Unicredit — Remuneration Information 2017

Mar 21, 2017

Objective of the document

2017 Group Compensation Policy

Side Presentation

1 UniCredit, Group Human Capital March 2017

Objective of the document

• The purpose of this presentation is to provide an overview of the key elements of the UniCredit 2017 Compensation Policy, specifically on:
• 2016 payout
• New Compensation Framework, as announced by the CEO Jean Pierre Mustier at a Capital Markets Day in London on Dec 13, 2016, during the presentation of our 2016-2019 Strategic Plan Transform 2019 to analysts and investors
• As such, these slides will always favor immediacy and simplicity to exhaustiveness and details. For full disclosure please refer to the 2017 Group Compensation Policy itself.

2016 Highlights

New Compensation Framework

Remuneration Committee Role and composition

SECTION III ANNUAL COMPENSATION REPORT PARAGRAPH 2.1

• The Remuneration Committee performs an integral role in supporting Board of Directors oversight of Group Compensation Policy and Incentive Plans design
• All members of the Committee in its current composition are independent according to the 'TUF' (Testo Unico della Finanza) and the majority of the members (3 out of 5) meet the requirements of independence described in the 'Corporate Governance Code', which coincide with the ones given in the Articles of Association
• The activities are coordinated by the Chairman, chosen among independent members

Remuneration Committee Activities in 2016

SECTION III ANNUAL COMPENSATION REPORT PARAGRAPH 2.1

In 2016, the Remuneration Committee met 10 times. The key activities included the followings:

	Approved by						2016
	BoD	AGM	JAN	FEB	MAR	JUN	AUG	OCT	NOV	DEC
STRATEGY, POLICY AND GOVERNANCE
2016 Group Compensation Policy					$\checkmark$
Ratio between variable and fixed compensation for Company Control Functions
Compensation framework review
2016 AGM - follow up								✓
ANNUAL COMPENSATION REVIEW
2015 Group Incentive System and previous incentive plans
2016 Group Incentive System
2016 Goal setting for the new Top Management
2017 Goal setting and compensation or CEO, GM and Heads of Company Control Functions
2016 Employee Share Ownership Plan					√
Competitive assessment of total compensation package for Top Management
COMPENSATION DECISIONS
Severance including local adaptations to the Group Policy
CEO and DGM-COO employment resolution
Compensation review for Executives					✓			✓
RISK AND REGULATORY
Follow up on regulators' inspections

2016 Group Incentive System Rules application

SECTION III ANNUAL COMPENSATION REPORT PARAGRAPH 5.2

Based on the different scenarios deriving from entry conditions assessment, 2016 Group Incentive System's rules have been applied:

	Entry conditions	Achievement	Rules application
Group	NET PROFIT $\geq 0 \in$ /mnl	× $-611.790$ mnl
	CET 1 RATIO TRANS $\geq 10\%$	$\mathscr{L}$ *	• Zero bonus for Executives & Identified Staff
	NOP ADJUSTED ≥ 0 €/mnl	× $-65.858$ mnl	• 50% pool reduction for Identified Staff of Zero Control Functions factor • Retention Pool for 4% of Identified Staff total
	LIQUIDITY COVERAGE RATIO >75%		population • 40% reduction applied to Not Identified Staff
Each bonus pool	ALL above "ENTRY CONDITIONS"		50% reduction CRO/CFO multipliers (from 50% to 125%) Partially
	excepting for Commercial Banking Italy, Commercial Banking Austria, Corporate Center Global (Holding), UBIS and GBS Holding	×	open (50%) BoD discretion +5% of the total for Not Identified Staff (excluding CIB)

* In the Financial Report 2016 CET 1 Ratio Transitional is reported as equal to 8.15%. Considering capital increase effects, the value at December 2016 would be equal to 11.49%. CET 1 fully loaded would be equal to 11.15%

2016 Group Incentive System Bonus Pool distribution

SECTION III ANNUAL COMPENSATION REPORT PARAGRAPH 5.2

With reference to the year 2016, the UniCredit Board of Directors , upon the proposals of the Remuneration Committee, defined the following distribution of the bonus for the Identified Staff population, ca. 1,050 resources¹ :

2016 Group Incentive System Payout

8

SECTION III ANNUAL COMPENSATION REPORT PARAGRAPH 5.2

The Board of Directors, in consideration of the group's results for the year 2016, while expressing sincere appreciation for the work done by the management in relation with the in-depth strategic review that brought the presentation and the launch of the 2016-2019 Strategic Plan Transform 2019, resolved not to proceed with any bonus payment for 2016 for the CEO, General Manager¹ and other Executives with strategic responsibilities² , independently from individual performance assessment

• 1. The CEO received a fixed remuneration of € 2 m, including director's remuneration. It has been paid pro rata for the period July 12, 2016 December 31, 2016 for the amount of € 0.95 m, the General Manager received a total fixed remuneration of € 1.2 m, of which € 0.4 m pro-rated, referring to General Manager position
• 1. Two incumbents received 2016 variable compensation related the positions covered before September 1, 2016 for a total amount of € 0.3 m
• 1. With reference to the LTI Plan 2015-2018 and the award foreseen for 2017, the BoD on March 13, 2017, exercised its downward discretion and decided not to proceed with any payments. In addition, it was decided to cancel the second award foreseen for 2019, considering the launch of the new LTI Plan linked to Transform 2019. The LTI Plan 2015-2018 is therefore closed

• 2016 Highlights

• New Compensation Framework

One Bank, One UniCredit Compensation strategy

SECTION III ANNUAL COMPENSATION REPORT CHAPTER 1

• In order to incentivize all our colleagues to focus on the implementation of our Transform 2019 Plan, meet our shareholders' expectations and above all, further improve our customer focus, we are presenting a revised compensation strategy
• The compensation framework review is based on 4 principles:

One Bank, One UniCredit Compensation strategy

SECTION III ANNUAL COMPENSATION REPORT CHAPTER 1

The compensation framework review leads to substantial changes to current Company policies as well as specific actions for the CEO:

	General policy	CEO's specific undertakings
Target pay	• General repositioning around median of the market (from above median)	• 40% reduction of own fixed pay, to $E1.2m$
Senior management remuneration	• Executive Management Committee incentives aligned to Group long term value creation, via new equity LTIP • Progressively softer cascading embracing the Top $\sim$ 120 Group positions	• No yearly bonus for 2016 nor plan horizon • Performance-based LTIP as the only form of variable remuneration till 2019
Shareholding requirements	• Share ownership guidelines extended to Top $\sim$ 120 Group positions	• Investment of $\epsilon$ 2m in UniCredit shares
Termination policy	• Reduction of overall severance limits to 24 $months1$ (inclusive of notice)	• "Zero severance" arrangement in case of separation from the Bank

1. Of total compensation defined as the average of the last 3 years fixed salary plus "cashed-in"/vested variable installments

11 Excerpt from «One Bank, One UniCredit - Compensation Strategy», J.P.Mustier - Capital Markets Day Dec 13, 2016

12 1. Source: Mercer

1. On March 1st, 2017 Mr. Fabrizio Palenzona advised the Chairman of the Board of Directors that, with immediate effect, he was stepping down from his role as Vice Chairman

Senior Management remuneration Reshaping the variable compensation

SECTION III ANNUAL COMPENSATION REPORT PARAGRAPH 5.1, 5.3, 5.5

The new framework of senior management variable compensation envisages a greater shift towards the new LTI Plan, and, as a consequence, a higher use of shares

		Focus on our Global Job Model

LTIP dilution ~0.31%(front loaded in the 1st year). GIS 2017 ~0.72%. Overall dilution (including previous Plans) ~1.75%

13 1. Considering the application, from 2016, of the new variable ratio between the variable and the fixed components of remuneration (which cannot exceed the limit of one third for Italian Identified Staff within Control Functions, while the fixed remuneration is expected to be the predominant component for the Control Functions of other geographies), Executives belonging to Company Control Functions will not participate to the LTIP

1. Group Incentive System

2. Out of the SEVP and EVP clusters

3. Malus conditions that reduce the payable amount based on profitability, liquidity, capital position 2. 100% upfront for Key Players not Identified Staff

14

Senior Management remuneration LTI Plan scorecard

Simple, straightforward and fully disclosed

17

Shareholding requirements Share ownership guidelines extension

• Aiming at aligning managerial interests to those of shareholders', share ownership guidelines set the minimum level of shares that shall be withheld in each Executive's portfolio
• To strengthen the common alignment to the achievement of the Transform 2019 Plan targets share ownership guidelines have been extended to SEVPs and EVPs¹ , taking into consideration the roles that are currently covered
• The requirement has to be met, as a rule, in 5 years from first appointment and shall be maintained until the role is held

• The achievement shall be accomplished through a linear pro rata approach over five years period, granting a minimum amount of shares every year, considering potential vested plans

• Considering the application, from 2016, of the new variable ratio between the variable and the fixed components of remuneration (which cannot exceed the limit of one third for Italian Identified Staff within Control Functions, while the fixed remuneration is expected to be the predominant component for the Control Functions of other geographies), share ownership guidelines will not be applied to Company Control Functions

New features	Termination Policy	SECTION II GROUP COMPENSATION POLICY PARAGRAPH 3.3

1. In particular for business roles

Disclaimer

• This Presentation may contain written and oral "forward-looking statements", which includes all statements that do not relate solely to historical or current facts and which are therefore inherently uncertain. All forward-looking statements rely on a number of assumptions, expectations, projections and provisional data concerning future events and are subject to a number of uncertainties and other factors, many of which are outside the control of UniCredit S.p.A. (the "Company"). There are a variety of factors that may cause actual results and performance to be materially different from the explicit or implicit contents of any forwardlooking statements and thus, such forward-looking statements are not a reliable indicator of future performance. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law. The information and opinions contained in this Presentation are provided as at the date hereof and are subject to change without notice. Neither this Presentation nor any part of it nor the fact of its distribution may form the basis of, or be relied on or in connection with, any contract or investment decision
• The information, statements and opinions contained in this Presentation are for information purposes only and do not constitute a public offer under any applicable legislation or an offer to sell or solicitation of an offer to purchase or subscribe for securities or financial instruments or any advice or recommendation with respect to such securities or other financial instruments. None of the securities referred to herein have been, or will be, registered under the U.S. Securities Act of 1933, as amended, or the securities laws of any state or other jurisdiction of the United States or in Australia, Canada or Japan or any other jurisdiction where such an offer or solicitation would be unlawful (the "Other Countries"), and there will be no public offer of any such securities in the United States. This Presentation does not constitute or form a part of any offer or solicitation to purchase or subscribe for securities in the United States or the Other Countries
• Neither the Company nor any member of the UniCredit Group nor any of its or their respective representatives, directors or employees accept any liability whatsoever in connection with this Presentation or any of its contents or in relation to any loss arising from its use or from any reliance placed upon it