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Information on the non-application of certain principles of the Code of Best Practice for WSE Listed Companies

Acting pursuant to §29 Item 3 of the Warsaw Stock Exchange Rules, in connection with the fact that the Warsaw Stock Exchange has adopted a new Best Practice for GPW Listed Companies 2016, which came into force from January, 1, 2016, UniCredit S.p.A. (hereinafter "UniCredit" or the "Company"), hereby provides information on the permanent non-application, of the following detailed principles of the above Code of Best Practice together with an explanation concerning the circumstances under which and the reasons why these rules are not applied.

The information below should be interpreted together with the following general explanations relating to specific topics concerning the Company as a foreign entity whose shares are listed on the foreign regulated markets, i.e. in Italy (on the Italian Stock Exchange operated by Borsa Italiana S.p.A.) and Germany (on the Frankfurt Stock Exchange operated by Deutsche Borse AG).

UniCredit is incorporated under the laws of Italy, and its corporate standing, rules of operation as well as the rights of shareholders are governed by the provisions of Italian corporate law. In certain areas, those provisions differ from the relevant provisions of the Polish law.

UniCredit operates under a system based on two bodies appointed by the Shareholders' Meeting, which are the Board of Directors and the Board of Statutory Auditors. The Board of Directors is responsible for the strategic supervision and the management of UniCredit. The Board of Statutory Auditors supervises the management of UniCredit and its compliance with laws, regulations and the Articles of Association, as well as the adequacy of the UniCredit organizational, managerial and accounting structure, the overall functionality of the internal control system, its financial disclosure process, the external auditing of the individual and consolidated  financial statements and the independence of the external audit firm.

Although the Board of Directors and the Board of Statutory Auditors of an Italian company could be, to some extent, characterized as being equivalent to, respectively, the Management Board and the Supervisory Board of a Polish company, there are very important differences. In particular, the Board of Directors performs many functions of the Polish Supervisory Board. However, for the purpose of the Code of Best Practice, references to the "management board" in the Code of Best Practice will be treated as references to UniCredit's Board of Directors. References to the "supervisory board" will be treated as references to UniCredit's Board of Statutory Auditors and, where appropriate, also to the Board of Directors as each of those corporate bodies performs certain functions of a Supervisory Board of a Polish company.

Furthermore, the information below should be also interpreted together with the yearly UniCredit Report on Corporate Governance and ownership structure (hereinafter referred to as the "Report on Corporate Governance") and with the UniCredit Report on Remuneration, which is available, inter alias, together with the Report on Corporate Governance on the Company's website. The Report on Corporate Governance contains, among other things, information on shareholders' meetings , composition and procedures of the Company's managing and supervisory bodies and committees and description of the basic features of the Company's internal control and risk management systems, while information concerning set-up, tasks and functioning of the Remuneration Committee, and remuneration of Directors are enclosed in the Report on Remuneration.

All capitalized terms not herein defined shall have the meaning assigned to them in the Report on Corporate Governance.

 

I. Disclosure Policy, Investor Communications

 

I.Z.1. A company should operate a corporate website and publish on it, in a legible form and in a separate section, in addition to information required under the legislation:

I.Z.1.3. a chart showing the division of duties and responsibilities among members of the management board drawn up according to principle II.Z.1;

Company's explanations:

The division of duties and responsibilities among the Board of Directors members is set out by the UniCredit Corporate Bodies Regulations that, inter alia, set forth the functions and competencies of the Board Committees. Furthermore, the powers delegated by the Board to the Chief Executive Officer (the only Board member with management powers) are stated in the yearly Report on Corporate Governance. Both said documents are available on the Company website.

 

I.Z.1.15. information about the company's diversity policy applicable to the company's governing bodies and key managers; the description should cover the following elements of the diversity policy: gender, education, age, professional experience, and specify the goals of the diversity policy and its implementation in the reporting period; where the company has not drafted and implemented a diversity policy, it should publish the explanation of its decision on its website;

Company's explanations:

Partial non application of the detailed principle.

The UniCredit diversity rules - as set out in the Articles of Association, the theoretical qualitative and quantitative profile (for the Board of Directors) - and the internal rules do not envisage any specific requirement concerning age for the members of its governing bodies and its key managers.

 

I.Z.1.16. information about the planned transmission of a general meeting, not later than 7 days before the date of the general meeting;

Company's explanations:

Italian law does not require companies to broadcast General Meetings on-line over the Internet, to record General Meetings in audio or video format, or to publish the recordings on the company website. However, according to the principles laid down by both local regulations and self-conduct rules, UniCredit makes all relevant documents available for review by the shareholders on the Company's website (www.unicreditgroup.eu) before any Shareholders' Meeting and publishes minutes of each resolution adopted. The Company does not rule out the application of this rule in the future.

 

I.Z.1.19. shareholders' questions asked to the management board pursuant to Article 428 § 1 or § 6 of the Commercial Companies Code together with answers of the management board to those questions, or a detailed explanation of the reasons why no answer is provided, pursuant to principle IV.Z.13;

Company's explanations:

Under Italian law, persons entitled to vote may submit questions pertaining to the items on the Agenda even prior to the Shareholders' Meeting. Questions received prior to the Meeting shall be answered - subject to the right thereto having being ascertained - during the Meeting itself at the latest. Answers may not be provided, not even during the Meeting, if the requested information is already available in "FAQ" format on the Company's website or when the answer has been published. The answer made available in printing to each of those entitled to vote at the beginning of the Meeting is deemed provided during the Meeting itself.

 

I.Z.1.20. an audio or video recording of a general meeting;

Company's explanations:

As already indicated in the Company's explanations to previous detailed principle I.Z.1.16., Italian law does not require companies to broadcast General Meetings on-line over the Internet, to record General Meetings in audio or video format, or to publish the recordings on the company website. However, according to the principles laid down by both local regulations and self-conduct rules, UniCredit makes all relevant documents available for review by the shareholders on the Company's website (www.unicreditgroup.eu) before any Shareholders' Meeting and publishes minutes of each resolution adopted. The Company does not rule out the application of this rule in the future.

 

 

II. Management Board, Supervisory Board

 

II.Z.1. The internal division of responsibilities for individual areas of the company's activity among management board members should be clear and transparent, and a chart describing that division should be available on the company's website.

Company's explanations:

Partial non application of the detailed principle.

As already indicated in the Company's explanations to previous detailed principle I.Z.1.3., the division of duties and responsibilities among the Board of Directors members is set out by the UniCredit Corporate Bodies Regulations that, inter alia, set forth the functions and competencies of the Board Committees. Furthermore, the powers delegated by the Board to the Chief Executive Officer (the only Board member with management powers) are stated in the yearly Report on Corporate Governance. Both said documents are available on the Company website.

 

II.Z.2. A company's management board members may sit on the management board or supervisory board of companies other than members of its group subject to the approval of the supervisory board.

Company's explanations:

The Board, in its document dealing with its qualitative-quantitative theoretical profile, has expressed its opinion, recalling the provisions of the CRD IV Directive (Directive 2013/36/EU dated June 26, 2013), on the limits to the maximum number of directorships that the Company Directors may hold at the same time, even if the provisions on the matter are not yet transposed into the Italian legislation. Moreover, Directors should also comply with the provisions laid down in Section 36 of Legislative Decree no. 201/2011 (ban on interlocking directorships), approved as statute by Law no. 214/2011, which establishes that holders of a seat in managerial, supervisory and controlling bodies, as well as top management officers in companies or groups of companies active in banking, insurance and financial markets are forbidden to hold similar offices, or to exercise similar duties, in competing companies or groups of companies.

 

II.Z.3. At least two members of the supervisory board should meet the criteria of being independent referred to in principle II.Z.4.

II.Z.4. Annex II to the European Commission Recommendation of 15 February 2005 on the role of non-executive or supervisory directors of listed companies and on the committees of the (supervisory) board applies to the independence criteria of supervisory board members.

Irrespective of the provisions of point 1(b) of the said Annex, a person who is an employee of the company or its subsidiary or affiliate or has entered into a similar agreement with any of them cannot be deemed to meet the independence criteria. In addition, a relationship with a shareholder precluding the independence of a member of the supervisory board as understood in this principle is an actual and significant relationship with any shareholder who holds at least 5% of the total vote in the company.

II.Z.5. Each supervisory board member should provide the other members of the supervisory board as well as the company's management board with a statement of meeting the independence criteria referred to in principle II.Z.4.

II.Z.6. The supervisory board should identify any relationships or circumstances which may affect a supervisory board member's fulfilment of the independence criteria. An assessment of supervisory board members' fulfilment of the independence criteria should be presented by the supervisory board according to principle II.Z.10.2.

Company's explanations:

Partial non-application of the above mentioned detailed principles (from II.Z.3. to II.Z.6.)

According to the Articles of Association, in addition to the independence requirements established by Italian law (a number of Directors equal to at least the one provided for by Section 148 of the Legislative Decree no. 58/1998 must meet the independence requirements established for Statutory Auditors), at least 1/3 of the Directors must meet the independence requirements established by the Italian Corporate Governance Code for listed companies, which coincide with those envisaged by the UniCredit Articles of Association. The independence requirements established by Italian law and those specified by the Corporate Governance Code may be cumulative for the same person.

Additionally, all Statutory Auditors of the Company shall meet the criteria of independence set out by Italian law. Such criteria generally comply with those set out by Annex II to the Commission Recommendation of 15 February 2005. However, there is no obligation relating specifically to relationships with shareholders holding or exceeding 5% of all votes. Anyway, the Statutory Auditor (as well as any Director) who has a significant commercial, financial or professional relationship (i) with a subject who, jointly with others through a shareholders' agreement, controls the issuer, or (ii) in the case of a company or an entity - with the relevant significant representatives - cannot be considered as independent and therefore cannot be appointed as Statutory Auditor (nor as independent director) and, if already appointed, has to resign from such office.

 

II.Z.10. In addition to its responsibilities laid down in the legislation, the supervisory board should prepare and present to the ordinary general meeting once per year the following:

II.Z.10.1. an assessment of the company's standing including an assessment of the internal control, risk management and compliance systems and the internal audit function; such assessment should cover all significant controls, in particular financial reporting and operational controls;

Company's explanations:

Partial application of the detailed principle.

The Italian Corporate Governance Code for listed Companies does not provide for a specific presentation by the Board of Directors to the Annual General Meeting on the assessment of adequacy, efficiency and the effective functioning of the internal control system.

 

III. Internal Systems and Functions

 

III.Z.6. Where the company has no separate internal audit function in its organisation, the audit committee (or the supervisory board if it performs the functions of the audit committee) should review on an annual basis whether such function needs to be separated.

Company's explanations:

The detailed principle is not applicable to UniCredit.

 

 

IV. General Meeting, Shareholder Relations

 

IV.Z.2. If justified by the structure of shareholders, companies should ensure publicly available real-time broadcasts of general meetings.

Company's explanations:

As already indicated in the Company's explanations to previous detailed principles I.Z.1.16., Italian law does not require companies to broadcast General Meetings on-line over the Internet, to record General Meetings in audio or video format, or to publish the recordings on the company website. However, according to the principles laid down by both local regulations and self-conduct rules, UniCredit makes all relevant documents available for review by the shareholders on the Company's website (www.unicreditgroup.eu) before any Shareholders' Meeting and publishes minutes of each resolution adopted. The Company does not rule out the application of this rule in the future.

 

IV.Z.4. If the management board becomes aware a general meeting being convened pursuant to Article 399 § 2 - 4 of the Commercial Companies Code, the management board should immediately take steps which it is required to take in order to organise and conduct the general meeting. The foregoing applies also where a general meeting is convened under authority granted by the registration court according to Article 400 § 3 of the Commercial Companies Code.

Company's explanations:

Italian law provides similar provisions regarding the summoning of General Meetings by corporate bodies or entities other than the Board of Directors to the ones stipulated in the Polish Commercial Companies Code. However, Italian law does not place specific duties on the Board of Directors for organizing or conducting General Meetings.

Generally, pursuant to Italian law, a General Meeting may be convened by the Board of Statutory Auditors (Collegio Sindacale), shareholders or the Court (Tribunale) in the following cases:

1.  The Board of Statutory Auditors is obliged to summon a General Meeting in the case of the resignation of all members of the Board of Directors. The General Meeting is convened in order to appoint a new Board of Directors. Additionally, Italian law requires the Board of Statutory Auditors to promptly summon a General Meeting, if the Board of Directors fails to do so, e.g.: (i) for the approval of the annual report; (ii) in the case of losses larger than one-third of the company's share capital; (iii) when shareholders representing at least one-twentieth of the company's share capital demand the convening of a General Meeting.

2.  Shareholders representing at least one-twentieth of the share capital of a listed company may demand that a General Meeting is convened. Such request must be submitted to the Board of Directors. If the General Meeting is not promptly convened by the Board of Directors, or by the Board of Statutory Auditors, the Court (Tribunale) may issue a decree ruling the summoning of a General Meeting. However, this rule is not enforceable in the case when a General Meeting is called in order to resolve on items in connection to which the Italian law requires a specific report to be prepared by the Board of Directors (e.g. capital increase, merger, etc.).

 

IV.Z.17. A resolution of the general meeting concerning a conditional dividend payment may only contain such conditions whose potential fulfilment takes place before the dividend record date.

Company's explanations:

Pursuant to Italian law, the Company is not allowed to pay conditional dividend.

 

 

Conflict of Interest, Related Party Transactions

 

V.Z.5. Before the company concludes a significant agreement with a shareholder who holds at least 5% of the total vote in the company or with a related party, the management board should request the supervisory board's approval of the transaction. Before giving its approval, the supervisory board should evaluate the impact of the transaction on the interest of the company. The foregoing does not apply to typical transactions and transactions at arm's-length made as part of the company's operations between the company and members of its group.

If the decision concerning the company's significant agreement with a related party is made by the general meeting, the company should give all shareholders access to information necessary to assess the impact of the transaction on the interest of the company before the decision is made.

Company's explanations:

Partial non-application of the detailed principle.

The approval of such agreements by the Board of Statutory Auditors is not required under Italian law. According to the CONSOB and Bank of Italy regulations and UniCredit internal rules, the Board of Directors has the exclusive competence to approve or issue its opinion on any transaction with related parties (including partnership and joint venture agreements or other cooperation agreements), which are put in place by UniCredit (directly or through its subsidiaries), when the total amount of said transaction is above the thresholds defining the "lesser relevance with significant amount" and the "greater relevance", as specified in the relevant UniCredit Global Policy.

Italian law assign a relevant role to the independent directors providing for their involvement in the adoption of the necessary procedures and in the management of the transactions with related parties, both in the pre-deliberative and deliberative phases, requiring (when provided for) the issuing of an opinion before the resolution of the relevant competent body. UniCredit has assigned such duties to the "Related Parties and Equity Investments Committee", which is composed only of independent directors.

Lastly, certain obligations are also set out for some Company's Directors, Statutory Auditors and Corporate Officers pursuant to Section 136 of the Italian Banking Law (Legislative Decree no. 385/93), whereby they may assume obligations, directly or indirectly, for the bank they manage, direct or control only with the Board of Directors' unanimous approval, without the person concerned voting, and the favorable vote of all the members of the Board of Statutory Auditors. For this purpose, the mentioned officers are required to give notice of the persons - individuals or legal entities - with whom the establishment of possible dealings could be construed as generating the type of indirect obligation substantially relating to the mentioned officers.

 

March 23, 2016