Bper Banca — M&A Activity 2020

Jun 10, 2020

1

Extraordinary Shareholders' Meeting held on 6 July 2020

Report on Item 1) on the Agenda

Approval of the merger plan for Cassa di Risparmio di Saluzzo S.p.A. and Cassa di Risparmio di Bra S.p.A. to be absorbed by BPER Banca S.p.A. and increase in capital to service the merger of Cassa di Risparmio di Bra S.p.A. with consequent amendment of art. 5 of the Articles of Association. Related resolutions

BPER Banca S.p.A, head office in Modena, via San Carlo, 8/20 -Tax Code, VAT number and Modena Companies Register no. 01153230360 – Company belonging to the VAT GROUP BPER BANCA VAT number 03830780361 - Share capital Euro 1,561,883,844 ABI Code 5387.6 - Register of Banks no. 4932 - Member of the Interbank Deposit Guarantee Fund and of the National Guarantee Fund - Parent Company of the BPER Banca S.p.A. Banking Group - Register of Banking Groups no. 5387.6 - Tel. +39 059 2021111 - Telefax +39 059 2022033 - e-mail: bpergroup@bper.it - Certified e-mail (PEC): bper@pec.gruppobper.it - www.bper.it – www.gruppobper.it

BPER Banca S.p.A.

Extraordinary Shareholders' Meeting held on 6 July 2020

Item 1) on the Agenda

Report pursuant to Article 2501-quinquies of the Italian Civil Code and Article 70 of the Regulation adopted through Consob Resolution no. 11971 of 14 May 1999, as subsequently supplemented and amended (the "Issuers' Regulation")

Dear Shareholders,

with reference to item 1) regarding the Extraordinary session of the Shareholders' Meeting, the Board of Directors (the "BoD") has called an Extraordinary Shareholders' Meeting to be held on 6 July 2020 to submit for your approval the draft terms dealing with the merger through absorption (the "Merger Draft Terms") of Cassa di Risparmio di Bra S.p.A. ("CR Bra") and of Cassa di Risparmio di Saluzzo S.p.A. ("CR Saluzzo", and together with CR Bra, the "Companies to be Merged",) into BPER Banca S.p.A. ("BPER" or the "Merging Company" and all companies the "Companies Involved in the Merger").

This report (the "Report"), drawn up pursuant to Article 2501-quinquies of the Italian Civil Code and Article 70, paragraph 2, of the Issuers' Regulation as well as according to the general criteria indicated in the relevant Annex 3A (Schemes no. 1 and no. 3), is aimed at exposing the aforementioned resolution proposal.

1. COMPANIES INVOLVED IN THE MERGER

1.1 The Merging Company

"BPER Banca S.p.A.", a company whose outstanding common shares are listed on the Electronic Share Market as operated and managed by Borsa Italiana S.p.A. ("ESM"), having its registered office in Modena, at Via San Carlo 8/20, share capital EUR 1,561,883,844, fully paid in, divided into 520,627,948 common shares, having no par value, tax code and registration number with the Companies' Register in Modena: 01153230360, Group VAT number 03830780361, registered with the Banks' Register under the number 4932 and Parent Company of the BPER Banca S.p.A. banking group, registered with the Banking Groups' Register under the number 5387.6 (the "BPER Group"), member of the Interbank Deposit Guarantee Fund and of the National Guarantee Fund.

1.2 The Companies to be Merged

"CASSA DI RISPARMIO DI BRA S.p.A.", having its registered office in Bra (Cuneo), at Via Principi di Piemonte 12, share capital EUR 57,330,000.00, fully paid in, divided into 110,250,000 common shares having a par value of EUR 0.52 each, tax code and registration number with the Companies' Register in Cuneo: 00200060044, group VAT number 03830780361, registered with the Banks' Register under the number 5087, under BPER Banca S.p.A.'s direction and coordination and belonging to the banking group bearing the same name.

"CASSA DI RISPARMIO DI SALUZZO S.p.A.", a sole-shareholder company, having its registered office in Saluzzo (Cuneo), at Corso Italia 86, share capital EUR 33,280,000.00, fully paid in, divided into 64,000,000 common shares having a par value of EUR 0.52 each, tax code and registration number with the Companies' Register in Cuneo: 00243830049, registered with the Banks' Register under the no. 5107, under BPER Banca S.p.A.'s direction and coordination and belonging to the banking group bearing the same name.

1.3 Business

The Companies Involved in the Merger receive deposits from the public and make loans under various forms.

CR Bra and CR Saluzzo are two local banks operating in the Piedmont Region, which became part of the BPER Group, respectively during 2013 and 2016. They both run the banking business, focusing on the retail and small business segments.

The BPER Group, made up of banking, financial and non-core companies, mainly carries out the banking business; furthermore, it operates in all the main market segments: bancassurance, leasing, factoring, consumer credit, e-money, securities brokerage, assets and wealth management, corporate & investment banking. At the date of the Report, it ranks sixth in the Italian banking system in terms of overall business activities and lending volumes.

1.4 Shareholders and Voting Agreements

BPER holds 84.286% of CR Bra's share capital and 100% of CR Saluzzo's share capital.

According to the information disclosed pursuant to the current provisions of law and to other available information, the shareholders - holding at the date of the Report directly and/or indirectly common shares representing a percentage of more than 1% of BPER's share capital and not falling within the exemption cases provided for by Article 119-bis of the Issuers' Regulation - are:

• − Fondazione di Sardegna (10.24%);
• − Unipol Gruppo S.p.A. (9.98%) and its subsidiary UnipolSai Assicurazioni S.p.A. (9.75%) for an overall 19.73%;
• − Dimensional Fund Advisors LP (4.72%);
• − Fondazione Cassa di Risparmio di Bologna (1.478%)
• − Fondazione Cassa di Risparmio di Modena (1.39%).

−

The remaining part of the share capital is publicly held and there are no other shareholders holding shares in excess of 1% out of the corporate capital.

At the date of the Report, no entity exercises control over the Merging Company pursuant to Article 93 of the Italian Consolidated Law on Finance, nor are there significant shareholder agreements in force pursuant to Article 122 of the Italian Consolidated Law on Finance.

On 25 July 2019, BPER issued an "Additional Tier 1" Convertible Note ("AT1 CN") having a par value of Eur 150,000,000.00, fully subscribed by Fondazione di Sardegna. The capital increase to serve the conversion of the AT1 CN provides for a maximum of 35,714,286 newly issued common shares, at the unit price of Eur 4.2, of which Eur 3.00 to be recorded as share capital and Eur 1.2 as share premium reserve.

In the event of a full conversion of the AT1 CN - and on the assumption that, at the conversion date, the Bank's ownership would not change with respect to the one reported above - the diluting effect on the shares currently outstanding would be equal to 6.419%. However, in the valuation analyses indicated in paragraph 3 here below, the possible conversion of the AT1 CN has not been taken in consideration since the current stock exchange price of the BPER shares is lower than the conversion price.

2. TRANSACTION DESCRIPTION, GROUNDS AND GOALS

2.1 Transaction legal framework

The BoD submits for your approval the merger transaction through absorption of CR Bra (the "CR Bra Merger") and CR Saluzzo (the "CR Saluzzo Merger", together with the CR Bra Merger, the "Transaction") into BPER – by approving their related Merger Draft Terms - pursuant to Article 2502 of the Italian Civil Code.

The Transaction is described in the Merger Draft Terms - drawn up pursuant to Articles 2501-ter of the Italian Civil Code, and, with regard to the CR Saluzzo Merger, also pursuant to Article 2505 of the Italian Civil Code – consisting of a single explanatory text, having regard to (i) the goal of implementing the Transaction, by aligning each merger statutory effectiveness on the same date and (ii) the necessity to explain goals and effects for the purposes of the single administrative Supervisory procedure.

Therefore, without prejudice to the autonomy of each merger transaction as a matter of principle, the intention of the Companies Involved in the Merger is to implement the Transaction at the same time and - should that not be possible - they reserve their right to implement them under a modular way. Should this be the case, any provisions in the Merger Draft Terms shall not be amended except for those affected by the non-involvement in the merger transaction of one of the Companies to be Merged.

In relation to the foregoing, also the resolution regarding the CR Saluzzo Merger will be subject to your approval - pursuant to Article 2502 of the Italian Civil Code - due to the uniformity and concomitance of the merger procedures, as the authority granted to the Managing Body - as referred to in Article 27 of BPER's Articles of Association for those merger transactions governed by Articles 2505 and 2505-bis of the Italian Civil Code – has to be considered as coexisting with the one attributed to the Extraordinary Shareholders' Meeting.

The Merger Draft Terms - together with BPER's post-merger Articles of Association – have been approved by BPER's BoD on 27 March 2020 and are attached to this Report.

With regard to the CR Saluzzo Merger, the Merger Draft Terms are drafted in line with the simplified merging procedure - according to Article 2505 of the Italian Civil Code - since BPER owns 100% of the former's corporate capital: therefore, the provisions of Article 2501-ter, paragraph 1, points 3), 4) and 5) of the Italian Civil Code shall not apply, since no exchange ratio will be generated, but rather a mere cancellation of the CR Saluzzo shares - wholly owned by the Merging Company - without giving rise to any corporate increase.

Furthermore - except what is specified regarding the concomitance and unitary description of the Transaction – as for the CR Saluzzo Merger the requirements provided for by Articles 2501-quinquies of the Italian Civil Code (Managing Body's Report) and those provided by Article 2501-sexies of the Italian Civil Code (Experts' Report) shall not apply. The Merging Company - as sole shareholder of CR Saluzzo – is entitled to notify its waiver to terms pursuant to Article 2501-septies, paragraph 1, of the Italian Civil Code.

The statutory procedure relating to the CR Bra Merger is - to the contrary - in line with the ordinary merging procedure, as BPER holds shares equal to 84.286% of the former's corporate capital.

The CR Bra Merger will entail cancellation of the shares of the company itself and the allotment in exchange - to the shareholders other than the Merging Company - of newly issued BPER common shares, carrying ordinary rights, and having the same characteristics as the outstanding shares at the issue date.

Following a joint request submitted with CR Bra, the Court of Bologna has appointed "PRICEWATERHOUSECOOPERS S.p.A." as common expert for preparing the report on the adequacy of the share exchange ratio, pursuant to Article 2501-sexies of the Italian Civil Code. Said report will be published together with this Report and with the other documents, as required under the terms and pursuant to the statutory and regulatory provisions.

It should be noted that - with regard to the aforementioned AT1 CN subscribed by Fondazione di Sardegna, whose regulation already allows the Sardinian Entity the right of conversion in overlap with that provided for by Article 2503-bis, paragraph 2, of the Italian Civil Code - the Merging Company in substantial compliance with the law also in light of the prevailing legal theory and case law on the matter, has already made the Foundation aware of the merger transaction and its related rights.

No amendments to the Articles of Association of the Merging Company will result from the CR Saluzzo Merger, while the CR Bra Merger will give rise to an amendment to Article 5, paragraph 1 - as further specified - by indicating the new share capital.

For this Transaction authorization has been required to the competent Supervisory Authority pursuant to and for the purposes of Articles 4 and 9 of Regulation (EU) no. 1024/2013 and Articles 57 and 61 of the Legislative Decree no. 385/93 (the "Italian Consolidated Law on Banking"); being a prerequisite for having the Merger Draft Terms being registered with the Companies' Register. In addition, any amendments to the Articles of Association resulting from the share capital increase serving the share exchange is subject to assessment pursuant to Article 56 of the Italian Consolidated Law on Banking.

It is the will of the Companies Involved in the Merger to finalize this Transaction as quickly as possible - considering the procedural time required for implementation - soon after having been granted any necessary authorization. In this regard, it is highlighted that - pursuant to Article 57, paragraph 3, of the Italian Consolidated Law on Banking - the time limit for creditors to object this merger - as provided for by Article 2503, paragraph 1, of the Italian Civil Code - is reduced to fifteen days.

The statements of assets and liabilities of the Companies Involved in the Merger are represented by their financial statements as of 31 December 2019, filed or published in accordance within the statutory as well as regulatory deadlines, along with the other documents set out in Article 2501 septies of the Italian Civil Code.

The provisions of Article 2501-bis of the Italian Civil Code on "Merger transactions following leveraged buy-outs" shall not apply, as the relevant conditions are not met.

This Transaction does not entail any right of withdrawal, as it does not fall within any of the specific cases as set out by the law and/or by the Articles of Association, nor does it fall within the concentration cases subject to being previously notified - pursuant to the Statutory Law No. 287/90 since it is an intra-group merger transaction.

As for the relevance of this Transaction - pursuant to Article 70 of the Issuers' Regulation and its relevant Annex 3B - it should be noted that the CR Saluzzo Merger is deemed exempt from the obligation to publish the information document as it is entirely controlled by BPER; while the CR Bra Merger is to be deemed non-relevant since the 25% threshold has not been exceeded in terms of relevance parameters as required by the law, having it been measured on the basis of the draft financial statements as of 31 December 2019.

It should be noted that the procedural provisions on connected parties and related parties have been applied, given the correlation existing among the Companies Involved in the Merger. CR Bra and CR Saluzzo are subject to BPER's control by law, pursuant to Article 2359, paragraph 1, point 1, of the Italian Civil Code and Article 93 of the Italian Consolidated Law on Finance.

Either the CR Bra Merger or the CR Saluzzo Merger are classified for these purposes as "of lesser importance", since the relevance indices as set by the Consob Regulation no. 17221/2010 and BPER's internal policy contained in the "Group policy for the governance of the risk of non-compliance concerning conflicts of interest with related parties and risk activities with associated persons" do not exceed the 5% threshold. Such policy is available on the website www.bper.it - Institutional website> Footer> Information and regulation> Soggetti Collegati.

BPER made use of the exemption pursuant to Article 14 of the aforementioned Consob Regulation, limited to the CR Saluzzo Merger.

For both mergers, any requirement as set out in the internal policy shall be met.

As for the information to be given to the holders of financial instruments of the Companies Involved in the Merger and to the public - as provided by statutory and regulatory provisions - any and all information necessary to exercise their rights will be disclosed, under terms as set out by the current provisions of law.

2.2 Transaction grounds and goals

The Transaction is part of an evolving sharing and collaborative process among the Companies Involved in the Merger, which first brought CR Bra and CR Saluzzo to become part of the BPER Group respectively during 2013 and 2016, with the aim of obtaining a competitive strengthening of the Group within the Piedmont area, while preserving at the same time the specific features in terms of expertise and bonds with the chosen area.

It aims at the full integration of the Companies to be Merged into BPER - facilitated by the fact that they have already achieved the alignment of the IT system with that of their Parent Company as well as the centralization of numerous activities concerning inter alia those within the Controls and Operations area - and it is in line with the 2019-2021 Industrial Plan and, in particular, with the activities started over in last few years - also following the indications provided by the Supervisory Authority - aimed at achieving a simplification and rationalization of the distribution, organizational and Governance structure of the BPER Group.

The Board of Directors of the Companies Involved in the Merger believe that the proposed integration can achieve the common goals of growth in value by strengthening the competitiveness in the markets which they belong to and further improving the quality of the services provided, maintaining their bonds with their areas and nearness to their reference customers.

The integration guidelines are aimed at pursuing:

• the strengthening of the BPER Group's presence to support the economic development of the Piedmont Region;
• the improvement of the operating efficiency and the enhancement of the resources of the Companies to be Merged;
• the strengthening of the centralized administration of the Merging Company, especially in loan and middle office areas;
• the cost and revenue synergies.

It is estimated that the Transaction may generate:

• overall cost savings of approximately EUR 8,000,000.00 per year, mainly due to the reorganization of the centralized and semi-centralized structures and the rationalization of the Companies to be Merged administrative expenses;
• estimated one-off costs equal to EUR 3,900,000.00 mainly related to other administrative expenses such as IT migration, advisory and marketing communication.

2.3 Management programs

The Companies to be Merged run the banking business, focusing on the retail and small business segments. The customers of CR Bra and CR Saluzzo are counted in approximately 30,000 each.

The current distribution Network of the Companies to be Merged (48 branches, of which 26 belonging to CR Bra and 22 belonging to CR Saluzzo), entirely located in the Piedmont Region, has no overlap. However, because of the presence in this area of 13 BPER branches (deriving from the merger transaction with Unipol Banca) it is expected that 3 branches close (and 3 branches be transformed into light Branches); these actions all to be carried out at the same time as of the finalization of the merger transaction, in order to achieve greater efficiency in providing services. The positive net incremental balance for BPER distribution Network will be 45 units.

Simultaneously, as of the finalization of the merger transaction, BPER Semi-central areas will be further reorganized with the aim of achieving more effective and consistent area coverage, improving area coordination, monitoring and control, as well as giving a greater boost to market development.

To this end, a new "Piedmont and Liguria Regional Head Office" will be set up, based in Turin, with three Area Managers who will report to it, overseeing all the Branches located in the Piedmont and Liguria Regions.

Offices conducting central BPER functions (primarily Middle Office) will be established or strengthened, in so doing continuing along the evolving roadmap of BPER organizational structure, also with regard to the logistical and area relocation of resources and activities.

The workforce of the Companies to be Merged is made up of 303 units (155 from CR Bra and 148 from CR Saluzzo) distributed as follows: 87 in the central structures and 216 in the distribution Network.

Taking into account the structure reorganization as above indicated, as well as the more comprehensive Personnel reorganization as set by the 2019-2021 Industrial Plan, the resources will be allocated among the Regional Head Office, the Geographical Areas, the Distribution Network, the Semi-central and the Central Structures of the Merging Company.

It is estimated that this integration process will entail - in terms of organizational efficiency - at least 45 reintegration of resources which - after a fair project follow-up period - will fall within the scope of the mentioned Personnel reorganization.

Any impacts regarding the workforce will be subject as usual to the trade unions under the required trade union procedure.

3. CALCULATING THE EXCHANGE RATIO

3.1 Preamble

The statements of assets and liabilities of BPER and CR Bra (jointly the "two Companies") - pursuant to Article 2501-quater of the Italian Civil Code - are represented by their financial statements as of 31 December 2019, as approved by their respective Shareholders' Meetings, in Ordinary session.

The managing bodies of the two Companies, each being assisted by their own financial advisor came to calculate the exchange ratio between the BPER shares - to be assigned to the CR Bra shareholders other than BPER itself - and the CR Bra shares (the "Exchange Ratio"), by choosing for this purpose methodologies commonly applied by the professional practice for such type of transaction and based on consolidated theory bases, taking into account the characteristics of the companies involved in that.

The analyses of the advisors are based on the economic and financial projections of BPER's and CR Bra's 2020-2024 financial years - as approved by the two Companies' Boards of Directors - reflecting an update of the prospective data contained in the 2019-2021 Industrial Plan and an extension of the forecast time span up to 2024 financial year (the "Projections").

These methodologies take as reference the typical qualitative/quantitative elements of the operations, the organization, the customer base, the capital structure, the risk profile and the sustainable profitability of the two Companies, in order to get not just an estimate of the economic capital in terms of absolute values but rather in terms of reasonably comparable relative values.

Reaching the estimate of significant and comparable values implies the homogeneity and comparability of the applied methods, having regard to the specific characteristics of the companies being valued. It follows that these valuations must be considered with exclusive reference to the concerned transaction and in no case to be considered as possibly indicating market prices or absolute current or prospective values, nor to be taken as a reference within a context other than the one herein examined.

The valuation analyses - for which prospective data, information and economic and financial estimates approved by the respective Boards of Directors of the two Companies have been used - were conducted considering conditions such as their normal course of business, their capacity to continue operating (going concern) and their operating autonomy (stand-alone), without substantial management changes and in light of reasonably foreseeable scenarios.

3.2 Adopted valuation methodologies

The valuation of BPER Banca's and CR Bra's 100% of their share capital was made by using the following methods:

• − the DDM method under the "Excess Capital" variant ("DDM"): which estimates the value of a company or a business unit on the basis of future dividend flows attributable to shareholders;
• − the method of the Stock Market Multiples of comparable companies ("Comparable Pricing Analysis" or "Stock Market Multiples"): which is based on the analysis of stock market prices of a sample of companies deemed comparable - in terms of business sector, market of reference and operational characteristics - to the company being valued and entails the identification of multipliers, inferred by relating the Stock Market capitalization to income, equity and financial indicators or related to the companies' business operations. The multipliers so obtained are applied to the income-equity aggregates of the companies in order to obtain the theoretical value attributed by the market.

Dividend Discount Model ("DDM")

The option of the Dividend Discount Model is motivated by the fact that it allows to set the value of a company on the basis of its development plan and its intrinsic characteristics. Such method is widely used by the most consolidated valuation practice and supported by the best theory in company valuation, with specific reference to businesses operating in the financial sector, in which the measurement of cash flows pertaining to the shareholders is influenced by the level of capitalization required by the Supervisory Authorities.

It should also be noted that the assumptions underlying the economic and financial projections acquire significant importance in developing the Dividend Discount Model; consequently, the valuations carried out through this method are conditioned by the occurrence of the assumptions and by the achievement of the goals upon which the economic-financial projections are based, which are random by nature.

Based on this method, the economic value of a bank is equal to a sum made of:

• the current value of future cash flows (i.e. dividends) generated in the chosen time span and distributable to shareholders based on a multi-year business plan, maintaining a capitalization level deemed adequate to allow future developments;
• the current value of the terminal value calculated by taking into account the cash flow (i.e. the dividend) of the explicit forecast's last year, the cost of capital and the perpetual growth rate.

The DDM methodology therefore estimates a bank's economic capital value by using the following formula:

$$
W = D I V a + V T a
$$

where:

• "W": stands for the economic value of the bank being valued;
• "DIVa": stands for the current value of future cash flows which can be distributed to shareholders over an identified time span, maintaining a satisfactory capitalization level;
• "VTa": stands for the current value of the bank's terminal value.

The DDM application is divided into the following phases:

• identifying future economic flows and the reference time span;
• fixing the perpetual growth rate and the discount rate (Ke): the discount rate of the flows corresponds to the rate of return of the cost of capital required by investors/shareholders for investments having similar risk characteristics and is calculated on the basis of the Capital Asset Pricing Model ("CAPM");
• calculating the terminal value, representing the current value of the cash flows theoretically distributable to shareholders in the long term, beyond the explicit forecast period.

The discount rate (Ke) is obtained by applying the following formula:

Ke = Risk Free Rate + β*Risk Premium + ARP

where:

• Risk Free Rate: identifies the return provided by risk-free investments with a maturity in the medium-long term, taken as equivalent to the government bonds yield with similar maturities;
• Risk Premium: is the premium required on stock investments, in terms of yield spread compared to risk-free investments (medium/long-term government bonds);
• Beta (β): i.e. the correlation factor between the actual return on shares of comparable companies and the overall return on the market of reference, i.e. this factor measures the volatility of securities with respect to the market portfolio.
• Additional Risk Premium (ARP): any premium for the additional risk linked to uncertainty relating to the effects on the economy deriving from emergency situations.

In order to value the impact of the current market conditions on the Exchange Ratio range - which record a high volatility linked to uncertainties about the duration and possible effects of the COVID-19 emergency on the national and international economy - three different valuation scenarios have been prepared ("Normalized" Baseline Scenario, "Last" Baseline Scenario and "COVID-19" Stress Scenario) which refer to different valuation parameters and/or prospective data, as modified compared to those approved by the two Companies' Boards of Directors.

AS for the "Normalized" Baseline Scenario development, reference was made to the Projections as approved by the Board of Directors of the two Companies and to the following parameters:

• CET1 fully loaded ratio target equal to 13.0%, in line with the median value recorded as of 31 December 2019 from a sample of Italian listed banking groups (BPER, Banco BPM, UBI Banca, Credito Valtellinese, Banca Popolare di Sondrio);
• long-term growth rate ("g-rate"), equal to 1.1%, obtained as the average in between the inflation rate expected by the European Central Bank for 2021 and the expected growth rate of the Italian GDP by 2022, following the COVID-19 emergency;
• Ke equal to 10.8%.

The "Last" Baseline Scenario was set by referring to parameters timely measured close to the date on which the Exchange Ratio has been calculated. The prospective data used are the same as in the scenario described above. This approach is based on the use of a Ke equal to approximately 11.0%, leaving the other parameters unchanged with respect to the "Normalized" Baseline Scenario.

The "COVID-19" Stress Scenario was prepared by reflecting the possible shocks deriving from the "COVID-19" health emergency on some of the two Companies' KPIs, referring to data and information obtained from Research Analyst available at the date on which the Exchange Ratio has been calculated. This scenario reflects a reduction of indirect deposits for the 2020-2024 period by 30% per year, and an increase in the credit cost deriving from expecting an increase in default rates and in the credit cost for the entire Italian banking system. In addition, the following valuation parameters were used in this scenario:

• g-rate equal to 0.8%, in line with the expected growth rate of the Italian GDP by 2022;
• Ke equal to 10.5%.

Based on the application of the parameters and the valuation process as described above, and on further sensitivity analyses concerning the Ke, the g-rate and the CET1 ratio target, the following values of the two Companies and their related Exchange Ratios have been identified as follows:

	Economic value: 100% and per share				Exchange Ratio
	BPER		CR Bra		# CR Bra shares for 1 BPER share
€ millions	min	max	min	max	min	max
"Normalized" Baseline Scenario
DDM Excess Ke - g	2,787.3	3,456.6	43.7	56.4	13.00	13.52
Value per share (€)	5.36	6.65	0.40	0.51
DDM Excess Ke - CET1	2,573.9	3,658.4	40.9	58.8	13.20	13.34
Value per share (€)	4.95	7.03	0.37	0.53
"Last" Baseline Scenario
DDM Excess Ke - g	2,725.3	3,358.8	42.6	54.6	13.03	13.56
Value per share (€)	5.24	6.46	0.39	0.50
DDM Excess Ke - CET1	2,511.5	3,563.3	39.8	57.1	13.23	13.38
Value per share (€)	4.83	6.85	0.36	0.52
"COVID-19" Stress Scenario
DDM Excess Ke - g	1,732.9	2,147.8	26.7	35.4	12.85	13.76
Value per share (€)	3.33	4.13	0.24	0.32

DDM Excess Ke - CET1	1,497.8	2,389.4	23.6	38.4	13.17	13.47
Value per share (€)	2.88	4.59	0.21	0.35

Stock Market Multiples Method (or Comparable Pricing Analysis)

The Stock Market Multiples method is based on the analysis of stock market prices referring to comparable companies and on the subsequent application of the valuation multiples - as highlighted by such analysis - to the values of the company being valuated.

The multiples are obtained as the ratio in between the stock market capitalization of the comparable companies and those related income, equity and financial aggregates deemed significant.

In applying the Comparable Pricing Analysis, the following multipliers were considered:

• P/BV 2019A, estimated from applying a linear regression to the ROAE 2021, as expected on a sample of comparable Italian banks (e.g. BPER, Banco BPM, Credito Valtellinese, Banca Popolare di Sondrio);
• P/E 2021E, obtained from the average value of the same sample as above referred to.

In both cases in applying the stock market multiples the following has been taken into consideration:

• the economic and equity positions as of 31 December 2019, both for BPER (consolidated) and for CR Bra;
• the 2020-2024 Projections for the two Companies;
• an alignment of the capitalization level of the two Companies with that of the banks part of the reference sample (CET 1 Ratio equal to 13%).

In line with what has been done within the analytical methodology, different valuation scenarios are taken as reference also in applying the Comparable Pricing Analysis, in order to take into consideration the possible effects of the COVID-19 emergency on the relative value of the two Companies.

From the valuation analyses being carried out, the following range has been set for the two Companies' economic values and their related Exchange Ratios.

	Economic value: 100% and per share				Exchange Ratio
	BPER		CR Bra		per 1 BPER share	# CR Bra shares
€ millions	min	max	min	max	min	max
"Normalized" Baseline Scenario
Stock Market Multiples	2,034.6	2,692.2	29.4	36.4	14.66	15.68
Value per share (€)	3.91	5.18	0.27	0.33
"Last" Baseline and "COVID-19" Stress Scenarios

Stock Market Multiples	1,226.3	1,744.4	16.6	22.7	15.63	16.28
Value per share (€)	2.36	3.35	0.15	0.21

3.3 Valuation summary and Exchange Ratio

Based on the analyses carried out, on the documents made available, on the assumptions, on the parameters, on the sensitivity analyses, and on the valuation scenarios prepared, the Exchange Ratio range as identified is equal to 13.60-14.12 CR BRA common shares for each newly issued BPER common share.

Taking into account this range, the number of newly issued BPER common shares needed for finalizing the Transaction would be equal to 1,233,435 and 1,279,840 common shares, corresponding to a shareholding owned by the only current minority shareholder of CR Bra (Fondazione Cassa di Risparmio di Cuneo) in BPER share capital post Transaction, equal respectively to 0.24% and 0.25%.

On the basis of the above, BPER's and CR Bra's Board of Directors have agreed on the following Exchange Ratio:

1 (one) BPER common share for each 14 (fourteen) CR Bra common shares

This value was identified by rounding the central value of the Exchange Ratio range thus fixed to the nearest whole number.

3.4 Limits of the analysis and valuation difficulties

As highlighted, the Directors set the Exchange Ratio also through the assistance of an independent advisor. The results of the valuation analyses and the conclusions reached must be interpreted in the light of certain limits and difficulties as summarized here below:

• methodologies and sensitivity analyses of analytical and empirical nature have been applied requiring the use of different data and parameters. In applying these methodologies, characteristics and limitations implicit in each of them have been considered, on the basis of the professional valuation practice - national and international - normally followed in the reference sectors. Particularly, in applying the selected valuation methods, data relating to financial parameters and stock market prices were used, which by their nature are subject to fluctuations, even significant;
• applying the chosen methodologies led to the use of forecast data which by their nature are random and uncertain, subject to changes in market scenarios and to macro-economic variables; in particular, the current macroeconomic and market context - characterized by unusual levels of volatility of financial aggregates being decisive for the valuation, and by the consequent difficulty in providing forecasts, even in the short term - has made the valuation activity even more complex and uncertain;
• the 2020-2024 Projections of the two Companies are based on a set of assumptions whose occurrence for some aspects derives from actions that will have to be taken by management, while for others derives from factors beyond their influence and which by their nature present uncertainties - exacerbated by the COVID-19 emergency - also connected to possible structural market changes; furthermore, at the date of the Report no analyses of scenarios are available coming from the two Companies, nor updates of the 2020-2024 Projections - useful to reflect the possible impact of said emergency on asset or liability items and on the differences between actual values and budgeted values - nor reliable scenarios relating to the Italian and European banking sector with reference to the duration of such emergency and its effects on the national and international economy. In facing this difficulty, useful sensitivity

scenarios have been developed to value the possible impacts on the Exchange Ratio range, deriving from shocks coming from a reduction in indirect deposits and an increase in the risk costs, by taking into account the first considerations made by market analysts - available at the date the Exchange Ratio was fixed - referring to the possible impacts of the COVID-19 emergency on the Italian and European banking sector. To date, elements of uncertainty remain, referring in particular to the impacts on the national and international economy, even considering the possible developments relating to the mitigating measures under discussion by the government and sector authorities. However, since the values of the Exchange Ratio expresses relative values, the stress test analyses - conducted at the date the share exchange has been set - show a substantial stability in the chosen Exchange Ratio, as the currently foreseeable impacts deriving from the ongoing health emergency should be relatively comparable between the two Companies, as also confirmed by the results reported in the statements of assets and liabilities of the two Companies as of 31 March 2020;

• the Stock Market Multiples criterion estimates the value of a company or of a business unit on the basis of direct stock market prices of a sample of companies deemed comparable to the company or business being valued, being recorded in a significant period close to the preparation date of the valuation. The selection of these comparable companies is sometimes influenced by considerations relating to their level of liquidity, as well as to the availability of estimates relating to the economic, equity and financial aggregates of the same companies made by analysts and information data providers;
• with reference to the previous point, it should also be noted that in the current market context, the volatility of stock exchange prices on one side, and the lack of reliable scenarios relating to the effects that the COVID-19 emergency might have on the banking sector and its perspectives on the other, show a limit in using this methodology when trying to estimate absolute values of a company's economic capital. However, in considering the purpose of the evaluation analyses being carried out - which consists in identifying relative and comparable values - the stock market multiples method has been chosen in setting the possible Exchange Ratio range;
• the valuation analyses so far conducted based on the two Companies' 2020-2024 Projections - do not reflect in any way the possible impacts on BPER value deriving from the transaction announced to the public regarding the acquisition of a business unit by the bank itself - consisting of bank branches as well as any further assets, liabilities and legal relations subject to the successful outcome of the public exchange offer launched by Intesa Sanpaolo SpA ("ISP") against UBI Banca S.p.A. entire share capital ("UBI Transaction"). This choice is primarily justified by the fact that there is no certainty on the final outcome of this transaction, depending the same on UBI Banca S.p.A. shareholders' will to subscribe the public exchange offer launched by ISP and on the following OPS final results being accepted by ISP. Furthermore, it is acknowledged that with reference to the UBI Transaction BPER's Extraordinary Shareholders' Meeting held on 22 April 2020 granted the BoD the right pursuant to Article 2443 of the Italian Civil Code, and to be exercised by 31 March 2021 - to increase the share capital one or more times against payment in cash on a divisible basis for a maximum total amount of Eur 1,000,000,000.00 aimed at completing the planned acquisition. However, (also in light of the amendment agreement concerning the criteria for determining the purchase price) even by assuming the completion of the UBI transaction at market conditions the potential overall impact could be neutral with respect to the values as emerged from the analyses carried out for setting the Exchange Ratio;
• the valuation analyses were conducted on the basis of a so-called "Ex dividend" approach, by reducing the economic value - as estimated through the identified methodologies - by BPER dividend out of the 2019 profits, which would have been distributed following the approval by the Shareholders' Meeting. As for CR Bra, no dividend distribution was considered out of the 2019 profits. This approach was adopted taking into account the timing for the completion of the Transaction, the occurrence of which was expected (subject to obtaining any necessary

authorization) on a date following the distribution of dividends out of the 2019 profits. However, with reference to the date of the Exchange Ratio approval, the sector international Authorities have adopted measures aimed at addressing banking institutions' any possible liquidity needs by suspending payment of dividends for the 2019 financial year. In this regard, sensitivity analyses have been carried out which have shown a limited impact on the Exchange Ratio considering that non-distribution of BPER dividend out of the 2019 profits.

4. METHOD OF ALLOCATING SHARES IN EXCHANGE

As the Transaction will take effect, all common shares of the Companies to be Merged shall be canceled. All the CR Saluzzo shares shall be cancelled without share exchange, since BPER holds and intends to hold CR Saluzzo's entire share capital until the time the Transaction shall be implemented and then cancels it, as Article 2504-ter of the Italian Civil Code prohibits allotment of shares.

As for the CR Bra Merger, BPER will cancel the CR Bra shares it holds, while those not owned by the Merging Company will be replaced by newly issued BPER common shares, based on the Exchange Ratio.

The BPER common shares to be exchanged shall be listed on the ESM like those outstanding, and shall be made available to those entitled to them - according to the terms set under the centralized management of shares by Monte Titoli S.p.A. - in electronic form, on the Stock Exchange trading date immediately following the merger statutory effective date (hereinafter the "Delivery Date").

No expenses will be borne by CR Bra's shareholders for the share exchange.

Should the CR Bra's shareholders – due to the Exchange Ratio - receive a non-integer number of BPER shares, the Merging Company shall then pay such shareholders - even by Depository Intermediaries - the equivalent value of fractional rights at BPER shares official price as calculated at the Delivery Date, with no additional costs, nor stamp duties, nor fees.

The Merging Company will increase its share capital - as indicated here below - to serve the share exchange.

5. PROFIT SHARING EFFECTIVE DATE

With reference to the CR Saluzzo Merger, reference is made to what above exposed on the nonapplication of Article 2501-ter, paragraph 1, points 3), 4) and 5) of the Italian Civil Code.

As for the CR Bra Merger, the common shares allotted by the Merging Company to CR Bra's shareholders other than the Merging Company itself shall carry ordinary rights.

6. MERGER EFFECTIVENESS AND EFFECTIVE DATE FOR ACCOUNTING AND TAX PURPOSES

The Transaction statutory effects - pursuant to Article 2504-bis, paragraph 2, of the Italian Civil Code shall take place as of the date as indicated in the merger deed, which may also occur later than the date of the last filing of the merger deed with the competent Companies' Registers, pursuant to Article 2504 of the Italian Civil Code.

Any operation of the Companies to be Merged shall be booked into the Merging Company's financial statements - even from a tax perspective - as of 1st January of the year in which the Transaction shall be statutorily effective.

7. TAX IMPLICATIONS OF THE TRANSACTION

The Transaction is fiscally neutral for income tax purposes (Article 172 of the Italian Consolidated Law on Income Tax, approved through Presidential Decree no. 917 of 22 December 1986) and is excluded from the scope of VAT application (pursuant to Article 2, paragraph 3, letter f) of the Presidential Decree n. 633/72).

The merger deed is subject to fixed registration tax (Article 4 of the Italian Consolidated Law on Registration Tax) and subject as well to mortgage and cadastral taxes (Article 10, paragraph 2, of the Italian Consolidated Law on Mortgage and Cadastral Taxes and Article 4 of the relative attached Tariff).

8. FORECASTS ON RELEVANT CORPORATE OWNERSHIP

No shareholder exercises control on the Merging Company, pursuant to Article 93 of the Italian Consolidated Law on Finance.

Following the Transaction, no significant changes of BPER corporate ownership will take place.

In particular, as a result of the CR Bra Merger - as CR Bra corporate ownership will not change - the sole minority shareholder will receive in exchange 1,237,500 newly issued BPER shares and will acquire a stake which at the date of the Report will represent approximately 0.24% of the share capital of the Merging Company.

9. RIGHT OF WITHDRAWAL

The Transaction - and in particular the CR Bra Merger - will not give rise to a right of withdrawal neither pursuant to Article 2437 of the Italian Civil Code, nor pursuant to other legal provisions. In particular, hereby it is reminded that the Merging Company and CR Bra share the same corporate purpose and are both joint stock companies.

10. AMENDMENTS TO THE ARTICLES OF ASSOCIATIONS

As a result of the implementation of the merger transaction, BPER will increase its share capital by EUR 3,712,500.00 by issuing 1,237,500 shares having no par value, to serve the Exchange Ratio.

It follows that Article 5, paragraph 1, of the Articles of Association of the Merging Company shall be amended.

The following is a comparison of the current and the proposed wording of the aforementioned Article 5. The wording in bold type is the one whose insertion is proposed, the wording stricken through is the one to be erased.

Current wording	Proposed Wording
Article 5	Article 5
1. The share capital, fully subscribed and paid in, amounts to EUR 1,561,883,844 and is represented by 520,627,948 registered common shares, having no par value.	1. The share capital, fully subscribed and paid in, amounts to EUR 1,561,883,844 1,565,596,344.00 and is represented by 520,627,948 521,865,448 registered common shares, having no par value.

* * *

Pursuant to Article 2501-sexies of the Italian Civil Code, a common expert appointed by the Court of Bologna will issue its report on the adequacy of the share exchanges. The expert's report will be made available together with the rest of the documents, pursuant to and in accordance with Article 2501 septies of the Italian Civil Code.

Proposal

The Board of Directors of the company "BPER Banca S.p.A." intends to submit the following resolution proposal to the Extraordinary Shareholders' Meeting:

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

acknowledged and confirmed that any statutory and regulatory provisions for each merger procedure have been observed:

RESOLVES UPON

• 1. approving in accordance with Article 2502 of the Italian Civil Code the merger through absorption under terms and conditions as set forth in the Merger Draft Terms – as filed, registered and published in accordance with the law - of the subsidiaries Cassa di Risparmio di Bra S.p.A. and Cassa di Risparmio di Saluzzo S.p.A. - a single member company, and a wholly owned company - into BPER Banca S.p.A., based on their respective financial statements approved as of 31 December 2019;
• 1. acknowledging that the merger by absorption of CR Saluzzo will be carried out under the socalled simplified procedure, pursuant to Article 2505 of the Italian Civil Code - without increasing the share capital of the Merging Company, as a booking entry - after cancelling without any replacement and without any share exchange all shares representing the entire share capital of CR Saluzzo, as the Merging Company currently holds and intends to hold up to the merger implementation all the shares and therefore CR Saluzzo's entire share capital;
• 1. acknowledging that the merger by absorption of CR Bra will be carried out under the ordinary procedure, subject to cancellation of all the shares representing the entire share capital of the company to be merged, and therefore entailing an exchange of shares held by shareholders other than the merging company, fixed in 1 (one) BPER common share for each 14 (fourteen) CR Bra common shares, also specifying that the CR Bra shares owned by the Merging Company will be canceled without any replacement and without any share exchange, as a booking entry;
• 1. increasing the share capital of the Merging Company for the benefit of and to serve the merger with CR Bra - for an amount of Eur 3,712,500.00 (three million seven hundred and twelve thousand five hundred), by issuing 1,237,500 (one million two hundred thirty-seven thousand five hundred) common shares, carrying ordinary rights, reserved for CR Bra's shareholders other than the merging Company – in accordance with the aforementioned Exchange Ratio - specifying that said shares will be listed on the ESM like those currently outstanding;
• 1. acknowledging that as a result of the merger with CR Bra Article 5, paragraph 1, of the Articles of Association of the Merging Company shall be amended, by indicating the following new wording:

"The share capital, fully subscribed and paid in, amounts to EUR 1,565,596,344.00 and is represented by 521,865,448 registered common shares, having no par value".

1. setting out that both mergers will become effective towards third parties from a legal and statutory perspective from the date of the last of the merger deed filing with the Companies' Registers - where the headquarters of the Companies Involved in the Merger are located - or from the date indicated in the merger deed which may be subsequent to the last of the merger deed filing with the Companies Register, as provided for by Article 2504 of the Italian Civil Code; while they will become effective from a tax perspective and from an accounting perspective - for the purpose of booking any operations of the Companies to be Merged into the Merging Company's financial statements - as of 1January of the year in which the merger transaction shall be statutorily effective; therefore, once the merger deed shall be registered, the Merging Company will succeed by law - as a result of the merger transaction - into all the assets and liabilities of each Company to be Merged, by taking over in its favor and assuming liability for all active and passive legal relations, all activities, rights and obligations, nothing excluded and excepted, taking over all relations, including Court proceedings prior to the merger transaction, pertaining to each Company to be Merged;

2. 1. declaring that there are no categories of shares carrying rights other than the common shares', nor securities other than shares, also specifying that the Companies to be Merged have no ongoing convertible notes, while the Merging Company has only the convertible note called "BPER 8.75% Additional Tier 1 Convertible Note" ("AT1 CN"), for which "Fondazione di Sardegna" - exclusive holder of all convertible notes issued in relation to the AT1 CN - in acknowledging the proposed merger and the main terms of the same, by means of a notice of its own abiding by Article 2503, paragraph 2, of the Italian Civil Code - has irrevocably waived its statutory right of conversion under the terms therein provided, without prejudice to any right in favor of the same Foundation deriving from the AT1 CN regulation;
3. 1. acknowledging that there are no specific advantages in favor of the Directors of the Companies Involved in the Merger;
4. 1. conferring to the Chairman of the Board of Directors and legal representative and in the event of his absence or impediment, separately, to the Vice-Chairman, or to the Chief Executive Officer - also by granting a special power of attorney for this purpose - all necessary authority to carry out what is required, necessary or useful to execute the resolutions adopted, including the power to: execute and sign the merger public deed, formulate each clause and part thereof, including the effective date - in line with the Merger Draft Terms - as well as calculate the exact share capital, by consequently amending the related clause in the Articles of Association, by giving any appropriate consent also through declaratory, supplementary and/or amending acts, formulating each clause, term and conditions in compliance with the Merger Draft Terms, agreeing to changes of ownership or transfers of registration of any activity, including real estate and movable property registered with public registers, public and private securities, rights, deposits, licenses, permits, credits towards the State and other public agencies; by fulfilling all required formalities to have the adopted resolutions be registered with the Companies' Register, along with the power to make any amendments, deletions and/or additions – as long as they are not substantial - which might be requested during the filing process.>>

Modena, 28 May 2020

BPER Banca S.p.A. The Chairman Pietro Ferrari