BANCA MEDIOLANUM S.P.A.

REPORT ON CORPORATE GOVERNANCE AND CORPORATE STRUCTURE pursuant to art. 123-bis of the CFA

FY 2016

Version approved by the Board of Directors on February 21, 2017

WWW.BANCAMEDIOLANUM.IT

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TABLE OF CONTENTS GLOSSARY pg. 3

1.0 ISSUER’S PROFILE pg. 5 2.0 INFORMATION ON CORPORATE STRUCTURES pg. 6 3.0 ADHESION TO THE CORPORATE GOVERNANCE CODE pg. 12 4.0 BOARD OF DIRECTORS pg. 13 5.0 PROCESSING OF CORPORATE INFORMATION pg. 52 6.0 BOARD OF DIRECTORS’ INTERNAL COMMITTEES pg. 58 7.0 APPOINTMENTS COMMITTEE pg. 61 8.0 REMUNERATION COMMITTEE pg. 64 9.0 DIRECTORS’ REMUNERATION pg. 69 10.0 RISK COMMITTEE pg. 72 11.0 INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM pg. 79 12.0 DIRECTORS’ INTERESTS AND RELATED-PARTY TRANSACTIONS pg. 105 13.0 APPOINTMENT OF STATUTORY AUDITORS pg. 108 14.0 COMPOSITION AND FUNCTIONING OF THE BOARD OF

STATUTORY AUDITORS pg. 115

15.0 RELATIONSHIP WITH THE SHAREHOLDERS pg. 118 16.0 GENERAL MEETINGS pg. 119 17.0 CHANGES AFTER THE CLOSURE OF THE FINANCIAL YEAR OF

REFERENCE pg. 122

ANNUAL REPORT OF THE DIRECTORS UNDER PRINCIPLE 1.C. 2. OF THE CORPORATE GOVERNANCE CODE OF LISTED COMPANIES

pg. 123

ANNEXES Annex 1: Paragraph on “Main characteristics of the risk management and

internal control systems in relation to the financial reporting process” pursuant to art. 123-bis, paragraph 2, lett. b), CFA

Tables

pg. 126 pg. 131

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GLOSSARY

Code/Corporate Governance Code: the Corporate Governance Code of listed companies approved in the amended version in July 2015 by the Committee for Corporate Governance and promoted by Borsa Italiana S.p.A., ABI, Ania, Assogestioni, Assonime and Confindustria. Civil Code/c.c.: the Civil Code. Board: the Issuer’s Board of Directors. Supervisory Provisions: the Supervisory Provisions for Banks (Bank of Italy Circular no. 285 of December 17, 2013 and subsequent updates). Issuer/Company: the Issuer of securities to which the Report refers. Financial Year: the Company financial year to which the Report refers. Merger: merger by incorporation of Mediolanum S.p.A. in Banca Mediolanum S.p.A. MTA : indicates the Electronic Stock Exchange organized and managed by Borsa Italiana S.p.A. Consob Issuer Regulation: the Regulations issued by CONSOB with resolution no. 11971 of 1999 (and subsequent amendments) on the matter of Issuers. Consob Market Regulation: the Regulations issued by CONSOB with resolution no. 16191 of 2007 (and subsequent amendments) on the matter of markets. Consob Related Parties Regulation: the Regulation issued by Consob with resolution no. 17221 of March 12, 2010 (and subsequent amendments) on the matter of transactions with related parties. Report: the corporate governance and corporate structure report that companies are required to draw up pursuant to article 123-bis of the CFA. Consolidated Banking Act/CBA: Legislative Decree of September 1, 1993, no. 385. Consolidated Finance Act/CFA: Legislative Decree of February 24, 1998, no. 58.

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Banca Mediolanum S.p.A. has prepared this Report, which aims to illustrate the characteristics of

its corporate governance organization.

Having adopted the Corporate Governance Code - available on the website www.borsaitalia.it,

under “Italian Stock Exchange/Publications” – issued by the Corporate Governance Committee

of the Italian Stock Exchange, the Company has also outlined in this Report the state of

compliance of the corporate governance system with the recommendations of the Code,

according to the “comply or explain” principle.

The Code was adopted following the initiation – on December 30, 2015 – of the listing of Banca

Mediolanum S.p.A. shares on the MTA, following the reverse merger (the “Merger”) by means

of which Banca Mediolanum S.p.A. incorporated its Parent Company – listed at the time –

Mediolanum S.p.A. To this end, the Company adopted the necessary decisions in order to adapt

the corporate governance system to the recommendations contained in the Corporate Governance

Code currently in force.

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1.0 ISSUER’S PROFILE

The purpose of Banca Mediolanum S.p.A. is the collection of savings and the provision of credit

in its various forms. It may carry out, in compliance with applicable regulations, all banking and

financial transactions and services, including the exercise of stock brokerage activities, as well as

any other instrumental operation and in any case related to the achievement of the corporate

purpose.

The Company is organized according to the “traditional” administration and control model under

articles 2380-bis et seq. of the Civil Code, with the General Meeting of Shareholders, the Board

of Directors with administrative functions, a Board of Auditors with administration control

functions and the Independent Auditors, entrusted with the statutory audit function.

This model, based on the in-depth assessment, has been considered the most suitable to ensure

efficient management and effective controls, keeping in mind also the costs linked to the adoption

and operation of the system chosen.

The Company, following the Merger and the consequent listing resumed, as from December 30,

2015 - the effective date of the Merger - the title of Parent Company of the Mediolanum Banking

Group registered in the Register of Banking Groups, assuming at the same time also the title of

Parent Company of the Mediolanum Financial Conglomerate mainly in banking activities.

The Issuer, in its capacity as Parent Company of the Mediolanum Banking Group, pursuant to

article 61, paragraph 4, of the CBA issues, in exercising its management and coordination

provisions to other members of the Group to comply with the instructions given by the Bank of

Italy in the interest of the stability of the Group.

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2.0 INFORMATION ON CORPORATE STRUCTURES

A) Structure of the share capital

The fully subscribed and paid-up share capital of the Company as at December 31, 2016 was

Euro 600,075,281.10, divided into 739,154,668 ordinary shares without nominal value. There are

no shares of a class other than the one mentioned.

B) Significant shareholdings

Below is the situation regarding the shareholders, directly or indirectly, of more than 3% of the

subscribed share capital of Banca Mediolanum S.p.A., represented by shares with voting rights,

according to the results of the shareholders’ register, with communications received and other

information available:

(data as at February 21, 2017)

NO. OF

SHARES

%

SILVIO BERLUSCONI INDIRECT. THROUGH:

- FININVEST S.p.A. (OWNERSHIP)

222,660,226

30.12

ENNIO DORIS

- DIRECTLY IN OWNERSHIP 23,563,070 3.19

- INDIRECTLY THROUGH:

FIN.PROG.ITALIA S.A.P.A. di E. Doris & C. 195,289,557 26.42

TOTAL 218,852,627 29.61

LINA TOMBOLATO

- DIRECTLY IN OWNERSHIP

- INDIRECTLY THROUGH:

T-INVEST S.r.l.

24,307,595

25,394,701

3.29

3.44

TOTAL 49,702,296 6.73

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C) Shareholders’ Agreements.

On September 14, 2016, Fininvest S.p.A. and Fin. Prog. Italia S.a.p.a. di Ennio Doris & C.

entered into the Banca Mediolanum Shareholders’ Agreement (hereinafter the “Agreement”). The

pre-existing Mediolanum Shareholders ‘Agreement - which later became the Banca Mediolanum

Shareholders’ Agreement (following the adjustment agreement of May 24, 2016) - expired on the

same date.

The Agreement provides, under article 122 of the CFA: obligations of prior consultation for the

exercise of the voting rights (art. 122, paragraph 5, letter a); limits on the transfer of shares (art.

122, paragraph 5, letter b); stability of the shareholding structure and management guidance unit

(art. 122, paragraph 5, letter d), of Banca Mediolanum S.p.A., based in Basiglio - Milano 3,

Palazzo Meucci, Via Francesco Sforza, tax ID and registration number with the Milan Register of

Companies: 02124090164, whose shares are listed on the MTA.

The overall percentage of the share capital conferred under the Agreement is equal to 51% of the

Issuer’s current capital and is divided into equal shares between Fininvest S.p.A. (25.5%) and

Fin.Prog.Italia S.a.p.a. di Ennio Doris & C. (25.5%).

The Decision of the European Central Bank of October 25, 2016 opposing the acquisition by

Fininvest S.p.A. of a qualified holding in Banca Mediolanum S.p.A., involves, as also

communicated to Fininvest S.p.A. by the Bank of Italy with Prot. note No. 1523247/16 of

December 21, 2016, “the automatic suspension of the voting rights regarding the shareholding

subject to the ECB’s decision” and that is the shareholding exceeding 9.999%. Fininvest S.p.A.,

as anticipated in its communication pursuant to art. 120 of Legislative Decree 58/1998 of October

31, 2016 appealed the Decision of the European Central Bank of October 25, 2016 before the

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European Court of Justice on December 23, 2016.

D) Change of control clauses

The Issuer and its subsidiaries have not stipulated nor are part of significant agreements that take

effect, are modified or terminate following change of control of the Company.

E) Powers to increase the share capital and authorize the purchase of treasury shares

As regards the proxies for share capital increases pursuant to art. 2443 of the Civil Code, please

refer to art. 6 of the By-laws of the Issuer available on the website of the Italian Stock Exchange

and on the website www.bancamediolanum.it in the section “Corporate Governance” under

“Company corporate governance” documents. Such proxies derive from the previous stock

option plans promoted by the merged company Mediolanum S.p.A.

The General Meeting of the Issuer of April 5, 2016, as proposed by the Board, resolved to

authorize the purchase and disposal of ordinary treasury shares.

In particular, the meeting resolved:

i. to authorize, pursuant to and for the effects of art. 2357 of the Civil Code, the purchase, on

one or more occasions for the period of eighteen months from the date of this resolution, the

ordinary shares of the Bank, up to a maximum of 3,500,000 ordinary shares of Banca

Mediolanum S.p.A., and, in any case, considering the ordinary shares of Banca Mediolanum

S.p.A. from time to time held in the portfolio by the Bank and its subsidiaries, within the

maximum limit established by the applicable regulations in force, conferring mandate to the

Board of Directors to identify the amount of shares to be purchased prior to the opening of

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each individual purchase program at a price that does not exceed the higher of the price of

the last independent trade and the current highest independent bid for trading where the

purchase is made, provided that the unit price shall not be less than the minimum of 15% and

higher by a maximum of 15% than the official price recorded by the Banca Mediolanum

S.p.A. stock the trading day before each single purchase transaction and that, in any case, the

maximum total amount of purchases made under this resolution may not exceed Euro

26,250,000;

ii. to authorize the Board of Directors, and its Chair, Chief Executive Officer and Vice

Chairmen, severally, so that, pursuant to and for the effects of art. 2357-ter of the Civil Code,

they may dispose of at any time, in whole or in part, on one or more occasions, the treasury

shares purchased pursuant to this resolution, or in any case in the Banca Mediolanum S.p.A.

portfolio, through the free allocation of these treasury shares in favour of the recipients of the

Performance Share Plans, if the regulatory requirements and conditions apply as laid down

by the Group Remuneration Policies for the payment of the variable remuneration related to

the incentive system, attributing to the same, also severally, the broadest powers for the

execution of disposals contained in this resolution, as well as any other formalities relating to

the same, including the possible conferment of assignments to intermediaries qualified in

accordance with law and with the power to appoint special proxies. It is specified that any

treasury shares of Banca Mediolanum S.p.A. purchased under this authorization which may

exceed those actually used for the aforementioned Performance Share Plans can be used for

(a) the allocation of the same for any future incentive plans and/or (b) the provision of the

same on or off the stock exchange, possibly also through the transfer of real and/or personal

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rights, with the terms, procedures and conditions of the disposal of treasury shares deemed

most appropriate in the interests of Banca Mediolanum S.p.A., in compliance with the

provisions of law and regulations currently in force. The authorization referred to in this

point under (ii) is granted without time limits.

The Board of Directors’ meeting held April 14, 2016, following the authorization to purchase and

dispose of treasury shares resolved by the General Meeting of the Issuer held April 5, 2016,

approved the launch of a treasury share buyback program with the exclusive objective of

establishing a “stock warehouse” in order to achieve the funding of shares of Banca Mediolanum

at the service of the Performance Share Plans approved by the same General Meeting of the

Issuer of April 5, 2016.

The program for the purchase of treasury shares, in accordance with as resolved by the General

Meeting, has the following characteristics:

• involved a maximum of 3,500,000 ordinary shares of Banca Mediolanum, for a maximum

counter-value of Euro 26,250,000.00;

• started on May 2, 2016 and was concluded with the last transaction on August 22, 2016;

• purchases of treasury shares were made in compliance with the operating conditions and in

the manner established by the “market practice” permitted by Consob pursuant to art. 180,

paragraph 1, lett. c) of the CFA with resolution no. 16839 of 2009, by EC Regulation no.

2273/2003 of December 22, 2003 and by legislation on “market abuse” pro tempore in force,

as resolved by the General Meeting of April 5, 2016, and in particular: (i) at a price that does

not exceed the higher of the price of the last independent trade and the current highest

independent bid for trading where the purchase is made, provided that the unit price was

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however not less than the minimum of 15% and higher by a maximum of 15% than the

official price recorded by the Banca Mediolanum stock the trading day before each single

purchase transaction; (ii) for volumes not exceeding 25% calculated on the basis of the

average daily trading volume of Banca Mediolanum shares in the month prior to the one in

which the start of the program is communicated to the public (and, therefore, in March

2016);

• purchases were made under the procedures set out in art. 144-bis, paragraph 1, lett. b) of

Consob Issuers’ Regulations and the provisions however applicable, so as to allow equal

treatment of shareholders as required by art. 132 of the CFA;

• there is a prohibition on operations on the Banca Mediolanum stock in the 15 calendar days

prior to the approval by the Board, of accounting data for the period.

At December 31, 2016, the Issuer held 3,500,000 treasury shares.

The forthcoming General Meeting will be called, inter alia, to resolve on the authorization for the

purchase and disposal of treasury shares in accordance with the combined provisions of articles

2357 and 2357-ter of the Civil Code, and article 132 of the CFA. Such authorization - strictly

related to the new performance share plans to be proposed to the General Meeting of April 5,

2017 - was subject to proper request to the Bank of Italy in accordance with the Supervisory

Provisions and articles 77 and 78 of EU Regulation 575/2013, and (EU) Delegated Regulation

no. 241/2014.

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3.0 ADHESION TO THE CORPORATE GOVERNANCE CODE

On September 23, 2015, the Company approved its adhesion to the Corporate Governance Code

of listed companies - available on the website www.borsaitalia.it – taking all necessary decisions

in order to adapt its corporate governance system to the recommendations in the Code in force.

The Company also provided that, for transactions that have a significant strategic, economic,

equity or financial importance for the same, subsidiaries shall submit the transaction to the Board

of Directors of the Parent Company Banca Mediolanum S.p.A.

The Issuer is among the banks classified as “less significant” for European single supervision.

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4.0 BOARD OF DIRECTORS

4.1 Appointment and Replacement

The current Board of Directors of the Issuer was appointed by the General Meeting on March 19,

2015 on the basis of the statutory provisions then in force – before listing – and shall be in office,

according to the shareholders’ resolution, for three years and thus until the date of the General

Meeting convened to approve the financial statements for the year ending December 31, 2017.

The statutory norms that currently regulate the appointment and replacement of the Directors are

contained in art. 17 of the By-laws and outlined below:

- Article 17)

1. The Company is managed by a Board of Directors consisting of seven to fifteen members, who

must meet the requirements of primary and secondary legislation in force pro tempore, as well

as the codes of conduct drafted by management companies operating in regulated markets or

by trade associations to which the Company adheres (hereinafter also the “Codes of

Conduct”), and may be reappointed. Of these, a number corresponding to at least the

minimum required by the primary and secondary legislation in force pro tempore shall be in

possession of the independence requirements prescribed herein (hereinafter also the

“Independent Directors”).

2. The General Meeting, prior to their appointment, shall determine the number of Board

members and the term of office within the limits established by the law.

3. The Company’s Directors shall be appointed by the General Meeting on the basis of lists, in

which no more than fifteen candidates shall be indicated, each associated to a progressive

number.

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A candidate may appear on only one list under penalty of ineligibility.

Shareholders having the right to vote who, alone or together with other shareholders,

represent at least the percentage of share capital set by the National Commission for

Companies and Stock Exchange, are entitled to submit lists.

The ownership of the percentage of share capital is determined with regard to the shares

registered in favor of the shareholders on the day when the list is filed at the Company, with

reference to the share capital subscribed at that date.

The related declaration can be communicated to the Company also after the filing of the list,

provided it is received by the deadline for publication of the lists by the Company.

The Company allows shareholders who intend to submit lists to proceed with filing through

at least one means of remote communication, in the manner which shall be disclosed in the

convocation notice of the General Meeting and which allows the identification of

shareholders who shall proceed with filing.

The shareholding portion required for the submission of lists of candidates for the election of

the Board of Directors shall be indicated in the convocation notice of the meeting called to

approve the appointment of said body.

4. A shareholder may not submit or vote for more than one list, even through a third party or

through trust companies. Shareholders belonging to the same group - intended as the Parent

Company, subsidiaries and companies under joint control - and shareholders who are

parties to a shareholders’ agreement pursuant to article 122 of Legislative Decree no.

58/1998 regarding Issuer’s shares may not submit or vote on more than one list, even

through a third party or trust companies.

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5. For the purposes of compliance with the minimum number of Independent Directors referred

to in paragraph 1 of this article, each list shall identify a minimum number of candidates,

calculated on the basis of the total number of candidates therein, who satisfy the

independence requirements provided by primary and secondary legislation in force pro

tempore.

In order to ensure gender balance in accordance with primary and secondary legislation in

force pro tempore, each list containing a number of candidates equal to or greater than

three shall have the presence of candidates of both genders, so that at least one third belongs

to the less represented gender, rounded up in the event of a fractional number of candidates.

In the first application, the portion reserved for the less represented gender is equal to at

least one-fifth, rounded up in the event of a fractional number.

6. Lists are filed at the Company within the twenty-fifth day before the date of the meeting

called on first or second call to resolve on the appointment of the members of the Board of

Directors and made available to the public at the registered office, on the website and other

manner prescribed by the National Commission for Companies and the Stock Exchange with

regulation at least twenty-one days prior to the meeting.

The lists contain:

a) information regarding the identity of the shareholders who submitted the lists, indicating the

percentage of shares held;

b) a declaration by shareholders other than those holding, even jointly, a controlling or relative

majority shareholding, certifying the absence or existence of any relation with the latter, in

accordance with the provisions of article 147-ter of Legislative Decree no. 58/1998 and

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article 144-quinquies, first paragraph, Consob Resolution no. 11971/1999 (hereinafter also

the “Issuers’ Regulation”);

c) exhaustive information on the personal and professional characteristics of the candidates, a

statement by the candidates attesting that they meet statutory requirements and accept the

appointment and regarding any possession of the independence requirements provided by

article 148, paragraph 3 of Legislative Decree no. 58/1998 and possibly any additional

requirements of the primary and secondary legislation in force pro tempore, and the Codes

of Conduct.

The lists presented without compliance with the foregoing provisions shall not be submitted

for voting.

7. The Chair of the General Meeting, before opening the vote, shall refer to any declarations

referred to in letter b) above, and require meeting participants who have not filed or

participated in filing of lists to declare any relations as defined above.

If an individual who is connected to one or more reference shareholders has voted for a

minority list, the existence of said relation shall only become relevant if the vote was crucial

for the election of the Director.

8. After the vote, the votes obtained by the lists are divided by whole numbers from one to the

number of Directors to be elected, regardless of lists that did not achieve a percentage of

votes equal to at least half of as required for submission thereof.

The resulting quotients are attributed to the candidates of each list, according to the order

envisaged therein.

Therefore, the quotients attributed to the candidates of the various lists are in a single list in

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decreasing order. The candidates elected, up to the number of Directors set by the General

Meeting, are those who have obtained the highest quotients, without prejudice to the fact that

the Director appointed shall be the candidate at the top of the second list that obtained the

highest number of votes and that is not connected in any way, even indirectly, with the

shareholders who submitted or voted for the list with the most votes.

Therefore, if said candidate has not obtained the quotient necessary to be elected, the

candidate who obtained the lowest quotient from the list that obtained the most votes shall

not be deemed appointed and the board will be completed with the appointment of the

candidate at the top of the second list that obtained the most votes.

9. The candidate at the top of the list that obtained the most votes shall be elected as Chair of

the Board of Directors.

10. If to complete the entire Board of Directors several candidates have obtained the same

quotient, the candidate elected shall be from the list that has not yet elected a Director or

that has elected the fewest Directors.

If none of these lists has elected a Director or they have all elected the same number of

Directors, within these lists, the candidate elected shall be from the list that obtained the

most votes.

In case of equal number of list votes and equal quotient, there shall be a new vote by the

General Meeting, and the candidate who obtains the simple majority of votes shall be

elected.

If proceeding as such, within the new Board of Directors at least the minimum number of

Independent Directors required by the primary and secondary legislation in force pro

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tempore is not elected, the procedure will be as follows: candidates who would be elected

last based on the progressive quotient and taken from the first list that obtained the most

votes, are replaced by candidates immediately following, which obtained the lower

progressive quotients, and identified in the same list as Independent Directors.

If following the vote and operations above the composition of the Board of Directors does

not comply with primary and secondary legislation in force pro tempore regarding the

gender balance, the candidate of the most represented gender elected last on the basis of the

progressive quotient and taken from the first list that obtained the most votes, is replaced by

the first candidate of the less represented gender that obtained the lower progressive

quotient and indicated in the same list, providing compliance with the minimum number of

Independent Directors required by the provisions in force pro tempore. If this were not the

case, the replaced candidate of the most represented gender would be from time to time the

subject elected for penultimate, third last and so on, based on the progressive quotient also

taken from the first list that obtained the most votes.

If, doing so, the result requested is not ensured, substitution shall take place by General

Meeting resolution decided by the relative majority, upon the presentation of the candidates

that belong to the less represented gender.

11. If only one list has been submitted, the General Meeting shall vote on it and, if it obtains the

relative majority of votes, without counting abstentions, the candidates listed in progressive

order up to the number set by the General Meeting shall be elected.

The candidate at the top of the list shall be elected Chair of the Board of Directors.

If proceeding as such, in the presence of a new Board of Directors the provisions currently

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in force are not complied with as regards Independent Directors and/or gender balance, the

procedure will be mutatis mutandis as described above in paragraph 10 of this article.

12. In the absence of lists, and if through the voting mechanism by list the number of candidates

elected is less than the number established by the General Meeting, the Board of Directors

shall respectively be appointed or integrated by the meeting with the majorities required by

law.

13. In the event of termination of office, for any reason, of one or more Directors, those

remaining in office shall replace them by co-option in accordance with and for the effects of

art. 2386 of the Civil Code, subject to the requirement to comply with the minimum number

of Independent Directors and the provisions of primary and secondary legislation in force

pro tempore, as well as the Codes of Conduct, also with reference to the gender balance.

The meeting appointment of Directors to replace Directors resigned from office, also as a

result of co-option of the same, is freely performed with the legal majorities, without

prejudice to the obligation to respect the minimum number of Independent Directors and the

provisions of the primary and secondary legislation in force pro tempore with regard to

gender balance.

14. The Directors listed in their respective lists as Independent Directors are required to

immediately inform the Board of Directors if they no longer meet independence requirements

and their consequent forfeiture pursuant to law.

It is recalled that in addition to the rules laid down by the CFA, the Issuer is subject to banking

regulations (the Supervisory Provisions) concerning the composition of the Board of Directors

with particular reference to the representation of minority shareholdings or the number and

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characteristics of the Directors.

Succession Plans

On December 20, 2016 the Board of the Company, subject to the favourable opinion of the

Appointments Committee, approved the Succession Plan policy.

This policy, prepared in view of best practice and in compliance with the Supervisory Provisions

aims to formalize plans by means of which to ensure the orderly succession - inter alia - in

executive leadership positions, in particular the CEO and General Manager, in the event of

termination, expiration of the mandate or for any other reason, in order to ensure continuity in

line with the Company’s strategic plans and avoid economic or reputational impact on the Bank.

This process also aims to protect the Company from any uncovering of specific organizational

roles, ensuring the timely replacement of resources that hold senior positions at the Company

and/or roles considered key for the Group.

With reference to executive leadership positions, a process has been established that is readily

active upon the occurrence of any event resulting in non-continuity in the action and thus the

need to appoint a successor.

In such cases, the policy in question provides that the Appointments Committee start the process,

defining the requirements that make up the profile of the resource to be identified. With the

support of the relevant company functions, it is then necessary to proceed with the “internal”

scouting of personnel (Directors, employees, collaborators, etc.) in order to search and identify,

within the Group’s scope, the possible immediate substitutes for the position considered.

Simultaneously, “external” scouting must be initiated to identify in the market potential

candidates who meet the requirements expressed by the Appointments Committee. The results of

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the internal and external scouting will thus be made available to the Appointments Committee

which, in turn, will submit potential candidates to the Board of Directors.

4.2 Composition and maximum number of offices held in other companies

The Board of Directors of the Company, as already mentioned, consists of 11 members appointed

by the General Meeting on March 19, 2015 in accordance with the statutory provisions then in

force and shall be in office until the General Meeting called to approve the financial statements at

December 31, 2017.

On May 19, 2016, Mr. Antonio Maria Penna resigned from the office of non-executive Director.

On July 28, 2016 the Board of the Company, following intervention of the Appointments

Committee, replaced Mr. Penna by co-option pursuant to and for the effects of art. 2386 of the

Civil Code, appointing Mr. Luigi Berlusconi non-executive Board Director, with expiry at the

next General Meeting of April 5, 2017 during which the consequent resolutions will be

submitted.

As a result of the above resolutions, the communications of the individuals concerned and the

verifications of requirements carried out by the Directors of the Company, the Board is currently

composed as follows:

1. Ennio Doris - Chair (without proxies) - Non-executive

2. Edoardo Lombardi - Deputy Chairman - Non-executive

3. Giovanni Pirovano - Deputy Chairman – Non-executive

4. Massimo Antonio Doris - CEO - Executive

5. Luigi Berlusconi – Director – Non-executive

6. Bruno Bianchi - Director - Independent pursuant to the Corporate Governance Code and

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art.147-ter CFA

7. Luigi Del Fabbro - Director - Non-Executive

8. Annalisa Sara Doris - Director - Non-Executive

9. Paolo Gualtieri - Director - Independent pursuant to the Corporate Governance Code and

art.147-ter CFA

10. Angelo Renoldi - Director - Independent pursuant to the Corporate Governance Code and

art.147-ter CFA

11. Carlos Javier Tusquets Trias de Bes – Non-Executive

As for the personal and professional characteristics of each Director, reference can be made to as

published on the website of the Issuer (www.bancamediolanum.it in the section “Corporate

Governance” under “Corporate Bodies”).

The Board of Directors of the Company defined - with the preliminary remarks pending the new

regulations outlined below - the following general criteria to express its orientation on the

maximum number of Director and Auditor positions held by its members in companies that

involve significant commitments (listed companies, banks, insurance, financial and large

companies) and that also take into account participation in Board Committees:

I) an Executive Director shall not hold:

i) the office of Executive Director of another listed company, Italian or foreign, or a finance,

bank or insurance company;

ii) the office of Non-executive Director or Auditor (or member of another control body) in

more than five of the aforementioned companies;

II) a Non-executive Director, in addition to the office held at the Company, shall not hold:

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i) the office of Executive Director in more than three of the aforementioned companies and

the office of Non-executive Director or Auditor (or member of another control body) in

more than five of the same companies;

or

ii) the office of Non-executive Director or Auditor (or member of another control body) in

more than eight of the aforementioned companies.

Any multiple positions held within the same group of companies - and thus linked to each other

by having in common the shareholder or shareholders of reference and/or under common control

- shall be considered as a single position.

For non-executive Directors who are also members of one or both of the Company’s Board

Committees, the limits described above need to be curtailed, respectively, of a 50% portion of the

office or an entire portion of office.

The Board of Directors reserves the right to perform a different assessment which it shall duly

disclose in the annual corporate governance report.

These criteria are also contained in the document Corporate Governance Project approved

recently on September 22, 2016 by the Issuer’s Board.

Regarding this point, both the Appointments Committee and the Board of Directors stated and

agreed that the matter should be reviewed following the expected enactment of the decree of the

Ministry of Economy and Finance, which must implement art. 26, paragraph 2, letter e, of the

CBA in terms of “limits to the number of offices for bankers, graded in accordance with

principles of proportionality and taking into account the size of the intermediary”.

Simultaneously with the periodic self-assessment of the Board of Directors, each Director was

24

asked to report on compliance or otherwise of said limit to the accumulation of offices also in

accordance with the provisions of the Corporate Governance Project of the Company.

With express reference to the year 2016, all the Directors declared to comply with the above

limit.

In 2015, in the exercise of its legal and statutory powers in force, the Board of Directors

confirmed:

- Chief Executive Officer Massimo Antonio Doris;

- Deputy Chairmen Edoardo Lombardi and Giovanni Pirovano, the first of which with vicarious

functions of the Chair.

It is pointed out that Ennio Doris (Chair of the Board of Directors) and Edoardo Lombardi

(Deputy Chairman) have been qualified as Non-executive Directors as the powers conferred to

them meet the requirements of the Supervisory Provisions (Part I, Title IV, Chapter I, Section V,

paragraph 2). These powers do not entail, not even de facto, management functions.

In 2016, Giovanni Pirovano (Deputy Chairman) and Luigi Del Fabbro (Director) were also

classified as Non-executive Directors as a result of changes in their assignments.

On January 24, 2017, on the basis of information provided by the Directors Bruno Bianchi,

Angelo Renoldi and Paolo Gualtieri, the Board evaluated the same as independent pursuant to art.

148, paragraph 3, of the CFA, as referred to in art. 147-ter, paragraph 4, of the CFA, and

pursuant to art. 3 of the Corporate Governance Code.

With reference to the qualification of Mr. Gualtieri and Mr. Renoldi as independent pursuant to

the Corporate Governance Code, it is emphasized that the Board of Directors reaffirmed, in view

of the prevalence of substance over form, as already affirmed also in the previous year, and

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therefore unanimously agreed on the fact that said qualification is also with reference to

application criterion 3.C.1. e), that is the persistence in office for more than nine years in the last

twelve.

In fact, the Board verified and considered the permanence of the ethical qualities of the

individuals in question and recognized professional qualities that have always allowed them to

maintain and exercise the complete autonomy and independence of judgment - as also, among

other things, stated by the same in the self-certification submitted - and considered the existence

of the independence requirement under the Corporate Governance Code, also in view of the

presence in the office for more than nine years in the last twelve.

The Board of Directors of the Issuer determined as Euro 200,000.00 per year the amount above

which the economic relationships are defined relevant and confirmed the second family degree as

a relevant level for the definition of close family members.

The Board also found the presence among its members of an adequate number of Independent

Directors.

The Board of Auditors verified the correct application of the ascertainment criteria and

procedures adopted by the Board to evaluate - pursuant to the Corporate Governance Code - the

independence of its members.

Induction Programme

The main legislative and regulatory amendments are made known and explained to the Board by

the Legal & Compliance Function and the Corporate Affairs Division, which will collaborate

with the Chair in order to help provide Board members with increasingly adequate knowledge of

the business sector.

26

The Chair of the Board of Directors, assisted by the relevant structures, arranged for the Directors

and Statutory Auditors of the Issuer two Board Induction sessions that involved the participation

of speakers of primary importance on subjects relating to governance.

In particular, the most important aspects were covered (i) of European banking and financial

legislation and the Single Supervisory Mechanism was illustrated, as well as its operation and

cooperation with other European organizations, and (ii) of the issue of responsibility of Directors

in corporate communications.

4.3 Role of the Board of Directors

The Board of Directors is the body responsible for business management. In this context, the

Board of Directors of the Company acts as the body responsible for strategic supervision and it is

assigned the guidance functions of the management of the Company, with the task of defining the

guidelines of the Internal Control System, verifying that it is consistent with the strategic

guidelines and risk appetite established and is able to manage the evolution of business risks and

the interaction between them.

In the collegial exercise of the strategic supervision function, the Corporate Governance Project

expressly provides that the Board of Directors, in addition to the competences reserved under art.

23 of the By-laws (listed in the following pages):

• Defines and approves:

o the business model with an understanding of the risks to which that model exposes the

Bank and the ways in which the risks are identified and assessed;

o the strategic guidelines and revises them in relation to changes in business activities and

the external surroundings, so as to ensure effectiveness over time;

27

o the risk objectives, risk tolerance (where applicable) and risk governance policies;

o the criteria for the coordination and management of the Banking Group companies, as

well as the criteria for the execution of the instructions of the Bank of Italy;

o the guidelines for the internal control system, verifying that they are consistent with the

strategic guidelines already in place and with established risk appetites and that they are

capable of reflecting the evolution of company risks and the interactions among them;

o the criteria for identifying transactions significant enough to require prior approval by the

Risk Control Function.

• It approves:

o the establishment of corporate control functions, the associated roles and responsibilities,

and arrangements for coordination, collaboration and reporting among those functions and

between them and the Company’s boards and officers;

o the risk management process and assesses its consistency with strategic guidelines and

risk governance policies;

o the policies and processes for the valuation of company assets, and financial instruments

in particular, checking that they are adequate at all times and also establishing maximum

exposure limits for the Bank with regard to financial instruments or products whose

valuation is uncertain or difficult, which includes checking that the price and conditions of

transactions with customers are consistent with the business model and risk strategies;

o the process for the development and approval of internal risk measurement systems not

used for compliance with regulations, periodically checking that it is functioning properly;

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o a document distributed to all structures concerned defining the roles and responsibilities

of the various control bodies and functions, the information flows between the various

bodies and functions and between them and company boards and officers and, if there are

any potential overlaps among control areas or if synergies could be achieved, the methods

for coordination and collaboration to ensure proper interaction among all functions and

bodies with control duties, preventing any overlapping and/or gaps;

o the process for approving new products and services, launching new activities and

entering new markets;

o the Company policy on the outsourcing of company functions and the annual report on

controls conducted on key operating functions or outsourced controls, any weaknesses

found and the consequent corrective action taken, prepared by the Internal Control

Function with the support of the control body;

o the Code of Ethics with which members of the Company boards and officers and

employees shall comply, with a view to mitigating the Bank’s operational and

reputational risks and fostering a culture of internal control;

o internal whistleblowing systems;

o the Corporate Governance Project, with the approval of the control body;

o the Maximum Available Amount, with the supervisory body’s prior approval, if the

Company has not complied with the combined equity-required reserve requirement;

o amendment to the main internal regulations.

• it decides on the acquisition and disposal of strategic equity investments;

• it appoints and revokes the office of the General Manager;

29

• it appoints and revokes the offices of the heads of the control functions, considering the

opinion of the Board of Auditors;

• considering the opinion of the Board of Auditors, it appoints the Financial Disclosure Officer;

• it decides on the establishment of committees within the Company boards;

• it establishes, with a specific resolution, the criteria for the classification, measurement and

management of impaired loans and receivables;

• it prepares, submits to the General Meeting and reviews, at least once a year, the

remuneration and incentive policy and is responsible for its proper implementation. The

strategic oversight body also ensures that the remuneration policy is adequately documented

and accessible within the Company structure;

• it defines the remuneration and incentive systems at least for the following positions:

Executive Directors; General Managers; Co-General Managers, Vice General Managers and

similar positions; the heads of the main business lines, corporate functions or geographical

areas; those reporting directly to the strategic oversight, management and control bodies; the

heads and most senior personnel of the corporate control functions. In particular, it ensures

that such systems are consistent with the Bank’s overall decisions in terms of risk

assumption, strategies, long-term objectives, corporate governance structure and internal

controls.

• It ensures that:

o the Bank’s structure is consistent with the activities that it performs and with the business

model that it has adopted, without the creation of complex structures that are not

necessary for operating reasons;

30

o the internal control system and the Company organisation are constantly aligned and that

the corporate control functions meet requirements and comply with regulatory provisions.

If there are weaknesses or irregularities, it immediately encourages the adoption of

corrective action and evaluates their effectiveness;

o the RAF has been implemented in line with the approved risk objectives and risk

tolerance thresholds (where applicable), periodically evaluating the adequacy and

effectiveness of the RAF and the compatibility of actual risk with the risk objectives;

o the strategic plan, the RAF, the ICAAP, budgets and the internal control system are

consistent, also considering changes in the Bank’s internal and external operating

conditions;

o the quantity and allocation of capital and cash are consistent with the risk appetite, risk

governance policies and risk management process.

• At least once a year, it approves the level 2 control functions’ action plans and the audit plan

prepared by the Internal Audit Function and examines the corporate control functions’ annual

reports. It also approves the long-term audit plan.

• It ensures that the ICAAP is consistent with the RAF and is promptly updated whenever there

are significant changes in the strategic guidelines, organisational structure or operating

context and encourages full use of the ICAAP findings for strategic purposes and in business

decisions.

• With regard to credit and counterparty risk, it approves the general guidelines of the system

for implementing risk mitigation techniques and oversees the entire process for the

acquisition, evaluation, control and creation of risk mitigation tools.

31

• It periodically checks that the choice made remain valid over time, approving substantial

changes to the system and overseeing the overall system’s correct functioning.

• It regularly establishes the frequency, in any case at least once a quarter, with which the

appointed bodies shall report to the Board on their activities in the performance of their

duties.

• It evaluates the general performance of operations, considering, in particular, the information

received from the appointed bodies, and periodically comparing results with forecasts.

• It resolves on the Issuer’s and its Subsidiaries’ transactions when such transactions are

significant with respect to the Issuer’s strategies, results, equity or financial position. To this

end, it establishes the general criteria for identifying significant transactions.

• It evaluates, at least once a year, the adequacy of the internal control and risk management

system considering the Company’s characteristics and risk appetite and its effectiveness.

• It evaluates, considering the opinion of the Board of Auditors, the Independent Auditors’

findings in any recommendation letters and reports on key issues that arose during the

legally-required audit.

• It exercises, with the Risk Committee’s support, supervisory functions with respect to the

adequacy of the powers and means assigned to the Financial Disclosure Officer and effective

compliance with administrative/accounting procedures.

The strategic oversight body is also responsible for:

• maintaining a level of liquidity that is consistent with the risk tolerance;

• defining strategic guidelines, governance policies and management processes for the Bank’s

specific risk appetite. To this end:

32

o it defines liquidity risk tolerance, i.e., the maximum permitted exposure to risk;

o it approves:

� the Bank’s methods for evaluating exposure to liquidity risk;

� the main assumptions used for stress tests;

� the indicators used to activate contingency plans;

� the contingency plan to activate in the case of market crises or specific situations

affecting the Bank (Contingency Funding Plan – CFP);

� and the internal fund transfer pricing policy, in accordance with regulations, ensuring

that the function responsible for processing the internal fund transfer pricing system is

independent of other operational functions;

� the policies for classifying indirect equity investments to meet supervisory

requirements;

� internal policies concerning equity investments in non-financial companies.

With respect to the Bank’s information system:

• it approves the information system development strategies, considering developments in the

relevant sector and in line with the as-is and to-be structure of operating segments, processes

and corporate organisation. In this context, it also approves the information system’s

architectural model;

• it approves the information security policy;

• it approves guidelines for the hiring of technical personnel and the acquisition of systems,

software and services, including the use of third-party providers;

33

• it promotes the development, sharing and updating of ICT knowledge throughout the

Company;

• it is informed at least once a year on the adequacy of the services provided and how these

services support developments in company operations, in proportion to costs incurred;

• it is promptly informed of any serious problems for business activities due to information

system incidents and malfunctioning;

• it approves the organisational and methodological framework for the analysis of IT risk,

encouraging the appropriate valuation of information on technological risk within the ICT

function and integration with risk measurement and management systems (in particular,

operational, reputational and strategic risks).

Furthermore, with reference to the General Meeting:

• the strategic oversight body ensures that a person is appointed to manage relationships with

shareholders and periodically considers whether to set up a corporate structure for this

function;

• proposes the shareholders approve a regulation indicating the procedures to follow for orderly

and functional General Meetings, ensuring, at the same time, each shareholder’s right to take

the floor on the matters being discussed;

• in the event of significant changes in the market capitalization of the Issuer’s shares or in the

composition of the corporate structure, it considers whether to propose the shareholders

amend the By-laws with respect to the percentages established for the exercise of rights and

privileges set forth for the protection of minority interests.

34

In 2016, 14 meetings of the Board of Directors were held (average duration: 206 minutes (3

hours 26 minutes).

In 2017, 11 meetings of the Board of Directors are currently planned, of which 2 already held,

respectively on January 24 and February 21, 2017.

An exhaustive discussion of each item on the agenda during the Board meeting is ensured,

supported, in principle, by the presence of the Managers of the Corporate Control Functions, by

the presence of the managers of the competent functions in order to provide appropriate

information on the agenda items, and the prior sending of appropriate documentation to Directors

and Auditors.

In this regard, the Issuer considered crucial for proper examination and board discussion - unless

precluded by confidentiality issues - the prior sending of any documentation available to support

the meetings with notice usually of at least 48 hours with respect to the Board meeting. The

Independent Directors of the Issuer have acknowledged compliance with said provision for the

year 2016.

The distribution of assignments realized is addressed, specifically, to allow the Board of

Directors to focus on the objective of creating value for shareholders.

In accordance with the regulations of the sector and with a view to creating value, the Board

reserved itself the following tasks (art. 23 of the By-laws):

1. The Board of Directors shall be entitled to all powers for the ordinary and extraordinary

management of the Company, and shall be empowered to carry out all acts deemed

appropriate for the achievement and implementation of the Company purpose, to the exclusion

only of those specifically reserved by law to the General Meeting.

35

2. The Board of Directors has exclusive responsibility for, in addition to as provided by primary

and secondary legislation in force pro tempore:

- definition of the overall governance structure and the approval of the guidelines of the

organizational structure of the Bank;

- approval of the accounting and reporting systems;

- supervision of the process of public information and communication of the Bank;

- ensuring effective dialectic discussion with the management function and the managers of

the main company functions and verifying over time the choices and decisions adopted by

the latter;

- determination of the general management guidelines, including decisions regarding the

strategic lines and operations and business and financial plans;

- approval and amendments of main internal regulations;

- appointment and dismissal of the Chief Executive Officer;

- appointment and dismissal of the Heads of the functions of Internal Audit, Compliance and

Risk Control;

- acquisition and disposal of equity investments modifying the composition of the Group;

- establishment of committees or commissions with consultancy or coordination functions,

including the Risk Committee, the Appointments Committee and the Remuneration

Committee, whose operation shall be governed by special Board regulations;

- determination of criteria for the coordination and management of the banking group

companies, as well as determination of criteria for execution of the instructions of the Bank

of Italy.

36

3. Except as provided in article 15.2 of these By-laws, the Board of Directors is responsible for

the adoption of resolutions concerning:

− the merger in the cases provided for in article 2505 of the Civil Code, within the limits of

law;

− the establishment or closing of secondary offices, and the establishment, transfer and

closing of branches and agencies;

− the indication of which Directors may represent the Company;

− reduction of capital in the event of withdrawal of a shareholder;

− adaptations of the By-laws to regulatory provisions;

− the issue of non-convertible bonds in accordance with the primary and secondary

legislation in force pro tempore.

Disclosure to the Board

The Board is periodically informed regarding the activities delegated in accordance with

applicable statutory provisions (art. 20 of the By-laws):

At meetings of the Board of Directors, at least quarterly, the Directors and the Board of Auditors

are informed, by the delegated bodies and also with regard to subsidiaries, on the general

performance of operations and outlook, and on the most important economic, financial and

equity transactions and those in which the Directors have an interest, on own or third-party

account, or are influenced by the party, if any, exercising the activity of management and

coordination and on the possible execution of transactions with related parties. If reasons of

urgency or opportunity require it, the communication may be made to recipients concerned also

in writing.

37

The Board, at its meeting on September 22, 2016, upon approval of the updated Corporate

Governance Project, evaluated the organizational, administrative and accounting structure of the

Company and the Banking Group entities.

Self-Assessment Process

The Issuer, in compliance with current legislation, has provided, on an annual basis, a structured

self-assessment process of the bodies with strategic supervision and management functions.

This process is governed by the “Regulations of the Self-Assessment process of the Board of

Directors of Banca Mediolanum”, which the Company adopted by resolution of December 17,

2014, and which includes the following phases:

1) Preparation of self-assessment questionnaires;

2) Completion of self-assessment questionnaires;

3) Processing of the results of the self-assessment questionnaires;

4) Preparation of the self-assessment document;

5) Examination of the results of the self-assessment process by the Board of Directors and

identification of any weaknesses;

6) Definition of any corrective measures;

7) Verification of the implementation of corrective measures.

The analyzes carried out are formalized in the self-assessment document that outlines:

• the methodology and individual stages making up the process;

• the parties involved;

• the results obtained, highlighting the strengths and weaknesses;

• any necessary corrective action.

38

The document mentioned above is approved by the Board of Directors and submitted, where

required, to the Bank of Italy.

The self-assessment process usually begins in December of each year, with the activities required

to prepare the assessment questionnaire, and concludes, as a rule, with the first Board meeting of

the following year. At said meeting, the Board of Directors expresses its opinion on the adequacy

of the process and, as a result of the analysis of potential weaknesses emerged, defines the

corrective measures for which adoption is required by the Bank.

In 2016 and January 2017, the Board of Directors carried out the self-assessment of the Board by

means of a questionnaire submitted to all Directors and the General Manager, as member of the

body with management function.

After examination of the replies received - at the Board meeting of January 24, 2017 - the Board

(i) while stressing that the documents concerning the optimal qualitative-quantitative

composition, self-assessment and in general the related process are being reviewed upon

completion of the merger process that took place in 2015 and the subsequent entry into force of

the new By-laws of Banca Mediolanum, with particular reference to the new provisions

applicable to listed companies, especially in terms of composition of corporate bodies, such as

the introduction of the list vote and of gender quotas and (ii) taking into account that the replies

to aspects concerning the composition suggest considering as correct and adequate the

qualitative-quantitative composition of the Board in relation to knowledge considered relevant or

a priority, for the proper functioning of the Board; it unanimously agreed to express even for the

year 2016 an appropriate level of satisfaction regarding the size, composition and functioning of

the Board.

39

4.4 Corporate Bodies

Chief Executive Officer

The CEO, Massimo Antonio Doris, under the By-laws - in addition to the general representation

of the Bank - has been conferred by the Board of Directors of March 19, 2015, the supervision

and accountability of operations, production activities and services offered by the Bank, as well

as the following powers:

– he supervises the ordinary management of the Company in the context of directives

established by the Board of Directors, ensuring that the operation of the same complies with

the laws and regulations in force;

– he executes the resolutions of the Board of Directors;

– he ensures the application of the directives issued in implementation of the supervisory

regulations and codes of conduct adopted by the Company, in line with the guidelines

established by the Board of Directors;

– he processes and proposes the strategic guidelines and operating plans relating to the periodic

budgets and business development plans to be submitted to the Board of Directors;

– he ensures the implementation of the approved operating plans;

– he proposes and implements, in line with the guidelines established by the Board of Directors,

the criteria and forms of the Company’s organisational structure;

– he ensures the application of the rules that the Bank’s various areas must follow in the

performance of their coordination and control activities over the corresponding functions of

the subsidiaries;

– he represents the Bank in all General Meetings, both ordinary and extraordinary, of any

40

company, consortium, association, in which it is a shareholder, exercising the right to vote and

any other corporate law entitled in these proceedings, issuing proxies to employees or third

parties pursuant to and for the effects of art. 2372 of the Civil Code and any other statutory

norm or law on the matter;

– he proposes the establishment of advisory or coordination committees in order to provide

instructions for initiatives of interest to the Bank and banking group and/or to study

particularly important issues, while the final decisions remains with the Board of Directors;

– he grants overdrafts within the limits of the powers established by the Board, with the

exclusion of the entities covered by the provisions of art. 136 of the CBA;

– he defines contractual and economic lending and funding terms for the various services and

products that the Bank and Group offer reporting to the Board of Directors;

– he hires, promotes, transfers, suspends and dismisses Bank employees, including managers,

setting all the related conditions, including economic conditions, with the exception of the

appointment and revocation of Heads of the control functions;

– he stipulates, with all the appropriate clauses, modifies and terminates property leasing

agreements, cooperation agreements, trade and exchange contracts of tangible assets, contracts

for supplies and services, trade agreements, financial lease agreements for vehicles and other

means of transportation, up to the amount or value per contract of Euro 3,000,000.00 (three

million) and for the maximum duration of up to 6 years; without prejudice to the rules

governing transactions with related parties as well as the exclusive competence of the Board in

the cases provided for by art. 136 of the CBA;

– he authorizes transactions in financial instruments with the Bank of Italy and with Italian and

41

foreign corporate counterparties, within the limits of the powers established by the Board of

Directors;

– he participates in placement consortia undertaking the maximum guarantee of Euro

5,000,000.00 (five million) for each placement;

– he represents the Bank in any insolvency proceedings;

– he lodges petitions and administrative appeals before any public authorities in any fields and

in relation to any matters, including tax matters, with the power to accept and/or settle taxable

income;

– he takes action before any legal and administrative authorities, both in cognizance and

execution; he responds in cases against the Company and he appoints and revokes counsel,

giving them any consequent powers, including the power to settle;

– he issues statements of seizure and attachment;

– he allows curtailments, cancellations and waivers of voluntary and court-ordered mortgages

issued in the Bank’s favour, exempting the relevant Keepers of Property Registers from any

liability in this respect, with the power to complete all the paperwork and meet all the

requirements;

– he waives executive deeds, cancels privileges and transcriptions in general, as well as

subrogation to third parties for loans that have been fully repaid or are to be repaid;

– he acts, resists and accepts judicial orders, before any judicial and administrative authority, in

any stage, at any level and in any proceedings, both in cognizance, as a preventive or urgent

measure, and in execution;

– he registers court-ordered mortgages, seizures and attachments, he obtains voluntary

42

mortgages and collateral and personal guarantees and he exercises, as a seizing creditor, the

right to vote;

– he acts as complainant and respondent in legal proceedings for the appeal and revocation of

credit and in appeals against and revocations of insolvency proceedings;

– he reaches out-of-court settlements and agrees grace periods and payment extensions with

primary debtors and co-debtors of any kind;

– he ascertains losses and makes agreements and transactions that still affect the debt in the

income statement,

– directly or indirectly, up to Euro 1,000,000.00 (one million).

In urgent cases, the CEO may make proposals to the Chair that exceed the limits of its powers;

the Chair, acting under the powers conferred, will evaluate the adoption of the related emergency

measures.

The CEO may also attribute, within the limits of the powers conferred, special proxies for single

acts or categories of acts to Bank personnel or third parties, supervising the acts performed by the

individual agents.

Chair of the Board of Directors

The ordinary General Meeting of the Issuer of March 19, 2015 confirmed as Chair Mr. Ennio

Doris - non-executive - to which the following tasks and powers were conferred:

• general representation of the Bank towards third parties;

• promote the effective functioning of the Bank’s governance system:

o verifying the implementation of the resolutions of the General Meeting, the Board of

Directors and the provisions and guidelines of the Chief Executive Officer;

43

o coordinating the activities of the corporate bodies also in order to ensure a balance of

powers with respect to the attributions of the CEO and other Executive Directors;

o overseeing the progress of corporate affairs and compliance thereof with the corporate

strategic development guidelines of the Bank;

• be the interlocutor of the internal control bodies and internal committees; in this regard, it

has the power to convene, independently or at the request of other Directors, special

meetings of the Independent Directors alone to discuss issues deemed of interest regarding

the operation of the Board of Directors or company management;

• ensure that the information and documents relevant for taking decisions within the authority

of the Board are made available to its members in an appropriate manner and timing;

• oversee relations with public and private institutional bodies, shareholders, and external

relations of the Bank;

• promote and coordinate the Bank’s communication strategies and oversee its image with the

public and relations with the press or other media;

• adopt, on the proposal of the CEO, any measures having urgency in the interest of the Bank

and for which it is impossible to convene the Board of Directors in due time, to which it

shall, however, be required to report at the next meeting.

Deputy Chairmen of the Board of Directors

The Deputy Chairman, Edoardo Lombardi, under the By-laws - in addition to the general

representation of the Bank - was assigned by the Board of Directors of March 19, 2015, the

following attributions:

– he exercises the Chair’s functions as his deputy in accordance with the By-laws;

44

– he supports the Chair and CEO in promoting the effective functioning of the governance

system of the Bank and its subsidiaries, with particular reference to the organization and

operation of the company Bankhaus August Lenz & Co. AG;

– he verifies the correct execution, by the Company Bankhaus August Lenz & Co. AG, of the

resolutions of the General Meeting, the Board of Directors and the provisions and guidelines

of the Chief Executive Officer;

– he proposes to the Board of Directors of the Bank the appointment/dismissal and remuneration

of the members of the bodies with strategic supervision and management function of the

company Bankhaus August Lenz & Co. AG in compliance with the remuneration and

incentive policies approved by the Parent Company;

– he promotes the circulation of information in favor of the Board of Directors and Chief

Executive Officer, respectively, for own competences, with reference to the affairs of the

company Bankhaus August Lenz & Co. AG and related compliance with the company

strategic development guidelines set by the Parent Company;

– he deals with relations of the same Company Bankhaus August Lenz & Co. AG with local

private and public institutional organisms;

– promotes Bankhaus August Lenz & Co. AG’s communication strategies AG in accordance

with the guidelines and as established by the Parent Company.

It is noted that as a result of resolutions passed by the Issuer’s Board on January 24, 2017, the

Deputy Chairman, Edoardo Lombardi - as a result of the waiver of certain positions held by the

same - is currently conferred only the vicarious functions of Chair.

The Deputy Chairman, Giovanni Pirovano - in addition to the general representation of the Bank

45

- was conferred by the Board of Banca Mediolanum of March 19, 2015, the following duties and

powers:

– he represents the Bank in relations with the Supervisory Authorities and other institutional

bodies and administrative entities;

– he implements the decisions of the Board of Directors with respect to the aforementioned

institutions’ requirements;

– he represents the Bank in all the meetings, both ordinary and extraordinary, of any company,

consortium, association, in which it is a shareholder, exercising the right to vote and any other

corporate law entitled in these proceedings, issuing proxies and related instructions to

employees or third parties pursuant to and for the effects of art. 2372 of the Civil Code and

any other statutory norm or law on the matter.

It is noted that, as a result of the non-continuation, on November 3, 2016, of the operating powers

granted previously by the subsidiary Mediolanum Fiduciaria S.p.A. to Mr. Giovanni Pirovano,

Deputy Chairman of the Company, the same now qualifies as Non-executive Director within the

meaning of as required by the Supervisory Provisions (Part I, Title IV, Chapter I, Section V,

paragraph 2).

General Manager

In 2014, the Board appointed as General Manager Gianluca Bosisio conferring him the following

powers:

- supervise the ordinary management of the Company in the context of directives

established by the CEO, ensuring that the operation of the same complies with the laws

and regulations in force;

46

- execute the resolution of the Board of Directors;

- sign requests, statements and communications to the Chambers of Commerce, Bank of

Italy, Consob, the Italian Stock Exchange, Ministries and other public authorities, and any

other public or private office regarding the fulfillments of the Bank by laws, regulations,

circulars and supervisory instructions;

- represent the Bank in all General Meetings, both ordinary and extraordinary, of any

company, consortium, association, in which it is a shareholder, exercising the right to vote

and any other corporate law entitled in these proceedings, issuing proxies to employees or

third parties pursuant to and for the effects of art. 2372 of the Civil Code and any other

statutory norm or law on the matter;

- grant overdrafts within the limits of the powers established by the Board, with the

exclusion of the entities covered by the provisions of art. 136 of the CBA; grant special

active or passive conditions to individual customers, within the guidelines established by

the competent bodies;

- define the contractual and economic conditions, assets and liabilities of the various

services and products offered by the Bank and the Group;

- stipulate, with all the appropriate clauses, modify and terminate property leasing

agreements, cooperation agreements, trade and exchange contracts of tangible assets,

contracts for supplies and services, trade agreements, financial lease agreements for

vehicles and other means of transportation, up to the amount or value per contract of Euro

2,000,000.00 (two million) and for the maximum duration of up to 6 years; without

prejudice to the rules governing transactions with related parties as well as the exclusive

47

competence of the Board in the cases provided for by art. 136 of the CBA;

- have all the necessary actions for maintenance, adaptation and restructuring of real estate

property and other properties leased to third parties for functional purposes, up to the

amount per contract of Euro 1,500,000.00 (one million five hundred thousand);

- authorize spending uses without limits of amount, within the appropriations already

approved by the competent bodies, without prejudice to the limits set out in the preceding

points: authorize the transfer from one expenditure item to another in amounts not

exceeding 10% of each appropriation;

- authorize transactions in financial instruments with the Bank of Italy and with Italian and

foreign institutional counterparties, within the limits of the powers established by the

Board of Directors;

- participate in placement consortia undertaking the maximum guarantee of Euro

3,000,000.00 (three million) for each placement;

- stipulate, modify and terminate, with all the appropriate clauses, insurance contracts of

any kind and postal and bank account contracts, including ancillary and related services;

- collect payments and values due to the Bank, issuing a receipt upon settlement and

release;

- collect documents and envelopes containing values, money and telegraphic orders and

anything else directly to the Bank, at any public and private office and especially at the

Administration of Post offices, issuing releases and receipts exonerating the offices from

any responsibility;

- perform all operations at the Public Debt, the Inland Revenue and any other entity,

48

obtaining the titles, amounts and values, issuing a receipt exonerating the offices from any

responsibility;

- issue bank and postal checks, within the limits of the sums available at drawees or within

the limits of credit facilities, endorse and cash checks, money orders and bills; carry out

endorsements and receipts relating to releases, contract transfers and settlement of

securities;

- represent the Bank in any bankruptcy proceedings;

- make administrative requests and appeals before any public authority in any field and

matter, also fiscal, with the right to accept and/or define taxable income;

- promote actions before any judicial and administrative authorities, both in terms of

knowledge and execution; oppose legal disputes; appoint and dismiss attorneys,

conferring any consequent power, including the right to settle;

- issue garnishee’s statements;

- allow reductions, cancellations and renunciations of voluntary and judicial mortgages,

registered in favor of the Bank with exemption of competent property registrars from all

liability in this regard, with the power to fulfill all the claims and duties required;

- renounce executive acts, cancels privileges transcripts in general, as well as subrogation

in favor of third parties for loans fully repaid or settled;

- act, oppose and renounce judgment acts, before any judicial and administrative

authorities, at any stage and degree and in any location, and thus both in terms of full

knowledge and as a precautionary or urgent measure and execution;

- register judicial mortgages and transcribe seizures and foreclosures; acquire voluntary

49

mortgages and real and personal guarantee and renounce them; exercise the right to vote

as a pledgee;

- act and oppose in litigations for appeals and revocations of claims and judgments of

opposition and revocation in bankruptcy proceedings;

- reach settlement agreements, and grant payment moratoriums and extensions for both the

main debtors and joint debtors in any capacity;

- ascertain losses and make agreements and transactions that still affect the debt in the

income statement, directly or indirectly, up to Euro 500,000.00 (five hundred thousand).

The General Manager may also assign, within the limits assigned to him, special proxies for

individual deeds and categories of deeds to Bank personnel or third parties, overseeing the steps

taken by each of the proxies.

4.5 Independent Directors

Taking account of as outlined above in paragraph 4.2 of this Report, on September 23, 2015, the

Board identified as Independent Directors - under both the Corporate Governance Code and the

provisions of the CFA - the following:

- Paolo Gualtieri;

- Bruno Bianchi;

- Angelo Renoldi.

For related assessments on the qualification of Independent Directors, reference is made to as

outlined in paragraph 4.2 above regarding the composition of the Board of Directors.

The Independent Directors meet collegially in meetings of Independent Directors alone, to assess

and monitor the governance of the Company submitting to the Board of Directors any changes or

50

additions to the Corporate Governance system deemed appropriate, and assist the Board of

Directors in preparing the annual “Corporate Governance Report” for the purpose of disclosure to

shareholders and to the market.

In 2016, the Independent Directors met 4 times (average duration: 1 hour 34 minutes). At the

meeting on January 21, 2016, they decided not to proceed with the appointment of a Lead

Independent Director and this decision was disclosed at the first Board meeting.

At its meeting of February 15, 2016, the Independent Directors met to examine the draft of the

Report on Corporate Governance and Corporate Structure for the year 2015.

In the subsequent 2 meetings in November 2016, the Independent Directors met in order to

support the Board, for aspects within its competence, concerning the sale of 50% of the share

capital of Banca Esperia S.p.A. (“Banca Esperia”) to Mediobanca - Banca di Credito Finanziario

S.p.A. (“Mediobanca”), holder of the remaining share capital.

The aforementioned transaction constitutes a related party transaction as Mediobanca is an

associated company (directly and indirectly) of Banca Mediolanum and also configures as

“significant” related party transaction pursuant to the requirements of article 8, paragraph 1, of

Consob Related Parties Regulation and art. 7.12 of the “Group Regulations for the management

of Transactions with Related Parties of Banca Mediolanum and Associates of the Mediolanum

Banking Group” adopted by the Company.

In this regard, the Independent Directors that met (i) expressed reasoned and prior favourable

opinion regarding the possible sale of the entire shareholding of 50% of the share capital of

Banca Esperia held by Banca Mediolanum and (ii) approved the explanatory document of the

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opinion of Independent Directors that was presented for examination to the Issuer’s Board on

November 16, 2016.

On November 16, 2016, Banca Mediolanum and Mediobanca reached an agreement for the sale

of 50% of the share capital of Banca Esperia to Mediobanca, holder of the remaining share

capital.

The sale of the shareholding in Banca Esperia - which is still subject to obtaining the necessary

authorizations from the competent national and EU supervisory authorities - will be for an

amount of Euro 141 million, to be paid in a lump sum upon transfer of the shareholding.

On November 16, 2016, following the resolutions passed by its Board, the Issuer prepared and

provided the information document drafted in accordance with the provisions of Consob Related

Parties Regulation and the “Group Regulations for the management of Transactions with Related

Parties of Banca Mediolanum and Associates of the Mediolanum Banking Group”.

In 2017, the Independent Directors met once to examine the draft of the Report on Corporate

Governance and Corporate Structure herewith for the year 2016.

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5.0 PROCESSING OF CORPORATE INFORMATION

Internal Dealing

On June 21, 2016, the Board of the Issuer approved the “Procedure for the fulfilment of

obligations regarding Internal Dealings Board of Directors” in implementation of EU discipline

contained in article 19 of Regulation (EU) no. 596/2014 of the European Parliament and of the

EU Council of April 16, 2014 relating to market abuse (Market Abuse Regulation - MAR),

integrated by articles 7 et seq. of Delegated Regulation (EU) 2016/522 of the European

Commission of December 17, 2015 and Implementing Regulation (EU) 2016/523 of the

European Commission of March 10, 2016.

The provisions contained in the procedure - available on the Company’s website - came into

force with binding effect as from July 3, 2016 and it was indicated that any subsequent

amendments and/or additions come into force on the day of publication of the procedure on the

Company’s website, or on the day otherwise provided by rules of law or regulations, or by

resolution of the Board of Directors.

Until July 3, 2016, the “Regulation for trade transactions carried out by relevant parties and

persons closely associated with them” (the “Internal Dealing Procedure”) approved by the Board

on September 23, 2015 and with effect from the Merger and therefore as of December 30, 2015,

remained in force.

With respect to the former Internal Dealing Procedure, the one currently in force considers

Relevant Parties in accordance with the effects of EU legislation:

(i) the members of the administration or control body of the Company;

(ii) senior executives, identified by the Board of Directors, who, although not members of the

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bodies referred to in letter (i), have regular access to Privileged Information related directly

or indirectly to the Company and are authorized to take management decisions that can

influence the future development and prospects of the Company; this category includes, in

relation to the Bank, the General Manager, the Chief Financial Officer and the Financial

Disclosure Officer.

Under the new EU legislation, the parties in the following categories are considered persons

closely associated with relevant parties:

(a) spouse or partner similar to spouse in accordance with Italian law;

(b) dependent children in accordance with Italian law;

(c) relatives who have shared the same household for at least one year on the transaction date;

(d) legal entities, trusts or partnerships, when management responsibilities are held by a

relevant party or a person closely associated falling under the categories referred to in

letters (a), (b) or (c) above, or directly or indirectly controlled by one of said parties, or

established for the benefit thereof, or the economic interests of which are substantially

equivalent to the interests of one of said parties.

The relevant party shall communicate to the party responsible, in the manner and within the terms

indicated in the Internal Dealing Procedure, all transactions involving financial instruments

issued by the Company set forth below (“Financial Instruments”) regardless of the amount. For

the purposes of the Internal Dealing Procedure, Financial Instruments are: (a) shares; (b) debt

instruments; (c) derivative instruments; (d) financial instruments related to the instruments

referred to in points (a) and (b).

Transactions involving Financial Instruments performed by persons closely associated with the

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relevant party shall be communicated to the party responsible by the relevant party.

Communication from the relevant party to the party in charge must be within the trading day

following the transaction date, with the specification that if the transaction is completed on

Friday, it is communicated by Saturday.

The party responsible shall communicate to the public and to Consob, in the manner and within

the terms set forth in the Internal Dealing Procedure, the transactions referable to each relevant

party, the total amount of which reaches Euro 5,000 in a calendar year (“Relevant Transactions”);

after reaching said amount, all transactions shall be considered Significant Transactions. The

value of the transactions (i) is calculated by adding all the transactions without compensation; (ii)

is calculated by adding the transactions carried out on behalf of each relevant party and the

transactions carried out on behalf of persons closely associated with each relevant party.

EU legislation introduced specific rules with regard to blocking periods, i.e. period of time in

which it is assumed that the relevant parties have access to certain Privileged Information and

therefore operate the prohibition to perform transactions. More specifically, the Internal Dealing

Procedure, in accordance with MAR, establishes that Relevant Parties (meaning both Relevant

Parties and persons closely associated with the Relevant Party) shall not carry out transactions

relating to the Financial Instruments, on own account or on account of third parties, directly or

indirectly, within the 30 calendar days preceding the announcement of the annual and half-year

financial report and the quarterly reports on operations that the Company is obliged to make

public according to (i) the rules of the Trading Office in which the Issuer’s shares are admitted to

trading, or ( ii) Italian law (blocking period).

Notwithstanding the above, the Company may allow the relevant parties to carry out transactions

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involving the Financial Instruments during the blocking period in the following cases:

(a) based on a case-by-case basis, under exceptional conditions, such as severe financial

difficulties requiring immediate sale of shares;

(b) because of the trading characteristics, in the case of transactions carried out simultaneously

or in relation to an employee stock ownership plan or an employee savings plan, all as

further described in Annex “E” of the Internal Dealing Procedure.

In cases (a) and (b) above, the relevant party is, in any case, required to demonstrate that the

specific transaction cannot be performed at another time if not during the blocking period and the

assessment regarding the concession of the authorization is the responsibility of the Chair or the

CEO, separately, and if the request regards the latter, the decision is left to the Board of

Directors.

Circulation of Confidential and Privileged Information

As of July 3, 2016, Regulation (EU) no. 596/2014 of the European Parliament and the EU

Council of 16 April 2014 (Market Abuse Regulation - MAR) entered into force – at EU

legislation level – supplemented by the “regulatory technical standards” and the “implementing

technical standards” of the ESMA (European Securities and Markets Authority) approved by the

European Commission, which establishes a uniform regulatory framework regarding market

abuse and directly applicable within the European Union.

Until July 3, 2016, the Manual for the circulation and monitoring of confidential and privileged

information remained in force - adopted by the Board of the Company on September 23, 2015

and with effect as of the Merger and thus from December 30, 2015 - that was the document of

reference for the management of confidential and privileged information, for use by employees

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and collaborators of Banca Mediolanum S.p.A. and other companies belonging to the

Mediolanum Group.

In light of the changes introduced by the MAR with regard to market abuse, and in particular,

with regard to public disclosure of privileged information and obligations of establishment and

keeping of the register of persons who have access to privileged information, the Board held June

21, 2016 adopted a new Manual for the circulation and monitoring of confidential and privileged

information - which came into force as of July 3, 2016 - in order to provide the Company with

adequate internal procedures in accordance with EU requirements.

The current “Privileged Information Procedure” has incorporated the most ample and single

definition of privileged information introduced by the new regulatory framework and thus

adapted the Company’s internal evaluation process leading to the identification of privileged

information, and also allows the Company to delay the disclosure of privileged information under

the conditions laid down by the MAR.

The further interventions of the Privileged Information Procedure mainly concerned:

• the introduction of a special “discipline of the delay”, which implements one of the major

additions of the MAR discipline, i.e. the possibility for issuers to delay, under own

responsibility, the public disclosure of privileged information, provided that all conditions of

the EU discipline are met (art. 17 MAR);

• the provision that the register be divided into separate sections, one for each single part of

privileged information (single section). Whenever there is new Privileged Information, a new

and separate single section is added to the register, which indicates only the data of persons

with access to privileged information envisaged in the same section. The Company may

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decide to add a supplementary section to the register, in which, if established, will contain the

data of persons who always have access to all privileged information (permanent section).

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6.0 BOARD OF DIRECTORS’ INTERNAL COMMITTEES

The Issuer, in line with the provisions of regulatory and statutory provisions, established the three

specialized Committees regarding “Appointments”, “Remuneration” and “Risk” within the body

with strategic supervision function (position held by the Board of Directors) on September 23,

2015 and with effect from the Merger and thus from December 30, 2015.

The establishment of these committees does not involve any limitation of the decision-making

powers and responsibilities of the Board of Directors.

The operating rules with reference to “Convocation and agenda” and “Validity and minutes” are

the same for all Internal Board Committees as defined below.

For the fulfilment of their duties, the Internal Board Committees have their own budget

previously approved by the Board of Directors.

The members of the Internal Board Committees report regularly at Board meetings on the

activities carried out by the same Committees with regard to individual tasks assigned.

The meetings of the Committees are attended by, at the invitation of the Committees and on

individual agenda items, parties who are not members.

Convocation and agenda

The meetings are normally convened by the Chair or by delegation of the latter by the Secretary,

unless requested by at least two other members.

Meetings may also be convened in a place other than the registered office.

The convocation notice contains information on the date, time and place of the meeting and the

list of matters to be discussed in order to allow reasonable and informed participation (unless

contrary to particular confidentiality reasons).

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The convocation may alternatively be:

• ordinary, at least five days before the date set for the meeting, by means of delivery to each

member and participant of the Committee of registered letter or telegram, fax or e-mail

message. In this case, participants are also provided, usually 48 hours before the meeting, with

the main supporting documentation and information necessary to enable them to express an

informed opinion on the matters to be resolved;

• in case of urgency, at least one day before the date set for the meeting, by means of delivery to

each member and participant of the Committee of telegram, fax or e-mail message. In this

case, members and participants are also provided, simultaneously with the sending of the

convocation notice and where possible, with the appropriate proposed supporting

documentation and the information necessary to enable them to express an informed opinion

on the matters to be resolved.

Committee meetings may be held by audio or video conference, provided that each member and

participant may be identified by all the others and that each of the members/participants is able to

intervene in real time during the discussion of topics. If these requirements are met, the

Committee shall be considered held in the place attended by the Chair and the Secretary, so that

the minutes can be drawn up and signed.

The notice is sent to the addresses or contact information previously communicated by the

recipients. For the same convocation, even more than one of the means listed above can be used.

The Secretariat is usually identified in the Corporate Affairs Division.

Validity and minutes

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For the validity of the constitution of the Committee, the presence of a majority of its members is

required and, in the absence of convocation, the presence of all its members.

Decisions are taken by the affirmative vote of the majority of members present and recorded in

minutes, signed by the Chair of the meeting and the Secretary. In case of a tie, the vote of the

Chair shall prevail.

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7.0 APPOINTMENTS COMMITTEE

The Appointments Committee has the power to submit proposals, provide consultancy and

instructions, expressed in the formulation of proposals, recommendations and opinions with the

aim of allowing the Board of Directors to adopt its own decisions with greater knowledge of

facts.

The Committee is composed as follows:

− Angelo Renoldi (independent pursuant to the CFA and the “Code”) – Chair of the

Committee;

− Bruno Bianchi (independent pursuant to the CFA and the “Code”);

− Annalisa Sara Doris (non-executive).

The Appointments Committee consists of three non-executive Directors, of which two

independent.

The Appointments Committee internally identifies a Chair, chosen from among its Independent

Directors.

Only the following may attend the meetings of the Appointments Committee in addition to its

members, at the invitation of the Chair and in an advisory and support capacity:

• Human Resources Manager;

• Compliance Manager.

On individual agenda items and at the invitation of the Appointments Committee, other company

managers attended in 2016 based on the subject.

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For the effective functioning of the Committee, there is the option of delegation by the

participants to their employees for specific topics that may require timely discussion, only in the

case of justified absence or impediment.

In carrying out its duties, the Committee takes into account the objective to avoid that the

decision-making processes of the Board of Directors are dominated by a single entity or group of

entities that may be detrimental to the Bank.

In particular, the Committee:

• supports the appointment or co-option of Directors according to the Supervisory Provisions;

• submits opinions to the Board of Directors regarding the size and composition of the same

and makes recommendations on the professional figures whose presence on the Board is

deemed appropriate and on the topics set out in articles 1.C.3 (maximum number of offices

in listed companies for Directors and Auditors) and 1.C.4 (exceptions to the prohibition of

competition set out in art. 2390 of the Civil Code, approved by the General Meeting) of the

Corporate Governance Code of listed companies;

• proposes to the Board of Directors candidates for the office of Director in cases of co-option,

if necessary to replace Independent Directors;

• with reference to the need to ensure an appropriate degree of diversification in the collective

composition of the Board of Directors, the Appointments Committee – without prejudice to

the obligations under the discipline of listed Banks – sets an objective in terms of the less

represented gender quota and prepares a plan to increase this quota up to the target set;

• supports the Board of Directors in the self-assessment process of the bodies, according to the

Supervisory Provisions, as well as in the verification of the conditions pursuant to art. 26 of

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the CBA and in the definition of succession plans in executive leadership positions

established by the Supervisory Provisions.

The Committee supports the development of the proposal, by the Risk Committee, of the

appointment of the managers of the internal control corporate functions, the appointment of

which is the responsibility of the Board of Directors.

The Appointments Committee has access to corporate information relevant for this purpose and

has the financial resources to ensure its operational independence.

The Committee may also resort to the Company functions necessary to carry out its tasks, as well

as external experts, if necessary.

In 2016, 5 meetings of the Appointments Committee were held (average duration: 55 minutes);

with reference to the functions assigned to it, the Committee supported the Board in the annual

self-assessment process of the bodies and in the assessment of the proposed application of the co-

opted Director Mr. Luigi Berlusconi.

In 2017, 2 meetings of the Appointments Committee are currently planned, of which 1 already

held on January 17, 2017.

The Appointments Committee met in 2016 for assessments regarding application criterion 1.C.1.

lett. g) of the Corporate Governance Code for listed companies (so-called self-assessment).

The Appointments Committee, during the meeting held December 14, 2016, presented to the

Board for the year 2016 a budget of Euro 50,000, which was approved by the Board of Directors

during the meeting held December 20, 2016.

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8.0 REMUNERATION COMMITTEE

The Remuneration Committee provides support to the Board of Directors regarding

remuneration, ensuring that the criteria underlying the remuneration and incentive system of the

Bank and the Group are consistent with the management of risk profiles, capital and liquidity.

The Committee is composed as follows:

− Angelo Renoldi (independent pursuant to the CFA and pursuant to the “Code”) – Chair of

the Committee

− Paolo Gualtieri (independent pursuant to the CFA and the “Code”);

− Luigi Del Fabbro (non-executive) [until May 19, 2016 Antonio Maria Penna (non-

executive)]

all in possession of adequate knowledge and experience in financial and accounting matters

and/or remuneration policies.

The Remuneration Committee consists of three non-executive Directors, of which two

independent.

The Remuneration Committee internally identifies a Chair, chosen from among its Independent

Directors.

Committee meetings are attended by the Chair of the Board of Auditors or another Auditor

appointed by the latter, and the Human Resources Manager.

The following may attend the meetings of the Remuneration Committee in addition to its

members, at the invitation of the Chair and in an advisory and support capacity:

• Head of Compliance;

• Head of Risk Management;

65

• Internal Audit Manager;

• Career, Compensation & Quality Control Manager in consideration of the management of

the remuneration policies of the Sales Network.

For the effective functioning of the Committee, there is the option of delegation by the

participants to their employees for specific topics that may require timely discussion, only in the

case of justified absence or impediment.

The Remuneration Committee has the power to provide proposals, consultancy and instructions,

expressed in the formulation of proposals, recommendations and opinions with the aim of

allowing the Board of Directors to adopt its own decisions with greater knowledge of facts; in

particular, it:

• has the task of proposing remuneration for personnel whose remuneration and incentive

systems are determined by the Board of Directors, including Directors and key management

as well as establishing the performance objectives related to the variable component of said

remuneration;

• has advisory tasks regarding determination of the criteria for the remuneration of all key

personnel;

• submits proposals to the Board of Directors regarding remuneration, and more generally for

the remuneration and incentive system of the members of bodies with strategic supervision

and management function of the foreign banking companies of the Group also in relation to

the economic results achieved and the achievement of specific objectives, also monitoring

the application thereof;

• with reference to the above points, provides consulting on:

66

o the process adopted for the development of remuneration policies; in this regard, the

Committee ensures the involvement of all relevant corporate functions, such as Human

Resources, Career Compensation & Quality Control, Compliance Function, Risk

Management Function, Internal Audit Function;

o the self-evaluation process of key personnel and of the significance criteria used;

o the structure of the remuneration and incentive systems with particular reference:

� to the balance between fixed and variable component;

� to performance indicators and correction mechanisms for risk both ex ante and ex post

against which to parameter and adjust the variable component in the final balance, if

required;

� the division between remuneration based on financial instruments and monetary

bonuses as well as the related options and deferral mechanisms;

� in relation to the previous point, the eventual use of plans based on financial

instruments to be approved by the General Meeting. In this regard, manages all

relevant technical aspects related to their formulation and application;

• the overall consistency of policies with the level of risk and the effectiveness and stability of

the results, conditions imposed for the payment of remuneration;

• the nature and impact of any changes compared to the already approved policies;

• the process adopted for the ex post information to be provided to the General Meeting on the

implementation of policies;

• provides appropriate feedback on the activities carried out to the corporate bodies, including

the General Meeting of shareholders;

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• proposes, in respect of the implementation of the self-assessment process of “key personnel”,

the list of corporate individuals to be considered “key”; in this regard, evaluates the inclusion

in the list of certain corporate individuals considered “potentially key”;

• supports the Board of Directors in the verification of the overall consistency, adequacy and

actual application of the Group remuneration policies approved by the General Meeting with

respect to sound and prudent management and long-term strategies of the Group; in this

regard:

o submits proposals to the Board of Directors on the matter;

o monitors the evolution and application over time of the plans based on financial

instruments possibly approved by the General Meeting in relation to the change in the

reference scenario;

o monitors the application of the decisions adopted by the Board of Directors on the

remuneration of the Chair, Deputy Chairmen, the CEO, the Directors holding special

offices, the General Manager and, more generally of the “key personnel”; to that end,

receives the appropriate information from the control functions;

o directly supervises the correct application of the rules on the remuneration of the internal

control function managers, in close collaboration with the Board of Auditors;

• drafts the documentation to be submitted to the Board of Directors for its decisions;

• collaborates with other Committees within the Board of Directors and in particular with the

Risk Committee;

• provides an opinion, making use of the information received by the competent company

functions, on the achievement of performance objectives which are linked to the incentive

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plans and on the ascertainment of other conditions for the payment of remuneration;

In 2016, 8 meetings of the Remuneration Committee were held (average duration: 1 hour 20

minutes).

In 2017, 4 meetings of the Remuneration Committee are currently planned, of which 1 already

held on February 15, 2017.

The Remuneration Committee has access to corporate information relevant for this purpose and

has the financial resources to ensure its operational independence.

The Remuneration Committee, during the meeting held December 14, 2016, presented to the

Board for the year 2016, a budget of Euro 50,000, which was approved by the Board of Directors

during the meeting held December 20, 2016.

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9.0 DIRECTORS’ REMUNERATION

The General Meeting of the Issuer of April 5, 2016 - in compliance with the Supervisory

Provisions on remuneration and incentives policies and practices (7th update of November 18,

2014), and in accordance with the provisions of Consob Issuers’ Regulation and the CFA -

approved the document on the Group’s remuneration policies.

In detail, the document in question defines a Group remuneration policy for the year 2016

consistent with the characteristics of the latter and all its components and with the Report on

remuneration policies drafted by the then parent and bank holding Mediolanum S.p.A. and

approved by the General Meeting of the latter on March 26, 2015.

Section I of the Mediolanum Bank Report - published on the Company’s website

(www.bancamediolanum.it in the section “Corporate Governance” under “General Meetings”) -

describes the remuneration policies adopted in 2016, relative to the entire Banking Group and

prepared in accordance with applicable sector regulations.

As for the variable remuneration component and also in consideration, among other things, of the

maintenance for 2016, for Banca Mediolanum, of the status of “intermediary” within the meaning

and for the effects of the Supervisory Provisions regarding remuneration, the 2016 Remuneration

Policies have characteristics that largely coincide with those defined for the year 2015. In

particular, in accordance with the regulatory provisions applicable and in line with previous

General Meeting resolutions, the following have not been modified:

− the adoption for the “Key Personnel” of a maximum ratio between the variable and fixed

remuneration component of up to 2:1;

− the criteria for the determination of the remuneration to be granted in case of early

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termination of the employment contract or early termination of office, including the limits

laid down for said amount in terms of the fixed remuneration and the maximum amount

deriving from their application.

The last criterion mentioned will be subject to partial revision in the guidelines of the 2017

remuneration policies to propose to the next General Meeting of April 5, 2017.

Share-based remuneration plans

The 2015 Group Remuneration Policies envisaged, among other things, that a portion of the

variable remuneration linked to the incentive system be recognized by assigning financial

instruments of the Bank and application of the so-called “proportionality principle” referred to in

the Supervisory Provisions.

In implementation of the 2015 Group Remuneration Policies and in accordance with art. 114-bis

of the CFA, and the Supervisory Provisions, the following “Performance Share Plans” have been

approved by the Issuer’s General Meeting on April 5, 2016:

i. a performance share plan referred to as “2015 Top Management Plan – Key Personnel” for

Directors and Executives (the “Top Management”) (a) of Banca Mediolanum, and/or (b) of

the subsidiaries within the scope of Mediolanum Banking Group pursuant to art. 23 of

Legislative Decree no. 385/1993 as subsequently amended, and/or (c) of the other

companies controlled by the Bank pursuant to art. 2359, paragraph 1, Civil Code, although

not belonging to the Mediolanum Banking Group (the companies sub (b) and (c), together

with the Bank, hereinafter the “Group”), which qualify as “key personnel” within the

meaning of the Supervisory Provisions and 2015 Group Remuneration Policies (the “Key

Personnel”) and whose variable remuneration is above Euro 75,000;

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ii. a performance share plan called “2015 Top Management Plan - Other Personnel” for Top

Management of Banca Mediolanum and/or other Group companies that do not qualify as

Key Personnel (“Other Personnel”) i.e. that qualify as Key Personnel, but whose variable

remuneration is less than Euro 75,000, “Executive Personnel”;

iii. a performance share plan referred to as “2015 Contract Workers Plan - Key Personnel” for

contract workers - intended as the sales network components - (the “Contract Workers” and

in conjunction with Top Management, the “Recipients”) of Banca Mediolanum and/or

other Group companies that qualify as Key Personnel.

iv. a performance share plan referred to as “2015 Contract Workers Plan - Other Personnel”

for Contract Workers of Banca Mediolanum and/or other Group companies that do not

qualify as Key Personnel.

For further details on the “Performance Share Plans”, reference is made to the documentation

published on the Company’s website (www.bancamediolanum.it in the section “Corporate

Governance” under “General Meeting”).

With regard to (i) the remuneration of executive Directors, key management, and non-executive

Directors, (ii) the incentive mechanisms of the Internal Audit Function Manager and the

Financial Disclosure Officer and (iii) indemnities of Directors and employees in the event of

early termination of employment, reference is made to the Directors’ Report on Group

remuneration policies prepared in accordance with art. 123-ter of the CFA, art. 84-quater of

Consob Issuers’ Regulation and the Supervisory Provisions, published on the Company’s website

(www.bancamediolanum.it in the section “Corporate Governance” under “General Meeting”).

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10.0 RISK COMMITTEE

The Risk Committee supports the Board of Directors with respect to risks and the Internal

Controls System. In this scope, the Committee must pay specific attention to all the activities that

are instrumental and necessary for the Board to correctly and efficiently determine the RAF (Risk

Appetite Framework) and risk governance policies.

The Committee is composed as follows:

− Bruno Bianchi (independent pursuant to the CFA and the “Code”) – Chair of the

Committee

− Paolo Gualtieri (independent pursuant to the CFA and the “Code”);

− Luigi Del Fabbro (non-executive) [until 19/05/2016 Antonio Maria Penna (non-executive)]

all experts in accounting and finance.

The Risk Committee consists of three non-executive Directors, of which two independent.

The Risk Committee internally identifies a Chair, chosen from among its Independent Directors.

Committee members shall have the knowledge, skills and experience to be able to fully

understand and monitor the Bank’s risk strategies and guidelines and at least one member has

adequate experience in accounting and finance.

Committee meetings are attended by at least one member of the Board of Statutory Auditors and

the Risk Management Manager.

The following may also attend the meetings of the Risk Committee in addition to its members, at

the invitation of the Chair and in a support capacity:

• Director Responsible for the internal control and risk management system

• Compliance Manager

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• Internal Audit Manager

• Anti-Money Laundering Manager

• Managers of the Departments/Divisions, based on the topics

For the effective functioning of the Committee, there is the option of delegation by the

participants to their employees for specific topics that may require timely discussion, only in the

case of justified absence or impediment.

The Risk Committee has powers to make proposals, advise and conduct inquiries, which it

exercises by preparing proposals, recommendations and opinions to enable the Board of Directors

to adopt its decisions with full knowledge of the facts.

The Committee:

• as part of the RAF, performs the assessments and proposals necessary so that the Board of

Directors, as required by the Supervisory Provisions (Part I, Tit. IV, Ch. 3) can define and

approve the risk objectives (“Risk appetite”), and tolerance threshold (“Risk tolerance”); it

also expresses opinions on specific aspects regarding identification of the main business

risks;

• assists the Board of Directors in determining how to regulate and manage the assessment of

the risks to which the Bank and Group are exposed;

• assists, expressing an opinion, the Board of Directors in the evaluation, at least annually, of

the compliance, adequacy and effective functioning of the Internal Control System, the

Company organization and the requirements that must be respected by the corporate control

functions and verifies that the internal control functions properly comply with the indications

and guidelines of the Board of Directors; assists the latter in the preparation of the

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coordination document required by the Supervisory Provisions (Part I, Tit. IV, Ch. 3).

Furthermore, it notifies the Board of Directors of any weaknesses and the consequent

corrective action to promote, ensuring that the main business risks are correctly identified

and adequately measured, managed and monitored. In particular, it expresses an opinion on:

o whether the Compliance, AML, Risk Management and Internal Audit Functions

effectively follow and apply the guidelines established with respect to how control

activities are performed;

o the qualitative and quantitative adequacy of the Compliance, AML, Risk Management

and Internal Audit Functions and whether they are appropriately independent in their

judgment;

o whether the Bank’s and the Group’s general control model is consistent with the principle

of proportionality and strategic guidelines; moreover, it considers the management

board’s proposals for the purposes of the previous points;

o definition of company policy on the outsourcing of functions, including corporate control

functions;

• assists the Board of Directors in determining guidelines and policies concerning risks and the

Internal Control System, also considering the preferred risk level. In particular, it submits

proposals relating to:

o how the strategic control, management and technical/operating activities are carried out

with respect to the individual companies and the Group;

o the Group’s control structure, with specific regard to the choices made for the

centralization of certain control functions in accordance with supervisory requirements;

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o the organizational model supporting the control functions, the guidelines for the

respective activities necessary to determine the related regulations and the coordination of

the various functions;

• supports the Board of Directors in specifying the policies and processes for valuing the

Company’s assets, including verification that the price and other terms of transactions with

customers are consistent with its business model and risk strategies;

• assists the Board of Directors in checking that the strategies, risk governance policies and

RAF are properly implemented. In particular, it checks that the incentives underlying the

Bank’s remuneration and incentive system are consistent with the RAF and expresses its

opinion on specific aspects concerning the identifying of the main business risks; to this end

it collaborates with the Remuneration Committee;

• it conducts a prior examination of the corporate control functions’ programmes, action plans

and annual reports to the Board of Directors (which are respectively prepared by the heads of

the Compliance, Risk Management, AML and Internal Audit Functions) and the periodic

reports containing an evaluation of the internal control and risk management systems and

particularly important reports prepared by the Internal Audit Function or the Board of

Auditors or those resulting from inspections and/or examinations by third parties. If the

committee finds it necessary, it may ask the Internal Audit Function to conduct audits on

specific operating areas, concurrently informing the Board of Directors and the Board of

Auditors;

• assists the Board of Directors in determining the ICAAP’s general guidelines and expresses

an opinion on the implementation of such guidelines, the results, focusing on the Bank’s and

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the Group’s capital adequacy, and the results of the Parent Company’s self-evaluation of the

process;

• specifically examines the IT risk analysis process and the annual IT risk report;

• examines the outcome of controls on the achievement of IT security and operating continuity

targets defined for the entire Group and its individual components;

• is recipient of information and proposals formulated by the Management Managerial

Committee of Directors within the areas covered by the “Recovery Plan”, for evaluations of

competence to be submitted to the Board of Directors;

• monitors that addressees comply with the ethics and rules of conduct established in the Code

of Ethics; it also coordinates, via the competent functions, informational, training and

communication initiatives for these values and rules of conduct promoted by Banca

Mediolanum and its subsidiaries;

• with adequate preliminary activities, supports the Board of Directors’ risk management

assessments and decisions resulting from adverse events and any breaches of the principles

of conduct and control;

• supports the Board of Directors’ decisions concerning the sustainability of business activities

and the dynamics of interaction with all stakeholders, evaluating the Sustainability Report

before the Board of Directors;

• identifies and proposes, with the contribution of the Appointments Committee, the heads of

corporate control functions to be appointed;

• with respect to financial reporting:

o assesses whether the accounting standards are being properly applied in the preparation of

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the separate and consolidated financial statements and that they are consistent for the

purposes of the consolidated financial statements, liaising with the Financial Disclosure

Officer, the Independent Auditors and the Board of Auditors for this purpose;

o examines reports from the Chief Financial Officer/Financial Disclosure Officer pursuant

to Italian Law 262/05 concerning the correct application of the accounting policies and

their consistency for the purposes of preparing the financial reports, including the

consolidated financial statements;

o examines the quarterly and half-year reports, as well as the annual reports, on the basis of

the Chief Financial Officer’s reports;

o reports to the Board, at least twice a year, concurrently with the approval of the annual

and half-yearly reports, on its activities and the adequacy of the internal control and risk

management systems;

• with respect to the regulation concerning conflicts of interest:

o expresses an opinion on the procedures for identifying and managing transactions that

present conflicts of interest for the Bank and Group companies;

o evaluates specific transactions for which there is a direct or indirect conflict of interest,

related party transactions and transactions with the related parties of Banca Mediolanum

S.p.A. in accordance with Consob Related Parties Regulation of Bank of Italy Circular

no. 285 and in compliance with internal regulations (Regulation on the management of

transactions with related parties of Banca Mediolanum and related parties of the

Mediolanum Banking Group):

� in the case of minor transactions, issues specific reasoned opinions that are not

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binding;

� verifies that the Company control functions conform properly to the indications and

guidelines of the Board of Directors and assists the latter in drafting the

coordination document;

� performs additional functions assigned to it by the Board of Directors.

The Risk Committee has the right to access the information and company functions needed to

perform their duties and to be assisted by external consultants, where necessary. The Risk

Committee and the Board of Auditors share all information of mutual interest and, if appropriate,

coordinate their work to carry out their respective duties. In this context, it may also resort to

external experts and – where necessary – liaise directly with the control functions.

The Committee, during the meeting held December 19, 2016, presented to the Board for the year

2017, a budget of Euro 50,000, which was approved by the Board of Directors during the

meeting held December 20, 2016.

In 2016, 12 meetings of the Risk Committee were held (average duration: 3 hours and 23

minutes) as a result of which the Risk Committee supported the Board, in the manner provided

by internal and sector regulations, on the specific activities of competence.

The meetings of the Risk Committee were attended by the members of the Board of Statutory

Auditors.

In 2017, 11 meetings of the Risk Committee are currently planned, of which 2 already held on

January 19 and February 20, 2017.

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11.0 INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM

Below is a description of the current control system in force that is completed by Annex 1) to this

report and concerning the “Main characteristics of the risk management and internal control

systems in relation to the financial reporting process” prepared pursuant to art. 123-bis,

paragraph 2, lett. b), CFA.

The internal Control System is organized according to different levels that involve:

• line controls (so-called “first-level monitoring”): aimed at ensuring the correct conduct of

transactions. These checks are made by the same units as carry out the transactions

themselves (e.g. supervisors’ controls, systematic controls and sample checks), which may

have subdivisions devoted exclusively to control tasks and reporting to the managers of the

operational units (or the checks may be carried out as part of back office functions);

whenever possible they are built into IT procedures. In this configuration the operational

units are the first line of responsibility for the risk management process: in the course of their

day-to-day operations these units are required to identify, measure (or assess), monitor,

mitigate and report on the risks arising from routine company activities in accordance with

the risk management process. They must also observe the transaction ceilings assigned to

them in accordance with their Risk Appetite and the procedures making up the risk

management process;

• controls on risks and compliance (so-called “second-level monitoring”): aimed at ensuring

compliance with the operating limits assigned to the various functions, the correct

implementation of the risk management process and compliance of business operations

according with norms, including self-regulation. As required under the regulations, the

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functions responsible for Level 2 controls are separate from those engaged in production.

Specifically, those functions are:

- Risk Management Function;

- Compliance Function;

- Anti-Money Laundering Function;

• internal audit (so-called “third-level monitoring”): aimed at identifying breaches of

procedure or rules, and providing regular assessments of the completeness, adequacy,

functionality (efficiency and effectiveness) and reliability of the Internal Control System and

(in the case of ICT audits) the information system, with the frequency of controls based on

the nature and intensity of the risks.

The assumption of a complete and functional internal control system is the existence of an

adequate business organization to ensure the sound and prudent management of banks and

compliance with their applicable provisions. Accordingly, the Group has provided for the

following general principles of organisation:

• decision-making processes and the assignment of duties to personnel are formalised and

unequivocally identify roles and responsibilities and are suited to preventing conflicts of

interest. In this context, the necessary separation between operational and control functions

must be ensured;

• the human resource management policies and procedure ensure that personnel has the

expertise and professional qualifications necessary to meet their responsibilities;

• the risk management process is effectively integrated. The following are considered

integration parameters, provided by way of example and not limited to: the dissemination of

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a common language in risk management at all levels of the Bank; the adoption of detection

and measurement methods and tools consistent with each other (ex., a single taxonomy of

processes and a single risk map); the definition of risk reporting models, in order to facilitate

the understanding and proper assessment, even in an integrated logic; the identification of

formalized moments of coordination for the planning of respective activities; the provision of

information flows on an ongoing basis between the various functions in relation to the results

of monitoring activities pertaining to them; sharing in the identification of remedial actions;

• the processes and methods used to assess business activities, including accounting, are

reliable and integrated with the risk management process. To this end: the definition and

validation of the assessment methods are entrusted to different units; the assessment

methodologies are robust, tested under stress scenarios and do not over-rely on a single

source of information; the valuation of a financial instrument is entrusted to an independent

unit with respect to the one negotiating said instrument;

• operating and control procedures minimise risks of fraud or misconduct by employees;

preventing or, where this is not possible, mitigating potential conflicts of interest; preventing

the risk of the Bank being even unknowingly involved in money laundering or the funding of

terrorism;

• the information system is based on a flexible and resilient architecture that is integrated at

Group level. It provides management with pertinent, up-to-date information for decision

making and the correct implementation of the risk management process. In addition, in terms

of compliance, the system records, stores and correctly presents operations and events that

are material for the purposes provided for by law and internal and external regulations;

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• business continuity levels are guaranteed, adequate and consistent with that established by

current supervisory provisions.

In the definition of strategic, business and financial plans, the Board of the Company defined the

nature and level of risk compatible with the Issuer’s strategic objectives, including in its

assessments all risks that can be relevant with a view to sustainability in the medium to long term

of the activity of the same.

The Board of Directors also defined the guidelines to be used for the internal control and risk

management system, so that the main risks regarding the Company and its subsidiaries are

properly identified and also adequately measured, managed and monitored, determining the

compatibility of said risks with a business management consistent with the identified strategic

objectives.

In 2016, the Board of the Company approved the work plan prepared by the Internal Audit

Function Manager, after consulting with the Board of Auditors and the Director in charge of the

internal control and risk management system.

The Board of the Company, at its meeting on February 18, 2016, following favourable

assessment of the Risk Committee and the Board of Auditors, agreed on the overall adequacy of

the Internal Control System and approved the work plan for the year 2016 prepared by the

Internal Audit Function Manager.

The Issuer’s Compliance, Anti-Money Laundering, Risk Management and Internal Audit

Functions play a key role within the Internal Control System. In their respective areas, they are

responsible for monitoring exposure to financial and credit risk and assessing the impact of

operational, legal and reputational, money-laundering and terrorist funding risks, constantly

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monitoring capital adequacy with respect to the activities performed.

Risk Management Function

The Risk Management Function (or Risk Control Function) is responsible for implementing the

Group’s governance policies and its risk management system, and helps to specify and

implement the Risk Appetite Framework (RAF), exercising its control function is such a way as

to ensure that the various company Boards have an all-round view of the various risks.

Specifically, the Risk Management Function:

• defines and maintains the control and management framework for all the Bank’s risks, in

accordance with the guidelines established by the Board of Directors and current

regulations;

• proposes the quantitative and qualitative parameters necessary for the definition of the

RAF, including stress scenarios needed to define the risk tolerance;

• identifies the credit risk assessment and control methods, collaborating and coordinating

with the Credit Department’s Level 1 control;

• identifies the financial risk assessment and control methods, particularly for core business

activities;

• identifies the operational and reputational risk assessment and control methods,

coordinating with the Compliance Function, which handles risk assessments as an

outsourcer;

• defines and develops the quantitative methods used to determine and manage Banca

Mediolanum’s Pillar 1 and Pillar 2 risks;

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• prepares, in coordination with the business structures and in accordance with the RAF

guidelines, internal regulations, policies and rules for all material Pillar 1 and Pillar 2

risks;

• continuously checks the adequacy of the RAF;

• monitors relevant specialized regulations and implements updates in collaboration with

the other company functions;

• monitors risks and defines the related management policies and prepares the controlling

reports for the Board of Directors following as defined in the Risk Appetite Framework;

• plans, in collaboration with the Compliance Function, operational and reputational risk

assessments;

• gathers and analyses information on operating loss events;

• assesses, for all relevant first and second pillar risks, the congruity of economic and

regulatory capital;

• evaluates the risk profile of the products placed by Banca Mediolanum for the

performance of the controls required by MiFID regulations (both for the Group’s and

third parties’ products);

• prepares the Bank’s periodic risk reporting to the Board of Directors;

• provides quantitative support to the functions responsible for managing capital;

• analyses the risks of new products and services and those arising from new operating and

market segments;

• supports the Company boards and officers in the assessment of strategic risk;

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• expresses prior opinions on whether the most significant transactions are consistent with

the RAF.

Compliance Function

The Compliance Function is responsible for the process of checking compliance with the law.

The Compliance Function applies a risk-based approach to the management of compliance risk

on all the Company’s activities, with the exception of the certain areas of regulation that are

covered by other control functions in accordance with the law. It makes use of specialist units

specifically identified in the Group Compliance Policy for particular areas of regulation where

specialized forms of protection apply, those specialist units being assigned particular stages of the

compliance process.

In addition to safeguarding the Company in relation to the whole relevant legal and regulatory

framework, the Function has the task of providing specialist advice, Rule Map alerts and gap

analyses, adequacy assessments of the Company’s resources and processes in terms of current

applicable laws and regulations, and recommending ways of mitigating compliance risks.

With regard to that explicitly provided for by regulations, the Compliance Function is required to

carry out the following:

• assist company structures in assessing compliance risk;

• identify suitable procedures for preventing the risks detected, with the power to call for

those measures to be adopted, and checks on their adequacy and proper application;

• continuously identify applicable laws and regulations and measure/assess their impact on

the Company’s processes and procedures;

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• recommend possible organizational and procedural changes aimed at ensuring adequate

monitoring of the compliance risks identified;

• drawing up reports for company boards and officers and the units involved, while

remaining duty bound to respond promptly to their requests for information or advice;

• check that the organizational adjustments recommended for preventing compliance risk

are working properly.

The Group’s chosen model for compliance risk management assigns the Compliance Function

itself direct oversight of those laws and regulations which are most significant in terms of

compliance risk, such as the ones on banking and brokerage, the management of conflicts of

interest, transparency in dealings with customers, and consumer protection rules in general, as

well as any laws and regulations for which “Specialist Units” have not been set up.

The Compliance Function is responsible for evaluating the adequacy of controls for regulations

that are subject to an operating control by the Specialist Units, which are charged with

guaranteeing adequate control of specific areas of regulation to which the Group has assigned

particular stages of the compliance process.

The Specialist Units are required to work with the Compliance Function in working out methods

for assessing compliance risk, identifying the procedures in place to prevent Compliance Risk

and verifying the adequacy of those procedures. Further details of specific assessments of

procedures and the Specialist Units will be found on the Group’s Compliance Policy.

The Compliance Function makes its own decisions at the operational level and provides its own

controls, following the general Guidelines issued by the Parent Company. Here it should be

recalled that the Issuer, as Parent Company, directs and coordinates the subsidiaries, prescribing a

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common business model and laying down guidelines for their strategic development, though

without prejudice to their independence under their own By-laws.

Though it retains responsibility for discharging these duties under specific laws or regulations,

the Compliance Function intervenes in other areas as well:

• it is involved beforehand in compliance assessments of all novel projects which the Bank

intends to undertake;

• it provides advice and support on any matter of importance in terms of compliance risk.

As outsourcer, the Compliance Function also oversees the assessment of operational and

reputational risks on behalf of the Risk Management Functions of the Bank and the Group’s other

Italian companies, as part of integrated risk assessment activities and according to a schedule

defined by those Risk Management Functions. Furthermore, it sends the appropriate information

to the Risk Management Functions on its activities. The Risk Management Functions have access

to the OpRisk database used by the Compliance Function to conduct its assessments; this

database contains the results of activities carried out and the risks identified. Any software

changes affecting the framework of operational and reputational risks must be agreed beforehand

between the Compliance Function and the Risk Management Functions.

The Compliance Function also oversees the management of complaints from customers and the

management of requests from the Supervisory Authority.

The Compliance Function supports the Financial Disclosure Officer in the discharge of his duties.

Furthermore, considering the Bank’s business model, specific attention has been paid to controls

of the work of the Bank’s Network of Financial Advisors. The Compliance Function conducts

these controls.

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Indeed, controlling the Sales Network is a key element of the Internal Control System and has

been performed since the Bank’s was established.

The Compliance Function carries out its controls on the Sales Network’s work, continuously

ensuring:

• an effective control of the entire Sales Network’s operations, using analytical tools and

performing checks and inspections both on the Sales Network and the central services to

prevent any embezzlement or adverse events;

• the detection and assessment, based on specific indicators, of potential operational and

reputational risks connected with the Sales Network’s activities, reporting any potentially

non-compliant conduct;

• the agreement and management of insurance policies for the Bank covering the risks of

possible offenses by members of the Sales Network to the detriment of customers or third

parties;

• the management of customer complaints when they relate to alleged disservices

attributable to the work of family brokers;

• coordinating the Banking Group’s non-Italian companies with a view to ensuring that a

standard model for control of the Sales Network is in use, taking due account of local

particularities in laws, regulations, organisation and business;

• the planning, calling and minutes of meetings of the Sales Network Disciplinary

Committee;

• the oversight of the application of Agent Misconduct or Customer Insolvency penalties;

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• the management of reporting on offenses by the Sales Network, collaborating with the

Litigation area in the collection of data and information useful to the area to define and

calculate the accruals to the relevant provision for agent misconduct in the Bank’s

financial statements and with the Risk Management Function in the loss data collection

process;

• the check that settlements in connection with controls (penalties imposed on the Sales

Network, receipt of insurance compensation for claims) are accounted for in a correct and

timely manner;

• regular reporting to the Bank’s own boards, the CEO, the Risk Committee and the Boards

of Directors of the companies involved on the controls and assessment conducted within

its scope of responsibility, as well as on situations deemed critical.

As part of the controls on the Sales Network, the Compliance Function collaborates with the

Litigation area, particularly with respect to managing disputes with customers in relation to

circumstances of misconduct and the related court proceedings (e.g., filing lawsuits, depositions,

etc.).

Anti-Money Laundering Function;

Taking a risk-based approach, the AML Function is responsible for monitoring the risk of money

laundering and the funding of terrorism and updating risk management processes in line with

changes in the regulatory and procedural context in this respect.

It continuously monitors that company procedures are consistent with the aim of preventing and

mitigating the violation of external regulations (laws and standards) and internal regulations

concerning money laundering and the funding of terrorism.

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It pays particular attention to the adequacy of systems and internal procedures with respect to

customers’ checks and registration and the adequacy of suspicious transaction detection,

assessment and reporting systems.

It reports directly to the Bank’s Board of Directors and has access to all the Bank’s information

and any material information for the performance of its duties.

In particular, the AML function:

• identifies the applicable regulations with respect to anti-money-laundering and terrorism

funding risks and evaluates their impact on internal procedures and processes;

• provides consultancy and assistance to the Bank’s boards and organizational units on the

areas for which it is concerned, especially when new products and services are offered;

• helps identify the procedures and controls to prevent and mitigate money-laundering and

terrorist financing risks;

• checks the adequacy of anti-money-laundering and anti-terrorism procedures and controls

adopted and proposes the organizational and procedural updates necessary or appropriate

in ensuring adequate risk control;

• analyzes reports from outside and within the Bank alleging suspicious transactions to be

submitted to the “Suspicious Transaction Reporting Official” who decides whether any

reports should be made to the Italian Financial Information Bureau established with the

Bank of Italy (the “UIF”);

• examines the findings of the AML Function’s automated detection systems or specific

detection systems and studies the results in view of possibly submitting them to the

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Suspicious Transaction Reporting Official who decides whether any reports should be

made to the UIF;

• supports the Suspicious Transaction Reporting Official in forwarding the UIF any reports

that are deemed valid;

• checks the reliability of the system of information flows to the sole electronic database,

performing periodic controls on its formal and logical qualities and on its consistency;

• oversees the monthly transmission of aggregate data recorded in the sole electronic

database by the IT outsourcer to the UIF;

• collaborates on anti-money-laundering issues with the Italian Ministry of the Economy

and Finance, the UIF, the Supervisory Authorities in its sector, the concerned public

authorities and the police, and fulfils their requests for information;

• collaborates with the relevant company functions in the design and offer of specialized

courses in this respect;

• prepares, at least once a year, a report on its work, any malfunctioning assessed, the

related corrective action to be taken and employee training, to be submitted to the Risk

Committee, Board of Auditors, CEO and Board of Directors of the Bank;

• in accordance with the methodologies and timing established by the Bank of Italy, the

AML Function handles the self-assessment of money laundering and terrorist funding

risks and includes its findings in the annual report mentioned above;

• ensures that the relevant information flows are sent to the Board of Auditors, the Risk

Committee, the Corporate Malpractice Prevention Panel pursuant to Italian Legislative

Decree 231/2001 and to the Board of Directors of the Bank and to the CEO;

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• in collaboration with the relevant company functions, manages institutional relationships

with the Bank’s contacts at Anti-Money laundering regulators/authorities (the Italian

Ministry of the Economy and Finance, the UIF, Bank of Italy and trade associations);

• in conjunction with the operating units, it collaborates in adequate additional customer

checks in cases where – due to objective, environmental and/or subjective circumstances

– there appears to be a higher risk of money laundering;

• as outsourcer, it performs the following activities on behalf of the Group companies with

which it has signed specific service agreements:

o meeting requirements in connection with the application of regulations to prevent

money laundering and the funding of terrorism, ensuring that processes,

procedures and internal controls are updated whenever new regulations come into

effect;

o analysis of reports received alleging suspicious transactions to be submitted to the

Suspicious Transaction Reporting Official who decides whether any reports

should be made to the UIF;

o monitoring that the data fed into the sole electronic database is correct and

complete and preparation of instructions on how it should be maintained,

including in the wake of any regulatory developments. It performs these activities

as outsourcer under a specific contract for the Group’s insurance companies as

well, which have their own internal and independent AML Functions;

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o prepares the relevant information flows for the Board of Auditors, the Corporate

Malpractice Prevention Panel pursuant to Italian Legislative Decree 231/2001 and

to the Board of Directors of the Company;

• as outsourcer, the AML Function conducts the adequate additional checks on behalf of the

Group’s non-Italian companies with which it has signed specific service agreements;

• gathers and examines information flows from the same functions at the foreign

subsidiaries;

• for as far as it is concerned, prepares/validates and updates internal anti-money-laundering

and anti-terrorism regulations, policies and rules and, where necessary, the related Group

guidelines.

Internal Audit Function

The Internal Audit Function’s purpose is to monitor, as a third level of control and by means of

on-site inspections, the proper conduct of transactions and any changes in risk, as well as

evaluating the completeness, adequacy, functionality and reliability of the organisational

structure and other components of the Internal Control System, reporting possible improvement

measures to the Company boards and officers, with particular regard to the RAF, risk

management process and risk measurement and control tools. It then makes recommendations to

the Company boards and officers on the basis of its findings.

In this context, the Function:

• each year, for the approval of the Company boards and officers, presents an audit plan

that specifies the planned audit activities considering the risks of the various activities and

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company structures; the plan includes a specific section on ICT auditing. It also presents

the three-year audit plan;

• assesses the completeness, adequacy, functionality, reliability of the components of the

Internal Controls Systems, the risk management and company process, also having regard

to the ability to identify errors and irregularities. In this context, it audits, among other

things, the corporate control functions;

• reports regularly to the Company boards and officers on whether the Internal Control

System is complete, adequate, functioning and reliable. Furthermore, it informs the

Company boards and officers of any and all violations or material weaknesses;

• evaluates the effectiveness of the process for definition of the RAF, internal consistency

of the overall scheme and its conformity with the Company’s operations;

• verifies the following specific areas:

o the regularity of the Company’s business, including outsourced activities;

o monitoring of compliance with regulations;

o respect, in the various operating sectors, of the limits set by the approval

mechanisms and the full and correct use of the information available in the various

activities;

o carrying out Level 3 controls on the activities carried out by the Sales Network,

coordinating with and using the support of, where appropriate, the Compliance

Function, with which it has defined a “coordination protocol” specifically for this

purpose;

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o the effectiveness of the powers of the Risk Management Function with reference

to consistency with the RAF of significant transactions;

o the adequacy and proper functioning of processes and methodologies for assessing

company activities and in particular financial instruments;

o the adequacy, overall reliability and security of the information system (ICT

audit);

o controls the Company’s business continuity plan, reviewing the verification

programs, assisting in the tests, checking the results, proposing changes to the plan

based on the emerging evidence. It also monitors the business continuity plans of

critical service providers and suppliers;

o at least once a year, that remuneration practices comply with the approved policies

and current regulations;

o the removal of anomalies detected in operations and in the functioning of controls

(follow-up activities);

• performs special investigation tasks with regard to specific irregularities;

• performs periodic tests on the functioning of the operating and internal control

procedures;

• assesses, with specific regard to the administrative liability of legal persons and the

preparation of corporate financial reports, whether the Models of organization,

management and control are effective and adequate, whether they are applied properly

and whether the controls in place are effective and up-to-date;

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• it is responsible for the Internal Reporting System (Whistleblowing) and the analysis and

assessment of the reports received, in compliance with current regulations and transposed

in the Policy and the Regulations of the process related to the internal systems for

Reporting Violations.

With reference to the risk management process, the Internal Audit Function assesses:

• the organization, powers and responsibilities of the risk control function, also with

reference to the adequacy and quality of the resources assigned to the latter;

• the appropriateness of the assumptions used in the sensitivity and scenario analyses and

stress tests;

• the alignment with industry best practices.

In carrying out its tasks, the Internal Audit Function:

• takes into account the requirements of professional reference standards;

• directly communicates its findings and assessments to the relevant company boards and

officers;

• has access to all activities, including those which have been outsourced.

The Internal Audit Function’s duties, benchmark values, methods and operating processes are

also described in detail in the Internal Audit Policy.

Finally, in line with their reciprocal independence and respective roles, the corporate control

functions collaborate together and with other functions (e.g., Legal Affairs, Organisation and

Security) to develop their own methodologies and control activities in a way that is consistent

with the Group’s strategies and operations. In this regard, specific information flows are provided

between company control functions on the results of the respective activities carried out.

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11.1 Director in charge of the internal control and risk management system

With effect from December 30, 2015 until April 30, 2016, the Board of the Company had

appointed Mr Luigi Del Fabbro as Director in charge of the Internal Control and Risk

Management System as required by the Corporate Governance Code. With effect from May 1,

2016, the office of Director in Charge of the Internal Control and Risk Management System has

been attributed to the CEO Massimo Antonio Doris.

For the periods of competence, both Directors have performed the following tasks:

• identifying the main business risks, considering the characteristics of the Issuer’s and its

subsidiaries’ activities, and periodically submitting those risks to the Board of Directors for its

examination;

• executing the guidelines specified by the Board of Directors, seeing to the design,

establishment and management of the internal control and risk management system and

constantly checking that it is both adequate and effective;

• ensuring that the system is properly adapted to changes in operational, legislative and

regulatory circumstances;

• asking the Internal Audit Function (copying in the Chair of the Board of Directors, the Risk

Committee and the Board of Auditors) to carry out checks on particular areas of operations or

on compliance with Group rules and procedures in the execution of the Company’s operations;

• promptly reporting any issues or flaws found in the course of his work or coming to his notice

in other ways to the Risk Committee (or to the Board of Directors in emergencies) so that the

Committee (or the Board) can take appropriate action.

11.2 Head of the Internal Audit Function

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The Board, upon proposal of the Risk Committee members, after consulting with the Director in

Charge of the Internal Control and Risk Management System, and the Board of Auditors - having

acknowledged the remuneration plan and the adequacy of the resources allocated - at its meeting

on September 23, 2015, and effective as of the beginning of trading of the Company’s Shares on

the MTA (December 30, 2015), confirmed Mr. Massimo Rotondi as Internal Audit Manager of

the Issuer pursuant to art. 7 of the Corporate Governance Code.

The Internal Audit Manager, in addition to the functions assigned under the sectoral legislation

applicable to banks, is assigned the following tasks in accordance with the Corporate Governance

Code:

• assist the Director Responsible for the Internal Control and Risk Management System in

identifying the main business risks for consideration by the Board of Directors, and in

implementing the guidelines of the Board of Directors regarding the Internal Control and

Risk Management System through the planning, implementation, management and

monitoring of said system;

• verify, both on an ongoing basis and in relation to specific requirements and in

accordance with the international standards, the performance and suitability of the Internal

Control and Risk Management System, using an audit plan approved by the Board of

Directors and based on a structured process of analysis of the main risks that are

consequently ordered according to priority;

• prepare periodic reports containing adequate information regarding its activities, ways in

which risk management is conducted, as well as compliance with the plans defined for

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their reduction. The periodic reports contain an assessment of the suitability of the

Internal Control and Risk Management System;

• prepare timely reports on events of major importance;

• submit these reports to the Chairpersons of the Board of Statutory Auditors, the Risk

Committee and the Board of Directors as well as the Director in charge of the Internal

Control and Risk Management System;

• verify, as part of the audit plan, the reliability of information systems including

accounting systems.

The Internal Audit Manager is not responsible for any operational area and has direct access to all

the information needed to carry out his duties; for the main functions, he will report to the Board

of Directors, the Risk Committee and the Board of Auditors.

11.3 Organizational Model pursuant to Legislative Decree 231/2001

In 2003, Banca Mediolanum adopted a specific Organization, Management and Control Model

pursuant to Legislative Decree 231/2001.

The Organizational Model pursuant to Legislative Decree 231/2001 was developed by Banca

Mediolanum as a result of a process that allowed identifying within the various operations

managed, the types of offenses that may be potentially committed in the execution of the same

activities.

The analysis and monitoring of the operating phases in which individual processes are divided

into, allowed identifying operating procedures and practices that constitute organizational

monitoring of the risks-offenses set forth in Legislative Decree 231/2001.

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The specific legislation on liability of legal entities deriving from the commission of offenses has

been interpreted in light of the Bank’s organizational structures (sensitive activities) and in

consideration of Associative ABI Guidelines, market best practices and case law developed over

the years.

In addition to specific banking and financial offenses, (such as: market abuse, anti-money

laundering, dealings with the supervisory authorities,...) non-banking offenses that also have risk

profiles for the Company were also considered (such as IT offenses, violations of occupational

health and safety standards, corporate crimes,...).

The Model is constantly updated both a result of amendments made by the legislator to the

“sensitive” case and as a result of significant corporate organizational changes.

The Supervisory Bodies, appointed by the Board of Directors for the same companies listed with

Model 231, carry out their activities thanks to an organized system of information flows deriving

from the corporate Organizational Units affected by sensitive activities.

As of September 1, 2016, Banca Mediolanum S.p.A., attributed the functions of Corporate

Malpractice Prevention Panel to the Board of Statutory Auditors.

As regards the composition of the Board of Auditors, reference is made to as stated in chapter

14.0 “Composition and functioning of the Board of Auditors”.

An extract of the Organization, Management and Control Model adopted pursuant to Legislative

Decree 231/2001 and approved by the Board of Directors of the Company is published on the

Company website (www.bancamediolanum.it in the section “Corporate Governance” under

“Corporate Malpractice Prevention Panel”).

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11.4 Independent Auditors

The independent auditors Deloitte & Touche S.p.A. - the appointment of which was conferred by

the General Meeting on April 20, 2011 and subsequently integrated by the same on September

29, 2015 as a result of the Merger and the resulting listing - is currently conducting the task for

the statutory audit of accounts in accordance with law, including the audit of the annual and

consolidated financial statements, as well as the limited audit of the half-year financial report.

The expiration of the current appointment is expected with the approval of the financial

statements for the year ending December 31, 2019.

11.5 Financial Disclosure Officer

The Board of the Company appointed Mr. Luigi Del Fabbro as Financial Disclosure Officer, who

remained in office until April 30, 2016.

With effect from May 1, 2016 and pursuant to art. 154-bis of the CFA, the Financial Disclosure

Officer was attributed by the Board - after verification of the existence of the inherent

requirements and the favourable opinion of the Board of Auditors - to Mr. Angelo Lietti

attributing the necessary powers.

The Financial Disclosure Officer of the Issuer has a specialist function including certain control

duties within the Bank’s overall Control System. Specifically, the Financial Disclosure Officer:

• outlines and coordinates the governance of the administrative and accounting procedures

at Group level;

• prepares adequate administrative and accounting procedures for drawing up financial

reports;

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• conducts company-level control assessments of the adequacy of the Group’s

organisational, administrative and accounting resources and arrangements by assessing

the adequacy of its Internal Control System;

• regularly reports to the Board of Directors on the activities performed in the scope of

administrative and accounting processes detected, the results and any gaps to be filled;

• issues the Certificates and Statements required under art.154-bis(2) concerning the

statutory reporting of the financial position and results;

• in connection with the activities performed, asks the Group’s non-Italian subsidiaries for

any administrative and accounting information useful in preparing separate and

consolidated financial statements;

• proposes changes to company processes and procedures (including ITC ones) directly

affecting the preparation of the separate and consolidated financial statements or the

financial position and results;

• calls on the support of the other company functions of suitable outside consultants for his

work of risk assessments and control of processes/procedures.

In order to carry out his duties in the best possible way, the Financial Disclosure Officer relies on

a commission, whose members are the heads of the main company structures participating in the

Model created for the purposes of Legislative Order 262. The commission has advisory and

monitoring duties.

For the conduct of the role, the Financial Disclosure Officer may act without mandate limits,

operating with full decision-making autonomy within the budget that he will prepare annually

and submit for approval to the Board of Directors, except in cases of urgency. All within the

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context of existing procedures in the Company, however without the latter constituting limitation

to the effectiveness of the delegation.

In an indicative and not exhaustive manner, the Financial Disclosure Officer is conferred the

following rights and powers:

- the right to organize an adequate structure for quantity and professionalism of resources

as part of its activities;

- the capability of independent spending, as part of the annual budget to be submitted for

approval by the Board of Directors, except in cases of urgency;

- the right to use the resources of information systems and management control as well as

the right to use the Internal Audit function for the purpose of verifying the adequacy of

the procedures and effective application of controls;

- the free access to all the information deemed relevant for the performance of his duties,

both within the Company and within the other companies of the Mediolanum Group;

- participation in Board of Directors’ meetings with particular attention to the meetings that

deal with issues relevant to the activity of the Reporting Manager;

- the right to communicate with any administrative and control body of the Mediolanum

Group;

- the right to approve corporate procedures that have an impact on the formation of the

documents subject to certification, as well as direct participation in the planning of related

information systems;

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11.6 Coordination between subjects involved in the Internal Control and Risk

Management System

On September 22, 2016, the Board of Directors approved, inter alia, the update of the document

entitled “Guidelines and basic principles of Group coordination between Bodies and Control

Functions” prepared in implementation of the current supervisory provisions of the Bank of Italy,

which describes the procedures for coordination and collaboration adopted by Banca

Mediolanum and by the Banking Group, in the exercise of the tasks that ensure the proper

functioning of the Internal Control System.

Proper functioning of the Internal Control System relies on interactions among the various

company boards and officers, corporate control functions and other control functions in the

performance of their duties of direction, implementation, verification and assessment.

As detailed in the document “Guidelines and basic principles of Group coordination between

Control Bodies and Functions”, to govern its affairs in accordance with the principles of sound

and prudent management, the Banking Group ensures coordination and collaboration among the

various parts of the Internal Control System by the following means:

• periodic updating of the assessment and measurement of risks and the adequacy of

controls;

• tools for coordination among the corporate control functions;

• information-sharing and reporting arrangements.

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12.0 DIRECTORS’ INTERESTS AND RELATED-PARTY TRANSACTIONS

With regard to transactions with related parties and associates, the Board of Directors by

resolution of September 23, 2015 adopted, following a unanimous vote in favor of the

Independent Directors in office, the “Group Regulations for the management of transactions with

related parties of Banca Mediolanum and Associates of the Mediolanum Banking Group”

pursuant to Consob Related Parties Regulation and Bank of Italy Circular no. 263 of December

27, 2006, with effect from the listing date of the shares of the Issuer (December 30, 2015).

The procedure aims to regulate significant transactions (i) with associates of the Mediolanum

Banking Group and (ii) realized by the Company, also through subsidiary companies pursuant to

art. 2359 of the Civil Code or however subject to management and coordination activities with

related parties of the Issuer to ensure the substantial and procedural correctness of the same, as

well as the correct disclosure to the market.

This document contains definitional and procedural criteria and rules harmonized for transactions

with related parties and those with associates. In particular:

• the quantitative limits for the definition of minor ordinary transactions, of minor and major

significance, are normally set by application of the rules established by the Bank of Italy as

they are more stringent than those issued by Consob;

• the operational process, especially with regard to the preliminary assessment and approval

phase, is organized following the rule that is more rigorous between that established by the

Bank of Italy and that established by Consob to regulate the same aspect;

• the scope of the exemptions applicable to intercompany transactions was extended to all the

companies of the Banking Group, as a result of the merger on the control, such as in

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particular, the Group’s asset management companies;

• the types of transactions subject to the two regulations and those excluded have been

identified;

• the prudential limits related to own funds, however, continue to apply only to transactions

with related parties of the Banking Group and the disclosure to be made regarding the

transaction is different depending on whether involving a transaction with related party with

Associate.

The aforementioned “Group Regulations for the management of transactions with Related Parties

of Banca Mediolanum and Associates of the Mediolanum Banking Group” is published on the

Company’s website (www.bancamediolanum.it in the section “Corporate Governance” under

“Other Corporate Documents”).

Under article 4, paragraph 3 of Consob Related Parties Regulation as amended by resolution no.

17389 of June 23, 2010 and the provisions of Bank of Italy Circular no. 263 of December 27,

2006, 9th update of December 12, 2011, Title V, Chapter 5, some of the resolutions on related

parties are subject to a prior “favorable opinion of a committee, also specially formed, composed

exclusively of Independent Directors” and it is therefore essential to identify said Directors.

Considering the provisions in question and the provisions of the procedures adopted by the

Company by the Board of Directors of September 23, 2015, the Independent Directors:

- Paolo Gualtieri;

- Bruno Bianchi;

- Angelo Renoldi;

have the task of expressing, if necessary, the prior opinion referred to in the above legislation.

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As pertains to the activities of the Independent Directors, reference is made to as outlined in

paragraph 4.5 above regarding Independent Directors.

Also considering the role of the Banking Group’s Parent Company, the Bank has issued specific

internal regulations to manage conflicts of interest at Group level, in accordance with:

• the provisions of the Civil Code contained in articles 2391 and 2391-bis;

• the individual instructions for banks with respect to risk activities performed on behalf of

related parties and the obligations of Bank officials, pursuant to articles 53 and 136 of the

CBA;

• the provisions for conflicts of interest in the performance of activities and investment

services in the Regulation implementing article 6, section 2-bis of the CFA;

• Joint Bank of Italy – Consob Regulation dated 29 October 2007 regarding the

organisation and procedures of intermediaries that provide investment and collective asset

management services;

• Supervisory Provisions.

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13.0 APPOINTMENT OF STATUTORY AUDITORS

The statutory norms that regulate the appointment and replacement of the Auditors are contained

in art. 27 of the By-laws and outlined below:

- Article 27)

1. The ordinary General Meeting shall elect the Board of Auditors, consisting of three regular

Auditors and three alternate Auditors, who shall hold office for three years and expire at the

General Meeting called to approve the financial statements for the third year of the term of

office and may be reappointed.

All Auditors must be registered with the Register of statutory Auditors and auditing firms

established under law and have performed the statutory auditing of accounts for a period not

less than three years.

The Auditors must also possess the requirements of the provisions of law and regulations in

force and the Board of Directors shall ascertain their validity.

Statutory Auditors shall be responsible for all the tasks and powers provided by the primary

and secondary legislation in force pro tempore, including the obligation to promptly inform

the Bank of Italy and Consob of all acts or facts it may acquire in the exercise of its duties that

may constitute an irregularity in the management of the banks or a violation of the rules

governing banking activities.

For these purposes, the Auditors, even individually, can proceed to inspection acts or formal

requests to any office of the Company on any matters concerning the Company’s business.

2. Auditors are appointed on the basis of lists submitted by shareholders, with the procedure

provided below. Each list shall consist of two sections: one for candidates for the office of

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Statutory Auditor and the other for candidates for the office of Alternate Auditor. In these lists,

candidates are listed in progressive number. Each candidate may appear on only one list

under penalty of ineligibility.

Each list must indicate at least one regular Auditor and one alternate Auditor. In order to

ensure gender balance in accordance with primary and secondary legislation in force pro

tempore, each list containing a total number of candidates equal to or greater than three shall

provide for the presence of candidates of both genders, so that at least one candidate for the

office of regular Auditor and one for the office of alternate Auditor belongs to the less

represented gender.

3. Shareholders having the right to vote who, alone or together with other shareholders,

represent at least the percentage of share capital set by the National Commission for

Companies and Stock Exchange are entitled to submit lists.

The ownership of the percentage of share capital is determined with regard to the shares

registered in favor of the shareholders on the day when the list is filed at the Company, with

reference to the share capital subscribed at that date.

The related declaration can be communicated also after the filing of the list provided that the

Company receives it by the deadline for publication of the lists by the Company.

The Company allows shareholders who intend to submit lists to proceed with filing through at

least one means of remote communication, in the manner which shall be disclosed in the

convocation notice of the General Meeting and which allows the identification of shareholders

who shall proceed with filing.

The shareholding portion required for the submission of lists of candidates for the election of

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the Board of Auditors shall be indicated in the convocation notice of the meeting called to

approve the appointment of said body.

A shareholder may not submit or vote for more than one list, even through a third party or

through trust companies. Shareholders belonging to the same group - intended as the Parent

Company, subsidiaries and companies under joint control - and shareholders who are parties

to a shareholders’ agreement pursuant to article 122 of Legislative Decree no. 58/1998

regarding Issuer’s shares may not submit or vote on more than one list, even through a third

party or trust companies.

4. Lists are filed at the Company within the twenty-fifth day before the date of the meeting called

on first or second call to resolve on the appointment of the members of the Board of Auditors

and made available to the public at the registered office, on the website and other manner

prescribed by the National Commission for Companies and the Stock Exchange with

regulation at least twenty-one days prior to the meeting.

The lists contain:

a) information regarding the identity of the shareholders who submitted the lists, indicating the

percentage of shares held;

b) a declaration by shareholders other than those holding, even jointly, a controlling or relative

majority shareholding, certifying the absence or existence of any connection with the latter,

in accordance with the provisions of article 148 of Legislative Decree no. 58/1998 and

article 144-quinquies, first paragraph, Consob Resolution no. 11971/1999 (hereinafter also

the “Issuers’ Regulation”);

c) exhaustive information on the personal and professional characteristics of the candidates, a

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statement by the candidates attesting that they meet statutory requirements and as provided

in these By-laws and accept the appointment.

Those who hold administration and control offices in excess of the limits established by the

primary and secondary legislation in force pro tempore may not be elected as Auditors.

5. If at the date of expiry of the term of twenty-five days before the date set for the meeting on

first or second call to resolve on the appointment of Auditors, only one list has been submitted,

or only lists submitted by shareholders associated under article 144-quinquies Issuers’

Regulation, lists may be submitted until the third day following said date. In this case, the

threshold referred to in paragraph 3 above is reduced by half.

6. The lists presented without compliance with the foregoing provisions shall not be submitted

for voting.

7. The Chair of the General Meeting, before opening the vote, shall refer to any declarations

referred to in letter b) above, and require meeting participants who have not filed or

participated in filing of lists to declare any relations as defined above.

If an individual who is connected to one or more reference shareholders has voted for a minority

list, the existence of said relation shall only become relevant if the vote was crucial for the

election of the Auditor.

8. The Auditors shall be elected as follows:

a) two regular Auditors and two alternate Auditors shall be selected, in the progressive order in

which they are indicated in the sections of the list, from the list that obtained the most votes.

b) a regular Auditor and an alternate Auditor are chosen, based on the progressive order in

which they appear in the list sections, from the second list that obtained the most votes at the

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meeting and that, pursuant to the first and secondary legislation in force pro tempore, is not

associated, even indirectly, with the shareholders who submitted or voted on the list that

obtained the most votes.

If several lists have obtained the same number of votes, a new vote is held between these lists and

the candidates are elected from the list that will obtain a simple majority of votes.

If following the vote and operations above the composition of the Board of Auditors for matters

relating to regular Auditors does not comply with the primary and secondary legislation in force

pro tempore concerning gender balance, there will be the necessary replacements, according to

the progressive order in which candidates are listed in the list that obtained the most votes.

9. The Chair of the Board of Auditors shall be the candidate at the top of the section of the

candidates for the office of regular Auditor of the list referred to in letter b) of the preceding

paragraph.

10. If only one list has been submitted, the General Meeting shall vote on it; if the list obtains the

majority required by article 2368 et seq. of the Civil Code, the three candidates indicated in

progressive order in the related section shall be elected as statutory Auditors and the three

candidates indicated in progressive order in the related section as alternate members; the

Chair of the Board of Auditors shall be the person indicated at the top of the section of

candidates for the office of Auditor in the list submitted.

11. In the absence of lists, and if through the voting mechanism by list the number of candidates

elected is less than the number established by these By-laws, the Board of Auditors shall

respectively be appointed or integrated by the meeting with the majorities required by law

and in compliance with the provisions from time to time applicable regarding gender

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balance.

12. In case of replacement of an Auditor, an alternate Auditor shall take over belonging to the

same list as the outgoing Auditor, provided compliance with the provisions applicable from

time to time with regard to gender balance; if this is not the case, there will be, in order, a

shift of people from the same list and, alternatively, to any additional lists on the basis of

votes received.

When the General Meeting is required to appoint regular and/or alternate Auditors in order to

complete the number of the members of the Board of Auditors it shall proceed, in compliance

with the provisions applicable from time to time regarding gender balance, as follows: if

Auditors elected in the majority list need replacing, the appointment shall take place by a simple

majority vote without any list constraints; if, on the other hand, minority Auditors are to be

replaced, the General Meeting replaces them with a simple majority vote, choosing them from the

candidates indicated in the same list as that in which the replaced candidate was listed, or from

the minority list that has obtained the second largest number of votes.

In the absence of candidates of minority list(s) and if the provisions from time to time applicable

regarding gender balance are not complied with, the appointment shall be by voting one or more

lists, made up of a number of candidates not exceeding those to be elected, presented before the

General Meeting in compliance with the provisions contained in this article for appointment of

the Board of Auditors, provided that no lists may be submitted (and if submitted will be void) by

reference shareholders and members connected to them, as defined by the current laws and

regulations. The candidates included in the list that received the most votes shall be elected.

In the absence of lists submitted in observance of the above and in compliance with the

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provisions applicable from time to time with regard to gender balance, the appointment shall be

by relative majority vote without list constraints.

13. In all cases of substitution of the Chair, the incoming Auditor shall also take the office of

Chair of the Board of Auditors.

14. The General Meeting shall determine the remuneration of the Auditors, plus reimbursement

of expenses incurred in carrying out their duties.

15. The powers and duties of Auditors are those established by primary and secondary

legislation in force pro tempore.

16. The meetings of the Board of Auditors may also be held by means of telecommunication,

provided that all participants can be identified and such identification is recorded in the

minutes and are able to follow the discussion and intervene in real time on the matters

addressed, exchanging documentation if required; in this case, the meeting of the Board of

Auditors is considered held at the place where the Chair of the meeting is.

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14.0 COMPOSITION AND FUNCTIONING OF THE BOARD OF STATUTO RY

AUDITORS

The Issuer’s Board of Statutory Auditors was appointed by the General Meeting of March 19,

2015, according to the statutory provisions then in force and expires with the General Meeting

approving the financial statements as at December 31, 2017.

Since the Chair of the Board Mr. Arnaldo Mauri passed away on November 21, 2016 and due to

the combined provisions of art. 2401 Civil Code and statutory provisions, Ms Francesca

Meneghel - alternate Auditor appointed by the aforementioned General Meeting of March 19,

2015 - took over the post of statutory Auditor of the Company and Chair of the Board.

The current Board of Auditors is composed as follows:

- Francesca Meneghel - Chair of the Board of Auditors since November 21, 2016 (alternate

Auditor until November 21, 2016);

- Adriano Alberto Angeli - regular Auditor;

- Marco Giuliani - regular Auditor;

- Gianluca Orrù - alternate Auditor.

As for the personal and professional characteristics of each Auditor, reference can be made to as

published on the website of the Issuer (www.bancamediolanum.it in the section “Corporate

Governance” under “Corporate Bodies”).

The Board of the Issuer expressed the orientation according to which it is appropriate to fully

apply also to the members of the Board of Auditors the independence criteria laid down for

Directors by the Corporate Governance Code of listed companies pursuant to art. 3.

At its meeting on January 24, 2017, the Board found the permanence of these requirements as a

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result of the examination of the disclosure statements made by members of the Board attesting to

the independence of the regular members of the Board of Auditors pursuant to art. 148, paragraph

3, of the CFA and pursuant to art. 3 of the Code, as referred to in application criterion 8.c.1 of the

Code.

Also in this case - as was done for two Directors - the Board, with a view to the prevalence of

substance over form, accepted the existence of the independence requirement for the Auditors

Adriano Alberto Angeli and Marco Giuliani despite application criterion 3.C. 1. e) of the Code,

according to which the persistence in office for more than nine years during the past twelve could

be reason for impediment to the recognition of the Independent Director qualification.

For further information and the offices held by the regular members of the Board of Auditors

pursuant to article 148-bis CFA, please refer to the table annexed to this report.

In 2016, 14 meetings of the Board of Auditors were held.

In 2017, 14 meetings of the Board of Auditors are currently planned, of which 3 already held,

respectively on January 16, 19 and 24, 2017.

It is also noted that all the members of the Board of Auditors are invited to attend the meetings of

the Risk Committee and the Remuneration Committee.

On December 1, 2016 and January 16, 2017, the Issuer’s Auditors and Directors participated in

two sessions of the Board Induction aimed at analyzing certain issues relating to governance, as

outlined in the previous paragraph regarding the Induction program.

The remuneration of the members of the Board of Auditors is commensurate to the commitment

required, the importance of the role as well as the dimensional and sectoral characteristics and the

Company.

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The Company requires that if a statutory Auditor, on own behalf or on behalf of third parties, has

any interest in a specific company transaction, he/she must duly and promptly inform the other

Auditors and the Board of Directors in a comprehensive fashion regarding the nature, terms,

origin and scope of their interest.

In 2016, the Board of Auditors operated in coordination with the Internal Audit Function and the

Risk Committee in the conduct of its activities.

Lastly, it is noted that the members of the Board of Auditors were granted the functions of

members of the Corporate Malpractice Prevention Panel in 2016 pursuant to Legislative Decree

231/2001. In this regard, see paragraph 11.3.

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15.0 RELATIONSHIP WITH THE SHAREHOLDERS

The Issuer’s Board of September 23, 2015 appointed, with effect from the start of trading of the

ordinary shares on the MTA (December 30, 2015), Ms. Alessandra Lanzone as Investor Relator.

The Investor Relations Function is responsible, among other things, for maintaining relations

with institutional investors; it contributes to fulfill the communication obligations to the market,

in the presence of privileged information, in full compliance with current legislation.

The management of relationships with all shareholders other than institutional ones, in particular

with regard to corporate information, is delegated to the Corporate Affairs Division.

With reference to the management of the General Meetings, the action of the Board of Directors

responds to the goal of maximizing member participation and facilitating the exercise of

shareholders’ rights also encouraging the use of the General Meetings to provide shareholders

with information on the Company.

A specific section of the Company’s website (www.bancamediolanum.it) was created – in

continuous implementation – easily identifiable and accessible, which provides relevant corporate

information.

In special sections, relevant corporate documents are also published such as the Company By-

laws, the press releases already published and the Corporate Governance Report.

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16.0 GENERAL MEETINGS

The General Meeting is regulated in its operation and as regards the rights of shareholders and

the manner of their exercise by law - primary and secondary - as outlined in the By-laws in

articles 9) to 16).

It is noted in particular - with regard to articles 9) to 16) - that:

- pursuant to article 9):

“1. The General Meeting shall be held at the registered office or elsewhere, as long as in Italy.

2. The General Meeting is convened by a notice published on the website of the Company under

the terms of the primary and secondary legislation in force pro tempore.

The convocation notice must indicate the date, time and place of the meeting and the list of

matters to be discussed and other information required by the provisions of primary and

secondary legislation in force pro tempore.

3. If provided in the convocation notice, the exercise of the right to attend and vote may take

place electronically, in the manner provided by the regulations of primary and secondary

legislation in force pro tempore.

4. The foregoing is without prejudice to the right of shareholders to request, pursuant to the

law, the convocation and/or additions to the agenda of the General Meeting and to submit

resolution proposals.”

- pursuant to art. 11)

“The right to attend the General Meeting and exercise the right to vote is certified by

communication to the Company by the intermediary, on the basis of their accounting records at

the end of the accounting day of the seventh trading day preceding the date set for the meeting on

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first or second call. All crediting or debiting of the accounts subsequent to said date, have no

relevance for the right to exercise the right to vote at the General Meeting.

The communication must reach the Company by the end of the third business trading day

preceding the date fixed for the General Meeting on first or single call or by another deadline

required by regulatory provisions from time to time in force.

The foregoing is without prejudice to the entitlement to intervene at the General Meeting and

exercise the right to vote if the communication reached the Company after the deadlines

indicated in this article, as long as by the beginning of the meeting.”

- pursuant to article 12)

“1. Those entitled to attend the General Meeting may be represented by written proxy, in

accordance with law.

The proxy may also be conferred with electronic document signed electronically in

accordance with article 135-novies, paragraph 6, of Legislative Decree no. 58/1998 and

related implementing provisions.

Electronic notification of the proxy may be carried out as specified in the convocation notice,

by using the appropriate section of the Company’s website or by sending the document to the

certified e-mail of the Company.

2. The Board of Directors may designate for each General Meeting, with mention in the related

convocation notice, a subject to which shareholders may confer, in the manner provided by

law and regulatory provisions, by the end of the second business trading day prior to the

date fixed for the meeting, also in call subsequent to the first, a proxy with voting

121

instructions on all or some of the proposals on the agenda. The proxy shall be valid only for

the proposals in relation to which voting instructions were conferred.

3. Shareholders may ask questions on the agenda even before the meeting. Details on the

exercise of this right are contained in the convocation notice also with reference to the

Company’s website.

The ordinary General Meeting is responsible for the competences required by applicable law.

By General Meeting resolution of November 23, 2015, the Company has adopted a “General

Meeting Regulation”, which became effective from the start of trading of the Issuer’s shares on

the MTA (December 30, 2015) and available on the websitewww.bancamediolanum.it in the

section “Corporate Governance” under “Company Corporate Governance Documents”.

The last ordinary General Meeting held on April 5, 2016 was attended by the following members

of the Board of Directors:

- Ennio Doris;

- Massimo Antonio Doris;

- Giovanni Pirovano;

- Angelo Renoldi;

- Bruno Bianchi;

- Luigi Del Fabbro.

During this meeting, the CEO and the Chair of the Board of Directors outlined the Company’s

performance in 2015 emphasizing certain economic and business indices of particular importance

and the Chair of the Remuneration Committee reported to shareholders on procedures to exercise

the Committee’s functions.

122

17.0 CHANGES AFTER THE CLOSURE OF THE FINANCIAL YEAR OF

REFERENCE

Taking into account as outlined in chapter “2.0 INFORMATION ON CORPORATE

STRUCTURES”, letter C)” regarding the situation of the Shareholders’ Agreement of Banca

Mediolanum, there were no changes in the Corporate Governance structure with effect from the

closing of 2016.

123

ANNUAL REPORT OF THE DIRECTORS UNDER PRINCIPLE 1.C. 2. OF THE

CORPORATE GOVERNANCE CODE OF LISTED COMPANIES

On February 21, 2017, the Board of Directors verified, as required by the Corporate Governance

Code, the offices of Director and Auditor currently held by the Directors in other companies

outside the Mediolanum Group, listed on regulated markets, in financial, banking, insurance or

large companies.

More precisely:

ENNIO DORIS – Chair

Does not hold relevant offices in companies outside the Group

EDOARDO LOMBARDI – Deputy Chairman

Chair of the Board of Directors of:

− Banca Esperia S.p.A.

Member of the Board of Directors of:

− Fedrigoni S.p.A.

− Istituto Europeo di Oncologia S.r.l.

GIOVANNI PIROVANO – Deputy Chairman

Deputy Chairman of the Board of Directors of:

− Cedacri S.p.A.

MASSIMO ANTONIO DORIS – CEO

Does not hold relevant offices in companies outside the Group

ANNALISA SARA DORIS – Director

Does not hold relevant offices in companies outside the Group

124

LUIGI BERLUSCONI – Director

Sole Director of:

− B Cinque S.r.l.

Chair of the Board of Directors of:

− Holding Italiana Quattordicesima S.p.A.

Member of the Board of Directors of:

− Fininvest S.p.A.

BRUNO BIANCHI – Director

Does not hold relevant offices in companies outside the Group

LUIGI DEL FABBRO – Director

Member of the Board of Directors of:

− Banca Esperia S.p.A.

PAOLO GUALTIERI – Director

Extraordinary commissioner of:

− Additional social security and pension funds for the personnel of Istituto Bancario Italiano

Chair of the Corporate Malpractice Prevention Panel pursuant to Legislative Decree

231/2001 of:

− Trenitalia S.p.A.

Chair of the Supervisory Committee of:

− Eagle SIM S.p.A.

ANGELO RENOLDI – Director

Chair of the Board of Auditors of:

125

− Europrogramme Fiduciaria S.p.A.

Member of the Board of Directors of:

− Arnoldo Mondadori Editore S.p.A.

CARLOS JAVIER TUSQUETS TRIAS DE BES – Director

Chair of the Board of Directors of:

− Trea Capital Partners S.V. S.A.

− Trea AM SGIIC SA

Member of the Board of Directors of:

− Renta Corporaciòn Real Estate S.A.

Basiglio - Milano 3, February 21, 2017

for the Board of Directors

The Chair

Ennio Doris

126

ANNEX 1

Annex 1: Paragraph on “Main characteristics of the risk management and internal control

systems in relation to the financial reporting process” pursuant to art. 123-bis, paragraph 2,

lett. b), CFA

Introduction

The risk management and internal control system in relation to the financial reporting process of

Banca Mediolanum consists of the set of rules and company procedures, adopted by the various

business units, aimed at ensuring the reliability, accuracy and timeliness of financial reporting

thus contributing to the strengthening of controls governance.

In this regard, it is recalled that Law 262 of December 28, 2005 (as amended) “Provisions for the

protection of savings and regulation of financial markets” with the entry in the CFA of art. 154-

bis, introduced in the organization of listed companies in Italy, the figure of the Financial

Disclosure Officer entrusted with the responsibility of preparing the accounting documents of the

Company.

In order to allow the Financial Disclosure Officer to certify consistency with accounting records

for all acts disseminated to the market, the adequacy and effective application of administrative-

accounting procedures adopted and the preparation of the financial statements, such as to provide

a true and correct representation of the financial and economic situation of the Issuer and of the

consolidated companies, the Issuer has therefore adopted a specific Model (“262 Management

Model”) , developed on the basis of as required by market best practice and governed by the

127

“Policy for the management of the activities of the Financial Disclosure Officer - L.262/2005”

approved by the Board on November 2, 2015.

Description of the main characteristics of the risk management and internal control system in

relation to the financial reporting process

Management Model 262 implemented by the Issuer develops through four distinct areas that

repeat cyclically in the activity of updating and periodic maintenance of the model:

Governance: assignment of roles, responsibilities and definition of the procedures and

information flows by means of which the various players involved interact.

Control environment: identification of regulations, disciplines, control mechanisms and general

governance rules of technologies and application developments.

Control model: definition of the pillars on which the monitoring activities of the Financial

Disclosure Officer are based, in order to meet the requirements of art. 154-bis of the CFA.

Methodological framework: definition of the process through which, periodically, activities are

planned and the scope of intervention is defined (planning & scoping of companies and relevant

processes within 262), verification of adequacy and functioning is performed on the

administrative-accounting processes identified and any mitigation actions of the riskiness

identified are defined.

a) Phases of the risk management and internal control system in relation to the financial

reporting process

Management Model 262 used by the Financial Disclosure Officer, in order to meet the

requirements of art. 154-bis of the CFA (Law 262/2005), is based on the following pillars:

- Assessment;

128

- Testing;

- Certification System.

The first pillar - Assessment: aims to annually verify, as part of the integrated risk assessment

organized by the Compliance Assessment & Controls Unit, of the Compliance Function, the

adequacy of the administrative-accounting oversights in terms of level of formalization of

processes and procedures, degree of automation of the same, training of dedicated personnel.

The second pillar - Testing: regards the verification to ascertain, independently, the effective

operation of the controls provided on administrative-accounting procedures.

This activity, organized by the Analysis and Control Unit Law 262/05, directly reporting to the

Chief Financial Officer, is planned every two years (reviewed every year) with the objective of

ascertaining the effectiveness of the controls associated with the administrative-accounting

processes performed by the various organizational units also through the re-performing of the

same.

Pillar 3 – Certification System: attributes specific ownership to the managers (Process Owners)

of administrative areas and the business units involved. This system has as its first objective to

ensure, through the certification of the managers concerned, that the procedures defined as

suitable to ensure compliance with the objectives identified by Law 262/2005 are met on an

ongoing basis and any events which would invalidate these expectations are reported and brought

to the attention of the Financial Disclosure Officer in due time for settlement.

The detection of relevant processes of interest and the assessment of their adequacy is prodromal

to the certification system, which the various managers must periodically meet at the request of

the Compliance Assessment & Controls Unit of the Compliance Function.

129

For foreign companies that significantly impact the items of the consolidated financial statements

of Banca Mediolanum S.p.A, every year, the respective Boards of Directors, at the request of the

Financial Disclosure Officer, identify a local representative to replicate, according to a criterion

of proportionality and taking account of local specifications, the activities envisaged by

Management Model 262 overseeing the administrative-accounting processes. The foreign local

representatives, in addition to realizing the activities needed for the Financial Disclosure Officer

to meet the regulatory requirements, have also provided the latter with adequate information

about the activities carried out by means of internal certification, made prior to the drafting of the

annual financial report.

b) Roles and Functions involved

The definition of the roles and responsibilities of those involved in the specific activities required

by Law 262/2005, as well as the relationships between the Financial Disclosure Officer and the

various company stakeholders, with particular reference to the information flows exchanged

between them, is in the aforementioned “Policy for the management of the activities of the

Financial Disclosure Officer - Law 262/2005” which is assigned the following:

- clarify the tasks and operational responsibilities of the structures in support of the Financial

Disclosure Officer and others involved in the processes/activities of adaptation to Law

262/2005;

- define the information flows necessary to Financial Disclosure Officer, with the

identification of the structures responsible for their preparation, as well as the related

periodicity and deadlines;

130

- ensure functional participation of the Financial Disclosure Officer within the Group

Corporate Governance.

Regarding communications to corporate bodies, the Financial Disclosure Officer shall report, at

least every six months, on the activities performed, ongoing projects and any deficiencies

identified that could compromise the fulfilment of regulatory obligations.

A more detailed disclosure on the above areas is provided when financial statements and half-

year financial reports are approved, when the Financial Disclosure Officer reports on his/her

activities for purposes of the certification to be provided and explains the plans he/she intends to

implement, and also provides an expense estimate for the actions he/she considers to be

necessary.

In order to better support the Financial Disclosure Officer in carrying out activities, a specific

Committee is established for operational purposes by the Financial Disclosure Officer, as part of

the powers conferred.

This Committee’s functions are primarily related to consulting and exchanging information with

the principal players who are part of Management Model 262.

Lastly, the Financial Disclosure Officer arranges and attends meetings and information

exchanges with the Independent Auditors appointed.

TABLE 1: INFORMATION ON CORPORATE STRUCTURES

STRUCTURE OF THE SHARE CAPITAL AT Dec. 31, 2016

No. shares

% with respect to share capital

Listed (indicate markets) / unlisted Rights and obligations

Ordinary shares

739,154,668 100% ITALY (MI)

Shares with limited voting right

Shares with no voting right

OTHER FINANCIAL INSTRUMENTS

(attributing the right to subscribe newly issued shares)

Not present

SIGNIFICANT SHAREHOLDINGS

Refer to the table on page 7

132

TABLE 2: STRUCTURE OF THE BOARD OF DIRECTORS AND COMMITTEES

Board of Directors

Risks Committee

Remun. Committee

Appointm. Committee

Office Members

Year of

birth

Date of

first appointme

nt*

In office since

In office up to

List **

Exec. Not

Exec.

Indep. Code

Indep. CFA

Number of other

Offices ***

(*) (*) (**) (*) (**) (*) (**)

Chair Ennio Doris

July 03,

1940

Nov. 20,

1991

March 19,

2015

Appr. FS Dec. 31,

2017

N.A.

X

0 14/14 100%

Deputy Chairman

Edoardo Lombardi Febr. 19,

1936 July 04,

1994 March 19,

2015 Appr. FS Dec. 31,

2017

N.A. X

3 14/14

100%

Deputy Chairman

Giovanni Pirovano June 07,

1951 Nov. 25,

1996 March 19,

2015 Appr. FS Dec. 31,

2017

N.A. X 1

14/14 100%

Chief Executive Officer

Massimo Antonio • Doris

June 09, 1967

Apr. 18, 2008

March 19, 2015

Appr. FS Dec. 31,

2017

N.A. X

0

14/14 100%

Director Annalisa Sara Doris May 07,

1970

March 19, 2015

March 19, 2015

Appr. FS Dec. 31,

2017

N.A. X

0

11/14 78.57%

4/5

80%

M

Director

Luigi Berlusconi (°)

Sept. 27, 1988

July 28, 2016

July 28, 2016 Next General Meeting

N.A. X

3 3/5

60%

Director Bruno Bianchi Febr. 04,

1938

Apr 20, 2009

March 19, 2015

Appr. FS Dec. 31,

2017

N.A. X X

X 0 14/14

100%

12/12 100%

C

5/5 100%

M

Director Luigi Del Fabbro (°°) Sept. 26,

1949

Nov. 25, 1996

March 19, 2015

Appr. FS Dec. 31,

2017

N.A. X 1 14/14

100%

6/6

100% M 5/5

100% M

Director Paolo Gualtieri July 20,

1961

Apr. 11, 2001

March 19, 2015

Appr. FS Dec. 31,

2017

N.A. X X

X 3

13/14 92.86%

5/12

41.67% M 6/8

75% M

Director Angelo Renoldi Aug. 07,

1949

Apr. 28, 2003

March 19, 2015

Appr. FS Dec. 31,

2017

N.A. X X X 2 8/14

57.14%

7/8

87.50% C 5/5

100%

C

Director Carlos Javier Tusquets Trias

de Bes

Jan. 23, 1951

Oct. 25, 2000

March 19, 2015

Appr. FS Dec. 31,

2017

N.A. X

3

11/14 78.57%

133

----------------- DIRECTORS REMOVED DURING THE FINA NCIAL YEAR OF REFERENCE -----------------

NOTES (°) On July 28, 2016, the Board of Directors of Banca Mediolanum, following the resignation from office on May 19, 2016 of the Director Antonio Maria Penna, appointed Mr. Luigi Berlusconi, as Board Director who will remain in office until the next General Meeting. (°°) Takeover of the Director Luigi Del Fabbro as member of the Risk Committee and the Remuneration Committee, following the resignation from office on May 19, 2016 of the Director Antonio Maria Penna. The symbols listed below shall be indicated in the “Office” column: • This symbol indicates the Director in charge of the internal audit and risk management system. This symbol indicates the main party responsible for the management of the Issuer (Chief Executive Officer or CEO). ° This symbol indicates the Lead Independent Director (LID). * Date of first appointment of each Director refers to the date on which the Director was appointed for the first time (ever) in the Board of Directors of the Issuer. ** This column indicates the list from which each Director was taken (“M”: majority list; “m” minority list; “BoD”: list submitted by the BoD). *** This column indicates the number of offices of Director or Statutory Auditor held by the party concerned in other companies listed on regulated markets, including foreign markets, in financial, banking, insurance or large companies. In the Report on corporate governance, the offices are indicated in full. (*) This column indicates the attendance of Directors at meetings of the Board and Committees (indicate the number of meetings attended compared to total number of meetings that could be attended, ex. 6/8, 8/8 etc.). (**) This column shows the qualification of Director within the Committee: “C”: chair; “M”: member.

Board of Directors

Committee Risks

Committee Remun.

Appointments Committee

Office Members Year of

birth

Date of

first appointme

nt*

In office since

In office up to

List **

Exec. Not

Exec. Indep. Code

Indep. CFA

Number of other

Offices ***

(*) (*) (**) (*) (**) (*) (**)

Director Antonio Maria Penna (°)

Febr. 06,

1958

Apr. 28, 2014

March 19, 2015

May 19, 2016

N.A. X 0 7/7

100% 6/6

100% M 3/3

100% M

No. of meetings held during the financial year of reference: BOD: 14 Risk C.: 12 Remun. C.: 8 App. C.: 5 Indicate the quorum required for the submission of lists by minority shareholders for the election of one or more members (pursuant to article 147-ter CFA): N.A.

134

TABLE 3: STRUCTURE OF THE BOARD OF AUDITORS

BOARD OF AUDITORS

Office Members Year of birth

Date of first

appointment *

In office since

In office until

List **

Indep. Code

Participation in the meetings of the

Board of Auditors ***

No. other assignments ****

Chair Francesca Meneghel (°)

Dec. 02, 1961

Nov. 21, 2016 Nov. 21, 2016 Next General

Meeting N.A. x 100% 3/3 9

Regular Auditor Alberto Angeli Adriano

June 20, 1948

Dec. 19, 1997

March 19, 2015 Appr. FS Dec. 31, 2017 N.A. x 100% 14/14 5

Regular Auditor Marco Giuliani June 18, 1959

Apr 18, 2007

March 19, 2015 Appr. FS Dec. 31, 2017 N.A. x 78.6% 11/14 22

Alternate Auditor Gianluca Orrù

Jan. 31, 1971

March 19, 2015 March 19, 2015 Appr. FS

Dec. 31, 2017 N.A. x // 3

----------------- AUDITORS REMOVED DURING THE FINAN CIAL YEAR OF REFERENCE -----------------

Chair Arnaldo Mauri (°)

Dec. 18, 1932

22/04/1997 March 19, 2015 Nov. 21, 2016 N.A. x 72% 8/11 0

Alternate Auditor Francesca Meneghel (°)

Dec. 02, 1961

20/04/2009 March 19, 2015 Nov. 21, 2016 N.A. x // 9

Number of meetings held during the financial year of reference: 14

Indicate the quorum required for the submission of lists by minority shareholders for the election of one or more members (pursuant to article 148 CFA): N.A.

NOTES (°) Takeover of Ms Meneghel in place of Mr. Arnaldo Mauri, who passed away on November 21, 2016. * Date of first appointment of each Auditor refers to the date on which the Auditor was appointed for the first time (ever) in the Board of Auditors of the Issuer. ** This column indicates the list from which each Auditor was taken (“M”: majority list; “m” minority list). *** This column indicates the attendance of Auditors at meetings of the Board of Auditors (indicate the number of meetings attended compared to total number of meetings that could be attended, ex. 6/8, 8/8 etc.). **** This column shows the number of Director or Auditor offices held by the person pursuant to art. 148-bis of the CFA and related implementing provisions contained in the Consob Issuer’s Regulation. The complete list of positions is published by Consob on its website under the terms of article 144-quinquiesdecies of the Consob Issuer Regulations.