S ANP A OLO IMI...on the one hand makes it possible to achieve the necessary economies of scale and scope and, on the other, guarantees a close link with the territory - lies at the

S A N P A O L O I M I

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

2002 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 06210280019

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

PARENT BANK OF THE SANPAOLO IMI BANKING GROUP

MEMBER OF THE INTERBANK DEPOSIT GUARANTEE FUNDThis document has been translated from that issued in Italy from the Italian into the English language

solely for the convenience of international readers.

Luigi Arcuti Honorary Chairman

Rainer Stefano Masera (*) Chairman

Isabelle Bouillot Director

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

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 Supplementary Auditor

Antonio Ottavi Supplementary Auditor

Abel Matutes Juan Chairman

Isabelle Bouillot Member

Alberto Carmi Member

Richard Gardner Member

Mario Manuli Member

Antonio Maria Marocco Member

Rainer Stefano Masera Member

PricewaterhouseCoopers S.p.A.

Board of Directors

Board of Statutory Auditors

Ethical Committee

Independent Auditors

Updated as of May 2003

ContentsLetter of Rainer Masera, Chairman of Sanpaolo IMI, and Abel Matutes Juan,

Chairman of the Sanpaolo IMI Ethical Committee

Introduction and preparation principles

1.IDENTITY AND GOVERNANCE

Group Profile

Mission and values

Corporate Governance

Compliance with principles and willingness to communicate

The Group and the Parent Bank

2.OUR STAKEHOLDERS

Customers

- Retail

- Companies

People

Shareholders

Collectivity

Environment

Suppliers

3.OBJECTIVES FOR 2003

4.ALLOCATION OF ADDED VALUE

5.PRICEWATERHOUSE COOPERS’ OPINION

ATTACHMENTS

Ethical Code

Glossary

8

12

15

16

26

28

34

36

38

40

42

60

72

88

96

118

130

135

145

157

162

168

Some people in the economic world consider banking and finance as areas which enjoy, or which should enjoy, a sort of“exemption” from the questions posed by ethics, while the observance of regulations and the application of market laws areenough. Others limit themselves to financial business as being neutral to the ethical values. A considerable number of criticsand detractors of the financial world itself also legitimize these opinions, albeit for different reasons, and this has a highlydistorted influence on the perception of public opinion.

But from whichever point of view one chooses to look, these are profoundly mistaken visions. And not because there is a lackof examples and behaviors which could lend weight to them: enough to think of recent news regarding major financialscandals and bankruptcies, especially in the United States. These episodes show again that the existence of specific and strictrules is not always enough to prevent abuse and that the market, with its laws, cannot appoint itself as its unique regulator. Aswith every other human activity, lending and finance require an approach animated and guided by a precise ethical reference.And this reference cannot just be considered as a personal individual question: ethics are socially relevant because they are animportant factor in creating people’s identity, influencing relationships between individuals and the complex organizations inwhich they operate.

This is extensively confirmed by the histories, some of which date back centuries, of the banking entities which are part ofour Group today, the origins of which are characterized by the initiatives of people and bodies who intended to alleviatepoverty and, more generally, contribute to the well-being and balanced development of their respective communities. Theevolution of our lending and financial business has never rejected these roots, and has constantly adapted to thetransformations and growing complexities of a world which is characterized by full interrelation between economic bodies,their choices and their actions.

The publication of a Social Report thus renders the approach to an ethical vision, which has existed for centuries in thegenetics of Sanpaolo and certainly represents another important opportunity to focus on business ethics and corporate socialresponsibility, more global, systematic and integrated. In addition to external stimuli, which do exist, several internal elementsstrongly encouraged us to pursue this initiative.

As a profit-making Public Company, our final aim is to create value for shareholders. We feel it is essential that the growthof the financial results that we pursue is sustainable in the long term and the search to maximize value can be better achievedby overcoming the temptation to set exclusively short-term aims, but rather operating in the context of the medium term. Inthis context, in full consistency between the creation of value for shareholders and ethical sensitivity, continued and constantattention to customer relations, as well as the full support of those who work for the Group, appears pursuable.

This approach requires constant and responsible attention to the needs of the various company stakeholders, with the aimof creating a sort of “virtuous circle” which encourages the convergence of the specific interests of shareholders, customers,staff and other important partners.

We are talking about approximately 7.5 million retail customers and some 400,000 companies, from the smallest to thelargest, with whom we have a strong commitment and who make up our first and most important asset; hundreds ofthousands of shareholders, including the Foundations, which are part of the Group’s history; more than 50,000 people whocontribute to the company’s success every day and of whom we intend to promote full appreciation. We are also talkingabout numerous territorial communities for which we perform our activities with the particular configuration of an Italian andEuropean Group operating through banking networks with deep roots in the various local communities. This model - whichon the one hand makes it possible to achieve the necessary economies of scale and scope and, on the other, guarantees aclose link with the territory - lies at the basis of our strategic plan for 2003-2005. It also concentrates on our relevance withregard to the structure of enterprises, especially micro, small and medium-sized companies. The latter, in turn, implementprinciples of business social responsibility, a commitment in which we intend to support them promoting their development.Our attention to the territory must be fuelled by extensive interest in environmental issues: the effects directly and indirectlygenerated by business activity provide us with an important field of verification. Attention to environmental issues has led to along-standing and active co-operation with the European Investment Bank, the bank of the European Union, with which wehave promoted the constitution of a European Forum for the dissemination of environmental policies and practices.

Letter to Stakeholders

Rainer MaseraChairman of Sanpaolo IMI

Abel Matutes JuanChairman of the Sanpaolo IMI Ethical Committee

112002 Social Report

All these topics can be summarized in our continuous commitment to adopt business governance systems in compliancewith the best international standards, providing a guarantee not only for shareholders but also for the whole society. Ourquotation on the New York Stock Exchange subjects us, the only Italian bank, to the strict provisions of the Sarbanes-OxleyAct. Besides observance of the rules of governance, we are convinced of the importance of clearly orienting the mechanismsused in the issue, placement and distribution of financial products, in respect of our fiduciary relationship with customers: thisis also contributed to by the education of staff and investors. On this subject, on the one hand we have taken self-governanceinitiatives developed at system level (adoption of the Code of Conduct for Listed Companies, participation in the work of theRapporto Assonime sul Risparmio and active contribution on these themes within the Italian Banking Association); on theother hand we have been working internally for some time on the issue of governance, both to guarantee maximumtransparency to our customers and professionalism in asset management, an activity in which we are the leader in Italy.

Today our tradition of culture and values has a direct effect on the activity of an Ethical Committee set up in September2001 within the Board of Directors. The Ethical Committee performs a role in addressing ethical and environmental issues: onits suggestion, we first adhered to the UNEP Declaration, containing principles for environmental protection and support forsustainable development as part of the United Nations program, and then to the UN Global Compact, which associatesenvironmental protection and principles aimed at the defense of human rights and employee rights.

The 2002 Social Report follows a year characterized by important integrations and transformations for the Group, such asthe acquisition and incorporation of Banco di Napoli and the merger with the Cardine Group, events which have alsoproduced qualitative changes to our way of operating and of being a bank. The document is an integrated part of a wideproject and its entire preparation process enables us to explain better the aims that Sanpaolo IMI has set itself or intends to setitself within this context. It is therefore for us a precise commitment and implies constant supervision of our activities to checksystematically and completely the evolution of our progress: therefore the Social Report should also be considered as agovernance instrument.

This is why we chose to create a document which is made to measure to suit our Group situation as much as possible. Wehope therefore that it is capable of being a useful and effective instrument in the evaluation of the serious nature of ourcommitment and activating a process of comparison and communication.

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

12 2002 Social Report 132002 Social Report

Like many social reports, this one satisfies differentrequirements, which aren’t necessarily those suggestedby the manuals. The report should, by definition,represent the end of a process: we start by definingstrategies and general and specific aims, organizingthings in such a way as to guarantee that they areachieved, and at the end we check what has succeededand what has failed. In actual fact, in social reporting thisrarely happens. Often the social report is used as a self-analysis tool; it is developed as though a managementsystem already exists, to highlight the strengths andweaknesses at all levels of the procedure. And in this casewe think that this aim has been achieved: we haveunderstood what already exists and what has still to bedone. We will record the results of periodical checks tohave an indicator of the progress, including culturalprogress, which we will make gradually as the aims aretranslated into results. The company reorganizationlinked with the integration process will end up assistingthis reflection: this first edition refers to the Parent Bankand to Banco di Napoli which, while having operated asan independent company in 2002, was the subject of amerger into Sanpaolo on 31 December, in view of asubsequent spin off due to take place in July. The social report also serves the purpose ofcommunication. In comparison with a version forexclusively internal use, this form involves an obvious riskof criticism, because - as we know - it is not perfect. Butcriticism is useful; and, above all, publication will ensure

an even greater undertaking to improve. The report isalso useful from this point of view, because it forms abasis for comparison with the outside world.The method aim is to talk to the stakeholders and notjust about the stakeholders. And to help them read thereport we have decided not to report the Bank’s activityaccording to business areas, but according to thearticulation of the interested parties. It is reasonable toassume that this will help them, knowing that a singleentity may be, simultaneously, customer and supplier,employee and member of a community, and so on.When planning this report we decided to devoteattention to examining the various models that theacademic world and agencies dedicate to ethical financehave developed so far, including, obviously, the modelpresented by the ABI (Italian Bankers’ Association) to theItalian banking system. Having said this, we rejected theidea of adopting a standardized model, preferring toattempt to create one which was more “ours” to suit thespecific nature of Sanpaolo IMI as much as possible. Inorder to do so, we tried to configure a model whichcould be referred to as an expression of the Group’shistory and traditions. For three reasons: so that thesocial report could effectively communicate the Group’sidentity during its evolution; in order that it could speakdirectly to the various stakeholders; and because, asmentioned earlier, the social report is to be intended notjust as a communication tool, but also, and mostimportantly, as a tool for the growth and verification of

the Group. This is one of the reasons why the nextversion could be quite different from this one.

In this first publication, while deciding not to use aprearranged model for the preparation of the socialreport, we have been inspired by several fundamentalsocial reporting principles.We have made an effort to:

• make the reference stakeholders clearly identifiable.Their individuation was complicated by the fact that theGroup has undergone a phase of considerable growth inrecent years, therefore it is possible that it may bearticulated according to different directions in the future;

• supply information in a summarized and linear way toenable the reader to understand sources ofinformation, criteria and the methods adopted for theirorganization and motivation of the discretionaldecisions made;

• supply information which is useful to stakeholders,presenting facts and data in support of the claims made;

• choose indicators that enable the comparison of theinformation contained in this first edition of the reportwith those that will follow. In many cases this wasn’teasy, because the quantitative data available could notalways be aggregated. It was necessary to implement

simplifications and conversions which will be overcomeby the integration of the IT systems, which took placein June 2003 for Sanpaolo and Banco di Napoli, and isdue to take place next year for the Cardine networks,achieving a more consistent system. In other cases, theinitial information could not be found or could not beused in the form available. We intend to make theindicator system more systematic and complete infuture editions;

• explaining economic and other impacts of the activitiesperformed. In this edition it has been possible toreconstruct the contexts concerned, but in future wewould like to be more analytical from the quantitiespoint of view, thanks to the development of a moreconsistent and articulated system of indicators;

• comprehending the degree of satisfaction ofstakeholders. In some cases it has been possible toverify it directly thanks to the existence ofinvestigations already carried out on the subject (suchas the case of customer satisfaction of customercompanies); in other cases it has been possible toobtain data related to satisfaction indirectly byanalyzing significant data. For the next edition wecould have the results of a series of investigations intoseveral other stakeholders, with the aim of graduallyextending tools offering direct comparison on thistheme to them.

Introduction andpreparation principles

Identity and Governance

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16 2002 Social Report – Identity and Governance 172002 Social Report – Identity and Governance

Sanpaolo IMI was created in November 1998 from themerger of two prestigious private banks, each leader inItaly in its reference activity segment. They were twosuccessful and distinctly complementary realities: one,Istituto Bancario San Paolo di Torino, of older origin,specialized largely in the retail lending activity, the other,Istituto Mobiliare Italiano, founded as a Public law Bodyin 1931, in a particularly delicate moment for the Italianand international economy, which had been shaken bythe world-wide recession. The Institute, 50% of thecapital of which was held directly by the Treasury,became a merchant and investment bank after the war,having contributed actively to the reconstructionthrough the activation of the interventions provided forby the European Recovery Program (ERP) in the contextof the Marshall Plan.The more recent merger between Sanpaolo IMI andBanco di Napoli sees the convergence of two realities intoa single bank, with their roots set into the same distanthistorical period, therefore from the need to help theneedy, initiatives aimed at creating organizations with aspirit of charity towards weaker social categories spring

up all over Italy. While the Sacro Monte dellaPietà was set up in Naples in 1539, in 1563, inTurin, the new capital of the Duchy of Savoy,

a brotherhood named Compagnia diSan Paolo laid the foundations

of that which, just a few yearslater, was to become the

town’s Monte di Pietà. The intention of both institutionswas to lend money at very low interest rates to offer theneedy an alternative to usury. But the destinies of the twoinstitutes soon took very different routes, developing inthe directions that characterized the fortunes of theNorth and South of the peninsula. In the second half of the 17th century Monte di Torinoassumed the administration of the public debt of thestate of Savoy: there was an evolution towards the realityof credit institute, which became final in the mid 18thcentury, although it was in the 19th century that a realbank was created, with the issue of construction loansbeginning in the second half of the century.Having survived the banking recession at the end of the1800’s without damage, San Paolo began the newcentury as a leader in the issue of loans for the industrialdevelopment of Turin and the economic growth of thecountry. With a decree in 1932, the finalities of publicinterest and the primary role of San Paolo in the Italianeconomy were made official, with the transformation ofthe bank into a public law Credit Institute, status whichwas maintained until its transformation into a joint-stockcompany on 1 January 1992.The bank continued to grow and expand its domesticnetwork in the 1960’s and 70’s, beginning a gradualinternationalization process in the second half of the1970’s. In the 1990’s, with the acquisition of other banks,Sanpaolo continued its dimensional and territorialstrengthening, further developing its overseas presence

and the range of products and services on offer. In 1997the privatization process was completed and, the yearafter, the integration with IMI took place.The rest is recent history: having now become a groupwhich operates in various sectors of activity throughdedicated companies or specific business units, on theone hand Sanpaolo IMI perfected the acquisition ofBanco di Napoli (2000) and on the other, it set upstrategic alliances with important Italian and foreignlending realities.Most recently (2002), the integration with the Cardine Groupwhich was then controlled by Fondazione Cassa di Risparmiodi Padova e Rovigo, Fondazione Cassa di Risparmio inBologna, Fondazione Cassa di Risparmio di Udine ePordenone and Fondazione Cassa di Risparmio di Gorizia.With this transaction Sanpaolo IMI gained seven medium-sized banks (Cassa di Risparmio di Padova e Rovigo, Cassadi Risparmio in Bologna, Cassa di Risparmio di Venezia,Cassa di Risparmio di Udine e Pordenone, Banca Popolaredell’Adriatico, Cassa di Risparmio di Gorizia and BancaAgricola di Cerea), operating in North-East Italy and alongthe Adriatic, with deep roots in the reference area andwith considerable indices of penetration, in terms ofbranches and dealing shares.Today, having launched a challenging plan for thereorganization of the commercial networks, it facesthe market stronger, more efficient and evenlydistributed throughout the country, although withdifferent brands.

Historical evolutionGroup profile

Rome, viale dell’ArteTurin, piazza San Carlo Bologna, via Farini


Sanpaolo IMI, currently the third domestic bankinggroup, can boast a conspicuous presence in almost allthe Italian regions and an adequate territorial coverageof all the main European countries, Asia and America,dedicating particular attention to emerging countries.More specifically, with its 136 branches and 17representative offices, today Sanpaolo IMI operates in30 countries. The Group’s foreign activity, aimed mainlyat offering operational support to business customersinvolved in international exchanges, is also exercisedthrough the outside support provided for bycommercial agreements with the Bank’s main strategic

partners, such as the Spanish group Santander CentralHispano, the French group Eulia, created from thealliance between the Caisse de Dépôts etConsignations Group and the Caisse Nationale - Caissed’Epargne GroupIn Italy, where the Group has its core business, after theintegration with Banco di Napoli and the CardineGroup, Sanpaolo has a fairly even presence all over thecountry, in which, at the end of 2002, it had 2,956banking branches (Sanpaolo, Banco di Napoli andCardine Networks), joined by 87 Fideuram branchesand 26 operating points of other companies with abanking license . Also considering the 494 branches ofthe Italian banks with which Sanpaolo IMI has madelong term strong strategic and commercial alliances -Cassa di Risparmio di Firenze Group and Cassa dei

Risparmi di Forlì - the Group has a direct and indirectpresence, with several services and products, through1,038 branches in the North West, 921 in the NorthEast, 814 in the Center and 763 in the South.Therefore, also by virtue of its geographical presence,the Group plays an important role in the promotion of local development: the localization of the branchesof our banking networks and the activities theyperform, both in terms of the inflow of assets and thegranting of credit, bear witness to this.A vast plan for the integration of the Group’s domesticbanking networks was presented in Autumn 2002. Thisproject aims to achieve relevant economies of scale andscope and to increase the commercial effectiveness andoperating efficiency of the networks. The merger byincorporation of Banco di Napoli into Sanpaolo IMIrepresented the conclusion of the first phase of thisunification process; the second saw the constitution, at the beginning of 2003, of a new Southern TerritorialDirection comprising 755 Sanpaolo and Banco di Napolibranches in Campania, Apulia, Basilicata and Calabria,mainly dedicated to the completion of the IT systems ofthe two networks. This phase is destined to culminate,during 2003, in the spin off of this Direction into thenew Sanpaolo Banco di Napoli company, equipped witha streamlined structure and operating with its ownhistorical brand - while highlighting the fact that itbelongs to the Sanpaolo IMI Group - in the referenceareas. In the meantime actions to accelerate the processof operational integration with the former CardineGroup banks will be implemented. The project aims mainly to introduce gradually thedistribution model already successfully adopted by the Sanpaolo Network, a model which privileges the specialization of branches by macro customersegments, into all Group networks. It will alsoguarantee, from a view point of consolidating andexploiting the historical brands and strengthening theirprestige in the respective reference areas, a uniquestrategy at national level and ensure a more effectiveresponse to the varying service needs expressed bydiverse types of customers and improve the efficiency of the structures and processes of investment intechnologies and resources.

The geographic presence andorganization of the banking networks

North WestEmployees: 15,035Branches: 996market share: 10.8%Loans: 37 bn euromarket share: 9%Market share: 9% 111 bn euromarket share: 11%

GEOGRAPHICAL BREAKDOWN OF EMPLOYEES,BRANCHES, LOANS AND FINANCIAL ACTIVITIES OF THESANPAOLO, BANCO DI NAPOLI AND CARDINE NETWORKS

Tuscany-EmiliaEmployees: 3,020Branches: 252market share: 4.9%Loans: 12 bn euromarket share: 8%Financial assets: 18 bn euromarket share: 4%

South Employees: 7,929Branches: 684market share: 19.4%Loans: 13 bn euromarket share: 16%Financial assets: 34 bn euromarket share: 11%

IslandsEmployees: 941Branches: 103market share: 4.4%Loans: 4 bn euromarket share: 8%Financial assets: 5 bn euroomarket share: 3%

North EastEmployees: 6,687Branches: 593market share: 12.0%Loans: 16 bn euromarket share: 12%Financial assets: 35 bn euromarket share: 10%

CentreEmployees: 3,837Branches: 328market share: 7.2%Loans: 15 bn euromarket share: 8%Financial assets: 25 bn euromarket share: 6%

Loans by region of the counterparty.Sources for system data: Bank of Italy (branches, household loans and financial assets),Bastra (financial Assets for companies).

1. Finconsumo (24 branches), Finemiro Banca (1) and Farbanca (1)

2. Includes: CR Firenze, CR Pistoia e Pescia, CR Orvieto, CR Civitavecchia and CR Mirandola

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Today Sanpaolo IMI is recognized as a multi-specialistgroup in the context of which the diverse business areasoperate on the basis of a underlying principle:responsibility of return on the area statement of incomeand participation in the maximization of the Groupresult, through the activation of every possible synergy,both in terms of cost - with the pooling of services and

functions - and revenue - with the joint development of business opportunities and the supply to customers of integrated services.It presents a differentiated mix of business and anorganizational structure aimed at the synergic combinationof an accentuated vocation towards the retail market and atargeted but significant presence in wholesale banking.

Domestic Banking Networks: this area is mainly represented by the banking networks ofSanpaolo, the former Banco di Napoli and the CardineGroup, as well as by equity investments and commercialagreements with Cassa di Risparmio di Firenze and Cassadei Risparmi di Forlì. The structures dedicated to bigindustrial groups, structured finance and financing andadvisory services to public entities and infrastructureprojects (exercised through Banca OPI), and to companiesoperating in the context of consumer credit, leasing andtax collection, are situated in this area.

THE GROUP IS SPLIT INTO FOUR MACRO-AREAS OF BUSINESS:

Personal Financial Services: including banks that distribute mainly through thefinancial planner network or other innovative non-bankingchannels. Banca Fideuram and its subsidiary BancaSanpaolo Invest operate in this area.

Wealth management:this is the sector in which, thanks to their furthersynergic strengthening, all the activities linked withactive asset management (mutual funds, portfoliomanagement, private banking and life insurance),investment banking (Banca IMI) and private equity(Sanpaolo IMI Private Equity), are concentrated.

International activities:this area mainly includes retail operating presences in foreign markets, especially in France, Hungary,Slovenia and Romania.

All the structures described are managed andcoordinated by a Corporate Center, set up in thecontext of the operating Parent Bank, of which the MOI- Macchina Operativa Integrata (Integrated OperatingVehicle) - is a member and is responsible for supplyingthe Group networks with a common platform regardingIT systems, auxiliary and back office activities, so as topermit, through the optimization of technologicalinvestments, significant reductions in costs.

The organizational model

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During 2002 the Group pursued strategic choices aimedat combining its need for growth with provisions to coveradverse market conditions. Therefore incisive structuralactions aimed at accelerating the integration processesof the banking networks were implemented: in June themerger with Cardine Banca took place followed, at theend of the year, by that with Banco di Napoli. Thesecompany transactions were accompanied by importantoperating initiatives concerning the operational natureand standardization of the IT systems.The strong impulse to the integration processes isclosely linked with the definition of a highly innovativeorganizational model for the branch networks, whichintends to improve the operating efficiency and thedistribution capacity, exploit local roots and developexcellent service and the provision of a quick answer to customers.

This new distribution model, mentioned earlier, representsthe mainstay of the three-year Plan for 2003-2005,approved in February 2003 by the Board of Directors,which confirms the Group’s strategic decision to prioritizethe reinforcement of its position in the national bankingmarket, consolidating the position gained in services tohouseholds and companies thanks to investments andinternal and external growth actions performed inprevious years. The operating links with the Cassa diRisparmio di Firenze Group and with the Cassa deiRisparmi di Forlì have also been strengthened, completingthe Group’s national coverage and distribution capacities.The Plan shows the company loans and services marketand retail asset management as being priority markets,areas in which the Group has already made importantdecisions, obtaining significant results.On the loans front, the decision to dedicate attention to all

the company segments resulted in the progressivediversification of the portfolio: despite the commitment tosustain the main Italian industrial groups, loans to severalgroups in Italy and abroad and, consequently, the level ofconcentration, were reduced, while loans to smallercompanies and to households increased, both through thebanking channel and in the form of consumer credit.Company loans and services will be strengthenedthroughout the country, accepting the challenge that thenew Basel rules present to banks and companies anddedicating to this customer segment the network ofapproximately 130 dedicated branches created during thelast 18 months and the activity of the specializedcompanies within the Group aimed at creating innovativefinancial products.Moreover, with the acquisition of Banka Koper, the Public Offer in InterEuropa Bank, the restorationand consolidation of West Bank and the establishmentof a widespread network of offices in the New Europe,the Group is now capable of offering efficient servicesto Italian customers and contributing to the support of economic and financial relations with countries in the region.As far as asset management products, instruments andtechniques adopted by the Sanpaolo network in terms ofsales and advisory services to households are concerned,these will be exported to the other distribution networks,benefiting markets in the South and North-East.Simultaneously, the Sanpaolo IMI Wealth Managementproduct factory will continue to improve productperformance and innovation, taking full advantage of theopportunities offered by the insurance, pensions andwelfare market.The plan also provides for initiatives aimed at improvingearnings in all the other main business areas, as well as the active management of the investment portfolio, inorder to optimize the allocation and performance of thecapital invested and to free up resources to use for new,selected development opportunities. The partnershipprojects with the foreign groups SCH and CDC-IXIS/EULIAare also moving in this direction.These actions to relaunch operations and revenues will beaccompanied by strict policies to improve the efficiency of structures and to keep costs down, starting byrationalizing head offices and subsidiaries, withinvestments in the IT systems of the MOI and with a careful staff policy.

The main strategic lines

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Significant stakeholdersThe size and articulation of the Group mean that itenters into contact with different situations andcomplex problems that involve a wide range of subjects: shareholders, customers (retail andcompanies), personnel, suppliers, social communitiesand institutions, the environment (considered as anessential context in which people live and operate).Every one of them expresses needs and expectationswhich make them parties with an interest in the bank,in other words, stakeholders, with whom the bankmust communicate and relate.We are fully aware that the infinite variety of humanrelationships does not enable the “immobilization” of people in a prearranged, exclusive role and thatmany of them may simultaneously belong to severalgroups of stakeholders. With this knowledge we have tried to propose theaggregation of our stakeholders and of their interestsin us around several macro-categories: this hasenabled us to concentrate more, through the partialsimplification of the problems, on the main interests of every group and to highlight the themes ofcommunication and confrontation for the near future.

EnvironmentSustainability is an essential element ofdevelopment. This conviction has led us tocomply with important commitments atinternational level, such as the UNEPDeclaration and the principles of the UNGlobal Compact, continuing at the sametime with the policy to restrict the directenvironmental impacts of our activity. Ourfinancing criteria also include the support ofprojects and initiatives aimed atenvironmental protection

SuppliersThe Group cultivates relationships with its suppliers

based upon principles of reciprocal transparencyand correctness, starting with the selection

process, which prioritize expertise andcompetitiveness with the aim of creating an

economic advantage, as well as a technical andoperational advantage, for the Company.

PeopleThe Group’s success depends on the over50,000 people employed within it. We set the exploitation of their professionalism at the center of the personnel management and development policies and systems.

CustomersThe customer, whether retail or company, represents

the main element in the life and development of our Bank and the Group. Our customer basin is made up of about 7.5 million retail customers

and about 400,000 customer companies.

ShareholdersThe first 14 shareholders ofSanpaolo IMI hold about 49.8%of the Bank’s ordinary capital,while the remaining 50.2% isdisseminated in the marketamong more than 168,000Italian and foreign shareholders.

CollectivityTo offer our services to households, customers and PublicAuthorities at all levels, we operate with our networks allover Italy, in big cities and small towns alike. We are awareof the importance of the lending and financial activities forthe development of the territory and social communities.This is why we place all the resources of a big Group at theirdisposal and, at the same time, dedicate constant attentionto specific local situations.

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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 to improve constantly. We intendto ensure that every single customer isserved in a flexible and innovative way, tothe best of our ability, adopting the samespirit of service to internal customers.

We orient the actions and behavior of those who operate on behalf of the bank towards criteria of integrityand honesty, in full and substantialobservance of the legal ordination andthe financial and lending system and of the spirit of the agreementssubscribed with 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 big dimensionswith strong territorial roots; to be a bankthat is capable of thinking big withoutlosing sight of the individual.

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

Growth in observanceof specific qualities

Responsibility in the use

of resources

Values

Creation of value

Customerorientation

Integrity

Commitment to excellence

Mission and valuesThe mission of Sanpaolo IMI is to exercise the financial and lendingactivity, offering services of excellence aimed at the prudentmanagement of the resources of households and at a commitmenttowards the sustainable development of the entrepreneurialsystem, also with the aim of contributing to the Country’s globaleconomic growth. The aim of creating value for shareholders ispursued with a view to long-term sustainability and in the context ofconstant, responsible attention to the company’s various stakeholders.

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CorporateGovernanceSanpaolo IMI has adhered to the aims and indications of theCode of Conduct developed by a Committee for the corporategovernance of companies listed on the Borsa Italiana (the Italian Stock Exchange). In accordance with the Code and in observance of its organizational model, the governance of theCompany is arranged as follows3 (a complete copy of thegovernance system report is available in the Annual Report andon the website www.sanpaoloimi.com).

The Board of Directors is supported in its institutional functionsby 4 Technical Committees made up from its members, withadvisory and management functions:

3. Situation updated to May 2003

4. 50,000 euro for atypical or unusual transactions and 10 million euro for loans and othertransactions at standard conditions, undertaken with correlated parties outside the Group.Moreover, the definition of correlated parties adopted is particularly restrictive: in additionto that already provided for by the Consob and on the basis of SEC provisions, thoseadhering to parasocial agreements have also been included.

Is responsible for strategic direction and holds the powers of ordinary and extraordinaryadministration, excluding those expressly attributed by law or by the Articles of Associationto the exclusive competence of the Shareholders’ Meeting. It approves, after examinationby the Board of Auditors, transactions with correlated parties considered to be significant4.

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

19

At the time of approval of the 2003 Annual Report

Functions

Composition

N° meetings in 2002

Expiry

Functions

Composition


It has the role of evaluating, in agreement with the Chairman of the Board of Statutory Auditors,the remuneration of the directors with particular offices and considering in depth the issuesconcerning top management remuneration and the approval and modification of the generalarrangements concerning work relationships. The involvement of the Managing Directors isenvisaged in the limits inherent in the definition of the general directions of top managementremuneration and management policies and of a general nature concerning work relationships.

9 directors, of which 3 executive

7Board of Directors

Executive Committee

Remuneration and Personnel Policies Technical Committee

It has the responsibility of analyzing the problems and relevant practices related to evaluating the internal control system, with the possibility to make specific analyses and further investigations. It also evaluates the adoption of corrective measures proposed to deal with omissions andanomalies found in the audit processes (both internally and with the independent auditors).

4 directors, all of which are non executive- of which 3 independentThe Chairman of the Board of Statutory Auditors, the Managing Directors and, asspeakers, the Accounting and Audit Direction Heads, take part in the meetings.

16

Audit Technical Committee

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

7 directors, of which 3 are executive

7

Group Risks Technical Committee

It has the responsibility of: evaluating the principles for the identification of an ethical/environmentalpolicy; proposing the definition of codes of conduct and compliance with declarations of principlesor sectorial organizations; monitoring the internal implementation of the principles; monitoring the preparation of a Social Report and the external communication processes within this context.

7 directors, all of which are non executive

4

Ethical Committee

It has powers to be exercised within the context of the strategies, addresses and planslaid out by the Board of Directors. In particular, it has powers concerning loan issue,recovery of loans and shareholdings.

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

21

((

Functions

Composition


(

Functions

Composition

N° meetings in 2002(

Functions

Composition


Functions

Composition


(

(

The nomination of the members of the Board of Directors takes places on the basis of the designationspresented by the shareholders who, at the meeting, illustrate the curriculum and professional experience of

those proposed.There is no vote and there is no need to set up a Committee for the nominations for the office of Director, the

vigil and active participation of the shareholders and institutional investors in the meetings being expected. The experience of Sanpaolo IMI has shown that the majority shareholders, with the undertaking of reciprocalcommitments with regard to the exercising of rights linked with the equity held, have thus far nominated for theoffice of Director people who were widely appreciated, always addressing choices towards those with a highstanding and professional and managerial experience of an ample and diversified nature, matured in a domesticand international context.It is well known that, in accordance with art. 26 of the Testo Unico Bancario (Single Banking Text), the directors ofbanks must possess requisites of honorability and professionalism, requesting company exponents to be peopleof proven honesty and moral integrity and to have competently performed experiences fitting to the office to beheld within the Company.In confirmation of that mentioned above, among the independent Directors of Sanpaolo IMI, profiles emergewhich, in addition to years of experience on the Boards of Directors of important banking groups, hold leadingroles in the management of industrial groups (Mr Fontana, Mr Ottolenghi, Mr Manuli, Mr Carmi and Mr Rossi) orthat, as well as having significant entrepreneurial and managerial expertise, they have held institutional roles androles in associative circles of absolute importance (Mr. Gardner, Don Matutes, Mr. Salza and Mr. Vermeiren);others (Mr. Marocco and Prof. Sacchi Morsiani) who own prestigious professional studios and university seats. The professional characteristics of M-me Bouillot, Mr. Marrone and Mr Mihalich, who hold executive positionsin the large groups that participate in the Bank’s capital, are also well known. Lastly, a mention goes to the professional profiles of the Chairman and the Managing Directors who, as

well as comprising prestigious offices in different contexts within the Group, are a real expression of thecompany cultures of the Banking groups to which they belong (Sanpaolo, IMI and Cardine Banca), the

aggregation of which formed the existing Sanpaolo IMI.

BOARD OF DIRECTORS

(30 2002 Social Report – Identity and Governance 312002 Social Report – Identity and Governance

The Boardroom in the piazza San Carlo office, Turin

Chairman and Managing DirectorsThe Chairman legally represents the Company beforethird parties. He also calls and presides over themeetings of the Board of Directors and the ExecutiveCommittee, ensuring adequate and prompt flows ofinformation to all the Directors to enable the mosteffective and aware contribution to the work of thecorporate bodies. The Board has conferred to the Managing Directors,considered individually, powers to be exercised withinthe context of the respective competencies,strategies, addresses and plans laid out by the sameBoard, with faculty of sub-power of attorney and the

obligation to report quarterly to the Board on theactivities performed, the decisions made and thepowers of attorney.The distribution of the areas of responsibility amongthe three Managing Directors originates from theidentification of operational and market contexts withsimilar characteristics and from the determination tomaximize specializations and competencies. Anotheraim is to achieve maximum sharing of Group targetsand successful coordination between distant butcorrelated operating areas, in order to maximizeoperating efficiency and supply a service of excellenceto all customers .


open following the transaction) for amounts of morethan 250,000 euro. Provision has also been made for theBoard of Directors to establish, for specific periods oftime, prohibitions or restrictions regarding securitytransactions.

American regulationsSanpaolo IMI, being a company listed on the NYSE andregistered with the SEC (Securities and ExchangeCommission), is also bound to observe the Americanregulation applicable to foreign issuers, including theso-called Sarbanes-Oxley Act, introduced on 30 July2002. These are deeply penetrating provisionsregarding market transparency which join the annualinformative document, better known as Form 20 F,provided for by the previous regulation. The provisionsof the Sarbanes-Oxley Act of major importance includethe obligation of the principal executive officer and theprincipal financial officer to include in the annualreports to be sent to the SEC (starting from those for2002) a certification stating that they have audited thedocuments and guarantee the absence of falsedeclarations or omissions regarding relevant facts, aswell as the correct nature of the financial conditionsreported. Within the picture of the initiatives aimed atputting such regulations into effect and in compliancewith SEC requirements, the Board of Directors hasestablished a Disclosure Committee to assist themanagement departments of the Bank in fulfilling theirduties and responsibilities in relation to the controls onaccuracy and timing of the disclosure activities.Moreover, Sanpaolo IMI, also consistently with thatdictated by the Sarbanes-Oxley Act, in the 2003-2004biennial will provide for the adoption of an Ethical Code(already approved by the Board of Directors on 25March 2003, and attached with this document), tomonitor the responsibilities of the independent auditorsand to make public every off-balance sheet transaction,agreement or obligation which may have a relevantimpact on financial and economic conditions.

Ethical CodeThe adoption of an Ethical Code, as of March 2003,follows the indications deriving from the Americanregulation and the Legislative Decree 231/01 on theadministrative responsibility of companies, but completesa process that has already been underway for some time.The document - attached - contains the indication of theethical principles of reference for the bank and itsdirectors, employees and co-workers in every operatingand geographical area.

established for the Chairman and the ManagingDirectors, a fixed remuneration and a variable part linkedwith the achievement of specific targets in Bank andGroup results, integrated with stock option plans. Thelatter, described in detail in the Annual Report, arearticulated in a fixed component and a variablecomponent fixed to share performance. The same Boardestablishes the amounts due to the Deputy Chairmenand members of the Technical Committees.

The Board of AuditorsIn accordance with art. 19 of the Articles of Association, theBoard of Auditors is elected by the Shareholders’ Meetingby a vote and in observance of a procedure which providesfor the preventive publicity of the candidacies and ensuresadequate representation of the exponents of the minorityshareholders. The Sanpaolo IMI Shareholders’ Meeting heldon 30 April 2002, nominated the Board of Auditors for the2002 - 2004 three-year period.

The system of internal controlsThe Sanpaolo IMI system of internal control is made upof a total plural integration of subsystems of controlwhich, operating at all levels throughout theorganization, guarantee the effective and efficientmanagement of risks. Audit Direction is particularlyresponsible for this function and reports directly to theManaging Directors and therefore enjoys the necessaryindependence from the operating structures.Its responsibilities include the evaluation of thefunctionalities of the Group’s complete system ofinternal controls, the control of operating regularity andthe trend in risks, as well as the highlighting of possibleimprovements. The Board of Directors and the AuditTechnical Committee are informed of the results of theactivity on a quarterly basis.

Internal dealing Sanpaolo IMI has also complied with the provisions onthe matter of internal dealing of Borsa Italiana, adoptinga special Code of Conduct with reference to the relevantpeople. This Code intends to make clear all transactionsof purchase and sale undertaken by the Directors and byother “relevant people” in the stocks of listed companiesof the Group (excluding non convertible bonds), in otherwords, those that, by virtue of their role, have access toprivileged information. Within ten stock exchangeworking days of the end of each quarter, the Bankinforms the market of the transactions performed byrelevant people amounting to at least 50,000 euro orwithout delay (and by the first day the stock exchange is

The remuneration of DirectorsThe remuneration of Directors comprises a fixedannual part, a variable part established on the basis ofparameters approved by the Shareholders’ Meeting,and a fixed amount inclusive of allowances for eachattendance at meetings of corporate bodies (withreimbursement of expenses). The Board of Directorsfor 2002, as proposed by the Remuneration andPersonnel Policies Technical Committee, has“S.Paolo”, anonymus author


In the process of definition of policies and willingness tocommunicate on the themes of Corporate SocialResponsibility, 2002 was an important year for Sanpaolo IMI.

UNEP DeclarationFirstly the Bank, as proposed by the Ethical Committee,complied with the principles of environmental protection andsupport of sustainable development developed by the UNEP in the United Nations Environmental program,subscribing the related Declaration. The UNEP Financial Institution Initiative was set up in 1992with the aim of involving a wide range of financialinstitutions in constructive debate on the link betweeneconomic development, environmental protection andsustainable development. The aims of the initiative, withwhich the Bank is in full agreement, include:

• committing companies to integrate social and ecologicalpreoccupations in their everyday activities and relationswith other interested parties;

• promoting the commitment to internal surveillance withregard to environmental objectives;

• encouraging the development of products and services toprotect the environment;

• encouraging the communication and sharing ofexperiences and know how on the matter.

UN Global Compact By way of further confirmation and continuation of thedirection taken, in December 2002 the Ethical Committeesupplied a favorable indication for compliance with UNGlobal Compact,formalized in May 2003.

UN Global Compact is a voluntary initiative which intends topromote the dissemination of practices aimed at achieving asustainable development program. The project was launchedand is sponsored by the Secretary General of the UnitedNations, Kofi Annan. It is based on compliance with nineprinciples related to human rights, employee rights andenvironmental protection.

The nine principles, which we have guaranteed our complete sharing and support, are the following:

Human rights1. Observe and promote the respect of human rights2. Ensure that the activities performed do not support any

kind of abuseEmployment

3. Freedom to join trade unions4. Elimination of every form of coercion to work5. Elimination of child labor6. Elimination of discrimination in the workplace

Environment7. Sensitivity towards environmental issues8. Promotion of initiatives to disseminate responsibility

towards the environment9. Encouragement of the development and dissemination

of eco-compatible technologies

Cooperation with EIBThe common interest for environmental issues and a relationshipof cooperation which has been in force for some time have led usto promote, in conjunction with the EIB, the formation of aEuropean forum for the dissemination of environmental policiesand practices. The Forum was created with the aim of developingand sharing with other banks methodologies and costs linkedwith the development of a best practice in terms of evaluating theenvironmental impact of investments financed by the same banks.The first meeting, in March 2002 in Rome, enabled the sharing ofthe know how and approaches of the banks that took part. Thisinitiative, attended by important Italian and foreign groups, offered significant inspiration for comparison andwas repeated in March 2003 in London. Sanpaolo IMI contributed to this latest meeting on sustainable mobility.

Forum for Sustainable Finance In the context of the search for greater comparison andcommunication with other operators in the sector and with ourstakeholders, we also joined the Forum for Sustainable Finance. The Forum is a no profit multistakeholder association with largelycultural aims, which sets itself the target of disseminating theculture of social responsibility and sustainable development in theItalian financial community. It is the Italian representative of Eurosif (European Sustainable and Responsible InvestmentForum), a network of European organizations which intends to promote and support the development of SRI (SociallyResponsible Investments) and which enjoys the support of the European Commission. The contribution includes participation in the research on“Pension Funds and Socially Responsible Investments”,conducted by Mefop, by the Forum for Sustainable Finance,with the cooperation of Avanzi srl Research, and sponsored,among others, by Sanpaolo Wealth Management.

Ftse4GoodRecognition of the concrete, active commitment of Sanpaolo IMIon the themes of the social responsibility of companies andsustainable development also arrived, in July 2001, with theinclusion of the share in the FTSE4Good Europe index. FTSE4Good(Footsie for good) is a series of benchmark indices and commercialindices, created by the FTSE, aimed at facilitating investmentdecisions by investors in companies that prioritize, along withfinancial performance, corporate social responsibility.

Compliance with principles and willingness to communicate

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The Groupand the Parent BankIn carrying out the general part, dedicated to identityand governance, we made principle reference to theSanpaolo IMI Group, so as to offer a summarized butthorough vision, capable of illustrating the reality itrepresents today in the context of the domesticfinancial system.

As illustrated in the explanatory notes on the publishingcriteria, this first edition of the Social Report particularlyregards the Sanpaolo IMI Parent Bank, considered as theresult of the merger by incorporation completed on 31December 2002 with Banco di Napoli. In the near futurewe intend to extend the analysis to the whole Group.

For the moment therefore, our treatment will continue tomake exclusive reference to this agglomerate, apart fromoccasional mentions of other Group companies, wherenecessary in order to indicate the specific tool with whichwe communicate with some categories of stakeholders.

To give the reader an idea of the “weight” of the bank,configured as above, compared with the Group, wethought it would be useful to list the figures below whichregard the main qualifying data of both realities at theend of 2002.

ECONOMIC AND FINANCIAL FIGURES (in mil €)Net incomeOperating incomeNet interest and other banking incomeTotal assetsShareholders’ equityCustomer loansFinancial assetsDirect depositsIndirect deposits

PROFITABILY RATIOS (%)ROECost/Income

OPERATING STRUCTUREEmployeesFinancial plannersDomestic branchesForeign branches and representative offices

RETAIL AND CORPORATE CUSTOMERS (in mil)

8892,3607,160

203,77310,537

126,701356,281137,049219,232

8.365.1

45,6504,9553,069

153

7.9

7641,4334,377

135,0079,956

76,159207,65275,213

132,439

7.465.6

28,036-

2,11528

5.3

86%61%61%66%94%60%58%55%60%

61%-

69%18%

67%

Group Parent Bank %

Key figures

Milan, piazza DiazPadova, via TriesteNaples, via Toledo

Our Stakeholders

Laur

a Ro

nchi

40 Parent Bank – Our Stakeholders 41Parent Bank – Our Stakeholders

Our work aims to provide real benefitsfor our customers, i.e. it is dedicatedto obtaining results which are - andare seen to be - consistent with theirexpectations.

We want our customers to feel theyare guided by an organization basedon concrete needs, which is willing totalk and offers good listening abilities.

We are convinced that over the longterm the loyalty and claritydemonstrated to our customers willbecome a further source of benefit forthe entire organization.

We want to offer our customerseasily accessible quality productsand services integrating tradition,through a network of Branches andvirtual channels, with the comfortand richness of information availablefrom technological instruments.

We operate in order to ensure thehighest attention is paid to individualsand, in particular, to the needs ofspecific categories of customers.

We aim to allocate financialresources responsibly, through our daily operations, by bringingtogether the needs for security and remuneration of our customerspersonal savings accounts with the financial requirements of the business world.

Customers Value in detail

Creation of value

Customerorientation

Integrity

VALUES

Commitment to excellence

Growth inobservance of

specific qualities


of resources

Our customers form an important part of ourwealth: Sanpaolo and Banco di Napoli have a totalof 5 million retail customers and more than300,000 business clients.Our customers are shown dividing their treatmentinto two large groups, which correspond to thefundamental activities of a financial institution:households represent the reservoir for the inflow ofassets; they are offered savings accounts and assetmanagement. Businesses, on the other hand, formthe demand for financial resources (venture capitalor borrowed capital), which is satisfied in differentways, from investment in share capital to short andlong term loans. Naturally, there are significant areaswhich overlap, in the sense that also households aregranted loans of one sort or another, just as assetscan be managed for businesses. Then there areactors, professionals, family manufacturers and smallbusinesses which, whilst belonging to the businesssector, are really halfway between the twocategories, in terms of both characteristics and inthe products and services offered.

Financial asset

Asset management

Asset administration

Direct deposits

Loans

of which Mortgage loans

207,652

71,087

61,352

75,213

76,159

33,155

PRINCIPAL VOLUMES OF ACTIVITYTOWARD CUSTOMERS (In millions of Euro)

Customer orientation is one of the principal values ofreference for the entire Group, which is strongly intenton maximizing customer satisfaction. With this in view, in April 2002 we created the Group CustomerSatisfaction Function, with the task of analyzing anddeveloping indicators of position and satisfaction withinthe areas of Group activities. In particular, the objectiveof this Function is to develop systematic programs aimedat “continuous improvement” rather than meremonitoring. From the point of view of services offered bythe bank, these will allow the integration and support of activities dedicated specifically to retail customers and businesses. The plan of work is set out in two distinctlevels of investigation:

the macro level, through adherence to the ABI-EuriskoCustomer Satisfaction Observatory, for the purpose ofmeasuring trends in the level of satisfaction toward theGroup’s banking network, analyzing market position,strengths and weaknesses in respect of main competitorsand defining a system of internal comparison which can beapplied to the individual banks in the Sanpaolo IMI Group;

the micro level, realized by a specific internal project,for the purpose of identifying and taking priority actionto improve satisfaction and to increase loyalty throughdetailed indicators.

Some freecall numbers, mainly dedicated to directchannels users, are available for Sanpaolo and Banco diNapoli customers, whose requests are responded by adedicated Function, with 169 operators.

Customer Satisfaction of the Group

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BREAKDOWN OF RETAIL CUSTOMERS BY AGE(INTEGRATED DATA FOR SANPAOLO AND BANCO DI NAPOLI)

BREAKDOWN OF RETAIL CUSTOMERS BY AGE(INTEGRATED DATA FOR SANPAOLO AND BANCO DI NAPOLI)

55-64 years19%

65-74 years14%

18-34 years22%

35-44 years23%

Number of customers

1,000,000 - 1,190,000500,000 - 1,000,000

200,000 - 500,000100,000 - 200,00050,000 - 100,000

0 - 50,000

45-54 years22%

Retail customersThe Bank has around 5 million retail customers,distributed over all age brackets and across theentire country. The areas of highest customerconcentration are - obviously - those whereSanpaolo and Banco di Napoli are deeply rooted:the North West and the South.

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The economic environment of this business activitywas characterized by intense uncertainties and by acrisis in investors trust in the efficiency andfunctionality of the markets, particularly stockmarkets. Being the Group leader on the market ofasset management, with a share of 14.4%, during2002 we tried to strengthen our role as guide andorientation in asset management services forhouseholds. For these purposes we have counted onthe traditional elements of strength in our Network:customer relations, capillarity and proximity to themarket, image of soundness and trust. With the support and personalized assistance offeredby our Branch networks, customers have changed thegeneral composition of portfolios (asset mix) in favorof products containing insurance policies andprotected capital to meet the demand for securityand assurance. With the desire to improve the level of service andthe global efficiency of the distribution processeswithin the investments sector, we started a series of initiatives, such as the Client Financial Planning,and realized service models for the differentcustomer segments.

Client Financial PlanningThe main objective of the Client Financial Planningproject is to significantly improve the professionalismof the operators and the quality of assistance providedto the customer in respect of investments, supportingthe Network in a difficult market environment,characterized by the widespread lack of confidence ofcustomers toward financial intermediaries. The ClientFinancial Planning project identified different areas forintervention, with the aim to:

• improve the culture of the sales force, strengtheningits technical and management skills;

• to prepare instruments, even software, suitable tosupport the Network and to rationalize themanagement of economic information provided;

• realize instruments to monitor the commercialefficiency of the sales force.

Investment PolicyThe principal inspirations behind the Client FinancialPlanning were incorporated within the InvestmentPolicy, a document distributed to all employees inApril 2003, which combines the guiding principles for providing investment services to customers,setting out the following objectives:

• to confirm the importance of customerassistance, within the scope of the Bank’sstrategies, in respect of investments;

• to promote the development of awarenessoriented toward monitoring the risk andconsistency of customers’ portfolio investmentsin respect of specific financial requirements;

• to define some rules for managing customerrelations, inspired by some essential financialprinciples, in order to strengthen the ability tointerpret customers’ needs in an impartialmanner, whilst respecting the Bank’s targets forincome over the medium term.

The asset management business

ASSOCIATION FORTHE PROTECTION

OF INVESTORSIN ARGENTINEAN SECURITIES

In September 2002 we, along withseven other important Italian banks,established the Association for theprotection of investors in Argentineansecurities, with the task of representingthe interests of investors in Argentineansecurities by providing, free of charge,consultancy and assistance. For thispurpose, we created a space on thewww.sanpaoloimi.com website forpublishing documents produced andsent to customers, press releasesissued by the Association and all otherforms of correspondence and

notification of possible interest tothe investor.

(The objective of the assistance to investments is toserve the Customer better in choosing, helping himto satisfy his financial needs.

The investment of assets and flow of Customersavings must be made by selecting activities with arisk/yield profile consistent with the financial needs.

The diversification of investments allows efficiency in the portfolio to be increased, improving thecombination of risk/yield.

Investing in asset management products is an efficient choice from the point of view of financial principles.

The long term global performance of the portfolio islargely attributable to the choice of asset allocationand, to a lesser extent, to the performance ofindividual investment tools.

Periodical investment reduces the risk ofconcentrating purchases to a particular moment inthe market.

Equity investments require a medium/long termhorizon.

The guidelines for investments must be explained tothe Customer in order to direct him in his choice.

Assistance with investments must be provided tothe Customer continually.

The consultant/manager must operate impartially todefend the interests of and to satisfy the Customer.

Investments in individual shares/bonds, for whichthe Bank does not provide suggestions, must alwaysbe made solely on explicit request by the Customer.

Speculation activities on financial markets must beperformed only by those Customers with adeguaterisk profile and on specific request.

1

2

3

4

5

6

7

8

9

10

11

12

THE GUIDING PRINCIPLESOF THE INVESTMENT POLICY

The

Imag

e Ba

nk


The growth in investment risk awareness towards the sales network…The above activities contributed to the growth inknowledge of the sales force of the social responsibilityof the Bank and of all its operators, when performingtheir tasks. These activities were supported byimportant initiatives in internal communication andtraining, which involved all sales Network and all theBranch managers. Together with the creation of new software, the maindocumentary support available to the branches was alsosubjected to review. As a matter of fact, a manualentitled “Invest Today - Client Financial Planning” hasbeen published, which contains, in addition to importantin-depth studies, all the reorganized product chartsaccording to the logics of the Client Financial Planning.

THE PROJECT IDENTIFIES FIVE MACRO-NEEDS FOR INVESTMENT:“LIQUIDITY”, “ASSURANCE AND INSURANCE COVER”, “CAPITAL

PROTECTION”, “ACCUMULATION” AND “SPECULATION”; MEETING

WITH THE CUSTOMER PROVIDES THE OCCASION TO DISCUSS ALL THE

INVESTMENT NEEDS, TAKING CARE TO ANALYZE THE PRIORITIES WHICH

MUST BE SATISFIED. THEREFORE THE UNDERLYING THEME OF THIS PROJECT ARE THE NEEDS

AND THE CHARACTERISTICS OF THE CUSTOMER, WITH PARTICULAR

ATTENTION TO THE ANALYSIS OF THE TOLERATION OF RISK.

• The availability of funds to cover ordinary expenses

LIQUIDITY

• To obtain an annuity at the end of the working life

• To have a cover againstextraordinary events

ASSURANCE AND INSURANCE COVER

SECURITY

NEEDS MEANINGS EXAMPLES

GROWTH

• To minimize the risk of capitallosses and deadlines to guaranteeavailability for future financialpredetermined investments

CAPITAL PROTECTION

• To increase the capital according to his/her risk aversion and time horizon

ACCUMULATION

SPECULATION(derivatives)

• To obtain the maximum capital growth, also in the short term, with the risk to lose the entire sum

• Ordinary payments

• Liquidity cushion (for unexpected occurrences)

• Pension integration

• Risks cover: - personal accident- sickness

- permanent disability- unemployment

• To buy home

• Wedding

• Children studies

• Investment in a product portfolio to get a “X” yield in a “Y” year timeframe with a fixed probability

• Investment in speculativeinstruments (CW, derivatives) not for hedging purposes

CLIENT FINANCIAL PLANNING: INVESTMENT NEEDS

((

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… and towards investorsWith an aim to articulate a strategy to improve theknowledge of the investors in respect of the risksconnected to their investments, as part of the ItalianBanking Association, we have also contributed to someworking panels.For this purpose an extensive initiative has started,involving the entire banking system, articulated atdifferent points, among which the classification offinancial instruments into homogeneous classes tofacilitate the understanding of risks and some autoregulatory initiatives (workshops on operations defined“inadequate” according to Consob classifications).We have also included an education section on thewww.sanpaoloimi.com site, which shows theimportance of “investing in a conscious manner”,focusing on financial instruments in existence on themarket and also on the risks connected to differenttypes of investment. In particular, the chapter “Somesuggestions before investing” is aimed at discouragingthe customer from approaching markets forspeculation and to make him aware of the illusion ofrapid and high earnings.

Offering Ethical FundsThrough Sanpaolo Asset Management Spa, SanpaoloIMI Wealth Management was one of the first operatorsin Italy to launch 3 “socially responsible” funds in 1997which comprise the Ethical System and which enrichthe Sanpaolo Italian Funds on offer. In order to respectthe strictest of ethical principles, Sanpaolo WealthManagement resorts to some of the most importantresearch companies in the sector for specializedconsulting in the “ethical rating” of a company. The control is carried out by an independent EthicalCommittee, chaired by Cardinal Ersilio Tonini, with thetask to verify constantly that management choicesconform to the declared ethical principles. Themembers of the Committee express their opinion onthe conformity of the choices made to the managers of the Ethical funds in respect of the issuers of thebonds in the portfolio and of potential issuers. The Sanpaolo Ethical System does not only control theethics of investments (eg. environmentally friendly orconformity to human rights), it also provides concretehelp for those in need, through donation of 0.01% of the average global monthly net equity of the EthicalSystem funds each year: a portion of the donation isdestined to 17 associations part of a convention, aportion to humanitarian initiatives selected by theBoard of Directors on the basis of suggestions

proposed by the Ethical Committee. Even subscribersto the Sanpaolo Ethical Bond can, if they wish, donateall or part of their income from coupons to one or moreof such associations (in 2002 a total of 93,400 eurowas donated)5 .Today Sanpaolo IMI Wealth Management is in aleadership position on the Italian market, with assetsunder management in ethical funds totaling around 1billion euro, representing almost 42% of Italian ethicalfunds (data at February 2003).

5. The associations belonging to the convention are: FOND. PRO - JUVENTUTE DONGNOCCHI , LEGA ITALIANA PER LA LOTTA CONTRO I TUMORI , LEGAMBIENTE , A.I.S.M.(ASS. ITALIANA SCLEROSI MULTIPLA) , GRUPPO ABELE , Ai.Bi. (ASS. AMICI DEI BAMBINI), A.M.U. (AZIONI PER UN MONDO UNITO), ANT (ASS. NAZIONALE TUMORI), COMETA(COORD. ASS. MALATTIE METABOLICHE EREDITARIE), FANEP (ASS. FAMIGLIENEUROLOGIA PEDIATRICA), FOND. ADVENTUM, FOND. BANCO ALIMENTARE, FOND.OPERA SAN FRANCESCO PER I POVERI, FOND. VITA, OPERA DI SANTA TERESA.6. The first 5 shares held by Sanpaolo International Equity Ethical at 30 April 2003were Microsoft (3,0%), Vodafone Group e BP Plc (con il 2,1%), HSBC (1,8%) eGlaxosmithkline (1,7%).

ETHICAL SYSTEM

International Ethical SharesInvests in companies listed on major

international markets, chosen on the basis ofethical principles, avoiding for example,

companies which show an indifference towardsafeguarding health or the environment orwhich exploit child labor6

Ethical BondsInvests in fixed income securities mainlydenominated in euro. The Fund is recommendedto investors on a medium term horizon and with alow risk factor, aimed above all at preserving thevalue of the investment whilst respecting ethicalprinciples and without renouncing a moderategrowth. The Fund is also characterized by theannual distribution of revenues and offers thesubscriber the possibility of donating part of theannual coupon to charity.Foreign Ethical BondsInvests in fixed income securities mainly in foreigncurrencies and by issuers selected taking intoaccount ethical principles. The Fund isrecommended to investors on a medium termhorizon and with a low risk factor, aimed at

preserving the value of the investment whilstrespecting ethical principles.

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The new range of current accountsDuring 2002 we renewed and expanded the offer tocurrent account holders, by launching a new rangeof products which better reflect the diverse needs of the customer: from that with greater autonomy,for whom we created an account for users of virtualchannels, to the natural need for simplicity andcertainty in costs. Included in the range are two current accountsspecifically studied for those with prevailinginvestment needs and, therefore, who need morequalified and professional information.

Products for young peopleWe have also renewed the entire range of products forUnder 18s (more specifically, two savings books aimed atthe 0-5 age group and 6-17 age group), with the aim ofcreating the basis for establishing a long term relationshipwith our youngest customers. In addition to supportingcampaigns by sponsoring ethical and social activities(contributing to the Davide.it portal, for safe surfing on theInternet, supporting WWF and Unicef), these products arecharacterized by the absolute absence of costs: as a matterof fact, charges for stamp duty required by law on openingan account are borne by the Bank. With the future of ouryounger customers in mind, we have also created “PremioGiò”, an insurance product which rewards scholasticresults with resources which can be used by the youngercustomers as a form of scholarship for University or tostart-up their first business activity.

Clarity and transparency at the forefront:- in the mortgage loans sectorFollowing a considerable drop in interest rates, werenegotiated mortgage contracts in favor of holders of fixedrate mortgages. Initially negotiations commenced freely andunder agreement with some consumer associations then, inaccordance with law 24/2001, they were extended toinclude all contracts in force as at 31/12/2000. We alsoadhered to the European Code of Conduct for homemortgages. In order to improve clarity of contracts, wechanged the mortgage forms to conform to the ItalianBanking Association, in accordance with the principalconsumer associations. Customers requesting an estimateare provided with the “Standard European informativeProspectus” containing the elements which identify theprecise characteristics and bank charges (including TAEG) ofthe mortgage requested. We have also commenced aproject aimed at obtaining the UNI EN ISO 9001:2000certificate for issuing Domus and Assidomus mortgages.

- in the foreign payments sector In the International Payments sector and in that of theEuropean Monetary Union (EMU), we issued a newinternal regulation and carried out some technologicalimplementations which have allowed us to achieve onthe one side greater transparency in respect of thecommissions applied to customers and, on the otherside, to reduce the maximum time to perform a banktransfer between countries belonging to the EU.This allowed our Bank to be among the promoters ona European level of a payment scheme7 which providesfor the entire operation (end-to-end) for payment byinternational bank transfer8 over a maximum of 3working days, halving the time required according tonormal regulations9. Since July 2002, Sanpaolo hasbeen among the top 20 banks (of around 9,000Commercial Banks in Europe) to offer this type ofservice for payment, at particularly competitive prices.In order to improve information for customers and tobe in a condition to provide standardized cross borderoperations, since the end of 2000 we have also, wayin advance of the rest of the European BankingIndustry, included a box in our bank statementsshowing the international banking coordinates.It is also useful to highlight that the new internalprocedures allow the branches to provide betterassistance to customers, through the availability of themajority of regulations and norms in electronic formatand on-line.International Payment and EMU services are certifiedin respect of UNI EN ISO 9001:200010.

• charges for keeping account: 10 euro quarterly

• remuneration of deposits: not expected

• possibility to reduce quarterly charges to zero with an averagequarterly balance of more than 5,000 euro and high level numberof transactions via remote channels

• the cost for account holders with less than 23 years of age remains zero


• interest bearing: not expected


• transactions through direct channels and withdrawals with debit cards

• other operations included: 9 per quarter

• interest bearing

• charges for keeping account: 15 euro or 30 euro quarterly,depends which version


• Trust Deposit free of charge

• “Integrated Reports” service



• Trust Deposit free of charge

• “Integrated Reports” service

• Debit cards: free of charge

Benefit Bonus

Benefit BonusUnder 23

Benefit Facile

Benefit Web

MultiBenefit(two versions)

MultiBenefitPlatinum

ExclusiveInvestments and Services

Completelyautonomous 24/7

Definite and contained cost

Possibility to reduce account costs to zero

Meeting the needs of the customer

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NEED PRODUCT PRINCIPAL CHARACTERISTICS

EXECUTIVE PROGRAMMEExecutive is a points program created to offer

holders of the MultiBenefit account rewards andbenefits absolutely free of charge. To obtain them, in

accordance with the Regulations, it is sufficient to usethe banking and investment services and products

connected to the MultiBenefit account and thus accrue,on a monthly basis, “points” which can be converted intothe reward to be chosen from catalogue. In the latest version of this program, the Account holderscan also convert the points accrued into donations to theSave the Children fund, the largest international movementfor the defense and protection of children’s rights, with anetwork of 30 voluntary and non-profit makingorganizations in more than 120 countries, including Italy.Collaboration with the FAI and Airc associations remainalongside that of Save the Children. The FAI (ItalianHeritage Society) has, over the past 25 years, safeguardedthe artistic and naturalistic heritage in Italy: by donating tothis organization, customers have the possibility toparticipate in financing works of art, monuments andgardens and receive two free entrance tickets to visit FAIproperty. Since 1965 Airc, (Italian Association forCancer Research) has financed cancer researchprojects, distributed scholarships and promotedsensitization campaigns.

During 2002 Executive account holders donated17,800 euro to charity, through 356 donations.

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7. Known as CREDEURO.8. The International Bank Code of the beneficiary’s bank and the IBAN of the latter.9. In particular, EC directive 97/5 and the Italian Dlgs 253/2000 which establish theprecise regulations in terms of transparency and maximum time to perform transfers. 10. In particular the certificate refers to “The design, realization and performance ofFinancial Clearing and Commercial Euro services and Customer Service and end-to-end transfers for payment operations entering into the Single European PaymentArea (SEPA) and cross-border”.


Differentiated service modelsIn light of the new needs for consumer security andprotection, we believe that a distinctly fundamentalability is represented by the capacity to build andmaintain a solid relationship with the customer. Ourcommitment to achieve this objective is accomplished, inaddition to the development of policies for a productcharacterized by innovation and competitiveness, by theever increasing departure from the “general” distributionset up, to come up with solutions based on servicemodels for the different customer segments. With this in view, we intend to promote a neworganizational model in the Retail Branches, based onspecialized models which will allow us to bring togethera focalized and personalized commercial approach and ahigh level of distributive efficiency. In fact, the evolutionof the organizational model answers the need to “getcloser” to the customer and determines, throughinteraction of the operators in a “team play” logic, toconstruct a long term relationship with the customer,based on professionalism and on the knowledge of thecustomers’ needs. For this purpose, a specializedprofessional figure will be created for each marketsegment.In particular, the following initiatives will be developedduring 2003 to give greater impulse to the differentiationof the service models:

• consolidation of the new service model, realized in 2002,aimed at the Private customers (customers withconsiderable financial liquidity and the need for specificassistance, not only financial), with the objective ofincreasing the quality of services through:- a more capillary presence of dedicated operating pointsover the territory, characterized by the presence of ateam of specialists;

- the expansion and evolution of the range of productsand specialized services on offer (an “exclusive” currentaccount, a specific portfolio management in funds withpersonalized asset allocation, a new platform of non-financial consultancy services);

- further growth in the skills of the segment specialists;

• consolidation of the service models by customersegments with investment needs, centered on PersonalBanking which, as opposed to the traditional modelorganized by function, allows the customer tocommunicate always with the same person. This choicecreates value and ensures continuity for the customer, inaddition to favoring the optimization of individualportfolios in terms of risk/yield;

• start-up of the “Front Line” project, aimed at promotingthe Household sector and to bring a strong contributionto the front-line of the Network by promoting theutilization of direct channels for customers that do notneed assistance at branches. The heart of this activity isconcentrated on the “front line” of the branchoperators, the physical area of access which providesthe customer with the first impression on the level ofquality offered in terms of reception, professionalismand service.Within this project, the Commercial Customer Chartwas created, an instrument which will allow relationswith the customer to strengthen even more, throughgreater knowledge of the customer’s financial andpersonal profile. The guidelines for this project wereinspired by an analysis of the Family customer, with thegoal of investigating the needs expressed by thereference market, in terms of type and purpose of theinvestments and loans, of perceived use of services andpreferred methods of operating with the Bank;

• continuous development in the professionalism of SmallBusiness Managers (dedicated exclusively to smallbusinesses, eg. shopkeepers and professionals) throughcapillary activities in training, communication and directinvolvement11. The role of the Small Business Manager isdecisive, both to maintain the assumptions ofsatisfaction, which is indispensable for a long-termrelationship with this type of client, and to seize theopportunity to strengthen the relationship itself.

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11. For more details on Small Business segment, see section companies customers.


Multi-channelsWe have chosen to expand the direct channels(Internet, phone and mobile banking) in closeintegration with the branch Network, on the one sidevaluing the relationships and assistance of a “classicalbank” and on the other side, offering the customerthe comfort and richness of information availablefrom the most sophisticated technologicalinstruments. In addition to visiting a branch, subscribers to theSanpaolo multichannel service can perform simpleoperations, from home, on their current accounts andinvestments at any hour of the day. The internet banking allows a large number of operations to be performed from a Personal Computer,phone banking through a simple telephone call andmobile banking directly from a mobile telephone. These services will also be extended to Banco di Napolicustomers who, from June 2003 will be able to use thesame online services.In the two years since the launch of the directchannels, more than 300,000 multichannel contractshave been signed, with a growth of 92% on 2001.The level of operations has quadrupled: in 2002almost 528,000 operations were performed, such asbank transfers, account transfers and charges tomobile telephone cards, while purchase and saletransactions in securities and funds totaled around570,000. As far as services offered are concerned, in 2002facilities for standing orders for paying utility bills,taxes and fiscal contributions, among others, werealso activated.The Internet Banking service for retail customers wascertified by Det Norske Veritas to be in compliancewith BS 7799 standard12. During 2003 the Direct Banking sector will be

assigned an important role both in terms of expansionof the services offered to its current customers and interms of the activity of acquiring new customerslargely oriented toward the utilization of directchannels and new technologies. For these purposes,the activities will focus on the personalization ofservices and on commercial promotions with thefollowing main objectives:

• growth in the number of multichannel customersand expansion of the methods of use of directchannels;

• further expansion of the range of investment,payments and banking services offered, also in the lightof widening the customer segment;

• distribution of insurance products (eg. car insuranceoffered on the Iinternet and telephone banking)

Telephone campaigns will also be intensified to supportthe promotions and to follow relations by extendingcustomer care to non-multichannel customers.

The spread of new instruments for payment

Prepaid cardsA number of initiatives commenced or were developedin 2002 with the aim of providing access to new toolsfor payment by people who, for social, cultural oreconomic reasons (unemployed, foreigners) do nothave any relations of any kind with banking systems orhave only a basic relationship with banks (pensioners,young people):

• in December 2001 we launched the first prepaiddebit cards (which can be re-charged as necessary)in order to facilitate the passage to the Euro forthose belonging to social categories normally mostresistant to the use of electronic monetary systems;

• in 2002 a prepaid card for use on internationalcircuits (Soldintasca international) was realized,mainly for minors, for them to gain moreconfidence in using such instruments and to beable to use them on journeys abroad for study orvacation. The card can immediately solve problemsrelating to expenses, thanks to the possibility ofbeing recharged by the parent and used by thechild while at a distance.

Bank Pass Web for safer e-commerceWithin the context of the more frequent use of debitcards, the level of security guaranteed to the user is ofparticular importance. With this in mind, we were the firstin 2002 to launch Bankpass Web, a “protected” paymentservice for use when purchasing on the Internet, whichguarantees the consumers and the retailer against thefraudulent use of debit cards and credit cards over theInternet.Among the services which can be purchased over theInternet with Bankpass Web is the Trenitalia Spa ticketingservice, which has been supported by our Bank since1997 through POS terminals and self service machines inrailway stations.

Web technology applied to self service machines As far as self service machines are concerned, we arecurrently adopting web technology: as a new self servicesolution denominated “ATM” (Automatic TransactionModel). This will allow the customer to perform multiplebank operations even outside of the normal hours ofservice, providing a more elastic and complete use ofbanking services (eg. payments, bank transfers).Alongside this, self service points are being reviewed inorder to improve their services and to guarantee greateraccess to the public, particularly the disabled. On thissubject, some points are being moved and architecturalbarriers eliminated; in addition a vocal solution is also beingstudied for use by the blind.

DistributiveInnovation

12. This is a certificate for processes, recognized by the Information SecurityManagement System (ISMS) of the Sanpaolo IMI MOI - Architecture and Security -relating to phases of analysis, design, development, management and maintenanceof Internet Banking services for retail customers.

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Customer comments represent an opportunity for the bankto improve and an occasion to investigate the dynamics ofcustomer relations. The management of customer complaintsis initially entrusted directly to the personnel involved, fromwhom the customer can obtain a solution to any problemsderiving from daily operations. In the event that the solution isnot satisfactory, the customer can contact the ComplaintsOffice, which will intervene, within the terms provided by theregulations for the sector, in order to clarify the situation withthe customer in a formal manner. If the internal inquiryverifies the existence of the complaint, the customer may beawarded compensation in cash. Any dissatisfied customercan, in any event, contact the banking Ombudsman (acollective body provided by the banking system as the highestgrade for resolving controversies to the value of up to 10,000euro) or the competent legal Authorities.

In 2002 the Sanpaolo and Banco di Napoli ComplaintsOffice received a total of 7,060 notices of complaintand awarded compensation to customers for around516,700 euro. A total of 208 dissatisfied customerscontacted the Banking Ombudsman.More specifically, the Sanpaolo Complaints Officereceived 5,147 notices of complaint, a 7% drop on2001; while complaints of anatocism - non-homogenous methods of accounting interest payableand receivable - practically disappeared (in 2000 theynumbered 4,936, falling to 839 in 2001 and down to51 in 2002), there was a net increase in the number ofcomplaints about investments, particularly regardingthe economic results of asset management and thenon-redemption of bonds on expiry owing to debtorinsolvency.

Best corrective action

Complaints received

Inquiry

Complaints not accepted

Ombudsmanand/or Legal Authority

Customer Branch( (Complaintsoffice

Customer comments

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Complaints regarding loans were significantly less andreferred mainly to withdrawn facilities or loanapplications refused owing to lack of necessaryrequirements. In 2002 complaints for the mortgage loanssector dropped considerably when compared to the pastand are limited to complaints about operations (eg.delays in canceling mortgages, missing registrations, etc).On the other hand, as in the previous two years, therehas been a considerable increase in complaints about thesystem of payments sector (+38% between 2001 and2002, +46% between 2000 and 2001, +43% between1999 and 2000): the causes for complaint are, above all,attributable to loss, theft and fraudulent use of debit orcredit cards or, in some cases, to the wrong issue ofbanknotes by bancomat tellers.Complaints about Direct Banking (phone banking, internetbanking and mobile banking) remained substantiallystable. Correspondence received generally referred to

requests for explanations, information and valuations onthe functionality of the Internet site, or even notification ofmalfunctions or errors in telematic operations.The timing of replies by the Complaints Office is, wherepossible, limited to the same day on which the complaintis received. Complaints in respect of investments andthose of more complex nature are an exception, as theyrequire more in-depth investigation.The Complaints Office of the Banco di Napoli received1,913 complaints in 2002, a significant reduction on theprevious year (5,042 in 2001, more than half of whichreferred to anatocism). There is still strong criticism of the system of payment owing to the widespreadphenomenon of false debit cards and the fraudulent useof such cards on national and international circuits. In the latter part of 2002, another area subject to anumber of complaints by customers was current depositand savings accounts.

Accounts and Deposits

Investments

Loans

Systems of payment

Direct banking

Anatocism

Other

814

875

1,387

748

304

839

180

5,147

866

1.275

915

1,035

352

51

304

4,798 -7%

2001 2002 %Change

SANPAOLO COMPLAINTS


LOANS TO COMPANIES, SMALL BUSINESSES,INSURANCE COMPANIES AND FINANCIALINSTITUTIONS, BROKEN DOWN BY CATEGORY ANDINCOME BRACKET(Excluding non-performing loans)

Other andSmall Business

54%

Medium to large(over 50 mil. €)

23.5%

SMEs(from 5 to 50 mil. €)

12.9%

Other small business(from 1.1 to 5 mil. €)

11.7%Small business*

(below 1.1 mil. €)5.6%

Insurance & Finance9%

Foreign corporates13%

Major corporates24%

BREAKDOWN OF LOANS PORTFOLIO TO COMPANIES AND SMALL BUSINESSES BY SECTOR(Excluding non-performing loans)

Manufacturing48%

Other10%

Construction9%

Commercial12%

Services21%

Companies CustomersCustomer profileLoans granted by Sanpaolo and Banco di Napoli toItalian and foreign companies, including smallbusinesses, insurance companies and financialinstitutions totaled almost 59 billion euro. Detail ofthe portfolio is provided in the graphic table.

Decentralization: a deep-rooted choiceThe combination of the criteria of specialization with thatof territorial origin is the basis for the new distributionmodel adopted by the Group and forms a crucial point inthe 2003-2005 strategic plan. For business clients theapplication of the new model provides the possibility torefer to a territorial structure offering professional skills,operational guidelines and products specifically dedicatedto their needs. Within a strategy to decentralize, which hasalready been successfully adopted by Sanpaolo, this allowsthe combination of the advantages of building informationabout the realities of local production, the history anddifferent entrepreneurial styles with the professionalism ofspecifically dedicated staff, which can understand thespecifics and adequately support, as and when needed, thefinancial needs and plans for development of eachbusiness.

Branches and business teamsThe criteria for specialization is applied today in a networkcomposed of 129 business branches (two of which aremainly dedicated to corporate clients) and 61 teamsdetached from the Sanpaolo Network. Following themerger with Banco di Napoli and the subsequent territorialrationalization, the number of dedicated branches willexceed 150 units. This organizational model obviously requires specializedprofessional staff: during 2002 more than 10,700 workingdays were spent on training staff operating in the businessbranches, corresponding to an average of 4.4 days perhead. The most considerable commitment was directedtoward the managers of the business branches whichattended on average 7.6 days of training, while commercialstaff benefited from 6.8 days per head.

Specialization and originswithing the territory

* The small business segment includes family owned manufacturing companies,micro businesses and professionals which, in addition to the limited amount ofrevenues, have credit lines of less than 130,000 euro and less than 20 employees.

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An inquiry into customer satisfaction at business branchesIt would appear that one of the principal objectives of thisspecialization, that is to improve the skill of each operator toidentify the needs of the business customer, either explicit orhidden, has been achieved: an investigation into customersatisfaction carried out in July 2002 and involving around2,000 customers represented by small and mediumbusinesses, showed a positive level of satisfaction in thiscustomer segment in respect of the new network ofdedicated branches. The new structure was in fact judgedby 47 % of those interviewed to be “excellent” or“convenient”, rising to 57% if we also include those whojudged the structure to be “moderately positive”. Thestructure was considered to be irrelevant by 32% of thoseinterviewed considered, who preferred to wait a whilelonger before giving an opinion on efficiency, while only11% of those interviewed gave negative opinions.

When asked whether it was already possible to noticeany positive effect on the relationship between thecompany and the bank through this new organizationalmodel, 24% of those interviewed believed that relationshad improved, 63% said they were unchanged and 13%said they had worsened.

The level of satisfaction in relations with the managerwas high. Two statistics demonstrate this: a good 86%believed they had “an efficient relationship with thecompany”, while 70% judged the ability of the managerto be “excellent” or “good” and capable of anticipatingthe needs and requirements of the customer.

Small Business ModelsThe evolution of the organizational structure of the retailbranches, based on the model of differentiated service bycustomer segment, also foresees some measures to betaken to improve the quality of relations withbusinessmen and professionals: appropriate “SmallBusiness Models” will be established in operating pointswith more than 15 staff members. Dedicated team logicwill also be applied to this customer segment, aimed atfocusing the maximum attention and highest standards ofservice to both beneficiary customers and those for whomwe only manage personal and company assets.

The relational ‘Business Project’In order to simplify, and at the same time to let the smallbusiness and professional activities grow, a relationalprogram called Business Project was launched in May2001. The program is composed of three fixed chargemulti service current accounts allowing the customer tochoose the type of account most economically balancedin respect of his/her operations and guaranteeing themaximum transparency, thanks to clearly pre-definedcosts.The launch of this project was preceded by marketresearch carried out on around a thousand businessmenand professionals, from which emerged an overall interestin the relational program and toward each type ofbanking/financial or extra-banking service. In order to monitor customer satisfaction and thecorrespondence of the Business Project to public needs,each year a customer research is performed to analyze thechoices made and future intentions of account holders

and their degree of approval of the packages on offer.The constant collaboration with the major associations inthis category also provides a better overview of the needsof potential customers and, therefore the possibility ofpersonalizing offers to specific targets.

Commercial ventures on the Small Business segmentIn 2003 some commercial ventures will be establishedwith the aim to improve the efficiency of service providedto Small Business customers: from the current activities anew commercial policy will arise in terms of segmentationof customers, commercial policy, (the logic of credit linesand management policies, development of remotechannels, targeted package proposals), identification ofpriorities (to be applied not only commercially but also incustomer management) and actions (integration of therange of products, commercial ventures and relevantsupporting tools).

JUDGEMENT ON THE NEW ORGANIZATIONAL STRUCTURE

Convenient37%

Irrelevant32%

Not convenient11%

Excellent10%

JUDGEMENT ON CURRENT RELATION WITH THE COMPANY

Unchanged63%

Worsened13%

Improved24%

THE BUSINESS SPECIALIST IS AN EFFECTIVE SUPPORT

Yes86%

No5%

In part9%

JUDGEMENT ON PROPOSAL CAPACITY

Good55%

Negative10% Excellent

15%

Hardlyenough

20%

Moderately positive10%

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During 2002 a commercial policy, a charter of values, salesstrategies and operative procedures referring specifically tobusiness customers were drawn up for all members of staff. The commercial policy which will become fully operative in theSanpaolo and Banco di Napoli network in 2003, reveals how thecreation of value for the Bank and its shareholders necessarilyinvolve satisfying the needs of the business, constant training andimprovement in professionalism of dedicated staff and theconstant application of ethical principles.

However the commercial policy does not exhaust the code forbehavior which Sanpaolo has always kept in mind when carryingout its banking activities. As a matter of fact the Bank has alwaysmade every effort to meet the expectations of a civil society aimedat identifying a balance between the objectives of profitability forthe Bank and those connected to models of sustainable growthand the strict observation of human rights.

The attention to the impact of companies on the environment, forthe purposes of valuing loans granted by the Bank, is dealt with inthe chapter specifically dedicated to the Environment.

OUR RELATIONS WITHTHE ARMAMENTS SECTOR

The subject of financing arms manufacturers has, for some time,been the object of growing attention by the general public and

remains an extremely delicate and complex subject, for which it is noteasy to identify a balancing point.

Sanpaolo IMI believes it to be not only opportune and a duty, but alsoappropriate to the identity of the company, to make an operational and

business choice consistent with its mission and values.Such choice is established in full support and in the spirit of the

Constitution of our Republic, the principles of which state “Italy repudiateswar as an offensive weapon against the liberty of other populations and as a

method of resolving international controversies”. In this spirit, we are alsoconvinced that the defense and safeguarding of security constituteunavoidable tasks of a democratic State, which must promote and guaranteethe protection of liberty and the security of its citizens. Consequently, on the basis of the Italian law and on internal auto disciplinaryregulations, we only carry out operations dedicated to defending andsafeguarding security. In particular, we have limited the financing of militarysupplies produced by foreign companies solely to operations “destined forcountries belonging to the European Union and/or Nato and therefore destined,by their nature, solely for the purposes of security.” In parallel, we do not support the sale of weapons and believe that the principlesexplained above are consistent with, for instance, providing financial support forthe purchase of weapons for police forces, in order to give our nation theinstruments necessary to defend and safeguard the security of its citizens.To conclude, we have therefore adopted principles limiting the scope of supportprovided and strict valuation criteria for each operation. On 5 September 2002, the Group Loans Committee, supported by the EthicalCommittee, established an internal disciplinary code to regulate this subject inorder that all Group units take the same position. In addition to what hasalready been explained, the internal disciplinary code provides that any loan toItalian and foreign companies which produce or sell any weaponry materialsmust be submitted to the Group Loans Committee for an opinion onconformity, which shall remain mandatory for granting the loan. Operationswith companies which manufacture weapons and related products - even ifthey operate, obviously, within the law - are subject to specific examinationby the deliberative bodies of the Parent Bank. For the record, suchexamination is subject to inspection by the Loans Committee in order tounderstand, within the limits of information available, if and to whatextent any form of finance granted to a company is utilized to supportmilitary activities, in which case it is valued according to the principlesdescribed above. The connection of sectors to the arms industry isextremely complex: on one side, there is the design, production andassembly, which is realized by dedicated conglomerates, which arevery often also leaders in civil production completely alien to thearms industry. On the other side, many technological applications,

above all components, lend themselves to promiscuous uses,both civilian and military.

CreditBusiness

1 the Business sector is strategic to the Bank;

2 managing the financial needs of the Business sector requiresextremely high levels of professionalism and skills;

3 the development of operations with the Business sector isnaturally limited in respect of ethical values which are recognized bythe Bank as being fundamental;

4 to ensure the efficiency necessary to manage Business sectorcustomers, the Bank adopts a combined organization based on theprinciple of involvement and responsibility of the resources involvedfor the results obtained by the Business sector;

5 all staff involved in the management of the Business sector must directtheir behavior toward the ultimate goal of generating value for the Bank.For this purpose, the Network is allocated operational objectives consistentwith its aims, defined by taking into account the power of each figure;

6 each resource involved in the management of the Business sector isvalued on the basis of his contribution in terms of quality and quantity,from an individual viewpoint and taking into account the result obtainedby the “team” of which he is a member;

THE PRINCIPLES OF THE COMMERCIAL POLICY

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7 in order to achieve his objectives, the manager must plan andappoint a hierarchy of importance in terms of actions to be takenfor all customers in his portfolio, utilizing as a guideline theestimated impact of such actions on the net income of the Bank;

8 the manager can develop revenues acting on fourfundamental leverages: the number of customers, volumes,pricing and product mix;

9 in addition to the impact on revenues, the commercial activityhas an effect on costs; when planning actions to be taken, it isnecessary to take this sufficiently into account;

10 in order to be able to successfully conclude eachcommercial action, it must be carefully prepared in advance andfollowed professionally over its course;

11 the Business sector is managed on a daily basis;

12 in order to create a long term and profitablerelationship, accurate knowledge of and frequent contact with the customer is fundamental, even throughpersonal visits.


Over the past years, whilst continuing with its traditionalpolicy of supporting all business segments, Sanpaolo IMIhas progressively diversified its loan portfolio. Even if itconfirmed its commitment to support the principle Italianindustrial groups, also considering their highly importantrole to the nation in respect of employment, the Grouphas reduced its exposure toward some Italian and foreigngroups and, as a consequence, the level of concentration.The effect of the top 10 borrowers has dropped over thepast three years from 13.4% to 10.4%, while the ratio ofloans to Small and Medium Enterprises (SMEs) and tohouseholds has increased in absolute and percentageterms. This increase continued at Parent Bank level also in2002: in December loans to small and medium businessesreached 69.4% of the total loans granted to domesticcompanies, against 66.2% in December 2001.

Attention to Small and Medium Enterprises …The financial support to domestic SMEs is one of the mostcrucial strategic choices of the Bank’s business plan. Thisdirection has also been dictated by social motives as well ascommercial, in that SMEs represent the backbone of thecountry's industrial system, absorbing 98% of the totalbusiness population and almost 60% of the employmentrate. Furthermore, Italian SMEs are the most flexiblecomponents and, quite often, the most efficient of theentire domestic economic system: they have demonstratedto be better equipped to remain afloat in moments ofcrisis, such as the present-day reality.

... the models for rating for Small and Medium EnterprisesTo improve the offer of loans to SMEs, in terms ofexpanding the client base and improving interest ratesand the quality of loans, specific valuation models havebeen developed internally. These models are currently inuse by the functions in the Head Office (RiskManagement and Loan Granting) in support of theinquiries for loan granting which exceed the branchlimits. The trend toward internal models for ratingsdedicated to SMEs benefits from the advantage of the in-depth knowledge about the realities of local productionaccrued over the years by Sanpaolo and Banco di Napoli,and advanced methods of valuation, with the aim ofunderstanding the peculiarities of such realities in order

to support financial needs and plans for development,even over the medium / long term.

For Sanpaolo IMI this choice represents the possibility toimprove considerably the Banks’ skills in differentiating theexpected profitability of such operations on the basis of thequality and stability of its investment projects. Thus it isintended to hold the “cross benefit” mechanisms to withinthe SMEs portfolio and aim to evaluate the effectivecapacity for growth of the individual companies.

In light of the success obtained from utilizing the internalmodels at function level in the Head Office, the leadstructures of the Business centers and branches in theMilan Area have started up an experimental project aheadof the forecast complete decentralization of these modelsto the Business branches, supporting the delegation ofdecisions to the structure which has direct contact withthe business customer.

The intention of the programmed plan is to promote anew method of increasing loans to SMEs, through thealliance between the strong territorial roots of theSanpaolo and Banco di Napoli network and the increaseddecentralization of rating models. The plan also providesthe further refinement of internal models to evaluate smalland medium businesses in accordance with therequirements of the new Basel Capital Accord. This willalso lead to a reduction in the absorption of assetsrequired by regulations, producing better conditions forgranting loans and better interest rates and thereforecreating value for Bank shareholders, businessmen and forindustry in general.

Attention to the peculiarity of some business categoriesand to local reality

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BASEL II PROJECT

The Basel Capital Accord, established by the supervisory authorities of the G10 countries whomeet together as the Basel Committee on Banking Supervision of the Bank of International

Settlements, has since 1988, determined the international regulations for computing the minimumrequired capital which banks must hold in order to guarantee stability and efficiency in the

international financial system. At the moment a bank’s capital is calculated, according to such regulations, as a fixed percentage on the

total value of loans granted (8%), taking into account to a limited extent the risk profile of each loan. After a long series of meetings which commenced in 1999, in October 2002 the Basel Committee published

a proposal to radically modify the original Accord. The New Capital Accord (“Basel II”), intends to create amore rigid connection between capital and the risk profile of the banks' activities. The supervisory authoritiesidentified in the rating, that is in the analytical valuation on the creditworthiness of the applicants, themeasure through which the credit risk is quantified, thus managing to gauge the capital requirements on therisk profile of the applicants. For supervisory purposes, “Basel II” recognizes the minimum requirements for capital calculated using theofficial or model ratings which the bank uses internally to measure, control and manage credit risk. With thenew regulations, less sophisticated and smaller banks can, through the so called Standardized approach, utilizethe official ratings produced by specialized agencies, to determine regulatory capital. Instead, larger and moreadvanced banks will be stimulated to promote and/or consolidate the adoption of increasingly sophisticatedinternal systems to measure, manage and control risks, with the aim of assigning internal ratings to thedifferent loan applicants (Foundation and Advanced Internal Rating Based or IRB approaches). In 2002 the Bankformalized its intention to adopt the most advanced version of the New Capital Accord, through the use ofsophisticated techniques to measure and manage risk, to obtain advantages in terms of lower capitalrequirements according to its loan portfolio. The adoption of the “Basel II” Advanced IRB approach thereforerepresents a strategic project which is aimed at obtaining a competitive advantage in terms of less capitalconsumption to serve our customers efficiently and skillfully. In order to reap the strategic opportunitiesoffered by the new regulations, we have already prepared a plan for substantial investments within the“Basel II” project, which could involve resources of 35 million euro over the next three years. The mostsignificant measures can be briefly summarized as follows:1) the preparation and alignment of rating models in compliance with regulations;2) the preparation of an operative organizational structure and technical and computer support adequateto the historical detailed and homogeneous needs for data and for the software characteristics required; 3) the widest combination of relations with rating agencies, investment institutions and the market.In order to combine careful examination and control of the risks involved in granting loans and to offeran excellent service to businesses in terms of transparency and precision in loan applicationprocedures, Sanpaolo IMI has, for some years, anticipated in Italy the regulatory changes and

international best practices in its procedures for risk management.As already mentioned, Internal rating models have in fact been developed in a specific and

dedicated manner for both the Large Business and Small and Medium Enterprises segments.

( Credit lines to support Fiat side-line businessesWith respect to the peculiarity of local situations,particular attention is paid to supporting SMEs duringperiods of considerable economic difficulty. Among theinitiatives which characterized 2002, we are remindedof the setting up of a credit line to support small andmedium sub-alpine businesses in the FIAT side-line,with the aim of transforming short term credit linesinto long term lines.

Furthermore, specific measures were taken tosupport small businesses, such as issuing facilitatedcredit lines to finance recovery in production activitiesand urgent measures for regions in the South of Italybadly damaged by meteorological events inNovember 2002.

The ‘Quality Agriculture’ projectWithin the scope of initiatives for specific categories,we started a project known as “Quality Agriculture”,with the aim of promoting new business for agro-alimentary companies operating according to highstandards of quality. It is our intention also to extendthis proposal to small business. This new approach isconsistent with the change in market demand, which isdirected toward well constructed and diverse productsrequiring considerable investments.

Collaboration with the National Association of YoungAccountants and the Piedmont and Aosta FederfarmaWithin the scope of small businesses we have planned tocollaborate in 2003 with:

• the National Association of Young Accountants to jointlydevelop a series of activities - by establishing mixed workgroups - aimed at creating products and banking/financialservices for around 10,000 members of the 100 associatedunions and their clients;

• Federfarma, the Piedmont and Aosta Valley association ofpharmacists, with more than 1,500 members. Theagreement signed in 2002 through the Farmacia AmicaAssociation, allowed us to realize communication initiativesand meetings involving direct contact with our contact staff.

The

Imag

e Ba

nk

Basel seen from the river


Business seminars with entrepreneursDuring 2002 we aimed at improving our professionalrelations with our business customers through an exchangeof experiences. For this purpose mixed “business seminars”were organized, following two threads.The first was concentrated on sessions with businessentrepreneurs and managers from Piedmont, organizedand managed by the Sanpaolo and Unione Industrialetrainee divisions. For the purpose of open and constructivecommunication, the five models and role-playing, whichinvolved almost 100 industrialists and almost the samenumber of Sanpaolo professionals, revealed the importanceof maximum completeness, transparency and mutualexchange in the flow of information between businessesand banks in all stages of relations.Following an in-depth consideration on the impact of theintroduction of the New Basel Accord, we also organized aseries of meetings with businessmen and associations inthat category, with the aim of illustrating the new elementsarising from the Accord.A series of meetings were held in the majority of Italianregions, with the purpose of:

• overcoming the concerns of a possible rationing of loansto small and medium businesses and a consequentworsening in the conditions on offer;

• defining the nature of the rating models, the statisticaltools for evaluating the creditworthiness of the customerthat support the final decision to grant the loan, which isalways left to the manager;

• highlighting the strict correlation between the ratingassigned to the customer and the pricing of the loan.These ties represent an opportunity for small andmedium businesses to receive loans at “fair” conditions,in relation to the effective quality of each business, onthe basis of which interest will be defined.

Banks and companies project - access to creditResearch into improving customer relations and publicopinion affects not only the commercial strategy ofSanpaolo IMI, but is felt by the entire banking industry.Towards the end of 2002, the Italian Banking Associationlaunched a wide-ranging project to do with retailcustomers and businesses named “Banks and society”, the completion and implementation of which is forecast for 2003. With specific reference to the work in progressrelating to access to loans, in which we have been

particularly active, the objective to improve customerrelations, especially with domestic small and mediumbusinesses, has been researched through:

• greater transparency and access for outsiders to thevarious phases in the loans application process, for whicha Guide has been prepared for SMEs;

• the preparation of a tool to measure the timing of inquiryinto/awarding of a loan, allowing customers to comparethe efficiency of the banks to whom they may eventuallyapply for a loan.

Our commitment to exchangeand confrontation

The new internet version of the traditional remotebanking site was considerably expanded in 2002,known as LINKS Sanpaolo, with the aim to enrichthe range of services on offer, making access easierby extending the use of multichannels, improvingthe efficiency of the services provided.On the whole, Sanpaolo customers using thetelematic services are continually increasing and weare witnessing a gradual move from traditionalmethods (-46%) toward Internet banking (+207%).

At the same time there is a substantial expansionin the transactions or information provided overthe telematic channel and, especially on the web,where to date there is already a considerablevolume of collection and payment made bybusiness customers.Similarly, new telematic functions are continuallyreleased. The new operational areas referprincipally to taxation and foreign transactions:recent releases include F24WEB (electronicpayment of F24 tax returns), IBOS forInternational Cash Management and electronicsignature.The utilization of the Sanpaolo LINKS station,with all of its functions, has recently beenextended to former Banco di Napoli customers(around 2,000) and, among the forthcomingprojects, a single workstation is shortly to belaunched for all customers of the banking Group.The contents and functions of the showcase“sanpaoloimprese.com”, which has been activesince 2001, is constantly being enriched in orderto: provide companies and professionals withspecialized information and consultancy; promoteproducts and services, even extra-bankingservices useful for management of companies(such as treasury and management control andcommercial information); develop personalcontact with visitors and customers throughnewsletters and e-mail.

Some data relating to the performance of the“sanpaoloimprese.com” site at 2002 year end:

• total number of registered users: 6,000

• total subscribers to newsletters: 5,000

• page views: approximately 350,000 per month

The latest new feature of the site for 2003 is theEuropean Horizons channel, which aims to keepbusinesses informed in a timely and customized wayon opportunities in respect of investments, marketoutlets, calls for tenders, benefits within thecommunity, etc.Similar to remote banking, from 1 June 2003,“sanpaoloimprese.com” will become the referencesite also for business customers of the new SanpaoloBanco di Napoli.

Telematic services for business

LINKS Internet Solutions

Other Sanpaolo remote solutions

Customers of other banks banks utilizing remote solutions

Total customers utilizing telematic services

26,379

11,431

19,830

57,640

207%

-46%

5%

18%

No. Companies % changeon 12/01

Phot

oDisc

After efficient pre-merger operations, the merger byincorporation of Banco di Napoli (8,106 people) intoSanpaolo IMI at year end brought the totalheadcount of the Parent Bank to 28,036 (of which 278 employed abroad), a reduction of 973

in respect of 2001.From an employment contract perspective, 63.9% of the headcount is composed of professionals (-0.7% on 2001), 34.5% managers (+0.5% on 2001)and 1.6% directors (+0.1% on 2001).

73Parent Bank – Our Stakeholders72 Parent Bank – Our Stakeholders

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

We pay the highest attention to eachmember of staff, who represent“internal customers”, providing themwith support and information so thatthey can perform their best.

We want to constantly express valuesof ethical behavior, which areinterpreted in the actions and decisionsoriented toward impartiality, honestyethics and social responsibility.

We cultivate drive and innovation byfollowing operational proceduresaligned at best practice and consistentwith the needs of the business; wedevelop a sense of responsibilitythrough the objectives expected payingattention to future implications.

It is our intention to develop aharmonious and integrated socialsystem within the company which,values the identity and individualprofessional skills and supportsdevelopment.

We seek efficiency and the responsibleutilization of staff and pay attention toeach source of cost to ensure future growth.

Value in detail

Creation of value

Customerorientation

Integrity

VALUES

Commitment toexcellence


specific qualities


of resources

Directors

Managers

Professionals

TOTAL

2001 (29,009 employees)2002 (28,036 employees)

1.4

26.0

32.2

59.6

0.1

8.0

32.3

40.4

1.5

34.0

64.5

100

2001

BREAKDOWN OF EMPLOYEES BY CATEGORY (in percentages)

FemaleMale Total

1.5

25.7

31.0

58.2

0.1

8.8

32.9

41.8

1.6

34.5

63.9

100

2002FemaleMale Total

The people


A growth in the number of female employees shouldbe mentioned (+0.7% on 2001) which, at 11,697account for 41.8% of the total. A total of 2,481female employees are employed at management level(managers and directors).Average seniority within the company and theaverage age of the employees are correlated to theprofessional level.

2001 2002

Directors

Managers

Professionals

Data refers to employees with contracts in Italy (2001=28,664; 2002=27,758)

26.5

22.2

15.5

26.3

22.6

15.9

2001 2002

51.2

45.7

39.3

51.0

46.1

39.8

AVERAGE SENIORITY AVERAGE AGE

Graduate

Undergraduate

Higher education

Other

Data from 2002 relating to employees with contract in Italy (27,758)

230

226

2,196

18

7,102

285

3,342

61

11,593

2,705

5,768

79

18,921

2,990

20.8%

0.3%

68.2%

10.7%

Directors Managers TotalProfessionals

From an educational point of view, 20.8% of theworkforce have a degree and 68.5% have completedhigher education.

Corb

isCo

rbis

Presentation of the “Investment Policy” at Città della Scienza, Naples


People are the main craftsmen in generating tenablecompetitive benefits and, therefore are the source ofcreating value for the business: in Sanpaolo IMI thiselement has given us the strength to undertake awide ranging strategic course which gives value topeople, to the lines of business and to the Group,placing the “professionalism” of people and their“value to the company” in the center of the policiesand systems of managing and developing personnel.

The system of tasks Therefore, continuing a project which began in 2000,we have significantly innovated the system ofanalyzing skills to consolidate better the “distincttasks” of each stage in the business system with the“skills required by the staff”.The system we have developed uses advancetechnological support:

• a) to reveal and monitor the “professionalportfolio” and the “key tasks” capable ofsupporting the company’s objectives and thespecific business/macro areas of companyprocesses;

• to orient the action of valuation, establishing anintegrated platform for the “people management”system.

In 2002 the tasks for all personnel working inbranches and in the territorial areas of all the Networkbanks of the Group were identified, as well as for themajority of staff allocated in the centralized structureof the Parent Bank.

The system of incentivating and evaluating We want to make people aware of the generation ofvalue, to consider the aim of the business is to grow in terms of capital, or rather, to consider the bank asan investment.In keeping with this argument, in 2002 a new systemof incentivation and valuation of clerical staff andmanagement was implemented. Aligned to bestpractice, it integrates the evaluation of short termresults (split by business areas and central structureson the basis of specific variables and indicators) withthe evaluation of excellent examples of behavior (by different businesses and in relation toprofessionalism) to guarantee continuity of resultsover the long term.

Professional paths in the distribution networkThe definition of paths for the professional growthof branch personnel within the network wascompleted through the development of “Unitarianmaps” (to allow greater organizational flexibility)and specific on-line support was made available topersonnel management at the beginning of 2003.

Analyzing employees potential for developmentWe have redefined the criteria to identify highlypotential resources for promotion.Furthermore, a Group method based on five prospectshas been defined to evaluate nominations for thepromotion to Director:

• the role to be covered within the company’sorganization;

• the level of professional skills acquired;

• the managerial capacity of the nominee, particularlyin respect of strategic vision and leadershipqualities;

• the wealth of professional experience earned interms of number/complexity of the roles covered inthe past and the results achieved;

• the margin of future use determined on the basis ofpersonal reference and targeting the possible use ofthe resource in a role carrying greater/morecomplex responsibility.

Using new technologiesWe have invested in new technologies, developing a platform of e-learning which gives each employeeaccess to online training directly from his/her place of work.

Updating management systems to business objectivesLinked to the business requirements, we haverealigned the organizational model of the branch,redesigning the professional figure for the “householdmarket” (mass market) and analyzing ex ante (withinthe concept of a multi-disciplinary analysis) the effecton the plan of duties, the professional paths, trainingactivities, promotion and dynamics of labor cost, whileothers are still be studied.

The path to updating thepersonnel administration system

Efficiency to allow growth Continuing prior year activities to ensure future growth,we pay particular attention to the themes of restructuringthe workforce, labor costs, generational replacement andthe safeguarding of the wealth and skills of our resources.Within this line of action we have, on one hand allowed1,546 dismissals (also by offering dismissal incentives to1,104 resources) and, on the other hand, created 573 newposts for young people. This activity was realized with adrive consistent with the industrial plan and prudentmanagement which also weighs the advantages anddisadvantages in terms of average rates of skill.As far as the new positions are concerned, the percentage ofresources employed under a flexible contract is significantlyhigher than those employed under open-end contracts. Thisfigure highlights the importance that we place not only oncosts variable, but also on controlling the professional level ofour resources and their contribution to producing value, inorder to safeguard the investment in new resources.

Our attention to the needs of the customer, theefficiency of our business, the ever increasingimportance of professionalism in marketing activitiesand in services to the business has influenced thedistribution of the resources between the variousentities of the Parent Bank. With the merger of Banco di Napoli, personnelwithin the distribution structure comprise 79.4% ofthe total number of employees. On the other hand,19.4% of staff of the Parent Bank operate within themanagement structure of the Group and business

line of the Parent Bank and in the functions thatprovide support. A portion of the remaining 1.2% ofstaff are distributed around other areas within theGroup and the other portion are in professionalrequalification programs.

Action to improve efficientyand flexibility

Distribution structures79.4%

Structure governing the Group, Parent Bank

business lines, support functions

19.4%

Detached and re-qualified

1.2%

Open-end contracts

Fixed term contracts

Apprenticeships

Other

Foreign contracts

Total employed

19.72%

46.25%

28.62%

0.70%

4.71%

573

EMPLOYED 2002

Phot

oDisc


Directors

Managers

Professionals

Total average

Data source: Parent Bank pre-Banco di Napoli merger

on GAR on TAR

33.2%

13.6%

7.7%

10.6%

24.9%

12.0%

7.2%

9.5%

VARIABLE AND GLOBAL RATIOS

TOTAL TRAINING DAYS

It is our policy to increase the ratio of variablecomponents to allow employees to contribute more in achieving Company and Group objectives and toprovide greater flexibility in the global cost of suchcomponents.In order to involve as many people as possible in theobjectives of the industrial plan, our company alsoprovides bonuses in the form of company shares.

In 2002 the Board of Directors approved the firststock granting of Sanpaolo IMI shares to all ParentBank staff employed at 27 June 2002. This voluntary incentive, involved 14,427 people,equal to 72.5% of those entitled to participate.In order to strengthen the sense of belonging to thecompany and to show the importance we place onindividual efforts and the results of the company, wehave again issued bonus shares to our employees in2003. As far as management is concerned, ourcompany already issued bonus shares in 1999 andthe shareholders meeting of 30 April 2002empowered the Board of Directors to issue newbonus shares in favor of Group directors. In this respect, on 17 December 2002 the Board ofDirectors launched a new stock option plan involving291 directors of the Group, of which 214 fromwithin the Parent Bank. This plan is characterized by the fact that a part ofthe entitlements assigned to the top management isconditional upon obtaining in 2003 the strategicobjectives of ROE and Group cost/income.

We firmly believe that competitive advantage is theoutcome of an excellent organization based on open,flexible, creative professionalism.Our efforts are bent on implementing a bank modelcomposed of a network of competent, motivated peoplecapable of following precise objectives and equipped withpowerful working autonomy. Our objective is to developprofessionalism in order to create value.

Investment in trainingIn the context of human capital development, our trainingpolicy represents a significant moment within the broaderprocess of investing in people. The trend over the past fiveyears continued in 2002 when we further increased theaverage number of days and hours per person spent ontraining. Our training activities are designed and realizedconsistently with the individual needs for development, withthe requirements of the sector, with the company’s plans fordevelopment and are based on three macro axes:

• development of specialized knowledge and conduct, inline with the contents of the “system of duties”. Thismethod of training refers to training programs andcourses (basic and specialized) according to the differentfamilies and professional figures, as well as “customized”training connected to specific requirements expressed byeach area of business or by head office functions. According to particular needs, we also provide thepossibility to attend inter-company specialization courses,organized and held externally (consultancy firms,universities, etc.);

• supporting the organizational and commercialdevelopment of the bank in order to provide all employeeswith the knowledge and instruments necessary to faceand successfully manage changes within the company.This activity is composed of seminars and participation inspecialized courses planned in correspondence with theactual development of change management programs;

• supporting management policies and activities and

Investment in the developmentand valuation of personnel

Total Parent Bank post mergerParent Bank pre merger

2001 2002

150,000

120,000

90,000

60,000

30,000

0

50

40

30

20

10

0

AVERAGE PER HEAD TRAINING HOURS

2001 2002

135,558

98,014

140,356

102,370

Flexibility and efficient wagesOur activities to increase the level oforganizational/managerial efficiency and flexibility areaccompanied by a system of remuneration based onmerit, which rewards professionalism according to marketvalue and the commitment of the employee in achievingthe objectives of performance.In the context of the strategy to maintain costs in respectof gross pay before extraordinary and contractualphenomena, the pre-merger figures for the Parent Bankshow the average ratio of variable components to be10.6% on gross annual remuneration (GAR) and 9.5%on total annual remuneration (TAR).It is worth highlighting, as already described earlier, that all the resources are involved in incentive plans tiedto achieving results (individual and/or team) and levels ofgood conduct. This incentive model will be extended to the colleaguesin the former Banco di Napoli during 2003. Other additional instruments forming variables inremuneration are also applied: a lump sum payment andbonus for company productivity.

Total Parent Bank post mergerParent Bank pre merger

35.1 36.8 37.9 39.1

Andr

ea Po

lato


Internal training (63,578 days within working hours)involved around 500 members of highly qualifiedprofessional staff, bringing the percentage of days spenttraining by this category to 59%.We made use of 140 tutors for long-distance training.We prepared specific training programs to increase theefficiency of internal teachers and tutors.

The total efforts of this investment contributed to increasingthe average rate of skill of our resources: an increase of 22%over two years for branch employees (Parent Bank before themerger with Banco di Napoli).Even if significant, the existing level of skill is not yet in linewith the “maximum required” and our programmedactivities are aimed at bringing the professional level to thetarget of excellency.The organizational development and constant research toincrease levels of efficiency in working processes, determinesthe need for professional reconversion. We have developed atraining process to provide staff with an easy introductioninto the reality of working in our branches, which comprisesa training course (composed of lectures and support in abranch) and one or more technical/professionals on site inthe branch. In 2002 143 employees were assigned tobranches.

The exploitation of newly employed staffOur attention to valuating personnel provided considerableflexibility in moving newly employed staff fromtransactions/back office to direct contact with customers or tospecialized support roles. As a matter of fact, staff dedicated totransactions/back office fell from 93% to 57%, with the 2005target for utilizing newly employed staff (in 2000) in this typeof activity set at 20%.

Managing by community We have followed a path along which our policies for thedevelopment of staff places emphasis on the segments ofthe population which, together with the family andprofessional figures, are important to the company overboth the short term and the medium/long term.The terminology we use for this segment of the population

is “community”. This “community” allows us to aimspecifically towards developing and concentrating the bestof our investments, managing to constantly protect it.Another peculiarity regarding the “communitymanagement” is the possibility of easily integrating it withcurrent management policies, becoming a factor ofintegration and aggregation at Group level.The four communities currently being managed are: newlyemployed, promising young employees, promisingemployees and management.

The “newly employed community” includes all thosepersonnel with seniority within the company of between 0and 24 months. The objective is to accompany theintroductory phase in order to increase knowledge of theGroup, create a sense of belonging, bring out the potentialof each employee in the direction of the subsequentprofessional course. The route to management level is constructed of individualinterviews and small group meetings (max. 12 participants).The induction, introductory and motivation interviewsinitiate a mechanism of direct confrontation from whichimpressions, considerations and motivations emerge, alsoto overcome any criticisms.The meetings held to verify and understand professionaldirection represent a further moment in evaluating theintroduction process.At the end of 2002 the community placed 957 newemployees within the Parent Bank.

The “Community of promising young employees”included staff of normally not more than 32 years of age,with average to high performance and skills. The objective is to identify, manage and develop young

BREAKDOWN OF TRAINING DAYS BY TYPE

External courses2%

Foreign languages3%

Internal Training62%

Online33%

development of key resources and management, throughthe preparation of ad hoc participation to support andassist the path of growth and/or training of thoseinterested.

The use of new technologies, developing a platform of e-learning which gives each employee access to onlinetraining directly from his/her place of work: more than33,000 days of training have been provided through this

channel (pre-merger Parent Bank data).Our investment in human resources is also shown by thepossibilities offered for self-development: the totalnumber of days spent training outside of working hourstotaled 8,200, of which 3,200 were performed by Bancodi Napoli employees.

Retail e Small business Directors

Advisor and Managers for retail customers

Managers for small business customers

Transactional staff

Business directors

Commercial staff

Back office staff

0 20 40 60 80

67,5

55,5

60,8

26,3

99,0

61,5

19,5

100

DISTRIBUTION OF HOURS OF TRAINING (PRE-MERGER PARENT BANK DATA)Professionals in the Network (average per head)

2000

NEWLY EMPLOYED STAFF ACTIVITIES

2002 Target 2005

93%

1% 2% 4%

57%

6% 8%

29%

60%

5%15%

20%

Sale and advisory activity to retail and small business customersSale and advisory activity to business customersTransactions and back officeSpecialist support

Cont

rast

o

Pre-merger data. Reference: 102,970 days


staff with high potential, which can cover skilful andcomplex roles. The route to management level is constructed of an initialreport showing medium/high skills and performances,which then proceeds to a “Meeting for orientation anddevelopment”, focused on empowerment throughsimulations and exercises in which the participants canput to use the skills acquired and reveal the possible areasfor personal development. It is concluded with a trainingprogram which defines an individual improvement plan.At the end of 2002 the community placed 316 promisingyoung employees within the Parent Bank.

The “Community of promising employees” is composedof staff over 33 years of age.The objective is to identify, manage and evaluate staffwith high potential in order to create a reservoir to covermanagement roles within the Group.The potential of staff is evaluated on two axis of reference:the possession of methods-skills as an essentialrequirement for professional development and the level ofskills relating to the targeted managerial profile.In order to develop the potential synergistically andconsistently, we have identified a moment for selection bythe direct head, a moment for self evaluation in order toallow the employee to present himself/herself with apersonal description of work experience, a group workproject which will allow the observation and developmentof some managerial skills. Lastly an evaluation programaimed at introducing accelerated professional routes.At the end of 2002 the community placed 284 promisingemployees within the Parent Bank.

The “management community”: the objectives are todirect behavior toward strategic and organizationallogistics of the Group for the effective integration ofbusiness, emphasizing the opportunities for transversaldevelopment.Training activities cover a number of areas:

• a basic program aimed to train managers in thebusiness and organizational context of Sanpaolo IMI;

• training to integrate and strengthen skills through theacquisition of managerial methods and tools;

• opportunities to compare and focus on currentthemes;

• personalized training.

The method for managing these communities is currentlybeing extended to include all Group companies.

The evolution of a careerThe method for managing these communities iscurrently being extended to include all Groupcompanies. Our policy of awarding bonuses on amerit basis is evident in a dynamic of careers basedon “skills/performance and results over aperiod/potential development”.In 2002, 1,075 people benefited from careerpromotions.

Other(25,745)

92.8%

Newly employed3.4%Young employees

Promising1.1%

Directors1.6%

Communities (2,013)7.2%

EmployeesPromising1%

Degree (924)46%

Higher education (1,088)54%

Men (1,111)55%

Women (901)45%

CorporateCenter (795)

40%

Branch Network (1,217)

60%

Men Women

Promoted to director

Promoted to upper management

Promoted to management

TOTAL

62

467

270

799

4

114

158

276

66

581

428

1,075

Total

In order to develop a sense of belonging, our companyhas for many years, offered a system of benefits whichcan assume a considerable economic value:

Company benefits in favor of employeesCompany regulations provide numerous forms of contribution:

• supplementary pension funds, replenished byminimum company contributions equal to 3% ofthe base salary;

• relief funds in favor of employees in retirement andin service, which can be extended by the latter, toimmediate members of the family;

• insurance policies for professional and private injury;

• educational grants and university scholarships foremployees and their children who attend junior orhigh schools or university;

• annual benefits for spouses and each child underthe burden of the employee, afflicted by seriousphysical or mental illness.

Preferential terms for employeesWe offer a vast range of easy term loans to employees:

• mortgages for the purchase of first or second homes;

• loans and overdrafts for flexibility in cash;

• facilitated loans for disabled employees;

• extension of legal provisions in relation to advanceson employee severance indemnities.

Company social clubThe company social club operates nationallydirectly and/or through de-centralized structures.In particular, in addition to a vast range ofagreements, the social club offers a choice ofactivities nationally (eg. tourism, summer campsfor employees’ children, children’s summer holidaycenters with recreational and sporting activities,including daily transport for employees’ childrenbetween the ages of 6 and 14 years) and locally(eg. day trips, visits to exhibitions and museums).

Furthermore, all directors receive a personalcomputer on free loan and a limited number alsohave use of a company car.

The sistem of providing benefits to support loyalty

PROFESSIONAL COMMUNITIES DATA

Laur

a Ro

nchi


The role of internal communicationInternal communications within Sanpaolo IMI arefundamental in allowing employees to participate fully inthe working life of the company. It provides anopportunity for multi-directional relations aimed atcirculating information and knowledge, it facilitatesinterpersonal collaboration, it stimulates a sense ofbelonging and, naturally, provides everyone with theconcrete support to perform professionally. We are fully aware that in order to achieve this objective,internal communication must express the fundamentalvalues which are impressed on our company and which,through the actions of each member of staff, are manifestexternally. Internal communication inspired by thesecriteria requires constant attention in respect of thediverse professional and social cultures within a nationallywidespread, internationally complex Group. Within a general and permanent context, the processes ofintegration currently taking place between the bankingrealities characterized by strong traditions, identity andterritorial roots are also added to this phase of evolution ofSanpaolo IMI. Arising from this, internal communicationhas the task of “facilitator” in spreading and sharing acommon business culture, capable of constructing astrong regard in respect of its peculiarity.

Facilities and toolsIn 2002 our company established a specific facility forInternal Communication, with the aim of coordinating andproviding support to the different company functions forthe development of communications, with thecollaboration of the specialized functions of the CorporateCenter, which protect the company’s image andtechnologies. The agency also directly manages theGroup’s most significant activities.In order to operate accurately and efficiently, internalcommunication requires a variety of tools and technologiesable to satisfy the needs for timing, access and utilizationwhich the business requires.For this purpose, the Sanpaolo IMI Group utilizes avariety of communication tools destined to satisfy thespecific requirements according to the contents, endusers and specific context of the contents (house organ,internal magazine which celebrated 7 years ofpublication in 2002; news sheets, issued by companydepartments providing news and updates on activities;teleconferences, meetings, intranet sites managed by

specific company structures to provide support andinformation on professional activities; etc.) Towards the end of 2002 a project was started to realize anintranet site for internal communications, aimed initially atstaff within the Parent Bank. The site started in June 2003.

Projects under wayIn the second half of 2002 a wider project to develop andintegrate the system of internal communications was started.The project began from the recognition and analysis ofthe needs to communicate and then proceeded informulating proposals to rationalize existing instrumentsand to eventually establish new activities aimed atincreasing the efficiency and accuracy of thecommunication processes; this project also foresees theadoption of ways to verify the efficiency of the actioncarried out, through the use of adequate instruments anda specific method of observation. During the analysis in the last quarter of the year, anappraisal was made of the quality of the organizationalclimate involving a sample of around 600 people,represented by the diverse realities of the Group, utilizingthe Focus Group method handled by externalprofessionals (or rather semi-structured meetings in whichissues relating to existing and forecast systems ofcommunications were discussed).The value and significance of the communications are acritical factor for the daily business of the company andthe personnel working therein. Sanpaolo IMI thereforebelieves it is important to promote the development andvaluation of the skills of communication of its staff,commencing from those that cover the various positionsof responsibility and coordination. For this purpose, aspecific training program is planned, destined for branchmanagers and supervisors of operating units.

Communication to employees

Our company fully and unconditionally guarantees its workersall the rights and entitlements legally recognized by westerncountries. We have always been attentive that our personnelare made fully aware of such rights and entitlements and thatthey are rigorously applied within the company. The commitment of the Bank has always been aimed, evenbeyond the formal guarantees, at effectively achieving theobjectives of equal opportunity employment in respect of itsfemale employees, disabled workers, the protection of minorityinterests and supporting voluntary workers.

Relations with Trade UnionsThe rate of employee trade union membership is 75%,which is in line with the national average for this sector.Company rules on trade union relations guarantees the wideapplication of comparison and information to the tradeunion organizations.The renewed company contract, signed on 21 May 2001,included ample space in respect of health, security, equalopportunities, with renewal and development of the mixedBusiness Commissions - Unions on Security and EqualOpportunities and a provision for introducing a EuropeanBusiness Committee at Parent Bank level. In respect of thelatter initiative, in 2002 specific training programs financedby the European Commission were performed.In 2002 the Executive Labor Contracts were signed inrelation to the merger of Banco di Napoli and BancaCardine with Sanpaolo IMI, which specified the clausesaimed at limiting the occupational terms, introducingguarantees for territorial turnover, professionalreconversion and requalification and at identifying themoments for “ad hoc” intervention by trade unionsbefore each reorganization action.

Working relationshipThe company regulations in respect of employment constituteone of the most articulate contracts in the entire sector andoffers employees protection and guarantees significantly betterthan those offered by the law.By agreeing to renew the integrated company contract,regulations in respect of leave of absence to assist children, incases of severe illness and for justifiable personal reasons, havebeen greatly expanded and are considerably better than thoseprovided for by law 53/2000.In addition, in case of the death of an employee, companyregulations are in favor of offering employment to theremaining spouse or child.

In relation to disputes with employees, there is a tradition ofminor conflict in respect mainly of economic retribution andpromotion.

Protected categoriesOf our total number of employees, 1,188 belong to aprotected category.On that issue, procedures have been taken to ensure thatlegal requirements for employment of this category havebeen fully respected. As a matter of fact, specificagreements have been made nationally and with theprovinces of Turin and Milan for the employment of stafffrom this category.

Industrial relations

SENSIBILITY TOWARD THE ETHNICINTEGRATION OF INTER-ETHIC CULTURE

Sanpaolo IMI has complied fully with the Almaterraproject, promoted by the association of the samename for inter-ethnic cultural integration and by theTurin City Council.This project, aimed at promoting the employment of young female foreigners with higher education or a degree in education, has developed throughassignment of 7 scholarships supported by the CityCouncil from regional financing from the EuropeanUnion and integrated with a contribution issued bythe Bank for apprenticeship. After the trainingperiod, all those involved were employed.

(

Disabled

Orphans, Widows, Refugees:

848

340


Historically and statistically, the banking activity is amongthose at least risk. Nevertheless, even in this form ofbusiness critical areas can be found, mainly recognized infour types:

• the ergonomics of the workplace (furniture and fittingsand equipment);

• climatic and environmental exposure (noise, light,temperature, humidity, suitability of the officeenvironment);

• mobility (accidents during transfers - journey betweenhome and work and vice versa);

• management of emergency facilities (fire prevention and firstaid).

The number of accidents in Sanpaolo last year, confirm thefollowing: 183 events based on 19,658 people. Of which, 111(61%) are due to mobility and 72 (39%) to the workingenvironment. Since the data relating to accidents in Banco diNapoli are held by each operating point, no detailedinformation is available at present.

The systemThe health and safety of employees is regulated by complexregulations, which we are wholly committed to complying to.We believe that the standard regulations represent a startingpoint, not the point of arrival, to ensure the maximum level ofwell being for all of our employees. Since health and safety issues are faced in each phase of ourworking activity, we can only be systematic in theirmanagement. For this reason, we have realized articulatedprocedures which identify the precise responsibilities andadequate resources. In fact, after the enactment of D.Lgs626 on “health and safety in the working environment”,since 1994 our company has set up a structure composed ofinternal experts, assisted by specialized external consultantswho were already part of a previous commission (since1987). The issues upon which this structure operates cover avast range of problems, among which: the ergonomics ofthe workplace, machinery and equipment, technologicalplant, adequacy of the workplace, fire prevention and firstaid, prevention of criminal activity. It is also its responsibility toupdate and integrate the operating structures (technical andbuilding) and company organization to conform to currentlegislation.In accordance with the provisions of D.Lgs 626/94, eachoperating point has been supplied with a safety plan toensure rapid and safe evacuation of the workforce from thebuildings.Furthermore, since 1991, immediately after approval of EECdirective 270/1990 in relation to video terminals, employees

may request periodical visits to opticians and/orphysiotherapists, with examination of anonymous collectivedata from an epidemic view point. The possibility to undergo such visits voluntarily, has also beenextended to those employees which are not legally recognizedas “video terminal operators”.

Multimedia trainingParticular attention has been paid to the training of andinformation provided to employees in respect of health andsafety: in accordance with the law, a CD Rom is created fortraining. We are currently preparing a version of on-linetraining available to all employees and a specific course foremployees which utilize video terminals.

Some specific projectsSanpaolo has paid greater attention to risks involving thehealth and safety of its employees when compared to legalrequirements. In this respect, we would like to highlight:

• Anti-smoking campaignThe knowledge of the risks involved from the presenceof smoke in closed environments has incouraged us toperform an anti-smoking campaign, the strength ofwhich was banning smoke for all employees in theworkplace from 1998, requesting all visitors to refrainfrom smoking and the distribution to all employees of apamphlet explaining the risks of smoking.

• WorkplacesConsidering the necessity to operate in compliance withrecent criteria on ergonomics in the workplace, we haveadopted types/positioning of furniture for all newlyconstructed/reconstructed branches and/or central officeswhich involve the following use of space:

SafetyTo provide adequate protection from physical risksinvolving the exposure of employees and customers tocriminal acts during banking activities, we have created aspecific structure, the Security Operating Unit, with thetask of identifying and taking the necessary measures toensure security (plant and norms).

MethodsDecisions are made and agreed upon by a mixed technicalcommittee composed of different company functions andunions. In order to evaluate the suitability of a securitymeasure in respect of the most common risk, that ofrobbery, an internal procedure has been developed whichanalyses and quantifies the probability of such an act,taking into account numerous factors which influencesuch phenomena. Based on the results of such analysis, the measures tostrengthen security are applied, with the double aim ofguaranteeing adequate protection to the branch andproviding the best form of investment and organization.The methods for evaluating the risks of robbery currentlyused by Sanpaolo will be extended to the former Banco diNapoli network.

Regulations and trainingAs far as regulations are concerned, a specific documenthas been prepared and is constantly updated in respect ofthe “methods of behavior for protecting people andassets”. This document is also available online.Furthermore, whilst on the subject of security, trainingcourses have been held and attended by more than 6,000people over the past two years.

ResultsThe work performed to date has provided us with one ofthe most secure banks in respect of the average for thesector.

Security

Consultancy position/cash desk

Cash desk counter

Back office/central office

10.9

8.9

11.5

Space occupied (m2)Type of place Robbery- in 2002- in 2001

Theft- in 2002- in 2001

Parent Bank

after the merger

Banking

system

5.05.6

0.30.2

8.37.8

0.70.6

NUMBER OF CRIMINAL EVENTS PER 100 BRANCHES Phot

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It is our intention to guarantee overthe medium-long term period,adequate remuneration in the capitalinvested by shareholders, through the distribution of dividends and with the valuation of shares on thestock exchange.

We believe that creating interest forour customers with the greatest spiritof service, is not only an essentialcondition for the growth of the Bank,but it is also one of the premises forincreasing the value of ourshareholders’ capital.

We must ensure that the Bank’sadministration is constantlycharacterized by honesty, correctnessand transparency.

We have set ambitious strategic,profitability and performanceobjectives, in line with European bestlevels, developing a sense ofresponsibility in everyone in respect of achieving these aims.

We want to treat each shareholderwith the same respect andconsideration that we reserve for the large investor.

We are aware that the capital of thebank is represented by the resourcesof our shareholders and that it is ourprecise duty to utilize such resourceswith respect, because their futuredepends on our care and attention.

ShareholdersCreation of value

Customerorientation

Integrity

VALUES



specific qualities


of resources

The share capital of Sanpaolo IMI is composed of1,837 million shares, of which 1,449 million ordinaryshares and 388 privileged shares. The introduction of privileged shares, which to dateare held by the three Foundations listed at thebeginning of the table below, can be traced to therealization of the project to integrate the Sanpaoloand Cardine Groups, within the scope of whichCompagnia di San Paolo on one side, and FondazioniCassa di Risparmio di Padova e Rovigo and Cassa diRisparmio di Bologna on the other side, chose, on thebasis of art. 28, subsection 3, lett. a) of D.Lgs n.153/99, - as in the letter of intent - to convert theexcess ordinary shares held into privileged shares for atotal of 15% of the capital of the Bank post merger.With this conversion, the Foundations have, for the

Compagnia di San Paolo

Fondazione CR Padova e Rovigo

Fondazione CR Bologna

Santander Central Hispano

Giovanni Agnelli e C.

Deutsche Bank

Monte Paschi di Siena

Credito Emiliano Holding

Fondazione Cariplo

Caisse de Depots et Consignations

Templeton Global Advisers LTD

Società Reale Mutua Assicurazioni

Ente Cassa di Risparmio di Firenze

Fondazione Cassa di Risp. di Venezia

14.48

10.80

7.69

6.37

3.83

3.68

2.04

1.96

1.74

1.70

1.54

1.54

1.53

1.47

7.50

4.38

3.12

8.08

4.86

4.67

2.59

2.49

2.21

2.16

1.95

1.95

1.94

1.87

Situation updated to May 2003.

% on share capital

PRINCIPAL SHAREHOLDERS (in %)

ordinarytotal

corresponding quota, waived their voting rights inordinary shareholders meetings: as a matter of fact,the privileged shares maintain the voting rights onlyin Extraordinary shareholders’ meetings. In light ofthis waiver, the “privilege” consists of pre-emption incase of reimbursement of capital and of the right tothe distribution of net profit from the financialstatements at 5% of the nominal value of the share,as well as the right to accumulation of the dividendnot collected with that matured in the twosubsequent financial years. At the moment there are no other limitations otherthan the privileged shares. The aforementioned Foundatios have also agreed toplace the ordinary shares in management to acompany specifically set up for such purpose for a

Phot

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period of 10 years (Fondaco SGR S.p.A.). This company was established with a technical partner,Ersel Finanziaria, and before commencing operations itis still waiting to complete regulatory requirements.

The presence of the Foundations, which are part ofour history, in the shareholdings testify the strong tiesbetween the banks in the Group and the respectivereference territories. Furthermore, the widegeographical distribution of the areas coveredrepresent additional guarantee in the aim of the Bankto enact strategies able to, on the one side, reconcilenational and international objectives and, on theother side, the direct needs emerging locally.As bearers of the essentially non-profit visionconnected to their institutional role, the Foundationsalso form an important reference point for theknowledge of this reality and for the definition, withinthe business policies of the Bank, of choicescharacterized by the best equilibrium betweenbusiness and social responsibility.

The break down of the shareholders by categoryreveals that almost 76% of the share capital is in the hands of institutional investors and privateentrepreneurs.Within the scope of the widespread shareholding initiative for employees promoted in June 2002,14,427 Sanpaolo IMI employees requested theassignement of ordinary shares in the company.

Consultation agreements exist between some of theprincipal shareholders, who hold a total of 16.2% ofthe ordinary capital (extracts from the agreements areavailable on the Internet site www.sanpaoloimi.com).

From a geographical point of view, 59% of theordinary capital is held by Italians, while the remaining41% is held by foreign shareholders, the majority ofwhich are European (32.5%).

The Sanpaolo IMI shares are dealt with in New York asAmerican Depositary Shares (ADSs), sponsored by JPMorgan as depositary bank, at a ratio of 2 ordinaryshares/1 ADS. The price in ADS shares reflects not onlythe trend in Sanpaolo IMI shares, but also the trend inthe Euro/$ exchange rate. At the end of 2002, thenumber of registered shareholders totaled14,245,636 ADS.

Italy59%

Other4%

GEOGRAPHICAL DISTRIBUTION OF ORDINARY CAPITAL

Benelux4%

Spain and Portugal8%

France6%

UK9%

Germany5%United States

5%

BREAKDOWN OF ORDINARY CAPITAL

Institutional investors and private entrepreneurs(n° 4,307)75.91%

- Compagnia di San Paolo (7.50%)- Fondazione CR Padova e Rovigo (4.38%)- Fondazione CR in Bologna (3.12%)Individuals

(164,526)9.09%

The Executive Commitee Room in the piazza San Carlo office, Turin


We believe that the best way to guarantee shareholders’maximum remuneration in the long term begins with the adoption of a strategic plan oriented towards thecreation of value. In this sense the Group has confirmed,in its 2003-2005 Strategic Plan, the priority of thedomestic banking market and the intention toconsolidate the position achieved in services tohouseholds and companies, especially small- andmedium-sized companies.

Altogether, the Strategic Plan, starting from uncertainmarket conditions, sets itself ambitious aims, as proven bythe profitability and performance ratios, but which can beconsidered achievable through the actions envisaged.These actions follow five directions.

Thanks also to the economic results achieved in time, theGroup is distinguished by the fact that it has always adopted agenerous income distribution policy (the pay-out ratio in 2002was 62% of the consolidated income), simultaneously payingparticular attention to maintaining a solid capital endowment(the Core Tier 1 ratio net of preferred shares and Total ratiotargets are 6% and 10% respectively). The company’seconomic-financial solidity is proven by the ratings attributedto Sanpaolo IMI.

Several indicators of particular importance to shareholdersand more closely linked with the strategic plan are:

• Shreholders’ equity per share performance: this is anindicator that highlights the importance of the bank’ssolidity, taking account of the capital performance.Despite the adverse condition of the markets and thenegative influences on statements of income, theindicator highlights a minimum change of -3.5%13 ;

• Dividend yield (dividend/average annual price): alongsidethe share performance, this represents the averageannual yield of the investment in shares. In 2002 it wasequal to 3.18%, just under the average of the last threeyears (3.5%);

• 2005 RoE target 2005, which identifies a three-yeartarget for the total profitability of capital. This has been set at 15% compared with the 8.4%achieved in 2002;

• Three-year CAGR of earnings per share, which measuresthe net income target change in the medium/long term:for the 2003-2005 three-year period at +25.7%;

• Cost/income ratio: this is equivalent to the ratio betweentotal costs and revenues and constitutes a very popularsynthetic indicator of efficiency. The 2005 target isequivalent to 54.6% compared with the 65.1%registered in 2002;

• NPLs ratio: this indicates the ratio of net nonperforming loans/net loans to customers. For 2002 it isequal to 1.0%. Used as an indicator of credit quality, its

slightness places Sanpaolo IMI at levels of absoluteexcellence at European level.

The performance of the Sanpaolo IMI shares, whichsuffered a decline of 48.5% in 2002, is strongly influencedby the total performance of the markets and by a highnumber of variables outside the Company. In view of thecreation of medium-/long-term value for shareholders, theperformance of the Sanpaolo IMI share compared with theMib Bancario is important: this change makes it possible tohighlight the shift attributable to the specific sharecompared with those of the other companies in the samesector quoted in the same market, and therefore subject tothe same exogenous phenomena. The indicator isequivalent to -29.1%: the penalization of the share in2002 can be traced back in particular to the related majorexposure of the Group results to the turbulence of thestock market, in relation to the leading position held in theasset management sector as well as to the high revenuecommission component. During 2003, the Sanpaolo IMI share registered an amplypositive trend, +36.3% at 11 June, with a relatedoverperformance compared with the Mib Bancario (up16.3 in the same period) by more than 17%.

Strategic Plan 2003-2005

1. Focus on “Core Retail Banking Assets”

• Continuation of current strategy

• Innovative branch distribution model

• Growth of revenues in a challengingenvironment

2. Cost control

• Human resources

• Optimization of the IT platform

• Logistics/buying process

4. Portfolio Management

• Active and efficient management of the portfolio of shareholdings

3. Focus on profitability for other activities

• Increasing profitability of business portfolio

• Strengthening of the Group’s presence inhigh growth business

5. Commitment to market communication

• Update on strategic guidelines and achievements

Fitch

Moody’s Investors Service

Standard & Poor’s

F1+

P-1

A-1

AA-

Aa3

A+

SANPAOLO IMI DEBT RATINGS

Medium-/long-term debt

Short-term debt

Corb

is

13. The shareholders’ equity per share was 5.74 euro at the end of 2002.


Among the Group’s priorities, the pursuit ofcorporate governance models in line with the bestinternational standards has been confirmed.The Group’s level of excellence is also proven by theresults of the “Corporate Governance Ranking”research carried out by the DWS in conjunctionwith Deminor Rating, on the Dow Jones STOXX 50index. The research, focused on corporategovernance commitment, information transparency,

rights and duties of shareholders, lack of poisonpills against takeovers and Board functioning andstructure, sees Sanpaolo IMI, the leading Italianfinancial institution, in 12th place compared with21st place last year. For full details refer to theAnnual Report and the website sanpaoloimi.com,where a copy of the governance system report isavailable, or, for a simplified version, to the specificsection of this document.

Corporate Governance

The Shareholders’ Meeting was held three timesduring 2002: the first on 5 March to approve themerger with Cardine, the second on 30 April for theapproval of the financial statements and the last on 25November for the merger with Banco di Napoli. Anaverage 54.2% of the capital voted at the first twomeetings while 62.50% of the share capital (ordinaryand priviledged shares) voted at the ExtraordinaryMeeting in November. Within the context of these percentages, in additionto the presence of the shareholders complying withthe advisory agreement or subscribers to the letter of intent mentioned, as well as the other bankingFoundations - an average of 13.8% of participantsincluded a consistent number of institutionalinvestors. The Bank did not deem it necessary toproceed to specific initiatives designed to amend thepercentage ceilings provided for by current regulationfor actions and prerogatives to safeguard minorities.No provision has been made for a presence on theBoard of Directors nominated exclusively by minorityshareholders, the latter being sufficiently representedon the Board of Statutory Auditors, which has aninfluential effect on the management of the Companyand currently includes two Statutory Auditorsnominated by the same (out of a total of 5 members).The vote by correspondence is not currently providedfor by the Company’s Articles of Association.

Partecipation by shareholdersin business governance

Transparency and direct communication to shareholders,institutional investors and the financial community on thewhole is ensured and managed by Investor Relations. Thisdepartment guarantees prompt illustration of activity,strategies and Group’s results, in full observance of theregulation on price sensitive information. Communicationto the public is inspired by criteria of trust, clarity andinformative continuity. Particularly noteworthy is the factthat the Bank communicates the results on a quarterlybasis: promptness is proven by the fact that, in 2002, anaverage of 27 working days went by between the end ofthe reference quarter and communication to the market.The results communicated are published in accordancewith the accounting standards in force in Italy. However,an annual report published in accordance with Americanstandards (US Generally Accepted Accounting Principles),20-F, is available on paper by request and can be viewedon the Sanpaolo IMI website.

In 2002, the activity of Investor Relations was expressed inthe form of:

• 4 roadshow in the main European financial market places;

• 5 conference call;

• 245 meetings with investors, 44% of which with theparticipation of top management.

Communication to the financial community - analysts,institutional investors, rating agencies - occurs on a two-way basis: that already illustrated is flanked by an intenseincoming communication activity. Top management isregularly informed of market moods, the result ofmeetings and their effectiveness, by means of a series ofinstruments, including the fundamentally importantmonitoring of market expectations with regard to shareperformance. To this end, using the contribution of morethan 30 brokers, the consensus on the figures of thestatement of income and target price

are constantly updated. In addition to direct meetings, animportant instrument for communication with thefinancial community and retail investors, is provided bythe website (www.sanpaoloimi.com). In the InvestorRelations section news on the profile of the Group andthe Bank’s shareholders, economic-financial informationon the Group (financial statements, half year reports andquarterly reports as well as summary tables), pressreleases issued by the Company and the annual calendarof relevant corporate events, are promptly and clearlyprovided. The website also provides news of periodicalmeetings organized with financial analysts, makingavailable a copy of the documentation distributed. Morethan 2,000 messages were sent to the IR department e-mail address in 2002. The promptness with which the requests of our investorswere answered contributed to making it one of the mostwidely appreciated sites in the Italian market (the mostcomplete according to research performed by thecompany Investor-relations.it, November 2002).

The next steps envisage:

• an increase in the frequency of meetings with investors,especially an intensification of the roadshow activity inthe various European and American market places. In2002, 8 European market places were visited by IR (justone of these twice) during 4 roadshows, but no visitswere made to the United States;

• the creation of a new institutional site(www.grupposanpaoloimi.com), with an analytical section on corporate governance, and one dedicated to the social and environmentalresponsibility of business;

• communication, through the website, of the updatedconsensus figure (starting in April 2003);

• the intensification of relations with SRI investors, with whom initial contact has already been made.

Relation with investors and with the market

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We want to responsibly play a leading role in order to activelycontribute to supporting anddeveloping the country’s economy.

We see the territory as a network of relations to serve with a spirit of service.

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 to become 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 the direct and indirect socialconsequences of the actions weperform or finance.

Value in detail

Creation of value

Customerorientation

Integrity

VALUES



specific qualities


of resources

The fact that we operate in a global market does notrule out the importance of a sense of belonging to a collective community, where words must beconsidered in the widest possible sense,encompassing the whole planet. Our values indicatethe need to remember that we belong to anextended group. Being a citizen-business imposesfiduciary duties towards the organized structures of civil society, however they may be articulated.

Sanpaolo IMI, which has its roots in the sametradition as the saving banks, considers territorialroots to be one of its fundamental values. Attentiontowards local communities of all sizes is also provenby the 2,115 branches of the Sanpaolo Network andBanco di Napoli, which guarantee provision of serviceto the territory, especially in small towns, in whichmore than half of our operating points are located.

Territorial roots

Roots as a strategic choice…Roots and proximity to the territory are the lynchpins ofour strategy: they have guided our choices of externalgrowth in recent years and have been recentlyconfirmed in the 2003-2005 Strategic Plan. Territorialproximity makes it possible to gather and properlyinterpret the financial needs of customers andfacilitates the flow of communication between thelatter and the Bank, enabling, at the same time, respectand exploitation of the links developed with the localcommunities over a period of time, links which stronglycharacterize the history and tradition of the banks thatmake up the Group today.

….combined with specializationAs we see it, the benefits of territorial roots areaccompanied by the need for specialization on thebasis of various market segments: retail, companiesand private customers. This methodological choicemakes it possible to offer a top level service,diversified to suit the different needs expressed bycustomers: the link between these segments, whichrequires unitary governance and strict coordination, isguaranteed by the territorial Area. This type oforganization ensures the best levels of efficiency andfast action and eases flows of communication withregard to commercial, lending and risk controlpolicies, from the center towards the local offices andvice versa, also permitting due consideration of thespecific requirements of the individual territories. Thisis an aspect which is particularly important for aGroup like Sanpaolo IMI, present throughout thecountry, which has provided for the delegation of awide range of power to the managers of the variousterritorial areas.

Local communities

Big cities>500,000 inhabitants

17%

Medium-sized towns30,000<inhabitants<500,000

30%

Small towns<30,000 inhabitants

53%

Corb

is

Collectivity


The brandsThe great effort towards optimum integration of thevarious realities which make up the Group, respect forspecific local situations and the exploitation of localroots also form the pillars on which the brandmanagement logics are founded. The Sanpaolo brandwill flank the local brands, which enjoy extensiverecognition on the territory and with which customersassociate continuing relations.

Consultative Committees on the local economyWe consider it fundamentally important tocommunicate freely with the local communities,economic, social and cultural operators so that theycan actively contribute to optimizing our creditallocation policies and range of banking services. Tothis end we intend to promote the constitution, in theareas in which the Bank is present, of ConsultativeCommittees on the local economy, bodies appointed toencourage communication with the leaders of the localeconomy, open for contributions of ideas and analysisby leaders in the production world, local communities,professional and cultural sectors. In particular, in virtue of the deep commitment towardsSouthern Italy, we envisage the activation ofConsultative Committees in the Campania, Apulia,Basilicata and Calabria regions. They will ordinarily meet three times a year, using thestructures and support of the Bank and other Groupcompanies.

Attention to weaker categories

Social bankingIn the context of the Italian Banking Association, wecooperate actively with the “Banks and Companies”project, participating in a work focusing on problemsrelated to current accounts. In particular, we havebecome active with regard to specific themes, such astransparency, comparable offer and basic bankingservices (social banking), aimed at encouraging theaffiliation to banks of those who have difficulty inaccessing credit circuits. The project envisages theissue of multi channel services, encouraging the use ofa debit card not necessarily linked with a currentaccount, to reduce banking commissions for users.We have always paid attention to disadvantagedcategories of consumers through conventions thatprovide for facilitated conditions and the issue of personal loans to members of Bodies and

Associations. These include: ANFASS (NationalAssociation of Families of the Mentally andRelationally Handicapped), A.N.D.I (Italian NationalAssociation for the Disabled), Unione NazionaleCiechi, Fondazione Provinciale Comunità ComascaPortatori di Handicap, and numerous associations insupport of international adoptions (AiBi Amici deiBambini - Amici di Don Bosco - Fondazione Nidoli).Besides these initiatives, we have stipulatedconventions that provide for subsidized loans in theevent of natural disasters or to small economicoperators in areas involved in public works.Cooperating initiatives are also underway with theLegal Authorities to contrast anti-social phenomenasuch as laundering, usury, domestic andinternational terrorism and child pornography.

The microcredit projectSocial micro credit must be considered in a logic ofsupport to the territory and of particular attention to thesocial reference fabric. This form of lending, beingreserved to those who, on the basis of the traditionalcriteria used when granting loans, would otherwise beexcluded, represents an important instrument, also in anevolved economy, to guarantee support to weakercategories and to combine economic growth and socialbenefit. It also constitutes an activity which convergesthe activity of banks, Foundations and non profitorganizations. San Paolo IMI is supporting thedevelopment of a project of social micro creditpromoted by Compagnia di Sanpaolo, which is due foractivation in 2003 and provides for the accomplishmentof events in the provinces of Turin, Genoa, Rome andNaples. More precisely, the Compagnia has madeavailable the funds necessary to set up a guaranteereserve to cover possible insolvencies originating frommicro credit operations, simultaneously involvingreligious bodies or local ONLUS (the Archdiocese ofTurin; Fondazione Antiusura Santa Maria del Soccorso,based in Genoa; Fondazione S. Giuseppe Moscati -Fondo di Solidarietà Antiusura, based in Naples, andFondazione Risorsa Donna, based in Rome) which, in thecontext of the project, have the job of individuating thepeople and initiatives that deserve to obtain credit. Sanpaolo IMI intervenes in the initiative in the dual roleof operating partner and issuer of a service, makingavailable its organizational capacities (loan managementusing IT systems and procedures and territorial coveragethanks to the branch network) and reserving specialeconomic conditions for the beneficiaries of micro credit(current account management costs and costs fortransactions).

With Fondazione Risorsa Donna, an initiative named “A woman, a computer, an opportunity”, supportingthe purchase of personal computers by women, is alsobeing created. Also, in order to favor access to credit byfemale entrepreneurs, local conventions are beingstipulated with some Chambers of Commerce. Lastly, the possibility of offering subsidized tariffs toextra-EU immigrants who need to send sums of moneyto their families in their countries of origin is beingverified (with particular aid for payments to Moroccoand Brazil, thanks to agreements entered into with localbanks). A request to this effect has been put forward bythe Turin Council Department for Employment, but theintention is to make the service active all over Italy,concentrating it in several branches.

Support for the ‘Facciamo Futuro’ project for the elderlyThe increase in the number of elderly people in Italyrequires increased attention to the needs of peoplewho are not self-sufficient and to the importance ofpreventative medicine and an integrated approach tohealth. A pilot project concentrating on this has beenpresented by the San Giovanni-Addolorata Hospital inRome, one of the most advanced hospitals in Italy,supported by Sanpaolo in Spring 2003. The aim of theinitiative is to supply an absolutely innovative servicethrough the creation of a Clinic for the Pathologies of theElderly, capable of guaranteeing integrated preventionand monitoring of pathologies and boosting homeassistance. To support fund raising to implement the project, wehave involved more than 2,000 branches all over thecountry, in which, as of March 2003, anyone candonate at least 3 euro by filling in a special form. In this way the funds raised are destined to thepurchase of health equipment for the center.

Corb

is

The play-bill of the project


Every local community finds in the creation ofinfrastructures and the development of small- andmedium-sized companies, two essential moments in itsdevelopment. In both these activities, Sanpaolo andBanco di Napoli represent reference points on the wholenational territory, both in big cities and in small townsand rural communities.

Partnership between public and private sectorsWe consider “financing the territory” as an expandingbusiness which requires a financial and professionalcommitment which is at least equal to the commitmentreserved by the Bank to its more traditional activity,business financing, which it highly complements.Alongside the growing financial needs of regional areas,the increased suitability of the territory and its structuresfor financing by extra-public capital compared with thepast helps stimulate banks to take on a new importantrole. Therefore public-private partnership (PPP) formulas

are being confirmed, actuated by Law 443/02 through avast program of public works considered strategic to thedevelopment and modernization of the country. Our Group is present in the sector of public works andinfrastructures through Banca OPI, as regards lendingand advisory services, through Finopi, equity investor ofBanca OPI, which supplies risk capital in infrastructuredevelopment programs, and lastly, through Sinloc,offering equity financing and advisory service focusedon local development projects and the relaunch of theterritory. The control of Banca OPI means that ourmarket share in the public administration sector is equalto 26%, more than double the percentage of othersectors. The desire to consolidate our considerablepresence in this area of activity is also confirmed in plansfor the future, which envisage further strengthening andrelaunch of operations in the public works sector, inorder to make Banca OPI a leading operator in theEuropean context.

Regional territory and development

BANCA OPI: AN INSTRUMENT AT THE

SERVICE OF THE TERRITORY

Through advisory service, the arrangement of project finance operations and traditional financing for public authorities such ascouncils, provinces, regions, former municipal companies, government bodies and other similar organizations, Banca OPI

actively contributes to the improvement of economic and competitive conditions in the territorial areas to which financing isaimed. Of the financing activity performed in 2002 (for a total of 7.1 billion euro), approximately 32% (2.2 billion euro) is aimed atoperations with a strong social and environmental character. In particular, these are operations in the environmental services sector in the strictest sense (waste and water cycle management), inthe conservation sector (protection of the Lagoon of Venice) or for the development of innovative urban transport systems:altogether, 581 million euro were channeled towards the financing of these activities in 2002. A significant amount of financing byBanca OPI was also destined to urban improvements and social construction projects (1,063 million euro), and to the renovation ofinfrastructures damaged as a result of natural disasters (208 million euro).Banca OPI is also active in the financial advisory field for the development of infrastructure projects in which the most consistentshare of financing which could be potentially activated regarded the management of waste and the water cycle, for which advisoryactivities are underway for projects that would involve investments of more than 1,600 million euro. Smaller, but numericallysignificant investments regarded the advisory activity for the organization of operations to finance projects in the social constructionsectors (health and education), urban improvement and the development of urban transport systems.A further increase in the advisory activity in sectors with a strong environmental aspect is forecast for 2003, following the adjudication of aseries of public tenders for the construction and management of plants to overcome the environmental emergency in the field of waste andthe purification of water in some areas of southern Italy (Campania, Apulia and Sicily). Advisory activities and organization of projectfinance operations in the public urban transport sector are also forecast for this year, with particular reference to restricted electric drivingsystems. These systems are part of the initiatives presented by numerous Italian towns to reduce pollution by noxious gas and noise.A specific projectIn the context of the advisory activity performed by Banca OPI, particularly noteworthy is the organization of a projectfinancing operation aimed at creating an integrated waste disposal system to serve the province of Naples. The projectregards the creation and management of a system made up of four recycling and final disposal plants, which represents thefirst large scale application of integrated waste management, as provided for by national regulations on the matter. These

regulations, in keeping with European regulations, envisage differentiated waste collection and recycling, with therecovery of materials and energy and a final process of disposal in dumps.

(TERRITORIAL BREAKDOWN OF BANCA OPI LOANS (bn Euro and % of total)

Education, Fair,Culture68 (3%)

BANCA OPIDESTINATION OF INVESTMENTS OBJECT OF ADVISORY(Total investments 3,651 mil. euro )

BANCA OPISOCIAL AND ENVIRONMENT FINANCING(mil. euro and % on total)

Health36 (2%)

Reclamation and industrialdevelopment courses

89 (4%)

Natural disasters208 (9%)

Regional railways197 (9%)

Urban transport, urban improvements and socialconstruction project

1,063 (47%)

Innovative urbantransport92 (4%)

Waste management27.4%

Urban and railway transport

0.9%Education

0.4%

Urban water service

18.1%Health8.2 %

Urban improvements1.9 %

Construction and parking9.0 %

Transports and logistics34.1 %

Protection of the lagoon of Venice266 (12%)

Environmental services223 (10%)

North West

Loans: 2.3 bn euro (16.4%)Market share: 0.6%

Tuscany-Emilia


South


Islands


North East


Centre



Public-private partnership initiatives were also sub-ject to an agreement signed in November 2002 withEulia (the French holding created by the Caisse desDépôts et Consignations Group and the Caissed’Epargne Group), aimed at setting up closed-endfunds oriented at investment in infrastructure. Thecreation of 4 funds is envisaged:

• Galaxy, specialized in investment in infrastructure proj-ects in the transport sector in the European Union;

• PPP Italia, a closed-end fund which will invest in terri-torial development projects in Italy;

• and two other funds destined to public-private part-nership initiatives: PPP Europa e Dévelopement des territoires France.

Our commitment in support of the Turin-Lyon linkWithin our relation with France, our Group is committed,with the European Investment Bank, and in collaborationwith the other actors involved, to the analysis of possiblesolutions for troubles arising from the financing of majorinfrastructural projects and, in particular of the Turin-Lyonlink. This link, deemed as essential for its economic and

SINLOC: AN INSTRUMENTFOR LOCAL INITIATIVES

Sinloc (Sistema Iniziative Locali) offersequity financing and advisory service and

its activity focuses on local developmentand initiatives to relaunch the territory,

combining public and private interest in alogic of efficiency and profitability.

We hold capital in Sinloc through Groupcompanies and the shareholders include severalFoundations (Compagnia di San Paolo,Fondazione Cassa di Risparmio di Venezia), the Cassa Depositi e Prestiti and an internationaloperating partner, the Caisse des Dépôts etConsignations (CDC) Group. Sinloc offerssupport and specific innovative services to localbodies and companies operating in publicutilities, promoting initiatives for the exploitationof Public Administration services andinvestments. The main areas of operation regardlocal public transport and infrastructure in theterritory, urban transformation aimed at therecovery of rundown or disused areas as well asresidential and specialized social (health anduniversity residence) buildings. Sinloc intervenesin these sectors supplying financial, technical-organizational and legal advice for the actuationof processes to liberalize local services andrelaunch and/or dispose of public assets,constantly monitoring the evolution ofEuropean policies on the matter of localservices and infrastructures and, lastly,

promoting domestic and internationalstudy projects in conjunction with

universities and research institutes.

(Co

rbis

environmental effects for the two countries, has costs whichseem high for Public Finance, with particular reference tothe ties of the Stability Pact. To this end, hypothesis thatcombine public and private have emerged, thereforereducing the burden on Public Finance and making thefinancing more attractive for private partners.


Private equity By way of the financing and direct capitalacquisition activity, the Bank covers an importantrole in the economic development of the areas inwhich it operates. Selecting meritorious businessinitiatives, it presents itself as a fundamentalpartner for the development of companies which, inturn, create employment and economic well-beingin the respective reference areas. This is particularlyobvious in the case of recently set up companiesand those with high potential. In addition, it mustbe said that a Group as big as ours has the strength,roots and knowledge of the territory necessary toattract foreign capital in support of local businessprojects. Through Sanpaolo IMI Private Equity, wededicate particular attention to the support of thedevelopment of small- and medium-sized companiesthrough participation in risk capital and subsequentsharing of the related entrepreneurial design. For the 2003-2005 three-year period we havealready provided for, in addition to the managementof existing closed-end private equity funds (SIPEFI,Cardine Impresa and Eptasviluppo), the launch ofthe following important new initiatives, in order toplace the Group in a leadership position in Italy inthis sector.

The Fund for the promotion of capital for Southern ItalyA first new close-end fund which is now ready tooperate is the Fund to Promote Risk Capital forSouthern Italy, presented in October 2002, forwhich subscriptions closed in April 2003. It isaimed at an area in which we have a strongpresence and for which we envisage extensivesupport: the capital of the Fund has reached theconsiderable sum of 100 million euro. In additionto Sanpaolo IMI Private Equity, subscribers includethe European Investment Fund (EIF), specialized ininvestments in risk capital reserves and currentlythe most important European operator in thesector, and CDC PME, which belongs to theCaisse des Dépôts et Consignations Group, whichis active in the management of closed end privateequity funds for French small and medium-sizedcompanies. These are joined by prestigiousbanking Foundations and several entrepreneursand industrial associations from the South. The Fund will be managed by NHS MezzogiornoSGR, localized in the historical offices of Banco di

Napoli, which will invest its capital in privateequity and venture capital transactions, mainlyacquiring minority shares in the capital of small-and medium-sized companies in Southern Italy,including recently set up companies, with capablemanagements totally focused on pursuingambitious growth projects. The aim of the Fund is to contribute to thedevelopment of local enterprise and employment,stimulating the creation of an efficient risk capitalmarket in Southern Italy in order to favor thegrowth of companies. The Fund also intends tocontribute to achieving the aims pursued by theEuropean Union through the EIF: the growth ofthe technological impulse in Europe and thebalanced development of the regions which makeit up. For subsidiary companies the Fundrepresents an important opportunity to acceleratetheir development and, through the introductionof adequate governance rules, to consolidate theentrepreneurial culture of the South of Italy.

Other territorial closed-end fundsFaith in the great prospects of this sector of activityhas led us to envisage the constitution of otherfunds, which will also be specialized in investmentsin small- and medium-sized companies: the Closedend-fund for investments in Central Italy, which isdue for launch in 2003, managed in conjunctionwith Cassa di Risparmio di Firenze and Cassa deiRisparmi di Forlì; and the Closed-end fund forinvestments in North West Italy, specialized ininvestments in small- and medium-sized companiessituated in Piedmont, Liguria and Valle d’Aosta,and conceived to provide a positive answer towidespread fears of the effects of the automobilerecession on the economic fabric of the area inquestion. Furthermore, together with CDC IXIS Private Equityand Bayerische Landesbank, we have reached anagreement for setting up a small pan Europeanfund named Eagle Fund, the investments of whichwill be destined to small- and medium-sizedEuropean companies, situated mainly in Italy,France and Germany.

Phot

oDisc


Activity in favor of the economic culture of Southern ItalyThrough its Studies and CommunicationDepartment, Banco di Napoli has always performedan intense activity aimed at favoring the growth ofthe economic culture of operators in SouthernItaly. The activity initially focused on promotingrelations with companies, associations and localpublic bodies, in order to strengthen relations withentrepreneurs and economic bodies for directfinalization towards growth projects. It has alsopromoted cultural and economic initiatives aimedat favoring the dissemination of specificknowledge in the South, both in the variousproduction sectors - in many cases also offeringinspiration for joint initiative with companies - and

in the public sector, with regard to themes relatedto the creation of infrastructures. Variousconventions and seminars have been activated onthese themes, along with research into the trendof the main economic sectors in specificgeographic areas, national and regional economicand lending policies, structural and long-termphenomena of the real and monetary economy andpublic finance, always with specific reference toSouthern Italy. In this context, two publicationscreated by Studies and Communication, distributedto companies and public entities throughout thewhole of Southern Italy, as well as in the academicworld and amongst trade associations, take onparticular importance: the European Union Dossierand the Economic Review.

The European Union DossierThe European Union Dossier is an operatingpublication which takes an in-depth look at subjectsof considerable interest for Southern Italy, linkedwith development and planning: system of publicincentives (regional, national and community),regional operative plans (POR), territorial integratedprojects, public works and infrastructures are justsome of the themes covered by the magazine.Aimed not only at companies, but also at publicentities, trade associations and advisory companies,the Dossier, as well as presenting the work of theStudies function, contains articles written byauthoritative independent exponents, including theEuropean Commission and the Ministry of Economy.

The Economic ReviewThe Economic Review, first published in 1931, intends tosupply innovative stimuli in the entrepreneurial andinstitutional field on the most important and currentquestions concerning the Southern economy, involvingin the debate the main entrepreneurial and institutionalforces of Southern Italy. The cultural commitmentshown, aimed at identifying the new frontiers ofdevelopment in Southern Italy and proposals for theremoval of restrictions to growth, have made theEconomic Review one of the reference points in handlingproblems inherent in the development of the South. In1998 it was joined by the Research Books, aimed attaking an in-depth look at themes regarding sectors and

territories specific to Southern Italy and exploitingSouthern intellectual energies in the economic field.

Association of Studies and Research for Southern Italy In order to preserve the tradition of analysis andresearch in the economic and cultural field of Bancodi Napoli and in the context of the reorganization ofthe Sanpaolo IMI Group structures, and to furtherexploit the experience and knowledge acquired todate, the Association of Studies and Research forSouthern Italy is being set up, with the intention ofproviding a center of excellence in the context ofthe economic and cultural debate concerning thevarious aspects of southern public and privatefinance. The Association, of which Compagnia diSan Paolo and Istituto Fondazione Banco di Napoliwill be members, will concentrate its attention onthemes related to the development of SouthernItaly, and especially to themes regarding the role ofthe local entitiesbodies and infrastructureoperations required to exploit the territory of theSouth. The non profit sector and themes of ethicalfinance will also be subject to investigation.

European Parlament, “The Spaak and Spinelli Buildings”,Brussels

Gioia Tauro Terminal (Reggio Calabria)


A pervasive feature of our business culture, theattentive and cooperative relationship with thecontext in which we operate is also substantiated inspecific contexts of operation in support of sociallyand cultural relevant realities and initiatives, whichwill be illustrated in the chapter. Here we have alsoincluded, grouped into themes, references to theartistic heritage which - like many other banks -Sanpaolo IMI has collected throughout its history.

Disbursements and liberalityFollowing the institutional reorganizations performedin actuation of the Amato/Carli Law, public law creditinstitutes and saving banks have been transformedinto joint stock companies. The capital of these newcompanies was assigned to Foundations which havethe task of pursuing the tradition of disbursements forbeneficial and social purposes, making this activitymore systematic, articulated and regulated, assumingit institutionally as their mission.This process has not detracted from Sanpaolo’sconsistency with the values that are part of its“genetic code”, its history and its traditions.In this spirit, the Bank, which operates at the serviceof collectivity with a business logic aimed at making aprofit, has continued to confirm its attention to thesocial context, also through disbursements anddonations of funds: in 2002 it destined a total ofabout 1.1 million euro to these activities. Thesedisbursements regarded, in the context of thebehavior set by the Administration, initiatives withbodies with socially and culturally beneficial initiatives.In this context, just under 350,000 euro werededicated to relevant operations - in terms ofgeographic area and/or specific importance - provided

by head office and by the territorial areas: thebreakdown of this amount is illustrated in the graph.

A relevant sum was destined to the issue of scholarships,split into two modules related to business risk assessmentand, more generally, credit and finance, and regarded 30people, all of whom were hired at the end of thespecialization courses. The remaining part of the funds wasused for disbursements of a limited amount in support ofbeneficial, social and cultural initiatives at local level.

SponsorshipThe Bank is also active in the sponsorship sector which, whileundoubtedly creating a positive effect in the social andcultural context, must be separate from liberal disbursement.In sponsorship, the support of events and initiatives is linkedwith the aim to obtain a positive return in terms of imageand therefore a commercial return for the sponsor. In thiscase therefore, the benefit regards both the direct andindirect receivers of the sponsorship (the beneficiary and, forexample, the public attending the event presented thanks tothe sponsor’s contribution) and the sponsor. As regards theactivity of sponsorship, in 2002 we allocated resources for atotal of 11.6 million euro.Backing for the sporting world accounted for about 2/3 ofthe total. In this context, most relevance goes to the XXTorino 2006 Winter Olympic Games. Sanpaolo IMI is one ofthe Principal Sponsors - with national coverage anddimensions - of this great sporting event, which will be heldin Piedmont in February 2006. With this appointment, theOlympic Games will be returning to Italy for the third time,after the 1956 Winter Games in Cortina and the RomeOlympics in 1960. This is the first time that they will be heldin Turin. This is an important opportunity for the wholecountry and especially for Turin and the surrounding area.This is why Sanpaolo IMI, which had already contributed to

the promotional activity for the candidacy of the city, hasdecided to take the role of Principal Sponsor of the Games.The sponsorship is at Group level and is consistent with thedecision, which has always characterized Sanpaolo IMI, tosupport projects and initiatives capable of generating newgrowth. Furthermore, it highlights our full agreement withthe universal values associated with the Olympics. The roleof sponsor of the XX Torino 2006 Winter Olympic Gamesincludes that of official sponsor of the Paralympics, whichwill be held a few days after Olympics (March 2006) andwill involve the participation of disabled athletes, and thatof official sponsor of the Italian Olympic teams at theAthens Olympics in 2004 and the Turin Winter Olympics in2006. Moreover, in virtue of a Joint Marketing Agreementbetween the Toroc (The Torino Games OrganizingCommittee) and the Italian Winter and Ice SportsFederations, the role of Principal Sponsor also extends tocover the latter. The Bank is also already one of thesponsors of the FISI (Italian Winter Sports Federation). Partof the sponsorship is aimed at the sector of art and culture.

• In this context, during 2002, Sanpaolo, as it had alreadydone in the past, confirmed its support of the activities

of the FAI (Italian Environmental Fund). The FAI is a nonprofit organization dedicated to the recovery andprotection of the country’s artistic-cultural andenvironmental heritage and its exploitation. Sanpaolohas contributed to numerous FAI initiatives and events,in terms of exhibitions and the promotion of events andvisits to sites with a high artistic-landscape value whichhave been recovered and are managed by the Fund.

• Fondazione Teatro San Carlo di Napoli. The San Carlo isthe oldest existing theatre in Europe. Built in 1737 to acommission by King Carlo di Borbone, over thecenturies it has won a prominent place in the history ofmusic thanks to its contribution to the formation ofItalian opera, ranging from serious eighteenth centuryopera to nineteenth century romantic drama. At thesame time, the Theatre developed a “Neapolitan”school of dance, an important reference point in Italy.Like Banco di Napoli before it, Sanpaolo nowparticipates as a supporting associate, in the activitiesof Fondazione Teatro di San Carlo, the finalities ofwhich include the dissemination of musical art and theformation of artistic scenes.

Attention to society and culture

BREAKDOWN OF DISBURSEMENTS FOR RELEVANT OPERATIONS

Cultural Associationsand Entities

26%

Medical and service researchInstitutes and Foundations

15%

Universities andschools14%

Religious entitiesand associations

13%Social assistance

associations32%

LaPr

esse


Our historical archiveBoth Sanpaolo and IMI, already prior to the merger (1998),had created structures dedicated to archiving historicaldocumentation and producing publications regarding theorigin and the evolution of the two Institutes.All the material that documents the history and theevolution of Sanpaolo from its origins through to theprivatization of the Bank (1992) is now part of theCompagnia di San Paolo Historical Archive. The archivedsection of Sanpaolo post-privatization and the IMIHistorical Archive, situated in Acilia near Rome, are run bya single Bank department named Sanpaolo IMI HistoricalArchives, responsible for conserving, inventorying andexploiting the materials in its possession, an activity whichis of the utmost importance in terms of comprehendingand developing a corporate culture within our company. The validity of the directions followed in the performanceof this activity - which will also be applied for other Groupcomponents in the future - is confirmed by the attentionwith which the competent archiving Superintendentsmonitor the evolution of the projects underway. With thisin mind, it is worth remembering that the IMI Archive hasbeen declared to be “of considerable historical interest”and that the Turin archive has for some time now been theobject of a constant and profitable cooperation. Moreover, the Bank actively participates in the work of theGroup set up specially in agreement with the Ministry ofCultural Assets, the Bank of Italy and the Italian BankingAssociation, for a study on the guidelines for the selectionand rejection of the documents in the archives of creditinstitutes, a project which aims to publish a guide to theexploitation of the historical-archive heritage for use by thewhole Italian banking system.Also with a view to expanding and developing historical-archiving knowledge, Sanpaolo IMI monitors, in itscapacity as member, the initiatives of the ANAI - ItalianNational Archiving Association, especially with regard tothe legal aspects of business archiving.

Our artistic heritageSpecial attention should be paid to the Sanpaolo’s artisticand historical assets, which have gradually been enrichedover the years also thanks to the incorporation of otherbanks. The heritage can be divided into two maincategories: works which provide furnishing complements inthe Bank’s operating points, and goods of major value,located mainly in head offices and representative offices.The collection of paintings includes works from theSixteenth century to the present day. The variety of thecollection encompasses the work of many sixteenth centuryschools: an example is the small but exquisite masterpiece

by the Flemish artist Denys Calvaert, “Tobiolo with theArchangel Raphael”. The passage from the sixteenth to theseventeenth centuries is represented by works such as “TheTrinity with four Saints” by the Venetian artists JacopoNegretti, known as Palma il Giovane. The collections of theSeventeenth and Eighteenth centuries appear to be ratherrich, with a conspicuous nucleus of Nordic paintings, mainlyfrom Flanders and Holland, and an extensive section ofworks from Piedmont, comprising the grand paintings thatdecorated the old Oratory of the historical Compagnia diSan Paolo, founded in 1563. The Nordic paintings feature a valuable painting attributableto the German artist, Hans von Aachen: “Scenes from abanquet”. Proceeding in chronological order we come to alively and animated “Roman market” by the Flemish artist,Peeter van Breadel. The paintings of major prestige from theperiod include the four magnificent canvases dated 1698,and signed by Isaac de Moucheron. The various aspects ofeighteenth century decorative Piedmontese painting arerepresented with a series of landscapes, marine scenes andstill life paintings from the workshop of Vittorio AmedeoCignaroli, Michele Antonio Rapous, Francesco Antoniani.Highly significant is the collection of nineteenth centurypaintings and sketches, which includes real works of art,some of which have never been exhibited. Of particular interest to the history of the bank is the seriesof portraits of the Chairmen of San Paolo, 17 canvases thatembrace more than a century, from the mid-nineteenthcentury to the mid-twentieth century. Three of these are byGiacomo Grosso.The selection of the twentieth century and contemporary

Virile head of the Romanperiod, bronze

“La cacciata degli Angeli ribelli„ Antonio Maria Viani


masters, which is also well nourished and comprises worksof considerable quality, offers an extensive view of some ofthe century’s main Italian and European artistic movements:the futurist movement, for example, is represented by twoof its leaders, Umberto Boccioni and Giacomo Balla, whilethe metaphysic period is represented by an importantpainting by Giorgio De Chirico, “Mannequins on the seashore”, dated 1926.The twentieth century Turin school is also duly celebratedwith valuable works by Felice Casorati and his English pupil,Jessie Boswell, a sensitive and cultured protagonist of thefamous group known as the “Turin Six”. The most recenttwentieth century currents are present in our collections,with canvases often of considerable worth, including worksby Lucio Fontana, Wilfredo Lam, Alberto Burri, Max Ernstand Pablo Picasso, amongst others.

The Group’s artistic heritage includes the Banco di Napolicollections of particular value and beauty, which are housedon the premises of Public Entities:

• The collection of the Museum of Villa Pignatelli. TheMuseum of Villa Pignatelli houses a permanent section

of works belonging to Banco di Napoli. The collection isclearly Neapolitan and includes a group of very highlevel seventeenth-eighteenth century works. Some ofthe masterpieces come from the old “public banks”and some come from private collections which werebought in the early years of the twentieth century. Thecollection opens with works from the sixteenth centuryand arrives at the twentieth century, with one ofGiacomo Balla’s masterpieces, “Magnolias reflected”,dated 1938. Banco di Napoli has also taken care of theorganization of the Villa Pignatelli art gallery, whichhouses the collection;

• The Nativity. Situated in the prestigious Palatine Chapelof the Royal Palace of Naples, it comprises 210 figurinesand 144 accessories from private collections. Somesignificant examples were modeled by great sculptorsoperating in Naples between the mid 18th and early19th centuries. The Nativity was created according totraditional eighteenth century Neapolitan style;

• The Library and Newspaper Library. Set up in the 1700’s,the Library and Newspaper Library continues to grow,

with 400 volumes purchased every year. It currentlycomprises more than 31,000 volumes and more than700 different newspapers, for a total of about 60,000Italian and foreign “pieces”. Most of the works are onthe subject of economic and banking sciences, butthere is also a section dedicated to cultural, artistic andfigurative sciences. The library is open to the publiconce a week for consultation in real time of its specialistsources, thanks to the technologies available.

• The Chapel of the Monte di Pietà. The Chapel and thebuilding of the Monte di Pietà in Via San Biagio deiLibrai is one of the most important examples ofNeapolitan architectural, plastic and pictorialproduction between the 16th and 17th centuries. In recent years, Banco di Napoli has promoted therecovery of several rooms on the ground floor of thebuilding, using them to house a museum in whichreligious objects and paintings from the Chapel andfrom the Banco di Napoli art collections are exhibited.

The Sanpaolo artistic heritage has recently been subjectto in-depth systematic cataloguing, which included acomplete historical-artistic card indexing system. Asimilar initiative is planned for the heritage of Banco di

Napoli, to integrate it into the cataloguing system usingconsistent criteria. In 2002, Sanpaolo and Banco di Napoli, like the Cardinebanks, joined the “Invito a Palazzo” initiative promotedby the Italian Banking Association: on Saturday 21September the main offices of the banks - characterizedboth by artistic prestige and the artistic level of thefurnishings and the works housed - were opened to thepublic for guided tours. The high attendance and greatappreciation of the initiative led the Italian BankingAssociation to present it once again in 2003, and theGroup’s banks have confirmed their presence.In the context of the bank’s activities in the artistic andcultural field, a reference, however slight, to artpublications is a must. Since 1952, Sanpaolo hasproduced an annual monograph of high level in terms ofcontents and publishing quality. The volumes are used asyear-end gifts to the public and to bank personnel. Themonographs focus largely on the various themes of thehistory of art. The last two volumes published regardedthe Places of Art, a selection of the main Italian (2001)and European (2002) museums. The new series of artisticmonographs will be dedicated to the Sanpaolo IMIGroup’s artistic heritage, with the first volume due to bepublished for the end of 2003.

"Taverna a Posillipo", Vincenzo Migliaro

“The Nativity”, Royal Palace of Naples


A particular form of communication, with greaterscope than the information to investors and analysts,is that aimed at the mass-media, to the combinedbodies appointed to inform the general public. Following in the footsteps of the British and Americanmedia, which, in the most evolved financial systemshave been handling economic and financial themes in amore attentive and critical way for some time, theItalian media has gradually began to handle news in anincreasingly aggressive manner over the last decade, ina climate which has become more and morecompetitive and therefore more open to the rumorswhich circulate in financial circles. This situation, takinginto consideration the great, often conflicting, interestsof the leaders in the domestic and internationaleconomic-financial world in the context of anincreasingly globalized system, has made the everydayrisk of leaks of news, disinformation and speculationtangible, capable of reflecting at all levels, especiallydamaging small investors.With a view to preventing the risk of speculation, theactivity of Media Relations has always been performedin full compliance with the instructions of the marketsupervisory bodies, offering them active support ininitiatives aimed at creating transparency and absolutecorrectness of information. For example, since thebeginning of June 1999, Sanpaolo IMI, acting as “pilotcompany”, has worked with Borsa Italiana (the ItalianStock Exchange) on preparing and testing the NetworkInformation System (NIS), the telematic circuit fordistributing information to the public, the use of whichhas become compulsory for all listed companies sinceApril 2002. It is worth remembering that the function ofNIS is to transmit price sensitive communications - onthe basis of the regulations in force - to Consob, BorsaItaliana and the press agencies that have voluntarilyjoined the system.The activity of Media relations aimed at the outside isperformed mainly through the instruments of theofficial press release, the official declaration, pressconferences and interviews granted individually bymembers of top management to individualnewspapers or magazines. This activity is naturallysupported by daily monitoring of the news publishedin order to check - and where necessary restore - itscorrectness, and cooperate with the variousnewspapers and magazines to provide adequate

documentation and support in preparing journalisticarticles.The object of distribution through the instrumentsdescribed are information regarding:

• the events that involve the equity, organizational andadministration models of Sanpaolo IMI and theGroup companies;

• the strategies pursued by the Group duringdevelopment or rationalization phases;

• the most ample company policies not concerningcommercial aspects (the divulgation of which ishandled by the sector that sees to the CorporateImage);

• the annual or periodic results of Sanpaolo IMI at civiland consolidated level, as well as, generally, those ofthe same kind pertaining to Group companies;

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

During 2002 the Media Relations officialcommunication activity was expressed through thefollowing operations:

As regards the recipients of the press releases,Media Relations, as well as channelinginformation through the NIS, as explained above,sends notes to all the main Italian and foreignpress agencies (in Italy), to all the national tradeand general daily newspapers, to the mainforeign financial daily newspapers, to the mainItalian periodical magazines, privileging those ofeconomic-financial nature, to the most popularregional daily newspapers and to the most wellknown on line news bulletins, thus favoring thegreatest possible dissemination of information.

Relations with the media

Press releases

of which related to periodic results

Declarations

Interviews

Press conferences

51

6

31

13

2


The State is the highest form of organization of acollectivity that is recognized as such and thereforeconstitutes the stakeholder par excellence of everysector in the life of a country. In performing itsactivity, a bank serves and supports the State towhich it belongs both translating its dictates, in theform of standards, regulations and indications, intoconforming, punctual and prompt operatingconducts, and offering its availability to performservices aimed at facilitating its characteristic activityin its multiple forms.

Anti-launderingAs regards the first field of cooperation, for example,we consider the observance of the anti-launderingstandard, an essential condition for the correctperformance of the Bank, and we attribute particularimportance to an in-depth knowledge of ourcustomers. For this purpose the Bank has constantlydedicated attention, resources and financial meansto the creation of IT instruments to gather all the

information concerning the complex ofrelationships with customers and the operationsperformed.From the organizational point of view, thesupervision of the anti-laundering activity is splitinto several contexts. The legal aspects - inparticular regarding the interpretation of standards- and fulfillments related to the indication ofsuspicious operations ex. Art 3 Law 197/91 are

handled by the Department for Anti-launderingand Relations with the Legal Authorities, set upwithin the General Secretariat Direction.The fulfillments related to the procedure and themanagement of the Sole IT Archive, are carriedout by the competent Functions within the MOI.In particular, further to rationalize the tasks andresponsibilities regarding anti-laundering (alsofollowing the concentration operations withinthe Sanpaolo IMI Group) a special structureknown as the Department for the Coordinationof Supervision and Anti-laundering, has recentlybeen set up to supervise and coordinate theentire matter. This Department is responsible forguaranteeing the complete and correct nature ofthe details of the Sole IT Archive, preparingindications for the Supervisory Bodies andhandling the procedures in support of thefulfillments provided for in Art. 3 of Law 197/91,as well as coordinating the other companystructures with regard to all the proceduralthemes attributable to the matter. To strengthenthe control system even more, theaforementioned Department has been attributedthe responsibility of systematically checking thecorrect execution of the fulfillments linked withobserving standards, including those delegatedto the operating points. On the theme of Anti-laundering, great attentionhas obviously been devoted to the trainingaspect. In particular, the Bank has regularlyissued and updated internal provisions on thematter, making available, at the time of thelatest update in June 2001, a “sole text” of thestandards, concerning both strictly legal aspectsand those of a more procedural nature, and thisdocument was personally given to eachemployee and made available for consultation onthe website. Special training modules have beendeveloped on the matter, preparing anddisseminating to all the operating points andhead office service a specific informativedocument, also given personally to eachemployee, including an audiovisual support,aimed at creating awareness of the theme inquestion throughout the Bank’s whole structure.In 2002 personnel benefited from the ItalianBanking Association training course entitled“Anti-laundering: the new operatinginstructions”, which has become an integratedpart of the basic training of all new staff.

The Patriot ActAfter the terrorist attacks on 11 September2001, the United States Congress promoted alaw aimed at supplying the Federal Agencieswith legal support and the investigative andstandardizing instruments to combatinternational terrorism. In the context of thissituation, in October 2001 the law on Uniting andStrengthening America by providing appropriatetools to intercept and obstruct terrorism, the so-called Patriot Act, was approved. The Patriot Actcomprises, among other things, a series ofregulations aimed at controlling the area offinancing and especially money launderingthrough foreign banks. Sanpaolo IMI, being afederally supervised company, has issued awritten declaration of its observance of theAmerican regulation on 2 December 2002.

The tax collection activityThe Sanpaolo IMI Group operates in the taxcollection sector, both at treasury level and forLocal Entities, through four 100% held taxcollection companies, Sanpaolo Riscossioni Genova,Sanpaolo Riscossioni Prato, GE.RI.CO., licensee forthe provinces of Bologna, Venice, Padua, Rovigoand Gorizia and Esaban SpA (GovernmentCommissary for the provinces of Naples andCaserta). About 1,600 resources were dedicatedexclusively to this activity at the end of 2002. With a view to achieving the economies of scaleand scope necessary to sustain the profitability ofthis sector, in October 2002 the Sanpaolo IMIGroup approved the concentration of all thecollection activities in a single company. Theoperation will be accomplished through themerger by incorporation of the other threesubsidiaries into Esaban SpA, with registeredoffices in Naples, due to the relevant weightcarried by the tax collection activity in theNeapolitan market place (803 employees at theend of 2002). Besides searching for an improvement inoperating efficiency and the effectiveness of thecollection activity, the concentration operationaims to search for the diversification of businessareas which lead to an increase in revenues, bydefining new commercial development policies. Italso intends to guarantee the capacity to operatein the new sectors permitted by currentregulations, such as the credit recovery sector.

Relations with the State

Rome, Quirinale Palace


We think it is indispensable to considerenvironmental protection as an opportunityfor the bank and its customers, especiallythose belonging to the corporate segment.

We have to look to the future with theknowledge that environmental qualitycan also depend on the methods ofdisbursement of our products andservices to customers.

We are aware of the direct or indirectconsequences of the operations that wepromote or finance: when we enter intothese operations we have to fullyconsider the environmental petitions offuture generations, who have no say inour decision making processes today.

We want to adapt our aims to theinternational best practices.

We intend to exercise with responsibilityand sensitivity our role as economic actorat national level, taking care to respectthe environmental heritage of theindividual areas in which we operate.

We intend to avoid all forms ofwastefulness and actively promote - inrelation to all available technologies andin a positive context of costs/benefits -initiatives which aim at saving energyand natural resources.

EnvironmentCreation of value

Customerorientation

Integrity

VALUES



specific qualities

Responsibility in theuse of resources

Towards a “green report”During 2002 we adhered to the UNEP Declaration of thefinancial institutes on the environment and sustainabledevelopment, openly declaring our commitment “toconsider environmental needs in all our activities, in equitymanagement and in other business decisions on allmarkets”. The commitment also regards the adoption of thebest environmental management methods, the promotionof internal surveillance concerning the respect ofenvironmental objectives and the development of productsand services in line with environmental protection criteria.

Organizational supervision Some time ago the Bank adopted an organizationalstructure that guarantees, in the context of its technical-logistic-acquisition functions, supervision of environmentalperformance. In particular, the energy managementactivities (for which an Energy Manager is responsible, asestablished by law 10/91) and the specific accomplishmentand acquisition standards of the bank obey instructions on

the matter. Indications related to operating instructionsand evaluations of the choices made are supplied insidethe Bank. Periodical monitoring activities on the resultsachieved are also envisaged, to improve quality levels inthe company context.

The impact of the activities on the environmentThe Bank’s activities generate two types of impact on theenvironment:

• direct effects: linked with the activities exercised by theBank’s various operating units and identifiable inconsumption of energy (electricity and heat) andresources (paper and water), in waste and in emissionsinto the atmosphere;

• indirect effects: linked with the consequences that theBank’s activity - especially through the issue of servicesand products, has on the behavior of some of itsstakeholders towards the environment.

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Compared with industrial companies, because of the typeof activity it performs, the Bank generates limited impactson the environment, although its dimensions mean that thetotal effect cannot be ignored.The most obvious consequences concern the consumptionof energy and paper, while the production of wastefollowing the use of consumables, emissions into theatmosphere related to the consumption of energy and theconsumption of water produce lesser effects. It is alsopossible to see environmental effects in the arrangement ofwork places, especially with regard to buildings andsystems, the creation of internal telematic networks, theuse of office equipment and computers, etc. When carryingout these operations, company addresses on the matterprovide for the adoption of standardized solutionsthroughout the country, resulting from project surveys andyears of management experience, also suitable forguaranteeing the consideration of environmental aspects. To restrict the use of the analyses represented here, thefollowing information refers jointly or, where indicated,separately, to Sanpaolo, with its 19,658 employees anda net floor surface of 965,733 m2, and to the formerBanco di Napoli, with its 7,842 employees and anoccupied surface of 350,870 m2 (figures for 2002). Theperformance ratios illustrated here therefore depend onthe above elements.

Energy consumptionEnergy consumption can be classed in two types:

• combustible fuels (mainly gas and oil), used mainly forheating purposes;

• electricity, used to power machines (computers, office

Direct environmental impacts

Calculation centers

Big office buildings

Other offices and operating points

Total

2

5

1,390

1,397

54,537

135,174

776,022

965,733

807

2,672

16,179

19,658

1,510

2,925

16,179

20,614

SANPAOLO OPERATING STRUCTURE

Surface(m2)

N° ofemployees

N° of workstations*

N° of operatingpoints

equipment, etc.), air-conditioning and cooling systemsand, where the winter climate permits, pumped heatheating systems in alternative to traditional fuel systems.

Energy consumption varies greatly depending on thetype of operating unit used by the bank: naturally theuse of electricity in head office buildings, especially incenters which house central elaborating departments(CED), is much higher than in the branches. To give acomplete and as detailed as possible picture of thebank’s consumption, it was considered useful toexamine the details for each type of operating unit. Forthis purpose we individuated identified three macrotypologies of production units:

• properties with big calculation centers, characterized byoperating rooms used partially for computers, withannexed offices and IT/telematic structures;

• big office buildings, mainly related to head officeoperating structures, characterized by rooms dedicatedto use as offices with high density use and a considerablepresence of office equipment and IT networks;

• operating points and other offices/rooms: branches,other offices and rooms for accessory use (archivesand stores).

For Banco di Napoli no details are available with regard tothe breakdown of consumption between the big officebuildings and the operating points, so the figures thatfollow referred to Sanpaolo are split by typology, while forBanco di Napoli the total consumption is indicated. TheSanpaolo operating structure, in numeric terms, can besummarized as follows:

* The number of workstations includes, in addition to employees, also those workers whowork in the company premises, but are not Bank’s employees.

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Besides having different connotations in terms ofenergy consumption, the different environmentswithin the Bank are also differentiated with regard tothe variations of consumptions in time. In particular,energy consumption in calculation centers varies intime mainly because of the evolution of technologicalsolutions regarding the power and capacity of thecomputers, and the quality and type of bankingservices developed. The calculation centers are equipped with refrigeratorunits that reduce electric absorption, without effecton performance levels, when the outside airtemperature falls (use of indirect free-cooling): thisenergetic effect is particularly significant for systems

that operate all year round (therefore not only duringthe summer, when the air temperature is high). Theconsumptions of other environments depend largelyon the number and type of machines used in the workstations, the technological characteristics of themachines and, lastly, the density of work stations, alsoconsidering the amount of space reserved for thepublic/customers. With regard to lighting, unifiedlighting systems are used. These are lighting systemswith control through optic grids and with fluorescentbulbs characterised by high energy performance andquality of the light. The related energy consumptionsvary exclusively according to the type and power ofthe bulb used and related accessory elements.

Heat *(kWh/year)

- Gas (m2/year)

- Oil (l/year)

Electricity (kWh/year)

Heat by surface (kWh/year)

- gas by surface (m2/year)

- oil by surface (l/year)

Electricity

- per work station (kWh/n°)

- by surface (kWh/m2)

PERFORMANCE RATIOS

CONSUMPTION

105,839,908

9,072,195

1,877,797

191,133,890

80

n.a.

n.a.

6,717

145

4,427,315

104,571

353,433

22,377,000

81

1.92

6.48

14,819

410

7,327,132

379,342

365,701

15,535,300

54

2.81

2.71

5,311

115

74,668,552

7,006,469

738,181

99,919,000

96

9.03

0.95

6,176

129

86,422,999

7,490,382

1,457,315

137,831,300

89

7.76

1.51

6,686

143

19,416,909

1,581,813

420,482

53,302,590

55

n.a.

n.a.

6,797

152

TOTAL

Calculationcenters

Big officebuildings

Sanpaolo Banco di Napoli

Other offices andoperating points Total

* Also includes consumption for operating points with heating systems connected tocondominium systems, based on the pertinent costs.

The current level of consumption is the result of theefficiency policies we have adopted, among whichthe programmed maintenance work, mainly on allthe systems (heating, cooling and air-conditioning),ensuring, observance of the laws in force, themaintenance of maximum efficiency and thereforeguaranteeing high operating performances of thesesystems. However, we pursue a continuous improvementprocess by monitoring consumption andprogressively installing electric equipment - especiallylighting equipment and coolers - with higher energyefficiency. The figures presented also showdifferences in the use of electricity depending on the

various types of operating units considered:emphasis should be placed on the fact that thecalculation centers use the most electricity. Todaythey are largely independent from the energyviewpoint as regards heating, thanks to heatpumping systems that recover the heat producedby computers. As of 2003 they will be poweredexclusively by gas.

Hydroelectric energyIn 2002 the Bank became part of a leadingconsortium co-producing energy generated byhydroelectric stations. Consequently all thecalculation centers, big office buildings and,gradually, some of the operating points, are beingpowered with electricity produced by a renewablesource (in this particular case, hydroelectricenergy), without producing emissions into theatmosphere. The supply of electricity from arenewable source amounted to 23.7 million kWhin 2002, corresponding to 17% of Sanpaolo’s totalconsumption of electricity. Banco di Napoli, whichdid not use hydroelectric energy in 2002, has alsobegun a program of progressive extension.Compatibly with the availability of suppliers and/orthe use of renewable types of energy, in the yearsahead further use of hydroelectric energy is envisaged.

Liquid crystal screensOn the basis of analyses and measurementsrecently carried out, an experimental program has been set up, providing for the replacement oftraditional cathode tube screens with liquid crystalscreens: in 2003 about 800 screens are due to bereplaced. This last type makes it possible to obtainvarious benefits: firstly, higher purchase costs areoffset by relevant energy savings, equal to about46% of every screen, for the Network’s operatingpoints. Moreover, the heat generated by traditionalmonitors, which forms a significant part of theheat in the working environment, will be reduced,therefore reducing the energy consumption forcooling the working environment in the summer.The two previous considerations will reduceelectricity consumptions by an estimated 52% for every work station in the Network’s operatingpoints. This action will also make it possible toreduce the amount of dangerous waste generatedby the Bank.


Paper consumptionThe use of paper is linked with operating needs, informativedocuments for customers, for the part supplied on paper,and communication flows within the company. For thesereasons the bank uses normal paper (e.g.: UNI A4 type Bformat). For operating purposes the Bank consumessignificant amounts of paper. However two initiatives areunderway which, despite guaranteeing full respect of thelaw and thorough communications between the Bankand its main stakeholders, aim at containing suchconsumption. These initiatives are related to the use oftelematic supports and Internet and to the introduction ofrecycled paper. In internal communications within thecompany, where possible, the progressive passage fromthe use of paper to the use of telematic instruments andalternative informative instruments is pursued, thanks tothe development of Intranet. Also towards customers, theavailability of the Internet channel for information andprovisional purposes enables rapid consultation offinancial positions, encouraging limited use of paper.

As regards the amount of paper used for our purposesbut by independent printers, and therefore notincluded in the tables that follow, it is necessary toremember that the extensive availability of pressreleases, quarterly reports, annual reports and otherdocumentation on the website provides a strongincentive to reduce the amount of paper used forissuing usual information to the market.

Recycled paperExperimental analyses are underway to evaluate thepossibility of using recycled paper in some areas of theBank: the exam will evaluate the possible dysfunctionsof machines deriving from the use of regenerated paper.These dysfunctions could generate maintenanceoperations with major energy consumption for thetransfer of maintenance operators, so much so as tocancel the environmental benefits deriving from theuse of this type of paper.

WasteIn the context of a complete evaluation of theenvironmental impacts of the Bank, waste is less importantthan other categories described earlier. Specializedcompanies are appointed to collect and transport waste toauthorized collection points to be treated, recuperatedand/or disposed of. Differentiated waste collection, whichfavors the recovery of waste products, is developed

through cooperation with the companies appointed, whoalso have the obligation to create awareness on the matterin the operating points. The entire process is managedthrough an integrated system at national level. On the basis of the census documents and annual reportsprovided for by the regulations in force, waste products arebroken down as follows.

Dangerous waste is produced in negligible amountsrelated mainly to cathode tube monitors and to smallamounts of solvents and cadmium-nickel batteries. In this sense the current project to replace cathodetube monitors with liquid crystal versions will permitfurther reductions. In the head office buildings in Turin, the differentiatedcollection of paper and cardboard is assigned tocooperatives and voluntary associations (such as theCartesio project) following an agreement betweenAzienda Multiservizi Igiene Ambientale Torino, theCouncil Department for the Environment and TurinCouncil Employment Department.

Total waste

- paper destined for recuperation

- paper and boxes

- packing

- cartridges, tapes and films

- dangerous waste

- office machinery

- miscellaneous (includingelectrical materials)

Waste per employee (kg/year)3,474,791

2,695,124

226,180

293,566

27,672

11,072

145,832

75,345

126

99%

0%

60%

Toner 50%, films 0%

0%

16%

0%

WASTE PRODUCTIONPERFORMANCE RATIO

%recuperatedKg/year

Corb

is

Reels for large printouts

Paper for photocopies, letters

Other

Total

- of which A3 and A4 sheets

1,073

2,131

315

3,519

3,135

30.5

60.5

9.0

100

89.1

CONSUMPTION

%t /yearType of paper

Consumption of paper per employee (kg/year)

Consumption of paper per customer (kg/year)

Consumption of A3 and A4 sheets per employee

- kg/year

- n°/day*

128

0.7

114

81

PERFORMANCE RATIOS

Forms are excluded.*Referred to 250 working days/year

˙

Heat (kg/year of CO2)

- Gas

- Oil

Electricity (kg/year of CO2)

Heat by surface (kg/year of CO2 per mq)

Electricity by surface (kg/year of CO2 per mq)


Atmospheric emissions attributable largely to the energyconsumption linked to our activities can be broken downinto two main categories:

• direct: generated specifically by heating systems(including condominiums) at the service of the Bankand comprising the products of combust gas, oil andother combustible fuels. Moreover, combustible fuelenergy sources are not normally used for airconditioning purposes.

• indirect: consequent to the use of electricityproduced by thermoelectric stations. In this case theemissions are generated outside the buildings whichhouse the Bank’s operating points.

In greater detail, we can confirm that, as regards directemissions, the territorial operating units, consideringtheir size, each generate rather contained emissions intothe atmosphere. However, altogether they reach a totalamount of emissions which cannot be ignored.

On this matter, part of these emissions are generatedby condominium heating systems, attributable to theBank only in a minimal part.The small number of big head office buildingsgenerate major amounts of emissions, while thecalculation centers (being largely independent interms of heating) considerably limit emissionscompared with those buildings of equal size used asoffices but lacking in heat recovery systems. Anyway,the extensive use of gas as a fuel and the use of heatpumps in central and southern Italy significantly limitemissions. The combination of the bank’s electricity consumptiontakes on a relevant dimension, to which part of theemissions of electricity production stations contribute:this is part of the indirect effects. The above-mentioned passage of the calculationcenters, head office buildings and major operatingpoints to the use of electricity produced byhydroelectric stations, eliminates the relatedemissions.

As regards other potential types of emissions, thebank’s cooling systems do not use R11 and R12cooling fluids, excluding isolated cases of buildingswith old systems which use R11: their replacement isprogrammed for the next system modernizationoperation. In recent years, the cooling units installedin the bank have been equipped with R407C (ratherthan R22 adopted from 1970 onwards), which has areduced pollutant potential compared with the otherfluids mentioned.

The high number of employees which, to reach work,or during service, use highly differentiated means oftransport, makes it impossible to ignore theenvironmental impact of emissions connected withthe mobility of employees and suppliers. For obviousreasons it is also very difficult for the bank to quantify.However we have implemented policies to encouragethe use of public transport and the Bank itself hasactivated collective transport systems for employees,as in the case of Naples and of the Accounting Centerin Moncalieri (Turin).

Atmospheric emissions

18,144,390

6,760,070

100,460,335

209,142

1,272,359

6,504,454

758,684

1,316,524

4,000,178

14,012,938

2,657,452

57,974,149

14,980,764

5,246,335

68,478,781

3,163,626

1,513,735

31,981,554

19

76

27

119

15

30

21

75

21

71

13

91

ESTIMATED EMISSIONS

PERFORMANCE RATIO

TOTAL

Calculationcenters

Big officebuildings

Operating pointsand other Total

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Sanpaolo Banco di Napoli

Requiring no water for the company processes, theBank’s water consumption is quite limited and refersalmost exclusively to use for hygiene purposes. The water used is supplied exclusively by aqueducts,guaranteeing the necessary hygiene.In some large operating units water is used toreintegrate the water evaporated during thetreatments in the technological cooling systems. In some rare cases, water is taken from undergroundsources for use as energy in heat pumping systemsserving heating and cooling/air-conditioning systems.

This already limited consumption of water can bereduced even further and we intend to promote majorawareness among employees, and install toiletcisterns with divided flushing systems in thebathrooms of new operating points.

Water consumption


During its activities and also through the services andproducts offered, the Bank can influence the behavior ofits stakeholders in terms of respect for the environment.As regards financing, in particular, the consideration ofenvironmental risks when assessing creditworthiness canbecome a strong incentive for companies to improve theirenvironmental performance.

Methane gas in public transportBanca OPI is dedicating particular attention to a projectthat envisages the adoption of ecological vehicles by thecompanies operating in the public urban road transportsector. It is a well known fact that public urban transportis responsible for a relevant amount of the noxious gasespresent in Italian cities (for some gases up to 90%): theurban environmental benefits of the introduction ofvehicles that use ecological fuels - especially methanegas - in harmony with the regulatory policiesimplemented in the EU, would therefore be significant.Also significant would be the effects in terms ofinvestments: the renewal of 25% of urban buses in thenext five years, equivalent to about 4,000 new units, aswell as the adaptation of the related supportinginfrastructures, such as methane gas stations, wouldrequire investments for several billion Euro.

The environmental criteria of ethical reservesEthical funds (produced by Sanpaolo IMI WealthManagement14) can also constitute an importantstimulation for companies: positive criteria (for theintroduction of a company within the fund) includesensitivity towards protecting the environment. Negativecriteria (which are a source of exclusion of shares) includethe direct production or creation of systems for producingnuclear energy (this criteria is valid not only for companiesbut for States).

THE EVALUATION OF THE ENVIRONMENTALRISK WHEN ISSUING LOANS

Nowadays the risk factors inherent in banking activitycan also significantly emerge from elements which arenot always attributable to traditional areas and cannotbe individuated directly in the performance of real andfinancial activities which are expressed in accountingdata: an example of these are risks regarding legalissues, reputation, environmental impact and those ofethical and social nature. In particular, environmental factors can representsources of risk capable of influencing the bankingactivity through two main channels: 1. on the one side, they can have a direct impact on

the repayment ability of the counterpartiesassigned: for instance, scarce attention to theecological content of the product and the eco-compatibility of the production processes by thecompany can represent a direct source of risk offailure and economic loss that the bank might finditself having to sustain;

2. on the other side, environmental factors mightreflect more indirectly on the evaluation of thecreditworthiness of a company and on itsreputation: for instance, scarce attention to theenvironmental problems directly generated bycompany production processes can be consideredas a real symptom of entrepreneurial omission withpossible negative consequences on the prospectsof growth and financial sustainability of thecompany and of its investments. This couldendanger future relations of activity and reciprocalcooperation between the bank and the company.

Several years ago, the Bank began considering andevaluating the relevance of these problems.In December 2002, for the first time, an indicatorrelated to the percentage of loans issued tocompanies operating in production sectors with ahigh and dangerous impact upon the environmentwas monitored. Activities considered as having a highand dangerous environmental impact represent10.2% of the joint credit portfolio of Sanpaolo IMIand Banco di Napoli. This ratio has been constructedon the basis of the indications on the productionactivities supplied by the Bank for Reconstruction andDevelopment (BERS) in its environmental riskmanagement manual.The environmental policies of companies are also

subject to evaluation in the Bank’s financing decisions.Attention to environmental problems by companiesrepresents one of the areas of investigation taken intoconsideration by the credit review, especially formedium- and long-term loans. The Bank’s attention to environmental problems canalso be seen in the activities for structuring projectfinancing transactions for infrastructure operations,including those in sectors which do not present highenvironmental risks. A positive evaluation of the impact on theenvironment of the creation of the infrastructureunder examination is one of the fundamentalprerequisites for the financing of the initiative. This evaluation is carried out by independentconsultants - for reasons concerning autonomy andlegal transparency - involved by the Bank during theproject structuring phase, and must be confirmed bythe official evaluation carried out by the national orregional bodies responsible for this task. Particularly attentive to the environmental effects ofany infrastructure operation suitable for financing,also in sectors which do not usually have anenvironmental value, is Banca OPI15, the Groupcompany specialized in loans for public works andinfrastructure. A positive evaluation, carried out byindependent consultants and confirmed by the officialevaluation of the regional or national bodiesresponsible, of the impact of the environment derivingfrom the creation of each individual infrastructureconsidered, is one of the fundamental prerequisitesfor its financing. The models used by Sanpaolo IMI to evaluatecreditworthiness take account of the environmentalrisk profiles in the context of the review process for theevaluation of the counterparty and in any proceduresfor preparing the rating and assigning the riskpremium. In particular, the assignment of the ratingmay be subject to downgrade; in other words,downward reviews, if the counterparty consideredoperates in specific production activities with a highenvironmental impact (e.g.: energy, chemicals, plastics)and does not supply sufficient guarantees regardingobservance of the best practices of management andcontrol of its environmental responsibility.

Indirect impacts

14. For more details on ethical reserves, see page 48. 15. For more details on Banca OPI, see page 101.

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We want to establish with ourcommercial partners andindependent cooperators an efficient system of relationscapable of translating into a common prospective of growth and economic benefit.

We choose our partners on the basis of the level of quality that they are ableto guarantee, privileging those that canensure to us and our customers mosteffectiveness and reliability.

We base relations with our supplierson principles of reciprocaltransparency and correctness,ensuring that the work of ourindependent cooperators observesthe same criteria and honesty asadopted by us.

We choose our suppliers on the basis of the level of performanceand the guarantees supplied,searching, with their cooperation,the most innovative and reciprocallyprofitable solutions.

We have supply relations all over thecountry, exploiting the social andcultural context of each regional realityas much as possible and respecting thenegotiation requirements of eachstakeholder.

We contribute to the bank’s total resultsby activating initiatives dedicated toreducing costs and waste.

Creation of value

Customerorientation

Integrity

VALUES



specific qualities


of resources

In 2002 we had commercial relations with about 9,800suppliers (of which 469 destined to payments of over155,000 euro) for a total turnover of about 826.6million euro.

Through the Purchases Function16 , our priority intention is to:

• obtain levels of efficiency and excellent results in stockingtransactions, with the purchase of products and serviceswith the best price/quality ratio and in observance of therequirements of “internal customers”, in order tomaximize the result for the end customer both in terms ofcosts and in terms of issuing times;

• contribute to the bank’s total results by activatinginitiatives dedicated to reducing costs and waste;

• stipulate, when possible, Group commercial agreements,in order to obtain better stocking conditions.

We work in conjunction with all the bank’s functions, so thatthe real needs of each user can be securely determined inthe search for the specific solution to satisfying individualrequirements.

16. The Purchase Function’s job to “define the Group’s purchasing policies, to supervise, monitor andmanage the Group’s purchases in terms of supplied linked with “information and communicationtechnology”, and every other asset or service which has significant potential of scale and economyobtainable through management in a centralized form, in accordance with a logic of access to thebest conditions practiced in the various reference markets”.

The profile of suppliers

Equipment, systems14%

Other18%

Advisory6%

Data processing,datawar houses6%

Parcel services and transports

3%Real estate

maintenance5%

Rents, leasing

21%Software27%

DISTRIBUTION OF BIG SUPPLIERS BY SECTOR (singlepayments above 155,000 €)

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Suppliers


Shared principlesRelations with our suppliers are based on principles ofreciprocal transparency and correctness. To this end, we ensure that the work of our independentcooperators observes the same criteria of integrityadopted by the purchase function.

The selection of suppliersTo individuate the suppliers in possession of thestanding, capacity and competitive requisites requiredin the individual merchandising areas of operation weadopt the instruments made available by the purchasemarketing techniques and carefully analyze theindividual markets.

Special care is dedicated to the selection phase, which isimplemented through a dual passage:1. During the first phase, a series of companies areselected on the basis of consistent criteria. The number varies in relation to the relevance of theindividual contract. During this phase we pay particularattention to the fact that the companies possess theobjective requisites of reliability and competence,including their effective capacity to satisfy the demandfor the product or service.The companies individuated as possible interlocutors forthe purchase procedure are then invited to present a bidfor tender. The bids are presented in sealed envelopesand are evaluated according to transparent andobjective criteria. At the end of this phase, a group of companies gainsaccess to the final selection.

2. The second contracting phase is aimed at selectingthe best bid and optimizing the final results of thepurchase operation.

Safety of products and energy savingWhen choosing products and services, we also try tofocus on products and services which offer the bestresults in terms of energy savings. For special supplies (compatible toner, securityenvelopes for carrying valuables), we thought it best toexercise a form of preventive security in order toreduce the risk of defective products as much aspossible. Therefore we ask for certification ofconformity to UNI-EN ISO 9000 by the manufacturer.As regards security, when the bid is presented for anykind of consumable product, the suppliers sign astatement that the materials, if any, supplied willcomply with the accident prevention and security

regulations in force. In a subsequent phase thesuppliers declare, in the form of special labeling, thepresence of symbols of danger, where necessary, orthe classification, following exhaustion of the product,as special or dangerous waste, so that it can becorrectly disposed of in accordance with theregulations in force. For supplies of equipment and instruments destinedfor use by employees, the companies must declare theergonomic and safety specifications required by thenational and international regulations in force, and bythe special quality certifications.

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135Parent Bank – Objectives for 2003

Objectives for 2003

136 Parent Bank – Objectives for 2003 137Parent Bank – Objectives for 2003

Having mentioned the actions undertaken and our futureplans in the part dedicated to our stakeholder, now we wouldlike to describe the main objectives that we intend to pursuein the coming future. Before discussing the merits of everysingle stakeholder, we would like to remind you howimportant it is for each one of them to adopt an Ethical Code,approved by the Board of Directors in March 2003. For thenear future we foresee the timely dissemination of the Code,its implementation in the relations with our partners, as wellas training activities for the employees.

• Development of commercial policies based oncustomer needs. Implementation of the ClientFinancial Planning project through a vast trainingplan intended for consultants and network agents,predisposing the IT tools concerned.

• Setting up of branch organizational modelsspecialized in customer segments: creation ofdifferentiated areas within the same branch, basedon specific modules combining distributiveefficiency with a personalized commercial approach(personal consultants).

• Growing use of direct channels for repetitiveoperations which do not require any interactionwith the Bank staff. On the one hand this allowscustomers to use basic banking servicesindependently and without time constraints and, onthe other hand, this gives the bank staff theopportunity to chiefly focus on the analysis ofcustomer needs and relational aspects.

Retail Customers• We intend to dedicate growing attention to the SME

sector and to the financing of specific local realties, whilecontinuing to ensure support to the entire nationaleconomy.

• Further widening of the knowledge of local productionsituations with the aim of understanding the differentfinancing and support needs in an even more articulatedand precise manner.

• Development of the training and specialization activitiesfor the professional figures dedicated to companybranches. This activity shall mainly concern the resourcesoperating in the area of competence of the formerBanco di Napoli, also to achieve an improvement inlogistics and an adjustment in the products portfoliowith the aim of putting the pre-existing structurescompletely in line with the qualitative standardsfollowed by similar Sanpaolo structures.

• Further widening of the range of telecom services tocompanies, in particular granting access to thecustomers of the former Banco di Napoli.

Customers Companies

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•Continuation of the people development and exploitationpolicy, with special consideration of promising resourceswithin the Group.

•Development of new systems and tools for themanagement of human resources:

1) managerial control of staff and Group personnel cost;2) Human Capital assessment system for the creation

of company value;3) decision support instruments with Enterprise Business

Intelligence IT solutions.

• Implementation of actions to increase efficiency and fosterfuture growth consistently with the indications of theindustrial plan.

•Continuation of the retributive flexibility policy.

•Application of a meritocratic award-granting system basedon three factors determining the value of a person: “know-how”, “performance”, “potentials for development”.

•Confirmation of the transparent industrial relations policyopen to social profiles.

•Creation of an internal communication plan.

• Strengthening and extension of the activities concerningsafety and security through actions such as:

1) the extension of Sanpaolo procedures to the Banco di Napoli for security and risk assessment, in particular in terms of indirect risks deriving from the work environment;

2) a monitoring campaign for Radon gas and its possible quantification;

3) the use of on-line training tools on safety for employees.

People• Increase of company profitability by aiming at ambitious

objectives, taking particular care on controlling costsand maintaining a contained risk profile and a solidasset base. Some of the planned actions include:

1) three-year plan, with the planned networkintegration process and the adoption of a newdistributive model;

2) initiatives focusing on improving the profitability ofthe main business lines and the active managementof the investment portfolio.

• Priority to the pursuit of a corporate governance modelin line with the highest international standards, alsocomplying with the strict American regulations recentlyamended.

• Further improvement of communication withinvestors. Actions include:

1) Intensify business activities towards the internationalmarket place and with SRI (Socially ResponsibleInvestments) investors;

2) timely update of the Investor Relations site andsetting up of the new Group site.

Shareholders

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• Give priority to territory financing activities as well as tothose activities supporting the productive structure, alsothrough research and study initiatives. Actions include:

1) intensification of Banca OPI activities;2) incentives to the economic cooperation between the

public and private sector;3) the launch of a Study and Research Association for the

South of Italy;4) the launch of closed-end funds for the territory.

• Management of the territorial reorganization of theGroup so as to guarantee proximity to the territory, withparticular focus on the consolidation of the dialoguewith local communities with a view to their growinginvolvement. Planned initiatives:

1) organization of Consultative Committees on the localeconomy;

2) activation of decentralization and specialization actionsset by the strategic plan 2003-2005.

• Study and launch of initiatives focusing on specificcategories:

1) micro-credit project;2) social banking;3) initiative for the elderly.

Collectivity• Constant development of the financing of

environmental investments through Banca OPI. Theplanned actions also include the initiative in favor of agrowing use of methane gas.

• Further improvement of our environmentalperformance, saving energy and natural resource. Someof the actions concern:

1) a greater use of hydroelectric energy;2) the starting up of a feasibility study for a pilot project

concerning recycled paper;3) implementation of the initiative involving the

replacement of traditional PC screens with liquid crystalvideo screens.

• Extension of the illustrated procedures to the Banco diNapoli, with special attention to those initiativesfocusing on energy management and natural resourcesavings already adopted by Sanpaolo, also through theintegration of IT systems.

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• Improvement of co-ordination with the functions thatcurrently monitor environmental and social problemsinside the bank as well as with those functions whichwill do so in the future.

• Careful analysis of the activities with the suppliers with aview to the tools that will allow to:

1) systematically identify the environmental effectsderiving from different products and services;

2) introduce environmental considerations in theprocedures for the purchase of goods and services ofgreater impact.

Suppliers

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145Parent Bank – Allocation of added value

Allocation of added value

146 Parent Bank – Allocation of added value 147Parent Bank – Allocation of added value

The added value of a company represents the wealthproduced by the company in the year, identifiable as thedifference between the gross production and theconsumption of goods and services.The calculation of this value acquires importance as itrepresents the accounting reconciliation between theannual report and the social report. Indeed, it is calculatedthrough a classification of the items of the annualstatement of income with the aim of highlighting both theprocess for the formation of the company added valueand its distribution, expressing in monetary terms therelation between the company and the social-economicsystem with which it interacts, with special reference tosome of the main stakeholders considered:

• Shareholders

• Human resources

• State, Entities and institutions

• Corporate Sector

From a methodological standpoint, of all the differentconfigurations that the Added Value may have, dependingon the level of aggregation of the income components, theGlobal Added Value-G.A.V. configuration, adopted in theABI model for the preparation of the Social Report for thecredit sector, was selected. The ABI model takes into accountthe specific nature of the banking world.The data used are extracted from the accounts and theannual report.The following pages report the two main reclassifiedstatements making up the Annual Report, the Balance Sheetand the Statement of Income, with the most important ratiofor the bank being highlighted.The statements concerning the calculation and allocation ofthe gross global added value on the basis of its destinationhighlight the share due to each stakeholder. Thesestatements are created by analytically re-processing theincome statement data following a different methodology.

As regards the content of the single statements, we highlightthat:

• The reclassified statement of income and balance sheetfor the year 2002 are compared against the pro formasituations of the previous year, drawn up toacknowledge:- the Cardine Banca merger by incorporation (with accounting effects starting on 1 January 1 2002);- the conferral of the Cardine Banca company branch toCardine Finanziaria (effective as of 1 June 2002);- the Banco di Napoli merger by incorporation (with accounting effects starting on 1 January 2002);- the change, in place since the 2001 report, in theaccounting criteria for the calculation of the dividendsfrom subsidiaries in the year in which the profit accruesrather than in the year in which it is collected.

• The important ratio concerning efficiency in terms ofpersonnel, operative structure, financial structure,profitability and securities market performance havebeen extracted from the data of the financialstatements (the data concerning the year 2001 wasreported on a pro forma basis).

• The statements concerning the analytical calculationand the year 2001 allocation of the global addedvalue used for comparison, having taken into accountthe different purposes of these statements ascompared to the purpose they have in terms ofcomparisons in the economic and financial trends ofthe bank, have been calculated on a combined basisof Sanpaolo IMI and merged banks, rather than on apro forma basis: the use of pro forma data wouldhave resulted in an incorrect representation of theallocation of the produced added value among thedifferent categories of stakeholders.

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

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

Shareholders’ equity- capital- reserves- net income- adjustment for alignment with net income

Total liabilities

GUARANTEES AND COMMITMENTSGuarantees givenCommitments

986

97,11020,95176,159

12,658

13,3812,0398,3131,6131,416

10,872

135,007

106,23331,02075,213

3,1151,038

6871,349

41

9,613

6,090

9,9565,1444,048

764

135,007

30,14214,181

31-12-2002

(€/mil)

31-12-2001

pro-forma

(€/mil)

779

99,65620,40279,254

15,444

15,3623,2568,6461,9031,557

14,480

145,721

116,60636,38680,220

2,927793687

1,40443

10,191

5,311

10,6865,1443,9431,065

534

145,721

26,69616,575

The calculation andallocation of added value

Reclassified balance sheet


NET INTEREST INCOMENet commissions and other net dealing revenuesProfits and losses from financial transactions and dividends on sharesDividends 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 differencesProvisions and net adjustments to loans and financial fixed assets

INCOME BEFORE EXTRAORDINARY ITEMSNet extraordinary incomeUse of reserve for general banking risksIncome taxes for the period

NET INCOME

2,1031,512

62700

4,377-2,866-1,823

-885-158252

-330

1,433-185-748

500316358

-410

764

2002

(€/mil)

2001

pro-forma

(€/mil)

2,3461,573

861,253

5,258-2,889-1,848

-879-162254

-298

2,325-196-463

1,666378

--979

1,065534

1,599

Reclassified statement of income

Adjustment for alignment with net incomeAggregate net income (Sanpaolo Imi + Cardine Banca + Banco di Napoli)

The structure of the Company’s statement of income istypical of an operative bank, parent company of amultispecialist reality. The main sources of revenue includethe net interest income, commissions and dividends fromsubsidiaries.The bank’s economic performance in 2002 wasconditioned by the difficult market context, which wascharacterized by:

• the fall in the net interest income (-10%) and incommissions (-4%);

• the loss of a significant amount of dividends fromcompanies in the group (-582 million euro);

• the need to make significant adjustments to theequity portfolio (+256 million euro compared to theprevious year);

• the increasingly heavy impact of fiscal policies essentiallydue to the decrease in taxable income (consequent tothe drop in profitability and to the incorporation of theBanco di Napoli), which gave rise to both inefficiency interms of tax credit recovery limited on dividends(entered for competence in the 2001 report andcollected in 2002 with relative fiscal accountability), anda penalization in terms of IRAP taxation (Regional Tax onProductive Activities).

In order to face the effects of such factors, some of whichare of extraordinary nature, bearing in mind the need toensure shareholders an acceptable flow of dividends, itwas considered appropriate to use the reserves for generalbanking risks for an amount of 358 million euro (inclusiveof the allocation of the merger surplus concerning theincorporation of Cardine Banca). After the use of this Reserve, which according to theregulations in force (instructions from the Bank of Italy)should occur by means of registration in the statement ofincome, the Parent company closed the year 2002 with anet profit of 764 million euro, equal to 406 million euronet of this Reserve; this value is to be compared with a netprofit of 1,065 million euro(-29%), recalculated on a proforma basis for the year 2001.Due to the economic trend described above, the bank’s RoEdecreased on an homogeneous basis from 10% to 7.4%.

On the other hand, the gross global added valuedecreased by 36% compared to the combined data forthe previous year (from 5,193 million euro to 3,315million euro).


PERSONNEL EFFICIENCY RATIOSGross loans to customers (*) / Average number of banking employeesCustomer financial assets (**) / Average number of banking employeesPersonnel costs / Net interest and other banking incomeNet interest and other banking income / Average number of total employeesGross result / Average number of total employeesDirect customer deposits (**) / Average number of banking employees

Average number of total employeesAverage number of banking employees (***)

OPERATING STRUCTURE (****)Branches and area offices

- Italy- Abroad

Representative offices

CAPITAL RATIOSShareholders’ equity / Net loans to customersShareholders’ equity / Customer financial assets

REGULATORY CAPITAL STRUCTURE (****)Regulatory capitalTotal ratioTotal 1 ratio

PROFITABILITY RATIOSROE (Return on Equity)Cost / Income ratioNet commissions / Administrative costs

SANPAOLO IMI SHARESQuoted price per share

- average- low- high

Net income / Number of shares in circulationDividend per shareDividend per share/ Average annual price

2.75 7.06

41.6%0.15 0.04 2.42

29,137 28,522

2,115 11

17

13.1%4.8%

12,191 12.9%9.1%

7.4%65.6%52.8%

9,439 5,231

13,702 0.42 0.30

3.2%

2002

(€/mil)

2001

pro-forma

(€/mil)

2.71 7.04

35.1%0.17 0.07 2.53

30,166 29,324

2,107 13

17

13.5%5.0%

9,776 12.6%10.0%

10.0%54.9%54.5%

14,375 8,764

18,893 0.58 0.57

4.0%

Key ratios

(*) Net of repurchase agreements and investment securities loaned.

(**) Excluding repurchase agreements and deposit securities loaned

(***) Excluding the average employees operating in the tax payments sector.

(****) As of 31/12/02, the Sanpaolo IMI Group had 3,205 tellers and regional offices, of which 3,069 in Italy. 4,955 financial planners worked for the Group.

(*****) The data as of 31/12/01 refer only to Sanpaolo IMI.

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Revenues

Consumption

GROSS ADDED VALUE

Net extraordinary components

GROSS GLOBAL ADDED VALUE

Divided among:

SHAREHOLDERSDividends distributed to shareholders (*)

HUMAN RESOURCES AND SOCIAL INSTITUTIONSLabour cost

- direct- indirect (social security charges)

Other personnel expenses (**)

STATE, ENTITIES AND INSTITUTIONSIndirect and property taxationIncome taxes for the period

CORPORATE SECTORNet adjustments to tangible and intangible fixed assetsReserves and earnings non distributedChange in reserve for general banking risks

GROSS GLOBAL ADDED VALUE

8,012

-5,014

2,998

316

3,314

551

1,407 416 96

159 410

515 118

-358

3,314

2002

(€/mil)

2001

combined

(€/mil)

10,161

-6,200

3,961

1,232

5,193

1,066

1,456 399 93

162 1,229

348 440

5,193

Statement on the allocation of the gross global added value

(*) The dividends distributed in 2001 were influenced by the mentioned change to the criteria for the calculation of dividends from subsidiaries

in the year in which the profit accrues rather than in the year of collection of the dividends. This change resulted in an increase in the net profit of 584 million euro on a combined basis.

(**) These are charges registered among the extraordinary items or covered using funds resulting from provisions of preceding years.

REVENUESInterest income and similar revenuesCommission incomeOther:

- dividends and other revenuesprofits (losses) on financial transactions- other operating income

TOTAL GROSS PRODUCTION

CONSUMPTIONInterest expense and similar chargesCommission expenseOther operating expenseOther administrative costs (1)Net adjustments to loans and provisions for guarantees and commitmentsNet adjustments to financial fixed assetsProvisions for risks and chargesTOTAL CONSUMPTION

GROSS ADDED VALUE Extraordinary incomeExtraordinary expense

GROSS GLOBAL ADDED VALUENet adjustments to intangible and tangible fixed assets and merger differences

NET GLOBAL ADDED VALUELabour cost

- direct- indirect

Gifts and donations (1)Indirect and property taxation (1)

INCOME BEFORE TAXES Change in reserve for general banking risksIncome taxes for the periodNET INCOME

5,363 1,630

700 62

257 8,012

-3,260 -118

-5 -883 -259 -338 -151

-5,014

2,998 495

-179

3,314

-515

2,799

-1,407 -416

-2 -158

816 358

-410 764

2002

(€/mil)

2001

combined

(€/mil)

6,804 1,680

1,253 86

338 10,161

-4,436 -107 -11

-977 -315 -246 -108

-6,200

3,961 1,465 -233

5,193

-347

4,846

-1,456 -399

-1 -162

2,828

-1,229 1,599

Analytical added value statement

(1) Balance item 80 (b) was disaggregated, separating the part referred to:- Gifts and donations- Indirect and property taxation


objectives for the strengthening of the Corporate SectorSystem, as proved by the high level of adjustments andprovisions and by the absolutely appropriate level of theBank’s capital ratios (the Group’s objectives include 6%of tier one ratio net of the preferred shares and 10% oftotal ratio). This policy translates in the allocation to theshareholders of € 0.30 dividend per share,corresponding to a 4.7% dividend yield calculated onthe average share price of the month preceding theresolution by the Board of Directors (middle of January -middle of February 2003). This parameter is about 4.3%compared to the current price.As already stated, the pay-out policy was possible alsothanks to the use of Reserves for General Banking Risks,358 million euro, affecting the share concerning theStatutory System.The share referring to Human Resources, although inslight decrease in absolute terms, has increased its

incidence in the period, always due to the decrease inthe gross added value produced. The decrease in personnel costs is attributable to thecontinuation of actions of personnel reduction and inparticular to the initiative of incentive to the voluntarytransfer to the former Banco di Napoli; this reductionwas obtained despite increases in contracts during thelast year, following the renewal of the national laborcontract. It is also pointed out that personnel costsinclude the charges of about 800 members of stafftransferred to ESABAN in October 2002, which willcentralize tax collection activities within the Group. The personnel structure of the Bank in the period, shows1,546 terminations and 573 hires, with the applicationof a management strategy that, if on the one handresorts to incentives to voluntary transfers, on the otherhand also promotes development by hiring newresources to ensure a progressive generational cycle.

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Allocation of added value

Comparison in added allocation

The pie chart illustrates in detail the allocation of the Added value among the different stakeholders:

• 58% to Human Resources in the form of salaries, socialsecurity charges, termination indemnities, pensions andsimilar commitments;

• 17% to the State, Local Entities and Institutions in theform direct and indirect duties;

• 17% to Shareholders in the form of dividends;

• 8% to the Corporate Sector.

The comparison in the gross global added valueallocation among the different categories ofstakeholders in 2001 and 2002 highlights how the mainvariations are attributable to the economic trend of thebank in the last year, mainly as a result of the negativeconjunctural situation.In particular, the decrease in the shares assigned to the

State, Entities and Institutions and to the shareholders isa direct consequence of the contraction in the addedvalue produced. On this point, it is important to noticehow, despite a decrease in the profits available fordistribution, the bank continued its traditional policy oflooking after the creation of value for Shareholders.This policy is pursued consistently and compatibly with the

Corporate sector

State, Entities and Istitutions

Human resources

Shareholders

2001

2002

Notwithstanding the ABI principles, the added valueattributed to the Shareholders includes (229 million euroin the period 2002 and 401 million euro in the period2001) the dividends distributed by Sanpaolo IMI toCompagnia di San Paolo, Fondazione CR Padova e Rovigo,Fondazione CR Bologna, Fondazione Cariplo, Ente CRFirenze, Fondazione CR Venezia, Fondazione CR Udine ePordenone, Fondazione CR Verona Vicenza Belluno eAncona, Fondazione Monte dei Paschi di Siena,Fondazione CR Gorizia and Fondazione CR Carpi, whosemission is to perform actions in social, artistic andscientific contexts in favor of the community. Based on thisallocation, the separate identification of the added value to the community was not considered significant.

Human Resources58%

State, Enties and Istitutions17%

Corporate Sector8%

Shareholders17%

0 500 1,000 1,500 2,000 2,500

PricewaterhouseCoopers’opinion

158 2002 Social Report – Pricewaterhouse Coopers’opinion 1592002 Social Report – Pricewaterhouse Coopers’opinion

Attachments

The

Imag

e Ba

nk

ETHICAL CODE OF SANPAOLO IMI S.P.A.

GLOSSARY

162 2002 Social Report – Attachments 1632002 Social Report – Attachments

Ethical Codeof Sanpaolo IMI S.p.A.

1.RECIPIENTS AND FIELD OF APPLICATION OF THE CODE

The principles of this Ethical Code inspire the strategicactivities carried out by the Board of Directors, thedirectors as well as the activities for the coordination andimplementation of the policies and the planned objectivesof the SANPAOLO IMI management.This Code contains an exemplification of the rules ofconduct that each SANPAOLO IMI employee is obliged toobserve and specifies the obligations to use diligence,fairness and loyalty characterizing the work performance;reference is also made to the provisions of art. 2104 andart. 2105 of the Civil Code. The regulations contained in the Ethical Code are bindingalso for the SANPAOLO IMI external partners and co-workers, who are also obliged to respect the rules oflegality, fairness and good-faith mentioned above.

2.OBSERVANCE OF THE LAWS AND REGULATIONS IN FORCE

By adopting every prevention and control measuresdeemed necessary, SANPAOLO IMI undertakes toguarantee the integral and unconditioned observance ofthe laws and regulations in force in every geographicaland operative context, at all decisional and executivelevels.

3. PRINCIPLES OF FAIRNESS, CONFIDENTIALITY AND IMPARTIALITY

In the performance of their professional activities,directors, employees and co-workers are required tobehave in line with the principles of fairness and honestyand in observance of obligations of confidentiality in themanagement of information in their possession. In its relations with the totality of subjects it may operatewith, in any operative and organizational context insideand outside the Group, SANPAOLO IMI does notdiscriminate in terms of age, gender, health status,nationality, political opinions and religious faith of itsinterlocutors.

4. COMPANY’S ACTIVITY AND BUSINESS ETHICSIn performing its activity, SAN PAOLO IMI aims atmaximizing profitability and reaching excellent levels inthe services offered to its customers in order to maintainand increase the company’s worth. These objectives arepursued through efficiency and market openness, in faircompetition with the other operators, avoiding collusive orabusive practices/behavior to the detriment of thecustomers and of consumers in general.Relations with suppliers of goods and services areestablished in observance of the efficiency, loyalty andimpartiality practices, in accordance with internalprocedures provided for this purpose. In any case,SANPAOLO IMI undertakes to follow impartial andtransparent selection mechanisms, avoiding practiceswhich may create situations of dependence andadequately documenting the phases concerning theestablishment, management and termination of theserelations. In every relation and activity, and in relationswith institutions and the Public Administration inparticular, SANPAOLO IMI undertakes to adopt all thecaution necessary to avoid the pursuit, both on own andfor its customers, of illegal objectives and interests,improper profits and/or benefits and conflicts of interest,which may potentially be detrimental to the concept ofindependence of both SANPAOLO IMI and itsinterlocutors.

5. INFORMATION TRANSPARENCYSAN PAOLO IMI ensures full transparency for investors andthe financial community, in compliance with the criteria oftrue, punctual and prompt dissemination of necessaryinformation and every other communication about thecompany. The activity of external communication falls to theChairman and/or Managing Directors, who for this end usethe structures of Investor Relations and CompanySecretariat. “Price-sensitive” information is treated andcommunicated following an internal procedure approved bythe Board of Directors, in observance of the obligation toconfidentiality, to which Directors and Auditors are bound inthe company’s interest.

6.RELATIONS WITH CONTROL AUTHORITIESThe relations with national, community and foreignRegulatory and Control Authorities inspire the observanceof transparency principles and fair cooperation. In makingperiodical communications and announcements as well asin specific relations, SANPAOLO IMI guarantees thecompleteness and integrity of the news and the objectivityof the assessments, ensuring a timely fulfillment.

7.GUIDING PRINCIPLES IN AN INTERNATIONAL CONTEXT Compliance with the regulations contained in this Ethical

Code is required also in the cases in which operations areperformed in foreign markets, in relation to the geographicalarticulation of the activities carried out. The specific cultural,social and economic aspects of the different countries inwhich SANPAOLO IMI operates, both directly and indirectly,in no case justify conduct that is not in line with referenceethical principles. SANPAOLO IMI actively cooperates withthe Authorities in charge of preventing and repressingmoney laundering activities, and, in every operating andgeographical context, it observes strict internal rules ofconduct issued to implement regulatory provisions andinternational best practice.

General Principles


1. TASKS AND DUTIES OF ADMINISTRATIVE AND CONTROL BODIES

1.1 Role of the Board of DirectorsIn the performance of its functions and with the objective ofkeeping the company efficient and effective, the Board ofDirectors of SANPAOLO IMI carries out all the actions neededto ensure:

• central control of the strategic interests of the SANPAOLO IMI Group by defining the organizationalstructures suitable for the reference context and theobjectives pursued and by determining competence andresponsibility areas for each operating and control area,ensuring the necessary coordination mechanisms withinthe SANPAOLO IMI Group;

• adequacy of the control structures and procedures aimedat the constant monitoring and prevention of credit,financial and operating risks run by SANPAOLO IMI andthe entire Group, in compliance with the guidingprinciples of separation between “originators” of therisk and “controllers” of the risk and of allocation ofresponsibility for the functions in charge of businesscontrol, in observance of the limits of exposure set bothinternally and by the Regulatory regulations.

1.2 Directors and ManagementIn respect of the relationship of trust, the directors of SANPOLO IMI shall provide their services in full and integralcompliance with the laws and the regulations in force aswell as in observance of the provisions of the Ethical Codeand other Codes of Conduct adopted.The directors and the management of SANPAOLO IMIhave the duty to perform their functions, playing their rolewith consciousness and sense of responsibility, inparticular striving to combine the pursuance of companyobjectives with the respect of the reference ethicalprinciples to protect the interests of shareholders,customers and the community and safeguard thereputation of the Group and the principles of formal andessential legality. Moreover, the directors of SANPAOLO IMI must try toavoid situations involving a conflict of interests betweenthem and SANPAOLO IMI or the SANPAOLO IMI Group,and they are in any case obliged to communicate, as set bylaw, every conflict of interest, which they may have ontheir own account or on account of third parties. By wayof example, it must be remembered that conflicts ofinterests may occur whenever personal interests interfere(or seem to interfere) with the interests of SANPAOLO IMI

or an entity of the SANPAOLO IMI Group, impeding theunbiased and effective fulfillment of their functions, topursue improper personal gains by virtue of their positionat SANPAOLO IMI or the SANPAOLO IMI Group.

1.3 Internal Audit FunctionWithin the framework of the control system in forceinside the SANPAOLO IMI Group, the Internal AuditFunction, entrusted to a specific control structure, directlyreporting to Managing Directors, has the main functionof verifying operations and risk managementperformance. The Internal Audit Function, which in theperformance of its activity has no constraints or limits ofaccess to data, archives and company assets, has theresponsibility of bringing to the attention of the Board ofDirectors and Top Management possible improvements inrisk management policies, measuring instruments andprocedures, providing periodic reports on the results of itsactivity and anomalies found.

2 TASKS AND DUTIES OF EMPLOYEES AND CO-WORKERS

2.1 Tasks and duties of personnel The personnel of the SANPAOLO IMI Group is obliged tocarry out its functions with diligence, competence andfairness, adequately investing its resources and time in theperformance of its activities, refraining from promoting ortaking part in initiatives which may result in situations ofconflict of interest on its own account or in the account ofthird parties. In particular, each employee is obliged torefrain from taking advantage from business andeconomic opportunities in general, for personal interest orin the interest of third parties, of which he/she may knowas a result of his/her functions. In cases in which a conflictof interest arises, each employee has the duty to informhis/her Manager.

2.2 Knowledge of the regulationsthe knowledge and application of the disciplinesspecifically regulating their activity and the observance ofthe laws and regulations in force as well as of theprovisions contained in the Ethical Code and other Codesof Conduct adopted. In particular, each employee isobliged to inform his/her Manager, or the EthicalCommittee if necessary, about the cases of seriousirregularity or violation of internal procedures, laws andregulation in force he/she may be aware of.

2.3 Reporting and documenting dutiesEach employee of SANPAOLO IMI is obliged to cooperatein order to ensure the correct reporting of eachmanagement event and to keep the documentationsupporting the activity carried out, according to thecriteria of easy trackability. This is done in order to keepthe social communications of SANPAOLO IMI reliable, for afair and true representation of economic, portfolio andfinancial results of the entire Group and to ensure that thetotal of the activities carried out is consistent with theorganizational model and the internal delegation modeland is compliant with laws, rules and Regulatoryregulations. Employees are also obliged to inform timelytheir Managers and the Ethical Committee about theirpossible finding of omissions, serious negligence orfalsification of accounts and/or documents on whichaccounting records are based.

2.4 Relations with customersIn their relations with customers and in external relationsestablished throughout their working activities,employees are obliged to follow a conduct based onpoliteness, cooperation and transparency, providing,whenever required or necessary, complete andappropriate information and avoiding, under anycircumstances, the pursuance of elusive or unfairpractices or practices that are aimed at undermining the interlocutor’s independent judgment.

2.5 Duties of external co-workersThe same principles of fairness, good-faith and observanceof laws and regulations in force must be followed by allexternal co-workers of the SANPAOLO IMI Group, who maybe required to sign the provisions of this Ethical Code by theFunctions in charge, in relation to existing procedures and tothe type and extent of activity required.

3. RELATIONS WITH PUBLIC INSTITUTIONS 3.1 Relations with the Public Administration and the Judicial Authority The relations with institutions and Public Authorities andBodies aimed at representing and protecting the interestsof SANPAOLO IMI are under the exclusive responsibility ofthe competent functions and must be exercised in atransparent, rigorous and coherent fashion, avoiding anyconducts from which attempts to influenceinappropriately and/or unduly the activity and opinions ofthese Authorities can be inferred.

3.2 Relations with Regulatory Authorities The relations with Regulatory Authorities are based onmaximum cooperation, in any case avoiding anydisruption, and are exercised through the creation of areasof mutual independence, avoiding any action or conductwhich may be interpreted as an attempt to inappropriatelyinfluence decisions.

4. PRESENTS, GIFTS AND FAVORS4.1 GiftsIn ordinary business relations, the gifts offered are onlyaimed at promoting the image of SANPAOLO IMI andin no case can be interpreted as exceeding normalcommercial or courtesy practices, which means thatthey are a way to obtain special favors in theperformance of any practice and/or activity related tothe SANPAOLO IMI Group.

4.2 Institutional and commercial relationsIn institutional and commercial relations, also atEuropean and international level, and in relations withthe European Union, the Public Administration and theJudicial Authority in particular, it is prohibited tounduly offer and/or promise gifts, presents or else toofficials and public servants. The same prohibition concerns the promises or offermade to third parties in executing the above-mentioned relations. In any case SANPAOLO IMIadopts promotional procedures controlled by thecompetent Functions and does not follow conducts orpractices which are not allowed by law and by thecommercial practices and the Ethical Codes, if known,of the companies and bodies, including public bodies,with whom relations exist.

4.3 Specific personnel duties Directors and employees of SANPAOLO IMI must refrainfrom accepting presents or gifts that are worth more thana reasonable value or go beyond normal courtesystandards and must refrain from accepting, for themselvesor for others, any other offer of favor beyond ordinarycommercial relations or in any case aimed atcompromising independent judgment or operativefairness. Those directors or employees who receive gifts orfavors that go beyond accepted standards are obliged toinform the Ethical Committee for adequate assessmentand, if appropriate, to notify the sender on the policy ofthe SANPAOLO IMI Group on this subject.

Rules of conduct


4.4 Insider trading, protection of confidentialinformation and intellectual property, protection andcorrect use of company assets The Directors, employees and consultants of SANPAOLO IMIare obliged to read carefully and observe the laws andprocedures of SANPAOLO IMI on the subject of prevention ofinsider trading activities, protection of confidential data andinformation as well as intellectual property and theprotection and correct use of SANPAOLO IMI assets.

IMPLEMENTATION AND FINAL POINTS

5. COMPLIANCE WITH THE PROVISIONS OF THE CODEEach employee of the SANPAOLO IMI Group must to beaware of the provisions of the Ethical Code by formaldeclaration. The same form of compliance can be requiredby the competent Functions to the Group’s consultants andexternal co-workers.

6. TRAINING ACTIVITIES The provisions contained in this Ethical Code are madeknown to the entire personnel and are the subject ofindependent and periodic training initiatives, as a wholeand/or by specific sections.

7. INSTITUTIONAL COMMUNICATION ACTIVITIES The ethical principles and values underlying every action andrelation attributable to the SANPAOLO IMI Group are thesubject of adequate forms of institutional communication,according to the means and procedures deemed mostappropriate by the company’s competent Functions.

8. REPORTS Every violation of the principles and provisions of this EthicalCode by directors, employees or co-workers shall bereported promptly to the Ethical Committee. Violations can also be reported anonymously and in writing,while bearing in mind that these reports can be taken intoconsideration only if they contain information sufficient toidentify the terms of the violation and if they enableSANPAOLO IMI to carry out a relevant inquiry. If the reportsreceived, in compliance with the regulations in force, requireconfidentiality (including anonymity), SANPAOLO IMIundertakes to protect this information in observance of laws,regulations or legal proceedings applicable to the case. SANPAOLO IMI encourages directors, employees and co-workers to report every violation promptly, with thecommitment to investigate every violation they may detect.SANPAOLO IMI does not tolerate any form of retaliation forreports that have been made in good-faith, because thepossibility of speaking openly and without any fear of

retaliation is a condition necessary for the implementation ofthe Ethical Code. All of those for whom this Ethical Code isintended are also kindly asked to cooperate with internalinvestigations concerning violations and conducts that arenot in line with this Code.

9. CONSEQUENCES OF THE VIOLATION OF THE CODE The violation of the provisions of this Ethical Code is adisciplinary offence and a breach of the contract forexternal co-workers and, as such, it can sanctioned. Thecompany’s Functions periodically inform the EthicalCommittee on the most meaningful violations and theconsequent measures taken.

10.CHANGES AND PERIODIC AMENDMENTS TO THE ETHICAL CODEThe Ethical Committee is in charge of changing andamending the provisions of this Ethical Code, submittingchanges and amendments for the attention of the Boardof Directors for the necessary approval. Every substantialchange shall be notified to the market in the formsdeemed most appropriate and in any case through theannual report on Form 20-F filed at the US Securities andExchange Commission.

Get

ty Im

ages


GlossaryABI: Associazione Bancaria Italiana (Italian BankingAssociation).Benchmark: objective reference parameter for financialinvestments, which can also consist of the best knownindexes (MIB30, Dow Jones etc..) or other indexesrepresenting the risk profile/ investment performance and which can also become the object of financialinvestments whose performance is related to the trend of the selected parameter.BIC (Bank Identification Code) international bank codefor the univocal identification of the reference bank.CAGR: Compound Annual Growth Rate.Company cityzenship: the constant commitment of acompany to promote integration between market needsand social responsibilities.Corporate giving: philanthropic activities carried out bycompanies, mainly through voluntary donations.Corporate governance: the set of governance criteriaand processes of a company.Corporate social responsibility: extended form ofgovernance according to which the decision-makers of acompany have duties of trust towards all companystakeholders. The Green Book of the EuropeanCommission “Promoting a European framework forcorporate social responsibility” defines the company’ssocial responsibility as the “voluntary integration ofsocial and environmental concerns of companies in theircommercial operations and in their relations with theparties concerned. […] To be socially responsible - theGreen Book states - does not only mean fully meetingapplicable juridical obligations but also to go beyond thispoint by investing in human capital, in the environmentand in relations with the other parties concerned”.Leg. Decree 626/’94: legislative decree regulating thedefense of the health and safety in the workplace. Thecompliance with the regulations in force is characterizedby the fact of asking the employer for the introduction ofa proper safety management system. Empowerment: a process according to which humanresources are given the opportunity to develop their ownskills and improve their knowledge of possibleprofessional development areas.Ethical Fund (Social Responsible Fund): Investment fundinvesting in financial instruments issued by companiesthat comply with special environmental and socialpolicies and are engaged in sustainable development.Forum for Sustainable Finance: no profit associationpromoting sustainable development in the Italianfinancial community (www.finanzasostenibile.it).

Ftse4Good: set of benchmark and commercial indexes forsocially responsible investments. A financial index monitorsthe performance of a series of selected securities accordingto a certain criterion (capitalization, sector, geographicalarea…). Benchmark indexes are used to strengthen thefinancial performance of a fund, for example.Home banking: banking service for private customersprovided by means of a telecom connection betweenusers and the bank; users can perform a number oftransactions directly from home and receive informationon their bank accounts. IBAN (International Bank Account Number): Standardinternational bank number (series of alphanumericalcharacters) univocally identifying the account of acustomer anywhere in the world. Environmental impact: any environmental change,positive or negative, partly or fully deriving from theorganizations’ activities, products and services.Direct environmental impact: environmental changepartly or fully deriving from the organizations’ products or services.Indirect environmental impact: environmental changederiving from the activities of third organizations directlyrelated to the main organization. For example, in case of abank, reference is made to the impact of customercompanies performing activities financed with resourceslent by the bank.Internal dealing: transactions of purchase and saleperformed by the directors and other “relevant people”,that is those people who, by virtue of their position, haveaccess to privileged information concerning stocks(excluding non convertible bonds) of the same company.ISO (International Organization for Standardization):World Federation of organizations setting nationaltechnical standards worldwide (ISO standards).ISO14000: standard concerning environmentalmanagement systems issued by the InternationalOrganization for Standardization (ISO).ISO9000: standard concerning environmental paymentsystems issued by the International Organization forStandardization (ISO).Mib bancario: stock exchange index including thebanks listed on the Borsa di Milano.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 microcredito.

Multi-channelling: offer of retail banking products andservices through both physical traditional channels (tellers)and telecommunication channels. This definition refersboth to the types of distribution channels through whichthese services are offered (closed networks or opennetworks like the Internet) and to the methods of accessto these channels by the customers (Pos terminals, ATMs,telephones, personal computers and micro-circuit cards).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 so solutionwas found at the bank’s office for complaints.Patriot Act: law issued in the USA following the terroristattacks of September 11 and including, among otherthings, a series of provisions meant 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.People management: human resources managementand enhancement system.Phone banking: offer of banking products and servicesvia call centers integrating telephone and informationtechnologies and sometimes also human resources, foran efficient management of communications betweenthe company and its customers; information is processedby specific technological devices which are oftenintegrated with the company information system andenable contact optimization and widening.SMEs: small and medium-sized enterprises.Private equity: investments in the venture capital ofnon-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 loanguarantee. This type of loan is usually destined to bigcomplex and expensive infrastructural projects, forexample in the energy, chemical, mining, transport,environmental and telecommunication sectors. It cantake the form of a loan destined for the construction ofnew installation or for the refinancing of existinginstallations with or without restructuring.Rating: assessment of the merit to credit of acounterparty to be made by quantifying the probabilityof insolvency of the same.Risk management: organizational structure for thedetermination of methodologies, measurement andmanagement criteria as well as control tools on thesubject of credit, financial and operating risks in order toguarantee the governance of the exposure to these risks.

Retail banking: retail market mainly including privatecustomers, small companies and households.Roadshow: series of meetings with institutionalinvestors taking place in intentional financial markets.ROE (Return on equity): net income/average net equity.SEC: Securities Exchange Commission, the AmericanRegulatory Authority.SEPA (Single European Payment Area): Single EuropeanPayment Area in which transactions can take placeefficiently, eliminating the idea of cross-border payment.SRI: asset management activity carried out according toenvironmental and social criteria. Usually, three differentapproaches exist: portfolio selection (securities areincluded or excluded depending on the environmental orsocial responsibility profile adopted by the issuingcompanies); active shareholding (the exercise of rightssuch as the right to vote at meetings, resulting from theownership of shares to influence the company’s socialresponsibility policies); community investment (theinvestment of capitals in marginal economies withobjectives of local development).Stakeholder: holder of interest. It is a subject, whichmay be public or private, individual or organized,establishing relations with the company, which may bedirect or indirect, formal or informal.Stock granting: free granting of stocks to the personnelwith a holding period of n years.Stock option: stock incentive in favor of the executivesof the Group, with the option to exercise it after n time.Sustainable development: a development meeting theneeds of existing generation without jeopardizing thepossibility of future generations to meet their needs(Brundtlad Report - WCED World Commission forEconomic Development - 1987).TAEG (Global Actual Annual Rate): synthetic andconventional indicator of the cost of credit. It is the rateequaling, on a yearly basis, the sum of the current value ofall the amounts which make up the loan granted by thecreditor and the sum of the present value of all thereimbursement installments.UN Global Compact: voluntary initiative for thepromotion and spread of sustainable developmentpractices launched and sponsored by the United Nations.UNEP (United Nations Environmental Program): programfor the promotion of sustainable development.Wealth management: activity for the management andadministration of customers’ portfolio resources.Wholesale banking: products and services destined to a “wholesale market” mainly including institutionaloperators or concerning transactions for significantamounts.

170 2002 Social Report – Attachments

The 2002 Social Report isavailable (in Italian and English)

on the website www.grupposanpaoloimi.com

For any query, suggestion or advice

please contact [email protected]

The realization of this Social Report was followed by an internal working group

with the assistance and advice of Avanzi - Idee richerce e progetti per la sostenibilità.

Graphic project: Partners - Turin

Documents

S ANP A OLO IMI...on the one hand makes it possible to achieve the necessary economies of scale and scope and, on the other, guarantees a close link with the territory - lies at the