thedocumentation distributed. The contents and friendliness of thecorporate site are regularly tested and subject to ongoingimprovement, and in its consideration we intend to measurethe progress made and the definition of new objectives. Thispolicy has been rewarded by a survey of the Investor-relations.it,where the Sanpaolo IMI Group has been designated the mosttransparent site among the Mib 30 companies.The daily market monitoring activity developed by the InvestorRelations Department is based on the permanent interactionwith other players in financial markets through different typesof communications. Also in this environment, which can bedefined as ordinary, during 2003, certain specific events havebeen performed, intended to improve visibility in keymoments of the year, or bring focus on certain particularlyrelevant subjects:- publication, in February, of the 2002 fiscal year results and

the 2003-2005 strategic plan;- performance of 3 conference calls held for the presentation

of quarterly results to the market;- organization of a Small and Medium-sized Industry Seminar

intended to discuss the characteristics of this market segmentand the approach adopted by the banking industry;

- participation in 6 international and domestic bankconferences.



Shareholders: objectives 2003


Increase in company’s profitability vis-à-vis ambitious objectives with specialfocus on cost control and contained riskmanagement over a sound financialbase. Some of the actions planned: 1) Three-year plan, with the establishednetwork integration process andadoption of a new distribution model;2) Initiatives designed to improve theprofitability of the main business linesand proactive share portfoliomanagement.

Priority to the adoption of a corporategovernance model according to thebest international standards thatmeets even the recently revisedstringent US regulations.

Eventual improvement of investorscommunications, including actions such as:1) Increasing the activities in internationalmarkets and with SRI investors;2) Keeping a timely updating of the IR siteand deployment of the new site of theGroup.

✓ During 2003, actions were taken for each one of thefive guidelines of the 2003-2005 strategic plan (See2003 Strategic Guidelines for a discussion of specificactions).

✓ Specific actions have been implemented inorder to increase transparency in companygovernance and match US regulations and theSarbanes-Oxley Act.

✓ Implemented 10 roadshows in international markets(compared with 4 held in 2002)

✓ Preparation of questionnaires, conference calls and,for the first time, organization of a road show forSRI investors.

✓ Development of a new institutional site for the Group,containing specific sections related to corporategovernance and Corporate Accountability and updatedcommunications on the consensus of financial analystson anticipated statements of income.

116

We want to responsibly play a leadingrole in order to actively contribute tosupporting and developing thecountry’s economy.

We see the territory as a network ofrelations to serve with a spirit ofservice.

We want to take the concept ofbusiness citizenship and translate itinto concrete behavior, guaranteeingmaximum transparency of our action.

One of our most ambitious aims is tobecome market leader in financialservices for the territory.

We intend to combine the dimensionof an international group withterritorial roots, exploiting localcultures and facilitating access tocredit and basic financial services,even to marginal subjects andeconomies to encourage greaterparticipation in economic and civil life.

We devote maximum attention to thedirect and indirect socialconsequences of the actions weperform or finance.

Value in detail

Creation of value

Customerorientation

Integrity



specific qualities


resources

(Community


VALUES

1172003 Social Report – The community

The Sanpaolo IMI Group is present throughout Italyby way of Banks with deep roots within theirrespective territories, and whose identity is valued bythe Group they are part of.With the aim of presenting the new Sanpaolo IMI Groupreality, and especially the diverse Banking Networks whichmake it up, in the winter of 2003 a national publicitycampaign was broadcast through commercials ontelevision and cinema, in daily newspapers andperiodicals, over the Internet and through posters andcommunications exhibited in the branches.This campaign, conceived by the Burnett Bgsadvertising agency, was centered on a green (thecolor of the Group’s logo) “guiding” path whichpasses through the cities in which the Italian Bankingbranches are located, and terminates its “journey”encircling the Sanpaolo logo and the logos of all theother Banks connected to the network.In this manner Sanpaolo IMI highlighted the guidelines ofits distribution model: the strength and experience of theGroup originating from the diverse local realities of thecountry, through the valuation of the deep roots of eachBank within the historical areas in which it is established. Therefore, the message expresses the attention paidby the Group to the specific needs and requirementsof the different social and economic components, aswell as the personalized services offered tocustomers; a concept summarized in the claim madeby the publicity campaign: “Your dimension”.

As regards the respect and attention to the territory, thestudy and relationship of exchange and collaborationwith local realities appear to be particularly important:by this we mean the establishment of the firstConsultative Committee on local economy in Bari andthe Association of Studies and Research for SouthernItaly, initiatives which prove the centrality of SouthernItaly for the Sanpaolo IMI Group.

Consultative committees on the local economyThe Consultative Committees on the localeconomy are instruments aimed at developing theknowledge of the economy of the referenceterritory and the trends in the evolution of thedemand for and offer of financial services forbusinesses and customers. The first ConsultativeCommittee was held in Bari in November 2003and was sponsored by Sanpaolo Banco di Napolito support the activities of the Bank in Apulia.Similar initiatives are also planned for thereference areas of Sanpaolo Banco di Napoli,Campania, Basilicata and Calabria.In order to achieve the above aims, the BariConsultative Committee takes advantage of theprofessionalism and experience of local prominentpersonalities in entrepreneurial, cultural andprofessional fields and works in collaboration withthe Bank’s Territorial Direction. The first meeting,which was attended by authoritative exponents ofthe same, shed light on a number of the territory’sneeds as well as the trend in the local economyand allowed close examination of someparticularly important sectors.

Exchange with local communitiesand territorial research

Big citiesover 500,000inhabitants13%

Medium-sized townsbetween 30,000 and 500,000inhabitants 32%

Small townsless than

30,000 inhabitants 55%

BREAKDOWN OF BRANCHES ON THE BASIS OF THENUMBER OF INHABITANTS IN EACH LOCATION

Udine


The Association of Studies and Research for Southern ItalyThe Association of “Studies and Research for SouthernItaly” was formed on 1 July 2003 and its founders areSanpaolo IMI, Sanpaolo Banco di Napoli, Banca OPI,Compagnia di San Paolo di Torino, Istituto Banco di Napoli– Fondazione and SPIMI Investimenti.The Association, which boasts of a consolidated knowhow in the field of study and research on the southerneconomy, constitutes a privileged observatory forvaluations and analyses of the critical factors andsuccesses of the development of policies in the territory.Its aim is to create added value to the social and economicfabric of Southern Italy and to its European andMediterranean dimension, giving leverage to theimprovement of knowledge of the territory and itscapacity to offer. The research activity of the Association is, in addition tothe research activities performed on request by theassociates, developed along three main tracks:

• infrastructures, territorial public bodies and local publicservice agencies;

• the dynamics and structure of the productive activitieswithin Southern Italy and the policies for developmentin the territory;

• solidarity and the world of non profit organizations.

Terra

Italy

(TM

)

In the second half of 2003, some research activities based onthe aforementioned themes were concluded, in particular:

• the southern water supply system: a comparison ofregions;

• the tourist sector in Southern Italy;

• imports-exports and flow of currencies: the competitiveposition of the regions in the South;

• the infrastructure scenario in Southern Italy and therelationship between local finance / infrastructure in Apulia;

• the “Southern Italy Focus – a quarterly report on regionaleconomies”;

• a fortnightly newsletter on policies for regionaldevelopment, with particular reference to communityfinancing (POR) and regional laws relating to the“Objective 1” area with the addition of Abruzzo.

The Association also publishes two journals (the EconomicReview and the European Union Dossier) which are mainlydistributed throughout the whole of Southern Italy, to companiesand public bodies, the academic world and to trade associations.The Association is open to exchanges and communicationwith the territory: to the effect that it has set up a website(www.srmezzogiorno.it) and commenced relations withimportant research centers (Fondazione Curella, Isae,Svimez, etc.), with Councilors from the Campania Region(production activities, research and technologicalinnovation) and with universities..

Naples, piazza del Plebiscito


The Sanpaolo IMI Group’s contribution to theCommunity in which it operates is somewhat variedand ranges from financing and consultancy servicesespecially aimed at supporting and promoting localeconomies, to supporting environmental issues andto donations made by Group companies. Thefollowing is a reclassification of the activities andcontributions made according to the guidelinesissued by the London Benchmarking Group (LBG):this model, which represents an important referencepoint in social-environmental reporting at Europeanlevel, identifies 4 categories of contributions to thecommunity. The different categories, represented by apyramid, demonstrate a progressive evolution fromactivities strictly related to the core business of thecompany, conducted according to the criteria ofsocial responsibility, to those for which the return forthe business is minimum. The cataloging of the activities according to themodel is not simple, since some actions have multiplepurposes and aspects and may correspond todifferent categories. The precise subdivision of the

Donations

• Disbursements for 1.7 million euro, of which around 50% are destined forsocial purposes.

• Donations of disused computer equipment: 262 units in 2003

Investments in the community

• Projects to encourage access to the bank of disadvantaged categories:support for the Compagnia di San Paolo micro-credit project (plafond of 2million euro, of which 1.6 for loans) and the basic banking service

• Immigrants: services for payment and multiethnic points

Commercial initiatives in the community

• Sponsorships totaling 22.1 million euro: the project for the Olympics and thesponsorship of the Banking Networks

• Projects to cooperate and also operate, with non-profit organizations

Business basics

• Banca OPI: 2.7 billion euro of loans for projects with strong social andenvironmental benefits

• FIN.OPI: investments in infrastructure projects, in local service companies andin environmental initiatives for 64 million euro

• Support for the High-speed/High-capacity Turin-Lion rail connection

donations also necessitate a targeted system ofinformation and accounting which the Groupcurrently does not have. Thus we can only providean indication of the items which are known to date.Lastly, since it refers to a finance Group, the corebusiness is manifested in financing and direct capitalinvestment activities: the specific nature should alsobe considered when compared to other subjects.

The contribution to the stakeholder community


Sanpaolo IMI also donates unused personal computersand printers to charitable Bodies and Associations. Suchequipment is no longer adequate for the advancedstandards of technology used by the Bank, but are stilluseful for activities such as individual computer training.As a matter of fact, worth mentioning is the opportunitythis represents to schools which, through suchdonations, can provide better computer teachingfacilities by enhancing the equipment available.The following table shows the quantities of thedonations according to the macro-type of beneficiary:

Investments in the communitySupport for the Compagnia di San Paolomicrocredit project In October 2003 a social micro-credit project wascreated by Compagnia di San Paolo to which theSanpaolo IMI Group acts as operating partner. Thisinitiative provides an opportunity for personal andsocio-economic growth to Italians and foreignerswho wish to develop a business or attend a trainingcourse with the aim of finding employment butwho, for various reasons, find it difficult to receiveloans: young people intheir first job, men andwomen who would like tostart work, immigrants.Overcoming a merelycharitable criteria, thisproject proposes totransform a potential work prospect into a real joband to prevent the serious and widespreadphenomenon of usury.This initiative has been developed according to aninnovative triangular scheme involving compagniadi San Paolo, the Sanpaolo Network and SanpaoloBanco di Napoli, and 4 non-profit territorial Bodies.

SUBDIVISION OF DONATIONS

Cultural associationsand enties 26%

Other9%

Scientific and medicalresearch institutes and

foundations 3%

Religiousassociations andenties 23%

Social welfare associationsand voluntaryorganizations 27%

Institutions in the field ofeducation and training 12%

DonationsIn 2003 donations for 1,668 thousand euro were disbursed,in the form of traditional methods carried out by each bankin the Group within their respective reference territories.Almost half of the 2003 donations were made to and forcharitable bodies and initiatives. Periods of training andscholarships and, generally donations to bodies operatingin the field of education and research, which in the LBGcategory may also be classified as investments for thecommunity, exceed 250,000 euro.Most of the donations were made by Banks within theirterritorial roots and refer to modest amounts. By way ofexample, we would like to mention the donation byBanca Popolare dell’Adriatico of the equivalent value ofChristmas gifts to employees (22,000 euro) toassociations for socially benevolent purposes. As far as donations are concerned, the intense activity insocial, cultural and artistic fields, carried out byInstitutions present in the Sanpaolo IMI shareholdingshould be remembered: Institutions from which theGroup’s Banks originate and which carry out importantsupporting activities within their historical territory.

Schools and educational institutions 118

Parishes and religious associations 24

Associations and cooperatives 120

Total 262

Quantità

Receiver

Amount

Duration

Type

Interest rate

Investigationcharges

Methods ofrepayment of loan

Substitutetax

Earlyrepayment

Interest on delayed payment


MAIN TERMS AND CONDITIONS OF FINANCING

Compagnia di San PaoloPromoter

Gruppo Sanpaolo IMIOperative Partner

4 Non-profitorganizations

Leverages 2 million euro, of which 1.6 for funds toguarantee loans and the remainder to cover thecosts of non-profit organizations

• Sanpaolo IMI

• Sanpaolo Banco di NapoliComplete the application and issue loans applyingspecial low rates

• Ufficio Pastorale Sociale e del Lavorodell’Arcidiocesi di Torino (Turin)

• Fondazione Antiusura Santa Maria del Soccorso(Genoa)

• Fondazione Risorsa Donna (Rome)

• Fondazione San Giuseppe Moscati (Naples)These follow the application and assist theapplicants in the development of the project. Eachorganization has a plafond of 400,000 euro.

Subjects – residing in the provinces of Genoa, Naples, Rome or within the territory of the Diocese of Turin – with difficult access to loans and who,either singularly or in association with others in the form of a partnership or cooperative society, intend to start up or develop projects aimed atcreating an employment and/or developing a business activity.

Minimum: 2,000 euro (1,000 euro for projects aimed at creating employment)Maximum: up to 20,000 euro for an individual person, up to 35,000 for a partnership or cooperative society.

Minimum: 18 monthsMaximum: 60 months

Fixed rate loan, with monthly repayments, subject to opening a current account

EuroIRS for the same length of time, increased by a spread of 0.50%

Forfait of 25,00 euro and reimbursement of out-of-pocket expenses

Monthly installments

Currently equal to 0.25% of the amount loaned over a period of more than 18 months.

Allowed at no extra charge

Exempt


In the first months of operation non profit Bodiesreceived more than 169 requests14, of which 30 wereaccepted. In March 2004, loans totaling 315,200 eurowere authorized for 26 of those accepted. The projects financed were extremely mixed: themajority of them were for commercial businesses (sale offurniture, African artifacts, scooters, clothing, etc.), orfor businesses in the service sector (opening of a nurseryschool, start up of a dry laundry, telephone center andInternet services, etc.). In some cases the loan was forthe purchase of automobiles or for driving licenses tostart up an activity (the purchase of a vehicle for apainter-decorator, driving school for an activity toaccompany the aged and disabled, etc.). The otherinitiatives referred to the opening of an art gallery andthe management of a bar. The Fondazione Risorsa Donna, which financedfemale immigrants, also provided a training course

for women, focusing on issues such as applying forloans and managing small businesses: the lectureswere held by ABI (Italian Bankers Association) andthe Associazione Laureati LUISS of Rome. The sameInstitution also requires that its beneficiariesparticipate toward the total cost of the project, bypaying between 5 and 10%, with the aim ofpromoting responsibility. The Fondazione San Giuseppe Moscati also chose tofavor those applicants prepared to participate withtheir own funds to cover the total cost.Lastly, the Sanpaolo IMI Group, by way of its widespreaddomestic presence and its strong interest in this initiative,together with other Institutions holding shares or thosewith whom it already cooperates, actively promoted themicro-credit project so that it could be repeated in otherareas of Italy, by making available the operations of otherGroup Banking Networks.

Commercial activities 9 35% 113,500 36%

Production of services 7 27% 118,700 38%

Purchase of automobiles 4 15% 49,000 16%

Driving licenses 4 15% 4,000 1%

Catering 1 4% 10,000 3%

Art and culture 1 4% 20,000 6%

Total 26 100% 315,200 100%

Number of projects financedFields Amounts per field (€)

BREAKDOWN OF PROJECTS FINANCED

BREAKDOWN OF REQUESTS

Sex

Citizenship

Employment

Province of Naples

Provinceof Rome

Province of Genova

women 33%men 67%

Italian 78%foreign 22%

self-employed 35%employees 20%

unemployed 45%

women 45%men 55%



unemployed 42%

women 100%

foreign 100%


unemployed 40%

women 43%men 57%



unemployed 28%

Territory of Arcidiocesi di Torino

14. Of these, 105 were forwarded to Ufficio Pastorale e del Lavoro of the Arcidiocesi of Turin, 20 toFondazione Antiusura Santa maria del Soccorso (Genoa), 22 to Fondazione Risorsa Donna (Rome)and 22 to Fondazione Giuseppe Moscati (Naples).

123

Basic banking serviceIn the context of the Clear Deal Project(“PattiChiari”), in February 2004 the “Basicbanking service” was set up in February 2004,aimed at facilitating the first access to the bankand to its main services for those with limitedfinancial needs. It envisages offering a simplifiedservice, commonly known as “Basic BankingService”, based on a current account or prepaidcard, available solely for those who do not hold acurrent account with the same bank. The service isaimed at the 20% of the adult population in Italywhich does not yet hold a current account.Sanpaolo and Sanpaolo Banco di Napoli offer theservice through its “Benefit Start – Basic BankingService” which guarantees – in accordance withthe Clear Deal Consortium – limited operations: itis not possible to receive a check book¸ hold amanaged savings account, receive loans, performoperations without liquid assets. It is a simple andeconomical account which offers a package ofuseful instruments to deposit money and manageincomings and payments.The pricing has been determined according to theaims of the Clear Deal initiative, mainly being toprovide a banking service to the less affluent, buttaking into account the costs involved in keepingsuch accounts.

Immigrants: systems of payment and the firstMultiethnic PointSanpaolo IMI is particularly sensitive to theproblems of those living in Italy withoutEuropean citizenship. In this sense a project iscurrently being developed with the aim ofoffering the possibility to perform transactionssuch as sending or transferring funds to extraUE countries (on this subject you are alsoreferred to the section dedicated to retailcustomers).Further confirming the attention whichSanpaolo IMI has reserved to a cosmopolitansociety, a project to create a Multiethnic Pointhas been set up to support the needs forconsultancy and transactions of potential extra-UE customers. The first Multiethnic Point, distinguished by apersonalized environmental andcommunicational layout, will be located inBranch no. 5, at Piazza della Repubblica in Turin,an area commonly known as “Porta Palazzo”and which is the commercial-residential hub to asignificant number of extra UE citizens.The creation of this Point will simultaneously seethe birth of ad hoc products and servicesfocused on the needs of the specific customertargets, particularly, a basic current account fora moderate charge and an economical andsecure service for transferring money abroad.


Pier

o O

ttavia

no

Pier

o O

ttavia

no


Commercial initiatives within the communityAmong the commercial initiatives for the communityare included sponsorships and collaboration with nonprofit organizations whose main aims are to providesocial benefits, assistance and research. Theseinitiatives are somewhat diverse and sometimes theboundary with the category of investments in favorof the community is transient: in some cases it refersto initiatives aimed at confronting social issues withreturns for the Group only in the medium-long termand of uncertain amounts. Since no pre-set computerprogram exists at the moment to separate thedifferent types and given the difficulty of insertingfixed standards for the division, all initiatives of thisnature are inserted into this category.

SponsorshipSponsorships made by the Group Banking Network andby Banca OPI totals around 22.1 million euro. Amongthese is the sponsorship of the XX Winter Olympic Gamesto be held in Turin in 2006.The Sanpaolo IMI Group is the Principal Sponsor of theTurin 2006 XX Winter Olympics, which will be held from10 to 26 February 2006, as well as the IX edition of thePara-Olympics for disabled athletes to be held from 10 to19 March of the same year.

Sanpaolo IMI, which covers this role together with Fiat,already supported the candidacy of the city to host theGames, which return to Italy for the third time (after theWinter Olympics in Cortina in 1956, and the OlympicGames in Rome in 1960) and which arrive in Turin for thefirst time: this event is of great significance and is animportant opportunity for the territory which will host theGames and for the entire country. The Group isparticipating as sponsor consistently with the choice tosupport the projects and the initiatives able to generatenew growth and in full compliance with the universalvalues which link the Olympics. Linking our trademark with the Olympic symbol, willallow us to show all the Group’s interlocutors that thevalues we share such as commitment, dedication,professionalism, dynamism, competitiveness andsolidarity are perfectly coherent with the culture of theSanpaolo IMI business.From this viewpoint, the sponsorship is considered to be aterrain unifying different but consistent lines of action,centered on involvement externally and internally.Externally in three directions: relations with the customer,more generally with the community, and contributiontoward opportunities for development in the territorylinked to the Olympic event. Internally, for the sense ofbelonging and pride which being linked to such aprestigious trademark and to the Olympic values canarouse in those belonging to the Group. Sanpaolo IMI is also contributing, as partner, to therealization of the “Torino 2007” University WinterGames, which will involve the participation of athletesfrom universities around the world. Again, Sanpaolo IMI’sparticipation underlines the compliance with the universalvalues of sport and the strong attention which thecompany dedicates to young people.

Among the most important initiatives which the Group’sbanks have sponsored are the following:

• Support to some important Italian theaters, amongwhich the Teatro dell’Opera of Rome (Banca OPI),Teatro San Carlo of Naples (Sanpaolo Banco di Napoli),Teatro Comunale Giuseppe Verdi of Gorizia(Friulcassa), Teatro Comunale of Bologna (Carisbo15).Also worth reminding is the support provided byCarive to the Venice Council in favor of thereconstruction of the Gran Teatro La Fenice, in thecontext of collaboration with the structure which,among others, is beneficiary of part of the donationsprovided by the Venezia Serenissima Ethical Fund16;

• in the context of the bodies to safeguard theenvironment, the support given to the activities of

15. Carisbo is also founding partner of the Fondazione Teatro Comunale and as such participates inits management.16. See the section dedicated to Ethical Funds, page 59.17. Fondo per l’ambiente italiano.

realization of a Clinic for the Pathologies of the Elderly,capable of guaranteeing integrated prevention andmonitoring of pathologies and boosting homeassistance. Sanpaolo IMI provided support to thisproject in the spring of 2003, fuelled by the stronginterest in these issues, already witnessed by theactivities of Sanpaolo IMI Wealth Management in thecontext of the development of insurance and welfareproducts and by studies into the problems of long-termcare. The work of raising funds, which involved 2,000branches, consisted of customers donating a fixed sumof 3 euro and enabled us to collect 8,730 euro at theend of December, most of which was geographicallyconcentrated in the region of Central Italy.

• The initiative to protect and assist refugees continuedinto 2003 through collaboration with the UNHCR,which protects and assists refugees, evacuees, asylumseekers, stateless persons, and other categories ofpeople forced to leave their home and land because ofwar, persecution and the violation of human rights. Thesupport was aimed at safeguarding the safety of

refugees, assisting them in procedures for asylum andin the difficult task of reconstructing a life, andproviding medical care and an adequate education totheir children. Sanpaolo IMI collaborated by providingoperational support and by being a vehicle for aninformation campaign. From an operational point ofview, the branches of the Sanpaolo Network andSanpaolo Banco di Napoli were involved in fundraisingin the form of a lump sum payment, as alreadyexperimented in previous years, and through monthlydonations charged either to a current account or to acredit card. Donations may also be made usingautomatic bank tellers across the ATM circuit anddirectly through the Operating area atwww.sanpaoloimi.com. From an informationviewpoint, the initiative has been widely communicatedinternally and to customers (through the website andby specific reference in bank statements).


FAI17 (Sanpaolo IMI), the thirtieth anniversary ofFederambiente (Banca OPI) and the Sicurexpo Fair inUdine (Friulcassa);

• other sporting sponsorships, among which BancaPopolare dell’Adriatico’s sponsorship of theScavolini basketball team, Carisbo’s sponsorship ofthe Fortitudo and Virtus basketball teams andCariparo’s sponsorship of the AS Cittadella Padova,Calcio Padova and Calcio Rovigo football teams;

• Among the artistic and cultural fields is Carisbo’ssponsorship of the 2003 Arts Fair. Held each year inBologna, it is one of the most importantappointments in Italy for collectors, artists andcritics, and receives considerable internationalcoverage; and BP Adriatico’s sponsorship of theRossini Opera Festival at Pesaro;

• lastly, economic sponsorship for socially benevolentevents: above all, Carisbo’s support of solidarityevents organized by the association “Gli amici diLuca” (Luca’s friends), to make known theimportant system of research and care which hassprung up to help those families living the dramaticexperience of having a loved one in a coma.

Last of all, the collaboration between Carisbo andSanpaolo IMI Wealth Management in organizing theconference “Finance and ethical values: perspectives”,held in Bologna on 30 September 2003.

Collaboration with non profit organizations for socialinitiativesThere are a number of cooperating initiatives between thevarious banks within the Group and organizations with the aimof providing social, artistic, scientific and sporting benefits.Some of these are focused within the territory of reference andare expressions of the origins of the diverse realities of theGroup within the local areas in which they operate. Withoutentering into great length and detail of the numerouspartnerships, a brief summary is provided below.

• The ‘Facciamo Futuro’ project. The lengthening prospectsof life and the progressive ageing of the population haveincreased the number of people at risk of being nolonger self-sufficient: this is an increasing phenomenonin Italy. On the basis of such facts, the Management ofthe San Giovanni – Addolorata Hospital, one of the mostavant-garde hospitals in Italy, has concentrated itsattention on the improvement to health of the ageingpopulation, by starting up the “Facciamo Futuro” (Let’sMake a Future) project. The object of this initiative is toprovide a completely innovative service through the


• The UNICEF initiative. In 2003 Sanpaolo IMI again renewedthe invitation to its customers during Christmas to supportthe UNICEF projects in favor of children, through thepurchase of greeting cards and small gift items, available atall Sanpaolo and Sanpaolo Banco di Napoli operatingpoints. It was again possible to support one of UNICEF’sdevelopment projects by opening a Benefit Under 18account (see the section on “Retail customers”).

• The Masi Foundation: Sanpaolo IMI is founding partner ofthe ICE Foundation named after Manlio Masi, whichproposes to study, promote and develop the processes andstrategies of internationalization of the national economicsystem. The aim of the Foundation is to assign donationsand scholarships to young graduates residing in theEuropean Union, finance research and study into marketsand international exchanges, provide training activities, topromote the cooperation and spread of science and cultureand to provide other methods of support to businesses inrespect of the processes of internationalization.

• Territorial initiatives: the intense activity in this area byCarive which, because of its widespread distribution andhistorical proximity to the territory, is often involved inassociations and committees aimed at providing socialbenefits for fundraising. The bank performs suchactivities by providing assistance and making availableits financial consultants and branches, as well as byoffering special rates on accounts and on deposits andtransfers. Among such organizations it is worthremembering the Banca degli Occhi del Veneto and theAssociazione ABO, which is active in research intotumor markers. Carive also participates, as organizerand co-organizer, in a series of events particularlyimportant to the Venetian community, among which theCarive-Associazione Regatanti Gran Premio, an awardgiven to a rowing club participating in the popularVolalonga display and the Carivela challenge trophy.

Business basicsThe banking industry can contribute considerably towardthe development of the Italian productive system, byfacilitating the satisfaction for the demand of credit and byfavoring those operations which may result in an increase inthe supply of public assets, improvements to infrastructuresand the modernization of public institutions. In this contextthe Group operates through Banca OPI, the Group companyspecialized in providing finance and advice to the publicsector (with a market share of around 26%), and focusedespecially on infrastructures, and through its subsidiaryFIN.OPI, which acts as investor with direct capital.

Through its advisory services, therealization of project financetransactions and traditional financing forpublic authorities, Banca OPI activelycontributes towards improving theeconomic and competitive conditions inthe territorial areas to which financing isaimed.Banca OPI is particularly attentive tothe economic and social developmentof Southern Italy. In this respect, ithas strengthened its presence in theterritory by opening a Branch inNaples and has channeledconsiderable financial resources toSouthern Italy, thanks to thecompletion of global loans with EIBand the Council of EuropeDevelopment Bank, aimed atfinancing infrastructures in Objective1 Areas, with particular attention tothe sectors of education and health.Banca OPI has also contributedtoward improving the infrastructuresupplied to the southern regions withnumerous and importantinterventions such as, for example,the upgrading of the Salerno-ReggioCalabria motorway and of somesections of the stretches of roadconnecting major Sicilian cities.The financing activity performed in 2003(for a total of 7 billion euro), foroperations of a strong social andenvironmental nature was equal toapproximately 39% (2.7 billion euro), asignificant increase on the previous year(32% equal to 2.2 billion euro).The most significant projects were in theenvironmental services sector in thestrictest sense (integrated waste andwater cycle), in environment protection(preservation of the Venice Lagoon) inurban transport, urban improvementand social housing: altogether 1,320million euro were channeled towards


the financing of these activities in 2003.A significant amount of financing byBanca OPI was destined for supportingdecontamination consortia (268 millioneuro), and for renovating infrastructuresdamaged as a result of natural disasters(110 million euro).Within the scope of many projectscurrently underway, some particularlysignificant examples are:

• University construction. Banca OPI isstructuring a project financeoperation related to an initiative inTurin called the Biotechnology School.This is one of the first examples ofproject financing in the sector ofuniversity construction in Italy.

• Protecting Venice. Banca OPI hasparticipated considerably towardsfinancing of the works being carriedout to protect Venice and its lagoon.The principal loans refer to worksrelating to the physical protection ofthe lagoon, realized by the ConsorzioVenezia Nuova (New VeniceConsortium), operations under theauthority of the Venetian Region toreduce pollution and investments tosafeguard the historical heritage of

the major Towns in the Lagoon.

• Sea-Highways. In 2003 Banca OPIcontinued its activity in financingports, a sector to which it dedicatesconsiderable attention, above all inrespect of the progressiveimplementation of projects related tothe Sea-Highways. These will absorbthe significant increase in trafficforecast for the future years, avoidingfurther congestion of highways.

Other projects were related to theenvironment (see the section onEnvironment). As far as school construction isconcerned, following the earthquakewhich hit the region of Molise, and inrelation to an operation promoted by animportant Neapolitan company, BancaOPI proposed to the Campania Regionto identify a procedure to verify thestatus of school buildings in order toquantify the requirements necessary tobring them in line with the recentlymodified earthquake-proof regulations.From a series of checks on thevulnerability of these buildings, madeshortly after the last earthquake, it hasbeen confirmed that around 10% of the

school buildings can be consideredhighly vulnerable to earthquakes (in thecentral-southern region of Italy alone,there are around 1,500-2,000 buildings).At the moment this operation has nothad any follow-up but it is believed thatthe principle which envisages public-private partnerships (PPP) may graduallybe accepted, thus making it possible tostart up instruments such as ProjectFinance also for this type of operation.

Education, fair,culture333 (12.4%)

BANCA OPIDESTINATION OF INVESTMENTS OBJECT OF ADVISORY(Total investments 4,860 million of euros)

BANCA OPISOCIAL AND ENVIRONMENTAL FINANCING(million euro and % amount)

Health548 (20.3%)

Reclamationand industrial

268 (10.0%)

Naturaldisasters110 (4.1%)

Regional railways8 (0.3%)

Urban trasport urban improvementand social costruction projet578 (21.4%)

Port49 (1.8%)

Waste management17%

Urban and railwayTransport

1%

Water services

15%

Social construction3%

Urban improvement4%

Parking8%

Transport and logistic52%

495 (18.4%)

Environmental services306 (11.3%)

Protection of the lagoon of Venice

development courses


Support for the High-speed/High-capacityTurin-Lyon rail connectionThe High-speed/High-capacity Turin-Lyon railconnection is part of the Lisbon-Kiev “V Corridor”and comprises the element connecting Portugal,Spain, France and East Europe, across the Po rivervalley (Pianura Padana) which is the secondeconomic region in Europe, after Bavaria, in termsof GDP and the movement of goods.To support this project, the Group promoted theformation of an informal work group, chaired byProf. Alberto Majocchi, Chairman of ISAE –representing the Ministry of Economy, whichcontributed to defining the possible economic-financial scenarios and the relevant legal schemes,and supported the Italian government duringdiscussions with the French government. At thesame time as the project, the operation saw the

consensual procedures move forward with theapproval of the preliminary project on both theItalian and French sides.This support, given freely through Banca OPI (theGroup company specialized in financing publicbodies focused specifically on infrastructures), is setin the framework of the actions by the Group aimedat assisting in the realization of strategic projectsfor the future of the “New Europe”. Projects whichare also destined to redefine the exchange ofpassengers and goods between countries, throughthe development of models of innovative financingwhich are based on putting into effect the schemesfor Public Private Partnership (PPP).This project has a high socio-economic andenvironmental value: from the first point of view, inaddition to building a crucial connecting elementfor the Pianura Padana, it will allow traffic to flowon the high capacity Turin-Milan-Venice-Naplesrailway line, which is already being constructed andwhich is also financed by the EIB. This connectionwill provide a “bridge” for the development ofSouthern Italy and an outlet towards theMediterranean.In order to provide a physical dimension to theenvironmental problem, it is enough to considerthat the Turin-Lyon line will allow a reduction ofaround 300 tons per day in the emission ofpoisonous gases, thanks to the shift from road torail of around 3,000 lorries per day (even throughrail road transport)16.

Within the scope of the business initiatives with astrong social value, it is worth mentioning that atthe end of the 1980’s the Group participated in thepositive experience of Banco del Desarrollo (BDD).With 15.72%, Sanpaolo IMI is currently one of themajority shareholders of this medium sized Chileanbank. BDD is one of the main “laboratories”supporting local development in the Latin-Americaregion. It is particularly active in financing micro andsmall Chilean businesses and social construction andcontributes significantly towards University andprofessional financing and training.

18. With special reference to CO2 emissions, which have a significant impact on the global warmingeffect (greenhouse gases effect), it should be noted that a heavy vehicle introduces about 0.8-1.2 Kgof this gas for every km of travel (about 30.50 Kg/h on avarage)

Corb

is


The FIN.OPI (controlled by Banca OPI)operation also enters into the context ofpublic sector initiatives, as it acts asequity investor, i.e., investor withventure capital. There are three mainsectors in which FIN.OPI participates:1) projects to develop infrastructures

managed by public-private partnerships;2) local public service companies;3) initiatives relating to the environment.

These investments are realized with bothdirect purchase of shares and with thesetting up of specialized closed-end fundssubscribed by third parties. The investmentportfolio at 2003 year end totals 64 millioneuro, of which 49% refers to local publicservice companies and 45% to projectsrelating to the development ofinfrastructures (including the investment inSinloc). In 2003 new investments totaledaround 41 million euro.1) Projects to develop infrastructures

managed by public-private partnerships.The necessity to improve infrastructures andthe need to keep public spending downhave, over the past years, led to a growth ofinterest in Europe in the development offorms of public-private partnerships (PPP). Benefiting from the experience maturedfrom project financing by Banca OPI,FIN.OPI operates alongside industrialoperators as venture capital investor incompanies which will have the responsibilityof realizing infrastructures. In this logic,FIN.OPI holds, for example, a 2%shareholding in Nuova Romea S.p.A., acompany engaged to develop the projectfor a new stretch of highway betweenRavenna and Mestre. FIN.OPI has also,through its closed-end funds, identified amore efficient method to allow privateinvestors and institutions access to public-private partnerships. In this sense someinitiatives have been started up and othersare being organized:

• participation in Galaxy Fund, a fund set upin 2003 by the French Caisse des Dépôts etConsignations (CDC), specialized ininfrastructure projects in the transportsector of the European Union.Subscription – initially for 100 million euroby CDC and 25 million euro by FIN.OPI. –has been increased to 167 million eurothrough the inclusion in February 2004 ofKfW.

• The promotion of an Italian fund calledFondo PPP Italia, for venture capital toparticipate in Public Private Partnerships.The aim of this fund, which will haveamong its main investors both Italian andinternational banking Foundations andinstitutional investors, is to acquire sharesin companies with building andmanagement permissions. The sectors ofinvestment include public and socialconstruction (schools, hospitals, publicbuildings), transport, the environment andwater resources. Other targets forinvestment will be municipal companiesoperating in the local public service sector.

FIN.OPI also has a shareholding in SINLOC –Sistema Iniziative Locali S.p.A., an equityfinancing and advisory service which offerssupport to public sectors in evaluating theeconomic-financial and legal feasibility ofprojects in respect of efficiency and revenues.The sectors (and principal projects in 2003)are as follows:

• local public transport and infrastructurefor the territory;

• urban transformation aimed at recoveringrundown or disused areas (the recovery ofthe Cavallerizza Reale area in Turin forexample);

• residential and specialized social buildings(health and university residences).

SINLOC also has an active role with localbodies, promoting projects of interest to thecommunity through the instrument ofproject financing, which brings togetherbusiness resources and private finance. Theoperational vocation of this company reflects

the particular composition of itsshareholders, which are made up ofbanking Foundations and other suchinstitutions. SINLOC appears thereforecapable of communicating with localadministrations, sharing the social benefitswith a view of reconciling public interestwith business logic. As a matter of fact thecompany is active in those sectors wherethe public body and private operator areplaced in strict contiguity, in the context offuture or current processes of liberalizationof local services or of territorialimprovement. 2) Local public service companies.The local public services sector has beenaffected by the process of reform for sometime now, characterized by an increasinglevel of liberalization of access to themarket and by a progressiveindustrialization of the management ofservices.FIN.OPI has made significant investmentsin important ex-listed companies, such asAEM of Turin and HERA of Bologna,working alongside them as an establishedshareholder, supporting and promotingplans for development and improvementin efficiency. Furthermore, at the end of 2003 anacquisition of around 15% shares wasmade in AMA International S.p.A., acompany controlled by the Rome Council.The company participates in tender bids inEuropean and foreign countries for themanagement of integrated systems forcollecting, transporting and disposing ofdomestic and industrial waste, with the aimof bringing technology and managementexpertise to countries where the level ofthese services is not so advanced. Lastly, FIN.OPI has a significantshareholding, equal to 7% of the capital,in the French company Transdev, one ofthe main European groups for local publictransport and which is controlled by CDC,the latter of which has important projectsfor development in Italy.


The Group’s Banks can boast a particularly prestigious arti-stic heritage: the management by the Group of its collec-tions is aimed not only at their safekeeping and exploita-tion, but also at making them available for public viewingon appropriate occasions, in order to widen knowledge andenjoyment by specialists, enthusiasts and ordinary citizens:one of these occasions is “Invito a Palazzo” (Invite to thePalace), an initiative promoted by ABI (Italian BankersAssociation) which, in 2003, took place on 20 September.This year Sanpaolo IMI took part yet again. This initiativeoffers the public the occasion to visit, free of charge, somehistorical palaces of particular artistic and cultural importan-ce and which are otherwise difficult to admire since they arebuildings in which the Bank normally performs its daily busi-ness. Within the Sanpaolo IMI Group, 15 palaces in 14 dif-ferent cities were opened to the public and visited byaround 8,350 people. For the occasion guided tours, forexample, were organized in the Campo Manin di Carivebuilding, and exhibitions were staged, such as that dedica-ted to the “Relations between the East and the West” heldat the Carisbo head office.

In addition to the Invite to the Palace, some Banks of theGroup organize and set up on their premises exhibits ofworks of art owned by themselves and by third parties. For some time now, Carisbo has favorably valued the requestby its artist customers to exhibit their works within the bankbranches: at the Carisbo Piazza Maggiore branch building,spaces destined to host permanent art exhibitions were inclu-ded in the renovation plans, with cyclic exhibitions of worksof art owned by Carisbo, the Fondazione Cassa di Risparmioin Bologna and by third parties. The list of cultural initiativeswhich have been held within this branch and which weregreatly appreciated by the public is extremely rich: among thelatest, held for the 2003 Christmas festivities, was the exhibi-tion entitled “L’identità del genio” (The identity of a genius),with works of art by Morandi, De Chirico, Campigli, Sisley,Boldini, Signorini, Fattori and Romagnoli. Carive also organizes exhibitions in the public halls of its lar-ger branches. These exhibitions enter into the rich panora-ma of Venetian culture in an original format, by presentingexhibitions which are distinguished by their originality,topics and vicinity to local themes of interest, with the aimof creating interest in a public the majority of whom enterthe buildings for purposes other than cultural. The materialdisplayed ranges from works owned by the Bank (for exam-ple, the exhibition “La Fenice, un’altra ricostruzione” (LaFenice, another restoration), with documents by Giovanni

Battista Meduna which form part of the Carive HistoricalArchive), to collections owned privately and by associations,to photographic or pictorial works made by groups andschools, to documentation of activities (such as “Merlettaiee Merletti di Burano nel terzo millennio” (Lace makers andLace from Burano in the third millennium), in collaborationwith the “Andriana Marcello” Foundation and the VeniceChamber of Commerce, with a demonstration of lacemakers at work), research and diverse publications. For exhibitions and displays, even of national interest,Cariparo makes available its prestigious rooms at Palazzodel Monte in Padua to associations and local bodies (parti-cularly the Padua Council, in the context of a long-termrelationship of cooperation).

Remaining within the context of the enjoyment of the Group’sartistic heritage also by the public, is the series of monographsdedicated to it. As has been the tradition since 1952, SanpaoloIMI realizes, as a Christmas gift, a monograph dedicated tovarious artistic themes. At the end of 2003 the first mono-graph of a series dedicated to the artistic heritage of theSanpaolo IMI Group was published: this volume illustratesaround 120 works owned by the Parent Bank, with an histo-rical-artistic foreword and followed by a summary of theauthors. The choice of the works of art, the editing and coor-dination of the content of the volume was assigned to AnnaColiva, the artistic director of the Borghese Gallery. The subject of future volumes will be the heritage ofSanpaolo Banco di Napoli and the Banks of the North East.

Having given details of the artistic heritage of Sanpaolo IMI andSanpaolo Banco di Napoli in the 2002 Social Report, this yearwe shall summarize the heritage of the Banks of the North East.

The artistic heritage


Cassa di Risparmio in BolognaThe artistic heritage of Carisbo includes:

• a pictorial collection which ranges from the fifteenthcentury to the twentieth century, and containing somemasterpieces:

- The cry of Saint Peter, by Giovan Francesco Barbieri,known as Guercino;

- Stories of Saint Andrew, two precious plates by MicheleDi Matteo;

- Shooting still life (two works) and Battle scene: Clorindaand Tancredi, three paintings by Giuseppe Maria Crespi;

- Portrait of a gentleman or watchmaker and The holyfamily, two paintings by Agostino Carracci;

- Angelica and Medoro, by Lorenzo Pasinelli;- Anna Maria Ranuzzi portrait as charity, by Elisabetta

Sirani;

• a series of drawings and engravings, among which theseries of Figurative Proverbs by Giuseppe Maria Mitelliand twenty water-colors of the story Bertoldo,Bertoldino and Cacasenno by Giuseppe Maria Crespi;

• a numismatic collection representing an extraordinarydocumentation of the historical-economic practice ofthe city through seven centuries of monetaryproduction. Particularly significant are the 1,550 coinsissued by the Bolognese Mint from 1191 – the year inwhich it was granted the privilege of minting andstriking the “denarium bononiense” – to 1861 when,

with the Unity of Italy and consequent reorganizationof the monetary system, the Bologna Mint was closed,after having minted around 1,200 types of coins;

• a technical-economic and banking library with over12,000 volumes published from the nineteenth centuryto modern day, and with a collection of more than 100newspapers.

“The holy family”, Lodovico Carracci


“Canal Grande with Basilica della Salute”, Canaletto


FriulcassaThe heritage of Friulcassa is mainly concentrated inthe building located at Palazzo del Monte di Pietà inUdine. A building dating from the 16th centurycontaining the Chapel of S. Maria, with frescoes from1694 by Giulio Quaglio, a native of Como.Particularly important from an artistic point of vieware the picture galleries and furnishings of thePalazzo, with some Pietà sculptures from the XVI –XVII centuries, 17th and 18th century paintings ofsacred and profane subjects attributed to NicolòFrangipane, Nicola Grassi, and Giovanni AntonioPellegrini, modern portraits and a considerablenumber of paintings from the twentieth century,among which a particularly large oil by MarcelloD’Olivo which adorns one wall of the hall open to thepublic. Lastly, worth mentioning are the 17th centuryilluminated manuscripts of the Monte di Pietà, aunique example in Italy of books painted on fabric.

Cassa di Risparmio di VeneziaIt cannot be said that the Carive art collection is rich becauseof the number of pieces, which are practically all kept in thehead office building at Campo Manin: however each singlework of art is most certainly of an artistic and historical value,some of which are priceless examples of the great culturalperiods of Venice in the 16th, 17th and 18th centuries.Among the best works in the collection are:

• Paradise by Jacopo and Domenico Tintoretto, one of thesketches realized between 1590 and 1592 during thework on the large canvas in the Sala del MaggiorConsiglio of the Palazzo Ducale in Venice, the Council ofthe Gods by Jacopo Tintoretto (circa 1540) and Portraitof a Venetian Gentleman by Domenico Tintorettoaround 1600;

• The Universal Judgement, painted by GiambattistaTiepolo (1696 – 1770) a sketch for a large ceiling frescowhich – it would seem – was never realized;

• Two Scenes from the Canal Grande: looking across toSaint Jeremiah with Palazzo Labia and Ponte delle Guglieand with the Basilica della Salute and to the left, theBacino di San Marco, both works by Canaletto (AntonioCanal) dated around 1745 – 1750.

Of particular importance is the Venetian Library, withits establishment in 1962, Carive is committed tocollecting publications dedicated to Venetian historyand culture. Continually enriched by newacquisitions, the Library holds over two thousandworks which range from manuscripts andincunabulum from the fifteenth century to rare

volumes from the nineteenth and twentiethcenturies. Among the rarest and most precious worksshould be remembered, for example, Poliphilo (AldoManuzio, 1499), Divina Commedia (MatheoChodecha, 1493) and, among the engravings, somerare examples by Domenico Tiepolo on The Escape toEgypt. The Venetian Library also displays some rareoriginal copies from 1500 of the great View fromVenice by Jacopo de’ Barbari.Lastly, a role not to be neglected in the conservationof particular aspects of the economic, social andcultural traditions is that assigned to Carive’s HistoricalArchives which – having been recently rearranged andaccurately cataloged – offers researchers an authenticmine of information and news.

“Universal Judgement”, Giovanni Battista Tiepolo


• The most important and one of the oldest paintings isthe canvas The Madonna between Saint Catherine andJohn the Baptist, signed by Giovanni Buonconsiglio,known as Marescalco. This painting is a preciousdocument surviving the work of this native of Vicenza.

• There are three canvases by Strozzi dating from the firsthalf of the 18th century depicting The dinner ofEmmaus.

• Two paintings depicting episodes from the life ofAlessandro date from the 18th century: the first is awork by Paolo Pagani, a scholar of Pietro Liberi, thesecond is a work by Gian Antonio Pellegrini.

• The underlying theme of the modern day works is thelocal history. The most significant works are thoseattributed to Mario Cavaglieri, Biasi, the Enne Groupand to Tono Zancanaro.

Banca Popolare dell’AdriaticoThe Banca Popolare dell’Adriatico’s art collection hasworks dating from the 16th to the 21st centuries byimportant Italian artists, the majority of which are nativesof the Marches and the Abruzzo or artists who haveworked in these regions.The collection includes:

• an oil painting from 1400 by Giovanni AntonioBellinzoni of Pesaro, entitled San Donnino;

• two works from 1500 entitled The Holy Family and themarriage of Saint Catherine by Girolamo Marchesi daCotignola and The Holy Family with Saint John andAngels by Federico Zuccari;

• a number of paintings dating from the 1600s and1700s; of those painted by Simone Cantarini, Portrait ofEleonora Albani is particularly appreciated, having beenrequested for display in Italy and abroad because of itscharacteristics;

• an interesting esoteric work by Giovan FrancescoGuerrieri da Fossombrone (Pesaro), entitled Judith andOlophern;

• two large canvases, Psyche’s awakening and Psyche’stoilette, originating from the Farnese collection of thenative of Pesaro, Giovanni Venanzi;

• a collection of works by Alessio De Marchis, whichprovided an opportunity for an in-depth study andrevaluation of this artist of Neapolitan origin, who livedand worked in Urbino at the time of Pope Albani;

• among the works from the nineteenth century, are fivepaintings by Teofilo Patini, among which A portrait ofChrist and The good Samaritan, and a series of 21 watercolors by Salvatore Di Giuseppe, depicting scenes fromTeramo’s life in the 19th century.

• among the works from the 21st century are two largepaintings by Schifano, one by the artist Nino Caffè: Piazzadel Duomo di Urbino and a bronze sculpture entitledSphere, by Arnaldo Pomodoro.

Cassa di Risparmio di Padova e RovigoThe Cariparo art collection includes works fromthe 16th to the 21st centuries and was realizedwith the aim of documenting, preserving,stimulating and supporting local art and theVenetian culture in its most diverse expressions.This collection of works was built up after thesecond world war, even if the Cassa already heldpaintings before that period.

“Dinner of Emmaus”, Bernardino Strozzi


Sanpaolo IMI takes into the highestconsideration the observance of moneylaundering regulations as a necessary conditionto correctly carry out its business. It fullyrecognizes the instructions as issued by the Bankof Italy and by the Committee of Basel inOctober in its document of October 2001,entitled “Customer due diligence for banks”. Particular importance is given to gaining an in-depth knowledge of our customers and, withthis in mind, constant attention is paid toresources and financial means in order to createadequate instruments to gather all informationconcerning the complex relationships withcustomers and the operations performed.From an organizational point of view, this issuehas an effect in terms of a strictly legal nature –such as, for example, the interpretation ofstandards and fulfillments related to reportingsuspicious operations according to Art. 3 Law197/91 – and those linked to operational andprocedural aspects, for example, themanagement of a Single IT Archive, the controlof which is assigned to qualified corporatestructures. Great attention has obviously also been paid totraining, which is fundamental to ensure thatoperators are fully aware of the importance ofknowing the various issues connected to“Money laundering” issues. Therefore, during the year the Bank has takensteps to review the relevant instruction manual,in the light of the changes made to proceduresin the meantime and clarification of theirinterpretations. This manual – which forms asole body of text concerning the more legalaspects and the operating methods to adopt inorder to ensure efficient control of the specificproblems involved – was issued in October 2003and sent out, with confirmation of receipt, toemployees according to their specific roles. Whilst on the subject of training – in observanceof the basic courses provided by ABI Formazioneand aimed at branch employees and all newlyemployed staff – a project focused ondeveloping an internal training course to widenknowledge on this subject was concluded.

Aimed at all employees of operating points, thecourse has the dual purpose of creatingawareness of the value of respecting regulationsof control against money laundering for thecompany to correctly perform its business and ofincreasing knowledge of the company’sprocedures governing these aspects.

THE ASSOCIATION

OF BLOOD DONORS

Established in the 1960’s, the Company Blood DonorsGroup today counts 17 sub-groups located in the

same number of cities, with important results: around2,200 donations per year by almost 1,100 donors.Membership of the Association is open to all employeesfrom the Sanpaolo IMI Group and from subsidiarycompanies and their families. The Company Association collaborates at national level withdifferent associations, such as ADVS, AVIS, the Red Cross,FIDAS, FRATRES and GIDS. Donations are made monthly atthe various branches and are organized on each workingday in order to satisfy the demand for blood efficiently andcontinuously. After donating blood the employees can

benefit from a day of paid leave.

Operations to safeguard thecommunity: money laundering

(

PATRIOT ACT

In December 2002 Sanpaolo IMI issued awritten declaration of its observance of theAmerican law entitled “Uniting andStrengthening America by providing appropriatetools to intercept and obstruct terrorism”, theso called “Patriot Act”. The Patriot Act alsoincludes, among other things, a series ofregulations aimed at controlling money

laundering through foreign banks.

(


Today communication is an essential element of thelife of every company. The objective of SanpaoloIMI is to communicate following the criteria oftransparency, accuracy, clarity and promptness.That is the task of the Media Relations. The mediahave a serious and trustworthy interlocutor whoguarantees information on the various activities,strategic choices and economic results achieved bythe Group. To ensure the quality of informationprovided to both the media and the financialcommunity, this activity is carried out in fullobservance of instructions issued by marketSupervisory Bodies in respect of price sensitiveinformation.The Sanpaolo IMI Group has also offered theSupervisory Bodies important support in order toachieve greater transparency and accuracy ofmarket information: in June 1999, acting as “pilotcompany”, Sanpaolo IMI cooperated with the BorsaItaliana (the Italian Stock Exchange), in thepreparation and testing of the Network InformationSystem (NIS). This system is the telematic circuit fordistributing information to the public, the use ofwhich has become compulsory for all listedcompanies since April 2002. The NIS is the channelused to transmit price sensitive information toConsob and to the Borsa Italiana (press releases,presentations to analysts, etc.): if they possess therequisites of the Regulatory Authorities, the systemtransmits them simultaneously to all the pressagencies connected to the system (most of whichare Italian and foreign). Where they do not meetsuch requirements, the company is invited toprovide a clearer definition or more detail.It goes without saying that this system does notcomplete the duties of the Media RelationsDepartment, which provides press releases aboutthe Bank to all those press agencies not connectedto the NIS, to all the national and general dailynewspapers, to the main foreign financial dailynewspapers (making available to the latter Englishlanguage text), to the main Italian periodicalmagazines, above all those of an economic andfinancial nature, to the most popular regional dailynewspapers and to the most well known on linenews bulletins, thus favoring the greatest possibledissemination of information.

In general, the instruments used by the MediaRelations Department for externalcommunications range from press releases, pressconferences and interviews granted by membersof top management of the Bank, to officialdeclarations. This institutional activity is flankedby intense work to support the journalists, toprovide adequate and exhaustive documentationwhich is useful, on one side, to facilitate thework of the journalists and, on the other, toavoid wherever possible, that informationreported on the Group is incorrect.Another efficient instrument for externalcommunication is the website: the Group’s newwebsite was launched in 2003(http://www.grupposanpaoloimi.com), wherein asection is dedicated to Media Relations (“UfficioStampa”), where it is possible to search for allpress releases issued from 2000, subdivided byyear and by subject matter. It is also possible tosubscribe to a mailing list to receive pressreleases and to download directly photographs ofthe top management of the Group, as well as ofthe branches; such images can eventually be usedto enrich journalistic articles.

MediaRelations

Press releases

of which 9 related to the periodic results of the Group

of which 1 related to the presentation of the Group’s 03-05 Three Year Plan

Press conferences

of which 1 related to the presentation of the 03-05 Three Year Plan

Interviews

Official announcements

136

9

1

19

1

65

74


In 2003 the two offices which previously handledrelations with the media were unified into theMedia Relations Department: the press office ofthe institution and the product. This choiceallowed us to give more integrated and promptreplies to the media, at a moment in which twoaspects, institutional and commercial, arebecoming increasingly interrelated.

Briefly, the information distributed by the MediaRelations Department refer to:

• the events that involve the equity,organizational and administration structures ofthe Sanpaolo IMI Group;

• the strategies pursued by the Group duringphases of development and rationalization;

• company policies concerning the maincommercial aspects;

• annual or periodical results at statutory andconsolidated level, of both the Parent Bankand Group companies; we would remind youthat in this respect Sanpaolo IMI was the firstGroup to adopt quarterly reporting of itseconomic results;

• communications aimed at denying, confirmingor preventing rumors which may circulatewithin financial circles and interfere with theperformance of the company’s activities andwith the performance of its shares;

• other financial information that it sees fit todistribute through the media, in constantobservance of the procedures dictated forcompanies listed in Italy and abroad.

There is just as much intense activity incommunicating internally as there is incommunicating externally. The top managementof the Group is in fact kept constantly informedof all important news, through a review of dailynewspapers and monitoring of all media toprevent, where possible, the spread of untruerumors or to make corrections as quickly aspossible. The knowledge of the market and ofany rumors spread on the market is anindispensable instrument to the life of a largecompany.

Phot

oDisc



The community: objectives for 2003


✓ 32% increase in investments in sectors of strong socialand environmental benefits; strengthening of thepresence on the territory with the opening of theBanca OPI Naples branch.

✓ Intense advisory activity and realization of projectfinancing and Public-Private Partnership transactions,particularly with projects in sectors such asenvironmental services, environment protection(preservation of the Venice Lagoon), urban transport,urban improvement, social construction and schools.

✓ The Association was established in July 2003✓ Operations of the Fund for the promotion of risk

capital in Southern Italy commenced in April 2003.

✓ The first Consultative Committee was started at Bariin November 2003.

✓ Considerable commitment was made to the activityof decentralization and specialization during theyear.

✓ Start up of the micro-credit project in October 2003✓ Start up of the basic banking service in February 2004 (in

the context of compliance to the ABI Clear Deal project)✓ Start up of the “Facciamo Futuro” project in Spring

2003

Give priority to territory financingactivities as well as to those activitiessupporting the productive structure,also through research and studyinitiatives. Actions include:

• intensification of Banca OPIactivities;

• incentives to the economiccooperation between the publicand private sector;

• the launch of the Association of Studiesand Research for Southern Italy;

• the launch of closed-end funds forthe territory

Management of the territorialreorganization of the Group so as toguarantee proximity to the territory,with particular focus on theconsolidation of the dialogue withlocal communities with a view totheir growing involvement. Plannedinitiatives:

• organization of Conferences on thelocal economy;

• activation of decentralization andspecialization as set out in the2003-2005 strategic plan

Study and launch of initiatives focusingon specific categories:

• micro-credit project;

• social banking;

• initiative for the elderly.

140

We deem it indispensable to considerenvironment protection to be anopportunity for the Group and itscustomers, above all those belongingto the corporate sector

We must look to the future in theknowledge that even the method ofdistributing our products and servicesto customers can depend on thequality of the environment

We are aware of the direct andindirect consequences of operationswhich we promote or finance: in orderto realize this we must also take intoaccount environmental issues forfuture generations

We want to align our objectives tointernational best practice

It is our intention to carry out our roleas economic player at national level ina responsible and sensitive manner,taking care to respect theenvironmental heritage of eachterritory in which we operate

We want to avoid all forms of wasteand – in relation to the technologiesavailable and in terms ofcosts/benefits - to actively promoteinitiatives aimed at saving energy andnatural resources

Creation of value

Customerorientation

Integrity

Commitmenttowards excellence


specific qualities

Responsibilityin the use

of resources

(Value in detail

VALUES


Environment

1412003 Social Report – The Environment

The direct environmental aspects, that is thoseelements on which the organization has a high levelof influence and management control, are limited fora bank - because of the type of business it carries out- when compared to those of industrial businesses.Nevertheless, the size of a large banking Group, withnumerous operating units spread across Italy, meansit cannot neglect its global influence.Significant direct impacts include consumption ofelectricity and paper, while the production of wastefrom the use of consumer goods, the emission ofgases through the consumption of energy and theconsumption of water have minor effects. The furnishings of workplaces can also have animpact on the environment, especially in terms ofbuildings and plants, the realization of internalcommunication networks and the supply of officemachinery and equipment.

Organization of supervision and environmental policiesThe direct influence is supervised by an organizationalstructure within the Purchase and Logistics Department.In particular, as far as energy consumption is concerned,management of this aspect is, in accordance with Law10/9119, entrusted to an Energy manager. Policies andprocedures on the matter of energy management, whichhave also been extended to Sanpaolo Banco di Napoli andwhich will be spread gradually to the other bankingnetworks, are concentrated on energy saving andspecifically set out:

• realization standards and acquisition specifics for theBank in line with current regulations on such issues;

• the use of highly efficient electrical equipment (withparticular attention to office machinery, data-processing centers, lighting and refrigerationequipment);

• the maintenance of all plants (heating, refrigeratorsand air conditioning) to ensure that efficiency of energyis kept to the maximum;

• the continuous monitoring of consumption;

• the growth in the supply of renewable sources ofenergy;

• to gradually increase efficiency across the country byapplying, at the moment of renovation and realizationof new operating points, solutions according to thehighest standards.

Direct environmental impact

THE UNEPDECLARATION

In 2002 Sanpaolo IMI adhered to the UNEPDeclaration for financial institutions in

respect of the environment and sustainabledevelopment, openly declaring its commitment“to take into account the environmental needsin respect of all our activities, in assetmanagement and in other business decisionsacross all markets”. This commitment alsorefers to the gradual adoption of the bestmethods of environmental management,promoting the surveillance of environmentalobjectives and developing products andservices in line with the principles of

environmental protection.

(19. Standards for implementing the National Energy Plan for the rational use of energy, energysaving and the development of renewable energy sources’

Phot

oDisc


The perimeters of reporting Compared to the previous edition of the Social Report, in2003 the methodology of collecting and analyzingenvironmental data has been extended to include SanpaoloBanco di Napoli. Furthermore, despite the variousprocedures in use by the other Banking Networks, everyeffort has been made, where possible, to report in thisedition environmental data relating to the Group. Theperimeter of reporting is indicated below according to eachenvironmental aspect subject to supervision and monitoring.

Sanpaolo IMI* and Sanpaolo Banco di Napoli 1,316,603 1,302,937 27,500 26,048

BUILDINGS AND EMPLOYEES

Surface covered (m2)2003

No.employees**

2003

No.employees**

2002Surface covered (m2)

2002

Energy consumption refers principally to two types:

• fuel (mainly gas and oil), used mainly for heating;

• electricity, used for office machinery and data-processing centers, air conditioning and refrigerationsystems and, where the winter climate allows, heatpump heating systems, an alternative to the traditionalfuel systems.

Consumption of energy changes considerably according tothe type of operating unit of the Bank. To supply as completea picture as possible of consumption, we carried out ourexamination according to the type of operating unit:

• buildings with data processing centers, characterizedby premises partially utilized for data processingequipment, with offices and structures for informationand communication technology;

• large office buildings, mainly destined for as headoffices, characterized by highly populated office spaceand with a considerable amount of office machineryand computer networks;

• operating points and other offices/premises: branches,other offices and premises for other use (archives andwarehouses).

The data-processing centers are those which absorb themost electricity, followed by large office buildings and,lastly, by branches and other offices and premises. For thisreason the data-processing centers pay particularattention to energy saving; as a matter of fact, as far asconcerns energy, these centers have been made largelyautonomous in respect of heating, thanks to the use ofheat pump heating systems which recycle the heatproduced by the data-processing machinery. The mostrecently built Sanpaolo IMI data-processing centers arealso equipped with refrigeration groups which, whilegiving the same performances, reduce the absorption ofelectricity when there is a drop in the external airtemperature.

* excluding the former Cardine Finanziaria ** sum of number of employees, net of personell permanently absent, personell on secondment from other companies and temporary employees.

Energy consumption

Consumption of energy, emission of gases: Sanpaolo IMI, Sanpaolo Banco di Napoli, former Cardine

Banks (including the former Cardine Finanziaria), BancaIMI, Sanpaolo IMI Wealth Management, GEST Line,

Sanpaolo IMI Internazionale, Sanpaolo IMI Private Equity,Finemiro, Sanpaolo Leasint, Banca OPI, SEP Servizi e Progetti.

Consumption of paper: Sanpaolo IMI, Sanpaolo Banco di Napoli, former CardineBanks (including the former Cardine Finanziaria), Banca IMI,Sanpaolo IMI Wealth Management, GEST Line, SanpaoloIMI Internazionale, Sanpaolo IMI Private Equity, Finemiro,Sanpaolo Leasint, Banca OPI, SEP Servizi e Progetti.Consumption of water:Sanpaolo IMI (including the former Cardine Finanziaria)and Sanpaolo Banco di Napoli. Waste products:Sanpaolo IMI, Sanpaolo Banco di Napoli, formerCardine Banks (including the former CardineFinanziaria), GEST Line, Sanpaolo IMI Internazionale,

Sanpaolo Leasint, SEP Servizi e Progetti.

(As is known, during 2003 the Sanpaolo IMI branches insouthern Italy were merged into Sanpaolo Banco di Napoliand, vice versa, the central-northern Italy branches of theformer Banco di Napoli were merged into Sanpaolo IMI: forthe purposes of comparison this Social Report shows theglobal data for the two companies which, in the 2002 SocialReport were analyzed together.


Phot

oDisc


Even if the annual climatic changes can generate changesyear by year in the consumption of energy, considering thatthe latter refers mainly to electricity connected to workstations, the above reductions can substantially beattributed to the reduction in the workforce and to theincreased efficiency of office machinery.

Thermal energy** (kWh millions/year)

- gas (mc millions/year)

- oil and other liquid fuels (liter millions/year)

Electricity** (kWh millions/year)

ENERGY CONSUMPTION

166.32

14.10

3.05

259.98

14,362

11,564

2,798

64,995

-1%

-4%

+12%

-9%

Group***

2002expressed

in Toe

Sanpaolo IMI* and Sanpaolo Banco di Napoli

2003expressed

in Toe

2003expressed

in Toe

Change (1)

* Excluding the former Cardine Finanziaria. ** Including consumption by operating points with heating connected to centralized building systems, estimated on the basis of the costs involved.*** For some Group companies the value is estimated on the basis of the costs incurred. (1) In the 2002 Social Report the data relating to oil and gas was split according to estimates, while in the current report, the data are of a more analytical nature.

LCD monitorsThe experimental program to replace traditional cathode raytube (CRT) monitors with liquid crystal display (LCD)monitors started in 2003 and saw the replacement of around800 traditional monitors during the course of the year. Against an increase cost when compared to traditionalmonitors, LCD monitors allow considerable savings inenergy, equal to roughly 46% for each monitor on Networkoperating points. Furthermore, as a result of the lower heatgenerated by the monitor, it is probable that there will alsobe a reduction in consumption for cooling workingenvironments during the summer. Therefore the reduction inthe consumption of electricity for each work station issignificant. This activity will also allow to reduce the quantityof dangerous waste produced.

Thermal energy by surface(kWh/mq)***

-oil by surface (liter/mq)

Electricity

- by work station (kWh/n.)****

- by surface (kWh/mq)

ENERGY PERFORMANCE RATIOS

90.6

7.7

1.7

6,636.2

141.7

56.2

3.5

2.2

5,952.0

144.5

84.0

7.1

1.6

5,722.8

116.1

+1%

-

-

-1%

-8%

Group**Sanpaolo IMI* and Sanpaolo Banco di Napoli

80.5

6.7

1.6

6,670.7

133.4

2003expressed

in Toe

Change

80

n.a.

n.a.

6,717

145

6.9

n.a.

n.a.

1,679.2

36.2

87.8

8.9

0.2

15,815.0

465.7

2002expressed

in Toe

2003Data-processing centers

expressed in Toe

Totalexpressed

in Toe

Large office buildingsexpressed

in Toe

Other offices and operating pointsexpressed

in Toe

6.3

1.5

1,659.1

35.4

4.9

2.9

2.0

1,234.5

30.0

7.3

5.8

1.5

1,433.9

28.9

6.9

5.5

1.5

1,667.7

33.3

7.1

6.8

0.2

3,953.8

116.4

* Excluding the former Cardine Finanziaria. ** For some Group companies the value is estimated on the basis of the costs incurred. *** For the column expressed in Toe: (Toe/mq) *1000 **** For the column expressed in Toe: (Toe/n.) *1000 n.a. Not available

105.84

9.07

1.88

191.13

9,163

7,439

1,724

47,783

104.85

8.68

2.11

173.76

9,049

7,114

1,935

43,440

- gas by surface (mc/mq)

7.8


Hydroelectric energyCommencing from 2002 Sanpaolo IMI is part of a leadingconsortium which co-produces energy generated byhydroelectric plants and has gradually increased its level ofconsumption of electricity supplied by renewable sources. Allof the data-processing centers, large buildings and a graduallyincreasing number of operating units are supplied withhydroelectric energy. In 2003 the increase in the level of supplyby this source was considerably higher than expectations.Compatibly with the availability of suppliers and the use ofother forms of renewable energy, over the next years furtheruse of hydroelectric and/or other types of renewable energyis expected.

Sanpaolo IMI


Group

17%

0%

n.a.

62%

19%

13%

SUPPLY BY RENEWABLE SOURCES(% on total consumption of electricty)

20032002

Phot

oDisc


Consumption of paperThe Group’s Banks use a significant amount ofpaper (normal and, for example, UNI A4 type B) foroffice machinery, information produced forcustomers and for internal communications. The operations to reduce consumption isconcentrated on increasing the use of electroniccommunication, both for internal correspondence,thanks to the development of the Intranet, and forcorrespondence with customers. Regarding paperused for internal purposes but entrusted toexternal typographers, and therefore not includedin the above calculations, it should be remembered

how the wide availability over the Internet of pressreleases, quarterly reports and other documentsconstitute a strong incentive to reduce paper forcustomary information to the market.

Corb

is


Recycled paperOver the year experiments were performed within theCentral Head Office of Sanpaolo IMI on the use ofrecycled paper, in order to evaluate any problems in theperformance of machinery as a result of using such paper.It has been decided not to continue with this projectbecause of some critical aspects.

No. machines 6Type of paper guaranteed entirely non-toxic

(originating from a Norwegian paper mill)Technical problems None notedCritical aspects Problems with legibility

(especially with photocopies).

Rolls for large printers

Paper for photocopiers, letters

Other

Total

- of which A3 and A4 sheets

CONSUMPTION OF PAPER

Type of paper

Excluding forms.

Excluding forms.* Data refers to 250 working days/year.

1,073

2,131

315

3,519

3,135

30.5

60.5

9.0

100

89.1

892

2,030

353

3,275

2,494

27.2

62

10.8

100

76.15

893

2,791

441

4,124

3,234

21.7

67.7

10.7

100

78.4

-16.9%

-4.7%

+12%

-6.9%

-20.5%

Group2002

t/year %

Sanpaolo IMI and Sanpaolo Banco di Napoli

2003t/year %

2003t/year %

Change

Consumption of paper per employee (kg/year)

Consumption of paper per customer (kg/year)

Consumption of A3 and A4 sheets per employee

- kg/year

- no. /day*

PERFORMANCE RATIOS

128

0.7

114

81

126

0.7

96

76

108

0.6

85

68

-1.6%

-15.9%

-5.6%

Group2002


2003 2003Variazione

Laur

a Ro

nchi


Consumption of waterWater consumption refers almost entirely to sanitaryuse. Only in a small number of plants in largeoperating units is water also used to replenish thatwhich evaporates during the treatment oftechnological refrigeration systems. The water is supplied through an aqueduct, except insome rare cases where it is drawn from undergroundfor use as a source of energy in heat pump heatingsystems and in air conditioning/cooling systems. Average consumption in 2003 (mc/year peremployee), calculated on a sample basis, can besummarized as follows:

New sanitation installed at operating pointsconfirms the use of tanks which shut off the flow,thus guaranteeing an inherent reduction inconsumption.

Sanpaolo IMI


31

16

Total

25

16

Operatingpoints and

others

48

-

Largeoffice

buildings

36

-

Data-processing

centers

(including the former Cardine Finanziaria)

Natio

nal G

eogr

aphi

c


The collection of waste products and theirtransportation to authorized disposal points forsubsequent treatment, recycling and/or disposal isentrusted to specialized companies. The entire processis managed for Sanpaolo IMI and Sanpaolo Banco diNapoli through an integrated system at national level.The quantity of dangerous waste is not significant andmainly consists of CRT monitors (refer to the project toreplace these with LCD monitors) and a small quantityof solvents and nickel-cadmium batteries. In the Head Offices at Turin, differentiated waste

collection of paper and cardboard is entrusted tocooperative societies and to voluntary organizations(eg. Cartesio project) as a consequence of anagreement between the Azienda Multiservizi IgieneAmbientale Torino (the Turin Multiservice Sanitaryand Environmental Company), and the Environmentaland Employment Offices of the Turin Council. Sanpaolo Banco di Napoli also started up a specificproject aimed at freeing the branches from allunutilized materials. This project is expected to beconcluded in 2004.

Source: documentation required by the Italian Law.

Waste

Waste per employee (kg/year)

PERFORMANCE RATIOS

Total waste

- paper for recycling

- paper and cardboard

- packaging

- cartridges, tapes and film

- dangerous waste

- office machinery

- other (including electrical materials)

WASTE PRODUCTION

3,474,791

2,695,124

226,180

293,566

27,672

11,072

145,832

75,345

99%

0%

60%

Toner 50%Film 0%

0%

16%

0%

4,566,437

2,776,988

754,736

699,663

60,081

29,617

188,712

56,640

99%

0%

60%

Toner 50%Film20%

0%

30%

0%

5,382,098

3,425,483

760,986

756,723

66,595

42,657

211,281

118,373

99%

0%

60%

Toner 50%Film 20%

0%

30%

0%

+31.4%

Group2002

Kg/year recycled


2003Kg/year recycled

2003Kg/year recycled

Change

GroupSanpaolo IMI and Sanpaolo Banco di Napoli

20032002 2003

126 175 145

Thermal energy (CO2 kg millions/year)

- oil

- oil and other liquid fuels

Electricity (CO2 kg millions/year)

Thermal energy by surface(kg/year of CO2 per m2) ***

Electricity by surface (kg/year of CO2 per m2) ***


The objectives of Kyoto, namely to reduce the emissionsof “greenhouse gases”, considered co-responsible forclimate change, cannot be achieved without the effortsof all public and private organizations across all theeconomic sectors.In the knowledge of this assumption, Sanpaolo IMI isalso committed to measuring and monitoring thisaspect. The emissions attributable to energyconsumption can be split into two main categories:direct and indirect emissions.

Direct emissions

• Generated by plant in buildings used by the banks

• Fuel for heating systems (For central heating systemsin buildings, the equivalent ratio of consumption andemissions has been considered)

Indirect emissions

• Generated outside of buildings used by the banks

• Utilization of electricity produced bythermoelectric plants

Atmospheric emissions are reduced thanks to thefollowing actions:

• by mainly using natural gas, which generates loweratmospheric emissions when compared to other fuels;

• by using, at data-processing centers, plant torecycle the heat produced by the data processingequipment and, where weather conditions allow,by using heat pumps;

• by using hydroelectric energy, which does notgenerate greenhouse gases.

Atmospheric emissions

21

53

19

0

15

3

20

50

19

41

+1%

-46%

ESTIMATED EMISSIONS

PERFORMANCE RATIOS Group**

Data-processingcenters

19

76

2002Total

2003Large office

buildingsOther offices andoperating points

TotalChange 2003


18.14

6.76

100.46

17.42

7.59

53.32

28.26

10.97

96.94

-4%

+12%

-47%

Group**

2002


2003 2003Change (1)

* Excluding the former Cardine Finanziaria. ** For some Group companies the value is estimated on the basis of the costs incurred.(1) The data is the result of a detailed analysis (refer to note 1 of the table on “consumption of energy”)

* Excluding the former Cardine Finanziaria. ** For some Group companies the value is estimated on the basis of the costs incurred.*** This refers to CO2, since it is the principal “greenhouse gas” emitted by the types of plants used by the Group companies.


Phot

oDisc

SUPPORTING THE EUROPEANGREEN LIGHT PROGRAM

Among the different methods of intervention,improvement to lighting systems can contribute

significantly toward energy saving, with a consequentreduction in the emission of greenhouse gases, as wellas increasing the quality of light to the benefit ofemployees. The European Green Light Program isbased on voluntary agreements that large scale users oflighting such as service industries, public administrationsand industrial companies enter into with the EuropeanCommission, committing themselves to upgrade thetechnologies and methods of lighting in their buildings.The primary aim is to contribute toward achieving theobjective of the European Union to reduce the emissionof greenhouse gases. We adhered to the Green Light Program in 2003, withone of the most recent and significant realizations bythe Bank (the building located in Via Arsenale in Turin). Analyses have also revealed that a large number ofSanpaolo Network branches are equipped with highquality lighting systems – in line with thoseestablished by Green Light – thanks to the fact thatover a number of years the Bank has carried out aprocess of improving efficiency in the lightingsystems of its buildings.The intention is to continue to support the projectby extending the plant to be included in the GreenLight Program, beginning with Sanpaolo IMI.

(Against an insignificant change in the total amount ofenergy consumed when compared to 2002, there hasbeen a considerable reduction in emissions in respect ofelectricity, thanks to the supply of hydroelectric energymentioned earlier. The impact of other emissions linked to the movement ofemployees and of suppliers cannot be ignored. However,it was not included in the calculation since it is difficult toquantify it. Nevertheless, policies have been enactedaimed at encouraging the use of public transport and theBank itself, such as the Accounts Department atMoncalieri (Turin) and at Naples, has started a system ofcollective transport for employees.As far as the Group’s refrigeration systems are concerned,these do not use the refrigerants R11 and R12, except inisolated cases where buildings have older plants installedwhich use R11: it is planned to replace such plants duringthe next phase of renovation. The most recently installedrefrigeration groups utilize R407C refrigerant (instead ofR22 which was used from 1970 onward and whichalready had a lower level of pollution when compared tothe other fluids above mentioned).

152 Bilancio Sociale 2003 – La Relazione Socio-Ambientale

Indirect impact

EIB – Banks Forum for the developmentof environmental policies and practices among banks,to be translated into operative plans

LENDING

ACTIVITY ACTIONS EXAMPLES

Evaluation of environmentalrisk from loan applicationdocuments

Evaluation ofenvironmental risk whenassigning ratings

Environmental criteriain asset management

Equator Principles forsome internationaltransactions

PROJECT FINANCEAND PUBLIC PRIVATE PARTNERSHIPS

INVESTIMENT WITHVENTURE CAPITAL

ASSET MANAGEMENT

offer of specificfinancing productsin favor of privatebusinesses orpublic bodies

Structuring andfinancing of projectshighly valuable to theenvironment

Creation ofinvestment fundsspecialized in theenvironmentalsector

• EIB- Sanpaolo IMI Internazionalefinancing of environmental protectionprojects carried out by small- andmedium-sized companies in Eastern-Central Europe (see Customer chapter)

• Yes Environment & Safety

• Loans granted by Cariparo for therenewal of commercial vehicles

• realization of an integrated systemfor the disposal of solid urbanwaste in the Province of Naples

• Europass Project

• Research on sustainable mobility

• European Carbon Fund

• Fund supporting renewableenergy

• Etrical Funds

Sanpaolo IMI aims to take intoaccount environmentalconcerns in all of its activities

From the UNEPDeclaration


The environmental concern involves banks above all inrelation to the indirect aspects, meaning those in whichthe company has only partial control and butconsiderable influence and involvement. Whileperforming their activities and through services andproducts offered, the banks can influence the behaviorof its interlocutors in respect of the environment –particularly its corporate customers. This can occurthrough activities aimed at creating the conditions tomake environmentally correct choices by way ofoffering incentives or defining rules.

Cooperation with the EIBThe common attention to environmental issues and arelationship of cooperation which has been in force forsome time has led us to promote, in conjunction with theEIB (European Investment Bank), the formation of aEuropean forum between banks for environmentalpolicies. The Form was established with the followingobjectives:1) to circulate environmental policies and practices to be

translated into operative plans;2) to define the schemes to be used to avoid damaging

effects on investments;3) to develop methodologies and to share operating

costs.

The second meeting of the Forum held in London inMarch 2003, included Sanpaolo IMI’s contribution onsustainable mobility. The issue of mobility was closelyexamined in respect of the three dimensions ofsustainability – economic, social and environmental.Particular attention was paid to alternative fuels, withclose examination of methane gas for road transport,above all in relation to recent developments in the use ofthis gas within urban public transport. The objectives ofthe study being carried out, for which the presentation atthe Forum meeting represented the first stage of itsprogress, shall be:

• to determine the financial requirements in connectionwith the purchase of new methane gas vehicles for urbanpublic transport and the realization of an infrastructurefor methods of transport using this fuel (which, accordingto an initial estimate, is calculated to be in the region of2.5 billion euro for the next four to five years);

• to promote, with EIB in a predominant position, thedefinition of financial instruments aimed at encouragingthe realization of the aforementioned investments.

Indirect impact

Eni’s

file

, Gas

& P

ower

Divi

sion


Phot

oDisc


Actions and initiatives in favor of the environmentThe contribution of the Sanpaolo IMI Group towardsupporting and promoting environmental issues isperformed through different actions which can begrouped as follows:

• definition of environmental policies during the processof issuing loans (refer to the box on the evaluation ofenvironmental risk);

• advisory activities, organization and financing ofprojects which are highly valuable to the environment,by way of project financing or by applying a publicprivate partnership structure;

• offering specific financing products in favor of privatebusinesses or public bodies;

• creating investment funds specialized in theenvironmental sector;

• realizing and/or promoting studies and researched onenvironmental issues, also in collaboration with publicand multi-lateral institutions.

Some examples of initiatives are given below:

Yes Environment & SafetyDue to the growing attention to problems linked toenvironmental protection and safety in the workplace,companies need to align, as quickly as possible, theirproductive processes and products and services, to meet thestandards of quality required at the national, European andinternational level. For this purpose Sanpaolo IMI offersspecific medium-long term loans to support small- andmedium-sized companies which have recently carried out –or intend to do so shortly – investments aimed at protectingthe environment and safety at work. Yes Environment andSafety supports, at competitive conditions and withparticularly streamlined procedures, up to 100% ofinvestments made in respect of managing water resourcesand introducing technologies and systems of a low impacton the environment, as well as recycling waste and reducingconsumption of energy. Furthermore, with Yes Environmentand Safety, it is possible for companies to finance the coststhey incur to obtain environmental certification (ISO 14001,EMAS registration) and certification for quality and safety inthe workplace (ISO 9000 and 9001, SOA).This new product will also support companies to acquirelabels of quality for their products (Ecolabel, national labels).Sanpaolo IMI also assists companies to gain access toopportunities envisaged by Law 598/94, whichestablishes benefits in favor of small- and medium-sizebusinesses that carry out investments in respect ofenvironmental protection and safety in the workplace,as well as in innovative technology.

Cassa di Risparmio di Padova e Rovigo loans for therenewal of commercial vehicles Cariparo offers medium- long-term loans tocompanies, across all sectors, that intend to purchasenew vehicles for business purposes, to replace thoseno longer compatible with European anti-pollutionregulations. This support is also provided for thepurchase of used vehicles from a second-handdealer, as long as they are environmentally friendly.Lastly, loans can also be requested as pre-financingof public measures in favor of the industrial,craftsmen, commercial/services sectors, whichenvisage special benefits.

Project to realize an integrated system of solidurban waste disposal in the Province of NaplesDuring 2003, Banca OPI concluded the structuringand financing of a project for the realization of anintegrated system for the disposal of solid urbanwaste in the Province of Naples, though a syndicationwith the main Italian and international banks. Inorganizing the project the strictest Italian andEuropean environmental standards have been metand, as requested in the first phase of syndication, aspecific study has been made to confirm that itconforms to the environmental standards identified inthe Equator Principles. During the year Banca OPI wasalso engaged to organize the completion of theintegrated system in the other four Provinces ofCampagna. As a whole, these two projects representthe first and most extensive large scale application ofintegrated management of the waste cycle, asenvisaged by national and European regulations,which require differentiated waste collection andrecycling, with the renewal of materials and energyand the final process of disposal in dumps.


Europass ProjectWorth remembering in the transport andinfrastructure sector, is the completion of theproject finance relating to the Europass Project; apay toll system for heavy vehicles on the Austrianroad network (started up in January 2004 on 2,000km of roads), in which Banca OPI and Bank Austriaare Mandated Lead Arrangers. The syndication ofthis project finance envisages the participation ofaround ten international banks.The project is included among the activities in replyto EU policies which, in the White Book ofSeptember 2001, identified among the priorities theimplementation of pay tolls for heavy vehicles as amethod aimed at reducing pollution from transportthrough a shift in balance of the modes of transportbetween road and train (above all in relation to thecrossing of the Alps).

European Carbon FundIn 2003 Banca OPI and its subsidiary FIN.OPIcontinued along the themes of the issuesintroduced by the Kyoto Protocol, in which theSanpaolo IMI Group has been involved for sometime now.In this field, FIN.OPI is collaborating with CDC Ixisto create a specialized closed-end investment fundcalled European Carbon Fund, for the purchase andsale of the so called “issue rights” of greenhousegas in the newly established European market.

The Fund to support renewable energyAt the beginning of 2003 CDC Ixis and Banca OPIlaunched a public/private fund of 45 million euro,called FIDEME and created by CDC Ixis and ADEME ,which will, by subscribing to debenture loans similarto subordinated loans, invest in companiesoperating in the environmental sectors and inenergy from renewable sources in France.Subscription to the fund closed successfully,collecting a wide display of consent by the financialinstitutions invited, and provided a considerableoccasion for acquisition by specialists.Thanks to the experience in the sector acquiredthrough the FIDEME fund, it is the intention ofBanca OPI to study the creation of a similar fund inItaly, to be called “FIDEME Italiano”, throughcontacts with the Ministry for the Environment andthe Ministry of Productive Activities.

Cont

rast

o


EVALUATION OF THE ENVIRONMENTAL RISKIN THE LENDING ACTIVITY

Only over recent years has the Group begun to considerthe relevance of the problems relating to environmentalrisk. It is worth remembering that banking activities arebased on relationships of trust. Intangible assets such asknowledge, ideas, professionalism and reputation arebecoming increasingly important. Nowadays theunderlying risk factors of banking activities cansignificantly emerge from elements which cannot alwaysbe attributed to traditional areas and that cannot bedirectly identified in the performance of tangible assets –real and financial – but can take shape through a loss inthe value of assets due to intangible components such astrust, expectations and image. The risks linked tocorporate environmental responsibility can, from thispoint of view, take on some importance. These can havean impact on banking activities through two mainchannels. On one side, they can have a direct impact onthe repayment ability of the counterparties assigned (forinstance, scarce attention to the ecological content ofthe product and the eco-compatibility of the productionprocesses of the company can represent a direct sourceof risk of failure and economic loss which the bankmight find itself having to sustain). On the other side,scant attention by banks to environmental values duringthe process of lending and evaluating counterparties –even small ones – may represent a negative element forthe bank’s reputation, thereby reducing the value of thebank’s assets in a much more direct and intense waythan the bankruptcy of a counterparty – no matter howlarge – may imply. Inadequate attention toenvironmental evaluation in lending may damage therelationship of trust with customers, investors and themarket, jeopardizing future business relations andcollaboration between the bank and its customers.At the time of the 2002 Social Report, with the intentionof achieving an initial measurement of theenvironmental risks for the loan portfolio of the Group,for the first time an indicator was monitored of thepercentage of loans issued to companies operating inproduction sectors with a high environmental dangerand impact. This indicator was calculated on the basis offigures on production activities supplied by the EuropeanBank for Reconstruction and Development (EBRD), in itsmanual for the management of environmental risk. InDecember 2003 activities classified as having a highlypotential risk to the environment represented 9.6% of

the credit portfolio of Sanpaolo IMI and Sanpaolo Bancodi Napoli, while in 2002 the ratio was around 10.2%.During 2003 these figures were also extended to thelending activities of the former Cardine Group Banks.Activities classified as having a highly potential risk to theenvironment represented 7.7% of the joint creditportfolio of Sanpaolo IMI, Sanpaolo Banco di Napoli andthe Banks of the former Cardine Group. Theenvironmental policies of companies are subject toevaluation in the Group’s financing decisions. Attentionto environmental problems by companies represents oneof the areas of investigation taken into consideration bythe credit review, especially for medium- long-term loans,and in the activities for structuring project financingtransactions for infrastructure operations.Particular attentive to the environmental impacts ofany infrastructure operation suitable to financing isBanca OPI20, the Group company specialized in loansfor public works and infrastructure. A positiveevaluation, carried out by independent consultantsand confirmed by the official evaluation of theregional or national bodies in charge, is one of thefundamental prerequisites for its financing. The models adopted by Sanpaolo IMI to evaluatecreditworthiness take into account the profiles ofenvironmental risk in the context of the review processfor the evaluation of the counterparty and, possibly, alsoin the procedure for assigning the rating and allocatingthe risk premium. In particular, the assignment of therating may be subject to downgrade if the counterpartyis considered to operate in specific production activitieswith a high impact on the environment (eg. energy,chemicals, plastic materials) and does not providesufficient guarantees that it respects the best practices inenvironmental management and control.

20. For a more exhaustive outline of Banca OPI, see p. 126.


Phot

oDisc


The environment: objectives 2003


Continuous development of financinginvestments protecting the environment,through Banca OPI. The planned actionsalso include the initiative in favor of agrowing use of methane gas.

Further improvement to ourenvironmental performance throughgreater use of hydroelectric energy.

✓Annual consumption of hydroelectric energy by theGroup has increased from 23.2 million KWh to 120.4million KWh.

Further improvement to ourenvironmental performance throughthe starting up of a feasibility study fora pilot project concerning recycledpaper.

Further improvement to ourenvironmental performance throughimplementation of the initiative involvingthe replacement of traditional PCmonitors with LCD monitors.

Extend the above-mentioned procedures toSanpaolo Banco di Napoli, with specialattention to those initiatives focusing onenergy management and natural resourcesaving already adopted by Sanpaolo IMI, alsothrough the integration of IT systems.

✓A 32% increase on investments in sectors of strong social andenvironmental benefits. The most significant operations were inthe environmental services sector in the strictest sense (integratedwaste and water cycle, above all in areas characterized byenvironmental emergency), in environment protection(preservation of the Venice Lagoon) and in urban transport.

✓Definition of instruments to finance investments in connectionwith the purchase of new methane gas vehicles for urbanpublic transport and the realization of infrastructures formethane gas vehicles.

✓The results of the experimental phase carried out in2003 are uncertain.

✓800 traditional monitors have been replaced byLCD monitors in 2003; this initiative will continueinto 2004.

✓The procedures have been extended and the ITsystems integrated.

We want to establish an efficientsystem of relationships with ourcommercial partners and externalcollaborators that allows translationinto a common prospective of growthand economic benefit.

We choose our partners on the basisof the quality level that they are ableto guarantee, privileging those thatcan ensure the greatest effectivenessand reliability to us and ourcustomers.

We base our relationships withsuppliers on principles of reciprocaltransparency and fairness, ensuringthat the work of our externalcollaborators follows the same criteriaof integrity and honesty to which weaspire.

We choose our suppliers on the basisof performance levels and suppliedguarantees, seeking more innovativeand reciprocally profitable solutionsthrough their collaboration.

We maintain supplier relationshipsacross the country while valuing thesocio-cultural context of each regionas much as possible and respectingthe negotiating needs of eachstakeholder.

We contribute to the overall results ofthe Group through theimplementation of initiatives directedtowards cost and waste reduction.

Creation of value

Customerorientation

Integrity

VALUES


Growthin observance

of specific qualities


resources

(Value in detail

160

Suppliers


1612003 Social Report – The suppliers

In the course of 2003, the Group had commercialrelationships with over 17,000 suppliers with a totalrevenue of almost one and a half billion euro.

The distribution of the larger suppliers by sector hasremained essentially unvaried with respect to 2002:

Relationships with commercial partners arehandled by the Purchase Function which thendefines purchasing policies that are reflectedthroughout all the phases of the relationship: frommonitoring the supply market to selection, fromtake-over of suppliers to the evaluation of theirperformance, and from information exchange tothe management of communication exchange. Thepurchase of goods and services relative to thedepartments where significant economies of scaleare achievable — therefore even when supplyingthe IT sector—are centrally managed for the wholeGroup by means of access to the best conditionspracticed in the various reference markets.

The profile of Suppliers

Equipment& systems14%

Other18%

Consulting6%

Data processingand warehousing6%

Parcel services and transports

3%Real estate

maintenance5%

Rentsand leasing

21%Software27%

BREAKDOWN OF BIG SUPPLIERS BY SECTORPh

otoD

isc


Shared PrinciplesOur policy of obtaining supplies of goods andservices reflects the principles of reciprocal fairnessand transparency contained in the Ethical Code. Theselection and management of supplier relationshipsis, as a result, based upon efficiency and objectivity.These principles are actively applied with ourcommercial partners since they constitute afundamental ring in the value creation chain of theBank. For this reason, the contractual standardsundersigned by suppliers for the closing of supplycontracts are being updated for 2004 and thesharing—on their part—of the Ethical Codeprinciples is being contemplated.

Moving Towards a Registry of Group SuppliersCommercial agreements are typically stipulated forthe entire Group, both for the purpose of obtainingmore advantageous procurement conditions as wellas for creating uniform technical, environmental andquality standards. In 2003, the Purchase Functionundertook a careful evaluation of the technical andqualitative standards of over 200 suppliers of theformer Banco di Napoli—an activity which willcontinue throughout 2004, and will include thesupplier contracts of the Banks of the North-East andwhich will result in the creation of a Registry ofGroup Suppliers.

Selection of Suppliers The selection of suppliers occurs through twodistinct phases:

• the identification of a restricted group of firms thatare allowed access to the purchasing procedure. Inthis phase, the firms are evaluated primarily from atechnical and qualitative perspective, usingparameters of reliability, competence andefficiency, as well as the effective capacity of thefirm in satisfying product or service requirements.These identified firms are then invited to place anoffer through a tender;

• a final selection of the best offer which, in themore complex acquisitions, is conducted through acareful evaluation separating the technical andeconomic part of the offer.

In the course of 2003, Sanpaolo IMI consideredincluding environmental and social considerations inthe evaluation process for the selection of suppliers.A detailed examination of the environmental andsocial impact of the commercial partners was not

carried out, however: it was considered moreappropriate to refer to the competencies ofcompanies that supply professional services ofenvironmental and social certification to firms. As aresult, the objective has been to favor, in theprocess of evaluation, those firms already inpossession, or in the course of attaining,environmental and/or social certifications.The introduction of these parameters in the new scoringsystem will initially be applied to:

• suppliers considered of strategic value;

• operators in sectors with significant environmentalimpact.

Supplier Contracts and Environmental Protection The Purchase Function was involved in the identificationof “critical areas” of environmental impact for the Bank,as well as the development and implementation ofprojects aimed at improving these aspects. This activitydeveloped along three main tracks:

• the use of renewable resources;

• special waste products;

• recycled paper.(For more information on these initiatives, see the sectionon Environment)

Legal ControversiesLegal controversies in 2003 were limited to two judicialcases for a total value of about 65,000 euro, and a pre-contentious situation regarding the sector of vigilance andtransport of valuables which involved suppliers affectedby the euro change-over.

1632003 Social Report – The suppliers

Suppliers: objectives 2003


Strengthening the coordination ofthe functions which - bothcurrently and in the future - willpreside over environmental andsocial issues within the bank.

Careful analysis of activities withsuppliers in light of the adoption ofinstruments that will allow:1) systematic identification of therelevant environmental impact ofthe various product and servicetypologies;2) the introduction of environmentalconcerns in the purchasing procedureof major impact goods and services.

✓ The Purchase Function has collaborated with otherfunctions of the Purchase and Logistics Department oncertain environmental initiatives (use of renewableresources, the collection and special waste collectionand disposal, use of recycled paper).

✓ A complete analysis for the systematic identificationof environmental impacts has not yet beenconducted, but the project remains in the works.

164 2003 Social Report – Economic Report

EconomicReport

Laur

a Ro

nchi

1652003 Social Report – Economic Report


The company’s added value represents the earningsobtained by the business in the fiscal year, and isdefined as the difference between production andconsumption of goods and services.The determination of such value has a specialsignificance, in as much as it represents theaccounting reconciliation between the fiscal yearfinancial statements and the Social Report. As amatter of fact, it is calculated based on a differentclassification of the captions in the consolidatedstatement of income, intended to show both theprocess of creation of corporate added value and itsallocation, expressing in monetary terms the relationbetween the company and the socio-economicenvironment with which it interacts, particularly inreference to some of the stakeholders considered:

• Shareholders

• Human resources

• State, Entities and Institutions and the Community

• Corporate sector

Under the methodological profile, among the differentconfigurations that the added value can take (depending onthe income component aggregation level), the GlobalAdded Value (Valore Aggiunto Globale – V.A.G.) has beenadopted as a reference base, which is the one used in theABI (Italian Bankers Association) model for the realization ofSocial Reports by banks, as it takes into account the specificfeatures of the banking sector.The data has been taken from the consolidated financialstatement as of 31 December 2003.In the following pages, the two main reclassifiedstatements making up the Consolidated FinancialStatements, i.e. the Balance Sheet and theStatement of Income, integrated with the keyGroup ratios.

The statements referred to the determination anddistribution of the gross global added value, based ontheir allocation, which show the share intended for eachstakeholder are prepared by an analytical reworking ofincome statement data, using a different methodology.

As regards the contents of each statement, the followingis noted:

• the reclassified consolidated income statement andthe reclassified consolidated balance sheet for the2003 fiscal year are compared with the correspondingproforma data of the preceding fiscal year which areprepared based on the conventional assumption of thesame footprint for the Group in 2002 and 2003(complete consolidation of the Eptaconsors group andInter-Europa Bank, the interest held in Cassa deiRisparmi di Forlì, as well as the passage from whole topartial consolidation of Banque Sanpaolo, IW Bankand Finconsumo Banca, as of 1 January 2002);

• Key ratios referred to personnel efficiency, operatingorganization, capital structure, profitability and shareprice performance have been taken from data ofquarterly financial statements (those for fiscal year 2002,on a pro forma basis);

• the statements referred to the analytical determinationand allocation of the global added value referred to thecomparative fiscal year, 2002 --given the differentpurpose of said statements from those related to thecomparison of the Group's economic and financialperformance-- were based on the official data of thebalance sheet, rather than on a pro forma basis; the useof pro forma data, in fact, could have caused aninaccurate representation of the attained added valueallocation among the different stakeholder categories.

Added value calculationand allocation

1672003 Social Report – Allocation of added value

ASSETSCash and deposits with central banks and post offices

Loans- due from banks- loans to customers

Dealing securities

Fixed assets- investment securities- equity investments- intangible fixed assets- tangible fixed assets

Differences arising on consolidation and on application of the equity method

Other assets

Total assets

LIABILITIESPayables

- due to banks- due to customers and securities issued

Provisions- for taxation- for termination indemnities- for risks and charges- for pensions and similar

Other liabilities

Subordinated liabilities

Minority interests

Shareholders’ equity

Total liabilities

1,474

146,87722,278

124,599

22,357

9,8222,9354,572

3431,972

959

21,091

202,580

160,25528,534

131,721

4,019732946

2,037304

20,626

6,414

271

10,995

202,580

31-12-2003

(€/mil)

31-12-2002

pro-forma

(€/mil)

1,499

145,92121,744

124,177

19,015

9,1032,3914,172

3982,142

1.080

23,027

199,645

157,36924,133

133,236

3,889742967

1,832348

20,738

6,605

342

10,702

199,645

Reclassified consolidated balance sheet


NET INTEREST INCOMENet commissions and other net dealing revenuesProfits and losses from financial transactions and dividends on sharesProfits from companies carried at equity and dividends from shareholdings

NET INTEREST AND OTHER BANKING INCOMEAdministrative costs

- personnel- other administrative costs- indirect duties and taxes

Other operating income, netAdjustments to tangible and intangible fixed assets

OPERATING INCOMEAdjustments to goodwill and merger and consolidation differencesProvisions and net adjustments to loans and financial fixed assets

- provisions for risks and chargesnet adjustments to loans and provisions for guarantees and commitments- net adjustments to financial fixed assets

INCOME BEFORE EXTRAORDINARY ITEMSNet extraordinary income/expense

INCOME BEFORE TAXESIncome taxes for the periodChange in reserves for general banking risksIncome attributable to minority interests

NET INCOME

3,7163,036

447283

7,482-4,610-2,841-1,512

-257329

-484

2,717-158-859-195-724

60

1,700-32

1,668-657

9-48

972

2003

(€/mil)

2002

pro-forma

(€/mil)

3,6532,795

304314

7,066-4,578-2,814-1,508

-256354

-508

2,334-218

-1,412-261-590-561

704320

1,024-443363-43

901

Reclassified consolidated statement of income


During 2003, the Sanpaolo IMI Group, as it stoodafter the changes in footprint occurred in the period,showed a positive evolution in profitability marginsand reduced vulnerability to the decline in interestrates and market volatility.

The good performance in operating revenues and costcontrols, coupled with the appreciation of andearnings realized over the equity portfolio, have allallowed to more than set off credit adjustments andone-time expenses associated with the voluntary

redundancy incentive plan. The net income for theperiod, totalling 972 million euro, was up 7.9%compared to 2002. This net income figure exceededthe budget target, thus confirming the growthevolution set out in the 2003-2005 Plan.

The gross global added value attained by the Groupclimbed 19% as compared to that of the precedingyear (from 5,213 million euro to 6,215 million euro).All stakeholder categories received benefits from thisincrease, as can be seen below.

Phot

oDisc


CAPITAL RATIOS (%)Net shareholders’ equity / gross loansNet shareholders’ equity / Direct customer deposits (excluding repos)

CUSTOMER FINANCIAL ASSETS (€mil.)Customer financial assets

- Direct deposits- Indirect deposits- Asset management- Asset administration

PROFITABILITY RATIOS (%)ROECost / Income ratioNet commissions / Administrative costs

CREDIT RISK RATIOS (%)Net non-performing loans / Net loans to customersNet problem loans and loans in restructuring/ Net loans to customers

SOLVENCY RATIOS (%)1

Core tier 1 ratioTier 1 ratioTotal ratio

SANPAOLO IMI SHARES Number of shares (millions)Quoted price per share (€)

- average- low- high

Earnings / Average number of shares in circulation (€)Dividend per share (€)Dividend per share / Average annual price %Book value per share2 (€)

OPERATING STRUCTUREEmployeesDomestic branchesForeign branches and representative officesPrivate bankers

PERSONNEL EFFICIENCY RATIOS (€/mil.)Gross loans to customers / Number of employeesCustomer financial assets / Number of employees Personnel costs / Net interest and other banking incomeNet interest and other banking income / Number of employeesIncome before taxes / Number of employeesDirect customer deposits (excluding repos) / Number of employeesAsset management / Number of employees and of financial planners

8.49.0

368,042131,721236,321143,71192,610

9.061.965.9

0.91.1

6.67.4

10.5

1,837

8.1585.796

11.3460.530.394.786.00

43,4653,168

1224,675

3.08.5

38.0%0.170.042.83.0

2003 2002

pro-forma

8.38.9

352,411133,236219,175132,93186,244

8.365.161.1

1.01.2

6.67.3

10.7

1,837

9.4395.231

13.7020.480.303.185.74

45,2173,115

1144,951

2.87.8

39.8%0.160.022.72.6

Key Group ratios

1. Solvency ratios as of 31 December 2002 are not pro forma.2. Shareholders’ equity / number of shares in circulation


Pier

o O

ttavia

no


NET PRODUCTIONNet interest incomeNet commissions and other net dealing revenues 1

Profits and losses from financial transactions and dividends on sharesProfits from companies carried at equity and dividends from shareholdingsOther operating income, netTOTAL NET PRODUCTION

CONSUMPTIONOther administrative costs1

Net adjustments to loans and provisions for guarantees and commitmentsProvisions for risks and chargesNet adjustments to financial fixed assets

TOTAL CONSUMPTION

GROSS TYPICAL VALUE ADDEDNet extraordinary income/expense1

GROSS GLOBAL VALUE ADDEDAdjustments to tangible and intangible fixed assets Adjustments to goodwill and merger and consolidation differences

NET GLOBAL VALUE ADDEDCost of labor

- personnel- costs of the network of private bankers2

- extraordinary staff leaving incentive2

Donations to bodies and institutions and gifts2

Indirect duties and taxes

INCOME BEFORE TAXESIncome taxes for the periodExtraordinary expenses for tax reform2

Change in reserves for general banking risksIncome attributable to minority interests

NET INCOME

3,7163,350

447283329

8,125

-1,510-724-195

60

-2,369

5,756459

6,215-484-158

5,573-3,630-2,841

-314-475

-2-257

1,684-657-16

9-48

972

2003

(€/mil)

2002

(€/mil)

3,7733,128

286292358

7,837

-1,525-604-261-561

-2,951

4,886327

5,213-510-212

4,491-3,206-2,856

-319-31-3

-264

1,018-450

-364-43

889

Analytical statement of added value determination

1. The data differs from that reported in the Reclassified Statement of Income owing to the specific recording of the caption used for the amounts referred to in note 2.2. Data disclosed in a specific caption in the added value determination scheme.


GROSS TYPICAL VALUE ADDEDNet extraordinary income/expense

GROSS GLOBAL VALUE ADDED

Allocated to:

SHAREHOLDERSDividends to Sanpaolo IMI S.p.A. shareholders Minority dividends

HUMAN RESOURCESCost of labor

- personnel- costs of the network of private bankers- extraordinary staff leaving incentive

STATE, ENTITIES AND INSTITUTIONS AND THE COMMUNITYIndirect duties and taxes Income taxes for the periodCharges for the tax reformDonations and gifts

CORPORATE SECTORAdjustments to tangible and intangible fixed assetsAdjustments to goodwill and merger and consolidation differencesChange in reserves for general banking risksUndistributed reserves and income to shareholders

GROSS GLOBAL VALUE ADDED

5,756459

6,215

75971643

3,6303,6302,841

314475

932257657162

894484158

-9261

6,215

2003

(€/mil)

2002

(€/mil)

4,886327

5,213

59555045

3,2063,2062,856

31931

717264450

-3

695510212

-364337

5,213

Statement on allocation of gross global added value


Fiscal year 2003 addedvalue allocation

COMPARISON OF ADDED VALUE ALLOCATION (2003 and 2002 fiscal years, €/mil.)

As announced before, the added value obtainedby the Group in 2003 increased significantly withrespect to the preceding year. The improvedresults translated into a better distribution of theresources to all stakeholder categories.Above all, Human Resources. This is, in fact, thestakeholder category that has seen, in absolutevalues, the greatest increase (+424 million euro).The growth is determined essentially from theprovisions made by the Parent Company andNorth-East Network Banks vis-à-vis personnel

voluntary redundancy, to a large extent allocatedto the implementation of the “Income,employment and re-training fund for staff in thebanking industry”. The “ordinary” allocation tohuman resources, through salaries and agentnetwork remuneration, has, in turn, seen substantialstability, even though the resources dropped innumbers as compared with 2002 year end.The aggregate amount allocated to Government,Agencies and Institutions and Community (+215million euro) also recorded a remarkable increase.

Corporate sector

State, enties and istitutionsand the community

Human resources

Shareholders

2002

2003

• 15% allocated to the State, Local Entities, Institutionsand the Community in the form of (direct and indirect)taxes and charity;

• 12% allocated to Shareholders, in the form ofdividends;

• 15% to the Corporate sector.

Based on the available information on the shareholdingstructure and the 0.39 euro per share dividend assessed on2003 profits, the added value allocated to the Shareholders --deviating from the ABI principles-- is comprised of thedividends of SANPAOLO IMI (2003 earnings of 291 millioneuro and 2002 earnings of 229 million euro) corresponding toCompagnia di San Paolo, Fondazione CR Padova e Rovigo,Fondazione CR in Bologna, Fondazione Cariplo, Ente CRFirenze, Fondazione CR Venezia, Fondazione CR Udine ePordenone, Fondazione Monte dei Paschi di Siena, FondazioneCR Gorizia and Fondazione CR Carpi, the mission of which canbe seen in their acts and actions in the social, artistic andscientific fields for the benefit of the community.

The chart shows a detail of Added Value allocation amongthe various stakeholders:

• 58% allocated to Human Resources, in the form of salaries,social security expenses, severance payments, pension andsimilar provisions, financial agent network remuneration, aswell as non recurrent expenses for voluntary redundancy;

Human resources58%

State, enties and istitutionsand the community

15%

Corporatesector15%

Shareholders12%

0 1,000 2,000 3,000 4,000


It should be underscored that the growth wasattained despite the two and half point reductionin the applicable tax coefficient.The share of the earnings allocated to theCorporate sector has, in turn, grown from 695 to894 million euro (+199 million euro). Thisamount represents, substantially, the investmentmade every fiscal year by the other stakeholdercategories in order to maintain efficiency andallow the development of the whole corporation.Particularly in the case of banks, the obligation

should be considered (arising from the specificminimum capital requirements imposed bySupervision bodies) to maintain appropriatecapital endowment for the protection ofdepositors.Finally, an increase can be seen in the allocationto Shareholders (+164 million euro). The datareflects the increase in the Sanpaolo IMI S.p.A.dividend which has increased from 0.30 to 0.39euro per share, a value equivalent to a dividendyield of 4.8% in 2003.

Phot

oDisc

176 2003 Social Report – Banca Fideuram

Banca Fideuram

1. Banca Fideuram profileMissionBrief HistoryOperating and organizational structureStrategic approachCorporate GovernanceMain operating, economic, and financial data

2. Social ReportCustomersEmployeesPrivate BankersShareholdersCommunityEnvironmentSuppliers

3. Main objectives for 2004

1772003 Social Report – Banca Fideuram

WE AT BANCAFIDEURAM ARE:


MissionTo invest wisely, based on a detailed analysis of ourcustomers' needs, meeting those needs with acomprehensive range of solutions and identifying themost effective investment choices from them, has fromthe very outset been Banca Fideuram's mission.

Brief History1968International Overseas Services (IOS) exits frommutual funds business. A new companyrepresented by Istituto Mobiliare Italiano (IMI) takesover the business in Italy and assumes the name ofFIDEURAM.Fideuram offers Italian investors the “historic”Luxembourg-based mutual funds, Fonditalia andInterfund, through a network of approximately 300Private Bankers.1983In March is approved a law allowing the institution andmarketing of Italian mutual funds.1984Fideuram offers its customers its first Italian mutual funds:Imirend and Imicapital.1992In January Banca Fideuram is created through themerger of two IMI Group companies: BancaManusardi and Fideuram.Since September Banca Fideuram stock has beenlisted on Milan Stock Exchange.1996Banca Fideuram stock is included on the Italian blue-chips index, MIB 30.1997The study of the most advanced private-assetsallocation systems and the lengthy collaboration withone of the world’s most important accreditedconsulting "finance houses", the American companyFrank Russell, give rise to the Personal FinancialPlanning a customized highly-advanced technologyfinancial-planning service.Therefore, Banca Fideuram now offers Italian investorsa “state-of-the- art” product for investment approachand financial planning according to personalobjectives suited to one’s own propensity to risk.

1998Fideuram Bank Luxembourg is founded.2000Banca Fideuram expands its business in France throughthe acquisition of the Wargny Group.2002Banca Fideuram acquires Banca Sanpaolo Invest. Withapproximately 55 billion euro of assets undermanagement and over 4,700 private bankers, becomesthe first multichannel banking network in Italy.

1. Banca Fideuram profile

• Professional who know how to manage allfinancial, banking and insurance services for privatecustomers.Providing the client, day by day, with worth and safety.

• We always give priority to the client’s interest onwhose trust our success is based.

• We believe in values like honesty and professionalsecrecy. And we apply them always.

• We want to reach beyond the clients expectations.Thanks to the expertise, availability, accuracy andattention we put in working.

• We bring our capabilities and individualcompetences to common realizations.

• The spirit of initiative and competition we all showimproves our success.

• We are always searching for new and efficientsolutions. With us, tradition means change.

(

1792003 Social Report – The Banca Fideuram profile


Banca Fideuram, with approximately 58 billion euro of assetsunder management (as at December 31st, 2004), is a leaderin the Italian and European Private Banking industry. BancaFideuram heads a group of integrated subsidiaries, locatedboth in Italy and abroad, specialized in managing financial,life insurance and pension products, exclusively distributedby its Private Bankers. Alongside these products BancaFideuram provides its customers with traditional bankingfacilities and securities/own mutual funds trading services,which are also available online. Banca Fideuram does not,however, carry out lending activities. The service to a total ofapproximately 750,000 customers is guaranteed by 4,543Private Bankers. Among those, 3,413 belong to the BancaFideuram network, while 1,130 to the Sanpaolo Investnetwork, acquired by Banca Fideuram in 2002 in order tofurther strengthen and widen its distribution capacity in Italy.Through its subsidiary Fideuram Wargny, Banca Fideuram ispresent also in France, where it is currently developing the

Private Banking activity, trying to replicate its successfulbusiness model, adapting it to the local market.Banca Fideuram business model guarantees flexibility, quickdecision-making and a strong adapting capability toincreasingly tough and changing market conditions.This model could be simply summarized as “upstreamintegration, downstream competition”. Upstream there isa corporate center that originates strategies, allocatinghuman and financial resources in order to implement andcontrol them. Downstream there are the Private Bankers'networks, separate and independent from each other,which are called to maximize their own commercial andfinancial results. In the middle, a shared infrastructure,comprising two main areas: services production andprocessing. The first one designs and manages the servicesdistributed by the networks; the second manages alloperations, from both administrative and IT perspective,through highly automated processes.

Area 1Private Bankers: 547Branches: 12Private Bankers’ offices: 19






* All the branches serve customers and private bankers of both Banca Fideuram and Sanpaolo Invest networks.

BANCA FIDEURAM NETWORK *

Operating andorganizational structure


Area 1Private Bankers: 315Private Bankers’ offices: 43

Area 5Private Bankers: 156Private Bankers’ offices: 19Area 3

Private Bankers: 296Private Bankers’ offices: 41



* In 2004 the territorial areas of Sanpaolo Invest have been reorganized and their number has been reduced from 5 to 3.

SANPAOLO INVEST NETWORK*

CoporateCentre

BF Network

Fideuram WargnyShared infrastructure

SPI Network

ServicesProduction Processing


When the 1999-01 three-year plan came to an endand the company had successfully achieved anotherimportant jump in size (increasing the assets undermanagement by 51% and the network of privatebankers by 20%) maintaining high profitability and asolid balance sheet, Banca Fideuram found itself facedwith a challenge: defining and implementing astrategy suitable for creating value and pursuingexcellence in customer service even during adverseand uncertain market conditions. This happened in2002 and even more so in 2003. To better understandthe implications of a transition from a bull marketstrategy to a strategy that is valid even in adversefinancial markets, it might help to refer to thefollowing diagram.

StrategicApproach

Net New Money

PerformanceAsset Mix

Asset Class Return

Network Productivity

Recruitment

Acquisitions

AuMGrowth

Contracts Maturity

Prices/Product Mix

Distribution Costs

Operating Costs

AuMProfitability

Value

BULL MARKET

BEAR MARKET


In a bull market, everything is easier. In short, thekey driver is represented by the recruitment ofqualified financial consultants and the concentrationof their incentives on the net new money. In thismarket environment, net new money meansmanaged assets which, in turn, means products withhigh equity content and, as a consequence, valuecreation. The issue becomes much more problematicwhen up against an on-going financial crisis withmarkets that are dominated for long periods byvolatility and uncertainty: a decrease in assets due tonegative market performance, recommendationsthat customers opt for safer forms of saving, andpoor assets mobility deriving from savers’ reluctanceto realise losses are all factors that make generatingvalue for shareholders an even more arduousobjective to achieve. In this situation efforts must beconcentrated on improving profitability bystrengthening relations with customers, improvingthe mix of products, and increasing operational anddistributive efficiency. Growth is still possible in thiscontext but the option of external growth(acquisitions) can become more attractive thanorganic growth (recruitment of private bankers).

Banca Fideuram’s strategic choices in 2002 and 2003largely reflect what was just described above.Refocusing took place through several stages:

• In 2002, through:a) A significant repositioning of the commercial activities

toward the life insurance and pension component,which translated into a 130% increase in the grosspremiums written by Fideuram Vita (compared to amarket average of 24%). From the customer’s point ofview the life insurance policy appeared, in fact, to bethe most suitable instrument for investing in growingand increasingly urgent pension needs; from thecompany’s viewpoint, it was the ideal product in orderto pursue the strategic goal of increasing thepersistence of revenues by extending contracts withcustomers;

b) The acquisition of Sanpaolo Invest, whichfundamentally distinguished itself as a large-scalerecruitment operation while the contingent marketsituation was making organic growth excessivelyburdensome;

• In 2003, in a more positive market, through:a) Further strengthening of the strategy of rationalizing

assets under management, aimed at increasing theabsolute and relative weight of managed assets. Thisapproach conforms with the traditional policy ofadvising customers not to concentrate largepercentages of their assets in single securities;

b) The integration of Sanpaolo Invest, through thecreation of a common platform of product andservices and the commercial relaunching of thecompany itself.

The 2002-2003 two-year period was accompanied byanother important phenomenon, which was the result ofthe company’s decision to sacrifice part of the short-termprofitability and to make the goal of maintaining customerrelations a matter of priority: a significant reduction in theequity content of funds, discretionary accounts, and unit-linked policies, which dropped from more than 50% toapproximately 30% during 2002, remaining slightly aboveminimums until the end of 2003.These choices will definitely bring about benefits overthe medium term for both shareholders and customers.Finally, it must be emphasized that the strategicapproach described up until now, although designedunder struggling financial markets and uncertainty, mayalso be easily adapted to a growth scenario with morestable and/or positive markets by simply refocusing onorganic growth.


ADHERENCE TO THE PREDA CODEIn May 2000 Banca Fideuram adhered to the Code ofSelf-discipline of Listed Companies instituted by BorsaItaliana S.p.A.. In accordance with the RegulatoryProvisions governing the markets regulated andmanaged by Borsa Italiana S.p.A., detailed informationis provided on the Bank's current model of corporategovernance, in particular regarding its compliance withthe provisions of the Code.

PROPRIETARY STRUCTUREThere are no agreements between shareholders.

COMPANY MANAGEMENT STRUCTURE

CorporateGovernance

The Board of Directors is assigned ordinary and extraordinarymanagement of the Bank, except for the competencies reserved by lawfor shareholders’ meetings.

9 directors, of which 8 non-executive, 2 of which fulfill the requisites ofindependence established by the Code of Self-discipline.

11

At the time of approval of the 2005 Annual Report.

Functions

Composition


Expiry

Board of Directors

(The Executive Committee is delegated the authority to make decisionsregarding specific management policies, the structure and development of thedistribution network, the granting of loans, expenditure commitments and theengagement and promotion of management personnel.

5 directors

• of which 4 non-executive

• out of the non-executive directors, 1 is independent.

10

Functions

Composition


Executive Committee

(


This Committee presents proposals to the Board of Directors regarding theremuneration of the Managing Director/General Manager and - with input fromand working in conjunction with the latter - for determining the remunerationcriteria adopted for the other members of the Bank's General Management andthe top senior management of its subsidiaries. The Committee may make use ofexternal consultants to this end, at the Bank's expense.

3 directors, all non-executive.

1

Functions

Composition


Remuneration Committee

(3 Statutory Auditors and 2 Alternate Auditors.

12

At the time of approval of the 2004 Annual Report.

Board of Statutory Auditors

(

The Internal Audit Committee plays a consultative and proactive role.The Committee has the following duties:

• evaluating the suitability of the internal auditing system;

• evaluating the work plan prepared by the Internal Audit Manager and receiving their periodic reports;

• evaluating the suitability of transactions with related parties;

• evaluating, together with the Company's directors and auditors, the suitability of theaccounting policies used and their compatibility for the purposes of preparing the consolidatedfinancial statements, through the prompt examination of the annual and within-year account;

• evaluating the Auditing Company's proposals, submitted with the aim of gainingappointment as Independent Auditors, as well as the work plan prepared for the auditand the results set out in the report and letter of comments;

• reporting to the Board of Directors at least every six months, upon the approval of thefinancial statements and six-monthly report, on the activities carried out and on thesuitability of the internal auditing system.

3 directors, all non-executive, 2 of which are independent. The Chairman of the Board ofStatutory Auditors and the Managing Director-General Manager may participate in the meetings.

4

Functions

Composition


Internal Audit Committee

(Composition


Expiry


RemunerationThe remuneration of the Directors is determined atthe Shareholders’ Meeting. It consists of a fixedannual part and an allowance paid each time theyattend board and/or internal committee meetings (inaddition to reimbursement of expenses).For Directors who hold special positions or aremembers of internal committees, an additional fixedremuneration is also provided for, which is establishedby the Board of Directors.The Managing Director/General Manager is also aparticipant in the 2003 stock option plan approved bythe Board of Directors for the senior management ofthe Bank and its subsidiaries as well as the privatebankers of the Bank and Sanpaolo Invest.

The remuneration of permanent members of theBoard of Statutory Auditors is determined at theShareholders’ Meeting. It consists of a fixed annualpart and an allowance paid each time they attend themeetings of company bodies (with reimbursement ofexpenses).

The remuneration of the company in charge of auditsis determined at the Shareholders’ Meeting.

The Board of Directors approved the 2003 stockoption plan in favor of the directors of the Bank andits subsidiaries, as well as the private bankers of theBank itself and Sanpaolo Invest.

Role of the Managing DirectorThe Managing Director-General Manager has the dutiesand powers of supervising the implementation ofdecisions made by the Board of Directors and theExecutive Committee, of managing the company and allof the Bank’s business, making sure it is carried outaccording to the general policies established by the Boardof Directors and the special policies established by theExecutive Committee.

Phot

oDisc


Phot

oDisc

188 Bilancio Sociale 2003 – Banca Fideuram

TRANSPARENCY AND CONTROLInternal dealingBanca Fideuram has adopted a Code of Conduct oninternal dealing consistent with the Regulatoryprovisions for markets organized and managed by BorsaItaliana. In particular, the Code provide that:

• The Bank will communicate, within the tenthstock-exchange working day following the lastday of each calendar quarter, transactionsregarding Bank shares (and derivative financialinstruments as well as covered warrants andwarrants that have the same shares as underlyingassets) carried out during each calendar quarterby parties identified, according to the referenceregulations, as insiders, if the amount of thetransactions, combined with other transactionscarried out during the same period, is equal to ormore than 50,000 euro;

• Significant insider transactions (those whosecombined amount is more than 250,000 euro) will bemade public without delay and, in any case, withinthe first day the stock exchange is opened;

• In determining insider transaction status transactionscarried out in exercise of stock options are not takeninto account;

• The Board of Directors of the Company shall beempowered to limit or prohibit for specific periods oftime the stated above transactions for insiders.

Transaction with related parties Banca Fideuram has adopted an organizationalprocedure that aims to guarantee the fairness ofsignificant transactions executed directly or bysubsidiaries with their own related parties or those of theParent Bank, Sanpaolo IMI.In particular, this procedure provides:

• The criteria for identifying correlated parties (in line withthose established by CONSOB – the Italian Securitiesand Exchange Commission) and significant transactionsfor the purposes of applying the procedure;

• The authority of the Board of Directors, sanctioned bythe Internal Audit Committee, to approve significanttransactions with related parties;

• The obligation of subsidiaries to acquire advanceconsent by the Bank in the case of significanttransactions with related parties;

• The obligation of using independent experts to evaluatethe economic conditions and/or the legitimacy and/or thetechnical aspects of all atypical or unusual transactionsand, in any case, particularly large transactions.

This procedure also identifies the immediate and/or periodicinformational duties that the Departments of the Bank and itssubsidiaries must fulfill with the market, the Internal AuditCommittee, the Bank’s Board of Directors, and correspondingbodies of the Parent Company, Sanpaolo IMI.If the related party is a person who has duties ofmanagement, administration, or control within the Bank, therules of the organizational procedure accompany thoseprovided for by Art. 136 of the Testo Unico Bancario(Consolidated Banking Law).Directors who have even a potential or indirect interest in atransaction with related parties must, finally, observe the newrules dictated by Art. 2391 of the Civil Code as amended bylegislative decree no. 6/2003 which reforms company law.


Use of confidential informationThe management of confidential information, with specialregard to price-sensitive information, is entrusted to theManaging Director-General Manager, who supervises andcoordinates the work of the:

• General Secretary’s Office, responsible for notifying theAuthorities;

• Media Relations Department, which notifies the press;

• Investor Relations Department, which notifiesinstitutional investors.

AuditsBoard of Statutory AuditorsThe Board of Statutory Auditors exercises the powers provided for bythe Civil Code and sector rules (Testo Unico Bancario - ConsolidatedBanking Law, Testo Unico della Finanza – Consolidated Financial Law,secondary regulations issued by the Regulatory Authorities). TheBoard supervises observance of the law and the articles of association,observance of the principles of proper administration, and inparticular, the adequacy of the organizational, administrative, andaccounting model used by the Bank, and its actual operation.

Internal Audit CommitteeThe Internal Audit Committee carries out the functions indicated inthe previous section entitled “Company management structure”.

Internal Audit UnitThe Bank has an Internal Audit Unit under the Audit Department, whoseManager reports directly to the Bank’s Managing Director-GeneralManager, which has the job of satisfying all of the specific requirementsregarding the controlling of risks and the efficiency/effectiveness of thebusiness processes of the Bank and its subsidiaries.

Cont

rast

o


RIGHTS AND DUTIES OF SHAREHOLDERSNomination and annulment procedures for the Boardof Directors and the Board of Statutory AuditorsThe members of the Board of Directors are nominated for aperiod of three financial years at the company Shareholders’Meeting, and may be re-elected. In accordance with theprovisions of the Code of Conduct for Listed Companies, theBank’s controlling shareholder submits the nominationsproposed for directors, along with resumes of the candidates, tothe registered office at least 10 days before the meeting. For theannulment of directors, the appropriate rules of law apply.The Board of Directors for the 2003-2006 three-year period wasnominated at the Banca Fideuram Shareholders’ Meeting held on28 April 2003.

The Board’s members are nominated for a period of three financialyears at the company Shareholders’ Meeting, and may be re-elected.The entire Board of Statutory Auditors is nominated based onlists, presented by the shareholders, submitted to the registeredoffice at least 10 days before the date established for theShareholder’s Meeting.Only shareholders who, alone or together with othershareholders, represent at least 3% of the shares with votingrights in ordinary meetings may present lists. For the annulment of directors, the appropriate rules of law apply.The Board of Statutory Auditors for the 2002-2005 three-yearperiod was nominated at the Banca Fideuram Shareholders’Meeting held on 29 April 2002.

One share, one vote principleBanca Fideuram’s By-laws do not establish limitsregarding the voting power of shareholders. Eachshare assigns the right of one vote to be exercisedat Shareholders’ Meetings.

Convening meetings, member participation in Shareholders’Meeting votesAccording to Art. 6 of By-laws, ordinarymeetings are called by the Board of Directors atleast once a year. Meetings may also be called byat least two members of the Board of Auditors,following notification of the Chair of the Boardof Directors.

Shareholders that at least five days prior to thatof a meeting deposit their shares with the Bankor other authorised parties specified in thenotice of meeting shall be entitled to take part inthe shareholders' meeting.Every shareholder who is entitled to take part ina meeting may have themselves represented inaccordance with the provisions of Italian law.

Antitakeover measuresNo antitakeover measures have been implemented.

Phot

oDisc

Economic and Financial data (€mn)

Consolidated net income Operating incomeTotal net interest and net revenuesConsolidated shareholders’ equity

Profitability indicators (%)

R.o.E.Cost/Income

Operational dataAsset under Management (€mn)

Net New Money in Managed Assets (€mn)

Total Net New Money (€mn)

Private Bankers (no.)

Customers (‘000)

Branches (no.)

Private Bankers’ offices (no.)

Employees (no.)

150.4253.7595.7999.6

14.455.4

54,883-1,1542,0554,754

77587

2672,007

2002* 2003

175.6254.1592.4

1,012.4

17.955.2

58,1293,5591,2034,543

75588

2611,995

Main operating, economic and financial data


* Pro-forma, includes Sanpaolo Invest acquired in October 2002


CustomersBanca Fideuram has over 750,000 customers, distributed overall age brackets and across the entire country.

Customer SatisfactionGoing beyond customers expectations by aiming at theirfull satisfaction is one of Banca Fideuram’s main values.With this in mind a Customer Satisfaction project waslaunched in the summer of 2003.The Bank “listened” to its customers in order to identifythe essential activities to improve satisfaction and toincrease customers’ loyalty.With the help of a well-known consulting firm, arepresentative sample of customers was interviewed,which indicated both the level of satisfactionregarding relations with Banca Fideuram (fromproducts to relations with Private Bankers) as well asneeds that have still to be covered. In particular, 20qualitative individual interviews and 1,650quantitative telephone interviews were carried out.The results of the survey, available at the end of thefirst quarter of 2004, will be used to increase thedegree of awareness regarding the characteristicsand needs of customers and to realize specificimprovements: Private Bankers “education” andenrichment of the range of products for specificsegments of customers.The Customer Satisfaction analysis is continuous:Banca Fideuram believes, in fact, that customers’needs are evolving and the level of satisfactionchanges with them. Only constant analysis of theseneeds will allow Banca Fideuram to satisfy itscustomers at best, always maintaining productquality high.

Asset management activities 2003 was characterized by two very distinct marketphases. During the first six-month period when anuncertain climate prevailed, caused by the war in Iraq,the stock market was especially volatile while thebond market benefited from a drop in rates aimed atsupporting a faltering economic recovery. During thesecond half-year, instead, the consolidation ofAmerican economy recovery, definitely faster thanexpected supported the strong raise in stock markets.The continued assistance provided by PrivateBankers allowed Banca Fideuram to maintain its rolein guiding choices in asset management services in amarket characterized by exceptional volatility. TheBank’s customers demonstrated their loyalty bydepositing new assets (Banca Fideuram collected1,203 million euro during 2003) and modifying thegeneral composition of their portfolios in favor ofasset management products (inflow surpassed 3.5billion euro). In particular, insurance products andcapital protected products were promoted in orderto respond to needs for security and pensions (unit-linked policies).

2. Social Report

BREAKDOWN OF CUSTOMERS BY AGE

45 - 54 years 23%

55 - 64 years 20%

65 - 74 years 13%

74 years and above

8%

35 - 44 years 23%

18 - 34 years13%

Managed savings

Mutual funds

Private banking

Life Insurance

of which Unit Linked

Pension Funds

Total non-discretionary savings

of which securities

Total

3,559

1,504

643

1,389

1,651

23

-2,356

-2,203

1,203

44,573

17,315

14,918

12,244

6,716

96

13,556

11,348

58,129

Assets undermanagement

2003

Netinflows(€mn)

1932003 Social Report – Social Report

NUMBER OF CUSTOMERS 100,000 - 150,00050,000 - 100,00020,000 - 50,00010,000 - 20,0005,000 - 10,000

0 - 5,000

Phot

oDisc


The business strategyThe responsibility to help customers choose theproducts that most suited their needs spurred theadoption of new business approaches that were closerto the real customers’needs.

Start from the customers’needs: the customer is thefocal point of Banca Fideuram’s strategy. Theguideline of the business activity is the firm belief thatthe first step toward giving value to customers ishelping them understand their basic needs.

Immediate cash

Future availability

High return

Cash Line

• Current account

• Repo

• Government securities

• Monetary investment funds

• Bond investment funds

Planning Line

• Three different types of discretionary accountsinvesting in mutual funds with a highlydiversified portfolio and various levels of risk

• Two types of Unit-Linked policies (with orwithout guaranteed capital at maturity)

Value Line

• Two different types of discretionaryaccounts investing in mutual funds

• Certificates on funds/stocks baskets

• Equity investment funds

The financial resources necessary forcoping with unexpected or short-term needs that must be invested inproducts that can be easily liquidatedand, above all, have a very low risk.

The most important part of financialresources – those used formaintaining a standard of living atthe time of retirement. They musttherefore be invested in productsthat can offer an adequate return,against a proportionate risk.

The remaining part of assets that maybe used for more aggressiveinvestment, which must be considereda marginal investment, associated witha considerable risk of loss.

Banca Fideuram solutionsMeaningNeeds

Pier

o O

ttavia

no


High Net Worth A dedicated team of high-profile employees was setup, within the Marketing and Private BankingDepartment, for High Net-Worth customers; that is,customers with considerable financial assets andspecific needs of assistance that are not just financial. The private banker continues to be the customer’sprimary contact and, with the dedicated team’s help,aims at understanding and satisfying the needs ofindividual clients. The customized approach has thegoal of offering an integrated management of familyassets through consultancy services such as wealthplanning and the definition of dedicated andexclusive products. These customers are also offeredadditional services such as tax optimization and legaladvice from leading internal and external specialists. The aim is therefore to build up a long-termtrustworthy relationship whose characteristics areprofessionalism, innovation, confidentiality, andcontinuous assistance.

Risk/ReturnMaking customers increasingly aware of theirrisk profile and therefore of the consistency oftheir choices was one of the main topics thatBanca Fideuram worked on during 2003. Thecombined efforts of several teams providedprivate bankers with an indicator of themaximum probable capital loss for each type ofasset management product. Within onlineservices, an indicator of maximum probable lossis also provided to customers for both theirtrading portfolios and for each security.

PattiChiari (Clear Deal)The “PattiChiari” (Clear Deal) project, promotedby ABI (Italian Bankers Association) in order toimprove bank/customer relations and approvedby thirteen leading banks, is a self-regulationinitiative that has the goal of guaranteeing thetransparency and comparability of the productsand services offered by banks to customers,allowing individual banks the power to adherein time to one or more initiatives.Banca Fideuram supports the “PattiChiari”Consortium. In particular, during 2003 itlaunched the first initiative - online searching offunctioning ATM’s (FARO) - that lets customersobtain information, via telephone, mobilephone, or the internet, on the nearest activeautomatic teller machine.

Cont

rast

o



Online servicesTo make the examination and retrieval of information aseasy as possible for customers, the graphics of thecompany’s internet site were completely updated in2003 (www.fideuram.it). In addition to being attractiveand striking, the new graphics were in fact designed tobe user-friendly and visually summarize the contentwith easy-to-understand symbols for quick selectionand consultation of the topics through intuitive surfing.

Internet is mainly a channel of communication thatbrings Banca Fideuram closer to its customers. Thepossibility of carrying out essential banking transactionscomfortably at home, at terms more reasonable thanthose applied at branches, allows customers to saveand optimize their time.

Thanks to Fideuram Online service, in fact, customers cangain information and operate directly via internet upontheir bank accounts, trading portfolios, and leadingfunds (Fonditalia), learn the value of their private bankinginvestments, follow the performance of chief financialmarkets, and buy and sell securities on leading markets.Furthermore, Fideuram Online membership is free: infact, there are no activation costs or subsequentmembership fees.

Approximately 127,000 customers belong to FideuramOnline (as of 31 December 2003).

Customer Service Customers, continuously assisted by their private bankers,have the possibility of directly contacting Banca Fideuramthrough Customer Service, which manages all complaintsand requests for information or documents. CustomerService is a part of the Audit Department, which isresponsible for internal audits, and is therefore completelyfree of conflicts of interest related to the mingling ofcontrolling party/controlled party roles.

The customer may contact Customer Service by telephone(using a toll-free number to which a special internal unitwill respond) or by e-mail or regular mail.

Banca Fideuram has decided to concentrate themanagement of complaints in order to:

• Guarantee its customers maximum uniformity in thehandling of all types of requests. In this way it alsomanages complaints that arrive, not only directly at allof the branches, but also at other Banca Fideuramsubsidiaries (for example, Fideuram Investimenti andSanpaolo Invest);

• Use the resulting important information to identify anyprocess anomalies that require organizationalintervention.

During 2003, Banca Fideuram received a total of5,103 written complaints (with an incidence of0.68% on approximately 755,000 customers). Theaverage time for replying to customers isconsiderably lower than that required by regulations(21 days rather than the standard 90). Banca Fideuram’s attention to the quality of theprovided services and customer perception of themled to the development of an analysis of customersatisfaction regarding Customer Service in 2003. Theanalysis regarded 3,305 customers and verified agood level of satisfaction regarding the assistanceprovided via telephone and mail.

Men Women TOTAL

Directors 3.6% 0.4% 4.0%

Managers 32.1% 12.5% 44.6%

Professional Areas 25.0% 26.4% 51.4%

TOTAL 60.7% 39.3% 100%

BANCA FIDEURAM EMPLOYEES IN ITALY


2003 ITALY ABROAD TOTAL

Men Women TOTAL Men Women TOTAL Men Women TOTAL

Directors 58 6 64 13 1 14 71 7 78

Managers 514 201 715 163 73 236 677 274 951

Professional Areas 400 423 823 68 75 143 468 498 966

TOTAL 972 630 1,602 244 149 393 1,216 779 1,995

Banca Fideuram’s staff went from 2,007 as of 31December 2002 to 1,995 as of 31 December2003, with a decrease of 12 personnel equal toapproximately 0.6%. In particular, the number ofpersonnel dropped in Italy by 1.7%, while itincreased abroad by 4.2%.In terms of contracts, 48.4% of personnel belong

to professional areas (51.5% in 2002), 47.7% aremanagers (45.0% in 2002), and 3.9% aredirectors (3.5% in 2002).Female employees equal 39% of personnel,whereas the incidence at the management levelreaches 27.3%.Staff operating abroad equals 19.7%.

Location of personnelPersonnel distribution shows a particularly significantpresence in the provinces of Rome (58.3%) andMilan (28.0%) where all of the main services andproduct companies are located. The distribution ofresources shows 63.7% in Central/Southern Italy and36.3% in the North.

BREAKDOWN OF PERSONNEL

Employees

BANCA FIDEURAM EMPLOYEES IN ITALY AND ABROAD

Men61.0%

Women39.0%

Other countries19.7%

Italy80.3%


Average seniority Average age

Directors 10.6 48.3

Managers 13.6 43.9

Professional Areas 10.5 37.4

AVERAGE SENIORITY AND AGE

On the whole, personnel have an average durationof service of 11.9 years and an average age equal toapproximately 40.7 years.

No. resources of which part time

Open-end contracts 1,588 121 7.6%

Fixed term contracts 9 1 11.1%

Apprenticeships 5

TOTAL 1,602 122 7.6%

TYPES OF CONTRACTS

Directors Managers Professional areas TOTAL

Degree 51 245 205 501 31.3%

Secondary school 13 421 485 919 57.3%

Other levels of education 49 133 182 11.4%

TOTAL 64 715 823 1,602 100%

EDUCATION

122 personnel have part-time job contracts, of which94.3% are female personnel that use this type of contractin order to flexibly manage their work.

Phot

oDisc


Men Women TOTAL

Directors 12.1% 3.0% 15.1%

Managers 18.2% 6.1% 24.3%

Professional areas 30.3% 30.3% 60.6%

TOTAL 60.6% 39.4% 100%

DIVISION BY QUALIFICATION

INCOMING 2003

OUTGOING 2003

Men Women TOTAL

Open-end contracts 36.4% 21.2% 57.6%

Fixed term contracts 18.2% 12.1% 30.3%

Apprenticeships 6.0% 6.1% 12.1%

TOTAL 60.6% 39.4% 100%

DIVISION BY TYPE OF CONTRACT

Men Women TOTAL

Directors 8.2% 8.2%

Managers 11.5% 4.9% 16.4%

Professional areas 34.4% 41.0% 75.4%

TOTAL 54.1% 45.9% 100%

DIVISION BY QUALIFICATION

Men Women TOTAL

Promoted to Director 6 2 8

Promoted within Management 71 18 89

Promoted to Manager 25 13 38

Promoted within Professional areas 81 56 137

TOTAL 183 89 272

CAREER EVOLUTION

Men Women TOTAL

Open-end contracts 34.4% 11.5% 45.9%

Fixed term contracts 18.1% 34.4% 52.5%

Apprenticeships 1.6% 1.6%

TOTAL 54.1% 45.9% 100%

DIVISION BY TYPE OF CONTRACT

TurnoverDuring 2003, 33 personnel were introduced tostrengthen the managerial structure and to replacepersonnel who resigned and were temporarily absent.The new employees, 58% of which have open-endcontracts, have an average age of 31 years andapproximately 80% are college graduates.


Career evolutionCareer development is based on merit and keeps inmind achieved results, level of expertise, andindividual skills. The process is also carried outconsistently with the organizational model and therequirements for carrying out roles ofresponsibility/coordination and particularly importantspecialist activities.During this development process, full agreement withthe company’s ethical and organizational values –consistent with those that inspire the San Paolo-IMIGroup’s work – is of fundamental importance. Thefollowing, among other things, are especiallyhighlighted:

• professional integrity and confidentiality;

• respect for the company and others;

• dependability and expertise;

• teamwork;

• assumption of responsibility at all levels.

In this regard, the process that manages andmonitors personnel performance has an importantrole and is based on:

• a system of goals for managerial and professional figuresthat safeguard areas with special strategic importance inthe company’s organization;

• an evaluation system that focuses on analyzing individualperformance: achieved results, organizational conduct,and explicit expertise.

The evaluation process, which develops and motivatespersonnel, is organized into specific leader/collaboratorstages of contact that define expected performancestandards and verify intermediate and final performance.

Relations with Trade UnionsTrade-union relations have for some time beencharacterized by open and constructive meetings thatpermitted creating important agreements, which hadthe purpose of reorganizing Banca Fideuram’ssubsidiaries during 2003. In particular:

• the investment services were concentrated into a singlecompany: Fideuram Investimenti SGR, which mergedFideuram Capital Sim’s consultancy branch and all ofFideuram Gestioni Patrimoniali SIM;

• Fideuram Capital Sim was merged throughincorporation into Banca Fideuram;

• Banca Sanpaolo Invest’s banking branch was spun offto Banca Fideuram with consequent reconfiguration ofSanpaolo Invest into a brokerage firm;

• the banking services were reorganized – in closerelation to the integration process of Banca SanpaoloInvest - and brought about the creation of the BankingServices Department and a reconfiguration plan forsome of the bank’s employees;

• the registered office was transferred from Milan toRome with a consequent plan to move theAdministration Department, Audit Department, andthe General Secretary’s Office to Rome.

Altogether, the transfers within the group concernedapproximately 300 personnel (19% of staff) andtook place without conflict.The rate of unionization is approximately 56%.The number of hours dedicated by workers to trade-union activities in 2003 was equal to 6,913 andrepresents approximately 0.3% of theoreticalworking hours.Company regulations provide for improved benefitscompared to national contractual provisions. Inparticular, there are special company negotiationprovisions in terms of time flexibility, shorter lunchbreaks, leave for student workers, the transformationof employer/employee relations from full-time intopa r t - t ime , p ro f e s s i ona l cou r s e s re l a t ed totechnical/special expertise development criteria,pension funds and health care.

Phot

oDisc


Protected categoriesPersonnel belonging to protected categories according tolaw 68/1999 present on 31 Dec 2003 are 146. During 2003, approximately 4,117 hours of leave wereused by employees for serious illness or to help familymembers with serious pathologies.

Development of human resourcesInvestment in training activities plays an especiallyimportant role in human resources developmentpolicies.In 2003, training was focused on developingspecialized expertise and organizational conductuseful to the company business through initiativesdesigned and created internally as well as organizedby external institutions (catalog).

The activities carried out internally, created ad hoc asneeded, were structured into the following twomacro areas:

• Specialistic area. Financial and company business,macroeconomics, banking operations, auditing, projectmanagement, and data processing initiatives werestarted in this area.

• Managerial/Personal development area. In particular,topics related to communication, negotiation, andproblem-solving were explored.

During 2003 special attention was placed onencouraging the professional integration of personnelaffected by corporate operations through special trainingcentered on the transferring of business and Bankorganization know-how.Furthermore, in regards to internal activities, as in previousyears the logistical and organizational needs of personnelwith part-time contracts belonging to protectedcategories were strongly considered in order to facilitateparticipation in courses.In terms of external initiatives, participation in languagecourses, special workshops, and intercompany meetingswere encouraged, consistent with the specific professionaldevelopment needs of concerned personnel.Finally, the following experimental initiatives were startedfor personnel:

• an e-learning platform dedicated to training throughself-learning, which registered 453 users for a total of129 days/person;

• an online noticeboard on the company Intranet aimedat encouraging the communication of information oncompany/employee relations.

Health care, pension fund, and services for employeesTo satisfy the various needs of employees, a group ofbenefits and special terms has been available to personnelfor several years now:

• A supplementary pension fund, with companycontributions of 3% of the base salary

• Insurance policies for professional and private injury

• Supplementary health care

• Facilitated part-time

• Loyalty bonus

• Special conditions for student workers

• Scholarships for the children of employees

• Contributions for disabled family members

• Mortgages for the purchase of first home

• Financing for personal needs

• Subsidized credit

• Christmas presents

Training area Number of partecipants days/person

Internal Training

Specialistic 828 988

Managerial/Personal development 722 1,432

External Training

Workshops / Conventions /Language courses 361 857

TOTAL 1,911 3,277

Disabled 85

Orphans, Widowers, Refugees 61

TOTAL 146


SafetyThe provisions of legislative decree 626/94 and otherrecent related regulations have undoubtedly introduced anew approach for confronting problems regarding safetyin the workplace.After an initial phase that was necessary for implementingthe various duties that must be fulfilled as provided for bythe norms of law, attention has recently been turned tomaking the workplace more comfortable.That includes:

• Progressive replacement of furniture;

• The adoption of solutions for optimum management ofthe microclimate, even during changing of the seasons;

• The pursuit of high standards of quality when openingnew banking branches;

• The introduction of a computer procedure for real-timeindication of maintenance problems (integratedmaintenance management) with quality control ofinterventions.

This approach derives in particular from the creation ofparticipatory and constructive awareness regardingprevention, developed through:

• Information and training plans for personnel and, inparticular, for employees who use video terminals(“online” course), and for employees assigned toprevention and managing emergencies, whorepresent approximately 20% of personnel;

• Active contribution of “Rappresentanti dei Lavoratoriper la Sicurezza” (Worker Representatives for Safety);

• Involvement of Management in related informationinitiatives and training.

In the past few years, the personnel of brancheslocated throughout the territory received special fireand first-aid training. Finally, in order to increase the awareness of all personnelregarding safety and appropriate behavior in the case ofan emergency, periodic fire drills were carried out.

SecurityBanca Fideuram adopted and continues to monitorand improve its security standards to protectemployees and customers against fraudulent acts.Within the context of the guarantees aimed atensuring a high level of security and in line withtechnological developments, the company hasimplemented further physical and logical securitymeasures in addition to the traditional measures.To intensify the main security topics, a robbery-prevention training program was also implementedfor branch operators. As a result of the group ofpreventive measures, the Bank experienced only onerobbery in 2002 and one in 2003. The protectivemeasures in both of the concerned areas thoughwere further raised.

Laur

a Ro

nchi


Banca Fideuram runs its business in Italy through 4,543private bankers (as of 31 December 2003), 3,413 ofwhich belong to the Banca Fideuram network and 1,130to the Sanpaolo Invest network.The private bankers are located across the entire nationalterritory and their activity is supported by 88 branchesand 261 offices.The private bankers are professionals connected withthe bank through agency agreements and representthe only channel used for distributing the entire rangeof Banca Fideuram services. They assist over 750,000customers with total financial resources (at BancaFideuram) of 58.1 billion euro.

Private Bankers

PRIVATE BANKERS BY REGION

PRIVATE BANKERS BY AGE

35-44years old37.7%

45-54 years old34.5%

13598

253

866

41

317121

428

48343

90

56954

257163

37

158

52

55-64 years old16.2%

65-74 years old2.6%

18-34 years old8.8%

over 74 years old0.2%

Data as of December 2003

Phot

oDisc


Organizational Structure of the NetworkTerritorial divisionThe Banca Fideuram network is organized into 6territorial areas (see map on page 180): each ofthese is supervised by an Area Manager to whomlocal managers report. Each area groups togetherone or more regions depending on the size andcommercial potential.The Sanpaolo Invest network, which went throughan initial reorganization phase in 2003, is dividedinto 5 territorial areas (see map on page 181), eachentrusted to an Area Manager, assisted in his or heractivities by an underlying managerial structure. A

second phase of network reorganization andoptimization across the territory begun in 2004,bringing the areas to 3, entrusted to the samenumber of Area Managers.

Managerial roles within the networksBoth Banca Fideuram and Sanpaolo Invest networksof private bankers are supervised by a managerialstructure divided into three levels. The threedifferent managerial levels focus on managingassigned resources (lower level managers or privatebankers), with the main task of leading andsupporting business across the territory.

Banca Fideuram Network Sanpaolo Invest Network

Level 1 Area Manager Area Manager

Coordinated resources

Role

From 400 to 900 private bankers, through themanagerial structures of Divisional Managerand Regional Manager

They collaborate with the company in defining commercial activities and supervise and coordinateactivities across their territorial area.

From 150 to 350 private bankers, through themanagerial structures of Regional Managerand Divisional Manager


Level 2 Divisional Manager Regional Manager


Role

They supervise 3 to 6 Regional Managers.

They guide the supervised Managers in commercial initiatives and in assisting private bankers. Inaddition to helping achieve sales goals, their functions include training private bankers anddeveloping and organizing the territory.

They coordinate 2 to 4 Divisional Managers.


Level 3 Regional Manager Divisional Manager


Role

They supervise an average of 25-30 private bankers.

They directly supervise the commercial activities of private bankers and help them to growprofessionally and develop the business even by joint cooperation.

They coordinate an average of 20 to 40 private bankers.


Among the managerial levels and private bankers thereare the Supervisors. The latter , in addition to carrying outtheir activities as private bankers, act as “tutors” for thenewly-recruited private bankers. In the Sanpaolo Investnetwork, the Group Manager mediates between theDivisional Manager and the private banker, by supportingthe Manager dealing with private bankers and also byhelping and training new recruits.

Private BankersThe private bankers are responsible for relations withcustomers. They are specialists who assist customers inchoosing investments and help them to identify anddevelop specific solutions that satisfy their financial andpension needs. They have an average age of 45 (see graphon page 204) and are professionals capable oftransmitting security and reliability to customers, guidedmainly by the values of common sense and continuity.When managing their activities, although working withina solid structure and respecting the values andcommitments undertaken with Banca Fideuram andcustomers, private bankers are autonomous. . The keyvalues that Banca Fideuram requests from its privatebankers are expertise, integrity and honesty, leadership,and commitment. The expertise and professionalism ofthe private bankers, together with the methods andinstruments provided by Banca Fideuram, constituteBanca Fideuram’s value -the basic foundations for thetrust granted by customers over the years.Relations between the bank and private bankers areregulated by open-end agency agreements that enforceprivate banker activities, remuneration, pension andhealth care.The logistical point of reference for private bankers is theoffice where they work with other colleagues, plan theiractivities, and meet with other private bankers and themanagerial structure. These offices are connected onlinethrough the company’s computer network. Many of themareadjacent to a branch where customers can carry outnormal banking transactions.Business may be carried out at the offices of privatebankers or at the customer’s home. Private bankers canconnect to the company’s online database, which can beconsulted from anywhere and at any time, using their PCs,in order to offer customers a level of service that is in linewith Banca Fideuram standards. The possibility ofaccessing updated and integrated data regarding thecustomer’s situation is an essential support for their work.Furthermore, private banker’s are also provided withonline analysis and financial planning software. To

facilitate the introduction and the career development ofthe private bankers and to further develop theircommercial and technical/financial skills according tomarket evolution, Banca Fideuram places special attentionon training activities. The periodically revised training planincludes standard courses and special courses for in-depthstudy of the products and services offered by the bank.Each private banker is continuously assisted by thenetwork’s managerial structure: periodic individualmeetings and group sessions are planned, and theyconstitute important opportunities of discussion ancomparison of the commercial actions. . The recruitmentof private bankers takes place through careful selection.Private bankers must possess excellent finance and lifeinsurance expertise and have a special bent for humanrelations and contact. Recruitment focuses on people whoalready have specific skills and experience in the financialsector, gained in a banking environment or othernetworks. To encourage the introduction of the bestcandidates, economic support packages have beenimplemented for the initial years of activity.Searching for highly-qualified professionals is a way forBanca Fideuram to offer continuously improved services tocustomers, increasing the value of the service andsimultaneously developing its market presence.



Remuneration Structure of the Network The remuneration of private bankers and networkmanagers consists of two main components:commissions and bonuses. Other forms of incentivesare also added to these.

CommissionsThe commissions are divided into subscriptioncommissions (sales) and commissions for maintainingassets (management). While the first reward theacquisition of new financial resources, the secondremunerate the private banker’s ability to consolidate andimprove relations with the customer over time. The lattertoday represent most of the remuneration of privatebankers.This remuneration system encourages the building ofcustomer relations based on continuity and trust. Theremuneration of network managers is connected with theactivities of the supervised private bankers and is basedon commission percentages applied to the volume ofbusiness that the latter generate.

Bonuses and IncentivesAnother component of remuneration, moreimportant for managerial levels, consists ofbonuses related to the achievement of businessobjectives. The incentives system is structured sothat it increases rewards as results are achieved. The incentives system is aimed at overall growth ofvalue, especially through the development ofmanaged savings. No incentives related toindividual products are accounted for: this is a signof company respect for the private banker’sprofessional autonomy.In addition to monetary incentives, other forms ofrewards have been implemented. They are closelyintegrated with the commercial budget, and allowthe best private bankers of the year to participatein special company events (trips, conventions).These events represent important opportunities forthe networks and top management to gather andmeet, as well as the opportunity for theprofessional development of private bankers. In 2003 and 2004, Banca Fideuram alsoimplemented a stock-option plan that provides forthe allotting of ordinary Banca Fideuram shares toprivate bankers. The exercising of stock options isrestricted to the achievement of the goals providedfor by the annual budget. This is another incentivemechanism for private bankers, which provides fortheir participation in creating value for the company.

Finally, there are forms of incentives that focusprimarily on the private banker’s ability to retaincustomers. Among others, Partnership Fideuramand Premio Fedeltà (for the Banca Fideuramnetwork) and Fidelity Plan (for the SanpaoloInvest network):

• Partnership Fideuram and Fidelity Plan rewardthe maintaining of assets over time and consistsof a provision (in pension products) made by theBank in favour of the private banker;

• The Banca Fideuram network’s Premio Fedeltàrewards private bankers for the best commercialresults achieved repeatedly over the years. Itconsists of annually provisions made by BancaFideuram into a fund for the private bankers.


Investigation by the Public Prosecutor’sOffice of FlorenceDuring 2004 the judicial authority started aninvestigation that concern, among other things,certain private bankers of the Banca FideuramGroup and employees of the subsidiary FideuramBank (Suisse). All of the disputes regard complicityin illegal practices (consisting of unauthorizedsubjects offering investment services or financialproducts in Italy), with the exception of one privatebanker who is also charged with moneylaundering. The Bank has formed a special teamfor a quick and rigorous verification of the factsand has ensured the investigative authoritiesmaximum collaboration.

Cont

rast

o


Banca Fideuram’s share capital consists of 980,290,564ordinary shares.73.4% of the capital is controlled directly (64.1%) orindirectly (9.3%) by Sanpaolo IMI. The remaining part(26.6%) is on the market. As of 31 December 2003, thereare no other shareholders with holdings of more than 2%who have notified CONSOB (the Italian securities andexchange commission) and Banca Fideuram according tothe rules contained in the Italian Consolidation Act onmarket intermediation provisions1.

Out of the part on the market, approximately two-thirds is estimated to be in the hands ofinstitutional investors, of which approximately 55%are Italian and 45% are foreigners. Among thelatter, Europeans prevail (approximately 33%).Banca Fideuram stock is listed on the Milan StockExchange and is part of the Italian “Blue Chips”index (MIB 30), which includes the companies thathave the highest capitalization and liquidity. Inaddition to being included in leading internationalshare indices such as FTSE Eurotop 300,DJEuroStoxx 600, MSCI Europe, and S&P 350,Banca Fideuram is also part of certain international“ethical” indices such as FTSE4Good and AxiaEthical.Banca Fideuram stands out not just because ofeconomic results obtained over time but alsobecause it has always applied a generous profitdistribution policy while simultaneously maintaininga solid balance sheet. In particular, the 2001 and2002 payout ratios were respectively above 90%and 100% of the consolidated net income.The solidity of company assets is also testified bythe rating it received from Standard & Poor’s: A-1short-term, A+ medium/long-term.The total profitability of capital, measured by RoE,always remained at very high levels (between 23%and 30%) from 1998 through 2001. It droppedslightly in 2002 (14%), although remaining wellabove the banking sector average, and recovered in2003 (18%).In 2003 Banca Fideuram stock performance waspositive, with a 5.1% increase. During 2004, thestock has raised by 1.4% from the start the start ofthe year to April 5.

Focus on the creation of valueThe creation of value for shareholders has alwaysbeen a primary goal for Banca Fideuram. As alreadydescribed in the paragraph explaining the strategicbusiness approach (page 182), during the years of abull market the creation of value for shareholderswas a direct consequence of the implementation ofplans that concentrated on the recruitment ofqualified financial consultants, and the focusing ofthe incentives on net new money targets. This directrelation between growth targets and value creationvanished during the troubled financial markets of

Shareholders

SHARE CAPITAL COMPOSITION

Sanpaolo IMI73.4%

Market26.6%

GEOGRAPHICAL DISTRIBUTION OF INSTITUTIONALSHAREHOLDERS*

Italy55%

UK&Ireland15%

Germany7%

North America12%

Other EuropeanCountries 11%

1. stated in legislative decree no. 58/1998, Part IV, Tit.III, Item II, Art. 120 (obligation ofcommunicating significant holdings), paragraph 2.

* Banca Fideuram estimates on UBS/Lionshare data, Feb. 2004


2001 and 2002, which proved extremely difficultfor the entire asset gathering industry. In this sense2003 arrives as a turning point. Through aninnovative incentive scheme, Banca Fideuramdirectly linked the incentives of private bankers(and management) with the so called “QualifiedInflow” (a proxy of the value added by the newcommercial initiatives), perfectly aligning theprivate banker’s “economics” with shareholderinterests. At company level, a target in terms ofvalue added by new commercial initiatives(between € 230 and 270 million) was set in 2003.The introduction of this incentives system broughtabout a true turnaround of business in 2003compared to 2002: Banca Fideuram ranked first inItaly for mutual fund net inflow (Assogestioni),with a 22% market share.Achieving a value generation equal to 393 millioneuro, the annual target was significantly beaten.The 2004 plan’s basic logic is the same that wasused for 2003, and fundamental points are:

• maintaining focus on the creation of value

• replicating the incentive scheme that proved tobe extremely effective in 2003

• investing in the recruitment of quality financialconsultants

• maintaining tight control of operating costs.

Relations with investors and the marketCommunication with shareholders, financialanalysts, and other subjects interested inunderstanding the factors for properly evaluatingBanca Fideuram is ensured and managed byInvestor Relations. This department guaranteestimely, accurate, and continuous updating onactivities, strategies, and results, in fullaccordance with regulations on price sensitiveinformation.In line with the standards of the parent companySanpaolo IMI, Banca Fideuram communicatesresults on a quarterly basis. Each quarter, on thesame day the Board of Directors approves theresults (or at the latest the following day), apresentation for the financial community (inMilan) and a conference call in English areorganized in order to promptly illustrate theresults to Italian and foreign analysts andinvestors.

Investor Relations activities in 2003, in addition today-to-day contact with all of the concernedparties, were carried out through:

• 4 presentations for the financial communityorganized in Milan;

• 4 conference calls;

• 2 roadshows;

• Participation in 2 banking sector conferencesorganized by leading international brokeragehouses;

• Approximately 120 meetings, videoconferences,audioconferences with analysts and investors,of which approximately 75% with theparticipation of top management.

Communication with organizations outside thecompany is accompanied by important internalcommunication, through which top managementis kept continuously informed on marketsentiment and expectations and shareperformance.To further improve communication andtransparency with all concerned parties, BancaFideuram completely updated its Internet site in2003 (www.bancafideuram.it). In the InvestorRelations section, available in Italian and English,a series of documents and information arepromptly made available to the public, including:

• Information on the company’s structure andbusiness;

• Information and documents relating tocorporate governance;

• Press releases;

• Calendar of events;

• Annual, half-year, and quarterly reports. Inparticular, an “interactive” report wasdeveloped for user-friendly surfing andexamination of the Annual Report;

• Documentation distributed for presentationsand participation in conferences;

• Information on the stock and the possibility ofdownloading the quotation’s history.

The site’s new version was highly appreciated byusers and various operators specialized inevaluating company sites.


Relations with the media: closer to the communityIn recent years, Banca Fideuram has made asignificant effort to improve communication withthe community in which it operates (from financialto territorial communities) by strengthening mediarelations activities.In this sense 2003 was an important year thatexperienced growth, of over 85% compared to theprevious year, in the number of articles regardingBanca Fideuram issued during the year.

Banca Fideuram and its humanitarian commitmentIts continuous monitoring of and presence in localsocio-economic communities persuaded BancaFideuram to expand to international scenes wherepolitical matters and wartime decline threaten thepossibility of growth for new generations. Banca Fideuram views financial assistance andstructural interventions as moral imperatives forsustaining the awareness of human rights anddignity. The Bank’s social responsibility facedsituations of greater imbalance and inequalitysignaled by international news. Banca Fideuram hadtherefore already decided in 2002 to set aside agood part of its budget for humanitarian initiatives.As it had already done during the previous year, in2003 Banca Fideuram concentrated resources andenergy into a single project, choosing ‘Emergency’as its partner. After its experience with Emergency in 2002 inAfghanistan, where it created a health facility and

first-aid center in Mirbachakot (in the heart of theShamali plain), in 2003 Banca Fideuram financed anew hospital in Iraq, in Karbala’, the main holy cityof Shiite Muslims. Karbala is located approximately100 km southwest of Baghdad and has a populationof 700,000 - 1.5 million if the surrounding areas arecounted. In spite of the population’s size, Karbala’has only one general hospital (Al Huseyn) withinsufficient medical personnel and little equipmentand is in constant need of medicines necessary forthe numerous emergency surgeries. Furthermore,the city is far from the flow of international help(primarily concentrated in the capital of Baghdad).This is why Banca Fideuram decided to collaboratewith Emergency in order to create a new surgicalcenter – Salam Surgical Centre – next to Al Huseynhospital. For the first year of activities – work wasinaugurated last November 4 – the project envisagesthe construction of a new building and the purchaseof equipment, medicines, and consumable materialsso that the clinic’s activities can begin in the autumnof 2004. Banca Fideuram’s 2003 donation willpermit the creation of three operating rooms and apediatric ward equipped with all of the equipmentnecessary for guaranteeing full operation.

Community

Strategies and company events

Operating, economic and financial results and profitability ranking

Analysis and comments on stock performance

Approach to services and investiments advisory

Network and private bankers

Company presence in local/national and international newspapers and magazines

MACROAREAS OF PRESS REVIEW

63

82

71

44

43

303

21%

27%

23%

15%

14%

100%

121

95

77

195

74

562

21%

17%

14%

35%

13%

100%

92%

16%

8%

343%

72%

85%

2002 2003 % change


In 2001 Banca Fideuram created the position of“Energy Manager” for the purpose of monitoring andconsequently carefully managing energyconsumption. The Energy Manager collaborates withthe Engineering Department, which supplies data onenergy consumption.The Engineering Department analyzes the energyconsumption of the various departments and thepolicies for limiting it. Furthermore, decisions aremade to purchase materials, such as those for lightingand air-conditioning, that are more efficient and havelower consumption.Energy consumption for 2003 was as follows (data refers toParent Company):

With the goal of optimizing electricity costs, during2003 a supply contract was signed with ConsorzioIdroenergia, of which Sanpaolo IMI is also a member,for the main offices.

In addition to electrical consumption, special attentionwas placed on the problems of waste disposal and theprovisioning of paper. During 2003 a qualified company was used for thedisposal of 74 tons of materials, outlined as follows:

Environment

Electricity (KWh) 8,600,000

Methane gas (Mc.) 724,000

Gas oil (L.) 30,000

Water (Mc.) 36,000

Paper (ton.) 70

Toner (ton.) 3

Batteries (ton.) 1

The following expenses were sustained for purchasing paper:

For forms (euro) 610,000

For photocopies (euro) 69,000

PHOTO of Mirbachakot’s Health Facility and Park.


The profile of suppliersDuring 2003 the Bank held business relations withabout 1,600 suppliers for a total turnover of 90.4million euro. Among these partners, 108 (the so-called “big suppliers”) provided goods or servicesfor an annual amount of over 155,000 euro each,altogether equaling 69 million euro.

Selection policiesThe supplier database consists of the names ofcompanies that are believed to possess thetechnical and reliability requisites necessary forsupplying goods or services to the Bank across theentire national territory and are selected based onthe following criteria:

• professionalism

• reliability

• honesty

• transparency

Previous supplies that were acceptably carried outare also evaluated during selection.The database also considers suppliers, if notalready present, selected or used by the parentcompany Sanpaolo IMI.Supply contracts that total more than 35,000euro are put out to tender by inviting at leastthree suppliers, chosen from those in the relativedatabase, to participate.

The supply contract is therefore subsequentlyawarded based on the best offer presented.

Management of relationsThe supplier database is periodically updated, excludingthe names of those for which the following occurred:

• contractual non-fulfillments

• unjustified abandoning of the supply afterawarding

• non-fulfillments regarding the safeguarding andconfidentiality of information

New names deemed worthy of being considered areevaluated for introduction, even if they have not beenused yet by the Bank.

Suppliers

DISTRIBUTION OF “BIG SUPPLIERS” BY SECTOR (single payments above 155,000 )

Data processingdataware houses30%

Software14%

Telephony 11%Advisory

8%

Real estatemanagement 7%

Parcel services andtrasport 5%

Insurance3%

Other22%

Phot

oDisc

2152003 Social Report – Objectives for 2004

Again for 2004, the main objective is represented by theQualified Inflow (Raccolta Qualificata - RQ). The QualifiedInflow is a proxy of the value added by the commercialactivity, or rather the embedded value of the contractswritten in the year. The Qualified Inflow’s objective is theparameter to which management and private bankersincentives are linked. The decision to use this objective asa concise indicator of the company strategy’s ultimategoal has important significance:

• because it also heads for the maximization of thecompany’s value, represented by the net economicflows generated by contracts with customers, andnot so much the year’s profit. In other words, thisobjective finalizes a development strategy that issustainable over time;

• because it consistently aligns the interests ofshareholders, management, private bankers, andall employees;

• because it directs business activities toward themanaged savings (diversification, professionalrisk management, control, transparency) andtherefore connects with the interests ofcustomers.

In 2004, Banca Fideuram intends to enlarge itsrange of products and raise the level of service in

order to improve the quality of relations betweenprivate bankers and customers, particularly in thehigher private-banking segments. Furthermore,Banca Fideuram intends to further pursue anddevelop the initiatives aimed at private bankertraining and professional growth.

As far as investor relations is concerned,activities on the main international financialmarkets will be intensified in 2004. Morefrequent monitoring of the the composition ofinstitutional shareholders will also beimplemented.

Banca Fideuram also intends to increase thedisclosure of data and information important forevaluating its social responsibility. This objectivewas already partially realized through thecreation of the section in the present SocialReport dedicated to the company itself.

In regards to environmental policies, 2004’sobjective will be to limit the increase of paperconsumption, connected with the establishmentof new reporting methods accounted for by“Banking transparency”, to 5%.

3. Main objectives for 2004

Bran

d X

Pict

ure

216 2003 Social Report – Objectives for 2004

Objectives for 2004

Cont

rast

o



• Improvement of the quality of service with specificactions aimed at different customer segmentsthrough:

1) perfection and extension of information technologytools in support of operations, training initiatives toexpand competencies;

2) presence of operating points or dedicated resourcesthroughout the territory;

3) expansion and evolution of the range of products andspecialized services.

• Full operation of the new process to assistcustomers with investments on the SanpaoloNetwork, dissemination of the model to all theGroup’s Bank Networks, also consistently with theIT migration plans. In particular:

1) completion of the training activity with refreshercourses;

2) integration of new IT tools into the process to evaluatethe adequacy of the investments provided for by theConsob regulation, realizing some improvements;

3) launch of initiatives and channels to enhance thecommunication of the Bank Networks on issuesregarding the provision of assistance toinvestments.

• Implementation of the range of asset managementproducts with the realization of an ethicalinsurance product aimed at retail customers.

• Further development of the direct banking activity(internet, phone and mobile banking), withgrowth of the number of multichannel customersand expansion of the methods of use of directchannels:

1) extension to the North East Banks (with anobjective of about 800,000 contracts in total on allthe Group Networks at the end of 2004);

2) revision of the structure of the website forcustomers in view of increasing personalization ofthe service for the reference targets (households,investors, young people);

3) development of functionalities to enable thecustomer to see and analyze his financial position;

4) further development of the range of investment,payment and banking services offered anddistribution of insurance products.

Retail customers

Pier

o O

ttavia

no


• Extension of the distribution model based onspecialization. The process will be internallyaccompanied by training activities and supported bythe extension of the IT system to the Group’s BankNetworks, paying particular attention to thecontinuity of relations with customers and the levelof service (through information to customers,supporting task forces, training programs andworkshops);

• Promotion of the use of telematic channels amongcustomers.

• Check on the degree of customer satisfaction andidentification of the gap to fill to guarantee aservice striving towards excellence, by launching acustomer satisfaction survey.

• Considerable attention to supporting the growth ofsmall- and medium-sized companies, whichcompose the most widespread and relevant Italianbusiness area, especially by intensifying theinitiatives for cooperation with the main LoansConsortia (Consorzi Fidi) and with the industrialdistricts throughout the country.

• Strengthening of the closeness of Sanpaolo IMI tosmall- and medium-sized companies that invest inResearch and Development through the study ofproducts dedicated to this market segment.

• Pursuit of the work tables undertaken as part of the“Basel II Project”, to identify, before theenforcement of the New Capital Accord (envisagedfor 2006), the best approach to the adequacy ofcapital assets and risk profile of the banking activity.

Corporate customer

Phot

oDisc


• Continuation of actions to improve efficiency,searching for every space to decrease theinfluence of costs.

• Development of selected innovative tools tomanage and govern human resources, consistentwith the business needs, and gradual extension tothe Group Companies of the systems and relatedtools for the development of personnel defined bythe Parent Bank, taking account of the specificnature of the company businesses.

• Activation, for Group executives, of the system for“measuring competencies” and the “managementreview” system.

• Consolidation of the training activities consistentwith individual development needs, the sectorialplans and the company development plans.

• Extension to all those who are part of the“communities of resources in evidence”, ofinitiatives to strengthen their personal capacities.

• Continuation of the retributive flexibility policy,preferring differentiated payment systems for keysegments of population and using all the totalreward levers.

• As regards safety and security, the extension to theNorth East Banks of the internal regulations andsecurity management procedures has beenscheduled, with particular focus on the self-instruction training course on “robbery risks”.

People

The following are also planned:1) updating of the contents of the on line training courses

with the introduction of the new evaluations on the riskfrom passive smoking and robbery risk;

2)completion of the radon gas monitoring campaignrelated to the fall-winter half year;

3) computerization of the Maintenance Register, carriedout in the branches to guarantee the health and safetyof the working environments and the functioning ofsafety and prevention devices.

Phot

oDisc


• Pursuit of the objectives indicated in the 2003-2005Strategic Plan. In particular, the following havebeen confirmed:

1) the growth of RoE to 15% for 2005;1) the drop of Cost/Income to 55% for 2005.

• Maintenance of a corporate governance modelaccording to the best practice of the market. Inparticular, in terms of disclosure and transparency, theintention is to make available to shareholders thepreparatory reports of the meeting discussions as wellas the results of post-Meeting votes.

• As regards communication with investors, the nextsteps provide for:

1) maintenance of the international profile of theGroup’s shareholders, through events in line withthat achieved in 2003, but increasing theireffectiveness through better, prior identification ofinvestors (investor targeting);

1) continued development of the interactive aspects ofthe website, with particular reference to relationswith retail investors.

Shareholders

Cont

rast

o


• Activation of other Consultative Committees on thelocal economy.

• Preparation of a policy for the donations made bySanpaolo IMI and Sanpaolo Banco di Napoli.

• Promotion of other micro-credit initiatives with theparticipation of the Group’s banks.

• Promotion and participation in closed-end funds byBanca OPI (through FIN.OPI), to enable private investors,including institutional investors, to embark on public-private partnership initiatives.

Community

Phot

oDisc


• Extension to all operating points of the Bank Networksof the energy management procedures used bySanpaolo IMI and Sanpaolo Banco di Napoli, withprogressive application (during restructuring and/ornew installations) of the most efficient energy solution.

• Continuous pursuit of energy savings and search forsolutions to drastically reduce the consumption ofelectricity; the following actions in particular areaccounted for:

1) extension, compatibly with that offered by the market,of electricity from renewable sources for the Bank’soperating points;

2) replacement of about 2,600 traditional monitors withLCD monitors.

• Updating and/or integration of IT procedures to manageexpenses and the main energy consumptions, withconsequent improvement of the pertinent monitoring andoptimization activities.

• Extension to the North East Banks of the integrated systemfor waste management used by Sanpaolo IMI andSanpaolo Banco di Napoli.

• Increase of the activities of Banca OPI in sectors ofconsiderable environmental value, with particularreference to

1) advisory activities for the realization of integratedsystems for the management of the solid urban wastecycle and the purification of water in certain regions ofSouthern Italy characterized by environmentalemergency situations;

1) study for the creation in Italy of a Fund to supportrenewable energies like that launched together withCDC IXIS in France.

Environment

Phot

oDisc


• Introduction of environmental parameters in theprocess of supplier selection.

• Launch of the update of the contractual standardsundersigned by suppliers for the closing of supplycontracts, also contemplating the sharing – on theirpart – of the Ethical Code principles.

Suppliers

Phot

oDisc


226 2003 Social Report – PricewaterhouseCoopers’ opinion

PricewaterhouseCoopers’ opinion

Cont

rast

o

2272003 Social Report – PricewaterhouseCoopers’ opinion

228 2003 Social Report – PricewaterhouseCoopers’ opinion

2292003 Social Report – PricewaterhouseCoopers’ opinion

230 2003 Social Report – Attachments

Attachments

GLOSSARY

INDEX

Cont

rast

o

2312003 Social Report – Attachments


Glossary

ABI (Associazione Bancaria Italiana): Italian BankingAssociation.ADS (American Depositary Share): shares in a non-UScompany deposited with a trustee which can circulate onthe United States capital markets. This makes it possiblefor United States investors to buy shares through thebank, which will hold them at the branch in which theinvestment takes place.Banking Ombudsman: board founded in 1993 andpromoted by the Italian Banking Association to settlecontroversies between banks and customers for valuesnot exceeding 10,000 euro and for which no solution wasfound at the bank’s offices for complaints.Basel Committee: committee of the Internationalregulations Bank and the G10 Nations, responsiblefor guaranteeing the international stability of thebanking system, the safety of depositors, banks,shareholders and the whole economy, and for settingunivocal rules for all banks. Benchmark: objective reference parameter of financialinvestment which can also be represented by the mostwell known indexes (MIB30, Dow Jones, etc.) or by otherindexes considered representative of the investment’srisk/performance profile. Broker: person who acts as an intermediary betweenbuyers and sellers of shares, bonds or other properties. Bull market: expression used to indicate a prolongedperiod of high prices on share and bond markets. CAGR: Compound Annual Growth Rate. CCIAA (Camera di Commercio IndustriaArtigianato e Agricoltura): Chamber of Commerce,Industry, Trade and Agriculture. Clearing (compensation): transaction in which thebanks exchange credit instruments drawn from each ofthem and paid by any of the others, adjusting any balanceby payment or charge to particular accounts that eachbank holds at the central bank.Code of conduct: code of conduct of listed companies. Conference call: business meeting held over the phone. Confidi (Consorzi di Garanzia Collettiva Fidi): LoanCollective Guarantee Consortia. Consob (Commissione nazionale per le Società ela Borsa): Italian commission for Companies and theStock Exchange. Core business: a company’s characteristic business. Corporate citizenship: constant commitment of acompany to promote integration between market needsand social responsibilities.

Corporate Governance: the combination of criteria andprocesses used to govern a company.Corporate Social Responsibility: form ofmanagement characterized by ethical and transparentrelations of the company with its stakeholders and bythe setting of company objectives compatible with thesociety’s sustainable development, by preservingenvironmental and cultural resources for futuregenerations, respecting differences and promoting thereduction of social inequality. The Green Book of theEuropean Commission “Promoting a Europeanframework for Corporate Social Responsibility” definescorporate social responsibility as the “voluntaryintegration of corporate social and environmentalconcerns in their commercial operations and in theirrelations with the parties concerned. […] To be sociallyresponsible – the Green Book states – does not onlymean fully meeting applicable juridical obligations butalso to go beyond this point by investing in humancapital, in the environment and in relations with theother parties concerned”.Direct environmental impact: environmental change,partly or fully deriving directly from the organization’sactivity, products or services.Disclosure: the revelation of a fact or a condition in areport or other financial document. The same term is usedto indicate banking confidentiality under certaincircumstances established by law.Ecolabel: European label of ecological quality. Thecommunity system for assigning the label, set up withRegulation (EEC) 880/92, intends to promote the concept,production, sale and use of products with lessenvironmental impact during their entire lifecycle. EIB (European Investment Bank): the financial body ofthe European Union which grants loans and guaranteesto finance certain categories of investment projects. e-learning: Internet on-line training programs. EMAS (Eco-management and Audit Scheme):regulation that introduces the community eco-management and audit scheme, which aims to encouragethe voluntary rationalization of environmentalmanagement capacities of the organizations.Emergency: non-profit organization of social utility(ONLUS) which provides medical-surgical assistance tovictims of armed conflicts and pursues the further aims ofimplementing human rights for those suffering the socialconsequences of war, hunger, poverty and alienation andto promote a culture of peace and solidarity.


Environmental impact: any environmental change,positive or negative, partly or fully deriving from theorganization’s activity, products or services.Equator Principles: combination of nine principles ofenvironmental sustainability applicable to projectfinance transactions, to which the banks mayvoluntarily adhere. The Equator Principles have beenpromoted and developed by the IFC (InternationalFinance Corporation), a World Bank institution, andby a group of banks from various countries. Eurosif (European Sustainable and ResponsibleInvestment Forum): European multi-stakeholdernetwork for the promotion of socially responsibleinvestment. It was created in 2001 by initiative of theNational Forums of France, Germany, the Netherlands andthe United Kingdom, with the backing of the EuropeanCommission, DG Employment and Social Affairs. Forum for Sustainable Finance: non-profit associationpromoting sustainable development in the Italian financialcommunity (www.finanzasostenibile.it). Ftse4Good: set of benchmark and commercialindexes for socially responsible investments. Afinancial index monitors the performance of a seriesof selected securities according to certain criteria(capitalization, sector, geographical area, etc.).Benchmark indexes are used to compare the financialperformance of a fund, for example.Holding: financial or limited company which owns themajority of the shares of other companies or is part ofanother company and controls its board of directors.IDB: Interamerican Development Bank. Members of theIDB are the United States and the main Latin Americanand Caribbean countries. Indirect environmental impact: environmentalchange deriving from the activities of third organizationsdirectly related to the main organization. In the case of abank, for example, reference is made to the impact ofcustomer companies performing activities financed withresources lent by the bank. Internal dealing: transactions of purchase and saleperformed by the directors and other “relevantpeople”, that is those people who, by virtue of theirposition, have access to privileged informationconcerning stocks (excluding non convertible bonds)of the same company.Internet banking: banking service for retail customersand customer companies through an Internet connectionbetween the user and the bank.

Investment banking: dealing in the sale and purchase offinancial instruments and portfolio management, eitherjointly or separately. ISAE (Istituto di Studi e Analisi Economica): a public,non government research body in the field of economics. ISO (International Organization forStandardization): world federation of organizationssetting national technical standards. The main referencestandards issues include ISO 14001 (related toenvironmental management systems) and ISO 9000(related to quality systems).Kyoto Protocol: protocol applying the United NationsConference Framework Convention on Climate Change.The Protocol sets targets of reduction in GHG(greenhouse gases) emissions by industrialized countriesand by economies in transition, on the basis of “mutualbut differentiated responsibilities”, to be achievedbetween 2008-2012 in order to obtain a global reductionof 3.8% of emissions compared with the 1990 values.L. 68/99: law on “Standards for the employmentrights of the disabled”. Its final aim is the promotionof the introduction and integration of the disabledinto the working world with dedicated support andplacement services. L. 197/91: law against money laundering aiming atlimiting the use of cash and bearer shares in transactionsto prevent the use of the financial system for moneylaundering purposes.L. 10/91: law on standards for implementing the NationalEnergy Plan for the rational use of energy, energy savingsand the development of renewable energy sources. L. 598/94: law introducing facilitations for technologicalinnovation, environmental protection and safety in theworkplace. Those concerned are small, medium and largecompanies and artisans. Leg. Decree 231/01: legislative decree introducingthe administrative and criminal responsibility ofcompanies and bodies, depending on the offencescommitted by their representatives. Mandated Lead Arranger: lead bank appointed toset up the necessary consortium of banks orsyndicate and to organize financing. Mib bancario: stock exchange index including the bankslisted on the Milan Stock Exchange. Microcredit: programs granting small loans to micro-entrepreneurs for self-investment projects producingincome, thereby enabling them to support themselvesand their families.


Mobile banking: payments made partly or totally byusing a cellular phone. These payments equate toelectronic payments and are subject to the relevantdirectives by the European banking system.Multi-channeling: offer of retail banking productsand services through both traditional channels(tellers) and telecommunications channels. Thisdefinition refers both to the types of distributionchannels through which these services are offered(closed networks or open networks like the Internet)and to the methods of access to these channels bythe customers (Pos terminals, ATMs, telephones,personal computers and micro-circuit cards).NATO: North Atlantic Treaty Organization. NYSE: New York Stock Exchange. NPL: non performing loans.Patriot Act: law issued in the USA following the terroristattacks of September 11 and including, among otherthings, a series of provisions aimed at controlling thefinancing world and, in particular, money launderingoperations through foreign banks.Pay out ratio: percentage of income distributed to theshareholders by means of dividends.Phone banking: offer of banking products and servicesvia call centers integrating telephone and informationtechnologies and sometimes also human resources, for anefficient management of communications between thecompany and its customers; information is processed byspecific technological devices which are often integratedwith the company information system and enable contactoptimization and widening.SMEs: small and medium-sized enterprises.ROPs: Regional Operational Programs, which use one ormore EU Structural Funds. PPP: Public Private Partnership. Private banker: financial planner.Private equity: investments in the venture capital of non-listed companies, usually small and medium-sized.Project finance: financing method in which the lendermainly examines the profitability of one single projectboth as a source of reimbursement and as a guarantee ofthe loan. This type of loan is generally destined to big,complex and expensive infrastructure projects, forexample in the energy, chemical, mining, transport,environmental and telecommunication sectors. Rating: assessment of the creditworthiness of acounterparty or possible counterparty to be made byquantifying the probability of insolvency of the same.

Retail banking: retail market mainly including privatecustomers, small companies and households.Risk management: organizational structure for thedetermination of methodologies, measurement andmanagement criteria as well as control tools for credit,financial and operating risks in order to guarantee thegovernance of exposure to these risks.Roadshow: series of meetings with institutional investorstaking place in international financial markets.ROE (Return on equity): net income/average net equity.One of the main profitability ratios.Sarbanes-Oxley Act: United States law passed in July2002 making further provisions on the financialinformation of companies offering guarantees to thepublic. In particular, the new law requires greater accuracyand reliability of the financial statements. SEC: Securities Exchange Commission, the AmericanRegulatory Authority.Settlement: liquidation. SOA: private law bodies authorized by the Authority forthe Supervision of Public Works, which verify and certifythe possession by those carrying out public works ofcertain specific qualifying elements indicated by article 2of D.P.R. 34/2000 (Regulation on the institution of thequalifying system for those carrying out public works).SRI (Socially Responsible Investment): assetmanagement activity carried out according toenvironmental and social criteria. Usually, three differentapproaches exist: portfolio selection (securities are includedor excluded depending on the environmental or socialresponsibility profile adopted by the issuing companies);active shareholding (the exercise of rights such as the rightto vote at meetings, resulting from the ownership of sharesto influence the company’s social responsibility policies);community investment (the investment of capitals inmarginal economies with objectives of local development).Stakeholder: holder of interest. It is a subject,private or public, individual or organization,establishing relations with the company, which maybe direct or indirect, formal or informal.Stock option: free granting of stocks in favor of theCompany personnel, with the option to exercise itafter a period of time. Sustainable development: development meeting theneeds of today’s generations without jeopardizing thepossibility for future generations to meet their needs(Brundtland Report - WCED World Commission forEconomic Development - 1987).


Toe (ton oil equivalent): international unit of measureused when dealing with relevant quantities of energy.Every Toe equals the quantity of energy obtained byburning 1,000 kg of oil (41.8 GJ or 11.6 MWh). Turnover: When referring to people, the term indicatesthe natural changeover of personnel which takes place asa result of resignation, pension, death or other reasonsimposing the hiring of a new employee in place of theemployee leaving the company. UN Global Compact: voluntary initiative for thepromotion and spread of sustainable developmentpractices launched and sponsored by the United Nations. Unit linked: insurance products which invest ininsurance funds, mainly constructed to take accountof the different risks. UNEP (United Nations Environmental Program):UN environment program for the promotion ofsustainable development of nations, communitiesand companies. Wealth Management: activity for the managementand administration of customers’ portfolio resources.


Armaments sector: p. 71Artistic heritage: p. 130-134 Association of Studies and Research for Southern Italy: p. 118 Banca IMI: p. 70 Banca OPI: p. 126-128; p. 155-157; p. 223Basel II: p. 79; p. 219 Basic banking services: p. 49; p. 53; p. 123; p. 139BEI Forum: p. 152-153Client Financial Planning: p. 56-58; p. 65Commercial Policy: p. 24; p. 32; p. 48; p. 71Complaints: p. 64; p. 197 Confidi (Loan Consortia): p. 72-74; p. 85; p. 219 Consultative Committees on the local economy: p. 78; p. 85;p. 117; p. 139Customer Satisfaction: p. 51; p. 192; p. 21 Donations: p. 120 Emissions: p. 150-151Energy (consumes of): p. 142-145; p. 213; p. 223Energy management: p. 141-145; p. 159; p. 213; p. 223Environmental risk evaluation: p. 157Ethical Code: p. 24-25; p. 32; p. 39; p. 162; p. 224Ethical Committee: p. 24-25; p 32; p. 37 Ethical funds: p. 24, p. 59-61 Ethical indexes: p. 24; p. 32 Financial planners: see Private bankers FIN.OPI: p. 129; p. 156Green Light (European program): p. 151 Immigrants: p. 55; p. 123 Industrial districts: p. 74-75; p. 83Investment Policy: p. 24; p. 32; p. 48; p. 56; p. 65 Kyoto protocol: p. 32; p. 156Long term care: p. 54; p. 125Media (relationship with): p.136-137; p. 212Micro-credit: p. 120-122; p. 139Money laundering: p. 135Multi-channeling: p. 48; pag.55; p. 65; p. 81; p. 85; p. 197;p. 218; p. 219 Paper (consumes of): p. 146-147; p. 213PattiChiari: p. 48-49; p. 123; p. 195 Payment systems: p. 55Private Bankers: p. 180 – 183; p. 204-209; p. 215Problems of asset administration: p. 62-64 Renewable energy: p. 144; p. 159; p. 156Safety: p. 102; p. 203; p. 220Security: p. 103; p. 105; p. 203; p. 220Small business: p. 52; p. 69 Socially Responsible Investments: see Ethical Funds Sponsorships: p. 124

Sanpaolo IMI Private Equity: p. 69; p. 76-77 Sanpaolo IMI Wealth Management: p. 59-61SRI investors (relationship with): p. 32; p. 115Strategic plan 2003-2005: p. 26-27; p. 110-111; p. 115; p. 221 Students (financing to): p. 54 Trade Unions (relationship with): p. 91; p. 105; p. 201UN Global Compact: p. 22; p. 24UNEP Declaration: p. 22; p. 141; p. 152Waste production: p. 149; p. 223 Water (consumes of): p. 148; p. 213

Index


238 2003 Social Report

The Social Reportis available (in Italian and in English)

on the website: www.grupposanpaoloimi.com

For any comment,suggestion or query please contact:

[email protected]

The realization of this Social Reportwas followed by an internal working group

with the assistance of Avanzi – Idee ricerche e progetti per la sostenibilità.

Graphic project: Partners - Turin