REPORT OF THE BOARD OF DIRECTORS OF CREDITO VALTELLINESE - JOINT-STOCK COMPANY ON ITEMS 1 AND 2 OF THE AGENDA OF THE EXTRAORDINARY SHAREHOLDERS' MEETING OF 19 DECEMBER 2017 (prepared pursuant to Article 125-ter of Italian Legislative Decree no. 58 of 24 February 1998, as subsequently amended and supplemented, and pursuant to Article 72 of the Regulation adopted with Consob Resolution no. 11971 of 14 May 1999 as subsequently amended and supplemented) 17 NOVEMBER 2017 La presente comunicazione non costituisce un offerta o un invito a sottoscrivere o acquistare titoli. I titoli non sono stati e non saranno registrati negli Stati Uniti ai sensi dell United States Securities Act of 1933 (come successivamente modificato) (the "Securities Act"), o in Australia, Canada o Giappone, nonché in qualsiasi altro Paese in cui tale offerta o sollecitazione sia soggetta all autorizzazione da parte di autorità locali o comunque vietata ai sensi di legge. I titoli ivi indicati non possono essere offerti o venduti negli Stati Uniti, salvo che siano registrati ai sensi del Securities Act o in presenza di un esenzione alla registrazione applicabile ai sensi del Securities Act. Credito Valtellinese non intende registrare alcuna parte dell offerta dei titoli negli Stati Uniti o condurre un offerta pubblica dei titoli negli Stati Uniti. Qualsiasi offerta pubblica di strumenti da promuovere negli Stati Uniti sarà svolta mediante un prospetto che potrà essere ottenuto da Credito Valtellinese e conterrà informazioni dettagliate circa la banca e la sua gestione, nonché i bilanci. Copie di questo annuncio non vengono preparate né possono essere distribuite o inoltrate negli Stati Uniti, in Canada, Australia o Giappone. This communication does not constitute an offer or an invitation to subscribe for or purchase any securities. The securities referred to herein have not been registered and will not be registered in the United States under the U.S. Securities Act of 1933, as amended (the Securities Act ), or in Australia, Canada or Japan or any other jurisdiction where such an offer or solicitation would require the approval of local authorities or otherwise be unlawful. The securities may not be offered or sold in the United States unless such securities are registered under the Securities Act, or an exemption from the registration requirements of the Securities Act is available. Credito Valtellinese does not intend to register any portion of the offering of the securities in the United States or to conduct a public offering of the securities in the United States. Any public offering of securities to be made in the United States will be made by means of a prospectus that may be obtained from Credito Valtellinese and will contain detailed information about the bank and management, as well as financial statements. Copies of this announcement are not being made and may not be distributed or sent into the United States, Canada, Australia or Japan.
Report of the Board of Directors of Credito Valtellinese - Joint-stock company on items 1 and 2 of the agenda of the Extraordinary Shareholders' Meeting Dear Shareholders, The Board of Directors of Banca Piccolo Credito Valtellinese - Joint-stock company (the Bank, the Company or Creval ) convened you to the Extraordinary Shareholders' Meeting on 19 December 2017, at 2.30 p.m., at the Polo Fieristico Provinciale (Provincial Fair-ground) in Morbegno (SO) via Passerini 7/8, in single call to discuss and resolve - among other things - upon items no. 1 and 2 of the agenda: 1. Proposal to assign to the Board of Directors, pursuant to Article 2443 of the Italian Civil Code, the power to increase the share capital for a maximum amount (including any premium) of Euro 700,000,000.00 by 31 December 2019. Related resolutions. 2. Reverse split of the Bank's ordinary shares in the ratio of 1 new ordinary share bearing dividend every 10 existing ordinary shares bearing dividends, after cancelling the minimum number of ordinary shares required for the overall balancing of the numbers without reducing the share capital. Related resolutions. This report (the Report ), prepared by the Board of Directors of the Bank, pursuant to Article 125-ter of Italian Legislative Decree no. 58 of 24 February 1998, as subsequently amended and supplemented (the Consolidated Finance Act ) and to Article 72 of the Regulation adopted with Consob resolution no. 11971 of 14 May 1999, as subsequently amended and supplemented (the Issuers Regulations ), as well as in compliance with Annexe 3A, table no. 2 of the Issuers Regulations, is intended to illustrate and substantiate the draft resolutions as per items no. 1 and 2 of the agenda. In particular, the Board of Directors convened you to the extraordinary shareholders' meeting in order to submit for your approval the assignment to the Board of Directors, pursuant to Article 2443 of the Italian Civil Code, of the right to increase against payment and through splitting shares, in one or more tranches, the share capital of the Bank, no later than 31 December 2019, for a total maximum amount (including any premium) of EUR 700,000,000.00 (seven hundred million/00), by issuing ordinary shares without par value to be offered under option to the shareholders, pursuant to Article 2441, paragraph 1, of the Italian Civil Code (the Offer under Option or the Share Capital Increase ). In order to provide the Bank with greater elasticity in defining the timing of the Offer under Option and its terms and conditions, we therefore ask you to grant the Board of Directors, pursuant to Article 2443 of the Italian Civil Code, the power to increase the Share capital with the broadest powers of the Directors to establish, in accordance with the limits set forth above, methods, terms and conditions of the Share Capital Increase, including the issue price of the new shares (including any premium) and bearing dividend (the Delegation of Power ). Moreover, as part of the possible Share Capital Increase, the shareholders are also called upon to resolve with regard to the reverse split of the shares of the Bank ( Reverse Split ), with the consequent reduction of the outstanding shares, as per proposal best described in Part 2 below. 2
* * * PART 1: PROPOSAL TO ASSIGN TO THE BOARD OF DIRECTORS, PURSUANT TO ARTICLE 2443 OF THE ITALIAN CIVIL CODE, THE POWER TO INCREASE THE SHARE CAPITAL FOR A MAXIMUM AMOUNT (INCLUDING ANY PREMIUM) OF EURO 700,000,000.00 BY 31 DECEMBER 2019. RELATED RESOLUTIONS. 1. REASONS AND ALLOCATION OF THE SHARE CAPITAL INCREASE The Share Capital Increase is one of the pillars of the 2018-2020 strategic plan (the Plan ) approved by the Board of Directors of the Bank on 7 November 2017. The Plan envisages, among other things, some initiatives aimed at improving the risk profile and profitability of the group headed by the Bank and the Share Capital Increase is closely related to achieving the objectives of the Plan in that it aims to enable the Banks to support the negative impacts of certain actions envisaged in the Plan and to increase the capital ratios. Albeit referring to the announcement to the market on 7 November, the Plan envisages, among other things: (i) the increase in the coverage ratio of non-performing loans, also by qualifying approximately EUR 800 million of unlikely to pay in bad loans, significantly reducing the risk profile of the Creval Group; (ii) the sale of a non-performing loan book with a GBV (Gross Book Value) of EUR 1.6 billion through a securitisation transaction with GACS (Garanzia Cartolarizzazione Sofferenze, Bad Loan Securitisation Guarantee), if extended, in addition to a further sale of bad loans with a GBV of EUR 500 million during 2018, (iii) the validation of the AIRB (Advanced Internal Rating Based) models, subject to receiving the authorisation from the competent authorities, (iv) the sale of non-core assets, (v) the reduction of the cost basis by rationalising the network and integration of Credito Siciliano in the Parent Credito Valtellinese and the implementation of the voluntary redundancy fund of 170 employees; and (vi) further improvement of commercial efforts to increase the fee and commission component of revenue through bancassurance and asset management and the development of specific business areas such as consumer and farm credit and factoring. The Share Capital Increase is not aimed at reducing or changing the structure of the short and medium to long-term net financial indebtedness of the Bank. It should also be noted that, pursuant to EU Regulation 575/2013 (the CRR ) and of Circular 285/2013 of the Bank of Italy, at 30 September 2017, the Bank presented the following capital ratios on a consolidated basis under transitional regulations, expressed as a percentage of RWA (Risk Weighted Assets): Common Equity Tier 1 (CET 1 ratio): 9.4%; Tier 1 Capital (Tier 1 ratio): 9.4%; total own funds (Total Capital ratio): 11.3%. The pro forma calculation on the figures at 30 September 2017 shows a benefit on the equity condition of 3
the Group of approximately 480 bps on CET 1 ratio and on Total Capital ratio ( 1 ). In percentage terms, the CET 1 ratio and the Tier 1 ratio would stand at 14.3%, whereas the Total Capital ratio would stand at 16.2%. The estimate of the main statement of financial position aggregates and income statement figures as well as the main targets over the plan's time frame are summarised below: 2018E 2020E Direct funding 20,068 20,096 Statement of financial position data Indirect funding 12,799 14,050 Loans and receivables with customers 16,832 17,417 Equity 1,603 1,834 In million of EUR Tangible Equity 1,587 1,818 2018E 2020E Net interest income 394 429 Net fee and commission income 296 311 Net interest income and net fee and commission income 690 740 Other Income 33 24 Income statement Operating costs -520-440 Impairment losses -161-113 Other elements 52-2 Pre-tax profit (loss) 95 210 Taxes -18-60 Net profit (loss) 73 150 In million of EUR 2018E 2020E Key indicators CET1 pre AIRB 11.0% 11.6% Texas ratio 74.7% 62.4% ( 1 ) Net of the costs of the operation. 4
LCR >100% >100% Gross NPE ratio 10.6% 9.6% NPE coverage 50.3% 59.1% Cost Income ratio 71.8% 57.5% RoTE 4.6% 8.2% 2. EXISTENCE OF UNDERWRITING AND/OR PLACEMENT SYNDICATES, THEIR COMPOSITION, AS WELL AS THE CONDITIONS AND TERMS OF THEIR INTERVENTION As part of the Share Capital Increase, Mediobanca S.p.A. ( Mediobanca ) will act as Global Coordinator and Bookrunner. On 7 November 2017, Mediobanca signed with Creval a pre-underwriting agreement, which will be effective at 30 June 2018, and the subject matter of which was the commitment subject to conditions in line with market practice for similar operations and to certain specific provisions, including the absence of hindering elements or events that may affect the implementation by the Company of the financial targets of the Business Plan, and that the terms of issue effectively applicable to the launch of the offer, taking into account the market conditions and institutional investors' feedback, allow to successfully complete the Share Capital Increase to sign an Underwriting Agreement for the subscription of the newly issued shares, not exercised at the end of the offer of non-exercised rights for a maximum amount equal to the value of the Share Capital Increase. The Underwriting Agreement related to the Share Capital Increase, subject to compliance with the terms of the pre-underwriting agreement, is expected to be stipulated in the absence of the launch of the offer to the public, following the fixing by the Board of Directors of the final terms and conditions of the Share Capital Increase (in accordance with the draft resolution submitted to this meeting). Before launching the offer related to the Share Capital Increase, additional financial institutions will be invited to participate in the underwriting syndicate of the Share Capital Increase. 3. ANY OTHER ENVISAGED FORMS OF PLACEMENT The new shares will be offered under option to the shareholders, pursuant to Article 2441 of the Italian Civil Code, so they will be offered directly to the Bank. No further forms of placement or other forms of private placement are envisaged. 5
4. TERMS AND CONDITIONS, INCLUDING THE CRITERIA FOR DETERMINING THE ISSUE PRICE OF THE NEW SHARES, OF THE SHARE CAPITAL INCREASE TO BE RESOLVED WHEN EXERCISING THE DELEGATION OF POWER The proposal subject matter of this Report provides for the assignment, pursuant to Article 2443 of the Italian Civil Code, to the Board of Directors of the Bank of the right to increase against payment and through splitting shares, in one or more tranches, the share capital, no later than 31 December 2019, for a total maximum amount (including any premium) of EUR 700,000,000.00 (seven hundred million/00), by issuing new ordinary shares without par value to be offered under option to the shareholders, pursuant to Article 2441, paragraph 1, of the Italian Civil Code, with the broadest powers of the Directors to establish, each time, in accordance with the limits set forth above, terms and conditions of the operation, including the issue price of the new shares (including any premium) and bearing dividend. With regard to the technical methods of implementation of the Share Capital Increase, the granting of the Delegation of Power to the Board of Directors allows the Bank to benefit from a greater flexibility when carrying on the operation, since it can define timing in a more flexible manner, and consequently seize any market opportunities. With reference to the maximum term within which the Board of Directors may exercise the Delegation of Power, consistent with the previous considerations on the reasons and allocation of the Share Capital Increase, it was considered appropriate to set this deadline at 31 December 2019, rather than in the broadest five-year time-limit provided for by law. With regard to the powers of the Directors when exercising the Delegation of Power, the Board of Directors is expected to have the widest powers to determine, as and when, methods, terms and conditions of the Operation, without prejudice to the fact that: a) the aggregate amount of the Share Capital Increase (including any premium), even if the Delegation of Power is exercised in several tranches, may not be greater than EUR 700,000,000.00; b) the Share Capital Increase must be against payment, or through the payment by the subscribers of the new shares of an amount of money by way of issue price; c) newly issued shares must be offered under option to the shareholders of the Bank, pursuant to Article 2441, paragraph 1, of the Italian Civil Code. Moreover, the terms and conditions of the Share Capital Increase, which include, among other things, the exact number of shares to be issued, the issue ratio and the issue price of the new shares will also be determined by the Board of Directors as the launch of the Offer under option approaches. In particular, the issue price (including any premium) will be defined in compliance with the applicable legislation and also taking into account the market conditions, price trend of the shares of the Bank, the Company's economic and financial results, as well as market practice for similar transactions, by also resorting to the 6
application of a discount on the TERP - theoretical ex right price (2) - of the Bank calculated using current methods, to the extent decided by the Board of Directors prior to the start of the offer under option. The subscription of the shares by exercising the option rights may be carried out with all the approved intermediaries compliant with the centralised management system of Monte Titoli S.p.A. 5. SHAREHOLDERS WHO HAVE EXPRESSED WILLINGNESS TO SUBSCRIBE At the date of preparation of this Report, the Bank has not received from the shareholders the willingness to subscribe the newly issued shares resulting from the Share Capital Increase. 6. PERIOD ENVISAGED FOR CARRYING OUT THE SHARE CAPITAL INCREASE The Delegation of Power is expected to last until 31 December 2019, and may be exercised in one or more tranches; the Share Capital Increase may also be reasonably carried out already during 2018 if allowed by market conditions and subject to receiving the authorisations envisaged by law. 7. DIVIDEND ENTITLEMENT DATE OF NEWLY ISSUED SHARES The dividend entitlement of the ordinary shares to be issued as part of the Share Capital Increase will be determined by the Board of Directors of the Bank when exercising the Delegation of Power and, in any case, prior to the start of the Offer under Option. 8. EQUITY AND FINANCIAL EFFECTS The pro forma consolidated figures are obtained by providing appropriate pro-forma adjustments to historical data to reflect retrospectively the significant effects of the share capital increase. Based on Consob communication no. DEM/1052803 of 5 July 2001, the effects are retrospectively reflected in the pro forma consolidated statement of financial position as if the share capital increase was put in place at the end of the reporting period and, in the pro forma consolidated income statement and in the pro forma consolidated Statement of Cash Flows, as if it were set up at the beginning of the reporting period. Following this approach, using accounting standards and evaluation criteria consistent with those applied in preparing the Consolidated financial statements, the pro forma equity, financial and economic effects would be as follows: (2) Theoretical ex right price (TERP) means the theoretical price of a share after detachment on the stock market of the coupon representing the option rights, or after the start of the Share Capital Increase. 7
an increase in the item Cash and cash equivalents would be recognised in the pro forma consolidated statement of financial position (which, at 30 September 2017, amounted to EUR 152,978 thousand) for an amount equal to the share capital increase net of the costs of the operation and an equal increase in Equity (which, at 30 September 2017, amounted to EUR 1,361,025 thousand); no effect in the pro forma Consolidated Income Statement if the effects deriving from the investment of the amounts resulting from the share capital increase are not recognised; an increase in Cash flow from financing activities in the pro forma consolidated Statement of Cash Flows and in the period for an amount equal to the share capital increase net of the costs of the operation. In the period from 1 January to 30 September 2017, Cash flow used in financing activities in the period amounted to EUR 17,757 thousand. It is understood that if the operation had actually taken place before a given reporting period, the obtained effects would not be necessarily the same. Considering the different purposes, the pro forma equity, financial and economic effects may differ significantly from the representation of the same operations in the consolidated financial statements of Credito Valtellinese referring to subsequent periods, in that these will be prepared based on the methods, terms and conditions related to the reporting date. 9. EFFECTS ON THE UNIT VALUE OF THE SHARES OF ANY DILUTION OF THIS VALUE The Share Capital Increase will be carried out through the offer under option to the shareholders of the Bank, pursuant to Article 2441, paragraph 1, of the Italian Civil Code: for this reason, the shareholdings of the Bank for the shareholders who will decide to fully subscribe to this offer will not undergo any diluting effect. At the date of this Extraordinary Shareholders Meeting, the issue price of the new shares, the total number of shares to be issued and the related issue ratio have not yet been fixed: as mentioned, these elements will be determined only subsequently and in any case as the carrying-out of the Share Capital Increase offered under option approaches and subject to the market trend. Therefore, it is not possible at the date of this Report to determine or formulate an estimate of the dilutive effect on the unit value of the shares that could be incurred by those shareholders who would not exercise, totally or only partially, the option rights pertaining to them. 10. AMENDMENTS TO ARTICLE 5 OF THE ARTICLES OF ASSOCIATION OF THE BANK If the proposal of Share Capital Increase offered under option is approved and the relevant Delegation of Power is assigned to the Board of Directors, it will be necessary to amend Article 5 of the Articles of Association of the Bank and, in particular, the introduction of paragraph 4, as better represented below: Current Text Art. 5 of the Articles of Association Proposed Text Art. 5 of the Articles of Association 4. The Extraordinary Shareholders' Meeting of 19 April 2017 8
11. AUTHORISATION OF THE COMPETENT AUTHORITIES assigned, pursuant to Article 2443 of the Italian Civil Code, the Board of Directors the right to increase the share capital against payment and through splitting shares, in one or more tranches, no later than 31 December 2019, for a maximum total amount (including any premium) of EUR 700,000,000.00 (seven hundred million/00), by issuing new ordinary shares without par value to be offered under option to the shareholders, pursuant to Article 2441, paragraph 1, of the Italian Civil Code, with the broadest powers of the Directors to establish, as and when, in accordance with the limits set forth above, methods, terms and conditions of the operation, including the issue price of the new shares (including any premium) and bearing dividend, it being understood that the issue price will be defined in compliance with the applicable legislation and also taking into account, among other things, the market conditions, price trend of the shares of the Bank, the Bank's economic and financial results, as well as market practice for similar operations, by also resorting to the application of a discount on the TERP - theoretical ex right price - of the Bank calculated using current methods, to the extent decided by the Board of Directors prior to the start of the offer under option. The operation proposed with this Report is subject to the Bank of Italy issuing its own assessment measure on the amendments to the Articles of Association of Creval as per the previous Paragraph 10, pursuant to Article 56 of Italian Legislative Decree no. 385 of 1 September 1993 (Consolidated Banking Act). Moreover, pursuant to Articles 94 et sequitur and 113 of the Consolidated Banking Act and relevant regulatory provisions, the carrying out of the Share Capital Increase requires the publication of an offer and listing prospectus, prepared in compliance with the tables envisaged by Regulation 809/2004/EC (as amended), the publication of which is subject to the approval of CONSOB. 12. INFORMATION OF THE RECURRENCE OF THE RIGHT OF WITHDRAWAL: PERSISTENCE OF THE CASE OF WITHDRAWAL IN RELATION TO THE PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION The adoption of the resolution related to the Share Capital Increase referred to in this Report does not entail the right of withdrawal, pursuant to Article 2437 of the Italian Civil Code. 13. DRAFT RESOLUTION TO THE EXTRAORDINARY SHAREHOLDERS' MEETING In the light of the above, the Board of Directors intends to submit to the Extraordinary Shareholders' Meeting the following draft resolution, related to item 1 on the agenda: The Extraordinary Shareholders Meeting of Banca Piccolo Credito Valtellinese S.p.A.: 9
- after examining the report of the Board of Directors and the proposal formulated in it RESOLVES 1. to assign, pursuant to Article 2443 of the Italian Civil Code, the Board of Directors the right to increase the share capital against payment and through splitting shares, in one or more tranches, no later than 31 December 2019, for a maximum total amount (including any premium) of EUR 700,000,000.00 (seven hundred million/00), by issuing new ordinary shares without par value to be offered under option to the shareholders, pursuant to Article 2441, paragraph 1, of the Italian Civil Code, with the broadest powers of the Directors to establish, as and when, in accordance with the limits set forth above, methods, terms and conditions of the operation, including the issue price of the new shares (including any premium) and bearing dividend, it being understood that the issue price will be defined in compliance with the applicable legislation and also taking into account, among other things, the market conditions, price trend of the shares of the Bank, the Bank's economic and financial results, as well as market practice for similar operations, by also resorting to the application of a discount on the TERP - theoretical ex right price - of the Bank calculated using current methods, to the extent decided by the Board of Directors prior to the start of the offer under option; 2. to amend Article 5 of the Articles of Association of the Bank as a result of the previous resolution, by including a new paragraph 4, formulated as follows: 4. The Extraordinary Shareholders' Meeting of 19 December 2017 assigned, pursuant to Article 2443 of the Italian Civil Code, the Board of Directors the right to increase the share capital against payment and through splitting shares, in one or more tranches, no later than 31 December 2019, for a maximum total amount (including any premium) of EUR 700,000,000.00 (seven hundred million/00), by issuing new ordinary shares without par value to be offered under option to the shareholders, pursuant to Article 2441, paragraph 1, of the Italian Civil Code, with the broadest powers of the Directors to establish, as and when, in accordance with the limits set forth above, methods, terms and conditions of the operation, including the issue price of the new shares (including any premium) and bearing dividend, it being understood that the issue price will be defined in compliance with the applicable legislation and also taking into account, among other things, the market conditions, price trend of the shares of the Bank, the Bank's economic and financial results, as well as market practice for similar operations, by also resorting to the application of a discount on the TERP - theoretical ex right price - of the Bank calculated using current methods, to the extent decided by the Board of Directors prior to the start of the offer under option. ; and 3. to grant the Board of Directors, hence the Chairman, with the right to sub-delegate for single deeds or categories of deeds, all powers, excluding none, to see to what is required for implementing the resolutions, including the completion of formalities required by law, and make non-substantial amendments, adjustments or additions to the resolutions of the shareholders' meetings that may be necessary or even only appropriate for the registration at the Companies Registry and/or required by the competent authorities. * * * PART 2: REVERSE SPLIT OF THE BANK'S ORDINARY SHARES IN THE RATIO OF 1 NEW ORDINARY SHARE BEARING DIVIDEND EVERY 10 EXISTING ORDINARY SHARES BEARING DIVIDENDS, AFTER CANCELLING THE MINIMUM NUMBER OF ORDINARY SHARES REQUIRED FOR THE OVERALL BALANCING OF THE NUMBER WITHOUT REDUCING THE SHARE CAPITAL. RELATED RESOLUTIONS. 10
14. REASONS FOR THE PROPOSED REVERSE SPLIT The share capital of the Bank is divided into 110,887,236 ordinary shares with no nominal value. In the event that the Board of Directors exercises the power, the resulting Share Capital Increase will determine a significant increase in the number of outstanding shares. In this context, the carrying-out of the reverse split, with the consequent reduction of the outstanding shares, would allow to simplify the administrative management of the shares, in the interest of current and future shareholders. The Reverse Split will not affect the value of the investments in portfolio, in that, in an efficient market, the number of shares in the portfolio of the shareholders would decrease and, at the same time, their value would increase, without any impact on the total value of the investment. Moreover, it should also be noted that, given that the shares of the Bank are without par value, the reverse split will not change and/or increase this value in any case. Therefore, even if the reverse split is neutral in financial terms, it is expected to bring benefits, in particular, in the light of the Share Capital Increase, including the creation of a more efficient and liquid market for the rights during the trading period. Based on the foregoing, it is proposed to today's Shareholders' Meeting to pass the resolution from now on the reverse split of the ordinary shares in the ratio of 1 new ordinary share bearing dividend every 10 existing ordinary shares. As a result of this Reverse Split, the total number of ordinary shares will be reduced from 110,887,236 to 11,088,723 ordinary shares. The Reverse Split, given the strict correlation with the Share Capital Increase, would be carried out before the Share Capital Increase, in accordance with the terms and conditions that will be agreed with Borsa Italiana and other competent Authorities and will be carried out without any expenses to the charge of the shareholders. It is clear that the Board of Directors of Creval, when exercising the Delegation of Power, will have to take account of this Reverse Split in determining the conditions of the Offer. In order to optimise the number ratios of the operation, it will be necessary to cancel a maximum of 6 ordinary shares. For this purpose, the Bank will identify, before carrying out the Reverse Split, one or more shareholders willing to give up these shares and/or an intermediary willing to purchase them (where necessary), to give up or carry out a balancing service, all without changing the amount of share capital. In case of remainders as a result of the Reverse Split, Creval will make available to its shareholders a service for dealing with fractions of shares that cannot be reverse split, on the basis of the official market price and without additional expenses or commissions and according to technical methods that will be communicated when carrying out the operation. 11
15. INFORMATION OF THE RECURRENCE OF THE RIGHT OF WITHDRAWAL: PERSISTENCE OF THE CASE OF WITHDRAWAL IN RELATION TO THE PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION The adoption of the resolution related to the Reverse Split referred to in this Report does not entail the right of withdrawal, pursuant to Article 2437 of the Italian Civil Code. 16. AMENDMENTS TO THE ARTICLES OF ASSOCIATION AND RIGHT OF WITHDRAWAL In the light of the above, should the proposal of Reverse Split be approved by today's shareholders' meeting, it will be necessary to amend paragraph 1 of Article 5 of the articles of association and add paragraph 5 to article 5 of the articles of association of the Bank, as indicated below: Current Text Art. 5 of the Articles of Association 1. The share capital, subscribed and paid-up, amounts to EUR 1,846,816,830.42 and is divided into 1,108,872,369 ordinary shares without nominal value. Proposed Text Art. 5 of the Articles of Association 1. The share capital, subscribed and paid-up, amounts to EUR 1,846,816,830.42 and is divided into 11,088,723 ordinary shares without nominal value. (not present) 5. The Extraordinary Shareholders' Meeting of 19 December 2017 resolved: 1) to approve the reverse split of the ordinary shares according to this ratio: 1 new ordinary share for every 10 ordinary shares held by the Bank to be carried out before the Share Capital Increase; 2) in order to optimise the number ratios of the reverse split above, to grant the Board of Directors the right to cancel the number of shares required for the balancing of the operation and in any case not more than 6 ordinary shares of the Bank, based on the identification, before carrying out the reverse split, of one or more shareholders willing to give up these shares and/or an intermediary willing to purchase them (where necessary), to give up these shares and carry out a balancing service, all without changing the amount of share capital, without prejudice to the fact that, for the management of any remainders as a result of the reverse split, a service for dealing with fractions of shares that cannot be reverse split will be made available to the shareholders, on the basis of the official market price and without additional expenses or commissions and according to technical methods that will be communicated when carrying out the operation. The proposed amendments to the articles of association are the subject matter of an assessment measure by the Bank of Italy pursuant to the provisions of Article 56 of the Consolidated Banking Act. 12
17. DRAFT RESOLUTION TO THE EXTRAORDINARY SHAREHOLDERS' MEETING In the light of the above, the Board of Directors intends to submit to the Extraordinary Shareholders' Meeting the following draft resolution, related to item 2 on the agenda: The Extraordinary Shareholders Meeting of Banca Piccolo Credito Valtellinese S.p.A.: - after examining the report of the Board of Directors and the proposal formulated in it RESOLVED 1. To approve the reverse split of the ordinary shares according to the following ratio: 1 new ordinary share for every 10 ordinary shares held by the Bank, to be carried out before the Share Capital Increase. 2. In order to optimise the number ratios of the reverse split above, to grant the Board of Directors the right to cancel, when implementing the reverse split, the number of shares required for the balancing of the operation and in any case not more than 6 ordinary shares of the Bank, based on the identification, before carrying out the reverse split, of one or more shareholders willing to give up these shares and/or an intermediary willing to purchase them (where necessary), and to give up these shares and carry out a balancing service, all without changing the amount of share capital, without prejudice to the fact that, for the management of any remainders as a result of the reverse split, a service for dealing with fractions of shares that cannot be reverse split will be made available to the shareholders, on the basis of the official market price and without additional expenses or commissions and according to technical methods that will be communicated when carrying out the operation; 3. To grant the Chairman of the Board of Directors and the General Manager, with the right to sub-delegate within the limits of the law, all powers and rights to see to what is required or appropriate for implementing, fully and in every single part, the resolutions passed for the success of the reverse split as well as to comply with the formalities required for all the resolutions passed today in order to obtain the necessary law approvals and in general all that is required for the full carrying out of the resolutions, with any and all powers necessary and appropriate for that purpose, excluding none, including that of making non-substantial amendments to the resolutions deemed necessary and/or appropriate for the registration at the Companies Registry and/or in relation to any indications by the Supervisory Authority, as well as to carry out, in relation to the results and timing for carrying out the approved share capital increase, any related advertising performance; 4. to approve starting from the effectiveness of the reverse split the amendment to paragraph 1 of Article 5 of the articles of association of the Bank as follows: 1. The share capital, subscribed and paid-up, amounts to EUR 1,846,816,830.42 and is divided into 11,088,723 ordinary shares without nominal value; and to introduce, without extensions, paragraph 5 of article 5 of the articles of association of the Bank as follows: 5. The Extraordinary Shareholders' Meeting of 19 December 2017 resolved: 1) to approve the reverse split of the ordinary shares according to this ratio: 1 new ordinary share for every 10 ordinary shares held by the Bank, to be carried out before the Share Capital Increase; 2) in order to optimise the number ratios of the reverse split above, to grant the Board of Directors the right to cancel the number of shares required for the balancing of the operation and in any case not more than 6 ordinary shares of the Bank, based on the identification, before carrying out the reverse split, of one or more shareholders willing to give up these shares and/or an intermediary willing to purchase them (where necessary), to give up these shares and carry out a balancing service, all without changing the amount of share capital, without prejudice to the fact that, for the management of any remainders as a result of the reverse split, a service for dealing with fractions of shares that cannot 13
be reverse split will be made available to the shareholders, on the basis of the official market price and without additional expenses or commissions and according to technical methods that will be communicated when carrying out the operation. Sondrio, 17 November 2017 The Board of Directors 14