Bper Banca — AGM Information 2020

Mar 24, 2020

Shareholders' Meeting of 22 April 2020

Report on item 3) of the agenda - ordinary part

Integration of the fees paid to Deloitte & Touche S.p.A., the company responsible for auditing the accounts for the period 2017-2025, based on a reasoned proposal by the Board of Statutory Auditors

This is a translation into English of the original in Italian. The Italian text shall prevail over the English version.

BPER Banca S.p.A.

Shareholders' Meeting of 22 April 2020

Report pursuant to art.125-ter TUF

Item 3) of the agenda - ordinary part

Integration of the fees paid to Deloitte & Touche S.p.A., the company responsible for auditing the accounts for the period 2017-2025, based on a reasoned proposal by the Board of Statutory Auditors

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Shareholders,

With reference to item 3) on the agenda of the Ordinary Shareholders' Meeting, the Board of Directors, based on the provisions of art. 11, paragraph 2, of the Articles of Association, has called this meeting to ask you to resolve, in compliance with the provisions of the law and the relevant regulatory provisions, on the integration of the fees paid to the auditing company Deloitte & Touche S.p.A. (also referred to as the "Independent Auditors"), based on a reasoned proposal by the Board of Statutory Auditors.

With a resolution of 26 November 2016, the Shareholders' Meeting of BPER Banca S.p.A. (also the "Parent Company" or "Merging Company") approved the offer of the Independent Auditors dated 14 October 2016, again based on a reasoned proposal by the Board of Statutory Auditors, granting the Independent Auditors the assignment to audit the separate and consolidated financial statements of BPER Banca S.p.A. for the period 2017-2025.

The mandate stipulated with Deloitte & Touche S.p.A. on 3 March 2017, provides in paragraph 5 "Update of fees" that "If circumstances arise that lead to an increase in the time compared with what is estimated in this proposal - such as, for example, a change in the structure or size of the Parent Company and/or Group companies, changes in the structures established within the internal control system, regulatory changes, accounting and/or auditing standards, the performance of complex transactions carried out by the Parent Company and/or by Group companies, additional audit procedures or additional obligations relating to the conduct of the audit, such as for example the request for meetings, information and documents by supervisory bodies, as well as any additional activities carried out in relation to the Companies examined by other auditors, we will inform you of the consequent additions to the fees."

With resolution of 17 April 2019, the Shareholders' Meeting approved, on a reasoned proposal by the Board of Statutory Auditors, the integration of the fees for the audit assignment of the financial statements and the consolidated financial statements, as requested by Deloitte & Touche S.p.A. on 3 December 2018, as a consequence of (i) the application of new international accounting standards which came into force on 1 January 2018 and (ii) the expansion of the scope of the BPER Group, factors which have led to and/or will entail the performance of specific auditing and control activities on a wider scope.

Deloitte & Touche S.p.A., taking into account the provisions of the aforementioned mandate, with letters most recently dated 17 October 2019, formulated a request for the integration of its fees, in relation to the increase in the time associated with additional auditing activities compared with that included in the initial proposal for the years 2017-2025, and subsequent integration already approved on 17 April 2019, as a consequence of the acquisition by BPER Banca S.p.A. of Unipol Banca S.p.A. (or Merged Company) and the subsequent merger of Unipol Banca S.p.A. with BPER Banca S.p.A.

In relation to the aforementioned acquisition and subsequent merger, which took place on 25 November 2019 and effective, for the purpose of attributing the transactions of the Merged Company to the financial statements of the Merging Company, starting from 1 July 2019, the Independent Auditors communicated that the expansion of the operating scope of the BPER Banca Group made it necessary to revise the estimate of the times relating to the performance of the review process, as well as the audit fees for the years of residual duration of the 2019-2025 assignment (recurring integration). This situation has led to and/or will involve the performance of specific audit work and more extensive control procedures on balance sheet and income statement aggregates, the values of which have undergone a significant increase as a result of the merger.

The Independent Auditors also communicated that the complexity inherent in the operational execution and accounting recognition of the merger operation in the financial statements of BPER Banca S.p.A. led, for the financial year 2019 only (one-off integration), additional audit work, including the verification of the correctness of the merger records and of the correct migration of the archives and accounting data relating to the Merged Company onto the information systems of the Merging Company, of the determination and accounting of the Purchase Price Allocation and the consequent recognition of the assets acquired and the liabilities assumed by the Merging Company according to the provisions of IFRS 3 "Business Combinations" and the information to be provided in the separate and consolidated financial statements at 31 December 2019 with reference to the merger.

Given the additional audit work deemed necessary, Deloitte & Touche S.p.A. presented the following proposal for an increase in working hours and corresponding fees:

					Changes in the structure of the BPER Group
Year of reference of the	Audit fees (original proposal)		Audit fees (with integrations approved previously)		One-off integration of audit work for expansion of the scope - Unipol Banca S.p.A.		Recurring integration of audit work for expansion of the scope - Unipol Banca S.p.A.		Total audit fees including the integration
audit fees	Hours	Audit fees	Hours	Audit fees	Hours	Audit fees (one-off)	Hours	Audit fees (recurring)	Hours	Audit fees
2017	16,800	588,000	19,400	728,000	-	-	-	-	19,400	728,000
2018	16,800	588,000	19,430	733,500	-	-	-	-	19,430	733,500
2019	16,800	588,000	18,350	661,500	750	34,000	1,660	61,000	20,760	756,500
2020-2025	16,800	588,000	18,350	661,500	-	-	1,660	61,000	20,010	722,500

BPER Banca S.p.A. - Integration of Deloitte & Touche S.p.A. fees

The Board of Statutory Auditors, taking into account the fact that the Shareholders' Meeting of 26 November 2016 did not establish specific criteria for any adjustment of the fees of the Independent Auditors, in compliance with the provisions of article 13, para. 1, of Legislative Decree 39/2010, according to which "the Shareholders' Meeting, on a reasoned proposal by the Board of Statutory Auditors, assigns the task of auditing the accounts and determines the fees due to the independent auditor or independent auditing company for the entire duration of the assignment", examined the aforementioned request of Deloitte & Touche S.p.A. in order to formulate this proposal to be submitted to the Shareholders' Meeting.

For the preliminary investigation that lies within its sphere of competence, the Board of Statutory Auditors:

• examined the proposal of Deloitte & Touche S.p.A., meeting the Independent Auditors on several occasions to get details on the reasons for the integration requests, on the activities carried out and to be carried out and on the relative quantification of the hours foreseen, by the professional staff involved, distinguishing between their levels of seniority;
• met with the Manager of the Administration and Reporting Department to learn more about the reasonableness of the additional activities envisaged by Deloitte & Touche S.p.A., in terms of a description of the activities and quantification of the hours and adequacy of the related fees;
• acquired, on 16 October 2019, the positive assessment of the Manager of the Administration and Reporting Department, on the consistency and adequacy of the request for integration of the audit work with the independent audit process referred to in the current assignment and on the reasonableness of its contents, which, in turn, discussed the terms, including financial terms, of the required integrations with the managers of the Independent Auditors;
• received from Deloitte & Touche S.p.A., on 26 March 2019, confirmation of their independence referred to in paragraph 6 of EU Regulation 537/2014. It should be noted that, on the occasion of the meeting of 6 November 2019 at which Deloitte & Touche S.p.A.'s auditing plan for the financial statements of 31 December 2019 was presented, the latter formally confirmed its independence;
• confirmed its positive assessment of the technical and professional suitability of Deloitte & Touche S.p.A., in consideration of both the adequacy of its organisation, and the level of knowledge of the Parent Company and of the BPER Group, as well as the specific features of the accounting system and the internal control system of the BPER Banca Group.

During the above process, the Board of Statutory Auditors carried out an analysis of the request of Deloitte & Touche S.p.A. and, in particular, of the estimated hours and so-called "seniority pyramid", also by comparing it with the times and costs for the previous audit assignment with the former auditing firm of the Merged Company, requesting some additional information to ascertain the reasonableness of the assumptions underlying the request for integration of the fees such as:

• use of more hours/work is justified:
  • o as regards the recurrent integration, by the considerable increase in the size of the balance sheet and income statement aggregates of BPER Banca S.p.A. as a result of absorbing Unipol Banca S.p.A. (approximately 20% of BPER Banca's standalone total assets) and the particular nature of the Merged Company's core business (insurance) compared with that of the BPER Group;
  • o as regards the one-off integration in 2019, by audit work on the control procedures needed following the execution of complex operations, to be performed in the same accounting period as the extraordinary transaction, to ensure correct recognition of the assets acquired and the liabilities assumed following the merger of Unipol Banca S.p.A.;
• these longer hours were then valued at the same conditions as the original audit proposal;
• there was substantially no change in the overall mix of professional staff used to carry out the additional work.

As a result of these assessments and the checks that we have carried out, the Board of Statutory Auditors believes that the request for integration of the audit work and related economic conditions, also in light of the attestations made by the corporate functions, is consistent with the independent audit process referred to the current assignment, adequate in consideration of the additional audit work imposed by the change in the operating scope of the BPER Group, and fair in relation to the professional commitment required and with respect to what was originally estimated and already integrated with the Shareholders' Resolution of 17 April 2019 referred to previously.

Resolution proposed to the Shareholders' Meeting

All this being said, the Board of Statutory Auditors submits the following proposal to the Shareholders' Meeting for its approval:

"The Ordinary Shareholders' Meeting of BPER Banca S.p.A.,

• having noted that on 17 October 2019 Deloitte & Touche S.p.A. made a request for the integration of the scheduled times and related fees for the additional work required compared with the initial audit proposal and subsequent integrations already approved;
• having examined the reasoned proposal of the Board of Statutory Auditors containing the terms of the requests of the Independent Auditors, formulated at the outcome of the analyses and verifications of competence carried out also in collaboration with the corporate functions of BPER Banca S.p.A. and with the Independent Auditors, having assessed the overall requests advanced in relation to the additional work compared with what was originally estimated and subsequent integrations already approved,

resolves

1. to update, in line with the terms and integration requests formulated by Deloitte & Touche S.p.A. on 17 October 2019, the fees for the audit of the separate and consolidated financial statements of BPER Banca S.p.A., the assignment granted to it by the Shareholders' Meeting of BPER Banca S.p.A. on 26 November 2016 for the years 2017-2025, as follows:

	Total audit fees with previous integrations - 2017	Total audit fees with previous integrations - 2018	Audit fees 2019-2025 (with previous integrations already approved)	Integrations to the audit work for the year 2019	Total audit fees including the integration - 2019	Integrations to the audit work for the years 2020- 2025	Total audit fees including the integration - 2020-2025
BPER	728,000	733,500	661,500	95,000	756,500	61,000	722,500

1. to give a mandate to the Chairman of the Board of Directors and the Chief Executive Officer, separately, to provide, also by means of agents, for what is required, necessary or useful for the execution of what has been resolved, as well as to fulfil the relevant formalities, as necessary, at the competent bodies and/or offices, with the right to introduce any non-substantial modifications that may be required for the purpose, and in general all that is necessary for their complete execution, with all the necessary and appropriate powers, in compliance with the current regulatory provisions".

Modena, 9 March 2020

The Board of Statutory Auditors

Paolo De Mitri Cristina Calandra Buonaura Diana Rizzo Francesca Sandrolini Vincenzo Tardini