COVER BONDS BOND INSTRUCTIONS ANTI-RISK When investing in bonds just remember some simple rules that

help avoid surprise s. Here is the map of risk warnings and ten key. With portfolios suitable to pre sent a series of corporate securities and Recommended Focus The choice Never choose a bond without knowing the characteristics and without c hecking if it is the right choice with respect to our risk tolerance and our inv estment objectives. ■ BONDS PRIMARY SECONDARY RISKS RISKS RATE RISK LIQUIDITY RISK ■ Angelo Drusiani ISSUER RISK EXCHANGE RISK The rules The rules to follow when you make a bond investment are few and simple . The quote clearly in these pages. ■ Argentina, end 2002: Cirio End End 2001: More evidence of many situations societ à2003: Parmalat. at risk or uncertain, with frequent downgrading of which seemed very solid. What a shock for people of Bots, which, after years of double-digit returns offered by the Italian Treasury has experimented with its own assets th e bitter reality of financial markets. Without returns, but also risks. Combinat ion which will inevitably refer to the unborn law on savings, but which can neve r evade the investor, even if the legislation in gestation will launch some impo rtant lifesaver. The trouble is that the transition from Bot obligations, motiva ted by the steady and significant decline in yields Investing 018 ■ June 2005 The risks also bond investment involves risk. Are shown in the diagram next to t he left. The risk rate and liquidity risk should be considered when you have to sell bonds or bonds before maturity, because the price may fall (rates) or becau se it can be difficult to find a buyer (cash). ■ Getting around in a market become more difficult market occurred in the absence of sufficient information. The trouble is that, e ven today, many investors choose bond instruments ignoring the characteristics a nd avoiding questioning whether they really represent the right choice. Simply b ecause recommended by a friend or an intermediary, or simply because they fascin ated by the name of the debtor. But invest their capital is not easy, because th e rules be followed, regardless of the content of the law on savings, although n ot complicated, demand respect and attention. To avoid being unexpectedly in a b ad way. Ten directions, ten moments to reflect on, before deciding that financia l instrument to choose. Here are some tips that may seem obvious, but very few o f which refers to the act of transferring their money to a bond or a bond. REMEMBER THAT WORKED MONEY 1 ■

To know Definition box with which means the investor who prefers to purchase and maintai n for a prolonged period of equities and bonds ■ Buy a corporate bond or government bond means lending money to a debtor, even if this is done through an intermediary, usually a bank. Is not it that the money is intended, but the issuer of the securities. The bank acts as the collector, c ollects the money to transfer them to others, in this case the person who propos ed the bond market. Bonds or bonds are simply a refinement of a contract between debtor and creditor, where the first s'obbliga to pay interest and repay the se cond, ultimately, the amount initially received. LOOK AT YOUR RATES AND DEBTORS 2 ■ Corporate term for private companies. For corporate bonds or corporate bonds, we refer to bonds issued by private companies that are indistinguishable from thos e issued by sovereign States governmental or supranational bodies. ■ Business is lending money at risk, whether it is done professionally, whether it is done for other reasons, to friends or relatives. Not always, the sum paid is returned. So it is for bonds: in most cases, the issuer pays regular interest a nd repay the agreed loan capital obtained, but the case of insolvency are not un common, especially during economic slowdown or recession. The purchase of a bond or a government bond exhibits two types of risk: rates are the primary risk and issuer risk, because stock prices depend on expectations about interest rates a nd the prospects of the debtor,€and the only and the other instruments come with the bond for the entire period of their lives. Are secondary liquidity risk and currency risk, because they are light or if you purchase a broadcast or placed in small amounts denominated in currencies other than euro. Secondary risks are defined, because it is not situations that characterize all loans on June 2005 ■ Investing 019 COVER BONDS market, but only part. It 'obvious that if you opt for emissions illiquid foreig n exchange, subscribers s'assume all risks, rates, issuer, liquidity, foreign cu rrency .. The risks, in finance, resulting in changes of market prices: the stro ngest effects they create currency risks, because the movements of the exchange ratios are larger. The quote between euro and U.S. dollar has suffered a swing o f 21.55% in 2003, 8, 31% in 2004, about 5% in the first months of this year. And these are two coins considered strong! To know Trading Activities for the sale of financial securities. Virtually all transacti ons involving the purchase or sale of a stock, bond, or financial in general. Tr ading online is instead the operation is performed by using technological platfo rms (eg connecting to Internet services). ■ MORE MORE EQUAL PERFORMANCE RISK 3 ■ In view of the issue of risk is essential to assess what the personal risk toler ance, as it is able to withstand losses virtual, related to the comparison betwe en the purchase price and debt market prices, or real losses, monetized when the bond is sold on the market. High risk tolerance leads the investor to purchase emissions with long duration or low ■ S & P MOODY'S reliability of the issuer, b

ecause they offer higher returns. Small risk appetite led him to buy securities with a maturity ber ■ AAA AAA ve or high degree of reliability dell'emit ■ AA + AA1 authority. The relationship between risk and return ■ AA AA2 chin, which dic tates the choice of ■ AA-AA3 investors, is straightforward: high-risk heart ■ A + A1 meets another performance, and vice versa ■ At A2. The Rating Scale QUALITY ISSUER Investment Grade Top ISSUER WITH MAXIMUM DEGREE OF RELIABILITY ISSUER WITH HIGH DEGREE OF RELIABILITY ISSUER WITH GOOD OVERALL ABILITY to meet the commitments ■ AA3 ISSUER WITH ADEQUATE capacity to fulfill its commitments DEBTORS ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ 4 ■ The bond which will pay the investor will also chosen on the basis of personal n eeds: it is important to assume the theoretical duration of the investment, the desired level of coupon payment, the hypothetical possibility of surrender befor e the expiry of the title, if you opt for one other form of investment, such as buying a property. VALUED WELL YOUR NEEDS Lower Investment Grade ■ ■ Baa1 BBB + BBB BBB-Baa3 BAA2 ■ ■ ■ BB BB + BA1 BA2 BA3 ■ ■ BB-B + ■ ■ ■ ■ ■ ■ ■ BCCC B + B1 B2 B3 C CCCCC CCC CAA CA C ISSUER WITH HIGH LIKELIHOOD OF FAILURE TO REFUND OF BONDS OR NO INTEREST IS PAID ISSUER COUPON bankrupt Not Investment Grade Issuer whose ability to fulfill its commitments and ■ LESS OF INVESTMENT GRADE ■ ■ Not Investment Grade Lower Issuer whose capacity to fulfill its commitments and lower court LAND SECURITIES to maturity? 5 ■ Investing 020 ■ June 2005 Where is tempted dall'immettere portfolio emissions in the long term ■ ■ ■ ■ ■ ■ ■ ■ The basic rules of investment bond should decide how much of the portfolio will be static, the typical figure of dr awers, just buy the securities, cash and collect the coupons, maturity, face val ue myself. Why? Because if you buy ten-year issue, the price can vary between fi ve and seven points, depending on the value of the coupon in the face of changin g a point of interest rates. For the part intended to be kept in the portfolio u ntil maturity, this issue has no particular effect, because, ultimately, the vot es will still be repaid at par, or other values, regardless of market prices mar ked during the life of ' obligation.

Understand letters and numbers IN THE TABLE: THE LADDER OF RATING, OR CO N WHICH THE EVALUATION OF THE SPECIALI ZED AGENCIES measure the reliability of issuer BONDS, AND A SERIES OF BONDS RECO MMENDED. THE FOLLOWING: THE EXPLANATORY NOTES ■ a) 06/21/2013 possibility 'of reimbursement to 100 or possibility' that the co upon rate is 3 months longer eurobor '3.45 ■ b) Coupon increases or decreases of 0.25, if credit ratings fall below A ■ c) coupon increases or decreases of 0.25 , if rating falls below BBB + ■ d) Coupon increases or decreases of 0.25, if rat ing is reduced by Moody's and S & P ■ e) Possible restrictions on sale in Italy ■ f) Possible restrictions on Sales in Italy and minimum amount negotiable '■ g 50 thousand euro) Minimum amount negotiable' 50 thousand euros GOVERNMENT & CORPORATE 6 ■ Depending on the risk appetite of the share will become static, the reddività yo u would like to achieve, emphasis will be on corporate bonds, medium to high ris k, or those governmental bonds, low to medium risk. Emissions recommended by degree of risk ISIN CODE SECURITIES RATING S & P Coupon Maturity Gross Yield PRICE COMMENTS FR0000492282 IT0003652077 XS0159387579 XS0114443772 XS0167456267 XS0103349774 XS 0166965797 XS0114448144 XS0182313527 XS0130182784 XS0139186356 XS0201333761 XS01 27693934 XS0217593176 XS0200848041 FR0000487647 GENERAL ELECTRIC BANK AUSTRIA ENI BTP CARREFOUR VODAFONE MUNICH RE EDISON LOTTOM ATICA ERICSSON AT & T Alcatel REPUBLIC OF TURKEY RENO DE MEDICI PIAGGIO GROHE HO LDING 4,125 5,875 4,625 3 4.5 5.75 6.75 6,375 4.8 7,375 7.75 8.5 5.5 6 10 8,575 1-18-06 8-02-2010 4-30-13 4-15-09 3-18-09 10-27-06 6-21-23 7-20-07 12-22-08 5-31 -06 11-21-06 12-07-2006 9-21-09 5-04-2006 4-30-12 10-01-2014 AAA AAA AA + AA + A + ABBB bbbbb BBB + BBB BB B + B102.80 114.31 107.92 101.28 105.97 104.87 116.22 109.51 105.15 105.16 106.53 108 .86 103.73 97.75 102.50 98.50 2.33 2.89 3.47 2.67 2.84 2.33 4.34 2.84 3.26 2.42 3.30 2.68 4.53 8.47 9.44 8.86 a) b) c) c) d) e) f) g) June 2005 ■ Investing 021 COVER BONDS Portfolio average aggressive variable 5% over 5 years 25% DIVERSIFIED always 7 ■ up to 2 years 35%

Determined the weight of the two sectors, corporate and governmental, should be further split the issuer risk: the best strategy is to diversify your portfolio among several titles, both governmental and corporate. In this sense, the experi ence of professional managers is illuminating, because their securities portfoli os consist of a particularly high number of securities, whose weight often exten ds to a maximum of 5 7.5% of the portfolio itself, for each issue. 5% cash Do not forget your investments 8 ■ 2 to 50 years 30% Liquidity LEGEND: BOT repo term accounts Durations up to 2 YEARS FROM 2 TO 5 YEARS OVER 5 YEARS OF LIQUIDITY VARIABLES WEIGHT 35% 30% 25% 5% 5% If you opt to maintain stable and static on your investment, if you have drawers , it is advisable to follow closely the evolution of market interest rates becau se the total value of assets is very sensitive, of course, prices tools that com pose it. Over 5 years: mostly titles ending 10 years LET THE TRADING FOR SPECIALISTS ... 9 ■ Moderate risk portfolio liquidity variables 5% 10% 10% over 5 years to 2 years 45% Generally, emissions more easily liquidated, such as government bonds with a ten year period, suitable to be used for trading, figure opposite to that of the tr ay, which is bought and sold several times the same instrument. Investor's objec tive is to buy at lower prices and sell at higher prices: they are activities to specialists. The results of which are uncertain and unpredictable, even for mar ket professionals. Better, then, would not venture into a type of asset manageme nt, particularly complex and difficult. 10 ■ 2 to 50 years 30% Durations up to 2 YEARS FROM 2 TO 5 YEARS OVER 5 YEARS OF LIQUIDITY VARIABLES Investing 022 ■ June 2005 WEIGHT 35% 30% 25% 5% 5% The choice of instruments issued by borrowers from emerging markets or high degr ee of reliability, but in currency other than euro should be paid to those who h ave good experience of financial markets. It 'easy to be attracted by very high yields, as proposed, for example, securities denominated in Hungarian forint, Po lish zloty, or by South African rand, but the trend of the exchange ratio may no t only reduce the performance proposed, but even reset or make it negative. Choo se foreign currency bonds is therefore a prerogative of those who have high risk tolerance. Ultimately, if the market rates fluctuate between 2 and 4% of GDP, a nd is offered a bond paying 10%, the risk is around the corner. ■ Be careful not

to be surprised! ... AND THE STRANGE CURRENCIES Reckoning